<PAGE>
PRESIDENT'S MESSAGE
December 1996
Dear Shareholder:
We are pleased to present you with the annual report for the Republic Bond
Fund for the period ending October 31, 1996. In this report, we have provided
you with a letter from the Investment Adviser, Republic National Bank of New
York.
We hope you find this letter and accompanying financial summaries
informative and as always we would be delighted to hear from you to answer any
questions you might have or provide you with additional information.
Audited financial statements and portfolio holdings for the period ending
October 31, 1996 also follow. We look forward to servicing your financial
needs and appreciate your continued support.
Respectfully submitted,
/s/ George O. Martinez
------------------------------------
George O. Martinez
President
<PAGE>
REPUBLIC BOND FUND
ANNUAL REPORT -- OCTOBER 31, 1996
TABLE OF CONTENTS
PAGE
----
President's Message .................................................. 1
Letter to Shareholders from Investment Adviser ....................... 3
Performance Graph .................................................... 4
REPUBLIC BOND FUND
Statement of Assets and Liabilities .................................. 5
Statement of Operations .............................................. 6
Statement of Changes in Net Assets ................................... 7
Financial Highlights ................................................. 8
Notes to Financial Statements ........................................ 9
Independent Auditors' Report ......................................... 12
REPUBLIC FIXED INCOME PORTFOLIO
Schedule of Investments .............................................. 13
Statement of Assets and Liabilities .................................. 20
Statement of Operations .............................................. 21
Statement of Changes in Net Assets ................................... 22
Financial Highlights ................................................. 22
Notes to Financial Statements ........................................ 23
Independent Auditors' Report ......................................... 27
<PAGE>
LETTER TO SHAREHOLDERS FROM INVESTMENT ADVISER
December 1996
DEAR SHAREHOLDER:
We are pleased to present you with the annual report for the Republic Bond
Fund (the "Fund") for the period ended October 31, 1996.
The Republic Bond Fund returned 6.21%* for the period ended October 31,
1996, compared to 5.27% for the Lipper A Rated Bond Fund Index and 5.88% for the
Salomon Broad Bond Index. For the period since inception,* the Fund's average
annual return was 11.21% versus 11.55% for the Lipper Index and 11.51% for the
Salomon Broad Bond Index.
Uncertainty regarding the direction of interest rates prevailed through much
of the fiscal year, which began with signs of a softening U.S. economy and
anticipation of further interest rate cuts by the Federal Reserve. By February,
the initial bullish view on interest rates changed as the picture of the U.S.
economy began to cloud. Speculation arose that the economy was growing too
strongly and that an interest rate hike was imminent to stave off inflationary
pressures. Concerns began to subside near the fiscal year-end with the release
of economic data depicting an economy in a moderate and more sustainable growth
trend.
The Fund benefited early in the year by maintaining a less-than-market
interest rate sensitivity and then later extending the duration as interest
rates rose. Returns were also enhanced by the Fund's overweighted position in
the top performing mortgage sector, strong security selection within the
corporate sector, and participation in higher-yielding foreign government
(currency hedged) bonds.
The Fund's strategy at year-end was based on the view that the U.S. fixed
income market offered good value on an inflation adjusted basis. Mortgages
remained attractive relative to corporates and U.S. Treasuries, while the yield
advantage in foreign markets became less appealing. Against this backdrop, the
portfolio was positioned with an interest-rate sensitivity moderately longer
than the benchmark. Mortgages continue to account for over half the portfolio,
corporate holdings are below the market weighting with improved credit quality,
and foreign holdings were reduced to below 3%. As of October 31, 1996 the Fund's
30-day SEC yield was 5.4%.
Audited financial statements and portfolio holdings as of October 31, 1996
follow. We appreciate your continued support.
Sincerely,
Republic National Bank of New York
Lipper A Rated Bond Fund Index: an equally weighted composite composed of
the 30 largest mutual funds within this investment objective.
Salomon Broad Bond Index: an unmanaged market capitalization weighted index
which includes fixed rate Treasury, government sponsored, corporate and
mortgage securities. All issues mature in one year or more and have at least
$50 million face amount outstanding for entry into the index.
The performance data quoted represents past performance and is not an
indication of future results. The investment return and Net Asset Value will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
The performance set forth may reflect the waiver of a portion of the Fund's
advisory or administrative fees for certain periods since the inception
date. In the absence of fee waivers 30-day SEC yield figures would have been
5.2%.
The composition of the portfolio is subject to change.
*Inception date for performance purposes is January 9, 1995. The performance
stated is that of the Republic Fixed Income Portfolio, adjusted to reflect
the fees and expenses of the Fund. The Fund's inception date was August 26,
1996. Total return since inception of the Fund was 3.61%.
<PAGE>
COMPARISON OF $10,000 INVESTMENT IN THE
REPUBLIC BOND FUND AND
SALOMON BROAD BOND INDEX
- --------------------------------------------------------------------------------
- --------------------------
AVERAGE ANNUAL
TOTAL RETURN
- --------------------------
Fiscal Year Inception
Ended to 10/31/96
10/31/96 (Annualized)
- ----------- ------------
6.21% 11.21%
- --------------------------
REPUBLIC BOND FUND SALOMON BROAD BOND INDEX
1/ 9/95 10.00 10.00
4/30/95 10.53 10.64
10/31/95 11.42 11.28
4/30/96 11.53 11.58
10/31/96 12.15 12.21
Past performance is not predictive of future performance
- --------------------------------------------------------------------------------
BISYS FUND SERVICES, INC. IS THE DISTRIBUTOR OF THE REPUBLIC BOND FUND (THE
"FUND").
REPUBLIC NATIONAL BANK OF NEW YORK ("REPUBLIC") SERVES AS INVESTMENT MANAGER AND
MAKES THE FUND AVAILABLE SOLELY IN ITS CAPACITY AS SHAREHOLDER SERVICING AGENT
FOR CUSTOMERS. INVESTMENTS IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, REPUBLIC OR ANY OTHER BANK. SHARES OF THE FUND ARE
NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER GOVERNMENTAL AGENCY.
PERFORMANCE DATA QUOTED HEREIN REPRESENTS PAST PERFORMANCE. PLEASE REMEMBER
THAT PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE PERFORMANCE. FUND RETURNS
ARE NET OF FEES. ALL RETURNS ASSUME REINVESTMENT OF INCOME AND CAPITAL GAINS
AND REFLECT THE REIMBURSEMENT OF CERTAIN FUND EXPENSES AS DESCRIBED IN THE
PROSPECTUS.
MORE COMPLETE INFORMATION ABOUT THE FUND, INCLUDING MANAGEMENT FEES AND OTHER
EXPENSES, IS PROVIDED IN THE PROSPECTUS, WHICH SHOULD BE READ CAREFULLY BEFORE
INVESTING. YOU MAY OBTAIN ADDITIONAL COPIES OF THE PROSPECTUS BY CALLING
1-800-782-8183.
*INCEPTION DATE FOR PERFORMANCE PURPOSES IS JANUARY 9, 1995. THE PERFORMANCE
STATED IS THAT OF THE REPUBLIC FIXED INCOME PORTFOLIO, ADJUSTED TO REFLECT
THE FEES AND EXPENSES OF THE FUND. THE FUND'S INCEPTION DATE WAS AUGUST 26,
1996. TOTAL RETURN SINCE INCEPTION OF THE FUND WAS 3.61%.
<PAGE>
REPUBLIC BOND FUND
STATEMENT OF ASSETS AND LIABILITIES -- OCTOBER 31, 1996
ASSETS:
Investment in Republic Fixed Income Portfolio ("Portfolio"), at value
(Note 1) .......................................................... $23,546
Unamortized organization expenses (Note 2)........................... 31,056
-------
Total Assets ................................................ 54,602
-------
LIABILITIES:
Organization expenses payable (Note 2) .............................. 31,056
Audit fee payable ................................................... 2,000
Other accrued expenses .............................................. 974
-------
Total Liabilities ........................................... 34,030
-------
NET ASSETS:
Applicable to 2,005 shares of beneficial interest outstanding (par
value $0.001, unlimited number of authorized shares) .............. $20,572
=======
REPRESENTED BY:
Paid-in capital ..................................................... $20,211
Accumulated net realized gain from Portfolio ........................ 113
Net unrealized appreciation from Portfolio .......................... 248
-------
Net Assets .................................................. $20,572
=======
Net Asset Value, Offering and Redemption Price Per Share ............ $10.26
======
See notes to financial statements
<PAGE>
REPUBLIC BOND FUND
STATEMENT OF OPERATIONS -- FOR THE PERIOD ENDED OCTOBER 31, 1996*
NET INVESTMENT INCOME FROM PORTFOLIO (NOTE 2):
Interest income ....................................................... $113
Allocated expenses .................................................... 17
----
Net investment income from Portfolio .............................. 96
EXPENSES (NOTE 2):
Administration fees (Note 3) .............................. $ 1
Audit fees ................................................ 2,000
Fund accounting fees (Note 3) ............................. 2,000
Reports to shareholders ................................... 969
Other expenses ............................................ 32
-------
Total expenses .......................................... 5,002
Reimbursement of expenses (Note 3) ...................... (3,000)
Voluntary fee reductions (Note 3) ....................... (2,000)
-------
Net expenses ...................................................... 2
----
NET INVESTMENT INCOME ................................................. 94
----
NET REALIZED AND UNREALIZED GAIN FROM PORTFOLIO:
Net realized gain on:
Investments ....................................................... 113
Net unrealized appreciation from Portfolio ............................ 248
----
Net realized and unrealized gain from Portfolio ....................... 361
----
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .................. $455
====
*For the period August 26, 1996 (commencement of operations) to October 31,
1996.
See notes to financial statements
<PAGE>
REPUBLIC BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD
AUGUST 26, 1996
(COMMENCEMENT
OF OPERATIONS) TO
OCTOBER 31, 1996
----------------
INCREASE IN NET ASSETS FROM:
OPERATIONS:
Net investment income ................................... $ 94
Net realized gain from Portfolio ........................ 113
Net unrealized appreciation from Portfolio .............. 248
------
Net increase in net assets resulting from operations 455
------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ................................... (94)
------
CAPITAL TRANSACTIONS:
Proceeds from sales of shares ........................... 20,018
Net asset value of shares issued in connection with
reinvestment of distributions ......................... 93
------
Net increase in net assets from capital transactions 20,111
------
TOTAL INCREASE IN NET ASSETS ............................ 20,472
NET ASSETS:
Beginning of period ................................. 100
------
End of period ....................................... $20,572
=======
ANALYSIS OF FUND SHARE TRANSACTIONS:
Shares sold ............................................. 1,996
Shares issued in reinvestment of dividends .............. 9
------
End of period ....................................... 2,005
=====
See notes to financial statements
<PAGE>
REPUBLIC BOND FUND
FINANCIAL HIGHLIGHTS
FOR THE PERIOD
AUGUST 26, 1996
(COMMENCEMENT
OF OPERATIONS) TO
OCTOBER 31, 1996
-----------------
NET ASSET VALUE, BEGINNING OF PERIOD .......................... $10.00
------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ....................................... 0.10
Net realized and unrealized gain from Portfolio ............. 0.26
------
Total increase from investment operations ............... 0.36
------
LESS DIVIDENDS:
Net investment income ..................................... (0.10)
-----
Total distributions ....................................... (0.10)
-----
NET ASSET VALUE, END OF PERIOD ................................ $10.26
-----
TOTAL RETURN .................................................. 3.61%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000) ......................... $21
Ratio of expenses to average net assets ................... 1.04%(c)
Ratio of net investment income to average net assets ...... 5.23%(c)
Ratio of expenses to average net assets(a) ................ 280.50%(c)
Ratio of net investment loss to average net assets(a) ..... (274.18%)(c)
- -------------------------------------------------------------------------------
(a) During the period, certain fees were voluntarily reduced and expenses
reimbursed. If such voluntary fee reductions and expense reimbursements had
not occurred, the ratios would have been as indicated.
(b) Not annualized.
(c) Annualized.
See notes to financial statements
<PAGE>
REPUBLIC BOND FUND
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 1996
1. ORGANIZATION. Republic Bond Fund (the "Fund") is a diversified separate
series of the Republic Funds (the "Trust"), a Massachusetts business trust
organized on April 22, 1987, which currently consists of seven funds, each
of which has different and distinct investment objectives and policies. The
Fund commenced operations on August 26, 1996. The financial statements for
the other six funds are presented separately. The Trust is registered under
the Investment Company Act of 1940, as amended (the "Act"), as a no-load
open-end management investment company.
The Fund's investment objective is to seek to realize above-average
total return over a market cycle of three to five years, consistent with
reasonable risk, through investment primarily in a diversified portfolio of
U.S. Government securities, corporate bonds, mortgage-backed securities and
other fixed-income securities. The Fund invests all of its investable assets
in the Republic Fixed Income Portfolio (the "Portfolio"). The Portfolio is a
diversified open-end management investment company which has the same
investment objective as the Fund. The value of such investment reflects the
Fund's proportionate interest (0.04% as of October 31, 1996) in the net
assets of the Portfolio. The performance of the Fund is directly affected by
the performance of the Portfolio. The financial statements of the Portfolio,
including the schedule of investments, are included elsewhere in this report
and should be read in conjunction with the Fund's financial statements.
Republic National Bank of New York ("Republic" or the "Manager") acts
as Investment Manager to the Portfolio. Miller, Anderson & Sherrerd acts
as Sub-Adviser ("Sub Adviser") to the Portfolio. Effective October 1, 1996
BISYS Fund Services, Inc. ("BISYS") replaced Signature Broker-Dealer
Services, Inc. ("Signature") as Administrator of the Trust and the
Portfolio and as Distributor and Sponsor ("Sponsor") of the Trust.
2. SIGNIFICANT ACCOUNTING POLICIES. The following is a summary of the
significant accounting policies followed by the Fund in the preparation of
its financial statements. The policies are in conformity with generally
accepted accounting principles. The preparation of financial statements
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses for the period.
Actual results could differ from those estimates.
INVESTMENT VALUATION:
Valuation of securities by the portfolio is discussed in Note 2 of the
Portfolio's Notes to Financial Statements that are included elsewhere in
this report.
INVESTMENT TRANSACTIONS AND RELATED INCOME:
All the net investment income and realized and unrealized gain and loss of
the Portfolio is allocated pro rata among the Fund and other investors in
the Portfolio each day.
DIVIDENDS TO SHAREHOLDERS:
The Trust declares all of the Fund's net investment income daily as a
dividend to the Fund shareholders. Dividends substantially equal to all of
the Fund's net investment income earned are distributed to the Fund
shareholders of record monthly. Generally, the Fund's net investment income
consists of the interest and dividend income it earns, less expenses. In
computing interest income, premiums are not amortized nor are discounts
accrued on long-term debt securities in the Portfolio, except as required
for federal income tax purposes.
The Fund's net realized short-term and long-term capital gains, if any,
are distributed to shareholders annually. Additional distributions are also
made to the Fund's Shareholders to the extent necessary to avoid application
of the 4% non-deductible federal excise tax on certain undistributed income
and net capital gains of regulated investment companies.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles.
Certain mortgage-backed securities may provide for periodic or
unscheduled payments of principal and interest as the mortgages underlying
the securities are paid or prepaid. However, such principal payments (not
otherwise characterized as ordinary discount income or bond premium expense)
will not normally be considered as income to the Portfolio and therefore
will not be distributed as dividends to Fund shareholders. Rather, these
payments on mortgage-backed securities generally will be reinvested by the
Portfolio in accordance with its investment objective and policies.
Unless a shareholder elects to receive dividends in cash (subject to the
policies of the shareholder's Shareholder Servicing Agent), dividends are
distributed in the form of additional Shares (purchased at their net asset
value without a sales charge).
EXPENSE ALLOCATION:
Expenses incurred by the Trust with respect to any two or more funds in the
Trust are allocated in proportion to the net assets of each fund in the
Trust, except when allocations of direct expenses to each fund can otherwise
be made fairly. Expenses directly attributable to a fund are charged to that
fund. The Fund's share of the Portfolio's expenses are charged against and
reduce the amount of the Fund's investment in the Portfolio.
FEDERAL INCOME TAXES:
The Fund intends to qualify in each future fiscal year as a "regulated
investment company" under Subchapter M of the Internal Revenue Code, as
amended, (the "Code"). By so qualifying, the Fund will be exempt from
federal income taxes to the extent that it distributes substantially all of
its net investment income and net realized gains to its shareholders.
UNAMORTIZED ORGANIZATION EXPENSES:
The Fund incurred organization expenses in the amount of $31,056. These
costs were deferred and are being amortized by the Fund on a straight-line
basis over a five year period commencing November 1, 1996.
3. RELATED PARTY TRANSACTIONS.
ADMINISTRATION:
Pursuant to an Administrative Services Agreement, Signature Broker-Dealer
Services, Inc. ("Signature") provided the Fund with general office
facilities, and supervised the overall administration of the Fund including,
among other responsibilities, the preparation and filing of all documents
required for compliance by the Fund with applicable laws and regulations and
arranged for the maintenance of books and records of the Fund for the period
August 26, 1996 through September 30, 1996. For its services to the Fund,
Signature received from the Fund fees payable monthly equal on an annual
basis to 0.05% of the Fund's average daily net assets; for this period
Signature received $4, of which the entire amount was voluntarily reduced.
Effective October 1, 1996, BISYS Fund Services, Inc., ("BISYS") was
appointed as administrator to the Fund, pursuant to an Administrative
Services Agreement. BISYS serves as administrator with substantially
identical terms as described above. In this capacity, BISYS voluntarily
reduced all fees for the period October 1, 1996 through October 31, 1996.
FUND ACCOUNTING:
Pursuant to a Fund Accounting Agreement, Signature Financial Services, Inc.,
("SFSI") served as fund accounting agent to the Fund for the period August
26, 1996 through September 30, 1996. For its services to the Fund, SFSI
received fees payable monthly equal on an annual basis to $12,000. For this
period, fees for these services aggregated $1,000, of which the entire
amount was voluntarily reduced.
Effective October 1, 1996, Investors Bank and Trust Co. ("IBT") provides
fund accounting services to the Fund. For the period October 1, 1996 through
October 31, 1996 the IBT fee for these services aggregated $1,000, of which
the entire amount was voluntarily reduced.
REIMBURSEMENT AND WAIVER OF EXPENSES:
BISYS, Signature, SFSI and IBT voluntarily agreed to waive a portion of
their fees, and to the extent necessary, reimburse the Fund for additional
expenses during the period August 26, 1996 through October 31, 1996.
Expenses of the Fund were voluntarily limited to no more than 0.19% of the
average daily net assets on an annualized basis. For the period ended
October 31, 1996, BISYS, Signature, SFSI and IBT voluntarily reduced fees
and reimbursed expenses aggregating $5,000.
4. INVESTMENT TRANSACTIONS. Additions and reductions in the Fund's
investments in the Portfolio amounted to $23,119, and $29 respectively.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees
Republic Funds:
We have audited the accompanying statement of net assets of Republic
Bond Fund (the "Fund"), a portfolio of Republic Funds, as of October 31,
1996 and the related statements of operations and changes in net assets and
the financial highlights for the period from August 26, 1996 (commencement
of operations) to October 31, 1996. These financial statements and financial
highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Republic Bond Fund at October 31, 1996, the results of its
operations, the changes in its net assets and the financial highlights for
the period from August 26, 1996 to October 31, 1996 in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Boston, Massachusetts
December 20, 1996
<PAGE>
REPUBLIC FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1996
- ------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SECURITY DESCRIPTION NOTE 2
------ -------------------- ------
CORPORATE OBLIGATIONS -- 11.5%
BANKING -- 0.1%
$ 63,000 Blue Bell Funding, 11.85%, due 5/1/99 .... $ 63,630
----------
BROADCASTING AND PUBLISHING -- 1.1%
330,000 Comcast Corp, 9.375%, due 5/15/05 ....... 330,413
395,000 Paramount Communications, 8.25%, due
8/1/22 ................................. 360,734
----------
691,147
----------
CONSUMER GOODS -- 0.3%
160,000 RJR Nabisco (New), 8.75%, due 4/15/04 ... 160,913
----------
ENERGY -- 0.9%
150,000 Excel Paralubes Funding, 7.43%, due
11/1/15(a) ............................. 148,289
176,588 Mobil Energy, 8.665%, due 1/1/17 ........ 182,767
250,000 Paiton Energy Funding Bv, 9.34%, due
2/15/14 ................................ 260,115
----------
591,171
----------
FINANCE -- 3.7%
150,000 Dr Structured Financial, 7.43%, due
8/15/18 ................................ 106,934
275,000 Farmers Ins Exch., 8.625%, due 5/1/24(a) . 279,512
70,000 K-Mart Funding Corp., 8.8%, due 7/1/10 .. 60,025
275,000 John Hancock, 7.375%, due 2/15/24(a) ..... 266,037
250,000 Mass Mutual Life 144a, 7.625%, due
11/15/23(a) ............................ 248,998
250,000 Met Life 144a, 7.45%, due 11/1/23(a) ..... 234,878
250,000 Mutual Life Ins Co NY 144a, 0%, due
8/15/24, 8.65%(a)(d) ................... 249,855
300,000 Nationwide Mutual Life 144a, 7.5%, due
02/15/24(a) ............................ 275,952
250,000 New York Life 144a, 7.5%, due 12/15/23(a) 239,444
250,000 Principal Mut Ins Co., 7.875%, due
3/1/24(a) .............................. 238,799
185,000 Reliance Group Holdings, 9.00%, due
11/15/00 ............................... 189,163
----------
2,389,597
----------
INDUSTRIAL -- 1.0%
143,391 DRSLT 1994-K1 A1, 7.6%, due 8/15/07 ..... 126,178
150,000 Owens-Illinois, Inc., 11%, due 12/1/03 .. 165,000
150,000 Oxymar, 7.5%, due 2/15/16(a) ............. 144,932
196,440 Scotia Pacific Holdings, 7.95%, due
7/20/15 ................................ 197,576
----------
633,686
----------
RETAIL -- 0.8%
195,000 Federated Department Stores, 8.125%, due
10/15/02 .............................. 200,160
374,000 Southland Corp., 5%, due 12/15/03 ....... 302,940
----------
503,100
----------
TECHNOLOGY -- 0.5%
295,000 Digital Equipment, 8.625%, due 11/1/12 .. 293,454
----------
<PAGE>
TELECOMMUNICATIONS -- 2.5%
400,000 Comcast Cellular, 0%, due 3/5/0, 8.76%(d) 282,000
295,000 Lenfest Comm, 8.375%, due 11/1/5 ........ 270,663
255,000 MFS Communications Corp.,0%, due 1/15/06,
8.56%(d) ............................... 180,413
415,000 Telecommunications, Inc., 7.875%,
due 2/15/26 ........................... 347,731
250,000 Telecommunications, Inc., 9.25%,
due 1/15/23 ............................ 235,820
275,000 Rogers Cable Systems, 10%, due 3/15/05 .. 280,500
----------
1,597,127
----------
TRANSPORTATION -- 0.7%
250,000 National Car Rental, 7.35%, due
10/20/03(a) ............................ 252,718
175,000 Jet Equipment Trust, 10%, due 6/15/12 ... 209,559
----------
462,277
----------
TOTAL CORPORATE OBLIGATIONS (Cost $7,273,858) 7,386,102
----------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 8.2%
274,942 Alliance HEL 96 2 A6, 8.3%, due 09/25/27 287,204
124,937 American Southwest Financial 1993-2 A1,
7.3%, due 1/18/09 ...................... 126,613
150,000 American Southwest Financial 1995-C1 A1b,
7.4%, due 11/17/04 .................... 154,757
5,343,651 Amsfs 93 2 S1 IO, due 1/18/09 ............ 282,519
250,000 Asset Securitization Corp., 7.4%, due
10/13/26 .............................. 256,788
172,113 Asset Securitization Corp., 1995-D1 A1,
7.59%, due 8/11/27 ..................... 179,144
197,423 Asset Securitization Corp., 1995-Md4 A1,
7.1%, due 8/13/29 ...................... 199,723
125,000 Beverly Finance Corp., 8.36%, due
7/15/04(a) ............................. 132,484
300,000 BSMI 96 09 L NAS, due 6/15/26 ............ 306,411
175,000 CBM Funding Corp., 1996, 7.08%,
due 2/1/13 ............................. 175,978
149,038 CMS 1996, 7.25%, due 1/25/26 ............. 146,240
123,375 CMSI 1995, 7.5%, due 4/25/25(a) .......... 121,911
145,136 CWMBS 1993-C, 6.5%, due 1/25/24 .......... 135,910
200,000 DLJMA 96, 7.58%, due 2/12/06 ............. 206,726
265,000 FHR 1632 SA INV FLTR Vr, due 11/15/23(c) . 207,230
144,848 First Boston Mortgage Security Corp.,
1993-5 B1, 7.3%, due 7/25/23 ........... 139,440
Independent National Mortgage Corp.,
1994-0 B1, 7.875%, due 9/25/24 ........ 193,302
96,964 JP Morgan 1995, 7.268%, due 7/25/10 ...... 98,674
100,000 Lakewood Mall Finance Company, 7%, due
8/13/10(a) ............................. 99,254
300,000 LBCMT96 C2 A Seq, due 10/25/26 ........... 308,026
225,000 Merrill Lynch Mortgage Investors, 7.42%,
due 3/25/26 ........................... 229,898
150,000 Mortgage Capital Funding, Inc., 7.6%, due
5/25/27 ................................ 155,153
1,084,170 Nomura ASC 95 MD4 CS2 IO VR, due 8/13/29 196,820
350,000 Rali 96 Qs8 A5 Nas, due 6/25/26 .......... 355,009
145,243 Residential Funding Mortgage Security
1993-S43 A10, 6.5%, due 11/25/23 ...... 135,785
100,000 Residential Funding Mortgage Security
1993-MZ3 A2, 6.97%, due 8/28/23 ....... 93,427
173,360 Residential Funding Mortgage Security
1995-R20 A5, 7.5%, due 12/25/25 ..... 172,538
148,844 Residential Funding Mortgage Security
1995-S16 A7, 7.5%, due 11/25/25 ..... 148,074
----------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost $5,187,227) ...................... 5,245,038
----------
<PAGE>
ASSET-BACKED OBLIGATIONS 2.5%
117,271 Aircraft Lease Portfolio Securitizations
Class B, 6.596%, due 3/15/19 ........... 117,916
200,000 Aircraft Lease Portfolio Securitizations
1994-1 A4, 7.8%, due 9/15/04 ........... 205,800
99,493 Aircraft Lease Portfolio Securitizations
1994-1 C, 9.35%, due 9/15/04 .......... 102,789
275,000 Amlt 1996 2A5, 8.08%, due 11/25/25 ...... 285,260
100,000 Carousel Center Financial- AI, 6.828%, due
11/15/07(a) .............. ............. 99,488
228,041 Carousel Center Financial C, 7.527%, due
10/15/07(a) ............................ 228,745
275,000 DELHE 1996 1 A7, 7.95%, due 6/25/27 ..... 281,089
300,000 IMCHel 96 3 A7, 8.05%, due 8/25/26 ...... 309,708
----------
TOTAL ASSET BACKED OBLIGATIONS (Cost
$1,595,906) ............................ 1,630,795
----------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 46.9%
FEDERAL GOVERNMENT LOAN MORTGAGE
CORPORATION -- 23.4%
3,750,000 7.5%, due 7/15/23(b) ..................... 3,762,900
3,050,000 7.5%, due 8/15/23(b) ..................... 3,060,490
600,000 7.5%, due 7/15/23(b) ..................... 602,064
1,800,000 7.5%, due 11/15/25(b) .................... 1,806,192
5,325,000 7.5%, due 6/15/25(b) ..................... 5,335,011
417,520 9.5%, due 12/1/16 ........................ 448,051
-----------
15,014,708
-----------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION -- 10.4%
113,704 93 205GTPO, 0%, due 9/25/23, 6.44%(d) .... 65,395
48,544 93 235H TPO, 0%, due 9/25/23, 7.85%(d) ... 34,466
149,198 93 243C TPO, due 11/25/23, 5.75%(d) ...... 108,457
30,899 93 243C XPPO, due 11/25/23, 5.74%(d) ..... 21,462
72,609 94 25CTPO, due 11/25/23, 5.64%(d) ........ 49,751
25,208 PL#034268 CL, DTD 9/1/86 due 9/1/16 ..... 26,774
224,710 PL#035052 CL, DTD 10/1/86 due 10/1/16 ... 238,671
599,392 TR 249 PO, DTD 10/1/93 due 10/25/23,
6.72%(d) ................................ 382,466
174,231 TR 254 PO,due 1/1/24, 5.74%(d) ........... 119,367
235,356 Strip 260 PO, due 4/1/24, 5.86%(d) ....... 159,489
105,640 10.5%, due 12/1/16 ...................... 116,675
118,844 10%, due 5/1/22 ......................... 130,563
2,000,000 7.5%, due 6/1/23(b) ...................... 2,003,760
275,000 7.5%, due 6/15/25(b) ..................... 275,517
1,950,000 7.5%, due 6/15/25(b) ..................... 1,953,666
1,000,000 7.5%, due 6/15/25(b) ..................... 1,001,880
-----------
6,688,359
-----------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION -- 9.5%
700,000 11%, due 6/15/15 ........................ 786,107
525,000 7.5%, due 6/15/25(b) ..................... 526,643
600,000 7.5%, due 10/1/23(b) ..................... 601,878
2,500,000 7.5%, due 6/15/25(b) ..................... 2,507,825
28,224 13.5%, due 11/15/14 ..................... 33,093
35,969 11.5%, due 2/15/16 ...................... 40,847
49,873 10.5%, due 8/15/16 ...................... 55,188
59,760 10.5%, due 6/15/16 ...................... 66,128
176,251 10.5%, due 9/15/19 ...................... 195,032
262,728 10.5%, due 4/15/25, DTD 4/1/95 .......... 291,991
439,548 11%, due 1/15/19 ........................ 480,791
461,221 11%, due 12/15/17 ....................... 518,108
----------
6,103,631
----------
<PAGE>
FEDERAL HOME LOAN MORTGAGE ASSOCIATION -- 3.6%
220,956 7%, due 7/1/24 .......................... 218,457
693,002 7%, due 12/1/24 ......................... 681,533
107,351 11%, due 9/1/16 ......................... 119,630
383,212 10%, due 9/1/17 ......................... 416,482
76,316 10.5%, due 10/1/11 ...................... 84,043
91,782 10.5%, due 11/1/18 ...................... 101,075
417,073 due 4/1/24, DTD 4/1/94 .................. 412,352
275,000 7.5%, due 6/15/06(b) .................... 275,000
----------
2,308,572
----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $29,832,142) ..................... 30,115,270
----------
U.S. TREASURY OBLIGATIONS -- 25.0%
3,650,000 U.S. Treasury Strip, 0%, due 2/15/19,
6.96%(d) ................................ 794,419
2,300,000 U.S. Treasury Strip, 0%, due 8/15/20,
6.97%(d) ............................... 450,729
3,175,000 U.S. Treasury Bond, 8.75%, due 8/15/20 .. 3,910,205
1,050,000 U.S. Treasury Note, 7.125%, due 9/30/99 . 1,082,813
5,935,000 U.S. Treasury Note, 7.5%, due 2/15/05 ... 6,375,708
3,400,000 U.S. Treasury Note, 6.125%, due 5/15/98 . 3,421,910
----------
TOTAL U.S. TREASURY OBLIGATIONS (Cost
$15,669,474) ........................... 16,035,784
----------
YANKEE BONDS -- 1.3%
250,000 Mexico Par Bond Series A, 6.25%,
due 12/31/19 ........................... 174,687
250,000 Mexico Series B, 6.25%, due 12/31/19 .... 174,687
500,000 United Mexican States Warrants 0%
due 6/30/03 ............................ 0
605,000 Republic of Argentina, 5.25%, due
3/31/23 ................................. 356,194
150,000 Republic of Colombia, 8.7%, due 2/15/16 . 142,992
----------
TOTAL YANKEE BONDS (Cost $748,331) ...... 848,560
----------
FOREIGN GOVERNMENT OBLIGATIONS 2.9%
DKR 3,425,000 Kingdom of Denmark, 8.0%, due 3/15/06 ... 631,512
DEM 815,000 Treuhandanstalt, 7.5%, due 9/9/04 ....... 591,653
GBP 340,000 UK Treasury, 9.75 %, due 8/27/02 ........ 614,013
----------
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $1,823,188) ..................... 1,837,178
----------
COMMERCIAL PAPER -- 39.8%
$2,000,000 American Express Credit ................. 1,992,694
2,000,000 Banc One ................................ 1,990,357
1,700,000 CJT holdings ............................ 1,696,934
1,700,000 John Deere .............................. 1,696,940
2,000,000 Ford Motor Credit Corp. ................. 1,993,000
1,700,000 GECC .................................... 1,696,940
2,000,000 General Re .............................. 1,984,542
1,700,000 Household Finance ....................... 1,696,940
2,000,000 IBM ..................................... 1,990,958
2,000,000 Metlife Funding ......................... 1,988,938
2,000,000 Raytheon ................................ 1,996,798
1,600,000 Transamerica Financial .................. 1,599,282
2,000,000 Weyerhauser Mortgage .................... 1,998,542
1,295,001 Investors Cash Reserve .................. 1,295,001
-----------
TOTAL COMMERCIAL PAPER (Cost $25,521,395). 25,617,866
-----------
TOTAL INVESTMENTS -- 138.2%
(Identified Cost $87,651,521)* ....................... 88,716,593
OTHER ASSETS LESS LIABILITIES -- (38.2%) ............... (24,538,211)
----------
NET ASSETS -- 100.0% ................................... $64,178,382
===========
(a) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
(b) Security purchased on a delayed delivery basis.
(c) Represents a variable rate note. Interest rate disclosed represents
current rate at 10/31/96.
(d) Effective yield (calculated at the date of purchase) is the yield at which
the bond accretes on an annual basis until maturity date.
* The aggregate cost of investments at October 31, 1996 for federal income tax
purposes is $87,818,883. Gross unrealized appreciation and depreciation of
securities was $1,025,107 and $127,397, respectively, resulting in net
unrealized appreciation of $897,710.
<PAGE>
REPUBLIC FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1996
- -------------------------------------------------------------------------------
OPEN FORWARD FOREIGN CURRENCY CONTRACTS
<TABLE>
<CAPTION>
NET UNREALIZED
EXPIRATION CONTRACT TO PRINCIPAL VALUE VALUE APPRECIATION/
DATE DELIVER LOCAL CURRENCY COST US$ (NOTE 2) (DEPRECIATION)
CONTRACTS TO BUY:
<S> <C> <C> <C> <C> <C>
11/05/96 Swedish Krona ............... 3,465,000 525,159 $ 526,382 $ 1,223
11/08/96 Swedish Krona ............... 420,000 63,658 63,807 149
11/08/96 Swedish Krona ............... 3,590,000 540,602 545,398 4,796
--------
6,168
--------
CONTRACTS TO SELL:
01/13/97 Danish Krone ................. 655,000 112,586 112,775 (189)
01/13/97 Danish Krone ................. 115,000 19,921 19,800 121
01/21/97 Danish Krone ................. 2,355,000 401,001 405,621 (4,620)
01/21/97 Danish Krone ................. 735,000 127,222 126,595 627
01/21/97 German Deutsche Mark ......... 1,790,000 1,167,264 1,185,484 (18,220)
01/21/97 German Deutsche Mark ......... 65,000 43,293 43,048 245
11/05/96 Swedish Krona ................ 3,465,000 527,478 526,381 1,097
11/08/96 Swedish Krona ................ 3,855,000 584,268 585,658 (1,390)
11/08/96 Swedish Krona ................ 155,000 23,426 23,548 (122)
--------
(22,451)
--------
NET UNREALIZED DEPRECIATION ON FORWARD FOREIGN CURRENCY CONTRACTS ....................... $(16,283)
========
</TABLE>
SCHEDULE OF OPEN FINANCIAL FUTURES CONTRACTS PURCHASED
NET UNREALIZED
EXPIRATION NUMBER OF CONTRACT DEPRECIATION
DATE CONTRACTS CONTRACTS VALUE OF CONTRACTS
- ----------- --------- --------- -------- ------------
12/19/96 12 US 5YR Note (CBT)M Dec 96 $1,271,924 $(14,888)
12/19/96 6 US 5YR Note (CBT)M Dec 96 638,118 (5,288)
12/02/96 9 US 10YR Note Fut Dec 96 959,568 (27,057)
12/02/96 5 US 10YR Note Fut Dec 96 531,721 (16,404)
--------
NET UNREALIZED DEPRECIATION ON OPEN FUTURES CONTRACTS ........ $(63,637)
========
<PAGE>
REPUBLIC FIXED INCOME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES -- OCTOBER 31, 1996
ASSETS:
Investments at value (Cost $87,651,521) (Note 2) ............... $ 88,716,593
Receivable for investments sold ................................ 11,952,294
Interest receivable ............................................ 593,399
Unamortized organization expenses .............................. 43,477
Unrealized appreciation on open forward foreign currency
contracts (Note 2) ............................................. 8,258
Cash ........................................................... 940
------------
Total Assets ............................................. 101,314,961
------------
LIABILITIES:
Payable for investments purchased .............................. 37,022,532
Unrealized depreciation on open forward foreign currency
contracts (Note 2) ............................................. 24,541
Variation margin payable on futures contracts (Note 2) ......... 4,594
Sub-advisory fee payable (Note 3) .............................. 38,007
Administration fee payable (Note 3) ............................ 2,652
Audit fees payable ............................................. 19,000
Legal fees payable ............................................. 11,227
Other accrued expenses ......................................... 14,026
------------
Total Liabilities ........................................ 37,136,579
------------
NET ASSETS:
Applicable to investors' beneficial interest ................... $ 64,178,382
============
See notes to financial statements
<PAGE>
REPUBLIC FIXED INCOME PORTFOLIO
STATEMENT OF OPERATIONS -- FOR THE YEAR ENDED OCTOBER 31, 1996
INVESTMENT INCOME (NOTE 2):
Interest income ................................................. $3,130,497
EXPENSES:
Manager and sub-advisory fees (Note 3) ............. $284,403
Administration fees (Note 3) ....................... 24,731
Fund accounting fees (Note 3) ...................... 40,000
Custodian fees and expenses ........................ 37,885
Audit fees ......................................... 21,533
Amortization of organization expenses .............. 13,607
Legal fees ......................................... 9,993
Trustees' fees (Note 3) ............................ 6,112
Insurance expense .................................. 5,936
Reports to shareholders ............................ 872
Other expenses ..................................... 1,473
--------
Total expenses ................................... 446,545
Voluntary fee reductions (Note 3) ................ (103,926)
Reimbursement of expenses (Note 3) ............... (9,526)
--------
Net expenses ................................................ 333,093
----------
NET INVESTMENT INCOME ........................................... 2,797,404
----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY TRANSACTIONS:
Net realized gain (loss) on:
Investments ................................................. (284,606)
Foreign currency transactions ............................... 379,308
Futures ..................................................... (8,098)
Net unrealized appreciation of investments ...................... 556,157
Net unrealized depreciation of futures contracts ................ (63,637)
Net unrealized appreciation of foreign currency contracts and
translations .................................................. 47,351
----------
Net realized and unrealized gain on investments and foreign
currency transactions ......................................... 626,475
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............ $3,423,879
==========
See notes to financial statements
<PAGE>
REPUBLIC FIXED INCOME PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD
JANUARY 9, 1995
FOR THE (COMMENCEMENT
YEAR ENDED OF OPERATIONS) TO
OCTOBER 31, 1996 OCTOBER 31, 1995
---------------- ----------------
INCREASE IN NET ASSETS FROM:
OPERATIONS:
Net investment income ............ $ 2,797,404 $ 869,764
Net realized gain from
investments and foreign ........ 86,604 1,056,225
Net unrealized appreciation of
investments and foreign ........ 539,871 349,074
---------- ----------
Net increase in net assets
resulting from operations .. 3,423,879 2,275,063
---------- ----------
CAPITAL TRANSACTIONS:
Contributions .................... 35,186,698 28,059,930
Withdrawals ...................... (4,454,722) (362,566)
---------- ----------
Net increase in net assets
from capital share
transactions ............... 30,731,976 27,697,364
---------- ----------
TOTAL INCREASE IN NET ASSETS 34,155,855 29,972,427
NET ASSETS:
Beginning of period .......... 30,022,527 50,100
---------- ----------
End of period ................ $64,178,382 $30,022,527
=========== ===========
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR THE PERIOD
JANUARY 9, 1995
FOR THE (COMMENCEMENT
YEAR ENDED OF OPERATIONS) TO
OCTOBER 31, 1996 OCTOBER 31, 1995
---------------- ----------------
RATIOS, SUPPLEMENTAL DATA
Net assets at end of period (000) $64,178 $30,023
Ratio of expenses to average
net assets .......................... 0.67% 0.46%(b)
Ratio of net investment income
to average net assets .............. 5.66% 6.04%(b)
Ratio of expenses to average
net assets(a) ...................... 0.90% 1.00%(b)
Ratio of net investment income
to average net assets(a) ........... 5.43% 5.51%(b)
Portfolio turnover ................... 152% 100.00%
- --------------------------------------------------------------------------
(a) During the period, certain fees were voluntarily reduced and expenses
reimbursed. If such voluntary fee reductions and expense reimbursements had
not occurred, the ratios would have been as indicated.
(b) Annualized.
See notes to financial statements
<PAGE>
REPUBLIC FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 1996
1. ORGANIZATION. The Republic Fixed Income Portfolio (the "Portfolio") is a
diversified separate series of Republic Portfolios (the "Portfolio Trust")
which is registered under the Investment Company Act of 1940, as amended
(the "Act"), as a no-load, open-end management investment company. The
Portfolio is a series of the Portfolio Trust which was organized as a master
trust fund under the laws of the State of New York on November 21, 1994. The
Portfolio commenced operations on January 9, 1995. The Declaration of Trust
permits the Trustees to issue an unlimited number of beneficial interests in
the Portfolio.
The Fund's investment objective is to realize above-average total return
over a market cycle of three to five years, consistent with reasonable risk,
by investing primarily in a diversified portfolio of U.S. Government
securities, corporate bonds (including bonds rated below investment grade
and commonly referred to as "junk bonds"), foreign fixed income securities,
mortgage backed securities of domestic issuers and other Fixed-income
securities.
2. SIGNIFICANT ACCOUNTING POLICIES. The following is a summary of the
significant accounting policies followed by the Portfolio in the preparation
of its financial statements. The policies are in conformity with U.S.
generally accepted accounting principles. The preparation of financial
statements requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses for the year.
Actual results could differ from those estimates.
INVESTMENT VALUATION:
The net asset value of the Portfolio is determined on each day on which the
New York Stock Exchange ("NYSE") is open for trading. Bonds and other
fixed-income securities which are traded over-the-counter and on a stock
exchange will be valued according to the broadest and most representative
market, and it is expected that for bonds and other fixed income securities
this ordinarily will be the over-the-counter market. Bonds and other fixed
income securities ( other than short-term obligations but including listed
issues) in the portfolio may be valued on the basis of valuations furnished
by a pricing service, use of which has been approved by the Board of
Trustees of the Portfolio Trust. In making such valuations, the pricing
service utilizes both dealer-supplied valuations and electronic data
processing techniques which take into account appropriate factors such as
institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics and other
market data, without exclusive reliance upon quoted prices or exchange or
over-the-counter prices, since such valuations are believed to reflect more
accurately the fair value of such securities. Short-term debt obligations
are valued at amortized cost, which constitutes fair value as determined by
the Board of Trustees of the Portfolio Trust. Futures contracts are normally
valued at the settlement price on the exchange on which they are traded.
Portfolio securities (other than short-term obligations) for which there are
no such valuations are valued at fair value as determined in good faith
under the direction of the Board of Trustees of the Portfolio Trust.
Bonds and other fixed income securities listed on a foreign exchange are
valued at the last quoted sales price available before the time when assets
are valued.
FOREIGN CURRENCY TRANSLATION:
The accounting records of the Portfolio are maintained in U.S. dollars.
Foreign currency amounts are translated into U.S. dollars at the current
rate of exchange to determine the value of investments, assets and
liabilities. Purchases and sales of securities, and income and expenses are
translated at the prevailing rate of exchange on the respective dates of
such transactions. The Portfolio does not isolate that portion of the
results of operations resulting from changes in foreign exchange rates on
investments from fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS:
The Portfolio may enter into forward foreign currency exchange contracts in
connection with planned purchases or sales of securities or to hedge the
U.S. dollar value of portfolio securities denominated in a particular
currency. The Portfolio could be exposed to risks if the counter-parties to
the contracts are unable to meet the terms of their contracts and from
unanticipated movements in the value of a foreign currency relative to the
U.S. dollar. The forward foreign currency exchange contracts are adjusted by
the daily exchange rate of the underlying currency and any gains or losses
are recorded for financial statement purpose as unrealized gains or losses
until the contract settlement date.
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 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 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 solely
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. The use of futures transactions
involves the risk of imperfect correlation in movements in the price of
futures contracts, interest rates and the underlying hedged assets, and the
possible inability of counterparties to meet the terms of their contracts.
ACCOUNTING FOR INVESTMENTS:
Securities transactions are recorded on a trade date basis. Realized gains
and losses are determined on the basis of specific identification. Dividend
income and other distributions from the portfolio securities are recorded on
the ex-dividend date, except, if the ex-dividend has passed. Certain
dividends from foreign securities are recorded as the Portfolio is informed
of the ex-dividend date. Dividend income is recorded net of foreign taxes
withheld where recovery of such taxes is not assured. Interest income is
accrued daily.
EXPENSES ALLOCATION:
Expenses incurred by the Portfolio Trust with respect to any two or more
portfolios in the Trust are allocated in proportion to the net assets of
each portfolio, except when allocations of direct expenses to each portfolio
can otherwise be made fairly. Expenses directly attributable to a portfolio
are charged to that portfolio.
TAXES:
Income received by the Portfolio from sources within foreign countries may
be subject to withholding and other income or similar taxes imposed by such
countries.
The Portfolio intends to comply with the requirements of the U.S.
Internal Revenue Code (the "Code"). The Portfolio intends to conduct its
operations so that the Funds investing in the Portfolio can qualify as
registered investment companies under Subchapter M of the Code. The
Portfolio will be treated as a partnership for U.S. Federal income tax
purposes and is therefore not subject to U.S. Federal income tax.
3. RELATED PARTY TRANSACTIONS.
INVESTMENT MANAGEMENT:
Republic National Bank of New York ("Republic" or the "Manager") is the
investment manager to the Portfolio pursuant to an investment management
agreement with the Portfolio Trust. For its services, the investment manager
receives from the Portfolio a fee, payable monthly, at the annual rate of
0.20% of the Portfolio's average daily net assets. The Manager waived its
entire fee of $98,923 for the year ended October 31, 1996.
SUB-ADVISORY:
Miller, Anderson & Sherrerd (the "Sub-Adviser") continuously manages the
investment portfolio of the Portfolio pursuant to a Sub-Advisory Agreement
with the Manager. For its services, the Sub-Adviser is paid a fee by the
Portfolio, computed daily and based on the Portfolio's average daily net
assets, equal to 0.375% of the net assets up to $50 million, 0.25% of the
net assets over $50 million up to $95 million, $300,000 on net assets over
$95 million up to $150 million, and 0.20% of net assets over $150 million up
to $250 million, and 0.15% of net assets over $250 million. It is the
responsibility of the Sub-Adviser not only to make investment decisions for
the Portfolio, but also to place purchase and sale orders for the portfolio
transactions of the Portfolio. For the year ended October 31, 1996 the
sub-advisory fee was $185,480, none of which was waived.
ADMINISTRATION:
Pursuant to an Administrative Services Agreement, Signature Financial Group
(Cayman) Ltd. ("Signature (Cayman)") provided the Portfolio with general
office facilities, and supervised the overall administration of the
Portfolio including, among other responsibilities, the preparation and
filing of all documents required for compliance by the Portfolio with
applicable laws and regulations and arranged for the maintenance of books
and records of the Portfolio for the period November 1, 1995 through
September 30, 1996. For its services to the Portfolio, Signature (Cayman)
received from the Portfolio, fees payable monthly equal on an annual basis
to 0.05% of the Portfolio's average daily net assets. For this period
Signature (Cayman) received $22,079 for its services.
Effective October 1, 1996, BISYS Fund Services Ireland Ltd. ("BISYS"),
was appointed as administrator to the Portfolio, pursuant to an
Administrative Services Agreement. BISYS serves as administrator in
substantially identical terms as described above. In this capacity, BISYS
earned $2,652 for the period October 1, 1996 through October 31, 1996.
FUND ACCOUNTING:
Pursuant to a Fund Accounting Agreement, Signature Financial Services, Inc.,
("SFSI") served as fund accounting agent to the Portfolio for the period
November 1, 1995 through September 30, 1996. For its services to the
Portfolio, SFSI received fees payable monthly equal on an annual basis to
$40,000. For this period, fees for these services aggregated $36,667, of
which $5,003 was voluntarily reduced.
Effective October 1, 1996, Investors Bank and Trust Co. ("IBT"),
provides fund accounting services to the Portfolio. For the period October
1, 1996 through October 31, 1996, the IBT fee for these services aggregated
$3,333.
TRUSTEE FEES:
The fees and expenses of the Trustees amounted to $6,112 for the year ended
October 31, 1996.
REIMBURSEMENT AND WAIVER OF EXPENSES:
The Manager and SFSI have voluntarily agreed to reduce a portion of their
fees, and to the extent necessary, reimburse the Portfolio for additional
expenses. For the year ended October 31, 1996 expenses of the Portfolio were
voluntarily limited to no more than 0.67% of the average daily net assets on
an annualized basis. For the year ended October 31, 1996 the Manager and
SFSI voluntarily reduced fees and reimbursed expenses aggregating $113,452.
4. INVESTMENT TRANSACTIONS. Purchases and sales of investments, other than
U.S. Government securities and short-term obligations, aggregated
$252,495,335, and $213,811,923, respectively for the year.
<PAGE>
INDEPENDENT AUDITOR'S REPORT
The Board of Trustees
Republic Portfolios:
We have audited the accompanying statement of net assets of Republic Fixed
Income Portfolio (the "Fund"), a portfolio of Republic Portfolios, as of October
31, 1996 and the related statements of operations and changes in net assets and
the financial highlights for the year then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsbility is to express an opinion on these financial statements and
financial highlights based on our audit. The statement of changes in net assets
and financial highlights for the period from January 9. 1995, (commencement of
operations) to October 31, 1995 were audited by other auditors whose report
thereon, dated December 8, 1995, expressed an unqualified opinion on that
statement and those financial highlights.
We conducted our audit in accordance with United States generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of October 31, 1996 by correspondence with the custodian or brokers. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the 1996 financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Republic Fixed Income Portfolio at October 31, 1996, the results of
its operations, the changes in its net assets and the financial highlights for
the year then ended in conformity with United States generally accepted
accounting principles.
KPMG
Toronto, Ontario
December 20, 1996
<PAGE>
FEDERAL INCOME TAX STATUS OF DIVIDENDS (UNAUDITED)
All dividends paid by the funds were paid out as short-term capital gain
dividends on net investment income dividends. For federal income tax purposes,
dividends from short-term capital gain are classified as ordinary income.
<PAGE>
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REPUBLIC
BOND
FUND
INVESTMENT ADVISER
Republic National Bank of New York
452 Fifth Avenue
New York, NY 10018
SUB-ADVISER
Miller Anderson & Sherrerd, L.L.P.
One Tower Bridge
West Conshohocken, PA 19428-2899
ADMINISTRATOR, DISTRIBUTOR AND SPONSOR
BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, OH 43219
CUSTODIAN AND TRANSFER AGENT
Investors Bank & Trust Company
89 South Street
Boston, MA 02111
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
99 High Street
Boston, MA 02110
LEGAL COUNSEL
Dechert Price & Rhoads
1500 K Street, N.W.
Washington, D.C. 20005
SHAREHOLDER SERVICING AGENTS:
Republic National Bank of New York
Republic Bank For Savings
452 Fifth Avenue
New York, NY 10018
(800) 782-8183
FOR NON-REPUBLIC CLIENTS:
Investors Bank & Trust Company
89 South Street
Boston, MA 02111
(800) 782-8183
[graphic omitted]
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REPUBLIC
BOND
FUND
ANNUAL REPORT
OCTOBER 31, 1996
