FFTW FUNDS, INC.
Semi-Annual Report
June 30, 1996
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200 PARK AVENUE
NEW YORK, NY 10166
TELEPHONE 212.681.3000
FACSIMILE 212.681.3250
August 23, 1996
Dear Shareholder:
We are pleased to present the Semi-Annual Report for the period ended
June 30, 1996. The FFTW Funds, Inc. continues to enjoy strong growth in its
seven Portfolios, each reflecting a specific strategy to meet the objectives
of our investors.
At June 30, net assets in our seven Portfolios totaled $981 million.
During the past quarter, we introduced the Mortgage Total Return Portfolio
for institutional investors who wish to participate in mortgage-related
securities. We also opened the International Fixed Income Portfolio to
expand our investors' options for participating in the non-U.S. dollar bond
markets.
We greatly appreciate your participation in the FFTW Funds. We welcome
the opportunity to discuss the objectives and results of our funds in a
continuing effort to meet your investment needs. Please do not hesitate to
contact us with questions or comments regarding this report, or for
assistance in general.
Yours sincerely,
/s/ O. John Olcay
O. John Olcay
Chairman of the Board and Chief Executive Officer
FFTW Funds, Inc.
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Table Of Contents
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U.S. Short-Term Fixed Income Portfolio
Overview 1
Schedule of Investments 2
Stable Return Portfolio
Overview 5
Schedule of Investments 6
Mortgage Total Return Portfolio
Overview 7
Schedule of Investments 8
Worldwide Fixed Income Portfolio
Overview 11
Schedule of Investments 12
Worldwide Fixed Income-Hedged Portfolio
Overview 14
Schedule of Investments 15
International Fixed Income Portfolio
Overview 17
Schedule of Investments 18
International Fixed Income-Hedged Portfolio
Overview 20
Schedule of Investments 21
Statements of Assets and Liabilities 22
Statements Of Operations 26
Statements of Changes in Net Assets 29
Financial Highlights 33
Notes to Financial Statements 41
FFTW Funds, Inc.
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U.S. Short-Term Fixed Income Portfolio
June 30, 1996
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The U.S. Short-Term Fixed Income Portfolio kept pace with its benchmark,
the IBC/Donoghue's Money Market Fund Average, for the one-year and six-month
periods ending June 30, 1996 (see below). For the five-year period ending
June 30, 1996, the Portfolio returned 4.29% annually, outperforming its
benchmark by an annualized rate of 22 basis points. The Portfolio ended the
period with net assets of $703.6 million. The Portfolio invests in high-
quality, short-term, dollar-denominated securities. It seeks to attain a high
level of total return while preserving capital and maintaining liquidity.
Average weighted duration is maintained at less than one year.
In the first three months of the year, interest rates rose in response
to stronger economic data. The powerful year-end bond market rally continued
in January, driven by a slight slowing in consumer and capital spending, the
lost production from a three-month strike at Boeing aircraft, a sharp downturn
in federal spending, and expectations for significant cuts in future budget
deficits. After a 25 basis point reduction in the discount rate and the
federal funds rate on January 31, Federal Reserve Chairman Alan Greenspan
dismissed any major concerns about downside risks to economic growth, causing
a significant readjustment of market expectations and a one-day rise in yields
of nearly one quarter of one percent. Without prospects for further near term
reductions in the federal funds rate, Treasury yields rose steadily throughout
the remainder of the quarter.
On the heels of February's high employment figures and the accompanying
sell-off in the Treasury market, market participants began the second quarter
searching for indications of the relative strength of the economy. With wage
inflation fears beginning to surface and rising expectations that the Federal
Reserve might tighten monetary policy, market participants pshed interest
rates higher and produced negative returns in intermediate and longer maturity
securities. Throughout the first half of the year, the Portfolio closely
tracked the performance of its benchmark as the duration was kept short of or
near the duration of the benchmark. Holdings of non-Treasury securities,
specifically holdings in mortgage- and asset-backed securities contributed
modestly to performance. The Portfolio currently maintains a short duration
position relative to the benchmark and an overweighting in non-Treasury
sectors.
Investment performance for the periods ended June 30, 1996:
Total Return
------------------------------------------------
Since
Six Last 12 Five Years Inception*
Months Months (Annualized) (Annualized)
U.S. Short-Term Fixed Income
Portfolio 2.42% 5.16% 4.29% 5.11%
IBC/Donoghue's Money Market
Fund Average 2.42% 5.19% 4.07% 4.84%
* U.S. Short-Term Fixed Income Portfolio commenced operations on
December 6, 1989.
FFTW Funds, Inc.
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U.S. Short-Term Fixed Income Portfolio - Schedule of Investments
June 30, 1996 (unaudited)
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Face
Amount Value
Asset- and Mortgage-Backed Securities - 36.6%
Beneficial Home Equity Loan Trust, Ser.
1995-1, Class A1, 5.712% due 3/28/25** $ 5,168,417 $ 5,171,648
Beneficial Mortgage Corp., Ser. 1996-1,
Class A, 5.672% due 4/28/26** 3,909,298 3,913,090
Carco Auto Loan Master Trust, Ser. 1991-3,
Class A, 7.875% due 3/15/98 12,250,000 12,246,068
Case Equipment Loan Trust, Ser. 1993-B,
Class A, 4.300% due 5/15/99 1,490,400 1,458,027
Case Equipment Loan Trust, Ser. 1994-C,
Class A1, 7.600% due 12/15/97 1,336,747 1,342,320
Caterpillar Financial Asset Trust, Ser. 1996-A,
Class A1, 5.418% due 5/25/97 2,153,117 2,149,670
Chase Manhattan Credit Card Trust, Ser. 1991-1,
Class A, 8.750% due 8/15/99 4,620,000 4,637,782
Chase Manhattan Grantor Trust, Ser. 1993-A,
Class A, 4.200% due 4/15/99 680,431 678,110
Chase Mortgage Finance Corp., Ser. 1995-1,
Class A1, 5.736% due 10/15/25** 7,836,090 7,904,656
Contimortgage Home Equity Loan Trust,
Ser. 1996-1, Class A8, 5.768% due 3/15/27** 4,171,893 4,169,285
Countrywide Funding Corp., Ser. 1994-5,
Class A1, 6.500% due 2/25/02 251,374 250,431
Discover Card Trust, Ser. 1991-B,
Class A, 8.625% due 7/16/98 4,275,000 4,265,804
FHLMC, Ser. 1385, Class C, 5.250% due 2/15/01 7,878,486 7,850,273
FNMA, Ser. 1993-26, Class C, 5.500%
due 12/25/09 328,866 327,116
FNMA, Ser. 1993-54, Class FK, 6.069%
due 4/21/21** 4,878,460 4,912,897
FNMA, Ser. 1993-191, Class PB, 4.750%
due 8/25/00 2,708,866 2,695,265
FNMA ARM, # 198087, 7.086% due 9/1/16** 10,567,570 10,855,146
Ford Credit Auto Loan Master Trust,
Ser. 1992-1, Class A, 6.875% due 1/15/99 10,550,000 10,615,938
Ford Credit Auto Loan Master Trust, Ser.
1996-2, Class A, 5.630% due 2/15/03** 7,000,000 6,993,763
GE Capital Mtg. Services, Inc., Ser. 1994-9,
Class A1, 6.500% due 2/25/24 677,096 674,134
GNMA, Ser. 1995-2, Class C, 8.500% due 2/20/14 913,163 912,496
Greentree Financial Corp., Ser. 1993-2,
Class A1, 5.930% due 7/15/18** 1,749,827 1,750,717
HFC Home Equity Loan, Ser. 1992-1,
Class A1, 5.890% due 5/20/07** 3,461,516 3,470,170
HFC Home Equity Loan, Ser. 1992-2,
Class A2, 5.860% due 10/20/07** 2,083,514 2,092,619
HFC Home Equity Loan, Ser. 1993-1,
Class A1, 5.840% due 5/20/08** 5,755,316 5,769,704
Independent National Mortgage Corp.,
Ser. 1994-O, Class A10, 7.500% due 9/25/24 2,547,157 2,546,187
MBNA Master Credit Card Trust, Ser. 1991-1,
Class A, 7.750% due 10/15/98 13,160,000 13,222,234
MBNA Master Credit Card Trust, Ser. 1993-4,
Class A, 5.750% due 12/15/00** 10,000,000 10,027,290
MBNA Master Credit Card Trust, Ser. 1994-1,
Class A, 5.650% due 3/15/01** 8,000,000 8,004,072
Merrill Lynch Asset Backed Corp, Ser. 1993-1,
Class A2, 5.125% due 7/15/98 3,964,472 3,957,054
Merrill Lynch Home Equity Loan, Ser. 1993-1,
Class A, 5.813% due 2/15/03** 611,352 611,461
Merrill Lynch Mortgage Investors, Ser. 1993-I,
Class A1, 5.768% due 11/15/23** 456,788 457,930
Merrill Lynch Mortgage Investors, Ser. 1994-F,
Class A1, 5.688% due 4/15/19** 1,888,672 1,889,852
Merrill Lynch Mortgage Investors, Ser. 1994-B,
Class A1, 5.838% due 12/15/19** 1,076,907 1,078,930
National Credit Card Trust, Ser. 1989-4,
Class A, 9.450% due 12/31/97 4,000,000 4,021,276
Novus Home Equity Credit Trust,
Ser. 1993-1, Class A, 5.946% due 12/31/03** 5,898,892 5,902,839
PNC Mortgage Securities Corp., Ser. 1994-2,
Class A1, 6.744% due 5/25/24 1,506,127 1,501,891
Premier Auto Trust, Ser. 1995-1, Class A3,
7.700% due 1/4/98 11,909,303 11,969,194
Premier Auto Trust, Ser. 1995-2, Class A4,
7.050% due 7/4/98 5,500,000 5,549,055
Prudential Home Mortgage Securities,
Ser. 1992-48, Class A2, 8.160% due 1/25/23 4,162,720 4,166,754
Prudential Home Mortgage Securities,
Ser. 1993-8, Class A9, 7.350% due 3/25/23 312,206 311,572
Prudential Bank & Trust Master Trust,
Ser. 1992-A, Class A, 6.250% due 7/15/98 79,166 78,989
Prudential Securities Secured Financing Corp.,
Ser. 1993-3, Class A3, 7.500% due 6/25/23 923,688 923,688
Residential Funding Mortgage, Ser. 1993-S26,
Class A3, 7.050% due 7/25/23 5,449,333 5,443,552
Residential Funding Mortgage, Ser. 1993-S31,
Class A1, 7.000% due 9/25/23 2,641,265 2,632,942
Residential Funding Mortgage, Ser. 1993-S41,
Class A1, 6.850% due 9/25/23 1,319,568 1,316,269
Residential Funding Mortgage, Ser. 1995-S8,
Class A1, 7.650% due 5/25/25 2,299,585 2,308,988
Resolution Trust Corp., Ser. 1992-M2, Class A1,
6.240% due 3/25/20** 1,598,062 1,598,062
Asset- and Mortgage-Backed Securities (continued)
Resolution Trust Corp., Ser. 1992-C3,
Class A2, 6.350% due 8/25/23** $ 721,800 $ 722,252
Resolution Trust Corp., Ser. 1992-C4,
Class A2, 6.700% due 6/25/24** 2,649,735 2,652,219
Resolution Trust Corp., Ser. 1992-11,
Class A5, 6.198% due 10/25/24** 6,299,001 6,299,001
Resolution Trust Corp., Ser. 1992-CHF,
Class A2, 6.468% due 12/25/20** 521,548 521,548
Ryland Mortgage Securities Corp., Ser. 1992-11,
Class A, 8.000% due 8/15/19 285,587 285,587
Student Loan Marketing Assn., Ser. 1996-2,
Class A1, 5.730% due 10/25/04** 10,000,000 10,000,000
Santa Barbara Funding II, Ser. A, Class 1,
6.213% due 3/20/18** 487,528 491,238
Sears Credit Account Trust, Ser. 1991-C,
Class A, 8.650% due 7/15/98 5,000,000 5,006,095
Sears Credit Account Trust, Ser. 1991-D,
Class A, 7.750% due 9/15/98 13,000,000 13,009,347
Signet Credit Card Master Trust, Ser. 1993-3,
Class A, 4.850% due 4/15/00 8,585,000 8,544,127
Standard Master Trust, Ser. 1991-4,
Class B, 8.250% due 8/7/96 8,000,000 8,052,304
Superior Wholesale Investment Financing,
Ser. 1994-A, Class A, 5.646% due 1/15/99** 5,500,000 5,502,578
Total (Cost - $258,342,039) 257,713,506
Bank Obligations - 10.4%
Bank of Boston (Nassau) Time Deposit,
5.000% due 7/1/96 33,400,000 33,400,000
Bank of Nova Scotia Yankee CD,
5.330% due 7/16/96 15,000,000 15,000,000
Chase Manhattan Bank Bankers Acceptance,
5.285% due 8/28/96 * 1,500,000 1,486,787
Toronto Dominion Euro CD, 5.090% due 8/23/96 4,000,000 4,000,000
Wachovia Bank Georgia N.A. CD,
5.330% due 7/17/96 6,000,000 5,999,950
West Deutsche Bank Time Deposit,
5.562% due 7/1/96 13,000,000 13,000,000
Total (Cost - $72,886,737) 72,886,737
Commercial Paper - 23.7%*
ABN/Amro Bank N.A. Finance, 5.295%
due 11/27/96 10,000,000 9,780,846
Abbey National N.A., 5.290% due 11/27/96 7,000,000 6,846,736
Daimler Benz N.A., 5.400% due 8/6/96 20,000,000 19,892,000
Falcon Asset Securitization, 5.400%
due 8/13/96 18,150,000 18,032,932
Ford Motor Credit Co., due 7/29/96 12,000,000 11,950,674
Glaxo Wellcome plc, 5.400% due 9/17/96 20,000,000 19,766,000
Ing Bank NV, 5.270% due 7/9/96 12,000,000 11,985,947
McKenna Triangle Corp., 5.300% due 8/9/96 5,000,000 4,971,293
McKenna Triangle Corp., 5.370% due 8/19/96 20,000,000 19,853,816
National Australia Funding, 5.300% due 8/6/96 4,000,000 3,978,800
NationsBank Corp., 5.310% due 11/25/96 10,000,000 9,783,175
Pitney Bowes Credit Corp., 5.360% due 8/19/96 4,400,000 4,367,900
Sandoz Corp., 5.270% due 7/29/96 11,000,000 10,954,912
Sweden (Kingdom of), 5.290% due 12/16/96 10,000,000 9,753,133
Toyota Motor Credit Corp., 5.350% due 8/12/96 5,000,000 4,968,792
Total (Cost - $166,886,956) 166,886,956
Corporate Obligations - 4.9%
Ameritech Capital Corp., 5.550% due 5/12/98** 5,000,000 5,006,170
General Electric Capital Corp., 5.530%
due 5/12/97** 6,200,000 6,195,790
NationsBank Texas N.A., 5.682% due 12/18/98** 10,000,000 10,021,150
PNC Bank N.A. Corp., 5.465% due 6/5/98** 6,000,000 6,003,726
Wells Fargo & Co., 5.600% due 12/29/97** 7,000,000 6,998,040
Total (Cost - $34,187,431) 34,224,876
Repurchase Agreements - 18.0%
Citibank Repurchase Agreement, 5.100%
due 7/1/96; Issued 6/28/96;
(Collateralized by $9,770,000 U.S.
Treasury Note, 7.500% due 12/31/96,
value $10,226,996) $10,000,000 $10,000,000
Eastbridge Capital Repurchase Agreement,
5.125% due 7/1/96; Issued 6/28/96;
(Collateralized by $20,160,000 U.S.
Treasury Note, 5.250% due 12/31/97,
value $20,438,169) 20,000,000 20,000,000
Lehman Brothers Repurchase Agreement,
5.130% due 7/1/96; Issued 6/28/96;
(Collateralized by $25,200,000 U.S.
Treasury Note, 5.875% due 8/15/98,
value $25,540,269) 25,000,000 25,000,000
Nomura Securities Repurchase Agreement,
5.125% due 7/1/96; Issued 6/28/96;
(Collateralized by $20,330,000 U.S.
Treasury Note, 6.125% due 5/15/98,
value $20,453,472) 20,000,000 20,000,000
J. P. Morgan Repurchase Agreement,
5.125% due 7/1/96; Issued 6/28/96;
(Collateralized by $25,278,000 U.S.
Treasury Bond, 7.250% due 5/15/16,
value $25,820,996) 25,000,000 25,000,000
Salomon Brothers Repurchase Agreement,
5.125% due 7/1/96; Issued 6/28/96;
(Collateralized by $5,450,000 U.S.
Treasury Note, 7.875% due 11/15/99,
value $5,725,277) 5,600,000 5,600,000
Salomon Brothers Repurchase Agreement,
5.400% due 7/1/96; Issued 6/28/96;
(Collateralized by $14,455,000 U.S.
Treasury Bond, 11.250% due 2/15/15,
value $21,215,095) 21,000,000 21,000,000
Total (Cost - $126,600,000) 126,600,000
U.S. Government and Agency Obligations - 6.0%*
FHLMC DN, 5.270% due 7/5/96 215,000 214,780
U.S. Treasury Bill, 4.850% due 8/22/96@ 3,000,000 2,978,505
U.S. Treasury Bill, 5.220% due 12/26/96 40,000,000 38,977,440
Total (Cost - $42,150,046) 42,170,725
Total Investments - 99.6% (Cost - $701,053,209) 700,482,800
Other Assets net of Liabilities - 0.4% 3,072,608
Net Assets - 100.0% $703,555,408
Summary of Abbreviations
ARM Adjustable Rate Mortgage
CD Certificate of Deposit
DN Discount Note
* Interest rate shown represents yield to maturity
at date of purchase.
** Variable or floating rate secuity. Coupon rate
shown reflects current rate.
@ Security, or a portion thereof, is held in a margin
account to cover financial futures contracts.
See Notes to Financial Statements
FFTW Funds, Inc.
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Stable Return Portfolio
June 30, 1996
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The total return for the Stable Return Portfolio in the first six
months of 1996 was 1.06%, compared to its benchmark, the Merrill Lynch 1-
2.99 Year Treasury Index, the return of which was 1.35%. For the one-year
period ending June 30, 1996, the Portfolio returned 5.62%, outperforming
its benchmark by an annualized rate of 16 basis points. The Portfolio ended
the period with net assets of $27.6 million. The Portfolio's objective is
to maintain as stable a rate of return as is consistent with preservation
of capital by investing primarily in high-quality debt securities with an
average weighted duration of less than three years and by using interest
rate hedging as a stabilizing technique.
After the powerful year-end bond market rally of the fourth quarter
of 1995 that continued into January, market participants had difficulty
determining how much of the economy's weakness was temporary and how much
reflected a cyclical faltering of the economic expansion. The effects of
the winter blizzard, two government shutdowns, and efforts to reduce
corporate inventories may have overwhelmed underlying trends and limited
the value of current economic data as distortions abounded. After a 25
basis point reduction in the discount rate and the federal funds rate on
January 31, Federal Reserve Chairman Alan Greenspan dismissed any major
concerns about downside risks to economic growth in early February.
Without prospects for further near term reductions in the federal funds
rate, Treasury yields rose steadily throughout the remainder of the
quarter. The Portfolio's duration was kept close to the duration of the
benchmark which helped the Portfolio's performance during the quarter.
Although second quarter employment reports did not contain the type
of dramatic news that the February release did, the bond market reacted
strongly to each report. With wage inflation fears beginning to surface
and rising expectations that the Federal Reserve might tighten monetary
policy as early as July, market participants pushed interest rates higher
through June. However, the lack of any direct evidence of price pressures
other than wages and May's disappointing retail sales report led to a late-
quarter rally of approximately 40 basis points. Over the quarter, the
return on Treasury securities varied significantly, ranging between +1.3%
and -0.5%, depending upon maturity. The Portfolio's duration was held to
the duration of the benchmark until June when it was moved substantially
short of the benchmark which detracted from performance. The Portfolio
currently maintains a short duration position relative to the benchmark.
Investment performance for the periods ended June 30, 1996:
Total Return
--------------------------------------------------
Since
Last 12 Inception*
Six Months Months (Annualized)
Stable Return Portfolio 1.60% 5.62% 5.02%
Merrill Lynch 1-2.99 Year
Treasury Index 1.35% 5.46% 4.95%
* Stable Return Portfolio commenced operations on July 26,1993.
FFTW Funds, Inc.
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Stable Return Portfolio - Schedule of Investments
June 30, 1996 (unaudited)
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Face
Amount Value
Long-Term Investments - 82.8%
U.S. Treasury Note, 6.875% due 2/28/97 $ 150,000 $ 151,172
U.S. Treasury Note, 6.500% due 4/30/97 220,000 221,306
U.S. Treasury Note, 6.500% due 8/15/97 1,960,000 1,971,634
U.S. Treasury Note, 5.750% due 9/30/97 700,000 698,468
U.S. Treasury Note, 5.000% due 1/31/98 500,000 492,031
U.S. Treasury Note, 5.875% due 4/30/98 1,300,000 1,295,125
U.S. Treasury Note, 6.000% due 5/31/98 11,500,000 11,474,838
U.S. Treasury Note, 6.250% due 6/30/98 5,500,000 5,513,750
U.S. Treasury Note, 6.375% due 5/15/99 470,000 471,175
U.S. Treasury Note, 6.875% due 8/31/99 520,000 527,475
U.S. Treasury Note, 5.500% due 12/31/00 20,000 19,263
Total (Cost - $22,811,892) 22,836,237
Short-Term Investments - 36.5%
Bank of Boston (Nassau) Time Deposit,
5.500% due 7/1/96 1,175,000 1,175,000
Citibank Repurchase Agreement,
5.100% due 7/1/96; Issued 6/28/96;
(Collateralized by $990,000 U.S.
Treasury Note, 7.500% due 12/31/96,
value $1,036,617) 1,000,000 1,000,000
Citibank Repurchase Agreement,
5.100% due 7/1/96; Issued 6/28/96;
(Collateralized by $410,000 U.S.
Treasury Note, 5.750% due 9/30/97,
value $414,066) 400,000 400,000
Eastbridge Capital Repurchase Agreement,
5.125% due 7/1/96; Issued 6/28/96;
(Collateralized by $2,450,000 U.S.
Treasury Bond, 5.625% due 6/30/97,
value $2,509,726) 2,500,000 2,500,000
Fuji Bank Repurchase Agreement,
5.130% due 7/1/96; Issued 6/28/96;
(Collateralized by $2,698,000 U.S.
Treasury Principal Strip, due 11/15/00,
value $2,021,611) 2,000,000 2,000,000
Sanwa Bank Repurchase Agreement,
5.100% due 7/1/96; Issued 6/28/96
(Collateralized by $1,952,000 U.S.
Treasury Bond, 5.625% due 6/30/97,
value $2,000,806) 2,000,000 2,000,000
UBS Securities, Inc. Repurchase Agreement,
5.080% due 7/1/96; Issued 6/28/96;
(Collateralized by $1,002,000 U.S.
Treasury Note, 5.250% due 7/31/98,
value $1,002,553) 1,000,000 1,000,000
Total (Cost - $10,075,000) 10,075,000
Total Investments - 119.3%
(Cost - $32,886,892) 32,911,237
Other Assets net of Liabilities - (19.3%) (5,315,251)
Net Assets - 100.0% $ 27,595,986
See Notes to Financial Statements
FFTW Funds, Inc.
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Mortgage Total Return Portfolio
June 30, 1996
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The Mortgage Total Return Portfolio commenced operations on April
29, 1996. The Portfolio's investment objective is to seek a high level of
total return consistent with preservation of capital and to maintain
liquidity by investing primarily in mortgage-related securities. The
Portfolio maintains an average weighted duration of between two and six
years. Since inception through June 30, 1996, the Portfolio's total return
was 1.13% compared to its benchmark, the Lehman Mortgage-Backed Securities
Index with a total return of 0.74%. Total net assets in the Portfolio as
of June 30, 1996, were $34.8 million.
The mortgage sector outperformed Treasuries and corporates during
the quarter. A combination of higher interest rates, lower expected
supply, and declining prepayment volatility raised investors' expectations
for future returns. The rise in interest rates during the first half of
1996 resulted in improved convexity characteristics for the market, since
borrowers found it less attractive to prepay their mortgages in the rising
rate environment.
The rise in interest rates and resulting decline in prepayment
activity also had the effect of reducing the prospects for gross mortgage
supply. The supply shortfall from lower prepayments more than offset any
increased demand from rising new home sales. Individual bond selection
played a key role in bolstering the Portfolio's performance relative to the
benchmark. Looking forward, prepayment rates should remain subdued and this
should have a positive impact on the mortgage securities market.
Investment performance for the period ended June 30, 1996:
Total Return
Since
Inception*
(Not Annualized)
Mortgage Total Return Portfolio 1.13%
Lehman Mortgage-Backed Securities Index 0.74%
* Mortgage Total Return Portfolio commenced
operations on April 29, 1996.
FFTW Funds, Inc.
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Mortgage Total Return Portfolio - Schedule of Investments
June 30, 1996 (unaudited)
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Face
Amount Value
Long-Term Investments - 138.5%
Federal National Mortgage Association
(FNMA) - 76.1%
(TBA), 6.500% due 1/1/11 $ 5,340,000 $ 5,166,450
(TBA), 6.500% due 7/1/03 1,640,000 1,609,763
(TBA), 8.500% due 7/1/11 2,800,000 2,874,376
(TBA), 8.500% due 7/1/26 200,000 205,313
(TBA), 9.000% due 7/1/26 1,070,000 1,116,813
ARM, 7.367% due 4/1/25 * # 1,148,578 1,189,496
ARM, 7.599% due 1/1/31 * 294,000 305,392
ARM, 7.645% due 6/1/24 * 804,917 839,126
ARM, 7.907% due 3/1/25 * 474,489 491,392
FRN, Ser. G92-60, Class F, 5.491%
due 10/25/22 * 837,661 808,343
IO, Ser. 163, Class 2, 13.609%
due 7/25/22** 217,550 230,240
IO, Ser. 1990-103, Class L, 3.190% due
9/25/20 #** 311,708 303,933
IO, Ser. 1991-56, Class U, 5.950% due
6/25/21 #** 75,684 75,365
IO, Ser. 1991-77, Class PL, 6.790% due
7/25/21 #** 337,997 337,162
IO, Ser. 1992-108, Class L, 14.510% due
7/25/07 #** 126,102 126,270
IO, Ser. 1992-109, Class L, 14.760% due
7/25/07 #** 202,849 199,825
IO, Ser. 1992-24, Class N, 15.650% due
3/25/07 #** 74,414 74,237
IO, Ser. 1992-70, Class M, 15.170% due
4/25/07 #** 188,063 189,961
IO, Ser. 1996-3L, Class L, 9.158%
due 7/1/06** 108,150 108,150
IO, Ser. 235, Class 2, 10.110%
due 8/1/23** 611,556 610,728
IO, Ser. 264, Class 2, 11.260%
due 7/1/24** 519,529 516,708
IO, Ser. G92-1, Class G, 14.060%
due 1/25/22 #** 63,627 60,917
IO, Ser. G92-6, Class E, 9.410%
due 12/25/21 #** 153,977 153,186
IO, Ser. G92-60, Class S, 36.654%
due 10/25/22 #** 66,414 75,171
IO, Ser. G92-8, Class L, 9.400%
due 1/25/22 #** 127,288 127,614
PO, Ser. 1993-100, Class J, 9.950%
due 6/25/23** 448,722 244,356
PO, Ser. 1993-100, Class N, 9.950%
due 6/25/23** 377,364 205,498
PO, Ser. 1993-111, Class B, 7.670%
due 12/25/20 #** 1,030,000 685,753
PO, Ser. 1993-152, Class J, 7.380%
due 8/25/23** 1,351,661 678,655
PO, Ser. 1993-152, Class K, 8.010%
due 8/25/23 #** 1,712,354 772,357
PO, Ser. 1993-157, Class E, 11.280%
due 5/25/22 #** 911,534 519,411
PO, Ser. 1993-219, Class C, 7.470%
due 8/25/23 #** 571,367 434,884
PO, Ser. 251, Class 1, 6.290%
due 11/1/23 #** 739,584 502,917
PO, Ser. 263, Class 1, 6.994%
due 5/25/24 #** 932,381 545,443
7.500% due 1/1/11 # 3,275,813 3,304,476
8.000% due 7/25/06 # 756,663 773,953
Total (Cost - $26,879,060) 26,463,634
Federal Home Loan Mortgage Corporation
(FHLMC) - 22.7%
(TBA), 7.000% due 7/1/26 $ 800,000 $ 770,750
(TBA), 8.500% due 7/1/26 1,800,000 1,847,813
IO, Ser. 1255, Class I, 16.110% due 7/15/21** 175,926 173,628
IO, Ser. 1295, Class JA, 14.780% due 3/15/07 #** 251,869 245,990
IO, Ser. 1366, Class KA, 16.390% due 9/15/07** 319,607 312,924
IO, Ser. 164, Class A, 8.696% due 3/1/24 #** 301,986 313,691
IO, Ser. 169, Class 169, 13.190% due 3/1/23 #** 668,301 695,216
IO, Ser. 1747, Class I, 8.000% due 6/15/23** 173,067 167,623
REMIC, Ser. 1511, Class L, 6.000% due 5/15/08 # 1,286,850 1,125,981
Ser. 1748, Class C, 8.000% due 9/15/24 # 1,030,000 1,051,517
Ser. 1765-B, Class BA, 10.000% due 1/15/17 637,802 666,497
Ser. 1792, Class B, 9.500% due 1/15/22 # 470,000 517,282
Total (Cost - $7,298,803) 7,888,912
Government National Mortgage Association
(GNMA) - 31.9%
7.500% due 10/15/22 1,941,066 1,924,082
7.500% due 12/15/22 806,677 799,619
7.500% due 3/15/23 850,495 843,053
7.500% due 5/15/23 893,282 885,466
7.500% due 6/15/23 1,175,604 1,165,318
7.500% due 7/15/23 1,022,067 1,013,124
7.500% due 8/15/23 483,209 478,981
7.500% due 9/15/23 453,360 449,393
7.500% due 10/15/23 84,914 84,171
7.500% due 11/15/23 198,929 197,189
8.000% due 10/15/24 299,917 302,541
8.000% due 11/15/24 393,388 396,831
8.000% due 12/15/24 31,823 32,101
TBA, 8.500% due 7/1/26 800,000 821,250
TBA, 8.000% due 8/1/26 1,700,000 1,714,875
Total (Cost - $11,110,959) 11,107,994
Asset-and Mortgage-Backed Securities - 7.5%
CTS ARM Trust, Ser. 1995-1, Class A,
6.110% due 5/25/26 * # 1,790,488 1,797,203
Morgan Stanley Mortgage Trust IO, Ser. 40,
CLass 14, 9.540% due 12/20/21** 278,399 262,396
Vendee Mortgage Trust IO, Ser. 1994-2,
Class 3, 18.930% due 6/15/24** 49,290 51,560
Vendee Mortgage Trust IO, Ser. 1994-3A,
Class 1, 15.890% due 9/15/24** 163,633 176,711
Vendee Mortgage Trust IO, Ser. 1994-3B,
Class 2, 19.070% due 9/15/24** 32,433 32,525
Vendee Mortgage Trust IO, Ser. 1995-1C,
Class 3, 14.890% due 2/15/25** 39,491 40,087
Vendee Mortgage Trust IO, Ser. 1996-1,
Class 1, 13.000% due 2/15/26** 145,601 153,882
Vendee Mortgage Trust IO, Ser. 1996-2,
Class 1, 10.000% due 6/15/26** 79,916 79,916
Total (Cost - $2,585,961) 2,594,280
U.S. Treasuries - 0.3%
U.S. Treasury Note, 6.875% due 5/15/06 #
(Cost - $118,966) $ 120,000 $ 120,413
Total Long-Term Investments (Cost - $47,993,749) 48,175,233
Short Term Investments - 6.9%
Bank of Boston (Nassau) Time Deposit, 5.500%
due 7/1/96
(Cost - $2,381,000) 2,381,000 2,381,000
Total Investments - 145.4% (Cost - $50,374,749) 50,556,233
Other Assets net of Liabilities - (45.4%) (15,778,985)
Net Assets - 100.0% $ 34,777,248
Schedule of Securities Sold Short - (8.1%)
FNMA (TBA), 8.500% due 7/1/26
(Cost - $2,798,225) 2,740,000 $ (2,812,783)
Summary of Abbreviations
ARM Adjustable Rate Mortgage
FRN Floating Rate Note
IO Interest Only (See Note 10 in Notes to Financial Statements)
PO Principal Only (See Note 10 in Notes to Financial Statements)
REMIC Real Estate Mortgage Investment Conduit
TBA To Be Announced
* Variable or floating rate security. Coupon rate shown reflects current rate.
** Interest rate shown represents yield to maturity at time of purchase.
# Security, or a portion thereof, has been segregated to cover to-be-announced
transactions and short sales.
See Notes to Financial Statements
FFTW Funds, Inc.
- -------------------------------------------------------------------------------
Worldwide Fixed Income Portfolio
June 30, 1996
- -------------------------------------------------------------------------------
The Worldwide Fixed Income Portfolio outperformed its benchmark, the
J.P. Morgan Global Government Bond Index (Unhedged), by 20 basis points in
the second quarter and by 1.61% for the twelve months ended June 30, 1996
(see below). The Portfolio's net assets totaled $119.5 million on June
30, 1996. The Portfolio's objective is to achieve a high level of total
return, consistent with the preservation of capital by investing in bonds
from around the world, denominated in U.S. dollars and other currencies.
The Portfolio's average weighted duration may not exceed eight years.
Global short-term interest rates generally declined during the first
quarter, but in Japan, rates remained unchanged. The Federal Reserve, the
Bundesbank, and the Bank of England all added monetary stimulus through
official rate reductions. However, core European bond yields generally
rose, discounting the probability that economic growth would continue to
accelerate following the first quarter. Higher yielding bond markets and
currencies outperformed due to declining inflation expectations. The
Portfolio held an underweighted position in the U.S. bond market relative
to the benchmark with the belief that resurgent domestic demand would
boost the production side of the economy, and that expectations of a
monetary easing that were priced into the market were unjustified. The
exposure was increased after February's strong employment report. The
Portfolio's exposure to the European bond markets was reduced to account
for increasing global growth expectations. Continuing economic
strengthening in Japan drove the Portfolio's underweighting in this bond
market. During the quarter, the U.S. dollar was overweighted and the
deutschemark underweighted.
Many of the trends of the first quarter continued through the second
quarter with a few notable exceptions. U.S. Treasury yields rose an
average of 40 basis points in response to evidence of strong domestic
demand and industrial production figures, and rapid job creation.
Japanese interest rates began to fluctuate as expectations for monetary
policy varied. At the same time, the yen declined as short-term rates
remained low and the trade surplus with the U.S. declined. The
Portfolio's exposure to the major markets remained consistent with that of
the first quarter. The portfolio manager anticipates maintaining an
underweighted position in the U.S. and Japanese bond markets and an
overweighted position in the European bond markets relative to the
Portfolio's benchmark. The Portfolio's current strategy is to overweight
the deutschemark at the expense of the U.S. dollar.
Investment performance for the periods ended June 30, 1996:
Total Return
-------------------------------------
Since
Last 12 Inception*
Six Months Months (Annualized)
Worldwide Fixed Income Portfolio (0.80%) 3.66% 8.06%
J.P. Morgan Global Government Bond
Index (Unhedged) (1.17%) 2.05% 8.92%
* Worldwide Fixed Income Portfolio
commenced operations on April 15,
1992.
FFTW Funds, Inc.
- ------------------------------------------------------------------------------
Worldwide Fixed Income Portfolio - Schedule of Investments
June 30, 1996 (unaudited)
- ------------------------------------------------------------------------------
Face
Amount (a) Value
Long-Term Investments - 43.6%
Australia - 0.8%
Australian Government, 10.000% due
2/15/06# AUD 730,000 $ 615,065
Australian Government, 6.750% due
11/15/06# AUD 540,000 364,620
Total (Cost - $980,598) 979,685
Belgium - 2.0%
Belgium Kingdom, 6.500% due 3/31/05#
(Cost - $2,479,366) BEF 75,000,000 2,371,350
Denmark - 1.1%
Kingdom of Denmark, 8.000% due 3/15/06#
(Cost - $1,358,974) DKK 7,600,000 1,346,272
France - 7.2%
French Treasury Bill, 7.000% due
10/12/00# FFR 25,000,000 5,134,500
Government of France, 7.250% due 4/25/06# FFR 16,900,000 3,457,791
Total (Cost - $8,774,343) 8,592,291
Germany - 7.3%
Deutschland Republic, 8.000% due 7/22/02#
(Cost - $8,954,624) DEM 12,000,000 8,668,056
Italy - 5.4%
Buoni Poliennali del Tesoro, 10.500%
due 11/1/00# ITL 4,600,000,000 3,187,800
Buoni Poliennali del Tesoro, 9.500%
due 2/1/01# ITL 4,900,000,000 3,292,800
Total (Cost - $6,154,723) 6,480,600
Japan - 1.7%
Government of Japan, 2.900% due 12/20/05
(Cost - $2,038,824) JPY 230,000,000 2,039,870
Netherlands - 2.7%
Bank Nederlandse Gemeenten, 6.750% due
10/3/05#
(Cost - $3,398,487) NLG 5,500,000 3,249,186
New Zealand - 1.6%
New Zealand Government, 8.000% due
11/15/06#
(Cost - $1,781,330) NZD 2,850,000 1,862,270
Spain - 1.7%
Bonos y Obligacion del Estado, 10.150%
due 1/31/06#
(Cost - $2,009,326) ESP 244,000,000 2,052,284
Sweden - 2.4%
Swedish Government, 10.250% due 5/5/00#
(Cost - $2,718,789) SKK 17,400,000 2,895,238
United Kingdom 4.2%
United Kingdom Treasury, 7.000%
due 11/6/01# GBP 1,600,000 $ 2,445,950
United Kingdom Treasury, 8.750%
due 8/25/17# GBP 1,600,000 2,585,630
Total (Cost - $4,946,264) 5,031,580
United States - 5.5%
U.S. Treasury Note, 6.375% due 5/15/99# 1,700,000 1,704,250
U.S. Treasury Note, 7.875% due 11/15/04# 200,000 215,000
U.S. Treasury Bond, 7.125% due 2/15/23# 1,600,000 1,616,000
U.S. Treasury Bond, 7.625% due 2/15/25# 2,790,000 3,007,968
Total (Cost - $6,659,890) 6,543,218
Total Long-Term Investments (Cost - $52,255,538) 52,111,900
Short-Term Investments - 60.1%
Bank of Boston (Nassau) Time Deposit,
5.500% due 7/1/96# 48,948,000 48,948,000
Federal National Mortgage Assn. DN, 5.340%
due 9/18/96* 7,000,000 6,907,588
Federal National Mortgage Assn. DN, 5.330%
due 9/26/96* 8,503,000 8,389,698
Federal National Mortgage Assn. (TBA), 8.500%
due 10/15/96 6,850,000 6,970,945
U.S. Treasury Bill, 4.870% due 7/25/96*@ 550,000 548,280
U.S. Treasury Bill, 4.988% due 8/22/96*@ 50,000 49,622
Total (Cost - $71,807,783) 71,814,133
Total Investments 103.7% (Cost - $124,063,321) 123,926,033
Other Assets net of Liabilities - (3.7%) (4,475,199)
Net Assets - 100.0% $ 119,450,834
Summary of Abbreviations
AUD Australian Dollar ITL Italian Lira
BEF Belgium Franc JPY Japanese Yen
DEM German Deutschemark NLG Netherlands Guilder
DKK Danish Krone NZD New Zealand Dollar
DN Discount Note SKK Swedish Krona
ESP Spanish Peseta TBA To Be Announced
FFR French Franc
GBP Great British Pound
(a) Face amount shown in U.S. dollars unless otherwise indicated.
* Interest rate shown represents yield to maturity at date of purchase.
# Security, or a portion thereof, has been segregated to cover forward
foreign exchange contracts, financial futures contracts, and firm
commitments.
@ Security, or a portion thereof, is held in a margin account to cover
financial futures contracts.
See Notes to Financial Statements
FFTW Funds, Inc.
- ------------------------------------------------------------------------------
Worldwide Fixed Income-Hedged Portfolio
June 30, 1996
- ------------------------------------------------------------------------------
The Worldwide Fixed Income-Hedged Portfolio seeks a high level of
total return consistent with preservation of capital by investing in high-
quality fixed income securities from bond markets worldwide and actively
utilizes currency hedging techniques. The Portfolio's average weighted
duration may not exceed eight years.
For an eleven-month period between August 1, 1994 and June 30, 1995,
the Worldwide Fixed Income-Hedged Portfolio was invested in cash or short-
term instruments due to its small size. Consequently, the Portfolio's
performance is compared to a Customized Benchmark* (see description of
benchmark below). The Portfolio rose by 2.03% in the second quarter and
by 9.74% in the one-year period ending June 30, 1996. The Portfolio's net
assets were $26.0 million as of June 30, 1996.
Global short-term interest rates generally declined during the first
quarter, but in Japan, rates remained unchanged. Higher yielding bond
markets and currencies outperformed due to declining inflation
expectations. The Portfolio held an underweighted position in the U.S.
bond market relative to the benchmark with the belief that resurgent
domestic demand would boost the production side of the economy, and that
expectations of a monetary easing that were priced into the market were
unjustified. The Portfolio's exposure to the European bond markets was
reduced to account for increasing global growth expectations. Continuing
economic strengthening in Japan drove the Portfolio's underweighting in
this bond market.
Many of the trends of the first quarter continued through the second
quarter with a few notable exceptions. U.S. Treasury yields rose an
average of 40 basis points in response to evidence of strong domestic
demand and industrial production figures, and rapid job creation.
Japanese interest rates began to fluctuate as expectations for monetary
policy varied. At the same time, the yen declined as short-term rates
remained low and the trade surplus with the U.S. declined. The
Portfolio's exposure to the major markets remained consistent with that of
the first quarter. The Portfolio currently maintains an underweighted
position in the U.S. and Japanese bond markets and an overweighted
position in the European bond markets relative to its benchmark.
Investment performance for the periods ended June 30, 1996:
Total Return
----------------------------------
Since
Last 12 Inception**
Six Months Months (Annualized)
Worldwide Fixed Income-Hedged Portfolio 1.94% 9.74% 9.59%
Customized Benchmark* 1.64% 9.11% 6.42%
* Customized Benchmark:
May 19, 1992 through July 31, 1994 - J.P. Morgan Global Government Bond
Index (Hedged)
August 1, 1994 through June 30, 1995 - IBC/Donoghue's Money Market Fund
Average
July 1, 1995 through June 30, 1996 - J.P. Morgan Global Government
Bond Index (Hedged)
** Worldwide Fixed Income-Hedged Portfolio commenced operations
on May 19, 1992.
FFTW Funds, Inc.
- ------------------------------------------------------------------------------
Worldwide Fixed Income-Hedged Portfolio - Schedule of Investments
June 30, 1996 (unaudited)
- ------------------------------------------------------------------------------
Face
Amount (a) Value
Long-Term Investments - 43.1%
Australia - 0.8%
Australian Government, 10.000%
due 2/15/06#
(Cost - $212,241) AUD 250,000 $ 210,639
Belgium - 2.4%
Belgium Kingdom (0273), 6.500%
due 3/31/05#
(Cost - $659,274) BEF 20,000,000 632,360
Denmark - 1.2%
Kingdom of Denmark, 8.000%
due 3/15/06#
(Cost - $304,056) DKK 1,700,000 301,140
France - 7.5%
French Treasury Bill, 7.000%
due 10/12/00# FFR 6,000,000 1,232,280
Government of France, 7.250%
due 4/25/06# FFR 3,500,000 716,111
Total (Cost - $1,991,370) 1,948,391
Germany - 6.1%
Deutschland Republic, 8.000%
due 7/22/02#
(Cost - $1,636,266) DEM 2,200,000 1,589,144
Italy - 5.5%
Buoni Poliennali del Tesoro, 10.500%
due 11/1/00# ITL 900,000,000 623,700
Buoni Poliennali del Tesoro, 9.500%
due 2/1/01# ITL 1,200,000,000 806,400
Total (Cost - $1,358,121) 1,430,100
Japan - 1.7%
Government of Japan, 2.900%
due 12/20/05
(Cost - $437,904) JPY 49,400,000 438,129
Netherlands - 3.0%
Bank Nederlandse Gemeenten, 6.750%
due 10/3/05#
(Cost - $803,277) NLG 1,300,000 767,989
New Zealand 1.6%
New Zealand Government, 8.000%
due 11/15/06#
(Cost - $406,268) NZD 650,000 424,728
Spain - 1.7%
Bonos y Obligacion del Estado, 10.150%
due 1/31/06#
(Cost - $436,452) ESP 53,000,000 445,783
Sweden - 2.8%
Swedish Government, 10.250%
due 5/5/00#
(Cost - $681,415) SKK 4,300,000 715,490
United Kingdom - 5.4%
United Kingdom Treasury, 7.000%
due 11/6/01# GBP 500,000 764,360
United Kingdom Treasury, 8.750%
due 8/25/17# GBP 400,000 646,406
Total (Cost - $1,386,755) 1,410,766
United States - 3.4%
U.S. Treasury Bond, 7.125%
due 2/15/23# 350,000 353,500
U.S. Treasury Bond, 7.625%
due 2/15/25# 490,000 528,281
Total (Cost - $1,050,218) 881,781
Total Long-Term Investments
(Cost - $11,363,617) 11,196,440
Short-Term Investments - 63.1%
Bank of Boston (Nassau) Time Deposit,
5.500% due 7/1/96# 10,617,000 10,617,000
Federal National Mortgage Assn. DN,
5.340% due 9/18/96* 2,000,000 1,973,596
Federal National Mortgage Assn. DN,
5.330% due 9/26/96* 1,512,000 1,491,853
Federal National Mortgage Assn. (TBA),
8.500% due 10/15/96 2,150,000 2,187,961
U.S. Treasury Bill, 4.870%
due 7/25/96*@ 100,000 99,687
U.S. Treasury Bill, 4.988%
due 8/22/96*@ 50,000 49,622
Total (Cost - $16,270,088) 16,419,719
Total Investments - 106.2%
(Cost - 27,633,705) 27,616,159
Other Assets net of Liabilities - (6.2%) (1,613,814)
Net Assets - 100.0% $ 26,002,345
Summary of Abbreviations
AUD Australian Dollar GBP Great British Pound
BEF Belgium Franc
ITL Italian Lira
DEM German Deutschemark JPY Japanese Yen
DKK Danish Krone NLG Netherlands Guilder
DN Discount Note NZD New Zealand Dollar
ESP Spanish Peseta SKK Swedish Krona
FFR French Franc TBA To Be Announced
(a) Face amount shown in U.S. dollars unless otherwise indicated.
* Interest rate shown represents yield to maturity at date of purchase.
# Security, or a portion thereof, held in segregated account to cover
forward foreign exchange contracts, financial futures contracts, and
firm commitments.
@ Security, or a portion thereof, is held in a margin account to cover
financial futures contracts.
See Notes to Financial Statements
FFTW Funds, Inc.
- ------------------------------------------------------------------------------
International Fixed Income Portfolio
June 30, 1996
- ------------------------------------------------------------------------------
The International Fixed Income Portfolio commenced operations on May 9,
1996. The Portfolio's net assets totaled $14.0 million on June 30, 1996.
The Portfolio's objective is to achieve a high level of total return,
consistent with the preservation of capital by investing in bonds from
outside the U.S., denominated in non-U.S. currencies. The Portfolio's
average weighted duration may not exceed eight years.
The Portfolio's current strategy reflects the fact that the Bank of
Japan has been restraining expectations of short-term rate increases in the
near term, although the weight of economic evidence points to strong and
evenly balanced growth. Consequently, the Portfolio is positioned
defensively in the Japanese bond market and will be structured to benefit
from a flatter Japanese yield curve as the market moves to discount higher
short-term rates. The degree of synchronization of world growth argues
against significant foreign exchange exposure.
Investment performance for the period ended June 30, 1996:
Total Return
Since Inception*
(Not Annualized)
International Fixed Income Portfolio (0.18%)
J.P. Morgan Global Government Bond Index
(Non-U.S. Unhedged) 0.65%
* International Fixed Income Portfolio commenced operations on May 9, 1996.
FFTW Funds, Inc.
- ------------------------------------------------------------------------------
International Fixed Income Portfolio - Schedule of Investments
June 30, 1996 (unaudited)
- ------------------------------------------------------------------------------
Face
Amount (a) Value
Long-Term Investments - 62.4%
Belgium - 3.4%
Belgium Kingdom, 6.500% due 3/31/05#
(Cost - $474,774) BEF 15,000,000 $ 473,880
Denmark - 1.9%
Kingdom of Denmark, 8.000% due 3/15/06#
(Cost - $263,037) DKK 1,500,000 265,712
France - 7.9%
French Treasury Bill, 7.000% due
10/12/00#
(Cost - $1,105,968) FRF 5,400,000 1,109,052
Germany - 17.0%
Bundesrepublic Deutschland, 8.250%
due 9/20/01# DEM 1,100,000 802,873
Bundesobligation Republic, 8.375%
due 5/21/01# DEM 2,150,000 1,574,615
Total (Cost - $2,383,331) 2,377,488
Italy - 8.2%
Buoni Poliennali del Tesoro, 9.500%
due 2/1/01#
(Cost - $1,108,039) ITL 1,700,000,000 1,142,400
Netherlands - 4.4%
Netherlands Government, 6.000%
due 1/15/06#
(Cost - $627,069) NLG 1,100,000 625,131
Spain - 3.0%
Bonos y Obligacion del Estado, 10.150%
due 1/31/06#
(Cost - $410,799) ESB 50,000,000 420,550
Sweden - 4.2%
Swedish Government, 10.250% due 5/5/00#
(Cost - $562,046) SEK 3,500,000 582,375
United Kingdom - 12.4%
United Kingdom Treasury, 8.000%
due 12/7/00 GBP 600,000 959,281
United Kingdom Treasury, 8.750%
due 8/25/17# GBP 480,000 775,689
Total (Cost - $1,705,360) 1,734,970
Total Long-Term Investments (Cost - $8,640,423) 8,731,558
Short-Term Investments - 36.0%
Bank of Boston (Nassau) Time Deposit,
5.500% due 7/1/96@ $ 4,730,000 $ 4,730,000
Federal National Mortgage Assn. DN,
5.330% due 9/26/96* 300,000 296,003
Total (Cost - $5,026,003) 5,026,003
Total Investments - 98.4% (Cost - $13,666,426) 13,757,561
Other Assets net of Liabilities - 1.6% 218,050
Net Assets - 100.0% $ 13,975,611
Summary of Abbreviations
BEF Belgium Franc FFR French Franc
DEM German Deutschemark GBP Great British Pound
DKK Danish Krone ITL Italian Lira
DN Discount Note NLG Netherlands Guilder
ESP Spanish Peseta SKK Swedish Krona
(a) Face amount shown in U.S. dollars unless otherwise indicated.
* Interest rate shown represents yield to maturity at date of purchase.
# Security, or a portion thereof, held in segregated account to cover
forward foreign exchange contracts, financial futures contracts, and
firm commitments.
@ Security, or a portion thereof, held in a margin account to cover
financial futures contracts.
See Notes to Financial Statements
FFTW Funds, Inc.
- --------------------------------------------------------------------------------
International Fixed Income-Hedged Portfolio
June 30, 1996
- --------------------------------------------------------------------------------
The International Fixed Income-Hedged Portfolio seeks to achieve a
high level of total return consistent with the preservation of capital by
investing in bonds from outside the U.S., denominated in non-U.S.
currencies but hedged into U.S. dollars. The Portfolio rose 0.87% during
the first six months of 1996. Its non-U.S. benchmark, the J.P. Morgan
Global Government Bond Index (Non-U.S. Hedged), rose 3.60% for the same
period and its U.S. benchmark, the J.P. Morgan 3-Month Eurodeposit Index,
rose 2.78% over the same period. The Portfolio's net assets totaled $55.4
million on June 30, 1996.
In the first quarter, core European bond yields generally rose
discounting the probability that economic growth would continue to
accelerate following the first quarter. German and U.K. gilt yields rose
in anticipation of economic rebounds. Interest rates declined in the
higher-yielding European bond markets, however, as improving inflation
expectations, stronger European currencies, and more confidence about
fiscal policy allowed the Central Banks of Italy, Spain, and Sweden to cut
official interest rates. In Japan, bond yields were more volatile but
ended the quarter almost unchanged. In summary, global bond markets
reacted to stronger economic growth expectations rather than to inflation
news which was uniformly excellent. The Portfolio's overweighting of the
European bond market was reduced to a neutral stance at the end of the
period. The Japanese bond market was underweighted strategically and
exposure was increased to achieve a significant position by quarter end.
A benign environment for bond markets prevailed during the second
quarter. The yields of the larger core markets drifted higher in
anticipation of firming economic growth. After the 50 basis point
reduction in the discount rate by the Bundesbank in April, the major
central banks pursued steady monetary policies. Several European monetary
authorities, however, further reduced short-term interest rates to promote
economic activity.
Investment performance for the periods ended June 30, 1996:
Total Return
Since
Recommencement
of Operations*
Six Months (Not Annualized)
---------------------------------
International Fixed Income-Hedged
Portfolio 0.87% 4.71%
J.P. Morgan Global Government
Bond Index (Non-U.S. Hedged) 3.60% 8.21%
J.P. Morgan 3-Month Eurodeposit Index 2.78% 4.60%
* The Portfolio redeemed all of its assets on December 30, 1994, and began
selling shares again on September 14, 1995. The total return (on an annualized
basis) from its original inception of March 25, 1993 through December 30, 1994,
was 5.39%, versus the J.P. Morgan Global Government Bond Index (Non-U.S.
Hedged), which had an annualized return of 2.98% for the same period, and the
J.P. Morgan 3-Month Eurodeposit Index, which had an annualized return of 4.05%
for the same period. The return stated is for the period commencing
September 14, 1995.
FFTW Funds, Inc.
- --------------------------------------------------------------------------------
International Fixed Income-Hedged Portfolio - Schedule of Investments
June 30, 1996 (unaudited)
- --------------------------------------------------------------------------------
Face
Amount (a) Value
Long-Term Investments - 0.0%*
Germany - 0.0%*
Bundesobligation, 5.125% due 11/21/00#
(Cost - $659) DEM 1,000 $ 651
Italy - 0.0%*
Buoni Poliennali del Tesoro, 10.500%
due 11/1/00#
(Cost - $3,360) ITL 5,000,000 3,465
Spain - 0.0%*
Spanish Government, 12.250% due 3/25/00#
(Cost - $1,055) ESP 120,000 1,061
Total Long-Term Investments (Cost - $5,074) 5,177
Short-Term Investments - 101.0%
Bank of Boston (Nassau) Time Deposit,
5.500% due 7/1/96# 48,925,000 48,925,000
Federal National Mortgage Assn. DN,
5.330% due 9/26/96** 5,100,000 5,032,042
U.S. Treasury Bill, 4.870% due 7/25/96** 2,000,000 1,993,744
Total (Cost - $55,949,647) 55,950,786
Total Investments - 101.0% (Cost - $55,954,721) 55,955,963
Other Assets net of Liabilities - (1.0%) (529,520)
Net Assets - 100.0% $ 55,426,443
Summary of Abbreviations
DEM German Deutschemark ITL Italian Lira
DN Discount Note ESP Spanish Peseta
(a) Face amount shown in U.S. dollars unless otherwise indicated.
* Rounds to less than 0.05%
** Interest rate shown represents yield to maturity at date of purchase.
# Security, or a portion thereof, held in segregated account to cover
forward foreign exchange contracts and firm commitments.
See Notes to Financial Statements
FFTW Funds, Inc.
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities
June 30, 1996 (unaudited) U.S. Portfolios
- --------------------------------------------------------------------------------
U.S. Short-Term Stable
Fixed Income Return
Portfolio Portfolio
Assets
Investments in securities, at value
(Cost - $701,053,209 and $32,886,892,
respectively) $ 700,482,800 (a) $ 32,911,237 (b)
Cash 294 553
Receivable from Investment Adviser 98,302 11,491
Interest receivable 3,022,680 171,609
Other assets 33,004 192
Total assets 703,637,080 33,095,082
Liabilities
Payable for securities purchased - 5,490,910
Distributions payable from investment
income, net 3,988 -
Variation margin payable 7,975 -
Accrued expenses and other liabilities 69,709 8,186
Total liabilities 81,672 5,499,096
Net Assets $ 703,555,408 $ 27,595,986
Shares Outstanding (par value $.001) 71,466,748 2,787,084
Net Asset Value Per Share $ 9.84 $ 9.90
Components of Net Assets as of
June 30, 1996 were as follows:
Capital stock at par value ($.001) $ 71,467 $ 2,787
Capital stock in excess of par value 709,384,212 27,571,485
Undistributed investment income, net 71,221 674
Accumulated net realized loss (5,381,579) (3,305)
Net unrealized appreciation
(depreciation) on investments,
and on financial futures and
options contracts (589,913) 24,345
$ 703,555,408 $ 27,595,986
(a) Includes repurchase agreements amounting to $126,600,000.
(b) Includes repurchase agreements amounting to $10,075,000.
See Notes to Financial Statements
FFTW Funds, Inc.
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities (continued)
June 30, 1996 (unaudited) U.S. Portfolios
- --------------------------------------------------------------------------------
Mortgage
Total Return
Portfolio
Assets
Investments in securities, at value (Cost - $50,374,749) $ 50,556,233
Cash 4,254
Receivable from Investment Adviser 8,301
Receivable for securities sold 2,812,536
Deposit with broker for securities sold short 2,807,282
Interest receivable 350,128
Total assets 56,538,734
Liabilities
Payable for securities purchased 18,931,768
Market value of securities sold short (Proceeds - $2,798,225) 2,812,783
Accrued expenses and other liabilities 16,935
Total liabilities 21,761,486
Net Assets $ 34,777,248
Shares Outstanding (par value $.001) 3,476,105
Net Asset Value Per Share $ 10.00
Components of Net Assets as of June 30, 1996 were as follows:
Capital stock at par value ($.001) $ 3,476
Capital stock in excess of par value 34,754,991
Undistributed investment income, net 1,351
Accumulated net realized loss (149,496)
Net unrealized appreciation on investments, and on securities
sold short 166,926
$ 34,777,248
See Notes to Financial Statements
FFTW Funds, Inc.
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities (continued)
June 30, 1996 (unaudited) Global & International Portfolios
- --------------------------------------------------------------------------------
Worldwide Worldwide Fixed
Fixed Income Income-Hedged
Portfolio Portfolio
Assets
Investments in securities, at value
(Cost - $124,063,321 and
$27,633,705, respectively) $ 123,926,033 $ 27,616,159
Cash 447 720
Foreign cash (Cost - $597,823
and $133,422, respectively) 604,839 132,623
Receivable from Investment Adviser 17,526 37,058
Receivable for securities sold 13,458,576 3,403,522
Interest receivable 1,761,199 378,395
Variation margin receivable 65,815 16,365
Other assets 14,399 1,965
Total assets 139,848,834 31,586,807
Liabilities
Payable for securities purchased 19,758,577 5,370,554
Distributions payable from income 86,589 -
Net unrealized depreciation of forward
foreign exchange contracts 510,462 190,414
Accrued expenses and other liabilities 42,372 23,494
Total liabilities 20,398,000 5,584,462
Net Assets $ 119,450,834 $ 26,002,345
Shares Outstanding (par value $.001) 12,581,658 2,415,530
Net Asset Value Per Share $ 9.49 $ 10.76
Components of Net Assets as of
June 30, 1996 were as follows:
Capital stock at par value ($.001) $ 12,582 $ 2,416
Capital stock in excess of par value 133,938,869 27,235,115
Undistributed investment income. net 4,185 659,059
Accumulated net realized loss (13,966,455) (1,712,839)
Net unrealized depreciation on
investments, forward foreign exchange
contracts, financial futures contracts,
and on translation of other assets and
liabilities denominated in foreign
currency (538,347) (181,406)
$ 119,450,834 $ 26,002,345
See Notes to Financial Statements
FFTW Funds, Inc.
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities (continued)
June 30, 1996 (unaudited) Global & International Portfolios
International Fixed International
Income Fixed Income-
Portfolio Hedged Portfolio
Assets
Investments in securities, at
value (Cost - $13,666,426 and
$55,954,721, respectively) $ 13,757,561 $ 55,955,963
Cash 635 112
Foreign cash (Cost - $22,280 and
$199,294, respectively) 22,269 186,097
Receivable from Investment Adviser 12,495 24,235
Receivable for securities sold 3,371,624 -
Interest receivable 223,768 25,084
Variation margin receivable 8,211 4,000
Other assets 2,289 1,007
Total assets 17,398,852 56,196,498
Liabilities
Payable for securities purchased 3,349,940 -
Net unrealized depreciation of forward
foreign exchange contracts 58,123 740,976
Accrued expenses and other liabilities 15,178 29,079
Total liabilities 3,423,241 770,055
Net Assets $ 13,975,611 $ 55,426,443
Shares Outstanding (par value $.001) 1,411,620 5,538,570
Net Asset Value Per Share $ 9.90 $ 10.01
Components of Net Assets as of
June 30, 1996 were as follows:
Capital Stock at par value ($.001) $ 1,412 $ 5,539
Capital Stock in excess of par value 14,113,867 55,132,002
Undistributed investment income, net - 107,506
Accumulated net realized gain (loss) (190,676) 932,366
Net unrealized appreciation
(depreciation) on investments,
forward foreign exchange contracts,
financial futures contracts, and
on translation of other assets and
liabilities denominated in foreign
currency 51,008 (750,970)
$ 13,975,611 $ 34,004,887
See Notes to Financial Statements
FFTW Funds, Inc.
- --------------------------------------------------------------------------------
Statements of Operations
For the Period Ended June 30, 1996 (Unaudited) U.S. Portfolios
- --------------------------------------------------------------------------------
U.S. Short-Term Stable Mortgage
Fixed Income Return Total Return
Portfolio Portfolio Portfolio*
Investment Income
Interest $ 15,777,313 $ 262,274 $ 412,543
Expenses
Investment advisory fees 504,844 7,938 17,199
Administration fees 154,520 2,439 3,347
Custodian fees 124,176 6,912 5,683
Shareholder recordkeeping fees 20,490 759 204
Legal fees 8,320 191 243
Audit fees 16,173 4,989 6,224
Directors' fees 23,444 257 825
SEC filing fees 10,607 121 -
Other fees and expenses 32,685 1,145 380
Total operating expenses 895,259 24,751 34,105
Waiver of investment advisory fees
and reimbursement of other expenses (129,763) (10,589) (8,301)
Operating expenses, net 765,496 14,162 25,804
Interest expense 305,002 23,904 631
Total expenses 1,070,498 38,066 26,435
Investment income, net 14,706,815 224,208 386,108
Net Realized and Unrealized Gain
(Loss) on Investments and on Financial
Futures and Options Contracts
Net realized loss on investments (741,749) (6,543) (149,496)
Net realized loss on financial
futures and options contracts (63,173) - -
Net unrealized appreciation
(depreciation) on investments (928,265) (4,903) 181,484
Net unrealized depreciation
on financial futures and options
contracts (8,047) - (14,558)
Net realized and unrealized gain
(loss) on investments, and on
financial futures and options
contracts (1,741,234) (11,446) 17,430
Net Increase in Net Assets
Resulting From Operations $ 12,965,581 $ 212,762 $ 403,538
See Notes to Financial Statements
* Commencement of Operations was April 29, 1996.
FFTW Funds, Inc.
- --------------------------------------------------------------------------------
Statements of Operations (continued)
For the Period Ended June 30, 1996 (Unaudited)
Global & International Portfolios
- --------------------------------------------------------------------------------
Worldwide Fixed Worldwide Fixed
Income Income-Hedged
Portfolio Portfolio
Investment Income
Interest $ 3,297,329 $ 774,043
Expenses
Investment advisory fees 216,168 32,093
Administration fees 32,114 7,641
Custodian fees 54,973 27,365
Shareholder recordkeeping fees 4,896 1,354
Legal fees 1,728 413
Audit fees 14,569 14,308
Directors' fees 5,516 1,237
SEC filing fees 6,958 6,260
Other fees and expenses 10,177 2,645
Total operating expenses 347,099 93,316
Waiver of investment advisory
fees and reimbursement of other expenses (22,886) (35,548)
Operating expenses, net 324,213 57,768
Investment income, net 2,973,116 716,275
Net Realized and Unrealized Gain
(Loss) on Investments, Financial
Futures Contracts, and on Foreign
Currency-Related Transactions
Net realized loss on investments (1,406,636) (140,198)
Net realized gain (loss) on financial
futures contracts 35,832 (1,040)
Net realized gain (loss) on foreign
currency-related transactions (577,094) 589,511
Net unrealized depreciation
on investments (1,559,478) (565,971)
Net unrealized appreciation on
financial futures contracts 144,578 34,535
Net unrealized depreciation on other
assets and liabilities denominated
in foreign currency (301,490) (110,598)
Net realized and unrealized loss
on investments, financial futures
contracts, and on foreign currency-
related transactions (3,664,288) (193,761)
Net Increase (Decrease) in Net Assets
Resulting From Operations $ (691,172) $ 522,514
See Notes to Financial Statements
FFTW Funds, Inc.
- --------------------------------------------------------------------------------
Statements of Operations (continued)
For the Period Ended June 30, 1996 (Unaudited)
Global & International Portfolios
- --------------------------------------------------------------------------------
International Fixed International Fixed
Income Income-Hedged
Portfolio * Portfolio
Investment Income
Interest $ 127,124 $ 1,349,070
Expenses
Investment advisory fees 7,897 91,305
Administration fees 1,150 13,551
Custodian fees 8,803 27,935
Shareholder recordkeeping fees 151 1,450
Legal fees 99 720
Audit fees 6,224 14,396
Directors' fees - 2,009
SEC filing fees - 7,605
Other fees and expenses 17 2,894
Total operating expenses 24,341 161,865
Waiver of investment advisory fees
and reimbursement of other expenses (12,495) (24,907)
Operating expenses, net 11,846 136,958
Investment income, net 115,278 1,212,112
Net Realized and Unrealized Gain
(Loss) on Investments, Financial
Futures Contracts, and on Foreign
Currency-Related Transactions
Net realized gain (loss) on investments (26,564) 1,024,277
Net realized gain on financial
futures contracts - 31,872
Net realized loss on foreign
currency-related transactions (164,112) (119,570)
Net unrealized appreciation
(depreciation) on investments 91,135 (1,230,553)
Net unrealized appreciation on
financial futures contracts 8,351 106,847
Net unrealized depreciation on
other assets and liabilities
denominated in foreign currency (48,478) (549,093)
Net realized and unrealized loss
on investments, financial futures
contracts, and on foreign currency-
related transactions (139,668) (736,220)
Net Increase (Decrease) in Net
Assets Resulting From Operations $ (24,390) $ 475,892
See Notes to Financial Statements
* Commencemen of Operations was May 9, 1996.
FFTW Funds, Inc.
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
For the Periods Ended U.S. Portfolios
- --------------------------------------------------------------------------------
U.S. Short-Term
Fixed Income Portfolio Stable Return Portfolio
June 30, 1996 June 30, 1996
(unaudited) Dec. 31, 1995 (unaudited) Dec. 31, 1995
Increase (Decrease)
in Net Assets From
Operations
Investment
income, net $ 14,706,815 $ 21,144,400 $ 224,208 $ 282,869
Net realized gain
(loss) on
investments,
and on financial
futures and options
contracts (804,922) (931,205) (6,543) 179,897
Net unrealized
appreciation
(depreciation)
on investments,
and on financial
futures and options
contracts (936,312) 761,484 (4,903) 35,872
Net increase in net
assets resulting
from operations 12,965,581 20,974,679 212,762 498,638
Distributions to
Shareholders
From investment
income, net 14,706,815 21,144,400 224,208 282,195
In excess of
investment income,
net 1,120 318 - -
Total Distributions 14,707,935 21,144,718 224,208 282,195
Capital Share
Transactions, Net 247,872,460 166,900,473 22,527,365 525,285
Total increase
(decrease) in net
assets 246,130,106 166,730,434 22,515,919 741,728
Net Assets
Beginning of
period 457,425,302 290,694,868 5,080,067 4,338,339
End of period $ 703,555,408 $ 457,425,302 $ 27,595,986 $ 5,080,067
Undistributed
Investment Income,
Net $ 71,221 $ 72,341 $ 674 $ 674
See Notes to Financial Statements
FFTW Funds, Inc.
- --------------------------------------------------------------------------------
Statements of Changes In Net Assets (continued)
For the Period Ended U.S. Portfolios
- --------------------------------------------------------------------------------
Mortgage Total
Return Portfolio
June 30, 1996*
(unaudited)
Increase (Decrease) in Net
Assets From Operations
Investment income, net $ 386,108
Net realized loss on investments,
short sales,and on financial
futures and options contracts (149,496)
Net unrealized appreciation on
investments, short sales, and on
financial futures and options contracts 166,926
Net increase in net assets resulting from operations 403,538
Distributions to Shareholders
From investment income, net 384,757
Capital Share Transactions, Net 34,758,467
Total increase in net assets 34,777,248
Net Assets
Beginning of period -
End of period $ 34,777,248
Undistributed Investment Income, Net $ 1,351
* Commencement of operations was April 29, 1996
See Notes to Financial Statements
FFTW Funds, Inc.
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (continued)
For the Periods Ended Global & International Portfolios
- --------------------------------------------------------------------------------
Worldwide Worldwide Fixed
Fixed Income Portfolio Income-Hedged Portfolio
June 30, 1996 June 30, 1996
(unaudited) Dec. 31, 1995 (unaudited) Dec. 31, 1995
Increase (Decrease)
in Net Assets
From Operations
Investment income,
net $ 2,973,116 $ 2,845,363 $ 716,275 $ 751,559
Net realized gain
(loss) on
investments,
financial futures
contracts, and on
foreign currency-
related
transactions (1,947,898) 1,227,250 448,273 804,916
Net unrealized
appreciation
(depreciation) on
investments,
financial futures
contracts, and on
assets and
liabilities
denominated in
foreign currency (1,716,390) 1,139,533 (642,034) 460,628
Net increase
(decrease) in net
assets resulting
from operations (691,172) 5,212,146 522,514 2,017,103
Distributions to
Shareholders
From investment
income, net 2,968,931 1,452,532 713,213 1,115,901
From capital stock
in excess of par
value - 1,393,024 - -
Total Distributions 2,968,931 2,845,556 713,213 1,115,901
Capital Share
Transactions, Net 36,924,760 30,098,106 (2,061,786) 27,080,903
Total increase
(decrease) in net
assets 33,264,657 32,464,696 (2,252,485) 27,982,105
Net Assets
Beginning of
period 86,186,177 53,721,481 28,254,830 272,725
End of period $119,450,834 $ 86,186,177 $ 26,002,345 $ 28,254,830
Undistributed
Investment
Income, Net $ 4,185 $ - $ 659,059 $ 655,997
See Notes to Financial Statements
FFTW Funds, Inc.
- -------------------------------------------------------------------------------
Statements of Changes In Net Assets (continued)
For the Periods Ended Global & International Portfolios
- --------------------------------------------------------------------------------
International Fixed International Fixed
Income Portfolio Income-Hedged Portfolio
June 30, 1996* June 30, 1996
(unaudited) (unaudited) Dec. 31, 1995**
Increase (Decrease) in Net
Assets From Operations
Investment income, net $ 115,278 $ 1,212,112 $ 1,405,519
Net realized gain (loss)
on investments, financial
futures contracts, and on
foreign currency-related
transactions (190,676) 936,579 186,248
Net unrealized appreciation
(depreciation) on
investments, financial
futures contracts, and on
assets and liabilities
denominated in foreign
currency 51,008 (1,672,799) 921,829
Net increase (decrease)
in net assets resulting
from operations (24,390) 475,892 2,513,596
Distributions to
Shareholders From
investment income, net 115,278 1,210,044 1,405,519
In excess of investment
income, net - - 2,023
Total Distributions 115,278 1,210,044 1,407,542
Capital Share
Transactions, Net 14,115,279 22,155,708 32,898,833
Total increase (decrease)
in net assets 13,975,611 21,421,556 34,004,887
Net Assets
Beginning of period - 34,004,887 -
End of period $ 13,975,611 $ 55,426,443 $ 34,004,887
Undistributed Investment
Income, Net $ - $ 107,506 $ 105,438
* Commencement of operations was May 9, 1996.
** The Portfolio was fully liquidated on December 30, 1994 and recommenced
operations on September 14, 1995.
See Notes to Financial Statements
FFTW Funds, Inc.
- --------------------------------------------------------------------------------
Financial Highlights
U.S. Short-Term Fixed Income Portfolio
- --------------------------------------------------------------------------------
For the Year Ended
For a share June 30, 1996 ---------------------------------------------
outstanding the (Unaudited) Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993
throughout the
period:
Per Share Data
Net asset value,
beginning of
period $ 9.88 $ 9.89 $ 9.98 $ 10.00
Increase
(Decrease) From
Investment
Operations
Investment income,
net 0.28 0.56 0.44 0.32
Net realized and
unrealized loss on
investments, and on
financial futures
and options
contracts (0.04) (0.01) (0.08) (0.03)
Total from investment
operations 0.24 0.55 0.36 0.29
Less Distributions
From investment
income, net 0.28 0.56 0.45 0.31
In excess of
investment income,
net 0.00 * 0.00 * 0.00 * -
Total distributions 0.28 0.56 0.45 0.31
Net asset value,
end of period $ 9.84 $ 9.88 $ 9.89 $ 9.98
Total Return 2.42% (c) 5.71% 3.71% 2.88%
Ratios/Supplemental
Data
Net assets, end
of period $703,555,408 $457,425,302 $290,694,868 $417,727,821
Ratio of operating
expenses to average
net assets (a) 0.29% (b) 0.40% 0.40% 0.40%
Ratio of investment
income, net to
average net assets 5.64% (b) 5.64% 4.14% 3.28%
Decrease reflected
in above ratios
due to waiver of
investment advisory
fees 0.05% (b) 0.07% 0.08% 0.03%
Ratio of interest
expense to average
net assets 0.12% (b) 0.11% 0.03% 0.08%
(a) Net of waivers, exclusive of interest expense.
(b) Annualized
(c) Not annualized
* Rounds to less than $0.01 .
See Notes to Financial Statements
FFTW Funds, Inc.
- --------------------------------------------------------------------------------
Financial Highlights (continued)
U.S. Short-Term Fixed Income Portfolio (continued)
- --------------------------------------------------------------------------------
Year Three Months Year Period From
For a share Ended Ended Ended Dec. 6, 1989* to
outstanding Dec.31, 1992 Dec.31, 1991 Sept.31, 1991 Sept.30, 1990
throughout the
period
Per Share Data
Net asset value,
beginning of
period $ 10.00 $ 10.00 $ 10.00 $ 10.00
Increase From
Investment
Operations
Investment income,
net 0.34 0.12 0.63 0.62
Net realized and
unrealized gain
on investments,
and on financial
futures and options
contracts 0.01 0.02 0.06 0.04
Total from investment
operations 0.35 0.14 0.69 0.66
Less Distributions
From investment
income, net 0.34 0.12 0.63 0.62
From net realized
and unrealized gain
on investments, and
on financial futures
and options contracts 0.01 0.02 0.06 0.04
Total distributions 0.35 0.14 0.69 0.66
Net asset value, end
of period $ 10.00 $ 10.00 $ 10.00 $ 10.00
Total Return 3.45% 5.67% (b) 7.11% 8.31% (b)
Ratios/Supplemental
Data
Net assets, end of
period $682,513,193 $365,310,697 $269,114,721 $111,956,929
Ratio of operating
expenses to
average net
assets (a) 0.40% 0.40% (b) 0.40% 0.50%
(b)
Ratio of
investment income,
net to average
net assets 3.37% 4.67% (b) 5.99% 8.23% (b)
Decrease reflected
in above ratios
due to waiver of
investment advisory
fees and
reimbursement of
other expenses - 0.03% (b) 0.11% 0.86% (b)
Ratio of interest expense
to average net assets 0.03% - 0.03% -
(a) Net of waivers and reimbursements, exclusive of interest expense.
(b) Annualized
* Commencement of Operations
See Notes to Financial Statements
FFTW Funds, Inc.
- --------------------------------------------------------------------------------
Financial Highlights (continued)
Stable Return Portfolio
- --------------------------------------------------------------------------------
For the Year Ended Period From
For a share June 30, 1996 July 26, 1993* to
outstanding (Unaudited) Dec.31, 1995 Dec.31, 1994 Dec. 31, 1993
throughout
the period:
Per Share Data
Net asset value,
beginning of
period $ 10.00 $ 9.55 $ 9.95 $ 10.00
Increase
(Decrease) From
Investment
Operations
Investment income,
net 0.26 0.60 0.43 0.14
Net realized and
unrealized gain
(loss) on
investments and
financial futures
contracts (0.10) 0.45 (0.40) 0.05
Total from
investment
operations 0.16 1.05 0.03 0.19
Less Distributions
From investment
income, net 0.26 0.60 0.43 0.14
From net realized
gain on investments
and financial
futures contracts - - - 0.03
In excess of net
realized gain on
investments and
financial futures
contracts - - - 0.07
Total distributions 0.26 0.60 0.43 0.24
Net asset value,
end of period $ 9.90 $ 10.00 $ 9.55 $ 9.95
Total Return 1.60% (c) 11.26% 0.29% 4.27% (b)
Ratios/Supplemental
Data
Net assets, end
of period $27,595,986 $ 5,080,067 $ 4,338,339 $ 3,482,439
Ratio of
operating expenses
to average net
assets (a) 0.34% (b) 0.50% 0.50% 0.50% (b)
Ratio of
investment income,
net to average
net assets 5.40% (b) 6.09% 4.43% 3.68% (b)
Decrease reflected
in above ratios
due to waiver of
investment advisory
fees and reimburse-
ment of other expenses 0.26% (b) 0.53% 0.57% 1.46% (b)
Ratio of interest
expense to average
net assets 0.58% (b) 0.91% 1.24% -
Portfolio turnover 966% 1,075% 343% 1,841%
(a) Net of waivers and reimbursements, exclusive of interest expense.
(b) Annualized
(c) Not annualized
* Commencement of Operations
See Notes to Financial Statements
FFTW Funds, Inc.
- --------------------------------------------------------------------------------
Financial Highlights (continued)
Mortgage Total Return Portfolio
- --------------------------------------------------------------------------------
Period From
April 29, 1996 *
For a share outstanding to June 30, 1996
throughout the period: (Unaudited)
Per Share Data
Net asset value, beginning of period $ 10.00
Increase (Decrease) From
Investment Operations
Investment income, net 0.11
Net realized and unrealized gain on
investments, short sales, and on financial
futures and options contracts 0.00
Total from investment operations 0.11
Less Distributions
From investment income, net 0.11
Net asset value, end of period $ 10.00
Total Return 1.13% (c)
Ratios/Supplemental Data
Net assets, end of period $ 34,777,248
Ratio of operating expenses
to average net assets (a) 0.45% (b)
Ratio of investment income,
net to average net assets 6.73% (b)
Decrease reflected in above ratios
due to waiver of investment
advisory fees 0.14% (b)
Ratio of interest expense
to average net assets 0.01% (b)
Portfolio turnover 92%
(a) Net of waivers, exclusive of interest expense.
(b) Annualized
(c) Not annualized
* Commencement of Operations
See Notes to Financial Statements
FFTW Funds, Inc.
- --------------------------------------------------------------------------------
Financial Highlights (continued)
Worldwide Fixed Income Portfolio
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C>
For the Year Ended Period From
For a share outstanding June 30, 1996 Dec. 31, Dec. 31, Dec. 31, April 15, 1992*
throughout the period: (Unaudited) 1995 1994 1993 to Dec. 31, 1992
Per Share Data
Net asset value,
beginning of period $ 9.83 $ 9.27 $ 10.02 $ 9.98 $ 10.00
Increase (Decrease) From
Investment Operations
Investment income, net 0.26 0.58 0.50 0.45 0.39
Net realized and
unrealized gain (loss)
on investments,
financial futures and
options contracts and
on foreign currency-
related transactions (0.34) 0.56 (0.74) 1.04 0.53
Total from investment
operations (0.08) 1.14 (0.24) 1.49 0.92
Less Distributions
From investment
income, net 0.26 0.30 0.20 0.45 0.39
In excess of
investment income,
net - - 0.01 - -
From capital stock
in excess of par value - 0.28 0.30 - -
From net realized
gain on investments,
financial futures and
options contracts, and
on foreign currency-
related transactions - - - 0.87 0.55
In excess of net
realized gain on
investments, financial
futures and options
contracts, and on
foreign currency-
related transactions - - - 0.13 0.00 **
Total distributions 0.26 0.58 0.51 1.45 0.94
Net asset value,
end of period $ 9.49 $ 9.83 $ 9.27 $ 10.02 $ 9.98
Total Return (0.80%)(c) 12.60% (2.25%) 15.86% 13.46% (b)
Ratios/Supplemental
Data
Net assets, end
of period $119,450,834 $86,186,177 $53,721,481 $217,163,036 $82,757,009
Ratio of operating
expenses to average
net assets (a) 0.60%(b) 0.60% 0.60% 0.59% 0.60% (b)
Ratio of investment
income, net to
average net assets 5.50%(b) 6.13% 5.11% 4.48% 5.39% (b)
Decrease reflected in
above ratios due to
waiver of investment
advisory fees and
reimbursement of other
expenses 0.04%(b) 0.30% 0.02% - 0.72% (b)
Ratio of interest expense
to average net assets - - 0.03% 0.27% 0.19% (b)
Portfolio turnover 544% 1,401% 1,479% 1,245% 850%
</TABLE>
(a) Net of waivers and reimbursements, exclusive of interest expense.
(b) Annualized
(c) Not annualized
* Commencement of Operations
** Rounds to less than $0.01.
See Notes to Financial Statements
FFTW Funds, Inc.
- --------------------------------------------------------------------------------
Financial Highlights (continued)
Worldwide Fixed Income-Hedged Portfolio
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C>
For the Year Ended Period From
For a share June 30, 1996 Dec. 31, Dec, 31, Dec. 31, May 19, 1992* to
outstanding (unaudited) 1995 1994 1993 Dec. 31, 1992
throughout the
period:
Per Share Data
Net asset value,
beginning of period $ 10.85 $ 10.41 $ 10.08 $ 9.85 $ 10.00
Increase (Decrease)
From Investment
Operations
Investment income, net 0.30 0.45 0.34 0.45 0.32
Net realized and
unrealized gain
on investments,
financial futures
and options contracts,
and on foreign currency-
related transactions (0.09) 0.66 0.43 (c) 0.76 0.25
Total from investment
operations 0.21 1.11 0.77 1.21 0.57
Less Distributions
From investment
income, net 0.30 0.67 0.44 0.45 0.32
In excess of investment
income, net - - 0.00 ** - -
From net realized gain
on investments,
financial futures and
options contracts,
and on foreign currency-
related transactions - - - 0.53 0.40
Total distributions 0.30 0.67 0.44 0.98 0.72
Net asset value,
end of period $ 10.76 $ 10.85 $ 10.41 $ 10.08 $ 9.85
Total Return 1.94% (d) 11.00% 7.84% 12.89% 9.45% (b)
Ratios/Supplemental
Data
Net assets, end of
period $26,002,345 $ 28,254,830 $ 272,725 $ 41,137,515 $ 21,785,134
Ratio of operating
expenses to average
net assets (a) 0.45% (b) 0.45% 0.60% 0.60% 0.60% (b)
Ratio of investment
income, net to
average net assets 5.58% (b) 5.84% 4.72% 4.49% 5.13% (b)
Decrease reflected in
above ratios due to
waiver of investment
advisory fees
and reimbursement of
other expenses 0.28% (b) 0.54% 0.17% 0.09% 1.01% (b)
Ratio of interest
expense to average
net assets - - 0.05% 0.26% 0.23% (b)
Portfolio turnover 468% 500% 1,622% 1,254% 826%
</TABLE>
(a) Net of waivers and reimbursements, exclusive of interest expense.
(b) Annualized
(c) Includes the effect of net realized losses prior to significant
decreases in shares outstanding.
(d) Not annualized
* Commencement of Operations
** Rounds to less than $0.01.
See Notes to Financial Statements
FFTW Funds, Inc.
- --------------------------------------------------------------------------------
Financial Highlights (continued)
International Fixed Income Portfolio
- --------------------------------------------------------------------------------
Period From
May 9, 1996 *
For a share outstanding to June 30, 1996
throughout the period: (Unaudited)
Per Share Data
Net asset value, beginning of period $ 10.00
Increase (Decrease) From
Investment Operations
Investment income, net 0.08
Net realized and unrealized
loss on investments, financial
futures and options contracts, and on
foreign currency-related transactions (0.10)
Total from investment operations (0.02)
Less Distributions
From investment income, net 0.08
Net asset value, end of period $ 9.90
Total Return (0.18%) (c)
Ratios/Supplemental Data
Net assets, end of period $ 13,975,611
Ratio of operating expenses
to average net assets (a) 0.60% (b)
Ratio of investment income,
net to average net assets 5.84% (b)
Decrease reflected in above ratios
due to waiver of investment
advisory fees and reimburse-
ment of other expenses 0.63% (b)
Portfolio turnover 140%
(a) Net of waivers and reimbursements.
(b) Annualized
(c) Not annualized
* Commencement of Operations
See Notes to Financial Statements
FFTW Funds, Inc.
- --------------------------------------------------------------------------------
Financial Highlights (continued)
International Fixed Income-Hedged Portfolio
- --------------------------------------------------------------------------------
For the Year Ended Period From
For a share June 30, 1996 March 25, 1993*
outstanding (Unaudited) Dec.31, 1995*** Dec.31, 1994 to Dec. 31, 1993
throughout
the period:
Per Share Data
Net asset value,
beginning of
period $ 10.19 $ 10.00 $ 10.39 $ 10.00
Increase
(Decrease) From
Investment
Operations
Investment
income, net 0.27 0.19 0.20 0.44
Net realized
and unrealized
gain (loss) on
investments,
financial futures
and options
contracts, and on
foreign currency-
related
transactions (0.18) 0.19 (0.46) 0.78
Total from
investment
operations 0.09 0.38 (0.26) 1.22
Less Distributions
From investment
income, net 0.27 0.19 0.20 0.44
In excess of
investment income,
net - 0.00 (c) - -
From net realized
gain on investments,
financial futures
and options contracts,
and on foreign currency-
related transactions - - 0.50 0.39
Total distributions 0.27 0.19 0.70 0.83
Net asset value,
end of period $ 10.01 $ 10.19 $ 9.43 ** $ 10.39
Total Return 0.87% (d) 13.45% (b) (2.53%) 16.37% (b)
Ratios/Supplemental
Data Net assets,
end of period $ 55,426,443 $ 34,004,887 $ - $17,866,568
Ratio of operating
expenses to average
net assets (a) 0.60% (b) 0.60% (b) 0.57% 0.60% (b)
Ratio of investment
income, net to
average net assets 5.31% (b) 6.12% (b) 2.87% 5.86% (b)
Decrease reflected
in above ratios
due to waiver of
investment advisory
fees and reimburse-
ment of other expenses 0.11% (b) 0.17% (b) 0.49% 0.28% (b)
Portfolio turnover 599% 764% 1,282% 855%
FFTW Funds, Inc.
- -------------------------------------------------------------------------------
Notes to Financial Statements
June 30, 1996 (unaudited)
- -------------------------------------------------------------------------------
1. Organization
FFTW Funds, Inc. (the "Fund") was organized as a Maryland corporation on
February 23, 1989 and is registered under the Investment Company Act of 1940,
as amended, as an open-end, management investment company. The Fund
currently has ten Portfolios, seven of which were active as of June 30, 1996.
The seven active Portfolios are: U.S. Short-Term Fixed Income Portfolio
("U.S. Short-Term"); Stable Return Portfolio ("Stable Return"); Mortgage
Total Return Portfolio ("Mortgage"); Worldwide Fixed Income Portfolio
("Worldwide"); Worldwide Fixed Income-Hedged Portfolio ("Worldwide-Hedged");
International Fixed Income Portfolio ("International"); and International
Fixed Income-Hedged Portfolio ("International-Hedged"). The Fund is managed
by Fischer Francis Trees and Watts, Inc. (the "Investment Adviser"). The
costs incurred by the Fund in connection with the organization and initial
registration of shares were borne by the Investment Adviser.
2. Summary of Significant Accounting Policies
Securities
All securities transactions are recorded on a trade date basis. Interest
income and expense are recorded on an accrual basis. The Fund amortizes
discount or premium on a daily basis to interest income. The Fund uses the
specific identification method for determining gain or loss on sales of
securities.
Valuation
All investments are valued daily at their market price, which results in
unrealized gains or losses. Readily marketable fixed-income securities are
valued on the basis of prices provided by a pricing service when such prices
are believed by the Investment Adviser to reflect the fair value of such
securities. Securities traded on an exchange are valued at their last sales
price on that exchange. Securities for which over-the-counter market
quotations are available are valued at the latest bid price. Deposits and
repurchase agreements are generally valued at their cost plus accrued
interest. Securities for which market quotations are not readily available
and illiquid securities will be valued in good faith by methods approved by
the Board of Directors. Securities with maturities less than 90 days are
valued at amortized cost, which approximates market value, unless this method
does not represent fair value.
Expenses
Expenses directly attributed to each Portfolio in the Fund are charged to
that Portfolio's operations; expenses which are applicable to all Portfolios
are allocated among them based on average daily net assets.
Income Tax
There is no provision for Federal income or excise tax since each Portfolio
has elected to be taxed as a regulated investment company ("RIC") and
therefore complies with the requirements of Subchapter M of the Internal
Revenue Code applicable to RICs and distributes all of its taxable income.
At December 31,1995, the Fund had the following capital loss carryforwards,
to offset future net capital gains, to the extent provided by regulations.
Net realized losses attributable to security transactions after October 31,
1995, are treated for federal income tax purposes as arising on the first day
of the Portfolio's next fiscal year.
Portfolio Carryforward Amount Expiration Date
U.S. Short-Term $1,404,714 December 31, 2001
1,779,703 December 31, 2002
1,335,380 December 31, 2003
Worldwide 11,035,770 December 31, 2002
Worldwide-Hedged 1,995,657 December 31, 2002
Dividends to Shareholders
It is the policy of the Portfolios, other than Mortgage, to declare dividends
daily from net investment income. Mortgage declares dividends monthly from
net investment income on the last business day of each month. Dividends are
paid in cash or reinvested monthly for all Portfolios.
2. Summary of Significant Accounting Policies (continued)
Distributions from net capital gains of each Portfolio, if any, are normally
declared and paid annually, but each Portfolio may make distributions on a
more frequent basis to comply with the distribution requirements of the
Internal Revenue Code. To the extent that a net realized capital gain can be
reduced by a capital loss carryover, such gain may not be distributed.
Dividends from net investment income and distributions from realized gains
from investment transactions have been determined in accordance with income
tax regulations and may differ from net investment income and realized gains
recorded by the Fund for financial reporting purposes. Differences result
primarily from foreign currency transactions and timing differences related
to recognition of income, and gains and losses from investment transactions.
To the extent that those differences which are permanent in nature result in
overdistributions to shareholders, amounts are reclassified within the
capital accounts based on their federal tax basis treatment. Temporary
differences do not require reclassification. Dividends and distributions
which exceed net investment income and net realized capital gains for
financial reporting purposes but not for tax purposes are reported as
distributions in excess of net investment income and net realized capital
gains, respectively. To the extent that they exceed net investment income
and net realized gains for tax purposes, they are reported as distributions
of capital stock in excess of par.
At December 31,1995, Worldwide had a return of capital for tax purposes of
$1,393,024. During the year ended December 31, 1995, the Portfolios
reclassified the following book to tax differences [increases (decreases)]:
Portfolio Undistributed Accumulated Net Capital Stock
Investment Income Realized Gain Excess of Par
Net (Loss) Value
U.S. Short-Term $ 142,606 $ (193,250) $ 50,644
Worldwide (1,286,865) (1,276,111) 2,562,976
Worldwide-Hedged 1,022,986 (1,182,848) 159,862
International-Hedged 107,461 (107,461) -
Currency Translation
Assets and liabilities denominated in foreign currencies and commitments
under forward foreign exchange contracts are translated into U.S. dollars at
the mean of the quoted bid and asked prices of such currencies against the
U.S. dollar. Purchases and sales of portfolio securities are translated at
the rates of exchange prevailing when such securities were acquired or sold.
Income and expenses are translated at exchange rates prevailing when accrued.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the 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.
Reported net realized gains or losses on foreign currency-related
transactions arise from sales and maturities of short-term securities, sales
of foreign currency, currency gains or losses realized between the trade and
settlement dates on securities transactions, the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books, and the U.S. dollar equivalent of the amounts actually received
or paid. Net unrealized appreciation or depreciation on assets and
liabilities denominated in foreign currency arise from changes in the value
of assets and liabilities other than investments in securities at fiscal year
end, resulting from changes in the exchange rate.
Estimates
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 in the financial statements.
Actual results could differ from those estimates.
3. Investment Advisory Agreements and Affiliated Transactions
The Fund's Board of Directors has approved investment advisory agreements
(the "Agreements") with the Investment Adviser. The investment advisory fees
to be paid to the Investment Adviser are computed daily at annual rates set
forth below. The fees are payable quarterly for U.S. Short-Term, Worldwide,
and Worldwide-Hedged, and monthly for Stable Return, Mortgage, International
Fixed and International-Hedged.
3. Investment Advisory Agreements and Affiliated Transactions (continued)
The Agreements with U.S. Short-Term, Worldwide and Worldwide-Hedged provide
that to the extent that the aggregate annual expenses, (exclusive of
interest, taxes, brokerage commissions and other extraordinary expenses)
exceed 0.40% of U.S. Short-Term's, 0.60% of Worldwide's, and 0.60% of
Worldwide-Hedged's average daily net assets, the Investment Adviser has
agreed to waive its investment advisory fee and reimburse the Portfolios for
any excess expenses. The Investment Adviser has voluntarily agreed to waive
its investment advisory fees and reimburse the Portfolio for any excess
expenses of Stable Return, Mortgage, Worldwide-Hedged, International and
International-Hedged to the extent that the aggregate expenses, (exclusive of
interest, taxes, brokerage commissions and other extraordinary expenses)
exceed 0.50% of Stable Return's, 0.45% of Mortgage's and Worldwide-Hedged's
and 0.60% of International and International-Hedged's average daily net
assets.
The investment advisory fee rates and the amounts waived or reimbursed by the
Investment Adviser are summarized below for each of the Portfolios:
Investment Waivers and Reimbursements
Advisory Six Months Ended
Portfolio Fee June 30, 1996
U.S. Short-Term 0.30%* $ 129,763
Stable Return 0 35%** 10,589
Mortgage 0.30% 8,301
Worldwide 0.40% 22,886
Worldwide-Hedged 0.40%*** 35,548
International 0.40% 12,495
International-Hedged 0.40% 24,907
* Effective March 1, 1996, the Investment Advisor voluntarily agreed to reduce
the investment advisory fee by an annualized rate of 0.15%. The investment
advisory fee is currently being charged at an annualized rate of 0.15% until
further notice.
** Effective March 1, 1996, the Investment Advisor voluntarily agreed to
reduce the investment advisory fee by an annualized rate of 0.20%. The
investment advisory fee is currently being charged at an annualized rate of
0.15% until further notice.
*** Due to the Investment Adviser's voluntary agreement to reduce the
investment advisory fee by an annualized rate of 0.15%. The investment
advisory fee is currently being charged at an annualized rate of 0.25% until
further notice.
Directors' fees of $31,899 were allocated among the Portfolios and paid for
the six months ended June 30, 1996 to Directors who are not employees of the
Investment Adviser.
4. Investment Transactions
Purchase cost and proceeds from sales of investment securities, other than
short-term investments, for the six months ended June 30, 1996 for each of
the Portfolios were as follows:
Purchase Cost of Proceeds from Sales of
Portfolio Investment Securities Investment Securities
U.S. Short-Term $826,355,653 $649,124,344
Stable Return 95,692,913 77,720,226
Mortgage 76,324,895 29,108,850
Worldwide 433,044,460 450,543,163
Worldwide-Hedged 98,022,390 109,303,055
International 19,553,534 10,875,738
International-Hedged 162,088,972 189,169,421
4. Investment Transactions (continued)
The components of net unrealized appreciation of investments at June 30, 1996
for each of the Portfolios were as follows:
Stable
U.S. Portfolios U.S. Short-Term Return Mortgage
Gross Unrealized Appreciation $ 468,690 $ 50,035 $ 333,034
Gross Unrealized Depreciation (1,039,099) (25,690) (132,800)
$ (570,409) $ 24,345 $ 200,234
Worldwide- International-
Global and International Worldwide Hedged International Hedged
Portfolios
Gross Unrealized
Appreciation $ 723,695 $ 164,801 $ 100,859 $ 1,250
Gross Unrealized
Depreciation (860,983) (182,347) (9,724) (8)
$ (137,288) $ (17,546) $ 91,135 $ 1,242
The cost of securities owned by the Fund at June 30, 1996 for Federal tax
purposes was substantially the same as for financial statement purposes.
5. Forward Foreign Exchange Contracts
The Fund enters into forward foreign exchange contracts in order to hedge its
exposure to changes in foreign currency exchange rates on its foreign
portfolio holdings. A forward foreign exchange contract is a commitment to
purchase or sell a foreign currency at a future date at a negotiated forward
rate. The gain or loss arising from the difference between the original
contracts and the closing of such contracts is included in net realized gains
or losses on foreign currency-related transactions. Fluctuations in the
value of forward foreign exchange contracts are recorded for book purposes as
unrealized gains or losses by the Fund. The Fund's custodian will place and
maintain cash not available for investment, U.S. Government securities, or
other appropriate high-grade debt securities in a separate account of the
Fund having a value equal to the aggregate amount of the Fund's commitments
under certain open forward exchange contracts. Risks may arise from the
potential inability of a counterparty to meet the terms of a contract and
from unanticipated movements in the value of a foreign currency relative to
the U.S. dollar.
At June 30, 1996, Worldwide had outstanding forward foreign exchange
contracts to purchase and sell foreign currencies as follows:
Unrealized
Contract Appreciation
Amount Cost Value (Depreciation)
Forward Foreign Exchange
Buy Contracts
388,353 Australian Dollar
closing 7/22/96 $ 307,187 $ 305,321 $ (1,866)
41,102,459 Belgian Franc
closing 7/22/96 1,303,185 1,313,010 9,825
13,914,511 Canadian closing
7/22/96 10,203,397 10,209,578 6,181
5,137,464 Danish Krone
closing 7/22/96 867,932 875,989 8,057
3,900,889 French Franc
closing 7/22/96 751,327 757,951 6,624
19,737,855 German Deutschemark
closing 7/22/96 13,014,040 12,971,435 (42,605)
1,929,310 Great British Pound
closing 7/22/96 2,961,491 2,993,656 32,165
587,771 Japanese Yen closing
7/2/96 5,375 5,366 (9)
2,022,237,593 Japanese Yen closing
7/22/96 18,692,361 18,515,404 (176,957)
2,304,992 Netherlands Guilder
closing 7/22/96 1,344,019 1,351,394 7,375
315,000,000 Spanish Peseta
closing 7/22/96 2,451,696 2,452,866 1,170
84,190,330 Swedish Krona
closing 7/22/96 12,729,302 12,693,719 (35,583)
7,100,000 Swiss Franc
closing 7/22/96 5,625,990 5,678,002 52,012
5. Forward Foreign Exchange Contracts (continued)
Unrealized
Contract Appreciation
Amount Proceeds Value (Depreciation)
Forward Foreign Exchange
Sell Contracts
819,345 Danish Krone
closing 7/02/96 $ 139,404 $ 139,583 $ (179)
13,363,201 German Deutschemark
closing 7/22/96 8,736,442 8,782,104 (45,662)
832,532 Great British Pound
closing 7/22/96 1,276,687 1,291,816 (15,129)
742,738,220 Italian Lira
closing 7/22/96 477,609 482,856 (5,247)
117,199,999 Japanese Yen
closing 7/22/96 1,077,899 1,073,071 4,828
2,667,886 New Zealand Dollar
closing 7/22/96 1,787,484 1,824,482 (36,998)
123,561,720 Spanish Peseta
closing 7/22/96 952,064 962,160 (10,096)
91,032,693 Swedish Krona
closing 7/22/96 13,499,670 13,725,370 (225,700)
7,031,984 Swiss Franc
closing 7/22/96 5,580,940 5,623,608 (42,668)
$ (510,462)
At June 30, 1996, Worldwide-Hedged had outstanding forward foreign exchange
contracts, both to purchase and sell foreign currencies as follows:
Unrealized
Contract Cost/ Appreciation
Amount Proceeds Value (Depreciation)
Forward Foreign Exchange
Buy Contracts
2,062,558 Canadian Dollar
closing 7/22/96 $ 1,511,223 $ 1,513,373 $ 2,150
4,044,395 German Deutschemark
closing 7/22/96 2,665,571 2,657,918 (7,653)
167,000,002 Japanese Yen
closing 7/22/96 1,556,486 1,529,036 (27,450)
75,000,003 Spanish Peseta
closing 7/22/96 583,737 584,016 279
17,754,423 Swedish Krona
closing 7/22/96 2,684,411 2,676,907 (7,504)
1,600,000 Swiss Franc
closing 7/2296 1,277,955 1,279,549 1,594
Forward Foreign Exchange Sell Contracts
312,813 Australian Dollar
closing 7/2296 247,435 245,932 1,503
21,607,278 Belgian Franc
closing 7/22/96 685,075 690,240 (5,165)
138,123 Danish Krone
closing 7/2/96 23,500 23,531 (31)
1,813,944 Danish Krone
closing 7/22/96 306,460 309,304 (2,844)
10,412,844 French Franc
closing 7/22/96 2,005,555 2,023,237 (17,682)
6,565,561 German Deutschemark
closing 7/22/96 4,300,618 4,314,792 (14,174)
878,684 Great British Pound
closing 7/22/96 1,348,359 1,363,429 (15,070)
1,812,344 Japanese Yen
closing 7/2/96 16,572 16,546 26
176,700,007 Japanese Yen
closing 7/22/96 1,625,146 1,617,847 7,299
2,199,431,720 Italian Lira closing
7/22/96 1,414,316 1,429,855 (15,539)
1,302,297 Netherlands Guilder
closing 7/22/96 759,357 763,524 (4,167)
608,465 New Zealand Dollar
closing 7/22/96 407,672 416,110 (8,438)
134,463,364 Spanish Peseta
closing 7/22/96 1,036,063 1,047,050 (10,987)
22,726,505 Swedish Krona
closing 7/22/96 3,369,815 3,426,568 (56,753)
1,616,548 Swiss Franc closing
7/22/96 1,282,975 1,292,784 (9,809)
$ (190,415)
5. Forward Foreign Exchange Contracts (continued)
At June 30, 1996, International had outstanding forward foreign exchange
contracts, both to purchase and sell foreign currencies as follows:
Unrealized
Contract Cost/ Appreciation
Amount Proceeds Value (Depreciation)
Forward Foreign Exchange
Buy Contracts
373,732 Australian Dollar
closing 7/22/96 $ 295,622 $ 293,827 $ (1,795)
6,844,272 Belgian Franc
closing 7/22/96 217,003 218,639 1,636
1,766,099 Canadian Dollar
closing 7/22/96 1,296,219 1,295,850 (369)
970,863 Danish Krone
closing 7/22/96 164,019 165,542 1,523
5,073,315 French Franc
closing 7/22/96 976,727 985,756 9,029
2,884,485 German Deutschemark
closing 7/2296 1,898,245 1,895,641 (2,604)
619,422 Great British Pound
closing 7/1/96 954,083 961,317 7,234
348,027 Great British Pound
closing 7/22/96 534,221 540,024 5,803
357,794,400 Japanese Yen
closing 7/22/96 3,299,943 3,275,930 (24,013)
431,782 Netherlands Guilder
closing 7/22/96 251,769 253,150 1,381
35,413,197 Spanish Peseta
closing 7/22/96 272,865 275,759 2,894
7,674,493 Swedish Krona
closing 7/22/96 1,160,359 1,157,115 (3,244)
Forward Foreign Exchange
Sell Contracts
5,073,315 French Franc
closing 7/1/96 975,825 984,789 (8,964)
1,759,523 French Franc
closing 7/22/96 338,891 341,879 (2,988)
3,169,314 German Deutschemark
closing 7/22/96 2,070,094 2,082,828 (12,734)
619,422 Great British Pound
closing 7/22/96 953,910 961,140 (7,230)
452,081 Japanese Yen
closing 7/02/96 4,134 4,127 7
8,722,217 Swedish Krona
closing 7/22/96 1,291,396 1,315,084 (23,688)
$ (58,122)
At June 30, 1996, International-Hedged had outstanding forward foreign
exchange contracts, both to purchase and sell foreign currencies as follows:
Unrealized
Contract Cost/ Appreciation
Amount Proceeds Value (Depreciation)
Forward Foreign Exchange
Buy Contracts
37,355,000 German Deutschemark
closing 7/22/96 $ 24,575,658 $ 24,549,171 $ (26,487)
185,562,360 Swedish Krona
closing 7/22/96 28,056,421 27,977,993 (78,428)
Forward Foreign Exchange
Sell Contracts
37,618,343 German Deutschemark
closing 7/22/96 24,570,658 24,722,236 (151,578)
659,678 Japanese Yen
closing 7/02/96 6,032 6,022 10
183,882,836 Swedish Krona
closing 7/22/96 27,240,271 27,724,764 (484,493)
$ (740,976)
5. Forward Foreign Exchange Contracts (continued)
The Fund enters into foreign currency transactions on the spot markets in
order to pay for foreign investment purchases or to convert to dollars the
proceeds from foreign investment sales or coupon interest receipts. At June
30, 1996 Worldwide, Worldwide-Hedged, International and International-Hedged
had no outstanding purchases or sales of foreign currencies on the spot
markets.
6. Futures Contracts
Each Portfolio may enter into financial futures contracts to hedge its
interest rate and foreign currency risk. The Fund is exposed to market risk
as a result of changes in the value of the underlying financial instruments.
Investments in financial futures contracts require the Fund to "mark to
market" on a daily basis, which reflects the change in the market value of
the contract at the close of each day's trading. Accordingly, variation
margin is paid or received to reflect daily unrealized gains or losses. When
the contracts are closed, the Fund recognizes a realized gain or loss equal
to the difference between the value of the contract at the time it was opened
and the time it was closed. These investments require initial margin
deposits which consist of cash or eligible securities. At June 30, 1996, the
Portfolios placed U.S. Treasury Bills or other liquid securities or cash in
segregated accounts for the benefit of the broker at the Fund's custodian
with respect to their financial futures contracts as follows:
Portfolio 6/30/96
Collateral Value
U.S. Short-Term $253,173
Stable Return -
Mortgage -
Worldwide 597,902
Worldwide-Hedged 149,309
International 95,000
International-Hedged -
As of June 30, 1996, U.S. Short-Term had the following open financial
futures contracts:
Value Unrealized
Covered by Appreciation
Contracts Contracts (Depreciation)
Long Futures Contracts:
319 August `96 LIBOR One Month $ 75,315,900 $ 46,273
Short Futures Contracts:
319 August `96 Euro Dollars 75,236,150 (65,777)
$ (19,504)
As of June 30, 1996, Worldwide had the following open financial futures
contracts:
Value Unrealized
Covered by Appreciation
Contracts Contracts (Depreciation)
Long Futures Contracts
8 Sept `96 10 Year Japanese
Gov't Bond JPY 954,400,000 $ 176,916
23 Sept `96 Medium Term
German Gov't Bond DEM 5,820,150 (30,883)
61 Sept `96 LIFFE Long Gilt GBP 3,257,781 54,281
Short Futures Contracts
61 Sept `96 French 10 year
Bond FFR 37,210,000 (55,736)
$ 144,578
6. Futures Contracts (continued)
As of June 30, 1996, Worldwide-Hedged had the following open financial
futures contracts:
Value Unrealized
Covered by Appreciation
Contracts Contracts (Depreciation)
Long Futures Contracts
2 Sept `96 10 Year Japanese
Gov't Bond JPY 238,600 $ 44,208
7 Sept `96 Medium Term
German Gov't Bond DEM 1,771,350 (9,387)
14 Sept `96 LIFFE Long Gilt GBP 747,688 12,480
Short Futures Contracts
61 Sept `96 French 10 year
Bond FFR 8,540,000 (12,766)
$ 34,535
As of June 30, 1996, International had the following open financial futures
contracts:
Value
Covered by Unrealized
Contracts Contracts Appreciation
Long Futures Contracts
2 Sept `96 10 Year Japanese
Gov't Bond JPY 238,900,000 $ 8,351
7. Capital Stock Transactions
As of June 30, 1996, there were 1,000,000,000 shares of $0.001 par value
capital stock authorized. Transactions in capital stock for U.S. Short-Term
were as follows for the periods indicated:
Six Months Ended Year Ended
June 30, 1996 December 31, 1995
Shares Amount Shares Amount
Shares sold 371,386,757 $ 3,662,589,977 489,693,965 $ 4,840,215,843
Shares issued
related to
reinvestment of
dividends 1,479,981 14,590,473 2,129,127 21,045,642
372,866,738 3,677,180,450 491,823,092 4,861,261,485
Shares
redeemed 347,691,804 3,429,307,990 474,927,909 4,694,361,012
Net increase 25,174,934 $ 247,872,460 16,895,183 $ 166,900,473
7. Capital Stock Transactions (continued)
Transactions in capital stock for Stable Return were as follows for the
periods indicated:
Six Months Ended Year Ended
June 30, 1996 December 31,1995
Shares Amount Shares Amount
Shares sold 2,267,196 $ 22,407,000 50,525 $ 500,000
Shares issued
related to
reinvestment
of dividends
22,578 224,056 28,122 276,555
2,289,774 22,631,056 78,647 776,555
Shares
redeemed 10,484 103,691 25,300 251,270
Net increase 2,279,290 $ 22,527,365 53,347 $ 525,285
Transactions in capital stock for Mortgage were as follows for the period
indicated:
Period From April 29, 1996* to
June 30, 1996
Shares Amount
Shares sold 3,437,371 $ 34,373,710
Shares issued related to
reinvestment of dividends
38,734 384,757
3,476,105 34,758,467
Shares redeemed - -
Net increase 3,476,105 $ 34,758,467
*Commencement of Operations
Transactions in capital stock for Worldwide were as follows for the periods
indicated:
Six Months Ended Year Ended
June 30, 1996 December 31,1995
Shares Amount Shares Amount
Shares sold 3,555,769 $ 34,437,228 8,600,064 $ 83,105,970
Shares issued related
to reinvestment of
dividends 260,319 2,492,700 264,481 2,525,673
3,816,088 36,929,928 8,864,545 85,631,643
Shares redeemed 543 5,168 5,895,380 55,533,537
Net increase 3,815,545 $ 36,924,760 2,969,165 $ 30,098,106
7. Capital Stock Transactions (continued)
Transactions in capital stock for Worldwide-Hedged were as follows for the
periods indicated:
Six Months Year Ended
June 30, 1996 December 31, 1995
Shares Amount Shares Amount
Shares sold - $ - 2,499,119 $ 26,240,000
Shares issued related
to reinvestment of
dividends 66,040 713,214 105,484 1,114,755
66,040 713,214 2,604,603 27,354,755
Shares redeemed 255,055 2,775,000 26,256 273,852
Net increase
(decrease) (189,015) $ (2,061,786) 2,578,347 $ 27,080,903
Transactions in capital stock for International were as follows for the
period indicated:
Period From May 9, 1996* to
June 30, 1996
Shares Amount
Shares sold 1,400,000 $ 14,000,000
Shares issued related to
reinvestment of dividends 11,620 115,279
1,411,620 14,115,279
Shares redeemed - -
Net increase 1,411,620 $ 14,115,279
*Commencement of Operations
Transactions in capital stock for International-Hedged were as follows for
the periods indicated:
Six Months Ended For the Period September 14, 1995*
June 30, 1996 to December 31,1995
Shares Amount Shares Amount
Shares sold 4,306,477 $ 55,400,000 10,600,000 $ 106,000,000
Shares issued
related to
reinvestment
of dividends 1,273,277 1,210,044 139,771 1,398,833
5,579,754 56,610,044 10,739,771 107,398,833
Shares
redeemed 3,377,082 34,454,336 7,403,873 74,500,000
Net
increase 2,202,672 $ 22,155,708 3,335,898 $ 32,898,833
* The International-Hedged Portfolio recommenced operations on September 14,
1995.
8. Repurchase and Reverse Repurchase Agreements
Each Portfolio may enter into repurchase agreements under which a bank or
securities firm that is a primary or reporting dealer in U.S. Government
securities agrees, upon entering into the contract, to sell U.S. Government
securities to a Portfolio and repurchase such securities from such Portfolio
at a mutually agreed upon price and date. U.S. Short-Term, Worldwide, and
Worldwide-Hedged may only invest up to 25% of their assets in repurchase
agreements. Securities purchased subject to repurchase agreements must have
an aggregate market value greater than or equal to the repurchase price plus
accrued interest at all times. If the value of the underlying securities
falls below the value of the repurchase price plus accrued interest, the
Portfolio will require the seller to deposit additional collateral by the
next business day. If the request for additional collateral is not met, or
the seller defaults on its repurchase obligation, such Portfolio maintains
the right to sell the underlying securities at market value and may claim any
resulting loss against the seller.
Each Portfolio is also permitted to enter into reverse repurchase agreements
under which a primary or reporting dealer in U.S. Government securities
purchases U.S. Government securities from a Portfolio and such Portfolio
agrees to repurchase the securities at an agreed upon price and date. U.S.
Short-Term, Worldwide, and Worldwide-Hedged may only invest up to 25% of
their assets in reverse repurchase agreements.
Each Portfolio will engage in repurchase and reverse repurchase transactions
with parties selected on the basis of such party's creditworthiness.
9. Options Transactions
For hedging purposes, the Fund may purchase and write (sell) put and call
options on U.S. and foreign government securities and foreign currencies that
are traded on U.S. and foreign securities exchanges and over-the-counter
markets.
The risk with purchasing an option is that the Fund pays a premium whether or
not the option is exercised. Additionally, the Fund bears the risk of loss
of premium and change in market value should the counterparty not perform
under the contract. Put and call options purchased are accounted for in the
same manner as portfolio securities. The cost of securities acquired through
the exercise of call options is increased by the premiums paid. The proceeds
from securities sold through the exercise of put options are decreased by the
premiums paid.
When the Fund writes an option, the premium received by the Fund is recorded
as a liability and is subsequently adjusted to the current market value of
the option written. Premiums received from writing options which expire
unexercised are recorded by the Fund on the expiration date as realized gains
from option transactions. The difference between the premium and the amount
paid on effecting a closing purchase transaction, including brokerage
commissions, is also treated as a realized gain, or if the premium is less
than the amount paid for the closing purchase transaction, as a realized
loss. If a call option is exercised, the premium is added to the proceeds
from the sale of the underlying security or currency in determining whether
the Fund has a realized gain or loss. If a put option is exercised, the
premium reduces the cost basis of the security or currency purchased by the
Fund. In writing an option, the Fund bears the market risk of an unfavorable
change in the price of the security or currency underlying the written
option. Exercise of an option written by the Fund could result in the Fund
selling or buying a security or currency at a price different from the
current market value.
9. Options Transactions (continued)
A summary of put and call options written by U.S. Short-Term for the six
months ended June 30, 1996 is as follows:
1996 Calls 1996 Puts
# of # of
Contracts Premiums Contracts Premiums
Outstanding, beginning
of period
Eurodollars 270 $ 15,101 - $ -
U.S. Treasury - $ - $ -
Options written
Eurodollars - - - -
U.S. Treasury 335 124,749 - -
Options closed
Eurodollars 270 15,101 - -
U.S. Treasury 294 117,574 - -
Options exercised
Eurodollars - - - -
U.S. Treasury - - - -
Options expired
Eurodollars - - - -
U.S. Treasury 41 7,175 - -
Outstanding, end of period
Eurodollars - $ - - $ -
U.S. Treasury - $ - - $ -
10. Definitions of IO's and PO's
An Interest Only ("IO") security entitles the holder to receive interest
payments from any underlying pool of mortgages. The risk associated with
this security is related to the speed of principal paydowns. High
prepayments would result in a smaller amount of interest being received and
cause the yield to decrease. Low prepayments would result in a greater
amount of interest being received and cause the yield to increase.
A Principal Only ("PO") security entitles the holder to receive principal
payments from an underlying pool of mortgages. High prepayments return
principal faster than expected and cause the yield to increase. Low
prepayments return principal more slowly than expected and cause the yield to
decrease.
OFFICERS & DIRECTORS AND OTHER PERTINENT INFORMATION
OFFICERS AND DIRECTORS Investment Adviser
Fischer Francis Trees & Watts, Inc.
Stephen J. Constantine 200 Park Avenue
President and Director of the Fund New York, NY 10166
John C Head III Sub-Adviser
Director of the Fund Fischer Francis Trees & Watts
3 Royal Court
Lawrence B. Krause The Royal Exchange
Director of the Fund London, EC3V 3RA
Paul Meek Administrator and Distributor
Director of the Fund AMT Capital Services, Inc.
600 Fifth Avenue
Onder John Olcay New York, NY 10020
Chairman of the Board and
CEO of the Fund
Custodian and Fund Accounting Agent
Stephen P. Casper Investors Bank & Trust Company
Treasurer of the Fund P.O. Box 1537
Boston, MA 02205-1537
Kyle L. Chang
Secretary of the Fund Transfer and Dividend Disbursing Agent
Investors Bank & Trust Company
Carla E. Dearing P.O. Box 1537
Assistant Treasures of the Fund Boston, MA 02205-1537
William E. Vastardis Legal Counsel
Assistant Secretary of the Fund Dechert Price & Rhoads
1500 K Street, N.W.
Washington, D.C. 20005-1208
Independent Auditors
Ernst & Young LLP
787 Seventh Avenue
New York, NY 10019
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