FFTW FUNDS, INC.
Annual Report
December 31, 1995
200 Park Avenue
New York, NY 10166
Telephone 212.681.3000
Facsimile 212.681.3250
February 23, 1995
Dear Shareholder:
We are pleased to present the annual report for the year ended
December 31, 1995, which marks the sixth year of offering high quality
institutional mutual funds for our investors. The FFTW Funds, Inc.
currently consists of six Portfolios, each reflecting a strategy
pursued by our investment adviser, Fischer Francis Trees & Watts,
Inc.
By year-end, assets in our six Portfolios totaled $645 million.
During the year, we reopened the International Fixed Income- Hedged
Portfolio, to enable investors to participate in non-U.S. dollar bond
markets with limited currency exposure.
1995 proved to be a dramatic year for global bonds, in particular
for the United States, as 1994's price declines were more than offset
by a return in excess of 35% for U.S. Treasury bonds. Various events
punctuated the early part of the year with emerging markets
suffering from the Mexican crisis, Japan suffering from the Kobe earthquake
and Barings' failure shaking confidence in financial safeguards
generally. These faded from view as the year wore on and rates fell in all
major markets. Sluggish economic growth and easier monetary policies,
together with generally subdued inflation, provided a supportive
environment for bonds. Higher yielding currency and sector exposures
generally contributed to performance across the Fund's Portfolios.
Specific commentary for each Portfolio is included in the overview in
this report.
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
TABLE OF CONTENTS
U.S. Short-Term Fixed Income Portfolio
Overview 1
Schedule of Investments 3
Stable Return Portfolio
Overview 6
Schedule of Investments 7
Worldwide Short-Term Fixed Income Portfolio
Overview 8
Schedule of Investments 9
Worldwide Fixed Income Portfolio
Overview 11
Schedule of Investments 12
Worldwide Fixed Income-Hedged Portfolio
Overview 14
Schedule of Investments 15
International Fixed Income-Hedged Portfolio
Overview 17
Schedule of Investments 18
Statements of Assets and Liabilities 19
Statements Of Operations 22
Statements of Changes in Net Assets 25
Statement of Cash Flows - Stable Return Portfolio 28
Financial Highlights 29
Notes to Financial Statements 36
Report of Independent Auditors 47
U.S. SHORT-TERM FIXED INCOME PORTFOLIO
GRAPH: Comparison of change in value of a $10,000 investment in U.S. Short-Term
Fixed Income Portfolio and The IBC/Donohue's Money Market Fund Average.
This is an x-y line graph with x being the date (starting at 12/6/89
and ending at 12/31/95) and y being the value of the $10,000 investment
in the Fund and the IBC/Donoghue's Average. At 12/31/95 the Value of the
$10,000 investment in the Fund was $13,550 and the value of the same
investment in the IBC/Donoghue's Average was $13,317.
The U.S. Short-Term Fixed Income Portfolio rose by 5.71% during 1995,
outperforming its benchmark, the IBC/Donoghue's Money Market Fund
Average, by 20 basis points. For the five-year period ending December
31,1995, the Portfolio returned 4.44% annually, outperforming its
benchmark by an annualized rate of 24 basis points. The Portfolio
ended the period with net assets of $457.4 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 fell and the
yield curve flattened as investors became more positive on the markets
despite a falling dollar and Federal Reserve tightening. Having
started the quarter with considerable pessimism about rate decline
prospects, market participants became increasingly convinced that
further tightening would not be needed. The Portfolio's favorable
duration exposures and yield curve positioning led to its
outperformance relative to its benchmark.
Interest rates declined dramatically during the second quarter as
economic data appeared weak and fears of economic slowdown returned to
the market. Market volatility increased significantly. The
Portfolio's duration positioning detracted slightly from performance,
although this was somewhat offset by tactical yield curve positioning.
The net result was a slight underperformance relative to the benchmark
for the quarter.
By the summer, uneven and ambiguous economic data made it difficult
for participants to gauge the strength and longevity of the economic
cycle. Continuing optimism regarding inflation lent a positive
undertone to the markets and rates ended the quarter slightly below
starting levels. Duration slightly detracted from performance
although the Portfolio's duration was generally long relative to the
benchmark. This was largely offset by overweighting non-Treasury
securities.
With markets rallying in the final quarter, the Portfolio's duration
was kept above that of its benchmark. Again, overweighting higher
yielding non-Treasury securities contributed to outperformance.
Tactical yield curve positioning anticipating a yield curve steepening
that did not materialize detracted slightly from performance.
Short-term rates are expected to continue their downward trend
through the third quarter of 1996 with the Fed likely to ease more
than is reflected in the consensus view. Spreads are expected to
remain narrow.
Investment performance for the periods ended December 31, 1995:
Total Return
Since
One Five Inception*
Year Years (Annualized)
U.S. Short-Term Fixed Income Portfolio 5.71% 4.44% 5.13%
IBC/Donoghue's Money Market Fund Average 5.51% 4.20% 4.83%
* The U.S. Short-Term Fixed Income Portfolio commenced operations on
December 6, 1989.
U.S. SHORT-TERM FIXED INCOME PORTFOLIO-SCHEDULE OF INVESTMENTS
December 31, 1995
Face Amount Value
Asset-and Mortgage-Backed Securities - 44.1%
BCI Home Equity Loan, Ser. 1994-1,
Class A1, 6.115% due 3/29/44** $ 4,418,670 $ 4,395,424
Beneficial Home Equity Loan Trust, Ser.
1995-1, Class A1, 5.970% due 3/28/25** 2,125,216 2,127,872
Capital Auto Receivables Asset Trust, Ser.
1993-1, Class A7, 5.350% due 2/17/98 3,795,325 3,795,397
Capital Auto Receivables Asset Trust, Ser.
1993-2, Class A4, 4.700% due 5/15/97 3,059,291 3,054,975
Capital Auto Receivables Asset Trust, Ser.
1992-1, Class A3, 5.750% due 12/15/97 3,488,427 3,489,517
Case Equipment Loan Trust, Ser. 1994-C,
Class A1, 7.600% due 12/15/97 394,048 398,090
Chase Manhattan Credit Card Master Trust, Ser.
1991-2, Class A, 7.650% due 11/15/98 7,667,500 7,666,649
Chase Manhattan Home Equity Loan Trust, Ser.
1995-1, Class A1, 6.180% due 5/15/02** 8,610,283 8,621,046
Countrywide Funding Corp., Ser. 1994-5,
Class A1, 6.500% due 2/25/02 1,697,672 1,694,489
Discover Card Trust , Ser. 1992-A,
Class A, 5.500%, due 5/16/98 3,333,333 3,327,063
Federal National Mortgage Assn., Ser.
1993-54, Class FK, 6.444% due 4/25/21** 5,383,200 5,412,263
Federal National Mortgage Assn., Ser.
1993-26, Class C, 5.500% due 12/25/09 500,000 496,490
Federal National Mortgage Assn.,
Ser. 1993-71, Class PB, 4.750% due 5/25/00 3,594,677 3,578,317
Federal National Mortgage Association
ARM, 7.191% due 9/1/16 12,187,781 12,540,129
First Deposit Master Credit Trust, Ser 1993-1,
Class A, 4.900% due 6/15/00 1,500,000 1,498,258
General Electric Capital Mtg. Services, Inc.,
Ser. 1994-9, Class A1, 6.500% due 2/25/24 3,333,151 3,323,776
HFC Home Equity Loan, Ser. 1992-1, Class A1,
6.360% due 5/20/07** 3,663,663 3,668,243
HFC Home Equity Loan, Ser. 1992-2, Class A2,
6.360% due 10/20/07** 2,332,292 2,335,930
HFC Home Equity Loan, Ser. 1993-1, Class A1,
6.310% due 5/20/08** 6,527,981 6,536,141
Independent National Mortgage Corp., Ser.
1994-O, Class A10, 7.500% due 9/25/24 4,232,460 4,227,673
John Deere Owner Trust, Ser. 1993-A, Class
A2, 5.810% due 4/29/00** 5,929,130 5,934,578
MBNA Master Credit Card Trust, Ser. 1991-1,
Class A, 7.750% due 10/15/98 4,000,000 4,063,916
MBNA Master Credit Card Trust, Ser. 1993-4,
Class A, 6.250% due 12/15/00** 10,000,000 10,026,690
Merrill Lynch Home Equity Loan, Ser. 1993-1,
Class A, 6.375% due 2/15/03** 923,968 924,179
Merrill Lynch Mortgage Investors, Inc.,
Ser. 1993-I, Class A1, 6.330% due 11/15/23** 864,649 864,655
Merrill Lynch Mortgage Investors, Inc., Ser.
1994-B, Class A1, 6.400% due 12/15/19** 1,423,570 1,423,570
Merrill Lynch Mortgage Investors, Inc., Ser.
1994-F, Class A1, 6.250% due 4/15/19** 2,572,798 2,570,386
NationsBank Credit Card Master Trust, Ser.
1993-1, Class A, 4.750% due 9/15/98 15,000,000 14,912,985
Novus Home Equity Credit Trust, Ser. 1993-1,
Class A, 6.388% due 12/31/03** 8,038,849 8,045,915
PNC Mortgage Securities Corp., Ser. 1994-2,
Class A1, 6.744% due 5/25/24 1,801,762 1,802,888
Premier Auto Trust, Ser. 1995-1, Class A2,
7.350% due 5/4/97 6,907,666 6,939,503
Prudential Bank & Trust Master Credit
Card Trust, Ser. 1992-A, Class A, 6.250%
due 7/15/98 554,167 554,205
Prudential Home Mortgage Securities, Ser.
1992-48, Class A2, 7.500% due 1/25/23 5,935,575 5,938,299
Prudential Home Mortgage Securities, Ser.
1993-8, Class A9, 7.350% due 3/25/23 613,152 612,447
Prudential Securities Secured Financing
Corp., Ser. 1993-3, Class A3, 7.500% due
6/25/23 1,146,116 1,142,893
Residential Funding Mortgage Securities I,
Ser. 1993-S31, Class A1, 7.000% due 9/25/23 3,767,346 3,759,544
Residential Funding Mortgage Securities I,
Ser. 1993-S41, Class A1, 6.850% due 9/25/23 1,458,629 1,458,629
Resolution Trust Corp., Ser. 1992-11, Class A5,
6.635% due 10/25/24** 7,327,800 7,336,960
Resolution Trust Corp., Ser. 1992-C3, Class A2,
6.725% due 8/25/23** 2,854,972 2,858,541
Resolution Trust Corp., Ser. 1992-C4, Class A2,
7.075% due 6/25/24** 3,045,390 3,058,714
Resolution Trust Corp., Ser. 1992-CHF, Class A2,
6.905% due 12/25/20** 684,016 688,077
Resolution Trust Corp., Ser. 1992-M2, Class A1,
6.615% due 3/25/20** 2,612,342 2,617,240
Ryland Mortgage Securities Corp., Ser. 1992-11,
Class A, 8.000% due 8/25/19 4,141,287 4,141,287
Santa Barbara Funding II, Ser. 1, Class A,
6.463% due 3/20/18** 536,256 540,476
Sears Credit Account Trust, Ser. 1991-C,
Class A, 8.650% due 7/15/98 5,000,000 5,084,995
Securitized Asset Sales, Inc., Ser. 1995-1,
Class A2, 7.500% due 8/25/25 193,398 192,914
Signet Home Equity Loan 95-A, 6.240%
due 6/20/04** 9,500,000 9,495,547
Standard Credit Master Trust 1991, 8.500%
due 8/7/97 12,500,000 12,663,363
Total (Cost - $201,516,858) 201,841,138
Face
Amount Value
Bank Obligations - 15.7%
Abbey National p.l.c. CD, 5.750% due 4/29/96 $ 10,000,000 $ 10,000,000
Bank of Boston (Nassau) Time Deposit, 4.500%
due 1/2/96 13,984,000 13,984,000
Bank of America Bankers Acceptance, 5.580%
due 4/19/96#* 11,000,000 10,814,155
Bayerische Hypotheken Yankee CD, 6.430%
due 4/19/96 2,000,000 2,004,917
Societe Generale Yankee CD, 5.750% due 3/8/96 10,000,000 10,000,000
West Deutsche Bank Time Deposit, 5.750% due
1/2/96 25,000,000 25,000,000
Total (Cost - $71,803,072) 71,803,072
Commercial Paper - 7.5%*
Bank of Scotland, 5.620% due 4/26/96# 10,000,000 9,818,911
Harvard University, 6.050% due 1/2/96 9,612,000 9,610,385
Student Loan Corporation, 5.720% due 1/8/96# 5,000,000 4,994,439
Sweden (Kingdom of), 5.580% due 4/17/96 10,000,000 9,834,150
Total (Cost - $34,257,885) 34,257,885
Corporate Obligations - 11.3%
A T & T Capital Corp., 5.260% due 5/24/96** 6,000,000 5,991,654
Ameritech Cap, 5.925% due 5/12/98** 5,000,000 4,999,280
FCC National Bank MTN, 5.320% due 2/20/96** 4,000,000 3,997,864
General Electric Capital Corp., 5.360% due
5/12/97** 6,200,000 6,179,652
NationsBank Texas N.A., 5.913% due 12/18/98** 10,000,000 9,988,290
Wells Fargo & Co., 5.813% due 4/7/97 10,500,000 10,481,415
World Savings & Loan Assoc., MTN, 5.813%
due 3/15/96** 10,000,000 10,004,990
Total (Cost - $51,680,211) 51,643,145
U.S. Government and Agency Obligations - 17.7%*
Federal Home Loan Mtg Corp DN, 5.480% due
1/4/96# 20,000,000 19,990,867
U.S. Treasury Bill, 5.548% due 4/04/96@ 3,000,000 2,961,789
U.S. Treasury Bill, 5.435% due 6/6/96 11,000,000 10,762,136
U.S. Treasury Bill, 5.376% due 6/20/96 9,500,000 9,277,482
U.S. Treasury Bill, 5.253% due 6/27/96#@ 39,000,000 38,050,818
Total (Cost - $80,972,450) 81,043,092
Repurchase Agreements - 12.8%
Eastbridge Capital Repurchase Agreement,
5.450% due 1/2/96; Issued 12/29/95;
(Collateralized by $16,180,000 U.S. Treasury
Note, 5.750% due 9/30/97, value $16,540,201) 16,500,000 16,500,000
Fuji Bank Repurchase Agreement, 5.520% due
1/2/96; Issued 12/29/95; (Collateralized by
$4,845,000 U.S. Treasury Principal Strip, due
8/15/00, value $3,778,858) 3,759,000 3,759,000
Fuji Bank Repurchase Agreement, 5.850% due
1/2/96; Issued 12/29/95; (Collateralized by
$15,560,000 U.S. Treasury Bond Strip, due
2/15/99, value $13,221,176) 13,187,000 13,187,000
Fuji Bank Repurchase Agreement, 5.850% due
1/2/96; Issued 12/29/95; (Collateralized by
$5,000,000 U.S. Treasury Strip, due 8/15/96,
value $4,846,400) 4,838,000 4,838,000
Face Value
Amount
Repurchase Agreements (continued)
Salomon Brothers Repurchase Agreement, 5.875%
due 1/2/96; Issued 12/29/95; (Collateralized
by $19,910,000 U.S. Treasury Note, 7.250% due
11/15/96, value $20,245,981) $ 20,000,000 $ 20,000,000
Total (Cost - $58,284,000) 58,284,000
Long Options - 0.0%***
Contracts
Mar '96 Eurodollar $95.25 call expiring 3/18/96 135 3,375
Mar '96 Eurodollar $94.75 call expiring 3/18/96 135 27,000
Total (Cost - $28,774) 30,375
Total Investments - 109.1% (Cost - $498,543,250) 498,902,707
Other Assets, net of Liabilities - (9.1%) (41,477,405)
Net Assets - 100.0% $ 457,425,302
Schedule of Option Contracts Written
Number of Exercise Expiration Unrealized
Name of Issuer Contracts Price Date Value Depreciation
March '96 Eurodollar
(Call) 270 $ 95.00 3/18/96 $ 20,250 $ (5,149)
Summary of Abbreviations
ARM Adjustable rate mortgage
CD Certificate of Deposit
DN Discount Note
MTN Medium-Term Note
* Interest rate shown represents yield to maturity at date of purchase.
** Variable or floating rate security. Coupon rate shown reflects current
rate.
*** Rounds to less than 0.05%
# Security, or a portion thereof, has been segregated to cover reverse
repurchase agreements.
@ Security, or a portion thereof, is held in a margin account, or with the
broker to cover futures and reverse repurchase agreements.
See Notes to Financial Statements
STABLE RETURN PORTFOLIO
GRAPH: Comparison of change in value of a $10,000 investment in Stable Return
Portfolio and the Merrill Lynch 1-2.99 Year Treasury Index. This graph
is an x-y line graph with x being the date (starting at 7/26/93 and
ending at 12/31/95) and y being the value of the $10,000 investment.
The value of the $10,000 investment at 12/31/95 in the Fund was $11,364
and the value of the same investment in the Index was $11,366.
The Stable Return Portfolio rose by 11.26% in 1995, compared to
its benchmark, the Merrill Lynch 1-2.99 Year Treasury Index, which
rose by 11.00%. 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.
Early in the first quarter, the Portfolio was defensively
positioned. Later, portfolio duration was lengthened in anticipation
of declining interest rates, resulting in moderate outperformance for
the quarter. The Portfolio outperformed its benchmark in the second
quarter as volatility soared and the yield curve flattened. The
Portfolio benefited from correct anticipation of a rise in rates early
in the period but generally kept to more neutral stance as the rally
proved faster and more extended than most market upturns. Yield curve
positioning added to returns while holdings of non-Treasury securities
detracted somewhat as spreads versus U.S. Treasury securities widened.
With substantial uncertainty as to the economic environment as
the summer began, yields fluctuated in a narrow band, ending the
quarter little changed. The Portfolio narrowly underperformed its
benchmark as unfavorable duration exposures were not quite offset by
overweighting higher yielding agency securities. The fourth quarter
brought a continuation of the bond market rally, bringing the year's
total return for long-term U.S. Treasury bonds to an astonishing 35%.
The Fund, which invests in shorter maturities, outperformed its
benchmark by lengthening duration in mid-November as rate declines
accelerated, and by maintaining an overweighting in higher yielding
non-Treasury securities.
The portfolio manager continues to expect downward pressure on
rates, especially short term rates, with continued policy easing by
the Federal Reserve through the third quarter. While spreads remain
narrow, higher yielding securities continue to be overweighted,
reflecting a conviction that continued demand and declining rates
should support current spread levels.
Investment performance for the periods ended December 31, 1995:
Total Return
Since
One Inception*
Year (Annualized)
Stable Return Portfolio 11.26% 5.40%
Merrill Lynch 1-2.99 Year Treasury Index 11.00% 5.41%
* The Stable Return Portfolio commenced operations on May 11, 1994.
STABLE RETURN PORTFOLIO-SCHEDULE OF INVESTMENT
December 31, 1995
Face Amount Value
Long-Term Investments 96.1%
U.S. Treasury Note, 6.875% due 2/28/97# $ 150,000 $ 152,813
U.S. Treasury Note, 6.500% due 4/30/97# 220,000 223,713
U.S. Treasury Note, 6.125% due 5/31/97 1,960,000 1,984,500
U.S. Treasury Note, 5.625% due 6/30/97# 600,000 603,937
U.S. Treasury Note, 5.750% due 9/30/97 360,000 363,262
U.S. Treasury Note, 5.625% due 10/31/97# 100,000 100,750
U.S. Treasury Note, 5.500% due 11/15/98@ 900,000 906,466
U.S. Treasury Note, 6.875% due 8/31/99 520,000 546,325
Total (Cost - $4,852,518) 4,881,766
Short-Term Investments - 6.5%
Bank of Boston (Nassau) Time Deposit, 4.500%
due 1/2/96 178,000 178,000
Bankers Trust Repurchase Agreement, 5.480%
due 1/2/96; Issued 12/29/95, (Collateralized
by $145,000 U.S. Treasury Note, 8.875% due
11/15/97, value $154,244) 150,000 150,000
Total (Cost - $328,000) 328,000
Total Investments - 102.6% (Cost - $5,180,518) 5,209,766
Other Assets, net of Liabilities - (2.6%) (129,699)
Net Assets - 100.0% $ 5,080,067
# Security, or portion thereof, has been segregated to cover reverse repurchase
agreements.
@ Security, or portion thereof, is held with the broker to collateralize
reverse repurchase agreements.
See Notes to Financial Statements
WORLDWIDE SHORT-TERM FIXED INCOME PORTFOLIO
GRAPH: Comparison of change in value of a $10,000 investment in Worldwide Short-
Term Fixed Income Portfolio and the J.P. Morgan Eurodeposit Index. This
is an x-y line graph with x being the date (starting at 12/31/93 and
ending at 12/31/95) and y being the value of the $10,000 investment.
At 12/31/95 the value of the $10,000 investment in the fund was at
$10,875 and the value of the same investment in the index was $10,875.
The Worldwide Short-Term Fixed Income Portfolio rose by 5.64% during
the year, underperforming its benchmark, the J.P. Morgan 3-Month
Eurodollar Index, which rose 6.52%. The Portfolio seeks as high a
return as is consistent with preservation of principal by investing in
debt securities from bond markets around the world, while maintaining
an average weighted duration of less than one year. Net assets
totaled $34.1 million as of December 31, 1995.
The Portfolio was positioned defensively in the beginning of the year,
with underweightings in major markets and a shorter duration in the
U.S., reflecting expectations of a stronger economic environment. An
initial underweighting of the yen vs. the deutschemark and
overweighting of the dollar, reversed during the course of the
quarter, contributed to the Portfolio's underperformance relative to
its benchmark. By the second quarter, the U.S. bond market was
overweighted, reflecting expectations of weaker economic activity.
Yen bonds were underweighted, as the Japanese economy was expected to
strengthen. In Europe, German bonds were overweighted. Exposures
were modest given market volatility, lack of trend and uncertainty
about the factors driving interest rates.
In the third quarter, the U.S. and Japanese bond markets were
predominantly underweighted in favor of a heavy overweighting of
European markets. The U.S. and European strategies were successful
but were partially offset by an unanticipated decline in Japanese
rates. Exchange rates were largely directionless during this
period. The U.S. and European bond markets were overweighted during the
fourth quarter, as was the dollar, while Japanese bonds and yen were
underweighted. This strategy worked on all fronts, providing positive
relative performance.
Looking forward, the portfolio manager is favoring shorter maturities
in the European higher yielding markets, with the expectation that
U.S. short rates will also continue to fall. Both the Yen and
deutschemark are expected to be under some pressure as the dollar
benefits from positive inflation performance and increasing
competitiveness indicators.
Investment performance for the periods ended December 31, 1995:
Total Return
Since
One Inception*
Year (Annualized)
Worldwide Short-Term Fixed Income Portfolio 5.64% 4.18%
J.P. Morgan 3-Month Eurodeposit Index 6.52% 5.45%
* The Worldwide Short-Term Fixed Income Portfolio commenced operations
on December 13, 1993.
WORKDWIDE SHORT-TERM FIXED INCOME PORTFOLIO-SCHEDULE OF INVESTMENT
December 31, 1995
Face Amount (a) Value
Long-Term Investments - 29.2%
Canada - 4.4%
Canadian Government Bond, 9.000%
due 12/1/04 CAD 1,800,000 $ 1,486,039
Total (Cost - $1,475,845)
France - 8.0%
French Treasury Bill, 7.250% due 8/12/97 FFR 13,000,000 2,747,069
Total (Cost - $2,665,295)
Germany - 0.6%
Bundesrepublic Deutschland, 6.750%
due 4/22/03 DEM 300,000 221,782
Total (Cost - $214,797)
Spain - 6.7%
Bonos y Obligacion del Estado, 10.100%
due 2/28/01 ESP 182,000,000 1,518,244
Bonos y Obligacion del Estado, 10.150%
due 1/31/06 ESP 90,000,000 758,160
Total (Cost - $2,150,585) 2,276,404
United Kingdom - 6.5%
United Kingdom Treasury, 8.000% due
12/7/00 GBP 700,000 1,139,559
United Kingdom Treasury, 7.000% due 11/6/01 GBP 700,000 1,087,622
Total (Cost - $2,190,302) 2,227,181
United States - 3.0%
MBNA Master Card Trust, Ser. 1991-1, Class A,
7.750% due 10/15/98# $ 1,000,000 1,015,979
Total (Cost - $1,013,437)
Total Long-Term Investments - (Cost - $9,710,261) 9,974,454
Short-Term Investments - 69.2%
Time Deposits - 13.9%
Bank of Boston (Nassau) Time Deposit, 4.500%
due 1/2/96 4,759,000 4,759,000
Total (Cost - $4,759,000)
Short-Term Corporate Obligations - 27.8%
A T & T Capital Corp., 5.260% due 5/24/96**# 2,000,000 1,997,218
CIT Group Holdings MTN, 5.460% due 5/2/97**# 2,000,000 1,998,938
General Electric Capital Corp., 5.360% due
5/12/97**# 3,000,000 2,990,154
Toyota Motor Credit Corp. MTN, 5.220%
due 6/3/96**# 2,500,000 2,497,500
Total (Cost - $9,499,123) 9,483,810
U.S. Government Obligations - 27.5%
U.S. Treasury Bill, 5.072% due 12/12/96*# 9,400,000 8,960,381
U.S. Treasury Bill, 5.240% due 1/18/96*@ 400,000 398,894
Total (Cost - $9,323,671) 9,359,275
Total Short-Term Investments - (Cost $23,581,794) 23,602,085
Total Investments - 98.4% (Cost - $33,292,055) $ 33,576,539
Other Assets, net of Liabilities - 1.6% 555,672
Net Assets - 100.0% $ 34,132,211
Summary of Abbreviation
CAD Canadian Dollar
DEM German Deutsche Mark
ESP Spanish Peseta
FFR French Franc
GBP Great British Pound
MTN Medium-Term Note
(a) Face amount shown in U.S. dollars unless otherwise indicated.
* Interest rate shown represents yield to maturity at date of purchase.
** Variable or floating rate security. Coupon rate shown reflects current
rate.
# Security, or a portion thereof, is held in a segregated account to cover
forward foreign exchange contracts.
@ Security held in a margin account to collateralize futures contracts.
See Notes to Financial Statements
WORLDWIDE FIXED INCOME PORTFOLIO
GRAPH: Comparison of changes in value of a $10,000 investment in Worldwide Fixed
Income Portfolio and the J.P. Morgan Global Government Bond Index
(unhedged). This is an x-y line graph with x being the date (starting at
4/15/92 and ending at 12/31/95 and y being the value of the $10,000
investment. At 12/31/95 the value of the $10,000 investment in the Fund
was $13,975 and the value of the same investment in the Index was
$14,498.
The Worldwide Fixed Income Portfolio rose 12.60% in 1995. Its
benchmarks, the J.P. Morgan Global Government Bond Index (Unhedged)
rose 19.31%. The Portfolio's net assets totaled $86.2 million on
December 31, 1995. 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.
Major markets were predominantly underweighted by the Portfolio
relative to the benchmark during the first quarter. Appreciation of
the yen and deutschemark, the Mexican crisis, and a moderation of
expectations for the U.S. economy all contributed to lower rates and,
consequently, to underperformance of the Portfolio relative to the
benchmark. By the second quarter, bond market exposure reflected a
view that U.S. rates would continue to decline and the dollar would
appreciate somewhat against the yen. European bonds, primarily German
bonds, were overweighted in the Portfolio, while Japanese bonds were
defensively positioned in anticipation of a pick-up in economic
activity. As it turned out, Japanese rates declined and the dollar was
stable, causing the Portfolio to underperform the benchmark.
During the third quarter, U.S. and Japanese bond markets were
underweighted relative to the benchmark in anticipation of stronger
economic growth and the Portfolio maintained a heavy overweighting of
holdings in European markets. The yen was underweighted against the
deutschemark and the dollar at the beginning of the quarter. The
Portfolio was shifted to overweight U.S. bonds in the fourth quarter,
while retaining its over- and under weighting, respectively, of
European and Japanese bonds. Higher yielding European currencies
outperformed while the yen weakened on fears of the effects of
reflation policies.
European and Japanese markets continue to be over- and underweighted,
respectively. The higher yielding European currencies are also
overweighted against the deutschemark. U.S. rates are expected to
fall at the short end of the yield curve, although there is some
caution about prospects for rate declines in the longer end.
Investment performance for the periods ended December 31, 1995:
Total Return
Since
One Inception
Year (Annualized)*
Worldwide Fixed Income Portfolio 12.60% 9.44%
J.P. Morgan Global Government Bond Index (Unhedged) 19.31% 10.52%
* The Worldwide Fixed Income Portfolio commenced operations on April 15, 1992.
Long-Term Investments - 92.5%
Face Amount (a) Value
Australia - 0.5%
Australian Government, 7.500%
due 7/15/05# AUD 565,000 $ 402,227
Total (Cost - $369,475)
Belgium - 1.9%
Belgium (Kingdom of), 6.500%
due 3/31/05# BEF 50,000,000 1,679,350
Total (Cost - $1,651,695)
Canada - 7.2%
Canadian Government Bond, 6.500%
due 6/1/04 CAD 1,050,000 743,595
Canadian Government Bond, 9.000%
due 12/1/04 CAD 6,600,000 5,448,808
Total (Cost - $6,077,634) 6,192,403
Denmark - 1.0%
Denmark (Kingdom of), 8.000% due 3/15/06# DKK 4,500,000 856,386
Total (Cost - $841,587)
France - 15.8%
French Treasury Bill, 7.250% due 8/12/97 FFR 44,000,000 9,297,772
French Treasury Bill, 7.750% due 4/12/00 FFR 10,000,000 2,193,120
French Treasury Bill, 7.000% due 10/12/00 FFR 10,000,000 2,141,570
Total (Cost - $13,236,122) 13,632,462
Germany - 4.5%
Deutschland Republic, 7.375% due 1/3/05 DEM 5,100,000 3,894,671
Total (Cost - $3,835,944)
Italy - 4.4%
Buoni Poliennali del Tesoro, 10.500%
due 4/1/00 ITL 6,000,000,000 3,822,000
Total (Cost - $3,714,794)
Japan - 6.0%
Japanese Government Bond (181), 3.400%
due 6/20/05 JPY 524,900,000 5,212,782
Total (Cost - $5,371,663)
Spain - 11.0%
Bonos y Obligacion del Estado, 7.400%
due 7/30/99 ESP 208,000,000 1,621,152
Bonos y Obligacion del Estado, 10.100%
due 2/28/01 ESP 882,000,000 7,357,644
Bonos y Obligacion del Estado, 10.150%
due 1/31/06 ESP 60,000,000 505,440
Total (Cost - $9,050,361) 9,484,236
Sweden -2.0%
Swedish Government Bond, 10.250%
due 5/5/00 SKK 10,400,000 1,684,998
Total (Cost - $1,645,889)
United Kingdom -13.6%
United Kingdom Treasury, 8.000%
due 12/7/00 GBP 2,900,000 4,721,032
United Kingdom Treasury, 7.000%
due 11/6/01 GBP 4,500,000 6,991,857
Total (Cost - $11,516,578) 11,712,889
Long Term Investments (continued)
United States - 24.6%
U.S. Treasury Note, 5.375% due 11/30/97# $ 2,600,000 $ 2,608,125
U.S. Treasury Note, 5.500% due 11/15/98# 4,100,000 4,129,463
U.S. Treasury Note, 5.750% due 10/31/00# 5,550,000 5,634,976
U.S. Treasury Note, 5.500% due 12/31/00 4,700,000 4,699,718
U.S. Treasury Note, 7.875% due 11/15/04# 200,000 231,625
U.S. Treasury Bond, 7.875% due 2/15/21# 3,150,000 3,877,448
Total (Cost - $21,048,407) 21,181,355
Total Long-Term Investments - (Cost - $78,360,149) 79,755,759
Short-Term Investments - 21.8%
Bank of Boston (Nassau) Time Deposit, 4.500%
due 1/2/96# 1,519,000 1,519,000
U.S. Treasury Bill, 5.072% due 12/12/96*# 18,150,000 17,301,161
Total (Cost - $18,793,581) 18,820,161
Total Investments - 114.3% (Cost - $97,153,730) 98,575,920
Other Assets, net of Liabilities - (14.3%) (12,389,743)
Net Assets - 100.0% $ 86,186,177
Summary of Abbreviations
AUD Australian Dollar
BEF Belgian Franc
CAD Canadian Dollar
DEM Deutsche Mark
DKK Danish Krone
ESP Spanish Peseta
FFR French Franc
GBP British Pound
ITL Italian Lira
JPY Japanese Yen
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 and firm commitments.
See Notes to Financial Statements
WORLDWIDE FIXED INCOME-HEDGED PORTFOLIO
GRAPH: Comparison of change in value of a $10,000 investment in Worldwide Fixed
Income-Hedged Portfolio and Constructed Benchmark*. This is an x-y line
graph with x being the date (starting at 5/19/92 and ending at 12/31/95)
and y being the value of the investment. At 12/31/95 the value of the
$10,000 investment in the Fund was $14,302 and the value of the same
investment in the Benchmark was $13,342.
Since August, 1994 through the first six months of 1995, due to
its relative small size in assets, (less than $300,000), the Worldwide
Fixed Income-Hedged Portfolio remained invested in cash or short-term
instruments. During the third quarter, the Portfolio received
additional assets in excess of $25 million and became fully invested.
Thus its benchmark, the J.P. Morgan Global Government Bond Index
(Hedged) which rose by 17.90% during year, is not comparable to the
Portfolio's performance of 11.00% for the whole period. For the final
two quarters of the year, when the Portfolio was amply funded, it
outperformed its benchmark by 30 basis points.
The Portfolio's net assets were $28.3 million as of December 31,
1995. The 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 by actively utilizing
currency hedging techniques. The Portfolio's average weighted
duration may not exceed eight years.
In the third quarter, the Portfolio's exposure to the U.S. and
Japanese bond markets was underweigthed relative to the benchmark,
both in anticipation of stronger economic growth. European bonds,
particularly the higher yielding markets, were overweighted. The
first two strategies detracted from performance as both markets
experienced declining rates. However, declining rates in Europe help
offset some of the decline. The Portfolio outperformed its benchmark
in the final quarter, as U.S. and European bond positions were
overweighted and Japanese bonds were underweighted. All three
tactics contributed to a strong performance relative to the benchmark.
European and U.S. rates are expected to continue to decline,
while Japanese rates are expected to be under pressure to increase as
the Japanese economy recovers. Portfolio exposures are concentrated
in the shorter end of the higher yielding European and U.S. markets to
take advantage of the effects of monetary easing expected in those
markets.
Investment performance for the periods ended December 31, 1995:
Total Return
Since
One Inception**
Year (Annualized)
Worldwide Fixed Income-Hedged Portfolio 11.00% 10.39%
Constructed Benchmark* 10.28% 6.85%
* Constructed Benchmark: May 19, 1992 through July 31, 1994 - J.P. Morgan
Global
Government
Bond (Hedged)
August 1, 1994 through June 30, 1995 - IBC/
Donoghue's
Money
Market Fund
Average
July 1, 1995 through December 31, 1995 -J.P. Morgan
Global
Government
Bond
(Hedged)
** The Worldwide Fixed Income-Hedged Portfolio commenced operations
on May 19, 1992.
WORLD WIDE FIXED INCOME-HEDGED PORTFOLIO-SCHEDULE OF INVESTMENTS
December 31, 1995
Face amount (a) Value
Long-Term Investments - 90.0%
Australia - 0.6%
Australian Government, 7.500%
due 7/15/05 AUD 250,000 $ 177,977
Total (Cost - $166,946)
Belgium - 2.4%
Belgium (Kingdom of), 6.500%
due 3/31/05 BEF 20,000,000 671,740
Total (Cost - $658,340)
Canada - 7.0%
Canadian Government Bond, 6.500%
due 6/1/04 CAD 750,000 531,140
Canadian Government Bond, 9.000%
due 12/1/04 CAD 1,750,000 1,444,760
Total (Cost - $1,921,282) 1,975,900
Denmark - 1.2%
Denmark (Kingdom of), 8.000% due 3/15/06 DKK 1,800,000 342,554
Total (Cost - $320,650)
France - 9.1%
French Treasury Bill, 7.000% due 10/12/00 FFR 12,000,000 2,569,884
Total (Cost - $2,500,156)
Germany - 5.7%
Bundesrepublic Deutschland, 7.500%
due 11/11/04 DEM 500,000 384,836
Bundesrepublic Deutschland, 7.375%
due 1/3/05 DEM 1,600,000 1,221,858
Total (Cost - $1,566,134) 1,606,694
Italy - 4.3%
Buoni Poliennali del Tesoro, 10.500%
due 4/1/00 ITL 1,900,000,000 1,210,300
Total (Cost - $1,173,632)
Japan - 5.2%
Japanese Government Bond, 3.400%
due 6/20/05 JPY 149,200,000 1,481,705
Total (Cost - $1,517,893)
Spain - 9.6%
Bonos y Obligacion del Estado, 10.100%
due 2/28/01 ESP 249,000,000 2,077,158
Bonos y Obligacion del Estado, 10.150%
due 1/31/06 # ESP 75,000,000 631,800
Total (Cost - $2,576,576) 2,708,958
Sweden - 2.5%
Swedish Government Bond, 10.250%
due 5/5/00 SKK 4,300,000 696,682
Total (Cost - $681,303)
United Kingdom - 14.5%
United Kingdom Treasury, 8.000%
due 12/7/00 GBP 700,000 1,139,559
United Kingdom Treasury, 7.000%
due 11/6/01 GBP 1,900,000 2,952,117
Total (Cost - $4,015,001) 4,091,676
United States - 27.9%
U.S. Treasury Note, 5.375% due 11/30/97# 1,250,000 1,253,906
U.S. Treasury Note, 5.500% due 11/15/98# 1,550,000 1,561,138
U.S. Treasury Note, 5.750% due 10/31/00# 1,800,000 1,827,560
U.S. Treasury Note, 5.500% due 12/31/00 1,950,000 1,949,883
U.S. Treasury Bond, 7.875% due 2/15/21# 1,050,000 1,292,483
Total (Cost - $7,778,734) 7,884,970
Total Long-Term Investments -
(Cost - $24,876,647) 25,419,040
Short-Term Investments - 24.9%
Bank of Boston (Nassau) Time Deposit, 4.500%
due 1/2/96# 2,956,000 2,956,000
U.S. Treasury Bill, 5.240% due 1/18/96*# 30,000 29,917
U.S. Treasury Bill, 5.252% due 12/12/96*# 4,250,000 4,051,236
Total (Cost - $7,031,121) 7,037,153
Total Investments - 114.9% (Cost - $31,907,768) 32,456,193
Other Assets, net of Liabilities - (14.9%) (4,201,363)
Net Assets - 100.0% $ 28,254,830
Summary of Abbreviations
AUD Australian Dollar
BEF Belgian Franc
CAD Canadian Dollar
DEM Deutsche Mark
DKK Danish Krone
ESP Spanish Peseta
FFR French Franc
GBP British Pound
ITL Italian Lira
JPY Japanese Yen
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 a segregated account to
cover forward foreign exchange contracts and firm commitments.
See Notes to Financial Statements
INTERNATIONAL FIXED INCOME-HEDGED PORTFOLIO
GRAPH: Comparison of change in value of $10,000 investment in International
Fixed Income-Hedged Portfolio, J.P. Morgan Global Government Bond Index
(Non-U.S. Hedged) and J.P. Morgan 3-Month U.S. Cash Index. This is an
x-y line graph with x being the date and y being the value of the
investment. The graph breaks at 12/30/94 and resumes at 9/14/95 (with
initial $10,000 investments). At 12/31/95 the value of the $10,000
investment in the Fund was $10,380; in the J.P. Morgan Global Government
Bond Index (Non-U.S. Hedged) it was $10,445; and in the J.P. Morgan
3-Month U.S. Cash Index it was $10,177.
The Portfolio redeemed all of its assets on December 30, 1994, and
began selling shares again on September 14, 1995.
The International Fixed Income-Hedged Portfolio recommenced operations
on September 14, 1995. (The Portfolio previously had operations from
March 25, 1993 through December 30, 1994.) It rose 3.80% during the
balance of 1995. Its non-U.S. benchmark, the J.P. Morgan Global
Government Bond Index (Non-U.S. Hedged), rose 4.45% for the same
period. Its U.S. benchmark, the J.P. Morgan 3-Month Eurodeposit
Index, rose 1.77% over the same period. The Portfolio's net assets
totaled $34.0 million on December 31, 1995. 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 but hedged into U.S. dollars. The
Portfolio's average weighted duration may not exceed eight years.
Non-dollar bonds continued their year-long rally during the
fourth quarter, supported by declining inflation, easier monetary
policy and moderating economic growth. European bond markets were
heavily overweighted in the Portfolio. Exposure was primarily
concentrated in the French, Spanish and U.K. gilt markets. Interest
rate differentials for shorter-dated French bonds reached levels
last seen during the 1992 and 1993 Exchange Rate Mechanism crisis.
European yields are expected to decline further, although the rate
decline should be most pronounced in the short end of the higher
yielding markets where easier monetary policy has only just begun to
have an effect. The decline in rates throughout Europe will not
necessarily be as steep or as continuous as that seen in the latter
part of 1995.
Investment performance for the period ended December 31, 1995:
Total Return
Since Recommencement
of Operations*
International Fixed Income-Hedged Portfolio 3.80%
J.P. Morgan Global Government Bond Index (Non-U.S. Hedged) 4.45%
J.P. Morgan 3-Month Eurodeposit Index 1.77%
* 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.
INTERNATIONAL FIXED INCOME-HEDGED-SCHEDULE OF INVESTMENTS
Face Amount (a) Value
Long-Term Investments - 80.8%
Canada - 32.6%
Canadian Government Bond, 9.000%
due 12/1/04 CAD 13,400,000 $ 11,062,732
Total (Cost - $10,761,280)
Spain - 27.2%
Bonos y Obligacion del Estado, 10.100%
due 2/28/01 ESP 200,000,000 1,668,400
Bonos y Obligacion del Estado, 10.150%
due 1/31/06 ESP 900,000,000 7,581,600
Total (Cost - $8,448,759) 9,250,000
United Kingdom - 21.0%
United Kingdom Treasury, 7.000%
due 11/6/01 GBP 4,600,000 7,147,232
Total (Cost - $7,018,130)
Total Long-Term Investments -
(Cost - $26,228,169) 27,459,964
Short-Term Investments - 18.9%
Bank of Boston (Nassau) Time Deposit,
4.50% due 1/2/96# $ 5,725,000 5,725,000
U.S. Treasury Bill, 5.240% due 1/18/96*@ 220,000 219,391
U.S. Treasury Bill, 5.300% due 1/18/96*@ 500,000 498,601
Total (Cost - $6,442,992) 6,442,992
Total Investments - 99.7% (Cost - $32,671,161) 33,902,956
Other Assets, net of Liabilities - 0.3% 101,931
Net Assets - 100.0% $ 34,004,887
Summary of Abbreviations
CAD Canadian Dollar
ESP Spanish Peseta
GBP 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, held in a segregated account to
cover forward foreign exchange contracts.
@ Security held in a margin account to collateralize futures contracts.
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1995 U.S. Portfolios
U.S.
Short-Term Stable
Fixed Income Return
Portfolio Portfolio
Assets
Investments in securities, at value
(Cost - $498,543,250 and $5,180,518,
respectively) $ 498,902,707 (a) $ 5,209,766
Cash 1,188 126
Receivable from Investment Adviser 256,423 24,439
Interest receivable 1,503,740 57,065
Other assets 32,185 1,205
Total assets 500,696,243 5,292,601
Liabilities
Payable for securities purchased 5,097,767 -
Lehman Brothers Reverse Repurchase
Agreement, 5.300% due 1/2/96;
Issued 12/29/95 (Collateralized by
$34,125,000 U.S. Treasury Bills, due
6/27/96) 38,025,000 -
UBS Securities Inc. Reverse Repurchase
Agreement, 5.500% due 1/2/96; Issued
12/29/95 (Collateralized by $201,250 U.S.
Treasury Note, 5.500% due 11/15/98) - 202,000
Open written options contracts (Proceeds
- $15,101) 20,250 -
Distributions payable from investment
income, net 2,231 -
Interest payable for reverse repurchase
agreements 16,794 155
Variation margin payable 900 -
Accrued expenses and other liabilities 107,999 10,379
Total liabilities 43,270,941 212,534
Net Assets $ 457,425,302 $ 5,080,067
Shares Outstanding (par value $.001) 46,291,814 507,794
Net Asset Value Per Share $ 9.88 $ 10.00
Components of Net Assets as of December 31,
1995 were as follows:
Capital stock at par value ($.001) $ 46,292 $ 508
Capital stock in excess of par value 461,536,927 5,046,399
Undistributed investment income, net 72,341 674
Accumulated net realized gain (loss) (4,576,657) 3,238
Net unrealized appreciation on investments,
and on financial futures and options
contracts 346,399 29,248
$ 457,425,302 $ 5,080,067
(a) The U.S. Short-Term Fixed Income Portfolio includes repurchase
agreements amounting to $58,284,000.
STATEMENTS OF ASSETS AND LIABILITIES (Continued)
December 31, 1995 Global and International Portfolios
Worldwide Short- Worldwide
Term Fixed Income Fixed Income
Portfolio Portfolio
Assets
Investments in securities, at value
(Cost - $33,292,055 and $97,153,730,
respectively) $ 33,576,539 $ 98,575,920
Cash 692 340
Foreign cash (Cost - $331,489 and
$304,017, respectively) 331,584 315,045
Receivable from Investment Adviser 53,273 138,899
Receivable for securities sold 2,919,206 11,968,513
Interest receivable 242,932 1,424,886
Other assets 9,632 112,959
Total assets 37,133,858 112,536,562
Liabilities
Payable for securities purchased 2,915,329 25,872,733
Distributions payable from income - 64,145
Net unrealized depreciation of forward
foreign exchange contracts 63,635 375,129
Variation margin payable 1,535 -
Accrued expenses and other liabilities 21,148 38,378
Total liabilities 3,001,647 26,350,385
Net Assets $ 34,132,211 $ 86,186,177
Shares Outstanding (par value $.001) 3,454,413 8,766,113
Net Asset Value Per Share $ 9.88 $ 9.83
Components of Net Assets as of December
31, 1995 were as follows:
Capital stock at par value ($.001) $ 3,454 $ 8,766
Capital stock in excess of par value 34,119,553 97,017,925
Accumulated net realized loss (219,063) (12,018,557)
Net unrealized appreciation on
investments, forwards, financial
futures contracts, and translation
of other assets and liabilities
denominated in foreign currency 228,267 1,178,043
$ 34,132,211 $ 86,186,177
See Notes to Financial Statements
STATEMENTS OF ASSETS AND LIABILITIES (Continued)
December 31, 1995 Global and International Portfolios
Worldwide Fixed International
Income-Hedged Fixed income-
Portfolio Hedged Portfolio
Assets
Investments in securities, at
value (Cost - $31,907,768 and
$32,671,161, respectively) $ 32,456,193 $ 33,902,956
Cash 470 753
Foreign cash (Cost - $157,116
and $39,665, respectively) 157,138 39,925
Receivable from Investment Adviser 49,877 38,955
Receivable for securities sold 2,743,942 -
Interest receivable 400,365 302,922
Other assets 45,884 2,306
Total assets 35,853,869 34,287,817
Liabilities
Payable for securities purchas 7,434,124 -
Net unrealized depreciation of
forward foreign exchange contracts 130,743 209,274
Variation margin payable - 28,125
Accrued expenses and other liabilities 34,172 45,531
Total liabilities 7,599,039 282,930
Net Assets $ 28,254,830 $ 34,004,887
Shares Outstanding (par value $.001) 2,604,545 3,335,898
Net Asset Value Per Share $ 10.85 $ 10.19
Components of Net Assets as of December
31, 1995 were as follows:
Capital Stock at par value ($.001) $ 2,605 $ 3,336
Capital Stock in excess of par value 29,296,712 32,978,497
Undistributed investment income, net 655,997 105,438
Accumulated net realized loss (2,161,112) (4,213)
Net unrealized appreciation on
investments, forward foreign
exchange contracts, financial
futures contracts, and translation
of other assets and liabilities
denominated in foreign currency 460,628 921,829
$ 28,254,830 $ 34,004,887
See Notes to Financial Statements
STATEMENTS OF OPERATIONS
For the year Ended December 31, 1995 U.S. Portfolios
U.S. Short-Term Stable
Fixed Income Return
Portfolio Portfolio
Investment Income
Interest $ 23,041,169 $ 348,586
Expenses
Investment advisory fees 1,124,469 16,258
Administration fees 233,800 2,880
Custodian fees 222,565 13,638
Shareholder recordkeeping fees 35,266 1,742
Legal fees 9,170 48
Audit fees 27,049 10,223
Directors' fees 43,985 594
Other fees and expenses 59,996 2,281
Total operating expenses 1,756,300 47,664
Waiver of investment advisory fees
and reimbursement of other expenses (257,008) (24,439)
Operating expenses, net 1,499,292 23,225
Interest expense 397,477 42,492
Total expenses 1,896,769 65,717
Investment income, net 21,144,400 282,869
Net Realized and Unrealized Gain
(Loss) on Investments and on Financial
Futures and Options Contracts
Net realized gain (loss) on investments (682,555) 155,804
Net realized gain (loss) on financial
futures and options contracts (248,650) 24,093
Net unrealized appreciation
on investments 774,542 35,649
Net unrealized appreciation (depreciation)
on financial futures and options contracts
(13,058) 223
Net realized and unrealized gain (loss)
on investments, and on financial futures
and options contracts (169,721) 215,769
Net Increase in Net Assets Resulting
From Operations $ 20,974,679 $ 498,638
See Notes to Financial Statements
STATEMENTS OF OPERATIONS (Continued)
December 31, 1995 Global & International Portfolio
Worldwide Short- Worldwide
Term Fixed Income Fixed Income
Portfolio Portfolio
Investment Income
Interest $ 2,915,386 $ 3,123,940
Expenses
Investment advisory fees 155,080 185,718
Administration fees 26,871 28,564
Custodian fees 50,117 94,699
Shareholder recordkeeping fees 2,329 9,605
Legal fees - 1,475
Audit fees 25,074 25,147
Directors' fees 6,059 5,686
Other fees and expenses 9,293 66,582
Total operating expenses 274,823 417,476
Waiver of investment advisory fees (53,273) (138,899)
Operating expenses, net 221,550 278,577
Investment income, net 2,693,836 2,845,363
Net Realized and Unrealized Gain
(Loss) on Investments, Financial
Futures Contracts, and Foreign
Currency-Related Transactions
Net realized gain on investments 2,782,882 6,189,857
Net realized loss on financial
futures contracts (1,391,325) (95,611)
Net realized loss on foreign
currency-related transactions (2,036,888) (4,866,996)
Net unrealized appreciation
(depreciation) on investments (191,308) 1,030,730
Net unrealized depreciation on
financial futures contracts (142,781) (103,988)
Net unrealized appreciation on
other assets and liabilities
denominated in foreign currency 337,987 212,791
Net realized and unrealized gain
(loss) on investments, financial
futures contracts, and foreign
currency-related transactions (641,433) 2,366,783
Net Increase in Net Assets
Resulting From Operations $ 2,052,403 $ 5,212,146
See Notes to Financial Statements
STATEMENTS OF OPERATIONS (Continued)
For the Year Ended December 31, 1995 Global & International Portfolios
Worldwide Fixed International Fixed
Income-Hedged Income-Hedged
Portfolio Portfolio
Investment Income
Interest $ 809,462 $ 1,543,241
Expenses
Investment advisory fees 51,470 91,815
Administration fees 7,951 13,971
Custodian fees 35,394 27,998
Shareholder recordkeeping fees 2,920 1,161
Legal fees 613 968
Audit fees 25,350 35,157
Directors' fees and expenses 1,408 2,268
Other fes and expenses 2,404 3,339
Total operating expenses 127,510 176,677
Waiver of investment advisory
fees and reimbursement of
other expenses (69,607) (38,955)
Operating expenses, net 57,903 137,722
Investment income, net 751,559 1,405,519
Net Realized and Unrealized
Gain (Loss) on Investments,
Financial Futures Contracts,
and Foreign Currency-Related
Transactions
Net realized gain on investments 566,999 4,873,973
Net realized loss on financial
futures contracts (80,087) (611,290)
Net realized gain (loss) on
foreign currency-related
transactions 318,004 (4,076,435)
Net unrealized appreciation on
investments 548,425 1,231,795
Net unrealized depreciation on
financial futures contracts - (106,847)
Net unrealized depreciation on
other assets and liabilities
denominated in foreign currency (87,797) (203,119)
Net realized and unrealized
gain on investments, financial
futures contracts, and foreign
currency-related transactions 1,265,544 1,108,077
Net Increase in Net Assets
Resulting From Operations $ 2,017,103 $ 2,513,596
* For the period September 14, 1995 (recommencement of operations) to
December 31, 1995.
See Notes to Financial Statements
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended U.S. Portfolios
U.S. Short-Term
Fixed Income Portfolio Stable Return Portfolio
Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1995 Dec. 31, 1994
Increase
(Decrease)
in Net Assets
From
Operations
Investment
income, net $ 21,144,400 $ 11,720,200 $ 282,869 $ 179,805
Net realized
gain (loss)
on investments,
and financial
futures and
options
contracts (931,205) (1,979,592) 179,897 (155,660)
Net unrealized
appreciation
(depreciation)
on investments,
and on financial
futures and
options contracts 761,484 (325,913) 35,872 (6,548)
Net increase in
net assets
resulting
from operations 20,974,679 9,414,695 498,638 17,597
Distributions
to Shareholders
From investment
income, net 21,144,400 12,010,085 282,195 179,805
In excess of
investment
income, net 318 69,947 - -
Total
Distributions 21,144,718 12,080,032 282,195 179,805
Capital Share
Transactions,
Net 166,900,473 (124,367,616) 525,285 1,018,108
Total increase
(decrease) in
net assets 166,730,434 (127,032,953) 741,728 855,900
Net Assets
Beginning of
period 290,694,868 417,727,821 4,338,339 3,482,439
End of period $ 457,425,302 $ 290,694,868 $ 5,080,067 $ 4,338,339
Undistributed
Net Investment
Income $ 72,341 $ - $ 674 $ -
See Notes to Financial Statements
STATEMENTS OF CHANGES IN NET ASSETS (continued)
For the Years Ended Global & International Portfolios
Worldwide Short-Term Worldwide
Fixed Income Portfolio Fixed Income Portfolio
Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1995 Dec. 31, 1994
Increase
(Decrease)
in Net Assets
From Operations
Investment
income, net 2,693,836 $ 2,976,095 $ 2,845,363 $ 6,927,707
Net realized
gain (loss) on
investments,
financial futures
contracts, and on
foreign currency
-related
transactions (645,331) (799,335) 1,227,250 (13,205,211)
Net unrealized
appreciation
(depreciation) on
investments,
financial futures
contracts, and on
assets and
liabilities
denominated in
foreign currency 3,898 216,567 1,139,533 (1,187,991)
Net increase
(decrease) in
net assets
resulting from
operations 2,052,403 2,393,327 5,212,146 (7,465,495)
Distributions
to Shareholders
From investment
income, net 1,778,457 2,305,838 1,452,532 3,041,000
In excess of
investment
income, net - 95 - 105,966
From capital
stock in
excess of
par value 916,209 670,257 1,393,024 3,902,306
Total
Distributions 2,694,666 2,976,190 2,845,556 7,049,272
Capital Share
Transactions,
Net (44,987,457) 74,329,808 30,098,106 (148,926,788)
Total increase
(decrease) in
net assets (45,629,720) 73,746,945 32,464,696 (163,441,555)
Net Assets
Beginning of
period 79,761,931 6,014,986 53,721,481 217,163,036
End of period $ 34,132,211 $79,761,931 $ 86,186,177 $53,721,481
Undistributed
Net Investment
Income $ - $ - $ - $ -
See Notes to Financial Statements
STATEMENTS OF CHANGES IN NET ASSETS (continued)
For the Periods Ended Global & International Portfolios
Worldwide Fixed Income International Fixed Income
Hedged Portfolio Hedged Portfilio*
Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1995 Dec. 31, 1994
Increase
(Decrease)
in Net Assets
From
Operations
Investment
income, net $ 751,559 $ 748,449 $ 1,405,519 $ 62,881
Net realized
gain (loss) on
investments,
financial
futures
contracts, and
on foreign
currency-
related
transactions 804,916 (1,924,957) 186,248 (215,261)
Net unrealized
appreciation
(depreciation)
on investments,
financial futures
contracts, and on
assets and
liabilities
denominated in
foreign currency 460,628 (207,823) 921,829 (226,142)
Net increase
(decrease) in net
assets resulting
from operations 2,017,103 (1,384,331) 2,513,596 (378,522)
Distributions to
Shareholders
From investment
income, net 1,115,901 748,449 1,405,519 63,287
In excess of
investment income,
net - 2,647 2,023 -
From net realized
gain on investments,
financial futures
contracts, and on
foreign currency-
related
transactions - - - 641,857
Total
Distributions 1,115,901 751,096 1,407,542 705,144
Capital Share
Transactions,
Net 27,080,903 (38,729,363) 32,898,833 (16,782,902)
Total increase
(decrease) in
net assets 27,982,105 (40,864,790) 34,004,887 (17,866,568)
Net Assets
Beginning of
period 272,725 41,137,515 - 17,866,568
End of period $ 28,254,830 $ 272,725 $ 34,004,887 $ -
Undistributed
Net Investment
Income $ 655,997 $ - $ 105,438 $ -
* The Portfolio was fully liquidated on December 30, 1994 and recommenced
operations on September 14, 1995.
See Notes to Financial Statements
STATEMENT OF CASH FLOWS-STABLE RETURN PORTFOLIO
For the Year Ended December 31, 1995
Increase (Decrease) in Cash
Cash Flows from Operating Activities
Investment income, net $ 282,869
Adjustments to reconcile investment income, net
to net cash used in operating activities:
Decrease in receivables and other assets related
to operations 6,302
Decrease in payables related to operations (298,796)
Net amortization of discount/premium (30,554)
Net cash used in operating activities (40,179)
Cash Flows provided by (used for) Investing Activities
Purchases of long-term portfolio investments (52,594,992)
Proceeds from disposition of long-term portfolio
investments 52,601,957
Net proceeds from sales of short-term portfolio
investments 562,215
Net gains on closed futures contracts 24,093
Net cash provided by investing activities 593,273
Cash Flows provided by (used for) Financing Activities
Net shares of capital stock sold 248,730
Net proceeds from issuance of reverse repurchase agreements (796,750)
Dividends to shareholders (net of reinvestments of $276,555) (5,640)
Net cash used in financing activities (553,660)
Net decrease in cash (566)
Cash at beginning of year 692
Cash at end of year $ 126
Cash paid during the period for interest $ 42,918
See Notes to Financial Statements
FINANCIAL HIGHLIGHTS
U.S. Short-Term Fixed Income Portfolio
For the Year Ended
For a share
outstanding
throughout
the period: Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993 Dec. 31, 1992
Per Share
Data
Net asset
value,
beginning of
period $ 9.89 $ 9.98 $ 10.00 $ 10.00
Increases
(Decreases)
From Investment
Operations
Investment income,
net 0.56 0.44 0.32 0.34
Net realized and
unrealized gain
(loss) on
investments,
and financial
futures and
options contracts (0.01) (0.08) (0.03) 0.01
Total from
investment
operations 0.55 0.36 0.29 0.35
Less Distributions
From investment
income, net 0.56 0.45 0.31 0.34
In excess of
investment income,
net 0.00 * 0.00 * - -
From net realized
and unrealized
gain on
investments, and
financial futures
and options
contracts - - - 0.01
Total distributions 0.56 0.45 0.31 0.35
Net asset value,
end of period $ 9.88 $ 9.89 $ 9.98 $ 10.00
Total Return 5.71% 3.71% 2.88% 3.45%
Ratios/
Supplemental
Data Net
assets,
end of
period $ 457,425,302 $ 290,694,868 $ 417,727,821 $ 682,513,193
Ratio of
operating
expenses
to average
net assets (a) 0.40% 0.40% 0.40% 0.40%
Ratio of
investment
income, net
to average
net assets 5.64% 4.14% 3.28% 3.37%
Decrease in
above ratios
due to waiver
of investment
advisory fees 0.07% 0.08% 0.03% -
Ratio of
interest expense
to average net
assets 0.11% 0.03% 0.08% 0.03%
(a) Net of waivers, exclusive of interest expense.
(b) Annualized
* Rounds to less than $0.01
See Notes to Financial Statements
FINANCIAL HIGHLIGHTS (Continued)
U.S. Short-Term Fixed Income Portfolio (continued)
Three Months Year Period From
Ended Ended Dec. 6, 1989* to
Dec. 31, 1991 Sept. 31, 1991 Sept. 30, 1990
Per Share Data
Net asset value,
beginning of
period $ 10.00 $ 10.00 $ 10.00
Increases From
Investment Operations
Investment income, net 0.12 0.63 0.62
Net realized and
unrealized gain
on investments,
financial futures
and options
contracts 0.02 0.06 0.04
Total from
investment operations 0.14 0.69 0.66
Less Distributions
From investment income,
net 0.12 0.63 0.62
In excess of investment
income, net - - -
From net realized and
unrealized gain on
investments, and
financial futures
and options contracts 0.02 0.06 0.04
Total distributions 0.14 0.69 0.66
Net asset value,
end of period $ 10.00 $ 10.00 $ 10.00
Total Return 5.67% (b) 7.11% 8.31% (b)
Ratios/Supplemental
Data Net assets,
end of period $ 365,310,697 $ 269,114,721 $ 111,956,929
Ratio of operating
expenses to
average net assets
(a) 0.40% (b) 0.40% 0.50% (b)
Ratio of investment
income, net to
average net assets 4.67% (b) 5.99% 8.23% (b)
Decrease in above
ratios due to
waiver of investment
advisory fees 0.03% (b) 0.11% 0.86% (b)
Ratio of interest
expense to average
net assets - 0.03% -
(a) Net of waivers, exclusive of interest expense.
(b) Annualized
* Commencement of Operations
See Notes to Financial Statements
FINANCIAL HIGHLIGHTS (continued)
Stable Return Portfolios
For the Year Ended Period From
July 26, 1993* to
Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993
Per Share Data
Net asset value,
beginning of period $ 9.55 $ 9.95 $ 10.00
Increases (Decreases)
From Investment
Operations
Investment income, net 0.60 0.43 0.14
Net realized and
unrealized gain
(loss) on investments
and financial futures
contracts 0.45 (0.40) 0.05
Total from investment
operations 1.05 0.03 0.19
Less Distributions
From investment income,
net 0.60 0.43 0.14
From net realized gain
on investments and
financial futures
contracts - - 0.03
In excess of net
realized gains on
investments and
financial futures
contracts - - 0.07
Total distributions 0.60 0.43 0.24
Net asset value,
end of period $ 10.00 $ 9.55 $ 9.95
Total Return 11.26% 0.29% 4.27%(b)
Ratios/Supplemental
Data
Net assets, end of
period $ 5,080,067 $ 4,338,339 $ 3,482,439
Ratio of operating
expenses to average
net assets (a) 0.50% 0.50% 0.50% (b)
Ratio of investment
income, net to
average net assets 6.09% 4.43% 3.68% (b)
Decrease in above ratios
due to waiver of investment
advisory fees and reimburse-
ment of other expenses 0.53% 0.57% 1.46% (b)
Ratio of interest expense
to average net assets 0.91% 1.24% -
Portfolio turnover 1,075% 343% 1,841%
(a) Net of waivers and reimbursements, exclusive of interest expense.
(b) Annualized
* Commencement of Operations
See Notes to Financial Statements
FINANCIAL HIGHLIGHTS (continued)
Worldwide Short-Term Fixed Income Portfolio
For the Year Ended Period From
For a share Dec. 13, 1993* to
outstanding Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993*
throughout
the period:
Per Share Data
Net asset value,
beginning of
period $ 9.92 $ 10.01 $ 10.00
Increases
(Decreases) From
Investment
Operations
Investment income,
net 0.58 0.33 0.01
Net realized and
unrealized gain
(loss) on investments,
financial futures
and options contracts,
and foreign currency-
related transactions (0.04) (0.09) 0.01
Total from investment
operations 0.54 0.24 0.02
Less Distributions
From investment income,
net 0.38 0.26 0.01
In excess of investment
income, net - 0.00 ** -
From capital stock in
excess of par value 0.20 0.07 -
Total distributions 0.58 0.33 0.01
Net asset value, end
of period $ 9.88 $ 9.92 $ 10.01
Total Return 5.64% 2.72% 4.22%(b)
Ratios/Supplemental
Data
Net assets, end of
period $ 34,132,211 $ 79,761,931 $ 6,014,986
Ratio of
operating
expenses to
average net
assets (a) 0.50% 0.50% 0.50% (b)
Ratio of
investment income,
net to average net
assets 6.08% 4.17% 2.43% (b)
Decrease in above
ratios due to waiver
of investment
advisory fees and
reimbursement of
other expenses 0.12% 0.09% 0.76% (b)
(a) Net of waivers and reimbursements
(b) Annualized
* Commencement of Operations
** Rounds to less than $0.01
See Notes to Financial Statements
FINANCIAL HIGHLIGHTS (continued)
Worldwide Fixed Income Portfolio
For the Year Period From
For a share Ended April 15, 1992* to
outstanding Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993 Dec. 31, 1992
throughout
the period:
Per Share Data
Net asset value,
beginning of
period $ 9.27 $ 10.02 $ 9.98 $ 10.00
Increases
(Decreases) From
Investment
Operations
Investment
income, net 0.58 0.50 0.45 0.39
Net realized and
unrealized gain
(loss) on
investments,
financial futures
and options contracts
and foreign currency-
related transactions 0.56 (0.74) 1.04 0.53
Total from investment
operations 1.14 (0.24) 1.49 0.92
Less Distributions
From investment income,
net 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 foreign currency-
related transactions - - 0.87 0.55
In excess of net realized
gain on investments,
financial futures and
options contracts, and
foreign currency-
related transactions - - 0.13 0.00 **
Total distributions 0.58 0.51 1.45 0.94
Net asset value,
end of period $ 9.83 $ 9.27 $ 10.02 $ 9.98
Total Return 12.60% (2.25%) 15.86% 13.46%(b)
Ratios/
Supplemental
Data
Net assets,
end of period $ 86,186,177 $ 53,721,481 $ 217,163,036 $ 82,757,009
Ratio of
operating
expenses to
average net
assets (a) 0.60% 0.60% 0.59% 0.60%(b)
Ratio of
investment
income, net to
average net
assets 6.13% 5.11% 4.48% 5.39%(b)
Decrease in
above ratios
due to waiver
of investment
advisory fees
and reimbursement
of other expenses 0.30% 0.02% - 0.72%(b)
Ratio of interest
expense to average
net assets - 0.03% 0.27% 0.19%(b)
Portfolio
Turnover 1,401% 1,479% 1,245% 850%
(a) Net of waivers and reimbursements.
(b) Annualized
* Commencement of Operations
** Rounds to less than $0.01
See Notes to Financial Statements
FINANCIAL HIGHLIGHTS (continued)
Worldwide Fixed Income-Hedged Portfolio
For the Year Ended Period From
For a share May 19, 1992* to
outstanding Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993 Dec. 31, 1992
throughout
the period:
Per Share Data
Net asset value,
beginning of
period $ 10.41 $ 10.08 $ 9.85 $ 10.00
Increases From
Investment
Operations
Investment income,
net 0.45 0.34 0.45 0.32
Net realized and
unrealized gain
(loss) on investments,
financial futures
and options contracts,
and foreign currency-
related transactions 0.66 0.43(c) 0.76 0.25
Total from investment
operations 1.11 0.77 1.21 0.57
Less Distributions
From investment
income, net 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 foreign currency-
related transactions - - 0.53 0.40
Total distributions 0.67 0.44 0.98 0.72
Net asset value,
end of period $ 0.85 $ 10.41 $ 10.08 $ 9.85
Total Return 11.00% 7.84% 12.89% 9.45% (b)
Ratios/
Supplemental
Data
Net assets, end of
period $ 28,254,830 $ 272,725 $ 41,137,515 $ 21,785,134
Ratio of
operating
expenses
to average
net assets (a) 0.45% 0.60% 0.60% 0.60%(b)
Ratio of
investment
income, net
to average
net assets 5.84% 4.72% 4.49% 5.13%(b)
Decrease in
above ratios
due to waiver
of investment
advisory fees
and reimbursement
of other expenses 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 500% 1,622% 1,254% 826%
(a) Net of waivers and reimbursements.
(b) Annualized
(c) Includes the effect of net realized losses prior to significant
decreases in shares outstanding
* Commencement of Operations
** Rounds to less than $0.01
See Notes to Financial Statements
FINANCIAL HIGHLIGHTS (continued)
International Fixed Income-Hedged Portfolio
For the Year Ended Period From
For a share March 25, 1993* to
outstanding Dec. 31, 1995*** Dec. 31, 1994 Dec. 31, 1993
throughout
the period:
Per Share Data
Net asset value,
beginning of
period $ 10.00 $ 10.39 $ 10.00
Increases
(Decreases)
From
Investment
Operations
Investment income,
net 0.19 0.20 0.44
Net realized and
unrealized gain
(loss) on
investments,
financial futures
and options contracts,
and foreign currency-
related transactions 0.19 (0.46) 0.78
Total from investment
operations 0.38 (0.26) 1.22
Less Distributions
From investment income,
net 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 foreign currency-
related transactions - 0.50 0.39
Total distributions 0.19 0.70 0.83
Net asset value,
end of period $ 10.19 $ 9.43 ** $ 10.39
Total Return 13.45% (b) (2.53%) 16.37%(b)
Ratios/
Supplemental
Data
Net assets, end
of period $ 34,004,887 $ - $ 17,866,568
Ratio of
operating
expenses to
average net
assets (a) 0.60% (b) 0.57% 0.60%(b)
Ratio of
investment
income, net
to average net
assets 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 0.17% (b) 0.49% 0.28%(b)
Portfolio
Turnover 764% 1,282% 855%
(a) Net of waivers and reimbursements.
(b) Annualized
(c) Rounds to less than $0.01
* Commencement of Operations
** Represents net asset value per share at December 30, 1994.
The Portfolio was fully liquidated on December 30, 1994 based on
this net asset value.
*** The Portfolio recommenced operations on September 14, 1995.
See Notes to Financial Statements
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
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, six of which were
active as of December 31, 1995. The six active Portfolios are: U.S.
Short-Term Fixed Income Portfolio ("U.S. Short-Term"); Stable Return
Portfolio ("Stable Return"); Worldwide Short-Term Fixed Income
Portfolio ("Worldwide Short-Term"); Worldwide Fixed Income Portfolio
("Worldwide"); Worldwide Fixed Income-Hedged Portfolio ("Worldwide-
Hedged") and International Fixed Income-Hedged Portfolio
("International-Hedged"). The Fund is managed by Fischer Francis
Trees and Watts, Inc. (the "Adviser"). The costs incurred by the Fund
in connection with the organization and initial registration of shares
were borne by the 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 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 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 U.S. Short-Term to employ the "Full Payout Method"
of paying dividends. As such, income is determined daily and, if
positive, a dividend is declared daily from net investment income, net
short-term capital gains or losses and net unrealized gains or losses
("Full Payout Income"). If a day's distribution is negative, each
shareholder's accumulated dividend accrual for the month is
2. Summary of Significant Accounting Policies (continued)
proportionately reduced. Actual dividends declared each day are based
on an average daily rate (based on the previous 30 days) to reduce the
possibility of a negative rate on a particular day. The "Full Payout
Method" was suspended by the Board at the beginning of 1994 and will
remain so until further notice to shareholders. In the interim, U.S.
Short-Term is declaring daily dividends from net investment income.
It is the policy of the other five Portfolios to declare dividends
daily from net investment income. Dividends are paid in cash or
reinvested monthly for all Portfolios.
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 Short-Term and Worldwide had tax
returns of capital of $916,209 and $1,393,024, respectively. During
the year ended December 31, 1995, the Portfolios reclassified the
following book to tax differences (increases (decreases):
Undistributed Accumulated Net
Investment Income, Realized Capital Stock in
Portfolio Net Gain/(Loss) Excess of Par Value
U.S. Short-Term $ 142,606 $ (193,250) $ 50,644
Worldwide Short-Term (915,284) 555,346 359,938
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 exchange currency contracts are
translatedinto 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 Adviser. The advisory
fees to be paid to the 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, Worldwide
Short-Term and International-Hedged. 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 Adviser has agreed to waive its
investment advisory fee and reimburse the Portfolios for any excess
expenses. The Adviser has voluntarily agreed to waive its
investment advisory fees and reimburse the Portfolio for any excess
expenses of Stable Return, Worldwide Short-Term, Worldwide Hedged, and
International-Hedged to the extent that each Portfolio's aggregate
expenses, (exclusive of interest, taxes, brokerage commissions
and other extraordinary expenses) exceed 0.50% of Stable Return's and
Worldwide Short-Term's, 0.45% of Worldwide Hedged's and 0.60% of
International-Hedged's average daily net assets. In addition, the
Adviser and Administrator had voluntarily agreed to waive their
fees with respect to Worldwide-Hedged Portfolio, for the period
January 1, 1995 through June 30, 1995.
The investment advisory fee rates and the amounts waived or
reimbursed by the advisor are summarized below for each of the Portfolios:
Investment Year Ended
Advisory December 31, 1995
Portfolio Fee Waivers and Reimbursements
U.S. Short-Term 0.30% $ 257,008
Stable Return 0.35% 24,439
Worldwide Short-Term 0.35% 53,273
Worldwide 0.40% 138,899
Worldwide-Hedged 0.40%* 69,607
International-Hedged 0.40% 38,955
* Due to the Adviser's voluntary agreement to reduce the expense
ratio 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 $60,000 were allocated among the Portfolios
and paid for the year ended December 31, 1995 to Directors who are
not employees of the Adviser.
4. Investment Transactions
Purchase cost and proceeds from sales of investment securities,
other than short-term investments, for the year ended December 31, 1995
for each of the Portfolios were as follows:
Purchase Cost Proceeds from Sales of
Portfolio of Investment Securities Investment Securities
U.S. Short-Term $ 959,680,223 $ 767,139,983
Stable Return 52,594,992 52,601,957
Worldwide Short-Term 320,444,110 345,101,998
Worldwide 711,533,137 688,600,575
Worldwide-Hedged 180,372,810 156,054,740
International-Hedged 440,383,093 419,034,869
4. Investment Transactions (continued)
The components of net unrealized appreciation of investments at
December 31, 1995 for each Portfolio were as follows:
U.S. Short-
Term Fixed Stable
Income Return
U.S. Portfolios Portfolio Portfolio
Gross Unrealized Appreciation $ 553,487 $ 29,248
Gross Unrealized Depreciation (194,030) -
$ 359,457 $ 29,248
Worldwide Worldwide International
Short-Term Worldwide Fixed Income- Fixed Income-
Fixed Income Fixed Income Hedged Hedged
Global and Portfolio Portfolio Portfolio Portfolio
International
Portfolios
Gross Unrealized
Appreciation $ 299,796 $ 1,581,070 $ 584,613 $ 1,231,795
Gross Unrealized
Depreciation (15,312) (158,880) (36,188) -
$ 284,484 $ 1,422,190 $ 548,425 $ 1,231,795
The cost of securities owned by the Fund at December 31, 1995 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 December 31, 1995, Worldwide Short-Term had outstanding forward
foreign exchange contracts, both to purchase and sell foreign
currencies as follows:
Contract Cost/ Unrealized
Amount Proceeds Value Appreciation
Forward Foreign
Exchange Buy
Contracts
1,076,572 Canadian Dollar
closing
1/29/96 $ 780,000 $ 788,956 $ 8,956
2,630,760 German Deutsche
Mark closing
1/29/96 1,822,487 1,841,607 19,120
1,159,999,994 Italian Lira
closing
1/29/96 723,815 729,382 5,567
5. Forward Foreign Exchange Contracts (continued)
At December 31, 1995, Worldwide Short-Term 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 Sell
Contracts
3,034,672 Canadian
Dollar
closing
1/29/96 $ 2,225,286 $ 2,223,933 $ 1,353
13,400,000 French Franc
closing
1/29/96 2,697,789 2,743,355 (45,566)
6,297,242 German Deutsche
Mark closing
1/29/96 4,372,353 4,408,249 (35,896)
1,531,108 Great British
Pound closing
1/29/96 2,348,720 2,374,184 (25,464)
164,706,885 Japanese Yen
closing
1/29/96 1,635,498 1,603,472 32,026
179,483,470 Spanish Peseta
closing
1/29/96 1,451,779 1,475,510 (23,731)
$ (63,635)
At December 31, 1995, Worldwide 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
600,000 Australian
Dollar
closing
1/29/96 $ 441,480 $ 445,739 $ 4,259
53,578,084 Belgian Franc
closing
1/29/96 1,806,819 1,827,010 20,191
4,663,664 Canadian
Dollar
closing
1/29/96 3,385,178 3,417,726 32,548
5,664,781 Danish Krone
closing
1/29/96 1,013,091 1,023,198 10,107
31,172,068 French Franc
closing
1/29/96 6,249,017 6,381,795 132,778
19,133,315 German
Deutsche
Mark
closing
1/29/96 13,298,627 13,393,866 95,239
1,525,381 Great
British
Pound
closing
1/29/96 2,341,995 2,365,304 23,309
9,222,062,002 Italian
Lira
closing
1/29/96 5,751,468 5,798,624 47,154
965,182,596 Japanese
Yen
closing
1/29/96 9,589,565 9,396,349 (193,216)
5,406,509 Netherlands
Guilder
closing
1/29/96 3,345,579 3,384,649 39,070
287,000,000 Spanish
Peseta
closing
1/29/96 2,321,406 2,359,389 37,983
6,920,000 Swedish
Krona
closing
1/29/96 1,025,338 1,041,739 16,401
Forward Foreign
Exchange Sell Contracts
20,650,833 Belgian
Franc
closing
1/29/96 697,228 704,193 (6,965)
8,145,528 Canadian
Dollar
closing
1/29/96 5,959,107 5,969,381 (10,274)
1,991,340 Danish
Krone
closing
1/29/96 356,558 359,685 (3,127)
67,588,381 French
Franc
closing
1/29/96 13,578,492 13,837,233 (258,741)
22,086,159 German
Deutsche
Mark
closing
1/29/96 15,318,642 15,460,940 (142,298)
5,992,715 Great
British
Pound
closing
1/29/96 9,186,251 9,292,489 (106,238)
111,000,000 Japanese
Yen closing
1/29/96 1,105,556 1,080,619 24,937
874,732,152 Spanish
Peseta
closing
1/29/96 7,067,351 7,191,057 (123,706)
6,929,302 Swedish
Krona
closing
1/29/96 1,028,600 1,043,140 (14,540)
$ (375,129)
5. Forward Foreign Exchange Contracts (continued)
At December 31, 1995, 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
938,550 Canadian Dollar
closing
1/29/96 $ 680,000 $ 687,808 $ 7,808
221,260 Danish Krone
closing
1/29/96 39,618 39,965 347
2,087,148 German
Deutsche
Mark closing
1/29/96 1,445,894 1,461,063 15,169
1,000,000,007 Italian Lira
closing
1/29/96 623,978 628,777 4,799
16,415,025 Spanish Peseta
closing
1/29/96 132,653 134,946 2,293
Forward
Foreign Exchange
Sell Contracts
276,140 Australian
Dollar
closing
1/29/96 203,039 205,144 (2,105)
20,007,278 Belgian
Franc
closing
1/29/96 673,374 682,247 (8,873)
3,577,762 Canadian
Dollar
closing
1/29/96 2,622,817 2,621,932 885
1,835,089 Danish
Krone
closing
1/29/96 328,869 331,462 (2,593)
12,630,441 French
Franc
closing
1/29/96 2,536,174 2,585,805 (49,631)
7,467,260 German
Deutsche
Mark
closing
1/29/96 5,184,635 5,227,294 (42,659)
2,615,396 Great
British
Pound
closing
1/29/96 4,012,018 4,055,515 (43,497)
147,001,101 Japanese
Yen
closing
1/29/96 1,459,684 1,431,101 28,583
245,557,055 Spanish
Peseta
closing
1/29/96 1,986,225 2,018,691 (32,466)
4,745,926 Swedish
Krona
closing
1/29/96 705,651 714,454 (8,803)
$ (130,743)
At December 31, 1995, 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
52,681,809 French Franc
closing
1/29/96 $ 10,555,361 $ 10,785,440 $ 230,079
27,587,873 German
Deutsche
Mark
closing
1/29/96 19,096,969 19,312,296 215,327
5,354,546 Great British
Pound
closing
1/29/96 8,192,455 8,302,925 110,470
1,599,374,680 Spanish Peseta
closing
1/29/96 12,908,593 13,148,247 239,654
Forward Foreign
Exchange Sell Contracts
14,900,158 Canadian
Dollar
closing
1/29/96 10,810,141 10,919,453 (109,312)
53,067,007 French
Franc
closing
1/29/96 10,657,204 10,864,302 (207,098)
27,550,896 German
Deutsche
Mark
closing
1/29/96 19,128,478 19,286,412 (157,934)
10,006,817 Great
British
Pound
closing
1/29/96 15,349,969 15,516,880 (166,911)
2,709,736,877 Spanish
Peseta
closing
1/29/96 21,912,839 22,276,388 (363,549)
$ (209,274)
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 December 31, 1995 Worldwide Short-Term, Worldwide,
Worldwide-Hedged, 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 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 payments are made 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
December 31, 1995, the Portfolios placed U.S. Treasury Bills in segregated
accounts for the benefit of the broker at the Fund's custodian
with respect to their futures contracts as follows:
Portfolio 12/31/95 Collateral Value
U.S. Short-Term $ 705,893
Stable Return -
Worldwide Short-Term 398,894
Worldwide -
Worldwide-Hedged -
International-Hedged 717,992
As of December 31, 1995 U.S. Short-Term Fixed Income Portfolio
had the following open futures contracts:
Value Unrealized
Covered by Appreciation
Contracts Contracts (Depreciation)
Long Futures
Contracts:
149 March '96 Euro
Dollars $ 35,268,300 $ 37,905
150 September '96
Euro Dollars 35,621,250 65,215
71 June '97 Euro
Dollars 16,819,900 16,055
Short Futures
Contracts:
342 June '96 Euro
Dollars 81,165,150 (120,389)
71 June '98 Euro
Dollars 16,748,900 (6,695)
$ (7,909)
6. Futures Contracts (continued)
As of December 31, 1995 Worldwide Short-Term Fixed Income Portfolio
had the following open futures contracts:
Value Unrealized
Covered by Appreciation
Contracts Contracts (Depreciation)
Short Futures Contracts
6 March '96 French
10 Year Bond FRF 3,606,000 $ (42)
14 March '96 U.S.
10 Year Treasury
Notes USD 1,604,313 (7,895)
16 March '96 Medium
Term German
Gov't Bond DEM 4,173,200 (14,397)
2 March '96 TSE
Japanese Gov't
10 Year Bond JPY 238,980,000 28,172
$ 5,838
As of December 31, 1995 International-Hedged Portfolio had the following
open futures contracts:
Value
Covered by Unrealized
Contracts Contracts
(Depreciation)
Short Futures Contracts
100 March '96 U.S.
10 Year Treasury
Notes $ 11,459,375 $ (106,847)
7. Capital Stock Transactions
As of December 31, 1995 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:
Year Ended Year Ended
December 31, 1995 December 31, 1994
Shares Amount Shares Amount
Shares sold 89,693,965 $ 4,840, 215,843 506,605,624 $ 5,036,843,719
Shares issued
related to
reinvestment
of dividends 2,129,127 21,045,642 1,208,822 12,008,654
491,823,092 4,861,261,485 507,814,446 5,048,852,373
Shares
redeemed 474,927,909 4,694,361,012 520,290,568 5,173,219,989
Net increase
(decrease) 16,895,183 $ 166,900,473 (12,476,122) $ (124,367,616)
7. Capital Stock Transactions (continued)
Transactions in capital stock for Stable Return were as follows
for the periods indicated:
Year Ended Year Ended
December 31, 1995 December 31,1994
Shares Amount Shares Amount
Shares sold 50,525 $ 500,000 87,759 $ 857,000
Shares issued
related to
reinvestment
of dividends 28,122 276,555 18,075 175,508
78,647 776,555 105,834 1,032,508
Shares
redeemed 25,300 251,270 1,490 14,400
Net increase 53,347 $ 525,285 104,344 $ 1,018,108
Transactions in capital stock for Worldwide Short-Term were as follows
for the periods indicated:
Year Ended Year Ended
December 31, 1995 December 31,1994
Shares Amount Shares Amount
Shares sold - $ - 18,652,539 $ 185,400,115
Shares issued
related to
reinvestment
of dividends 267,769 2,624,833 297,020 2,948,491
267,769 2,624,833 18,949,559 188,348,606
Shares
redeemed 4,850,546 47,612,290 11,513,098 114,018,798
Net increase
(decrease) (4,582,777) $ (44,987,457) 7,436,461 $ 74,329,808
Transactions in capital stock for Worldwide were as follows for the periods
indicated:
Year Ended Year Ended
December 31, 1995 December 31, 1994
Shares Amount Shares Amount
Shares sold 8,600,064 $ 83,105,970 1,092,884 $ 10,420,502
Shares issued
related to
reinvestment
of dividends 264,481 2,525,673 735,508 6,999,011
8,864,545 85,631,643 1,828,392 17,419,513
Shares
redeemed 5,895,380 55,533,537 17,698,224 166,346,301
Net increase
(decrease) 2,969,165 $ 30,098,106 (15,869,832) $ (148,926,788)
7. Capital Stock Transactions (continued)
Transactions in capital stock for Worldwide-Hedged were as follows for
the periods indicated:
Year Ended Year Ended
December 31, 1995 December 31,1994
Shares Amount Shares Amount
Shares
sold 2,499,119 $ 26,240,000 1,058,719 $ 10,310,000
Shares
issued
related
to
reinvest-
ment of
dividends 105,484 1,114,755 62,526 607,111
2,604,603 27,354,755 1,121,245 10,917,111
Shares
redeemed 26,256 273,852 5,177,515 49,646,474
Net
increase
(decrease) 2,578,347 $ 27,080,903 (4,056,270) $ (38,729,363)
Transactions in capital stock for International-Hedged were as
follows for the periods indicated:
For the Period September 14, 1995 Year
to December 31, 1995 December 31, 1994
Shares Amount Shares Amount
Shares sold 10,600,000 $ 106,000,000 350,238 $ 3,512,979
Shares
issued
related
to
reinvest-
ment of
dividends 139,771 1,398,833 2,321 23,610
10,739,771 107,398,833 352,559 3,536,589
Shares
redeemed 7,403,873 74,500,000 2,071,572 20,319,491
Net increase
(decrease) 3,335,898 $ 32,898,833 (1,719,013) $ (16,782,902)
* 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. For the year ended December 31,
1995, for both U.S. Short-Term and Stable Return, the maximum amount of
reverse repurchase agreements outstanding was $165,495,000 and $2,045,500,
respectively, the average amount of reverse repurchase agreements
outstanding was approximately $7,491,000 and $738,446, respectively,
and the daily weighted average interest rate was 5.306% and
5.754%, respectively.
8. Repurchase and Reverse Repurchase Agreements (continued)
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.
A summary of put and call options written by U.S. Short-Term for
the year ended December 31, 1995 is as follows:
1995 Calls 1995 Puts
# of # of
Contracts Premiums Contracts Premiums
Outstanding,
beginning of period
Eurodollars - $ - - $ -
U.S. Treasury - $ - - $ -
Options written
Eurodollars 1,741 672,387 1,247 488,232
U.S. Treasury 200 273,807 450 106,570
Options closed
Eurodollars 1,471 657,286 1,047 484,546
U.S. Treasury 200 273,807 450 106,570
Options exercised
Eurodollars - - - -
U.S. Treasury - - - -
Options expired
Eurodollars - 200 3,686
U.S. Treasury - - - -
Outstanding,
end of period
Eurodollars 270 $ 15,101 - $ -
U.S. Treasury - $ - - $ -
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Shareholders and Board of Directors
FFTW Funds, Inc.
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of FFTW Funds, Inc.
(comprising, respectively, the U.S. Short-Term Fixed Income, Stable
Return, Worldwide Short-Term Fixed Income, Worldwide Fixed Income,
Worldwide Fixed Income-Hedged and International Fixed Income-Hedged
Portfolios) as of December 31, 1995, and the related statements of
operations for the year then ended, the statement of cash flows for
the Stable Return Portfolio for the year then ended, the statements of
changes in net assets for each of the two years in the period then
ended and the financial highlights for each of the periods indicated
therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1995 by
correspondence with the custodian and others. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of each of the respective Portfolios constituting
FFTW Funds, Inc. at December 31, 1995, the results of their operations
for the year then ended, the cash flows for the Stable Return
Portfolio for the year then ended, the changes in their net assets for
each of the two years in the period then ended and the financial
highlights for each of the indicated periods, in conformity with
generally accepted accounting principles.
New York, New York
February 23, 1996
/s/ Ernst & Young LLP
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
Investors Bank & Trust Company
Stephen P. Casper P.O. Box 1537
Treasurer of the Fund Boston, MA 02205-1537
Kyle L. Chang Transfer and Dividend Disbursing Agent
Secretary of the Fund Investors Bank & Trust Company
P.O. Box 1537
Carla E. Dearing Boston, MA 02205-1537
Assistant Treasurer of the Fund
Legal Counsel
William E. Vastardis Dechert Price & Rhoads
Assistant Secretary of the Fund 1500 K Street, N.W.
Washington, D.C. 20005-1208
Independent Auditors
Ernst & Young LLP
787 Seventh Avenue
New York, NY 10019
