FFTW FUNDS, INC.
Semi-Annual Report
June 30, 1997
(Unaudited)
200 PARK AVENUE
NEW YORK, NY 10166
TELEPHONE 212.681.3000
FACSIMILE 212.681.3250
FFTW Funds, Inc.
Presidents Letter
August 13, 1997
Dear Shareholder:
We are pleased to present our Semi-Annual Report for the six
months ended June 30, 1997. FFTW Funds, Inc. continues to enjoy strong
growth in its eight Portfolios, each reflecting a specific strategy to
meet the objectives of our investors.
During the first six months of this year, we added the Money Market
Portfolio through a tax-free reorganization with another money market fund
managed by Fischer Francis Trees & Watts, Inc. In August, we also introduced
the Emerging Markets Portfolio.
We greatly appreciate your participation in FFTW Funds. We welcome
the opportunity to discuss the objectives and results of our portfolios 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,
O. John Olcay
Chairman of the Board and Chief Executive Officer
Table of Contents
Money Market Portfolio
Overview 1
Schedule of Investments 2
U.S. Short-Term Portfolio
Overview 3
Schedule of Investments 4
Stable Return Portfolio
Overview 8
Schedule of Investments 9
Mortgage Total Return Portfolio
Overview 11
Schedule of Investments 12
Schedule of Securities Sold Short 16
Schedule of Written Options 16
Worldwide Portfolio
Overview 17
Schedule of Investments 18
Worldwide-Hedged Portfolio
Overview 20
Schedule of Investments 21
International Portfolio
Overview 23
Schedule of Investments 24
International-Hedged Portfolio
Overview 26
Schedule of Investments 27
Statements of Assets and Liabilities 30
Statements of Operations 34
Statements of Changes in Net Assets 38
Financial Highlights 42
Notes to Financial Statements 50
FFTW Funds, Inc.
Money Market Portfolio
June 30, 1997(unaudited)
Investment performance for the periods ended June 30, 1997:
----------------------------------------------------------------------------
<TABLE>
Average Annual Total Return
------------------------
<S> <C> <C> <C>
Six Month One Since
Total Return Year Inception*
Money Market Portfolio
2.60% 5.27% 4.94%
IBCs Money Fund Report AveragesTM-All Taxable 2.46% 4.98% 4.68%
</TABLE>
* Money Market Portfolio commenced operations on November 1, 1993.
The Money Market Portfolio began operations as a Portfolio of FFTW
Funds, Inc. (the "FFTW Portfolio") on April
29, 1997. Previously, the Portfolio operated as the Money Market Portfolio
of AMT Capital Fund, Inc. (the "AMT Capital
Portfolio"), which was sub-advised by Fischer Francis Trees & Watts, Inc.
Shareholders of the AMT Capital Portfolio
approved a tax-free reorganization into the FFTW Portfolio on April 28, 1997.
The Portfolio outperformed its benchmark by 14 basis points during
the first six months of 1997. This was the
result of an overweighting in non-Treasury investments during the entire
period along with a second quarter lengthening
of duration relative to the benchmark.
In the first quarter, money market yields were fairly volatile, as
interest rates increased and the yield curve
flattened. In what seems to be a regular occurrence, non-Treasury sectors
outperformed government securities in the
front end of the yield curve as their higher yields more than compensated
for the additional spread risk. In early
January, the Portfolios duration was shortened in the expectation that
strong growth and subtle inflationary signals
would eventually cause the Federal Reserve to raise rates. Although the Fed
ultimately tightened monetary policy, the
Portfolio's duration had been brought back to neutral before the Fed action
and remained so over the remainder of the
quarter.
As typically follows a Fed tightening, the coupon curve flattened
and the money market curve steepened. By
creating a bullet strategy, the Portfolio picked up yield and avoided the
steepening in the front end of the market.
When interest rates peaked in late April, the market's anticipation
of a Fed tightening was evidenced by higher
implied forward rates. This provided an opportunity to extend duration, and
the Portfolio maintained this somewhat long
bias for most of the second quarter. Consumption slowed dramatically,
and expectations for an acceleration in inflation
never materialized, leading to a rapid rise in bond prices.
The economy clearly has slowed from its rapid pace of the first
quarter and the key to the future is consumer
behavior. All the variables are in place for a resurgence in demand,
including high consumer confidence, high incomes,
and a rising stock market, but the timing is uncertain. The Fed has
decided to wait, and we think the market risk is
symmetric. Given the rally over the past two months, the bond market is
expecting very good news on the economy and
inflation. But there is uncertainty as to when, or if, the good news will
arrive. As a result, the Portfolio holds a
neutral duration position and bulleted yield curve exposure to pick up both
yield and curve "rolldown." In addition, the
Portfolio expects to remain overweighted in non-Treasury securities as well
as focusing on specific security analysis and
selection in the asset-backed and corporate sectors.
Money Market Portfolio - Schedule of Investments
June 30, 1997 (unaudited)
<TABLE>
<S> <C> <C>
Face
Amount Value
- ----------------------------------------------------------------------------------------------------------------------------
Asset- and Mortgage-Backed Securities - 0.5%
Norwest Auto Trust, Ser. 96-A, Class A1, 5.465% due 12/5/97
(Cost - $115,099) $ 115,099 $115,099
------------------
Bank Obligations- 41.1%
Abbey Natl Euro CD, 5.690% due 7/2/97 1,000,000 1,000,000
Bank of Boston (Nassau) Time Deposit, 5.750% due 7/1/97 541,000 541,000
Bayerische Landesbank Euro CD, 5.750% due 12/29/97 1,000,000 1,000,073
Bayerische Vereinsbank Euro CD, 5.710% due 8/4/97 1,000,000 1,000,015
Canadian Imperial Bank Euro CD, 5.700% due 7/24/97 1,000,000 1,000,000
First Union Bank of North Carolina BA, 5.670% due 9/24/97 * 1,000,000 986,943
Landsesbank Hess CD, 6.010% due 7/18/97 1,000,000 1,000,034
Mellon Bank CD, 5.800% due 12/15/97 1,000,000 1,000,000
Natwest Yankee CD, 5.760% due 12/31/97 1,000,000 1,000,049
Societe General Yankee CD, 5.870% due 11/24/97 1,000,000 1,000,118
Suedwestdeutsche Lande Euro CD, 5.780% due 12/16/97 1,000,000 1,000,107
------------------
Total (Cost - $10,528,339) 10,528,339
------------------
Commercial Paper - 54.2% *
ABN-Amro NA, 5.690% due 7/24/97 1,000,000 996,582
Bayer Corp., 6.050% due 7/1/97 1,000,000 1,000,000
Caisse DAmortissement de la Dette Sociale, 5.610% due 8/8/97 1,000,000 994,700
Daimler Benz NA, 5.650% due 9/2/97 1,000,000 990,078
Falcon Asset Sec. Corp., 6.010% due 7/7/97 1,000,000 999,063
GE Electric Cap. Corp., 5.800% due 1/20/98 1,000,000 968,535
Halifax Building Society, 5.610% due 8/1/97 1,000,000 995,419
KFW International Finance, Inc., 5.740% due 11/28/97 1,000,000 976,716
Mobil Australia Finance Corp., 5.730% due 11/6/97 1,000,000 979,840
Morgan (JP) & Co., Inc., 5.610% due 8/6/97 1,000,000 994,823
Nations Bank Corp., 5.960% due 7/8/97 1,000,000 998,753
Royal Bank of Scotland plc, 5.720% due 7/22/97 1,000,000 996,727
Toronto Dominion Holdings, 5.390% due 7/1/97 1,000,000 1,000,000
Woolwich Building Society, 5.680% due 7/25/97 1,000,000 996,487
------------------
Total (Cost - $13,887,723) 13,887,723
------------------
Corporate Obligations - 3.9%
Ford Motor Credit Corp., 6.024% due 10/21/97
(Cost - $1,000,645) 1,000,000 1,000,645
------------------
Total Investments - 99.7% (Cost - $25,531,806) 25,531,806
Other Assets, net of Liabilities - 0.3% 101,862
------------------
Net Assets - 100.0% $25,633,668
==================
</TABLE>
Summary of Abbreviations
BA Bankers Acceptance
CD Certificate of Deposit
* Interest rate represents yield to maturity at date of purchase
See notes to financial statements.
U.S. Short-Term Portfolio
June 30, 1997(unaudited)
Investment performance for the periods ended June 30, 1997:
----------------------------------------------------------------------------
Average Annual Total Return
<TABLE>
<S> <C> <C> <C> <C>
Six Months One Since
Total Return Year Five Years Inception*
U.S. Short-Term Portfolio 2.61% 5.67% 4.43% 5.19%
IBC's Money Fund Report AveragesTM-All 2.46% 4.98% 4.17% 4.86%
Taxable
</TABLE>
* U.S. Short-Term Portfolio commenced operations on December 6, 1989.
The Portfolio outperformed its benchmark by 15 basis points
during the first six months of 1997 due to an
overweighting in non-Treasury investments during the entire period along
with a second quarter lengthening of duration
relative to the benchmark.
In early January, the Portfolio's duration was shortened in the
expectation that strong growth and subtle
inflationary signals would eventually cause the Federal Reserve to raise
rates. Although the Fed ultimately tightened,
the Portfolio's duration had been brought back to neutral prematurely in
mid-February. Over the remainder of the quarter,
its duration ranged from several months short of the benchmark to neutral.
Spreads on non-Treasury securities widened slightly at the short
end of the yield curve in the first quarter.
However, the excess yield more than compensated for the widening. Money
market, asset-backed and mortgage-backed
securities all raised the Portfolio's yield with minimal spread and
convexity risk. Although the first quarter was
marked by credit concerns with selected Japanese banks and poorer quality
asset-backed securities, careful security
analysis and research helped the Portfolio avoid any problems.
When interest rates peaked in late April, the market's anticipation
of a Fed tightening was evidenced by higher
implied forward rates. This provided an opportunity to extend duration,
and the Portfolio maintained this somewhat long
bias for most of the second quarter. Consumption slowed dramatically,
and expectations for an acceleration in inflation
never materialized, leading to a rapid rise in bond prices.
Given the rally over the past two months, the bond market is
expecting very good news on the economy and
inflation. But there is uncertainty as to when, or if, the good news will
arrive. In view of that, the Portfolio holds
a neutral duration position and bulleted yield curve exposure to pick
up both yield and curve "rolldown." In addition,
the Portfolio expects to remain overweighted in non-Treasury
securities as well as focusing on security selection in the
asset-backed and corporate sectors.
U.S. Short-Term Portfolio - Schedule of Investments
June 30, 1997 (unaudited)
<TABLE>
<S> <C> <C>
Face
Amount Value
- ----------------------------------------------------------------------------------------------------------------------------
Asset- and Mortgage-Backed Securities - 74.2%
American Express Master Trust, Ser. 1-A, 6.050% due 6/15/98 $ 10,000,000 $ 10,002,500
Banc One Auto Trust, Ser. 1995 - A, Class A4, 6.900% due 4/15/98 1,014,611 1,015,565
Beneficial Home Equity Loan Trust FRN, Ser. 1995-1, Class A1, 5.908% due 3/28/25 3,027,571 3,032,657
Beneficial Mortgage Corp. FRN, Ser. 1996-1, Class A, 5.868% due 4/28/26 9,825,845 9,840,584
Beneficial Mortgage Corp., Ser. 1997-1, Class M, 5.938% due 5/28/37 10,000,000 10,000,000
Bombardier Receivables Master Trust, Ser. 1997-1, Class A, 5.800% due 4/15/04 13,000,000 13,012,480
Carco Auto Loan Master Trust, Ser. 1994-2, Class A, 7.875% due 7/15/99 5,000,000 5,014,550
Carco Auto Loan Master Trust, Ser. 1994-3, 8.125% due 10/15/99 5,268,000 5,310,803
Case Equipment Loan Trust, Ser. 1997-A, Class A1, 5.597% due 3/15/98 6,050,006 6,050,248
Chase Mortgage Finance Corp. FRN, Ser. 1995-1, Class A1, 5.928% due 10/15/25 6,746,451 6,746,451
Contimortgage Home Equity Loan Trust, Ser. 1996-1, Class A8, 6.020% due 3/15/27 2,058,366 2,060,012
Contimortgage Home Equity Loan Trust, Ser. 1997-2, Class A1, 6.320% due 9/15/07 3,814,697 3,813,438
Discover Card Trust, Ser. 1993-A, Class A, 6.250% due 8/16/00 6,810,000 6,825,595
FHLMC, Ser. 1537, Class E, 5.450% due 3/15/04 6,122,513 6,104,513
First Chicago Master Trust II, Ser. 1992-E, Class A, 6.250% due 8/15/99 9,123,333 9,128,625
First USA Credit Card Master Trust, Ser. 1994-5, Class B, 6.028% due 4/17/00 10,000,000 9,999,700
FNMA FRN, Ser. 1992-214, Class FA, 6.519% due 12/25/22 3,220,047 3,200,952
FNMA TBA, 7.000% due 5/25/13 6,041,000 6,061,781
FNMA ARM, 7.291% due 9/1/16 9,170,757 9,297,167
FNMA FRN, Ser. 1993-54, Class FK, 6.256% due 4/25/21 4,131,533 4,162,891
FNMA, Ser. 1993-245, Class PC, 5.000% due 7/25/13 2,323,681 2,312,365
FNMA, Ser. 1993-78, Class B, 5.100% due 11/25/01 2,391,652 2,382,062
Ford Credit Auto Loan Master Trust, Ser. 1996-2, Class A, 5.943% due 2/15/03 7,000,000 7,009,030
Ford Motor Credit Corp. MTN FRN, 5.926% due 10/21/97 5,500,000 5,504,477
Headlands Mortgage Securities Inc., Ser. 97-3, Class C1, 5.938%, 7/25/27 5,000,000 4,987,500
HFC Home Equity Loan FRN, Ser. 1992-1, Class A1, 5.970% due 5/20/07 3,195,995 3,200,980
HFC Home Equity Loan FRN, Ser. 1992-1, Class A2, 6.068% due 5/20/07 1,938,900 1,938,900
HFC Home Equity Loan FRN, Ser. 1992-2, Class A2, 6.048% due 10/20/07 1,665,218 1,670,929
HFC Home Equity Loan FRN, Ser. 1993-1, Class A1, 5.920% due 5/20/08 4,930,221 4,939,440
HFC Revolving Home Equity Loan Trust, Ser. 1995-1, Class A1, 5.896% due 9/20/15 4,186,366 4,186,366
Household Affinity Credit Card Trust, Ser. 1994-2, Class A, 7.000% due 12/15/99 6,250,000 6,275,938
Independent National Mortgage Corp. FRN, Ser. 1996-A, Class A7, 6.039% due 9/25/26 4,900,574 4,934,437
Independent National Mortgage Corp., Ser. 1994-O, Class A10, 7.500% due 9/25/24 13 12
Matterhorn, Ser. 9651, Class A, 6.138% due 1/21/06 5,897,591 5,909,570
MBNA Master Credit Card Trust FRN, Ser. 1992-3, Class A, 6.038% due 12/15/99 7,200,000 7,209,144
MBNA Master Credit Card Trust, Ser. 1992-1, Class A, 7.250% due 6/15/99 3,750,000 3,757,275
Merrill Lynch Home Equity Loan FRN, Ser. 1993-1, Class A, 6.063% due 2/15/03 201,890 201,871
</TABLE>
U.S. Short-Term Portfolio - Schedule of Investments (continued)
June 30, 1997 (unaudited)
<TABLE>
<S> <C> <C>
Face
Amount Value
Asset- and Mortgage-Backed Securities (continued)
Merrill Lynch Mortgage Investors FRN, Ser. 1993-F, Class A2, 6.038% due 9/15/23
$ 7,297,931 $ 7,421,047
Merrill Lynch Mortgage Investors FRN, Ser. 1994-F, Class A1, 5.938% due 4/15/19 754,383 753,676
Money Store Home Equity Trust (The), Ser. 1996-C, Class A1, 6.700% due 9/15/08 8,045,790 8,070,973
NationsBank Auto Owner Trust, Ser. 1996-A, Class A2, 6.125% due 7/15/99 3,606,387 3,616,557
Norwest Auto Trust, Ser. 1996-A, Class A1, 5.465% due 12/5/97 431,622 431,648
Novus Home Equity Credit Trust FRN, Ser. 1993-1, Class A, 6.138% due 12/31/03 3,245,585 3,246,136
Oakwood Mtg. Investors, Inc. FRN, Ser. 1997-A, Class A1, 5.760% due 5/15/27 430,849 430,879
Peoples Bank Credit Card Trust, Ser. 1994-1, Class A, 5.100% due 8/15/01 825,000 824,860
Premier Auto Trust, Ser. 1995-1, Class A5, 7.900% due 5/4/99 2,502,451 2,516,965
Premier Auto Trust, Ser. 1995-3, Class A5, 6.150% due 3/6/00 5,500,000 5,507,535
Premier Auto Trust, Ser. 1995-4, Class A3, 5.900% due 7/6/99 9,883,807 9,901,499
Prudential Home Mortgage Securities, Ser. 1992-48, Class A2, 7.500% due 1/25/23 1,325,828 1,322,765
Prudential Home Mortgage Securities, Ser. 1993-35, Class A3, 6.750% due 9/25/08 223,263 222,752
Prudential Securities Secured Financing Corp., Ser. 1993-3, Class A3, 7.500% due 174,564 173,895
6/25/23
Residential Asset Sec. Trust, Ser. 1997-A4, Class A9, 6.119% due 6/25/27 14,710,184 14,551,167
Residential Funding Mortgage, Ser. 1993-S26, Class A3, 7.050% due 7/25/23 2,837,108 2,832,370
Residential Funding Mortgage, Ser. 1993-S41, Class A1, 6.846% due 9/25/23 908,587 908,332
Resolution Trust Corp., Ser. 1994-C1, Class B, 8.000% due 6/25/26 8,500,000 8,697,891
Santa Barbara Funding II FRN, Ser. A, Class 1, 6.275% due 3/20/18 398,133 403,649
Sears Credit Card Account Master Trust, Ser. 1994-2, Class A, 7.250% due 7/16/01 10,193,333 10,256,838
Standard Credit Card Master Trust, Ser. 1991-3, Class B, 9.250% due 9/7/98 4,150,000 4,293,038
Standard Credit Card Master Trust, Ser. 1992-1, Class B, 6.250% due 9/7/98 10,890,000 10,910,800
Standard Credit Card Master Trust, Ser. 1993-1, Class B, 5.500% due 9/8/98 10,000,000 9,999,600
Standard Credit Card Master Trust, Ser. 1991-6, Class A, 7.875% due 1/7/00 3,000,000 3,070,110
Standard Credit Card Master Trust, Ser. 1990-6, Class A, 9.375% due 9/10/98 5,000,000 5,005,300
Student Loan Marketing Assn. FRN, Ser. 1996-2, Class A1, 5.741% due 10/25/04 8,063,860 8,053,780
TMS Auto Grantor Trust, Ser. 1996-2, Class A2, 5.768% due 6/20/03 4,000,000 4,000,360
------------------
Total (Cost- $324,537,188) 324,525,230
------------------
Bank Obligations- 6.2%
Arkaig Finance Co. BV FRN, 5.841% due 3/19/99 4,500,000 4,498,380
Bank of Boston (Nassau) Time Deposit, 5.750% due 7/1/97 8,013,000 8,013,000
NationsBank N.C. FRN, 5.759% due 10/28/99 7,000,000 7,000,000
Suedwestdeutsche Lande Euro CD, 5.780% due 12/16/97 7,500,000 7,500,839
------------------
Total (Cost- $27,012,334) 27,012,219
------------------
</TABLE>
U.S. Short-Term Portfolio - Schedule of Investments (continued)
June 30, 1997 (unaudited)
<TABLE>
<S> <C> <C>
Face
Amount Value
Corporate Obligations- 7.9%
Ameritech Cap FRN, 5.894% due 8/12/97
$5,000,000 $ 5,005,995
Fairfax Financial Holdings, 7.750% due 12/15/03 3,000,000 3,054,609
Florida Property & Casualty (144A), 7.250% due 7/1/02 (a) 3,000,000 3,007,419
Halifax Building Society FRN, 5.8125% due 9/8/99 10,000,000 10,007,500
Prudential Insurance Co. of America (144A), 6.875% due 4/15/03 (a) 4,000,000 3,938,780
DuPont (E.I.) de Nemours & Co., 8.500% due 6/25/98 2,750,000 2,810,156
Pacific Gas & Electric, 6.900% due 7/1/97 6,900,000 6,907,590
------------------
Total (Cost- $34,745,043) 34,732,049
------------------
Foreign Obligations- 10.1%
Banco Latino Americano (144A), 7.050% due 7/19/99 (a) 3,250,000 3,253,047
Bangkok Bank Public Co., Ltd. (144A), 8.250% due 3/15/16 (a) 1,000,000 999,799
Celulosa Arauco y Constitucion, 6.750% due 12/15/03 3,449,000 3,362,930
Corp. Andina de Fomento (144A), 7.250% due 4/30/98 (a) 1,000,000 1,000,000
Corp. Andina de Fomento, 7.250% due 4/30/98 2,330,000 2,332,167
Croatia National Govt. FRN, Ser. B, 6.500% due 7/31/06 4,000,000 3,932,400
Industrial Fin. Corp. (144A), 6.875% due 4/1/03 (a) 2,750,000 2,636,150
Okobank FRN, Ser. BR, 7.266% due 10/29/49 3,600,000 3,672,000
Poland Regd FRN, 6.938% due 10/27/24 4,500,000 4,432,500
Province of Ontario, 5.700% due 10/1/97 10,000,000 9,992,990
Ras Laffan Liquid Natural Gas (144A), 8.294% due 3/15/14 (a) 2,500,000 2,613,738
Republic of Colombia, 8.750% due 10/6/99 1,000,000 1,043,829
Republic of Colombia, 8.750% due 10/6/99 575,000 600,202
United Mexican States FRN (144A), 7.875% due 8/6/01 (a) 750,000 751,313
YPF Sociedad Anonima, 7.500% due 10/26/02 3,631,619 3,686,780
------------------
Total (Cost- $44,168,066) 44,309,845
------------------
U.S. Government Obligations- 0.7%
U.S. Treasury Bill, 4.870% due 7/24/97 *@
Total (Cost- $2,990,524) 3,000,000 2,990,524
------------------
Total Investments - 99.1% (Cost - $433,453,154) 433,569,867
Other Assets, net of Liabilities - 0.9% 3,979,079
------------------
Net Assets - 100.0% $ 437,548,946
</TABLE>
Summary of Abbreviations
ARM Adjustable Rate Mortgage
CD Certificate of Deposit
FRN Floating Rate Note
MTN Medium Term Note
TBA To Be Announced
* Interest rate represents yield to maturity at date of purchase.
(a) Security exempt from registration under Rule 144 A of the Securities Act
of 1933. These securities may be resold in
transactions exempt
from registration, normally to qualified buyers. At June 30, 1997,
these securities were valued at $18,200,246 or
4.2% of net assets.
@ Security, or a portion thereof, is held in a margin account to cover
financial futures contracts.
See notes to financial statements.
Stable Return Portfolio
June 30, 1997(unaudited)
Investment performance for the periods ended June 30, 1997:
----------------------------------------------------------------------------
Average Annual Total Return
<TABLE>
<S> <C> <C> <C>
Six Months One Since
Total Return Year Inception*
Stable Return Portfolio
3.26% 7.02% 5.51%
Merrill Lynch 1-2.99 Year Treasury Index 2.88% 6.57% 5.36%
</TABLE>
* Stable Return Portfolio commenced operations on July 26,1993.
The Portfolio outperformed its benchmark by 38 basis points during
the first six months of 1997 resulting from an
overweighting in non-Treasury investments during the entire period along
with a second quarter lengthening of duration
vs. the benchmark.
Interest rates increased and the yield curve flattened in the first
quarter. Non-Treasury sectors outperformed
government securities in the front end of the yield curve as their higher
yields more than compensated for the additional
spread risk. As typically follows a Fed tightening, the coupon curve
flattened and the money market curve steepened. By
creating a bullet strategy, the Portfolio picked up yield and avoided the
steepening in the front end of the market.
Spreads on non-Treasury securities widened slightly at the short
end of the yield curve in the first quarter.
Money market, asset- and mortgage-backed securities, nevertheless, raised
the Portfolio's yield with minimal spread and
convexity risk. Although the first quarter was marked by credit concerns
with selected Japanese banks and poorer quality
asset-backed securities, careful security analysis and research helped the
Portfolio avoid any problems.
As usual in bond market rallies, the intermediate (five to ten year)
part of the yield curve outperformed both
the longer and shorter ends in the second quarter. The money market
curve flattened, and a tight supply of short
maturity Treasury bills led to technical dislocations and lower yields.
The Portfolio's yield curve position was
barbelled at the beginning of the second quarter, holding longer duration
securities than the benchmark. The Portfolio
later moved to a bulleted position, increasing yield and capturing price
appreciation from the flattening curve.
The economy has clearly slowed from its rapid pace of the first
quarter and the key to the future is consumer
behavior. All the variables are in place for a resurgence in demand,
including high consumer confidence, high incomes,
and a rising stock market, but the timing is uncertain. The Fed has
decided to wait, and we think the market risk is
symmetric. Given the rally over the past two months, the bond market is
expecting very good news on the economy and
inflation. But there is uncertainty as to when, or if, the good news will
arrive. In response to this dilemma, the
Portfolio holds a neutral duration position and bulleted yield curve
exposure to pick up both yield and curve
"rolldown." In addition, the Portfolio expects to remain overweighted in
non-Treasury securities as well as focusing on
security selection in the asset-backed and corporate sectors.
Stable Return Portfolio - Schedule of Investments
June 30, 1997 (unaudited)
<TABLE>
<S> <C> <C>
Face
Amount Value
- ----------------------------------------------------------------------------------------------------------------------------
Long-Term Investments - 94.6%
Asset- and Mortgage-Backed Obligations - 76.8%
Bear Stearns Mtg. Sec. Corp., Ser. 1996-4, Class AI4, 7.350% due 9/25/27 $ 400,000 $ 402,480
Bear Stearns Mtg. Sec. Corp., Ser. 1996-5, Class A3, 7.250% due 9/25/27 1,000,000 1,004,980
Bear Stearns Mtg. Sec. Corp., Ser. 1996-8, Class A4, 7.250% due 11/25/27 668,000 671,447
Capita Equipment Rec. Trust, Ser. 1996-1, Class B, 6.570% due 3/15/01 400,000 399,392
Centrex Auto Trust, Ser. 1996-B, Class CTFS, 6.600% due 9/15/04 500,000 489,297
Citicorp Mtg Sec., Inc., Ser. 1993-7, Class A2, 7.000% due 8/25/21 1,000,000 998,210
EQCC Home Equity Loan Trust, Ser. 1997-1 Class B, 6.610% due 6/15/06 1,259,000 1,263,344
FHLMC, Ser. 1625, Class DA, 5.500% due 7/15/04 2,000,000 1,989,860
FHLMC, Ser. 1733, Class PD, 7.250% due 1/15/17 500,000 505,270
First Plus Home Loan Trust, Ser. 1996-3, Class A2, 6.850% due 6/20/07 1,000,000 1,005,170
FNMA, Ser. 1994-56, Class D, 6.000% due 3/25/14 2,000,000 1,990,420
Merrill Lynch Mtg. Investors, Inc., Ser. 1994-M1, Class B, 8.124% due 6/25/22 1,000,000 1,013,750
Norwest Asset Sec. Corp., Ser. 1997-6, Class A11, 7.500% due 5/25/27 1,000,000 1,008,750
Premier Auto Trust, Ser. 1995-2, Class CTFS, 7.350% due 6/4/01 1,500,000 1,525,335
Prudential Home Mtg. Securities, Ser. 1993-4, Class A5, 7.000% due 3/25/23 1,000,000 998,100
Residential Accredit Loans, Ser. 1996-QS2, Class A3, 7.050% due 3/25/19 1,000,000 1,001,360
Residential Accredit Loans, Ser. 1996-QS4, Class AI4, 7.500% due 8/25/26 600,000 605,310
Residential Asset Sec. Trust, Ser. 1996-A5, Class A3, 7.750% due 9/25/26 1,000,000 1,009,748
Residential Funding Mortgage Sec., Ser. 1996-S20, Class A1, 7.100% due 9/25/26 1,000,000 1,006,910
Resolution Trust Corp., Ser. 1994-C1, Class B, 8.000% due 6/25/26 1,000,000 1,023,281
------------------
Total (Cost - $19,852,754) 19,912,414
------------------
Foreign Obligations - 1.7%
Industrial Fin. Corp. (144A), 6.875% due 4/1/03 (a) 250,000 239,650
Okobank FRN, Ser. BR, 7.266% due 10/29/49 200,000 204,000
------------------
Total (Cost - $444,607) 443,650
------------------
U.S. Treasury Obligations - 16.1%
U.S. Treasury Note, 5.875% due 4/30/98 430,000 430,403
U.S. Treasury Note, 6.000% due 6/30/99 500,000 499,375
U.S. Treasury Note, 6.375% due 5/15/00 1,240,000 1,244,650
U.S. Treasury Note, 6.250% due 6/30/02 2,000,000 1,988,118
------------------
Total (Cost - $4,165,434) 4,162,546
------------------
Total Long-Term Investments (Cost - $24,462,795) 24,518,610
------------------
</TABLE>
Stable Return Portfolio - Schedule of Investments (continued)
June 30, 1997 (unaudited)
<TABLE>
<S> <C> <C>
Face
Amount Value
- ----------------------------------------------------------------------------------------------------------------------------
Short-Term Investments - 12.3%
Bank of Boston (Nassau) Time Deposit, 5.750% due 7/1/97 $ 268,000 $268,000
U.S. Treasury Bill, 4.870% due 7/24/97 * 500,000 498,421
U.S. Treasury Bill, 5.350% due 6/25/98 *@ 60,000 56,793
U.S. Treasury Bill, 5.070% due 6/25/98 * 2,500,000 2,367,269
Total (Cost - $3,190,469) 3,190,483
------------------
Total Investments - 106.9% (Cost - $27,653,264) 27,709,093
Other Assets, net of Liabilities - (6.9%)
(1,789,983)
------------------
Net Assets - 100.0% $ 25,919,110
==================
</TABLE>
Summary of Abbreviations
FRN Floating Rate Note
* Interest rate represents yield to maturity at date of purchase.
(a) Security exempt from registration under Rule 144 A of the Securities Act
of 1933. This security may be resold in
transactions exempt
from registration, normally to qualified buyers. At June 30, 1997,
this security was valued at $239,650 or 0.9% of
net assets.
@ Security, or a portion thereof, is held in a margin account to cover
financial futures contracts.
See notes to financial statements.
Mortgage Total Return Portfolio
June 30, 1997(unaudited)
Investment performance for the periods ended June 30, 1997:
----------------------------------------------------------------------------
Average Annual Total Return
<TABLE>
<S> <C> <C> <C>
Six Months One Since
Total Return Year Inception*
Mortgage Total Return Portfolio 4.73% 10.34% 9.82%
Lehman Mortgage-Backed Securities Index 3.91% 9.09% 8.41%
</TABLE>
* Mortgage Total Return Portfolio commenced operations on April 29, 1996.
The Portfolio outperformed its benchmark by 82 basis points during the
first six months of 1997.
The volatility of interest rate movements during the first
quarter declined. This decline presented an
opportunity to "buy" volatility and reduce the negative convexity of the
mortgage portfolio. As a result, the Portfolio
had a higher convexity than its benchmark at quarter end. The mortgage
exposure overall didn't change in a material way
during the first quarter but within the sector, two shifts occurred.
The first concentrated the pass-through position in
current coupon pass-throughs and the second reduced the exposure to
prepayment risk.
During the second quarter, all sectors of the mortgage market
performed well, outperforming Treasuries, as
current coupon pass-through spreads tightened. This performance was the
result of a low volatility environment, making
the incremental return from mortgage securities especially attractive.
During the second quarter, the Portfolio attempted to capitalize
on the benign environment for the mortgage
sector by focusing on TBA pass-throughs, which enjoyed excellent financing
in the dollar roll market due to strong CMO
bids. The Portfolio also took selective positions in lower coupon IOs and
GNMA ARMs. At the same time, however, the
Portfolio was preparing for a possibly different environment by selling
off-the-run securities, such as CMO's and
mortgage derivatives, and replacing them with liquid, on-the-run products such
as pass-throughs.
During the first week of July, the market rallied significantly,
with 30 year U. S. Treasury yields declining 22
basis points over a week and a half. Currently, the mortgage market is faced
with a much more difficult environment. It
is closer to refinancing thresholds than it has been in over a year, with
the 8.5% coupon deeply in the money and the 8%
coupon very close. A further rally would push 8%'s into the money and 7.5%'s
very close to the edge.
While we do not necessarily expect a continued rally, we do
believe that if it were to occur, the risk/reward
trade-off in mortgages would be highly asymmetric. As a result, the
Portfolio has become much more defensive on the
mortgage market. The Portfolio has reduced its holdings of mortgage product,
especially off-the-run mortgage product,
and increased holdings in options, thereby significantly increasing the
convexity of the Portfolio. The Portfolio has,
through the use of mortgage and treasury options, constructed a position
where it would further reduce the mortgage
versus treasury positions in a rally.
Mortgage Total Return Portfolio - Schedule of Investments
June 30, 1997 (unaudited)
<TABLE>
<S> <C> <C>
Face
Amount Value
- ----------------------------------------------------------------------------------------------------------------------------
Long-Term Investments - 220.2%
To Be Announced Pools (TBAs) - 135.6%
FNMA (TBA), 7.000% due 7/1/12 $97,000,000 $96,787,764
FNMA (TBA), 7.500% due (7/1/27 - 8/1/27)
547,000,000 547,212,624
GNMA (TBA), 7.500% due (4/1/98 - 5/1/98)
6,524,712 6,411,724
------------------
Total (Cost - $650,016,893) 650,412,112
------------------
- ------------------------------------------------------------------------------
Pools - 11.1%
- -----------------------------------------------------------------------------
FNMA, 9.000% due (6/1/24 - 7/1/25)
17,673,585 18,630,166
- ------------------------------------------------------------------------------
GNMA, 8.000% due 8/15/00
12,837 13,263
- -----------------------------------------------------------------------------
GNMA, 7.500% due (8/15/98 - 10/15/23)
7,480,376 7,358,603
- ------------------------------------------------------------------------------
GNMA II ARM, 7.000% due 3/20/24
12,335,335 12,672,633
- ------------------------------------------------------------------------------
GNMA II ARM, 7.125% due (7/20/22 - 7/20/23)
16,102,966 16,575,715
- -----------------------------------------------------------------------------
Total (Cost - $55,036,703)
55,250,380
- -----------------------------------------------------------------------------
- ---------------------------------------------------------------------------
Interest Only Obligations (IOs) - 13.3% *
- ---------------------------------------------------------------------------
FHLMC IO Strip, Ser. 1295, Class JA (12.765%-13.682%) due 3/15/07
943,743 978,817
- ------------------------------------------------------------------------------
FHLMC IO Strip, Ser. 1428, Class N, 10.467% due 11/15/07
111,726 114,043
- -----------------------------------------------------------------------------
FHLMC IO Strip, Ser. 1464, Class L, 10.478% due 6/15/22
841,646 883,022
- ------------------------------------------------------------------------------
FHLMC IO Strip, Ser. 164, Class A, 7.436% due 3/1/24
3,931,266 3,929,086
- ------------------------------------------------------------------------------
FHLMC IO, Ser. 1687, (6.255%-6.743%) due 3/15/07
99,639 102,980
- -----------------------------------------------------------------------------
FHLMC IO, Ser. 1164, Class I, 8.7493% due 11/15/06
947,397 929,201
- -------------------------------------------------------------------------------
FHLMC IO, Ser. 183, Class IO, 9.610% due 4/1/27
1,375,230 1,373,702
- ------------------------------------------------------------------------------
FNMA IO, Ser. 1990-103, Class L, (8.698%-11.721%) due 9/25/20
1,672,169 1,884,604
- ------------------------------------------------------------------------------
FNMA IO, Ser. 1991-56, Class U, (8.185%-9.730%) due 6/25/21
354,820 383,784
- -----------------------------------------------------------------------------
FNMA IO, Ser. 1991-77, Class PL, (7.965%-10.100% due 7/25/21
1,613,324 1,829,929
- -----------------------------------------------------------------------------
FNMA IO, Ser. 1992-148, Class C, 0.216% due 4/25/19
945,105 930,323
- ------------------------------------------------------------------------------
FNMA IO, Ser. 1992-170, Class H, (10.467%-10.839%) due 9/25/07
673,801 685,894
- ----------------------------------------------------------------------------
FNMA IO, Ser. 1992-24, Class N, (10.253%-13.446%) due 3/25/07
366,007 388,707
- -----------------------------------------------------------------------------
FNMA IO, Ser. 1992-47, Class L, (9.827%-10.407%) due 2/25/07
550,764 577,645
- -----------------------------------------------------------------------------
FNMA IO, Ser. 1992-70, Class M, (11.714%-14.987%) due 4/25/07
1,077,070 1,185,136
- -----------------------------------------------------------------------------
FNMA IO, Ser. 240, Class 2, 7.836% due 9/1/23
6,031,917 6,017,286
- ------------------------------------------------------------------------------
FNMA IO, Ser. 249, Class 2, 7.731% due 10/25/23
2,348,869 2,340,538
- -------------------------------------------------------------------------------
FNMA IO, Ser. 276, Class 2, 7.846% due 10/1/24
4,027,288 4,054,540
- -----------------------------------------------------------------------------
FNMA IO, Ser. 284, Class 2, (10.109%-11.108%) due 6/1/01 20,575,287
20,760,625
- ------------------------------------------------------------------------------
FNMA IO, Ser. 97-49, Class PJ, 9.613% due 6/18/10 2,941,126
2,935,080
- ------------------------------------------------------------------------------
FNMA IO, Ser. G92-1, Class G, (10.700%-14.465%) due 1/25/22
310,863 333,832
- ------------------------------------------------------------------------------
FNMA IO, Ser. G92-6, Class E, (12.819%-15.948%) due 12/25/21
735,138 786,790
- -----------------------------------------------------------------------------
FNMA IO, Ser. G92-8, Class L, (12.099%-15.322%) due 1/25/22
730,564 772,241
- ------------------------------------------------------------------------------
Prudential Home Mortgage Sec. IO, Ser. 1994-30, Class A11, (12.045%-14.255%) due
10/25/24 1,369,361 1,512,562
- -----------------------------------------------------------------------------
Structured Asset Sec. Corp. IO, Ser. 1996-CFL, Class X1, (11.047%-11.865%) due 2/25/28 913,347
1,562,184
- -------------------------------------------------------------------------------
Structured Asset Sec. Corp. IO, Ser. 1996-CFL, Class X2, (6.231%-11.648%) due 2/25/28 2,307,429
2,717,588
- -------------------------------------------------------------------------------
Vendee Mtg. Trust IO, Ser. 1992-2, Class IO, (5.933%-8.422%) due 9/15/22
1,778,018 1,771,746
- -----------------------------------------------------------------------------
Vendee Mtg. Trust IO, Ser. 1994-2, Class 3IO, (9.835%-12.327%) due 6/15/24
340,086 361,762
- ------------------------------------------------------------------------------
Vendee Mtg. Trust IO, Ser. 1994-3A, Class 1IO, (8.363%-11.554%) due 9/15/24
1,163,153 1,223,379
- ------------------------------------------------------------------------------
</TABLE>
Mortgage Total Return Portfolio - Schedule of Investments (continued)
June 30, 1997 (unaudited)
<TABLE>
<S> <C> <C>
Face
Amount Value
- ----------------------------------------------------------------------------------------------------------------------------
Interest Only Obligations (IOs) (continued)
Vendee Mtg. Trust IO, Ser. 1994-3B, Class 2IO, (4.648%-6.915%) due 9/15/24 $ 354,732 $360,068
Vendee Mtg. Trust IO, Ser. 1996-1, Class 1IO, (8.024%-10.281%) due 2/15/26 1,964,137
1,856,467
Vendee Mtg. Trust IO, Ser. 1996-2, Class 1IO, (0.165%-9.841%) due 6/15/26 488,310
317,348
------------------
Total (Cost - $63,604,700) 66,139,541
------------------
Principal Only Obligations (POs) - 10.7% *
FHLMC PO, Ser. 1862, Class G, 6.195% due 9/15/08 1,990,176 1,982,832
FHLMC PO, Ser. 1957, Class PO, 4.544% due 10/25/23
1,386,607 1,358,978
FNMA PO Strip, Ser. 1996-34, Class A, (5.755%-7.225%) due 10/25/21
1,407,397 1,335,935
FNMA PO, Ser. 1932, Class T, 6.245% due 1/15/25
2,905,976 2,784,401
FNMA PO, Ser. 193-213, Class E, (6.038%-6.588%) due 9/25/23
785,384 786,723
FNMA PO, Ser. 1993-100, Class J, (7.326%-8.535%) due 6/25/23
1,944,544 1,965,454
FNMA PO, Ser. 1993-100, Class L, 7.549% due 6/25/23
1,638,632 1,635,425
FNMA PO, Ser. 1993-100, Class M, (7.945%-8.376%) due 6/25/23
1,758,248 1,774,436
FNMA PO, Ser. 1993-100, Class N, (7.192%-8.517%) due 6/25/23
1,476,397 1,485,784
FNMA PO, Ser. 1993-111, Class B, (6.779%-8.312%) due 12/25/20
5,014,134 5,066,085
FNMA PO, Ser. 1993-152, Class J, (6.534%-7.793%) due 8/25/23
5,077,415 5,168,307
FNMA PO, Ser. 1993-157, Class E, (7.843%-9.028%) due 5/25/22
3,796,738 3,910,971
FNMA PO, Ser. 1993-159, Class PA, (6.576%-7.122%) due 1/25/21
949,258 955,315
FNMA PO, Ser. 1996-38, Class B, 5.115% due 11/25/23
4,015,106 4,190,163
FNMA PO, Ser. 1996-54, Class H, 5.115% due 11/25/23
1,889,068 1,957,800
FNMA PO, Ser. 284, Class 1, (5.829%-6.179%) due 6/1/01 17,071,883
16,924,388
Total (Cost - $52,836,963)
53,282,997
Collateralized Mortgage Obligations (CMOs) - 46.3%
Beneficial Home Equity Loan Trust FRN, Ser. 1995-1, Class A1, 5.908% due 3/28/25
6,054,954 6,060,882
Beneficial Mortgage Corp. FRN, Ser. 1996-1, Class A, 5.868% due 4/28/26
11,761,012 11,767,253
CMC Securities Corp., Ser. 1993-E, Class S3, 5.500% due 11/25/08
907,876 903,189
CTS ARM Trust, Ser. 1995-1, Class A, 6.298% due 5/25/26
4,100,435 4,120,937
Countrywide MBS, Inc., Ser. 1993-D, Class A4, 6.000% due 1/25/09
1,435,954 1,430,635
Countrywide MBS, Inc. FRN, Ser. 1993-D, Cl. A15, 4.363% due 1/25/09
3,923,851 2,753,641
Countrywide Funding Corp., Ser. 1994-10, Class A1, 6.000% due 5/25/09
3,925,148 3,902,559
Corestates Home Equity Trust, Ser. 1994-2, Class A1, 7.000% due 11/15/02
425,870 426,414
FHLMC, Ser. 1349, Class PG, 6.500% due 5/15/14
948,898 949,442
FHLMC, Ser. 1415, Class M, 6.750% due 2/15/06
14,200,000 14,247,002
FHLMC, Ser. 1417, Class S, 7.594% due 11/15/07
3,293,038 2,832,046
FHLMC, Ser. 1425, Class D, 5.500% due 10/15/02
849,973 847,892
FHLMC FRN, Ser. 1427, Class S, 5.812% due 12/15/97
899,345 898,455
FHLMC FRN, Ser. 1438, Class F, 5.438% due 12/15/97
1,964,194 1,957,496
FHLMC, Ser. 1458, Class D, 6.250% due 4/15/03
228,933 228,707
FHLMC REMIC, Ser. 1511, Class L, 6.000% due 5/15/08
9,364,356 8,638,619
FHLMC, Ser. 1614, Class K, 10.000% due 6/15/20
4,704,947 4,970,579
FHLMC FRN, Ser. 1615, Class SB, 4.286% due 11/15/08
4,025,900 2,938,907
FHLMC, Ser. 1693, Cass. Z, 6.000% due 3/15/09
4,134,909 3,669,732
FHLMC, Ser. 1748, Class C, 8.000% due 9/15/24
6,100,000 6,452,580
Mortgage Total Return Portfolio - Schedule of Investments (continued)
June 30, 1997 (unaudited)
Face
Amount Value
Collateralized Mortgage Obligations (CMOs) (continued)
FHLMC, Ser. 1765-B, Class BA, 10.000% due 1/15/17 $ 4,142,609 $4,338,513
FNMA FRN, Ser. G92-9, Class SA, 9.540% due 1/25/20
553,260 554,686
FNMA, Ser. G93-10, Class H, 5.000% due 8/25/22
3,970,000 3,255,400
FNMA, Ser. 1993-240, Class Z, 6.250% due 12/25/13
3,980,204 3,517,068
FNMA FRN, Ser. 1994-17, Class F, 6.856% due 2/25/09
31,147,619 31,229,537
FNMA, Ser. X-89B FRN, 6.106% due 3/25/09
13,000,425 13,082,328
FNMA, Ser. X-19B, Class ED, 6.500% due 1/25/22
3,660,000 3,216,298
FNMA, Ser. 1997-13, Class QA, 6.500% due 3/18/09
7,732,374 7,747,839
First Chicago Master Trust II, Ser. 1993-F, Class A, 5.988% due 2/15/00
8,100,000 8,115,188
Fusam, Ser. 1994-6, Class A, 6.038% due 10/15/03
11,500,000 11,580,857
Matterhorn, Ser. 1996S1, Class A, 6.1375% due 1/21/06
6,784,781 6,795,386
Homart A1, 6.625% due 12/29/98
10,225,000 10,228,200
Mellon Bank Home Equity Loan Trust, Ser. 1996-1, Class A1, 5.878% due 4/15/26 800,000 800,500
Paine Webber MAC FRN, Ser. 1994-6, Class A9, 3.800% due 4/25/09
1,800,000 1,161,972
Prudential Home Mortgage Securities, Ser. 1994-15, Class A3, 6.800% due 5/25/24
313,671 313,622
Residential Funding Mtg. Sec. I, Ser. 1993-S36, Class A3, 5.065% due 10/25/08
1,028,934 1,015,380
Residential Funding Mtg. Sec. FRN, Ser. 1997-HS2, Class A, 5.843% due 9/20/22
18,592,742 18,581,121
Resolution Trust Corp. FRN, Ser. 1993-C3, Class A3, 6.438% due 12/25/24
831,008 831,007
Resolution Trust Corp., Ser. 1993-C3, Class A2, 6.350% due 12/25/24
2,874,239 2,866,605
Signet Home Equity Loan Corp. Trust FRN, Ser. 1995-A, Class A, 5.935% due 6/20/04
9,664,460 9,691,646
Structured Asset Sec. Corp., Ser. 1996-CFL, Class A2A, 7.750% due 2/25/28
6,089,130 6,167,150
Vanderbilt Mortgage Finance, Ser. 1997-B, Class 2A1, 5.915% due 11/7/12
4,208,465 4,208,465
Total (Cost - $228,897,003)
229,295,735
U.S. Treasury Securities - 30.3%
U.S. Treasury Note, 6.250% due 5/31/99
9,600,000 9,627,005
U.S. Treasury Note, 6.000% due 6/30/99
6,600,000 6,589,691
U.S. Treasury Note, 6.250% due 6/30/02 27,000,000
26,848,125
U.S. Treasury Note, 6.625% due 5/15/07 11,700,000
11,802,376
Total (Cost - $54,884,470)
54,867,197
Total Long-Term Investments (Cost - $1,105,276,732)
1,109,247,962
Short-Term Investments - 14.2%
Bank of Boston (Nassau) Time Deposit, 5.750% due 7/1/97
21,093,000 21,093,000
U.S. Treasury Bill, 5.000% due 10/24/96 *@
6,500,000 6,394,700
Citibank Repurchase Agreement, 5.320% due 7/1/97; Issued 6/30/97;
(Collateralized by $20,535,000 U.S. Treasury Note, 5.750% due 10/31/00,
value $20,249,435)
20,000,000 20,000,000
Sanwa Bank Repurchase Agreement, 4.500% due 7/1/97; Issued 6/30/97;
(Collateralized by $2,815,000 U.S. Treasury Note, 6.625% due 5/15/07;
value $2,849,306)
2,871,300 2,871,300
</TABLE>
Mortgage Total Return Portfolio - Schedule of Investments (continued)
June 30, 1997 (unaudited)
<TABLE>
<S> <C> <C>
Amount Value
Short-Term Investments (continued)
Sanwa Bank Repurchase Agreement, 5.950% due 7/1/97; Issued 6/30/97;
(Collateralized by $20,593,000 U.S. Treasury Bill, due 9/4/97;
value $20,401,588) $ 20,000,000 $20,000,000
Total (Cost - $70,359,000)
70,359,000
- ------------------------------------------------------------------------------
- ----------------------------------------------------------------------------
Long Options - 1.1% Contracts
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
U.S. (5 Yr.) OTC C $101.2 Strike Expiring 8/9/97 77
264,726
- -----------------------------------------------------------------------------
U.S. (10 Yr.) OTC $102.2 Strike Expiring 8/9/97 22
123,750
- ------------------------------------------------------------------------------
Swap Option OTC 6.900% Strike Expiring 2/26/07 40
1,040,000
- -----------------------------------------------------------------------------
Swap Option OTC 6.900% Strike Expiring 2/26/07 40
1,416,000
- ------------------------------------------------------------------------------
Swap Option OTC 7.040% Strike Expiring 2/20/02 40
2,180,000
- ------------------------------------------------------------------------------
U.S.T. Note (10 Yr.) $108 Call Expiring 11/15/97 50
55,474
- -----------------------------------------------------------------------------
U.S.T. Note (10 Yr.) $108 Call Expiring 11/15/97 361
400,490
- ------------------------------------------------------------------------------
U.S.T. Note (10 Yr.) $111 Call Expiring 11/15/97 175
49,225
- -----------------------------------------------------------------------------
U.S.T. Note (10 Yr.) $111 Call Expiring 11/15/97 86
24,194
- ------------------------------------------------------------------------------
Total (Cost - $6,003,369)
5,553,859
- ----------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- ------------------------------------------------------------------------------- 1,185,160,821
Total Investments - 235.5% (Cost - $1,181,639,101)
- ------------------------------------------------------------------------------
Other Assets net of Liabilities - (135.5%) (687,965,477)
Net Assets - 100% $497,195,344
</TABLE>
Summary of Abbreviations
ARM Adjustable Rate Mortgage
FRN Floating Rate Note
* Interest rate represents yield to maturity at date of purchase.
@ Security, or a portion thereof, is held in a margin account to cover
financial futures contracts.
See notes to financial statements.
Mortgage Total Return Portfolio - Schedule of Securities Sold Short
June 30, 1997 (unaudited)
<TABLE>
<S> <C> <C>
Face
Amount Value
- ----------------------------------------------------------------------------------------------------------------------------
TBAs - (22.9%)
GNMA (TBA), 7.000% due 7/1/27 $ (76,000,000) $ (74,615,280)
GNMA (TBA), 7.000% due 8/1/27
(40,000,000) (39,196,200)
Total (Proceeds - $114,120,000)
(113,811,480)
U.S. Treasury Securities - (0.6%)
U.S. Treasury Note, 6.625% due 5/15/07
(Proceeds - $2,849,308)
(2,815,000) (2,837,872)
Total Securities Sold Short - (23.5%) (Proceeds - $116,969,308) $ (116,649,352)
</TABLE>
Summary of Abbreviations
TBA To Be Announced
Mortgage Total Return Portfolio - Schedule of Written Options
June 30, 1997 (unaudited)
Contracts Value
FNMA 7.500% OTC C $100.7 Strike Expiring 8/9/97
(Premium - $420,000) (128) $(419,968)
Summary of Abbreviations
OTC Over the Counter
See notes to financial statements.
Worldwide Portfolio
June 30, 1997(unaudited)
Investment performance for the periods ended June 30, 1997:
Average Annual Total Return
<TABLE>
<S> <C> <C> <C> <C>
Six Months One Since
Total Return Year Five Years Inception*
Worldwide Portfolio (0.48%) 6.12% 7.59% 7.69%
JP Morgan Global Government Bond Index (Unhedged) (1.08%) 4.48% 7.25% 8.05%
</TABLE>
----------------------------------------------------------------------------
* Worldwide Portfolio commenced operations on April 15, 1992.
The Portfolio outperformed its benchmark by 60 basis points in the
first six months of 1997.
Overweighting Japanese and Italian bonds contributed to positive
performance versus the benchmark as did a switch
from underweighting to overweighting U.S. Treasuries in the second quarter.
An overweighting of the Canadian dollar,
however, detracted from relative performance versus the benchmark.
In the U.S., renewed strength in manufacturing, a firm labor
market and robust consumption were the key
ingredients to a 60 basis point rise in bond yields in the first quarter.
In the second quarter, the market revised its
expectations of continuing strong growth and Federal Reserve tightening
as weak retail sales signalled a slow down in
consumption. Consequently bond yields fell 40 basis points in the second
quarter.
In Europe, the German bond market was buffeted by countervailing
forces in the first quarter. Inflation news was
excellent and business activity picked up helped by strong exports. However,
unemployment continued to climb and doubts
about the timing of the European Monetary Union undermined previous
assumptions of perpetually tight fiscal policy. The
net result was a modest rise in bond yields, an increase in money market
rates and a significant widening in the spread
between the higher yielding European bond markets and the"core" markets of
Germany and France.
The second quarter saw a fall of core European bond yields despite
a modest pick up in economic activity. The
driving factors were expectations of low and stable interest rates and the
rally of U. S. Treasuries. The dominant theme
within Europe was optimism about EMU. Long dated Gilts reacted very
positively to Bank of England's newly granted
operational independence. The spread between Italian and German bonds
fell 100 basis points. Late in the quarter,
Japanese bond yields decreased as market participants realized that
persistent evidence of a recovery would be required
before monetary policy would be changed.
In the foreign exchange market, the first quarter was marked by
a higher U.S. dollar due to non-inflationary
growth and tighter monetary policy; a decline of the Deutschemark against
the U.S. dollar, but a stabilization against
other currencies and; a weak environment for the yen due to a continued
weakness of the domestic economy. In the second
quarter, the Deutschemark weakened against most currencies as the
probability of a broad EMU grew and the real economy
failed to accelerate, and continued its slide against the U.S. dollar. The
yen strengthened by 10% as the trade surplus
grew dramatically and expectations of rate hikes were brought forward.
The current strategy is to overweight U.S. Treasuries while
underweighting U.S. dollar exposure. Neutral
positions in both Europe and Japanese bonds will be emphasized along with a
strategy of overweighting the Japanese yen.
Worldwide Portfolio - Schedule of Investments
June 30, 1997 (unaudited)
<TABLE>
<S> <C> <C> <C>
Face
Amount (a) Value
Long-Term Investments - 50.1%
Canada - 5.3%
Canadian Government, 4.000% due 3/15/99 CAD 4,700,000 $ 3,370,234
Canadian Government, 8.000% due 6/1/27 CAD 1,440,000 1,190,069
------------------
Total (Cost - $4,520,418) 4,560,303
------------------
Denmark - 1.2%
Kingdom of Denmark, 8.000% due 3/15/06
(Cost - $1,084,186) DKK 6,010,000 1,019,482
------------------
Italy - 5.2%
Buoni Poliennali del Tes, 9.500% due 2/1/01
(Cost - $4,402,109) ITL 6,910,000,000 4,477,680
------------------
Netherlands - 2.3%
Bank Nederlandse Gemeenten, 6.750% due 10/3/05
(Cost - $2,186,630) NLG 3,540,000 1,941,800
------------------
New Zealand - 0.9%
New Zealand Government, 8.000% due 2/15/01 NZD 800,000 564,539
New Zealand Government, 8.000% due 11/15/06 NZD 350,000 254,447
------------------
Total (Cost - $823,898) 818,986
------------------
United States - 35.2%
FHLB FRN, 5.388% due 3/19/98 2,000,000 2,000,390
Signet Credit Card Trust, Ser. 1994-4, Class A, 6.800% due 12/15/00 3,000,000 3,005,610
U.S. Treasury Note, 6.625% due 4/20/02 5,150,000 5,196,669
U.S. Treasury Note, 6.500% due 5/31/02 1,750,000 1,756,563
U.S. Treasury Note, 6.250% due 6/30/02 1,700,000 1,689,900
U.S. Treasury Note, 6.625% due 5/15/07 4,100,000 4,133,313
U.S. Treasury Bond, 7.625% due 2/15/25 5,250,000 5,745,469
U.S. Treasury Bond, 6.500% due 11/15/26 7,070,000 6,776,150
------------------
Total (Cost - $30,188,335) 30,304,064
------------------
Total Long-Term Investments (Cost - $43,205,575) 43,122,315
------------------
</TABLE>
Worldwide Portfolio - Schedule of Investments (continued)
June 30, 1997 (unaudited)
<TABLE>
<S> <C> <C>
Face
Amount Value
Short- Term Investments - 43.4%
Bank of Boston (Nassau) Time Deposit, 5.750% due 7/1/97 $13,410,000 $13,410,000
Bank of Nova Scotia Yankee CD, 5.680% due 9/8/97 4,000,000 4,000,069
Bank of Scotland Euro CD, 5.750% due 12/29/97 4,000,000 4,000,293
Bayerische Vereinsbank Euro CD, 5.710% due 8/4/97 4,000,000 4,000,061
Bayerische Landesbank Euro CD, 5.750% due 12/29/97 4,000,000 4,000,293
Mellon Bank CD, 5.800% due 12/15/97 4,000,000 4,000,000
U.S. Treasury Bill, 4.870% due 7/24/97 *@ 900,000 897,159
Westdeutsche Landesbank Euro CD, 5.830% due 11/24/97 3,000,000 2,999,651
------------------
Total (Cost - $37,307,710) 37,307,526
------------------
Total Investments - 93.5% (Cost - $80,513,285) 80,429,841
Other Assets, net of Liabilities - 6.5%
5,614,466
------------------
Net Assets - 100.0% $
86,044,307
==================
</TABLE>
Summary of Abbreviations
CAD Canadian Dollars
CD Certificates of Deposit
DKK Danish Krone
FRN Floating Rate Note
ITL Italian Lira
NLG Netherlands Guilder
NZD New Zealand Dollars
* Interest rate represents yield to maturity at date of purchase.
(a) Face amount shown in U.S. dollars unless otherwise indicated.
@ Security, or a portion thereof, is held in a margin account to cover
financial futures contracts.
See notes to financial statements.
Worldwide-Hedged Portfolio
June 30, 1997(unaudited)
Investment performance for the periods ended June 30, 1997:
----------------------------------------------------------------------------
Average Annual Total Return
<TABLE>
<S> <C> <C> <C> <C>
Six Months One Since
Total Return Year Five Years Inception**
Worldwide-Hedged Portfolio 4.35% 12.64% 10.20% 10.18%
Customized Benchmark* 3.97% 11.14% 7.38% 7.32%
</TABLE>
* Customized Benchmark
May 19, 1992 through July 31, 1994 - JP Morgan Global Government Bond
Index (Hedged) August 1, 1994 through June 30, 1995 - IBC's Money Fund
Report Averages
TM-All Taxable
July 1, 1995 to present - JP Morgan Global Government Bond Index (Hedged)
** Worldwide-Hedged Portfolio commenced operations on May 19, 1992.
The Portfolio outperformed its benchmark by 38 basis points in the
first six months of 1997.
Renewed strength in manufacturing, a firm labor market and robust
consumption were the key ingredients to a 60 basis point rise in U. S. bond
yields in the first quarter. In the second quarter, the market revised its
expectations of continuing strong growth and Federal Reserve tightening as
weak retail sales signaled a slow down in consumption. Consequently bond
yields fell 40 basis points in the second quarter.
In Europe, the German bond market was buffeted by countervailing
forces in the first quarter. Inflation news was excellent and business
activity picked up helped by strong exports. However, unemployment continued
to climb and doubts about the timing of the European Monetary Union undermined
previous assumptions of perpetually tight fiscal policy. The net result was a
modest rise in bond yields, an increase in money market rates and a
significant widening in the spread between the higher yielding European bond
markets and the "core" markets of Germany and France.
The second quarter saw a fall of core European bond yields despite
a modest pick up in economic activity. The driving factors were
expectations of low and stable interest rates and the rally of U. S.
Treasuries. The dominant theme within Europe was optimism about EMU.
Long dated Gilts reacted very positively to Bank of England's newly
granted operational independence. The spread between Italian and German bonds
fell 100 basis points.
In Japan, Japanese bond yields were sustained at record low levels
in the first quarter by continued evidence of problems with the banking
system, concerns about the impact of prospective fiscal tightening and the
confinement of unequivocal economic recovery to the export sector. During
the second quarter, the bond market was volatile. In April, bonds traded in a
very narrow range. In May, yields increased by approximately 50 basis
points mainly due to strong economic data and expectations of an interest
rate hike during the summer. In June, yields decreased as market
participants realized that persistent evidence of a recovery would be required
before monetary policy would be changed.
Overweighting Japanese and Italian bonds contributed to positive
performance versus the benchmark as did a switch from underweighting to
overweighting U. S. Treasuries in the second quarter. An overweighting of the
Canadian dollar, however, detracted from relative performance versus the
benchmark. The current strategy is to overweight U. S. Treasuries
while underweighting the U. S. dollar. Looking ahead, neutral positions
in both Europe and Japanese bonds will be emphasized while a strategy of
overweighting in Japanese yen will be embraced.
Worldwide-Hedged Portfolio - Schedule of Investments
June 30, 1997 (unaudited)
<TABLE>
<S> <C> <C> <C>
Face
Amount (a) Value
Long-Term Investments - 40.0%
Australia - 0.3%
Australian Government, 10.000% due 10/15/07
(Cost - $175,920) AUD $
200,000 181,324
------------------
Canada - 5.0%
Canadian Government, 8.000% due 6/1/27 CAD
810,000 669,414
Canadian Government, 4.000% due 3/15/99 CAD 2,366,334
3,300,000
------------------
------------------
Total (Cost - $3,012,624) 3,035,748
------------------
Denmark - 0.9%
Kingdom of Denmark, 8.000% due 3/15/06
(Cost - $601,926) DKK
3,400,000 576,745
------------------
Italy - 5.0%
Buoni Poliennali del Tes, 9.500% due 2/1/01
(Cost - $2,971,418) ITL 4,675,000,000 3,029,400
------------------
Japan - 1.0%
Government of Japan (184), 2.900% due 12/20/05
(Cost - $627,093) JPY 70,000,000
632,310
------------------
New Zealand - 0.5%
New Zealand Government, 8.000% due 2/15/01 NZD
300,000 211,702
New Zealand Government, 8.000% due 11/15/06 NZD
150,000 109,049
------------------
------------------
Total (Cost - $321,841)
320,751
------------------
United States - 27.3%
FHLB FRN, 5.388% due 3/19/98 1,000,000 1,000,196
U.S. Treasury Note, 6.625% due 4/20/02 1,564,046
1,550,000
U.S. Treasury Note, 6.500% due 5/31/02 1,204,500
1,200,000
U.S. Treasury Note, 6.250% due 6/30/02
700,000 695,841
U.S. Treasury Note, 6.625% due 5/15/07 2,419,500
2,400,000
U.S. Treasury Bond, 7.625% due 2/15/25 3,830,313
3,500,000
U.S. Treasury Bond, 6.500% due 11/15/26 5,903,972
6,160,000
------------------
------------------
Total (Cost - $16,567,387) 16,618,368
------------------
Total Long-Term Investments (Cost- $24,278,209) 24,394,646
------------------
</TABLE>
Worldwide-Hedged Portfolio - Schedule of Investments (continued)
June 30, 1997 (unaudited)
<TABLE>
<S> <C> <C>
Face
Amount Value
Short-Term Investments - 59.5%
Bank of Boston (Nassau) Time Deposit, 5.750% due 7/1/97 $ 28,579,000 $ 28,579,000
Abbey Natl Euro CD, 5.690% due 7/2/97 1,000,000
1,000,000
Bank of Nova Scotia Yankee CD, 5.680% due 9/8/97 2,000,034
2,000,000
Bayerische Vereinsbank CD, 5.745% due 12/19/97 2,000,139
2,000,000
Mellon Bank CD, 5.800% due 7/2/97 2,000,000
2,000,000
U.S. Treasury Bill, 4.870% due 7/24/97 *@
650,000 647,948
------------------
Total (Cost - $36,227,204) 36,227,121
------------------
Total Investments - 99.5% (Cost - $60,505,413) 60,621,767
Other Assets, net of Liabilities - 0.5%
289,179
------------------
Net Assets - 100.0% $60,910,946
</TABLE>
Summary of Abbreviations
AUD Australian Dollars
CAD Canadian Dollars
CD Certificate of Deposit
DKK Danish Krone
FRN Floating Rate Note
ITL Italian Lira
JPY Japanese Yen
NZD New Zealand Dollars
* Interest rate represents yield to maturity at date of purchase.
(a) Face amount shown in U.S. dollars unless otherwise indicated.
@ Security, or a portion thereof, is held in a margin account to cover
financial futures contracts.
See notes to financial statements.
International Portfolio
June 30, 1997 (unaudited)
Investment performance for the periods ended June 30, 1997:
---------------------------------------------------------------------------
Average Annual Total Return
----------------------------
<TABLE>
<S> <C> <C> <C>
Six Months One Since
Total Return Year Inception*
International Portfolio (3.00%) 3.65% 3.03%
JP Morgan Global Government Bond Index (Non-U.S. Unhedged) (3.40%) 2.72% 2.96%
</TABLE>
* International Portfolio commenced operations on May 9, 1996.
The Portfolio outperformed its benchmark by 40 basis points in the
first six months of 1997.
During the first quarter in Europe, the German bond market was
buffeted by countervailing forces. Inflation news was excellent and business
activity picked up helped by strong exports. However, unemployment
continued to climb and doubts about the timing of the European Monetary
Union undermined previous assumptions of perpetually tight fiscal
policy. The net result was a modest rise in bond yields, an increase in money
market rates and a significant widening in the spread between the higher
yielding European bond markets and the "core" markets of Germany and France.
Despite a modest pick up in economic activity, the second quarter
saw a fall of core European bond yields. The driving factors were
expectations of low and stable interest rates and the rally of U. S.
Treasuries. The dominant theme within Europe was optimism about EMU. Long
dated Gilts reacted very positively to Bank of England's newly granted
operational independence. The spread between Italian and German
bonds fell 100 basis points. The Portfolio's overweight position in
Italian bonds contributed significantly to returns in the quarter.
Japanese bonds were sustained at record low levels in the first quarter by
continued evidence of problems with the banking system, concerns about the
impact of prospective fiscal tightening and the confinement of economic
recovery to the export sector. During the second quarter, the bond market
was volatile. In April, bonds traded in a very narrow range. In May, yields
increased by approximately 50 basis points mainly due to strong economic data
and expectations of an interest rate hike during the summer. In June,
yields decreased as market participants realized that persistent
evidence of a recovery would be required before monetary policy would be
changed. The Portfolio's overweighted position in Japanese bonds during the
quarter contributed to positive performance relative to the benchmark.
In the foreign exchange market, the first quarter was marked by a
higher U. S. dollar due to non-inflationary growth and tighter monetary policy;
a decline of the Deutschemark against the U. S. dollar, but a stabilization
against other currencies and; a weak environment for the yen due to a
continued weakness of the domestic economy. In the second quarter, the
Deutschemark weakened against most currencies as the probability of a broad
EMU grew and the real economy failed to accelerate, and continued its slide
against the U. S. dollar. The yen strengthened by 10% as the trade surplus
grew dramatically and expectations of rate hikes were brought forward.
An overweighting in the Canadian dollar detracted from relative performance
during the quarter.
The current strategy is to overweight U. S. Treasuries while
underweighting the U. S. dollar. Neutral positions in both Europe and
Japanese bonds will be emphasized while a strategy of overweighting in Japanese
yen will be embraced.
International Portfolio - Schedule of Investments
June 30, 1997 (unaudited)
<TABLE>
<S> <C> <C> <C>
Face
Amount (a) Value
Long-Term Investments - 47.4%
Australia - 0.6%
Australian Government, 10.000% due 10/15/07
(Cost - $263,880) AUD 300,000 $ 271,986
------------------
Canada - 6.1%
Canadian Government, 4.000% due 3/15/99 CAD
2,550,000 1,828,531
Canadian Government, 8.000% due 6/1/27 CAD
940,000 776,851
------------------
Total (Cost - $2,564,720)
2,605,382
------------------
Denmark - 1.6%
Kingdom of Denmark, 8.000% due 3/15/06
(Cost - $717,448) DKK
3,950,000 670,042
------------------
Italy - 11.2%
Buoni Poliennali del Tes, 9.500% due 2/1/01
(Cost - $4,832,078) ITL
7,400,000,000 4,795,200
------------------
Japan - 5.7%
Government of Japan (184), 2.900% due 12/20/05
(Cost - $2,440,500) JPY
272,000,000 2,456,976
------------------
New Zealand - 0.8%
New Zealand Government, 8.000% due 2/15/01 NZD
350,000 246,986
New Zealand Government, 8.000% due 11/15/06 NZD
150,000 109,049
------------------
------------------
Total (Cost - $358,238)
356,035
------------------
United Kingdom - 4.6%
United Kingdom Treasury, 7.000% due 6/7/02
(Cost - $1,965,580) GBP
1,200,000 1,989,780
------------------
United States - 16.8%
FHLMC FRN, 5.467% due 6/22/98 5,000,000
4,996,083
U.S. Treasury Bond, 7.625% due 2/15/25
280,000 306,425
U.S. Treasury Bond, 6.500% due 11/15/26
2,020,000 1,936,043
------------------
------------------
Total (Cost - $7,259,533)
7,238,551
------------------
Total Long-Term Investments (Cost - $20,401,977) 20,383,952
------------------
</TABLE>
International Portfolio - Schedule of Investments (continued)
June 30, 1997 (unaudited)
<TABLE>
<S> <C> <C>
Face
Amount Value
Short-Term Investments - 57.2%
Bank of Boston (Nassau) Time Deposit, 5.750% due 7/1/97 $ 20,027,000 $20,027,000
FHLB DN, 5.450% due 8/28/97 *
4,000,000 3,964,272
U.S. Treasury Bill, 4.870% due 7/24/97 *@
600,000 598,106
------------------
Total (Cost - $24,589,481) 24,589,378
------------------
Total Investments - 104.6% (Cost - $44,991,458) 44,973,330
Other Assets net of Liabilities - (4.6%)
(1,981,518)
Net Assets - 100.0% $ 42,991,812
</TABLE>
Summary of Abbreviations
AUD Australian Dollars
CAD Canadian Dollars
DKK Danish Krone
DN Discount Note
FRN Floating Rate Note
GBP Great British Pound
ITL Italian Lira
JPY Japanese Yen
NZD New Zealand Dollars
* Interest rate represents yield to maturity at date of purchase.
(a) Face amount shown in U.S. dollars unless otherwise indicated.
@ Security, or a portion thereof, is held in a margin account to cover
financial futures contracts.
See notes to financial statements.
International-Hedged Portfolio
June 30, 1997(unaudited)
Investment performance for the periods ended June 30, 1997:
-----------------------------------------------------------------------------
Average Annual Total Return
<TABLE>
<S> <C> <C> <C>
Since
Six Months One Recommencement
Total Return Year of Operations*
International-Hedged Portfolio 4.35% 6.74% 6.39%
JP Morgan 3-Month Eurodeposit Index 2.92% 5.96% 5.90%
JP Morgan Global Government Bond Index (Non-U.S. Hedged) 4.74% 13.45% 12.04%
</TABLE>
* 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 JP Morgan Global Government Bond Index (Non-U.S. Hedged),
which had an annualized return of 2.98% for the same period, and the JP 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.
The Portfolio is used exclusively by the adviser for the portion
for its client base that seeks the incremental return that a limited exposure
to the international markets may bring. The investment strategy employed by
the adviser involves investing the Portfolio in a diversified international
portfolio but swapping the return of the international index in exchange for a
LIBOR-based payment to the Portfolio. The success of the strategy is measured
relative to the JP Morgan 3-Month Eurodeposit Index. This strategy was
employed in the fourth quarter of 1996 and has generated an incremental
return over the 3-Month Eurodeposit Index, by holding a portfolio of
international securities that outperformed the market benchmark (the JP
Morgan Global Government Bond Index, Non-U. S. Hedged).
International-Hedged Portfolio - Schedule of Investments
June 30, 1997 (unaudited)
<TABLE>
<S> <C> <C> <C>
Face
Amount (a) Value
- ----------------------------------------------------------------------------------------------------------------------------
Long-Term Investments - 43.2%
Australia - 0.4%
Australian Government, 10.000% due 10/15/07
(Cost - $615,719) AUD 700,000 $ 634,633
------------------
Canada - 4.4%
Canadian Government, 7.250% due 6/1/07 CAD
1,350,000 1,043,429
Canadian Government, 4.000% due 3/15/99 CAD
5,850,000 4,194,865
Canadian Government, 8.000% due 6/1/27 CAD
2,470,000 2,041,299
------------------
------------------
Total (Cost - $7,218,776)
7,279,593
------------------
Denmark - 1.3%
Kingdom of Denmark, 8.000% due 3/15/06
(Cost - $2,400,447) DKK
13,000,000 2,205,203
------------------
Germany - 4.5%
Bundesibligation Series 117, 5.125% due 11/21/00 DEM
1,000 592
Deutschland Republic, 7.375% due 1/3/05 DEM
11,600,000 7,479,726
------------------
------------------
Total (Cost - $7,502,190)
7,480,318
------------------
Italy - 2.5%
Buoni Poliennali del Tes, 8.750% due 7/1/06
(Cost - $4,000,648) ITL
6,180,000,000 4,097,340
------------------
New Zealand - 1.2%
New Zealand Government, 8.000% due 2/15/01 NZD
2,000,000 1,411,346
New Zealand Government, 8.000% due 11/15/06 NZD
850,000 617,943
------------------
Total (Cost - $2,042,151)
2,029,289
------------------
Spain - 0.0%
Spanish Government, 12.250% due 3/25/00
(Cost - $1,028) ESP
120,000 958
------------------
United States - 28.8%
American Express Master Trust Ser. 1-A, 6.050% due 6/15/98 4,000,000 4,001,000
Beneficial Mortgage Corp. FRN, Ser. 1996-1, Class A, 5.868% due 4/28/26
2,400,207 2,403,807
Beneficial Mortgage Corp. FRN, Ser. 1997-1, Class A, 5.807% due 5/28/37
2,855,085 2,855,085
Bombardier Receivables Master Trust, Ser. 1997-1, Class A, 5.808% due 4/15/04
3,000,000 3,002,880
Carco Auto Loan Master Trust, Ser. 1993-1, Class A, 6.030% due 1/18/00
4,000,000 3,998,320
Carco Auto Loan Master Trust, Ser. 1994-3, 8.125% due 10/15/99
2,000,000 2,016,250
Case Equipment Loan Trust, Ser. 1997-A, Class A1, 5.597% due 3/15/98
2,016,669 2,016,749
Contimortgage Home Equity Loan Trust, Ser. 1997-1, Class A1, 6.250% due
5/15/06 1,487,891 1,486,136
Contimortgage Home Equity Loan Trust, Ser. 1997-3, Class A1, 6.420% due
4/15/07 3,500,000 3,503,281
Croatia National Govt. FRN, Ser. B, 6.500% due 7/31/06
1,700,000 1,671,270
</TABLE>
International-Hedged Portfolio - Schedule of Investments (continued)
June 30, 1997 (unaudited)
<TABLE>
<S> <C> <C>
Face
Amount Value
United States (continued)
FHLMC FRN, 5.467% due 6/22/98 $ 3,000,000 $2,997,650
First Chicago Master Trust II, Ser. 1992-E, Class A, 6.250% due 8/15/99
3,066,667 3,068,445
First USA Credit Card Master Trust, Ser. 1994-5, Class B, 6.028% due 4/17/00
3,000,000 2,999,910
Household Affinity Credit Card Trust, Ser. 1994-2, Class A, 7.000% due
12/15/99 4,500,000 4,518,675
Premier Auto Trust, Ser. 1995-1, Class A5, 7.900% due 5/4/99
945,551 951,035
Sears Credit Card Trust, Ser. 1994-2, Class A, 7.250% due 7/16/01
2,000,000 2,012,460
Signet Credit Card Trust, Ser. 1994-4, Class A, 6.800% due 12/15/00
4,000,000 4,007,480
------------------
Total (Cost - $47,538,958) 47,510,433
------------------
Total Long-Term Investments (Cost- $71,319,917) 71,237,767
------------------
Short-Term Investments - 38.9%
Bank of Boston (Nassau) Time Deposit, 5.75% due 7/1/97
2,194,000 2,194,000
Bayerische Landesbank Euro CD, 5.670% due 7/14/97
3,000,000 2,999,961
Bayerische Vereinsbank Euro CD, 5.745% due 12/19/97
2,000,000 2,000,139
Caisse DAmortissement de la Dette Sociale CP, 5.300% due 8/6/97 *
3,000,000 2,983,659
Falcon Asset Secur. CP, 5.620% due 7/10/97 *
3,000,000 2,995,317
Federal Home Loan Bank DN, 6.000% due 7/1/97 *
22,035,000 22,035,000
KFW International Finance, Inc. CP, 5.588% due 11/28/97 *
4,000,000 3,906,241
Mobil Australia Finance Corp CP, 5.670% due 11/6/97 *
4,000,000 3,918,730
NationsBank Corp CP, 5.610% due 7/9/97 *
4,000,000 3,994,390
Natwest Yankee CD, 5.760% due 12/31/97
5,000,000 5,000,247
Societe General Yankee CD, 5.750% due 8/18/97
6,000,000 6,000,000
U.S. Treasury Bill, 4.870% due 7/24/97 *@
6,200,000 6,180,427
------------------
------------------
Total (Cost - $64,208,016) 64,208,111
------------------
Total Investments - 82.1% (Cost - $135,527,933) 135,445,878
Other Assets, net of Liabilities - 17.9% 29,515,202
------------------
Net Assets - 100.0% $ 164,968,852
</TABLE>
International-Hedged Portfolio - Schedule of Investments (continued)
June 30, 1997 (unaudited)
Summary of Abbreviations
AUD Australian Dollars
CAD Canadian Dollars
CD Certificate of Deposit
CP Commercial Paper
DEM German Deutschemark
DKK Danish Krone
DN Discount Note
ESP Spanish Peseta
FRN Floating Rate Note
ITL Italian Lira
NZD New Zealand Dollars
* Interest rate represents yield to maturity at date of purchase.
(a) Face amount shown in U.S. dollars unless otherwise indicated.
@ Security, or a portion thereof, is held in a margin account to cover
financial futures contracts.
See notes to financial statements.
Statements of Assets and Liabilities
June 30, 1997 (unaudited) U.S. Portfolios
<TABLE>
<S> <C> <C>
Money Market U.S. Short-Term
Portfolio Portfolio
Assets
Investments in securities, at value (Cost - $25,531,806 and
$433,604,122, respectively)
$ 25,531,806 $ 433,569,867
Cash
1,098 42,591
Receivable from Investment Adviser
172 43,315
Receivable for securities sold
- 1,898,424
Interest receivable
116,126 3,948,429
Prepaid organizational costs
23,663 -
Other assets 84,815
-
----------------------- ------------------
----------------------- ------------------
Total assets
25,672,865 439,587,441
----------------------- ------------------
Liabilities
Distributions payable from income
- 198,309
Payable for fund shares redeemed
30,000 1,744,016
Payable to administrator
867 -
Accrued expenses and other liabilities
8,330 96,170
----------------------- ------------------
----------------------- ------------------
Total liabilities
39,197 2,038,495
----------------------- ------------------
Net Assets $ 25,633,668 $437,548,946
====================== ===================
Shares Outstanding (par value $0.001)
25,611,497 44,540,136
====================== ====================
Net Asset Value Per Share $ 1.00 $9.82
======================= ===================
Components of Net Assets as of June 30, 1997 were as follows:
Capital stock at par value ($0.001)
$ 25,611 $ 44,540
Capital stock in excess of par value
25,585,886 444,169,609
Undistributed investment income, net
818 19,640
Accumulated net realized gain (loss) on investments, financial futures 21,353
and options contracts and foreign currency-related transactions (6,805,936)
Net unrealized appreciation on investments, financial futures contracts, and
on translation of other assets and liabilities denominated in foreign
currency - 121,093
--------------------------------------------
============================================
$ 25,633,668 $437,548,946
============================================
</TABLE>
See notes to financial statements.
Statements of Assets and Liabilities (continued)
June 30, 1997 (unaudited) U.S. Portfolios
<TABLE>
<S> <C> <C>
Stable Return Mortgage Total
Portfolio Return Portfolio
Assets
Investments in securities, at value (Cost - $27,653,264
and $1,181,639,101, respectively) $27,709,093 $1,185,160,821
Cash
1,110 6,336
Receivable from Investment Adviser
11,048 -
Receivable for securities sold
960,570 801,607
Receivable for securities sold short
- 116,969,308
Receivable for premium on options written - 420,000
Receivable for fund shares sold
- 30,000,000
Interest receivable
130,517 5,144,714
Receivable for variation margin
- 626,487
Other assets
529 22,024
----------------------- ------------------
----------------------- ------------------
Total assets
28,812,867 1,339,151,297
---------------------- -------------------
Liabilities
Payable for securities purchased
2,866,765 724,307,278
Market value of securities sold short (Proceeds - $116,969,308)
- 116,649,352
Market value of options written (Premium - $ 420,000)
- 419,968
Interest payable on securities sold short
- 467,152
Accrued expenses and other liabilities
26,992 112,203
----------------------- ------------------
----------------------- ------------------
Total liabilities
2,893,757 841,955,953
----------------------- ------------------
Net Assets $25,919,110 $ 497,195,344
====================== ===================
Shares Outstanding (par value $0.001)
2,606,873 48,509,804
====================== ===================
Net Asset Value Per Share
$ 9.94 $10.25
====================== ===================
Components of Net Assets as of June 30, 1997 were as follows:
Capital stock at par value ($0.001)
$ 2,607 $ 48,510
Capital stock in excess of par value
25,715,403 494,497,535
Accumulated net realized gain on investments, shorts sales, financial
futures,
swap and option contracts, and foreign currency-related transactions
148,581 (831,804)
Net unrealized appreciation on investments, short sales, financial futures
and options contracts, and on translation of other assets and
liabilities denominated in foreign currency
52,519 3,481,103
---------------------- -------------------
====================== ===================
$ 25,919,110 $497,195,344
</TABLE>
See notes to financial statements.
Statements of Assets and Liabilities (continued)
June 30, 1997 (unaudited) Global & International Portfolios
<TABLE>
<S> <C> <C>
Worldwide Worldwide-Hedged
Portfolio Portfolio
Assets
Investments in securities, at value (Cost - $80,513,285 and
$60,505,413, respectively) $ 80,429,841 $60,621,767
Cash
2,080 1,252
Foreign cash (Cost - $580,641 and $661,989, respectively)
1,575,746 636,101
Receivable from Investment Adviser
3,966 7,146
Receivable for securities sold
10,040,537 6,736,371
Interest receivable
747,694 394,328
Other assets
5,967 565
----------------------- ------------------
----------------------- ------------------
Total assets
92,805,831 68,397,530
----------------------- ------------------
Liabilities
Payable for securities purchased
6,160,076 7,378,908
Distributions payable from income
83,495 -
Payable for variation margin
54,273 37,816
Net unrealized depreciation of forward foreign exchange contracts
408,350 34,000
Accrued expenses and other liabilities
55,330 35,860
----------------------- ------------------
----------------------- ------------------
Total liabilities
6,761,524 7,486,584
----------------------- ------------------
Net Assets $ 86,044,307 $ 60,910,946
======================= ==================
Shares Outstanding (par value $0.001)
9,201,465 5,493,156
====================== ===================
Net Asset Value Per Share
$9.35 $11.09
======================= ==================
Components of Net Assets as of June 30, 1997 were as follows:
Capital stock at par value ($0.001)
$ 9,201 $ 5,493
Capital stock in excess of par value
98,573,405 60,943,267
Undistributed investment income, net
2,732 270,874
Accumulated net realized (loss) on investments, financial futures contracts,
and foreign currency-related transactions
(13,519,897) (656,909)
Net unrealized appreciation on investments, financial futures contracts, and
on translation of other assets and liabilities denominated in foreign
currency 978,866 348,221
------------------------- ----------------
========================= ================
$ 86,044,307 $ 60,910,946
======================== =================
</TABLE>
See notes to financial statements.
Statements of Assets and Liabilities (continued)
June 30, 1997 (unaudited) Global & International Portfolios
<TABLE>
<S> <C> <C>
International International-Hedged
Portfolio Portfolio
Assets
Investments in securities, at value (Cost - $44,991,458 and
$135,527,933, respectively) $ 44,973,330 $135,445,878
Cash
485 2,205
Foreign cash (Cost - $523,236 and $1,167,091, respectively)
475,856 1,308,302
Receivable from Investment Adviser
12,820 -
Receivable for fund shares sold
- 32,000,000
Receivable for securities sold
2,204,181 4,706,424
Interest receivable
281,992 1,104,943
Other assets
1,880 7,064
----------------------- ------------------
----------------------- ------------------
Total assets
47,950,544 174,574,816
----------------------- ------------------
Liabilities
Payable for securities purchased
4,627,960 7,324,151
Payable for variation margin
40,875 144,698
Net unrealized depreciation of forward foreign exchange contracts
253,227 1,141,776
Swap contract payable
- 937,192
Accrued expenses and other liabilities
36,670 58,147
------------------------ -----------------
------------------------ -----------------
Total liabilities
4,958,732 9,605,964
------------------------ -----------------
Net Assets $ 42,991,812 $164,968,852
======================== =================
Shares Outstanding (par value $0.001)
4,459,540 16,542,081
======================== =================
Net Asset Value Per Share
$ 9.64 $ 9.97
======================== =================
Components of Net Assets as of June 30, 1997 were as follows:
Capital stock at par value ($0.001)
$ 4,460 $16,542
Capital stock in excess of par value
44,724,797 164,054,843
Overdistribution of investment income, net
- (702,532)
Accumulated net realized gain (loss) on investments, financial futures and
swap
contracts, and foreign currency-related transactions
(1,699,793) 1,545,308
Net unrealized appreciation (depreciation) on investments, financial futures
and
swap contracts, and on translation of other assets and liabilities
denominated
in foreign currency
(37,652) 54,691
------------------------ -----------------
======================== =================
$ 42,991,812 $164,968,852
</TABLE>
See notes to financial statements.
Statements of Operations
For the Six Months Ended June 30, 1997 (unaudited) U.S. Portfolios
<TABLE>
<S> <C> <C>
Money Market U.S. Short-Term
Portfolio Portfolio
Investment Income
Interest $ 698,617 $ 13,916,180
-------------------- ------------------
Expenses
Investment advisory fees
25,186 685,509
Administration fees
10,728 127,759
Custodian fees
9,395 92,260
Shareholder recordkeeping fees
2,083 18,913
Legal fees
3,699 2,661
Audit fees
7,890 16,338
Directors fees
2,963 11,016
Other fees and expenses
13,107 26,078
----------------------- ------------------
Total operating expenses 75,051
980,534
Waiver of investment advisory and administration fees
(31,105) (411.998)
------------------------- ----------------
Operating expenses, net
43,946 568,536
Interest expense
- 48,774
------------------------ -----------------
Total expenses
43,946 617,310
------------------------ -----------------
Investment income, net
654,671 13,298,870
------------------------ -----------------
Net Realized and Unrealized Gain (Loss) on Investments, Financial
Futures Contracts, and on Foreign Currency-Related Transactions
Net realized (loss) on investments
- (1,279,390)
Net realized (loss) on financial futures and options contracts
- (26,883)
Net realized gain on foreign currency-related transactions
- 815,927
Net unrealized (depreciation) on investments
- (182,175)
Net unrealized (depreciation) on financial futures and options contracts
- (158,340)
Net unrealized (depreciation) on other assets and liabilities
denominated in foreign currency
- (15,591)
------------------------ -----------------
Net realized and unrealized (loss) on investments, financial futures
contracts, and on foreign currency-related transactions
- (846,452)
------------------------ -----------------
Net Increase in Net Assets Resulting From Operations $ 654,671 $12,452,418
</TABLE>
See notes to financial statements.
Statements of Operations (continued)
For the Six Months Ended June 30, 1997 (unaudited) U.S. Portfolios
<TABLE>
<S> <C> <C>
Stable Return Mortgage Total
Portfolio Return Portfolio
Investment Income
Interest $ 1,033,735 13,864,330
------------------------ -----------------
Expenses
Investment advisory fees
51,447 599,759
Administration fees
8,227 111,618
Custodian fees
13,613 126,937
Shareholder recordkeeping fees
1,025 1,389
Legal fees
346 1,056
Audit fees
11,250 18,364
Directors fees
912 14,060
Other fees and expenses
6,075 20,334
-------------------------- ---------------
Total operating expenses
92,895 893,517
Waiver of investment advisory fees (49,001)
-
------------------------- ----------------
Operating expenses, net
43,894 893,517
Interest expense
68,215 264,895
------------------------ -----------------
Total expenses
112,109 1,158,412
------------------------ -----------------
Investment income, net
921,626 12,705,918
------------------------ -----------------
Net Realized and Unrealized Gain (Loss) on Investments, Short Sales,
Financial Futures and Options Contracts, and on Foreign Currency-
Related Transactions
Net realized gain (loss) on investments
(139,717) 5,106,248
Net realized (loss) on short sales
- (1,015,728)
Net realized gain (loss) on financial futures and options contracts
9,135 (222,008)
Net realized gain on foreign currency-related transactions
235,701 -
Net unrealized appreciation (depreciation) on investments 4,029,393
(58,339)
Net unrealized (depreciation) on short sales
- (206,893)
Net unrealized (depreciation) on financial futures and options contracts
(3,304) (798,659)
Net unrealized (depreciation) on translation of other assets
and liabilities denominated in foreign currency
(3,947) -
-------------------------- ---------------
Net realized and unrealized gain on investments, short sales, financial
futures and options contracts, and on foreign currency-related
transactions
39,529 6,892,353
------------------------- -----------------
Net Increase in Net Assets Resulting From Operations $ 961,155 $19,598,271
========================= ================
</TABLE>
See notes to financial statements.
Statements of Operations (continued)
For the Six Months Ended June 30, 1997 (unaudited)
Global & International Portfolios
<TABLE>
<S> <C> <C>
Worldwide Worldwide-Hedged
Portfolio Portfolio
Investment Income
Interest $ 2,335,436 $1,237,090
----------------------- ------------------
Expenses
Investment advisory fees
161,201 85,930
Administration fees
22,528 11,997
Custodian fees
43,376 32,775
Shareholder recordkeeping fees
4,513 1,785
Legal fees
744 200
Audit fees
14,590 14,250
Directors fees
2,675 1,388
Other fees and expenses
8,374 3,143
------------------------- ----------------
Total operating expenses
258,001 151,468
Waiver of investment advisory fees (55,328)
(17,605)
------------------------- ----------------
Operating expenses, net
240,396 96,140
------------------------ -----------------
Investment income, net
2,095,040 1,140,950
------------------------- ----------------
Net Realized and Unrealized Gain (Loss) on Investments, Financial
Futures Contracts, and on Foreign Currency-Related Transactions
Net realized (loss) on investments
(3,941,457) (1,672,790)
Net realized gain on financial futures contracts
247,221 17,721
Net realized gain on foreign currency-related transactions
342,117 2,128,623
Net unrealized appreciation on investments
146,628 60,133
Net unrealized appreciation on financial futures contracts
524,983 323,459
Net unrealized appreciation (depreciation) on translation of other assets
and liabilities denominated in foreign currency
226,922 (191,781)
---------------------- -------------------
Net realized and unrealized gain (loss) on investments, financial
futures contracts, and on foreign currency-related transactions
(2,453,586) 665,365
---------------------- ------------------
Net Increase (Decrease) in Net Assets Resulting From Operations $ (358,546) $ 1,806,315
======================== =================
</TABLE>
See notes to financial statements.
Statements of Operations (continued)
For the Six Months Ended June 30, 1997 (unaudited)
Global & International Portfolios
<TABLE>
<S> <C> <C>
International International-Hedged
Portfolio Portfolio
- ------------------------------------------------------------------------------
Investment Income
Interest $ 1,118,917 $2,992,893
------------------------ -----------------
Expenses
Investment advisory fees
76,570 258,039
Administration fees
10,700 36,049
Custodian fees
37,000 55,180
Shareholder recordkeeping fees
703 1,565
Legal fees
258 276
Audit fees
14,250 14,953
Directors fees
1,239 4,233
Other fees and expenses
1,543 14,493
------------------------ -----------------
Total operating expenses
142,263 384,788
Waiver of investment advisory fees
(28,099) -
----------------------- ------------------
Operating expenses, net
114,164 384,788
---------------------- -------------------
Investment income, net
1,004,753 2,608,105
---------------------- -------------------
Net Realized and Unrealized Gain (Loss) on Investments, Financial
Futures and Swap Contracts, and on Foreign Currency-Related Transactions
Net realized (loss) on investments
(1,822,536) (8,728,910)
Net realized gain (loss) on financial futures and swap contracts
(59,755) 1,885,387
Net realized gain (loss) on foreign currency-related transactions
(60,053) 9,089,555
Net unrealized (depreciation) on investments
(214,719) (203,902)
Net unrealized appreciation on financial futures contracts
423,686 2,021,124
Net unrealized (depreciation) on other assets and liabilities
denominated in foreign currency
(360,486) (1,084,606)
----------------------- ------------------
Net realized and unrealized gain (loss) on investments, financial futures
and swap contracts, and on foreign currency-related transactions
(2,093,863) 2,978,648
----------------------- ------------------
Net Increase (Decrease) in Net Assets Resulting From Operations $ (1,089,110) $5,586,753
============================================
</TABLE>
See notes to financial statements.
Statements of Changes In Net Assets
<TABLE>
<S> <C> <C> <C> <C>
U.S. Portfolios
Money Market Portfolio U.S. Short-Term Portfolio
Six Months Ended Six Months Ended
June 30, 1997 Year Ended June 30, 1997 Year Ended
(unaudited) Dec. 31, 1996 (unaudited) Dec. 31, 1996
Increase (Decrease) in Net
Assets From Operations
Investment income, net $654,671 $1,295,319 $ 13,298,870 $27,489,851
Net realized gain (loss) on investments,
financial futures and options contracts, and on
foreign currency-related transactions - 9,381 (490,346) (1,791,633)
Net unrealized appreciation (depreciation) on
investments, financial futures and options
contracts,
and on translation of other assets and
liabilities
denominated in foreign currency - - (356,106) 130,799
------------------ ------------------- ------------------ -------------------
Net increase in net assets resulting
from operations
654,671 1,304,700 12,452,418 25,829,017
------------------ ------------------- ------------------ -------------------
Distributions to Shareholders
From investment income, net
653,853 1,295,319 13,298,870 27,489,851
From net realized gain on investments - - -
2,870
------------------ ------------------- ------------------ -------------------
Total Distributions
653,853 1,298,189 13,298,870 27,489,851
------------------ ------------------- ------------------ -------------------
Capital Share Transactions, Net
585,827 (829,641) 83,138,684 (100,507,754)
------------------ ------------------- ------------------ -------------------
Total increase (decrease) in net assets
586,645 (823,130) 82,292,231 (102,168,588)
Net Assets
Beginning of period
25,047,023 25,870,153 355,256,714 457,425,302
------------------ ------------------- ------------------ -------------------
End of period $ 25,633,668 $ 25,047,023 $437,548,946 $355,256,714
================== =================== ================== ===================
Undistributed net investment income $ 818 $ - $ 19,640 $ 19,640
</TABLE>
See notes to financial statements.
Statements of Changes In Net Assets (continued)
U.S. Portfolios
<TABLE>
<S> <C> <C> <C> <C>
Stable Return Portfolio Mortgage Total Return Portfolio
Six Months Ended Six Months Ended Period From April
June 30, 1997 Year Ended June 30, 1997 29, 1996* to
(unaudited) Dec. 31, 1996 (unaudited) Dec. 31, 1996
Increase (Decrease) in Net
Assets From Operations
Investment income, net $ 921,626 $1,304,748 $ 12,705,918 $ 4,606,608
Net realized gain on investments, short sales,
financial futures and options contracts,
105,119 178,550 3,868,512 379,214
and on foreign currency-related transactions
Net unrealized appreciation (depreciation)
on investments, short sales, financial futures
and
options contracts, and on translation of other
assets
and liabilities denominated in foreign currency 3,023,841
(65,590) 88,861 457,263
------------------ ------------------- -------------------------------------
Net increase in net assets resulting
from operations
961,155 1,572,159 19,598,271 5,443,085
------------------ ------------------- -------------------------------------
Distributions to Shareholders
From investment income, net
921,626 1,304,748 12,705,918 4,606,608
In excess of investment income, net - 674 - 1,260,264
From net realized gain on investments, short
sales,
financial futures and options contracts,
and foreign currency-related transactions - 138,326 3,702,084 117,184
------------------ ------------------- -------------------------------------
Total Distributions
921,626 1,443,748 16,408,002 5,984,056
------------------ ------------------- -------------------------------------
Capital Share Transactions, Net
(16,220,880) 36,891,983 273,015,286 221,530,760
------------------ ------------------- -------------------------------------
Total increase (decrease) in net assets
(16,181,351) 37,020,394 276,205,555 220,989,789
Net Assets
Beginning of period
42,100,461 5,080,067 220,989,789 -
------------------ ------------------- -------------------------------------
End of period $ 25,919,110 $ 42,100,461 $ 497,195,344 $ 220,989,789
================== =================== =====================================
Undistributed net investment income $ - $ - $ - $ (1,260,264)
</TABLE>
* Commencement of operations.
See notes to financial statements.
Statements of Changes In Net Assets (continued)
Global & International Portfolios
<TABLE>
<S> <C> <C> <C> <C>
Worldwide Portfolio Worldwide-Hedged Portfolio
-------------------------------------- -------------------------------------
Six Months Ended Six Months Ended
June 30, 1997 Year Ended June 30, 1997 Year Ended
(unaudited) Dec. 31, 1996 (unaudited) Dec. 31, 1996
Increase (Decrease) in Net Assets
From Operations
Investment income, net $ 2,095,040 $ 5,238,427 $ 1,140,950 $ 1,548,703
Net realized gain (loss) on investments,
financial futures contracts, and
foreign currency-related transactions
(3,352,119) 613,278 473,554 1,460,511
Net unrealized appreciation (depreciation) on
investments, financial futures contracts,
and on translation of assets and liabilities
denominated in foreign currency
898,533 (1,097,710) 191,811 (304,218)
------------------ ------------------- ------------------ ------------------
Net increase (decrease) in net assets resulting
from operations
(358,546) 4,753,995 1,806,315 2,704,996
------------------ ------------------- ------------------ ------------------
Distributions to Shareholders
From investment income, net
2,092,308 5,238,427 1,138,139 1,548,703
In excess of investment income, net - - - 977,659
From net realized gain on investments,
financial futures contracts, and foreign
currency-related transactions - - -
738,137
From capital stock in excess of par value - 794,254 - -
------------------ ------------------- ------------------ ------------------
Total Distributions
2,092,308 6,770,818 1,138,139 2,526,362
------------------ ------------------- ------------------ ------------------
Capital Share Transactions, Net
13,555,724 (9,229,917) 30,219,113 1,590,193
------------------ ------------------- ------------------ ------------------
Total increase (decrease) in net assets 11,104,870 (11,246,740) 30,887,289 1,768,827
Net Assets
Beginning of period
74,939,437 86,186,177 30,023,657 28,254,830
------------------ ------------------- ------------------ ------------------
End of period $ 86,044,307 $ 74,939,437 $60,910,946 $30,023,657
================== =================== ================== ==================
Undistributed Net Investment Income $ 2,732 $ - $ 270,874 $268,063
</TABLE>
See notes to financial statements.
Statements of Changes In Net Assets (continued)
Global & International Portfolios
<TABLE>
<S> <C> <C> <C> <C>
International-Hedged
International Portfolio Portfolio
-------------------------------------- -------------------------------------
Six Months Ended Period From May Six Months Ended
June 30, 1997 9, 1996* to June 30, 1997 Year Ended
(unaudited) Dec. 31, 1996 (unaudited) Dec. 31, 1996
Increase (Decrease) in Net Assets
From Operations
Investment income, net $ 1,004,753 $ 836,419 $2,608,105 $ 2,486,212
Net realized gain (loss) on investments,
financial futures and swap contracts, and on
foreign currency-related transactions
(1,942,344) 518,846 2,246,032 454,698
Net unrealized appreciation (depreciation) on
investments, financial futures and swap
contracts, and on translation of assets and
liabilities denominated in foreign currency
(151,519) 113,867 732,616 (1,599,754)
------------------ ------------------- ------------------ ------------------
Net increase (decrease) in net assets resulting
from operations
(1,089,110) 1,469,132 5,586,753 1,341,156
------------------ ------------------- ------------------ ------------------
Distributions to Shareholders
From investment income, net
1,004,753 836,419 3,310,637 2,486,212
From net realized gain on investments,
financial futures and swap contracts, and
foreign currency-related transactions - 276,295 -
454,698
In excess of net realized gain on investments,
financial futures and swap contracts, and
foreign currency-related transactions - - -
801,949
From capital stock in excess of par value - -
- 1,305,588
------------------ ------------------- ------------------ ------------------
Total Distributions
1,004,753 1,112,714 3,310,637 5,048,447
------------------ ------------------- ------------------ ------------------
Capital Share Transactions, Net
9,339,738 35,389,519 36,047,625 96,347,515
------------------ ------------------- ------------------ ------------------
Total increase in net assets
7,245,875 35,745,937 38,323,741 92,640,224
Net Assets
Beginning of period -
35,745,937 126,645,111 34,004,887
------------------ ------------------- ------------------ ------------------
End of period $ 42,991,812 $35,745,937 $164,968,852 $ 126,645,111
================== =================== ================== ==================
Overdistributed Net Investment Income $ - $ - $ (702,532) $ -
</TABLE>
* Commencement of Operations.
See notes to financial statements.
Financial Highlights
Money Market Portfolio
<TABLE>
<S> <C> <C> <C> <C> <C>
Six months Period From
ended Nov. 1, 1993*
For a share outstanding June 30, 1997 Year Ended to
------------------------------------------------------
throughout the period: (unaudited) Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993
Per Share Data
Net asset value, beginning of period
$ 1.00 $ 1.00 $1.00 $ 1.00 $1.00
Increase (Decrease) From
Investment Operations
Investment income, net **
0.02 0.05 0.06 0.04 0.00
Net realized gain on investments - ** ** -
0.00 0.00 0.00
--------------- --------------- --------------- --------------- ---------------
Total from investment operations
0.02 0.05 0.06 0.04 0.00
--------------- --------------- --------------- --------------- ---------------
Less Distributions
From investment income, net **
0.02 0.05 0.06 0.04 0.00
From net realized gain on - 0.00 ** - - -
investments
In excess of net realized gain on
investments - - - 0.00 ** -
--------------- --------------- --------------- --------------- ---------------
Total distributions
0.02 0.05 0.06 0.04 0.00
--------------- --------------- --------------- --------------- ---------------
Net asset value, end of period
$1.00 $ 1.00 $ 1.00 $ 1.00 $1.00
=============== =============== =============== =============== ===============
Total Return 2.60%(c) 5.18% 5.74% 4.13% 2.69%(b)
Ratios/Supplemental Data
Net assets, end of period (000s) $ 25,634 $ 25,047 25,870 $ 22,006 $2,336
Ratio of operating expenses to
average
net assets (a) 0.35%(b) 0.40% 0.40% 0.40% 0.40%(b)
Ratio of investment income,
net to average net assets 5.19%(b) 5.05% 5.58% 4.16% 2.67%(b)
Decrease in above ratios due to
waiver of investment advisory and
administration fees and
reimbursement
of other expenses 0.25%(b) 0.30% 0.37% 0.64% 25.54%(b)
</TABLE>
(a) Net of waivers and reimbursements
(b) Annualized.
(c) Not annualized.
* Commencement of Operations
** Rounds to less than $.01
See notes to financial statements.
Financial Highlights (continued)
U.S. Short-Term Portfolio
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Six Months
Ended June Year Ended
30, 1997 ---------------------------------------------------
For a share outstanding (unaudited) Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
throughout the period: 1996 1995 1994 1993 1992
Per Share Data
Net asset value, beginning of period $ 9.85 $ 9.88 $ 9.89 $ 9.98 $ 10.00 $10.00
------------ ------------ ------------ ------------ ------------ ------------
Increase (Decrease) From
Investment Operations
Investment income, net
0.28 0.55 0.56 0.44 0.32 0.34
Net realized and unrealized gain on
investments, financial futures and
options
contracts, and foreign
currency-related transactions (0.03) (0.03) (0.01) (0.08) (0.03) 0.01
------------ ------------ ------------ ------------ ------------ ------------
Total from investment operations 0.35
0.25 0.52 0.55 0.36 0.29
------------ ------------ ------------ ------------ ------------ ------------
Less Distributions
From investment income, net 0.34
0.28 0.55 0.56 0.45 0.31
In excess of investment income, net - - 0.00* 0.00* - -
From net realized gain on investments,
and financial futures and options - - - - - 0.01
contracts
------------ ------------ ------------ ------------ ------------ ------------
Total distributions 0.28 0.55 0.56 0.45 0.31 0.35
------------ ------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 9.82 $ 9.85 $ 9.88 $ 9.89 $ 9.98 $ 10.00
============ ============ ============ ============ ============ ============
Total Return 2.61%(c) 5.45% 5.71% 3.71% 2.88% 3.45%
Ratios/Supplemental Data
Net assets, end of period (000s) $ 437,548 $ 355,257 $ 457,425 $ 290,695 $417,728 $ 682,513
Ratio of operating expenses to average
net assets, exclusive of interest 0.25%(b) 0.27% 0.40% 0.40% 0.40% 0.40%
expense (a)
Ratio of operating expenses to average
net assets, inclusive of interest 0.27%(b) 0.40% 0.51% 0.43% 0.48% 0.43%
expense (a)
Ratio of investment income,
net to average net assets 5.82%(b) 5.62% 5.64% 4.14% 3.28% 3.37%
Decrease in above ratios due to waiver 0.18%(b) 0.05% 0.07% 0.08% 0.03% -
of investment advisory fees
</TABLE>
(a) Net of waivers
(b) Annualized.
(c) Not annualized.
* Rounds to less than $0.01
See notes to financial statements.
Financial Highlights (continued)
Stable Return Portfolio
<TABLE>
<S> <C> <C> <C> <C> <C>
Six Months Period From
Ended July
For a share outstanding June 30, 1997 Year Ended 26, 1993* to
--------------------------------------------------
throughout the period: (unaudited) Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993
Per Share Data
Net asset value, beginning of period $ 9.93 $ 10.00 $ 9.55 $ 9.95 $10.00
Increase (Decrease) From
Investment Operations
Investment income, net
0.31 0.55 0.60 0.43 0.14
Net realized and unrealized gain
(loss) on investments and
financial futures contracts
0.01 (0.04) 0.45 (0.40) 0.05
--------------- --------------- --------------- --------------- ---------------
Total from investment operations
0.32 0.51 1.05 0.03 0.19
--------------- --------------- --------------- --------------- ---------------
Less Distributions
From investment income, net
0.31 0.55 0.60 0.43 0.14
In excess of investment income, net - 0.00 ** - - -
From net realized gain on
investments and financial futures - 0.03 - - 0.03
contracts
In excess of net realized gain on
investments and financial futures
contracts - - - - 0.07
--------------- --------------- --------------- --------------- ---------------
Total distributions
0.31 0.58 0.60 0.43 0.24
--------------- --------------- --------------- --------------- ---------------
Net asset value, end of period $9.94 $ 9.93 $ 10.00 $ 9.55 $ 9.95
=============== =============== =============== =============== ===============
Total Return 3.26%(c) 5.28% 11.26% 0.29% 1.78%(c)
Ratios/Supplemental Data
Net assets, end of period (000s) $ 25,919 $ 42,100 $ 5,080 $ 4,338 $3,482
Ratio of operating expenses to average
net assets, exclusive of interest 0.30%(b) 0.31% 0.50% 0.50% 0.50%(b)
expense (a)
Ratio of operating expenses to average
net assets, inclusive of interest 0.76%(b) 0.49% 1.41% 1.74% -
expense (a)
Ratio of investment income,
net to average net assets 6.27%(b) 5.79% 6.09% 4.43% 3.68%(b)
Decrease in above ratios due to
waiver of investment advisory fees
and reimbursement of other expenses 0.33%(b) 0.15% 0.53% 0.57% 1.46%(b)
Portfolio turnover 885% 1,387% 1,075% 343% 1,841%
</TABLE>
(a) Net of waivers and reimbursements
(b) Annualized.
(c) Not annualized.
* Commencement of Operations was July 26, 1993
** Rounds to less than $.01
See notes to financial statements.
Financial Highlights (continued)
Mortgage Total Return Portfolio
<TABLE>
<S> <C> <C>
For the six Period From
For a share outstanding months ended April 29, 1996*
throughout the period: June 30,1997 to Dec. 31 1996
Per Share Data
Net asset value, beginning of period $ 10.16 $10.00
Increases (Decreases) From Investment Operations
Investment income, net 0.34 0.41
Net realized and unrealized gain on investments, short sales, and financial
futures, options and swap contracts 0.13 0.23
------------------- -------------------
Total from investment operations 0.47 0.64
------------------- -------------------
Less Distributions
From investment income, net 0.34 0.41
In excess of investment income, net - 0.06
From net realized gain on investments, short sales, and financial futures,
options and swap contracts 0.04 0.01
------------------- -------------------
Total distributions 0.38 0.48
------------------- -------------------
Net asset value, end of period $10.25 $ 10.16
=================== ===================
Total Return 4.73%(c) 6.54%(c)
Ratios/Supplemental Data
Net assets, end of period (000's) $ 497,195 $ 220,990
Ratio of operating expenses, exclusive of interest expense (a) 0.45%(b) 0.45%(b)
Ratio of operating expenses, inclusive of interest expense (a) 0.58%(b) 0.88%(b)
Ratio of investment income, to average net assets 6.36%(b) 7.61%(b)
Decrease in above ratios due to waiver of investment
advisory fees and reimbursement of other expenses - 0.10%(b)
Portfolio turnover 1,942% 590%
</TABLE>
(a) Net of waivers and reimbursements, exclusive of interest.
(b) Annualized.
(c) Not annualized.
* Commencement of Operations was April 29, 1996
See notes to financial statements.
Financial Highlights (continued)
<TABLE>
Worldwide Portfolio
<S> <C> <C> <C> <C> <C> <C>
Six months Period from
ended June Year Ended April 15, 1992*
to
------------------------------------------------------
For a share outstanding 30, 1997 Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
throughout the period: (unaudited) 1996 1995 1994 1993 1992
Per Share Data
Net asset value, beginning of period $ 9.64 $ 9.83 $ 9.27 $10.02 $ 9.98 $10.00
-------------- ------------ ------------ ------------ ------------ ------------
Increase (Decrease) From
Investment Operations
Investment income, net 0.39
0.24 0.53 0.58 0.50 0.45
Net realized and unrealized gain
(loss) on investments, financial
futures contracts, and foreign (0.29) 0.01 0.56 (0.74) 1.04 0.53
currency-related transactions
-------------- ------------ ------------ ------------ ------------ ------------
Total from investment operations 0.92
(0.05) 0.54 1.14 (0.24) 1.49
-------------- ------------ ------------ ------------ ------------ ------------
Less Distributions
From investment income, net 0.39
0.24 0.53 0.30 0.20 0.45
In excess of investment income, net - - - 0.01 - -
From net realized gain on
investments, financial futures
contracts, and foreign - 0.09 - - 0.87 0.55
currency-related transactions
In excess of net realized gain on
investments, financial futures
contracts, and foreign - - - - 0.13 0.00**
currency-related transactions
From capital stock in excess of par - 0.11 0.28 0.30 - 0.00
value
-------------- ------------ ------------ ------------ ------------ ------------
Total distributions 0.94
0.24 0.73 0.58 0.51 1.45
-------------- ------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 9.35 $ 9.64 9.83 $9.27 $10.02 $ 9.98
============== ============ ============ ============ ============ ============
Total Return (0.48%)(c) 5.77% 12.60% (2.25%) 15.86% 13.46%(b)
Ratios/Supplemental Data
Net assets, end of period (000's) $ 86,044 $ 74,939 86,186 $53,721 $ 217,163 $ 82,757
Ratio of operating expenses to
average net assets, exclusive of 0.60%(b) 0.60% 0.60% 0.60% 0.59% 0.60%(b)
interest exp. (a)
Ratio of operating expenses to
average net assets, inclusive of 0.60%(b) 0.60% 0.60% 0.63% 0.86% 0.79%(b)
interest exp. (a)
Ratio of investment income,
net to average net assets 5.20%(b) 5.52% 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 0.05%(b) 0.05% 0.30% 0.02% - 0.72%(b)
Portfolio turnover 386% 1,126% 1,401% 1,479% 1,245% 850%
</TABLE>
(a) Net of waivers and reimbursements
(b) Annualized.
(c) Not annualized.
* Commencement of Operations
** Rounds to less than $0.01
See notes to financial statements.
Financial Highlights (continued)
Worldwide-Hedged Portfolio
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Six months Period from May
ended June Year Ended 19, 1992* to
For a share outstanding 30, 1997 Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
throughout the period: (unaudited) 1996 1995 1994 1993 1992
Per Share Data
Net asset value, beginning of period $ 10.91 $ 10.85 $ 10.41 $ 10.08 $ 9.85 $10.00
-------------- ------------ ------------ ------------ ------------ ------------
Increase (Decrease) From
Investment Operations
Investment income, net 0.32
0.29 0.62 0.45 0.34 0.45
Net realized and unrealized gain on
investments, financial futures
contracts, and foreign 0.18 0.43 0.66 0.43 0.76 0.25
currency-related transactions
-------------- ------------ ------------ ------------ ------------ ------------
Total from investment operations 0.57
0.47 1.05 1.11 0.77 1.21
-------------- ------------ ------------ ------------ ------------ ------------
Less Distributions
From investment income, net 0.32
0.29 0.62 0.67 0.44 0.45
In excess of investment income, net - 0.37 - 0.00** - -
From net realized gain on
investments, financial futures
contracts, and foreign - - - - 0.53 0.40
currency-related transactions
-------------- ------------ ------------ ------------ ------------ ------------
Total distributions 0.72
0.29 0.99 0.67 0.44 0.98
-------------- ------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 11.09 $ 10.91 $10.85 $10.41 $ 10.08 $9.85
============== ============ ============ ============ ============ ============
Total Return 4.35%(c) 10.03% 11.00% 7.84% 12.89% 9.45%(b)
Ratios/Supplemental Data
Net assets, end of period (000s) $ 60,911 $ 30,024 $ 28,255 $ 273 $ 41,138 $21,785
Ratio of operating expenses to
average net assets, exclusive of 0.45%(b) 0.45% 0.45% 0.60% 0.60% 0.60%(b)
interest expense (a)
Ratio of operating expenses to
average net assets, inclusive of 0.45%(b) 0.45% 0.45% 0.65% 0.86% 0.83%(b)
interest expense (a)
Ratio of investment income, net to
average net assets 5.31%(b) 5.71% 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 0.26%(b) 0.24% 0.54% 0.17% 0.09% 1.01%(b)
Portfolio Turnover 420% 1,087% 500% 1,622% 1,254% 826%
</TABLE>
(a) Net of waivers and reimbursements.
(b) Annualized.
(c) Not annualized.
* Commencement of Operations
** Rounds to less than $0.01
See notes to financial statements.
Financial Highlights (continued)
International Portfolio
<TABLE>
<S> <C> <C>
Six months Period from
ended June May 9, 1996* to
For a share outstanding 30,1997 December 31, 1996
throughout the period: (unaudited)
Per Share Data
Net asset value, beginning of period $10.20 $10.00
Increases (Decreases) From
Investment Operations
Investment income, net 0.25 0.38
Net realized and unrealized gain (loss) on investments, financial futures
contracts, and foreign currency-related transactions (0.56) 0.28
------------------- -------------------
Total from investment operations (0.31) 0.66
------------------- -------------------
Less Distributions
From investment income, net 0.25 0.38
From net realized gain on investments, financial futures contracts,
and foreign currency-related transactions - 0.08
------------------- -------------------
Total distributions 0.25 0.46
------------------- -------------------
Net asset value, end of period $9.64 $10.20
=================== ===================
Total Return (3.00%)(c) 6.66%(c)
Ratios/Supplemental Data
Net assets, end of period (000s) $ 42,992 $ 35,746
Ratio of operating expenses to average net assets (a) 0.60%(b) 0.60%(b)
Ratio of investment income, net to average net assets 5.25%(b) 5.73%(b)
Decrease in above ratios due to waiver of investment advisory fees 0.15%(b) 0.32%(b)
Portfolio Turnover 360% 539%
</TABLE>
(a) Net of waivers
(b) Annualized.
(c) Not annualized
* Commencement of Operations.
See notes to financial statements.
Financial Highlights (continued)
International-Hedged Portfolio
<TABLE>
<S> <C> <C> <C> <C> <C>
Six months Period from
ended June March 25,
For a share outstanding 30, 1997 Year ended 1993* to Dec.
---------------------------------------------
throughout the period: (unaudited) Dec. 31, Dec. 31, *** Dec. 31, 31, 1993
1996 1995 1994
Per Share Data
Net asset value, beginning of period $ 9.80 $ 10.19 $ 10.00 $ 10.39 $ 10.00
Increases (Decreases) From
Investment Operations
Investment income, net 0.19 0.19 0.20 0.44
0.47
Net realized and unrealized gain (loss) on
investments, financial futures and swap
contracts, and foreign currency-related 0.23 (0.15) 0.19 (0.46) 0.78
transactions
-------------- ------------- ------------- ------------- -------------
Total from investment operations 0.42 0.32 0.38 (0.26) 1.22
-------------- ------------- ------------- ------------- -------------
Less Distributions
From investment income, net 0.25 0.47 0.19 0.20 0.44
In excess of investment income, net - - 0.00(c) - -
From net realized gain on investments,
options and financial futures contracts,
and foreign currency-related transactions - 0.05 - 0.50 0.39
In excess of net realized gain on
investments, options and financial futures
contracts, and foreign currency-related - 0.09 - - -
transactions
From capital stock in excess of par value - 0.10 - - -
-------------- ------------- ------------- ------------- -------------
Total distributions 0.25 0.71 0.19 0.70 0.83
-------------- ------------- ------------- ------------- -------------
Net asset value, end of period $ 9.97 $ 9.80 $ 10.19 $9.43 ** $ 10.39
============== ============= ============= ============= =============
Total Return 4.35%(c) 3.18% 13.45%(b) (2.53%) 16.37%(b)
Ratios/Supplemental Data
Net assets, end of period (000s) $ 164,969 $ 126,645 $34,005 $ - $ 17,867
Ratio of operating expenses
to average net assets (a) 0.60%(b) 0.60% 0.60%(b) 0.57% 0.60%(b)
Ratio of investment income,
net to average net assets 4.04%(b) 4.65% 6.12%(b) 2.87% 5.86%(b)
Decrease in above ratios due to waiver of
investment advisory fees and reimbursement 0.04%(b) 0.06% 0.17%(b) 0.49% 0.28%(b)
of other expenses
Portfolio Turnover 206% 784% 764% 1,282% 855%
</TABLE>
(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
June 30, 1997 (unaudited)
1. Organization
FFTW Funds, Inc. (the "Fund") was organized as a Maryland corporation
on February 23, 1989 and is registered under the Investment Company Act of
1940, as amended, as an open-end, management investment company. The Fund
currently has thirteen Portfolios, eight of which were active as of June 30,
1997. The eight active Portfolios are: Money Market Portfolio
("Money Market"); U.S. Short-Term Portfolio ("U.S. Short-Term"); Stable
Return Portfolio ("Stable Return"); Mortgage Total Return Portfolio
("Mortgage"); Worldwide Portfolio("Worldwide"); Worldwide-Hedged
Portfolio("Worldwide-Hedged");International Portfolio("International");
and International-Hedged Portfolio ("International-Hedged"). The Fund is
managed by Fischer Francis Trees & Watts, Inc. (the "Investment Adviser").
2. Summary of Significant Accounting Policies
Net Asset Value
The net asset value per share ("NAV") of each Portfolio is determined by
adding the value of all of the assets of the Portfolio, subtracting all of the
Portfolio's liabilities, dividing by the number of shares outstanding and
adjusting to the nearest cent. The NAV is calculated by the Fund's Accounting
Agent as of 4:00 p.m. Eastern time on each Business Day (as that term is
defined in the Fund's registration statement) for each Portfolio, other than
Money Market and Mortgage. The NAV of Money Market is calculated by the Fund's
Accounting Agent as of 12:00 p.m. Eastern time on each Business Day.
The NAV of Mortgage is calculated by the Fund's Accounting Agent as of
4:00 p.m. Eastern time on the last Business Day of each month, on any other
Business Days in which the Investment Adviser approves a purchase, and on
each Business Day for which a redemption order has been placed.
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
Except for Money Market, all investments are valued daily at their market
price, which results in unrealized gains or losses. Readily marketable
fixed-income securities are valued on the basis of prices provided by a
pricing service when such prices are believed by the Investment Adviser to
reflect the fair value of such securities. Securities traded on an
exchange are valued at their last sales price on that exchange. Securities for
which over-the-counter market quotations are available are valued at the
latest bid price. Time deposits and repurchase agreements are generally
valued at their cost plus accrued interest. Securities for which market
quotations are not readily available and illiquid securities will be valued
in good faith by methods approved by the Board of Directors. Securities with
maturities less than 60 days are valued at amortized cost, which approximates
market value, unless this method does not represent fair value.
All investments in Money Market are valued daily using the amortized cost
valuation method which approximates market value and is consistent with Rule
2a-7 of the Investment Company Act of 1940.
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
distributes all of its taxable income and qualifies or intends to qualify
as a regulated investment company ("RIC") by complying with the
requirements of Subchapter M of the Internal Revenue Code applicable to RICs.
Notes to Financial Statements (continued)
June 30, 1997 (unaudited)
2. Summary of Significant Accounting Policies (continued)
At December 31,1996, the Portfolios 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, 1996, 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
1,594,356 December 31, 2004
Worldwide 9,589,732 December 31, 2002
Worldwide-Hedged 1,113,488 December 31, 2002
Dividends to Shareholders
It is the policy of the Portfolios, other than Mortgage, to declare
dividends daily from net investment income. Mortgage declares dividends
monthly from net investment income on the last Business Day of each month.
Dividends are paid in cash or reinvested monthly for all Portfolios.
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
Federal income tax regulations and may differ from net investment income and
realized gains recorded by a Portfolio 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.
Currency Translation
Assets and liabilities denominated in foreign currencies and commitments
under forward foreign exchange contracts are translated into U.S. dollars
at the mean of the quoted bid and asked prices of such currencies against the
U.S. dollar. Purchases and sales of portfolio securities are translated at
the rates of exchange prevailing when such securities were acquired or sold.
Income and expenses are translated at exchange rates prevailing when accrued.
The Portfolios do 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 foreign
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 Portfoli's books, and the U.S.
dollar equivalent of the amounts actually received. 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 rates.
Notes to Financial Statements (continued)
June 30, 1997 (unaudited)
2. Summary of Significant Accounting Policies (continued)
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 Funds Board of Directors has approved investment advisory agreements
(the "Agreements") with the Investment Adviser. The investment advisory
fees to be paid to the Investment Adviser are computed daily at annual rates
set forth below. The fees are payable quarterly for U.S. Short-Term,
Worldwide, and Worldwide-Hedged, and monthly for Money Market, Stable
Return, Mortgage, International 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-Terms, 0.60% of Worldwides, and 0.60% of Worldwide-Hedgeds
average daily net assets, the Investment Adviser has agreed to waive its
investment advisory fee and reimburse the Portfolios for any excess
expenses. Additionally, the Investment Adviser has voluntarily agreed to
waive its investment advisory fees and reimburse the Portfolio for any
excess expenses of Money Market, U.S. Short-Term, Stable Return,
Mortgage, Worldwide-Hedged, International and International-Hedged to the
extent that the aggregate expenses, (exclusive of interest, taxes, brokerage
commissions and other extraordinary expenses) exceed 0.25% (0.40% prior to
April 29, 1997) of Money Market's, 0.25% of U.S. Short-Term's, 0.30% of
Stable Return's, 0.45% of Mortgage's and Worldwide-Hedged's and
0.60% of International and International-Hedged's average daily net assets.
The investment advisory fee rates are summarized below for each of the
Portfolios:
------------------------------------------------------
Investment
Advisory
Portfolio Fee
------------------------------------------------------
Money Market 0.10%
U.S. Short-Term 0.30%*
Stable Return 0 35%**
Mortgage 0.30%
Worldwide 0.40%
Worldwide-Hedged 0.40%***
International 0.40%
International-Hedged 0.40%
* Effective March 1, 1996, the Investment Adviser voluntarily agreed to
reduce the investment advisory fee by an annualized rate of 0.15%. The
investment advisory fee is currently being charged at an annualized rate of
0.15% untilfurther notice.
** Effective March 1, 1996, the Investment Adviser voluntarily agreed
to reduce the investment advisory fee by an annualized rate of 0.20%. The
investment advisory fee is currently being charged at an annualized rate of
0.15% untilfurther notice.
*** Effective July 1, 1995, the Investment Adviser voluntarily agreed to
reduce the investment advisory fee by an annualized rate of 0.15%. The
investment advisory fee is currently being charged at an annualized rate of
0.25% until further notice.
Notes to Financial Statements (continued)
June 30, 1997 (unaudited)
3. Investment Advisory Agreements and Affiliated Transactions (continued)
Directors fees of $35,250 were allocated among the Portfolios and paid
for the six months ended June 30, 1997 to Directors who are not employees of
the Investment Adviser. Effective February 12, 1997, Directors who are not
employees of the Investment Adviser receive an annual retainer of $20,000,
payable quarterly and $1,000 per meeting attended.
As of June 30, 1997, the Investment Adviser had discretionary investment
advisory agreements with shareholders of the Fund that represent 75.3% of the
Fund's total net assets and therefore, may be deemed a control person.
4. Investment Transactions
Purchase cost and proceeds from sales of investment securities
(including U.S. Government securities), other than short-term investments,
for the six months ended June 30, 1997 for each of the Portfolios were as
follows:
<TABLE>
<S> <C> <C> <C>
------------------------------ --------------------------- ----------------------------
Purchase Cost of Proceeds from Sales of
Portfolio Investment Securities Investment Securities
------------------------------ --------------------------- ----------------------------
Money Market $ - $ -
U.S. Short-Term 677,227,105 354,717,906
Stable Return 279,476,841 295,448,913
Mortgage 13,449,356,679 12,802,394,493
Worldwide 200,272,081 205,757,918
Worldwide-Hedged 106,044,266 100,793,904
International 87,630,548 91,180,623
International-Hedged 224,929,963 199,592,397
</TABLE>
The components of net unrealized appreciation (depreciation) of investments
for federal income tax purposes at June 30, 1997 for each of the Portfolios
were as follows:
<TABLE>
<S> <C> <C> <C> <C>
------------------------- -------------------------- ------------------------ ----------------------
Unrealized Unrealized
Portfolio Appreciation Depreciation Net
------------------------- -------------------------- ------------------------ ----------------------
Money Market $ - $ - $ -
U.S. Short-Term 767,019 651,818 115,201
Stable Return 80,692 24,863 55,829
Mortgage 4,980,204 1,458,484 3,431,720
Worldwide 261,123 344,567 (83,444)
Worldwide-Hedged 158,942 42,588 116,354
International 99,517 117,645 (18,128)
International-Hedged 239,158 321,213 (82,055)
</TABLE>
The cost of securities owned by each Portfolio at June 30, 1997 for
Federal tax purposes was substantially the same as for financial statement
purposes.
5. Forward Foreign Exchange Contracts
Each Portfolio, except Money Market, may enter 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
Notes to Financial Statements (continued)
June 30, 1997 (unaudited)
5. Forward Foreign Exchange Contracts (continued)
purposes as unrealized gains or losses by the Portfolio. The Portfolio's
custodian will place and maintain cash not available for investment, U.S.
Government securities, or other appropriate liquid, unencumbered securities
in a separate account of the Portfolio having a value equal to the aggregate
amount of the Portfolio's commitments under certain open forward foreign
exchange contracts. Risks may arise from the potential inability of a
counterparty to meet the terms of a contract and from unanticipated movements
in the value of a foreign currency relative to the U.S. dollar.
At June 30, 1997, Worldwide had outstanding forward foreign exchange contracts,
both to purchase and sell foreign currencies as follows:
<TABLE>
<S>
<C> <C> <C> <C> <C>
Unrealized
Contract Appreciation
Amount Proceeds Value (Depreciation)
Forward Foreign Exchange Buy Contracts
4,301,617 Australian Dollar closing 7/28/97 $3,234,214 $ 3,226,196 $ (8,018)
4,119,474 Canadian Dollar closing 7/3/97 2,986,533 2,986,860 327
8,401,539 Canadian Dollar closing 7/28/97 6,108,238 6,102,706 (5,532)
3,581,515 Danish Krone closing 7/28/97 550,410 540,806 (9,603)
35,389,554 French Franc closing 7/28/97 6,106,543 6,036,124 (70,419)
14,484,877 German Deutschemark closing 7/28/97 8,390,694 8,330,036 (60,658)
3,513,839 Great British Pound closing 7/28/97 5,773,515 5,843,580 70,065
1,417,773,599 Japanese Yen closing 7/28/97 12,671,138 12,439,433 (231,705)
2,916,937 New Zealand Dollar closing 7/28/97 2,014,317 1,977,827 (36,490)
10,400,000 Norwegian Krone closing 7/28/97 1,453,529 1,423,077 (30,452)
888,830,531 Spanish Peseta closing 7/28/97 6,114,642 6,035,834 (78,807)
8,287,332 Swedish Krona closing 7/28/97 1,065,360 1,074,496 9,136
Forward Foreign Exchange Sell Contracts
2,650,000 Australian Dollar closing 7/28/97 1,999,689 1,987,489 12,200
11,069,474 Canadian Dollar closing 7/28/97 7,997,136 8,040,639 (43,503)
3,472,120 German Deutschemark closing 7/28/97 2,018,440 1,996,764 21,675
3,918,962,581 Italian Lira closing 7/28/97 2,303,470 2,302,216 1,254
4,224,902 New Zealand Dollar closing 7/28/97 2,916,872 2,864,692 52,181
=====================
$ (408,350)
=====================
</TABLE>
Notes to Financial Statements (continued)
June 30, 1997 (unaudited)
5. Forward Foreign Exchange Contracts (continued)
At June 30, 1997, Worldwide-Hedged had outstanding forward foreign exchange
contracts, both to purchase and sell foreign
currencies as follows:
<TABLE>
<S>
<C> <C> <C> <C> <C>
Unrealized
Contract Appreciation
Amount Proceeds Value (Depreciation)
Forward Foreign Exchange Buy Contracts
1,500,000 Australian Dollar closing 7/28/97 $ 1,127,790 $ 1,124,994 $(2,796)
2,913,790 Canadian Dollar closing 7/3/97 2,112,437 2,112,668 231
2,661,210 Canadian Dollar closing 7/28/97 1,935,425 1,933,048 (2,377)
1,277,161 German Deutschemark closing 7/28/97 736,530 734,476 (2,053)
780,000 Great British Pound closing 7/28/97 1,290,478 1,297,155 6,677
1,437,572 Netherlands Guilder closing 7/28/97 748,346 734,433 (13,913)
1,826,459 New Zealand Dollar closing 7/28/97 1,261,280 1,238,429 (22,851)
6,000,000 Norwegian Krone closing 7/28/97 838,574 821,006 (17,568)
197,065,795 Spanish Peseta closing 7/28/97 1,358,138 1,338,226 (19,911)
Forward Foreign Exchange Sell Contracts
1,650,000 Australian Dollar closing 7/28/97 1,244,939 1,237,493 7,446
6,713,790 Canadian Dollar closing 7/28/97 4,852,898 4,876,760 (23,861)
4,002,838 Danish Krone closing 7/28/97 615,159 604,426 10,733
6,240,727 German Deutschemark closing 7/28/97 3,621,458 3,588,949 32,509
860,000 Great British Pound closing 7/28/97 1,405,240 1,430,196 (24,956)
7,030,550,536 Italian Lira closing 7/28/97 4,132,385 4,130,135 2,250
37,597,366 Japanese Yen closing 7/28/97 336,021 329,876 6,144
1,437,572 Netherlands Guilder closing 7/28/97 736,530 734,433 2,097
2,283,414 New Zealand Dollar closing 7/28/97 1,576,469 1,548,267 28,202
=====================
$(34,000)
=====================
</TABLE>
At June 30, 1997, International had outstanding forward foreign exchange
contracts, both to purchase and sell foreign currencies as follows:
<TABLE>
<S>
<C> <C> <C> <C> <C>
Unrealized
Contract Appreciation
Amount Proceeds Value (Depreciation)
Forward Foreign Exchange Buy Contracts
1,974,526 Australian Dollar closing 7/28/97 $1,484,567 $ 1,480,887 $ (3,681)
2,210,339 Canadian Dollar closing 7/3/97 1,602,449 1,602,625 175
4,956,582 Canadian Dollar closing 7/28/97 3,602,313 3,600,360 (1,953)
1,315,040 Danish Krone closing 7/28/97 200,000 198,570 (1,430)
24,455,066 French Franc closing 7/28/97 4,215,480 4,171,112 (44,367)
</TABLE>
Notes to Financial Statements (continued)
June 30, 1997 (unaudited)
5. Forward Foreign Exchange Contracts (continued)
<TABLE>
<S>
<C> <C> <C> <C> <C>
Unrealized
Contract Appreciation
Amount Proceeds Value (Depreciation)
- --------------------------------------------------------------------------------------------------------------------------------
8,635,515 German Deutschemark closing 7/28/97 $ 5,003,529 $ 4,966,155 $ (37,374)
1,238,235 Great British Pound closing 7/28/97 2,023,790 2,059,209 35,419
781,101,375 Japanese Yen closing 7/28/97 6,978,858 6,853,321 (125,536)
1,353,971 New Zealand Dollar closing 7/28/97 934,997 918,059 (16,938)
7,244,260 Norwegian Krone closing 7/28/97 1,010,622 991,264 (19,358)
442,298,978 Spanish Peseta closing 7/28/97 3,040,751 3,003,546 (37,205)
4,394,602 Swedish Krona closing 7/28/97 564,939 569,783 4,845
Forward Foreign Exchange Sell Contracts
1,250,000 Australian Dollar closing 7/28/97 943,299 937,495 5,804
6,110,339 Canadian Dollar closing 7/28/97 4,414,202 4,438,425 (24,223)
510,244 Great British Pound closing 7/28/97 834,759 848,545 (13,786)
6,384,650,982 Italian Lira closing 7/28/97 3,752,741 3,750,698 2,043
1,970,618 New Zealand Dollar closing 7/28/97 1,360,515 1,336,176 24,339
=====================
($253,227)
</TABLE>
At June 30, 1997, International-Hedged had outstanding forward foreign
exchange contracts, both to purchase and sell foreign currencies as follows:
<TABLE>
<S>
<C> <C> <C> <C> <C>
Unrealized
Contract Appreciation
Amount Proceeds Value (Depreciation)
Forward Foreign Exchange Buy Contracts
12,012,409 Australian Dollar closing 7/28/97 $ 9,031,650 $9,009,258 $(22,391)
5,425,652 Canadian Dollar closing 7/3/97 3,933,485 3,933,915 431
27,176,553 Canadian Dollar closing 7/28/97 19,754,277 19,740,492 (13,785)
9,968,439 Danish Krone closing 7/28/97 1,531,956 1,505,227 (26,729)
91,988,284 French Franc closing 7/28/97 15,872,775 15,689,734 (183,040)
27,742,669 German Deutschemark closing 7/28/97 16,088,300 15,954,394 (133,906)
8,734,338 Great British Pound 7/28/97 14,379,708 14,525,367 145,660
11,476,759,358 Italian Lira closing 7/28/97 6,745,757 6,742,085 (3,672)
3,674,626,170 Japanese Yen closing 7/28/97 32,841,417 32,240,878 (600,539)
9,123,298 New Zealand Dollar closing 7/28/97 6,300,182 6,186,045 (114,137)
34,800,000 Norwegian Krone closing 7/28/97 4,863,732 4,761,835 (101,896)
2,671,407,204 Spanish Peseta closing 7/28/97 18,410,801 18,140,884 (269,917)
28,288,495 Swedish Krona closing 7/28/97 3,636,568 3,667,753 31,185
</TABLE>
Notes to Financial Statements (continued)
June 30, 1997 (unaudited)
5. Forward Foreign Exchange Contracts (continued)
<TABLE>
<S>
<C> <C> <C> <C> <C>
Unrealized
Contract Appreciation
Amount Proceeds Value (Depreciation)
Forward Foreign Exchange Sell Contracts
8,300,000 Australian Dollar closing 7/28/97 $ 6,262,887 $ 6,224,967 $ 37,920
28,275,652 Canadian Dollar closing 7/28/97 20,397,739 20,538,855 (141,116)
13,945,400 German Deutschemark closing 7/28/97 8,114,400 8,019,791 94,609
7,306,811,139 Italian Lira closing 7/28/97 4,300,505 4,292,575 7,930
12,276,018 New Zealand Dollar closing 7/28/97 8,475,363 8,323,744 151,618
=====================
$ (1,141,776)
=====================
</TABLE>
Each Portfolio, other than Money Market, may enter into foreign currency
transactions on the spot markets in order to pay for foreign investment
purchases or to convert to U.S. dollars the proceeds from foreign
investment sales or coupon interest receipts. At June 30, 1997, no Portfolio
had an outstanding purchase or sale of foreign currency on the spot markets.
6. Financial Futures Contracts
Each Portfolio, other than Money Market, may enter into financial futures
contracts to hedge its interest rate and foreign currency risk. A
Portfolio is exposed to market risk as a result of changes in the value of
the underlying financial instruments. Investments in financial futures
contracts require the Portfolio to "mark to market" on a daily basis, which
reflects the change in the market value of the contract at the close of each
days trading. Accordingly, variation margin is paid or received to reflect
daily unrealized gains or losses. When the contracts are closed, the
Portfolio recognizes a realized gain or loss equal to the difference between
the value of the contract at the time it was opened and the time it was closed.
These investments require initial margin deposits which consist of cash or
eligible securities. At June 30, 1997, the Portfolios placed U.S. Treasury
Bills or other liquid securities or cash in segregated accounts for the benefit
of the broker at the Portfolio's custodian with respect to their financial
futures contracts as follows:
----------------------------- -----------------------------
6/30/97
Portfolio Collateral Value
----------------------------- -----------------------------
U.S. Short-Term $632,994
Stable Return 56,793
Mortgage 1,425,000
Worldwide 897,159
Worldwide-Hedged 647,948
International 598,106
International-Hedged 6,180,427
Notes to Financial Statements (continued)
June 30, 1997 (unaudited)
6. Financial Futures Contracts (continued)
As of June 30, 1997, U.S. Short-Term had the following open financial
futures contracts:
<TABLE>
<S>
<C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
Value Unrealized
Covered by Appreciation
Contracts Contracts (Depreciation)
- ---------------------------------------------------------------------------------------------
Long Futures Contract
323 Sept 97 Euro Dollars $76,001,900 $ (16,150)
50 Dec 97 Euro Dollars 11,737,500 (6,250)
Short Futures Contract
70 Sept 97 U.S. Treasury 2 Year Notes 14,421,094 15,313
30 Sept 97 U.S. Treasury Bonds 3,331,875 16,875
32 Sept 97 U.S. Treasury 10 Year Notes 3,452,000 11,000
153 Sept 97 U.S. Treasury 5 Year Notes 16,201,266 38,250
=================
$59,038
=================
</TABLE>
As of June 30, 1997, Stable Return had the following open financial futures
contracts:
<TABLE>
<S>
<C> <C> <C> <C>
Value
Covered by Unrealized
Contracts Contracts (Deprectiation)
- ---------------------------------------------------------------------------------------------
Long Futures Contract
26 Sept 97 U.S. Treasury 2 Year Notes $5,356,406 $ (2,551)
Short Futures Contract
153 Sept 97 U.S. Treasury 5 Year Notes 953,016 (753)
=================
$(3,304)
=================
</TABLE>
As of June 30, 1997, Mortgage had the following open financial futures
contracts:
<TABLE>
<S>
<C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------
Value Unrealized
Covered by Appreciation
Contracts Contracts (Depreciation)
- --------------------------------------------------------------------------------------------------
Short Futures Contracts
682 Sept 97 U.S. Treasury 10 Year Notes $ 73,570,750 $ 50,358
390 Sept 97 U.S. Treasury CBT 5 Year Notes 41,297,344 47,437
360 Sept 97 U.S. Treasury 2 Year Notes 74,165,625 (179,364)
69 Sept 97 U.S. Treasury Bonds 7,663,312 (73,697)
232 Dec 97 U.S. Treasury 10 Year Notes 24,947,250 4,177
63 Jul97 Euro Dollars 14,836,500 437
54 Sept'97 Euro Dollars 12,706,200 (9.251)
50 Dec'97 Euro Dollars 11,737,500 2,834
49 Mar'98 Euro Dollars 11,491,112 2,952
48 Jun'98 Euro Dollars 11,241,600 (21,192)
48 Sept'98 Euro Dollars 11,228,400 5,333
47 Dec'98 Euro Dollars 10,981,550 9,438
46 Mar'99 Euro Dollars 10,745,600 (7,256)
45 Jun'99 Euro Dollars 10,507,500 (17,251)
44 Sept'99 Euro Dollars 10,268,500 (17,070)
43 Dec'99 Euro Dollars 10,026,525 (16,840)
47 Mar'00 Euro Dollars 10,959,225 (18,862)
</TABLE>
Notes to Financial Statements (continued)
June 30, 1997 (unaudited)
6. Financial Futures Contracts (continued)
<TABLE>
<S>
<C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------
Value Unrealized
Covered by Appreciation
Contracts Contracts (Depreciation)
- --------------------------------------------------------------------------------------------------
42 Jun'00 Euro Dollars 9,789,150 $(17,784)
42 Sept'00 Euro Dollars 9,784,950 (17,809)
41 Dec'00 Euro Dollars 9,544,800 (18,928)
40 Mar'01 Euro Dollars 9,312,000 (19,098)
39 Jun'01 Euro Dollars 9,075,300 (19,967)
39 Sept'01 Euro Dollars 9,071,400 (18,917)
38 Dec'01 Euro Dollars 8,832,150 (15,362)
31 Mar'02 Euro Dollars 7,205,175 5,077
--------------------
$ (360,605)
====================
</TABLE>
As of June 30, 1997, Worldwide had the following open financial futures
contracts:
<TABLE>
<S>
<C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
Value Unrealized
Covered by Appreciation
Contracts Contracts (Depreciation)
- --------------------------------------------------------------------------------------------------------------------
Long Futures Contracts
11 Sept '97 TSE Japanese Go't 10 Year Bond JPY 136,510,000 $177,586
52 Sept '97 LIFFE Long Gilt GBP 2,962,375 (325)
40 Sept '97 LIFFE 10 Year Deutsche Bundes DEM 10,149,000 102,456
67 Sept '97 LIFFE Italian Gov't ITL 230,305
17,956,000,000
---------------------
$ 510,022
=====================
</TABLE>
As of June 30, 1997, Worldwide-Hedged had the following open financial futures
contracts:
<TABLE>
<S>
<C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
Value
Covered by Unrealized
Contracts Contracts (Depreciation)
- --------------------------------------------------------------------------------------------------------------------
Long Futures Contracts
5 Sept '97 TSE Japanese Gov't 10 Year Bond JPY 620,500,000 $ 88,487
34 June '97 LIFFE Long Gilt GBP 1,936,938 (1,461)
32 Sept '97 LIFFE 10 Year Deutsche Bundes DEM 8,119,200 81,965
48 Sept '97 LIFFE Italian Gov't ITL 12,864,000,000 121,550
-------------------
$ 290,541
=====================
</TABLE>
Notes to Financial Statements (continued)
June 30, 1997 (unaudited)
6. Financial Futures Contracts (continued)
As of June 30, 1997, International had the following open financial futures
contracts:
<TABLE>
<S>
<C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
Value
Covered by Unrealized
Contracts Contracts (Depreciation)
- --------------------------------------------------------------------------------------------------------------------
Long Futures Contracts
6 Sept '97 TSE Japanese Go't 10 Year Bond JPY 744,600,000 $90,584
24 Sept '97 LIFFE Long Gilt GBP 1,367,250 (150)
49 June '97 LIFFE 10 Year Deutsche Bundes DEM 12,432,525 95,684
34 Sept '97 LIFFE Japanese Go't Bond ITL 9,112,000,000 112,939
---------------------
$ (124,629)
=====================
</TABLE>
As of June 30, 1997, International-Hedged had the following open financial
futures contracts:
<TABLE>
<S>
<C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
Value
Covered by Unrealized
Contracts Contracts (Depreciation)
- -------------------------------------------------------------------------------------------------------------------
Long Futures Contracts
29 March '97 TSE Japanese Gov't 10 Year Bond JPY 3,598,900,000 $436,059
108 Sept '97 LIFFE Long Gilt GBP 6,152,625 (674)
124 June '97 LIFFE 10 Year Deutsche Bundes DEM 31,461,900 271,363
229 Sept '97 LIFFE Japanese Gov't Bond ITL 61,371,999,000 891,908
---------------------
$ 1,598,656
</TABLE>
7. Capital Stock Transactions
As of June 30, 1997, there were 1,000,000,000 shares of $0.001 par value
capital stock authorized.
Transactions in capital stock for Money Market were as follows for the periods
indicated:
<TABLE>
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
Six Months Ended Year Ended
June 30, 1997 December 31, 1996
-----------------------------------------------------------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------
Shares sold 809,658 $ 809,658 1,049,604 $ 1,049,604
Shares issued related to
reinvestment of dividends 652,751 652,751 1,244,304 1,244,304
-----------------------------------------------------------------------
1,462,409 1,462,409 2,293,908 2,293,908
Shares redeemed 876,582 876,582 3,123,549 3,123,549
-----------------------------------------------------------------------
Net increase (decrease) 585,827 $ 585,827 (829,641) $ (829,641)
=======================================================================
</TABLE>
Notes to Financial Statements (continued)
June 30, 1997 (unaudited)
7. Capital Stock Transactions (continued)
Transactions in capital stock for U.S. Short-Term were as follows for the
periods indicated:
<TABLE>
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
Six Months Ended Year Ended
June 30, 1997 December 31, 1996
-----------------------------------------------------------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------
Shares sold 315,185,578 $ 3,099,613,416 698,753,332 $ 3,885,689,388
Shares issued related to
reinvestment of dividends 1,317,481 12,955,379 2,773,655 27,323,767
-----------------------------------------------------------------------
316,503,059 3,112,568,795 701,526,987 6,913,013,155
Shares redeemed 308,029,278 3,029,430,111 711,752,445 7,013,520,909
-----------------------------------------------------------------------
Net increase (decrease) 8,473,781 $ 83,138,684 (10,225,458) $ (100,507,754)
=======================================================================
</TABLE>
Transactions in capital stock for Stable Return were as follows for the periods
indicated:
<TABLE>
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
Six Months Ended Year Ended
June 30, 1997 December 31, 1996
-----------------------------------------------------------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------
Shares sold - $ - 3,600,391 $ 35,567,661
Shares issued related to
reinvestment of dividends 92,780 919,358 145,519 1,445,423
-----------------------------------------------------------------------
92,780 919,358 3,745,910 37,013,084
Shares redeemed 1,727,370 17,140,238 12,241 121,101
-----------------------------------------------------------------------
Net increase (decrease) (1,634,590) $ (16,220,880) 3,733,669 $ 36,891,983
=======================================================================
Transactions in capital stock for Mortgage were as follows for the periods
indicated:
- -----------------------------------------------------------------------------------------------------------
Six Months Ended Period From April 29, 1996* to
June 30, 1997 December 31, 1996
-----------------------------------------------------------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------
Shares sold 25,318,819 $ 258,437,284 24,698,121 $ 251,360,141
Shares issued related to
reinvestment of dividends 1,615,101 16,408,002 588,076 5,984,056
-----------------------------------------------------------------------
26,933,920 274,845,286 25,286,197 257,344,197
Shares redeemed 179,815 1,830,000 3,530,497 35,813,437
-----------------------------------------------------------------------
Net increase 26,754,104 $ 273,015,286 21,755,700 $ 221,530,760
=======================================================================
*Commencement of Operations
</TABLE>
Notes to Financial Statements (continued)
June 30, 1997 (unaudited)
7. Capital Stock Transactions (continued)
Transactions in capital stock for Worldwide were as follows for the periods
indicated:
<TABLE>
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
Six Months Ended Year Ended
June 30, 1997 December 31, 1996
-----------------------------------------------------------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------
Shares sold 1,873,850 $ 17,669,440 4,903,256 $ 47,314,387
Shares issued related to
reinvestment of dividends 170,512 1,582,844 565,816 5,450,078
-----------------------------------------------------------------------
2,044,362 19,252,284 5,469,072 52,764,465
Shares redeemed 616,015 5,696,560 6,462,067 61,994,382
-----------------------------------------------------------------------
Net increase (decrease) 1,428,347 $ 13,555,724 (992,995) $ (9,229,917)
=======================================================================
Transactions in capital stock for Worldwide-Hedged were as follows for
the periods indicated:
- -----------------------------------------------------------------------------------------------------------
Six Months Ended Year Ended
June 30, 1997 December 31, 1996
-----------------------------------------------------------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------
Shares sold 2,705,521 $ 29,819,861 170,880 $ 1,849,300
Shares issued related to
reinvestment of dividends 103,522 1,138,139 231,838 2,529,368
-----------------------------------------------------------------------
2,809,043 30,958,000 402,718 4,378,668
Shares redeemed 66,897 738,887 256,253 2,788,475
-----------------------------------------------------------------------
Net increase 2,742,146 $ 30,219,113 146,465 $ 1,590,193
=======================================================================
Transactions in capital stock for International were as follows for the periods
indicated:
- -----------------------------------------------------------------------------------------------------------
Six Months Ended Period From May 9, 1996* to
June 30, 1997 December 31, 1996
-----------------------------------------------------------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------
Shares sold 848,900 $ 8,337,021 3,397,413 $ 34,283,766
Shares issued related to
reinvestment of dividends 104,612 1,003,318 109,492 1,114,153
-----------------------------------------------------------------------
953,512 9,340,340 3,506,905 35,397,919
Shares redeemed 60 602 817 8,400
-----------------------------------------------------------------------
Net increase 953,452 $ 9,339,738 3,506,088 $ 35,389,519
=======================================================================
*Commencement of Operations
</TABLE>
Notes to Financial Statements (continued)
June 30, 1997 (unaudited)
7. Capital Stock Transactions (continued)
Transactions in capital stock for International-Hedged were as follows for the
periods indicated:
<TABLE>
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
Six Months Ended Year Ended
June 30, 1997 December 31, 1996
-----------------------------------------------------------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------
Shares sold 3,755,961 $ 37,444,174 17,293,642 $ 174,000,000
Shares issued related to
reinvestment of dividends 333,722 3,302,328 509,355 5,046,775
-----------------------------------------------------------------------
4,089,683 40,746,502 17,802,997 179,046,775
Shares redeemed 471,824 4,698,877 8,214,673 82,699,260
-----------------------------------------------------------------------
Net increase 3,617,859 $ 36,047,625 9,588,324 $ 96,347,515
=======================================================================
</TABLE>
8. Repurchase and Reverse Repurchase Agreements
Each Portfolio may enter into repurchase agreements under which a bank or
securities firm that is a primary or reporting dealer in U.S. Government
securities agrees, upon entering into the contract, to sell U.S. Government
securities to a Portfolio and repurchase such securities from such Portfolio
at a mutually agreed upon price and date. U.S. Short-Term, Worldwide,
and Worldwide-Hedged may only invest up to 25% of their assets in repurchase
agreements. Securities purchased subject to repurchase agreements must have
an aggregate market value greater than or equal to the repurchase price
plus accrued interest at all times. If the value of the underlying
securities falls below the value of the repurchase price plus accrued
interest, the Portfolio will require the seller to deposit additional
collateral by the next business day. If the request for additional collateral
is not met, or the seller defaults on its repurchase obligation, such
Portfolio maintains the right to sell the underlying securities at market value
and may claim any resulting loss against the seller.
Each Portfolio is also permitted to enter into reverse repurchase agreements
under which a primary or reporting dealer in U.S. Government securities
purchases U.S. Government securities from a Portfolio and such Portfolio
agrees to repurchase the securities at an agreed upon price and date. U.S.
Short-Term, Worldwide, and Worldwide-Hedged may only invest up to 25% of
their assets in reverse repurchase agreements. When a Portfolio engages in
reverse repurchase transactions, the Portfolio will maintain, in a
segregated account with its custodian, securities equal in value to those
subject to the agreement.
9. Options Transactions
For hedging purposes, each Portfolio other than Money Market, 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 Portfolio pays a premium
whether or not the option is exercised. Additionally, the Portfolio
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 Portfolio writes an option, the premium received by the Portfolio 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 Portfolio 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
Portfolio has a realized gain or loss. If a put option is exercised, the
premium reduces the cost basis
Notes to Financial Statements (continued)
June 30, 1997 (unaudited)
9. Options Transactions (continued)
of the security or currency purchased by the Portfolio. In writing an option,
the Portfolio 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 Portfolio could result in the Portfolio 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 Mortgage for the six months ended
June 30, 1997 is as follows:
<TABLE>
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
1997 Calls 1997 Puts
-------------------------------- -----------------------------------
# of # of
Contracts Premiums Contracts Premiums
- -----------------------------------------------------------------------------------------------------------
Outstanding, beginning of period - $ - - $-
Options written 128 420,000
Options closed or expired - - -
-
========================================================================
Outstanding, end of period 128 $ 420,000 - $-
========================================================================
</TABLE>
10. Swap Transactions
A swap is an agreement that obligates two parties to exchange a series of cash
flows at specified intervals based upon or calculated by reference to
changes in specified prices or rates for a specified amount of an
underlying asset. The payment flows are usually netted against each other,
with the difference being paid by one party to the other. Risks may
arise as a result of the failure of another party to the swap contract to
comply with the terms of the swap contract. The loss incurred by the failure
of a counterparty is generally limited to the net payment to be received by a
Portfolio, and/or the termination value at the end of the contract. Therefore,
the Portfolio considers the creditworthiness of each counterparty to a swap
contract in evaluating potential credit risk. Additionally, risks may arise
from unanticipated movements in interest rates or in the value of the
underlying securities or indices.
International-Hedged entered into a swap agreement pursuant to which the
Portfolio agrees to pay the return of a specified global index in exchange
for an interest payment based on LIBOR. The effect of such is to hedge the
market exposure imbedded in the Portfolio for a current market interest return,
plus (or minus) any incremental return achieved in excess of the index return.
This type of transaction also serves to hedge currency exposure. The index
used pursuant to this hedging technique is the JP Morgan Non-U.S. Traded
Total Return Government Bond Index (Unhedged) ("JP Morgan Index").
The Portfolio records a net receivable or payable on a daily basis for the
amount expected to be received or paid in the period. Income paid or received
on the JP Morgan Index is broken down into an interest expense component
(recorded as an offset to interest income) and a capital component
(recorded as net realized gain or loss on investment). Income received
based on LIBOR is recorded as interest income.
At June 30, 1997, International-Hedged had one outstanding swap contract with
the following terms:
<TABLE>
<S> <C> <C> <C> <C>
- ---------------------- -------------------- --------------------- --------------------- --------------------
Payments Received
Swap Notional Termination Payments Made by the
Counterparty Amount Date by the Portfolio Portfolio
- ---------------------- -------------------- --------------------- --------------------- --------------------
Morgan Guaranty % of change in the LIBOR minus
Trust Co. $158,000,000 11/4/98 JP Morgan Index 26 basis points
</TABLE>
11. Segregation of Assets
It is the policy of each of the Fund's Portfolios to have its custodian
segregate certain assets to cover portfolio transactions which are deemed
to create leverage under Section 18(f) of the Investment Company Act of 1940.
Except for Money Market, the Portfolios turn over assets on a frequent basis
which would make it impractical to specify individual securities to be used
for segregation purposes. Therefore, the Portfolio's custodian has been
instructed to segregate all assets on a settled basis. The Portfolios will
not enter into transactions deemed to create leverage in excess of
each Portfolio's ability to segregate up to 100% of its settled assets.
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 200 Clarendon St.
Treasurer of the Fund Boston, MA 02116
William E. Vastardis Transfer and Dividend Disbursing Agent
Secretary of the Fund Investors Bank & Trust Company
200 Clarendon St.
Carla E. Dearing Boston, MA 02116
Assistant Treasurer of the Fund
Legal Counsel
Dechert Price & Rhoads
1500 K Street, N.W.
Washington, D.C. 20005-1208
Independent Auditors
Ernst & Young LLP
787 Seventh Avenue
New York, NY 10019
