FFTW FUNDS, INC.
Annual Report
December 31, 1998
- --------------------------------------------------------------------------------
200 PARK AVENUE
NEW YORK, NY 10166
TELEPHONE 212.681.3000
FACSIMILE 212.681.3250
<PAGE>
FFTW Funds, Inc.
President's Letter
February 22, 1999
Dear Shareholders,
We are pleased to present the Annual Report of FFTW Funds, Inc., for the year
ended December 31, 1998. Our funds had a successful year, distinguished by
strong performance relative to our competitors, by low expense ratios, and by
favorable mention from the financial press.
Among the highlights, FFTW's Limited Duration (formerly called Stable Return),
U.S. Short Term Fixed Income, and Worldwide Fixed Income Hedged Portfolios
were included in Business Week's Bond Fund A-List for superior risk-adjusted
returns over the past five years. These Portfolios also earned the distinction
of a Morningstar rating of 5 stars. In November, FFTW's International and
Worldwide Portfolios were highlighted in the Wall Street Journal Mutual Fund
Scorecard as among the Top 15 performers in their categories, and FFTW's Money
Market Portfolio was the number one institutional money fund for the fourth
quarter of 1998 in IBC's Money Fund Express.
FFTW is pleased to invite our clients and their consultants to participate in
quarterly conference calls with senior portfolio managers to discuss our
Funds. These regular calls provide a forum for open discussion on current
market developments and outlook, and FFTW's portfolio strategy. If you are
interested in participating, please call Johanna Lasker at (212) 681-3054 for
details.
We appreciate your participation in FFTW Funds. In our continuing effort to
meet your investment needs, we would welcome the opportunity to discuss the
objectives and results of each of our portfolios with you.
Sincerely,
/s/ O. John Olcay
O. John Olcay
Chairman of the Board and President
(All ratings are historical and not forward looking. Ratings are not a
forecast of future performance and are subject to change at any time.)
Footnote for Wall Street Journal Mutual Fund Scorecard
FFTW's International and Worldwide Portfolios (the "Portfolios") were compared
against other bond funds in the World Income category. The performance returns
of the Portfolios in the Mutual Fund Scoreboard were compared against the
returns of 277 bond funds for the 4 week period ended 11/19/98, 261 bond funds
for the period from 12/31/97 to 11/19/98, 254 bond funds for the 12 month
period ended 11/19/98, and 92 bond funds for the 5-year period ended 11/19/98.
Footnote for IBC's Money Fund Expense Report
FFTW's Money Market Portfolio (the "Portfolio") was compared against 374 other
institutional money market funds. The ranking that the Portfolio received was
for the fourth quarter 1998 gross total return.
Footnote for Business Week's Bond Fund A-List
FFTW's Limited Duration, U.S. Short-Term, and Worldwide-Hedged Portfolios were
compared against 652 other taxable and tax-exempt bond funds. The article
focused on the 1-, 3-, and 5-year returns, yield, maturity, and expenses. Each
fund in the article with more than five years of performance was rated based
upon its risk-adjusted total returns. Those funds with the top risk-adjusted
returns received A ratings.
Footnote for Morningstar Rating
Each of FFTW's Limited Duration, U.S. Short-Term, and Worldwide-Hedged
Portfolios received 5 star ratings from Morningstar for the 3- and 5-year
periods commencing on 1/1/94 and 1/1/96, respectively and ending on 12/31/98.
Morningstar's proprietary ratings reflect historical risk-adjusted performance
as of 12/31/98. Overall ratings are calculated from a fund's 3- and 5-year
average annual returns in excess of 90-day Treasury bill returns with
appropriate fee adjustments, and a risk factor that reflects fund performance
below 90-day T-bill returns. During the 3- and 5-year periods ended 12/31/98,
there were 1,505, and 1,004 taxable bond funds rated by Morningstar,
respectively. 5-star ratings are limited to the top 10% of funds in an
investment category, the next 22.5% earn 4 stars, the next 35% earn 3 stars,
the next 22.5% earn 2 stars and the bottom 10% earn 1 star.
<PAGE>
FFTW Funds, Inc.
Table of Contents
<TABLE>
<S> <C>
Market Review - General Market 1
Portfolio Reviews - U.S. Portfolios 2
Performance - U.S. Portfolios 4
Portfolio Reviews - Global and International Portfolios 7
Market Outlook 10
Performance - Global and International Portfolios 11
Schedules of Investments
Money Market Portfolio 17
U.S. Short-Term Portfolio 18
Limited Duration Portfolio 21
Mortgage-Backed Portfolio 23
Worldwide Portfolio 27
Worldwide-Hedged Portfolio 29
International Portfolio 32
Global Tactical Exposure Portfolio 34
Emerging Markets Portfolio 36
International Opportunities Portfolio 39
Statements of Assets and Liabilities 40
Statements of Operations 45
Statements of Changes in Net Assets 50
Financial Highlights 55
Notes to Financial Statements 65
</TABLE>
<PAGE>
FFTW Funds, Inc.
Market Review (unaudited)
December 31, 1998
The first quarter of 1998 saw global bond markets perform well as
interest rates trended lower in the major markets. US rates fell sharply early
in the quarter but retraced much of their decline while German rates were
lower by 30-40 basis points. In Japan, recessionary conditions persisted and
policy makers struggled to develop an effective remedy, resulting in continued
low interest rates. In currency markets, the Deutschemark ended the period
where it began and the appreciation of the yen in the early part of the
quarter was retraced by quarter-end. Yankee bonds, both investment grade and
high yield, recovered lost ground as conditions improved from the crisis in
the fourth quarter of 1997. Corporate securities were the best performing
investment grade sector, enjoying a good technical environment as investors
searched for additional yield for their portfolios. In contrast, the U.S.
mortgage sector underperformed early in the period due to uncertainty about
prepayment levels, but recovered somewhat as market volatility declined and
interest rates stabilized.
Interest rates trended lower in Europe, Japan, and the U.S. resulting in
good performance for the major world markets during the second quarter.
However, turmoil continued to dominate the Asian markets. U.S. rates were
bound within a 40 basis point range, as were German yields, and ended the
period near their lowest levels. In Japan, recessionary conditions worsened as
the magnitude of the country's banking crisis became obvious. Interest rates
in Japan continued to fall with the five-year JGBs reaching a low of 80 basis
points before rebounding.
The volatile dollar/yen relationship dominated the currency markets in
the second quarter. The yen depreciated steadily until mid-June when the U.S.
and Japanese governments intervened in support of the yen in conjunction with
Japan's commitment to provide more fiscal stimulus.
Corporate bond spreads widened to their largest levels since 1994 as bond
investors became concerned about the increasing prospects for a slowdown in
corporate profits. The U.S. mortgage sector suffered as falling interest rates
raised principal prepayment levels which more than offset the positive effects
of declining volatility. Yankee bonds, particularly those in the high yield
category, were battered again by the continuing crisis in Asia, which spread
most notably to Russia.
The third quarter of 1998 was a dramatic period for bond and equity
investors alike. High-quality fixed income assets yielded positive total
returns for the period as investors weighed the implications of Russia's
default on its domestic debt, heightened expectations for slower global growth
and deflationary pressures, and declining equity markets worldwide. U.S. rates
dropped as much as 125 basis points, followed by a modest lowering of official
interest rates by the Federal Reserve in late September. German and Japanese
yields also declined precipitously to reach new lows. Currency markets were
volatile during the quarter, as the dollar lost ground relative to both the
yen and the deutschemark.
Spreads on non-sovereign securities and debt of emerging market countries
widened dramatically in August from already wide levels, as investors shunned
these asset classes in favor of the safe haven provided by U.S. Treasuries and
German bunds. The underperformance of emerging market debt dominated the
quarter with the JPM Emerging Market Bond Index losing in excess of 20%.
Corporate and Yankee bonds, particularly those rated below A, were hurt across
the board in sympathy with a global repricing of credit risk premiums. The
U.S. mortgage sector, already buffeted by continued low rates, suffered from
fears of accelerated pre-payments as even newly-originated mortgages became
re-financeable by homeowners. The dramatic widening in spreads of all non-U.S.
Treasury securities provided yield increments that had not been seen since the
early 1990s.
The fourth quarter provided a respite for bond investors as the credit
markets either stabilized or rose in value. Another reduction in official U.S.
interest rates by the Federal Reserve, the second in a series of three
quarter-point reductions, was a major factor in calming the markets. European
central banks responded by reducing rates as well, converging on a rate of
three percent prior to the Euro conversion at year-end. Nonetheless, U.S.
Treasury yields subsequently rose as continued economic strength diminished
the prospects for further reductions. Conversely, yields fell in Europe as
evidence of a pending economic slowdown surfaced, raising the prospects that
the European Central Bank (ECB) would cut rates more aggressively than
previously anticipated.
Led by monetary accommodation and surging equity markets, non-sovereign
bonds partially recovered from the third quarter's spread widening. U.S.
mortgages, and selected Yankee and emerging market bonds benefited the most.
While investor sentiment improved significantly, a large new issuance calendar
kept U.S. corporate spreads from narrowing proportionately to other fixed
income sectors.
In the currency markets, the Japanese yen soared against the dollar
during October on the prospects of a 60 trillion yen recapitalization of the
banking system and investors scrambled to cover their short positions. The
yen's rally gained momentum into year-end as the yields on JGBs more than
doubled. In comparison, the deutschemark was relatively stable versus the
dollar.
1
<PAGE>
FFTW Funds, Inc.
Portfolio Reviews - U.S. Portfolios
December 31, 1998
Money Market Portfolio
U.S. Short-Term Portfolio
Limited Duration Portfolio/1/
The portfolios invest in similar type short- and intermediate-term
investments and only differ on a duration basis with Money Market at the
shorter end, U.S. Short-Term in the middle and Limited Duration at the longer
end.
For most of the first quarter the Portfolios maintained a long duration
exposure and were overweighted in asset-backed securities. While duration
positions detracted from overall performance, the Portfolios" asset-backed
holdings had a positive contribution to performance. In addition to being
overweight in asset backed securities the Portfolios were also overweight U.S.
government agency pass through securities. This combination of holdings had a
positive impact on performance for the quarter. Barbelled yield curve
positioning also added to overall performance. During the third quarter the
Portfolios retained a long duration bias. In expectation of a further decline
in yields, the U.S. mortgage allocation was positioned defensively. Mortgage-
backed holdings detracted slightly from performance during the third quarter
while the Portfolios" holdings in asset-backed securities were selectively
increased to take advantage of higher yields. The dramatic widening of asset-
backed security spreads detracted from Portfolio performance. During the
fourth quarter the allocation to asset-backed securities as well as money
market positions increased. As spreads tightened money market securities added
to Portfolio returns while the Portfolios' asset-backed holdings detracted
slightly. Holdings in collateralized mortgage obligations added modestly to
performance.
- -----------------------
/1/ The Stable Return Portfolio changed its name to the Limited Duration
Portfolio and the Mortgage Total Return Portfolio changed its name to the
Mortgage-Backed Portfolio on September 11, 1998.
2
<PAGE>
FFTW Funds, Inc.
Portfolio Reviews - U.S. Portfolios (continued) (unaudited)
December 31, 1998
Mortgage-Backed Portfolio/1/
Because of widening swap spreads combined with higher volatility and
prepayment fears, the Portfolio was neutral on the mortgage basis during the
first quarter. The U.S. Treasury market rally in the second quarter led to
mortgage prepayment fears that caused the mortgage market to weaken later in
the quarter. Higher coupon pass-throughs and interest only securities
underperformed for most of the quarter. Collateralized mortgage-backed
securities underperformed U.S. Treasury securities during the quarter,
detracting from the Portfolio's return. While there was no fundamental credit
deterioration in the mortgage sector, U.S. corporate bond spreads widened
significantly causing a spillover into mortgage credit. During the third
quarter, a long duration position added significantly to incremental return.
The Portfolio overweight position in both residential and commercial mortgage-
backed securities detracted from performance. An allocation to asset-backed
securities had a negative impact and interest-only securities also detracted
from performance. The Portfolio began the fourth quarter with a moderate
overweight in pass-throughs and this overweight position was increased later
in the quarter. Spreads on mortgage pass-through securities ended the quarter
only moderately wider, but traded as much as 50 basis points wider during
October. This led to underperformance early in the quarter but a recovery in
November and December. Commercial mortgage-backed securities, which were added
to the Portfolio after the market turmoil in early October, detracted slightly
from performance in the fourth quarter. Interest-only securities were added to
the Portfolio in November and December and the Portfolio performed well in
December.
- -----------------------
/1/ The Stable Return Portfolio changed its name to the Limited Duration
Portfolio and the Mortgage Total Return Portfolio changed its name to the
Mortgage-Backed Portfolio on September 11, 1998.
3
<PAGE>
FFTW Funds, Inc.
Performance - U.S. Portfolios (continued) (unaudited)
December 31, 1998
Money Market Portfolio seeks to attain current income, liquidity, and the
maintenance of a stable net asset value per share through investments in high
quality, short-term obligations.
Yield Information for the 7-day period ended December 31, 1998:
<TABLE>
<CAPTION>
Effective
Yield Yield
<S> <C> <C>
Money Market Portfolio 4.99% 5.12%
IBC's Money Fund Report Averages(TM)-All Taxable 4.53% 4.64%
</TABLE>
U.S. Short-Term Portfolio seeks to attain a high level of total return as may
be consistent with the preservation of capital and to maintain liquidity by
investing primarily in high-quality fixed income securities with an average
U.S. dollar-weighted duration of less than one year. U.S. Short-Term is not a
money market fund and its shares are not guaranteed by the U.S. Government.
[CHART APPEARS HERE]
Comparison of Changes In Value of a $100,000 Investment In U.S. Short-Term
Portfolio and the IBC's Money Fund Report Averages(TM) -- All Taxable
IBC's Money Fund
U.S. Short-Term Report Averages(TM)
Portfolio -- All Taxable
--------------- -------------------
12/6/89 100000 100000
12/31/89 100489 100543
1/31/90 101235 101205
2/28/90 101802 101799
3/31/90 102487 102462
4/30/90 103131 103109
5/31/90 103898 103781
6/30/90 104518 104436
7/31/90 105224 105117
8/31/90 105952 105786
9/30/90 106676 106436
10/31/90 107504 107109
11/30/90 108182 107753
12/31/90 109039 108415
1/31/91 109720 109050
2/28/91 110392 109586
3/31/91 110885 110153
4/30/91 111554 110681
5/31/91 112058 111206
6/30/91 112505 111707
7/31/91 113134 112227
8/31/91 113773 112738
9/30/91 114378 113220
10/31/91 114936 113704
11/30/91 115467 114151
12/31/91 116012 114595
1/31/92 116399 114995
2/29/92 116655 115343
3/31/92 116971 115707
4/30/92 117286 116053
5/31/92 117618 116398
6/30/92 118063 116726
7/31/92 118518 117047
8/31/92 118809 117350
9/30/92 119214 117631
10/31/92 119424 117909
11/30/92 119664 118174
12/31/92 120018 118458
1/31/93 120341 118741
2/28/93 120657 118989
3/31/93 120957 119259
4/30/93 121214 119519
5/31/93 121461 119783
6/30/93 121741 120041
7/31/93 122056 120310
8/31/93 122434 120581
9/30/93 122801 120845
10/31/93 122977 121117
11/30/93 123055 121382
12/31/93 123480 121661
1/31/94 123959 121939
2/28/94 124021 122194
3/31/94 124367 122498
4/30/94 124618 122803
5/31/94 124930 123155
6/30/94 125219 123520
7/31/94 125734 123913
8/31/94 126306 124329
9/30/94 126703 124753
10/31/94 127201 125209
11/30/94 127561 125684
12/31/94 128185 126218
1/31/95 128827 126772
2/28/95 129555 127301
3/31/95 130198 127897
4/30/95 130687 128479
5/31/95 131327 129081
6/30/95 131956 129663
7/31/95 132456 130257
8/31/95 133085 130867
9/30/95 133709 131431
10/31/95 134334 132014
11/30/95 134948 132582
12/31/95 135486 133168
1/31/96 136115 133740
2/29/96 136601 134262
3/31/96 137136 134799
4/30/96 137773 135325
5/31/96 138291 135866
6/30/96 138765 136396
7/31/96 139426 136955
8/31/96 140091 137514
9/30/96 140751 138067
10/31/96 141429 138631
11/30/96 142232 139186
12/31/96 142893 139757
1/31/97 143573 140332
2/28/97 144108 140852
3/31/97 144649 141429
4/30/97 145331 142003
5/31/97 146049 142604
6/30/97 146629 143191
7/31/97 147503 143802
8/31/97 148073 144417
9/30/97 148618 145014
10/31/97 148888 145634
11/30/97 149294 146237
12/31/97 150167 146873
1/31/98 151055 147504
2/28/98 151602 148076
3/31/98 152328 148710
4/30/98 153046 149323
5/31/98 153770 149956
6/30/98 154332 150574
7/31/98 155065 151214
8/31/98 156279 151858
9/30/98 157143 152481
10/31/98 157676 153096
11/30/98 158027 153674
12/31/98 158565 154267
(Past performance is not predictive of future performance.)
Average Annual Total Return for the periods ended December 31, 1998:
<TABLE>
<CAPTION>
Since
One Year 5 Years Inception*
<S> <C> <C> <C>
U.S. Short-Term Portfolio 5.59% 5.13% 5.21%
IBC's Money Fund Report AveragesTM-All
Taxable* 5.03% 4.86% 4.89%
</TABLE>
* U.S. Short Term Portfolio commenced operations on December
6, 1989. The Portfolio invests in longer term maturities
than the benchmark and, therefore, presents greater risks of
NAV fluctuation.
4
<PAGE>
FFTW Funds, Inc.
Performance - U.S. Portfolios (continued) (unaudited)
December 31, 1998
Limited Duration Portfolio seeks to maintain a stable level of total return as
may be consistent with the preservation of capital by investing primarily in
high-quality debt securities with an average U.S. dollar-weighted duration of
less than three years and by using interest rate hedging as a stabilizing
technique.
Comparison of Changes in Value of a $100,000 Investment in
Limited Duration Portfolio and the Merrill Lynch 1-2.99 Year Treasury Index
[CHART APPEARS HERE]
Limited Duration Merrill Lynch 1-2.99 Year
Portfolio Treasury Index
---------------- -------------------------
7/26/93 100000 100000
7/31/93 100044 100023
8/31/93 100825 100895
9/30/93 101606 101223
10/31/93 101588 101422
11/30/93 101326 101447
12/31/93 101849 101821
1/31/94 102376 102475
2/28/94 101747 101820
3/31/94 101367 101313
4/30/94 100872 100955
5/31/94 101002 101098
6/30/94 101212 101397
7/31/94 102155 102269
8/31/94 102375 102629
9/30/94 102277 102396
10/31/94 102525 102632
11/30/94 101913 102170
12/31/94 102146 102405
1/31/95 103526 103828
2/28/95 105150 105251
3/31/95 105756 105840
4/30/95 106501 106782
5/31/95 108364 108651
6/30/95 109315 109238
7/31/95 109663 109685
8/31/95 110212 110344
9/30/95 110737 110884
10/31/95 111727 111816
11/30/95 112669 112800
12/31/95 113635 113668
1/31/96 114575 114634
2/29/96 114449 114153
3/31/96 114237 114050
4/30/96 114509 114141
5/31/96 114686 114381
6/30/96 115440 115202
7/31/96 115872 115652
8/31/96 116217 116045
9/30/96 117116 117101
10/31/96 118544 118424
11/30/96 119614 119336
12/31/96 119634 119336
1/31/97 120150 119896
2/28/97 120620 120171
3/31/97 120654 120125
4/30/97 121410 121106
5/31/97 122426 121932
6/30/97 123458 122772
7/31/97 125138 124121
8/31/97 125204 124235
9/30/97 126252 125178
10/31/97 127120 126108
11/30/97 127333 126415
12/31/97 128170 127278
1/31/98 129551 128514
2/28/98 129465 128625
3/31/98 129931 129148
4/30/98 130548 129753
5/31/98 131302 130444
6/30/98 132044 131123
7/31/98 132531 131736
8/31/98 134217 133392
9/30/98 136012 135160
10/31/98 136357 135823
11/30/98 136421 135705
12/31/98 136869 136184
(Past performance is not predictive of future performance.)
Average Annual Total Return for the periods ended December 31, 1998:
<TABLE>
<CAPTION>
One 5 Since
Year Years Inception*
<S> <C> <C> <C>
Limited Duration Portfolio 6.79% 5.76% 5.94%
Merrill Lynch 1-2.99 Year Treasury Index 7.00% 5.59% 5.85%
</TABLE>
* Stable Return Portfolio commenced operations on July 26,1993.
5
<PAGE>
FFTW Funds, Inc.
Performance - U.S. Portfolios (continued) (unaudited)
December 31, 1998
Mortgage-Backed Portfolio seeks to attain a high level of total return as may
be consistent with the preservation of capital by investing primarily in
mortgage-related securities, maintaining an average U.S. dollar-weighted
duration in the range of two to six years.
[CHART APPEARS HERE]
Comparison of Changes in Value of a $100,000 Investment in
Mortgage-Backed Portfolio and the Lehman Mortgage-Backed Securities Index
Mortgage Total Lehman Mortgage-Backed
Return Portfolio Securities Index
---------------- ----------------------
4/29/96 100000 100000
4/30/96 99817 99660
5/31/96 99757 99371
6/30/96 101127 100742
7/31/96 101590 101115
8/31/96 101710 101115
9/30/96 103620 102804
10/31/96 105386 104819
11/30/96 107112 106318
12/31/96 106539 105765
1/31/97 106751 106547
2/28/97 108197 106899
3/31/97 107319 105894
4/30/97 109133 107578
5/31/97 109714 108632
6/30/97 111580 109903
7/31/97 113320 111969
8/31/97 113596 111701
9/30/97 114846 113119
10/31/97 115930 114375
11/30/97 116305 114752
12/31/97 117400 115796
1/31/98 118515 116943
2/28/98 118844 117188
3/31/98 119334 117681
4/30/98 120004 118351
5/31/98 120939 119132
6/30/98 121415 119704
7/31/98 122142 120315
8/31/98 123719 121410
9/30/98 125536 122879
10/31/98 124733 122719
11/30/98 125267 123333
12/31/98 125865 123863
(Past performance is not predictive of future performance.)
Average Annual Total Return for the periods ended December 31, 1998:
<TABLE>
<CAPTION>
One Since
Year Inception*
<S> <C> <C>
Mortgage-Backed Portfolio 7.42% 8.98%
Lehman Mortgage-Backed Securities Index 6.97% 8.33%
</TABLE>
* Mortgage Total Return Portfolio commenced operations on April 29,
1996.
6
<PAGE>
FFTW Funds, Inc.
Portfolio Reviews - Global and International Portfolios (unaudited)
December 31, 1998
<TABLE>
<S> <C>
Worldwide Portfolio International Portfolio
Worldwide-Hedged Portfolio Global Tactical Exposure Portfolio/2/
International Opportunities
Portfolio/3/
</TABLE>
All of the global and international Portfolios invest in similar
securities, financial futures contracts and forward foreign exchange
contracts. The main differences among the Portfolios relate to positions in
the U.S. markets and the currency hedging ratio.
Global (synonymous with "worldwide") Portfolios were overweight U.S.
duration in January and February focusing on lower inflation rather than
higher growth. In addition, the portfolios were positioned to take advantage
of a flattening yield curve. The Portfolios were overweight the U.S. as a
spread against Japan due to the latter's relative low level of real and
nominal yields. This duration position detracted from performance offset
somewhat by the yield curve exposure. Both global and international Portfolios
were initially overweight core European duration to benefit from an expected
downward revision in interest rate expectations. The global and international
Portfolios' position in European duration in March was gradually reduced to an
underweight position as evidence of increased economic growth put upward
pressure on yields. In addition, the Portfolios were overweighted UK bonds
versus German bonds as the UK economy showed signs of weakening. These
positions were broadly neutral on performance. The Portfolios were underweight
Japanese bonds throughout the first quarter due to the low level of both real
and nominal yields. This position had little impact on performance. The
Portfolios however, were underweight the Japanese Yen against the U.S. dollar
and Deutschemark and overweighted the Deutschemark versus the U.S. dollar.
These foreign exchange positions detracted from returns.
Focusing on lower inflation rather than higher growth, the global
Portfolios were overweight U.S. duration in April. In May duration was reduced
to neutral as the Federal Reserve moved towards a tightening bias. In June,
U.S. duration was overweighted again as weaker manufacturing data pointed to a
slowdown in the US economy. These positions added modestly to returns. Global
and international Portfolios were initially underweight core European duration
as stronger domestic demand in Germany suggested a possible need for the
Bundesbank to increase interest rates. Each Portfolio's exposure was
subsequently increased to an overweight allocation following excellent
inflation data and signs of a slowdown in economic growth. These positions
added to returns. The Portfolios were underweight Japanese bonds relative to
U.S. bonds throughout most of the second quarter due to the low level of both
real and nominal yields, and the prospects for credit deterioration in Japan.
These positions subtracted from returns. The global and international
Portfolios maintained an underweight position in the Japanese yen during much
of the quarter. These positions were cut following intervention to support the
yen by Japanese and U.S. authorities. The Australian dollar was underweighted
due to contagion effects from the Asian crisis. Swedish krona was overweighted
vs UK Sterling as the anticipation was that Sterling should weaken as UK
economic growth slows. The global and international Portfolios maintained an
underweight position in Swiss Francs against Deutschemarks due to the weak
Swiss economy and the likelihood of a strong Euro. Foreign exchange positions
added significantly to returns in the second quarter.
During the third quarter the global Portfolios were overweight U.S.
Treasuries in July in global Portfolios, moving to a flat position in late
August as intermediate U.S. Treasuries rallied. The Portfolios remained
neutral to the U.S. yield curve for the entire quarter. These positions added
to returns. All global and international Portfolios were overweight core
European duration during the quarter. In the early summer, the market was
still discounting higher official interest rates which was unlikely given the
deteriorating global environment. The Portfolios had exposure in Denmark but
were principally concentrated in benchmark German bonds that performed well.
These positions added significantly to returns. The Portfolios were
underweight JGB's throughout the quarter and this position detracted modestly
from returns. The global Portfolios were overweight the U.S. dollar versus yen
at the beginning of the quarter. Within Europe, the global and international
Portfolios were also overweight the Deutschemark versus Swiss Franc and
Swedish Krona versus UK Sterling. By the end of the quarter, the Portfolios
were underweight in the U.S. dollar versus the Deutschemark. Foreign exchange
positions added modestly to returns.
During the fourth quarter the global Portfolios were modestly overweight
U.S. Treasuries until December when the Portfolios assumed a neutral U.S.
duration position. U.S. duration and yield curve positions added modestly to
Portfolio returns.
- -----------------------
/2/ International-Hedged Portfolio changed its name to Global Tactical
Exposure on September 11, 1998. The Global Tactical Exposure Portfolio is used
exclusively by FFTW for a portion of its client base that seeks the
incremental returns that a limited exposure to the international markets may
bring. The investment strategy involves investing the Portfolio in a
diversified international portfolio but swapping the return of the JP Morgan
Global Government Bond Index, Non-U.S. Hedged in exchange for a LIBOR-based
payment to the Portfolio. The success of this strategy is measured relative to
the JP Morgan 3-Month Eurodeposit Index. The Portfolio significantly
outperformed the index using the strategies noted above with respect to its
international bond positions.
/3/ The International Opportunities Portfolio began operations on October 8,
1998.
7
<PAGE>
FFTW Funds, Inc.
Portfolio Reviews - Global and International Portfolios (continued)
(unaudited)
December 31, 1998
Also during the quarter global and international Portfolios were overweight
European bonds and underweight Japanese government bonds. Both positions added
positively to performance for the quarter. The Portfolios were modestly
overweight Canadian bonds for the majority of the quarter and neutral in
December. The Canadian duration and yield curve position added modestly to
returns. In addition, the global Portfolios had an investment in U.S. asset-
backed securities which had a modest positive impact on returns as a result of
narrowing spreads. European asset-backed securities which were held in the
global and international Portfolios as well did not have a significant impact
on performance. In anticipation of the Euro conversion, the Portfolios'
European positions were consolidated into German Bunds. In foreign exchange,
the Portfolios were underweight the U.S. dollar versus the Deutschemark early
on in the quarter. This position contributed positively to returns. Within
Europe, key foreign exchange positions were underweight UK Sterling versus
Deutschemark and overweight Deutschemark versus the Swiss Franc. European
foreign exchange positions detracted from returns.
8
<PAGE>
FFTW Funds, Inc.
Portfolio Reviews - Global and International Portfolios (continued)
(unaudited)
December 31, 1998
Emerging Markets
Emerging market debt stabilized and then improved with the spread of the
JP Morgan Emerging Market Bond Index ("EMBI") declining during the first part
of the year. Investors differentiated among emerging market credits, using the
recent turmoil as an opportunity to add yield to the Portfolio. Short-duration
instruments that benefited from the positive slope of the credit curve added
to return.
Emerging Market debt initially stabilized after a strong first quarter,
but weakened significantly in the latter part of the second quarter. Concern
about the impact of the Japanese crisis in Asia, the potential for a
devaluation of the Chinese yuan, and a worsening fiscal situation in Russia
led to volatile spreads on EM bonds and rising real interest rates in local
currency markets. The Portfolio's strategy of maintaining a high yield on
external debt portion of the portfolio versus local currency detracted from
returns.
After briefly stabilizing in July, emerging market debt plummeted in the
wake of Russia's August devaluation and domestic debt default. Investors
shunned all emerging market debt almost without regard to vast differences in
underlying economic fundamentals. Selling pressures by investors seeking to
reduce leverage and exposure in the asset class led to a sharp decline in
market liquidity, further exacerbating the emerging markets' woes. The
tightening in external debt spreads shifted the risk reward balance in favor
of local currency investments. The Portfolio remained overweight in hard
currency debt, anticipating a shift toward local currency.
Following the disastrous third quarter, emerging market spreads tightened
by about 200 basis points during the fourth quarter of 1998. Investors began
to distinguish once again among the various emerging markets credits. Korean
bonds, for instance, recovered to a spread near last April's new issue spread,
despite the overall EMBI spread being over 600 basis points wider than April's
levels. Liquidity improved somewhat, but was below August's levels and many
liquidity-induced price discrepancies remained in the market. The overweight
position in of external emerging market debt added to the Portfolio return as
did an overweight position in of Korean bonds and selected exposure to local
currencies in European emerging market countries.
9
<PAGE>
FFTW Funds, Inc.
Portfolio Reviews - Global and International Portfolios (continued)
(unaudited)
December 31, 1998
Market Outlook
The economic prospects for the U.S. in 1999 have improved relative to the
forecasts at the beginning of the fourth quarter of 1998 as equity prices have
recovered dramatically and both consumer confidence and consumption have
remained stronger than originally expected. These bearish indicators for bond
investors are offset by continued low inflation. However, rates are not likely
to fall materially until economic weakness materializes once again.
By comparison, the outlook for European bonds is positive. Expectations
for economic growth are being revised downward and coupled with extremely low
inflation, further easing by the European Central Bank appears likely.
However, the outlook in Japan remains bearish in spite of the recent rise in
rates. The financing needs associated with bank recapitalization and the
government's fiscal stimuli should cause yields to increase further.
The prospects for Emerging Markets in the balance of 1999 are mixed. On
the positive side, last year's massive sell-off in the asset class has left
bond yields quite attractive. Moreover, much "bad news" has already been taken
into account by investors; commodity prices are already at very low levels,
many important emerging economies are in recession, and feared events such as
Russia's sovereign default and Brazil's devaluation have taken place. In some
sense, it is difficult to imagine the situation deteriorating from here.
Difficult, but not, unfortunately, impossible. Important risks to the
asset class remain. Asian economies seem to be turning the corner towards
renewed growth, but Japan is mired in recession and its continuing problems
could hamper recovery prospects in the rest of Asia. Also, while Brazil has
devalued, it has not yet been able to stabilize its economy and demonstrate
conclusively (at all, in fact) that devaluation is not simply a first step
towards financial catastrophe. And one would be foolish to ignore the risks to
global liquidity (Fed tightening? A collapse in the Dow Jones?) potentially
lurking in Washington or New York.
In spite of the risks, on balance we view emerging markets as a solid
investment opportunity for 1999, albeit one which must be approached
carefully. Our recent strategy has been to emphasize those countries with
solid economic fundamentals which have been unjustly punished for the sins of
their neighbors. Over time, the market will continue winnowing credits,
allowing the inferior to fall by the wayside while favoring those with
superior policies, and our approach will lead us to outperform the market.
10
<PAGE>
FFTW Funds, Inc.
Performance - Global and International Portfolios (unaudited)
December 31, 1998
Worldwide Portfolio seeks to attain a high level of total return as may be
consistent with the preservation of capital by investing primarily in high-
quality fixed income securities from bond markets worldwide, denominated in
both U.S. dollars and foreign currencies, with an average U.S. dollar-weighted
duration of less than eight years.
[CHART APPEARS HERE]
Comparison of Changes in Value of a $100,000 Investment in Worldwide Portfolio
and the JP Morgan Global Government Bond Index (Unhedged)
JP Morgan Global Government
Worldwide Portfolio Bond Index (Unhedged)
------------------- ---------------------------
4/15/92 100000 100000
4/30/92 99144 99860
5/31/92 100891 102696
6/30/92 102026 105500
7/31/92 103813 107821
8/31/92 104477 110689
9/30/92 106602 110578
10/31/92 107520 107814
11/30/92 107933 105905
12/31/92 109591 106901
1/31/93 111843 108718
2/28/93 115013 110468
3/31/93 115481 112170
4/30/93 117032 114211
5/31/93 118118 114931
6/30/93 120381 115023
7/31/93 122819 115069
8/31/93 124952 118475
9/30/93 125952 119730
10/31/93 128146 119671
11/30/93 125935 118797
12/31/93 126973 120009
1/31/94 127892 121137
2/28/94 125603 119804
3/31/94 122213 119253
4/30/94 121490 119158
5/31/94 121675 118169
6/30/94 121395 119575
7/31/94 122982 120699
8/31/94 123827 120385
9/30/94 123844 120975
10/31/94 124204 122790
11/30/94 124579 121243
12/31/94 124118 121521
1/31/95 124902 123976
2/28/95 126480 127175
3/31/95 128481 133648
4/30/95 130069 135773
5/31/95 133707 139561
6/30/95 133714 140426
7/31/95 134725 141086
8/31/95 131196 137164
9/30/95 133825 140250
10/31/95 135452 141625
11/30/95 136955 143211
12/31/95 139734 144987
1/31/96 139178 143493
2/29/96 138525 142661
3/31/96 137514 142447
4/30/96 138607 141920
5/31/96 138272 142062
6/30/96 138612 143298
7/31/96 141007 145935
8/31/96 141224 146547
9/30/96 142646 147354
10/31/96 146458 150271
11/30/96 149536 152420
12/31/96 147791 151353
1/31/97 144736 147569
2/28/97 144359 146551
3/31/97 143256 145437
4/30/97 142180 144623
5/31/97 145191 148036
6/30/97 147089 149723
7/31/97 147450 149169
8/31/97 147325 148990
9/30/97 150822 152298
10/31/97 154015 155527
11/30/97 152094 153660
12/31/97 152126 153497
1/31/98 153280 155026
2/28/98 154220 156174
3/31/98 152918 155002
4/30/98 155357 157389
5/31/98 156507 158066
6/30/98 157131 158509
7/31/98 157944 158937
8/31/98 162910 163323
9/30/98 171043 171849
10/31/38 174353 175698
11/30/98 172415 173713
12/31/98 175825 176979
(Past performance is not predictive of future performance.)
Average Annual Total Return for the periods ended December 31, 1998:
<TABLE>
<CAPTION>
One Since
Year Five Years Inception*
<S> <C> <C> <C>
Worldwide Portfolio 15.58% 6.72% 8.77%
JP Morgan Global Government Bond Index
(Unhedged) 15.30% 8.07% 8.87%
</TABLE>
* Worldwide Portfolio commenced operations on April 15,
1992.
11
<PAGE>
FFTW Funds, Inc.
Performance - Global and International Portfolios (continued) (unaudited)
December 31, 1998
Worldwide-Hedged Portfolio seeks to attain a high level of total return as may
be consistent with the preservation of capital by investing primarily in high-
quality fixed income securities from bond markets worldwide, denominated in
both U.S. dollars and foreign currencies, with an average U.S. dollar-weighted
duration of less than eight years and by actively utilizing currency hedging
techniques.
[GRAPH APPEARS HERE]
Comparison of Changes in Value of a $100,000 Investment in
Worldwide-Hedged Portfolio and a Customized Worldwide-Hedged Benchmark
Customized Worldwide-
Worldwide-Hedged Portfolio Hedged Benchmark
-------------------------- ---------------------
5/19/92 100000 100000
5/31/92 99727 99850
6/30/92 101052 100579
7/31/92 102844 101685
8/31/92 103881 102214
9/30/92 105737 103665
10/31/92 105272 103914
11/30/92 104504 103675
12/31/92 105847 105147
1/31/93 108451 106725
2/28/93 110646 108710
3/31/93 111055 108938
4/30/93 111498 109406
5/31/93 112088 109603
6/30/93 113788 111839
7/31/93 115045 112745
8/31/93 117941 115068
9/30/93 118782 115551
10/31/93 119934 116533
11/30/93 118121 116440
12/31/93 119489 117942
1/31/94 120099 118331
2/28/94 117947 115823
3/31/94 114731 114201
4/30/94 113764 113356
5/31/94 115848 112619
6/30/94 116049 111921
7/31/94 113950 113141
8/31/94 127664 113520
9/30/94 128188 113907
10/31/94 128581 114323
11/30/94 129033 114757
12/31/94 128853 115245
1/31/95 129935 115751
2/28/95 130386 116234
3/31/95 130905 116778
4/30/95 131383 117309
5/31/95 131884 117859
6/30/95 132853 118391
7/31/95 132499 119184
8/31/95 134062 120304
9/30/95 135368 121868
10/31/95 137397 123367
11/30/95 140576 125723
12/31/95 143017 127094
1/31/96 145389 128377
2/29/96 143340 126542
3/31/96 142899 126807
4/30/96 145074 127492
5/31/96 145260 127964
6/30/96 145794 129180
7/31/96 146502 129903
8/31/96 147481 130942
9/30/96 150829 133430
10/31/96 154752 135818
11/30/96 158139 138358
12/31/96 157367 138082
1/31/97 159401 139255
2/28/97 160662 139882
3/31/97 159115 138903
4/30/97 161132 140597
5/31/97 161571 141539
6/30/97 164219 143563
7/31/97 168528 146694
8/31/97 168099 146180
9/30/97 172119 148636
10/31/97 173920 150271
11/30/97 175107 151233
12/31/97 177188 153093
1/31/98 179362 155267
2/28/98 179584 155903
3/31/98 180367 156917
4/30/98 181441 157686
5/31/98 184149 159657
6/30/98 185556 160806
7/31/98 186995 161835
8/31/98 192019 165525
9/30/98 196055 169746
10/31/98 195515 169373
11/30/98 197051 170575
12/31/98 197614 170575
(Past performance is not predictive of future performance.)
Average Annual Total Return for the periods ended December 31, 1998:
<TABLE>
<CAPTION>
Since
One Year Five Years Inception*
<S> <C> <C> <C>
Worldwide-Hedged Portfolio 11.53% 10.58% 10.83%
Customized Worldwide-Hedged Benchmark* 11.42% 7.65% 8.40%
</TABLE>
* For the period from May 19, 1992 (commencement of
operations of the Portfolio) 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). For the period between
August 1, 1994 and June 30, 1995, the Wordwide-Hedged
Portfolio was invested in cash or short-term instruments due
to its small size. Consequently, the Portfolio's performance
is compared to this Customized Worldwide-Hedged Benchmark.
12
<PAGE>
FFTW Funds, Inc.
Performance - Global and International Portfolios (continued) (unaudited)
December 31, 1998
International Portfolio seeks to attain a high level of total return as may be
consistent with the preservation of capital by investing primarily in high-
quality fixed income securities from bond markets worldwide, denominated in
foreign currencies, with an average U.S. dollar-weighted duration of less than
eight years.
[CHART APPEARS HERE]C
Comparison of Changes in Value of a $100,000 Investment in
International Portfolio and
the JP Morgan Global Government Bond Index (Non-U.S. Unhedged)
JP Morgan Global Government
International Portfolio Bond Index (Non-U.S. Unhedged)
----------------------- ------------------------------
5/9/96 100000 100000
5/31/96 99843 99940
6/30/96 99822 100650
7/31/96 102319 103458
8/31/96 102714 104203
9/30/96 103127 104213
10/31/96 105924 106256
11/30/96 107383 107648
12/31/96 106662 107023
1/31/97 102829 102646
2/28/97 101899 101435
3/31/97 101061 100806
4/30/97 99913 99901
5/31/97 101953 102224
6/30/97 103467 103389
7/31/97 102632 100773
8/31/97 103302 101277
9/30/97 106224 103971
10/31/97 107986 106383
11/30/97 106460 103936
12/31/97 106209 102991
1/31/98 106345 103650
2/28/98 107564 105153
3/31/98 106220 103675
4/30/98 108583 106008
5/31/98 108919 106050
6/30/98 108780 105743
7/31/98 109453 106098
8/31/98 113459 109005
9/30/98 120119 116276
10/31/98 123990 120624
11/30/98 121682 118538
12/31/98 125700 121833
(Past performance is not predictive of future performance.)
Average Annual Total Return for the periods ended December 31, 1998:
<TABLE>
<CAPTION>
One Since
Year Inception*
<S> <C> <C>
International Portfolio 18.35% 9.03%
JP Morgan Global Government Bond Index (Non-U.S.
Unhedged) 18.30% 7.75%
</TABLE>
* International Portfolio commenced operations on May 9,
1996.
13
<PAGE>
FFTW Funds, Inc.
Performance - Global and International Portfolios (continued) (unaudited)
December 31, 1998
Global Tactical Exposure Portfolio seeks to attain a high level of total
return as may be consistent with the preservation of capital by investing
primarily in high-quality fixed income securities from bond markets worldwide,
denominated in foreign currencies, with an average U.S. dollar-weighted
duration of less than eight years and by actively utilizing currency hedging
techniques.
[GRAPH APPEARS HERE]
Comparison of Changes in Value of a $100,000 Investment in
Global Tactical Exposure Portfolio and the JP Morgan 3-Month Eurodeposit Index
Global Tactical JP Morgan 3-Month
Exposure Portfolio Eurodeposit Index
------------------ -----------------
9/14/95 100000 100000
9/30/95 99563 100220
10/31/95 100071 100761
11/30/95 101491 101255
12/31/95 103804 101771
1/31/96 103817 102341
2/29/96 103400 102781
3/31/96 103380 103182
4/30/96 105196 103677
5/31/96 104676 104165
6/30/96 104705 104602
7/31/96 105131 105136
8/31/96 104925 105651
9/30/96 105768 106158
10/31/96 106812 106721
11/30/96 107129 107190
12/31/96 107104 107694
1/31/97 108326 108222
2/28/97 110456 108698
3/31/97 110902 109176
4/30/97 111034 109711
5/31/97 110722 110260
6/30/97 111760 110833
7/31/97 112824 111409
8/31/97 113571 111922
9/30/97 115001 112481
10/31/97 115186 113055
11/30/97 115812 113519
12/31/97 116502 114154
1/31/98 116597 114748
2/28/98 116749 115230
3/31/98 117284 115794
4/30/98 118044 116339
5/31/98 119402 116874
6/30/98 120161 117447
7/31/98 121295 118022
8/31/98 124342 118612
9/30/98 123413 119241
10/31/98 123903 119777
11/30/98 124093 120280
12/31/98 126034 120798
(Past performance is not predictive of future performance.)
Average Annual Total Return for the periods ended December 31, 1998:
<TABLE>
<CAPTION>
Since
One Year Inception*
<S> <C> <C>
Global Tactical Exposure Portfolio 8.20% 7.27%
JP Morgan 3-Month Eurodeposit Index 5.82% 5.90%
</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 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.
14
<PAGE>
FFTW Funds, Inc.
Performance - Global and International Portfolios (continued) (unaudited)
December 31, 1998
Emerging Markets Portfolio seeks to attain a high level of total return as may
be consistent with the preservation of capital by investing primarily in fixed
income securities from bond markets in emerging markets countries, denominated
in local currencies or currencies of OECD countries, with an average U.S.
dollar-weighted duration of less than eight years.
[GRAPH APPEARS HERE]
Comparison of Change in Value of a $100,000 Investment in
Emerging Markets Portfolio and a Customized Emerging Markets Benchmark**
Customized Emerging
Emerging Markets Portfolio Markets Benchmark **
-------------------------- --------------------
8/12/97 100000 100000
8/31/97 99623 98050
9/30/97 100412 97785
10/31/97 96269 94901
11/30/97 97779 95063
12/31/97 98805 91506
1/31/98 97618 86666
2/28/98 100461 92620
3/31/98 102886 94812
4/30/98 103397 96376
5/31/98 100775 94041
6/30/98 97534 93205
7/31/98 99631 97587
8/31/98 71371 83284
9/30/98 74642 89625
10/31/98 82305 96166
11/30/98 88206 99556
12/31/98 88429 103067
(Past performance is not predictive of future performance.)
Average Annual Total Return for the period ended December 31, 1998:
<TABLE>
<CAPTION>
Since
One Year Inception*
<S> <C> <C>
Emerging Markets Portfolio (10.50%) (8.49%)
Customized Emerging Markets Benchmark** 8.97% 2.20%
</TABLE>
*Emerging Markets Portfolio commenced operations on August
12,1997.
** 60% of the JP Morgan Emerging Local Markets Index Plus
and 40% of the JP Morgan Emerging Markets Bond Index Plus
15
<PAGE>
FFTW Funds, Inc.
Performance - Global and International Portfolios (continued) (unaudited)
December 31, 1998
International Opportunities Portfolio seeks to attain a high level of total
return consistent with the preservation of capital by investing primarily in
high quality fixed income securities from bond markets worldwide denominated
in foreign currencies with active management of the currency hedge ratio.
[CHART APPEARS HERE]
Comparison of Changes in Value of a $100,000 Investment in
International Opportunities Portfolio and
the JP Morgan Global Government Bond Index (Non-U.S. Unhedged) and
the JP Morgan Global Government Bond Index (Non-U.S. Hedged)
International
Opportunites JP Morgan Non-US JP Morgan
Portfolio (Unhedged) Non-US Hedged Index
------------- ---------------- -------------------
10/8/98 100000 100000 100000
10/31/98 99394 98480 99880
11/30/98 97475 96776 100959
12/31/98 100890 99467 100838
(Past performance is not predictive of future performance.)
Total Return for the period ended December 31, 1998:
<TABLE>
<CAPTION>
Since
Inception*
<S> <C>
International Opportunities Portfolio 0.89%
JP Morgan Global Government Bond Index (Non-US Hedged) 0.84%
JP Morgan Global Government Bond Index (Non-US Unhedged) (0.53%)
</TABLE>
*Inception October 8, 1998.
16
<PAGE>
FFTW Funds, Inc.
Money Market Portfolio - Schedule of Investments
December 31, 1998
<TABLE>
<CAPTION>
Coupon Face
Rate Maturity Amount Value
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Bank Obligations - 3.4%
Investors Bank & Trust Company Cash
Sweep 4.500% 01/04/99 $1,011,000 $ 1,011,000
-------------
(Cost - $1,011,000)
Certificates of Deposit - 59.8%
Bank of Austria Yankee 5.320% 03/30/99 1,000,000 1,000,564
Bank of Nova Scotia Yankee 5.610% 02/25/99 1,000,000 999,957
Barclays Bank Yankee 5.250% 01/14/99 1,000,000 1,000,000
Bayerische Vereinsbank Yankee 5.000% 05/07/99 1,500,000 1,503,195
CIBC Yankee 5.070% 04/27/99 1,000,000 1,001,527
CIBC Yankee 5.040% 02/10/99 1,500,000 1,500,515
Commerzbank Euro 5.320% 01/06/99 1,000,000 1,000,003
Dresdner Yankee 5.310% 03/11/99 1,000,000 1,000,029
ING Bank Euro 5.080% 01/22/99 1,000,000 1,000,006
Morgan Guaranty Trust 5.380% 02/02/99 1,000,000 999,988
Natwest Yankee 5.710% 05/07/99 1,000,000 999,948
Rabobank Euro 5.100% 03/02/99 1,000,000 1,000,065
Societe Generale Yankee 5.050% 04/06/99 1,500,000 1,502,135
Suedwestdeutsche Landesbanken Euro 5.080% 01/22/99 1,000,000 1,000,006
Svenska Handelsbanken Euro 5.320% 01/06/99 1,000,000 1,000,003
Toronto Dominion Bank Yankee 5.610% 02/08/99 1,100,000 1,100,011
-------------
Total (Cost - $17,607,952) 17,607,952
-------------
Commercial Paper - 35.1%*
- -------------------------
Banque Caisse Epargne 5.144% 02/19/99 1,000,000 993,086
E.I. Dupont De Nemours 4.999% 01/29/99 400,000 398,466
E.I. Dupont De Nemours 5.156% 01/11/99 500,000 499,289
Ford Motor Credit Corp. 5.063% 01/14/99 1,500,000 1,497,291
General Electric Capital Corp. 5.310% 01/11/99 1,000,000 998,533
General Motors Acceptance Corp. 5.674% 01/20/99 1,000,000 997,086
H.H. Heinz 5.290% 01/21/99 1,000,000 997,083
KWF International Finance 5.044% 04/22/99 1,000,000 984,707
NYS Power Inc. 5.331% 01/19/99 1,000,000 997,350
Procter & Gamble 5.102% 02/25/99 1,000,000 992,286
Shell Finance Inc. 5.203% 03/29/99 1,000,000 987,747
-------------
Total (Cost - $10,342,924) 10,342,924
-------------
Total Investments - 98.3% (Cost -
$28,961,876) 28,961,876
-------------
Other Assets and Liabilities - 1.7% 489,541
-------------
Net Assets - 100.0% $ 29,451,417
=============
</TABLE>
* Interest rate shown represents yield to maturity at date of purchase.
See Notes to Financial Statements.
17
<PAGE>
FFTW Funds, Inc.
U.S. Short-Term Portfolio - Schedule of Investments
December 31, 1998
<TABLE>
<CAPTION>
Coupon
Rate Maturity Face Amount Value
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Asset- and Mortgage-Backed
Securities - 64.4%
Aames Mortgage Trust (FRN), Ser.
1997-C, Class A1A 5.740% 11/15/27 $ 288,522 $ 281,987
Advanta Business Corp., Ser. 1998-1,
Class A1 5.770% 12/15/06 8,000,000 8,012,800
Amresco Residential Securities
Mortgage Loan Trust (FRN), Ser.
1998-2, Class A6 5.197% 05/25/28 8,388,593 8,292,712
BankBoston Commercial Loan Master,
LLC (144A) (FRN), Ser. 1998-1,
Class A1(a) 5.563% 11/16/03 15,000,000 15,000,000
BankBoston Home Equity Loan Trust,
Ser. 1998-2, Class A1 6.280% 11/25/10 10,000,000 9,984,375
Beneficial Mortgage Corp. (FRN),
Ser. 1995-1, Class A1 5.844% 03/28/25 1,147,769 1,147,322
Beneficial Mortgage Corp. (FRN),
Ser. 1997-1, Class M 5.874% 05/28/37 3,000,000 2,976,210
Block Mortgage Finance, Inc. (FRN),
Ser. 1997-2, Class A5 5.834% 05/25/27 1,728,986 1,719,442
Case Equipment Loan Trust, Ser.
1998-C, Class A2 5.490% 08/15/02 14,000,000 13,974,844
Caterpillar Financial Asset Trust,
Ser. 1998-A, Class A2 5.750% 09/25/01 10,000,000 10,033,700
Champion Home Equity Loan Trust,
Ser. 1997-2, Class A1 6.590% 11/25/10 3,326,354 3,324,823
Chase Manhattan Auto Owner Trust,
Ser. 1996-C, Class A3 5.950% 11/15/00 3,096,947 3,109,923
Chase Manhattan RV Owner Trust, Ser.
1997-A, Class A5 6.050% 11/15/04 10,000,000 10,005,000
Citibank Credit Card Master Trust 1
(FRN), Ser. 1998-7, Class B 5.660% 05/15/02 15,000,000 14,983,200
Contimortgage Home Equity Loan Trust
(FRN), Ser. 1996-1, Class A8 5.875% 03/15/27 825,565 830,989
Contimortgage Home Equity Loan Trust
(FRN), Ser. 1997-3, Class A10 5.745% 08/15/28 3,536,074 3,532,325
Copeico Capital Funding Corp., Ser.
1998-A, Class A3 5.780% 08/15/01 7,000,000 7,039,270
Crimi Mae CMBS Corp. (144A), Ser.
1996-1, Class A1 (a) 5.697% 10/20/01 12,556,119 12,450,177
Daimler-Benz Verhicle Trust, Ser.
1998-A, Class A3 5.160% 11/10/00 9,000,000 8,981,016
Discover Card Master Trust 1 (FRN),
Ser. 1994-2, Class A 5.885% 10/16/04 16,955,000 17,018,920
EQCC Home Equity Loan Trust (FRN),
Ser. 1997-3, Class A-10 5.710% 11/15/28 6,668,263 6,600,514
EQCC Home Equity Loan Trust, Ser.
1996-4, Class A3 6.260% 11/15/06 747,661 748,169
EQCC Home Equity Loan Trust, Ser.
1998-2, Class A1F 6.235% 04/15/08 9,827,234 9,844,628
FHLMC, Ser. 1561, Class ZA 6.000% 01/15/05 4,637,261 4,634,850
FHLMC, Ser. 1587, Class EZ 5.750% 05/15/07 5,577,769 5,588,255
FHLMC, Ser. 1727, Class E 6.500% 04/15/18 10,000,000 10,082,760
FHLMC, Ser. 2012, Class A 6.900% 04/15/26 12,995,721 12,962,049
First Chicago Master Trust II (FRN),
Ser. 1996-R, Class A 5.606% 07/15/01 8,000,000 7,996,400
First Chicago Master Trust II (FRN),
Ser. 1996-S, Class A 5.661% 08/15/04 15,000,000 14,946,900
First Chicago Master Trust II (FRN),
Ser. 1998-V, Class A 5.820% 10/15/03 20,000,000 20,031,250
FNMA (FRN), Ser. 1993-54, Class FK 6.256% 04/25/21 2,977,563 2,986,109
FNMA, Ser. 1993-163, Class BK 6.150% 11/25/17 2,673,508 2,672,760
FNMA, Ser. 1993-196, Class E 5.500% 02/25/07 8,685,178 8,669,284
Ford Credit Auto Owner Trust, Ser.
1997-B, Class A2 5.950% 01/15/00 1,749,860 1,751,662
Ford Credit Auto Owner Trust, Ser.
1998-B, Class A-2 5.800% 10/15/00 7,848,829 7,882,343
Ford Credit Auto Owner Trust, Ser.
1998-C, Class A4 5.810% 03/15/02 5,000,000 5,043,050
GE Capital Mortgage Services, Inc.,
Ser. 1997-HE3, Class A1 6.530% 12/25/10 363,179 362,009
GMACM Home Equity Loan Trust (FRN),
Ser. 1998-1, Class A 5.705% 03/15/24 8,907,291 8,762,548
Green Tree Home Improvement Loan
Trust, Ser. 1998-D, Class HEA1 5.980% 08/15/29 9,297,268 9,320,697
Green Tree Financial Corp., Ser.
1997-3, Class A-2 6.490% 07/15/28 2,315,805 2,320,853
HCF Revolving Home Equity Loan Trust
(FRN), Ser. 1996-1, Class A 5.761% 07/20/17 8,598,573 8,571,832
Headlands Mortgage Securities, Inc.
(FRN), Ser. 1997-3, Class C1 5,906% 07/25/27 414,140 413,506
HFC Home Equity Loan (FRN), Ser.
1993-1, Class A1 5.670% 05/20/08 3,478,322 3,458,739
</TABLE>
18
<PAGE>
FFTW Funds, Inc.
U.S. Short-Term Portfolio - Schedule of Investments (continued)
December 31, 1998
<TABLE>
<CAPTION>
Coupon
Rate Maturity Face Amount Value
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Asset- and Mortgage-Backed
Securities - (continued)
HFC Home Equity Loan Asset Backed
Certificates (FRN), Ser. 1992-1,
Class A1 5.720% 05/20/07 $ 120,773 $ 120,761
HFC Home Equity Loan Asset Backed
Certificates (FRN), Ser. 1992-1,
Class A2 6.005% 05/20/07 73,266 73,292
HFC Home Equity Loan Asset Backed
Certificates (FRN), Ser. 1992-2,
Class A2 5.985% 10/20/07 4,998,650 4,993,851
HFC Revolving Home Equity Loan Trust
(FRN), Ser. 1994-2, Class A1 5.791% 09/20/14 5,526,356 5,477,890
Keycorp Student Loan Trust (FRN),
Ser. 1995-B, Class A 5.854% 09/27/24 7,259,490 7,255,062
Lakeshore Commercial Loan Master
Trust (144A) (FRN), Ser. 1998-AA,
Class A2(a) 5.314% 07/25/04 10,000,000 9,959,375
MBNA Master Credit Card Trust, Ser.
1993-3, Class A 5.400% 09/15/00 2,886,246 2,881,253
MBNA Master Credit Card Trust, Ser.
1994-C, Class B 5.450% 03/15/04 10,000,000 9,980,600
Merrill Lynch Mortgage Investors,
Inc. (FRN), Ser. 1998-FF1, Class A 5.377% 01/20/28 8,842,736 8,815,235
Metris Master Trust (144A) (FRN),
1998-1A, Class B (a) 6.011% 08/20/05 5,000,000 4,959,375
Newcourt Equipment Trust Securities,
Ser. 1998-1, Class A2 5.170% 09/20/00 12,000,000 11,949,375
Norwest Auto Trust, Ser. 1996-A,
Class CTFS 6.300% 05/15/03 10,000,000 10,054,688
People's Bank Credit Card Master
Trust (FRN), Ser. 1996-1, Class A 5.686% 11/15/04 12,350,000 12,336,415
Premier Auto Trust, Ser. 1995-2,
Class A6 7.200% 10/04/99 739,646 740,615
Premier Auto Trust, Ser. 1995-2,
Class CTFS 7.350% 06/04/01 7,000,000 7,015,750
Premier Auto Trust, Ser. 1997-1,
Class A2 5.900% 04/06/00 876 876
Premier Auto Trust, Ser. 1997-2,
Class A3 6.130% 09/06/00 6,500,000 6,531,330
Premier Auto Trust, Ser. 1998-4,
Class A2 5.560% 04/08/01 10,000,000 10,030,200
Premier Auto Trust, Ser. 1998-5,
Class A2 5.070% 04/09/01 10,000,000 9,983,100
Providian Master Trust (FRN), Ser.
1997-3, Class A 5.646% 12/15/05 10,000,000 9,981,400
Residential Accredit Loans Inc.
(FRN), Ser. 1998-QS2, Class A4 6.224% 02/25/28 8,127,044 8,132,001
Residential Asset Securities Corp.,
Ser. 1998-KS1, Class Al1 6.940% 02/25/11 774,327 776,030
Residential Asset Securitization
Trust (FRN), Ser. 1997-A4, Class A9 6.056% 06/25/27 3,029,122 3,030,667
Residential Funding Mortgage
Securities I, Ser. 1993-S41, Class
A1 6.842% 09/25/23 6,765 6,740
Santa Barbara Funding II (FRN), Ser.
A, Class 1 5.900% 03/20/18 241,523 243,100
Saxon Asset Securities Trust, Ser.
1998-2, Class AV2 6.200% 04/25/17 13,100,000 13,134,453
Sears Credit Account Master Trust,
Ser. 1995-4, Class B 6.350% 01/15/03 8,000,000 8,017,440
Sears Credit Account Master Trust,
Ser. 1996-2, Class A 6.500% 10/15/03 14,776,667 14,865,031
Secured Asset Soc. Commercial
Mortgage Corp (144A) (FRN), Ser.
1998-3A, Class A1A (a) 6.174% 10/25/99 9,913,556 9,914,845
Structured Asset Securities Corp.
(144A) (FRN), Ser. 1998-C2A, Class
A (a) 5.794% 12/25/00 7,046,385 7,018,059
Toyota Auto Lease Trust, Ser. 1998-
B, Class A1 5.350% 07/25/02 9,000,000 8,966,250
Westpac Securitisation Trust (FRN),
Ser. 1998-1G, Class A 5.480% 07/19/29 13,456,529 13,328,691
WFS Financial Owner Trust, Ser.
1998-B, Class A2 5.777% 01/20/01 12,000,000 12,022,500
-------------
Total (Cost - $541,946,314) 540,946,452
-------------
Bank Obligations - 3.3%
Investors Bank & Trust Company Cash
Sweep 4.500% 01/04/99 27,521,000 27,521,000
-------------
(Cost - $27,521,000)
</TABLE>
19
<PAGE>
FFTW Funds, Inc.
U.S. Short-Term Portfolio - Schedule of Investments (continued)
December 31, 1998
<TABLE>
<CAPTION>
Coupon
Rate Maturity Face Amount Value
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Certificates of Deposit - 5.5%
Abbey National Euro 5.065% 03/30/99 $24,000,000 $ 24,030,136
Bank of Austria Yankee 5.320% 03/30/99 12,000,000 12,006,774
Rabobank Euro 5.100% 03/02/99 10,000,000 10,000,653
--------------
Total (Cost - $46,037,563) 46,037,563
--------------
Commercial Paper - 3.0%*
General Electric Capital Corp. 5.320% 01/11/99 11,000,000 10,956,110
Shell Finance Inc. 5.070% 03/29/99 15,000,000 14,615,525
--------------
Total (Cost - $25,571,635) 25,571,635
--------------
Corporate Obligations - 9.1%
Beneficial Corp. (FRN) (MTN) 5.411% 12/05/01 10,000,000 9,951,000
Chrysler Financial Co., LLC (MTN) 5.507% 06/09/00 15,000,000 14,969,160
CIT Group Holdings, Inc. 5.000% 10/06/00 15,000,000 14,882,250
JP Morgan & Co., Inc. (FRN) (MTN) 5.200% 02/25/00 10,000,000 9,983,360
Key Bank NA (FRN) 5.469% 10/27/00 15,000,000 15,006,000
Salomon, Inc. (FRN) 6.520% 02/14/00 12,000,000 11,960,624
--------------
Total (Cost - $77,031,589) 76,752,394
--------------
Foreign Obligations - 1.2%
Halifax Building Society (FRN) 5.244% 09/10/99 10,000,000 9,999,470
--------------
(Cost - $10,002,333)
Time Deposits - 12.6%
Bank of Montreal 4.750% 01/04/99 26,000,000 26,000,000
Den Banske Bank 4.750% 01/04/99 40,000,000 40,000,000
Societe Generale 4.750% 01/04/99 40,000,000 40,000,000
--------------
Total (Cost - $106,000,000) 106,000,000
--------------
U.S. Government Obligations - 0.4%*
U.S. Treasury Bill @ 4.441% 05/27/99 3,000,000 2,947,806
--------------
(Cost - $2,946,528)
Total Investments - 99.5% (Cost -
$837,056,962) 835,776,320
--------------
Other Assets and Liabilities - 0.5% 4,589,686
--------------
Net Assets - 100.0% $ 840,366,006
==============
</TABLE>
Summary of Abbreviations
FRNFloating Rate Note
MTNMedium-Term Note
* Interest rate shown represents yield to maturity at date of purchase.
@ Security, or a portion thereof, is held in a margin account as collateral
for open financial futures contracts.
(a) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At December 31,
1998, these securities were valued at $59,301,831 or 7.1% of net assets.
See Notes to Financial Statements.
20
<PAGE>
FFTW Funds, Inc.
Limited Duration Portfolio - Schedule of Investments
December 31, 1998
<TABLE>
<CAPTION>
Coupon
Rate Maturity Face Amount Value
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Long-Term Investments - 140.1%
Asset- and Mortgage-Backed
Securities - 84.1%
Aames Mortgage Trust (FRN), Ser.
1998-B, Class A1A 5.700% 06/15/28 $ 902,059 $ 895,672
Advanta Mortgage Loan Trust (FRN),
Ser. 1997-1, Class A6 5.889% 05/25/27 1,235,872 1,230,496
Allied Capital Commercial Mortgage
Trust (144A), Ser. 1998-1, Class A
(a) 6.310% 09/25/03 1,255,421 1,259,148
BankBoston Commercial Loan Master,
LLC (144A) (a) 6.133% 02/16/06 3,000,000 3,000,000
BankBoston Marine Asset Backed
Trust, Ser. 1997-2, Class A4 6.410% 10/15/08 1,500,000 1,508,520
Centrex Auto Trust (144A), Ser.
1996-B, Class CTFS (a) 6.600% 09/15/04 500,000 510,625
Champion Home Equity Loan Trust
(FRN), Ser. 1998-1, Class A1 5.352% 09/25/28 3,794,981 3,720,371
CIT RV Trust, Ser. 1997-A, Class A4 6.200% 10/16/06 1,250,000 1,261,638
Citicorp Mortgage Securities, Inc.,
Ser. 1993-7, Class A2 7.000% 08/25/21 5,223 5,203
Contimortage Home Equity Loan Trust,
Ser. 1997-4, Class A5 6.440% 12/15/12 1,200,000 1,213,884
Copelco Capital Funding Corp., Ser.
1998-A, Class A3 5.780% 08/15/01 2,000,000 2,011,220
Criimi Mae CMBS Corp. (144A), Ser.
1998-1, Class A1 (a) 5.697% 10/20/01 965,855 957,706
Daimler-Banz Vehicle Trust, Ser.
1998-A, Class A3 5.160% 11/10/00 2,500,000 2,494,727
Discover Card Master Trust I (FRN),
Ser. 1994-2, Class A 5.885% 10/16/04 3,000,000 3,011,310
EQCC Home Equity Loan Trust (FRN),
Ser. 1997-3, Class A10 5.710% 11/15/28 1,025,887 1,015,464
EQCC Home Equity Loan Trust, Ser.
1998-1, Class A2F 6.136% 04/15/09 2,000,000 2,001,780
FHLMC (FRN)., Ser. 2079, Class FA 6.044% 07/17/28 920,452 922,751
FHLMC, Ser. 1733, Class PD 7.250% 01/15/17 242,242 242,075
FHLMC, Ser. 2012, Class A 6.900% 04/15/26 4,331,907 4,320,683
First Chicago Master Trust II (FRN),
Ser. 1995-0, Class A 5.770% 02/15/04 5,000,000 5,001,050
First Plus Home Loan Trust, Ser.
1998-1, Class A2 5.970% 11/20/10 1,000,000 1,000,810
Fleet Credit Card Master Trust
(FRN), Ser. 1998-A, Class A 5.575% 07/15/03 1,000,000 997,230
FNMA Whole Loan, Ser. 1996-W4, Class
A3 6.720% 12/25/11 1,000,000 1,010,984
FNMA, Ser. 1993-35, Class G 6.500% 07/25/06 3,000,000 3,024,177
Ford Credit Auto Owner Trust, Ser.
1998-C, Class A4 5.810% 03/15/02 3,000,000 3,025,830
GNMA (FRN), Ser. 1998, Class F 6.037% 07/16/28 1,828,737 1,839,241
Green Tree Home Equity Loan Trust,
Ser. 1998-A, Class A2 6.040% 06/15/29 2,000,000 2,008,260
Merrill Lynch Mortgage Investors,
Inc. (FRN), Ser. 1994-M1, Class B 8.335% 06/25/22 1,000,000 1,003,600
Navistar Financial Corp. Owner
Trust, Ser. 1997-A, Class A3 6.750% 03/15/02 3,600,000 3,654,900
Norwest Asset Securities Corp., Ser.
1997-6, Class A11 7.500% 05/25/27 887,562 891,458
People's Bank Credit Card Master
Trust (FRN), Ser. 1996-1, Class A 5.686% 11/15/04 1,000,000 998,900
Rental Car Finance Corp. (144A),
Ser. 1997-1, Class A1 (a) 6.250% 06/25/03 1,500,000 1,508,438
Residential Accredit Loans, Inc.,
Ser. 1996-QS2, Class A3 7.050% 03/25/19 7,948 7,918
Residential Funding Mortgage
Securities I, Ser. 1996-S20, Class
A1 7.100% 09/25/26 321,135 320,804
Saxon Asset Securities Trust, Ser.
1998-2, Class AV2 6.200% 04/25/17 3,501,000 3,510,208
Secured Lein Home Loan Owner Trust
(144A)(FRN), Ser. 1998-1A,
Class A1 (a) 5.495% 07/15/10 2,383,099 2,374,907
Structured Asset Securities Corp.
(FRN), Ser. 1998-9, Class A3 5.884% 08/25/28 1,500,000 1,476,140
The Money Store Home Equity Trust
(FRN), Ser. 1998-A, Class AV 5.710% 06/15/29 820,502 814,513
Toyota Auto Lease Trust, Ser. 1998-
B, Class A1 5.450% 03/25/03 3,000,000 2,984,063
Vendee Mortgage Trust, Ser. 1998-1,
Class 2A 7.000% 11/15/14 1,733,805 1,759,800
Westpac Securitisation Trust (FRN),
Ser. 1998-1G, Class A 5.483% 07/19/29 4,485,510 4,442,896
-------------
Total (Cost - $75,395,723) 75,239,400
-------------
</TABLE>
21
<PAGE>
FFTW Funds, Inc.
Limited Duration Portfolio - Schedule of Investments (continued)
December 31, 1998
<TABLE>
<CAPTION>
Coupon
Rate Maturity Face Amount Value
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Corporate Obligations - 9.2%
Associates Pass-Thru Asset Trust
Sec. Corp. (144A) (a) 6.450% 09/15/00 $ 500,000 $ 506,959
Banc One Corp. 7.250% 08/01/02 500,000 526,044
Chase Manhattan Corp. (MTN) 6.450% 03/29/01 1,000,000 1,017,729
FNMA (MTN) 5.820% 10/18/99 5,000,000 5,031,600
Industrial Financial Corp. (144A)
(a) 6.875% 04/01/03 200,000 174,189
Metropolitan Life Insurance Co.,
(144A) (a) 6.300% 11/01/03 1,000,000 1,004,400
-------------
Total (Cost - $8,252,607) 8,260,921
-------------
Mortgage (TBAs) - 39.5%
FNMA Dwarf 6.000% 02/01/14 8,000,000 8,030,072
FNMA Dwarf 6.000% 01/01/14 5,000,000 5,014,105
FNMA Dwarf 6.500% 01/01/14 12,000,000 12,172,607
FNMA Dwarf 6.500% 02/01/14 10,000,000 10,153,210
-------------
Total (Cost - $35,211,875) 35,369,994
-------------
U.S. Government Obligations - 7.3%
U.S. Treasury Note 4.625% 11/30/00 3,750,000 3,752,344
U.S. Treasury Note 4.625% 12/31/00 2,800,000 2,804,367
-------------
Total (Cost - $6,549,964) 6,556,711
-------------
Total Long Term Investments (Cost -
$125,410,169) 125,427,026
-------------
Short-Term Investments - .9%
Investors Bank & Trust Company Cash
Sweep 4.500% 01/04/99 245,000 245,000
U.S. Treasury Bill*@ 4.441% 05/27/99 550,000 540,431
-------------
Total (Cost - $785,197) 785,431
-------------
Total Investments - 141.0% (Cost -
$126,195,366) 126,212,457
-------------
Other Assets and Liabilities -
(41.0%) (36,691,472)
-------------
Net Assets - 100.0% $ 89,520,985
=============
</TABLE>
Summary of Abbreviations
<TABLE>
<C> <S>
FRN Floating Rate Note
MTN Medium-Term Note
</TABLE>
* Interest rate shown represents yield to maturity at date of purchase.
@ Security, or a portion thereof, is held in a margin account as collateral
for open financial futures contracts.
(a) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At December
31,1998, these securities were valued at $11,296,372 or 12.6% of net
assets.
See Notes to Financial Statements.
22
<PAGE>
FFTW Funds, Inc.
Mortgage-Backed Portfolio - Schedule of Investments
December 31, 1998
<TABLE>
<CAPTION>
Coupon Face
Rate Maturity Amount Value
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Long-Term Investments - 179.8%
Asset-Backed Securities - 40.7%
American Residential Eagle
Certificate Trust (FRN), Ser.
1998-1, Class M1 5.719% 05/25/28 $ 19,000,000 $ 18,505,240
BankBoston Commercial Loan
Master, LLC (144A) (a) 6.133% 02/16/06 6,000,000 6,000,000
CIT Group Home Equity Loan Trust
Ser. 1998-1, Class M1 6.440% 11/15/27 3,000,000 3,014,160
CIT Group Home Equity Loan
Trust, Ser. 1998-1 Class M2 6.720% 09/15/27 3,000,000 2,938,140
Citibank Credit Card Master
Trust I (FRN), Ser. 1997-10,
Class B 5.695% 11/15/01 32,000,000 31,993,920
Citibank Credit Card Master
Trust I (FRN), Ser. 1998-7,
Class B 5.660% 05/15/02 35,000,000 34,960,800
Contimortgage Home Equity Loan
Trust, Ser. 1997-3, Class A5 7.010% 08/15/13 12,055,000 12,214,608
Discover Card Master Trust I,
Ser. 1998-7, Class B 5.900% 05/16/06 10,000,000 9,996,875
EQCC Home Equity Loan Trust,
Ser. 1997-3, Class A7 6.930% 02/15/29 10,700,000 11,092,283
First Union Lehman Brothers Bank
of America, Ser. 1998-C2, Class
A2 6.560% 11/18/08 10,000,000 10,348,900
GMACM Home Equity Loan Trust
(FRN), Ser. 1998-1, Class A 5.170% 03/15/24 19,150,675 18,839,476
Green Tree Home Equity Loan
Trust, Ser. 1998-C, Class M1 6.800% 07/15/29 7,200,000 7,323,840
Green Tree Financial Corp., Ser.
1998-6, Class M2 6.800% 05/01/28 6,000,000 5,928,660
Household Affinity Credit Card
Master Trust, Ser. 1997-1,
Class B 5.280% 08/16/04 23,500,000 23,390,960
Mellon Bank Home Equity Loan
Trust (FRN), Ser. 1995-1, Class
A1 5.726% 04/15/26 11,537,106 11,520,031
Metris Master Trust (144A)
(FRN), 1998-1A, Class B (a) 5.511% 08/20/05 6,000,000 5,951,250
Nationslink Funding Corporation,
Ser. 1998-2, Class A1 6.001% 11/20/07 4,973,901 5,026,226
Saxon Asset Securities Trust,
Ser. 1998-2, Class MF1 6.690% 12/25/27 11,691,000 11,828,486
Signet Home Equity Loan Corp.
Trust (FRN), Ser. 1995-A, Class
A 5.561% 06/20/04 6,891,231 6,856,913
Structured Asset Securities
Corp. (144A) (FRN), Ser. 1998-
C2A, Class A (a) 5.212% 12/25/00 32,818,538 32,686,608
Structured Asset Securities
Corp. (FRN), Ser. 1998-4, Class
A2 5.282% 06/25/28 38,000,000 37,738,750
UCFC Home Equity Loan, Ser.
1998-D, Class AC2 5.905% 05/15/21 15,000,000 14,962,500
Westpac Securitisation Trust
(FRN), Ser. 1998-1G, Class A 5.483% 07/19/29 8,971,019 8,885,794
---------------
Total (Cost - $332,907,781) 332,004,420
---------------
Collateralized Mortgage
Obligations (CMOs) - 12.3%
FHLMC, Ser. 1415, Class M 6.750% 02/15/06 14,200,000 14,331,861
FHLMC, Ser. 1511, Class L 6.000% 05/15/08 9,064,277 9,047,689
FHLMC (FRN), Ser. 1506, Class FD 6.563% 05/15/08 6,345,700 6,442,840
FHLMC, Ser. 1614, Class K 10.000% 06/15/20 2,364,664 2,452,802
FHLMC, Ser. 1765-B, Class BA 10.000% 01/15/17 1,688,186 1,705,374
FHLMC (FRN), Ser. 2079, Class FA 6.044% 07/17/28 19,329,492 19,377,777
FNMA, Ser. G1993-10, Class H 5.000% 08/25/22 4,800,000 4,638,269
FNMA (FRN), Ser. 1993-156, Class
FA 5.494% 05/25/16 7,302,844 7,301,851
FNMA (FRN), Ser. G93-40, Class
FA 5.594% 12/25/23 12,256,023 12,279,015
FNMA (FRN), Ser. 1996-68, Class
FD 5.580% 12/18/26 7,243,436 7,249,129
FNMA, Ser. 1997-13, Class QA 6.500% 03/18/09 3,671,381 3,674,241
FNMA Aces, Ser. 1997-M5, Class C 6.740% 08/25/07 11,000,000 11,620,510
---------------
Total (Cost - $98,726,082) 100,121,358
---------------
</TABLE>
23
<PAGE>
FFTW Funds, Inc.
Mortgage-Backed Portfolio - Schedule of Investments (continued)
December 31, 1998
<TABLE>
<CAPTION>
Coupon Face
Rate Maturity Amount Value
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest Only
Obligations (IOs) -
3.9% (b)*
DLJ Commercial Mortgage
Corp. IO, Ser. 1998-
CG1, Class S 8.244% 05/10/23 $ 6,710,209 $ 6,489,776
FHLMC IO, Ser. 150,
Class IO 23.271% 07/01/23 991,984 1,063,359
FHLMC IO, Ser. 188,
Class IO 11.491%-20.691% 10/01/27 2,980,339 2,816,770
FHLMC IO, Ser. 195,
Class IO 12.850%-20.253% 04/01/28 1,876,150 1,825,215
FNMA IO, Ser. 1992-148,
Class C 0.216%-3.669% 04/25/19 498,599 226,619
FNMA IO, Ser. 240, Class
2 7.000% 09/01/23 1,070,025 995,032
FNMA IO, Ser. 252, Class
2 18.017% 11/01/23 1,226,843 1,274,772
FNMA IO, Ser. 218, Class
2 19.100% 04/01/23 797,654 905,401
First Union Lehman
Brothers Trust IO, Ser.
1998-C2, Class IO 8.503% 05/18/28 4,830,358 4,521,006
Prudential Home Mortgage
Sec. IO, Ser. 1994-30,
Class A11 12.045%-14.255% 10/25/24 576,728 180,918
Residential Accredit
Loan Inc. IO, Ser.
1997-QS13, Class A2 43.701% 12/25/27 2,252,234 2,396,023
Structured Asset
Securities Corp. IO,
Ser. 1996-CFL, Class X1 10.896%-12.437% 02/25/28 3,184,710 3,221,109
Structured Asset
Securities Corp. IO,
Ser. 1996-CFL, Class X2 5.315%-11.238% 02/25/28 1,263,235 1,520,255
Vendee Mortgage Trust
IO, Ser. 1992-2, Class
IO 3.908%-16.679% 09/15/22 1,379,247 1,065,383
Vendee Mortgage Trust
IO, Ser. 1994-2, Class
3 IO 9.118%-19.331% 06/15/24 298,696 222,129
Vendee Mortgage Trust
IO, Ser. 1994-3A, Class
1 IO 8.235%-18.080% 09/15/24 1,042,145 693,057
Vendee Mortgage Trust
IO, Ser. 1994-3B, Class
2 IO 3.215%-15.752% 09/15/24 438,807 336,173
Vendee Mortgage Trust
IO, Ser. 1996-2, Class
1 IO 7.993%-9.841% 06/15/26 366,023 155,465
Vendee Mortgage Trust
IO, Ser. 1998-2, Class
1 IO 9.955% 06/15/28 159,418 160,380
Vendee Mortgage Trust
IO, Ser. 1996-1, Class
1 IO 6.809%-19.766% 02/15/26 2,897,546 1,529,671
---------------
Total (Cost -
$34,880,950) 31,598,516
---------------
Principal Only
Obligations (POs) -
2.4% (b)*
FNMA PO, Ser. 1993-100,
Class J 7.192%-8.535% 06/25/23 2,428,152 2,725,738
FNMA PO, Ser. 1993-100,
Class L 7.45% 06/25/23 1,934,969 2,154,052
FNMA PO, Ser. 1993-100,
Class M 7.945%-8.376% 06/25/23 2,080,646 2,337,147
FNMA PO, Ser. 1993-100,
Class N 7.192%-8.517% 06/25/23 1,848,430 2,073,060
FNMA PO, Ser. 1993-159,
Class PA 6.576%-7.122% 01/25/21 460,821 461,996
FNMA PO, Ser. 1993-157,
Class E 5.952%-9.028% 05/25/22 5,601,797 6,416,883
FNMA PO, Ser. 1998-15,
Class N 5.798% 08/25/21 3,078,797 3,262,188
---------------
Total (Cost -
$17,433,612) 19,431,064
---------------
Commercial Mortgage-
Backed Securities -
33.3%
Aames Mortgage Trust
(FRN), Ser, 1998-A,
Class A1A 5.725% 03/15/28 4,209,652 4,180,900
Aames Mortgage Trust
(FRN), Ser. 1998-B,
Class A1A 5.700% 06/15/28 7,216,472 7,165,379
Amresco Residential Mtg.
(FRN), Ser. 1997-3,
Class A10 5.232% 07/25/27 16,935,952 16,798,602
Amresco Residential Sec.
Mortgage Loan Trust,
Ser. 1998-2, Class M2F 7.040% 06/25/28 6,250,000 6,157,938
Beneficial Mortgage
Corp. (FRN), Ser. 1997-
2, Class A 5.268% 03/28/25 3,825,996 3,824,504
Beneficial Mortgage
Corp. (FRN), Ser. 1996-
1, Class A 5.228% 04/28/26 8,125,025 8,112,919
Beneficial Mortgage
Corp. (FRN), Ser. 1997-
2, Class A 5.168% 09/28/37 8,860,177 8,794,612
CTS Adjustable Rate
Mortgage Trust (FRN),
Ser. 1995-1, Class A 5.673% 05/25/26 2,456,590 2,463,499
Chase Commercial
Mortgage Securities
Corp., Ser. 1997-2,
Class A2 6.600% 11/19/07 5,000,000 5,205,050
</TABLE>
24
<PAGE>
FFTW Funds, Inc.
Mortgage-Backed Portfolio - Schedule of Investments (continued)
December 31, 1998
<TABLE>
<CAPTION>
Coupon Face
Rate Maturity Amount Value
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial Mortgage-Backed
Securities - (continued)
Chase Commercial Mortgage
Securities Corp., Ser. 1998-1,
Class C 6.560% 05/18/08 $ 5,000,000 $ 5,068,100
Chase Commercial Mortgage
Securities Corp., 1998-1,
Class A 5.373% 12/22/99 1,049,983 1,052,545
Chase Commercial Mortgage
Securities Corp., Ser. 1998-2,
Class A1 6.025% 08/18/07 3,282,386 3,321,348
CS First Boston Mortgage
Securities Corp., Ser. 1998-
C1, Class A1B 6.480% 05/17/08 5,000,000 5,173,400
Criimi Mae Commercial Mortgage
Trust (144A), Ser. 1998-C1,
Class A1 (a) 7.000% 11/02/06 6,000,000 5,717,340
Criimi Mae CMBS Corp. (144A),
Ser. 1998-1, Class C (a) 6.701% 05/20/08 7,000,000 6,593,125
DLJ Mortgage Acceptance Corp.
(144A), Ser. 1995-CF2, Class
A3 (a) 7.050% 12/17/27 8,500,000 8,794,844
DLJ Commercial Mortgage Corp.,
Ser. 1998-CG1, Class A1B 6.410% 05/10/08 6,100,000 6,320,088
GE Capital Mortgage Services
Inc. (FRN), Ser. 1998-13,
Class A12 5.340% 08/25/28 25,392,067 25,033,277
GMAC Commercial Mortgage
Securities Inc., Ser. 1997-C1,
Class A3 6.869% 08/15/07 16,000,000 17,057,760
GMAC Commercial Mortgage
Securities Inc., Ser. 1998-C2,
Class A1 6.150% 11/15/07 4,913,588 4,991,026
GS Mortgage Securities Corp. II
(144A)(FRN), Ser. 1998-G81,
Class A (a) 5.160% 02/13/00 4,948,750 4,924,006
GS Mortgage backed Securities
Corp. II, Ser. 1998-C1, Class
A1 6.060% 10/18/30 4,940,725 5,004,312
LB Commercial Conduit Mortgage
Trust, Ser. 1998-C1, Class AB 6.480% 01/18/08 13,750,000 14,295,875
Lakeshore Commercial Loan
Master Trust (144A) (FRN, Ser.
1998-AA, Class A2 (a) 5.080% 07/25/04 7,000,000 6,971,563
Merrill Lynch Mortgage
Investors, Inc. (FRN), Ser.
1998-FF1, Class A 5.110% 01/20/28 8,842,736 8,815,235
MLCC Mortgage Investors, Inc.
(FRN), Ser. 1995-B, Class A 5.713% 10/15/20 11,789,261 11,765,918
Mid-America Finance Inc., Ser.
1998-1, Class A 6.376% 09/01/05 13,250,000 12,753,125
Morgan Stanley Capital I, Ser.
1998 WF2, Class C 6.770% 06/15/08 6,000,000 6,170,040
Morgan Stanley Capital, Ser.
1998-HF2, Class A-2 6.480% 11/15/30 10,000,000 10,403,600
PNC Mortgage Securities Corp.,
Ser. 1998-6, Class 1B2 6.750% 09/25/28 5,164,002 4,968,738
Prudential Home Mortgage
Securities (FRN), Ser. 1993-
13, Class A3 5.713% 04/25/08 9,842,627 9,858,277
Residential Funding Mtg.
Securities (FRN), Ser. 1997-
HS2, Class A 5.216% 09/20/22 14,215,191 14,119,380
Vanderbilt Mortgage Finance
(FRN), Ser. 1997-B, Class 2A1 5.513% 11/07/12 4,360,691 4,361,606
Vanderbilt Mortgage Finance,
Ser. 1998-B, Class A6 07/07/28 5,875,000 5,668,610
---------------
Total (Cost - $273,065,229) 271,906,541
---------------
Mortgage Pools - 0.6%
FNMA Pool #D82608 7.500% 09/01/27 1,235,391 1,268,833
FNMA Pool #D83270 7.500% 10/01/27 2,381,558 2,446,027
FNMA Pool #C16343 7.500% 10/01/28 686,579 705,103
FNMA Pool #340777 6.500% 03/01/11 17,606 17,859
GNMA Pool #000017 8.000% 08/15/00 4,864 4,950
GNMA Pool #359157 7.500% 10/15/23 290,339 299,334
---------------
Total (Cost - $4,729,681) 4,742,106
---------------
Long Options - 0.0% Strike Contracts
3 month LIBOR cap 8.000% 11/14/01 22 14,234
3 month LIBOR cap 8.500% 11/14/02 38 42,969
---------------
Total (Cost - $199,150) 57,203
---------------
</TABLE>
25
<PAGE>
FFTW Funds, Inc.
Mortgage-Backed Portfolio - Schedule of Investments (continued)
December 31, 1998
<TABLE>
<CAPTION>
Coupon Face
Rate Maturity Amount Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mortgage (TBAs) - 80.7%
FNMA Dwarf 6.000% 01/01/14 $ 85,000,000 $ 85,239,785
FNMA 6.500% 01/01/28 412,000,000 414,836,208
FNMA 6.500% 02/01/28 6,000,000 6,046,926
FNMA 7.500% 01/01/28 41,000,000 42,106,262
GNMA 8.000% 01/01/28 106,000,000 110,118,842
-------------
Total (Cost - $658,798,908) 658,348,023
-------------
U.S. Treasury Obligations - 5.9%
U.S. Treasury Note 5.500% 02/15/08 5,000,000 5,300,000
U.S. Treasury Note 4.750% 11/15/08 36,010,000 36,291,346
U.S. Treasury Note 6.625% 05/15/07 5,500,000 6,185,784
-------------
Total (Cost - $47,366,461) 47,777,130
-------------
Total Long-Term Investments (Cost - $1,468,107,854) 1,465,986,361
-------------
Short-Term Investments - 2.6%
Investors Bank & Trust Company Cash
Sweep 4.500% 01/04/99 6,344,000 6,344,000
U.S. Treasury Bill*@ 4.441% 05/27/99 15,550,000 15,279,461
-------------
Total (Cost - $21,615,273) 21,623,461
-------------
Total Investments - 182.4% (Cost -
$1,489,723,127) 1,487,609,822
-------------
Other Assets and Liabilities - (82.4%) (672,243,212)
-------------
Net Assets - 100.0% $ 815,366,610
=============
</TABLE>
Summary of Abbreviations
<TABLE>
<C> <S>
FRN Floating Rate Note
LIBOR London Interbank Offered Rate
</TABLE>
* Interest rate shown represents yield to maturity at date of purchase.
@ Security, or a portion thereof, is held in a margin account to cover open
financial futures contracts.
(a) Security exempt from registration under Rule 144A of Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At December 31,
1998, these securities were valued at $77,638,736 or 9.5% of net assets.
(b) Face amount shown represents amortized cost.
See Notes to Financial Statements.
26
<PAGE>
FFTW Funds, Inc.
Worldwide Portfolio - Schedule of Investments
December 31, 1998
<TABLE>
<CAPTION>
Coupon Face
Rate Maturity Amount (a) Value
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Long-Term Investments - 42.9%
Australia - 0.9%
Australian Government Bond
(Cost - $640,763) 6.750% 11/15/06 AUD 900,000 $ 616,065
------------
Canada - 1.7%
Canadian Government Bond
(Cost - $1,200,937) 6.000% 06/01/08 CAD 1,700,000 1,198,548
------------
Denmark - 1.3%
Kingdom of Denmark Bond
(Cost - $673,565) 7.000% 11/10/24 DKK 4,400,000 885,258
------------
Germany - 4.0%
Bundesrepublic Deutschland Bond 6.250% 01/04/24 DEM 2,200,000 1,603,974
CORE (FRN), Ser. 1998-1, Class A-
2A 3.700% 01/15/06 DEM 2,000,000 1,197,143
------------
Total (Cost - $2,681,527) 2,801,117
------------
Netherlands - 3.1%
Bank Nederlandse Gemeenten (MTN)
(Cost - $2,185,408) 6.750% 10/03/05 NLG 3,540,000 2,187,978
------------
Spain - 1.4%
Spanish Government Bond
(Cost - $954,070) 6.000% 01/31/08 ESP 120,200,000 968,932
------------
Sweden - 1.4%
Swedish Government Bond
(Cost - $902,229) 8.000% 08/15/07 SEK 6,100,000 963,690
------------
United Kingdom - 9.0%
Chester Asset Receivables Deal 3
(FRN) 7.245% 11/17/03 GBP 300,000 495,551
Chester Asset Receivables Deal 5 6.625% 03/17/08 GBP 500,000 886,233
The Higher Education Securitised
Investments
(FRN). Ser, 1X, Class A1 6.790% 04/10/28 GBP 843,268 1,393,491
UK Treasury Bond 6.500% 12/07/03 GBP 1,900,000 3,466,842
------------
Total (Cost - $6,164,439) 6,242,117
------------
United States - 20.1%
Capital Credit Card Corp., Ser.
1996-A 5.625% 08/15/01 DEM 3,300,000 2,073,892
Chase Commercial Mortgage Sec.
Corp., Ser. 1998-2, Class A1 6.025% 08/18/07 497,331 503,235
Citibank Credit Card Master Trust
I, Ser. A 5.750% 07/16/07 DEM 1,300,000 845,118
CS First Boston Mortgage
Securities Corp., Ser. 1998-C1,
Class A1B 6.480% 05/17/08 350,000 362,138
Discover Card Master Trust I
(FRN), Ser. 1994-2, Class A 5.890% 10/16/04 3,000,000 3,011,310
DLJ Commercial Mortgage Corp.,
Ser. 1998-CG1, Class A1B 6.410% 05/10/08 750,000 777,060
FNMA Aces, Ser. 1997-M5, Class C 6.740% 08/25/07 600,000 633,846
</TABLE>
27
<PAGE>
FFTW Funds, Inc.
Worldwide Portfolio - Schedule of Investments (continued)
December 31, 1998
<TABLE>
<CAPTION>
Coupon Face
Rate Maturity Amount (a) Value
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
United States - (continued)
FNMA Global Bond 6.875% 06/07/02 GBP 1,000,000 $ 1,749,792
GMAC Commercial Mortgage Securities
Inc., Ser. 1997-C1, Class A3 6.869% 08/15/07 800,000 852,888
GMAC Commercial Mortgage Securities
Inc., Ser. 1998-C2, Class A1 6.150% 11/15/07 393,087 399,282
GS Mortgage Backed Securities Corp.
II, Ser. 1998-C1, Class A1 6.060% 10/18/30 395,258 400,345
U.S. Treasury Bond 6.500% 11/15/26 800,000 931,000
U.S. Treasury Bond 5.500% 08/15/28 50,000 52,405
U.S. Treasury Bond 8.125% 08/15/19 690,000 922,660
U.S. Treasury Note 6.125% 12/31/01 500,000 520,156
------------
Total (Cost - $13,652,977) 14,035,127
------------
Total Long-Term Investments (Cost
$29,055,915) 29,898,832
------------
Short-Term Investments - 53.6%
Bank of Austria Yankee CD 5.710% 06/07/99 3,000,000 2,999,224
Daimler Benz Corp., CP* 5.030% 03/25/99 2,000,000 1,976,806
Investors Bank & Trust Company Cash
Sweep 4.500% 01/04/99 28,671,000 28,671,000
Quebec Province, CP* 4.880% 06/21/99 1,000,000 976,820
Royal Bank of Canada Yankee CD 5.120% 03/22/99 2,000,000 2,000,085
U.S. Treasury Bill*@ 4.093% 01/07/99 700,000 699,810
------------
Total (Cost - $37,323,347) 37,323,745
------------
Total Investments - 96.5% (Cost -
$66,379,262) 67,222,577
Other Assets and Liabilities - 3.5% 2,430,177
------------
Net Assets - 100.0% $ 69,652,754
============
</TABLE>
Summary of Abbreviations
<TABLE>
<C> <S>
AUD Australian Dollar
CAD Canadian Dollar
CD Certificate of Deposit
CP Commercial Paper
DEM German Deutschemark
DKK Danish Krone
ESP Spanish Peseta
FRN Floating Rate Note
GBP British Pound
MTN Medium-Term Note
NLG Dutch Guilder
SEK Swedish Krona
</TABLE>
* Interest rate shown represents yield to maturity at date of purchase.
@ Security, or a portion thereof, is held in a margin account as collateral for
open financial futures contracts.
(a) Face amount shown in U.S. dollars unless otherwise indicated.
See Notes to Financial Statements.
28
<PAGE>
FFTW Funds, Inc.
Worldwide-Hedged Portfolio - Schedule of Investments
December 31, 1998
<TABLE>
<CAPTION>
Coupon Face
Rate Maturity Amount (a) Value
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Long-Term Investment - 52.6%
Australia - 0.3%
Australian Government Bond
(Cost - $605,156) 6.750% 11/15/06 AUD 850,000 $ 581,839
-------------
Canada - 1.9%
Canadian Government Bond
(Cost - $3,355,572) 6.000% 06/01/08 CAD 4,750,000 3,348,883
-------------
Denmark - 0.6%
Kingdom of Denmark Bond 7.000% 11/15/07 DKK 100,000 18,873
Kingdom of Denmark Bond 7.000% 11/10/24 DKK 5,400,000 1,086,453
-------------
Total (Cost - $915,122) 1,105,326
-------------
Germany - 3.7%
Bundesrepublic Deutschland Bond 6.250% 01/04/24 DEM 5,400,000 3,937,027
CORE (FRN). Ser. 1998-1, Class
A-2A 3.700% 01/15/06 DEM 4,250,000 2,543,928
-------------
Total (Cost - $6,212,297) 6,480,955
-------------
Spain - 2.3%
Spanish Government Bond
(Cost - $3,936,135) 6.000% 01/31/08 ESP 495,900,000 3,997,450
-------------
Sweden - 0.4%
Swedish Government Bond
(Cost - $695,169) 8.000% 08/15/07 SEK 4,700,000 742,515
-------------
United Kingdom - 10.5%
Chester Asset Receivables Deal 3
(FRN) 7.245% 11/17/03 GBP 400,000 660,734
Chester Asset Receivables Deal 5 6.625% 03/17/08 GBP 500,000 886,234
The Higher Education Securitised
Investments
(FRN), Ser. 1X, Class A1 6.790% 04/10/28 GBP 843,268 1,393,491
UK Treasury Bond 6.500% 12/07/03 GBP 8,400,000 15,327,094
-------------
Total (Cost - $17,811,191) 18,267,553
-------------
United States - 32.9%
Advanta Mortgage Loan Trust,
Ser. 1998-2, Class A1 6.440% 05/25/13 4,674,537 4,678,417
BA Credit Card Corp. 6.000% 10/15/03 DEM 1,500,000 972,506
Capital Credit Card Corp., Ser.
1996-A 5.625% 08/15/01 DEM 2,800,000 1,759,666
Chase Commercial Mortgage
Securities Corp., Ser. 1998-2,
Class A1 6.025% 08/18/07 795,730 805,175
Citibank Credit Card Master
Trust I, Ser. A 5.750% 07/16/07 2,900,000 1,885,264
CS First Boston Mortgage
Securities Corp., Ser. 1998-C1,
Class A1B 6.480% 05/17/08 550,000 569,074
Discover Card Master Trust I
(FRN), Ser. 1994-2 Class A 5.885% 10/16/04 3,000,000 3,011,310
DLJ Commercial Mortgage Corp.,
Ser. 1998-CG1, Class A1B 6.410% 05/10/08 1,250,000 1,295,100
Exxon Capital Corp. 6.625% 08/15/02 1,500,000 1,566,069
FNMA (MTN)(FRN) 5.334% 02/17/99 5,000,000 5,000,505
</TABLE>
29
<PAGE>
FFTW Funds, Inc.
Worldwide-Hedged Portfolio - Schedule of Investments (continued)
December 31, 1998
<TABLE>
<CAPTION>
Coupon Face
Rate Maturity Amount (a) Value
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
United States - (continued)
FNMA Acas, Ser 1997-M5, Class C 6.740% 08/25/07 1,100,000 $ 1,162,051
FNMA Global Notes 6.875% 06/07/02 GBP 2,500,000 4,374,479
FNMA Global Notes 5.500% 12/07/03 GBP 120,000 203,269
GMAC Commercial Mortgage
Securities Inc, Ser. 1997-C1,
Class A3 6.869% 08/15/07 1,300,000 1,385,943
GMAC Commercial Mortgage
Securities Inc., Ser. 1998-C2,
Class A1 6.150% 11/15/07 687,902 698,744
GS Mortgage Backed Securities
Corp. II, Ser. 1998-C1, Class A1 6.060% 10/18/30 691,701 700,604
HFC Revolving Home Equity Loan
Trust (FRN), Ser. 1996-1, Class A 5.261% 07/20/17 3,439,429 3,428,733
International Bank of
Reconstruction & Development 7.125% 07/30/07 GBP 160,000 302,556
Navistar Financial Corp. Owners
Trust Ser. 1995-B, Class A3 6.050% 04/15/02 3,214,466 3,222,663
Premier Auto Trust, Ser. 1995-2,
Class A6 7.200% 10/04/99 739,645 740,614
U.S. Treasury Note 5.500% 05/31/03 7,350,000 7,584,281
U.S. Treasury Note 6.125% 12/31/01 10,930,000 11,370,621
WFS Financial Owner Trust, Ser.
1997-B, Class A2 6.050% 07/20/00 824,906 827,215
-------------
Total (Cost - $57,116,537) 57,544,859
-------------
Total Long-Term Investments
(Cost - $90,647,179) 92,069,380
-------------
Short-Term Investments - 46.6%
Bank of Austria Yankee CD 5.100% 06/07/99 5,000,000 4,998,706
Bank of Montreal Yankee CD 5.130% 01/26/99 5,000,000 5,000,000
Bayerische Vereinsbank Yankee CD 5.750% 05/07/99 5,000,000 5,010,648
Daimler Benz Corp. CP* 5.030% 03/25/99 6,000,000 5,930,418
Investors Bank & Trust Company
Cash Sweep 4.500% 01/04/99 47,997,000 47,997,000
Quebec Province, CP* 4.880% 06/21/99 5,000,000 4,884,100
Royal Bank of Canada Yankee CD 5.120% 03/22/99 6,000,000 6,000,254
U.S. Treasury Bill*@ 5.045% 01/07/99 1,300,000 1,299,645
U.S. Treasury Bill* 4.093% 03/04/99 300,000 297,851
-------------
Total (Cost - $81,417,595) 81,418,622
-------------
Total Investments - 99.2% (Cost -
$172,064,774) 173,488,002
-------------
Other Assets and Liabilities -
0.8% 1,316,533
-------------
Net Assets - 100.0% $ 174,804,535
=============
</TABLE>
30
<PAGE>
FFTW Funds, Inc.
Worldwide-Hedged Portfolio - Schedule of Investments (continued)
December 31, 1998
Summary of Abbreviations
<TABLE>
<C> <S>
AUD Australian Dollar
CAD Canadian Dollar
CD Certificate of Deposit
CP Commercial Paper
DEM German Deutschemark
DKK Danish Krone
ESP Spanish Peseta
FRN Floating Rate Note
GBP British Pound
MTN Medium-Term Note
SEK Swedish Krona
</TABLE>
*Interest rate shown represents yield to maturity at date of purchase.
@Security, or a portion thereof, is held to a margin account as collateral for
open financial futures contracts.
(a)Face amount shown in U.S. dollars unless otherwise indicated.
See Notes to Financial Statements.
31
<PAGE>
FFTW Funds, Inc.
International Portfolio - Schedule of Investments
December 31, 1998
<TABLE>
<CAPTION>
Coupon Face
Rate Maturity Amount (a) Value
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Long-Term Investments - 54.0%
Australia - 0.8%
Australian Government Bond
(Cost - $676,360) 6.750% 11/15/06 AUD 950,000 $ 650,291
------------
Canada - 2.9%
Canadian Government Bond
(Cost - $2,331,240) 6.000% 06/01/08 CAD 3,300,000 2,326,592
------------
Denmark - 1.8%
Kingdom of Denmark Bond
(Cost - $1,279,698) 7.000% 11/10/24 DKK 7,500,000 1,508,962
------------
Germany - 28.4%
Bundesrepublic Deutschland Bond 5.000% 11/12/02 DEM 15,000,000 9,535,965
Bundesrepublic Deutschland Bond 5.250% 01/04/08 DEM 14,000,000 9,282,630
Bundesrepublic Deutschland Bond 6.250% 01/04/24 DEM 4,400,000 3,207,948
CORE (FRN), Ser. 1998-1, Class A-
2A 3.640% 01/15/06 DEM 2,000,000 1,197,143
------------
Total (Cost - $23,234,997) 23,223,686
------------
Spain - 4.8%
Spanish Government Bond
(Cost - $3,894,067) 6.000% 01/31/08 ESP 490,600,000 3,954,727
------------
Sweden - 1.5%
Swedish Government Bond
(Cost - $1,105,467) 8.000% 08/15/07 SEK 7,500,000 1,184,865
------------
United Kingdom - 9.8%
Abbey National Treasury 6.500% 03/05/04 GBP 258,000 450,055
UK Treasury Bond 6.500% 12/07/03 GBP 4,142,000 7,557,717
------------
Total (Cost - $8,031,998) 8,007,772
------------
United States - 4.0%
FNMA Global Bond 6.875% 06/07/02 GBP 1,700,000 2,974,646
Investor AB 5.250% 06/30/08 DEM 500,000 310,474
------------
Total (Cost - $3,254,141) 3,285,120
------------
Total Long-Term Investments (Cost
$43,807,968) 44,142,015
------------
</TABLE>
32
<PAGE>
FFTW Funds, Inc.
International Portfolio - Schedule of Investments (continued)
December 31, 1998
<TABLE>
<CAPTION>
Coupon Face
Rate Maturity Amount (a) Value
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Short-Term Investments - 42.4%
Bank of Austria Yankee CD 5.770% 06/07/99 3,000,000 $ 2,999,224
Bank of Montreal Yankee CD 5.130% 01/26/99 1,000,000 1,000,000
Bayerische Vereinsbank Yankee CD 5.000% 05/07/99 3,000,000 3,006,389
Daimler Benz N.A. Corp., CP* 5.030% 03/25/99 3,000,000 2,965,209
Investors Bank & Trust Company
Cash Sweep 4.500% 01/04/99 17,790,000 17,790,000
Quebec Province, CP* 4.880% 06/21/99 3,000,000 2,930,459
Royal Bank of Canada Yankee CD 5.120% 03/22/99 3,000,000 3,000,127
U.S. Treasury Bill*@ 5.045% 01/07/99 900,000 899,755
------------
Total (Cost - $34,590,653) 34,591,163
------------
Total Investments - 96.4%
(Cost - $78,398,621) 78,733,178
------------
Other Assets and Liabilities -
3.6% 2,971,694
------------
Net Assets - 100.0% $ 81,704,872
============
</TABLE>
Summary of Abbreviations
<TABLE>
<C> <S>
AUD Australian Dollar
CAD Canadian Dollar
CD Certificate of Deposit
CP Commercial Paper
DEM German Deutschemark
DKK Danish Krone
ESP Spanish Peseta
FRN Floating Rate Note
GBP British Pound
SEK Swedish Krona
</TABLE>
* Interest rate shown represents yield to maturity at date of purchase.
@ Security, or a portion thereof, is held in a margin account as collateral for
open financial futures contracts.
(a) Face amount shown in U.S. dollars unless otherwise indicated.
See Notes to Financial Statements.
33
<PAGE>
FFTW Funds, Inc.
Global Tactical Exposure Portfolio - Schedule of Investments
December 31, 1998
<TABLE>
<CAPTION>
Coupon Face
Rate Maturity Amount (a) Value
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Long-Term Investments -
71.9%
Australia - 0.8%
Australian Government
Bond
(Cost - $3,630,988) 6.750% 11/15/06 AUD 5,100,000 $ 3,491,036
------------------
Canada - 2.8%
Canadian Government Bond
(Cost - $11,803,465) 6.000% 06/01/08 CAD 16,710,000 11,781,017
------------------
Denmark - 1.5%
Kingdom of Denmark Bond
(Cost - $5,040,970) 7.000% 11/10/24 DKK 31,800,000 6,398,001
------------------
Germany - 25.6%
Bundesrepublic
Deutschland Bond 5.250% 01/04/08 DEM 135,000,000 89,511,075
Bundesrepublic
Deutschland Bond 6.250% 01/04/24 DEM 20,200,000 14,727,396
CORE (FRN), Ser. 1998-1,
Class A-2A 3.640% 01/15/06 DEM 7,000,000 4,189,999
------------------
Total (Cost -
$106,975,381) 108,428,470
------------------
Spain - 4.2%
Spanish Government Bond 6.000% 01/31/08 ESP 2,224,700,000 17,933,307
------------------
(Cost - $17,658,234)
Sweden - 1.4%
Swedish Government Bond
(Cost - $5,783,139) 8.000% 08/15/07 SEK 39,100,000 6,177,096
------------------
United Kingdom - 13.8%
Chester Asset
Receivables Deal 3
(FRN) 7.245% 11/17/03 GBP 1,000,000 1,651,835
Chester Asset
Receivables Deal 5 6.625% 03/17/08 GBP 1,440,000 2,552,352
The Higher Education
Securitised Investments
(FRN), Ser. 1X, Class
A1 5.244% 04/10/28 GBP 3,373,072 5,573,963
UK Treasury Bond 6.500% 12/07/03 GBP 26,639,000 48,606,958
------------------
Total (Cost -
$57,077,802) 58,385,108
------------------
United States - 21.8%
Aames Mortgage Trust
(FRN), Ser. 1997-C,
Class A1A 5.735% 11/15/27 5,193,404 5,075,774
Beneficial Mortgage
Corp. (FRN), Ser. 1997-
2, Class A 5.168% 09/28/37 4,219,138 4,187,917
Bombardier Receivables
Master Trust 1 (FRN),
Ser. 1997-1, Class A 5.398% 04/15/04 4,000,000 3,988,320
Capital Credit Card
Corp., Ser. 1996-A 5.625% 08/15/01 DEM 11,700,000 7,352,888
Champion Home Equity
Loan Trust (FRN), Ser.
1998-1, Class A1 5.352% 09/25/28 5,692,471 5,580,557
Chase Credit Card Master
Trust, Ser. 1998-1,
Class A3 5.125% 02/15/05 NLG 5,200,000 2,950,433
Citibank Credit Card
Master Trust 1 (FRN),
Ser. 1998-7, Class B 5.660% 05/15/02 9,000,000 8,989,920
Citibank Credit Card
Master Trust 1, Ser. A 5.750% 07/16/07 DEM 8,900,000 5,785,810
</TABLE>
34
<PAGE>
FFTW Funds, Inc.
Global Tactical Exposure Portfolio - Schedule of Investments (continued)
December 31, 1998
<TABLE>
<CAPTION>
Coupon Face
Rate Maturity Amount (a) Value
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
United States -
(continued)
Contimortgage Home
Equity Loan Trust,
Ser. 1998-1, Class A3 6.220% 01/15/13 3,000,000 $ 3,008,130
Croatia Government
(FRN), Ser. B 6.563% 07/31/06 904,779 717,761
FNMA Global Bond 6.875% 06/07/02 GBP6,000,000 10,498,750
Green Tree Home
Improvement Loan
Trust, Ser. 1998-D,
Class HEA1 5.980% 08/15/29 6,508,087 6,524,488
HFC Revolving Home
Equity Loan Trust
(FRN), Ser. 1996-2,
Class A 5.700% 02/20/18 5,761,631 5,738,238
Investor AB 5.250% 06/30/08 DEM2,200,000 1,366,086
MBNA Master Credit Card
Trust (FRN), Ser.
1996-D, Class B 5.830% 09/15/03 5,000,000 4,988,350
Newcourt Equipment
Trust Securities, Ser.
1998-1, Class A2 5.170% 09/20/00 7,750,000 7,717,305
People's Bank Credit
Card Master Trust
(FRN), Ser. 1996-1,
Class A 5.686% 11/15/04 8,000,000 7,991,200
-----------------
Total (Cost -
$91,472,691) 92,461,927
-----------------
Total Long-Term
Investments (Cost
$299,442,670) 305,055,962
-----------------
Short-Term
Investments - 16.8%
Bank of Austria Yankee
CD 5.770% 01/22/99 15,000,000 15,000,233
Bank of Montreal Yankee
CD 5.130% 01/25/99 7,000,000 7,000,000
Daimler Benz Corp., CP* 5.030% 03/25/99 10,000,000 9,884,030
Investors Bank & Trust
Company Cash Sweep 4.500% 01/04/99 4,622,000 4,622,000
Quebec Province, CP* 4,880% 06/21/99 5,000,000 4,884,100
U.S. Treasury Bill* 4.720% 03/04/99 23,200,000 23,033,842
U.S. Treasury Bill*@ 5.045% 01/07/99 6,600,000 6,598,205
-----------------
Total (Cost
$70,997,410) 71,022,410
-----------------
Total Investments -
88.7% (Cost -
$370,440,080) 376,078,372
-----------------
Other Assets and
Liabilities - 11.3% 47,887,337
-----------------
Net Assets - 100.0% $ 423,965,709
=================
</TABLE>
Summary of Abbreviations
<TABLE>
<C> <S>
AUD Australian Dollar
CAD Canadian Dollar
CD Certificate of Deposit
CP Commercial Paper
DEM German Deutschemark
DKK Danish Krone
ESP Spanish Peseta
FRN Floating Rate Note
GBP British Pound
NLG Dutch Guilder
SEK Swedish Krona
</TABLE>
* Interest rate shown represents yield to maturity at date of purchase.
@ Security, or a portion thereof, is held in a margin account as collateral for
open financial futures contracts.
(a) Face amount shown in U.S. dollars unless otherwise indicated.
See Notes to Financial Statements.
35
<PAGE>
FFTW Funds, Inc.
Emerging Markets Portfolio - Schedule of Investments
December 31, 1998
<TABLE>
<CAPTION>
Coupon Face
Rate Maturity Amount (a) Value
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Long-Term Investments -
69.6%
Argentina - 6.7%
Republic of Argentina (FRN) 6.188% 03/31/05 2,115,000 $ 1,797,750
Republic of Argentina (MTN) 11.750% 02/12/07 ARP 10,600,000 9,204,244
--------------
Total (Cost - $7,288,025) 11,001,994
--------------
Brazil - 5.1%
Brazil C-bond 8.000% 04/15/14 6,991,382 4,159,872
Republic of Brazil Discount
ZI 6.688% 04/15/24 7,250,000 4,205,000
--------------
Total (Cost - $10,610,113) 8,364,872
--------------
Bulgaria - 4.2%
Bulgaria Discount Bond (FRN) 6.188% 07/28/24 6,250,000 4,375,000
Bulgaria Government (FRN),
Ser. A 2.500% 07/28/12 4,500,000 2,559,600
--------------
Total (Cost - $7,846,790) 6,934,600
--------------
Colombia - 1.8%
Republic of Colombia Bond
(Cost - $3,440,752) 8.375% 02/15/27 4,000,000 2,910,000
--------------
Croatia - 0.9%
Croatia Government (FRN),
Ser. A 6.563% 07/31/10 1,000,000 776,700
Croatia Government (FRN),
Ser. B 6.563% 07/31/06 904,779 717,761
--------------
Total (Cost - $1,744,468) 1,494,461
--------------
Ecuador - 4.0%
Ecuador Discount Bond (FRN) 6.625% 02/28/25 9,250,000 4,717,500
Government of Ecuador (FRN) 6.625% 02/27/15 4,579,687 1,843,324
--------------
Total (Cost - $9,145,307) 6,560,824
--------------
Greece - 5.2%
Hellenic Republic Bond 11.000% 02/25/00 GRD 500,000,000 1,802,286
Hellenic Republic Bond 8.600% 03/26/08 GRD 1,700,000,000 6,740,489
--------------
Total (Cost - $7,953,939) 8,542,775
--------------
Hungary - 1.4%
Hungary Government Bond
(Cost - $2,243,027) 16.000% 04/12/00 HUF 500,000,000 2,347,249
--------------
Mexico - 8.8%
Mexican Unibond 6.000% 09/26/02 MXN 17,503,830 1,647,646
United Mexican States Par
Bonds, Ser. A 6.250% 12/31/19 2,000,000 1,562,600
United Mexican States Par
Bonds, Ser. B 6.250% 12/31/19 14,500,000 11,328,850
--------------
Total (Cost - $16,159,666) 14,539,096
--------------
Morocco - 3.6%
Morocco Reconstruction &
Consolidation (FRN), Ser. A
(Cost - $6,618,010) 6.063% 01/01/09 7,500,000 5,850,000
--------------
</TABLE>
36
<PAGE>
FFTW Funds, Inc.
Emerging Markets Portfolio - Schedule of Investments (continued)
December 31, 1998
<TABLE>
<CAPTION>
Coupon Face
Rate Maturity Amount (a) Value
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Nigeria - 4.0%
Central Bank of Nigeria Bond 6.250% 11/15/20 10,500,000 $ 6,615,000
Central Bank of Nigeria
Warrants Exp. 11/15/20 10,500 0
--------------
Total (Cost - $7,505,919) 6,615,000
--------------
Panama - 4.6%
Panama - Interest Reduction
Bond (FRN), Ser. 18 yr 4.000% 07/17/14 4,500,000 3,352,500
Republic of Panama Bond 8.875% 09/30/27 4,500,000 4,168,125
--------------
Total (Cost - $7,798,534) 7,520,625
--------------
Peru - 3.0%
Peru - Past Due Interest
(FRN)
(Cost - $4,212,287) 4.000% 03/07/17 8,000,000 5,020,000
--------------
Poland - 3.0%
Poland Government Bond 14.000% 02/12/00 PZL 10,000,000 2,893,010
Poland Government Bond 12.000% 06/12/03 PZL 7,000,000 2,067,047
--------------
Total (Cost - $5,007,376) 4,960,057
--------------
Russia - 4.8%
City of Moscow Bond 9.500% 05/31/00 13,750,000 5,637,500
Ministry of Finance Russia
Bond 12.750% 06/24/28 7,600,000 2,280,000
--------------
Total (Cost - $18,224,813) 7,917,500
--------------
South Korea - 3.2%
Korea Development Bank Bond 6.500% 11/15/02 2,000,000 1,645,000
Republic of Korea Bond 8.875% 04/15/08 3,500,000 3,596,250
--------------
Total (Cost - $5,051,337) 5,241,250
--------------
United States - 1.7%
International Financial
Corp. Structured Note (FRN) 20.000% 04/06/99 2,000,000 400,000
Pera Financial Services
(144A) (b) 9.375% 10/15/02 3,000,000 2,386,500
--------------
Total (Cost - $4,909,123) 2,786,500
--------------
Uruguay - 0.6%
Banco Central del Uruguay,
Series B
(Cost - $1,152,296) 6.750% 02/19/21 1,250,000 1,062,500
--------------
Venezuela - 3.0%
Republic of Venezuela (FRN) 5.813% 03/31/20 6,250,000 4,343,750
Republic of Venezuela (FRN) 5.938% 12/18/07 857,142 544,287
--------------
Total (Cost - $4,552,757) 4,888,037
--------------
Total Long-Term Investments
(Cost $131,464,539) 114,557,340
--------------
Short-Term Investments -
27.4%
Mexico - 2.2%
Mexican Cetes 30.867% 05/06/99 MXN 21,036,160 1,919,241
Mexican Cetes 31.086% 03/11/99 MXN 17,500,000 1,668,267
--------------
Total (Cost - $4,216,147) 3,587,508
--------------
</TABLE>
37
<PAGE>
FFTW Funds, Inc.
Emerging Markets Portfolio - Schedule of Investments (continued)
December 31, 1998
<TABLE>
<CAPTION>
Coupon Face
Rate Maturity Amount (a) Value
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Turkey - 3.2%
Deutsche Bank Time Deposit
(Cost - $5,207,224) 01/04/99 TRL 1,588,667,076 $ 5,207,224
-------------
United States - 22.0%
Investors Bank & Trust Company
Cash Sweep 4.500% 01/04/99 35,362,000 35,362,000
U.S. Treasury Bill*@ 4.030% 01/07/99 1,000,000 999,728
-------------
Total (Cost - $36,361,328) 36,361,728
-------------
Total Short-Term Investments
(Cost - $45,784,699) 45,156,460
-------------
Total Investments - 97.0%
(Cost - $177,249,238) 159,713,800
-------------
Other Assets and Liabilities -
3.0% 4,994,915
-------------
Net Assets - 100.0% $ 164,708,715
=============
</TABLE>
Summary of Abbreviations
<TABLE>
<C> <S>
ARP Argentine Peso
FRN Floating Rate Note
GRD Greek Drachma
HUF Hungarian Forint
MTN Medium-Term Note
MXN Mexican Peso
PZL Polish Zloty
TRL Turkish Lira
</TABLE>
* Interest rate shown represents yield to maturity at date of purchase.
@ Security, or a portion thereof, is held in a margin account as collateral
for open financial futures contracts.
(a) Face amount shown in U.S. dollars unless otherwise noted.
(b) Security exempt from registration under Rule 144A of Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At December 31,
1998, these securities were valued at $2,386,500 or 1.5% of net assets.
See Notes to Financial Statements.
38
<PAGE>
FFTW Funds, Inc.
International Opportunities Portfolio - Schedule of Investments
December 31, 1998
<TABLE>
<CAPTION>
Coupon Face
Rate Maturity Amount (a) Value
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Long-Term Investments - 65.8%
Canada - 2.8%
Canadian Government Bond
(Cost - $706,440) 6.000% 06/01/08 CAD 1,000,000 $ 705,028
------------
Japan - 3.2%
Japanese Government Bond
(Cost - $801,997) 1.800% 06/20/08 JPY 90,000,000 825,030
------------
Germany - 26.4%
Bundesrepublic Deutschland Bond 6.250% 01/04/24 DEM 1,900,000 1,385,250
Bundesrepublic Deutschland Bond 5.250% 01/04/08 DEM 8,100,000 5,370,665
------------
Total (Cost - $6,634,824) 6,755,915
------------
France - 17.0%
French Government Bond
(Cost - $4,318,887) 5.250% 04/25/08 FRF 22,000,000 4,351,952
------------
United Kingdom - 16.4%
UK Treasury Bond
(Cost - $4,176,695) 6.500% 12/07/03 GBP 2,300,000 4,196,704
------------
Total Long-Term Investments
(Cost - $16,638,843) 16,834,629
------------
Short-Term Investments - 87.9%
Investors Bank & Trust Company
Cash Sweep 4.500% 01/04/99 8,527,000 8,527,000
U.S. Treasury Bill*@ 4.001% 01/07/99 100,000 99,678
U.S. Treasury Bill* 4.385% 04/01/99 14,000,000 13,845,704
------------
Total (Cost - $22,485,140) 22,472,382
------------
Total Investments - 153.7%
(Cost - $39,123,983) 39,307,011
------------
Other Assets and Liabilities -
(53.7%) (13,730,965)
------------
Net Assets - 100.0% $ 25,576,046
============
</TABLE>
Summary of Abbreviations
<TABLE>
<C> <S>
CAD Canadian Dollar
DEM German Deutschemark
FRF French Franc
GBP British Pound
JPY Japanese Yen
</TABLE>
* Interest rate shown represents yield to maturity at date of purchase.
@ Security, or a portion thereof, is held in a margin account as collateral for
open financial futures contracts.
(a) Face amount shown in U.S. dollars unless otherwise indicated.
See Notes to Financial Statements.
39
<PAGE>
FFTW Funds, Inc.
Statements of Assets and Liabilities
December 31, 1998 U.S. Portfolios
<TABLE>
<CAPTION>
Money Market U.S. Short-Term
Portfolio Portfolio
- -------------------------------------------------------------------------------
<S> <C> <C>
Assets
Investments in securities, at value
(Cost - $28,961,876 and
$837,056,962, respectively) $ 28,961,876 $ 835,776,320
Cash 324 292
Interest receivable 518,148 4,544,956
Other receivables - 93,881
------------------ ------------------
Total assets 29,480,348 840,415,449
------------------ ------------------
Liabilities
Variation margin payable - 12,106
Accrued expenses and other liabilities 28,931 37,337
------------------ ------------------
Total liabilities 28,931 49,443
------------------ ------------------
Net Assets $ 29,451,417 $ 840,366,006
================== ==================
Shares Outstanding (par value $0.001) 29,451,451 86,086,181
================== ==================
Net Asset Value Per Share $ 1.00 $ 9.76
================== ==================
Components of Net Assets as of December
31, 1998 were as follows:
Paid-in capital $ 29,450,833 $ 851,757,893
Undistributed (distributions in excess
of) investment income, net - 243,592
Accumulated net realized gain (loss) on
investments, financial futures and
options contracts, and foreign
currency-related transactions 584 (9,961,812)
Net unrealized appreciation
(depreciation) on investments,
financial futures contracts, and on
translation of other assets and
liabilities denominated in foreign
currency - (1,673,667)
------------------ ------------------
$ 29,451,417 $ 840,366,006
================== ==================
</TABLE>
See Notes to Financial Statements.
40
<PAGE>
FFTW Funds, Inc.
Statements of Assets and Liabilities (continued)
December 31, 1998 U.S. Portfolios
<TABLE>
<CAPTION>
Limited Duration Mortgage-Backed
Portfolio Portfolio
- -------------------------------------------------------------------------------
<S> <C> <C>
Assets
Investments in securities, at value
(Cost - $126,195,366 and
$1,489,723,127, respectively) $ 126,212,457 $ 1,487,609,822
Cash 974 636
Receivable for securities sold 22,060,075 111,107,551
Interest receivable 569,056 5,585,116
Variation margin receivable - 18,359
Other receivables - 68,980
------------------ ------------------
Total assets 148,842,562 1,604,390,464
------------------ ------------------
Liabilities
Payable for securities purchased 59,284,523 788,982,204
Accrued expenses and other liabilities 37,054 41,650
------------------ ------------------
Total liabilities 59,321,577 789,023,854
------------------ ------------------
Net Assets $ 89,520,985 $ 815,366,610
================== ==================
Shares Outstanding (par value $0.001) 9,011,987 80,085,381
================== ==================
Net Asset Value Per Share $ 9.93 $ 10.18
================== ==================
Components of Net Assets as of
December 31, 1998 were as follows:
Paid-in capital $ 89,794,885 $ 814,859,197
Undistributed (distributions in excess
of) investment income, net - 1,498,565
Accumulated net realized gain (loss)
on investments, shorts sales,
financial futures, swap and options
contracts and foreign currency-
related transactions (293,548) 722,860
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 19,648 (1,714,012)
------------------ ------------------
$ 89,520,985 $ 815,366,610
================== ==================
</TABLE>
See Notes to Financial Statements.
41
<PAGE>
FFTW Funds, Inc.
Statements of Assets and Liabilities (continued)
December 31, 1998 Global & International Portfolios
<TABLE>
<CAPTION>
Worldwide Worldwide-Hedged
Portfolio Portfolio
- -------------------------------------------------------------------------------
<S> <C> <C>
Assets
Investments in securities, at value
(Cost - $66,379,262 and
$172,064,774, respectively) $ 67,222,577 $ 173,488,002
Cash 654 489
Foreign cash (Cost - $916,973 and
$1,800,707, respectively) 907,954 1,865,437
Interest receivable 599,952 1,477,189
Net unrealized appreciation of forward
foreign exchange contracts 1,124,346 -
------------------ ------------------
Total assets 69,855,483 176,831,117
------------------ ------------------
Liabilities
Payable for fund shares redeemed - 1,870,000
Variation margin payable 5,833 23,557
Net unrealized depreciation of forward
foreign exchange contracts - 83,335
Distribution payable 147,789 -
Accrued expenses and other liabilities 49,107 49,690
------------------ ------------------
Total liabilities 202,729 2,026,582
------------------ ------------------
Net Assets $ 69,652,754 $ 174,804,535
================== ==================
Shares Outstanding (par value $0.001) 6,774,560 15,619,933
================== ==================
Net Asset Value Per Share $ 10.28 $ 11.19
================== ==================
Components of Net Assets as of
December 31, 1998 were as follows:
Paid-in capital $ 70,923,933 $ 175,256,603
Undistributed (distributions in excess
of) investment income, net 1,633,253 (1,122,393)
Accumulated net realized gain (loss)
on investments, financial futures,
options contracts and foreign
currency-related transactions (4,597,767) (270,158)
Net unrealized appreciation
(depreciation) on investments,
financial futures contracts and
translation of other assets and
liabilities denominated in foreign
currency 1,693,335 940,483
------------------ ------------------
$ 69,652,754 $ 174,804,535
================== ==================
</TABLE>
See Notes to Financial Statements.
42
<PAGE>
FFTW Funds, Inc.
Statements of Assets and Liabilities (continued)
December 31, 1998 Global & International Portfolios
<TABLE>
<S> <C> <C>
International Global Tactical Exposure
Portfolio Portfolio
- --------------------------------------------------------------------------------
Assets
Investments in securities, at value
(Cost - $78,398,621 and
$370,440,080, respectively) $ 78,733,178 $ 376,078,372
Cash 866 516
Foreign cash (Cost - $407,002 and
$1,565,085, respectively) 402,373 1,373,574
Interest receivable 1,312,340 7,611,987
Receivable for fund shares sold 98,095 40,000,000
Variation margin receivable - 5,541
Net unrealized appreciation of forward
foreign exchange contracts 1,228,100 7,645,917
Other assets 2,484 -
------------------ ------------------
Total assets 81,777,436 432,715,907
------------------ ------------------
Liabilities
Accounts payable on swap contract(s) - 8,714,892
Variation margin payable 5,452 -
Accrued expenses and other liabilities 67,112 35,306
------------------ ------------------
Total liabilities 72,564 8,750,198
------------------ ------------------
Net Assets $ 81,704,872 $ 423,965,709
================== ==================
Shares Outstanding (par value $0.001) 8,437,782 41,370,968
================== ==================
Net Asset Value Per Share $ 9.68 $ 10.25
================== ==================
Components of Net Assets as of
December 31, 1998 were as follows:
Paid-in capital $ 81,397,080 $ 414,393,673
Undistributed (distributions in excess
of) investment income, net (934,988) 506,074
Accumulated net realized gain (loss)
on investments, financial futures and
swap contracts, and foreign currency-
related transactions (42,557) (4,094,888)
Net unrealized appreciation
(depreciation) on investments,
financial futures contracts, and on
translation of other assets and
liabilities denominated in foreign
currency 1,285,337 13,160,850
------------------ ------------------
$ 81,704,872 $ 423,965,709
================== ==================
</TABLE>
See Notes to Financial Statements.
43
<PAGE>
FFTW Funds, Inc.
Statements of Assets & Liabilities (continued)
December 31, 1998 Global & International Portfolios
<TABLE>
<CAPTION>
International
Emerging Markets Opportunities
Portfolio Portfolio
- -------------------------------------------------------------------------------
<S> <C> <C>
Assets
Investments in securities, at value
(Cost - $177,249,238 and
$39,123,983, respectively) $ 159,713,800 $ 39,307,011
Cash 639 19
Foreign cash (Cost - $126,765) 119,331 -
Interest receivable 4,018,312 488,624
Net unrealized appreciation of forward
foreign exchange contracts 846,318 463,656
Other receivables 44,963 16,383
------------------ ------------------
Total assets 164,743,363 40,275,693
------------------ ------------------
Liabilities
Payable for securities purchased - 14,684,536
Variation margin payable - 44
Accrued expenses and other liabilities 34,648 15,067
------------------ ------------------
Total liabilities 34,648 14,699,647
------------------ ------------------
Net Assets $ 164,708,715 $ 25,576,046
================== ==================
Shares Outstanding (par value $0.001) 21,349,089 2,574,256
================== ==================
Net Asset Value Per Share $ 7.72 $ 9.94
================== ==================
Components of Net Assets as of
December 31, 1998 were as follows:
Paid-in capital $ 205,051,703 $ 25,536,057
Undistributed (distributions in excess
of) investment income, net (1,275,363) (532,291)
Accumulated net realized gain (loss)
on investments, financial futures
contracts and foreign currency-
related transactions (22,429,669) (47,485)
Net unrealized appreciation
(depreciation) on investments,
financial futures contracts and
translation of other assets and
liabilities denominated in foreign
currency (16,637,956) 619,765
------------------ ------------------
$ 164,708,715 $ 25,576,046
================== ==================
</TABLE>
See Notes to Financial Statements.
44
<PAGE>
FFTW Funds, Inc.
Statements of Operations
For the Year Ended December 31, 1998 U.S. Portfolios
<TABLE>
<CAPTION>
Money Market U.S. Short-Term
Portfolio Portfolio
- ------------------------------------------------------------------------------
<S> <C> <C>
Investment Income
Interest $ 1,602,575 $ 36,612,468
------------------ ------------------
Expenses
Investment advisory fees 28,927 1,916,079
Administration fees 14,727 323,059
Custodian fees 19,762 232,243
Audit fees 17,779 35,421
Transfer agent fees 3,679 42,992
Legal fees 400 9,424
Directors' fees 663 14,306
Registration fees 761 46,334
Amortization of organizational
expenses 14,763 -
Other fees and expenses 2,796 36,909
------------------ ------------------
Total operating expenses 104,257 2,656,767
Waiver of investment advisory and
administration fees (31,939) (1,060,035)
------------------ ------------------
Operating expenses, net 72,318 1,596,732
Interest expense - 1,417
------------------ ------------------
Total expenses 72,318 1,598,149
------------------ ------------------
Investment income, net 1,530,257 35,014,319
------------------ ------------------
Net Realized and Unrealized Gain
(Loss) on Investments,
Financial Futures and Options
Contracts, and
Foreign Currency-Related Transactions
Net realized gain (loss) on
investments - (1,546,381)
Net realized gain (loss) on financial
futures and options contracts - 819,939
Net unrealized appreciation
(depreciation) on investments - (998,837)
Net unrealized appreciation
(depreciation) on financial futures
contracts - (501,272)
------------------ ------------------
Net realized and unrealized gain
(loss) on investments, financial
futures contracts, and foreign
currency-related transactions - (2,226,551)
------------------ ------------------
Net Increase (Decrease) in Net Assets
Resulting From Operations $ 1,530,257 $ 32,787,768
================== ==================
</TABLE>
See Notes to Financial Statements.
45
<PAGE>
FFTW Funds, Inc.
Statements of Operations (continued)
For the Year Ended December 31, 1998 U.S. Portfolios
<TABLE>
<CAPTION>
Limited Duration Mortgage-Backed
Portfolio Portfolio
- ------------------------------------------------------------------------------
<S> <C> <C>
Investment Income
Interest $ 4,692,851 $ 56,440,610
------------------ ------------------
Expenses
Investment advisory fees 284,400 2,529,742
Administration fees 41,257 556,090
Custodian fees 40,549 309,417
Audit fees 25,277 53,345
Transfer agent fees 2,458 4,736
Legal fees 1,129 12,883
Directors' fees 1,946 20,450
Registration fees 17,325 130,791
Other fees and expenses 4,324 48,801
------------------ ------------------
Total operating expenses 418,665 3,666,255
Waiver of investment advisory fees (174,893) (1,686,495)
------------------ ------------------
Operating expenses, net 243,772 1,979,760
Short sale interest expense 1,089,813
Interest expense - 25,388
------------------ ------------------
Total expenses 243,772 3,094,961
------------------ ------------------
Investment income, net 4,449,079 53,345,649
------------------ ------------------
Net Realized and Unrealized Gain
(Loss) on Investments,
Short Sales, Financial Futures, Swap
and Options Contracts, and
Foreign Currency-Related Transactions
Net realized gain (loss) on
investments 834,075 19,330,796
Net realized gain (loss) on short
sales - (1,067,054)
Net realized gain (loss) on financial
futures, swap and options contracts (26,509) (2,570,898)
Net unrealized appreciation
(depreciation) on investments (75,980) (9,815,295)
Net unrealized appreciation
(depreciation) on financial futures
and options contracts 7,810 1,537,463
------------------ ------------------
Net realized and unrealized gain
(loss) on investments, short sales,
financial futures, swap and options
contracts, and foreign currency-
related transactions 739,396 7,415,012
------------------ ------------------
Net Increase (Decrease) in Net Assets
Resulting From Operations $ 5,188,475 $ 60,760,661
================== ==================
</TABLE>
See Notes to Financial Statements.
46
<PAGE>
FFTW Funds, Inc.
Statements of Operations (continued)
For the Year Ended December 31, 1998 Global & International Portfolios
<TABLE>
<CAPTION>
Worldwide Worldwide-Hedged
Portfolio Portfolio
- ------------------------------------------------------------------------------
<S> <C> <C>
Investment Income
Interest $ 4,463,664 $ 8,196,222
------------------ ------------------
Expenses
Investment advisory fees 333,072 618,028
Administration fees 42,545 107,615
Custodian fees 76,241 97,683
Audit fees 33,024 33,587
Legal fees 1,178 2,414
Directors' fees 1,968 3,552
Transfer agent fees 7,830 4,646
Registration fees 7,253 22,584
Other fees and expenses 5,937 7,661
------------------ ------------------
Total operating expenses 509,048 897,770
Waiver of investment advisory fees (9,439) (202,489)
------------------ ------------------
Operating expenses, net 499,609 695,281
------------------ ------------------
Investment income, net 3,964,055 7,500,941
------------------ ------------------
Net Realized and Unrealized Gain (Loss) on Investments,
Financial Futures and Options Contracts, and
Foreign Currency-Related Transactions
Net realized gain (loss) on
investments 4,537,946 5,401,459
Net realized gain (loss) on financial
futures and options contracts 2,468,578 5,876,793
Net realized gain (loss) on foreign
currency-related transactions (548,598) (1,014,760)
Net unrealized appreciation
(depreciation) on investments 246,930 747,244
Net unrealized appreciation
(depreciation) on financial futures
contracts (357,874) (668,640)
Net unrealized appreciation
(depreciation) on translation of
other assets and liabilities
denominated in foreign currency 2,562,911 (321,540)
------------------ ------------------
Net realized and unrealized gain
(loss) on investments, financial
futures and options contracts and
foreign currency-related
transactions 8,909,893 10,020,556
------------------ ------------------
Net Increase (Decrease) in Net Assets
Resulting From Operations $ 12,873,948 $ 17,521,497
================== ==================
</TABLE>
See Notes to Financial Statements.
47
<PAGE>
FFTW Funds, Inc.
Statements of Operations (continued)
for the Year Ended December 31, 1998 Global & International Portfolios
<TABLE>
<CAPTION>
International Global Tactical Exposure
Portfolio Portfolio
- -------------------------------------------------------------------------------
<S> <C> <C>
Investment Income
Interest $ 3,774,694 $ 35,762,472
------------------ ------------------
Expenses
Investment advisory fees 292,455 1,338,587
Administration fees 37,219 237,408
Custodian fees 71,614 200,733
Audit fees 32,921 37,164
Transfer agent fees 4,033 4,408
Legal fees 1,099 4,749
Directors' fees 1,715 7,950
Registration fees 16,176 50,323
Other fees and expenses 4,647 20,050
------------------ ------------------
Total operating expenses 461,879 1,901,372
Waiver of investment advisory
fees (23,197) (1,003,941)
------------------ ------------------
Operating expenses, net 438,682 897,431
Interest expense - 17,657,812
------------------ ------------------
Total expenses 438,682 18,555,243
------------------ ------------------
Investment income, net 3,336,012 17,207,229
------------------ ------------------
Net Realized and Unrealized Gain
(Loss) on Investments, Financial
Futures and Swap Contracts, and
Foreign Currency-Related
Transactions
Net realized gain (loss) on
investments 2,895,897 15,139,355
Net realized gain (loss) on
financial futures and swap
contracts 3,297,794 4,482,880
Net realized gain (loss) on
foreign currency-related
transactions 1,580,814 (31,970,147)
Net unrealized appreciation
(depreciation) on investments 276,162 4,268,459
Net unrealized appreciation
(depreciation) on financial
futures contracts (459,507) (402,352)
Net unrealized appreciation
(depreciation) on other assets
and liabilities denominated in
foreign currency 2,688,455 18,287,096
------------------ ------------------
Net realized and unrealized gain
(loss) on investments, financial
futures and swap contracts, and
foreign currency-related
transactions 10,279,615 9,805,291
------------------ ------------------
Net Increase (Decrease) in Net
Assets Resulting From Operations $ 13,615,627 $ 27,012,520
================== ==================
</TABLE>
See Notes to Financial Statements.
48
<PAGE>
FFTW Funds, Inc.
Statements of Operations (continued)
For the Year Ended December 31, 1998 Global & International Portfolios
<TABLE>
<CAPTION>
For the period from
October 8,1998*
to December 31, 1998
Emerging Markets International Opportunities
Portfolio Portfolio
- -------------------------------------------------------------------------------
<S> <C> <C>
Investment Income
Interest $ 18,553,490 $ 236,259
------------------ ------------------
Expenses
Investment advisory fees 1,191,914 21,566
Administration fees 112,704 2,666
Custodian fees 184,407 8,503
Transfer agent 3,714 198
Legal fees 2,560 67
Audit fees 34,483 15,000
Directors' fees 3,776 93
Registration fees 40,193 7
Other fees and expenses 9,198 33
------------------ ------------------
Total Operating expense 1,582,949 48,133
------------------ ------------------
Waiver of investment advisory
and administration fees - (15,784)
------------------ ------------------
Operating expenses, net 1,582,949 32,349
Interest expense 247,399 -
------------------ ------------------
Total expenses 1,830,348 32,349
------------------ ------------------
Investment income, net 16,723,142 203,910
------------------ ------------------
Net Realized and Unrealized Gain (Loss) on Investments,
Financial Futures Contracts and Foreign Currency-Related Transactions
Net realized gain (loss) on
investments (19,115,104) (197,610)
Net realized gain (loss) on
financial futures contracts (6,136,491) 9,072
Net realized gain (loss) on
foreign currency-related
transactions 234,542 (234,925)
Net unrealized appreciation
(depreciation) on investments (15,921,534) 183,028
Net unrealized appreciation
(depreciation) on financial
futures contracts 409,159 (2,249)
Net unrealized appreciation
(depreciation) on other
assets and liabilities
denominated in foreign
currency 373,355 438,986
------------------ ------------------
Net realized and unrealized
gain (loss) on investments,
financial futures contracts
and foreign currency-related
transactions (40,156,073) 196,302
------------------ ------------------
Net Increase (Decrease) in Net
Assets Resulting From
Operations $ (23,432,931) $ 400,212
================== ==================
</TABLE>
* Commencement of Operations.
See Notes to Financial Statements.
49
<PAGE>
FFTW Funds, Inc.
Statements of Changes in Net Assets
U.S. Portfolios
<TABLE>
<CAPTION>
Money Market Portfolio U.S. Short-Term Portfolio
--------------------------- ----------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1998 Dec. 31, 1997 Dec. 31, 1998 Dec. 31, 1997
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase (Decrease) in
Net
Assets From Operations
Investment income, net $ 1,530,257 $ 1,364,266 $ 35,014,319 $ 28,250,430
Net realized gain (loss)
on investments,
financial futures and
options contracts, and
foreign currency-
related transactions - - (726,442) (2,683,825)
Net unrealized
appreciation
(depreciation) on
investments and
financial futures - - (1,500,109) (650,756)
------------ ------------ ------------- -------------
Net increase in net
assets resulting from
operations 1,530,257 1,364,266 32,787,768 24,915,849
------------ ------------ ------------- -------------
Distributions to
Shareholders
From investment income,
net 1,530,257 1,364,266 35,026,323 28,250,430
In excess of investment
income, net 21,387 - - -
------------ ------------ ------------- -------------
Total Distributions 1,551,644 1,364,266 35,026,323 28,250,430
------------ ------------ ------------- -------------
Capital Share
Transactions, Net 3,320,586 1,105,195 355,698,913 134,983,515
------------ ------------ ------------- -------------
Total increase
(decrease) in net
assets 3,299,199 1,105,195 353,460,358 131,648,934
Net Assets
Beginning of Year 26,152,218 25,047,023 486,905,648 355,256,714
------------ ------------ ------------- -------------
End of Year $29,451,417 $26,152,218 $840,366,006 $486,905,648
============ ============ ============= =============
Undistributed
(distributions in excess
of) Investment Income,
Net $ - $ - $ 243,592 $ 255,606
</TABLE>
See Notes to Financial Statements.
50
<PAGE>
FFTW Funds, Inc.
Statements of Changes in Net Assets (continued)
U.S. Portfolios
<TABLE>
<CAPTION>
Limited Duration Portfolio Mortgage-Backed Portfolio
---------------------------- ----------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1998 Dec. 31, 1997 Dec. 31, 1998 Dec. 31, 1997
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase (Decrease) in
Net
Assets From Operations
Investment income, net $ 4,449,079 $ 1,842,069 $ 53,345,649 $ 34,046,985
Net realized gain (loss)
on investments, short
sales, financial
futures, swap and
options contracts, and
foreign currency-
related transactions 807,566 230,294 15,692,844 15,173,200
Net unrealized
appreciation
(depreciation) on
investments, short
sales, financial
futures and options
contracts, and
translation of other
assets and liabilities
denominated in foreign
currency (68,170) (30,291) (8,277,832) 6,106,558
------------ ------------ ------------- -------------
Net increase in net
assets resulting from
operations 5,188,475 2,042,072 60,760,661 55,326,743
------------ ------------ ------------- -------------
Distributions to
Shareholders
From investment income,
net 4,449,079 1,842,069 52,124,492 34,046,985
In excess of investment
income, net 26,882 - - 2,828,370
From net realized gain
on investments, short
sales, financial
futures, swap and
options contracts, and
foreign currency-
related transactions 1,041,363 306,625 16,884,432 11,071,301
------------ ------------ ------------- -------------
Total Distributions 5,517,324 2,148,694 69,008,924 47,946,656
------------ ------------ ------------- -------------
Capital Share
Transactions, Net 49,820,618 (1,964,623) 168,343,622 426,901,375
------------ ------------ ------------- -------------
Total increase
(decrease) in net
assets 49,491,769 (2,071,245) 160,095,359 434,281,462
Net Assets
Beginning of Year 40,029,216 42,100,461 655,271,251 220,989,789
------------ ------------ ------------- -------------
End of Year $89,520,985 $40,029,216 $815,366,610 $655,271,251
============ ============ ============= =============
Undistributed
(distributions in excess
of)
Investment Income, Net $ - $ 9,921 $ (1,498,565) $ (5,770,131)
</TABLE>
See Notes to Financial Statements.
51
<PAGE>
FFTW Funds, Inc.
Statements of Changes In Net Assets (continued)
Global & International Portfolios
<TABLE>
<CAPTION>
Worldwide Portfolio Worldwide-Hedged Portfolio
---------------------------- ----------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1998 Dec. 31, 1997 Dec. 31, 1998 Dec. 31, 1997
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase (Decrease) in
Net Assets
From Operations
Investment income, net $ 3,964,055 $ 4,228,741 $ 7,500,941 $ 3,044,893
Net realized gain (loss)
on investments,
financial futures,
options contracts, and
foreign currency-
related transactions 6,457,926 (1,031,547) 10,263,492 3,039,184
Net unrealized
appreciation
(depreciation) on
investments, financial
futures contracts, and
on translation of
assets and liabilities
denominated in foreign
currency 2,451,967 (838,965) (242,936) 1,027,009
------------ ------------ ------------- ------------
Net increase (decrease)
in net assets resulting
from operations 12,873,948 2,358,229 17,521,497 7,111,086
------------ ------------ ------------- ------------
Distributions to
Shareholders
From investment income,
net 3,964,055 1,610,613 7,500,941 3,044,893
In excess of investment
income, net 2,391 932,993 2,012,026 -
From net realized gain
on investments,
financial futures
contracts, and foreign
currency-related
transactions 648,984 - 8,917,381 2,913,718
From capital stock in
excess of par value - 1,685,135 - -
------------ ------------ ------------- ------------
Total Distributions 4,615,430 4,228,741 18,430,348 5,958,611
------------ ------------ ------------- ------------
Capital Share
Transactions, Net (20,841,508) 9,166,819 95,323,789 49,213,465
------------ ------------ ------------- ------------
Total increase
(decrease) in net
assets (12,582,990) 7,296,307 94,414,938 50,365,940
Net Assets
Beginning of Year 82,235,744 74,939,437 80,389,597 30,023,657
------------ ------------ ------------- ------------
End of Year $69,652,754 $82,235,744 $174,804,535 $80,389,597
============ ============ ============= ============
Undistributed
(distributions in excess
of) Investment Income,
Net $ 1,633,253 $ (18,120) $ (1,122,393) $ (300,387)
</TABLE>
See Notes to Financial Statements.
52
<PAGE>
FFTW Funds, Inc.
Statements of Changes In Net Assets (continued)
Global & International Portfolios
<TABLE>
<CAPTION>
Global Tactical Exposure
International Portfolio Portfolio
---------------------------- ----------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1998 Dec. 31, 1997 Dec. 31, 1998 Dec. 31, 1997
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase (Decrease) in
Net Assets
From Operations
Investment income, net $ 3,336,012 $ 2,364,672 $ 17,207,229 $ 7,523,838
Net realized gain (loss)
on investments,
financial futures and
swap contracts, and
foreign currency-
related transactions 7,774,505 (950,583) (12,347,912) 17,520,704
Net unrealized
appreciation
(depreciation) on
investments, financial
futures contracts, and
translation of assets
and liabilities
denominated in foreign
currency 2,505,110 (1,333,639) 22,153,203 (8,314,428)
------------ ------------ ------------- -------------
Net increase in net
assets resulting from
operations 13,615,627 80,450 27,012,520 16,730,114
------------ ------------ ------------- -------------
Distributions to
Shareholders
From investment income,
net 3,336,012 643,069 17,207,229 7,523,838
In excess of investment
income, net 3,005,070 - 74,921 3,539,829
From net realized gain
on investments,
financial futures and
swap contracts, and
foreign currency-
related transactions 5,026,290 1,002,367 - 1,697,755
In excess of net
realized gain on
investments, financial
futures and swap
contracts, and foreign
currency-related
transactions - - 2,764,626 -
From capital stock in
excess of par value - 1,721,603 - -
------------ ------------ ------------- -------------
Total Distributions 11,367,372 3,367,039 20,046,776 12,761,422
------------ ------------ ------------- -------------
Capital Share
Transactions, Net 11,803,979 35,193,290 133,994,685 152,391,477
------------ ------------ ------------- -------------
Total increase in net
assets 14,052,234 31,906,701 140,960,429 156,360,169
Net Assets
Beginning of Year 67,652,638 35,745,937 283,005,280 126,645,111
------------ ------------ ------------- -------------
End of Year $81,704,872 $67,652,638 $423,965,709 $283,005,280
============ ============ ============= =============
Undistributed
(distributions in
excess of)
Investment Income, Net $ (934,988) $ 232,458 $ 506,074 $ 13,349,601
</TABLE>
See Notes to Financial Statements.
53
<PAGE>
FFTW Funds, Inc.
Statements of Changes in Net Assets (continued)
Global & International Portfolios
<TABLE>
<CAPTION>
Emerging Markets International Opportunities
Portfolio Portfolio
------------------------------- ---------------------------
Period from Period From
Year Ended August 12, 1997* October 8, 1998* to
Dec. 31, 1998 to Dec. 31, 1997 December 31, 1998
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Increase (Decrease) in
Net Assets
From Operations
Investment income, net $ 16,723,142 $ 2,004,815 $ 203,910
Net realized (loss) on
investments, financial
futures contracts and
foreign currency-
related transactions (25,017,053) (930,072) (423,463)
Net unrealized
(depreciation) on
investments and on
translation of assets
and liabilities
denominated in foreign
currency (15,139,020) (1,498,936) 619,765
------------- ------------- ------------
Net (decrease) in net
assets resulting from
operations (23,432,931) (424,193) 400,212
------------- ------------- ------------
Distributions to
Shareholders
From investment income,
net 14,481,049 2,004,815 203,662
In excess of investment
income, net - - -
In excess of net
realized gain on
investments, financial
futures contracts, and
foreign currency-
related transactions - - 156,561
From capital stock in
excess of par value 2,252,464 - -
------------- ------------- ------------
Total Distributions 16,733,513 2,004,815 360,223
------------- ------------- ------------
Capital Share
Transactions, Net 93,831,710 113,472,457 25,536,057
------------- ------------- ------------
Total increase in net
assets 53,665,266 111,043,449 25,576,046
Net Assets
Beginning of Period 111,043,449 - -
------------- ------------- ------------
End of Period $164,708,715 $111,043,449 $25,576,046
============= ============= ============
Undistributed
(distributions in
excess of) Investment
Income, Net $ (1,275,363) $ 63,424 $ (532,291)
</TABLE>
* Commencement of Operations.
See Notes to Financial Statements.
54
<PAGE>
FFTW Funds, Inc.
Financial Highlights
Money Market Portfolio
<TABLE>
<CAPTION>
For the Year Ended
----------------------------------------------------------------
For a share outstanding December 31, December 31, December 31, December 31, December 31,
throughout the period: 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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 0.05 0.05 0.05 0.06 0.04
Net realized gain on
investments - - 0.00* 0.00* 0.00*
------- ------- ------- ------- -------
Total from investment
operations 0.05 0.05 0.05 0.06 0.04
------- ------- ------- ------- -------
Less Distributions
From investment income,
net 0.05 0.05 0.05 0.06 0.04
From net realized gain
on investments - - 0.00* - -
In excess of net
realized gain on
investments - - - - 0.00*
------- ------- ------- ------- -------
Total distributions 0.05 0.05 0.05 0.06 0.04
------- ------- ------- ------- -------
Net asset value, end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= =======
Total Return 5.51% 5.46% 5.18% 5.74% 4.13%
Ratios/Supplemental Data
Net assets, end of
period (000's) $29,451 $26,152 $25,047 $25,870 $22,006
Ratio of operating
expenses to average
net assets (a) 0.25% 0.30% 0.40% 0.40% 0.40%
Ratio of investment
income, net to average
net assets (a) 5.29% 5.33% 5.05% 5.58% 4.16%
Decrease in above
expense ratios due to
waiver of investment
advisory and
administration fees and
reimbursement of other
expenses 0.11% 0.16% 0.30% 0.37% 0.64%
</TABLE>
- --------------------------------------------------------------------------------
(a)Net of waivers and reimbursements.
*Rounds to less than $.01.
See Notes to Financial Statements.
55
<PAGE>
FFTW Funds, Inc.
Financial Highlights (continued)
U.S. Short-Term Portfolio
<TABLE>
<CAPTION>
For the Year Ended
----------------------------------------------------------------
For a share outstanding December 31, December 31, December 31, December 31, December 31,
throughout the period: 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Share Data
Net asset value,
beginning of period $ 9.77 $ 9.85 $ 9.88 $ 9.89 $ 9.98
Increase (Decrease) From
Investment Operations
Investment income, net 0.54 0.57 0.55 0.56 0.44
Net realized and
unrealized (loss) on
investments, financial
futures and options
contracts, and foreign
currency-related
transactions (0.01) (0.08) (0.03) (0.01) (0.08)
-------- -------- -------- -------- --------
Total from investment
operations 0.53 0.49 0.52 0.55 0.36
-------- -------- -------- -------- --------
Less Distributions
From investment income,
net 0.54 0.57 0.55 0.56 0.45
In excess of investment
income, net - - - 0.00* 0.00*
-------- -------- -------- -------- --------
Total distributions 0.54 0.57 0.55 0.56 0.45
-------- -------- -------- -------- --------
Net asset value, end of
period $ 9.76 $ 9.77 $ 9.85 $ 9.88 $ 9.89
======== ======== ======== ======== ========
Total Return 5.59% 5.09% 5.45% 5.71% 3.71%
Ratios/Supplemental Data
Net assets, end of
period (000's) $840,366 $486,906 $355,257 $457,425 $290,695
Ratio of operating
expenses to average net
assets, exclusive of
interest expense (a) 0.25% 0.25% 0.27% 0.40% 0.40%
Ratio of operating
expenses to average net
assets, inclusive of
interest expense (a) 0.25% 0.26% 0.40% 0.51% 0.43%
Ratio of investment
income, net to average
net assets(a) 5.48% 5.78% 5.62% 5.64% 4.14%
Decrease in above
expense ratios due to
waiver of investment
advisory fees 0.17% 0.18% 0.05% 0.07% 0.08%
</TABLE>
- --------------------------------------------------------------------------------
(a)Net of waivers and reimbursements.
*Rounds to less than $0.01.
See Notes to Financial Statements.
56
<PAGE>
FFTW Funds, Inc.
Financial Highlights (continued)
Limited Duration Portfolio
<TABLE>
<CAPTION>
For the Year Ended
----------------------------------------------------------------
For a share outstanding December 31, December 31, December 31, December 31, December 31,
throughout the period: 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Share Data
Net asset value, begin-
ning of period $ 9.93 $ 9.93 $ 10.00 $ 9.55 $ 9.95
Increase (Decrease) From
Investment Operations
Investment income, net 0.55 0.62 0.55 0.60 0.43
Net realized and
unrealized gain (loss)
on investments, finan-
cial futures and op-
tions contracts, and
foreign currency-re-
lated transactions 0.11 0.08 (0.04) 0.45 (0.40)
------- ------- ------- ------ ------
Total from investment
operations 0.66 0.70 0.51 1.05 0.03
------- ------- ------- ------ ------
Less Distributions
From investment income,
net 0.55 0.62 0.55 0.60 0.43
In excess of investment
income, net 0.00* - 0.00* - -
From net realized gain
on investments,
financial futures and
options contracts, and
foreign currency-
related transactions 0.11 0.08 0.03 - -
------- ------- ------- ------ ------
Total distributions 0.66 0.70 0.58 0.60 0.43
------- ------- ------- ------ ------
Net asset value, end of
period $ 9.93 $ 9.93 $ 9.93 $10.00 $ 9.55
======= ======= ======= ====== ======
Total Return 6.79% 7.21% 5.29% 11.26% 0.29%
Ratios/Supplemental Data
Net assets, end of
period (000's) $89,521 $40,029 $42,100 $5,080 $4,338
Ratio of operating
expenses to average net
assets, exclusive of
interest expense (a) 0.30% 0.30% 0.31% 0.50% 0.50%
Ratio of operating
expenses to average net
assets, inclusive of
interest expense (a) 0.30% 0.60% 0.49% 1.41% 1.74%
Ratio of investment
income, net to average
net assets (a) 5.48% 6.10% 5.79% 6.09% 4.43%
Decrease in above ex-
pense ratios due to
waiver of investment
advisory fees and reim-
bursement of other ex-
penses 0.22% 0.31% 0.15% 0.53% 0.57%
Portfolio turnover 1,059% 1,292% 1,387% 1,075% 343%
</TABLE>
- --------------------------------------------------------------------------------
(a)Net of waivers and reimbursements.
*Rounds to less than $0.01.
See Notes to Financial Statements.
57
<PAGE>
FFTW Funds, Inc.
Financial Highlights (continued)
Mortgage-Backed Portfolio
<TABLE>
<CAPTION>
Year Ended Year Ended Period From
For a share outstanding December 31, December 31, April 29, 1996*
throughout the period: 1998 1997 to Dec. 31, 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share Data
Net asset value, beginning of
period $ 10.30 $ 10.16 $ 10.00
Increase (Decrease) From
Investment Operations
Investment income, net 0.68 0.68 0.41
Net realized and unrealized gain on
investments, short sales, and
financial futures, swap and
options contracts 0.07 0.32 0.23
-------- -------- --------
Total from investment operations 0.75 1.00 0.64
-------- -------- --------
Less Distributions
From investment income, net 0.65 0.63 0.41
In excess of investment income, net - 0.05 0.06
From net realized gain on
investments, short sales, and
financial futures, swap and
options contracts 0.22 0.18 0.01
-------- -------- --------
Total distributions 0.87 0.86 0.48
-------- -------- --------
Net asset value, end of period $ 10.18 $ 10.30 $ 10.16
======== ======== ========
Total Return 7.42% 10.19% 6.54%(c)
Ratios/Supplemental Data
Net assets, end of period (000's) $815,367 $655,271 $220,990
Ratio of operating expenses to
average net assets, exclusive of
interest expense (a) 0.23% 0.38% 0.45%(b)
Ratio of operating expenses to
average net assets, inclusive of
interest expense (a) 0.37% 0.47% 0.88%(b)
Ratio of investment income, net to
average net assets (a) 6.33% 6.07% 7.61%(b)
Decrease in above expense ratios
due to waiver of investment
advisory fees and reimbursement of
other expenses 0.20% 0.07% 0.10%(b)
Porfolio turnover 843% 3,396% 590%
</TABLE>
- --------------------------------------------------------------------------------
(a)Net of waivers and reimbursements.
(b)Annualized.
(c)Not annualized.
*Commencement of Operations.
See Notes to Financial Statements.
58
<PAGE>
FFTW Funds, Inc.
Financial Highlights (continued)
Worldwide Portfolio
<TABLE>
<CAPTION>
For the Year Ended
----------------------------------------------------------------
For a share outstanding December 31, December 31, December 31, December 31, December 31,
throughout the period: 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Share Data
Net asset value,
beginning of period $ 9.42 $ 9.64 $ 9.83 $ 9.27 $ 10.02
------- ------- ------- ------- -------
Increase (Decrease) From
Investment Operations
Investment income, net 0.46 0.49 0.53 0.58 0.50
Net realized and
unrealized gain (loss)
on investments,
financial futures and
options contracts, and
foreign currency-
related transactions 0.96 (0.22) 0.01 0.56 (0.74)
------- ------- ------- ------- -------
Total from investment
operations 1.42 0.27 0.54 1.14 (0.24)
------- ------- ------- ------- -------
Less Distributions
From investment income,
net 0.46 0.19 0.53 0.30 0.20
In excess of investment
income, net - 0.11 - - 0.01
From net realized gain
on investments,
financial futures and
options contracts, and
foreign currency-
related transactions 0.10 - 0.09 - -
In excess of net
realized gain on
investments, financial
futures contracts and
foreign currency-
related transactions - - - - -
From capital stock in
excess of par value - 0.19 0.11 0.28 0.30
------- ------- ------- ------- -------
Total distributions 0.56 0.49 0.73 0.58 0.51
------- ------- ------- ------- -------
Net asset value, end of
period $ 10.28 $ 9.42 $ 9.64 $ 9.83 $ 9.27
======= ======= ======= ======= =======
Total Return 15.58% 2.93% 5.77% 12.60% (2.25%)
Ratios/Supplemental Data
Net assets, end of
period (000's) $69,653 $82,236 $74,939 $86,186 $53,721
Ratio of operating
expenses to average net
assets, exclusive of
interest expense (a) 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of operating
expenses to average net
assets, inclusive of
interest expense (a) 0.60% 0.60% 0.60% 0.60% 0.63%
Ratio of investment
income, net to average
net assets (a) 4.76% 5.21% 5.52% 6.13% 5.11%
Decrease in above
expense ratios due to
waiver of investment
advisory fees and
reimbursement of other
expenses 0.01% 0.02% 0.05% 0.30% 0.02%
Portfolio Turnover 668% 713% 1,126% 1,401% 1,479%
</TABLE>
- --------------------------------------------------------------------------------
(a)Net of waivers and reimbursements.
See Notes to Financial Statements.
59
<PAGE>
FFTW Funds, Inc.
Financial Highlights (continued)
Worldwide-Hedged Portfolio
<TABLE>
<CAPTION>
For the Year Ended
----------------------------------------------------------------
For a share outstanding December 31, December 31, December 31, December 31, December 31,
throughout the period: 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Share Data
Net asset value,
beginning of period $ 11.23 $ 10.91 $ 10.85 $ 10.41 $10.08
-------- ------- ------- ------- ------
Increase (Decrease) From
Investment Operations
Investment income, net 0.59 0.53 0.62 0.45 0.34
Net realized and
unrealized gain on
investments, financial
futures and options
contracts, and foreign
currency-related
transactions 0.68 0.80 0.43 0.66 0.43
-------- ------- ------- ------- ------
Total from investment
operations 1.27 1.33 1.05 1.11 0.77
-------- ------- ------- ------- ------
Less Distributions
From investment income,
net 0.70 0.59 0.62 0.67 0.44
In excess of investment
income, net - - 0.37 - 0.00*
From net realized gain
on investments,
financial futures and
options contracts, and
foreign currency-
related transactions 0.61 0.42 - - -
-------- ------- ------- ------- ------
Total distributions 1.31 1.01 0.99 0.67 0.44
-------- ------- ------- ------- ------
Net asset value, end of
period $ 11.19 $ 11.23 $ 10.91 $ 10.85 $10.41
======== ======= ======= ======= ======
Total Return 11.53% 12.60% 10.03% 11.00% 7.84%
Ratios/Supplemental Data
Net assets, end of
period (000's) $174,805 $80,390 $30,024 $28,255 $ 273
Ratio of operating
expenses to average net
assets, exclusive of
interest expense (a) 0.45% 0.45% 0.45% 0.45% 0.60%
Ratio of operating
expenses to average net
assets, inclusive of
interest expense (a) 0.45% 0.45% 0.45% 0.45% 0.65%
Ratio of investment
income, net to average
net assets (a) 4.85% 5.29% 5.71% 5.84% 4.72%
Decrease in above
expense ratios due to
waiver of investment
advisory fees and
reimbursement of other
expenses 0.13% 0.20% 0.24% 0.54% 0.17%
Portfolio Turnover 745% 704% 1,087% 500% 1,622%
</TABLE>
- --------------------------------------------------------------------------------
(a)Net of waivers and reimbursements.
*Rounds to less than $0.01.
See Notes to Financial Statements.
60
<PAGE>
FFTW Funds, Inc.
Financial Highlights (continued)
International Portfolio
<TABLE>
<CAPTION>
For the Year Ended
------------------------- Period From
For a share outstanding December 31, December 31, May 9, 1996* to
throughout the period: 1998 1997 December 31, 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share Data
Net asset value, beginning of
period $9.50 $10.20 $10.00
Increase (Decrease) From
Investment Operations
Investment income, net 0.48 0.50 0.38
Net realized and unrealized gain
(loss) on investments, financial
futures contracts and foreign
currency-related transactions 1.21 (0.56) 0.28
------- ------- -------
Total from investment operations 1.69 (0.06) 0.66
------- ------- -------
Less Distributions
From investment income, net 0.45 0.14 0.38
In excess of net investment
income, net 0.40 - -
From net realized gain on
investments, financial futures
contracts and foreign currency-
related transactions 0.66 0.14 0.08
From capital stock in excess of
par value - 0.36 -
------- ------- -------
Total distributions 1.51 0.64 0.46
------- ------- -------
Net asset value, end of period $9.68 $ 9.50 $10.20
======= ======= =======
Total Return 18.35% (0.43%) 6.66%(c)
Ratios/Supplemental Data
Net assets, end of period (000's) $81,705 $67,653 $35,746
Ratio of operating expenses to
average net assets (a) 0.60% 0.60% 0.60%(b)
Ratio of investment income, net to
average net assets (a) 4.56% 5.19% 5.73%(b)
Decrease in above expense ratios
due to waiver of investment
advisory fees 0.03% 0.10% 0.32%(b)
Portfolio Turnover 1,049% 809% 539%
</TABLE>
- --------------------------------------------------------------------------------
(a)Net of waivers and reimbursements.
(b)Annualized.
(c)Not annualized
* Commencement of Operations
See Notes to Financial Statements.
61
<PAGE>
FFTW Funds, Inc.
Financial Highlights (continued)
Global Tactical Exposure Portfolio
<TABLE>
<CAPTION>
For the Year Ended
--------------------------------------------------------------------
For a share outstanding December 31, December 31, December 31, December 31, December 31,
throughout the period: 1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Share Data
Net asset value,
beginning of period $10.05 $9.80 $10.19 $10.00* $10.39
Increase (Decrease) From
Investment Operations
Investment income, net 0.52*** 0.41 0.47 0.19 0.20
Net realized and
unrealized gain (loss)
on investments,
financial futures, swap
and options contracts,
and foreign currency-
related transactions 0.28 0.43 (0.15) 0.19 (0.46)
-------- -------- -------- ------- ------
Total from investment
operations 0.80 0.84 0.32 0.38 (0.26)
-------- -------- -------- ------- ------
Less Distributions
From investment income,
net 0.53 0.36 0.47 0.19 0.20
In excess of investment
income, net 0.00 (c) 0.17 - 0.00 (c) -
From net realized gain
on investments,
financial futures, swap
and options contracts,
and foreign currency-
related transactions - 0.06 0.05 - 0.50
In excess of net
realized gain on
investments, financial
futures, swap and
options contracts, and
foreign currency-
related transactions 0.07 - 0.09 - -
From capital stock in
excess of par value - - 0.10 - -
-------- -------- -------- ------- ------
Total distributions 0.60 0.59 0.71 0.19 0.70
-------- -------- -------- ------- ------
Net asset value, end of
period $10.25 $10.05 $9.80 $10.19 $9.43**
======== ======== ======== ======= ======
Total Return 8.20% 8.77% 3.18% 3.80% (b) (2.53%)
Ratios/Supplemental Data
Net assets, end of
period (000's) $423,966 $283,005 $126,645 $34,005 -
Ratio of operating
expenses to average net
assets, exclusive of
interest expense (a) 0.27% 0.42% 0.60% 0.60% (b) 0.57%
Ratio of operating
expenses to average net
assets, inclusive of
interest expense (a) 5.54% 0.42% 0.60% 0.60% (b) 0.57%
Ratio of investment
income, net to average
net assets 5.14% 3.67% 4.65% 6.12% (b) 2.87%
Decrease in above
expense ratios due to
waiver of investment
advisory fees and
reimbursement of other
expenses 0.30% 0.16% 0.06% 0.17% (b) 0.49%
Portfolio Turnover 766% 712% 784% 764% 1,282%
</TABLE>
- --------------------------------------------------------------------------------
(a)Net of waivers and reimbursements.
(b)Annualized.
(c)Rounds to less than $0.01.
*The portfolio recommenced operations on September 14, 1995.
** 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.
*** Calculation done based on average shares outstanding.
See Notes to Financial Statements.
62
<PAGE>
FFTW Funds, Inc.
Financial Highlights (continued)
Emerging Markets Portfolio
<TABLE>
<CAPTION>
Year Ended Period from
For a share outstanding December 31, August 12, 1997* to
throughout the period: 1998 December 31, 1997
- -------------------------------------------------------------------------------
<S> <C> <C>
Per Share Data
Net asset value, beginning of period $ 9.59 $ 10.00
Increase (Decrease) From
Investment Operations
Investment income, net 0.88 0.29
Net realized and unrealized (loss) on
investments, financial futures contracts and
foreign currency-related transactions (1.86) (0.41)
-------- --------
Total from investment operations (0.98) (0.12)
-------- --------
Less Distributions
From investment income, net 0.76 0.29
From net realized and unrealized (loss) on
investments, financial futures contracts and
foreign currency-related transactions - -
From capital stock in excess of par value 0.13 -
-------- --------
Total distributions 0.89 0.29
-------- --------
Net asset value, end of period $ 7.72 $ 9.59
======== ========
Total Return (10.50%) (1.20%) (b)
Ratios/Supplemental Data
Net assets, end of period (000's) $164,709 $111,043
Ratio of operating expenses to average net
assets, exclusive of interest expense 1.00% 1.03% (a)
Ratio of operating expenses to average net
assets, inclusive of interest expense 1.15% 1.03% (a)
Ratio of investment income, net to average
net assets 10.52% 7.87% (a)
Porfolio turnover 157% 16%
- -------------------------------------------------------------------------------
</TABLE>
(a)Annualized
(b)Not annualized
*Commencement of Operations
See Notes to Financial Statements.
63
<PAGE>
FFTW Funds, Inc.
Financial Highlights (continued)
International Opportunities Portfolio
<TABLE>
<CAPTION>
Period From
For a share outstanding October 8, 1998* to
throughout the period: December 31, 1998
- ------------------------------------------------------------------------------
<S> <C>
Per Share Data
Net asset value, beginning of period $ 10.00
Increase (Decrease) From
Investment Operations
Investment income, net 0.09
Net realized and unrealized gain (loss) on investments,
financial futures contracts and foreign currency-related
transactions -
-------
Total from investment operations 0.09
-------
Less Distributions
From investment income, net 0.09
In excess of net realized gain on investments, financial
futures contracts and foreign currency-related
transactions 0.06
-------
Total distributions 0.15
-------
Net asset value, end of period $ 9.94
=======
Total Return 0.89%(c)
Ratios/Supplemental Data
Net assets, end of period (000's) $25,576
Ratio of operating expenses to average net assets (a) 0.60%(b)
Ratio of investment income, net to average net assets (a) 3.78%(b)
Decrease in above expense ratios due to waiver of
investment advisory fees 0.29%(b)
Portfolio Turnover 238%
</TABLE>
- --------------------------------------------------------------------------------
(a)Net of waivers and reimbursements
(b)Annualized.
(c)Not annualized.
*Commencement of Operations.
See Notes to Financial Statements.
64
<PAGE>
FFTW Funds, Inc.
Notes to Financial Statements
December 31, 1998
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, ten of which were active as of December 31, 1998. The
ten active Portfolios are: Money Market Portfolio ("Money Market"); U.S.
Short-Term Portfolio ("U.S. Short-Term"); Limited Duration Portfolio ("Limited
Duration"), formerly Stable Return Portfolio; Mortgage-Backed Portfolio
("Mortgage"), formerly Mortgage Total Return Portfolio; Worldwide Portfolio
("Worldwide"); Worldwide-Hedged Portfolio ("Worldwide-Hedged"); International
Portfolio ("International"); Global Tactical Exposure Portfolio ("Global
Tactical Exposure"), formerly International-Hedged Portfolio; Emerging Markets
Portfolio ("Emerging Markets"); and International Opportunities Portfolio
("International Opportunities"). International Opportunities commenced
operations on October 8, 1998. The Fund is managed by Fischer Francis Trees &
Watts, Inc. (the "Investment Adviser"). The Portfolio name changes were
effective on September 11, 1998.
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, Mortgage, Global Tactical Exposure and Emerging Markets. 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, Global Tactical
Exposure and Emerging Markets 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 the 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 (asked
price for short sales). Time deposits and repurchase agreements are generally
valued at their cost plus accrued interest. Securities for which market
quotations are not readily available 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.
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.
65
<PAGE>
FFTW Funds, Inc.
Notes to Financial Statements (continued)
December 31, 1998
2. Summary of Significant Accounting Policies (continued)
At December 31, 1998, the Portfolio 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, 1998, are treated for federal income tax purposes as arising on
the first day of the Portfolio's next fiscal year.
<TABLE>
<CAPTION>
Portfolio Carryforward Amount Expiration Date
--------- ------------------- -----------------
<S> <C> <C>
U.S. Short-Term $1,021,947 December 31, 2001
1,779,703 December 31, 2002
1,335,380 December 31, 2003
1,594,356 December 31, 2004
2,647,239 December 31, 2005
Worldwide 4,461,157 December 31, 2002
Global Tactical Exposure 3,987,996 December 31, 2006
Emerging Markets 745,596 December 31, 2005
19,253,285 December 31, 2006
</TABLE>
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 U.S.
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 U.S. 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.
During the year ended December 31, 1998, the Portfolios reclassified the
following book to tax differences [increases (decreases)]:
<TABLE>
<CAPTION>
Undistributed Accumulated Capital Stock
Investment Net Realized in Excess
Portfolio Income, Net Gain/Loss of Par Value
--------- ------------- ------------ -------------
<S> <C> <C> <C>
Money Market $ 21,387 $ (20,769) $ (618)
U.S. Short-Term (10) 10 -
Limited Duration 16,962 (16,962) -
Mortgage 6,047,539 (4,130,978) (1,916,561)
Worldwide 1,653,764 (1,715,641) 61,877
Worldwide-Hedged 1,190,020 (1,188,908) (1,112)
International 1,837,624 (2,569,519) 731,895
Global Tactical Exposure (12,768,606) 12,768,606 -
Emerging Markets (1,328,416) 3,580,880 (2,252,464)
International Opportunities (532,539) 532,539 -
</TABLE>
66
<PAGE>
FFTW Funds, Inc.
Notes to Financial Statements (continued)
December 31, 1998
2. Summary of Significant Accounting Policies (continued)
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 of foreign currency, currency gains or losses realized
between the trade and settlement dates on securities transactions, and the
difference between the amounts of dividends, interest, and foreign withholding
taxes recorded on the Portfolio's books, and the U.S. dollar equivalent of the
amounts actually received. Net unrealized appreciation or depreciation on
other 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.
Estimates
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts and disclosures in the financial statements.
Actual results could differ from those estimates.
3. Investment Advisory Agreements and Affiliated Transactions
The Fund's Board of Directors has approved investment advisory agreements (the
"Agreements") with the Investment Adviser. The investment advisory fees to be
paid to the Investment Adviser are computed daily at annual rates set forth
below. The fees are payable quarterly for U.S. Short-Term, Worldwide, and
Worldwide-Hedged, and monthly for Money Market, Limited Duration, Mortgage,
International, Global Tactical Exposure and Emerging Markets.
From time to time, the Investment Adviser has agreed to waive its investment
advisory fee and reimburse the Portfolios for any expenses (exclusive of
interest, taxes, brokerage commissions and other extraordinary expenses) in
excess of certain specified amounts. The table below summarizes the current
investment advisory fee arrangement (reflecting certain waivers), the
investment advisory fee per the Agreements and the current expense cap as
percentages of average daily net assets. All waiver and expense cap agreements
are in effect until further notice.
<TABLE>
<CAPTION>
Current Investment
Investment Advisory Current
Advisory Fee per Expense
Portfolio Fee Agreement Cap
--------- ---------- ---------- -------
<S> <C> <C> <C>
Money Market 0.10% 0.10% 0.25%
U.S. Short-Term 0.15% 0.30% 0.25%
Limited Duration 0.15% 0.35% 0.30%
Mortgage 0.10% 0.30% 0.25%
Worldwide 0.40% 0.40% 0.60%
Worldwide-Hedged 0.26% 0.40% 0.45%
International 0.40% 0.40% 0.60%
Global Tactical Exposure 0.10% 0.40% 0.30%
Emerging Markets 0.75% 0.75% 1.04%
International Opportunities 0.40% 0.40% 0.60%
</TABLE>
Directors who are not employees of the Investment Adviser receive an annual
retainer of $20,000, payable quarterly and $1,000 per meeting attended.
Directors' fees of $27,000 were allocated among the Portfolios and paid for
the year ended December 31, 1998.
On May 29, 1998, Investors Capital Services, Inc. became a wholly-owned
subsidiary of Investors Bank and Trust Company (IBT), which is a wholly-owned
subsidiary of Investors Financial Services Co., Inc. IBT serves as the Funds'
custodian and accounting agent. Fees paid for services rendered by IBT are
based upon assets of the Portfolios and on transactions entered into by the
Portfolios during the year. Fees paid to IBT by the Portfolios are reflected
as accounting and custody fees in the statement of operations.
67
<PAGE>
FFTW Funds, Inc.
Notes to Financial Statements (continued)
December 31, 1998
3. Investment Advisory Agreements and Affiliated Transactions (continued)
As of December 31, 1998, the Investment Adviser had discretionary investment
advisory agreements with shareholders of the Fund that represent 83.6% of the
Fund's total net assets and therefore, the investment adviser 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 year ended
December 31, 1998 for each of the Portfolios were as follows:
<TABLE>
<CAPTION>
Purchase Cost of Proceeds from Sales of
Portfolio* Investment Securities Investment Securities
---------- --------------------- ----------------------
<S> <C> <C>
Money Market $ - $ -
U.S. Short-Term 5,950,028,369 5,644,552,902
Limited Duration 1,064,862,644 959,185,852
Mortgage 12,095,393,646 11,739,578,910
Mortgage (short sale
transactions) 349,165,972 348,138,919
Worldwide 368,962,358 407,358,705
Worldwide-Hedged 665,629,105 631,842,162
International 369,210,749 362,755,381
Global Tactical Exposure 1,984,403,584 1,913,561,632
Emerging Markets 287,818,979 203,144,450
International Opportunities 67,249,895 36,529,499
</TABLE>
- -------
*Long transactions unless otherwise indicated
Mortgage (the "Portfolio") is engaged in short-selling which obligates the
Portfolio to replace the security borrowed by purchasing the security at
current market value. The Portfolio would incur a loss if the price of the
security increases between the date of the short sale and the date on which
the Portfolio replaces the borrowed security. The Portfolio would realize a
gain if the price of the security declines between those dates. Until the
Portfolio replaces the borrowed security, the Fund will maintain daily, a
segregated account with a broker and/or custodian, of cash and/or liquid
securities sufficient to cover its short position. At December 31, 1998, there
were no securities sold short outstanding.
The cost of investments for U.S. Federal income tax purposes and the
components of net unrealized appreciation (depreciation) on investments at
December 31, 1998, for each of the Portfolios were as follows:
<TABLE>
<CAPTION>
Unrealized Unrealized
Portfolio Appreciation Depreciation Net Cost
- --------- ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
U.S. Short-Term $ 390,609 $1,671,251 $ (1,280,642) $ 837,056,962
Limited Duration 350,715 334,796 15,919 126,196,538
Mortgage 6,504,071 9,254,487 (2,750,416) 1,490,360,238
Worldwide 842,053 74,069 767,984 66,454,593
Worldwide-Hedged 1,612,293 268,464 1,343,829 172,144,173
International 560,302 236,541 323,761 78,409,417
Global Tactical Exposure 6,344,585 786,947 5,557,638 370,520,734
Emerging Markets 5,921,149 23,811,932 (17,890,783) 177,604,583
International
Opportunities 197,197 14,169 183,028 39,123,983
</TABLE>
5. Forward Foreign Exchange Contracts
Each Portfolio, except Money Market, may enter into forward foreign exchange
contracts to hedge its exposure to changes in foreign currency exchange rates
on its foreign currency denominated portfolio holdings. A forward foreign
exchange contract is a commitment to purchase or sell a foreign currency at a
future date at a negotiated forward rate. The gain or loss arising from the
difference between the original contracts and the closing of such contracts is
included in net realized gains or losses on foreign currency-related
transactions. Fluctuations in the value of forward foreign exchange contracts
are recorded for book purposes as unrealized gains or losses by the 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 counter-party to meet the terms of a contract and from
unanticipated movements in the value of a foreign currency relative to the
U.S. dollar.
68
<PAGE>
FFTW Funds, Inc.
Notes to Financial Statements (continued)
December 31, 1998
5. Forward Foreign Exchange Contracts (continued)
At December 31, 1998, Worldwide had outstanding forward foreign exchange
contracts, both to purchase and sell foreign currencies as follows:
<TABLE>
- ---------------------------------------------------------------------------------
<CAPTION>
Unrealized
Contract Cost/ Appreciation
Amount Proceeds Value (Depreciation)
- ---------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Forward Foreign Exchange Buy Contracts
Australian Dollar
1,900,000 closing 2/23/99 $ 1,183,153 $ 1,166,041 $ (17,112)
British Pound closing
1,250,004 2/23/99 2,062,255 2,075,637 13,382
Canadian Dollar closing
3,853,314 2/23/99 2,534,948 2,510,084 (24,864)
Danish Krone closing
12,795,198 2/23/99 2,017,549 2,014,345 (3,204)
Dutch Guilder closing
850,000 2/23/99 450,412 454,134 3,722
French Franc closing
33,451,499 2/23/99 5,967,089 6,004,288 37,199
German Deutschemark
39,141,811 closing 2/23/99 23,618,411 23,561,462 (56,949)
Italian Lira closing
9,981,001,121 2/23/99 5,994,595 6,054,559 59,964
Japanese Yen closing
2,302,919,082 2/23/99 19,100,595 20,557,372 1,456,777
Spanish Peseta closing
316,859,011 2/23/99 2,252,019 2,236,486 (15,533)
Swedish Krona closing
4,938,903 2/23/99 619,920 611,746 (8,174)
Forward Foreign Exchange Sell
Contracts
Australian Dollar
2,050,000 closing 2/23/99 1,286,794 1,258,097 28,697
British Pound closing
3,760,762 2/23/99 6,220,502 6,244,760 (24,258)
Canadian Dollar closing
3,379,661 2/23/99 2,202,718 2,201,542 1,176
Danish Krone closing
12,750,668 2/23/99 2,026,908 2,007,334 19,574
German Deutschemark
39,729,919 closing 2/23/99 24,006,297 23,915,474 90,823
Japanese Yen closing
1,302,452,140 2/23/99 11,181,182 11,626,546 (445,364)
Swedish Krona closing
5,155,370 2/23/99 653,983 638,558 15,425
Swiss Franc closing
2,450,000 2/23/99 1,787,258 1,794,193 (6,935)
----------
$1,124,346
==========
At December 31, 1998, Worldwide-Hedged had outstanding forward foreign exchange
contracts, both to purchase and sell foreign currencies as follows:
Forward Foreign Exchange Sell
Contracts
Australian Dollar
4,800,000 closing 2/23/99 3,012,995 2,945,789 67,206
British Pound closing
17,095,065 2/23/99 28,308,048 28,386,425 (78,377)
Canadian Dollar closing
9,974,568 2/23/99 6,531,637 6,497,523 34,114
Danish Krone closing
38,270,421 2/23/99 6,083,651 6,024,902 58,749
German Deutschemark
30,910,942 closing 2/23/99 18,477,558 18,606,880 (129,322)
Japanese Yen closing
1,469,170,083 2/23/99 12,473,185 13,114,780 (641,595)
Spanish Peseta closing
586,469,038 2/23/99 4,172,553 4,139,474 33,079
Swedish Krona closing
5,741,561 2/23/99 720,966 711,165 9,801
Swiss Franc closing
6,350,000 2/23/99 4,674,961 4,650,257 24,704
----------
$ (83,335)
==========
</TABLE>
Forward Foreign Exchange Buy Contracts
Australian Dollar
4,100,000 closing 2/23/99 2,553,105 2,516,195 (36,910)
British Pound closing
3,338,131 2/23/99 5,507,224 5,542,981 35,757
Canadian Dollar closing
4,980,139 2/23/99 3,278,564 3,244,107 (34,457)
Danish Krone closing
28,560,961 2/23/99 4,503,760 4,496,345 (7,415)
German Deutschemark
16,921,368 closing 2/23/99 10,227,577 10,185,839 (41,738)
Japanese Yen closing
1,351,353,225 2/23/99 11,440,000 12,063,069 623,069
69
<PAGE>
FFTW Funds, Inc.
Notes to Financial Statements (continued)
December 31, 1998
5. Forward Foreign Exchange Contracts (continued)
At December 31, 1998, International had outstanding forward foreign exchange
contracts, both to purchase and sell foreign currencies as follows:
<TABLE>
- ----------------------------------------------------------------------------------
<CAPTION>
Unrealized
Contract Cost/ Appreciation
Amount Proceeds Value (Depreciation)
- ----------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Forward Foreign Exchange Buy Contracts
Australian Dollar
2,888,967 closing 2/23/99 $ 1,805,531 $ 1,772,977 $ (32,554)
British Pound closing
2,301,598 2/23/99 3,797,138 3,821,813 24,675
Canadian Dollar closing
3,875,363 2/23/99 2,549,688 2,524,446 (25,242)
Danish Krone closing
16,755,733 2/23/99 2,642,169 2,637,851 (4,318)
French Franc closing
41,074,506 2/23/99 7,326,883 7,372,560 45,677
German Deutschemark
26,838,281 closing 2/23/99 16,210,575 16,155,337 (55,238)
Italian Lira closing
14,415,556,395 2/23/99 8,657,992 8,744,598 86,606
Japanese Yen closing
2,790,350,820 2/23/99 23,306,035 24,908,509 1,602,474
Swedish Krona closing
7,230,443 2/23/99 907,549 895,582 (11,967)
Forward Foreign Exchange Sell Contracts
Australian Dollar
2,250,000 closing 2/23/99 1,412,339 1,380,839 31,500
British Pound closing
3,798,086 2/23/99 6,290,054 6,306,737 (16,683)
Canadian Dollar closing
3,574,423 2/23/99 2,334,698 2,328,411 6,287
Danish Krone closing
14,629,786 2/23/99 2,325,621 2,303,163 22,458
German Deutschemark
23,867,656 closing 2/23/99 14,284,571 14,367,165 (82,594)
Japanese Yen closing
846,679,890 2/23/99 7,206,215 7,558,021 (351,806)
Spanish Peseta closing
85,494,917 2/23/99 608,270 603,449 4,821
Swiss Franc closing
3,500,000 2/23/99 2,547,137 2,563,133 (15,996)
-----------
$ 1,228,100
===========
At December 31, 1998, Global Tactical Exposure had outstanding forward foreign
exchange contracts, both to purchase and sell foreign currencies as follows:
Forward Foreign Exchange Buy Contracts
Australian Dollar
22,078,260 closing 2/23/99 13,792,667 13,549,561 (243,106)
British Pound closing
9,737,640 2/23/99 16,065,136 16,169,392 104,256
Canadian Dollar closing
21,795,831 2/23/99 14,341,067 14,198,000 (143,067)
Danish Krone closing
156,055,697 2/23/99 24,606,869 24,567,807 (39,062)
Dutch Guilder closing
62,244,916 2/23/99 32,983,380 33,255,891 272,511
French Franc closing
242,630,209 2/23/99 43,280,451 43,550,267 269,816
German Deutschemark
188,290,212 closing 2/23/99 113,264,629 113,341,530 76,901
Italian Lira closing
67,081,880,064 2/23/99 40,289,417 40,692,428 403,011
Japanese Yen closing
15,139,390,996 2/23/99 125,852,492 135,144,174 9,291,682
Spanish Peseta closing
302,139,060 2/23/99 2,147,399 2,132,588 (14,811)
Swedish Krona closing
39,035,567 2/23/99 4,899,657 4,835,048 (64,609)
Forward Foreign Exchange Sell Contracts
Australian Dollar
19,600,000 closing 2/23/99 12,303,288 12,028,637 274,651
British Pound closing
26,430,672 2/23/99 43,815,803 43,888,238 (72,435)
Canadian Dollar closing
17,980,275 2/23/99 11,744,138 11,712,512 31,626
Danish Krone closing
130,573,605 2/23/99 20,756,610 20,556,168 200,442
German Deutschemark
254,782,644 closing 2/23/99 152,685,433 153,366,732 (681,299)
Japanese Yen closing
4,996,979,870 2/23/99 42,700,000 44,606,335 (1,906,335)
Swiss Franc closing
25,000,000 2/23/99 18,193,842 18,308,097 (114,255)
-----------
$ 7,645,917
===========
</TABLE>
70
<PAGE>
FFTW Funds, Inc.
Notes to Financial Statements (continued)
December 31, 1998
5. Forward Foreign Exchange Contracts (continued)
At December 31, 1998, Emerging Markets had outstanding forward exchange
contracts, both to purchase and sell foreign currencies as follows:
<TABLE>
- --------------------------------------------------------------------------------
<CAPTION>
Unrealized
Contract Cost/ Appreciation
Amount Proceeds Value (Depreciation)
- --------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Forward Foreign Exchange Buy Contracts
Czech Republic Koruna
300,000,000 closing 7/14/99 $ 8,543,536 $ 9,815,737 $ 1,272,201
European Currency Unit
4,380,561 closing 7/21/99 5,060,051 5,199,707 139,656
German Deutschemark
15,608,741 closing 7/14/99 8,914,187 9,465,580 551,393
Greek Drachma closing
1,600,000,000 7/21/99 5,402,157 5,546,478 144,321
Indonesian Rupiah
24,300,000,000 closing 3/02/99 3,000,000 3,115,368 115,368
Japanese Yen closing
425,040,000 2/23/99 3,593,951 3,794,187 200,236
Phillipine Peso closing
160,000,000 3/2/99 3,970,223 4,067,724 97,501
South African Rand
50,000,000 closing 7/13/99 7,089,986 8,020,318 930,332
Turkish Lira closing
2,594,750,000 3/10/99 5,500,000 7,125,889 1,625,889
Turkish Lira closing
944,000,000 4/30/99 2,000,000 2,329,177 329,177
Forward Foreign Exchange Sell Contracts
Czech Republic Koruna
300,000,000 closing 7/14/99 8,914,187 9,815,737 (901,550)
European Currency Unit
4,565,168 closing 7/14/99 5,402,157 5,418,834 (16,677)
German Deutschemark
15,608,741 closing 7/14/99 8,765,683 9,465,581 (699,898)
German Deutschemark
6,000,000 closing 2/23/99 3,593,951 3,611,708 (17,757)
Greek Drachma closing
1,600,000,000 7/21/99 5,060,051 5,546,478 (486,427)
Japanese Yen closing
481,104,450 3/3/99 3,970,000 4,299,107 (329,107)
South African Rand
50,000,000 closing 7/13/99 7,309,942 8,020,318 (710,376)
Turkish Lira closing
2,594,750,000 3/10/99 5,727,925 7,125,889 (1,397,964)
-----------
$ 846,318
===========
At December 31, 1998, International Opportunities had outstanding forward
foreign exchange contracts, both to purchase and sell foreign currencies as
follows:
Forward Foreign Exchange Buy Contracts
Australian Dollars
1,100,000 closing 2/23/99 689,401 675,076 (14,325)
British Pound closing
789,521 2/23/99 1,306,591 1,311,003 4,412
Canadian Dollar closing
2,253,706 2/23/99 1,469,763 1,468,085 (1,678)
Danish Krone closing
3,579,677 2/23/99 564,517 563,548 (969)
French Franc closing
16,386,600 2/23/99 2,923,047 2,941,269 18,222
German Deutschemark
23,494,355 closing 2/23/99 14,078,653 14,142,456 63,803
Italian Lira closing
3,714,384,997 2/23/99 2,230,862 2,253,177 22,315
Japanese Yen closing
776,334,714 2/23/99 6,443,915 6,930,075 486,160
Spanish Peseta closing
152,427,000 2/23/99 1,083,348 1,075,875 (7,473)
Swedish Krona closing
3,954,250 2/23/99 496,329 489,784 (6,545)
Forward Foreign Exchange Sell Contracts
Australian Dollar
600,000 closing 2/23/99 376,619 368,224 8,395
British Pound closing
1,740,000 2/23/99 2,881,380 2,889,277 (7,897)
Canadian Dollar closing
2,087,089 2/23/99 1,357,488 1,359,549 (2,061)
French Franc closing
25,004,540 2/23/99 4,463,502 4,488,124 (24,622)
German Deutschemark
23,564,752 closing 2/23/99 14,183,283 14,184,833 (1,550)
Japanese Yen closing
217,799,850 2/23/99 1,857,333 1,944,224 (86,891)
Swiss Franc closing
1,150,000 2/23/99 856,532 842,172 14,360
-----------
$ 463,656
===========
</TABLE>
71
<PAGE>
FFTW Funds, Inc.
Notes to Financial Statements (continued)
December 31, 1998
5. Forward Foreign Exchange Contracts (continued)
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 December 31, 1998, 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" open financial futures contracts on a daily basis, which reflects the
change in the market value of the contract at the close of each day's trading.
Accordingly, variation margin is paid or received to reflect daily unrealized
gains or losses. When the contracts are closed, the 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 December 31, 1998, the Portfolios placed U.S. Treasury Bills,
other liquid securities or cash in segregated accounts for the benefit of the
futures clearing broker at the Portfolio's custodian with respect to their
financial futures contracts as follows:
<TABLE>
<CAPTION>
December 31, 1998
Portfolio Collateral Value
--------- -----------------
<S> <C>
U.S. Short-Term $2,947,806
Limited Duration 491,301
Mortgage 1,965,204
Worldwide 699,810
Worldwide-Hedged 1,299,645
International 899,755
Global Tactical Exposure 6,598,205
International Opportunities 99,678
</TABLE>
As of December 31, 1998, U.S. Short-Term had the following open financial
futures contracts:
<TABLE>
- ------------------------------------------------------------------------------
<CAPTION>
Value Unrealized
Covered by Appreciation
Contracts Contracts (Depreciation)
- ------------------------------------------------------------------------------
<C> <S> <C> <C>
Long Futures Contracts:
428 June '99 Euro Dollars $101,746,000 $(414,569)
Short Futures Contracts:
45 March '99 2 Year U.S. Treasury Notes (9,518,203) 21,544
---------
$(393,025)
=========
</TABLE>
As of December 31, 1998, Limited Duration had the following open financial
futures contracts:
<TABLE>
- -----------------------------------------------------------------------------
<CAPTION>
Value Unrealized
Covered by Appreciation
Contracts Contracts (Depreciation)
- -----------------------------------------------------------------------------
<C> <S> <C> <C>
Short Futures Contracts:
12 March '99 2 Year U.S. Treasury Notes $(2,538,188) $2,557
======
</TABLE>
72
<PAGE>
FFTW Funds, Inc.
Notes to Financial Statements (continued)
December 31, 1998
6. Financial Futures Contracts (continued)
As of December 31, 1998, Mortgage had the following open financial futures
contracts:
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Value Unrealized
Covered by Appreciation
Contracts Contracts (Depreciation)
- -------------------------------------------------------------------------------
<C> <S> <C> <C>
Long Futures Contracts:
15 March '99 U.S. Treasury Bonds $ 1,916,719 $ 8,002
March '99 CBT 5 Year U.S. Treasury
107 Notes 12,127,781 (78,076)
Short Futures Contracts
593 March '99 10 Year U.S. Treasury Notes (70,659,656) 422,226
45 June '00 Euro Dollars (10,684,125) 16,623
75 September '99 Euro Dollars (17,831,250) 30,518
--------
$399,293
========
</TABLE>
As of December 31, 1998, Worldwide had the following open financial futures
contracts:
<TABLE>
- ---------------------------------------------------------------
<CAPTION>
Value Unrealized
Covered by Appreciation
Contracts Contracts (Depreciation)
- ---------------------------------------------------------------
<C> <S> <C> <C>
Long Futures Contracts:
March '99 Deutsche MED
120 Bundes $19,583,383 $ (16,569)
March '99 CBT 5 Year
98 U.S. Treasury Notes 11,107,688 (47,025)
March '99 Deutsche
23 Bundes 3,996,488 12,151
March '99 TSE Japanese
2 10 Year Bonds 2,267,128 (168,572)
March '99 U.S. Treasury
31 Bonds 3,961,219 (30,205)
---------
$(250,220)
=========
</TABLE>
As of December 31, 1998, Worldwide-Hedged had the following open financial
futures contracts:
<TABLE>
- -----------------------------------------------------------------------------
<CAPTION>
Value Unrealized
Covered by Appreciation
Contracts Contracts (Depreciation)
- -----------------------------------------------------------------------------
<C> <S> <C> <C>
Long Futures Contracts:
20 March '99 10 Year U.S. Treasury Notes $ 2,383,125 $ 6,007
March '99 CBT 5 Year U.S. Treasury
90 Notes 10,200,938 (84,970)
116 March '99 Deutsche Bundes 20,156,201 29,217
324 March '99 Deutsche MED Bundes 52,875,135 (36,451)
March '99 TSE Japanese Gov't. 10 Year
4 Bonds 4,534,255 (337,144)
164 March '99 U.S. Treasury Bonds 20,956,125 (159,793)
---------
$(583,134)
=========
</TABLE>
73
<PAGE>
FFTW Funds, Inc.
Notes to Financial Statements (continued)
December 31, 1998
6. Financial Futures Contracts (continued)
As of December 31, 1998, International had the following open financial futures
contracts:
<TABLE>
- -----------------------------------------------------------------------------
<CAPTION>
Value Unrealized
Covered by Appreciation
Contracts Contracts (Depreciation)
- -----------------------------------------------------------------------------
<C> <S> <C> <C>
Long Futures Contracts:
132 March '99 Deutsche MED Bundes $21,541,722 $ (4,538)
30 March '99 Deutsche Bundes 5,212,811 27,862
March '99 TSE Japanese Gov't. 10 Year
4 Bonds 4,534,255 (337,144)
---------
$(313,820)
=========
</TABLE>
As of December 31, 1998, Global Tactical Exposure had the following open
financial futures contracts:
<TABLE>
- ---------------------------------------------------------------------
<CAPTION>
Value Unrealized
Covered by Appreciation
Contracts Contracts (Depreciation)
- ---------------------------------------------------------------------
<C> <S> <C> <C>
Long Futures Contracts:
550 March '99 Deutsche MED Bundes $89,757,174 $(140,556)
4 March '99 U.S. Treasury Bonds 476,625 1,228
---------
$(139,328)
=========
</TABLE>
As of December 31, 1998, International Opportunities had the following open
financial futures contracts:
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Value Unrealized
Covered by Appreciation
Contracts Contracts (Depreciation)
- -------------------------------------------------------------------------------
<C> <S> <C> <C>
Long Futures Contracts:
3 March '99 CBT 5 Year U.S. Treasury Notes $340,031 $(3,173)
1 March '99 Deutsche Bundes 173,760 924
-------
$(2,249)
=======
</TABLE>
7. Capital Stock Transactions
As of December 31, 1998, there were 5,000,000,000 shares of $0.001 par value
capital stock authorized.
Transactions in capital stock for Money Market were as follows for the periods
indicated:
<TABLE>
----------------------------------
<CAPTION>
Year Ended Year Ended
December 31, 1998 December 31, 1997
----------------------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 13,249,156 $13,249,156 809,659 $ 809,659
Shares issued related to
reinvestment of dividends 1,547,822 1,547,822 1,363,118 1,363,118
----------------------------------
14,796,978 14,796,978 2,172,777 2,172,777
Shares redeemed 11,476,392 11,476,392 1,067,582 1,067,582
----------------------------------
Net increase (decrease) 3,320,586 $ 3,320,586 1,105,195 $1,105,195
----------------------------------
----------------------------------
</TABLE>
74
<PAGE>
FFTW Funds, Inc.
Notes to Financial Statements (continued)
December 31, 1998
7. Capital Stock Transactions (continued)
Transactions in capital stock for U.S. Short-Term were as follows for the
periods indicated:
<TABLE>
----------------------------------------------------
<CAPTION>
Year Ended Year Ended
December 31, 1998 December 31, 1997
----------------------------------------------------
Shares Amount Shares Amount
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 883,180,967 $8,636,306,700 635,311,236 $6,237,574,780
Shares issued related to
reinvestment of
dividends 3,557,660 34,776,941 2,789,536 27,377,336
----------------------------------------------------
886,738,627 8,671,083,641 638,100,772 6,264,952,116
Shares redeemed 850,486,394 8,315,384,728 624,333,180 6,129,968,601
----------------------------------------------------
Net increase (decrease) 36,252,233 $ 355,698,913 13,767,592 $ 134,983,515
----------------------------------------------------
----------------------------------------------------
Transactions in capital stock for Limited Duration were as follows for the
periods indicated:
----------------------------------------------------
<CAPTION>
Year Ended Year Ended
December 31, 1998 December 31, 1997
----------------------------------------------------
Shares Amount Shares Amount
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 10,680,290 $ 106,723,144 3,788,291 $ 37,880,900
Shares issued related to
reinvestment of
dividends 545,455 5,446,193 215,997 2,148,047
----------------------------------------------------
11,225,745 112,169,337 4,004,288 40,028,947
Shares redeemed 6,243,321 62,348,719 4,216,188 41,993,570
----------------------------------------------------
Net increase (decrease) 4,982,424 $ 49,820,618 (211,900) $ (1,964,623)
----------------------------------------------------
----------------------------------------------------
Transactions in capital stock for Mortgage were as follows for the periods
indicated:
----------------------------------------------------
<CAPTION>
Year Ended Year Ended
December 31, 1998 December 31, 1997
----------------------------------------------------
Shares Amount Shares Amount
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 39,025,398 $ 403,050,000 73,900,117 $ 762,614,676
Shares issued related to
reinvestment of
dividends 6,638,891 68,466,878 4,663,202 47,946,656
----------------------------------------------------
45,664,289 471,516,878 78,563,319 810,561,332
Shares redeemed 29,176,443 303,173,256 36,721,484 383,659,957
----------------------------------------------------
Net increase (decrease) 16,487,846 $ 168,343,622 41,841,835 $ 426,901,375
----------------------------------------------------
----------------------------------------------------
</TABLE>
75
<PAGE>
FFTW Funds, Inc.
Notes to Financial Statements (continued)
December 31, 1998
7. Capital Stock Transactions (continued)
Transactions in capital stock for Worldwide were as follows for the periods
indicated:
<TABLE>
--------------------------------------------------
<CAPTION>
Year Ended Year Ended
December 31, 1998 December 31, 1997
--------------------------------------------------
Shares Amount Shares Amount
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 1,355,632 $ 13,503,235 1,920,788 $18,112,235
Shares issued related to
reinvestment of dividends 351,950 3,437,295 343,250 3,210,931
--------------------------------------------------
1,707,582 16,940,530 2,264,038 21,323,166
Shares redeemed 3,666,125 37,782,038 1,304,053 12,156,347
--------------------------------------------------
Net increase (decrease) (1,958,543) $(20,841,508) 959,985 $ 9,166,819
--------------------------------------------------
--------------------------------------------------
Transactions in capital stock for Worldwide-Hedged were as follows for the
periods indicated:
-----------------------------------------------
<CAPTION>
Year Ended Year Ended
December 31, 1998 December 31, 1997
<S> <C> <C> <C> <C>
-----------------------------------------------
<CAPTION>
Shares Amount Shares Amount
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 8,577,164 $ 97,208,680 3,982,279 $44,433,183
Shares issued related to
reinvestment of dividends 1,624,885 18,421,804 530,286 5,958,627
--------------------------------------------------
10,202,049 115,630,484 4,512,565 50,391,810
Shares redeemed 1,740,289 20,306,695 105,402 1,178,345
--------------------------------------------------
Net increase (decrease) 8,461,760 $ 95,323,789 4,407,163 $49,213,465
--------------------------------------------------
--------------------------------------------------
Transactions in capital stock for International were as follows for the periods
indicated:
-----------------------------------------------
<CAPTION>
Year Ended Year Ended
December 31, 1998 December 31, 1997
<S> <C> <C> <C> <C>
-----------------------------------------------
<CAPTION>
Shares Amount Shares Amount
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 4,369,703 $ 43,727,753 3,289,389 $32,040,188
Shares issued related to
reinvestment of dividends 1,164,157 11,290,681 351,087 3,365,604
--------------------------------------------------
5,533,860 55,018,434 3,640,476 35,405,792
Shares redeemed 4,220,805 43,214,455 21,837 212,502
--------------------------------------------------
Net increase (decrease) 1,313,055 $ 11,803,979 3,618,639 $35,193,290
--------------------------------------------------
--------------------------------------------------
</TABLE>
76
<PAGE>
FFTW Funds, Inc.
Notes to Financial Statements (continued)
December 31, 1998
7. Capital Stock Transactions (continued)
Transactions in capital stock for Global Tactical Exposure were as follows for
the periods indicated:
<TABLE>
----------------------------------------------
<CAPTION>
Year Ended Year Ended
December 31, 1998 December 31, 1997
----------------------------------------------
Shares Amount Shares Amount
----------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 13,695,844 $139,000,000 21,516,017 $216,244,172
Shares issued related to
reinvestment of dividends 1,972,986 20,020,277 1,252,355 12,577,383
----------------------------------------------
15,668,830 159,020,277 22,768,372 228,821,555
Shares redeemed 2,457,580 25,025,592 7,532,876 76,430,078
----------------------------------------------
Net increase (decrease) 13,211,250 $133,994,685 15,235,496 $152,391,477
----------------------------------------------
----------------------------------------------
</TABLE>
Transactions in capital stock for Emerging Markets were as follows for the
periods indicated:
<TABLE>
- --------------------------------------------------------------------------
<CAPTION>
Period from
Year Ended August 12, 1997* to
December 31, 1998 December 31, 1997
---------------------------------------------
Shares Amount Shares Amount
---------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 8,316,238 $81,000,000 12,811,892 $125,300,000
Shares issued related to
reinvestment of dividends 2,032,162 16,696,296 197,299 1,903,314
---------------------------------------------
10,348,400 97,696,296 13,009,191 127,203,314
Shares redeemed 576,713 3,864,586 1,431,789 13,730,857
---------------------------------------------
Net increase (decrease) 9,771,687 $93,831,710 11,577,402 $113,472,457
---------------------------------------------
---------------------------------------------
</TABLE>
Transactions in capital stock for International Opportunities were as follows
for the period indicated:
<TABLE>
- -------------------------------------------------------
<CAPTION>
Period from October 8,1998*
to December 31, 1998
--------------------------
Shares Amount
--------------------------
<S> <C> <C>
Shares sold 2,537,825 $ 25,175,844
Shares issued related to
reinvestment of dividends 36,432 360,224
--------------------------
2,574,257 25,536,067
Shares redeemed 1 10
--------------------------
Net increase (decrease) 2,574,256 $ 25,536,057
--------------------------
--------------------------
</TABLE>
- -----------------------
*Commencement of operations.
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.
77
<PAGE>
FFTW Funds, Inc.
Notes to Financial Statements (continued)
December 31, 1998
8. Repurchase and Reverse Repurchase Agreements (continued)
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. Reverse
repurchase agreements for U.S. Short-Term, Worldwide, and Worldwide-Hedged may
not exceed 25% of the Portfolio's total assets. When a Portfolio engages in
reverse repurchase transactions, the Portfolio will maintain, in a segregated
account with its custodian, cash or securities equal in value to those subject
to the reverse repurchase agreement. Each Portfolio will engage in repurchase
and reverse repurchase transactions with parties selected on the basis of such
party's creditworthiness.
For the year ended December 31, 1998, the average amount of reverse repurchase
agreements outstanding and related weighted average interest rates for those
Portfolios engaging in reverse repurchase agreements was as follows:
<TABLE>
<CAPTION>
Average Average
Portfolio Balance Rate
- ------------------------------------
<S> <C> <C>
U.S. Short-Term $ 27,945 5.07%
Mortgage 468,185 5.42%
Emerging Markets 9,695,254 2.55%
</TABLE>
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 associated with purchasing an option is limited to the premium paid
whether or not the option is exercised. In addition, each Portfolio bears the
risk of a change in the market value of the underlying securities should the
counterparty to an option contract failed to perform.
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 a Portfolio writes an option, the premium received by such 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 options transactions. The difference between the premium
and the amount paid on effecting a closing purchase transaction, including
brokerage commissions, also is 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 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.
78
<PAGE>
FFTW Funds, Inc.
Notes to Financial Statements (continued)
December 31, 1998
9. Options Transactions (continued)
A summary of put and call options written by U.S. Short-Term for the year ended
December 31, 1998 is as follows:
<TABLE>
<CAPTION>
Calls Puts
------------------ ------------------
# of # of
Contracts Premiums Contracts Premiums
-------------------------------------
<S> <C> <C> <C> <C>
Outstanding, beginning of year - $ - - $ -
Options written
U.S. Treasury 817 424,847 970 397,677
Euro Dollars 100 6,940 100 4,440
Options closed
U.S. Treasury 817 424,847 970 397,677
Euro Dollars 100 6,940 100 4,440
<CAPTION>
-------------------------------------
<S> <C> <C> <C> <C>
Outstanding, end of year - $ - - $ -
<CAPTION>
=====================================
</TABLE>
Net realized gain on written options transactions for the year ended December
31, 1998 was $48,575.
A summary of put and call options written by Limited Duration for the year
ended December 31, 1998 is as follows:
<TABLE>
<CAPTION>
Calls Puts
------------------ ------------------
# of # of
Contracts Premiums Contracts Premiums
-------------------------------------
<S> <C> <C> <C> <C>
Outstanding, beginning of year - $ - - $ -
Options written
U.S. Treasury 95 40,890 95 48,421
Options closed
U.S. Treasury 95 40,890 95 48,421
<CAPTION>
-------------------------------------
<S> <C> <C> <C> <C>
Outstanding, end of year - $ - - $ -
<CAPTION>
=====================================
</TABLE>
Net realized gain on written options transactions for the year ended December
31, 1998 was $19,661.
A summary of put and call options written by Worldwide for the year ended
December 31, 1998 is as follows:
<TABLE>
<CAPTION>
Calls Puts
------------------ ------------------
# of # of
Contracts Premiums Contracts Premiums
-------------------------------------
<S> <C> <C> <C> <C>
Outstanding, beginning of year - $ - - $ -
Options written
U.S. Treasury 30 15,301 30 21,551
Options closed
U.S. Treasury 30 15,301 30 21,551
<CAPTION>
-------------------------------------
<S> <C> <C> <C> <C>
Outstanding, end of year - $ - - $ -
<CAPTION>
=====================================
</TABLE>
Net realized gain on written options transactions for the year ended December
31, 1998 was $10,734.
79
<PAGE>
FFTW Funds, Inc.
Notes to Financial Statements (continued)
December 31, 1998
9. Options Transactions (continued)
A summary of put and call options written by Worldwide-Hedged for the year
ended December 31, 1998 is as follows:
<TABLE>
<CAPTION>
Calls Puts
------------------ ------------------
# of # of
Contracts Premiums Contracts Premiums
-------------------------------------
<S> <C> <C> <C> <C>
Outstanding, beginning of year - $ - - $ -
Options written
U.S. Treasury 55 28,051 55 39,505
Options closed
U.S. Treasury 55 28,051 55 39,505
<CAPTION>
-------------------------------------
<S> <C> <C> <C> <C>
Outstanding, end of year - $ - - $ -
<CAPTION>
=====================================
</TABLE>
Net realized gain on written options transactions for the year ended December
31, 1998 was $19,674.
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 one of the parties to comply with the terms of the swap contract.
The loss incurred by the failure of a counter-party generally is limited to
the net payment to be received by a Portfolio, and/or the termination value at
the end of the contract. Therefore, the Fund considers the creditworthiness of
each counter-party to a swap contract in evaluating overall potential risk.
Additionally, risks may arise from unanticipated movements in interest rates
or in the value of the underlying securities or indices related to a swap
contract.
Global Tactical Exposure entered into a swap agreement pursuant to which this
Portfolio agrees to pay the return of a specified global index in exchange for
an interest payment based on the London Interbank Offered Rate (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").
Global Tactical Exposure 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 investments). Income
received based on LIBOR is recorded as interest income.
At December 31, 1998, Global Tactical Exposure had one outstanding swap
contract with Morgan Guaranty Trust Company of New York broken down into six
components with the following terms:
<TABLE>
- ---------------------------------------------------------------------------------
<CAPTION>
Notional Termination Payments Made Payments Received
Amount Date By the Portfolio by the Portfolio
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 90,000,000 8/4/99 % change in JP Morgan Index LIBOR minus .26%
51,000,000 8/4/99 % change in JP Morgan Index LIBOR minus .27%
12,000,000 8/4/99 % change in JP Morgan Index LIBOR minus .28%
36,000,000 8/4/99 % change in JP Morgan Index LIBOR minus .29%
36,600,000 4/5/00 % change in JP Morgan Index LIBOR minus .28%
143,000,000 11/3/00 % change in JP Morgan Index LIBOR minus .28%
</TABLE>
80
<PAGE>
FFTW Funds, Inc.
Notes to Financial Statements (continued)
December 31, 1998
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.
Given certain operational efficiencies it is impractical to specify individual
securities to be used for segregation purposes. Therefore, the Fund'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 segregated
settled assets.
12. Subsequent Events
Year 2000 Issues (unaudited)
The Fund could be adversely affected if the computer systems used by Investors
Bank & Trust (IBT) and the Fund's other service providers do not properly
process and calculate date-related information from and after January 1, 2000.
All of the Fund's service provides are working to avoid Year 2000-related
problems in their systems and to obtain assurances from other service
providers that they are taking similar steps. In addition, issuers of
securities in which the Fund invests may be adversely affected by Year 2000-
related problems. This could have an impact on the value of the Fund's
investments and its share price.
81
<PAGE>
FFTW Funds, Inc.
Report of Ernst & Young LLP, Independent Auditors
Shareholders and Board of Directors
FFTW Funds, Inc.
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of FFTW Funds, Inc. (comprising,
respectively, the Money Market, U.S. Short-Term, Limited Duration, Mortgage-
Backed, Worldwide, Worldwide-Hedged, International, Global Tactical Exposure,
Emerging Markets and International Opportunities Portfolios) as of December
31, 1998, and the related statements of operations and changes in net assets
and financial highlights for each of the periods indicated therein. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of December 31, 1998 by correspondence
with the custodian and others. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective Portfolios constituting FFTW Funds, Inc. at December 31,
1998 and the results of their operations, the changes in their net assets and
the financial highlights for each of the indicated periods, in conformity with
generally accepted accounting principles.
Ernst & Young LLP
New York, New York
February 22, 1999
82
<PAGE>
FFTW Funds, Inc.
OFFICERS & DIRECTORS AND OTHER PERTINENT INFORMATION
OFFICERS AND DIRECTORS Investment Adviser
Fischer Francis Trees & Watts,
Stephen P. Casper Inc.
Director of the Fund 200 Park Avenue
New York, NY 10166
John C Head III
Director of the Fund Sub-Adviser
Fischer Francis Trees & Watts
Lawrence B. Krause 3 Royal Court
Director of the Fund The Royal Exchange
London, EC3V 3RA
Onder John Olcay
Chairman of the Board and Administrator
President of the Fund Investors Capital Services,
Inc.
William E. Vastardis 600 Fifth Avenue
Secretary and Treasurer of the Fund New York, NY 10020
Carla E. Dearing Distributor
Assistant Treasurer of the Fund AMT Capital Securities, LLC
399 Park Avenue, 37th floor
New York, NY 10022
Custodian and Fund Accounting
Agent
Investors Bank & Trust Company
200 Clarendon St.
Boston, MA 02116
Transfer and Dividend
Disbursing Agent
Investors Bank & Trust Company
200 Clarendon St.
Boston, MA 02116
Legal Counsel
Dechert Price & Rhoads
1775 Eye Street, N.W.
Washington, D.C. 20006-2401
Independent Auditors
Ernst & Young LLP
787 Seventh Avenue
New York, NY 10019
- --------------------------------------------------------------------------------
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 10
<NAME> MONEY MARKET PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 28962
<INVESTMENTS-AT-VALUE> 28962
<RECEIVABLES> 518
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 29480
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 29
<TOTAL-LIABILITIES> 29
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 29451
<SHARES-COMMON-STOCK> 29451
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 29451
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1603
<OTHER-INCOME> 0
<EXPENSES-NET> 72
<NET-INVESTMENT-INCOME> 1530
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 1530
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1530
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 12274
<NUMBER-OF-SHARES-REDEEMED> 9690
<SHARES-REINVESTED> 859
<NET-CHANGE-IN-ASSETS> 3299
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 21
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 29
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 104
<AVERAGE-NET-ASSETS> 28927
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> .00
<PER-SHARE-DIVIDEND> 0.05
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> U.S. SHORT-TERM PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 837057
<INVESTMENTS-AT-VALUE> 835776
<RECEIVABLES> 4545
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 840415
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 37337
<TOTAL-LIABILITIES> 49443
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 851758
<SHARES-COMMON-STOCK> 86086
<SHARES-COMMON-PRIOR> 46
<ACCUMULATED-NII-CURRENT> 243
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (9962)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (1674)
<NET-ASSETS> 840366
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 36612
<OTHER-INCOME> 0
<EXPENSES-NET> (1598)
<NET-INVESTMENT-INCOME> 35014
<REALIZED-GAINS-CURRENT> (726)
<APPREC-INCREASE-CURRENT> (998837)
<NET-CHANGE-FROM-OPS> 32788
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (35014)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 490385
<NUMBER-OF-SHARES-REDEEMED> 452
<SHARES-REINVESTED> 2121
<NET-CHANGE-IN-ASSETS> 353460
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1916
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2657
<AVERAGE-NET-ASSETS> 638693
<PER-SHARE-NAV-BEGIN> 9.77
<PER-SHARE-NII> 0.54
<PER-SHARE-GAIN-APPREC> (0.01)
<PER-SHARE-DIVIDEND> (0.54)
<PER-SHARE-DISTRIBUTIONS> .00
<RETURNS-OF-CAPITAL> .00
<PER-SHARE-NAV-END> 9.76
<EXPENSE-RATIO> .25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 5
<NAME> LIMITED DURATION PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 126195
<INVESTMENTS-AT-VALUE> 126212
<RECEIVABLES> 22629
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 1
<TOTAL-ASSETS> 148843
<PAYABLE-FOR-SECURITIES> 59284
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 37
<TOTAL-LIABILITIES> 59321
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 89795
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 6
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (293)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 20
<NET-ASSETS> 89521
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4693
<OTHER-INCOME> 0
<EXPENSES-NET> 244
<NET-INVESTMENT-INCOME> 4449
<REALIZED-GAINS-CURRENT> 807
<APPREC-INCREASE-CURRENT> 68
<NET-CHANGE-FROM-OPS> 5188
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4449
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6753
<NUMBER-OF-SHARES-REDEEMED> 3604
<SHARES-REINVESTED> 374
<NET-CHANGE-IN-ASSETS> 49492
<ACCUMULATED-NII-PRIOR> 10
<ACCUMULATED-GAINS-PRIOR> (43)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 284
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 419
<AVERAGE-NET-ASSETS> 81257
<PER-SHARE-NAV-BEGIN> 9.93
<PER-SHARE-NII> .55
<PER-SHARE-GAIN-APPREC> .11
<PER-SHARE-DIVIDEND> .66
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> .00
<PER-SHARE-NAV-END> 9.93
<EXPENSE-RATIO> .30
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 8
<NAME> MORTGAGE-BACKED PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 1489723
<INVESTMENTS-AT-VALUE> 1487610
<RECEIVABLES> 116780
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 1
<TOTAL-ASSETS> 1604390
<PAYABLE-FOR-SECURITIES> 788982
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 42
<TOTAL-LIABILITIES> 789024
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 814859
<SHARES-COMMON-STOCK> 80085
<SHARES-COMMON-PRIOR> 92
<ACCUMULATED-NII-CURRENT> 1499
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 723
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (1714)
<NET-ASSETS> 815367
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 55351
<OTHER-INCOME> 0
<EXPENSES-NET> 1980
<NET-INVESTMENT-INCOME> 53346
<REALIZED-GAINS-CURRENT> 15693
<APPREC-INCREASE-CURRENT> (8278)
<NET-CHANGE-FROM-OPS> 60761
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 53346
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4114
<NUMBER-OF-SHARES-REDEEMED> 20614
<SHARES-REINVESTED> 4209
<NET-CHANGE-IN-ASSETS> 160095
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 2828
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2530
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3666
<AVERAGE-NET-ASSETS> 843247
<PER-SHARE-NAV-BEGIN> 10.30
<PER-SHARE-NII> .65
<PER-SHARE-GAIN-APPREC> (.15)
<PER-SHARE-DIVIDEND> .65
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.18
<EXPENSE-RATIO> 0.23
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> GLOBAL TACTICAL EXPOSURE PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 370440
<INVESTMENTS-AT-VALUE> 376078
<RECEIVABLES> 47617
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 1374
<TOTAL-ASSETS> 432716
<PAYABLE-FOR-SECURITIES> 8715
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 35306
<TOTAL-LIABILITIES> 8751
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 414394
<SHARES-COMMON-STOCK> 41371
<SHARES-COMMON-PRIOR> 32650
<ACCUMULATED-NII-CURRENT> 506
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (4095)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 13161
<NET-ASSETS> 423966
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 35762
<OTHER-INCOME> 0
<EXPENSES-NET> 897
<NET-INVESTMENT-INCOME> 17207
<REALIZED-GAINS-CURRENT> (12348)
<APPREC-INCREASE-CURRENT> 3866
<NET-CHANGE-FROM-OPS> 27012
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 17207
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 609
<NUMBER-OF-SHARES-REDEEMED> 1223
<SHARES-REINVESTED> 1336
<NET-CHANGE-IN-ASSETS> 140960
<ACCUMULATED-NII-PRIOR> 13313
<ACCUMULATED-GAINS-PRIOR> (6934)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1339
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1901
<AVERAGE-NET-ASSETS> 334647
<PER-SHARE-NAV-BEGIN> 10.05
<PER-SHARE-NII> 0.37
<PER-SHARE-GAIN-APPREC> 0.43
<PER-SHARE-DIVIDEND> 0.53
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.25
<EXPENSE-RATIO> .27
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> WORLDWIDE PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 66379
<INVESTMENTS-AT-VALUE> 67223
<RECEIVABLES> 1477
<ASSETS-OTHER> 1
<OTHER-ITEMS-ASSETS> 908
<TOTAL-ASSETS> 69855
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 49
<TOTAL-LIABILITIES> 203
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 70924
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 1633
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (4598)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1693
<NET-ASSETS> 69653
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 500
<NET-INVESTMENT-INCOME> (3964)
<REALIZED-GAINS-CURRENT> 6458
<APPREC-INCREASE-CURRENT> 2563
<NET-CHANGE-FROM-OPS> 12874
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3964
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 864
<NUMBER-OF-SHARES-REDEEMED> 3440
<SHARES-REINVESTED> 180
<NET-CHANGE-IN-ASSETS> (12583)
<ACCUMULATED-NII-PRIOR> 18
<ACCUMULATED-GAINS-PRIOR> (8519)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 333
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 509
<AVERAGE-NET-ASSETS> 83268
<PER-SHARE-NAV-BEGIN> 9.42
<PER-SHARE-NII> 0.46
<PER-SHARE-GAIN-APPREC> 0.10
<PER-SHARE-DIVIDEND> 0.56
<PER-SHARE-DISTRIBUTIONS> .00
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.28
<EXPENSE-RATIO> 0.60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> WORLDWIDE-HEDGED PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 172065
<INVESTMENTS-AT-VALUE> 173488
<RECEIVABLES> 1477
<ASSETS-OTHER> 1866
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 176831
<PAYABLE-FOR-SECURITIES> 1870
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 50
<TOTAL-LIABILITIES> 2027
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 175257
<SHARES-COMMON-STOCK> 15620
<SHARES-COMMON-PRIOR> 15
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (270)
<OVERDISTRIBUTION-GAINS> (1122)
<ACCUM-APPREC-OR-DEPREC> 940
<NET-ASSETS> 174805
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 8196
<OTHER-INCOME> 0
<EXPENSES-NET> 695
<NET-INVESTMENT-INCOME> 7501
<REALIZED-GAINS-CURRENT> 10263
<APPREC-INCREASE-CURRENT> (243)
<NET-CHANGE-FROM-OPS> 17521
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 7501
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 609
<NUMBER-OF-SHARES-REDEEMED> 1223
<SHARES-REINVESTED> 1336
<NET-CHANGE-IN-ASSETS> 94415
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 2555
<OVERDISTRIB-NII-PRIOR> 300
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 618
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 898
<AVERAGE-NET-ASSETS> 154507
<PER-SHARE-NAV-BEGIN> 11.23
<PER-SHARE-NII> 0.68
<PER-SHARE-GAIN-APPREC> 0.57
<PER-SHARE-DIVIDEND> 0.60
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.19
<EXPENSE-RATIO> 0.45
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 9
<NAME> INTERNATIONAL PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 78399
<INVESTMENTS-AT-VALUE> 78733
<RECEIVABLES> 1410
<ASSETS-OTHER> 2
<OTHER-ITEMS-ASSETS> 1631
<TOTAL-ASSETS> 81777
<PAYABLE-FOR-SECURITIES> 5
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 67
<TOTAL-LIABILITIES> 73
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 81397
<SHARES-COMMON-STOCK> 8438
<SHARES-COMMON-PRIOR> 8
<ACCUMULATED-NII-CURRENT> (935)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (43)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1285
<NET-ASSETS> 81705
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3775
<OTHER-INCOME> 0
<EXPENSES-NET> 439
<NET-INVESTMENT-INCOME> 3336
<REALIZED-GAINS-CURRENT> 7775
<APPREC-INCREASE-CURRENT> 2505
<NET-CHANGE-FROM-OPS> 13616
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3336
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1946
<NUMBER-OF-SHARES-REDEEMED> 2615
<SHARES-REINVESTED> 988
<NET-CHANGE-IN-ASSETS> 14052
<ACCUMULATED-NII-PRIOR> 232
<ACCUMULATED-GAINS-PRIOR> 844
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 292
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 462
<AVERAGE-NET-ASSETS> 73114
<PER-SHARE-NAV-BEGIN> 9.50
<PER-SHARE-NII> 0.48
<PER-SHARE-GAIN-APPREC> 1.21
<PER-SHARE-DIVIDEND> .85
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> .00
<PER-SHARE-NAV-END> 9.68
<EXPENSE-RATIO> .60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 12
<NAME> INTERNATIONAL OPPORTUNITIES PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 39307
<RECEIVABLES> 505
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 464
<TOTAL-ASSETS> 40276
<PAYABLE-FOR-SECURITIES> 14684
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 15
<TOTAL-LIABILITIES> 14700
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 25536
<SHARES-COMMON-STOCK> 2574
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (532)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (47)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 620
<NET-ASSETS> 25576
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 236
<OTHER-INCOME> 0
<EXPENSES-NET> 32
<NET-INVESTMENT-INCOME> 204
<REALIZED-GAINS-CURRENT> (423)
<APPREC-INCREASE-CURRENT> 620
<NET-CHANGE-FROM-OPS> 400
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 204
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2537
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 37
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 22
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 32
<AVERAGE-NET-ASSETS> 21800
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.09
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0.09
<PER-SHARE-DISTRIBUTIONS> .00
<RETURNS-OF-CAPITAL> .00
<PER-SHARE-NAV-END> 9.94
<EXPENSE-RATIO> .60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> EMERGING MARKETS PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 177249
<INVESTMENTS-AT-VALUE> 159714
<RECEIVABLES> 4063
<ASSETS-OTHER> 966
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 164743
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 35
<TOTAL-LIABILITIES> 35
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 205052
<SHARES-COMMON-STOCK> 21349
<SHARES-COMMON-PRIOR> 22
<ACCUMULATED-NII-CURRENT> (1275)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (22430)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (16638)
<NET-ASSETS> 164709
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 18553
<OTHER-INCOME> 0
<EXPENSES-NET> 1583
<NET-INVESTMENT-INCOME> 16723
<REALIZED-GAINS-CURRENT> (25057)
<APPREC-INCREASE-CURRENT> (15139)
<NET-CHANGE-FROM-OPS> (23433)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 16723
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 1253
<SHARES-REINVESTED> 577
<NET-CHANGE-IN-ASSETS> 53665
<ACCUMULATED-NII-PRIOR> 63
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (3885)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1192
<INTEREST-EXPENSE> 247
<GROSS-EXPENSE> 1830
<AVERAGE-NET-ASSETS> 158922
<PER-SHARE-NAV-BEGIN> 9.59
<PER-SHARE-NII> 0.88
<PER-SHARE-GAIN-APPREC> (1.86)
<PER-SHARE-DIVIDEND> .89
<PER-SHARE-DISTRIBUTIONS> .00
<RETURNS-OF-CAPITAL> .00
<PER-SHARE-NAV-END> 7.73
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
