<PAGE>
FFTW FUNDS, INC.
- --------------------------------------------------------------------
Annual Report
December 31, 1999
- --------------------------------------------------------------------
200 PARK AVENUE
NEW YORK, NY 10166
TELEPHONE 212.681.3000
FACSIMILE 212.681.3250
<PAGE>
FFTW FUNDS, INC.
PRESIDENT'S LETTER
February 16, 2000
Dear Shareholders,
We are pleased to present the Annual Report of FFTW Funds, Inc., for the
year ended December 31, 1999.
During what was the most difficult year for bond funds since 1994, three
of our FFTW Funds were highlighted in the financial press for the second year in
a row. FFTW's Limited Duration, U.S. Short-Term Fixed Income, and Worldwide
Fixed Income Hedged Portfolios all made repeat performances in BUSINESS WEEK'S
Bond Fund A-List for superior risk-adjusted returns over the past five years.
In our continued effort to provide easy access to our funds, FFTW Funds
Worldwide-Hedged Portfolio is available through Fidelity (800 - 544-6666). In
addition, the Limited Duration and International Portfolios are available
through the Charles Schwab & Co., Inc. Mutual Fund Marketplace (800 - 225-8570).
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/John Olcay
O. John Olcay
Chairman of the Board and President
FOOTNOTE FOR BUSINESS WEEK'S BOND FUND A-LIST
FFTW's Limited Duration, U.S. Short-Term, and Worldwide-Hedged Portfolios were
compared against approximately 700 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.
<PAGE>
FFTW FUNDS, INC.
TABLE OF CONTENTS
<TABLE>
<S> <C>
MARKET REVIEW - General Market 1
PORTFOLIO REVIEWS - U.S. Portfolios 4
PERFORMANCE - U.S. Portfolios 6
PORTFOLIO REVIEWS - Global and International Portfolios 9
PERFORMANCE - Global and International Portfolios 11
MARKET OUTLOOK 16
SCHEDULES OF INVESTMENTS
U.S. Short-Term Portfolio 17
Limited Duration Portfolio 20
Mortgage-Backed Portfolio 22
Global Tactical Exposure Portfolio 27
Worldwide Portfolio 31
Worldwide-Hedged Portfolio 36
International Portfolio 42
Emerging Markets Portfolio 47
STATEMENTS OF ASSETS AND LIABILITIES 51
STATEMENTS OF OPERATIONS 54
STATEMENTS OF CHANGES IN NET ASSETS 57
FINANCIAL HIGHLIGHTS 62
NOTES TO FINANCIAL STATEMENTS 70
REPORT OF INDEPENDENT AUDITORS 91
</TABLE>
<PAGE>
FFTW FUNDS, INC.
MARKET REVIEW
DECEMBER 31, 1999
1999 was marked by continual strength in the US, and gradual recovery in Japan
and European economies which was interrupted briefly by the Brazilian crisis
during the first quarter and a temporary slowdown in European growth prospects
in the second quarter. As Y2K disruptions proved unfounded, these economies
finished the year strongly with inflation remaining relatively benign.
The first quarter of 1999 was marked by a change in expectations for US monetary
policy and improving sentiment about non-Treasury sectors as credit fears
diminished. After drifting lower early in the period, US interest rates rose
abruptly during February in all but the shortest maturities. Although there were
no signs of increased inflation, investors reacted to continued strength in
manufacturing, consumption and consumer sentiment. A stronger economy raised
fears that the Federal Reserve would move to an asymmetrical bias to tighten
policy and caused investors to shift assets back into the non-Treasury sectors.
February's rise in US rates carried over into Europe. UK Gilts underperformed as
economic activity proved to be stronger than expected. In Japan, a drop in
overnight rates to near zero combined with the continued poor economic
situation, exerted downward pressure on yields after a brief spike upward. Over
the quarter, corporates and mortgages outperformed Treasuries as investors
flocked to these higher yielding sectors. The devaluation of the Brazilian real
in January sent a shock wave through the global credit markets, but the lack of
any significant contagion only renewed enthusiasm for private securities.
In the currency markets, the yen weakened relative to the dollar reflecting
Japan's poor economic fundamentals and the aggressive monetary program pursued
by the Bank of Japan. Repatriation of assets by Japanese investors at their
fiscal year-end gave rise to a brief recovery in the yen at quarter-end. The
Euro also lost ground against the dollar as the new currency was pressured by
deteriorating economic fundamentals in the Euro zone.
The second quarter of 1999 was marked by increasing unease among bond investors
as the US economy showed few signs of slowdown. US bond yields rose steadily
over the period, dragging European yields upwards, despite sluggish European
growth and an otherwise positive environment for bonds. Speculation about the
direction of US monetary policy increased after Chairman Greenspan indicated
that he favored a tightening bias. By mid-June, the market had fully discounted
an increase of 50 basis points over a three-month period. The Federal Reserve's
announcement on June 30 of a 25 basis point rise in the Fed funds rate and its
shift back to a neutral bias sparked a quick, but modest, rally.
European rates were adversely affected by the rise in US rates. Although
evidence of slower growth in core Europe led the European Central Bank to lower
official rates, as US rates came under pressure, European yields rose in
sympathy. Yields continued to rise throughout June as economic data emerged
indicating stronger growth in Germany. Japanese yields fell in the early part of
the quarter and rose during June. A very strong first-quarter GDP number
released in June and other signs of growth gave investors reason to believe the
low interest rate policy in Japan would not stay in place indefinitely. In
addition, fears of a supplementary budget haunted the bond market, as this would
lead to increased issuance of Japanese government bonds.
The US dollar appreciated during the quarter against both the euro and the yen.
The euro continued its year-long slide, reflecting poor economic conditions in
Europe. Although this trend slowed somewhat in June, the euro ended the quarter
nearly 20% below its January starting value. The US dollar also appreciated
relative to the Japanese yen, which suffered early in the quarter in
anticipation of an aggressive monetization of the Japanese fiscal deficit.
Stronger economic data in June sparked a strong rally in the yen, which met with
massive intervention by the Bank of Japan unwilling to see the fragile Japanese
recovery hurt by an appreciation of the yen.
After a significant narrowing in the first quarter, mortgage spreads and credit
spreads widened moderately due to rising interest rate volatility and concerns
about the impact of Fed tightening on corporations.
In the third quarter of 1999, yields in the major financial markets continued to
rise but the pace of the increase in rates was somewhat lower. Across the globe,
economic growth strengthened while inflation appeared to have stabilised. As
1
<PAGE>
FFTW FUNDS, INC.
MARKET REVIEW (CONTINUED)
DECEMBER 31, 1999
the summer's economic data provided evidence of continued strength in the US
economy, investors anticipated and received an additional tightening by the
Federal Reserve in August. By the end of the quarter, the continued signs of
economic growth in the US caused some investors to fear another increase in
official rates by the Federal Reserve, effectively retracing the three crisis
easings of last fall. At quarter-end, the market had discounted a 20% chance of
an additional 25 basis point increase in official rates later this year.
Core European rates rose sharply through the quarter, reflecting the strength in
economic data and a turnaround in confidence surveys. In the UK, the Bank of
England surprised investors by raising official interest rates, despite the
30-year low in inflation. A notable exception to rising European yields was long
Gilts, which were supported by very low supply and technical factors rather than
market fundamentals. Japanese bond yields were higher midway through the period
before declining to end the quarter modestly lower. Although the overall
economic picture was mixed, the fundamentals of the Japanese economy exhibited
positive momentum for the first time in years. Industrial production picked up,
inventory stocks were low and companies reported improved profits. Weak spots in
the economy, such as the high unemployment rate and low household expenditures,
remained a source of concern, particularly in combination with a major rally in
the yen.
The appreciation of the yen relative to both the dollar and the euro was the
dominant theme in currencies during the quarter. From early July levels of 123
yen to the dollar, the yen came close to reaching the Y100 mark in late
September. In the face of this rally, the Bank of Japan refused to yield to
political pressure and kept monetary policy unchanged. The euro stabilised after
constant deterioration in the first half of the year, reflecting stronger
economic conditions and higher domestic yields.
Spreads on non-government sectors, particularly mortgages, investment-grade
credit, and asset-backs, widened relative to Treasuries. July proved to be
especially difficult for the corporate and asset-backed markets as issuers
crammed several months worth of issuance into a much shorter period. While there
were no fundamental concerns, the uncertainty surrounding Y2K, and the effect of
widening swap spreads caused these sectors to underperform.
In the fourth quarter of 1999, financial markets proved relatively stable, with
no disruptions in recent trends. Preparations for year-end, particularly
sensitive because of Y2K, led to a marked decrease in market activity. Across
all major markets, yields ended the period higher, despite a brief rally in
mid-November. In the US, economic releases continued to reflect strength in the
economy, but inflation continued to be exceptionally benign. The Federal Reserve
raised official interest rates by 25 basis points, and third-quarter GDP proved
to be robust. By year-end, labor statistics, retail activity and holiday sales
all pointed toward another strong quarter for the US economy. Employment cost
index continued to fly in the face of logic, as the unemployment rate stayed
quite low, while wage pressure remained subdued.
Core European rates continued their upward path, early in the quarter, in
response to consistent indications of a stronger growth outlook for Europe.
Accelerating money supply growth and expectations for higher prices also put
pressure on bond yields. As expected by market participants, the European
Central Bank raised key official rates in early November by 50 basis points. The
bond market rallied immediately following the announcement. However, yields
subsequently retraced much of this move as the fundamental story of strong
growth and improving employment reasserted its influence. Long gilts continued
to defy other European interest rate trends, responding to both reduced issuance
and increased demand from UK pension investors. Japanese bond yields remained in
a 30 basis point range, as the improving economic picture and prospects for
further fiscal stimulus competed for influence with a firming yen and a
commitment by the Bank of Japan to keep short rates effectively at zero. The
economic picture continued to show signs of improvement despite weaker than
expected third-quarter GDP.
In currencies, the real surprise was the continued decline of the euro. After a
brief respite in October, during which the dollar suffered as the US equity
market experienced a short-lived decline, the year-long slide in the euro
resumed in November. By year-end, the euro was near parity with the dollar and
had depreciated particularly severely against the yen, falling nearly 23% since
its introduction. The reluctant pace of reforms in key markets such as Germany
were
2
<PAGE>
FFTW FUNDS, INC.
MARKET REVIEW (CONTINUED)
DECEMBER 31, 1999
behind the euro's poor performance. In addition, pressure on Japanese investors
to hedge their euro exposure exacerbated its fall versus the yen. The yen also
appreciated modestly relative to the dollar.
After widening sharply in the third quarter due to early Y2K fears, yield
spreads of non-government sectors, (particularly mortgages, high-yield credits,
and emerging markets) narrowed relative to treasuries. Spreads on higher-rated
credits narrowed modestly as well. The lack of new supply proved to be
beneficial and the positive economic fundamentals reasserted themselves for
investors, leading to good performance in these sectors.
3
<PAGE>
FFTW FUNDS, INC.
PORTFOLIO REVIEWS - U.S. PORTFOLIOS
DECEMBER 31, 1999
U.S. SHORT-TERM PORTFOLIO
LIMITED DURATION PORTFOLIO
The Portfolios invest in similar type short and intermediate term investments
and only differ on a duration basis with the US Short-Term positioned with a
shorter duration and Limited Duration positioned with a longer duration.
The Portfolios started off the first quarter with a long relative duration
position and an increased allocation to asset-backed securities as spreads
tightened. Duration positioning, which was a substantial detractor from
performance, was scaled back to neutral at the end of the quarter while the
Portfolio's asset-backed holdings contributed to incremental return. In the
second quarter, a further increase in allocation to asset-backed securities did
not generate any significant gain for the Portfolios. The long Treasuries in the
10-year sector position along with a bias towards a flattening yield curve
further detracted from returns.
During the third quarter, a shift to an overweight position in the intermediate
portion of the yield curve resulted in a modest contribution to return, while
yet another increase in allocation to asset-backed securities continued to
detract modestly from return. The Portfolio's asset-backed holdings contributed
to relative return during the fourth quarter as allocation to asset-backed
securities was reduced slightly. Actively managed duration and yield curve
positions, which subtracted from return during the quarter, ended the year
neutral to benchmark.
4
<PAGE>
FFTW FUNDS, INC.
PORTFOLIO REVIEWS - U.S. PORTFOLIOS (CONTINUED)
DECEMBER 31, 1999
MORTGAGE-BACKED PORTFOLIO
As a result of better market technicals and higher interest rates, mortgage
spreads continued to narrow in the first quarter of 1999 after hitting peak
levels for this cycle in the fall of 1998. During most of the first quarter, the
Portfolio was overweight in current-coupon pass-throughs and in A- to AAA-rated
commercial mortgage and asset-backed securities. The portfolio's cash was
invested largely in asset-backed securities and Collateralized Mortgage
Obligation floaters. As spreads tightened significantly in both agency and
non-agency mortgage products and in floating rate securities, these positions
contributed significantly to performance. Furthermore, instead of a combination
of structured Principal Only securities and treasuries, the Portfolio held trust
Interest Only securities and structured Interest Only securities. Interest
Only/Principal Only combination positions also contributed positively to return.
The rapid sell-off in the Treasury market added to underperformance in the
mortgage market during the second quarter. The Portfolio continued to hold an
overweight position in discount pass-throughs in the second quarter, but ,
mortgage spreads widened during the quarter, detracting from performance. The
Portfolio was able to reduce holdings in commercial mortgage-backed securities
prior to the spread widening in May. In response to the rapid 100 basis point
sell-off in US interest rates leading to duration extension in mortgage-backed
securities, lower coupon mortgages were sold to buy higher coupon mortgages. The
attempt to maintain duration targets in the Portfolio had a negative impact on
performance. The combination of Interest Only securities and structured
Principal Only securities held during the quarter contributed modestly to
incremental return.
An August increase in the Fed Funds Target Rate helped to ease some of the
uncertainty that had caused spreads to widen in the second quarter. The
Portfolio held a slight overweight in agency mortgages and maintained its
Collateralized Mortgage-Backed securities position in the third quarter. As
mortgage spreads continued to widen, detracting from performance, a moderate
position in agency debentures was added to take advantage of widening spreads.
The overweight higher coupon pass-throughs position detracted from return as
higher coupon pass-throughs underperformed lower coupon pass-throughs. In the
fourth quarter, higher interest rates led to lower prepayment rates and slower
origination volume. The Portfolio maintained its exposure to non-agency mortgage
securities and increased positions in Collateralized Mortgage-Backed securities
and interest-only pass-throughs. These positions added to return as spreads in
most markets tightened and as the commercial mortgage sector outperformed other
sectors of the mortgage market. Furthermore, the significant backup in interest
rates led investors to add to prepayment-sensitive securities, leading to
outperformance of interest-only pass-throughs.
5
<PAGE>
FFTW FUNDS, INC.
PERFORMANCE - U.S. PORTFOLIOS
DECEMBER 31, 1999
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.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
COMPARISON OF CHANGES IN VALUE OF A $100,000 INVESTMENT IN U.S. SHORT-TERM
<S> <C>
PORTFOLIO AND THE IBC'S MONEY FUND REPORT AVERAGES-TM- - ALL TAXABLE
U.S. Short-Term Portfolio
12/6/89 $100,000
12/31/89 $100,489
3/31/90 $102,487
6/30/90 $104,518
9/30/90 $106,676
12/31/90 $109,039
3/31/91 $110,885
6/30/91 $112,505
9/30/91 $114,378
12/31/91 $116,012
3/31/92 $116,971
6/30/92 $118,063
9/30/92 $119,214
12/31/92 $120,018
3/31/93 $120,957
6/30/93 $121,741
9/30/93 $122,801
12/31/93 $123,480
3/31/94 $124,367
6/30/94 $125,219
9/30/94 $126,703
12/31/94 $128,185
3/31/95 $130,198
6/30/95 $131,956
9/30/95 $133,709
12/31/95 $135,486
3/31/96 $137,136
6/30/96 $138,765
9/30/96 $140,751
12/31/96 $142,893
3/31/97 $144,649
6/30/97 $146,629
9/30/97 $148,618
12/31/97 $150,167
3/31/98 $152,328
6/30/98 $154,332
9/30/98 $157,143
12/31/98 $158,565
3/31/99 $160,283
6/30/99 $161,341
9/30/99 $163,185
12/31/99 $165,315
(Past performance is not predictive of future performance.)
<CAPTION>
COMPARISON OF CHANGES IN VALUE OF A $100,000 INVESTMENT IN U.S. SHORT-TERM
<S> <C>
PORTFOLIO AND THE IBC'S MONEY FUND REPORT AVERAGES-TM- - ALL TAXABLE
IBC's Money Fund Report Averages -TM- - All Taxable
12/6/89 $100,000
12/31/89 $100,543
3/31/90 $102,462
6/30/90 $104,436
9/30/90 $106,436
12/31/90 $108,415
3/31/91 $110,153
6/30/91 $111,707
9/30/91 $113,220
12/31/91 $114,595
3/31/92 $115,707
6/30/92 $116,726
9/30/92 $117,631
12/31/92 $118,458
3/31/93 $119,259
6/30/93 $120,041
9/30/93 $120,845
12/31/93 $121,661
3/31/94 $122,498
6/30/94 $123,520
9/30/94 $124,753
12/31/94 $126,218
3/31/95 $127,897
6/30/95 $129,663
9/30/95 $131,431
12/31/95 $133,168
3/31/96 $134,799
6/30/96 $136,396
9/30/96 $138,067
12/31/96 $139,757
3/31/97 $141,429
6/30/97 $143,191
9/30/97 $145,014
12/31/97 $146,873
3/31/98 $148,710
6/30/98 $150,574
9/30/98 $152,481
12/31/98 $154,267
3/31/99 $155,942
6/30/99 $157,622
9/30/99 $159,453
12/31/99 $161,431
(Past performance is not predictive of future performance.)
</TABLE>
Average Annual Total Return for the periods ended December 31, 1999:
<TABLE>
Five Ten Since
One Year Years Years Inception*
<S> <C> <C> <C> <C>
U.S. SHORT-TERM PORTFOLIO 4.26% 5.22% 5.10% 5.12%
IBC's Money Fund Report
Averages-TM--All Taxable* 4.64% 5.04% 4.85% 4.87%
</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.
6
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FFTW FUNDS, INC.
PERFORMANCE - U.S. PORTFOLIOS (CONTINUED)
DECEMBER 31, 1999
LIMITED DURATION PORTFOLIO seeks to maintain a stable level of total return as
may be coinsistent with the preservation of capital by investing primarily in
high-quality debt securities with a average U.S. dollar-weighted duration of
less than three years and by using interest rate hedging as a stabilizing
technique.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
COMPARISON OF CHANGES IN VALUE OF A $100,000 INVESTMENT IN LIMITED DURATION PORTFOLIO
<S> <C>
AND THE MERRILL LYNCH 1-2.99 YEAR TREASURY INDEX
Limited Duration Portfolio
7/26/93 $100,000
9/30/93 $100,044
12/31/93 $101,849
3/31/94 $101,367
6/30/94 $101,212
9/30/94 $102,277
12/31/94 $102,146
3/31/95 $105,756
6/30/95 $109,315
9/30/95 $110,737
12/31/95 $113,635
3/31/96 $114,237
6/30/96 $115,440
9/30/96 $117,116
12/31/96 $119,634
3/31/97 $120,654
6/30/97 $123,458
9/30/97 $126,252
12/31/97 $128,170
3/31/98 $129,931
6/30/98 $132,044
9/30/98 $136,012
12/31/98 $136,869
3/31/99 $138,162
6/30/99 $138,231
9/30/99 $139,631
12/31/99 $140,806
(Past performance is not predictive of future performance.)
<CAPTION>
COMPARISON OF CHANGES IN VALUE OF A $100,000 INVESTMENT IN LIMITED DURATION PORTFOLIO
<S> <C>
AND THE MERRILL LYNCH 1-2.99 YEAR TREASURY INDEX
Merrill Lynch 1-2.99 Year Treasury Index
7/26/93 $100,000
9/30/93 $100,023
12/31/93 $101,821
3/31/94 $101,313
6/30/94 $101,397
9/30/94 $102,396
12/31/94 $102,405
3/31/95 $105,840
6/30/95 $109,238
9/30/95 $110,884
12/31/95 $113,668
3/31/96 $114,050
6/30/96 $115,202
9/30/96 $117,101
12/31/96 $119,336
3/31/97 $120,125
6/30/97 $122,772
9/30/97 $125,178
12/31/97 $127,278
3/31/98 $129,148
6/30/98 $131,123
9/30/98 $135,160
12/31/98 $136,184
3/31/99 $136,999
6/30/99 $137,778
9/30/99 $139,515
12/31/99 $140,354
(Past performance is not predictive of future performance.)
</TABLE>
Average Annual Total Return for the periods ended December 31, 1999:
<TABLE>
Five Since
One Year Years Inception*
<S> <C> <C> <C>
LIMITED DURATION PORTFOLIO 2.88% 6.64% 5.46%
Merrill Lynch 1-2.99 Year Treasury Index 3.06% 6.50% 5.41%
</TABLE>
* Limited Duration Portfolio commenced operations on July 26, 1993.
7
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FFTW FUNDS, INC.
PERFORMANCE - U.S. PORTFOLIOS (CONTINUED)
DECEMBER 31, 1999
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.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
COMPARISON OF CHANGES IN VALUE OF A $100,000 INVESTMENT IN MORTGAGE-BACKED PORTFOLIO
<S> <C>
AND THE LEHMAN MORTGAGE-BACKED SECURITIES INDEX
Mortgage Total Return Portfolio
4/29/96 $100,000
6/30/96 $101,127
9/30/96 $103,620
12/31/96 $106,539
3/31/97 $107,319
6/30/97 $111,580
9/30/97 $114,846
12/31/97 $117,400
3/31/98 $119,395
6/30/98 $121,656
9/30/98 $125,786
12/31/98 $126,115
3/31/99 $127,960
6/30/99 $126,548
9/30/99 $127,268
12/31/99 $127,638
(Past performance is not predictive of future performance.)
<CAPTION>
COMPARISON OF CHANGES IN VALUE OF A $100,000 INVESTMENT IN MORTGAGE-BACKED PORTFOLIO
<S> <C>
AND THE LEHMAN MORTGAGE-BACKED SECURITIES INDEX
Lehman Mortgage-Backed Securities Index
4/29/96 $100,000
6/30/96 $100,742
9/30/96 $102,804
12/31/96 $105,765
3/31/97 $105,894
6/30/97 $109,903
9/30/97 $113,119
12/31/97 $115,796
3/31/98 $117,681
6/30/98 $119,704
9/30/98 $122,879
12/31/98 $123,863
3/31/99 $125,076
6/30/99 $124,510
9/30/99 $125,667
12/31/99 $126,155
(Past performance is not predictive of future performance.)
</TABLE>
Average Annual Total Return for the periods ended December 31, 1999:
<TABLE>
Since
One Year Inception*
<S> <C> <C>
MORTGAGE-BACKED PORTFOLIO 1.21% 6.87%
Lehman Mortgage-Backed Securities Index 1.85% 6.53%
</TABLE>
* Mortgage-Backed Portfolio commenced operations on April 29, 1996.
8
<PAGE>
FFTW FUNDS, INC.
PORTFOLIO REVIEWS - GLOBAL AND INTERNATIONAL PORTFOLIOS
DECEMBER 31, 1999
GLOBAL TACTICAL EXPOSURE PORTFOLIO
WORLDWIDE PORTFOLIO
WORLDWIDE-HEDGED PORTFOLIO
INTERNATIONAL PORTFOLIO
All of the global and international Portfolios invest in similar securities,
financial futures contracts and forward foreign exchange contracts. The main
difference among the Portfolios relates to positions in the US markets and the
currency hedging ratio into the US dollar.
For most of the first quarter, the Worldwide Portfolio was overweight US
Treasuries and the International Portfolio was modestly overweight the US bloc.
The Worldwide Portfolio ended the first quarter underweight the US while the
International Portfolio finished the quarter neutral to benchmark. Both
Portfolios were overweight European bonds for most of the first quarter and
remained underweight Japanese government bonds. While US duration and yield
curve positions and underweighting Japan detracted from performance,
overweighting European duration added to returns. A portion of the Worldwide and
International Portfolios was invested in European asset-backed securities while
simultaneously, the Worldwide Portfolio's allocation to US asset-backed
securities was gradually increased. These positions contributed positively to
incremental return as spreads continued to narrow throughout the quarter. The
Global and International Portfolio's overweight the US dollar and euro against
the yen was also a positive contributor to return.
Despite establishing neutral duration positions in the US, Europe and Japan
blocs at the end of the quarter, the Worldwide and International Portfolio's
performance continued to be negatively affected by second quarter duration
positions. Currency positions were able to ameliorate the impact of duration
positions on the Portfolios. The underweight Japanese yen versus US dollar early
in the quarter and overweight Swedish krona and underweight Swiss franc versus
euro in June contributed positively to performance in both Portfolios. An
overweight Australian dollar versus US dollar did not affect the International
Portfolio's performance. An increase in the Worldwide and International
Portfolio's holdings in non-US fixed-rate asset-backed securities also had no
substantial impact on performance.
The third quarter saw a trend towards shortening duration positions in the US
and Europe while the underweight in Japanese duration was maintained in the
Global and International Portfolios. US duration did not have an impact on
performance while Europe contributed positively and Japan negatively to return
in both Worldwide and International Portfolios. The underweight Canadian bonds
versus US Treasuries in the Portfolios contributed to return while the
overweight Swedish and Danish bonds versus UK Gilts detracted from return. In
foreign exchange, the Portfolios favored the euro versus the Swiss franc, which
had no significant impact on return. However, the overweighted Australian dollar
versus US dollar added to excess return for the third quarter. Maintaining the
allocation to European asset-backed securities began to show a positive impact
on the Worldwide and International Portfolio returns. The slight increase in US
asset-backed securities in the Worldwide Portfolio also contributed positively
to return.
As the Worldwide Portfolio's US duration position was cut to neutral by the end
of the fourth quarter, US duration added slightly to performance. Both the
Worldwide and International Portfolio started the quarter with a short duration
position in Europe, but ended the year flat to benchmark as duration exposure in
Europe continued to detract from return. The Portfolios' underweight position in
Japan had no impact on fourth quarter performance and was also moved to neutral
in December. European country selection added to return as the Portfolios' were
overweight Swedish, Danish and UK bonds versus German bunds. In currencies, the
Swedish krona and British pound sterling were short versus the euro while the
Australian and New Zealand dollars were overweight versus the US dollar and the
Japanese yen underweight versus the dollar. The short Swedish krona, long New
Zealand dollar and short Japanese yen positions all had a negative impact on
return. The Worldwide Portfolio's allocation to US asset-backed securities
continued to increase as the position continued to contribute slightly to
incremental return. However, the European asset-backed securities position in
the Worldwide and International Portfolios had no impact on return.
9
<PAGE>
FFTW FUNDS, INC.
PORTFOLIO REVIEWS - GLOBAL AND INTERNATIONAL PORTFOLIOS (CONTINUED)
DECEMBER 31, 1999
EMERGING MARKET PORTFOLIO
Despite Brazil's devaluation of the real in mid-January, emerging market spreads
ended the first quarter of 1999 about where they began. The initial response to
the Brazilian devaluation was a widening of all emerging market spreads, but
with higher quality credits continuing their relative out performance. With the
improvement in sentiment towards Brazil later in the quarter, however, investors
began to favor higher-yielding markets, reversing the recent decoupling process.
Latin American positions detracted from performance in the beginning of the
quarter but added value in February and March. The capital markets have
selectively re-opened to primary issuance, though demand is not so strong as to
allow borrowers to come to market without offering significant concessions
relative to secondary market trading levels. Russian Eurobond positions also
added to performance.
Emerging market spreads tightened by about 200 basis points early in the second
quarter, but then widened once again to end the quarter about where they began.
Investors went head-over-heels for Asia (again), as talk of the region's
imminent "V-shaped recovery" was all the rage. Better prospects for world growth
as a whole helped commodities, but only oil was able to stage a significant
recovery from the depressed prices of recent months. Oil-rich countries such as
Venezuela benefited, while those dependent on agriculture or mining continued to
suffer from low prices for their goods on world markets. Underweight positions
in Latin America detracted from portfolio returns as Brazil and Venezuela were
the region's strongest performers. Russian markets exhibited stellar performance
as Russia's debt service capacity improved due to the combination of rising oil
prices, progress on debt restructuring, and a more stable political environment.
An overweight position in Russian Eurobonds early in the quarter added to
performance but an underweight in June took away from performance due to the
strong rally in June. Low transaction volumes in the secondary market were
indicative of a lack of investor appetite for risk and suggested that spreads
were likely to be volatile but remain in a rather wide range, much as they did
since January.
Emerging market spreads fluctuated in a wide range during the third quarter but
ended unchanged. Better prospects for world growth as a whole and higher prices
for oil benefited emerging markets. However low transaction volumes in the
secondary market were indicative of a lack of investor appetite for emerging
market risk. Y2K concerns also prevented large scale spread tightening. A large
overweight position in Latin America, particularly Argentina, had a positive
impact on performance.
Emerging market spreads narrowed significantly during the fourth quarter, with
the Emerging Market Bond Index spread ending the year about 250 basis points
tighter than at the end of September. Improving fundamentals in Asia, Eastern
Europe-- particularly Turkey and Latin America all contributed to the positive
performance of the asset class. An overweight position in Latin America had a
positive impact on portfolio performance while an underweight in Asia hurt
performance. Exceptions to the generally positive picture for emerging economies
included Poland and Russia, which continued to defy expectations by rallying in
the face of the Chechnya crisis.
10
<PAGE>
FFTW FUNDS, INC.
PERFORMANCE - GLOBAL AND INTERNATIONAL PORTFOLIOS
DECEMBER 31, 1999
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.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
COMPARISON OF CHANGES IN VALUE OF A $100,000 GLOBAL TACTICAL EXPOSURE JP MORGAN 3-MONTH
INVESTMENT IN GLOBAL TACTICAL EXPOSURE PORTFOLIO EURODEPOSIT INDEX
PORTFOLIO AND THE JP MORGAN 3-MONTH
EURODEPOSIT INDEX
<S> <C> <C>
9/14/95 $100,000 $100,000
9/30/95 $99,563 $100,220
12/31/95 $103,804 $101,771
3/31/96 $103,380 $103,182
6/30/96 $104,705 $104,602
9/30/96 $105,768 $106,158
12/31/96 $107,104 $107,694
3/31/97 $110,902 $109,176
6/30/97 $111,760 $110,833
9/30/97 $115,001 $112,481
12/31/97 $116,502 $114,154
3/31/98 $117,284 $115,794
6/30/98 $120,161 $117,447
9/30/98 $123,413 $119,241
12/31/98 $126,034 $120,798
3/31/99 $126,818 $122,350
6/30/99 $128,172 $123,849
9/30/99 $129,379 $125,404
12/31/99 $129,691 $127,535
(Past performance is not predictive of
future performance.)
</TABLE>
Average Annual Total Return for the periods ended December 31, 1999:
<TABLE>
Since
One Year Inception*
<S> <C> <C>
GLOBAL TACTICAL EXPOSURE PORTFOLIO 2.90% 6.24%
JP Morgan 3-Month Eurodeposit Index 5.58% 5.82%
</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.
11
<PAGE>
FFTW FUNDS, INC.
PERFORMANCE - GLOBAL AND INTERNATIONAL PORTFOLIOS (CONTINUED)
DECEMBER 31, 1999
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.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
COMPARISON OF CHANGES IN VALUE OF A $100,000 INVESTMENT IN WORLDWIDE PORTFOLIO WORLDWIDE PORTFOLIO
AND THE JP MORGAN GLOBAL GOVERNMENT BOND INDEX (UNHEDGED)
<S> <C>
4/15/92 $100,000
6/30/92 $102,026
9/30/92 $106,602
12/31/92 $109,591
3/31/93 $115,481
6/30/93 $120,381
9/30/93 $125,952
12/31/93 $126,973
3/31/94 $122,213
6/30/94 $121,395
9/30/94 $123,844
12/31/94 $124,118
3/31/95 $128,481
6/30/95 $133,714
9/30/95 $133,825
12/31/95 $139,734
3/31/96 $137,514
6/30/96 $138,612
9/30/96 $142,646
12/31/96 $147,791
3/31/97 $143,256
6/30/97 $147,089
9/30/97 $150,822
12/31/97 $152,126
3/31/98 $152,918
6/30/98 $157,131
9/30/98 $171,043
12/31/98 $175,825
3/31/99 $169,272
6/30/99 $163,327
9/30/99 $168,326
12/31/99 $166,370
(Past performance is not predictive of future performance.)
<CAPTION>
COMPARISON OF CHANGES IN VALUE OF A $100,000 INVESTMENT IN WORLDWIDE PORTFOLIO JP MORGAN GLOBAL GOVERNMENT BOND INDEX (UNHEDGED)
AND THE JP MORGAN GLOBAL GOVERNMENT BOND INDEX (UNHEDGED)
<S> <C>
4/15/92 $100,000
6/30/92 $105,500
9/30/92 $110,578
12/31/92 $106,901
3/31/93 $112,170
6/30/93 $115,023
9/30/93 $119,730
12/31/93 $120,009
3/31/94 $119,253
6/30/94 $119,575
9/30/94 $120,975
12/31/94 $121,521
3/31/95 $133,648
6/30/95 $140,426
9/30/95 $140,250
12/31/95 $144,987
3/31/96 $142,447
6/30/96 $143,298
9/30/96 $147,354
12/31/96 $151,353
3/31/97 $145,437
6/30/97 $149,723
9/30/97 $152,298
12/31/97 $153,497
3/31/98 $155,002
6/30/98 $158,509
9/30/98 $171,849
12/31/98 $176,979
3/31/99 $170,089
6/30/99 $164,256
9/30/99 $170,729
12/31/99 $168,006
(Past performance is not predictive of future performance.)
</TABLE>
Average Annual Total Return for the periods ended December 31, 1999:
<TABLE>
Five Since
One Year Years Inception*
<S> <C> <C> <C>
WORLDWIDE PORTFOLIO (5.38%) 6.03% 6.82%
JP Morgan Global Government Bond Index
(Unhedged) (5.07%) 6.69% 6.96%
</TABLE>
* Worldwide Portfolio commenced operations on April 15, 1992.
12
<PAGE>
FFTW FUNDS, INC.
PERFORMANCE - GLOBAL AND INTERNATIONAL PORTFOLIOS (CONTINUED)
DECEMBER 31, 1999
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.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
COMPARISON OF CHANGES IN VALUE OF A $100,000 INVESTMENT IN WORLDWIDE-HEDGED WORLDWIDE-HEDGED PORTFOLIO
PORTFOLIO AND A CUSTOMIZED WORLDWIDE-HEDGED BENCHMARK
<S> <C>
5/19/92 $100,000
6/30/92 $101,052
9/30/92 $105,737
12/31/92 $105,847
3/31/93 $111,055
6/30/93 $113,788
9/30/93 $118,782
12/31/93 $119,489
3/31/94 $114,731
6/30/94 $116,049
9/30/94 $128,188
12/31/94 $128,853
3/31/95 $130,905
6/30/95 $132,853
9/30/95 $135,368
12/31/95 $143,017
3/31/96 $142,899
6/30/96 $145,794
9/30/96 $150,829
12/31/96 $157,367
3/31/97 $159,115
6/30/97 $164,219
9/30/97 $172,119
12/31/97 $177,188
3/31/98 $180,367
6/30/98 $185,556
9/30/98 $196,055
12/31/98 $197,614
3/31/99 $197,853
6/30/99 $196,121
9/30/99 $196,163
12/31/99 $197,231
(Past performance is not predictive of future performance.)
<CAPTION>
COMPARISON OF CHANGES IN VALUE OF A $100,000 INVESTMENT IN WORLDWIDE-HEDGED CUSTOMIZED WORLDWIDE-HEDGED BENCHMARK
PORTFOLIO AND A CUSTOMIZED WORLDWIDE-HEDGED BENCHMARK
<S> <C>
5/19/92 $100,000
6/30/92 $100,579
9/30/92 $103,665
12/31/92 $105,147
3/31/93 $108,938
6/30/93 $111,839
9/30/93 $115,551
12/31/93 $117,942
3/31/94 $114,201
6/30/94 $111,921
9/30/94 $113,907
12/31/94 $115,245
3/31/95 $116,778
6/30/95 $118,391
9/30/95 $121,868
12/31/95 $127,094
3/31/96 $126,807
6/30/96 $129,180
9/30/96 $133,430
12/31/96 $138,082
3/31/97 $138,903
6/30/97 $143,563
9/30/97 $148,636
12/31/97 $153,093
3/31/98 $156,917
6/30/98 $160,806
9/30/98 $169,746
12/31/98 $170,576
3/31/99 $171,554
6/30/99 $170,183
9/30/99 $170,880
12/31/99 $171,821
(Past performance is not predictive of future performance.)
</TABLE>
Average Annual Total Return for the periods ended December 31, 1999:
<TABLE>
Five Since
One Year Years Inception*
<S> <C> <C> <C>
WORLDWIDE-HEDGED PORTFOLIO (0.19%) 8.88% 9.32%
Customized Worldwide-Hedged Benchmark* 0.73% 8.31% 7.36%
</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 Worldwide-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.
13
<PAGE>
FFTW FUNDS, INC.
PERFORMANCE - GLOBAL AND INTERNATIONAL PORTFOLIOS (CONTINUED)
DECEMBER 31, 1999
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.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
COMPARISON OF CHANGES IN VALUE OF A $100,000 INVESTMENT IN INTERNATIONAL PORTFOLIO AND INTERNATIONAL
THE JP MORGAN GLOBAL GOVERNMENT BOND INDEX (NON-U.S. UNHEDGED)
<S> <C>
Portfolio
5/9/96 $100,000
6/30/96 $99,843
9/30/96 $103,127
12/31/96 $106,662
3/31/97 $101,061
6/30/97 $103,467
9/30/97 $106,224
12/31/97 $106,209
3/31/98 $106,220
6/30/98 $108,780
9/30/98 $120,119
12/31/98 $125,700
3/31/99 $119,062
6/30/99 $114,995
9/30/99 $119,264
12/31/99 $117,730
(Past performance is not predictive of future performance.)
<CAPTION>
COMPARISON OF CHANGES IN VALUE OF A $100,000 INVESTMENT IN INTERNATIONAL PORTFOLIO AND JP MORGAN GLOBAL GOVERNMENT
THE JP MORGAN GLOBAL GOVERNMENT BOND INDEX (NON-U.S. UNHEDGED)
<S> <C>
Bond Index (Non-U.S. Unhedged)
5/9/96 $100,000
6/30/96 $99,940
9/30/96 $104,213
12/31/96 $107,023
3/31/97 $100,806
6/30/97 $103,389
9/30/97 $103,971
12/31/97 $102,991
3/31/98 $103,675
6/30/98 $105,743
9/30/98 $116,276
12/31/98 $121,833
3/31/99 $115,798
6/30/99 $110,461
9/30/99 $116,589
12/31/99 $114,299
(Past performance is not predictive of future performance.)
</TABLE>
Average Annual Total Return for the periods ended December 31, 1999:
<TABLE>
Since
One Year Inception*
<S> <C> <C>
INTERNATIONAL PORTFOLIO (6.34%) 4.58%
JP Morgan Global Government Bond Index (Non-U.S.
Unhedged) (6.18%) 3.73%
</TABLE>
* International Portfolio commenced operations on May 9, 1996.
14
<PAGE>
FFTW FUNDS, INC.
PERFORMANCE - GLOBAL AND INTERNATIONAL PORTFOLIOS (CONTINUED)
DECEMBER 31, 1999
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.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF A $100,000 INVESTMENT IN EMERGING MARKETS EMERGING MARKETS CUSTOMIZED
PORTFOLIO AND A CUSTOMIZED EMERGING MARKETS BENCHMARK** PORTFOLIO EMERGING
MARKETS BENCHMARK**
<S> <C> <C>
8/12/97 $100,000 $100,000
9/30/97 $100,412 $99,869
12/31/97 $98,805 $94,544
3/31/98 $102,886 $98,605
6/30/98 $97,534 $95,231
9/30/98 $74,642 $89,585
12/31/98 $88,429 $99,383
3/31/99 $88,734 $102,171
6/30/99 $90,699 $108,077
9/30/99 $92,680 $108,597
12/31/99 $98,797 $117,161
(Past performance is not predictive of future performance.)
</TABLE>
Average Annual Total Return for the period ended December 31, 1999:
<TABLE>
Since
One Year Inception*
<S> <C> <C>
EMERGING MARKETS PORTFOLIO 11.73% (0.51%)
Customized Emerging Markets Benchmark** 17.89% 6.86%
</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.
MARKET OUTLOOK
DECEMBER 31, 1999
The economic outlook in the US continues to show strong growth and little sign
of inflation. The Federal Reserve will remain vigilant and is expected to raise
official rates in February. As a result, bond yields are expected to rise and
the curve to flatten. This process, however, may be well advanced at this point.
Even with the recent narrowing in spreads, the fundamental outlook for
non-treasury securities continues to be positive.
In Europe, the outlook is also for a strengthening economy. The European Central
Bank, already having tightened monetary policy, will likely move again to raise
official rates early in the new year. Therefore, rising rates and a flattening
yield curve are also expected for Europe. The outlook for Japan, however,
continues to be uncertain. The Japanese economy seems to be recovering, but the
central bank is not likely to act to raise short rates. As a consequence, bond
yields are expected to remain in a narrow range.
In summary, we believe that:
- - Short term interest rates will rise in Europe and the United States.
- - Bond yields, except for yields in the long bond, will rise modestly in
Europe, and in the United States.
- - However, bond yields will peak in the first half of 2000.
- - And global bond returns will somewhat exceed cash returns.
- - On a longer run perspective the current level of nominal bond yields
represents an attractive investment opportunity, and any further short-term
rises in yields should be exploited.
The dominant secular theme remains the compression of and reduction of global
inflation, ensuring that the bond premium embodied in the positive yield curve
will translate into bond returns above cash returns.
16
<PAGE>
FFTW FUNDS, INC.
U.S. SHORT-TERM PORTFOLIO - SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
COUPON FACE
RATE MATURITY AMOUNT VALUE
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSET- AND MORTGAGE-BACKED SECURITIES (NON-AGENCY) - 46.7%
Advanta Mortgage Loan Trust,
Ser. 1999-2, Class A1 (FRN) 6.581% 05/25/2029 $ 7,323,590 $ 7,318,390
AFC Home Equity Loan Trust,
Ser. 1999-2, Class 2A (FRN) 6.731% 06/24/2029 1,836,955 1,843,642
Amresco Residential Securities
Mortgage Loan Trust, Ser.
1998-2, Class A8 (FRN) 6.636% 05/25/2028 4,504,035 4,498,180
Banc One Home Equity Trust,
Ser. 1999-1, Class A1 6.060% 01/25/2012 8,077,290 7,998,941
BankBoston Home Equity Loan
Trust, Ser. 1998-2, Class A1 6.280% 11/25/2010 4,165,540 4,143,587
Barnett Auto Trust, Ser.
1997-A, Class A3 6.030% 11/15/2001 5,411,824 5,412,311
Beneficial Mortgage Corp.,
Ser. 1995-1, Class A1 (FRN) 6.710% 03/28/2025 842,180 842,180
Block Mortgage Finance, Inc.,
Ser. 1997-2, Class A6 (FRN) 6.691% 05/25/2027 1,001,678 1,000,526
Capital Auto Receivables Asset
Trust, Ser. 1999-2, Class A2 6.060% 06/15/2002 15,000,000 14,957,227
Case Equipment Loan Trust,
Ser. 1998-C, Class A2 5.490% 08/15/2002 4,797,990 4,786,858
Caterpillar Financial Asset
Trust, Ser. 1998-A, Class A2 5.750% 09/25/2001 3,078,880 3,075,431
Chase Manhattan Auto Owner
Trust, Ser. 1996-C, Class A3 5.950% 11/15/2000 12,549 12,548
Chase Manhattan RV Owner
Trust, Ser. 1997-A, Class A5 6.050% 11/15/2004 660,688 660,688
CIT Marine Trust, Ser. 1999-A,
Class A2 5.800% 04/15/2010 4,500,000 4,336,425
Contimortgage Home Equity Loan
Trust, Ser. 1996-1,
Class A8 (FRN) 6.803% 03/15/2027 508,748 508,224
Contimortgage Home Equity Loan
Trust, Ser. 1999-3, Class A1 6.420% 04/25/2014 8,053,082 8,006,777
Copelco Capital Funding Corp.,
Ser. 1998-A, Class A3 5.780% 08/15/2001 7,000,000 6,978,020
Countrywide Home Equity, Ser.
1999-A, Class CTFS (FRN) 6.783% 04/15/2025 13,737,924 13,778,314
EQCC Home Equity Loan Trust,
Ser. 1998-2, Class A1F 6.235% 04/15/2008 2,139,335 2,133,259
GMAC Home Equity Loan Trust,
Ser. 1998-1, Class A (FRN) -
144A(a) 6.633% 03/15/2024 6,582,644 6,549,731
Gracechurch Card Funding Plc,
Ser. 1, Class A (FRN) 6.340% 11/15/2004 11,000,000 11,000,000
Green Tree Home Improvement
Loan Trust, Ser. 1998-D,
Class HEA1 5.980% 08/15/2029 1,864,608 1,863,321
HFC Revolving Home Equity Loan
Trust, Ser. 1994-2,
Class A1 (FRN) 6.691% 09/20/2014 3,526,403 3,505,844
HFC Revolving Home Equity Loan
Trust, Ser. 1996-1,
Class A (FRN) 6.661% 07/20/2017 5,562,951 5,553,160
Leaf Master Trust I, Ser.
1999-1, Class A1 (FRN) -
144A(a) 6.421% 11/15/2004 9,000,000 9,000,000
MBNA Master Credit Card Trust,
Ser. 1994-C, Class B (FRN) 6.888% 03/15/2004 10,000,000 10,005,200
MBNA Master Credit Card Trust,
Ser. 1996-D, Class B (FRN) 6.753% 09/15/2003 10,000,000 10,003,300
Merrill Lynch Mortgage
Investors, Inc., Ser.
1998-FF1,
Class A (FRN) 6.611% 01/20/2028 4,628,399 4,624,002
Metris Master Trust, Ser.
1998-1A, Class B (FRN) -
144A(a) 6.043% 08/20/2005 5,000,000 4,969,141
Newcourt Equipment Trust
Securities, Ser. 1998-1,
Class A2 5.170% 09/20/2000 418,486 418,290
Norwest Auto Trust, Ser.
1996-A, Class CTFS 6.300% 05/15/2003 16,000,000 15,918,240
Norwest Integrated Structured
Assets, Inc., Ser. 1999-2,
Class 1A1 (FRN) 5.990% 09/25/2029 16,098,813 15,978,072
Premier Auto Trust, Ser.
1996-3, Class CTFS 6.950% 11/06/2001 5,000,000 5,007,850
Premier Auto Trust, Ser.
1998-4, Class A2 5.560% 04/08/2001 4,115,315 4,111,323
</TABLE>
17
<PAGE>
FFTW FUNDS, INC.
U.S. SHORT-TERM PORTFOLIO - SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
COUPON FACE
RATE MATURITY AMOUNT VALUE
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSET- AND MORTGAGE-BACKED SECURITIES (NON-AGENCY) (CONTINUED)
Providian Home Equity Loan
Trust, Ser. 1999-1, Class A
(FRN) 6.771% 06/25/2025 $13,216,166 $ 13,230,175
Rental Car Finance Corp., Ser.
1997-1, Class A1 - 144A(a) 6.250% 06/25/2003 11,650,000 11,547,152
Residential Accredit Loans,
Inc., Ser. 1998-QS2, Class A4
(FRN) 6.190% 02/25/2028 4,800,979 4,807,893
Residential Asset
Securitization Trust, Ser.
1997-A4,
Class A9 (FRN) 6.900% 06/25/2027 502,827 502,726
Residential Asset
Securitization Trust, Ser.
1998-A5, Class A2 6.750% 06/25/2028 6,547,299 6,469,059
Santa Barbara Funding II, Ser.
A, Class 1 (FRN) 6.838% 03/20/2018 162,678 164,679
Saxon Asset Securities Trust,
Ser. 1998-2, Class AV2 6.200% 04/25/2017 10,237,525 10,127,984
Structured Asset Securities
Corp., Ser. 1998-C2A,
Class A (FRN) - 144A(a) 6.651% 12/25/2000 4,254,456 4,249,819
Toyota Auto Lease Trust, Ser.
1998-B, Class A1 5.350% 07/25/2002 13,375,000 13,354,938
Toyota Auto Lease Trust, Ser.
1998-C, Class A2 (FRN) 6.451% 02/25/2003 14,000,000 14,018,760
World Omni Automobile Lease,
Ser. 1996-B, Class A3 6.250% 11/15/2002 5,327,462 5,329,859
World Omni Automobile Lease,
Ser. 1998-A, Class A4 (FRN) 7.013% 12/15/2004 19,000,000 19,118,750
------------
Total (Cost - $304,980,746) 303,720,796
------------
BANK OBLIGATIONS - 17.4%
ABN/AMRO Bank NV, Yankee CD 5.100% 02/22/2000 20,000,000 19,961,875
Bank of Montreal, Yankee CD 6.300% 01/14/2000 20,000,000 20,000,000
Investors Bank & Trust Company
Cash Sweep 5.000% 01/03/2000 26,256,000 26,256,000
State Street Bank & Trust Co.
Time Deposit 4.500% 01/03/2000 22,000,000 22,000,000
Svenska Handelsbanken, Yankee
CD 6.060% 01/14/2000 25,000,000 24,999,821
------------
Total (Cost - $113,217,696) 113,217,696
------------
COMMERCIAL PAPER - 25.9%*
Banque Internationale a
Luxembourg North America Inc. 5.934% 02/01/2000 18,000,000 17,908,550
BMW US Capital Corp. 6.090% 03/20/2000 22,000,000 21,710,334
Four Winds Funding Corp. - Sec
4(2)(a) 6.787% 01/18/2000 25,000,000 24,920,312
Glencore Asset Funding, Ser.
SGEN - Sec. 4(2)(a) 5.729% 01/31/2000 30,000,000 29,857,500
Minnesota Mining and
Manufacturing Co. 6.090% 03/20/2000 20,000,000 19,736,666
Moriarty Ltd. - Sec. 4(2)(a) 6.243% 03/16/2000 25,000,000 24,679,687
San Paolo IMI U.S. Financial
Co. 5.933% 02/01/2000 30,000,000 29,847,583
------------
Total (Cost - $168,660,632) 168,660,632
------------
</TABLE>
18
<PAGE>
FFTW FUNDS, INC.
U.S. SHORT-TERM PORTFOLIO - SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
COUPON FACE
RATE MATURITY AMOUNT VALUE
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CORPORATE OBLIGATIONS - 4.1%
CIT Group Holdings, Inc. 5.000% 10/06/2000 $15,000,000 $ 14,814,435
Salomon Smith Barney Holdings
(FRN) (MTN) 7.482% 02/14/2000 12,000,000 12,016,320
------------
Total (Cost - $27,014,030) 26,830,755
------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED OBLIGATIONS - 5.2%
FHLMC, Ser. 1587, Class EZ 5.750% 05/15/2007 2,469,707 2,458,890
FHLMC, Ser. 1727, Class E 6.500% 04/15/2018 10,925,703 10,909,096
FHLMC, Ser. T-19, Class A
(FRN) 5.759% 02/25/2029 4,347,425 4,347,425
FNMA, Ser. 1993-54, Class FK
(FRN) 7.100% 04/25/2021 1,749,044 1,760,711
FNMA, Ser. 1993-82, Class C 6.000% 07/25/2015 3,339,494 3,325,502
FNMA, Ser. 1993-163, Class BK 6.150% 11/25/2017 1,922,000 1,913,985
FNMA, Ser. 1993-196, Class E 5.500% 02/25/2007 3,829,746 3,802,593
GNMA, Ser. 1996-19, Class C 7.500% 03/20/2022 4,911,086 4,924,405
------------
Total (Cost - $33,608,579) 33,442,607
------------
U.S. TREASURY OBLIGATION - 0.3%
U.S. Treasury Bill*@
(Cost - $1,963,902) 5.240% 05/04/2000 2,000,000 1,963,874
------------
TOTAL INVESTMENTS - 99.6%
(COST - $649,445,585) 647,836,360
------------
OTHER ASSETS, NET OF
LIABILITIES - 0.4% 2,610,580
------------
NET ASSETS - 100.0% $650,446,940
============
</TABLE>
<TABLE>
<CAPTION>
Summary of Abbreviations
- ------------------------
- -----------------------------------------------------------------------------
<S> <C>
FHLMC Federal Home Loan Mortgage Corp.
FNMA Federal National Mortgage Association
FRN Floating Rate Note
GNMA Government National Mortgage Association
MTN Medium-Term Note
Yankee CD U.S. dollar denominated certificates of deposit issued by
non-U.S. banks in the U.S.
</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 or Section 4(2) of the
Securities Act of 1933. This security may be sold in transactions exempt
from registration, normally to qualified institutional buyers. At December
31, 1999 these securities were valued at $115,773,342 or 17.8% of net
assets.
See Notes to Financial Statements.
19
<PAGE>
FFTW FUNDS, INC.
LIMITED DURATION PORTFOLIO - SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
COUPON FACE
RATE MATURITY AMOUNT VALUE
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LONG-TERM INVESTMENTS - 105.5%
ASSET- AND MORTGAGE-BACKED SECURITIES (NON-AGENCY) - 55.8%
Aames Mortgage Trust, Ser.
1998-B, Class A1A (FRN) 6.628% 06/15/2028 $ 531,417 $ 528,143
Advanta Mortgage Loan Trust,
Ser. 1998-2, Class A13 6.360% 01/25/2025 3,000,000 2,884,890
Allied Capital Commercial
Mortgage Trust, Ser. 1998-1,
Class A - 144A(a) 6.310% 09/25/2003 557,946 548,377
BankBoston Commercial Loan
Master LLC, Ser. 1998-1A,
Class B1 (FRN) - 144A(a) 6.921% 02/16/2006 2,800,000 2,801,750
Case Equipment Loan Trust,
Ser. 1998-A, Class A4 5.830% 02/15/2005 4,000,000 3,943,400
CIT Marine Trust, Ser. 1999-A,
Class A2 5.800% 04/15/2010 1,250,000 1,204,562
CIT RV Trust, Ser. 1997-A,
Class A4 6.200% 10/16/2006 373,797 373,715
Contimortgage Home Equity Loan
Trust, Ser. 1998-3, Class A10 5.840% 05/15/2016 4,000,000 3,929,120
Copelco Capital Funding Corp.,
Ser. 1998-A, Class A3 5.780% 08/15/2001 2,000,000 1,993,720
EQCC Home Equity Loan Trust,
Ser. 1999-1, Class A2F 5.765% 06/20/2015 5,000,000 4,898,600
First USA Credit Card Master
Trust, Ser. 1994-6, Class B
(FRN) 7.018% 10/15/2003 3,000,000 3,007,920
GMAC Home Equity Loan Trust,
Ser. 1998-1, Class A (FRN) -
144A(a) 6.633% 03/15/2024 1,316,529 1,309,946
Green Tree Home Equity Loan
Trust, Ser. 1998-A, Class A2 6.040% 06/15/2029 1,310,629 1,306,933
Green Tree Home Equity Loan
Trust, Ser. 1999-A, Class B1 8.970% 11/15/2027 1,750,000 1,726,532
Leaf Master Trust I, Ser.
1999-1, Class C1 (FRN) -
144A(a) 7.671% 02/15/2007 1,750,000 1,745,078
MBNA Master Credit Card Trust,
Ser. 1996-D, Class B (FRN) 6.753% 09/15/2003 3,000,000 3,000,990
Metris Master Trust, Ser.
1998-1A, Class C (FRN) -
144A(a) 6.443% 08/20/2005 2,250,000 2,202,539
Norwest Asset Securities
Corporation, Ser. 1999-16,
Class A1 6.000% 06/25/2029 4,000,000 3,927,360
Providian Master Trust, Ser.
1999-2, Class A 6.600% 04/15/2007 3,000,000 2,976,510
Rental Car Finance Corp., Ser.
1997-1, Class A1 - 144A(a) 6.250% 06/25/2003 1,500,000 1,486,758
Saxon Asset Securities Trust,
Ser. 1998-1, Class MF1 7.050% 12/25/2027 2,000,000 1,945,060
Sears Credit Account Master
Trust, Ser. 1999-2, Class A 6.350% 02/16/2007 3,000,000 2,964,840
SMS Student Loan Trust, Ser.
1999-A, Class A1 (FRN) 6.304% 07/28/2006 1,000,000 1,001,080
Toyota Auto Lease Trust, Ser.
1998-B, Class A1 5.450% 03/25/2003 3,000,000 2,958,900
Vendee Mortgage Trust, Ser.
1998-1, Class 2A 7.000% 11/15/2014 1,152,244 1,152,924
------------
Total (Cost - $56,439,376) 55,819,647
------------
CORPORATE OBLIGATION - 1.0%
Chase Manhattan Corp. (MTN)
(Cost - $1,001,935) 6.450% 03/29/2001 1,000,000 994,298
------------
U.S. GOVERNMENT AGENCY AND TREASURY OBLIGATIONS - 16.9%
FHLB, Ser. 136 5.875% 09/17/2001 5,000,000 4,944,850
U.S. Treasury Note 5.875% 10/31/2001 7,700,000 7,649,473
U.S. Treasury Note 6.000% 08/15/2004 4,400,000 4,331,250
------------
Total (Cost - $17,007,475) 16,925,573
------------
</TABLE>
20
<PAGE>
FFTW FUNDS, INC.
LIMITED DURATION PORTFOLIO - SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
COUPON FACE
RATE MATURITY AMOUNT VALUE
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED OBLIGATIONS - 31.8%
FHLMC Pool #B00462 9.500% 03/01/2002 $ 791,422 $ 802,471
FHLMC Pool #292264 6.500% 12/01/2002 122,929 116,271
FHLMC Ser. 1869, Class TF
(FRN) 7.100% 07/15/2023 569,374 570,120
FHLMC Ser. 1873, Class C 7.000% 06/15/2008 661,939 662,879
FHLMC Ser. 2034, Class PC 6.000% 11/15/2018 5,300,000 5,199,830
FNMA Ser. 1992-177, Class CB 7.500% 02/25/2021 5,207,000 5,232,827
FNMA Ser. 1993-35, Class G 6.500% 07/25/2006 4,000,000 3,972,760
FNMA Ser. 1994-13, Class PE 5.800% 12/25/2006 2,928,974 2,910,960
FNMA Ser. 1994-79, Class B 7.000% 12/25/2019 2,000,000 1,992,800
FNMA Ser. 1996-70, Class PD 6.250% 07/25/2018 6,000,000 5,917,800
FNMA Ser. 1997-39, Class PB 7.250% 01/20/2019 3,000,000 3,001,620
GNMA Ser. 1998, Class F (FRN) 6.961% 07/16/2028 1,513,349 1,493,648
------------
Total (Cost - $32,078,619) 31,873,986
------------
TOTAL LONG-TERM INVESTMENTS
(COST - $106,527,405) 105,613,504
------------
SHORT-TERM INVESTMENTS - 0.8%
Investors Bank & Trust Company
Cash Sweep 5.000% 01/03/2000 440,000 440,000
U.S. Treasury Bill* 5.230% 05/04/2000 400,000 392,775
------------
Total (Cost - $832,794) 832,775
------------
TOTAL INVESTMENTS - 106.3%
(COST - $107,360,199) 106,446,279
------------
LIABILITIES, NET OF OTHER
ASSETS - (6.3%) (6,341,282)
------------
NET ASSETS - 100.0% $100,104,997
============
</TABLE>
<TABLE>
<CAPTION>
Summary of Abbreviations
- ------------------------
<S> <C>
FHLB Federal Home Loan Bank
FHLMC Federal Home Loan Mortgage Corp.
FNMA Federal National Mortgage Association
FRN Floating Rate Note
GNMA Government National Mortgage Association
MTN Medium-Term Note
</TABLE>
* Interest rate shown represents yield to maturity at date of purchase.
(a) Security exempt from registration under Rule 144A of the Securities Act of
1933. This security may be sold in transactions exempt from registration,
normally to qualified institutional buyers. At December 31, 1999, these
securities were valued at $10,094,448 or 10.1% of net assets.
See Notes to Financial Statements.
21
<PAGE>
FFTW FUNDS, INC.
MORTGAGE-BACKED PORTFOLIO - SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
COUPON FACE
RATE MATURITY AMOUNT VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LONG-TERM INVESTMENTS - 166.8%
ASSET-BACKED SECURITIES - 23.5%
Advanta Mortgage Loan Trust,
Ser. 1997-1,
Class B1A (FRN) 7.450% 05/25/2027 $ 5,000,000 $ 4,876,172
American Residential Eagle
Certificate Trust,
Ser. 1998-1,
Class M1 (FRN) 5.909% 05/25/2028 6,000,000 5,966,250
Chase Credit Card Master
Trust, Ser. 1997-2, Class A 6.300% 04/15/2003 8,565,000 8,557,291
CIT Group Home Equity Loan
Trust, Ser. 1998-1,
Class M1 6.440% 11/15/2027 4,000,000 3,787,120
EQCC Home Equity Loan Trust,
Ser. 1997-3, Class A7 6.930% 02/15/2029 10,700,000 10,192,285
Ford Credit Auto Owner Trust,
Ser. 1998-C, Class C 6.300% 04/15/2003 5,500,000 5,346,715
MBNA Master Credit Card Trust,
Ser. 1999-A, Class C 6.650% 07/17/2006 5,000,000 4,810,937
Saxon Asset Securities Trust,
Series 1998-1, Class MF1 7.050% 12/25/2027 3,696,000 3,594,471
Saxon Asset Securities Trust,
Series 1998-2, Class MF1 6.690% 11/01/2005 6,691,000 6,224,198
Tribeca Mortgage Fund I,
Ser. 1999-1, Class A1 (FRN) 6.604% 02/18/2004 10,000,000 9,993,750
Westpac Securitisation Trust,
Ser. 1998-1G,
Class A (FRN) 6.333% 07/19/2029 6,727,714 6,672,042
--------------
Total (Cost - $71,854,479) 70,021,231
--------------
COLLATERALIZED MORTGAGE OBLIGATIONS (AGENCY) (CMOS) - 12.8%
FHLMC, Ser. 42, Class C 9.000% 06/15/2020 4,852,147 4,991,384
FHLMC, Ser. 1506, Class FD
(FRN) 7.500% 05/15/2008 4,113,665 4,138,779
FHLMC, Ser. 1511, Class L 6.000% 05/15/2008 6,285,679 5,819,093
FHLMC, Ser. 1614, Class K 10.000% 06/15/2020 1,486,096 1,519,646
FHLMC, Ser. 2141, Class FC
(FRN) 6.763% 04/15/2019 8,547,659 8,417,914
FNMA Grantor Trust,
Ser. 1999-20, Class A2 (FRN) 7.281% 04/28/2029 8,989,655 8,981,227
FNMA, Ser. G1993-10, Class H 5.000% 08/25/2022 4,800,000 4,358,208
--------------
Total (Cost - $37,968,002) 38,226,251
--------------
COLLATERALIZED MORTGAGE OBLIGATIONS (NON-AGENCY) (CMOS) - 38.5%
Beneficial Residential
Mortgage Corp., Ser. 1995-1,
Class A1 (FRN) 6.710% 03/28/2025 1,579,143 1,579,143
Beneficial Residential
Mortgage Corp., Ser. 1996-1,
Class A (FRN) 6.670% 04/28/2026 847,358 847,163
Chase Commercial Mortgage
Securities Corp.,
Ser. 1997-2, Class C 6.600% 12/19/2007 7,000,000 6,498,030
Chase Commercial Mortgage
Securities Corp.,
Ser. 1998-1, Class A2 6.560% 05/18/2008 11,700,000 11,088,336
</TABLE>
22
<PAGE>
FFTW FUNDS, INC.
MORTGAGE-BACKED PORTFOLIO - SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
COUPON FACE
RATE MATURITY AMOUNT VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS (NON-AGENCY) (CMOS) (CONTINUED)
Chase Commercial Mortgage
Securities Corp.,
Ser. 1998-1, Class C 6.560% 05/18/2008 $ 5,000,000 $ 4,612,330
Enterprise Commercial
Mortgage, Ser. 1999-1,
Class A1 6.420% 09/15/2008 7,116,667 6,795,420
Enterprise Commercial
Mortgage, Ser. 1999-1,
Class A2 6.900% 04/15/2013 6,000,000 5,534,063
First Union-Chase Commercial
Mortgage Trust,
Ser. 1999-C1 Class A1 5.730% 10/15/2035 4,717,525 4,445,678
First Union-Chase Commercial
Mortgage Trust,
Ser. 1999-C1 Class A2 6.070% 10/15/2008 5,000,000 4,570,580
First Union-Lehman Brothers
Commercial Mortgage,
Ser. 1997-C2, Class A3 6.650% 06/18/2008 5,300,000 5,057,366
GE Residential Capital
Mortgage Services Inc.,
Ser. 1998-13, Class A12 (FRN) 5.990% 08/25/2028 7,484,253 7,276,416
MLCC Mortgage Investors, Inc.,
Ser. 1995-B, Class A (FRN) 5.838% 10/15/2020 11,844,629 11,886,677
Morgan Stanley Commercial
Capital 1, Ser. 1998-WF2,
Class A1 6.340% 11/15/2007 9,046,254 8,745,466
Morgan Stanley Commercial
Capital 1, Ser. 1998-WF2,
Class A2 6.540% 05/15/2008 7,072,000 6,678,302
Morgan Stanley Commercial
Capital 1, Ser. 1998-WF2,
Class C 6.770% 07/15/2030 6,000,000 5,605,920
Morgan Stanley Commercial
Capital 1, Ser. 1999-WF1,
Class A2 6.210% 09/15/2008 8,100,000 7,459,047
Prudential Home Mortgage
Securities, Ser. 1993-13,
Class A3 (FRN) 6.088% 04/25/2008 4,783,543 4,794,784
Residential Funding Mortgage
Securitization I,
Ser. 1999-S20, Class A1 6.500% 09/25/2014 11,707,564 11,250,384
--------------
Total (Cost - $118,013,201) 114,725,105
--------------
INTEREST ONLY OBLIGATIONS (IOS) - 11.7% (a)*
DLJ Commercial Mortgage Corp.,
Ser. 1998-CG1, Class S 8.244% 05/10/2023 6,119,605 5,546,690
FHLMC IO, Ser. 188, Class IO 12.375%-24.245% 10/01/2027 608,815 969,624
FHLMC IO, Ser. 192, Class IO 13.418%-13.782% 02/01/2028 1,303,592 1,585,871
FHLMC IO, Ser. 195, Class IO 11.765%-13.668% 04/01/2028 2,398,961 2,672,782
FHLMC IO, Ser. 202, Class IO 12.533% 04/01/2029 317,202 368,353
FHLMC IO, Ser. 203, Class IO 10.744% 05/01/2029 845,953 907,704
FHLMC IO, Ser. 2085, Class PI 13.249% 11/15/2026 552,573 557,594
FHLMC IO, Ser. 2113, Class MI 17.616% 04/15/2024 1,480,704 1,578,250
First Union-Lehman Brothers -
Bank of America,
Ser. 1998-C2, Class IO 8.503% 05/18/2028 4,439,153 3,968,058
</TABLE>
23
<PAGE>
FFTW FUNDS, INC.
MORTGAGE-BACKED PORTFOLIO - SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
COUPON FACE
RATE MATURITY AMOUNT VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST ONLY OBLIGATIONS (IOS) (CONTINUED)
First Union-Lehman Brothers
Commercial Mortgage,
Ser. 1997-C1, Class IO 10.697% 04/18/2027 $ 3,682,368 $ 3,468,115
FNMA IO, Ser. 231, Class 2 10.249% 07/01/2023 2,584,025 2,599,931
FNMA IO, Ser. 254, Class 2 11.291%-11.839% 01/01/2024 854,295 907,499
FNMA IO, Ser. 1992-148,
Class C 0.216%-3.669% 04/25/2019 200,982 122,666
FNMA IO, Ser. 1998-52,
Class PI 16.242% 03/25/2022 604,545 653,419
FNMA IO, Ser. 1999-5,
Class PU 8.663% 04/25/2018 259,825 265,198
Prudential Home Mortgage
Securities, Ser. 1994-30,
Class A11 12.045%-14.255% 10/25/2024 439,724 195,919
Residential Accredited Loans
Inc., Ser. 1997-QS13,
Class A12 43.701% 12/25/2027 1,424,449 3,299,576
Vendee Mortgage Trust IO,
Ser. 1992-2, Class IO 3.091%-16.679% 09/15/2022 1,023,522 1,086,769
Vendee Mortgage Trust IO,
Ser. 1994-2, Class 3 IO 9.118%-19.331% 06/15/2024 258,073 256,565
Vendee Mortgage Trust IO,
Ser. 1994-3A, Class 1 IO 8.235%-18.080% 09/15/2024 900,589 831,354
Vendee Mortgage Trust IO,
Ser. 1994-3B, Class 2 IO 3.215%-15.752% 09/15/2024 332,880 311,350
Vendee Mortgage Trust IO,
Ser. 1996-1, Class 1 IO 6.809%-19.766% 02/15/2026 2,514,808 2,374,831
Vendee Mortgage Trust IO,
Ser. 1996-2, Class 1 IO 7.933%-9.841% 06/15/2026 324,579 306,926
Vendee Mortgage Trust IO,
Ser. 1998-2, Class 1 IO 9.955% 06/15/2028 137,780 162,198
--------------
Total (Cost - $33,609,002) 34,997,242
--------------
MORTGAGE POOLS - 0.1%
FNMA Pool #340777 6.500% 03/01/2011 11,770 11,467
GNMA Pool #000017 8.000% 08/15/2000 1,416 1,423
GNMA Pool #359157 7.500% 10/15/2023 256,407 255,064
--------------
Total (Cost - $269,880) 267,954
--------------
MORTGAGE TBAS - 72.7%
FHLMC Gold TBA 6.500% 01/01/2030 22,000,000 20,748,750
FHLMC TBA 7.500% 01/01/2030 3,000,000 2,970,936
FNMA TBA 6.500% 01/01/2014 17,000,000 16,495,304
FNMA TBA 6.500% 01/01/2029 67,000,000 63,147,500
FNMA TBA 7.000% 01/01/2029 4,000,000 3,867,500
FNMA TBA 7.500% 01/01/2029 51,000,000 50,442,162
GNMA TBA 7.500% 01/01/2029 19,000,000 18,792,178
GNMA TBA 8.000% 01/25/2030 40,000,000 40,400,000
--------------
Total (Cost - $220,040,627) 216,864,330
--------------
</TABLE>
24
<PAGE>
FFTW FUNDS, INC.
MORTGAGE-BACKED PORTFOLIO - SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
COUPON FACE
RATE MATURITY AMOUNT VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PRINCIPAL ONLY OBLIGATIONS (POS) - 2.8% (a)*
FNMA PO, Ser. 1993-157,
Class E 5.952%-9.028% 05/25/2022 $ 3,375,284 $ 3,442,984
FNMA PO, Ser. 1993-159,
Class PA 6.576%-7.122% 01/25/2021 139,143 138,898
FNMA PO, Ser. 1993-222,
Class D 4.498% 07/25/2023 2,431,222 2,041,990
FNMA PO, Ser. 1994-9, Class D 4.152% 11/25/2023 1,686,603 1,438,059
FNMA PO, Ser. 1996-45,
Class N 4.651% 06/25/2023 1,373,805 1,254,616
--------------
Total (Cost - $9,006,057) 8,316,547
--------------
U.S. TREASURY OBLIGATION - 4.7%
U.S. Treasury Note
(Cost - $14,300,411) 6.000% 08/15/2009 14,570,000 14,114,687
--------------
<CAPTION>
LONG OPTIONS - 0.0% STRIKE EXPIRATION CONTRACTS
3 month LIBOR cap 8.000% 11/14/2001 22 31,208
<S> <C> <C> <C> <C>
3 month LIBOR cap 8.500% 11/14/2002 38 134,097
U.S. Treasury, Mar. 2000
10-Year 100 02/19/2000 116 9,063
--------------
Total (Cost - $228,798) 174,368
--------------
TOTAL LONG-TERM INVESTMENTS
(COST - $505,290,457) 497,707,715
--------------
<CAPTION>
COUPON FACE
SHORT-TERM INVESTMENTS - 11.4% RATE MATURITY AMOUNT
<S> <C> <C> <C> <C>
Investors Bank & Trust Company
Cash Sweep 5.000% 01/03/2000 $17,510,000 17,510,000
U.S. Treasury Bill* 4.815% 02/17/2000 11,900,000 11,825,768
U.S. Treasury Bill*@ 5.230% 05/04/2000 4,650,000 4,566,007
--------------
Total (Cost - $33,901,427) 33,901,775
--------------
TOTAL INVESTMENTS - 178.2%
(COST - $539,191,884) 531,609,490
--------------
LIABILITIES, NET OF OTHER
ASSETS - (78.2%) (233,344,292)
--------------
NET ASSETS - 100.0% $ 298,265,198
==============
</TABLE>
25
<PAGE>
FFTW FUNDS, INC.
MORTGAGE-BACKED PORTFOLIO - SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
Summary of Abbreviations
- ------------------------
<S> <C>
FHLMC Federal Home Loan Mortgage Corp.
FNMA Federal National Mortgage Association
FRN Floating Rate Note
GNMA Government National Mortgage Association
LIBOR London Interbank Offered Rate
TBA To Be Announced - Security is subject to delayed delivery.
</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) Face amount shown represents amortized cost.
See Notes to Financial Statements.
26
<PAGE>
FFTW FUNDS, INC.
GLOBAL TACTICAL EXPOSURE PORTFOLIO - SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
COUPON FACE
RATE MATURITY AMOUNT (A) VALUE
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LONG-TERM INVESTMENTS - 83.5%
ASSET- AND MORTGAGE-BACKED SECURITIES - 24.5%
JAPAN - 6.5%
Card Loan Investment
Opportunities, Ser. 1,
Class 1 (FRN) 4.035% 09/28/2003 EUR 1,800,000 $ 1,814,231
J-Shop Corp., Ser. II, Class 1
(FRN) 1.041% 01/13/2003 JPY 500,000,000 4,908,441
Oscar Funding Corp., Ser. 4,
Class 2 (FRN) 3.972% 05/10/2004 EUR 1,805,017 1,819,470
------------
8,542,142
------------
NETHERLANDS - 1.1%
European Mortgage Securities
B.V., Ser. III,
Class A2 (FRN) 5.875% 09/29/2049 EUR 1,500,000 1,495,395
------------
UNITED KINGDOM - 5.0%
Chester Asset Receivables Deal
5 6.625% 03/17/2008 GBP 3,840,000 6,127,964
Hexagon Funding Ltd., Ser. 1X,
Class 2 (FRN) 3.918% 01/26/2004 EUR 461,812 465,277
------------
6,593,241
------------
UNITED STATES - 11.9%
Capital Credit Card Corp.,
Ser. 1996, Class A 5.625% 08/15/2001 DEM 6,000,000 3,138,174
Chase Credit Card Master
Trust, Ser. 1998-1, Class A3 5.125% 02/15/2005 NLG 5,200,000 2,336,854
Chase Credit Card Master
Trust, Ser. 1998-4, Class A 5.000% 08/15/2008 DEM 3,700,000 1,778,597
Citibank Credit Card Master
Trust, Ser. 1999-6,
Class A - 144A(b) 4.500% 08/25/2004 EUR 4,500,000 4,424,557
GMAC Swift Trust, Ser. 1999-1
- 144A(b) 5.000% 01/18/2005 EUR 4,000,000 4,016,319
------------
15,694,501
------------
Total (Cost - $33,530,135) 32,325,279
------------
CORPORATE OBLIGATIONS - 12.2%
CANADA - 1.2%
GMAC Canada Ltd. 5.125% 12/23/2003 DEM 3,000,000 1,550,802
------------
</TABLE>
27
<PAGE>
FFTW FUNDS, INC.
GLOBAL TACTICAL EXPOSURE PORTFOLIO - SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
COUPON FACE
RATE MATURITY AMOUNT (A) VALUE
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FRANCE - 0.8%
Suez Lyonnaise des Eaux SA 5.875% 10/13/2009 EUR 1,070,000 $ 1,053,461
------------
PORTUGAL - 0.6%
Caixa Geral de Depositos
Finance (MTN) 6.250% 10/12/2009 EUR 790,000 784,552
------------
SPAIN - 0.5%
BSCH Issuance Ltd. 5.125% 07/06/2009 EUR 660,000 608,127
------------
SWEDEN - 0.8%
Investor AB 5.250% 06/30/2008 EUR 1,085,004 1,072,343
------------
UNITED KINGDOM - 5.6%
Argyll Group 8.125% 10/04/2002 GBP 308,000 505,063
B.A.T. International Finance
Plc 5.375% 07/28/2006 DEM 3,100,000 1,538,000
Coca-Cola Enterprises Great
Britain (MTN) 6.750% 03/12/2008 GBP 500,000 797,871
Gallagher Group Plc 5.875% 08/06/2008 DEM 2,332,000 1,132,289
Glaxo Wellcome Plc 8.750% 12/01/2005 GBP 608,000 1,075,242
Hilton Group Finance Plc (MTN) 5.000% 07/27/2004 EUR 1,085,000 1,055,664
Pearson Plc 4.625% 07/08/2004 EUR 1,327,000 1,284,174
------------
7,388,303
------------
UNITED STATES - 2.7%
Enron Corp. 4.375% 04/08/2005 EUR 1,307,000 1,228,353
Fort James Corp. 4.750% 06/29/2004 EUR 1,504,000 1,446,523
General Motors Acceptance
Corp. 4.000% 02/09/2006 EUR 500,000 462,893
John Hancock Global Funding
Corp. 5.375% 06/10/2008 DEM 850,000 419,357
------------
3,557,126
------------
Total (Cost - $17,634,743) 16,014,714
------------
SOVEREIGN DEBT OBLIGATIONS - 46.5%
AUSTRALIA - 7.1%
Australian Government Bond 9.000% 09/15/2004 AUD 13,000,000 9,341,280
------------
</TABLE>
28
<PAGE>
FFTW FUNDS, INC.
GLOBAL TACTICAL EXPOSURE PORTFOLIO - SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
COUPON FACE
RATE MATURITY AMOUNT (A) VALUE
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CANADA - 2.4%
Canadian Government Bond 5.000% 09/01/2004 CAD 4,700,000 $ 3,100,450
------------
CROATIA - 0.6%
Croatian Government Bond, Ser.
B (FRN) 6.456% 07/31/2006 865,440 791,878
------------
DENMARK - 1.9%
Kingdom of Denmark Bond 7.000% 11/10/2024 DKK 16,800,000 2,528,266
------------
GERMANY - 17.2%
Bundesobligation, Ser. 130 3.250% 02/17/2004 EUR 20,000,000 19,066,980
Bundesrepublic Deutschland
Bond 4.125% 07/04/2008 EUR 261,951 243,256
Bundesrepublic Deutschland
Bond 4.750% 07/04/2028 EUR 4,000,000 3,365,984
Bundesrepublic Deutschland
Bond 6.250% 01/04/2024 EUR 96 100
------------
22,676,320
------------
ITALY - 3.2%
Buoni Poliennali del Tesoro 4.500% 05/01/2009 EUR 4,500,000 4,190,188
------------
MULTI-NATIONAL - 4.1%
European Investment Bank 5.500% 12/07/2009 GBP 3,547,000 5,402,705
------------
SPAIN - 0.3%
Spanish Government Bond 6.000% 01/31/2008 EUR 370,716 386,022
------------
SWEDEN - 4.0%
Swedish Government Bond 8.000% 08/15/2007 SEK 39,100,000 5,241,003
------------
UNITED KINGDOM - 5.7%
UK Treasury Note 6.500% 12/07/2003 GBP 1,100,000 1,796,650
UK Treasury Bond 5.750% 12/07/2009 GBP 1,100,000 1,814,074
UK Treasury Bond 6.000% 12/07/2028 GBP 2,000,000 3,953,842
------------
7,564,566
------------
Total (Cost - $63,256,598) 61,222,678
------------
</TABLE>
29
<PAGE>
FFTW FUNDS, INC.
GLOBAL TACTICAL EXPOSURE PORTFOLIO - SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
COUPON FACE
RATE MATURITY AMOUNT (A) VALUE
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. TREASURY OBLIGATION - 0.3%
U.S. Treasury Bond
(Cost - $476,530) 6.125% 11/15/2027 500,000 $ 465,000
------------
TOTAL LONG-TERM INVESTMENTS
(COST - $114,898,006) 110,027,671
------------
SHORT-TERM INVESTMENTS - 13.8%
Investors Bank & Trust Company
Cash Sweep 5.000% 01/03/2000 14,421,000 14,421,000
U.S. Treasury Bill*@ 4.850% 05/25/2000 3,800,000 3,718,338
------------
Total (Cost - $18,146,612) 18,139,338
------------
TOTAL INVESTMENTS - 97.3%
(COST - $133,044,618) 128,167,009
------------
OTHER ASSETS, NET OF
LIABILITIES - 2.7% 3,576,861
------------
NET ASSETS - 100.0% $131,743,870
============
</TABLE>
<TABLE>
<CAPTION>
Summary of Abbreviations
- ------------------------
<S> <C>
AUD Australian Dollar
CAD Canadian Dollar
DEM German Deutschemark
DKK Danish Krone
EUR European Monetary Unit (Euro)
FRN Floating Rate Note
GBP Great British Pound
JPY Japanese Yen
MTN Medium-Term Note
NLG Netherlands Guilder
SEK Swedish Krona
</TABLE>
* Coupon rate represents yield to maturity at the time 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.
(b) Security exempt from registration under Rule 144A of Securities Act of
1933. This security may be sold in transactions exempt from registration,
normally to qualified institutional buyers. At December 31, 1999, these
securities were valued at $8,440,876 or 6.4% of net assets.
See Notes to Financial Statements.
30
<PAGE>
FFTW FUNDS, INC.
WORLDWIDE PORTFOLIO - SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
COUPON FACE
RATE MATURITY AMOUNT (A) VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LONG-TERM INVESTMENTS - 78.8%
ASSET- AND MORTGAGE-BACKED SECURITIES - 23.7%
GERMANY - 1.1%
CORE, Ser. 1998-1X,
Class A-2A (FRN) 3.466% 01/15/2006 DEM 912,192 $ 468,299
CORE, Ser. 1999-1X,
Class A-3A (FRN) 3.666% 03/17/2009 EUR 300,000 302,100
-----------
770,399
-----------
JAPAN - 3.6%
Card Loan Investment
Opportunities, Ser. 1,
Class 1 (FRN) 4.035% 09/28/2003 EUR 200,000 201,581
Lumiere Funding Corp., Ser.
1A,
Class 1 (FRN) - 144A(b) 6.869% 07/10/2003 125,540 125,204
Lumiere Funding Corp., Ser.
1X, Class 1 (FRN) 6.869% 07/10/2003 251,080 251,180
Maestro Securitisation Corp.,
Ser. 1, Class 1 (FRN) 6.879% 07/10/2005 875,077 875,602
Oscar Funding Corp., Ser. 2,
Class 1 (FRN) 6.809% 08/10/2003 172,608 172,643
Oscar Funding Corp., Ser. 3,
Class 1 (FRN) 7.069% 12/10/2003 265,612 266,329
Oscar Funding Corp., Ser. 4,
Class 2 (FRN) 3.972% 05/10/2004 EUR 235,437 237,322
Soleil Funding Corp., Ser. 1,
Class 1 (FRN) 7.219% 08/10/2004 331,550 333,440
-----------
2,463,301
-----------
UNITED KINGDOM - 3.0%
Chester Asset Receivables Deal
3 (FRN) 5.836% 11/17/2003 GBP 300,000 483,062
Chester Asset Receivables Deal
5 6.625% 03/17/2008 GBP 500,000 797,912
Hexagon Funding Limited, Ser.
1X, Class 2 (FRN) 3.918% 01/26/2004 EUR 115,453 116,319
Higher Education Securitised
Investments (The), Ser. 1X,
Class A1 (FRN) 5.856% 04/10/2028 GBP 421,558 678,256
-----------
2,075,549
-----------
UNITED STATES - 16.0%
Amethyst Funding Corp., Ser.
2, Class 1 (FRN) 6.806% 01/02/2004 1,249,707 1,249,707
Block Mortgage Finance Inc.,
Ser. 1999-1,
Class A7 (FRN) 5.830% 04/25/2016 1,000,000 980,050
Capital Credit Card Corp.,
Ser. 1996, Class A 5.625% 08/15/2001 DEM 900,000 470,726
Chase Commercial Mortgage
Securities Corp.,
Ser. 1998-1, Class A2 6.560% 05/18/2008 350,000 331,702
Chase Commercial Mortgage
Securities Corp.,
Ser. 1998-2, Class A1 6.025% 08/18/2007 465,443 442,655
Citibank Credit Card Master
Trust I, Ser. 1997-5,
Class A 5.750% 07/16/2007 DEM 1,300,000 671,489
</TABLE>
31
<PAGE>
FFTW FUNDS, INC.
WORLDWIDE PORTFOLIO - SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
COUPON FACE
RATE MATURITY AMOUNT (A) VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
UNITED STATES (CONTINUED)
Citibank Credit Card Master
Trust, Ser. 1999-6,
Class A - 144A(b) 4.500% 08/25/2004 EUR 800,000 $ 786,588
DLJ Commercial Mortgage Corp.,
Ser. 1998-CG1, Class A1B 6.410% 05/10/2008 750,000 702,900
EQCC Home Equity Loan Trust,
Ser. 1999-1, Class A2F 5.765% 06/20/2015 600,000 587,832
First Union Commercial
Mortgage Trust, Ser. 1999-C1,
Class A1 5.730% 10/15/2035 471,753 444,568
FNMA-ACES, Ser. 1997-M5,
Class C 6.740% 08/25/2007 600,000 576,678
GMAC Commercial Mortgage
Securities Inc.,
Ser. 1998-C2, Class A1 6.150% 11/15/2007 370,721 354,050
GMAC Swift Trust, Ser. 1999-1
- 144A(b) 5.000% 01/18/2005 EUR 600,000 602,448
MCL Auto Loan Funding Corp.,
Ser. 1, Class 1 (FRN) 7.019% 09/10/2003 624,504 625,753
Nationslink Funding Corp.,
Ser. 1998-2, Class A2 6.476% 07/20/2008 270,000 253,284
Navistar Financial Corp.
Owners Trust, Ser. 1999-A,
Class A4 6.130% 10/15/2005 1,400,000 1,375,052
New South Home Equity Trust,
Ser. 1999-2, Class A4 (FRN) 7.590% 04/25/2030 500,000 499,907
-----------
10,955,389
-----------
Total (Cost - $16,922,046) 16,264,638
-----------
CORPORATE OBLIGATIONS - 6.5%
CANADA - 0.7%
GMAC Canada Ltd. 5.125% 12/23/2003 DEM 900,000 465,241
-----------
FRANCE - 0.4%
Suez Lyonnaise des Eaux SA 5.875% 10/13/2009 EUR 300,000 295,363
-----------
PORTUGAL - 0.2%
Caixa Geral de Depositos
Finance (MTN) 6.250% 10/12/2009 EUR 150,000 148,965
-----------
SPAIN - 0.2%
BSCH Issuance Ltd. 5.125% 07/06/2009 EUR 130,000 119,783
-----------
SWEDEN - 0.6%
Investor AB 5.250% 06/30/2008 EUR 409,033 404,260
-----------
UNITED KINGDOM - 2.5%
Argyll Group 8.125% 10/04/2002 GBP 113,000 185,299
</TABLE>
32
<PAGE>
FFTW FUNDS, INC.
WORLDWIDE PORTFOLIO - SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
COUPON FACE
RATE MATURITY AMOUNT (A) VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
UNITED KINGDOM (CONTINUED)
B.A.T. International Finance
Plc 4.875% 02/25/2009 EUR 148,000 $ 133,572
B.A.T. International Finance
Plc 5.375% 07/28/2006 DEM 600,000 297,677
Coca-Cola Enterprises Great
Britain (MTN) 6.750% 03/12/2008 GBP 140,000 223,404
Glaxo Wellcome Plc 8.750% 12/01/2005 GBP 224,000 396,142
Hilton Group Finance Plc (MTN) 5.000% 07/27/2004 EUR 283,000 275,348
Pearson Plc 4.625% 07/08/2004 EUR 246,000 238,061
-----------
1,749,503
-----------
UNITED STATES - 1.9%
Bank of America Corp. 5.875% 02/15/2009 150,000 133,606
Commercial Credit Co. 6.500% 08/01/2004 250,000 242,365
Finova Capital Corp. 7.250% 11/08/2004 236,000 233,413
Fort James Corp. 4.750% 06/29/2004 EUR 138,000 132,726
General Motors Acceptance
Corp. 4.000% 02/09/2006 EUR 275,000 254,591
Household Finance Corp. 6.000% 05/01/2004 156,000 148,128
John Hancock Global Funding
Corp. 5.375% 06/10/2008 DEM 160,000 78,938
May Department Stores Co. 5.950% 11/01/2008 80,000 72,629
-----------
1,296,396
-----------
Total (Cost - $4,928,142) 4,479,511
-----------
SOVEREIGN DEBT OBLIGATIONS - 28.0%
CANADA - 1.7%
Canadian Government Bond 5.500% 06/01/2009 CAD 1,780,000 1,167,555
-----------
DENMARK - 1.0%
Kingdom of Denmark Bond 7.000% 11/10/2024 DKK 4,400,000 662,165
-----------
FRANCE - 1.2%
France O.A.T. 6.000% 10/25/2025 EUR 800,000 806,442
-----------
GERMANY - 5.0%
Bundesrepublic Deutschland
Bond 3.750% 01/04/2009 EUR 2,500,000 2,243,215
Bundesrepublic Deutschland
Bond 4.750% 07/04/2028 EUR 300,000 252,449
Bundesrepublic Deutschland
Bond 6.250% 01/04/2024 EUR 924,842 966,239
-----------
3,461,903
-----------
</TABLE>
33
<PAGE>
FFTW FUNDS, INC.
WORLDWIDE PORTFOLIO - SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
COUPON FACE
RATE MATURITY AMOUNT (A) VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ITALY - 3.4%
Buoni Poliennali del Tesoro 4.500% 05/01/2009 EUR 2,500,000 $ 2,327,882
-----------
JAPAN - 7.1%
Japanese Government Bond 1.500% 06/22/2009 JPY 76,000,000 718,276
Japanese Government Bond 1.800% 06/20/2008 JPY 412,000,000 4,128,652
-----------
4,846,928
-----------
MULTI-NATIONAL - 1.7%
European Investment Bank 5.500% 12/07/2009 GBP 118,000 179,735
International Bank for
Reconstruction & Development,
Ser. 791 5.500% 05/14/2003 AUD 1,600,000 1,009,626
-----------
1,189,361
-----------
NETHERLANDS - 2.5%
Bank Nederlandse Gemeenten
(MTN) 6.750% 10/03/2005 NLG 3,540,000 1,733,216
-----------
SWEDEN - 1.2%
Swedish Government Bond 8.000% 08/15/2007 SEK 6,100,000 817,650
-----------
UNITED KINGDOM - 3.2%
UK Treasury Bond 5.750% 12/07/2009 GBP 600,000 989,495
UK Treasury Bond 6.000% 12/07/2028 GBP 600,000 1,186,153
-----------
2,175,648
-----------
Total (Cost - $20,645,755) 19,188,750
-----------
U.S. GOVERNMENT AGENCY AND TREASURY OBLIGATIONS - 20.6%
FHLMC Global Bond 6.625% 09/15/2009 3,700,000 3,584,386
FNMA Global Bond 6.375% 06/15/2009 4,200,000 4,002,251
U.S. Treasury Note 6.000% 08/15/2004 4,790,000 4,715,156
U.S. Treasury Bond 6.125% 11/15/2027 1,490,000 1,385,700
U.S. Treasury Bond 8.125% 08/15/2019 380,000 432,962
-----------
Total (Cost - $14,448,959) 14,120,455
-----------
TOTAL LONG-TERM INVESTMENTS
(COST - $56,944,902) 54,053,354
-----------
</TABLE>
34
<PAGE>
FFTW FUNDS, INC.
WORLDWIDE PORTFOLIO - SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
COUPON FACE
RATE MATURITY AMOUNT (A) VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHORT-TERM INVESTMENTS - 26.0%
Investors Bank & Trust Company
Cash Sweep 5.000% 01/03/2000 17,313,000 $17,313,000
U.S. Treasury Bill*@ 4.850% 05/25/2000 500,000 489,255
-----------
Total (Cost - $17,803,212) 17,802,255
-----------
TOTAL INVESTMENTS - 104.8%
(COST - $74,748,114) 71,855,609
-----------
LIABILITIES, NET OF OTHER
ASSETS - (4.8%) (3,274,523)
-----------
NET ASSETS - 100.0% $68,581,086
===========
</TABLE>
<TABLE>
<CAPTION>
Summary of Abbreviations
- ------------------------
<S> <C>
ACES Adjustable Conversion-Rate Equity Security
AUD Australian Dollar
CAD Canadian Dollar
DEM German Deutschemark
DKK Danish Krone
EUR European Monetary Unit (Euro)
FHLMC Federal Home Loan Mortgage Corp.
FNMA Federal National Mortgage Association
FRN Floating Rate Note
GBP Great British Pound
JPY Japanese Yen
MTN Medium-Term Note
NLG Netherlands Guilder
SEK Swedish Krona
</TABLE>
* Coupon rate represents yield to maturity at the time 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.
(b) Security exempt from registration under Rule 144A of Securities Act of
1933. This security may be sold in transactions exempt from registration,
normally to qualified institutional buyers. At December 31, 1999, these
securities were valued at $1,514,240 or 2.2% of net assets.
See Notes to Financial Statements.
35
<PAGE>
FFTW FUNDS, INC.
WORLDWIDE-HEDGED PORTFOLIO - SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
COUPON FACE
RATE MATURITY AMOUNT (A) VALUE
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LONG-TERM INVESTMENTS - 81.1%
ASSET- AND MORTGAGE-BACKED SECURITIES - 28.7%
GERMANY - 0.9%
CORE, Ser. 1998-1X, Class A-2A
(FRN) 3.466% 01/15/2006 DEM 2,280,480 $ 1,170,748
CORE, Ser. 1999-1X, Class A-3A
(FRN) 3.666% 03/17/2009 EUR 400,000 402,800
------------
1,573,548
------------
JAPAN - 5.6%
Card Loan Investment
Opportunities, Ser. 1, Class
1 (FRN) 4.035% 09/28/2003 EUR 730,000 735,772
Lumiere Funding Corp., Ser.
1A,
Class 1 (FRN) - 144A(b) 6.869% 07/10/2003 502,160 500,814
Lumiere Funding Corp., Ser.
1X, Class 1 (FRN) 6.869% 07/10/2003 439,390 439,566
Maestro Securitisation Corp.,
Ser. 1, Class 1 (FRN) 6.879% 07/10/2005 2,625,231 2,626,806
Oscar Funding Corp., Ser. 1,
Class 1 (FRN) 6.749% 03/10/2003 892,002 891,913
Oscar Funding Corp., Ser. 2,
Class 1 (FRN) 6.809% 08/10/2003 632,896 633,023
Oscar Funding Corp., Ser. 3,
Class 1 (FRN) 7.069% 12/10/2003 929,642 932,152
Oscar Funding Corp., Ser. 4,
Class 2 (FRN) 3.972% 05/10/2004 EUR 784,790 791,074
R Funding Corp., Ser. 1X,
Class 1 (FRN) 7.026% 02/02/2004 1,585,768 1,589,415
Soleil Funding Corp., Ser. 1,
Class 1 (FRN) 7.219% 08/10/2004 1,077,539 1,083,681
------------
10,224,216
------------
NETHERLANDS - 0.3%
European Mortgage Securities
B.V., Ser. III, Class A2
(FRN) 5.875% 09/29/2049 EUR 500,000 498,465
------------
UNITED KINGDOM - 2.0%
Chester Asset Receivables Deal
3 (FRN) 5.368% 11/17/2003 GBP 400,000 644,083
Chester Asset Receivables Deal
5 6.625% 03/17/2008 GBP 1,100,000 1,755,406
Hexagon Funding Ltd., Ser. 1X,
Class 2 (FRN) 3.918% 01/26/2004 EUR 115,453 116,319
Higher Education Securitised
Investments (The),
Ser. 1X, Class A1 (FRN) 5.416% 04/10/2028 GBP 758,805 1,220,862
------------
3,736,670
------------
UNITED STATES - 19.9%
Advanta Mortgage Loan Trust,
Ser. 1998-2, Class A1 6.440% 05/25/2013 459,354 457,323
</TABLE>
36
<PAGE>
FFTW FUNDS, INC.
WORLDWIDE-HEDGED PORTFOLIO - SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
COUPON FACE
RATE MATURITY AMOUNT (A) VALUE
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
UNITED STATES (CONTINUED)
Amethyst Funding Corp., Ser.
2, Class 1 (FRN) 6.806% 01/02/2004 1,874,560 $ 1,874,560
BankBoston Home Equity Loan
Trust, Ser. 1998-1, Class A1 6.460% 04/25/2012 1,087,777 1,082,861
Block Mortgage Finance Inc.,
Ser. 1999-1,
Class A7 (FRN) 5.830% 04/25/2016 2,000,000 1,960,100
Capital Credit Card Corp.,
Ser. 1996, Class A 5.625% 08/15/2001 DEM 2,000,000 1,046,058
Chase Commercial Mortgage
Securities Corp.,
Ser. 1998-1, Class A2 6.560% 05/18/2008 550,000 521,247
Chase Commercial Mortgage
Securities Corp.,
Ser. 1998-2, Class A1 6.025% 08/18/2007 744,709 708,248
Chase Credit Card Master
Trust, Ser. 1998-4, Class A 5.000% 08/15/2008 DEM 1,600,000 769,123
Citibank Credit Card Master
Trust I, Ser. 1997-5,
Class A 5.750% 07/16/2007 DEM 2,900,000 1,497,937
Citibank Credit Card Master
Trust, Ser. 1999-6,
Class A - 144A(b) 4.500% 08/25/2004 EUR 2,300,000 2,261,440
Discover Card Master Trust I,
Ser. 1994-2,
Class A (FRN) 6.813% 10/16/2004 3,000,000 3,014,550
DLJ Commercial Mortgage Corp.,
Ser. 1998-CG1, Class A1B 6.410% 05/10/2008 1,250,000 1,171,500
EQCC Home Equity Loan Trust,
Ser. 1999-1,
Class A2F 5.765% 06/20/2015 3,700,000 3,624,964
First Union Commercial
Mortgage Trust, Ser. 1999-C1,
Class A1 5.730% 10/15/2035 707,629 666,852
FNMA-ACES, Ser. 1997-M5, Class
C 6.740% 08/25/2007 1,100,000 1,057,243
GMAC Commercial Mortgage
Securities Inc.,
Ser. 1998-C2, Class A1 6.150% 11/15/2007 648,761 619,587
GMAC Swift Trust, Ser. 1999-1
- 144A(b) 5.000% 01/18/2005 EUR 1,600,000 1,606,528
HFC Revolving Home Equity Loan
Trust,
Ser. 1996-1, Class A (FRN) 6.661% 07/20/2017 2,225,180 2,221,264
Ikon Receivables LLC, Ser.
1999-1, Class A4 6.230% 05/25/2008 2,275,000 2,219,191
MBNA American European
Structure Offering,
Ser. 1998, Class B 5.125% 04/19/2008 DEM 2,100,000 1,029,682
MCL Auto Loan Funding Corp.,
Ser. 1, Class 1 (FRN) 7.019% 09/10/2003 624,504 625,753
Nationslink Funding Corp.,
Ser. 1998-2, Class A2 6.476% 07/20/2008 470,000 440,902
Navistar Financial Corp.
Owners Trust, Ser. 1999-A,
Class A4 6.130% 10/15/2005 4,200,000 4,125,156
New South Home Equity Trust,
Ser. 1999-2,
Class A4 (FRN) 7.590% 04/25/2030 1,500,000 1,499,721
------------
36,101,790
------------
Total (Cost - $53,791,484) 52,134,689
------------
</TABLE>
37
<PAGE>
FFTW FUNDS, INC.
WORLDWIDE-HEDGED PORTFOLIO - SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
COUPON FACE
RATE MATURITY AMOUNT (A) VALUE
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CORPORATE OBLIGATIONS - 7.7%
CANADA - 0.4%
GMAC Canada Ltd. 5.125% 12/23/2003 DEM 1,500,000 $ 775,401
------------
FRANCE - 0.3%
Suez Lyonnaise des Eaux SA 5.875% 10/13/2009 EUR 500,000 492,271
------------
PORTUGAL - 0.2%
Caixa Geral de Depositos
Finance (MTN) 6.250% 10/12/2009 EUR 440,000 436,965
------------
SPAIN - 0.2%
BSCH Issuance Ltd. 5.125% 07/06/2009 EUR 370,000 340,920
------------
SWEDEN - 0.5%
Investor AB 5.250% 06/30/2008 EUR 971,454 960,118
------------
UNITED KINGDOM - 3.3%
Argyll Group 8.125% 10/04/2002 GBP 329,000 539,499
B.A.T. International Finance
Plc 4.875% 02/25/2009 EUR 1,171,000 1,056,842
B.A.T. International Finance
Plc 5.375% 07/28/2006 DEM 1,600,000 793,806
Coca-Cola Enterprises Great
Britain (MTN) 6.750% 03/12/2008 GBP 400,000 638,297
Gallagher Group Plc 5.875% 08/06/2008 DEM 600,000 291,326
Glaxo Wellcome Plc 8.750% 12/01/2005 GBP 649,000 1,147,751
Hilton Group Finance Plc (MTN) 5.000% 07/27/2004 EUR 813,000 791,018
Pearson Plc 4.625% 07/08/2004 EUR 698,000 675,473
------------
5,934,012
------------
UNITED STATES - 2.8%
Bank of America Corp. 5.875% 02/15/2009 450,000 400,819
Commercial Credit Co. 6.500% 08/01/2004 750,000 727,097
Enron Corp. 4.375% 04/08/2005 EUR 804,000 755,620
Exxon Capital Corp. 6.625% 08/15/2002 1,500,000 1,493,899
Finova Capital Corp. 7.250% 11/08/2004 636,000 629,028
Fort James Corp. 4.750% 06/29/2004 EUR 397,000 381,828
General Motors Acceptance
Corp. 4.000% 02/09/2006 EUR 100,000 92,579
Household Finance Corp. 6.000% 05/01/2004 446,000 423,494
</TABLE>
38
<PAGE>
FFTW FUNDS, INC.
WORLDWIDE-HEDGED PORTFOLIO - SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
COUPON FACE
RATE MATURITY AMOUNT (A) VALUE
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
UNITED STATES (CONTINUED)
John Hancock Global Funding
Corp. 5.375% 06/10/2008 DEM 450,000 $ 222,012
------------
5,126,376
------------
Total (Cost - $15,210,159) 14,066,063
------------
SOVEREIGN DEBT OBLIGATIONS - 21.9%
CANADA - 1.8%
Canadian Government Bond 5.500% 06/01/2009 CAD 5,050,000 3,312,445
------------
DENMARK - 0.5%
Kingdom of Denmark Bond 7.000% 11/15/2007 DKK 100,000 14,789
Kingdom of Denmark Bond 7.000% 11/10/2024 DKK 5,400,000 812,657
------------
827,446
------------
FRANCE - 0.3%
France O.A.T. 6.000% 10/25/2025 EUR 500,000 504,026
------------
GERMANY - 2.9%
Bundesrepublic Deutschland
Bond 4.750% 07/04/2028 EUR 5,100,000 4,291,630
Bundesrepublic Deutschland
Bond 6.250% 01/04/2024 EUR 960,976 1,003,990
------------
5,295,620
------------
ITALY - 0.6%
Buoni Poliennali del Tesoro 4.500% 05/01/2009 EUR 1,100,000 1,024,268
------------
JAPAN - 8.5%
Japanese Government Bond 1.500% 06/22/2009 JPY 215,000,000 2,031,965
Japanese Government Bond 1.800% 06/20/2008 JPY 1,335,000,000 13,378,035
------------
15,410,000
------------
MULTI-NATIONAL - 1.2%
European Investment Bank 5.500% 12/07/2009 GBP 670,000 1,020,528
International Bank for
Reconstruction & Development
(MTN) 7.125% 07/30/2007 GBP 160,000 268,533
</TABLE>
39
<PAGE>
FFTW FUNDS, INC.
WORLDWIDE-HEDGED PORTFOLIO - SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
COUPON FACE
RATE MATURITY AMOUNT (A) VALUE
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MULTI-NATIONAL (CONTINUED)
International Bank for
Reconstruction & Development,
Ser. 791 5.500% 05/14/2003 AUD 1,400,000 $ 883,422
------------
2,172,483
------------
SPAIN - 1.7%
Spanish Government Bond 6.000% 01/31/2008 EUR 2,980,419 3,103,472
------------
SWEDEN - 0.8%
Swedish Government Bond 8.000% 08/15/2007 SEK 4,700,000 629,993
Swedish Government Bond 9.000% 04/20/2009 SEK 5,600,000 810,040
------------
1,440,033
------------
UNITED KINGDOM - 3.6%
UK Treasury Note 6.500% 12/07/2003 GBP 200,000 326,664
UK Treasury Bond 5.750% 12/07/2009 GBP 1,900,000 3,133,400
UK Treasury Bond 6.000% 12/07/2028 GBP 1,600,000 3,163,074
------------
6,623,138
------------
Total (Cost - $41,562,362) 39,712,931
------------
U.S. GOVERNMENT AGENCY AND TREASURY OBLIGATIONS - 22.8%
FHLMC Global Bond 6.625% 09/15/2009 10,700,000 10,365,657
FNMA Global Bond 5.500% 12/07/2003 GBP 120,000 185,042
FNMA Global Bond 6.375% 06/15/2009 11,900,000 11,339,712
U.S. Treasury Note 6.000% 08/15/2004 12,860,000 12,659,062
U.S. Treasury Bond 6.125% 11/15/2027 7,240,000 6,733,200
------------
Total (Cost - $42,286,348) 41,282,673
------------
TOTAL LONG-TERM INVESTMENTS
(COST - $152,850,353) 147,196,356
------------
SHORT-TERM INVESTMENTS - 24.1%
Deutsche Bank AG, Yankee CD 5.100% 02/17/2000 8,000,000 7,986,924
Investors Bank & Trust Company
Cash Sweep 5.000% 01/03/2000 34,903,000 34,903,000
</TABLE>
40
<PAGE>
FFTW FUNDS, INC.
WORLDWIDE-HEDGED PORTFOLIO - SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
COUPON FACE
RATE MATURITY AMOUNT (A) VALUE
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHORT-TERM INVESTMENTS (CONTINUED)
U.S. Treasury Bill*@ 4.850%-4.980% 05/25/2000 900,000 $ 880,659
------------
Total (Cost - $43,772,256) 43,770,583
------------
TOTAL INVESTMENTS - 105.2%
(COST - $196,622,609) 190,966,939
------------
LIABILITIES, NET OF OTHER
ASSETS - (5.2%) (9,431,808)
------------
NET ASSETS - 100.0% $181,535,131
============
</TABLE>
<TABLE>
<CAPTION>
Summary of Abbreviations
- ------------------------
<S> <C>
ACES Adjustable Conversion-Rate Equity Security
AUD Australian Dollar
CAD Canadian Dollar
DEM German Deutschemark
DKK Danish Krone
EUR European Monetary Unit (Euro)
FRN Floating Rate Note
FHLMC Federal Home Loan Mortgage Corp.
FNMA Federal National Mortgage Association
GBP Great British Pound
JPY Japanese Yen
MTN Medium-Term Note
NLG Netherlands Guilder
SEK Swedish Krona
</TABLE>
Yankee CD U.S. dollar denominated certificates of deposit issued by non-U.S.
banks in the U.S.
* Coupon rate represents yield to maturity at the time 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.
(b) Security exempt from registration under Rule 144A of Securities Act of
1933. This security may be sold in transactions exempt from registration,
normally to qualified institutional buyers. At December 31, 1999, these
securities were valued at $4,368,782 or 2.4% of net assets.
See Notes to Financial Statements.
41
<PAGE>
FFTW FUNDS, INC.
INTERNATIONAL PORTFOLIO - SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
COUPON FACE
RATE MATURITY AMOUNT (A) VALUE
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LONG-TERM INVESTMENTS - 44.8%
ASSET- AND MORTGAGE-BACKED SECURITIES - 14.9%
GERMANY - 0.7%
CORE, Ser. 1998-1X, Class A-2A
(FRN) 3.466% 01/15/2006 DEM 912,192 $ 468,299
CORE, Ser. 1999-1X, Class A-3A
(FRN) 3.666% 03/17/2009 EUR 300,000 302,100
------------
770,399
------------
JAPAN - 5.0%
Card Loan Investment
Opportunities, Ser. 1, Class
1 (FRN) 4.035% 09/28/2003 EUR 350,000 352,767
J-Shop Corp., Ser. II, Class 1
(FRN) 1.041% 01/13/2003 JPY 100,000,000 981,688
Lumiere Funding Corp., Ser.
1A, Class 1 (FRN) - 144A(b) 6.869% 07/10/2003 251,080 250,407
Lumiere Funding Corp., Ser.
1X, Class 1 (FRN) 6.869% 07/10/2003 251,080 251,180
Maestro Securitisation Corp.,
Ser. 1, Class 1 (FRN) 6.879% 07/10/2005 875,077 875,602
Oscar Funding Corp., Ser. 2,
Class 1 (FRN) 6.809% 08/10/2003 287,680 287,738
Oscar Funding Corp., Ser. 3,
Class 1 (FRN) 7.069% 12/10/2003 398,418 399,494
Oscar Funding Corp., Ser. 4,
Class 2 (FRN) 3.972% 05/10/2004 EUR 235,437 237,322
R Funding Corp., Ser. 1X,
Class 1 (FRN) 7.026% 02/02/2004 792,884 794,708
Soleil Funding Corp., Ser. 1,
Class 1 (FRN) 7.219% 08/10/2004 745,988 750,241
------------
5,181,147
------------
UNITED KINGDOM - 0.7%
Chester Asset Receivables Deal
5 6.625% 03/17/2008 GBP 200,000 319,165
Chester Asset Receivables Deal
6, Ser. UK98-2 (FRN) 6.126% 09/15/2003 GBP 200,000 322,755
Hexagon Funding Ltd., Ser. 1X,
Class 2 (FRN) 3.918% 01/26/2004 EUR 115,453 116,319
------------
758,239
------------
UNITED STATES - 8.5%
Amethyst Funding Corp., Ser.
2, Class 1 (FRN) 6.806% 01/02/2004 1,249,707 1,249,707
BankBoston Home Equity Loan
Trust, Ser. 1998-1, Class A1 6.460% 04/25/2012 433,119 431,161
Chase Credit Card Master
Trust, Ser. 1998-1,
Class A1 5.125% 02/15/2005 DEM 1,000,000 502,009
</TABLE>
42
<PAGE>
FFTW FUNDS, INC.
INTERNATIONAL PORTFOLIO - SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
COUPON FACE
RATE MATURITY AMOUNT (A) VALUE
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
UNITED STATES (CONTINUED)
Chase Credit Card Master
Trust, Ser. 1998-4, Class A 5.000% 08/15/2008 DEM 600,000 $ 288,421
Citibank Credit Card Master
Trust, Ser. 1999-6,
Class A - 144A(b) 4.500% 08/25/2004 EUR 900,000 884,911
GMAC Swift Trust, Ser. 1999-1
- 144A(b) 5.000% 01/18/2005 EUR 700,000 702,856
MBNA American European
Structure Offering,
Ser. 1998, Class B 5.125% 04/19/2008 DEM 1,500,000 735,488
MCL Auto Loan Funding Corp.,
Ser. 1, Class 1 (FRN) 7.019% 09/10/2003 624,504 625,753
Novus Home Equity Line of
Credit Trust, Ser. 1999-1,
Class A (FRN) 5.569% 05/25/2010 1,589,770 1,589,055
Providian Home Equity Loan
Trust, Ser. 1999-1,
Class A (FRN) 5.884% 06/25/2025 1,762,155 1,764,023
------------
8,773,384
------------
Total (Cost - $15,756,661) 15,483,169
------------
CORPORATE OBLIGATIONS - 6.6%
CANADA - 1.1%
GMAC Canada Ltd. 5.125% 12/23/2003 DEM 2,100,000 1,085,561
------------
FRANCE - 0.4%
Suez Lyonnaise des Eaux SA 5.875% 10/13/2009 EUR 450,000 443,044
------------
PORTUGAL - 0.4%
Caixa Geral de Depositos
Finance (MTN) 6.250% 10/12/2009 EUR 420,000 417,103
------------
SPAIN - 0.3%
BSCH Issuance Ltd. 5.125% 07/06/2009 EUR 350,000 322,492
------------
SWEDEN - 0.3%
Investor AB 5.250% 06/30/2008 EUR 306,775 303,195
------------
UNITED KINGDOM - 3.3%
Abbey National Treasury
Services 6.500% 03/05/2004 GBP 258,000 409,429
Argyll Group 8.125% 10/04/2002 GBP 134,000 219,735
</TABLE>
43
<PAGE>
FFTW FUNDS, INC.
INTERNATIONAL PORTFOLIO - SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
COUPON FACE
RATE MATURITY AMOUNT (A) VALUE
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
UNITED KINGDOM (CONTINUED)
B.A.T. International Finance
Plc 4.875% 02/25/2009 EUR 562,000 $ 507,212
B.A.T. International Finance
Plc 5.375% 07/28/2006 DEM 600,000 297,677
Coca-Cola Enterprises Great
Britain (MTN) 6.750% 03/12/2008 GBP 200,000 319,149
Gallagher Group Plc 5.875% 08/06/2008 DEM 200,000 97,109
Glaxo Wellcome Plc 8.750% 12/01/2005 GBP 268,000 473,956
Hilton Group Finance Plc (MTN) 5.000% 07/27/2004 EUR 775,000 754,046
Pearson Plc 4.625% 07/08/2004 EUR 337,000 326,124
------------
3,404,437
------------
UNITED STATES - 0.8%
Enron Corp. 4.375% 04/08/2005 EUR 312,000 293,226
Fort James Corp. 4.750% 06/29/2004 EUR 378,000 363,554
General Motors Acceptance
Corp. 4.000% 02/09/2006 EUR 100,000 92,579
John Hancock Global Funding
Corp. 5.375% 06/10/2008 DEM 170,000 83,871
------------
833,230
------------
Total (Cost - $7,461,765) 6,809,062
------------
SOVEREIGN DEBT OBLIGATIONS - 22.5%
DENMARK - 1.1%
Kingdom of Denmark Bond 7.000% 11/10/2024 DKK 7,500,000 1,128,690
------------
FRANCE - 0.9%
France O.A.T. 6.000% 10/25/2025 EUR 900,000 907,247
------------
GERMANY - 3.5%
Bundesobligation 5.000% 11/12/2002 EUR 552,843 563,226
Bundesrepublic Deutschland
Bond 3.750% 01/04/2009 EUR 1,100,000 987,015
Bundesrepublic Deutschland
Bond 4.750% 07/04/2028 EUR 700,000 589,047
Bundesrepublic Deutschland
Bond 6.250% 01/04/2024 EUR 1,449,684 1,514,573
------------
3,653,861
------------
</TABLE>
44
<PAGE>
FFTW FUNDS, INC.
INTERNATIONAL PORTFOLIO - SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
COUPON FACE
RATE MATURITY AMOUNT (A) VALUE
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
JAPAN - 9.6%
Japanese Government Bond 1.500% 06/22/2009 JPY 270,000,000 $ 2,551,770
Japanese Government Bond 1.800% 06/20/2008 JPY 743,000,000 7,445,603
------------
9,997,373
------------
MULTI-NATIONAL - 1.0%
European Investment Bank 5.500% 12/07/2009 GBP 656,000 999,203
------------
SPAIN - 2.0%
Spanish Government Bond 6.000% 01/31/2008 EUR 2,000,000 2,082,574
------------
SWEDEN - 1.0%
Swedish Government Bond 8.000% 08/15/2007 SEK 7,500,000 1,005,308
------------
UNITED KINGDOM - 3.4%
UK Treasury Note 6.500% 12/07/2003 GBP 1,042,000 1,701,917
UK Treasury Bond 6.000% 12/07/2028 GBP 900,000 1,779,229
------------
3,481,146
------------
Total (Cost - $24,875,602) 23,255,402
------------
U.S. GOVERNMENT AGENCY OBLIGATION - 0.8%
FNMA Global Bond
(Cost - $860,643) 6.875% 06/07/2002 GBP 500,000 808,019
------------
TOTAL LONG-TERM INVESTMENTS
(COST - $48,954,671) 46,355,652
------------
SHORT-TERM INVESTMENTS - 64.0%
Investors Bank & Trust Company
Cash Sweep 5.000% 01/03/2000 52,213,000 52,213,000
Revolving Commitment Vehicle,
CP * - Sec. 4(2)(b) 5.551% 01/18/2000 1,500,000 1,496,175
Societe Generale, Eurodollar
CD 5.990% 02/01/2000 3,000,000 2,999,905
Toronto Dominion Bank, Yankee
CD 6.010% 03/14/2000 3,000,000 3,000,000
U.S. Treasury Bill*@ 4.850%-5.205% 05/25/2000 650,000 636,031
</TABLE>
45
<PAGE>
FFTW FUNDS, INC.
INTERNATIONAL PORTFOLIO - SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
COUPON FACE
RATE MATURITY AMOUNT (A) VALUE
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHORT-TERM INVESTMENTS (CONTINUED)
Westdeutsche Landesbank,
Eurodollar CD 6.070% 02/03/2000 3,000,000 $ 3,000,033
Westpac Trust Securities Ltd.,
CP* 6.089% 02/07/2000 3,000,000 2,981,839
------------
Total (Cost - $66,327,621) 66,326,983
------------
TOTAL INVESTMENTS - 108.8%
(COST - $115,282,292) 112,682,635
------------
LIABILITIES, NET OF OTHER
ASSETS - (8.8%) (9,118,787)
------------
NET ASSETS - 100.0% $103,563,848
============
</TABLE>
<TABLE>
<CAPTION>
Summary of Abbreviations
- ------------------------
<S> <C>
CP Commercial Paper
DEM German Deutschemark
DKK Danish Krone
EUR European Monetary Unit (Euro)
Eurodollar CD U.S. dollar denominated certificates of deposit issued by a
bank outside the U.S., with interest and principal paid in
U.S. dollars.
FNMA Federal National Mortgage Association
FRN Floating Rate Note
GBP Great British Pound
JPY Japanese Yen
MTN Medium-Term Note
SEK Swedish Krona
</TABLE>
Yankee CD - U.S. dollar denominated certificates of deposit issued by non-U.S.
banks in the U.S.
* Coupon rate represents yield to maturity at the time 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.
(b) Security exempt from registration under Rule 144A or Section 4(2) of
Securities Act of 1933. This security may be sold in transactions exempt
from registration, normally to qualified institutional buyers
At December 31, 1999, these securities were valued at $3,334,349 or 3.2% of
net assets.
See Notes to Financial Statements.
46
<PAGE>
FFTW FUNDS, INC.
EMERGING MARKETS PORTFOLIO - SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
COUPON FACE
RATE MATURITY AMOUNT (A) VALUE
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LONG-TERM INVESTMENTS - 73.1%
CORPORATE OBLIGATIONS - 4.1%
SOUTH KOREA - 2.3%
Pohang Iron & Steel Co. -
Yankee 7.125% 11/01/2006 2,000,000 $ 1,882,600
Pohang Iron & Steel Co. -
Yankee 7.500% 08/01/2002 1,000,000 990,000
------------
2,872,600
------------
THAILAND - 1.8%
Export-Import Bank of Thailand
(FRN) 5.338% 11/20/2000 500,000 495,500
Industrial Finance Corp. 7.375% 01/14/2007 2,000,000 1,846,000
------------
2,341,500
------------
Total (Cost - $5,228,071) 5,214,100
------------
SOVEREIGN DEBT OBLIGATIONS - 69.0%
ARGENTINA - 4.3%
Republic of Argentina (FRN) 6.875% 03/31/2023 4,200,000 3,325,606
Republic of Argentina (MTN) 11.750% 02/12/2007 ARS 2,500,000 2,256,634
------------
5,582,240
------------
BRAZIL - 2.9%
Republic of Brazil # 8.000% 04/15/2014 4,883,170 3,668,726
------------
BULGARIA - 3.4%
Bulgaria Discount Bond, Ser. A
(FRN) 6.500% 07/28/2024 3,750,000 3,004,875
Bulgaria Government Bond, Ser.
A (FRN) 2.750% 07/28/2012 2,000,000 1,410,000
------------
4,414,875
------------
COLOMBIA - 4.7%
Republic of Colombia 9.750% 04/23/2009 6,500,000 6,045,000
------------
CROATIA - 1.3%
Croatia Government Bond, Ser.
A (FRN) 6.456% 07/31/2010 1,000,000 890,000
</TABLE>
47
<PAGE>
FFTW FUNDS, INC.
EMERGING MARKETS PORTFOLIO - SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
COUPON FACE
RATE MATURITY AMOUNT (A) VALUE
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CROATIA (CONTINUED)
Croatia Government Bond, Ser.
B (FRN) 6.456% 07/31/2006 865,440 $ 800,532
------------
1,690,532
------------
ECUADOR - 3.0%
Ecuador Discount Bond (FRN) ^ 6.750% 02/28/2025 10,000,000 3,800,000
------------
EL SALVADOR - 1.5%
Republic of El Salvador -
144A(b) 9.500% 08/15/2006 2,000,000 1,985,000
------------
GREECE - 3.9%
Hellenic Republic Bond 8.600% 03/26/2008 GRD 1,000,000,000 3,449,538
Hellenic Republic Bond 11.000% 02/25/2000 GRD 500,000,000 1,528,153
------------
4,977,691
------------
HUNGARY - 4.0%
Hungary Government Bond 16.000% 04/12/2000 HUF 1,300,000,000 5,178,557
------------
MEXICO - 10.6%
United Mexican States Par
Bond, Ser. A 6.250% 12/31/2019 4,000,000 3,150,000
United Mexican States Par
Bond, Ser. B 6.250% 12/31/2019 6,500,000 5,118,750
United Mexican States, Ser. XW 10.375% 02/17/2009 5,000,000 5,331,500
------------
13,600,250
------------
MOROCCO - 3.0%
Morocco Reconstruction &
Consolidation,
Ser. A (FRN) 6.844% 01/01/2009 4,285,714 3,878,571
------------
NIGERIA - 2.9%
Central Bank of Nigeria Par
Bond, Ser. WW + 6.250% 11/15/2020 6,500,000 3,786,250
------------
PANAMA - 2.9%
Republic of Panama 8.875% 09/30/2027 4,500,000 3,780,000
------------
</TABLE>
48
<PAGE>
FFTW FUNDS, INC.
EMERGING MARKETS PORTFOLIO - SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
COUPON FACE
RATE MATURITY AMOUNT (A) VALUE
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PERU - 4.3%
Peru - Past Due Interest (FRN) 4.500% 03/07/2017 8,000,000 $ 5,540,000
------------
(THE) PHILIPPINES - 2.3%
Republic of Philippines 8.875% 04/15/2008 3,000,000 2,932,500
------------
POLAND - 3.1%
Poland Government Bond 12.000% 06/12/2003 PLN 7,000,000 1,646,610
Poland Government Bond 14.000% 02/12/2000 PLN 10,000,000 2,397,094
------------
4,043,704
------------
RUSSIA - 3.2%
City of Moscow Bond 9.500% 05/31/2000 3,000,000 2,655,000
Russian Federation Bond,
Eurodollar 12.750% 06/24/2028 2,000,000 1,400,000
------------
4,055,000
------------
SOUTH KOREA - 2.8%
Korea Development Bank 6.500% 11/15/2002 2,000,000 1,992,500
Republic of Korea 8.875% 04/15/2008 1,500,000 1,575,000
------------
3,567,500
------------
URUGUAY - 0.8%
Banco Central del Uruguay,
Ser. B 6.750% 02/19/2021 1,250,000 1,087,500
------------
VENEZUELA - 3.9%
Republic of Venezuela, Ser. DL
(FRN) 7.000% 12/18/2007 761,885 598,080
Republic of Venezuela, Ser.
W-A (FRN) + 7.000% 03/31/2020 6,250,000 4,375,000
------------
4,973,080
------------
Total (Cost - $87,574,303) 88,586,976
------------
TOTAL LONG-TERM INVESTMENTS
(COST - $92,802,374) 93,801,076
------------
</TABLE>
49
<PAGE>
FFTW FUNDS, INC.
EMERGING MARKETS PORTFOLIO - SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
COUPON FACE
RATE MATURITY AMOUNT (A) VALUE
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHORT-TERM INVESTMENTS - 25.4%
Investors Bank & Trust Company
Cash Sweep 5.000% 01/03/2000 17,836,000 $ 17,836,000
Poland Treasury Bill* 12.100% 04/12/2000 PLN 20,000,000 4,625,182
Turkish Treasury Bill* 90.252%-110.603% 08/23/2000 TRL 5,000,000 6,806,863
Turkish Treasury Bill* 93.226% 05/17/2000 TRL 1,850,000 2,786,432
U.S. Treasury Bill*@ 5.072% 05/25/2000 600,000 587,106
------------
Total (Cost - $34,659,759) 32,641,583
------------
TOTAL INVESTMENTS -
98.5% (COST - $127,462,133) 126,442,659
------------
OTHER ASSETS, NET OF
LIABILITIES - 1.5% 1,976,365
------------
NET ASSETS - 100.0% $128,419,024
============
</TABLE>
<TABLE>
<CAPTION>
Summary of Abbreviations
- ------------------------
<S> <C>
ARS Argentinian Peso
Eurodollar U.S. dollar denominated security issued outside the U.S.
with interest and principal paid in U.S. dollars.
FRN Floating Rate Note
GRD Greek Drachma
HUF Hungarian Forint
MTN Medium-Term Note
PLN Polish Zloty
TRL Turkish Lira
</TABLE>
Yankee - U.S. dollar denominated bonds issued by non-U.S. companies in the U.S.
* Coupon rate represents yield to maturity at the time of purchase.
# Coupon rate shown represents 5% cash and 3% capitalization through April
2000; 8% cash thereafter.
^ Bond is currently in default after missing 8/31/99 coupon payment.
+ Security is issued with detachable warrants. The current value of each
warrant is zero.
@ 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.
(b) Security exempt from registration under Rule 144A of Securities Act of
1933. This security may be sold in transactions exempt from registration,
normally to qualified institutional buyers. At December 31, 1999, these
securities were valued at $1,985,000 or 1.5% of net assets.
See Notes to Financial Statements.
50
<PAGE>
FFTW FUNDS, INC.
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1999 U.S. PORTFOLIOS
<TABLE>
<CAPTION>
U.S. SHORT-TERM LIMITED DURATION MORTGAGE-BACKED
PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
- -----------------------------------
Investments in securities, at value
(Cost - $649,445,585,
$107,360,199, and $539,191,884,
respectively) $647,836,360 $106,446,279 $531,609,490
Cash 523 518 672
Interest receivable 2,609,548 766,922 2,193,135
Receivable for securities sold - - 189,020,508
Receivable for fund shares sold - 74,223 -
Receivable from Investment Adviser 97,086 38,229 -
Variation margin receivable - - 197,094
Other receivables 18,806 59,449 49,470
------------ ------------ ------------
Total assets 650,562,323 107,385,620 723,070,369
------------ ------------ ------------
LIABILITIES
- -----------------------------------
Payable for securities purchased - 7,257,224 424,658,575
Variation margin payable 77,012 - -
Distribution payable 7,967 - -
Payable to Investment Adviser - - 4,905
Accrued expenses and other
liabilities 30,404 23,399 141,691
------------ ------------ ------------
Total liabilities 115,383 7,280,623 424,805,171
------------ ------------ ------------
NET ASSETS $650,446,940 $100,104,997 $298,265,198
- -----------------------------------
============ ============ ============
SHARES OUTSTANDING (PAR VALUE
$0.001) 67,410,719 10,361,515 30,939,935
- -----------------------------------
============ ============ ============
NET ASSET VALUE PER SHARE $ 9.65 $ 9.66 $ 9.64
- -----------------------------------
============ ============ ============
COMPONENTS OF NET ASSETS AS OF DECEMBER 31, 1999
WERE AS FOLLOWS:
- ----------------------------------------------------
Paid-in capital $669,030,705 $102,768,501 $327,868,055
Undistributed investment income,
net 279,133 - 1,602,830
Accumulated net realized loss on
investments, short sales,
financial futures and options
contracts (16,971,053) (1,749,584) (24,288,852)
Net unrealized depreciation on
investments and financial futures
and options contracts (1,891,845) (913,920) (6,916,835)
------------ ------------ ------------
$650,446,940 $100,104,997 $298,265,198
============ ============ ============
</TABLE>
See Notes to Financial Statements.
51
<PAGE>
FFTW FUNDS, INC.
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1999 GLOBAL & INTERNATIONAL PORTFOLIOS
<TABLE>
<CAPTION>
GLOBAL TACTICAL WORLDWIDE WORLDWIDE-HEDGED
EXPOSURE PORTFOLIO PORTFOLIO PORTFOLIO
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
- -----------------------------------
Investments in securities, at value
(Cost - $133,044,618, $74,748,114,
and $196,622,609, respectively) $128,167,009 $71,855,609 $190,966,939
Cash 513 6 27
Cash on deposit at broker 1,868,890 - -
Foreign cash (Cost - $2,667,705,
$968,329,
and $2,366,004, respectively) 2,642,273 945,074 2,350,765
Interest receivable 2,391,585 792,761 2,403,599
Receivable on swap contracts 655,420 - -
Receivable from Investment Adviser - 17,402 -
Variation margin receivable - - 343,863
Net unrealized appreciation of
forward foreign exchange contracts 3,530,440 332,422 906,648
Other receivables 8,859 1,053 1,362
------------ ----------- ------------
Total assets 139,264,989 73,944,327 196,973,203
------------ ----------- ------------
LIABILITIES
- -----------------------------------
Payable for securities purchased - 4,834,643 15,367,851
Payable for fund shares redeemed 1,300,000 - -
Variation margin payable 685,601 117,491 -
Net unrealized depreciation of
forward foreign exchange contracts 5,423,979 274,606 -
Distribution payable - 113,962 3,357
Payable to Investment Adviser 1,313 - 20,390
Accrued expenses and other
liabilities 110,226 22,539 46,474
------------ ----------- ------------
Total liabilities 7,521,119 5,363,241 15,438,072
------------ ----------- ------------
NET ASSETS $131,743,870 $68,581,086 $181,535,131
- -----------------------------------
============ =========== ============
SHARES OUTSTANDING (PAR VALUE
$0.001) 13,068,046 7,519,838 17,151,492
- -----------------------------------
============ =========== ============
NET ASSET VALUE PER SHARE $ 10.08 $ 9.12 $ 10.58
- -----------------------------------
============ =========== ============
COMPONENTS OF NET ASSETS AS OF DECEMBER 31, 1999 WERE
AS FOLLOWS:
- -------------------------------------------------------
Paid-in capital $128,118,163 $77,843,851 $192,365,442
Undistributed investment income,
net 13,733,654 146,385 377,668
Accumulated net realized loss on
investments, financial futures and
swap contracts (3,914,986) (6,640,857) (6,649,345)
Net unrealized depreciation on
investments, financial futures and
forward foreign exchange
contracts, and on translation of
other assets and liabilities
denominated in foreign currency (6,192,961) (2,768,293) (4,558,634)
------------ ----------- ------------
$131,743,870 $68,581,086 $181,535,131
============ =========== ============
</TABLE>
See Notes to Financial Statements.
52
<PAGE>
FFTW FUNDS, INC.
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1999 GLOBAL & INTERNATIONAL PORTFOLIOS
<TABLE>
<CAPTION>
INTERNATIONAL EMERGING MARKETS
PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------
<S> <C> <C>
ASSETS
- ----------------------------------------
Investments in securities, at value
(Cost - $115,282,292 and $127,462,133
respectively) $112,682,635 $126,442,659
Cash 847 846
Cash on deposit at broker 265,584 270,210
Foreign cash (Cost - $504,082 and
$138,245 respectively) 487,812 135,027
Interest receivable 886,361 2,582,817
Receivable from Investment Adviser 5,102 -
Variation margin receivable - 31,500
Net unrealized appreciation of forward
foreign exchange contracts 134,351 641,744
Other receivables 1,396 12,464
------------ ------------
Total assets 114,464,088 130,117,267
------------ ------------
LIABILITIES
- ----------------------------------------
Payable for securities purchased 9,990,103 -
Payable for fund shares redeemed 17,343 -
Variation margin payable 431,116 -
Payable on swap contract - 93,000
Net unrealized depreciation of forward
foreign exchange contracts 434,485 35,844
Unrealized depreciation on swap contract - 840,000
Payable to Investment Adviser - 243
Accrued taxes - 656,911
Accrued expenses and other liabilities 27,193 72,245
------------ ------------
Total liabilities 10,900,240 1,698,243
------------ ------------
NET ASSETS $103,563,848 $128,419,024
- ----------------------------------------
============ ============
SHARES OUTSTANDING (PAR VALUE $0.001) 11,904,545 16,717,599
- ----------------------------------------
============ ============
NET ASSET VALUE PER SHARE $ 8.70 $ 7.68
- ----------------------------------------
============ ============
COMPONENTS OF NET ASSETS AS OF DECEMBER 31, 1999 WERE
AS FOLLOWS:
- -------------------------------------------------------
Paid-in capital $109,112,874 $167,232,474
Distributions in excess of investment
income, net (1,051,888) (2,864,693)
Accumulated net realized loss on
investments, financial futures
contracts and foreign currency-related
transactions (1,326,908) (34,704,054)
Net unrealized depreciation on
investments, financial futures, forward
foreign exchange and swap contracts and
on translation of other assets and
liabilities denominated in foreign
currency (3,170,230) (1,244,703)
------------ ------------
$103,563,848 $128,419,024
============ ============
</TABLE>
See Notes to Financial Statements.
53
<PAGE>
FFTW FUNDS, INC.
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999 U.S. PORTFOLIOS
<TABLE>
<CAPTION>
U.S. SHORT-TERM LIMITED DURATION MORTGAGE-BACKED
PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
- -----------------------------------
Interest $35,347,656 $ 5,236,828 $ 38,448,314
----------- ----------- ------------
EXPENSES
- -----------------------------------
Investment advisory fees 1,912,272 310,454 1,819,861
Administration fees 318,144 44,367 379,291
Custodian fees 227,933 41,117 236,645
Registration fees 104,411 29,602 51,611
Directors' fees and expenses 38,330 5,768 37,137
Transfer agent fees 37,783 4,188 3,392
Audit fees 45,007 31,118 61,473
Legal fees 10,926 1,347 10,226
Other fees and expenses 50,565 12,812 69,493
----------- ----------- ------------
Total operating expenses 2,745,371 480,773 2,669,129
Waiver of investment advisory and
administration fees (1,151,811) (214,670) (1,213,241)
----------- ----------- ------------
Operating expenses, net 1,593,560 266,103 1,455,888
Interest expense 25,104 - -
----------- ----------- ------------
Total expenses 1,618,664 266,103 1,455,888
----------- ----------- ------------
Investment income, net 33,728,992 4,970,725 36,992,426
----------- ----------- ------------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS, SHORT SALES,
FINANCIAL FUTURES AND OPTIONS
CONTRACTS
- -----------------------------------
Net realized loss on investments (4,723,079) (1,576,429) (25,587,648)
Net realized gain on short sales - - 498,801
Net realized gain (loss) on
financial futures and options
contracts (2,250,621) 102,460 3,956,242
Net change in unrealized
depreciation on investments (328,583) (931,011) (5,469,089)
Net change in unrealized
appreciation (depreciation)
on financial futures contracts 110,405 (2,557) 266,266
----------- ----------- ------------
Net realized and unrealized loss
on investments, short sales,
financial futures
and options contracts (7,191,878) (2,407,537) (26,335,428)
----------- ----------- ------------
Net Increase in Net Assets
Resulting From Operations $26,537,114 $ 2,563,188 $ 10,656,998
=========== =========== ============
</TABLE>
See Notes to Financial Statements.
54
<PAGE>
FFTW FUNDS, INC.
STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1999 GLOBAL & INTERNATIONAL PORTFOLIOS
<TABLE>
<CAPTION>
GLOBAL TACTICAL EXPOSURE WORLDWIDE WORLDWIDE-HEDGED
PORTFOLIO PORTFOLIO PORTFOLIO
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
- -----------------------------------
Interest $36,196,498 $ 3,437,038 $ 9,551,315
----------- ----------- -----------
EXPENSES
- -----------------------------------
Investment advisory fees 1,539,643 269,137 742,268
Administration fees 261,177 33,611 113,137
Custodian fees 277,829 67,990 124,480
Registration fees 43,052 5,615 36,151
Directors' fees and expenses 23,583 4,321 11,896
Transfer agent fees 4,072 6,278 7,672
Audit fees 49,016 32,328 37,420
Legal fees 7,421 1,241 3,494
Other fees and expenses 39,938 6,586 16,444
----------- ----------- -----------
Total operating expenses 2,245,731 427,107 1,092,962
Waiver of investment advisory fees (1,154,732) (23,402) (257,911)
----------- ----------- -----------
Operating expenses, net 1,090,999 403,705 835,051
Interest expense 17,733,602 - -
----------- ----------- -----------
Total expenses 18,824,601 403,705 835,051
----------- ----------- -----------
Investment income, net 17,371,897 3,033,333 8,716,264
----------- ----------- -----------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS,
FINANCIAL FUTURES AND SWAP
CONTRACTS, AND
FOREIGN CURRENCY-RELATED
TRANSACTIONS
- -----------------------------------
Net realized loss on investments (25,702,750) (1,192,212) (3,877,823)
Net realized gain (loss) on
financial futures and swap
contracts 18,213,973 (432,689) (2,314,219)
Net realized gain (loss) on foreign
currency-related transactions 20,757,792 (581,456) 2,611,029
Net change in unrealized
appreciation (depreciation) on
investments (10,515,901) (3,735,820) (7,078,898)
Net change in unrealized
appreciation (depreciation) on
financial futures and swap
contracts 816,215 441,765 1,046,718
Net change in unrealized
appreciation (depreciation) on
translation of other assets and
liabilities denominated in foreign
currency (9,654,125) (1,167,573) 533,063
----------- ----------- -----------
Net realized and unrealized loss on
investments, financial futures and
swap contracts and foreign
currency-related transactions (6,084,796) (6,667,985) (9,080,130)
----------- ----------- -----------
Net Increase (Decrease) in Net
Assets Resulting From Operations $11,287,101 $(3,634,652) $ (363,866)
=========== =========== ===========
</TABLE>
See Notes to Financial Statements.
55
<PAGE>
FFTW FUNDS, INC.
STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1999 GLOBAL & INTERNATIONAL PORTFOLIOS
<TABLE>
<CAPTION>
INTERNATIONAL EMERGING MARKETS
PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
- ----------------------------------------
Interest (net of tax expense of $0, and
$656,911, respectively) $ 4,384,622 $20,889,923
----------- -----------
EXPENSES
- ----------------------------------------
Investment advisory fees 370,742 1,251,344
Administration fees 46,333 116,647
Custodian fees 75,126 209,537
Registration fees 6,382 29,003
Directors' fees and expenses 6,221 10,525
Transfer agent fees 6,329 3,961
Audit fees 37,726 43,161
Legal fees 1,806 3,331
Other fees and expenses 8,610 21,490
----------- -----------
Total operating expenses 559,275 1,688,999
Waiver of investment advisory fees (3,162) -
----------- -----------
Operating expenses, net 556,113 1,688,999
Interest expense - 93,000
----------- -----------
Total expenses 556,113 1,781,999
----------- -----------
Investment income, net 3,828,509 19,107,924
----------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS, FINANCIAL
FUTURES AND SWAP CONTRACTS, AND FOREIGN
CURRENCY-RELATED TRANSACTIONS
- ----------------------------------------
Net realized loss on investments (1,479,210) (13,944,155)
Net realized gain (loss) on financial
futures contracts (1,226,104) 220,173
Net realized loss on foreign
currency-related transactions (2,105,344) (3,849,709)
Net change in unrealized appreciation
(depreciation) on investments (2,934,214) 16,515,964
Net change in unrealized appreciation
(depreciation) on financial futures and
swap contracts 229,337 (684,816)
Net change in unrealized appreciation
(depreciation) on other assets
and liabilities denominated in foreign
currency (1,750,690) (437,895)
----------- -----------
Net realized and unrealized loss on
investments,
financial futures and swap contracts,
and foreign currency-related
transactions (9,266,225) (2,180,438)
----------- -----------
Net Increase (Decrease) in Net Assets
Resulting From Operations $(5,437,716) $16,927,486
=========== ===========
</TABLE>
See Notes to Financial Statements.
56
<PAGE>
FFTW FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
U.S. PORTFOLIOS
<TABLE>
<CAPTION>
U.S. SHORT-TERM PORTFOLIO LIMITED DURATION PORTFOLIO
---------------------------- ----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, 1999 DEC. 31, 1998 DEC. 31, 1999 DEC. 31, 1998
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS
- ------------------------------
Investment income, net $ 33,728,992 $ 35,014,319 $ 4,970,725 $ 4,449,079
Net realized gain (loss) on
investments and
financial futures and options
contracts (6,973,700) (726,442) (1,473,969) 807,566
Net change in unrealized
appreciation (depreciation)
on investments and financial
futures contracts (218,178) (1,500,109) (933,568) (68,170)
------------ ------------ ------------ ------------
Net increase in net assets
resulting from operations 26,537,114 32,787,768 2,563,188 5,188,475
------------ ------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS
- ------------------------------
From investment income, net 33,728,992 35,026,323 4,970,725 4,449,079
In excess of investment
income, net - - - 26,882
From net realized gain on
investments and
financial futures and options
contracts - - - 1,041,363
------------ ------------ ------------ ------------
Total Distributions 33,728,992 35,026,323 4,970,725 5,517,324
------------ ------------ ------------ ------------
CAPITAL SHARE TRANSACTIONS,
NET (182,727,188) 355,698,913 12,991,549 49,820,618
------------ ------------ ------------ ------------
Total increase (decrease) in
net assets (189,919,066) 353,460,358 10,584,012 49,491,769
NET ASSETS
- ------------------------------
Beginning of Year 840,366,006 486,905,648 89,520,985 40,029,216
------------ ------------ ------------ ------------
End of Year $650,446,940 $840,366,006 $100,104,997 $ 89,520,985
============ ============ ============ ============
UNDISTRIBUTED INVESTMENT
INCOME, NET $ 279,133 $ 243,592 $ - $ -
- ------------------------------
</TABLE>
See Notes to Financial Statements.
57
<PAGE>
FFTW FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
U.S. PORTFOLIOS
<TABLE>
<CAPTION>
MORTGAGE-BACKED PORTFOLIO
----------------------------
YEAR ENDED YEAR ENDED
DEC. 31, 1999 DEC. 31, 1998
- ----------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS
- ----------------------------------------
Investment income, net $ 36,992,426 $ 53,345,649
Net realized gain (loss) on investments,
short sales and
financial futures and options contracts (21,132,605) 15,692,844
Net change in unrealized appreciation
(depreciation)
on investments and financial futures
contracts (5,202,823) (8,277,832)
------------ ------------
Net increase in net assets resulting
from operations 10,656,998 60,760,661
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS
- ----------------------------------------
From investment income, net 39,460,236 52,124,492
From net realized gain on investments,
short sales and
financial futures and options contracts 1,307,032 16,884,432
------------ ------------
Total Distributions 40,767,268 69,008,924
------------ ------------
CAPITAL SHARE TRANSACTIONS, NET (486,991,142) 168,343,622
------------ ------------
Total increase (decrease) in net assets (517,101,412) 160,095,359
NET ASSETS
- ----------------------------------------
Beginning of Year 815,366,610 655,271,251
------------ ------------
End of Year $298,265,198 $815,366,610
============ ============
UNDISTRIBUTED INVESTMENT INCOME, NET $ 1,602,830 $ 1,498,565
- ----------------------------------------
</TABLE>
See Notes to Financial Statements.
58
<PAGE>
FFTW FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
GLOBAL & INTERNATIONAL PORTFOLIOS
<TABLE>
<CAPTION>
GLOBAL TACTICAL EXPOSURE
PORTFOLIO WORLDWIDE PORTFOLIO
---------------------------- ----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, 1999 DEC. 31, 1998 DEC. 31, 1999 DEC. 31, 1998
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS
FROM OPERATIONS
- ------------------------------
Investment income, net $ 17,371,897 $ 17,207,229 $ 3,033,333 $ 3,964,055
Net realized gain (loss) on
investments, financial
futures and swap contracts,
and foreign currency-related
transactions 13,269,015 (12,347,912) (2,206,357) 6,457,926
Net change in unrealized
appreciation (depreciation)
on investments, financial
futures contracts, and on
translation of assets and
liabilities denominated in
foreign currency (19,353,811) 22,153,203 (4,461,628) 2,451,967
------------- ------------ ----------- ------------
Net increase (decrease) in net
assets resulting from
operations 11,287,101 27,012,520 (3,634,652) 12,873,948
------------- ------------ ----------- ------------
DISTRIBUTIONS TO SHAREHOLDERS
- ------------------------------
From investment income, net 17,233,430 17,207,229 4,356,934 3,964,055
In excess of investment
income, net - 74,921 - 2,391
From net realized gain on
investments, financial
futures and swaps contracts,
and foreign currency-related
transactions - - - 648,984
In excess of net realized gain
on investments, financial
futures and swap
transactions, and foreign
currency-related transactions - 2,764,626 - -
------------- ------------ ----------- ------------
Total Distributions 17,233,430 20,046,776 4,356,934 4,615,430
------------- ------------ ----------- ------------
CAPITAL SHARE TRANSACTIONS,
NET (286,275,510) 133,994,685 6,919,918 (20,841,508)
------------- ------------ ----------- ------------
Total increase (decrease) in
net assets (292,221,839) 140,960,429 (1,071,668) (12,582,990)
NET ASSETS
- ------------------------------
Beginning of Year 423,965,709 283,005,280 69,652,754 82,235,744
------------- ------------ ----------- ------------
End of Year $ 131,743,870 $423,965,709 $68,581,086 $ 69,652,754
============= ============ =========== ============
UNDISTRIBUTED INVESTMENT
INCOME, NET $ 13,733,654 $ 506,074 $ 146,385 $ 1,633,253
- ------------------------------
</TABLE>
See Notes to Financial Statements.
59
<PAGE>
FFTW FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
GLOBAL & INTERNATIONAL PORTFOLIOS
<TABLE>
<CAPTION>
WORLDWIDE-HEDGED PORTFOLIO INTERNATIONAL PORTFOLIO
---------------------------- ----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, 1999 DEC. 31, 1998 DEC. 31, 1999 DEC. 31, 1998
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS
FROM OPERATIONS
- ------------------------------
Investment income, net $ 8,716,264 $ 7,500,941 $ 3,828,509 $ 3,336,012
Net realized gain (loss) on
investments, financial
futures contracts, and
foreign currency-related
transactions (3,581,013) 10,263,492 (4,810,658) 7,774,505
Net change in unrealized
appreciation (depreciation)
on investments, financial
futures contracts, and
translation of assets and
liabilities denominated in
foreign currency (5,499,117) (242,936) (4,455,567) 2,505,110
------------ ------------ ------------ -----------
Net increase (decrease) in net
assets resulting from
operations (363,866) 17,521,497 (5,437,716) 13,615,627
------------ ------------ ------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS
- ------------------------------
From investment income, net 9,960,603 7,500,941 3,828,509 3,336,012
In excess of investment
income, net - 2,012,026 - 3,005,070
From net realized gain on
investments, financial
futures contracts, and
foreign currency-related
transactions 53,774 8,917,381 - 5,026,290
------------ ------------ ------------ -----------
Total Distributions 10,014,377 18,430,348 3,828,509 11,367,372
------------ ------------ ------------ -----------
CAPITAL SHARE TRANSACTIONS,
NET 17,108,839 95,323,789 31,125,201 11,803,979
------------ ------------ ------------ -----------
Total increase in net assets 6,730,596 94,414,938 21,858,976 14,052,234
NET ASSETS
- ------------------------------
Beginning of Year 174,804,535 80,389,597 81,704,872 67,652,638
------------ ------------ ------------ -----------
End of Year $181,535,131 $174,804,535 $103,563,848 $81,704,872
============ ============ ============ ===========
UNDISTRIBUTED (DISTRIBUTIONS
IN EXCESS OF) INVESTMENT
INCOME, NET $ 377,668 $ (1,122,393) $ (1,051,888) $ (934,988)
- ------------------------------
</TABLE>
See Notes to Financial Statements.
60
<PAGE>
FFTW FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
GLOBAL & INTERNATIONAL PORTFOLIOS
<TABLE>
<CAPTION>
EMERGING MARKETS PORTFOLIO
----------------------------
YEAR ENDED YEAR ENDED
DEC. 31, 1999 DEC. 31, 1998
- ----------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
- ----------------------------------------
Investment income, net $ 19,107,924 $ 16,723,142
Net realized loss on investments,
financial futures contracts and foreign
currency-related transactions (17,573,691) (25,017,053)
Net change in unrealized (depreciation)
on investments, financial futures and
swap contracts and on translation of
assets and liabilities denominated in
foreign currency 15,393,253 (15,139,020)
------------ ------------
Net increase (decrease) in net assets
resulting from operations 16,927,486 (23,432,931)
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS
- ----------------------------------------
From investment income, net 19,648,340 14,481,049
From capital stock in excess of par
value - 2,252,464
------------ ------------
Total Distributions 19,648,340 16,733,513
------------ ------------
CAPITAL SHARE TRANSACTIONS, NET (33,568,837) 93,831,710
------------ ------------
Total increase (decrease) in net assets (36,289,691) 53,665,266
NET ASSETS
- ----------------------------------------
Beginning of Year 164,708,715 111,043,449
------------ ------------
End of Year $128,419,024 $164,708,715
============ ============
DISTRIBUTIONS IN EXCESS OF INVESTMENT
INCOME, NET $ (2,864,693) $ (1,275,363)
- ----------------------------------------
</TABLE>
See Notes to Financial Statements.
61
<PAGE>
FFTW FUNDS, INC.
FINANCIAL HIGHLIGHTS
U.S. SHORT-TERM PORTFOLIO
<TABLE>
<CAPTION>
FOR THE YEAR ENDED,
------------------------------------------------
FOR A SHARE OUTSTANDING DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
THROUGHOUT THE PERIOD: 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
- -------------------------
Net asset value,
beginning of period $ 9.76 $ 9.77 $ 9.85 $ 9.88 $ 9.89
INCREASE (DECREASE) FROM
INVESTMENT OPERATIONS
- -------------------------
Investment income, net 0.51 * 0.54 0.57 0.55 0.56
Net realized and
unrealized loss on
investments and
financial futures and
options contracts, and
foreign
currency-related
transactions (0.11) (0.01) (0.08) (0.03) (0.01)
-------- -------- -------- -------- --------
Total from investment
operations 0.40 0.53 0.49 0.52 0.55
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS
- -------------------------
From investment income,
net 0.51 0.54 0.57 0.55 0.56
In excess of investment
income, net - - - - 0.00 **
-------- -------- -------- -------- --------
Total distributions 0.51 0.54 0.57 0.55 0.56
-------- -------- -------- -------- --------
Net asset value, end of
period $ 9.65 $ 9.76 $ 9.77 $ 9.85 $ 9.88
======== ======== ======== ======== ========
TOTAL RETURN 4.26% 5.59% 5.09% 5.45% 5.71%
- -------------------------
RATIOS/SUPPLEMENTAL DATA
- -------------------------
Net assets, end of period
(000's) $650,447 $840,366 $486,906 $355,257 $457,425
Ratio of operating
expenses to average net
assets, exclusive of
interest expense (a) 0.25% 0.25% 0.25% 0.27% 0.40%
Ratio of operating
expenses to average net
assets, inclusive of
interest expense (a) 0.25% 0.25% 0.26% 0.40% 0.51%
Ratio of investment
income, net to average
net assets (a) 5.29% 5.48% 5.78% 5.62% 5.64%
Decrease in above expense
ratios due to waiver of
investment advisory and
administration fees 0.18% 0.17% 0.18% 0.05% 0.07%
</TABLE>
- --------------------------------------------------------------------------------
(a) Net of waivers and reimbursements.
* Calculation done based on average shares outstanding.
** Rounds to less than $0.01.
See Notes to Financial Statements.
62
<PAGE>
FFTW FUNDS, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
LIMITED DURATION PORTFOLIO
<TABLE>
<CAPTION>
FOR THE YEAR ENDED,
------------------------------------------------
FOR A SHARE OUTSTANDING DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
THROUGHOUT THE PERIOD: 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
- -------------------------
Net asset value,
beginning of period $ 9.93 $ 9.93 $ 9.93 $ 10.00 $ 9.55
INCREASE (DECREASE) FROM
INVESTMENT OPERATIONS
- -------------------------
Investment income, net 0.55 * 0.55 0.62 0.55 0.60
Net realized and
unrealized gain (loss)
on investments
financial futures and
options contracts, and
foreign
currency-related
transactions (0.27) 0.11 0.08 (0.04) 0.45
-------- -------- -------- -------- --------
Total from investment
operations 0.28 0.66 0.70 0.51 1.05
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS
- -------------------------
From investment income,
net 0.55 0.55 0.62 0.55 0.60
In excess of investment
income, net - 0.00 ** - 0.00 ** -
From net realized and
unrealized gain on
investments financial
futures and options
contracts and foreign
currency-related
transactions - 0.11 0.08 0.03 -
-------- -------- -------- -------- --------
Total distributions 0.55 0.66 0.70 0.58 0.60
-------- -------- -------- -------- --------
Net asset value, end of
period $ 9.66 $ 9.93 $ 9.93 $ 9.93 $ 10.00
======== ======== ======== ======== ========
TOTAL RETURN 2.88% 6.79% 7.21% 5.29% 11.26%
- -------------------------
RATIOS/SUPPLEMENTAL DATA
- -------------------------
Net assets, end of period
(000's) $100,105 $ 89,521 $ 40,029 $ 42,100 $ 5,080
Ratio of operating
expenses to average net
assets, exclusive of
interest expense (a) 0.30% 0.30% 0.30% 0.31% 0.50%
Ratio of operating
expenses to average net
assets, inclusive of
interest expense (a) 0.30% 0.30% 0.60% 0.49% 1.41%
Ratio of investment
income, net to average
net assets (a) 5.60% 5.48% 6.10% 5.79% 6.09%
Decrease in above expense
ratios due to waiver of
investment advisory
fees and reimbursement
of other expenses 0.24% 0.22% 0.31% 0.15% 0.53%
Portfolio Turnover 823% 1,059% 1,292% 1,387% 1,075%
</TABLE>
- --------------------------------------------------------------------------------
(a) Net of waivers and reimbursements.
* Calculation done based on average shares outstanding.
** Rounds to less than $0.01.
See Notes to Financial Statements.
63
<PAGE>
FFTW FUNDS, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
MORTGAGE-BACKED PORTFOLIO
<TABLE>
<CAPTION>
FOR THE YEAR ENDED,
---------------------------------------- PERIOD FROM
FOR A SHARE OUTSTANDING DECEMBER 31, DECEMBER 31, DECEMBER 31, APRIL 20, 1996*
THROUGHOUT THE PERIOD: 1999 1998 1997 TO DEC. 31, 1996
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE DATA
- ------------------------------
Net asset value, beginning of
period $ 10.18 $ 10.30 $ 10.16 $ 10.00
INCREASE (DECREASE) FROM
INVESTMENT OPERATIONS
- ------------------------------
Investment income, net 0.61 ** 0.68 0.68 0.41
Net realized and unrealized
gain (loss) on investments,
short sales, and financial
futures, swaps and options
contracts (0.49) 0.07 0.32 0.23
-------- -------- -------- --------
Total from investment
operations 0.12 0.75 1.00 0.64
-------- -------- -------- --------
LESS DISTRIBUTIONS
- ------------------------------
From investment income, net 0.64 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, swaps
and options contracts 0.02 0.22 0.18 0.01
-------- -------- -------- --------
Total distributions 0.66 0.87 0.86 0.48
-------- -------- -------- --------
Net asset value, end of period $ 9.64 $ 10.18 $ 10.30 $ 10.16
======== ======== ======== ========
TOTAL RETURN 1.21% 7.42% 10.19% 6.54% (c)
- ------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------
Net assets, end of period
(000's) $298,265 $815,367 $655,271 $220,990
Ratio of operating expenses to
average net assets,
exclusive of interest
expense (a) 0.24% 0.23% 0.38% 0.45% (b)
Ratio of operating expenses to
average net assets,
inclusive of interest
expense (a) 0.24% 0.37% 0.47% 0.88% (b)
Ratio of investment income,
net to average net
assets (a) 6.10% 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% 0.20% 0.07% 0.10% (b)
Portfolio Turnover 745% 843% 3,396% 590%
</TABLE>
- --------------------------------------------------------------------------------
(a) Net of waivers and reimbursements.
(b) Annualized.
(c) Not annualized.
* Commencement of Operations.
** Calculation done using average shares outstanding.
See Notes to Financial Statements.
64
<PAGE>
FFTW FUNDS, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
GLOBAL TACTICAL EXPOSURE PORTFOLIO
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
------------------------------------------------------ PERIOD FROM
FOR A SHARE OUTSTANDING DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, SEPTEMBER 14, 1995* TO
THROUGHOUT THE PERIOD: 1999 1998 1997 1996 DECEMBER 31, 1995
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
- -------------------------
Net asset value,
beginning of period $ 10.25 $ 10.05 $ 9.80 $ 10.19 $ 10.00
INCREASE (DECREASE) FROM
INVESTMENT OPERATIONS
- -------------------------
Investment income, net 0.46 ** 0.52 ** 0.41 0.47 0.19
Net realized and
unrealized gain (loss)
on investments,
financial futures and
swap and options
contracts and foreign
currency-related
transactions (0.17) 0.28 0.43 (0.15) 0.19
-------- -------- -------- -------- --------
Total from investment
operations 0.29 0.80 0.84 0.32 0.38
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS
- -------------------------
From investment income,
net 0.46 0.53 0.36 0.47 0.19
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 -
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 0.46 0.60 0.59 0.71 0.19
-------- -------- -------- -------- --------
Net asset value, end of
period $ 10.08 $ 10.25 $ 10.05 $ 9.80 $ 10.19
======== ======== ======== ======== ========
TOTAL RETURN 2.90% 8.20% 8.77% 3.18% 3.80% (b)
- -------------------------
RATIOS/SUPPLEMENTAL DATA
- -------------------------
Net assets, end of period
(000's) $131,744 $423,966 $283,005 $126,645 $ 34,005
Ratio of operating
expenses to average net
assets, exclusive of
interest expense (a) 0.28% 0.27% 0.42% 0.60% 0.60% (b)
Ratio of operating
expenses to average net
assets, inclusive of
interest expense (a) 4.89% 5.54% 0.42% 0.60% 0.60% (b)
Ratio of investment
income, net to average
net assets (a) 4.51% 5.14% 3.67% 4.65% 6.12% (b)
Decrease in above expense
ratios due to waiver of
investment advisory
fees and reimbursement
of other expenses 0.30% 0.30% 0.16% 0.06% 0.17% (b)
Portfolio Turnover 413% 766% 712% 784% 764%
</TABLE>
- --------------------------------------------------------------------------------
(a) Net of waivers and reimbursements.
(b) Annualized.
(c) Rounds to less than $0.01.
* The portfolio recommenced operations on September 14, 1995.
** Calculation done based on average shares outstanding.
See Notes to Financial Statements.
65
<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: 1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
- -------------------------
Net asset value,
beginning of period $ 10.28 $ 9.42 $ 9.64 $ 9.83 $ 9.27
INCREASE (DECREASE) FROM
INVESTMENT OPERATIONS
- -------------------------
Investment income, net 0.43 * 0.46 0.49 0.53 0.58
Net realized and
unrealized gain (loss)
on investments,
financial futures
contracts and foreign
currency-related
transactions (0.98) 0.96 (0.22) 0.01 0.56
------- ------- ------- ------- -------
Total from investment
operations (0.55) 1.42 0.27 0.54 1.14
------- ------- ------- ------- -------
LESS DISTRIBUTIONS
- -------------------------
From investment income,
net 0.61 0.46 0.19 0.53 0.30
In excess of investment
income, net - - 0.11 - -
From net realized gain on
investments, financial
futures contracts and
foreign
currency-related
transactions - 0.10 - 0.09 -
From capital stock in
excess of par value - - 0.19 0.11 0.28
------- ------- ------- ------- -------
Total distributions 0.61 0.56 0.49 0.73 0.58
------- ------- ------- ------- -------
Net asset value, end of
period $ 9.12 $ 10.28 $ 9.42 $ 9.64 $ 9.83
======= ======= ======= ======= =======
TOTAL RETURN (5.38%) 15.58% 2.93% 5.77% 12.60%
- -------------------------
RATIOS/SUPPLEMENTAL DATA
- -------------------------
Net assets, end of period
(000's) $68,581 $69,653 $82,236 $74,939 $86,186
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% 0.60%
Ratio of investment
income, net to average
net assets (a) 4.51% 4.76% 5.21% 5.52% 6.13%
Decrease in above expense
ratios due to waiver of
investment advisory
fees and reimbursement
of other expenses 0.03% 0.01% 0.02% 0.05% 0.30%
Portfolio Turnover 390% 668% 713% 1,126% 1,401%
</TABLE>
- --------------------------------------------------------------------------------
(a) Net of waivers and reimbursements.
* Calculation done based on average shares outstanding.
See Notes to Financial Statements.
66
<PAGE>
FFTW FUNDS, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
WOLDWIDE-HEDGED PORTFOLIO
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
------------------------------------------------
FOR A SHARE OUTSTANDING DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
THROUGHOUT THE PERIOD: 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
- -------------------------
Net asset value,
beginning of period $ 11.19 $ 11.23 $ 10.91 $ 10.85 $ 10.41
-------- -------- ------- ------- -------
INCREASE (DECREASE) FROM
INVESTMENT OPERATIONS
- -------------------------
Investment income, net 0.51 * 0.59 0.53 0.62 0.45
Net realized and
unrealized gain (loss)
on investments,
financial futures
contracts and foreign
currency-related
transactions (0.53) 0.68 0.80 0.43 0.66
-------- -------- ------- ------- -------
Total from investment
operations (0.02) 1.27 1.33 1.05 1.11
-------- -------- ------- ------- -------
LESS DISTRIBUTIONS
- -------------------------
From investment income,
net 0.59 0.70 0.59 0.62 0.67
In excess of investment
income, net - - - 0.37 -
From net realized gain on
investments, financial
futures contracts and
foreign
currency-related
transactions 0.00 ** 0.61 0.42 - -
-------- -------- ------- ------- -------
Total distributions 0.59 1.31 1.01 0.99 0.67
-------- -------- ------- ------- -------
Net asset value, end of
period $ 10.58 $ 11.19 $ 11.23 $ 10.91 $ 10.85
======== ======== ======= ======= =======
TOTAL RETURN (0.19%) 11.53% 12.60% 10.03% 11.00%
- -------------------------
RATIOS/SUPPLEMENTAL DATA
- -------------------------
Net assets, end of period
(000's) $181,535 $174,805 $80,390 $30,024 $28,255
Ratio of operating
expenses to average net
assets, exclusive of
interest expense (a) 0.45% 0.45% 0.45% 0.45% 0.45%
Ratio of operating
expenses to average net
assets, inclusive of
interest expense (a) 0.45% 0.45% 0.45% 0.45% 0.45%
Ratio of investment
income, net to average
net assets (a) 4.70% 4.85% 5.29% 5.71% 5.84%
Decrease in above expense
ratios due to waiver of
investment advisory
fees and reimbursement
of other expenses 0.14% 0.13% 0.20% 0.24% 0.54%
Portfolio Turnover 404% 745% 704% 1,087% 500%
</TABLE>
- --------------------------------------------------------------------------------
(a) Net of waivers and reimbursements.
* Calculation done based on average shares outstanding.
** Rounds to less than $0.01.
See Notes to Financial Statements.
67
<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, DECEMBER 31, MAY 9, 1996* TO
THROUGHOUT THE PERIOD: 1999 1998 1997 DECEMBER 31, 1996
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE DATA
- ------------------------------
Net asset value, beginning of
period $ 9.68 $ 9.50 $ 10.20 $ 10.00
INCREASE (DECREASE) FROM
INVESTMENT OPERATIONS
- ------------------------------
Investment income, net 0.37 ** 0.48 0.50 0.38
Net realized and unrealized
gain (loss) on investments,
financial futures contracts
and foreign currency-related
transactions (0.98) 1.21 (0.56) 0.28
-------- ------- ------- -------
Total from investment
operations (0.61) 1.69 (0.06) 0.66
-------- ------- ------- -------
LESS DISTRIBUTIONS
- ------------------------------
From investment income, net 0.37 0.45 0.14 0.38
In excess of 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 0.37 1.51 0.64 0.46
-------- ------- ------- -------
Net asset value, end of period $ 8.70 $ 9.68 $ 9.50 $ 10.20
======== ======= ======= =======
TOTAL RETURN (6.34%) 18.35% (0.43%) 6.66% (c)
- ------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------
Net assets, end of period
(000's) $103,564 $81,705 $67,653 $35,746
Ratio of operating expenses to
average net assets (a) 0.60% 0.60% 0.60% 0.60% (b)
Ratio of investment income,
net to average net
assets (a) 4.13% 4.56% 5.19% 5.73% (b)
Decrease in above expense
ratios due to waiver of
investment advisory fees 0.00% # 0.03% 0.10% 0.32% (b)
Portfolio Turnover 569% 1,049% 809% 539%
</TABLE>
- --------------------------------------------------------------------------------
(a) Net of waivers and reimbursements.
(b) Annualized.
(c) Not annualized.
* Commencement of Operations.
** Calculation done based on average shares outstanding.
# Rounds to less than 0.01%.
See Notes to Financial Statements.
68
<PAGE>
FFTW FUNDS, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
EMERGING MARKETS PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED PERIOD FROM
FOR A SHARE OUTSTANDING DECEMBER 31, DECEMBER 31, AUGUST 12, 1997* TO
THROUGHOUT THE PERIOD: 1999 1998 DECEMBER 31, 1997
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE DATA
- -----------------------------------
Net asset value, beginning of
period $ 7.72 $ 9.59 $ 10.00
INCREASE (DECREASE) FROM
INVESTMENT OPERATIONS
- -----------------------------------
Investment income, net 0.78 ** 0.88 0.29
Net realized and unrealized loss on
investments, financial futures
and swap contracts and foreign
currency-related transactions 0.05 (1.86) (0.41)
-------- -------- --------
Total from investment operations 0.83 (0.98) (0.12)
-------- -------- --------
LESS DISTRIBUTIONS
- -----------------------------------
From investment income, net 0.87 0.76 0.29
From capital stock in excess of par
value - 0.13 -
-------- -------- --------
Total distributions 0.87 0.89 0.29
-------- -------- --------
Net asset value, end of period $ 7.68 $ 7.72 $ 9.59
======== ======== ========
TOTAL RETURN 11.73% (10.50%) (1.20%) (b)
- -----------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------
Net assets, end of period (000's) $128,419 $164,709 $111,043
Ratio of operating expenses to
average net assets, exclusive of
interest expense 1.01% 1.00% 1.03% (a)
Ratio of operating expenses to
average net assets, inclusive of
interest expense 1.07% 1.15% 1.03% (a)
Ratio of investment income, net to
average net assets 10.44% 10.52% 7.87% (a)
Portfolio Turnover 137% 157% 16%
</TABLE>
- --------------------------------------------------------------------------------
(a) Annualized.
(b) Not annualized.
* Commencement of Operations.
** Calculation done based on average shares outstanding.
See Notes to Financial Statements.
69
<PAGE>
FFTW FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
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
twenty-one Portfolios, eight of which were active as of December 31, 1999. The
eight active Portfolios are: 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; Global Tactical Exposure Portfolio ("Global Tactical
Exposure"), formerly International-Hedged Portfolio; Worldwide Portfolio
("Worldwide"); Worldwide-Hedged Portfolio ("Worldwide-Hedged"); International
Portfolio ("International"); and Emerging Markets Portfolio ("Emerging
Markets"). 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 Mortgage,
Global Tactical Exposure and Emerging Markets. 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 using the interest method on a daily basis to interest income. The Fund
uses the specific identification method for determining gain or loss on sales of
securities.
VALUATION
All investments are valued daily at their market price, which results in
unrealized gains or losses. Readily marketable fixed-income securities are
valued on the basis of prices provided by a pricing service when such prices are
believed by the Investment Adviser to reflect the fair value of such securities.
Securities traded on an exchange are valued at their last sales price on that
exchange. Securities and other financial instruments 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.
EXPENSES
Expenses directly attributed to each Portfolio in the Fund are charged to that
Portfolio's operations; expenses which are applicable to all Portfolios are
allocated among them based on their relative net asset values.
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.
70
<PAGE>
FFTW FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
At December 31, 1999, 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, 1999,
are treated for federal income tax purposes as arising on the first day of the
Portfolio's next fiscal year.
<TABLE>
- --------------------------------------------------------------------------
CARRYFORWARD EXPIRATION
PORTFOLIO AMOUNT 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
7,649,973 December 31, 2007
Limited Duration 1,379,329 December 31, 2007
Mortgage 19,966,897 December 31, 2007
Worldwide 4,461,157 December 31, 2002
1,826,856 December 31, 2007
Worldwide-Hedged 5,391,817 December 31, 2007
International 1,300,724 December 31, 2007
Emerging Markets 745,596 December 31, 2005
19,253,285 December 31, 2006
12,968,421 December 31, 2007
</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.
Fund management designates the following distributions made by the following
Portfolios during their taxable years ended December 31, 1999 as capital gain
dividends in accordance with subchapter M of the Internal Revenue Code.
<TABLE>
<S> <C>
Mortgage 1,307,032
Worldwide-Hedged 53,774
</TABLE>
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 the treatment of 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
71
<PAGE>
FFTW FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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, 1999, the Portfolios reclassified the
following book to tax differences [increases (decreases)]:
<TABLE>
- -------------------------------------------------------------------------------
UNDISTRIBUTED ACCUMULATED CAPITAL STOCK
INVESTMENT NET REALIZED IN EXCESS OF
PORTFOLIO INCOME, NET GAIN/LOSS PAR VALUE
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Short-Term 35,541 (35,541) --
Limited Duration -- 17,934 (17,934)
Mortgage 2,572,075 (2,572,075) --
Global-Tactical Exposure 13,089,113 (13,089,113) --
Worldwide (163,267) 163,267 --
Worldwide-Hedged 2,744,400 (2,744,400) --
International (116,900) 3,526,307 (3,409,407)
Emerging Markets (1,589,330) 5,299,306 (3,709,976)
</TABLE>
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 Limited Duration, Mortgage, Global Tactical
Exposure, International, and Emerging Markets.
72
<PAGE>
FFTW FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
3. INVESTMENT ADVISORY AGREEMENTS AND AFFILIATED TRANSACTIONS (CONTINUED)
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>
- -----------------------------------------------------------------------------
INVESTMENT CURRENT CURRENT
ADVISORY INVESTMENT EXPENSE
PORTFOLIO FEE PER AGREEMENT ADVISORY FEE CAP
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Short-Term 0.30% 0.15% 0.25%
Limited Duration 0.35% 0.15% 0.30%
Mortgage 0.30% 0.10% 0.25%
Global Tactical Exposure 0.40% 0.10% 0.30%
Worldwide 0.40% 0.40% 0.60%
Worldwide-Hedged 0.40% 0.26% 0.45%
International 0.40% 0.40% 0.60%
Emerging Markets 0.75% 0.75% 1.50%
</TABLE>
Directors who are not employees of the Investment Adviser receive an annual
retainer of $35,000 payable quarterly. Directors' fees of $113,750 (including
$26,250 paid to an Advisory Director) were allocated among the Portfolios and
paid for the year ended December 31, 1999. On May 29, 1998, Investors Capital
Services, Inc. became a wholly-owned subsidiary of Investors Bank & 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.
As of December 31, 1999, the Investment Adviser had discretionary investment
advisory agreements with shareholders of the Fund that represent 69.3% of the
Fund's total net assets and therefore, the investment adviser may be deemed a
control person.
4. INVESTMENT TRANSACTIONS
The cost of investments for Federal income tax purposes and the components of
net unrealized appreciation (depreciation) on investments at December 31, 1999,
for each of the Portfolios were as follows:
<TABLE>
- -------------------------------------------------------------------------------------
UNREALIZED UNREALIZED TAX
PORTFOLIO APPRECIATION DEPRECIATION NET COST
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Short-Term $ 83,871 $ 1,693,096 $(1,609,225) $649,445,585
Limited Duration 51,201 965,121 (913,920) 107,360,199
Mortgage 3,495,329 12,403,053 (8,907,724) 540,517,214
Global Tactical Exposure 551,910 6,596,648 (6,044,738) 134,211,747
Worldwide 1,238 3,026,948 (3,025,710) 74,881,319
Worldwide-Hedged 4,589 6,252,104 (6,247,515) 197,214,454
International 123,188 2,996,650 (2,873,462) 115,556,097
Emerging Markets 5,006,266 7,552,705 (2,546,439) 128,989,098
</TABLE>
73
<PAGE>
FFTW FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
4. INVESTMENT TRANSACTIONS (CONTINUED)
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, 1999 for each of the Portfolios were as follows:
<TABLE>
- ---------------------------------------------------------------------------------------
PURCHASE COST OF PROCEEDS FROM SALES OF
PORTFOLIO INVESTMENT SECURITIES INVESTMENT SECURITIES
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Limited Duration $ 872,904,907 $ 890,364,936
Mortgage 7,369,424,291 8,300,885,787
Mortgage (short sale transactions*) 415,609,472 416,108,273
Global Tactical Exposure 1,264,841,194 1,449,693,183
Worldwide 220,538,829 191,585,928
Worldwide-Hedged 590,680,396 525,099,018
International 262,939,784 256,351,834
Emerging Markets 174,184,904 195,875,540
</TABLE>
* Securities sold but not yet purchased.
Mortgage is engaged in short-selling which obligates Mortgage to borrow the
security then replace the security borrowed by purchasing the security at
current market value. Mortgage would incur a loss if the price of the security
increases between the date of the short sale and the date on which Mortgage
purchases the security to cover the short sale. Mortgage would realize a gain if
the price of the security declines between those dates. While Mortgage has a
borrowed security, Mortgage 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, 1999, there were no securities sold short
outstanding.
5. FORWARD FOREIGN EXCHANGE CONTRACTS
Each Portfolio may enter into forward foreign exchange contracts in order to
hedge its exposure to changes in foreign currency exchange rates on its foreign
currency denominated portfolio holdings with counterparties which the
Portfolio's Investment Advisor has deemed creditworthy. A forward foreign
exchange contract is a commitment to purchase or sell a foreign currency at a
future date at a negotiated forward rate. These contracts are valued daily, and
the Portfolio's net equity therein, representing unrealized gain or loss on the
contracts as measured by the difference between the forward foreign exchange
rate at the dates of entry into the contracts and the forward rates at the
reporting date, is included in the statement of assets and liabilities and in
the statement of operations as unrealized gains and losses. Realized 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 in the statement of operations. 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.
74
<PAGE>
FFTW FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
5. FORWARD FOREIGN EXCHANGE CONTRACTS (CONTINUED)
At December 31, 1999, Global Tactical Exposure had outstanding forward foreign
exchange contracts, both to purchase and sell foreign currencies as follows:
<TABLE>
- ------------------------------------------------------------------------------------------
UNREALIZED
CONTRACT COST/ APPRECIATION
AMOUNT PROCEEDS VALUE (DEPRECIATION)
- ------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
FORWARD FOREIGN EXCHANGE BUY CONTRACTS
- ----------------------------------------------
4,235,180 Australian Dollar closing
2/24/00 $ 3,232,222 $ 2,784,673 $ (447,549)
44,733,468 British Pound closing 2/24/00 73,157,998 72,306,282 (851,716)
32,356,744 Canadian Dollar closing
2/24/00 22,346,017 22,444,633 98,616
4,017,200 Danish Krone closing 2/24/00 635,671 545,752 (89,919)
256,687,494 European Monetary Unit closing
2/24/00 266,422,763 259,579,913 (6,842,850)
13,526,453,569 Japanese Yen closing 2/24/00 131,280,171 133,665,011 2,384,840
6,050,000 New Zealand Dollar closing
2/24/00 3,140,555 3,166,671 26,116
180,235,083 Swedish Krona closing 2/24/00 21,267,322 21,276,049 8,727
FORWARD FOREIGN EXCHANGE SELL CONTRACTS
- ----------------------------------------------
4,100,000 Australian Dollar closing
2/24/00 2,617,610 2,695,791 (78,181)
64,065,215 British Pound closing 2/24/00 103,833,746 103,553,733 280,013
32,318,854 Canadian Dollar closing
2/24/00 21,972,879 22,418,350 (445,471)
211,590,460 European Monetary Unit closing
2/24/00 218,507,736 213,974,715 4,533,021
9,800,402,850 Japanese Yen closing 2/24/00 95,400,000 96,845,115 (1,445,115)
6,030,000 New Zealand Dollar closing
2/24/00 2,987,865 3,156,203 (168,338)
376,424,353 Swedish Krona closing 2/24/00 45,443,081 44,435,427 1,007,654
-----------
$(2,030,152)
===========
</TABLE>
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------
CONTRACT CURRENCY TO COST/ CONTRACT CURRENCY TO COST/ UNREALIZED
AMOUNT DELIVER PROCEEDS VALUE AMOUNT RECEIVE PROCEEDS VALUE APPRECIATION
- -----------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C> <C> <C>
FORWARD CROSS CURRENCY CONTRACTS
- -----------------------------------------------------------------------------------------------------------------------
20,764,720 European $21,493,600 $20,998,702 178,560,000 Swedish Krona $21,493,600 $21,078,311 $ 79,609
Monetary closing
Unit closing 2/24/00
2/24/00
13,500,000 European 13,589,219 13,652,121 8,481,375 British Pound 13,589,219 13,709,125 57,004
Monetary closing
Unit closing 2/24/00
2/24/00
--------
$136,613
========
</TABLE>
75
<PAGE>
FFTW FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
5. FORWARD FOREIGN EXCHANGE CONTRACTS (CONTINUED)
At December 31, 1999, Worldwide had outstanding forward foreign exchange
contracts, both to purchase and sell foreign currencies as follows:
<TABLE>
- --------------------------------------------------------------------------------------------------------------
UNREALIZED
CONTRACT COST/ APPRECIATION
AMOUNT PROCEEDS VALUE (DEPRECIATION)
- --------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
FORWARD FOREIGN EXCHANGE BUY CONTRACTS
- --------------------------------------------------------------------
1,408,322 Australian Dollar closing 2/24/00 $ 914,438 $ 925,986 $ 11,548
510,555 British Pound closing 2/24/00 824,930 825,251 321
1,043,872 Canadian Dollar closing 2/24/00 721,424 724,094 2,670
799,794 Danish Krone closing 2/24/00 112,947 108,655 (4,292)
7,981,247 European Monetary Unit closing 2/24/00 8,306,413 8,071,182 (235,231)
1,373,163,856 Japanese Yen closing 2/24/00 13,359,482 13,569,260 209,778
1,200,000 New Zealand Dollar closing 2/24/00 611,880 628,100 16,220
18,873,299 Swedish Krona closing 2/24/00 2,218,614 2,227,920 9,306
FORWARD FOREIGN EXCHANGE SELL CONTRACTS
- --------------------------------------------------------------------
2,294,226 British Pound closing 2/24/00 3,728,851 3,708,340 20,511
588,730 Canadian Dollar closing 2/24/00 399,999 408,380 (8,381)
516,732 European Monetary Unit closing 2/24/00 541,358 522,554 18,804
115,310,250 Japanese Yen closing 2/24/00 1,100,000 1,139,467 (39,467)
1,180,000 New Zealand Dollar closing 2/24/00 584,703 617,632 (32,929)
31,036,110 Swedish Krona closing 2/24/00 3,746,771 3,663,692 83,079
---------
$ 51,937
=========
</TABLE>
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------
CONTRACT CURRENCY TO COST/ CONTRACT CURRENCY TO COST/ UNREALIZED
AMOUNT DELIVER PROCEEDS VALUE AMOUNT RECEIVE PROCEEDS VALUE APPRECIATION
- ---------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C> <C> <C>
FORWARD CROSS CURRENCY CONTRACTS
- ---------------------------------------------------------------------------------------------------------------------
1,539,701 European $ 1,593,619 $ 1,557,051 13,240,000 Swedish $ 1,593,619 $ 1,562,930 $ 5,879
Monetary Krona
Unit closing closing
2/24/00 2/24/00
</TABLE>
76
<PAGE>
FFTW FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
5. FORWARD FOREIGN EXCHANGE CONTRACTS (CONTINUED)
At December 31, 1999, Worldwide-Hedged had outstanding forward foreign exchange
contracts, both to purchase and sell foreign currencies as follows:
<TABLE>
- --------------------------------------------------------------------------------------------------------------
UNREALIZED
CONTRACT COST/ APPRECIATION
AMOUNT PROCEEDS VALUE (DEPRECIATION)
- --------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
FORWARD FOREIGN EXCHANGE BUY CONTRACTS
- --------------------------------------------------------------------
6,050,000 Australian Dollar closing 2/24/00 $ 3,928,325 $ 3,977,935 $ 49,610
4,117,401 British Pound closing 2/24/00 6,909,905 6,665,285 (254,620)
3,800,000 New Zealand Dollar closing 2/24/00 1,937,619 1,988,984 51,365
65,267,812 Swedish Krona closing 2/24/00 7,672,428 7,704,610 32,182
FORWARD FOREIGN EXCHANGE SELL CONTRACTS
- --------------------------------------------------------------------
16,690,233 British Pound closing 2/24/00 27,126,970 26,977,759 149,211
4,880,754 Canadian Dollar closing 2/24/00 3,326,180 3,385,592 (59,412)
13,326,236 Danish Krone closing 2/24/00 1,868,982 1,810,421 58,561
20,243,616 European Monetary Unit closing 2/24/00 21,114,541 20,471,726 642,815
3,630,000 New Zealand Dollar closing 2/24/00 1,798,794 1,900,003 (101,209)
119,340,222 Swedish Krona closing 2/24/00 14,407,102 14,087,648 319,454
---------
$ 887,957
=========
</TABLE>
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------
CONTRACT CURRENCY TO COST/ CONTRACT CURRENCY TO COST/ UNREALIZED
AMOUNT DELIVER PROCEEDS VALUE AMOUNT RECEIVE PROCEEDS VALUE APPRECIATION
- ----------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C> <C> <C>
FORWARD CROSS CURRENCY CONTRACTS
- ----------------------------------------------------------------------------------------------------------------------
4,860,862 European $ 5,031,785 $ 4,915,636 41,800,000 Swedish $ 5,031,785 $ 4,934,327 $ 18,691
Monetary Krona
Unit closing closing
2/24/00 2/24/00
</TABLE>
77
<PAGE>
FFTW FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
5. FORWARD FOREIGN EXCHANGE CONTRACTS (CONTINUED)
At December 31, 1999, International had outstanding forward foreign exchange
contracts, both to purchase and sell foreign currencies as follows:
<TABLE>
- -------------------------------------------------------------------------------------------------------------
UNREALIZED
CONTRACT COST/ APPRECIATION
AMOUNT PROCEEDS VALUE (DEPRECIATION)
- -------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
FORWARD FOREIGN EXCHANGE BUY CONTRACTS
- -------------------------------------------------------------------
4,912,667 Australian Dollar closing 2/24/00 $ 3,189,746 $ 3,230,128 $ 40,382
4,889,402 Canadian Dollar closing 2/24/00 3,367,816 3,391,591 23,775
4,266,240 Danish Krone closing 2/24/00 600,059 579,585 (20,474)
26,805,344 European Monetary Unit closing 2/24/00 27,959,602 27,107,394 (852,208)
2,434,160,854 Japanese Yen closing 2/24/00 23,614,388 24,053,765 439,377
2,000,000 New Zealand Dollar closing 2/24/00 1,019,799 1,046,833 27,034
26,133,389 Swedish Krona closing 2/24/00 3,071,264 3,084,944 13,680
FORWARD FOREIGN EXCHANGE SELL CONTRACTS
- -------------------------------------------------------------------
1,642,983 British Pound closing 2/24/00 2,670,373 2,655,684 14,689
956,686 Canadian Dollar closing 2/24/00 650,000 663,617 (13,617)
2,454,463 European Monetary Unit closing 2/24/00 2,544,781 2,482,120 62,661
218,726,200 Japanese Yen closing 2/24/00 2,050,000 2,161,397 (111,397)
2,030,000 New Zealand Dollar closing 2/24/00 1,005,874 1,062,536 (56,662)
45,599,996 Swedish Krona closing 2/24/00 5,504,966 5,382,902 122,064
---------
$(310,696)
=========
</TABLE>
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------
CONTRACT CURRENCY TO COST/ CONTRACT CURRENCY TO COST/ UNREALIZED
AMOUNT DELIVER PROCEEDS VALUE AMOUNT RECEIVE PROCEEDS VALUE APPRECIATION
- ----------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C> <C> <C>
FORWARD CROSS CURRENCY CONTRACTS
- ----------------------------------------------------------------------------------------------------------------------
2,749,071 European $ 2,845,688 $ 2,780,048 23,640,000 Swedish $ 2,845,688 $ 2,790,610 $ 10,562
Monetary Krona
Unit closing closing
2/24/00 2/24/00
</TABLE>
78
<PAGE>
FFTW FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
5. FORWARD FOREIGN EXCHANGE CONTRACTS (CONTINUED)
At December 31, 1999, Emerging Markets had outstanding forward foreign exchange
contracts, both to purchase and sell foreign currencies as follows:
<TABLE>
- ------------------------------------------------------------------------------------------------------------
UNREALIZED
CONTRACT COST/ APPRECIATION
AMOUNT PROCEEDS VALUE (DEPRECIATION)
- ------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
FORWARD FOREIGN EXCHANGE BUY CONTRACTS
- --------------------------------------------------------------------
5,455,000 Argentinean Peso closing 6/26/00 $5,000,000 $5,351,885 $351,885
2,630,000,000 Chilean Peso closing 1/12/00 5,000,000 4,964,156 (35,844)
21,360,000,000 Indonesian Rupiah closing 1/24/00 2,925,627 3,055,392 129,765
234,000,000 Phillipine Peso closing 1/28/00 5,708,709 5,802,574 93,865
33,189,750 South African Rand closing 2/24/00 5,333,829 5,350,740 16,911
--------
$556,582
========
</TABLE>
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------
CONTRACT CURRENCY TO COST/ CONTRACT CURRENCY TO COST/ UNREALIZED
AMOUNT DELIVER PROCEEDS VALUE AMOUNT RECEIVE PROCEEDS VALUE APPRECIATION
- ----------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C> <C> <C>
FORWARD CROSS CURRENCY CONTRACTS
- ----------------------------------------------------------------------------------------------------------------------
4,653,709 European $ 4,829,738 $ 4,706,148 170,000,000 Czech $ 4,829,738 $ 4,755,466 $ 49,318
Monetary Republic
Unit closing Koruna
2/24/00 closing
2/24/00
</TABLE>
Each Portfolio may enter into foreign currency transactions on the spot markets
(foreign currency translations that settle in two days) 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, 1999, no
Portfolio had an outstanding purchase or sale of foreign currency on the spot
markets.
6. FINANCIAL FUTURES CONTRACTS
Each Portfolio may enter into financial futures contracts with counterparties,
which the Portfolio's Investment Advisor has deemed creditworthy, to hedge its
interest rate and foreign currency risk. Hedging theoretically reduces market
risk, and exposure exists to the extent there is a related imperfect
correlation. The use of futures contracts involves the risk of imperfect
correlation in movement in the price of futures contracts, interest rates
compared to the underlying hedged assets.
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, 1999, the Portfolios placed U.S. Treasury Bills, other liquid
securities or cash in
79
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FFTW FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
6. FINANCIAL FUTURES CONTRACTS (CONTINUED)
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>
- ------------------------------------------------------------------------
DECEMBER 31, 1999
PORTFOLIO COLLATERAL VALUE
- ------------------------------------------------------------------------
<S> <C>
U.S. Short-Term $1,963,874
Mortgage 4,566,007
Global Tactical Exposure 3,718,338
Worldwide 489,255
Worldwide-Hedged 880,659
International 636,031
Emerging Markets 587,106
</TABLE>
As of December 31, 1999, U.S. Short-Term had the following open financial
futures contracts:
<TABLE>
- ----------------------------------------------------------------------------
NOTIONAL VALUE
OF UNREALIZED
CONTRACTS CONTRACTS DEPRECIATION
- ----------------------------------------------------------------------------
<C> <S> <C> <C>
LONG FUTURES CONTRACTS:
- ----------------------------------------------
164 March 2000 2-Year U.S. Treasury $32,571,938 $(160,151)
Notes
338 March 2000 EuroDollars 79,290,575 (68,590)
108 June 2000 EuroDollars 25,251,750 (53,879)
---------
$(282,620)
=========
</TABLE>
As of December 31, 1999, Mortgage had the following open financial futures
contracts:
<TABLE>
- ---------------------------------------------------------------------------------------------
NOTIONAL VALUE
OF UNREALIZED
CONTRACTS CONTRACTS APPRECIATION
- ---------------------------------------------------------------------------------------------
<C> <S> <C> <C>
SHORT FUTURES CONTRACTS:
- ---------------------------------------------------------------
168 March 2000 2-Year U.S. Treasury Notes $16,104,375 $223,233
363 March 2000 5-Year U.S. Treasury Notes 35,579,672 384,322
58 March 2000 10-Year U.S. Treasury Notes 11,519,344 58,004
--------
$665,559
========
</TABLE>
80
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FFTW FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
6. FINANCIAL FUTURES CONTRACTS (CONTINUED)
As of December 31, 1999, Global Tactical Exposure had the following open
financial futures contracts:
<TABLE>
- ------------------------------------------------------------------------------
NOTIONAL VALUE UNREALIZED
OF APPRECIATION
CONTRACTS CONTRACTS (DEPRECIATION)
- ------------------------------------------------------------------------------
<C> <S> <C> <C>
LONG FUTURES CONTRACTS:
- ----------------------------------------------
30 March 2000 TSE Japanese Gov't. $39,015,864 $ 509,861
10-Year Bonds
54 March 2000 Euro Bundes 5,645,464 (136,568)
SHORT FUTURES CONTRACTS:
- ----------------------------------------------
96 March 2000 Euro Bobl 9,957,355 101,392
91 March 2000 British Long Gilts 16,365,311 202,202
---------
$ 676,887
=========
</TABLE>
As of December 31, 1999, Worldwide had the following open financial futures
contracts:
<TABLE>
- ------------------------------------------------------------------------------
NOTIONAL VALUE UNREALIZED
OF APPRECIATION
CONTRACTS CONTRACTS (DEPRECIATION)
- ------------------------------------------------------------------------------
<C> <S> <C> <C>
LONG FUTURES CONTRACTS:
- ----------------------------------------------
5 March 2000 TSE Japanese Gov't $6,502,644 $ 85,582
10-Year Bonds
59 March 2000 Euro Bobl 6,138,543 (29,731)
SHORT FUTURES CONTRACTS:
- ----------------------------------------------
5 March 2000 5-Year U.S. Treasury 490,078 3,761
Notes
43 March 2000 10-Year U.S. Treasury 4,121,953 81,056
Notes
50 March 2000 Euro Bundes 5,243,442 50,877
--------
$191,545
========
</TABLE>
81
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FFTW FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
6. FINANCIAL FUTURES CONTRACTS (CONTINUED)
As of December 31, 1999, Worldwide-Hedged had the following open financial
futures contracts:
<TABLE>
- ------------------------------------------------------------------------------
NOTIONAL VALUE UNREALIZED
OF APPRECIATION
CONTRACTS CONTRACTS (DEPRECIATION)
- ------------------------------------------------------------------------------
<C> <S> <C> <C>
LONG FUTURES CONTRACTS:
- ----------------------------------------------
12 March 2000 TSE Japanese Gov't $15,606,345 $ 185,067
10-Year Bonds
199 March 2000 Euro Bobl 20,704,577 (100,045)
SHORT FUTURES CONTRACTS:
- ----------------------------------------------
15 March 2000 5-Year U.S. Treasury 1,470,234 11,283
Notes
140 March 2000 10-Year U.S. Treasury 13,420,313 263,905
Notes
28 March 2000 British Long Gilts 5,041,665 100,421
3 March 2000 Euro Bundes 314,607 2,953
---------
$ 463,584
=========
</TABLE>
As of December 31, 1999, International had the following open financial futures
contracts:
<TABLE>
- ------------------------------------------------------------------------------
NOTIONAL VALUE UNREALIZED
OF APPRECIATION
CONTRACTS CONTRACTS (DEPRECIATION)
- ------------------------------------------------------------------------------
<C> <S> <C> <C>
LONG FUTURES CONTRACTS:
- ----------------------------------------------
7 March 2000 TSE Japanese Gov't $ 9,103,702 $ 99,806
10-Year Bonds
21 March 2000 10-Year U.S. Treasury 2,013,045 (36,539)
Notes
134 March 2000 Euro Bobl 13,941,775 (110,775)
26 March 2000 Euro Bundes 2,726,590 (63,408)
SHORT FUTURES CONTRACTS:
- ----------------------------------------------
7 March 2000 British Long Gilts 1,260,416 26,433
---------
$ (84,483)
=========
</TABLE>
82
<PAGE>
FFTW FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
6. FINANCIAL FUTURES CONTRACTS (CONTINUED)
As of December 31, 1999, Emerging Markets had the following open financial
futures contracts:
<TABLE>
- ----------------------------------------------------------------------------
NOTIONAL VALUE
OF UNREALIZED
CONTRACTS CONTRACTS APPRECIATION
- ----------------------------------------------------------------------------
<C> <S> <C> <C>
SHORT FUTURES CONTRACTS:
- ----------------------------------------------
35 March 2000 U.S. Long Bonds $3,182,813 $ 94,141
11 March 2000 U.S. 5-Year Notes 1,078,172 11,626
26 March 2000 U.S. 10-Year Notes 2,492,344 49,417
--------
$155,184
========
</TABLE>
7. CAPITAL STOCK TRANSACTIONS
As of December 31, 1999, there were 5,000,000,000 shares of $0.001 par value
capital stock authorized.
Transactions in capital stock for U.S. Short-Term were as follows for the
periods indicated:
<TABLE>
- ----------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 604,668,913 $5,863,374,459 883,180,967 $8,636,306,700
Shares issued related to
reinvestment of dividends 3,459,023 33,530,633 3,557,660 34,776,941
----------- -------------- ----------- --------------
608,127,936 5,896,905,092 886,738,627 8,671,083,641
Shares redeemed 626,803,398 6,079,632,280 850,486,394 8,315,384,728
----------- -------------- ----------- --------------
Net increase (decrease) (18,675,462) $(182,727,188) 36,252,233 $ 355,698,913
=========== ============== =========== ==============
</TABLE>
Transactions in capital stock for Limited Duration were as follows for the
periods indicated:
<TABLE>
- --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
---------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 9,005,840 $88,352,801 10,680,290 $106,723,144
Shares issued related to
reinvestment of dividends 505,491 4,941,241 545,455 5,446,193
--------- ----------- ---------- ------------
9,511,331 93,294,042 11,225,745 112,169,337
Shares redeemed 8,161,803 80,302,493 6,243,321 62,348,719
--------- ----------- ---------- ------------
Net increase 1,349,528 $12,991,549 4,982,424 $ 49,820,618
========= =========== ========== ============
</TABLE>
83
<PAGE>
FFTW FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
7. CAPITAL STOCK TRANSACTIONS (CONTINUED)
Transactions in capital stock for Mortgage were as follows for the periods
indicated:
<TABLE>
- ------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
-------------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold - $ - 39,025,398 $403,050,000
Shares issued related to
reinvestment of dividends 3,855,269 38,275,178 6,638,891 68,466,878
----------- ------------- ---------- ------------
3,855,269 38,275,178 45,664,289 471,516,878
Shares redeemed (53,000,715) (525,266,320) 29,176,443 303,173,256
----------- ------------- ---------- ------------
Net increase (decrease) (49,145,446) $(486,991,142) 16,487,846 $168,343,622
=========== ============= ========== ============
</TABLE>
Transactions in capital stock for Global Tactical Exposure were as follows for
the periods indicated:
<TABLE>
- ------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
-------------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 3,712,375 $ 38,000,000 13,695,844 $139,000,000
Shares issued related to
reinvestment of dividends 1,663,328 16,960,963 1,972,986 20,020,277
----------- ------------- ---------- ------------
5,375,703 54,960,963 15,668,830 159,020,277
Shares redeemed 33,678,625 341,236,473 2,457,580 25,025,592
----------- ------------- ---------- ------------
Net increase (decrease) (28,302,922) $(286,275,510) 13,211,250 $133,994,685
=========== ============= ========== ============
</TABLE>
Transactions in capital stock for Worldwide were as follows for the periods
indicated:
<TABLE>
- --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
---------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 839,957 $7,922,263 1,355,632 $ 13,503,235
Shares issued related to
reinvestment of dividends 268,901 2,541,613 351,950 3,437,295
--------- ----------- ---------- ------------
1,108,858 10,463,876 1,707,582 16,940,530
Shares redeemed 363,580 3,543,958 3,666,125 37,782,038
--------- ----------- ---------- ------------
Net increase (decrease) 745,278 $6,919,918 (1,958,543) $(20,841,508)
========= =========== ========== ============
</TABLE>
84
<PAGE>
FFTW FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
7. CAPITAL STOCK TRANSACTIONS (CONTINUED)
Transactions in capital stock for Worldwide-Hedged were as follows for the
periods indicated:
<TABLE>
- --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
---------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 4,423,094 $48,206,643 8,577,164 $ 97,208,680
Shares issued related to
reinvestment of dividends 917,109 9,937,225 1,624,885 18,421,804
--------- ----------- ---------- ------------
5,340,203 58,143,868 10,202,049 115,630,484
Shares redeemed 3,808,644 41,035,029 1,740,289 20,306,695
--------- ----------- ---------- ------------
Net increase 1,531,559 17,108,839 8,461,760 $ 95,323,789
========= =========== ========== ============
</TABLE>
Transactions in capital stock for International were as follows for the periods
indicated:
<TABLE>
- ------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
---------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 3,963,200 $35,606,252 4,369,703 $43,727,753
Shares issued related to
reinvestment of dividends 429,515 3,827,646 1,164,157 11,290,681
--------- ----------- --------- -----------
4,392,715 39,433,898 5,533,860 55,018,434
Shares redeemed 925,952 8,308,697 4,220,805 43,214,455
--------- ----------- --------- -----------
Net increase 3,466,763 $31,125,201 1,313,055 $11,803,979
========= =========== ========= ===========
</TABLE>
Transactions in capital stock for Emerging Markets were as follows for the
periods indicated:
<TABLE>
- ---------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
------------------------ -----------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 9,878,273 $75,900,000 8,316,238 $81,000,000
Shares issued related to
Reinvestment of dividends 2,568,485 19,223,364 2,032,162 16,696,296
---------- ------------ ---------- -----------
12,446,758 95,123,364 10,348,400 97,696,296
Shares redeemed 17,078,248 128,692,201 576,713 3,864,586
---------- ------------ ---------- -----------
Net increase (decrease) (4,631,490) $(33,568,837) 9,771,687 $93,831,710
========== ============ ========== ===========
</TABLE>
8. REPURCHASE AND REVERSE REPURCHASE AGREEMENTS
Each Portfolio may enter into repurchase agreements under which a bank or
securities firm which the Portfolio's Investment Advisor has deemed creditworthy
that is a primary or reporting dealer in U.S. Government securities
85
<PAGE>
FFTW FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
8. REPURCHASE AND REVERSE REPURCHASE AGREEMENTS (CONTINUED)
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. Reverse repurchase agreements involve the risk that the market value of
the securities purchased with the proceeds from the sale of securities received
by the Portfolio may decline below the price of the securities that the
Portfolio is obligated to repurchase. If the value of the underlying securities
falls below the value of the repurchase price plus accrued interest, the
Portfolio will require the seller to deposit additional collateral by the next
business day. If the request for additional collateral is not met, or the seller
defaults on its repurchase obligation, such Portfolio maintains the right to
sell the underlying securities at market value and may claim any resulting loss
against the seller.
Each Portfolio is also permitted to enter into reverse repurchase agreements
under which a primary or reporting dealer in U.S. Government securities
purchases U.S. Government securities from a Portfolio and such Portfolio agrees
to repurchase the securities at an agreed upon price and date. 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, 1999, the average amount of reverse repurchase
agreements outstanding was $453,131 and the weighted average interest rate was
5.54% for U.S. Short Term, the only Portfolio to engage in reverse repurchase
agreements during the year.
9. OPTIONS TRANSACTIONS
For hedging purposes, each Portfolio may purchase or 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 fail to perform.
Put and call options purchased are accounted for in the same manner as portfolio
securities. Investments in option contracts require the Portfolio to "mark to
market" option contracts on a daily basis which reflects the change in the
market value of the contracts at the close of each day's trading. 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
purchased 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 written 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 written 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
86
<PAGE>
FFTW FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
9. OPTIONS TRANSACTIONS (CONTINUED)
option. Exercise of an option written by the Portfolio could result in the
Portfolio selling or buying a security or currency at a price different from the
current market value.
A summary of put and call options written by U.S. Short-Term for the year ended
December 31, 1999 is as follows:
<TABLE>
- ---------------------------------------------------------------------
CALLS PUTS
----------------- ------------------
# OF # OF
CONTRACTS PREMIUMS CONTRACTS PREMIUMS
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
OUTSTANDING, BEGINNING OF YEAR - $ - - $ -
OPTIONS WRITTEN
- ----------------------------------------
U.S. Treasury 250 78,125 250 264,225
OPTIONS CLOSED
- ----------------------------------------
U.S. Treasury 250 78,125 250 264,225
--- ------- --- --------
OUTSTANDING, END OF YEAR - $ - - $ -
=== ======= === ========
</TABLE>
Net realized loss on written options transactions for the year ended December
31, 1999 was $157,943.
A summary of put and call options written by Mortgage for the year ended
December 31, 1999 is as follows:
<TABLE>
- ---------------------------------------------------------------------
CALLS PUTS
------------------ -----------------
# OF # OF
CONTRACTS PREMIUMS CONTRACTS PREMIUMS
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
OUTSTANDING, BEGINNING OF YEAR - $ - - $ -
OPTIONS WRITTEN
- ----------------------------------------
FNMA 46 115,000 - -
OPTIONS CLOSED
- ----------------------------------------
FNMA 46 115,000 - -
-- -------- -- ---
OUTSTANDING, END OF YEAR - $ - - $ -
== ======== == ===
</TABLE>
Net realized gain on written options transactions for the year ended December
31, 1999 was $115,000.
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 include a possibility that no liquid
market exists for these obligations, the counterparty may default on its
obligation, or unfavorable changes may exist in the value of underlying
securities or indices related to a 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.
87
<PAGE>
FFTW FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
10. SWAP TRANSACTIONS (CONTINUED)
Global Tactical Exposure entered into a swap agreement under which it 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 the swap 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 consists of 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, 1999, Global Tactical Exposure had one outstanding swap contract
with Morgan Guaranty Trust Company of New York broken down into three components
with the following terms:
<TABLE>
- --------------------------------------------------------------------------------------------------
NOTIONAL TERMINATION PAYMENTS MADE PAYMENTS RECEIVED
AMOUNT DATE BY THE PORTFOLIO BY THE PORTFOLIO
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$35,000,000 11/3/00 % change in JP Morgan Index LIBOR minus .28%
35,000,000 11/3/00 % change in JP Morgan Index LIBOR minus .26%
40,000,000 11/3/00 % change in JP Morgan Index LIBOR minus .28%
</TABLE>
Emerging Markets Portfolio entered into a swap agreement under which it agrees
to pay a specified rate based on the notional amount. The Portfolio receives
payment upon a default of an underlying security.
Emerging Markets Portfolio records a net receivable or payable on a daily basis
for the amount expected to be received or paid during the period. The swap is
marked-to-market on a monthly basis and this amount is recorded as unrealized
gain or loss on the Statement of Operations.
At December 31, 1999, Emerging Markets had one outstanding swap contract with
Goldman Sachs International of New York with the following terms:
<TABLE>
- --------------------------------------------------------------------------------------------------
NOTIONAL TERMINATION PAYMENTS MADE PAYMENTS RECEIVED
AMOUNT DATE BY THE PORTFOLIO BY THE PORTFOLIO
- --------------------------------------------------------------------------------------------------
<C> <C> <C> <S>
$ 5,000,000 8/10/09 $5,000,000 multiplied by 4.65% per The Portfolio receives payment only
year upon default by United Mexican
States, of a 11.5% bond due
5/15/2026. Upon default, the
Portfolio shall receive $5,000,000.
</TABLE>
Subsequent to year-end, Emerging Markets closed its swap contract. At the time
the swap was closed, $633,131 was paid and a loss of $518,819 was realized.
11. INTEREST ONLY AND PRINCIPAL ONLY SECURITIES
Stripped mortgage-backed securities are derivative multi-class mortgage
securities structured so that one class receives most, if not all, of the
principal from the mortgage assets ("POs"), while the other class receives most,
if not all, of the interest ("IOs"). POs do not pay interest, its return is
solely based on payment of principal at maturity. If the
88
<PAGE>
FFTW FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
11. INTEREST ONLY AND PRINCIPAL ONLY SECURITIES (CONTINUED)
underlying mortgage assets experience greater than anticipated prepayments of
principal, a portfolio may fail to fully recoup its initial investment in an IO.
The fair market value of these securities is unusually volatile in response to
changes in interest rates. Mortgage invests in IO and PO securities whose
issuers are deemed creditworthy by the Investment Advisor.
12. 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 except for the initial margin of
futures contracts. 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.
89
<PAGE>
FFTW FUNDS, INC.
ADDITIONAL INFORMATION
DECEMBER 31, 1999
Change in Independent Auditor: On August 13, 1999, based upon the recommendation
of the Audit Committee of the Fund, the Board of Directors determined not to
retain Ernst & Young LLP. ("Ernst & Young") as the Fund's independent auditor
and voted to appoint KPMG LLP. During the Fund's two most recent fiscal years,
Ernst & Young's audit reports contained no adverse opinion or disclaimer of
opinion; nor were the reports qualified or modified as to uncertainty, audit
scope, or accounting principles. Further, during this same period there were no
disagreements with Ernst and Young on any matter of accounting principles or
practices, financial statement disclosure, or audit scope or procedure, which
disagreements, if not resolved to the satisfaction of Ernst & Young, would have
caused it to make reference to the subject matter of such disagreements in
connection with its audit reports. The Fund requested Ernst & Young to provide a
letter to the Securities and Exchange Commission stating whether Ernst & Young
agrees with the foregoing statements, and to provide the Fund with a copy of
such letter. A copy of this letter is available upon request by calling the Fund
at (212) 332-5211.
90
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FFTW FUNDS, INC.
REPORT OF INDEPENDENT AUDITORS
DECEMBER 31, 1999
The Board of Directors and Shareholders
FFTW Funds, Inc.
We have audited the accompanying statements of assets and liabilities
including the schedules of investments, of FFTW Funds, Inc. (comprising, U.S.
Short-Term, Limited Duration, Mortgage-Backed, Global Tactical Exposure,
Worldwide, Worldwide-Hedged, International, and Emerging Markets Portfolios)
(the "Funds") as of December 31, 1999, and the related statements of operations,
statements of changes in net assets and financial highlights for the year then
ended. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits. The statements of changes in net assets for the period ended December
31, 1998 and financial highlights for each of the periods in the four-year
period ended December 31, 1998 were audited by other auditors whose report
thereon dated February 22, 1999, expressed an unqualified opinion on those
financial statements and financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1999, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the 1999 financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of the Funds as of December 31, 1999, the results of their operations,
the changes in their net assets, and their financial highlights for the year
then ended, in conformity with generally accepted accounting principles.
[SIG]
New York, New York
February 23, 2000
91
<PAGE>
OFFICERS & DIRECTORS AND OTHER PERTINENT INFORMATION
- --------------------------------------------------------------------------------
OFFICERS AND DIRECTORS
Stephen P. Casper
DIRECTOR OF THE FUND
John C Head III
DIRECTOR OF THE FUND
Saul H. Hymans
DIRECTOR OF THE FUND
Lawrence B. Krause
DIRECTOR OF THE FUND
Andrea Redmond
DIRECTOR OF THE FUND
Onder John Olcay
CHAIRMAN OF THE BOARD AND
PRESIDENT OF THE FUND
William E. Vastardis
SECRETARY AND TREASURER OF THE FUND
Carla E. Dearing
ASSISTANT TREASURER OF THE FUND
INVESTMENT ADVISER
Fischer Francis Trees & Watts, Inc.
200 Park Avenue
New York, NY 10166
SUB-ADVISER
Fischer Francis Trees & Watts
3 Royal Court
The Royal Exchange
London, EC3V 3RA
ADMINISTRATOR
Investors Capital Services, Inc.
600 Fifth Avenue, 26th Floor
New York, NY 10020
DISTRIBUTOR
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
KPMG LLP
757 Third Avenue
New York, NY 10017
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