Short-Term World Income Portfolio
Annual Report
October 31, 1995
<PAGE>
Short-Term World Income Portfolio
Portfolio of Investments
October 31, 1995
- - --------------------------------------------------------------------------------
Principal Value
Amount* (Note 1)
(Local Currency) (U.S. $)
---------------- ------------
BONDS & NOTES - 61.2%
Canada - 4.8%
Government of Canada,
8.00%, due 3/15/97 ................ CAD 3,180,000 $2,421,217
-------------
Netherlands - 4.9%
Government of The Netherlands,
6.25%, due 7/15/98 ................ NLG 3,810,000 2,499,503
-------------
United States - 51.5%
Federal Home Loan Bank
6.10%, due 9/18/00 ................ USD 5,000,000 5,010,938
U. S. Treasury Notes,
5.875%, due 7/31/97 ............... USD 5,000,000 5,018,750
7.25%, due 2/15/98 ................ USD 5,000,000 5,163,281
7.75%, due 11/30/99 ............... USD 3,500,000 3,742,266
6.875%, due 3/31/00 ............... USD 7,000,000 7,283,280
-------------
26,218,515
-------------
TOTAL BONDS AND NOTES (Identified Cost $30,772,883).............. 31,139,235
-------------
COMMERCIAL PAPER - 37.9%
Columbia/HCA Healthcare
due 11/7/95 ....................... USD 2,000,000 1,998,033
Conagra Holdings
due 11/27/95 ...................... USD 2,000,000 1,991,806
Crown, Cork & Seal
due 11/1/95 ....................... USD 2,000,000 2,000,000
See notes to financial statements.
<PAGE>
Short-Term World Income Portfolio
Portfolio of Investments (continued)
October 31, 1995
- - --------------------------------------------------------------------------------
Principal Value
Amount* (Note 1)
(Local Currency) (U.S. $)
---------------- ------------
Mattel, Inc. ..........................
due 11/14/95 ...................... USD 2,000,000 $1,995,768
RJR-Nabisco
due 12/1/95 ....................... USD 1,000,000 995,083
Ralston Purina
due 11/1/95 ....................... USD 3,092,000 3,092,000
Reynolds Metal Co. ....................
due 11/2/95 ....................... USD 2,000,000 1,999,675
Texas Electric Utilities
due 11/9/95 ....................... USD 1,205,000 1,203,420
Unocal
due 11/3/95 ....................... USD 2,000,000 1,999,348
Whitman Corporation
due 11/13/95 ...................... USD 2,000,000 1,996,087
----------
TOTAL COMMERCIAL PAPER (Identified Cost $19,270,381)............ 19,271,220
----------
TOTAL INVESTMENTS - 99.1%
(Identified Cost $50,043,264) .................................. 50,410,455
-----------
Other Assets less Liabilities - 0.9% ........................... 473,758
-----------
NET ASSETS - 100% .............................................. $50,884,213
===========
* Principal amount is stated in the currency in which the security is
denominated.
CAD: Canadian Dollars
NLG: Netherlands Guilder
USD: United States Dollar
See notes to financial statements.
<PAGE>
Short-Term World Income Portfolio
Statement of Assets and Liabilities
October 31, 1995
- - --------------------------------------------------------------------------------
Assets:
Investments in securities, at market value (cost $50,043,264)
(Notes 1 and 3) - see Portfolio of Investments $50,410,455
Cash 10,495
Net unrealized appreciation on forward foreign currency contracts
purchased (Notes 1 and 4) 38,121
Foreign currency (cost $153,957) 153,957
Interest receivable 413,376
Deferred organization expenses (Note 1) 28,450
-----------
Total assets 51,054,854
-----------
Liabilities:
Fund accounting and custody fees payable 23,334
Advisory fee payable (Note 2) 11,112
Administration fee payable (Note 2) 2,222
Other liabilities 133,973
-----------
Total liabilities 170,641
-----------
Net assets applicable to investors'
beneficial interests $50,884,213
============
See notes to financial statements.
<PAGE>
Short-Term World Income Portfolio
Statement of Operations
For the year ended
October 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment Income:
Interest income (Note 1) $ 5,092,472
Foreign taxes withheld (61,976)
---------------
Total investment income 5,030,496
---------------
Expenses:
Advisory fees (Note 2) 190,481
Custody fees 114,017
Audit fees 66,230
Fund accounting fees (Note 2) 44,921
Administration fees (Note 2) 38,096
Legal fees 22,910
Insurance fees 19,469
Amortization of organization expenses (Note 1) 16,483
Trustees' fees and expenses (Note 2) 14,223
Other expenses 60,752
---------------
Total expenses 587,582
---------------
Net investment income 4,442,914
---------------
Realized and Unrealized Gain (Loss) on Investments (Notes 1, 3, and 4):
Net realized gain (loss) on:
Investment securities $ 89,311
Foreign currency contracts and transactions 1,754,659 1,843,970
--------------
Net unrealized appreciation (depreciation) on:
Investment securities (993,071)
Foreign currency contracts and translations 623,430 (369,641)
-------------- ---------------
Net realized and unrealized gain on investments and
foreign currency transactions 1,474,329
---------------
Net increase in net assets resulting from operations $ 5,917,243
===============
</TABLE>
See notes to financial statements.
<PAGE>
Short-Term World Income Portfolio
Statement of Changes in Net Assets
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the year ended October 31,
-------------------------------------------------
Increase (Decrease) in Net Assets: 1995 1994
------------------- -----------------------
<S> <C> <C>
Operations:
Net investment income $4,442,914 $12,047,475
Net realized gain (loss) from investments and
foreign currency transactions 1,843,970 (17,548,040)
Net unrealized depreciation on investments and
foreign currency translations (369,641) (382,899)
------------------- -----------------------
Net increase (decrease) in net assets resulting
from operations 5,917,243 (5,883,464)
------------------- -----------------------
Transactions in Investors' Beneficial Interests:
Additions 670,918 89,193,871
Reductions (64,527,159) (157,778,942)
------------------- -----------------------
Net decrease in net assets resulting from
transactions in investors' beneficial interests (63,856,241) (68,585,071)
------------------- -----------------------
Net decrease in net assets (57,938,998) (74,468,535)
Net Assets:
Beginning of year 108,823,211 183,291,746
------------------- -----------------------
End of year $50,884,213 $108,823,211
=================== =======================
</TABLE>
See notes to financial statements.
<PAGE>
Short-Term World Income Portfolio
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the period
ended
For the year ended October 31, October 31,
----------------------------------------------
1995 1994 1993 1992 (a)
------------- ------------- -------------- --------------------
<S> <C> <C> <C> <C>
Ratios/Supplementary data:
Net investment income to
average net assets 5.83% 6.60% 5.99% 6.51%(b)
Expenses to average net assets 0.77% 0.48% 0.60% 0.60%(b)
Portfolio turnover 264% 192% 37% 10%
<FN>
(a) Comencement of operations, July 20, 1992.
(b) Annualized.
</FN>
</TABLE>
See notes to financial statements.
<PAGE>
Short-Term World Income Portfolio
Notes to Financial Statements
October 31, 1995
- - --------------------------------------------------------------------------------
1. Organization and Significant Accounting Policies. Short-Term World Income
Portfolio (the "Portfolio") is registered under the Investment Company Act of
1940, as amended (the "Act"), as a non-diversified, open-end management
investment company which was organized as a trust under the laws of the State of
New York. The following is a summary of the significant accounting policies of
the Portfolio.
A. Valuation of Investments. Debt securities (other than short-term
obligations maturing in sixty days or less) for which price quotations are
available will normally be valued on the basis of market valuations furnished by
brokers. Short-term obligations and money market securities maturing in sixty
days or less are valued at amortized cost, which approximates market value.
B. Foreign Currency Translation. The accounting records of the
Portfolio are maintained in U.S. dollars. Foreign currency amounts are
translated into U.S. dollars at the current rate of exchange of such currency
against the U.S. dollar to determine the value of investments, other assets and
liabilities. Purchases and sales of securities, and income and expenses are
translated at the prevailing rate of exchange on the respective dates of such
transactions.
C. Forward Foreign Currency Contracts. The Portfolio may enter into
forward foreign currency contracts ("contracts") in connection with planned
purchases or sales of securities, to hedge the U.S. dollar value of portfolio
securities denominated in a foreign currency, or to increase or decrease its
currency exposure. The Portfolio has no specific limitation on the percentage of
assets which may be committed to these types of contracts. The Portfolio could
be exposed to risks if a counterparty to the contracts is unable to meet the
terms of its contracts or if the value of the foreign currency changes
unfavorably. The U.S. dollar value of the foreign currency underlying all
contractual commitments held by the Portfolio is determined using forward
foreign currency exchange rates supplied by a quotation service.
D. Repurchase Agreements. The Portfolio may invest in repurchase
agreements, which are agreements pursuant to which securities are acquired by
the Portfolio from a third party with the commitment that they will be
repurchased by the seller at a fixed price on an agreed upon date.
<PAGE>
Short-Term World Income Portfolio
Notes to Financial Statements (continued)
October 31, 1995
- - --------------------------------------------------------------------------------
The Portfolio may enter into repurchase agreements with banks or lenders meeting
the creditworthiness standards established by the Portfolio's Board of Trustees.
The resale price reflects the purchase price plus an agreed upon market rate of
interest which is unrelated to the coupon rate or date of maturity of the
purchased security.
The use of repurchase agreements involves certain risks. For example, if the
seller of securities under a repurchase agreement defaults on its obligation to
repurchase the underlying securities, the Portfolio will seek to dispose of such
securities, which action could involve costs or delays. To minimize this risk,
securities collateralizing the repurchase agreement will be held by the
custodian at all times in an amount at least equal to the repurchase price,
including accrued interest.
E. Futures Contracts and Options. The Portfolio may invest in futures
contracts and write options. These investments involve to varying degrees,
elements of market risk and risks in excess of the amount recognized in the
Statement of Assets and Liabilities. The face or contract amounts reflect the
involvement the Portfolio has in the particular classes of instruments. Risks
may be caused by an imperfect correlation between movements in the price of the
instruments and the price of the underlying securities and interest rates. Risks
also may arise if there is an illiquid secondary market for the instruments, or
due to the inability of counterparties to perform.
Futures contracts are valued at the settlement price established each day by the
board of trade or exchange on which they are traded. Options traded on an
exchange are valued using the last sale price or, in the absence of a sale, the
last offering price. Options traded over-the-counter are valued using dealer
supplied valuations. There were no open futures contracts at October 31, 1995.
F. Interest Income. Interest income is accrued as earned. Interest
income is recorded net of foreign taxes withheld where recovery of such taxes is
not assured.
G. Income Taxes. The Portfolio will be treated as a partnership for
federal income tax purposes. As such, each investor in the Portfolio will be
taxed on its share of the Portfolio's ordinary income and capital gains. It is
intended that the Portfolio's assets will be managed in such a way that an
investor in the Portfolio will be able to satisfy the requirements of Subchapter
M of the Internal Revenue Code. Accordingly, no provision for United States
federal income or excise tax is necessary.
<PAGE>
Short-Term World Income Portfolio
Notes to Financial Statements (continued)
October 31, 1995
- - --------------------------------------------------------------------------------
H. Deferred Organization Expenses. Expenses incurred by the Portfolio
in connection with its organization are being amortized by the Portfolio on a
straight-line basis over a five year period.
I. Security Transactions. Security transactions are accounted for as of
trade date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. Transactions with Affiliates.
A. Investment Advisory Fee Pursuant to an Investment Advisory Agreement
approved by the Trustees of the Portfolio on May 17, 1995, the Portfolio has
retained Brinson Partners, Inc. ("Brinson"), a wholly-owned investment advisory
subsidiary of Swiss Bank Corporation, to make investment decisions for the
Portfolio effective July 29, 1995. For its services under the Investment
Advisory Agreement, Brinson receives a fee from the Portfolio, computed daily
and paid monthly, at an annual rate not to exceed 0.25% of the Portfolio's
average daily net assets. For the period July 29, 1995 through October 31, 1995,
Brinson received $34,391 in advisory fees. Prior to July 29, 1995 the Portfolio
had retained SBC Portfolio Management International, Inc. ("SBC"), a
wholly-owned investment advisory subsidiary of Swiss Bank Corporation, as the
Portfolio's adviser. For the period November 1, 1994 through July 28, 1995, SBC
received $156,090 in advisory fees.
B. Administration Fee. Pursuant to an Administrative Services
Agreement, the Portfolio has retained SwissKey Fund Services, Inc. ("SFS") to
serve as Administrator and exclusive placement agent. SFS provides
administrative services necessary for the operation of the Portfolio, furnishes
office space and facilities required for conducting the business of the
Portfolio and pays the compensation of the Portfolio's officers affiliated with
SFS. For its services under the Administrative Services Agreement, SFS receives
a fee from the Portfolio, computed daily and paid monthly, at an annual rate not
to exceed 0.05% of the Portfolio's average daily net assets.
C. Trustee Fees. Each Trustee who is not an "interested person" (as
defined in the Act) of the Fund receives an annual retainer prorated by the net
assets of the Short-Term World Income Portfolio, and its respective feeder
<PAGE>
Short-Term World Income Portfolio
Notes to Financial Statements (continued)
October 31, 1995
- - --------------------------------------------------------------------------------
funds. Each Trustee is also reimbursed for out-of-pocket expenses incurred in
connection with committee or board meetings. For the fiscal year ended October
31, 1995, the Portfolio accrued $14,223 in Trustee fees and expenses.
D. Fund Accounting Fees. On December 15, 1994, the Trustees of the
Portfolio, retroactively to September 19, 1994, approved a Fund Accounting
Agreement with Signature Financial Services, Inc. ("SFSI"). For its services
SFSI will receive $40,000 per year plus expenses. For the fiscal year ended
October 31, 1995, the Portfolio accrued $44,921 in fund accounting fees and
expenses.
3. Investment in Securities. Purchases and sales of securities (other than
short-term obligations) including maturities, foreign currencies and forward
currency contracts were as follows:
Purchases Sales
--------- -----
Investments $25,591,984 $74,521,399
U.S. Government
Obligations $76,184,698 $57,982,781
For United States federal income tax purposes, the cost of securities owned at
October 31, 1995 was $50,043,264. At October 31, 1995, the components of net
unrealized appreciation of investments were as follows:
Gross appreciation $ 370,942
Gross depreciation (3,751)
---------
Net appreciation on investments $ 367,191
=========
<PAGE>
Short-Term World Income Portfolio
Notes to Financial Statements (continued)
October 31, 1995
- - --------------------------------------------------------------------------------
4. Commitments. During the fiscal year ended October 31, 1995 the Portfolio
entered into various forward contracts which obligate the Portfolio to deliver
or receive currencies at specified future dates. Open contracts at October 31,
1995 were as follows:
Net Unrealized
Contracts In Settlement Appreciation
to Deliver* Exchange for Date Value (Depreciation)
----------- ------------ ---- ----- --------------
Sale
- - ----
NLG 3,885,000 $2,499,517 11/7/95 $2,464,319 $35,198
NLG** 265,000 170,495 11/7/95 167,298 3,197
NLG** 200,000 128,675 11/7/95 128,949 (274)
------- ------- ----
$2,798,687 $2,760,566 $38,121
========== ========== =======
* In local currency.
** Value represents amount to be delivered from offsetting forward contract on
settlement date.
<PAGE>
REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS
To the Investors and Board of Trustees.
Short-Term World Income Portfolio
We have audited the accompanying statement of assets and liabilities of
Short-Term World Income Portfolio, including the portfolio of investments, as of
October 31, 1995, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended, and the supplementary data for each of the periods indicated
therein. These financial statements and supplementary data are the
responsibility of the Portfolio's management. Our responsibility is to express
an opinion on these financial statements and supplementary data based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and supplementary data 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 October 31, 1995 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 financial statements and supplementary data referred to
above present fairly, in all material respects, the financial position of
Short-Term World Income Portfolio at October 31, 1995, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the supplementary data for each of
the indicated periods, in conformity with accounting principles generally
accepted in the United States of America.
ERNST & YOUNG
George Town, Grand Cayman
December 27, 1995
