INCOME PORTFOLIO TRUST
MANAGED U.S. GOVERNMENT PORTFOLIO
ANNUAL REPORT
For the fiscal year ended October 31, 1995
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Income Portfolio Trust - Managed U.S. Government Portfolio
Portfolio of Investments
October 31, 1995
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Principal Maturity Interest
Amount Description Date Rate Value
U.S. Government Agency Mortgage Backed Securities - 81.6%:
$9,875,415 Government National Mortgage
Association Pool 405842
(cost $10,109,957) 2/15/2025 9.0% $10,387,702
Short-term Investments - 17.7%:
2,259,000 Repurchase agreement dated 10/31/95
with State Street Bank, market value
of collateral $2,308,880, representing
$1,520,000 U.S. Treasury Bonds, 12%,
due 8/15/13, maturity value $2,259,282
(cost $2,259,000)" 11/1/1995 4.5% 2,259,000
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Total Investments (cost $12,368,957) - 99.3% 12,646,702
Other Assets less Liabilities - 0.7% 93,448
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Total Net Assets - 100.0% $12,740,150
See notes to financial statements.
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Income Portfolio Trust - Managed U.S. Government Portfolio
Statement of Assets and Liabilities
October 31, 1995
_______________________________________________________________________________
Assets:
Investments in securities, at market value (cost $10,109,957)
(Notes 1 and 4) - See Portfolio of Investments $10,387,702
Repurchase agreements (cost $2,259,000) (Note 1) 2,259,000
Cash 22,382
Interest receivable 74,348
Deferred organization expenses (Notes 1 and 5) 17,164
Prepaid expenses 12,049
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Total assets 12,772,645
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Liabilities:
Accrued expenses 30,620
Variation margin payable on futures contracts (Notes 1 and 4) 1,875
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Total liabilities 32,495
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Net assets applicable to investors'
beneficial interests $12,740,150
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See notes to financial statements.
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Income Portfolio Trust - Managed U.S. Government Portfolio
Statement of Operations
For the fiscal year ended
"October 31, 1995"
_______________________________________________________________________________
Investment Income (Note 1):
Interest income $1,001,388
Expenses:
Investment advisory fees (Note 2) $ 48,616
Custody fees and expenses 44,979
Audit fees 23,750
Administration fees (Note 2) 20,835
Rating service 20,271
Insurance 18,629
Trustees' fees and expenses (Note 2) 11,502
Legal fees 10,651
Amortization of organization expenses (Notes 1 and 5) 8,298
Printing fees 3,710
Miscellaneous expenses 263
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Total expenses 211,504
Less: Waiver of expenses (Note 3) (69,451)
Less: Reimbursement of expenses (Note 3) (72,602)
Net expenses 69,451
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Net investment income 931,937
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Realized and Unrealized Gain (Loss) on
Investments (Notes 1 and 4):
Net realized loss on:
Investment securities $ (291,271)
Futures transactions (562,615) (853,886)
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Net unrealized appreciation/(depreciation) on:
Investment securities $1,135,073
Futures transactions (469,734) 665,339
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Net realized and unrealized loss on investments
and futures transactions (188,547)
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Net Increase in Assets Resulting from Operations $ 743,390
See notes to financial statements.
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Income Portfolio Trust - Managed U.S. Government Portfolio
Statement of Changes in Net Assets
_______________________________________________________________________________
For the fiscal year
ended October 31,
Increase/(Decrease) in Net Assets: 1995 1994
----------- -----------
Operations:
Net investment income $ 931,937 $ 719,452
Net realized gain/(loss) from investments
and futures transactions (853,886) 331,605
Net unrealized appreciation/(depreciation)
on investments and futures 665,339 (454,717)
Net increase in net assets resulting ------------ ------------
from operations 743,390 596,340
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Transactions in Investors' Beneficial Interests:
Additions 2,129,340 6,494,368
Reductions (5,451,328) (2,617,014)
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Net increase/(decrease) in net assets
resulting from transactions in investors'
beneficial interests (3,321,988) 3,877,354
------------ ------------
Net Increase/(Decrease) in Net Assets (2,578,598) 4,473,694
Net Assets:
Beginning of year 15,318,748 10,845,054
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End of year $12,740,150 $15,318,748
See notes to financial statements.
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Income Portfolio Trust - Managed U.S. Government Portfolio
Financial Highlights
_______________________________________________________________________________
For the period
For the fiscal year ended November 25,
October 31, 1992 (a) through
Ratios/Supplementary data: --------------------------
1995 1994 October 31, 1993
------------ ------------ ------------------
Net assets at end of
period (000's) $12,740 $15,319 $10,845
Portfolio turnover 179% 255% 292%(b)
Including waiver and reimbursement:
Net investment income to average
net assets 6.71% 5.26% 5.05%(b)
Expenses to average net assets 0.50% 0.50% 0.50%(b)
Without waiver and reimbursement:
Net investment income to average
net assets 5.69% 4.27% 3.71%(b)
Expenses to average net assets 1.52% 1.49% 1.84%(b)
(a) Commencement of operations (see Note 1).
(b) Annualized.
See notes to financial statements.
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Income Portfolio Trust - Managed U.S. Government Portfolio
Notes to Financial Statements
October 31, 1995
_______________________________________________________________________________
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES. Managed U.S. Government
Portfolio (the "Portfolio"), a series of Income Portfolio Trust (the "Trust"),
is registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as a no-load, diversified, open-end management investment company. The
Portfolio was organized as a trust under the laws of the State of New York on
September 16, 1992 and commenced operations on November 25, 1992. Pursuant to an
amended and restated declaration of trust dated as of June 8, 1993 (the
"Declaration of Trust"), the Portfolio was reorganized as a series of the Trust.
The Declaration of Trust permits the Trustees to issue an unlimited number of
beneficial interests in the Portfolio and other series of the Trust which may be
created from time to time. As explained in Note 5, on December 18, 1995, the
Trustees of the Trust approved and authorized the sale of assets and dissolution
of the Trust.
The following is a summary of the significant accounting policies of the
Portfolio.
A. Valuation of Investments. Where market quotations are readily
available, portfolio securities are valued based upon the current bid price. The
Portfolio values Mortgage-Backed Securities and other debt securities for which
market quotations are not readily available at their fair value as determined in
good faith, utilizing procedures approved by the Board of Trustees of the
Portfolio, on the basis of information provided by dealers in such securities.
Some of the general factors which may be considered in determining fair value
include the fundamental analytic data relating to the investment and an
evaluation of the forces which influence the market in which these securities
are purchased and sold. Determination of fair value involves subjective
judgment, as the actual market value of a particular security can be established
only by negotiations between the parties in a sales transaction. Debt securities
having a remaining maturity of sixty days or less when purchased and debt
securities originally purchased with maturities in excess of sixty days but
which currently have maturities of sixty days or less are valued at amortized
cost.
B. Interest Income. Interest income is determined on the basis of
interest accrued and original issue discount earned, adjusted for amortization
of premium or accretion of discount and amortization of market premium when
required or elected for federal income tax purposes. Any paydown gain or loss
associated with mortgage backed securities is included in interest income.
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Income Portfolio Trust - Managed U.S. Government Portfolio
Notes to Financial Statements (continued)
October 31, 1995
_______________________________________________________________________________
C. 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. The Portfolio
may enter into repurchase agreements with banks or lenders meeting the
creditworthiness standards established by the Trust'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,
the 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. The collateral is marked-to-market daily.
D. Futures. A futures contract is an agreement between two parties to
buy and sell a security at a set price on a future date. Upon entering into such
a contract the Portfolio is required to pledge to the broker an amount of cash
and/or securities equal to the minimum "initial margin" requirements of the
exchange. Pursuant to the contract, the Portfolio agrees to receive from or pay
to the broker an amount of cash equal to the daily fluctuation in value of the
contract. Such receipts or payments are known as "variation margin" and are
recorded by the Portfolio as unrealized gains or losses. When the contract is
closed, the Portfolio records a realized gain or loss equal to the difference
between the value of the contract at the time it was opened and the value at the
time it was closed. Risks of entering into futures contracts include the
possibility that there may be an illiquid secondary market and/or that a change
in the value of the contract may not correlate with changes in the value of the
underlying security.
E. Federal 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.
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Income Portfolio Trust - Managed U.S. Government Portfolio
Notes to Financial Statements (continued)
October 31, 1995
_______________________________________________________________________________
F. 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. As more fully discussed in Note 5,
remaining unamortized organization expenses will be absorbed by Eastbridge Asset
Management, Inc., the investment adviser, in connection with the planned
liquidation of the Trust.
G. Other. Investment transactions are accounted for on trade date
(the date the security is purchased or sold). Gains and losses are determined on
the basis of identified cost.
2. ADVISORY, ADMINISTRATION AND TRUSTEES' FEES.
A. Investment Advisory Fees. The Portfolio has retained Eastbridge
Asset Management, Inc.("Eastbridge") to make investment decisions for the
Portfolio. For its services under the Investment Advisory Agreement, Eastbridge
receives from the Portfolio a fee accrued daily and paid monthly at an annual
rate equal to 0.35% of the Portfolio's average daily net assets. Eastbridge is
currently waiving its investment advisory fee. For the fiscal year ended
October 31, 1995, the Portfolio incurred advisory fees aggregating $48,616,
all of which were waived. (See Note 3).
B. Administration Fees. The Portfolio has retained EBC Distributors,
Inc. ("EBC") to serve as Administrator. Certain officers of EBC serve as
officers to the Portfolio. Under the Administrative Services Agreement, EBC
provides management and 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 EBC.
For these services, EBC receives from the Portfolio a fee accrued daily and paid
monthly at an annual rate equal to 0.15% of the Portfolio's average daily net
assets. For the fiscal year ended October 31, 1995, the Portfolio accrued
administration fees aggregating $20,835, all of which were waived. (See Note 3).
C. Trustees' Fees and Expenses. The fees and expenses of the Trustees
amounted to $11,502 for the fiscal year ended October 31, 1995. Trustees
affiliated with EBC or Eastbridge receive no fees for their services.
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Income Portfolio Trust - Managed U.S. Government Portfolio
Notes to Financial Statements (continued)
October 31, 1995
_______________________________________________________________________________
3. EXPENSE REIMBURSEMENT AND WAIVERS. Eastbridge and EBC have each agreed to
voluntarily waive all or a portion of their fees during the initial start up
period. For the fiscal year ended October 31, 1995, all such fees, totaling
$69,451, were waived. In addition, EBC has voluntarily agreed to reimburse the
Portfolio for certain expenses, such that, following the aforementioned waivers
and reimbursement, the total operating expenses (excluding taxes, brokerage,
interest expense and extraordinary expenses) of the Portfolio will not exceed on
an annual basis 0.50% of the average daily net assets of the Portfolio. For the
fiscal year ended October 31, 1995, this reimbursement amounted to $72,602.
4. INVESTMENTS IN SECURITIES. Purchases and sales of investment securities,
other than short-term obligations, aggregated $25,854,210 and $33,018,683,
respectively.
Treasury futures transactions during the period are summarized as follows:
Number of Principal Amount
Contracts* of Contracts
Contracts open at beginning of period 184 $18,400,000
Contracts opened 499 49,900,000
Contracts closed (663) (66,300,000)
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Open at end of period 20 $2,000,000
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The Portfolio's purchases and sales of futures contracts are designed to hedge a
portion of its investments against changes in value. Open short futures
contracts held as of October 31, 1995 consist of the following:
Number of Expiration Unrealized
Description Contracts* Date Loss
December 1995, 10 year
Treasury Note future 20 December 1995 $(31,932)
*All contracts above are denominated in principal amounts of $100,000 per
contract.
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Income Portfolio Trust - Managed U.S. Government Portfolio
Notes to Financial Statements (continued)
October 31, 1995
_______________________________________________________________________________
For federal income tax purposes, the cost of securities owned at October 31,
1995, was $12,368,957. At October 31, 1995, the Portfolio had unrealized
appreciation on investments of $277,745.
5. SUBSEQUENT EVENT. On December 18, 1995, the Trustees of the Portfolio voted
to terminate the Portfolio as an investment company under the Investment Company
Act of 1940 and authorized the sale of assets and dissolution of the Portfolio.
Eastbridge Asset Management, Inc. has agreed to reimburse the balance of
unamortized organizational expenses at October 31, 1995 of $17,164 for which
amortization was accelerated due to the decision to terminate the Trust. It is
expected that the Trust's net assets (subject to realization) will be
distributed to shareholders on December 28, 1995.
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Report of Independant Accountants
December 20, 1995
To the Trustees of Income Portfolio Trust
and Investors in Managed U.S. Government Portfolio
In our opinion, the accompanying statement of assets and liabilities and the
related statements of operations and of changes in net assets and the financial
highlights present fairly, in all material repects, the financial position of
Managed U. S. Government Portfolio, a series of Income Portfolio Trust (the
"Trust") at October 31, 1995, the results of its operations, the changes in its
net assets and the financial highlights for the periods indicated, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Trust's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a resonable basis for the opinion expressed above.
As explained in note 6, on December 18, 1995, the Trustees of the Trust approved
and authorized the sale of assets and dissolution of the Trust.
/s/ PRICE WATERHOUSE LLP
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Portfolio Investment Adviser
Eastbridge Asset Management, Inc.
(A Majority Owned Subsidiary of
The Nippon Credit Bank, Ltd.)
135 East 57th Street
New York, New York 10022
Administrator and Distributor
EBC Distributors, Inc.
6 St. James Avenue
Boston, Massachusetts 02116
Custodian and Transfer Agent
State Street Bank & Trust Company
