THE U.S. FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
APRIL 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT SECURITY DESCRIPTION RATING VALUE
- --------------- --------------------------------------------------------------------------- ----------- ------------
<C> <S> <C> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS AND ASSET
BACKED SECURITIES (10.1%)
FINANCE (10.1%)
$ 9,278,417 Access Financial Manufacturing Housing Contract Trust, Series 95-1, Class
A1, 6.10% due 05/15/21................................................... Aaa/NR $ 9,175,334
70,433 Advanta Home Equity Loan Trust, Series 92-2, Class A1, 7.15% due
06/25/08................................................................. Aaa/AAA 70,084
144,248 Case Equipment Loan Trust, Series 94-A, Class A2, 4.65% due 08/15/99....... Aaa/AAA 143,490
15,699,000 Chemical Mortgage Securities, Inc., Series 96-1, Class A7, 7.25% due
01/25/26................................................................. Aaa/AAA 14,394,413
19,749 Chrysler Financial Corp. Grantor Trust, Series 17, Class A, 6.25% due
03/15/02................................................................. Aaa/AAA 19,757
4,139,222 Collateralized Mortgage Obligation Trust II, Class E, 9.00% due 06/20/17... Aaa/AAA 4,305,743
3,159,559 Criimi Mae Financial Corporation, Class A, 7.00% due 01/01/33.............. NR/AAA 3,005,531
8,855,000 GE Capital Mortgage Services, Inc., Series 94-17, Class A5, 7.00% due
05/25/24................................................................. Aa1/AAA 8,739,708
1,626,633 Green Tree Financial Corp., Series 95-A, Class A, 7.25% due 07/15/05....... Baa3/BBB+ 1,623,583
767,102 Green Tree Financial Corp., Series 94-A, Class A, 6.90% due 02/15/04....... Baa3/BBB+ 757,273
3,860,172 Green Tree Recreational Equipment and Consumer Trust, Series 96-A, Class
A1, 5.55% due 02/15/18................................................... Aaa/AAA 3,786,443
5,500,000 Oakwood Mortgage Investors Inc., Series 96-A, Class A2, 5.80% due
05/15/21................................................................. NR/AAA 5,259,375
14,927,899 Paine Webber Mortgage Acceptance Corp., Remic: PAC (11), Series 93-5, Class
A2, 5.50% due 06/25/08................................................... NR/AAA 14,785,188
20,050 Premier Auto Trust, Series 92-3, Class A, 5.90% due 11/17/97............... Aaa/AAA 20,028
1,609,386 Prudential Home Loan Mortgage Securities, Remic: PAC (11), Series 93-54,
Class A2, 6.50% due 01/25/24............................................. Aaa/AA 1,608,404
8,934,495 Residential Funding Mortgage Securities I, Inc., Remic: PAC (11), Series
94-S12, Class A3, 6.50% due 04/25/09..................................... Aa1/AAA 8,880,352
174,832 Resolution Trust Corp., Remic: ARM Determined Interest Rate, Series 91-6,
Class A1, 6.92% due 05/25/19............................................. Aaa/AAA 166,528
95,266 The Money Store Home Equity Trust, Series 92-A, Class A, 6.95% due
12/15/07................................................................. Aaa/AAA 94,815
------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS AND ASSET BACKED SECURITIES (COST
$77,925,536)............................................................. 76,836,049
------------
CORPORATE OBLIGATIONS (22.6%)
AUTOMOTIVE (0.7%)
4,170,000 Ford Motor Co., 9.95% due 02/15/32......................................... A1/A+ 5,203,159
------------
BANKING (7.7%)
1,600,000 Chase Manhattan Corp. - New, 10.125% due 11/01/00.......................... A2/A- 1,791,200
5,000,000 First Chicago Corp., 8.25% due 06/15/02.................................... A2/A 5,311,400
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
18
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT SECURITY DESCRIPTION RATING VALUE
- --------------- --------------------------------------------------------------------------- ----------- ------------
BANKING (CONTINUED)
<C> <S> <C> <C>
$ 2,095,000 First Chicago Corp., 6.875% due 06/15/03................................... A2/A $ 2,064,685
8,300,000 First Union Corp., 6.55% due 10/15/35...................................... A2/A- 7,957,376
2,000,000 Mellon Bank, N.A., 6.75% due 06/01/03...................................... A2/A 1,961,840
1,500,000 Midland Bank, PLC, 8.625% due 12/15/04..................................... A1/A 1,617,525
4,660,000 NationsBank Corp., 10.20% due 07/15/15..................................... A3/A- 5,767,356
13,700,000 Norwest Corp., 6.75% due 05/12/00.......................................... Aa3/AA- 13,679,587
7,500,000 Shawmut National Corp., 8.625% due 12/15/99................................ A3/BBB+ 7,936,275
11,000,000 Trans Financial Bank, 6.48% due 10/23/98................................... Baa3/BBB- 10,915,850
------------
59,003,094
------------
CHEMICALS, OIL & GAS (1.9%)
4,425,000 Consolidated Natural Gas, 8.625% due 12/01/11.............................. A1/AA- 4,663,817
2,300,000 Ferrellgas Partners, M.L.P., 9.375% due 06/15/06, (144A)................... B1/B+ 2,300,000
5,000,000 Occidental Petroleum Corp., 5.85% due 11/09/98............................. Baa3/BBB 4,910,850
1,000,000 Occidental Petroleum Corp., 5.84% due 11/09/98............................. Baa3/BBB 981,940
1,125,000 SFP Pipeline Holdings, Inc., 11.16% due 08/15/10........................... Baa3/NR 1,451,250
------------
14,307,857
------------
DEPARTMENT STORES (0.4%)
1,000,000 Federated Department Stores, Inc., 8.125% due 10/15/02..................... Ba1/BB- 971,400
2,200,000 Sears Roebuck & Co., 8.52% due 05/13/02.................................... A2/BBB 2,353,230
------------
3,324,630
------------
ELECTRICAL EQUIPMENT (1.7%)
2,000,000 Legrand S.A., 8.50% due 02/15/25........................................... A2/A 2,151,820
2,200,000 Mark IV Industries Inc., 7.75% due 04/01/06, (144A)........................ Ba3/BB+ 2,092,750
1,900,000 Philips Electronics NV, 6.75% due 08/15/03................................. A3/BBB+ 1,847,161
7,000,000 Sensormatic Electronics Corp., 7.74% due 03/29/06.......................... NR/NR 6,938,750
------------
13,030,481
------------
FINANCE (3.0%)
3,900,000 Cheung Kong Finance Cayman Ltd., 5.50% due 09/30/98........................ NR/NR 3,753,750
159,134 Chevy Chase Auto Receivables Trust, 6.00% due 12/15/01..................... Aaa/AAA 158,757
25,000 Commercial Credit Group Inc., 7.375% due 11/15/96.......................... A1/A+ 25,231
2,281,438 Fleetwood Credit Corp. Grantor Trust, Series 95-B 6.55% due 05/15/11....... Aaa/AAA 2,274,731
12,550,000 Ford Motor Credit Co., 6.25% due 11/08/00.................................. A1/A+ 12,249,177
4,000,000 USL Capital Corp., 7.76% due 03/29/02...................................... A1/A+ 4,117,080
69,326 Western Financial Grantor Trust, Series 95-3, Class A1 6.05% due
11/01/00................................................................. Aaa/AA 69,193
------------
22,647,919
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT SECURITY DESCRIPTION RATING VALUE
- --------------- --------------------------------------------------------------------------- ----------- ------------
HOSPITALS AND HEALTH CARE (0.4%)
<C> <S> <C> <C>
$ 3,000,000 Tenet Healthcare Corp., 10.125% due 03/01/05............................... Ba3/B+ $ 3,210,000
------------
LUMBER & OTHER CONSTRUCTION MATERIALS (3.1%)
1,250,000 Buckeye Cellulose Corp., 8.50% due 12/15/05................................ Ba3/BB- 1,206,250
5,000,000 Celulosa Arauco y Constitucion SA, 6.75% due 12/15/03...................... Baa2/BBB+ 4,697,800
5,200,000 Georgia-Pacific Corp., 7.375% due 12/01/25................................. Baa2/BBB- 4,664,452
5,600,000 Georgia-Pacific Corp., 9.95% due 06/15/02.................................. Baa2/BBB- 6,360,032
1,000,000 Schuller International Group Inc., 10.875% due 12/15/04.................... Ba3/BB- 1,082,500
4,000,000 USG Corp., 9.25% due 09/15/01.............................................. Ba2/BB 4,265,000
1,000,000 USG Corp., 8.50% due 08/01/05.............................................. Ba2/BB 998,750
------------
23,274,784
------------
TEXTILES AND APPAREL (0.3%)
2,000,000 WestPoint Stevens Inc., 8.75% due 12/15/01................................. B1/BB- 1,995,000
------------
TELECOMMUNICATIONS (0.4%)
4,000,000 Tele-Communications, Inc., 7.875% due 02/15/26............................. Ba1/BBB- 3,472,240
------------
TRANSPORTATION (1.0%)
2,500,000 Teekay Shipping Corp., 8.32% due 02/01/08.................................. Ba2/BB 2,381,250
6,719,014 Union Tank Car Co., 6.50% due 04/15/08..................................... A2/A+ 5,605,789
------------
7,987,039
------------
UTILITIES (2.0%)
1,972,000 Connecticut Light & Power Co., Series UU, 7.625% due 04/01/97.............. Baa1/BBB+ 1,973,913
6,000,000 Duke Power Co., 6.75% due 08/01/25......................................... Aa2/AA- 5,312,400
4,500,000 Hydro-Quebec, 8.875% due 03/01/26.......................................... A2/A+ 4,965,840
3,000,000 Texas Utilities Co., 7.375% due 10/01/25................................... Baa2/BBB+ 2,752,770
------------
15,004,923
------------
TOTAL CORPORATE OBLIGATIONS (COST $175,443,525)............................ 172,461,126
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY DESCRIPTION VALUE
- --------------- ---------------------------------------------------------------------------------------- ------------
<C> <S> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS (39.3%)
FHA Insured
$ 3,344,561 7.43% due 03/01/22...................................................................... $ 3,056,928
Federal Home Loan Mortgage Corp.
18,112 9.00% due 04/01/03...................................................................... 18,803
435,940 9.50% due 08/01/04...................................................................... 450,919
700,731 9.50% due 11/01/05...................................................................... 724,942
3,643,494 9.50% due 12/01/05...................................................................... 3,769,562
703,326 9.50% due 02/01/06...................................................................... 727,647
844,539 9.50% due 03/01/06...................................................................... 873,836
1,377 12.50% due 08/01/14..................................................................... 1,518
27,018 Series 600, 10.00% due 04/01/09......................................................... 29,366
200,000 Series 39, Class F, 10.00% due 05/15/20................................................. 219,824
6,931,067 Gold, 6.50% due 06/01/04................................................................ 6,785,948
11,000,000 Gold, 8.506% due 12/01/04............................................................... 11,536,250
75,021 Gold, 6.00% due 09/01/10................................................................ 71,145
347 Gold, 6.50% due 03/01/26................................................................ 325
22,750,000 Gold, 8.00% TBA (t)..................................................................... 22,984,609
250,000 Remic: PAC-1(11), Series 1215, Class F, 6.75% due 05/15/05.............................. 247,698
250,000 Remic: PAC-1(11), Series 1199, Class E, 7.50% due 10/15/19.............................. 250,170
35,760,000 Remic: PAC-1(11), Series 1542, Class J, 7.00% due 02/15/22.............................. 35,145,375
13,000,000 Remic: PAC-1(11), Series 1594, Class H, 6.00% due 10/15/08.............................. 12,111,320
31,500,000 Remic: PAC-1(11), Series 1684, Class G, 6.50% 03/15/23.................................. 30,028,359
7,500,000 Remic: PAC-1(11), Series 1714, Class K, 7.00% due 04/15/24.............................. 7,028,775
300,000 Remic: Accretion Directed, Series 1290, Class L, 7.50% due 10/15/09..................... 302,529
32,000 Remic: PAC-1(11), Series 1168, Class H, 7.50% due 11/15/21.............................. 31,606
300,000 Remic: Series 102, Class I, 7.00% due 12/15/20.......................................... 283,329
415,000 Remic: PAC-1(11), Series 1207, Class J, 6.75% due 07/15/19.............................. 407,609
1,600,000 Remic: SCH(22), Series 1701, Class B, 6.50% due 03/15/09................................ 1,462,464
Federal National Mortgage Association
90,648 8.00% due 01/01/02...................................................................... 92,648
66,457 8.00% due 05/01/02...................................................................... 67,930
451,013 8.00% due 07/01/02...................................................................... 460,992
4,409,469 8.70% due 01/01/05...................................................................... 4,712,620
36,195,865 8.50% due 01/01/05...................................................................... 37,439,555
2,890,051 6.88% due 11/01/05...................................................................... 2,926,118
20,385 8.50% due 06/01/10...................................................................... 20,889
730,055 10.00% due 06/01/20..................................................................... 795,600
6,195 8.00% due 08/01/22...................................................................... 6,254
4,848,000 9.00% due 04/01/26...................................................................... 5,066,160
967,190 Remic: PAC, Series 1991-64, Class Z, 8.50% due 06/25/06................................. 972,065
681,925 Remic: PAC, Series 1991-101, Class C, 8.50% due 08/25/18................................ 689,262
9,882 Remic: PAC (11), Series 1991-9, Class H, 8.30% due 08/25/18............................. 9,900
3,100,000 Remic: PAC (11), Series 1993-041, Class PE, 5.75% due 04/25/19.......................... 3,022,128
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY DESCRIPTION VALUE
- --------------- ---------------------------------------------------------------------------------------- ------------
Government National Mortgage Association (GNMA)
<C> <S> <C> <C>
$ 6,000,000 7.125% due 01/15/99..................................................................... $ 5,775,000
10,215,004 8.00% due 12/15/08...................................................................... 10,523,394
14,411,769 8.00% due 11/15/09...................................................................... 14,847,293
27,923 11.50% due 07/15/13..................................................................... 31,255
5,690 13.50% due 10/15/14..................................................................... 6,390
208,548 7.00% due 07/15/22...................................................................... 201,324
558,567 7.00% due 11/15/22...................................................................... 539,570
796,977 7.00% due 01/15/23...................................................................... 771,027
368,213 7.00% due 03/15/23...................................................................... 355,517
106,282 7.50% due 03/15/23...................................................................... 105,235
236,653 7.50% due 05/15/23...................................................................... 234,140
136,909 7.50% due 06/15/23...................................................................... 135,679
941,610 7.00% due 07/15/23...................................................................... 909,914
339,048 7.00% due 09/15/23...................................................................... 327,340
1,331,757 7.00% due 10/15/23...................................................................... 1,284,751
65,622 7.00% due 12/15/23...................................................................... 63,340
4,097,951 7.00% due 01/15/24...................................................................... 3,959,150
3,621,373 7.50% due 01/15/24...................................................................... 3,583,023
2,050,106 7.00% due 02/15/24...................................................................... 1,978,173
853,770 7.50% due 02/15/24...................................................................... 844,883
577,340 7.00% due 03/15/24...................................................................... 556,993
754,462 7.50% due 03/15/24...................................................................... 746,276
4,979,337 7.00% due 04/15/24...................................................................... 4,806,964
2,813,560 7.00% due 05/15/24...................................................................... 2,713,062
58,173 7.50% due 05/15/24...................................................................... 57,532
992,096 7.00% due 06/15/24...................................................................... 956,803
442,277 7.50% due 06/15/24...................................................................... 437,337
342,825 7.50% due 11/15/24...................................................................... 338,793
774,396 7.50% due 12/15/24...................................................................... 765,816
1,034,116 7.50% due 07/15/25...................................................................... 1,021,902
979,542 7.50% due 08/15/25...................................................................... 968,073
198,862 7.50% due 09/15/25...................................................................... 196,508
180,840 7.50% due 10/15/25...................................................................... 178,761
3 7.50% due 11/15/25...................................................................... 265,699
2,804,652 7.00% due 01/15/26...................................................................... 2,701,364
6,634,932 7.00% due 03/15/26...................................................................... 6,390,368
623,610 7.50% due 03/15/26...................................................................... 616,208
2,833,600 7.50% due 04/15/26...................................................................... 2,845,112
5,542,000 7.625% due 04/15/26..................................................................... 5,512,558
5,222,920 7.25% due 02/15/27...................................................................... 5,095,741
5,291,881 7.125% due 01/15/31..................................................................... 5,130,002
2,621,098 7.25% due 01/15/31...................................................................... 2,557,274
7,843,596 7.00% due 05/15/35...................................................................... 7,532,304
6,425,000 7.50% TBA (t)........................................................................... 6,348,703
------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (COST $305,208,718)............................ 300,049,528
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY DESCRIPTION VALUE
- --------------- ---------------------------------------------------------------------------------------- ------------
U.S. GOVERNMENT TREASURY OBLIGATIONS (24.1%)
<C> <S> <C> <C>
U.S. Treasury Bonds
$ 63,000,000 11.125% due 08/15/03 (s)................................................................ $ 79,149,419
24,000,000 8.50% due 02/15/20...................................................................... 27,782,160
U.S. Treasury Notes
20,500,000 8.875% due 11/15/98..................................................................... 21,778,995
45,000,000 8.50% due 11/15/00...................................................................... 48,641,850
6,675,000 6.375% due 03/31/01..................................................................... 6,655,042
------------
TOTAL U.S. GOVERNMENT TREASURY OBLIGATIONS (COST $185,195,481).......................... 184,007,466
------------
<CAPTION>
MOODY'S/S&P
RATING
-----------
<C> <S> <C> <C>
FOREIGN GOVERNMENT OBLIGATIONS (0.9%)
3,500,000 Republic of Argentina, 9.25% due 02/23/01.................................. B1/NR 3,334,695
3,500,000 United Mexican States, 9.75% due 02/06/01.................................. Ba2/NR 3,456,250
------------
TOTAL FOREIGN GOVERNMENT OBLIGATIONS (COST $6,817,454).................................. 6,790,945
------------
<CAPTION>
SHARES
- ---------------
<C> <S> <C> <C>
CONVERTIBLE PREFERRED STOCKS (0.3%)
NATURAL GAS (0.3%)
74,600 Lasmo PLC, Sponsored ADR, 10.00%, Series A................................. Ba1/BBB- 1,837,025
------------
TOTAL CONVERTIBLE PREFERRED STOCKS (COST $1,659,850).................................... 1,837,025
------------
<CAPTION>
PRINCIPAL
AMOUNT
- ---------------
<C> <S> <C> <C>
REPURCHASE AGREEMENT (4.8%)
$ 36,773,000 Goldman Sachs Repurchase Agreement, dated 4/30/96 due 5/01/96, proceeds
$36,778,444 (collateralized by U.S. Treasury Bond, 7.125% due 02/15/23,
valued at $37,509,234)
(cost $36,773,000)....................................................... P1/A1+ $ 36,773,000
------------
TOTAL INVESTMENTS (COST $789,023,564) (102.1%)........................................................... 778,755,139
LIABILITIES IN EXCESS OF OTHER ASSETS (-2.1%)............................................................ (15,947,150)
------------
TOTAL NET ASSETS (100.0%)................................................................................ $762,807,989
------------
------------
</TABLE>
Note: Based on the cost of investments of $789,822,741 for Federal Income Tax
purposes at April 30, 1996, the aggregate gross unrealized appreciation
and depreciation was $1,998,016 and $13,065,618, respectively, resulting
in net unrealized depreciation of $11,067,602.
(t) TBA securities are purchased (sold) on a forward commitment basis with an
approximate principal amount and no definite maturity date. The actual
principal amount and maturity date will be determined upon settlement.
(s) $50,000,000 par segregated as collateral for TBA securities.
Abbreviations:
144A - Securities restricted for resale to Qualified Institutional Buyers.
ADR - American Depository Receipt; ARM - Adjustable Rate Mortgage; FHA - Federal
Housing Administration;
PAC - Planned Amortization Class; Remic - Real Estate Mortgage Investment
Conduit; NR - Not Rated
SCH - Scheduled Payment Bond
The Accompanying Notes are an Integral Part of the Financial Statements.
23
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
APRIL 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $789,023,564) $778,755,139
Cash 173
Receivable for Investments Sold 27,078,962
Interest Receivable 10,892,056
Prepaid Trustees' Fees 3,106
Prepaid Expenses and Other Assets 1,354
------------
Total Assets 816,730,790
------------
LIABILITIES
Payable for Investments Purchased 53,606,427
Advisory Fee Payable 224,845
Custody Fee Payable 20,871
Administrative Services Fee Payable 15,449
Administration Fee Payable 8,077
Fund Services Fee Payable 2,803
Accrued Expenses 44,329
------------
Total Liabilities 53,922,801
------------
NET ASSETS
Applicable to Investors' Beneficial Interests $762,807,989
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
24
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED APRIL 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest Income $22,795,542
Dividend Income (Net of Foreign Withholding Tax of $13,991) 79,255
-----------
Total Investment Income 22,874,797
EXPENSES
Advisory Fee $1,034,411
Custodian Fees and Expenses 99,730
Administrative Services Fee 61,515
Administration Fee 37,995
Professional Fees and Expenses 23,011
Fund Services Fee 19,158
Trustees' Fees and Expenses 5,849
Printing Expenses 5,397
Miscellaneous 4,001
----------
Total Expenses (1,291,067)
-----------
NET INVESTMENT INCOME 21,583,730
NET REALIZED GAIN ON INVESTMENTS (including $606,386 net realized loss from
forward contracts) 4,183,731
NET CHANGE IN UNREALIZED DEPRECIATION OF INVESTMENTS (including $606,109
net unrealized appreciation from forward contracts) (27,865,651)
-----------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ($2,098,190)
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
25
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS FOR THE
ENDED FISCAL
APRIL 30, YEAR ENDED
1996 OCTOBER 31,
INCREASE IN NET ASSETS (UNAUDITED) 1995
----------- -------------
<S> <C> <C>
FROM OPERATIONS
Net Investment Income $21,583,730 $29,754,031
Net Realized Gain on Investments 4,183,731 7,762,316
Net Change in Unrealized Appreciation (Depreciation) of
Investments (27,865,651) 26,604,322
----------- -------------
Net Increase (Decrease) in Net Assets Resulting from
Operations (2,098,190) 64,120,669
----------- -------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 258,019,845 241,455,035
Withdrawals (74,993,661) (89,561,736)
----------- -------------
Net Increase from Investors' Transactions 183,026,184 151,893,299
----------- -------------
Total Increase in Net Assets 180,927,994 216,013,968
NET ASSETS
Beginning of Period 581,879,995 365,866,027
----------- -------------
End of Period $762,807,989 $581,879,995
----------- -------------
----------- -------------
- -----------------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- -----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR FOR THE PERIOD
FOR THE SIX ENDED JULY 12, 1993
MONTHS ENDED OCTOBER 31, (COMMENCEMENT OF
APRIL 30, 1996 -------------------- OPERATIONS) THROUGH
(UNAUDITED) 1995 1994 OCTOBER 31, 1993
-------------- --------- --------- -------------------
<S> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Expenses 0.37%(a) 0.39% 0.46% 0.48%(a)
Net Investment Income 6.26%(a) 6.68% 5.88% 4.91%(a)
Portfolio Turnover 163% 293% 234% 295%(b)
</TABLE>
(a) Annualized.
(b) Portfolio turnover is for the twelve month period ended October 31, 1993,
and includes the portfolio activity of the Portfolio's predecessor entity,
The Pierpont Bond Fund, for the period November 1, 1992 through July 11,
1993.
The Accompanying Notes are an Integral Part of the Financial Statements.
26
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
APRIL 30, 1996
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The U.S. Fixed Income Portfolio (the "Portfolio") is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company which was organized as a trust under the laws of
the State of New York. The Portfolio commenced operations on July 12, 1993 and
received a contribution of certain assets and liabilities, including securities,
with a value of $91,653,371 on that date from The Pierpont Bond Fund in exchange
for a beneficial interest in the Portfolio. At that date, net unrealized
appreciation of $1,731,405 was included in the contributed securities. The
Portfolio's investment objective is to provide a high total return consistent
with moderate risk of capital and maintenance of liquidity. The Declaration of
Trust permits the Trustees to issue an unlimited number of beneficial interests
in the Portfolio.
The preparation of financial statements prepared in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures. Actual amounts
could differ from those estimates. The following is a summary of the significant
accounting policies of the Portfolio:
a) Portfolio securities with a maturity of 60 days or more, including
securities that are listed on an exchange or traded over the counter, are
valued using prices supplied daily by an independent pricing service or
services that (i) are based on the last sale price on a national
securities exchange, or in the absence of recorded sales, at the readily
available bid price on such exchange or at the quoted bid price in the
over-the-counter market, if such exchange or market constitutes the
broadest and most representative market for the security and (ii) in
other cases, take into account various factors affecting market value,
including yields and prices of comparable securities, indication as to
value from dealers and general market conditions. If such prices are not
supplied by the Portfolio's independent pricing services, such securities
are priced in accordance with procedures adopted by the Trustees, All
portfolio securities with a remaining maturity of less than 60 days are
valued by the amortized cost method.
b) Securities transactions are recorded on a trade date basis. Interest
income, which includes the amortization of premiums and discounts, if
any, is recorded on an accrual basis. For financial and tax reporting
purposes, realized gains and losses are determined on the basis of
specific lot identification.
c) The Portfolio may enter into forward and spot foreign currency contracts
to protect securities and related receivables against fluctuations in
future foreign currency rates. A forward contract is an agreement to buy
or sell currencies of different countries on a specified future date at a
specified rate. Risks associated with such contracts include the movement
in the value of the foreign currency relative to the U.S. Dollar and the
ability of the counterparty to perform.
The market value of the contract will fluctuate with changes in currency
exchange rates. Contracts are valued daily based on procedures
established by and under the general supervision of the Portfolio's
Trustees and the change in the market value is recorded by the Portfolio
as unrealized appreciation or depreciation of foreign forward and spot
currency contract translations. There were no open forward or spot
currency contracts as of April 30, 1996.
27
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1996
- --------------------------------------------------------------------------------
d) The Portfolio intends to 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.
2. TRANSACTIONS WITH AFFILIATES
a) The Portfolio has an investment advisory agreement with Morgan Guaranty
Trust Company of New York ("Morgan"). Under the terms of the investment
advisory agreement, the Portfolio pays Morgan at an annual rate of 0.30%
of the Portfolio's average daily net assets. For the six months ended
April 30, 1996, this fee amounted to $1,034,411.
b) The Portfolio has retained Signature Broker-Dealer Services, Inc.
("Signature") to serve as Administrator and exclusive placement agent.
Signature provides administrative services necessary for the operations
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 Signature. The agreement provides
for a fee to be paid to Signature at an annual rate determined by the
following schedule: 0.01% of the first $1 billion of the aggregate
average daily net assets of the Portfolio and the other portfolios
subject to the Administration Agreement, 0.008% of the next $2 billion of
such net assets, 0.006% of the next $2 billion of such net assets, and
0.004% of such net assets in excess of $5 billion. The daily equivalent
of the fee rate is applied each day to the net assets of the Portfolio.
For the period from November 1, 1995 to December 28, 1995, Signature's
fee for these services amounted to $5,709.
Effective December 29, 1995, the Administration Agreement was amended
such that the fee charged would be equal to the Portfolio's proportionate
share of a complex-wide fee based on the following annual schedule: 0.03%
on the first $7 billion of the aggregate average daily net assets of the
Portfolio and the other portfolios subject to this agreement (the "Master
Portfolios") and 0.01% on the aggregate average daily net assets of the
Master Portfolios in excess of $7 billion. The portion of this charge
payable by the Portfolio is determined by the proportionate share its net
assets bear to the total net assets of The Pierpont Funds, The JPM
Institutional Funds, The JPM Advisor Funds and the Master Portfolios. For
the period from December 29, 1995 through April 30, 1996, Signature's fee
for these services amounted to $32,286.
c) Until August 31, 1995, the Portfolio had a Financial and Fund Accounting
Services Agreement ("Services Agreement") with Morgan under which Morgan
would receive a fee, based on the percentages described below, for
overseeing certain aspects of the administration and operation of the
Portfolio and was also designed to provide an expense limit for certain
expenses of the Portfolio. This fee was calculated at 0.10% of the
Portfolio's average daily net assets up to $200 million, 0.05% of the
next $200 million of average daily net assets, and 0.03% of average daily
net
assets thereafter. From September 1, 1995 until December 28, 1995, an
interim agreement between
28
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1996
- --------------------------------------------------------------------------------
the Portfolio and Morgan provided for the continuation of the oversight
services that were outlined under the prior agreement and that Morgan
shall bear all of its expenses incurred in connection with these
services.
Effective December 29, 1995, the Portfolio entered into an Administrative
Services Agreement with Morgan (the "Agreement") under which Morgan is
responsible for overseeing certain aspects of the administration and
operation of the Portfolio. Under the Agreement, the Portfolio has agreed
to pay Morgan a fee equal to its proportionate share of an annual
complex-wide charge. This charge is calculated daily based on the
aggregate net assets of the Master Portfolios in accordance with the
following annual schedule: 0.06% on the first $7 billion of the Master
Portfolios' aggregate average daily net assets and 0.03% of the aggregate
average daily net assets in excess of $7 billion. The portion of this
charge payable by the Portfolio is determined by the proportionate share
that the Portfolio's net assets bear to the net assets of the Master
Portfolios and other investors in the Master Portfolios for which Morgan
provides similar services. For the period from December 29, 1995 through
April 30, 1996, the fee for these services amounted to $61,515.
d) The Portfolio has a Fund Services Agreement with Pierpont Group, Inc.
("Group") to assist the Trustees in exercising their overall supervisory
responsibilities for the Portfolio's affairs. The Trustees of the
Portfolio represent all the shareholders of Group. The Portfolio's
allocated portion of Group's costs in performing its services amounted to
$19,158 for the six months ended April 30, 1996.
e) An aggregate annual fee of $65,000 is paid to each Trustee for serving as
a Trustee of The Pierpont Funds, The JPM Institutional Funds and their
corresponding Portfolios. The Trustees' Fees and Expenses shown in the
financial statements represents the Portfolio's allocated portion of the
total fees and expenses. The Trustee who serves as Chairman and Chief
Executive Officer of these Funds and Portfolios also serves as Chairman
of Group and received compensation and employee benefits from Group in
his role as Group's Chairman. The allocated portion of such compensation
and benefits included in the Fund Services Fee shown in the financial
statements was $2,500.
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the six months
ended April 30, 1996 were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS FROM
PURCHASES SALES
---------------- ----------------
<S> <C> <C>
U.S. Treasury and Agency Obligations $ 1,079,884,570 $ 912,288,107
Corporate and Collateralized Obligations 224,622,725 197,955,050
---------------- ----------------
$ 1,304,507,295 $ 1,110,243,157
---------------- ----------------
---------------- ----------------
</TABLE>
29
