<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
APRIL 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT SECURITY DESCRIPTION RATING VALUE
- --------------- ------------------------------------------------- ------------ -------------
<C> <S> <C> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS AND ASSET BACKED SECURITIES (12.5%)
FINANCIAL SERVICES (12.5%)
$ 52,085 Advanta Home Equity Loan Trust, Series 92-2, Aaa/AAA $ 51,425
Class A1, 7.15% due 06/25/08...................
7,521,156 Aegis Auto Receivables Trust, Series 1996-3, NR/NR 7,535,258
Class A, Sequential Payer, Callable, (144A),
8.80% due 03/20/02.............................
3,002,357 American Southwest Financial Corp., Series 60, NR/AAA 3,094,980
Class D, 8.90% due 03/01/18....................
28,113,000 Associates Manufactured Housing Pass Through, Aaa/AAA 28,016,362
Series 97-1, Class A3, 6.60% due 06/15/28......
41,916 Case Equipment Loan Trust, Series 94-A, Class A2, Aaa/AAA 41,736
4.65% due 08/15/99.............................
15,699,000 Chemical Mortgage Securities, Inc., Series 96-1, Aaa/AAA 14,797,092
Class A7,, 7.25% due 01/25/26..................
86,661 Chevy Chase Auto Receivables Trust, Series 95-1, Aaa/AAA 86,473
Class A, 6.00% due 12/15/01....................
7,094,032 Collateralized Mortgage Obligation Trust, Remic: Aaa/AAA 7,402,197
Accrual Bond, Series 62, Class Z, 9.50% due
06/25/20.......................................
2,815,677 Criimi Mae Financial Corp., Series 1, Class A, NR/AAA 2,672,254
7.00% due 01/01/33.............................
1,718,921 Fleetwood Credit Corp. Grantor Trust, Series Aaa/AAA 1,707,456
95-B, Class A, 6.55% due 05/15/11..............
8,855,000 GE Capital Mortgage Services, Inc., Remic: Aaa/AAA 8,730,587
PAC-1(11), Series 94-17, Class A5, 7.00% due
05/25/24.......................................
2,000,000 Green Tree Financial Corp., Series 92-1, Class Aaa/NR 2,000,060
A3, 6.70% due 10/15/17.........................
2,407,286 Green Tree Recreational, Equipment & Consumer Aaa/AAA 2,316,676
Trust, Series 96-A, Class A1, 5.55% due
02/15/18.......................................
4,270,082 Merrill Lynch Mortgage Investors, Inc., Series Ba3/NR 4,210,701
95-C2, Class E, 7.98% due 06/15/21.............
2,500,000 Merrill Lynch Mortgage Investors, Inc., Series NR/AAA 2,444,531
96-C2, Class A3, 6.96% due 11/21/28............
11,587,719 Midland Realty Acceptance Corp., Series 96-C2, Aaa/NR 11,562,371
Class A1, 7.02% due 01/25/29...................
631,229 Morgan Stanley Mortgage Trust, Series V, Class 4, NR/AAA 654,850
8.95% due 05/01/17.............................
8,322,683 Paine Webber Mortgage Acceptance Corp., Remic: NR/AAA 8,271,082
PAC (11), Series 93-5, Class A2, 5.50% due
06/25/08.......................................
834,856 Prudential Home Mortgage Securities, Remic: PAC Aaa/NR 833,980
(11), Series 93-54, Class A2, 6.50% due
01/25/24.......................................
6,782,608 Residential Funding Mortgage Securities I, Inc., Aa1/AAA 6,737,843
Remic: PAC (11), Series 94-S12, Class A3, 6.50%
due 04/25/09...................................
136,049 Resolution Trust Corp., Remic: Collateral Strip Aaa/AAA 129,757
Interest, Series 91-6, Class A1, 6.992% due
05/25/19.......................................
69,310 The Money Store Home Equity Trust, Series 92-A, Aaa/AAA 68,770
Class A, 6.95% due 01/15/07....................
39,229 Western Financial Grantor Trust, Series 95-3, Aaa/AAA 39,135
Class A1, 6.05% due 11/01/00...................
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
16
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT SECURITY DESCRIPTION RATING VALUE
- --------------- ------------------------------------------------- ------------ -------------
<C> <S> <C> <C>
FINANCIAL SERVICES (CONTINUED)
$ 1,750,000 World Omni Automobile Lease Securitization Trust, Aaa/AAA $ 1,754,655
Series 1996-A, Class A1, Sequential Payer,
Callable, 6.30% due 06/25/02...................
2,600,000 World Omni Automobile Lease Securitization Trust, Aaa/AAA 2,611,375
Series 1997-A, Class A2, Sequential Payer,
Callable, 6.75% due 06/25/03...................
-------------
117,771,606
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS AND
ASSET BACKED SECURITIES (COST
$118,582,361)..............................
-------------
CONVERTIBLE BONDS (0.1%)
RETAIL (0.1%)
1,100,000 Corporate Express Inc., 4.50% due 07/01/00 (cost B3/B 939,125
$934,625)......................................
-------------
CORPORATE OBLIGATIONS (26.1%)
AUTOMOTIVE (2.9%)
6,000,000 Ford Motor Co., 8.875% due 01/15/22.............. A1/A+ 6,664,380
16,755,000 Ford Motor Co., 9.95% due 02/15/32............... A1/A+ 20,811,050
-------------
27,475,430
-------------
BANKING (4.6%)
500,000 Abbey National First Capital, 8.20% due Aa3/AA- 527,995
10/15/04.......................................
1,300,000 Chase Manhattan Corp., Series A, 8.65% due A1/A- 1,346,072
02/13/99.......................................
5,000,000 First Chicago Corp., 8.25% due 06/15/02.......... A2/A 5,240,650
8,300,000 First Union Corp., 6.55% due 10/15/35............ A2/A- 8,043,613
1,000,000 Manufacturers Hanover Corp., 8.50% due A1/A- 1,031,210
02/15/99.......................................
8,000,000 Mellon Capital I, Series A, 7.72% due 12/01/26... A2/BBB+ 7,537,520
6,400,000 NB Capital Trust II, 7.83% due 12/15/26.......... A1/A- 6,162,304
3,000,000 Security Pacific Corp., 9.75% due 05/15/99....... A2/A 3,174,750
7,500,000 Shawmut National Corp., 8.625% due 12/15/99...... A3/BBB+ 7,832,400
2,500,000 Wachovia Bank North Carolina, 5.60% due Aa2/AA+ 2,464,675
03/08/99.......................................
-------------
43,361,189
-------------
BUILDING MATERIALS (0.3%)
3,000,000 USG Corp., Series B, 9.25% due 09/15/01.......... A2/BBB+ 3,146,250
-------------
CHEMICALS (0.5%)
5,000,000 Airgas, Inc., 7.14% due 03/08/04................. Baa3/BBB- 5,013,300
-------------
CONSTRUCTION & HOUSING (0.2%)
2,000,000 Schuller International Group, Inc., 10.875% due Ba3/BB- 2,200,000
12/15/04.......................................
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
17
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT SECURITY DESCRIPTION RATING VALUE
- --------------- ------------------------------------------------- ------------ -------------
<C> <S> <C> <C>
ELECTRIC (3.6%)
$ 2,950,000 Central Power & Light Co., Series KK, 6.625% due A3/A $ 2,823,209
07/01/05.......................................
6,000,000 Duke Power Co., 6.75% due 08/01/25............... Aa2/AA- 5,294,040
8,400,000 Idaho Power Co., Series A, 7.50% due 05/01/23.... A2/A+ 7,922,208
3,300,000 Southern Co. Capital Trust I, (144A), 8.19% due A3/A- 3,306,567
02/01/37.......................................
10,000,000 Virginia Electric & Power Co., 6.75% due A2/A 9,568,000
02/01/07.......................................
5,000,000 Virginia Electric & Power Co., Series A, 7.25% A2/A 4,662,300
due 02/01/23...................................
-------------
33,576,324
-------------
ELECTRONICS (0.7%)
7,000,000 Sensormatic Electronics Corp., 7.74% due NR/BBB+ 6,860,000
03/29/06.......................................
-------------
ENTERTAINMENT, LEISURE & MEDIA (1.0%)
2,000,000 Jacor Communications Co., 9.75% due 12/15/06..... B2/B 2,035,000
5,400,000 News America Holdings, Inc., 7.75% due Baa3/BBB 4,952,448
12/01/45.......................................
2,000,000 Rogers Cablesystems Limited, 11.09% due NR/NR 2,080,460
06/01/00.......................................
-------------
9,067,908
-------------
FINANCIAL SERVICES (3.4%)
6,000,000 Bank Boston Capital Trust II, Series B, 7.75% due Baa1/BBB 5,603,640
12/15/26.......................................
2,000,000 First Nationwide Hldgs. Inc., 10.625% due Ba3/NA 2,130,000
10/01/03.......................................
5,050,000 First Union Institutional Capital I, (144A), A1/BBB+ 4,980,663
8.04% due 12/01/26.............................
10,400,000 Ford Motor Credit Co., 7.00% due 09/25/01........ A1/A+ 10,435,048
2,000,000 General Motors Acceptance Corp., 6.70% due A3/A- 2,005,280
06/24/99.......................................
1,000,000 Sun World International, Inc., (144A), 11.25% due NR/NR 1,015,000
04/15/04.......................................
6,000,000 US Bancorp Capital I, (144A), 8.27% due Ba2/BB+ 6,017,220
12/15/26.......................................
-------------
32,186,851
-------------
FOREST PRODUCTS & PAPER (2.3%)
1,100,000 Buckeye Cellulose Corp., 8.50% due 12/15/05...... Ba3/BB- 1,075,250
5,200,000 Georgia-Pacific Corp., 7.375% due 12/01/25....... Baa2/BBB- 4,721,236
9,150,000 Georgia-Pacific Corp., 8.625% due 04/30/25....... Baa2/BBB- 9,199,410
5,600,000 Georgia-Pacific Corp., 9.95% due 06/15/02........ Baa2/BBB- 6,254,304
-------------
21,250,200
-------------
HEALTH SERVICES (0.5%)
2,000,000 Mariner Health Group, Inc., Series B, 9.50% due B2/B 1,945,000
04/01/06.......................................
3,000,000 Tenet Healthcare Corp., 10.125% due 03/01/05..... Ba3/B+ 3,225,000
-------------
5,170,000
-------------
</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, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT SECURITY DESCRIPTION RATING VALUE
- --------------- ------------------------------------------------- ------------ -------------
<C> <S> <C> <C>
INDUSTRIAL (0.1%)
$ 500,000 Ferrellgas Partners, L.P., Series B, 9.375% due B1/B+ $ 514,375
06/15/06.......................................
-------------
INSURANCE (0.5%)
4,400,000 Principal Mutual Insurance Co., (144A), 7.875% NR/NR 4,257,132
due 03/01/24...................................
-------------
MANUFACTURING (0.1%)
1,000,000 Collins & Aikman Products Co., 11.50% due B3/B 1,100,000
04/15/06.......................................
-------------
METALS & MINING (0.2%)
275,000 AK Steel Corp., 9.125% due 12/15/06.............. Ba2/BB- 272,594
700,000 Oregon Steel Mills, Inc., 11.00% due 06/15/03.... B1/BB 756,000
1,000,000 Ryerson Tull, Inc., 8.50% due 07/15/01........... Ba1/BB 1,016,250
-------------
2,044,844
-------------
NATURAL GAS (0.3%)
1,378,000 Consolidated Natural Gas Co., 8.625% due A1/AA- 1,411,541
12/01/11.......................................
750,000 Lasmo (USA) Inc., 8.375% due 06/01/23............ Baa2/BBB 739,042
700,000 Lomak Petroleum, Inc., 8.75% due 01/15/07........ B1/B 666,750
-------------
2,817,333
-------------
OIL-PRODUCTION (0.2%)
2,000,000 Plains Resources, Inc., Series B, 10.25% due B2/B 2,070,000
03/15/06.......................................
-------------
RAILROADS (0.1%)
1,125,000 SFP Pipeline Holdings Inc., 11.16% due Baa3/NR 1,366,875
08/15/10.......................................
-------------
RETAIL (0.8%)
2,500,000 Federated Department Stores, Inc., 8.50% due Baa2/BB+ 2,595,600
06/15/03.......................................
2,350,000 Sears Roebuck & Co., 8.00% due 02/16/99.......... A2/A- 2,409,972
2,200,000 Sears Roebuck & Co., 8.52% due 05/13/02.......... A2/A- 2,334,002
-------------
7,339,574
-------------
TELECOMMUNICATION SERVICES (0.1%)
2,000,000 McLeod, Inc., (144A), 0.00%* due 03/01/07........ B3/NR 1,127,500
-------------
</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, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT SECURITY DESCRIPTION RATING VALUE
- --------------- ------------------------------------------------- ------------ -------------
<C> <S> <C> <C>
TELECOMMUNICATIONS (0.9%)
$ 2,580,000 Tele-Communications, Inc., 10.125% due Ba1/BBB- $ 2,818,650
04/15/22.......................................
3,870,000 Worldcom Inc., 7.75% due 04/01/27................ Ba1/BBB- 3,862,840
1,970,000 Worldcom Inc., 9.375% due 01/15/04............... Ba3/BBB- 1,777,925
-------------
8,459,415
-------------
TELEPHONE (1.8%)
1,825,000 New York Telephone Co., 7.00% due 08/15/25....... A2/A+ 1,650,621
16,075,000 New York Telephone Co., 7.25% due 02/15/24....... A2/A+ 14,842,047
-------------
16,492,668
-------------
TEXTILES (0.4%)
4,000,000 WestPoint Stevens, Inc., 8.75% due 12/15/01...... Ba3/BB- 4,060,000
-------------
TRANSPORTATION (0.6%)
5,361,028 Union Tank Car Co., Series 93-A, 6.50% due A1/A+ 5,180,522
04/15/08.......................................
-------------
246,137,690
TOTAL CORPORATE OBLIGATIONS (COST
$249,276,893)..............................
-------------
FOREIGN CORPORATE OBLIGATIONS (4.0%)
CANADA (1.0%)
Forest Products & Paper
1,900,000 Canadian Pacific Forest Products Ltd., 9.25% Ba1/NR 1,962,529
due 06/15/02..................................
Water
4,500,000 Hydro Quebec, 8.875% due 03/01/26.............. A2/A+ 5,000,400
Transport Services
2,500,000 Teekay Shipping Corp., 8.32% due 02/01/08...... Ba2/BB 2,443,750
-------------
9,406,679
-------------
CHILE (0.5%)
Forest Products & Paper
5,000,000 Celulosa Arauco y Constitucion SA, 6.75% due Baa2/BBB+ 4,806,800
12/15/03......................................
-------------
CHINA (0.2%)
Financial Services
1,700,000 Guangdong International Trust & Investment Baa2/BBB- 1,753,873
Corp., (144A), 8.75% due 10/24/16.............
-------------
FRANCE (0.1%)
Electrical Equipment
1,000,000 Legrand S.A., 8.50% due 02/15/25............... A2/A 1,084,790
-------------
</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, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT SECURITY DESCRIPTION RATING VALUE
- --------------- ------------------------------------------------- ------------ -------------
<C> <S> <C> <C>
INDONESIA (0.5%)
Financial Services
$ 4,700,000 Sampoerna Intl. (144A), 8.375% due 06/15/06.... Baa3/BBB $ 4,709,776
-------------
MEXICO (0.8%)
Banking
2,000,000 Bancomext Trust Division, (144A), 11.25% due NA/BB 2,145,000
05/30/06......................................
Forest Products & Paper
2,000,000 Copamex Industrias SA DE CV, (144A), 11.375% B1/NR 2,052,500
due 04/30/04..................................
Gas Exploration
3,000,000 Petroleos Mexicanos, 7.60% due 06/15/00........ Ba2/NR 2,947,260
-------------
7,144,760
-------------
PHILIPPINES (0.4%)
Telephone
1,250,000 Philippine Long Distance Telephone, 10.625% due Ba2/BB+ 1,400,781
06/02/04......................................
2,570,000 Philippine Long Distance Telephone, Series E, Ba2/BB+ 2,427,134
7.85% due 03/06/07............................
-------------
3,827,915
-------------
UNITED KINGDOM (0.5%)
Electric
5,000,000 National Power Co. PLC, 6.25% due 12/01/03..... A2/A 4,703,125
-------------
37,437,718
TOTAL FOREIGN CORPORATE OBLIGATIONS (COST
$37,823,742)...............................
-------------
U.S. GOVERNMENT AGENCY OBLIGATIONS (34.1%)
FEDERAL HOME LOAN MORTGAGE CORP.
14,755,417 7.50% due 10/01/26............................... 14,672,787
1,506,708 8.00% due 11/01/26............................... 1,529,776
2,579,795 8.00% due 12/01/26............................... 2,619,214
13,373 9.00% due 04/01/03............................... 13,776
8,573,565 9.25% due 06/01/16............................... 9,065,344
195,569 9.50% due 08/01/04............................... 204,243
426,302 9.50% due 11/01/05............................... 445,298
2,157,923 9.50% due 12/01/05............................... 2,254,161
409,086 9.50% due 02/01/06............................... 427,319
589,037 9.50% due 03/01/06............................... 615,397
21,643 10.00% due 04/01/09.............................. 23,342
1,073 12.50% due 08/01/14.............................. 1,195
4,712,877 Gold, 6.50% due 06/01/04......................... 4,606,837
553,442 Gold, 8.00% due 04/01/10......................... 565,861
1,832,459 Gold, 8.00% due 07/01/10......................... 1,874,129
1,493,300 Gold, 8.00% due 07/01/11......................... 1,528,146
</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, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT SECURITY DESCRIPTION RATING VALUE
- --------------- ------------------------------------------------- ------------ -------------
<C> <S> <C> <C>
FEDERAL HOME LOAN MORTGAGE CORP. (CONTINUED)
$ 750,864 Gold, 8.00% due 08/01/11......................... $ 768,344
11,000,000 Gold, 8.506% due 12/01/04........................ 11,660,000
300,000 Remic: Accretion Directed, Series 1290, Class L, 301,167
7.50% due 10/15/09.............................
300,000 Remic: PAC, Series 102, Class I, 7.00% due 285,882
12/15/20.......................................
32,000 Remic: PAC-1(11), Series 1168, Class H, 7.50% due 31,526
11/15/21.......................................
250,000 Remic: PAC-1(11), Series 1199, Class E, 7.50% due 249,552
10/15/19.......................................
415,000 Remic: PAC-1(11), Series 1207, Class J, 6.75% due 402,994
07/15/19.......................................
250,000 Remic: PAC-1(11), Series 1215, Class F, 6.75% due 249,223
05/15/05.......................................
35,760,000 Remic: PAC-1(11), Series 1542, Class J, 7.00% due 35,434,942
02/15/22.......................................
13,000,000 Remic: PAC-1(11), Series 1594, Class H, 6.00% due 12,124,060
10/15/08.......................................
31,500,000 Remic: PAC-1(11), Series 1684, Class G, 6.50% due 30,442,230
03/15/23.......................................
7,500,000 Remic: PAC-1(11), Series 1714, Class K, 7.00% due 7,239,825
04/15/24.......................................
200,000 Remic: PAC-2(11), Series 39, Class F, 10.00% due 216,580
05/15/20.......................................
1,600,000 Remic: SCH(22), Series 1701, Class B, 6.50% due 1,523,408
03/15/09.......................................
-------------
141,376,558
-------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
2,864,787 6.88% due 11/01/05............................... 2,934,544
5,025,081 7.50% due 11/01/26............................... 4,992,167
10,846,256 7.50% due 01/01/27............................... 10,775,213
52,667 8.00% due 01/01/02............................... 53,760
51,323 8.00% due 05/01/02............................... 52,396
333,990 8.00% due 07/01/02............................... 340,959
5,504 8.00% due 08/01/22............................... 5,576
3,220,871 8.00% due 12/01/26............................... 3,265,093
27,694,750 8.50% due 01/01/05............................... 28,600,645
16,317 8.50% due 06/01/10............................... 16,784
4,355,873 8.70% due 01/01/05............................... 4,711,149
2,006,782 9.50% due 07/01/05............................... 2,105,817
540,417 10.00% due 06/01/20.............................. 585,930
8,205,128 10.00% due 06/01/26.............................. 8,943,507
134,850 Remic: PAC, Series 1991-101, Class C, 8.50% due 134,768
08/25/18.......................................
120,781 Remic: PAC, Series 1991-64, Class Z, 8.50% due 120,426
06/25/06.......................................
-------------
67,638,734
-------------
FEDERAL HOUSING ADMINISTRATION INSURED
3,293,992 Project 23, 7.43% due 03/01/22................... 3,131,351
-------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
184,983 7.00% due 07/15/22............................... 179,698
540,929 7.00% due 11/15/22............................... 524,891
757,549 7.00% due 01/15/23............................... 736,277
</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, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT SECURITY DESCRIPTION RATING VALUE
- --------------- ------------------------------------------------- ------------ -------------
<C> <S> <C> <C>
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (CONTINUED)
$ 345,774 7.00% due 03/15/23............................... $ 335,581
842,427 7.00% due 07/15/23............................... 818,899
333,926 7.00% due 09/15/23............................... 323,768
1,274,576 7.00% due 10/15/23............................... 1,235,513
60,638 7.00% due 12/15/23............................... 58,854
3,662,045 7.00% due 01/15/24............................... 3,558,971
1,941,307 7.00% due 02/15/24............................... 1,882,716
490,587 7.00% due 03/15/24............................... 476,662
4,679,210 7.00% due 04/15/24............................... 4,540,377
2,605,403 7.00% due 05/15/24............................... 2,526,562
885,688 7.00% due 06/15/24............................... 859,608
6,591,311 7.00% due 03/15/26............................... 6,343,280
7,806,528 7.00% due 05/15/35............................... 7,512,457
5,962,198 7.125% due 01/15/99.............................. 5,772,958
5,257,870 7.125% due 01/15/31.............................. 5,091,143
5,179,128 7.25% due 02/15/27............................... 5,047,267
2,604,739 7.25% due 01/15/31............................... 2,538,344
94,980 7.50% due 03/15/23............................... 94,357
201,584 7.50% due 05/15/23............................... 200,203
119,397 7.50% due 06/15/23............................... 118,689
194,934 7.50% due 01/15/24............................... 193,573
2,818,680 7.50% due 04/15/26............................... 2,780,937
6,374,734 7.50% due 05/15/26............................... 6,289,504
8,828,192 7.50% due 01/15/27............................... 8,754,300
5,044,642 7.50% due 02/15/27............................... 5,002,166
5,513,681 7.625% due 04/15/26.............................. 5,510,262
1,518,009 7.75% due 06/15/23............................... 1,525,584
8,595,622 7.75% due 07/15/31............................... 8,638,600
3,325,102 7.875% due 12/15/99.............................. 3,367,697
212,886 8.00% due 06/15/26............................... 215,722
246,342 8.00% due 07/15/26............................... 249,629
1,033,084 8.00% due 08/15/26............................... 1,046,938
2,302,318 8.00% due 06/15/31............................... 2,350,506
23,242 11.50% due 07/15/13.............................. 25,885
11,024,885 12.00% due 07/15/26.............................. 12,534,854
1,037 13.50% due 10/15/14.............................. 1,165
-------------
109,264,397
-------------
321,411,040
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(COST $324,432,010)........................
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
23
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT SECURITY DESCRIPTION RATING VALUE
- --------------- ------------------------------------------------- ------------ -------------
<C> <S> <C> <C>
U.S. TREASURY OBLIGATIONS (15.5%)
U.S. TREASURY BONDS
$ 2,842,000 6.00% due 02/15/26............................... $ 2,483,567
2,440,000 6.50% due 11/15/26............................... 2,286,914
-------------
4,770,481
-------------
U.S. TREASURY NOTES
6,295,000 5.625% due 11/30/98.............................. 6,244,640
3,220,000 5.75% due 12/31/98............................... 3,199,553
16,500,000 5.875% due 11/15/99.............................. 16,303,155
8,730,000 5.875% due 02/15/00.............................. 8,609,264
7,163,000 5.875% due 06/30/00.............................. 7,048,034
4,290,000 5.875% due 11/15/05.............................. 4,049,159
1,985,000 6.625% due 06/30/01.............................. 1,990,995
1,795,000 7.25% due 08/15/04............................... 1,852,925
25,000,000 8.25% due 07/15/98(s)............................ 25,629,500
42,370,000 8.50% due 11/15/00(s)............................ 45,035,920
20,500,000 8.875% due 11/15/98.............................. 21,301,345
-------------
141,264,490
-------------
146,034,971
TOTAL U.S. TREASURY OBLIGATIONS (COST
$146,393,196)..............................
-------------
SOVEREIGN BONDS (1.8%)
ARGENTINA (0.4%)
2,000,000 Republic of Argentina Global Bonds, 11.375% due B1/BB 2,122,500
01/30/17.......................................
1,455,000 Republic of Argentina, FRB, Series L, 6.813% due B1/BB 1,334,963
03/31/05.......................................
-------------
3,457,463
-------------
BRAZIL (0.5%)
2,911,290 Brazil, MYDFA Trust Certificates, FRN, 6.813% due NR/NR 2,587,409
09/15/07.......................................
3,361,950 Republic of Brazil, C Bonds, 8.00% due B1/BB- 2,546,677
04/15/14(c)....................................
-------------
5,134,086
-------------
MEXICO (0.4%)
3,500,000 United Mexican States, 9.75% due 02/06/01........ Ba2/NA 3,664,850
-------------
POLAND (0.3%)
3,670,000 Republic of Poland, 4.00%* due 10/27/14.......... Baa3/BBB- 2,986,646
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
24
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT SECURITY DESCRIPTION RATING VALUE
- --------------- ------------------------------------------------- ------------ -------------
<C> <S> <C> <C>
VENEZUELA (0.2%)
$ 2,500,000 Republic of Venezuela, DCB, Series DL, FRN, Ba2/NR $ 2,209,500
6.875% due 12/18/07............................
-------------
17,452,545
TOTAL SOVEREIGN BONDS (COST $17,435,061).....
-------------
<CAPTION>
SHARES
- ---------------
<C> <S> <C> <C>
CONVERTIBLE PREFERRED STOCKS (1.6%)
NATURAL GAS (0.1%)
36,000 Lasmo PLC, 10.00%, Series A...................... Baa3/BBB-
922,500
-------------
INDUSTRIAL PRODUCTS & SERVICES (1.5%)
80,000 James River Corp. of Virginia, 8.25%, Series O... Ba2/BB+ 2,020,000
12,575 Home Ownership Funding, (144A), 13.331%.......... Aaa/NA 12,297,596
-------------
14,317,596
-------------
15,240,096
TOTAL CONVERTIBLE PREFERRED STOCKS (COST
$15,428,278)...............................
-------------
<CAPTION>
PRINCIPAL
AMOUNT
- ---------------
<C> <S> <C> <C>
SHORT-TERM INVESTMENTS (3.2%)
U.S. GOVERNMENT AGENCY OBLIGATIONS (3.2%)
$ 29,917,000 Federal Home Loan Mortgage Discount Notes, 5.40% due 5/01/97... $ 29,917,000
-------------
932,341,791
TOTAL INVESTMENTS (COST $940,223,166) (98.9%)..................
10,169,125
OTHER ASSETS IN EXCESS OF LIABILITIES (1.1%)...................
-------------
$ 942,510,916
NET ASSETS (100.0%)............................................
-------------
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
25
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1997
- --------------------------------------------------------------------------------
- ------------------------------
Note: Based on the cost of investments of $940,223,166 for Federal Income Tax
purposes at April 30, 1997, the aggregate gross unrealized appreciation and
depreciation was $3,242,263 and $11,123,596, respectively, resulting in net
unrealized depreciation of $7,881,333.
(s) -- $20,500,000 par segregated as collateral for future contracts.
Abbreviations used in the schedule of investments are as follows:
* -- Rate shown reflects current rate on variable rate instrument or instrument
with step coupon rates.
144A -- Securities restricted for resale to Qualified Institutional Buyers.
ADR -- American Depository Receipt.
C -- Debt instrument with a fixed interest rate that pays a portion in interest
and a portion capitalizes increasing the principal.
DCB -- Debt Conversion Bond - non-collateralized floating rate instrument that
previously allowed the holder to convert the debt at a specific time.
FRB -- Floating Rate Bond.
FRN -- Floating Rate Note.
REMIC -- Real Estate Mortgage Investment Conduit.
PAC -- Planned Amortization Class.
NR -- Not Rated.
The Accompanying Notes are an Integral Part of the Financial Statements.
26
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
APRIL 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $940,223,166 ) $932,341,791
Cash 4,909
Receivable for Investments Sold 2,602,112
Interest Receivable 13,403,107
Prepaid Trustees' Fees 2,122
Prepaid Expenses and Other Assets 1,607
------------
Total Assets 948,355,648
------------
LIABILITIES
Payable for Investments Purchased 5,472,886
Advisory Fee Payable 231,141
Custody Fee Payable 39,567
Administrative Services Fee Payable 23,947
Administration Fee Payable 4,630
Fund Services Fee Payable 592
Variation Margin Payable 38,737
Accrued Expenses 33,232
------------
Total Liabilities 5,844,732
------------
NET ASSETS
Applicable to Investors' Beneficial Interests $942,510,916
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
27
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED APRIL 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest Income $32,130,666
Dividend Income (Net of Foreign Withholding Tax
of $6,749 ) 348,315
-----------
Investment Income 32,478,981
EXPENSES
Advisory Fee $ 1,384,277
Administrative Services Fee 145,189
Custodian Fees and Expenses 100,838
Professional Fees and Expenses 19,111
Fund Services Fee 16,645
Administration Fee 11,650
Trustees' Fees and Expenses 8,354
Miscellaneous 7,152
-----------
Total Expenses 1,693,216
-----------
NET INVESTMENT INCOME 30,785,765
NET REALIZED GAIN ON
Investment Transactions (including $28,610 net
realized gain from futures contracts) 3,520,833
NET CHANGE IN UNREALIZED DEPRECIATION OF
Investment (including $233,356 net unrealized
depreciation from futures contracts) (15,843,526)
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $18,463,072
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
28
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE FISCAL
APRIL 30, 1997 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1996
-------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 30,785,765 $ 51,059,862
Net Realized Gain on Investments 3,520,833 2,643,598
Net Change in Unrealized Depreciation of
Investments (15,843,526) (9,807,630)
-------------- -----------------
Net Increase in Net Assets Resulting from
Operations 18,463,072 43,895,830
-------------- -----------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 242,182,973 513,960,050
Withdrawals (304,440,377) (153,430,627)
-------------- -----------------
Net Increase (Decrease) from Investors'
Transactions (62,257,404) 360,529,423
-------------- -----------------
Total Increase (Decrease) in Net Assets (43,794,332) 404,425,253
NET ASSETS
Beginning of Period 986,305,248 581,879,995
-------------- -----------------
End of Period $942,510,916 $986,305,248
-------------- -----------------
-------------- -----------------
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FISCAL FOR THE PERIOD
FOR THE YEAR ENDED OCTOBER JULY 12, 1993
SIX MONTHS ENDED 31, (COMMENCEMENT OF
APRIL 30, 1997 ------------------ OPERATIONS) TO
(UNAUDITED) 1996 1995 1994 OCTOBER 31, 1993
----------------- ---- ---- ---- -----------------
<S> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Expenses 0.37%(a) 0.37% 0.39% 0.46% 0.48%
Net Investment Income 6.67%(a) 6.38% 6.68% 5.88% 4.91%(a)
Portfolio Turnover 48% 186% 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.
29
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
APRIL 30, 1997
- --------------------------------------------------------------------------------
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 (the "Act"), as a no load, 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 JPM Pierpont Bond Fund,
(formerly The Pierpont Bond Fund), in exchange for a beneficial interest in the
Portfolio. 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.
Investments in emerging markets may involve certain considerations and risks not
typically associated with investments in the United States. Future economic and
political developments in emerging market countries could adversely affect the
liquidity or value, or both, of such securities in which the Portfolio is
invested. The ability of the issuers of debt securities held by the Portfolio to
meet their obligations may be affected by economic and political developments in
a specific industry or region.
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. Actual amounts could differ from
those estimates. The following is a summary of the significant accounting
policies of the Portfolio:
a)The Portfolio values mortgage and asset-backed securities and other debt
securities with a maturity of 60 days or more, including securities that
are listed on an exchange or traded over the counter, 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, indications as to value from dealers and general market
conditions. Securities listed on a foreign exchange are valued at the last
quoted sale price available before the time when net assets are valued. 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 short-term portfolio securities with a remaining
maturity of less than 60 days are valued using the amortized cost method.
The ability of issuers of mortgage and asset-backed securities, held by
the Portfolio, to meet their obligations may be affected by economic
developments in a specific industry or region. The value of mortgage and
asset-backed securities can be significantly affected by changes in
interest rates, rapid principal payments including pre-payments.
The Portfolio's custodian or designated subcustodians, as the case may be,
under triparty repurchase agreements takes possession of the collateral
pledged for investments in repurchase agreements on behalf of the
Portfolio. It is the policy of the Portfolio to value the underlying
collateral daily on a mark-to-market basis to determine that the value,
including accrued interest, is at least equal to the repurchase price plus
accrued interest. In the event of default of the obligation to repurchase,
the Portfolio has the
30
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1997
- --------------------------------------------------------------------------------
right to liquidate the collateral and apply the proceeds in satisfaction
of the obligation. Under certain circumstances, in the event of default or
bankruptcy by the other party to the agreement, realization and/or
retention of the collateral or proceeds may be subject to legal
proceedings.
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. The
change in the market value is recorded by the Portfolio as unrealized
appreciation or depreciation of foreign forward and spot currency
contracts until terminated, at which time realized foreign currency gains
and losses are recognized. There were no open forward or spot currency
contracts as of April 30, 1997.
d)Futures -- A futures contract is an agreement to purchase/sell a specified
quantity of an underlying instrument at a specified future date or to
make/receive a cash payment based on the value of a securities index. The
price at which the purchase and sale will take place will be fixed when
the Portfolio enters into the contract. Upon entering into such a contract
the Portfolio is required to pledge to the broker an amount of cash and/or
liquid 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 the 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 when
it was closed. The Portfolio invests in futures contracts for the purpose
of hedging its existing portfolio securities, or securities the Portfolio
intends to purchase, against fluctuations in value caused by changes in
prevailing market interest rates or securities movements. The use of
futures transactions involves the risk of imperfect correlation of
movements in the price of futures contracts, interest rates and the
underlying hedged assets, and the possible inability of counterparties to
meet the terms of their contracts. Futures transactions during the six
months ended April 30, 1997 are summarized as follows:
<TABLE>
<CAPTION>
NUMBER OF PRINCIPAL AMOUNT
CONTRACTS OF CONTRACTS
--------- ----------------
<S> <C> <C>
Contracts open at beginning of period............ 0 $ 0
Contracts opened................................. 586 64,059,612
Contracts closed................................. (401) (44,006,562)
--------- ----------------
Contracts open at end of period.................. 185 $ 20,053,050
--------- ----------------
--------- ----------------
</TABLE>
31
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1997
- --------------------------------------------------------------------------------
SUMMARY OF OPEN CONTRACTS AT APRIL 30, 1997
<TABLE>
<CAPTION>
NET UNREALIZED
APPRECIATION/
CONTRACTS LONG (DEPRECIATION)
-------------- --------------
<S> <C> <C>
U. S. Long Bond, June 1997....................... 185 (233,356)
-------------- --------------
Totals........................................... 185 $ (233,356)
-------------- --------------
-------------- --------------
</TABLE>
e)The Portfolio intends to be treated as a partnership for federal income
tax purposes. As such, each investor in the Portfolio will be subject to
taxation 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. The Portfolio
earns foreign income which may be subject to foreign withholding taxes at
various rates.
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 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, 1997, this
fee amounted to $1,384,277.
b)The Portfolio has retained Funds Distributor, Inc. ("FDI"), a registered
broker-dealer to serve as a co-administrator and distributor. Under a
Co-Administration Agreement between FDI and the Portfolio, FDI 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 officers affiliated with
FDI. The Portfolio has agreed to pay FDI fees equal to its allocable share
of an annual complex-wide charge of $425,000 plus FDI's out-of-pocket
expenses. The amount allocable to the Portfolio is based on the ratio of
the Portfolio's net assets to the aggregate net assets of The JPM Pierpont
Funds, The JPM Institutional Funds, The JPM Advisor Funds, the Portfolio
and the other portfolios in which the JPM Pierpont Funds,The JPM
Institutional Funds invest (the "Master Portfolios"), JPM Series Trust and
JPM Series Trust II. For the six months ended April 30, 1997, the fee for
these services amounted to $11,650.
On November 15, 1996, The JPM Advisor Funds terminated operations and were
liquidated. Subsequent to that date, the net assets of the JPM Advisor
Funds were no longer included in the calculation of the allocation of
FDI's fees.
c)The Portfolio has an Administrative Services Agreement (the "Services
Agreement") with Morgan under which Morgan is responsible for overseeing
certain aspects of the administration and operation of the Portfolio.
Under the Services 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, and JPM Series Trust in accordance with the following annual
schedule: 0.09% on the first $7 billion of their aggregate average daily
net assets and 0.04% of their aggregate average daily net assets in excess
of $7 billion, less the complex-wide fees payable to FDI.
32
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1997
- --------------------------------------------------------------------------------
The portion of this charge payable by the Portfolio is determined by the
proportionate share that the net assets bear to the total net assets of
the Master Portfolios, investors in the Master Portfolios for which Morgan
provides similar services, the JPM Pierpont Funds, hte JPM Institutional
Funds and JPM Series Trust. For the six months ended April 30, 1997, the
fee for these services amounted to $145,189.
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 existing shareholders of Group. The
Portfolio's allocated portion of Group's costs in performing its services
amounted to $16,645 for the six months ended April 30, 1997.
e)An aggregate annual fee of $75,000 is paid to each Trustee for serving as
a Trustee of The JPM Pierpont Funds, The JPM Institutional Funds and the
Master Portfolios, and JPM Series Trust. The Trustees' Fees and Expenses
shown in the financial statements represent the Portfolio's allocated
portion of the total fees and expenses. Prior to April 1, 1997, the
aggregate annual Trustee Fee was $65,000. The Portfolio's Chairman and
Chief Executive Officer also serves as Chairman of Group and receives
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 $3,300.
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the six months
ended April 30, 1997, were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
------------ ------------
<S> <C> <C>
U.S. Government and Agency Obligations........... $180,181,964 $334,208,764
Corporate and Collateralized Obligations......... 250,517,067 118,821,269
------------ ------------
$430,699,031 $453,030,033
------------ ------------
------------ ------------
</TABLE>
33