<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS
APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT SECURITY DESCRIPTION RATING VALUE
------------- ------------------------------------------------- ------------ ---------------
<C> <S> <C> <C>
ASSET BACKED SECURITIES (8.6%)
$ 10,000,000 Citibank Credit Card Master Trust I, Soft Bullet
Maturity, Series 1998-9, Class A, 5.300%
due 01/09/06................................... Aaa/AAA $ 9,306,200
12,000,000 Discover Card Master Trust, Series 1998-4, Class
A, 5.750% due 10/16/03......................... Aaa/AAA 11,812,440
16,912,030 Green Tree Financial Corp., Series 1993-3, Class
B, 6.850% due 10/15/18......................... Baa1/NR 14,036,985
10,000,000 Green Tree Financial Corp., Series 1999-5, Class
B1, 9.200% due 04/01/31........................ NR/BBB 9,206,200
14,750,000 CNH Equipment Trust, Sequential Payer, Series
2000-A, Class A3, 7.140% due 08/15/04.......... Aaa/AAA 14,704,127
35,090,000 DaimlerChrysler Auto Trust, Sequential Payer,
Series 00-A, Class A2, 6.760% due 01/06/03..... Aaa/AAA 35,002,275
5,000,000 First USA Credit Card Master Trust, Series
1999-1, Class C, 6.420% due 10/19/06........... NR/NR 4,744,530
5,550,000 Ford Credit Auto Owner Trust, Sequential Payer,
Series 2000-A, Class A3, 6.820% due 06/17/02... Aaa/AAA 5,541,286
5,000,000 Ford Credit Auto Owner Trust, Subordinate Bond,
Series 1999-A, Class D, 8.000% due 06/15/04.... NR/BB 4,868,750
23,428,000 MBNA Master Credit Trust, Series 95-F, Class A,
6.600% due 01/15/03............................ Aaa/AAA 23,442,525
--------------
TOTAL ASSET BACKED SECURITY (COST
$135,360,386).............................. 132,665,318
--------------
CERTIFICATES OF DEPOSIT - FOREIGN (0.3%)
CANADA (0.3%)
4,000,000 Canadian Imperial Bank of Commerce, 6.200% due
08/01/00 (cost $4,000,100)..................... Aa3/AA- 3,995,600
--------------
CORPORATE OBLIGATIONS (12.6%)
AIRLINES (0.1%)
1,882,890 Continental Airlines, Inc., Series 1999-2, Class
C-1, 7.730% due 03/15/11....................... Baa1/A- 1,803,545
--------------
AUTOMOTIVE (0.9%)
1,000,000 Chrysler Financial Corp., 6.625% due 08/15/00.... A1/A+ 999,010
135,000 Ford Motor Credit Corp., 7.250% due 01/15/03..... A2/A 133,516
10,000,000 Daimlerchrysler, N.A. Holding, 6.900% due
09/01/04....................................... A1/A+ 9,724,800
735,000 Federal-Mogul Corp., 7.750% due 07/01/06......... Ba2/BB+ 601,134
1,010,000 Ford Motor Credit Corp., 7.375% due 10/28/09..... A2/A 976,286
--------------
12,434,746
--------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
16
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT SECURITY DESCRIPTION RATING VALUE
------------- ------------------------------------------------- ------------ ---------------
<C> <S> <C> <C>
BANKING (1.1%)
$ 1,000,000 Chase Manhattan Corp., 7.500% due 02/01/03....... A1/A $ 1,001,100
10,500,000 Comerica Bank, 6.160% due 06/12/00 (v)........... A1/A 10,498,740
585,000 FCB/NC Capital Trust I, 8.050% due 03/01/28...... Baa3/BB+ 482,625
2,200,000 Keycorp Institutional Capital, Series B, 8.250%
due 12/15/26................................... A1/BBB 2,021,558
2,500,000 Keystone Financial Mid-Atlantic Funding, MTN,
6.500% due 05/31/08............................ Baa2/BBB+ 2,215,575
1,500,000 US Bancorp Capital I, Series B, 8.270% due
12/15/26....................................... A1/BBB+ 1,388,355
--------------
17,607,953
--------------
BROADCASTING (0.1%)
1,700,000 AMFM, Inc., 9.250% due 07/01/07.................. B1/B 1,704,250
--------------
BUILDING MATERIALS (0.1%)
1,000,000 Armstrong World, Inc., 6.350% due 08/15/03....... Baa1/A- 884,790
--------------
CHEMICALS (0.1%)
1,000,000 Cytec Industries, Inc., MOPPRS, 6.846% due
05/11/05 (v)................................... Baa2/BBB 913,990
--------------
CONSUMER GOODS & SERVICES (0.3%)
5,000,000 Cendant Corp., 7.750% due 12/01/03............... Baa1/BBB 4,872,700
--------------
ELECTRIC (0.9%)
10,000,000 Pacific Corp., Series G, 6.710% due 01/15/26..... Aaa/AAA 8,787,400
5,000,000 PECO Energy Co., 8.000% due 04/01/02............. Baa1/A 5,008,000
--------------
13,795,400
--------------
ENERGY (0.0%)
506,000 Cogentrix Energy, Inc., 8.750% due 10/15/08...... Ba1/BB+ 495,880
--------------
FINANCIAL SERVICES (2.5%)
795,000 CIT Group Inc., 7.250% due 08/15/05.............. A1/A+ 774,187
1,000,000 Household Finance Corp., 6.875% due 03/01/03..... A2/A 979,430
6,500,000 Associates Corp. N.A., 5.875% due 07/15/02....... Aa3/A+ 6,278,415
3,400,000 Commercial Credit Co., 8.700% due 06/15/10....... Aa3/AA- 3,596,962
5,000,000 Enterprise Rent-a-Car USA Finance Co., (144A),
6.375% due 05/15/03............................ Baa1/BBB 4,803,800
23,500,000 Newcourt CR Group Inc., 6.875% due 02/16/05...... A1/A+ 22,603,710
--------------
39,036,504
--------------
FOOD, BEVERAGES & TOBACCO (0.1%)
2,000,000 Smithfield Foods, Inc., 7.625% due 02/15/08...... Ba3/BB+ 1,742,500
--------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
17
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT SECURITY DESCRIPTION RATING VALUE
------------- ------------------------------------------------- ------------ ---------------
<C> <S> <C> <C>
FOREST PRODUCTS & PAPER (0.7%)
$ 5,000,000 Champion International Corp., 7.100% due
09/01/05....................................... Baa1/BBB $ 4,754,050
5,600,000 Georgia-Pacific Corp., 9.950% due 06/15/02....... Baa2/BBB- 5,824,280
--------------
10,578,330
--------------
GAS PRODUCERS (0.9%)
5,000,000 National Fuel Gas Co., Series D, MTN, 6.214% due
08/12/27....................................... A2/A- 4,874,700
10,000,000 NGC Corp. Capital Trust, Series B, 8.316% due
06/01/27....................................... Baa3/BBB- 8,758,200
--------------
13,632,900
--------------
GAS-PIPELINES (1.0%)
15,000,000 Enron Corp. (144A), 6.580% due 09/10/01 (v)...... Baa1/BBB+ 14,997,000
1,497,600 Express Pipeline LP, Series B, (144A), 7.390% due
12/31/17....................................... Baa3/BBB- 1,278,576
--------------
16,275,576
--------------
HEALTH SERVICES (0.0%)
2,000,000 Mariner Post-Acute Network, Inc., Series B,
9.500% due 04/01/06{/\}........................ C/D 10,000
--------------
MEDIA (0.7%)
3,125,000 Adelphia Communications, Inc., 9.375% due
11/15/09....................................... B1/B+ 2,906,250
3,125,000 Charter Communications Holdings LLC, 8.250% due
04/01/07....................................... B2/B+ 2,796,875
1,200,000 Fox Family Worldwide, Inc., 9.250% due
11/01/07....................................... B1/B 1,044,000
2,500,000 Fox/Liberty Networks LLC, 8.875% due 08/15/07.... Ba1/BBB- 2,500,000
1,900,000 Lamar Media Corp., 8.625% due 09/15/07........... B1/B 1,767,000
--------------
11,014,125
--------------
METALS & MINING (0.1%)
1,400,000 P&L Coal Holdings Corp., Series B, 9.625% due
05/15/08....................................... B2/B 1,246,000
1,000,000 Ryerson Tull, Inc., 8.500% due 07/15/01.......... Baa3/BBB 990,000
--------------
2,236,000
--------------
MISCELLANEOUS CONSUMER GOODS (0.1%)
2,000,000 Sun World International, Inc., Series B, 11.250%
due 04/15/04................................... B2/B 1,870,000
--------------
NATURAL GAS (0.0%)
350,000 Williams Companies, Inc., 6.200% due 08/01/02.... Baa2/BBB- 338,754
--------------
OIL-PRODUCTION (0.4%)
6,400,000 Canadian Occidental Petroleum Ltd., 7.125% due
02/04/04....................................... Baa2/BBB 6,157,760
--------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
18
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT SECURITY DESCRIPTION RATING VALUE
------------- ------------------------------------------------- ------------ ---------------
<C> <S> <C> <C>
OIL-SERVICES (0.2%)
$ 500,000 Lasmo (USA) Inc., 6.750% due 12/15/07............ Baa2/BBB $ 452,095
2,318,985 Oil Purchase Co., (144A), 7.100% due 04/30/02.... Ba2/BBB- 2,214,630
--------------
2,666,725
--------------
PHARMACEUTICALS (0.0%)
500,000 McKesson Corp., 6.300% due 03/01/05.............. A3/A- 429,605
--------------
PROPERTY & CASUALTY (0.2%)
3,000,000 Safeco Capital Trust I, 8.072% due 07/15/37...... A3/BBB 2,470,440
--------------
RAILROADS (0.4%)
1,667,058 Burlington Northern Santa Fe Corp., Series
1996-A, 7.330% due 06/23/10.................... Aa3/A+ 1,643,536
5,350,000 Canadian National Railway, 7.000% due 03/15/04... Baa2/BBB 5,167,832
--------------
6,811,368
--------------
RETAIL (0.2%)
2,500,000 Federated Department Stores, Inc., 8.500% due
06/15/03....................................... Baa1/BBB+ 2,537,750
--------------
TELECOMMUNICATIONS (1.1%)
700,000 US West Capital Funding Inc., 6.875% due
07/15/28....................................... Baa1/A- 602,966
3,000,000 McLeodUSA, Inc., 9.250% due 07/15/07............. B1/B+ 2,880,000
1,000,000 Nextlink Communications, Inc., 9.625% due
10/01/07....................................... B2/B 930,000
10,000,000 Sprint Capital Corp., 5.875% due 05/01/04........ Baa1/BBB+ 9,400,700
400,000 Sprint Capital Corp., 6.500% due 11/15/01........ Baa1/BBB+ 394,452
2,000,000 Williams Communications Group, Inc., 10.700% due
10/01/07....................................... B2/BB- 2,035,000
500,000 Worldcom, Inc., 6.400% due 08/15/05.............. A3/A- 474,865
--------------
16,717,983
--------------
TRANSPORT & SERVICES (0.1%)
2,000,000 Atlantic Express Transportation Corp., 10.750%
due 02/01/04................................... B2/B 1,800,000
--------------
TRUCK & FREIGHT CARRIERS (0.3%)
4,762,159 Federal Express Corp., Series 1999-1, Class C,
8.250% due 01/15/19............................ Baa1/BBB+ 4,714,394
--------------
TOTAL CORPORATE OBLIGATIONS (COST
$207,865,003).............................. 195,553,968
--------------
FOREIGN CORPORATE OBLIGATIONS (2.1%)
BERMUDA (0.3%)
TELECOMMUNICATION SERVICES
4,125,000 Global Crossing Holdings Ltd., Inc. (144A),
9.125% due 11/15/06............................ Ba2/BB 4,011,562
--------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT SECURITY DESCRIPTION RATING VALUE
------------- ------------------------------------------------- ------------ ---------------
<C> <S> <C> <C>
CANADA (0.8%)
FINANCIAL SERVICES
$ 5,000,000 McKesson Finance of Canada, (144A), 6.550% due
11/01/02....................................... Baa1/BBB+ $ 4,611,200
--------------
TELECOMMUNICATION SERVICES
300,000 Microcell Telecommunications, Inc., Series B,
Zero Coupon, 0.000% due 06/01/06 (v)........... B3/NR 270,000
--------------
TELEPHONE
325,000 Call-Net Enterprises, Inc., Zero Coupon, 0.000%
due 08/15/07................................... B2/B+ 162,500
--------------
TRANSPORT & SERVICES
5,995,000 Laidlaw, Inc., 6.720% due 10/01/27............... B2/BB- 2,038,300
--------------
WATER
4,500,000 Hydro Quebec, Series GF, 8.875% due 03/01/26..... A2/A+ 5,053,950
--------------
12,135,950
--------------
FRANCE (0.1%)
ELECTRICAL EQUIPMENT
1,785,000 Legrand S.A., 8.500% due 02/15/25................ A2/A 1,764,633
--------------
KOREA (0.2%)
BANKING
1,665,000 Cho Hung Bank, (144A), 11.875% due 04/01/10
(v)............................................ B1/B 1,635,862
2,135,000 Hanvit Bank, (144A), 11.750% due 03/01/10........ B1/B 2,094,969
--------------
3,730,831
--------------
NETHERLANDS (0.1%)
FINANCIAL SERVICES
2,250,000 Montell Finance Co. BV, (144A), 8.100% due
03/15/27....................................... Baa2/BBB- 2,146,275
--------------
UNITED KINGDOM (0.6%)
ELECTRIC
10,000,000 United Utilities PLC, 6.875% due 08/15/28........ A3/BBB+ 8,168,800
--------------
UTILITIES
1,000,000 United Utilities PLC, 6.250% due 08/15/05........ A3/BBB+ 913,140
--------------
9,081,940
--------------
TOTAL FOREIGN CORPORATE OBLIGATIONS (COST
$39,937,047)............................... 32,871,191
--------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT SECURITY DESCRIPTION RATING VALUE
------------- ------------------------------------------------- ------------ ---------------
<C> <S> <C> <C>
FOREIGN GOVERNMENT OBLIGATIONS (0.9%)
CANADA (0.9%)
$ 10,035,000 Province of Ontario, 7.625% due 06/22/04......... Aa3/AA- $ 10,109,159
4,700,000 Province of Quebec, Series NY, 6.500% due
01/17/06....................................... A2/A+ 4,465,658
--------------
TOTAL FOREIGN GOVERNMENT OBLIGATIONS (COST
$15,087,879)............................... 14,574,817
--------------
MORTGAGE BACKED SECURITIES (33.3%)
COLLATERALIZED MORTGAGE OBLIGATIONS (3.1%)
2,253,150 Bear Stearns Structured Securities Inc.,
Sequential Payer, Series 1997-2, Class 1A5,
(144A), 7.000% due 08/25/36.................... Aaa/NR 2,062,689
12,500,000 CS First Boston Mortgage Securities Corp., Series
1999-C1, Class A2, Sequential Payer, 7.290% due
09/15/09....................................... Aaa/NR 12,300,787
29,645,664 First Nationwide Trust, Sequential Payer, Series
1999-4, Class 3PA1, 6.500% due 10/19/29........ NR/AAA 27,348,125
5,000,000 GS Mortgage Securities Corp. II, Series
2000-GSFL, Class F, 7.630% due 08/15/04........ Baa2/BBB 5,000,000
1,192,966 Vendee Mortgage Trust, Sequential Payer, Series
1997-1, Class 2C, 7.500% due 09/15/17.......... NR/NR 1,194,075
--------------
47,905,676
--------------
COMMERCIAL PROPERTIES (2.3%)
11,500,000 Commercial Mortgage Acceptance Corp.,
Subordinated Bond, CSTR, Series 1997-ML1, Class
C, 6.774% due 12/15/07......................... A2/A 10,608,750
20,000,000 First Union Commercial Mortgage Trust, Sequential
Payer, Series 1999-C1, Class A2, 6.070% due
10/15/08....................................... NR/AAA 18,059,380
7,830,000 Morgan Stanley Capital I, Inc., Sequential Payer,
Series 1998-XL2, Class A2, 6.170% due
10/03/08....................................... NR/AAA 7,091,044
--------------
35,759,174
--------------
MORTGAGE PASS-THROUGHS (27.9%)
78,010,000 TBA FNMA, May, 6.500% due 05/01/30............... 72,793,471
40,370,000 TBA FNMA, May, 7.000% due 05/01/15............... 39,423,727
8,515,000 TBA FNMA, May, 7.500% due 05/01/30............... 8,332,694
32,175,000 TBA FNMA, May, 8.000% due 05/01/30............... 32,124,807
40,900,000 TBA FNMA, May, 6.500% due 05/01/15............... 39,136,392
59,865,000 TBA FNMA, May, 7.000% due 05/01/30............... 57,274,043
4,064,000 TBA GNMA, May, 7.000% due 05/01/30............... 3,907,780
45,435,000 TBA GNMA, May, 8.000% due 05/01/30............... 45,527,233
425,180 Federal Home Loan Bank, 7.000% due 09/01/09...... 418,289
1,268,191 Federal Home Loan Mortgage Corp., 6.000% due
09/01/03-04/01/11.............................. 1,205,258
343 Federal Home Loan Mortgage Corp., 12.500% due
08/01/14....................................... 381
72,928,389 FNMA , 6.500% due 07/01/28-02/01/29.............. 66,378,181
3,266,088 FNMA, 7.000% due 09/01/29........................ 3,125,829
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT SECURITY DESCRIPTION RATING VALUE
------------- ------------------------------------------------- ------------ ---------------
<C> <S> <C> <C>
MORTGAGE PASS-THROUGHS (CONTINUED)
$ 2,089,127 FNMA, 8.000% due 05/01/27........................ $ 2,087,720
330,417 FNMA, 9.000% due 12/01/24........................ 338,892
53,772,113 GNMA, 6.500% due 11/15/29........................ 50,398,451
216,505 GNMA, 7.000% due 12/15/08........................ 213,398
9,109,437 GNMA, 7.500% due 01/15/27-02/15/27............... 8,971,155
1,205,797 GNMA, 8.000% due 04/15/22-08/15/26............... 1,214,134
219,242 GNMA, 8.500% due 05/15/27........................ 223,362
68,840 GNMA , 9.000% due 12/15/26....................... 71,564
--------------
433,166,761
--------------
TOTAL MORTGAGE BACKED SECURITY (COST
$523,684,464).............................. 516,831,611
--------------
PRIVATE PLACEMENT (1.4%)
FINANCIAL SERVICES (0.3%)
5,672,558 500 Grant Street Associates, (144A), 6.460% due
12/01/08....................................... A2/NR 5,273,210
--------------
REAL ESTATE (1.1%)
4,444,044 180 East End Avenue Note, secured by first
mortgage and agreement on co-op apartment
building in new York City, 6.875% due 01/01/28
(f)............................................ NR/NR 4,094,876
10,939,671 200 East 57th Street, secured by first mortgage
and agreement on co-op apartment building in
New York City, 6.500% due 01/01/14 (f)......... NR/NR 9,844,391
3,260,264 81 Irving Place Note, secured by first mortgage
and agreement on co-op apartment buliding in
New York City , 6.950% due 01/01/29 (f)........ NR/NR 3,011,800
--------------
16,951,067
--------------
TOTAL PRIVATE PLACEMENT (COST $24,316,537)... 22,224,277
--------------
SOVEREIGN BONDS (2.7%)
ARGENTINA (0.3%)
1,065,000 Republic of Argentina Global Bonds, 12.000% due
02/01/20....................................... B1/BB 1,051,687
4,875,000 Republic of Argentina Global Bonds, Series BGL5,
11.375% due 01/30/17........................... B1/BB 4,641,000
--------------
5,692,687
--------------
BRAZIL (0.4%)
715,000 Republic of Brazil, 7.375% due 04/15/09 (v)...... B2/NR 586,300
3,337,000 Republic of Brazil, 7.438% due 04/15/06 (v)...... B2/B+ 2,978,273
1,840,000 Republic of Brazil Discount Bonds, Series 30 Year
ZL, 7.375% due 04/15/24 (v).................... B2/NR 1,421,400
1,395,000 Republic of Brazil Global Bonds, 12.750% due
01/15/20....................................... B2/B+ 1,337,108
--------------
6,323,081
--------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT SECURITY DESCRIPTION RATING VALUE
------------- ------------------------------------------------- ------------ ---------------
<C> <S> <C> <C>
BULGARIA (0.2%)
$ 4,135,000 Republic of Bulgaria Global FLIRB, Series A,
2.750% due 07/28/12 (v)........................ B2/NR $ 2,873,825
--------------
COLOMBIA (0.5%)
3,035,000 Republic of Colombia, 9.750% due 04/23/09........ Ba2/BB+ 2,382,475
5,995,000 Republic of Colombia, 11.750% due 02/25/20....... Ba2/BB+ 5,080,763
--------------
7,463,238
--------------
MEXICO (0.3%)
2,325,000 United Mexican States Global Bonds, 11.500% due
05/15/26....................................... Baa3/BB+ 2,749,313
1,830,000 United Mexican States Global Bonds, Series XW,
10.375% due 02/17/09........................... Baa3/BB+ 1,923,330
--------------
4,672,643
--------------
PANAMA (0.3%)
6,429,437 Republic of Panama PDI, 7.544% due 07/17/16
(v)............................................ NR/NR 5,175,697
--------------
PERU (0.2%)
4,090,000 Peru PDI, Series 20 Year, 4.500% due 03/07/17.... Ba3/BB 2,735,188
--------------
PHILIPPINES (0.3%)
3,855,000 Republic of Philippines Global Bonds, 9.875% due
01/15/19....................................... Ba1/BB+ 3,411,675
1,170,000 Republic of Philippines Global Bonds, 10.625% due
03/16/25....................................... Ba1/BB+ 1,080,788
--------------
4,492,463
--------------
TURKEY (0.2%)
2,325,000 Republic of Turkey, 11.875% due 01/15/30......... B1/B+ 2,513,906
--------------
TOTAL SOVEREIGN BONDS (COST $44,524,130)..... 41,942,728
--------------
U.S. GOVERNMENT AGENCY OBLIGATIONS (0.1%)
FEDERAL HOME LOAN MORTGAGE CORP. (0.1%)
886,013 REMIC: Sequential Payer, Series 1980, Class C,
Partially Callable, 6.850% due 10/15/21 (cost
$887,106)...................................... 882,132
--------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
23
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT SECURITY DESCRIPTION RATING VALUE
------------- ------------------------------------------------- ------------ ---------------
<C> <S> <C> <C>
U.S. TREASURY OBLIGATIONS (31.6%)
U.S. TREASURY BONDS (11.5%)
$ 2,300,000 6.500% due 11/15/26.............................. $ 2,383,743
81,753,000 6.750% due 08/15/26.............................. 87,322,014
70,195,000 8.875% due 02/15/19.............................. 89,783,617
--------------
179,489,374
--------------
U.S. TREASURY NOTES (19.1%)
199,310,000 5.500% due 05/15/09 (s).......................... 187,662,324
12,425,000 6.000% due 08/15/09.............................. 12,137,610
31,835,000 6.500% due 02/15/10.............................. 32,466,606
62,950,000 6.875% due 05/15/06 (s).......................... 63,972,938
--------------
296,239,478
--------------
U.S. TREASURY STRIPS (1.0%)
38,155,000 PO, 6.237% (y) due 11/15/15...................... 14,685,860
--------------
TOTAL U.S. TREASURY OBLIGATIONS (COST
$488,658,280).............................. 490,414,712
--------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
-------------
<C> <S> <C>
PREFERRED STOCK (0.2%)
FINANCIAL SERVICES (0.2%)
150,000 TCI Ccmmunications Financing (cost $4,087,500)... 3,862,500
--------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
-------------
<C> <S> <C>
SHORT-TERM INVESTMENTS (23.6%)
SHORT-TERM INVESTMENTS (23.4%)
362,540,117 J.P. Morgan Institutional Prime Money
Market Fund (s)................................ 362,540,117
--------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
24
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY DESCRIPTION VALUE
------------- ------------------------------------------------- ---------------
<C> <S> <C>
U.S. TREASURY OBLIGATIONS (0.2%)
$ 3,400,000 United States Treasury Notes, 5.625%
due 11/30/00 (s)............................... $ 3,385,108
--------------
TOTAL SHORT-TERM INVESTMENTS (COST
$365,938,893)............................... 365,925,225
--------------
TOTAL INVESTMENTS (COST $1,854,347,326)
(117.4%)....................................... 1,821,744,079
LIABILITIES IN EXCESS OF OTHER ASSETS (-17.4%)... (270,399,484)
--------------
NET ASSETS (100.0%).............................. $1,551,344,595
==============
</TABLE>
------------------------------
Note: Based on the cost of the investments of $1,854,347,326 for federal income
tax purposes at April 30, 2000, the aggregate gross unrealized appreciation and
depreciation was $5,129,464 and $37,732,711, respectively, resulting in net
unrealized depreciation of $32,603,247.
(f)Fair valued security. Approximately 1.0% of the market value of the
securities have been valued at fair value. (See Note 1a)
(s)Security is fully or partially segregated with custodian as collateral for
future contracts or with broker as initial margin for futures contracts.
$624,838,016 of the market value has been segregated.
(t)All or a portion of the security has been segregated as collateral for TBA
securities and when issued securities.
(v)Rate shown reflects current rate on variable or floating rate instrument or
investment with step coupon rate.
(y) Yield to maturity.
{/\} Defaulted security.
Abbreviations used in the schedule of investment are as follows:
144A - Securities restricted for resale to Qualified Institutional Buyers.
CSTR - Collateral Strip Rate.
FLIRB - Floating Interest Rate Bond.
FNMA - Federal National Mortgage Association.
GNMA - Government National Mortgage Association.
MOPPRS - Mandatory Par Put Remarketed Security.
MTN - Medium Term Note.
PDI - Past Due Interest.
PO - Principal Only.
REMIC - Real Estate Mortgage Investment Conduit.
TBA - Security purchased on a forward commitment basis with an approximate
principal amount and no definite maturity date. The actual principal amount and
maturity will be determined upon settlement date.
The Accompanying Notes are an Integral Part of the Financial Statements.
25
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $1,854,347,325 ) $1,821,744,079
Cash 1,989,859
Receivable for Investments Sold 105,310,295
Interest Receivable 20,504,006
Other Assets 57,164
Prepaid Trustees' Fees 8,506
Prepaid Expenses and Other Assets 4,915
--------------
Total Assets 1,949,618,824
--------------
LIABILITIES
Payable for Investments Purchased 397,719,094
Advisory Fee Payable 377,632
Variation Margin Payable 51,788
Administrative Services Fee Payable 30,499
Administration Fee Payable 748
Accrued Expenses 94,468
--------------
Total Liabilities 398,274,229
--------------
NET ASSETS
Applicable to Investors' Beneficial Interests $1,551,344,595
==============
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
26
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest Income $50,541,772
Dividend Income (Net of Foreign Withholding Tax
of $2,250 ) 669,107
-----------
Investment Income 51,210,879
EXPENSES
Advisory Fee $ 2,083,567
Administrative Services Fee 185,234
Custodian Fees and Expenses 161,416
Professional Fees and Expenses 24,312
Fund Services Fee 12,713
Trustees' Fees and Expenses 6,524
Administration Fee 6,486
Miscellaneous 7,089
-----------
Total Expenses 2,487,341
Less: Reimbursement of Expenses (136,933)
-----------
NET EXPENSES 2,350,408
-----------
NET INVESTMENT INCOME 48,860,471
NET REALIZED GAIN (LOSS) ON INVESTMENTS (22,465,033)
Futures, Options and Swap Contracts 3,705,858
Foreign Currency Transactions 881,067
-----------
NET REALIZED LOSS (17,878,108)
NET CHANGE IN UNREALIZED DEPRECIATION OF
INVESTMENTS (8,092,988)
Futures, Options and Swap Contracts 10,197
Foreign Currency Contracts and Translations (876,484)
-----------
NET CHANGE IN UNREALIZED DEPRECIATION (8,959,275)
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $22,023,088
===========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
27
<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, 2000 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1999
-------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 48,860,471 $ 90,985,155
Net Realized Loss on Investments (17,878,108) (40,014,602)
Net Change in Unrealized Depreciation of
Investments (8,959,275) (48,217,908)
-------------- ---------------
Net Increase in Net Assets Resulting from
Operations 22,023,088 2,752,645
-------------- ---------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 312,680,724 936,203,363
Withdrawals (381,480,896) (688,024,126)
-------------- ---------------
Net Increase (Decrease) from Investors'
Transactions (68,800,172) 248,179,237
-------------- ---------------
Total Increase (Decrease) in Net Assets (46,777,084) 250,931,882
NET ASSETS
Beginning of Period 1,598,121,679 1,347,189,797
-------------- ---------------
End of Period $1,551,344,595 $ 1,598,121,679
============== ===============
</TABLE>
--------------------------------------------------------------------------------
SUPPLEMENTARY DATA
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS ENDED FOR THE FISCAL YEAR ENDED OCTOBER 31,
APRIL 30, 2000 --------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
---------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Net Expenses 0.32% 0.36% 0.36% 0.37% 0.37% 0.39%
Net Investment Income 6.68% 6.05% 6.42% 6.70% 6.38% 6.68%
Portfolio Turnover 247% 465% 115% 93% 186% 293%
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
28
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
APRIL 30, 2000
--------------------------------------------------------------------------------
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 on January 29, 1993. 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 J.P. Morgan
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 and international markets may involve certain
considerations and risks not typically associated with investments in the United
States. Future economic and political developments in emerging market and
foreign 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, asset-backed and mortgage securities held by the portfolio to meet
their obligations may be affected by economic and political developments in a
specific industry or region. The value of asset-backed and mortgage securities
can be significantly affected by changes in interest rates or rapid principal
payments including pre-payments.
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 value of each security for which readily available market quotations
exist is based on a decision as to the broadest and most representative
market for such security. The value of such security will be based either
on the last sale price on a national securities exchange, or in the
absence of recorded sales, at the average of readily available closing bid
and asked prices on such exchanges. Securities listed on a foreign
exchange are valued at the last quoted sale price available before the
time when net assets are valued. Unlisted securities are valued at the
average of the quoted bid and asked prices in the over-the-counter market.
Securities or other assets for which market quotations are not readily
available are valued at fair value in accordance with procedures
established by the portfolio's trustees. Such procedures include the use
of independent pricing services, which use prices based upon yields or
prices of securities of comparable quality, coupon, maturity and type;
indications as to values from dealers; and general market conditions. All
short-term portfolio securities with a remaining maturity of less than 60
days are valued by the amortized cost method.
Trading in securities on most foreign exchanges and over-the-counter
markets is normally completed before the close of the domestic market and
may also take place on days on which the domestic market is closed. If
events materially affecting the value of foreign securities occur between
the time when the exchange on which they are traded closes and the time
when the portfolio's net assets are calculated, such securities will be
valued at fair value in accordance with procedures established by and
under the general supervision of the portfolio's trustees.
29
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
The portfolio's custodian 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 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) The books and records of the portfolio are maintained in U.S. dollars. The
market value of investment securities, other assets and liabilities and
foreign currency contracts are translated at the prevailing exchange rates
at the end of the period. Purchases, sales, income and expenses are
translated at the exchange rates prevailing on the respective dates of
such transactions. Translation gains and losses resulting from changes in
exchange rates during the reporting period and gains and losses realized
upon settlement of foreign currency transactions are reported in the
Statement of Operations. Although the net assets of the portfolio are
presented at the exchange rates and market values prevailing at the end of
the period, the portfolio does not isolate the portion of the results of
operations arising as a result of changes in foreign exchange rates from
the fluctuations arising from changes in the market prices of securities
during the period.
c) Securities transactions are recorded on a trade date basis. Dividend
income is recorded on the ex-dividend date or as of the time that the
relevant ex-dividend date and amount becomes known. 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.
d) The portfolio may enter into forward and spot foreign currency contracts
to protect securities and related receivables and payables 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 at the current foreign exchange
rates, and the change in the market value is recorded by the portfolio as
unrealized appreciation or depreciation of forward foreign currency
contract translations. At April 30, 2000, the portfolio had no open
forward foreign currency contracts:
e) 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 is fixed when the
portfolio enters into the contract. Upon entering in to 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 eceipts or payments are
known as "variation margin" and are recorded by the portfolio as
unrealized gains or losses. When the
30
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
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 in 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.
Open futures contracts at April 30, 2000 are summarized as follows:
f) The portfolio may enter into commitments to buy and sell investments to
settle on future dates as part of its normal investment activities. These
commitments are reported at market value in the financial statements.
Credit risk exists on these commitments to the extent of any unrealized
gains on the underlying securities purchased and any unrealized losses on
the underlying securities sold. Market risk exists on these commitments to
the same extent as if the security were owned on a settled basis and gains
and losses are recorded and reported in the same manner. However, during
the commitment period, these investments earn no interest or dividends.
g) 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. The portfolio earns foreign income which may
be subject to foreign withholding taxes at various rates.
2. TRANSACTIONS WITH AFFILIATES
a) Prior to October 28, 1998, the portfolio had an Investment Advisory
Agreement with Morgan Guaranty Trust Company of New York ("Morgan"), a
wholly owned subsidiary of J.P. Morgan & Co. Incorporated
("J.P. Morgan"). Under the terms of the Agreement, the portfolio paid
Morgan at an annual rate of 0.30% of the portfolio's average daily net
assets. Effective October 28, 1998 the portfolio's Investment Advisor is
J.P. Morgan Investment Management Inc. ("JPMIM"), an affiliate of Morgan
and a wholly owned subsidiary of J.P. Morgan, and the terms of the
Agreement will remain the same. For the six months ended April 30, 2000,
this fee amounted to $2,083,567
The fund may invest in one or more affiliated money market funds:
J.P. Morgan Institutional Prime Money Market Fund, J.P. Morgan
Institutional Tax Exempt Money Market Fund, J.P. Morgan Institutional
Federal Money Market Fund and J.P. Morgan Institutional Treasury Money
Market Fund. The Advisor has agreed to reimburse its advisory fee from the
fund in an amount to offset any doubling of investment advisory and
shareholder servicing fees. For the six months ended April 30, 2000,
J.P. Morgan has agreed to reimburse the fund $174,973 under this
agreement.
b) The portfolio, on behalf of the fund, has retained Funds Distributor, Inc.
("FDI"), a registered broker-dealer, to serve as the co-administrator and
exclusive placement agent. 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
31
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
the portfolio and pays the compensation of the portfolio's 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
portfolio and certain other investment companies subject to similar
agreements with FDI. For the six months ended April 30, 2000, the fee for
these services amounted to $6,486.
c) The portfolio has an Administrative Services Agreement (the "Services
Agreement") with Morgan under which Morgan is responsible for 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 allocable share of an annual complex-wide charge. This charge is
calculated based on the aggregate average daily net assets of the
portfolio and certain other portfolios for which JPMIM acts as investment
advisor (the "master portfolios") and J.P. Morgan 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. The portion of this charge payable by
the portfolio is determined by the proportionate share that its net assets
bear to the net assets of the master portfolios, other investors in the
master portfolios for which Morgan provides similar services and
J.P. Morgan Series Trust. For the six months ended April 30, 2000 the fee
for these services amounted to $185,234.
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 $12,713 for the six months ended April 30, 2000.
e) An aggregate annual fee of $75,000 is paid to each trustee for serving as
a trustee of the J.P. Morgan Funds, J.P. Morgan Institutional Funds, the
master portfolios and J.P. Morgan Series Trust. The Trustees' Fees and
Expenses shown in the financial statements represents the portfolio's
allocated portion of the total fees and expenses. 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 $2,400.
32
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the six months
ended April 30, 2000, were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
-------------- --------------
<S> <C> <C>
U.S. Government and Agency Obligations........... $3,229,362,449 $2,904,247,716
Corporate and Collateralized Obligations......... 783,663,605 707,913,185
-------------- --------------
$4,013,026,054 $3,612,160,901
============== ==============
</TABLE>
Open Futures Contracts at April 30, 2000 are as follows:
<TABLE>
<CAPTION>
NET UNREALIZED
APPRECIATION/ MARKET VALUE
CONTRACTS LONG (DEPRECIATION) OF CONTRACTS
--------------- -------------- ------------
<S> <C> <C> <C>
U.S. Treasury Long Bond, expiring
June 2000....................................... 290 $ (437,939) $ 28,003,125
============== ============= ============
</TABLE>
<TABLE>
<CAPTION>
CONTRACTS SHORT
---------------
<S> <C> <C> <C>
U.S. Five-Year Treasury Note, expiring
June 2000....................................... 354 $ 431,223 $ 34,542,658
U.S. Ten-Year Treasury Note, expiring
June 2000....................................... 1,042 (639,438) 101,025,161
-------------- ------------- ------------
Totals........................................... 1,396 $ (208,215) $135,567,819
============== ============= ============
</TABLE>
4. CREDIT AGREEMENT
The portfolio is party to a revolving line of credit agreement (the "Agreement")
as discussed more fully in Note 4 of the fund's Notes to the Financial
Statements which are included elsewhere in this report.
33
