<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS
MAY 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
SECURITY DESCRIPTION SHARES VALUE
- -------------------------------------------------------------------------------------- ----------- ------------
COMMON STOCKS (95.3%)
BASIC INDUSTRIES (8.2%)
AGRICULTURE (1.4%)
Dekalb Genetics Corp. ................................................................ 425,700 $ 12,185,662
------------
CHEMICALS (3.0%)
Albemarle Corp. ...................................................................... 318,300 7,161,750
Cytec Industries, Inc.+ .............................................................. 37,800 3,383,100
General Chemical Group, Inc.+ ........................................................ 261,400 5,031,950
Landec Corp.+ ........................................................................ 19,700 398,925
Petrolite Corp. ...................................................................... 5,300 170,925
Polymer Group, Inc.+ ................................................................. 41,500 798,875
RPM, Inc. ............................................................................ 154,500 2,549,250
Schulman (A) ,Inc. ................................................................... 60,200 1,557,675
Synalloy Corp. ....................................................................... 28,000 546,000
Wellman, Inc. ........................................................................ 169,900 3,843,987
------------
25,442,437
------------
FOREST PRODUCTS & PAPER (0.5%)
Caraustar Industries, Inc. ........................................................... 6,500 170,625
Glatfelter (P.H.) Co. ................................................................ 152,800 2,693,100
Jefferson Smurfit Corp.+ ............................................................. 79,100 993,694
Universal Forest Products, Inc. ...................................................... 10,800 114,750
------------
3,972,169
------------
METALS & MINING (3.3%)
AK Steel Holding Corp ................................................................ 44,700 1,933,275
Allegheny Ludlum Corp. ............................................................... 299,300 5,986,000
Alumax Inc.+ ......................................................................... 51,200 1,711,872
Commercial Metals Co. ................................................................ 285,300 8,951,287
Kaiser Aluminum Corp.+ ............................................................... 83,502 1,064,650
Minera Rayrock, Inc.* ................................................................ 696,600 609,695
Oregon Steel Mills, Inc. ............................................................. 127,900 2,046,400
Schnitzer Steel Industries, Inc. ..................................................... 34,300 960,400
Steel Technologies, Inc. ............................................................. 414,100 6,004,450
------------
29,268,029
------------
TOTAL BASIC INDUSTRIES ........................................................... 70,868,297
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
19
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THE U.S. SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 1996
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<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- -------------------------------------------------------------------------------------- ----------- ------------
<S> <C> <C>
CONSUMER GOODS & SERVICES (14.3%)
AUTOMOTIVE (0.8%)
Amcast Industrial Corp. .............................................................. 34,200 $ 662,625
Excel Industries, Inc. ............................................................... 207,000 3,105,000
Simpson Industries, Inc. ............................................................. 363,400 3,543,150
------------
7,310,775
------------
BROADCASTING & PUBLISHING (2.3%)
Banta Corp. .......................................................................... 201,050 4,875,462
Consolidated Graphics, Inc.+ ......................................................... 144,400 3,808,550
Digital Generation Systems, Inc.+ .................................................... 11,600 152,250
Edmark Corp.+ ........................................................................ 31,100 917,450
Emmis Broadcasting Corp.+ ............................................................ 23,100 1,010,625
Heartland Wireless Communications, Inc.+ ............................................. 49,300 1,315,694
Heritage Media Corp.+ ................................................................ 43,800 1,741,050
K-III Communications Corp.+ .......................................................... 119,400 1,522,350
Norwood Promotional Products, Inc.+ .................................................. 33,100 678,550
People's Choice TV Corp.+ ............................................................ 106,600 1,838,850
TeleWest Communications PLC (ADR)*+ .................................................. 64,400 1,803,200
------------
19,664,031
------------
CONSTRUCTION & HOUSING (0.8%)
Centex Corp. ......................................................................... 87,100 2,623,887
D.R. Horton, Inc.+ ................................................................... 369,200 3,876,600
------------
6,500,487
------------
ENTERTAINMENT, LEISURE & MEDIA (1.8%)
Ascent Entertainment Group, Inc.+ .................................................... 92,800 1,658,800
Boyd Gaming Corp.+ ................................................................... 202,970 3,399,747
Imax Corp.+ .......................................................................... 84,200 2,920,687
Johnson Worldwide Associates, Inc.+ .................................................. 98,800 1,716,650
Royal Caribbean Cruises Ltd.* ........................................................ 121,600 3,496,000
SCP Pool Corp.+ ...................................................................... 33,200 618,350
WMS Industries, Inc.+ ................................................................ 90,000 1,980,000
------------
15,790,234
------------
FOOD, BEVERAGES & TOBACCO (1.3%)
Coors (Adolph) Co. ................................................................... 61,000 1,136,125
Dean Foods Co. ....................................................................... 55,800 1,360,125
Dreyer's Grand Ice Cream, Inc. ....................................................... 39,100 1,300,075
Eskimo Pie Corp. ..................................................................... 78,000 1,633,125
Nabisco Holdings Corp., Class A ...................................................... 21,770 737,459
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
20
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THE U.S. SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 1996
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SECURITY DESCRIPTION SHARES VALUE
- -------------------------------------------------------------------------------------- ----------- ------------
<S> <C> <C>
</TABLE>
FOOD, BEVERAGES & TOBACCO (CONTINUED)
<TABLE>
<S> <C> <C>
Riviana Foods, Inc. .................................................................. 49,500 $ 903,375
Sanderson Farms, Inc. ................................................................ 33,601 453,613
Universal Foods Corp. ................................................................ 93,500 3,295,875
------------
10,819,772
------------
HOUSEHOLD APPLIANCES FURNISHINGS (0.5%)
Aaron Rents, Inc. .................................................................... 23,800 669,375
Bush Industries, Inc. ................................................................ 52,300 1,863,187
Leggett & Platt, Inc. ................................................................ 72,200 2,048,675
------------
4,581,237
------------
HOUSEHOLD PRODUCTS (1.3%)
Bush Boake Allen, Inc.+ .............................................................. 56,200 1,390,950
Department 56, Inc.+ ................................................................. 202,300 4,855,200
First Brands Corp. ................................................................... 73,900 1,829,025
Libbey, Inc. ......................................................................... 87,500 2,121,875
Scott Paper Ltd.* .................................................................... 58,600 978,770
------------
11,175,820
------------
PERSONAL CARE (0.2%)
Tambrands, Inc. ...................................................................... 33,600 1,549,800
------------
RESTAURANTS & HOTELS (0.7%)
Doubletree Corp.+ .................................................................... 33,200 1,174,450
Extended Stay America, Inc.+ ......................................................... 71,000 2,227,625
Landry's Seafood Restaurants, Inc.+ .................................................. 40,200 969,825
Planet Hollywood International, Inc.+ ................................................ 10,000 267,500
Starbucks Corp.+ ..................................................................... 60,600 1,636,200
------------
6,275,600
------------
RETAIL (4.6%)
Authentic Fitness Corp. .............................................................. 30,000 570,000
Books A Million, Inc.+ ............................................................... 76,700 906,019
Borders Group, Inc.+ ................................................................. 42,300 1,385,325
Catherines Stores Corp.+ ............................................................. 181,100 1,765,725
Charming Shoppes, Inc. ............................................................... 284,900 2,270,297
Circuit City Stores, Inc. ............................................................ 106,500 3,474,562
Fastenal Co. ......................................................................... 24,300 1,099,575
Garden Ridge Corp.+ .................................................................. 49,200 2,570,700
Hannaford Brothers Co. ............................................................... 46,500 1,470,562
Kohl's Corp.+ ........................................................................ 45,400 1,503,875
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 1996
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SECURITY DESCRIPTION SHARES VALUE
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<S> <C> <C>
</TABLE>
RETAIL (CONTINUED)
<TABLE>
<S> <C> <C>
Leslie's Poolmart+ ................................................................... 69,200 $ 1,297,500
Loehmann's Holdings, Inc.+ ........................................................... 8,000 204,000
Oakley, Inc.+ ........................................................................ 18,500 941,187
Office Depot, Inc.+ .................................................................. 164,800 4,223,000
One Price Clothing Stores, Inc.+ ..................................................... 308,500 1,735,312
Penn Traffic Co.+ .................................................................... 150,100 1,913,775
Petco Animal Supplies, Inc.+ ......................................................... 22,600 641,275
Talbots, Inc. ........................................................................ 41,400 1,350,675
The Sports Authority, Inc.+ .......................................................... 28,900 859,775
Thrifty PayLess Holdings, Inc.+ ...................................................... 92,400 1,328,250
TJX Companies, Inc. .................................................................. 116,000 4,089,000
Trans World Entertainment Corp.+ ..................................................... 94,400 542,800
Urban Outfitters, Inc.+ .............................................................. 56,800 2,392,700
Wolverine World Wide, Inc. ........................................................... 26,400 877,800
------------
39,413,689
------------
TOTAL CONSUMER GOODS & SERVICES .................................................. 123,081,445
------------
ENERGY (4.4%)
GAS EXPLORATION (2.4%)
Devon Energy Corp. ................................................................... 112,800 2,876,400
El Paso Natural Gas Co. .............................................................. 39,100 1,417,375
K N Energy, Inc. ..................................................................... 53,500 1,805,625
Newfield Exploration Co.+ ............................................................ 33,500 1,247,875
Pogo Producing Co. ................................................................... 71,800 2,584,800
Sonat Offshore Drilling, Inc. ........................................................ 33,300 1,764,900
TCP Corp.+ ........................................................................... 99,500 820,875
Texas Meridian Resources Corp.+ ...................................................... 146,300 1,572,725
TransCanada Pipelines Ltd.* .......................................................... 438,700 6,361,150
------------
20,451,725
------------
OIL-PRODUCTION (1.1%)
Anadarko Petroleum Corp. ............................................................. 44,100 2,370,375
Flores & Rucks, Inc.+ ................................................................ 56,600 1,690,925
MAPCO, Inc. .......................................................................... 3,100 179,598
Noble Affiliates, Inc. ............................................................... 83,300 2,821,787
Vastar Resources, Inc. ............................................................... 50,000 1,818,750
Vintage Petroleum, Inc. .............................................................. 20,700 538,200
------------
9,419,635
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 1996
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<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- -------------------------------------------------------------------------------------- ----------- ------------
<S> <C> <C>
OIL-SERVICES (0.9%)
Camco International, Inc. ............................................................ 40,500 $ 1,331,437
Dreco Energy Services Ltd.*+ ......................................................... 111,700 3,099,675
Landmark Graphics Corp.+ ............................................................. 78,300 1,487,700
Smith International, Inc.+ ........................................................... 55,800 1,757,700
------------
7,676,512
------------
TOTAL ENERGY ..................................................................... 37,547,872
------------
FINANCE (17.5%)
BANKING (8.0%)
Banknorth Group, Inc. ................................................................ 78,300 2,613,262
CCB Financial Corp. .................................................................. 27,600 1,438,650
Charter One Financial, Inc. .......................................................... 131,300 4,792,450
Colonial BancGroup, Inc. ............................................................. 103,400 3,619,000
Commerce Bancorporation, Inc. ........................................................ 44,000 1,061,500
Community First Bankshares, Inc. ..................................................... 49,900 1,166,412
First Colorado Bancorp, Inc. ......................................................... 103,600 1,379,175
First Commerce Corp. ................................................................. 173,900 6,195,187
First Hawaiian, Inc. ................................................................. 23,100 658,350
Firstar Corp. ........................................................................ 97,600 4,782,400
FirstFed Financial Corp.+ ............................................................ 39,000 648,375
GBC Bancorp .......................................................................... 84,400 1,962,300
GreenPoint Financial Corp. ........................................................... 98,300 2,924,425
HUBCO, Inc. .......................................................................... 96,600 2,034,637
Irwin Financial Corp. ................................................................ 17,300 720,112
Mark Twain Bancshares, Inc. .......................................................... 42,500 1,561,875
Mountain Parks Financial Corp.+ ...................................................... 29,500 667,437
National Commerce Bancorporation ..................................................... 109,800 3,376,350
Pinnacle Financial Services, Inc. .................................................... 48,600 984,150
Roosevelt Financial Group, Inc. ...................................................... 238,300 4,274,506
Security First Network Bank+ ......................................................... 7,200 287,100
Silicon Valley Bancshares+ ........................................................... 44,000 1,067,000
Southern National Corp. .............................................................. 196,000 5,733,000
Southtrust Corp. ..................................................................... 34,410 946,275
Standard Federal Bancorporation ...................................................... 59,900 2,358,562
Sterling Bancshares, Inc. ............................................................ 78,975 1,085,906
Trustco Bank Corp. ................................................................... 77,400 1,702,800
Westamerica Bancorporation ........................................................... 67,600 3,287,050
Wilmington Trust Corp. ............................................................... 150,800 5,014,100
------------
68,342,346
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
23
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THE U.S. SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 1996
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<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
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<S> <C> <C>
FINANCIAL SERVICES (1.0%)
Amresco, Inc. ........................................................................ 72,000 $ 1,336,500
Donaldson, Lufkin & Jenrette, Inc. ................................................... 20,400 650,250
Edwards (A.G.), Inc. ................................................................. 71,000 1,819,375
First USA Paymentech, Inc.+ .......................................................... 9,800 454,475
Litchfield Financial Corp. ........................................................... 46,300 653,987
Mercury Finance Co. .................................................................. 82,500 1,031,250
Southwest Securities Group, Inc. ..................................................... 126,100 1,442,269
WFS Financial, Inc.+ ................................................................. 75,300 1,586,006
------------
8,974,112
------------
INSURANCE (4.1%)
AMBAC, Inc. .......................................................................... 81,000 4,201,875
Capital Re Corp. ..................................................................... 382,300 13,953,950
Chartwell Re Corp. ................................................................... 26,100 580,725
First Colony Corp. ................................................................... 57,300 1,504,125
Mid Ocean Ltd.* ...................................................................... 41,900 1,749,325
MMI Companies, Inc. .................................................................. 242,500 7,184,062
PartnerRe Ltd.* ...................................................................... 118,500 3,555,000
RenaissanceRe Holdings, Ltd.* ........................................................ 86,300 2,464,944
------------
35,194,006
------------
REAL ESTATE INVESTMENT TRUSTS (4.4%)
Associated Estates Realty Corp. ...................................................... 62,800 1,287,400
Beacon Properties Corp. .............................................................. 20,800 525,200
Capstone Capital Trust, Inc. ......................................................... 99,100 2,031,550
CBL & Associate Properties, Inc. ..................................................... 31,800 679,725
CenterPoint Properties Corp. ......................................................... 10,700 254,125
Chelsea GCA Realty, Inc. ............................................................. 66,500 1,961,750
Colonial Properties Trust ............................................................ 92,200 2,166,700
Columbus Realty Trust ................................................................ 108,800 2,108,000
DeBartolo Realty Corp. ............................................................... 45,800 744,250
Developers Diversified Realty Corp. .................................................. 72,200 2,256,250
Equity Residential Properties Trust .................................................. 150,100 4,653,100
Gables Residential Trust ............................................................. 82,300 1,892,900
Health & Retirement Property Trust ................................................... 162,600 2,764,200
Healthcare Realty Trust, Inc. ........................................................ 98,700 2,245,425
Kimco Realty Corp. ................................................................... 25,800 706,275
Liberty Property Trust ............................................................... 107,800 2,196,425
Macerich Co. ......................................................................... 35,500 745,500
MerryLand & Investment Company, Inc. ................................................. 72,900 1,594,687
Oasis Residential, Inc. .............................................................. 79,200 1,683,000
Patriot American Hospitality, Inc. ................................................... 34,700 984,612
ROC Communities, Inc. ................................................................ 27,600 658,950
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
24
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
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SECURITY DESCRIPTION SHARES VALUE
- -------------------------------------------------------------------------------------- ----------- ------------
<S> <C> <C>
</TABLE>
REAL ESTATE INVESTMENT TRUSTS (CONTINUED)
<TABLE>
<S> <C> <C>
Sovran Self Storage, Inc. ............................................................ 9,500 $ 248,187
Starwood Lodging Trust ............................................................... 31,600 1,200,800
Storage Trust Realty ................................................................. 68,500 1,421,375
Wellsford Residential Property Trust ................................................. 39,100 889,525
------------
37,899,911
------------
TOTAL FINANCE .................................................................... 150,410,375
------------
HEALTHCARE (8.9%)
BIOTECHNOLOGY (1.9%)
Aksys Ltd.+ .......................................................................... 9,800 166,600
Biofield Corp.+ ...................................................................... 59,100 982,537
Houghten Pharmaceuticals, Inc.+ ...................................................... 58,100 573,737
Human Genome Sciences, Inc.+ ......................................................... 52,400 1,925,700
Incyte Pharmaceuticals, Inc.+ ........................................................ 83,500 2,828,562
Microcide Pharmaceuticals, Inc.+ ..................................................... 9,400 155,100
Millennium Pharmaceuticals, Inc.+ .................................................... 13,700 280,850
NABI, Inc.+ .......................................................................... 104,800 1,427,900
Neurocrine Bisciences, Inc.+ ......................................................... 7,600 84,075
Neurogen Corp.+ ...................................................................... 38,500 1,111,687
ONYX Pharmaceuticals, Inc.+ .......................................................... 34,500 493,781
Sequana Therapeutics, Inc.+ .......................................................... 80,500 1,645,219
Somatogen, Inc.+ ..................................................................... 86,600 1,445,137
Targeted Genetics Corp.+ ............................................................. 112,900 606,837
Vertex Pharmaceuticals, Inc.+ ........................................................ 66,000 2,442,000
------------
16,169,722
------------
HEALTH SERVICES (4.4%)
Advocat, Inc.+ ....................................................................... 156,300 1,602,075
Apria Healthcare Group, Inc.+ ........................................................ 98,300 2,875,275
Caremark International, Inc. ......................................................... 59,100 1,617,862
Community Health Systems, Inc.+ ...................................................... 86,700 3,760,612
Foundation Health Corp.+ ............................................................. 43,300 1,721,175
Health Care & Retirement Corp.+ ...................................................... 107,000 3,865,375
Health Systems International, Inc.+ .................................................. 124,700 3,709,825
Healthsource, Inc.+ .................................................................. 70,500 1,595,062
Living Centers of America, Inc.+ ..................................................... 82,800 3,125,700
Mariner Health Group, Inc.+ .......................................................... 133,600 2,388,100
Professional Sports Care Management, Inc.+ ........................................... 65,000 501,719
Sierra Health Services, Inc.+ ........................................................ 41,400 1,335,150
Sterling House Corp.+ ................................................................ 54,300 1,045,275
Summit Care Corp.+ ................................................................... 183,600 4,406,400
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
25
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THE U.S. SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 1996
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SECURITY DESCRIPTION SHARES VALUE
- -------------------------------------------------------------------------------------- ----------- ------------
<S> <C> <C>
</TABLE>
HEALTH SERVICES (CONTINUED)
<TABLE>
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Sunrise Assisted Living, Inc.+ ....................................................... 14,700 $ 294,000
Vivra, Inc.+ ......................................................................... 128,800 4,395,300
------------
38,238,905
------------
MEDICAL SUPPLIES (1.9%)
Cellpro, Inc.+ ....................................................................... 94,200 1,719,150
Eclipse Surgical Technologies+ ....................................................... 17,000 272,000
Fresenius USA, Inc.+ ................................................................. 174,800 3,539,700
Heartport, Inc.+ ..................................................................... 13,800 534,750
Heartstream, Inc.+ ................................................................... 52,900 767,050
Imagyn Medical, Inc.+ ................................................................ 13,200 226,050
Kensey Nash Corp.+ ................................................................... 84,200 1,220,900
KeraVision, Inc.+ .................................................................... 115,800 1,925,175
Metra Biosystems, Inc.+ .............................................................. 8,300 103,231
Perseptive Biosystems, Inc.+ ......................................................... 203,100 1,980,225
Physio-Control International Corp.+ .................................................. 25,600 497,600
Research Medical, Inc.+ .............................................................. 123,500 3,133,812
------------
15,919,643
------------
PHARMACEUTICALS (0.7%)
Allergan, Inc. ....................................................................... 54,400 2,094,400
Gensia, Inc.+ ........................................................................ 3,321 17,020
SangStat Medical Corp.+ .............................................................. 93,400 1,862,162
Vical, Inc.+ ......................................................................... 101,900 1,967,944
------------
5,941,526
------------
TOTAL HEALTHCARE ................................................................. 76,269,796
------------
INDUSTRIAL PRODUCTS & SERVICES (13.9%)
BUILDING MATERIALS (0.7%)
Apogee Enterprises, Inc. ............................................................. 17,800 478,375
USG Corp.+ ........................................................................... 203,600 5,573,550
------------
6,051,925
------------
CAPITAL GOODS (3.5%)
ABC Rail Products Corp.+ ............................................................. 28,500 621,656
Applied Power, Inc. .................................................................. 173,700 5,124,150
Cincinnati Milacron, Inc. ............................................................ 41,500 996,000
Collins & Aikman Corp.+ .............................................................. 191,100 1,289,925
Gardner Denver Machinery, Inc.+ ...................................................... 126,800 3,312,650
IDEX Corp. ........................................................................... 10,300 391,400
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
26
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- -------------------------------------------------------------------------------------- ----------- ------------
<S> <C> <C>
</TABLE>
CAPITAL GOODS (CONTINUED)
<TABLE>
<S> <C> <C>
Kaydon Corp. ......................................................................... 70,600 $ 3,035,800
Modine Manufacturing Co. ............................................................. 99,300 2,532,150
PACCAR, Inc. ......................................................................... 122,700 6,012,300
Strategic Distribution, Inc.+ ........................................................ 90,600 753,112
TRINOVA Corp. ........................................................................ 32,400 1,069,200
Wabash National Corp. ................................................................ 175,500 3,575,813
Worldtex Inc.+ ....................................................................... 72,500 453,125
------------
29,167,281
------------
COMMERCIAL SERVICES (3.2%)
DeVry, Inc.+ ......................................................................... 138,400 5,501,400
Equity Corp. International+ .......................................................... 37,900 1,113,313
FlightSafety International, Inc. ..................................................... 25,100 1,383,638
Leasing Solutions, Inc.+ ............................................................. 66,200 1,075,750
May & Speh, Inc.+ .................................................................... 88,400 1,370,200
Measurex Corp. ....................................................................... 66,200 1,911,525
Ogden Corp. .......................................................................... 86,600 1,677,875
Pinkertons, Inc.+ .................................................................... 65,900 1,631,025
Robert Half International, Inc.+ ..................................................... 41,400 2,323,575
Service Corp. International .......................................................... 166,900 9,325,538
Vincam Group, Inc.+ .................................................................. 5,800 163,850
Whittman-Hart, Inc.+ ................................................................. 4,400 166,650
York Group, Inc. ..................................................................... 16,500 286,688
------------
27,931,027
------------
DIVERSIFIED MANUFACTURING (2.9%)
American Standard Co., Inc.+ ......................................................... 185,400 5,492,475
Asyst Technologies, Inc.+ ............................................................ 54,000 1,262,250
Brady (WH) Co. ....................................................................... 137,400 3,503,700
Credence Systems Corp.+ .............................................................. 147,900 2,976,488
Fisher Scientific International, Inc. ................................................ 18,000 735,750
Intermet Corp.+ ...................................................................... 435,400 7,292,950
Safety 1st Inc.+ ..................................................................... 228,300 3,481,575
Special Devices, Inc.+ ............................................................... 22,200 446,775
------------
25,191,963
------------
ELECTRICAL EQUIPMENT (2.2%)
Anixter International, Inc.+ ......................................................... 88,400 1,480,700
Black & Decker Corp. ................................................................. 173,700 7,143,413
Bolder Technologies Corp.+ ........................................................... 36,200 459,288
Encore Wire Corp.+ ................................................................... 94,700 941,081
Grainger (W.W.), Inc. ................................................................ 65,100 4,353,563
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
27
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
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- -------------------------------------------------------------------------------------- ----------- ------------
<S> <C> <C>
</TABLE>
ELECTRICAL EQUIPMENT (CONTINUED)
<TABLE>
<S> <C> <C>
Integrated Device Technology+ ........................................................ 90,200 $ 1,166,963
Kuhlman Corp. ........................................................................ 25,000 431,250
Microchip Technology Inc.+ ........................................................... 80,200 2,080,188
Vishay Intertechnology, Inc.+ ........................................................ 34,755 960,107
------------
19,016,553
------------
POLLUTION CONTROL (1.4%)
Culligan Water Technologies, Inc.+ ................................................... 44,000 1,677,500
Dames & Moore, Inc. .................................................................. 292,900 3,551,413
Sevenson Environmental Services, Inc. ................................................ 41,000 789,250
Tetra Technologies, Inc.+ ............................................................ 203,600 4,250,150
USA Waste Services, Inc.+ ............................................................ 67,700 1,997,150
------------
12,265,463
------------
TOTAL INDUSTRIAL PRODUCTS & SERVICES ............................................. 119,624,212
------------
TECHNOLOGY (20.4%)
AEROSPACE (1.2%)
Coltec Industries, Inc.+ ............................................................. 320,900 4,251,925
Orbital Sciences Corp.+ .............................................................. 166,000 2,988,000
Rohr Industries, Inc.+ ............................................................... 160,800 3,396,900
------------
10,636,825
------------
COMPUTER PERIPHERALS (2.4%)
Mylex Corp. .......................................................................... 99,500 2,574,563
Planar Systems, Inc. ................................................................. 229,500 3,557,250
Quantum Corp.+ ....................................................................... 293,100 7,034,400
Read-Rite Corp. ...................................................................... 292,500 6,727,500
Telxon Corp. ......................................................................... 18,000 331,875
------------
20,225,588
------------
COMPUTER SOFTWARE (6.1%)
Acxiom Corp.+ ........................................................................ 70,900 2,224,488
Adept Technology, Inc.+ .............................................................. 163,900 2,724,838
Adobe Systems, Inc. .................................................................. 83,000 3,076,188
Analogy, Inc.+ ....................................................................... 88,200 810,338
Aspect Development, Inc.+ ............................................................ 6,000 181,500
Autodesk, Inc. ....................................................................... 65,900 2,277,669
Avid Technology, Inc.+ ............................................................... 36,000 816,750
BMC Software, Inc.+ .................................................................. 30,600 1,931,625
Broderbund Software, Inc.+ ........................................................... 41,400 1,738,800
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
28
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- -------------------------------------------------------------------------------------- ----------- ------------
<S> <C> <C>
</TABLE>
COMPUTER SOFTWARE (CONTINUED)
<TABLE>
<S> <C> <C>
Checkfree Corp.+ ..................................................................... 24,700 $ 552,663
DST Systems, Inc.+ ................................................................... 37,900 1,321,763
Edify Corp.+ ......................................................................... 7,700 325,325
Forte Software, Inc.+ ................................................................ 3,700 238,188
Informix Corp.+ ...................................................................... 42,200 962,688
Inso Corp.+ .......................................................................... 38,700 2,167,200
ISOCOR+ .............................................................................. 24,100 433,800
Logic Works, Inc.+ ................................................................... 23,200 352,350
Mathsoft, Inc.+ ...................................................................... 145,400 1,163,200
Maxis, Inc.+ ......................................................................... 22,100 513,825
MetaTools, Inc.+ ..................................................................... 28,800 910,800
Microware Systems Corp.+ ............................................................. 23,200 437,900
Network General Corp.+ ............................................................... 173,200 4,145,975
Oak Technology, Inc.+ ................................................................ 282,200 3,598,050
On Technology, Corp.+ ................................................................ 151,900 2,088,625
ParcPlace Digitalk, Inc.+ ............................................................ 157,200 2,063,250
Pinnacle Systems, Inc.+ .............................................................. 92,700 2,236,388
PowerCerv Corp.+ ..................................................................... 66,900 1,103,850
Rational Software Corp.+ ............................................................. 60,900 3,783,413
Segue Software, Inc.+ ................................................................ 7,400 249,750
SPS Transaction Services, Inc.+ ...................................................... 130,100 3,366,338
SS&C Technologies, Inc. .............................................................. 10,000 190,000
Symantec Corp. ....................................................................... 137,400 2,181,225
Tripos, Inc. ......................................................................... 96,400 650,700
Vanstar Corp. ........................................................................ 48,400 695,750
Verity, Inc. ......................................................................... 13,900 536,888
------------
52,052,100
------------
COMPUTER SYSTEMS (0.4%)
EMC Corp.+ ........................................................................... 168,000 3,717,000
------------
ELECTRONICS (4.2%)
ADT Ltd.* ............................................................................ 205,200 3,950,100
Affinity Technology Group ............................................................ 14,900 283,100
Altera Corp. ......................................................................... 71,400 3,445,050
Amphenol Corp. ....................................................................... 47,700 1,228,275
Brooktree Corp. ...................................................................... 172,400 2,068,800
FEI Co. .............................................................................. 60,600 969,600
Gemstar International Group Ltd. ..................................................... 9,700 322,525
Harris Corp. ......................................................................... 57,000 3,683,625
Input/Output, Inc.+ .................................................................. 146,200 5,902,825
Itron, Inc.+ ......................................................................... 34,600 1,177,117
Mentor Graphics Corp.+ ............................................................... 169,273 3,046,914
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
29
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- -------------------------------------------------------------------------------------- ----------- ------------
<S> <C> <C>
</TABLE>
ELECTRONICS (CONTINUED)
<TABLE>
<S> <C> <C>
Micrel, Inc.+ ........................................................................ 199,800 $ 3,221,775
Nimbus CD International, Inc.+ ....................................................... 90,800 1,367,675
Perkin-Elmer Corp. ................................................................... 91,300 4,838,900
Sensormatic Electronics Corp. ........................................................ 49,200 879,450
------------
36,385,731
------------
INFORMATION PROCESSING (0.2%)
Ceridian Corp.+ ...................................................................... 30,800 1,628,550
------------
SEMICONDUCTORS (1.3%)
Actel Corp.+ ......................................................................... 154,600 3,014,700
Adaptec, Inc.+ ....................................................................... 14,300 855,319
Advanced Technology Materials, Inc.+ ................................................. 217,200 3,190,125
SDL, Inc.+ ........................................................................... 87,200 3,738,700
Sierra Semi Conductor Corp.+ ......................................................... 21,800 322,913
------------
11,121,757
------------
TELECOMMUNICATIONS (2.1%)
International CableTel, Inc.+ ........................................................ 47,700 1,493,606
Metrocall, Inc.+ ..................................................................... 47,700 921,206
MFS Communications Company, Inc.+ .................................................... 0 9
MobileMedia Corp.+ ................................................................... 126,400 2,433,200
Omnipoint Corp.+ ..................................................................... 16,800 522,900
Paging Network, Inc.+ ................................................................ 436,600 9,768,925
Premiere Technologies, Inc.+ ......................................................... 10,600 496,875
QUALCOMM, Inc.+ ...................................................................... 22,200 1,208,513
Videotron Holdings PLC (ADR)*+ ....................................................... 48,400 922,625
------------
17,767,859
------------
TELECOMMUNICATIONS-EQUIPMENT (2.5%)
Andrew Corp.+ ........................................................................ 30,150 1,631,869
Applied Digital Access, Inc.+ ........................................................ 147,200 2,281,600
BroadBand Technologies, Inc.+ ........................................................ 73,800 2,273,963
Cascade Communications Corp.+ ........................................................ 40,800 2,302,650
Comdial Corp.+ ....................................................................... 278,200 3,060,200
Digital Microwave Corp.+ ............................................................. 136,000 2,133,500
P-COM, Inc.+ ......................................................................... 49,900 1,497,000
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
30
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- -------------------------------------------------------------------------------------- ----------- ------------
<S> <C> <C>
</TABLE>
TELECOMMUNICATIONS-EQUIPMENT (CONTINUED)
<TABLE>
<S> <C> <C>
Scientific-Atlanta, Inc. ............................................................. 326,900 $ 6,170,238
Wireless One, Inc.+ .................................................................. 27,500 515,625
------------
21,866,645
------------
TOTAL TECHNOLOGY ................................................................. 175,402,055
------------
TRANSPORTATION (2.5%)
AIRLINES (1.0%)
Mesa Airlines, Inc.+ ................................................................. 497,100 6,617,644
ValuJet, Inc.+ ....................................................................... 132,700 1,849,506
------------
8,467,150
------------
TRANSPORT & SERVICES (0.1%)
Trico Marine Services, Inc.+ ......................................................... 23,800 535,500
------------
TRANSPORTATION (0.2%)
GATX Corp. ........................................................................... 38,000 1,710,000
------------
TRUCK & FREIGHT CARRIERS (1.2%)
American Freightways Corp.+ .......................................................... 111,700 1,438,138
Roadway Express, Inc. ................................................................ 166,200 2,752,688
Rollins Truck Leasing Corp. .......................................................... 165,500 1,799,813
USA Truck, Inc.+ ..................................................................... 37,500 445,313
Werner Enterprises, Inc. ............................................................. 190,500 4,619,625
------------
11,055,577
------------
TOTAL TRANSPORTATION ............................................................. 21,768,227
------------
UTILITIES (5.2%)
ELECTRIC (2.2%)
Central Hudson Gas & Electric ........................................................ 169,300 5,057,838
Central Louisiana Electric ........................................................... 80,600 2,145,975
Idaho Power Co. ...................................................................... 36,800 1,076,400
Illinova Corp. ....................................................................... 119,200 3,129,000
Maine Public Service Co. ............................................................. 19,400 351,625
Minnesota Power & Light Co. .......................................................... 92,900 2,496,688
Pinnacle West Capital Corp. .......................................................... 98,900 2,620,850
Washington Water Power Co. ........................................................... 98,800 1,827,800
------------
18,706,176
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
31
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- -------------------------------------------------------------------------------------- ----------- ------------
<S> <C> <C>
NATURAL GAS (1.2%)
AGL Resources, Inc. .................................................................. 125,300 $ 2,208,413
Brooklyn Union Gas Co. ............................................................... 97,600 2,610,800
New Jersey Resources Corp. ........................................................... 18,400 506,000
Providence Energy Corp. .............................................................. 97,900 1,688,775
United Cities Gas Co. ................................................................ 133,200 2,014,650
Wicor, Inc. .......................................................................... 27,600 1,007,400
------------
10,036,038
------------
TELEPHONE (0.6%)
Frontier Corp. ....................................................................... 158,900 5,084,800
------------
WATER (1.2%)
American Water Works, Inc. ........................................................... 176,900 6,302,063
Aquarion Co. ......................................................................... 26,900 652,325
E'Town Corp. ......................................................................... 43,700 1,218,138
SJW Corp. ............................................................................ 11,500 427,656
Southern California Water Co. ........................................................ 88,700 1,973,575
------------
10,573,757
------------
TOTAL UTILITIES .................................................................. 44,400,771
------------
TOTAL COMMON STOCKS (COST $682,138,078) .......................................... 819,373,050
------------
CONVERTIBLE PREFERRED STOCKS (0.0%)(B)
TECHNOLOGY (0.0%)(B)
ELECTRONICS (0.0%)(B)
Comptronix Corp.+
(cost $1) .......................................................................... 0 1
------------
WARRANTS (0.0%)(B)
CONSUMER GOODS & SERVICES (0.0%)(B)
HOUSEHOLD PRODUCTS (0.0%)(B)
Windmere Corp. (expire 1/19/98)+(a)
(cost $0) .......................................................................... 1,672 0
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
32
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- -------------------------------------------------------------------------------------- ----------- ------------
FIXED INCOME SECURITIES (0.0%)(B)
CORPORATE OBLIGATIONS (0.0%)(B)
AUTOMOTIVE (0.0%)(B)
Collins Industries, Inc., 8.75% due 01/11/00+(a)
(cost $0) .......................................................................... $ 22,750 $ 17,839
------------
CONVERTIBLE BONDS (0.2%)
CONSUMER GOODS & SERVICES (0.2%)
FOOD, BEVERAGES & TOBACCO (0.2%)
Boston Chicken Inc., 4.5% due 02/01/04
(cost $1,552,670) .................................................................. 1,782,000 2,153,992
------------
SHORT-TERM INVESTMENTS (4.5%)
U.S. GOVERNMENT AGENCY OBLIGATIONS (4.5%)
Federal Home Loan Bank Consolidated Discount Note 5.26% due 06/03/96
(cost $38,658,700) ................................................................. 38,670,000 38,658,700
------------
TOTAL INVESTMENTS (COST $722,349,449) (100.0%) .................................................... 860,203,582
LIABILITIES IN EXCESS OF OTHER ASSETS (-0.0%)(B) .................................................. (158,300)
------------
NET ASSETS (100.0%) ............................................................................... $860,045,282
------------
------------
</TABLE>
- ------------------------------
Note: Based on the cost of investments of $724,793,552 for Federal Income Tax
purposes at May 31, 1996, the aggregate gross unrealized appreciation and
depreciation was $159,599,301 and $24,189,271 respectively, resulting in net
unrealized appreciation of $135,410,030.
* Foreign security.
+ Non-income producing security.
(a) At fair value as approved by the Board of Trustees.
(b) Less than 0.1%.
(ADR)--Securities whose value is determined or significantly influenced by
trading on exchanges not located in the US or Canada. ADR after the name of a
foreign holding stands for American Depository Receipt, representing ownership
of foreign securities on deposit with a domestic custodian bank.
The Accompanying Notes are an Integral Part of the Financial Statements.
33
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $722,349,449 ) $860,203,582
Cash 46,061
Receivable for Investments Sold 11,075,279
Dividends Receivable 571,146
Interest Receivable 27,431
Prepaid Trustees' Fees 1,451
Prepaid Expenses and Other Assets 1,793
------------
Total Assets 871,926,743
------------
LIABILITIES
Payable for Investments Purchased 11,332,496
Advisory Fee Payable 426,086
Custody Fee Payable 60,717
Administrative Services Fee Payable 17,546
Administration Fee Payable 9,334
Fund Services Fee Payable 1,905
Accrued Expenses 33,377
------------
Total Liabilities 11,881,461
------------
NET ASSETS
Applicable to Investors' Beneficial Interests $860,045,282
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
34
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED MAY 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividend Income (Net of Withholding Tax of $60,882) $ 11,544,939
Interest Income 2,694,148
------------
Investment Income 14,239,087
EXPENSES
Advisory Fee $ 4,286,311
Custodian Fees and Expenses 140,892
Administrative Services Fee 79,976
Financial and Fund Accounting Services Fee 64,301
Administration Fee 65,079
Professional Fees 49,669
Fund Services Fee 48,688
Trustees' Fees and Expenses 14,538
Printing Expenses 9,000
Insurance Expense 6,478
Registration Fees 610
Miscellaneous 2,000
------------
Total Expenses (4,767,542)
------------
NET INVESTMENT INCOME 9,471,545
NET REALIZED GAIN ON INVESTMENTS 79,496,646
NET CHANGE IN UNREALIZED APPRECIATION OF INVESTMENTS 132,103,605
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $221,071,796
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
35
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
FOR THE FOR THE
FISCAL FISCAL
YEAR ENDED YEAR ENDED
MAY 31, 1996 MAY 31, 1995
------------- ------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 9,471,545 $ 7,063,319
Net Realized Gain on Investments 79,496,646 28,881,980
Net Change in Unrealized Appreciation of Investments 132,103,605 31,665,894
------------- ------------
Net Increase in Net Assets Resulting from Operations 221,071,796 67,611,193
------------- ------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST
Contributions 222,451,859 162,456,578
Withdrawals (204,531,582) (243,561,586)
------------- ------------
Net Increase (Decrease) from Investors' Transactions 17,920,277 (81,105,008)
------------- ------------
Total Increase (Decrease) in Net Assets 238,992,073 (13,493,815)
NET ASSETS
Beginning of Fiscal Year 621,053,209 634,547,024
------------- ------------
End of Fiscal Year $ 860,045,282 $621,053,209
------------- ------------
------------- ------------
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FOR THE PERIOD FROM
FOR THE FISCAL JULY 19, 1993
YEAR ENDED MAY 31, (COMMENCEMENT
OF OPERATIONS)
-------------------- THROUGH
1996 1995 MAY 31, 1994
--------- --------- -------------------
RATIOS TO AVERAGE NET ASSETS
Expenses 0.67% 0.71% 0.72%(a)
Net Investment Income 1.33% 1.21% 0.99%(a)
Portfolio Turnover 92.58% 75.00% 97.00%+
</TABLE>
- ------------------------
(a)Annualized.
+ Portfolio turnover is for the twelve month period ended May 31, 1994, and
includes the portfolio activity of the Portfolio's predecessor entity, The
Pierpont Capital Appreciation Fund, for the period June 1, 1993 to July 18,
1993.
The Accompanying Notes are an Integral Part of the Financial Statements.
36
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1996
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The U.S. Small Company Portfolio (the "Portfolio") is registered under the
Investment Company Act of 1940, as amended, as a no-load, diversified, open-end
management investment company which was organized as a trust under the laws of
the State of New York. The Portfolio commenced operations on July 19, 1993 and
received a contribution of certain assets and liabilities, including securities,
with a value of $200,358,103 on that date from The Pierpont Capital Appreciation
Fund in exchange for a beneficial interest in the Portfolio. At that date, net
unrealized appreciation of $29,458,073 was included in the contributed
securities. The Portfolio's investment objective is to provide a high total
return from a portfolio of equity securities of small companies. The Declaration
of Trust permits the Trustees to issue an unlimited number of beneficial
interests in the Portfolio.
The preparation of financial statements prepared in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures. Actual amounts
could differ from those estimates. The following is a summary of the significant
accounting policies of the Portfolio:
a)The value of each security for which readily available market quotations
exists 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 readily available closing bid price on
such exchanges, or at the quoted bid price in the over-the-counter market.
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 portfolio securities with a remaining
maturity of less than 60 days are valued at amortized cost.
b)Securities transactions are recorded on a trade date basis. Dividend
income is recorded on the ex-dividend date or at 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.
c)The Portfolio intends to be treated as a partnership for federal income
tax purposes. As such, each investor in the Portfolio will be taxable 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.
d)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
37
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1996
- --------------------------------------------------------------------------------
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.
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 0.60% of the Portfolio's
average daily net assets. For the fiscal year ended May 31, 1996, such
fees amounted to $4,286,311.
b)The Portfolio has retained Signature Broker-Dealer Services, Inc.
("Signature") to serve as administrator and exclusive placement agent.
Signature provides administrative services necessary for the operations of
the Portfolio, furnishes office space and facilities required for
conducting the business of the Portfolio and pays the compensation of the
Portfolio's officers affiliated with Signature. Until December 28, 1995,
the Administration Agreement provided for a fee to be paid to Signature at
an annual fee rate determined by the following schedule: 0.01% of the
first $1 billion of the aggregate average daily net assets of the
Portfolio and the other portfolios subject to the Administration
Agreement, 0.008% of the next $2 billion of such net assets, 0.006% of the
next $2 billion of such net assets, and 0.004% of such net assets in
excess of $5 billion. The daily equivalent of the fee rate was applied
each day to the net assets of the Portfolio. For the period from June 1,
1995 through December 28, 1995, such fees amounted to $23,049.
Effective December 29, 1995, the Administration Agreement was amended such
that the fee charged would be equal to the Portfolio's proportionate share
of a complex-wide fee based on the following annual schedule: 0.03% on the
first $7 billion of the aggregate average daily net assets of the
Portfolio and the other portfolios subject to this agreement (the "Master
Portfolios") and 0.01% on the aggregate average daily net assets of the
Master Portfolios in excess of $7 billion. The portion of this charge
payable by the Portfolio is determined by the proportionate share its net
assets bear to the total net assets of The Pierpont Funds, The JPM
Institutional Funds, The JPM Advisor Funds and the Master Portfolios. For
the period from December 29, 1995 through May 31, 1996, such fees amounted
to $42,030.
Effective August 1, 1996, administrative functions provided by Signature
will be provided by Funds Distributor, Inc. ("FDI"), a registered
broker-dealer, and by Morgan. FDI will also become the Portfolio's
exclusive placement agent. Under a Co-Administration Agreement between FDI
and the Portfolio, FDI's fees are to be paid by the Portfolio (see Note
2c).
c)Until August 31, 1995, the Portfolio had a Financial and Fund Accounting
Services Agreement with Morgan under which Morgan would receive a fee,
based on the percentages described below, for overseeing certain aspects
of the administration and operation of the Portfolio and was also designed
to provide an expense limit for certain expenses of the Portfolio. This
fee was calculated exclusive of the advisory fee, custody expenses, fund
services fee and amortization of organization expenses at 0.10% of the
Portfolio's average daily net assets up to $200 million, 0.05% of the next
38
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1996
- --------------------------------------------------------------------------------
$200 million of average daily net assets, and 0.03% of average daily net
assets thereafter. For the three months ended August 31, 1995, the fee for
these services amounted to $64,301. From September 1, 1995 until December
28, 1995, an interim agreement between the Portfolio and Morgan provided
for the continuation of the oversight functions that were outlined under
the agreement and that Morgan shall bear all of its expenses incurred in
connection with these services.
Effective December 29, 1995, the Portfolio entered into an Administrative
Services Agreement (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 average daily net assets of the Master Portfolios in
accordance with the following annual schedule: 0.06% on the first $7
billion of the Master Portfolios' aggregate average daily net assets and
0.03% of the aggregate average daily net assets in excess of $7 billion.
The portion of this charge payable by the Portfolio is determined by the
proportionate share that the Portfolio's net assets bear to the net assets
of the Master Portfolios and other investors in the Master Portfolios for
which Morgan provides similar services. For the period from December 29,
1995 through May 31, 1996, such fees amounted to $79,976.
Effective August 1, 1996, the Services Agreement will be amended such that
the aggregate complex-wide fees to be paid by the Portfolio under both the
amended Services Agreement and the Co-Administration Agreement (see Note
2b) will be calculated daily based on the aggregate net assets of the
Master Portfolios in accordance with the following annual schedule: 0.09%
on the first $7 billion of the Master Portfolios' aggregate average daily
net assets and 0.04% of the aggregate average daily net assets in excess
of $7 billion.
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 $48,688 for the fiscal year ended May 31, 1996.
e)An aggregate annual fee of $65,000 is paid to each Trustee for serving as
a Trustee of The Pierpont Funds, The JPM Institutional Funds, and the
Master Portfolios. 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 received compensation and employee
benefits from Group in his role as Group's Chairman. The allocated portion
of such compensation and benefits included in the Fund Services Fee shown
in the financial statements was $6,200.
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the fiscal year
ended May 31, 1996 were as follows:
<TABLE>
<S> <C>
COST OF PROCEEDS FROM
PURCHASES SALES
- -------------- --------------
$ 670,579,696 $ 629,110,839
</TABLE>
39
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Investors of
The U.S. Small Company Portfolio
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the supplementary data present fairly, in all material
respects, the financial position of The U.S. Small Company Portfolio (the
"Portfolio") at May 31, 1996, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and the supplementary data for each of the two years in the period
then ended and for the period July 19, 1993 (commencement of operations) through
May 31, 1994, in conformity with generally accepted accounting principles. These
financial statements and supplementary data (hereafter referred to as "financial
statements") are the responsibility of the Portfolio's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at May 31,
1996 by correspondence with the custodian and brokers and the application of
alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
New York, New York
July 25, 1996
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