<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
NOVEMBER 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
COMMON STOCKS (95.1%)
BASIC INDUSTRIES (8.7%)
CHEMICALS (2.7%)
Albemarle Corp................................... 261,400 $ 4,868,575
Bush Boake Allen, Inc.+.......................... 119,500 4,077,937
General Chemical Group, Inc...................... 46,100 783,700
Geon Co.......................................... 185,900 4,136,275
Minerals Technologies, Inc....................... 20,200 886,275
-------------
14,752,762
-------------
FOREST PRODUCTS & PAPER (1.6%)
Caraustar Industries, Inc........................ 190,700 5,083,347
Universal Forest Products, Inc................... 177,300 3,468,431
-------------
8,551,778
-------------
METALS & MINING (4.4%)
Commercial Metals Co............................. 336,900 8,527,781
Mueller Industries, Inc.+........................ 390,200 8,901,437
Schnitzer Steel Industries, Inc., Class A........ 127,700 2,354,469
Steel Technologies, Inc.......................... 250,100 2,071,141
USEC, Inc........................................ 145,200 1,969,275
-------------
23,824,103
-------------
TOTAL BASIC INDUSTRIES......................... 47,128,643
-------------
CONSUMER GOODS & SERVICES (10.5%)
APPARELS & TEXTILES (0.3%)
Ashworth, Inc.+.................................. 71,000 408,250
Genesco, Inc.+................................... 16,400 91,225
Interface, Inc................................... 74,200 925,181
-------------
1,424,656
-------------
AUTOMOTIVE (0.8%)
Amcast Industrial Corp........................... 94,200 1,654,387
Sonic Automotive, Inc.+.......................... 99,700 2,685,669
-------------
4,340,056
-------------
BROADCASTING & PUBLISHING (1.3%)
Banta Corp....................................... 71,400 1,892,100
Emmis Broadcasting Corp., Class A+............... 43,600 1,496,025
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
BROADCASTING & PUBLISHING (CONTINUED)
HA-LO Industries, Inc.+.......................... 103,000 $ 3,289,562
Journal Register Co.+............................ 29,800 482,387
-------------
7,160,074
-------------
EDUCATION (1.0%)
Education Management Corp.+...................... 68,300 3,116,187
ITT Educational Services, Inc.+.................. 71,300 2,343,987
-------------
5,460,174
-------------
ENTERTAINMENT, LEISURE & MEDIA (1.4%)
Cinar Films Inc., Class B+....................... 82,200 1,839,225
Imax Corp.+...................................... 122,100 3,334,856
MGM Grand, Inc.+................................. 37,900 973,556
Steiner Leisure Ltd.+(i)......................... 59,625 1,494,352
-------------
7,641,989
-------------
FOOD, BEVERAGES & TOBACCO (0.8%)
American Italian Pasta Co., Class A+............. 63,900 1,613,475
Beringer Wine Estates Holdings, Inc., Class B+... 45,700 1,669,478
Coors (Adolph) Co................................ 21,800 1,085,231
-------------
4,368,184
-------------
HOUSEHOLD APPLIANCES & FURNISHINGS (0.8%)
Bush Industries, Inc., Class A................... 193,800 3,173,475
Stanley Furniture Co., Inc.+..................... 59,900 1,014,556
-------------
4,188,031
-------------
RESTAURANTS & HOTELS (0.9%)
CEC Entertainment, Inc.+......................... 56,500 1,673,812
Extended Stay America, Inc.+..................... 117,800 1,178,000
MeriStar Hotels & Resorts, Inc.+................. 21,679 58,262
Papa John's International, Inc.+................. 40,400 1,695,537
-------------
4,605,611
-------------
RETAIL (3.2%)
Central Garden & Pet Co.+........................ 72,100 1,160,359
Columbia Sportwear Co.+.......................... 28,100 622,591
Fingerhut Companies, Inc......................... 121,000 1,346,125
Garden Ridge Corp.+.............................. 300,700 2,330,425
Lithia Motors, Inc., Class A+.................... 124,000 2,135,125
O'Reilly Automotive, Inc.+....................... 16,000 725,500
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
17
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
NOVEMBER 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
RETAIL (CONTINUED)
PETsMART, Inc.+.................................. 162,900 $ 1,399,922
School Specialty, Inc.+.......................... 24,800 420,050
ShopKo Stores, Inc.+............................. 116,400 3,753,900
Steven Madden Ltd.+(i)........................... 10,700 70,887
Urban Outfitters, Inc.+.......................... 214,800 3,027,337
-------------
16,992,221
-------------
TOTAL CONSUMER GOODS & SERVICES................ 56,180,996
-------------
ENERGY (2.5%)
GAS EXPLORATION (1.5%)
Devon Energy Corp................................ 95,400 3,142,237
Newfield Exploration Co.+........................ 122,000 2,379,000
Patterson Energy, Inc.+.......................... 25,600 119,200
St. Mary Land & Exploration Co................... 67,600 1,282,287
Tesoro Petroleum Corp.+.......................... 91,400 1,216,762
-------------
8,139,486
-------------
OIL-PRODUCTION (0.4%)
Plains Resources, Inc.+.......................... 53,600 951,400
Vintage Petroleum, Inc........................... 134,500 1,387,031
-------------
2,338,431
-------------
OIL-SERVICES (0.6%)
Input/Output, Inc.+.............................. 150,000 1,228,125
National-Oilwell, Inc.+.......................... 93,500 923,312
Smith International, Inc.+....................... 42,400 1,022,900
-------------
3,174,337
-------------
TOTAL ENERGY................................... 13,652,254
-------------
FINANCE (24.0%)
BANKING (9.6%)
BancorpSouth, Inc................................ 31,200 596,700
Bank of Commerce................................. 86,400 1,271,700
Bank United Corp., Class A....................... 150,900 6,649,031
Banknorth Group, Inc............................. 158,300 5,263,475
Colonial BancGroup, Inc.......................... 278,800 3,450,150
Commercial Federal Corp.......................... 91,049 2,088,436
Community First Bankshares, Inc.................. 149,000 3,203,500
FirstFed Financial Corp.+........................ 226,800 4,025,700
Flagstar Bancorp, Inc............................ 139,700 3,392,091
GBC Bancorp...................................... 96,100 2,384,481
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
BANKING (CONTINUED)
Hamilton Bancorp, Inc.+.......................... 32,400 $ 833,287
HUBCO, Inc....................................... 122,240 3,304,300
Irwin Financial Corp............................. 29,300 844,206
National Commerce Bancorporation................. 277,100 5,022,437
Prime Bancshares, Inc.+.......................... 60,400 1,045,675
Republic Banking Corp. of Florida................ 86,000 954,062
Southwest Bancorporation of Texas, Inc.+......... 47,500 853,516
Summit Bancshares, Inc........................... 28,400 553,800
Sun Bancorp, Inc.+............................... 26,972 544,497
TeleBanc Financial Corp.+........................ 48,800 1,096,475
Trustco Bank Corp................................ 80,729 2,270,499
Westamerica Bancorporation....................... 45,500 1,638,000
-------------
51,286,018
-------------
FINANCIAL SERVICES (2.5%)
Allied Capital Corp.............................. 58,500 1,054,828
Amresco, Inc.+................................... 118,600 869,116
ARM Financial Group, Inc......................... 80,100 1,722,150
Hanover Capital Mortgage Holdings, Inc........... 700 3,412
Heller Financial, Inc............................ 37,800 989,887
Investors Financial Services Corp................ 14,500 835,562
Litchfield Financial Corp........................ 141,840 2,544,255
Ocwen Financial Corp.+........................... 37,800 491,400
Waddell & Reed Financial, Inc., Class A.......... 49,800 1,188,975
Willis Lease Finance Corp.+...................... 189,400 3,586,763
-------------
13,286,348
-------------
INSURANCE (3.7%)
Annuity and Life Re (Holdings) Ltd.(i)........... 99,000 2,521,406
Capital Re Corp.................................. 362,900 7,167,275
MONY Group, Inc.+................................ 13,400 414,563
RenaissanceRe Holdings Ltd.(i)................... 259,100 9,845,800
-------------
19,949,044
-------------
REAL ESTATE INVESTMENT TRUSTS (8.2%)
Arden Realty Group, Inc.......................... 129,400 2,976,200
Burnham Pacific Properties, Inc.................. 245,200 3,156,950
Camden Property Trust............................ 101,574 2,609,182
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
18
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
NOVEMBER 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
REAL ESTATE INVESTMENT TRUSTS (CONTINUED)
CBL & Associates Properties, Inc................. 73,900 $ 1,856,738
Charles E. Smith Residential Realty, Inc......... 35,700 1,055,381
Cousins Properties, Inc.......................... 126,700 3,911,863
ElderTrust....................................... 43,000 516,000
Federal Realty Investment Trust.................. 8,400 201,075
LaSalle Hotel Properties......................... 65,200 876,125
Macerich Co...................................... 76,100 2,026,163
Manufactured Home Communities, Inc............... 119,300 2,922,850
Meristar Hospitality Corp........................ 172,476 3,352,502
Mills Corp....................................... 205,800 4,411,838
National Golf Properties, Inc.................... 81,700 2,359,088
Post Properties, Inc............................. 151,500 5,794,875
Tower Realty Trust, Inc.......................... 85,400 1,606,588
Weeks Corp....................................... 148,900 4,262,263
-------------
43,895,681
-------------
TOTAL FINANCE.................................. 128,417,091
-------------
HEALTHCARE (10.3%)
BIOTECHNOLOGY (3.6%)
Applied Analytical Industries, Inc.+............. 161,600 2,929,000
Human Genome Sciences, Inc.+..................... 170,500 5,392,063
IDEC Pharmaceuticals Corp.+...................... 78,600 2,647,838
Incyte Pharmaceuticals, Inc...................... 78,400 2,459,800
Millennium Pharmaceuticals, Inc.+................ 96,200 1,954,063
SangStat Medical Corp.+.......................... 174,000 4,176,000
-------------
19,558,764
-------------
HEALTH SERVICES (3.0%)
Alternative Living Services, Inc.+............... 104,429 2,806,529
IDX Systems Corp.+............................... 19,000 784,344
Lifeline Systems, Inc.+.......................... 22,100 571,838
Mariner Post-Acute Network, Inc.+................ 131,400 566,663
Monarch Dental Corp.+............................ 96,500 1,085,625
Pediatrix Medical Group, Inc.+................... 63,400 3,403,788
ProMedCo Management Co.+......................... 40,000 210,000
Renal Care Group, Inc.+.......................... 104,600 2,820,931
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
HEALTH SERVICES (CONTINUED)
Sierra Health Services, Inc.+.................... 112,200 $ 2,566,575
Sunrise Assisted Living, Inc.+................... 28,700 1,238,584
-------------
16,054,877
-------------
MEDICAL SUPPLIES (2.9%)
CONMED Corp.+.................................... 60,200 1,640,450
Endocardial Solutions, Inc.+..................... 73,600 487,600
Focal, Inc.+..................................... 67,700 564,872
Kensey Nash Corp.+............................... 215,400 1,925,138
Medtronic, Inc................................... 1 68
ResMed, Inc.+.................................... 36,800 1,253,500
Sola International, Inc.+........................ 130,600 2,073,275
Ventana Medical Systems, Inc.+................... 330,900 7,186,734
Vital Signs, Inc................................. 30,700 519,981
-------------
15,651,618
-------------
PHARMACEUTICALS (0.8%)
Kos Pharmaceuticals, Inc.+....................... 160,900 1,156,469
Ligand Pharmaceuticals, Class B+................. 239,800 2,405,494
U.S. Bioscience, Inc.+........................... 79,100 598,194
-------------
4,160,157
-------------
TOTAL HEALTHCARE............................... 55,425,416
-------------
INDUSTRIAL PRODUCTS & SERVICES (8.5%)
BUILDING MATERIALS (0.7%)
Comfort Systems USA, Inc.+....................... 80,800 1,515,000
Service Experts, Inc.+........................... 77,600 2,298,900
-------------
3,813,900
-------------
CAPITAL GOODS (3.2%)
ABC Rail Products Corp.+......................... 77,200 969,825
Applied Power, Inc., Class A..................... 54,400 1,938,000
IDEX Corp........................................ 160,800 4,351,650
MagneTek, Inc.+.................................. 257,200 2,925,650
Modine Manufacturing Co.......................... 91,900 3,351,478
Shaw Group, Inc.+................................ 117,900 1,046,363
Wabash National Corp............................. 137,500 2,578,125
-------------
17,161,091
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
NOVEMBER 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
COMMERCIAL SERVICES (0.8%)
Pinkertons, Inc.+................................ 110,700 $ 2,214,000
Source Information Management Co.+............... 39,100 289,584
Wackenhut Corrections Corp.+..................... 60,000 1,620,000
-------------
4,123,584
-------------
CONSTRUCTION & HOUSING (1.2%)
D.R. Horton, Inc................................. 335,300 6,328,788
-------------
DIVERSIFIED MANUFACTURING (1.0%)
Intermet Corp.................................... 386,800 5,318,500
-------------
ELECTRICAL EQUIPMENT (0.6%)
Anixter International, Inc.+..................... 184,600 3,045,900
-------------
MACHINERY (0.2%)
Sauer, Inc....................................... 106,100 994,688
-------------
MANUFACTURING (0.1%)
Rock of Ages Corp.+.............................. 49,000 606,375
-------------
PACKAGING & CONTAINERS (0.3%)
Ivex Packaging Corp.+............................ 70,700 1,378,650
-------------
POLLUTION CONTROL (0.4%)
Tetra Technologies, Inc.+........................ 178,900 2,258,613
-------------
TOTAL INDUSTRIAL PRODUCTS & SERVICES........... 45,030,089
-------------
TECHNOLOGY (19.3%)
AEROSPACE (1.6%)
L-3 Communications Holdings, Inc.+............... 49,200 2,293,950
Orbital Sciences Corp.+.......................... 164,600 6,295,950
-------------
8,589,900
-------------
COMPUTER PERIPHERALS (3.2%)
Bolder Technologies Corp.+....................... 64,600 579,381
HMT Technology Corp.+............................ 309,300 3,527,953
Hutchinson Technology, Inc.+..................... 77,000 2,384,594
Maxtor Corp.+.................................... 337,000 4,675,875
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
COMPUTER PERIPHERALS (CONTINUED)
Pinnacle Systems, Inc.+.......................... 96,000 $ 3,222,000
Proxim, Inc.+.................................... 120,400 2,739,100
-------------
17,128,903
-------------
COMPUTER SOFTWARE (5.5%)
Aspect Development, Inc.+........................ 108,300 3,631,434
Aspen Technologies, Inc.+........................ 158,100 2,208,459
BroadVision, Inc.+............................... 96,500 2,572,328
HNC Software, Inc.+.............................. 71,900 2,374,947
Legato Systems, Inc.+............................ 48,000 2,293,500
Macromedia, Inc.+................................ 110,000 3,069,688
MAPICS, Inc.+.................................... 194,100 3,712,163
MicroStrategy, Inc.+............................. 81,500 1,828,656
New Era of Networks, Inc.+....................... 17,800 1,316,088
Transaction Systems Architects, Inc., Class A+... 71,400 2,726,588
TSI International Software Ltd.+(i).............. 21,200 781,088
Visio Corp.+..................................... 79,800 2,817,938
-------------
29,332,877
-------------
COMPUTER SYSTEMS (1.1%)
Avid Technology, Inc.+........................... 103,800 2,474,981
Equant NV-NY Registered Shares+(i)............... 21,900 1,235,981
Quickturn Design System, Inc.+................... 129,400 1,443,619
Radiant Systems, Inc.+........................... 100,500 709,781
-------------
5,864,362
-------------
INFORMATION PROCESSING (2.7%)
CNET, Inc.+...................................... 28,300 1,493,709
Computer Literacy, Inc.+......................... 12,400 199,175
Condor Technology Solutions, Inc.+............... 185,600 1,809,600
CSG Systems International, Inc.+................. 57,400 3,612,613
Exodus Communications, Inc.+..................... 104,200 3,510,238
Metro Information Services, Inc.+................ 80,300 2,102,856
Pegasus Systems, Inc.+........................... 68,600 1,504,913
Visual Networks, Inc.+........................... 15,600 540,150
-------------
14,773,254
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
NOVEMBER 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
SEMICONDUCTORS (3.5%)
8 x 8, Inc.+..................................... 51,100 $ 148,509
Applied Mircro Circuits Corp.+................... 68,900 2,310,303
ATMI, Inc.+...................................... 153,500 2,921,297
Cognex Corp.+.................................... 55,800 918,956
Cypress Semiconductor Corp.+..................... 135,800 1,383,463
Exar Corp.+...................................... 81,800 1,431,500
Integrated Device Technology, Inc.+.............. 241,900 1,428,722
Integrated Silicon Solution, Inc.+............... 119,000 390,469
SDL, Inc.+....................................... 118,900 2,652,956
SIPEX Corp.+..................................... 84,500 2,740,969
Veeco Instruments, Inc.+......................... 70,000 2,563,750
-------------
18,890,894
-------------
TELECOMMUNICATIONS-EQUIPMENT (1.7%)
ANTEC Corp.+..................................... 109,400 2,030,738
Davox Corp.+..................................... 23,400 167,456
Excel Switching Corp.+........................... 144,100 3,755,606
Glenayre Technologies, Inc.+..................... 248,100 1,542,872
PairGain Technologies, Inc.+..................... 115,700 1,175,078
Tekelec+......................................... 32,300 500,650
-------------
9,172,400
-------------
TOTAL TECHNOLOGY............................... 103,752,590
-------------
TELECOMMUNICATIONS (2.6%)
TELECOMMUNICATION SERVICES (2.6%)
Concentric Network Corp.+........................ 200,900 5,713,094
Global Crossing Ltd.+(i)......................... 64,400 2,443,175
Premiere Technologies, Inc.+..................... 23,100 114,778
RCN Corp.+....................................... 34,000 584,375
SkyTel Communications, Inc.+..................... 143,200 2,980,350
Teligent, Inc., Class A+......................... 65,400 2,060,100
-------------
TOTAL TELECOMMUNICATIONS....................... 13,895,872
-------------
TRANSPORTATION (1.9%)
RAILROADS (0.2%)
Genesee & Wyoming Inc., Class A+................. 85,600 1,265,275
-------------
TRANSPORT & SERVICES (0.4%)
C.H. Robinson Worldwide, Inc..................... 85,600 1,926,000
-------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
TRUCK & FREIGHT CARRIERS (1.3%)
Allied Holdings, Inc.+........................... 142,300 $ 2,170,075
American Freightways Corp.+...................... 67,900 606,856
Jevic Transportation, Inc.+...................... 23,100 176,859
Werner Enterprises, Inc.......................... 252,925 4,125,839
-------------
7,079,629
-------------
TOTAL TRANSPORTATION........................... 10,270,904
-------------
UTILITIES (6.8%)
ELECTRIC (2.2%)
Central Hudson Gas & Electric Corp............... 139,500 5,641,031
Cleco Corporation................................ 181,700 6,211,869
-------------
11,852,900
-------------
NATURAL GAS (2.5%)
Atmos Energy Corp................................ 183,700 5,625,813
Indiana Energy, Inc.............................. 3 75
Public Service Company of North Carolina, Inc.... 69,900 1,699,444
Wicor, Inc....................................... 279,000 6,103,125
-------------
13,428,457
-------------
TELEPHONE (1.3%)
Intermedia Communications, Inc.+................. 45,800 791,481
ITC DeltaCom, Inc................................ 32,200 509,163
MetroNet Communications Corp., Class B+.......... 171,100 4,528,803
NEXTLINK Communications, Inc., Class A+.......... 30,200 917,325
-------------
6,746,772
-------------
WATER (0.8%)
American States Water Co......................... 52,800 1,491,600
E'Town Corp...................................... 61,500 2,590,688
-------------
4,082,288
-------------
TOTAL UTILITIES................................ 36,110,417
-------------
TOTAL COMMON STOCKS (COST $498,179,906)........ 509,864,272
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
NOVEMBER 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
SHORT-TERM INVESTMENTS (4.9%)
REPURCHASE AGREEMENT (4.9%)
Goldman Sachs Repurchase Agreement 5.10% dated
11/30/98 due 12/01/98, proceeds $26,509,755
(collateralized by $24,517,000 U.S. Treasury
Bond, 6.00% due 02/15/26, valued at
$27,036,260) (cost $26,506,000)................ $ 26,506,000 $ 26,506,000
-------------
TOTAL INVESTMENTS (COST $524,685,906) (100.0%).................
536,370,272
OTHER ASSETS IN EXCESS OF LIABILITIES (0.0%)...................
3,196,904
-------------
NET ASSETS (100.0%)............................................ $ 539,567,176
-------------
-------------
</TABLE>
- ------------------------------
Note: Based on the cost of investments of $531,800,324 for federal income tax
purposes at November 30, 1998, the aggregate gross unrealized appreciation and
depreciation was $69,068,338 and $64,498,390, respectively, resulting in net
unrealized appreciation of $4,569,948.
+ Non-income producing security.
(i) Foreign security.
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
NOVEMBER 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $524,685,906 ) $536,370,272
Cash 389
Receivable for Investments Sold 4,773,155
Dividends Receivable 406,041
Interest Receivable 3,755
Prepaid Trustees' Fees 2,711
Prepaid Expenses and Other Assets 1,609
------------
Total Assets 541,557,932
------------
LIABILITIES
Payable for Investments Purchased 1,632,723
Advisory Fee Payable 267,953
Custody Fee Payable 64,735
Administrative Services Fee Payable 12,427
Fund Services Fee Payable 514
Accrued Expenses 12,404
------------
Total Liabilities 1,990,756
------------
NET ASSETS
Applicable to Investors' Beneficial Interests $539,567,176
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
23
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividend Income $ 3,825,513
Interest Income 592,805
------------
Investment Income 4,418,318
EXPENSES
Advisory Fee $ 1,756,798
Custodian Fees and Expenses 133,545
Administrative Services Fee 83,005
Professional Fees and Expenses 23,921
Fund Services Fee 8,099
Administration Fee 5,118
Trustees' Fees and Expenses 4,842
Printing Expenses 4,344
Insurance Expense 3,454
Miscellaneous 101
-----------
Total Expenses 2,023,227
------------
NET INVESTMENT INCOME 2,395,091
NET REALIZED LOSS ON INVESTMENTS (47,659,676)
NET CHANGE IN UNREALIZED APPRECIATION OF
INVESTMENTS (66,188,699)
------------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS $(111,453,284)
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
24
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
NOVEMBER 30, FOR THE FISCAL
1998 YEAR ENDED
(UNAUDITED) MAY 31, 1998
---------------- ----------------
<S> <C> <C>
DECREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 2,395,091 $ 7,007,518
Net Realized Loss on Investments (47,659,676) 248,748,288
Net Change in Unrealized Appreciation of
Investments (66,188,699) (57,304,380)
---------------- ----------------
Net Increase (Decrease) in Net Assets
Resulting from Operations (111,453,284) 198,451,426
---------------- ----------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 111,312,655 244,010,077
Withdrawals (142,056,673) (830,979,636)
---------------- ----------------
Net Decrease from Investors' Transactions (30,744,018) (586,969,559)
---------------- ----------------
Total Decrease in Net Assets (142,197,302) (388,518,133)
NET ASSETS
Beginning of Period 681,764,478 1,070,282,611
---------------- ----------------
End of Period $ 539,567,176 $ 681,764,478
---------------- ----------------
---------------- ----------------
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 19, 1993
FOR THE (COMMENCEMENT OF
SIX MONTHS ENDED FOR THE FISCAL YEAR ENDED MAY 31, OPERATIONS)
NOVEMBER 30, 1998 -------------------------------------- THROUGH
(UNAUDITED) 1998 1997 1996 1995 MAY 31, 1994
----------------- -------- -------- -------- -------- ----------------
<S> <C> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Net Expenses 0.69%(a) 0.68% 0.68% 0.67% 0.71% 0.72%(a)
Net Investment Income 0.82%(a) 0.68% 0.92% 1.33% 1.21% 0.99%(a)
Portfolio Turnover 27% 96% 98% 93% 75% 97%+
</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.
25
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOVEMBER 30,1998
- --------------------------------------------------------------------------------
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 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 small company stocks. The Declaration of Trust
permits the trustees to issue an unlimited number of beneficial interests in the
portfolio.
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
portfolio securities with a remaining maturity of less than 60 days are
valued by the amortized cost method.
b) The portfolio's custodian or designated sub custodians, as the case may be
under tri-party repurchase agreements, takes possession of the collateral
pledged for investments in repurchase agreements on behalf of the
portfolio. It is the policy of the portfolio to value the underlying
collateral daily on a mark-to-market basis to determine that the value,
including accrued interest, is at least equal to the repurchase price plus
accrued interest. In the event of default of the obligation to repurchase,
the portfolio has the 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.
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.
26
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOVEMBER 30,1998
- --------------------------------------------------------------------------------
d) The portfolio intends to be treated as a partnership for federal income
tax purposes. As such, each investor in the portfolio will be taxed on its
share of the portfolio's ordinary income and capital gains. It is intended
that the portfolio's assets will be managed in such a way that an investor
in the portfolio will be able to satisfy the requirements of Subchapter M
of the Internal Revenue Code.
2. TRANSACTIONS WITH AFFILIATES
a) Prior to October 1, 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 0.60% of the portfolio's average daily net assets. Effective
October 1, 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 November 30, 1998, such fees
amounted to $1,756,798.
b) The portfolio 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 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 November 30, 1998,
the fee for these services amounted to $5,118.
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 portfolio, 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 November
30, 1998, the fee for these services amounted to $83,005.
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 $8,099 for the six months ended November 30, 1998.
27
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOVEMBER 30,1998
- --------------------------------------------------------------------------------
e) An aggregate annual fee of $75,000 is paid to each trustee for serving as
a trustee of the portfolio, 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 $1,700.
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the six months
ended November 30, 1998 were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
------------- ------------
<S> <C>
$ 103,526,438 $ 77,270,105
</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.
28
