<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS
MAY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------- -------------
<S> <C> <C>
COMMON STOCKS (97.3%)
BASIC INDUSTRIES (9.0%)
CHEMICALS (4.8%)
Albemarle Corp................................... 233,500 $ 5,239,156
Bush Boake Allen, Inc.+.......................... 145,600 4,195,100
General Chemical Group, Inc...................... 194,300 825,775
Geon Co.......................................... 189,800 5,717,725
Georgia Gulf Corp................................ 237,600 3,549,150
Minerals Technologies, Inc....................... 36,500 1,943,625
Wellman, Inc..................................... 297,000 4,046,625
-------------
25,517,156
-------------
FOREST PRODUCTS & PAPER (1.7%)
Caraustar Industries, Inc........................ 205,100 5,390,284
Universal Forest Products, Inc................... 190,600 3,442,712
-------------
8,832,996
-------------
METALS & MINING (2.5%)
Commercial Metals Co............................. 114,500 2,683,594
Kennametal, Inc.................................. 54,200 1,541,312
Mueller Industries, Inc.+........................ 249,200 7,226,800
Schnitzer Steel Industries, Inc., Class A........ 133,100 2,013,137
-------------
13,464,843
-------------
TOTAL BASIC INDUSTRIES......................... 47,814,995
-------------
CONSUMER GOODS & SERVICES (17.7%)
AUTOMOTIVE (0.7%)
Amcast Industrial Corp........................... 82,600 1,388,712
Ducati Motor Holding (Spon. ADR)+................ 15,700 471,000
Sonic Automotive, Inc.+.......................... 136,300 1,771,900
-------------
3,631,612
-------------
AUTOMOTIVE SUPPLIES (0.8%)
Dura Automotive Systems, Inc.+................... 48,200 1,427,925
Tower Automotive, Inc.+.......................... 117,700 2,692,387
-------------
4,120,312
-------------
BROADCASTING & PUBLISHING (1.5%)
Entercom Communications Corp.+................... 86,100 2,809,012
HA-LO Industries, Inc.+.......................... 359,850 4,340,691
Radio One, Inc.+................................. 10,800 435,375
TV Guide, Inc., Class A+......................... 12,100 482,487
-------------
8,067,565
-------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------- -------------
<S> <C> <C>
BUSINESS & PUBLIC SERVICES (1.3%)
Kroll-O'Gara Co.+................................ 89,300 $ 1,794,372
Metzler Group, Inc.+............................. 39,100 1,286,634
Realty Information Group, Inc.+.................. 52,400 1,894,587
Tetra Tech, Inc.+................................ 89,900 1,910,375
-------------
6,885,968
-------------
EDUCATION (0.9%)
Argosy Education Group, Inc., Class A+........... 57,400 498,662
Education Management Corp.+...................... 195,600 3,502,462
ITT Educational Services, Inc.+.................. 30,800 733,425
-------------
4,734,549
-------------
ENTERTAINMENT, LEISURE & MEDIA (3.9%)
American Classic Voyages Co.+.................... 57,000 1,001,062
Anchor Gaming+................................... 78,600 3,524,719
Cinar Corp., Class B+............................ 266,000 6,334,125
Florida Panthers Holdings, Inc.+................. 149,000 1,620,375
Media Metrix, Inc.+.............................. 5,200 247,650
MGM Grand, Inc.+................................. 81,400 3,418,800
Nielsen Media Research, Inc...................... 51,000 1,364,250
Steiner Leisure Ltd.+(i)......................... 116,425 3,339,942
-------------
20,850,923
-------------
FOOD, BEVERAGES & TOBACCO (1.5%)
American Italian Pasta Co., Class A+............. 69,100 1,900,250
Beringer Wine Estates Holdings, Inc., Class B+... 47,900 1,950,428
Keebler Foods Co.+............................... 120,400 4,033,400
-------------
7,884,078
-------------
HOUSEHOLD APPLIANCES & FURNISHINGS (0.8%)
Furniture Brands International, Inc.+............ 106,600 2,585,050
Stanley Furniture Co., Inc.+..................... 80,900 1,688,787
-------------
4,273,837
-------------
HOUSEHOLD PRODUCTS (0.1%)
Blyth Industries, Inc.+.......................... 21,100 590,800
-------------
MISCELLANEOUS (0.3%)
Carriage Services, Inc.+......................... 26,300 434,863
WESCO International, Inc.+....................... 61,200 1,212,525
-------------
1,647,388
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
18
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------- -------------
<S> <C> <C>
RESTAURANTS & HOTELS (0.6%)
Extended Stay America, Inc.+..................... 121,200 $ 1,287,750
Sun International Hotels Ltd.+(i)................ 41,600 1,838,200
-------------
3,125,950
-------------
RETAIL (5.3%)
Alloy Online, Inc.+.............................. 35,200 427,900
Ames Department Stores, Inc.+.................... 100,000 4,096,875
barnesandnoble.com, inc.+........................ 36,600 849,806
DM Management Co.+............................... 32,500 523,047
eToys, Inc.+..................................... 21,700 1,313,528
Lithia Motors, Inc., Class A+.................... 91,800 1,738,462
Pacific Sunwear of California, Inc.+............. 39,600 1,487,475
Quiksilver, Inc.+................................ 43,150 1,229,775
Regis Corp....................................... 87,750 2,119,711
School Specialty, Inc.+.......................... 188,200 2,805,356
Shoe Carnival, Inc.+............................. 41,800 676,637
ShopKo Stores, Inc.+............................. 148,400 5,268,200
The Finish Line, Inc., Class A+.................. 155,500 1,904,875
Williams-Sonoma, Inc.+........................... 43,600 1,299,825
Zale Corp.+...................................... 65,600 2,529,700
-------------
28,271,172
-------------
TOTAL CONSUMER GOODS & SERVICES................ 94,084,154
-------------
ENERGY (3.5%)
GAS EXPLORATION (1.4%)
Barrett Resources Corp.+......................... 21,000 710,062
Devon Energy Corp................................ 98,800 3,433,300
Newfield Exploration Co.+........................ 129,600 3,288,600
-------------
7,431,962
-------------
OIL-SERVICES (2.1%)
Cooper Cameron Corp.+............................ 149,200 5,399,175
ENSCO International, Inc......................... 103,900 1,844,225
National-Oilwell, Inc.+.......................... 132,500 1,598,281
Smith International, Inc.+....................... 59,100 2,556,075
-------------
11,397,756
-------------
TOTAL ENERGY................................... 18,829,718
-------------
FINANCE (17.9%)
BANKING (8.4%)
BancorpSouth, Inc................................ 33,200 566,475
Bank United Corp., Class A....................... 160,200 6,643,294
Banknorth Group, Inc............................. 119,400 3,190,219
Colonial BancGroup, Inc.......................... 241,800 3,113,175
Commercial Federal Corp.......................... 139,049 3,172,055
Community First Bankshares, Inc.................. 139,300 2,947,066
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------- -------------
<S> <C> <C>
BANKING (CONTINUED)
FirstFed Financial Corp.+........................ 145,200 $ 2,740,650
Flagstar Bancorp, Inc............................ 20,700 485,156
GBC Bancorp...................................... 106,000 1,934,500
Hamilton Bancorp, Inc.+.......................... 95,000 2,164,219
Hudson United Bancorp............................ 135,240 4,141,725
National Commerce Bancorporation................. 302,400 7,078,050
Prime Bancshares, Inc............................ 49,700 848,006
Republic Security Financial Corp................. 122,900 1,025,447
Sterling Bancshares, Inc......................... 11,800 148,237
Summit Bancshares, Inc........................... 31,000 563,812
Sun Bancorp, Inc.+............................... 55,572 1,104,493
Trustco Bank Corp................................ 38,128 1,050,903
Westamerica Bancorporation....................... 49,200 1,700,475
-------------
44,617,957
-------------
FINANCIAL SERVICES (3.1%)
Allied Capital Corp.............................. 130,900 2,458,466
Creditrust Corp.+................................ 30,100 707,350
Donaldson, Lufkin & Jenrette, Inc-DLJdirect+..... 15,600 643,500
Franchise Finance Corporation of America......... 53,100 1,307,587
Gabelli Asset Management, Inc., Class A+......... 103,000 1,718,812
Heller Financial, Inc............................ 60,100 1,787,975
Intelligent Life Corp.+.......................... 11,700 102,375
Litchfield Financial Corp........................ 154,040 2,527,219
MicroFinancial, Inc.............................. 42,200 511,675
NextCard, Inc.+.................................. 9,100 271,578
Ocwen Financial Corp.+........................... 159,500 1,385,656
Willis Lease Finance Corp.+...................... 198,200 3,220,750
-------------
16,642,943
-------------
INSURANCE (2.6%)
Annuity and Life Re (Holdings), Ltd.(i).......... 136,100 3,513,081
Capital Re Corp.................................. 36,300 592,144
E.W. Blanch Holdings, Inc........................ 40,100 2,566,400
Fremont General Corp............................. 109,100 2,311,556
RenaissanceRe Holdings Ltd.+(i).................. 124,800 4,648,800
-------------
13,631,981
-------------
REAL ESTATE INVESTMENT TRUSTS (3.8%)
Arden Realty, Inc................................ 123,400 3,154,412
Burnham Pacific Properties, Inc.................. 151,300 1,673,756
Cousins Properties, Inc.......................... 94,800 3,288,375
Macerich Co...................................... 79,200 2,093,850
Manufactured Home Communities, Inc............... 96,300 2,491,762
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------- -------------
<S> <C> <C>
REAL ESTATE INVESTMENT TRUSTS (CONTINUED)
Mills Corp....................................... 82,600 $ 1,822,362
Post Properties, Inc............................. 134,700 5,640,563
-------------
20,165,080
-------------
TOTAL FINANCE.................................. 95,057,961
-------------
HEALTHCARE (11.8%)
BIOTECHNOLOGY (5.3%)
Affymetrix, Inc.+................................ 69,400 2,433,338
Applied Analytical Industries, Inc.+............. 111,700 1,493,988
Human Genome Sciences, Inc.+..................... 170,300 7,184,531
IDEC Pharmaceuticals Corp.+...................... 81,000 4,082,906
Inhale Therapeutics Systems+..................... 26,300 696,128
Millennium Pharmaceuticals, Inc.+................ 141,300 5,342,906
MiniMed, Inc.+................................... 12,600 743,400
Novoste Corp.+................................... 57,100 1,457,834
Osteotech, Inc.+................................. 41,450 1,468,884
SangStat Medical Corp.+.......................... 223,200 3,089,925
Trimeris, Inc.+.................................. 23,200 313,925
-------------
28,307,765
-------------
HEALTH SERVICES (3.6%)
Accredo Health, Inc.+............................ 9,400 254,975
Alterra Healthcare Corp.+........................ 317,829 3,893,405
IDX Systems Corp.+............................... 108,300 2,589,047
Lifeline Systems, Inc.+.......................... 4,700 87,538
Mediconsult.com, Inc.+........................... 14,600 219,456
MedQuist, Inc.+.................................. 126,700 4,632,469
OnHealth Network Co.+............................ 15,900 180,863
Renal Care Group, Inc.+.......................... 60,500 1,667,531
Sunrise Assisted Living, Inc.+................... 145,300 5,403,344
-------------
18,928,628
-------------
MEDICAL SUPPLIES (2.1%)
CONMED Corp.+.................................... 114,600 3,892,819
IDEXX Laboratories, Inc.+........................ 107,700 2,739,619
Kensey Nash Corp.+............................... 178,200 1,759,725
ResMed, Inc.+.................................... 52,000 1,454,375
Xomed Surgical Products, Inc.+................... 32,100 1,314,094
-------------
11,160,632
-------------
PHARMACEUTICALS (0.8%)
Ligand Pharmaceuticals, Class B+................. 308,900 3,156,572
U.S. Bioscience, Inc.+........................... 122,800 990,075
-------------
4,146,647
-------------
TOTAL HEALTHCARE............................... 62,543,672
-------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------- -------------
<S> <C> <C>
INDUSTRIAL PRODUCTS & SERVICES (9.8%)
BUILDING MATERIALS (0.8%)
Comfort Systems USA, Inc.+....................... 84,500 $ 1,330,875
Elcor Corp....................................... 35,900 1,449,463
Service Experts, Inc.+........................... 82,300 1,527,694
-------------
4,308,032
-------------
CAPITAL GOODS (2.0%)
ABC Rail Products Corp.+......................... 81,000 1,182,094
Applied Power, Inc., Class A..................... 103,200 2,502,600
IDEX Corp........................................ 120,800 3,389,950
Milacron, Inc.................................... 90,700 1,933,044
Shaw Group, Inc.+................................ 124,200 1,622,363
-------------
10,630,051
-------------
COMMERCIAL SERVICES (1.6%)
@plan., Inc.+.................................... 7,300 96,497
Central Parking Corp............................. 38,000 1,235,000
Newgen Results Corp.+............................ 18,300 212,738
On Assignment, Inc.+............................. 119,500 3,092,063
Romac International, Inc.+....................... 75,900 1,093,434
Snyder Communications, Inc.+..................... 57,900 1,414,931
Source Information Management Co.+............... 98,400 1,482,150
-------------
8,626,813
-------------
CONSTRUCTION & HOUSING (0.4%)
D.R. Horton, Inc.+............................... 131,400 2,233,800
-------------
DIVERSIFIED MANUFACTURING (0.8%)
Gentek, Inc...................................... 194,300 2,525,900
Intermet Corp.................................... 131,500 1,836,891
-------------
4,362,791
-------------
MACHINERY (1.3%)
Manitowoc Co., Inc............................... 36,000 1,224,000
New Holland N.V.(i).............................. 146,300 2,185,356
Terex Corp.+..................................... 104,800 3,242,250
-------------
6,651,606
-------------
MANUFACTURING (2.2%)
AptarGroup, Inc.................................. 49,300 1,355,750
Herman Miller, Inc............................... 52,000 1,048,125
HON INDUSTRIES, Inc.............................. 19,500 475,313
JAKKS Pacific, Inc.+............................. 30,800 851,813
Mettler-Toledo International, Inc................ 159,200 3,940,200
MKS Instruments, Inc.+........................... 142,900 2,179,225
National R.V. Holdings, Inc.+.................... 42,000 1,078,875
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------- -------------
<S> <C> <C>
MANUFACTURING (CONTINUED)
Rock of Ages Corp.+.............................. 50,500 $ 539,719
Steelcase, Inc., Class A......................... 19,600 358,925
-------------
11,827,945
-------------
PACKAGING & CONTAINERS (0.7%)
Gaylord Container Corp., Class A+................ 171,200 1,433,800
Ivex Packaging Corp.+............................ 107,200 2,063,600
-------------
3,497,400
-------------
TOTAL INDUSTRIAL PRODUCTS & SERVICES........... 52,138,438
-------------
TECHNOLOGY (18.5%)
AEROSPACE (1.6%)
Armor Holdings, Inc.+............................ 85,300 890,319
L-3 Communications Holdings, Inc.+............... 153,800 7,574,650
-------------
8,464,969
-------------
COMPUTER SOFTWARE (6.1%)
Acxiom Corp.+.................................... 58,400 1,582,275
Aspect Development, Inc.+........................ 104,400 1,481,175
BindView Development Corp.+...................... 67,900 1,353,756
Concord Communications, Inc.+.................... 98,800 4,421,300
Concur Technologies, Inc.+....................... 45,900 1,474,538
Excalibur Technologies Corp.+.................... 56,900 803,713
I2 Technologies, Inc.+........................... 42,900 1,351,350
Inktomi Corp.+................................... 14,300 1,471,113
Legato Systems, Inc.+............................ 38,500 2,106,672
Macromedia, Inc.+................................ 22,600 866,569
MicroStrategy, Inc.+............................. 123,500 3,079,781
New Era of Networks, Inc.+....................... 66,800 2,976,775
Razorfish, Inc.+................................. 19,700 743,675
SalesLogix Corp.+................................ 54,200 626,688
Sanchez Computer Associates, Inc.+............... 35,200 2,413,400
TenFold Corp.+................................... 3,600 97,538
Unify Corp.+..................................... 124,000 1,724,375
Wind River Systems, Inc.+........................ 179,600 3,777,213
-------------
32,351,906
-------------
COMPUTER SYSTEMS (1.0%)
Allaire Corp.+................................... 18,800 1,014,613
Brocade Communications Systems, Inc.+............ 3,900 252,525
Equant NV-NY Registered Shares+(i)............... 43,300 3,591,194
Redback Networks, Inc.+.......................... 4,600 504,275
-------------
5,362,607
-------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------- -------------
<S> <C> <C>
INFORMATION PROCESSING (5.7%)
24/7 Media, Inc.+................................ 52,100 $ 1,499,503
AppliedTheory Corp.+............................. 2,700 36,534
CAIS Internet, Inc.+............................. 15,000 195,938
CCC Information Services Group, Inc.+............ 69,400 869,669
Computer Horizons Corp.+......................... 86,400 1,582,200
Covad Communications Group, Inc.+................ 22,200 1,128,731
DoubleClick, Inc.+............................... 9,600 934,500
iVillage, Inc.+.................................. 10,400 498,550
Mpath Interactive, Inc.+......................... 36,300 941,531
Multex.com, Inc.+................................ 40,200 1,218,563
Net Perceptions, Inc.+........................... 55,100 929,813
NorthPoint Communications Group, Inc.+........... 18,900 801,478
pcOrder.com, Inc.+............................... 29,700 1,084,050
Pegasus Systems, Inc.+........................... 43,800 1,523,419
Profit Recovery Group International, Inc.+....... 77,300 2,845,606
Rhythms NetConnections, Inc.+.................... 26,400 1,275,450
Scient Corp.+.................................... 5,500 276,203
SoftNet Systems, Inc.+........................... 37,000 959,688
TheStreet.com, Inc.+............................. 15,200 544,350
TMP Worldwide, Inc.+............................. 35,900 1,752,369
USWeb Corp.+..................................... 120,100 3,051,291
Visual Networks, Inc.+........................... 75,500 2,224,891
WorldGate Communications, Inc.+.................. 69,800 2,610,956
Xoom.com, Inc.+.................................. 13,900 638,966
Ziff-Davis, Inc.+................................ 42,200 880,925
-------------
30,305,174
-------------
SEMICONDUCTORS (3.7%)
Applied Micro Circuits Corp.+.................... 78,700 4,645,759
Applied Science and Technology, Inc.+............ 94,100 1,343,866
ATMI, Inc.+...................................... 176,400 3,869,775
Exar Corp.+...................................... 86,800 1,817,375
hi / fn, inc.+................................... 34,800 2,012,963
Lam Research Corp.+.............................. 46,400 1,286,150
Maker Communications, Inc.+...................... 22,500 506,250
PLX Technology, Inc.+............................ 9,100 164,938
SDL, Inc.+....................................... 43,500 4,042,781
-------------
19,689,857
-------------
TELECOMMUNICATIONS-EQUIPMENT (0.4%)
ANTEC Corp.+..................................... 65,700 1,923,778
-------------
TOTAL TECHNOLOGY............................... 98,098,291
-------------
</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, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------- -------------
<S> <C> <C>
TELECOMMUNICATIONS (3.4%)
TELECOMMUNICATION SERVICES (3.4%)
Allegiance Telecom, Inc.+........................ 85,500 $ 3,160,828
American Mobile Satellite Corp.+................. 87,600 1,240,088
CapRock Communications Corp.+.................... 74,700 1,676,081
Concentric Network Corp.+........................ 132,600 4,288,781
Copper Mountain Networks, Inc.+.................. 9,300 584,156
NEXTLINK Communications, Inc., Class A+.......... 54,100 4,136,959
Teligent, Inc., Class A+......................... 65,500 3,205,406
-------------
TOTAL TELECOMMUNICATIONS....................... 18,292,299
-------------
TRANSPORTATION (2.4%)
AIRLINES (0.2%)
Alaska Air Group, Inc.+.......................... 30,700 1,274,050
-------------
TRANSPORT & SERVICES (1.0%)
C.H. Robinson Worldwide, Inc..................... 134,800 4,347,300
Forward Air Corp.+............................... 39,400 1,074,881
-------------
5,422,181
-------------
TRUCK & FREIGHT CARRIERS (1.2%)
American Freightways Corp.+...................... 70,900 1,242,966
Werner Enterprises, Inc.......................... 270,925 5,206,840
-------------
6,449,806
-------------
TOTAL TRANSPORTATION........................... 13,146,037
-------------
UTILITIES (3.3%)
ELECTRIC (1.0%)
Cleco Corp....................................... 154,600 5,111,463
-------------
NATURAL GAS (1.4%)
Atmos Energy Corp................................ 147,800 3,787,375
Wicor, Inc....................................... 141,800 3,615,900
-------------
7,403,275
-------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------- -------------
<S> <C> <C>
TELEPHONE (0.4%)
ITC DeltaCom, Inc.+.............................. 92,000 $ 2,190,750
-------------
WATER (0.5%)
E'Town Corp...................................... 61,000 2,611,563
-------------
TOTAL UTILITIES................................ 17,317,051
-------------
TOTAL COMMON STOCKS (COST $464,824,834)........ 517,322,616
-------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
-------------------
<S> <C> <C>
SHORT-TERM INVESTMENTS (0.6%)
U.S. GOVERNMENT AGENCY OBLIGATIONS (0.6%)
Student Loan Marketing Association 4.680%, due
06/01/1999 (cost $3,275,000)................... $ 3,275,000 3,275,000
-------------
TOTAL INVESTMENTS (COST $468,099,834) (97.9%).........................
520,597,616
OTHER ASSETS IN EXCESS OF LIABILITIES (2.1%)..........................
11,269,369
-------------
NET ASSETS (100.0%)................................................... $ 531,866,985
-------------
-------------
</TABLE>
- ------------------------------
Note: Based on the cost of investments of $478,359,265 for federal income tax
purposes at May 31, 1999, the aggregate gross unrealized appreciation and
depreciation was $71,025,085 and $28,786,734, respectively, resulting in net
unrealized appreciation of $42,238,351.
+ Non-income producing security.
(i) Foreign security.
Spon. ADR - Sponsored American Depositary Receipt.
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $468,099,834 ) $520,597,616
Cash 1,452
Receivable for Investments Sold 14,247,926
Dividends and Interest Receivable 288,632
Prepaid Trustees' Fees 2,571
Prepaid Expenses and Other Assets 3,207
------------
Total Assets 535,141,404
------------
LIABILITIES
Payable for Investments Purchased 2,920,819
Advisory Fee Payable 277,509
Custody Fee Payable 32,261
Administrative Services Fee Payable 11,939
Administration Fee Payable 564
Fund Services Fee Payable 486
Accrued Expenses 30,841
------------
Total Liabilities 3,274,419
------------
NET ASSETS
Applicable to Investors' Beneficial Interests $531,866,985
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
23
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED MAY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividend Income $ 6,634,735
Interest Income 984,355
------------
Investment Income 7,619,090
EXPENSES
Advisory Fee $3,367,503
Custodian Fees and Expenses 225,074
Administrative Services Fee 153,123
Professional Fees and Expenses 50,506
Fund Services Fee 13,942
Printing Expenses 8,666
Administration Fee 8,564
Trustees' Fees and Expenses 7,720
Insurance Expense 1,856
----------
Total Expenses 3,836,954
------------
NET INVESTMENT INCOME 3,782,136
NET REALIZED LOSS ON INVESTMENTS (62,700,742)
NET CHANGE IN UNREALIZED DEPRECIATION OF
INVESTMENTS (25,375,283)
------------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS $(84,293,889)
------------
------------
</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 FISCAL FOR THE FISCAL
YEAR ENDED YEAR ENDED
MAY 31, 1999 MAY 31, 1998
-------------- --------------
<S> <C> <C>
DECREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 3,782,136 $ 7,007,518
Net Realized Gain (Loss) on Investments (62,700,742) 248,748,288
Net Change in Unrealized Depreciation of
Investments (25,375,283) (57,304,380)
-------------- --------------
Net Increase (Decrease) in Net Assets
Resulting from Operations (84,293,889) 198,451,426
-------------- --------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 289,628,106 244,010,077
Withdrawals (355,231,710) (830,979,636)
-------------- --------------
Net Decrease from Investors' Transactions (65,603,604) (586,969,559)
-------------- --------------
Total Decrease in Net Assets (149,897,493) (388,518,133)
NET ASSETS
Beginning of Fiscal Year 681,764,478 1,070,282,611
-------------- --------------
End of Fiscal Year $ 531,866,985 $ 681,764,478
-------------- --------------
-------------- --------------
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED MAY
31,
--------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Expenses 0.68% 0.68% 0.68% 0.67% 0.71%
Net Investment Income 0.67% 0.68% 0.92% 1.33% 1.21%
Portfolio Turnover 104% 96% 98% 93% 75%
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
25
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
MAY 31,1999
- --------------------------------------------------------------------------------
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 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. 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 portfolio values securities that are listed on an exchange using
prices supplied daily by an independent pricing service that are based on
the last traded price on a national securities exchange or in the absence
of recorded trades, at the readily available mean of the bid and asked
prices on such exchange, if such exchange or market constitutes the
broadest and most representative market for the security. Securities
listed on a foreign exchange are valued at the last traded price or in the
absence of recorded trades, at the readily available mean of the bid and
asked prices on such exchange available before the time when net assets
are valued. Independent pricing service procedures may also include the
use of prices based on yields or prices of securities of comparable
quality, coupon, maturity and type, indications as to values from dealers,
operating data, and general market conditions. Unlisted securities are
valued at the average of the quoted bid and asked prices in the
over-the-counter market provided by a principal market maker or dealer. If
prices are not supplied by the portfolio's independent pricing service or
principal market maker or dealer, such securities are priced using fair
values in accordance with procedures adopted by the portfolio's Trustees.
All short-term securities with a remaining maturity of sixty days or less
are valued using 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 (CONTINUED)
MAY 31,1999
- --------------------------------------------------------------------------------
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 fiscal year ended May 31, 1999, such fees
amounted to $3,367,503.
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 fiscal year ended May 31, 1999, the
fee for these services amounted to $8,564.
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 fiscal year ended May 31,
1999, the fee for these services amounted to $153,123.
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 $13,942 for the fiscal year ended May 31, 1999.
27
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 31,1999
- --------------------------------------------------------------------------------
e) An aggregate annual fee of $75,000 is paid to each trustee for serving as
a trustee of the portfolio, the J.P. Morgan Funds, the J.P. Morgan
Institutional Funds, the master portfolios and J.P. Morgan Series Trust.
The Trustees' Fees and Expenses shown in the financial statements
represents the portfolio's allocated portion of the total fees and
expenses. The portfolio's Chairman and Chief Executive Officer also serves
as Chairman of Group and receives compensation and employee benefits from
Group in his role as Group's Chairman. The allocated portion of such
compensation and benefits included in the Fund Services Fee shown in the
financial statements was $2,900.
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the fiscal year
ended May 31, 1999 were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
- ----------------- ------------
<S> <C>
$562,002,476...... $611,017,357
</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
<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, 1999, 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 five years in the period
then ended, 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,
1999 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
July 14, 1999
29
