<PAGE>
THE U.S. SMALL COMPANY OPPORTUNITIES PORTFOLIO
SCHEDULE OF INVESTMENTS
MAY 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- -------- -------------
<S> <C> <C>
COMMON STOCKS (89.7%)
BASIC INDUSTRIES (2.2%)
AGRICULTURE (0.8%)
Delta & Pine Land Co............................. 34,633 $ 1,482,725
-------------
CHEMICALS (0.5%)
Albemarle Corp................................... 26,400 641,850
Geon Co.......................................... 16,900 365,462
-------------
1,007,312
-------------
FOREST PRODUCTS & PAPER (0.2%)
Universal Forest Products, Inc................... 21,000 358,969
-------------
METALS & MINING (0.7%)
Mueller Industries, Inc.+........................ 40,000 1,240,000
-------------
TOTAL BASIC INDUSTRIES......................... 4,089,006
-------------
CONSUMER GOODS & SERVICES (20.9%)
APPARELS & TEXTILES (1.2%)
Ashworth, Inc.+.................................. 65,800 832,781
Genesco, Inc.+................................... 103,900 1,337,712
-------------
2,170,493
-------------
BROADCASTING & PUBLISHING (2.1%)
Emmis Broadcasting Corp., Class A+............... 3,200 134,400
Hearst-Argyle Television, Inc.+.................. 35,800 1,291,037
Journal Register Co.+............................ 56,800 1,136,000
Univision Communications, Inc., Class A+......... 24,000 834,000
Ziff-Davis, Inc.+................................ 30,900 521,437
-------------
3,916,874
-------------
EDUCATION (4.0%)
Advantage Learning Systems, Inc.+................ 24,200 647,350
Bright Horizons, Inc.+........................... 24,700 619,044
Caliber Learning Network, Inc.+.................. 6,600 109,725
Children's Comprehensive Services, Inc.+......... 52,800 897,600
CorporateFamily Solutions, Inc.+................. 26,000 606,125
DeVry, Inc.+..................................... 22,200 883,837
Education Management Corp.+...................... 65,600 2,293,950
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- -------- -------------
<S> <C> <C>
EDUCATION (CONTINUED)
ITT Educational Services, Inc.+.................. 51,700 $ 1,473,450
ViaGrafix Corp.+................................. 5,400 33,075
-------------
7,564,156
-------------
ENTERTAINMENT, LEISURE & MEDIA (5.1%)
Action Performance Companies, Inc.+.............. 60,700 1,688,219
AMF Bowling, Inc.+............................... 8,300 207,500
Championship Auto Racing Teams, Inc.+............ 5,700 111,150
Cinar Films Inc., Class B+....................... 103,200 1,999,500
Imax Corp.+...................................... 27,100 686,816
Metromedia International Group, Inc.+............ 34,400 464,400
Premier Parks, Inc.+............................. 25,000 1,328,125
ResortQuest International, Inc.+................. 44,300 672,806
Steiner Leisure, Ltd.+(i)........................ 52,050 1,545,234
Ticketmaster Group, Inc.+........................ 32,600 892,425
-------------
9,596,175
-------------
FOOD, BEVERAGES & TOBACCO (0.3%)
Hain Food Group, Inc.+........................... 23,400 527,231
-------------
HEALTH & PERSONAL CARE (0.9%)
Bally Total Fitness Holding Corp.+............... 54,400 1,754,400
-------------
PERSONAL CARE (0.7%)
French Fragrances, Inc.+......................... 77,700 1,333,041
-------------
RESTAURANTS & HOTELS (1.8%)
Friendly Ice Cream Corp.+........................ 64,000 1,608,000
Sun International Hotels Ltd.+(i)................ 28,600 1,306,662
Vail Resorts, Inc.+.............................. 16,700 484,300
-------------
3,398,962
-------------
RETAIL (4.8%)
A.C. Moore Arts & Crafts, Inc.+.................. 70,400 1,183,600
DM Management Co.+............................... 12,900 395,062
Fingerhut Companies, Inc......................... 18,500 542,281
Guitar Center, Inc.+............................. 21,900 578,297
Hibbett Sporting Goods, Inc.+.................... 8,500 287,406
Insight Enterprises, Inc.+....................... 33,000 1,033,312
Kenneth Cole Productions, Inc., Class A+......... 30,100 690,419
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
17
<PAGE>
THE U.S. SMALL COMPANY OPPORTUNITIES PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- -------- -------------
<S> <C> <C>
RETAIL (CONTINUED)
Maxwell Shoe Company, Inc., Class A+............. 42,700 $ 835,319
Party City Corp.+................................ 50,050 1,479,603
Steven Madden, Ltd.+............................. 47,400 460,669
United Natural Foods, Inc.+...................... 58,400 1,536,650
-------------
9,022,618
-------------
TOTAL CONSUMER GOODS & SERVICES................ 39,283,950
-------------
ENERGY (2.9%)
GAS EXPLORATION (1.8%)
Devon Energy Corp................................ 52,900 1,940,769
FX Energy, Inc.+................................. 31,400 326,756
Patterson Energy, Inc.+.......................... 95,700 1,073,634
-------------
3,341,159
-------------
OIL-SERVICES (1.1%)
National-Oilwell, Inc.+.......................... 38,600 1,348,587
Transmontaigne Oil Co.+.......................... 49,000 793,187
-------------
2,141,774
-------------
TOTAL ENERGY................................... 5,482,933
-------------
FINANCE (11.8%)
BANKING (4.4%)
Bank of Commerce................................. 24,500 441,000
Bank United Corp., Class A....................... 46,600 2,325,631
FNB Financial Services Corp...................... 8,300 203,350
Imperial Bancorp+................................ 14,000 409,500
National Commerce Bancorporation................. 68,600 3,037,694
Silicon Valley Bancshares+....................... 25,800 854,625
Webster Financial Corp........................... 32,000 1,071,000
-------------
8,342,800
-------------
FINANCIAL SERVICES (3.0%)
Federal Agricultural Mortgage Corp. , Class C+... 20,700 1,384,312
Financial Federal Corp.+......................... 67,500 1,582,031
Medallion Financial Corp......................... 74,000 1,845,375
Ocwen Financial Corp.+........................... 33,500 816,562
-------------
5,628,280
-------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- -------- -------------
<S> <C> <C>
INSURANCE (2.4%)
Annuity and Life Re (Holdings), Ltd.+(i)......... 9,000 $ 205,031
CMAC Investment Corp............................. 18,600 1,125,300
Nationwide Financial Services, Inc., Class A..... 20,300 881,781
Penn Treaty American Corp.+...................... 60,800 1,846,800
RenaissanceRe Holdings, Ltd.(i).................. 11,200 523,600
-------------
4,582,512
-------------
REAL ESTATE INVESTMENT TRUSTS (2.0%)
ElderTrust....................................... 28,200 444,150
Equity Office Properties Trust................... 17,300 475,750
Innkeepers USA Trust............................. 96,700 1,347,756
Ocwen Asset Investment Corp...................... 55,600 945,200
Storage USA, Inc................................. 16,400 609,875
-------------
3,822,731
-------------
TOTAL FINANCE.................................. 22,376,323
-------------
HEALTHCARE (18.9%)
BIOTECHNOLOGY (5.8%)
Affymetrix, Inc.+................................ 33,100 890,597
Alkermes, Inc.+.................................. 17,500 383,906
Applied Analytical Industries, Inc.+............. 55,300 570,281
ArQule, Inc.+.................................... 60,400 864,475
BioReliance Corp.+............................... 38,000 560,500
Human Genome Sciences, Inc.+..................... 27,200 980,050
IDEC Pharmaceuticals Corp.+...................... 58,500 1,839,094
Incyte Pharmaceuticals, Inc.+.................... 44,700 1,641,328
Millennium Pharmaceuticals, Inc.+................ 55,900 988,731
Novoste Corp.+................................... 13,200 331,650
SangStat Medical Corp.+.......................... 64,200 1,681,237
Synaptic Pharmaceutical Corp.+................... 17,100 257,569
-------------
10,989,418
-------------
HEALTH SERVICES (5.2%)
Alternative Living Services, Inc.+............... 12,300 333,637
Assisted Living Concepts, Inc.+.................. 24,200 390,225
Boron, LePore & Associates, Inc.+................ 7,500 220,312
Curative Health Services, Inc.+.................. 56,900 1,582,531
Healthcare Recoveries, Inc.+..................... 67,100 1,218,284
INMET Systems, Inc.+............................. 44,400 491,175
Kendle International, Inc.+...................... 75,300 1,990,744
MedQuist, Inc.+.................................. 29,600 1,295,000
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
18
<PAGE>
THE U.S. SMALL COMPANY OPPORTUNITIES PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- -------- -------------
<S> <C> <C>
HEALTH SERVICES (CONTINUED)
Professional Detailing, Inc.+.................... 6,000 $ 126,375
Transition Systems, Inc.+........................ 105,610 2,098,999
-------------
9,747,282
-------------
MEDICAL SUPPLIES (3.4%)
AutoCyte, Inc.+.................................. 75,200 535,800
Closure Medical Corp.+........................... 26,400 669,900
Focal, Inc.+..................................... 27,200 338,300
IDEXX Laboratories, Inc.+........................ 37,700 841,181
Sabratek Corp.+.................................. 63,500 1,666,875
Symphonix Devices, Inc.+......................... 3,700 38,850
Ventana Medical Systems, Inc.+................... 69,700 1,807,844
Vysis, Inc.+..................................... 39,200 414,050
-------------
6,312,800
-------------
PHARMACEUTICALS (4.5%)
Algos Pharmaceutical Corp.+...................... 49,100 1,790,616
Andrx Corp.+..................................... 59,300 2,005,081
Ascent Pediatrics, Inc.+......................... 65,400 249,337
AXYS Pharmaceuticals, Inc.+...................... 90,100 695,459
Columbia Laboratories, Inc.+..................... 63,700 537,469
Ligand Pharmaceuticals, Class B+................. 52,600 734,756
PathoGenesis Corp.+.............................. 55,300 1,976,975
U.S. Bioscience, Inc.+........................... 59,000 553,125
-------------
8,542,818
-------------
TOTAL HEALTHCARE............................... 35,592,318
-------------
INDUSTRIAL PRODUCTS & SERVICES (8.3%)
COMMERCIAL SERVICES (6.1%)
ACSYS, Inc.+..................................... 18,100 270,934
Administaff, Inc.+............................... 30,400 1,246,400
Charles River Associates, Inc.+.................. 4,300 109,919
First Consulting Group, Inc.+.................... 9,000 199,969
Mac-Gray Corp.+.................................. 8,200 117,875
On Assignment, Inc.+............................. 74,800 2,505,800
Personnel Group of America, Inc.+................ 56,900 1,152,225
Provant, Inc.+................................... 28,000 549,500
Snyder Communication, Inc.+...................... 29,600 1,193,250
Staffmark, Inc.+................................. 48,100 1,764,669
Vincam Group, Inc.+.............................. 64,000 1,280,000
Wackenhut Corrections Corp.+..................... 15,700 380,725
Youth Services International, Inc.+.............. 87,100 628,753
-------------
11,400,019
-------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- -------- -------------
<S> <C> <C>
MANUFACTURING (0.4%)
Alyn Corp.+...................................... 30,300 $ 244,294
Monaco Coach Corp.+.............................. 16,800 452,550
-------------
696,844
-------------
PACKAGING & CONTAINERS (1.8%)
Ivex Packaging Corp.+............................ 76,300 1,769,206
Schawk, Inc., Class A............................ 113,000 1,695,000
-------------
3,464,206
-------------
TOTAL INDUSTRIAL PRODUCTS & SERVICES........... 15,561,069
-------------
TECHNOLOGY (19.4%)
AEROSPACE (0.6%)
L-3 Communications Holdings, Inc.+............... 2,800 78,400
Orbital Sciences Corp.+.......................... 25,700 1,052,094
-------------
1,130,494
-------------
COMPUTER PERIPHERALS (1.6%)
HMT Technology Corp.+............................ 71,000 827,594
Radiant Systems, Inc.+........................... 67,500 1,109,531
SCM Microsystems, Inc.+.......................... 18,600 1,070,081
-------------
3,007,206
-------------
COMPUTER SOFTWARE (5.5%)
Aspen Technologies, Inc.+........................ 23,700 1,055,391
Concord Communications, Inc.+.................... 27,300 631,312
CrossKeys Systems Corp.+......................... 35,900 371,341
Datastream Systems, Inc.+........................ 71,100 1,510,875
Evolving Systems, Inc.+.......................... 1,900 35,625
FARO Technologies, Inc.+......................... 27,800 299,719
Harbinger Corp.+................................. 63,750 1,484,180
HNC Software, Inc.+.............................. 38,000 1,312,187
Inspire Insurance Solutions, Inc.+............... 28,800 935,100
Macromedia, Inc.+................................ 50,100 793,772
MAPICS, Inc.+.................................... 104,000 1,826,500
Powerhouse Technologies, Inc.+................... 16,300 157,397
-------------
10,413,399
-------------
COMPUTER SYSTEMS (0.1%)
Princeton Video Image, Inc.+..................... 39,300 194,044
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
THE U.S. SMALL COMPANY OPPORTUNITIES PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- -------- -------------
<S> <C> <C>
ELECTRICAL EQUIPMENT (1.3%)
Advanced Lighting Technologies, Inc.+............ 100,700 $ 2,498,619
-------------
INFORMATION PROCESSING (6.7%)
Applied Graphics Technologies, Inc.+............. 21,800 1,046,400
Aris Corp.+...................................... 42,700 1,203,606
CNET, Inc.+...................................... 17,300 627,125
Computer Horizons Corp.+......................... 42,000 1,403,063
Condor Technology Solutions, Inc.+............... 44,000 617,375
CSG Systems International, Inc.+................. 9,600 410,100
Diamond Technology Partners, Inc., Class A+...... 47,000 1,101,563
Exodus Communications, Inc.+..................... 2,100 71,728
Getty Images, Inc.+.............................. 24,600 499,688
ONSALE, Inc.+.................................... 17,000 432,969
Pegasus Systems, Inc.+........................... 86,800 2,235,100
Profit Recovery Group International, Inc.+....... 71,000 1,735,063
USCS International, Inc.+........................ 69,300 1,301,541
-------------
12,685,321
-------------
SEMICONDUCTORS (2.0%)
American Xtal Technology, Inc.+.................. 4,900 54,513
ARM Holdings plc (Spons. ADR)+................... 2,200 78,650
ATMI, Inc.+...................................... 53,100 962,438
Broadcom Corp.+.................................. 3,100 159,456
Genesis Microchip, Inc.+......................... 2,900 35,344
Integrated Device Technology, Inc.+.............. 25,600 239,600
Intevac, Inc.+................................... 28,300 269,734
Kopin Corp.+..................................... 17,600 332,750
Parlex Corp.+.................................... 23,400 440,213
SIPEX Corp.+..................................... 57,000 1,236,188
-------------
3,808,886
-------------
TELECOMMUNICATIONS-EQUIPMENT (1.6%)
AmeriLink Corp.+................................. 12,700 189,363
Davox Corp.+..................................... 14,200 261,813
Excel Switching Corp.+........................... 38,200 752,063
Glenayre Technologies, Inc.+..................... 43,600 668,988
Natural Microsystems Corp.+...................... 48,000 1,027,500
Verio, Inc.+..................................... 4,500 102,797
-------------
3,002,524
-------------
TOTAL TECHNOLOGY............................... 36,740,493
-------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- -------- -------------
<S> <C> <C>
TELECOMMUNICATIONS (1.0%)
TELECOMMUNICATION SERVICES (1.0%)
IDT Corp.+....................................... 9,600 $ 250,800
Omnipoint Corp.+................................. 37,000 760,813
Premiere Technologies, Inc.+..................... 34,600 828,238
-------------
TOTAL TELECOMMUNICATIONS....................... 1,839,851
-------------
TRANSPORTATION (1.4%)
AIRLINES (1.2%)
ASA Holdings, Inc................................ 58,500 2,297,953
-------------
TRANSPORT & SERVICES (0.2%)
C.H. Robinson Worldwide, Inc..................... 19,000 437,000
-------------
TOTAL TRANSPORTATION........................... 2,734,953
-------------
UTILITIES (2.9%)
NATURAL GAS (0.3%)
MarkWest Hydrocarbon, Inc.+...................... 36,000 630,000
-------------
TELEPHONE (2.6%)
Electric Lightwave, Inc., Class A+............... 44,300 606,356
ICG Communications, Inc.+........................ 23,000 697,188
Intermedia Communications, Inc.+................. 20,700 1,533,094
MetroNet Communications Corp., Class B+.......... 33,100 930,938
NEXTLINK Communications, Inc., Class A+.......... 34,100 1,063,494
-------------
4,831,070
-------------
TOTAL UTILITIES................................ 5,461,070
-------------
TOTAL COMMON STOCKS (COST $161,847,103)........ 169,161,966
-------------
</TABLE>
<TABLE>
<S> <C> <C>
CONVERTIBLE PREFERRED STOCKS (0.2%)
CONSUMER GOODS & SERVICES (0.2%)
ENTERTAINMENT, LEISURE & MEDIA (0.2%)
Metromedia International Group, Inc. (cost
$320,515)...................................... 6,000 336,000
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE U.S. SMALL COMPANY OPPORTUNITIES PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------- ------------ ------------
<S> <C> <C>
FIXED INCOME SECURITIES (0.4%)
TECHNOLOGY (0.4%)
COMPUTER SOFTWARE (0.4%)
HNC Software Inc., 4.75% due 09/01/98............ $ 225,000 $ 237,937
Quadramed Corp., 144A, 5.25% due 11/01/98........ 500,000 490,000
------------
TOTAL TECHNOLOGY............................... 727,937
------------
TOTAL FIXED INCOME SECURITIES (COST
$725,000)..................................... 727,937
------------
</TABLE>
<TABLE>
<S> <C> <C>
CONVERTIBLE BONDS (0.5%)
CONSUMER GOODS & SERVICES (0.5%)
ENTERTAINMENT, LEISURE & MEDIA (0.5%)
Family Golf Centers, Inc., 144A, 5.75% due
04/15/99 (cost $750,000)....................... 750,000 935,625
------------
</TABLE>
<TABLE>
<S> <C> <C>
SHORT-TERM INVESTMENTS (8.8%)
OTHER INVESTMENT COMPANIES (1.8%)
Seven Seas Money Market Fund, 5.25% due
06/01/98....................................... 3,423,614 3,423,614
------------
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS (7.0%)
United States Treasury Bills, 4.195% due
08/20/98....................................... $13,400,000 $ 13,253,642
------------
TOTAL SHORT-TERM INVESTMENTS (COST
$16,677,256).................................. 16,677,256
------------
TOTAL INVESTMENTS (COST $180,319,874) (99.6%).................
187,838,784
OTHER ASSETS IN EXCESS OF LIABILITIES (0.4%)..................
740,131
------------
NET ASSETS (100.0%)........................................... $188,578,915
------------
------------
</TABLE>
- ------------------------------
Note: The cost of securities for Federal Income Tax purposes at May 31, 1998,
was $180,676,669, the aggregate gross unrealized appreciation and depreciation
was $18,047,313 and $10,885,198, respectively, resulting in net unrealized
appreciation of $7,162,115.
(i) Foreign security.
+ Non-income producing security.
144A - Securities restricted for resale to Qualified Institutional Buyers.
Spon. ADR - Sponsored American Depositary Receipt.
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE U.S. SMALL COMPANY OPPORTUNITIES PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $180,319,874 ) $187,838,784
Cash 213,323
Receivable for Investments Sold 1,633,147
Interest Receivable 24,400
Dividends Receivable 19,395
Deferred Organization Expenses 7,275
Prepaid Trustees' Fees 322
Prepaid Expenses and Other Assets 57
------------
Total Assets 189,736,703
------------
LIABILITIES
Payable for Investments Purchased 1,000,006
Advisory Fee Payable 98,441
Custody Fee Payable 37,063
Organization Expenses Payable 9,000
Administrative Services Fee Payable 4,760
Administration Fee Payable 579
Fund Services Fee Payable 177
Accrued Expenses 7,762
------------
Total Liabilities 1,157,788
------------
NET ASSETS
Applicable to Investors' Beneficial Interests $188,578,915
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE U.S. SMALL COMPANY OPPORTUNITIES PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE PERIOD JUNE 16, 1997 (COMMENCEMENT OF OPERATIONS) THROUGH MAY 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividend Income (Net of Foreign Withholding Tax
of $244 ) $ 272,912
Interest Income 529,020
-----------
Investment Income 801,932
EXPENSES
Advisory Fee $596,695
Custodian Fees and Expenses 161,211
Professional Fees and Expenses 40,573
Administrative Services Fee 29,566
Printing Expenses 5,500
Fund Services Fee 3,088
Administration Fee 2,036
Amortization of Organization Expenses 1,725
Trustees' Fees and Expenses 671
Insurance Expense 141
Miscellaneous 521
--------
Total Expenses 841,727
Less: Reimbursement of Expenses (3,597)
--------
NET EXPENSES 838,130
-----------
NET INVESTMENT LOSS (36,198)
NET REALIZED GAIN ON INVESTMENTS 4,883,980
NET CHANGE IN UNREALIZED APPRECIATION OF
INVESTMENTS 7,518,910
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $12,366,692
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
23
<PAGE>
THE U.S. SMALL COMPANY OPPORTUNITIES PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
JUNE 16, 1997
(COMMENCEMENT OF
OPERATIONS) THROUGH
MAY 31, 1998
-------------------
<S> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Loss $ (36,198)
Net Realized Gain on Investments 4,883,980
Net Change in Unrealized Appreciation of
Investments 7,518,910
-------------------
Net Increase in Net Assets Resulting from
Operations 12,366,692
-------------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 206,272,601
Withdrawals (30,060,378)
-------------------
Net Increase from Investors' Transactions 176,212,223
-------------------
Total Increase in Net Assets 188,578,915
NET ASSETS
Beginning of Period --
-------------------
End of Period $ 188,578,915
-------------------
-------------------
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
JUNE 16, 1997
(COMMENCEMENT OF
OPERATIONS) THROUGH
MAY 31, 1998
-------------------
<S> <C>
RATIOS TO AVERAGE NET ASSETS
Expenses 0.84%(a)
Net Investment Loss (0.04)%(a)
Expenses without Reimbursement 0.84%(a)(b)
Portfolio Turnover 73%
</TABLE>
- ------------------------
(a) Annualized.
(b) Reimbursement was less than 0.01%.
The Accompanying Notes are an Integral Part of the Financial Statements.
24
<PAGE>
THE U.S. SMALL COMPANY OPPORTUNITIES PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1998
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The U.S. Small Company Opportunities Portfolio (the "portfolio") is one of seven
subtrusts (portfolios) comprising The Series Portfolio (the "series 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 on June 24, 1994.
The portfolio commenced operations on June 16, 1997. The portfolio's investment
objective is long term capital appreciation 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 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 at amortized cost.
b) The portfolio's custodian takes possession of the collateral pledged for
investments in repurchase agreements on behalf of the portfolio. It is the
policy of the portfolio to value the underlying collateral daily on a
mark-to-market basis to determine that the value, including accrued
interest, is at least equal to the repurchase price plus accrued interest.
In the event of default of the obligation to repurchase, the portfolio has
the right to liquidate the collateral and apply the proceeds in
satisfaction of the obligation. Under certain circumstances, in the event
of default or bankruptcy by the other party to the agreement, realization
and/or retention of the collateral or proceeds may be subject to legal
proceedings.
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 become known. Interest income, which
includes the amortization of premiums and discounts, if any, is recorded
on an accrual basis. For financial and tax reporting purposes, realized
gains and losses are determined on the basis of specific lot
identification.
d) The portfolio incurred organization expenses in the amount of $9,000.
Morgan Guaranty Trust Company of New York ("Morgan") has paid the
organization expenses of the portfolio. The portfolio
25
<PAGE>
THE U.S. SMALL COMPANY OPPORTUNITIES PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1998
- --------------------------------------------------------------------------------
has agreed to reimburse Morgan for these costs which are being deferred
and amortized on a straight-line basis over a period not to exceed five
years beginning with the commencement of operations of the portfolio.
e) Expenses incurred by the series portfolio with respect to any two or more
portfolios in the series portfolio are allocated in proportion to the net
assets of each portfolio in the series portfolio, except where allocations
of direct expenses to each portfolio can otherwise be made fairly.
Expenses directly attributable to a portfolio are charged to that
portfolio.
f) 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) The portfolio has an Investment Advisory Agreement with 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 period June 16,
1997 (commencement of operations) through May 31, 1998, such fees amounted
to $596,695.
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 period June 16, 1997 (commencement of
operations) through May 31, 1998, the fee for these services amounted to
$2,036.
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 Morgan acts as investment
advisor (the "master portfolios") and J.P.Morgan Series Trust (formerly
JPM Series Trust) in accordance with the following annual schedule: 0.09%
on the first $7 billion of their aggregate average daily net assets and
0.04% of their aggregate average daily net assets in excess of $7 billion
less the complex-wide fees payable to FDI. The portion of this charge
payable by the portfolio is determined by the proportionate share that its
net assets bear to the net assets of the master portfolios, other
investors in the
26
<PAGE>
THE U.S. SMALL COMPANY OPPORTUNITIES PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1998
- --------------------------------------------------------------------------------
master portfolios for which Morgan provides similar services and
J.P.Morgan Series Trust. For the period June 16, 1997 (commencement of
operations) through May 31, 1998, the fee for these services amounted to
$29,566.
In addition, Morgan has agreed to reimburse the portfolio to the extent
necessary to maintain the total operating expenses of the portfolio at no
more than 1.20% of the average daily net assets of the portfolio through
September 30, 1998. For the period June 16, 1997 (commencement of
operations) through May 31, 1998, Morgan has agreed to reimburse the
portfolio $3,597 for expenses under this agreement.
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 $3,088 for the period June 16, 1997 (commencement of
operations) through May 31, 1998.
e) An aggregate annual fee of $75,000 is paid to each trustee for serving as
a trustee of the J.P. Morgan Funds (formerly The JPM Pierpont Funds), the
J.P. Morgan Institutional Funds (formerly The JPM 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 $600.
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the period June
16, 1997 (commencement of operations) through May 31, 1998 were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
--------------- -------------
<S> <C>
$ 231,359,965 $ 72,601,446
</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.
27
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Investors of
The U.S. Small Company Opportunities 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 Opportunities
Portfolio (the "Portfolio") at May 31, 1998, and the results of its operations,
the changes in its net assets and the supplementary data for the period June 16,
1997 (commencement of operations) through May 31, 1998, 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 audit. We conducted our
audit 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
audit, which included confirmation of securities at May 31, 1998 by
correspondence with the custodian and brokers and the application of alternative
auditing procedures where confirmations from brokers were not received, provides
a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
July 17, 1998
28
