JP MORGAN INSTITUTIONAL FUNDS, N-30D, 1999-06-28

JP MORGAN INSTITUTIONAL FUNDS
N-30D, 1999-06-28

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<PAGE>

LETTER TO THE SHAREHOLDERS OF THE J.P. MORGAN INSTITUTIONAL BOND FUND-ULTRA

June 1, 1999

Dear Shareholder,

The previous six-month period was marked by continued strength in the U.S.
economy, coupled with benign inflation and narrowing spreads. During this
period, the J.P. Morgan Institutional Bond Fund-Ultra posted a 1.05% return,
compared with the 0.73% return of the Salomon Smith Barney Broad Investment
Grade Bond Index and the 0.61% return of the Lipper Intermediate Investment
Grade Debt Funds Average.

The fund's net asset value declined to $9.97 on April 30, 1999, from $10.17 on
October 31, 1998. The fund paid approximately $0.31 per share in dividends from
ordinary income during the reporting period. On April 30, 1999, the net assets
of the fund were approximately $231 million, while the assets of The U.S. Fixed
Income Portfolio, in which the fund invests, amounted to approximately $1.5
billion.

This report includes a discussion with William Tennille, the portfolio manager
primarily responsible for The U.S. Fixed Income Portfolio. In this interview,
Bill talks about the events of the previous six months that had the greatest
effect on the portfolio and discusses his investment strategy.

As chairman and president of Asset Management Services, we appreciate your
investment in the fund. If you have any comments or questions, please call your
Morgan representative or J.P. Morgan Funds Services at (800) 766-7722.

Sincerely yours,

/s/ Ramon de Oliveira /s/ Keith M. Schappert

Ramon de Oliveira Keith M. Schappert
Chairman of Asset Management Services President of Asset Management Services
J.P. Morgan & Co. Incorporated J.P. Morgan & Co. Incorporated

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<S> <C> <C> <C>
LETTER TO THE SHAREHOLDERS . . . .1 FUND FACTS AND HIGHLIGHTS. . . . . . 5

FUND PERFORMANCE . . . . . . . . .2 FINANCIAL STATEMENTS . . . . . . . . 8

PORTFOLIO MANAGER Q&A. . . . . . .3
- --------------------------------------------------------------------------------
</TABLE>

1
<PAGE>

FUND PERFORMANCE

EXAMINING PERFORMANCE
One way to look at performance is to review a fund's average annual total
return. This figure takes the fund's actual (or cumulative) return and shows
what would have happened if the fund had achieved that return by performing at a
constant rate each year. Average annual total returns represent the average
yearly change of a fund's value over various time periods, typically one, five,
or ten years (or since inception). Total returns for periods of less than one
year are not annualized and provide a picture of how a fund has performed over
the short term.
<TABLE>
<CAPTION>
PERFORMANCE TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS
------------------------- ----------------------------------
THREE SIX ONE FIVE TEN
AS OF APRIL 30, 1999 MONTHS MONTHS YEAR YEARS* YEARS*
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
J.P. Morgan Inst. Bond Fund-Ultra -0.37% 1.05% 5.56% 7.73% 8.19%
Salomon Smith Barney Broad
Investment Grade Bond Index** -0.86% 0.73% 6.30% 8.05% 8.96%
Lipper Intermediate Investment
Grade Debt Funds Average -0.85% 0.61% 5.12% 7.15% 8.08%

AS OF MARCH 31, 1999
- ------------------------------------------------------------- -----------------------------------
J.P. Morgan Inst. Bond Fund-Ultra -0.38% -0.33% 5.39% 7.41% 8.26%
Salomon Smith Barney Broad
Investment Grade Bond Index** -0.46% -0.05% 6.50% 7.81% 9.13%
Lipper Intermediate Investment
Grade Debt Funds Average -0.52% -0.45% 5.15% 6.86% 8.22%
</TABLE>

*THE AVERAGE ANNUAL FIVE- AND TEN-YEAR TOTAL RETURN OF THE FUND IS BASED ON J.P.
MORGAN BOND FUND, THE PREDECESSOR ENTITY TO THE U.S. FIXED INCOME PORTFOLIO,
WHICH HAS A SUBSTANTIALLY SIMILAR INVESTMENT OBJECTIVE AND RESTRICTIONS AS J.P.
MORGAN INSTITUTIONAL BOND FUND-ULTRA, PRIOR TO 7/25/93 AND J.P. MORGAN
INSTITUTIONAL BOND FUND FROM 7/26/93 THROUGH 12/14/97 (GROWTH AND AVERAGE ANNUAL
TOTAL RETURNS BASED ON THE MONTH FOLLOWING INCEPTION). THE FUND'S AVERAGE ANNUAL
TOTAL RETURN FROM THE INCEPTION DATE ON 12/15/97 THROUGH 4/30/99 IS 5.98%.

**THE SALOMON SMITH BARNEY BROAD INVESTMENT GRADE BOND INDEX IS AN UNMANAGED,
MARKET-WEIGHTED INDEX THAT MEASURES BOND MARKET PERFORMANCE AND CONTAINS
APPROXIMATELY 4,700 INDIVIDUALLY PRICED INVESTMENT-GRADE BONDS.

PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. RETURNS ARE NET OF FEES,
ASSUME THE REINVESTMENT OF DISTRIBUTIONS AND REFLECT REIMBURSEMENT OF CERTAIN
FUND AND PORTFOLIO EXPENSES AS DESCRIBED IN THE PROSPECTUS. HAD EXPENSES NOT
BEEN SUBSIDIZED, RETURNS WOULD HAVE BEEN LOWER. LIPPER ANALYTICAL SERVICES, INC.
IS A LEADING SOURCE FOR MUTUAL FUND DATA.

2
<PAGE>

PORTFOLIO MANAGER Q&A

[PHOTO]

The following is an interview with WILLIAM G. TENNILLE, vice president, a member
of the portfolio management team for The U.S. Fixed Income Portfolio, in which
the fund invests. Bill joined Morgan in 1992 and has extensive experience across
a broad range of markets, including mortgage securities and derivatives. He is a
graduate of the University of North Carolina. This interview was conducted on
May 18, 1999, and reflects Bill's views on that date.

WHAT FACTORS HAVE MOST INFLUENCED THE BOND MARKET OVER THE PAST SIX MONTHS?

WGT: We've seen a definite change in market sentiment from the panic meltdown
experienced in the third quarter of 1998. Now there's much greater confidence in
the prospects for economic growth, both domestic and global, coupled with
expectations of continued benign inflation. As a result, investors are now more
willing to hold non-Treasury obligations, which has certainly helped the
performance of spread product - corporates, asset-backeds, mortgages, and
high-yield and emerging market debt. There is also much more liquidity evident
in the market of late, following a period when liquidity was significantly
lacking.

In the U.S., the economy has continued to be strong throughout the past six
months, even stronger than we had expected. The strength of the equity markets,
and the tremendous wealth effect that has resulted for both households and
corporations, has driven this economic growth. Our economist believes this
wealth effect was a major reason the U.S. was able to shrug off the economic
sluggishness seen globally. Such persistent strength, particularly when coupled
with signs of a rebound in global economic growth like we have been seeing,
would often incite the Federal Reserve to bump up interest rates. But with
inflation remaining in check, the Fed has maintained its neutral stance,
although it just announced a shift to a tightening bias from a neutral one.

TO WHAT DO YOU ATTRIBUTE THE FUND'S PERFORMANCE OVER THE PERIOD?

WGT: October was the worst of times for spread product, as spreads widened to
degrees not seen for many years. Since then, however, spreads have narrowed
considerably; this positively affected the portfolio, as we had been holding a
large percentage of spread product in the portfolio relative to Treasuries.
Pretty much all spread product has performed well since October, with emerging
market debt, high-yield debt, investment-grade corporates, and commodity bonds
leading the pack.

3
<PAGE>

During the period, we added to our emerging-market debt position, as signs of
improvement in the global economy, particularly in Brazil and Russia, became
evident. Most of our emerging-market holdings are in the form of Brady Bonds, as
we like the liquidity that they provide. Among corporates, issues from the oil
and gas, bank, and telecommunications sectors did well. Toward the end of the
six-month period we brought our duration position in line with the benchmark. We
had been short of the benchmark during most of the period, and as the yield
curve steepened, performance suffered.

WHAT DO YOU SEE ON THE HORIZON IN THE BOND MARKET, AND HOW WILL YOU POSITION THE
PORTFOLIO?

WGT: We believe we are approaching a point at which global economic recovery
and financial market stabilization are reflected in bond prices. While we
continue to maintain a positive view on spread sectors, further spread-sector
outperformance is dependent on the continued strength of global economies.
Though our conviction that non-U.S. growth is bottoming continues to increase,
we will keep a close eye on the progress of structural reform in Japan and
commodity price trends worldwide.

We expect the U.S. economy to continue to be strong; in fact, we recently raised
our 1999 GDP forecast again. But since we also expect inflation to continue to
be benign, we think the Fed will stick with its patient approach to rates and
remain on hold in the near term, despite its shift to a tightening bias.
Regardless, we believe that concern in the market about the economy's continued
strength may override recent indications that inflation remains in check. As a
result, we expect the 30-year Treasury bond to trade between 5.40% and 6.00%,
with risk on the upside of that range. We will likely maintain the portfolio's
neutral duration relative to the benchmark.

Should bond dealers look to lock in profits they earned from what has thus far
been a strong year, there may be some tightness in the bond market over the next
couple of months. Though the market as a whole may fade somewhat in
attractiveness, good investment opportunities will surely crop up. There appears
to be some anxiety in the market, as the economy seems to be moving a little
faster than most people would like; other factors, such as U.S. Treasury
Secretary Robert Rubin's resignation and political unrest in Russia, are also
contributing to the concern. Considering this, we thought it wise to take some
of the risk off the table, so we recently sold a lot of longer-term issues and
replaced them with similar, though shorter-term, bonds.

4
<PAGE>

FUND FACTS

INVESTMENT OBJECTIVE

J.P. MorganInstitutional Bond Fund-Ultra seeks to provide a high total return
consistent with moderate risk of capital. It is designed for investors who seek
a total return that is higher than that generally available from short-term
obligations while recognizing the greater price fluctuation of longer-term
instruments.

- --------------------------------------------------------------------------------
COMMENCEMENT OF INVESTMENT OPERATIONS
12/15/97

- --------------------------------------------------------------------------------
FUND NET ASSETS AS OF 4/30/99
$230,704,523

- --------------------------------------------------------------------------------
PORTFOLIO NET ASSETS AS OF 4/30/99
$1,536,391,238

- --------------------------------------------------------------------------------
DIVIDEND PAYABLE DATES
MONTHLY

- --------------------------------------------------------------------------------
CAPITAL GAIN PAYABLE DATE (IF APPLICABLE)
12/13/99

EXPENSE RATIO
The fund's current annualized expense ratio of 0.36% covers shareholders'
expenses for custody, tax reporting, investment advisory and shareholder
services, after reimbursement. The fund is no-load and does not charge any
sales, redemption, or exchange fees. There are no additional charges for buying,
selling, or safekeeping fund shares, or for wiring redemption proceeds from the
fund.

FUND HIGHLIGHTS
ALL DATA AS OF APRIL 30, 1999

PORTFOLIO ALLOCATION
(PERCENTAGE OF TOTAL INVESTMENTS)

[PIE CHART]

<TABLE>
<S> <C>
U.S. AGENCY OBLIGATIONS 36.9%
SHORT-TERM INVESTMENTS 21.8%
CORPORATE OBLIGATIONS 20.9%
COLLATERALIZED MORTGAGE OBLIGATIONS 9.7%
U.S. TREASURY OBLIGATIONS 3.8%
SOVEREIGN BONDS & FOREIGN GOVERNMENT BONDS 3.6%
PRIVATE PLACEMENTS 2.4%
CONV. PREFERRED STOCK 0.8%
CD 0.2%
CONVERTIBLE BONDS 0.1%
</TABLE>

30-DAY SEC YIELD
5.93%*

DURATION
5.0 years

QUALITY BREAKDOWN
<TABLE>
<S> <C>
AAA** 73%
AA 4%
A 7%
Other 16%
</TABLE>

*YIELD REFLECTS THE REIMBURSEMENT OF FUND EXPENSES AS DESCRIBED IN THE
PROSPECTUS. HAD EXPENSES NOT BEEN SUBSIDIZED, THE 30-DAY SEC YIELD WOULD HAVE
BEEN LOWER.

**INCLUDES U.S. GOVERNMENT AGENCY, TREASURY OBLIGATIONS, COMMERCIAL PAPER,
ANDREPURCHASE AGREEMENTS.

5
<PAGE>

DISTRIBUTED BY FUNDS DISTRIBUTOR, INC. J.P. MORGAN INVESTMENT MANAGEMENT INC.
SERVES AS INVESTMENT ADVISOR. SHARES OF THE FUND ARE NOT BANK DEPOSITS AND ARE
NOT GUARANTEED BY ANY BANK, GOVERNMENT ENTITY, OR THE FDIC. RETURN AND SHARE
PRICE WILL FLUCTUATE AND REDEMPTION VALUE MAY BE MORE OR LESS THAN ORIGINAL
COST.

Opinions expressed herein are based on current market conditions and are subject
to change without notice. The fund invests through a master portfolio (another
fund with the same objective).

CALL J.P. MORGAN FUNDS SERVICES AT (800) 766-7722 FOR A PROSPECTUS CONTAINING
MORE COMPLETE INFORMATION ABOUT THE FUND INCLUDING MANAGEMENT FEES AND OTHER
EXPENSES. PLEASE READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.

6
<PAGE>

THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY

<PAGE>
J.P. MORGAN INSTITUTIONAL BOND FUND -- ULTRA
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
APRIL 30, 1999
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS
Investment in The U.S. Fixed Income Portfolio
("Portfolio"), at value $231,113,777
Receivable for Expense Reimbursements 28,371
Receivable for Shares of Beneficial Interest Sold 12,550
Deferred Organization Expenses 7,256
Prepaid Trustees' Fees 481
Prepaid Expenses and Other Assets 620
------------
Total Assets 231,163,055
------------
LIABILITIES
Dividends Payable to Shareholders 399,307
Shareholder Servicing Fee Payable 10,524
Administrative Services Fee Payable 5,421
Organization Expenses Payable 3,061
Administration Fee Payable 912
Fund Services Fee Payable 110
Accrued Expenses 39,197
------------
Total Liabilities 458,532
------------
NET ASSETS
Applicable to 23,145,473 Shares of Beneficial
Interest Outstanding
(par value $0.001, unlimited shares authorized) $230,704,523
------------
------------
Net Asset Value, Offering and Redemption Price
Per Share $9.97
----
----
ANALYSIS OF NET ASSETS
Paid-in Capital $234,477,081
Distributions in Excess of Net Investment Income (230,426)
Accumulated Net Realized Loss on Investment (2,054,944)
Net Unrealized Depreciation of Investment (1,487,188)
------------
Net Assets $230,704,523
------------
------------
</TABLE>

The Accompanying Notes are an Integral Part of the Financial Statements.

8
<PAGE>
J.P. MORGAN INSTITUTIONAL BOND FUND -- ULTRA
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED APRIL 30, 1999
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
INVESTMENT INCOME ALLOCATED FROM PORTFOLIO
Allocated Interest Income $ 6,960,722
Allocated Dividend Income (Net of Foreign
Withholding Tax of $1,127) 170,068
Allocated Portfolio Expenses (388,789)
-----------
Net Investment Income Allocated from
Portfolio 6,742,001
FUND EXPENSES
Shareholder Servicing Fee $ 54,587
Administrative Services Fee 28,703
Registration Fees 18,360
Transfer Agent Fees 10,267
Printing Expenses 7,051
Professional Fees 6,363
Fund Services Fee 2,209
Administration Fee 1,675
Amortization of Organization Expenses 992
Trustees' Fees and Expenses 933
Miscellaneous 3,259
---------
Total Fund Expenses 134,399
Less: Reimbursement of Expenses (134,399)
---------
NET FUND EXPENSES --
-----------
NET INVESTMENT INCOME 6,742,001
NET REALIZED LOSS ON INVESTMENT ALLOCATED FROM
PORTFOLIO (1,906,937)
NET CHANGE IN UNREALIZED DEPRECIATION OF
INVESTMENT ALLOCATED FROM PORTFOLIO (2,696,525)
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $ 2,138,539
-----------
-----------
</TABLE>

The Accompanying Notes are an Integral Part of the Financial Statements.

9
<PAGE>
J.P. MORGAN INSTITUTIONAL BOND FUND -- ULTRA
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
FOR THE SIX FOR THE PERIOD
MONTHS ENDED DECEMBER 15, 1997
APRIL 30, (COMMENCEMENT OF
1999 OPERATIONS) THROUGH
(UNAUDITED) OCTOBER 31, 1998
------------ -------------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 6,742,001 $ 3,947,795
Net Realized Loss on Investment Allocated from
Portfolio (1,906,937) (438,954)
Net Change in Unrealized Appreciation
(Depreciation) of Investment Allocated from
Portfolio (2,696,525) 1,209,337
------------ -------------------
Net Increase in Net Assets Resulting from
Operations 2,138,539 4,718,178
------------ -------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (6,709,211) (3,920,129)
------------ -------------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Proceeds from Shares of Beneficial Interest Sold 147,909,656 127,389,178
Reinvestment of Dividends 4,278,443 1,612,281
Cost of Shares of Beneficial Interest Redeemed (45,162,412) (1,550,000)
------------ -------------------
Net Increase from Transactions in Shares of
Beneficial Interest 107,025,687 127,451,459
------------ -------------------
Total Increase in Net Assets 102,455,015 128,249,508
NET ASSETS
Beginning of Period 128,249,508 --
------------ -------------------
End of Period (including undistributed net
investment income of $0 and $0, respectively) $230,704,523 $ 128,249,508
------------ -------------------
------------ -------------------
</TABLE>

The Accompanying Notes are an Integral Part of the Financial Statements.

10
<PAGE>
J.P. MORGAN INSTITUTIONAL BOND FUND -- ULTRA
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share outstanding throughout each period are as follows:

<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE DECEMBER 15, 1997
SIX MONTHS ENDED (COMMENCEMENT OF
APRIL 30, 1999 OPERATIONS) THROUGH
(UNAUDITED) OCTOBER 31, 1998
---------------- -------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.17 $ 10.03
---------------- -------------------

INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.32 0.54
Net Realized and Unrealized Gain (Loss) on
Investment (0.21) 0.16
---------------- -------------------
Total from Investment Operations 0.11 0.70
---------------- -------------------

LESS DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (0.31) (0.56)
---------------- -------------------

NET ASSET VALUE, END OF PERIOD $ 9.97 $ 10.17
---------------- -------------------
---------------- -------------------

RATIOS AND SUPPLEMENTAL DATA
Total Return 1.05%(a) 7.17%(a)
Net Assets, End of Period (in thousands) $ 230,705 $ 128,250
Ratios to Average Net Assets
Net Expenses 0.36%(b) 0.37%(b)
Net Investment Income 6.18%(b) 6.28%(b)
Expenses without Reimbursement 0.48%(b) 0.60%(b)
</TABLE>

- ------------------------
(a) Not annualized.

(b) Annualized.

The Accompanying Notes are an Integral Part of the Financial Statements.

11
<PAGE>
J.P. MORGAN INSTITUTIONAL BOND FUND -- ULTRA
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
APRIL 30, 1999
- --------------------------------------------------------------------------------

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

J.P. Morgan Institutional Bond Fund -- Ultra (the "fund") is a separate series
of J.P. Morgan Institutional Funds, a Massachusetts business trust (the "trust")
which was organized on November 4, 1992. The trust is registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company. The fund commenced operations on December 15, 1997.

The fund invests all of its investable assets in The U.S. Fixed Income Portfolio
(the "portfolio"), a no-load diversified, open-end management investment company
having the same investment objective as the fund. The value of such investment
included in the Statement of Assets and Liabilities reflects the fund's
proportionate interest in the net assets of the portfolio (15% at April 30,
1999). The performance of the fund is directly affected by the performance of
the portfolio. The financial statements of the portfolio, including the Schedule
of Investments, are included elsewhere in this report and should be read in
conjunction with the fund's financial statements.

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 fund:

a) Valuation of securities by the portfolio is discussed in Note 1a of the
portfolio's Notes to Financial Statements which are included elsewhere in
this report.

b) The fund records its share of net investment income, realized and
unrealized gain and loss and adjusts its investment in the portfolio each
day. All the net investment income and realized and unrealized gain and
loss of the portfolio is allocated pro rata among the fund and other
investors in the portfolio at the time of such determination.

c) Substantially all the fund's net investment income is declared as
dividends daily and paid monthly. Distributions to shareholders of net
realized capital gains, if any, are declared and paid annually.

d) The fund incurred organization expenses in the amount of $10,000, which
were deferred and are being amortized on a straight-line basis over a
period not to exceed five years beginning with the commencement of
operations of the fund.

e) Expenses incurred by the trust with respect to any two or more funds in
the trust are allocated in proportion to the net assets of each fund in
the trust, except where allocations of direct expenses to each fund can
otherwise be made fairly. Expenses directly attributable to a fund are
charged to that fund.

f ) The fund is treated as a separate entity for federal income tax purposes
and intends to comply with the provisions of the Internal Revenue Code of
1986, as amended, applicable to regulated investment companies and to
distribute substantially all of its income, including net realized
capital gains, if any, within the prescribed time periods. Accordingly,
no provision for federal income or excise tax is necessary.

12
<PAGE>
J.P. MORGAN INSTITUTIONAL BOND FUND -- ULTRA
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1999
- --------------------------------------------------------------------------------

g) For federal income tax purposes, the fund had a capital loss carryforward
at October 31, 1998 of $226,218 all of which expires in the year 2006. To
the extent that this capital loss is used to offset future capital gains,
it is probable that gains so offset will not be distributed to
shareholders.

2. TRANSACTIONS WITH AFFILIATES

a) The trust, on behalf of the fund, has retained Funds Distributor, Inc.
("FDI"), a registered broker-dealer, to serve as the co-administrator and
distributor for the fund. Under a Co-Administration Agreement between FDI
and the trust on behalf of the fund, FDI provides administrative services
necessary for the operations of the fund, furnishes office space and
facilities required for conducting the business of the fund and pays the
compensation of the fund's officers affiliated with FDI. The fund 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 fund is based on the ratio of the fund's net
assets to the aggregate net assets of the trust and certain other
investment companies subject to similar agreements with FDI. For the six
months ended April 30, 1999, the fee for these services amounted to
$1,675.

b) The trust, on behalf of the fund, has an Administrative Services Agreement
(the "Services Agreement") with Morgan Guaranty Trust Company of New York
("Morgan"), a wholly owned subsidiary of J.P. Morgan & Co. Incorporated
("J.P. Morgan"), under which Morgan is responsible for certain aspects of
the administration and operation of the fund. Under the Services
Agreement, the fund 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 the other
portfolios in which the trust and the J.P. Morgan Funds invest (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 fund is
determined by the proportionate share that its net assets bear to the net
assets of the trust, the master portfolios, other investors in the master
portfolios for which Morgan provides similar services, and J.P. Morgan
Series Trust. For the six months ended April 30, 1999, the fee for these
services amounted to $28,703.

J.P. Morgan has agreed to waive and/or reimburse the fund expenses (except
for those allocated to the fund by the master portfolio and extraordinary
expenses). J.P. Morgan will not waive/reimburse fund expenses if such
waiver/reimbursement would cause total operating expenses to be less than
0.35%, and in no case will total operating expenses exceed 0.50%. This
reimbursement arrangement can be changed or terminated at any time at the
option of J.P. Morgan. For the six months ended April 30, 1999, J.P.
Morgan has agreed to reimburse the fund $134,399 for the expenses under
this agreement.

c) The trust, on behalf of the fund, has a Shareholder Servicing Agreement
with Morgan to provide account administration and personal account
maintenance services to fund shareholders. The Agreement provides for the
fund to pay Morgan a fee for these services which is computed daily and
paid monthly at an annual rate of 0.05% of the average daily net assets of
the fund. For the six months ended April 30, 1999, the fee for these
services amounted to $54,587.

13
<PAGE>
J.P. MORGAN INSTITUTIONAL BOND FUND -- ULTRA
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1999
- --------------------------------------------------------------------------------

d) The trust, on behalf of the fund, has a Fund Services Agreement with
Pierpont Group, Inc. ("Group") to assist the trustees in exercising their
overall supervisory responsibilities for the trust's affairs. The trustees
of the trust represent all the existing shareholders of Group. The fund's
allocated portion of Group's costs in performing its services amounted to
$2,209 for the six months ended April 30, 1999.

e) An aggregate annual fee of $75,000 is paid to each trustee for serving as
a trustee of the trust, the J.P. Morgan Funds, the master portfolios and
J.P. Morgan Series Trust. The Trustees' Fees and Expenses shown in the
financial statements represents the fund's allocated portion of the total
fees and expenses. The trust'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 $500.

3. TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST

The Declaration of Trust permits the trustees to issue an unlimited number of
full and fractional shares of beneficial interest of one or more series.
Transactions in shares of beneficial interest of the fund were as follows:

<TABLE>
<CAPTION>
FOR THE SIX FOR THE PERIOD
MONTHS ENDED DECEMBER 15, 1997
APRIL 30, (COMMENCEMENT OF
1999 OPERATIONS) THROUGH
(UNAUDITED) OCTOBER 31, 1998
------------ -------------------
<S> <C> <C>
Shares sold...................................... 14,628,345 12,597,636
Reinvestment of dividends and distributions...... 426,363 159,037
Shares redeemed.................................. (4,513,664) (152,244)
------------ -------------------
Net Increase..................................... 10,541,044 12,604,429
------------ -------------------
------------ -------------------
</TABLE>

4. AGREEMENT

The trust, on behalf of the fund, together with other affiliated investment
companies (the "funds"), entered into a revolving line of credit agreement (the
"Agreement") on May 27, 1998, with unaffiliated lenders. The maximum borrowing
under the Agreement was $150,000,000. The Agreement expired on May 26, 1999,
however, the fund as party to the Agreement has extended the Agreement and will
continue its participation therein for an additional 364 days until May 23,
2000. The maximum borrowing under the current agreement is $150,000,000. The
purpose of the Agreement is to provide another alternative for settling large
fund shareholder redemptions. Interest on any such borrowings outstanding will
approximate market rates. Prior to May 26, 1999 the funds paid a commitment fee
at an annual rate of 0.065% on the unused portion of the committed amount; under
the current Agreement, the commitment fee has increased to an annual rate of
0.085% on the unused portion of the committed amount. The commitment fee is
allocated to the funds in accordance with procedures established by their
respective trustees or directors. There were no outstanding borrowings pursuant
to the Agreement as of April 30, 1999.

14
<PAGE>
The U.S. Fixed Income Portfolio

Semiannual Report April 30, 1999

(unaudited)

(The following pages should be read in conjunction
with J.P. Morgan Institutional Bond Fund -- Ultra
Semiannual Financial Statements)

15
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
APRIL 30, 1999
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT SECURITY DESCRIPTION RATING VALUE
- ------------- ------------------------------------------------- ------------ ---------------
<C> <S> <C> <C>
CERTIFICATES OF DEPOSIT-FOREIGN (0.3%)
CANADA (0.3%)
$ 4,000,000 Canadian Imperial Bank of Commerce, 6.200% due
08/01/00(s) (cost $4,000,481).................. Aa3/AA- $ 4,020,800
---------------

COLLATERALIZED MORTGAGE OBLIGATIONS AND ASSET BACKED SECURITIES (12.4%)
FINANCIAL SERVICES (12.4%)
20,999,947 AFC Home Equity Loan Trust, NAS, Series 1997-3,
Class 1A5, Callable, 6.900% due 09/27/27....... Aaa/AAA 21,209,947
2,109,366 American Southwest Financial Corp., Support Bond,
Series 60, Class D, Callable, 8.900% due
03/01/18....................................... NR/AAA 2,135,733
2,253,150 Bear Stearns Structured Securities Inc.,
Sequential Payer, Series 1997-2, Class 1A5,
Callable, (144A), 7.000% due 08/25/36.......... Aaa/NR 2,213,368
2,000,000 Chase Commercial Mortgage Securities Corp.,
Subordinated Bond, Series 1996-2, Class F,
Callable, (144A), 6.900% due 11/19/06(s)....... NR/NR 1,659,375
16,090,000 Citibank Credit Card Master Trust I, PO, Series
1997-6, Class A, Callable, 5.937% due
08/15/06(y).................................... Aaa/AAA 11,806,037
4,700,000 COMM, Sequential Payer, Series 1999-1, Class A2,
Partially Callable, 6.455% due 09/15/08(s)..... Aaa/NR 4,697,430
1,002,076 Countrywide Home Loans, Sequential Payer, Series
1997-4, Class A, Callable, 8.000% due
08/25/27....................................... Aaa/NR 1,022,428
5,089,000 CS First Boston Mortgage Securities Corp.,
Subordinated Bond, Series 1997-C2, Class B,
Callable, 6.720% due 11/17/07(s)............... Aa2/NR 5,108,084
2,452,000 First Union-Lehman Brothers Commercial Mortgage,
Subordinated Bond, Series 1997-C2, Class E,
Partially Callable, 7.120% due 11/18/12........ Baa3/BBB- 2,136,305
1,500,000 J.P. Morgan Commercial Mortgage Finance Corp.,
Subordinated Bond, CSTR, Series 1996-C2, Class
E, Callable, (144A), 8.684% due 11/25/27(v).... NR/BB 1,328,203
2,467,787 Merrill Lynch Mortgage Investors, Inc.,
Subordinated Bond, CSTR, Series 1995-C2, Class
E, Callable, 7.765% due 06/15/21(v)............ Ba3/NR 2,300,055
2,000,000 Merrill Lynch Mortgage Investors, Inc.,
Subordinated Bond, Series 1997-C1, Class F,
Partially Callable, 7.120% due 06/18/29........ NR/BB 1,471,875
8,577,910 Midland Realty Acceptance Corp., Sequential
Payer, Series 1996-C2, Class A1, Callable,
7.020% due 01/25/29............................ Aaa/NR 8,742,767
34,000,000 Morgan Stanley Capital I, Inc., Sequential Payer,
Series 1997-XL1, Class A3, Partially Callable,
6.950% due 10/03/30(s)......................... Aaa/AAA 34,903,125
5,000,000 Morgan Stanley Capital I, Inc., Subordinated
Bond, CSTR, Series 1997-RR, Class D, Callable,
(144A), 7.759% due 04/30/39(v)................. NR/NR 3,861,719
1,000,000 Morgan Stanley Capital I, Inc., Subordinated
Bond, Series 1995-GAL1, Class E, Callable,
(144A), 8.250% due 08/15/05.................... NR/NR 884,375
2,000,000 Morgan Stanley Capital I, Inc., Subordinated
Bond, Series 1997-HF1, Class F, Partially
Callable, (144A), 6.860% due 02/15/10.......... NR/NR 1,537,500
1,823,528 Mortgage Capital Funding, Inc., Sequential Payer,
Series 1997-MC2, Class A1, Partially Callable,
6.525% due 01/20/07............................ Aaa/NR 1,848,031
</TABLE>

The Accompanying Notes are an Integral Part of the Financial Statements.

16
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT SECURITY DESCRIPTION RATING VALUE
- ------------- ------------------------------------------------- ------------ ---------------
<C> <S> <C> <C>
FINANCIAL SERVICES (CONTINUED)
$ 48,090,000 Nationslink Funding Corp., Sequential Payer,
Series 1999-1, Class A2, Partially Callable,
6.316% due 11/20/08(t)......................... Aaa/AAA $ 47,721,810
19,770,000 Nomura Asset Securities Corp., Sequential Payer,
Series 1998-D6, Class A1B, Partially Callable,
6.590% due 03/17/28............................ Aaa/AAA 19,853,405
13,020,000 Nomura Asset Securities Corp., Sequential Payer,
Series 1998-D6, Class A1C, Partially Callable,
6.690% due 03/17/28............................ Aaa/AAA 12,881,662
1,150,000 Vendee Mortgage Trust, Sequential Payer, Series
1997-1, Class 2C, Partially Callable, 7.500%
due 09/15/17................................... NR/NR 1,167,963
---------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS AND
ASSET BACKED SECURITIES (COST
$195,034,258).............................. 190,491,197
---------------

CONVERTIBLE BONDS (0.1%)
RETAIL (0.1%)
1,100,000 Corporate Express, Inc., Callable 07/01/99,
4.500% due 07/01/00 (cost $934,625)............ B3/B- 980,375
---------------

CORPORATE OBLIGATIONS (22.4%)
APPARELS & TEXTILES (0.3%)
500,000 Collins & Aikman Products Co., Callable 04/15/01,
11.500% due 04/15/06........................... B2/B 516,250
2,570,000 Polymer Group, Inc., Series B, Callable 07/01/02,
9.000% due 07/01/07(s)......................... B2/B 2,634,250
1,000,000 Westpoint Stevens, Inc., Callable, 7.875% due
06/15/05....................................... Ba3/BB 1,022,500
---------------
4,173,000
---------------

AUTOMOTIVE SUPPLIES (0.1%)
1,000,000 Federal-Mogul Corp., Callable, 7.750% due
07/01/06....................................... Ba2/BB+ 1,001,920
---------------

BANKING (1.4%)
2,750,000 FCB/SC Capital Trust I, Callable 03/15/08, 8.250%
due 03/15/28................................... NR/NR 2,763,887
8,300,000 First Union Corp., Putable, 6.550% due
10/15/35(s).................................... A2/A- 8,457,119
10,800,000 Swiss Bank Corp.-New York, 7.000% due
10/15/15(t).................................... Aa2/AA 10,819,008
---------------
22,040,014
---------------

BROADCASTING & PUBLISHING (0.3%)
1,700,000 Capstar Broadcasting Partners, Callable 07/01/02,
9.250% due 07/01/07............................ B2/B- 1,819,000
2,700,000 Fox Family Worldwide, Inc., Callable 11/01/02,
9.250% due 11/01/07(s)......................... B1/B 2,619,000
---------------
4,438,000
---------------

BUILDING MATERIALS (0.7%)
11,000,000 Armstrong World, Inc., 6.350% due 08/15/03(s).... Baa1/A- 11,009,790
---------------
</TABLE>

The Accompanying Notes are an Integral Part of the Financial Statements.

17
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT SECURITY DESCRIPTION RATING VALUE
- ------------- ------------------------------------------------- ------------ ---------------
<C> <S> <C> <C>
CHEMICALS (0.2%)
$ 3,500,000 Arco Chemical Co., 9.800% due 02/01/20........... Ba3/BB $ 3,440,290
---------------

ELECTRIC (1.8%)
494,000 Calpine Corp., 7.875% due 04/01/08............... Ba2/BB 498,940
6,250,000 East Coast Power LLC, Callable, (144A), 7.536%
due 06/30/17................................... Baa3/BBB- 6,197,625
10,000,000 Pacific Corp., Series G, Callable, 6.710% due
01/15/26(s).................................... Aaa/AAA 9,849,300
5,000,000 PECO Energy Co., 8.000% due 04/01/02(s).......... Baa1/BBB+ 5,285,250
5,735,000 Scana Corp., Series B, MTN, 5.810% due
10/23/08(t).................................... A3/A 5,513,055
---------------
27,344,170
---------------

ELECTRONICS (0.4%)
7,000,000 Sensormatic Electronics Corp., Callable, (144A),
7.740% due 03/29/06(s)......................... NR/BB+ 6,573,140
---------------

ENERGY SOURCE (0.7%)
506,000 Cogentrix Energy, Inc., Callable, 8.750% due
10/15/08....................................... Ba1/BB+ 546,480
9,825,000 Florida Power & Light Co., Callable, 6.000% due
06/01/08....................................... Aa3/AA- 9,721,543
---------------
10,268,023
---------------

ENTERTAINMENT, LEISURE & MEDIA (0.4%)
2,500,000 Fox/Liberty Networks LLC, Callable 08/15/02,
8.875% due 08/15/07(s)......................... B1/B 2,728,125
1,090,000 Jacor Communications Co., Series B, Callable
06/15/02, 8.750% due 06/15/07.................. B2/BB+ 1,160,850
1,100,000 Lamar Advertising Co., Callable 09/15/02, 8.625%
due 09/15/07................................... B1/B 1,152,250
1,000,000 Outdoor Systems, Inc., Callable 06/15/02, 8.875%
due 06/15/07(s)................................ B1/B 1,065,000
---------------
6,106,225
---------------

FINANCIAL SERVICES (8.1%)
13,000,000 Associates Corp. N.A., 5.875% due 07/15/02(s).... Aa3/AA- 13,004,290
3,060,000 Associates Corp. N.A., Putable, 5.960% due
05/15/37....................................... Aa3/AA- 3,078,238
9,600,000 Cendant Corp., Callable, 7.500% due 12/01/00..... Baa1/BBB 9,731,808
3,400,000 Commercial Credit Co., Putable, 8.700% due
06/15/10(s).................................... Aa3/A+ 3,993,844
5,000,000 Enterprise Rent-a-Car USA Finance Co., (144A),
6.375% due 05/15/03(s)......................... Baa2/BBB+ 4,923,600
4,000,000 FCB/NC Capital Trust I, Callable 03/01/08, 8.050%
due 03/01/28(s)................................ Baa3/BB+ 3,932,000
1,000,000 Golden State Holdings Co., Callable, 7.125% due
08/01/05....................................... Ba1/BB+ 980,550
17,500,000 Household Finance Corp., 5.875% due
02/01/09(s)(t)................................. A2/A 16,607,150
2,525,000 Household Finance Corp., 6.500% due 11/15/08..... A2/A 2,511,845
2,500,000 Keystone Financial Mid-Atlantic Funding, MTN,
6.500% due 05/31/08(s)......................... Baa2/BBB+ 2,432,500
1,900,000 Nationwide Financial Services, Inc., Callable
03/01/07, 8.000% due 03/01/27(s)............... A1/A+ 2,021,334
10,000,000 NGC Corp. Capital Trust, Series B, Callable,
8.316% due 06/01/27(t)......................... Baa3/BBB- 10,183,600
13,000,000 Norwest Financial, Inc., 7.200% due
04/01/04(s).................................... Aa3/A+ 13,630,890
5,000,000 Phillips 66 Capital Trust II, Callable 01/15/07,
8.000% due 01/15/37(s)......................... Baa1/BBB 5,259,350
</TABLE>

The Accompanying Notes are an Integral Part of the Financial Statements.

18
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT SECURITY DESCRIPTION RATING VALUE
- ------------- ------------------------------------------------- ------------ ---------------
<C> <S> <C> <C>
FINANCIAL SERVICES (CONTINUED)
$ 4,100,000 Provident Financing Trust I, 7.405% due
03/15/38(s).................................... A3/BBB- $ 4,086,429
3,000,000 Safeco Capital Trust I, Callable 07/15/07, 8.072%
due 07/15/37................................... A3/A 2,978,610
1,250,000 Sears Roebuck Acceptance Corp., Series 3, MTN,
6.600% due 10/09/01(s)......................... A2/A- 1,272,725
2,450,000 Sun World International, Inc., Series B, Callable
04/15/01, 11.250% due 04/15/04................. B2/B 2,587,812
20,000,000 Toyota Motor Credit Corp., 5.625% due
11/13/03(t).................................... Aa1/AAA 19,763,800
1,500,000 US Bancorp, Series B, Callable 12/15/06, 8.270%
due 12/15/26................................... A1/BBB+ 1,600,845
---------------
124,581,220
---------------

FOOD, BEVERAGES & TOBACCO (0.2%)
3,175,000 J Seagram & Sons, 7.600% due 12/15/28(s)......... Baa3/BBB- 3,246,120
---------------

FOREST PRODUCTS & PAPER (1.4%)
5,000,000 Champion International Corp., 7.100% due
09/01/05(s).................................... Baa1/BBB 5,149,200
5,600,000 Georgia-Pacific Corp., 9.950% due 06/15/02(s).... Baa2/BBB- 6,177,080
9,150,000 Georgia-Pacific Corp., Callable 04/30/05, 8.625%
due 04/30/25(t)................................ Baa2/BBB- 9,761,037
---------------
21,087,317
---------------

HEALTH SERVICES (0.2%)
1,826,000 Genesis Health Ventures, Callable 06/15/00,
9.750% due 06/15/05............................ B2/CCC+ 1,652,530
2,000,000 Mariner Post-Acute Network, Inc., Series B,
Callable 04/01/01, 9.500% due 04/01/06......... B3/CCC 1,400,000
---------------
3,052,530
---------------

METALS & MINING (0.2%)
2,400,000 P&L Coal Holdings Corp., Series B, Callable
05/15/03, 9.625% due 05/15/08(s)............... B2/B 2,496,000
1,000,000 Ryerson Tull, Inc., Callable, 8.500% due
07/15/01....................................... Baa3/BBB 1,030,000
---------------
3,526,000
---------------

NATURAL GAS (0.6%)
3,591,000 Columbia Energy Group, Series G, Callable
11/28/05, 7.620% due 11/28/25(s)............... A3/BBB+ 3,585,649
5,000,000 National Fuel Gas Co., Series D, MTN, Putable,
6.214% due 08/12/27............................ A2/A- 5,048,050
---------------
8,633,699
---------------

OIL-PRODUCTION (0.2%)
2,500,000 Plains Resources, Inc., Series D, Callable
03/15/01, 10.250% due 03/15/06(s).............. B2/B- 2,600,000
---------------
</TABLE>

The Accompanying Notes are an Integral Part of the Financial Statements.

19
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT SECURITY DESCRIPTION RATING VALUE
- ------------- ------------------------------------------------- ------------ ---------------
<C> <S> <C> <C>
OIL-SERVICES (0.3%)
$ 750,000 Lasmo (USA) Inc., Callable 06/01/03, 8.375% due
06/01/23....................................... Baa2/BBB $ 757,117
1,250,000 Newpark Resources, Inc., Series B, Callable
12/15/02, 8.625% due 12/15/07(s)............... B2/B+ 1,206,250
3,013,892 Oil Purchase Co., Sinking Fund, (144A), 7.100%
due 10/31/02(s)................................ Baa3/BBB 2,833,058
---------------
4,796,425
---------------

PACKAGING & CONTAINERS (0.0%)
710,000 Stone Container Corp., Callable, 12.750% due
04/01/02(v).................................... B3/B- 713,550
---------------

RAILROADS (0.6%)
1,500,000 Union Pacific Corp., 7.125% due 02/01/28(t)...... Baa3/BBB- 1,482,600
7,000,000 Union Pacific Corp., 7.600% due 05/01/05(s)...... Baa3/BBB- 7,409,570
---------------
8,892,170
---------------

RETAIL (0.2%)
2,500,000 Federated Department Stores, Inc., 8.500% due
06/15/03....................................... Baa2/BBB+ 2,714,450
1,000,000 Fred Meyer, Inc., Callable, 7.450% due
03/01/08....................................... Ba2/BB+ 1,048,300
---------------
3,762,750
---------------

TELECOMMUNICATIONS (0.3%)
1,000,000 Lenfest Communications, Inc., 7.625% due
02/15/08....................................... Ba2/BB+ 1,022,500
1,500,000 McLeodUSA, Inc., Callable 07/15/02, 9.250% due
07/15/07....................................... B2/B+ 1,567,500
1,000,000 NEXTLINK Communications, Inc., Callable 10/01/02,
9.625% due 10/01/07(s)......................... B3/B 1,010,000
1,300,000 Qwest Communications International, Inc., Series
B, Callable 04/01/02, 10.875% due 04/01/07..... Ba1/BB+ 1,495,754
---------------
5,095,754
---------------

TELEPHONE (1.9%)
21,900,000 AT&T Corp., Callable, 6.000% due 03/15/09(t)..... A1/AA- 21,404,624
7,500,000 MCI Worldcom, Inc., 6.950% due 08/15/06(s)....... Baa2/BBB+ 7,791,900
---------------
29,196,524
---------------

TRANSPORTATION (0.2%)
2,500,000 Atlantic Express Transportation Corp., Callable
02/01/01, 10.750% due 02/01/04................. B2/B 2,568,750
---------------
</TABLE>

The Accompanying Notes are an Integral Part of the Financial Statements.

20
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT SECURITY DESCRIPTION RATING VALUE
- ------------- ------------------------------------------------- ------------ ---------------
<C> <S> <C> <C>
UTILITIES (1.7%)
$ 10,000,000 Atmos Energy Corp., Callable, 6.750% due
07/15/28(t).................................... A3/A- $ 9,516,500
2,950,000 Central Power & Light Co., Series KK, 6.625% due
07/01/05....................................... A3/A 3,021,714
12,400,000 Southern Co. Capital Trust I, Callable 02/01/07,
8.190% due 02/01/37(s)......................... A3/BBB+ 13,083,860
---------------
25,622,074
---------------
TOTAL CORPORATE OBLIGATIONS (COST
$346,555,870).............................. 343,769,455
---------------

FOREIGN CORPORATE OBLIGATIONS (4.2%)
BERMUDA (0.1%)
ENTERTAINMENT, LEISURE & MEDIA
1,250,000 Central European Media Enterprises, Callable
08/15/01, 9.375% due 08/15/04.................. Caa1/CCC+ 1,112,500
---------------

CANADA (2.4%)
FINANCIAL SERVICES
5,000,000 McKesson Finance of Canada, (144A), 6.550% due
11/01/02....................................... A3/A- 5,039,100

FOOD, BEVERAGES & TOBACCO
350,000 Cott Corp., Callable 07/01/00, 8.500% due
05/01/07....................................... B1/B+ 315,000

OIL PRODUCTION
6,400,000 Canadian Occidental Petroleum, Callable, 7.125%
due 02/04/04(s)................................ Baa2/BBB 6,440,000
1,498,800 Express Pipeline LP, Series B, Callable, Sinking
Fund, (144A), 7.390% due 12/31/19.............. Baa3/BBB- 1,362,034

RAILROADS
5,350,000 Canadian National Railway, 7.000% due
03/15/04(s).................................... Baa2/BBB 5,489,742

TELECOMMUNICATIONS
900,000 Rogers Cablesystems Ltd., Callable 12/01/02,
10.000% due 12/01/07........................... Ba3/BB+ 1,012,500

TELECOMMUNICATION SERVICES
300,000 Microcell Telecommunications, Inc., Series B,
Callable 12/01/01, 0.000% due 06/01/06(v)...... B3/NR 252,000

TELEPHONE
600,000 Call-Net Enterprises, Inc., Callable 08/15/02,
0.000% due 08/15/07(v)......................... B2/BB- 423,000
1,250,000 Rogers Cantel, Inc., Callable 10/01/02, 8.300%
due 10/01/07................................... Ba3/BB+ 1,318,750

TRANSPORT & SERVICES
7,000,000 Laidlaw, Inc., Putable, 6.720% due 10/01/27(s)... Baa3/BBB 6,542,200
2,500,000 Teekay Shipping Corp., Sinking Fund, 8.320% due
02/01/08(s).................................... Ba2/BB+ 2,456,250
</TABLE>

The Accompanying Notes are an Integral Part of the Financial Statements.

21
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT SECURITY DESCRIPTION RATING VALUE
- ------------- ------------------------------------------------- ------------ ---------------
<C> <S> <C> <C>
WATER
$ 4,500,000 Hydro Quebec, Series GF, 8.875% due
03/01/26(s).................................... A2/A+ $ 5,669,866
---------------
36,320,442
---------------

FRANCE (0.1%)
ELECTRICAL EQUIPMENT
1,785,000 Legrand S.A., 8.500% due 02/15/25(s)............. A2/A 2,036,167
---------------

HONG KONG (0.0%)
BANKING
44,000 Bangkok Bank Public Co. Ltd., (144A), 9.025% due
03/15/29....................................... NR/B+ 34,320
---------------

MEXICO (0.1%)
FOOD, BEVERAGES & TOBACCO
1,625,000 Panamerican Beverages, 7.250% due 07/01/09(s).... Baa3/BBB- 1,428,586
---------------

NETHERLANDS (0.2%)
FINANCIAL SERVICES
900,000 ICI Investments BV, Series E, MTN, 6.750% due
08/07/02....................................... Baa1/A- 911,070
2,250,000 Montell Finance Co. BV, (144A), 8.100% due
03/15/27....................................... A3/A 2,267,640
---------------
3,178,710
---------------

SOUTH KOREA (0.2%)
BANKING
1,000,000 Export-Import Bank of Korea, 7.125% due
09/20/01....................................... Baa3/NR 964,400

ELECTRIC
1,500,000 Korea Electric Power Corp., Putable, 6.000% due
12/01/26....................................... Baa3/BBB- 1,443,660
---------------
2,408,060
---------------

SWEDEN (0.1%)
TRANSPORTATION
1,500,000 Stena AB, Callable 06/15/02, 8.750% due
06/15/07....................................... Ba2/BB 1,406,250
---------------

UNITED KINGDOM (1.0%)
ELECTRIC
5,000,000 National Power Co. PLC, 6.250% due 12/01/03...... A2/A- 5,012,500
10,000,000 United Utilities PLC, Callable, 6.875% due
08/15/28(s).................................... A2/A 9,593,600
</TABLE>

The Accompanying Notes are an Integral Part of the Financial Statements.

22
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT SECURITY DESCRIPTION RATING VALUE
- ------------- ------------------------------------------------- ------------ ---------------
<C> <S> <C> <C>
TELEPHONE
$ 1,500,000 Orange PLC, Callable 08/01/03, 8.000% due
08/01/08(s).................................... Ba3/B+ $ 1,545,000
---------------
16,151,100
---------------
TOTAL FOREIGN CORPORATE OBLIGATIONS (COST
$64,640,552)............................... 64,076,135
---------------

FOREIGN GOVERNMENT AGENCIES (0.2%)
MEXICO (0.2%)
ELECTRIC
3,814,000 Petroleos Mexicanos, (144A), 7.750% due 10/29/99
(cost $3,825,596).............................. Ba2/BB 3,823,535
---------------

FOREIGN GOVERNMENT OBLIGATIONS (0.3%)
CANADA (0.3%)
4,700,000 Province of Quebec, Series NY, 6.500% due
01/17/06(s) (cost $4,763,668).................. A2/A+ 4,787,843
---------------

PRIVATE PLACEMENT (3.2%)
FINANCIAL SERVICES (2.0%)
6,000,000 500 Grant Street Associates, Sinking Fund,
(144A), 6.460% due 12/01/08.................... A2/NR 6,033,600
23,500,000 Newcourt Credit Group, (144A), 6.875% due
02/16/05(t).................................... Baa3/BBB 24,059,535
---------------
30,093,135
---------------

REAL ESTATE (1.2%)
4,487,596 180 East End Avenue Note, secured by first
mortgage and agreement on co-op apartment
building in New York City, 6.875% due
01/01/29(f).................................... NR/NR 4,382,407
10,986,452 200 East 57th Street, secured by first mortgage
and agreement on co-op apartment building in
New York City, 6.500% due 01/01/14(f).......... NR/NR 10,545,895
3,291,757 81 Irving Place Note, secured by first mortgage
and agreement on co-op apartment building in
New York City, 6.950% due 01/01/29(f).......... NR/NR 3,221,840
---------------
18,150,142
---------------
TOTAL PRIVATE PLACEMENT (COST $48,186,139)... 48,243,277
---------------

SOVEREIGN BONDS (4.0%)
ARGENTINA (0.2%)
606,000 Republic of Argentina Global Bonds, 11.750% due
04/04/09....................................... Ba3/BB 625,392
3,031,800 Republic of Argentina, Series FRB, Callable
09/30/99, Sinking Fund, 5.938% due
03/31/05(v).................................... Ba3/BB 2,698,302
---------------
3,323,694
---------------

BULGARIA (0.0%)
785,000 Republic of Bulgaria IAB PDI Bonds, Callable
07/28/99, Sinking Fund, 5.875% due
07/28/11(v).................................... B2/NR 531,838
---------------
</TABLE>

The Accompanying Notes are an Integral Part of the Financial Statements.

23
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT SECURITY DESCRIPTION RATING VALUE
- ------------- ------------------------------------------------- ------------ ---------------
<C> <S> <C> <C>
COLOMBIA (0.4%)
$ 2,120,000 Republic of Colombia Global Bonds, 7.625% due
02/15/07....................................... Baa3/BBB- $ 1,841,750
3,472,000 Republic of Colombia Global Bonds, 10.875% due
03/09/04....................................... Baa3/BBB- 3,655,728
---------------
5,497,478
---------------

MEXICO (1.3%)
7,671,000 United Mexican States Global Bonds, 11.375% due
09/15/16....................................... Ba2/BB 8,749,734
3,920,000 United Mexican States Global Bonds, 11.500% due
05/15/26(s).................................... Ba2/BB 4,662,840
1,470,000 United Mexican States Global Bonds, Series E,
MTN, 9.750% due 04/06/05....................... Ba2/BB 1,524,390
4,362,000 United Mexican States Global Bonds, Series XW,
10.375% due 02/17/09........................... NR/NR 4,678,245
---------------
19,615,209
---------------

PANAMA (0.4%)
700,000 Republic of Panama IRB, Series 18 Year, Sinking
Fund, 4.000% due 07/17/14(v)................... Ba1/BB+ 548,625
8,158,759 Republic of Panama PDI, Series 20 Year, Sinking
Fund, 5.938% due 07/17/16(v)................... Ba1/BB+ 6,376,070
---------------
6,924,695
---------------

PERU (0.4%)
10,114,000 Republic of Peru PDI, Series 20 Year, Sinking
Fund, 4.500% due 03/07/17(v)................... NR/BB 6,814,308
---------------

PHILIPPINES (0.4%)
3,463,000 Republic of Philippines Global Bonds, 8.875% due
04/15/08....................................... Ba1/BB+ 3,523,603
2,957,000 Republic of Philippines Global Bonds, 9.875% due
01/15/19....................................... Ba1/BB+ 3,031,812
---------------
6,555,415
---------------

POLAND (0.4%)
7,240,000 Republic of Poland Bearer PDI, Callable 10/27/99,
Sinking Fund, 5.000% due 10/27/14(s)(v)........ Baa3/BBB- 6,697,000
---------------

VENEZUELA (0.5%)
8,785,685 Republic of Venezuela DCB, Series DL, Callable,
Sinking Fund, 5.938% due 12/18/07(v)........... B2/B+ 7,094,440
---------------
TOTAL SOVEREIGN BONDS (COST $60,586,489)..... 63,054,077
---------------

U.S. GOVERNMENT AGENCY OBLIGATIONS (47.4%)
FEDERAL HOME LOAN MORTGAGE CORP. (3.0%)
1,275,937 6.000% due 03/01/11-04/01/11..................... 1,269,149
3,618,358 7.000% due 09/01/09-07/01/28..................... 3,675,069
8,400,217 7.500% due 10/01/26.............................. 8,633,827
3,067,885 8.000% due 11/01/26-03/01/27..................... 3,192,502
6,494 9.000% due 04/01/03.............................. 6,639
4,569,512 9.250% due 06/01/16.............................. 4,804,430
</TABLE>

The Accompanying Notes are an Integral Part of the Financial Statements.

24
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT SECURITY DESCRIPTION RATING VALUE
- ------------- ------------------------------------------------- ------------ ---------------
<C> <S> <C> <C>
FEDERAL HOME LOAN MORTGAGE CORP. (CONTINUED)
$ 1,509,536 9.500% due 08/01/04-03/01/06..................... $ 1,585,832
12,926 10.000% due 04/01/09............................. 13,701
616 12.500% due 08/01/14............................. 704
2,654,180 Gold, 6.500% due 05/01/04........................ 2,664,133
9,762,562 Gold, 8.506% due 12/01/04........................ 10,374,247
100,212 REMIC: PAC-1(11), Series 1207, Class J, Partially
Callable, 6.750% due 07/15/19.................. 100,024
7,830,000 REMIC: Sequential Payer, AD, Series 1980, Class
VB, Partially Callable, 7.000% due 03/15/11.... 7,976,813
1,550,000 REMIC: Sequential Payer, Series 1980, Class C,
Partially Callable, 6.850% due 10/15/21........ 1,555,813
---------------
45,852,883
---------------

FEDERAL NATIONAL MORTGAGE ASSOCIATION (33.9%)
7,846,279 6.500% due 10/01/13-09/01/28..................... 7,795,122
2,807,834 6.880% due 11/01/05.............................. 2,869,269
41,933,690 7.000% due 04/01/28-09/01/28..................... 42,483,860
250,989 7.500% due 03/01/27.............................. 257,969
4,101,234 8.000% due 06/01/11-05/01/27..................... 4,263,182
4,232,737 8.700% due 01/01/05.............................. 4,634,847
379,848 9.000% due 12/01/24.............................. 402,756
213,997 10.000% due 06/01/20............................. 231,924
16,179,025 IO, Series 292, Class 2, 7.500% due 11/01/27..... 3,473,434
16,179,025 PO, Series 292, Class 1, 7.081% due
11/01/27(y).................................... 13,201,073
123,420,000 TBA, May, 6.000% due 03/01/29.................... 119,601,694
307,105,000 TBA, May, 6.500% due 03/01/29.................... 305,089,620
16,350,000 TBA, May, 7.000% due 03/01/29.................... 16,564,594
---------------
520,869,344
---------------

GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (10.5%)
9,680,059 6.500% due 06/15/28-07/15/28..................... 9,616,461
136,583,239 7.000% due 12/15/08-02/15/29..................... 138,591,178
10,397,282 7.500% due 01/15/27-02/15/27..................... 10,715,647
1,661,585 8.000% due 06/15/17-04/15/27..................... 1,736,257
95,959 9.000% due 12/15/26.............................. 103,095
17,032 11.000% due 05/15/16............................. 19,012
9,239 11.500% due 07/15/13............................. 10,413
---------------
160,792,063
---------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(COST $728,780,875)........................ 727,514,290
---------------
</TABLE>

The Accompanying Notes are an Integral Part of the Financial Statements.

25
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY DESCRIPTION VALUE
- ------------- ------------------------------------------------- ---------------
<C> <S> <C> <C>
U.S. TREASURY OBLIGATIONS (4.8%)
U.S. TREASURY BONDS (4.4%)
$ 7,240,000 5.500% due 08/15/28(s)........................... $ 6,899,503
19,418,000 6.750% due 08/15/26(s)........................... 21,647,963
27,250,000 12.000% due 08/15/13(s).......................... 39,614,688
---------------
68,162,154
---------------

U.S. TREASURY NOTES (0.1%)
2,120,000 7.875% due 08/15/01(s)........................... 2,243,893
---------------

U.S. TREASURY STRIPS (0.3%)
13,490,000 PO, 6.112% due 11/15/15(y)....................... 4,983,340
---------------
TOTAL U.S. TREASURY OBLIGATIONS (COST
$77,934,664)............................... 75,389,387
---------------
</TABLE>

<TABLE>
<CAPTION>
MOODY'S/S&P
SHARES RATING
- ----------- ---------------
<C> <S> <C> <C>
CONVERTIBLE PREFERRED STOCKS (1.0%)
FINANCIAL SERVICES (0.3%)
150,000 TCI Communications Financing II, Callable
05/31/01....................................... A3/A 4,059,375
---------------

INDUSTRIAL PRODUCTS & SERVICES (0.7%)
12,575 Home Ownership Funding, (144A), 13.331%(v)....... Aaa/NR 11,478,133
---------------
TOTAL CONVERTIBLE PREFERRED STOCKS (COST
$16,675,578)............................... 15,537,508
---------------

PREFERRED STOCKS (0.1%)
OIL-SERVICES (0.1%)
36,000 Lasmo PLC, Series A, Callable 06/16/99, 10.000%
(cost $801,000)................................ Baa3/BB+ 866,250
---------------
</TABLE>

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY DESCRIPTION VALUE
- ------------ ------------------------------------------------- --------------
<C> <S> <C>
SHORT-TERM INVESTMENTS (28.0%)
COMMERCIAL PAPER--DOMESTIC (12.6%)
25,000,000 Asset Securitization Corp., 4.810% due
06/16/99(t).................................... 24,846,347
15,000,000 General Electric Capital Corp., 4.800 due
06/07/99....................................... 14,926,000
50,000,000 Morgan Stanley Dean Witter & Co., 4.656 due
06/08/99(t)(y)................................. 49,746,139
20,000,000 Bavaria TRR Corp., 4.830 due 07/20/99(t)......... 19,785,333
35,000,000 TRW Inc., 5.130% due 06/30/99(t)................. 34,700,750
50,000,000 MCI Worlcom Inc., 5.080% due 05/18/99(t)......... 49,880,056
--------------
193,884,625
--------------

COMMERCIAL PAPER--FOREIGN (1.3%)
20,000,000 Caisse D'Amortissement, 4.891 due 12/03/99(y).... 19,420,400
--------------
</TABLE>

The Accompanying Notes are an Integral Part of the Financial Statements.

26
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY DESCRIPTION VALUE
- ------------ ------------------------------------------------- --------------
<C> <S> <C>
REPURCHASE AGREEMENT (14.1%)
$217,333,000 Goldman Sachs Repurchase Agreement, 4.890% dated
04/30/99 due 05/03/99, proceeds $217,421,563
(collateralized by $92,964,000 U.S. Treasury
Bond, 8.875% due 08/15/17, valued at
$125,406,949; $73,073,000 U.S. Treasury Bond,
8.125% due 08/15/19, valued at $93,373,556).... $ 217,333,000
--------------
TOTAL SHORT-TERM INVESTMENTS (COST
$430,638,025)............................... 430,638,025
--------------
TOTAL INVESTMENTS (COST $1,983,357,820)
(128.4%)....................................... 1,973,192,154
LIABILITIES IN EXCESS OF OTHER ASSETS (-28.4%)... (436,800,916)
--------------
NET ASSETS (100.0%).............................. $1,536,391,238
--------------
--------------
</TABLE>

- ------------------------------
Note: Based on the cost of the investments of $1,983,391,859 for federal income
tax purposes at April 30, 1999, the aggregate gross unrealized appreciation and
depreciation was $11,440,100 and $21,639,805, respectively, resulting in net
unrealized depreciation of $10,199,705.

(f) Fair valued security. Approximately 1% of the market value of the securities
have been valued at fair value. (See Note 1a).

(s) Security is fully or partially segregated with custodian as collateral for
future contracts or with broker as initial margin for futures contracts.
$337,451,890 of the market value has been segregated.

(t) All or a portion of the security has been segregated as collateral for TBA
securities and when issued securities.

(v) Rate shown reflects current rate on variable or floating rate instrument or
investment with step coupon rate.

(y) Yield to maturity.

Abbreviations used in the schedule of investments are as follows:

144A - Securities restricted for resale to Qualified Institutional Buyers.

AD - Accretion Directed.

CSTR - Collateral Strip Rate.

DCB - Debt Conversion Bond.

IAB - Interest in Arrears Bond.

IRB - Interest Reduction Bond.

IO - Interest Only.

MTN - Medium Term Note.

NAS - Non-accelerated Security.

PAC - Planned Amortization Class.

PDI - Past Due Interest.

PO - Principal Only.

REMIC - Real Estate Mortgage Investment Conduit.

TBA - Security purchased on a forward commitment basis with an approximate
principal amount and no definite maturity date. The actual principal amount and
maturity will be determined upon settlement date.

The Accompanying Notes are an Integral Part of the Financial Statements.

27
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
APRIL 30, 1999
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $1,983,357,820) $1,973,192,154
Cash 875
Foreign Currency at Value (Cost $40) 40
Interest Receivable 13,107,275
Receivable for Investments Sold 3,736,371
Variation Margin Receivable 456,597
Prepaid Trustees' Fees 7,678
Prepaid Expenses and Other Assets 8,029
--------------
Total Assets 1,990,509,019
--------------
LIABILITIES
Payable for Investments Purchased 453,643,453
Advisory Fee Payable 387,184
Administrative Services Fee Payable 33,241
Fund Services Fee Payable 641
Accrued Expenses 53,262
--------------
Total Liabilities 454,117,781
--------------
NET ASSETS
Applicable to Investors' Beneficial Interests $1,536,391,238
--------------
--------------
</TABLE>

The Accompanying Notes are an Integral Part of the Financial Statements.

28
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED APRIL 30, 1999
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest Income $47,264,299
Dividend Income (Net of Foreign Withholding Tax
of $6,948 ) 1,065,060
-----------
Investment Income 48,329,359
EXPENSES
Advisory Fee $ 2,239,935
Administrative Services Fee 197,184
Custodian Fees and Expenses 142,116
Professional Fees and Expenses 23,994
Fund Services Fee 15,656
Administration Fee 10,039
Trustees' Fees and Expenses 8,444
Miscellaneous 5,978
-----------
Total Expenses 2,643,346
-----------
NET INVESTMENT INCOME 45,686,013
NET REALIZED GAIN (LOSS) ON
Investment Transactions 3,118,896
Futures (2,070,952)
Foreign Currency Contracts and Transactions 926,014
-----------
Net Realized Gain 1,973,958
NET CHANGE IN UNREALIZED
APPRECIATION/(DEPRECIATION) OF
Investments (32,824,651)
Futures 242,366
Foreign Currency Contracts and Translations (955,626)
-----------
Net Change in Unrealized Depreciation (33,537,911)
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $14,122,060
-----------
-----------
</TABLE>

The Accompanying Notes are an Integral Part of the Financial Statements.

29
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE FISCAL
APRIL 30, 1999 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1998
-------------- ----------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 45,686,013 $ 76,630,594
Net Realized Gain on Investments, Futures and
Foreign Currency Contracts and Transactions 1,973,958 14,578,678
Net Change in Unrealized Appreciation
(Depreciation) of Investments, Futures and
Foreign Currency Contracts and Translations (33,537,911) 5,171,549
-------------- ----------------
Net Increase in Net Assets Resulting from
Operations 14,122,060 96,380,821
-------------- ----------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 476,795,432 542,769,830
Withdrawals (301,716,051) (373,515,793)
-------------- ----------------
Net Increase from Investors' Transactions 175,079,381 169,254,037
-------------- ----------------
Total Increase in Net Assets 189,201,441 265,634,858
NET ASSETS
Beginning of Period 1,347,189,797 1,081,554,939
-------------- ----------------
End of Period $1,536,391,238 $ 1,347,189,797
-------------- ----------------
-------------- ----------------
</TABLE>

- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
FOR THE
SIX MONTHS FOR THE FISCAL YEAR ENDED
ENDED OCTOBER 31,
APRIL 30, 1999 --------------------------------
(UNAUDITED) 1998 1997 1996 1995 1994
--------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Expenses 0.35%(a) 0.36% 0.37% 0.37% 0.39% 0.46%
Net Investment Income 6.12%(a) 6.42% 6.70% 6.38% 6.68% 5.88%
Portfolio Turnover 145%(b) 115% 93% 186% 293% 234%
</TABLE>

- ------------------------
(a) Annualized.

(b) Not Annualized.

The Accompanying Notes are an Integral Part of the Financial Statements.

30
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
APRIL 30, 1999
- --------------------------------------------------------------------------------

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

The U.S. Fixed Income Portfolio (the "portfolio") is registered under the
Investment Company Act of 1940, as amended (the "Act"), as a no load, open-end
management investment company which was organized as a trust under the laws of
the State of New York on January 29, 1993. The portfolio commenced operations on
July 12, 1993 and received a contribution of certain assets and liabilities,
including securities, with a value of $91,653,371 on that date from J.P. Morgan
Bond Fund in exchange for a beneficial interest in the portfolio. The
portfolio's investment objective is to provide a high total return consistent
with moderate risk of capital. The Declaration of Trust permits the trustees to
issue an unlimited number of beneficial interests in the portfolio.

Investments in emerging and international markets may involve certain
considerations and risks not typically associated with investments in the United
States. Future economic and political developments in emerging market and
foreign countries could adversely affect the liquidity or value, or both, of
such securities in which the portfolio is invested. The ability of the issuers
of debt, asset-backed and mortgage securities held by the portfolio to meet
their obligations may be affected by economic and political developments in a
specific industry or region. The value of asset-backed and mortgage securities
can be significantly affected by changes in interest rates or rapid principal
payments including pre-payments.

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.
Independent pricing services procedures include the use of 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. 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. All short-term
portfolio securities with a remaining maturity of less than 60 days are
valued by the amortized cost method.

Trading in securities on most foreign exchanges and over-the-counter
markets is normally completed before the close of the domestic market and
may also take place on days on which the domestic market is closed. If
events materially affecting the value of foreign securities occur between
the time when the exchange on which they are traded closes and the time
when the portfolio's net assets are calculated, such securities will be
valued at fair value in accordance with procedures established by and
under the general supervision of the portfolio's trustees.

31
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1999
- --------------------------------------------------------------------------------

The portfolio's custodian takes possession of the collateral pledged for
investments in repurchase agreements on behalf of the portfolio. It is the
policy of the portfolio to value the underlying collateral daily on a
mark-to-market basis to determine that the value, including accrued
interest, is at least equal to the repurchase price plus accrued interest.
In the event of default of the obligation to repurchase, the portfolio has
the right to liquidate the collateral and apply the proceeds in
satisfaction of the obligation. Under certain circumstances, in the event
of default or bankruptcy by the other party to the agreement, realization
and/or retention of the collateral or proceeds may be subject to legal
proceedings.

b) The books and records of the portfolio are maintained in U.S. dollars. The
market value of investment securities, other assets and liabilities and
foreign currency contracts are translated at the prevailing exchange rates
at the end of the period. Purchases, sales, income and expenses are
translated at the exchange rates prevailing on the respective dates of
such transactions. Translation gains and losses resulting from changes in
exchange rates during the reporting period and gains and losses realized
upon settlement of foreign currency transactions are reported in the
Statement of Operations. Although the net assets of the portfolio are
presented at the exchange rates and market values prevailing at the end of
the period, the portfolio does not isolate the portion of the results of
operations arising as a result of changes in foreign exchange rates from
the fluctuations arising from changes in the market prices of securities
during the period.

c) Securities transactions are recorded on a trade date basis. Dividend
income is recorded on the ex-dividend date or as of the time that the
relevant ex-dividend date and amount becomes known. Interest income, which
includes the amortization of premiums and discounts, if any, is recorded
on an accrual basis. For financial and tax reporting purposes, realized
gains and losses are determined on the basis of specific lot
identification.

d) The portfolio may enter into forward and spot foreign currency contracts
to protect securities and related receivables and payables against
fluctuations in future foreign currency rates. A forward contract is an
agreement to buy or sell currencies of different countries on a specified
future date at a specified rate. Risks associated with such contracts
include the movement in the value of the foreign currency relative to the
U.S. dollar and the ability of the counterparty to perform.

The market value of the contract will fluctuate with changes in currency
exchange rates. Contracts are valued daily at the current foreign exchange
rates, and the change in the market value is recorded by the portfolio as
unrealized appreciation or depreciation of forward foreign currency
contract translations. At April 30, 1999, the portfolio had no open
forward foreign currency contracts.

e) Futures -- A futures contract is an agreement to purchase/sell a specified
quantity of an underlying instrument at a specified future date or to
make/receive a cash payment based on the value of a securities index. The
price at which the purchase and sale will take place is fixed when the
portfolio enters into the contract. Upon entering into such a contract the
portfolio is required to pledge to the broker an amount of cash and/or
liquid securities equal to the minimum "initial margin" requirements of
the exchange. Pursuant to the contract, the portfolio agrees to receive
from, or pay to, the broker an amount of cash equal to the daily
fluctuation in the value of the contract. Such receipts or payments are

32
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1999
- --------------------------------------------------------------------------------
known as "variation margin" and are recorded by the portfolio as
unrealized gains or losses. When the contract is closed, the portfolio
records a realized gain or loss equal to the difference between the value
of the contract at the time it was opened and the value at the time when
it was closed. The portfolio invests in futures contracts for the purpose
of hedging its existing portfolio securities, or securities the portfolio
intends to purchase, against fluctuations in value caused by changes in
prevailing market interest rates or securities movements. The use of
futures transactions involves the risk of imperfect correlation in
movements in the price of futures contracts, interest rates and the
underlying hedged assets, and the possible inability of counterparties to
meet the terms of their contracts. Open futures contracts at April 30,
1999 are summarized as follows:

SUMMARY OF OPEN CONTRACTS AT APRIL 30, 1999

<TABLE>
<CAPTION>
NET UNREALIZED
APPRECIATION/ PRINCIPAL AMOUNT
CONTRACTS LONG (DEPRECIATION) OF CONTRACTS
-------------- -------------- ----------------
<S> <C> <C> <C>
U.S. Five Year Note, expiring June 1999.......... 624 $ (338,428) $ 69,690,182
-------------- -------------- ----------------
-------------- -------------- ----------------
</TABLE>

<TABLE>
<CAPTION>
NET UNREALIZED
APPRECIATION/ PRINCIPAL AMOUNT
CONTRACTS SHORT (DEPRECIATION) OF CONTRACTS
--------------- -------------- ----------------
<S> <C> <C> <C>
U.S. Ten Year Note, expiring June 1999........... 400 $ 657,670 $ 46,532,670
U.S. Long Bond, expiring June 1999............... 235 249,371 28,493,434
--------------- -------------- ----------------
Totals........................................... 635 $ 907,041 $ 75,026,104
--------------- -------------- ----------------
--------------- -------------- ----------------
</TABLE>

f) The portfolio may enter into commitments to buy and sell investments to
settle on future dates as part of its normal investment activities. These
commitments are reported at market value in the financial statements.
Credit risk exists on these commitments to the extent of any unrealized
gains on the underlying securities purchased and any unrealized losses on
the underlying securities sold. Market risk exists on these commitments to
the same extent as if the security were owned on a settled basis and gains
and losses are recorded and reported in the same manner. However, during
the commitment period, these investments earn no interest or dividends.

g) The portfolio intends to be treated as a partnership for federal income
tax purposes. As such, each investor in the portfolio will be taxed on its
share of the portfolio's ordinary income and capital gains. It is intended
that the portfolio's assets will be managed in such a way that an investor
in the portfolio will be able to satisfy the requirements of Subchapter M
of the Internal Revenue Code. The portfolio earns foreign income which may
be subject to foreign withholding taxes at various rates.

2. TRANSACTIONS WITH AFFILIATES

a) The portfolio has an Investment Advisory Agreement with J.P. Morgan
Investment Management Inc. ("JPMIM"), a wholly owned subsidiary of J.P.
Morgan & Co. Incorporated ("J.P. Morgan"). Under the terms of the
Agreement, the portfolio pays JPMIM at an annual rate of 0.30% of the
portfolio's average daily net assets. For the six months ended April 30,
1998, this fee amounted to $2,239,935.

33
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1999
- --------------------------------------------------------------------------------

b) The portfolio, on behalf of the fund, has retained Funds Distributor, Inc.
("FDI"), a registered broker-dealer, to serve as the co-administrator and
exclusive placement agent. Under a Co-Administration Agreement between FDI
and the portfolio, FDI provides administrative services necessary for the
operations of the portfolio, furnishes office space and facilities
required for conducting the business of the portfolio and pays the
compensation of the portfolio's officers affiliated with FDI. The
portfolio has agreed to pay FDI fees equal to its allocable share of an
annual complex-wide charge of $425,000 plus FDI's out-of-pocket expenses.
The amount allocable to the portfolio is based on the ratio of the
portfolio's net assets to the aggregate net assets of the portfolio and
certain other investment companies subject to similar agreements with FDI.
For the six months ended April 30, 1999, the fee for these services
amounted to $10,039.

c) The portfolio has an Administrative Services Agreement (the "Services
Agreement") with Morgan Guaranty Trust Company of New York ("Morgan")
under which Morgan is responsible for certain aspects of the
administration and operation of the portfolio. Under the Services
Agreement, the portfolio has agreed to pay Morgan a fee equal to its
allocable share of an annual complex-wide charge. This charge is
calculated based on the aggregate average daily net assets of the
portfolio and certain other portfolios for which JPMIM acts as investment
advisor (the "master portfolios") and J.P. Morgan Series Trust in
accordance with the following annual schedule: 0.09% on the first $7
billion of their aggregate average daily net assets and 0.04% of their
aggregate average daily net assets in excess of $7 billion, less the
complex-wide fees payable to FDI. The portion of this charge payable by
the portfolio is determined by the proportionate share that its net assets
bear to the net assets of the master portfolios, other investors in the
master portfolios for which Morgan provides similar services and J.P.
Morgan Series Trust. For the six months ended April 30, 1999, the fee for
these services amounted to $197,184.

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 $15,656 for the six months ended April 30, 1999.

e) An aggregate annual fee of $75,000 is paid to each trustee for serving as
a trustee of the J.P. Morgan Funds, J.P. Morgan Institutional Funds, the
master portfolios and J.P. Morgan Series Trust. The Trustees' Fees and
Expenses shown in the financial statements represents the portfolio's
allocated portion of the total fees and expenses. The portfolio's Chairman
and Chief Executive Officer also serves as Chairman of Group and receives
compensation and employee benefits from Group in his role as Group's
Chairman. The allocated portion of such compensation and benefits included
in the Fund Services Fee shown in the financial statements was $3,300.

34
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1999
- --------------------------------------------------------------------------------

3. INVESTMENT TRANSACTIONS

Investment transactions (excluding short-term investments) for the six months
ended April 30, 1999, were as follows:

<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
-------------- --------------
<S> <C> <C>
U.S. Government and Agency Obligations........... $1,816,957,596 $1,675,959,539
Corporate and Collateralized Mortgage Obligations
and Other Securities............................ 533,839,040 392,336,500
-------------- --------------
$2,350,796,636 $2,068,296,039
-------------- --------------
-------------- --------------
</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.

35
<PAGE>

J.P. MORGAN
INSTITUTIONAL
BOND FUND-ULTRA

FOR MORE INFORMATION ON THE J.P. MORGAN INSTITUTIONAL FUNDS, CALL J.P. MORGAN
FUNDS SERVICES AT
(800) 766-7722.

SEMIANNUAL REPORT
APRIL 30, 1999

IM0413-U