<PAGE>
The U.S. Fixed Income Portfolio
Semi-Annual Report April 30, 1995
(unaudited)
(The following pages should be read in conjunction
with The Pierpont Bond Fund
Semi-Annual Financial Statements)
14
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
APRIL 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P VALUE
AMOUNT SECURITY DESCRIPTION RATING (NOTE 1A)
- ---------------------------------------------------------------------------------- ----------- ------------
<C> <S> <C> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS (4.4%)
FINANCE (4.4%)
$ 95,517 Advanta Home Equity Loan Trust, Series 92-2, Class A1, 7.15% due
06/25/08............................................................ Aaa/AAA $ 89,079
82,796 Case Equipment Loan Trust, Series 94-A, Class A2, 4.65% due
08/15/99............................................................ Aaa/AAA 80,958
1,000,000 Discover Credit Card Trust, Series 92-A, 5.50% due 05/15/98.......... Aaa/AAA 988,800
5,984 Fical Home Equity Loan Trust, Series 90-1 Class A, 8.90% due
10/15/15............................................................ Aaa/NR 6,001
1,100,000 First Chicago Credit Master Trust II, Series 90-A, Class A, 9.25% due
12/15/96............................................................ Aaa/AAA 1,104,180
8,855,000 GE Capital Mortgage Services, Inc., Series 94-17, Class A5, 7.00% due
05/25/24............................................................ Aaa/AAA 8,407,822
4,501,800 GE Capital Mortgage Services, Inc., Series 94-21, Class A, 6.50% due
08/25/09............................................................ Aaa/AAA 4,255,607
418,884 Green Tree Financial Corp., Series 94-A Class A, 6.90% due 02/15/04.. Baa3/BBB+ 407,103
139,487 Navistar Financial Grantor Trust, Series 91-1, Class A, 6.40% due
11/15/96............................................................ Aaa/AAA 139,269
60,183 Premier Auto Trust, Series 92-3, Class A, 5.90% due 11/17/97......... Aaa/AAA 59,708
1,566,717 Premier Auto Trust, Series 93-4, Class A2, 4.650% due 02/02/99....... Aaa/AAA 1,531,466
645,791 Prudential Home Loan Mortgage Securities, Remic: PAC(11), Series
93-54, Class A2, 6.50% due 01/25/24................................. Aaa/AAA 641,193
232,175 Resolution Trust Corp., Remic: ARM Determined Interest Rate, Series
91-6, Class A1, 6.951% due 05/25/19................................. Aaa/AAA 224,122
156,930 Resolution Trust Corp., Remic: Sequential Payer, Series 92-M3, Class
A1, 7.75% due 07/25/30.............................................. Aa2/AA+ 160,066
4,496 Sears Mortgage Securities, Remic: TAC(11), Series 92-3, Class T5,
7.75% due 02/25/20, callable........................................ NR/AAA 4,476
100,000 Standard Credit Card Master Trust, Series 91-1, Class A, 8.50% due
06/07/96............................................................ Aaa/AAA 101,810
300,000 Standard Credit Card Master Trust, Series 92-2, Class A, 5.875% due
07/07/95............................................................ Aaa/AAA 299,430
130,349 The Money Store Home Equity Trust, Series 92-A, Class A, 6.95% due
12/15/07............................................................ Aaa/AAA 126,438
------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (COST $18,629,060) ........ 18,627,528
------------
</TABLE>
See Accompanying Notes.
15
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P VALUE
AMOUNT SECURITY DESCRIPTION RATING (NOTE 1A)
- ---------------------------------------------------------------------------------- ----------- ------------
<C> <S> <C> <C>
CORPORATE OBLIGATIONS (37.1%)
AUTOMOTIVE (1.8%)
$ 7,350,000 Ford Motor Co., 7.875% due 10/15/96................................... A1/A+ $ 7,445,109
------------
BANKING (6.0%)
1,400,000 BankAmerica Corp., 9.50% due 04/01/01................................. A3/A- 1,527,596
1,300,000 BankAmerica Corp., 7.50% due 03/15/97................................. A2/A 1,310,647
6,000,000 Central Fidelity Bank, Inc., 8.15% due 11/15/02....................... Baa2/BBB 6,061,860
1,600,000 Chemical Banking Corp., 10.125% due 11/01/00.......................... A3/A- 1,782,512
1,295,000 First Chicago Corp., 6.875% due 06/15/03.............................. A3/A- 1,225,795
1,380,000 First Union Corp., 6.438% due 06/15/05................................ A2/A 1,377,516
2,000,000 Mellon Bank, N.A., 6.75% due 06/01/03................................. A2/A 1,889,620
200,000 Republic New York Corp., 9.75% due 12/01/00........................... AA3/A 220,960
10,000,000 Society National Bank, 6.875% due 10/15/96............................ A1/A+ 10,008,200
------------
25,404,706
------------
CHEMICALS, OIL & GAS (7.8%)
1,637,000 E.I. Du Pont de Nemours & Co., 8.65% due 12/01/97..................... Aa2/AA 1,697,880
6,400,000 Occidental Petroleum Corp., 11.125% due 08/01/10...................... Baa3/BBB 8,013,760
5,000,000 Occidental Petroleum Corp., 5.85% due 11/09/98........................ Baa3/BBB 4,758,300
1,000,000 Occidental Petroleum Corp., 5.84% due 11/09/98........................ Baa3/BBB 951,330
9,950,000 Oxy USA Inc., 7.00% due 04/15/11...................................... Baa3/BBB 8,649,734
1,125,000 SFP Pipeline Holdings, Inc., 9.67% due 08/15/10....................... Baa3/NR 1,440,000
4,000,000 Texas Eastern Corp., 8.50% due 02/04/97............................... NR/NR 4,065,600
2,450,000 Texas Eastern Transmission Corp., 10.375% due 11/15/00................ Baa2/BBB 2,707,666
500,000 Union Oil of California, 9.25% due 02/01/03........................... Baa2/BBB 546,830
------------
32,831,100
------------
DEPARTMENT STORES (1.3%)
4,000,000 Sears, Roebuck & Co., 7.25% due 08/05/97.............................. A2/BBB 4,020,680
1,405,000 Wal Mart Stores, Inc., 10.875% due 08/15/00........................... Aa1/AA 1,456,985
------------
5,477,665
------------
FINANCE (10.1%)
100,000 Associates Corp., N.A., 8.125% due 01/15/98........................... Aa3/AA- 102,494
3,050,000 Beneficial Corp., 6.47% due 11/17/08.................................. A2/A 2,761,195
18,250,000 Chrysler Financial Corp., Series MTNN, 7.360% due 03/14/97............ A3/BBB 18,272,448
1,000,000 Chrysler Financial Corp., 7.20% due 03/17/97.......................... A2/A- 998,500
400,000 Ford Capital BV, 9.125% due 04/08/96.................................. A2/A 408,000
4,250,000 General Motors Acceptance Corp., 8.625% due 07/15/96.................. Baa1/BBB+ 4,334,235
5,175,000 General Motors Acceptance Corp., 6.90% due 09/09/97................... Baa1/BBB+ 5,146,486
1,000,000 General Motors Acceptance Corp., 6.875% due 06/10/97.................. Baa1/BBB+ 995,340
3,000,000 General Motors Acceptance Corp., 6.70% due 04/21/97................... Baa1/BBB+ 2,979,690
</TABLE>
See Accompanying Notes.
16
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P VALUE
AMOUNT SECURITY DESCRIPTION RATING (NOTE 1A)
- -------------------------------------------------------------------------- ----------- ------------
<C> <S> <C> <C>
FINANCE (10.1%) (CONTINUED)
$ 6,500,000 General Motors Acceptance Corp., 5.25% due 12/06/96...... Baa1/BBB+ $ 6,333,145
-----------
42,331,533
-----------
PUBLISHING (0.5%)
2,170,000 Reed Publishing, 9.00% due 07/10/96...................... Aa1/NR 2,222,894
-----------
TRANSPORTATION (0.0%)
200,000 Delta Air Lines, Inc., 3.23% due 06/15/03
(convertible).......................................... Ba3/B+ 167,750
-----------
UTILITIES (9.6%)
1,500,000 Cleveland Electric Illumination, 7.625% due 08/01/02..... Ba2/BB 1,336,815
1,000,000 Cleveland Electric Illumination, 7.375% due 06/01/03..... Ba2/BB 883,050
3,000,000 Commonwealth Edison Co., 7.00% due 02/15/97.............. Baa3/BBB- 2,989,200
3,000,000 Commonwealth Edison Co., 6.50% due 07/15/97.............. Baa3/BBB- 2,960,610
500,000 Commonwealth Edison Co., Series 87, 6.25% due 10/01/97... Baa2/BBB 488,345
2,000,000 Connecticut Light & Power Co., Series UU, 7.625% due
04/01/97............................................... Baa1/BBB+ 2,023,680
2,400,000 GTE Corp., 8.85% due 03/01/98............................ Baa1/BBB+ 2,494,080
7,240,000 Hydro-Quebec, 8.05% due 07/07/24......................... A1/A+ 7,381,035
5,000,000 Pacific Gas & Electric, Series 92-A, 7.875% due
03/01/02............................................... A2/A 5,096,050
8,000,000 Texas Utilities Electric Co., 6.75% due 03/01/03......... Baa2/BBB 7,565,280
3,000,000 Westinghouse Electric Corp., 9.44% due 06/05/96..........
4,250,000 United Telephone Company of Florida, 8.375% due Baa2/BBB 3,051,150
01/15/25............................................... A2/A 4,386,808
-----------
40,656,103
-----------
TOTAL CORPORATE OBLIGATIONS (COST $155,756,514).......... 156,536,860
-----------
</TABLE>
See Accompanying Notes.
17
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT SECURITY DESCRIPTION (NOTE 1A)
- -------------- ---------------------------------------------------------------------- ------------
<C> <S> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS (15.4%)
FHA Insured
$ 3,409,966 7.43% due 03/01/22...................................................... $ 3,208,032
Federal Home Loan Mortgage Corp.
31,804 10.00% due 04/01/09..................................................... 33,623
200,000 Series 39, Class F, 10.00% due 05/15/20................................. 215,028
23,366 9.00% due 04/01/03...................................................... 23,767
1,190,562 Gold, 8.50% due 11/01/21................................................ 1,210,171
11,000,000 Gold, 8.506% due 12/01/04............................................... 11,618,750
1,800 Series 1977, Class A, 8.05% due 03/15/96................................ 1,747
10,000,000 Remic: PAC(11), Series 1751, Class PK, 8.00% due 09/15/24............... 9,877,300
17,200,000 Gold, 8.00% TBA......................................................... 17,183,832
100,000 Remic: Accretion Directed, Series 1290, Class L, 7.50% due 10/15/09..... 98,333
32,000 Remic: PAC-1(11), Series 1168, Class H, 7.50% due 11/15/21.............. 30,441
150,000 Remic: PAC-1(11), Series 1215, Class F, 6.75% due 05/15/05.............. 145,154
165,000 Remic: PAC-1(11), Series 1207, Class J, 6.75% due 07/15/19.............. 153,993
1,587,007 Remic: SCH, LIQ, Series 1580, Class A, 6.50% due 09/15/98............... 1,573,470
1,600,000 Remic: SCH(22), Series 1701, Class B, 6.50% due 03/15/09................ 1,429,824
Federal National Mortgage Association
841,823 10.00% due 06/01/20..................................................... 899,614
881,561 9.50% due 07/01/17...................................................... 917,846
4,458,366 8.70% due 02/01/05...................................................... 4,776,024
114,539 8.00% due 01/01/02...................................................... 115,958
75,855 8.00% due 05/01/02...................................................... 76,797
524,815 8.00% due 07/01/02...................................................... 531,347
8,734 8.00% due 11/01/16...................................................... 8,729
6,918 8.00% due 08/01/22...................................................... 6,912
3,918,336 7.75% due 11/01/99...................................................... 3,913,438
2,014,803 Remic: Z, PAC, Series 1991-64, Class Z, 8.50% due 06/25/06.............. 2,048,168
1,419,318 Remic: PAC, Series 1991-101, Class C, 8.50% due 08/25/18................ 1,431,240
1,076,444 Remic: PAC, Series 1990-112, Class E, 8.50% due 07/25/19................ 1,093,420
33,387 Remic: PAC(11), Series 1991-9, Class H, 8.30% due 11/25/04.............. 33,572
1,904,134 Remic: Z, PAC-2(23), Series 1994-50, Class Z, 6.50% due 03/25/24........ 1,350,745
610,000 Remic: PAC (11), Series 1993-041, Class PE, 5.75% due 04/25/19.......... 575,999
Government National Mortgage Association
37,928 11.50% due 07/15/13..................................................... 41,941
23,076 8.50% due 07/15/08...................................................... 23,529
39,398 8.50% due 08/15/08...................................................... 40,168
-----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (COST $64,062,527)............. 64,688,912
-----------
U.S. TREASURY OBLIGATIONS (38.7%)
U.S. Treasury Bonds
48,815,000 10.75% due 02/15/03..................................................... 59,556,253
27,200,000 10.375% due 11/15/09.................................................... 33,024,608
5,000,000 10.375% due 11/15/12.................................................... 6,231,350
23,975,000 8.125% due 08/15/19..................................................... 25,703,358
</TABLE>
See Accompanying Notes.
18
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P VALUE
AMOUNT SECURITY DESCRIPTION RATING (NOTE 1A)
- -------------- --------------------------------------------------------- ------------- -----------
<C> <S> <C> <C>
U.S. Treasury Notes
$ 4,425,000 6.375% due 08/15/02..................................................... $ 4,268,222
33,145,000 4.75% due 02/15/97...................................................... 32,133,746
2,495,000 4.25% due 05/15/96...................................................... 2,442,306
-----------
TOTAL U.S. TREASURY OBLIGATIONS (COST $160,698,959).....................
163,359,843
-----------
FOREIGN GOVERNMENT OBLIGATIONS (0.1%)
380,000 Province of Ontario, 7.375% due 01/27/03 (cost
$371,079).............................................. Aa3/AA- 376,455
-----------
<CAPTION>
SHARES
- --------------
<C> <S> <C> <C>
CONVERTIBLE PREFERRED STOCKS (0.5%)
AUTOMOTIVE SUPPLIES (0.1%)
2,200 Ford Motor Co., $4.20.................................... A3/A- 193,875
-----------
COMPUTER PERIPHERALS (0.0%)
500 Storage Technology Corp., $3.50.......................... B3/B 25,687
-----------
NATURAL GAS (0.4%)
74,600 Lasmo PLC, Sponsored ADR, 10.00%, Series A............... Ba1/BBB- 1,697,150
2,600 Occidental Petroleum Corp., $3.00........................ N/A 148,200
-----------
1,845,350
-----------
TOTAL CONVERTIBLE PREFERRED STOCKS (COST $2,035,500)..... 2,064,912
-----------
<CAPTION>
ption>
PRINCIPAL
AMOUNT
- --------------
<C> <S> <C> <C>
REPURCHASE AGREEMENT (0.6%)
$ 2,518,000 Goldman Sachs Repurchase Agreement, dated 04/28/95 due
05/01/95, proceeds $2,519,238 (collateralized by
$3,309,000 U.S. Treasury Strip, 0.00% due 02/15/99,
valued at $2,568,942) (cost $2,518,000)................ P1/A1+ 2,518,000
-----------
TOTAL INVESTMENTS (COST $404,071,639) (96.8%) 408,172,510
OTHER ASSETS IN EXCESS OF LIABILITIES (3.2%) 13,513,129
-----------
TOTAL NET ASSETS (100.0%) $421,685,639
-----------
-----------
</TABLE>
Note: Based on the cost of investments of $404,075,337 for Federal Income Tax
purposes at April 30, 1995, the aggregate gross unrealized appreciation
and depreciation was $5,775,230 and $1,678,057, respectively, resulting
in net unrealized appreciation of $4,097,173.
ADR -- American Depository Receipts;
ARM -- Adjustable Rate Mortgage;
FHA -- Federal Housing Administration;
PAC -- Planned Amortization Class;
REMIC -- Real Estate Mortgage Investment Conduit;
TAC -- Target Amortization Class.
See Accompanying Notes.
19
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
APRIL 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $404,071,639) (Note 1a) $408,172,510
Cash 100,394
Receivable for Investments Sold 64,392,583
Interest Receivable 7,075,336
Dividends Receivable 2,310
------------
Total Assets 479,743,133
------------
LIABILITIES
Payable for Securities Purchased 57,473,688
Financial and Fund Accounting Services Fee Payable (Note 2c) 228,877
Custody Fee Payable 183,044
Advisory Fee Payable (Note 2a) 139,967
Fund Services Fee Payable (Note 2d) 3,668
Administration Fee Payable (Note 2b) 2,000
Accrued Expenses 26,250
------------
Total Liabilities 58,057,494
------------
NET ASSETS
Applicable to Investors' Beneficial Interests $421,685,639
------------
------------
</TABLE>
See Accompanying Notes.
20
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED APRIL 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME (NOTE 1B)
Interest Income $ 14,140,936
Dividend Income 49,022
------------
Net Investment Income 14,189,958
EXPENSES
Advisory Fee (Note 2a) $573,963
Custodian Fees and Expenses 95,660
Financial and Fund Accounting Services Fees (Note 2c) 95,088
Professional Fees 28,578
Fund Services Fee (Note 2d) 19,571
Administration Fee (Note 2b) 12,129
Trustees' Fees and Expenses (Note 2e) 4,677
Miscellaneous 4,309
--------
Total Expenses 833,975
------------
NET INVESTMENT INCOME 13,355,983
NET REALIZED LOSS ON INVESTMENTS (1,602,383)
NET CHANGE IN UNREALIZED DEPRECIATION OF INVESTMENTS 13,107,965
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 24,861,565
------------
------------
</TABLE>
See Accompanying Notes.
21
<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, 1995 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1994
------------------ ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 13,355,983 $ 13,708,591
Net Realized Loss on Investments (1,602,383) (8,930,226)
Net Change in Unrealized Depreciation of Investments 13,107,965 (11,045,898)
------------------ ------------------
Net Increase (Decrease) in Net Assets Resulting from
Operations 24,861,565 (6,267,533)
------------------ ------------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 87,625,776 298,426,651
Withdrawals (56,667,729) (73,416,442)
------------------ ------------------
Net Increase from Investors' Transactions 30,958,047 225,010,209
------------------ ------------------
Total Increase in Net Assets 55,819,612 218,742,676
NET ASSETS
Beginning of Period 365,866,027 147,123,351
------------------ ------------------
End of Period $ 421,685,639 $ 365,866,027
------------------ ------------------
------------------ ------------------
- -------------------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- -------------------------------------------------------------------------------------------
<CAPTION>
FOR THE SIX
MONTHS ENDED
APRIL 30, FOR THE FISCAL
1995 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1994
------------- ----------------
<S> <C> <C>
Ratios to Average Net Assets
Expenses 0.44%(a) 0.46%
Net Investment Income 6.98%(a) 5.88%
Portfolio Turnover 192% 234%
<FN>
- ------------------------
(a) Annualized
</TABLE>
See Accompanying Notes.
22
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
APRIL 30, 1995
- --------------------------------------------------------------------------------
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, as a no-load, diversified, open-end
management investment company which was organized as a trust under the laws of
the State of New York. The Portfolio commenced operations on July 12, 1993 and
received a contribution of certain assets and liabilities, including securities,
with a value of $91,653,371 on that date from The Pierpont Bond Fund in exchange
for a beneficial interest in the Portfolio. At that date, net unrealized
appreciation of $1,731,405 was included in the contributed securities. The
Declaration of Trust permits the Trustees to issue an unlimited number of
beneficial interests in the Portfolio.
The following is a summary of the significant accounting policies of the
Portfolio:
a)Portfolio securities with a maturity of 60 days or more, including
securities that are listed on an exchange or traded over the counter, are
valued using prices supplied daily by an independent pricing service or
services that (i) are based on the last sale price on a national
securities exchange, or in the absence of recorded sales, at the readily
available bid price on such exchange or at the quoted bid price in the
over-the-counter market, if such exchange or market constitutes the
broadest and most representative market for the security and (ii) in other
cases, take into account various factors affecting market value, including
yields and prices of comparable securities, indication as to value from
dealers and general market conditions. If such prices are not supplied by
the Portfolio's independent pricing services, such securities are priced
in accordance with procedures adopted by the Trustees. All portfolio
securities with a remaining maturity of less than 60 days are valued by
the amortized cost method.
b)Securities transactions are recorded on a trade date basis. Interest
income, which includes the amortization of premiums and discounts, if any,
is recorded on an accrual basis. For financial and tax reporting purposes,
realized gains and losses are determined on the basis of specific lot
identification.
c)The Portfolio intends to be treated as a partnership for federal income
tax purposes. As such, each investor in the Portfolio will be 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 Guaranty
Trust Company of New York ("Morgan"). Under the terms of the investment
advisory agreement, the Portfolio pays Morgan at an annual rate of 0.30%
of the Portfolio's average daily net assets. For the six months ended
April 30, 1995, this fee amounted to $573,963.
23
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1995
- --------------------------------------------------------------------------------
b)The Portfolio retains Signature Broker-Dealer Services, Inc. ("Signature")
to serve as Administrator and exclusive placement agent. Signature
provides administrative services necessary for the operations of the
Portfolio, furnishes office space and facilities required for conducting
the business of the Portfolio and pays the compensation of the Portfolio's
officers affiliated with Signature. The agreement provides for a fee to be
paid to Signature at an annual rate determined by the following schedule:
0.01% of the first $1 billion of the aggregate average daily net assets of
the Portfolio and the other portfolios subject to the Administrative
Services Agreement, 0.008% of the next $2 billion of such net assets,
0.006% of the next $2 billion of such net assets, and 0.004% of such net
assets in excess of $5 billion. The daily equivalent of the fee rate is
applied to the daily net assets of the Portfolio. For the six months ended
April 30, 1995, Signature's fee for these services amounted to $12,129.
c)The Portfolio has a Financial and Fund Accounting Services Agreement
("Services Agreement") with Morgan under which Morgan receives a fee,
based on the percentages described below, for overseeing certain aspects
of the administration and operation of the Portfolio. The Services
Agreement is also designed to provide an expense limit for certain
expenses of the Portfolio. If total expenses of the Portfolio, excluding
the advisory fee, custody expenses, fund services fee, and brokerage
costs, exceed the expense limit of 0.10% of the Portfolio's average daily
net assets up to $200 million, 0.05% of the next $200 million of average
daily net assets, and 0.03% of average daily net assets thereafter, Morgan
will reimburse the Portfolio for the excess expense amount and receive no
fee. Should such expenses be less than the expense limit, Morgan's fee
would be limited to the difference between such expenses and the fee
calculated under the Services Agreement. For the six months ended April
30, 1995, this fee amounted to $95,088.
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 $19,571 for the six months ended April 30, 1995.
e)An aggregate annual fee of $65,000 is paid to each Trustee for serving as
a Trustee of The Pierpont Funds, The JPM Institutional Funds and their
corresponding Portfolios. The Trustees' Fees and Expenses shown in the
financial statements represents the Portfolio's allocated portion of the
total fees and expenses. Prior to April 1, 1995, the aggregate annual
Trustee Fee was $55,000. The Trustee who serves as Chairman and Chief
Executive Officer of these Funds and Portfolios also serves as Chairman of
Group and received compensation and employee benefits from Group in his
role as Group's Chairman. The allocated portion of such compensation and
benefits included in the Fund Services Fee shown in the financial
statements was $2,300.
24
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1995
- --------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the six
months ended April 30, 1995 were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS FROM
PURCHASES SALES
-------------- --------------
<S> <C> <C>
U.S. Government and Agency Obligations $ 648,768,737 $ 642,229,366
Corporate and Collateralized Mortgage Obligations 113,565,071 80,375,680
-------------- --------------
$ 762,333,808 $ 722,605,046
-------------- --------------
-------------- --------------
</TABLE>
25
