<PAGE>
THE U.S. EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS
MAY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -------------
<S> <C> <C>
COMMON STOCKS (96.8%)
BASIC INDUSTRIES (4.4%)
CHEMICALS (2.1%)
Rohm & Haas Co................................... 377,700 $ 15,155,212
-------------
FOREST PRODUCTS & PAPER (1.3%)
Temple-Inland, Inc............................... 136,900 9,172,300
-------------
METALS & MINING (1.0%)
Allegheny Teledyne, Inc.......................... 335,472 6,856,209
-------------
TOTAL BASIC INDUSTRIES......................... 31,183,721
-------------
CONSUMER GOODS & SERVICES (18.1%)
AUTOMOTIVE (1.3%)
Lear Corp.+...................................... 184,800 9,089,850
-------------
ENTERTAINMENT, LEISURE & MEDIA (2.8%)
International Game Technology.................... 208,300 3,671,287
News Corp. Ltd. (Spons. ADR)..................... 224,900 7,463,869
Seagram Company Ltd.(i).......................... 166,400 8,642,400
-------------
19,777,556
-------------
FOOD, BEVERAGES & TOBACCO (5.1%)
Pepsi Bottling Group, Inc........................ 341,900 7,927,806
PepsiCo, Inc..................................... 243,600 8,723,925
Philip Morris Companies, Inc..................... 400,500 15,444,281
Ralston-Ralston Purina Group..................... 181,200 4,937,700
-------------
37,033,712
-------------
HOUSEHOLD PRODUCTS (2.7%)
Kimberly-Clark Corp.............................. 120,300 7,060,106
Procter & Gamble Co.............................. 129,860 12,125,677
-------------
19,185,783
-------------
RESTAURANTS & HOTELS (2.3%)
Mirage Resorts, Inc.+............................ 345,900 7,090,950
Starwood Hotels & Resorts Worldwide, Inc......... 301,700 9,880,675
-------------
16,971,625
-------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -------------
<S> <C> <C>
RETAIL (3.9%)
Circuit City Stores-Circuit City Group........... 144,200 $ 10,355,362
Federated Department Stores, Inc.+............... 118,500 6,458,250
Toys 'R' Us, Inc.(s)+............................ 198,000 4,566,375
Wal-Mart Stores, Inc............................. 154,600 6,589,825
-------------
27,969,812
-------------
TOTAL CONSUMER GOODS & SERVICES................ 130,028,338
-------------
ENERGY (7.8%)
NATURAL GAS (1.9%)
Columbia Energy Group............................ 248,950 13,318,825
-------------
OIL-PRODUCTION (5.1%)
BP Amoco Plc (Spon. ADR)......................... 1,300 139,262
Mobil Corp....................................... 91,800 9,294,750
Phillips Petroleum Co............................ 127,000 6,659,562
Royal Dutch Petroleum Co. (ADR).................. 188,300 10,650,719
Tosco Corp....................................... 397,200 10,153,425
-------------
36,897,718
-------------
OIL-SERVICES (0.8%)
Cooper Cameron Corp.+............................ 167,400 6,057,787
-------------
TOTAL ENERGY................................... 56,274,330
-------------
FINANCE (15.2%)
BANKING (10.0%)
Astoria Financial Corp........................... 125,130 5,642,581
Bank of America Corp............................. 403,201 26,082,065
First Union Corp................................. 293,800 13,533,162
KeyCorp.......................................... 115,800 4,024,050
Washington Mutual, Inc........................... 442,250 16,888,422
Wells Fargo Co................................... 137,500 5,500,000
-------------
71,670,280
-------------
FINANCIAL SERVICES (1.5%)
CIT Group, Inc., Class A......................... 243,400 7,058,600
Goldman Sachs Group, Inc.+....................... 25,000 1,698,437
Newcourt Credit Group, Inc.(i)................... 121,000 1,966,250
-------------
10,723,287
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
17
<PAGE>
THE U.S. EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -------------
<S> <C> <C>
INSURANCE (3.7%)
Ambac Financial Group, Inc....................... 86,800 $ 5,061,525
Marsh & McLennan Companies, Inc.................. 104,100 7,573,275
UNUM Corp........................................ 258,200 13,894,387
-------------
26,529,187
-------------
TOTAL FINANCE.................................. 108,922,754
-------------
HEALTHCARE (13.2%)
BIOTECHNOLOGY (1.9%)
Genzyme Corp.+................................... 139,300 5,646,003
PE Corp.-PE Biosystems Group+.................... 63,900 7,136,831
PE Corp.-Celera Genomics+........................ 31,950 543,150
-------------
13,325,984
-------------
HEALTH SERVICES (1.1%)
Healthsouth Corp.+............................... 297,200 3,975,050
Humana, Inc.+.................................... 321,500 4,038,844
-------------
8,013,894
-------------
PHARMACEUTICALS (10.2%)
ALZA Corp.+...................................... 315,000 11,241,562
American Home Products Corp...................... 100,600 5,797,075
Bristol-Myers Squibb Co.......................... 217,000 14,891,625
Eli Lilly & Co................................... 72,200 5,157,787
Forest Laboratories, Inc.+....................... 212,800 10,134,600
Monsanto Co...................................... 403,000 16,724,500
Warner-Lambert Co................................ 154,000 9,548,000
-------------
73,495,149
-------------
TOTAL HEALTHCARE............................... 94,835,027
-------------
INDUSTRIAL PRODUCTS & SERVICES (10.5%)
AEROSPACE (1.5%)
Boeing Co........................................ 139,200 5,881,200
Lockheed Martin Corp............................. 118,000 4,771,625
-------------
10,652,825
-------------
COMMERCIAL SERVICES (2.2%)
Cendant Corp.+................................... 680,600 12,548,563
Service Corp. International...................... 175,200 3,361,650
-------------
15,910,213
-------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -------------
<S> <C> <C>
DIVERSIFIED MANUFACTURING (3.7%)
Cooper Industries, Inc........................... 51,000 $ 2,527,688
Tyco International Ltd.(i)....................... 276,546 24,163,207
-------------
26,690,895
-------------
POLLUTION CONTROL (3.1%)
Waste Management, Inc............................ 420,857 22,252,814
-------------
TOTAL INDUSTRIAL PRODUCTS & SERVICES........... 75,506,747
-------------
TECHNOLOGY (17.3%)
COMPUTER PERIPHERALS (0.6%)
EMC Corp.+....................................... 45,800 4,562,825
-------------
COMPUTER SOFTWARE (3.0%)
Microsoft Corp.+................................. 242,000 19,533,938
Oracle Corp.+.................................... 86,850 2,152,252
-------------
21,686,190
-------------
COMPUTER SYSTEMS (5.3%)
Apple Computer, Inc.+............................ 54,600 2,404,106
Compaq Computer Corp............................. 110,200 2,610,363
Hewlett-Packard Co............................... 67,900 6,403,819
International Business Machines Corp............. 158,200 18,400,638
Sun Microsystems, Inc.+.......................... 144,000 8,599,500
-------------
38,418,426
-------------
ELECTRONICS (1.8%)
3Com Corp.+...................................... 35,700 976,172
Cisco Systems, Inc.+............................. 108,600 11,834,006
-------------
12,810,178
-------------
SEMICONDUCTORS (2.6%)
General Semiconductor, Inc.+..................... 38,200 296,050
Intel Corp....................................... 194,200 10,523,213
Motorola, Inc.................................... 50,600 4,190,313
Texas Instruments, Inc........................... 33,100 3,620,313
-------------
18,629,889
-------------
TELECOMMUNICATION SERVICES (2.0%)
MCI WorldCom, Inc.+.............................. 162,400 14,022,225
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
18
<PAGE>
THE U.S. EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -------------
<S> <C> <C>
TELECOMMUNICATIONS-EQUIPMENT (2.0%)
Commscope, Inc.+................................. 183,233 $ 4,809,866
Lucent Technologies, Inc......................... 169,500 9,640,313
-------------
14,450,179
-------------
TOTAL TECHNOLOGY............................... 124,579,912
-------------
TRANSPORTATION (2.3%)
RAILROADS (2.3%)
CSX Corp......................................... 75,000 3,520,313
Union Pacific Corp............................... 230,200 13,135,788
-------------
TOTAL TRANSPORTATION........................... 16,656,101
-------------
UTILITIES (8.0%)
ELECTRIC (2.5%)
Central & South West Corp........................ 90,400 2,327,800
Northern States Power Co......................... 213,500 5,564,344
PP&L Resources, Inc.............................. 343,800 10,314,000
-------------
18,206,144
-------------
TELEPHONE (5.5%)
AT&T Corp........................................ 227,400 12,620,700
Bell Atlantic Corp............................... 145,300 7,955,175
GTE Corp......................................... 205,500 12,959,344
Level 3 Communications, Inc.+.................... 38,100 2,989,659
SBC Communications, Inc.......................... 65,200 3,333,350
-------------
39,858,228
-------------
TOTAL UTILITIES................................ 58,064,372
-------------
TOTAL COMMON STOCKS
(COST $562,975,168)........................... 696,051,302
-------------
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------- ----------- -------------
<S> <C> <C>
FIXED INCOME SECURITIES (0.4%)
U.S. TREASURY OBLIGATIONS (0.4%)
U.S. TREASURY NOTES (0.4%)
United States Treasury Notes, 6.000% due 06/30/99
(cost $3,198,448)(s)........................... $ 3,195,000 $ 3,198,482
-------------
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------- ----------- -------------
<S> <C> <C>
SHORT-TERM INVESTMENTS (0.9%)
U.S. GOVERNMENT AGENCY OBLIGATIONS (0.9%)
Student Loan Marketing Association, 4.680% due
06/01/99 (cost $6,254,000)..................... $ 6,254,000 $ 6,254,000
-------------
TOTAL INVESTMENTS
(COST $572,427,616) (98.1%)................................. 705,503,784
OTHER ASSETS IN EXCESS OF LIABILITIES (1.9%)..................
13,926,661
-------------
NET ASSETS (100.0%)........................................... $ 719,430,445
-------------
-------------
</TABLE>
- ------------------------------
Note: Based on the cost of investments of $577,774,509 for federal income tax
purposes at May 31, 1999, the aggregate gross unrealized appreciation and
depreciation was $151,368,947 and $23,639,672, respectively, resulting in net
unrealized appreciation of $127,729,275.
+ Non-income producing security.
(i) Foreign Security.
(s) Security is partially segregated with custodian as collateral for futures
contracts or with broker as initial margin for futures contracts.
ADR - American Depositary Receipt.
Spon. ADR - Sponsored ADR.
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
THE U.S. EQUITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment at Value (Cost $572,427,616) $705,503,784
Cash 410
Receivable for Investments Sold 20,306,703
Dividends Receivable 934,664
Variation Margin Receivable 92,400
Interest Receivable 80,493
Prepaid Trustees' Fees 4,973
Prepaid Expenses and Other Assets 4,928
------------
Total Assets 726,928,355
------------
LIABILITIES
Payable for Investments Purchased 7,176,439
Advisory Fee Payable 249,662
Custody Fee Payable 20,112
Administrative Services Fee Payable 16,112
Administration Fee Payable 761
Fund Services Fee Payable 663
Accrued Expenses 34,161
------------
Total Liabilities 7,497,910
------------
NET ASSETS
Applicable to Investors' Beneficial Interests $719,430,445
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE U.S. EQUITY PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED MAY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividend Income (Net of Foreign Withholding Tax
of $92,624) $ 10,049,672
Interest Income 827,125
------------
Investment Income 10,876,797
EXPENSES
Advisory Fee $ 2,911,314
Administrative Services Fee 198,407
Custodian Fees and Expenses 162,460
Professional Fees and Expenses 65,618
Fund Services Fee 18,019
Administration Fee 11,075
Printing Expenses 8,365
Trustees' Fees and Expenses 6,531
Insurance Expense 4,800
Miscellaneous 258
------------
Total Expenses 3,386,847
------------
NET INVESTMENT INCOME 7,489,950
NET REALIZED GAIN ON
Investment Transactions 120,840,928
Futures Contracts 3,603,219
------------
Net Realized Gain 124,444,147
NET CHANGE IN UNREALIZED
APPRECIATION/(DEPRECIATION) OF
Investments (20,541,898)
Futures Contracts 477,852
------------
Net Change in Unrealized Depreciation (20,064,046)
------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $111,870,051
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE U.S. EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FISCAL FOR THE FISCAL
YEAR ENDED YEAR ENDED
MAY 31, 1999 MAY 31, 1998
-------------- --------------
<S> <C> <C>
DECREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 7,489,950 $ 8,957,310
Net Realized Gain on Investments and Futures
Contracts 124,444,147 211,793,953
Net Change in Unrealized
Appreciation/(Depreciation) of Investments and
Futures Contracts (20,064,046) (9,192,276)
-------------- --------------
Net Increase in Net Assets Resulting from
Operations 111,870,051 211,558,987
-------------- --------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 137,233,705 171,037,121
Withdrawals (356,977,035) (414,552,601)
-------------- --------------
Net Decrease from Investors' Transactions (219,743,330) (243,515,480)
-------------- --------------
Total Decrease in Net Assets (107,873,279) (31,956,493)
NET ASSETS
Beginning of Fiscal Year 827,303,724 859,260,217
-------------- --------------
End of Fiscal Year $ 719,430,445 $ 827,303,724
-------------- --------------
-------------- --------------
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED MAY
31,
--------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Expenses 0.47% 0.47% 0.47% 0.46% 0.51%
Net Investment Income 1.03% 1.01% 1.44% 2.20% 2.12%
Portfolio Turnover 84% 106% 99% 85% 71%
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE U.S. EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1999
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The U.S. Equity 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 19, 1993. The portfolio's
investment objective is to provide a high total return from a portfolio of
selected equity securities. The Declaration of Trust permits the trustees to
issue an unlimited number of beneficial interests in the portfolio.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual amounts could differ from
those estimates. The following is a summary of the significant accounting
policies of the portfolio:
a) The portfolio values securities that are listed on an exchange using
prices supplied daily by an independent pricing service that are based on
the last traded price on a national securities exchange or in the absence
of recorded trades, at the readily available mean of the bid and asked
prices on such exchange, if such exchange or market constitutes the
broadest and most representative market for the security. Securities
listed on a foreign exchange are valued at the last traded price or in the
absence of recorded trades, at the readily available mean of the bid and
asked prices on such exchange available before the time when net assets
are valued. Independent pricing service procedures may also include the
use of prices based on yields or prices of securities of comparable
quality, coupon, maturity and type, indications as to values from dealers,
operating data, and general market conditions. Unlisted securities are
valued at the average of the quoted bid and asked prices in the
over-the-counter market provided by a principal market maker or dealer. If
prices are not supplied by the portfolio's independent pricing service or
principal market maker or dealer, such securities are priced using fair
values in accordance with procedures adopted by the portfolio's Trustees.
All short-term securities with a remaining maturity of sixty days or less
are valued using the amortized cost method.
b) The portfolio's custodian (or designated subcustodians, as the case may be
under tri-party repurchase agreements) takes possession of the collateral
pledged for investments in repurchase agreements on behalf of the
portfolio. It is the policy of the portfolio to value the underlying
collateral daily on a mark-to-market basis to determine that the value,
including accrued interest, is at least equal to the repurchase price plus
accrued interest. In the event of default of the obligation to repurchase,
the portfolio has the right to liquidate the collateral and apply the
proceeds in satisfaction of the obligation. Under certain circumstances,
in the event of default or bankruptcy by the other party to the agreement,
realization and/or retention of the collateral or proceeds may be subject
to legal proceedings.
c) Securities transactions are recorded on a trade date basis. Dividend
income is recorded on the ex-dividend date or as of the time that the
relevant ex-dividend date and amount becomes known. Interest income, which
includes the amortization of premiums and discounts, if any, is recorded
on an accrual basis. For financial and tax reporting purposes, realized
gains and losses are determined on the basis of specific lot
identification.
d) 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
23
<PAGE>
THE U.S. EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1999
- --------------------------------------------------------------------------------
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 value of the contract. Such receipts or payments are 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 different 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 movement. 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.
e) 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) Prior to October 1, 1998, the portfolio had an Investment Advisory
Agreement with Morgan Guaranty Trust Company of New York ("Morgan"), a
wholly owned subsidiary of J.P. Morgan & Co. Incorporated ("J.P. Morgan").
Under the terms of the agreement, the portfolio pays Morgan at an annual
rate of 0.40% of the portfolio's average daily net assets. Effective
October 1, 1998, the portfolio's Investment Advisor is J.P. Morgan
Investment Management Inc. ("JPMIM"), an affiliate of Morgan and a wholly
owned subsidiary of J.P. Morgan and the terms of the agreement will remain
the same. For the fiscal year ended May 31, 1999, such fees amounted to
$2,911,314.
b) The portfolio has retained Funds Distributor, Inc. ("FDI"), a registered
broker-dealer, to serve as the co-administrator and exclusive placement
agent. Under a Co-Administration Agreement between FDI and the portfolio,
FDI provides administrative services necessary for the operations of the
portfolio, furnishes office space and facilities required for conducting
the business of the portfolio and pays the compensation of the portfolio's
officers affiliated with FDI. The portfolio has agreed to pay FDI fees
equal to its allocable share of an annual complex-wide charge of $425,000
plus FDI's out-of-pocket expenses. The amount allocable to the portfolio
is based on the ratio of the portfolio's net assets to the aggregate net
assets of the portfolio and certain other investment companies subject to
similar agreements with FDI. For the fiscal year ended May 31, 1999, the
fee for these services amounted to $11,075.
c) The portfolio has an Administrative Services Agreement (the "Services
Agreement") with Morgan, under which Morgan is responsible for certain
aspects of the administration and operation of the portfolio. Under the
Services Agreement, the portfolio has agreed to pay Morgan a fee equal to
its allocable share of an annual complex-wide charge. This charge is
calculated based on the aggregate average daily net assets of the
portfolio and certain other portfolios for which the Morgan acts as
advisor
24
<PAGE>
THE U.S. EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1999
- --------------------------------------------------------------------------------
(the "master portfolios") and J.P Morgan Series Trust in accordance with
the following annual schedule: 0.09% on the first $7 billion of their
aggregate average daily net assets and 0.04% of their aggregate average
daily net assets in excess of $7 billion, less the complex-wide fees
payable to FDI. The portion of this charge payable by the portfolio is
determined by the proportionate share that its net assets bear to the net
assets of the portfolio, other investors in the master portfolios for
which Morgan provides similar services, and J.P. Morgan Series Trust. For
the fiscal year ended May 31, 1999, the fee for these services amounted to
$198,407.
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 $18,019 for the fiscal year ended May 31, 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, the J.P. Morgan Institutional Funds,
the master portfolios and J.P. Morgan Series Trust. The Trustees' Fees and
Expenses shown in the financial statements represents the portfolio's
allocated portion of the total fees and expenses. The portfolio's Chairman
and Chief Executive Officer also serves as Chairman of Group and received
compensation and employee benefits from Group in his role as Group's
Chairman. The allocated portion of such compensation and benefits included
the Fund Services Fee shown in the financial statements was $3,800.
3. INVESTMENT TRANSACTIONS
Investment transactions as of May 31, 1999 were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
- ----------------- ------------
<S> <C>
$598,666,653 $790,110,126
</TABLE>
Futures transactions as of May 31, 1999 are summarized as follows:
<TABLE>
<CAPTION>
NET UNREALIZED CURRENT MARKET
CONTRACTS LONG APPRECIATION VALUE OF CONTRACTS
-------------- -------------- ------------------
<S> <C> <C> <C>
S&P 500, expiring June 1999...................... 33 $ 74,202 $ 10,701,900
-------------- -------------- ------------------
-------------- -------------- ------------------
</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.
25
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Investors of
The U.S. Equity Portfolio
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the supplementary data present fairly, in all material
respects, the financial position of The U.S. Equity Portfolio (the "portfolio")
at May 31, 1999, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then ended and
its supplementary data for each of the five years in the period then ended, in
conformity with generally accepted accounting principles. These financial
statements and supplementary data (hereafter referred to as "financial
statements") are the responsibility of the portfolio's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at May 31,
1999 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
July 14, 1999
26
