<PAGE>
THE U.S. EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
NOVEMBER 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
COMMON STOCKS (96.2%)
BASIC INDUSTRIES (5.4%)
AGRICULTURE (0.0%)
Agribrands International, Inc.+.................. 7,520 $ 228,420
-------------
CHEMICALS (1.7%)
Rohm & Haas Co................................... 258,400 9,027,850
Union Carbide Corp............................... 76,400 3,418,900
-------------
12,446,750
-------------
FOREST PRODUCTS & PAPER (2.6%)
Georgia-Pacific Group............................ 188,900 10,720,075
Temple-Inland, Inc............................... 151,100 8,112,181
-------------
18,832,256
-------------
METALS & MINING (1.1%)
Allegheny Teledyne, Inc.......................... 387,172 7,961,224
-------------
TOTAL BASIC INDUSTRIES......................... 39,468,650
-------------
CONSUMER GOODS & SERVICES (17.5%)
ENTERTAINMENT, LEISURE & MEDIA (3.5%)
Fox Entertainment Group, Inc. Class A+........... 57,000 1,346,625
Hasbro, Inc...................................... 210,400 7,377,150
International Game Technology.................... 235,400 5,428,912
Mirage Resorts, Inc.+............................ 303,500 4,514,562
Seagram Company Ltd.............................. 192,000 6,588,000
-------------
25,255,249
-------------
FOOD, BEVERAGES & TOBACCO (7.1%)
Anheuser Busch Companies, Inc.................... 83,400 5,056,125
General Mills, Inc............................... 89,300 6,742,150
PepsiCo, Inc..................................... 370,700 14,341,456
Philip Morris Companies, Inc..................... 324,400 18,146,125
Ralston-Ralston Purina Group..................... 209,000 7,275,812
-------------
51,561,668
-------------
HOUSEHOLD PRODUCTS (2.3%)
Kimberly-Clark Corp.............................. 64,000 3,368,000
Procter & Gamble Co.............................. 149,960 13,140,245
-------------
16,508,245
-------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
RETAIL (4.6%)
American Stores Co............................... 181,700 $ 6,098,306
Circuit City Stores, Inc......................... 329,000 11,905,687
Federated Department Stores, Inc.+............... 136,800 5,702,850
Toys 'R' Us, Inc.+............................... 217,000 4,285,750
Wal-Mart Stores, Inc.(s)......................... 78,600 5,919,562
-------------
33,912,155
-------------
TOTAL CONSUMER GOODS & SERVICES................ 127,237,317
-------------
ENERGY (6.9%)
OIL-PRODUCTION (6.7%)
Atlantic Richfield Co............................ 257,700 17,137,050
British Petroleum Co. PLC (Spons. ADR)........... 798 73,516
Mobil Corp....................................... 61,000 5,257,437
Phillips Petroleum Co............................ 146,700 6,161,400
Royal Dutch Petroleum Co. (ADR).................. 169,700 7,975,900
Tosco Corp....................................... 458,400 11,975,700
-------------
48,581,003
-------------
OIL-SERVICES (0.2%)
Cooper Cameron Corp.+............................ 70,900 1,728,187
-------------
TOTAL ENERGY................................... 50,309,190
-------------
FINANCE (17.5%)
BANKING (10.0%)
Astoria Financial Corp........................... 144,430 6,503,863
BankAmerica Corp................................. 338,601 22,072,553
Bankers Trust Corp............................... 119,300 10,379,100
Citigroup, Inc................................... 322,118 16,166,297
First Union Corp................................. 76,800 4,665,600
Washington Mutual, Inc........................... 266,450 10,333,264
Wells Fargo Co.(s)............................... 85,800 3,088,800
-------------
73,209,477
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
17
<PAGE>
THE U.S. EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
NOVEMBER 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
FINANCIAL SERVICES (2.2%)
American Express Co.............................. 42,000 $ 4,202,625
CIT Group, Inc., Class A......................... 228,800 6,420,700
Federal National Mortgage Association............ 75,400 5,485,350
-------------
16,108,675
-------------
INSURANCE (4.1%)
Ambac Financial Group, Inc....................... 133,000 8,113,000
American International Group, Inc................ 35,300 3,318,200
Marsh & McLennan Companies, Inc.................. 120,100 6,988,319
UNUM Corp........................................ 218,100 11,750,137
-------------
30,169,656
-------------
REAL ESTATE INVESTMENT TRUSTS (1.2%)
Starwood Hotels & Resorts........................ 293,500 8,915,063
-------------
TOTAL FINANCE.................................. 128,402,871
-------------
HEALTHCARE (11.4%)
HEALTH SERVICES (2.2%)
Humana, Inc.+.................................... 371,000 7,350,438
Perkin-Elmer Corp................................ 93,100 8,681,575
-------------
16,032,013
-------------
PHARMACEUTICALS (9.2%)
Alza Corp.+...................................... 209,400 10,941,150
American Home Products Corp...................... 189,200 10,074,900
Bristol-Myers Squibb Co.......................... 145,500 17,832,844
Crescendo Pharmaceuticals Corp.+................. 10,995 147,745
Forest Laboratories, Inc.+....................... 73,600 3,431,600
Monsanto Co...................................... 435,800 19,747,188
Warner-Lambert Co................................ 61,600 4,650,800
-------------
66,826,227
-------------
TOTAL HEALTHCARE............................... 82,858,240
-------------
INDUSTRIAL PRODUCTS & SERVICES (10.0%)
CAPITAL GOODS (0.8%)
Cooper Industries, Inc.(s)....................... 55,900 2,746,088
Eaton Corp....................................... 48,100 3,285,831
-------------
6,031,919
-------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
COMMERCIAL SERVICES (3.0%)
Cendant Corp.+................................... 747,700 $ 14,206,300
Service Corp. International...................... 202,300 7,560,963
-------------
21,767,263
-------------
DIVERSIFIED MANUFACTURING (4.3%)
AlliedSignal, Inc................................ 158,200 6,960,800
Boeing Co........................................ 160,800 6,532,500
Coltec Industries, Inc.+......................... 229,925 4,440,427
Tyco International Ltd........................... 201,046 13,231,340
-------------
31,165,067
-------------
POLLUTION CONTROL (1.9%)
Waste Management, Inc.(s)........................ 323,457 13,868,219
-------------
TOTAL INDUSTRIAL PRODUCTS & SERVICES........... 72,832,468
-------------
TECHNOLOGY (13.7%)
COMPUTER PERIPHERALS (2.0%)
EMC Corp.+....................................... 201,900 14,637,750
-------------
COMPUTER SOFTWARE (2.5%)
Microsoft Corp.+................................. 139,700 17,047,766
Oracle Corp.+.................................... 39,700 1,360,966
-------------
18,408,732
-------------
COMPUTER SYSTEMS (5.0%)
Compaq Computer Corp............................. 212,700 6,912,750
International Business Machines Corp............. 112,700 18,595,500
Sun Microsystems, Inc.+.......................... 145,900 10,796,600
-------------
36,304,850
-------------
ELECTRONICS (0.4%)
Sensormatic Electronics Corp.+................... 345,100 2,803,938
-------------
SEMICONDUCTORS (1.1%)
General Semiconductor, Inc.+..................... 44,100 446,513
Intel Corp....................................... 35,500 3,819,578
Texas Instruments, Inc........................... 53,500 4,086,063
-------------
8,352,154
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
18
<PAGE>
THE U.S. EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
NOVEMBER 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
TELECOMMUNICATIONS-EQUIPMENT (2.7%)
Cisco Systems, Inc.+............................. 125,400 $ 9,455,944
Commscope, Inc.+................................. 334,033 5,073,126
Lucent Technologies, Inc......................... 58,100 5,000,231
-------------
19,529,301
-------------
TOTAL TECHNOLOGY............................... 100,036,725
-------------
TRANSPORTATION (2.6%)
RAILROADS (2.6%)
Union Pacific Corp............................... 387,000 18,817,875
-------------
UTILITIES (11.2%)
ELECTRIC (3.7%)
Central & South West Corp........................ 104,500 2,873,750
Northern States Power Co......................... 246,500 6,701,719
PP&L Resources, Inc.............................. 396,900 10,840,331
Texas Utilities Co............................... 142,900 6,367,981
-------------
26,783,781
-------------
GAS-PIPELINES (0.6%)
Columbia Energy Group(s)......................... 75,750 4,298,813
-------------
TELEPHONE (6.9%)
AT & T Corp...................................... 195,700 12,194,556
Bell Atlantic Corp............................... 98,400 5,473,500
GTE Corp......................................... 237,200 14,706,400
MCI WorldCom, Inc.+.............................. 187,300 11,044,847
SBC Communications, Inc.......................... 150,100 7,195,419
-------------
50,614,722
-------------
TOTAL UTILITIES................................ 81,697,316
-------------
TOTAL COMMON STOCKS (COST $580,087,718)........ 701,660,652
-------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
------------
<S> <C> <C>
FIXED INCOME SECURITIES (0.2%)
U.S. TREASURY OBLIGATIONS (0.2%)
U.S. TREASURY NOTES (0.2%)
U.S. Treasury Notes, 6.000%
due 06/30/99(s)
(cost $1,632,517).............................. $ 1,620,000 1,632,425
-------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------- ------------ -------------
SHORT-TERM INVESTMENTS (2.9%)
<S> <C> <C>
REPURCHASE AGREEMENT (2.9%)
Goldman Sachs Repurchase Agreement, 5.10% dated
11/30/98 due 12/01/98, proceeds $21,297,016.65
(collateralized by $19,697,000 U.S Treasury
Bond, 6.00%
due 02/15/26, valued at $21,720,978) (cost
$21,294,000)................................... $ 21,294,000 $ 21,294,000
-------------
TOTAL INVESTMENTS (COST $603,014,235) (99.3%)..................
724,587,077
OTHER ASSETS IN EXCESS OF LIABILITIES (0.7%)...................
5,341,768
-------------
NET ASSETS (100.0%)............................................ $ 729,928,845
-------------
-------------
</TABLE>
- ------------------------------
Note: Based on the cost of securities of $607,091,194 for federal income tax
purposes at November 30, 1998 the aggregate gross unrealized appreciation and
depreciation was $144,576,991 and $27,081,108, respectively, resulting in net
unrealized appreciation of $117,495,883.
+ - Non-income producing securities.
(s) - Security is fully or partially segregated with custodian as collateral for
futures contracts or with broker as initial margin for futures contracts.
$29,157,394 of the market value has been segregated.
ADR - American Depositary Receipt.
Spons. 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 (UNAUDITED)
NOVEMBER 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $603,014,235 ) $724,587,077
Cash 607
Receivable for Investments Sold 7,009,950
Dividends Receivable 928,193
Interest Receivable 43,693
Prepaid Trustees' Fees 3,486
Prepaid Expenses and Other Assets 7,308
------------
Total Assets 732,580,314
------------
LIABILITIES
Payable for Investments Purchased 1,895,043
Variation Margin Payable 467,575
Advisory Fee Payable 232,704
Custody Fee Payable 39,301
Administrative Services Fee Payable 16,185
Fund Services Fee Payable 661
------------
Total Liabilities 2,651,469
------------
NET ASSETS
Applicable to Investors' Beneficial Interests $729,928,845
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE U.S. EQUITY PORTFOLIO
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividend Income (Net of Foreign Withholding Tax
of $43,198 ) $ 5,334,480
Interest Income 558,995
------------
Investment Income 5,893,475
EXPENSES
Advisory Fee $ 1,491,031
Administrative Services Fee 105,636
Custodian Fees and Expenses 84,063
Professional Fees and Expenses 25,110
Fund Services Fee 10,257
Administration Fee 6,512
Printing Expenses 4,513
Trustees' Fees and Expenses 4,269
Insurance Expense 3,636
Miscellaneous 157
------------
Total Expenses 1,735,184
------------
NET INVESTMENT INCOME 4,158,291
NET REALIZED GAIN ON
Investment Transactions 46,383,760
Futures Contracts 1,284,045
------------
Net Realized Gain 47,667,805
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) OF
Investment Transactions (32,045,199)
Futures Contracts 683,336
------------
Net Change in Unrealized Appreciation
(Depreciation) (31,361,863)
------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $ 20,464,233
------------
------------
</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 SIX
MONTHS ENDED FOR THE FISCAL
NOVEMBER 30, 1998 YEAR ENDED
(UNAUDITED) MAY 31, 1998
----------------- --------------
<S> <C> <C>
DECREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 4,158,291 $ 8,957,310
Net Realized Gain on Investments and Futures
Contracts 47,667,805 211,793,953
Net Change in Unrealized Appreciation of
Investments and Futures Contracts (31,361,863) (9,192,276)
----------------- --------------
Net Increase in Net Assets Resulting from
Operations 20,464,233 211,558,987
----------------- --------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 69,495,837 171,037,121
Withdrawals (187,334,949) (414,552,601)
----------------- --------------
Net Decrease from Investors' Transactions (117,839,112) (243,515,480)
----------------- --------------
Total Decrease in Net Assets (97,374,879) (31,956,493)
NET ASSETS
Beginning of Period 827,303,724 859,260,217
----------------- --------------
End of Period $ 729,928,845 $ 827,303,724
----------------- --------------
----------------- --------------
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE JULY 19, 1993
SIX MONTHS ENDED FOR THE FISCAL YEAR ENDED MAY 31, (COMMENCEMENT OF
NOVEMBER 30, 1998 --------------------------------- OPERATIONS) TO
(UNAUDITED) 1998 1997 1996 1995 MAY 31, 1994
----------------- ------ ------ ------ ------ ----------------
<S> <C> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Net Expenses 0.47%(a) 0.47% 0.47% 0.46% 0.51% 0.53%(a)
Net Investment Income 1.12%(a) 1.01% 1.44% 2.20% 2.12% 1.79%(a)
Portfolio Turnover 49% 106% 99% 85% 71% 76%+
</TABLE>
- --------------------------
(a) Annualized.
+ Portfolio turnover is for the twelve month period ended May 31, 1994, and
includes the portfolio activity of the Portfolio's predecessor entity, The
Pierpont Equity Fund, for the period June 1, 1993 to June 18, 1993.
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE U.S. EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOVEMBER 30, 1998
- --------------------------------------------------------------------------------
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 and received a
contribution of certain assets and liabilities, including securities, with a
value of $209,477,219 on that date from The Pierpont Equity Fund in exchange for
a beneficial interest in the portfolio. At that date, net unrealized
appreciation of $12,039,552 was included in the contributed securities. On
October 31, 1993, the portfolio received a contribution of securities and
certain assets and liabilities, with a market value and cost of $128,337,342
from the JPM North America Fund, Ltd., in exchange for a beneficial interest in
the portfolio. 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 value of each security for which readily available market quotations
exist is based on a decision as to the broadest and most representative
market for such security. The value of such security will be based either
on the last sale price on a national securities exchange or, in the
absence of recorded sales, at the average of readily available closing bid
and asked prices on such exchanges. Securities listed on a foreign
exchange are valued at the last quoted sale price available before the
time when net assets are valued. Unlisted securities are valued at the
average of the quoted bid and asked prices in the over-the-counter market.
Securities or other assets for which market quotations are not readily
available are valued at fair value in accordance with procedures
established by the portfolio's trustees. Such procedures include the use
of independent pricing services, which use prices based upon yields or
prices of securities of comparable quality, coupon, maturity and type;
indications as to values from dealers; and general market conditions. All
portfolio securities with a remaining maturity of less than 60 days are
valued by 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.
23
<PAGE>
THE U.S. EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOVEMBER 30, 1998
- --------------------------------------------------------------------------------
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 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 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 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. Futures transactions during the six
months ended November 30, 1998 are summarized as follows:
SUMMARY OF OPEN CONTRACTS AT NOVEMBER 30, 1998
<TABLE>
<CAPTION>
NET UNREALIZED PRINCIPAL AMOUNT
CONTRACTS LONG APPRECIATION OF CONTRACTS
-------------- -------------- ----------------
<S> <C> <C> <C>
S & P 500, expiring December 1998................ 59 $ 279,846 $ 16,867,029
</TABLE>
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.
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 six months ended November 30, 1998, such fees amounted
to $1,491,031.
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
24
<PAGE>
THE U.S. EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOVEMBER 30, 1998
- --------------------------------------------------------------------------------
aggregate net assets of the portfolio and certain other investment
companies subject to similar agreements with FDI. For the six months ended
November 30, 1998, the fee for these services amounted to $6,512.
c) The portfolio has an Administrative Services Agreement (the "Services
Agreement") with Morgan, under which Morgan is responsible for certain
aspects of the administration and operation of the portfolio. Under the
Services Agreement, the portfolio has agreed to pay Morgan a fee equal to
its allocable share of an annual complex-wide charge. This charge is
calculated based on the aggregate average daily net assets of the
portfolio and certain other portfolios for which JPMIM acts as advisor
(the 'master portfolios') and J.P. Morgan Series Trust in accordance with
the following annual schedule: 0.09% on the first $7 billion of their
aggregate average daily net assets and 0.04% of their aggregate average
daily net assets in excess of $7 billion, less the complex-wide fees
payable to FDI. The portion of this charge payable by the portfolio is
determined by the proportionate share that its net assets bear to the net
assets of the portfolio, other investors in the master portfolios for
which Morgan provides similar services, and J.P. Morgan Series Trust. For
the six months ended November 30, 1998, the fee for these services
amounted to $105,636.
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 $10,257 for the six months ended November 30, 1998.
e) An aggregate annual fee of $75,000 is paid to each trustee for serving as
a trustee of 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 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 $2,200.
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the six months
ended November 30, 1998 were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
- ----------------- ------------
<S> <C>
$355,695,960...... $458,786,997
</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
