<PAGE>
The Non-U.S. Fixed Income Portfolio
Annual Report September 30, 1995
(The following pages should be read in conjunction
with The JPM Institutional International Bond Fund
Annual Financial Statements)
15
<PAGE>
THE NON-U.S. FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(LOCAL CURRENCY(1)
000'S OMITTED) SECURITY DESCRIPTION VALUE
- -------------------------------------------------------------------- ---------------
<S> <C> <C>
CORPORATE OBLIGATIONS (26.2%)
CANADA (1.5%)
GBP 2,617 Hydro-Quebec, 6.50% due 12/09/98.................. $ 3,969,537
---------------
FRANCE (5.7%)
FRF 48,800 Credit Local de France, 7.50% due 03/31/04........ 9,893,780
FRF 24,600 Electricite De France, 8.60% due 04/09/04......... 5,302,650
---------------
15,196,430
---------------
GERMANY (10.4%)
ITL 5,595,000 Bayerische Landesbank Girozentrale, 10.75% due 3,378,686
03/01/03........................................
DEM 4,000 Bayerische Vereinsbank 6.25% due 05/15/00......... 2,842,138
KFW International Finance
DEM 5,000 6.375% due 08/16/00............................... 3,558,265
DEM 5,000 6.75% due 02/08/02................................ 3,561,109
DEM 17,570 Landesbank Rheinland-Pfalz Girozentrale 7.25% due 12,507,406
04/20/05........................................
DEM 2,600 Sudwestdeutsche Landesbank Capital Markets 6.25% 1,759,412
due 10/21/03....................................
---------------
27,607,016
---------------
JAPAN (3.1%)
JPY 740,000 Export-Import Bank of Japan, 4.375% due 8,329,716
10/01/03........................................
---------------
NETHERLANDS (4.2%)
NLG 17,000 Bank Voor Nederlandsche Gemeenten 7.625% due 11,263,204
12/16/02........................................
---------------
UNITED KINGDOM (1.3%)
GBP 2,400 Halifax Building Society, 6.50% due 02/16/04...... 3,313,320
---------------
TOTAL CORPORATE OBLIGATIONS (COST $68,046,322).... 69,679,223
---------------
GOVERNMENT OBLIGATIONS (51.3%)
AUSTRALIA (0.5%)
AUD 1,560 Commonwealth of Australia, 12.00% due 11/15/01.... 1,386,811
---------------
AUSTRIA (2.3%)
Republic of Austria
GBP 2,000 9.00% due 07/22/04................................ 3,248,933
DEM 3,800 4.1625% due 02/19/05 (floating rate note)......... 2,641,784
JPY 25,000 3.75% due 02/03/09................................ 267,055
---------------
6,157,772
---------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
16
<PAGE>
THE NON-U.S. FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(LOCAL CURRENCY(1)
000'S OMITTED) SECURITY DESCRIPTION VALUE
- -------------------------------------------------------------------- ---------------
<S> <C> <C>
BELGIUM (4.7%)
BEF 381,000 Kingdom of Belgium, 6.50% due 03/31/05............ $ 12,348,806
---------------
CANADA (3.3%)
CAD 10,940 Government of Canada, 8.75% due 12/01/05.......... 8,687,863
---------------
DENMARK (4.5%)
Kingdom of Denmark
DKK 42,000 7.00% due 12/15/04................................ 7,114,920
DKK 26,930 8.00% due 11/15/01................................ 4,970,123
---------------
12,085,043
---------------
FRANCE (4.0%)
Government of France
FRF 39,100 7.75% due 04/12/00................................ 8,214,613
FRF 10,850 8.50% due 11/25/02................................ 2,355,295
---------------
10,569,908
---------------
GERMANY (3.6%)
DEM 12,150 Federal Republic of Germany, 9.00% due 10/20/00... 9,612,869
---------------
ITALY (5.6%)
Republic of Italy
ITL 13,150,000 9.50% due 01/01/05................................ 7,133,212
ITL 180,000 9.50% due 12/01/97................................ 108,324
JPY 675,000 5.125% due 07/29/03............................... 7,776,929
---------------
15,018,465
---------------
JAPAN (12.5%)
Government of Japan
JPY 1,508,100 No. 119, 4.80% due 06/21/99....................... 17,178,227
JPY 418,850 No. 153, 4.80% due 12/20/02....................... 4,820,443
JPY 985,800 No. 157, 4.50% due 06/20/03....................... 11,182,120
---------------
33,180,790
---------------
NETHERLANDS (3.5%)
Government of the Netherlands
NLG 3,100 9.00% due 05/15/00................................ 2,191,449
NLG 10,070 9.00% due 01/15/01................................ 7,153,294
---------------
9,344,743
---------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
17
<PAGE>
THE NON-U.S. FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(LOCAL CURRENCY(1)
000'S OMITTED) SECURITY DESCRIPTION VALUE
- -------------------------------------------------------------------- ---------------
<S> <C> <C>
SPAIN (2.9%)
ESP 1,020,200 Government of Spain, 10.00% due 02/28/05.......... $ 7,826,953
---------------
UNITED KINGDOM (3.9%)
GBP 700 Treasury Conversion, 9.00% due 03/03/00........... 1,164,086
GBP 750 Treasury Gilt, 6.00% due 08/10/99................. 1,126,140
GBP 5,240 Treasury Gilt, 7.75% due 09/08/06................. 8,020,619
---------------
10,310,845
---------------
TOTAL GOVERNMENT OBLIGATIONS (COST
$134,691,922)................................... 136,530,868
---------------
SUPRANATIONAL OBLIGATIONS(2) (6.4%)
ITL 2,537,000 European Investment Bank, 12.20% due 02/18/03..... 1,637,053
International Bank for Reconstruction &
Development
JPY 512,100 5.25% due 03/20/02................................ 6,045,499
JPY 865,000 6.00% due 10/18/96................................ 9,225,910
---------------
TOTAL SUPRANATIONAL OBLIGATIONS (COST
$16,421,894).................................... 16,908,462
---------------
SHORT-TERM HOLDINGS (20.1%)
COMMERCIAL PAPER (5.6%)
USD 5,000 Abbey National North America, 5.73% due 4,984,879
10/20/95........................................
USD 5,000 Ford Motor Credit Co., 6.00% due 11/17/95......... 4,962,922
USD 5,000 Glaxo PLC, 6.00% due 10/20/95..................... 4,984,959
---------------
14,932,760
---------------
TIME DEPOSITS (14.5%)
State Street Bank & Trust Co. London,
USD 2,684 5.00% due 10/02/95................................ 2,684,000
USD 8,000 5.625% due 10/02/95............................... 8,000,000
USD 10,000 5.687% due 10/02/95............................... 10,000,000
USD 8,000 5.625% due 10/04/95............................... 8,000,000
USD 10,000 5.687% due 10/04/95............................... 10,000,000
---------------
38,684,000
---------------
TOTAL SHORT-TERM HOLDINGS (COST $53,616,760)...... 53,616,760
---------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
18
<PAGE>
THE NON-U.S. FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION VALUE
-------------------------------------------------- ---------------
<S> <C> <C>
FOREIGN CURRENCY (0.1%) (COST $168,771)............................. $ 175,984
---------------
TOTAL INVESTMENTS (COST $272,945,669) (104.1%) 276,911,297
LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS (-4.1%) (10,788,380)
---------------
TOTAL NET ASSETS (100.0%) $ 266,122,917
---------------
---------------
</TABLE>
Note: Based on the cost of investments of $273,497,273 for federal income tax
purposes at September 30, 1995, the aggregate gross unrealized appreciation was
$5,267,574, and the aggregate gross unrealized depreciation was $1,853,550,
resulting in net unrealized appreciation of investments of $3,414,024.
(1)Principal is in the local currency of the country in which the security is
traded, which may not be the country of origin.
(2)International Agencies
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
THE NON-U.S. FIXED INCOME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $272,945,669) $276,911,297
Cash 138
Interest Receivable 7,887,945
Unrealized Appreciation on Forward Foreign Currency Contracts 1,911,147
Unrealized Appreciation on Spot Foreign Currency Contracts 75,486
Deferred Organization Expenses 8,081
Prepaid Expenses and Other Assets 43,761
-----------
Total Assets 286,837,855
-----------
LIABILITIES
Payable for Securities Purchased 16,143,016
Unrealized Depreciation on Forward Foreign Currency Contracts 4,326,838
Custody Fee Payable 101,762
Advisory Fee Payable 75,940
Organization Expenses Payable 4,397
Fund Services Fee Payable 1,848
Administration Fee Payable 1,262
Accrued Expenses 59,875
-----------
Total Liabilities 20,714,938
-----------
NET ASSETS
Applicable to Investors' Beneficial Interests $266,122,917
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE NON-U.S. FIXED INCOME PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE PERIOD OCTOBER 11, 1994 (COMMENCEMENT OF OPERATIONS) THROUGH SEPTEMBER
30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
$14,045,882
Interest Income (Net of Foreign Withholding Tax of $247,536)
----------
EXPENSES
Advisory Fee $ 782,748
Custodian Fees and Expenses 194,680
Financial and Fund Accounting Services Fee 156,367
Professional Fees 54,310
Fund Services Fee 20,446
Administration Fee 13,862
Trustees' Fees and Expenses 5,584
Printing Expenses 4,500
Amortization of Organization Expenses 1,919
Registration Fees 610
Insurance Premium Expenses 143
Miscellaneous 1,937
----------
(1,237,106)
Total Expenses
----------
12,808,776
NET INVESTMENT INCOME
NET REALIZED GAIN ON
Investment Transactions 14,189,658
Foreign Currency Transactions 1,402,193
----------
15,591,851
Net Realized Gain
NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) OF
Investments 3,965,628
Foreign Currency Contracts and Translations (2,402,985)
----------
1,562,643
Net Change in Unrealized Appreciation
----------
$29,963,270
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
----------
----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE NON-U.S. FIXED INCOME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
OCTOBER 11, 1994
(COMMENCEMENT OF
OPERATIONS) THROUGH
SEPTEMBER 30, 1995
-------------------
<S> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 12,808,776
Net Realized Gain on Investments and Foreign Currency Transactions 15,591,851
Net Change in Unrealized Appreciation of Investments and Foreign Currency
Translations 1,562,643
-------------------
Net Increase in Net Assets Resulting from Operations 29,963,270
-------------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 318,237,762
Withdrawals (82,178,215)
-------------------
Net Increase from Investors' Transactions 236,059,547
-------------------
Total Increase in Net Assets 266,022,817
NET ASSETS
Beginning of Period 100,100
-------------------
End of Period $266,122,917
-------------------
-------------------
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
OCTOBER 11, 1994
(COMMENCEMENT OF
OPERATIONS) THROUGH
SEPTEMBER 30, 1995
-------------------
<S> <C>
RATIOS TO AVERAGE NET ASSETS
Net Investment Income 5.73%(a)
Expenses 0.55%(a)
Portfolio Turnover 288%(b)
<FN>
- ------------------------
(a) Annualized.
(b) Not Annualized.
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE NON-U.S. FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Non-U.S. Fixed Income Portfolio (the "Portfolio") is registered under the
Investment Company Act of 1940, as amended, as a no-load, non-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 October 11,
1994. 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.
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.
b) The books and records of the Portfolio are maintained in U.S. dollars.
The market values of investment securities, other assets and liabilities
and forward contracts stated in foreign currencies are translated at the
prevailing exchange rates at the end of the period. Purchases, sales,
income and expenses are translated at the exchange rate prevailing on the
respective dates of such transactions. Translation gains and losses
resulting from changes in the exchange rate during the reporting period
and gains and losses realized upon settlement of foreign currency
transactions are reported in the Statement of Operations. Since 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. 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
23
<PAGE>
THE NON-U.S. FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1995
- --------------------------------------------------------------------------------
identification. However, pursuant to U.S. federal income tax regulations,
gains and losses from certain foreign currency transactions and sales of
foreign denominated debt securities are treated as ordinary income for
U.S. federal income tax purposes.
d) The portfolio may enter into forward 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 (USD) 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 based on procedures established
by and under the general supervision of the Portfolio's Trustees and the
change in the market value is recorded by the Portfolio as unrealized
appreciation or depreciation of foreign currency translations. At
September 30, 1995, the Portfolio had open forward foreign currency
contracts as follows:
SUMMARY OF OPEN FORWARD FOREIGN CURRENCY CONTRACTS
<TABLE>
<CAPTION>
U.S. DOLLAR NET UNREALIZED
VALUE AT APPRECIATION/
PURCHASE CONTRACTS COST/PROCEEDS 09/30/95 (DEPRECIATION)
- ------------------------------------------------------------- ------------------ ------------- ---------------
<S> <C> <C> <C>
Belgian Franc 97,253,622, expiring 11/08/95 $ 3,293,384 $ 3,316,410 $ 23,026
British Pound 4,225,120, expiring 11/08/95 6,544,711 6,668,613 123,902
Canadian Dollar 13,971,806, expiring 11/08/95 10,442,111 10,394,003 (48,108)
German Mark 20,831,226, expiring 11/08/95 14,430,971 14,610,807 179,836
Japanese Yen 415,751,914, expiring 11/08/95 4,036,426 4,225,584 189,158
Netherlands Guilder 2,826,397, expiring 11/08/95 1,775,501 1,770,945 (4,556)
Swedish Krona 25,234,214, expiring 11/08/95 3,505,473 3,633,300 127,827
<CAPTION>
SALE CONTRACTS
- -------------------------------------------------------------
<S> <C> <C> <C>
Australian Dollar 1,701,292, expiring 11/08/95 1,273,417 1,283,131 (9,714)
Belgian Franc 467,398,839, expiring 11/08/95 15,542,504 15,938,597 (396,093)
British Pound 17,909,962, expiring 11/08/95 27,844,648 28,267,744 (423,096)
Canadian Dollar 25,643,897, expiring 11/08/95 19,046,081 19,077,186 (31,105)
Danish Krone 70,388,366, expiring 11/08/95 12,362,603 12,703,062 (340,459)
French Franc 123,703,727, expiring 11/08/95 24,535,163 25,125,701 (590,538)
German Mark 75,072,289, expiring 11/08/95 51,275,513 52,654,927 (1,379,414)
Italian Lira 20,931,535,044, expiring 11/08/95 12,767,179 12,922,296 (155,117)
Japanese Yen 6,894,249,714, expiring 11/08/95 71,294,931 70,071,186 1,223,745
Netherlands Guilder 40,048,303, expiring 11/08/95 24,570,404 25,091,428 (521,024)
Spanish Peseta 1,037,261,187, expiring 11/08/95 8,173,402 8,359,508 (186,106)
Swedish Krona 25,477,627, expiring 11/08/95 3,471,555 3,668,348 (196,793)
French Franc 8,725,634, for NLG 2,827,032, expiring 11/08/95 1,771,218 1,772,280 (1,062)
---------------
NET UNREALIZED APPRECIATION (DEPRECIATION) ON FORWARD FOREIGN CURRENCY CONTRACTS $ (2,415,691)
---------------
---------------
</TABLE>
24
<PAGE>
THE NON-U.S. FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. DOLLAR
VALUE AT NET UNREALIZED
OPEN SPOT FOREIGN CURRENCY PURCHASE CONTRACTS COST 09/30/95 APPRECIATION
- --------------------------------------------------------------------- ------------ ------------ ---------------
<S> <C> <C> <C>
British Pound 5,153,151, expiring 10/02/95 $ 8,066,639 $ 8,142,125 $ 75,486
------------ ------------ -------
</TABLE>
e) The Portfolio will be treated as a partnership for federal income tax
purposes. As such, each investor in the Portfolio will be taxable 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.
f) The Portfolio's Service Agent, Morgan Guaranty Trust Company of New York
("Morgan"), paid the organization expenses of the Portfolio in the amount
of $10,000. The Portfolio has agreed to reimburse Morgan for these costs
which are being amortized by the Portfolio on a straight-line basis over a
five-year period from the commencement of operations.
2. TRANSACTIONS WITH AFFILIATES
a) The Portfolio has an investment advisory agreement with Morgan. Under the
terms of the investment advisory agreement, the Portfolio pays Morgan at
an annual rate of 0.35% of the Portfolio's average daily net assets. For
the period October 11, 1994 (commencement of operations) through September
30, 1995, this fee amounted to $782,748.
b) The Portfolio has retained 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 each day to the net assets of the Portfolio. For the
period October 11, 1994 (commencement of operations) through September 30,
1995, such expenses amounted to $13,862.
c) During the period October 11, 1994 (commencement of operations) through
August 31, 1995, the Portfolio, had a Financial and Fund Accounting
Services Agreement ("Services Agreement") with Morgan under which Morgan
received a fee, based on the percentages described below, for overseeing
certain aspects of the administration and operation of the Portfolio and
which was also designed to provide an expense limit for certain expenses
of the Portfolio. This fee was calculated exclusive of the advisory fee,
custody expenses, fund services fee, amortization of organization
expenses, and brokerage costs at 0.12% of the Portfolio's average daily
net assets up to $200 million, 0.08% of the next $200 million of average
daily net assets, and 0.04% on any excess over
25
<PAGE>
THE NON-U.S. FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1995
- --------------------------------------------------------------------------------
$400 million. For the period from October 11, 1994, (commencement of
operations) through August 31, 1995, the fee for these services amounted
to $156,367. Effective September 1, 1995, the Services Agreement was
terminated and an interim agreement was entered into between the Portfolio
and Morgan which provides for the continuation of the oversight services
that were outlined under the prior agreement and that Morgan shall bear
all of its expenses incurred in connection with these services.
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 $20,446 for the period October 11, 1994 (commencement of
operations) through September 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, their
corresponding Portfolios and The Series Portfolio. The Trustees' Fees and
Expenses shown in the financial statements represent 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 $2,600.
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the period
October 11, 1994 (commencement of operations) to September 30, 1995 were as
follows:
<TABLE>
<CAPTION>
COST OF PURCHASES PROCEEDS FROM SALES
- ----------------- -------------------
<S> <C>
$ 773,222,281 $ 567,544,593
</TABLE>
26
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Investors of
The Non-U.S. Fixed Income 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 Non-U.S. Fixed Income Portfolio (the
"Portfolio") at September 30, 1995, and the results of its operations, the
changes in its net assets and its supplementary data for the period October 11,
1994 (commencement of operations) through September 30, 1995, in conformity with
generally accepted accounting principles. These financial statements and
supplementary data (hereafter referred to as "financial statements") are the
responsibility of the Portfolio's management; our responsibility is to express
an opinion on these financial statements based on our audit. We conducted our
audit of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit, which included confirmation of securities at September 30, 1995 by
correspondence with the custodian and brokers, provides a reasonable basis for
the opinion expressed above.
PRICE WATERHOUSE LLP
New York, New York
November 20, 1995
27
