<PAGE>
THE NON-U.S. FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
MARCH 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(LOCAL CURRENCY
000'S OMITTED)(1) SECURITY DESCRIPTION VALUE
- ------------------ ------------------------------------------------- -------------
<C> <S> <C>
CORPORATE OBLIGATIONS (19.4%)
CANADA (2.7%)
GBP 2,617 Hydro-Quebec, 6.50% due 12/09/98................. $ 4,243,403
-------------
FRANCE (1.6%)
FRF 12,300 Electricite de France, 8.60% due 04/09/04........ 2,582,158
-------------
GERMANY (6.4%)
ITL 5,595,000 Bayerische Landesbank Girozentrale, 10.75% due
03/01/03....................................... 3,825,444
DEM 5,000 Deutsche Pfandbriefe Hypobank, 5.625% due
02/07/03, 144A................................. 3,046,946
DEM 5,000 KFW International Finance, 6.75% due 02/08/02.... 3,221,665
-------------
10,094,055
-------------
THAILAND (2.2%)
USD 3,500 Krung Thai Bank Public Company Ltd., 6.855% due
09/30/97, FRN.................................. 3,471,300
-------------
UNITED KINGDOM (6.5%)
GBP 3,000 MEPC PLC, 8.75% due 12/07/06..................... 5,015,287
GBP 3,300 Royal Bank of Scotland PLC, 7.88% due 12/07/06... 5,303,458
-------------
10,318,745
-------------
TOTAL CORPORATE OBLIGATIONS (COST
$30,145,607)............................... 30,709,661
-------------
GOVERNMENT OBLIGATIONS (67.8%)
AUSTRALIA (6.6%)
AUD 14,500 Government of Australia, 6.75% due 11/15/06(3)... 10,401,756
-------------
AUSTRIA (3.8%)
DEM 9,000 Autobahnen Und Schnellstr Finance Agency, 7.13%
due 12/22/99................................... 5,774,722
JPY 25,000 Republic of Austria, 3.75% due 02/03/09.......... 221,357
-------------
5,996,079
-------------
BELGIUM (3.5%)
Kingdom of Belgium
BEF 110,000 7.00% due 05/15/06(3).......................... 3,447,159
BEF 63,000 7.75% due 12/22/00(3).......................... 2,025,068
-------------
5,472,227
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
THE NON-U.S. FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
MARCH 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(LOCAL CURRENCY
000'S OMITTED)(1) SECURITY DESCRIPTION VALUE
- ------------------ ------------------------------------------------- -------------
<C> <S> <C>
CANADA (7.8%)
Government of Canada
CAD 12,200 7.00% due 09/01/01............................. $ 9,184,719
CAD 4,050 8.00% due 06/01/23............................. 3,169,227
-------------
12,353,946
-------------
FRANCE (4.7%)
FRF 20,600 Government of France, 6.00% due 10/25/25......... 3,369,344
FRF 19,000 Societe National de Chemins, 8.60% due
03/09/04....................................... 3,973,846
-------------
7,343,190
-------------
GERMANY (0.2%)
DEM 550 Germany Unity Fund, 8.00% due 01/21/02(3)........ 372,778
-------------
IRELAND (1.3%)
ESP 250,000 Republic of Ireland, 10.55% due 02/21/02......... 2,052,179
-------------
ITALY (2.8%)
ITL 6,900,000 Republic of Italy, 9.00% due 10/01/03............ 4,357,350
-------------
JAPAN (27.2%)
Government of Japan
JPY 1,370,000 Series 144, 6.00% due 12/20/01(3).............. 13,310,495
JPY 374,000 Series 157, 4.50% due 06/20/03................. 3,479,005
JPY 1,065,000 Series 164, 4.10% due 12/22/03................. 9,730,454
JPY 1,909,000 Series 187, 3.30% due 06/20/06................. 16,547,436
-------------
43,067,390
-------------
NETHERLANDS (3.4%)
Government of the Netherlands
NLG 2,500 6.00% due 01/15/06............................. 1,361,447
NLG 6,500 8.50% due 03/15/01(3).......................... 3,943,466
-------------
5,304,913
-------------
SPAIN (1.7%)
ESP 323,000 Government of Spain, 10.50% due 10/30/03......... 2,708,032
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE NON-U.S. FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
MARCH 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(LOCAL CURRENCY
000'S OMITTED)(1) SECURITY DESCRIPTION VALUE
- ------------------ ------------------------------------------------- -------------
<C> <S> <C>
SWEDEN (3.2%)
Kingdom of Sweden
SEK 6,700 6.00% due 02/09/05............................. $ 837,242
SEK 28,300 10.25% due 05/05/00............................ 4,248,637
-------------
5,085,879
-------------
UNITED KINGDOM (1.6%)
GBP 1,491 Treasury Gilt, 8.50% due 12/07/05................ 2,581,460
-------------
TOTAL GOVERNMENT OBLIGATIONS (COST
$111,427,187).............................. 107,097,179
-------------
SUPRANATIONAL OBLIGATIONS (2) (1.9%)
European Investment Bank
ITL 1,700,000 10.875% due 12/14/05........................... 1,197,999
ITL 2,537,000 12.20% due 02/18/03............................ 1,829,659
-------------
TOTAL SUPRANATIONAL OBLIGATIONS (COST
$2,988,762)................................ 3,027,658
-------------
SHORT-TERM INVESTMENTS (8.3%)
TIME DEPOSITS (8.1%)
State Street Bank & Trust Co. London,
2,879,000 4.50% due 04/01/97............................. 2,879,000
10,000,000 6.125% due 04/01/97............................ 10,000,000
-------------
12,879,000
-------------
U.S. TREASURY OBLIGATIONS (0.2%)
280,000 United States Treasury Bills 5.13% due
06/19/97(3).................................... 276,771
-------------
TOTAL SHORT-TERM INVESTMENTS (COST
$13,155,916)............................... 13,155,771
-------------
TOTAL INVESTMENTS (COST $157,717,472) (97.4%).... 153,990,269
OTHER ASSETS IN EXCESS OF LIABILITIES (2.6%)..... 4,123,694
-------------
NET ASSETS (100.0%).............................. $ 158,113,963
-------------
-------------
</TABLE>
- ------------------------------
(1) -- Principal is in the local currency of the country in which the currency
is traded, which may not be the country of origin.
(2) -- International agencies.
(3) -- Amount segregated as collateral for initial and variation margin on
futures contracts.
144A -- Securities restricted for sale to Qualified Institutional Buyers.
FRN -- Floating Rate Note. Maturity date reflects the later of the next interest
rate change or the next put date.
NOTE: Based on the cost of investments of $158,179,678 for federal income tax
purposes at March 31, 1997, the aggregate gross unrealized appreciation was
$1,331,966 and the aggregate gross unrealized depreciation was $5,521,375
resulting in net unrealized depreciation of investments of $4,189,409.
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE NON-U.S. FIXED INCOME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
MARCH 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $157,717,472 ) $153,990,269
Cash 895
Foreign Currency at Value (Cost $6,469,237 ) 6,536,679
Receivable for Investments Sold 11,066,213
Interest Receivable 2,959,569
Unrealized Appreciation of Forward Foreign
Currency Contracts 907,001
Prepaid Expenses and Other Assets 298
------------
Total Assets 175,460,924
------------
LIABILITIES
Payable for Investments Purchased 14,693,051
Unrealized Depreciation of Forward Foreign
Currency Contracts 2,489,273
Advisory Fee Payable 48,434
Variation Margin Payable 31,371
Custody Fee Payable 26,057
Administrative Services Fee Payable 4,327
Administration Fee Payable 513
Fund Services Fee Payable 392
Accrued Trustees' Fees and Expenses 1,356
Accrued Expenses 52,187
------------
Total Liabilities 17,346,961
------------
NET ASSETS
Applicable to Investors' Beneficial Interests $158,113,963
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE NON-U.S. FIXED INCOME PORTFOLIO
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED MARCH 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest Income $ 4,208,627
EXPENSES
Advisory Fee $ 266,522
Custodian Fees and Expenses 69,817
Professional Fees and Expenses 29,788
Administrative Services Fee 24,061
Printing Expenses 4,980
Fund Services Fee 2,802
Trustees' Fees and Expenses 2,779
Administration Fee 1,944
Insurance Expense 1,001
Registration Fees 224
Miscellaneous 263
-----------
Total Expenses 404,181
-----------
NET INVESTMENT INCOME 3,804,446
NET REALIZED GAIN (LOSS) ON
Investment Transactions (including $783,662 net
realized gain from futures contracts) (732,169)
Foreign Currency Transactions 12,572,291
-----------
Net Realized Gain 11,840,122
NET CHANGE IN UNREALIZED DEPRECIATION OF
Investment (including $280,217 net unrealized
depreciation from futures contracts) (5,401,400)
Foreign Currency Contracts and Translations (3,359,490)
-----------
Net Change in Unrealized Depreciation (8,760,890)
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $ 6,883,678
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
23
<PAGE>
THE NON-U.S. FIXED INCOME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE FISCAL
MARCH 31, 1997 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 1996
-------------- ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 3,804,446 $ 11,244,228
Net Realized Gain on Investment and Foreign
Currency Transactions 11,840,122 12,170,665
Net Change in Unrealized Appreciation
(Depreciation) of Investment and Foreign
Currency Translations (8,760,890) 1,814,400
-------------- ------------------
Net Increase in Net Assets Resulting from
Operations 6,883,678 25,229,293
-------------- ------------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 49,203,010 116,826,143
Withdrawals (43,875,738) (262,275,340)
-------------- ------------------
Net Increase (Decrease) from Investors'
Transactions 5,327,272 (145,449,197)
-------------- ------------------
Total Increase (Decrease) in Net Assets 12,210,950 (120,219,904)
NET ASSETS
Beginning of Period 145,903,013 266,122,917
-------------- ------------------
End of Period $ 158,113,963 $ 145,903,013
-------------- ------------------
-------------- ------------------
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
OCTOBER 11, 1994
FOR THE (COMMENCEMENT OF
SIX MONTHS ENDED FOR THE FISCAL OPERATIONS) TO
MARCH 31, 1997 YEAR ENDED SEPTEMBER 30,
(UNAUDITED) SEPTEMBER 30, 1996 1995
---------------- ------------------ ----------------
<S> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Expenses 0.53%(a) 0.51% 0.55%(a)
Net Investment Income 4.99%(a) 5.34% 5.73%(a)
Portfolio Turnover 111%(b) 330% 288%(b)
</TABLE>
- ------------------------
(a) Annualized.
(b) Not annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
24
<PAGE>
THE NON-U.S. FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31,1997
- --------------------------------------------------------------------------------
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 (the "Act"), 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's investment
objective is to provide a high total return, consistent with moderate risk of
capital, from a portfolio of international fixed income securities. 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.
Investments in international markets may involve certain considerations and
risks not typically associated with investments in the United States. Future
economic and political developments in foreign countries could adversely affect
the liquidity or value, or both, of such securities in which the Portfolio is
invested. The ability of the issuers of the debt securities held by the
Portfolio to meet their obligations may be affected by economic and political
developments in a specific industy or region.
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)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 rates prevailing on the
respective dates of such transactions. Translation gains and losses
resulting from changes in the exchange rates during the reporting period
and gains and losses realized upon settlement of foreign currency
transactions are reported in the Statement of Operations.
25
<PAGE>
THE NON-U.S. FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
MARCH 31,1997
- --------------------------------------------------------------------------------
Although the net assets of the Portfolio are presented at the exchange
rates and market values prevailing at the end of the period, the Portfolio
does not isolate the portion of the results of operations arising as a
result of changes in foreign exchange rates from the fluctuations arising
from changes in the market prices of securities during the period.
c)Securities transactions are recorded on a trade date basis. Interest
income, which includes the amortization of premiums and discounts, if any,
is recorded on an accrual basis. For financial and tax reporting purposes,
realized gains and losses are determined on the basis of specific lot
identification.
d)The portfolio may enter into forward and spot foreign currency contracts
to protect securities and related receivables and payables against
fluctuations in future foreign currency rates. A forward contract is an
agreement to buy or sell currencies of different countries on a specified
future date at a specified rate. Risks associated with such contracts
include the movement in the value of the foreign currency relative to the
U.S. dollar and the ability of the counterparty to perform.
The market value of the contract will fluctuate with changes in currency
exchange rates. Contracts are valued daily 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 forward and spot foreign currency contract
translations. At March 31, 1997, the Portfolio had open forward 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 3/31/97 (DEPRECIATION)
- ------------------------------------------------- ------------- ----------- --------------
<S> <C> <C> <C>
Australian Dollar 265,560, expiring 5/14/97...... $ 207,562 $ 207,979 $ 417
British Pound 118,027, expiring 5/14/97.......... 192,048 194,108 2,060
Canadian Dollar 4,057,317, expiring 5/14/97...... 2,981,130 2,940,417 (40,713)
Finnish Markka 8,124,398, expiring 5/14/97....... 1,593,019 1,644,337 51,318
French Franc 1,848,159, expiring 5/14/97......... 326,588 330,325 3,737
German Mark 11,758,106, expiring 5/14/97......... 6,980,723 7,081,085 100,362
Italian Lira 549,469,740, expiring 5/14/97....... 324,636 329,432 4,796
Japanese Yen 699,215,507, expiring 5/14/97....... 5,735,976 5,695,553 (40,423)
</TABLE>
26
<PAGE>
THE NON-U.S. FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
MARCH 31,1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. DOLLAR NET UNREALIZED
VALUE AT APPRECIATION/
SALES CONTRACTS COST/PROCEEDS 3/31/97 (DEPRECIATION)
- ------------------------------------------------- ------------- ----------- --------------
<S> <C> <C> <C>
Australian Dollar 14,381,744, expiring 5/14/97... $ 11,347,196 $11,263,385 $ 83,811
Belgium Franc 198,511,735, expiring 5/14/97...... 5,623,562 5,787,928 (164,366)
British Pound 11,539,784, expiring 5/14/97....... 18,515,994 18,978,442 (462,448)
Canadian Dollar 18,962,586, expiring 5/14/97..... 13,907,287 13,742,558 164,729
Finnish Markka 7,300,764, expiring 5/14/97....... 1,428,721 1,477,638 (48,917)
French Franc 60,545,849, expiring 5/14/97........ 10,494,258 10,821,482 (327,224)
German Mark 34,411,203, expiring 5/14/97......... 20,094,133 20,723,461 (629,328)
Italian Lira 21,486,271,323, expiring 5/14/97.... 12,583,468 12,881,993 (298,525)
Japanese Yen 6,068,448,872, expiring 5/14/97..... 49,927,132 49,431,360 495,772
Netherland Guilder 10,512,406, expiring
5/14/97......................................... 5,452,493 5,627,174 (174,681)
Spanish Peseta 776,181,879, expiring 5/14/97..... 5,330,773 5,500,037 (169,264)
Swedish Krona 44,897,962, expiring 5/14/97....... 5,846,089 5,979,474 (133,385)
--------------
NET UNREALIZED DEPRECIATION ON FORWARD FOREIGN
CURRENCY CONTRACTS.............................. $ (1,582,272)
--------------
--------------
</TABLE>
e)Futures -- A futures contract is an agreement to purchase/sell a specified
quantity of an underlying instrument at a specified future date or to
make/receive a cash payment based on the value of a securities index. The
price at which the purchase and sale will take place is fixed when the
Portfolio enters into the contract. Upon entering into such a contract,
the Portfolio is required to pledge to the broker an amount of cash and/or
securities equal to the minimum "initial margin" requirements of the
exchange. Pursuant to the contract, the Portfolio agrees to receive from
or pay to the broker an amount of cash equal to the daily fluctuation in
the value of the contract. Such receipts or payments are 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 solely for the purpose of hedging
its existing portfolio securities, or securities the Portfolio intends to
purchase, against fluctuations in value caused by changes in prevailing
market interest rates or securities movements. The use of futures
transactions involves the risk of imperfect correlation in movements in
the price of futures contracts, interest rates and the underlying hedged
assets, and the possible inability of counterparties to meet the terms of
their contracts. Futures transactions during the six months ended March
31, 1997 are summarized as follows:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
NUMBER OF CONTRACTS OF CONTRACTS
------------------- ----------------
<S> <C> <C>
Contracts open at beginning of period............ 14 $ 1,121,505
Contracts opened................................. 339 39,566,381
Contracts closed................................. (256) (30,782,042)
------------------- ----------------
Contracts open at end of period.................. 97 $ 9,905,844
------------------- ----------------
------------------- ----------------
</TABLE>
27
<PAGE>
THE NON-U.S. FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
MARCH 31,1997
- --------------------------------------------------------------------------------
SUMMARY OF OPEN CONTRACTS AT MARCH 31, 1997
<TABLE>
<CAPTION>
NET UNREALIZED
APPRECIATION/
CONTRACTS LONG (DEPRECIATION)
--------------- --------------
<S> <C> <C>
Ten-Year German Liffe, expiring June 1997........ 26 $ (104,361)
Fifteen-Year Treasury Gilt, expiring June 1997... 57 (143,794)
Ten-Year Spanish Government Note, expiring June
1997............................................ 20 (21,280)
</TABLE>
<TABLE>
<CAPTION>
CONTRACTS SHORT
---------------
<S> <C> <C>
Ten-Year Italian Government Note, expiring June
1997............................................ (6) 26,332
--------------- --------------
Totals........................................... 97 $ (243,103)
--------------- --------------
--------------- --------------
</TABLE>
f)The Portfolio intends to be treated as a partnership for federal income
tax purposes. As such, each investor in the Portfolio will be taxed on its
share of the Portfolio's ordinary income and capital gains. It is intended
that the Portfolio's assets will be managed in such a way that an investor
in the Portfolio will be able to satisfy the requirements of Subchapter M
of the Internal Revenue Code. The Portfolio earns foreign income which may
be subject to foreign withholding taxes at various rates.
2. TRANSACTIONS WITH AFFILIATES
a)The Portfolio has an Investment Advisory Agreement with Morgan Guaranty
Trust Company of New York ("Morgan"). Under the terms of the agreement,
the Portfolio pays Morgan at an annual rate of 0.35% of the Portfolio's
average daily net assets. For the six months ended March 31, 1997, such
fees amounted to $266,522.
b)The Portfolio has retained Funds Distributor, Inc. ("FDI"), a registered
broker-dealer, to serve as co-administrator and exclusive placement agent.
Under a Co-Administration Agreement, 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. Under
the Co-Administration Agreement, 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 The JPM Pierpont Funds, The JPM Institutional Funds, The JPM
Advisor Funds, the Portfolio and other portfolios (the "Master
Portfolios") in which The JPM Pierpont Funds, The JPM Institutional Funds
and The JPM Advisor Funds invest, JPM Series Trust and JPM Series Trust
II. For the six months ended March 31, 1997, the fee for these services
amounted to $1,944.
On November 15, 1996, The JPM Advisor Funds terminated operations and were
liquidated. Subsequent to that date, the net assets of the JPM Advisor
Funds were no longer included in the calculation of the allocation of
FDI's fees.
c)The Portfolio has an Administrative Services Agreement (the "Services
Agreement") with Morgan under which Morgan is responsible for overseeing
certain aspects of the administration and operation of
28
<PAGE>
THE NON-U.S. FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
MARCH 31,1997
- --------------------------------------------------------------------------------
the Portfolio. Under the Services Agreement, the Portfolio has agreed to
pay Morgan a fee equal to its proportionate share of an annual
complex-wide charge. This charge is calculated daily based on the
aggregate net assets of the Master Portfolios and JPM 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 paid by the
Portfolio is determined by the proportionate share that its net assets
bear to the net assets of the Master Portfolios, investors in the Master
Portfolios for which Morgan provides similar services, and JPM Series
Trust. For the six months ended March 31, 1997, the fee for these services
amounted to $24,061.
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 $2,802 for the six months ended March 31, 1997.
e)An aggregate annual fee of $65,000 is paid to each Trustee for serving as
a Trustee of The JPM Pierpont Funds, The JPM Institutional Funds, the
Master Portfolios and JPM 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 $400.
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the six months
ended March 31, 1997 were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
- ---------------------- ------------
<S> <C>
$160,061,356........... $146,756,244
</TABLE>
29
