<PAGE>
LETTER TO THE SHAREHOLDERS OF THE JPM INSTITUTIONAL BOND FUND
December 15, 1995
Dear Shareholder:
Bond investors enjoyed an unexpectedly delightful 1995, as the bond market
produced double-digit returns due to a falling interest rate environment. This
was in sharp contrast to 1994, when returns dipped into negative territory for
much of the year as rates increased. In the changing interest rate environment,
The JPM Institutional Bond Fund returned 15.50% for its fiscal year ended
October 31, 1995. For the same period, the average bond mutual fund, as measured
by the Composite High Quality Intermediate Corporate Bond Fund Average*,
returned 13.69%, and the Salomon Brothers Broad Investment Grade Index returned
15.71%.
The Fund seeks to reduce risk and increase consistency of returns by
diversifying its holdings and its sources of added value. This diversified
strategy proved especially beneficial during the period as the Fund's sector and
security selection decisions added value, while its defensive duration position
held it back slightly early in 1995. Specifically, we maintained a lower risk,
defensive strategy with regard to interest rates during the first quarter --
when the bond bull market commenced. As evidence of the economic slowdown
accumulated, we moved to a slightly positive posture on interest rates, which
has added value throughout the remainder of the year.
For the period under review, the Fund's net asset value increased from $9.23 per
share on October 31, 1994 to end at $9.98, after paying dividends of
approximately $0.63 per share from ordinary income. The Fund's net assets stood
at $438.6 million at the end of the reporting period, up from $253.2 million on
October 31, 1994. The net assets of The U.S. Fixed Income Portfolio, in which
the Fund invests, totaled approximately $581.9 million on October 31, 1995.
MARKET ENVIRONMENT
After declining dramatically in 1994, the bond market switched direction in
early 1995. Rapid economic growth and fears of inflation early in the period
caused the Federal Reserve to continue its program of raising short-term
interest rates. As a result, Treasury yields of all maturities rose. As the
economy began showing signs of a slowdown and it became clearer that additional
rate increases were unlikely, Treasury yields declined and prices rallied. By
the time the Fed lowered rates in July, however, the bond market had already
priced-in this action. By the end of the period, mixed to weak economic data
caused the market to anticipate another Fed easing, as indicated by longer-term
note and bond rates falling below the Fed funds level.
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
LETTER TO THE SHAREHOLDERS...............1 FUND PERFORMANCE...............4
FUND FACTS AND HIGHLIGHTS................3 FINANCIAL STATEMENTS...........6
- --------------------------------------------------------------------------------
1
<PAGE>
PORTFOLIO REVIEW
The Portfolio's investment process involves three key decisions to diversify its
sources of return potential: duration management, sector allocation, and
security selection. This diversified approach is designed to help consistently
add value under all market conditions.
DURATION MANAGEMENT. Duration is the measure of a fund's sensitivity to interest
rate changes, which is closely related to the average maturity of the bonds in a
portfolio. As mentioned previously, the Portfolio began the period with a
relatively short duration. As interest rates began to change direction, however,
we lengthened to a slightly long duration position by the end of the period.
SECTOR ALLOCATION. During the period, we actively managed the Portfolio's
allocations to Treasuries, corporates, and mortgages based on their relative
attractiveness. For example, we began the period modestly overweighted in
corporates relative to the Salomon BIG Index, and we were adding slightly to its
mortgage position because of the relative value offered by this market.
Conversely, we decreased our allocations to corporates and mortgages in early
1995, fearing that yield spreads would widen and these sectors would
underperform. The Portfolio ended the period slightly overweighted in corporates
and neutral to underweighted in mortgages.
SECURITY SELECTION. Security selection added value to performance during this
period. The Portfolio maintained its focus on high-quality issues, keeping the
average quality of Portfolio holdings between AA and AAA.
INVESTMENT OUTLOOK
We continue to maintain the duration of the Portfolio slightly longer than the
Index, seeking to capture value through actively trading securities for the near
term. The economy continues to exhibit sluggish growth, and measures of its
performance are mixed. Over the longer term, the bond market should be helped by
deficit reduction action in Washington and by benign inflation data.
We also continue to slightly overweight corporates, taking advantage of their
present yield advantage. We expect that their yield spreads versus Treasuries
will remain stable in the near future.
As always, we welcome your comments or questions. Please call J.P. Morgan Funds
Services toll free at (800) 766-7722.
Sincerely yours,
/s/ Evelyn E. Guernsey
Evelyn E. Guernsey
J.P. Morgan Funds Services
*THE COMPOSITE HIGH QUALITY INTERMEDIATE CORPORATE BOND FUND AVERAGE PERFORMANCE
IS COMPUTED ON ALL FUNDS IN THE MORNINGSTAR UNIVERSE HAVING A HIGH-QUALITY
CORPORATE BOND OBJECTIVE AND AN INTERMEDIATE MATURITY.
2
<PAGE>
FUND FACTS
INVESTMENT OBJECTIVE
The JPM Institutional Bond Fund seeks to provide high total return consistent
with moderate risk of capital and maintenance of liquidity. It is designed for
investors who seek a total return that is higher than that generally available
from short-term obli-gations while recognizing the greater price fluctuation of
longer-term instruments.
- --------------------------------------------------------------------------------
COMMENCEMENT OF OPERATIONS
7/12/93
- --------------------------------------------------------------------------------
NET ASSETS AS OF 10/31/95
$438,610,435
- --------------------------------------------------------------------------------
DIVIDEND PAYABLE DATES
MONTHLY
- --------------------------------------------------------------------------------
CAPITAL GAIN PAYABLE DATE (IF APPLICABLE)
12/18/95
- --------------------------------------------------------------------------------
EXPENSE RATIO
The Fund's annualized expense ratio of 0.47% covers shareholders' expenses for
custody, tax reporting, investment advisory and shareholder services, after
reimbursement. The Fund is no-load and does not charge any sales, redemption,
or exchange fees. There are no additional charges for buying, selling, or
safekeeping Fund shares, or for wiring redemption proceeds from the Fund.
FUND HIGHLIGHTS
ALL DATA AS OF OCTOBER 31, 1995
PORTFOLIO ALLOCATION
(PERCENTAGE OF TOTAL INVESTMENTS)
[pie graph]
/ / U.S. TREASURY OBLIGATIONS 41.1%
/ / CORPORATE OBLIGATIONS 37.9%
/ / U.S. AGENCY OBLIGATIONS 15.5%
/ / COLLATERALIZED MORTGAGE OBLIGATIONS AND ASSED BACKED
SECURITIES 3.6%
/ / SHORT-TERM HOLDINGS 1.6%
/ / CONVERTIBLE PREFERRED STOCK 0.3%
30-DAY SEC YIELD
6.28%
DURATION
4.7 years
QUALITY BREAKDOWN
AAA* 61%
AA 3%
A 16%
Other 20%
*Includes U.S. government agency, Treasury obligations, and cash.
3
<PAGE>
FUND PERFORMANCE
EXAMINING PERFORMANCE
There are several ways to evaluate a mutual fund's historical performance
record. One approach is to look at the growth of a hypothetical investment of
$5,000,000. The chart at right shows that the minimum invested at the Fund's
inception would have grown to $9,262,141 at October 31, 1995.
Another way to look at performance is to review a fund's average annual total
return. This figure takes the fund's actual (or cumulative) return and shows you
what would have happened if the fund had achieved that return by performing at a
constant rate each year. Average annual total returns represent the average
yearly change of a fund's value over various time periods, typically 1, 5, or 10
years (or since inception). Total returns for periods of less than one year are
not annualized and provide a picture of how a fund has performed over the
short term.
GROWTH OF $5,000,000 SINCE INCEPTION*
MARCH 11, 1988 - OCTOBER 31, 1995
THE JPM INSTITUTIONAL BOND FUND LINE CHART
DOLLARS IN THOUSANDS
THE JPM
INSTITUTIONAL SALOMON
BOND FUND BIG
3/88 5000.00 5000.00
10/88 5156.00 5259.00
10/89 5582.40 5880.09
10/90 6072.54 6256.41
10/91 6773.91 7241.80
10/92 7407.27 7972.50
10/93 8295.41 8926.80
10/94 8019.17 8606.33
10/95 9262.14 9958.39
PERFORMANCE TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURN
---------------------------------------------
THREE SIX ONE FIVE SINCE
AS OF OCTOBER 31, 1995 MONTHS MONTHS YEAR YEARS INCEPTION*
- ------------------------------- ---------------------------------------------
The JPM Institutional Bond Fund 3.78% 8.34% 15.50% 8.81% 8.46%
Salomon BIG** 3.47% 8.11% 15.71% 9.74% 9.51%
Composite High Quality
Int. Corporate Bond
Fund Average 3.21% 7.36% 13.69% 8.69% 7.55%
AS OF SEPTEMBER 30, 1995
- ------------------------------- ---------------------------------------------
The JPM Institutional Bond Fund 1.90% 8.32% 13.62% 8.74% 8.35%
Salomon BIG** 1.90% 8.15% 14.06% 9.72% 9.42%
Composite High Quality
Int. Corporate Bond
Fund Average 1.72% 7.45% 12.21% 8.60% 7.47%
*3/11/88 IS THE INCEPTION DATE OF THE PIERPONT BOND FUND, THE PREDECESSOR
ENTITY TO THE U.S. FIXED INCOME PORTFOLIO, WHICH HAS A SUBSTANTIALLY SIMILAR
INVESTMENT OBJECTIVE AND RESTRICTIONS AS THE JPM INSTITUTIONAL BOND FUND.
(AVERAGE ANNUAL TOTAL RETURNS BASED ON MONTH END FOLLOWING INCEPTION OF THE
PIERPONT BOND FUND.)
**THE SALOMON BROTHERS BROAD INVESTMENT GRADE BOND INDEX.
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. ALL RETURNS ASSUME THE
REINVESTMENT OF DISTRIBUTIONS AND MAY REFLECT REIMBURSEMENT OF CERTAIN FUND AND
PORTFOLIO EXPENSES AS DESCRIBED IN THE PROSPECTUS. THE COMPOSITE HIGH QUALITY
INTERMEDIATE CORPORATE BOND FUND AVERAGE PERFORMANCE IS COMPUTED ON ALL FUNDS IN
THE MORNINGSTAR UNIVERSE HAVING A HIGH QUALITY CORPORATE BOND OBJECTIVE AND AN
INTERMEDIATE MATURITY. MORNINGSTAR, INC. IS A LEADING RESOURCE FOR MUTUAL FUND
DATA. ALTHOUGH GATHERED FROM RELIABLE SOURCES, DATA ACCURACY AND COMPLETENESS
CANNOT BE GUARANTEED. THE FUND INVESTS ALL OF ITS INVESTABLE ASSETS IN THE U.S.
FIXED INCOME PORTFOLIO, A SEPARATELY REGISTERED INVESTMENT COMPANY WHICH IS NOT
AVAILABLE TO THE PUBLIC BUT ONLY TO OTHER COLLECTIVE INVESTMENT VEHICLES SUCH AS
THE FUND.
4
<PAGE>
SIGNATURE BROKER-DEALER SERVICES, INC. IS THE DISTRIBUTOR OF THE JPM
INSTITUTIONAL BOND FUND (THE "FUND").
MORGAN GUARANTY TRUST COMPANY OF NEW YORK ("MORGAN") SERVES AS PORTFOLIO
INVESTMENT ADVISOR AND MAKES THE FUND AVAILABLE SOLELY IN ITS CAPACITY AS
SHAREHOLDER SERVICING AGENT FOR CUSTOMERS. INVESTMENTS IN THE FUND ARE NOT
DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, MORGAN OR ANY OTHER
BANK. SHARES OF THE FUND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENTAL
AGENCY. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND CAN
FLUCTUATE, SO AN INVESTOR'S SHARES WHEN REDEEMED MAY BE WORTH MORE OR LESS THAN
THEIR ORIGINAL COST.
Performance data quoted herein represent past performance. Please remember that
past performance is not a guarantee of future performance. Fund returns are net
of fees, assume the reinvestment of Fund distributions, and may reflect the
reimbursement of Fund expenses. Had expenses not been subsidized, returns would
have been lower. The Fund invests all of its investable assets in The U.S. Fixed
Income Portfolio, a separately registered investment company which is not
available to the public but only to other collective investment vehicles such as
the Fund. Consistent with applicable regulatory guidance, performance for the
Fund prior to July 12, 1993, reflects the performance of The Pierpont Bond
Fund, the predecessor entity to the Portfolio, which had a substantially similar
investment objective and restrictions as the Fund. Performance for the period
prior to July 12, 1993, reflects deduction of the charges and expenses of The
Pierpont Bond Fund, which were higher than the estimated charges and expenses
for the Fund, after reimbursements.
MORE COMPLETE INFORMATION ABOUT THE FUND, INCLUDING MANAGEMENT FEES AND OTHER
EXPENSES, IS PROVIDED IN THE PROSPECTUS, WHICH SHOULD BE READ CAREFULLY BEFORE
INVESTING. YOU MAY OBTAIN ADDITIONAL COPIES OF THE PROSPECTUS BY CALLING J.P.
MORGAN FUNDS SERVICES AT (800) 766-7722.
5
<PAGE>
THE JPM INSTITUTIONAL BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets
Investment in The U.S. Fixed Income Portfolio ("Portfolio"), at value $438,784,743
Receivable for Shares of Beneficial Interest Sold 1,222,527
Deferred Organization Expenses 26,294
Prepaid Expenses 4,282
-----------
Total Assets 440,037,846
-----------
Liabilities
Dividend Payable 1,323,919
Payable for Shares of Beneficial Interest Redeemed 4,382
Shareholder Servicing Fee Payable 17,568
Administration Fee Payable 8,705
Fund Services Fee Payable 2,805
Accrued Expenses 70,032
-----------
Total Liabilities 1,427,411
-----------
Net Assets
Applicable to 43,963,712 Shares of Beneficial Interest Outstanding
(unlimited authorized shares, par value $0.001) $438,610,435
-----------
-----------
Net Asset Value, Offering and Redemption Price Per Share $9.98
-----------
-----------
Analysis of Net Assets
Paid-In Capital $423,830,946
Undistributed Net Investment Income 432,830
Accumulated Net Realized Gain on Investment 1,262,194
Net Unrealized Appreciation of Investment 13,084,465
-----------
Net Assets $438,610,435
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
6
<PAGE>
THE JPM INSTITUTIONAL BOND FUND
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment Income Allocated from Portfolio
$22,691,163
Interest Income
97,142
Dividend Income
(1,252,787)
Portfolio Expenses
----------
21,535,518
Net Investment Income Allocated from Portfolio
Fund Expenses
$ 161,357
Shareholder Servicing Fee
85,904
Administration Fee
38,944
Registration Fees
29,276
Fund Services Fee
17,378
Transfer Agent Fees
15,000
Printing
13,085
Professional Fees
11,249
Amortization of Organization Expenses
8,176
Trustees' Fees and Expenses
20,629
Miscellaneous
---------
400,998
Total Fund Expenses
(146,399)
Less: Reimbursement of Expenses
---------
(254,599)
Net Fund Expenses
----------
21,280,919
Net Investment Income
6,128,348
Net Realized Gain on Investment Allocated from Portfolio
18,701,915
Net Change in Unrealized Appreciation of Investment Allocated from
Portfolio
----------
$46,111,182
Net Increase in Net Assets Resulting from Operations
----------
----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
7
<PAGE>
THE JPM INSTITUTIONAL BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Fiscal Year Ended
October 31,
------------------------------
1995 1994
-------------- --------------
<S> <C> <C>
Increase (Decrease) in Net Assets
From Operations
Net Investment Income $ 21,280,919 $ 7,601,786
Net Realized Gain (Loss) on Investment Allocated from Portfolio 6,128,348 (4,519,466)
Net Change in Unrealized Appreciation (Depreciation) of Investment Allocated
from Portfolio 18,701,915 (5,930,953)
-------------- --------------
Net Increase (Decrease) in Net Assets Resulting from Operations 46,111,182 (2,848,633)
-------------- --------------
Distributions to Shareholders from
Net Investment Income (21,287,883) (7,599,843)
Net Realized Gain -- (190,150)
-------------- --------------
Total Distributions to Shareholders (21,287,883) (7,789,993)
-------------- --------------
Transactions in Shares of Beneficial Interest
Proceeds from Shares of Beneficial Interest Sold 199,579,863 234,725,070
Reinvestment of Distributions 9,630,186 5,257,669
Cost of Shares of Beneficial Interest Redeemed (48,596,499) (19,881,774)
-------------- --------------
Net Increase from Transactions in Shares of Beneficial Interest 160,613,550 220,100,965
-------------- --------------
Total Increase in Net Assets 185,436,849 209,462,339
Net Assets
Beginning of Fiscal Year 253,173,586 43,711,247
-------------- --------------
End of Fiscal Year (including undistributed net investment income of $432,830
and $1,943, respectively) $ 438,610,435 $ 253,173,586
-------------- --------------
-------------- --------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
8
<PAGE>
THE JPM INSTITUTIONAL BOND FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share outstanding throughout each period are as follows:
<TABLE>
<CAPTION>
For the period
For the Fiscal Year Ended July 12, 1993
October 31, (commencement of
-------------------------- operations) through
1995 1994 October 31, 1993
------------ ------------ -------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $ 9.23 $ 10.14 $ 10.00
------------ ------------ -------
Income from Investment Operations
Net Investment Income 0.63 0.55 0.15
Net Realized and Unrealized Gain (Loss) on Investment Allocated
from Portfolio 0.75 (0.88) 0.14
------------ ------------ -------
Total from Investment Operations 1.38 (0.33) 0.29
------------ ------------ -------
Less Distributions to Shareholders from
Net Investment Income (0.63) (0.55) (0.15)
Net Realized Gain -- (0.03) --
------------ ------------ -------
Total Distributions to Shareholders (0.63) (0.58) (0.15)
------------ ------------ -------
Net Asset Value, End of Period $ 9.98 $ 9.23 $ 10.14
------------ ------------ -------
------------ ------------ -------
Total Return 15.50% (3.33)% 2.90%(a)
------------ ------------ -------
------------ ------------ -------
Ratios and Supplemental Data
Net Assets at End of Period (in thousands) $ 438,610 $ 253,174 $ 43,711
Ratios to Average Net Assets:
Expenses 0.47% 0.50% 0.50%(b)
Net Investment Income 6.62% 6.00% 4.83%(b)
Decrease Reflected in Expense Ratio due to Expense
Reimbursements by Morgan 0.05% 0.19% 0.39%(b)
</TABLE>
- -------------------
(a) Not annualized.
(b) Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
9
<PAGE>
THE JPM INSTITUTIONAL BOND FUND
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
1. Organization and Significant Accounting Policies
The JPM Institutional Bond Fund (the "Fund") is a separate series of The JPM
Institutional Funds, a Massachusetts business trust (the "Trust"). The Trust
is registered under the Investment Company Act of 1940, as amended, as a
diversified open-end management investment company. The Fund commenced
operations on July 12, 1993.
The Fund invests all of its investable assets in The U.S. Fixed Income
Portfolio (the "Portfolio"), a diversified open-end management investment
company having the same investment objectives as the Fund. The value of such
investment reflects the Fund's proportionate interest in the net assets of
the Portfolio (75% at October 31, 1995). The performance of the Fund is
directly affected by the performance of the Portfolio. The financial
statements of the Portfolio, including the schedule of investments, are
included elsewhere in this report and should be read in conjunction with the
Fund's financial statements.
The following is a summary of the significant accounting policies of the Fund:
a)Valuation of securities by the Portfolio is discussed in Note 1 of the
Portfolio's Notes to Financial Statements which are included elsewhere in
this report.
b)The Fund records its share of net investment income, realized and
unrealized gain and loss and adjusts its investment in the Portfolio each
day. All the net investment income and realized and unrealized gain and
loss of the Portfolio is allocated pro rata among the Fund and other
investors in the Portfolio at the time of such determination.
c)Substantially all the Fund's net investment income is declared as
dividends daily and paid monthly. Distributions to shareholders of net
realized capital gain, if any, are declared and paid annually.
d)The Fund incurred organization expenses in the amount of $49,295. These
costs were deferred and are being amortized by the Fund on a straight-line
basis over a five-year period from the commencement of operations.
e)Each series of the Trust is treated as a separate entity for federal
income tax purposes. The Fund intends to comply with the provisions of the
Internal Revenue Code of 1986, as amended, applicable to regulated
investment companies and to distribute substantially all of its income,
including net realized capital gains, if any, within the prescribed time
periods. Accordingly, no provision for federal income or excise tax is
necessary.
f)Expenses incurred by the Trust with respect to any two or more funds in
the Trust are allocated in proportion to the net assets of each fund in
the Trust, except where allocations of direct expenses to each fund can
otherwise be made fairly. Expenses directly attributable to a fund are
charged to that fund.
g)The Fund accounts for and reports distributions to shareholders in
accordance with Statement of Position 93-2 "Determination, Disclosure, and
Financial Statement Presentation of Income, Capital Gain, and Return of
Capital Distributions by Investment Companies." The effect of applying
this
10
<PAGE>
THE JPM INSTITUTIONAL BOND FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
statement was to increase Undistributed Net Investment Income by $437,851,
increase Paid-in Capital by $25,794 and decrease Accumulated Net Realized
Gain on Investment by $463,645. Net investment income, net realized gains
and net assets were not affected by this change.
h)For United States federal income tax purposes, the Fund utilized
approximately $4,333,572 of capital loss carryforwards to offset the
Fund's net taxable gains realized and recognized in the year ended October
31, 1995.
2. Transactions with Affiliates
a)The Trust retains Signature Broker-Dealer Services, Inc. ("Signature") to
serve as Administrator and Distributor. Signature provides administrative
services necessary for the operations of the Fund, furnishes office space
and facilities required for conducting the business of the Fund and pays
the compensation of the Fund'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: 0.04% of the first $1 billion of the
aggregate average daily net assets of the Trust, as well as two other
affiliated fund families for which Signature acts as administrator, 0.032%
of the next $2 billion of such net assets, 0.024% of the next $2 billion
of such net assets, and 0.016% of such net assets in excess of $5 billion.
The daily equivalent of the fee rate is applied each day to the daily net
assets of the Fund. For the fiscal year ended October 31, 1995,
Signature's fee for these services amounted to $85,904.
b)During the period November 1, 1994, through August 31, 1995, the Trust, on
behalf of the Fund, had a Financial and Fund Accounting Services Agreement
("Services Agreement") with Morgan Guaranty Trust Company of New York
("Morgan") under which Morgan may receive a fee, based on the percentage
described below, for overseeing certain aspects of the administration and
operation of the Fund and which was also designed to provide an expense
limit for certain expenses of the Fund. This fee was calculated exclusive
of the shareholder servicing fee, the fund services fee and amortization
of organization expenses, at 0.05% of the Fund's average daily net assets.
For the period November 1, 1994 through August 31, 1995, Morgan agreed to
reimburse the Fund $35,078 for the expenses that exceeded this limit.
Effective September 1, 1995 the Services Agreement was terminated and an
interim agreement was entered into between the Trust, on behalf of the
Fund, and Morgan which provides for the continuation of the oversight of
the services that were outlined under the prior agreement and that Morgan
shall bear all of its expenses incurred in connection with these services.
In addition, Morgan has agreed to reimburse the Fund to the extent
necessary to maintain the total operating expenses of the Fund, including
the expenses allocated to the Fund from the Portfolio, at no more than
0.50% of the average daily net assets of the Fund through February 28,
1997. For the fiscal year ended October 31, 1995, Morgan has agreed to
reimburse the Fund $111,321 for expenses under this agreement.
c)The Trust, on behalf of the Fund, has a Shareholder Servicing Agreement
with Morgan. The Agreement provides for the Fund to pay Morgan a fee for
these services which is computed daily and may be paid monthly at an
annual rate of 0.05% of the average daily net assets of the Fund. For the
fiscal year ended October 31, 1995, the fee for these services amounted to
$161,357.
d)The Trust, on behalf of the Fund, has a Fund Services Agreement with
Pierpont Group, Inc. ("Group") to assist the Trustees in exercising their
overall supervisory responsibilities for the
11
<PAGE>
THE JPM INSTITUTIONAL BOND FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
Trust's affairs. The Trustees of the Trust represent all the existing
shareholders of Group. The Fund's allocated portion of Group's costs in
performing its services amounted to $29,276 for the for the fiscal year
ended October 31, 1995.
e)An aggregate annual fee of $65,000 is paid to each Trustee for serving as
a Trustee of The Pierpont Funds, The JPM Institutional Funds and their
corresponding Portfolios. The Trustees' Fees and Expenses shown in the
financial statements represent the Fund'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
$3,800.
3. Transactions in Shares of Beneficial Interest
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest of one or more series.
Transactions in shares of beneficial interest of the Fund were as follows:
<TABLE>
<CAPTION>
For the Fiscal Year Ended
October 31,
--------------------------
1995 1994
------------ ------------
<S> <C> <C>
Shares sold 20,689,217 24,639,271
Reinvestments of dividends and distributions 1,000,811 551,323
Shares redeemed (5,143,975) (2,084,575)
------------ ------------
Net increase 16,546,053 23,106,019
------------ ------------
------------ ------------
</TABLE>
12
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of
The JPM Institutional Bond Fund
In our opinion, the accompanying statement of assets and liabilities and the
related statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
The JPM Institutional Bond Fund (one of the series constituting part of the JPM
Institutional Funds, hereafter referred to as the "Fund") at October 31, 1995,
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 the financial
highlights for each of the two years in the period then ended and for the period
July 12, 1993 (commencement of operations) through October 31, 1993, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund'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 provide a reasonable basis for the opinion expressed above.
[LOGO]
PRICE WATERHOUSE LLP
New York, New York
December 22, 1995
13
<PAGE>
The U.S. Fixed Income Portfolio
Annual Report October 31, 1995
(The following pages should be read in conjunction
with The JPM Institutional Bond Fund
Annual Financial Statements)
14
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P
PRINCIPAL RATING
AMOUNT SECURITY DESCRIPTION (UNAUDITED) VALUE
- --------------- --------------------------------------------------------------------------- ----------- ------------
<C> <S> <C> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS AND ASSET
BACKED SECURITIES (3.6%)
FINANCE (3.6%)
$ 79,701 Advanta Home Equity Loan Trust, Series 92-2, Class A1, 7.15% due
06/25/08................................................................. Aaa/AAA $ 80,383
229,122 Case Equipment Loan Trust, Series 94-A, Class A2, 4.65% due 08/15/99....... Aaa/AAA 226,831
4,599,555 Collateralized Mortgage Obligation Trust II Class E, 9.00% due 06/20/17.... Aaa/AAA 4,824,152
3,000,000 Criimi Mae Financial Corporation Class A, 7.00% due 01/01/33............... NR/AAA 2,936,250
2,476 Fical Home Equity Loan Trust, Series 90-1 Class A, 8.90% due 10/15/15...... Aaa/NR 2,476
8,855,000 GE Capital Mortgage Services, Inc., Series 94-17, Class A5, 7.00% due
05/25/24................................................................. Aaa/AAA 8,943,107
1,854,087 Green Tree Financial Corp., Series 95-A Class A, 7.25% due 07/15/05........ Baa3/BBB+ 1,865,096
589,307 Green Tree Financial Corp., Series 94-A Class A, 6.90% due 02/15/04........ Baa3/BBB+ 589,491
37,297 Premier Auto Trust, Series 92-3, Class A, 5.90% due 11/17/97............... Aaa/AAA 37,275
1,258,125 Prudential Home Loan Mortgage Securities, Remic: PAC(11), Series 93-54,
Class A2, 6.50% due 01/25/24............................................. Aaa/AAA 1,254,175
196,691 Resolution Trust Corp., Remic: ARM Determined Interest Rate, Series 91-6,
Class A1, 6.9473% due 05/25/19........................................... Aaa/AAA 187,840
3,588 Sears Mortgage Securities, Remic: TAC(11), Series 92-3, Class T5, 7.75% due
02/25/20................................................................. NR/AAA 3,573
112,243 The Money Store Home Equity Trust, Series 92-A, Class A, 6.95% due
12/15/07................................................................. Aaa/AAA 112,650
------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS AND ASSET BACKED SECURITIES (COST
$20,270,036)............................................................. 21,063,299
------------
CORPORATE OBLIGATIONS (37.9%)
AUTOMOTIVE (1.3%)
7,325,000 Ford Motor Co., 9.50% due 05/30/97......................................... A1/A+ 7,708,683
------------
BANKING (10.7%)
1,925,000 BankAmerica Corp., 9.50% due 04/01/01...................................... A3/A- 2,188,359
1,300,000 BankAmerica Corp., 7.50% due 03/15/97...................................... A2/A 1,326,104
1,925,000 Capital One Bank, 8.625% due 01/15/97...................................... Baa3/BBB- 1,984,405
6,000,000 Central Fidelity Banks, Inc., 8.15% due 11/15/02........................... Baa2/BBB 6,476,820
1,600,000 Chemical Banking Corp., 10.125% due 11/01/00............................... A3/A- 1,855,520
5,000,000 First Chicago Corp., 8.25% due 06/15/02.................................... A3/A- 5,507,850
1,745,000 First Chicago Corp., 6.875% due 06/15/03................................... A3/A- 1,769,866
100,000 Fleet Financial Group Inc., 7.125% due 05/01/00............................ A2/A- 102,542
2,000,000 Mellon Bank, N.A., 6.75% due 06/01/03...................................... A2/A 2,003,060
4,660,000 NationsBank Corp., 10.20% due 07/15/15..................................... A3/A- 5,989,218
13,700,000 Norwest Corp., 6.75% due 05/12/00.......................................... Aa3/AA- 13,888,649
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
15
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P
PRINCIPAL RATING
AMOUNT SECURITY DESCRIPTION (UNAUDITED) VALUE
- --------------- --------------------------------------------------------------------------- ----------- ------------
BANKING (CONTINUED)
<C> <S> <C> <C>
$ 7,500,000 Shawmut National Corp., 8.625% due 12/15/99................................ Baa2/BBB- $ 8,029,800
11,000,000 Trans Financial Bank, 6.48% due 10/23/98................................... A1/A+ 10,973,270
------------
62,095,463
------------
CHEMICALS, OIL & GAS (3.5%)
2,277,000 E. I. Du Pont de Nemours & Co., 8.65% due 12/01/97......................... Aa2/AA 2,389,415
5,000,000 Occidental Petroleum Corp., 5.85% due 11/09/98............................. Baa3/BBB 4,932,250
1,000,000 Occidental Petroleum Corp., 5.84% due 11/09/98............................. Baa3/BBB 986,180
1,125,000 SFP Pipeline Holdings, Inc., 11.16% due 08/15/10........................... Baa3/NR 1,406,250
6,600,000 Texaco Capital, 9.00% due 11/15/96......................................... A1/A+ 6,809,286
4,000,000 Texas Eastern Corp., 8.50% due 02/04/97.................................... NR/NR 4,100,000
------------
20,623,381
------------
DEPARTMENT STORES (1.1%)
2,200,000 Sears Roebuck & Co., 8.52% due 05/13/02.................................... A2/BBB 2,427,788
4,000,000 Sears Roebuck & Co., 7.25% due 08/05/97.................................... A2/BBB 4,080,920
------------
6,508,708
------------
ELECTRICAL EQUIPMENT (0.8%)
2,000,000 Legrand S.A., 8.50% due 02/15/25........................................... A2/A 2,287,960
2,000,000 Mark IV Industries Inc., 8.75% due 04/01/03................................ Ba3/BB+ 2,085,000
------------
4,372,960
------------
FINANCE (12.5%)
100,000 Associates Corp., N.A., 8.125% due 01/15/98................................ Aa3/AA- 104,158
400,000 Associates Corp., N.A., 7.30% due 03/15/98................................. Aa3/AA- 410,564
95,196 Chevy Chase Auto Receivables Trust, 6.00% due 12/15/01..................... Aaa/AAA 95,192
18,250,000 Chrysler Financial Corp., Series MTNN, 7.36% due 03/14/97.................. A3/BBB 18,530,320
1,000,000 Chrysler Financial Corp., 7.20% due 03/17/97............................... A2/A- 1,013,380
25,000 Commercial Credit Group Inc., 7.375% due 11/15/96.......................... A1/A+ 25,351
2,620,761 Fleetwood Credit Corp Grantor Trust, Series 95-B 6.55% due 05/15/11........ Aaa/AAA 2,630,301
17,550,000 Ford Motor Credit Co., 6.25% due 11/08/00.................................. A1/A+ 17,499,644
400,000 General Motors Acceptance Corp., 7.85% due 11/17/97........................ Baa1/BBB+ 413,136
300,000 General Motors Acceptance Corp., 7.55% due 01/14/97........................ Baa1/BBB+ 305,322
100,000 General Motors Acceptance Corp., 7.375% due 02/27/97....................... Baa1/BBB+ 101,640
800,000 General Motors Acceptance Corp., 7.30% due 02/02/98........................ Baa1/BBB+ 819,088
5,175,000 General Motors Acceptance Corp., 6.90% due 09/09/97........................ Baa1/BBB+ 5,245,794
5,000,000 General Motors Acceptance Corp., 6.75% due 07/10/97........................ Baa1/BBB+ 5,052,300
2,200,000 General Motors Acceptance Corp., 6.70% due 04/18/97........................ Baa1/BBB+ 2,219,888
3,000,000 General Motors Acceptance Corp., 6.70% due 04/21/97........................ Baa1/BBB+ 3,015,630
4,500,000 General Motors Acceptance Corp., 6.625% due 05/15/98....................... Baa1/BBB+ 4,536,720
6,500,000 General Motors Acceptance Corp., 5.25% due 12/06/96........................ Baa1/BBB+ 6,448,130
4,000,000 USL Capital Corp., 7.76% due 03/29/02...................................... A1/A+ 4,226,680
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
16
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P
PRINCIPAL RATING
AMOUNT SECURITY DESCRIPTION (UNAUDITED) VALUE
- --------------- --------------------------------------------------------------------------- ----------- ------------
FINANCE (CONTINUED)
<C> <S> <C> <C>
$ 90,000 Western Financial Grantor Trust, Series 95-3, Class A1 6.05% due
11/01/00................................................................. Aaa/AAA $ 90,058
------------
72,783,296
------------
LUMBER & OTHER CONSTRUCTION MATERIALS (2.2%)
5,600,000 Georgia Pacific Corp., 9.95% due 06/15/02.................................. Baa2/BBB- 6,561,520
1,000,000 Schuller International Group Inc., 10.875% due 12/15/04.................... Ba3/BB- 1,112,500
4,000,000 USG Corp., 9.25% due 09/15/01.............................................. Ba3/BB 4,200,000
1,000,000 USG Corp., 8.50% due 08/01/05.............................................. Ba3/BB 1,031,250
------------
12,905,270
------------
TRANSPORTATION (1.2%)
6,719,014 Union Tank Car Co., 6.50% due 04/15/08..................................... A2/A+ 6,732,788
------------
UTILITIES (4.6%)
1,500,000 Cleveland Electric Illumination, 7.625% due 08/01/02....................... Ba2/BB 1,416,555
1,000,000 Cleveland Electric Illumination, 7.375% due 06/01/03....................... Ba2/BB 945,050
3,000,000 Commonwealth Edison Co., 7.00% due 02/15/97................................ Baa3/BBB- 3,026,190
3,000,000 Commonwealth Edison Co., 6.50% due 07/15/97................................ Baa3/BBB- 3,009,630
200,000 Commonwealth Edison Co., 6.50% due 04/15/00................................ Baa3/BBB- 199,186
500,000 Commonwealth Edison Co., Series 87, 6.25% due 10/01/97..................... Baa2/BBB 499,340
1,972,000 Connecticut Light & Power Co., Series UU, 7.625% due 04/01/97.............. Baa1/BBB+ 2,019,131
2,400,000 GTE Corp., 8.85% due 03/01/98.............................................. Baa1/BBB+ 2,528,568
7,240,000 Hydro-Quebec, 8.05% due 07/07/24........................................... A1/A+ 7,969,430
500,000 Jersey Central Power & Light, 6.70% due 12/19/97........................... Baa1/BBB+ 506,945
4,250,000 United Telephone Company of Florida, 8.375% due 01/15/25................... A2/A 4,850,015
------------
26,970,040
------------
TOTAL CORPORATE OBLIGATIONS (COST $215,980,630)............................ 220,700,589
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
17
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY DESCRIPTION VALUE
- --------------- ---------------------------------------------------------------------------------------- ------------
<C> <S> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS (15.5%)
FHA Insured
$ 3,368,477 7.43% due 03/01/22...................................................................... $ 3,292,341
Federal Home Loan Mortgage Corp.
1,391 12.50% due 08/01/14..................................................................... 1,527
29,688 Series 600, 10.00% due 04/01/09......................................................... 31,899
200,000 Series 39, Class F, 10.00% due 05/15/20................................................. 223,946
21,122 9.00% due 04/01/03...................................................................... 21,935
11,000,000 Gold, 8.506% due 12/01/04............................................................... 12,213,438
126,355 Gold, 8.50% due 11/01/24................................................................ 130,979
52,835 Gold, 8.50% due 01/01/25................................................................ 54,773
315,485 Gold, 8.50% due 04/01/25................................................................ 327,057
990,000 Gold, 8.50% due 04/01/25................................................................ 1,026,244
1,422,376 Gold, 8.50% due 04/01/25................................................................ 1,474,236
523,366 Gold, 8.50% due 05/01/25................................................................ 542,238
1,398,426 Gold, 8.50% due 05/01/25................................................................ 1,449,538
1,414,012 Gold, 8.50% due 06/01/25................................................................ 1,465,878
764,315 Gold, 8.50% due 07/01/24................................................................ 791,937
990,000 Gold, 8.50% due 08/01/25................................................................ 1,025,977
34,259 Gold, 8.50% due 09/01/25................................................................ 35,522
269,998 Gold, 8.50% due 09/01/25................................................................ 279,953
311,576 Gold, 8.50% due 10/01/25................................................................ 323,067
10,910,000 Gold, 8.00% TBA (t)..................................................................... 11,179,341
405,078 Gold, 7.00% due 04/01/24................................................................ 402,198
518,824 Gold, 7.00% due 06/01/24................................................................ 515,192
4,042,023 Gold, 7.00% due 07/01/25................................................................ 4,013,001
1,210,316 Gold, 7.00% due 08/01/25................................................................ 1,201,626
1,446,433 Gold, 7.00% due 08/01/25................................................................ 1,436,048
1,672,089 Gold, 7.00% due 08/01/25................................................................ 1,660,083
1,995,638 Gold, 7.00% due 08/01/25................................................................ 1,981,309
1,998,301 Gold, 7.00% due 08/01/25................................................................ 1,983,953
1,578,063 Gold, 7.00% due 09/01/25................................................................ 1,566,732
6,978,071 Gold, 6.50% due 06/01/04................................................................ 6,973,710
1,807,135 Gold, 6.00% due 08/01/10................................................................ 1,765,517
28,029 Gold, 6.00% due 09/01/10................................................................ 27,372
76,609 Gold, 6.00% due 09/01/10................................................................ 74,814
806,079 Gold, 6.00% due 09/01/10................................................................ 787,187
849,092 Gold, 6.00% due 09/01/10................................................................ 829,495
3,654,307 Gold, 6.00% due 09/01/10................................................................ 3,569,965
524,301 Gold, 6.00% due 10/01/10................................................................ 512,013
541,800 Gold, 6.00% due 10/01/10................................................................ 529,102
618,468 Gold, 6.00% due 10/01/10................................................................ 604,169
710,441 Gold, 6.00% due 10/01/10................................................................ 694,016
1,299,980 Gold, 6.00% due 10/01/10................................................................ 1,269,512
1,564,469 Gold, 6.00% due 10/01/10................................................................ 1,527,802
1,800 Remic: Series 1977, Class A, 8.05% due 03/15/07......................................... 1,747
100,000 Remic: Series 1290, Class L, 7.50% due 10/15/09......................................... 105,581
32,000 Remic: PAC-1(11), Series 1168, Class H, 7.50% due 11/15/21.............................. 33,196
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
18
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY DESCRIPTION VALUE
- --------------- ---------------------------------------------------------------------------------------- ------------
Federal Home Loan Mortgage Corp. (continued)
<C> <S> <C> <C>
$ 300,000 Remic: Series 102, Class I, 7.00% due 12/15/20.......................................... $ 297,132
165,000 Remic: PAC-1(11), Series 1207, Class J, 6.75% due 07/15/19.............................. 164,050
1,600,000 Remic: SCH(22), Series 1701, Class B, 6.50% due 03/15/09................................ 1,522,384
Federal National Mortgage Association
778,552 10.00% due 06/01/20..................................................................... 846,099
4,434,478 8.70% due 02/01/05...................................................................... 4,936,128
25,499 8.50% due 06/01/10...................................................................... 26,348
98,647 8.00% due 01/01/02...................................................................... 101,365
71,267 8.00% due 05/01/02...................................................................... 73,239
479,919 8.00% due 07/01/02...................................................................... 493,208
44,577 8.00% due 07/01/02...................................................................... 45,810
6,602 8.00% due 08/01/22...................................................................... 6,764
1,569,893 Remic: PAC, Series 1991-64, Class Z, 8.50% due 06/25/06................................. 1,627,289
1,083,547 Remic: PAC, Series 1991-101, Class C, 8.50% due 08/25/18................................ 1,093,233
22,062 Remic: PAC(11), Series 1991-9, Class H, 8.30% due 11/25/04.............................. 22,136
1,966,862 Remic: PAC-2(23), Series 1994-50, Class Z, 6.50% due 03/25/24........................... 1,633,085
3,100,000 Remic: PAC (11), Series 1993-041, Class PE, 5.75% due 04/25/19.......................... 3,048,478
Government National Mortgage Association
5,723 13.50% due 10/15/14..................................................................... 6,436
28,263 11.50% due 07/15/13..................................................................... 31,588
874,042 7.00% due 01/15/23...................................................................... 869,182
371,355 7.00% due 03/15/23...................................................................... 369,283
47,402 7.00% due 07/15/23...................................................................... 47,142
343,324 7.00% due 07/15/23...................................................................... 341,435
134,072 7.00% due 07/15/23...................................................................... 133,331
445,906 7.00% due 07/15/23...................................................................... 443,435
24,471 7.00% due 09/15/23...................................................................... 24,328
342,135 7.00% due 09/15/23...................................................................... 340,133
23,084 7.00% due 10/15/23...................................................................... 22,954
31,942 7.00% due 10/15/23...................................................................... 31,763
393,630 7.00% due 10/15/23...................................................................... 391,462
903,266 7.00% due 10/15/23...................................................................... 897,991
67,382 7.00% due 12/15/23...................................................................... 66,998
------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (COST $87,699,415)............................. 89,911,375
------------
U.S. TREASURY OBLIGATIONS (41.1%)
U.S. Treasury Bonds
4,060,000 12.00% due 08/15/13..................................................................... 6,086,833
44,165,000 10.75% due 02/15/03..................................................................... 56,549,308
18,130,000 10.375% due 11/15/09.................................................................... 23,383,349
16,010,000 10.375% due 11/15/12.................................................................... 21,512,477
11,455,000 8.875% due 02/15/19..................................................................... 14,803,869
6,860,000 8.50% due 02/15/20...................................................................... 8,578,224
10,000,000 8.125% due 08/15/19..................................................................... 12,029,300
4,705,000 7.875% due 02/15/21..................................................................... 5,538,632
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY DESCRIPTION VALUE
- --------------- ---------------------------------------------------------------------------------------- ------------
U.S. Treasury Notes
<C> <S> <C> <C>
$ 5,000,000 8.50% due 11/15/00...................................................................... $ 5,579,250
13,350,000 7.25% due 02/15/98...................................................................... 13,792,286
1,055,000 7.25% due 08/15/04...................................................................... 1,141,763
17,820,000 7.125% due 02/29/00..................................................................... 18,699,061
4,905,000 5.50% due 04/15/00...................................................................... 4,854,135
9,200,000 5.125% due 11/30/98..................................................................... 9,049,396
15,295,000 4.75% due 02/15/97...................................................................... 15,124,920
U.S. Treasury Strip
33,025,000 Due 05/15/02 (Principal Only)........................................................... 22,565,322
------------
TOTAL U.S. TREASURY OBLIGATIONS (COST $228,949,847)..................................... 239,288,125
------------
<CAPTION>
MOODY'S/S&P
RATING
SHARES (UNAUDITED)
- --------------- -----------
<C> <S> <C> <C>
CONVERTIBLE PREFERRED STOCKS (0.3%)
NATURAL GAS (0.3%)
74,600 Lasmo PLC, Sponsored ADR, 10.00%, Series A................................. Ba1/BBB- 1,799,725
------------
TOTAL CONVERTIBLE PREFERRED STOCKS (COST $1,659,850).................................... 1,799,725
------------
<CAPTION>
PRINCIPAL
AMOUNT
- ---------------
<C> <S> <C> <C>
REPURCHASE AGREEMENT (0.4%)
$ 2,066,000 Goldman Sachs Repurchase Agreement, dated 10/31/95 due 11/01/95, at 5.880%,
proceeds $2,066,142 (collateralized by U.S. Treasury Note, 5.875% due
07/31/97, valued at $2,077,406)
(cost $2,066,000)........................................................ P1/A1+ $ 2,066,000
------------
TOTAL INVESTMENTS (COST $556,625,778) (98.8%)............................................................ 574,829,113
OTHER ASSETS IN EXCESS OF LIABILITIES (1.2%)............................................................. 7,050,882
------------
TOTAL NET ASSETS (100.0%)................................................................................ $581,879,995
------------
------------
</TABLE>
Note: Based on the cost of investments of $556,629,476 for Federal Income Tax
purposes at October 31, 1995, the aggregate gross unrealized appreciation and
depreciation was $18,337,903 and $138,266, respectively, resulting in net
unrealized appreciation of $18,199,637.
(t) TBA securities are purchased on a forward commitment basis with an
approximate principal amount and no definite maturity date. The actual
principal amount and maturity date will be determined upon settlement.
Abbreviations used in the schedule of investments are as follows:
ADR - American Depository Receipt; ARM - Adjustable Rate Mortgage; FHA - Federal
Housing Administration;
PAC - Planned Amortization Class; Remic - Real Estate Mortgage Investment
Conduit;
NR - Not Rated; TAC - Targeted Amortization Class; SCH - Scheduled Payment Bond
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $556,625,778) $574,829,113
Receivable for Investments Sold 73,638,034
Interest Receivable 8,686,770
Other Receivables 6,408
Prepaid Expenses 5,770
------------
Total Assets 657,166,095
------------
LIABILITIES
Payable for Securities Purchased 74,362,206
Unrealized Depreciation on Open Foreign Currency Contracts 606,109
Advisory Fee Payable 178,438
Custodian Fees and Expenses Payable 81,524
Payable to Custodian 8,328
Fund Services Fee Payable 3,788
Administration Fee Payable 2,691
Accrued Expenses 43,016
------------
Total Liabilities 75,286,100
------------
NET ASSETS
Applicable to Investors' Beneficial Interests $581,879,995
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest Income $31,358,157
Dividend Income 132,975
-----------
Total Investment Income 31,491,132
EXPENSES
Advisory Fee $1,339,147
Financial and Fund Accounting Services Fee 167,081
Custodian Fees and Expenses 83,838
Fund Services Fee 40,729
Administration Fee 27,436
Trustees' Fees and Expenses 11,096
Miscellaneous 67,774
----------
Total Expenses (1,737,101)
-----------
NET INVESTMENT INCOME 29,754,031
NET REALIZED GAIN ON INVESTMENTS (including $621,192 of net realized gains
from forward contracts) 7,762,316
NET CHANGE IN UNREALIZED APPRECIATION OF INVESTMENTS (including $606,109 of
net unrealized depreciation of forward contracts) 26,604,322
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $64,120,669
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED
OCTOBER 31,
--------------------------
INCREASE (DECREASE) IN NET ASSETS 1995 1994
------------ ------------
<S> <C> <C>
FROM OPERATIONS
Net Investment Income $ 29,754,031 $ 13,708,591
Net Realized Gain (Loss) on Investments 7,762,316 (8,930,226)
Net Change in Unrealized Appreciation (Depreciation) of Investments 26,604,322 (11,045,898)
------------ ------------
Net Increase (Decrease) in Net Assets Resulting from Operations 64,120,669 (6,267,533)
------------ ------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 241,455,035 298,426,651
Withdrawals (89,561,736) (73,416,442)
------------ ------------
Net Increase from Investors' Transactions 151,893,299 225,010,209
------------ ------------
Total Increase in Net Assets 216,013,968 218,742,676
NET ASSETS
Beginning of Fiscal Year 365,866,027 147,123,351
------------ ------------
End of Fiscal Year $581,879,995 $365,866,027
------------ ------------
------------ ------------
- -------------------------------------------------------------------------------------------------------
SUPPLEMENTARY DATA:
- -------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FOR THE FISCAL FOR THE PERIOD
YEAR ENDED JULY 12, 1993
OCTOBER 31, (COMMENCEMENT OF
---------------- OPERATIONS) THROUGH
1995 1994 OCTOBER 31, 1993
------- ------- -------------------
<S> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Expenses 0.39% 0.46% 0.48%(a)
Net Investment Income 6.68% 5.88% 4.91%(a)
Portfolio Turnover 293% 234% 295%+
</TABLE>
(a) Annualized.
(+) Portfolio turnover is for the twelve month period ended October 31, 1993,
and includes the portfolio activity of the Portfolio's predecessor entity,
The Pierpont Bond Fund, for the period November 1, 1992 through July 11,
1993.
The Accompanying Notes are an Integral Part of the Financial Statements.
23
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The U.S. Fixed Income Portfolio (the "Portfolio") is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company which was organized as a trust under the laws of
the State of New York. The Portfolio commenced operations on July 12, 1993 and
received a contribution of certain assets and liabilities, including securities,
with a value of $91,653,371 on that date from The Pierpont Bond Fund in exchange
for a beneficial interest in the Portfolio. At that date, net unrealized
appreciation of $1,731,405 was included in the contributed securities. The
Declaration of Trust permits the Trustees to issue an unlimited number of
beneficial interests in the Portfolio.
The following is a summary of the significant accounting policies of the
Portfolio:
a) Portfolio securities with a maturity of 60 days or more, including
securities that are listed on an exchange or traded over the counter, are
valued using prices supplied daily by an independent pricing service or
services that (i) are based on the last sale price on a national
securities exchange, or in the absence of recorded sales, at the readily
available bid price on such exchange or at the quoted bid price in the
over-the-counter market, if such exchange or market constitutes the
broadest and most representative market for the security and (ii) in
other cases, take into account various factors affecting market value,
including yields and prices of comparable securities, indication as to
value from dealers and general market conditions. If such prices are not
supplied by the Portfolio's independent pricing services, such securities
are priced in accordance with procedures adopted by the Trustees. All
portfolio securities with a remaining maturity of less than 60 days are
valued by the amortized cost method.
b) Securities transactions are recorded on a trade date basis. Interest
income, which includes the amortization of premiums and discounts, if
any, is recorded on an accrual basis. For financial and tax reporting
purposes, realized gains and losses are determined on the basis of
specific lot identification.
c) The Portfolio may enter into forward and spot foreign currency contracts
to protect securities and related receivables 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
24
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
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 October 31, 1995 the Portfolio
had open forward foreign currency contracts as follows:
SUMMARY OF OPEN CONTRACTS
<TABLE>
<CAPTION>
U.S. DOLLAR
VALUE NET UNREALIZED
FOREIGN CURRENCY SALE CONTRACTS PROCEEDS AT 10/31/95 DEPRECIATION
- --------------------------------------------------------------------- ------------ ------------ ---------------
<S> <C> <C> <C>
German Mark, 5,281,000, expiring 12/5/95 $ 3,588,367 $ 3,757,729 $ (169,362)
German Mark, 2,410,000, expiring 12/5/95 1,642,920 1,714,851 (71,931)
Danish Krone, 4,683,000, expiring 12/5/95 817,306 857,297 (39,991)
Danish Krone, 22,420,000, expiring 12/5/95 3,923,010 4,104,333 (181,323)
<CAPTION>
FOREIGN CURRENCY PURCHASE CONTRACTS COST
- --------------------------------------------------------------------- ------------
<S> <C> <C> <C>
German Mark, 7,691,000, expiring 12/5/95 5,573,188 5,472,580 (100,608)
Danish Krone, 27,103,000, expiring 12/5/95 5,004,524 4,961,630 (42,894)
---------------
Net Unrealized Depreciation on Foreign Currency Contracts $ (606,109)
---------------
</TABLE>
d) 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.
e) The Portfolio's custodian 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.
2. TRANSACTIONS WITH AFFILIATES
a) The Portfolio has an investment advisory agreement with Morgan Guaranty
Trust Company of New York ("Morgan"). Under the terms of the investment
advisory agreement, the Portfolio pays Morgan at an annual rate of 0.30%
of the Portfolio's average daily net assets. For the fiscal year ended
October 31, 1995, this fee amounted to $1,339,147.
b) The Portfolio retains Signature Broker-Dealer Services, Inc.
("Signature") to serve as Administrator and exclusive placement agent.
Signature provides administrative services necessary for the operations
of the Portfolio, furnishes office space and facilities required for
conducting the business of the Portfolio and pays the compensation of the
Portfolio's officers affiliated with
25
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
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 fiscal year ended October 31, 1995,
Signature's fee for these services amounted to $27,436.
c) During the period November 1, 1994, 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 at 0.10% of the Portfolio's average
daily net assets up to $200 million, 0.05% of the next $200 million of
average daily net assets, and 0.03% of average daily net assets
thereafter. For the period November 1, 1994, through August 31, 1995, the
fee for these services amounted to $167,081. 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 shareholders of Group. The Portfolio's
allocated portion of Group's costs in performing its services amounted to
$40,729 for the fiscal year ended October 31, 1995.
e) An aggregate annual fee of $65,000 is paid to each Trustee for serving as
a Trustee of The Pierpont Funds, The JPM Institutional Funds and their
corresponding Portfolios. The Trustees' Fees and Expenses shown in the
financial statements 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 $5,200.
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the fiscal year
ended October 31, 1995 were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS FROM
PURCHASES SALES
---------------- ----------------
<S> <C> <C>
U.S. Treasury and Agency Obligations $ 1,171,503,087 $ 1,078,447,543
Corporate and Collateralized Obligations 298,968,392 207,445,656
---------------- ----------------
$ 1,470,471,479 $ 1,285,893,199
---------------- ----------------
---------------- ----------------
</TABLE>
26
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Investors of
The 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 U.S. Fixed Income Portfolio (the
"Portfolio") at October 31, 1995, 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 two years in the
period then ended and for the period July 12, 1993 (commencement of operations)
through October 31, 1993, 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 October 31, 1995 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
[SIGNATURE]
PRICE WATERHOUSE LLP
New York, New York
December 22, 1995
27
<PAGE>
THE JPM INSTITUTIONAL BOND FUND
JPM INSTITUTIONAL MONEY MARKET FUND
JPM INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND
JPM INSTITUTIONAL TREASURY MONEY MARKET FUND
JPM INSTITUTIONAL SHORT TERM BOND FUND
JPM INSTITUTIONAL BOND FUND
JPM INSTITUTIONAL TAX EXEMPT BOND FUND
JPM INSTITUTIONAL NEW YORK TOTAL RETURN BOND FUND
JPM INSTITUTIONAL INTERNATIONAL BOND FUND
JPM INSTITUTIONAL DIVERSIFIED FUND
JPM INSTITUTIONAL SELECTED U.S. EQUITY FUND
JPM INSTITUTIONAL U.S. SMALL COMPANY FUND
JPM INSTITUTIONAL INTERNATIONAL EQUITY FUND
JPM INSTITUTIONAL EMERGING MARKETS EQUITY FUND
FOR MORE INFORMATION ON THE JPM INSTITUTIONAL FAMILY OF FUNDS, CALL J.P. MORGAN
FUNDS SERVICES AT (800)766-7722.
ANNUAL REPORT
OCTOBER 31, 1995
