<PAGE>
LETTER TO THE SHAREHOLDERS OF THE JPM INSTITUTIONAL GLOBAL STRATEGIC INCOME FUND
June 5, 1997
Dear Shareholder:
The JPM Institutional Global Strategic Income Fund seeks to exceed the total
returns that can be provided by more traditional U.S. fixed income portfolios
by investing in the world's extended fixed income markets. The Fund commenced
operations on March 17, 1997.
In an investment environment made challenging by the varying economic cycles
among Europe, Japan, and the U.S., the Fund returned 1.71% for the period
March 31, 1997 through April 30, 1997, versus a 1.50% return of the Lehman
Brothers Aggregate Bond Index (the Fund's benchmark) for the same period.
Although this performance measures a short period of time, we are pleased to
report the Fund got off to a strong start by also outperforming its
competitors, as measured by the Lipper Global Income Funds Average, which
returned 0.20% for the one-month period ending April 30, 1997.
The Fund's net asset value decreased from $10.00 per share, as of March 17,
1997 to $9.99 by April 30, 1997. The Fund's net assets were $57.9 million and
the net assets of The Global Strategic Income Portfolio, in which the Fund
invests, totaled approximately $58.2 million on April 30, 1997.
In addition to the performance and Fund highlights within this report, we
have also provided a portfolio manager Q&A with Mark E. Smith, a member of
our portfolio management team. This interview is designed to address commonly
asked questions regarding the Portfolio and the markets in which it invests.
Mark also discusses major decisions affecting the Fund during the past month,
as well as our outlook and strategy for the months ahead.
As always, we welcome your comments and questions or any suggestions as to
how we can improve your financial reports. As such, we encourage you to 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
TABLE OF CONTENTS
LETTER TO THE SHAREHOLDERS.......1 FUND FACTS AND HIGHLIGHTS........7
FUND PERFORMANCE.................2 FINANCIAL STATEMENTS.............9
PORTFOLIO MANAGER Q&A............3
1
<PAGE>
Fund performance
EXAMINING PERFORMANCE
One way to look at performance is to review a fund's average annual total
return. This figure takes a fund's actual (or cumulative) return and shows
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.
PERFORMANCE TOTAL RETURNS TOTAL RETURNS
------------------ ------------------
ONE SINCE
AS OF APRIL 30, 1997 MONTH INCEPTION*
- -------------------------------------------------------- ------------------
The JPM Institutional Global
Strategic Income Fund 1.71% 1.71%
Lehman Brothers Aggregate Bond Index 1.50% 1.50%
Lipper Global Income Funds Average 0.20% 0.20%
*03/17/97 -- COMMENCEMENT OF OPERATIONS. THE FUND'S AVERAGE ANNUAL TOTAL RETURN
SINCE ITS COMMENCEMENT OF OPERATIONS ON 03/17/97 IS 0.61%.
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. FUND RETURNS ARE NET
OF FEES AND ASSUME THE REINVESTMENT OF DISTRIBUTIONS AND REFLECT
REIMBURSEMENT OF CERTAIN FUND AND PORTFOLIO EXPENSES AS DESCRIBED IN THE
PROSPECTUS. HAD EXPENSES NOT BEEN SUBSIDIZED, RETURNS WOULD HAVE BEEN LOWER.
THE LEHMAN BROTHERS AGGREGATE BOND INDEX IS AN UNMANAGED INDEX IN WHICH
INVESTORS MAY NOT DIRECTLY INVEST. LIPPER ANALYTICAL SERVICES, INC. IS A
LEADING SOURCE FOR MUTUAL FUND DATA. NO REPRESENTATION IS MADE THAT
INFORMATION GATHERED FROM THIS SOURCE IS ACCURATE OR COMPLETE. THE FUND
INVESTS ALL OF ITS INVESTABLE ASSETS IN THE GLOBAL STRATEGIC 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.
2
<PAGE>
Portfolio manager Q&A
Following is an interview with MARK E. SMITH, VICE PRESIDENT who is
a member of the portfolio management team for The Global Strategic
Income Portfolio, in which the Fund invests. Mark joined J.P.
Morgan's investment management group after ten years at Allied
[PHOTO] Signal, Inc., where he was an internal fixed income portfolio
manager. For five years, he had similar responsibilities at Armco
Inc. Mark is a graduate of Ohio Northern University and earned his
MBA at the University of Cincinnati. This interview was conducted
on May 22, 1997 and reflects Mark's views on that date.
BEFORE GOING INTO THE SPECIFICS OF HOW THE PORTFOLIO AND THE MARKETS BEHAVED
OVER THE PAST FEW MONTHS, COULD YOU BRIEFLY EXPLAIN THE THREE-STEP INVESTMENT
PROCESS EMPLOYED FOR THE PORTFOLIO? INVESTING THE PORTFOLIO INCLUDES 1) A
STRATEGIC ALLOCATION DECISION, 2) A TACTICAL ALLOCATION DECISION AND 3) A
SECURITY SELECTION DECISION. SINCE THE PORTFOLIO IS SO NEW, IT MIGHT BE
HELPFUL FOR YOU TO EXPLAIN THIS PROCESS.
MES: As you said, we seek to generate excess return from three types of
decisions. The first decision, the STRATEGIC decision, is based on creating a
strategic portfolio designed to provide excess return relative to a broad
fixed income investment strategy. In other words, relative to a broad market
index, such as the Lehman Brothers Aggregate Bond Index, we will build a
portfolio that is structured in sectors of the market that strategically
provide a yield advantage and therefore provide an opportunity to
incrementally add return. For example, the Portfolio invests in five sectors
of the fixed income market which each have a current yield advantage relative
to the broad market. We describe these sectors as "extended markets," as they
are different from the traditional sectors in which a broad fixed income
strategy normally invests. Specifically, we invest the Portfolio in 1)
international sovereign debt, 2) emerging markets debt (EMD), 3)
below-investment-grade (high-yield) debt, as well as in two sectors which
could be described as traditional sectors, 4) corporates and 5) mortgages.
Within both the corporate and mortgage sectors, however, investments are made
in a nonstandard fashion, meaning we will use more aggressive positions or
encompass more breadth to the types of corporate issues we will include.
While we look to strategic allocation to provide a certain yield
advantage, we also TACTICALLY allocate among those five sectors. This adds a
second level of investment opportunity. Historically, value has shifted among
market sectors over time, so if we are effective at making allocation shifts
among the five sectors, we expect to be able to capture additional return
opportunities. For example, when the high-yield market comes under severe
pressure, we can overweight that sector, and in that way may capture
additional return.
Thirdly, within each one of the extended market sectors, Morgan has
established teams of specialists and security analysts who focus on the
SECURITY level decisions. We work very hard to find exactly the right
companies in the extended markets we identify as providing strategic and
tactical opportunity. This provides the third level of potential return
opportunity. Whether it be a Brazilian paper company or a BBB-rated corporate
issue in the U.S. market, we selectively choose those securities we consider
the most attractive.
3
<PAGE>
OF THE FIVE SEPARATE EXTENDED-MARKET SECTORS IN WHICH THE PORTFOLIO INVESTS
GLOBALLY, HOW IS IT THAT YOU ARE ABLE TO FOLLOW CLOSELY AND KEEP CURRENT ON ALL
THE NEWS AND DATA INVOLVING EACH?
MES: We are provided the great luxury of having access to a full array of
specialist portfolio managers, credit analysts and security analysts within
Morgan's investment management group. Consequently, I can turn to those
individuals who focus on the specifics of each individual sector.
For example, Eduardo Cortez is one of Morgan's portfolio managers
specializing in managing EMD portfolios. Eduardo is our primary information
source regarding specific opportunities in EMD. Whether it be a revaluation
of the Brazilian market or a specific corporate credit that is being issued
into the U.S. market, Eduardo has access to that kind of specific
information. Additionally, Eduardo has the ability to access not only
Morgan's internal research capability (i.e., within the investment management
group), but he also can access the broader array of J.P. Morgan's global
analysts.
We do not have to depend upon third parties for assessing the credit
quality or risk of specific sectors or issues. We have specialists focused on
each extended market in our strategy. While there is a broad array of markets
involved in this strategy, we capitalize on the expertise of several groups
already in place.
COULD YOU PROVIDE A REVIEW OF HOW THE MARKETS BEHAVED OVER THE PAST FEW
MONTHS, PERHAPS EXPLAINING THE MARKET CONDITIONS IN WHICH THIS FUND WAS FIRST
INVESTED ABOUT SIX WEEKS AGO?
MES: The strategy we employ for the Portfolio is the result of a similar
strategy we have delivered for at least two years to institutional clients.
As a consequence, the Portfolio's strategy is not new for us.
Specifically, if you think in terms of mid-March, it was an optimal time
to begin investing the Portfolio's assets. The Portfolio's commencement
happened to fall right in the middle of a great deal of uncertainty and
speculation about what action Federal Reserve Chairman Alan Greenspan would
take regarding monetary policy. Because of that speculation, along with
specific comments made by Greenspan suggesting the "irrational exuberance" of
investors could be causing market valuations to be overinflated, some of the
higher yielding sectors of the fixed income market came under some pressure.
The resulting uncertainty in the marketplace caused spreads to widen in both
the high-yield and EMD sectors, as well as, to some degree, in the corporate
sector. This provided opportunities to make new investments in these sectors
at slightly wider yield spreads than were available earlier in the year.
Yield spreads have since narrowed, but only after providing excellent
start-up opportunities for the Portfolio, and we believe the future continues
to look favorable for the higher yielding sectors of the fixed income market.
Looking forward, we continue to see an attractive investment opportunity in
the EMD area, and we expect to be able to use not only sovereign debt but
also corporate debt to seek additional investment return.
PLEASE COMMENT, GENERALLY, ON THE ECONOMIC CONDITIONS IN THE U.S. AND THE
EFFECTS THE FEDERAL RESERVE'S MARCH 25 INCREASE IN INTEREST RATES HAD ON GLOBAL
BOND MARKETS. ALSO, SINCE THE FED DID NOT INCREASE RATES AT ITS LAST FEDERAL
OPEN MARKET COMMITTEE (FOMC) MEETING ON MAY 21, DOES THIS MEAN FURTHER
TIGHTENING WILL NOT OCCUR?
MES: At the March 25 FOMC meeting, the Federal Reserve raised interest rates
on the short end of the yield curve by about 25 basis points. Market concerns
regarding the potential for additional rate increases resulted in a temporary
widening of yield spreads.
4
<PAGE>
Then, over the ensuing six weeks, the market became more confident that
a near-term slowing in the underlying economy would take place. As a
consequence, the markets believed and still expect that the nature of any Fed
tightening will either be deferred or perhaps limited to a 25 basis point
increase. As a result, yield spreads have narrowed significantly and
long-term interest rates have declined.
Now, OUR expectation is that any slow down in the economy will be
temporary and that we will see a resurgence in growth, perhaps later in the
year. Also, because income and wages have continued to rise, we think there
may be a need for further Fed action later in the year, culminating with
perhaps an additional 50 basis points of Fed tightening.
That kind of backdrop should be favorable for most of the markets in
which the Portfolio invests. For example, the U.S. mortgage sector, being
sensitive to prepayment risk, would benefit from a further increase in
interest rates, as higher rates usually translate into slower prepayments. We
think the mortgage sector, for one, should fare well going forward given the
scenario we expect to unfold in the U.S. We also believe that emerging
markets will perform well in the future environment we expect, predominately
driven by the incremental yield spread available as well as the availability
of corporate debt in that market.
ANOTHER RELEVANT TOPIC IS THE APPROACHING EVENTUALITY OF A EUROPEAN ECONOMIC
& MONETARY UNION (EMU). COULD YOU BRIEFLY EXPLAIN TO SHAREHOLDERS WHAT EMU IS
AND WHY IT IS RELEVANT TO THEM AS GLOBAL BOND INVESTORS.
MES: It is expected that a number of European countries will share a common
currency after 1999 -- and therefore a common monetary policy (monetary
union) -- rather than operate within a system of individual national
currencies. If this happens, it means the economies within that union are
likely to become more like one another. Although long-term interest rates
would continue to be different country by country, short-term interest rates
of these converging countries should be very close to the same level.
Inflation would also be virtually the same across the European region. This
progress toward EMU has had a dramatic influence on the bond markets and will
obviously have some impact on the strategy. EMU will reduce the opportunity
to effectively trade among the European countries, which has historically
been the definition of the international trading opportunities. With a single
currency, there would be a single large bond market, instead of the smaller,
separate markets that currently exist.
We also expect the size of this single large bond market to create a
currency that many issuers will seek to access. As a consequence, we expect
there to be greater issuance of yield oriented securities into the European
market, creating a market more similar to the U.S. bond market. Historically,
the U.S. has been the only fixed income market with a significant
nongovernment sector, with domestic and international corporations having the
ability to obtain funding. The U.S. has also had a significant mortgage
sector.
Going forward, we think there is a great opportunity that the single European
currency will produce a similar market. We are therefore preparing now to
take advantage of that development by enhancing the global credit resources
that will be required to successfully participate in this new single-currency
market.
5
<PAGE>
THE FUND HAS OUTPERFORMED ITS BENCHMARK, THE LEHMAN BROTHERS AGGREGATE BOND
INDEX, SINCE INCEPTION. WHAT WERE SOME OF THE REASONS FOR THE FUND'S
OUTPERFORMANCE?
MES: As we mentioned earlier, the Portfolio was initially invested at an
opportune time. Uncertainty that existed in the marketplace during March
caused spreads to widen in both the high-yield and EMD sectors, as well as,
to some degree, the corporate sector. This provided opportunities to make new
investments in these sectors at slightly wider yield spreads than were
available earlier in the year. In addition, after initial investments were
made, the mortgage and EMD sectors continued to perform well. Because the
benchmark has a much lower allocation to such sectors, the Fund fared better
over this period.
IN GENERAL, WHAT KIND OF INVESTMENT ENVIRONMENT DO YOU SEE DEVELOPING IN
INTERNATIONAL MARKETS FOR THE REMAINDER OF 1997? HOW DO YOU FORESEE THE
PORTFOLIO WILL BE ALLOCATED GIVEN YOUR EXPECTED SCENARIO?
MES: Our expectation is that there will be a time during the course of the
year when we will want to reduce the Portfolio's allocation to the developed
international markets. While the Portfolio allows for a 25% strategic
allocation to this sector, we also have the flexibility to decrease this
allocation if we see fit. Conceivably we would move in that direction should
the relative opportunity between the U.S. and Europe shift. Right now,
however, international markets are somewhat uncertain. There are economic
factors that suggest growth is materializing in Europe, and expectations
about interest rates increasing in Japan. So our flexibility in being able to
shift the Portfolio's weightings will be key to us as conditions evolve.
Also, as I believe we already mentioned, while we would expect that
monetary tightening (rate increases) will probably continue in the U.S.
during the course of this year, we expect to overweight the mortgage sector
going forward. We also think that emerging markets are well suited to perform
as well in the future environment.
6
<PAGE>
Fund facts
INVESTMENT OBJECTIVE
The JPM Institutional Global Strategic Income Fund's investment objective is
high total return from a portfolio of fixed income securities of foreign and
domestic issuers. It is designed for investors who seek exposure to
high-yielding, international and emerging debt markets in their investment
portfolios. The Portfolio's benchmark is The Lehman Brothers Aggregate Bond
Index.
- -----------------------------------------------------------------------------
COMMENCEMENT OF OPERATIONS
03/17/97
- -----------------------------------------------------------------------------
NET ASSETS AS OF 04/30/97
$57,934,464
- -----------------------------------------------------------------------------
DIVIDEND PAYABLE DATE
MONTHLY
- -----------------------------------------------------------------------------
CAPITAL GAIN PAYABLE DATE (IF APPLICABLE)
12/19/97
EXPENSE RATIO
The Fund's annual expense ratio of 0.65% 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 APRIL 30, 1997
PORTFOLIO ALLOCATION
(PERCENTAGE OF TOTAL INVESTMENTS)
[PIE CHART]
[EDGAR REPRESENTATION OF DATA IN PIE CHART]
SHORT-TERM INVESTMENTS 30.8%
CORPORATE OBLIGATIONS 20.4%
U.S. AGENCY OBLIGATIONS 20.1%
SOVEREIGN BONDS 11.3%
CMOs AND ASSET-BACKED SECURITIES 8.5%
FOREIGN GOVERNMENT OBLIGATIONS 4.7%
PRIVATE PLACEMENTS - REAL ESTATE 4.0%
CONVERTIBLE BONDS 0.2%
30-DAY SEC YIELD
6.40%
DURATION
4.61 years
7
<PAGE>
FUNDS DISTRIBUTOR, INC. IS THE DISTRIBUTOR FOR THE JPM INSTITUTIONAL GLOBAL
STRATEGIC INCOME 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 reflect
the reimbursement of Fund and Portfolio expenses as described in the
Prospectus. Had expenses not been subsidized, returns would have been lower.
The Fund invests all of its investable assets in The Global Strategic Income
Portfolio (the "Portfolio"), a separately registered investment company which
is not available to the public but only to other collective investment
vehicles such as the Fund. The Portfolio may invest in below-investment-grade
debt obligations and foreign securities which are subject to special risks;
prospective investors should refer to the Fund's Prospectus for a discussion
of these risks.
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.
8
<PAGE>
THE JPM INSTITUTIONAL GLOBAL STRATEGIC INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
APRIL 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment in The Global Strategic Income
Portfolio ("Portfolio"), at value $58,166,752
Deferred Organization Expenses 35,405
Receivable for Expense Reimbursements 20,169
-----------
Total Assets 58,222,326
-----------
LIABILITIES
Dividends Payable to Shareholders 237,804
Organization Expenses Payable 26,639
Shareholder Servicing Fee Payable 4,449
Administrative Services Fee Payable 1,385
Accrued Trustees' Fees and Expenses 297
Administration Fee Payable 202
Fund Services Fee Payable 29
Accrued Expenses 17,057
-----------
Total Liabilities 287,862
-----------
NET ASSETS
Applicable to 5,799,461 Shares of Beneficial
Interest Outstanding
(par value $0.001, unlimited shares authorized) $57,934,464
-----------
-----------
Net Asset Value, Offering and Redemption Price
Per Share $9.99
----
----
ANALYSIS OF NET ASSETS
Paid-in Capital $57,839,122
Undistributed Net Investment Income 39,919
Accumulated Net Realized Loss on Investment and
Foreign Currency Transactions (120,361)
Net Unrealized Appreciation of Investment and
Foreign Currency Translations 175,784
-----------
Net Assets $57,934,464
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
9
<PAGE>
THE JPM INSTITUTIONAL GLOBAL STRATEGIC INCOME FUND
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE PERIOD MARCH 17, 1997 (COMMENCEMENT OF OPERATIONS) TO APRIL 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME ALLOCATED FROM PORTFOLIO
Allocated Interest Income $454,031
Allocated Portfolio Expenses (Net of
Reimbursement of $15,368) (41,031)
--------
Net Investment Income Allocated from
Portfolio 413,000
FUND EXPENSES
Registration Fees $11,850
Shareholder Servicing Fee 6,312
Printing Expenses 2,856
Professional Fees 2,390
Transfer Agent Fees 2,253
Administrative Services Fee 1,968
Amortization of Organization Expenses 895
Trustees' Fees and Expenses 344
Administration Fee 202
Fund Services Fee 83
Insurance Expense 13
Miscellaneous 522
-------
Total Fund Expenses 29,688
Less: Reimbursement of Expenses (29,688)
-------
NET FUND EXPENSES --
--------
NET INVESTMENT INCOME 413,000
NET REALIZED LOSS ON INVESTMENT AND FOREIGN
CURRENCY TRANSACTIONS ALLOCATED FROM PORTFOLIO (120,361)
NET CHANGE IN UNREALIZED APPRECIATION OF
INVESTMENT AND FOREIGN CURRENCY TRANSLATIONS
ALLOCATED FROM PORTFOLIO 175,784
--------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $468,423
--------
--------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
10
<PAGE>
THE JPM INSTITUTIONAL GLOBAL STRATEGIC INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
MARCH 17, 1997
(COMMENCEMENT OF
OPERATIONS) TO
APRIL 30, 1997
----------------
<S> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 413,000
Net Realized Loss on Investment and Foreign
Currency Transactions Allocated from Portfolio (120,361)
Net Change in Unrealized Appreciation of
Investment and Foreign Currency Translations
Allocated from Portfolio 175,784
----------------
Net Increase in Net Assets Resulting from
Operations 468,423
----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (373,081)
----------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Proceeds from Shares of Beneficial Interest Sold 57,603,845
Reinvestment of Dividends 135,277
----------------
Net Increase from Transactions in Shares of
Beneficial Interest 57,739,122
----------------
Total Increase in Net Assets 57,834,464
NET ASSETS
Beginning of Period 100,000
----------------
End of Period (including undistributed net
investment income of $39,919) $ 57,934,464
----------------
----------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
11
<PAGE>
THE JPM INSTITUTIONAL GLOBAL STRATEGIC INCOME FUND
FINANCIAL HIGHLIGHTS (UNAUDITED)
- --------------------------------------------------------------------------------
Selected data for a share outstanding throughout the period is as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
MARCH 17, 1997
(COMMENCEMENT OF
OPERATIONS) TO
APRIL 30, 1997
----------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
----------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.08
Net Realized and Unrealized Loss on Investment
and Foreign Currency (0.02)
----------------
Total from Investment Operations 0.06
----------------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (0.07)
----------------
NET ASSET VALUE, END OF PERIOD $ 9.99
----------------
----------------
Total Return 0.61%(a)
----------------
----------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (in thousands) $ 57,934
Ratios to Average Net Assets
Expenses 0.65%(b)
Net Investment Income 6.54%(b)
Decrease Reflected in Expense Ratio due to
Expense Reimbursement 0.71%(b)
</TABLE>
- ------------------------
(a) Not annualized.
(b) Annualized
The Accompanying Notes are an Integral Part of the Financial Statements.
12
<PAGE>
THE JPM INSTITUTIONAL GLOBAL STRATEGIC INCOME FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
APRIL 30, 1997
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The JPM Institutional Global Strategic Income Fund (the "Fund") is a separate
series of The JPM Institutional Funds, a Massachusetts business trust (the
"Trust") which was organized on November 4, 1992. The Trust is registered under
the Investment Company Act of 1940, as amended, as an open-end management
investment company. The Fund commenced operations on March 17, 1997.
The Fund invests all of its investable assets in The Global Strategic Income
Portfolio (the "Portfolio"), a no-load, diversified, open-end management
investment company having the same investment objective as the Fund. The value
of such investment included in the Statement of Assets and Liabilities reflects
the Fund's proportionate interest in the net assets of the Portfolio (100% at
April 30, 1997). 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 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 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 $36,300. These
costs were deferred and are being amortized on a straight-line basis over
a five-year period from the commencement of operations.
e)The Fund is treated as a separate entity for federal income tax purposes
and 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.
13
<PAGE>
THE JPM INSTITUTIONAL GLOBAL STRATEGIC INCOME FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1997
- --------------------------------------------------------------------------------
2. TRANSACTIONS WITH AFFILIATES
a)The Trust has retained Funds Distributor, Inc. ("FDI"), a registered
broker-dealer, to serve as co-administrator and distributor. Under a
Co-Administration Agreement between FDI and the Trust on behalf of the
Fund, FDI 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 FDI. The Fund 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 Fund is based on the
ratio of the Fund's net assets to the aggregate net assets of the Trust,
The JPM Pierpont Funds, the Portfolio and the other portfolios (the
"Master Portfolios") in which the Trust and The JPM Pierpont Funds invest
(the "Master Portfolios"), JPM Series Trust and JPM Series Trust II. For
the period from March 17, 1997 (commencement of operations) to April 30,
1997, the fee for these services amounted to $202.
b)The Trust, on behalf of the Fund, has an Administrative Services Agreement
(the "Services Agreement") with Morgan Guaranty Trust Company of New York
("Morgan") under which Morgan is responsible for certain aspects of the
administration and operation of the Fund. Under the Services Agreement,
the Fund has agreed to pay Morgan a fee equal to its allocable 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 payable by
the Fund is determined by the proportionate share that its net assets bear
to the net assets of the Trust, The JPM Pierpont Funds, the Master
Portfolios, other investors in the Master Portfolios for which Morgan
provides similar services, and JPM Series Trust. For the period March 17,
1997 through April 30, 1997, the fee for these services amounted to
$1,968.
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
0.65% of the average daily net assets of the Fund through November 30,
1997. For the period from March 17, 1997 (commencement of operations)
through April 30, 1997, Morgan has agreed to reimburse the Fund $29,688
for expenses that exceeded this limit.
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 paid monthly at an annual rate
of 0.10% of the average daily net assets of the Fund. For the period from
March 17, 1997 (commencement of operations) to April 30, 1997, the fee for
these services amounted to $6,312.
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 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
$83 for the period from March 17, 1997 (commencement of operations) to
April 30, 1997.
14
<PAGE>
THE JPM INSTITUTIONAL GLOBAL STRATEGIC INCOME FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1997
- --------------------------------------------------------------------------------
e)An aggregate annual fee of $75,000 is paid to each Trustee for serving as
a Trustee of the Trust, The JPM Pierpont Funds, the Master Portfolios and
JPM Series Trust. The Trustees' Fees and Expenses shown in the financial
statements represents the Fund's allocated portion of the total fees and
expenses. Prior to April 1, 1997, the aggregate annual Trustee Fee was
$65,000. The Trust's Chairman and Chief Executive Officer also serves as
Chairman of Group and receives 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 $20.
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 PERIOD
MARCH 17, 1997
(COMMENCEMENT OF
OPERATIONS) TO
APRIL 30, 1997
(UNAUDITED)
----------------
<S> <C>
Shares of beneficial interest sold............... 5,785,920
Reinvestment of dividends........................ 13,541
----------------
Net Increase..................................... 5,799,461
----------------
----------------
</TABLE>
From time to time, the Fund may have a concentration of several shareholders
holding a significant percentage of shares outstanding. Investment activities of
these shareholders could have a material impact on the Fund and Portfolio.
15
<PAGE>
The Global Strategic Income Portfolio
Semi-Annual Report April 30, 1997
(unaudited)
(The following pages should be read in conjunction
with The JPM Institutional Global Strategic Income Fund
Semi-Annual Financial Statements)
16
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
APRIL 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT SECURITY DESCRIPTION RATING VALUE
- ---------------- ------------------------------------------------- ------------ -------------
<C> <S> <C> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS AND ASSET BACKED SECURITIES (11.4%)
FINANCIAL SERVICES (11.4%)
$ 25,000,000 Credit Suisse First Boston Mortgage Securities
Corp, Remic:I/O, CSTR, Series 97-2, Class X,
(144A), 1.04% due 06/25/20..................... NR/AAA $ 992,187
2,000,000 First Chicago/Lennar Trust I, Series 97-D, 8.11%
due 04/13/39................................... NR/NR 1,860,625
2,047,851 Merrill Lynch Mortgage Investors, Inc., Series
95-C2, Class E, 7.98% due 06/15/21............. Ba3/NR 2,021,454
2,000,000 Morgan Stanley Capital I, Series 97-1, Class F,
(144A), 6.85% due 02/15/20..................... Ba2/NR 1,753,020
-------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS AND
ASSET BACKED SECURITIES (COST
$6,588,549)................................ 6,627,286
-------------
CONVERTIBLE BONDS (0.2%)
RETAIL (0.2%)
150,000 Corporate Express Inc., 4.50% due 07/01/00 (cost
$127,217)...................................... B3/B 128,062
-------------
CORPORATE OBLIGATIONS (19.5%)
BANKING (0.9%)
500,000 Union Bank of Switzerland - New York Branch,
7.25% due 07/15/06............................. Aa1/AA 499,000
-------------
BROADCASTING & PUBLISHING (2.5%)
500,000 Cablevision Systems Corp., 10.50% due 05/15/16... B2/B 505,625
500,000 Lenfest Communications Inc., 10.50% due
06/15/06....................................... B2/BB- 518,750
500,000 TCI Communications Inc., 7.875% due 02/15/26..... Ba1/BBB- 440,640
-------------
1,465,015
-------------
BUILDING MATERIALS (0.5%)
300,000 USG Corp., 8.50% due 08/01/05.................... Ba2/BB+ 304,125
-------------
ELECTRIC (0.9%)
500,000 Commonwealth Edison Co., Series 85, 7.375% due
09/15/02....................................... Baa2/BBB 499,225
-------------
ELECTRONICS (0.9%)
371,685 LG Electronics Inc./Zenith Electronics, 9.06% due
04/02/07....................................... NR/NR 374,383
120,982 LG Electronics Inc./Zenith Electronics, 9.09% due
04/02/07....................................... NR/NR 122,020
-------------
496,403
-------------
ENTERTAINMENT, LEISURE & MEDIA (0.3%)
175,000 Jacor Communications Co., 9.75% due 12/15/06..... B2/B 178,062
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
17
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT SECURITY DESCRIPTION RATING VALUE
- ---------------- ------------------------------------------------- ------------ -------------
<C> <S> <C> <C>
FINANCIAL SERVICES (3.6%)
$ 500,000 Aames Financial Corp., 9.125% due 11/01/03....... Ba3/BB- $ 473,750
500,000 Bank Boston Capital Trust II, Series B, 7.75% due
12/15/26....................................... Baa1/BBB 466,970
500,000 Montell America Finance Corp., (144A), 7.60% due
03/15/07....................................... Baa2/BBB 500,000
150,000 Sun World International, Inc., (144A), 11.25% due
04/15/04....................................... NR/NR 152,250
500,000 Termoemcali Funding Corp., (144A), 10.125% due
12/15/14....................................... NR/BBB- 521,875
-------------
2,114,845
-------------
HEALTH SERVICES (1.4%)
300,000 Mariner Health Group, Inc., Series B, 9.50% due
04/01/06....................................... B2/B 291,750
500,000 Tenet Healthcare Corp., 10.125% due 03/01/05..... Ba3/B+ 537,500
-------------
829,250
-------------
MANUFACTURING (0.4%)
200,000 Collins & Aikman Products Co., 11.50% due
04/15/06....................................... B3/B 220,000
-------------
METALS & MINING (1.4%)
180,000 AK Steel Corp., 9.125% due 12/15/06.............. Ba2/BB- 178,425
200,000 Oregon Steel Mills, Inc., 11.00% due 06/15/03.... B1/BB 216,000
400,000 Ryerson Tull, Inc., 8.50% due 07/15/01........... Ba1/BB 406,500
-------------
800,925
-------------
NATURAL GAS (1.7%)
500,000 Lasmo (USA) Inc., 7.50% due 06/30/06............. Baa2/BBB 503,280
500,000 Lomak Petroleum, Inc., 8.75% due 01/15/07........ B1/B 476,250
-------------
979,530
-------------
OIL-PRODUCTION (0.9%)
500,000 Plains Resources, Inc., Series B, 10.25% due
03/15/06....................................... B2/B- 517,500
-------------
POLLUTION CONTROL (0.4%)
200,000 Allied Waste North America, Inc., (144A), 10.25%
due 12/01/06................................... B3/B+ 210,250
-------------
TELECOMMUNICATION SERVICES (1.3%)
325,000 McLeod, Inc., (144A), 0.00%* due 03/01/07........ B3/NR 183,219
500,000 Paging Network Inc., 10.00% due 10/15/08......... B2/B 441,250
215,000 Teleport Communications Group, 0.00%* due
07/01/07....................................... B1/B 147,275
-------------
771,744
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
18
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT SECURITY DESCRIPTION RATING VALUE
- ---------------- ------------------------------------------------- ------------ -------------
<C> <S> <C> <C>
TELECOMMUNICATIONS (0.3%)
$ 150,000 Qwest Communications International, Inc., (144A),
10.875% due 04/01/07........................... NR/NR $ 153,000
-------------
TELEPHONE (1.7%)
500,000 GTE Corp., 7.90% due 02/01/27.................... A3/A 493,565
500,000 US West Capital Funding Inc., 7.30% due
01/15/07....................................... Baa1/BBB+ 494,910
-------------
988,475
-------------
TRANSPORTATION (0.4%)
200,000 Atlantic Express Transportation Corp., (144A),
10.75% due 02/01/04............................ B2/B 205,000
-------------
TOTAL CORPORATE OBLIGATIONS (COST
$11,351,655)............................... 11,232,349
-------------
FOREIGN CORPORATE OBLIGATIONS (7.9%)
CANADA (1.4%)
Forest Products & Paper
500,000 Canadian Pacific Forest Products Ltd., 9.25%
due 06/15/02.................................. Ba1/NR 516,455
300,000 Gulf Canada Resources Ltd., 8.25% due
03/15/17...................................... Ba1/BB+ 294,750
-------------
811,205
-------------
CHINA (0.8%)
Banking
500,000 State Development Bank of China, 7.375% due
02/01/07...................................... A3/BBB 491,355
-------------
MEXICO (2.3%)
Metals & Mining
500,000 Altos Hornos de Mexico S.A., (144A), 11.375%
due 04/30/02.................................. NR/NR 508,750
Forest Products & Paper
800,000 Copamex Industrias SA DE CV, (144A), 11.375%
due 04/30/04.................................. B1/NR 821,000
-------------
1,329,750
-------------
NETHERLANDS (1.8%)
Financial Services
1,000,000 Matahari International Finance Co. BV, (144A),
11.25% due 03/15/01........................... NR/NR 1,057,500
-------------
SOUTH KOREA (0.8%)
Banking
500,000 Korea Development Bank, 6.75% due 12/01/05..... A1/AA- 475,915
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT SECURITY DESCRIPTION RATING VALUE
- ---------------- ------------------------------------------------- ------------ -------------
<C> <S> <C> <C>
THAILAND (0.8%)
Banking
$ 500,000 Bangkok Bank Public Co. Ltd., (144A), 7.25% due
09/15/05...................................... A3/BBB+ $ 479,060
-------------
TOTAL FOREIGN CORPORATE OBLIGATIONS (COST
$4,597,778)................................ 4,644,785
-------------
GOVERNMENT OBLIGATIONS (6.4%)
AUSTRALIA (0.3%)
Government of Australia
AUD 71,000 Series 101, 8.75% due 01/15/01................. NR/AAA 58,630
AUD 110,000 Series 206, 10.00% due 02/15/06................ NR/AAA 97,869
-------------
156,499
-------------
BELGIUM (0.3%)
Kingdom of Belgium
BEF 2,000,000 Series 24, 7.00% due 05/15/06.................. Aa1/NR 60,588
BEF 3,000,000 Series 7, 9.00% due 06/27/01................... Aa1/NR 97,752
-------------
158,340
-------------
CANADA (1.2%)
USD 500,000 Province of Quebec, 7.00% due 01/30/07........... A2/A+ 486,310
Government of Canada
CAD 191,000 7.00% due 12/01/06............................. Aa1/AAA 140,275
CAD 56,000 Series A77, 8.50% due 03/01/00................. Aa1/AAA 43,265
-------------
669,850
-------------
FRANCE (0.6%)
Government of France
FRF 1,280,000 7.50% due 04/25/05............................. Aaa/NR 247,343
FRF 620,000 9.50% due 01/25/01............................. Aaa/NR 124,640
-------------
371,983
-------------
GERMANY (0.7%)
DEM 300,000 Federal Republic of Germany, Series 92, 8.00% due
07/22/02....................................... Aaa/NR 197,602
DEM 339,000 Germany Unity Fund, 8.00% due 01/21/02........... NR/NR 222,096
-------------
419,698
-------------
ITALY (0.3%)
ITL 320,000,000 Republic of Italy, 9.00% due 10/01/03............ Aa3/AAA 201,248
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT SECURITY DESCRIPTION RATING VALUE
- ---------------- ------------------------------------------------- ------------ -------------
<C> <S> <C> <C>
JAPAN (1.4%)
Government of Japan
JPY 24,200,000 Series 144, 6.00% due 12/20/01................. Aaa/NR $ 227,565
JPY 25,800,000 Series 164, 4.10% due 12/22/03................. Aaa/NR 227,994
JPY 40,300,000 Series 187, 3.30% due 06/20/06................. Aaa/NR 338,315
-------------
793,874
-------------
NETHERLANDS (0.4%)
Government of the Netherlands
NLG 137,000 Series 1&2, 6.00% due 01/15/06................. NR/NR 72,069
NLG 226,000 Series 1-3, 8.50% due 03/15/01................. NR/NR 132,193
-------------
204,262
-------------
SPAIN (0.2%)
ESP 14,600,000 Government of Spain, 10.50% due 10/30/03......... Aa2/NR 121,308
-------------
SWEDEN (0.2%)
SEK 700,000 Kingdom of Sweden, Series 1030, 13.00% due
06/15/01....................................... Aa1/NR 111,364
-------------
UNITED KINGDOM (0.8%)
Treasury Gilt
GBP 73,000 7.00% due 11/06/01............................. Aaa/NR 117,894
GBP 210,000 7.50% due 12/07/06............................. Aaa/NR 338,297
-------------
456,191
-------------
TOTAL GOVERNMENT OBLIGATIONS (COST
$3,713,378)................................ 3,664,617
-------------
U.S. GOVERNMENT AGENCY OBLIGATIONS (26.9%)
FEDERAL NATIONAL MORTGAGE ASSOCIATION
$ 6,060,000 TBA May, 7.50% due 12/01/99...................... 6,027,806
9,500,000 TBA May, 8.00% due 01/01/99...................... 9,648,437
-------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(COST $15,551,994)......................... 15,676,243
-------------
PRIVATE PLACEMENT (5.3%)
REAL ESTATE (5.3%)
650,000 3512 Oxford Avenue (1st Mortgage Agreement on
Cooperative Building in Riverdale, New York),
8.45% due 04/01/17............................. NR/NR 662,188
650,000 3810 Greystone Avenue (1st Mortgage Agreement on
Cooperative Building in Riverdale, New York),
8.45% due 04/01/17............................. NR/NR 654,947
825,000 421 West 57th Street (1st Mortgage Agreement on
Coop Building in New York City), 8.98% due
05/01/22....................................... NR/NR 825,000
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT SECURITY DESCRIPTION RATING VALUE
- ---------------- ------------------------------------------------- ------------ -------------
<C> <S> <C> <C>
REAL ESTATE (CONTINUED)
$ 933,000 Crystal River Mobile Home Park, Florida, 8.75%
due 11/01/02................................... NR/NR $ 953,965
-------------
TOTAL PRIVATE PLACEMENT (COST $3,058,000).... 3,096,100
-------------
SOVEREIGN BONDS (15.1%)
ARGENTINA (3.7%)
2,328,000 Republic of Argentina FRB, 6.75% due 03/31/05.... B1/BB 2,135,940
-------------
BRAZIL (3.5%)
2,689,560 Republic of Brazil, C Bonds, 8.00%* due
04/15/14....................................... B1/BB- 2,037,342
-------------
ECUADOR (0.9%)
500,000 Republic of Ecuador FRN, (144A), 10.813% due
04/25/04....................................... NR/NR 506,250
-------------
MEXICO (1.7%)
1,000,000 United Mexican States, (144A), 7.625% due
08/06/01....................................... Baa3/BBB- 1,012,500
-------------
POLAND (0.8%)
600,000 Government of Poland PDI, 4.00%* due 10/27/14.... Baa3/BBB- 488,280
-------------
RUSSIA (1.5%)
1,500,000 Russia Principal Loan**.......................... NR/NR 873,750
-------------
VENEZUELA (3.0%)
2,000,000 Republic of Venezuela DCB Series DL, FRN, 6.50%
due 12/18/07................................... Ba2/NR 1,767,600
-------------
TOTAL SOVEREIGN BONDS (COST $8,798,812)...... 8,821,662
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY DESCRIPTION VALUE
- --------------- ------------------------------------------------- -------------
<C> <S> <C> <C>
SHORT-TERM INVESTMENTS (41.3%)
RUSSIA (1.6%)
$ 1,000,000 Russia Treasury Bills, due 10/27/97.............. $ 938,665
-------------
REPURCHASE AGREEMENT (39.7%)
(s) 23,085,000 State Street Bank and Trust Co., 5.00% dated
4/30/97 due 5/01/97, proceeds $23,088,206
(collateralized by $15,955,000 U.S. Treasury
Notes, 4.75% due 10/31/98, valued at
$15,633,407; $1,320,000 U.S. Treasury Notes,
5.00% due 2/15/99, valued at $1,292,981;
$3,325,000 U.S. Treasury Notes, 6.125% due
7/13/00, valued at $3,293,309; $1,475,000 U.S.
Treasury Notes, 12.00% due 8/15/13, valued at
$1,808,949; $455,000 U.S. Treasury Notes,
8.125% due 8/15/21, valued at $509,884;
$675,000 U.S. Treasury Notes, 7.50% due
11/15/24, valued at $711,703) (cost
$23,085,000)................................... 23,085,000
-------------
TOTAL SHORT-TERM INVESTMENTS (COST
$24,022,006)................................ 24,023,665
-------------
TOTAL INVESTMENTS (COST $77,809,389) (134.0%).... 77,914,769
LIABILITIES IN EXCESS OF OTHER ASSETS (-34.0%)... (19,748,007)
-------------
NET ASSETS (100.0%).............................. $ 58,166,762
-------------
-------------
</TABLE>
- ------------------------------
Note: Based on the cost of investments of $77,809,389 for Federal Income Tax
Purposes at April 30, 1997, the aggregate gross unrealized appreciation and
depreciation was $407,515 and $302,135, respectively, resulting in net
unrealized appreciation of $105,380.
(s) $16,510,000 par segregated as collateral for TBA securities.
Abbreviations:
* Rate shown reflects current rate on variable rate instrument or instrument
with step coupon rates.
** When and If issued securities.
144A - Securities restricted for resale to Qualified Institutional Buyers.
TBA - Securities purchased (sold) 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.
C - Debt instrument with a fixed interest rate that pays a portion in interest
and a portion capitalizes increasing the principal.
CSTR - Collateral Strip Rate.
DCB - Debt Conversion Bond - noncollateralized floating rate instrument that
previously allowed the holder to convert the debt at a specific time.
FRB - Floating Rate Bond.
FRN - Floating Rate Note.
I/O - Interest Only.
NR - Not Rated.
PDI - Debt instrument created from past due interest on previous Brady Bond
plans.
Remic - Real Estate Mortgage Investment Conduit
The Accompanying Notes are an Integral Part of the Financial Statements.
23
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
APRIL 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $77,809,389 ) $77,914,769
Cash 3,240
Foreign Currency at Value (Cost $27,681 ) 27,481
Receivable for Investments Sold 2,963,797
Unrealized Appreciation of Forward Foreign
Currency Contracts 111,349
Interest Receivable 537,913
Deferred Organization Expenses 17,264
Receivable for Expense Reimbursement 9,864
-----------
Total Assets 81,585,677
-----------
LIABILITIES
Payable for Investments Purchased 23,318,187
Unrealized Depreciation of Forward Foreign
Currency Contracts 38,273
Advisory Fee Payable 20,100
Organization Expenses Payable 14,200
Custody Fee Payable 13,984
Administrative Services Fee Payable 1,391
Administration Fee Payable 156
Fund Services Fee Payable 29
Accrued Trustees' Fees and Expenses 296
Accrued Expenses 12,299
-----------
Total Liabilities 23,418,915
-----------
NET ASSETS
Applicable to Investors' Beneficial Interests $58,166,762
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
24
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE PERIOD FROM MARCH 17, 1997 (COMMENCEMENT OF OPERATIONS) TO APRIL 30,
1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest Income $454,031
EXPENSES
Advisory Fee $ 28,495
Custodian Fees and Expenses 13,984
Professional Fees and Expenses 9,504
Administrative Services Fee 1,974
Printing Expenses 1,441
Amortization of Organization Expense 436
Trustees' Fees and Expenses 344
Administration Fee 156
Fund Services Fee 83
Insurance Expense 13
Miscellaneous 98
---------
Total Expenses 56,528
Less: Reimbursement of Expenses (15,368)
---------
NET EXPENSES 41,160
--------
NET INVESTMENT INCOME 412,871
NET REALIZED LOSS ON
Investment Transactions (104,651)
Foreign Currency Transactions (15,710)
---------
Net Realized Loss (120,361)
NET CHANGE IN UNREALIZED APPRECIATION OF
Investments 105,380
Foreign Currency Contracts and Translations 70,404
---------
Net Change in Unrealized Appreciation 175,784
--------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $468,294
--------
--------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
25
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
MARCH 17, 1997
(COMMENCEMENT OF
OPERATIONS) TO
APRIL 30, 1997
----------------
<S> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 412,871
Net Realized Loss on Investment and Foreign
Currency Transactions (120,361)
Net Change in Unrealized Appreciation of
Investments and Foreign Currency Translations 175,784
----------------
Net Increase in Net Assets Resulting from
Operations 468,294
----------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 57,603,845
Withdrawals (5,387)
----------------
Net Increase from Investors' Transactions 57,598,458
----------------
Total Increase in Net Assets 58,066,752
NET ASSETS
Beginning of Period 100,010
----------------
End of Period $ 58,166,762
----------------
----------------
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
MARCH 17, 1997
(COMMENCEMENT OF
OPERATIONS) TO
APRIL 30, 1997
----------------
<S> <C>
RATIOS TO AVERAGE NET ASSETS
Expenses 0.65%(a)
Net Investment Income 6.52%(a)
Decrease Reflected in Expense Ratio due to
Expense Reimbursement 0.24%(a)
Portfolio Turnover 104.17%
</TABLE>
- ------------------------
(a) Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
26
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
APRIL 30,1997
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Global Strategic Income Portfolio (the "Portfolio"), is one of two subtrusts
(portfolios) comprising Series Portfolio II. Series Portfolio II is registered
under the Investment Company Act of 1940, as amended (the "Act"), as a no-load,
open-end management investment company which was organized as a trust under the
laws of the State of New York on January 9, 1997. The Portfolio commenced
operations on March 17, 1997 and received a contribution of certain assets and
liabilities including securities, with a value of $41,072,730 on that date from
The JPM Institutional Global Strategic Income Fund in exchange for a beneficial
interest in the Portfolio. The Portfolio's investment objective is to provide a
high total return from a portfolio of fixed income securities of foreign and
domestic issuers. The Declaration of Trust permits the Trustees to issue an
unlimited number of beneficial interests in the Portfolio.
Investments in emerging and international markets may involve certain
considerations and risks not typically associated with investments in the United
States. Future economic and political developments in emerging market and
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 debt securities held by the Portfolio to meet their obligations may be
affected by economic and political developments in a specific industry 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)The Portfolio values mortgage and asset-backed securities and other debt
securities with a maturity of 60 days or more, including securities that
are listed on an exchange or traded over the counter, 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, indications as to value from dealers and general market
conditions. Securities listed on a foreign exchange are valued at the last
quoted sale price available before the time when net assets are valued. 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. Such procedures may include the use of independent
pricing services or affiliated advisor pricing, which use prices based
upon yields or prices of securities of comparable quality, coupon,
maturity and type; indications as to values from dealers; operating data
and general market conditions. All short-term portfolio securities with a
remaining maturity of less than 60 days are valued by the amortized cost
method. The ability of issuers of mortgage and asset-backed securities,
held by the Portfolio, to meet their obligations may be affected by
economic developments in a specific industry or region. The value of
mortgage and asset-backed securities can be significantly affected by
changes in interest rates, rapid principal payments including
pre-payments.
27
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30,1997
- --------------------------------------------------------------------------------
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.
The Portfolio's custodian or designated subcustodians, as the case may be,
under triparty repurchase agreements takes possession of the collateral
pledged for investments in repurchase agreements on behalf of the
Portfolio. It is the policy of the Portfolio to value the underlying
collateral daily on a mark-to-market basis to determine that the value,
including accrued interest, is at least equal to the repurchase price plus
accrued interest. In the event of default of the obligation to repurchase,
the Portfolio has the right to liquidate the collateral and apply the
proceeds in satisfaction of the obligation. Under certain circumstances,
in the event of default or bankruptcy by the other party to the agreement,
realization and/or retention of the collateral or proceeds may be subject
to legal proceedings.
b)The books and records of the Portfolio are maintained in U.S. dollars. The
market value of investment securities, other assets and liabilities and
forward contracts stated in foreign currencies are translated at the
prevailing exchange rates at the end of the period. Purchases, sales,
income and expenses are translated at the exchange rate prevailing on the
respective dates of such transactions. Translation gains and losses
resulting from changes in exchange rates during the reporting period and
gains and losses realized upon settlement of foreign currency transactions
are reported in the Statement of Operations. 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
in order to hedge exposure by managing foreign currency exchange risk and
enhancing returns on foreign portfolio holdings or 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. The
change in the market value is recorded by the Portfolio as unrealized
appreciation or depreciation of forward and spot foreign currency
contracts until terminated, at which time realized
28
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30,1997
- --------------------------------------------------------------------------------
foreign currency gains and losses are recognized. At April 30, 1997, the
Portfolio had open forward foreign currency contracts as follows:
SUMMARY OF OPEN FORWARD FOREIGN CURRENCY CONTRACTS
<TABLE>
<CAPTION>
U.S. DOLLAR NET UNREALIZED
COST/ VALUE AT APPRECIATION/
PURCHASE CONTRACTS PROCEEDS 4/30/97 (DEPRECIATION)
- ------------------------------------------------- -------- ----------- --------------
<S> <C> <C> <C>
Australian Dollar 132,417 expiring 07/28/97...... $102,756 $ 103,409 $ 653
Belgian Franc 5,970,917 expiring 07/28/97........ 170,598 168,301 (2,297)
British Pound 243,095 expiring 07/28/97.......... 396,975 393,653 (3,322)
Canadian Dollar 191,946 expiring 07/28/97........ 138,086 138,167 81
French Franc 1,933,873 expiring 07/28/97......... 337,500 333,382 (4,118)
German Mark 946,490 expiring 07/28/97............ 557,795 550,208 (7,587)
Italian Lira 350,580,000 expiring 07/28/97....... 205,637 204,350 (1,287)
Japanese Yen 97,985,221 expiring 07/28/97........ 787,017 782,587 (4,430)
Netherland Guilder 401,121 expiring 07/28/97..... 210,011 207,276 (2,735)
Spanish Peseta 28,920,181 expiring 07/28/97...... 200,417 198,173 (2,244)
Swedish Krona 947,681 expiring 07/28/97.......... 124,400 121,288 (3,112)
</TABLE>
<TABLE>
<CAPTION>
SALES CONTRACTS
- -------------------------------------------------
<S> <C> <C> <C>
Australian Dollar 142,097 expiring 07/28/97...... $111,546 $ 110,968 $ 578
Australian Dollar 192,613 expiring 10/29/97...... 149,617 150,452 (835)
Belgian Franc 5,970,917 expiring 07/28/97........ 173,070 168,301 4,769
Belgian Franc 5,970,917 expiring 10/29/97........ 171,820 169,479 2,341
British Pound 243,095 expiring 07/28/97.......... 387,494 393,653 (6,159)
British Pound 290,279 expiring 10/29/97.......... 472,750 469,374 3,376
Canadian Dollar 191,946 expiring 07/28/97........ 140,312 138,167 2,145
Canadian Dollar 262,186 expiring 10/29/97........ 189,688 189,777 (89)
French Franc 1,933,873 expiring 07/28/97......... 343,702 333,382 10,320
French Franc 2,250,453 expiring 10/29/97......... 394,919 390,479 4,440
German Mark 946,490 expiring 07/28/97............ 567,124 550,208 16,916
German Mark 819,624 expiring 10/29/97............ 486,236 479,833 6,403
Italian Lira 350,580,000 expiring 07/28/97....... 206,817 204,349 2,468
Italian Lira 337,580,000 expiring 10/29/97....... 197,654 196,482 1,172
Japanese Yen 97,985,221 expiring 07/28/97........ 812,161 782,587 29,574
Japanese Yen 112,198,826 expiring 10/29/97....... 914,479 908,778 5,701
Netherlands Guilder 401,121 expiring 07/28/97.... 213,669 207,276 6,393
Netherlands Guilder 401,121 expiring 10/29/97.... 211,496 208,729 2,767
Spanish Peseta 28,920,181 expiring 07/28/97...... 201,328 198,173 3,155
Spanish Peseta 28,920,181 expiring 10/28/97...... 200,751 198,574 2,177
Swedish Krona 947,681 expiring 07/28/97.......... 124,042 121,288 2,754
Swedish Krona 947,681 expiring 10/28/97.......... 124,915 121,807 3,108
--------------
NET UNREALIZED APPRECIATION ON FORWARD FOREIGN
CURRENCY CONTRACTS.............................. $ 73,076
--------------
--------------
</TABLE>
29
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30,1997
- --------------------------------------------------------------------------------
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 will be fixed when
the Portfolio enters into the contract. Upon entering into such a contract
the Portfolio is required to pledge to the broker an amount of cash and/or
liquid securities equal to the minimum "initial margin" requirements of
the exchange. Pursuant to the contract, the Portfolio agrees to receive
from, or pay to, the broker an amount of cash equal to the daily
fluctuation in 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 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 of
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. There were no futures transactions
during the period from March 17, 1997 (commencement of operations) to
April 30, 1997.
f)The Portfolio intends to be treated as a partnership for federal income
tax purposes. As such, each investor in the Portfolio will be subject to
taxation 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.
g)The Portfolio incurred organization expenses in the amount of $17,700.
These costs were deferred and are being amortized on a straight-line basis
over a five year period from the commencement of operations.
h)The Portfolio may engage in swap transactions, specifically interest rate,
currency, index and total return swaps. The Portfolio will use these
transactions to preserve a return or spread on a particular investment or
portion of its investments, to protect against currency fluctuations, as a
duration management technique, to protect against any increase in the
price of securities the Portfolio anticipates purchasing at a later date,
or to gain exposure to certain markets in the most economical way
possible. An interest rate swap is an agreement between two parties to
exchange interest payments on a specified amount ("the notional amount")
for a specified period. If a swap agreement provides for payments in
different currencies, the parties might agree to exchange the notional
amount as well. Risks associated with swap transactions include the
ability of counterparties to meet the terms of their contracts, and the
amount of the Portfolio's potential gain or loss on swap transaction is
not subject to any fixed limit.
30
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30,1997
- --------------------------------------------------------------------------------
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 0.45% of the Portfolio's
average daily net assets. For the period from March 17, 1997 (commencement
of operations) to April 30, 1997, this fee amounted to $28,495.
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 between FDI and the Portfolio, FDI
provides administrative services necessary for the operations of the
Portfolio, furnishes office space and facilities required for conducting
the business of the Portfolio and pays the compensation of the officers
affiliated with FDI. The Portfolio has agreed to pay FDI fees equal to its
allocable share of an annual complex-wide charge of $425,000 plus FDI's
out-of-pocket expenses. The amount allocable to the Portfolio is based on
the ratio of the Portfolio's net assets to the aggregate net assets of the
The JPM Pierpont Funds, The JPM Institutional Funds, the Portfolio and the
other portfolios in which The JPM Pierpont Funds and The JPM Institutional
Funds invest (the "Master Portfolios"), JPM Series Trust and JPM Series
Trust II. For the period from March 17, 1997 (commencement of operations )
to April 30, 1997, the fee for these services amounted to $156.
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 the Portfolio.
Under the Services Agreement, the Portfolio has agreed to pay Morgan a fee
equal to its allocable share of an annual complex-wide charge. This charge
is calculated 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 payable by the Portfolio is determined by the proportionate
share that the net assets bear to the total net assets of the Master
Portfolios, other investors in the Master Portfolios for which Morgan
provides similar services, The JPM Pierpont Funds, The JPM Institutional
Funds and JPM Series Trust. For the period from March 17, 1997
(commencement of operations) to April 30, 1997, the fee for these services
amounted to $1,974.
In addition, Morgan has agreed to reimburse the Portfolio to the extent
necessary to maintain the total operating expenses of the Portfolio at no
more than 0.65% of the average daily net assets of the Portfolio through
November 30, 1997. For the period from March 17, 1997 (commencement of
operations) to April 30, 1997, Morgan has agreed to reimburse the
Portfolio $15,368 for expenses under this agreement.
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 $83 for the period from March 17, 1997 (commencement of
operations) to April 30, 1997.
31
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30,1997
- --------------------------------------------------------------------------------
e)An aggregate annual fee of $75,000 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. Prior to April 1, 1997, the
aggregate annual Trustee Fee was $65,000. The Portfolio's Chairman and
Chief Executive Officer also serves as Chairman of Group and receives
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 $20.
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the period from
March 17, 1997 (commencement of operations) to April 30, 1997 were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
----------- -----------
<S> <C> <C>
U.S. Government and Agency Obligations........... $47,137,635 $31,640,703
Corporate and Collateralized Mortgage
Obligations..................................... 40,220,428 1,830,302
----------- -----------
$87,358,063 $33,471,005
----------- -----------
----------- -----------
</TABLE>
32
<PAGE>
JPM INSTITUTIONAL PRIME MONEY MARKET FUND
JPM INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND
JPM INSTITUTIONAL FEDERAL 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 SHARES: CALIFORNIA BOND FUND
JPM INSTITUTIONAL INTERNATIONAL BOND FUND
JPM INSTITUTIONAL GLOBAL STRATEGIC INCOME FUND
JPM INSTITUTIONAL DIVERSIFIED FUND
JPM INSTITUTIONAL U.S. EQUITY FUND
JPM INSTITUTIONAL DISCIPLINED EQUITY FUND
JPM INSTITUTIONAL U.S. SMALL COMPANY FUND
JPM INSTITUTIONAL INTERNATIONAL EQUITY FUND
JPM INSTITUTIONAL INTERNATIONAL OPPORTUNITIES FUND
JPM INSTITUTIONAL EMERGING MARKETS EQUITY FUND
JPM INSTITUTIONAL EUROPEAN EQUITY FUND
JPM INSTITUTIONAL JAPAN EQUITY FUND
JPM INSTITUTIONAL ASIA GROWTH FUND
FOR MORE INFORMATION ON THE JPM INSTITUTIONAL FAMILY OF FUNDS, CALL J.P.
MORGAN FUNDS SERVICES AT (800)766-7722.
The
JPM Institutional
Global Strategic
Income Fund
SEMI-ANNUAL REPORT
APRIL 30, 1997
