<PAGE>
LETTER TO THE SHAREHOLDERS OF THE PIERPONT BOND FUND
June 15, 1995
Dear Shareholder:
We are pleased to report that The Pierpont Bond Fund returned 6.34% for the six
months ended April 30, 1995, well ahead of the Composite Bond Fund Average* of
5.76%. At the beginning of the period, we maintained a short Portfolio duration
relative to the Salomon Brothers Broad Investment Grade Index as we believed the
economy would continue to grow at a rapid pace. However, this cautious position
caused the Fund to underperform the Index when growth stabilized and rates began
to fall earlier than most market participants expected. At the end of the first
calendar quarter of 1995, we began to extend the Portfolio's duration to a
neutral position relative to the Index, which has added value to performance
since March.
For the period under review, the Fund's net asset value increased from $9.64 per
share to end at $9.92, after paying dividends of approximately $0.32 per share.
The Fund's net assets stood at $118.9 million at the end of the reporting
period, up from $112.0 million on October 31, 1994. The net assets of The U.S.
Fixed Income Portfolio, in which the Fund invests, totaled approximately $421.7
million at April 30, 1995.
MARKET ENVIRONMENT
The Federal Reserve raised the Federal funds rate in November and again in
February as part of its program to slow the torrid pace of economic growth to
sustainable levels. As the economy began showing signs of a slowdown, and
investors became convinced that additional actions by the Federal Reserve were
unlikely, yields on Treasuries of all maturities declined. In spite of the fact
that the economy slowed, the yield difference or "spread" between mortgages and
corporates versus Treasuries remained tight.
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.
TABLE OF CONTENTS
LETTER TO THE SHAREHOLDERS . . . . . . . . .1
FUND FACTS AND HIGHLIGHTS. . . . . . . . . .3
FUND PERFORMANCE . . . . . . . . . . . . . .4
SPECIAL FUND-BASED SERVICES. . . . . . . . .5
FINANCIAL STATEMENTS . . . . . . . . . . . .7
1
<PAGE>
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, in 1994, we positioned the Portfolio
defensively with a target duration that was shorter than the Index as we
expected continued strong economic growth and higher interest rates. When rates
fell during the first quarter of 1995, we extended the target duration of the
Portfolio to a near-neutral position relative to the Index. At the end of April,
the Portfolio had a duration of 4.74 years versus 4.76 years for the Index.
SECTOR ALLOCATION. At the start of November 1994, the Portfolio was modestly
overweighted in corporates, and we were adding slightly to its mortgage position
because of the relative value offered by that market compared with corporates
and Treasuries. We decreased our allocations to corporates and mortgages in
early 1995, however, fearing that yield spreads would widen and these sectors
would underperform.
SECURITY SELECTION. Security selection added value to Fund performance during
this period. The Portfolio maintained its focus on high quality issues, keeping
its average credit quality between AA and AAA for the period.
INVESTMENT OUTLOOK
We expect to maintain a close-to-neutral duration, as we await further
indications regarding the future direction of interest rates. We reduced the
Portfolio's allocation to mortgages and corporates, due to concerns about
increasing mortgage prepayments and the possible deterioration of corporate
credit quality. We achieved a defensive position in corporates by focusing on
short duration, high quality issues.
As always, we welcome your comments or questions. Please call J.P. Morgan Funds
Services toll free at (800) 521-5411.
Sincerely yours,
/s/ EVELYN E. GUERNSEY
Evelyn E. Guernsey
J.P. Morgan Funds Services
*THE COMPOSITE BOND FUND AVERAGE PERFORMANCE IS COMPUTED ON ALL FUNDS IN THE
MORNINGSTAR UNIVERSE HAVING A GENERAL CORPORATE BOND OBJECTIVE AND AN
INTERMEDIATE MATURITY.
2
<PAGE>
FUND FACTS
INVESTMENT OBJECTIVE
The Pierpont 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 obligations while recognizing the greater price fluctuation of
longer-term instruments.
- ---------------------------------------------
COMMENCEMENT OF OPERATIONS
3/11/88
- ---------------------------------------------
NET ASSETS AS OF 4/30/95
$118,892,931
- ---------------------------------------------
DIVIDEND PAYABLE DATES
MONTHLY
- ---------------------------------------------
CAPITAL GAIN PAYABLE DATE (IF APPLICABLE)
12/18/95
EXPENSE RATIO
The Fund's current annualized expense ratio of 0.74% 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, 1995
[PIE CHART]
PORTFOLIO ALLOCATION
(PERCENTAGE OF TOTAL INVESTMENTS)
Pie chart depicting allocation of the Fund's investment securities held at
April 30, 1995 by investment category. The chart is segmented to represent the
following percentages:
U.S. TREASURY OBLIGATIONS 40.0%
CORPORATE OBLIGATIONS 38.4%
U.S. AGENCY OBLIGATIONS 15.8%
COLLATERALIZED MORTGAGE OBLIGATIONS 4.6%
SHORT-TERM HOLDINGS 0.6%
CONVERTIBLE PREFERRED STOCK 0.5%
FOREIGN GOVERNMENT OBLIGATIONS 0.1%
30-DAY SEC YIELD
6.87%
DURATION
4.7 YEARS
QUALITY BREAKDOWN
AAA* 60%
AA 2%
A 17%
Other 21%
*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
$10,000. The chart at right shows that $10,000 invested at the Fund's inception
would have grown to $17,022 at April 30, 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.
[LINE GRAPH]
GROWTH OF $10,000 SINCE INCEPTION**
MARCH 11, 1988 -- APRIL 30, 1995
Line graph with two axes: the X-axis represents years of operations; the
Y-axis represents dollar value. The graph plots two lines: the first line
represents the growth of a ten thousand dollar investment in the Fund from
March 11, 1988 to April 30, 1995; the second line represents the growth of a
ten thousand dollar investment in a portfolio of securities reflecting the
composition of the Salomon Brothers Broad Investment Grade Bond Index ("BIG")
for the same time period. The graph points are as follows:
<TABLE>
DATE FUND SALOMON BIG
- ----- -------- -----------
<S> <C> <C>
03/88 $ 10,000 $ 10,000
10/88 10,312 10,399
10/89 11,165 11,358
10/90 12,145 11,951
10/91 13,548 13,602
10/92 14,815 14,897
10/93 16,588 16,536
10/94 16,007 15,764
04/95 17,022 18,418
</TABLE>
<TABLE>
<CAPTION>
PERFORMANCE TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURN
----------------------------------------------------------------------------
THREE YEAR ONE FIVE SINCE
AS OF APRIL 30, 1995 MONTHS TO DATE YEAR YEARS INCEPTION**
- ------------------------------------------------------------------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
The Pierpont Bond Fund 4.49% 6.18% 6.57% 8.23% 7.79%
Salomon BIG* 4.34% 6.50% 7.26% 9.49% 9.00%
Composite Bond Fund Average 4.18% 5.72% 5.75% 8.72% 8.11%
AS OF MARCH 31, 1995
- ------------------------------------------------------------------- -----------------------------------------
The Pierpont Bond Fund 4.74% 4.74% 4.11% 7.85% 7.67%
Salomon BIG* 5.06% 5.06% 5.02% 9.00% 8.90%
Composite Bond Fund Average 4.27% 4.27% 3.22% 8.33% 7.97%
<FN>
*THE SALOMON BROTHERS BROAD INVESTMENT GRADE INDEX.
**3/11/88 -- COMMENCEMENT OF OPERATIONS. (AVERAGE ANNUAL TOTAL RETURNS BASED ON
THE MONTH END FOLLOWING INCEPTION.)
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. ALL RETURNS ASSUME THE
REINVESTMENT OF DISTRIBUTIONS AND REFLECT REIMBURSEMENT OF CERTAIN FUND AND
PORTFOLIO EXPENSES AS DESCRIBED IN THE PROSPECTUS.THE COMPOSITE BOND FUND
AVERAGE PERFORMANCE IS COMPUTED ON ALL FUNDS IN THE MORNINGSTAR UNIVERSE HAVING
A GENERAL 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 PIERPONT BOND
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.
</TABLE>
4
<PAGE>
SPECIAL FUND-BASED SERVICES
PIERPONT ASSET ALLOCATION SERVICE (PAAS)
For many investors, a diversified portfolio -- including short-term instruments,
bonds, and stocks -- can offer an excellent opportunity to achieve one's
investment objectives. PAAS provides investors with a comprehensive management
program for their portfolios. Through this service, investors can:
- - create and maintain an asset allocation that is specifically targeted at
meeting their most critical investment objectives;
- - make ongoing tactical adjustments in the actual asset mix of their
portfolios to capitalize on shifting market trends;
- - make investments through The Pierpont Funds, a family of diversified mutual
funds.
PAAS is available to clients who invest a minimum of $500,000 in The Pierpont
Funds.
IRA MANAGEMENT SERVICE
As one of the few remaining investments that can help your assets grow
tax-deferred until retirement, the IRA enables more of your dollars to work for
you longer. Morgan offers an IRA Rollover plan that helps you to build well-
balanced long-term investment portfolios, diversified across a wide array of
mutual funds. From money markets to emerging markets, The Pierpont Funds provide
an excellent way to help you accumulate long-term wealth for retirement. The IRA
Rollover plan is available to clients who invest at least $10,000 in any given
Pierpont Fund.
KEOGH
In early 1995, Morgan introduced a Keogh program for its clients. Keoghs provide
another excellent vehicle to help individuals who are self-employed or are
employees of unincorporated businesses to accumulate retirement savings. A Keogh
is a tax-deferred pension plan that can allow you to contribute the lesser of
$30,000 or 25% of your annual earned gross compensation. The Pierpont Funds can
help you build a comprehensive investment program designed to maximize the
retirement dollars in your Keogh account. The Keogh plan also requires a minimum
investment of $10,000 in any given Pierpont Fund.
5
<PAGE>
THE FUND'S DISTRIBUTOR IS SIGNATURE BROKER-DEALER SERVICES, INC.
MORGAN GUARANTY TRUST COMPANY OF NEW YORK ("MORGAN") SERVES AS PORTFOLIO
INVESTMENT ADVISOR AND MAKES THE PIERPONT BOND FUND (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.
The 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 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.
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) 521-5411.
6
<PAGE>
THE PIERPONT BOND FUND
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
APRIL 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment in The U.S. Fixed Income Portfolio ("Portfolio" ), at value $ 118,765,695
(Note 1)
Receivable for Shares of Beneficial Interest Sold 184,921
Receivable for Expense Reimbursements (Note 2b) 22,855
Prepaid Expenses 538
-------------
Total Assets 118,974,009
-------------
LIABILITIES
Dividend Payable 30,736
Shareholder Servicing Fee Payable (Note 2c) 17,332
Payable for Shares of Beneficial Interest Redeemed 7,482
Administration Fee Payable (Note 2a) 2,600
Fund Services Fee Payable (Note 2d) 1,003
Accrued Expenses 21,925
-------------
Total Liabilities 81,078
-------------
NET ASSETS
Applicable to 11,982,710 Shares of Beneficial Interest Outstanding $ 118,892,931
(unlimited authorized shares, par value $0.001)
-------------
-------------
Net Asset Value, Offering and Redemption Price Per Share $9.92
ANALYSIS OF NET ASSETS
Paid-in Capital $ 123,356,338
Undistributed Net Investment Income 7,423
Accumulated Net Realized Loss on Investment (5,240,881)
Net Unrealized Appreciation of Investment 770,051
-------------
Net Assets $ 118,892,931
-------------
-------------
</TABLE>
See Accompanying Notes.
7
<PAGE>
THE PIERPONT BOND FUND
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED APRIL 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME ALLOCATED FROM PORTFOLIO (NOTE 1B)
$ 4,182,704
Allocated Interest Income
13,929
Allocated Dividend Income
(246,774)
Allocated Portfolio Expenses
-----------
3,949,859
Net Investment Income Allocated from Portfolio
EXPENSES
Shareholder Servicing Fee (Note 2c) $ 101,663
Printing 20,390
Transfer Agent Fees 15,425
Administration Fee (Note 2a) 15,497
Registration Fees 11,051
Fund Services Fee (Note 2d) 5,785
Professional Fees 3,822
Trustees' Fees and Expenses (Note 2e) 1,390
Miscellaneous 4,128
---------
Total Fund Expenses 179,151
Less: Reimbursement of Expenses (Note 2b) (5,305)
---------
173,846
NET FUND EXPENSES
-----------
3,776,013
NET INVESTMENT INCOME
(816,912)
NET REALIZED LOSS ON INVESTMENTS ALLOCATED FROM PORTFOLIO
4,159,694
NET CHANGE IN UNREALIZED DEPRECIATION OF INVESTMENTS ALLOCATED FROM
PORTFOLIO
-----------
$ 7,118,795
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
-----------
-----------
</TABLE>
See Accompanying Notes.
8
<PAGE>
THE PIERPONT BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED FISCAL
APRIL 30, YEAR ENDED
1995 OCTOBER 31,
INCREASE (DECREASE) IN NET ASSETS (UNAUDITED) 1994
------------- -------------
<S> <C> <C>
FROM OPERATIONS
Net Investment Income $ 3,776,013 $ 5,728,210
Net Realized Loss on Investments Allocated from Portfolio (816,912) (4,410,760)
Net Change in Unrealized Depreciation of Investments
Allocated from Portfolio 4,159,694 (5,114,945)
------------- -------------
Net Increase (Decrease) in Net Assets Resulting from
Operations 7,118,795 (3,797,495)
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (3,767,896) (5,728,904)
Net Realized Gain on Investments -- (4,444,155)
------------- -------------
Total Distributions to Shareholders (3,767,896) (10,173,059)
------------- -------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST (NOTE 3)
Proceeds from Shares of Beneficial Interest Sold 17,575,495 62,734,029
Reinvestment of Dividends and Distributions 3,598,976 9,685,386
Cost of Shares of Beneficial Interest Redeemed (17,681,573) (49,971,704)
------------- -------------
Net Increase from Transactions in Shares of Beneficial
Interest 3,492,898 22,447,711
------------- -------------
Total Increase in Net Assets 6,843,797 8,477,157
NET ASSETS
Beginning of Period 112,049,134 103,571,977
------------- -------------
End of Period (including undistributed net investment
income of $7,423 and $0, respectively) $ 118,892,931 $112,049,134
------------- -------------
------------- -------------
</TABLE>
See Accompanying Notes.
9
<PAGE>
THE PIERPONT BOND FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share outstanding throughout each period are as follows:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE FISCAL YEAR ENDED OCTOBER 31,
APRIL 30, 1995 -----------------------------------------------------------
(UNAUDITED) 1994 1993 1992 1991 1990
------------------ ---------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.64 $ 11.00 $ 10.52 $ 10.32 $ 9.93 $ 9.84
-------- ---------- ---------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.32 0.55 0.54 0.66 0.70 0.74
Net Realized and Unrealized Gain (Loss) on
Investments 0.28 (0.91) 0.67 0.28 0.41 0.09
-------- ---------- ---------- --------- --------- ---------
Total from Investment Operations 0.60 (0.36) 1.21 0.94 1.11 0.83
-------- ---------- ---------- --------- --------- ---------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (0.32) (0.55) (0.54) (0.66) (0.70) (0.74)
Net Realized Gain -- (0.45) (0.19) (0.08) (0.02) --
-------- ---------- ---------- --------- --------- ---------
Total Distributions to Shareholders (0.32) (1.00) (0.73) (0.74) (0.72) (0.74)
-------- ---------- ---------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 9.92 $ 9.64 $ 11.00 $ 10.52 $ 10.32 $ 9.93
-------- ---------- ---------- --------- --------- ---------
-------- ---------- ---------- --------- --------- ---------
Total Return 6.34%(a) (3.50)% 11.97% 9.35% 11.55% 8.78%
-------- ---------- ---------- --------- --------- ---------
-------- ---------- ---------- --------- --------- ---------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (in thousands) $ 118,893 $ 112,049 $ 103,572 $ 75,882 $ 41,616 $ 12,306
Ratios to Average Net Assets:
Expenses 0.74%(b) 0.78% 0.81% 0.81% 0.81% 0.83%
Net Investment Income 6.69%(b) 5.43% 5.01% 6.26% 6.84% 7.58%
Decrease Reflected in Expense Ratio due
to Expense Reimbursement and Fee
Waivers 0.01%(b) 0.01% 0.08% 0.20% 0.58% 1.26%
Portfolio Turnover -- -- 236.39%+ 267.04% 166.78% 68.55%
<FN>
- ------------------------
(a) Not annualized
(b) Annualized
+ 1993 Portfolio Turnover reflects the period November 1, 1992 to July 11,
1993. After July 11, 1993, all the Fund's investable assets were invested in
The U.S. Fixed Income Portfolio.
</TABLE>
See Accompanying Notes.
10
<PAGE>
THE PIERPONT BOND FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
APRIL 30, 1995
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Pierpont Bond Fund (the "Fund") is a separate series of The Pierpont 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 a diversified open-end management investment company. The Fund,
prior to its tax-free reorganization on July 11, 1993, to a series of the Trust,
operated as a stand-alone mutual fund. Costs related to the reorganization were
borne by Morgan Guaranty Trust Company of New York ("Morgan"). This report
includes periods which preceded the Fund's reorganization and reflects the
operations of the predecessor entity.
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
(28% at April 30, 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)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.
e)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.
f)The Fund has adopted Statement of Position 93-2 Determination, Disclosure,
and Financial Statement Presentation of Income, Capital Gain, and Return
of Capital Distributions by Investment Companies. Accordingly, permanent
book and tax differences relating to shareholder
11
<PAGE>
THE PIERPONT BOND FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1995
- --------------------------------------------------------------------------------
distributions are reclassified to paid-in capital. For the fiscal year
ended October 31, 1994, the Fund reclassified $88,148 to accumulated net
realized loss on investments from paid-in capital. Net investment income,
net realized gains and net assets were not affected by this change.
g)For United States Federal income tax purposes, the Fund had a capital loss
carryforward at October 31, 1994 of $4,388,908 which will expire in the
year 2002. No capital gains distribution is expected to be paid to
shareholders until future net gains have been realized in excess of such
carryforward.
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 daily to the net assets of
the Fund. For the six months ended April 30, 1995, Signature's fee for
these services amounted to $15,497.
b)The Trust, on behalf of the Fund, has a Financial and Fund Accounting
Services Agreement ("Services Agreement") with Morgan Guaranty Trust
Company of New York ("Morgan") under which Morgan receives a fee, based on
the percentages described below, for overseeing certain aspects of the
administration and operation of the Fund. The Services Agreement is also
designed to provide an expense limit for certain expenses of the Fund. If
total expenses of the Fund, excluding the shareholder servicing fee and
the fund services fee, exceed the expense limit of 0.12% of the first $100
million of the Fund's average daily net assets and 0.10% of average daily
net assets over $100 million, Morgan will reimburse the Fund for the
excess expense amount and receive no fee. Should such expenses be less
than the expense limit, Morgan's fee would be limited to the difference
between such expenses and the fee calculated under the Services Agreement.
For the six months ended April 30, 1995, Morgan has agreed to reimburse
the Fund $5,305.
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 0.18% of the average daily net assets of the Fund. For the
six months ended April 30, 1995, the fee for these services amounted to
$101,663.
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
12
<PAGE>
THE PIERPONT BOND FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 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 $5,785 for the six months ended April
30, 1995.
e)An aggregate annual fee of $65,000 is paid to each Trustee for serving as
a Trustee of the Pierpont Funds, the JPM Institutional Funds and their
corresponding Portfolios. 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, 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
$700.
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 SIX FOR THE FISCAL
MONTHS ENDED YEAR ENDED
APRIL 30, 1995 OCTOBER 31, 1994
-------------- ----------------
<S> <C> <C>
Shares sold 1,815,185 6,213,346
Reinvestment of dividends and distributions 370,140 947,768
Shares redeemed (1,828,813) (4,946,923)
-------------- ----------------
Net Increase 356,512 2,214,191
-------------- ----------------
-------------- ----------------
</TABLE>
13
<PAGE>
The U.S. Fixed Income Portfolio
Semi-Annual Report April 30, 1995
(unaudited)
(The following pages should be read in conjunction
with The Pierpont Bond Fund
Semi-Annual Financial Statements)
14
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
APRIL 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P VALUE
AMOUNT SECURITY DESCRIPTION RATING (NOTE 1A)
- -------------- --------------------------------------------------------- ------------- -----------
<C> <S> <C> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS (4.4%)
FINANCE (4.4%)
$ 95,517 Advanta Home Equity Loan Trust, Series 92-2, Class A1,
7.15% due 06/25/08.....................................
Aaa/AAA $ 89,079
82,796 Case Equipment Loan Trust, Series 94-A, Class A2, 4.65%
due 08/15/99...........................................
Aaa/AAA 80,958
1,000,000 Discover Credit Card Trust, Series 92-A, 5.50% due
05/15/98...............................................
Aaa/AAA 988,800
5,984 Fical Home Equity Loan Trust, Series 90-1 Class A, 8.90%
due 10/15/15...........................................
Aaa/NR 6,001
1,100,000 First Chicago Credit Master Trust II, Series 90-A, Class
A, 9.25% due 12/15/96..................................
Aaa/AAA 1,104,180
8,855,000 GE Capital Mortgage Services, Inc., Series 94-17, Class
A5, 7.00% due 05/25/24.................................
Aaa/AAA 8,407,822
4,501,800 GE Capital Mortgage Services, Inc., Series 94-21, Class
A, 6.50% due 08/25/09..................................
Aaa/AAA 4,255,607
418,884 Green Tree Financial Corp., Series 94-A Class A, 6.90%
due 02/15/04...........................................
Baa3/BBB+ 407,103
139,487 Navistar Financial Grantor Trust, Series 91-1, Class A,
6.40% due 11/15/96.....................................
Aaa/AAA 139,269
60,183 Premier Auto Trust, Series 92-3, Class A, 5.90% due
11/17/97...............................................
Aaa/AAA 59,708
1,566,717 Premier Auto Trust, Series 93-4, Class A2, 4.650% due
02/02/99...............................................
Aaa/AAA 1,531,466
645,791 Prudential Home Loan Mortgage Securities, Remic: PAC(11),
Series 93-54, Class A2, 6.50% due 01/25/24.............
Aaa/AAA 641,193
232,175 Resolution Trust Corp., Remic: ARM Determined Interest
Rate, Series 91-6, Class A1, 6.951% due 05/25/19.......
Aaa/AAA 224,122
156,930 Resolution Trust Corp., Remic: Sequential Payer, Series
92-M3, Class A1, 7.75% due 07/25/30....................
Aa2/AA+ 160,066
4,496 Sears Mortgage Securities, Remic: TAC(11), Series 92-3,
Class T5, 7.75% due 02/25/20, callable.................
NR/AAA 4,476
100,000 Standard Credit Card Master Trust, Series 91-1, Class A,
8.50% due 06/07/96.....................................
Aaa/AAA 101,810
300,000 Standard Credit Card Master Trust, Series 92-2, Class A,
5.875% due 07/07/95....................................
Aaa/AAA 299,430
130,349 The Money Store Home Equity Trust, Series 92-A, Class A,
6.95% due 12/15/07.....................................
Aaa/AAA 126,438
-----------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (COST
$18,629,060) . 18,627,528
-----------
</TABLE>
See Accompanying Notes.
15
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P VALUE
AMOUNT SECURITY DESCRIPTION RATING (NOTE 1A)
- -------------- --------------------------------------------------------- ------------- -----------
CORPORATE OBLIGATIONS (37.1%)
<C> <S> <C> <C>
AUTOMOTIVE (1.8%)
$ 7,350,000 Ford Motor Co., 7.875% due 10/15/96......................
A1/A+ $ 7,445,109
-----------
BANKING (6.0%)
1,400,000 BankAmerica Corp., 9.50% due 04/01/01....................
A3/A- 1,527,596
1,300,000 BankAmerica Corp., 7.50% due 03/15/97....................
A2/A 1,310,647
6,000,000 Central Fidelity Bank, Inc., 8.15% due 11/15/02..........
Baa2/BBB 6,061,860
1,600,000 Chemical Banking Corp., 10.125% due 11/01/00.............
A3/A- 1,782,512
1,295,000 First Chicago Corp., 6.875% due 06/15/03.................
A3/A- 1,225,795
1,380,000 First Union Corp., 6.438% due 06/15/05...................
A2/A 1,377,516
2,000,000 Mellon Bank, N.A., 6.75% due 06/01/03....................
A2/A 1,889,620
200,000 Republic New York Corp., 9.75% due 12/01/00..............
AA3/A 220,960
10,000,000 Society National Bank, 6.875% due 10/15/96...............
A1/A+ 10,008,200
-----------
25,404,706
-----------
CHEMICALS, OIL & GAS (7.8%)
1,637,000 E.I. Du Pont de Nemours & Co., 8.65% due 12/01/97........
Aa2/AA 1,697,880
6,400,000 Occidental Petroleum Corp., 11.125% due 08/01/10.........
Baa3/BBB 8,013,760
5,000,000 Occidental Petroleum Corp., 5.85% due 11/09/98...........
Baa3/BBB 4,758,300
1,000,000 Occidental Petroleum Corp., 5.84% due 11/09/98...........
Baa3/BBB 951,330
9,950,000 Oxy USA Inc., 7.00% due 04/15/11.........................
Baa3/BBB 8,649,734
1,125,000 SFP Pipeline Holdings, Inc., 9.67% due 08/15/10..........
Baa3/NR 1,440,000
4,000,000 Texas Eastern Corp., 8.50% due 02/04/97..................
NR/NR 4,065,600
2,450,000 Texas Eastern Transmission Corp., 10.375% due 11/15/00...
Baa2/BBB 2,707,666
500,000 Union Oil of California, 9.25% due 02/01/03..............
Baa2/BBB 546,830
-----------
32,831,100
-----------
DEPARTMENT STORES (1.3%)
4,000,000 Sears, Roebuck & Co., 7.25% due 08/05/97.................
A2/BBB 4,020,680
1,405,000 Wal Mart Stores, Inc., 10.875% due 08/15/00..............
Aa1/AA 1,456,985
-----------
5,477,665
-----------
FINANCE (10.1%)
100,000 Associates Corp., N.A., 8.125% due 01/15/98..............
Aa3/AA- 102,494
3,050,000 Beneficial Corp., 6.47% due 11/17/08.....................
A2/A 2,761,195
18,250,000 Chrysler Financial Corp., Series MTNN, 7.360% due
03/14/97...............................................
A3/BBB 18,272,448
1,000,000 Chrysler Financial Corp., 7.20% due 03/17/97.............
A2/A- 998,500
400,000 Ford Capital BV, 9.125% due 04/08/96.....................
A2/A 408,000
4,250,000 General Motors Acceptance Corp., 8.625% due 07/15/96.....
Baa1/BBB+ 4,334,235
5,175,000 General Motors Acceptance Corp., 6.90% due 09/09/97......
Baa1/BBB+ 5,146,486
1,000,000 General Motors Acceptance Corp., 6.875% due 06/10/97.....
Baa1/BBB+ 995,340
3,000,000 General Motors Acceptance Corp., 6.70% due 04/21/97......
Baa1/BBB+ 2,979,690
</TABLE>
See Accompanying Notes.
16
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P VALUE
AMOUNT SECURITY DESCRIPTION RATING (NOTE 1A)
- -------------- --------------------------------------------------------- ------------- -----------
FINANCE (10.1%) (CONTINUED)
<C> <S> <C> <C>
$ 6,500,000 General Motors Acceptance Corp., 5.25% due 12/06/96......
Baa1/BBB+ $ 6,333,145
-----------
42,331,533
-----------
PUBLISHING (0.5%)
2,170,000 Reed Publishing, 9.00% due 07/10/96......................
Aa1/NR 2,222,894
-----------
TRANSPORTATION (0.0%)
200,000 Delta Air Lines, Inc., 3.23% due 06/15/03
(convertible)..........................................
Ba3/B+ 167,750
-----------
UTILITIES (9.6%)
1,500,000 Cleveland Electric Illumination, 7.625% due 08/01/02.....
Ba2/BB 1,336,815
1,000,000 Cleveland Electric Illumination, 7.375% due 06/01/03.....
Ba2/BB 883,050
3,000,000 Commonwealth Edison Co., 7.00% due 02/15/97..............
Baa3/BBB- 2,989,200
3,000,000 Commonwealth Edison Co., 6.50% due 07/15/97..............
Baa3/BBB- 2,960,610
500,000 Commonwealth Edison Co., Series 87, 6.25% due 10/01/97...
Baa2/BBB 488,345
2,000,000 Connecticut Light & Power Co., Series UU, 7.625% due
04/01/97...............................................
Baa1/BBB+ 2,023,680
2,400,000 GTE Corp., 8.85% due 03/01/98............................
Baa1/BBB+ 2,494,080
7,240,000 Hydro-Quebec, 8.05% due 07/07/24.........................
A1/A+ 7,381,035
5,000,000 Pacific Gas & Electric, Series 92-A, 7.875% due
03/01/02...............................................
A2/A 5,096,050
8,000,000 Texas Utilities Electric Co., 6.75% due 03/01/03.........
Baa2/BBB 7,565,280
3,000,000 Westinghouse Electric Corp., 9.44% due 06/05/96..........
Baa2/BBB 3,051,150
4,250,000 United Telephone Company of Florida, 8.375% due
01/15/25...............................................
A2/A 4,386,808
-----------
40,656,103
-----------
TOTAL CORPORATE OBLIGATIONS (COST $155,756,514).......... 156,536,860
-----------
</TABLE>
See Accompanying Notes.
17
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT SECURITY DESCRIPTION (NOTE 1A)
- -------------- --------------------------------------------------------- -----------
<C> <S> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS (15.4%)
FHA Insured
$ 3,409,966 7.43% due 03/01/22...................................................... $ 3,208,032
Federal Home Loan Mortgage Corp.
31,804 10.00% due 04/01/09..................................................... 33,623
200,000 Series 39, Class F, 10.00% due 05/15/20................................. 215,028
23,366 9.00% due 04/01/03...................................................... 23,767
1,190,562 Gold, 8.50% due 11/01/21................................................ 1,210,171
11,000,000 Gold, 8.506% due 12/01/04............................................... 11,618,750
1,800 Series 1977, Class A, 8.05% due 03/15/96................................ 1,747
10,000,000 Remic: PAC(11), Series 1751, Class PK, 8.00% due 09/15/24............... 9,877,300
17,200,000 Gold, 8.00% TBA......................................................... 17,183,832
100,000 Remic: Accretion Directed, Series 1290, Class L, 7.50% due 10/15/09..... 98,333
32,000 Remic: PAC-1(11), Series 1168, Class H, 7.50% due 11/15/21.............. 30,441
150,000 Remic: PAC-1(11), Series 1215, Class F, 6.75% due 05/15/05.............. 145,154
165,000 Remic: PAC-1(11), Series 1207, Class J, 6.75% due 07/15/19.............. 153,993
1,587,007 Remic: SCH, LIQ, Series 1580, Class A, 6.50% due 09/15/98............... 1,573,470
1,600,000 Remic: SCH(22), Series 1701, Class B, 6.50% due 03/15/09................ 1,429,824
Federal National Mortgage Association
841,823 10.00% due 06/01/20..................................................... 899,614
881,561 9.50% due 07/01/17...................................................... 917,846
4,458,366 8.70% due 02/01/05...................................................... 4,776,024
114,539 8.00% due 01/01/02...................................................... 115,958
75,855 8.00% due 05/01/02...................................................... 76,797
524,815 8.00% due 07/01/02...................................................... 531,347
8,734 8.00% due 11/01/16...................................................... 8,729
6,918 8.00% due 08/01/22...................................................... 6,912
3,918,336 7.75% due 11/01/99...................................................... 3,913,438
2,014,803 Remic: Z, PAC, Series 1991-64, Class Z, 8.50% due 06/25/06.............. 2,048,168
1,419,318 Remic: PAC, Series 1991-101, Class C, 8.50% due 08/25/18................ 1,431,240
1,076,444 Remic: PAC, Series 1990-112, Class E, 8.50% due 07/25/19................ 1,093,420
33,387 Remic: PAC(11), Series 1991-9, Class H, 8.30% due 11/25/04.............. 33,572
1,904,134 Remic: Z, PAC-2(23), Series 1994-50, Class Z, 6.50% due 03/25/24........ 1,350,745
610,000 Remic: PAC (11), Series 1993-041, Class PE, 5.75% due 04/25/19.......... 575,999
Government National Mortgage Association
37,928 11.50% due 07/15/13..................................................... 41,941
23,076 8.50% due 07/15/08...................................................... 23,529
39,398 8.50% due 08/15/08...................................................... 40,168
-----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (COST $64,062,527).............
64,688,912
-----------
U.S. TREASURY OBLIGATIONS (38.7%)
U.S. Treasury Bonds
48,815,000 10.75% due 02/15/03..................................................... 59,556,253
27,200,000 10.375% due 11/15/09.................................................... 33,024,608
5,000,000 10.375% due 11/15/12.................................................... 6,231,350
23,975,000 8.125% due 08/15/19..................................................... 25,703,358
</TABLE>
See Accompanying Notes.
18
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P VALUE
AMOUNT SECURITY DESCRIPTION RATING (NOTE 1A)
- -------------- --------------------------------------------------------- ------------- -----------
<C> <S> <C> <C>
U.S. Treasury Notes
$ 4,425,000 6.375% due 08/15/02..................................................... $ 4,268,222
33,145,000 4.75% due 02/15/97...................................................... 32,133,746
2,495,000 4.25% due 05/15/96...................................................... 2,442,306
-----------
TOTAL U.S. TREASURY OBLIGATIONS (COST $160,698,959).....................
163,359,843
-----------
FOREIGN GOVERNMENT OBLIGATIONS (0.1%)
380,000 Province of Ontario, 7.375% due 01/27/03 (cost
$371,079)..............................................
Aa3/AA- 376,455
-----------
<CAPTION>
SHARES
- --------------
<C> <S> <C> <C>
CONVERTIBLE PREFERRED STOCKS (0.5%)
AUTOMOTIVE SUPPLIES (0.1%)
2,200 Ford Motor Co., $4.20....................................
A3/A- 193,875
-----------
COMPUTER PERIPHERALS (0.0%)
500 Storage Technology Corp., $3.50..........................
B3/B 25,687
-----------
NATURAL GAS (0.4%)
74,600 Lasmo PLC, Sponsored ADR, 10.00%, Series A...............
Ba1/BBB- 1,697,150
2,600 Occidental Petroleum Corp., $3.00........................
N/A 148,200
-----------
1,845,350
-----------
TOTAL CONVERTIBLE PREFERRED STOCKS (COST $2,035,500)..... 2,064,912
-----------
<CAPTION>
PRINCIPAL
AMOUNT
- --------------
<C> <S> <C> <C>
REPURCHASE AGREEMENT (0.6%)
$ 2,518,000 Goldman Sachs Repurchase Agreement, dated 04/28/95 due
05/01/95, proceeds $2,519,238 (collateralized by
$3,309,000 U.S. Treasury Strip, 0.00% due 02/15/99,
valued at $2,568,942) (cost $2,518,000)................
P1/A1+ 2,518,000
-----------
TOTAL INVESTMENTS (COST $404,071,639) (96.8%) 408,172,510
OTHER ASSETS IN EXCESS OF LIABILITIES (3.2%) 13,513,129
-----------
TOTAL NET ASSETS (100.0%) $421,685,639
-----------
-----------
</TABLE>
Note: Based on the cost of investments of $404,075,337 for Federal Income Tax
purposes at April 30, 1995, the aggregate gross unrealized appreciation
and depreciation was $5,775,230 and $1,678,057, respectively, resulting
in net unrealized appreciation of $4,097,173.
ADR -- American Depository Receipts;
ARM -- Adjustable Rate Mortgage;
FHA -- Federal Housing Administration;
PAC -- Planned Amortization Class;
REMIC -- Real Estate Mortgage Investment Conduit;
TAC -- Target Amortization Class.
See Accompanying Notes.
19
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
APRIL 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $404,071,639) (Note 1a) $408,172,510
Cash 100,394
Receivable for Investments Sold 64,392,583
Interest Receivable 7,075,336
Dividends Receivable 2,310
------------
Total Assets 479,743,133
------------
LIABILITIES
Payable for Securities Purchased 57,473,688
Financial and Fund Accounting Services Fee Payable (Note 2c) 228,877
Custody Fee Payable 183,044
Advisory Fee Payable (Note 2a) 139,967
Fund Services Fee Payable (Note 2d) 3,668
Administration Fee Payable (Note 2b) 2,000
Accrued Expenses 26,250
------------
Total Liabilities 58,057,494
------------
NET ASSETS
Applicable to Investors' Beneficial Interests $421,685,639
------------
------------
</TABLE>
See Accompanying Notes.
20
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED APRIL 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME (NOTE 1B)
$ 14,140,936
Interest Income
49,022
Dividend Income
------------
14,189,958
Net Investment Income
EXPENSES
Advisory Fee (Note 2a) $573,963
Custodian Fees and Expenses 95,660
Financial and Fund Accounting Services Fees (Note 2c) 95,088
Professional Fees 28,578
Fund Services Fee (Note 2d) 19,571
Administration Fee (Note 2b) 12,129
Trustees' Fees and Expenses (Note 2e) 4,677
Miscellaneous 4,309
--------
833,975
Total Expenses
------------
13,355,983
NET INVESTMENT INCOME
(1,602,383)
NET REALIZED LOSS ON INVESTMENTS
13,107,965
NET CHANGE IN UNREALIZED DEPRECIATION OF INVESTMENTS
------------
$ 24,861,565
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
------------
------------
</TABLE>
See Accompanying Notes.
21
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE FISCAL
APRIL 30, 1995 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1994
------------------ ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 13,355,983 $ 13,708,591
Net Realized Loss on Investments (1,602,383) (8,930,226)
Net Change in Unrealized Depreciation of Investments 13,107,965 (11,045,898)
------------------ ------------------
Net Increase (Decrease) in Net Assets Resulting from
Operations 24,861,565 (6,267,533)
------------------ ------------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 87,625,776 298,426,651
Withdrawals (56,667,729) (73,416,442)
------------------ ------------------
Net Increase from Investors' Transactions 30,958,047 225,010,209
------------------ ------------------
Total Increase in Net Assets 55,819,612 218,742,676
NET ASSETS
Beginning of Period 365,866,027 147,123,351
------------------ ------------------
End of Period $ 421,685,639 $ 365,866,027
------------------ ------------------
------------------ ------------------
- -------------------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- -------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
APRIL 30, FOR THE FISCAL
1995 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1994
------------- ----------------
<S> <C> <C>
Ratios to Average Net Assets
Expenses 0.44%(a) 0.46%
Net Investment Income 6.98%(a ) 5.88%
Portfolio Turnover 192% 234%
<FN>
- ------------------------
(a) Annualized
</TABLE>
See Accompanying Notes.
22
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
APRIL 30, 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 no-load, diversified, open-end
management investment company which was organized as a trust under the laws of
the State of New York. The Portfolio commenced operations on July 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 intends to be treated as a partnership for federal income
tax purposes. As such, each investor in the Portfolio will be taxed on its
share of the Portfolio's ordinary income and capital gains. It is intended
that the Portfolio's assets will be managed in such a way that an investor
in the Portfolio will be able to satisfy the requirements of Subchapter M
of the Internal Revenue Code.
2. TRANSACTIONS WITH AFFILIATES
a)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 six months ended
April 30, 1995, this fee amounted to $573,963.
23
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1995
- --------------------------------------------------------------------------------
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 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 to the daily net assets of the Portfolio. For the six months ended
April 30, 1995, Signature's fee for these services amounted to $12,129.
c)The Portfolio has a Financial and Fund Accounting Services Agreement
("Services Agreement") with Morgan under which Morgan receives a fee,
based on the percentages described below, for overseeing certain aspects
of the administration and operation of the Portfolio. The Services
Agreement is also designed to provide an expense limit for certain
expenses of the Portfolio. If total expenses of the Portfolio, excluding
the advisory fee, custody expenses, fund services fee, and brokerage
costs, exceed the expense limit of 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, Morgan
will reimburse the Portfolio for the excess expense amount and receive no
fee. Should such expenses be less than the expense limit, Morgan's fee
would be limited to the difference between such expenses and the fee
calculated under the Services Agreement. For the six months ended April
30, 1995, this fee amounted to $95,088.
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 $19,571 for the six months ended April 30, 1995.
e)An aggregate annual fee of $65,000 is paid to each Trustee for serving as
a Trustee of The Pierpont Funds, The JPM Institutional Funds and their
corresponding Portfolios. 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, 1995, the aggregate annual
Trustee Fee was $55,000. The Trustee who serves as Chairman and Chief
Executive Officer of these Funds and Portfolios also serves as Chairman of
Group and received compensation and employee benefits from Group in his
role as Group's Chairman. The allocated portion of such compensation and
benefits included in the Fund Services Fee shown in the financial
statements was $2,300.
24
<PAGE>
THE U.S. FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1995
- --------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the six
months ended April 30, 1995 were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS FROM
PURCHASES SALES
-------------- --------------
<S> <C> <C>
U.S. Government and Agency Obligations $ 648,768,737 $ 642,229,366
Corporate and Collateralized Mortgage Obligations 113,565,071 80,375,680
-------------- --------------
$ 762,333,808 $ 722,605,046
-------------- --------------
-------------- --------------
</TABLE>
25
<PAGE>
THE PIERPONT MONEY MARKET FUND
THE PIERPONT TAX EXEMPT MONEY MARKET FUND
THE PIERPONT TREASURY MONEY MARKET FUND
THE PIERPONT SHORT TERM BOND FUND
THE PIERPONT BOND FUND
THE PIERPONT TAX EXEMPT BOND FUND
THE PIERPONT NEW YORK TOTAL RETURN BOND FUND
THE PIERPONT DIVERSIFIED FUND
THE PIERPONT EQUITY FUND
THE PIERPONT CAPITAL APPRECIATION FUND
THE PIERPONT INTERNATIONAL EQUITY FUND
THE PIERPONT EMERGING MARKETS EQUITY FUND
FOR MORE INFORMATION ON HOW THE PIERPONT FAMILY OF FUNDS CAN HELP YOU PLAN FOR
YOUR FUTURE, CALL J.P. MORGAN FUNDS SERVICES AT (800) 521-5411.
THE PIERPONT BOND FUND
SEMI-ANNUAL REPORT
APRIL 30, 1995
