<PAGE>
LETTER TO THE SHAREHOLDERS OF THE JPM PIERPONT ASIA GROWTH FUND
February 5, 1997
Dear Shareholder:
It was an event-filled year for Asian markets. Returns were mixed throughout the
region, as each market was largely influenced by local dynamics. Politics took
center stage in many countries. Overall, the region provided positive results
for investors.
In general, the outlook for Asia is on the upswing. The various economies are no
longer showing signs of overheating or inflationary pressure. Furthermore, there
are expectations of a cyclical rebound in the electronics industry, upon which
many Asian economies are leveraged. We continue to view Asia as a region with
high growth potential and investment opportunity.
Included in this report is a Q&A with Steven Ho, a member of the Fund's
portfolio management team. This interview is designed to answer commonly asked
questions about the Fund, elaborate on what happened during the reporting
period, and provide an outlook for the months ahead. We hope you find it
informative.
As always, we welcome your comments, questions, or any suggestions on how we can
further improve your financial reports. 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
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
LETTER TO THE SHAREHOLDERS . . . . . . . . . . . . . .1
FUND PERFORMANCE . . . . . . . . . . . . . . . . . . .2
PORTFOLIO MANAGER Q&A. . . . . . . . . . . . . . . . .3
FUND FACTS AND HIGHLIGHTS. . . . . . . . . . . . . . .6
SPECIAL FUND-BASED SERVICES. . . . . . . . . . . . . .7
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . .9
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1
<PAGE>
Fund performance
EXAMINING PERFORMANCE
One way to evaluate a mutual fund's historical performance is to look at the
growth of a hypothetical investment of $100,000, which is the Fund's investment
minimum. The chart at the right shows that $100,000 invested in the Fund on
February 29, 1996 would have grown to $101,593 on December 31, 1996.
Another way to look at performance is to review a fund's average annual total
return. This figure takes the fund's actual (or cumulative) return and shows you
what would have happened if the fund had achieved that return by performing at a
constant rate each year. Average annual total returns represent the average
yearly change of a fund's value over various time periods, typically 1, 5, or 10
years (or since inception). Total returns for periods of less than one year are
not annualized and provide a picture of how a fund has performed over the short
term.
GROWTH OF $100,000 SINCE INCEPTION
FEBRUARY 29, 1996 - DECEMBER 31, 1996
[Line Graph]
[FOLLOWING IS AN EDGAR REPRESENTATION OF THE POINTS IN LINE GRAPH]
JPM Pierpont
Asia Growth Fund Asia Growth Benchmark
------------------- ---------------------
Inception* $100,000 $100,000
12/31/96 $101,593 $102,950
- ------------------------------------------------------------------
PERFORMANCE TOTAL RETURNS
----------------------------------------
THREE SIX SINCE
AS OF DECEMBER 31, 1996 MONTHS MONTHS INCEPTION*
- --------------------------------------------------------------------------------
The JPM Pierpont Asia Growth Fund 2.54% 0.89% 1.29%
Asia Growth Benchmark** 2.12% 0.90% 2.95%
Lipper Universe Average 4.80% 2.81% 1.87%
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. ALL RETURNS ASSUME THE
REINVESTMENT OF DISTRIBUTIONS. LIPPER ANALYTICAL SERVICES, INC. IS A LEADING
SOURCE FOR MUTUAL FUND DATA. ALTHOUGH GATHERED FROM RELIABLE SOURCES, DATA
ACCURACY AND COMPLETENESS CANNOT BE GUARANTEED.
*THE JPM PIERPONT ASIA GROWTH FUND'S RETURNS INCLUDE HISTORICAL RETURNS OF THE
JPM INSTITUTIONAL ASIA GROWTH FUND FROM FEBRUARY 29, 1996 THROUGH MAY 13, 1996.
**IFC: 5% CHINA, INDONESIA, PHILIPPINES, S. KOREA, AND TAIWAN, 20% MALAYSIA, 12%
THAILAND; MSCI: 32% HONG KONG, 11% SINGAPORE.
2
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Portfolio manager Q&A
[PICTURE] The following is an interview with Steven Ho, vice president and
fund manager for non-Japanese Pacific Rim equities. Prior to his
recent transfer to the London office, he was head of equity
research in the Singapore office and was responsible for
Southeast Asian equity portfolios. Between 1990 and 1993, Mr. Ho
was a member of the London equity research group, with
responsibility for the electronics and property sectors. He
joined Morgan in Singapore in 1984. He has a B.S. in Business
Management and is a Chartered Financial Analyst. This interview
was conducted on February 3, 1997 and reflects his views on that
date.
HONG KONG, THE REGION'S LARGEST MARKET, HAS HAD AN OUTSTANDING YEAR. WHAT WERE
THE DYNAMICS BEHIND THIS MARKET'S EXCEPTIONAL PERFORMANCE?
SH: A number of factors contributed to the strong performance of Hong Kong. One
was the easier monetary policy in China. This led to a pickup in economic
activity that benefitted Hong Kong through which more than two thirds of China's
imports and exports are channeled. As you know, Hong Kong, has become
increasingly integrated into the Chinese economy, providing services in support
of manufacturing and investment activity there.
More importantly, Hong Kong equities benefitted from the cyclical upturn in
the housing sector. And as real estate is heavily weighted in the Index, stock
prices moved ahead as the profit outlook for the sector brightened. Housing
values, which had been in a downturn since early 1994, recovered in 1996 as
demand picked up, helped by a higher-than-expected immigration rate. Prices rose
30% during the year, although speculation in the luxury market led to much more
dramatic increases there.
Finally, there was a growing level of optimism and confidence about the
handover of Hong Kong to China in mid-1997. At the same time, the new chief
executive is a local Chinese businessman, representing the free spirit of
enterprise and appearing to have the endorsement of the Chinese government as
well as the people in Hong Kong.
WHILE THE RETURNS FOR THE EMERGING ASIAN REGION AS A WHOLE WERE POSITIVE IN
1996, THE RETURNS AMONG THE INDIVIDUAL COUNTRIES WERE MIXED. OUTSIDE OF HONG
KONG, WHAT WERE SOME OF THE BEST PERFORMING MARKETS AND WHY?
SH: Taiwan was a very strong performer, mostly due to the easing of tensions
with China along with expectations that the electronics cycle was turning
upwards. The government's nonrestrictive monetary policy also helped the equity
market.
Malaysia was another good market, rising on expectations that the current
account balance, which ballooned in 1995, would improve over the course of 1996.
This occurred, aided by a moderation in import growth and by the weakness in the
Japanese yen. Expectations that domestic interest rates would ease -- which
would be good for equities -- contributed as well.
In China, the equity market is divided between A-shares for locals and
B-shares for foreigners. A-shares typically trade on valuation premiums, often
in excess of 50%, to their B-share counterparts. With the B
3
<PAGE>
market initially in the doldrums, there were signals that the government would
take action to stimulate activity there, possibly by merging the A- and B-share
markets which led to aggressive purchases of B-shares, especially among locals
using offshore accounts.
In the Philippines, which also performed well this year, there was a
demonstrated commitment towards fiscal reform. The government was able to push
ahead with its comprehensive tax reform package, which broadened the tax base
and was crucial in helping balance the fiscal budget. The government deregulated
the domestic oil industry with the dismantling of the Oil Price Stabilization
Fund, a buffer mechanism designed to stabilize oil prices domestically. At the
same time, inflation went from a double digit rate at the beginning of the year
to below 5% at the end of the year. Finally, robust corporate profits were
supportive of a sustained uptrend in stock prices.
In Indonesia, there was a lot of positive news. Despite political unrest
mid-year triggered by the ouster of the opposition's leadership, the economy
sustained a high level of growth with inflation rates declining sharply. At the
same time the progressive widening of the country's currency fluctuation band
reaffirmed the belief that the government's economic policies are sound. Foreign
investment flows remained strong as did corporate profits.
WHAT WERE SOME OF THE WORST PERFORMING MARKETS AND WHY?
SH: There were two that performed very poorly, Thailand and Korea. In Thailand,
there was a great deal of uncertainty about the effectiveness of the coalition
government, which was hampered by allegations of corruption that led to the
resignation of Prime Minister Barnharn. At the same time, the economy was
slowing sharply under weak export performance and a deterioration of the
country's current account deficit, which increased sharply to more than 8% of
GDP, raising the prospect of a currency devaluation. However, the central bank's
commitment to maintaining the value of the baht prevented a crisis from
occurring.
In Korea, where the economy is dominated by cyclical industries -- including
semiconductors, chemicals and steel -- trading conditions deteriorated as the
country lost competitiveness versus the Japanese. A propensity among locals for
foreign imports further compounded the deterioration of Korea's trade and
current account balances. Interest rates also rose as inventories built up as a
consequence of weak demand for products.
AFTER STRUGGLING THROUGH 1996, WHAT IS THE GENERAL ECONOMIC OUTLOOK FOR THE
ASIAN REGION IN 1997 AND BEYOND?
SH: One of the themes to focus on will be the lack of overheating pressures
that was a feature of 1994 and 1995. Economic growth has slowed across the
region but has in recent months begun to pick up as external demand conditions
have improved, especially in the electronics industry. Taiwan, Korea, and
Singapore are key beneficiaries of this recovery. Trade and current account
balances also should recover, if modestly, in the year ahead which in turn
should give flexibility to domestic monetary policy across the region.
There has been some discussion about Asia having structural difficulties, and
not being able to compete in the global marketplace. We don't think that's true.
The Asian countries have highly skilled labor forces that are well trained and
are quite disciplined. Labor costs are at the same time relatively low in many
countries which help maintain global export competitiveness. There are huge
investments in infrastructure which, in the medium term, also contribute to
strong economic growth rates.
4
<PAGE>
Additionally, intra-Asian trade and investment flows have increased.
Historically, the region looked to the U.S. or Europe or Japan for investment
capital, but now we are seeing Taiwanese companies investing in various
industries in the Philippines; Singapore is a big investor in Vietnam, and so
on. That provides the basis for sustained superior levels of growth, relative to
developed countries.
WHILE THE FUND PROVIDED A SOLID RETURN FOR THE PERIOD, IT WAS BELOW THE RETURN
FOR THE BENCHMARK. WHY?
SH: The main culprit was stock selection. In Indonesia and the Philippines, the
markets were liquidity driven -- an environment which did not reward our value
approach to investing. We were under-represented in larger, more established
companies in favor of smaller ones, as they were attractively valued. However,
investors were drawn to the more liquid stocks, and these performed better in
1996.
Index changes also adversely affected performance. In Indonesia, both the
domestic and MSCI indices were rebalanced following the listing of PT Telkom,
the domestic telephone operator which replaced Indosat, the international phone
carrier. As a consequence, the former, which was trading at a much higher
price-to-earnings ratio, performed much better as investors switched into the
index stock.
In terms of country allocation, the Fund benefited from an underweighted
position in Singapore and an overweighting in Taiwan. Performance was hindered,
however, by an underweighted position in the Philippines and in Malaysia, where
corporate profits grew more strongly than anticipated. Our initial optimism over
the likelihood of a turnaround in both Thailand and Korea proved premature.
Having initially been overweighted in these markets hurt overall returns.
WHAT IS THE STRATEGY FOR THE PORTFOLIO FOR THE UPCOMING YEAR?
SH: In general, we think inflationary pressures in the region have eased,
leaving room for interest rates to decline. This should be a positive for equity
markets, although the scope remains limited, given the likelihood of higher U.S.
rates. We currently favor Taiwan, Indonesia, and, to a lesser extent, the
Philippines. Corporate profits are expected to be very strong in these
countries, though political risks moderate our enthusiasm.
We view Korea and Thailand positively for the medium term. Korean valuations
appear very cheap. Many of the banks are trading at half of book value.
Cyclicals like the chemical companies are actually trading at valuations below
replacement cost. In Thailand, it's only a matter of time before the economy
gets back on its feet again. By historical comparisons, valuations there are
very attractive, and we believe that the market's expectations for a devaluation
of the currency are overdone.
In Hong Kong, we have reduced the Portfolio's holdings. After such a rewarding
year, and where valuations are clearly stretched, there are several factors
indicating a possible correction. There has been a heightening of anxiety in the
country, in part due to China's plans to repeal legislation protecting civil
rights. At the same time the curbs on residential mortgage lending and rising
vacancy rates in the office sector are likely to lead to disappointments in
earnings in what is a key sector of the market. Finally, stock prices are
vulnerable to a pullback in the U.S. where valuations are extended.
5
<PAGE>
Fund facts
INVESTMENT OBJECTIVE
The JPM Pierpont Asia Growth Fund seeks to provide a high total return from a
portfolio of equity securities of companies in Asian growth markets. It is
designed for long-term investors who want to diversify their investments by
adding exposure to the rapidly growing Asian markets. As an international
investment, the Fund is subject to foreign market, political, and currency risk.
- --------------------------------------------------------------------------------
COMMENCEMENT OF OPERATIONS
5/13/96
- --------------------------------------------------------------------------------
NET ASSETS AS OF 12/31/96
$1,155,816
- --------------------------------------------------------------------------------
CAPITAL GAIN PAYABLE DATE (IF APPLICABLE)
12/24/97
EXPENSE RATIO
The Fund's current annualized expense ratio of 1.60% 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 DECEMBER 31, 1996
COUNTRY ALLOCATION
(PERCENTAGE OF TOTAL INVESTMENTS)
[PIECHART]
[FOLLOWING IS AN EDGAR REPRESENTATION OF THE PIE CHART]
HONG KONG 32.4%
MALAYSIA 19.8%
THAILAND 9.6%
SINGAPORE 7.0%
SOUTH KOREA 5.9%
PHILIPPINES 5.8%
INDONESIA 5.7%
CHINA 5.3%
TAIWAN 5.2%
OTHER 3.3%
LARGEST HOLDINGS % OF TOTAL INVESTMENTS
SUN HUNG KAI PROPERTIES, LTD. (HONG KONG) 5.7%
HUTCHISON WHAMPOA, LTD. (HONG KONG) 5.4%
CHEUNG KONG HOLDINGS, LTD. (HONG KONG) 4.6%
HANG SENG BANK, LTD. (HONG KONG) 2.6%
SWIRE PACIFIC, LTD. (HONG KONG) 2.6%
6
<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 JPM Pierpont Funds, a family of diversified
mutual funds.
PAAS is available to clients who invest a minimum of $500,000 in The JPM
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 JPM Pierpont Funds
provide an excellent way to help you accumulate long-term wealth for retirement.
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 JPM Pierpont Funds
can help you build a comprehensive investment program designed to maximize the
retirement dollars in your Keogh account.
7
<PAGE>
FUNDS DISTRIBUTOR, INC. IS THE DISTRIBUTOR OF THE JPM PIERPONT ASIA GROWTH 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 certain Fund 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 Asia Growth 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. Consistent
with applicable regulatory guidance, performance for the Fund prior to May 13,
1996 reflects the performance of The JPM Institutional Asia Growth Fund, which
also invests its assets in the Portfolio and has a substantially similar
investment objective and restrictions as the Fund. Performance for the period
prior to May 13, 1996 reflects the deduction of the charges and expenses of The
JPM Institutional Asia Growth Fund, which were lower than the charges and
expenses of the Fund. References to specific securities and their issuers are
for illustrative purposes only and should not be interpreted as recommendations
to purchase or sell such securities. Opinions expressed herein on current market
conditions are subject to change without notice. The Portfolio invests in
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) 521-5411.
8
<PAGE>
THE JPM PIERPONT ASIA GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment in The Asia Growth Portfolio
("Portfolio"), at value $1,201,270
Receivable for Expense Reimbursements 27,644
Deferred Organization Expenses 14,831
Other Assets 95
----------
Total Assets 1,243,840
----------
LIABILITIES
Organization Expenses Payable 17,000
Shareholder Servicing Fee Payable 243
Administrative Services Fee Payable 31
Administration Fee Payable 10
Accrued Trustees' Fees and Expenses 4
Fund Services Fee Payable 3
Accrued Expenses 70,733
----------
Total Liabilities 88,024
----------
NET ASSETS
Applicable to 115,366 Shares of Beneficial
Interest Outstanding
(par value $0.001, unlimited shares authorized) $1,155,816
----------
----------
Net Asset Value, Offering and Redemption Price
Per Share $10.02
-----
-----
ANALYSIS OF NET ASSETS
Paid-in Capital $1,110,942
Distributions in Excess of Net Investment Income (508)
Accumulated Net Realized Loss on Investment and
Foreign Currency Transactions (13,633)
Net Unrealized Appreciation of Investment and
Foreign Currency Translations 59,015
----------
Net Assets $1,155,816
----------
----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
9
<PAGE>
THE JPM PIERPONT ASIA GROWTH FUND
STATEMENT OF OPERATIONS
FOR THE PERIOD MAY 13, 1996 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME ALLOCATED FROM PORTFOLIO
Allocated Dividend Income (Net of Foreign
Withholding Tax of $614) $ 5,343
Allocated Interest Income 1,062
Allocated Portfolio Expenses (3,816)
--------
Net Investment Income Allocated from
Portfolio 2,589
FUND EXPENSES
Registration Fees $ 42,196
Printing Expenses 13,450
Transfer Agent Fees 13,232
Professional Fees 11,305
Amortization of Organization Expenses 2,169
Shareholder Servicing Fee 812
Administrative Services Fee 102
Administration Fee 13
Fund Services Fee 11
Trustees' Fees and Expenses 9
Miscellaneous 1,500
--------
Total Fund Expenses 84,799
Less: Reimbursement of Expenses (83,417)
--------
NET FUND EXPENSES 1,382
--------
NET INVESTMENT INCOME 1,207
NET REALIZED LOSS ON INVESTMENT AND FOREIGN
CURRENCY TRANSACTIONS ALLOCATED FROM PORTFOLIO (13,833)
NET CHANGE IN UNREALIZED APPRECIATION OF
INVESTMENT AND FOREIGN CURRENCY TRANSLATIONS
ALLOCATED FROM PORTFOLIO 59,015
--------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $ 46,389
--------
--------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
10
<PAGE>
THE JPM PIERPONT ASIA GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 13, 1996
(COMMENCEMENT OF
OPERATIONS) TO
DECEMBER 31,
1996
----------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 1,207
Net Realized Loss on Investment and Foreign
Currency Transactions Allocated from Portfolio (13,833)
Net Change in Unrealized Appreciation of
Investment and Foreign Currency Translations
Allocated from Portfolio 59,015
----------------
Net Increase in Net Assets Resulting from
Operations 46,389
----------------
DISTRIBUTIONS TO SHAREHOLDERS
From Net Investment Income (1,207)
In Excess of Net Investment Income (897)
----------------
(2,104)
----------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Proceeds from Shares of Beneficial Interest Sold 1,158,263
Reinvestment of Dividends 2,052
Cost of Shares of Beneficial Interest Redeemed (48,784)
----------------
Net Increase from Transactions in Shares of
Beneficial Interest 1,111,531
----------------
Total Increase in Net Assets 1,155,816
NET ASSETS
Beginning of Period --
----------------
End of Period (including distributions in excess
of net investment income of $508) $ 1,155,816
----------------
----------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
11
<PAGE>
THE JPM PIERPONT ASIA GROWTH FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share outstanding throughout the period is as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 13, 1996
(COMMENCEMENT OF
OPERATIONS) TO
DECEMBER 31,
1996
----------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
----------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.01
Net Realized and Unrealized Gain on Investment
and Foreign Currency 0.03
----------------
Total from Investment Operations 0.04
----------------
LESS DISTRIBUTIONS TO SHAREHOLDERS
From Net Investment Income (0.01)
In Excess of Net Investment Income (0.01)
----------------
(0.02)
----------------
NET ASSET VALUE, END OF PERIOD $ 10.02
----------------
----------------
Total Return 0.38%(a)
----------------
----------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (in thousands) $ 1,156
Ratios to Average Net Assets
Expenses 1.60%(b)
Net Investment Income 0.37%(b)
Decrease Reflected in Expense Ratio due to
Expense Reimbursement 0.90%(b)(c)
</TABLE>
- ------------------------
(a) Not annualized.
(b) Annualized.
(c) After consideration of certain state limitations.
The Accompanying Notes are an Integral Part of the Financial Statements.
12
<PAGE>
THE JPM PIERPONT ASIA GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The JPM Pierpont Asia Growth Fund (the "Fund") is a separate series of The JPM
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 no-load open-end management investment company. The Fund
commenced operations on May 13, 1996. Prior to October 10, 1996, the Trust's and
the Fund's names were The Pierpont Funds and The Pierpont Asia Growth Fund,
respectively.
The Fund invests all of its investable assets in The Asia Growth Portfolio (the
"Portfolio"), a 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 (approximately 1% at December 31,
1996). 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)Distributions to shareholders of net investment income and net realized
capital gains, if any, are declared and paid annually.
d)The Fund has incurred $17,000 in organization expenses. Morgan Guaranty
Trust Company of New York ("Morgan") has agreed to pay the organization
expenses of the Fund. The Fund has agreed to reimburse Morgan for these
costs which are being deferred and will be amortized on a straight-line
basis over a period not to exceed five years beginning with the
commencement of operations of the Fund.
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 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.
13
<PAGE>
THE JPM PIERPONT ASIA GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
f)Expenses incurred by the Trust with respect to any two or more funds in
the Trust are allocated in proportion to the net assets of each fund in
the Trust, except where allocations of direct expenses to each fund can
otherwise be made fairly. Expenses directly attributable to a fund are
charged to that fund.
g)The Fund accounts for and reports distributions to shareholders in
accordance with Statement of Position 93-2 "Determination, Disclosure, and
Financial Statement Presentation of Income, Capital Gain, and Return of
Capital Distributions by Investment Companies." The effect of applying
this statement as of December 31, 1996, was to decrease accumulated net
realized loss on investment and foreign currency transactions by $200,
decrease distributions in excess of net investment income by $389 and
decrease paid-in capital by $589. The adjustments are primarily
attributable to foreign currency losses. Net investment income, net
realized loss and net assets were not affected by this change.
2. TRANSACTIONS WITH AFFILIATES
a)The Trust had retained Signature Broker-Dealer Services, Inc.
("Signature") to serve as administrator and distributor. Under an
Administration Agreement, Signature provided administrative services
necessary for the operations of the Fund, furnished office space and
facilities required for conducting the business of the Fund and paid the
compensation of the Fund's officers affiliated with Signature. The
agreement provided for a fee to be paid to Signature equal to the Fund's
proportionate share of a complex-wide charge based on the following
schedule: 0.03% on the first $7 billion of the aggregate average daily net
assets of the Portfolio and the other portfolios (the "Master Portfolios")
in which series of the Trust, The JPM Institutional Funds or The JPM
Advisor Funds invest and 0.01% of the aggregate average daily net assets
of the Master Portfolios in excess of $7 billion. The portion of this
charge paid by the Fund was determined by the proportionate share its net
assets bore to the total net assets of the Trust, The JPM Institutional
Funds, The JPM Advisor Funds and the Master Portfolios. For the period
from May 13, 1996 (commencement of operations) to July 31, 1996,
Signature's fee amounted to $1. The Administration Agreement with
Signature was terminated July 31, 1996.
Effective August 1, 1996, certain administrative functions formerly
provided by Signature are provided by Funds Distributor, Inc. ("FDI"), a
registered broker-dealer, and by Morgan. FDI also serves as the Fund's
distributor. Under a Co-Administration Agreement between FDI and the Trust
on behalf of the Fund, 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 Institutional Funds, The JPM Advisor Funds, the Master Portfolios
and JPM Series Trust. For the period from August 1, 1996 to December 31,
1996, the fee for these services amounted to $12.
On November 15, 1996, The JPM Advisor Funds terminated operations and were
liquidated. Subsequent to that date, the net assets of The JPM Advisor
Funds are no longer included in the calculation of the allocation of FDI's
fees.
b)The Trust, on behalf of the Fund, has an Administrative Services Agreement
(the "Services Agreement") with Morgan under which Morgan is responsible
for certain aspects of the administration
14
<PAGE>
THE JPM PIERPONT ASIA GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
and operation of the Fund. Under the Services Agreement, the Fund had
agreed to pay Morgan a fee equal to its proportionate share of an annual
complex-wide charge. Until July 31, 1996, this charge was calculated daily
based on the aggregate net assets of the Master Portfolios in accordance
with the following annual schedule: 0.06% on the first $7 billion of the
Master Portfolios' aggregate average daily net assets and 0.03% of the
Master Portfolios' aggregate average daily net assets in excess of $7
billion. The portion of this charge paid by the Fund was determined by the
proportionate share its net assets bore to the net assets of the Trust,
the Master Portfolios and other investors in the Master Portfolios for
which Morgan provided similar services. For the period from May 13, 1996
(commencement of operations) to July 31, 1996, Morgan's fee for these
services amounted to $3.
After July 31, 1996, the Services Agreement was amended such that the
annual complex-wide charge is calculated daily based on the aggregate net
assets of the Master Portfolios and JPM Series Trust in accordance with
the following schedule: 0.09% on the first $7 billion of their aggregate
average daily net assets and 0.04% of their aggregate average daily net
assets in excess of $7 billion less the complex-wide fees payable to FDI.
The portion of this charge paid by the Fund is determined by the
proportionate share that its net assets bear to the net assets of the
Trust, the Master Portfolios, other investors in the Master Portfolios for
which Morgan provides similar services, and JPM Series Trust. For the
period from August 1, 1996 to December 31, 1996, the fee for these
services amounted to $99.
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
1.60% of the average daily net assets of the Fund through April 30, 1997.
For the period from May 13, 1996 (commencement of operations) to December
31, 1996, Morgan has agreed to reimburse the Fund $83,417 for the expenses
under this agreement.
c)The Trust, on behalf of the Fund, has a Shareholder Servicing Agreement
with Morgan. The Agreement provides for the Fund to pay Morgan a fee for
these services which is computed daily and paid monthly at an annual rate
of 0.25% of the average daily net assets of the Fund. For the period from
May 13, 1996 (commencement of operations) to December 31, 1996, the fee
for these services amounted to $812.
Morgan, Charles Schwab & Co. ("Schwab") and the Trust are parties to
separate services and operating agreements (the "Schwab Agreements")
whereby Schwab makes fund shares available to customers of investment
advisors and other financial intermediaries who are Schwab's clients. The
Fund is not responsible for payments to Schwab under the Schwab
Agreements; however, in the event the Services Agreement with Schwab is
terminated for reasons other than a breach by Schwab and the relationship
between the Trust and Morgan is terminated, the Fund would be responsible
for the ongoing payments to Schwab with respect to pre-termination shares.
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 cost in performing its services amounted to
$11 for the period from May 13, 1996 (commencement of operations) to
December 31, 1996.
15
<PAGE>
THE JPM PIERPONT ASIA GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
e)An aggregate annual fee of $65,000 is paid to each Trustee for serving as
a Trustee of the Trust, The JPM Institutional Funds, the Master Portfolios
and JPM Series Trust. The Trustees' Fees and Expenses shown in the
financial statements represent the Fund's allocated portion of the total
fees and expenses. The Trust's Chairman and Chief Executive Officer also
serves as Chairman of Group and received compensation and employee
benefits from Group in his role as Group's Chairman. For the period from
May 13, 1996 (commencement of operations) to December 31, 1996, there was
no fee for these services.
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
MAY 13, 1996
(COMMENCEMENT OF
OPERATIONS) TO
DECEMBER 31,
1996
----------------
<S> <C>
Shares sold 120,225
Reinvestment of dividends and distributions 207
Shares redeemed (5,066)
----------------
Net Increase 115,366
----------------
----------------
</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.
16
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of
The JPM Pierpont Asia Growth Fund
In our opinion, the accompanying statement of assets and liabilities and the
related statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
The JPM Pierpont Asia Growth Fund (one of the series constituting part of The
JPM Pierpont Funds, hereafter referred to as the "Fund") at December 31, 1996,
and the results of its operations, the changes in its net assets and the
financial highlights for the period May 13, 1996 (commencement of operations) to
December 31, 1996, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
New York, New York
February 21, 1997
17
<PAGE>
The Asia Growth Portfolio
Annual Report December 31, 1996
(The following pages should be read in conjunction
with The JPM Pierpont Asia Growth Fund
Annual Financial Statements)
18
<PAGE>
THE ASIA GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -------------
<S> <C> <C>
COMMON STOCK (89.7%)
CHINA (5.1%)
Guangdong Electric Power (Series B) (Electric)... 316,000 $ 279,436
Guangdong Province Expressway Development Ltd.
(Series B) (Construction & Housing)+........... 585,000 567,227
Guangshen Railway Co. Ltd. (Series H)
(Railroads)+................................... 2,112,000 914,700
Huaneng Power International Inc. (ADR)
(Telecommunication Services)+.................. 40,000 900,000
Luoyang Glass Co. Ltd. (Series H) (Building
Materials)..................................... 1,576,000 483,905
Qingling Motors Co. Ltd. (Series H)
(Automotive)................................... 400,000 221,073
Shandong Huaneng Power Ltd. (ADR) (Electric)..... 80,000 780,000
Shanghai Dajiang Group Co. Ltd. (Series B) (Multi
- Industry).................................... 1,487,100 724,218
Shanghai Tyre and Rubber Co. Ltd. (Series B)
(Metals & Mining)+............................. 1,135,800 481,579
Yizheng Chemical Fibre Co. Ltd. (Series H)
(Chemicals).................................... 1,340,000 325,689
Zhenhai Refining & Chemical Co. Ltd. (Series H)
(Chemicals).................................... 1,632,000 601,319
-------------
6,279,146
-------------
HONG KONG (30.6%)
Bank of East Asia Ltd. (Banking)................. 325,800 1,448,937
Cathay Pacific Airways Ltd. (Airlines)........... 150,000 236,587
CDL Hotels International Ltd. (Restaurants &
Hotels)........................................ 940,000 537,751
Cheung Kong Holdings Ltd. (Real Estate).......... 606,000 5,386,234
China Resources Enterprises Ltd. (Real Estate
Investment Trusts)............................. 140,000 314,932
Dickson Concepts International Ltd. (Wholesale &
International Trade)........................... 180,000 674,855
First Pacific Company Ltd. (Multi - Industry).... 323,000 419,670
Hang Seng Bank Ltd. (Banking).................... 257,000 3,123,207
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -------------
<S> <C> <C>
HONG KONG (CONTINUED)
Henderson Land Development Company Ltd. (Real
Estate)........................................ 187,000 $ 1,885,715
Hong Kong & China Gas Co. Ltd. (Natural Gas)..... 927,000 1,791,681
Hong Kong Electric Holdings Ltd. (Electric)...... 451,000 1,498,475
Hong Kong Telecommunications Ltd.
(Telecommunications)........................... 999,200 1,608,280
HSBC Holdings PLC (Banking)...................... 34,103 729,677
Hutchison Whampoa Ltd. (Multi - Industry)........ 815,000 6,400,940
JCG Holdings Ltd. (Financial Services)........... 276,000 269,399
New World Infrastructure Ltd. (Construction &
Housing)+...................................... 94,000 274,648
Sun Hung Kai Properties Ltd. (Real Estate)....... 545,000 6,675,988
Swire Pacific Ltd. (Multi - Industry)............ 321,000 3,060,602
Television Broadcast Ltd. (Entertainment, Leisure
& Media)....................................... 128,000 511,338
Yue Yuen Industrial (Holdings) Ltd. (Metals &
Mining)........................................ 1,330,000 507,240
-------------
37,356,156
-------------
INDIA (0.5%)
EIH Limited (GDR) (Entertainment, Leisure &
Media)......................................... 8,900 210,263
Reliance Industrial Infrastructure Ltd. (GDR)
(Chemicals).................................... 14,700 176,400
State Bank of India (GDR) (Banking)+............. 10,400 180,648
-------------
567,311
-------------
INDONESIA (5.5%)
P.T. Bimantara Citra (Multi - Industry).......... 240,500 320,667
P.T. Fajar Surya Wisea (Metals & Mining)......... 1,150,000 498,942
P.T. Gudang Garam (Food, Beverages & Tobacco).... 287,000 1,239,111
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
THE ASIA GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -------------
<S> <C> <C>
INDONESIA (CONTINUED)
P.T. Kabelmetal Indonesia (Telecommunications-
Equipment)..................................... 765,000 $ 340,000
P.T. Kawasan Industri Jababeka (Real Estate)..... 258,000 300,317
P.T. Matahari Putra Prima (Retail)............... 411,000 478,413
P.T. Pabris Kertas Tjiwi Kimia (Metals &
Mining)........................................ 561,868 558,895
P.T. Pan Indonesia Bank (Banking)................ 442,125 505,286
P.T. Semen Cibinong (Building Materials)......... 152,000 427,852
P.T. Telekomunikasi Indonesia
(Telecommunications)........................... 1,198,000 2,066,391
-------------
6,735,874
-------------
MALAYSIA (18.6%)
Arab Malaysian Finance Berhad (Financial
Services)...................................... 189,000 1,055,194
Berjaya Capital Berhad (Financial Services)...... 629,000 697,365
Commerce Asset-Holding Berhad (Banking).......... 269,211 2,025,339
Gamuda Berhad (Construction & Housing)........... 287,000 1,215,954
Golden Hope Plantations Berhard (Metals &
Mining)........................................ 19,000 32,350
Guinness Anchor Berhad (Food, Beverages &
Tobacco)....................................... 489,000 1,200,472
IJM Corporation Berhad (Building Materials)...... 472,000 1,112,014
Industrial Concrete Products (Building
Materials)+.................................... 175,000 436,546
Industrial Oxygen Incorporated Berhad
(Agriculture).................................. 804,000 1,235,205
Lingkaran Trans Kota Holdings Berhad
(Construction & Housing)+...................... 112,000 230,607
Lingui Developments Berhad (Forest Products &
Paper)......................................... 311,000 531,980
Malayan Banking Berhad (Banking)................. 181,800 2,015,595
Malayan Cement Berhad (Building Materials)....... 233,000 535,100
Malaysian Oxygen Berhad (Chemicals).............. 500 2,574
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -------------
MALAYSIA (CONTINUED)
Malaywata Steel Berhad (Metals & Mining)......... 443,000 $ 834,953
New Straits Times Press Berhad (Entertainment,
Leisure & Media)............................... 221,000 1,277,605
Pacific & Orient Berhad (Insurance).............. 104,000 251,197
Pelangi Berhad (Real Estate)..................... 376,000 396,768
Perusahaan Otomobil Nasional Berhad
(Automotive)................................... 170,000 1,077,011
Petronas Dagangan Berhad (Oil-Services).......... 112,000 288,259
Resorts World Berhad (Entertainment, Leisure &
Media)......................................... 219,000 997,226
Sime Darby Berhad (Multi - Industry)............. 596,000 2,348,123
Sime U.E.P. Properties Berhad (Real Estate)...... 266,000 684,615
Tenaga Nasional Berhad (Telecommunications)...... 476,000 2,280,572
-------------
22,762,624
-------------
PHILIPPINES (5.2%)
Aboitiz Equity Ventures Inc. (Banking)+.......... 4,490,040 452,418
Alaska Milk Corp. (Food, Beverages & Tobacco)+... 2,386,500 308,521
Ayala Corp. (Class B) (Multi - Industry)......... 304,000 329,430
Bankard Inc. (Banking)+.......................... 790,000 282,357
Engineering & Equipment Corp. (Industrial)....... 5,500,000 363,878
Fil-Estate Land Inc. (Real Estate)............... 296,100 258,947
Filinvest Land Inc. (Building Materials)+........ 1,610,000 501,977
First Philippine Holdings Corp. (Class B) (Multi
- Industry).................................... 50,100 114,297
Ionics Circuit Inc (Electronics)+................ 564,000 402,091
JG Summit Holdings Inc. (Class B) (Multi -
Industry)...................................... 852,000 239,726
Manila Electric Company (Class B) (Electric)..... 124,000 1,013,688
Petron Corp. (Oil-Services)...................... 1,212,813 410,420
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE ASIA GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -------------
<S> <C> <C>
PHILIPPINES (CONTINUED)
Philippine National Bank (Banking)+.............. 30,628 $ 363,926
Pryce Properties Corp. (Real Estate)+............ 5,405,400 390,504
San Miguel Corp. (Class B) (Food, Beverages &
Tobacco)....................................... 63,300 279,194
Steniel Manufacturing Corp. (Metals & Mining).... 950,000 67,909
Uniwide Holdings Inc. (Wholesale & International
Trade)+........................................ 2,719,000 537,597
-------------
6,316,880
-------------
SINGAPORE (6.7%)
Cerebos Pacific Ltd. (Food, Beverages &
Tobacco)....................................... 68,000 505,569
City Developments Ltd. (Real Estate)............. 30,000 270,228
DBS Land Ltd. (Real Estate)...................... 102,000 375,531
Development Bank Singapore (Banking)............. 73,000 986,331
Hotel Properties Limited (Restaurants &
Hotels)........................................ 297,000 479,847
Keppel Corporation Ltd. (Multi - Industry)....... 92,000 716,890
Osprey Maritime Ltd. (Transport & Services)...... 317,500 483,461
Overseas Chinese Bank (Banking).................. 24,600 306,001
Pacific Century Regional Development (Multi -
Industry)+..................................... 340,000 405,914
Singapore Airlines Ltd. (Airlines)............... 100,000 907,908
Singapore Land Ltd. (Real Estate)................ 60,000 332,423
Singapore Press Holdings (Entertainment, Leisure
& Media)....................................... 43,000 848,429
Singapore Telecommunications Ltd.
(Telecommunications)........................... 300,000 707,739
United Overseas Bank Ltd. (Banking).............. 80,310 895,638
-------------
8,221,909
-------------
SOUTH KOREA (5.4%)
Cho Hung Bank (Banking).......................... 61,000 495,215
Chung Ho Computer Co. (Computer Peripherals)..... 8,000 324,542
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -------------
SOUTH KOREA (CONTINUED)
Dong Ah Construction Industrial Co. Ltd.
(Construction & Housing)....................... 7,300 $ 148,504
Dong Ah Construction Industrial Co. Ltd. (2nd
New) (Construction & Housing)+................. 643 13,689
Dongbu Insurance (Insurance)+.................... 16,210 525,315
Hana Bank (Banking).............................. 17,596 253,899
Hana Bank (1st New) (Banking)+................... 26,000 393,250
Hana Bank (New) (Banking)+....................... 3,046 42,150
Hansol Paper Co. Ltd. (GDS) (Forest Products &
Paper)+........................................ 14,937 190,447
Hansol Paper Co. Ltd. (GDS) (144A) (Forest
Products & Paper)+............................. 2,195 27,986
Hansol Paper Co. Ltd (Forest Products & Paper)
(144A)......................................... 2,329 29,695
Housing & Commercial Bank, Korea (New)
(Banking)+..................................... 540 7,536
Hyundai Engineering & Construction Co.
(Construction & Housing)+...................... 4,000 92,726
Korea Electric Power Corp. (Electric)............ 28,000 814,666
Korea First Bank (Banking)+...................... 83,000 420,154
Korea Long Term Credit Bank (Banking)............ 10,050 172,354
Korea Mobile Telecommunications
(Telecommunications)........................... 453 464,198
Korea Zinc Co. Ltd. (Metals & Mining)+........... 14,100 266,824
Korean Air Co. Ltd. (Aerospace).................. 15,360 236,168
LG Information & Communication (New)
(Telecommunications-Equipment)+................ 2,700 191,283
Oriental Fire & Marine Insurance Co. Ltd.
(Insurance).................................... 4,200 86,434
Pohang Iron & Steel Co. Ltd. (Metals & Mining)... 5,100 292,820
Samsung Electronics Co. Ltd. (GDS represents 1/2
non-voting common share) (144A)
(Electronics).................................. 11,374 209,850
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE ASIA GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -------------
<S> <C> <C>
SOUTH KOREA (CONTINUED)
Samsung Electronics Co. Ltd. (GDS represents 1/2
non-voting preferred share, 144A)
(Electronics)+................................. 5,236 $ 83,776
Samsung Electronics Co. Ltd. (GDS represents 1/2
voting common share, 144A) (Electronics)....... 266 9,576
Samsung Electronics Co. Ltd. (GDS represents 1/2
voting common share, 144A) (Electronics)+...... 884 36,576
Seoul City Gas Co. Ltd. (Natural Gas)+........... 4,500 282,082
Sungmi Telecom Electronics Co. Ltd.
(Telecommunications)........................... 270 42,248
Tong Yang Cement Co. (Building Materials)........ 13,000 235,245
Tong Yang Confectionery Co. Ltd. (Food, Beverages
& Tobacco)..................................... 11,800 259,586
-------------
6,648,794
-------------
TAIWAN (2.8%)
Asia Cement Corp. (GDS) (Building Materials)
(144A)......................................... 84,739 1,554,961
China Steel Corp. (GDS) (Metals & Mining)........ 50,000 1,003,125
Siliconware Precision Industries Co. (GDR)
(Semiconductors)+.............................. 32,000 355,200
Yageo Corp. (GDR) (Electronics)+................. 50,800 495,300
-------------
3,408,586
-------------
THAILAND (9.3%)
Bangkok Bank Public Co. Ltd. (Banking)........... 128,000 1,238,064
Bangkok Expressway Public Co. Ltd. (Transport &
Services)+..................................... 100,000 112,129
Banpu Public Co. Ltd. (Metals & Mining).......... 10,700 198,642
Central Pattana Public Co. Ltd. (Real Estate).... 194,500 675,135
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -------------
THAILAND (CONTINUED)
Charoen Pokphand Feedmill Public Co. Ltd.
(Agriculture).................................. 58,000 $ 210,374
Dhana Siam Finance and Securities Public Co. Ltd.
(Financial Services)........................... 100,000 237,909
Finance One Public Co. Ltd. (Financial
Services)...................................... 83,000 168,330
KR Precision Public Co. Ltd. (Computer
Peripherals)................................... 76,900 524,863
Krung Thai Bank Public Co. Ltd. (Banking)........ 399,500 779,055
Land & House Public Co. Ltd. (Real Estate)....... 44,000 320,904
Modern Form Group Public Co. Ltd.
(Manufacturing)................................ 174,700 102,203
PTT Exploration & Production Public Co. Ltd.
(Oil-Production)............................... 26,000 375,194
Regional Container Line Public Co. Ltd.
(Packaging & Containers)....................... 58,300 563,899
Robinson Department Store Public Co. Ltd.
(Retail)....................................... 281,000 257,546
Shinawatra Computer Public Co. Ltd. (Computer
Systems)....................................... 69,900 845,123
Siam Cement Public Co. Ltd. (Building
Materials)..................................... 20,000 630,264
Siam Commercial Bank Public Co. Ltd. (Banking)... 105,000 761,699
Swedish Motors Public Co. Ltd. (Capital Goods)... 110,000 164,099
TelecomAsia Corporation Public Co. Ltd.
(Telecommunications)+.......................... 551,000 1,149,706
Thai Farmers Bank Public Co. Ltd. (Banking)...... 54,700 341,341
Thai Military Bank Public Co. Ltd. (Financial
Services)...................................... 169,000 332,858
Thai Petrochemical Industry Public Co. Ltd.
(Chemicals).................................... 352,000 356,942
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE ASIA GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -------------
<S> <C> <C>
THAILAND (CONTINUED)
Tipco Asphalt Public Co. Ltd. (Construction &
Housing)....................................... 46,000 $ 279,875
Total Access Communication Public Co. Ltd.
(Telecommunication Services)................... 102,000 703,800
-------------
11,329,954
-------------
TOTAL COMMON STOCK (COST $102,400,021)......... 109,627,234
-------------
CONVERTIBLE PREFERRED STOCKS (0.4%)
PHILIPPINES (0.4%)
Philippine Long Distance Telephone Co. (GDS
represents 1 Series 2 Cnv Pfd)
(Telecommunications)
(cost $532,650)................................ 15,900 500,850
-------------
PREFERRED STOCK (0.2%)
SOUTH KOREA (0.2%)
Hyundai Engineering & Construction Co. (New)
(Construction & Housing)+...................... 232 5,104
Mando Machinery Corp. (Automotive Supplies)...... 11,000 162,626
Shin Won Corp. (Apparels & Textiles)............. 13,530 118,097
-------------
285,827
-------------
TOTAL PREFERRED STOCK (COST $598,557).......... 285,827
-------------
RIGHTS (0.0%)
INDONESIA (0.0%)
P.T. Kabelmetal Indonesia
(Expires 2/12/97) (Telecommunications-
Equipment)..................................... 200,000 4,233
P.T. Kawasan Industri Jababeka (Expires 1/24/97)
(Real Estate).................................. 50,000 9,524
-------------
13,757
-------------
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -------------
MALAYSIA (0.0%)
Gamuda Berhad
(Expires 2/12/97) (Construction & Housing)..... 20,500 $ 42,209
Gamuda Berhad
(Expires 2/12/97) (Rights to Warrants)
(Construction & Housing)....................... 41,000 --
-------------
42,209
-------------
TOTAL RIGHTS................................... 55,966
-------------
WARRANTS (0.5%)
MALAYSIA (0.5%)
Petronas Dagangan Berhad (Expires 2/24/99)
(Retail)....................................... 412,000 587,288
SINGAPORE (0.0%)
United Overseas Land Ltd. (Expires 06/09/97)
(Real Estate).................................. 90 41
-------------
TOTAL WARRANTS (COST $601,196)................. 587,329
-------------
PRINCIPAL
AMOUNT
-----------
CONVERTIBLE BONDS (2.9%)
HONG KONG (0.7%)
Regal Hotels International, 5.25% due 12/13/08
(Restaurants & Hotels)......................... $ 705,000 839,831
TAIWAN (2.2%)
Far Eastern Department Stores Ltd., 3.00% due
07/06/01 (Retail).............................. 788,000 831,340
Nan Ya Plastics Corp., 1.75% due 07/19/01
(Chemicals).................................... 580,000 661,200
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
23
<PAGE>
THE ASIA GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------- ----------- -------------
<S> <C> <C>
TAIWAN (CONTINUED)
U-Ming Marine Transport Corp., 1.50% due 02/07/01
(Transport & Services)......................... $ 690,000 $ 607,200
Yang Ming Marine Transport Corp., 2.00% due
10/06/01 (Transport & Services)................ 545,000 621,300
-------------
2,721,040
-------------
TOTAL CONVERTIBLE BONDS (COST $3,301,423)...... 3,560,871
-------------
SHORT-TERM INVESTMENTS (2.8%)
TIME DEPOSITS--FOREIGN (2.8%)
State Street Bank Cayman Islands, 4.88% due
01/02/97
(cost $3,430,000).............................. $ 3,430,000 3,430,000
-------------
TOTAL INVESTMENTS (COST $110,863,847) (96.5%).................
118,048,077
OTHER ASSETS IN EXCESS OF LIABILITIES (3.5%)..................
4,224,477
-------------
NET ASSETS (100.0%)........................................... $ 122,272,554
-------------
-------------
</TABLE>
- ------------------------------
Note: The cost of securities for Federal Income Tax purposes at December 31,
1996, was $111,490,917; the aggregate gross unrealized appreciation and
depreciation was $17,391,909 and $10,834,749, respectively, resulting in net
unrealized appreciation of $6,557,160.
+ - Non-income producing security.
ADS - American Depository Shares.
ADR - American Depository Receipts.
GDR - Global Depository Receipts.
GDS - Global Depository Shares.
144A - Securities restricted for resale to Qualified Institutional Buyers.
The Accompanying Notes are an Integral Part of the Financial Statements.
24
<PAGE>
THE ASIA GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY DIVERSIFICATION
PERCENT OF
TOTAL
INVESTMENTS
------------
<S> <C>
Banking............................................................................................. 15.43%
Real Estate......................................................................................... 15.22%
Multi-Industry...................................................................................... 12.77%
Telecommunications.................................................................................. 7.47%
Building Materials.................................................................................. 5.01%
Metals & Mining..................................................................................... 4.02%
Electric............................................................................................ 3.71%
Entertainment, Leisure & Media...................................................................... 3.26%
Food, Beverages & Tobacco........................................................................... 3.21%
Short-term Investments.............................................................................. 2.91%
Construction & Housing.............................................................................. 2.43%
Financial Services.................................................................................. 2.34%
Retail.............................................................................................. 1.83%
Chemicals........................................................................................... 1.80%
Natural Gas......................................................................................... 1.76%
Restaurants & Hotels................................................................................ 1.57%
Transportation...................................................................................... 1.55%
Telecommunication Services.......................................................................... 1.36%
Automotive.......................................................................................... 1.24%
Agriculture......................................................................................... 1.22%
Electronics......................................................................................... 1.05%
Wholesale & International Trade..................................................................... 1.03%
Airlines............................................................................................ 0.97%
Railroads........................................................................................... 0.77%
Insurance........................................................................................... 0.73%
Computer Peripherals................................................................................ 0.72%
Computer Systems.................................................................................... 0.71%
Forest Products & Paper............................................................................. 0.66%
Oil-Services........................................................................................ 0.59%
Packaging & Containers.............................................................................. 0.48%
Telecommunications-Equipment........................................................................ 0.45%
Oil-Production...................................................................................... 0.32%
Industrial.......................................................................................... 0.31%
Semiconductors...................................................................................... 0.30%
Real Estate Investment Trusts....................................................................... 0.27%
Aerospace........................................................................................... 0.20%
Capital Goods....................................................................................... 0.14%
Apparels & Textiles................................................................................. 0.10%
Manufacturing....................................................................................... 0.09%
------------
100.00%
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
25
<PAGE>
THE ASIA GROWTH PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $110,863,847 ) $118,048,077
Foreign Currency at Value (Cost $1,362,172) 1,360,947
Cash 372
Receivable for Investments Sold 5,332,245
Dividends Receivable 76,945
Interest Receivable 28,377
Deferred Organization Expenses 21,733
Prepaid Trustees' Fees 409
Prepaid Expenses and Other Assets 430
------------
Total Assets 124,869,535
------------
LIABILITIES
Payable for Investments Purchased 2,369,447
Unrealized Depreciation of Open Spot Foreign
Currency Contracts 3,171
Custody Fee Payable 88,471
Advisory Fee Payable 83,677
Organization Expenses Payable 5,750
Administrative Services Fee Payable 3,317
Administration Fee Payable 348
Accrued Expenses 42,800
------------
Total Liabilities 2,596,981
------------
NET ASSETS
Applicable to Investors' Beneficial Interests $122,272,554
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
26
<PAGE>
THE ASIA GROWTH PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividend Income (Net of Foreign Withholding Tax
of $229,982 ) $2,099,917
Interest Income 301,692
----------
Investment Income 2,401,609
EXPENSES
Advisory Fee $ 899,241
Custodian Fees and Expenses 333,386
Professional Fees and Expenses 54,431
Administrative Services Fee 31,613
Administration Fee 9,063
Printing Expenses 6,655
Amortization of Organization Expense 6,644
Fund Services Fee 4,975
Trustees' Fees and Expenses 2,040
Insurance Expense 634
Miscellaneous 1,057
----------
Total Expenses 1,349,739
Less: Reimbursement of Expenses (7,302)
----------
NET EXPENSES 1,342,437
----------
NET INVESTMENT INCOME 1,059,172
NET REALIZED GAIN (LOSS) ON INVESTMENTS
Investment Transactions 4,120,737
Foreign Currency Transactions (36,577)
----------
Net Realized Gain 4,084,160
NET CHANGE IN UNREALIZED APPRECIATION OF
Investments 4,768,292
Foreign Currency Contracts and Translations 499
----------
Net Change in Unrealized Appreciation 4,768,791
----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $9,912,123
----------
----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
27
<PAGE>
THE ASIA GROWTH PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 5, 1995
(COMMENCEMENT OF
FOR THE FISCAL OPERATIONS) TO
YEAR ENDED DECEMBER 31,
DECEMBER 31, 1996 1995
----------------- ----------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 1,059,172 $ 783,140
Net Realized Gain on Investments and Foreign
Currency Transactions 4,084,160 2,768,176
Net Change in Unrealized Appreciation of
Investments and Foreign Currency Contracts and
Translations 4,768,791 2,414,409
----------------- ----------------
Net Increase in Net Assets Resulting from
Operations 9,912,123 5,965,725
----------------- ----------------
----------------- ----------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 85,257,294 104,554,882
Withdrawals (59,878,251) (23,539,419)
----------------- ----------------
Net Increase from Investors' Transactions 25,379,043 81,015,463
----------------- ----------------
Total Increase in Net Assets 35,291,166 86,981,188
NET ASSETS
Beginning of Period 86,981,388 200
----------------- ----------------
End of Period $ 122,272,554 $ 86,981,388
----------------- ----------------
----------------- ----------------
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 5, 1995
FOR THE (COMMENCEMENT OF
FISCAL YEAR OPERATIONS) TO
ENDED DECEMBER 31,
DECEMBER 31, 1996 1995
----------------- ----------------
<S> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Expenses 1.19% 1.40%(a)
Net Investment Income 0.94% 1.18%(a)
Decrease Reflected in Expense Ratio due to
Expense Reimbursement 0.01% --
Portfolio Turnover 93% 70%(b)
Average Brokerage Commissions $ 0.0069 --
</TABLE>
- ------------------------
(a) Annualized.
(b) Not annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
28
<PAGE>
THE ASIA GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Asia Growth Portfolio (the "Portfolio"), is one of five subtrusts
(portfolios) comprising The Series Portfolio (the "Series Portfolio"). The
Series Portfolio 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 June 24,
1994. The Portfolio's investment objective is to achieve a high total return
from a portfolio of equity securities of companies in Asian emerging market
countries. The Portfolio commenced operations on April 5, 1995. The Series
Portfolio's Declaration of Trust permits the Trustees to issue an unlimited
number of beneficial interests in the Portfolio.
Investments in Asian emerging markets may involve certain considerations and
risks not typically associated with investments in the United States. Future
economic and political developments in Asian emerging market 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 value of each security for which readily available market quotations
exists is based on a decision as to the broadest and most representative
market for such security. The value of such security will be based either
on the last sale price on a national securities exchange or, in the
absence of recorded sales, at the readily available closing bid price on
such exchange, or at the quoted bid price in the over-the-counter market.
Securities listed on a foreign exchange are valued at the last quoted sale
price available before the time when net assets are valued. Unlisted
securities are valued at the average of the quoted bid and asked prices in
the over-the-counter market. Securities or other assets for which market
quotations are not readily available are valued at fair value in
accordance with procedures established by the Portfolio's Trustees. Such
procedures include the use of independent pricing services, 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 portfolio securities
with a remaining maturity of less than 60 days are valued by the amortized
cost method.
Trading in securities on most foreign exchanges and over-the-counter
markets is normally completed before the close of the domestic market and
may also take place on days on which the domestic market is closed. If
events materially affecting the value of foreign securities occur between
the time when the exchange on which they are traded closes and the time
when the Portfolio's net assets are calculated, such securities will be
valued at fair value in accordance with procedures established by and
under the general supervision of the Portfolio's Trustees.
b)The books and records of the Portfolio are maintained in U.S. dollars. The
market value of investment securities, other assets and liabilities and
foreign currency contracts are translated at the prevailing exchange rates
at the end of the period. Purchases, sales, income and expense are
translated at the
29
<PAGE>
THE ASIA GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
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. Dividend
income is recorded on the ex-dividend date or at the time that the
relevant ex-dividend date and amount becomes known. Interest income, which
includes the amortization of premiums and discounts, if any, is recorded
on an accrual basis. For financial and tax reporting purposes, realized
gains and losses are determined on the basis of specific lot
identification.
d)The Portfolio may enter into forward and spot foreign currency contracts
to protect securities and related receivables and payables against
fluctuations in future foreign currency rates. A forward contract is an
agreement to buy or sell currencies of different countries on a specified
future date at a specified rate. Risks associated with such contracts
include the movement in the value of the foreign currency relative to the
U.S. dollar and the ability of the counterparty to perform.
The market value of the contract will fluctuate with changes in currency
exchange rates. Contracts are valued daily based on procedures established
by and under the general supervision of the Portfolio's Trustees, and the
change in the market value is recorded by the Portfolio as unrealized
appreciation or depreciation of forward and spot foreign currency contract
translations. At December 31, 1996, the Portfolio had no open forward
foreign currency contracts.
e)The Portfolio intends to be treated as a partnership for federal income
tax purposes. As such, each investor in the Portfolio will be taxed on its
share of the Portfolio's ordinary income and capital gains. It is intended
that the Portfolio's assets will be managed in such a way that an investor
in the Portfolio will be able to satisfy the requirements of Subchapter M
of the Internal Revenue Code. The Portfolio earns foreign income which may
be subject to foreign withholding taxes at various rates.
f)The Portfolio has incurred $33,000 in organization expenses. Morgan
Guaranty Trust Company of New York ("Morgan") has agreed to pay the
organization expenses of the Portfolio. The Portfolio has agreed to
reimburse Morgan for these costs which are being deferred and will be
amortized on a straight-line basis over a period not to exceed five years
beginning with the commencement of operations of the Portfolio.
g)The Portfolio's custodian takes possession of the collateral pledged for
investments in repurchase agreements on behalf of the Portfolio. It is the
policy of the Portfolio to value the underlying collateral daily on a
mark-to-market basis to determine that the value, including accrued
interest, is at least equal to the repurchase price plus accrued interest.
In the event of default of the obligation to repurchase, the
30
<PAGE>
THE ASIA GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
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.
(h)Expenses incurred by the Series Portfolio with respect to any two or more
portfolios in the Series Portfolio are allocated in proportion to the net
assets of each portfolio in the Series Portfolio, except where
allocations of direct expenses to each portfolio can otherwise be made
fairly. Expenses directly attributable to a portfolio are charged to that
portfolio.
2. TRANSACTIONS WITH AFFILIATES
a)The Portfolio has an Investment Advisory Agreement with Morgan. Under the
terms of the agreement, the Portfolio pays Morgan at an annual rate of
0.80% of the Portfolio's average daily net assets. For the fiscal year
ended December 31, 1996 such fees amounted to $899,241.
b)The Portfolio had retained Signature Broker-Dealer Services, Inc.
("Signature") to serve as administrator and exclusive placement agent.
Under an Administration Agreement, Signature provided administrative
services necessary for the operations of the Portfolio, furnished office
space and facilities required for conducting the business of the Portfolio
and paid the compensation of the Portfolio's officers affiliated with
Signature. The agreement provided for a fee to be paid to Signature equal
to the Portfolio's proportionate share of a complex-wide fee based on the
following annual schedule: 0.03% on the first $7 billion of the aggregate
average daily net assets of the Portfolio and the other portfolios (the
"Master Portfolios") in which The JPM Pierpont Funds, The JPM
Institutional Funds or The JPM Advisor Funds invest and 0.01% on the
aggregate average daily net assets of the Master Portfolios in excess of
$7 billion. The portion of this charge paid by the Portfolio was
determined by the proportionate share its net assets bore to the total net
assets of The JPM Pierpont Funds, The JPM Institutional Funds, The JPM
Advisor Funds and the Master Portfolios. For the period from January 1,
1996 to July 31, 1996, such fees amounted to $7,712. The Administration
Agreement with Signature was terminated July 31, 1996.
Effective August 1, 1996, certain administrative functions formerly
provided by Signature are provided by Funds Distributor, Inc. ("FDI"), a
registered broker-dealer, and by Morgan. FDI also serves as the
Portfolio's exclusive placement agent. Under a Co-Administration Agreement
between FDI and the Portfolio, the Portfolio has agreed to pay FDI fees
equal to its allocable share of an annual complex-wide charge of $425,000
plus FDI's out-of-pocket expenses. The amount allocable to the Portfolio
is based on the ratio of the Portfolio's net assets to the aggregate net
assets of the The JPM Pierpont Funds, The JPM Institutional Funds, The JPM
Advisor Funds, the Master Portfolios and JPM Series Trust. For the period
from August 1, 1996 to December 31, 1996, the fee for these services
amounted to $1,351.
On November 15, 1996, The JPM Advisor Funds terminated operations and were
liquidated. Subsequent to that date, the net assets of The JPM Advisor
Funds are no longer included in the calculation of the allocation of FDI's
fees.
c)The Portfolio has an Administrative Services Agreement (the "Services
Agreement") with Morgan under which Morgan was responsible for overseeing
certain aspects of the administration and operation
31
<PAGE>
THE ASIA GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
of the Portfolio. Under the Services Agreement, the Portfolio had agreed
to pay Morgan a fee equal to its proportionate share of an annual
complex-wide charge. Until July 31, 1996, this charge was calculated daily
based on the aggregate net assets of the Master Portfolios in accordance
with the following annual schedule: 0.06% on the first $7 billion of the
Master Portfolios' aggregate average daily net assets and 0.03% of the
Master Portfolios' aggregate average daily net assets in excess of $7
billion. The portion of this charge paid by the Portfolio was determined
by the proportionate share that the Portfolio's net assets bore to the net
assets of the Master Portfolios and investors in the Master Portfolios for
which Morgan provided similar services. For the period from January 1,
1996 to July 31, 1996, the fee for these services amounted to $15,260.
After July 31, 1996, the Services Agreement was amended such that the
annual complex-wide charge is calculated daily based on the aggregate
average daily 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 aggregate
average daily net assets in excess of $7 billion less the complex-wide
fees payable to FDI. The portion of this charge paid by the Portfolio is
determined by the proportionate share that its net assets bear to the net
assets of the Master Portfolios, investors in the Master Portfolios for
which Morgan provides similar services, and JPM Series Trust. For the
period from August 1, 1996 to December 31, 1996, the fee for these
services amounted to $16,353.
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 $4,975 for the fiscal year ended December 31, 1996.
e)An aggregate annual fee of $65,000 is paid to each Trustee for serving as
a Trustee of The JPM Pierpont Funds, The JPM Institutional Funds, the
Master Portfolios and JPM Series Trust. The Trustees' Fees and Expenses
shown in the financial statements represent the Portfolio's allocated
portion of the total fees and expenses. The Portfolio's Chairman and Chief
Executive Officer also serves as Chairman of Group and received
compensation and employee benefits from Group in his role as Group's
Chairman. The allocated portion of such compensation and benefits included
in the Fund Services Fee shown in the financial statements was $600.
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the fiscal year
ended December 31, 1996 were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS FROM
PURCHASES SALES
- --------------- ---------------
<S> <C>
$123,302,624 $ 100,980,201
</TABLE>
32
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of
The Asia Growth Portfolio
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the supplementary data present fairly, in all material
respects, the financial position of The Asia Growth Portfolio (one of the
portfolios comprising part of the Series Portfolio, hereafter referred to as the
"Portfolio") at December 31, 1996, the results of its operations for the year
then ended, and the changes in its net assets and the supplementary data for the
year then ended and for the period April 5, 1995 (commencement of operations) to
December 31, 1995, in conformity with generally accepted accounting principles.
These financial statements and supplementary data (hereafter referred to as
"financial statements") are the responsibility of the Portfolio's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of securities at December 31, 1996 by correspondence with the custodian and
brokers and the application of alternative auditing procedures where
confirmations from brokers were not received, provide a reasonable basis for the
opinion expressed above.
PRICE WATERHOUSE LLP
New York, New York
February 21, 1997
33
<PAGE>
- --------------------------------------------------------------------------------
JPM PIERPONT MONEY MARKET FUND
JPM PIERPONT TAX EXEMPT MONEY MARKET FUND
JPM PIERPONT FEDERAL MONEY MARKET FUND
JPM PIERPONT SHORT TERM BOND FUND
JPM PIERPONT BOND FUND
JPM PIERPONT TAX EXEMPT BOND FUND
JPM PIERPONT NEW YORK TOTAL RETURN BOND FUND
JPM PIERPONT DIVERSIFIED FUND
JPM PIERPONT EQUITY FUND
JPM PIERPONT SHARES: TAX AWARE EQUITY FUND
JPM PIERPONT SHARES: DISCIPLINED EQUITY FUND
JPM PIERPONT CAPITAL APPRECIATION FUND
JPM PIERPONT INTERNATIONAL EQUITY FUND
JPM PIERPONT EMERGING MARKETS EQUITY FUND
JPM PIERPONT EUROPEAN EQUITY FUND
JPM PIERPONT JAPAN EQUITY FUND
JPM PIERPONT ASIA GROWTH FUND
THE
JPM PIERPONT
ASIA GROWTH
FUND
FOR MORE INFORMATION ON HOW THE JPM PIERPONT FAMILY OF FUNDS CAN HELP YOU PLAN
FOR YOUR FUTURE, CALL J.P. MORGAN FUNDS SERVICES AT (800) 521-5411.
ANNUAL REPORT
DECEMBER 31, 1996
