<PAGE>
LETTER TO THE SHAREHOLDERS OF THE JPM ADVISOR INTERNATIONAL FIXED INCOME FUND
May 22, 1996
Dear Shareholder:
Thank you for investing in The JPM Advisor International Fixed Income Fund.
Let me take this opportunity to welcome you to the JPM Advisor shareholder
family and to express the hope that you will wish to explore additional JPM
Advisor Funds as a way to conveniently diversify your investment portfolio
and gain broad exposure to financial opportunities in domestic and world
markets.
In the months ahead, we will be sending you detailed reports on the Fund's
performance and its strategies as it pursues its investment objective -- which
is to provide a high total return, consistent with moderate risk of capital,
from a portfolio of international fixed income securities. The first of these
reports follows and covers the extremely short period from the Fund's March 6,
1996 inception to March 31, 1996. Going forward, these reports will be provided
to you on both a semi-annual and an annual basis.
By way of introduction to the in-depth reporting we believe you deserve, we
offer and hope you will enjoy the Q&A that follows with Robert P. Browne, a
member of our international portfolio management team. It should be noted that
this interview pertains to The Non-U.S. Fixed Income Portfolio, a separate
investment company in which the Fund invests all of its assets, which has been
in operation since October 11, 1994. The performance of the Fund will be
directly related to the performance of the Portfolio.
Going forward, please be assured that we will always welcome your comments and
questions, as well as any suggestions on how we can improve your financial
reports. Please call J.P. Morgan Funds Services, toll free, at (800) JPM-3637.
Sincerely yours,
/s/ Alistair Jessiman
Alistair Jessiman
J.P. Morgan Funds Services
TABLE OF CONTENTS
LETTER TO THE SHAREHOLDERS. . . 1
PORTFOLIO MANAGER Q&A . . . . . 2
FUND FACTS AND HIGHLIGHTS . . . 6
FINANCIAL STATEMENTS. . . . . . 8
1
<PAGE>
Portfolio manager Q&A
[PHOTO]
Following is an interview with Robert P. Browne, part of the portfolio
management team for The Non-U.S. Fixed Income Portfolio in which the Fund
invests. Bob joined Morgan in June 1989, after earning his Master's Degree in
International Business Studies from the University of South Carolina. From
February 1990 to April 1994, he worked in Morgan's Tokyo office as a global
fixed income and currency portfolio manager. In April 1994, he transferred to
Morgan's London office, where he currently manages global and international
fixed income portfolios. This interview was conducted on May 20, 1996, and
reflects Robert P. Browne's views on that date.
BOB, MANY OBSERVERS BELIEVE THAT THE TWO QUARTERS ENDED MARCH 31, 1996 SAW AN
ALMOST IDEAL ECONOMIC BACKDROP FOR INTERNATIONAL BONDS. WHAT DO YOU REGARD AS
THE HIGHLIGHTS OF THAT PERIOD AND WHAT INVESTMENT STRATEGIES DID YOU FAVOR TO
SUCCESSFULLY MEET ITS CHALLENGES?
RPB: That's interesting, because the two highlights would have led you to
believe it would have been a relatively poor period for international bonds, but
the economic recoveries in both Japan and the U.S. were the two issues that
stood out. In Japan, the recovery is something which has been long talked about
and it finally began to come to fruition in the fourth quarter of the calendar
year and became much more apparent during the first quarter of this year. That
actually had a beneficial impact on the Portfolio's relative return because we
were expecting it and had underweighted the Japanese bond market. With regard to
our non-dollar international holdings, the Portfolio benefited by not having any
exposure to U.S. bonds, which have done quite poorly for the three months
through the March-end period. U.S. bonds actually had negative returns and once
again showed the investment benefits of being diversified among the
international markets. The continued resurgence of the U.S. dollar was another
theme for the period and, being fully hedged, the Portfolio was also able to
avoid any poor returns generated by that emerging trend. On the positive side
was continued weakness in the European economies, which have enabled the
European bond markets to generate both high absolute as well as relative
returns.
WHAT IS YOUR PROJECTION FOR INTERNATIONAL BOND RETURNS?
RPB: We would expect coupon-like returns for international bonds. Our one-year
forecast basically calls for yields being unchanged across most major markets
and, therefore, we would forecast returns possibly in the range of 6% to 8% --
nothing like the double-digit returns that were enjoyed during calendar year
1995.
U.S. BOND PRICES AND ACTIONS TAKEN BY THE FEDERAL RESERVE HAVE ALWAYS BEEN KEY
IN DETERMINING THE COURSE OF INTERNATIONAL BOND MARKETS. WHAT DO YOU THINK LIES
AHEAD FOR THESE INTERNATIONAL PACESETTERS?
RPB: Well, without a doubt U.S. Federal Reserve policy continues to have a large
impact on global bond markets -- in particular, the dollar blocs of Canada and
Australia, as well as the Western European bond markets. Over the past three
months, however, we have started to see these markets follow the European eco-
2
<PAGE>
nomic momentum. In particular, the high-yielding markets are now driven more by
convergence trends -- that is, a convergence towards a common European currency
- -- than by U.S. central bank policy. The absolute returns of markets most likely
to benefit from convergence -- such as Spain, Sweden, and Italy -- have been
extremely high, 5% to 7% relative to the negative returns of the U.S. on a year-
to-date basis.
WHY WOULD THE HIGH-YIELDERS BENEFIT THE MOST FROM THE EMU?
RPB: Because, in the past, they had to pay the highest rates. The reason for
this was because these markets had central banks that were not completely
independent and economies where control of inflation was not a primary goal
of monetary policy. The fact that new political parties are now in power,
coupled with the European Monetary Union (EMU) criteria, make it likely that
the governments of these countries will focus on inflation and fiscal reform.
Consequently, their yields have the farthest to fall.
WHAT TRENDS ARE YOU FORECASTING FOR THE RELATIVE STRENGTH OF THE U.S. DOLLAR?
RPB: We still expect the U.S. dollar's recent strength to continue. Part of the
story has already been realized, however, so we are conscious of that fact and
we don't want to fall into the trap of constantly raising our
targets, simply because the market's moving. We're still anticipating a dollar
at the end of the year in the 110 to 115 U.S. dollar/yen range. We do expect the
dollar's strength to continue and, therefore, we're likely to remain fully
hedged, at least in the short term. As we break 100 on dollar/yen and perhaps
get into the high 150s on dollar/deutsche mark, the Portfolio may start to see
some unhedged tactical bets -- something we never did in 1995.
COULD YOU OFFER SOME DETAILS ON WHY YOU CURRENTLY FAVOR CORE EUROPEAN MARKETS,
LIKE GERMANY AND THE NETHERLANDS, OVER THE REGION'S NON-CORE COUNTRIES, LIKE
SPAIN AND ITALY?
RPB: Well, that story has been slightly in transition over the past month or so.
We have been moving some assets from the Core markets to the non-Core markets,
but nonetheless we view the Core markets as a nice medium return/medium risk
type of tradeoff. The three key factors are that the yield curves remain very
steep, the central banks are committed to price stability, and the currencies
have been traditionally strong within the Western European bond universe. That
story has partially been realized. The currencies have started to weaken, but
nonetheless the economic backdrop is still very favorable; that is, the export
sector is still being hurt somewhat by the strong currencies, and we think that
the deutsche mark needs to weaken more and underlying economic growth, while
having bottomed out, is still not that strong. We think there's a very good,
sound story for Core European bonds over at least the next couple of months.
The non-Core markets were often avoided in 1995 because of the political risk.
In particular, we felt that evaluating the economic fundamentals was a difficult
and ambiguous process because often the markets were driven by political
criteria that we felt uncomfortable evaluating. But now it's clear that the
political risk has been at least partially removed. Now, what you mostly have is
the economic backdrop of monetary convergence and a commitment by the central
banks to controlling inflation, and we think that the potential for long-term
convergence in these markets is very high. They've done very well already in a
short time, so that's the one caveat. We have performed very well by having this
exposure already, and so in the short term we
3
<PAGE>
may want to start taking some profits.
SINCE FRANCE PERFORMED RELATIVELY WELL OVER THE PAST TWO QUARTERS, OUR DECISION
TO HAVE THE PORTFOLIO UNDERWEIGHTED THERE DID NOT MAKE A POSITIVE CONTRIBUTION
TO OVERALL RETURNS. WHAT'S YOUR LATEST THINKING ON THAT MARKET'S FUTURE AND HOW
IS THE PORTFOLIO CURRENTLY INVESTING IN IT?
RPB: We think there's really very little more downside to the position. The
yield provided by France's 10-year bond is now lower than the yield provided by
Germany's 10-year bond, and it is hard to justify a sustained spread below
German bonds on either political or economic grounds, especially since the
French economy is showing more signs of recovery than the German economy. We
have maintained the underweighted position, but we're likely to start reducing
the underweighting as the position goes our way from here. When we first
decreased the Portfolio's position, I think that France's yield was about 40
basis points higher than Germany's. Fortunately, we've also made it up elsewhere
in the Portfolio so, on a forward-looking basis, if that spread starts to widen
over the short term, we would probably take some profits on a monthly basis.
STOCKS IN "JAPAN, INC." HAVE BEEN ON THE REBOUND SINCE MID-1995, WHILE ITS BONDS
WERE PROVIDING HISTORICALLY LOW YIELDS. WITH THIS ECONOMY APPARENTLY HEATING UP,
WHEN DO YOU THINK JAPAN'S CURRENT UNDERWEIGHTING IN THE PORTFOLIO MIGHT BE
DECREASED OR EVEN REVERSED?
RPB: We are in profit-taking mode on the Portfolio's Japanese Government Bond
(JGB) position, which is underweighted relative to its benchmark [The Salomon
Brother's Non-U.S. Government Bond Index (currency hedged)]. Because of where
Japan is in its recovery, we look to be neutral in Japan as 10-year rates hit
the 4% level. That's still a fair amount of yield away from where we are
currently; nevertheless, the economic story is starting to be discounted in
yield levels. In order for the market to trade off significantly, the economic
recovery would have to pick up. There is a risk of that and that, in part, is
why we remain underweighted. We still feel very comfortable remaining
underweighted in Japan against other markets because we feel JGBs will
underperform relative to almost any other major market in the world. Why?
Because of where Japan is in its economic recovery cycle and because the
disinflationary period we had seen over the past few years has come to an end.
We still think that JGBs are slow to perform, and we're looking to gradually
take profits over the next month or two as yields continue to rise.
HOW DO THESE OUTLOOKS AND STRATEGIES DIFFER FROM OUR MAJOR COMPETITORS, AND DO
YOU THINK OUR FOCUS ON CREDIT QUALITY HAS MADE A SIGNIFICANT DIFFERENCE IN
OVERALL RETURNS?
RPB: The six months that ended March 31 were undoubtedly a good period for
emerging markets debt, especially Brady bonds -- but that's not the mandate for
the Portfolio. Many of Eastern Europe's high-yielding markets have done
extremely well, but it is important to remember that the Portfolio's investments
must be investment grade or higher at the time of purchase. The Portfolio's
corporate debt exposure was not as
4
<PAGE>
high as it could have been and competitors may have benefited by having more
non-government debt. New supply coming into the marketplace has been fairly
limited to the deutsche mark sector, and it is typically unseasoned debt that
the Portfolio does not purchase.
When we look at the consensus surveys, there seem to be no major differences
between the Portfolio and its major competitors in terms of direction. I think
the differences lie in terms of degree and timing. Many of our peers have been
underweighted in the Japanese bond market and overweighted in the Core European
markets. I think we were early to delve into the non-Core markets, and that
probably explains the better performance relative to our peers in the Lipper and
Morningstar universes. We certainly went into Spain and Italy before the bulk of
the rally that took place over the last two months, so we were ahead there.
IS THAT WHAT DIFFERENTIATES TODAY'S MAJOR MONEY MANAGERS?
RPB: Most definitely. I think it's a question of degree and timing -- not a
question of direction -- that has tended to distinguish the better money
managers over the past year or so. What determines a top quartile house from a
mediocre performer is how quickly it gets in and out of the market and how large
or small the position is. So I think in the first quarter we were just quicker
going into the non-Core European markets than other managers, and we probably
held our underweighted Japanese position longer than our competitors. Looking
ahead, I think we probably are similar to consensus in European bonds right now,
and have the luxury to take profits quickly in the non-Core European markets. If
the markets start to overheat, we may be more likely to pull out of some of
these European positions and to stay strategically underweighted in JGBs than
some competitors.
5
<PAGE>
Fund facts
INVESTMENT OBJECTIVE
The JPM Advisor International Fixed Income Fund seeks to provide a high total
return consistent with moderate risk of capital, from a portfolio of
international fixed income securities. The Fund's benchmark is The Salomon
Brothers Non-U.S. Government Bond Index (currency-hedged)
- -----------------------------------------
INCEPTION DATE
3/6/96
- -----------------------------------------
NET ASSETS AS OF 3/31/96
$17,995
- -----------------------------------------
DIVIDEND PAYABLE DATE
12/27/96
- -----------------------------------------
CAPITAL GAIN PAYABLE DATE (IF APPLICABLE)
12/27/96
EXPENSE RATIO
The Fund's annual expense ratio of 1.20% 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 MARCH 31, 1996
PORTFOLIO ALLOCATION
(PERCENTAGE OF TOTAL INVESTMENTS)
[PIE CHART]
NETHERLANDS 24.8%
GERMANY 24.1%
SUPRANATIONAL OBLIGATIONS 8.7%
UNITED KINGDOM 7.3%
CANADA 6.7%
JAPAN 5.8%
SPAIN 5.2%
AUSTRIA 4.4%
BELGIUM 4.0%
OTHER COUNTRIES/
SHORT TERM HOLDINGS 9.0%
DURATION
4.3 years
6
<PAGE>
Signature Broker-Dealer Services, Inc. is the Distributor for The JPM Advisor
International Fixed Income Fund (the "Fund").
Morgan Guaranty Trust Company of New York ("Morgan") serves as Investment
Advisor to The Non-U.S. Fixed Income Portfolio (the "Portfolio") and makes the
Fund available solely in its capacity as services 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 Fund invests all of its investable assets in the Portfolio, a separately
registered investment company that is not available to the public but only to
other collective investment vehicles such as the Fund. The Portfolio invests in
foreign securities which are subject to special risk. For a discussion of these
risks and more complete information about the Fund and the other JPM Advisor
Funds, including management fees and other expenses, prospective investors
should refer to the Prospectuses for the Funds, which should be read carefully
before investing. You may obtain copies of the Prospectuses for the Funds by
calling the J.P. Morgan Funds Services at (800) JPM-3637.
7
<PAGE>
THE JPM ADVISOR INTERNATIONAL FIXED INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
MARCH 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment in The Non-U.S. Fixed Income Portfolio ("Portfolio"), at value $ 5,353
Deferred Organization Expenses 31,792
Receivable for Share of Beneficial Interest Sold 12,644
Receivable for Expense Reimbursement 7,776
---------
Total Assets 57,565
---------
LIABILITIES
Organization Expenses Payable 32,251
Accrued Trustees' Fees 351
Accrued Expenses 6,968
---------
Total Liabilities 39,570
---------
NET ASSETS
Applicable to 1,799 Shares of Beneficial Interest Outstanding $ 17,995
(par value $0.001, unlimited shares authorized)
---------
---------
Net Asset Value, Offering and Redemption Price Per Share $ 10.00
---------
---------
ANALYSIS OF NET ASSETS
Paid-In Capital $ 17,994
Undistributed Net Investment Income 16
Accumulated Net Realized Gain on Investment and Foreign Currency Transactions 130
Net Unrealized Depreciation of Investment and Foreign Currency Translations (145)
---------
Net Assets $ 17,995
---------
---------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
8
<PAGE>
THE JPM ADVISOR INTERNATIONAL FIXED INCOME FUND
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE PERIOD MARCH 6, 1996 (COMMENCEMENT OF OPERATIONS) THROUGH MARCH 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME ALLOCATED FROM PORTFOLIO
$ 20
Allocated Interest Income
(2)
Allocated Portfolio Expenses
---------
18
Net Investment Income Allocated from Portfolio
FUND EXPENSES
Registration Fees $ 2,189
Printing Expenses 1,866
Transfer Agent Fees 1,506
Professional Fees 1,121
Amortization of Organization Expenses 459
Trustees' Fees and Expenses 351
Insurance Expense 161
Miscellaneous 125
---------
Total Fund Expenses 7,778
Less: Reimbursement of Expenses (7,776)
---------
(2)
NET FUND EXPENSES
---------
16
NET INVESTMENT INCOME
130
NET REALIZED GAIN ON INVESTMENT AND FOREIGN CURRENCY TRANSACTIONS
ALLOCATED FROM PORTFOLIO
(145)
NET CHANGE IN UNREALIZED APPRECIATION OF INVESTMENT AND FOREIGN
CURRENCY TRANSLATIONS ALLOCATED FROM PORTFOLIO
---------
$ 1
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
---------
---------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
9
<PAGE>
THE JPM ADVISOR INTERNATIONAL FIXED INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
MARCH 6, 1996
(COMMENCEMENT OF
(OPERATIONS) THROUGH
MARCH 31, 1996
(UNAUDITED)
--------------------
<S> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 16
Net Realized Gain on Investment and Foreign Currency Transactions Allocated from
Portfolio 130
Net Change in Unrealized Appreciation of Investment and Foreign Currency Translations
Allocated from Portfolio (145)
-------
Net Increase in Net Assets Resulting from Operations 1
-------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Proceeds from Shares of Beneficial Interest Sold 17,894
-------
Total Increase in Net Assets 17,895
NET ASSETS
Beginning of Period 100
-------
End of Period (including undistributed net investment income of $16) $ 17,995
-------
-------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
10
<PAGE>
THE JPM ADVISOR INTERNATIONAL FIXED INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share outstanding throughout the period is as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
MARCH 6, 1996
(COMMENCEMENT OF
OPERATIONS) THROUGH
MARCH 31, 1996
(UNAUDITED)
--------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
----------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.01
Net Realized and Unrealized Loss on Investment and Foreign Currency (0.01)
----------
Total from Investment Operations 0.00
----------
NET ASSET VALUE, END OF PERIOD $ 10.00
----------
----------
Total Return 0.00%
----------
----------
RATIOS AND SUPPLEMENTAL DATA
Net Assets at end of Period (in thousands) $ 18
Ratios to Average Net Assets
Expenses 1.10 %(a)
Net Investment Income 4.40 %(a)
Decrease reflected in Expense Ratio due to Expense Reimbursement 2.50 %(a),(b)
</TABLE>
- ------------------------
(a) Annualized.
(b) After consideration of certain state limitations.
The Accompanying Notes are an Integral Part of the Financial Statements.
11
<PAGE>
THE JPM ADVISOR INTERNATIONAL FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1996
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The JPM Advisor International Fixed Income Fund (the "Fund") is a separate
series of The JPM Advisor Funds, a Massachusetts business trust (the "Trust").
The Trust is registered under the Investment Company Act of 1940, as amended, as
an open-end management investment company. The Fund commenced operations on
March 6, 1996.
The Fund invests all of its investable assets in The Non-U.S. Fixed Income
Portfolio (the "Portfolio"), a no-load, non-diversified, open-end management
investment company having the same investment objective as the Fund. The value
of such investment reflects the Fund's proportionate interest in the net assets
of the Portfolio (less than 1% at March 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 prepared in accordance with generally
accepted accounting principals requires management to make estimates and
assumptions that affect the reported amounts and disclosures. Actual amounts
could differ from those estimates. The following is a summary of the significant
accounting policies of the Fund:
a)Valuation of securities by the Portfolio is discussed in Note 1 of the
Portfolio's Notes to Financial Statements which are included elsewhere in
this report.
b)The Fund records its share of net investment income, realized and
unrealized gain and loss and adjusts its investment in the Portfolio each
day. All the net investment income and realized and unrealized gain and
loss of the Portfolio is allocated pro rata among the Fund and other
investors in the Portfolio at the time of such determination.
c)Substantially all the Fund's net investment income is declared as
dividends and paid annually. Distributions to shareholders of net realized
capital gain, if any, are declared and paid annually.
d)The Fund incurred organization expenses in the amount of $32,251. These
costs were deferred and are being amortized on a straight-line basis over
a five-year period from the commencement of operations.
e)Each series of the Trust is treated as a separate entity for federal
income tax purposes. The Fund intends to comply with the provisions of the
Internal Revenue Code of 1986, as amended, applicable to regulated
investment companies and to distribute substantially all of its income,
including net realized capital gains, if any, within the prescribed time
periods. Accordingly, no provision for federal income or excise tax is
necessary.
f)Expenses incurred by the Trust with respect to any two or more funds in
the Trust are allocated in proportion to the net assets of each fund in
the Trust, except where allocations of direct expenses to each fund can
otherwise be made fairly. Expenses directly attributable to a fund are
charged to that fund.
12
<PAGE>
THE JPM ADVISOR INTERNATIONAL FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
MARCH 31, 1996
- --------------------------------------------------------------------------------
2. TRANSACTIONS WITH AFFILIATES
a)The Trust has retained 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 provided for a fee to be paid to Signature
at an annual rate determined by the following schedule: 0.04% of the first
$1 billion of the aggregate average daily net assets of the Trust, as well
as two other affiliated fund families for which Signature acts as
administrator, 0.032% of the next $2 billion of such net assets, 0.024% of
the next $2 billion of such net assets, and 0.016% of such net assets in
excess of $5 billion. The daily equivalent of the fee rate is applied each
day to the net assets of the Fund
Effective December 29, 1995, the Administration Agreement was amended such
that the fee charged would be equal to the Fund'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
series of the Trust, The JPM Institutional Funds, or The Pierpont 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 payable by
the Fund is determined by the proportionate share its net assets bear to
the total of the Trust, The JPM Institutional Funds, The Pierpont Funds
and the Master Portfolios. For the period March 6, 1996 (commencement of
operations) through March 31, 1996, there was no fee for these services.
b)The Trust, on behalf of the Fund, has a Services Agreement with Morgan
Guaranty Trust Company of New York ("Morgan") under which Morgan receives
a fee, based on the percentage described below, for overseeing certain
aspects of the administration and operation of the Fund and for providing
shareholder servicing to Fund shareholders. The Services Agreement is also
designed to provide an expense limit for certain expenses of the Fund. If
total expenses of the Fund, excluding amortization of organization
expenses, exceed the expense limit of 0.68% of the Fund's average daily
net assets, 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 period March 6,
1996 (commencement of operations) through March 31, 1996, Morgan agreed to
reimburse the Fund $7,317 under the Services Agreement.
In addition to the expenses that Morgan assumes under the Services
Agreement, 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 1.20%
of the average daily net assets of the Fund through December 31, 1996. For
the period from March 6, 1996 (commencement of operations) through March
31, 1996, Morgan has agreed to reimburse the Fund $459 for expenses under
this agreement. 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
13
<PAGE>
THE JPM ADVISOR INTERNATIONAL FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
MARCH 31, 1996
- --------------------------------------------------------------------------------
and other financial intermediaries who are Schwab's clients. In the event
the Services Agreement with the Trust is terminated, the Fund would be
responsible for the ongoing payments to Schwab under the Schwab
Agreements.
c)An aggregate annual fee of $16,000 is paid to each Trustee for serving as
a Trustee of The Trust. The Trustees' Fees and Expenses shown in the
financial statements represents the Fund's allocated portion of the total
fees and expenses.
3. TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest of one or more series.
Transactions in shares of beneficial interest of the Fund were as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD MARCH 6, 1996
(COMMENCEMENT OF OPERATIONS)
THROUGH MARCH 31, 1996
-------------------------------
<S> <C>
Shares of beneficial interest sold 1,789
-----------
-----------
</TABLE>
14
<PAGE>
The Non-U.S. Fixed Income Portfolio
Semi-Annual Report March 31, 1996
(unaudited)
(The following pages should be read in conjunction
with The JPM Advisor International Fixed Income Fund
Semi-Annual Financial Statements)
15
<PAGE>
THE NON-U.S. FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
MARCH 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
LOCAL CURRENCY (1)
SECURITY DESCRIPTION (000'S OMITTED) VALUE
- ---------------------------------------------------------------------- ------------------ ------------
CORPORATE OBLIGATIONS (26.6%)
<S> <C> <C>
CANADA (2.2%)
Hydro-Quebec, 6.50% due 12/09/98.................................... GBP 2,617 $ 3,887,491
------------
FRANCE (1.6%)
Electricite De France, 8.60% due 04/09/04........................... FRF 12,300 2,756,787
------------
GERMANY (10.4%)
Bayerische Landesbank Girozentrale, 10.75% due 03/01/03............. ITL 5,595,000 3,657,765
Deutsche Ausgleichsbank, 6.75% due 07/04/05......................... DEM 4,000 2,729,642
Deutsche Pfandbriefe Hypobank, 5.625% due 02/07/03, 144A............ DEM 5,000 3,290,133
KFW International Finance
6.375% due 08/16/00................................................ DEM 5,000 3,520,426
6.75% due 02/08/02................................................. DEM 5,000 3,528,892
Suedwestdeutsche Landesbank Capital Markets, 6.25% due 10/21/03..... DEM 2,600 1,756,657
------------
18,483,515
------------
JAPAN (5.0%)
Export-Import Bank of Japan, 6.50% due 05/19/00..................... DEM 5,000 3,530,586
Japan Development Bank, 6.50% due 09/20/01.......................... JPY 480,000 5,390,446
------------
8,921,032
------------
NETHERLANDS (4.7%)
Bank Voor Nederlandsche Gemeenten, 7.625% due 12/16/02.............. NLG 12,800 8,365,314
------------
UNITED KINGDOM (2.7%)
Royal Bank of Scotland, 7.875% due 12/07/06......................... GBP 3,300 4,710,018
------------
TOTAL CORPORATE OBLIGATIONS (COST $47,211,690).................... 47,124,157
------------
GOVERNMENT OBLIGATIONS (51.6%)
AUSTRIA (3.8%)
Autobahnen Und Schnellstr Finance Agency, 7.125% due 12/22/99....... DEM 9,000 6,498,309
Republic of Austria, 3.75% due 02/03/09............................. JPY 25,000 238,910
------------
6,737,219
------------
BELGIUM (3.5%)
Kingdom of Belgium
6.50% due 03/31/05................................................. BEF 122,000 3,963,996
7.75% due 12/22/00................................................. BEF 63,000 2,260,235
------------
6,224,231
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
16
<PAGE>
THE NON-U.S. FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
MARCH 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
LOCAL CURRENCY (1)
SECURITY DESCRIPTION (000'S OMITTED) VALUE
- ---------------------------------------------------------------------- ------------------ ------------
CANADA (3.6%)
<S> <C> <C>
Government of Canada, 7.50% due 12/01/03............................ CAD 8,700 $ 6,389,964
------------
DENMARK (2.0%)
Kingdom of Denmark, 8.00% due 05/15/03.............................. DKK 19,650 3,641,321
------------
GERMANY (10.5%)
Federal Republic of Germany
6.00% due 02/20/98................................................. DEM 8,100 5,687,728
9.00% due 10/20/00................................................. DEM 11,000 8,527,253
German Unity Fund, 8.00% due 01/21/02............................... DEM 5,950 4,462,145
------------
18,677,126
------------
ITALY (1.4%)
Republic of Italy
9.50% due 12/01/97................................................. ITL 180,000 113,818
10.50% due 11/01/00................................................ ITL 3,650,000 2,357,029
------------
2,470,847
------------
NETHERLANDS (16.8%)
Government of the Netherlands
6.25% due 07/15/98................................................. NLG 8,880 5,610,526
7.50% due 06/15/99................................................. NLG 17,300 11,316,714
9.00% due 05/15/00................................................. NLG 3,100 2,140,405
9.00% due 01/15/01................................................. NLG 15,370 10,677,370
------------
29,745,015
------------
SPAIN (4.5%)
Government of Spain
10.10% due 02/28/01................................................ ESP 356,000 2,959,974
10.00% due 02/28/05................................................ ESP 620,200 5,076,725
------------
8,036,699
------------
SWEDEN (1.8%)
Kingdom of Sweden, 6.00% due 02/09/05............................... SEK 25,000 3,165,452
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
17
<PAGE>
THE NON-U.S. FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
MARCH 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
LOCAL CURRENCY (1)
SECURITY DESCRIPTION (000'S OMITTED) VALUE
- ---------------------------------------------------------------------- ------------------ ------------
UNITED KINGDOM (3.7%)
<S> <C> <C>
Treasury Gilt, 6.00% due 08/10/99................................... GBP 750 $ 1,101,227
Treasury Gilt, 7.50% due 12/07/06................................... GBP 3,700 5,379,771
------------
6,480,998
------------
TOTAL GOVERNMENT OBLIGATIONS (COST $92,026,635)................... 91,568,872
------------
SUPRANATIONAL OBLIGATIONS (2) (7.6%)
Asian Development Bank, 5.00% due 02/05/03.......................... JPY 720,000 7,592,691
European Investment Bank, 12.20% due 02/18/03....................... ITL 2,537,000 1,769,690
International Bank for Reconstruction & Development, 4.50% due
06/20/00........................................................... JPY 390,000 4,028,811
------------
TOTAL SUPRANATIONAL OBLIGATIONS (COST $13,904,064)................ 13,391,192
------------
SHORT-TERM HOLDINGS (1.0%)
TIME DEPOSITS (1.0%)
State Street Bank & Trust Co. London, 4.50% due 04/01/96 (cost
$1,825,000)........................................................ USD 1,825 1,825,000
------------
TOTAL INVESTMENTS (COST $154,967,389) (86.8%) 153,909,221
OTHER ASSETS NET LIABILITIES (13.2%) 23,390,604
------------
TOTAL NET ASSETS (100.0%) $177,299,825
------------
------------
</TABLE>
- ------------------------------
Note: For Federal income tax purposes, the cost of securities owned at March 31,
1996 was substantially the same as the cost of securities for financial
statement purposes.
(1) Principal is in the local currency of the country in which the security is
traded, which may not be the country of origin.
(2) International Agencies.
144A -- Securities restricted for resale to Qualified Institutional Buyers.
The Accompanying Notes are an Integral Part of the Financial Statements.
18
<PAGE>
THE NON-U.S. FIXED INCOME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
MARCH 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $154,967,389) $153,909,221
Cash 512
Foreign Currency at Value (Cost $1,314,808) 1,313,842
Receivable for Investments Sold 28,090,351
Interest Receivable 4,935,004
Unrealized Appreciation on Forward Foreign Currency Contracts 1,304,327
Unrealized Appreciation on Spot Foreign Currency Contracts 19,277
Prepaid Trustees' Fees 579
Prepaid Expenses and Other Assets 1,494
------------
Total Assets 189,574,607
------------
LIABILITIES
Payable for Investments Purchased 11,856,238
Unrealized Depreciation on Forward Foreign Currency Contracts 297,492
Advisory Fee Payable 54,249
Custody Fee Payable 23,966
Administrative Services Fee Payable 3,828
Administration Fee Payable 2,008
Fund Services Fee Payable 449
Accrued Expenses 36,552
------------
Total Liabilities 12,274,782
------------
NET ASSETS
Applicable to Investors' Beneficial Interests $177,299,825
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
THE NON-U.S. FIXED INCOME PORTFOLIO
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED MARCH 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
$ 7,273,196
Interest Income
EXPENSES
Advisory Fee $ 435,320
Custodian Fees and Expenses 101,155
Professional Fees 27,151
Administrative Services Fee 14,076
Administration Fee 11,394
Fund Services Fee 6,994
Trustees' Fees and Expenses 2,442
Printing Expenses 2,049
Miscellaneous 2,927
-------------
(603,508)
Total Expenses
------------
6,669,688
NET INVESTMENT INCOME
NET REALIZED GAIN ON
Investment Transactions 1,360,728
Foreign Currency Transactions 8,172,318
-------------
9,533,046
Net Realized Gain
NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) OF
Investments (5,016,583)
Foreign Currency Contracts and Translations 3,323,421
-------------
(1,693,162)
Net Change in Unrealized Appreciation (Depreciation)
------------
$ 14,509,572
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE NON-U.S. FIXED INCOME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX OCTOBER 11, 1994
MONTHS ENDED (COMMENCEMENT
MARCH 31, 1996 OF OPERATIONS) THROUGH
(UNAUDITED) SEPTEMBER 30, 1995
----------------- ----------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 6,669,688 $ 12,808,776
Net Realized Gain on Investments and Foreign Currency
Transactions 9,533,046 15,591,851
Net Change in Unrealized Appreciation (Depreciation) of
Investments and Foreign Currency Translations (1,693,162) 1,562,643
----------------- ------------
Net Increase in Net Assets Resulting from Operations 14,509,572 29,963,270
----------------- ------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 72,412,770 318,237,762
Withdrawals (175,745,434) (82,178,215)
----------------- ------------
Net Increase (Decrease) from Investors' Transactions (103,332,664) 236,059,547
----------------- ------------
Total Increase (Decrease) in Net Assets (88,823,092) 266,022,817
NET ASSETS
Beginning of Period 266,122,917 100,100
----------------- ------------
End of Period $ 177,299,825 $ 266,122,917
----------------- ------------
----------------- ------------
<CAPTION>
- ----------------------------------------------------------------------------------------
<S> <C> <C>
SUPPLEMENTARY DATA
<CAPTION>
- ----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX OCTOBER 11, 1994
MONTHS ENDED (COMMENCEMENT
MARCH 31, 1996 OF OPERATIONS) THROUGH
RATIOS TO AVERAGE NET ASSETS (UNAUDITED) SEPTEMBER 30, 1995
---------------- ----------------------
<S> <C> <C> <C>
Net Investment Income 5.37%(a) 5.73%(a)
Expenses 0.49%(a) 0.55%(a)
Portfolio Turnover 169%(b) 288%(b)
</TABLE>
- ------------------------
(a) Annualized.
(b) Not Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE NON-U.S. FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1996
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Non-U.S. Fixed Income Portfolio (the "Portfolio") is registered under the
Investment Company Act of 1940, as amended, as a no-load, non-diversified,
open-end management investment company which was organized as a trust under
the laws of the State of New York. The Portfolio's investment objective is to
provide a high total return, consistent with moderate risk of capital, from a
portfolio of international fixed income securities. The Portfolio commenced
operations on October 11, 1994. The Declaration of Trust permits the Trustees
to issue an unlimited number of beneficial interests in the Portfolio.
Investments in international markets may involve certain considerations and
risks not typically associated with investments in the United States. Future
economic and political developments in foreign countries could adversely
affect the liquidity or value, or both, of such securities in which the
Portfolio is invested. The ability of the issuers of the debt securities held
by the Portfolio to meet their obligations may be affected by economic and
political developments in a specific industy or region.
The preparation of financial statements prepared in accordance with generally
accepted accounting principals requires management to make estimates and
assumptions that affect the reported amounts and disclosures. Actual amounts
could differ from those estimates. The following is a summary of the
significant accounting policies of the Portfolio:
a) Portfolio securities with a maturity of 60 days or more, including
securities that are listed on an exchange or traded over the counter, are
valued using prices supplied daily by an independent pricing service or
services that (i) are based on the last sale price on a national
securities exchange, or in the absence of recorded sales, at the readily
available bid price on such exchange or at the quoted bid price in the
over-the-counter market, if such exchange or market constitutes the
broadest and most representative market for the security and (ii) in
other cases, take into account various factors affecting market value,
including yields and prices of comparable securities, indication as to
value from dealers and general market conditions. If such prices are not
supplied by the Portfolio's independent pricing services, such securities
are priced in accordance with procedures adopted by the Trustees. All
portfolio securities with a remaining maturity of less than 60 days are
valued by the amortized cost method.
Trading in securities on most foreign exchanges and over-the-counter
markets is normally completed before the close of the domestic market and
may also take place on days on which the domestic market is closed. If
events materially affecting the value of foreign securities occur between
the time when the exchange on which they are traded closes and the time
when the Portfolio's net assets are calculated, such securities will be
valued at fair value in accordance with procedures established by and
under the general supervision of the Portfolio's Trustees.
b) The books and records of the Portfolio are maintained in U.S. dollars.
The market values of investment securities, other assets and liabilities
and forward contracts stated in foreign currencies are translated at the
prevailing exchange rates at the end of the period. Purchases, sales,
income and expenses are translated at the exchange rates prevailing on
the respective dates of such
22
<PAGE>
THE NON-U.S. FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
MARCH 31, 1996
- --------------------------------------------------------------------------------
transactions. Translation gains and losses resulting from changes in the
exchange rates during the reporting period and gains and losses realized
upon settlement of foreign currency transactions are reported in the
Statement of Operations.
Although the net assets of the Portfolio are presented at the exchange
rates and market values prevailing at the end of the period, the
Portfolio does not isolate the portion of the results of operations
arising as a result of changes in foreign exchange rates from the
fluctuations arising from changes in the market prices of securities
during the period.
c) Securities transactions are recorded on a trade date basis. Interest
income, which includes the amortization of premiums and discounts, if
any, is recorded on an accrual basis. For financial and tax reporting
purposes, realized gains and losses are determined on the basis of
specific lot identification.
d) The portfolio may enter into forward and spot foreign currency contracts
to protect securities and related receivables and payables against
fluctuations in future foreign currency rates. A forward contract is an
agreement to buy or sell currencies of different countries on a specified
future date at a specified rate. Risks associated with such contracts
include the movement in the value of the foreign currency relative to the
U.S. Dollar and the ability of the counterparty to perform.
The market value of the contract will fluctuate with changes in currency
exchange rates. Contracts are valued daily based on procedures
established by and under the general supervision of the Portfolio's
Trustees and the change in the market value is recorded by the Portfolio
as unrealized appreciation or depreciation of forward and spot foreign
currency contract translations. At March 31, 1996, the Portfolio had open
forward and spot foreign currency contracts as follows:
SUMMARY OF OPEN FORWARD FOREIGN CURRENCY CONTRACTS
<TABLE>
<CAPTION>
U.S. DOLLAR NET UNREALIZED
VALUE AT APPRECIATION/
COST/PROCEEDS 03/31/96 (DEPRECIATION)
-------------- ------------- ---------------
<S> <C> <C> <C>
PURCHASE CONTRACTS
Belgian Franc 72,211,479, expiring 05/13/96 $ 2,384,791 $ 2,387,956 $ 3,165
British Pound 289,172, expiring 05/13/96 440,943 440,741 (202)
Canadian Dollar 242,712, expiring 05/13/96 178,189 178,246 57
Danish Krone 25,896,950, expiring 05/13/96 4,558,717 4,555,427 (3,290)
French Franc 27,330,731, expiring 05/13/96 5,428,257 5,438,084 9,827
German Mark 27,433,369, expiring 05/13/96 18,596,126 18,641,532 45,406
Italian Lira 601,462,500, expiring 05/13/96 381,131 381,134 3
Japanese Yen 1,464,971,441, expiring 05/13/96 13,904,725 13,793,298 (111,427)
Netherlands Guilder 16,077,908, expiring 05/13/96 9,753,776 9,766,169 12,393
</TABLE>
23
<PAGE>
THE NON-U.S. FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
MARCH 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. DOLLAR NET UNREALIZED
VALUE AT APPRECIATION/
COST/PROCEEDS 03/31/96 (DEPRECIATION)
-------------- ------------- ---------------
SALE CONTRACTS
<S> <C> <C> <C>
Belgian Franc 270,437,925, expiring 05/13/96 $ 8,969,749 $ 8,943,092 $ 26,657
British Pound 10,884,546, expiring 05/13/96 16,620,702 16,589,666 31,036
Canadian Dollar 9,018,813, expiring 05/13/96 6,576,579 6,623,367 (46,788)
Danish Krone 49,457,048, expiring 05/13/96 8,706,803 8,699,788 7,015
French Franc 41,858,969, expiring 05/13/96 8,383,531 8,328,814 54,717
German Mark 98,307,274, expiring 05/13/96 66,988,713 66,801,306 187,407
Italian Lira 13,297,153,440, expiring 05/13/96 8,453,717 8,426,124 27,593
Japanese Yen 4,038,015,909, expiring 05/13/96 38,774,462 38,019,551 754,911
Netherlands Guilder 80,923,545, expiring 05/13/96 49,275,412 49,155,216 120,196
Spanish Peseta 692,315,631, expiring 05/13/96 5,508,558 5,562,429 (53,871)
Swedish Krona 23,279,115, expiring 05/13/96 3,424,727 3,482,697 (57,970)
---------------
NET UNREALIZED APPRECIATION ON FORWARD FOREIGN CURRENCY CONTRACTS $ 1,006,835
---------------
---------------
</TABLE>
SUMMARY OF OPEN SPOT FOREIGN CURRENCY CONTRACTS
<TABLE>
<CAPTION>
U.S. DOLLAR NET UNREALIZED
VALUE AT APPRECIATION/
COST 03/31/96 (DEPRECIATION)
------------- ------------- ---------------
<S> <C> <C> <C>
PURCHASE CONTRACTS
German Mark 8,156, expiring 04/02/96 $ 5,528 $ 5,525 $ (3)
Spanish Peseta 186,434,118, for DEM 2,215,498,
expiring 04/03/96 1,500,624 1,502,047 1,423
SALES CONTRACTS
Italian Lira 601,462,500, expiring 04/02/96 383,097 383,152 (55)
Japanese Yen 948,035,274, expiring 04/02/96 8,894,828 8,876,916 17,912
---------------
NET UNREALIZED APPRECIATION ON SPOT FOREIGN CURRENCY CONTRACTS $ 19,277
---------------
---------------
</TABLE>
e) The Portfolio intends to be treated as a partnership for federal income
tax purposes. As such, each investor in the Portfolio will be taxable 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.
24
<PAGE>
THE NON-U.S. FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
MARCH 31, 1996
- --------------------------------------------------------------------------------
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 0.35%
of the Portfolio's average daily net assets. For the six months ended
March 31, 1996, such fees amounted to $435,320.
b) The Portfolio has retained 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 provided
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 Administration Agreement, 0.008% of the next $2 billion of
such net assets, 0.006% of the next $2 billion of such net assets, and
0.004% of such net assets in excess of $5 billion. The daily equivalent
of the fee rate is applied each day to the net assets of the Portfolio.
For the period October 1, 1995 through December 28, 1995, such fees
amounted to $4,006.
Effective December 29, 1995, the Administration Agreement was amended
such that the fee charged would be 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 subject to this agreement (the "Master
Portfolios") and 0.01% on the aggregate average daily net assets of the
Master Portfolios in excess of $7 billion. The portion of this charge
payable by the Portfolio is determined by the proportionate share its net
assets bear to the total net assets of The Pierpont Funds, The JPM
Institutional Funds, The JPM Advisor Funds and the Master Portfolios. For
the period from December 29, 1995 through March 31, 1996, such fees
amounted to $7,388.
c) Until August 31, 1995, the Portfolio had a Financial and Fund Accounting
Services Agreement ("Service Agreement") with Morgan under which Morgan
received a fee, based on the percentage described below, for overseeing
certain aspects of the administration and operation of the Portfolio and
was also designed to provide an expense limit for certain expenses of the
Portfolio. This fee was calculated exclusive of the advisory fee, custody
expenses, fund services fee, and brokerage costs at 0.12% of the
Portfolio's average daily net assets up to $200 million, 0.08% of the
next $200 million of average daily net assets, and 0.04% on any excess
over $400 million. From September 1, 1995 until December 28, 1995, an
interim agreement between the Portfolio and Morgan provided for the
continuation of the oversight functions that were outlined under the
Service Agreement and that Morgan should bear all of its expenses
incurred in connection with these services.
Effective December 29, 1995, the Portfolio entered into an
Administrative Services Agreement (the "Agreement") with Morgan under
which Morgan is responsible for overseeing certain aspects of the
administration and operation of the Portfolio. Under the Agreement, the
Portfolio has
25
<PAGE>
THE NON-U.S. FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
MARCH 31, 1996
- --------------------------------------------------------------------------------
agreed to pay Morgan a fee equal to its proportionate share of an annual
complex-wide charge. This charge is calculated daily based on the
aggregate net assets of the Master Portfolios 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 aggregate
average daily net assets in excess of $7 billion. The portion of this
charge payable by the Portfolio is determined by the proportionate share
that the Portfolio's net assets bear to the net assets of the Master
Portfolios and other investors in the Master Portfolios for which Morgan
provides similar services. For the period December 29, 1995 through March
31, 1996, the fee for these services amounted to $14,076.
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 $6,994 for the six months ended March 31, 1996.
e) An aggregate annual fee of $65,000 is paid to each Trustee for serving
as a Trustee of The Pierpont Funds, The JPM Institutional Funds and their
corresponding Portfolios. The Trustees' Fees and Expenses shown in the
financial statements represent the Portfolio's allocated portion of the
total fees and expenses. 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 $900.
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the six months
ended March 31, 1996 were as follows:
<TABLE>
<CAPTION>
COST OF PURCHASES PROCEEDS FROM SALES
- ----------------- -------------------
<S> <C>
$ 351,512,206 $ 418,271,057
</TABLE>
26
<PAGE>
THE JPM ADVISOR FAMILY OF FUNDS
THE JPM ADVISOR U.S. FIXED INCOME FUND
THE JPM ADVISOR INTERNATIONAL FIXED INCOME FUND
THE JPM ADVISOR U.S. EQUITY FUND
THE JPM ADVISOR U.S. SMALL CAP EQUITY FUND
THE JPM ADVISOR INTERNATIONAL EQUITY FUND
THE JPM ADVISOR EUROPEAN EQUITY FUND
THE JPM ADVISOR JAPAN EQUITY FUND
THE JPM ADVISOR ASIA GROWTH FUND
THE JPM ADVISOR EMERGING MARKETS EQUITY FUND
THE
JPM ADVISOR
INTERNATIONAL
FIXED INCOME FUND
FOR MORE INFORMATION ON THE JPM ADVISOR FAMILY OF FUNDS, CALL J.P. MORGAN FUNDS
SERVICES AT (800)JPM-3637.
SEMI-ANNUAL REPORT
MARCH 31, 1996
