<PAGE>
LETTER TO THE SHAREHOLDERS OF THE JPM ADVISOR JAPAN EQUITY FUND
August 15, 1996
Dear Shareholder:
Thank you for investing in The JPM Advisor Japan Equity Fund. Let me take this
opportunity to welcome you to the JPM Advisor shareholder family and to express
the hope that you will explore additional JPM Advisor Funds as a way to
diversify your investment portfolio and gain broad exposure to financial
opportunities in domestic and international markets.
In the months ahead, we will be sending you detailed reports of the Fund's
performance and its strategies as it pursues its investment objective. The
Fund's objective is to provide high total return from a portfolio of equity
securities of Japanese companies. It is designed for long-term investors who
want an actively managed approach to Japanese equity securities that seeks to
outperform the Tokyo Stock Price Index ("TOPIX"). The first of these reports
covers the short period from the Fund's January 24, 1996 commencement of
operations to June 30, 1996. Going forward, these reports will be provided to
you on both a semi-annual and an annual basis.
To introduce the in-depth reporting you deserve, we have included a portfolio
manager Q&A with Masato Degawa, a member of the Fund's portfolio management
team. It should be noted that this interview pertains to The Japan Equity
Portfolio, a separate investment company in which the Fund invests all of its
assets. The performance of the Fund is directly related to the performance of
the Portfolio.
We 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 FUND FACTS AND HIGHLIGHTS . . . .6
PORTFOLIO MANAGER Q&A. . . . . . . . . 2 FINANCIAL STATEMENTS. . . . . . .9
1
<PAGE>
PORTFOLIO MANAGER Q&A
[PHOTO]
Following is an interview with MASATO DEGAWA, who is a member of the portfolio
management team for The Japan Equity Portfolio in which the Fund invests. Masato
joined Morgan's International Investment Group in 1993 as a Japanese equity
portfolio manager. Prior to joining Morgan, he was a senior analyst with Morgan
Stanley in Tokyo covering Japanese utilities and special situations. He has B.A.
and M.A. degrees from Oxford University, England, in Engineering Science and
Economics. This interview was conducted on August 6, 1996 and reflects Masato's
views on that date.
THE JAPANESE EQUITY MARKET HAS NOW PROVIDED FOUR STRAIGHT QUARTERS OF POSITIVE
RETURNS. IN ADDITION TO THE YEN'S DECLINE IN RELATIVE STRENGTH DURING THAT
PERIOD, WHICH INCREASES THE ATTRACTIVENESS OF JAPANESE EXPORTS, WHAT CATALYSTS
DO YOU VIEW AS BEING RESPONSIBLE FOR THIS RESURGENCE IN THE WORLD'S SECOND-
LARGEST EQUITY MARKET?
MD: We believe that one of the key factors underlying the market's downturn
prior to mid-1995 was the excessively pessimistic attitude of investors toward
companies representing the Japanese financial system. The strongly negative
publicity that surrounded the financial companies was due partly to their poor
disclosure practices and also had an enormous impact on market prices at the
time, since these companies represent almost 30% of the entire market.
Once the bad news in this area had been "priced in" to the market by
participants, stocks in Tokyo were ready to rebound. Such a rebound was, in
fact, triggered by the sudden downward reversal in yen strength that began last
year. The market rally that ensued was primarily led by international blue chip
stocks that benefited enormously from recovering Japanese exports.
THE PORTFOLIO'S INVESTMENT RESULTS OUTPACED THOSE OF THE BENCHMARK FOR THE SIX
MONTHS ENDING JUNE 30, 1996. WHY DOES MORGAN'S SEARCH FOR FUNDAMENTAL VALUE IN
JAPANESE STOCKS NOW SEEM TO BE MORE SUCCESSFUL THAN A YEAR AGO?
MD: The answer to your question is somewhat related to the situation I've just
described. In our view, last year's market situation in Japan may be thought of
as a "search for quality." Investors had become so obsessed with short-term
profitability that they tended to ignore value based on long-term fundamentals
and bought what were perceived to be the safest companies in each industry -- no
matter how expensive.
The beginning of 1996 coincided with the market's reversal of its previous
search for quality. Once negative sentiments had been priced in to Japan's
financial industry stocks, investors came to believe that the worst was behind
them with regard to this market sector, and they were therefore willing to
develop buy and sell strategies in accordance with long-term fundamentals. Since
the Portfolio continued to search out value in Japan during the market's lowest
ebb, its strategy of focusing on inexpensive stocks, and on cheap stocks that
had grown even cheaper during Japan's recession, left it well positioned to
benefit from the market upsurge that began in the early weeks of 1996.
2
<PAGE>
THE MARKET REACTED FAVORABLY TO AN ANNOUNCEMENT BY 21 MAJOR BANKS THAT THEY
WOULD WRITE OFF A TOTAL OF 3.3 TRILLION YEN IN ORDER TO LIGHTEN THEIR BAD DEBT
BURDEN. WHAT IMPACT DID THIS ANNOUNCEMENT HAVE ON THE PORTFOLIO'S HOLDINGS IN
JAPANESE BANK STOCKS, AND WHAT DO YOU SEE AS THE LONG-TERM IMPLICATIONS OF SUCH
MEASURES ON STOCKS IN THE JAPANESE FINANCIAL SECTOR?
MD: Here again, I think the answer is dependent on changing market sentiment.
Banks that became inexpensive during 1995, in part because of market concerns
regarding Japan's financial system as a whole, began to be viewed in a far more
normal manner in 1996 as the risks of bankruptcies subsided. As a result, less-
solid Japanese banks started to outperform their safer counterparts on a
relative basis. This shift in performance rewarded the Portfolio's investment
strategy of pursuing an enhanced exposure to lower-quality banks in Japan that
are also attractively valued.
THE COPPER TRADING SCANDAL BROUGHT TO LIGHT AT SUMITOMO CORPORATION WAS ARGUABLY
THE JAPANESE MARKET'S MOST WIDELY REPORTED NEWS EVENT DURING THE FIRST HALF OF
1996. WHAT EFFECT DID THIS DEVELOPMENT HAVE ON BROAD JAPANESE MARKET PRICES, AND
WERE OVERALL PORTFOLIO RETURNS IMPACTED FOR THE PERIOD?
MD: Sumitomo Corporation, which lost more than $1.8 billion as a result of
unauthorized copper trading, was identified as overvalued by Morgan's
proprietary fundamental research. We therefore did not hold any Sumitomo stock
in the Portfolio. Since Sumitomo accounts for quite a significant portion of the
TOPIX Index, this added to the Portfolio's relative returns for the period.
IN TERMS OF JAPANESE MARKET SECTORS, WHERE DID THE PORTFOLIO OUTPERFORM THE
TOPIX INDEX FOR THE PERIOD AND WHY?
MD: Our investment strategy for Japan's machinery sector provided strong added
value versus the Index's holdings in this sector thanks to the relative
outperformance of several Portfolio holdings. Most of these companies are
medium-sized, and they are not closely researched by analysts at brokerage
firms. Morgan is committed to providing in-depth coverage of these companies,
and the analysis of the firm's Tokyo-based equity research team showed that they
were undervalued late last year. As value became an important investment
criteria this year, Morgan's research efforts were rewarded when the stock
selections it inspired proved successful.
THE PORTFOLIO'S STOCK SELECTION HAS BEEN VERY SUCCESSFUL THROUGH THE FIRST HALF
OF 1996. COULD YOU PLEASE EXPLAIN HOW MORGAN'S IN-DEPTH PROPRIETARY RESEARCH HAS
CONTINUED TO ADD VALUE?
MD: The strength of our in-house research team lies in its ability to identify
long-term value. While some investors might feel tempted to avoid companies that
appear poor in the trough of an economic cycle, Morgan prefers to focus on
fundamentals rather than on short-term corporate earnings fluctuations. This
capability is designed to help Morgan identify value companies at the bottom of
a market cycle, enabling our clients to benefit when the stocks of these
companies inevitably reach their true value.
3
<PAGE>
WE KNOW THAT THE ROAD TO FUNDAMENTAL VALUE CAN SOMETIMES BE A ROCKY ONE. WHICH
STOCKS CHOSEN DURING THE LAST SIX MONTHS HAVE PROVEN DISAPPOINTING PERFORMERS
OVER THE SHORT TERM, AND WHAT IS IT ABOUT THEM THAT MAKES YOU CONTINUE TO HOLD
THEM IN THE PORTFOLIO?
MD: Similar to what we observed in Japanese banks, companies in the country's
electronics industry saw a relatively sharp stock price decline for
semiconductor manufacturers on the back of disappointing personal computer sales
in the U.S. HITACHI, a major producer of memory chips, suffered a price decline
despite its solid fundamentals and long-term growth potential in semiconductors,
mainframe computers, industrial electronics and power plant machineries.
Notwithstanding this short-term setback, we continue to hold the stock in the
Portfolio because our analysts in Tokyo rate the company highest among major
firms in the industry and because we believe that its stock price will move
toward fundamental value over time.
THE JAPANESE GOVERNMENT HAS MADE EXTRAORDINARY EFFORTS TO HELP KEEP DOMESTIC
INTEREST RATES ARTIFICIALLY LOW DURING THE PAST YEAR. IF THESE MEASURES ARE
REMOVED, HOW DO YOU EXPECT JAPANESE STOCKS AND THE JAPANESE MARKET WILL REACT TO
THE "NORMALIZED" RATE ENVIRONMENT THAT IS LIKELY TO ENSUE?
MD: Obviously, the money market rate in Japan has been kept very low by
historical standards and we expect that this rate will move toward a more
normalized level in the months ahead. However, due to an increasing penetration
of imported goods into the Japanese market, inflation is not expected to become
an important issue in the future.
For the months ahead, Morgan is forecasting an increase in Japanese interest
rates, a strong recovery in the domestic economy, and the highest growth rate
among the world's major industrialized countries. Given this scenario, our view
is that any negative impact stemming from a rate hike is likely to be offset by
increased corporate profits.
The focus of our Japanese research team will be to anticipate the development
of long-term trends in the corporate profit arena, rather than spot forecast
numbers for this year or next year. We expect that the research will provide an
information advantage for both Morgan and its clients within the Japanese equity
market.
WHERE DO WE SEE THE JAPANESE ECONOMY HEADING THROUGHOUT THE REST OF 1996 AND
INTO 1997?
MD: We maintain the view that the strain on Japanese economic growth that is
likely to result from a decline in public spending during 1996 will be more than
offset by strong recovery in consumption and capital spending. Again, Morgan
believes Japan can be expected to post the highest growth rate among the world's
seven major industrialized nations in 1996. We have recently made an upward
revision in the firm's real economic growth rate outlook for Japan from 3.0% to
4.0%. Meanwhile, we maintain our 2.8% growth forecast for 1997 and expect
inflation to play little or no role in this recovery process.
4
<PAGE>
WHAT IMPACT DO YOU THINK THIS ECONOMIC GROWTH MAY HAVE ON THE JAPANESE EQUITY
MARKET?
MD: Although we anticipate that the rate of economic growth in Japan will be at
its highest in 1996, we believe that an increase in unemployment (and its
resulting suppression of consumption) will limit growth to lower than Japan's
historical post-recession rate of between 5% and 6%. This same environment
should, however, considerably lower the fixed costs of Japanese companies. As a
result, increases in corporate profits are likely to run quite a bit higher, in
our view, than the levels thought commensurate with traditional economic growth
rates. Excluding companies in Japan's financial sectors, we anticipate a 12%
year-on-year increase among listed companies during the fiscal year ending June
30, 1997. Meanwhile, we believe that corporate returns on equity are likely to
rebound sharply, from 3% to 8%, in the year ahead.
WHAT MAJOR CHANGES, IF ANY, ARE YOU PLANNING FOR THE PORTFOLIO DURING THE MONTHS
AHEAD?
MD: We plan to more aggressively utilize the Portfolio's convertible bond and
warrant substitution strategy. Given that the Japanese market has substantially
increased in value over the past twelve months, we now see many attractively
valued convertible bonds and warrants that could serve as excellent substitutes
for the common stocks we would like to include in the Portfolio. This
substitution strategy should enable the Portfolio to receive higher income or
enjoy greater downside protection -- or both -- as the Japanese market is likely
to remain inefficient and continue to misprice equity substitutes.
We also plan to rely on Morgan's proprietary research to help us decide
whether we should rebalance the Portfolio's holdings within the electronics
industry -- and, specifically, whether we should increase the Portfolio's
allocation to selected semiconductor stocks. Preliminary findings indicate
significant value in this market sector in the wake of the adverse publicity it
has endured year to date in 1996.
5
<PAGE>
FUND FACTS
INVESTMENT OBJECTIVE
The JPM Advisor Japan Equity Fund seeks to provide a high total return from a
portfolio of equity securities of Japanese companies. The Fund is designed for
investors who want an actively managed portfolio of Japanese equity securities
that seeks to outperform the Tokyo Stock Price Index ("TOPIX"), a composite
market-capitalization weighted index of all common stocks listed on the First
Section of the Tokyo Stock Exchange. Investments in Japanese equities are
subject to foreign political and currency risk, in addition to market risk. The
Fund does not represent a complete investment program nor is the Fund suitable
for all investors.
COMMENCEMENT OF OPERATIONS
1/24/96
NET ASSETS AS OF 6/30/96
$124,381
CAPITAL GAIN PAYABLE DATE
ANNUAL
EXPENSE RATIO
The Fund's annualized expense ratio of 1.70% 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 JUNE 30, 1996
PORTFOLIO ALLOCATION
(AS A PERCENTAGE OF TOTAL INVESTMENTS)
[PIE CHART]
FINANCE 31.1%
CONSUMER GOODS & SERVICES 19.2%
CAPITAL GOODS 16.8%
BASIC INDUSTRIES 10.6%
TECHNOLOGY 9.3%
TRANSPORTATION 6.0%
UTILITIES 3.8%
HEALTH CARE 2.3%
ENERGY 0.9%
LARGEST HOLDINGS % OF TOTAL INVESTMENTS
- ---------------------------------------------------------
DAI-ICHI KANGYO BANK LTD. 5.1%
NOMURA SECURITIES CO. LTD. 3.1%
SAKURA BANK LTD. 2.3%
BOTCAYMAN FINANCE LTD. 2.2%
NIPPON STEEL CORP. 2.0%
6
<PAGE>
Funds Distributor, Inc. is the distributor for The JPM Advisor Japan Equity Fund
(the "Fund"). Signature Broker-Dealer Services, Inc. served as the Fund's
distributor prior to August 1, 1996.
Morgan Guaranty Trust Company of New York ("Morgan") serves as Investment
Advisor to The Japan Equity 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 which 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 risks. For more complete
information about the Fund or 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
additional copies of the Prospectuses for the Funds by calling the J.P. Morgan
Funds Services at (800) JPM-3637.
7
<PAGE>
THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY
<PAGE>
THE JPM ADVISOR JAPAN EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment in The Japan Equity Portfolio ("Portfolio"), at value $ 124,244
Deferred Organization Expenses 29,837
---------
Total Assets 154,081
---------
LIABILITIES
Organization Expenses Payable 29,697
Administration Fee Payable 3
---------
Total Liabilities 29,700
---------
NET ASSETS
Applicable to 11,887 Shares of Beneficial Interest Outstanding
(par value $0.001, unlimited shares authorized) $ 124,381
---------
---------
Net Asset Value, Offering and Redemption Price Per Share $10.46
-----
-----
ANALYSIS OF NET ASSETS
Paid-in Capital $ 28,921
Accumulated Net Investment Loss (395)
Accumulated Net Realized Gain on Investment and Foreign Currency Transactions 28,340
Net Unrealized Appreciation of Investment and Foreign Currency Translations 67,515
---------
Net Assets $ 124,381
---------
---------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
9
<PAGE>
THE JPM ADVISOR JAPAN EQUITY FUND
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE PERIOD JANUARY 24, 1996 (COMMENCEMENT OF OPERATIONS) THROUGH JUNE 30,
1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME ALLOCATED FROM PORTFOLIO
Allocated Dividend Income (Net of $698 Foreign Withholding Taxes) $ 2,574
Allocated Interest Income 428
Allocated Portfolio Expenses (1,595)
---------
Net Investment Income Allocated from Portfolio 1,407
FUND EXPENSES
Transfer Agent Fees $ 7,545
Printing Expenses 6,635
Registration Fees 5,960
Professional Fees 3,974
Amortization of Organization Expenses 2,882
Trustees' Fees and Expenses 1,021
Administration Fee 26
Miscellaneous 1,244
---------
Total Fund Expenses 29,287
Less: Reimbursement of Expenses (27,485)
---------
NET FUND EXPENSES (1,802)
---------
NET INVESTMENT LOSS (395)
NET REALIZED GAIN ON INVESTMENT AND FOREIGN CURRENCY
TRANSACTIONS ALLOCATED FROM PORTFOLIO 28,340
NET CHANGE IN UNREALIZED APPRECIATION OF INVESTMENT AND FOREIGN
CURRENCY TRANSLATIONS ALLOCATED FROM PORTFOLIO 67,515
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 95,460
---------
---------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
10
<PAGE>
THE JPM ADVISOR JAPAN EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
FOR THE PERIOD
JANUARY 24,
1996
(COMMENCEMENT
OF
OPERATIONS)
THROUGH
JUNE 30, 1996
(UNAUDITED)
---------------
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Loss $ (395)
Net Realized Gain on Investment and Foreign Currency
Transactions Allocated from Portfolio 28,340
Net Change in Unrealized Appreciation of Investment and Foreign
Currency Translations Allocated from Portfolio 67,515
---------------
Net Increase in Net Assets Resulting from Operations 95,460
---------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTERESTS
Proceeds from Shares of Beneficial Interest Sold 1,871,853
Cost of Shares of Beneficial Interest Redeemed (1,843,031)
---------------
Net Increase from Transactions in Shares of Beneficial Interest 28,822
---------------
Total Increase in Net Assets 124,282
NET ASSETS
Beginning of Period 99
---------------
End of Period (including accumulated net investment loss of $395) $ 124,381
---------------
---------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
11
<PAGE>
THE JPM ADVISOR JAPAN EQUITY FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share outstanding throughout the period is as follows:
<TABLE>
<CAPTION>
<S> <C>
FOR THE PERIOD
JANUARY 24,
1996
(COMMENCEMENT
OF
OPERATIONS)
THROUGH
JUNE 30, 1996
(UNAUDITED)
---------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.91
---------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (.03)
Net Realized and Unrealized Gain on Investment and Foreign Currency .58
---------------
Total from Investment Operations .55
---------------
NET ASSET VALUE, END OF PERIOD $ 10.46
---------------
---------------
Total Return 5.55%(a)
---------------
---------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets at end of Period (in thousands) $ 124
Ratios to Average Net Assets (b)
Expenses 1.70%
Net Investment Income (0.20)%
Decrease Reflected in Expense Ratio due to Expense Reimbursement .80%(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 ADVISOR JAPAN EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The JPM Advisor Japan Equity 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 investment operations on
January 24, 1996.
The Fund invests all of its investable assets in The Japan Equity Portfolio (the
"Portfolio"), a no load, diversified, open-end management investment company
having the same investment objective as the Fund. The value of such investment
included in the Statement of Assets and Liabilities reflects the Fund's
proportionate interest in the net assets of the Portfolio (less than 1% at June
30, 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 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 gain, if any, are declared and paid annually.
d)The Fund incurred organization expenses in the amount of $32,684. These
costs were deferred and are being amortized by the Fund on a straight-line
basis over a five-year period from the commencement of operations.
e)Each series of the Trust is treated as a separate entity for federal
income tax purposes. The Fund intends to comply with the provisions of the
Internal Revenue Code of 1986, as amended, applicable to regulated
investment companies and to distribute substantially all of its income,
including net realized capital gain, if any, within the prescribed time
periods. Accordingly, no provision for federal income or excise tax is
necessary.
f)Expenses incurred by the Trust with respect to any two or more funds in
the Trust are allocated in proportion to the net assets of each fund in
the Trust, except where allocations of direct expenses to each fund can
otherwise be made fairly. Expenses directly attributable to a fund are
charged to that fund.
13
<PAGE>
THE JPM ADVISOR JAPAN EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 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 Administration Agreement provides for a fee to be paid
to Signature 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 net assets of
the Trust, The JPM Institutional Funds, The Pierpont Funds and the Master
Portfolios. For the period January 24, 1996 (commencement of operations)
through June 30, 1996, such fees amounted to $26. The fees payable by the
Fund under the Administration Agreement between Signature and the Trust
are subject to the expense limit provided by the Services Agreement (see
Note 2b).
Effective August 1, 1996, administrative functions provided by Signature
will be provided by Funds Distributor, Inc. ("FDI"), a registered
broker-dealer, and by Morgan Guaranty Trust Company of New York
("Morgan"). FDI will also become the Fund's distributor. The fees payable
by the Fund under a Co-Administration Agreement between FDI and the Trust
on behalf of the Fund, are based on the Fund's allocable share of a
complex-wide fee and will also be subject to the expense limit provided by
the Services Agreement (see Note 2b).
b)The Trust, on behalf of the Fund, has a Services Agreement with Morgan
under which Morgan would receive 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 0.77%
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 January 24, 1996 (commencement of operations) through June
30, 1996, Morgan has agreed to reimburse the Fund $24,880 under the
Services Agreement.
In addition to the expenses that Morgan assumes under the Trust's 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 1.70%
of the average daily net assets of the Fund through December 31, 1996. For
the period from January 24, 1996 (commencement of operations) through June
30, 1996. Morgan has agreed to reimburse the Fund $2,605 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
14
<PAGE>
THE JPM ADVISOR JAPAN EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
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 the Trust is terminated,
the Fund would be responsible for the ongoing payments to Schwab.
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 JANUARY 24, 1996
(COMMENCEMENT OF OPERATIONS)
THROUGH JUNE 30, 1996
-------------------------------------
<S> <C>
Shares of beneficial interest sold..................... 181,310
Shares of beneficial interest redeemed................. (169,433)
--------
Net increase........................................... 11,877
--------
--------
</TABLE>
15
<PAGE>
The Japan Equity Portfolio
Semi-Annual Report June 30, 1996
(unaudited)
(The following pages should be read in conjunction
with The JPM Advisor Japan Equity Fund
Semi-Annual Financial Statements)
16
<PAGE>
THE JAPAN EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ---------------------------- ------------ ------------
<S> <C> <C>
COMMON STOCK (85.1%)
BASIC INDUSTRIES (8.8%)
CHEMICALS (3.2%)
Daido Hoxan Inc. ........... 90,000 $ 579,314
Hitachi Chemical Co.
Ltd. ..................... 100,000 984,669
Japan Synthetic Rubber ..... 150,000 1,079,034
Kyowa Hakko Kogyo Co. Ltd. . 200,000 1,914,635
Matsumoto Yushi-Seiyaku
Co. ...................... 37,000 944,553
Mitsui Petrochemical
Industries ............... 150,000 1,203,485
Mitsui Toatsu Chemicals .... 1,248,000 4,926,848
Nippon Zeon Company,
Ltd.+ .................... 403,000 2,498,507
Tosoh Corp.+ ............... 400,000 1,776,052
------------
15,907,097
------------
DIVERSIFIED MANUFACTURING (1.3%)
Itoki Crebio Corp. ......... 62,000 560,186
Organo Corp. ............... 20,000 215,169
Sun Wave Corp. ............. 100,000 1,431,417
Ube Industries Ltd.+ ....... 1,219,000 4,634,538
------------
6,841,310
------------
FOREST PRODUCTS & PAPER (1.3%)
Chuetsu Pulp & Paper Co.
Ltd.+ .................... 9,000 55,634
Daiken Corp. ............... 25,000 211,977
Honshu Paper Co. Ltd. ...... 432,000 3,060,352
Mitsubishi Pencil Co.
Ltd. ..................... 10,000 97,555
Sumitomo Forestry Co. ...... 200,000 2,972,243
------------
6,397,761
------------
METALS & MINING (2.9%)
Daido Steel Co. Ltd. ....... 416,000 2,055,698
Komai Tekko Inc. ........... 32,000 288,836
Mitsui Mining & Smelting Co.
Ltd.+ .................... 580,000 2,369,041
Nippon Steel Corp. ......... 2,824,000 9,680,977
Sumitomo Light Metal
Industries Ltd.+ ......... 100,000 405,720
------------
14,800,272
------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ---------------------------- ------------ ------------
<S> <C> <C>
PACKAGING & CONTAINERS (0.1%)
Hokkai Can Co. Ltd. ........ 94,000 $ 741,328
------------
TOTAL BASIC INDUSTRIES ... 44,687,768
------------
CAPITAL GOODS (13.2%)
BUILDING MATERIALS (0.7%)
Asahi Glass Co. Ltd. ....... 100,000 1,194,367
Sankyo Aluminium Industries
Co. Ltd. ................. 380,000 2,224,259
Yokogawa Bridge Corp. ...... 25,000 341,899
------------
3,760,525
------------
COMPUTER SYSTEMS (0.3%)
Fujitsu Ltd. ............... 165,000 1,504,356
------------
CONSTRUCTION & HOUSING (2.9%)
Hitachi Plant Engineering
and Construction Co.
Ltd. ..................... 130,000 1,037,094
Kawasaki Heavy
Industries ............... 200,000 1,012,021
Matsui Construction Co.
Ltd. ..................... 200,000 1,597,352
Nippon Hodo ................ 115,000 1,950,192
Nishimatsu Construction Co.
Ltd. ..................... 257,000 2,811,778
Sekisui House Ltd. ......... 100,000 1,139,664
SXL Corp. .................. 50,000 492,335
Toenec Corp. ............... 125,000 1,162,457
Tokyo Denki Komusho Co.
Ltd. ..................... 103,100 1,080,994
Toyo Construction Co.
Ltd. ..................... 520,000 2,650,219
------------
14,934,106
------------
ELECTRICAL EQUIPMENT (3.5%)
Alps Electric Co. Ltd. ..... 200,000 2,425,204
Fuji Electric Co., Ltd. .... 1,142,000 6,174,296
Hitachi .................... 798,000 7,421,125
Matsushita Refrigeration
Co. ...................... 10,000 78,227
Murata Manufacturing Co.,
Ltd. ..................... 26,000 983,758
Ricoh Corp. Ltd. ........... 71,000 750,902
------------
17,833,512
------------
INDUSTRIAL (0.5%)
Okamura Corp. .............. 300,000 2,508,172
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
17
<PAGE>
THE JAPAN EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ---------------------------- ------------ ------------
<S> <C> <C>
MACHINERY (4.6%)
Aichi Corp. ................ 184,000 $ 1,979,550
Daikin Industries Ltd. ..... 300,000 3,282,231
Ebara Corp. ................ 309,000 4,930,185
Kitz Corp. ................. 370,000 1,922,840
Mitsubishi Heavy Industries
Ltd. ..................... 734,000 6,377,576
NSK Corp. .................. 73,000 551,752
Sanden Corp. ............... 280,000 2,139,285
Shin Nippon Machinery ...... 48,000 328,223
Yaskawa Electric Corp.+ .... 370,000 1,808,145
------------
23,319,787
------------
MANUFACTURING (0.7%)
Topy Industries Co. Ltd. ... 230,000 1,121,885
Tsubakimoto Chain .......... 350,000 2,383,720
------------
3,505,605
------------
TOTAL CAPITAL GOODS ...... 67,366,063
------------
CONSUMER GOODS & SERVICES (15.4%)
APPARELS & TEXTILES (0.4%)
Tomiya Apparel Co. Ltd. .... 229,000 1,983,471
Toyobo Co. Ltd. ............ 25,000 93,680
------------
2,077,151
------------
AUTOMOTIVE (4.8%)
Honda Motor Co. ............ 165,000 4,272,371
Nissan Diesel Motor Co.+ ... 450,000 2,662,710
Nissan Motor Co. Ltd. ...... 600,000 5,322,685
Toyota Auto Body Co.
Ltd. ..................... 61,000 661,825
Toyota Motor Corp. ......... 324,000 8,093,982
Yokohama Rubber Company
Ltd. ..................... 400,000 2,505,436
------------
23,519,009
------------
AUTOMOTIVE SUPPLIES (0.4%)
Achilles Corp. ............. 209,000 851,766
Nissan Shatai Co. .......... 21,000 132,301
Sumitomo Rubber Industries
Ltd. ..................... 150,000 1,297,849
------------
2,281,916
------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ---------------------------- ------------ ------------
<S> <C> <C>
BROADCASTING & PUBLISHING (0.9%)
Gakken Co. Ltd. ............ 273,000 $ 2,021,089
Toppan Printing Co. Ltd. ... 172,000 2,509,083
------------
4,530,172
------------
COMMERCIAL SERVICES (0.4%)
Japan Airport Terminal ..... 133,000 1,879,533
------------
CONSTRUCTION & HOUSING (0.3%)
Mitsui Home Co. ............ 30,000 486,864
Sanyo Industries ........... 198,000 1,265,464
------------
1,752,328
------------
ENTERTAINMENT, LEISURE & MEDIA (0.5%)
Daiwa Kosho Lease Co.
Ltd. ...................... 15,000 160,009
Kinki Nippon Tourist Co.
Ltd.+ .................... 192,000 1,540,460
Kyodo Printing Co. ......... 90,000 1,058,520
------------
2,758,989
------------
FOOD, BEVERAGES & TOBACCO (2.9%)
Itoham Foods Inc. .......... 444,000 3,380,151
Japan Tobacco, Inc. ........ 434 3,323,806
Nippon Suisan Kaisha
Ltd.+ .................... 400,000 1,703,113
Pokka Corporation .......... 30,000 361,045
Q.P. Corporation ........... 125,000 1,208,043
Snow Brand Milk Products Co.
Ltd. ..................... 509,000 3,457,329
Yamazaki Baking Co. Ltd. ... 73,000 1,351,094
------------
14,784,581
------------
HOUSEHOLD PRODUCTS (0.7%)
Nippon Sheet Glass ......... 336,000 1,645,054
Uni-Charm Corp. ............ 80,000 2,056,865
------------
3,701,919
------------
MISCELLANEOUS (0.3%)
Canon Sales Co. Inc. ....... 57,000 1,585,044
------------
MULTI - INDUSTRY (0.3%)
Fuji Denki Reiki ........... 135,450 1,728,915
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
18
<PAGE>
THE JAPAN EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ---------------------------- ------------ ------------
<S> <C> <C>
RETAIL (3.5%)
Familymart Co. ............. 54,500 $ 2,424,839
Izumi Co. .................. 97,000 1,936,790
Izumiya Co. Ltd. ........... 201,000 4,031,674
Kansai Super Market
Ltd.+ .................... 70,000 778,618
Keiyo Co. Ltd. ............. 75,000 943,641
Mizuno Corp. ............... 59,000 554,059
Nichii Co. Ltd. ............ 150,000 2,489,025
Seiyu Ltd. ................. 130,000 1,647,498
Takashimaya Co. Ltd. ....... 200,000 3,099,885
Tokyu Store Chain .......... 17,000 151,739
------------
18,057,768
------------
TOTAL CONSUMER GOODS &
SERVICES ................ 78,657,325
------------
ENERGY (0.9%)
OIL-PRODUCTION (0.9%)
Cosmo Oil Company Ltd. ..... 650,000 4,017,998
Showa Shell Sekiyu K. K. ... 31,000 322,206
------------
4,340,204
------------
TOTAL ENERGY ............. 4,340,204
------------
FINANCE (27.1%)
BANKING (20.4%)
Asahi Bank Ltd. ............ 831,000 9,622,134
Bank of Iwate Limited ...... 4,300 248,556
Bank of Ryukyus ............ 45,000 1,608,293
Bank of Tokyo-Mitsubishi ... 400 9,300
Chuo Trust & Banking Co.
Ltd. ..................... 331,000 3,259,256
Dai-Ichi Kangyo Bank
Ltd. ..................... 1,305,000 24,272,099
Daiwa Bank Ltd. ............ 1,333,000 9,212,256
Fukui Bank ................. 688,000 3,958,079
Fukushima Bank Ltd. ........ 45,000 180,523
Hokkaido Takushoku Bank .... 1,675,000 5,070,135
Hyakugo Bank ............... 400,000 2,673,195
Juroku Bank ................ 291,000 1,591,882
Kagawa Bank ................ 122,000 1,179,050
Keiyo Bank ................. 150,000 882,100
Kita-Nippon Bank ........... 19,000 1,108,665
Kyushu Bank ................ 69,000 290,012
Mitsui Trust & Banking ..... 200,000 2,334,031
Miyazaki Bank .............. 146,000 1,031,623
Nanto Bank Ltd. ............ 252,000 1,812,776
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ---------------------------- ------------ ------------
<S> <C> <C>
</TABLE>
BANKING (CONTINUED)
<TABLE>
<S> <C> <C>
North Pacific Bank ......... 71,000 $ 388,397
Sakura Bank Ltd. ........... 976,000 10,856,162
San-In Godo Bank ........... 31,000 253,808
Sanwa Bank Ltd. ............ 423,000 7,828,942
Shinwa Bank ................ 89,000 547,722
Sumitomo Bank Ltd. ......... 257,000 4,967,474
Sumitomo Trust & Bank ...... 74,000 1,012,021
Suruga Bank Ltd. ........... 103,000 684,591
Toyo Trust & Banking Co.
Ltd. ..................... 220,000 2,266,563
Yasuda Trust & Banking Co.
Ltd. ..................... 759,000 4,795,586
------------
103,945,231
------------
COMMERCIAL SERVICES (0.3%)
Asatsu Inc. ................ 30,000 1,299,216
------------
FINANCIAL SERVICES (3.6%)
Daiwa Securities Co.
Ltd. ...................... 150,000 1,928,311
Diamond Lease Co. Ltd. ..... 100,000 1,358,479
Nomura Securities Co.
Ltd. ..................... 760,000 14,828,391
------------
18,115,181
------------
INSURANCE (1.7%)
Chiyoda Fire & Marine
Insurance Co. Ltd. ....... 271,000 1,593,660
Fuji Fire & Marine ......... 335,000 1,863,122
Koa Fire & Marine Insurance
Co. Ltd. ................. 150,000 972,361
Tokio Marine & Fire
Insurance Co. Ltd. ....... 328,000 4,366,097
------------
8,795,240
------------
REAL ESTATE (1.1%)
Daikyo Inc. ................ 65,000 482,989
Daiwa Danchi Co. Ltd.+ ..... 208,000 1,335,066
Heiwa Real Estate .......... 182,500 1,497,518
Mitsui Fudosan Co. Ltd. .... 180,000 2,428,851
------------
5,744,424
------------
TOTAL FINANCE ............ 137,899,292
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
THE JAPAN EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ---------------------------- ------------ ------------
<S> <C> <C>
HEALTHCARE (2.2%)
PHARMACEUTICALS (2.2%)
Chugai Pharmaceutical Co.
Ltd. ..................... 568,000 $ 5,541,135
Dai Ichi Pharmaceutical Co.
Ltd. ..................... 100,000 1,540,825
Eisai Co. Ltd. ............. 5,000 94,364
Kissei Pharmaceutical
Co. ...................... 2,500 69,975
Ono Pharmaceutical ......... 115,000 3,952,809
------------
11,199,108
------------
TOTAL HEALTHCARE ......... 11,199,108
------------
TECHNOLOGY (8.5%)
ELECTRONICS (6.3%)
Canon Inc. ................. 88,000 1,829,297
Kyocera Corp. .............. 47,000 3,320,980
Matsushita Electric
Industries Co. Ltd. ...... 478,000 8,890,470
Ryoyo Electro Corp. ........ 50,000 1,075,842
Sony Corp. ................. 130,000 8,545,653
TDK Corp. .................. 90,000 5,366,448
Tokai Rika Denki Co. ....... 147,000 1,581,488
Victor Company of Japan,
Ltd.+ .................... 100,000 1,431,417
------------
32,041,595
------------
SEMICONDUCTORS (0.3%)
Rohm Company ............... 26,000 1,716,242
------------
TELECOMMUNICATIONS (1.9%)
Nippon Telegraph & Telephone
Corp. .................... 1,277 9,453,956
------------
TOTAL TECHNOLOGY ......... 43,211,793
------------
TRANSPORTATION (5.5%)
RAILROADS (2.5%)
East Japan Railway Co. ..... 1,552 8,136,286
Nishi-Nippon Railroad ...... 418,000 1,734,021
Tobu Railway Co. ........... 425,000 2,786,022
------------
12,656,329
------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ---------------------------- ------------ ------------
<S> <C> <C>
TRANSPORT & SERVICES (2.4%)
Hitachi Transport System ... 150,000 $ 1,641,116
Itochu Warehouse Co.
Ltd. ..................... 47,000 269,964
Kawasaki Kisen Kaisha
Ltd.+ .................... 873,000 2,944,982
Marubeni Corp. ............. 700,000 3,829,270
Nippon Express Co. Ltd. .... 150,000 1,463,328
Sankyu Inc. ................ 300,000 1,367,596
Senko Co. Ltd. ............. 136,000 841,929
------------
12,358,185
------------
WHOLESALE & INTERNATIONAL TRADE (0.6%)
Kamei Corp. ................ 10,000 121,260
Kawasho Corp.+ ............. 152,000 737,262
Tomen Corp. ................ 402,000 1,543,032
Toyota Tsusho
Corporation .............. 73,000 499,173
------------
2,900,727
------------
TOTAL TRANSPORTATION ..... 27,915,241
------------
UTILITIES (3.5%)
ELECTRIC (2.6%)
Shikoku Electric Power
Inc. ...................... 139,780 3,096,834
Tohoku Electric Power Co.
Inc. ..................... 178,300 3,982,760
Tokyo Electric Power ....... 200,000 5,069,224
Yurtec Corp. ............... 75,000 1,319,730
------------
13,468,548
------------
NATURAL GAS (.9%)
Hokuriku Gas ............... 204,000 799,770
Osaka Gas Co. .............. 1,075,000 3,930,244
------------
4,730,014
------------
TOTAL UTILITIES .......... 18,198,562
------------
TOTAL COMMON STOCK (COST
$420,502,552) ........... 433,475,356
------------
WARRANTS (2.2%)
CONSUMER GOODS & SERVICES (1.0%)
APPARELS & TEXTILES (0.1%)
Kuraray Co. Ltd.
(Expire 1/26/99) ......... 800 710,000
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE JAPAN EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ---------------------------- ------------ ------------
<S> <C> <C>
CONSTRUCTION & HOUSING (0.5%)
Maeda Corp. (Expire
2/5/97) ................... 515 $ 778,937
Misawa Homes (Expire
10/29/99) ................ 3,000 814,930
------------
1,593,867
------------
MERCHANDISING (0.1%)
Canon Sales Co. Inc. (Expire
11/11/97) ................ 4,500 737,032
------------
MISCELLANEOUS (0.1%)
Yuasa Trading Co. Ltd.
(Expire 1/12/97) .......... 4,550 748,857
------------
RETAIL (0.2%)
Parco (Expire 7/21/99) ..... 500 843,750
Marutomi Group Co. Ltd.
(Expire 11/24/99) ........ 340 97,792
------------
941,542
------------
TOTAL CONSUMER GOODS &
SERVICES ................ 4,731,298
------------
BASIC INDUSTRIES (0.8%)
FOREST PRODUCTS & PAPER (0.0%)
New Oji Paper Co., Ltd.
(Expire 7/30/98) .......... 100 161,376
------------
INDUSTRIAL (0.3%)
Lion Corp. (Expire
6/18/99) .................. 6,020 1,322,664
------------
METALS & MINING (0.5%)
Dowa Mining Co., Ltd.
(Expire 12/9/97) .......... 1,043 1,212,488
Yodogawa Steel Works (Expire
12/10/97) ................ 1,000 1,487,500
------------
2,699,988
------------
TOTAL BASIC INDUSTRIES ... 4,184,028
------------
TRANSPORTATION (0.2%)
RAILROADS (0.2%)
Nagoya Railroad Co. Ltd.
(Expire 1/22/97) ......... 662 976,450
------------
TOTAL TRANSPORTATION ..... 976,450
------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ---------------------------- ------------ ------------
<S> <C> <C>
TECHNOLOGY (0.2%)
SEMICONDUCTORS (0.2%)
Rohm Company (Expire
11/20/97) ................ 1,100 $ 1,043,630
Sanken Electric Co. (Expire
4/2/99) .................. 930 204,332
------------
1,247,962
------------
TOTAL TECHNOLOGY ......... 1,247,962
------------
TOTAL WARRANTS (COST
$11,300,028) ............ 11,139,738
------------
<CAPTION>
FIXED INCOME PRINCIPAL
SECURITIES (0.1%) AMOUNT
------------
<S> <C> <C>
CAPITAL GOODS (0.1%)
CONSTRUCTION & HOUSING (0.1%)
Nishimatsu Construction Co.
Ltd., 0.5% due
09/30/09 ................. 75,000,000 683,798
------------
TOTAL FIXED INCOME
SECURITIES (COST
$694,627) ............... 683,798
------------
CONVERTIBLE BONDS (7.0%)
BASIC INDUSTRIES (0.4%)
DIVERSIFIED MANUFACTURING (0.1%)
Ryobi Ltd., 2.8% due
03/29/02 ................. 48,000,000 512,903
------------
COMMERCIAL SERVICES (0.3%)
Yamanouchi Pharmacuetical,
1.25% due 03/31/14 ....... 140,000,000 1,534,899
------------
TOTAL BASIC INDUSTRIES ................... 2,047,802
------------
CAPITAL GOODS (2.5%)
COMPUTER SYSTEMS (1.5%)
NEC Corp., 1.9% due
03/30/01 ................. 696,000,000 7,722,652
------------
CONSTRUCTION & HOUSING (0.3%)
SXL Corp., 2.7% due
03/29/02 ................. 150,000,000 1,586,412
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE JAPAN EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ---------------------------- ------------ ------------
<S> <C> <C>
ELECTRICAL EQUIPMENT (0.7%)
Hitachi Ltd., 2.7% due
03/31/97 ................. $289,000,000 $ 3,351,596
------------
TOTAL CAPITAL GOODS ...... 12,660,660
------------
CONSUMER GOODS & SERVICES (1.8%)
AUTOMOTIVE (1.3%)
Toyota Motor Corp., 1.2% due
01/28/98 ................. 500,000,000 6,550,786
------------
RETAIL (0.5%)
Izumiya Co. Ltd., 0.8% due
08/31/99 ................. 173,000,000 2,429,033
------------
TOTAL CONSUMER GOODS &
SERVICES ................ 8,979,819
------------
FINANCE (2.3%)
FINANCIAL SERVICES (2.1%)
BOT Cayman Finance Ltd.,
4.25% due 03/24/03 ....... 780,000,000 10,685,030
------------
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ---------------------------- ------------ ------------
<S> <C> <C>
REAL ESTATE (0.2%)
Sekisui House Ltd., 2.5% due
01/31/02 ................. $ 75,000,000 $ 925,179
------------
TOTAL FINANCE ............ 11,610,209
------------
TOTAL CONVERTIBLE BONDS
(COST $34,163,749) ...... 35,298,490
------------
TOTAL INVESTMENTS (COST $466,660,957)
(94.4%) ................................ 480,597,382
OTHER ASSETS IN EXCESS OF LIABILITIES
(5.6%) ................................. 28,743,528
------------
NET ASSETS (100.0%) ...................... $509,340,910
------------
------------
</TABLE>
- ------------------------------
+Non-Income Producing Security.
Note: For Federal Income Tax purposes, the cost of securities owned at June 30,
1996 was substantially the same as the cost of securities for financial
statement purposes.
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE JAPAN EQUITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $466,660,957) $480,597,382
Cash 1,317,104
Foreign Currency at Value (Cost $13,528,027) 13,396,202
Receivable for Investments Sold 16,879,005
Dividends Receivable 1,990,435
Interest Receivable 199,757
Deferred Organization Expenses 25,316
------------
Total Assets 514,405,201
------------
LIABILITIES
Payable for Investments Purchased 4,147,222
Advisory Fee Payable 282,102
Custody Fee Payable 127,179
Administrative Services Fee Payable 22,845
Unrealized Depreciation on Open Spot Foreign Currency Contract 18,099
Administration Fee Payable 5,571
Organization Expenses Payable 3,488
Fund Services Fee Payable 1,552
Accrued Expenses & Other Liabilities 456,233
------------
Total Liabilities 5,064,291
------------
NET ASSETS
Applicable to Investors' Beneficial Interests $509,340,910
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
23
<PAGE>
THE JAPAN EQUITY PORTFOLIO
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividend Income (Net of $436,764 Foreign Withholding Taxes) $ 1,747,055
Interest Income (Net of $50,082 Foreign Withholding Taxes) 458,046
-----------
Investment Income 2,205,101
EXPENSES
Advisory Fee $ 1,581,190
Custodian Fees and Expenses 221,591
Administrative Services Fee 60,965
Professional Fees 30,781
Administration Fee 30,693
Fund Services Fee 13,641
Trustees' Fees and Expenses 4,631
Amortization of Organization Expense 2,638
Printing Expenses 1,691
Insurance Expense 1,316
Registration Fees 344
Miscellaneous 1,128
-----------
Total Expenses (1,950,609)
-----------
NET INVESTMENT INCOME 254,492
NET REALIZED GAIN (LOSS) ON INVESTMENTS
Investment Transactions 10,439,727
Foreign Currency Transactions (160,282)
-----------
Net Realized Gain 10,279,445
NET CHANGE IN UNREALIZED APPRECIATION OF INVESTMENTS
Investment 6,839,111
Foreign Currency Contracts and Translations (225,135)
-----------
Net Change in Unrealized Appreciation 6,613,976
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $17,147,913
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
24
<PAGE>
THE JAPAN EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
MARCH 28, 1995
FOR THE SIX (COMMENCEMENT
MONTHS ENDED OF
JUNE 30, OPERATIONS) TO
1996 DECEMBER 31,
(UNAUDITED) 1995
------------ --------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 254,492 $ 314,783
Net Realized Gain on Investments and Foreign Currency
Transactions 10,279,445 5,011,111
Net Change in Unrealized Appreciation of Investments and
Foreign Currency Translations 6,613,976 7,075,578
------------ --------------
Net Increase in Net Assets Resulting from Operations 17,147,913 12,401,472
------------ --------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST
Contributions 244,370,378 465,133,508
Withdrawals (164,668,585) (65,143,876)
------------ --------------
Net Increase from Investors' Transactions 79,701,793 399,989,632
------------ --------------
Total Increase in Net Assets 96,849,706 412,391,104
NET ASSETS
Beginning of Period 412,491,204 100,100
------------ --------------
End of Period $509,340,910 $412,491,204
------------ --------------
------------ --------------
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX MARCH 28, 1995
MONTHS ENDED (COMMENCEMENT OF
JUNE 30, 1996 OPERATIONS)
(UNAUDITED) THROUGH DECEMBER 31, 1995
------------- ---------------------------
<S> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Expenses 0.80%(a) 0.87%(a)
Net Investment Income 0.10%(a) 0.12%(a)
Portfolio Turnover 44.07%(b) 60%(b)
</TABLE>
- ------------------------
(a)Annualized
(b)Not Annualized
The Accompanying Notes are an Integral Part of the Financial Statements.
25
<PAGE>
THE JAPAN EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Japan Equity Portfolio (the "Portfolio"), one of three portfolios comprising
The Series Portfolio (the "Series Portfolio"), is registered under the
Investment Company Act of 1940, as amended (the "Act"), as a no-load,
diversified, open-end management investment company which was organized as a
trust under the laws of the State of New York on June 24, 1994. The Portfolio
commenced operations on March 28, 1995. The Portfolio's investment objective is
to provide a high total return from a portfolio of equity securities of issuers
that have their principal activities in Japan or are organized under Japanese
law. The Declaration of Trust permits the Trustees to issue an unlimited number
of beneficial interests in the Portfolio.
Investments in Japanese markets may involve certain considerations and risks not
typically associated with investments in the United States. Future economic and
political developments in Japan 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
industry or region.
The preparation of financial statements prepared 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 exchanges, 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 may 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 asset value is 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
26
<PAGE>
THE JAPAN EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
prevailing exchange rates at the end of the period. Purchases, sales,
income and expense are translated at the exchange rate prevailing on the
respective dates of such transactions. Translation gains and losses
resulting from changes in exchange rates during the reporting period and
gains and losses realized upon settlement of foreign currency transactions
are reported in the Statement of Operations.
Although the net assets of the Portfolio are presented at the exchange
rates and market values prevailing at the end of the period, the Portfolio
does not isolate the portion of the results of operations arising as a
result of changes in foreign exchange rates from the fluctuations arising
from changes in the market prices of securities during the period.
c)Securities transactions are recorded on a trade date basis. 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 June 30, 1996 the Portfolio had open spot foreign
currency contract as follows:
SUMMARY OF OPEN CONTRACTS
<TABLE>
<CAPTION>
U.S. DOLLAR NET UNREALIZED
VALUE APPRECIATION
FOREIGN CURRENCY SALE CONTRACTS PROCEEDS AT 6/30/96 (DEPRECIATION)
- ------------------------------------------------------------------- ------------- ------------- --------------
<S> <C> <C> <C>
Japanese Yen, 1,098,800,000, expiring 7/2/96 $ 10,000,000 $ 10,018,099 ($18,099)
</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.
f)The Portfolio incurred organization expenses in the amount of $33,000.
These costs were deferred and are being amortized on a straight-line basis
over a five year period from the commencement of operations.
27
<PAGE>
THE JAPAN EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 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 agreement,
the Portfolio pays Morgan at an annual rate of 0.65% of the Portfolio's
average daily net assets. For the six months ended June 30, 1996, such
fees amounted to $1,581,190.
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 Administration
Agreement provides 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 Institutional Funds, The Pierpont
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 payable by the Portfolio is determined by the
proportionate share its net assets bear to the total net assets of The JPM
Institutional Funds, The Pierpont Funds, The JPM Advisor Funds and the
Master Portfolios. For the six months ended June 30, 1996, such fees
amounted to $30,693.
Effective August 1, 1996, administrative functions provided by Signature
will be provided by Funds Distributor, Inc. ("FDI"), a registered
broker-dealer, and by Morgan. FDI will also become the Portfolio's
exclusive placement agent. Under a Co-Administration Agreement between FDI
and the Portfolio, FDI's fees are to be paid by the Portfolio. (see Note
2c).
c)The Portfolio has an Administrative Services Agreement (the "Services
Agreement") with Morgan under which Morgan is responsible for certain
aspects of the administration and operation of the Portfolio. Under the
Services Agreement, the Portfolio has agreed to pay Morgan a fee equal to
its 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 six months
ended June 30, 1996, such fees amounted to $60,965.
Effective August 1, 1996, the Services Agreement will be amended such that
the aggregate complex-wide fees to be paid by the Portfolio under both the
amended Services Agreement and the Co-Administration Agreement (see Note
2b) will be calculated daily based on the aggregate average daily net
assets of the Master Portfolios in accordance with the following annual
schedule: 0.09% on the first $7 billion of the Master Portfolios'
aggregate average daily net assets and 0.04% of the aggregate average
daily net assets in excess of $7 billion.
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
28
<PAGE>
THE JAPAN EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
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 $13,641 for the six months ended June 30, 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 the
Master Portfolios. 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 $1,750.
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the six months
ended June 30, 1996 were as follows:
<TABLE>
<CAPTION>
COST OF PURCHASES PROCEEDS FROM SALES
- ----------------- -------------------
<S> <C>
$ 288,823,423 $ 215,905,276
</TABLE>
29
<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
FOR MORE INFORMATION ON THE JPM ADVISOR FAMILY OF FUNDS, CALL J.P. MORGAN FUNDS
SERVICES AT (800) JPM-3637.
THE JPM ADVISOR FAMILY OF FUNDS
THE
JPM ADVISOR
JAPAN EQUITY
FUND
SEMI-ANNUAL REPORT
JUNE 30, 1996
