<PAGE>
LETTER TO THE SHAREHOLDERS OF TAX AWARE DISCIPLINED EQUITY FUND
December 10, 1997
Dear Shareholder:
Tax Aware Disciplined Equity Fund uses a proprietary tax aware model to seek to
minimize capital gains distributions from a portfolio of U.S. large and medium
cap stocks. By avoiding stocks in the market quintile that Morgan research has
identified as "most overvalued," the Fund seeks to outperform traditional index
funds that track the S&P 500 at comparable levels of investment risk. From the
Fund's inception on January 30 through October 31 of this year, it has
accomplished this goal.
We are pleased to report that the Fund provided a solid absolute return of
20.44% from inception (as calculated from January 31, 1997)through October 31,
1997. This performance is well ahead of the 17.94% return for the overall
market, represented by the S&P 500, and the 16.39% return posted over the same
period by Fund competitors, represented by the Lipper Growth and Income Average.
The Fund's net asset value increased from $10.00 per share at inception (January
30, 1997)to $12.08 at October 31, 1997. No distributions were made during the
reporting period from ordinary income, from short-term capital gains, or from
long-term capital gains. The Fund's net assets stood at approximately $12
million at the end of the period under review.
The report that follows includes a portfolio manager Q&A with Robin B. Chance, a
member of the portfolio management team. This interview is designed to answer
commonly asked questions about the Fund, elaborate on what happened during the
reporting period, and provide an outlook for the months ahead.
As chairman and president of Asset Management Services, we look forward to
sharing Morgan's insights regarding financial markets with you. If you have any
comments or questions, please call your Morgan representative or J.P. Morgan
Funds Services at (800) 521-5411.
Sincerely yours,
/s/ Ramon de Oliveira /s/ Keith M. Schappert
Ramon de Oliveira Keith M. Schappert
Chairman of Asset Management Services President of Asset Management Services
J.P. Morgan & Co. Incorporated J.P. Morgan & Co. Incorporated
TABLE OF CONTENTS
LETTER TO THE SHAREHOLDERS . . . . . 1 FUND FACTS AND HIGHLIGHTS . . . . . . 5
FUND PERFORMANCE . . . . . . . . . . 2 SPECIAL FUND-BASED SERVICES . . . . . 6
PORTFOLIO MANAGER Q&A. . . . . . . . 3 FINANCIAL STATEMENTS. . . . . . . . . 8
<PAGE>
Fund performance
EXAMINING PERFORMANCE
There are several ways to evaluate a mutual fund's historical performance
record. One approach is to take a look at the growth of a hypothetical
investment of $10,000. The chart at right shows that $10,000 invested in the
Fund since inception* would have grown to $12,044 at October 31, 1997.
Another way to look at performance is to review a fund's average annual total
return. This figure takes the fund's actual (or cumulative) return and shows
what would have happened if the fund had achieved that return by performing at a
constant rate each year. Average annual total returns represent the average
yearly change of a fund's value over various time periods, typically 1, 5, or 10
years (or since inception). Total returns for periods of less than one year are
not annualized and provide a picture of how a fund has performed over the short
term.
GROWTH OF $10,000 SINCE INCEPTION*
JANUARY 31, 1997 - OCTOBER 31, 1997
[CHART]
Lipper performance averages are calculated by taking an arithmetic average of
the returns of the funds in the group. The average annualized returns which
result from this methodology will differ from annualizing the growth of the
minimum initial investment.
<TABLE>
<CAPTION>
PERFORMANCE TOTAL RETURNS
------------------------------
THREE SIX SINCE
AS OF OCTOBER 31, 1997 MONTHS MONTHS INCEPTION*
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
JPM Pierpont Shares: Tax Aware Disciplined Equity Fund -3.59% 17.85% 20.44%
S&P500 -3.76% 15.16% 17.94%
Lipper Growth and Income Average -1.99% 16.01% 16.39%
AS OF SEPTEMBER 30, 1997
- ------------------------------------------------------------------------------------------
JPM Pierpont Shares: Tax Aware Disciplined Equity Fund 8.50% 29.37% 24.73%
S&P500 7.49% 26.26% 22.02%
Lipper Growth and Income Average 9.04% 24.59% 20.78%
</TABLE>
*THE FUND COMMENCED OPERATIONS ON JANUARY 30, 1997 AND HAS PROVIDED A TOTAL
RETURN OF 20.80% FROM THAT DATE THROUGH OCTOBER 31, 1997. FOR THE PURPOSE OF
COMPARISON, THE "SINCE INCEPTION" RETURNS ARE CALCULATED FROM JANUARY 31, 1997,
THE FIRST DATE WHEN DATA FOR THE FUND'S BENCHMARK, AND ITS LIPPER CATEGORY
AVERAGE WERE AVAILABLE.
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. FUND RETURNS ARE NET OF
FEES AND ASSUME THE REINVESTMENT OF DISTRIBUTIONS AND REFLECT REIMBURSEMENT OF
CERTAIN FUND EXPENSES AS DESCRIBED IN THE PROSPECTUS. LIPPER ANALYTICAL
SERVICES, INC. IS A LEADING SOURCE FOR MUTUAL FUND DATA.
2
<PAGE>
Portfolio manager Q&A
[PHOTOGRAPH]
Following is an interview with ROBIN B. CHANCE, who is a member of the portfolio
management team for Tax Aware Disciplined Equity Fund. A Chartered Financial
Analyst who is also a 10-year veteran of Morgan, Robin developed the systems
used to rebalance the firm's structured equity portfolios. She is currently a
member of Morgan's Structured Equity Group, with responsibility for tax aware
structured equity strategies. Robin is a graduate of the University of
Pennsylvania's Management and Technology Program and earned her MBA from New
York University's Stern School of Business. This interview was conducted
December 9, 1997 and reflects Robin's views on that date.
HOW WOULD YOU DESCRIBE THE U.S. EQUITY MARKET OVER THE PAST YEAR?
RBC: The U.S. equity market continued the roll it had been on for the past two
years. As of October 31, 1997, the S&P 500, a commonly used proxy for the U.S.
equity market, reported a total return of 25.32% for the year to date. The
market has been driven mainly by an economic environment of low inflation and
strong economic growth, which has benefited corporate profit margins.
Investor expectations of continued improvement in profit margins have been a big
boost for stocks. In the current environment, if a company reports even slightly
disappointing earnings, investors quickly put their money elsewhere. This
partially explains why rising equity prices have been accompanied by a rise in
volatility, which has returned to its long term historical average.
Unfortunately, we think corporate profit margins and price-to-earnings ratios
have reached their cyclical highs and will prove difficult to maintain.
This year has also seen increased volatility sparked by the financial crisis in
Southeast Asia. Excessive lending and investing in unprofitable ventures in that
region have caused interest rates to rise and currencies to fall. U.S. investors
became concerned about the effect of the Southeast Asian economies on U.S.
companies. Companies with exposure to that market plummeted -- especially
semiconductor and capital goods companies. When this occurred, investors
returned to the safe haven of the "Nifty Fifty." These are the largest blue chip
companies in the U.S. which, as a group, have outperformed the rest of the
market this year.
HOW DID MARKET EVENTS, SUCH AS OCTOBER'S VOLATILITY AFFECTED THE FUND
DIFFERENTLY THAN NON-TAX AWARE FUNDS?
RBC: When the stock market continues to rise, this Fund's tax aware nature
limits our ability to trade, since almost anything we sell will result in a
capital gain. When the market becomes volatile, as it has recently, we are
provided with much more flexibility to replace overvalued stocks with
undervalued ones. During October, the Fund had more opportunities to trade since
selling securities resulted in smaller realized gains, or in some cases, losses
that were used to offset gains.
3
<PAGE>
WHERE WAS THE FUND'S DISCIPLINED STOCK SELECTION THE STRONGEST? AND THE WEAKEST?
RBC: Since the Fund's inception, stock selection positively contributed to the
Fund's performance. The best performance by far was in the Fund's largest
position, WARNER LAMBERT CO., whose new drugs Lipitor and Resulin, have exceeded
all expectations since they were introduced at the beginning of 1997. Lipitor
and Resulin are used for the treatment of high cholesterol and second stage
diabetes, respectively. Wall Street analysts continued to raise earnings
estimates of the company as these drugs gained market share and drove the stock
price higher. While Resulin has recently received some negative press (in
December '97, after the Fund's reporting period) we believe Resulin is still a
beneficial and important drug, and we continue to view WARNER-LAMBERT CO. as a
company the Fund should emphasize.
On the other side of that equation, if Lipitor was to gain market share then
somebody else would have to lose it. Since this product competed directly with
MERCK'S Zocor we chose to underweight MERCK in the Portfolio. MERCK & Co,
Inc. is a large weighting in the S&P 500 but a very small weighting in the
Fund, so when the stock lags the S&P 500, the Fund should perform
comparatively better.
The stocks which detracted from performance the most were WASTE MANAGEMENT INC.
and FIRST DATA CORP. WASTE MANAGEMENT announced the resignation of their new CEO
and several other top executives. The new CEO, Ron LeMay, had only been with the
company for a few months and investors were still waiting to hear his
restructuring plans. The resignation calls into question the chances of a
successful turnaround occurring in the near future. FIRST DATA CORP. guided
analysts' estimates downward due to slower than expected growth in its non-core
businesses. In addition, Wall Street analysts have become concerned that the new
Smart Cards issued by banks may have a negative impact on credit card usage,
which is a major source of FIRST DATA'S revenues. Smart Cards are issued by
banks and are used like cash when making purchases.
WHAT IS YOUR OUTLOOK FOR THE COMING MONTHS, AND HOW WILL YOU BE POSITIONING THE
PORTFOLIO?
RBC: We expect the market will continue to display a normal level of
volatility, which is higher that what we've seen over the past couple of years.
Since corporate profit margins are at their highest levels in years, we expect
earnings disappointments and, consequently, a lowering of estimates in the
coming year. Profit margins may come under pressure from rising labor costs,
associated with our low unemployment rate, and an inability to raise prices, due
to a strong dollar and weak Asian markets. We think securities are currently
overvalued because investors, in their enthusiasm over one of the longest bull
markets and economic expansions in history, have underestimated risk. The events
in Southeast Asia may have provided a wake up call.
However, increased volatility in the market actually creates more opportunity
for outperforming the S&P 500, and for trading stocks with minimal tax
consequences. We believe we can add the most value by selecting undervalued
securities in each economic sector and refraining from market timing, sector
timing, or theme investing. With this approach, we aim to provide somewhat
higher returns than the S&P 500, but with a similar level of volatility.
4
<PAGE>
Fund facts
INVESTMENT OBJECTIVE
Tax Aware Disciplined Equity Fund seeks to provide high total return, while
being sensitive to the impact of capital gains taxes on investors' returns.
Designed for long-term investors, the Fund invests primarily in common stocks
and other equity securities of large and medium-sized U.S. companies.
- ------------------------------------------------------------------------------
COMMENCEMENT OF OPERATIONS
1/30/97
- ------------------------------------------------------------------------------
NET ASSETS AS OF 10/31/97
$12,025,879
- ------------------------------------------------------------------------------
DIVIDEND PAYABLE DATE
12/24/97
- ------------------------------------------------------------------------------
CAPITAL GAIN PAYABLE DATE (IF APPLICABLE)
12/24/97
EXPENSE RATIO
The Fund's current annualized expense ratio of 0.55% 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
or exchange fees; however, shares held less than five years are subject to
redemption fees. There are no additional charges for buying, selling, or
safekeeping Fund shares, or for wiring redemption proceeds from the Fund. Fund
redemption fees are waived when shares worth over $500,000 are redeemed in kind
from the Fund. Shareholders owning more than 5% of the Fund's outstanding shares
should consult "Redemption of Shares" in the Prospectus.
Fund highlights
ALL DATA AS OF OCTOBER 31, 1997
PORTFOLIO ALLOCATION
(AS A PERCENTAGE OF TOTAL INVESTMENTS)
CONSUMER GOODS & SERVICES 20.9%
FINANCE 17.6%
TECHNOLOGY 13.9%
HEALTH CARE 10.7%
INDUSTRIAL PRODUCTS & SERVICES 9.7%
UTILITIES 9.5%
ENERGY 9.3%
BASIC INDUSTRIES 4.6%
TRANSPORTATION 2.1%
SHORT-TERM HOLDINGS 1.7%
LARGEST EQUITY HOLDINGS % OF TOTAL INVESTMENTS
- ------------------------------------------------------------------------------
EXXON CORP. (ENERGY) 2.7%
ROYAL DUTCH PETROLEUM CO. (ENERGY) 2.1%
PROCTER & GAMBLE CO. (CONSUMER GOODS
& SERVICES) 1.9%
INTEL CORP. (TECHNOLOGY) 1.9%
GENERAL ELECTRIC CO.
(INDUSTRIAL PRODUCTS & SERVICES) 1.8%
PFIZER, INC. (HEALTH CARE) 1.6%
INTERNATIONAL BUSINESS MACHINES CORP.
(TECHNOLOGY) 1.6%
BRISTOL-MYERS SQUIBB CO. (HEALTH CARE) 1.6%
AMERICAN INTERNATIONAL GROUP, INC.
(FINANCE) 1.4%
MERCK & CO., INC. (HEALTH CARE) 1.4%
5
<PAGE>
Special fund-based services
PIERPONT ASSET ALLOCATION SERVICE (PAAS)
For many investors, a diversified portfolio -- including short-term
instruments, bonds, and stocks -- can offer an excellent opportunity to
achieve one's investment objectives. PAAS provides investors with a
comprehensive management program for their portfolios. Through this service,
investors can:
- create and maintain an asset allocation that is specifically targeted at
meeting their most critical investment objectives;
- make ongoing tactical adjustments in the actual asset mix of their
portfolios to capitalize on shifting market trends;
- make investments through The JPM Pierpont Funds, a family of diversified
mutual funds.
PAAS is available to clients who invest a minimum of $500,000 in The JPM
Pierpont Funds.
IRA MANAGEMENT SERVICE
As one of the few remaining investments that can help your assets grow
tax-deferred until retirement, the IRA enables more of your dollars to work for
you longer. Morgan offers an IRA Rollover plan that helps you to build
well-balanced long-term investment portfolios, diversified across a wide array
of mutual funds. From money markets to emerging markets, The JPM Pierpont Funds
provide an excellent way to help you accumulate long-term wealth for retirement.
KEOGH
Keoghs provide another excellent vehicle to help individuals who are
self-employed or are employees of unincorporated businesses to accumulate
retirement savings. A Keogh is a tax-deferred pension plan that can allow you to
contribute the lesser of $30,000 or 25% of your annual earned gross
compensation. The JPM Pierpont Funds can help you build a comprehensive
investment program designed to maximize the retirement dollars in your Keogh
account.
6
<PAGE>
DISTRIBUTED BY FUNDS DISTRIBUTOR, INC. MORGAN GUARANTY TRUST COMPANY OF NEW
YORKSERVES AS AN INVESTMENT ADVISOR AND MAKES THE FUNDS AVAILABLE SOLELY IN ITS
CAPACITY AS SHAREHOLDER SERVICING AGENT. SHARES OF THE FUND ARE NOT BANK
DEPOSITS AND ARE NOT GUARANTEED BY ANY BANK, GOVERNMENT ENTITY, OR THE FDIC. AN
INVESTMENT IN THE FUND WILL FLUCTUATE AND MAY LOSE VALUE.
Past performance is no guarantee for future performance. Returns are net of
fees, assume the reinvestment of fund distributions and may reflect the
reimbursement of the fund expenses as described in the prospectus. Had expenses
not been subsidized, returns would have been lower. References to specific
securities and their issuers are for illustrative purposes and only and are not
intended to be, and should not be interpreted as, recommendations to purchase or
sell such securities. Opinion expressed herein are based on current market
conditions and are subject to change without notice.
CALL J.P. MORGAN FUNDS SERVICES AT (800) 521-5411 FOR A PROSPECTUS CONTAINING
MORE COMPLETE INFORMATION ABOUT THE FUND INCLUDING MANAGEMENT FEES AND OTHER
EXPENSES. PLEASE READ IT CAREFULLY BEFORE INVESTING.
7
<PAGE>
TAX AWARE DISCIPLINED EQUITY FUND
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ ------------
<S> <C> <C>
COMMON STOCKS (100.6%)
BASIC INDUSTRIES (4.7%)
AGRICULTURE (0.2%)
Pioneer Hi-Bred International, Inc............... 200 $ 18,325
------------
CHEMICALS (3.3%)
Albemarle Corp................................... 1,100 26,675
Crompton & Knowles Corp.......................... 1,400 35,350
Cytec Industries, Inc.+.......................... 600 29,250
Dow Chemical Co.................................. 1,000 90,750
E.I. du Pont de Nemours & Co..................... 2,200 125,125
Solutia, Inc.+................................... 600 13,275
Union Carbide Corp............................... 1,800 82,237
------------
402,662
------------
FOREST PRODUCTS & PAPER (0.6%)
Boise Cascade Corp............................... 200 7,043
Mead Corp........................................ 300 18,150
Temple-Inland, Inc............................... 900 51,637
------------
76,830
------------
METALS & MINING (0.6%)
Alcan Aluminum Ltd.*............................. 1,400 39,987
Allegheny Teledyne, Inc.......................... 500 13,156
Freeport-McMoran Copper & Gold, Inc., Class A.... 600 13,837
------------
66,980
------------
TOTAL BASIC INDUSTRIES......................... 564,797
------------
CONSUMER GOODS & SERVICES (21.5%)
AUTOMOTIVE (1.3%)
Chrysler Corp.................................... 1,000 35,250
Ford Motor Co.................................... 1,000 43,687
General Motors Corp.............................. 100 6,419
Goodyear Tire and Rubber Co...................... 1,100 68,887
------------
154,243
------------
BROADCASTING & PUBLISHING (1.3%)
R.R. Donnelley & Sons Co......................... 600 19,575
Tele-Communications Inc.,
Series A+...................................... 2,145 49,134
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ ------------
<S> <C> <C>
BROADCASTING & PUBLISHING (CONTINUED)
Tele-Communications TCI Ventures Group+.......... 1,055 $ 24,364
U.S. West Media Group............................ 2,300 58,075
------------
151,148
------------
ENTERTAINMENT, LEISURE & MEDIA (2.7%)
Harrah's Entertainment, Inc.+.................... 1,800 35,437
International Game Technology.................... 1,200 30,675
ITT Corp.+....................................... 100 7,469
Mirage Resorts, Inc.+............................ 200 5,000
Seagram Company Ltd.*............................ 2,100 70,744
Time Warner, Inc................................. 1,500 86,531
Viacom, Inc., Class B+........................... 800 24,200
Walt Disney Co................................... 800 65,800
------------
325,856
------------
FOOD, BEVERAGES & TOBACCO (7.7%)
Anheuser Busch Companies, Inc.................... 2,300 91,856
Coca-Cola Co..................................... 2,200 124,300
CPC International, Inc........................... 200 19,800
General Mills, Inc............................... 400 26,400
Heinz (H.J.) Company............................. 800 37,150
Kellogg Co....................................... 700 30,144
Kroger Co.+...................................... 1,700 55,462
PepsiCo, Inc..................................... 3,700 136,206
Philip Morris Companies, Inc..................... 4,000 158,500
Ralston-Ralston Purina Group..................... 600 53,850
Safeway, Inc.+................................... 500 29,062
Sara Lee Corp.................................... 800 40,900
Unilever NV (ADR)................................ 2,400 128,100
------------
931,730
------------
HOUSEHOLD APPLIANCES FURNISHINGS (0.3%)
Black & Decker Corp.............................. 100 3,806
Leggett & Platt, Inc............................. 100 4,175
Whirlpool Corp................................... 400 24,250
------------
32,231
------------
HOUSEHOLD PRODUCTS (2.0%)
Procter & Gamble Co.............................. 3,500 238,000
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
8
<PAGE>
TAX AWARE DISCIPLINED EQUITY FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ ------------
<S> <C> <C>
PERSONAL CARE (1.0%)
Avon Products, Inc............................... 100 $ 6,550
Gillette Co...................................... 1,300 115,781
------------
122,331
------------
RESTAURANTS & HOTELS (0.2%)
Extended Stay America, Inc.+..................... 300 3,937
Hilton Hotels Corp............................... 200 6,162
McDonald's Corp.................................. 100 4,481
Tricon Global Restaurants, Inc.+................. 370 11,216
------------
25,796
------------
RETAIL (4.8%)
Albertson's, Inc................................. 800 29,500
AutoZone, Inc.+.................................. 500 14,781
Circuit City Stores, Inc......................... 700 27,912
Corporate Express, Inc.+......................... 200 3,062
Dayton Hudson Corp............................... 300 18,844
Dillard's Inc. -- Class A........................ 800 30,700
Federated Department Stores, Inc.+............... 700 30,800
Gap, Inc......................................... 200 10,637
Home Depot, Inc.................................. 650 36,156
J.C. Penney Co., Inc............................. 100 5,869
Mattel, Inc...................................... 1,000 38,875
Nine West Group, Inc.+........................... 900 31,781
Reebok International Ltd. (ADR)*+................ 500 18,437
Sears, Roebuck & Co.............................. 2,700 113,062
Toys "R" Us, Inc.+............................... 1,000 34,062
Wal-Mart Stores, Inc............................. 3,700 129,962
------------
574,440
------------
TEXTILES (0.2%)
Fruit of the Loom, Inc., Class A+................ 800 20,850
------------
TOTAL CONSUMER GOODS & SERVICES................ 2,576,625
------------
ENERGY (9.5%)
OIL-PRODUCTION (9.0%)
Amoco Corp....................................... 500 45,844
Anadarko Petroleum Corp.......................... 200 14,650
Ashland, Inc..................................... 200 9,537
Atlantic Richfield Co............................ 1,800 148,162
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ ------------
<S> <C> <C>
OIL-PRODUCTION (CONTINUED)
Chevron Corp..................................... 600 $ 49,762
Exxon Corp....................................... 5,400 331,762
Mobil Corp....................................... 2,100 152,906
Royal Dutch Petroleum Co. (ADR).................. 4,800 252,600
Tosco Corp....................................... 1,100 36,300
Valero Energy Corp............................... 1,500 45,187
------------
1,086,710
------------
OIL-SERVICES (0.5%)
Baker Hughes Inc................................. 200 9,187
Diamond Offshore Drilling, Inc................... 500 31,125
Noble Drilling Corp.+............................ 100 3,556
Schlumberger Ltd................................. 200 17,500
------------
61,368
------------
TOTAL ENERGY................................... 1,148,078
------------
FINANCE (18.0%)
BANKING (9.0%)
Banc One Corp.................................... 1,866 97,265
BankAmerica Corp................................. 500 35,750
Barnett Banks, Inc............................... 400 27,600
Charter One Financial, Inc....................... 415 24,122
Chase Manhattan Corp............................. 1,000 115,375
Citicorp......................................... 500 62,531
Compass Bancshares, Inc.......................... 100 3,712
Dime Bancorp, Inc................................ 200 4,800
First Chicago NBD Corp........................... 900 65,475
First Union Corp................................. 300 14,719
Firstar Corp..................................... 500 18,062
Fleet Financial Group, Inc....................... 600 38,587
Household International, Inc..................... 500 56,625
Mercantile Bancorporation, Inc................... 200 9,656
NationsBank Corp................................. 1,400 83,825
North Fork Bancorporation, Inc................... 300 8,831
Pacific Century Financial Corp................... 600 30,225
Providian Financial Corp......................... 800 29,600
Republic New York Corp........................... 200 21,163
Signet Banking Corp.............................. 2,800 150,675
Southtrust Corp.................................. 700 33,775
TCF Financial Corp............................... 300 17,063
Washington Federal, Inc.......................... 1,430 42,543
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
9
<PAGE>
TAX AWARE DISCIPLINED EQUITY FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ ------------
<S> <C> <C>
BANKING (CONTINUED)
Washington Mutual, Inc........................... 850 $ 58,145
Wells Fargo & Co................................. 100 29,138
------------
1,079,262
------------
FINANCIAL SERVICES (4.1%)
Bear Stearns Companies, Inc...................... 100 3,969
Beneficial Corp.................................. 600 46,013
ContiFinancial Corp.+............................ 100 2,844
Edwards (A.G.), Inc.............................. 800 26,250
Federal Home Loan Mortgage Corporation........... 1,400 53,025
Federal National Mortgage Association............ 3,000 145,313
Finova Group, Inc................................ 300 13,181
Morgan Stanley, Dean Witter, Discover & Co....... 1,530 74,970
Salomon, Inc..................................... 700 54,381
Travelers Group, Inc............................. 1,100 77,000
------------
496,946
------------
INSURANCE (4.9%)
Aegon NV (ARS)................................... 174 13,833
Allstate Corp.................................... 300 24,881
American General Corp............................ 100 5,100
American International Group, Inc................ 1,700 173,506
CIGNA Corp....................................... 600 93,150
Financial Security Assurance Holdings Ltd.*...... 300 13,097
Fremont General Corp............................. 200 9,325
Hartford Financial Services Group, Inc........... 800 64,800
Lincoln National Corp............................ 100 6,875
Marsh & McLennan Companies, Inc.................. 1,000 71,000
MBIA, Inc........................................ 400 23,900
PMI Group, Inc................................... 300 18,131
St. Paul Companies, Inc.......................... 100 7,994
Transamerica Corp................................ 200 20,188
UNUM Corp........................................ 800 39,000
------------
584,780
------------
TOTAL FINANCE.................................. 2,160,988
------------
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ ------------
HEALTH CARE (10.9%)
HEALTH SERVICES (2.4%)
Bausch & Lomb, Inc............................... 600 $ 23,550
Boston Scientific Corp.+......................... 400 18,200
Columbia / HCA Healthcare Corp................... 400 11,300
Health Care & Retirement Corp.+.................. 400 15,125
Humana, Inc.+.................................... 2,600 54,600
Perkin-Elmer Corp................................ 1,500 93,750
Tenet Healthcare Corp.+.......................... 1,100 33,619
United Healthcare Corp........................... 900 41,681
------------
291,825
------------
PHARMACEUTICALS (8.5%)
Alza Corp.+...................................... 1,600 41,700
American Home Products Corp.+.................... 1,100 81,538
Bristol-Myers Squibb Co.......................... 2,200 193,050
Crescendo Pharmaceuticals Corp.+................. 80 908
Forest Laboratories, Inc.+....................... 1,300 60,125
Johnson & Johnson................................ 200 11,475
Merck & Company, Inc............................. 1,900 169,575
Pfizer, Inc...................................... 2,800 198,100
Pharmacia & Upjohn, Inc.......................... 100 3,175
Schering-Plough Corp............................. 2,000 112,125
Warner-Lambert Co................................ 1,000 143,188
Watson Pharmaceuticals, Inc.+.................... 200 6,350
------------
1,021,309
------------
TOTAL HEALTH CARE.............................. 1,313,134
------------
INDUSTRIAL PRODUCTS & SERVICES (9.9%)
BUILDING MATERIALS (0.5%)
Owens Corning.................................... 1,600 54,800
------------
CAPITAL GOODS (0.5%)
Fluor Corp....................................... 800 32,900
Foster Wheeler Corp.............................. 400 13,125
Harnischfeger Industries, Inc.................... 500 19,688
------------
65,713
------------
COMMERCIAL SERVICES (0.6%)
Service Corp. International...................... 2,200 66,963
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
10
<PAGE>
TAX AWARE DISCIPLINED EQUITY FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ ------------
<S> <C> <C>
DIVERSIFIED MANUFACTURING (5.6%)
AlliedSignal, Inc................................ 2,400 $ 86,400
Cooper Industries, Inc........................... 600 31,275
Eastman Kodak Co................................. 100 5,988
General Electric Co.............................. 3,500 225,969
ITT Industries, Inc.............................. 1,900 59,969
Johnson Controls, Inc............................ 1,000 44,875
Minnesota Mining & Manufacturing Co.............. 100 9,150
Monsanto Co...................................... 200 8,550
Raychem Corp..................................... 200 18,113
Tenneco, Inc. -- New Shares...................... 1,000 44,938
Tyco International Ltd........................... 1,970 74,368
Xerox Corp....................................... 800 63,450
------------
673,045
------------
ELECTRICAL EQUIPMENT (1.3%)
Emerson Electric Co.............................. 1,800 94,388
Grainger (W.W.), Inc............................. 700 61,206
------------
155,594
------------
ELECTRONICS (0.2%)
Rockwell International Corp...................... 600 29,596
------------
MACHINERY (0.1%)
Caterpillar, Inc................................. 200 10,250
------------
PACKAGING & CONTAINERS (0.3%)
Kimberly-Clark Corp.............................. 800 41,550
------------
POLLUTION CONTROL (0.8%)
Waste Management, Inc............................ 4,000 93,500
------------
TOTAL INDUSTRIAL PRODUCTS & SERVICES........... 1,191,011
------------
TECHNOLOGY (14.2%)
AEROSPACE (1.1%)
Boeing Co........................................ 1,930 92,399
Coltec Industries, Inc.+......................... 500 10,000
General Dynamics Corp............................ 100 8,119
Lockheed Martin Corp............................. 100 9,506
Northrop Grumman Corp............................ 100 10,925
------------
130,949
------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ ------------
<S> <C> <C>
COMPUTER PERIPHERALS (0.7%)
EMC Corp.+....................................... 1,000 $ 56,000
Quantum Corp.+................................... 1,000 31,594
------------
87,594
------------
COMPUTER SOFTWARE (2.6%)
Computer Associates International, Inc........... 600 44,738
Microsoft Corp.+................................. 1,200 155,925
Oracle Corp.+.................................... 3,300 118,078
------------
318,741
------------
COMPUTER SYSTEMS (3.4%)
Compaq Computer Corp.+........................... 1,150 73,313
Dell Computer Corp.+............................. 400 32,075
Hewlett-Packard Co............................... 200 12,338
International Business Machines Corp............. 2,000 196,125
Sun Microsystems, Inc.+.......................... 2,900 99,234
------------
413,085
------------
ELECTRONICS (2.6%)
Bay Networks, Inc.+.............................. 800 25,300
Cabletron Systems, Inc.+......................... 500 14,500
Cisco Systems, Inc.+............................. 1,400 114,844
Harris Corp...................................... 1,200 52,350
Motorola, Inc.................................... 1,600 98,800
Symbol Technologies, Inc......................... 100 3,975
------------
309,769
------------
INFORMATION PROCESSING (0.3%)
Electronic Data System Corp...................... 200 7,738
First Data Corp.................................. 1,000 29,063
------------
36,801
------------
SEMICONDUCTORS (3.0%)
Applied Materials, Inc.+......................... 700 23,341
Intel Corp....................................... 3,000 231,094
National Semiconductor Corp.+.................... 600 21,600
Texas Instruments, Inc........................... 800 85,350
------------
361,385
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
11
<PAGE>
TAX AWARE DISCIPLINED EQUITY FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ ------------
<S> <C> <C>
TELECOMMUNICATIONS-EQUIPMENT (0.5%)
Lucent Technologies, Inc......................... 700 $ 57,706
------------
TOTAL TECHNOLOGY............................... 1,716,030
------------
TRANSPORTATION (2.2%)
AIRLINES (0.3%)
Southwest Airlines Co............................ 1,000 32,625
------------
RAILROADS (1.9%)
Burlington Northern Railroad Co.................. 400 38,000
CSX Corp......................................... 1,000 54,688
Norfolk Southern Corp............................ 1,300 41,044
Union Pacific Corp............................... 1,600 98,000
------------
231,732
------------
TOTAL TRANSPORTATION........................... 264,357
------------
UTILITIES (9.7%)
ELECTRIC (2.6%)
Central & South West Corp........................ 1,300 28,031
Cinergy Corp..................................... 300 9,900
Dominion Resources, Inc.......................... 700 26,031
Duke Power Co.................................... 1,131 54,571
Entergy Corp..................................... 2,000 48,875
Illinova Corp.................................... 100 2,225
Northern States Power Co......................... 700 35,263
PG&E Corp........................................ 110 2,812
Southern Co...................................... 3,500 80,281
Unicom Corp...................................... 200 5,600
Wisconsin Energy Corp............................ 700 17,719
------------
311,308
------------
GAS-PIPELINES (0.3%)
Enron Corp....................................... 1,000 38,000
------------
TELEPHONE (6.8%)
Ameritech Corp................................... 100 6,500
AT & T Corp...................................... 1,300 63,619
Bell Atlantic Corp............................... 1,130 90,259
Bellsouth Corp................................... 1,000 47,313
GTE Corp......................................... 3,400 144,288
MCI Communications Corp.......................... 400 14,188
SBC Communications, Inc.......................... 2,500 159,063
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ ------------
<S> <C> <C>
TELEPHONE (CONTINUED)
Sprint Corp...................................... 2,500 $ 130,000
WorldCom, Inc.+.................................. 4,700 157,891
------------
813,121
------------
TOTAL UTILITIES................................ 1,162,429
------------
TOTAL COMMON STOCKS (COST $11,242,760)......... 12,097,449
------------
PRINCIPAL
AMOUNT
------------
SHORT-TERM INVESTMENTS (1.7%)
OTHER INVESTMENT COMPANIES (1.6%)
Seven Seas Money Market Fund, 5.31% due
11/01/97....................................... $ 193,595 193,595
------------
U.S. TREASURY OBLIGATIONS (0.1%)
U.S. Treasury Bill, 4.60% due 11/13/97........... 15,000 14,977
------------
TOTAL SHORT-TERM INVESTMENTS (COST $208,572)... 208,572
------------
TOTAL INVESTMENTS (COST $11,451,332) (102.3%)..................
12,306,021
LIABILITIES IN EXCESS OF OTHER
ASSETS (-2.3%)............................................... (280,142)
------------
NET ASSETS (100.0%)............................................ $ 12,025,879
------------
------------
</TABLE>
- ------------------------------
Note: The cost of securities for Federal Income Tax purposes at October 31, 1997
was $11,451,910, the aggregate gross unrealized appreciation and depreciation
was $1,078,441 and $224,330, respectively, resulting in net unrealized
appreciation of $854,111.
* Foreign security.
+ Non-income producing security.
(ADR) Securities whose value is determined or significantly influenced by
trading on exchanges not located in the United States or Canada. ADR, after the
name of a foreign holding, stands for American Depositary Receipt, representing
ownership of foreign securities on deposit with a domestic custodian bank.
(ARS) American Registered Shares.
The Accompanying Notes are an Integral Part of the Financial Statements.
12
<PAGE>
TAX AWARE DISCIPLINED EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $11,451,332 ) $12,306,021
Receivable for Investments Sold 398,466
Deferred Organization Expenses 40,429
Receivable for Expense Reimbursements 13,256
Dividends Receivable 10,703
Interest Receivable 719
Receivable for Fund Shares Sold 100
Prepaid Expenses and Other Assets 94
-----------
Total Assets 12,769,788
-----------
LIABILITIES
Payable for Investments Purchased 593,510
Organization Expenses Payable 40,765
Custody Fee Payable 17,381
Advisory Fee Payable 3,454
Shareholder Servicing Fee Payable 2,467
Administrative Services Fee Payable 594
Administration Fee Payable 17
Fund Services Fee Payable 16
Accrued Trustees' Fees and Expenses 41
Accrued Expenses 85,664
-----------
Total Liabilities 743,909
-----------
NET ASSETS
Applicable to 995,155 shares outstanding
(par value $0.001, unlimited shares authorized) $$12,025,879
-----------
-----------
Net Asset Value, Offering and Redemption Price
per Share $12.08
----
----
ANALYSIS OF NET ASSETS
Paid-in Capital $11,134,557
Undistributed Net Investment Income 56,306
Accumulated Net Realized Loss on Investments (19,673)
Net Unrealized Appreciation of Investments 854,689
-----------
Net Assets $12,025,879
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
13
<PAGE>
TAX AWARE DISCIPLINED EQUITY FUND
STATEMENT OF OPERATIONS
FOR THE PERIOD JANUARY 30, 1997 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividend Income (Net of Foreign Withholding Tax
of $717 ) $ 75,541
Interest Income 6,730
--------
Investment Income 82,271
EXPENSES
Custodian Fees and Expenses $ 45,898
Registration Fees 44,273
Professional Fees and Expenses 37,544
Printing Expenses 27,000
Transfer Agent Fee 20,269
Advisory Fee 16,524
Shareholder Servicing Fee 11,803
Amortization of Organization Expense 7,138
Administrative Services Fee 2,693
Fund Services Fee 157
Administration Fee 84
Trustees' Fees and Expenses 68
Insurance Expense 6
Miscellaneous 3,107
--------
Total Expenses 216,564
Less: Reimbursement of Expenses (190,599)
--------
NET EXPENSES 25,965
--------
NET INVESTMENT INCOME 56,306
NET REALIZED LOSS ON INVESTMENTS (19,673)
NET CHANGE IN UNREALIZED APPRECIATION OF
INVESTMENTS 854,689
--------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $891,322
--------
--------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
14
<PAGE>
TAX AWARE DISCIPLINED EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 30, 1997
(COMMENCEMENT OF
OPERATIONS) TO
OCTOBER 31, 1997
----------------
<S> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 56,306
Net Realized Loss on Investments (19,673)
Net Change in Unrealized Appreciation of
Investments 854,689
----------------
Net Increase in Net Assets Resulting from
Operations 891,322
----------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Proceeds from Shares of Beneficial Interest Sold 11,084,557
----------------
Total Increase in Net Assets 11,975,879
NET ASSETS
Beginning of Period 50,000
----------------
End of Period (including undistributed net
investment income of $56,306) $ 12,025,879
----------------
----------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
15
<PAGE>
TAX AWARE DISCIPLINED EQUITY FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share outstanding throughout the period is as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 30, 1997
(COMMENCEMENT OF
OPERATIONS) TO
OCTOBER 31, 1997
----------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
----------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.06
Net Realized and Unrealized Gain on Investments 2.02
----------------
Total from Investment Operations 2.08
----------------
NET ASSET VALUE, END OF PERIOD $ 12.08
----------------
----------------
Total Return 20.80%(a)
----------------
----------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (in thousands) $ 12,026
Ratios to Average Net Assets
Expenses 0.55%(b)
Net Investment Income 1.19%(b)
Decrease Reflected in Expense Ratio due to
Expense Reimbursement 4.04%(b)
Portfolio Turnover Rate 35%
Average Broker Commissions $ 0.0261
</TABLE>
- ------------------------
(a) Not annualized.
(b) Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
16
<PAGE>
TAX AWARE DISCIPLINED EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Tax Aware Disciplined Equity Fund (the "Fund") is a series of JPM Series Trust,
a Massachusetts business trust (the "Trust"). The Trust, which was organized on
August 15, 1996, is registered under the Investment Company Act of 1940, as
amended, as a no-load open-end management investment company. The Fund's
investment objective is to provide a high total return, while being sensitive to
the impact of capital gains taxes on investors' returns. The Trustees of the
Trust have divided the beneficial interests in the Fund into two classes of
shares, JPM Institutional Shares and JPM Pierpont Shares. The Fund commenced
operations on January 30, 1997, when the first public shareholder purchased JPM
Pierpont Shares. As of October 31, 1997, no sales of JPM Institutional Shares
have occurred. Prior to commencing its operations on January 30, 1997, the Fund
had no activities other than the sale of 5,000 JPM Pierpont Shares to FDI
Distribution Services, Inc. ("FDSI"), a wholly owned indirect subsidiary of
Boston Institutional Group, Inc. The Declaration of Trust permits the Trustees
to issue an unlimited number of shares in the Fund.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual amounts could differ from
those estimates. The following is a summary of the significant accounting
policies of the Fund:
a) The value of each security for which readily available market quotations
exist 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 average of readily available closing bid
and asked prices on such exchange. 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
Fund's Trustees. Such procedures include the use of independent pricing
services, which use prices based upon yields or prices of securities of
comparable quality, coupon, maturity and type; indications as to values
from dealers; and general market conditions. All portfolio securities with
a remaining maturity of less than 60 days are valued at amortized cost.
b) Securities transactions are recorded on a trade date basis. Dividend
income is recorded on the ex-dividend date or as of 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.
c) Distributions to shareholders of net investment income and realized net
capital gains, if any, are declared and paid annually.
d) The Fund incurred organization expenses in the amount of $47,567. Morgan
Guaranty Trust Company of New York ("Morgan") has paid to pay the
organization expenses of the Fund. The Fund
17
<PAGE>
TAX AWARE DISCIPLINED EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
has agreed to reimburse Morgan for these costs which are being deferred
and amortized on a straight-line basis over a period not to exceed five
years beginning with the commencement of operations of the Fund.
e) The Fund is treated as a separate entity for federal income tax purposes.
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) For United States federal income tax purposes, the Fund had a capital loss
carryforward at October 31, 1997 of $19,095 which will expire in 2005. No
capital gains distribution is expected to be paid to shareholders until
future gains have been realized in excess of such carryforward.
2. TRANSACTIONS WITH AFFILIATES
a) The Fund has an Investment Advisory Agreement with Morgan. Under the terms
of the agreement, the Fund pays Morgan at an annual rate of 0.35% of the
Fund's average daily net assets. For the period January 30, 1997
(commencement of operations) to October 31, 1997, such fees amounted to
$16,524.
b) The Trust, on behalf of the Fund, has retained Funds Distributor, Inc.
("FDI"), a registered broker-dealer, to serve as co-administrator and
distributor for the Fund. Under a Co-Administration Agreement between FDI
and the Trust on behalf of the Fund, FDI provides administrative services
necessary for the operations of the Fund, furnishes office space and
facilities required for conducting the business of the Fund and pays the
compensation of the Fund's officers affiliated with FDI. The Fund has
agreed to pay FDI fees equal to its allocable share of an annual
complex-wide charge of $425,000 plus FDI's out-of-pocket expenses. The
amount allocable to the Fund is based on the ratio of the Fund's net
assets to the aggregate net assets of the Trust and certain other
investment companies subject to similar agreements with FDI. For the
period January 30, 1997 (commencement of operations) to October 31, 1997,
the fee for these services amounted to $84.
c) The Trust, on behalf of the Fund, has an Administrative Services Agreement
(the "Services Agreement") with Morgan under which Morgan is responsible
for certain aspects of the administration and operation of the Fund. Under
the Services Agreement, the Fund has agreed to pay Morgan a fee equal to
its allocable share of an annual complex-wide charge. This charge is
calculated based on the aggregate average daily net assets of the Trust
and certain other registered investment companies for which Morgan acts as
investment advisor in accordance with the following annual schedule: 0.09%
on the first $7 billion of their aggregate average daily net assets and
0.04% of their aggregate average daily net assets in excess of $7 billion
less the complex-wide fees payable to FDI. The portion of this charge
payable by the Fund is determined by the proportionate share that its net
assets bear to the net assets of the Trust and certain other investment
companies for which Morgan provides administrative services. For the
period January 30, 1997 (commencement of operations) to October 31, 1997,
the fee for these services amounted to $2,693.
18
<PAGE>
TAX AWARE DISCIPLINED EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
In addition, Morgan has agreed to reimburse the Fund to the extent
necessary to maintain the total operating expenses of the Fund at no more
than 0.55% of the average daily net assets of the Fund through February
28, 1999. For the period January 30, 1997 (commencement of operations) to
October 31, 1997, Morgan has agreed to reimburse the Fund $190,599 for
expenses under this agreement.
d) The Trust, on behalf of the Fund, has a Shareholder Servicing Agreement
with Morgan to provide account administration and personal account
maintenance services to Fund shareholders. The agreement provides for the
Fund to pay Morgan a fee for these services which is computed daily and
paid monthly at an annual rate of 0.25% of the average daily net assets of
the JPM Pierpont Shares. For the period January 30, 1997 (commencement of
operations) to October 31, 1997, the fee for these services amounted to
$11,803.
e) The Trust, on behalf of the Fund, has a Fund Services Agreement with
Pierpont Group, Inc. ("Group") to assist the Trustees in exercising their
overall supervisory responsibilities for the Trust's affairs. The Trustees
of the Trust represent all the existing shareholders of Group. The Fund's
allocated portion of Group's costs in performing its services amounted to
$157 for the period January 30, 1997 (commencement of operations) to
October 31, 1997.
f) An aggregate annual fee of $75,000 is paid to each Trustee for serving as
a Trustee of the Trust, The JPM Pierpont Funds, The JPM Institutional
Funds, and certain other registered investment companies. The Trustees'
Fees and Expenses shown in the financial statements represents the Fund's
allocated portion of the total fees and expenses. Prior to April 1, 1997,
the aggregate annual Trustee fee was $65,000. The Trust's Chairman and
Chief Executive Officer also serves as Chairman of Group and receives
compensation and employee benefits from Group in his role as Group's
Chairman. The allocated portion of such compensation and benefits included
in the Fund Services Fee shown in the financial statements was $32.
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 30, 1997
(COMMENCEMENT OF
OPERATIONS) TO
OCTOBER 31, 1997
----------------
<S> <C>
Shares of beneficial interest sold............... 990,155
</TABLE>
From time to time, the Fund may have a concentration of several shareholders
holding a significant percentage of shares outstanding. Investment activities of
these shareholders could have a material impact on the Fund.
19
<PAGE>
TAX AWARE DISCIPLINED EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
4. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the period from
January 30, 1997 (commencement of operations) to October 31, 1997 were as
follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
------------ ------------
<S> <C>
$ 13,441,583 $ 2,179,116
</TABLE>
5. CREDIT AGREEMENT
The Trust, on behalf of the Fund, together with other affiliated investment
companies (the "Funds"), entered into a revolving line of credit agreement (the
"Agreement") on May 28, 1997, with unaffiliated lenders. The maximum borrowing
under the commitment Agreement is $150,000,000. The Agreement expires on May 27,
1998, however, the Fund as party to the Agreement will have the ability to
extend the Agreement and continue its participation therein for an additional
364 days. The purpose of the Agreement is to provide another alternative for
settling large fund shareholder redemptions. Interest on any such borrowings
outstanding will approximate market rates. The Funds pay a commitment fee at an
annual rate of 0.065% on the unused portion of the committed amount which is
allocated to the Funds in accordance with procedures established by their
respective Trustees or Directors. The Fund has not borrowed pursuant to the
Agreement as of October 31, 1997.
20
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of
Tax Aware Disciplined Equity Fund
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Tax Aware Disciplined Equity Fund
(one of the funds comprising JPM Series Trust, hereafter referred to as the
"Fund") at October 31, 1997, and the results of its operations, the changes in
its net assets and the financial highlights for the period January 30, 1997
(commencement of operations) to October 31, 1997, in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these financial statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit, which included confirmation of securities at October 31, 1997 by
correspondence with the custodian and brokers and the application of alternative
auditing procedures where confirmations from brokers were not received, provides
a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
New York, New York
December 16, 1997
21
<PAGE>
JPM PIERPONT FEDERAL MONEY MARKET FUND
JPM PIERPONT PRIME MONEY MARKET FUND
JPM PIERPONT TAX EXEMPT MONEY MARKET FUND
JPM PIERPONT BOND FUND
JPM PIERPONT EMERGING MARKETS DEBT FUND
JPM PIERPONT NEW YORK TOTAL RETURN BOND FUND
JPM PIERPONT SHORT TERM BOND FUND
JPM PIERPONT TAX EXEMPT BOND FUND
JPM PIERPONT SHARES: CALIFORNIA BOND FUND
JPM PIERPONT DIVERSIFIED FUND
JPM PIERPONT U.S. EQUITY FUND
JPM PIERPONT U.S. SMALL COMPANY FUND
JPM PIERPONT U.S. SMALL COMPANY OPPORTUNITIES FUND
JPM PIERPONT SHARES: TAX AWARE U.S. EQUITY FUND
JPM PIERPONT SHARES: TAX AWARE DISCIPLINED EQUITY FUND
JPM PIERPONT EMERGING MARKETS EQUITY FUND
JPM PIERPONT EUROPEAN EQUITY FUND
JPM PIERPONT INTERNATIONAL EQUITY FUND
JPM PIERPONT INTERNATIONAL OPPORTUNITIES FUND
JPM PIERPONT JAPAN EQUITY FUND
JPM Series Trust
Tax Aware
Disciplined
Equity Fund
FOR MORE INFORMATION ON HOW THE JPMPIERPONT FUNDS CAN HELP YOU PLAN FOR YOUR
FUTURE, CALL J.P. MORGAN FUNDS SERVICES AT (800) 521-5411.
ANNUAL REPORT
OCTOBER 31, 1997
