<PAGE>
LETTER TO THE SHAREHOLDERS OF CALIFORNIA BOND FUND
November 17, 1997
Dear Shareholder:
The California Bond Fund provided positive returns for the six months ended
October 31, 1997. The Fund outperformed its competitors, as measured by the
Lipper Intermediate Municipal Debt Bond Fund Average. For the reporting
period, JPM Institutional Shares returned 5.38% and JPM Pierpont Shares 5.34%
compared with 5.00% for the Lipper Average. The Fund's benchmark, the Lehman
Brothers 1-16 Year Municipal Bond Index, returned 5.47% over the same period.
Net asset values of JPM Institutional and JPM Pierpont Shares on October 31,
1997 were $10.22 and $10.37, respectively. Net assets attributable to JPM
Institutional Shares stood at $48.0 million on that date, while those of JPM
Pierpont Shares were $2.7 million. During the period, the Fund made
distributions of approximately $0.21 and $0.20 to JPM Institutional and JPM
Pierpont shareholders, respectively. Substantially all of these distributions
represent tax-exempt interest dividends. The net assets of the Fund totaled
approximately $50.7 million.
The report that follows includes an interview with Elaine Young and Robert
Meiselas, members of the portfolio management team responsible for the Fund.
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 global markets with you. If you have any
comments or questions, please call your Morgan representative or J.P. Morgan
Funds Services toll free at the telephone numbers indicated on the cover of this
report.
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 bbbbb J.P. Morgan & Co. Incorporated
TABLE OF CONTENTS
LETTER TO THE SHAREHOLDERS . . . . . 1 GLOSSARY OF TERMS . . . . . . . . . 6
FUND PERFORMANCE . . . . . . . . . . 2 FUND FACTS AND HIGHLIGHTS. . . . . . 7
PORTFOLIO MANAGER Q & A. . . . . . . 3 FINANCIAL STATEMENTS . . . . . . . .10
<PAGE>
Fund performance
EXAMINING PERFORMANCE
One 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 a specified time period, 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.
<TABLE>
<CAPTION>
PERFORMANCE TOTAL RETURNS
----------------------------------------
THREE SIX SINCE
AS OF OCTOBER 31, 1997 MONTHS MONTHS INCEPTION*
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
JPM Institutional Shares 0.44% 5.38% 5.65%
JPM Pierpont Shares** 0.40% 5.34% 5.58%
Lehman Brothers 1-16
Year Municipal Bond Index 0.87% 5.47% 6.21%
Lehman National Muni 3-15***
Year Bond Index 0.85% 5.72% 6.46%
Lipper Intermediate
Municipal Debt Bond Fund Average 0.42% 5.00% 5.34%
AS OF SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
JPM Institutional Shares 2.73% 5.85% 5.50%
JPM Pierpont Shares** 2.66% 5.70% 5.35%
Lehman Brothers 1-16
Year Municipal Bond Index 2.62% 5.62% 5.64%
Lehman National Muni 3-15***
Year Bond Index 2.75% 5.85% 5.87%
Lipper Intermediate
Municipal Debt Bond Fund Average 2.45% 5.22% 5.06%
</TABLE>
*12/23/96 -- COMMENCEMENT OF OPERATIONS (TOTAL RETURNS BASED ON MONTH END
FOLLOWING INCEPTION). ACTUAL RETURN SINCE INCEPTION: JPM INSTITUTIONAL SHARES
RETURNED 5.98% AND JPM PIERPONT SHARES RETURNED 5.91%).
**CONSISTENT WITH APPLICABLE REGULATORY GUIDANCE, PERFORMANCE FOR THE FUND'S
JPM PIERPONT SHARES PRIOR TO APRIL 21, 1997, REFLECTS THE PERFORMANCE OF THE
FUND'S JPM INSTITUTIONAL SHARES. THE PERFORMANCE FOR SUCH PERIOD REFLECTS THE
DEDUCTION OF LOWER CHARGES AND EXPENSES ASSOCIATED WITH HOLDING JPM
INSTITUTIONAL SHARES.
***PRIOR TO MAY 1, 1997 THE BENCHMARK WAS COMPOSED OF LEHMAN NATIONAL MUNI 3-15
YEAR BOND INDEX. COMMENCING MAY 1, 1997 THE BENCHMARK IS THE LEHMAN BROTHERS
1-16 YEAR MUNICIPAL BOND INDEX. BOTH ARE UNMANAGED INDICES THAT MEASURE
MUNICIPAL BOND MARKET PERFORMANCE. THEY DO NOT INCLUDE FEES OR EXPENSES AND ARE
NOT AVAILABLE FOR ACTUAL INVESTMENT. LIPPER ANALYTICAL SERVICES, INC. IS A
LEADING SOURCE FOR MUTUAL FUND DATA.
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. FUND RETURNS ARE NET OF
FEES, ASSUME THE REINVESTMENT OF DISTRIBUTIONS, AND REFLECT REIMBURSEMENT OF
CERTAIN FUND EXPENSES AS DESCRIBED IN THE PROSPECTUS.
2
<PAGE>
Portfolio manager Q&A
[PHOTOGRAPHS]
This interview was conducted with Elaine Young and Robert Meiselas, both members
of the portfolio management team responsible for managing the California Bond
Fund. This interview was conducted on November 17, 1997 and represents both Bob
and Elaine's views on that date.
ELAINE YOUNG, VICE PRESIDENT, is a portfolio manager with the U.S. Fixed Income
Group and responsible for managing municipal bonds. In Ms. Young's previous
position at Morgan, she traded tax-exempt securities. Elaine joined Morgan in
1994 after five years of municipal trading experience at Scudder, Stevens, and
Clark. She graduated from New York University with a B.S. degree in 1986 and an
M.B.A. in Finance in 1989. Elaine is also a Chartered Financial Analyst.
ROBERT MEISELAS, VICE PRESIDENT, is a portfolio manager with the U.S. Fixed
Income Group responsible for managing municipal bonds, including tax exempt
private placements. Mr. Meiselas is a CPA and joined J.P. Morgan's financial
group in 1982, after having spent 10 years at Coopers & Lybrand. Bob also spent
five years in J.P. Morgan's Private Banking Investment Management Group, and
moved to J.P. Morgan Investment Management in 1997. Bob is a graduate of St.
John's University and has completed graduate work at Long Island University in
the field of taxation.
PLEASE COMMENT ON WHAT HAS HAPPENED IN THE CALIFORNIA MUNICIPAL MARKET OVER THE
PAST SIX MONTHS: HAVE YOU SEEN ANY NEW TRENDS DEVELOP?
RM: We've seen the continuation of a bull market for tax exempt bonds caused by
lower interest rates and fewer tax efficient investments. Also, municipal bonds
are trading in a relatively narrow range as most new bond issues are issued with
bond insurance. The predominance of bond insurance has heightened demand for
uninsured investment grade bonds and caused the credit spread for these bonds to
narrow as well. These factors have led to a favorable investment return for muni
bond investors.
EY: I might add that bond insurance is particularly dominant in the California
new-issue market, with over 65% of new issues coming with insurance this year
(compared to 50% for the overall municipal new-issue market).
WHEN WE LAST SPOKE TO YOUR INVESTMENT TEAM (SIX MONTHS AGO), YOU INDICATED THERE
WAS A CONTINUING SHORT SUPPLY OF TAX-EXEMPT ISSUES. IS SHORT SUPPLY STILL A
PROBLEM?
EY: The supply of California bonds has fluctuated during the last six months. I
wouldn't say that the varying levels of supply is a "problem" for the Fund, as
an institutional investor. While it's true that tight supply
3
<PAGE>
can inhibit some short term opportunities to add value, we are also able to take
advantage of supply fluctuations to buy or sell securities at attractive prices.
When California bonds are in short supply and the bonds are aggressively priced,
we invest in non-California municipal bonds. We later sell these out-of-state
investments when supply increases and prices become more attractive for
California bonds. We also invest in Puerto Rican bonds whose income is exempt
from California state taxes if they offer higher yields than California bonds.
HOW HAS CALIFORNIA'S ECONOMY EFFECTED ITS MUNI MARKET?
RM: The favorable economic climate has helped to improve the financial health
of California and its municipal subdivisions. Job growth and spending have led
to increased tax revenues, which have helped to balance budgets and, in some
cases, created small budget surpluses. At the same time, Federal and State
officials have paid more attention to contain the growth of expenditures. These
factors and some other related issues have stimulated greater confidence in the
credit standing of many muni borrowers. As such, lower perceived risk
contributed to higher bond prices.
SPECIFICALLY REGARDING THE FUND'S PERFORMANCE, WE NOTICE THAT IT RANKED
FAVORABLY AGAINST ITS COMPETITORS FOR THE REPORTING PERIOD, AS MEASURED BY THE
LIPPER INTERMEDIATE MUNICIPAL DEBT BOND FUND AVERAGE. WHAT WERE SOME OF THE
FACTORS THAT CONTRIBUTED TO THE FUND'S PERFORMANCE?
EY: Performance has been relatively good but investors should bear in mind that
we are equally interested in managing risk and volatility. Our muni bond funds
target segments of the muni bond market where risk and return are attractively
balanced. Some competitors are able to obtain higher short-term return but
introduce much greater risk and volatility in doing so. Also, we strive to take
the impact of income taxes into consideration when making investment decisions.
At a future date, other mutual funds may report better results than our Fund but
investors must be careful to weigh the incremental risk that may accompany those
higher returns.
We think that our success is due to our disciplined investment process. We make
investments when we believe that we have an information advantage that we can
apply in the market. Based on our internal analysis, we try to buy undervalued
securities and sell those bonds whose prices may have peaked. During this
period, our success was largely attributable to our security selection process.
Success in this area comes back to having the right tools, a process that works,
as well as the experience and expertise to manage bond portfolios.
RM: Good fundamental credit analysis has also enabled us to stay ahead of the
market. This has always been a Morgan hallmark, and has served us well during
this reporting period. For example, after conducting a comprehensive credit
review, we purchased a non-rated land secured deal because of its superior risk
adjusted return. We have the resources to review and monitor these complex
securities.
4
<PAGE>
WHAT IS YOUR OUTLOOK FOR THE NEXT SIX MONTHS AND HOW ARE YOU POSITIONING THE
FUND?
EY: Generally, we expect current market conditions to persist. In order to
continue to succeed in this tight market, we know that we are going to have to
work harder to find opportunities. We will continue to favor more complex
instruments such as zero coupon bonds, AMT bonds, and tax exempt private
placements, because we have the tools to take advantage of these investments and
avoid the pitfalls. We will also utilize our municipal credit research group to
help us stay ahead of any issuer specific bond price fluctuations.
Muni bond yields have been fluctuating within a relatively narrow range. The
bond market has been shifting abruptly within this range based on the latest
economic news and as the opinions of Fed-watchers change. In view of the run-up
in bond prices, we have found it difficult to take advantage of interest rate
shifts without incurring capital-gain taxes that may outweigh the return. We
recently moved the Fund duration to be "neutral" to its benchmark until we
identify a trend that we can take advantage of.
5
<PAGE>
Glossary of terms
BASIS POINT: A measure used in quoting bond yields. One basis point equals 0.01%
of yield. For example if a bond's yield changed from 10.25% to 11.00%, it would
have moved 75 basis points.
CREDIT RATING: The rating assigned to a bond by independent rating agencies such
as Standard & Poor's and Moody's. In evaluating creditworthiness, these agencies
assess the issuer's present financial condition and future ability and
willingness to make principal and interest payments when due.
DURATION: Duration is used as a measure of the relative sensitivity of the price
of a security to a change in interest rates. The longer the duration, the more
sensitive the bond is to interest rate moves. For example, a bond with a 5-year
duration will experience an approximate 5% increase in price if interest rates
drop 100 basis points (1%) while a bond with a 10-year duration would see its
price rise by approximately 10%.
MATURITY: The date on which the life of a financial instrument ends through cash
or physical settlement, or expiration with no value, or the date a security
comes due and fully payable. Average maturity refers to the average time to
maturity of the entire portfolio.
PRIVATE PLACEMENT: The direct sale of a block of securities of a new or
secondary issue to a single investor or group of investors. The sale or
placement is usually made through an investment banker and the securities'
public resale is restricted if they are not registered under the Securities Act
of 1933.
YIELD CURVE: A graph showing the term structure of interest rates at a point in
time, ranging from the shortest to the longest available. The resulting curve
shows if short-term interest rates are higher or lower than long-term rates.
YIELD SPREAD: The difference in yield between different types of securities. For
example, if a Treasury bond is yielding 6.5% and a municipal is yielding 5.5%,
the spread is 1% or 100 basis points.
ZERO COUPON BOND: A debt instrument sold at a discount to its face value. The
bond makes no payments until maturity, at which time it is redeemed at face
value. Effectively, the interest received is the difference between face value
and the price paid for the security.
6
<PAGE>
Fund facts
INVESTMENT OBJECTIVE
The California Bond Fund seeks to provide a high after-tax total return for
California residents consistent with moderate risk of capital. It is designed
for investors subject to federal and California income taxes who seek a high
after-tax total return and who are willing to receive some taxable income and
capital gains to achieve that return.
- ------------------------------------------------------------------------------
COMMENCEMENT OF OPERATIONS
JPM INSTITUTIONAL SHARES: 12/23/96
JPM PIERPONT SHARES: 4/21/97
- ------------------------------------------------------------------------------
NET ASSETS AS OF 10/31/97
JPM INSTITUTIONAL SHARES: $48,013,414
JPM PIERPONT SHARES: $2,725,877
- ------------------------------------------------------------------------------
DIVIDEND PAYABLE DATES
MONTHLY
- ------------------------------------------------------------------------------
CAPITAL GAIN PAYABLE DATES (IF APPLICABLE)
12/19/97
EXPENSE RATIOS
JPM INSTITUTIONAL SHARES: 0.45%
JPM PIERPONT SHARES: 0.65%
The current annual expense ratios cover 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 OCTOBER 31, 1997
[Graph]
SECTOR ALLOCATION
(PERCENTAGE OF TOTAL INVESTMENTS)
INSURED 63.3%
REVENUE BONDS 17.4%
GENERAL OBLIGATIONS 7.1%
SHORT-TERM/OTHER 12.2%
30-DAY SEC YIELD
JPM Institutional Shares: 4.01%
JPM Pierpont Shares: 3.76%
DURATION
5.76 years
QUALITY PROFILE
AAA* 75.41%
AA 11.31%
A 6.37%
Other 6.91%
* INCLUDES SHORT-TERM INVESTMENTS AND CASH
7
<PAGE>
DISTRIBUTED BY FUNDS DISTRIBUTOR, INC. MORGAN GUARANTY TRUST COMPANY OF NEW YORK
SERVES AS INVESTMENT ADVISOR AND MAKES THE FUNDS AVAILABLE SOLELY IN ITS
CAPACITY AS SHAREHOLDER SERVICING AGENT. SHARES OF THE FUNDS 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 of future performance. Returns are net of fees,
assume the reinvestment of fund distributions, and may reflect the reimbursement
of fund expenses as described in the prospectus. Had expenses not been
subsidized, returns would have been lower. Income may be subject to state and
local taxes. Some income may be subject to the Federal alternative minimum tax.
CALL J.P. MORGAN FUNDS SERVICES AT (800) 521-5411 (JPM PIERPONT SHARES) OR
(800) 766-7722 (JPM INSTITUTIONAL SHARES) FOR A PROSPECTUS CONTAINING MORE
COMPLETE INFORMATION ABOUT THE FUND, INCLUDING MANAGEMENT FEES AND OTHER
EXPENSES. PLEASE READ IT CAREFULLY BEFORE INVESTING.
8
<PAGE>
THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY
<PAGE>
CALIFORNIA BOND FUND
SCHEDULE OF INVESTMENTS (UNAUDITED)
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY MOODY'S/ MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE S&P DATE RATE VALUE
- -------------- ---------------------------------------- -------- -------- ----------- ------ -----------
<C> <S> <C> <C> <C> <C> <C>
LONG-TERM INVESTMENTS (86.8%)
CALIFORNIA (76.2%)
$ 500 Alameda Public Financing Authority,
(Refunding, Marina Revenue, Special
Assessment)........................... RB NR/NR 09/02/06 5.900% $ 511,330
1,000 Anaheim Public Financing Authority,
(Public Improvements, Series C), FSA
Insured............................... RB Aaa/AAA 09/01/10 6.000 1,112,890
1,000 California.............................. GO A1/A+ 04/01/03 6.800 1,119,100
1,000 California.............................. GO A1/A+ 10/01/09 6.000 1,110,780
600 California Department of Water
Resources, (Refunding, Water Utility
Improvements, Water Revenue, Series
S).................................... RB Aa2/AA 12/01/03 5.000 621,924
1,240 California Education Facilities
Authority, (Refunding, University and
College Improvements, University and
College Revenue), MBIA Insured........ RB Aaa/AAA 10/01/07 6.250 1,406,681
1,165 California Educational Facilities
Authority, (Refunding, University and
College Revenues, Series A)........... RB Aa3/AA 10/01/06 5.600 1,258,223
525 California Educational Facilities
Authority, (University and College
Improvements, University and College
Revenues, Series B)................... RB Baa2/NR 04/01/07 6.750 601,377
1,890 California Health Facilities Finance
Authority (Refunding, Health
Improvements, Health Revenue, Series
A), MBIA Insured...................... RB Aaa/AAA 07/01/06 5.500 2,020,070
950 California State Public Works,
(University and College Improvemnts,
Series A)............................. RB A2/A 04/01/99 5.000 963,841
1,280 California Statewide Communities
Development Authority, (Refunding,
Health Revenue)....................... RB Aa3/AA 07/01/06 5.500 1,353,984
1,150 Center University School District, Zero
Coupon, (Refunding, School
Improvements, Property Tax Revenue,
Series C), MBIA Insured............... GO Aaa/AAA 09/01/11 0.000 567,606
500 Contra Costa Transportation Authority,
(Highway Improvements, Sales Tax
Revenue, Series A), FGIC Insured...... RB Aaa/AAA 03/01/05 6.000 548,660
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
10
<PAGE>
CALIFORNIA BOND FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY MOODY'S/ MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE S&P DATE RATE VALUE
- -------------- ---------------------------------------- -------- -------- ----------- ------ -----------
<C> <S> <C> <C> <C> <C> <C>
CALIFORNIA (CONTINUED)
$ 600 La Quinta Redevelopment Agency,
(Refunding, Public Improvements,
Special Tax) MBIA Insured............. RB Aaa/AAA 09/01/11 7.300% $ 739,962
1,000 Long Beach Harbor, (Airport and Marina
Improvements, Airport and Marina
Revenue), MBIA Insured................ RB Aaa/AAA 05/15/06 6.000 1,096,440
1,000 Los Angeles County Public Works
Financing Authority, (Public
Improvements), AMBAC Insured.......... RB Aaa/AAA 12/01/07 6.000 1,113,610
1,000 Los Angeles County Transportation,
(Refunding, Sales Tax Revenue, Series
B), FGIC Insured...................... RB Aaa/AAA 07/01/02 5.875 1,071,120
500 Los Angeles Department of Water and
Power, (Crossover Refunded, Electric
Power and Light Improvements, Electric
Power and Light Revenues, due
04/01/32)............................. RB Aa3/A+ 04/01/02(a) 6.750 555,995
1,000 Los Angeles Unified School District,
(School Improvements, Property Tax
Revenue, Series A), FGIC Insured...... GO Aaa/AAA 07/01/10 6.000 1,111,820
500 Los Angeles Wastewater System,
(Refunding, Sewer Revenue, Series A),
FGIC Insured.......................... RB Aaa/AAA 02/01/03 6.000 540,015
1,700 Metropolitan Water District, (Water
Utility Improvements, Water Revenue,
Series C)............................. RB Aa/AA 07/01/06 6.000 1,881,220
200 Modesto Irrigation District, (Refunding,
Electric Power and Light Improvements,
Electric Power and Light Revenues,
Series A), MBIA Insured............... RB Aaa/AAA 10/01/04 5.150 209,096
1,500 Orange County Local Transportation
Authority, (Transit Improvements,
Sales Tax Revenue, Second Series-
Measure M), FGIC Insured.............. RB Aaa/AAA 02/15/07 6.000 1,658,370
595 Palmadale Civic Authority, (Refunding,
Sales Tax Revenue, Series A), MBIA
Insured............................... RB Aaa/AAA 07/01/07 5.500 635,888
200 Port of Oakland, (Airport and Marina
Improvements, Airport and Marina
Revenue, Series G), MBIA Insured...... RB Aaa/AAA 11/01/07 6.000 221,060
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
11
<PAGE>
CALIFORNIA BOND FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY MOODY'S/ MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE S&P DATE RATE VALUE
- -------------- ---------------------------------------- -------- -------- ----------- ------ -----------
<C> <S> <C> <C> <C> <C> <C>
CALIFORNIA (CONTINUED)
$ 1,250 Riverside County Transportation
Authority, (Refunding, Sales Tax
Revenue, Series A), FGIC Insured...... RB Aaa/AAA 06/01/09 6.000% $ 1,391,450
200 Riverside County Transportation
Authority, (Transit Improvements,
Sales Tax Revenue, Series A), AMBAC
Insured............................... RB Aaa/AAA 06/01/07 5.750 218,466
1,000 Sacramento Municipal Utility,
(Refunding, Electric Power and Light
Revenues, Series L), MBIA Insured..... RB Aaa/AAA 07/01/01 5.000 1,030,980
1,610 San Bernardino County Transportation
Authority, (Transit Improvements,
Sales Tax Revenue, Series A), FSA
Insured............................... RB Aaa/AAA 03/01/07 5.250 1,694,831
1,000 San Diego Public Facilities Financing
Authority, (Sewer Improvements, Sewer
Revenue), FGIC Insured................ RB Aaa/AAA 05/15/07 6.000 1,111,180
1,000 San Diego Regional Transportation
Authority, (Highway and Transit
Improvements, Sales Tax Revenue,
Series A), FGIC Insured............... RB Aaa/AAA 04/01/07 5.500 1,070,480
1,910 San Francisco City and County Airport,
(Refunding, Airport and Marina
Revenue, Second Series, Issue 2), MBIA
Insured............................... RB Aaa/AAA 05/01/01 6.350 2,050,079
1,000 San Francisco City and County Airports
Commission, (Refunding, Airport and
Marina Revenue, Second Series, Issue
2), MBIA Insured...................... RB Aaa/AAA 05/01/03 6.350 1,100,490
1,000 San Francisco State Building Authority,
(Public Improvements, Series A), AMBAC
Insured............................... RB Aaa/AAA 12/01/09 6.000 1,116,810
1,000 San Jose Redevelopment Agency,
(Refunding, Public Improvements,
Special Tax), MBIA Insured............ RB Aaa/AAA 08/01/09 6.000 1,114,350
1,250 Santa Margarita/Dana Point Authority,
(Refunding, Water Revenue, Series A),
AMBAC Insured......................... RB Aaa/AAA 08/01/06 5.250 1,311,563
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
12
<PAGE>
CALIFORNIA BOND FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY MOODY'S/ MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE S&P DATE RATE VALUE
- -------------- ---------------------------------------- -------- -------- ----------- ------ -----------
<C> <S> <C> <C> <C> <C> <C>
CALIFORNIA (CONTINUED)
$ 400 Southern California Public Power
Authority, (Refunding, Electric Power
and Light Revenue, Series A), AMBAC
Insured............................... RB Aaa/AAA 07/01/04 5.500% $ 424,448
1,000 Stockton Community Facilities,
(Refunding, Public Improvements, No.
90-2-Brookside Estates, Special
Tax).................................. RB NR/NR 08/01/02 5.200 1,003,670
-----------
TOTAL CALIFORNIA.................... 38,669,859
-----------
DISTRICT OF COLUMBIA (2.1%)
1,000 Metropolitan Airports, (Airport and
Marina Improvements, Airport and
Marina Revenue, SeriesB), FGIC
Insured............................... RB Aaa/AAA 10/01/03 5.750 1,066,400
-----------
NEW YORK (0.4%)
200 New York, (Refunding, Series E)......... GO Baa1/BBB+ 02/15/06 6.500 220,278
-----------
PUERTO RICO (4.5%)
1,100 Puerto Rico Commonwealth, (Refunding)... GO Baa1/A 07/01/99 5.500 1,126,642
1,000 Puerto Rico Electric Power Authority,
(Electric Power and Light
Improvements, Electric Power and Light
Revenue, Series AA), MBIA Insured..... RB Aaa/AAA 07/01/10 6.250 1,136,350
-----------
TOTAL PUERTO RICO................... 2,262,992
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
13
<PAGE>
CALIFORNIA BOND FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY MOODY'S/ MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE S&P DATE RATE VALUE
- -------------- ---------------------------------------- -------- -------- ----------- ------ -----------
<C> <S> <C> <C> <C> <C> <C>
WASHINGTON (3.6%)
$ 1,700 Washington Public Power Supply Systems,
(Refunding, Electric Power and Light
Revenue, Series A), AMBAC Insured..... RB Aaa/AAA 07/01/05 6.000% $ 1,844,177
-----------
TOTAL LONG TERM INVESTMENTS (COST $43,345,904)................................. 44,063,706
-----------
SHORT-TERM INVESTMENTS (12.0%)
CALIFORNIA (11.6%)
1,000 California Statewide Communities
Development Authority, (Tax and
Revenue Anticipatory, Series B), FSA
Insured............................... RB Aaa/AAA 09/30/98 4.750 1,008,540
1,000 Los Angeles Unified School District,
(School Improvements, Property Tax)... GO MIG1/SP1+ 10/01/98 4.500 1,006,490
1,000 Riverside County California School
Financing Authority................... GO MIG1/NR 10/01/98 4.500 1,005,780
1,750 Santa Clara County...................... GO MIG1/SP1+ 10/01/98 4.750 1,764,403
1,000 South Coast Local Education Agencies,
(Property Tax Revenue, Series A), MBIA
Insured............................... GO MIG1/SP1+ 06/30/98 4.500 1,004,510
100 West Basin Municipal Water District,
(Refunding, Series B, callable, due
08/01/27), LOC-Bayerische
Vereinsbank........................... VRDN VMIG1/NR 11/05/97(b) 3.350 100,000
-----------
5,889,723
-----------
KANSAS (0.2%)
100 Kansas City Industry Revenue Development
Corp., (Refunding, IDR, due 08/01/15),
LOC-Credit Suisse First Boston........ VRDN VMIG1/NR 11/03/97(b) 4.100 100,000
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
14
<PAGE>
CALIFORNIA BOND FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY MOODY'S/ MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE S&P DATE RATE VALUE
- -------------- ---------------------------------------- -------- -------- ----------- ------ -----------
<C> <S> <C> <C> <C> <C> <C>
WYOMING (0.2%)
$ 100 Lincoln County Pollution Control, (PCR,
Sewer Improvements, IDR, due
11/01/14)............................. VRDN P-1/A-1+ 11/03/97(b) 3.950% $ 100,000
-----------
TOTAL SHORT-TERM INVESTMENTS (COST $6,080,952)..................................... 6,089,723
-----------
TOTAL INVESTMENTS (COST $49,426,856) (98.8%)....................................... 50,153,429
OTHER ASSETS IN EXCESS OF LIABILITIES (1.2%)....................................... 585,862
-----------
NET ASSETS (100.0%)................................................................ $50,739,291
-----------
-----------
</TABLE>
- ------------------------------
Note: Based on the cost of the investments of $49,426,856 for federal income tax
purposes at October 31, 1997, the aggregate gross unrealized appreciation and
depreciation was $751,046 and $24,473, respectively, resulting in net unrealized
appreciation of investments of $726,573.
(a) The date listed under the heading maturity date represents an optional
tender date. The actual maturity date is indicated in the security description.
(b) Variable Rate Demand Notes tender dates and/or interest rates are reset at
specified intervals which coincide with their tender feature.
Abbreviations used in schedule of investments:
AMBAC - Ambac Indemnity Corporation, FGIC - Financial Guaranty Insurance
Company, FSA - Financial Security Assurance, GO - General Obligation, IDR -
Industrial Development Revenue, LOC - Letter of Credit, MBIA - Municipal Bond
Investors Assurance Corp., NR - Not Rated, PCR - Pollution Control Revenue, RB -
Revenue Bond, VRDN - Variable Rate Demand Note.
Definition of terms used:
Crossover Refunded: Bonds for which the issuer of the bond invests the proceeds
from a subsequent bond issue in cash and/or securities which have been
deposited.
Refunding: Bonds for which the issuer has issued new bonds and canceled the old
issue.
The Accompanying Notes are an Integral Part of the Financial Statements.
15
<PAGE>
CALIFORNIA BOND FUND
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $49,426,856 ) $50,153,429
Cash 35,094
Interest Receivable 700,815
Deferred Organization Expenses 39,444
Receivable for Expense Reimbursements 9,896
Prepaid Expenses and Other Assets 319
-----------
Total Assets 50,938,997
-----------
LIABILITIES
Dividends Payable to Shareholders 90,440
Organization Expenses Payable 39,206
Printing Expenses Payable 27,125
Advisory Fee Payable 12,385
Custody Fee Payable 6,746
Administrative Services Fee Payable 2,486
Shareholder Servicing Fee Payable 2,417
Administration Fee Payable 75
Fund Services Fee Payable 63
Accrued Expenses 18,763
-----------
Total Liabilities 199,706
-----------
NET ASSETS $50,739,291
-----------
-----------
ANALYSIS OF NET ASSETS
Paid-in Capital $50,066,142
Accumulated Net Realized Loss on Investment (53,424)
Net Unrealized Appreciation of Investments 726,573
-----------
Net Assets $50,739,291
-----------
-----------
JPM INSTITUTIONAL SHARES
Applicable to 4,696,456 shares outstanding
(par value $0.001, unlimited shares authorized) $48,013,414
-----------
-----------
Net Asset Value, Offering and Redemption Price
per Share $10.22
-----
-----
JPM PIERPONT SHARES
Applicable to 262,855 shares outstanding
(par value $0.001, unlimited shares authorized) $ 2,725,877
-----------
-----------
Net Asset Value, Offering and Redemption Price
per Share $10.37
-----
-----
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
16
<PAGE>
CALIFORNIA BOND FUND
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED OCTOBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest Income $ 802,532
EXPENSES
Advisory Fee $ 52,683
Transfer Agent Fee 21,081
Professional Fees and Expenses 18,932
Administrative Services Fee 10,714
Custodian Fees and Expenses 10,273
Printing Expenses 9,577
Shareholder Servicing Fee-JPM Institutional
Shares 8,504
Amortization of Organization Expenses 4,789
Shareholder Servicing Fee-JPM Pierpont Shares 1,381
Fund Services Fee 613
Administration Fee 305
Trustees' Fees and Expenses 50
Miscellaneous 2,516
--------
Total Expenses 141,418
Less: Reimbursement of Expenses (61,285)
--------
NET EXPENSES 80,133
----------
NET INVESTMENT INCOME 722,399
NET REALIZED GAIN ON INVESTMENTS 3,574
NET CHANGE IN UNREALIZED APPRECIATION OF
INVESTMENTS 801,038
----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $1,527,011
----------
----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
17
<PAGE>
CALIFORNIA BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
DECEMBER 23,
FOR THE SIX 1996
MONTHS ENDED (COMMENCEMENT OF
OCTOBER 31, 1997 OPERATIONS) TO
(UNAUDITED) APRIL 30, 1997
---------------- ----------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 722,399 $ 151,759
Net Realized Gain (Loss) on Investments 3,574 (56,998)
Net Change in Unrealized Appreciation
(Depreciation) of Investments 801,038 (74,465)
---------------- ----------------
Net Increase in Net Assets Resulting from
Operations 1,527,011 20,296
---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT
INCOME
JPM Institutional Shares (700,638) (151,425)
JPM Pierpont Shares (21,761) (334)
---------------- ----------------
Total Distributions from Net Investment
Income (722,399) (151,759)
---------------- ----------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Proceeds from Shares of Beneficial Interest Sold 34,765,001 15,594,184
Reinvestment of Dividends 339,064 54,112
Cost of Shares of Beneficial Interest Redeemed (263,617) (447,602)
---------------- ----------------
Net Increase from Shareholder Transactions 34,840,448 15,200,694
---------------- ----------------
Total Increase in Net Assets 35,645,060 15,069,231
NET ASSETS
Beginning of Period 15,094,231 25,000
---------------- ----------------
End of Period $ 50,739,291 $ 15,094,231
---------------- ----------------
---------------- ----------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
18
<PAGE>
CALIFORNIA BOND FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share outstanding throughout each period are as follows:
<TABLE>
<CAPTION>
JPM INSTITUTIONAL SHARES JPM PIERPONT SHARES
------------------------------------ -----------------------------------
FOR THE PERIOD FOR THE PERIOD
FOR THE SIX DECEMBER 23, 1996 FOR THE SIX APRIL 21, 1997
MONTHS ENDED (COMMENCEMENT OF MONTHS ENDED (COMMENCEMENT OF
OCTOBER 31, 1997 OPERATIONS) TO OCTOBER 31, 1997 OPERATIONS) TO
(UNAUDITED) APRIL 30, 1997 (UNAUDITED) APRIL 30, 1997
---------------- ----------------- ---------------- ----------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.90 $ 10.00 $10.04 $10.00
---------------- ----------------- ---------------- ----------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.21 0.16 0.20 0.01
Net Realized and Unrealized Gain (Loss) on
Investment 0.32 (0.10) 0.33 0.04
---------------- ----------------- ---------------- ----------------
Total from Investment Operations 0.53 0.06 0.53 0.05
---------------- ----------------- ---------------- ----------------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (0.21) (0.16) (0.20) (0.01)
---------------- ----------------- ---------------- ----------------
NET ASSET VALUE, END OF PERIOD $ 10.22 $ 9.90 $10.37 $10.04
---------------- ----------------- ---------------- ----------------
---------------- ----------------- ---------------- ----------------
RATIOS AND SUPPLEMENTAL DATA
Total Return 5.38%(a) 0.56%(a) 5.34%(a) 0.51%(a)
Net Assets, End of Period (in thousands) $48,013 $14,793 $2,726 $ 302
Ratios to Average Net Assets
Expenses 0.45%(b) 0.45%(b) 0.65%(b) 0.62%(b)
Net Investment Income 4.12%(b) 4.43%(b) 3.94%(b) 4.52%(b)
Decrease Reflected in Expense Ratio due to
Expense Reimbursement 0.35%(b) 3.01%(b) 0.32%(b) 0.55%(b)
Portfolio Turnover Rate 15% 40% 15% 40%
</TABLE>
- ------------------------
(a) Not Annualized.
(b) Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
CALIFORNIA BOND FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
OCTOBER 31,1997
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
California Bond Fund (the "Fund") is a series of JPM Series Trust, a
Massachusetts business trust (the "Trust"), which was organized on August 15,
1996. The Trust 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 after tax total return for California
residents consistent with moderate risk of capital. 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 invests a significant
amount of its assets in debt obligations issued by political subdivisions and
authorities of the State of California. The issuer's ability to meet its
obligations may be affected by economic and political developments within the
State of California. 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 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) Securities with a maturity of more than 60 days, including securities that
are listed on an exchange or traded over the counter, are valued using
prices supplied daily by an independent pricing service or services that
(i) are based on the last sale price on a national securities exchange or,
in the absence of recorded sales, at the readily available closing bid
price on such exchange or at the quoted bid price in the OTC market, if
such exchange or market constitutes the broadest and most representative
market for the security and (ii) in other cases, take into account various
factors affecting market value, including yields and prices of comparable
securities, indications as to value from dealers and general market
conditions. If such prices are not supplied by the Fund's independent
pricing service, such securities are priced in accordance with procedures
adopted by the Trustees. All securities with a remaining maturity of 60
days or less are valued by the amortized cost method. Because of the large
number of municipal bond issues outstanding and the varying maturity
dates, coupons, and risk factors applicable to each issuer's bonds, no
readily available market quotations exist for most municipal securities.
The Fund values municipal securities on the basis of prices from a pricing
service which uses information with respect to transactions in bonds,
quotations from bond dealers, market transactions in comparable securities
and various relationships between securities in determining values.
b) Securities transactions are recorded on a trade date basis. Interest
income, which includes the amortization of premiums and discounts, if any,
is recorded on an accrual basis. For financial and tax reporting purposes,
realized gains and losses are determined on the basis of specific lot
identification.
c) Net investment income (other than shareholder servicing fees) and
unrealized and realized gains and losses are allocated daily to each class
of shares based upon the relative proportion of net assets of each class
at the beginning of the day.
d) Substantially all of the Fund's net investment income is declared as
dividends daily for each class of shares outstanding and paid monthly. Net
investment income for dividend purposes consists of the income of the Fund
less certain Fund expenses and other expenses directly attributable to
such class. Distributions to shareholder's of net realized capital gains,
if any, are declared and paid annually for each class of shares.
20
<PAGE>
CALIFORNIA BOND FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
OCTOBER 31,1997
- --------------------------------------------------------------------------------
e) The Fund incurred organization expenses in the amount of $47,567. Morgan
Guaranty Trust Company of New York ("Morgan") has agreed to pay the
organization expenses of the Fund. The Fund has agreed to reimburse Morgan
for these costs which are being deferred and will be amortized on a
straight-line basis over a period not to exceed five years beginning with
the commencement of operations of the Fund.
f) 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.
g) As of April 30, 1997, the Fund incurred and elected to defer post-October
losses of $56,998 until the next taxable year.
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 0.30% of the
Fund's average daily net assets. For the six months ended October 31, 1997
such fees amounted to $52,683.
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 six
months ended October 31, 1997, the fee for these services amounted to
$305.
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 six
months ended October 31, 1997, the fee for these services amounted to
$10,714.
Morgan has agreed to reimburse the Fund to the extent necessary to
maintain the total operating expenses of the Fund at no more than 0.40% of
the average daily net assets of the Fund through February 28, 1999. The
expense limit combined with the shareholder servicing fees specific to
each
21
<PAGE>
CALIFORNIA BOND FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
OCTOBER 31,1997
- --------------------------------------------------------------------------------
class results in an aggregate 0.45% and 0.65% expense limit for the JPM
Institutional Shares and the JPM Pierpont Shares, respectively. For the
six months ended October 31, 1997, Morgan has agreed to reimburse the Fund
$61,285 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 0.05% and 0.25% of the average daily net
assets of the JPM Institutional Shares and JPM Pierpont Shares,
respectively. For the six months ended October 31, 1997, the fee for these
services amounted to $8,504 and $1,381 for JPM Institutional Shares and
JPM Pierpont Shares, respectively.
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
$636 for the six months ended 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. 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 $100.
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:
JPM INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX MONTHS DECEMBER 23,1996
ENDED (COMMENCEMENT OF
OCTOBER 31, 1997 OPERATIONS) TO
(UNAUDITED) APRIL 30,1997
----------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Shares sold...................................... 3,195,365 $32,376,590 1,531,745 $15,294,184
Reinvestment of dividends and distributions...... 31,361 319,164 5,423 53,778
Shares redeemed.................................. (24,816) (254,117) (45,122) (447,602)
--------- ----------- --------- -----------
Net Increase..................................... 3,201,910 $32,441,637 1,492,046 $14,900,360
--------- ----------- --------- -----------
--------- ----------- --------- -----------
</TABLE>
22
<PAGE>
CALIFORNIA BOND FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
OCTOBER 31,1997
- --------------------------------------------------------------------------------
JPM PIERPONT SHARES
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX MONTHS APRIL 21, 1997
ENDED (COMMENCEMENT OF
OCTOBER 31, 1997 OPERATIONS) TO
(UNAUDITED) APRIL 30,1997
-------------------- -----------------
SHARES AMOUNT SHARES AMOUNT
------- ---------- ------ --------
<S> <C> <C> <C> <C>
Shares sold...................................... 231,815 $2,388,411 30,000 $300,000
Reinvestment of dividends and distributions...... 1,924 19,900 33 334
Shares redeemed.................................. (917) (9,500) 0 0
------- ---------- ------ --------
Net Increase..................................... 232,822 $2,398,811 30,033 $300,334
------- ---------- ------ --------
------- ---------- ------ --------
</TABLE>
From time to time, the Fund may have a concentration of several shareholders
holding a significant percentage of shares outstanding. Investment activities of
these shareholders could have a material impact on the Fund and Portfolio.
4. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the six months
ended October 31, 1997 were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
----------- ----------
<S> <C> <C>
Municipal Obligations............................ $38,417,894 $4,376,219
U.S. Government Obligations...................... 0 153,375
----------- ----------
$38,417,894 $4,529,594
----------- ----------
----------- ----------
</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.
23
<PAGE>
JPM Series Trust
California
Bond Fund
FOR MORE INFORMATION ON THE JPM FAMILY OF FUNDS, CALL J.P. MORGAN FUNDS
SERVICES:
PIERPONT SHARES (800) 521-5411
INSTITUTIONAL SHARES (800) 766-7722
SEMI-ANNUAL REPORT
OCTOBER 31, 1997
