<PAGE>
LETTER TO THE SHAREHOLDERS OF THE J.P. MORGAN TAX AWARE DISCIPLINED EQUITY FUND
May 23, 1998
Dear Shareholder:
J.P. Morgan Tax Aware Disciplined Equity Fund seeks to outperform the S&P 500
Index on an AFTER-TAX basis with comparable levels of investment risk. The fund
uses a proprietary tax-aware model that recommends tax-efficient trades in an
attempt to minimize capital gains distributions. The portfolio management team
selects stocks from Morgan's research universe of U.S. large- and medium-cap
stocks, avoiding stocks that Morgan research identifies as overvalued. From the
fund's inception on January 30, 1997, through April 30 of this year, it has
accomplished its goal.
We are pleased to report that the fund provided a solid absolute return of
23.18% for the six months ended April 30, 1998. This performance is ahead of the
22.49% return for the S&P 500 Index, and well ahead of the 17.38% return posted
by the fund's competitors in the Lipper Growth & Income Fund Average.
The fund's net asset value increased from $12.08 per share on October 31,
1997,to $14.76 per share on April 30, 1998. A distribution was made during
the reporting period of approximately $0.10 per share from ordinary income.
There were no distributions from short- or long-term capital gains. The
fund's net assets stood at approximately $67.2 million at the end of the
period under review.
The report that follows includes an interview with Robin B. Chance, a member of
the fund's portfolio management team. This interview is designed to answer
commonly asked questions about the fund, elaborate on what happened during the
reporting period, and reiterate the fund's investment strategy.
As chairman and president of Asset Management Services, we appreciate your
investment in the fund. If you have any comments or questions, please call
your Morgan representative or J.P. Morgan Funds Services at (800) 766-7722.
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>
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TABLE OF CONTENTS
<S> <C> <C> <C>
LETTER TO THE SHAREHOLDERS . . . 1 FUND FACTS AND HIGHLIGHTS. . . . . . 6
FUND PERFORMANCE . . . . . . . . 2 FINANCIAL STATEMENTS . . . . . . . . 8
PORTFOLIO MANAGER Q&A. . . . . . 3
- --------------------------------------------------------------------------------
</TABLE>
1
<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 various time periods, typically one, five,
or ten 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 AVERAGE ANNUAL TOTAL RETURNS
------------------------ ------------------------------
THREE SIX ONE SINCE
AS OF APRIL 30, 1998 MONTHS MONTHS YEAR INCEPTION*
- ------------------------------------------------------------------------ ------------------------------
<S> <C> <C> <C> <C>
J.P. Morgan Institutional Tax Aware
Disciplined Equity Fund 14.57% 23.18% 45.17% 37.32%
S&P 500 Index 13.84% 22.49% 41.07% 34.42%
Lipper Growth & Income Fund Average 12.37% 17.38% 36.12% 28.38%
AS OF MARCH 31, 1998
- ------------------------------------------------------------------------ ------------------------------
J.P. Morgan Institutional Tax Aware
Disciplined Equity Fund 14.30% 17.10% 51.49% 38.55%
S&P 500 Index 13.95% 17.22% 48.00% 36.08%
Lipper Growth & Income Fund Average 11.62% 12.49% 40.15% 30.00%
</TABLE>
*THE FUND COMMENCED OPERATIONS ON JANUARY 30, 1997, AND HAS PROVIDED AN AVERAGE
ANNUAL TOTAL RETURN OF 37.55% FROM THAT DATE THROUGH APRIL 30, 1998. 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 NO GUARANTEE OF FUTURE RESULTS. FUND RETURNS ARE NET OF
FEES, ASSUME THE REINVESTMENT OF FUND DISTRIBUTIONS, AND REFLECT THE
REIMBURSEMENT OF FUND EXPENSES AS DESCRIBED IN THE PROSPECTUS. HAD EXPENSES NOT
BEEN SUBSIDIZED, RETURNS WOULD HAVE BEEN LOWER. LIPPER ANALYTICAL SERVICES, INC.
IS A LEADING SOURCE FOR MUTUAL FUND DATA.
2
<PAGE>
PORTFOLIO MANAGER Q&A
[PHOTO]
Following is an interview with ROBIN B. CHANCE, who is a member of the portfolio
management team for the J.P. Morgan Tax Aware Disciplined Equity Fund. A
Chartered Financial Analyst who is also an 11-year veteran of Morgan, Robin
developed the systems used to rebalance the firm's structured equity portfolios.
Robin is a graduate of the University of Pennsylvania's Management and
Technology Program. She earned her MBA from New York University's Stern School
of Business. This interview was conducted on May 14, 1998, and reflects Robin's
views on that date.
HOW DID MARKET EVENTS AFFECT THE PORTFOLIO DURING THE SIX MONTHS UNDER REVIEW?
RBC: The portfolio earned high absolute returns as the U.S. stock market
continued to rally. Strong economic growth and low inflation helped stocks reach
several record highs. We also witnessed a return to historical levels of price
volatility, sparked by the monetary crisis in Asia.
The "Nifty Fifty," the 50 largest companies within the S&P 500 Index, have
outperformed the rest of the U.S. equity market for some time now. In the
turmoil of 1997's fourth quarter, nervous investors flocked to the perceived
safety of these stocks, giving the Nifty Fifty another boost. Although we viewed
some of these companies as overvalued, we held small positions in the large
names in an effort to reduce the portfolio's volatility. General Electric, for
example, represents 3.2% of the S&P 500. We held its weight to a more cautious
2.1% of the portfolio's assets. This strategy paid off as we outperformed the
S&P 500 for the six months.
WHAT EFFECT DID STOCK SELECTION HAVE ON THE PORTFOLIO DURING THE PERIOD?
RBC: The portfolio's outperformance over the past six months can be attributed
solely to specific stock selection. The portfolio is designed to earn excess
return from stock selection -- not from sector bets or style/theme investing.
This means that we keep our industry group weightings close to those of our
benchmark. We also remain fully invested in stocks, rather than trying to time
the markets.
We focus exclusively on stock selection because we believe that J.P. Morgan has
an information advantage. This advantage springs from the fact that we do all of
our own research. Our global network of equity analysts conducts fundamental
research on more than 500 large-cap U.S. stocks. The analysts determine the
relative value of each stock within the stock's industry group, or sector. We
use our in-house research to help us construct a portfolio that deviates from
the benchmark only in areas where we believe we have information that the Wall
Street consensus may have overlooked.
3
<PAGE>
Many investors would be surprised at how returns can vary from one sector to
another. For example, the consumer goods and services group was the
best-performing sector for the period. These stocks earned a return of 31.2%.
The worst-performing sector was basic industries, which returned only 2.8%. A
decision to overweight or underweight one of these sectors would have had a
substantial impact on the fund's returns.
WHAT ARE SOME OF THE BENEFITS OF TAX-AWARE INVESTING?
RBC: Three years of extraordinary gains in the U.S. equity market led to record
mutual fund distributions in 1997. When a fund sells a security which has
appreciated in price, it recognizes a capital gain, which the fund is required
by law to distribute to shareholders. Even if an investor chooses to reinvest
the payout, that distribution is taxable.
In response to the challenge that taxes can pose, we created the J.P. Morgan Tax
Aware Disciplined Equity Fund. The portfolio seeks to keep capital gains
distributions low so that investors can defer their tax payments for as long as
they choose. We seek to minimize capital gains distributions by recognizing
losses in securities which have declined in price. We then use these losses to
offset realized gains.
Here is an example of how this strategy works: Oracle Corp., a developer of
database software, was the greatest detractor from performance during the past
six months. In December of 1997, the company reported disappointing results due
to slower growth in the database software business. The stock price plummeted.
Meanwhile, our research indicated that Xerox Corp., which had been one of the
portfolio's strongest holdings, had become relatively overvalued. As investors
gained confidence in the company's ability to execute its restructuring program,
which is expected to result in significant cost savings, the stock's price rose.
We decided it would be a good time to trim our position in Xerox. In keeping
with our tax-aware approach, we sold part of our Oracle holdings in order to
realize a loss, which we used to offset the gains we had realized in Xerox.
WHICH STOCKS HELPED THE PORTFOLIO'S PERFORMANCE FOR THE PERIOD?
RBC: The biggest positive contribution to the portfolio's performance during
the six months was our decision to underweight Eli Lilly & Co. Lilly recently
launched Evista, a new osteoporosis drug that had been highly touted by the
company and Wall Street analysts. The launch proved disappointing, and the stock
suffered as a result. Our small position in Lilly insulated us from much of the
turmoil.
We benefited from being overweighted in Waste Management, Inc., which decided to
merge with USA Waste, a better-managed competitor.
The portfolio also benefited from an overweighted position in Forest Labs, Inc.,
which announced higher-than-expected earnings in December. Forest experienced an
increase in investor enthusiasm over the new drugs the company has in its
pipeline, especially its new anti-depressant, Celexa. Investor optimism was
boosted by a co-promotion agreement with Warner-Lambert Co. Furthermore, the
company announced a deal with Lundbeck, a Danish company which provides access
to several new drugs. The deal considerably enhances the longer-term outlook for
Forest Labs.
4
<PAGE>
WHICH STOCKS HAMPERED THE PORTFOLIO'S PERFORMANCE?
RBC: We were overweighted in Oracle Corp., which disappointed analysts with
earnings below expectations amid a declining database software market. Our
decision to underweight Pfizer, Inc. held us back, as that company rose sharply
due to the anticipation and ultimate launch of Viagra. We also underweighted
Ford Motor Co., which has progressed with its cost-cutting efforts more rapidly
than we expected and is doing well as a result.
WHAT IS YOUR STRATEGY FOR COMING MONTHS?
RBC: We will continue to be sector-, style-, and theme-neutral, and to seek to
add value through stock selection. We will continue to focus on the long-term
earnings potential of each company that we research.
5
<PAGE>
FUND FACTS
INVESTMENT OBJECTIVE
J.P. Morgan 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
- --------------------------------------------------------------------------------
FUND NET ASSETS AS OF 4/30/98
$67,198,499
- --------------------------------------------------------------------------------
DIVIDEND PAYABLE DATES
7/31/98, 10/30/98, 12/18/98
- --------------------------------------------------------------------------------
CAPITAL GAIN PAYABLE DATE (IF APPLICABLE)
12/18/98
EXPENSE RATIO
The fund's current annualized expense ratio of 0.55% covers shareholders'
expenses for custody, tax reporting, and 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 may be 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 Statement of Additional
Information.
FUND HIGHLIGHTS
ALL DATA AS OF APRIL 30, 1998
PORTFOLIO ALLOCATION
(AS A PERCENTAGE OF TOTAL INVESTMENTS)
[CHART]
<TABLE>
<S> <C>
CONSUMER GOODS & SERVICES 21.6%
FINANCE 17.4%
TECHNOLOGY 14.8%
HEALTH CARE 11.6%
INDUSTRIAL PRODUCTS & SERVICES 9.6%
UTILITIES 9.6%
ENERGY 7.9%
BASIC INDUSTRIES 4.1%
TRANSPORTATION 1.2%
SHORT-TERM & OTHER INVESTMENTS 2.2%
</TABLE>
<TABLE>
<CAPTION>
LARGEST EQUITY HOLDINGS % OF TOTAL INVESTMENTS
- --------------------------------------------------------------------------------
<S> <C>
EXXON CORP. (ENERGY) 2.8%
BRISTOL-MYERS SQUIBB CO. (HEALTH CARE) 2.2%
GENERAL ELECTRIC CO.
(INDUSTRIAL PRODUCTS & SERVICES) 2.1%
PROCTER & GAMBLE CO.
(CONSUMER GOODS & SERVICES) 1.9%
INTEL CORP. (TECHNOLOGY) 1.8%
INTERNATIONAL BUSINESS MACHINES CORP.
(TECHNOLOGY) 1.8%
FIRST UNION CORP. (FINANCE) 1.6%
AMERICAN HOME PRODUCTS CORP. (HEALTH CARE) 1.6%
COCA-COLA CO.
(CONSUMER GOODS & SERVICES) 1.6%
MICROSOFT CORP. (TECHNOLOGY) 1.5%
</TABLE>
6
<PAGE>
DISTRIBUTED BY FUNDS DISTRIBUTOR, INC. MORGAN GUARANTY TRUST COMPANY OF NEW
YORK SERVES AS INVESTMENT ADVISOR AND MAKES THE FUND 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.
RETURN AND SHARE PRICE WILL FLUCTUATE AND REDEMPTION VALUE MAY BE MORE OR LESS
THAN ORIGINAL COST.
References to specific securities and their issuers are for illustrative
purposes only and are not intended to be, and should not be interpreted as,
recommendations to purchase or sell such securities. Opinions expressed herein
are based on current market conditions and are subject to change without notice.
CALL J.P. MORGAN FUNDS SERVICES AT (800) 766-7722 FOR A PROSPECTUS CONTAINING
MORE COMPLETE INFORMATION ABOUT THE FUND INCLUDING MANAGEMENT FEES AND OTHER
EXPENSES. PLEASE READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
7
<PAGE>
J.P. MORGAN TAX AWARE DISCIPLINED EQUITY FUND
SCHEDULE OF INVESTMENTS (UNAUDITED)
APRIL 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------- ------------
<S> <C> <C>
COMMON STOCKS (99.9%)
BASIC INDUSTRIES (4.2%)
AGRICULTURE (0.0%)
Agribrands International, Inc.+.................. 210 $ 7,993
------------
CHEMICALS (2.3%)
Albemarle Corp................................... 4,600 114,425
Crompton & Knowles Corp.......................... 700 20,956
Cytec Industries, Inc.+.......................... 1,200 65,700
Dow Chemical Co.................................. 6,200 599,462
E.I. du Pont de Nemours & Co..................... 7,100 516,969
Rohm & Haas Co................................... 1,600 172,500
Solutia, Inc..................................... 1,200 34,050
------------
1,524,062
------------
FOREST PRODUCTS & PAPER (0.9%)
Boise Cascade Corp............................... 1,700 63,856
Georgia-Pacific Corp............................. 1,000 77,187
Louisiana Pacific Corp........................... 900 19,687
Mead Corp........................................ 5,400 186,975
Temple-Inland, Inc............................... 4,200 271,162
------------
618,867
------------
METALS & MINING (1.0%)
Allegheny Teledyne, Inc.......................... 16,750 425,031
Aluminum Company of America (ALCOA).............. 2,700 209,250
Reynolds Metals Co............................... 400 26,400
------------
660,681
------------
TOTAL BASIC INDUSTRIES......................... 2,811,603
------------
CONSUMER GOODS & SERVICES (22.1%)
APPARELS & TEXTILES (0.1%)
Nike, Inc., Class B.............................. 1,600 76,400
------------
AUTOMOTIVE (1.5%)
Chrysler Corp.................................... 12,900 518,419
Ford Motor Co.................................... 6,000 274,875
General Motors Corp.............................. 300 20,212
Goodyear Tire and Rubber Co...................... 3,000 210,000
------------
1,023,506
------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------- ------------
<S> <C> <C>
BROADCASTING & PUBLISHING (1.3%)
Comcast Corp., Class A........................... 9,300 $ 332,184
Cox Communications, Inc., Class A+............... 2,200 98,175
R.R. Donnelley & Sons Co......................... 3,000 132,187
Tele-Communications TCI Ventures Group+.......... 2,710 44,292
Tele-Communications, Inc., Series A+............. 2,345 75,700
U.S. West Media Group+........................... 5,600 211,400
------------
893,938
------------
ENTERTAINMENT, LEISURE & MEDIA (3.3%)
Gannett Company, Inc............................. 200 13,587
Harrah's Entertainment, Inc.+.................... 300 7,819
Hasbro, Inc...................................... 5,400 198,787
International Game Technology.................... 2,400 66,750
Mattel, Inc...................................... 9,000 344,812
MGM Grand, Inc.+................................. 500 16,875
Mirage Resorts, Inc.+............................ 1,700 37,506
Seagram Company Ltd.(i).......................... 11,000 469,562
Time Warner, Inc................................. 10,000 785,000
Viacom, Inc., Class B+........................... 1,200 69,600
Walt Disney Co................................... 700 87,019
Washington Post Co., Class B..................... 200 104,850
------------
2,202,167
------------
FOOD, BEVERAGES & TOBACCO (6.5%)
Anheuser Busch Companies, Inc.................... 6,900 316,106
Bestfoods........................................ 800 43,900
Campbell Soup Co................................. 3,500 179,594
Coca-Cola Co..................................... 14,300 1,085,012
Corn Products International, Inc.+............... 100 3,562
General Mills, Inc............................... 600 40,537
H.J. Heinz Company............................... 3,700 201,650
Kellogg Co....................................... 3,700 152,625
PepsiCo, Inc..................................... 15,000 595,312
Philip Morris Companies, Inc..................... 18,600 694,012
Ralston-Ralston Purina Group..................... 2,900 307,400
Sara Lee Corp.................................... 2,900 172,731
Unilever NV (ADR)................................ 7,500 559,687
Vlasic Foods International, Inc.+................ 60 1,384
------------
4,353,512
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
8
<PAGE>
J.P. MORGAN TAX AWARE DISCIPLINED EQUITY FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------- ------------
<S> <C> <C>
HOUSEHOLD APPLIANCES & FURNISHINGS (0.3%)
Furniture Brands International, Inc.+............ 2,200 $ 64,625
Leggett & Platt, Inc............................. 400 20,775
Whirlpool Corp................................... 1,600 115,200
------------
200,600
------------
HOUSEHOLD PRODUCTS (2.0%)
Procter & Gamble Co.............................. 15,900 1,306,781
Rubbermaid, Inc.................................. 400 11,450
------------
1,318,231
------------
PERSONAL CARE (1.1%)
Gillette Co...................................... 6,400 738,800
------------
RESTAURANTS & HOTELS (0.6%)
Extended Stay America, Inc.+..................... 300 3,919
McDonald's Corp.................................. 6,000 371,250
Tricon Global Restaurants, Inc.+................. 240 7,620
------------
382,789
------------
RETAIL (5.2%)
Albertson's, Inc................................. 200 10,000
American Stores Co............................... 2,200 52,800
AutoZone, Inc.+.................................. 3,900 117,731
Best Buy Co., Inc.+.............................. 1,800 126,450
Circuit City Stores, Inc......................... 900 36,562
CompUSA, Inc.+................................... 4,400 81,675
Corporate Express, Inc.+......................... 2,200 22,069
Dayton Hudson Corp............................... 4,100 357,981
Dillard's, Inc., Class A......................... 2,400 87,900
Federated Department Stores, Inc.+............... 4,700 231,181
Gap, Inc......................................... 2,000 102,875
Hannaford Brothers Co............................ 4,200 186,637
Home Depot, Inc.................................. 4,950 344,644
J.C. Penney, Inc................................. 500 35,531
Kmart Corp.+..................................... 5,700 99,394
Kroger Co.+...................................... 5,100 213,562
May Department Stores Co......................... 1,200 74,025
Nordstrom, Inc................................... 500 32,766
Reebok International Ltd. (ADR)+................. 2,700 79,312
Safeway, Inc.+................................... 4,900 187,425
Sears, Roebuck & Co.............................. 10,900 646,506
TJX Companies, Inc............................... 3,700 163,725
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------- ------------
<S> <C> <C>
RETAIL (CONTINUED)
Toys 'R' Us, Inc.+............................... 1,900 $ 52,369
Wal-Mart Stores, Inc............................. 3,700 187,081
------------
3,530,201
------------
TEXTILES (0.2%)
Fruit of the Loom, Inc., Class A+................ 3,500 130,812
------------
TOTAL CONSUMER GOODS & SERVICES................ 14,850,956
------------
ENERGY (8.1%)
OIL-PRODUCTION (7.1%)
Atlantic Richfield Co............................ 10,300 803,400
Chevron Corp..................................... 3,500 289,406
Exxon Corp....................................... 26,700 1,947,431
Mobil Corp....................................... 8,100 639,900
Royal Dutch Petroleum Co. (ADR).................. 8,700 492,094
Texaco, Inc...................................... 3,000 184,500
Tosco Corp....................................... 6,700 238,687
Valero Energy Corp............................... 4,700 152,162
------------
4,747,580
------------
OIL-SERVICES (1.0%)
Baker Hughes, Inc................................ 100 4,050
Cooper Cameron Corp.+............................ 1,900 126,231
Diamond Offshore Drilling, Inc................... 500 25,312
R&B Falcon Corp.+................................ 4,500 144,281
Schlumberger Ltd................................. 4,800 397,800
------------
697,674
------------
TOTAL ENERGY................................... 5,445,254
------------
FINANCE (17.7%)
BANKING (8.5%)
Banc One Corp.................................... 1,392 81,867
BankAmerica Corp................................. 5,800 493,000
Charter One Financial, Inc....................... 415 28,077
Chase Manhattan Corp............................. 4,200 581,962
Citicorp......................................... 4,800 722,400
Compass Bancshares, Inc.......................... 200 9,681
First Chicago NBD Corp........................... 3,200 297,200
First Commerce Corp.............................. 300 24,450
First Empire State Corp.......................... 300 153,000
First Union Corp................................. 18,480 1,115,730
Firstar Corp..................................... 3,400 126,862
Fleet Financial Group, Inc....................... 500 43,187
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
9
<PAGE>
J.P. MORGAN TAX AWARE DISCIPLINED EQUITY FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------- ------------
<S> <C> <C>
BANKING (CONTINUED)
H.F. Ahmanson, and Co............................ 2,300 $ 175,375
Huntington Bancshares, Inc....................... 600 21,281
KeyCorp.......................................... 3,400 134,937
MBNA Corp........................................ 500 16,937
National Commerce Bancorporation................. 600 26,625
NationsBank Corp................................. 10,781 816,661
North Fork Bancorporation, Inc................... 300 11,137
Pacific Century Financial Corp................... 4,100 101,219
Provident Financial Group, Inc................... 2,300 121,972
Republic New York Corp........................... 200 26,750
Southtrust Corp.................................. 1,050 44,789
TCF Financial Corp............................... 3,000 97,687
Washington Federal, Inc.......................... 2,433 68,124
Washington Mutual, Inc........................... 3,850 269,620
Wells Fargo & Co................................. 300 110,550
------------
5,721,080
------------
FINANCIAL SERVICES (5.3%)
A.G. Edwards, Inc................................ 400 18,000
American Express Co.............................. 5,200 530,400
Associates First Capital Corp., Class A.......... 1,310 97,922
Bear Stearns Companies, Inc...................... 700 39,944
Beneficial Corp.................................. 900 117,338
Capital One Financial Corp....................... 400 38,425
Charles Schwab Corp.............................. 800 26,608
Equifax, Inc..................................... 3,200 123,800
Federal Home Loan Mortgage Corp.................. 6,000 277,875
Federal National Mortgage Association............ 10,800 646,650
Finova Group, Inc................................ 1,600 93,700
Green Tree Financial Corp........................ 2,400 97,800
Household International, Inc..................... 400 52,575
Merrill Lynch & Company, Inc..................... 1,100 96,525
Morgan Stanley, Dean Witter, Discover & Co....... 3,930 309,979
Ocwen Financial Corp.+........................... 4,800 124,200
Providian Financial Corp......................... 1,500 90,281
Travelers Group, Inc............................. 12,886 788,462
------------
3,570,484
------------
INSURANCE (3.9%)
Aegon NV (ARE)................................... 174 23,120
Allstate Corp.................................... 5,400 519,750
AMBAC, Inc....................................... 2,300 130,381
American International Group, Inc................ 6,500 855,156
CIGNA Corp....................................... 1,500 310,406
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------- ------------
<S> <C> <C>
INSURANCE (CONTINUED)
Financial Security Assurance Holdings Ltd........ 2,000 $ 119,750
Fremont General Corp............................. 300 16,725
Hartford Financial Services Group, Inc........... 200 22,150
Marsh & McLennan Companies, Inc.................. 3,900 355,388
MBIA, Inc........................................ 800 59,700
PMI Group, Inc................................... 300 24,375
St. Paul Companies, Inc.......................... 200 16,950
Transamerica Corp................................ 200 23,100
UNUM Corp........................................ 2,800 150,500
------------
2,627,451
------------
REAL ESTATE INVESTMENT TRUSTS (0.0%)
Starwood Lodging Trust........................... 183 9,184
------------
TOTAL FINANCE.................................. 11,928,199
------------
HEALTHCARE (11.8%)
HEALTH SERVICES (2.2%)
Abbott Laboratories.............................. 4,300 314,438
Aetna, Inc....................................... 700 56,569
Bausch & Lomb, Inc............................... 2,200 108,763
Boston Scientific Corp.+......................... 1,600 115,700
Columbia / HCA Healthcare Corp................... 1,600 52,700
Health Care & Retirement Corp.+.................. 1,700 69,275
Humana, Inc.+.................................... 5,500 148,500
Perkin-Elmer Corp................................ 3,700 252,988
Tenet Healthcare Corp.+.......................... 5,200 194,675
United Healthcare Corp........................... 2,800 196,700
------------
1,510,308
------------
MEDICAL SUPPLIES (0.2%)
Medtronic, Inc................................... 2,200 115,775
------------
PHARMACEUTICALS (9.4%)
Alza Corp.+...................................... 1,600 76,700
American Home Products Corp...................... 11,700 1,089,563
Bristol-Myers Squibb Co.......................... 14,200 1,503,425
Eli Lilly & Co................................... 9,600 667,800
Forest Laboratories, Inc.+....................... 8,500 307,594
Johnson & Johnson................................ 5,400 385,425
Merck & Company, Inc............................. 3,800 457,900
Monsanto Co...................................... 10,000 528,750
Pfizer, Inc...................................... 4,000 455,250
Schering-Plough Corp............................. 1,500 120,188
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
10
<PAGE>
J.P. MORGAN TAX AWARE DISCIPLINED EQUITY FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------- ------------
<S> <C> <C>
PHARMACEUTICALS (CONTINUED)
Warner-Lambert Co................................ 3,900 $ 737,831
Watson Pharmaceuticals, Inc.+.................... 100 4,300
------------
6,334,726
------------
TOTAL HEALTHCARE............................... 7,960,809
------------
INDUSTRIAL PRODUCTS & SERVICES (9.8%)
AUTOMOTIVE SUPPLIES (0.0%)
Echlin, Inc...................................... 600 28,388
------------
BUILDING MATERIALS (0.1%)
Owens Corning.................................... 1,200 49,875
------------
CAPITAL GOODS (0.3%)
Eaton Corp....................................... 2,300 212,463
------------
COMMERCIAL SERVICES (0.9%)
Service Corp. International...................... 14,900 614,625
------------
DIVERSIFIED MANUFACTURING (6.4%)
AlliedSignal, Inc................................ 12,800 560,800
Cooper Industries, Inc........................... 3,400 227,375
Eastman Kodak Co................................. 5,100 368,156
General Electric Co.............................. 17,100 1,455,638
Harris Corp...................................... 3,400 164,475
Illinois Tool Works, Inc......................... 100 7,050
ITT Industries, Inc.............................. 4,400 160,325
Johnson Controls, Inc............................ 2,300 136,563
Minnesota Mining & Manufacturing Co.............. 800 75,500
Raychem Corp..................................... 200 8,038
Raytheon Co., Class A............................ 806 44,481
Raytheon Co., Class B............................ 900 51,019
Tenneco, Inc..................................... 5,000 215,313
Tyco International Ltd........................... 8,570 467,065
Xerox Corp....................................... 3,000 340,500
------------
4,282,298
------------
ELECTRICAL EQUIPMENT (0.6%)
Emerson Electric Co.............................. 2,600 165,425
W.W. Grainger, Inc............................... 1,900 206,981
------------
372,406
------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------- ------------
<S> <C> <C>
ELECTRONICS (0.2%)
Rockwell International Corp...................... 500 $ 27,969
Tektronix, Inc................................... 2,300 98,900
------------
126,869
------------
MACHINERY (0.5%)
Caterpillar, Inc................................. 6,200 353,013
------------
PACKAGING & CONTAINERS (0.2%)
Kimberly-Clark Corp.............................. 2,600 131,950
------------
POLLUTION CONTROL (0.6%)
Waste Management, Inc............................ 12,700 425,450
------------
TOTAL INDUSTRIAL PRODUCTS & SERVICES........... 6,597,337
------------
TECHNOLOGY (15.1%)
AEROSPACE (1.6%)
Boeing Co........................................ 18,730 937,671
Coltec Industries, Inc.+......................... 4,000 100,000
General Dynamics Corp............................ 200 8,450
Lockheed Martin Corp............................. 100 11,138
Northrop Grumman Corp............................ 100 10,569
------------
1,067,828
------------
COMPUTER PERIPHERALS (0.7%)
EMC Corp.+....................................... 10,600 488,925
------------
COMPUTER SOFTWARE (3.1%)
Computer Associates International, Inc........... 5,900 345,519
Microsoft Corp.+................................. 11,500 1,036,797
Oracle Corp.+.................................... 21,050 545,327
Parametric Technology Co.+....................... 3,700 118,284
------------
2,045,927
------------
COMPUTER SYSTEMS (3.5%)
3Com Corp.+...................................... 2,000 68,563
Compaq Computer Corp............................. 11,600 325,525
Dell Computer Corp.+............................. 2,800 226,013
Hewlett-Packard Co............................... 200 15,063
International Business Machines Corp............. 10,600 1,228,275
Sun Microsystems, Inc.+.......................... 12,400 510,338
------------
2,373,777
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
11
<PAGE>
J.P. MORGAN TAX AWARE DISCIPLINED EQUITY FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------- ------------
<S> <C> <C>
ELECTRONICS (1.4%)
Bay Networks, Inc.+.............................. 7,300 $ 171,094
Cisco Systems, Inc.+............................. 10,850 795,102
------------
966,196
------------
INFORMATION PROCESSING (0.4%)
First Data Corp.................................. 8,300 281,163
------------
SEMICONDUCTORS (3.3%)
Applied Materials, Inc.+......................... 6,200 224,169
Intel Corp....................................... 15,400 1,244,994
Motorola, Inc.................................... 7,300 406,063
Texas Instruments, Inc........................... 5,500 352,344
------------
2,227,570
------------
TELECOMMUNICATIONS (0.3%)
Airtouch Communications, Inc.+................... 1,500 79,688
Northern Telecom Ltd.(i)......................... 1,700 103,488
------------
183,176
------------
TELECOMMUNICATIONS-EQUIPMENT (0.8%)
Lucent Technologies, Inc......................... 7,000 532,875
------------
TOTAL TECHNOLOGY............................... 10,167,437
------------
TRANSPORTATION (1.2%)
AIRLINES (0.0%)
Southwest Airlines Co............................ 900 24,694
------------
RAILROADS (1.0%)
CSX Corp......................................... 2,900 152,250
Norfolk Southern Corp............................ 7,000 234,063
Union Pacific Corp............................... 5,800 317,550
------------
703,863
------------
TRUCK & FREIGHT CARRIERS (0.2%)
CNF Transportation, Inc.......................... 2,700 104,288
------------
TOTAL TRANSPORTATION........................... 832,845
------------
UTILITIES (9.9%)
ELECTRIC (1.9%)
Central & South West Corp........................ 4,900 127,706
Dominion Resources, Inc.......................... 1,100 43,519
Duke Power Co.................................... 1,131 65,457
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------- ------------
<S> <C> <C>
ELECTRIC (CONTINUED)
Entergy Corp..................................... 900 $ 22,388
Illinova Corp.................................... 300 9,169
New England Electric System...................... 1,000 43,500
Northern States Power Co......................... 3,900 219,863
Peco Energy Co................................... 5,200 123,825
PG&E Corp........................................ 1 32
Southern Co...................................... 11,000 291,500
Texas Utilities Co............................... 3,400 136,000
Unicom Corp...................................... 3,300 114,675
Western Resources, Inc........................... 300 11,719
Wisconsin Energy Corp............................ 1,900 57,950
------------
1,267,303
------------
GAS-PIPELINES (0.9%)
Columbia Energy Group............................ 3,600 292,500
Enron Corp....................................... 5,700 280,369
------------
572,869
------------
NATURAL GAS (0.3%)
El Paso Natural Gas Co........................... 5,000 184,688
------------
TELEPHONE (6.8%)
Ameritech Corp................................... 200 8,513
AT & T Corp...................................... 10,800 648,675
Bell Atlantic Corp............................... 5,930 554,826
Bellsouth Corp................................... 4,500 288,844
GTE Corp......................................... 12,800 748,000
MCI Communications Corp.......................... 16,800 844,725
SBC Communications, Inc.......................... 18,700 774,881
Sprint Corp...................................... 4,000 273,250
WorldCom, Inc.+.................................. 9,500 406,421
------------
4,548,135
------------
TOTAL UTILITIES................................ 6,572,995
------------
TOTAL COMMON STOCKS (COST $59,316,829)......... 67,167,435
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
12
<PAGE>
J.P. MORGAN TAX AWARE DISCIPLINED EQUITY FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
SHORT-TERM INVESTMENTS (2.2%)
OTHER INVESTMENT COMPANIES (2.2%)
Seven Seas Money Market Fund, 5.21% due 05/01/98
(cost $1,474,741).............................. $ 1,474,741 $ 1,474,741
------------
TOTAL INVESTMENTS (COST $60,791,570) (102.1%).................
68,642,176
LIABILITIES IN EXCESS OF OTHER ASSETS (-2.1%).................
(1,443,677)
------------
NET ASSETS (100.0%)........................................... $ 67,198,499
------------
------------
</TABLE>
- ------------------------------
Note: For Federal Income Tax purposes, the cost of securities at April 30, 1998,
was substantially the same as the cost for financial statement purposes. The
aggregate gross unrealized appreciation and depreciation was $8,218,252 and
$367,646, respectively, resulting in net unrealized appreciation of $7,850,606.
(i) 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.
(ARE) - American Registered Share.
The Accompanying Notes are an Integral Part of the Financial Statements.
13
<PAGE>
J.P. MORGAN TAX AWARE DISCIPLINED EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
APRIL 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $60,791,570 ) $68,642,176
Dividends Receivable 52,868
Deferred Organization Expenses 35,714
Receivable for Expense Reimbursement 23,098
Receivable for Fund Shares Sold 9,668
Interest Receivable 4,302
Prepaid Trustees' Fees 27
Prepaid Expenses and Other Assets 22
-----------
Total Assets 68,767,875
-----------
LIABILITIES
Payable for Investments Purchased 1,431,841
Advisory Fee Payable 17,942
Shareholder Servicing Fee Payable 12,580
Organization Expenses Payable 12,060
Custody Fee Payable 4,307
Administrative Services Fee Payable 2,982
Fund Services Fee Payable 50
Administration Fee Payable 69
Accrued Expenses 87,545
-----------
Total Liabilities 1,569,376
-----------
NET ASSETS
Applicable to 4,552,446 shares outstanding
(par value $0.001, unlimited shares authorized) $67,198,499
-----------
-----------
Net Asset Value, Offering and Redemption Price
per Share $14.76
-----
-----
ANALYSIS OF NET ASSETS
Paid-in Capital $59,306,220
Undistributed Net Investment Income 45,959
Accumulated Net Realized Loss on Investments (4,286)
Net Unrealized Appreciation of Investments 7,850,606
----------
Net Assets $67,198,499
----------
----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
14
<PAGE>
J.P. MORGAN TAX AWARE DISCIPLINED EQUITY FUND
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED APRIL 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividend Income (Net of Foreign Withholding Tax
of $390) $ 234,685
Interest Income 25,334
----------
Investment Income 260,019
EXPENSES
Advisory Fee $ 57,845
Shareholder Servicing Fee 41,318
Custodian Fees and Expenses 32,377
Professional Fees and Expenses 19,605
Registration Fees 16,205
Administrative Services Fee 9,832
Transfer Agent Fee 9,150
Printing Expenses 8,393
Amortization of Organization Expenses 4,715
Fund Services Fee 528
Administration Fee 244
Trustees' Fees and Expenses 130
Miscellaneous 1,966
---------
Total Expenses 202,308
Less: Reimbursement of Expenses (111,409)
---------
NET EXPENSES 90,899
----------
NET INVESTMENT INCOME 169,120
NET REALIZED GAIN ON INVESTMENTS 15,387
NET CHANGE IN UNREALIZED APPRECIATION OF
INVESTMENTS 6,995,917
----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $7,180,424
----------
----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
15
<PAGE>
J.P. MORGAN TAX AWARE DISCIPLINED EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX FOR THE PERIOD
MONTHS ENDED JANUARY 30, 1997
APRIL 30, (COMMENCEMENT OF
1998 OPERATIONS) THROUGH
(UNAUDITED) OCTOBER 31, 1997
------------ -------------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 169,120 $ 56,306
Net Realized Gain (Loss) on Investments 15,387 (19,673)
Net Change in Unrealized Appreciation of
Investments 6,995,917 854,689
------------ -------------------
Net Increase in Net Assets Resulting from
Operations 7,180,424 891,322
------------ -------------------
DIVIDENDS TO SHAREHOLDERS FROM
Net Investment Income (179,467) --
------------ -------------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Proceeds from Shares of Beneficial Interest Sold 48,802,338 11,084,557
Reinvestment of Dividends 169,866 --
Cost of Shares of Beneficial Interest Redeemed (808,349) --
Service Charge 7,808 --
------------ -------------------
Net Increase from Shareholder Transactions 48,171,663 11,084,557
------------ -------------------
Total Increase in Net Assets 55,172,620 11,975,879
NET ASSETS
Beginning of Period 12,025,879 50,000
------------ -------------------
End of Period (including undistributed net
investment income of $45,959 and $56,306,
respectively) $ 67,198,499 $ 12,025,879
------------ -------------------
------------ -------------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
16
<PAGE>
J.P. MORGAN TAX AWARE DISCIPLINED EQUITY FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share outstanding throughout each period are as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE JANUARY 30, 1997
SIX MONTHS ENDED (COMMENCEMENT OF
APRIL 30, 1998 OPERATIONS) THROUGH
(UNAUDITED) OCTOBER 31, 1997
---------------- -----------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.08 $ 10.00
---------------- -----------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.06 0.06
Net Realized and Unrealized Gain on Investments 2.72 2.02
---------------- -----------------------
Total from Investment Operations 2.78 2.08
---------------- -----------------------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (0.10) --
---------------- -----------------------
NET ASSET VALUE, END OF PERIOD $ 14.76 $ 12.08
---------------- -----------------------
---------------- -----------------------
Total Return 23.18%(a) 20.80%(a)
---------------- -----------------------
---------------- -----------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (in thousands) $ 67,198 $12,026
Ratios to Average Net Assets
Expenses 0.55%(b) 0.55%(b)
Net Investment Income 1.02%(b) 1.19%(b)
Expenses without Reimbursement 1.22%(b) 4.59%(b)
Portfolio Turnover Rate 12% 35%
Average Broker Commissions $ 0.0235 $0.0261
</TABLE>
- ------------------------
(a) Not annualized.
(b) Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
17
<PAGE>
J.P. MORGAN TAX AWARE DISCIPLINED EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
APRIL 30, 1998
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
J.P. Morgan Tax Aware Disciplined Equity Fund (the "fund") is a series of J.P.
Morgan 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, diversified, open-end management
investment company. The fund's investment objective is to provide 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, Institutional Shares and Select Shares. Prior
to January 1, 1998, the names of the fund, trust and classes of shares were Tax
Aware Disciplined Equity Fund, JPM Series Trust, JPM Institutional Shares and
JPM Pierpont Shares, respectively. Additionally, on January 1, 1998, the JPM
Pierpont Shares of this fund were renamed Institutional Shares. Currently the
fund only offers Institutional Shares. The fund commenced operations on January
30, 1997. 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 short-term portfolio
securities with a remaining maturity of less than 60 days are valued by
the amortized cost method.
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) Substantially all the fund's net investment income is declared as
dividends and paid quarterly. Distributions to shareholders of net
realized 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 the organization
expenses of the fund. The fund 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.
18
<PAGE>
J.P. MORGAN TAX AWARE DISCIPLINED EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1998
- --------------------------------------------------------------------------------
e) 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.
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 six months ended April 30, 1998,
such fees amounted to $57,845.
b) The trust, on behalf of the fund, has retained Funds Distributor, Inc.
("FDI"), a registered broker-dealer, to serve as the 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 April 30, 1998, the fee for these services amounted to $244.
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 April 30, 1998, the fee for these services amounted to
$9,832.
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 six months ended April 30, 1998, Morgan has agreed to
reimburse the fund $111,409 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 service 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 fund. For the six months ended April 30, 1998, the fee for these
services amounted to $41,318.
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
$528 for the six months ended April 30, 1998.
19
<PAGE>
J.P. MORGAN TAX AWARE DISCIPLINED EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1998
- --------------------------------------------------------------------------------
f) An aggregate annual fee of $75,000 is paid to each trustee for serving as
a trustee of the trust, the J.P. Morgan Funds, the J.P. Morgan
Institutional Funds, and other registered investment companies in which
they invest. 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:
<TABLE>
<CAPTION>
FOR THE SIX FOR THE PERIOD
MONTHS ENDED JANUARY 30, 1997
APRIL 30, (COMMENCEMENT OF
1998 OPERATIONS) THROUGH
(UNAUDITED) OCTOBER 31, 1997
------------ -------------------
<S> <C> <C>
Shares of beneficial interest sold............... 3,604,120 990,155
Reinvestment of dividends........................ 12,682 --
Shares of beneficial interest redeemed........... (59,511) --
------------ -------------------
NET INCREASE..................................... 3,557,291 990,155
------------ -------------------
------------ -------------------
</TABLE>
Redemptions may be subject to service charges, retained by the fund, in
accordance with the following schedule:
<TABLE>
<CAPTION>
PERCENTAGE OF
YEAR SINCE PURCHASE CASH PROCEEDS
- ------------------------------------------------- -------------
<S> <C>
Shares held for less than five years............. 1%
Shares held five years or longer................. None
</TABLE>
4. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the six months
ended April 30, 1998 were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
- ----------------- ----------
<S> <C>
$52,491,920....... $4,430,169
</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 Agreement expired
on May 27, 1998, however, the fund as party to the Agreement has extended the
Agreement and will continue its participation therein for an additional 364 days
until May 26, 1999. The maximum borrowing under the Agreement is $150,000,000.
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 April
30, 1998.
20
<PAGE>
J.P. MORGAN INSTITUTIONAL FUNDS
PRIME MONEY MARKET FUND
TREASURY MONEY MARKET FUND
FEDERAL MONEY MARKET FUND
TAX EXEMPT MONEY MARKET FUND
SHORT TERM BOND FUND
BOND FUND
INTERNATIONAL BOND FUND
GLOBAL STRATEGIC INCOME FUND
TAX EXEMPT BOND FUND
NEW YORK TOTAL RETURN BOND FUND
CALIFORNIA BOND FUND: INSTITUTIONAL SHARES
DIVERSIFIED FUND
DISCIPLINED EQUITY FUND
U.S. EQUITY FUND
U.S. SMALL COMPANY FUND
TAX AWARE DISCIPLINED EQUITY FUND:
INSTITUTIONAL SHARES
INTERNATIONAL EQUITY FUND
EUROPEAN EQUITY FUND
JAPAN EQUITY FUND
INTERNATIONAL OPPORTUNITIES FUND
EMERGING MARKETS EQUITY FUND
FOR MORE INFORMATION ON THE J.P. MORGAN
INSTITUTIONAL FUNDS, CALL J.P. MORGAN FUNDS
SERVICES AT (800) 766-7722.
J.P. MORGAN
INSTITUTIONAL
TAX AWARE
DISCIPLINED
EQUITY FUND
SEMI-ANNUAL REPORT
APRIL 30, 1998
