<PAGE>
LETTER TO THE SHAREHOLDERS OF THE J.P. MORGAN INSTITUTIONAL TAX AWARE
DISCIPLINED EQUITY FUND
December 1, 1998
Dear Shareholder:
We are pleased to report that the J.P. Morgan Institutional Tax Aware
Disciplined Equity Fund provided a solid absolute return of 23.26% for the
fiscal year ended October 31, 1998. This performance is ahead of the 21.99%
return for the S&P 500 Index, and well ahead of the 9.88% 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 $14.71 per share on October 31, 1998. A distribution was made during the
reporting period of approximately $0.16 per share from ordinary income. There
were no distributions from short- or long-term capital gains. The fund's net
assets stood at approximately $90.1 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>
<CAPTION>
- --------------------------------------------------------------------------------
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
There are several ways to evaluate a mutual fund's historical performance
record. One approach is to look at the growth of a hypothetical investment of
$3,000,000 (the minimum investment in the fund). The chart at right shows that
$3,000,000 invested on January 31, 1997*, would have grown to $4,453,569 on
October 31, 1998.
Another way to look at performance is to review a fund's average annual total
return. This figure takes the fund's actual (or cumulative) return and shows
what would have happened if the fund had achieved that return by performing at a
constant rate each year. Average annual total returns represent the average
yearly change of a fund's value over various time periods, typically 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.
GROWTH OF $3,000,000 SINCE FUND INCEPTION*
JANUARY 31, 1997 -- OCTOBER 31,1998
[GRAPH]
<TABLE>
<CAPTION>
J.P. Morgan Institutional Tax Aware S&P 500 Lipper Growth and
Disciplined Equity Fund Index Income Fund Average
<S> <C> <C> <C>
Jan-97 $3,000,000 $3,000,000 $3,000,000
Mar-97 $2,892,320 $2,899,280 $2,909,120
Jun-97 $3,448,650 $3,405,440 $3,327,780
Sep-97 $3,741,780 $3,660,540 $3,625,420
Oct-97 $3,613,160 $3,538,270 $3,498,530
Mar-98 $4,381,570 $4,290,880 $4,081,450
Jun-98 $4,568,380 $4,432,570 $4,092,180
Sep-98 $4,109,030 $3,991,640 $3,528,560
Oct-98 $4,453,570 $4,316,320 $3,842,290
</TABLE>
LIPPER PERFORMANCE AVERAGES ARE CALCULATED BY TAKING AN ARITHMETIC AVERAGE OF
THE RETURNS OF THE FUNDS IN THE GROUP. THE AVERAGE ANNUALIZED RETURNS WHICH
RESULT FROM THIS METHODOLOGY WILL DIFFER FROM ANNUALIZING THE GROWTH OF THE
MINIMUM INITIAL INVESTMENT.
<TABLE>
<CAPTION>
PERFORMANCE TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS
--------------------------------- ----------------------------------
THREE SIX ONE SINCE
AS OF OCTOBER 31, 1998 MONTHS MONTHS YEAR INCEPTION*
- ---------------------------------------------------------------------------- -----------------------------------
<S> <C> <C> <C> <C>
J.P. Morgan Institutional Tax Aware
Disciplined Equity Fund -1.60% 0.06% 23.26% 25.33%
S&P 500 Index -1.57% -0.41% 21.99% 23.11%
Lipper Growth & Income Fund Average -3.64% -6.54% 9.88% 15.02%
AS OF SEPTEMBER 30, 1998
- ---------------------------------------------------------------------------- -----------------------------------
J.P. Morgan Institutional Tax Aware
Disciplined Equity Fund -10.05% -6.22% 9.82% 20.77%
S&P 500 Index -9.95% -6.97% 9.05% 18.69%
Lipper Growth & Income Fund Average -12.47% -12.20% -1.08% 11.12%
</TABLE>
*THE FUND COMMENCED OPERATIONS ON JANUARY 30, 1997, AND HAS PROVIDED AN AVERAGE
ANNUAL TOTAL RETURN OF 25.53% FROM THAT DATE THROUGH OCTOBER 31, 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 November 16, 1998, and reflects
Robin's views on that date.
THE J.P. MORGAN INSTITUTIONAL TAX AWARE DISCIPLINED EQUITY FUND ACHIEVED SOLID
ABSOLUTE AND RELATIVE PERFORMANCE THIS PAST YEAR. WHAT FACTORS CONTRIBUTED TO
THIS SUCCESS?
RC: Absolute performance was solid thanks to the continued demand for U.S.
stocks driven by a growing economy with low inflation. Strong relative
performance was achieved by meeting the fund's goal of outperforming the S&P 500
Index exclusively through stock selection. We accomplished this by constructing
a portfolio primarily consisting of stocks we deem to be undervalued and
imposing risk controls. What we mean by risk controls is that we seek to keep
the sector weightings and other characteristics of the fund comparable to those
of the S&P 500 Index. We remove market timing, sector and style/theme bets that
are popular with other active managers since our goal is to concentrate on
company-specific fundamentals. That is where we feel we can add the most value
given our extensive research team of 25 equity analysts.
Many of the economic sectors in which the fund invested contributed positively
to the fund's performance. The services sector contributed the most to the
fund's performance given our decisions to overweight Time Warner Inc. and to
underweight both Cendant Corp. and Walt Disney Co. Retail proved to be a
difficult sector, mainly because we chose to hold less than a market weight in
Wal-Mart Stores Inc. and to hold more than a market weight in Sears Roebuck &
Co. and Federated Department Stores.
Sector neutrality was critical, as in year end October 31, 1998, there were vast
differences in performance among economic sectors. For example, the telephone
industry enjoyed returns of 49%; meanwhile, the capital goods industry returns
were a disappointing -5.8%. By maintaining the fund's sector neutrality, the
portfolio was not adversely impacted by an incorrect sector decision.
3
<PAGE>
HOW DID THE RECENT MARKET TURMOIL AFFECT THE PORTFOLIO?
RC: The stocks that got hurt were those that were very cyclical in nature. In
particular, basic industry--chemicals, paper goods, and metals--as well as the
capital goods sector were harmed by the third quarter market downturn. Sectors
that were more domestically oriented fared better, as investors viewed these
stocks as more immune to the economic tumult in Russia, Asia, and Latin America.
Again, sector neutrality was our friend since the fund was not overweighted in
these troubled sectors. Increased volatility created more opportunities within
each economic sector. And, given that this is a tax-aware portfolio, we may be
able to use losses realized to offset capital gains.
SOME INVESTORS HAVE WONDERED WHY, IF THE PORTFOLIO IS TAX AWARE, THEY RECEIVE
DISTRIBUTIONS EVERY QUARTER. COULD YOU ADDRESS THIS CONCERN?
RC: These distributions are for the dividends the fund receives on the
securities held. The only way to prevent this distribution is to avoid
purchasing companies that pay dividends. This is very difficult to do since most
large capitalization companies pay some kind of dividend. Avoiding these
companies would introduce sector and style/theme bets and would increase the
volatility of the fund relative to the S&P500. The fund would not necessarily be
compensated for taking on this additional risk.
A NUMBER OF ECONOMISTS ARE CALLING FOR A RECESSION IN 1999. HOW ARE YOU
POSITIONING THE PORTFOLIO TO RESPOND TO THE THREAT OF A SUSTAINED ECONOMIC
DOWNTURN?
RC: It is very difficult to predict when or if a recession will occur. For
example, after the third quarter this year, many experts asserted that the
United States was entering a recession, but what followed was a robust October
in which many market losses were recouped.
Having said that, this portfolio is not short-term oriented. We look for the
long-term earnings potential of the companies we follow. While other portfolios
may adjust to near-term market conditions, our strategy is to estimate how
specific companies would perform in an average economic environment. Our view is
that the taxable investor should not be involved in heavy trading to make a
"quick buck," because taxes on short-term capital gains may negate the
seemingly higher returns. While the short-term return may be higher, once taxes
are considered, investors are often better off staying with a company with
better fundamentals that they can hold onto for a long time.
4
<PAGE>
AS TAX AWARE STRATEGIES GAIN FAVOR, WHAT ARE THE KEY ATTRIBUTES THIS FUND OFFERS
VERSUS A SIMILARLY INVESTED FUND WITHOUT A TAX AWARE STRATEGY?
RC: A fund that is not tax-aware does not pay as much attention to realized
capital gains. When a portfolio manager sells a security within the fund, a gain
(or loss) is "realized." At the end of the year the fund must distribute the
realized gains (in excess of any losses realized) to the shareholders. Fund
managers may scramble at the end of the year to realize losses to offset these
gains. Sometimes sufficient losses may not be available to offset all the gains
or the fund manager may not want to sell a particular security because it is
considered to be a desirable holding. We keep our eye on the amount of gains
realized throughout the entire year to try to ensure that shareholders are not
stuck with a large year-end distribution, recognizing that it is especially
frustrating for shareholders to receive a distribution in a year when the fund
may not have appreciated or perhaps even depreciated. To keep the year-end
distribution low, we offset realized gains with realized losses to the extent
practicable. We evaluate if the additional expected return of a new holding
offsets the tax cost of selling an existing holding. The fund employs the
specific lot identification method of inventory accounting, which permits us to
identify the specific cost lots to sell. In addition, we generally aim to retain
securities for more than one year so that any gains realized on their sale and
distributed would be taxed at the lower long-term capital gains tax rate by the
shareholder.
5
<PAGE>
FUND FACTS
INVESTMENT OBJECTIVE
J.P. Morgan Institutional 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 INVESTMENT OPERATIONS
1/30/97
- --------------------------------------------------------------------------------
FUND NET ASSETS AS OF 10/31/98
$90,079,166
- --------------------------------------------------------------------------------
DIVIDEND PAYABLE DATE
12/18/98
- --------------------------------------------------------------------------------
CAPITAL GAIN PAYABLE DATE (IF APPLICABLE)
12/18/98
EXPENSE RATIO
The fund's current annual 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 OCTOBER 31, 1998
PORTFOLIO ALLOCATION
(AS A PERCENTAGE OF TOTAL INVESTMENTS)
[CHART]
<TABLE>
<S> <C>
CONSUMER GOODS & SERVICES 22.0%
TECHNOLOGY 17.8%
FINANCE 16.7%
HEALTH CARE 12.9%
INDUSTRIAL PRODUCTS & SERVICES 9.6%
UTILITIES 8.8%
ENERGY 7.1%
BASIC INDUSTRIES 3.9%
TRANSPORTATION 1.2%
</TABLE>
<TABLE>
<CAPTION>
LARGEST EQUITY HOLDINGS % OF TOTAL INVESTMENTS
- -----------------------------------------------------------------
<S> <C>
MICROSOFT CORP. (TECHNOLOGY) 3.3%
GENERAL ELECTRIC CO.
(INDUSTRIAL PRODUCTS & SERVICES) 2.4%
PHILIP MORRIS COMPANIES, INC.
(CONSUMER GOODS & SERVICES) 2.4%
BRISTOL-MYERS SQUIBB CO. (HEALTH CARE) 2.2%
BANKAMERICA CORP. (FINANCE) 2.1%
INTEL CORP. (TECHNOLOGY) 2.1%
INTERNATIONAL BUSINESS MACHINES CORP.
(TECHNOLOGY) 2.1%
GTE CORP. (UTILITIES) 1.9%
CISCO SYSTEMS, INC. (TECHNOLOGY) 1.9%
MCI WORLDCOM, INC. (TECHNOLOGY) 1.9%
</TABLE>
6
<PAGE>
DISTRIBUTED BY FUNDS DISTRIBUTOR, INC. J.P. MORGAN INVESTMENT MANAGEMENT INC.
SERVES AS INVESTMENT ADVISOR. 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 WORTH MORE OR LESS
THAN ORIGINAL COST.
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 INSTITUTIONAL TAX AWARE DISCIPLINED EQUITY FUND
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- -------- ------------
<S> <C> <C>
COMMON STOCKS (99.7%)
BASIC INDUSTRIES (3.9%)
AGRICULTURE (0.0%)
Agribrands International, Inc.+.................. 100 $ 2,931
Pioneer Hi-Bred International, Inc............... 500 14,000
------------
16,931
------------
CHEMICALS (2.0%)
Crompton & Knowles Corp.......................... 600 9,637
Dow Chemical Co.................................. 7,600 711,550
E.I. du Pont de Nemours & Co..................... 4,400 253,000
Lyondell Chemical Co............................. 23,400 394,875
Rohm & Haas Co................................... 3,000 101,250
Union Carbide Corp............................... 8,100 311,850
------------
1,782,162
------------
FOREST PRODUCTS & PAPER (0.5%)
Georgia-Pacific Corp............................. 5,900 305,325
Stone Container Corp.+........................... 5,300 50,681
Temple-Inland, Inc............................... 1,600 77,700
------------
433,706
------------
METALS & MINING (1.4%)
Alcan Aluminum Ltd.(i)........................... 500 12,656
Allegheny Teledyne, Inc.......................... 42,750 879,047
USEC, Inc.+...................................... 24,400 356,850
------------
1,248,553
------------
TOTAL BASIC INDUSTRIES......................... 3,481,352
------------
CONSUMER GOODS & SERVICES (22.0%)
AUTOMOTIVE (1.6%)
Chrysler Corp.................................... 9,300 447,562
Dana Corp........................................ 4,057 169,633
Ford Motor Co.................................... 5,700 309,225
General Motors Corp.............................. 2,000 126,125
Goodyear Tire and Rubber Co...................... 4,600 247,825
Lear Corp.+...................................... 4,200 134,925
------------
1,435,295
------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- -------- ------------
<S> <C> <C>
BROADCASTING & PUBLISHING (0.6%)
Comcast Corp., Class A........................... 5,500 $ 271,734
Gannett Co., Inc................................. 200 12,375
Tele-Communications TCI Ventures Group+.......... 8,810 163,811
Tele-Communications, Inc., Series A+............. 2,345 98,637
------------
546,557
------------
ENTERTAINMENT, LEISURE & MEDIA (3.1%)
Hasbro, Inc...................................... 1,200 42,075
International Game Technology.................... 8,500 191,781
Mattel, Inc...................................... 13,100 469,962
Mirage Resorts, Inc.+............................ 12,200 206,637
Seagram Company Ltd.(i).......................... 27,700 910,637
Time Warner, Inc................................. 8,300 770,344
Viacom, Inc., Class B+........................... 2,200 131,725
Walt Disney Co................................... 2,900 78,119
------------
2,801,280
------------
FOOD, BEVERAGES & TOBACCO (7.7%)
Anheuser Busch Companies, Inc.................... 2,600 154,537
Bestfoods........................................ 1,500 81,750
Campbell Soup Co................................. 7,400 394,512
Coca-Cola Co..................................... 24,100 1,629,762
Corn Products International, Inc................. 50 1,425
General Mills, Inc............................... 2,100 154,350
PepsiCo, Inc..................................... 21,700 732,375
Philip Morris Companies, Inc..................... 41,800 2,137,025
Ralston-Ralston Purina Group..................... 14,600 487,275
Sara Lee Corp.................................... 3,300 196,969
Unilever NV (ADR)(i)............................. 12,500 940,625
------------
6,910,605
------------
HOUSEHOLD APPLIANCES & FURNISHINGS (0.5%)
Furniture Brands International, Inc.+............ 2,200 47,300
Leggett & Platt, Inc............................. 11,500 268,812
Whirlpool Corp................................... 3,200 164,000
------------
480,112
------------
HOUSEHOLD PRODUCTS (1.5%)
Procter & Gamble Co.............................. 15,100 1,342,012
------------
PERSONAL CARE (0.4%)
Gillette Co...................................... 7,000 314,562
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
8
<PAGE>
J.P. MORGAN INSTITUTIONAL TAX AWARE DISCIPLINED EQUITY FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- -------- ------------
<S> <C> <C>
RESTAURANTS & HOTELS (0.4%)
Extended Stay America, Inc.+..................... 300 $ 2,887
McDonald's Corp.................................. 5,200 347,750
------------
350,637
------------
RETAIL (5.8%)
Albertson's, Inc................................. 1,200 66,675
American Stores Co............................... 8,200 267,012
AutoZone, Inc.+.................................. 7,600 199,975
Best Buy Co., Inc.+.............................. 1,000 48,000
Circuit City Stores, Inc......................... 6,800 246,075
CompUSA, Inc.+................................... 200 2,775
Corporate Express, Inc........................... 1,800 20,981
Dayton Hudson Corp............................... 6,600 279,675
Dillard's, Inc., Class A......................... 800 24,850
Federated Department Stores, Inc.+............... 8,400 322,875
Gap, Inc......................................... 4,200 252,525
General Nutrition Companies, Inc................. 4,700 68,591
Hannaford Brothers Co............................ 6,200 271,637
Home Depot, Inc.................................. 7,900 343,650
J.C. Penney, Inc................................. 4,900 232,750
Kmart Corp.+..................................... 9,300 131,362
Kroger Co.+...................................... 300 16,650
Safeway, Inc.+................................... 3,500 167,344
Sears, Roebuck & Co.............................. 14,300 642,606
TJX Companies, Inc............................... 22,700 429,881
Toys 'R' Us, Inc.+............................... 3,000 58,687
Wal-Mart Stores, Inc............................. 15,800 1,090,200
------------
5,184,776
------------
TEXTILES (0.4%)
Fruit of the Loom, Inc., Class A+................ 9,100 138,775
Unifi, Inc....................................... 12,600 212,625
------------
351,400
------------
TOTAL CONSUMER GOODS & SERVICES................ 19,717,236
------------
ENERGY (7.0%)
OIL-PRODUCTION (6.7%)
Amoco Corp....................................... 14,700 825,037
Atlantic Richfield Co............................ 15,500 1,067,562
Chevron Corp..................................... 600 48,900
Exxon Corp....................................... 15,200 1,083,000
Mobil Corp....................................... 14,100 1,067,194
Phillips Petroleum Co............................ 8,300 358,975
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- -------- ------------
<S> <C> <C>
OIL-PRODUCTION (CONTINUED)
Royal Dutch Petroleum Co. (ADR)(i)............... 25,500 $ 1,255,875
Texaco, Inc...................................... 1,200 71,175
Tosco Corp....................................... 6,700 188,019
Valero Energy Corp............................... 4,200 105,000
------------
6,070,737
------------
OIL-SERVICES (0.3%)
R&B Falcon Corp.+................................ 16,400 222,425
Schlumberger Ltd.(i)............................. 1,700 89,250
------------
311,675
------------
TOTAL ENERGY................................... 6,382,412
------------
FINANCE (16.6%)
BANKING (9.2%)
Astoria Financial Corp........................... 12,140 523,917
Bank One Corp.................................... 40 1,955
BankAmerica Corp................................. 33,273 1,911,118
Bankers Trust Corp............................... 9,500 596,719
Charter One Financial, Inc....................... 871 23,844
Chase Manhattan Corp............................. 5,300 301,106
Citigroup, Inc................................... 32,636 1,535,932
Commercial Federal Corp.......................... 1,500 34,031
Compass Bancshares, Inc.......................... 1,300 47,816
Dime Bancorp, Inc................................ 9,500 226,219
First Union Corp................................. 12,680 735,440
KeyCorp.......................................... 19,100 578,969
National Commerce Bancorporation................. 9,200 164,162
Norwest Corp..................................... 6,900 256,594
Pacific Century Financial Corp................... 1,300 26,487
Provident Financial Group, Inc................... 3,500 134,859
Republic New York Corp........................... 400 16,725
Southtrust Corp.................................. 3,650 133,111
TCF Financial Corp............................... 14,700 346,369
Washington Mutual, Inc........................... 12,141 454,149
Wells Fargo & Co................................. 700 259,000
------------
8,308,522
------------
FINANCIAL SERVICES (3.6%)
American Express Co.............................. 5,000 441,875
Associates First Capital Corp., Class A.......... 5,010 353,205
Capital One Financial Corp....................... 600 61,050
Equifax, Inc..................................... 8,100 313,369
Federal National Mortgage Association............ 15,000 1,062,187
Finova Group, Inc................................ 3,000 146,250
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
9
<PAGE>
J.P. MORGAN INSTITUTIONAL TAX AWARE DISCIPLINED EQUITY FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- -------- ------------
<S> <C> <C>
FINANCIAL SERVICES (CONTINUED)
Household International, Inc..................... 5,759 $ 210,563
Merrill Lynch & Company, Inc..................... 500 29,625
Morgan Stanley Dean Witter....................... 7,930 513,467
Ocwen Financial Corp.+........................... 8,600 103,200
------------
3,234,791
------------
INSURANCE (3.8%)
Aegon NV (ARE)(i)................................ 348 30,406
Allstate Corp.................................... 15,600 671,775
Ambac Financial Group, Inc....................... 2,300 133,831
American International Group, Inc................ 10,850 924,963
Fremont General Corp............................. 800 39,500
Marsh & McLennan Companies, Inc.................. 7,550 419,025
MBIA, Inc........................................ 8,100 495,113
Mercury General Corp............................. 1,300 55,250
St. Paul Companies, Inc.......................... 9,100 301,438
UNUM Corp........................................ 7,900 351,056
------------
3,422,357
------------
REAL ESTATE INVESTMENT TRUSTS (0.0%)
Starwood Lodging Trust........................... 183 5,181
------------
TOTAL FINANCE.................................. 14,970,851
------------
HEALTHCARE (12.8%)
BIOTECHNOLOGY (0.4%)
Amgen, Inc.+..................................... 900 70,734
Genzyme Corp..................................... 7,500 315,234
Immunex Corp..................................... 200 13,813
------------
399,781
------------
HEALTH SERVICES (2.0%)
Abbott Laboratories.............................. 8,600 403,663
Aetna, Inc....................................... 1,200 89,550
Bausch & Lomb, Inc............................... 2,600 108,388
Boston Scientific Corp.+......................... 1,400 76,213
Columbia / HCA Healthcare Corp................... 6,600 138,600
HCR Manor Care, Inc.............................. 800 26,000
Humana, Inc...................................... 11,500 217,781
Perkin-Elmer Corp................................ 1,500 126,469
Tenet Healthcare Corp.+.......................... 17,000 474,938
United Healthcare Corp........................... 2,200 95,838
------------
1,757,440
------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- -------- ------------
<S> <C> <C>
MEDICAL SUPPLIES (0.1%)
Medtronic, Inc................................... 1,600 $ 104,000
------------
PHARMACEUTICALS (10.3%)
Alza Corp.+...................................... 10,300 493,113
American Home Products Corp...................... 20,600 1,004,250
Bristol-Myers Squibb Co.......................... 18,100 2,001,181
Eli Lilly & Co................................... 7,500 607,031
Forest Laboratories, Inc......................... 6,300 263,419
Johnson & Johnson................................ 6,900 562,350
MedImmune, Inc.+................................. 1,300 87,506
Merck & Co., Inc................................. 7,600 1,027,900
Monsanto Co...................................... 25,900 1,052,188
Pfizer, Inc...................................... 11,000 1,180,438
Schering-Plough Corp............................. 2,500 257,188
Warner-Lambert Co................................ 9,900 775,913
------------
9,312,477
------------
TOTAL HEALTHCARE............................... 11,573,698
------------
INDUSTRIAL PRODUCTS & SERVICES (9.5%)
BUILDING MATERIALS (0.0%)
Sherwin-Williams Co.............................. 100 2,519
------------
CAPITAL GOODS (0.3%)
Eaton Corp....................................... 3,900 263,981
------------
COMMERCIAL SERVICES (1.0%)
Cendant Corp.+................................... 20,000 228,750
Service Corp. International...................... 19,500 694,688
------------
923,438
------------
DIVERSIFIED MANUFACTURING (6.9%)
AlliedSignal, Inc................................ 20,600 802,113
Cooper Industries, Inc........................... 8,500 375,063
Deere & Co....................................... 3,000 106,125
Eastman Kodak Co................................. 5,900 457,250
General Electric Co.............................. 24,700 2,161,250
Harris Corp...................................... 10,800 378,675
ITT Industries, Inc.............................. 700 25,025
Johnson Controls, Inc............................ 15,500 871,875
Tyco International Ltd.(i)....................... 17,122 1,060,494
------------
6,237,870
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
10
<PAGE>
J.P. MORGAN INSTITUTIONAL TAX AWARE DISCIPLINED EQUITY FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- -------- ------------
<S> <C> <C>
ELECTRICAL EQUIPMENT (0.3%)
W.W. Grainger, Inc............................... 5,300 $ 244,131
------------
PACKAGING & CONTAINERS (0.3%)
Kimberly-Clark Corp.............................. 5,500 265,375
------------
POLLUTION CONTROL (0.7%)
Waste Management, Inc............................ 14,107 636,578
------------
TOTAL INDUSTRIAL PRODUCTS & SERVICES........... 8,573,892
------------
TECHNOLOGY (17.8%)
AEROSPACE (0.5%)
Boeing Co........................................ 9,200 345,000
Coltec Industries, Inc.+......................... 4,500 75,094
General Dynamics Corp............................ 200 11,838
Lockheed Martin Corp............................. 100 11,138
------------
443,070
------------
COMPUTER SOFTWARE (4.0%)
Autodesk, Inc.................................... 800 25,075
BMC Software, Inc.+.............................. 1,900 91,259
Computer Associates International, Inc........... 2,650 104,344
Microsoft Corp.+................................. 28,000 2,965,375
Oracle Corp.+.................................... 11,750 347,359
PeopleSoft, Inc.+................................ 1,100 23,272
------------
3,556,684
------------
COMPUTER SYSTEMS (4.9%)
Compaq Computer Corp............................. 6,700 211,888
Dell Computer Corp.+............................. 10,300 674,972
EMC Corp.+....................................... 10,600 682,375
International Business Machines Corp............. 12,400 1,840,625
Sun Microsystems, Inc.+.......................... 16,700 971,731
------------
4,381,591
------------
ELECTRONICS (2.0%)
Cisco Systems, Inc.+............................. 27,125 1,711,418
Rockwell International Corp...................... 3,100 127,294
------------
1,838,712
------------
INFORMATION PROCESSING (0.1%)
First Data Corp.................................. 3,800 100,700
------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- -------- ------------
<S> <C> <C>
SEMICONDUCTORS (2.8%)
Intel Corp....................................... 20,800 $ 1,855,750
Motorola, Inc.................................... 1,700 88,400
Texas Instruments, Inc........................... 8,400 537,075
------------
2,481,225
------------
TELECOMMUNICATION SERVICES (1.9%)
MCI WorldCom, Inc.+.............................. 30,839 1,704,818
US WEST, Inc..................................... 79 4,533
------------
1,709,351
------------
TELECOMMUNICATIONS (0.1%)
Airtouch Communications, Inc.+................... 1,500 84,000
Northern Telecom Ltd.(i)......................... 20 856
------------
84,856
------------
TELECOMMUNICATIONS-EQUIPMENT (1.5%)
Lucent Technologies, Inc......................... 17,200 1,379,225
------------
TOTAL TECHNOLOGY............................... 15,975,414
------------
TRANSPORTATION (1.2%)
RAILROADS (0.9%)
CSX Corp......................................... 7,700 302,225
Union Pacific Corp............................... 11,500 547,688
------------
849,913
------------
TRUCK & FREIGHT CARRIERS (0.3%)
CNF Transportation, Inc.......................... 7,600 229,900
------------
TOTAL TRANSPORTATION........................... 1,079,813
------------
UTILITIES (8.9%)
ELECTRIC (1.9%)
Central & South West Corp........................ 9,900 275,344
Entergy Corp..................................... 3,100 89,125
Northeast Utilities+............................. 1,100 17,188
Northern States Power Co......................... 11,300 305,100
PG&E Corp........................................ 1,001 30,468
PP&L Resources, Inc.............................. 19,500 528,938
Southern Co...................................... 3,200 90,200
Western Resources, Inc........................... 2,300 80,500
Wisconsin Energy Corp............................ 8,900 272,563
------------
1,689,426
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
11
<PAGE>
J.P. MORGAN INSTITUTIONAL TAX AWARE DISCIPLINED EQUITY FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- -------- ------------
<S> <C> <C>
GAS-PIPELINES (0.9%)
Columbia Energy Group............................ 5,500 $ 318,313
Enron Corp....................................... 3,000 158,250
K N Energy, Inc.................................. 6,500 322,969
------------
799,532
------------
NATURAL GAS (0.2%)
El Paso Energy Corp.............................. 5,100 180,731
------------
TELEPHONE (5.9%)
Ameritech Corp................................... 500 26,969
AT & T Corp...................................... 20,200 1,257,450
Bell Atlantic Corp............................... 8,860 470,688
Bellsouth Corp................................... 900 71,831
Cincinnati Bell, Inc............................. 1,300 33,719
Frontier Corp.................................... 6,900 207,431
GTE Corp......................................... 29,600 1,737,150
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- -------- ------------
<S> <C> <C>
TELEPHONE (CONTINUED)
SBC Communications, Inc.......................... 27,200 $ 1,259,700
Sprint Corp...................................... 3,700 283,975
------------
5,348,913
------------
TOTAL UTILITIES................................ 8,018,602
------------
TOTAL COMMON STOCKS
(COST $81,108,566)............................ 89,773,270
------------
TOTAL INVESTMENTS
(COST $81,108,566) (99.7%)............................... 89,773,270
OTHER ASSETS IN EXCESS OF LIABILITIES (0.3%)...............
305,896
------------
NET ASSETS (100.0%)........................................ $ 90,079,166
------------
------------
</TABLE>
- ------------------------------
Note: Based on the cost of investments of $81,118,875 for federal income tax
purposes at October 31, 1998, the aggregate gross unrealized appreciation and
depreciation was $11,133,265 and $2,478,870, respectively, resulting in net
unrealized appreciation of $8,654,395.
+ - Non-income producing security.
(i) - Foreign security.
ADR - American Depositary Receipt.
ARE - American Registered Share.
The Accompanying Notes are an Integral Part of the Financial Statements.
12
<PAGE>
J.P. MORGAN INSTITUTIONAL TAX AWARE DISCIPLINED EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $81,108,566 ) $89,773,270
Receivable for Investments Sold 379,076
Receivable for Fund Shares Sold 212,728
Receivable for Expense Reimbursements 80,061
Dividends Receivable 68,613
Deferred Organization Expenses 30,921
Interest Receivable 2,500
Prepaid Trustees' Fees 139
Prepaid Expenses and Other Assets 593
-----------
Total Assets 90,547,901
-----------
LIABILITIES
Payable for Investments Purchased 304,292
Advisory Fee Payable 24,557
Payable to Custodian 20,787
Shareholder Servicing Fee Payable 16,971
Custody Fee Payable 16,492
Organization Expenses Payable 12,060
Administrative Services Fee Payable 3,953
Payable for Fund Shares Redeemed 601
Administration Fee Payable 171
Fund Services Fee Payable 69
Accrued Expenses 68,782
-----------
Total Liabilities 468,735
-----------
NET ASSETS
Applicable to 6,123,072 shares outstanding
(par value $0.001, unlimited shares authorized) $90,079,166
-----------
-----------
Net Asset Value, Offering and Redemption Price
per Share $14.71
-----
-----
ANALYSIS OF NET ASSETS
Paid-in Capital $82,316,403
Undistributed Net Investment Income 72,671
Accumulated Net Realized Loss on Investments (974,612)
Net Unrealized Appreciation of Investments 8,664,704
-----------
Net Assets $90,079,166
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
13
<PAGE>
J.P. MORGAN INSTITUTIONAL TAX AWARE DISCIPLINED EQUITY FUND
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividend Income (Net of Foreign Withholding Tax
of $6,009 ) $ 808,748
Interest Income 37,582
----------
Investment Income 846,330
EXPENSES
Advisory Fee $ 195,083
Shareholder Servicing Fee 108,894
Custodian Fees and Expenses 90,128
Professional Fees and Expenses 43,879
Registration Fees 40,982
Administrative Services Fee 32,142
Transfer Agent Fee 26,189
Printing Expenses 14,740
Amortization of Organization Expenses 9,508
Fund Services Fee 1,578
Administration Fee 744
Trustees' Fees and Expenses 474
Miscellaneous 3,359
---------
Total Expenses 567,700
Less: Reimbursement of Expenses (261,143)
---------
NET EXPENSES 306,557
----------
NET INVESTMENT INCOME 539,773
NET REALIZED LOSS ON INVESTMENTS (954,939)
NET CHANGE IN UNREALIZED APPRECIATION OF
INVESTMENTS 7,810,015
----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $7,394,849
----------
----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
14
<PAGE>
J.P. MORGAN INSTITUTIONAL TAX AWARE DISCIPLINED EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 30, 1997
FOR THE FISCAL (COMMENCEMENT OF
YEAR ENDED OPERATIONS) THROUGH
OCTOBER 31, 1998 OCTOBER 31, 1997
---------------- -------------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 539,773 $ 56,306
Net Realized Loss on Investments (954,939) (19,673)
Net Change in Unrealized Appreciation of
Investments 7,810,015 854,689
---------------- -------------------
Net Increase in Net Assets Resulting from
Operations 7,394,849 891,322
---------------- -------------------
DIVIDENDS TO SHAREHOLDERS FROM
Net Investment Income (523,408) --
---------------- -------------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Proceeds from Shares of Beneficial Interest Sold 74,412,898 11,084,557
Reinvestment of Dividends 517,796 --
Cost of Shares of Beneficial Interest Redeemed (3,775,057) --
Service Charge 26,209 --
---------------- -------------------
Net Increase from Shareholder Transactions 71,181,846 11,084,557
---------------- -------------------
Total Increase in Net Assets 78,053,287 11,975,879
NET ASSETS
Beginning of Period 12,025,879 50,000
---------------- -------------------
End of Period (including undistributed net
investment income of $72,671 and $56,306,
respectively) $ 90,079,166 $ 12,025,879
---------------- -------------------
---------------- -------------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
15
<PAGE>
J.P. MORGAN INSTITUTIONAL TAX AWARE DISCIPLINED EQUITY FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share outstanding throughout each period are as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 30, 1997
FOR THE (COMMENCEMENT OF
FISCAL YEAR ENDED OPERATIONS) THROUGH
OCTOBER 31, 1998 OCTOBER 31, 1997
----------------- -------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.08 $ 10.00
----------------- -------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.11 0.06
Net Realized and Unrealized Gain on Investments 2.68 2.02
----------------- -------------------
Total from Investment Operations 2.79 2.08
----------------- -------------------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (0.16) --
----------------- -------------------
NET ASSET VALUE, END OF PERIOD $ 14.71 $ 12.08
----------------- -------------------
----------------- -------------------
RATIOS AND SUPPLEMENTAL DATA
Total Return 23.26% 20.80%(a)
Net Assets, End of Period (in thousands) $ 90,079 $ 12,026
Ratios to Average Net Assets
Expenses 0.55% 0.55%(b)
Net Investment Income 0.97% 1.19%(b)
Expenses Without Reimbursement 1.02% 4.59%(b)
Portfolio Turnover Rate 57% 35%
</TABLE>
- ------------------------
(a) Not annualized.
(b) Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
16
<PAGE>
J.P. MORGAN INSTITUTIONAL TAX AWARE DISCIPLINED EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 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 exchanges. 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"), a wholly owned subsidiary
of J.P. Morgan & Co Incorporated ("J.P.
17
<PAGE>
J.P. MORGAN INSTITUTIONAL TAX AWARE DISCIPLINED EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
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.
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.
f) For Federal income tax purposes, the fund had a capital loss carryforward
of $964,303 at October 31, 1998, of which $19,095 will expire in the year
2005 and $945,208 will expire in the year 2006. To the extent that this
capital loss is used to offset future capital gains, it is probable that
the gains so offset will not be distributed to shareholders.
g) The fund accounts for and reports distributions to shareholder in
accordance with Statement of Position 93-2 "Determination, Disclosure, and
Financial Statement Presentation of Income, Capital Gain, and Return of
Capital Distributions by Investment Companies."
2. TRANSACTIONS WITH AFFILIATES
a) Prior to October 1, 1998, the fund had an Investment Advisory Agreement
with Morgan. Under the terms of the agreement, the fund paid Morgan at an
annual rate of 0.35% of the fund's average daily net assets. Effective
October 1, 1998, the fund's Investment Advisor is J.P. Morgan Investment
Management Inc. ("JPMIM"), an affiliate of Morgan and a wholly owned
subsidiary of J.P. Morgan and the terms of the agreement will remain the
same. For the fiscal year ended October 31, 1998, such fees amounted to
$195,083.
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
fiscal year ended October 31, 1998, the fee for these services amounted to
$744.
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 JPMIM 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
18
<PAGE>
J.P. MORGAN INSTITUTIONAL TAX AWARE DISCIPLINED EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
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
similar services. For the fiscal year ended October 31, 1998, the fee for
these services amounted to $32,142.
In addition, J.P. 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. This reimbursement arrangement can be changed or terminated at
any time after February 28, 1999 at the option of J.P. Morgan. For the
fiscal year ended October 31, 1998, J.P. Morgan has agreed to reimburse
the fund $261,143 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. This rate was 0.25% of the average daily
net assets of the fund from November 1, 1998 through July 31, 1998.
Effective August 1, 1998 the rate was decreased to 0.10%. For the fiscal
year ended October 31, 1998, the fee for these services amounted to
$108,894.
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
$1,578 for the fiscal year ended October 31, 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 $300.
3. TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the trustees to issue an unlimited number of
full and fractional shares of beneficial interest of one or more series.
Transactions in shares of beneficial interest of the fund were as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 30, 1997
(COMMENCEMENT OF
FOR THE YEAR ENDED OPERATIONS) THROUGH
OCTOBER 31, 1998 OCTOBER 31, 1997
------------------ -------------------
<S> <C> <C>
Shares of beneficial interest sold............... 5,366,501 990,155
Reinvestment of dividends........................ 36,061 --
Shares of beneficial interest redeemed........... (274,645) --
------------------ -------------------
NET INCREASE..................................... 5,127,917 990,155
------------------ -------------------
------------------ -------------------
</TABLE>
19
<PAGE>
J.P. MORGAN INSTITUTIONAL TAX AWARE DISCIPLINED EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
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.
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 fiscal year
ended October 31, 1998 were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
- ----------------- -----------
<S> <C>
$ 102,970,499 $32,146,685
</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 Agreement was $100,000,000. The agreement expired on May 27, 1998,
however, the fund as party to the Agreement has extended the Agreement and
continues its participation therein for an additional 364 days until May 26,
1999.The maximum borrowing under the new 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 allocable to the
funds in accordance with procedures established by their respective trustees or
directors. There were no outstanding borrowings pursuant to the Agreement as of
October 31, 1998.
20
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of
J.P. Morgan Institutional Tax Aware Disciplined Equity Fund
(Formerly Tax Aware Disciplined Equity Fund)
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of J.P. Morgan Institutional Tax Aware
Disciplined Equity Fund (one of the funds comprising J.P. Morgan Series Trust,
hereafter referred to as the "fund") at October 31, 1998, the results of its
operations for the year then ended, and the changes in its net assets and the
financial highlights for the year then ended and for the period January 30, 1997
(commencement of operations) through October 31, 1997, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at October 31, 1998 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
December 17, 1998
21
<PAGE>
J.P. MORGAN INSTITUTIONAL TAX AWARE DISCIPLINED EQUITY FUND
SUPPLEMENTAL PROXY INFORMATION
- --------------------------------------------------------------------------------
A Joint Special Meeting of Shareholders of the J.P. Morgan Family of Funds was
held on August 20, 1998. Each of the applicable funds voted in favor of adopting
the following proposals, therefore, the results are aggregated for the trust
unless otherwise specified. The meeting was held for the following purposes:
1. To elect a slate of five trustees to hold office for a term of unlimited
duration subject to the current retirement age of 70.
2a.To approve the amendment of the fund's investment restriction relating to
diversification of assets.
2b.To approve the amendment of the fund's investment restriction relating to
concentration of assets in a particular industry.
2c.To approve the amendment of the fund's investment restrictions relating to
the issuance of senior securities.
2d.To standardize the borrowing ability of the fund to the extent permitted by
applicable law.
2e.To approve the amendment of the fund's investment restriction relating to
underwriting.
2f. To approve the amendment of the fund's investment restriction relating to
investment in real estate.
2g.To approve the amendment of the fund's investment restriction relating to
commodities.
2h.To approve the amendment of the fund's investment restriction relating to
lending.
2i. To approve the reclassification of the fund's other fundamental restrictions
as nonfundamental.
3. To approve the reclassification of the fund's investment objective from
fundamental to nonfundamental.
4. To approve a new investment advisory agreement of the fund.
5. To amend the Declaration of Trust to provide dollar-based voting rights.
6. To ratify the selection of independent accountants, PricewaterhouseCoopers
LLP.
The results of the proxy solicitation on the above matters were as follows:
<TABLE>
<CAPTION>
VOTES
DIRECTORS/MATTER VOTES FOR AGAINST ABSTENTIONS
- ------------------------------------------------------------------------------------- ------------- ------------ -----------
<C> <S> <C> <C> <C> <C>
1. Frederick S. Addy......................................................... 107,823,043 6,550 --
William G. Burns.......................................................... 107,823,043 6,550 --
Arthur C. Eschenlauer..................................................... 107,823,043 6,550 --
Matthew Healey............................................................ 107,817,936 11,657 --
Michael P. Mallardi....................................................... 107,823,043 6,550 --
2. Amending of Investment Restrictions:
a. Relating to diversification of assets.......................... 36,821,707 146,750 113,675
b. Relating to concentration of assets............................ 36,960,592 7,865 113,675
c. Relating to issuance of senior securities...................... 36,960,592 7,865 113,675
d. Relating to borrowing.......................................... 36,792,586 175,871 113,675
e. Relating to underwriting....................................... 36,792,586 175,871 113,675
f. Relating to investment in real estate.......................... 36,821,707 146,750 113,675
g. Relating to commodities........................................ 36,821,707 7,864 252,561
h. Relating to lending............................................ 36,931,472 36,985 113,675
i. Reclassification of other restrictions as nonfundamental....... 36,792,586 175,871 113,675
3. Reclassification of investment objectives................................. N/A N/A N/A
4. Investment advisory agreement............................................. 36,827,572 140,900 113,675
5. Dollar-based voting rights................................................ N/A N/A N/A
6. Independent accountants, PricewaterhouseCoopers LLP....................... 107,567,491 145,945 116,168
</TABLE>
22
<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
GLOBAL STRATEGIC INCOME FUND
TAX EXEMPT BOND FUND
NEW YORK TAX EXEMPT 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
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
ANNUAL REPORT
OCTOBER 31, 1998
