[front cover]
J.P. MORGAN
CALIFORNIA BOND FUND
[jp morgan logo]
Semiannual Report
October 31, 2000
<PAGE>
LETTER TO THE SHAREHOLDERS
--------------------------------------------------------------------------------
December 1, 2000
Dear Shareholder,
We are pleased to report that the J.P. Morgan California Bond Fund
outperformed its benchmark, the Lehman Brothers 1-16 year Municipal Bond Index,
for the six months ended October 31, 2000. The Fund's two share
classes--Institutional and Select--provided total returns of 5.26% and 5.14%,
respectively, while the benchmark had a total return of 4.86% during the same
time period.
The 30-day SEC yield as of October 31, 2000 was 4.35% for Institutional
Shares, and 4.21% for the Select Shares. This is equivalent to a taxable yield
of 7.20% and 6.97%, respectively, for an investor in the top federal income tax
bracket of 39.6%.
The net asset value of the Institutional Shares at mid-year increased to
$10.32 from $10.03 on April 30, 2000, after distributions totaling approximately
$0.23 per share over the last six months, all of which was exempt from federal
income tax.
Similarly, the net asset value of Select shares increased to $10.49 from
$10.20 over the same time period, after distributions totaling approximately
$0.23 a share, all of which was exempt from federal income tax.
On the following pages, the Funds' portfolio managers--Kit Wood, Benjamin
Thompson, and Robert Meiselas--discuss the fixed income market in detail. The
managers also explain the factors that influenced the Funds' performance during
the fiscal period, and provide insight in regard to positioning the Funds for
the coming months.
As chairman and president of Asset Management Services, we appreciate your
investment in the Funds. If you have any comments or questions, please contact
your Morgan representative, or call J.P. Morgan Funds Services at (800) 766-7722
(Institutional Shares) or (800) 521-5411 (Select Shares).
/signature/ /signature/
Sincerely yours,
Ramon de Oliveira Keith M. Schappert
Chairman of Asset Management Services President of Asset Management Services
J.P. Morgan & Co. Incorporated J.P. Morgan & Co. Incorporated
TABLE OF CONTENTS
--------------------------------------------------------------------------------
Letter to the Shareholders 1
Fund Performance 2
Portfolio Manager Q&A 4
Fund Facts & Highlights 6
Financial Statements 7
1
<PAGE>
CALIFORNIA BOND FUND PERFORMANCE - INSTITUTIONAL SHARES
--------------------------------------------------------------------------------
EXAMINING PERFORMANCE
One way to look at performance is to review a fund's average annual total
return. This calculation takes the Fund's actual 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
in a fund's value over various time periods, typically one, five, and 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.
PERFORMANCE
<TABLE>
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURNS TOTAL RETURNS
----------------------- ------------------------------
SIX ONE THREE SINCE
MONTHS YEAR YEARS INCEPTION*
AS OF OCTOBER 31, 2000
<S> <C> <C> <C> <C>
J.P. Morgan California Bond Fund:
Institutional Shares 5.26% 7.86% 4.78% 5.22%
Lehman Brothers 1-16 Year Municipal Bond Index** 4.86% 7.13% 4.80% 5.39%
Lipper California Intermediate Municipal
Debt Funds Average*** 5.18% 7.38% 4.27% 4.72%
AS OF SEPTEMBER 30, 2000
J.P. Morgan California Bond Fund:
Institutional Shares 4.03% 6.36% 4.57% 5.13%
Lehman Brothers 1-16 Year Municipal Bond Index** 3.69% 5.68% 4.69% 5.26%
Lipper California Intermediate Municipal Debt
Funds Average*** 3.89% 5.78% 4.16% 4.65%
</TABLE>
* The Institutional Shares commenced operations on December 23, 1996, and
have provided an average annual total return of 5.27% from that date through
October 31, 2000. For the purpose of comparison, the "since inception" returns
are calculated from December 31, 1996, the first date when data for the Fund's
benchmark and its Lipper category average were available.
** Lehman Brothers 1-16 year Municipal Bond Index is an unmanaged index which
measures municipal bond market performance. It does not include fees or
operating expenses and is not available for actual investments.
***Describes the average total return for all funds in the indicated Lipper
category, as defined by Lipper Inc., and does not take into account applicable
sales charges. Lipper Analytical Services, Inc. is a leading source for mutual
fund data.
Past performance is no guarantee of future results. Returns are net of
fees, assume the reinvestment of distributions and reflect the reimbursement of
certain expenses as described in the prospectus. Had expenses not been
subsidized, returns would have been lower.
2
<PAGE>
CALIFORNIA BOND FUND PERFORMANCE - SELECT SHARES
--------------------------------------------------------------------------------
EXAMINING PERFORMANCE
One way to look at performance is to review a fund's average annual total
return. This calculation takes the Fund's actual 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
in a fund's value over various time periods, typically one, five, and 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.
PERFORMANCE
<TABLE>
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURNS TOTAL RETURNS
----------------------- ------------------------------
SIX ONE THREE SINCE
MONTHS YEAR YEARS INCEPTION*
AS OF OCTOBER 31, 2000
<S> <C> <C> <C> <C>
J.P. Morgan California Bond Fund: Select Shares 5.14% 7.75% 4.64% 5.09%
Lehman Brothers 1-16 Year Municipal Bond Index** 4.86% 7.13% 4.80% 5.39%
Lipper California Intermediate Municipal Debt
Funds Average*** 5.18% 7.38% 4.27% 4.72%
AS OF SEPTEMBER 30, 2000
J.P. Morgan California Bond Fund: Select Shares 3.93% 6.27% 4.45% 5.00%
Lehman Brothers 1-16 Year Municipal Bond Index** 3.69% 5.68% 4.69% 5.26%
Lipper California Intermediate Municipal Debt
Funds Average*** 3.89% 5.78% 4.16% 4.65%
</TABLE>
* Reflects the performance of the Fund's Institutional Shares from December
23, 1996 through April 27, 1997 (commencement of operations), which had a lower
expense ratio. Therefore, these returns may be higher than the Fund's would have
been had it existed during the same period. For the purpose of comparison, the
"since inception" returns are calculated from December 31, 1996, the first date
when data for the Select Share's benchmark and its Lipper category average were
available. The Select Share's average total return since the commencement of
operations on April 21, 1997 is 5.63%.
** Lehman Brothers 1-16 year Municipal Bond Index is an unmanaged index which
measures municipal bond market performance. It does not include fees or
operating expenses and is not available for actual investments.
***Describes the average total return for all funds in the indicated Lipper
category, as defined by Lipper Inc., and does not take into account applicable
sales charges. Lipper Analytical Services, Inc. is a leading source for mutual
fund data.
Past performance is no guarantee of future results. Returns are net of
fees, assume the reinvestment of distributions and reflect the reimbursement of
certain expenses as described in the prospectus. Had expenses not been
subsidized, returns would have been lower.
3
<PAGE>
PORTFOLIO MANAGER Q&A
--------------------------------------------------------------------------------
Following is an interview with Benjamin S. Thompson, who with Robert
Meiselas and Kingsley Wood Jr., manages the master portfolio in which the Fund
invests.
[photo of Benjamin S. Thompson]
BENJAMIN S. THOMPSON, vice president, is a senior fixed income portfolio
manager and head of J.P. Morgan's municipal bond strategies. His
responsibilities include coordination of strategy and research, portfolio
structuring, and trade execution for the Tax Aware Fixed Income Group. Prior to
joining Morgan in 1999, Ben was a senior fixed income portfolio manager at
Goldman Sachs Asset Management. Earlier, he was with the Structured Finance
Group at Chase Manhattan Bank. He holds a B.A. in Economics from Colorado
College.
[photo of Robert Meiselas]
ROBERT MEISELAS, vice president, is a portfolio manager with the Tax Aware
Fixed Income Group responsible for managing municipal bonds, including tax
exempt private placements. Bob is a CPA and joined Morgan's financial group in
1982, after having spent 10 years at Coopers & Lybrand. He also spent five years
in J.P. Morgan's Private Banking Investment Management Group, and moved to J.P.
Morgan Investment Management in 1997. Bob is a graduate of St. John's University
and has completed graduate work in taxation at Long Island University.
[photo of Kingsley Wood, Jr.]
KINGSLEY (KIT) WOOD, JR., vice president, is a portfolio manager in the Tax
Aware Fixed Income Group. Prior to joining J.P. Morgan Investment Management in
2000, he worked at Mercantile Bank & Trust (MSD&T Funds) in Balitmore, MD as a
portfolio manager. There he managed all institutional tax-exempt assets (mutual
funds and separate accounts). Prior to that, he was a sell-side institutional
trader at ABN-AMRO Bank and Kemper Securities in Chicago. Kit holds a B.A. from
the University of Colorado, and has completed graduate work towards an M.B.A. at
the University of Maryland.
WHAT EVENTS IMPACTED THE FIXED INCOME MARKETS, GENERALLY, AND THE MUNICIPAL
BOND MARKET, SPECIFICALLY, OVER THE LAST SIX MONTHS?
This was a volatile period that was fueled by uncertainty over the direction
of the US economy. By and large, the most significant factors were the actions
by the Federal Reserve to tighten short-end rates, and subsequent recognition by
the bond market that these actions were effective in slowing U.S. economic
growth.
At the outset of this reporting period, there was some question as to
whether the Federal Reserve would continue to raise interest rates and whether
the six rate increases - totaling 175 basis points (1.75%) through May - were
actually slowing the economy to the much-discussed "soft landing" that everyone
desired.
As we moved through the summer, investors became confident that the economy
was, indeed, slowing. Toward the end of the six-month period, however, the bond
market began to question just how soft, or hard, the landing would be. Some
investors even suggested that an interest rate easing might be necessary to
reinvigorate the economy.
Bonds, however, generally performed well in this environment. Prices in most
fixed income markets trended upward. In the end, performance was driven by
whether you were appropriately positioned as market expectations vacillated and
whether you were invested in the right bonds at the right time as this economic
scenario unfolded.
Another significant occurrence was the volatility experienced by the stock
market since spring. Stock market volatility led to increased retail awareness
of bonds, as investors sought safe havens for their equity-related gains. This
propelled the municipal bond market, in particular, as municipal bonds pay
attractive returns for individuals who pay taxes.
4
<PAGE>
PORTFOLIO MANAGER Q&A
--------------------------------------------------------------------------------
(Continued)
HOW DID THESE THEMES PLAY OUT IN CALIFORNIA?
In California, we had already been coping with a lack of municipal bond
supply, owing to increased demand and a continuing downward trend in new bond
issuance. The net result was that California muni bonds rose to high prices
relative to other municipals.
WHY HAS SUPPLY BEEN A PROBLEM IN CALIFORNIA?
A few years ago, California was one of the most prolific issuers of debt in
the United States. Essentially, this debt was needed to finance the massive
infrastructure needs of a dramatically growing population. Also, a large portion
of the new debt was issued to retire older, more costly bond issues that were
already outstanding. Now, thanks to the creation of wealth from our strong
economy, tax revenues have increased markedly. In part, this is reflected by
the state's tremendously successful Internet-related businesses. Therefore, the
need to borrow money to finance projects is not the same as it used to be. In
the past, for example, the state might go to market for several billions of
dollars at different times during the year. Lately, however, we've seen only a
fraction of this activity. Aside from supply-related problems, we note that
retail demand is steadily increasing, which results in more pressure in a tight
market that is getting tighter.
HOW WAS THE FUND POSITIONED DURING THE LAST SIX MONTHS?
Although we forecasted an eventual decline in interest rates, we tempered
our bullish outlook to allow for market uncertainty. During this time, the
Fund performed well when interest rates declined, and out-performed the
competition when market uncertainty drove interest rates upward. However, we
underestimated the strong inflow of investor cash during this period. Whereas
the competition had to cope with persistent cash withdrawals, this Fund had
sharp growth. This influx of cash had to be put to work in an increasingly
expensive market, and overall returns were diluted somewhat by having to buy
some bonds at higher prices.
Even so, on a one-year basis, we were in the top quartile of the Lipper
California Intermediate Municipal Debt Funds Average. If you look at the last
three months, however, performance was not as strong. This was largely because
of the aforementioned inflow of cash, and because other funds were generally
positioned longer than we were. As such, they benefited more from recent bull
runs than did we.
HAS YOUR POSITIONING PAID OFF THE WAY YOUR YOU EXPECTED?
Not always, but much of the time. We think that, as a general rule, our
positioning in the market has made us less susceptible to NAV declines during a
downturn. Because we are tax aware and don't take gains purely to provide
marginally higher returns, and because we are not structurally as long as some
other similar type funds, longer funds may have a higher return every now and
then.
HOW ARE YOU POSITIONING THE PORTFOLIO TO PROSPER IN THE MONTHS AHEAD?
By and large, we're still bullish on bonds, especially California munis. We
believe that in a decelerating economy, munis may continue to appreciate in
value as investors seek a haven from stock market volatility, along with
tax-aware returns.
This is a timeframe when bond investors must pay close attention to the
market. There will be opportunities when careful investors can capitalize on
the mistakes of less sophisticated, or less diligent, investors. At a time when
all bond prices are high and supply is limited, the imprudent investor may be
inclined to purchase securities at prices beyond fair market value. In our view,
it may not be evident in the returns you'll see over the coming months, but
perhaps a year from now, the folks who were careless will be sorry, and the more
careful investors will be happy. We plan on being among the latter.
5
<PAGE>
FUND FACTS
--------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
J.P. Morgan California Bond Fund seeks to provide a high after-tax total
return for California residents consistent with moderate risk of capital. It is
designed for investors subject to federal and California income taxes who seek
a high after-tax total return and who are willing to receive some taxable
income and capital gains to achieve that return.
--------------------------------------------------------------------------------
Inception Date:
Institutional Shares: 12/23/1996
Select Shares: 4/21/1997
--------------------------------------------------------------------------------
Net Assets as of 10/31/2000:
Institutional Shares: $116,573,061
Select Shares: $24,959,978
--------------------------------------------------------------------------------
Fund Net Assets as of 10/31/2000: $141,533,039
--------------------------------------------------------------------------------
Dividend Payable Dates: MONTHLY
--------------------------------------------------------------------------------
Capital Gain
Payable Dates (if applicable): 12/13/2000
EXPENSE RATIOS
Institutional Shares: 0.50%
Select Shares: 0.65%
The current annualized expense ratio covers shareholders' expenses for
custody, tax reporting, investment advisory, and shareholder services, after
reimbursement. The Fund is no-load and does not charge any sales, redemption, or
exchange fees. There are no additional charges for buying, selling, or safe
keeping fund shares, or for wiring redemption proceeds from the Fund.
FUND HIGHLIGHTS
--------------------------------------------------------------------------------
All data as of October 31, 2000
SECTOR ALLOCATION
(As a percentage of total investment securities)
[data from pie chart]
<TABLE>
<S> <C>
Insured 42.6%
Revenue Bonds 18.2%
Short Term Investments/Other 17.6%
Prerefunded 11.1%
General Obligations & House Authority 6.8%
Tax Anticipation Notes 2.2%
Auction Rate Debt Bond 1.5%
</TABLE>
--------------------------------------------------------------------------------
30 Day SEC Yields:
Institutional Shares: 4.35%*
Select Shares: 4.21%*
--------------------------------------------------------------------------------
Duration: 5.4 YEARS
* Yields reflect the reimbursement of certain fund expenses as described in
the prospectus. Had expenses not been subsidized, yields would have been lower.
DISTRIBUTED BY FUNDS DISTRIBUTOR, INC. J.P. MORGAN INVESTMENT MANAGEMENT INC.
SERVES AS INVESTMENT ADVISOR. SHARES OF THE FUND ARE NOT INSURED BY THE FDIC,
ARE NOT BANK DEPOSITS OR OTHER OBLIGATIONS OF THE FINANCIAL INSTITUTION AND ARE
NOT GUARANTEED BY THE FINANCIAL INSTITUTION. SHARES OF THE FUND ARE SUBJECT TO
INVESTMENT RISK, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL INVESTED. RETURN AND
SHARE PRICE WILL FLUCTUATE AND REDEMPTION VALUE MAY BE MORE OR LESS THAN
ORIGINAL COST.
Opinions expressed herein are based on current market conditions and are subject
to change without notice. Income may be subject to state and local taxes. Some
income may be subject to federal alternative minimum tax.
CALL J.P. MORGAN FUNDS SERVICES AT (800) 766-7722 (INSTITUTIONAL SHARES) OR
(800) 521-5411 (SELECT SHARES) FOR A PROSPECTUS CONTAINING MORE COMPLETE
INFORMATION ABOUT THE FUND, INCLUDING MANAGEMENT FEES AND OTHER EXPENSES. PLEASE
READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
6
<PAGE>
J.P. MORGAN CALIFORNIA BOND FUND - SCHEDULE OF INVESTMENTS (UNAUDITED)
--------------------------------------------------------------------------------
OCTOBER 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
--------------------------------------------------------------------------------
<C> <S> <C>
MUNICIPALS - 82.4%
CALIFORNIA - 64.3%
$2,100,000 Anaheim Public Financing Auth. Tax
Allocation Rev., 4.20%, 11/28/00(MBIA)
(Auction Rate Debt Bond)(v) $ 2,100,000
2,000,000 California Department of Water Resources
Center Valley Project Rev., Series 1992 J-3,
(Water Systems), 7.00%, 12/1/12 2,428,020
5,000,000 California Educational Facilities Auth.
Rev., (Pomona College), 6.00%, 2/15/17
Partially Prerefunded at 102% of Par 5,198,050
1,100,000 California Educational Facilities Auth.
Rev., Series 1997 A, (University of Southern
California), 5.60%, 10/1/06 1,176,670
525,000 California Educational Facilities Auth.
Rev., Series 1997 B, (Pooled University and
College Projects), 6.75%, 4/1/07 578,718
1,000,000 California GO, 6.80%, 4/1/03 1,060,870
3,000,000 California GO, 6.75%, 8/1/12 3,555,180
2,000,000 California GO, 6.25%, 10/1/19, Partially
Prerefunded at 102% of Par (MBIA) 2,100,060
970,000 California Housing Finance Agency Rev.,
Series 1996 E, (Home Mortgage), 5.30%,
8/1/20(MBIA) (FHA) 969,631
2,950,000 California Housing Finance Agency Rev.,
Series 1997 I, (Home Mortgage), 4.95%,
8/1/28(MBIA) 2,945,015
1,000,000 California State GO, 6.50%, 2/1/08 1,129,720
2,360,000 California Statewide Communities
Development Auth. 6.00%, 7/1/09 2,408,215
2,000,000 Central Valley Financing Auth. Cogeneration
Project Rev., (Carson ICE-GEN Project),
6.20%, 7/1/20, Prerefunded at 102% of Par 2,140,120
1,500,000 Contra Costa Transportation Auth. Sales
Tax Rev., Series 1993 A, 6.00%, 3/1/06(FGIC) 1,623,480
2,505,000 Corona Community Facilities District
Rev., (Eagle Glen), 5.75%, 9/1/16 2,486,213
1,535,000 El Monte City School District Rev., Series
2000 A, 6.25%, 5/1/20(FSA) 1,735,179
1,000,000 Foothill, Eastern Corridor Agency Toll
Road Rev., Series 1995 A, 6.00%, 1/1/34,
Prerefunded at 100% of Par 1,090,530
600,000 La Quinta Redevelopment Agency Tax
Allocation, (Redevelopment Project No. 1),
7.30%, 9/1/11(MBIA) 733,836
3,085,000 Laguna Salada Union School District GO,
Series 2000 C, 5.78%, 8/1/29(FGIC)(y) 599,200
1,000,000 Long Beach Harbor Rev., 6.00%,
5/15/06(MBIA) 1,073,000
2,000,000 Los Angeles Community Redevelopment
Agency Tax Allocation, Series 1997 I,
(Central Business District), 5.00%, 11/15/01 2,014,780
1,000,000 Los Angeles County Pension Obligation,
Series 1994 A, 8.30%, 6/30/02(FSA) 1,025,960
1,000,000 Los Angeles County Public Works
Financing Auth. Lease Rev., Series 1997 B,
(Multiple Capital Facilities Project V), 6.00%,
12/1/07(AMBAC) 1,101,500
PRINCIPAL AMOUNT VALUE
--------------------------------------------------------------------------------
$1,000,000 Los Angeles County Transportation
Commission Sales Tax Rev., Series 1992 B,
5.88%, 7/1/02(FGIC) $ 1,029,460
1,000,000 Los Angeles Department of Water &
Power Electric Plant Rev., Second
Issue, 5.75%, 11/15/02 1,033,440
5,110,000 Los Angeles, (Sonnenblick Del Rio
West L.A.), 6.13%, 11/1/15(AMBAC) 5,659,324
1,000,000 Modesto Irrigation District Financing
Auth. Rev., Series 1996 A 5.45%, 10/1/07(MBIA) 1,063,760
1,200,000 Montebello Community Redevelopment
Agency Tax Allocation Rev., Series 1999 B,
(Montebello Hills), 5.74%, 3/1/23(MBIA)(y) 339,144
1,160,000 Newark Unified School District,
Series 2000 C, 5.49%, 8/1/16(FSA)(y) 484,741
1,205,000 Newark Unified School District,
Series 2000 C, 5.64%, 8/1/17(FSA)(y) 466,395
1,265,000 Newark Unified School District,
Series 2000 C, 5.69%, 8/1/18(FSA)(y) 458,651
1,305,000 Newark Unified School District,
Series 2000 C, 5.71%, 8/1/19(FSA)(y) 443,609
1,370,000 Newark Unified School District,
Series 2000 C, 5.67%, 8/1/20(FSA)(y) 441,332
1,445,000 Newark Unified School District,
Series 2000 C, 5.73%, 8/1/21(FSA)(y) 434,223
1,000,000 Orange County Local Transportation
Auth. Sales Tax Rev., Series
1998 A, 5.25%, 2/15/05(MBIA) 1,040,650
2,000,000 Orange County Public Financing Auth.
Waste Management System Rev., 5.75%, 12/1/09(AMBAC) 2,160,360
1,210,000 Richmond GO, Series 1999 A, (Limited
Obligation Pension), 7.02%, 8/1/05(MBIA) 1,215,977
3,500,000 Riverside County Public Financing
Auth. Lease Rev., Series 2000 A,
(Open Space Notes), 5.00%, 4/1/02 3,550,120
1,250,000 Riverside County Transportation
Commission Sales Tax Rev.,
Series 1996 A, 6.00%, 6/1/09(FGIC) 1,390,000
1,200,000 Sacramento Regional County Sanitation
District, 5.00%, 8/1/04 1,234,956
1,000,000 San Bernardino Single Family Mortgage
Rev., Series 1990 A, 7.50%, 5/1/23(FHA) 1,252,120
1,200,000 San Diego County Regional
Transportation Commission Rev., Series 1996 A,
6.00%, 4/1/06(AMBAC) 1,300,212
3,790,000 San Francisco Bay Area Transit Financing
Auth. Rev., (Bridge Toll Notes), 5.25%, 8/1/03(ACA) 3,877,094
1,000,000 San Francisco City & County Airports
Commission Rev., Series 1998-15B, 5.50%, 5/1/06(FSA) 1,060,430
5,500,000 San Joaquin Hills Transportation
Corridor Agency Toll Road Rev.,
5.66%, 1/1/23(y) 1,596,430
1,240,000 San Jose Redevelopment Agency Tax
Allocation, (Merged Area Redevelopment Project),
6.00%, 8/1/07(MBIA) 1,360,640
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
7
<PAGE>
J.P. MORGAN CALIFORNIA BOND FUND - SCHEDULE OF INVESTMENTS (UNAUDITED)
--------------------------------------------------------------------------------
(Continued)
OCTOBER 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
--------------------------------------------------------------------------------
<C> <S> <C>
$3,000,000 San Jose Redevelopment Agency Tax
Allocation, (Merged Area
Redevelopment Project), 6.00%, 8/1/15(MBIA) $ 3,346,290
1,440,000 San Rafael Redevelopment Agency Tax Allocation,
5.57%, 12/1/18(AMBAC)(y) 533,462
1,440,000 San Rafael Redevelopment Agency Tax Allocation,
5.62%, 12/1/19(AMBAC)(y) 500,270
1,440,000 San Rafael Redevelopment Agency Tax Allocation,
5.67%, 12/1/20(AMBAC)(y) 468,677
2,445,000 Santa Ana Financing Auth. Lease Rev.,
Series 1994 A, (Police Administrative &
Holding Facility), 6.25%, 7/1/24(MBIA) 2,752,874
2,605,000 South Bayside Waste Management Auth.
Solid Waste System Rev., 6.13%, 3/1/17(AMBAC) 2,835,569
1,000,000 Stockton Community Facilities District
Rev., (No. 90-2 Brookside Estates), 5.20%, 8/1/02 1,009,040
1,000,000 Turlock Irrigation District Rev., Series
1996 A, 6.00%, 1/1/07(MBIA) 1,087,020
3,000,000 Tustin Unified School District Rev., Series
1997, Class 1, (Community Facilities), 6.10%, 9/1/02 3,003,780
--------------
89,703,997
--------------
GUAM - 0.8%
1,000,000 Guam Power Auth. Rev., Series 1994 A, 6.75%,
10/1/24, Prerefunded at 102% of Par 1,104,600
--------------
MICHIGAN - 1.4%
2,000,000 Michigan State Hospital Finance Auth.
Rev., Series 1999 B, (Ascension Health Credit),
5.30%, 11/15/33 2,018,620
--------------
NORTH CAROLINA - 1.5%
2,000,000 North Carolina Municipal Power
Agency No. 1 Catawba Electric Rev.,
Series 1999 B, 6.38%, 1/1/08 2,119,180
---------------
PUERTO RICO - 12.9%
1,500,000 Puerto Rico Commonwealth GO, 6.45%,
7/1/17, Prerefunded at 101.5% of Par 1,633,185
4,050,000 Puerto Rico Commonwealth Highway
& Transportation Authority Highway Rev. Series 1993 W,
5.50%, 7/1/13(MBIA-IBC) 4,347,189
1,400,000 Puerto Rico Commonwealth, (Public
Improvements), 3.00%, 7/1/06(MBIA) 1,305,598
3,000,000 Puerto Rico Electric Power Auth. Power
Rev., Series 1997 BB, 6.00%, 7/1/11(MBIA) 3,346,830
4,000,000 Puerto Rico Electric Power Auth.
Rev., Series 1995 X, 6.13%, 7/1/21,
Prerefunded at 102% of Par 4,384,960
3,000,000 Puerto Rico Public Finance Corp., Series
1998 A, (Commonwealth Appropriations),
5.13%, 6/1/24(AMBAC) 2,925,930
---------------
17,943,692
---------------
TEXAS - 1.5%
2,000,000 Dallas-Fort Worth International Airport
Facility Improvement Corp. Rev., Series 2000 B,
(American Airlines), 6.05%, 5/1/29 2,024,780
---------------
TOTAL MUNICIPALS 114,914,869
---------------
(Cost $112,005,512)
PRINCIPAL AMOUNT VALUE
--------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 17.6%
CALIFORNIA - 10.2%
$1,000,000 California Educational Facilities Auth.
Rev., 4.60%, 11/1/00, (Private Placement)(v) $1,000,040
5,312,940 California Educational Facilities Auth.
Rev., 5.06%, 11/1/00, (Private Placement)(v) 5,274,209
2,000,000 Los Angeles GO, Series 2000-N8,
(Registered D Shares), 4.00%, 11/1/00(v) 2,000,000
6,000,000 San Diego County & School District Note
Participation, Series 2000 C, 6.00%, 10/4/01 6,119,940
--------------
14,394,189
--------------
PUERTO RICO - 2.5%
3,420,000 University of Puerto Rico Rev., Series
2000 O, 4.50%, 6/1/01 3,426,259
--------------
INVESTMENT COMPANIES - 4.9%
6,766,214 J.P. Morgan Institutional Tax Exempt Money Market* 6,766,214
--------------
TOTAL SHORT-TERM INVESTMENTS 24,586,662
--------------
(Cost $24,624,502)
TOTAL INVESTMENT SECURITIES - 100.0% $139,501,531
==============
(Cost $136,630,014)
</TABLE>
ACA - American Capital Access
AMBAC - AMBAC Assurance Corp.
FGIC - Financial Guaranty Insurance Co.
FHA - Federal Housing Authority
FSA - Financial Security Assurance Inc.
GO - General Obligation
LOC - Letter of Credit
MBIA - MBIA Insurance Corp.
(v) Variable or floating rate instrument or instrument with step coupon rate.
(y) Yield to maturity
* Affiliate-Money Market mutual fund registered under the Investment Company
Act of 1940, as amended and advised by J.P. Morgan Investment Management, Inc.
The Accompanying Notes are an Integral Part of the Financial Statements.
8
<PAGE>
J.P. MORGAN CALIFORNIA BOND FUND
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
--------------------------------------------------------------------------------
OCTOBER 31, 2000
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $136,630,014) $139,501,531
Dividend and Interest Receivable 2,122,692
Receivable for Shares of Beneficial Interest Sold 439,000
Receivable for Expense Reimbursement 7,343
Prepaid Trustees' Fees and Expenses 52
Prepaid and Other Assets 9,120
. ------------
TOTAL ASSETS 142,079,738
. ------------
LIABILITIES
Dividends Payable 319,965
Payable for Shares of Beneficial Interest Redeemed 100,000
Advisory Fee Payable 34,395
Shareholder Servicing Fee Payable 14,541
Due to Custodian 6,766
Administration Service Fee Payable 5,470
Fund Services Fee Payable 92
Administration Fee Payable 42
Accrued Expenses and Other Liabilities 65,428
------------
TOTAL LIABILITIES 546,699
------------
NET ASSETS $141,533,039
============
INSTITUTIONAL SHARES
Applicable to 11,296,859 shares outstanding $116,573,061
============
Net Asset Value, Offering and Redemption Price per Share $10.32
============
SELECT SHARES
Applicable to 2,378,512 shares outstanding $24,959,978
============
Net Asset Value, Offering and Redemption Price per Share $10.49
============
ANALYSIS OF NET ASSETS
Paid-in Capital $139,620,638
Distributions in Excess of Net Investment Income (58,166)
Accumulated Undistributed Net Realized Loss (900,950)
Net Unrealized Appreciation on Investments 2,871,517
------------
NET ASSETS $141,533,039
============
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
9
<PAGE>
J.P. MORGAN CALIFORNIA BOND FUND
STATEMENT OF OPERATIONS (UNAUDITED)
--------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED OCTOBER 31, 2000
<TABLE>
<S> <C>
INVESTMENT INCOME
INCOME
Interest Income $2,818,852
Dividend Income from Affiliated Investment 127,299
----------
Investment Income 2,946,151
----------
FUND EXPENSES
Advisory Fee 170,434
Shareholder Servicing Fee - Institutional Class 50,021
Administrative Service Fee 28,491
Shareholder Servicing Fee - Select Class 22,989
Professional Fee 20,059
Transfer Agent Fee 19,847
Registration Fee 14,133
Printing Expenses 9,039
Organization Expenses 3,612
Fund Services Fee 853
Trustee Fees and Expenses 481
Administration Fee 367
Miscellaneous 25,789
----------
Total Expenses 366,115
Less: Reimbursement of Expenses (57,249)
-----------
Net Expenses 308,866
----------
NET INVESTMENT INCOME 2,637,285
----------
REALIZED AND UNREALIZED GAIN
NET REALIZED GAIN ON INVESTMENT TRANSACTIONS 98,538
----------
NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION)
ON INVESTMENT TRANSACTIONS 3,128,695
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $5,864,518
==========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
10
<PAGE>
J.P. MORGAN CALIFORNIA BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEAR ENDED
INCREASE IN NET ASSETS ENDED OCTOBER 31, 2000 APRIL 30, 2000
<S> <C> <C>
(UNAUDITED)
FROM OPERATIONS
Net Investment Income $ 2,637,285 $ 3,319,769
Net Realized Gain (Loss) on Investments 98,538 (999,460)
Net Change in Unrealized Appreciation (Depreciation) of Investments 3,128,695 (1,729,459)
-------------- ------------
Net Increase in Net Assets Resulting from Operations 5,864,518 590,850
--------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME
Institutional Shares (2,238,736) (2,752,604)
Select Shares (398,549) (585,931)
--------------- -------------
Total Distributions from Net Investment Income (2,637,285) (3,338,535)
--------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS IN EXCESS OF NET INVESTMENT INCOME
Institutional Shares (33,610) -
Select Shares (5,790) -
--------------- -------------
Total Distributions in Excess of Net Investment Income (39,400) -
--------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET REALIZED GAINS
Institutional Shares - (82,455)
Select Shares - (18,326)
--------------- --------------
Total Distributions from Net Realized Gains - (100,781)
--------------- --------------
Total Distributions to Shareholders (2,676,685) (3,439,316)
--------------- --------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Proceeds from Shares of Beneficial Interest Sold 52,755,030 71,720,511
Reinvestment of Distributions 709,318 1,417,624
Cost of Shares of Beneficial Interest Redeemed (13,509,772) (53,392,140)
--------------- --------------
Net Increase from Transactions in Shares of Beneficial Interest 39,954,576 19,745,995
--------------- --------------
Total Increase in Net Assets 43,142,409 16,897,529
--------------- -------------
NET ASSETS
Beginning of Period 98,390,630 81,493,101
--------------- -------------
End of Period $141,533,039 $98,390,630
=============== =============
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
11
<PAGE>
J.P. MORGAN CALIFORNIA BOND FUND - INSTITUTIONAL SHARES
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT
EACH PERIOD ARE AS FOLLOWS:
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX DECEMBER 23, 1996
MONTHS ENDED (COMMENCEMENT OF
OCTOBER 31, 2000 FOR THE YEARS ENDED APRIL 30 OPERATIONS) THROUGH
(UNAUDITED) 2000 1999 1998 APRIL 30, 1997
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE PER SHARE, BEGINNING OF PERIOD $10.03 $10.40 $10.20 $9.90 $10.00
--------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.23 0.42 0.41 0.42 0.16
Net Realized and Unrealized Gain
(Loss) on Investments 0.29 (0.36) 0.25 0.30 (0.10)
--------------------------------------------------------------------------
Total From Investment Operations 0.52 0.06 0.66 0.72 0.06
--------------------------------------------------------------------------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (0.23) (0.42) (0.41) (0.42) (0.16)
In Excess of Net Investment Income (0.00)(a) - - - -
Net Realized Gains - (0.01) (0.05) - -
--------------------------------------------------------------------------
Total Distributions to Shareholders (0.23) (0.43) (0.46) (0.42) (0.16)
--------------------------------------------------------------------------
NET ASSET VALUE PER SHARE, END OF PERIOD $10.32 $10.03 $10.40 $10.20 $9.90
==========================================================================
RATIOS AND SUPPLEMENTAL DATA
Total Return
5.26%(b) 0.70% 6.55% 7.35% 0.56%(b)
Net Assets, End of Period (in thousands) $116,573 $84,579 $64,102 $46,280 $14,793
Ratios to Average Net Assets
Net Expenses 0.50%(c) 0.50% 0.49% 0.45% 0.45%(c)
Net Investment Income 4.52%(c) 4.19% 3.92% 4.11% 4.43%(c)
Expenses Without Reimbursement 0.60%(c) 0.70% 0.71% 0.79% 3.46%(c)
Portfolio Turnover 24% 87% 40% 44% 40%
</TABLE>
(a) Less than $0.005.
(b) Not Annualized
(c) Annualized
The Accompanying Notes are an Integral Part of the Financial Statements.
12
<PAGE>
J.P. MORGAN CALIFORNIA BOND FUND - SELECT SHARES
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT
EACH PERIOD ARE AS FOLLOWS:
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX APRIL 21, 1997
MONTHS ENDED (COMMENCEMENT OF
OCTOBER 31, 2000 FOR THE YEARS ENDED APRIL 30 OPERATIONS) THROUGH
(UNAUDITED) 2000 1999 1998 APRIL 30, 1997
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE PER SHARE, BEGINNING OF PERIOD $10.20 $10.57 $10.35 $10.04 $10.00
--------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.23 0.41 0.40 0.41 0.01
Net Realized and Unrealized Gain (Loss)
on Investments 0.29 (0.36) 0.26 0.31 0.04
--------------------------------------------------------------------------
Total From Investment Operations 0.52 0.05 0.66 0.72 0.05
--------------------------------------------------------------------------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (0.23) (0.41) (0.40) (0.41) (0.01)
In Excess of Net Investment Income (0.00)(a) - - - -
Net Realized Gains - (0.01) (0.04) - -
--------------------------------------------------------------------------
Total Distributions to Shareholders (0.23) (0.42) (0.44) (0.41) (0.01)
--------------------------------------------------------------------------
NET ASSET VALUE PER SHARE, END OF PERIOD $10.49 $10.20 $10.57 $10.35 $10.04
==========================================================================
RATIOS AND SUPPLEMENTAL DATA
Total Return 5.14%(b) 0.60% 6.43% 7.20% 0.51%(b)
Net Assets, End of Period (in thousands) $24,960 $13,811 $17,391 $5,811 $ 302
Ratios to Average Net Assets
Net Expenses 0.65%(c) 0.65% 0.65% 0.65% 0.62%(c)
Net Investment Income 4.37%(c) 3.99% 3.76% 3.94% 4.52%(c)
Expenses Without Reimbursement 0.82%(c) 0.85% 0.87% 1.00% 1.17%(c)
Portfolio Turnover 24% 87% 40% 44% 40%
</TABLE>
(a) Less than $0.005.
(b) Not Annualized
(c) Annualized
The Accompanying Notes are an Integral Part of the Financial Statements.
13
<PAGE>
J.P. MORGAN CALIFORNIA BOND FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
OCTOBER 31, 2000
--------------------------------------------------------------------------------
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION--J. P. Morgan California Bond Fund (the "Fund") is a series of
J. P. Morgan Series Trust, a Massachusetts business trust (the "Trust") which
was organized on August 15, 1996. The Trust is registered under the Investment
Company Act of 1940, as amended, as a no-load, non-diversified, open-end
management investment company. The trustees of the Trust have divided the
beneficial interests in the Fund into two classes of shares, Institutional
Shares and Select Shares. The investment objective of the Fund is to provide
high after-tax total return for California residents consistent with moderate
risk of capital. The Fund invests a significant amount of its assets in debt
obligations issued by political subdivisions and authorities in the State of
California. The issuer's ability to meet its obligations may be affected by
economic and political developments within the State of California. The
Declaration of Trust permits the trustees to issue an unlimited number of shares
in the Fund.
The preparation of financial statements in accordance with accounting
principles generally accepted in the United States 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:
SECURITY VALUATIONS--Fixed Income Securities, (other than convertible bonds),
with a maturity of 60 days or more held by Funds other than money market funds
will be valued each day based on readily available market quotations received
from independent or affiliated commercial pricing services. Such pricing
services will generally provide bidside quotations. Convertible bonds are valued
at the last sale price on the primary exchange on which the bond is principally
traded. When valuations are not readily available, securities are valued at fair
value as determined in accordance with procedures adopted by the Trustees. All
short-term securities with a remaining maturity of sixty days or less are
valued using the amortized cost method.
SECURITY TRANSACTIONS--Security transactions are accounted for as of the
trade date. Realized gains and losses are determined on the identified cost
basis, which is also used for federal income tax purposes.
INVESTMENT INCOME--Dividend income less foreign taxes withheld, if any, is
recorded on the ex-dividend date or at the time that the relevant ex-dividend
and amount becomes known. Interest income is recorded on the accrual basis and
includes accretion of discounts and amortization of premiums. Net investment
income, excluding shareholder servicing fees, and realized and unrealized gains
and losses are allocated daily to each class of shares based upon the relative
proportion of net assets of each class at the beginning of each day.
ORGANIZATION EXPENSES--The Fund incurred organization expenses in the amount
of $39,030, which have been deferred and are being amortized on a straight-line
basis over a period not to exceed five years beginning with the commencement of
operations of the Fund.
INCOME TAX STATUS--It is the Fund's policy to distribute all net investment
income and net realized gains to shareholders and to otherwise qualify as a
regulated investment company under the provisions of the Internal Revenue Code.
Accordingly, no provision has been made for federal or state income taxes.
DISTRIBUTIONS TO SHAREHOLDERS--Distributions from net investment income are
declared daily and paid monthly. Distributions from net realized gains, if any,
are paid annually.
--------------------------------------------------------------------------------
2. TRANSACTIONS WITH AFFILIATES
ADVISORY-- The Trust, on behalf of the Fund, has an Investment Advisory
Agreement with J.P. Morgan Investment Management Inc. ("JPMIM"), an affiliate
of Morgan Guaranty Trust Company of New York ("Morgan") and a wholly owned
subsidiary of J.P. Morgan & Co. Incorporated ("J.P. Morgan"). Under the terms
of the agreement, the Fund pays JPMIM at an annual rate of 0.30% of the Fund's
average daily net assets.
The Fund may invest in one or more affiliated money market funds: J.P.
Morgan Institutional Prime Money Market Fund, J.P. Morgan Institutional Tax
Exempt Money Market Fund, J.P. Morgan Institutional Federal Money Market Fund
and J.P. Morgan Institutional Treasury Money Market Fund. The Advisor has agreed
to reimburse its advisory fee from the Fund in an amount to offset any
investment advisory, administrative fee and shareholder servicing fees related
to a Fund investment in an affiliated money market fund.
ADMINISTRATIVE SERVICES-- The Trust 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 Trust 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
14
<PAGE>
J.P. MORGAN CALIFORNIA BOND FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
(Continued)
OCTOBER 31, 2000
--------------------------------------------------------------------------------
2. TRANSACTIONS WITH AFFILIATES (CONTINUED)
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 Funds
Distributor, Inc. 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.
Morgan has agreed to reimburse the Fund to the extent necessary to maintain
the total operating expenses (which excludes interest and dividend expenses,
taxes and extraordinary items) of the Fund at no more than 0.50% of the average
daily net assets of the Institutional Shares and 0.65% of the average daily net
assets of the Select Shares. This reimbursement arrangement can be changed or
terminated at any time after August 31, 2001 at the option of Morgan.
ADMINISTRATION-- The Trust 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, 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 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 FDI provides similar services.
SHAREHOLDER SERVICING--The Trust has a Shareholder Servicing Agreement with
Morgan under which Morgan provides account administration and personal account
maintenance service to Fund shareholders. The agreement provides for the Fund to
pay Morgan a fee for these services that is computed daily and paid monthly at
an annual rate of 0.10% of the average daily net assets of the Institutional
Shares and 0.25% of the average daily net assets of the Select Shares.
Morgan, Charles Schwab & Co. ("Schwab") and the Trust are parties to
separate services and operating agreements (the "Schwab Agreements") whereby
Schwab makes Fund shares available to customers of investment advisors and other
financial intermediaries who are Schwab's clients. The Fund is not responsible
for payments to Schwab under the Schwab Agreements; however, in the event the
services agreement with Schwab is terminated for reasons other than a breach by
Schwab and the relationship between the Trust and Morgan is terminated, the Fund
would be responsible for the ongoing payments to Schwab with respect to
pre-termination shares.
FUND SERVICES--The Fund has a Fund Services Agreement with Pierpont Group,
Inc. ("PGI") to assist the Trustees in exercising their overall supervisory
responsibilities for the Fund's affairs. The Trustees of the Fund represent all
the existing shareholders of PGI.
Each Trustee receives an aggregate annual fee of $75,000 for serving on the
boards 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 represent the Fund's
allocated portion of the total Trustees' fees and expenses. The Trust's Chairman
and Chief Executive Officer also serves as Chairman of PGI and receives
compensation and employee benefits from PGI. The allocated portion of such
compensation and benefits included in the Fund Services Fee shown on the
Statement of Operations was $200.
--------------------------------------------------------------------------------
3. FEDERAL INCOME TAXES
As of October 31, 2000, accumulated net unrealized appreciation was
$2,871,517, based on the aggregate cost of investments for federal income tax
purposes of $136,630,014, which consisted of unrealized appreciation of
$2,961,326 and unrealized depreciation of $89,809.
15
<PAGE>
J.P. MORGAN CALIFORNIA BOND FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
(Continued)
OCTOBER 31, 2000
--------------------------------------------------------------------------------
4. INVESTMENT TRANSACTIONS
During the six months ended October 31, 2000, the Fund purchased $56,998,212
of investment securities and sold $24,891,375 of investment securities other
than U.S. government securities and short-term investments.
--------------------------------------------------------------------------------
5. CAPITAL SHARE TRANSACTIONS
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:
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED FOR THE YEAR ENDED
OCTOBER 31, 2000 APRIL 30, 2000
SHARES AMOUNT SHARES AMOUNT
----------------------------------- -----------------------------------
<S> <C> <C> <C> <C>
Shares of Beneficial Interest Sold 3,884,844 $39,688,389 6,269,906 $62,956,087
Shares of Beneficial Interest Reinvested 52,285 533,824 101,605 1,023,831
Shares of Beneficial Interest Redeemed (1,075,706) (10,951,314) (4,097,715) (41,241,649)
----------------------------------- -----------------------------------
Net Increase in shares of Beneficial Interest 2,861,423 $29,270,899 2,273,796 $22,738,269
=================================== ===================================
SELECT SHARES
FOR THE SIX MONTHS ENDED FOR THE YEAR ENDED
OCTOBER 31, 2000 APRIL 30, 2000
SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------
Shares of Beneficial Interest Sold 1,255,243 $13,066,641 856,515 $8,764,424
Shares of Beneficial Interest Reinvested 16,862 175,494 38,364
393,793
Shares of Beneficial Interest Redeemed (248,024) (2,558,458) (1,186,083) (12,150,491)
----------------------------------- -----------------------------------
Net Increase in Shares of Beneficial Interest 1,024,081 $10,683,677 (291,204) $(2,992,274)
=================================== ===================================
</TABLE>
From time to time, the Fund may have a concentration of several shareholders
holding a significant percentage of shares outstanding. Investment activities of
these shareholders could have a material impact on the Fund.
--------------------------------------------------------------------------------
6. BANK LOANS
The Fund may borrow money for temporary or emergency purposes, such as
funding shareholder redemptions. Effective May 23, 2000, the Fund, along with
certain other Funds managed by JPMIM, entered into a $150,000,000 bank line of
credit agreement with DeutscheBank. Borrowings under the agreement will bear
interest at approximate market rates and a commitment fee at an annual rate of
.085% on the unused portion of the committed amount.
16
<PAGE>
J.P. MORGAN CALIFORNIA BOND FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
(Continued)
OCTOBER 31, 2000
--------------------------------------------------------------------------------
7. CONCENTRATIONS OF CREDIT RISK
The ability of the issuers of debt, asset-backed and mortgage-backed
securities to meet their obligations may be affected by the economic and
political developments in a specific industry or region. The value of
asset-backed and mortgage-backed securities can be significantly affected by
changes in interest rates or rapid principal payments including prepayments.
--------------------------------------------------------------------------------
8. SUBSEQUENT EVENTS
On September 13, 2000, J.P. Morgan & Co. Incorporated and The Chase
Manhattan Corporation announced that they have entered into an agreement and
plan of merger. The transaction is expected to close in December 2000 and is
subject to approval by shareholders of both companies.
17
<PAGE>
NOTES
--------------------------------------------------------------------------------
18
<PAGE>
NOTES
--------------------------------------------------------------------------------
19
<PAGE>
NOTES
--------------------------------------------------------------------------------
20
<PAGE>
[back cover]
For more information on the J.P. Morgan
Funds, call J.P. Morgan Funds
Services: Institutional Shares (800) 766-7722
Select Shares (800) 521-5411
---------------------------------------------------------------------
Morgan Guaranty Trust Company MAILING
500 Stanton Christiana Road INFORMATION
Newark, Delaware 19713-2107
IN-SAN-23766 0090
