<PAGE>
THE JPM INSTITUTIONAL DISCIPLINED EQUITY FUND
ANNUAL REPORT
MAY 31, 1997
<PAGE>
LETTER TO THE SHAREHOLDERS OF THE JPM INSTITUTIONAL DISCIPLINED EQUITY FUND
July 8, 1997
Dear Shareholder:
The JPM Institutional Disciplined Equity Fund seeks to provide a high total
return from a broadly diversified portfolio of equity securities. The equity
securities consist of large and medium-sized U.S. companies, typically
represented by the S&P 500 Index, which is the Fund's benchmark. While its
overall characteristics parallel the benchmark, the Fund has the potential to
outperform the Index because its active security selection focuses on stocks
deemed fairly valued or undervalued by Morgan's proprietary analysis. At the
same time, we seek to limit the risk of underperformance relative to the
Index by minimizing the Portfolio's exposure to stocks that are viewed as
relatively overvalued by Morgan. A January 3, 1997 launch date meant that we
began to pursue our investment strategy during the eighth year of an historic
bull market.
U.S. large capitalization stocks got off to a flying start in 1997, following
one of the largest two-year upswings in 40 years for the S&P 500 Index.
Fueling a narrowly focused 6.25% Index rise for January, there was optimism
regarding fourth-quarter corporate earnings (amid a 3.9% annualized GDP
growth rate), as well as a record level of new assets committed to equity
mutual funds from 401(k), defined contribution, and bonus investing. The
seemingly relentless advance of the Index slowed to 0.78% in February,
largely in reaction to congressional testimony by Federal Reserve Chairman
Alan Greenspan that suggested market overvaluation. The declining mutual fund
inflows and the Fed's late March short-term rate increase (which suggested
that U.S. bond investments may have become more attractive in relative terms)
helped trigger a resurgence in market volatility. This, in turn, limited the
S&P 500 to a modest 2.68% first-quarter advance. Within a month, however,
U.S. large cap equities had managed to stage a dramatic 5.97% comeback,
thanks to a "Nirvana Channel" of low inflation, low unemployment, and a
strong economy that was extremely favorable for stocks. The S&P 500 Index
advanced an additional 6.09% during May 1997.
Given these market challenges, we are pleased to report that the Fund made
very strong progress, providing a solid return of 9.24% from its commencement
of operations on January 3, 1997 through May 31, 1997, which was the Fund's
first fiscal year end. This performance, in which total returns are
calculated from the month end following inception, was considerably ahead of
both the 8.65% return posted over the same period by the S&P 500 Index and
the 6.68% return provided by Fund competitors included in the Lipper Growth
and Income Average.
TABLE OF CONTENTS
LETTER TO THE SHAREHOLDERS........ 1 FUND FACTS AND HIGHLIGHTS......... 7
FUND PERFORMANCE.................. 3 FINANCIAL STATEMENTS.............. 9
PORTFOLIO MANAGER Q&A............. 4
1
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The Fund's net asset value increased from $10.00 per share at inception
(January 3, 1997) to $11.47 at May 31, 1997. No distributions were made
during the reporting period. The Fund's net assets stood at $49.7 million at
the end of the period under review. The net assets of The Disciplined Equity
Portfolio, in which the Fund invests, totaled approximately $76.5 million at
May 31, 1997.
The report that follows includes a Q&A with Timothy J. Devlin, a member of
the portfolio management team. This interview is designed to answer commonly
asked questions about the Fund, elaborate on what happened during the
reporting period, and provide an outlook for the months ahead.
As chairman and president of Asset Management Services, we look forward to
sharing Morgan's insights regarding global markets with you going forward.
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
2
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FUND PERFORMANCE
EXAMINING PERFORMANCE
One way to evaluate a mutual fund's historical performance is to look at the
growth of a hypothetical investment of $1,000,000, which is the Fund's
investment minimum. The chart at right shows the minimum invested on January 3,
1997* would have grown to $1,092,385 at May 31, 1997.
Another way to look at performance is to review a fund's average annual total
return. This figure takes the fund's actual (or cumulative) return and shows
you what would have happened if the fund had achieved that return by
performing at a constant rate each year. Average annual total returns
represent the average yearly change of a fund's value over various time
periods, typically 1, 5, or 10 years. 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 $1,000,000 since inception*
JANUARY 3, 1997 -- MAY 31, 1997
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
The JPM Institutional Lipper Growth and
Disciplined Equity Fund S&P 500 Income Average
----------------------- -------- -----------------
Jan-97 1,000.00 1,000.00 1,000.00
Feb-97 1,007.60 1,007.84 1,005.20
Mar-97 965.68 966.43 969.31
Apr-97 1,020.92 1,024.12 1,004.21
May-97 1,092.38 1,086.47 1,067.07
PERFORMANCE
TOTAL RETURNS
----------------------------
ONE THREE SINCE
AS OF MAY 31, 1997 MONTH MONTHS INCEPTION*
- -------------------------------------------------------------------------------
The JPM Institutional Disciplined Equity Fund 7.00% 8.41% 9.24%
S&P 500 6.09% 7.80% 8.65%
Lipper Growth and Income Average 6.26% 6.13% 6.68%
AS OF MARCH 31, 1997
- -------------------------------------------------------------------------------
The JPM Institutional Disciplined Equity Fund -4.16% -- -3.43%
S&P 500 -4.11% -- -3.36%
Lipper Growth and Income Average -3.57% -- -3.06%
* 1/3/97 -- COMMENCEMENT OF OPERATIONS (TOTAL RETURNS BASED ON MONTH-END
FOLLOWING INCEPTION). THE FUND'S TOTAL RETURN SINCE ITS COMMENCEMENT OF
OPERATIONS ON 1/3/97 IS 14.70%.
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. FUND RETURNS ASSUME
THE REINVESTMENT OF DISTRIBUTIONS AND REFLECT REIMBURSEMENT OF CERTAIN FUND
AND PORTFOLIO EXPENSES AS DESCRIBED IN THE PROSPECTUS. LIPPER ANALYTICAL
SERVICES, INC. IS A LEADING SOURCE FOR MUTUAL FUND DATA. ALTHOUGH BENCHMARK
RETURNS ARE GATHERED FROM RELIABLE SOURCES, DATA ACCURACY AND COMPLETENESS
CANNOT BE GUARANTEED. THE JPM INSTITUTIONAL DISCIPLINED EQUITY FUND INVESTS
ALL OF ITS INVESTABLE ASSETS IN THE DISCIPLINED EQUITY PORTFOLIO, A
SEPARATELY REGISTERED INVESTMENT COMPANY THAT IS NOT AVAILABLE TO THE PUBLIC
BUT ONLY TO OTHER COLLECTIVE INVESTMENT VEHICLES SUCH AS THE FUND.
3
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PORTFOLIO MANAGER Q&A
[Photo]
Following is an interview with TIMOTHY J. DEVLIN, Vice President, a member of
the portfolio management team for The Disciplined Equity Portfolio in which
the Fund invests. Tim joined J.P. Morgan Investment in 1996 after spending
nine years at Mitchell Hutchins, where he managed quantitatively driven
equity portfolios for institutional and retail investors. Tim was educated at
Union College, where he received a B.A. in Economics. This interview was
conducted July 7, 1997 and reflects Tim's views on that date.
THE FUND'S LAUNCH CAME ONLY A FEW WEEKS BEFORE ALAN GREENSPAN'S REMARKS ABOUT
"IRRATIONAL EXUBERANCE" HEIGHTENED OVERVALUATION CONCERNS AMONG MARKET
PARTICIPANTS. THIS HELPED SLOW THE S&P 500'S SEEMINGLY RELENTLESS ADVANCE TO
A FIRST-QUARTER CRAWL OF ONLY 2.68% -- CONSIDERABLY BELOW ITS MID-FEBRUARY
HIGH. BY THE END OF THE FUND'S FISCAL YEAR, HOWEVER, THE S&P 500 HAD RISEN TO
PREVIOUSLY UNTHINKABLE HIGHS AND THE DOW SEEMED POISED TO BREAK 8000. WHERE
DO YOU THINK THIS RENEWED MARKET CONFIDENCE CAME FROM AND HOW LONG ARE YOU
EXPECTING IT TO CONTINUE?
TJD: The prevailing view is that the U.S. economy has settled down and can
now be expected to afford a relatively sustainable rate of growth going
forward. This is the so-called "soft landing" that many believe resulted from
the Federal Reserve's decision to tighten monetary policy in March. The
perception that the economy was under control diminished key concerns among
investors and left them freer to concentrate on finding value in both the
equity and fixed income markets. While still relatively narrow, market
leadership also broadened for stocks in this environment.
The confidence of any market is vulnerable to "surprises" that cannot be
forecast. In terms of fundamentals, however, we believe that cyclical
pressures, such as rising labor costs, are building in the U.S. economy. If
these continue or worsen because of higher economic growth rates overseas
and/or higher inflation at home, the Federal Reserve will undoubtedly raise
short-term interest rates. An economic downturn hasn't happened in the U.S.
for a very long time. If the market begins to sense that an economic downturn
is in the wings, it will almost certainly work as a catalyst for correction.
THE FUND HAS SIGNIFICANTLY OUTPERFORMED ITS BENCHMARK ON A ONE-MONTH,
THREE-MONTH, AND SINCE-INCEPTION BASIS AT MAY 31. HOW DID THE PORTFOLIO'S
INVESTMENT APPROACH HELP ACHIEVE THESE IMPRESSIVE SHORT-TERM RESULTS?
TJD: We believe the secret behind the short-term -- and, hopefully,
long-term -- success of our strategy is that it seeks to combine the
advantages of equity index funds and actively managed equity funds. Our
approach uses proprietary fundamental research along with a disciplined
valuation and portfolio construction process. We expect stock selection
within each sector to generate above-market returns over time. However, we
seek to maintain Index-like levels of investment risk by keeping the
Portfolio's sector weights and other characteristics close to those of the
Index. The Portfolio is also expected to remain fully invested at all times.
4
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THE PORTFOLIO COMBINES ACTIVE AND INDEX MANAGEMENT TECHNIQUES TO SEEK GREATER-
THAN-INDEX RETURNS AT LEVELS OF RISK EQUAL TO THE S&P 500.
[Graphic]
Following is a representation of above graphic:
THE JPM INSTITUTIONAL
TYPICAL EQUITY INDEX FUND DISCIPLINED EQUITY FUND TYPICAL ACTIVE EQUITY FUND
- ------------------------- ----------------------- --------------------------
Always underperforms Potential to Outperform the Index
the Index (net of fees)
- ------------------------- --------------------------------------------------
No value added through Value can be added through stock selection
stock selection
- ------------------------- --------------------------------------------------
Index-like risk Potential for higher risk
- ------------------------------------------------- --------------------------
No market timing, sector bets or theme investing Potential for market timing,
sector bets and theme
investing
- --------------------------------------------------- --------------------------
THE PORTFOLIO'S DISCIPLINED INVESTMENT PROCESS SEEKS HIGHER RETURNS THAN
INDEX FUNDS BY EXCLUDING S&P 500 STOCKS THAT MORGAN CONSIDERS OVERVALUED.
[Graphic]
Following is a representation of above graphic:
Typical S&P 500 The JPM Institutional
Index Fund Disciplined Equity Fund
--------------- -----------------------
1st Quintile 500 250 to 350
Most stocks stocks
Undervalued
2nd Quintile
Undervalued
3rd Quintile
Fairly Valued
4th Quintile
Overvalued
5th Quintile
Most
Overvalued
THE PORTFOLIO'S STOCK SELECTIONS HAVE OUTPERFORMED THE BENCHMARK IN A
MAJORITY OF INDUSTRY SECTORS SINCE INCEPTION. WHICH STOCKS WERE ESPECIALLY
HELPFUL IN ENHANCING RELATIVE RETURNS FOR THE PERIOD?
TJD: Overweighting AMERICAN HOME PRODUCTS COMPANY (pharmaceuticals) and
WAL-MART STORES (retail) in the Portfolio were good calls as these stocks
advanced roughly 31% and 32%, respectively, while their sectors advanced by
only 23% and 17%, respectively. American Home benefited from the FDA's
decision NOT to approve a generic substitute for one of the company's key
niche products. Wal-Mart advanced on accelerating same-store sales for the
quarter, a surprise which drove profits upward.
5
<PAGE>
Our research indicated that PHARMACIA & UPJOHN, INC., a pharmaceutical
company, and 3COM CORP., in data processing/electronics, were overvalued. Our
underweighting of these stocks in the Portfolio added value when they
declined by roughly -11% and -34%, respectively, against Index sector
advances of roughly 23% and 21%, respectively.
DO YOU BELIEVE THAT MORGAN'S SKILL IN STOCK SELECTION IS THE ONLY REASON FOR
INVESTORS TO CONSIDER THIS FUND IN A NARROWLY FOCUSED MARKET?
TJD: While stock selection is certainly the cornerstone of our investment
strategy, we also make sure to focus on risk control elements that we believe
are crucial to success in every market environment.
We believe one reason why actively managed U.S. large cap funds find it so
difficult to outperform the S&P 500 Index during periods of narrow market
leadership is that their strategy forces them to avoid investment in
overvalued stocks. If an active manager doesn't buy Coca-Cola or Microsoft
because his or her research determines it's overvalued or expensive, his or
her portfolio will suffer relative to the Index if Coke or Microsoft continue
their strong advance.
We believe the advantage of our Fund in this environment is that our
investment strategy seeks to minimize the risk of underperformance relative to
the S&P 500 Index by maintaining an exposure to the largest stocks in the
Index, regardless of their current valuation. The Portfolio's structure
features what is called a "maximum misweighting" of plus or minus 1% of stocks
included in the Index.
What this means is that we can benefit from owning the largest stocks in the
Index when the market is narrowly focused precisely on those stocks. More
importantly, the Fund's relative performance won't be compromised during these
periods, and that lets us look to our skill in stock selection to help the
Fund outperform the S&P 500 Index over both the long and the short term.
6
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FUND FACTS
INVESTMENT OBJECTIVE
The JPM Institutional Disciplined Equity Fund seeks to provide a high total
return from a broadly diversified portfolio of equity securities. It is
designed for investors who want the potential to outperform the S&P 500 Stock
Index without assuming a level of risk substantially greater than that of the
Index.
COMMENCEMENT OF OPERATIONS
1/3/97
NET ASSETS AS OF 5/31/97
$49,726,183
CAPITAL GAIN PAYABLE DATES
8/15/97 and 12/24/97
EXPENSE RATIO
The Fund's current annualized expense ratio of 0.45% 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 safekeeping Fund shares, or for wiring dividend or
redemption proceeds from the Fund.
FUND HIGHLIGHTS
ALL DATA AS OF MAY 31, 1997
PORTFOLIO ALLOCATION
(AS A PERCENTAGE OF TOTAL INVESTMENTS)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Consumer Goods & Services 23.7%
Technology 15.6%
Finance 14.5%
Health Care 10.8%
Energy 9.7%
Industrial Products & Services 9.7%
Utilities 8.1%
Basic Industries 4.9%
Short-term Investments 1.7%
Transportation 1.3%
<TABLE>
<CAPTION>
LARGEST EQUITY HOLDINGS % OF TOTAL INVESTMENTS
- -----------------------------------------------------
<S> <C>
EXXON CORP. 3.2%
(OIL-PRODUCTION)
INTEL CORP. 2.8%
(SEMICONDUCTORS)
PROCTER & GAMBLE CO. 2.4%
(HOUSEHOLD PRODUCTS)
INTERNATIONAL BUSINESS MACHINES CORP. 2.3%
(COMPUTER SYSTEMS)
GENERAL ELECTRIC CO. 2.0%
(DIVERSIFIED MANUFACTURING)
MOBIL CORP. 1.8%
(OIL-PRODUCTION)
AMERICAN HOME PRODUCTS CORP. 1.7%
(PHARMACEUTICALS)
WAL-MART STORES, INC. 1.7%
(RETAIL)
PHILIP MORRIS COMPANIES, INC. 1.6%
(FOOD, BEVERAGES & TOBACCO)
PEPSICO, INC. 1.6%
(FOOD, BEVERAGES & TOBACCO)
</TABLE>
7
<PAGE>
FUNDS DISTRIBUTOR, INC. IS THE DISTRIBUTOR FOR THE JPM INSTITUTIONAL
DISCIPLINED EQUITY FUND (THE "FUND").
MORGAN GUARANTY TRUST COMPANY OF NEW YORK ("MORGAN") SERVES AS PORTFOLIO
INVESTMENT ADVISOR AND MAKES THE FUND AVAILABLE SOLELY IN ITS CAPACITY AS
SHAREHOLDER SERVICING AGENT FOR CUSTOMERS. INVESTMENTS IN THE FUND ARE NOT
DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, MORGAN OR ANY OTHER
BANK. SHARES OF THE FUND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND CAN
FLUCTUATE, SO AN INVESTOR'S SHARES WHEN REDEEMED MAY BE WORTH MORE OR LESS
THAN THEIR ORIGINAL COST.
The performance data quoted herein represent past performance. Please
remember that past performance is not a guarantee of future performance. Fund
returns are net of fees and assume the reinvestment of distributions and
reflect reimbursement of certain Fund expenses as described in the
Prospectus. Had expenses not been subsidized, returns would have been lower.
Although gathered from reliable sources, benchmark data accuracy cannot be
guaranteed. References to specific securities and their issuers are for
illustrative purposes only and are not intended to be, and should not be
interpreted as, recommendations to purchase or sell such securities. Opinions
expressed herein are based on current market conditions and are subject to
change without notice.
MORE COMPLETE INFORMATION ABOUT THE FUND, INCLUDING MANAGEMENT FEES AND OTHER
EXPENSES, IS PROVIDED IN THE PROSPECTUS, WHICH SHOULD BE READ CAREFULLY BEFORE
INVESTING. YOU MAY OBTAIN ADDITIONAL COPIES OF THE PROSPECTUS BY CALLING J.P.
MORGAN FUNDS SERVICES AT (800) 766-7722.
8
<PAGE>
THE JPM INSTITUTIONAL DISCIPLINED EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment in The Disciplined Equity Portfolio
("Portfolio"), at value $49,552,063
Receivable for Shares of Beneficial Interest Sold 205,000
Receivable for Expense Reimbursements 19,481
Deferred Organization Expenses 9,201
Other Assets 1,056
-----------
Total Assets 49,786,801
-----------
LIABILITIES
Organization Expenses Payable 4,208
Shareholder Servicing Fee Payable 4,008
Administrative Services Fee Payable 1,253
Accrued Trustees' Fees and Expenses 337
Administration Fee Payable 149
Fund Services Fee Payable 30
Accrued Expenses 50,633
-----------
Total Liabilities 60,618
-----------
NET ASSETS
Applicable to 4,336,173 Shares of Beneficial
Interest Outstanding
(par value $0.001, unlimited shares authorized) $49,726,183
-----------
-----------
Net Asset Value, Offering and Redemption Price
Per Share $11.47
-----
-----
ANALYSIS OF NET ASSETS
Paid-in Capital $46,564,540
Undistributed Net Investment Income 192,456
Accumulated Net Realized Loss on Investment (144,254)
Net Unrealized Appreciation of Investment 3,113,441
-----------
Net Assets $49,726,183
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
9
<PAGE>
THE JPM INSTITUTIONAL DISCIPLINED EQUITY FUND
STATEMENT OF OPERATIONS
FOR THE PERIOD JANUARY 3, 1997 (COMMENCEMENT OF OPERATIONS) TO MAY 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME ALLOCATED FROM PORTFOLIO
Allocated Dividend Income (Net of Foreign
Withholding Tax of $2,642) $ 223,541
Allocated Interest Income 23,669
Allocated Portfolio Expenses (Net of
Reimbursement of $34,771) (54,754)
----------
Net Investment Income Allocated from
Portfolio 192,456
FUND EXPENSES
Registration Fees $ 22,576
Shareholder Servicing Fee 12,168
Professional Fees 11,516
Transfer Agent Fees 8,900
Printing Expenses 8,367
Administrative Services Fee 3,801
Amortization of Organization Expenses 799
Trustees' Fees and Expenses 438
Administration Fee 392
Fund Services Fee 320
Miscellaneous 4,000
--------
Total Fund Expenses 73,277
Less: Reimbursement of Expenses (73,277)
--------
NET FUND EXPENSES --
----------
NET INVESTMENT INCOME 192,456
NET REALIZED LOSS ON INVESTMENT ALLOCATED FROM
PORTFOLIO (144,254)
NET CHANGE IN UNREALIZED APPRECIATION OF
INVESTMENT ALLOCATED FROM PORTFOLIO 3,113,441
----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $3,161,643
----------
----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
10
<PAGE>
THE JPM INSTITUTIONAL DISCIPLINED EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD JANUARY 3, 1997 (COMMENCEMENT OF OPERATIONS) TO MAY 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 192,456
Net Realized Loss on Investment Allocated from
Portfolio (144,254)
Net Change in Unrealized Appreciation of
Investment Allocated from Portfolio 3,113,441
-----------
Net Increase in Net Assets Resulting from
Operations 3,161,643
-----------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Proceeds from Shares of Beneficial Interest Sold 49,177,316
Cost of Shares of Beneficial Interest Redeemed (2,612,776)
-----------
Net Increase from Transactions in Shares of
Beneficial Interest 46,564,540
-----------
Total Increase in Net Assets 49,726,183
NET ASSETS
Beginning of Period --
-----------
End of Period (including undistributed net
investment income of $192,456) $49,726,183
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
11
<PAGE>
THE JPM INSTITUTIONAL DISCIPLINED EQUITY FUND
FINANCIAL HIGHLIGHTS
FOR THE PERIOD JANUARY 3, 1997 (COMMENCEMENT OF OPERATIONS) TO MAY 31, 1997
- --------------------------------------------------------------------------------
Selected data for a share outstanding throughout the period is as follows:
<TABLE>
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
---------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.04
Net Realized and Unrealized Gain on Investment 1.43
---------------
Total from Investment Operations 1.47
---------------
NET ASSET VALUE, END OF PERIOD $ 11.47
---------------
---------------
Total Return 14.70%(a)
---------------
---------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (in thousands) $ 49,726
Ratios to Average Net Assets
Expenses 0.45%(b)
Net Investment Income 1.58%(b)
Decrease Reflected in Expense Ratio due to
Expense Reimbursement 0.89%(b)
</TABLE>
- ------------------------
(a) Not annualized.
(b) Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
12
<PAGE>
THE JPM INSTITUTIONAL DISCIPLINED EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1997
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The JPM Institutional Disciplined Equity Fund (the "Fund") is a separate series
of The JPM Institutional Funds, a Massachusetts business trust (the "Trust")
which was organized on November 4, 1992. The Trust is registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company. The Fund commenced operations on January 3, 1997.
The Fund invests all of its investable assets in The Disciplined Equity
Portfolio (the "Portfolio"), a diversified open-end management investment
company having the same investment objective as the Fund. The value of such
investment included in the Statement of Assets and Liabilities reflects the
Fund's proportionate interest in the net assets of the Portfolio (65% at May 31,
1997). The performance of the Fund is directly affected by the performance of
the Portfolio. The financial statements of the Portfolio, including the Schedule
of Investments, are included elsewhere in this report and should be read in
conjunction with the Fund's financial statements.
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)Valuation of securities by the Portfolio is discussed in Note 1 of the
Portfolio's Notes to Financial Statements which are included elsewhere in
this report.
b)The Fund records its share of net investment income, realized and
unrealized gain and loss and adjusts its investment in the Portfolio each
day. All the net investment income and realized and unrealized gain and
loss of the Portfolio is allocated pro rata among the Fund and other
investors in the Portfolio at the time of such determination.
c)Substantially all the Fund's net investment income is declared and paid as
dividends semi-annually. Distributions to shareholders of net realized
capital gain, if any, are declared and paid annually.
d)The Fund incurred organization expenses in the amount of $10,000. Morgan
Guaranty Trust Company of New York ("Morgan") has agreed to pay the
organization expenses of the Fund. The Fund has agreed to reimburse Morgan
for these costs which are being deferred and amortized on a straight-line
basis over a period not to exceed five-years beginning with the
commencement of operations of the Fund.
e)The Fund is treated as a separate entity for federal income tax purposes
and 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)Expenses incurred by the Trust with respect to any two or more funds in
the Trust are allocated in proportion to the net assets of each fund in
the Trust, except where allocations of direct expenses to each fund can
otherwise be made fairly. Expenses directly attributable to a fund are
charged to that fund.
13
<PAGE>
THE JPM INSTITUTIONAL DISCIPLINED EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1997
- --------------------------------------------------------------------------------
2. TRANSACTIONS WITH AFFILIATES
a)The Trust has retained Funds Distributor, Inc. ("FDI"), a registered
broker-dealer, to serve as co-administrator and distributor. 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,
The JPM Pierpont Funds, the Portfolio and the other portfolios in which
the Trust and The JPM Pierpont Funds invest (the "Master Portfolios"), JPM
Series Trust and JPM Series Trust II. For the period from January 3, 1997
(commencement of operations) to May 31, 1997, the fee for these services
amounted to $392.
b)The Trust, on behalf of the Fund, has an Administrative Services Agreement
(the "Services Agreement") with Morgan under which Morgan is responsible
for overseeing 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 daily based on the aggregate net assets of the Master
Portfolios and JPM Series Trust 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 the aggregate average daily net assets in excess
of $7 billion, less the complex-wide fees payable to FDI. The portion of
this charge payable by the Fund is determined by the proportionate share
that its net assets bear to the net assets of the Trust, the Master
Portfolios, other investors in the Master Portfolios for which Morgan
provides similar services, and JPM Series Trust. For the period from
January 3, 1997 (commencement of operations) to May 31, 1997, the fee for
these services amounted to $3,801.
In addition, Morgan has agreed to reimburse the Fund to the extent
necessary to maintain the total operating expenses of the Fund, including
the expenses allocated to the Fund from the Portfolio, at no more than
0.45% of the average daily net assets of the Fund through February 28,
1998. For the period from January 3, 1997 (commencement of operations) to
May 31, 1997, Morgan has agreed to reimburse the Fund $73,277 for expenses
that exceeded this limit.
c)The Trust, on behalf of the Fund, has a Shareholder Servicing Agreement
with Morgan. The agreement provides for the Fund to pay Morgan a fee for
these services which is computed daily and paid monthly at an annual rate
of 0.10% of the average daily net assets of the Fund. For the period from
January 3, 1997 (commencement of operations) to May 31, 1997, the fee for
these services amounted to $12,168.
d)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
$320 for the period from January 3, 1997 (commencement of operations) to
May 31, 1997.
14
<PAGE>
THE JPM INSTITUTIONAL DISCIPLINED EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1997
- --------------------------------------------------------------------------------
e)An aggregate annual fee of $75,000 is paid to each Trustee for serving as
a Trustee of the Trust, The JPM Pierpont Funds, the Master Portfolios and
JPM Series Trust. The Trustees' Fees and Expenses shown in the financial
statements represent the Fund's allocated portion of the total fees and
expenses. Prior to April 1, 1997, the aggregate annual Trustee fee was
$65,000. The Trust's Chairman and Chief Executive Officer also serves as
Chairman of Group and received 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 $65.
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 3, 1997
(COMMENCEMENT OF
OPERATIONS) TO
MAY 31, 1997
----------------
<S> <C>
Shares sold...................................... 4,595,214
Shares redeemed.................................. (259,041)
----------------
Net Increase..................................... 4,336,173
----------------
----------------
</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.
15
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of
The JPM Institutional Disciplined Equity Fund
In our opinion, the accompanying statement of assets and liabilities 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
The JPM Institutional Disciplined Equity Fund (one of the series constituting
part of The JPM Institutional Funds, hereafter referred to as the "Fund") at May
31, 1997, and the results of its operations, the changes in its net assets and
the financial highlights for the period January 3, 1997 (commencement of
operations) to May 31, 1997, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
New York, New York
July 21, 1997
16
<PAGE>
THE DISCIPLINED EQUITY PORTFOLIO
ANNUAL REPORT MAY 31, 1997
(The following pages should be read in conjunction
with The JPM Institutional Disciplined Equity Fund
Annual Financial Statements)
17
<PAGE>
THE DISCIPLINED EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS
MAY 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
COMMON STOCK (97.4%)
BASIC INDUSTRIES (4.9%)
AGRICULTURE (0.1%)
Pioneer Hi-Bred International,
Inc............................................ 1,500 $ 104,625
------------
CHEMICALS (2.5%)
Air Products and Chemicals, Inc.................. 300 23,325
Albemarle Corp................................... 300 5,625
Crompton & Knowles Corp.......................... 1,200 28,050
Cytec Industries, Inc.+.......................... 800 31,300
Dow Chemical Co.................................. 4,200 350,175
E.I. Du Pont De Nemours &
Co.(a)......................................... 10,000 1,088,750
Georgia Gulf Corp................................ 100 2,762
Lyondell Petrochemical Co........................ 1,400 30,800
PPG Industries Inc............................... 2,100 122,062
Rohm & Haas Co................................... 1,100 94,875
Union Carbide Corp............................... 2,200 102,850
------------
1,880,574
------------
FOREST PRODUCTS & PAPER (1.0%)
Boise Cascade Corp............................... 1,200 45,600
Bowater Inc...................................... 800 39,500
Champion International Corp...................... 2,500 123,437
James River Corp. of Virginia.................... 1,400 49,175
Louisiana Pacific Corp........................... 2,800 54,600
Mead Corp........................................ 1,400 89,250
Temple-Inland, Inc............................... 1,500 90,750
Union Camp Corp.................................. 300 15,750
Weyerhaeuser Co.................................. 4,900 244,387
------------
752,449
------------
METALS & MINING (1.3%)
Alcan Aluminum Ltd............................... 1,100 39,462
Allegheny Teledyne, Inc.......................... 4,300 110,725
Aluminum Company of America...................... 4,300 316,587
Bethlehem Steel Corp.+........................... 700 7,000
Freeport-McMoran Copper & Gold, Inc. - Class A... 4,700 130,425
Nucor Corp....................................... 2,100 123,900
Reynolds Metals Co............................... 1,600 108,600
UCAR International, Inc.+........................ 700 33,600
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
METALS & MINING (CONTINUED)
USX-U.S. Steel Group, Inc........................ 1,500 $ 48,375
Worthington Industries, Inc...................... 2,200 40,837
------------
959,511
------------
TOTAL BASIC INDUSTRIES......................... 3,697,159
------------
CONSUMER GOODS & SERVICES (23.5%)
AUTOMOTIVE (2.0%)
Chrysler Corp.................................... 10,400 330,200
Cooper Tire & Rubber Co.......................... 1,400 31,325
Ford Motor Co.................................... 17,200 645,000
General Motors Corp.............................. 6,000 343,500
Goodyear Tire and Rubber Co...................... 3,100 181,350
Lear Corp.+...................................... 900 34,425
------------
1,565,800
------------
BROADCASTING & PUBLISHING (1.4%)
Comcast Corp. - Class A.......................... 10,100 176,119
Cox Communications, Inc. - Class A+.............. 1,000 21,875
R.R. Donnelley & Sons Co......................... 4,700 174,487
TCI Satellite Entertainment, Inc. - Class A+..... 400 3,825
Tele-Communications TCI, Series A+............... 19,000 288,562
U.S. West, Inc. Media Group+..................... 18,800 373,650
------------
1,038,518
------------
ENTERTAINMENT, LEISURE & MEDIA (2.2%)
Circus Circus Enterprises, Inc.+................. 2,500 65,000
Harrah's Entertainment, Inc.+.................... 3,000 55,875
International Game Technology.................... 3,800 67,450
ITT Corp.+....................................... 3,600 214,650
MGM Grand, Inc.+................................. 1,700 64,387
Mirage Resorts, Inc.+............................ 5,400 128,925
Time Warner Inc.................................. 15,900 739,350
Viacom, Inc. - Class B+.......................... 10,800 320,625
------------
1,656,262
------------
FOOD, BEVERAGES & TOBACCO (8.7%)
Anheuser Busch Companies, Inc.................... 10,300 441,612
Coca-Cola Co..................................... 17,400 1,187,550
CPC International, Inc........................... 1,900 163,400
General Mills, Inc............................... 3,500 221,375
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
18
<PAGE>
THE DISCIPLINED EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
FOOD, BEVERAGES & TOBACCO (CONTINUED)
Heinz (H.J.) Company............................. 6,800 $ 292,400
Kellogg Co....................................... 4,300 317,125
Nabisco Holdings Corp. - Class A................. 1,100 43,587
PepsiCo, Inc.(a)................................. 32,700 1,201,725
Philip Morris Companies, Inc.(a)................. 28,200 1,240,800
Ralston Purina Co................................ 2,300 196,075
Sara Lee Corp.................................... 5,600 228,900
Seagram Company Ltd.............................. 11,500 462,875
Unilever NV (ADR)................................ 3,300 639,375
------------
6,636,799
------------
HOUSEHOLD APPLIANCES & FURNISHINGS (0.5%)
Black & Decker Corp.............................. 3,600 125,100
Leggett & Platt, Inc............................. 2,500 94,375
Whirlpool Corp................................... 2,800 139,650
------------
359,125
------------
HOUSEHOLD PRODUCTS (2.5%)
Procter & Gamble Co.(a).......................... 13,200 1,819,950
Rubbermaid, Inc.................................. 4,200 117,075
------------
1,937,025
------------
PERSONAL CARE (1.0%)
Avon Products, Inc............................... 2,500 159,375
Gillette Co...................................... 6,700 595,462
------------
754,837
------------
RESTAURANTS & HOTELS (0.3%)
Extended Stay America, Inc.+..................... 2,900 39,875
Hilton Hotels Corp............................... 7,400 209,050
------------
248,925
------------
RETAIL (4.8%)
Albertson's, Inc................................. 5,000 167,500
AutoZone, Inc.+.................................. 3,000 70,125
Circuit City Stores, Inc......................... 1,900 75,050
Dayton Hudson Corp............................... 1,600 77,000
Federated Department Stores,
Inc.+.......................................... 4,200 155,400
Footstar, Inc.+.................................. 100 2,225
Gap, Inc......................................... 5,500 188,375
General Nutrition Companies, Inc.+............... 1,700 39,312
Limited, Inc..................................... 4,400 89,100
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
RETAIL (CONTINUED)
Lowe's Companies, Inc............................ 2,900 $ 114,187
Mattel, Inc...................................... 11,100 331,612
May Department Stores Co......................... 600 28,275
Nine West Group, Inc.+........................... 700 26,950
Nordstrom, Inc................................... 1,400 67,287
Penney (J.C.) Inc................................ 5,100 262,650
Sears, Roebuck & Co.............................. 7,800 383,175
TJX Companies, Inc............................... 1,500 72,000
Toys 'R' Us, Inc.+............................... 5,700 177,412
Wal-Mart Stores, Inc.(a)......................... 44,300 1,317,925
------------
3,645,560
------------
TEXTILES (0.1%)
Fruit of the Loom, Inc. - Class A+............... 2,600 90,675
Unifi, Inc....................................... 700 22,575
------------
113,250
------------
TOTAL CONSUMER GOODS & SERVICES................ 17,956,101
------------
ENERGY (9.7%)
GAS EXPLORATION (0.4%)
Enron Corp....................................... 6,000 244,500
Pogo Producing Co................................ 1,100 44,000
Union Pacific Resources Group, Inc............... 500 14,437
------------
302,937
------------
NATURAL GAS (0.4%)
Burlington Resources, Inc........................ 100 4,650
PanEnergy Corp................................... 6,000 280,500
------------
285,150
------------
OIL-PRODUCTION (7.4%)
Anadarko Petroleum Corp.......................... 2,000 126,000
Ashland Inc...................................... 2,400 114,900
Atlantic Richfield Co............................ 3,100 451,050
Exxon Corp.(a)................................... 41,100 2,435,175
Mobil Corp....................................... 9,500 1,328,812
Phillips Petroleum Co............................ 5,400 229,500
Royal Dutch Petroleum Co. (ADR)(a)............... 2,700 527,175
Tosco Corp....................................... 4,300 140,287
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
THE DISCIPLINED EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
OIL-PRODUCTION (CONTINUED)
Unocal Corp...................................... 5,200 $ 221,650
Valero Energy Corp............................... 1,500 53,625
------------
5,628,174
------------
OIL-SERVICES (1.5%)
Amerada Hess Corp................................ 1,400 74,900
Cooper Cameron Corp.+............................ 600 49,125
Diamond Offshore Drilling Inc.+.................. 1,100 78,237
Dresser Industries, Inc.......................... 3,500 119,875
Global Marine, Inc.+............................. 3,300 74,250
Input/Output, Inc.+.............................. 200 3,550
Noble Drilling Corp.+............................ 3,000 65,250
Schlumberger Ltd................................. 4,600 547,975
Smith International, Inc.+....................... 800 41,900
Western Atlas, Inc.+............................. 1,100 74,525
------------
1,129,587
------------
TOTAL ENERGY................................... 7,345,848
------------
FINANCE (14.3%)
BANKING (7.4%)
Ahmanson, (H.F.) and Co.......................... 1,800 73,350
Alex Brown, Inc.................................. 600 40,200
Banc One Corp.................................... 10,000 432,500
BankBoston Corp.................................. 2,400 175,200
Bankers Trust New York Corp...................... 1,200 101,550
BB+T Corp........................................ 1,700 68,000
Central Fidelity Banks, Inc...................... 900 26,269
Charter One Financial, Inc....................... 800 37,450
Chase Manhattan Corp............................. 6,700 633,150
Citicorp......................................... 2,700 308,812
CoreStates Financial Corp........................ 3,900 206,212
Crestar Financial Corp........................... 1,900 72,200
Dime Bancorp, Inc................................ 1,800 30,600
First Chicago NBD Corp........................... 5,500 325,875
First Commerce Corp.............................. 600 27,037
First Hawaiian, Inc.............................. 200 7,087
First Tennessee National Corp.................... 1,000 45,000
First Union Corp................................. 4,700 403,612
First Virginia Banks, Inc........................ 500 28,000
Firstar Corp..................................... 2,600 77,675
Fleet Financial Group, Inc....................... 2,800 171,150
Golden West Financial Corp....................... 1,000 67,750
Great Western Financial Corp..................... 2,400 116,400
Hibernia Corp. - Class A......................... 2,200 29,150
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
BANKING (CONTINUED)
Household International, Inc..................... 1,700 $ 167,025
Mercantile Bancorporation, Inc................... 1,301 76,747
NationsBank Corp.(a)............................. 13,400 788,925
North Fork Bancorporation, Inc................... 1,000 21,000
Old Kent Financial Corp.......................... 800 42,550
Pacific Century Financial Corp................... 700 32,200
PNC Bank Corp.................................... 1,200 50,250
Provident Bancorp, Inc.+......................... 400 16,000
Regions Financial Corp........................... 1,000 59,625
Republic New York Corp........................... 1,000 99,750
Signet Banking Corp.............................. 1,200 39,450
Southtrust Corp.................................. 1,700 66,300
TCF Financial Corp............................... 700 29,750
Union Planters Corp.............................. 1,100 51,975
United Carolina Bancshares, Inc.................. 1,500 66,937
Valley National Bancorp.......................... 600 16,200
Washington Federal, Inc.......................... 900 23,850
Washington Mutual, Inc........................... 2,200 122,237
Wells Fargo & Co................................. 1,500 395,250
Wilmington Trust Corp............................ 500 22,219
------------
5,692,469
------------
FINANCIAL SERVICES (2.8%)
Advanta Corp. - Class B.......................... 600 16,687
Associates First Capital Corp. - Class A......... 900 42,525
Bear Stearns Companies, Inc...................... 2,000 65,000
Beneficial Corp.................................. 1,100 70,675
Contifinancial Corp.+............................ 700 23,625
Edwards (A.G.), Inc.............................. 1,200 44,550
Federal Home Loan Mortgage Corporation........... 11,300 372,900
Federal National Mortgage Association............ 19,000 828,875
Finova Group, Inc................................ 500 37,250
First USA, Inc................................... 1,200 59,400
Money Store, Inc................................. 900 23,119
Morgan Stanley Dean Witter Discover & Co......... 3,400 140,250
Morgan Stanley Group, Inc........................ 4,500 303,750
Paine Webber Group Inc........................... 1,300 46,150
Salomon, Inc..................................... 1,900 101,887
------------
2,176,643
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE DISCIPLINED EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
INSURANCE (4.1%)
American General Corp............................ 4,900 $ 216,825
American International Group,
Inc............................................ 7,700 1,042,387
Chubb Corp....................................... 2,900 176,900
General Re Corporation........................... 1,400 245,350
Hartford Financial Services
Group, Inc..................................... 1,000 78,000
Lincoln National Corp............................ 2,500 152,187
Marsh & McLennan Companies, Inc.................. 1,600 210,800
MBIA, Inc........................................ 1,000 107,375
Mercury General Corp............................. 500 36,625
PMI Group, Inc................................... 800 43,900
Progressive Corp................................. 1,600 126,600
Providian Corp................................... 2,300 137,713
Safeco Corp...................................... 2,000 86,875
St. Paul Companies, Inc.......................... 1,400 100,275
Torchmark Corp................................... 1,100 72,188
Transamerica Corp................................ 1,600 145,400
Unum Corp........................................ 1,800 142,425
------------
3,121,825
------------
TOTAL FINANCE.................................. 10,990,937
------------
HEALTH CARE (10.7%)
HEALTH SERVICES (3.0%)
Aetna Inc........................................ 1,100 111,100
Apria Healthcare Group, Inc.+.................... 500 9,000
Columbia / HCA
Healthcare Corp.(a)............................ 25,200 922,950
Health Care & Retirement Corp.+.................. 2,100 71,400
Health Management
Associates, Inc. - Class A+.................... 3,500 102,375
Humana, Inc.+.................................... 7,800 176,475
Tenet Healthcare Corp.+.......................... 13,700 376,750
United Healthcare Corp........................... 8,900 502,850
------------
2,272,900
------------
MEDICAL SUPPLIES (0.4%)
Bard (C.R.), Inc................................. 1,900 60,800
Bausch & Lomb, Inc............................... 2,300 92,575
Biomet, Inc...................................... 3,600 67,275
Medtronic, Inc................................... 1,600 118,400
------------
339,050
------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
PHARMACEUTICALS (7.3%)
Alza Corp.+...................................... 4,200 $ 123,900
American Home Products
Corp.(a)....................................... 17,300 1,319,125
Boston Scientific Corp.+......................... 4,300 229,513
Bristol-Myers Squibb Co.......................... 14,100 1,034,588
Forest Laboratories, Inc.+....................... 500 21,125
Johnson & Johnson................................ 2,700 161,663
Merck & Company, Inc............................. 5,400 485,325
Pfizer, Inc...................................... 4,800 493,800
Schering-Plough Corp............................. 9,900 898,425
Warner-Lambert Co................................ 7,300 735,475
Watson Pharmaceuticals, Inc.+.................... 2,100 82,556
------------
5,585,495
------------
TOTAL HEALTH CARE.............................. 8,197,445
------------
INDUSTRIAL PRODUCTS & SERVICES (9.4%)
BUILDING MATERIALS (0.2%)
Owens Corning.................................... 2,000 83,500
USG Corp.+....................................... 1,700 59,288
------------
142,788
------------
CAPITAL GOODS (0.7%)
Cummins Engine Company, Inc...................... 600 38,250
Eastman Kodak Co................................. 4,400 364,650
Eaton Corp....................................... 1,700 135,575
Foster Wheeler Corp.............................. 900 34,875
------------
573,350
------------
COMMERCIAL SERVICES (0.5%)
ADT Ltd.+........................................ 3,100 90,288
Ecolab, Inc...................................... 800 33,300
Service Corp. International...................... 7,100 250,275
------------
373,863
------------
DIVERSIFIED MANUFACTURING (5.9%)
AlliedSignal, Inc................................ 9,100 698,425
Cooper Industries, Inc........................... 2,700 137,700
General Electric Co.............................. 25,000 1,509,375
General Motors Corp. - Class H................... 11,900 655,988
ITT Industries, Inc.............................. 3,800 94,050
Johnson Controls, Inc............................ 3,100 131,363
Monsanto Co...................................... 1,000 44,000
Raychem Corp..................................... 1,400 103,775
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE DISCIPLINED EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
DIVERSIFIED MANUFACTURING (CONTINUED)
Tenneco, Inc. - New Shares....................... 4,500 $ 201,375
Tyco International Ltd........................... 4,600 292,100
Xerox Corp....................................... 10,100 684,275
------------
4,552,426
------------
ELECTRICAL EQUIPMENT (0.9%)
Emerson Electric Co.............................. 10,100 545,400
Grainger (W.W.), Inc............................. 1,200 96,300
National Service Industries Inc.................. 400 17,550
------------
659,250
------------
MACHINERY (0.3%)
Caterpillar, Inc................................. 1,600 156,200
Ingersoll-Rand Co................................ 1,900 103,550
------------
259,750
------------
MISCELLANEOUS (0.1%)
Fluor Corp....................................... 1,900 100,463
------------
MULTI - INDUSTRY (0.0%)*
Harnischfeger Industries, Inc.................... 700 30,013
------------
PACKAGING & CONTAINERS (0.1%)
Kimberly-Clark Corp.............................. 1,800 90,225
------------
POLLUTION CONTROL (0.7%)
Waste Management, Inc............................ 16,800 533,400
Wheelabrator Technologies, Inc................... 2,300 29,613
------------
563,013
------------
TOTAL INDUSTRIAL PRODUCTS & SERVICES........... 7,345,141
------------
TECHNOLOGY (15.5%)
AEROSPACE (2.1%)
Boeing Co........................................ 2,900 305,225
Coltec Industries, Inc.+......................... 2,800 54,950
McDonnell Douglas Corp........................... 16,300 1,049,313
Raytheon Co...................................... 3,500 167,125
------------
1,576,613
------------
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
COMPUTER PERIPHERALS (0.3%)
Gateway 2000, Inc.+.............................. 1,700 $ 112,838
Quantum Corp.+................................... 1,500 58,406
Read-Rite Corp.+................................. 1,000 20,813
------------
192,057
------------
COMPUTER SOFTWARE (2.4%)
Adobe Systems, Inc............................... 400 17,913
Autodesk, Inc.................................... 700 27,256
Cabletron Systems, Inc.+......................... 2,600 109,928
Computer Associates
International, Inc............................. 5,000 273,750
Electronic Arts+................................. 1,100 35,200
Microsoft Corp.+................................. 7,600 942,875
Oracle Corp.+.................................... 9,800 457,538
------------
1,864,460
------------
COMPUTER SYSTEMS (4.4%)
Apple Computer, Inc.+............................ 800 13,350
Compaq Computer Corp.+........................... 6,500 703,625
Dell Computer Corp.+............................. 2,900 326,069
EMC Corp.+....................................... 6,100 243,238
International Business
Machines Corp.(a).............................. 20,000 1,730,000
Silicon Graphics, Inc.+.......................... 3,800 71,725
Sun Microsystems, Inc.+.......................... 8,600 277,888
------------
3,365,895
------------
ELECTRONICS (2.0%)
Bay Networks, Inc.+.............................. 4,700 115,150
Cisco Systems, Inc.+............................. 16,400 1,108,025
Harris Corp...................................... 900 79,763
Perkin-Elmer Corp................................ 2,100 159,600
Sensormatic Electronics Corp..................... 1,800 28,125
Symbol Technologies, Inc......................... 1,100 34,513
------------
1,525,176
------------
INFORMATION PROCESSING (0.8%)
Electronic Data System Corp...................... 5,700 213,038
First Data Corp.................................. 10,500 420,000
------------
633,038
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE DISCIPLINED EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
SEMICONDUCTORS (3.4%)
Applied Materials, Inc.+......................... 300 $ 19,556
Intel Corp.(a)................................... 13,900 2,104,981
National Semiconductor Corp.+.................... 3,300 92,813
Texas Instruments, Inc........................... 4,100 368,488
------------
2,585,838
------------
TELECOMMUNICATIONS (0.1%)
360 Communications Co.+.......................... 3,600 67,950
Airtouch Communications, Inc.+................... 400 11,150
Paging Network, Inc.+............................ 2,100 15,881
------------
94,981
------------
TOTAL TECHNOLOGY............................... 11,838,058
------------
TRANSPORTATION (1.3%)
AIRLINES (0.2%)
AMR Corp.+....................................... 1,200 119,250
Comair Holdings, Inc............................. 200 5,175
Southwest Airlines Co............................ 1,900 48,925
------------
173,350
------------
RAILROADS (1.0%)
Burlington Northern Santa Fe..................... 2,100 174,300
CSX Corp......................................... 3,600 190,800
Norfolk Southern Corp............................ 1,700 165,113
Union Pacific Corp............................... 3,300 223,575
------------
753,788
------------
TRUCK & FREIGHT CARRIERS (0.1%)
CNF Transportation, Inc.......................... 600 19,350
Consolidated Freightways Corp.+.................. 100 1,231
Ryder System, Inc................................ 1,000 33,125
------------
53,706
------------
TOTAL TRANSPORTATION........................... 980,844
------------
UTILITIES (8.1%)
ELECTRIC (2.2%)
Allegheny Power Systems, Inc..................... 2,100 54,863
American Electric Power Co....................... 2,900 118,175
Baltimore Gas & Electric Co...................... 400 10,500
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
ELECTRIC (CONTINUED)
Central & South West Corp........................ 3,500 $ 74,375
Consolidated Edison Co. of New York, Inc......... 4,100 119,413
Dominion Resources, Inc.......................... 3,300 114,263
DTE Energy Co.................................... 2,500 66,563
Entergy Corp..................................... 4,200 110,775
GPU, Inc......................................... 600 21,000
Houston Industries, Inc.......................... 3,900 80,925
Illinova Corp.................................... 1,400 30,625
New England Electric System...................... 1,100 38,088
Northeast Utilities.............................. 2,300 20,988
Northern States Power Co......................... 1,800 88,200
P P & L Resources, Inc........................... 2,800 56,350
PECO Energy Co................................... 4,000 76,000
PG&E Corp........................................ 3,700 85,563
Pinnacle West Capital Corp....................... 1,400 41,125
Potomac Electric Power Co........................ 2,100 48,300
Southern Co...................................... 11,600 246,500
Unicom Corp...................................... 3,600 81,900
Union Electric Co................................ 1,700 62,263
Wisconsin Energy Corp............................ 1,900 45,838
------------
1,692,592
------------
TELEPHONE (5.9%)
AT & T Corp...................................... 30,200 1,113,625
Bell Atlantic Corp............................... 9,500 665,000
Frontier Corp.................................... 3,800 69,825
MCI Communications Corp.......................... 16,700 641,906
NYNEX Corp....................................... 2,400 129,000
SBC Communications, Inc.......................... 12,400 725,400
Sprint Corp...................................... 10,600 518,075
WorldCom, Inc.+.................................. 21,700 644,219
------------
4,507,050
------------
TOTAL UTILITIES................................ 6,199,642
------------
TOTAL COMMON STOCK (COST $69,043,984).......... 74,551,175
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
23
<PAGE>
THE DISCIPLINED EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
SHORT-TERM INVESTMENTS (1.7%)
REPURCHASE AGREEMENT (1.6%)
State Street Bank and Trust Company Repurchase
Agreement, dated 05/30/97 due 06/02/97,
proceeds $1,201,167 (collateralized by
$1,190,000 U.S. Treasury Note, 6.00%, due
05/31/98, valued at $1,226,062) (cost
$1,201,000).................................... $ 1,201,000 $ 1,201,000
------------
U.S. TREASURY OBLIGATIONS (0.1%)
United States Treasury Bills, 5.04% due 07/31/97
(a)............................................ 75,000 74,407
United States Treasury Bills, 5.08% due 07/17/97
(a)............................................ 50,000 49,682
------------
TOTAL U.S. TREASURY OBLIGATIONS................ 124,089
------------
TOTAL SHORT-TERM INVESTMENTS (COST
$1,325,045)................................... 1,325,089
------------
TOTAL INVESTMENTS (COST $70,369,029) (99.1%)..................
75,876,264
OTHER ASSETS IN EXCESS OF LIABILITIES (0.9%)..................
671,632
------------
NET ASSETS (100.0%)........................................... $ 76,547,896
------------
------------
</TABLE>
- ------------------------------
Note: For Federal Income Tax purposes, the cost of securities at May 31, 1997,
was substantially the same as the cost for financial statement purposes.
+ Non-income producing security.
* Less than 0.1%
ADR -- Securities whose value is determined or significantly influenced by
trading on exchanges not located in the United States or Canada. ADR after the
name of a foreign holding stands for American Depository Receipt, representing
ownership of foreign securities on deposit with a domestic custodian bank.
(a) Security is fully or partially segregated as collateral for futures
contracts. Total market value of collateral is $4,008,276.
The Accompanying Notes are an Integral Part of the Financial Statements.
24
<PAGE>
THE DISCIPLINED EQUITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $70,369,029 ) $75,876,264
Cash 1,481,736
Receivable for Investments Sold 148,161
Dividends Receivable 148,695
Receivable for Expense Reimbursement 15,806
Variation Margin Receivable 10,200
Deferred Organization Expenses 9,168
Interest Receivable 334
-----------
Total Assets 77,690,364
-----------
LIABILITIES
Payable for Investments Purchased 1,056,352
Advisory Fee Payable 21,512
Custody Fee Payable 10,609
Organization Expenses Payable 8,000
Administrative Services Fee Payable 1,921
Accrued Trustees' Fees and Expenses 669
Administration Fee Payable 149
Fund Services Fee Payable 47
Accrued Expenses 43,209
-----------
Total Liabilities 1,142,468
-----------
NET ASSETS
Applicable to Investors' Beneficial Interests $76,547,896
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
25
<PAGE>
THE DISCIPLINED EQUITY PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM DECEMBER 30, 1996 (COMMENCEMENT OF OPERATIONS) TO MAY 31,
1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividend Income (Net of Foreign Withholding Tax
of $4,054 ) $ 382,747
Interest Income 36,979
----------
Investment Income 419,726
EXPENSES
Advisory Fee $ 73,985
Professional Fees and Expenses 37,932
Custodian Fees and Expenses 37,450
Administrative Services Fee 6,614
Printing Expenses 3,667
Trustees' Fees and Expenses 876
Amortization of Organization Expense 832
Registration Fees 610
Fund Services Fee 607
Administration Fee 520
Miscellaneous 1,000
--------
Total Expenses 164,093
Less: Reimbursement of Expenses (68,970)
--------
NET EXPENSES 95,123
----------
NET INVESTMENT INCOME 324,603
NET REALIZED GAIN ON INVESTMENTS (including
$49,299 net realized loss from futures
contracts) 157,560
NET CHANGE IN UNREALIZED APPRECIATION OF
INVESTMENTS (including $184,345 net unrealized
appreciation from futures contracts) 5,691,580
----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $6,173,743
----------
----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
26
<PAGE>
THE DISCIPLINED EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD DECEMBER 30, 1996 (COMMENCEMENT OF OPERATIONS) TO MAY 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 324,603
Net Realized Gain on Investments 157,560
Net Change in Unrealized Appreciation of
Investments 5,691,580
-----------
Net Increase in Net Assets Resulting from
Operations 6,173,743
-----------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 72,972,888
Withdrawals (2,598,735)
-----------
Net Increase from Investors' Transactions 70,374,153
-----------
Total Increase in Net Assets 76,547,896
NET ASSETS
Beginning of Period --
-----------
End of Period $76,547,896
-----------
-----------
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
RATIOS TO AVERAGE NET ASSETS
Expenses 0.45%(a)
Net Investment Income 1.54%(a)
Decrease Reflected in Expense Ratio due to
Expense Reimbursement 0.33%(a)
Portfolio Turnover 20.47%(b)
Average Broker Commissions 0.0280
</TABLE>
- ------------------------
(a) Annualized.
(b) Not Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
27
<PAGE>
THE DISCIPLINED EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1997
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Disciplined Equity Portfolio (the "Portfolio") is one of eight subtrusts
(portfolios) comprising The Series Portfolio (the "Series Portfolio"). The
Series Portfolio is registered under the Investment Company Act of 1940, as
amended (the "Act"), as a no-load open-end management investment company which
was organized as a trust under the laws of the State of New York on June 24,
1994. The Portfolio commenced operations on December 30, 1996. The Portfolio's
investment objective is to provide a high total return from a broadly
diversified portfolio of equity securities. The Declaration of Trust permits the
Trustees to issue an unlimited number of beneficial interests in the Portfolio.
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 Portfolio:
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 Portfolio's Trustees. Such procedures include the use
of independent pricing services, which use prices based upon yields or
prices of securities of comparable quality, coupon, maturity and type;
indications as to values from dealers; and general market conditions. All
portfolio securities with a remaining maturity of less than 60 days are
valued 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 become 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)Futures -- A futures contract is an agreement to purchase/sell a specified
quantity of an underlying instrument at a specified future date or to
make/receive a cash payment based on the value of a securities index. The
price at which the purchase and sale will take place is fixed when the
Portfolio enters into the contract. Upon entering into such a contract the
Portfolio is required to pledge to the broker an amount of cash and/or
liquid securities equal to the minimum "initial margin" requirements of
the exchange. Pursuant to the contract, the Portfolio agrees to receive
from, or pay to, the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are known
as "variation margin" and are recorded by the Portfolio as unrealized
gains or losses. When the contract is closed, the Portfolio records a
realized gain or loss equal to the difference between the value of the
contract at the time it was opened and the value at the time when it was
closed. The Portfolio
28
<PAGE>
THE DISCIPLINED EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1997
- --------------------------------------------------------------------------------
invests in futures contracts for the purpose of hedging its existing
portfolio securities, or securities the Portfolio intends to purchase,
against fluctuations in value caused by changes in prevailing market
interest rates or securities movements. The use of futures transactions
involves the risk of imperfect correlation of movements in the price of
futures contracts, interest rates and the underlying hedged assets and the
possible inability of counterparties to meet the terms of their contracts.
Futures transactions during the period December 30, 1996 (commencement of
operations) to May 31, 1997 are summarized as follows:
<TABLE>
<CAPTION>
NUMBER OF PRINCIPAL AMOUNT
CONTRACTS OF CONTRACTS
--------- ----------------
<S> <C> <C>
Contracts opened................................. 16 $ 6,229,442
Contracts closed................................. (12) (4,712,587)
--------- ----------------
Contracts open at end of period.................. 4 $ 1,516,855
--------- ----------------
--------- ----------------
</TABLE>
SUMMARY OF OPEN CONTRACTS AT MAY 31, 1997
<TABLE>
<CAPTION>
NET UNREALIZED
CONTRACTS LONG APPRECIATION
-------------- --------------
<S> <C> <C>
S&P 500, expiring June 1997...................... 4 $ 184,345
-------------- --------------
Totals........................................... 4 $ 184,345
-------------- --------------
-------------- --------------
</TABLE>
d)The Portfolio intends to be treated as a partnership for federal income
tax purposes. As such, each investor in the Portfolio will be subject to
taxation on its share of the Portfolio's ordinary income and capital
gains. It is intended that the Portfolio's assets will be managed in such
a way that an investor in the Portfolio will be able to satisfy the
requirements of Subchapter M of the Internal Revenue Code.
e)The Portfolio's custodian takes possession of the collateral pledged for
investments in repurchase agreements on behalf of the Portfolio. It is the
policy of the Portfolio to value the underlying collateral daily on a
mark-to-market basis to determine that the value, including accrued
interest, is at least equal to the repurchase price plus accrued interest.
In the event of default of the obligation to repurchase, the Portfolio has
the right to liquidate the collateral and apply the proceeds in
satisfaction of the obligation. Under certain circumstances, in the event
of default or bankruptcy by the other party to the agreement, realization
and/or retention of the collateral or proceeds may be subject to legal
proceedings.
f)The Portfolio incurred organization expenses in the amount of $10,000.
Morgan Guaranty Trust Company of New York ("Morgan") has agreed to pay the
organization expenses of the Portfolio. The Portfolio 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 Portfolio.
g)Expenses incurred by the Series Portfolio with respect to any two or more
portfolios in the Series Portfolio are allocated in proportion to the net
assets of each portfolio in the Series Portfolio, except where allocations
of direct expenses to each portfolio can otherwise be made fairly.
Expenses directly attributable to a portfolio are charged to that
portfolio.
29
<PAGE>
THE DISCIPLINED EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1997
- --------------------------------------------------------------------------------
2. TRANSACTIONS WITH AFFILIATES
a)The Portfolio has an Investment Advisory Agreement with Morgan. Under the
terms of the agreement, the Portfolio pays Morgan at an annual rate of
0.35% of the Portfolio's average daily net assets. For the period from
December 30, 1996 (commencement of operations) to May 31, 1997, such fees
amounted to $73,985.
b)The Portfolio has retained Funds Distributor, Inc. ("FDI"), a registered
broker-dealer, to serve as the co-administrator and exclusive placement
agent. Under a Co-Administration Agreement between FDI and the Portfolio,
FDI provides administrative services necessary for the operations of the
Portfolio, furnishes office space and facilities required for conducting
the business of the Portfolio and pays the compensation of the officers
affiliated with FDI. The Portfolio 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 Portfolio is based on
the ratio of the Portfolio's net assets to the aggregate net assets of The
JPM Pierpont Funds, The JPM Institutional Funds, the Portfolio and the
other portfolios (the "Master Portfolios") in which The JPM Pierpont Funds
and The JPM Institutional Funds invest , JPM Series Trust and JPM Series
Trust II. For the period from December 30, 1996 (commencement of
operations) to May 31, 1997, the fee for these services amounted to $520.
c)The Portfolio has an Administrative Services Agreement (the "Services
Agreement") with Morgan under which Morgan is responsible for overseeing
certain aspects of the administration and operation of the Portfolio.
Under the Services Agreement, the Portfolio had agreed to pay Morgan a fee
equal to its allocable share of an annual complex-wide charge. This charge
is calculated daily based on the aggregate net assets of the Master
Portfolios and JPM Series Trust in accordance with the following annual
schedule: 0.09% on the first $7 billion of their aggregate average daily
net assets and 0.04% of their aggregate average daily net assets in excess
of $7 billion, less the complex-wide fees payable to FDI. The portion of
this charge payable by the Portfolio is determined by the proportionate
share that its net assets bear to the total net assets of the Master
Portfolios, other investors in the Master Portfolios for which Morgan
provides similar services, The JPM Pierpont Funds, The JPM Institutional
Funds, and JPM Series Trust. For the period from December 30, 1996
(commencement of operations) to May 31, 1997, the fee for these services
amounted to $6,614.
In addition, Morgan has agreed to reimburse the Portfolio to the extent
necessary to maintain the total operating expenses of the Portfolio at no
more than 0.45% of the average daily net assets of the Portfolio through
February 28, 1998. For the period from December 30, 1996 (commencement of
operations) to May 31, 1997, Morgan has agreed to reimburse the Portfolio
$68,970 for expenses under this agreement.
d)The Portfolio has a Fund Services Agreement with Pierpont Group, Inc.
("Group") to assist the Trustees in exercising their overall supervisory
responsibilities for the Portfolio's affairs. The Trustees of the
Portfolio represent all the existing shareholders of Group. The
Portfolio's allocated portion of Group's costs in performing its services
amounted to $607 for the period from December 30, 1996 (commencement of
operations) to May 31, 1997.
30
<PAGE>
THE DISCIPLINED EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1997
- --------------------------------------------------------------------------------
e)An aggregate annual fee of $75,000 is paid to each Trustee for serving as
a Trustee of The JPM Pierpont Funds, The JPM Institutional Funds, the
Master Portfolios and JPM Series Trust. The Trustees' Fees and Expenses
shown in the financial statements represents the Portfolio's allocated
portion of the total fees and expenses. Prior to April 1, 1997, the
aggregate annual Trustee fee was $65,000. The Portfolio's Chairman and
Chief Executive Officer also serves as Chairman of Group and received
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 $122.
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the period from
December 30, 1996 (commencement of operations) to May 31, 1997 were as follows:
COST OF PROCEEDS
PURCHASES FROM SALES
----------- -----------
$78,930,434 $10,094,782
31
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Investors of
The Disciplined Equity Portfolio
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operation and of
changes in net assets and the supplementary data present fairly, in all material
respects, the financial position of The Disciplined Equity Portfolio (one of the
portfolios comprising part of The Series Portfolio, hereafter referred to as the
"Portfolio") at May 31, 1997, and the results of its operations, the changes in
its net assets and the supplementary data for the period December 30, 1996
(commencement of operations) to May 31, 1997, in conformity with generally
accepted accounting principles. These financial statements and supplementary
data (hereafter referred to as "financial statements") are the responsibility of
the Portfolio's management; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit, which included
confirmation of securities at May 31, 1997 by correspondence with the custodian
and brokers and the application of alternative auditing procedures where
confirmations from brokers were not received, provides a reasonable basis for
the opinion expressed above.
PRICE WATERHOUSE LLP
New York, New York
July 21, 1997
32
<PAGE>
JPM INSTITUTIONAL PRIME MONEY MARKET FUND
JPM INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND
JPM INSTITUTIONAL TREASURY MONEY MARKET FUND
JPM INSTITUTIONAL FEDERAL MONEY MARKET FUND
JPM INSTITUTIONAL SHORT TERM BOND FUND
JPM INSTITUTIONAL BOND FUND
JPM INSTITUTIONAL TAX EXEMPT BOND FUND
JPM INSTITUTIONAL NEW YORK TOTAL RETURN BOND FUND
JPM INSTITUTIONAL SHARES: CALIFORNIA BOND FUND
JPM INSTITUTIONAL INTERNATIONAL BOND FUND
JPM INSTITUTIONAL GLOBAL STRATEGIC INCOME FUND
JPM INSTITUTIONAL DIVERSIFIED FUND
JPM INSTITUTIONAL U.S. EQUITY FUND
JPM INSTITUTIONAL DISCIPLINED EQUITY FUND
JPM INSTITUTIONAL U.S. SMALL COMPANY FUND
JPM INSTITUTIONAL INTERNATIONAL EQUITY FUND
JPM INSTITUTIONAL INTERNATIONAL OPPORTUNITIES FUND
JPM INSTITUTIONAL EMERGING MARKETS EQUITY FUND
JPM INSTITUTIONAL EUROPEAN EQUITY FUND
JPM INSTITUTIONAL JAPAN EQUITY FUND
JPM INSTITUTIONAL ASIA GROWTH FUND
FOR MORE INFORMATION ON THE JPM INSTITUTIONAL FAMILY OF FUNDS, CALL J.P. MORGAN
FUNDS SERVICES AT (800)766-7722.
THE
JPM INSTITUTIONAL
DISCIPLINED EQUITY
FUND
ANNUAL REPORT
MAY 31, 1997
