<PAGE>
J.P. Morgan
Institutional
Large Cap
Growth Fund
ANNUAL REPORT
May 31, 1999
J.P. Morgan Institutional Funds
Prime Money Market Fund
Treasury Money Market Fund
Federal Money Market Fund
Tax Exempt Money Market Fund
Tax Aware Enhanced Income Fund:
Institutional Shares
Short Term Bond Fund
Bond Fund
Global Strategic Income Fund
Tax Exempt Bond Fund
California Bond Fund: Institutional Shares
New York Tax Exempt Bond Fund
Diversified Fund
Disciplined Equity Fund
Large Cap Growth Fund:
Institutional Shares
U.S. Equity Fund
U.S. Small Company Fund
Tax Aware Disciplined Equity Fund: Institutional Shares
Emerging Markets Equity Fund
European Equity Fund
International Equity Fund
International Opportunities Fund
SmartIndex-TM-Fund: Institutional Shares
For more information on the J.P. Morgan
Institutional Funds, call J.P. Morgan Funds
Services at (800)766-7722.
<PAGE>
LETTER TO THE SHAREHOLDERS OF THE J.P. MORGAN INSTITUTIONAL LARGE CAP GROWTH
FUND
July 1, 1999
Dear Shareholder:
Welcome to the first shareholder letter of the J.P. Morgan Institutional Large
Cap Growth Fund. We are pleased to report that the fund delivered a return of
5.20% from its December 31, 1998, inception to May 31, 1999, exceeding its
benchmark, the Russell 1000 Growth Index. The fund's net asset value on May 31
rose to $15.78 per share, from $15.00 per share on December 31. The fund's net
assets were more than $5.2 million on May 31.
Included in this report is an interview with Kathleen Tait, a member of the
portfolio management team. This interview is designed to reflect what happened
during the reporting period, as well as provide an outlook for the months ahead.
As chairman and president of Asset Management Services, we thank you for
investing with J.P. Morgan. Should you have any comments or questions, please
telephone your Morgan representative or J.P. Morgan Funds Services at
800-766-7722.
Sincerely yours,
/s/ Ramon de Oliveira /s/ Keith M. Schappert
Ramon de Oliveira Keith M. Schappert
Chairman of Asset Management Services President of Asset Management Services
J.P. Morgan & Co. Incorporated J.P. Morgan & Co. Incorporated>
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
Letter to the shareholders ............................................... 1
Fund performance ......................................................... 2
Portfolio manager Q&A .................................................... 3
Fund facts and highlights ................................................ 5
Financial statements ..................................................... 8
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1
<PAGE>
Fund performance
EXAMINING PERFORMANCE
There are several ways to evaluate a mutual fund's historical performance
record. One approach is to look at the growth of a hypothetical investment of
$3,000,000 (the minimum initial investment in the fund). The chart at right
shows that $3,000,000 invested on December 31, 1998, would have grown to
$3,156,000 on May 31, 1999.
Another way to look at performance is to review a fund's average annual total
return. This figure takes the fund's actual (or cumulative) return and shows
what would have happened if the fund had achieved that return by performing at a
constant rate each year. Average annual total returns represent the average
yearly change of a fund's value over various time periods, typically one, five,
or ten years (or since inception). Total returns for periods of less than one
year are not annualized and provide a picture of how a fund has performed over
the short term.
GROWTH OF $3,000,000
December 31, 1998 - May 31, 1999
[GRAPH]
<TABLE>
<CAPTION>
PERFORMANCE
TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS
------------- ----------------------------
Three Since
As of May 31, 1999 months inception
- --------------------------------------------------------- ----------------------------
<S> <C>
J.P. Morgan Institutional Large Cap Growth Fund 4.64% 5.20%
Russell 1000 Growth Index 2.16% 3.22%
As of March 31, 1999
- --------------------------------------------------------- ----------------------------
J.P. MorganInstitutional Large Cap Growth Fund 5.47% 5.47%
Russell 1000 Growth Index 6.36% 6.36%
</TABLE>
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. FUND RETURNS ARE NET OF
FEES, ASSUME THE REINVESTMENT OF FUND DISTRIBUTIONS, AND REFLECT REIMBURSEMENT
OF FUND EXPENSES AS DESCRIBED IN THE PROSPECTUS. HAD EXPENSES NOT BEEN
SUBSIDIZED, RETURNS WOULD HAVE BEEN LOWER. THE RUSSELL 1000 GROWTH INDEX IS AN
UNMANAGED INDEX USED TO MEASURE PERFORMANCE OF GROWTH-ORIENTED U.S. STOCKS. IT
DOES NOT INCLUDE FEES OR OPERATING EXPENSES AND IS NOT AVAILABLE FOR ACTUAL
INVESTMENT. LIPPER ANALYTICAL SERVICES, INC. IS A LEADING SOURCE FOR MUTUAL FUND
DATA.
2
<PAGE>
PORTFOLIO MANAGER Q&A
[PHOTO]
Following is an interview with KATHLEEN TAIT, vice president, and a member of
the portfolio management team of the J.P. Morgan Large Cap Growth Fund. Kathleen
joined J.P. Morgan in 1992 and has held positions in relationship management,
new business development, and defined contributions. Previously, she held
marketing positions with the Reader's Digest Association. Kathleen received her
B.A. from Spelman College and her M.B.A from Columbia University. She is a
Chartered Financial Analyst. This interview was conducted on June 16, 1999, and
reflects her views on that date.
THERE ARE MANY GROWTH FUNDS. WHAT DIFFERENTIATES THE J.P. MORGAN LARGE CAP
GROWTH FUND?
KT: We follow a disciplined, three-step process. First, we identify our
universe, then we use a disciplined process to select attractive stocks, and
finally we rigorously examine the behavior of our portfolio in hopes of
outperforming the Russell 1000 Growth Index with below average risk.
HOW DO YOU SELECT THE STOCKS?
KT: We start with a universe of about 650 stocks covered by our in-house
security analysts, and then screen for the best 450 based on a growth-oriented
earnings and cash flow model that emphasizes intrinsic valuation and changes in
analysts's opinions over the last three months. We strive to capture both the
inherent worth and the momentum components in growth stock investing. We divide
the market into 16 sectors and then select between 55 and 65 stocks. We can
overweight a sector by as much as five percentage points, although to date we've
averaged only about a 250 basis point overweight. We can also overweight a stock
by as much as four percentage points.
AND THE THIRD STEP IS THE CONTROL?
KT: Yes. We use an optimizer to check that we haven't gained any additional
risk or drifted from our style when we assembled the portfolio. We have some
flexibility to emphasize certain sectors and specific stocks, so we want to
double-check ourselves. We want to be sure that we're delivering our
shareholders what they want -- a growth fund, not a sector fund.
SO HAS THE FUND PERFORMED AS PLANNED?
KT: Yes. Since inception, we've beaten our benchmark y the Russell 1000 Growth
Index y by more than 200 basis points. We believe we've been quite competitive.
While growth has underperformed the S&P 500 Index, we have managed to outperform
the growth index.
3
<PAGE>
WHAT WERE YOUR BEST PERFORMING STOCKS?
KT: SunMicrosystems and Teradyne. SunMicrosystems is well positioned for the
migration to Internet usage. It produces servers that are crucial for high-end
uses such as the Internet, and many of the top Internet sites use Sun servers.
Teradyne is the largest semiconductor test equipment supplier. It has benefited
from the rebound in microchips. The company also tests telecommunications
equipment and software.
WERE THERE ANY DISAPPOINTMENTS?
KT: Yes: Funeral services provider Service Corp. announced that quarterly
earnings would be far below analysts's expectations, blaming declining mortality
rates, lower than expected pre-need cemetery plot sales, fewer than expected
acquisitions, and poor results from operations. We have since sold the position.
Technology has been an important sector.
WHAT'S YOUR OUTLOOK FOR IT?
KT: Given the uncertainty about corporate information technology spending in the
second half of the year, we have recently underweighted this sector. What do you
see for the market as a whole in the second half of the year? KT: The U.S. stock
market continues to trade at record high multiples of earnings and cash flows.
We expect the leadership to continue to shift away from the Nifty 50 and toward
the rest of the market for the foreseeable future.
4
<PAGE>
Fund facts
INVESTMENT OBJECTIVE
J.P. MorganInstitutional Large Cap Growth Fund seeks to provide long-term growth
from a portfolio of large cap stocks. It is designed for investors who want an
actively managed portfolio of large cap stocks that seeks to outperform the
Russell 1000 Growth Index.
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COMMENCEMENT OF OPERATIONS
12/31/98
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FUND NET ASSETS
AS OF 5/31/99
$5,261,446
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DIVIDEND PAYABLE DATES
8/20/99, 12/20/99
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CAPITAL GAIN PAYABLE DATE
12/20/99
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REGISTRANT
J.P. MORGAN SERIES TRUST
J.P. MORGAN LARGE CAP GROWTH FUND:
INSTITUTIONAL SHARES
EXPENSE RATIO
The fund's current annualized expense ratio of 0.75% 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 redemption proceeds from the
fund.
Fund highlights
ALL DATA AS OF MAY 31,1999
PORTFOLIO ALLOCATION
(As a percentage of total investments)
[GRAPH]
<TABLE>
<CAPTION>
LARGEST EQUITY HOLDINGS % OF TOTAL INVESTMENTS
- --------------------------------------------------------------------------------
<S> <C>
Cisco Systems, Inc. (Technology) 4.5%
Intel Corp. (Technology) 4.2%
Microsoft Corp. (Technology) 3.7%
Bristol-Myers Squibb Co. (Healthcare) 3.4%
Coca-Cola Co.
(Consumer Goods and Services) 3.0%
Rohm & Haas Co. (Basic Industries) 2.9%
MCI WorldCom, Inc. (Utilities) 2.8%
Philip Morris Companies, Inc.
(Consumer Goods and Services) 2.8%
Proctor & Gamble Co.
(Consumer Goods and Services) 2.6%
General Electric Co.
(Industrial Products & Services) 2.5%>
</TABLE>
5
<PAGE>
J.P. MORGAN INSTITUTIONAL LARGE CAP GROWTH FUND
SCHEDULE OF INVESTMENTS
MAY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- -------- -----------
<S> <C> <C>
COMMON STOCKS (100.2%)
BASIC INDUSTRIES (2.9%)
CHEMICALS (2.9%)
Rohm & Haas Co................................... 3,803 $ 152,595
-----------
CONSUMER GOODS & SERVICES (28.1%)
APPARELS & TEXTILES (1.6%)
Jones Apparel Group, Inc.+....................... 2,700 83,025
-----------
BROADCASTING & PUBLISHING (2.0%)
AT+ T Corp. - Liberty Media Group+............... 1,560 103,642
-----------
ENTERTAINMENT, LEISURE & MEDIA (2.8%)
News Corp. Ltd. (Spon. ADR)(i)................... 2,400 79,650
Seagram Company Ltd.(i).......................... 1,300 67,519
-----------
147,169
-----------
FOOD, BEVERAGES & TOBACCO (7.9%)
Coca-Cola Co..................................... 2,300 157,119
PepsiCo, Inc..................................... 3,100 111,019
Philip Morris Companies, Inc..................... 3,800 146,537
-----------
414,675
-----------
HOUSEHOLD PRODUCTS (4.1%)
Kimberly-Clark Corp.............................. 1,300 76,294
Procter & Gamble Co.............................. 1,500 140,063
-----------
216,357
-----------
RESTAURANTS & HOTELS (1.4%)
Mirage Resorts, Inc.+............................ 1,300 26,650
Starwood Hotels & Resorts Worldwide, Inc......... 1,500 49,125
-----------
75,775
-----------
RETAIL (8.3%)
Abercrombie & Fitch Co., Class A+................ 600 50,475
American Stores Co............................... 2,200 72,600
Dayton Hudson Corp............................... 1,100 69,300
eBay, Inc.+...................................... 100 17,709
Kroger Co.+...................................... 500 29,281
Mattel, Inc...................................... 2,400 63,450
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- -------- -----------
<S> <C> <C>
RETAIL (CONTINUED)
Safeway, Inc.+................................... 1,600 $ 74,400
Wal-Mart Stores, Inc............................. 1,400 59,675
-----------
436,890
-----------
TOTAL CONSUMER GOODS & SERVICES................ 1,477,533
-----------
FINANCE (11.3%)
BANKING (6.4%)
Citigroup, Inc................................... 700 46,375
GreenPoint Financial Corp........................ 2,200 75,900
KeyCorp.......................................... 2,300 79,925
U.S. Bancorp..................................... 1,400 45,500
Washington Mutual, Inc........................... 2,300 87,831
-----------
335,531
-----------
FINANCIAL SERVICES (1.0%)
Ocwen Financial Corp.+........................... 6,000 52,125
-----------
INSURANCE (3.9%)
Aon Corp......................................... 1,200 51,600
Marsh & McLennan Companies, Inc.................. 700 50,925
Mercury General Corp............................. 1,500 54,094
UNUM Corp........................................ 900 48,431
-----------
205,050
-----------
TOTAL FINANCE.................................. 592,706
-----------
HEALTHCARE (22.4%)
BIOTECHNOLOGY (2.4%)
Genzyme Corp.+................................... 1,900 77,009
MedImmune, Inc.+................................. 800 50,850
-----------
127,859
-----------
HEALTH SERVICES (1.7%)
Healthsouth Corp.+............................... 3,200 42,800
Tenet Healthcare Corp.+.......................... 2,000 49,000
-----------
91,800
-----------
MEDICAL SUPPLIES (1.8%)
Medtronic, Inc................................... 1,300 92,300
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
8
<PAGE>
J.P. MORGAN INSTITUTIONAL LARGE CAP GROWTH FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- -------- -----------
<S> <C> <C>
PHARMACEUTICALS (16.5%)
ALZA Corp.+...................................... 1,500 $ 53,531
American Home Products Corp...................... 2,100 121,013
Bristol-Myers Squibb Co.......................... 2,600 178,425
Eli Lilly & Co................................... 1,400 100,013
Forest Laboratories, Inc.+....................... 1,900 90,488
Merck & Co., Inc................................. 800 54,000
Monsanto Co...................................... 2,300 95,450
Pfizer, Inc...................................... 400 42,800
Schering-Plough Corp............................. 1,300 58,581
Warner-Lambert Co................................ 1,200 74,400
-----------
868,701
-----------
TOTAL HEALTHCARE............................... 1,180,660
-----------
INDUSTRIAL PRODUCTS & SERVICES (7.7%)
DIVERSIFIED MANUFACTURING (5.3%)
AlliedSignal, Inc................................ 400 23,225
General Electric Co.............................. 1,300 132,194
Tyco International Ltd........................... 1,400 122,325
-----------
277,744
-----------
POLLUTION CONTROL (2.4%)
Waste Management, Inc............................ 2,400 126,900
-----------
TOTAL INDUSTRIAL PRODUCTS & SERVICES........... 404,644
-----------
TECHNOLOGY (23.7%)
COMPUTER PERIPHERALS (2.4%)
EMC Corp.+....................................... 699 69,638
Quantum Corp.+................................... 2,900 57,456
-----------
127,094
-----------
COMPUTER SOFTWARE (4.1%)
Microsoft Corp.+................................. 2,400 193,725
Oracle Corp.+.................................... 950 23,542
-----------
217,267
-----------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- -------- -----------
<S> <C> <C>
COMPUTER SYSTEMS (2.5%)
Sun Microsystems, Inc.+.......................... 2,200 $ 131,381
-----------
ELECTRONICS (4.6%)
Cisco Systems, Inc.+............................. 2,200 239,731
-----------
SEMICONDUCTORS (7.9%)
Applied Materials, Inc.+......................... 1,000 55,031
Intel Corp....................................... 4,100 222,169
Teradyne, Inc.+.................................. 2,000 105,625
Texas Instruments, Inc........................... 300 32,813
-----------
415,638
-----------
TELECOMMUNICATION SERVICES (2.2%)
Ascend Communications, Inc.+..................... 400 37,063
Qwest Communications International, Inc.+........ 1,800 76,781
-----------
113,844
-----------
TOTAL TECHNOLOGY............................... 1,244,955
-----------
UTILITIES (4.1%)
TELEPHONE (4.1%)
Level 3 Communications, Inc.+.................... 900 70,622
MCI WorldCom, Inc.+.............................. 1,700 146,784
-----------
TOTAL UTILITIES................................ 217,406
-----------
TOTAL COMMON STOCKS (COST $5,082,466).......... 5,270,499
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
9
<PAGE>
J.P. MORGAN INSTITUTIONAL LARGE CAP GROWTH FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------- --------- -----------
<S> <C> <C>
SHORT-TERM INVESTMENTS (0.5%)
OTHER INVESTMENT COMPANIES (0.5%)
Seven Seas Money Market Fund 4.615%, due 6/1/1999
(cost $26,405)................................. $ 26,405 $ 26,405
-----------
TOTAL INVESTMENTS (COST $5,108,871) (100.7%)................
5,296,904
LIABILITIES IN EXCESS OF OTHER ASSETS (-0.7%)...............
(35,458)
-----------
NET ASSETS (100.0%)......................................... $ 5,261,446
-----------
-----------
</TABLE>
- ------------------------------
Note: Based on the cost of investments of $5,114,719 for federal income tax
purposes at May 31, 1999, the aggregate gross unrealized appreciation and
depreciation was $419,734 and $237,549, respectively, resulting in net
unrealized appreciation of $182,185.
+ Non-income producing security.
(i) Foreign security.
Spon. ADR - Sponsored American Depository Receipt.
The Accompanying Notes are an Integral Part of the Financial Statements.
10
<PAGE>
J.P. MORGAN INSTITUTIONAL LARGE CAP GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $5,108,871 ) $5,296,904
Receivable for Investments Sold 26,703
Receivable for Expense Reimbursement 12,255
Dividends Receivable 4,009
Interest Receivable 106
Prepaid Trustees' Fees 3
----------
Total Assets 5,339,980
----------
LIABILITIES
Payable for Investments Purchased 13,071
Custody Fee Payable 6,388
Advisory Fee Payable 2,284
Shareholder Servicing Fee Payable 457
Administrative Services Fee Payable 236
Administration Fee Payable 47
Fund Services Fee Payable 8
Accrued Expenses 56,043
----------
Total Liabilities 78,534
----------
NET ASSETS $5,261,446
----------
----------
ANALYSIS OF NET ASSETS
Paid-in capital $5,000,600
Accumulated Net Realized Gain on Investments 72,813
Net Unrealized Appreciation of Investments 188,033
----------
Net Assets $5,261,446
----------
----------
INSTITUTIONAL SHARES
Applicable to 333,373 shares outstanding
(par value $0.001, unlimited shares authorized) $5,261,446
----------
----------
Net Asset Value, Offering and Redemption Price
per Share $15.78
-----
-----
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
11
<PAGE>
J.P. MORGAN INSTITUTIONAL LARGE CAP GROWTH FUND
STATEMENT OF OPERATIONS
FOR THE PERIOD DECEMBER 31, 1998 (COMMENCEMENT OF OPERATIONS) THROUGH MAY 31,
1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividend Income $ 14,931
Interest Income 757
--------
Investment Income 15,688
EXPENSES
Professional Fees and Expenses $39,032
Custodian Fees and Expenses 11,420
Advisory Fee 10,884
Printing Expenses 9,502
Shareholder Servicing Fee 2,177
Administrative Services Fee 1,269
Administrative Fee 61
Fund Services Fee 48
Trustees' Fees and Expenses 9
Miscellaneous 12,821
-------
Total Expenses 87,223
Less: Reimbursement of Expenses (70,819)
-------
NET EXPENSES 16,404
--------
NET INVESTMENT LOSS (716)
NET REALIZED GAIN ON INVESTMENTS 73,529
NET CHANGE IN UNREALIZED APPRECIATION OF
INVESTMENTS 188,033
--------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $260,846
--------
--------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
12
<PAGE>
J.P. MORGAN INSTITUTIONAL LARGE CAP GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
DECEMBER 31, 1998
(COMMENCEMENT OF
OPERATIONS) THROUGH
MAY 31, 1999
-------------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Loss $ (716)
Net Realized Gain on Investments 73,529
Net Change in Unrealized Appreciation of
Investments 188,033
-------------------
Net Increase in Net Assets Resulting from
Operations 260,846
-------------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Proceeds from Shares of Beneficial Interest Sold 5,000,600
-------------------
Net Increase from Shareholder Transactions 5,000,600
-------------------
Total Increase in Net Assets 5,261,446
NET ASSETS
Beginning of Period --
-------------------
End of Period $ 5,261,446
-------------------
-------------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
13
<PAGE>
J.P. MORGAN INSTITUTIONAL LARGE CAP GROWTH FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share outstanding throughout the period are as follows:
<TABLE>
<CAPTION>
INSTITUTIONAL
SHARES
-----------------
FOR THE PERIOD
DECEMBER 31, 1998
(COMMENCEMENT OF
OPERATIONS)
THROUGH
MAY 31, 1999
-----------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 15.00
-----------------
INCOME FROM INVESTMENT OPERATIONS
Net Realized and Unrealized Gain on Investments 0.78
-----------------
Total from Investment Operations 0.78
-----------------
NET ASSET VALUE, END OF PERIOD $ 15.78
-----------------
-----------------
RATIOS AND SUPPLEMENTAL DATA
Total Return 5.20%(a)
Net Assets, End of Period (in thousands) $ 5,261
Ratios to Average Net Assets
Net Expenses 0.75%(b)
Net Investment Loss (0.03%)(b)
Expenses without Reimbursement 4.01%(b)
Portfolio Turnover 33%
</TABLE>
- ------------------------
(a) Not annualized.
(b) Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
14
<PAGE>
J.P. MORGAN INSTITUTIONAL LARGE CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1999
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
J.P. Morgan Institutional Large Cap Growth Fund (the "fund"), registered as J.P.
Morgan Large Cap Growth 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, 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 is to provide long-term capital appreciation from a broadly
diversified portfolio of U.S. stocks while neutralizing the general risks
associated with stock market investing. Currently, the fund only offers
Institutional Shares. The fund commenced operations on December 31, 1998. The
Declaration of Trust permits the trustees to issue an unlimited number of each
class of shares in the fund. Organization costs incurred prior to commencement
of operations were borne by J.P. Morgan & Co. Incorporated ("J.P. Morgan").
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual amounts could differ from
those estimates. The following is a summary of the significant accounting
policies of the fund:
a) The fund values securities that are listed on an exchange using prices
supplied daily by an independent pricing service that are based on the
last traded price on a national securities exchange or in the absence of
recorded trades, at the readily available mean of the bid and asked prices
on such exchange, if such exchange or market constitutes the broadest and
most representative market for the security. Securities listed on a
foreign exchange are valued at the last traded price or in the absence of
recorded trades, at the readily available mean of the bid and asked prices
on such exchange available before the time when net assets are valued.
Independent pricing service procedures may also include the use of prices
based on yields or prices of securities of comparable quality, coupon,
maturity and type, indications as to values from dealers, operating data,
and general market conditions. Unlisted securities are valued at the
average of the quoted bid and asked prices in the over-the-counter market
provided by a principal market maker or dealer. If prices are not supplied
by the fund's independent pricing service or principal market maker or
dealer, such securities are priced using fair values in accordance with
procedures adopted by the fund's Trustees. All short-term securities with
a remaining maturity of sixty days or less are valued using the amortized
cost method.
b) Securities transactions are recorded on a trade date basis. Dividend
income is recorded on the ex-dividend date or as of the time that the
relevant ex-dividend date and amount becomes known. Interest income, which
includes the amortization of premiums and discounts, if any, is recorded
on an accrual basis. For financial and tax reporting purposes, realized
gains and losses are determined on the basis of specific lot
identification.
c) Net investment income (other than shareholder servicing fees) and
unrealized and realized gains and losses are allocated daily to each class
of shares based upon the relative proportion of net assets of each class
at the beginning of the day.
d) Substantially all the fund's net investment income is declared as
dividends and paid quarterly. Distributions to shareholders of net
realized capital gains, if any, are declared and paid annually.
15
<PAGE>
J.P. MORGAN INSTITUTIONAL LARGE CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1999
- --------------------------------------------------------------------------------
e) The fund intends to comply with the provisions of the Internal Revenue
Code of 1986, as amended, applicable to regulated investment companies and
to distribute substantially all of its income, including net realized
capital gains, if any, within the prescribed time periods. Accordingly, no
provision for federal income or excise tax is necessary. The fund earns
foreign income which may be subject to foreign withholding taxes at
various rates.
f ) The fund accounts for and reports distributions to shareholders in
accordance with "Statement of Position 93-2: Determination, Disclosure,
and Financial Statement Presentation of Income, Capital Gain, and Return
of Capital Distributions by Investment Companies." The effect of applying
this statement as of May 31, 1999 was to increase net investment income
by $716 and decrease accumulated net realized gain on investment by $716.
Net investment income, net realized gains and net assets were not
affected by this change.
2. TRANSACTIONS WITH AFFILIATES
a) 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 .50% of the fund's average daily net
assets. For the period December 31, 1998 (commencement of operations)
through May 31, 1999, such fees amounted to $10,884.
b) The trust, on behalf of the fund, has retained Funds Distributor, Inc.
("FDI"), a registered broker-dealer, to serve as the co-administrator and
distributor for the fund. Under a Co-Administration Agreement between FDI
and the trust on behalf of the fund, FDI provides administrative services
necessary for the operations of the fund, furnishes office space and
facilities required for conducting the business of the fund and pays the
compensation of the fund's officers affiliated with FDI. The fund has
agreed to pay FDI fees equal to its allocable share of an annual
complex-wide charge of $425,000, plus FDI's out-of-pocket expenses. The
amount allocable to the fund is based on the ratio of the fund's net
assets to the aggregate net assets of the trust and certain other
investment companies subject to similar agreements with FDI. For the
period December 31, 1998 (commencement of operations) through May 31,
1999, the fee for these services amounted to $61.
c) 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 based on the aggregate average daily net assets of
the trust and certain other registered investment companies for which
JPMIM acts as investment advisor in accordance with the following annual
schedule: 0.09% on the first $7 billion of their aggregate average daily
net assets and 0.04% of their aggregate average daily net assets 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
16
<PAGE>
J.P. MORGAN INSTITUTIONAL LARGE CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1999
- --------------------------------------------------------------------------------
the trust and certain other investment companies for which Morgan provides
administrative services. For the period December 31, 1998 (commencement of
operations) through May 31, 1999, the fee for these services amounted to
$1,269.
In addition, J.P. Morgan has agreed to reimburse the fund to the extent
necessary to maintain the total operating expenses of the fund at no more
than .75% of the average daily net assets of the fund and may be
terminated at any time after September 30, 1999 at the option of J.P.
Morgan. For the period December 31, 1998 (commencement of operations)
through May 31, 1999, J.P. Morgan has agreed to reimburse the fund $70,819
for expenses under this agreement.
d) The trust, on behalf of the fund, has a Shareholder Servicing Agreement
with Morgan to provide account administration and personal account
maintenance service to fund shareholders. The agreement provides for the
fund to pay Morgan a fee for these services which is computed daily and
paid monthly at an annual rate of 0.10% and 0.25% of the average daily net
assets for Institutional Shares and Select Shares, respectively. For the
period December 31, 1998 (commencement of operations) through May 31,
1999, the fee for these services amounted to $2,177 for Institutional
Shares.
Morgan, Charles Schwab & Co. ("Schwab") and the fund (Select Shares) 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.
e) The trust, on behalf of the fund, has a Fund Services Agreement with
Pierpont Group, Inc. ("Group") to assist the trustees in exercising their
overall supervisory responsibilities for the trust's affairs. The trustees
of the trust represent all the existing shareholders of Group. The fund's
allocated portion of Group's costs in performing its services amounted to
$48 for the period December 31, 1998 (commencement of operations) through
May 31, 1999.
f) An aggregate annual fee of $75,000 is paid to each trustee for serving as
a trustee of the trust, the J.P. Morgan Funds, the J.P. Morgan
Institutional Funds, and other registered investment companies in which
they invest. The Trustees' Fees and Expenses shown in the financial
statements represents the fund's allocated portion of the total fees and
expenses. The trust's Chairman and Chief Executive Officer also serves as
Chairman of Group and receives compensation and employee benefits from
Group in his role as Group's Chairman. The allocated portion of such
compensation and benefits included in the Fund Services Fee shown in the
financial statements was $10.
17
<PAGE>
J.P. MORGAN INSTITUTIONAL LARGE CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1999
- --------------------------------------------------------------------------------
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
DECEMBER 31, 1998
(COMMENCEMENT OF
OPERATIONS) THROUGH
MAY 31, 1999
---------------------
SHARES AMOUNT
-------- ----------
<S> <C> <C>
Shares sold...................................... 333,373 $5,000,600
-------- ----------
-------- ----------
</TABLE>
From time to time, the fund may have a concentration of several shareholders
which may include affiliates of J.P. Morgan holding a significant percentage of
shares outstanding. Investment activities of these shareholders could have a
material impact on the fund.
4. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the period
December 31, 1998 (commencement of operations) through May 31, 1999 were as
follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
- ----------------- ----------
<S> <C>
$6,710,261........ $1,701,324
</TABLE>
5. CREDIT AGREEMENT
The trust, on behalf of the fund, together with other affiliated investment
companies (the "funds"), entered into a revolving line of credit agreement (the
"Agreement") on May 27, 1998, with unaffiliated lenders. The maximum borrowing
under the Agreement is $150,000,000. The Agreement expired on May 26, 1999,
however, the fund as party to the Agreement has extended the Agreement and
continues its participation therein for an additional 364 days until May 23,
2000. The purpose of the Agreement is to provide another alternative for
settling large fund shareholder redemptions. Interest on any such borrowings
outstanding will approximate market rates. The funds pay a commitment fee at an
annual rate of 0.085% (0.065% prior to May 26, 1999) on the unused portion of
the committed amount. This is allocable to the funds in accordance with
procedures established by their respective trustees or directors. There were no
outstanding borrowings pursuant to the Agreement as of May 31, 1999.
18
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of
J.P. Morgan Institutional Large Cap Growth Fund
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of J.P. Morgan Institutional Large Cap
Growth Fund (one of the funds comprising the J.P. Morgan Series Trust,
registered as J.P. Morgan Large Cap Growth Fund, hereafter referred to as the
"fund") at May 31, 1999, and the results of its operations, the changes in its
net assets and the financial highlights for the period December 31, 1998
(commencement of operations) through May 31, 1999, 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, which included confirmation of securities at May 31, 1999 by
correspondence with the custodian and brokers, provides a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
July 14, 1999
19
<PAGE>
DISTRIBUTED BY FUNDS DISTRIBUTOR, INC. J.P. MORGAN INVESTMENT MANAGEMENT
INC.SERVES AS AN INVESTMENT ADVISOR. SHARES OF THE FUND ARE NOT BANK DEPOSITS
AND ARE NOT GUARANTEED BY ANY BANK, GOVERNMENT ENTITY, OR THE FDIC. RETURN AND
SHARE PRICE WILL FLUCTUATE AND REDEMPTION VALUE MAY BE MORE OR LESS THEN
ORIGINAL COST.
References to specific securities and their issuers are for
illustrative purposes only and are not intended to be, and should not be
interpreted as, recommendations to purchase or sell such securities. Opinions
expressed herein are based on current market conditions and are subject to
change without notice.
CALL J.P. MORGAN FUNDS SERVICES AT (800) 766-7722 FOR A
PROSPECTUS CONTAINING MORE COMPLETE INFORMATION ABOUT THE FUND INCLUDING
MANAGEMENT FEES AND OTHER EXPENSES. PLEASE READ THE PROSPECTUS CAREFULLY BEFORE
INVESTING.
6
