<PAGE>
LETTER TO THE SHAREHOLDERS OF THE J.P. MORGAN INSTITUTIONAL SMARTINDEX-TM- FUND
July 1, 2000
Dear Shareholder,
For the 12 months ended May 31, 2000, the J.P. Morgan Institutional
SmartIndex-TM- Fund posted a 7.25% return, underperforming both the 10.47%
return of the S&P 500 and the 13.76% return of the Lipper Large Cap Core Fund
Average.
The fund's net asset value increased to $17.07 on May 31, 2000, from $16.06 on
May 31, 1999. Dividends of approximately $0.14 per share were paid from ordinary
income and approximately $0.01 in short-term capital gains.
On May 31, 2000, the net assets of the fund were approximately $400.5 million.
This report includes a discussion with Timothy J. Devlin, the portfolio manager
primarily responsible for the J.P. Morgan Institutional SmartIndex-TM- Fund. In
this interview, Tim talks about the events of the previous year that had the
greatest effect on the fund and discusses his investment strategy.
As chairman and president of Asset Management Services, we appreciate your
investment in the fund. If you have any comments or questions, please call your
Morgan representative or J.P. Morgan Funds Services at (800) 766-7722.
Sincerely yours,
/s/ Ramon de Oliveira /s/ Keith M. Schappert
Ramon de Oliveira Keith M. Schappert
Chairman of Asset Management Services President of Asset Management Services
J.P. Morgan & Co. Incorporated J.P. Morgan & Co. Incorporated
-------------------------------------------------------------------------------
TABLE OF CONTENTS
LETTER TO THE SHAREHOLDERS...........1 FUND FACTS AND HIGHLIGHTS............7
FUND PERFORMANCE.....................2 FINANCIAL STATEMENTS................10
PORTFOLIO MANAGER Q&A................3
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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 investment in the fund). The chart at right shows that
$3,000,000 invested on December 31, 1998, would have grown to $3,458,474 on May
31, 2000.
Another way to look at performance is to review a fund's average annual total
return. This figure takes the fund's actual (or cumulative) return and shows
what would have happened if the fund had achieved that return by performing at
a constant rate each year. Average annual total returns represent the average
yearly change of a fund's value over various time periods, typically one,
five, or ten years (or since inception). Total returns for periods of less
than one year are not annualized and provide a picture of how a fund has
performed over the short term.
GROWTH OF $3,000,000 SINCE FUND INCEPTION*
DECEMBER 31, 1998 - MAY 31, 2000
[EDGAR REPRESENTATION OF PLOT POINTS USED IN PRINTED GRAPHIC]
<TABLE>
<CAPTION>
JPM INST LIPPER LARGE CAP CORE
SMARTINDEX S&P 500 FUNDS AVERAGE
<S> <C> <C> <C>
12/31/98 3,000,000 3,000,000 3,000,000
1/31/99 3,124,248 3,125,460 3,116,700
2/28/99 3,022,044 3,028,321 3,012,602
3/31/99 3,134,242 3,149,484 3,132,203
4/30/99 3,290,853 3,271,463 3,216,459
5/31/99 3,224,595 3,194,224 3,141,837
6/30/99 3,389,479 3,371,504 3,326,891
7/31/99 3,284,878 3,266,245 3,235,402
8/31/99 3,270,790 3,249,914 3,208,224
9/30/99 3,176,130 3,160,834 3,135,398
10/31/99 3,355,379 3,360,851 3,335,122
11/30/99 3,423,856 3,429,177 3,431,507
12/31/99 3,588,202 3,631,156 3,682,007
1/31/00 3,418,298 3,448,727 3,522,945
2/29/00 3,333,346 3,383,442 3,550,776
3/31/00 3,665,010 3,714,445 3,847,621
4/30/00 3,545,543 3,602,677 3,735,270
5/31/00 3,458,474 3,528,750 3,628,815
</TABLE>
LIPPER PERFORMANCE AVERAGES ARE CALCULATED BY TAKING AN ARITHMETIC AVERAGE
OF THE RETURNS OF THE FUNDS IN THE GROUP. THE AVERAGE ANNUALIZED RETURNS WHICH
RESULT FROM THIS METHODOLOGY WILL DIFFER FROM ANNUALIZING THE GROWTH OF THE
MINIMUM INITIAL INVESTMENT.
<TABLE>
<CAPTION>
PERFORMANCE
TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS
------------------- --------------------------------
THREE SIX ONE SINCE
AS OF MAY 31, 2000 MONTHS MONTHS YEAR INCEPTION*
-------------------------------------------------------------------------------- --------------------------------
<S> <C> <C> <C> <C>
J.P. Morgan Institutional SmartIndex-TM- Fund 3.75% 1.01% 7.25% 10.56%
S&P 500 Index** 4.29% 2.90% 10.47% 12.14%
Lipper Large Cap Core Fund Average*** 1.90% 4.81% 13.76% 13.48%
AS OF MARCH 31, 2000
-------------------------------------------------------------------------------- --------------------------------
J.P. Morgan Institutional SmartIndex-TM- Fund 2.14% 15.39% 16.93% 17.37%
S&P 500 Index** 2.29% 17.51% 17.94% 18.64%
Lipper Large Cap Core Fund Average*** 4.11% 21.66% 21.70% 21.32%
</TABLE>
* THE FUND COMMENCED OPERATIONS ON DECEMBER 31, 1998.
** S&P 500 INDEX IS AN UNMANAGED INDEX USED TO PORTRAY THE PATTERN OF COMMON
STOCK MOVEMENT BASED ON THE AVERAGE PERFORMANCE OF 500 WIDELY HELD COMMON
STOCKS. IT DOES NOT INCLUDE FEES OR OPERATING EXPENSES AND IS NOT AVAILABLE FOR
ACTUAL INVESTMENT.
*** DESCRIBES THE AVERAGE TOTAL RETURN FOR ALL FUNDS IN THE INDICATED LIPPER
CATEGORY, AS DEFINED BY LIPPER, INC., AND DOES NOT TAKE INTO ACCOUNT APPLICABLE
SALES CHARGES. LIPPER ANALYTICAL SERVICES, INC. IS A LEADING SERVICE FOR MUTUAL
FUND DATA. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. FUND RETURNS ARE
NET OF FEES, ASSUME THE REINVESTMENT OF FUND DISTRIBUTIONS, AND REFLECT THE
REIMBURSEMENT OF FUND EXPENSES AS DESCRIBED IN THE PROSPECTUS. HAD EXPENSES NOT
BEEN SUBSIDIZED, RETURNS WOULD HAVE BEEN LOWER.
2
<PAGE>
PORTFOLIO MANAGER Q&A
[PHOTO]
The following is an interview with TIMOTHY J. DEVLIN, vice president and
member of the portfolio management team for the J.P. Morgan SmartIndex-TM-
Fund since its inception. Tim joined J.P. Morgan in 1996 after spending nine
years at Mitchell Hutchins Asset Management, where he managed quantitatively
driven equity portfolios for institutional and retail investors. Tim received
his B.A. in economics from Union College. This interview was conducted on June
11, 2000, and reflects Tim's views on that date.
WHAT WOULD YOU SAY WERE THE PRINCIPAL EVENTS THAT IMPACTED U.S. EQUITIES OVER
THE PAST YEAR?
TJD: Certainly, the string of interest rate hikes by the Fed was very
influential. In an effort to cool what was perceived to be an overheated
economy, the Fed starting raising rates last June, beginning with five
consecutive quarter-point increases and culminating, at least for now, in a
half-point increase in mid-May of this year. The first five increases were
generally disregarded by a marketplace that seemed to embrace growth at any
price. In fact, our economy grew at the incredible pace of more than 7% in
1999's fourth quarter and over 5% in the first quarter of 2000. It was during
this period that the stock market almost literally shot through the roof,
particularly the tech-heavy NASDAQ, which set new records, seemingly on a weekly
basis.
This all came to an end during the closing days of the first quarter and most of
April 2000, when investors got the message that the Fed was serious about
dampening the economy's torrid growth. Looking ahead to a slower growth economy,
they began to re-evaluate the earnings prospects of many of the technology
companies that had dominated the market until then. The result was a significant
correction in the NASDAQ during April and a volatile equity market that persists
to this day.
This said, the overall market is still up 10%-11% through May 2000, a return
that would be consistent with a normal year, historically. To me, it is somewhat
unnerving to see the market respond this way, particularly in the face of a 175
basis point increase in interest rates and the prospect of more to come.
The other major event would be the continued advances of technology in virtually
every business sector. Until recently, investors were focused almost purely on
technology-related companies, particularly those that were perceived to be
leading the growth of the Internet. What we've seen lately is a broadening of
investor interest to include those companies, tech or not tech, that are using
new technologies to leapfrog the competition and create new operating
environments. In the business-to-business arena, you can see this most
prominently in ongoing efforts to create Internet-based exchanges for virtually
anything from auto parts to basic commodities. You also see it in individual
efforts to improve customer service, streamline distribution, and do just about
everything more efficiently by utilizing the technological tools at hand.
3
<PAGE>
Investors have taken note and are paying significant premiums for companies that
are successful in their efforts to adapt and use technology, believing that they
will be best positioned to compete in the new economy. Those that haven't been
able to adapt have really been thrashed. I think this division between the
technological haves and have-nots will be a key investment theme for some time
yet to come.
YOU MENTIONED INTEREST RATES, THE STORY THAT'S BEEN ON VIRTUALLY EVERYONE'S
MINDS THESE DAYS. WHAT DO YOU THINK THE FEDERAL RESERVE BOARD IS GOING TO DO IN
COMING MONTHS?
TJD: In our view, the most likely economic scenario going forward is that the
Fed succeeds in its efforts to engineer a soft landing for the U.S. economy.
We've already seen some signs of a cooling economy, including a fairly recent
decline in job growth, a significant reduction in new home sales and weaker than
expected retail sales, particularly in the interest rate-sensitive durable goods
sector. We don't think the Fed will increase rates at the next Federal Open
Market Committee meeting, but between now and year-end, we think we'll see
additional tightening, on the order of 50 basis points or so. This should serve
to slow our economy's growth, without slowing it down too far, too fast.
HOW HAVE INVESTORS' PERCEPTIONS CHANGED SINCE THE NEAR COLLAPSE OF THE NASDAQ?
TJD: One thing we are starting to see is a move away from the kind of
momentum-based investing that ruled the market in late 1999 and early 2000, to
more rational, valuation-based investing.
WHAT MAKES YOU THINK VALUATION WILL STAGE A COMEBACK?
TJD: The price of any investment ultimately MUST relate in some way to its
ability to earn money for the investor. It's common sense. We believe hype can
only drive the market for a little while, before investors start to look beyond
it and focus on real earnings, or earnings potential.
HOW DO YOU MANAGE THE PORTFOLIO IN SUCH AN ENVIRONMENT?
TJD: Pretty much the same way we always have. For us, valuation investing is a
process of forecasting a company's future earnings, discounting these back to
the stock price, and comparing stocks based on their dividend discount rate
(DDR), or internal rate of return. By ranking stocks within each sector by their
DDR, we can identify and avoid the priciest stocks in each sector, while
maintaining portfolio characteristics and sector weightings similar to the S&P
500 Index. The end result is a diversified portfolio that relies exclusively on
valuation-based stock selection in an effort to beat the market.
LET'S GET TO PERFORMANCE. HOW DID YOU DO OVER THE PAST 12 MONTHS?
TJD: There's no question that the last 12 months been a difficult time for
valuation-driven investors, such as ourselves. We just don't do well in a market
that is driven almost exclusively by price momentum. This was particularly true
in the fourth quarter of 1999, a period in which we incurred most of our
negative, annualized performance. According to our analysis, the return to price
momentum in 1999, and especially the fourth quarter, far exceeded any other year
in the last 30 years, which is as far back as we went.
4
<PAGE>
With momentum investing, investors focus, almost exclusively, on price. If
investors see a stock going up, they see it as good and continue to buy it,
which, of course, makes it continue to go up - at least for a time. In such an
environment, fundamentals go out the window. All that matters is that the stock
is going up, not whether it should be going up based on present and expected
future earnings growth.
Under our investment philosophy, all things being equal, if a stock's price goes
up, it looks less, not more, attractive. For us, this means that the stock is
being more fully valued and, rationally, has less room to appreciate. The key
word here is Orationally.O Until lately, we've been in the grips of an
exceedingly irrational and very narrow market, in which investors were willing
to bet their fortunes on essentially 25 tech names.
With our broad diversification and focus on valuation, this price-driven market
mentality created a very significant headwind for us over the past 12 months,
and stock selection wasn't enough to pull us out of it.
WHICH HOLDINGS DID WELL OVER THE PAST 12 MONTHS?
TJD: Overweight positions in Intel, EMC, Cisco, and Warner-Lambert helped us a
great deal, as all performed admirably over the past 12 months. Intel has
benefited from continued strong PC demand, including a larger percentage of
higher margin laptops, stable average selling price (asp's), and strong
server/PC demand fueled by the explosive growth of the Internet. Intel has also
lowered costs through shrinking line width and improved packaging. EMC remains
the leader of the data storage market, and demand for storage is booming.
Despite competitive pressures and a high cost structure, the market is its to
lose. Investors have agreed, as the stock climbed appreciably in the last 12
months. Cisco was up significantly over this reporting period. It's just a
fantastic company. Even though it trades at 85X next year's earnings, it still
looks attractive relative to other companies in its sector. Its management is
excellent, as is its track record in successfully identifying and integrating
new acquisitions. We are highly confident in our earnings forecast for the
company, as are we in management's ability to deliver these earnings. We are
less so with Cisco's competitors. Given this level of confidence and Cisco's
premier position as a primary provider of Internet-related infrastructure
products and services, we believe it deserves the premium that the market has
assigned to it. Warner-Lambert, a favorite holding since the fund's inception,
rose on the year, on the heels of its blockbuster cholesterol drug, Lipitor, and
the just-completed merger with Pfizer.
WHICH DIDN'T PERFORM UP TO EXPECTATIONS?
TJD: As noted, we had generally good stock selection in the tech sector, but we
were hurt by underweighting, relative to the benchmark, a couple of stocks that
significantly outperformed their respective sectors, these being Oracle and
Qualcomm, both of which were up significantly during this time. More recently,
we were hurt by an overweight position in Microsoft, which declined
substantially during the recent Department of Justice antitrust proceedings.
Beyond the technology sector, an underweight position in Disney hurt us over the
past year. Disney's success from 1990 to 1997 has been largely driven by home
video sales. As a result, the market for home videos has been saturated and will
need time to regenerate. Additionally, theme park attendance has been slowing as
competition has been intense. Disney's surprising success this year has been on
the back of the phenomenally popular ABC television show "Who Wants to Be a
Millionaire?"
5
<PAGE>
GIVEN THE VOLATILITY OF THE MARKET AND ITS IMPACT ON THE PORTFOLIO, DO YOU PLAN
TO MAKE ANY CHANGES IN YOUR MANAGEMENT STYLE?
TJD: No. As I said, we are confident that valuation investing will rise from the
ashes of momentum, and that the portfolio will benefit when it does. We have,
however, elected to apply a few additional analytical tools to our process that
will enable us to make better use of near term information, such as revisions in
earnings estimates. This should have the effect of buffering the portfolio
against the kind of volatility we've endured over the past year.
6
<PAGE>
FUND FACTS
INVESTMENT OBJECTIVE
J.P. Morgan Institutional SmartIndex-TM- Fund seeks to provide a consistently
high total return from a broadly diversified portfolio of approximately 350
equity securities while maintaining risk characteristics similar to those of the
S&P 500.
-------------------------------------------------------------------------------
COMMENCEMENT OF INVESTMENT OPERATIONS
12/31/98
-------------------------------------------------------------------------------
FUND NET ASSETS AS OF 5/31/00
$400,541,096
-------------------------------------------------------------------------------
DIVIDEND PAYABLE DATES
6/23/00, 8/18/00, 12/21/00
-------------------------------------------------------------------------------
CAPITAL GAIN PAYABLE DATE (IF APPLICABLE)
12/20/00
-------------------------------------------------------------------------------
REGISTRANT
J.P. MORGAN SERIES TRUST
J.P. MORGAN SMARTINDEX-TM- FUND:
INSTITUTIONAL SHARES
EXPENSE RATIO
The fund's current annualized expense ratio of 0.35% 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, 2000
PORTFOLIO ALLOCATION
(AS A PERCENTAGE OF TOTAL INVESTMENTS)
[PIE CHART]
<TABLE>
<S> <C>
TECHNOLOGY 29.3%
CONSUMER GOODS & SERVICES 19.2%
FINANCE 13.9%
HEALTHCARE 10.7%
INDUSTRIAL PRODUCTS & SERVICES 7.9%
UTILITIES 6.8%
ENERGY 5.8%
SHORT-TERM AND OTHER INVESTMENTS 3.5%
BASIC INDUSTRIES 2.4%
TRANSPORTATION 0.5%
</TABLE>
<TABLE>
<CAPTION>
LARGEST EQUITY HOLDINGS % OF TOTAL INVESTMENTS
--------------------------------------------------------------------
<S> <C>
GENERAL ELECTRIC CO. 4.1%
(INDUSTRIAL PRODUCTS & SERVICES)
INTEL CORP. (TECHNOLOGY) 3.7%
CISCO SYSTEMS, INC. (TECHNOLOGY) 3.6%
MICROSOFT CORP. (TECHNOLOGY) 3.1%
EXXON MOBIL CORP. (ENERGY) 2.7%
WAL-MART STORES, INC. 2.6%
(CONSUMER GOODS & SERVICES)
CITIGROUP INC. (FINANCE) 2.2%
NORTEL NETWORKS CORP. (TECHNOLOGY) 1.7%
WARNER-LAMBERT CO. (HEALTHCARE) 1.6%
MERCK & CO., INC. (HEALTHCARE) 1.5%
</TABLE>
7
<PAGE>
DISTRIBUTED BY FUNDS DISTRIBUTOR, INC. J.P. MORGAN INVESTMENT MANAGEMENT INC.
SERVES AS INVESTMENT ADVISOR. SHARES OF THE FUND ARE NOT BANK DEPOSITS AND ARE
NOT GUARANTEED BY ANY BANK, GOVERNMENT ENTITY, OR THE FDIC. RETURN AND SHARE
PRICE WILL FLUCTUATE AND REDEMPTION VALUE MAY BE MORE OR LESS THAN ORIGINAL
COST.
References to specific securities and their issuers are for illustrative
purposes only and are not intended to be, and should not be interpreted as,
recommendations to purchase or sell such securities. Opinions expressed herein
and other fund data presented 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.
8
<PAGE>
THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY
<PAGE>
J.P. MORGAN INSTITUTIONAL SMARTINDEX-TM- FUND
SCHEDULE OF INVESTMENTS
MAY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ------------ -------------
<S> <C> <C>
COMMON STOCKS (96.4%)
BASIC INDUSTRIES (2.4%)
CHEMICALS (1.1%)
Air Products and Chemicals, Inc.................. 19,400 $ 671,725
Dow Chemical Co.................................. 14,900 1,595,231
IMC Global, Inc.................................. 3,700 56,887
Lyondell Chemical Co............................. 1,300 21,694
PPG Industries, Inc.............................. 14,400 713,700
Praxair, Inc..................................... 12,200 512,400
Rohm & Haas Co................................... 30,000 1,023,750
------------
4,595,387
------------
FOREST PRODUCTS & PAPER (0.5%)
Fort James Corp.................................. 13,600 307,700
Georgia-Pacific Group............................ 10,900 356,975
International Paper Co........................... 27,500 957,344
Temple-Inland, Inc............................... 6,800 337,875
------------
1,959,894
------------
METALS & MINING (0.7%)
Alcan Aluminum Ltd.(i)........................... 10,700 351,094
Alcoa, Inc....................................... 28,600 1,671,312
Allegheny Technologies, Inc...................... 7,400 166,962
Freeport-McMoran Copper & Gold, Inc., Class B.... 11,700 107,494
Nucor Corp....................................... 5,300 206,037
Phelps Dodge Corp................................ 3,700 166,037
------------
2,668,936
------------
PACKAGING & CONTAINERS (0.1%)
Smurfit-Stone Container Corp.+................... 17,800 252,537
------------
TOTAL BASIC INDUSTRIES......................... 9,476,754
------------
CONSUMER GOODS & SERVICES (19.2%)
APPARELS & TEXTILES (0.1%)
Jones Apparel Group, Inc.+....................... 8,500 227,906
------------
AUTOMOTIVE (1.8%)
Dana Corp.+...................................... 11,500 296,844
Delphi Automotive Systems Corp.+................. 31,300 565,356
Ford Motor Co.+.................................. 71,800 3,486,787
General Motors Corp.+............................ 34,500 2,436,562
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ------------ -------------
<S> <C> <C>
AUTOMOTIVE (CONTINUED)
Genuine Parts Co.+............................... 1,600 $ 38,200
Goodyear Tire and Rubber Co.+.................... 11,000 273,625
Lear Corp.+...................................... 9,900 232,031
------------
7,329,405
------------
BROADCASTING & PUBLISHING (2.0%)
AT&T Corp. - Liberty Media Group, Class A+....... 40,600 1,799,087
Comcast Corp., Class A+.......................... 51,900 1,965,712
Gannett Co., Inc.+............................... 17,000 1,100,750
Knight-Ridder, Inc.+............................. 5,000 265,000
MediaOne Group, Inc.+............................ 36,600 2,445,337
New York Times Co., Class A...................... 7,600 291,650
Tribune Co....................................... 3,400 130,900
------------
7,998,436
------------
BUSINESS & PUBLIC SERVICES (0.1%)
FedEx Corp....................................... 16,000 566,000
------------
ENTERTAINMENT, LEISURE & MEDIA (3.0%)
America Online, Inc.+............................ 80,500 4,266,500
Fox Entertainment Group, Inc., Class A+.......... 15,300 399,712
Seagram Company Ltd.(i).......................... 29,600 1,411,550
Time Warner, Inc................................. 60,300 4,759,931
Viacom, Inc., Class B+........................... 12,100 750,200
Walt Disney Co................................... 15,300 645,469
------------
12,233,362
------------
FOOD, BEVERAGES & TOBACCO (3.4%)
Bestfoods........................................ 15,000 967,500
Campbell Soup Co................................. 7,100 220,100
Coca-Cola Co..................................... 75,300 4,019,137
General Mills, Inc............................... 13,500 535,781
H.J. Heinz Co.................................... 20,000 783,750
Kellogg Co....................................... 35,200 1,069,200
Nabisco Holdings Corp., Class A.................. 500 23,094
PepsiCo, Inc..................................... 9,300 378,394
Philip Morris Companies, Inc..................... 131,400 3,432,825
Quaker Oats Co................................... 11,300 831,256
Unilever NV - NY Shares(i)....................... 27,100 1,377,019
------------
13,638,056
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
10
<PAGE>
J.P. MORGAN INSTITUTIONAL SMARTINDEX-TM- FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ------------ -------------
<S> <C> <C>
HOUSEHOLD PRODUCTS (1.4%)
Clorox Co........................................ 13,400 $ 530,975
Kimberly-Clark Corp.............................. 25,000 1,512,500
Procter & Gamble Co.............................. 51,600 3,431,400
Ralston-Ralston Purina Group..................... 14,100 261,731
------------
5,736,606
------------
PERSONAL CARE (0.6%)
Estee Lauder Companies, Inc., Class A............ 7,200 322,650
Gillette Co...................................... 59,000 1,969,125
------------
2,291,775
------------
RESTAURANTS & HOTELS (0.9%)
Mandalay Resort Group............................ 1,000 21,187
Mariott International Inc., Class A.............. 15,200 551,000
McDonald's Corp.................................. 74,200 2,657,287
Starwood Hotels & Resorts Worldwide, Inc......... 9,900 292,669
------------
3,522,143
------------
RETAIL (5.9%)
Circuit City Stores-Circuit City Group........... 16,000 797,000
Federated Department Stores, Inc.+............... 14,400 554,400
Gap, Inc......................................... 53,700 1,882,856
Hasbro, Inc...................................... 12,400 203,050
Home Depot, Inc.................................. 53,000 2,587,062
J.C. Penney, Inc................................. 14,000 253,750
Kroger Co.+...................................... 45,500 904,312
Limited Inc...................................... 23,200 559,700
Lowe's Companies, Inc............................ 20,600 959,187
Mattel, Inc...................................... 31,100 421,794
May Department Stores Co......................... 17,100 514,069
Nordstrom, Inc................................... 5,400 135,675
Safeway, Inc.+................................... 7,100 327,487
Sears, Roebuck & Co.............................. 23,300 860,644
Target Corp...................................... 28,100 1,761,519
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ------------ -------------
<S> <C> <C>
RETAIL (CONTINUED)
TJX Companies, Inc............................... 21,200 $ 458,450
Wal-Mart Stores, Inc............................. 178,600 10,291,825
------------
23,472,780
------------
TOTAL CONSUMER GOODS & SERVICES................ 77,016,469
------------
ENERGY (5.8%)
ELECTRIC (0.0%)
CMS Energy Corp.................................. 6,500 147,875
------------
GAS EXPLORATION (0.1%)
Union Pacific Resources Group, Inc............... 10,100 239,244
------------
GAS-PIPELINES (0.1%)
Dynegy, Inc., Class A............................ 5,600 431,900
------------
OIL-PRODUCTION (5.3%)
Amerada Hess Corp.+.............................. 3,300 219,037
Anadarko Petroleum Corp.+........................ 4,300 228,169
Chevron Corp.+................................... 24,500 2,264,719
Conoco, Inc., Class A+........................... 2,400 64,200
Conoco, Inc., Class B+........................... 20,700 589,950
Devon Energy Corp.+.............................. 3,000 179,437
Exxon Mobil Corp.+............................... 130,100 10,838,956
Phillips Petroleum Co.+.......................... 2,800 160,300
Royal Dutch Petroleum Co. - NY Shares(i)......... 80,200 5,007,487
Texaco, Inc...................................... 20,700 1,188,956
Tosco Corp....................................... 3,000 91,875
Unocal Corp...................................... 5,800 222,937
------------
21,056,023
------------
OIL-SERVICES (0.3%)
Apache Corp.+.................................... 4,100 249,587
Baker Hughes, Inc.+.............................. 11,800 427,750
Cooper Cameron Corp.+............................ 1,700 118,575
Diamond Offshore Drilling, Inc.+................. 2,300 94,012
ENSCO International, Inc.+....................... 2,500 87,344
Global Marine, Inc.+............................. 6,200 175,537
------------
1,152,805
------------
TOTAL ENERGY................................... 23,027,847
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
11
<PAGE>
J.P. MORGAN INSTITUTIONAL SMARTINDEX-TM- FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ------------ -------------
<S> <C> <C>
FINANCE (13.9%)
BANKING (5.7%)
Associated Banc - Corp.+......................... 2,000 $ 50,906
Bank of America Corp.+........................... 58,200 3,233,737
Bank One Corp.+.................................. 35,200 1,163,800
Banknorth Group, Inc.+........................... 1,000 13,937
Charter One Financial, Inc.+..................... 9,500 216,125
Citigroup, Inc.+................................. 139,600 8,681,375
Comerica, Inc.+.................................. 7,000 354,375
Dime Bancorp, Inc.+.............................. 8,100 147,825
First Tennessee National Corp.+.................. 6,000 123,000
First Union Corp.+............................... 46,800 1,646,775
Firstar Corp.+................................... 10,500 268,406
FirstMerit Corp.+................................ 2,000 37,875
FleetBoston Financial Corp.+..................... 41,900 1,584,344
Golden West Financial Corp.+..................... 7,200 300,600
GreenPoint Financial Corp.+...................... 4,700 98,112
Hibernia Corp., Class A+......................... 3,400 43,775
KeyCorp+......................................... 19,400 407,400
Marshall & Ilsley Corp.+......................... 4,800 232,800
Mercantile Bankshares Corp.+..................... 2,700 89,437
National Commerce Bancorporation................. 3,500 66,500
North Fork Bancorporation, Inc................... 7,600 125,875
PNC Financial Services Group..................... 13,200 664,950
Regions Financial Corp........................... 9,700 219,462
Southtrust Corp.................................. 7,100 192,144
Summit Bancorp................................... 7,800 223,762
TCF Financial Corp............................... 3,600 94,275
U.S. Bancorp..................................... 34,700 902,200
U.S. Trust Corp.................................. 3,600 511,425
Union Planters Corp.............................. 6,300 196,875
Washington Mutual, Inc........................... 24,800 713,000
Wells Fargo Co................................... 8,700 393,675
------------
22,998,747
------------
FINANCIAL SERVICES (5.5%)
A.G.Edwards, Inc................................. 5,600 195,650
American Express Co.............................. 900 48,431
Ameritrade Holding Corp., Class A+............... 11,800 134,225
Associates First Capital Corp., Class A.......... 33,800 927,387
AXA Financial, Inc............................... 25,700 1,000,694
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ------------ -------------
<S> <C> <C>
FINANCIAL SERVICES (CONTINUED)
Bear Stearns Companies, Inc...................... 12,600 $ 496,125
Capital One Financial Corp....................... 10,100 477,225
Charles Schwab Corp.............................. 41,100 1,181,625
CIT Group, Inc., Class A......................... 17,200 314,975
Countrywide Credit Industries, Inc............... 7,900 242,925
E*TRADE Group, Inc.+............................. 24,200 376,612
Fannie Mae....................................... 47,300 2,843,912
Franklin Resources, Inc.......................... 14,000 420,000
Freddie Mac...................................... 32,300 1,437,350
Goldman Sachs Group, Inc......................... 24,600 1,809,637
Household International, Inc..................... 22,000 1,034,000
John Hancock Financial Services, Inc.+........... 18,700 417,244
Lehman Brothers Holdings, Inc.................... 9,000 694,687
Merrill Lynch & Co., Inc......................... 33,100 3,264,487
Morgan Stanley Dean Witter
& Co........................................... 45,100 3,244,381
Paine Webber Group, Inc.......................... 15,800 710,012
Providian Financial Corp......................... 4,100 364,644
TD Waterhouse Group, Inc.+....................... 26,800 413,725
------------
22,049,953
------------
INSURANCE (2.7%)
Allstate Corp.................................... 50,000 1,325,000
Ambac Financial Group, Inc....................... 9,200 463,450
American General Corp............................ 14,600 935,312
American International Group, Inc................ 30,800 3,466,925
Aon Corp......................................... 15,300 537,412
CIGNA Corp....................................... 11,600 1,030,225
Financial Security Assurance Holdings Ltd........ 1,700 127,712
Hartford Financial Services Group, Inc........... 13,200 780,450
Lincoln National Corp............................ 13,200 511,500
MBIA, Inc........................................ 6,700 387,344
MetLife, Inc.+................................... 45,000 922,500
Torchmark Corp................................... 7,900 214,781
------------
10,702,611
------------
TOTAL FINANCE.................................. 55,751,311
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
12
<PAGE>
J.P. MORGAN INSTITUTIONAL SMARTINDEX-TM- FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ------------ -------------
<S> <C> <C>
HEALTH CARE (10.6%)
BIOTECHNOLOGY (0.1%)
Genzyme Corp..................................... 3,300 $ 187,481
Human Genome Sciences, Inc.+..................... 1,800 157,950
------------
345,431
------------
HEALTH SERVICES (0.8%)
Aetna, Inc....................................... 9,800 654,150
Tenet Healthcare Corp.+.......................... 21,500 550,938
The Healthcare Co................................ 36,700 990,900
UnitedHealth Group, Inc.......................... 10,900 812,731
Wellpoint Health Networks, Inc.+................. 4,300 312,288
------------
3,321,007
------------
MEDICAL SUPPLIES (0.8%)
Baxter International, Inc........................ 3,300 219,450
Becton, Dickinson & Co........................... 17,500 510,781
Boston Scientific Corp.+......................... 13,200 338,250
Guidant Corp.+................................... 9,200 465,750
Medtronic, Inc................................... 26,800 1,383,550
St. Jude Medical, Inc............................ 5,300 190,469
------------
3,108,250
------------
PHARMACEUTICALS (8.9%)
Abbott Laboratories.............................. 60,100 2,445,319
ALZA Corp.+...................................... 14,600 741,863
American Home Products Corp...................... 55,300 2,979,288
Bristol-Myers Squibb Co.......................... 75,700 4,168,231
Eli Lilly & Co................................... 45,600 3,471,300
Forest Laboratories, Inc......................... 6,000 531,000
IDEC Pharmaceuticals Corp.+...................... 1,700 108,481
Johnson & Johnson................................ 23,900 2,139,050
Merck & Co., Inc................................. 82,000 6,119,250
Pfizer, Inc...................................... 29,000 1,292,313
Pharmacia Corp................................... 48,800 2,534,550
Schering-Plough Corp............................. 57,300 2,771,888
Vertex Pharmaceuticals, Inc.+.................... 100 7,388
Warner-Lambert Co................................ 52,600 6,423,775
Watson Pharmaceuticals, Inc.+.................... 2,500 110,313
------------
35,844,009
------------
TOTAL HEALTH CARE.............................. 42,618,697
------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ------------ -------------
<S> <C> <C>
INDUSTRIAL PRODUCTS & SERVICES (7.8%)
AEROSPACE (0.6%)
B.F. Goodrich Co................................. 9,800 $ 347,900
Boeing Co........................................ 25,400 992,188
Lockheed Martin Corp............................. 15,600 382,200
Raytheon Co., Class A............................ 7,000 164,938
Raytheon Co., Class B............................ 6,000 140,625
United Technologies Corp......................... 3,900 235,706
------------
2,263,557
------------
BUILDING MATERIALS (0.0%)
USG Corp......................................... 2,400 90,450
------------
CAPITAL GOODS (0.1%)
Eaton Corp....................................... 4,600 333,788
PACCAR, Inc...................................... 5,100 213,563
------------
547,351
------------
COMMERCIAL SERVICES (0.2%)
Cendant Corp.+................................... 53,600 710,200
------------
DIVERSIFIED MANUFACTURING (6.4%)
Cooper Industries, Inc........................... 6,000 201,000
Eastman Kodak Co................................. 17,800 1,063,550
General Electric Co.(s).......................... 309,400 16,282,175
Honeywell International, Inc..................... 54,000 2,953,125
ITT Industries, Inc.............................. 5,600 193,550
Johnson Controls, Inc............................ 4,800 273,300
Tyco International Ltd.+(i)...................... 90,200 4,245,038
Xerox Corp....................................... 14,000 379,750
------------
25,591,488
------------
ELECTRICAL EQUIPMENT (0.2%)
Emerson Electric Co.............................. 16,400 967,600
------------
MACHINERY (0.3%)
Caterpillar, Inc................................. 23,100 883,575
Ingersoll-Rand Co................................ 10,700 487,519
------------
1,371,094
------------
TOTAL INDUSTRIAL PRODUCTS & SERVICES........... 31,541,740
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
13
<PAGE>
J.P. MORGAN INSTITUTIONAL SMARTINDEX-TM- FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ------------ -------------
<S> <C> <C>
TECHNOLOGY (29.4%)
COMPUTER PERIPHERALS (1.0%)
EMC Corp.+....................................... 22,900 $ 2,663,556
Lexmark International Group, Inc., Class A+...... 5,500 383,625
Quantum Corp.- DLT & Storage Systems+............ 15,200 157,700
Seagate Technology, Inc.+........................ 11,100 643,800
------------
3,848,681
------------
COMPUTER SOFTWARE (5.5%)
Adobe Systems, Inc............................... 5,400 607,838
BMC Software, Inc.+.............................. 11,400 501,600
Citrix Systems, Inc.+............................ 13,000 684,125
Computer Associates International, Inc........... 27,500 1,416,250
Microsoft Corp.+................................. 196,500 12,293,531
Network Associates, Inc.......................... 5,400 118,125
Oracle Corp.+.................................... 61,500 4,420,313
Siebel Systems, Inc.+............................ 11,000 1,287,000
Symantec Corp.+.................................. 2,500 164,375
Tibco Software, Inc.............................. 7,400 411,625
------------
21,904,782
------------
COMPUTER SYSTEMS (5.9%)
Apple Computer, Inc.+............................ 7,200 604,800
Compaq Computer Corp............................. 69,500 1,824,375
Dell Computer Corp.+............................. 100,300 4,325,438
Hewlett-Packard Co............................... 45,200 5,429,650
International Business Machines Corp............. 38,300 4,110,069
Sun Microsystems, Inc.+.......................... 70,200 5,379,075
VERITAS Software Corp.+.......................... 17,500 2,038,750
------------
23,712,157
------------
ELECTRONICS (3.7%)
Cisco Systems, Inc.(s)+.......................... 250,500 14,262,844
Rockwell International Corp...................... 12,000 492,000
------------
14,754,844
------------
INFORMATION PROCESSING (0.9%)
DoubleClick, Inc.+............................... 5,600 236,600
Electronic Data Systems Corp..................... 18,200 1,170,488
Exodus Communications, Inc.+..................... 5,400 381,038
Yahoo!, Inc.+.................................... 15,100 1,707,244
------------
3,495,370
------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ------------ -------------
<S> <C> <C>
SEMICONDUCTORS (6.3%)
Advanced Micro Devices, Inc.+.................... 6,800 $ 553,775
Altera Corp.+.................................... 8,700 747,113
Applied Materials, Inc.+......................... 34,800 2,905,800
Intel Corp.(s)................................... 117,900 14,700,656
Lattice Semiconductor Corp.+..................... 5,700 338,081
National Semiconductor Corp.+.................... 7,900 424,625
Texas Instruments, Inc........................... 71,400 5,158,650
Xilinx, Inc.+.................................... 3,100 235,988
------------
25,064,688
------------
TELECOMMUNICATION SERVICES (1.8%)
Global Crossing Ltd.+(i)......................... 45,600 1,142,850
Sprint Corp. (PCS Group)+........................ 35,100 1,948,050
WorldCom, Inc.+.................................. 109,900 4,134,988
------------
7,225,888
------------
TELECOMMUNICATIONS-EQUIPMENT (4.3%)
JDS Uniphase Corp................................ 2,500 220,000
Lucent Technologies, Inc......................... 67,700 3,884,288
Motorola, Inc.................................... 32,000 3,000,000
Nortel Networks Corp............................. 125,800 6,832,513
QUALCOMM, Inc.+.................................. 32,200 2,137,275
Tellabs, Inc.+................................... 18,100 1,175,369
------------
17,249,445
------------
TOTAL TECHNOLOGY............................... 117,255,855
------------
TELECOMMUNICATIONS (0.0%)
TELECOMMUNICATION SERVICES (0.0%)
Allegiance Telecom, Inc.+........................ 4,200 222,075
------------
TRANSPORTATION (0.5%)
AIRLINES (0.0%)
Northwest Airlines Corp.......................... 1,000 28,438
------------
RAILROADS (0.5%)
Burlington Northern Santa Fe Corp................ 27,900 659,138
CSX Corp......................................... 14,500 315,375
Norfolk Southern Corp............................ 24,500 436,406
Union Pacific Corp............................... 16,400 693,925
------------
2,104,844
------------
TRANSPORT & SERVICES (0.0%)
C.H. Robinson Worldwide, Inc..................... 1,000 44,938
------------
TOTAL TRANSPORTATION........................... 2,178,220
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
14
<PAGE>
J.P. MORGAN INSTITUTIONAL SMARTINDEX-TM- FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ------------ -------------
<S> <C> <C>
UTILITIES (6.8%)
ELECTRIC (1.8%)
Allegheny Energy, Inc............................ 700 $ 21,656
Carolina Power & Light Co........................ 18,100 622,188
Central & South West Corp........................ 32,700 680,569
Cinergy Corp..................................... 9,500 252,938
Consolidated Edison, Inc......................... 12,300 401,288
Dominion Resources, Inc.......................... 16,300 745,725
DTE Energy Co.................................... 8,600 297,238
Edison International............................. 19,300 412,538
Entergy Corp..................................... 16,900 490,100
FPL Group, Inc................................... 10,400 514,800
GPU, Inc......................................... 7,100 200,575
NiSource, Inc.................................... 7,400 133,663
Northern States Power Co......................... 9,700 214,613
PG&E Corp........................................ 23,300 604,344
Pinnacle West Capital Corp....................... 6,000 214,500
PPL Corp......................................... 8,000 189,000
TECO Energy, Inc................................. 7,600 162,925
TXU Corp......................................... 16,500 589,875
Wisconsin Energy Corp............................ 15,000 316,875
------------
7,065,410
------------
GAS-PIPELINES (0.5%)
Columbia Energy Group............................ 2,000 129,375
Enron Corp....................................... 25,800 1,880,175
------------
2,009,550
------------
NATURAL GAS (0.1%)
El Paso Energy Corp.............................. 8,500 437,750
------------
PIPELINES (0.2%)
Williams Companies, Inc.......................... 16,200 673,313
------------
TELEPHONE (4.2%)
ALLTEL Corp...................................... 11,400 745,988
AT&T Corp........................................ 97,300 3,375,094
Bell Atlantic Corp............................... 34,900 1,845,338
BellSouth Corp................................... 17,600 821,700
GTE Corp......................................... 57,400 3,630,550
Level 3 Communications, Inc.+.................... 7,000 534,188
SBC Communications, Inc.......................... 130,400 5,696,850
US WEST, Inc..................................... 1,900 136,800
------------
16,786,508
------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ------------ -------------
<S> <C> <C>
WATER (0.0%)
American Water Works, Inc........................ 5,900 $ 137,913
------------
TOTAL UTILITIES................................ 27,110,444
------------
TOTAL COMMON STOCKS (COST $383,411,231)........ 386,199,412
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
------------
<S> <C> <C>
SHORT-TERM INVESTMENTS (3.5%)
OTHER INVESTMENT COMPANIES (3.2%)
J.P. Morgan Institutional
Prime Money Market Fund
(cost $12,752,132)*............................ $12,752,132 12,752,132
------------
U.S. TREASURY OBLIGATIONS (0.3%)
Notes, 5.625% 2/28/01(s)
(cost $1,212,301).............................. 1,220,000 1,210,472
------------
TOTAL SHORT-TERM INVESTMENTS
(COST $13,964,433)............................ 13,962,604
------------
TOTAL INVESTMENTS
(COST $397,375,664) (99.9%).................................. 400,162,016
OTHER ASSETS IN EXCESS OF LIABILITIES (0.1%)...................
379,080
------------
NET ASSETS (100.0%)............................................ $400,541,096
============
</TABLE>
------------------------------
Note: Based on the cost of investments of $399,164,756 for federal income tax
purposes at May 31, 2000, the aggregate gross unrealized appreciation and
depreciation was $27,865,456 and $26,868,196, respectively, resulting in net
unrealized appreciation of $997,260.
(i) Foreign Security
+ - Non-income producing security
(s)Security is fully or partially segregated with custodian as collateral for
futures contracts or with broker as initial margin for futures contracts.
$1,210,472 of the market value has been segregated.
* Money market mutual fund registered under the Investment Company Act of 1940,
as amended and advised by J.P Morgan Investment Management, Inc.
The Accompanying Notes are an Integral Part of the Financial Statements.
15
<PAGE>
J.P. MORGAN INSTITUTIONAL SMARTINDEX-TM- FUND
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $397,375,664 ) $400,162,016
Cash 215,039
Receivable for Shares of Beneficial Interest Sold 14,093,589
Receivable for Investments Sold 12,801,240
Dividends and Interest Receivable 578,783
Receivable for Expense Reimbursements 149,877
Prepaid Trustees' Fees 524
Prepaid Expenses and Other Assets 70
------------
Total Assets 428,001,138
------------
LIABILITIES
Payable for Investments Purchased 27,068,426
Payable for Shares of Beneficial Interest
Redeemed 80,623
Advisory Fee Payable 73,110
Variation Margin Payable 48,750
Shareholder Servicing Fee Payable 30,044
Custody Fee Payable 27,137
Administrative Services Fee Payable 14,650
Transfer Agent Fees Payable 5,960
Administration Fee Payable 1,708
Fund Services Fee Payable 278
Accrued Expenses 109,356
------------
Total Liabilities 27,460,042
------------
NET ASSETS $400,541,096
============
INSTITUTIONAL SHARES
Applicable to 23,463,902 shares outstanding
(par value $0.001, unlimited shares authorized) $400,541,096
============
Net Asset Value, Offering and Redemption Price
per Share $17.07
-----
-----
ANALYSIS OF NET ASSETS
Paid-in capital $400,549,149
Undistributed Net Investment Income 1,087,039
Accumulated Net Realized Loss on Investments (3,931,767)
Net Unrealized Appreciation of Investments 2,836,675
------------
Net Assets $400,541,096
============
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
16
<PAGE>
J.P. MORGAN INSTITUTIONAL SMARTINDEX-TM- FUND
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED MAY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividend Income (Net of Foreign Withholding Tax
of $20,107 ) $ 2,365,220
Interest Income 426,270
-----------
Investment Income 2,791,490
EXPENSES
Advisory Fee $ 424,511
Shareholder Servicing Fee 173,734
Custodian Fees and Expenses 120,662
Registration Fees 115,448
Administrative Services Fee 85,537
Professional Fees and Expenses 41,124
Transfer Agent Fee 19,058
Administrative Fee 2,810
Fund Services Fee 2,544
Trustees' Fees and Expenses 715
Miscellaneous 27,215
-----------
Total Expenses 1,013,358
Less: Reimbursement of Expenses (408,049)
-----------
NET EXPENSES 605,309
-----------
NET INVESTMENT INCOME 2,186,181
NET REALIZED LOSS ON
Investment Transactions (3,291,400)
Futures Contracts (635,900)
-----------
Net Realized Loss (3,927,300)
NET CHANGE IN UNREALIZED APPRECIATION OF
Investments 2,495,001
Futures Contracts 50,323
-----------
Net Change in Unrealized Appreciation 2,545,324
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $ 804,205
===========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
17
<PAGE>
J.P. MORGAN INSTITUTIONAL SMARTINDEX-TM- FUND
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
DECEMBER 31, 1998
FOR THE FISCAL (COMMENCEMENT OF
YEAR ENDED OPERATIONS) THROUGH
MAY 31, 2000 MAY 31, 1999
-------------- -------------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 2,186,181 $ 24,633
Net Realized Gain (Loss) on Investments and
Futures Contracts (3,927,300) 46,499
Net Change in Unrealized Appreciation of
Investments and Futures Contracts 2,545,324 291,351
------------- ------------------
Net Increase in Net Assets Resulting from
Operations 804,205 362,483
------------- ------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (1,113,774) (10,001)
Net Realized Gains (50,966) --
------------- ------------------
Total Distributions to Shareholders (1,164,740) (10,001)
------------- ------------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Proceeds from Shares of Beneficial Interest Sold 430,661,547 5,000,600
Reinvestment of Dividends and Distributions 1,163,790 10,001
Cost of Shares of Beneficial Interest Redeemed (36,286,789) --
------------- ------------------
Net Increase from Shareholder Transactions 395,538,548 5,010,601
------------- ------------------
Total Increase in Net Assets 395,178,013 5,363,083
NET ASSETS
Beginning of Period 5,363,083 --
------------- ------------------
End of Period (including undistributed net
investment income of $1,087,039 and $14,632,
respectively) $ 400,541,096 $ 5,363,083
============= ==================
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
18
<PAGE>
J.P. MORGAN INSTITUTIONAL SMARTINDEX-TM- FUND
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
Selected data for a unit outstanding throughout each period are as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
DECEMBER 31, 1998
FOR THE FISCAL (COMMENCEMENT OF
YEAR ENDED OPERATIONS) THROUGH
MAY 31, 2000 MAY 31, 1999
-------------- -------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 16.06 $15.00
-------- ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.14 0.07
Net Realized and Unrealized Gain on Investments and Futures
Contracts 1.02 1.02
-------- ------
Total from Investment Operations 1.16 1.09
-------- ------
LESS DIVIDEND AND DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (0.14) (0.03)
Net Realized Gain (0.01) --
-------- ------
Total Dividend and Distributions to Shareholders (0.15) (0.03)
-------- ------
NET ASSET VALUE, END OF PERIOD $ 17.07 $16.06
======== ======
RATIOS AND SUPPLEMENTAL DATA
Total Return 7.25% 7.27%(a)
Net Assets, End of Period (in thousands) $400,541 $5,363
Ratio to Average Net Assets
Net Expenses 0.35% 0.35%(b)
Net Investment Income 1.26% 1.13%(b)
Expenses without Reimbursement 0.58% 5.44%(b)
Portfolio Turnover 45% 19%
</TABLE>
------------------------
(a) Not Annualized.
(b) Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
J.P. MORGAN INSTITUTIONAL SMARTINDEX-TM- FUND
NOTES TO FINANCIAL STATEMENTS
MAY 31, 2000
--------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
J.P. Morgan Institutional SmartIndex-TM- Fund (the "fund"), registered as J.P.
Morgan SmartIndex-TM- 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 a consistently high total return from a broadly
diversified portfolio while maintaining risk characteristics similar to the S &
P 500. 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 shares in the fund.
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts and disclosures. Actual amounts
could differ from those estimates. The following is a summary of the significant
accounting policies of the fund:
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) The fund's custodian takes possession of the collateral pledged for
investments in repurchase agreements on behalf of the fund. It is the
policy of the fund 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 fund 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.
c) 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
20
<PAGE>
J.P. MORGAN INSTITUTIONAL SMARTINDEX-TM- FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 2000
--------------------------------------------------------------------------------
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.
d) 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.
e) 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.
f) 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.
g) 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 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 in
movements in the price of futures contracts, interest rates and the
underlying hedged assets.
h) For federal income tax purposes, the fund has a capital loss carryforward
at May 31, 2000 of $102,307, all of which expires in the year 2008. To the
extent that this capital loss is used to offset future capital gains, it
is probable that gains so offset will not be distributed to shareholders.
i) For federal income tax purposes, the fund incurred approximately
$1,990,017 of capital losses in the period from November 1, 1999 to
May 31, 2000. These losses were deferred for tax purposes until June 1,
2000.
21
<PAGE>
J.P. MORGAN INSTITUTIONAL SMARTINDEX-TM- FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 2000
--------------------------------------------------------------------------------
2. TRANSACTIONS WITH AFFILIATES
a) The fund has an Investment Advisory Agreement with J.P. Morgan Investment
Management, Inc. ("JPMIM"), an affiliate of Morgan and a wholly owned
subsidiary of J.P. Morgan & Co. Incorporated. Under the terms of the
agreement, the fund pays JPMIM at an annual rate of 0.25% of the fund's
average daily net assets. For the fiscal year ended May 31, 2000, such
fees amounted to $434,335.
The fund may invest in one or more affiliated money market funds: J.P.
Morgan Institutional Prime Money Market Fund, J.P. Morgan Institutional
Tax Exempt Money Market Fund, J.P. Morgan Institutional Federal Money
Market Fund and J.P. Morgan Institutional Treasury Money Market Fund. The
Advisor has agreed to reimburse its advisory fee from the fund in an
amount to offset any doubling of investment advisory and shareholder
servicing fees. For the fiscal year ended May 31, 2000, J.P. Morgan has
agreed to reimburse the fund $9,824 under this agreement. Interest income
included in the Statement of Operations for the year ended May 31, 2000
includes $191,428 of interest income from investments in affiliated money
market fund.
b) The trust, on behalf of the fund, has retained Funds Distributor, Inc.
("FDI"), a registered broker-dealer, to serve as the co-administrator and
distributor for the fund. Under a Co-Administration Agreement between FDI
and the trust on behalf of the fund, FDI provides administrative services
necessary for the operations of the fund, furnishes office space and
facilities required for conducting the business of the fund and pays the
compensation of the fund's officers affiliated with FDI. The fund has
agreed to pay FDI fees equal to its allocable share of an annual
complex-wide charge of $425,000 plus FDI's out-of-pocket expenses. The
amount allocable to the fund is based on the ratio of the fund's net
assets to the aggregate net assets of the trust and certain other
investment companies subject to similar agreements with FDI. For the
fiscal year ended May 31, 2000, the fee for these services amounted to
$2,810.
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 the trust and certain other
investment companies for which Morgan provides administrative services.
For the fiscal year ended May 31, 2000, the fee for these services
amounted to $85,537.
In addition, Morgan has agreed to reimburse the fund to the extent
necessary to maintain the total operating expenses of the fund at no more
than 0.35% of the average daily net assets of the fund through September
30, 2000. This reimbursement arrangement can be changed or terminated at
any time after September 30, 2000 at the option of J.P. Morgan. For the
fiscal year ended May 31, 2000, Morgan has agreed to reimburse
Institutional Shares $408,049 for expenses under this agreement.
22
<PAGE>
J.P. MORGAN INSTITUTIONAL SMARTINDEX-TM- FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 2000
--------------------------------------------------------------------------------
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% of the average daily net assets of
the fund. For the fiscal year ended May 31, 2000, the fee for these
services amounted to $173,734 for Institutional Shares.
Morgan, Charles Schwab & Co. ("Schwab") and the trust are parties to
separate services and operating agreements (the "Schwab Agreements")
whereby Schwab makes fund shares available to customers of investment
advisors and other financial intermediaries who are Schwab's clients. The
fund is not responsible for payments to Schwab under the Schwab
Agreements; however, in the event the services agreement with Schwab is
terminated for reasons other than a breach by Schwab and the relationship
between the trust and Morgan is terminated, the fund would be responsible
for the ongoing payments to Schwab with respect to pre-termination shares.
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
$2,544 for the fiscal year ended May 31, 2000.
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 $500.
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:
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
FOR THE PERIOD
DECEMBER 31, 1998
(COMMENCEMENT OF
FOR THE YEAR ENDED OPERATIONS) THROUGH
MAY 31, 2000 MAY 31, 1999
------------------------- --------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------ -------- ----------
<S> <C> <C> <C> <C>
Shares of Beneficial Interest Sold............... 25,195,086 $430,661,547 333,373 $5,000,600
Reinvestment of Dividends and Distributions...... 66,763 1,163,790 638 10,001
Shares redeemed.................................. (2,131,957) (36,286,789) -- --
----------- ------------ -------- ----------
Net Increase..................................... 23,129,892 $395,538,548 334,011 $5,010,601
=========== ============ ======== ==========
</TABLE>
23
<PAGE>
J.P. MORGAN INSTITUTIONAL SMARTINDEX-TM- FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 2000
--------------------------------------------------------------------------------
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.
4. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the fiscal year
ended May 31, 2000 were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
--------- -----------
<S> <C>
$540,107,884 $75,142,930
</TABLE>
SUMMARY OF OPEN FUTURES CONTRACTS AT MAY 31, 2000
<TABLE>
<CAPTION>
NET UNREALIZED
APPRECIATION/ MARKET VALUE
CONTRACTS LONG (DEPRECIATION) OF CONTRACTS
-------------- -------------- ------------
<S> <C> <C> <C>
S&P 500, expiring June 2000...................... 39 $ 50,323 $13,866,450
</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 26, 1999, with unaffiliated lenders. The maximum borrowing
under the Agreement is $150,000,000. The Agreement expired on May 23, 2000,
however, the fund as party to the Agreement has extended the Agreement and
continues its participation therein for an additional 364 days until May 21,
2001. 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% on the unused portion of the committed amount which is
allocated to the funds in accordance with procedures established by their
respective trustees or directors. The fund has not borrowed pursuant to the
Agreement as of May 31, 2000.
* * * *
6. TAX INFORMATION NOTICE (UNAUDITED)
For corporate taxpayers 95.43% of the ordinary income distributions paid during
the fiscal year ended May 31, 2000 qualify for the corporate dividends received
deductions.
24
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of
J.P. Morgan Institutional SmartIndex-TM- 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
SmartIndex-TM- Fund (one of funds comprising the J.P. Morgan Series Trust and
registered as J.P. Morgan SmartIndex-TM- Fund, hereafter referred to as the
"fund") at May 31, 2000, the results of its operations for the year then ended,
and the changes in its net assets and the financial highlights for the year then
ended and for the period December 31, 1998 (commencement of operations) through
May 31, 1999, in conformity with accounting principles generally accepted in the
United States. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with auditing standards generally accepted in the
United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at May 31, 2000 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
July 14, 2000
25
<PAGE>
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
NEW YORK TAX EXEMPT BOND FUND
CALIFORNIA BOND FUND: INSTITUTIONAL SHARES
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
INTERNATIONAL EQUITY FUND
EUROPEAN EQUITY FUND
INTERNATIONAL OPPORTUNITIES FUND
EMERGING MARKETS EQUITY FUND
SMARTINDEX-TM- FUND: INSTITUTIONAL SHARES
MARKET NEUTRAL FUND: INSTITUTIONAL SHARES
FOR MORE INFORMATION ON THE J.P. MORGAN INSTITUTIONAL FUNDS, CALL J.P. MORGAN
FUNDS SERVICES AT (800)766-7722.
IMAR782
J.P. MORGAN INSTITUTIONAL SMARTINDEX-TM- FUND
ANNUAL REPORT
MAY 31, 2000
