<PAGE>
LETTER TO THE SHAREHOLDERS OF THE J.P. MORGAN INSTITUTIONAL MARKET NEUTRAL FUND
July 1, 2000
Dear Shareholder,
For the 12 months ended May 31, 2000, the J.P. Morgan Institutional Market
Neutral Fund posted a -0.99% return, compared with the 5.54% return of the
Merrill Lynch 91-Day T-Bill.
The fund's net asset value decreased to $14.02 on May 31, 2000, from $15.16 on
May 31, 1999. During the year, the fund made distributions of approximately
$0.48 per share from ordinary income and approximately $0.51 in short-term
capital gains. On May 31, 2000, the net assets of the fund were approximately
$12.5 million.
This report includes a discussion with Bernard Kroll, a member of the portfolio
management team. In this interview, Bud 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.........................6
FUND PERFORMANCE.....................2 FUND HIGHLIGHTS....................7
PORTFOLIO MANAGER Q&A................3 FINANCIAL STATEMENTS..............10
--------------------------------------------------------------------------------
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
$1,000,000 (the minimum investment in the fund). The chart at right shows that
$1,000,000 invested on December 31, 1998 would have grown to $1,008,797 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 $1,000,000 SINCE FUND INCEPTION*
DECEMBER 31, 1998 - MAY 31, 2000
[EDGAR REPRESENTATION OF PLOT POINTS USED IN PRINTED GRAPHIC]
<TABLE>
<CAPTION>
JPM INST MARKET NEUTRAL ML 91 DAY T-BILL
---------------------------------------------------------
<S> <C> <C>
12/31/98 1,000,000 1,000,000
1/31/99 994,638.07 1,003,552.08
2/28/99 992,627 1,006,432
3/31/99 981,914.54 1,010,572.21
4/30/99 1,012,158 1,014,241
5/31/99 1,018,879.15 1,018,186.74
6/30/99 1,026,168 1,022,440
7/31/99 1,036,976.82 1,026,610.89
8/31/99 1,032,219 1,030,741
9/30/99 1,030,862.46 1,035,608.95
10/31/99 1,017,298 1,039,686
11/30/99 1,032,218.86 1,043,840.43
12/31/99 999,474 1,048,514
1/31/00 1,008,089.99 1,053,016.81
2/29/00 1,000,910 1,057,633
3/31/00 1,019,590.42 1,063,142.19
4/30/00 1,013,115 1,068,096
5/31/00 1,008,797.30 1,074,611.82
</TABLE>
<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 Market Neutral Fund 0.79% -2.27% -0.99% 0.62%
Merrill Lynch 91-Day T-Bill 1.61% 2.95% 5.54% 5.21%
As of March 31, 2000
--------------------------------------------------------------------------- ----------------------------
J.P. Morgan Institutional Market Neutral Fund 2.01% -1.09% 3.84% 1.56%
Merrill Lynch 91-Day T-Bill 1.40% 2.66% 5.20% 5.02%
</TABLE>
* Since the fund's performance inception on December 30, 1998, it has provided
an average annual total return of 0.24% through May 31, 2000. For the purposes
of comparison, the "since inception" returns are calculated from December 31,
1998, the first date when data for the fund and its benchmark were available.
Past performance is no guarantee of future results. Fund returns are net of
fees, assume the reinvestment of fund distributions, and reflect the
reimbursement of fund expenses as described in the prospectus. Had expenses not
been subsidized, returns would have been lower.
2
<PAGE>
PORTFOLIO MANAGER Q&A
[PHOTO]
The following is an interview with BERNARD KROLL, managing director and member
of the portfolio management team for J.P. Morgan Institutional Market Neutral
Fund. Bud is a portfolio manager in the Structured Equity Group. A J.P. Morgan
Investment Management employee for the past four years, he was previously an
equity derivatives specialist at Goldman Sachs & Co. Earlier, he managed his own
software development firm and options broker-dealer, and managed several
derivatives businesses at Kidder, Peabody & Co. Bud received an M.B.A. in
finance from New York University, and a B.A. in economics from Stanford
University.
THIS IS A RELATIVELY YOUNG FUND, DEBUTING IN DECEMBER 1998. HOW IS IT
STRUCTURED?
BK: On average, the fund is made up of 150 names in which we are long and 150 in
which we are short. We don't try to match the benchmark with our holdings, as a
more traditional, long-only equity portfolio manager might do. Rather, with this
portfolio, we work to ensure that the amount of dollars invested long in a
specific sector be equal to the amount of dollars invested short in that sector.
That's what makes this fund sector neutral. We also try to manage the portfolio
so that the general characteristics of the long and short portfolios are
similar. Over time, our goal is to benefit by picking stocks for the long
portfolio that go up more than the stocks we are short.
THE FEDERAL RESERVE BOARD'S EFFORTS TO COOL THE ECONOMY BY RAISING INTEREST
RATES HAS BEEN AND CONTINUES TO BE THE STORY OF THE DAY. HOW DO RISING INTEREST
RATES AFFECT THE FUND?
BK: The stocks we are long are not expected to behave differently than the
stocks we are short, simply as the function of changing interest rates. However,
all things being equal, the return of the fund should go up modestly as interest
rates rise, this being due to mechanical reasons. To illustrate, let's look at a
hypothetical position in which we go long one stock at $100 a share and short
another in the same sector that is also trading at $100 a share. Say that they
both go up to $110 a share. In this instance, the return we earn will be a
combination of two things. One is the alpha, or the price difference between our
long and short positions. Here, the alpha would be zero since both stocks went
up by the same amount. But, we also earn what is called a "rebate rate" from the
broker who holds the cash that comes from the stock that was sold short. In
exchange for what is in effect a cash deposit, the broker pays us a rebate rate
that is computed as a spread to the Fed funds rate. So, as interest rates go up,
the amount of short stock rebate (or interest) we get goes up as well.
U.S. EQUITIES HAVE BEEN ON QUITE A RIDE OVER THE PAST 12 MONTHS. HOW WOULD YOU
CHARACTERIZE THIS PERIOD?
BK: First and foremost, extremely volatile. The stock-specific risk, or the
volatility of individual stocks relative to one another, has been significantly
higher than we've seen in the past and has presented us with
3
<PAGE>
equally significant challenges. In this case, volatility in and of itself isn't
necessarily bad, it just means more opportunity to do well - or to do less well.
HOW DID THE FUND PERFORM OVER THE PAST 12 MONTHS?
BK: To put it bluntly, not very well. The 12-month period that ended May 31,
2000 was certainly one of the most challenging we have experienced to date.
A good deal of the underperformance we experienced can be linked directly to the
two fundamental principles that underlie our investment strategy. The first is
the concept of normalized earnings. When we are pricing a security to see if it
will be a good long-term investment, we forecast earnings that we expect the
company to produce over the long term. For example, we look out three years and
focus on earnings that will likely surface in the middle of the company's
business cycle. And then we focus on the anticipated growth rate of these
earnings for the next five years. Our aim is to invest in attractively priced
companies that possess the fundamentals necessary to keep their businesses
moving on an upward path for some time yet to come.
This past year, however, investors were very sensitive to and focused, almost
myopically, on short-term earnings, as opposed to normalized earnings, and
tended to price securities based on expectations of quarter-to-quarter earnings
growth, rather than long-term potential. In this investment environment, our
style was somewhat out of sync with where the marketplace was valuing
securities. That was the first difficulty we faced in managing the portfolio.
The second difficulty was that, until very recently, we've been in an investment
environment where positive price momentum has been very well rewarded, and
selection of securities based on valuation hasn't. By that I mean that investors
have taken the view that the most important thing about a stock is whether its
price has been going up, not whether it is attractively priced relative to its
future earnings flow. When investors are only looking to stay with recent
winners, and placing less emphasis on valuation as a methodology for determining
which stocks to buy, we are not going to do as well. There are some signs that
this singular focus on price has begun to change, which should benefit the
fund's future performance, but does little to improve that of this past year.
WHERE DID STOCK SELECTION HURT OR HELP PERFORMANCE?
BK: Since we invest long and short on a sector neutral basis, we also look at
our performance by sector. For the last twelve months, our most disappointing
sectors were multi-sector, finance, and services, while we were most successful
in drugs, energy, and chemicals. Within multi-sector, long positions in Waste
Management and Harris Corp. accounted for much of the underperformance for the
sector. In finance, we suffered most from long positions in Finova Group and
Astoria Federal, as well as our short position in Northern Trust. In services,
short positions in Colgate Palmolive and Anheuser-Busch, coupled with long
positions in Procter & Gamble and Philip Morris, caused the greatest negative
impact.
Finova shares plunged following its announcement that first-quarter profit would
fail to meet analyst expectations. This was due to an $80 million special charge
that was incurred to bolster loss reserves and pay for
4
<PAGE>
deferred compensation and executive severance. Shares of Procter & Gamble Co.
lost more than a third of their value after the consumer products company
announced that its third-quarter earnings would fall well below year-ago levels,
owing mainly to higher costs for raw materials and aggressive pricing by
competitors.
On the positive side of the ledger, drugs, energy, and chemicals helped the
portfolio the most. In drugs, long positions in Human Genome Science led the
positive news, with long positions in Monsanto, Alza, and Forest Labs making
strong contributions. In energy, long positions in Global Marine, R&B Falcon,
and Union Pacific Resources were the greatest contributors. In chemicals, a long
position in Rohm & Haas and a short position in Air Products were the greatest
positive contributors.
To briefly profile a couple of these, Monsanto rallied when it was announced
that it would be acquired by Pharmacia Corp., a large drug company. The combined
company will be among the industry's fastest growing, with near-term growth
estimated to be in the 14%-15% range, and with earnings per share expected to
grow by 20% annually after 2002. Alza made several positive announcements on new
drugs during this period, the most important being the receipt of an approval
letter from the FDA on Concerta, a once-a-day treatment for children with
Attention Deficit Disorder.
EARLIER, YOU MENTIONED THAT THE INVESTMENT ENVIRONMENT HAS BEGUN TO CHANGE AND
MAY BEGIN TO FAVOR YOUR STYLE GOING FORWARD. HOW SO?
BK: We have evidence that gives us cause for tremendous hope for the future,
actually. Due to our disciplined research and portfolio construction process, we
have a solid means of measuring how attractive the stocks we like are relative
to the stocks we don't like. That spread is among the widest it has ever been,
going back over the entire history of measuring stock valuation at J.P. Morgan.
In other words, the opportunities embedded in the issues we own versus the ones
we are short are as attractive as any we have ever had. Thus, we believe the
fund should be well positioned to benefit when the market returns to some
semblance of normalcy. For this and other reasons, our forward-looking
expectation for the performance of the fund is highly favorable.
IN GENERAL, HOW DO YOU EXPECT THE MARKET TO SHAKE OUT OVER THE NEXT FEW MONTHS?
BK: The head winds of momentum have definitely eased over the past few months.
While we're not out of the woods yet, we believe that we're just now beginning
to see the turning of the tide away from most momentum driven stocks to those
that represent good valuation for us.
To prepare for a future in which volatility will inevitably hold sway from time
to time, we have added an additional quantitative signal to our portfolio
construction process, one that, we believe, will have the effect of better
controlling risk during periods of extreme market volatility, such as that of
the year just past.
Also, to account for the tremendous growth of the technology sector and the
resultant shrinkage in several others, we have remapped our sector definitions
so as to allow us to better focus our analysts and portfolio construction rules
on appropriately sized sectors. These two improvements in the process, plus the
continuation of our research advantage and disciplined portfolio construction
process, give us renewed confidence in our ability to deliver going
forward.
5
<PAGE>
FUND FACTS
INVESTMENT OBJECTIVE
J.P. Morgan Institutional Market Neutral Fund seeks to provide long term capital
appreciation from a broadly diversified portfolio of stocks. It is designed for
investors who want potential returns that exceed those of 90-day U.S. Treasury
Bills while minimizing exposure to general stock market risk.
--------------------------------------------------------------------------------
COMMENCEMENT OF INVESTMENT OPERATIONS
12/31/98
--------------------------------------------------------------------------------
FUND NET ASSETS AS OF 5/31/00
$12,528,538
--------------------------------------------------------------------------------
DIVIDEND PAYABLE DATES
6/23/00, 8/18/00, 12/20/00
--------------------------------------------------------------------------------
CAPITAL GAIN PAYABLE DATE (IF APPLICABLE)
12/20/00
--------------------------------------------------------------------------------
REGISTRANT
J.P. MORGAN SERIES TRUST
J.P. MORGAN MARKET NEUTRAL FUND:
INSTITUTIONAL SHARES
EXPENSE RATIO
The fund's current annualized expense ratio of 1.50% 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.
6
<PAGE>
FUND HIGHLIGHTS
ALL DATA AS OF MAY 31, 2000
PORTFOLIO ALLOCATION OF LONG/SHORT HOLDINGS
(AS A PERCENTAGE OF TOTAL LONG OR SHORT INVESTMENTS)
[CHART]
LONG
FINANCE 25.2%
CONSUMER GOODS & SERVICES 18.1%
UTILITIES 13.1%
ENERGY 10.0%
TECHNOLOGY 9.7%
HEALTHCARE 6.8%
SHORT-TERM 6.1%
BASIC INDUSTRIES 5.6%
INDUSTRIAL PRODUCTS & SERVICES 3.2%
TRANSPORTATION 2.2%
[CHART]
SHORT
FINANCE 25.2%
CONSUMER GOODS & SERVICES 16.3%
ENERGY 13.7%
TECHNOLOGY 11.2%
UTILITIES 10.4%
HEALTHCARE 8.1%
BASIC INDUSTRIES 6.7%
INDUSTRIAL PRODUCTS & SERVICES 5.0%
TRANSPORTATION 3.4%
LARGEST LONG/LARGEST SHORT EQUITY HOLDINGS (AS A PERCENTAGE OF TOTAL LONG OR
SHORT INVESTMENTS)
<TABLE>
<CAPTION>
LONG Short
---------------------------------------------------- ----------------------------------------------------
<S> <C> <C> <C>
CHEVRON CORP. (ENERGY) 2.1% CHUBB CORP. (FINANCE) 2.9%
AMBAC FINANCIAL GROUP, INC. (FINANCE) 2.0% OCCIDENTAL PETROLEUM CORP. (ENERGY) 2.2%
EXXON MOBIL CORP. (ENERGY) 1.8% BURLINGTON RESOURCES, INC. (ENERGY) 2.0%
COMCAST CORP., CLASS A 1.8% E.I. DU PONT DE NEMOURS & CO. 1.9%
(CONSUMER GOODS & SERVICES) (BASIC INDUSTRIES)
ALLSTATE CORP. (FINANCE) 1.7% WALT DISNEY CO. 1.9%
SEAGRAM COMPANY LTD. 1.6% (CONSUMER GOODS & SERVICES)
(CONSUMER GOODS & SERVICES) ANHEUSER-BUSCH COMPANIES, INC. 1.8%
MBIA, INC. (FINANCE) 1.5% (CONSUMER GOODS & SERVICES)
PHILIP MORRIS COMPANIES, INC. 1.4% PHILLIPS PETROLEUM CO. (ENERGY) 1.8%
(CONSUMER GOODS & SERVICES) PFIZER, INC. (HEALTHCARE) 1.6%
ROYAL DUTCH PETROLEUM CO. 1.3% US WEST, INC. (TECHNOLOGY) 1.6%
(NY SHARES) (ENERGY) PROGRESSIVE CORP. (FINANCE) 1.6%
ELI LILLY & CO. (HEALTHCARE) 1.3%
</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.
This fund has significant short positions that could magnify the potential
for loss.
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 MARKET NEUTRAL FUND
SCHEDULE OF INVESTMENTS
MAY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ------------ ------------
<S> <C> <C>
LONG POSITIONS (97.1%)(E)
COMMON STOCKS (91.1%)
BASIC INDUSTRIES (5.5%)
CHEMICALS (2.5%)
Air Products and Chemicals, Inc.................. 2,300 $ 79,637
PPG Industries, Inc.............................. 1,500 74,344
Praxair, Inc..................................... 1,200 50,400
Rohm & Haas Co................................... 3,100 105,787
-----------
310,168
-----------
FOREST PRODUCTS & PAPER (1.4%)
Fort James Corp.................................. 600 13,575
International Paper Co........................... 1,500 52,219
Temple-Inland, Inc............................... 2,100 104,344
-----------
170,138
-----------
METALS & MINING (1.4%)
Alcoa, Inc....................................... 1,700 99,344
Allegheny Technologies, Inc...................... 3,300 74,456
-----------
173,800
-----------
PACKAGING & CONTAINERS (0.2%)
Smurfit-Stone Container Corp.+................... 2,100 29,794
-----------
TOTAL BASIC INDUSTRIES......................... 683,900
-----------
CONSUMER GOODS & SERVICES (17.5%)
APPARELS & TEXTILES (0.4%)
Jones Apparel Group, Inc.+....................... 1,900 50,944
-----------
AUTOMOTIVE (1.7%)
Dana Corp........................................ 1,500 38,719
Delphi Automotive Systems Corp................... 3,309 59,769
Ford Motor Co.................................... 1,200 58,275
Goodyear Tire and Rubber Co...................... 1,300 32,337
Lear Corp.+...................................... 1,000 23,437
-----------
212,537
-----------
BROADCASTING & PUBLISHING (2.8%)
Comcast Corp., Class A+.......................... 5,700 215,887
Gannett Co., Inc................................. 1,200 77,700
Knight-Ridder, Inc............................... 1,200 63,600
-----------
357,187
-----------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ------------ ------------
<S> <C> <C>
ENTERTAINMENT, LEISURE & MEDIA (2.9%)
America Online, Inc.+............................ 800 $ 42,400
Fox Entertainment Group, Inc., Class A+.......... 2,100 54,862
Seagram Company Ltd.(i).......................... 4,000 190,750
Time Warner, Inc................................. 900 71,044
-----------
359,056
-----------
FOOD, BEVERAGES & TOBACCO (3.6%)
Bestfoods........................................ 1,300 83,850
General Mills, Inc............................... 1,400 55,562
H.J. Heinz Co.................................... 1,500 58,781
Philip Morris Companies, Inc..................... 6,400 167,200
Quaker Oats Co................................... 1,200 88,275
-----------
453,668
-----------
HOUSEHOLD PRODUCTS (1.6%)
Clorox Co........................................ 1,700 67,362
Procter & Gamble Co.............................. 2,000 133,000
-----------
200,362
-----------
PERSONAL CARE (0.5%)
Estee Lauder Companies, Inc., Class A............ 500 22,406
Gillette Co...................................... 1,200 40,050
-----------
62,456
-----------
RESTAURANTS & HOTELS (0.6%)
Mariott International Inc., Class A.............. 2,100 76,125
-----------
RETAIL (3.4%)
Abercrombie & Fitch Co., Class A+................ 700 6,869
Federated Department Stores, Inc.+............... 1,400 53,900
Gap, Inc......................................... 1,200 42,075
Hasbro, Inc...................................... 100 1,637
Kroger Co.+...................................... 200 3,975
Limited, Inc..................................... 3,200 77,200
Mattel, Inc...................................... 100 1,356
May Department Stores Co......................... 1,400 42,087
Sears, Roebuck & Co.............................. 200 7,387
Target Corp...................................... 1,300 81,494
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
10
<PAGE>
J.P. MORGAN INSTITUTIONAL MARKET NEUTRAL FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ------------ ------------
<S> <C> <C>
RETAIL (CONTINUED)
TJX Companies, Inc............................... 4,100 $ 88,662
Wal-Mart Stores, Inc............................. 400 23,050
-----------
429,692
-----------
TOTAL CONSUMER GOODS & SERVICES................ 2,202,027
-----------
ENERGY (9.6%)
GAS EXPLORATION (0.9%)
Union Pacific Resources Group, Inc............... 4,900 116,069
-----------
OIL-PRODUCTION (6.4%)
Chevron Corp..................................... 2,800 258,825
Devon Energy Corp................................ 100 5,981
Exxon Mobil Corp................................. 2,600 216,612
Royal Dutch Petroleum Co. - NY Shares(i)......... 2,600 162,337
Texaco, Inc...................................... 2,600 149,337
Tosco Corp....................................... 200 6,125
Valero Energy Corp............................... 300 8,775
-----------
807,992
-----------
OIL-SERVICES (2.3%)
Apache Corp...................................... 1,700 103,487
Baker Hughes, Inc................................ 1,000 36,250
Global Marine, Inc. +............................ 5,200 147,225
-----------
286,962
-----------
TOTAL ENERGY................................... 1,211,023
-----------
FINANCE (24.4%)
BANKING (7.5%)
Astoria Financial Corp........................... 700 19,075
Banknorth Group, Inc............................. 3,300 45,994
Charter One Financial, Inc....................... 1,800 40,950
Dime Bancorp, Inc................................ 3,500 63,875
First Tennessee National Corp.................... 1,400 28,700
First Union Corp................................. 4,300 151,306
GreenPoint Financial Corp........................ 3,100 64,712
Hibernia Corp., Class A.......................... 3,300 42,487
KeyCorp.......................................... 3,500 73,500
Marshall & Ilsley Corp........................... 1,300 63,050
North Fork Bancorporation, Inc................... 1,700 28,156
PNC Financial Services Group..................... 1,200 60,450
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ------------ ------------
<S> <C> <C>
BANKING (CONTINUED)
Provident Financial Group, Inc................... 1,200 $ 33,450
Regions Financial Corp........................... 100 2,262
Southtrust Corp.................................. 2,400 64,950
Summit Bancorp................................... 1,400 40,162
U.S. Bancorp..................................... 3,800 98,800
Washington Mutual, Inc........................... 500 14,375
-----------
936,254
-----------
FINANCIAL SERVICES (6.9%)
A.G. Edwards, Inc................................ 800 27,950
AXA Financial, Inc............................... 3,200 124,600
Bear Stearns Companies, Inc...................... 200 7,875
Charles Schwab Corp.............................. 1,050 30,187
CIT Group, Inc., Class A......................... 4,400 80,575
E*TRADE Group, Inc.+............................. 3,800 59,137
FINOVA Group, Inc................................ 200 2,387
Franklin Resources, Inc.......................... 700 21,000
Freddie Mac...................................... 1,000 44,500
Goldman Sachs Group, Inc......................... 1,500 110,344
John Hancock Financial Services, Inc.+........... 3,200 71,400
Lehman Brothers Holdings, Inc.................... 800 61,750
Merrill Lynch & Co., Inc......................... 1,400 138,075
Paine Webber Group, Inc.......................... 1,500 67,406
TD Waterhouse Group, Inc. +...................... 1,400 21,613
-----------
868,799
-----------
INSURANCE (8.6%)
Allstate Corp.................................... 7,700 204,050
Ambac Financial Group, Inc....................... 4,900 246,838
Aon Corp......................................... 2,700 94,838
CIGNA Corp....................................... 300 26,644
Hartford Financial Services Group, Inc........... 1,300 76,863
Lincoln National Corp............................ 800 31,000
MBIA, Inc........................................ 3,200 185,000
MetLife, Inc. +.................................. 6,800 139,400
Torchmark Corp................................... 2,600 70,688
-----------
1,075,321
-----------
REAL ESTATE INVESTMENT TRUSTS (1.4%)
Crescent Real Estate Equities Co................. 2,100 42,919
Equity Office Properties Trust................... 1,300 34,531
Equity Residential Properties Trust.............. 200 8,925
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
11
<PAGE>
J.P. MORGAN INSTITUTIONAL MARKET NEUTRAL FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ------------ ------------
<S> <C> <C>
REAL ESTATE INVESTMENT TRUSTS (CONTINUED)
ProLogis Trust................................... 1,500 $ 31,031
Public Storage, Inc.............................. 1,400 31,238
Vornado Realty Trust............................. 900 31,444
-----------
180,088
-----------
TOTAL FINANCE.................................. 3,060,462
-----------
HEALTH CARE (6.6%)
BIOTECHNOLOGY (0.6%)
Genzyme Corp..................................... 600 34,088
Human Genome Sciences, Inc. +.................... 400 35,100
Incyte Pharmaceuticals, Inc.+.................... 100 5,275
-----------
74,463
-----------
HEALTH SERVICES (0.4%)
Aetna, Inc....................................... 300 20,025
Tenet Healthcare Corp.+.......................... 600 15,375
Wellpoint Health Networks, Inc.+................. 200 14,525
-----------
49,925
-----------
MEDICAL SUPPLIES (0.2%)
Becton, Dickinson & Co........................... 300 8,756
St. Jude Medical, Inc............................ 400 14,375
-----------
23,131
-----------
PHARMACEUTICALS (5.4%)
Abbott Laboratories.............................. 1,000 40,688
ALZA Corp.+...................................... 2,200 111,788
American Home Products Corp...................... 1,200 64,650
Bristol-Myers Squibb Co.......................... 2,100 115,631
Eli Lilly & Co................................... 2,100 159,863
Pharmacia Corp................................... 2,400 124,650
Schering-Plough Corp............................. 1,300 62,888
-----------
680,158
-----------
TOTAL HEALTH CARE.............................. 827,677
-----------
INDUSTRIAL PRODUCTS & SERVICES (3.1%)
AEROSPACE (0.1%)
B.F. Goodrich Co................................. 300 10,650
-----------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ------------ ------------
<S> <C> <C>
CAPITAL GOODS (0.8%)
Eaton Corp....................................... 1,100 $ 79,819
PACCAR, Inc...................................... 400 16,750
-----------
96,569
-----------
COMMERCIAL SERVICES (0.5%)
Cendant Corp.+................................... 4,900 64,925
-----------
DIVERSIFIED MANUFACTURING (1.2%)
Cooper Industries, Inc........................... 3,000 100,500
Eastman Kodak Co................................. 100 5,975
Honeywell International, Inc..................... 500 27,344
Tyco International Ltd. +(i)..................... 400 18,825
-----------
152,644
-----------
ELECTRICAL EQUIPMENT (0.2%)
Emerson Electric Co.............................. 400 23,600
-----------
MACHINERY (0.3%)
Caterpillar, Inc................................. 100 3,825
Ingersoll-Rand Co................................ 800 36,450
-----------
40,275
-----------
TOTAL INDUSTRIAL PRODUCTS & SERVICES........... 388,663
-----------
TECHNOLOGY (9.4%)
COMPUTER PERIPHERALS (0.3%)
Quantum Corp.- DLT & Storage Systems+............ 600 6,225
Seagate Technology, Inc.+........................ 600 34,800
-----------
41,025
-----------
COMPUTER SOFTWARE (3.0%)
BMC Software, Inc.+.............................. 300 13,200
Citrix Systems, Inc.+............................ 800 42,100
Computer Associates International, Inc........... 2,400 123,600
Microsoft Corp.+................................. 1,300 81,331
Siebel Systems, Inc.+............................ 400 46,800
Symantec Corp.+.................................. 1,000 65,750
-----------
372,781
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
12
<PAGE>
J.P. MORGAN INSTITUTIONAL MARKET NEUTRAL FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ------------ ------------
<S> <C> <C>
COMPUTER SYSTEMS (0.8%)
Apple Computer, Inc.+............................ 300 $ 25,200
Sun Microsystems, Inc.+.......................... 1,000 76,625
-----------
101,825
-----------
ELECTRONICS (0.9%)
Cisco Systems, Inc.+............................. 1,300 74,019
Rockwell International Corp...................... 800 32,800
-----------
106,819
-----------
INFORMATION PROCESSING (0.1%)
DoubleClick, Inc.+............................... 400 16,900
-----------
SEMICONDUCTORS (1.9%)
Advanced Micro Devices, Inc.+.................... 100 8,144
Intel Corp....................................... 800 99,750
Lattice Semiconductor Corp.+..................... 400 23,725
National Semiconductor Corp.+.................... 600 32,250
Texas Instruments, Inc........................... 1,000 72,250
-----------
236,119
-----------
TELECOMMUNICATION SERVICES (1.5%)
Allegiance Telecom, Inc.+........................ 500 26,438
Global Crossing Ltd.+(i)......................... 2,700 67,669
WorldCom, Inc.+.................................. 2,500 94,063
-----------
188,170
-----------
TELECOMMUNICATIONS-EQUIPMENT (0.9%)
Motorola, Inc.+.................................. 300 28,125
Nortel Networks Corp.+........................... 800 43,450
Tellabs, Inc.+................................... 600 38,963
-----------
110,538
-----------
TOTAL TECHNOLOGY............................... 1,174,177
-----------
TRANSPORTATION (2.2%)
AIRLINES (0.7%)
Northwest Airlines Corp.+........................ 700 19,906
Southwest Airlines Co............................ 3,300 63,319
-----------
83,225
-----------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ------------ ------------
<S> <C> <C>
RAILROADS (1.5%)
Burlington Northern Santa Fe Corp................ 2,200 $ 51,975
Union Pacific Corp............................... 3,200 135,400
-----------
187,375
-----------
TOTAL TRANSPORTATION........................... 270,600
-----------
UTILITIES (12.8%)
ELECTRIC (9.1%)
Carolina Power & Light Co........................ 3,900 134,063
Central & South West Corp........................ 900 18,731
Cinergy Corp..................................... 2,100 55,913
CMS Energy Corp.................................. 2,200 50,050
DTE Energy Co.................................... 4,100 141,706
Edison International............................. 2,700 57,713
Entergy Corp..................................... 1,200 34,800
FPL Group, Inc................................... 500 24,750
GPU, Inc......................................... 2,400 67,800
NiSource, Inc.................................... 300 5,419
PG&E Corp........................................ 4,100 106,344
Pinnacle West Capital Corp....................... 3,600 128,700
PPL Corp......................................... 5,400 127,575
TXU Corp......................................... 1,900 67,925
Wisconsin Energy Corp............................ 5,700 120,413
-----------
1,141,902
-----------
GAS-PIPELINES (1.8%)
Columbia Energy Group............................ 2,000 129,375
Dynegy, Inc., Class A............................ 1,200 92,550
-----------
221,925
-----------
PIPELINES (0.4%)
Williams Companies, Inc.......................... 1,200 49,875
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
13
<PAGE>
J.P. MORGAN INSTITUTIONAL MARKET NEUTRAL FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ------------ ------------
<S> <C> <C>
TELEPHONE (1.5%)
ALLTEL Corp...................................... 1,100 $ 71,981
GTE Corp......................................... 800 50,600
SBC Communications, Inc.......................... 1,400 61,163
-----------
183,744
-----------
TOTAL UTILITIES................................ 1,597,446
-----------
TOTAL COMMON STOCKS--LONG POSITIONS (COST
$11,355,372).................................. 11,415,975
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
-------------------
<S> <C> <C>
SHORT-TERM INVESTMENTS (6.0%)
OTHER INVESTMENT COMPANIES (6.0%)
J.P. Morgan Institutional Prime Money Market Fund
(cost $746,384)*............................... $ 746,384 746,384
-----------
TOTAL INVESTMENTS--LONG POSITIONS (COST
$12,101,756).................................. 12,162,359
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES
------------
<S> <C> <C>
COMMON STOCK - SHORT POSITIONS (-92.1%)
BASIC INDUSTRIES (-6.2%)
CHEMICALS (-4.0%)
Dow Chemical......................... (800) (85,650)
E.I. du Pont de Nemours & Co......... (4,500) (220,500)
Great Lakes Chemical Corp............ (3,900) (108,225)
Lyondell Chemical Co................. (1,300) (21,694)
Union Carbide Corp................... (1,200) (65,625)
-----------
(501,694)
-----------
FOREST PRODUCTS & PAPER (-1.2%)
Boise Cascade Corp................... (1,300) (37,862)
Mead Corp............................ (1,800) (55,462)
Weyerhaeuser Co...................... (1,100) (54,587)
-----------
(147,911)
-----------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------- ------------ -----------
<S> <C> <C>
METALS & MINING (-1.0%)
Alcan Aluminum Inc................... (1,900) $ (62,344)
Nucor Corp........................... (1,300) (50,537)
USX-U.S. Steel Group................. (500) (11,281)
-----------
(124,162)
-----------
TOTAL BASIC INDUSTRIES............. (773,767)
-----------
CONSUMER GOODS & SERVICES (-15.0%)
APPARELS & TEXTILES (-0.2%)
Nike, Inc., Class B.................. (700) (30,012)
-----------
BROADCASTING & PUBLISHING (-2.2%)
Cox Communications, Inc., Class A.... (3,200) (141,200)
New York Times Co., Class A.......... (900) (34,537)
Washington Post, Class B............. (200) (100,100)
-----------
(275,837)
-----------
ENTERTAINMENT, LEISURE & MEDIA (-3.3%)
Tribune Co........................... (1,800) (69,300)
Viacom, Inc., Class B................ (2,000) (124,000)
Walt Disney Co....................... (5,100) (215,156)
-----------
(408,456)
-----------
FOOD, BEVERAGES & TOBACCO (-5.2%)
Anheuser-Busch Companies, Inc........ (2,700) (209,250)
Campbell Soup Co..................... (2,200) (68,200)
Coca - Cola Co....................... (200) (10,675)
Kellogg Co........................... (1,800) (54,675)
PepsiCo, Inc......................... (4,200) (170,887)
Ralston - Ralston Purina Group....... (3,500) (64,969)
Unilever NV - NY Shares(i)........... (1,400) (71,137)
-----------
(649,793)
-----------
HOUSEHOLD PRODUCTS (-0.6%)
Kimberly-Clark Corp.................. (1,300) (78,650)
-----------
REAL ESTATE INVESTMENT TRUSTS (-0.5%)
Albertsons Inc....................... (1,900) (69,587)
-----------
RESTAURANTS & HOTELS (-0.3%)
Hilton Hotels Corp................... (3,900) (33,150)
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
14
<PAGE>
J.P. MORGAN INSTITUTIONAL MARKET NEUTRAL FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------- ------------ -----------
<S> <C> <C>
RETAIL (-2.7%)
Circuit City Stores - Circuit City
Group.............................. (300) $ (14,944)
CVS Corp............................. (1,500) (65,250)
Home Depot, Inc...................... (600) (29,287)
J.C. Penny Co., Inc.................. (3,300) (59,812)
Kmart Corp........................... (4,700) (39,950)
Nordstrom, Inc....................... (2,600) (65,325)
Walgreen Co.......................... (2,200) (62,425)
-----------
(336,993)
-----------
TOTAL CONSUMER GOODS & SERVICES.... (1,882,478)
-----------
ENERGY (-12.7%)
GAS EXPLORATION (-0.5%)
Constellation Energy Group........... (1,800) (61,762)
-----------
OIL-PRODUCTION (-6.0%)
Allegheny Energy, Inc................ (100) (3,094)
Burlington Resources, Inc............ (5,100) (233,325)
Conoco, Inc., Class A................ (1,200) (32,100)
ENSCO International, Inc............. (800) (27,950)
Occidental Petroleum Corp............ (10,700) (253,456)
Phillips Petroleum Co................ (3,600) (206,100)
-----------
(756,025)
-----------
OIL-SERVICES (-5.2%)
Amerada Hess Corp.................... (2,300) (152,662)
Halliburton Co....................... (1,600) (81,600)
R & B Falcon Corp.................... (1,300) (30,469)
Schlumberger Ltd..................... (2,100) (154,481)
Smith International.................. (700) (55,344)
TECO Energy, Inc..................... (3,300) (70,744)
Unocal Corp.......................... (2,600) (99,937)
-----------
(645,237)
-----------
UTILITIES (-1.0%)
Public Service Enterprise Group,
Inc................................ (3,000) (111,750)
-----------
TOTAL ENERGY....................... (1,574,774)
-----------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------- ------------ -----------
<S> <C> <C>
FINANCE (-23.1%)
BANKING (-11.0%)
AmSouth Bancorporation............... (3,500) $ (63,219)
Bank of America Corp................. (1,200) (66,675)
Bank of New York Co., Inc............ (2,600) (122,037)
BB&T Corp............................ (2,700) (79,144)
Chase Manhattan Corp................. (600) (44,812)
Compass Bancshares, Inc.............. (300) (6,075)
Fifth Third Bancorp.................. (2,500) (170,000)
FleetBoston Financial Corp........... (100) (3,781)
Huntington Bancshares................ (4,300) (83,312)
National City Corp................... (4,700) (94,000)
Northern Trust Corp.................. (2,000) (131,625)
Old Kent Financial Corp.............. (2,000) (66,500)
State Street Corp.................... (600) (66,900)
Suntrust Banks, Inc.................. (800) (47,800)
Union Planters Corp.................. (200) (6,250)
Wachovia Corp........................ (2,200) (152,075)
Wells Fargo & Co..................... (2,000) (90,500)
Zions Bancorporation................. (1,700) (79,262)
-----------
(1,373,967)
-----------
FINANCIAL SERVICES (-1.5%)
American Express Co.................. (2,100) (113,006)
Household International, Inc......... (1,600) (75,200)
Morgan Stanley Dean Witter & Co...... (100) (7,194)
-----------
(195,400)
-----------
INSURANCE (-9.2%)
American General Corp................ (2,400) (153,750)
American International Group, Inc.... (300) (33,769)
Chubb Corp........................... (4,800) (336,000)
Cincinnati Financial Corp............ (3,900) (156,548)
Jefferson-Pilot Corp................. (2,400) (164,700)
Progressive Corp..................... (1,900) (178,362)
Safeco Corp.......................... (2,300) (56,494)
UnumProvident Corp................... (3,300) (74,869)
-----------
(1,154,492)
-----------
REAL ESTATE INVESTMENT TRUSTS (-1.4%)
AMB Property Corp.................... (100) (2,250)
Archstone Communities Trust.......... (1,500) (33,656)
AvalonBay Communities Inc............ (900) (35,775)
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
15
<PAGE>
J.P. MORGAN INSTITUTIONAL MARKET NEUTRAL FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------- ------------ -----------
<S> <C> <C>
REAL ESTATE INVESTMENT TRUSTS (CONTINUED)
Boston Properties, Inc............... (2,100) $ (73,369)
Duke Realty Investments, Inc......... (1,600) (34,500)
-----------
(179,550)
-----------
TOTAL FINANCE...................... (2,903,409)
-----------
HEALTH CARE (-7.5%)
BIOTECHNOLOGY (-0.8%)
Immunex Corp......................... (1,700) (43,987)
MedImmune, Inc....................... (400) (62,150)
-----------
(106,137)
-----------
HEALTH SERVICES (-0.2%)
Unitedhealth Group, Inc.............. (300) (22,369)
-----------
HOSPITAL MANAGEMENT SERVICES (-0.1%)
Healthcare Corporation............... (400) (10,800)
-----------
MEDICAL SUPPLIES (-2.0%)
Baxter International, Inc............ (300) (19,950)
Chiron Corp.......................... (2,100) (79,669)
Guidant Corporation.................. (200) (10,125)
Medtronic, Inc....................... (300) (15,487)
St. Paul Companies, Inc.............. (3,100) (116,250)
-----------
(241,481)
-----------
PHARMACEUTICALS (-4.4%)
Biogen, Inc.......................... (1,100) (59,950)
IDEC Pharmaceuticals Corp............ (400) (25,525)
Johnson & Johnson, Inc............... (1,400) (125,300)
Merck & Co., Inc..................... (1,400) (104,475)
Pfizer, Inc.......................... (4,100) (182,706)
Watson Pharmaceuticals, Inc.......... (1,300) (57,363)
-----------
(555,319)
-----------
TOTAL HEALTH CARE.................. (936,106)
-----------
INDUSTRIAL PRODUCTS & SERVICES (-4.6%)
COMMERCIAL SERVICES (-1.0%)
Interpublic Group of Companies,
Inc................................ (1,400) (60,113)
Omnicom Group, Inc................... (800) (67,150)
-----------
(127,263)
-----------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------- ------------ -----------
<S> <C> <C>
DIVERSIFIED MANUFACTURING (-1.8%)
Illinois Tool Works, Inc............. (1,800) $ (104,513)
Johnson, Inc......................... (300) (17,081)
Minnesota Mining & Manufacturing
Co................................. (300) (25,725)
Parker Hannifin Corp................. (1,500) (62,531)
Xerox Corp........................... (600) (16,275)
-----------
(226,125)
-----------
ELECTRIC (-0.0%)
Dominion Resources, Inc.............. (100) (4,575)
-----------
ELECTRICAL EQUIPMENT (-0.2%)
W.W. Grainger, Inc................... (500) (19,969)
-----------
MACHINERY (-1.6%)
Deere & Co........................... (1,700) (70,656)
Dover Corp........................... (2,800) (130,200)
-----------
(200,856)
-----------
TOTAL INDUSTRIAL PRODUCTS &
SERVICES.......................... (578,788)
-----------
TECHNOLOGY (-10.2%)
COMMERCIAL SERVICES (-0.1%)
Freemarkets, Inc..................... (300) (12,994)
-----------
COMPUTER SOFTWARE (-2.1%)
Adobe Systems, Inc................... (100) (11,256)
Ariba, Inc........................... (500) (26,063)
Commerce One, Inc.................... (600) (21,469)
Electronic Arts...................... (500) (31,938)
Intuit, Inc.......................... (1,000) (36,250)
Networks Associates, Inc............. (1,400) (30,625)
Novell, Inc.......................... (1,100) (9,144)
Oracle Corp.......................... (500) (35,938)
Parametric Technology Corp........... (2,200) (23,375)
PeopleSoft, Inc...................... (3,200) (44,200)
-----------
(270,258)
-----------
COMPUTER SYSTEMS (-2.4%)
Compaq Computer Corp................. (1,400) (36,750)
Dell Computer Corp................... (1,300) (56,063)
Gateway, Inc......................... (800) (39,600)
Hewlett Packard Co................... (200) (24,025)
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
16
<PAGE>
J.P. MORGAN INSTITUTIONAL MARKET NEUTRAL FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------- ------------ -----------
<S> <C> <C>
COMPUTER SYSTEMS (CONTINUED)
International Business Machines
Corp............................... (1,200) $ (128,775)
United Technologies Corp............. (300) (18,131)
-----------
(303,344)
-----------
ELECTRONICS (-0.7%)
Cabletron System, Inc................ (1,300) (29,819)
Xilinx, Inc.......................... (800) (60,900)
-----------
(90,719)
-----------
INFORMATION PROCESSING (-2.4%)
Automatic Data Processing............ (1,900) (104,381)
Electronic Data Systems Corp......... (1,100) (70,744)
First Data Corp...................... (1,900) (106,519)
Lexmark International Group, Class
A.................................. (100) (6,975)
Network Appliance, Inc............... (300) (19,369)
-----------
(307,988)
-----------
SEMICONDUCTORS (-0.1%)
Micron Technology, Inc............... (200) (13,988)
-----------
TELECOMMUNICATION SERVICES (-1.5%)
Sprint Corp. (PCS Group)............. (100) (5,550)
US West, Inc......................... (2,500) (180,000)
-----------
(185,550)
-----------
TELECOMMUNICATIONS-EQUIPMENT (0.9%)
Lucent Technologies, Inc............. (1,700) (97,538)
QUALCOMM, Inc........................ (200) (13,275)
-----------
(110,813)
-----------
TOTAL TECHNOLOGY................... (1,295,654)
-----------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------- ------------ -----------
<S> <C> <C>
TRANSPORTATION (-3.1%)
AIRLINES (-2.5%)
Continental Airlines, Inc............ (1,600) $ (70,100)
Delta Air Lines, Inc................. (1,500) (77,156)
UAL Corp............................. (1,900) (97,850)
US Airways Group..................... (1,700) (72,250)
-----------
(317,356)
-----------
TRUCK & FREIGHT CARRIERS (-0.6%)
FedEx Corp........................... (800) (28,300)
United Parcel Service, Inc., Class
B.................................. (800) (47,900)
-----------
(76,200)
-----------
TOTAL TRANSPORTATION............... (393,556)
-----------
UTILITIES (-9.7%)
ELECTRIC (-7.8%)
Ameren Corp.......................... (2,800) (102,725)
Calpine Corp......................... (1,000) (105,938)
Consolidated Edison, Inc............. (3,500) (114,188)
Duke Energy Co....................... (2,400) (139,800)
Northern States Power Co............. (1,100) (24,338)
PECO Energy Co....................... (3,300) (144,994)
Potomac Electric Power Co............ (5,400) (140,063)
Reliant Energy, Inc.................. (2,100) (59,850)
Southern Co.......................... (5,400) (140,063)
-----------
(971,959)
-----------
TELEPHONE (-1.6%)
BellSouth Corp....................... (3,700) (172,744)
Level 3 Communications, Inc.+........ (300) (22,894)
-----------
(195,638)
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
17
<PAGE>
J.P. MORGAN INSTITUTIONAL MARKET NEUTRAL FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------- ------------ -----------
<S> <C> <C>
WATER (-0.3%)
American Water Works, Inc............ (1,500) $ (35,063)
-----------
TOTAL UTILITIES.................... (1,202,660)
-----------
TOTAL COMMON STOCK -
SHORT POSITIONS
(PROCEEDS $11,132,097)............ (11,541,192)
-----------
TOTAL INVESTMENTS (COST $969,660) (5.0%)........... 621,167
OTHER ASSETS IN EXCESS OF
LIABILITIES (95.0%).............................. 11,907,371
-----------
NET ASSETS (100.0%)................................ $12,528,538
===========
</TABLE>
------------------------------
Note: Based on the cost of investments of $12,179,615 for federal income tax
purposes at May 31, 2000, the aggregate gross unrealized appreciation and
depreciation was $863,850 and $881,106, respectively, resulting in net
unrealized depreciation of $17,256.
+ Non-income producing security.
(e) Securities are pledged with brokers as collateral for short sales.
(i) Foreign security.
*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.
18
<PAGE>
J.P. MORGAN INSTITUTIONAL MARKET NEUTRAL FUND
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $12,101,756 ) $12,162,359
Deposit with Brokers for Securities Sold Short 11,713,473
Cash 153,342
Receivable for Investments Sold 150,105
Dividends and Interest Receivable 78,134
Receivable for Expense Reimbursements 26,167
-----------
Total Assets 24,283,580
-----------
LIABILITIES
Securities Sold Short at Value (Proceeds
$11,132,097) 11,541,192
Payable for Investments Purchased 149,593
Dividends Payable on Securities Sold Short 18,388
Advisory Fee Payable 14,529
Custody Fee Payable 6,738
Shareholder Servicing Fee Payable 969
Administrative Services Fee Payable 472
Administration Fee Payable 97
Fund Services Fee Payable 9
Accrued Expenses 23,055
-----------
Total Liabilities 11,755,042
-----------
NET ASSETS $12,528,538
===========
INSTITUTIONAL SHARES
Applicable to 893,786 shares outstanding
(par value $0.001, unlimited shares authorized) $12,528,538
===========
Net Asset Value, Offering and Redemption Price
per Share $14.02
-----
-----
ANALYSIS OF NET ASSETS
Paid-in capital $13,201,507
Undistributed Net Investment Income 187,255
Accumulated Net Realized Loss on Investments (511,732)
Net Unrealized Depreciation of Investments (348,492)
-----------
Net Assets $12,528,538
===========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
J.P. MORGAN INSTITUTIONAL MARKET NEUTRAL FUND
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED MAY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividend Income $ 94,715
Interest Income 577,155
---------
Investment Income 671,870
EXPENSES
Advisory Fee $153,471
Custodian Fees and Expenses 62,260
Dividends on Securities Sold Short 61,523
Professional Fees and Expenses 40,126
Transfer Agent Fee 16,779
Printing Expenses 13,951
Shareholder Servicing Fee 10,274
Administrative Services Fee 5,117
Administrative Fee 192
Trustees' Fees and Expenses 186
Fund Services Fee 176
Miscellaneous 12,897
--------
Total Expenses 376,952
Less: Reimbursement of Expenses (161,240)
--------
NET EXPENSES 215,712
---------
NET INVESTMENT INCOME 456,158
NET REALIZED GAIN (LOSS) ON
Investment Transactions 58,410
Securities Sold Short (396,461)
--------
Net Realized Loss (338,051)
NET CHANGE IN UNREALIZED DEPRECIATION OF
Investments (226,216)
Securities Sold Short (6,042)
--------
Net Change in Unrealized Depreciation (232,258)
---------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS $(114,151)
=========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
J.P. MORGAN INSTITUTIONAL MARKET NEUTRAL 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 $ 456,158 $ 88,797
Net Realized Gain (Loss) on Investments and
Securities Sold Short (338,051) 164,526
Net Change in Unrealized Depreciation of
Investments and Securities Sold Short (232,258) (116,234)
------------- ------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations (114,151) 137,089
------------- ------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (324,888) (26,682)
Net Realized Gains (164,526) --
In Excess of Net Realized Gains (179,811) --
------------- ------------------
Total Distributions to Shareholders (669,225) (26,682)
------------- ------------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Proceeds from Shares of Beneficial Interest Sold 2,500,000 10,005,600
Reinvestment of Dividends and Distributions 669,225 26,682
------------- ------------------
Net Increase from Shareholder Transactions 3,169,225 10,032,282
------------- ------------------
Total Increase in Net Assets 2,385,849 10,142,689
NET ASSETS
Beginning of Period 10,142,689 --
------------- ------------------
End of Period (including undistributed net
investment income of $187,255 and $62,115,
respectively) $ 12,528,538 $ 10,142,689
============= ==================
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
J.P. MORGAN INSTITUTIONAL MARKET NEUTRAL FUND
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
Selected data for a share 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 PER SHARE, BEGINNING OF PERIOD $ 15.16 $ 15.00
--------------------------- ------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.60 0.13
Net Realized and Unrealized Gain (Loss) on
Investments (0.75) 0.07
--------------------------- ------------------
Total from Investment Operations (0.15) 0.20
--------------------------- ------------------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (0.48) (0.04)
Net Realized Gains (0.24) --
In Excess of Net Realized Gains (0.27) --
--------------------------- ------------------
Total Distributions to Shareholders (0.99) (0.04)
--------------------------- ------------------
NET ASSET VALUE PER SHARE, END PERIOD $ 14.02 $ 15.16
=========================== ==================
RATIOS AND SUPPLEMENTAL DATA
Total Return (0.99)% 1.34%(b)
Net Assets, End of Period (in thousands) $ 12,529 $ 10,143
Ratios to Average Net Assets
Net Expenses (Excluding Dividend Expense) 1.50% 2.00%(a)
Net Investment Income 4.46% 2.14%(a)
Expenses Without Reimbursement (Including
Dividend Expense) 3.69% 5.66%(a)
Portfolio Turnover 165% 195%
</TABLE>
------------------------
(a) Annualized.
(b) Not Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
J.P. MORGAN INSTITUTIONAL MARKET NEUTRAL FUND
NOTES TO FINANCIAL STATEMENTS
MAY 31, 2000
--------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
J.P. Morgan Institutional Market Neutral Fund (the "fund"), registered as
J.P. Morgan Market Neutral 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 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.
Securities sold short are valued at the readily available ask price.
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
23
<PAGE>
J.P. MORGAN INSTITUTIONAL MARKET NEUTRAL 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) The fund engages in short sales (selling securities it does not own) as
part of its normal investment activities. These short sales are
collateralized via cash deposits and securities made with the applicable
counterparty broker. The collateral required is determined daily by
reference to the market value of the short positions. Such collateral for
the fund is held by one broker. Dividend expense on short sales is treated
as an expense on the Statement of Operations. Liabilities for securities
sold short are reported at market value in the financial statements. Such
liabilities are subject to off balance sheet risk to the extent of any
future increases in market value of the securities sold short. The
ultimate liability for securities sold short could exceed the liabilities
recorded in the Statement of Assets and Liabilities. Liabilities for
securities sold short are closed out by purchasing the applicable
securities for the delivery to the counterparty broker.
e) 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.
f) 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.
g) 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.
h) 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, 2000 was to decrease undistributed net
investment income by $6,130 and decrease accumulated net realized loss on
investment by $6,130. Paid-in capital, net investment income, net realized
gains and net assets were not affected by this change. This adjustment is
primarily attributable to a dividend reclassification.
i) For federal income tax purposes, the fund incurred approximately $436,482
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.
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
24
<PAGE>
J.P. MORGAN INSTITUTIONAL MARKET NEUTRAL FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 2000
--------------------------------------------------------------------------------
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 1.50%
of the fund's average daily net assets. For the fiscal year ended May 31,
2000, such fees amounted to $154,107.
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 $636 under this agreement.
Interest income included in the Statement of Operations for the year ended
May 31, 2000 includes $12,942 of interest income from investments in
affiliated money market funds.
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
$192.
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 $5,117.
In addition, Morgan has agreed to reimburse the fund to the extent
necessary to maintain the total operating expenses, excluding dividend
expenses, of the fund at no more than 2.00% of the average daily net
assets of the fund through October 1, 1999 and 1.25% 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 the fund $161,240 for expenses under this agreement.
25
<PAGE>
J.P. MORGAN INSTITUTIONAL MARKET NEUTRAL 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 $10,274.
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
$176 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 $33.
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
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............... 177,683 $2,500,000 667,041 $10,005,600
Reinvestment of Dividends and Distributions...... 47,228 669,225 1,834 26,682
------- ---------- ------- -----------
Net Increase..................................... 224,911 $3,169,225 668,875 $10,032,282
======= ========== ======= ===========
</TABLE>
26
<PAGE>
J.P. MORGAN INSTITUTIONAL MARKET NEUTRAL FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 2000
--------------------------------------------------------------------------------
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 fiscal year
ended May 31, 2000 were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
----------- -----------
<S> <C> <C>
Long............................................. $13,215,797 $10,868,331
Short............................................ 18,428,495 20,425,028
----------- -----------
$31,644,292 $31,293,359
=========== ===========
</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 maximum borrowing under the new Agreement is $150,000,000. The purpose
of the Agreement is to provide another alternative for settling large fund
shareholder redemptions. Interest on any such borrowings outstanding will
approximate market rates. Under the Agreement, the commitment fee is at an
annual rate of 0.085% on the unused portion of the committed amount. The
commitment fee is allocated 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, 2000.
* * * * *
6. TAX INFORMATION NOTICE (UNAUDITED)
For corporate taxpayers 13.88% of the ordinary income distributions paid during
the fiscal year ended May 31, 2000 qualify for the corporate dividends received
deductions.
27
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of
J.P. Morgan Institutional Market Neutral 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 the J.P. Morgan Institutional
Market Neutral Fund (one of funds comprising the J.P. Morgan Series Trust and
registered as J.P. Morgan Market Neutral 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
28
<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
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.
IMAR781
J.P. MORGAN
INSTITUTIONAL
MARKET NEUTRAL
FUND
ANNUAL REPORT
MAY 31, 2000
