<PAGE>
LETTER TO THE SHAREHOLDERS OF THE J.P. MORGAN INSTITUTIONAL SMARTINDEX-TM- FUND
January 3, 2000
Dear Shareholder,
The U.S. equity market continued to surge this year, though the period was
marked by extreme volatility. For the six months ended November 30, 1999, the
J.P. Morgan Institutional SmartIndex-TM- Fund posted a 6.18% return, lagging
the 7.36% return of the S&P 500 and the 7.48% return of the Lipper Multi-Cap
Core Funds Average.
The fund's net asset value increased from $16.06 on May 31, 1999 to $17.00 as
of November 30, 1999. Dividends of approximately $0.05 per share were paid
from ordinary income. On November 30, 1999, the net assets of the fund were
approximately $127 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 discusses events in the equity
markets, portfolio performance, and his outlook for the coming months.
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>
<CAPTION>
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
<S> <C> <C> <C>
LETTER TO THE SHAREHOLDERS..... 1 FUND FACTS AND HIGHLIGHTS......... 6
FUND PERFORMANCE............... 2 FINANCIAL STATEMENTS.............. 8
PORTFOLIO MANAGER Q&A.......... 3
- -------------------------------------------------------------------------------
</TABLE>
1
<PAGE>
FUND PERFORMANCE
EXAMINING PERFORMANCE
One 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.
<TABLE>
<CAPTION>
PERFORMANCE TOTAL RETURNS
--------------------------------------
THREE SIX SINCE
AS OF NOVEMBER 30, 1999 MONTHS MONTHS INCEPTION*
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
J.P. Morgan Institutional SmartIndex-TM-Fund 4.68% 6.18% 13.90%
S&P 500 Index** 5.52% 7.36% 14.31%
Lipper Multi-Cap Core Funds Average 6.20% 7.48% 13.64%
AS OF SEPTEMBER 30, 1999
- ----------------------------------------------------------------------------------------------
J.P. Morgan Institutional SmartIndex-TM-Fund -6.29% 1.34% 5.66%
S&P 500 Index** -6.25% 0.36% 5.36%
Lipper Multi-Cap Core Funds Average -6.36% 1.53% 4.16%
</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.
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. LIPPER ANALYTICAL
SERVICES, INC. IS A LEADING SOURCE FOR MUTUAL FUND DATA.
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 Institutional
SmartIndex-TM- Fund. 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
December 9, 1999, and reflects Tim's views on that date.
WHAT WERE THE KEY TRENDS IN THE U.S. EQUITY MARKET OVER THE PAST SIX MONTHS?
TJD: On the macro level, we saw four main trends affecting the equity market
over the past six months. First, the U.S. economy continued to be strong,
although there have been some recent signs of moderation, including a slowing
in housing starts and retail chain stores sales. Overall, however, the
economy continues to chug along. Second, we are in a rising interest rate
environment. With three quarter-point rate hikes in June, August, and
November, the Federal Reserve took back all the easing it had added last year
in the face of the global economic crisis. Third, and directly related to Fed
activity, is the fact that inflation continues to be benign. The Fed has
remained ever alert for the specter of inflation to rear its head, and for
the most part it has not. Wage pressures have remained dormant; it is in
industrial commodity prices that pressure has been building. This has been
concentrated in oil prices, which have more than doubled this year, and we
expect they still have room to go up, particularly with Iraq's latest
cessation of production. Fourth, global growth on the whole has been showing
signs of improvement. The recent data coming out of Europe, Japan, and the
emerging markets indicates that growth finally is taking hold.
For the U.S. equity market, this six-month period was a highly volatile one.
Rising interest rates and fears of Y2K-related problems as the year-end
approaches have created an environment of extreme uncertainty. This has
caused the market to favor some of the stocks that have already done well
this year, as they look for certainty.
The S&P was up 14.3% year-to-date, and 7.4% over the six months ended
November 30. Positive earnings announcements and forecasts for future strong
earnings propelled this market forward. On the flip side, however, any
company that missed consensus expectations, even by a penny or two, was
punished by the market.
The spread between sectors manifested itself even further between growth
versus value. For the year-to-date through November, the S&P 500/BARRA Growth
was up 19.41%, whereas the S&P 500/BARRA Value was up just 8.64%. This
disparity is even more striking in the small-cap arena where, for the same
year-to-date period, the Russell 2000 Growth returned 21.65% versus the
- -4.42% return of the Russell 2000 Value.
3
<PAGE>
Within the S&P 500, 10 of the 16 industrial sectors were in negative
territory for the six-month period, some significantly. Reflective of the
over-rewarding of good earnings and knockdown of underperformers, the
performance among different sectors was at extremes. For example, utilities
were down 14.2%, consumer cyclicals were down 16.5%, and transportation
(largely due to the increase in oil prices) was down 17.7%. However,
technology - which currently accounts for over 25% of the market, compared to
the 10% it comprised a few years ago - was up 34.5% and telecom was up over
8%. The leadership of the market narrowed even further, driven by the
continued dramatic performance of tech stocks. This has been fueled by
optimism about spending by both consumers and businesses on technology and
telecom products and services, much of which is driven by the increased
importance of the Internet and e-commerce applications. Strong Internet sales
are expected over the holidays, and businesses, having addressed Y2K issues,
are starting to pour money into e-commerce; the "realization" is that a
company can't survive unless it's on the web.
HOW DID THE PORTFOLIO PERFORM IN THIS ENVIRONMENT?
TJD: The portfolio returned 6.18% for the six-month period while the S&P 500
rose 7.36%. The exceptionally near-term focus described above can create a
difficult environment for our longer-term valuation process. Although the
portfolio underperformed the benchmark, the shortfall was limited by the risk
controls of our process. You may recall that the portfolio is always sector-
and style-neutral to the benchmark. In an environment where, over a six-month
period, one sector returns 35% and another is down 17%, the penalty for not
choosing the winning sector is severe. Our process relies on selecting the
most attractive stocks - and more importantly, avoiding the unattractive
stocks - within each sector, while matching the sector weights and style
characteristics of the benchmark.
WHICH HOLDINGS ADDED TO PERFORMANCE?
TJD: Among the positions that added the most to relative performance were
overweights in Sun Microsystems and Cisco Systems.
Sun Microsystems continues to be a top performer for us. The leading vendor
of UNIX-based systems transformed itself from technical workstations to
enterprise servers with a focus on mission critical applications. Sun more
than doubled over the period as sales of its servers continued to benefit
from growth in the Internet. Cisco, the leading supplier of Internet
infrastructure, continues to invest in and develop new technology, making
them our favorite play on Internet growth.
Underweights in Hewlett-Packard, Dell, and Charles Schwab, which were all
down over the six months, helped performance. HP, the computer manufacturer,
made profit warnings twice in October, saying that fourth-quarter profits
would be hurt by softness in its UNIX server business. Analysts cut estimates
and downgraded the stock on fears that softness would continue through
year-end (it has since bounced back). Dell has been hit alongside other
computer manufacturers by investor emphasis on Internet infrastructure names.
After huge gains in 1998 and early 1999 based on its early lead in on-line
trading, Charles Schwab has lost some of its luster to investors as
competitors have aggressively entered the market.
4
<PAGE>
WHICH ONES DETRACTED FROM PERFORMANCE?
TJD: In addition to the hostile market environment, company-specific events
hurt performance. Waste Management, in particular, detracted. The company's
shares were down 69% over the six months. During the summer, it restated
first- and second-quarter earnings and fired both the CFO and CEO. Our
relatively modest overweight hurt performance.
Our overweight in IBM detracted from performance. In October, Big Blue
announced slowing mainframe sales resulting from the end of Y2K spending
would reduce earnings for the coming quarters. Likewise our overweight in
Xerox hurt us as its third-quarter earnings reported in October fell short of
expectations. An underweight in Nortel Networks and not owning Qualcomm, both
of which gained a significant amount over the period, reduced performance.
Both are benefiting from increased spending on telecommunications and
wireless technology in particular.
WHAT IS YOUR OUTLOOK FOR THE COMING MONTHS?
TJD: We remain somewhat cautious as the overall level of the equity market
remains high. The leadership has become too narrow, focused on too few
companies. Moreover, the extremely high valuations of tech companies do not
allow for anything less than perfection. We expect the volatility of the past
year to continue into 2000. According to our valuations, the spread between
the most attractive and the fairly valued stocks is the largest we have ever
seen, indicating a lot of pent-up value in the market. Though it's hard to
say when this value will be realized, hopefully when some of the uncertainty
is removed (i.e., a disruption-free Y2K and more clarity about inflation and
Fed activity), valuation will become important again.
5
<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 11/30/99
$126,956,410
- -------------------------------------------------------------------------------
DIVIDEND PAYABLE DATES
12/20/99
- -------------------------------------------------------------------------------
CAPITAL GAIN PAYABLE DATE (IF APPLICABLE)
12/20/99
- -------------------------------------------------------------------------------
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 NOVEMBER 30, 1999
PORTFOLIO ALLOCATION
(AS A PERCENTAGE OF TOTAL INVESTMENTS)
[CHART]
TECHNOLOGY 22.6%
CONSUMER GOODS & SERVICES 21.9%
FINANCE 13.8%
HEALTHCARE 10.6%
UTILITIES 9.9%
INDUSTRIAL PRODUCTS & SERVICES 8.6%
ENERGY 5.8%
SHORT-TERM AND OTHER INVESTMENTS 3.5%
BASIC INDUSTRIES 2.6%
TRANSPORTATION 0.7%
<TABLE>
<CAPTION>
LARGEST EQUITY HOLDINGS % OF TOTAL INVESTMENTS
- ---------------------------------------------------------------------
<S> <C>
MICROSOFT CORP. (TECHNOLOGY) 4.4%
GENERAL ELECTRIC CO. 3.4%
(INDUSTRIAL PRODUCTS & SERVICES)
CISCO SYSTEMS, INC. (TECHNOLOGY) 3.0%
INTEL CORP. (TECHNOLOGY) 2.6%
LUCENT TECHNOLOGIES INC. (TECHNOLOGY) 2.3%
WAL-MART STORES, INC. 2.2%
(CONSUMER GOODS & SERVICES)
SBC COMMUNICATIONS, INC. (UTILITIES) 2.0%
CITIGROUP INC. (FINANCE) 1.9%
MCI WORLDCOM, INC. (UTILITIES) 1.8%
BRISTOL-MYERS SQUIBB (HEALTHCARE) 1.7%
</TABLE>
6
<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 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.
7
<PAGE>
J.P. MORGAN INSTITUTIONAL SMARTINDEX-TM- FUND
SCHEDULE OF INVESTMENTS (UNAUDITED)
NOVEMBER 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -------------
<S> <C> <C>
COMMON STOCKS (96.6%)
BASIC INDUSTRIES (2.7%)
CHEMICALS (1.4%)
Air Products and Chemicals, Inc.................. 6,800 $ 220,150
Dow Chemical Co.................................. 2,700 316,237
E.I. du Pont de Nemours & Co..................... 1,300 77,269
IMC Global, Inc.................................. 3,100 49,987
Lyondell Chemical Co............................. 2,900 40,600
PPG Industries, Inc.............................. 1,900 111,269
Praxair, Inc..................................... 3,900 174,037
Rohm & Haas Co................................... 5,800 212,425
Solutia, Inc..................................... 3,300 49,500
Union Carbide Corp............................... 8,100 473,850
------------
1,725,324
------------
FOREST PRODUCTS & PAPER (0.6%)
Bowater, Inc..................................... 700 34,300
Fort James Corp.................................. 3,300 94,875
Georgia-Pacific Group............................ 2,500 99,531
International Paper Co........................... 6,200 323,562
Louisiana-Pacific Corp........................... 1,300 15,925
Mead Corp........................................ 300 10,706
Smurfit-Stone Container Corp.+................... 4,100 78,669
Temple-Inland, Inc............................... 800 45,800
------------
703,368
------------
METALS & MINING (0.7%)
Alcoa, Inc....................................... 7,000 458,500
Allegheny Technologies, Inc...................... 2,100 52,894
Freeport-McMoran Copper & Gold, Inc., Class B+... 5,700 90,131
Reynolds Metals Co............................... 3,400 212,712
USX-U.S. Steel Group............................. 2,100 53,156
------------
867,393
------------
TOTAL BASIC INDUSTRIES......................... 3,296,085
------------
CONSUMER GOODS & SERVICES (21.9%)
APPARELS & TEXTILES (0.1%)
Jones Apparel Group, Inc.+....................... 2,200 58,712
------------
AUTOMOTIVE (1.6%)
Dana Corp........................................ 3,200 88,800
Delphi Automotive Systems Corp................... 11,100 174,825
Ford Motor Co.................................... 20,700 1,045,350
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -------------
<S> <C> <C>
AUTOMOTIVE (CONTINUED)
General Motors Corp.............................. 6,900 $ 496,800
Genuine Parts Co................................. 3,500 90,125
Goodyear Tire and Rubber Co...................... 3,100 104,625
Lear Corp.+...................................... 1,200 39,675
Tenneco Automotive Inc........................... 220 1,732
------------
2,041,932
------------
BROADCASTING & PUBLISHING (3.1%)
AT&T Corp. - Liberty Media Group, Class A+....... 16,900 706,631
Comcast Corp., Class A+.......................... 16,900 763,669
Gannett Co., Inc................................. 6,800 486,625
Knight - Ridder, Inc............................. 2,000 109,125
MediaOne Group, Inc.+............................ 18,800 1,489,900
New York Times Co., Class A...................... 3,800 146,062
Times Mirror Co. New............................. 1,100 71,019
Washington Post Co., Class B..................... 200 114,300
------------
3,887,331
------------
CONSTRUCTION & HOUSING (0.0%)
Centex Corp...................................... 300 7,125
------------
ENTERTAINMENT, LEISURE & MEDIA (3.5%)
America Online, Inc.+............................ 28,800 2,093,400
Seagram Company Ltd. (i)......................... 10,400 453,050
Time Warner, Inc................................. 4,300 265,256
Viacom, Inc., Class B+........................... 9,100 452,725
Walt Disney Co................................... 42,200 1,176,325
------------
4,440,756
------------
FOOD, BEVERAGES & TOBACCO (4.0%)
Bestfoods........................................ 4,000 219,250
Coca-Cola Co..................................... 27,700 1,864,556
General Mills, Inc............................... 200 7,537
H.J. Heinz Co.................................... 6,100 255,437
Hershey Foods Corp............................... 2,300 112,987
Nabisco Holdings Corp., Class A.................. 700 23,319
PepsiCo, Inc..................................... 20,900 722,356
Philip Morris Companies, Inc..................... 42,500 1,118,281
Sara Lee Corp.................................... 13,900 337,075
Unilever NV+ (ADR)............................... 8,600 468,162
------------
5,128,960
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
8
<PAGE>
J.P. MORGAN INSTITUTIONAL SMARTINDEX-TM- FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
NOVEMBER 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -------------
<S> <C> <C>
HOUSEHOLD APPLIANCES & FURNISHINGS (0.1%)
Herman Miller, Inc............................... 1,600 $ 36,600
Leggett & Platt, Inc............................. 3,900 83,606
------------
120,206
------------
HOUSEHOLD PRODUCTS (2.3%)
Clorox Co........................................ 4,100 182,706
Kimberly-Clark Corp.............................. 7,700 491,837
Procter & Gamble Co.............................. 19,500 2,106,000
Ralston-Ralston Purina Group..................... 3,200 95,000
Water Pik Technologies, Inc.+.................... 110 811
------------
2,876,354
------------
PERSONAL CARE (0.5%)
Gillette Co...................................... 16,400 659,075
------------
RESTAURANTS & HOTELS (0.4%)
Hilton Hotels Corp............................... 6,200 62,387
Mandalay Resort Group+........................... 100 2,331
McDonald's Corp.................................. 7,300 328,500
Mirage Resorts, Inc.+............................ 4,800 61,500
Starwood Hotels & Resorts Worldwide, Inc......... 4,300 95,944
------------
550,662
------------
RETAIL (6.3%)
Abercrombie & Fitch Co., Class A+................ 2,200 71,225
Albertson's, Inc................................. 7,400 236,337
Circuit City Stores - Circuit City Group......... 2,400 116,400
Costco Wholesale Corp.+.......................... 1,400 128,362
CVS Corp......................................... 4,500 178,594
Dayton Hudson Corp............................... 9,300 656,231
Federated Department Stores, Inc.+............... 4,200 197,662
Gap, Inc......................................... 18,100 733,050
Hasbro, Inc...................................... 3,800 81,937
Home Depot, Inc.................................. 11,100 877,594
J.C. Penney, Inc................................. 4,300 95,944
Kmart Corp....................................... 8,200 81,487
Kohl's Corp.+.................................... 2,400 173,250
Kroger Co.+...................................... 17,500 372,969
Mattel, Inc...................................... 8,200 117,362
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -------------
<S> <C> <C>
RETAIL (CONTINUED)
May Department Stores Co......................... 5,900 $ 198,387
Nordstrom, Inc................................... 2,900 80,656
Safeway, Inc.+................................... 10,800 398,250
Sears, Roebuck & Co.............................. 6,300 215,381
TJX Companies, Inc............................... 8,400 219,975
Wal-Mart Stores, Inc............................. 48,800 2,812,100
------------
8,043,153
------------
TOTAL CONSUMER GOODS & SERVICES................ 27,814,266
------------
ENERGY (5.8%)
GAS EXPLORATION (0.1%)
Union Pacific Resources Group, Inc............... 3,500 45,719
Unocal Corp...................................... 1,300 43,144
------------
88,863
------------
OIL-PRODUCTION (5.6%)
Amerada Hess Corp................................ 1,000 57,937
Chevron Corp..................................... 9,600 850,200
Conoco, Inc., Class A............................ 1,400 36,837
Conoco, Inc., Class B............................ 12,800 335,200
Exxon Corp....................................... 25,000 1,982,812
Mobil Corp....................................... 15,400 1,606,412
Phillips Petroleum Co............................ 3,600 172,125
Royal Dutch Petroleum Co. - NY Shares (i)........ 30,100 1,745,800
Texaco, Inc...................................... 3,500 213,281
Tosco Corp....................................... 2,500 67,656
Ultramar Diamond Shamrock Corp................... 1,400 35,437
------------
7,103,697
------------
OIL-SERVICES (0.1%)
Cooper Cameron Corp.+............................ 700 30,012
ENSCO International, Inc......................... 2,300 46,144
Global Marine, Inc.+............................. 2,900 44,406
R&B Falcon Corp.................................. 3,200 39,600
Smith International, Inc.+....................... 700 27,912
------------
188,074
------------
TOTAL ENERGY................................... 7,380,634
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
9
<PAGE>
J.P. MORGAN INSTITUTIONAL SMARTINDEX-TM- FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
NOVEMBER 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -------------
<S> <C> <C>
FINANCE (13.8%)
BANKING (7.7%)
AmSouth Bancorporation........................... 7,100 $ 160,194
Associated Banc - Corp........................... 1,000 39,062
Astoria Financial Corp........................... 500 15,766
Bank of America Corp............................. 27,100 1,585,350
Bank One Corp.................................... 20,800 733,200
CCB Financial Corp............................... 300 13,012
Charter One Financial, Inc....................... 3,400 73,737
Chase Manhattan Corp............................. 1,200 92,700
Citigroup, Inc................................... 44,300 2,386,663
Comerica, Inc.................................... 2,800 148,400
Commerce Bancshares, Inc......................... 1,050 39,441
Compass Bancshares, Inc.......................... 2,100 53,287
Dime Bancorp, Inc................................ 3,000 54,750
First Tennessee National Corp.................... 2,200 72,325
First Union Corp................................. 17,900 692,506
Firstar Corp..................................... 4,100 106,600
FirstMerit Corp.................................. 1,600 41,550
FleetBoston Financial Corp....................... 15,000 567,187
Golden West Financial Corp....................... 1,000 100,937
GreenPoint Financial Corp........................ 1,800 45,562
Hibernia Corp., Class A.......................... 2,900 36,794
Huntington Bancshares, Inc....................... 3,400 94,137
KeyCorp.......................................... 8,000 216,000
M & T Bank Corp.................................. 100 47,000
Marshall & Ilsley Corp........................... 900 60,244
Mercantile Bankshares Corp....................... 1,200 41,287
National City Corp............................... 9,700 241,894
North Fork Bancorporation, Inc................... 2,400 48,300
Peoples Heritage Financial Group, Inc............ 1,000 16,937
PNC Bank Corp.................................... 5,300 295,475
Regions Financial Corp........................... 4,100 112,494
Southtrust Corp.................................. 3,400 131,962
Sovereign Bancorp, Inc........................... 2,300 20,412
Summit Bancorp................................... 3,200 104,400
SunTrust Bank, Inc............................... 2,800 195,650
TCF Financial Corp............................... 1,500 42,469
U.S. Bancorp..................................... 11,500 393,156
Union Planters Corp.............................. 2,600 110,825
Washington Mutual, Inc........................... 10,600 307,400
Wells Fargo Co................................... 4,200 195,300
Zions Bancorporation............................. 600 38,737
------------
9,773,102
------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -------------
<S> <C> <C>
FINANCIAL SERVICES (3.3%)
American Express Co.............................. 500 $ 75,656
Ameritrade Holding Corp., Class A+............... 1,400 31,675
Associates First Capital Corp., Class A.......... 11,700 389,025
AXA Financial, Inc............................... 3,800 127,775
Bear Stearns Companies, Inc...................... 2,205 89,991
Charles Schwab Corp.............................. 400 15,175
CIT Group, Inc., Class A......................... 2,900 60,175
Countrywide Credit Industries, Inc............... 2,000 56,250
Donaldson, Lufkin & Jenrette, Inc. - DLJ......... 100 5,031
E*TRADE Group, Inc.+............................. 4,400 132,275
Federal Home Loan Mortgage Corp.................. 12,300 607,313
Federal National Mortgage Association............ 12,800 852,800
Finova Group, Inc................................ 1,000 37,187
Goldman Sachs Group, Inc......................... 7,300 548,412
Household International, Inc..................... 7,600 300,675
Merrill Lynch & Co., Inc......................... 6,500 524,062
Morgan Stanley Dean Witter & Co.................. 100 12,063
Paine Webber Group Inc........................... 4,100 160,669
TD Waterhouse Group, Inc.+....................... 6,700 117,669
------------
4,143,878
------------
INSURANCE (2.8%)
Allstate Corp.................................... 22,100 578,744
Ambac Financial Group, Inc....................... 1,900 103,550
American International Group, Inc................ 10,200 1,053,150
Aon Corp......................................... 6,400 228,400
CIGNA Corp....................................... 3,500 287,875
Hartford Financial Services Group, Inc........... 5,500 256,781
Marsh & McLennan Companies, Inc.................. 4,700 369,537
MBIA, Inc........................................ 2,400 120,000
Mercury General Corp............................. 100 2,338
Safeco Corp...................................... 4,000 94,750
St. Paul Companies, Inc.......................... 5,500 166,031
Torchmark Corp................................... 3,200 101,600
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
10
<PAGE>
J.P. MORGAN INSTITUTIONAL SMARTINDEX-TM- FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
NOVEMBER 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -------------
<S> <C> <C>
INSURANCE (CONTINUED)
Travelers Property Casualty Corp., Class A....... 1,500 $ 49,969
UnumProvident Corp............................... 6,400 208,400
------------
3,621,125
------------
TOTAL FINANCE.................................. 17,538,105
------------
HEALTHCARE (10.7%)
BIOTECHNOLOGY (0.4%)
Amgen, Inc.+..................................... 7,600 346,275
Genzyme Corp.+................................... 1,200 43,200
Human Genome Sciences, Inc.+..................... 300 33,600
IDEC Pharmaceuticals Corp.+...................... 300 38,025
------------
461,100
------------
HEALTH SERVICES (0.7%)
Aetna, Inc....................................... 2,500 136,563
Columbia/HCA Healthcare Corp..................... 10,200 277,950
Healthsouth Corp.+............................... 7,300 41,519
Humana, Inc.+.................................... 1,900 13,300
Manor Care, Inc.................................. 700 14,044
Tenet Healthcare Corp.+.......................... 5,500 122,719
United Healthcare Corp........................... 3,100 161,006
Wellpoint Health Networks, Inc.+................. 1,200 69,075
------------
836,176
------------
MEDICAL SUPPLIES (0.7%)
Baxter International Inc......................... 300 20,269
Becton, Dickinson & Co........................... 4,400 119,900
Boston Scientific Corp.+......................... 7,300 154,213
Guidant Corp.+................................... 3,000 150,000
Medtronic, Inc................................... 7,500 291,563
PE Corp. - PE Biosystems Group................... 1,800 146,925
St. Jude Medical, Inc............................ 1,500 39,844
------------
922,714
------------
PHARMACEUTICALS (8.9%)
Abbott Laboratories.............................. 23,700 900,600
ALZA Corp.+...................................... 200 8,638
American Home Products Corp...................... 19,300 1,003,600
Bristol-Myers Squibb Co.......................... 29,200 2,133,425
Eli Lilly & Co................................... 16,200 1,162,350
Forest Laboratories, Inc.+....................... 1,200 61,425
Johnson & Johnson................................ 8,100 840,375
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -------------
<S> <C> <C>
PHARMACEUTICALS (CONTINUED)
Merck & Co., Inc................................. 17,500 $ 1,373,750
Monsanto Co...................................... 9,300 392,344
Pfizer, Inc...................................... 26,100 944,494
Pharmacia & Upjohn, Inc.......................... 1,800 98,438
Schering-Plough Corp............................. 23,500 1,201,438
Warner-Lambert Co................................ 12,600 1,130,063
Watson Pharmaceuticals, Inc.+.................... 1,300 48,344
------------
11,299,284
------------
TOTAL HEALTHCARE............................... 13,519,274
------------
INDUSTRIAL PRODUCTS & SERVICES (8.5%)
AEROSPACE (0.6%)
Boeing Co........................................ 6,800 277,525
Lockheed Martin Corp............................. 11,200 222,600
Raytheon Co., Class A............................ 9,700 282,513
Raytheon Co., Class B............................ 100 3,069
------------
785,707
------------
BUILDING MATERIALS (0.0%)
Owens Corning.................................... 80 1,260
USG Corp.+....................................... 700 34,738
------------
35,998
------------
CAPITAL GOODS (0.1%)
Eaton Corp....................................... 1,500 116,156
PACCAR, Inc...................................... 1,600 65,800
------------
181,956
------------
COMMERCIAL SERVICES (0.3%)
Cendant Corp.+................................... 17,400 288,188
Equifax, Inc..................................... 3,500 86,625
Service Corp. International...................... 6,600 49,913
------------
424,726
------------
DIVERSIFIED MANUFACTURING (6.8%)
AlliedSignal, Inc................................ 17,200 1,028,775
B.F.Goodrich Co.................................. 2,800 63,175
Cooper Industries, Inc........................... 1,900 81,581
Deere & Co....................................... 5,000 214,688
Eastman Kodak Co................................. 8,700 538,313
General Electric Co.............................. 32,900 4,277,000
Harris Corp...................................... 200 4,200
Hubbell, Inc., Class B........................... 1,000 27,875
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
11
<PAGE>
J.P. MORGAN INSTITUTIONAL SMARTINDEX-TM- FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
NOVEMBER 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -------------
<S> <C> <C>
DIVERSIFIED MANUFACTURING (CONTINUED)
Ingersoll-Rand Co................................ 3,500 $ 169,531
ITT Industries, Inc.............................. 2,500 87,188
Parker Hannifin Corp............................. 2,400 112,950
Rockwell International Corp...................... 3,400 168,725
Teledyne Technologies, Inc.+..................... 5 44
Tyco International Ltd.(i)....................... 33,600 1,346,100
Xerox Corp....................................... 18,800 508,775
------------
8,628,920
------------
ELECTRICAL EQUIPMENT (0.5%)
Emerson Electric Co.............................. 8,700 495,900
W.W. Grainger, Inc............................... 1,900 89,538
------------
585,438
------------
POLLUTION CONTROL (0.2%)
Waste Management, Inc............................ 15,000 243,750
------------
TOTAL INDUSTRIAL PRODUCTS & SERVICES........... 10,886,495
------------
TECHNOLOGY (22.6%)
COMPUTER PERIPHERALS (1.2%)
EMC Corp.+....................................... 16,400 1,370,425
Lexmark International Group, Inc., Class A+...... 600 49,800
Quantum Corp. - DLT & Storage Systems+........... 2,300 36,225
Seagate Technology, Inc.+........................ 3,100 114,700
------------
1,571,150
------------
COMPUTER SOFTWARE (6.0%)
Adobe Systems, Inc............................... 1,800 123,638
BMC Software, Inc.+.............................. 3,800 276,688
Citrix Systems, Inc.+............................ 100 9,488
Computer Associates International, Inc........... 6,900 448,500
Microsoft Corp.+................................. 61,700 5,617,592
Oracle Corp.+.................................... 16,100 1,091,781
------------
7,567,687
------------
COMPUTER SYSTEMS (3.6%)
Apple Computer, Inc.+............................ 1,300 127,238
Compaq Computer Corp............................. 24,500 598,719
Dell Computer Corp.+............................. 19,600 842,800
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -------------
<S> <C> <C>
COMPUTER SYSTEMS (CONTINUED)
Hewlett-Packard Co............................... 2,900 $ 275,138
International Business Machines Corp............. 12,800 1,319,200
Sun Microsystems, Inc.+.......................... 10,900 1,441,525
------------
4,604,620
------------
ELECTRONICS (3.2%)
3Com Corp.+...................................... 5,000 199,063
Cisco Systems, Inc.+............................. 42,200 3,763,713
Symbol Technologies, Inc......................... 2,400 114,450
------------
4,077,226
------------
INFORMATION PROCESSING (1.1%)
Automatic Data Processing, Inc................... 8,900 439,438
DoubleClick, Inc.+............................... 600 96,038
Electronic Data Systems Corp..................... 7,000 450,188
Exodus Communications, Inc.+..................... 1,000 107,813
First Data Corp.................................. 6,100 263,825
------------
1,357,302
------------
SEMICONDUCTORS (4.1%)
Applied Materials, Inc.+......................... 5,300 516,419
Intel Corp....................................... 42,900 3,289,894
National Semiconductor Corp.+.................... 2,100 89,250
Texas Instruments, Inc........................... 11,100 1,066,294
Xilinx, Inc.+.................................... 2,200 196,900
------------
5,158,757
------------
TELECOMMUNICATIONS-EQUIPMENT (3.4%)
Lucent Technologies, Inc......................... 40,500 2,959,031
Motorola, Inc.................................... 9,400 1,073,950
Nortel Networks Corp............................. 4,000 296,000
------------
4,328,981
------------
TOTAL TECHNOLOGY............................... 28,665,723
------------
TRANSPORTATION (0.7%)
AIRLINES (0.2%)
AMR Corp.+....................................... 1,900 115,663
Northwest Airlines Corp.+........................ 900 21,094
Southwest Airlines Co............................ 6,300 102,769
US Airways Group Inc.+........................... 500 13,969
------------
253,495
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
12
<PAGE>
J.P. MORGAN INSTITUTIONAL SMARTINDEX-TM- FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
NOVEMBER 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -------------
<S> <C> <C>
RAILROADS (0.4%)
Burlington Northern Railroad Co.................. 6,200 $ 179,800
CSX Corp......................................... 2,900 103,131
Norfolk Southern Corp............................ 5,000 106,875
Union Pacific Corp............................... 3,300 155,306
------------
545,112
------------
TRUCK & FREIGHT CARRIERS (0.1%)
CNF Transportation, Inc.......................... 500 16,625
FDX Corp.+....................................... 900 37,969
United Parcel Service, Inc., Class B............. 300 19,819
------------
74,413
------------
TOTAL TRANSPORTATION........................... 873,020
------------
UTILITIES (9.9%)
ELECTRIC (2.2%)
Allegheny Energy, Inc............................ 2,300 66,700
Ameren Corp...................................... 600 20,775
Carolina Power & Light Co........................ 5,700 171,713
Central & South West Corp........................ 10,500 210,000
Cinergy Corp..................................... 3,100 78,469
CMS Energy Corp.................................. 2,200 73,150
Consolidated Edison, Inc......................... 2,100 72,450
Constellation Energy Group....................... 3,000 88,313
Dominion Resources, Inc.+ (i).................... 5,900 267,713
DTE Energy Co.................................... 2,900 95,881
Edison International............................. 2,600 68,900
Entergy Corp..................................... 5,000 137,813
FPL Group, Inc................................... 3,600 157,500
GPU, Inc......................................... 2,500 80,000
NiSource, Inc.................................... 2,500 47,031
Northeast Utilities+............................. 2,300 48,588
Northern States Power Co......................... 6,600 134,888
PG&E Corp........................................ 8,000 179,000
Pinnacle West Capital Corp....................... 1,700 56,419
PP&L Resources, Inc.............................. 3,200 73,800
Reliant Energy, Inc.............................. 5,800 143,913
Southern Co...................................... 6,800 158,950
TECO Energy, Inc................................. 2,600 52,000
Texas Utilities Co............................... 5,800 207,713
Unicom Corp...................................... 900 28,744
Wisconsin Energy Corp............................ 2,400 47,700
------------
2,768,123
------------
NATURAL GAS (0.1%)
Columbia Energy Group............................ 800 $ 50,200
Consolidated Natural Gas Co...................... 400 25,650
El Paso Energy Corp.............................. 2,300 88,550
------------
164,400
------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -------------
<S> <C> <C>
TELEPHONE (7.6%)
AT&T Corp........................................ 27,000 1,508,625
Bell Atlantic Corp............................... 17,500 1,107,969
BellSouth Corp................................... 6,400 295,600
Global Crossing Ltd.+(i)......................... 13,400 584,575
GTE Corp......................................... 14,800 1,080,400
Level 3 Communications, Inc.+.................... 5,100 345,844
MCI WorldCom, Inc.+.............................. 27,800 2,298,713
SBC Communications, Inc.......................... 47,900 2,487,806
Sprint Corp...................................... 200 13,875
------------
9,723,407
------------
TOTAL UTILITIES................................ 12,655,930
------------
TOTAL COMMON STOCKS (COST $119,329,930)........ 122,629,532
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
-----------
<S> <C> <C>
SHORT-TERM INVESTMENTS (3.5%)
OTHER INVESTMENT COMPANIES (3.2%)
J.P. Institutional Prime Money Market Fund....... $4,019,281 4,019,281
------------
U.S. TREASURY OBLIGATIONS (0.3%)
United States Treasury Notes..................... 400,000 400,312
------------
TOTAL SHORT-TERM INVESTMENTS (COST
$4,419,858)................................... 4,419,593
------------
TOTAL INVESTMENTS (COST $123,749,788) (100.1%)................
127,049,125
LIABILITIES IN EXCESS OF OTHER ASSETS (-0.1%).................
(92,715)
------------
NET ASSETS (100.0%)........................................... $126,956,410
============
</TABLE>
- ------------------------------
Note: Based on the cost of investments of $123,876,434 for federal income tax
purposes at November 30, 1999 the aggregate gross unrealized appreciation and
depreciation was $10,446,586 and $7,273,895, respectively, resulting in net
unrealized appreciation of $3,172,691.
+ Non-income producing security.
(i)Foreign security.
ADR - American Depositary Receipt.
The Accompanying Notes are an Integral Part of the Financial Statements.
13
<PAGE>
J.P. MORGAN INSTITUTIONAL SMARTINDEX-TM- FUND
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
NOVEMBER 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $123,749,788 ) $127,049,125
Receivable for Investments Sold 409,535
Receivable for Fund Shares Sold 371,578
Dividends Receivable 180,033
Receivable for Expense Reimbursement 46,409
Interest Receivable 22,193
Prepaid Trustees' Fees 156
------------
Total Assets 128,079,029
------------
LIABILITIES
Payable to Custodian 138
Payable for Investments Purchased 391,769
Payable for Fund Shares Redeemed 622,505
Variation Margin Payable 56,700
Fund Services Fee Payable 125
Accrued Expenses 51,382
------------
Total Liabilities 1,122,619
------------
NET ASSETS $126,956,410
============
INSTITUTIONAL SHARES
Applicable to 7,467,274 shares outstanding
(par value $0.001, unlimited shares authorized) $126,956,410
============
Net Asset Value, Offering and Redemption Price
per Share $17.00
----
----
ANALYSIS OF NET ASSETS
Paid-in capital $123,580,135
Undistributed Net Investment Income 423,850
Accumulated Net Realized Loss on Investments (523,322)
Net Unrealized Appreciation of Investments 3,475,747
--------
Net Assets $126,956,410
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
14
<PAGE>
J.P. MORGAN INSTITUTIONAL SMARTINDEX-TM- FUND
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividend Income (Net of Foreign Witholding Tax of
$2,145) $ 574,511
Interest Income 124,161
----------
Investment Income 698,672
EXPENSES
Advisory Fee $ 105,983
Shareholder Servicing Fee 42,393
Custodian Fees and Expenses 42,013
Administrative Services Fee 21,390
Professional Fees and Expenses 19,548
Transfer Agent Fee 8,939
Printing Expenses 8,250
Administrative Fee 949
Registration Fees 695
Fund Services Fee 651
Trustees' Fees and Expenses 59
Miscellaneous 11,570
----------
Total Expenses 262,440
Less: Reimbursement of Expenses (114,376)
----------
NET EXPENSES 148,064
----------
NET INVESTMENT INCOME 550,608
NET REALIZED GAIN (LOSS) ON
Investment Transactions (595,297)
Futures Contracts 25,476
----------
Total Realized Loss (569,821)
NET CHANGE IN UNREALIZED APPRECIATION OF
Investment 3,007,987
Futures Contracts 176,409
----------
Net Change in Unrealized Appreciation 3,184,396
----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $3,165,183
==========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
15
<PAGE>
J.P. MORGAN INSTITUTIONAL SMARTINDEX-TM- FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX DECEMBER 31, 1998
MONTHS ENDED (COMMENCEMENT OF
NOVEMBER 30, 1999 OPERATIONS) THROUGH
(UNAUDITED) MAY 31, 1999
----------------- -------------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 550,608 $ 24,633
Net Realized Gain (Loss) on Investments and
Futures Contracts (569,821) 46,499
Net Change in Unrealized Appreciation of
Investments and Futures Contracts 3,184,396 291,351
---------------- ------------------
Net Increase in Net Assets Resulting from
Operations 3,165,183 362,483
---------------- ------------------
DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT
INCOME
Institutional Shares (141,390) (10,001)
---------------- ------------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Proceeds from Shares of Beneficial Interest Sold 130,609,569 5,000,600
Reinvestment of Dividends 140,342 10,001
Cost of Shares of Beneficial Interest Redeemed (12,180,377) --
---------------- ------------------
Net Increase from Shareholder Transactions 118,569,534 5,010,601
---------------- ------------------
Total Increase in Net Assets 121,593,327 5,363,083
NET ASSETS
Beginning of Period 5,363,083 --
---------------- ------------------
End of Period (including undistributed net
investment
income of $423,850 and $14,632, respectively) $ 126,956,410 $ 5,363,083
================ ==================
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
16
<PAGE>
J.P. MORGAN INSTITUTIONAL SMARTINDEX-TM- FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share outstanding throughout each period is as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX DECEMBER 31, 1998
MONTHS ENDED (COMMENCEMENT OF
NOVEMBER 30, 1999 OPERATIONS) THROUGH
(UNAUDITED) MAY 31, 1999
------------------ --------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 16.06 $ 15.00
---------------- -------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.05 0.07
Net Realized and Unrealized Gain on Investment
and Futures 0.94 1.02
---------------- -------------------
Total from Investment Operations 0.99 1.09
---------------- -------------------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (0.05) (0.03)
---------------- -------------------
NET ASSET VALUE, END OF PERIOD $ 17.00 $ 16.06
================ ===================
RATIOS AND SUPPLEMENTAL DATA
Total Return 6.18%(a) 7.27%(a)
Net Assets, End of Period (in thousands) $ 126,956 $ 5,363
Ratios to Average Net Assets
Net Expenses 0.35%(b) 0.35%(b)
Net Investment Income 1.30%(b) 1.13%(b)
Expenses without Reimbursement 0.62%(b) 5.44%(b)
Portfolio Turnover 17% 19%
</TABLE>
- ------------------------
(a) Not annualized.
(b) Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
17
<PAGE>
J.P. MORGAN INSTITUTIONAL SMARTINDEX-TM- FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOVEMBER 30, 1999
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
J.P. Morgan Smartindex Equity Fund (the "fund") is a series of J.P. Morgan
Series Trust, a Massachusetts business trust (the "trust"), which was organized
on August 15, 1996. The trust is registered under the Investment Company Act of
1940, as amended, as a no-load, 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 generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual amounts could differ from
those estimates. The following is a summary of the significant accounting
policies of the fund:
a) The value of each security for which readily available market quotations
exist is based on a decision as to the broadest and most representative
market for such security. The value of such security will be based either
on the last sale price on a national securities exchange, or, in the
absence of recorded sales, at the average of readily available closing bid
and asked prices on such exchanges. Securities listed on a foreign
exchange are valued at the last quoted sale price available before the
time when net assets are valued. Unlisted securities are valued at the
average of the quoted bid and asked prices in the over-the-counter market.
Securities or other assets for which market quotations are not readily
available are valued at fair value in accordance with procedures
established by the fund's trustees. Such procedures include the use of
independent pricing services, which use prices based upon yields or prices
of securities of comparable quality, coupon, maturity and type;
indications as to values from dealers; and general market conditions. All
short-term portfolio securities with a remaining maturity of less than 60
days are valued by the amortized cost method.
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.
b) Securities transactions are recorded on a trade date basis. Dividend
income is recorded on the ex-dividend date or as of the time that the
relevant ex-dividend date and amount becomes known. Interest income, which
includes the amortization of premiums and discounts, if any, is recorded
on an accrual basis. For financial and tax reporting purposes, realized
gains and losses are determined on the basis of specific lot
identification.
18
<PAGE>
J.P. MORGAN INSTITUTIONAL SMARTINDEX-TM- FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOVEMBER 30, 1999
- --------------------------------------------------------------------------------
c) Net investment income (other than shareholder servicing fees) and
unrealized and realized gains and losses are allocated daily to each class
of shares based upon the relative proportion of net assets of each class
at the beginning of the day.
d) Substantially all the fund's net investment income is declared as
dividends and paid quarterly. Distributions to shareholders of net
realized capital gains, if any, are declared and paid annually.
h) 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.
i) 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
fund enters into the contract. Upon entering into such a contract, the
fund is required to pledge to the broker an amount of cash and/or
securities equal to the minimum "initial margin" requirements of the
exchange. Pursuant to the contract, the fund 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 fund as unrealized gains or losses. When
the contract is closed, the fund 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 fund invests in futures
contracts for the purpose of hedging its existing securities, or
securities the fund 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.
2. TRANSACTIONS WITH AFFILIATES
a) The fund has an Investment Advisory Agreement with J.P. Morgan Investment
Management, Inc. ("JPMIM"), an affiliate of Morgan Guaranty Trust Company
of New York ("Morgan") and a wholly owned subsidiary of J.P. Morgan & Co.
Incorporated. 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
period ended November 30, 1999, such fees amounted to $105,983.
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
19
<PAGE>
J.P. MORGAN INSTITUTIONAL SMARTINDEX-TM- FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOVEMBER 30, 1999
- --------------------------------------------------------------------------------
assets to the aggregate net assets of the trust and certain other
investment companies subject to similar agreements with FDI. For the
period ended November 30, 1999, the fee for these services amounted to
$949.
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 period ended November 30, 1999, the fee for these services
amounted to $21,390.
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 February
29, 2000. For the period ended November 30, 1999, Morgan has agreed to
reimburse Institutional Shares $114,376 for expenses under this agreement.
d) The trust, on behalf of the fund, has a Shareholder Servicing Agreement
with Morgan to provide account administration and personal account
maintenance service to fund shareholders. The agreement provides for the
fund to pay Morgan a fee for these services which is computed daily and
paid monthly at an annual rate of 0.10% of the average daily net assets of
the fund. For the period ended November 30, 1999, the fee for these
services amounted to $42,393 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
$651 for the period ended November 30, 1999.
f) An aggregate annual fee of $75,000 is paid to each trustee for serving as
a trustee of the trust, the J.P. Morgan Funds, the J.P. Morgan
Institutional Funds, and other registered investment companies in which
they invest. The Trustees' Fees and Expenses shown in the financial
statements represents the fund's allocated portion of the total fees and
expenses. The trust's Chairman and Chief Executive
20
<PAGE>
J.P. MORGAN INSTITUTIONAL SMARTINDEX-TM- FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOVEMBER 30, 1999
- --------------------------------------------------------------------------------
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 $137.
g) 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 six months ended November 30, 1999, J.P. Morgan
has agreed to reimburse the fund $797 under this agreement.
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, 1999
FOR THE PERIOD ENDED (COMMENCEMENT OF
NOVEMBER 30, 1999 OPERATIONS) THROUGH
(UNAUDITED) MAY 31, 1999
----------------------- -------------------
SHARES AMOUNT SHARES AMOUNT
--------- ------------ ------- ----------
<S> <C> <C> <C> <C>
Shares sold...................................... 7,854,872 $130,609,569 333,373 $5,000,600
Reinvestment of dividends and distributions...... 8,630 140,342 638 10,001
Shares redeemed.................................. (730,239) (12,180,377) -- --
--------- ------------ ------- ----------
Net Increase..................................... 7,133,263 $118,569,534 334,011 $5,010,601
========= ============ ======= ==========
</TABLE>
21
<PAGE>
J.P. MORGAN INSTITUTIONAL SMARTINDEX-TM- FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOVEMBER 30, 1999
- --------------------------------------------------------------------------------
4. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the period ended
November 30, 1999 were as follows:
<TABLE>
<CAPTION>
Cost of Proceeds
Purchases from Sales
- ------------ -----------
<S> <C>
$130,786,870 $15,902,982
</TABLE>
Futures Transactions as of November 30, 1999 are summarized as follows:
<TABLE>
<CAPTION>
CURRENT
NET UNREALIZED MARKET VALUE
CONTRACTS LONG APPRECIATION OF CONTRACTS
-------------- -------------- ------------
<S> <C> <C> <C>
S&P 500, expiring December 1999.................. 12 $ 176,409 $ 4,174,500
============= ============= ===========
</TABLE>
5. CREDIT AGREEMENT
The trust, on behalf of the fund, together with other affiliated investment
companies (the "funds"), entered into a revolving line of credit agreement (the
"Agreement") on May 27, 1998, with unaffiliated lenders. The maximum borrowing
under the Agreement is $150,000,000. The Agreement expires on May 26, 1999,
however, the fund as party to the Agreement has extended the Agreement and
continues its participation therein until May 25, 2000. The purpose of the
Agreement is to provide another alternative for settling large fund shareholder
redemptions. Interest on any such borrowings outstanding will approximate market
rates. The funds pay a commitment fee at an annual rate of 0.085% (0.065% prior
to May 26, 1999) on the unused portion of the committed amount. This is
allocable to the funds in accordance with procedures established by their
respective trustees or directors. The fund has not borrowed pursuant to the
Agreement as of November 30, 1999.
22
<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
FOR MORE INFORMATION ON THE J.P. MORGAN
INSTITUTIONAL FUNDS, CALL J.P. MORGAN FUNDS
SERVICES AT (800)766-7722.
IM0870-I
J.P. MORGAN
INSTITUTIONAL
SMARTINDEX-TM- FUND
SEMIANNUAL REPORT
NOVEMBER 30, 1999
