<PAGE>
LETTER TO THE SHAREHOLDERS OF THE J.P. MORGAN
INSTITUTIONAL MARKET NEUTRAL FUND
July 1, 1999
Dear Shareholder,
The U.S. equity market continued to surge ahead since the beginning of this
year, though the period was marked by extreme volatility. Since December 31,
1998, the J.P. Morgan Institutional Market Neutral Fund posted a 1.89% return,
compared with the 1.82% returned by the Merrill Lynch 91-Day T-Bill.
The fund's net asset value rose to $15.16 at May 31, 1999, from $15.00 at
inception. During the year, the fund made distributions of approximately $0.04
per share from ordinary income. On May 31, 1999, the net assets of the fund were
approximately $10.1 million.
This report includes a discussion with Marc N. Roston, the portfolio manager
primarily responsible for the fund. In this interview, Marc 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>
<CAPTION>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<S> <C> <C> <C>
LETTER TO THE SHAREHOLDERS ........ 1 FUND FACTS AND HIGHLIGHTS ......... 5
FUND PERFORMANCE .................. 2 FINANCIAL STATEMENTS .............. 8
PORTFOLIO MANAGER Q&A ............. 3
- --------------------------------------------------------------------------------
</TABLE>
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 $1,018,879 on May
31, 1999.
Another way to look at performance is to review a fund's average annual total
return. This figure takes the fund's actual (or cumulative) return and shows
what would have happened if the fund had achieved that return by performing at a
constant rate each year. Average annual total returns represent the average
yearly change of a fund's value over various time periods, typically one, five,
or ten years (or since inception). Total returns for periods of less than one
year are not annualized and provide a picture of how a fund has performed over
the short term.
GROWTH OF $1,000,000 SINCE FUND INCEPTION*
DECEMBER 31, 1998 -- MAY 31, 1999
<TABLE>
<S> <C>
J.P. Morgan Institutional Market Neutral Fund $1,018,879
Merrill Lynch 91-Day T-Bill $1,018,180
</TABLE>
<TABLE>
<CAPTION>
PERFORMANCE TOTAL RETURNS
-----------------------------------
ONE THREE SINCE
AS OF MAY 31, 1999 MONTHS MONTHS INCEPTION*
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
J.P. Morgan Institutional Market Neutral Fund 0.66% 2.64% 1.89%
Merrill Lynch 91-Day T-Bill 0.39% 1.17% 1.82%
AS OF MARCH 31, 1999
- ---------------------------------------------------------------------------------------
J.P. Morgan Institutional Market Neutral Fund -1.08% -1.81% -1.81%
Merrill Lynch 91-Day T-Bill 0.41% 1.06% 1.06%
</TABLE>
* SINCE THE FUND'S PERFORMANCE INCEPTION ON DECEMBER 30, 1998, IT HAS PROVIDED A
TOTAL RETURN OF 1.34% THROUGH MAY 31, 1999. 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 MARC N. ROSTON, vice president, a member of
the portfolio management team for J.P. Morgan Institutional Market Neutral Fund.
Marc is a portfolio manager in the Structured Equity group, which he joined
after working in Capital Markets Research performing quantitative equity
research. Marc came to Morgan in 1996 after completing his Ph.D. in Economics at
the University of Chicago. He also holds a B.S. in Economics from Carnegie
Mellon University. This interview took place on June 18, 1999, and reflects
Marc's views on that date.
HOW HAS THE U.S. EQUITY MARKET PERFORMED SINCE THE FUND'S INCEPTION, AND HOW HAS
THIS AFFECTED THE FUND?
MNR: It's been an exciting, volatile period for the U.S. equity market since the
fund's launch at the beginning of the year. This is an ideal situation for a
market neutral fund, which is designed to ride out the shocks inherent in the
equity market to provide a consistent return. We hold long and short positions
in large-capitalization U.S. stocks in an effort to insulate the fund's
performance from the effects of general stock market movements. In a rising
market, we expect our long positions to appreciate more rapidly than the short
positions; in a declining market, we believe our short positions will decline
faster than our long positions.
Since the inception of the fund, the overall market, despite significant
volatility, continued to climb a bit, continuing the trend of the past several
years. While much of last year the market was led by a narrow group of
larger-cap growth issues, often referred to as the "Nifty Fifty," of late, there
has been a broadening of market leadership to companies across the
market-capitalization spectrum. And signs of a bottoming in the global economy
have helped companies in industries that would benefit from global growth, such
as those in the energy and cyclical industrial sectors.
Recently, the Federal Reserve, concerned over the continued strong pace of the
domestic economy and the possibility of inflation, announced that its position
on interest rates shifted to a tightening bias from a neutral one. As a result,
the market has again come under some pressure.
HOW DID THE FUND PERFORM DURING THE PERIOD?
MNR: The fund returned 1.84% since its inception through the fiscal year ended
May 31, compared with the return on the Merrill Lynch 91-Day T-Bill of 1.82%
over the same period. The first few months of the fund's operations were
difficult. However, we saw a strong turnaround during April and May, and we
remain confident going forward.
WHICH STOCKS CONTRIBUTED TO THE PORTFOLIO'S PERFORMANCE?
MNR: On the long side of the portfolio, Rohm & Haas, a global leader in
specialty chemicals, has shown phenomenal performance, as the market has begun
to look more favorably on cyclical stocks over the past
3
<PAGE>
few months. Going forward, we have a positive outlook for the company's
prospects following its merger with Morton International; we expect the combined
firm will be a global force in the highest-margin products in the specialty
chemicals industry.
Our long position in Sun Microsystems also proved to be profitable. Sun is the
leading vendor of UNIX-based computer systems and has successfully made the
transition from technical workstations to enterprise servers. A recent agreement
with the America Online/Netscape combination has solidified Sun's position as
the premier Internet server company. Our outlook for the company is still
positive, and we continue to consider Sun a core holding.
On the short side, Advanced Micro Devices contributed positively to performance.
The stock has drifted downward over the past five months, as the global
semiconductor industry has been weak and consumer pricing pressure has hurt the
personal computer business.
WHAT STOCKS HINDERED THE PORTFOLIO'S PERFORMANCE?
MNR: We've been disappointed by Alza on the long side of the portfolio. Alza, a
mid-sized pharmaceutical company, develops technologies to deliver drugs into
the body; often, it applies these technologies to existing drugs as they come
off patent. The stock has been very volatile of late, and we think it's
attractively valued where it now stands. Alza's recent launch of the urology
drug Ditropan XL has ramped up more slowly than expected, despite the company's
significant expenditures to support it. But we think that Ditropan XL will
ultimately prove successful, to the benefit of Alza's stock price.
On the short side, we were somewhat hindered by the continued surge in
Internet-related financial firms. We have been short Charles Schwab, since we
felt that its valuation was too high and that other firms in the online trading
arena offered better relative value. But, since rising tides lift all boats, our
short position hurt us. We think that once competition heats up in this business
- -- Merrill Lynch's announcement that it would begin offering online trading is
evidence that it will indeed heat up -- Schwab will lose its advantage and its
stock will lose its premium.
WHAT IS YOUR OUTLOOK FOR THE COMING MONTHS?
MNR: A market neutral strategy should maintain steady performance regardless of
market conditions, and we expect to achieve this goal in the months ahead.
Because we maintain market neutrality by matching our long and short portfolios,
our concerns focus on stock-specific issues, rather than the overall direction
and tone of the equity markets. As long as different companies have different
returns, we can add value!
4
<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 5/31/99
$10,142,689
- --------------------------------------------------------------------------------
DIVIDEND PAYABLE DATES
6/25/99, 8/20/99, 12/20/99
- --------------------------------------------------------------------------------
CAPITAL GAIN PAYABLE DATE (IF APPLICABLE)
12/20/99
- --------------------------------------------------------------------------------
REGISTRANT
J.P. MORGAN SERIES TRUST
J.P. MORGAN MARKET NEUTRAL FUND:
INSTITUTIONAL SHARES
EXPENSE RATIO
The fund's current annualized expense ratio of 2.00% 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.
5
<PAGE>
FUND HIGHLIGHTS
ALL DATA AS OF MAY 31, 1999
PORTFOLIO ALLOCATION OF LONG/SHORT HOLDINGS
(AS A PERCENTAGE OF TOTAL LONG OR SHORT INVESTMENTS)
LONG
- --------------------------------------------------------------------
[CHART]
- - FINANCE 21.6%
- - CONSUMER GOODS
& SERVICES 12.4%
- - INDUSTRIAL PRODUCTS
& SERVICES 10.6%
- - BASIC INDUSTRIES 10.5%
- - TECHNOLOGY 10.0%
- - UTILITIES 9.5%
- - ENERGY 8.2%
- - HEALTHCARE 6.7%
- - TRANSPORTATION 6.2%
SHORT-TERM 4.3%
LARGEST LONG/LARGEST SHORT EQUITY HOLDINGS
(AS A PERCENTAGE OF TOTAL LONG OR SHORT INVESTMENTS)
<TABLE>
<CAPTION>
LONG
- --------------------------------------------------------------------
<S> <C>
ROHM & HAAS CO. (BASIC INDUSTRIES) 2.60%
MCI WORLDCOM, INC. (UTILITIES) 2.58%
ALLEGHENY TELEDYNE INC. (BASIC INDUSTRIES) 2.48%
MARSH & MCLENNAN COS. (FINANCE) 2.25%
UNION PACIFIC CORP. (TRANSPORTATION) 2.17%
CNF TRANSPORTATION INC. (TRANSPORTATION) 1.79%
WASTE MANAGEMENT INC. 1.74%
(INDUSTRIAL PRODUCTS & SERVICES)
ALLSTATE CORP. (FINANCE) 1.69%
MOBIL CORP. (ENERGY) 1.67%
LYONDELL CHEMICAL CO. (BASIC INDUSTRIES) 1.53%
</TABLE>
SHORT
- --------------------------------------------------------------------
[CHART]
- - FINANCE 22.9%
- - UTILITIES 13.2%
- - CONSUMER GOODS
& SERVICES 12.2%
- - INDUSTRIAL PRODUCTS
& SERVICES 11.1%
- - BASIC INDUSTRIES 10.7%
- - TECHNOLOGY 9.4%
- - ENERGY 7.4%
- - HEALTHCARE 7.0%
- - TRANSPORTATION 6.1%
<TABLE>
<CAPTION>
SHORT
- --------------------------------------------------------------------
<S> <C>
E.I. DU PONT DE NEMOURS & CO. 3.02%
(BASIC INDUSTRIES)
UAL CORP. (TRANSPORTATION) 2.96%
JEFFERSON-PILOT CORP. (FINANCE) 2.10%
PROGRESSIVE CORP. (FINANCE) 1.96%
CORNING INC. 1.76%
(INDUSTRIAL PRODUCTS & SERVICES)
CINCINNATI FINANCIAL CORP. 1.72%
(FINANCE)
AIR PRODUCTS AND CHEMICALS INC. 1.58%
(BASIC INDUSTRIES)
AMERADA HESS CORP. (ENERGY) 1.48%
PHARMACIA & UPJOHN INC. (HEALTHCARE) 1.43%
HEWLETT PACKARD CO. (TECHNOLOGY) 1.42%
</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.
The fund invests in a master portfolio (another fund with the same objective).
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 MARKET NEUTRAL FUND
SCHEDULE OF INVESTMENTS
MAY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
LONG POSITIONS (95.8%)(E)
COMMON STOCKS (91.6%)
BASIC INDUSTRIES (10.1%)
CHEMICALS (5.3%)
Dow Chemical Co.................................. 1,100 $ 133,650
Lyondell Chemical Co............................. 7,800 148,687
Rohm & Haas Co................................... 6,300 252,787
------------
535,124
------------
FOREST PRODUCTS & PAPER (1.4%)
International Paper Co........................... 800 40,000
Temple-Inland, Inc............................... 1,500 100,500
------------
140,500
------------
METALS & MINING (3.4%)
Alcan Aluminum Ltd.(i)........................... 3,700 103,600
Allegheny Teledyne, Inc.......................... 11,800 241,162
------------
344,762
------------
TOTAL BASIC INDUSTRIES......................... 1,020,386
------------
CONSUMER GOODS & SERVICES (11.9%)
APPARELS & TEXTILES (0.3%)
Jones Apparel Group, Inc.+....................... 900 27,675
------------
AUTOMOTIVE (0.8%)
Dana Corp........................................ 400 20,650
Delphi Automotive Systems Corp................... 700 13,737
Goodyear Tire and Rubber Co...................... 300 17,906
Lear Corp.+...................................... 600 29,512
------------
81,805
------------
BROADCASTING & PUBLISHING (0.5%)
MediaOne Group, Inc.............................. 700 51,712
------------
ENTERTAINMENT, LEISURE & MEDIA (1.4%)
Seagram Company Ltd.............................. 2,700 140,231
------------
FOOD, BEVERAGES & TOBACCO (2.4%)
Bestfoods........................................ 100 5,000
Coca-Cola Co..................................... 600 40,987
Pepsi Bottling Group, Inc........................ 100 2,319
PepsiCo, Inc..................................... 300 10,744
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
FOOD, BEVERAGES & TOBACCO (CONTINUED)
Philip Morris Companies, Inc..................... 2,700 $ 104,119
Unilever NV (ADR)................................ 1,300 84,906
------------
248,075
------------
HOUSEHOLD APPLIANCES & FURNISHINGS (0.5%)
Furniture Brands International, Inc.+............ 800 19,400
Leggett & Platt, Inc............................. 1,200 31,650
------------
51,050
------------
HOUSEHOLD PRODUCTS (1.7%)
Kimberly-Clark Corp.............................. 1,600 93,900
Procter & Gamble Co.............................. 800 74,700
------------
168,600
------------
RESTAURANTS & HOTELS (1.4%)
Mirage Resorts, Inc.+............................ 2,700 55,350
Starwood Hotels & Resorts Worldwide, Inc......... 2,600 85,150
------------
140,500
------------
RETAIL (2.7%)
Abercrombie & Fitch Co., Class A................. 100 8,412
American Stores Co............................... 200 6,600
AutoZone, Inc.+.................................. 900 26,044
Dillard's, Inc., Class A......................... 500 17,562
Federated Department Stores, Inc.+............... 600 32,700
General Nutrition Companies, Inc.+............... 600 9,937
Hannaford Brothers Co............................ 200 10,400
J.C. Penney, Inc................................. 500 25,844
Kmart Corp.+..................................... 1,700 26,137
Mattel, Inc...................................... 1,100 29,081
Sears, Roebuck & Co.............................. 600 28,687
TJX Companies, Inc............................... 900 27,000
Toys 'R' Us, Inc.+............................... 1,100 25,369
------------
273,773
------------
TEXTILES (0.2%)
Unifi, Inc.+..................................... 1,300 21,450
------------
TOTAL CONSUMER GOODS & SERVICES................ 1,204,871
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
8
<PAGE>
J.P. MORGAN INSTITUTIONAL MARKET NEUTRAL FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
ENERGY (7.9%)
NATURAL GAS (1.1%)
Columbia Energy Group............................ 2,000 $ 107,000
------------
OIL-PRODUCTION (4.3%)
Exxon Corp....................................... 1,300 103,837
Mobil Corp....................................... 1,600 162,000
Royal Dutch Petroleum Co. (ADR)+................. 500 28,281
Tosco Corp....................................... 1,100 28,119
Ultramar Diamond Shamrock Corp................... 2,500 55,000
Valero Energy Corp............................... 2,900 58,181
------------
435,418
------------
OIL-SERVICES (2.0%)
Cooper Cameron Corp.+............................ 200 7,237
Diamond Offshore Drilling, Inc................... 200 5,450
ENSCO International, Inc......................... 1,300 23,075
Global Marine, Inc.+............................. 6,600 92,812
R&B Falcon Corp.+................................ 4,800 44,400
Smith International, Inc.+....................... 700 30,275
------------
203,249
------------
UTILITIES (0.5%)
USEC, Inc........................................ 4,700 51,700
------------
TOTAL ENERGY................................... 797,367
------------
FINANCE (20.7%)
BANKING (9.1%)
Associated Banc - Corp.+......................... 1,500 51,844
Astoria Financial Corp........................... 1,800 81,169
Bank of America Corp............................. 1,300 84,094
Charter One Financial, Inc....................... 2,200 62,425
Dime Bancorp, Inc................................ 1,100 22,412
First American Corp.............................. 400 16,325
First Union Corp................................. 1,800 82,912
Hibernia Corp., Class A.......................... 400 5,700
KeyCorp.......................................... 3,200 111,200
North Fork Bancorporation, Inc................... 900 19,181
Peoples Heritage Financial Group, Inc............ 3,400 63,644
Provident Financial Group, Inc................... 1,200 51,375
TCF Financial Corp............................... 2,400 66,600
U.S. Bancorp..................................... 1,900 61,750
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
BANKING (CONTINUED)
Union Planters Corp.............................. 1,700 $ 70,231
Washington Mutual, Inc........................... 1,800 68,737
------------
919,599
------------
FINANCIAL SERVICES (1.6%)
CIT Group, Inc., Class A......................... 2,400 69,600
Finova Group, Inc................................ 1,700 81,281
Ocwen Financial Corp.+........................... 1,700 14,769
------------
165,650
------------
INSURANCE (8.8%)
Allstate Corp.................................... 4,500 163,969
Ambac Financial Group, Inc....................... 2,300 134,119
Aon Corp......................................... 200 8,600
Equitable Companies, Inc......................... 200 14,037
Fremont General Corp............................. 600 12,713
Marsh & McLennan Companies, Inc.................. 3,000 218,250
MBIA, Inc........................................ 1,900 129,794
Mercury General Corp............................. 1,700 61,306
Provident Companies, Inc......................... 300 11,719
Travelers Property Casualty Corp., Class A....... 300 11,850
UNUM Corp........................................ 2,300 123,769
------------
890,126
------------
REAL ESTATE INVESTMENT TRUSTS (1.2%)
Crescent Real Estate Equities Co................. 2,100 48,431
Meditrust Cos.................................... 1,000 13,875
ProLogis Trust................................... 700 14,392
Simon Property Group, Inc........................ 500 14,625
Vornado Realty Trust............................. 800 31,050
------------
122,373
------------
TOTAL FINANCE.................................. 2,097,748
------------
HEALTHCARE (6.4%)
BIOTECHNOLOGY (1.2%)
Genzyme Corp..................................... 1,900 77,009
MedImmune, Inc.+................................. 200 12,713
PE Corp.- PE Biosystems Group.................... 300 33,506
------------
123,228
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
9
<PAGE>
J.P. MORGAN INSTITUTIONAL MARKET NEUTRAL FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
HEALTH SERVICES (1.7%)
Aetna, Inc....................................... 200 $ 18,163
Columbia / HCA Healthcare Corp................... 300 7,069
HCR Manor Care, Inc.+............................ 1,000 26,750
Health Management Associates, Inc., Class A+..... 1,500 19,500
Healthsouth Corp.+............................... 2,000 26,750
Humana, Inc.+.................................... 1,200 15,075
Tenet Healthcare Corp.+.......................... 1,200 29,400
Wellpoint Health Networks, Inc.+................. 300 24,731
------------
167,438
------------
PHARMACEUTICALS (3.5%)
ALZA Corp.+...................................... 2,400 85,650
American Home Products Corp...................... 100 5,763
Bristol-Myers Squibb Co.......................... 300 20,588
Eli Lilly & Co................................... 800 57,150
Forest Laboratories, Inc.+....................... 1,100 52,388
Monsanto Co...................................... 2,100 87,150
Warner-Lambert Co................................ 200 12,400
Watson Pharmaceuticals, Inc.+.................... 1,000 38,313
------------
359,402
------------
TOTAL HEALTHCARE............................... 650,068
------------
INDUSTRIAL PRODUCTS & SERVICES (10.1%)
AEROSPACE (0.5%)
Lockheed Martin Corp............................. 1,200 48,525
------------
CAPITAL GOODS (1.4%)
Eaton Corp....................................... 1,600 139,500
------------
COMMERCIAL SERVICES (0.9%)
Cendant Corp.+................................... 1,000 18,438
Equifax, Inc..................................... 600 21,600
Service Corp. International...................... 2,600 49,888
------------
89,926
------------
DIVERSIFIED MANUFACTURING (4.9%)
Coltec Industries, Inc.+......................... 2,900 58,000
Cooper Industries, Inc........................... 1,700 84,256
Deere & Co....................................... 1,400 53,288
Eastman Kodak Co................................. 900 60,863
Harris Corp...................................... 3,700 139,906
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
DIVERSIFIED MANUFACTURING (CONTINUED)
Tenneco, Inc..................................... 2,000 $ 46,625
Tyco International Ltd........................... 600 52,425
------------
495,363
------------
ELECTRICAL EQUIPMENT (0.3%)
Emerson Electric Co.............................. 500 31,938
------------
FOREST PRODUCTS & PAPER (0.5%)
Smurfit-Stone Container Corp.+................... 2,500 53,906
------------
POLLUTION CONTROL (1.6%)
Waste Management, Inc.+.......................... 3,200 169,200
------------
TOTAL INDUSTRIAL PRODUCTS & SERVICES........... 1,028,358
------------
TECHNOLOGY (9.5%)
COMPUTER PERIPHERALS (0.5%)
EMC Corp.+....................................... 500 49,813
------------
COMPUTER SOFTWARE (0.0%)
Oracle Corp.+.................................... 100 2,478
------------
COMPUTER SYSTEMS (2.2%)
Gateway, Inc.+................................... 200 12,163
International Business Machines Corp............. 1,000 116,313
Sun Microsystems, Inc............................ 1,600 95,550
------------
224,026
------------
ELECTRONICS (1.2%)
Cisco Systems, Inc.+............................. 1,100 119,866
------------
INFORMATION PROCESSING (0.2%)
Automatic Data Processing, Inc................... 500 20,594
------------
SEMICONDUCTORS (2.7%)
Applied Materials, Inc.+......................... 1,000 55,031
Intel Corp....................................... 2,000 108,375
Motorola, Inc.................................... 300 24,844
Texas Instruments, Inc........................... 800 87,500
------------
275,750
------------
</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, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
TELECOMMUNICATION SERVICES (2.5%)
MCI WorldCom, Inc.+.............................. 2,900 $ 250,397
------------
TELECOMMUNICATIONS-EQUIPMENT (0.2%)
Lucent Technologies, Inc......................... 400 22,750
------------
TOTAL TECHNOLOGY............................... 965,674
------------
TRANSPORTATION (5.9%)
AIRLINES (0.4%)
AMR Corp.+....................................... 600 39,038
------------
RAILROADS (3.2%)
CSX Corp......................................... 2,500 117,344
Union Pacific Corp............................... 3,700 211,131
------------
328,475
------------
TRUCK & FREIGHT CARRIERS (2.3%)
CNF Transportation, Inc.......................... 4,200 174,300
Ryder System, Inc................................ 2,600 62,400
------------
236,700
------------
TOTAL TRANSPORTATION........................... 604,213
------------
UTILITIES (9.1%)
ELECTRIC (7.9%)
Allegheny Energy, Inc............................ 2,900 101,138
Central & South West Corp........................ 1,300 33,475
Dominion Resources, Inc.......................... 1,800 77,738
Entergy Corp..................................... 1,900 61,631
Northern States Power Co......................... 4,000 104,250
Pinnacle West Capital Corp....................... 2,100 87,938
PP&L Resources, Inc.............................. 4,400 132,000
TECO Energy, Inc................................. 4,300 99,706
Wisconsin Energy Corp............................ 3,900 108,225
------------
806,101
------------
NATURAL GAS (0.3%)
El Paso Energy Corp.............................. 100 3,606
K N Energy, Inc.................................. 1,200 25,725
------------
29,331
------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
TELEPHONE (0.9%)
GTE Corp......................................... 1,200 $ 75,675
Level 3 Communications, Inc.+.................... 100 7,847
SBC Communications, Inc.......................... 100 5,113
------------
88,635
------------
TOTAL UTILITIES................................ 924,067
------------
TOTAL COMMON STOCKS--LONG POSITIONS (COST
$9,005,933)................................... 9,292,752
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
-----------
<S> <C> <C>
SHORT-TERM INVESTMENTS (4.2%)
OTHER INVESTMENT COMPANIES (0.3%)
Seven Seas Money Market Fund 4.615%, due
6/1/99......................................... $ 25,988 25,988
------------
U.S. TREASURY OBLIGATIONS (3.9%)
United States Treasury Bills 4.380%, due
08/12/99....................................... 399,000 395,505
------------
TOTAL SHORT-TERM INVESTMENTS (COST $421,493)... 421,493
------------
TOTAL INVESTMENTS--LONG POSITIONS (COST $9,427,426)...........
9,714,245
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
-----------
<S> <C> <C>
COMMON STOCK - SHORT POSITIONS(-92.0%)
BASIC INDUSTRIES (-9.8%)
AUTOMOTIVE (-0.0%)
Delphi Automotive Systems Corp................... (210) (4,115)
------------
CHEMICALS (-5.2%)
Air Products & Chemicals, Inc.................... (3,600) (147,600)
E.I. du Pont de Nemours & Co..................... (4,300) (281,381)
Nalco Chemical Co................................ (800) (26,800)
Praxair, Inc..................................... (1,000) (48,812)
Union Carbide Corp............................... (400) (20,525)
------------
(525,118)
------------
</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, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
FOREST PRODUCTS & PAPER (-1.7%)
Boise Cascade Corp............................... (100) $ (3,962)
Champion International Corp...................... (700) (35,875)
Louisiana-Pacific Corp........................... (500) (10,125)
Weyerhaeuser Co.................................. (1,900) (117,919)
------------
(167,881)
------------
METALS & MINING (-2.9%)
Bethlehem Steel Corp.+........................... (1,800) (14,962)
Nucor Corp....................................... (1,400) (69,913)
Phelps Dodge Corp................................ (1,800) (93,263)
USX-U.S. Steel Group............................. (4,400) (118,525)
------------
(296,663)
------------
TOTAL BASIC INDUSTRIES......................... (993,777)
------------
CONSUMER GOODS & SERVICES (-11.3%)
APPARELS & TEXTILES (-0.3%)
Nike, Inc........................................ (500) (30,469)
------------
AUTOMOTIVE (-1.0%)
Ford Motor Co.................................... (200) (11,413)
General Motor Corp............................... (1,200) (65,850)
General Motors Corp., Class H.................... (300) (20,700)
------------
(97,963)
------------
BROADCASTING & PUBLISHING (-0.8%)
Cox Communications, Inc., Class A................ (2,200) (85,938)
------------
CONSTRUCTION & HOUSING (-0.3%)
Centex Corp...................................... (700) (25,944)
------------
ENTERTAINMENT, LEISURE & MEDIA (-1.6%)
Circus Circus Enterprises, Inc.+................. (800) (16,900)
Time Warner, Inc................................. (600) (40,838)
Tribune Co....................................... (500) (39,469)
Viacom, Inc., Class B............................ (800) (30,800)
Walt Disney Co.+................................. (1,100) (32,038)
------------
(160,045)
------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
FOOD, BEVERAGES & TOBACCO (-2.3%)
Anheuser-Busch Companies, Inc.................... (400) $ (29,225)
Campbell Soup Co................................. (2,100) (92,663)
Kellogg Co....................................... (2,200) (76,313)
The Quaker Oats Co............................... (600) (39,638)
------------
(237,839)
------------
HOUSEHOLD APPLIANCES & FURNISHINGS (-0.6%)
Black & Decker Corp.............................. (500) (28,469)
Maytag Corp...................................... (400) (28,225)
------------
(56,694)
------------
HOUSEHOLD PRODUCTS (-0.2%)
Clorox Co........................................ (100) (10,094)
Colgate-Palmolive Co............................. (100) (9,988)
------------
(20,082)
------------
PERSONAL CARE (-1.5%)
Avon Products, Inc............................... (2,100) (103,819)
Gillette Co...................................... (1,000) (51,000)
------------
(154,819)
------------
RESTAURANTS & HOTELS (-0.2%)
McDonald's Corp.................................. (400) (15,400)
------------
RETAIL (-2.5%)
Best Buy Co. Inc.+............................... (300) (13,650)
CVS Corp......................................... (600) (27,600)
Hasbro, Inc...................................... (500) (14,313)
Home Depot, Inc.................................. (400) (22,750)
Kohl's Corp.+.................................... (400) (27,275)
Kroger Co........................................ (400) (23,425)
Limited, Inc..................................... (600) (29,325)
Lowe's Companies, Inc............................ (400) (20,775)
Nordstrom, Inc................................... (600) (21,338)
Tiffany & Co..................................... (200) (16,575)
Wal-Mart Stores, Inc............................. (400) (17,050)
Walgreen Co...................................... (1,000) (23,250)
------------
(257,326)
------------
TOTAL CONSUMER GOODS & SERVICES................ (1,142,519)
------------
</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, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
ENERGY (-6.9%)
GAS EXPLORATION (-0.9%)
Union Pacific Resources Group, Inc............... (6,600) $ (91,987)
------------
OIL-PRODUCTION (-1.6%)
Anadarko Petroleum Corp.......................... (1,000) (37,500)
Burlington Resources, Inc........................ (1,900) (81,581)
Occidental Petrolium Corp........................ (2,200) (46,475)
------------
(165,556)
------------
OIL-SERVICES (-3.7%)
Amerada Hess Corp................................ (2,300) (137,856)
Baker Hughes, Inc................................ (2,200) (68,475)
Halliburton Co................................... (2,100) (86,887)
Schlumberger Ltd................................. (300) (18,056)
Unocal Corp...................................... (1,500) (59,625)
------------
(370,899)
------------
UTILITIES (-0.7%)
Public Service Enterprise Group, Inc............. (1,600) (67,100)
------------
TOTAL ENERGY................................... (695,542)
------------
FINANCE (-21.0%)
BANKING (-9.2%)
AmSouth Bancorporation........................... (3,300) (93,637)
BB&T Corp........................................ (2,800) (102,200)
Fifth Third Bancorp.............................. (1,600) (109,150)
First Tennessee National Corp.................... (1,400) (57,706)
Firstar Corp.+................................... (3,000) (86,437)
Northern Trust Corp.............................. (800) (72,400)
Old Kent Financial Corp.......................... (2,500) (112,344)
State Street Corp................................ (900) (68,625)
The Bank of New York Co., Inc.................... (2,400) (85,800)
Wachovia Corp.................................... (500) (44,125)
Zions Bancorporation............................. (1,600) (102,000)
------------
(934,424)
------------
FINANCIAL SERVICES (-1.6%)
Charles Schwab Corp.............................. (1,100) (116,394)
Providian Financial Corp......................... (200) (19,187)
T. Rowe Price & Associates, Inc.................. (800) (30,975)
------------
(166,556)
------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
INSURANCE (-9.0%)
American General Corp............................ (1,600) $ (115,600)
American International Group, Inc................ (200) (22,862)
Cincinnati Financial Corp........................ (3,900) (160,753)
Hartford Financial Services Group, Inc........... (800) (50,600)
Jefferson-Pilot Corp............................. (2,900) (196,294)
Lincoln National Corp............................ (500) (50,875)
Progressive Corp................................. (1,300) (182,487)
Safeco Corp...................................... (3,000) (131,906)
------------
(911,377)
------------
REAL ESTATE INVESTMENT TRUSTS (-1.2%)
Boston Properties, Inc........................... (1,800) (64,687)
Duke Realty Investments, Inc..................... (2,400) (55,500)
------------
(120,187)
------------
TOTAL FINANCE.................................. (2,132,544)
------------
HEALTHCARE (-6.4%)
BIOTECHNOLOGY (-0.1%)
Immunex Corp..................................... (100) (13,009)
------------
MEDICAL SUPPLIES (-2.0%)
Bard (C.R.), Inc................................. (500) (22,844)
Bausch & Lomb, Inc............................... (200) (15,275)
Baxter International, Inc........................ (500) (32,281)
Becton, Dickinson & Co........................... (700) (27,125)
Biomet, Inc.+.................................... (600) (24,019)
Boston Scientific Corp.+......................... (600) (22,762)
Chiron Corp.+.................................... (400) (8,437)
Medtronic, Inc.+................................. (400) (28,400)
Stryker Corp..................................... (300) (17,850)
------------
(198,993)
------------
PHARMACEUTICALS (-4.3%)
Abbott Laboratories.............................. (1,100) (49,706)
Biogen, Inc...................................... (100) (10,906)
Johnson & Johnson, Inc........................... (1,100) (101,887)
Merck & Co., Inc................................. (800) (54,000)
Pfizer, Inc...................................... (800) (85,600)
Pharmacia & Upjohn,Inc........................... (2,400) (133,050)
Schering-Plough Corp............................. (100) (4,506)
------------
(439,655)
------------
TOTAL HEALTHCARE............................... (651,657)
------------
</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, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
INDUSTRIAL PRODUCTS & SERVICES (-10.2%)
AEROSPACE (-0.4%)
Boeing Co........................................ (800) $ (33,800)
------------
BUILDING MATERIALS (-0.6%)
Masco Corp....................................... (1,000) (28,563)
USG Corp......................................... (600) (33,975)
------------
(62,538)
------------
COMMERCIAL SERVICES (-1.8%)
Interpublic Group of Companies, Inc.............. (900) (68,175)
Omnicom Group, Inc............................... (1,000) (70,000)
Raytheon Co.+.................................... (700) (47,644)
------------
(185,819)
------------
DIVERSIFIED MANUFACTURING (-5.6%)
Alcoa, Inc....................................... (1,000) (55,000)
Corning, Inc..................................... (3,000) (163,875)
General Electric Co.............................. (700) (71,181)
Honeywell, Inc................................... (1,300) (123,013)
Illinois Tool Works, Inc......................... (600) (46,050)
Minnesota Mining & Manufacturing Co.............. (700) (60,025)
Parker Hannifin Corp............................. (100) (4,369)
Xerox Corp....................................... (800) (44,950)
------------
(568,463)
------------
MACHINERY (-1.8%)
Caterpillar, Inc................................. (2,400) (131,700)
Dover Corp....................................... (400) (15,075)
Ingersoll-Rand Co................................ (600) (38,213)
------------
(184,988)
------------
TOTAL INDUSTRIAL PRODUCTS & SERVICES........... (1,035,608)
------------
TECHNOLOGY (-8.6%)
COMPUTER PERIPHERALS (-0.9%)
Cabletron System, Inc.+.......................... (6,200) (92,225)
------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
COMPUTER SOFTWARE (-3.1%)
AutoDesk, Inc.................................... (1,400) $ (38,631)
BMC Software, Inc.+.............................. (200) (9,881)
Computer Associates International, Inc........... (600) (28,387)
Intuit, Inc.+.................................... (500) (40,656)
Networks Associates, Inc.+....................... (2,700) (39,741)
Parametric Technology Corp.+..................... (4,700) (65,359)
PeopleSoft, Inc.+................................ (5,500) (89,203)
------------
(311,858)
------------
COMPUTER SYSTEMS (-2.0%)
Hewlett Packard Co............................... (1,400) (132,037)
Silicon Graphics, Inc.+.......................... (5,900) (73,012)
------------
(205,049)
------------
ELECTRONICS (-0.6%)
Rockwell International Corp...................... (1,100) (60,706)
------------
INFORMATION PROCESSING (-1.1%)
3Com Corp.+...................................... (800) (21,875)
Compaq Computer Corp............................. (3,900) (92,381)
------------
(114,256)
------------
SEMICONDUCTORS (-0.4%)
Advanced Micro Devices, Inc.+.................... (2,200) (40,700)
------------
TELECOMMUNICATION SERVICES (-0.5%)
US West, Inc..................................... (900) (48,656)
------------
TOTAL TECHNOLOGY............................... (873,450)
------------
TRANSPORTATION (-5.7%)
AIRLINES (-4.6%)
Continental Airlines, Inc.+...................... (700) (27,475)
Delta Air Lines, Inc............................. (1,000) (57,375)
UAL Corp.+....................................... (4,100) (275,725)
US Airways Group+................................ (2,100) (101,981)
------------
(462,556)
------------
TRUCK & FREIGHT CARRIERS (-1.1%)
FDX Corp......................................... (2,000) (110,125)
------------
TOTAL TRANSPORTATION........................... (572,681)
------------
</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, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
UTILITIES (-12.1%)
ELECTRIC (-8.7%)
Carolina Power & Light Co........................ (2,500) $ (109,375)
Cinergy Corp..................................... (400) (13,650)
Consolidated Edison, Inc......................... (2,200) (106,838)
DTE Energy Co.................................... (2,500) (108,906)
Duke Energy Co................................... (700) (42,219)
FPL Group, Inc................................... (200) (11,638)
GPU, Inc......................................... (2,100) (91,481)
NiSource, Inc.................................... (200) (5,588)
PECO Energy Co................................... (2,200) (107,663)
Potomac Electric Power Co........................ (3,500) (108,063)
Reliant Energy, Inc.............................. (700) (21,350)
Southern Co...................................... (1,900) (53,913)
Unicom Corp...................................... (2,400) (101,550)
------------
(882,234)
------------
TELEPHONE (-2.9%)
AT & T Corp...................................... (1,100) (61,050)
BellSouth Corp................................... (2,600) (122,688)
SBC Communications, Inc.......................... (600) (30,675)
Sprint Corp...................................... (700) (78,925)
------------
(293,338)
------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
WATER (-0.5%)
American Water Works, Inc........................ (1,700) $ (52,700)
------------
TOTAL UTILITIES................................ (1,228,272)
------------
TOTAL COMMON STOCK - SHORT POSITIONS (PROCEEDS
$8,922,997)................................... (9,326,050)
------------
TOTAL INVESTMENTS (3.8%)...................................... 388,195
OTHER ASSETS IN EXCESS OF LIABILITIES (96.2%).................
9,754,494
------------
NET ASSETS (100.0%)........................................... $ 10,142,689
------------
------------
</TABLE>
- ------------------------------
Note: For federal income tax purposes, the cost of securities at May 31, 1999,
was $9,429,156; the aggregate gross unrealized appreciation and depreciation was
$676,372 and $391,283, respectively, resulting in net unrealized appreciation of
$285,089.
+ - Non-income producing security.
ADR - American Depositary Receipt.
(e) - Securities are pledged with broker as collateral for short sales.
(i) - Foreign Security
The Accompanying Notes are an Integral Part of the Financial Statements.
15
<PAGE>
J.P. MORGAN INSTITUTIONAL MARKET NEUTRAL FUND
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $9,427,426) $ 9,714,245
Cash 995
Deposits with Brokers for Securities Sold Short 9,791,145
Receivable for Investments Sold 84,856
Receivable for Expense Reimbursement 30,755
Dividends Receivable 17,164
Interest Receivable 136
Prepaid Expenses and Other Assets 3
-----------
Total Assets 19,639,299
-----------
LIABILITIES
Securities Sold Short at Value (Proceeds
$8,922,997) 9,326,050
Payable for Investments Purchased 83,630
Custody Fee Payable 15,205
Advisory Fee Payable 12,916
Shareholder Servicing Fee Payable 861
Administrative Services Fee Payable 445
Administration Fee Payable 75
Fund Services Fee Payable 10
Accrued Expenses 57,418
-----------
Total Liabilities 9,496,610
-----------
NET ASSETS $10,142,689
-----------
-----------
INSTITUTIONAL SHARES
Applicable to 668,875 shares outstanding
(par value $0.001, unlimited shares authorized) $10,142,689
-----------
-----------
Net Asset Value, Offering and Redemption Price
per Share $15.16
-----
-----
ANALYSIS OF NET ASSETS
Paid-in Capital $10,032,282
Undistributed Net Investment Income 62,115
Accumulated Net Realized Gain on Investments 164,526
Net Unrealized Depreciation of Investments (116,234)
-----------
Net Assets $10,142,689
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
16
<PAGE>
J.P. MORGAN INSTITUTIONAL MARKET NEUTRAL FUND
STATEMENT OF OPERATIONS
FOR THE PERIOD DECEMBER 31, 1998 (COMMENCEMENT OF OPERATIONS) THROUGH MAY 31,
1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividend Income (Net of Foreign Withholding Tax
of $2,885) $ 86,991
Interest Income 147,764
---------
Investment Income 234,755
EXPENSES
Dividends on Securities Sold Short $ 63,157
Advisory Fee 62,113
Custodian Fees and Expenses 40,139
Professional Fees and Expenses 39,048
Printing Expenses 9,505
Transfer Agent Fee 8,474
Registration Fees 4,780
Shareholder Servicing Fee 4,141
Administrative Services Fee 2,147
Administration Fee 103
Fund Services Fee 91
Trustees' Fees and Expenses 28
Miscellaneous 880
--------
Total Expenses 234,606
Less: Reimbursement of Expenses (88,648)
--------
NET EXPENSES 145,958
---------
NET INVESTMENT INCOME 88,797
NET REALIZED GAIN/(LOSS) ON
Investments 377,890
Securities Sold Short (213,364)
--------
164,526
NET CHANGE IN UNREALIZED
APPRECIATION/(DEPRECIATION) OF
Investments 286,819
Securities Sold Short (403,053)
--------
(116,234)
---------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $ 137,089
---------
---------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
17
<PAGE>
J.P. MORGAN INSTITUTIONAL MARKET NEUTRAL FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
DECEMBER 31, 1998
(COMMENCEMENT OF
OPERATIONS) THROUGH
MAY 31, 1999
-------------------
<S> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 88,797
Net Realized Gain on Investments and Securities
Sold Short 164,526
Net Change in Unrealized Depreciation of
Investments and Securities Sold Short (116,234)
-------------------
Net Increase in Net Assets Resulting from
Operations 137,089
-------------------
DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT
INCOME
Institutional Shares (26,682)
-------------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Proceeds from Shares of Beneficial Interest Sold 10,005,600
Reinvestment of Dividends 26,682
-------------------
Net Increase from Shareholder Transactions 10,032,282
-------------------
Total Increase in Net Assets 10,142,689
NET ASSETS
Beginning of Period --
-------------------
End of Period (including undistributed net
investment income of $62,115) $ 10,142,689
-------------------
-------------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
18
<PAGE>
J.P. MORGAN INSTITUTIONAL MARKET NEUTRAL FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share outstanding throughout the period is as follows:
<TABLE>
<CAPTION>
FOR THE
PERIOD
DECEMBER
31, 1998
(COMMENCEMENT
OF
OPERATIONS)
THROUGH
MAY 31,
1999
----------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 15.00
----------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.13
Net Realized and Unrealized Gain on Investments 0.07
----------
Total from Investment Operations 0.20
----------
LESS DIVIDENDS TO SHAREHOLDERS FROM
Net Investment Income (0.04)
----------
NET ASSET VALUE, END OF PERIOD $ 15.16
----------
----------
RATIOS AND SUPPLEMENTAL DATA
Total Return 1.34%(b)
Net Assets, End of Period (in thousands) $10,143
Ratios to Average Net Assets
Net Expenses (Excluding Dividend Expense) 2.00%(a)
Net Investment Income 2.14%(a)
Expenses Without Reimbursement (Including
Dividend Expense) 5.66%(a)
Portfolio Turnover 195%
</TABLE>
- ------------------------
(a) Annualized.
(b) Not Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
J.P. MORGAN INSTITUTIONAL MARKET NEUTRAL FUND
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1999
- --------------------------------------------------------------------------------
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 each
class of shares in the fund. Organization costs incurred prior to commencement
of operations were borne by J.P. Morgan & Co. Incorporated ("J.P. Morgan").
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual amounts could differ from
those estimates. The following is a summary of the significant accounting
policies of the fund:
a) The fund values securities (including securities sold short) that are
listed on an exchange using prices supplied daily by an independent
pricing service that are based on the last traded price on a national
securities exchange or in the absence of recorded trades, at the readily
available mean of the bid and asked prices on such exchange, if such
exchange or market constitutes the broadest and most representative market
for the security. Securities listed on a foreign exchange are valued at
the last traded price or in the absence of recorded trades, at the readily
available mean of the bid and asked prices on such exchange available
before the time when net assets are valued. Independent pricing service
procedures may also include the use of prices based on yields or prices of
securities of comparable quality, coupon, maturity and type, indications
as to values from dealers, operating data, and general market conditions.
Unlisted securities are valued at the average of the quoted bid and asked
prices in the over-the-counter market provided by a principal market maker
or dealer. If prices are not supplied by the fund's independent pricing
service or principal market maker or dealer, such securities are priced
using fair values in accordance with procedures adopted by the fund's
Trustees. All short-term securities with a remaining maturity of sixty
days or less are valued using the amortized cost method.
b) The fund's custodian takes possession of the collateral pledged for
investments in repurchase agreements on behalf of the fund. It is the
policy of the fund to value the underlying collateral daily on a mark-to-
market basis to determine that the value, including accrued interest, is
at least equal to the repurchase price plus accrued interest. In the event
of default of the obligation to repurchase, the fund has the right to
liquidate the collateral and apply the proceeds in satisfaction of the
obligation. Under certain circumstances, in the event of default or
bankruptcy by the other party to the agreement, realization and/or
retention of the collateral or proceeds may be subject to legal
proceedings.
c) Securities transactions are recorded on a trade date basis. Dividend
income is recorded on the ex-dividend date or as of the time that the
relevant ex-dividend date and amount becomes known. Interest
20
<PAGE>
J.P. MORGAN INSTITUTIONAL MARKET NEUTRAL FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1999
- --------------------------------------------------------------------------------
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 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.
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. 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 period December 31, 1998
(commencement of operations) through May 31, 1999, such fees amounted to
$62,113.
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
21
<PAGE>
J.P. MORGAN INSTITUTIONAL MARKET NEUTRAL FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1999
- --------------------------------------------------------------------------------
assets to the aggregate net assets of the trust and certain other
investment companies subject to similar agreements with FDI. For the
period December 31, 1998 (commencement of operations) through May 31,
1999, the fee for these services amounted to $103.
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 December 31, 1998 (commencement of operations) through May
31, 1999, the fee for these services amounted to $2,147.
In addition, J.P. Morgan has agreed to reimburse the fund to the extent
necessary to maintain the total operating expenses, excluding dividend
expense, of the fund at no more than 2.00% of the average daily net assets
of the fund through August 31, 1999. For the period December 31, 1998
(commencement of operations) through May 31, 1999, J.P. Morgan has agreed
to reimburse the fund $88,648 for expenses under this agreement.
d) The trust, on behalf of the fund, has a Shareholder Servicing Agreement
with Morgan to provide account administration and personal account
maintenance service to fund shareholders. The agreement provides for the
fund to pay Morgan a fee for these services which is computed daily and
paid monthly at an annual rate of 0.10% and 0.25% of the average daily net
assets for Institutional Shares and Select Shares, respectively. For the
period December 31, 1998 (commencement of operations) through May 31,
1999, the fee for these services amounted to $4,141.
Morgan, Charles Schwab & Co. ("Schwab"), and the fund (Select Shares) are
parties to separate services and operating agreements (the "Schwab
Agreements") whereby Schwab makes fund shares available to customers of
investment advisors and other financial intermediaries who are Schwab's
clients. The fund is not responsible for payments to Schwab under the
Schwab Agreements; however, in the event the Services Agreement with
Schwab is terminated for reasons other than a breach by Schwab and the
relationship between the trust and Morgan is terminated, the fund would be
responsible for the ongoing payments to Schwab with respect to
pre-termination shares.
e) The trust, on behalf of the fund, has a Fund Services Agreement with
Pierpont Group, Inc. ("Group") to assist the trustees in exercising their
overall supervisory responsibilities for the trust's affairs. The trustees
of the trust represent all the existing shareholders of Group. The fund's
allocated portion of Group's costs in performing its services for the
period December 31, 1998 (commencement of operations) through May 31, 1999
amounted to $91.
22
<PAGE>
J.P. MORGAN INSTITUTIONAL MARKET NEUTRAL FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1999
- --------------------------------------------------------------------------------
f) An aggregate annual fee of $75,000 is paid to each trustee for serving as
a trustee of the trust, the J.P. Morgan Funds, the J.P. Morgan
Institutional Funds, and other registered investment companies in which
they invest. The Trustees' Fees and Expenses shown in the financial
statements represents the fund's allocated portion of the total fees and
expenses. The trust's Chairman and Chief Executive Officer also serves as
Chairman of Group and receives compensation and employee benefits from
Group in his role as Group's Chairman. The allocated portion of such
compensation and benefits included in the Fund Services Fee shown in the
financial statements was $19.
3. TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the trustees to issue an unlimited number of
full and fractional shares of beneficial interest of one or more series.
Transactions in shares of beneficial interest of the fund were as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
DECEMBER 31, 1998
(COMMENCEMENT OF
OPERATIONS) THROUGH
MAY 31, 1999
----------------------
SHARES AMOUNT
-------- -----------
<S> <C> <C> <C> <C>
Shares sold...................................... 667,041 $10,005,600
Reinvestment of dividends........................ 1,834 26,682
-------- -----------
Net Increase..................................... 668,875 $10,032,282
-------- -----------
-------- -----------
</TABLE>
From time to time, the fund may have a concentration of several shareholders
which may include affiliates of J.P. Morgan holding a significant percentage of
shares outstanding. Investment activities of these shareholders could have a
material impact on the fund.
4. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the period
December 31, 1998 (commencement of operations) through May 31, 1999 were as
follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
----------- -----------
<S> <C> <C>
Long............................................. $13,583,403 $ 4,955,685
Short............................................ 4,323,157 13,032,789
----------- -----------
$17,906,560 $17,988,474
----------- -----------
----------- -----------
</TABLE>
5. CREDIT AGREEMENT
The trust, on behalf of the fund, together with other affiliated investment
companies (the "funds"), entered into a revolving line of credit agreement (the
"Agreement") on May 27, 1998, with unaffiliated lenders. The maximum borrowing
under the Agreement is $150,000,000. The Agreement expired on May 26, 1999,
however, the fund as party to the Agreement extended the Agreement and continues
its participation therein for an additional 364 days until May 23, 2000. The
purpose of the Agreement is to provide another alternative for
23
<PAGE>
J.P. MORGAN INSTITUTIONAL MARKET NEUTRAL FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1999
- --------------------------------------------------------------------------------
settling large fund shareholder redemptions. Interest on any such borrowings
outstanding will approximate market rates. The funds pay a commitment fee at an
annual rate of 0.085% (0.065% prior to May 26, 1999) on the unused portion of
the committed amount. This is allocable to the funds in accordance with
procedures established by their respective trustees or directors. There were no
outstanding borrowings pursuant to the Agreement as of May 31, 1999.
24
<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 J.P. Morgan Institutional Market
Neutral Fund (one of the funds comprising the J.P. Morgan Series Trust,
registered as J.P. Morgan Market Neutral Fund, hereafter referred to as the
"fund") at May 31, 1999, and the results of its operations, the changes in its
net assets and the financial highlights for the period December 31, 1998
(commencement of operations) through May 31, 1999, in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the fund's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these financial statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit, which included confirmation of securities at May 31, 1999 by
correspondence with the custodian and brokers, provides a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
July 14, 1999
25
<PAGE>
J.P. MORGAN INSTITUTIONAL FUNDS
PRIME MONEY MARKET FUND
TREASURY MONEY MARKET FUND
FEDERAL MONEY MARKET FUND
TAX EXEMPT MONEY MARKET FUND
TAX AWARE ENHANCED INCOME FUND:
INSTITUTIONAL SHARES
SHORT TERM BOND FUND
BOND FUND
GLOBAL STRATEGIC INCOME FUND
TAX EXEMPT BOND FUND
NEW YORK TAX EXEMPT BOND FUND
CALIFORNIA BOND FUND: INSTITUTIONAL SHARES
DIVERSIFIED FUND
DISCIPLINED EQUITY FUND
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.
IMO493-1
J.P. MORGAN
INSTITUTIONAL
MARKET NEUTRAL
FUND
ANNUAL REPORT
MAY 31, 1999
