<PAGE>
LETTER TO THE SHAREHOLDERS OF J.P. MORGAN
U.S. SMALL COMPANY FUND
July 1, 1999
Dear Shareholder:
The fiscal year ended May 31, 1999, proved to be another difficult period for
small-cap stocks, as investors continued to prefer larger-cap U.S. stocks to
small ones. During this time, the J.P. Morgan U.S. Small Company Fund posted
a negative 10.95% return, falling short of the negative 2.69% return of the
Russell 2000 Index and the negative 4.21% return of the Lipper Small-Cap
Funds Average.
The fund's net asset value decreased to $21.54 at May 31, 1999, from $27.68
at May 31, 1998. During the year, the fund made distributions of
approximately $0.08 per share from ordinary income, approximately $0.70 per
share from short-term capital gains, and approximately $2.14 per share from
long-term capital gains. On May 31, 1999, the net assets of the fund were
approximately $187 million, while the assets of The U.S. Small Company
Portfolio, in which the fund invests, amounted to approximately $532 million.
This report includes a discussion with Stephen J. Rich, a member of the
portfolio management team for The U.S. Small Company Portfolio. In this
interview, Steve talks about the events of the previous year that had the
greatest effect on the portfolio 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) 521-5411.
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 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 $10,000. The chart at right shows that $10,000
invested on May 31, 1989, would have grown to $28,155 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 $10,000 OVER 10 YEARS
MAY 31, 1989 - MAY 31, 1999
[GRAPH]
<TABLE>
<S> <C>
J.P. Morgan U.S. Small Company Fund $28,155
Lipper Small-Cap Funds Average $36,300
Russell 2000 Index $30,060
</TABLE>
LIPPER PERFORMANCE AVERAGES ARE CALCULATED BY TAKING AN ARITHMETIC AVERAGE OF
THE RETURNS OF THE FUNDS IN THE GROUP. THE AVERAGE ANNUALIZED RETURNS THAT
RESULT FROM THIS METHODOLOGY WILL DIFFER FROM ANNUALIZING THE GROWTH OF THE
MINIMUM INITIAL INVESTMENT.
<TABLE>
<CAPTION>
PERFORMANCE TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS
------------------ ------------------------------------------
THREE SIX ONE THREE FIVE TEN
AS OF MAY 31, 1999 MONTHS MONTHS YEAR YEARS YEARS YEARS
- ---------------------------------------------------------------------- ------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
J.P. Morgan U.S. Small Company Fund 7.92% 5.89% -10.95% 6.35% 12.85% 10.91%
Russell 2000 Index* 12.28% 11.03% -2.69% 8.07% 13.60% 11.63%
Lipper Small-Cap Funds Average 10.40% 9.41% -4.21% 6.69% 14.06% 13.28%
AS OF MARCH 31, 1999
- ---------------------------------------------------------------------- --------------------------------------------
J.P. Morgan U.S. Small Company Fund -4.86% 10.26% -19.47% 8.00% 11.30% 11.99%
Russell 2000 Index* -5.42% 10.00% -16.26% 7.72% 11.22% 11.46%
Lipper Small-Cap Funds Average -5.96% 12.51% -15.48% 8.03% 12.11% 13.60%
</TABLE>
*THE RUSSELL 2000 IS AN UNMANAGED INDEX USED TO MEASURE THE AVERAGE STOCK
PERFORMANCE OF U.S. SMALL-CAP 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 AND ASSUME THE REINVESTMENT OF FUND DISTRIBUTIONS. 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 STEPHEN J. RICH, vice president, a member
of the portfolio management team for The U.S. Small Company Portfolio. Steve
joined Morgan in 1991, and has held positions in Morgan's structured equity
and balanced/equity groups. He received an A.B. from Princeton University and
an M.B.A. from New York University. This interview took place on June 11,
1999, and reflects Steve's views on that date.
HOW HAS THE U.S. EQUITY MARKET PERFORMED OVER THE PAST YEAR?
SJR: The tough times persisted for small-cap stocks for most of the period,
as measured by the Russell 2000 Index, while the Dow and S&P 500 continued to
surge ahead. Volatility, however, was a common trait among all the equity
indices.
For much of the second half of 1998, and particularly in the summer, there
was a flight to quality, as investors eschewed small-cap equities in favor of
some of the largest-cap stocks the U.S. market has to offer. Large U.S.
stocks were seen as a liquid and stable haven, shielding assets from the
uncertainties shaking the global economy. Small-cap issues were punished for
their perceived lack of quality and limited liquidity, regardless of their
fundamentals.
In October of last year, the Federal Reserve lowered short-term interest
rates in an attempt to stabilize the global economy. As investors' nerves
began to steady, small caps began to bounce back, but a small number of
larger-cap stocks continued to dominate the market. The strong U.S. economy
was a big reason for the success of the equity market during this period, as
it buoyed corporate profits of domestically focused companies in industries
like automaking, homebuilding, and retailing. In the tech field, the
emergence of e-commerce and a rash of Internet-related IPOs generated some
excitement.
Although there have been hints of a general equity market broadening since
the Russell 2000 Index hit its October 1998 lows, it really wasn't until
mid-April that market leadership began to broaden in earnest and include
stocks along the entire market-cap spectrum. 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.
Once all was said and done, the Russell 2000 finished the fiscal year lower,
with those sectors in some way associated with the Internet -- such as
technology, software, and communications -- performing less poorly than the
others. Cyclical, value-oriented sectors such as energy, basic industry, and
consumer cyclicals were the biggest laggards for the year.
The Federal Reserve was active over the past year. In the fall, the Fed eased
rates in an attempt to settle world markets. In mid-May, the Fed, 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 general equity market
has again come under some pressure.
3
<PAGE>
HOW DID THE FUND PERFORM DURING THE PERIOD?
SJR: The fund fell short of its benchmark for the period, returning negative
10.95% for the fiscal year ended May 31, compared with the Russell 2000's
return of negative 2.69%. Obviously when the index suffered last summer, we
did as well. When things began to turn around, it was the growth stocks that
led the Russell out of its depths; since we had more of a value orientation,
our rebound, though strong, was not as dramatic.
Another issue in our underperformance was our lack of exposure to some of the
large Internet stocks in the Russell 2000. Since the composition of the index
is adjusted only once a year, a strong rally in a Russell 2000 stock can
raise its market cap well above the index's normal maximum of around $1.5
billion. Over the past year, we saw this happen with a number of
Internet-related stocks that we felt were inappropriate for a small-cap
portfolio such as ours owing to their valuation and size; as a result, these
gains were lost on us.
WHICH STOCKS CONTRIBUTED TO THE PORTFOLIO'S PERFORMANCE?
SJR: Like everyone else, we're excited about the investment possibilities in
the technology sector due to the growth of the Internet. We think that a less
risky way to take advantage of this trend is to invest in those companies
that provide the infrastructure of the Internet rather than the "dot-coms"
that are relying on advertising revenue for cash flow. In this realm, we've
seen strong performance from Exodus Communications, SDL, and Concentric
Network.
Exodus, the leader in high-end mission-critical Web site outsourcing, was the
best performing stock in the portfolio; we sold our holding for a gain.
Exodus has been helped by the boom in outsourcing of Web site management and
the general growth in Internet traffic. SDL, a leading provider of
high-powered semiconductor lasers, was another top performer. SDL's lasers
are used to enhance the optical signal during long-haul terrestrial and
undersea transmission of data. We feel the company is well positioned to take
advantage of the growth in spending by communication companies as they build
global communication networks. Concentric, a leading provider of IP network
services for small to medium-sized companies, was also strong. Concentric
offers services such as high-speed DSL access, Web hosting, e-commerce
services, and Virtual Private Networks.
WHAT STOCKS HINDERED THE PORTFOLIO'S PERFORMANCE?
SJR: Capital Re was a big disappointment. The shares of this reinsurance
company had been steadily climbing for many years until the middle of last
year, when the bottom dropped out. It had made its name underwriting
municipal bonds, but management decided to expand beyond that niche into more
risky areas. This backfired, as the company suffered a substantial loss from
a reinsurance contract with MBIA. Moody's subsequently downgraded its rating
on Capital Re's credit, citing concerns about the company's new business
tack. Another blow to the company was the resignation of the CEO, under
pressure from the board of directors. Late in May, ACE Limited reached an
agreement to buy Capital Re.
The stock of Alterra Healthcare has been up and down over the past 12 months,
and we think it can rebound from its most recent, and most precipitous,
decline. The assisted-living company recently lowered its
4
<PAGE>
guidance for 1999 and 2000 earnings as a result of buying in joint ventures
that it had been keeping off its balance sheet. Additionally, Alterra
reported that its occupancy fill rate was coming in lower than expected.
However, we consider Alterra a fundamentally strong company, and expect that
its franchise and earnings should be driven by an aging U.S. population.
Plus, this buying in of off-balance-sheet joint ventures should result in
better earnings visibility going forward.
WHAT IS YOUR OUTLOOK FOR THE COMING MONTHS?
SJR: The success of the small-cap area is dependent upon the general equity
market remaining broad. Certainly, from a valuation standpoint, small-cap
stocks are attractive relative to large caps. But we're reluctant to call for
a reversal of the trend that has seen small caps underperform large caps
every year since 1993-- the longest and most intense period of
underperformance ever seen by the small-cap market.
Since the underperformance of the small-cap market has been so severe, we
think that a snapback -- when it happens -- is likely to happen very quickly.
The liquidity that hurt the market as it was heading down should help it on
the way back up. Plus, there's something to be said for being ahead of the
curve in the small-cap market, because once things start moving up, it may be
hard to get into a stock because of its limited liquidity.
And there are signs that a change may be in the offing. There has been a
significant amount of merger and acquisition activity in the small-cap
market, with larger companies swooping in and buying smaller ones; this has
been prevalent in the utility, REIT, service, and tech industries. To us,
this means that the larger companies are finding attractive values in the
small-cap sector, which is a good sign that investors may begin to do the
same.
From a sectoral standpoint, we believe opportunities will continue to exist
in the communications arena. The services area also continues to hold our
interest; we see investment possibilities among several education companies.
We're warming up to the basic industry sector as well, namely chemicals, as
the global economy begins to recover and commodity prices have started to
firm.
5
<PAGE>
FUND FACTS
INVESTMENT OBJECTIVE
J.P. Morgan U.S. Small Company Fund seeks to provide a high total return from
a portfolio of equity securities of small companies. The fund seeks to
outperform the Russell 2000 Index. It is designed for investors who are
willing to assume the somewhat higher risk of investing in small companies in
order to seek a higher total return over time than might be expected from a
portfolio of stocks of large companies.
- --------------------------------------------------------------------------------
COMMENCEMENT OF INVESTMENT OPERATIONS
6/27/85
- --------------------------------------------------------------------------------
FUND NET ASSETS AS OF 5/31/99
$186,879,187
- --------------------------------------------------------------------------------
PORTFOLIO NET ASSETS AS OF 5/31/99
$531,866,985
- --------------------------------------------------------------------------------
DIVIDEND PAYABLE DATES
8/20/99, 12/20/99
- --------------------------------------------------------------------------------
CAPITAL GAIN PAYABLE DATE (IF APPLICABLE)
12/20/99
EXPENSE RATIO
The fund's current annualized expense ratio of 1.02% covers shareholders'
expenses for custody, tax reporting, investment advisory and shareholder
services. The fund is no-load and does not charge any sales, redemption, or
exchange fees. There are no additional charges for buying, selling, or
safekeeping fund shares, or for wiring redemption proceeds from the fund.
FUND HIGHLIGHTS
ALL DATA AS OF MAY 31, 1999
PORTFOLIO ALLOCATION
(AS A PERCENTAGE OF TOTAL INVESTMENTS)
[CHART]
- - TECHNOLOGY 18.8%
- - FINANCE 18.3%
- - CONSUMER GOODS
& SERVICES 18.1%
- - HEALTHCARE 12.0%
- - INDUSTRIAL PRODUCTS
& SERVICES 10.0%
- - BASIC INDUSTRIES 9.2%
- - ENERGY 3.6%
- - TELECOMMUNICATIONS 3.5%
- - UTILITIES 3.3%
- - TRANSPORTATION 2.6%
- - SHORT-TERM &
OTHER INVESTMENTS 0.6%
<TABLE>
<CAPTION>
LARGEST EQUITY HOLDINGS % OF TOTAL INVESTMENTS
- --------------------------------------------------------------------------------
<S> <C>
L-3 COMMUNICATIONS HOLDINGS, INC. 1.5%
(TECHNOLOGY)
MUELLER INDUSTRIES, INC. (BASIC INDUSTRIES) 1.4%
HUMAN GENOME SCIENCES, INC. (HEALTHCARE) 1.4%
NATIONAL COMMERCE BANCORPORATION (FINANCE) 1.4%
BANK UNITED CORP., CLASS A (FINANCE) 1.3%
CINAR CORP., CLASS B 1.2%
(CONSUMER GOODS & SERVICES)
GEON CO. (BASIC INDUSTRIES) 1.1%
POST PROPERTIES, INC. (FINANCE) 1.1%
SUNRISE ASSISTED LIVING, INC. (HEALTHCARE) 1.0%
COOPER CAMERON CORP. (ENERGY) 1.0%
</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. Opinion 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). Historically, small-company stocks have been more volatile than
large-company stocks.
CALL J.P. MORGAN FUNDS SERVICES AT (800) 521-5411 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>
THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY
<PAGE>
J.P. MORGAN U.S. SMALL COMPANY FUND
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment in The U.S. Small Company Portfolio
("Portfolio"), at value $187,127,128
Receivable for Shares of Beneficial Interest Sold 653,765
Prepaid Trustees' Fees 1,348
Prepaid Expenses and Other Assets 5,621
------------
Total Assets 187,787,862
------------
LIABILITIES
Payable for Shares of Beneficial Interest
Redeemed 822,919
Shareholder Servicing Fee Payable 40,301
Administrative Services Fee Payable 4,161
Administration Fee Payable 309
Fund Services Fee Payable 169
Accrued Expenses 40,816
------------
Total Liabilities 908,675
------------
NET ASSETS
Applicable to 8,677,921 Shares of Beneficial
Interest Outstanding
(par value $0.001, unlimited shares authorized) $186,879,187
------------
------------
Net Asset Value, Offering and Redemption Price
Per Share $21.54
-----
-----
ANALYSIS OF NET ASSETS
Paid-in Capital $190,360,107
Undistributed Net Investment Income 148,445
Accumulated Net Realized Loss on Investment (23,451,974)
Net Unrealized Appreciation of Investment 19,822,609
------------
Net Assets $186,879,187
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
8
<PAGE>
J.P. MORGAN U.S. SMALL COMPANY FUND
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED MAY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME ALLOCATED FROM PORTFOLIO
Allocated Dividend Income $ 2,426,830
Allocated Interest Income 361,483
Allocated Portfolio Expenses (1,399,576)
------------
Net Investment Income Allocated from
Portfolio 1,388,737
FUND EXPENSES
Shareholder Servicing Fee $510,994
Administrative Services Fee 55,836
Transfer Agent Fees 53,286
Printing Expenses 14,653
Registration Fees 14,421
Professional Fees 12,015
Fund Services Fee 5,130
Administration Fee 3,605
Trustees' Fees and Expenses 2,013
Insurance Expense 1,201
Miscellaneous 21,065
--------
Total Fund Expenses 694,219
------------
NET INVESTMENT INCOME 694,518
NET REALIZED LOSS ON INVESTMENT ALLOCATED FROM
PORTFOLIO (23,131,194)
NET CHANGE IN UNREALIZED DEPRECIATION OF
INVESTMENT ALLOCATED FROM PORTFOLIO (10,598,624)
------------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS $(33,035,300)
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
9
<PAGE>
J.P. MORGAN U.S. SMALL COMPANY FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FISCAL FOR THE FISCAL
YEAR ENDED YEAR ENDED
MAY 31, 1999 MAY 31, 1998
-------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 694,518 $ 1,022,861
Net Realized Gain (Loss) on Investment Allocated
from Portfolio (23,131,194) 61,222,260
Net Change in Unrealized Depreciation of
Investment Allocated from Portfolio (10,598,624) (8,412,093)
-------------- --------------
Net Increase (Decrease) in Net Assets
Resulting from Operations (33,035,300) 53,833,028
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (678,710) (1,260,636)
Net Realized Gain (23,789,109) (36,242,647)
-------------- --------------
Total Distributions to Shareholders (24,467,819) (37,503,283)
-------------- --------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Proceeds from Shares of Beneficial Interest Sold 74,694,963 55,262,754
Reinvestment of Dividends and Distributions 19,317,244 27,700,048
Cost of Shares of Beneficial Interest Redeemed (111,433,558) (75,473,543)
-------------- --------------
Net Increase (Decrease) from Transactions in
Shares of Beneficial
Interest (17,421,351) 7,489,259
-------------- --------------
Total Increase (Decrease) in Net Assets (74,924,470) 23,819,004
NET ASSETS
Beginning of Fiscal Year 261,803,657 237,984,653
-------------- --------------
End of Fiscal Year (including undistributed net
investment income of
$148,445 and $77,927, respectively) $ 186,879,187 $ 261,803,657
-------------- --------------
-------------- --------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
10
<PAGE>
J.P. MORGAN U.S. SMALL COMPANY FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share outstanding throughout each year are as follows:
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED MAY 31,
----------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $ 27.68 $ 26.04 $ 26.20 $ 22.02 $ 21.40
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.08 0.11 0.18 0.26 0.22
Net Realized and Unrealized Gain (Loss) on
Investment (3.30) 5.58 2.00 6.96 2.13
-------- -------- -------- -------- --------
Total from Investment Operations (3.22) 5.69 2.18 7.22 2.35
-------- -------- -------- -------- --------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (0.08) (0.14) (0.21) (0.26) (0.21)
Net Realized Gain (2.84) (3.91) (2.13) (2.78) (1.52)
-------- -------- -------- -------- --------
Total Distributions to Shareholders (2.92) (4.05) (2.34) (3.04) (1.73)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF YEAR $ 21.54 $ 27.68 $ 26.04 $ 26.20 $ 22.02
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
RATIOS AND SUPPLEMENTAL DATA
Total Return (10.95%) 23.37% 9.49% 35.48% 12.28%
Net Assets, End of Year (in thousands) $186,879 $261,804 $237,985 $220,917 $179,130
Ratios to Average Net Assets
Expenses 1.02% 0.97% 0.90% 0.90% 0.90%
Net Investment Income 0.34% 0.39% 0.71% 1.10% 1.02%
Expenses without Reimbursement 1.02% 1.03% 1.03% 1.03% 1.12%
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
11
<PAGE>
J.P. MORGAN U.S. SMALL COMPANY FUND
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1999
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
J.P. Morgan U.S. Small Company Fund (the "fund") is a separate series of J.P.
Morgan Funds, a Massachusetts business trust (the "trust") which was organized
on November 4, 1992. The trust is registered under the Investment Company Act of
1940, as amended, as an open-end management investment company. The fund, prior
to its tax-free reorganization on July 18, 1993 to a series of the trust,
operated as a stand-alone mutual fund. Costs related to the reorganization were
borne by Morgan Guaranty Trust Company of New York ("Morgan"), a wholly owned
subsidiary of J.P. Morgan & Co., Incorporated ("J.P. Morgan").
The fund invests all of its investable assets in The U.S. Small Company
Portfolio (the "portfolio"), a no-load, diversified, open-end management
investment company having the same investment objective as the fund. The value
of such investment included in the Statement of Assets and Liabilities reflects
the fund's proportionate interest in the net assets of the portfolio (35% at May
31, 1999). The performance of the fund is directly affected by the performance
of the portfolio. The financial statements of the portfolio, including the
Schedule of Investments, are included elsewhere in this report and should be
read in conjunction with the fund's financial statements.
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) Valuation of securities by the portfolio is discussed in Note 1a of the
portfolio's Notes to Financial Statements which are included elsewhere in
this report.
b) The fund records its share of net investment income, realized and
unrealized gain and loss and adjusts its investment in the portfolio each
day. All the net investment income and realized and unrealized gain and
loss of the portfolio is allocated pro rata among the fund and other
investors in the portfolio at the time of such determination.
c) Distributions to shareholders of net investment income are declared and
paid as dividends semi-annually. Distributions to shareholders of net
realized capital gains, if any, are declared and paid annually.
d) Expenses incurred by the trust with respect to any two or more funds in
the trust are allocated in proportion to the net assets of each fund in
the trust, except where allocations of direct expenses to each fund can
otherwise be made fairly. Expenses directly attributable to a fund are
charged to that fund.
e) The fund is treated as a separate entity for federal income tax purposes
and 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.
f) The fund accounts for and reports distributions to shareholders in
accordance with "Statement of Position 93-2: Determination, Disclosure,
and Financial Statement Presentation of Income, Capital Gain, and Return
of Capital Distributions by Investment Companies." The effect of applying
this statement as of
12
<PAGE>
J.P. MORGAN U.S. SMALL COMPANY FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1999
- --------------------------------------------------------------------------------
May 31, 1999 was to increase undistributed net investment income by
$54,710, decrease accumulated net realized loss on investment by $678,710
and decrease paid-in capital by $733,420. Net investment income, net
realized gains and net assets were not affected by this change. This
adjustment is primarily attributable to reclassification of dividend
income. In addition, a reclassification of approximately $7,734,824 was
made by the fund to decrease paid-in capital and increase net unrealized
appreciation of investments attributable to its allocation from the
portfolio. Net assets were not affected by the reclassification.
g) For federal income tax purposes, the fund had a capital loss carryforward
at May 31, 1999 of $14,416,582, all of which expires in the year 2007. To
the extent that this capital loss is used to offset future capital gains,
it is probable that gains so offset will not be distributed to
shareholders.
h) The fund incurred approximately $5,194,677 of capital losses in the period
from November 1, 1998, to May 31, 1999. These losses were deferred for tax
purposes until June 1, 1999.
2. TRANSACTIONS WITH AFFILIATES
a) The trust, on behalf of the fund, has retained Funds Distributor, Inc.
("FDI"), a registered broker-dealer, to serve as co-administrator and
distributor for the fund. Under a Co-Administration Agreement between FDI
and the trust, on behalf of the fund, FDI provides administrative services
necessary for the operations of the fund, furnishes office space and
facilities required for conducting the business of the fund and pays the
compensation of the fund's officers affiliated with FDI. The fund has
agreed to pay FDI fees equal to its allocable share of an annual
complex-wide charge of $425,000 plus FDI's out-of-pocket expenses. The
amount allocable to the fund is based on the ratio of the fund's net
assets to the aggregate net assets of the trust and certain other
investment companies subject to similar agreements with FDI. For the
fiscal year ended May 31, 1999, the fee for these services amounted to
$3,605.
b) The trust, on behalf of the fund, has an Administrative Services Agreement
(the "Services Agreement") with Morgan, under which Morgan is responsible
for 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
portfolio and the other portfolios in which the trust and the J.P. Morgan
Institutional Funds invest (the "master portfolios") and J.P. Morgan
Series Trust 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, the master portfolios, other
investors in the master portfolios for which Morgan provides similar
services, and J.P. Morgan Series Trust. For the fiscal year ended May 31,
1999, the fee for these services amounted to $55,836.
13
<PAGE>
J.P. MORGAN U.S. SMALL COMPANY FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1999
- --------------------------------------------------------------------------------
In addition, J.P. Morgan had agreed to reimburse the fund to the extent
necessary to maintain the total operating expenses of the fund, including
the expenses allocated to the fund from the portfolio, at no more than
1.01% of the average daily net assets of the fund through June 30, 1998.
Effective July 1, 1998, the expense cap has been removed.
c) 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 0.25% of the average daily net assets of
the fund. For the fiscal year ended May 31, 1999, the fee for these
services amounted to $510,994.
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.
d) 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
$5,130 for the fiscal year ended May 31, 1999.
e) An aggregate annual fee of $75,000 is paid to each trustee for serving as
a trustee of the trust, the J.P. Morgan Institutional Funds, the master
portfolios and J.P. Morgan Series Trust. 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 $1,100.
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 FISCAL FOR THE FISCAL
YEAR ENDED YEAR ENDED
MAY 31, 1999 MAY 31, 1998
-------------- --------------
<S> <C> <C>
Shares sold...................................... 3,301,060 1,988,341
Reinvestment of dividends and distributions...... 954,446 1,058,956
Shares redeemed.................................. (5,037,132) (2,727,588)
-------------- --------------
Net Increase (Decrease).......................... (781,626) 319,709
-------------- --------------
-------------- --------------
</TABLE>
14
<PAGE>
J.P. MORGAN U.S. SMALL COMPANY FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1999
- --------------------------------------------------------------------------------
4. CREDIT AGREEMENT
The trust, on behalf of the fund, together with other affiliated investment
companies (the "funds"), entered into a revolving line of credit agreement (the
"Agreement") on May 27, 1998, with unaffiliated lenders. The maximum borrowing
under the Agreement is $150,000,000. The Agreement expired on May 26, 1999,
however, the fund as party to the Agreement has extended the Agreement and
continues its participation therein for an additional 364 days until May 23,
2000. The purpose of the Agreement is to provide another alternative for
settling large fund shareholder redemptions. Interest on any such borrowings
outstanding will approximate market rates. The funds pay a commitment fee at an
annual rate of 0.085% (0.065% prior to May 26, 1999) on the unused portion of
the committed amount. This is allocable to the funds in accordance with
procedures established by their respective trustees or directors. There were no
outstanding borrowings pursuant to the Agreement as of May 31, 1999.
15
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of
J.P. Morgan U.S. Small Company Fund
In our opinion, the accompanying statement of assets and liabilities 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 U.S. Small Company Fund (one of the series constituting part of J.P.
Morgan Funds, hereafter referred to as the "fund") at May 31, 1999, the results
of its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended and the financial highlights for
each of the five years in the period then ended, 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 audits. We conducted our
audits 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
audits provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
July 14, 1999
16
<PAGE>
The U.S. Small Company Portfolio
Annual Report May 31, 1999
(The following pages should be read in conjunction
with J.P. Morgan U.S. Small Company Fund
Annual Financial Statements)
17
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS
MAY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------- -------------
<S> <C> <C>
COMMON STOCKS (97.3%)
BASIC INDUSTRIES (9.0%)
CHEMICALS (4.8%)
Albemarle Corp................................... 233,500 $ 5,239,156
Bush Boake Allen, Inc.+.......................... 145,600 4,195,100
General Chemical Group, Inc...................... 194,300 825,775
Geon Co.......................................... 189,800 5,717,725
Georgia Gulf Corp................................ 237,600 3,549,150
Minerals Technologies, Inc....................... 36,500 1,943,625
Wellman, Inc..................................... 297,000 4,046,625
-------------
25,517,156
-------------
FOREST PRODUCTS & PAPER (1.7%)
Caraustar Industries, Inc........................ 205,100 5,390,284
Universal Forest Products, Inc................... 190,600 3,442,712
-------------
8,832,996
-------------
METALS & MINING (2.5%)
Commercial Metals Co............................. 114,500 2,683,594
Kennametal, Inc.................................. 54,200 1,541,312
Mueller Industries, Inc.+........................ 249,200 7,226,800
Schnitzer Steel Industries, Inc., Class A........ 133,100 2,013,137
-------------
13,464,843
-------------
TOTAL BASIC INDUSTRIES......................... 47,814,995
-------------
CONSUMER GOODS & SERVICES (17.7%)
AUTOMOTIVE (0.7%)
Amcast Industrial Corp........................... 82,600 1,388,712
Ducati Motor Holding (Spon. ADR)+................ 15,700 471,000
Sonic Automotive, Inc.+.......................... 136,300 1,771,900
-------------
3,631,612
-------------
AUTOMOTIVE SUPPLIES (0.8%)
Dura Automotive Systems, Inc.+................... 48,200 1,427,925
Tower Automotive, Inc.+.......................... 117,700 2,692,387
-------------
4,120,312
-------------
BROADCASTING & PUBLISHING (1.5%)
Entercom Communications Corp.+................... 86,100 2,809,012
HA-LO Industries, Inc.+.......................... 359,850 4,340,691
Radio One, Inc.+................................. 10,800 435,375
TV Guide, Inc., Class A+......................... 12,100 482,487
-------------
8,067,565
-------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------- -------------
<S> <C> <C>
BUSINESS & PUBLIC SERVICES (1.3%)
Kroll-O'Gara Co.+................................ 89,300 $ 1,794,372
Metzler Group, Inc.+............................. 39,100 1,286,634
Realty Information Group, Inc.+.................. 52,400 1,894,587
Tetra Tech, Inc.+................................ 89,900 1,910,375
-------------
6,885,968
-------------
EDUCATION (0.9%)
Argosy Education Group, Inc., Class A+........... 57,400 498,662
Education Management Corp.+...................... 195,600 3,502,462
ITT Educational Services, Inc.+.................. 30,800 733,425
-------------
4,734,549
-------------
ENTERTAINMENT, LEISURE & MEDIA (3.9%)
American Classic Voyages Co.+.................... 57,000 1,001,062
Anchor Gaming+................................... 78,600 3,524,719
Cinar Corp., Class B+............................ 266,000 6,334,125
Florida Panthers Holdings, Inc.+................. 149,000 1,620,375
Media Metrix, Inc.+.............................. 5,200 247,650
MGM Grand, Inc.+................................. 81,400 3,418,800
Nielsen Media Research, Inc...................... 51,000 1,364,250
Steiner Leisure Ltd.+(i)......................... 116,425 3,339,942
-------------
20,850,923
-------------
FOOD, BEVERAGES & TOBACCO (1.5%)
American Italian Pasta Co., Class A+............. 69,100 1,900,250
Beringer Wine Estates Holdings, Inc., Class B+... 47,900 1,950,428
Keebler Foods Co.+............................... 120,400 4,033,400
-------------
7,884,078
-------------
HOUSEHOLD APPLIANCES & FURNISHINGS (0.8%)
Furniture Brands International, Inc.+............ 106,600 2,585,050
Stanley Furniture Co., Inc.+..................... 80,900 1,688,787
-------------
4,273,837
-------------
HOUSEHOLD PRODUCTS (0.1%)
Blyth Industries, Inc.+.......................... 21,100 590,800
-------------
MISCELLANEOUS (0.3%)
Carriage Services, Inc.+......................... 26,300 434,863
WESCO International, Inc.+....................... 61,200 1,212,525
-------------
1,647,388
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
18
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------- -------------
<S> <C> <C>
RESTAURANTS & HOTELS (0.6%)
Extended Stay America, Inc.+..................... 121,200 $ 1,287,750
Sun International Hotels Ltd.+(i)................ 41,600 1,838,200
-------------
3,125,950
-------------
RETAIL (5.3%)
Alloy Online, Inc.+.............................. 35,200 427,900
Ames Department Stores, Inc.+.................... 100,000 4,096,875
barnesandnoble.com, inc.+........................ 36,600 849,806
DM Management Co.+............................... 32,500 523,047
eToys, Inc.+..................................... 21,700 1,313,528
Lithia Motors, Inc., Class A+.................... 91,800 1,738,462
Pacific Sunwear of California, Inc.+............. 39,600 1,487,475
Quiksilver, Inc.+................................ 43,150 1,229,775
Regis Corp....................................... 87,750 2,119,711
School Specialty, Inc.+.......................... 188,200 2,805,356
Shoe Carnival, Inc.+............................. 41,800 676,637
ShopKo Stores, Inc.+............................. 148,400 5,268,200
The Finish Line, Inc., Class A+.................. 155,500 1,904,875
Williams-Sonoma, Inc.+........................... 43,600 1,299,825
Zale Corp.+...................................... 65,600 2,529,700
-------------
28,271,172
-------------
TOTAL CONSUMER GOODS & SERVICES................ 94,084,154
-------------
ENERGY (3.5%)
GAS EXPLORATION (1.4%)
Barrett Resources Corp.+......................... 21,000 710,062
Devon Energy Corp................................ 98,800 3,433,300
Newfield Exploration Co.+........................ 129,600 3,288,600
-------------
7,431,962
-------------
OIL-SERVICES (2.1%)
Cooper Cameron Corp.+............................ 149,200 5,399,175
ENSCO International, Inc......................... 103,900 1,844,225
National-Oilwell, Inc.+.......................... 132,500 1,598,281
Smith International, Inc.+....................... 59,100 2,556,075
-------------
11,397,756
-------------
TOTAL ENERGY................................... 18,829,718
-------------
FINANCE (17.9%)
BANKING (8.4%)
BancorpSouth, Inc................................ 33,200 566,475
Bank United Corp., Class A....................... 160,200 6,643,294
Banknorth Group, Inc............................. 119,400 3,190,219
Colonial BancGroup, Inc.......................... 241,800 3,113,175
Commercial Federal Corp.......................... 139,049 3,172,055
Community First Bankshares, Inc.................. 139,300 2,947,066
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------- -------------
<S> <C> <C>
BANKING (CONTINUED)
FirstFed Financial Corp.+........................ 145,200 $ 2,740,650
Flagstar Bancorp, Inc............................ 20,700 485,156
GBC Bancorp...................................... 106,000 1,934,500
Hamilton Bancorp, Inc.+.......................... 95,000 2,164,219
Hudson United Bancorp............................ 135,240 4,141,725
National Commerce Bancorporation................. 302,400 7,078,050
Prime Bancshares, Inc............................ 49,700 848,006
Republic Security Financial Corp................. 122,900 1,025,447
Sterling Bancshares, Inc......................... 11,800 148,237
Summit Bancshares, Inc........................... 31,000 563,812
Sun Bancorp, Inc.+............................... 55,572 1,104,493
Trustco Bank Corp................................ 38,128 1,050,903
Westamerica Bancorporation....................... 49,200 1,700,475
-------------
44,617,957
-------------
FINANCIAL SERVICES (3.1%)
Allied Capital Corp.............................. 130,900 2,458,466
Creditrust Corp.+................................ 30,100 707,350
Donaldson, Lufkin & Jenrette, Inc-DLJdirect+..... 15,600 643,500
Franchise Finance Corporation of America......... 53,100 1,307,587
Gabelli Asset Management, Inc., Class A+......... 103,000 1,718,812
Heller Financial, Inc............................ 60,100 1,787,975
Intelligent Life Corp.+.......................... 11,700 102,375
Litchfield Financial Corp........................ 154,040 2,527,219
MicroFinancial, Inc.............................. 42,200 511,675
NextCard, Inc.+.................................. 9,100 271,578
Ocwen Financial Corp.+........................... 159,500 1,385,656
Willis Lease Finance Corp.+...................... 198,200 3,220,750
-------------
16,642,943
-------------
INSURANCE (2.6%)
Annuity and Life Re (Holdings), Ltd.(i).......... 136,100 3,513,081
Capital Re Corp.................................. 36,300 592,144
E.W. Blanch Holdings, Inc........................ 40,100 2,566,400
Fremont General Corp............................. 109,100 2,311,556
RenaissanceRe Holdings Ltd.+(i).................. 124,800 4,648,800
-------------
13,631,981
-------------
REAL ESTATE INVESTMENT TRUSTS (3.8%)
Arden Realty, Inc................................ 123,400 3,154,412
Burnham Pacific Properties, Inc.................. 151,300 1,673,756
Cousins Properties, Inc.......................... 94,800 3,288,375
Macerich Co...................................... 79,200 2,093,850
Manufactured Home Communities, Inc............... 96,300 2,491,762
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------- -------------
<S> <C> <C>
REAL ESTATE INVESTMENT TRUSTS (CONTINUED)
Mills Corp....................................... 82,600 $ 1,822,362
Post Properties, Inc............................. 134,700 5,640,563
-------------
20,165,080
-------------
TOTAL FINANCE.................................. 95,057,961
-------------
HEALTHCARE (11.8%)
BIOTECHNOLOGY (5.3%)
Affymetrix, Inc.+................................ 69,400 2,433,338
Applied Analytical Industries, Inc.+............. 111,700 1,493,988
Human Genome Sciences, Inc.+..................... 170,300 7,184,531
IDEC Pharmaceuticals Corp.+...................... 81,000 4,082,906
Inhale Therapeutics Systems+..................... 26,300 696,128
Millennium Pharmaceuticals, Inc.+................ 141,300 5,342,906
MiniMed, Inc.+................................... 12,600 743,400
Novoste Corp.+................................... 57,100 1,457,834
Osteotech, Inc.+................................. 41,450 1,468,884
SangStat Medical Corp.+.......................... 223,200 3,089,925
Trimeris, Inc.+.................................. 23,200 313,925
-------------
28,307,765
-------------
HEALTH SERVICES (3.6%)
Accredo Health, Inc.+............................ 9,400 254,975
Alterra Healthcare Corp.+........................ 317,829 3,893,405
IDX Systems Corp.+............................... 108,300 2,589,047
Lifeline Systems, Inc.+.......................... 4,700 87,538
Mediconsult.com, Inc.+........................... 14,600 219,456
MedQuist, Inc.+.................................. 126,700 4,632,469
OnHealth Network Co.+............................ 15,900 180,863
Renal Care Group, Inc.+.......................... 60,500 1,667,531
Sunrise Assisted Living, Inc.+................... 145,300 5,403,344
-------------
18,928,628
-------------
MEDICAL SUPPLIES (2.1%)
CONMED Corp.+.................................... 114,600 3,892,819
IDEXX Laboratories, Inc.+........................ 107,700 2,739,619
Kensey Nash Corp.+............................... 178,200 1,759,725
ResMed, Inc.+.................................... 52,000 1,454,375
Xomed Surgical Products, Inc.+................... 32,100 1,314,094
-------------
11,160,632
-------------
PHARMACEUTICALS (0.8%)
Ligand Pharmaceuticals, Class B+................. 308,900 3,156,572
U.S. Bioscience, Inc.+........................... 122,800 990,075
-------------
4,146,647
-------------
TOTAL HEALTHCARE............................... 62,543,672
-------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------- -------------
<S> <C> <C>
INDUSTRIAL PRODUCTS & SERVICES (9.8%)
BUILDING MATERIALS (0.8%)
Comfort Systems USA, Inc.+....................... 84,500 $ 1,330,875
Elcor Corp....................................... 35,900 1,449,463
Service Experts, Inc.+........................... 82,300 1,527,694
-------------
4,308,032
-------------
CAPITAL GOODS (2.0%)
ABC Rail Products Corp.+......................... 81,000 1,182,094
Applied Power, Inc., Class A..................... 103,200 2,502,600
IDEX Corp........................................ 120,800 3,389,950
Milacron, Inc.................................... 90,700 1,933,044
Shaw Group, Inc.+................................ 124,200 1,622,363
-------------
10,630,051
-------------
COMMERCIAL SERVICES (1.6%)
@plan., Inc.+.................................... 7,300 96,497
Central Parking Corp............................. 38,000 1,235,000
Newgen Results Corp.+............................ 18,300 212,738
On Assignment, Inc.+............................. 119,500 3,092,063
Romac International, Inc.+....................... 75,900 1,093,434
Snyder Communications, Inc.+..................... 57,900 1,414,931
Source Information Management Co.+............... 98,400 1,482,150
-------------
8,626,813
-------------
CONSTRUCTION & HOUSING (0.4%)
D.R. Horton, Inc.+............................... 131,400 2,233,800
-------------
DIVERSIFIED MANUFACTURING (0.8%)
Gentek, Inc...................................... 194,300 2,525,900
Intermet Corp.................................... 131,500 1,836,891
-------------
4,362,791
-------------
MACHINERY (1.3%)
Manitowoc Co., Inc............................... 36,000 1,224,000
New Holland N.V.(i).............................. 146,300 2,185,356
Terex Corp.+..................................... 104,800 3,242,250
-------------
6,651,606
-------------
MANUFACTURING (2.2%)
AptarGroup, Inc.................................. 49,300 1,355,750
Herman Miller, Inc............................... 52,000 1,048,125
HON INDUSTRIES, Inc.............................. 19,500 475,313
JAKKS Pacific, Inc.+............................. 30,800 851,813
Mettler-Toledo International, Inc................ 159,200 3,940,200
MKS Instruments, Inc.+........................... 142,900 2,179,225
National R.V. Holdings, Inc.+.................... 42,000 1,078,875
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------- -------------
<S> <C> <C>
MANUFACTURING (CONTINUED)
Rock of Ages Corp.+.............................. 50,500 $ 539,719
Steelcase, Inc., Class A......................... 19,600 358,925
-------------
11,827,945
-------------
PACKAGING & CONTAINERS (0.7%)
Gaylord Container Corp., Class A+................ 171,200 1,433,800
Ivex Packaging Corp.+............................ 107,200 2,063,600
-------------
3,497,400
-------------
TOTAL INDUSTRIAL PRODUCTS & SERVICES........... 52,138,438
-------------
TECHNOLOGY (18.5%)
AEROSPACE (1.6%)
Armor Holdings, Inc.+............................ 85,300 890,319
L-3 Communications Holdings, Inc.+............... 153,800 7,574,650
-------------
8,464,969
-------------
COMPUTER SOFTWARE (6.1%)
Acxiom Corp.+.................................... 58,400 1,582,275
Aspect Development, Inc.+........................ 104,400 1,481,175
BindView Development Corp.+...................... 67,900 1,353,756
Concord Communications, Inc.+.................... 98,800 4,421,300
Concur Technologies, Inc.+....................... 45,900 1,474,538
Excalibur Technologies Corp.+.................... 56,900 803,713
I2 Technologies, Inc.+........................... 42,900 1,351,350
Inktomi Corp.+................................... 14,300 1,471,113
Legato Systems, Inc.+............................ 38,500 2,106,672
Macromedia, Inc.+................................ 22,600 866,569
MicroStrategy, Inc.+............................. 123,500 3,079,781
New Era of Networks, Inc.+....................... 66,800 2,976,775
Razorfish, Inc.+................................. 19,700 743,675
SalesLogix Corp.+................................ 54,200 626,688
Sanchez Computer Associates, Inc.+............... 35,200 2,413,400
TenFold Corp.+................................... 3,600 97,538
Unify Corp.+..................................... 124,000 1,724,375
Wind River Systems, Inc.+........................ 179,600 3,777,213
-------------
32,351,906
-------------
COMPUTER SYSTEMS (1.0%)
Allaire Corp.+................................... 18,800 1,014,613
Brocade Communications Systems, Inc.+............ 3,900 252,525
Equant NV-NY Registered Shares+(i)............... 43,300 3,591,194
Redback Networks, Inc.+.......................... 4,600 504,275
-------------
5,362,607
-------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------- -------------
<S> <C> <C>
INFORMATION PROCESSING (5.7%)
24/7 Media, Inc.+................................ 52,100 $ 1,499,503
AppliedTheory Corp.+............................. 2,700 36,534
CAIS Internet, Inc.+............................. 15,000 195,938
CCC Information Services Group, Inc.+............ 69,400 869,669
Computer Horizons Corp.+......................... 86,400 1,582,200
Covad Communications Group, Inc.+................ 22,200 1,128,731
DoubleClick, Inc.+............................... 9,600 934,500
iVillage, Inc.+.................................. 10,400 498,550
Mpath Interactive, Inc.+......................... 36,300 941,531
Multex.com, Inc.+................................ 40,200 1,218,563
Net Perceptions, Inc.+........................... 55,100 929,813
NorthPoint Communications Group, Inc.+........... 18,900 801,478
pcOrder.com, Inc.+............................... 29,700 1,084,050
Pegasus Systems, Inc.+........................... 43,800 1,523,419
Profit Recovery Group International, Inc.+....... 77,300 2,845,606
Rhythms NetConnections, Inc.+.................... 26,400 1,275,450
Scient Corp.+.................................... 5,500 276,203
SoftNet Systems, Inc.+........................... 37,000 959,688
TheStreet.com, Inc.+............................. 15,200 544,350
TMP Worldwide, Inc.+............................. 35,900 1,752,369
USWeb Corp.+..................................... 120,100 3,051,291
Visual Networks, Inc.+........................... 75,500 2,224,891
WorldGate Communications, Inc.+.................. 69,800 2,610,956
Xoom.com, Inc.+.................................. 13,900 638,966
Ziff-Davis, Inc.+................................ 42,200 880,925
-------------
30,305,174
-------------
SEMICONDUCTORS (3.7%)
Applied Micro Circuits Corp.+.................... 78,700 4,645,759
Applied Science and Technology, Inc.+............ 94,100 1,343,866
ATMI, Inc.+...................................... 176,400 3,869,775
Exar Corp.+...................................... 86,800 1,817,375
hi / fn, inc.+................................... 34,800 2,012,963
Lam Research Corp.+.............................. 46,400 1,286,150
Maker Communications, Inc.+...................... 22,500 506,250
PLX Technology, Inc.+............................ 9,100 164,938
SDL, Inc.+....................................... 43,500 4,042,781
-------------
19,689,857
-------------
TELECOMMUNICATIONS-EQUIPMENT (0.4%)
ANTEC Corp.+..................................... 65,700 1,923,778
-------------
TOTAL TECHNOLOGY............................... 98,098,291
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------- -------------
<S> <C> <C>
TELECOMMUNICATIONS (3.4%)
TELECOMMUNICATION SERVICES (3.4%)
Allegiance Telecom, Inc.+........................ 85,500 $ 3,160,828
American Mobile Satellite Corp.+................. 87,600 1,240,088
CapRock Communications Corp.+.................... 74,700 1,676,081
Concentric Network Corp.+........................ 132,600 4,288,781
Copper Mountain Networks, Inc.+.................. 9,300 584,156
NEXTLINK Communications, Inc., Class A+.......... 54,100 4,136,959
Teligent, Inc., Class A+......................... 65,500 3,205,406
-------------
TOTAL TELECOMMUNICATIONS....................... 18,292,299
-------------
TRANSPORTATION (2.4%)
AIRLINES (0.2%)
Alaska Air Group, Inc.+.......................... 30,700 1,274,050
-------------
TRANSPORT & SERVICES (1.0%)
C.H. Robinson Worldwide, Inc..................... 134,800 4,347,300
Forward Air Corp.+............................... 39,400 1,074,881
-------------
5,422,181
-------------
TRUCK & FREIGHT CARRIERS (1.2%)
American Freightways Corp.+...................... 70,900 1,242,966
Werner Enterprises, Inc.......................... 270,925 5,206,840
-------------
6,449,806
-------------
TOTAL TRANSPORTATION........................... 13,146,037
-------------
UTILITIES (3.3%)
ELECTRIC (1.0%)
Cleco Corp....................................... 154,600 5,111,463
-------------
NATURAL GAS (1.4%)
Atmos Energy Corp................................ 147,800 3,787,375
Wicor, Inc....................................... 141,800 3,615,900
-------------
7,403,275
-------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------- -------------
<S> <C> <C>
TELEPHONE (0.4%)
ITC DeltaCom, Inc.+.............................. 92,000 $ 2,190,750
-------------
WATER (0.5%)
E'Town Corp...................................... 61,000 2,611,563
-------------
TOTAL UTILITIES................................ 17,317,051
-------------
TOTAL COMMON STOCKS (COST $464,824,834)........ 517,322,616
-------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
-------------------
<S> <C> <C>
SHORT-TERM INVESTMENTS (0.6%)
U.S. GOVERNMENT AGENCY OBLIGATIONS (0.6%)
Student Loan Marketing Association 4.680%, due
06/01/1999 (cost $3,275,000)................... $ 3,275,000 3,275,000
-------------
TOTAL INVESTMENTS (COST $468,099,834) (97.9%).........................
520,597,616
OTHER ASSETS IN EXCESS OF LIABILITIES (2.1%)..........................
11,269,369
-------------
NET ASSETS (100.0%)................................................... $ 531,866,985
-------------
-------------
</TABLE>
- ------------------------------
Note: Based on the cost of investments of $478,359,265 for federal income tax
purposes at May 31, 1999, the aggregate gross unrealized appreciation and
depreciation was $71,025,085 and $28,786,734, respectively, resulting in net
unrealized appreciation of $42,238,351.
+ Non-income producing security.
(i) Foreign security.
Spon. ADR - Sponsored American Depositary Receipt.
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $468,099,834 ) $520,597,616
Cash 1,452
Receivable for Investments Sold 14,247,926
Dividends and Interest Receivable 288,632
Prepaid Trustees' Fees 2,571
Prepaid Expenses and Other Assets 3,207
------------
Total Assets 535,141,404
------------
LIABILITIES
Payable for Investments Purchased 2,920,819
Advisory Fee Payable 277,509
Custody Fee Payable 32,261
Administrative Services Fee Payable 11,939
Administration Fee Payable 564
Fund Services Fee Payable 486
Accrued Expenses 30,841
------------
Total Liabilities 3,274,419
------------
NET ASSETS
Applicable to Investors' Beneficial Interests $531,866,985
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
23
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED MAY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividend Income $ 6,634,735
Interest Income 984,355
------------
Investment Income 7,619,090
EXPENSES
Advisory Fee $3,367,503
Custodian Fees and Expenses 225,074
Administrative Services Fee 153,123
Professional Fees and Expenses 50,506
Fund Services Fee 13,942
Printing Expenses 8,666
Administration Fee 8,564
Trustees' Fees and Expenses 7,720
Insurance Expense 1,856
----------
Total Expenses 3,836,954
------------
NET INVESTMENT INCOME 3,782,136
NET REALIZED LOSS ON INVESTMENTS (62,700,742)
NET CHANGE IN UNREALIZED DEPRECIATION OF
INVESTMENTS (25,375,283)
------------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS $(84,293,889)
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
24
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FISCAL FOR THE FISCAL
YEAR ENDED YEAR ENDED
MAY 31, 1999 MAY 31, 1998
-------------- --------------
<S> <C> <C>
DECREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 3,782,136 $ 7,007,518
Net Realized Gain (Loss) on Investments (62,700,742) 248,748,288
Net Change in Unrealized Depreciation of
Investments (25,375,283) (57,304,380)
-------------- --------------
Net Increase (Decrease) in Net Assets
Resulting from Operations (84,293,889) 198,451,426
-------------- --------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 289,628,106 244,010,077
Withdrawals (355,231,710) (830,979,636)
-------------- --------------
Net Decrease from Investors' Transactions (65,603,604) (586,969,559)
-------------- --------------
Total Decrease in Net Assets (149,897,493) (388,518,133)
NET ASSETS
Beginning of Fiscal Year 681,764,478 1,070,282,611
-------------- --------------
End of Fiscal Year $ 531,866,985 $ 681,764,478
-------------- --------------
-------------- --------------
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED MAY
31,
--------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Expenses 0.68% 0.68% 0.68% 0.67% 0.71%
Net Investment Income 0.67% 0.68% 0.92% 1.33% 1.21%
Portfolio Turnover 104% 96% 98% 93% 75%
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
25
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
MAY 31,1999
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The U.S. Small Company Portfolio (the "portfolio") is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company which was organized as a trust under the laws of
the State of New York. The portfolio commenced operations on July 19, 1993. The
portfolio's investment objective is to provide a high total return from a
portfolio of small company stocks. The Declaration of Trust permits the trustees
to issue an unlimited number of beneficial interests in the portfolio.
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 portfolio:
a) The portfolio values securities that are listed on an exchange using
prices supplied daily by an independent pricing service that are based on
the last traded price on a national securities exchange or in the absence
of recorded trades, at the readily available mean of the bid and asked
prices on such exchange, if such exchange or market constitutes the
broadest and most representative market for the security. Securities
listed on a foreign exchange are valued at the last traded price or in the
absence of recorded trades, at the readily available mean of the bid and
asked prices on such exchange available before the time when net assets
are valued. Independent pricing service procedures may also include the
use of prices based on yields or prices of securities of comparable
quality, coupon, maturity and type, indications as to values from dealers,
operating data, and general market conditions. Unlisted securities are
valued at the average of the quoted bid and asked prices in the
over-the-counter market provided by a principal market maker or dealer. If
prices are not supplied by the portfolio's independent pricing service or
principal market maker or dealer, such securities are priced using fair
values in accordance with procedures adopted by the portfolio's Trustees.
All short-term securities with a remaining maturity of sixty days or less
are valued using the amortized cost method.
b) The portfolio's custodian or designated sub custodians, as the case may be
under tri-party repurchase agreements, takes possession of the collateral
pledged for investments in repurchase agreements on behalf of the
portfolio. It is the policy of the portfolio 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 portfolio 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 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.
26
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 31,1999
- --------------------------------------------------------------------------------
d) The portfolio intends to be treated as a partnership for federal income
tax purposes. As such, each investor in the portfolio will be taxed on its
share of the portfolio's ordinary income and capital gains. It is intended
that the portfolio's assets will be managed in such a way that an investor
in the portfolio will be able to satisfy the requirements of Subchapter M
of the Internal Revenue Code.
2. TRANSACTIONS WITH AFFILIATES
a) Prior to October 1, 1998, the portfolio had an Investment Advisory
Agreement with Morgan Guaranty Trust Company of New York ("Morgan"), a
wholly owned subsidiary of J.P. Morgan & Co. Incorporated ("J.P. Morgan").
Under the terms of the agreement, the portfolio paid Morgan at an annual
rate of 0.60% of the portfolio's average daily net assets. Effective
October 1, 1998, the portfolio's Investment Advisor is J.P. Morgan
Investment Management Inc.("JPMIM"), an affiliate of Morgan and a wholly
owned subsidiary of J.P. Morgan, and the terms of the agreement will
remain the same. For the fiscal year ended May 31, 1999, such fees
amounted to $3,367,503.
b) The portfolio has retained Funds Distributor, Inc. ("FDI"), a registered
broker-dealer, to serve as the co-administrator and exclusive placement
agent. Under a Co-Administration Agreement between FDI and the portfolio,
FDI provides administrative services necessary for the operations of the
portfolio, furnishes office space and facilities required for conducting
the business of the portfolio and pays the compensation of the portfolio's
officers affiliated with FDI. The portfolio 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 portfolio
is based on the ratio of the portfolio's net assets to the aggregate net
assets of the portfolio and certain other investment companies subject to
similar agreements with FDI. For the fiscal year ended May 31, 1999, the
fee for these services amounted to $8,564.
c) The portfolio has an Administrative Services Agreement (the "Services
Agreement") with Morgan, under which Morgan is responsible for certain
aspects of the administration and operation of the portfolio. Under the
Services Agreement, the portfolio 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
portfolio and certain other portfolios for which JPMIM acts as investment
advisor (the "master portfolios") and J.P. Morgan Series Trust 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 portfolio is determined by the proportionate share that its net assets
bear to the net assets of the portfolio, the master portfolios, other
investors in the master portfolios for which Morgan provides similar
services, and J.P. Morgan Series Trust. For the fiscal year ended May 31,
1999, the fee for these services amounted to $153,123.
d) The portfolio has a Fund Services Agreement with Pierpont Group, Inc.
("Group") to assist the trustees in exercising their overall supervisory
responsibilities for the portfolio's affairs. The trustees of the
portfolio represent all the existing shareholders of Group. The
portfolio's allocated portion of Group's costs in performing its services
amounted to $13,942 for the fiscal year ended May 31, 1999.
27
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 31,1999
- --------------------------------------------------------------------------------
e) An aggregate annual fee of $75,000 is paid to each trustee for serving as
a trustee of the portfolio, the J.P. Morgan Funds, the J.P. Morgan
Institutional Funds, the master portfolios and J.P. Morgan Series Trust.
The Trustees' Fees and Expenses shown in the financial statements
represents the portfolio's allocated portion of the total fees and
expenses. The portfolio'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 $2,900.
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the fiscal year
ended May 31, 1999 were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
- ----------------- ------------
<S> <C>
$562,002,476...... $611,017,357
</TABLE>
4. CREDIT AGREEMENT
The portfolio is party to a revolving line of credit agreement (the "Agreement")
as discussed more fully in Note 4 of the fund's Notes to the Financial
Statements which are included elsewhere in this report.
28
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Investors of
The U.S. Small Company Portfolio
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 supplementary data present fairly, in all material
respects, the financial position of The U.S. Small Company Portfolio (the
"portfolio") at May 31, 1999, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and the supplementary data for each of the five years in the period
then ended, in conformity with generally accepted accounting principles. These
financial statements and supplementary data (hereafter referred to as "financial
statements") are the responsibility of the portfolio's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with 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 audits, which included confirmation of securities at May 31,
1999 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
July 14, 1999
29
<PAGE>
J.P. MORGAN FUNDS
PRIME MONEY MARKET FUND
FEDERAL MONEY MARKET FUND
TAX EXEMPT MONEY MARKET FUND
TAX AWARE ENHANCED INCOME FUND: SELECT SHARES
SHORT TERM BOND FUND
BOND FUND
GLOBAL STRATEGIC INCOME FUND
EMERGING MARKETS DEBT FUND
TAX EXEMPT BOND FUND
NEW YORK TAX EXEMPT BOND FUND
CALIFORNIA BOND FUND: SELECT SHARES
DIVERSIFIED FUND
DISCIPLINED EQUITY FUND
U.S. EQUITY FUND
U.S. SMALL COMPANY FUND
U.S. SMALL COMPANY OPPORTUNITIES FUND
TAX AWARE U.S. EQUITY FUND: SELECT SHARES
INTERNATIONAL EQUITY FUND
EUROPEAN EQUITY FUND
INTERNATIONAL OPPORTUNITIES FUND
EMERGING MARKETS EQUITY FUND
GLOBAL 50 FUND: SELECT SHARES
FOR MORE INFORMATION ON THE J.P. MORGAN FUNDS, CALL J.P. MORGAN
FUNDS SERVICES AT
(800) 521-5411.
IM0474-M
J.P. MORGAN
U.S. SMALL
COMPANY FUND
ANNUAL REPORT
MAY 31, 1999
