<PAGE>
LETTER TO THE SHAREHOLDERS OF THE J.P. MORGAN
U.S. SMALL COMPANY OPPORTUNITIES FUND
January 3, 2000
Dear Shareholder:
The six months ended November 30, 1999 were quite volatile for small growth
companies. J.P. Morgan U.S. Small Company Opportunities Fund returned 35.00% for
the period, outperforming the Russell 2000 Growth Index, which returned 13.51%,
as well as the Lipper Small Company Fund Average, which returned 32.22%.
The fund's net asset value increased from $12.17 per share on May 31, 1999, to
$16.43 per share on November 30, 1999. The fund's net assets stood at
approximately $442.1 million at the end of November. The net assets of the
master portfolio, in which the fund invests, were approximately $445.1 million
at November 30, 1999. There were no distributions made during the period.
This report includes an interview with Candice Eggerss, the portfolio manager
primarily responsible for the master portfolio. In this interview, Candice
discusses events in the small-cap market, portfolio performance, and her outlook
for the coming months.
As chairman and president of Asset Management Services, we appreciate your
investment in the fund. If you have any comments or questions, please call your
Morgan representative or J.P. Morgan Funds Services at (800) 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
One way to look at performance is to review a fund's average annual total
return. This figure takes the fund's actual (or cumulative) return and shows
what would have happened if the fund had achieved that return by performing at a
constant rate each year. Average annual total returns represent the average
yearly change of a fund's value over various time periods, typically one, five,
or ten years (or since inception). Total returns for periods of less than one
year are not annualized and provide a picture of how a fund has performed over
the short term.
<TABLE>
<CAPTION>
PERFORMANCE TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS
--------------------- ----------------------------
THREE SIX ONE SINCE
AS OF NOVEMBER 30, 1999 MONTHS MONTHS YEAR INCEPTION*
- ------------------------------------------------------------------------- ----------------------------
<S> <C> <C> <C> <C>
J.P. Morgan U.S. Small Company
Opportunities Fund 24.00% 35.00% 49.30% 22.80%
Russell 2000 Growth Index** 15.59% 13.51% 32.66% 12.24%
Lipper Small Company Fund Average 22.23% 32.22% 52.49% 19.07%
AS OF SEPTEMBER 30, 1999
- ------------------------------------------------------------------------- ----------------------------
<S> <C> <C> <C> <C>
J.P. Morgan U.S. Small Company
Opportunities Fund 1.63% 14.88% 39.54% 15.16%
Russell 2000 Growth Index** -4.92% 9.10% 32.63% 7.05%
Lipper Small Company Fund Average 0.81% 15.94% 43.29% 11.41%
</TABLE>
*THE FUND COMMENCED OPERATIONS ON JUNE 16, 1997, AND HAS PROVIDED A TOTAL RETURN
OF 23.76% FROM THAT DATE THROUGH NOVEMBER 30, 1999. FOR THE PURPOSES OF
COMPARISON, THE "SINCE INCEPTION" RETURNS ARE CALCULATED FROM JUNE 30, 1997, THE
FIRST DATE WHEN DATA FOR THE FUND'S BENCHMARK AND ITS LIPPER CATEGORY AVERAGE
WERE AVAILABLE.
** THE RUSSELL 2000 GROWTH INDEX IS AN UNMANAGED INDEX OF SMALL, GROWTH-ORIENTED
U.S. 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
AS DESCRIBED IN THE PROSPECTUS. LIPPER ANALYTICAL SERVICES, INC. IS A LEADING
SOURCE FOR MUTUAL FUND DATA.
2
<PAGE>
PORTFOLIO MANAGER Q&A
[PHOTO]
Following is an interview with CANDICE EGGERSS, vice president and member of the
portfolio management team for the master portfolio, in which the fund invests.
Candice has been with Morgan since 1996, and has nearly 13 years of industry
experience. Prior to joining Morgan, Candice was employed by Weiss, Peck &
Greer, Equitable Capital Management, and Morgan Stanley, where she held
positions including analyst, portfolio manager, and research director. Candice
received her B.S. from Stanford University and her M.B.A. from Columbia
University. This interview took place on December 14, 1999, and reflects
Candice's views on that date.
WHAT WERE THE KEY TRENDS IN THE U.S. EQUITY MARKET OVER THE PAST SIX MONTHS?
CE: On the macro level, there were a number of things happening over the past
six months that affected the market as a whole. First, the U.S. economy
continued to be strong, although there have been some recent signs of
moderation, including a slowing in housing starts and retail chain stores sales.
Overall, however, the economy continues to chug along. Second, we are in a
rising interest rate environment. With three quarter-point rate hikes in June,
August, and November, the Federal Reserve took back all the easing it had added
last year in the face of the global economic crisis. Third, and directly related
to Fed activity, is the fact that inflation continues to be benign. The Fed has
remained ever alert for the specter of inflation to rear its head, and for the
most part it has not. Wage pressures have remained dormant; it is in industrial
commodity prices that pressure has been building. This has been concentrated in
oil prices, which have more than doubled this year and we expect they still have
room to go up, particularly with Iraq's latest cessation of production. Fourth,
global growth on the whole has been showing signs of improvement. The recent
data coming out of Europe, Japan, and the emerging markets indicates that growth
is finally taking hold.
For the U.S. equity market, this six-month period was a highly volatile one.
Large caps established new highs during the summer, corrected in the first part
of the third quarter, and then recovered to new highs in October and November on
positive inflation data and earnings announcements. Small caps started off the
year on somewhat shaky footing. However, for the balance of the year, they have
done quite well, outperforming their larger-cap brethren and offering attractive
relative value. Positive earnings announcements and forecasts for strong future
earnings propelled the U.S. market forward while market leadership narrowed and
technology stocks asserted their dominance. On the flip side, however, any
company that missed consensus expectations, even by a small margin, was severely
punished by the market.
The increasing disparity between growth and value that was a general market
trend was particularly striking in the small cap arena. For the year-to-date
ended November 30, the Russell 2000 Growth returned 21.65% versus a negative
4.42% for the Russell 2000 Value. The IPO market has continued to be red hot as
well, with a large number of oversubscribed deals and Internet related issues
immediately soaring to dizzying
3
<PAGE>
heights. One advantage of being a major asset management firm is that we have
access to the companies going public. Last year we met with over 75% of the
companies that were doing their initial public offerings.
Another big trend this year, was the rise in M&A activity. Mergers and
acquisitions have been reshaping the small-cap landscape. Many of the deals this
year have been large companies buying small, such as AT&T's acquisition of
MetroNet. This has driven up the price of the targets and may serve as an
indicator that small caps are poised for a broad-based rally.
Lastly, on June 30th, the Russell 2000 Index, and its component Growth and Value
indices, was rebalanced. A number of large names were shifted out and the
weightings of "new economy" sectors (read tech and telecom) were increased, the
result being an index that is a much better representation of the small cap
world.
HOW DID THE PORTFOLIO PERFORM IN THIS ENVIRONMENT?
CE: The portfolio had a great six months! We are now over 1300 basis points
ahead of the index year-to-date. The tech and growth-driven market has
definitely been to our advantage. The sector bets we made were right on and we
were overweight the sectors that outperformed and underweight those that were
negative. We made effective theme bets as well. Within drugs, our focus on
genomics research stocks such as Human Genome Sciences (one of our core holdings
and top performers), Millennium, and Affymetrix proved to be the right one.
We continued to exploit the environment of increasing deregulation in
communications. In that sector, Allegiance and NextLink were among our winners.
In technology, we stayed on the leading edge of new Internet space. Our focus is
on software and hardware infrastructure companies that have defensible, real
business models. Exodus, MicroStrategy, Liberate, and AppNet among others added
significantly to performance. Our research team, whose expertise have been
broadening as the market evolves, has made an incredible contribution to our
strategy.
WHICH HOLDINGS ADDED TO PERFORMANCE?
CE: Human Genome Sciences, MicroStrategy, and Exodus were among our top
performers over the six months. We've owned Human Genome Sciences since its
IPO two years ago and the company continues to be at the forefront of
pharmaceutical and diagnostic product development. MicroStrategy was our top
software stock. The stocks of enterprise software providers in general have
skyrocketed this year and MicroStrategy has been among the big winners. In
October, the company announced that revenues were up 102% over the same
quarter last year and third-quarter net income rose 97% from a year ago.
Exodus, the Internet network and systems management company, had the greatest
positive impact on the portfolio during the period. The company has continued
to benefit from the trend toward outsourcing Internet hardware and software
management and broad market support for its aggressive expansion plan. The
firm recently formed strategic partnerships with hardware industry leaders
Compaq and Sun Microsystems. We sold Exodus following the June 30 rebalancing
of the index after it was bumped out because its market cap has gotten so big.
4
<PAGE>
WHICH ONES DETRACTED FROM PERFORMANCE?
CE: Although communications was among the top sectors, some of our holdings
there were the biggest drags on performance. Cinar Films, a Canadian film
company was down for the period through no fault of its own. Government
reimbursement rates in the industry have become a political flashpoint, and
Cinar has been caught in the fall-out. Concentric Network, another
communications name, also detracted from performance as investors took profits.
Two sporting goods companies, K-Swiss (athletic footwear) and Action Performance
(motor sports) were down due to earnings disappointments resulting from
weakening demand for athletic apparel.
WHAT IS YOUR OUTLOOK FOR THE COMING MONTHS?
CE: In an extremely volatile market, with very narrow leadership, we feel we are
properly positioned to take advantage of the opportunities out there. We
continue to be believers in fundamental research, viable business models, and
strong management teams. If you look at our biggest positions you'll see where
we have our strongest convictions. We believe that understanding market
sentiment is critical for managing the portfolio. Marginal investors have
transformed the market over the past few years with on-line trading and day
trading. The market is currently behaving irrationally so we have to pay
attention to market sentiment or miss out on in some cases, potentially
significant performance. It is hard to know when the market will become rational
again. We think technology will continue to captivate the market, which in turn
will cause a ripple effect through every industry. An old economy sector such as
chemicals could see delivery mechanisms transformed by e-commerce. We are being
slightly defensive, taking profits in areas we feel will be vulnerable in a
correction and buying those we think are undervalued and overlooked. We believe
that the strength of our research team will continue to carry us forward,
helping us navigate the choppy waters. We think the opportunity for small caps
is enormous as long as the economy stays its current course.
5
<PAGE>
FUND FACTS
INVESTMENT OBJECTIVE
J.P. Morgan U.S. Small Company Opportunities Fund seeks to provide long term
capital appreciation from a portfolio of equity securities of small companies.
The fund seeks to outperform the Russell 2000 Growth 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
6/16/97
- --------------------------------------------------------------------------------
FUND NET ASSETS AS OF 11/30/99
$442,122,406
- --------------------------------------------------------------------------------
PORTFOLIO NET ASSETS AS OF 11/30/99
$445,083,130
- --------------------------------------------------------------------------------
DIVIDEND PAYABLE DATE
12/20/99
- --------------------------------------------------------------------------------
CAPITAL GAIN PAYABLE DATE (IF APPLICABLE)
12/20/99
EXPENSE RATIO
The fund's current annualized expense ratio of 1.00% 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 NOVEMBER 30, 1999
PORTFOLIO ALLOCATION
(AS A PERCENTAGE OF TOTAL INVESTMENTS)
[CHART]
TECHNOLOGY 43.1%
CONSUMER GOODS & SERVICES 17.1%
HEALTHCARE 11.9%
TRANSPORTATION 11.1%
FINANCE 5.6%
BASIC INDUSTRIES 4.9%
INDUSTRIAL PRODUCTS & SERVICES 2.7%
ENERGY 2.1%
SHORT-TERM & OTHER INVESTMENTS 1.5%
<TABLE>
<CAPTION>
LARGEST EQUITY HOLDINGS % OF TOTAL INVESTMENTS
- ------------------------------------------------------------------------------
<S> <C>
HUMAN GENOME SCIENCES, INC. (HEALTHCARE) 2.4%
MICROSTRATEGY, INC. (TECHNOLOGY) 1.9%
ALLEGIANCE TELECOM, INC. (TELECOMMUNICATIONS) 1.7%
ATMI, INC. (TECHNOLOGY) 1.6%
LIBERATE TECHNOLOGIES, INC. (TECHNOLOGY) 1.6%
CYPRESS SEMICONDUCTOR CORP. (TECHNOLOGY) 1.5%
CONCENTRIC NETWORK CORP. (TELECOMMUNICATIONS) 1.5%
24/7 MEDIA, INC (TECHNOLOGY) 1.4%
UNIVISION COMMUNICATIONS, INC., CLASS A
(CONSUMER GOODS & SERVICES) 1.4%
LAM RESEARCH CORP. (TECHNOLOGY) 1.3%
</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>
J.P. MORGAN U.S. SMALL COMPANY OPPORTUNITIES FUND
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
NOVEMBER 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment in The U.S. Small Company
Opportunities Portfolio ("Portfolio"), at value $445,083,130
Receivable for Shares of Beneficial Interest Sold 1,103,402
Deferred Organization Expenses 4,307
Prepaid Expenses and Other Assets 1,361
------------
Total Assets 446,192,200
------------
LIABILITIES
Payable for Shares of Beneficial Interest
Redeemed 3,927,109
Shareholder Servicing Fee Payable 87,641
Administrative Services Fee Payable 8,746
Administration Fee Payable 447
Fund Services Fee Payable 228
Accrued Expenses 45,623
------------
Total Liabilities 4,069,794
------------
NET ASSETS
Applicable to 26,908,875 Shares of Beneficial
Interest Outstanding
(par value $0.001, unlimited shares authorized) $442,122,406
============
Net Asset Value, Offering and Redemption Price
Per Share $16.43
-----
-----
ANALYSIS OF NET ASSETS
Paid-in Capital $328,293,379
Accumulated Net Investment Loss (651,484)
Accumulated Net Realized Loss on Investment (10,572,927)
Net Unrealized Appreciation of Investment 125,053,438
------------
Net Assets $442,122,406
============
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
8
<PAGE>
J.P. MORGAN U.S. SMALL COMPANY OPPORTUNITIES FUND
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME ALLOCATED FROM PORTFOLIO
Allocated Dividend Income $ 629,503
Allocated Interest Income 458,392
Allocated Portfolio Expenses (1,186,906)
------------
Net Investment Income Allocated from
Portfolio (99,011)
FUND EXPENSES
Shareholder Servicing Fee $435,514
Administrative Services Fee 44,094
Transfer Agent Fees 22,496
Registration Fees 19,524
Professional Fees 6,526
Printing Expenses 6,099
Fund Services Fee 2,975
Administration Fee 2,443
Trustees' Fees and Expenses 1,020
Amortization of Organization Expenses 847
Insurance Expense 324
Miscellaneous 10,611
--------
Total Fund Expenses 552,473
------------
NET INVESTMENT LOSS (651,484)
NET REALIZED GAIN ON INVESTMENT ALLOCATED FROM
PORTFOLIO 9,066,318
NET CHANGE IN UNREALIZED APPRECIATION OF
INVESTMENT ALLOCATED FROM PORTFOLIO 101,947,087
------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $110,361,921
============
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
9
<PAGE>
J.P. MORGAN U.S. SMALL COMPANY OPPORTUNITIES FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE FISCAL
NOVEMBER 30, 1999 YEAR ENDED
(UNAUDITED) MAY 31, 1999
----------------- --------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Loss $ (651,484) $ (884,578)
Net Realized Gain (Loss) on Investment Allocated
from Portfolio 9,066,318 (19,297,966)
Net Change in Unrealized Appreciation of
Investment Allocated from Portfolio 101,947,087 15,587,441
------------ ------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 110,361,921 (4,595,103)
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Realized Gain -- (4,869,937)
------------ ------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Proceeds from Shares of Beneficial Interest Sold 118,751,932 208,981,870
Reinvestment of Dividends and Distributions -- 3,462,981
Cost of Shares of Beneficial Interest Redeemed (73,073,626) (105,829,742)
------------ ------------
Net Increase from Transactions in Shares of
Beneficial Interest 45,678,306 106,615,109
------------ ------------
Total Increase in Net Assets 156,040,227 97,150,069
NET ASSETS
Beginning of Period 286,082,179 188,932,110
------------ ------------
End of Period (including accumulated net
investment loss of $651,484 and $0,
respectively) $442,122,406 $286,082,179
============ ============
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
10
<PAGE>
J.P. MORGAN U.S. SMALL COMPANY OPPORTUNITIES FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share outstanding throughout each period is as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE JUNE 16, 1997
SIX MONTHS ENDED FOR THE FISCAL (COMMENCEMENT OF
NOVEMBER 30, 1999 YEAR ENDED OPERATIONS) THROUGH
(UNAUDITED) MAY 31, 1999 MAY 31, 1998
----------------- -------------- -------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.17 $ 12.57 $ 10.00
-------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Loss (0.02) (0.01) (0.02)
Net Realized and Unrealized Gain (Loss) on
Investments 4.28 (0.08) 2.59
-------- -------- --------
Total from Investment Operations 4.26 (0.09) 2.57
-------- -------- --------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Realized Gain -- (0.31) --
-------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 16.43 $ 12.17 $ 12.57
======== ======== ========
RATIOS AND SUPPLEMENTAL DATA
Total Return 35.00%(b) (0.49)% 25.70%(b)
Net Assets, End of Period (in thousands) $442,122 $286,082 $188,932
Ratios to Average Net Assets
Net Expenses 1.00%(a) 1.07% 1.19%(a)
Net Investment Income (0.37)%(a) (0.42)% (0.37)%(a)
Expenses without Reimbursement 1.00% 1.07% 1.25%
</TABLE>
- ------------------------
(a) Annualized.
(b) Not annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
11
<PAGE>
J.P. MORGAN U.S. SMALL COMPANY OPPORTUNITIES FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOVEMBER 30, 1999
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
J.P. Morgan U.S. Small Company Opportunities 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 commenced operations on June 16, 1997.
The fund invests all of its investable assets in The U.S. Small Company
Opportunities 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
(99% at November 30, 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.
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) The fund incurred organization expenses in the amount of $14,000. Morgan
Guaranty Trust Company of New York ("Morgan"), a wholly owned subsidiary
of J.P. Morgan Co. Inc. ("J.P. Morgan"), has paid the organization
expenses of the fund. The fund has agreed to reimburse Morgan for these
costs which are being deferred and amortized on a straight-line basis over
a period not to exceed five-years beginning with the commencement of
operations of the fund.
e) 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.
f) 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.
g) For federal income tax purposes, the fund had a capital loss carryforward
at May 31, 1999 of $14,885,080 which will expire 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.
12
<PAGE>
J.P. MORGAN U.S. SMALL COMPANY OPPORTUNITIES FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOVEMBER 30, 1999
- --------------------------------------------------------------------------------
h) For federal income tax purposes, the fund incurred approximately
$1,722,190 of realized capital losses in the period 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 six
months ended November 30, 1999, the fee for these services amounted to
$2,443.
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 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 six months ended
November 30, 1999, the fee for these services amounted to $44,094.
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 six months ended November 30, 1999, the fee for these
services amounted to $435,514.
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.
13
<PAGE>
J.P. MORGAN U.S. SMALL COMPANY OPPORTUNITIES FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOVEMBER 30, 1999
- --------------------------------------------------------------------------------
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. For the six
months ended November 30, 1999, the fund's allocated portion of Group's
costs in performing its services amounted to $2,975.
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 these 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 $600.
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 SIX
MONTHS ENDED FOR THE FISCAL
NOVEMBER 30, 1999 YEAR ENDED
(UNAUDITED) MAY 31, 1999
----------------- --------------
<S> <C> <C>
Shares of beneficial interest sold............... 8,520,880 17,770,492
Reinvestment of dividends and distributions...... -- 303,960
Shares of beneficial interest redeemed........... (5,115,723) (9,615,757)
---------- ----------
Net Increase..................................... 3,405,157 8,458,695
========== ==========
</TABLE>
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 was $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 until May 23, 2000. The maximum borrowing
under the new agreement is $150,000,000. The purpose of the Agreement is to
provide another alternative for settling large fund shareholder redemptions.
Interest on any such borrowings outstanding will approximate market rates. Prior
to May 26, 1999 the funds paid a commitment fee at an annual rate of 0.065% on
the unused portion of the committed amount; under the current Agreement, the
commitment fee has increased to an annual rate of 0.085% on the unused portion
of the committed amount. The commitment fee is allocated to the funds in
accordance with procedures established by their respective trustees or
directors. There were no outstanding borrowings pursuant to the Agreement at
November 30, 1999.
14
<PAGE>
The U.S. Small Company Opportunities Portfolio
Semi-Annual Report November 30, 1999
(unaudited)
(The following pages should be read in conjunction
with J.P Morgan U.S. Small Company Opportunities Fund
Semi-Annual Financial Statements)
15
<PAGE>
THE U.S. SMALL COMPANY OPPORTUNITIES PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
NOVEMBER 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -------------
<S> <C> <C>
COMMON STOCKS (98.4%)
BASIC INDUSTRIES (4.8%)
CHEMICALS (3.8%)
Albemarle Corp................................... 157,900 $ 3,059,312
Bush Boake Allen, Inc.+.......................... 28,300 711,037
General Chemical Group, Inc.+.................... 177,200 498,375
Geon Co.......................................... 96,100 2,907,025
Georgia Gulf Corp................................ 199,800 5,094,900
Wellman, Inc..................................... 291,000 4,637,812
------------
16,908,461
------------
FOREST PRODUCTS & PAPER (0.3%)
Universal Forest Products, Inc................... 99,000 1,522,125
------------
METALS & MINING (0.7%)
Kennametal, Inc.................................. 46,600 1,549,450
Mueller Industries, Inc.+........................ 48,800 1,756,800
------------
3,306,250
------------
TOTAL BASIC INDUSTRIES......................... 21,736,836
------------
CONSUMER GOODS & SERVICES (17.1%)
BROADCASTING & PUBLISHING (3.2%)
Entercom Communications Corp.+................... 54,200 3,099,562
Radio Unica Corp.+............................... 16,750 462,719
Scholastic Corp.+................................ 37,300 2,046,837
Spanish Broadcasting System, Inc., Class A+...... 45,700 1,450,975
Univision Communications, Inc., Class A+......... 70,300 6,151,250
World Wrestling Federation Entertainment,
Inc.+.......................................... 45,775 921,222
------------
14,132,565
------------
EDUCATION (0.9%)
DeVry, Inc.+..................................... 195,400 3,944,637
------------
ENTERTAINMENT, LEISURE & MEDIA (4.4%)
American Classic Voyages Co.+.................... 38,100 1,104,900
Anchor Gaming+................................... 68,600 3,777,287
Cinar Corp., Class B+............................ 181,900 2,489,756
Insight Communications Co., Inc.+................ 86,800 2,148,300
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -------------
<S> <C> <C>
ENTERTAINMENT, LEISURE & MEDIA (CONTINUED)
Jones Intercable, Inc., Class A+................. 23,600 $ 1,383,550
Media Metrix, Inc.+.............................. 41,750 1,544,750
Pixar, Inc.+..................................... 59,700 2,507,400
Premier Parks, Inc.+............................. 161,600 4,040,000
Steiner Leisure Ltd.+(i)......................... 17,050 282,391
Webstakes. com, Inc.+............................ 39,975 354,778
------------
19,633,112
------------
FOOD, BEVERAGES & TOBACCO (1.8%)
American Italian Pasta Co., Class A+............. 49,800 1,497,112
Keebler Foods Co.+............................... 60,000 1,653,750
Robert Mondavi Corp., Class A+................... 86,100 3,312,159
Webvan Group, Inc.+.............................. 57,700 1,424,469
------------
7,887,490
------------
HOUSEHOLD APPLIANCES & FURNISHINGS (0.2%)
Furniture Brands International, Inc.+............ 43,000 838,500
------------
RESTAURANTS & HOTELS (1.5%)
Aztar Corp.+..................................... 69,400 741,712
Papa John's International, Inc.+................. 120,500 4,326,703
Sun International Hotels Ltd.+(i)................ 33,400 630,425
Vail Resorts, Inc.+.............................. 62,900 1,081,094
------------
6,779,934
------------
RETAIL (5.1%)
AnnTaylor Stores Corp.+.......................... 75,000 3,239,062
bebe stores, inc.+............................... 78,600 2,446,425
Cost Plus, Inc.+................................. 83,050 3,072,850
eToys, Inc.+..................................... 23,200 1,452,900
Hibbett Sporting Goods, Inc.+.................... 39,300 510,900
InterTAN, Inc.+.................................. 39,600 947,925
Kenneth Cole Productions, Inc., Class A+......... 33,400 1,532,225
Linens n' Things, Inc.+.......................... 49,500 1,670,625
MSC Industrial Direct Co., Inc., Class A+........ 98,700 894,469
Steven Madden Ltd.+.............................. 163,900 2,099,969
Talbots, Inc..................................... 58,200 2,822,700
The Finish Line, Inc., Class A+.................. 74,300 492,237
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
16
<PAGE>
THE U.S. SMALL COMPANY OPPORTUNITIES PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
NOVEMBER 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -------------
<S> <C> <C>
RETAIL (CONTINUED)
Ticketmaster Online-CitySearch, Inc., Class B+... 29,000 $ 822,875
Vans, Inc.+...................................... 63,300 755,644
------------
22,760,806
------------
TOTAL CONSUMER GOODS & SERVICES................ 75,977,044
------------
ENERGY (2.0%)
GAS EXPLORATION (0.7%)
Devon Energy Corp................................ 82,600 2,911,650
------------
OIL-PRODUCTION (0.2%)
Spinnaker Exploration Co.+....................... 66,700 983,825
OIL-SERVICES (1.1%)
Cooper Cameron Corp.+............................ 36,700 1,573,512
National-Oilwell, Inc.+.......................... 140,700 2,004,975
Smith International, Inc.+....................... 38,800 1,547,150
------------
5,125,637
------------
TOTAL ENERGY................................... 9,021,112
------------
FINANCE (5.7%)
BANKING (2.8%)
AMCORE Financial, Inc............................ 17,700 446,925
Bank United Corp., Class A....................... 75,400 2,686,125
Centura Banks, Inc............................... 8,800 409,200
City National Corp............................... 32,900 1,186,456
Colonial BancGroup, Inc.......................... 26,900 307,669
Columbia Banking System, Inc.+................... 7,100 116,262
Commercial Federal Corp.......................... 43,500 791,156
Hamilton Bancorp, Inc.+.......................... 31,300 602,525
Independent Bank Corp............................ 41,395 693,366
National Commerce Bancorporation................. 121,800 3,075,450
Pacific Century Financial Corp................... 21,700 425,862
Sterling Bancshares, Inc......................... 91,700 1,174,906
Webster Financial Corp........................... 22,100 588,412
West Coast Bancorp............................... 11,730 173,017
------------
12,677,331
------------
FINANCIAL SERVICES (2.1%)
Allied Capital Corp.............................. 79,300 1,605,825
BlackRock, Inc.+................................. 37,700 692,737
Financial Federal Corp.+......................... 118,500 2,451,469
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -------------
<S> <C> <C>
FINANCIAL SERVICES (CONTINUED)
Gabelli Asset Management, Inc., Class A+......... 75,500 $ 1,311,812
Heller Financial, Inc............................ 92,200 2,039,925
Wit Capital Group, Inc.+......................... 52,900 1,031,550
------------
9,133,318
------------
INSURANCE (0.6%)
Fremont General Corp............................. 87,700 443,981
RenaissanceRe Holdings Ltd.(i)................... 50,700 2,113,556
------------
2,557,537
------------
REAL ESTATE INVESTMENT TRUSTS (0.2%)
IndyMac Mortgage Holdings, Inc................... 63,700 704,681
------------
TOTAL FINANCE.................................. 25,072,867
------------
HEALTH CARE (11.9%)
BIOTECHNOLOGY (5.5%)
Affymetrix, Inc.+................................ 35,700 3,498,600
Human Genome Sciences, Inc.+..................... 97,200 10,886,400
IDEC Pharmaceuticals Corp.+...................... 16,900 2,142,075
Millennium Pharmaceuticals, Inc.+................ 52,700 5,130,016
SangStat Medical Corp.+.......................... 114,000 2,686,125
------------
24,343,216
------------
HEALTH SERVICES (2.3%)
Allscripts, Inc.+................................ 121,475 4,388,284
CareInsite, Inc.+................................ 37,800 1,979,775
MedQuist, Inc.+.................................. 143,700 4,095,450
------------
10,463,509
------------
MEDICAL SUPPLIES (1.8%)
CONMED Corp.+.................................... 12,700 320,675
Cyberonics, Inc.+................................ 89,900 1,567,631
IDEXX Laboratories, Inc.+........................ 103,200 1,909,200
MedImmune, Inc.+................................. 16,575 1,992,108
Ocular Sciences, Inc.+........................... 22,100 410,231
Respironics, Inc.+............................... 27,900 221,456
Summit Technology, Inc.+......................... 81,600 1,565,700
------------
7,987,001
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
17
<PAGE>
THE U.S. SMALL COMPANY OPPORTUNITIES PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
NOVEMBER 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -------------
<S> <C> <C>
PHARMACEUTICALS (2.3%)
BioCryst Pharmaceuticals, Inc.+.................. 42,500 $ 1,094,375
Gilead Sciences, Inc............................. 11,700 561,600
ILEX Oncology, Inc.+............................. 26,350 457,831
Ligand Pharmaceuticals, Inc., Class B+........... 210,000 2,415,000
Symyx Technologies, Inc.+........................ 30,100 1,038,450
Triangle Pharmaceuticals, Inc.+.................. 63,600 1,248,150
Vertex Pharmaceuticals, Inc.+.................... 76,700 2,037,344
Vical, Inc.+..................................... 54,600 1,184,137
------------
10,036,887
------------
TOTAL HEALTH CARE.............................. 52,830,613
------------
INDUSTRIAL PRODUCTS & SERVICES (2.7%)
CAPITAL GOODS (0.1%)
Milacron, Inc.................................... 29,500 429,594
------------
COMMERCIAL SERVICES (0.1%)
Central Parking Corp.+........................... 26,400 683,100
------------
CONSTRUCTION & HOUSING (0.7%)
Dycom Industries, Inc.+.......................... 66,600 2,680,650
MasTec, Inc.+.................................... 12,600 518,962
------------
3,199,612
------------
DIVERSIFIED MANUFACTURING (1.1%)
Gentek, Inc...................................... 232,500 2,717,344
Olin Corp........................................ 119,800 2,148,912
------------
4,866,256
------------
MACHINERY (0.7%)
AGCO Corp........................................ 63,500 805,656
CNH Global N.V.(i)............................... 155,100 2,122,931
------------
2,928,587
------------
TOTAL INDUSTRIAL PRODUCTS & SERVICES........... 12,107,149
------------
TECHNOLOGY (43.2%)
AEROSPACE (0.8%)
L-3 Communications Holdings, Inc.+............... 83,900 3,460,875
------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -------------
<S> <C> <C>
COMPUTER PERIPHERALS (1.3%)
Creative Technology Ltd.......................... 65,000 $ 942,500
In Focus Systems, Inc.+.......................... 43,500 908,062
JNI Corp.+....................................... 8,500 666,187
Radiant Systems, Inc.+........................... 127,900 3,165,525
------------
5,682,274
------------
COMPUTER SOFTWARE (13.6%)
3DO Co.+......................................... 175,500 1,661,766
Actuate Software Corp.+.......................... 63,100 3,849,100
Aether Systems, Inc.+............................ 8,725 663,100
Akamai Technologies, Inc.+....................... 11,900 2,820,300
AppNet, Inc.+.................................... 86,900 4,323,275
Art Technology Group, Inc.+...................... 30,400 1,930,400
Aspen Technologies, Inc.+........................ 192,900 3,640,987
CacheFlow, Inc.+................................. 8,425 1,276,387
CBT Group Public Ltd. Co., (Spon. ADR)+(i)....... 48,100 1,178,450
Digital Impact, Inc.+............................ 13,575 731,353
Digital Island, Inc.+............................ 8,400 392,700
E. piphany, Inc.+................................ 4,400 745,525
Exchange Applications, Inc.+..................... 63,500 3,857,625
Interleaf, Inc.+................................. 10,800 396,225
Liberate Technologies, Inc.+..................... 54,400 6,942,800
Manugistics Group, Inc.+......................... 59,200 991,600
MAPICS, Inc.+.................................... 27,500 261,250
Mediaplex, Inc.+................................. 21,825 742,050
Metasolv Software, Inc.+......................... 8,375 516,633
MicroStrategy, Inc.+............................. 69,100 8,464,750
Mission Critical Software, Inc.+................. 53,100 2,907,225
National Information Consortium, Inc.+........... 73,700 1,943,837
NetZero, Inc.+................................... 22,800 484,500
nFront, Inc.+.................................... 45,400 888,139
OpenTV Corp.+.................................... 7,825 604,481
PC-Tel, Inc.+.................................... 34,100 1,257,438
Private Business, Inc.+.......................... 18,000 54,563
Quest Software, Inc.+............................ 4,300 322,500
Quintus Corp.+................................... 15,625 867,188
Retek, Inc.+..................................... 25,225 1,710,570
SalesLogix Corp.+................................ 88,300 2,538,625
WebTrends Corp.+................................. 22,800 1,312,425
------------
60,277,767
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
18
<PAGE>
THE U.S. SMALL COMPANY OPPORTUNITIES PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
NOVEMBER 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -------------
<S> <C> <C>
COMPUTER SYSTEMS (1.2%)
Cobalt Networks, Inc.+........................... 6,600 $ 1,114,163
National Computer Systems, Inc................... 36,700 1,408,363
Pinnacle Systems, Inc.+.......................... 71,900 2,372,700
SonicWALL, Inc.+................................. 9,125 311,962
------------
5,207,188
------------
ELECTRONICS (1.4%)
Alteon Websystems, Inc.+......................... 7,400 714,100
Finisar Corp.+................................... 9,025 1,040,131
Foundry Networks, Inc.+.......................... 12,700 2,986,088
Plexus Corp.+.................................... 37,900 1,492,313
------------
6,232,632
------------
INFORMATION PROCESSING (9.6%)
24 / 7 Media, Inc.+.............................. 122,100 6,196,576
Breakaway Solutions, Inc.+....................... 8,200 467,400
Catalina Marketing Corp.+........................ 52,700 5,022,969
CheckFree Holdings Corp.+........................ 22,400 1,471,400
Covad Communications Group, Inc.+................ 86,150 4,474,416
Diamond Technology Partners, Inc., Class A+...... 19,500 1,023,750
Expedia Inc., Class A+........................... 14,525 773,456
Go2Net, Inc.+.................................... 11,500 840,219
Internet Capital Group, Inc.+.................... 18,310 3,076,080
Management Network Group, Inc.+.................. 30,850 1,041,188
Multex.com, Inc.+................................ 73,600 2,097,600
Net Perceptions, Inc.+........................... 115,300 4,352,575
Predictive Systems, Inc.+........................ 22,900 1,031,931
Safeguard Scientifics, Inc.+..................... 25,200 2,800,350
Verio, Inc.+..................................... 133,600 4,801,250
VerticalNet, Inc.+............................... 20,000 1,752,500
Wireless Facilities, Inc.+....................... 29,700 1,603,800
------------
42,827,460
------------
SEMICONDUCTORS (15.3%)
Applied Mircro Circuits Corp.+................... 43,600 3,624,250
Asyst Technologies, Inc.+........................ 57,200 2,285,319
ATMI, Inc.+...................................... 231,800 7,055,413
Brooks Automation, Inc.+......................... 64,100 1,746,725
C-Cube Microsystems, Inc.+....................... 52,900 2,368,102
Cognex Corp.+.................................... 17,100 555,750
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -------------
<S> <C> <C>
SEMICONDUCTORS (CONTINUED)
Cymer, Inc.+..................................... 87,100 $ 3,484,000
Cypress Semiconductor Corp.+..................... 242,200 6,599,950
Electro Scientific Industries, Inc.+............. 39,600 2,314,125
Exar Corp.+...................................... 49,800 2,421,525
Fairchild Semiconductor Corp., Class A+.......... 129,930 3,638,040
Galileo Technology Ltd.+......................... 104,700 2,388,469
GaSonics International Corp.+.................... 138,800 2,134,050
hi / fn, inc.+................................... 23,500 1,034,000
Integrated Device Technology, Inc.+.............. 135,200 3,185,650
Intevac, Inc.+................................... 17,900 69,922
Lam Research Corp.+.............................. 76,900 5,969,363
LTX Corp.+....................................... 107,800 1,940,400
Metron Technology N.V.+.......................... 75,300 1,200,094
Microchip Technology, Inc.+...................... 30,300 1,920,263
MIPS Technologies, Inc., Class A+................ 66,900 2,951,963
MKS Instruments, Inc.+........................... 147,900 3,679,013
Photronics, Inc.+................................ 82,700 1,995,138
PLX Technology, Inc.+............................ 57,700 1,154,000
Rudolph Technologies, Inc.+...................... 8,925 254,363
Sage, Inc.+...................................... 7,100 177,500
Silicon Image, Inc.+............................. 43,300 1,861,900
Virata Corp.+.................................... 8,350 268,244
------------
68,277,531
------------
TOTAL TECHNOLOGY............................... 191,965,727
------------
TELECOMMUNICATIONS (11.0%)
TELECOMMUNICATION SERVICES (6.7%)
Allegiance Telecom, Inc.......................... 104,200 7,697,775
American Mobile Satellite Corp.+................. 182,100 2,856,694
CapRock Communications Corp.+.................... 152,000 3,705,000
Concentric Network Corp.+........................ 231,800 6,591,813
Illuminet Holdings, Inc.+........................ 16,400 861,000
Pac-West Telecomm, Inc.+......................... 2,180 55,590
Pacific Gateway Exchange, Inc.+.................. 68,900 1,257,425
Splitrock Services, Inc.+........................ 187,880 3,006,080
TALK.com, Inc.+.................................. 64,200 1,083,375
TeleCorp PCS, Inc., Class A+..................... 17,200 620,275
Versatel Telecom International, N.V. (ADR)+(i)... 16,100 442,750
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
THE U.S. SMALL COMPANY OPPORTUNITIES PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
NOVEMBER 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -------------
<S> <C> <C>
TELECOMMUNICATION SERVICES (CONTINUED)
Williams Communications Group, Inc.+............. 31,100 $ 927,169
WinStar Communications, Inc.+.................... 13,600 690,200
------------
29,795,146
------------
TELECOMMUNICATIONS-EQUIPMENT (4.3%)
Advanced Fibre Communications, Inc.+............. 142,300 3,957,719
Copper Mountain Networks, Inc.+.................. 21,400 1,785,563
E-Tek Dynamics, Inc.+............................ 49,975 3,748,125
Paradyne Networks, Inc.+......................... 25,800 757,875
Polycom, Inc.+................................... 90,200 5,772,800
Sycamore Networks, Inc.+......................... 15,000 3,330,000
------------
19,352,082
------------
TOTAL TELECOMMUNICATIONS....................... 49,147,228
------------
TOTAL COMMON STOCKS (COST $312,776,221)........ 437,858,576
------------
CONVERTIBLE PREFERRED STOCKS (0.0%)
ENERGY (0.0%)
GAS EXPLORATION (0.0%)
Tesoro Petroleum Corp.
(cost $222,717)................................ 15,200 193,800
------------
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------- ----------- -------------
<S> <C> <C>
SHORT-TERM INVESTMENTS (1.5%)
OTHER INVESTMENT COMPANIES (1.5%)
J.P. Morgan Institutional Prime Money Market
Fund(cost $6,621,576).......................... $6,621,576 $ 6,621,576
------------
TOTAL INVESTMENTS (COST
$319,620,514) (99.9%)....................................... 444,673,952
OTHER ASSETS IN EXCESS OF
LIABILITIES (0.1%).......................................... 409,178
------------
NET ASSETS (100.0%)........................................... $445,083,130
============
</TABLE>
- ------------------------------
Note: Based on the cost of investments of $321,442,262 for federal income tax
purposes at November 30, 1999, the aggregate gross unrealized appreciation and
depreciation was $135,523,223 and $12,291,533, respectively, resulting in net
unrealized appreciation of $123,231,690.
(i) Foreign security.
+ Non-income producing security.
ADR - American Depositary Receipt.
Spon. ADR - Sponsored ADR.
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE U.S. SMALL COMPANY OPPORTUNITIES PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
NOVEMBER 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $319,620,514 ) $444,673,952
Receivable for Investments Sold 3,222,864
Dividends Receivable 151,136
Interest Receivable 70,499
Receivable for Expense Reimbursement 2,370
Prepaid Trustees' Fees 628
Prepaid Expenses and Other Assets 3,957
------------
Total Assets 448,125,406
------------
LIABILITIES
Payable for Investments Purchased 1,945,095
Payable to Custodian 820,580
Advisory Fee Payable 210,402
Custody Fee Payable 24,035
Administration Fee Payable 8,749
Administrative Services Fee Payable 372
Fund Services Fee Payable 228
Accrued Expenses 32,815
------------
Total Liabilities 3,042,276
------------
NET ASSETS
Applicable to Investors' Beneficial Interests $445,083,130
============
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE U.S. SMALL COMPANY OPPORTUNITIES PORTFOLIO
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividend Income (Net of Foreign Withholding Tax
of $10,423 ) $ 629,503
Interest Income 458,392
------------
Investment Income 1,087,895
EXPENSES
Advisory Fee $ 1,042,069
Custodian Fees and Expenses 69,778
Administrative Services Fee 44,108
Professional Fees and Expenses 20,726
Printing Expenses 3,250
Fund Services Fee 2,975
Administration Fee 2,019
Trustees' Fees and Expenses 1,082
Amortization of Organization Expense 607
Insurance Expense 243
Miscellaneous 49
------------
Total Expenses 1,186,906
------------
NET INVESTMENT LOSS (99,011)
NET REALIZED GAIN ON INVESTMENTS 9,066,318
NET CHANGE IN UNREALIZED APPRECIATION OF
INVESTMENTS 101,947,087
------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $110,914,394
============
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE U.S. SMALL COMPANY OPPORTUNITIES PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE FISCAL
NOVEMBER 30, 1999 YEAR ENDED
(UNAUDITED) MAY 31, 1999
----------------- --------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Loss $ (99,011) $ (137,253)
Net Realized Gain (Loss) on Investments 9,066,318 (19,297,966)
Net Change in Unrealized Appreciation of
Investments 101,947,087 15,587,441
---------------- -------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 110,914,394 (3,847,778)
---------------- -------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 119,128,605 208,622,616
Withdrawals (69,760,702) (108,552,920)
---------------- -------------
Net Increase from Investors' Transactions 49,367,903 100,069,696
---------------- -------------
Total Increase in Net Assets 160,282,297 96,221,918
NET ASSETS
Beginning of Period 284,800,833 188,578,915
---------------- -------------
End of Period $ 445,083,130 $ 284,800,833
================ =============
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE JUNE 16, 1997
SIX MONTHS ENDED FOR THE (COMMENCEMENT OF
NOVEMBER 30, 1999 FISCAL YEAR ENDED OPERATIONS) THROUGH
(UNAUDITED) MAY 31, 1999 MAY 31, 1998
----------------- ----------------- -------------------
<S> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Net Expenses 0.68%(a) 0.71% 0.84%(a)
Net Investment Loss (0.06)%(a) (0.07)% (0.04)%(a)
Expenses without Reimbursement 0.68%(a) 0.71% 0.84%(a)(b)
Portfolio Turnover 65% 116% 73%
</TABLE>
- ------------------------
(a) Annualized
(b) Reimbursement was less than 0.01%
The Accompanying Notes are an Integral Part of the Financial Statements.
23
<PAGE>
THE U.S. SMALL COMPANY OPPORTUNITIES PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOVEMBER 30, 1999
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The U.S. Small Company Opportunities Portfolio (the "portfolio") is one of five
subtrusts (portfolios) comprising The Series Portfolio (the "series 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 on June 24, 1994.
The portfolio commenced operations on June 16, 1997. The portfolio's investment
objective is to provide long-term growth from a portfolio of small company
growth 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 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 upon
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) 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 become 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.
c) The portfolio incurred organization expenses in the amount of $9,000 which
were deferred and amortized on a straight-line basis over a period not to
exceed five years beginning with the commencement of operations of the
portfolio.
d) Expenses incurred by the series portfolio with respect to any two or more
portfolios in the series portfolio are allocated in proportion to the net
assets of each portfolio in the series portfolio, except where allocations
of direct expenses to each portfolio can otherwise be made fairly.
Expenses directly attributable to a portfolio are charged to that
portfolio.
24
<PAGE>
THE U.S. SMALL COMPANY OPPORTUNITIES PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOVEMBER 30, 1999
- --------------------------------------------------------------------------------
e) 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) The portfolio 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 and Co. Incorporated ("J.P. Morgan"). Under the terms of the
agreement, the portfolio pays JPMIM at an annual rate of 0.60% of the
portfolio's average daily net assets. For the six months ended
November 30, 1999, such fees amounted to $1,045,561.
The portfolio may invest in one or more affiliated money market funds:
J.P. Morgan Institutional Prime Money Market Fund, J.P. Morgan
Institutional Tax Exempt Money Market Fund, J.P. Morgan Institutional
Federal Money Market Fund and J.P. Morgan Institutional Treasury Money
Market Fund. The Advisor has agreed to reimburse its advisory fee from the
portfolio in an amount to offset any doubling of investment advisory and
shareholder servicing fees. For the six months ended November 30, 1999,
J.P. Morgan has agreed to reimburse the portfolio $3,492 under this
agreement.
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 six months ended November 30, 1999,
the fee for these services amounted to $2,019.
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 the 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 six months ended
November 30, 1999, the fee for these services amounted to $44,108.
25
<PAGE>
THE U.S. SMALL COMPANY OPPORTUNITIES PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOVEMBER 30, 1999
- --------------------------------------------------------------------------------
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. For the six
months ended November 30, 1999, the portfolio's allocated portion of
Group's costs in performing its services amounted to $2,975.
e) An aggregate annual fee of $75,000 is paid to each trustee for serving as
a trustee of 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 $600.
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the six months
ended November 30, 1999 were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
--------- -------------
<S> <C>
$ 271,680,175 $216,158,946
</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.
26
<PAGE>
J.P. MORGAN FUNDS
PRIME MONEY MARKET FUND
FEDERAL MONEY MARKET FUND
TAX EXEMPT MONEY MARKET FUND
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.
IM0871-M
J.P. MORGAN
U.S. SMALL COMPANY
OPPORTUNITIES
FUND
SEMIANNUAL REPORT
NOVEMBER 30, 1999
