<PAGE>
LETTER TO THE SHAREHOLDERS OF JPM SERIES TRUST II
August 15, 1997
Dear Shareholder:
We are pleased to provide you with the semi-annual report for the JPM Series
Trust II.
Financial markets in the U.S. continued to focus on the economy during the
first half of 1997. The economy was exceptionally robust in the first
quarter, eventually posting a 4.9% GDP figure that was well above
expectations, outpacing even the rapid growth of the previous quarter. After
starting the year with a bang, stocks sold off in March as the rapidly
expanding economy revived fears of inflation and higher interest rates. With
market participants worried that equities might have risen too far too fast,
stocks fell into negative territory for the year to date in April. This
correction was short-lived, however, and the bull market quickly resumed its
advance. Economic data gradually revealed an economy cooling to a trend-like
pace, and market indices soared again to record highs.
The S&P 500 Index posted a total return of 20.61% for the first six months of
1997. Small company stocks also provided solid returns, but trailed the
performance of larger companies. The Russell 2000 Index reflected this with a
total return of 10.20% during the reporting period.
International stocks also advanced, with the MSCI EAFE Index producing a
six-month return of 11.21%. International equity markets benefited from a
global environment of low inflation, low interest rates, and continued
economic recovery in both Japan and Continental Europe.
On the fixed income side, concern over inflationary pressures plagued the
stock market and roiled the bond market across all sectors, particularly in
March. As anticipated, the Federal Reserve raised the Fed funds rate in March
from 5.25% to 5.50%. Paralleling the stock market, bonds rallied in April and
ended the first half of 1997 with strong returns. For the period under
review, the Salomon Broad Investment Grade Bond Index provided a total return
of 3.06%.
TABLE OF CONTENTS
Letter to the shareholders 1
Portfolio reviews
JPM Treasury Money Market Portfolio 3
JPM Bond Portfolio 6
JPM Equity Portfolio 10
JPM Small Company Portfolio 15
JPM International Equity Portfolio 19
Financial statements 25
1
<PAGE>
The report that follows includes detailed information on the JPM Series Trust
II Portfolios and interviews with members of the portfolio management teams.
The interviews are designed to answer commonly asked questions about the
Portfolios, elaborate on what happened during the reporting period, and
provide an outlook for the months ahead.
As chairman and president of Asset Management Services, we thank you for your
participation in the JPM Portfolios and look forward to sharing Morgan's
insights regarding financial markets with you in the future. If you have any
comments or questions, please call the Trust's distributor, Funds
Distributor, Inc., at (800) 221-7930.
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
2
<PAGE>
JPM TREASURY MONEY
MARKET PORTFOLIO
PORTFOLIO REVIEW
We are pleased to report that JPM Treasury Money Market Portfolio provided a
2.28% return for the six months ended June 30, 1997, placing it in the top
third among Variable Annuity Money Market Portfolios tracked by Lipper
Analytical Services, Inc. The Portfolio's net assets advanced from $1.4
million on December 31, 1996 to $1.5 million at the end of the period under
review.
During the past six months, conflicting economic data caused market
perceptions to flip flop as to the future strength of the economy and the
need for the Federal Reserve to tighten monetary policy. The result was a
volatile market environment, through which the Portfolio was guided with a
conservative strategy. While the Portfolio's average maturity was lengthened
in late March to capitalize on attractive yields, it has again been reigned
in to a defensive level in anticipation of further Fed action.
The table below presents the Portfolio's average annual total return over
various time periods, as well as on a since-inception basis. Total returns
for periods of less than one year are not annualized and provide a picture of
how the Portfolio has performed over the short term.
<TABLE>
<CAPTION>
PERFORMANCE TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS
---------------------- ----------------------------
THREE SIX ONE SINCE
AS OF JUNE 30, 1997 MONTHS MONTHS YEAR INCEPTION*
- ------------------------------------------------ ----------------------------
<S> <C> <C> <C> <C>
JPM Treasury Money
Market Portfolio 1.18% 2.28% 4.68% 4.83%
IBC U.S.Treasury and
Repo Money Fund
Average** 1.17% 2.33% 4.68% 4.87%
Lipper Variable Annuity
Money Market Average 1.25% 2.47% 5.04% 4.45%
</TABLE>
*1/3/95 -- COMMENCEMENT OF OPERATIONS.
**IBC U.S. TREASURY AND REPO MONEY FUND AVERAGE IS AN UNMANAGED INDEX WHICH
DOES NOT INCLUDE FEES OR OPERATING EXPENSES AND IS NOT AVAILABLE FOR DIRECT
INVESTMENT.
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. PORTFOLIO RETURNS ARE
NET OF PORTFOLIO EXPENSES ONLY, INCLUDE REINVESTMENT OF DIVIDENDS AND REFLECT
THE REIMBURSEMENT OF CERTAIN PORTFOLIO EXPENSES AS DESCRIBED IN THE
PROSPECTUS FOR THE PORTFOLIO. HAD EXPENSES NOT BEEN SUBSIDIZED, THE
PORTFOLIO'S RETURN WOULD HAVE BEEN LOWER. PORTFOLIO RETURNS DO NOT REFLECT
ANY SEPARATE ACCOUNT EXPENSES IMPOSED ON THE VARIABLE CONTRACTS WHICH MAY
INCLUDE A SALES CHARGE, PREMIUM TAX CHARGE, DAC TAX SALES CHARGE, COST OF
INSURANCE, MORTALITY EXPENSES, SURRENDER AND OTHER CHARGES.
LIPPER ANALYTICAL SERVICES, INC. IS A LEADING SOURCE FOR MUTUAL FUND DATA.
3
<PAGE>
PORTFOLIO MANAGER Q&A
[PHOTO]
Following is an interview with ROBERT R. (SKIP) JOHNSON, a member of the
portfolio management team for JPM Treasury Money Market Portfolio. Prior to
joining Morgan in 1988, he founded and managed R.R. Johnson Associates,
merchant bankers. He also held senior positions with the Bank of Montreal and
U.S. Steel. This interview was conducted July 29, 1997 and reflects Skip's
views on that date.
FIXED INCOME MARKETS OVER THE LAST SIX MONTHS HAVE BEEN DOMINATED BY THE
QUESTION OF WHETHER THE FEDERAL RESERVE WOULD INCREASE THE FEDERAL FUNDS
RATE; AND CONFLICTING ECONOMIC DATA PRODUCED A FAIR AMOUNT OF MARKET
VOLATILITY -- ESPECIALLY PRIOR TO THE ONE FED TIGHTENING THAT OCCURRED DURING
THE PERIOD ON MARCH 25. (THE FED FUNDS RATE WAS RAISED FROM 5.25% TO 5.50%.)
HOW DID WE POSITION THE PORTFOLIO IN RESPONSE TO ALL OF THIS UNCERTAINTY?
RRJ: Although the economy has been showing moderate growth recently, after a
strong fourth quarter of 1996 and an even stronger first quarter of this
year, the economic data over the period has been somewhat ambiguous as to the
direction of the economy. While inflation remained low, and other indicators,
such as durable goods orders, suggested no surge in the economy, unemployment
fell to historically low levels, raising fears of wage pressures. The first
quarter was a period when being conservative was helpful.
By the end of March, following the Fed tightening, we lengthened the
Portfolio's average maturity somewhat to take advantage of higher yields, and
received some benefit from this when rates fell in April. Somewhat weaker
consumer demand and a slowdown in growth in the second quarter resulted in
rates continuing to fall throughout May and June. Since we think that rates
are unlikely to drop much further and the economy appears to be
strengthening, we have shortened the Portfolio's maturity and developed a
defensive posture.
WHAT IS YOUR OUTLOOK FOR THE NEXT SIX MONTHS, AND HOW WILL YOU POSITION THE
PORTFOLIO?
RRJ: We continue to believe there will be a third-quarter bounce back in
economic growth, as the economy is fundamentally strong and monetary
conditions continue to ease. There is reason to be cautious because demand is
not likely to capitulate with jobs plentiful, confidence strong, and consumer
credit growth not accelerating. Consequently, we plan on reducing the
Portfolio's average life from its 39-day level on June 30, given our
expectation of Fed intervention before year end.
4
<PAGE>
PORTFOLIO FACTS
INVESTMENT OBJECTIVE
JPM Treasury Money Market Portfolio seeks to provide current income, maintain
a high level of liquidity, and preserve capital. The Portfolio seeks to
achieve its investment objective by investing in direct obligations of the
U.S. Treasury and engaging in repurchase agreements with respect to those
obligations.
- --------------------------------------------------
COMMENCEMENT OF OPERATIONS
1/3/95
- --------------------------------------------------
NET ASSETS AS OF 6/30/97
$1,483,879
- --------------------------------------------------
AVERAGE LIFE
39 days
- --------------------------------------------------
DIVIDEND PAYABLE DATES
12/19/97 AND 4/29/98
- --------------------------------------------------
CAPITAL GAIN PAYABLE DATES (IF APPLICABLE)
12/19/97 AND 4/29/98
EXPENSE RATIO
The Portfolio's current annualized expense ratio of 0.60% covers
shareholders' expenses for custody, tax reporting, investment advisory and
shareholder services, after reimbursement. The Portfolio is no-load and does
not charge any sales, redemption, or exchange fees. There are no additional
charges for buying, selling, safekeeping Portfolio shares, or for wiring
redemption proceeds from the Portfolio
PORTFOLIO HIGHLIGHTS
ALL DATA AS OF JUNE 30, 1997
PORTFOLIO ALLOCATION
(AS A PERCENTAGE OF TOTAL INVESTMENTS)
[GRAPH]
U. S. TREASURY OBLIGATIONS 98.9%
OTHER INVESTMENT COMPANIES 1.1%
5
<PAGE>
JPM BOND PORTFOLIO
PORTFOLIO REVIEW
The six months ending June 30, 1997 saw a healthy 3.06% advance for U.S. bond
returns, as measured by the Salomon Brothers Broad Investment Grade (BIG) Bond
Index. A generally favorable environment for fixed income investments was
offset throughout much of this period by the Federal Reserve's belief that
robust U.S. economic growth could translate into higher inflation. Its
subsequent decision to preempt such inflation by raising the Federal funds
rate from 5.25% to 5.50% on March 25 triggered a dramatic downturn in U.S.
bond prices. A strong market rally, which began in April, more than recouped
these losses by the end of the Portfolio's six-month reporting period.
In such a challenging environment, a diversified investment strategy
comprised of ACTIVE DURATION MANAGEMENT, SECURITY SELECTION, and SECTOR
ALLOCATION enabled JPM Bond Portfolio to provide its shareholders with an
attractive absolute return of 2.78% for the six months under review. On a
since-inception basis,* Lipper reports that the Portfolio's total returns
have placed it 23rd (or in the 16th percentile) within a competitive universe
of 146 similar Portfolios included in the Lipper Variable Annuity Corporate
Debt A-Rated Average.
A key reason why the Portfolio underperformed its benchmark for the period is
that performance of the Salomon Brothers BIG Bond Index does not include fees
or operating expenses, whereas the performance results of the Portfolio are
reported net of fees.
The Portfolio's net asset value per share increased from $10.65 on December
31, 1996 to $10.90 at the end of the reporting period, after paying $0.04 per
share in dividends. The Portfolio's net assets stood at $5.2 million at the
end of the reporting period, up from $2.8 million on December 31, 1996.
The table below presents the Portfolio's average annual total return over
various time periods, as well as on a since-inception basis. Total returns
for periods of less than one year are not annualized and provide a picture of
how the Portfolio has performed over the short term. 6
<TABLE>
<CAPTION>
PERFORMANCE TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS
---------------------- ----------------------------
THREE SIX ONE SINCE
AS OF JUNE 30, 1997 MONTHS MONTHS YEAR INCEPTION*
- ------------------------------------------------ ----------------------------
<S> <C> <C> <C> <C>
JPM Bond Portfolio 3.32% 2.78% 7.52% 8.51%
Salomon Brothers BIG 3.60% 3.06% 8.15% 9.89%
Bond Index**
Lipper Variable Annuity 3.55% 2.84% 7.80% 9.23%
Corporate Debt A-Rated
Average
</TABLE>
*1/3/95 -- COMMENCEMENT OF OPERATIONS.
**THE SALOMON BROTHERS BROAD INVESTMENT GRADE BOND INDEX: AN UNMANAGED, MARKET-
WEIGHTED INDEX THAT CONTAINS APPROXIMATELY 4,700 INDIVIDUALLY PRICED INVESTMENT
GRADE BONDS.
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. PORTFOLIO RETURNS ARE
NET OF PORTFOLIO EXPENSES ONLY, INCLUDE REINVESTMENT OF DIVIDENDS AND REFLECT
THE REIMBURSEMENT OF CERTAIN PORTFOLIO EXPENSES AS DESCRIBED IN THE
PROSPECTUS FOR THE PORTFOLIO. HAD EXPENSES NOT BEEN SUBSIDIZED, THE
PORTFOLIO'S RETURN WOULD HAVE BEEN LOWER. PORTFOLIO RETURNS DO NOT REFLECT
ANY SEPARATE ACCOUNT EXPENSES IMPOSED ON THE VARIABLE CONTRACTS WHICH MAY
INCLUDE A SALES CHARGE, PREMIUM TAX CHARGE, DAC TAX SALES CHARGE, COST OF
INSURANCE, MORTALITY EXPENSES, SURRENDER AND OTHER CHARGES.
LIPPER ANALYTICAL SERVICES, INC. IS A LEADING SOURCE FOR MUTUAL FUND DATA.
6
<PAGE>
PORTFOLIO MANAGER Q&A
[PHOTO]
Following is an interview with WILLIAM G. TENNILLE, a member of the portfolio
management team for JPM Bond Portfolio. Bill joined Morgan in 1992 and has
extensive experience across a broad range of markets, including mortgage
securities and derivatives. This interview was conducted on July 22, 1997 and
reflects Bill's views on that date.
THE SIX MONTHS ENDING JUNE 30, 1997 WERE SOMETHING OF A ROLLER COASTER RIDE
FOR U.S. BOND INVESTORS. DURING THE FIRST HALF OF THE PERIOD, THE MARKET
EXPERIENCED FALLOUT CAUSED BY ACCELERATING ECONOMIC GROWTH, WHICH ULTIMATELY
LED TO A SHORT-TERM RATE INCREASE IN MARCH BY THE FEDERAL RESERVE, THEN CAME
TO A CLOSE AMID WANING INFLATION FEARS AND A MARKET RALLY. HOW DID YOUR
MANAGEMENT TEAM'S KEY INVESTMENT DECISIONS ENHANCE THE PORTFOLIO'S
PERFORMANCE AS RATES BACKED UP?
WGT: As always, the Portfolio's duration was maintained within a relatively
tight band around the The Salomon Brothers Broad Investment Grade Bond Index.
In fact, we managed duration within one-eighth of one year around the Index
during the entire six months under review, and kept it neutral to the
benchmark throughout most of the period's last four months.
When an investment decision is kept that close to the Index, it necessarily
limits how much it can add to overall returns relative to the Index.
Consequently, the Portfolio's performance was enhanced more significantly by
our decisions to have the Portfolio be overweighted in U.S. government agency
mortgages and investment-grade corporate bonds, which outperformed the Index,
while maintaining the Portfolio's opportunistic exposure to below-investment
grade instruments -- both U.S. high-yield bonds and U.S. dollar denominated
emerging markets debt. Neither of these categories of bonds is included in
the Index, but both significantly outperformed throughout the period.
YOUR SECTOR STRATEGY OF OVERWEIGHTING MORTGAGE-BACKED SECURITIES ACHIEVED
FAVORABLE INVESTMENT RESULTS FOR THE THE PERIOD UNDER REVIEW. WHAT FORECASTS
ARE YOU MAKING FOR THIS SECTOR, AND HOW IS IT LIKELY TO BE WEIGHTED IN THE
PORTFOLIO DURING THE NEXT SIX MONTHS?
WGT: We anticipate reducing our overweighting in mortgages opportunistically
when spreads narrow further, in the event interest rates fall below the 6.25%
level for 10-year Treasuries.
INVESTOR CASH FLOW AND STABLE-TO-IMPROVING FUNDAMENTALS HAVE BEEN KEY TO THE
RECENT RELATIVE STRENGTH OF EMERGING MARKETS DEBT AND U.S. HIGH-YIELD BONDS.
DO YOU EXPECT TO SEE THESE FACTORS SUPPORT THE SECTORS GOING FORWARD, AND IS
THE PORTFOLIO LIKELY TO CONTINUE ITS CURRENT OPPORTUNISTIC ALLOCATION TO THEM?
WGT: We do expect these factors to support the markets in the foreseeable
future and, as such, we expect to maintain the Portfolio's current allocation
to each sector. The initial reason is that market yields have fallen smartly
over the last couple of months resulting in investor demand for yield
product. Consequently, bond investors have satiated their appetite by
investing in the below investment grade sectors -- we feel this is
sustainable.
7
<PAGE>
In addition, despite historically tight spreads in the U.S. high-yield
market, we believe that this sector will perform relatively well as companies
continue to clean up their balance sheets thanks to strong earnings and
deleveraging. In the emerging markets camp, economic fundamentals and
improving political environments point to potential outperformance by this
sector.
ONE OF THE IRONIES THAT SEEMS TO BE GAINING GREATER CURRENCY THESE DAYS IS
THE SENTIMENT THAT "WHAT'S GOOD FOR THE ECONOMY IS BAD FOR BONDS AND STOCKS."
GIVEN THE CURRENT ECONOMIC ENVIRONMENT, WHAT IS YOUR VIEW OF THE LIKELIHOOD
OF ADDITIONAL FED ACTION BY THE END OF THIS YEAR?
WGT: First of all, we expect a bounce back in economic growth in the second
half of the year following the slow down in the second quarter. Couple this
with the tightness in the labor market and it leads us to believe the Fed
will eventually intervene in an attempt to drive economic growth toward trend
and keep inflation at bay. We expect the Fed may raise rates by another 50
basis points by year end.
WHAT MIGHT CAUSE YOU TO MOVE THE PORTFOLIO AWAY FROM ITS CURRENT NEUTRAL
DURATION POSITION?
WGT: Interestingly enough, that has become a very topical question. Since
the market began to rally at the end of June, we have shortened the
Portfolio's duration to about one-eighth of a year shorter than the
benchmark. Should the market continue to rally from here, we would look to
shorten duration even further -- possibly to as much as one-quarter of a year
shorter than the benchmark. On the other hand, if the market were to back up
and cause the long bond's yield to approach 6.8%, we would gravitate toward
neutral once again.
8
<PAGE>
PORTFOLIO FACTS
INVESTMENT OBJECTIVE
JPM Bond Portfolio seeks to provide a high total return consistent with
moderate risk of capital and maintenance of liquidity. The Portfolio is
designed for investors who seek a total return over time that is higher than
that generally available from a portfolio of short-term obligations while
acknowledging greater price fluctuation of longer-term instruments.
- --------------------------------------------------
COMMENCEMENT OF OPERATIONS
1/3/95
- --------------------------------------------------
NET ASSETS AS OF 6/30/97
$5,222,886
- --------------------------------------------------
DIVIDEND PAYABLE DATES
12/24/97 AND 4/29/98
- --------------------------------------------------
CAPITAL GAIN PAYABLE DATES (IF APPLICABLE)
12/24/97 AND 4/29/98
30-DAY SEC YIELD
6.36%
DURATION
4.49 years
EXPENSE RATIO
The Portfolio's current annualized expense ratio of 0.75% covers
shareholders' expenses for custody, tax reporting, investment advisory and
shareholder services, after reimbursement. The Portfolio is no-load and does
not charge any sales, redemption, or exchange fees. There are no additional
charges for buying, selling, safekeeping Portfolio shares, or for wiring
redemption proceeds from the Portfolio
PORTFOLIO HIGHLIGHTS
ALL DATA AS OF JUNE 30, 1997
PORTFOLIO ALLOCATION
(PERCENTAGE OF TOTAL INVESTMENTS)
[GRAPH]
U. S. GOVERNMENT AGENCY OBLIGATIONS 31.8%
CORPORATE OBLIGATIONS 26.4%
SHORT-TERM INVESTMENTS 15.8%
U. S. TREASURY OBLIGATIONS 14.7%
FOREIGN CORPORATE OBLIGATIONS 3.2%
CMOS AND ASSET-BACKED SECURITIES 3.0%
FOREIGN GOVERNMENT OBLIGATIONS 2.5%
CONVERTIBLE PREFERRED STOCK 2.4%
CONVERTIBLE BONDS 0.2%
<TABLE>
<CAPTION>
QUALITY BREAKDOWN
<S> <C>
AAA* 68%
AA 4%
A 11%
Other 17%
</TABLE>
*INCLUDES U.S. GOVERNMENT AGENCY, U.S. TREASURY OBLIGATIONS AND SHORT-TERM
INVESTMENTS.
<TABLE>
<CAPTION>
LARGEST HOLDINGS
(EXCLUDING SHORT-TERM INVESTMENTS) % OF TOTAL INVESTMENTS
- ------------------------------------------------------------------------------
<S> <C>
GNMA 8.00% DUE 6/15/27 9.7%
GNMA 7.50% DUE 3/15/26 6.6%
GNMA 9.00% DUE 6/15/16 5.0%
U.S. TREASURY BOND 6.50%, 4.2%
DUE 11/15/26
GNMA 7.50% DUE 8/15/25 3.6%
GNMA 7.50% DUE 6/15/26 3.5%
GNMA 6.50% DUE 12/15/23 2.5%
U.S. TREASURY NOTE 7.875%, 2.4%
DUE 11/15/99
U.S. TREASURY NOTE 6.875%, 2.0%
DUE 5/15/06
WASHINGTON MUTUAL CAPITAL I 8.375% 2.0%
DUE 6/1/27
</TABLE>
9
<PAGE>
JPM EQUITY PORTFOLIO
PORTFOLIO REVIEW
We are pleased to report that, as the bulls in the U.S. market for large cap
stocks continued their unprecedented eight-year run, JPM Equity Portfolio
provided an impressive 17.26% return for the six months ended June 30, 1997.
This result outdistanced the 15.61%average return posted over the same period
by Portfolio competitors that are included in the Lipper Variable Annuity
Growth and Income Average. According to Lipper, the Portfolio's total return
since inception* enabled it to rank 86th in a competitive universe of 520
similar portfolios (17th percentile).
The Portfolio's results for the period did, however, trail the 20.61% return
of its benchmark, which is the S&P 500 Index. We believe the Portfolio's
relative underperformance is largely attributable to the fact that its
investment strategy was not rewarded by the market's focus throughout much of
the year.
The Portfolio's investment strategy is to diversify its holdings among large
cap stocks that have been identified as undervalued by Morgan research. The
market, meanwhile, centered its enthusiasm on a small number of very large
stocks with stable earnings growth that we viewed as overvalued. When these
"defensive growth" stocks moved the Index forward, their absence from the
Portfolio hurt relative short-term returns. We feel it is also important to
note that the Portfolio's benchmark is an unmanaged index whose performance
does not include fees or operating expenses and which is not available to
individual or institutional investors.
The Portfolio's net asset value per share increased from $13.68 on December
31, 1996 to $15.89 at the end of the six months under review, after making
distributions of $0.05 from long-term capital gains and $0.08 from short-term
capital gains. In addition, the Portfolio's net assets advanced from $5.3
million on December 31, 1996 to $7.6 million at the end of the period under
review.
The table below presents the Portfolio's average annual total return over
various time periods, as well as on a since-inception basis. Total returns
for periods of less than one year are not annualized and provide a picture of
how the Portfolio has performed over the short term
<TABLE>
<CAPTION>
PERFORMANCE TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS
---------------------- ----------------------------
THREE SIX ONE SINCE
AS OF JUNE 30, 1997 MONTHS MONTHS YEAR INCEPTION*
- ------------------------------------------------ ----------------------------
<S> <C> <C> <C> <C>
JPM Equity Portfolio 14.23% 17.26% 30.12% 29.39%
S&P 500 Index** 17.46% 20.61% 34.70% 33.01%
Lipper Variable Annuity 14.44% 15.61% 28.12% 28.50%
Growth & Income Average
</TABLE>
*1/3/95 -- COMMENCEMENT OF OPERATIONS.
**THE S&P 500 INDEX: AN UNMANAGED INDEX USED TO PORTRAY THE PATTERN OF STOCK
MOVEMENT BASED ON THE AVERAGE PERFORMANCE OF 500 WIDELY HELD U.S. LARGE CAP
STOCKS. THE INDEX DOES NOT INCLUDE FEES OR OPERATING EXPENSES AND IS NOT
AVAILABLE FOR DIRECT INVESTMENT.
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. PORTFOLIO RETURNS ARE
NET OF PORTFOLIO EXPENSES ONLY, INCLUDE REINVESTMENT OF DIVIDENDS AND REFLECT
THE REIMBURSEMENT OF CERTAIN PORTFOLIO EXPENSES AS DESCRIBED IN THE
PROSPECTUS FOR THE PORTFOLIO. HAD EXPENSES NOT BEEN SUBSIDIZED, THE
PORTFOLIO'S RETURN WOULD HAVE BEEN LOWER. PORTFOLIO RETURNS DO NOT REFLECT
ANY SEPARATE ACCOUNT EXPENSES IMPOSED ON THE VARIABLE CONTRACTS WHICH MAY
INCLUDE A SALES CHARGE, PREMIUM TAX CHARGE, DAC TAX SALES CHARGE, COST OF
INSURANCE, MORTALITY EXPENSES, SURRENDER AND OTHER CHARGES.
LIPPER ANALYTICAL SERVICES, INC. IS A LEADING SOURCE FOR MUTUAL FUND DATA.
10
<PAGE>
PORTFOLIO MANAGER Q&A
[PHOTO]
Following is an interview with WILLIAM B. PETERSEN, a member of the portfolio
management team for JPM Equity Portfolio. Bill originally joined Morgan in
1972 as a research analyst and became a member of the firm's portfolio
management team in 1977. This interview was conducted July 23, 1997 and
reflects Bill's views on that date.
THE S&P 500 ROSE TO ALL-TIME HIGHS DURING THE SIX MONTHS UNDER REVIEW. GIVEN
THE MARKET'S RECOVERY FROM ITS LATE-WINTER SLOWDOWN, WOULD YOU SAY THE
FEDERAL RESERVE'S CAUTIOUS TIGHTENING HAS HELPED BRING ABOUT ANOTHER "SOFT
LANDING" FOR THE ECONOMY?
WBP: The evidence would certainly point that way for the short term. The
economy has settled down to what appears to be a relatively sustainable rate
of growth, and the market certainly agrees with it. Both the stock market and
the bond market have rallied quite a bit on this perception. We continue to
be concerned by the fact that the U.S. unemployment rate is under 5% while
labor costs are beginning to rise. Low unemployment means that higher labor
costs cannot be arrested unless the economy slows to a below-trend rate of
growth. At the current rate of growth, we still see cyclical pressures
growing in the economy, which makes us concerned the Federal Reserve may have
to tighten monetary policy by raising short-term interest rates.
A second, perhaps slightly overlooked, cause for concern is that the relative
weakness of global economies has underpinned the rosy U.S. inflation
scenario. If the economies of Europe and Japan begin to grow -- and there are
now signs they are doing just that -- inflationary pressures in this country
could become evident sooner than later. This could also mean an outflow of
assets from U.S. stocks to international markets.
THE MARKET HAS RECENTLY SHOWN SIGNS OF MOVING AWAY FROM BUYING ONLY THE
"NIFTY FIFTY" DEFENSIVE GROWTH STOCKS. IF THAT TREND CONTINUES, WHAT DO YOU
THINK IT MIGHT MEAN FOR THE PORTFOLIO'S INVESTMENT STRATEGY?
WBP: Market leadership tends to narrow when the profit cycle peaks and
begins to slow. Profits are still growing, but the rate of growth is slower
than it used to be. That's part of the reason why performance leadership had
narrowed to the market's largest-capitalized stocks -- the so-called "Nifty
Fifty." As confidence has increased that the economic cycle is likely to be
extended, lessening the need for the Federal Reserve to tighten monetary
policy, the market has been more willing to look beyond stocks with stable
earnings growth. That, in turn, has helped performance in the Portfolio's
value-driven stock selection. Should this environment persist, we expect that
it will enhance overall returns.
I think it's important to remember that while the Portfolio is primarily
focused on large cap stocks, it also has a somewhat smaller market
capitalization than the market as a whole. The management team pursues this
strategy because we believe that we can find value in some of the large cap
market's smaller names. These companies may be small relative to a Coca-Cola
or a Microsoft, but they still bring hefty capitalizations of at least $1
billion to the table (the average capitalization within the Index is $50
billion). The 50 largest S&P 500 stocks advanced 24.18% for the period under
review, roughly 56% of the Index's total
11
<PAGE>
return. We now regard the Index's 50 largest stocks as overvalued and believe
their relative outperformance is unsustainable. Should the present market
environment continue, we believe investors will increase their search for
value, which would be good news for us,rather than buy just the "big names"
to remain in the market.
ONLY A SMALL PERCENTAGE OF ACTIVELY MANAGED LARGE CAP FUNDS OUTPERFORMED THE
S&P 500 FOR THE PERIOD UNDER REVIEW. THAT BEING THE CASE, WHAT ADVANTAGES DO
YOU BELIEVE YOUR MANAGED APPROACH CAN POTENTIALLY DELIVER AS THE MARKET
CONTINUES TO EVOLVE?
WBP: Index funds have outperformed active management because the recent
market advance has been dominated by a small number of large stocks -- the
Coca-Colas and Microsofts of the world -- that we think most investors would
agree are fairly expensive. We believe index fund buyers should realize they
are putting a lot of their money into 10 or 15 stocks -- something they might
not do if they were investing individually. They should also remember that
index funds don't always go up -- recent history notwithstanding. When stock
prices decline, index fund investors can expect to bear the full brunt of
that market downturn. We understand that great companies are not always great
investments. That's why the portfolio management team is constantly searching
for value across market sectors, rather than focusing on a favored few. Our
objective, as always, is to achieve superior long-term returns as well as
dampen investment risk.
WHICH OF YOUR TEAM'S STOCK SELECTIONS WERE ESPECIALLY HELPFUL IN ADDING VALUE
FOR THE PERIOD?
WBP: Holding WARNER-LAMBERT CO., a pharmaceuticals company, has proved
extremely beneficial to overall returns. Rather than buy "disappointment," so
to speak, in this stock, we anticipated the flow of new drugs that the
company would eventually produce well before the market did. So, just as the
market often over-reacts to short-term negative disappointments, it's often
slow to react positively to developing good news. Through our frequent visits
with management, we garnered a lot of confidence that the old Warner-Lambert
had changed and that the company had a new product pipeline. The products,
frankly, have been more successful than we ever could have imagined. This is
particularly true of Rezulin, a diabetes drug that the company introduced in
January, as well as Lipitor, a cholesterol drug.
Holding QUANTUM CORP., a maker of computer disk drives, also served to
enhance overall returns. We initially became interested in the company
because of the strength of its DLT tape business, as well as the enormous
sales potential of its "Bigfoot" disk drive. The company's stock price took
off because Bigfoot was widely regarded as offering excellent
price/performance characteristics, although there was some degree of
uncertainty about the product because its format differs slightly from the
industry standard. We have now sold the stock from the Portfolio.
WHERE DID THE PORTFOLIO LAG?
WBP: Technology was far and away our most difficult sector for the six months
under review. Most of the Portfolio's relative underperformance in technology
has come from not owning Microsoft, which has always looked very expensive to
us, and from overweighting Sensormatic Electronics Corp., which significantly
underperformed its sector following a quarterly profit announcement that fell
below earlier expectations. Tech-
12
<PAGE>
nology stocks in the Index rose 23% for the six months under review, while
the market as a whole was up more than 20%. The sector was very good, but
surprisingly few technology stocks outperformed and many lost money during
the period.
A KEY SUPPORT FOR THE EXTENDED BULL MARKET HAS BEEN THE NEAR-UNINTERRUPTED
INFLOW OF NEW ASSETS INTO STOCK MUTUAL FUNDS. WILL THE INCREASED
PARTICIPATION IN U.S. STOCKS BY OVERSEAS INVESTORS ADDITIONALLY BOOST PRICES?
WBP: There's no question that the basic liquidity backdrop of fund flows --
whether it be domestic mutual funds, 401(k) investors, or international
investors -- is helping to support this market. Nevertheless, fund flows
can't do it alone, and we'd expect the market to go down if economic
fundamentals deteriorate.
HOW HIGH DO WE CURRENTLY EXPECT THIS SEEMINGLY UNSTOPPABLE MARKET TO GO?
WBP: We believe we're at extreme levels now -- even for a low inflationary
environment -- in terms of price-to-earnings ratios and dividend yields. That
doesn't mean the market has to go down. Valuation is not a market timing
tool. But we are at an extreme, and it's difficult to see valuations going
much higher. At best, we see the market giving you an earnings growth in the
5% to 6% range going forward, although other market factors may reduce this
somewhat. That's a very good return -- even if it does follow the spectacular
double-digit returns posted in 1995 and 1996, and the more than 20% market
advance seen so far this year -- and it's just one of the reasons why Morgan
recommends maintaining portfolio exposure to this key market.
WHAT DO YOU THINK COULD CAUSE AN EVENTUAL CORRECTION?
WBP: The market is clearly vulnerable to "surprises" that cannot be
forecast. On a fundamental basis, however, we do think cyclical pressures are
building in the U.S. economy. If these continue or become exacerbated by
higher economic growth rates overseas and/or higher inflation at home, the
Federal Reserve will undoubtedly raise interest rates. And if the market
begins to sense there's an economic downturn coming, something that hasn't
happened for a very long time, it will almost certainly work as a catalyst
for correction.
13
<PAGE>
PORTFOLIO FACTS
INVESTMENT OBJECTIVE
JPM Equity Portfolio seeks to provide a high total return from a portfolio
comprised of selected equity securities. The Portfolio invests primarily in
the common stock of U.S. corporations with market capitalizations above $1.5
billion. The Portfolio is designed for investors who want an actively managed
portfolio of selected equity securities that seeks to outperform the S&P 500
Index.
- --------------------------------------------------
COMMENCEMENT OF OPERATIONS
1/3/95
- --------------------------------------------------
NET ASSETS AS OF 6/30/97
$7,575,583
- --------------------------------------------------
INCOME DIVIDEND PAYABLES DATES
12/24/97 AND 4/29/98
- --------------------------------------------------
CAPITAL GAIN PAYABLE DATES (IF APPLICABLE)
12/24/97 and 4/29/98
EXPENSE RATIO
The Portfolio's current annualized expense ratio of 0.90% covers
shareholders' expenses for custody, tax reporting, investment advisory and
shareholder services, after reimbursement. The Portfolio is no-load and does
not charge any sales, redemption, or exchange fees. There are no additional
charges for buying, selling, safekeeping Portfolio shares, or for wiring
redemption proceeds from the Portfolio
PORTFOLIO HIGHLIGHTS
ALL DATA AS OF JUNE 30, 1997
PORTFOLIO ALLOCATION
(AS A PERCENTAGE OF TOTAL INVESTMENTS)
[GRAPH]
CONSUMER GOODS 24.0%
TECHNOLOGY 15.7%
FINANCE 12.4%
HEALTH CARE 11.5%
ENERGY 8.0%
UTILITIES 7.9%
INDUSTRIAL 7.6%
BASIC INDUSTRIES 7.2%
SHORT-TERM HOLDINGS 3.9%
TRANSPORTATION 1.8%
<TABLE>
<CAPTION>
LARGEST HOLDINGS
(EXCLUDING SHORT-TERM INVESTMENTS) % OF TOTAL INVESTMENTS
- ------------------------------------------------------------------------------
<S> <C>
PROCTER &GAMBLE CO. 2.8%
(CONSUMER GOODS & SERVICES)
TELE-COMMUNICATIONS TCI -- SERIES A 2.6%
(CONSUMER GOODS & SERVICES)
WARNER-LAMBERT CO. 2.5%
(HEALTH CARE)
EXXON CORP. 2.4%
(ENERGY)
ALLEGHENY TELEDYNE, INC. 2.4%
(BASIC INDUSTRIES)
TIME WARNER, INC. 2.2%
(CONSUMER GOODS & SERVICES)
TOYS 'R' US, INC. 2.2%
(CONSUMER GOODS & SERVICES)
COOPER INDUSTRIES, INC. 2.0%
(INDUSTRIAL PRODUCTS & SERVICES)
BAUSCH & LOMB, INC. 2.0%
(HEALTH CARE)
GENERAL MILLS, INC. 2.0%
(CONSUMER GOODS & SERVICES)
</TABLE>
14
<PAGE>
JPM SMALL COMPANY PORTFOLIO
PORTFOLIO REVIEW
The six months ended June 30, 1997 were a textbook example of U.S. small cap
volatility. Concerns about Federal Reserve tightening, which was a drain on
the market in late 1996, proved essentially groundless after the New Year,
allowing small cap stocks to more than recoup their previous losses. Small
caps were again sent tumbling when Fed Chairman Greenspan hinted the market
was substantially overvalued. Negative corporate earnings surprises then held
sway in a momentum-driven market until March tightening by the Fed spawned
the general perception that a "soft landing" had taken place in the U.S.
economy. Given this backdrop, small cap stocks rebounded, outperforming large
caps for the first time in 1997 and ending the first half of the year at an
all-time high.
The Portfolio's investment strategy seeks to add long-term value for
shareholders by using Morgan's proprietary research to identify undervalued
small cap stocks. Given the extremes of volatility that have been outlined
above, we are pleased to report that the Portfolio's actively managed,
disciplined investment strategy for small cap stocks enabled it to provide an
attractive nominal return of 7.49% for the six-month period under review.
This performance let the Portfolio rank 30th (or in the 17th percentile of
520 similar portfolios included in the Lipper Variable Annuity Small Cap
Funds Average in terms of total returns since inception. *
The small cap market remained focused on short-term corporate earnings rather
than long-term fundamentals throughout much of the period under review. In
our view, this was a contributing factor to the Portfolio's relative
underperformance of its benchmark, which is the Russell 2000 Index, during
the first half of 1997. The benchmark returned 10.20% for the period.
The Portfolio's net asset value per share advanced from $12.53 at December
31, 1996 to $12.75 at June 30, 1997 after making distributions of $0.28 from
long-term capital gains, and $0.34 from short-term capital gains. The
Portfolio's net assets grew from $3.9 million at December 31, 1996 to $5.0
million at the end of the period under review.
The table below presents the Portfolio's average annual total return over
various time periods, as well as on a since-inception basis. Total returns
for periods of less than one year are not annualized and provide a picture of
how the Portfolio has performed over the short term.
<TABLE>
<CAPTION>
PERFORMANCE TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS
---------------------- ----------------------------
THREE SIX ONE SINCE
AS OF JUNE 30, 1997 MONTHS MONTHS YEAR INCEPTION*
- ------------------------------------------------ ----------------------------
<S> <C> <C> <C> <C>
JPM Small Company
Portfolio 15.28% 7.49% 17.72% 24.83%
Russell 2000 Index** 16.21% 10.20% 16.33% 22.15%
Lipper Variable Annuity
Small Cap Funds Average 16.27% 8.11% 14.19% 24.30%
</TABLE>
*1/3/95 -- COMMENCEMENT OF OPERATIONS.
**THE RUSSELL 2000 INDEX: AN UNMANAGED INDEX USED TO PORTRAY THE PATTERN OF
STOCK MOVEMENT BASED ON THE AVERAGE PERFORMANCE OF 2000 U.S. SMALL CAP
STOCKS. THE INDEX DOES NOT INCLUDE FEES OR OPERATING EXPENSES AND IS NOT
AVAILABLE FOR DIRECT INVESTMENT.
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. PORTFOLIO RETURNS ARE
NET OF PORTFOLIO EXPENSES ONLY, INCLUDE REINVESTMENT OF DIVIDENDS AND REFLECT
THE REIMBURSEMENT OF CERTAIN PORTFOLIO EXPENSES AS DESCRIBED IN THE
PROSPECTUS FOR THE PORTFOLIO. HAD EXPENSES NOT BEEN SUBSIDIZED, THE
PORTFOLIO'S RETURN WOULD HAVE BEEN LOWER. PORTFOLIO RETURNS DO NOT REFLECT
ANY SEPARATE ACCOUNT EXPENSES IMPOSED ON THE VARIABLE CONTRACTS WHICH MAY
INCLUDE A SALES CHARGE, PREMIUM TAX CHARGE, DAC TAX SALES CHARGE, COST OF
INSURANCE, MORTALITY EXPENSES, SURRENDER AND OTHER CHARGES.
LIPPER ANALYTICAL SERVICES, INC. IS A LEADING SOURCE FOR MUTUAL FUND DATA.
15
<PAGE>
PORTFOLIO MANAGER Q&A
[PHOTO]
Following is an interview with STEPHEN J. RICH, a member of the portfolio
management team for JPM Small Company Portfolio. Stephen joined J.P. Morgan
Investment Management in 1991. Prior to assuming his current
responsibilities, he held positions in Morgan's structured equity and
balanced/equity groups. Stephen was educated at Princeton University and is
currently pursuing a Masters degree in Business Administration at New York
University. This interview was conducted July 24, 1997 and reflects Stephen's
views on that date.
SMALL COMPANY STOCKS, AS MEASURED BY THE RUSSELL 2000 INDEX, RETURNED 16.21%
FOR THE SECOND QUARTER OF 1997 -- THEIR LARGEST QUARTERLY GAIN SINCE MARCH OF
1991. WHAT FACTORS DO YOU BELIEVE CONTRIBUTED TO THIS UPSURGE?
SJR: A near-perfect environment -- a "Nirvana Channel," if you will -- of
benign inflation and strong economic growth drove U.S. stocks throughout the
second quarter, catapulting the Russell 2000 Index to new highs. While still
trailing the S&P 500, this second quarter rebound from negative territory
enabled the Russell 2000 to post a respectable 10.20% return since the
beginning of the year.
DID EITHER GROWTH OR VALUE STOCKS EMERGE AS THE DOMINANT PLAYERS?
SJR: Value stocks in the Index were the clear winners during the first
quarter, rising a modest 0.25% for the period while growth stocks declined
- -10.45%. Concerns about inflation, which were prevalent at the time, seemed
to drive investors toward value stocks because they generally offer lower
price volatility in the small cap area. Value stocks continued to attract a
higher level of investor interest at the beginning of the second quarter,
while growth stocks spurred the market later on. We believe the small cap
market's year-to-date flip-flop between growth and value stocks favored the
Portfolio's "core" approach, which seeks to invest equally in the two sectors
as a way of capturing a true small cap return, rather than one that is
contingent upon whether growth sectors are doing well or whether value
sectors are doing well.
While portfolios that come down strongly on either side of this investment
equation can "blow out the lights" in any given month, they can also post
strong negative returns if their preference for growth or value stocks falls
out of favor. In our view, market shifts between growth and value happen very
quickly and cannot be predicted with any degree of accuracy. Consequently, we
believe that steering the Portfolio on a neutral course between growth and
value stocks is the best way to achieve a small cap exposure that has the
potential to limit dramatic shifts in overall value by being firmly grounded
in market realities.
STOCKS IN THE RUSSELL 2000 RECOVERED FROM THEIR JULY 1996 SELLOFF TO REACH
ALL-TIME HIGHS IN JANUARY OF THIS YEAR. A SUBSEQUENT DOWNTURN, HOWEVER, LED
TO THE FIRST NEGATIVE QUARTERLY RETURN FOR THE INDEX SINCE DECEMBER 1994. HOW
LARGE A ROLE DO YOU THINK MARKET CONCERNS ABOUT TIGHTENING BY THE FEDERAL
RESERVE PLAYED IN THESE EVENTS?
SJR: Uncertainty on this issue was the main driver of market volatility.
Generally speaking, any indication the Fed may be serious about tightening
money supply will trigger a "flight to safety," during which
16
<PAGE>
investors usually favor larger, more stable stocks. Flights to safety can
affect stocks of any size but, over the years, small caps have proved
especially susceptible.
SHARP BOUNCE BACKS IN APRIL AND MAY SUGGEST TO MANY THAT SMALL CAP STOCKS HAVE
NOW TURNED AN IMPORTANT CORNER. IF SO, WHAT FACTORS DO YOU SEE AS KEY TO
SUSTAINED FORWARD MOMENTUM?
SJR: As April and May came to an end, the fact that the Fed didn't tighten
the money supply seems to have reassured many equity investors regarding the
health of the U.S. economy. We believe the general view now is that the
market will operate in an environment of low inflation and sustainable
economic growth, both of which should prove extremely beneficial to U.S.
equities, regardless of size.
What needs to be kept in mind, however, is the fact that small cap stocks
underperformed large caps for the six months under review. Now that the
economic environment seems to promise smooth sailing for a while, we expect
investors to favor the smaller stocks of the U.S. market because they are
substantially undervalued relative to large cap issues.
WHICH STOCK SELECTIONS WERE KEY TO PORTFOLIO RETURNS?
SJR: One stock that has been phenomenal for the Portfolio is Dekalb
Genetics, a producer of agricultural seeds in the basic industry sector,
which advanced more than 56% for the period. Our analyst, Jim Brown, brought
this stock to our attention. Dekalb's seed has demonstrably better yields and
should gain very meaningful market share for years to come.
We're also very proud of the results that were obtained from our drug stock
selections during the past six-month period. Among these, the platform
bio-tech companies Incyte Pharmaceuticals and Tripos, Inc. were especially
successful (advancing 30% and 33%, respectively). Rather than trying to find
our way among the "one-drug wonders" typically found in this sector,
"platform bio-tech" is now one of the Portfolio's major investment themes.
These companies provide their bio-tech skills as outsourcing to major drug
concerns, and we believe they represent a key trend in an ever-changing
industry.
WHERE DID THE PORTFOLIO LAG?
SJR: In media, our position in Paging Network limited overall returns.
Paging Network continues to struggle with overcapacity in core paging as well
as difficulties surrounding the company's VoiceNow product rollout.
17
<PAGE>
PORTFOLIO FACTS
INVESTMENT OBJECTIVE
JPM Small Company Fund seeks to provide a high total return from a portfolio
comprised of equity securities of small companies.The Portfolio invests at
least 65% of the value of its total assets in the common stock of small U.S.
companies primarily with market capitalizations of less than $1 billion. The
Portfolio is designed for investors who are willing to assume the somewhat
higher risk of investing in small companies in order to seek a higher return
over time than might be expected from a portfolio of stocks of large
companies.
- --------------------------------------------------
COMMENCEMENT OF OPERATIONS
1/3/95
- --------------------------------------------------
NET ASSETS AS OF 6/30/97
$5,008,521
- --------------------------------------------------
DIVIDEND PAYABLE DATES
12/19/97 AND 4/29/98
- --------------------------------------------------
CAPITAL GAIN PAYABLE DATES (IF APPLICABLE)
12/19/97 AND 4/29/98
EXPENSE RATIO
The Portfolio's current annualized expense ratio of 1.15% covers
shareholders' expenses for custody, tax reporting, investment advisory and
shareholder services after reimbursement. The Portfolio is no-load and does
not charge any sales, redemption, or exchange fees. There are no additional
charges for buying, selling, safekeeping Portfolio shares, or for wiring
redemption proceeds from the Portfolio
PORTFOLIO HIGHLIGHTS
ALL DATA AS OF JUNE 30, 1997
PORTFOLIO ALLOCATION
(AS A PERCENTAGE OF TOTAL INVESTMENTS)
[GRAPH]
FINANCE 23.5%
TECHNOLOGY 15.1%
CONSUMER GOODS 14.5%
INDUSTRIAL 12.3%
BASIC INDUSTRIES 10.0%
HEALTH CARE 9.4%
SHORT-TERM INVESTMENTS 5.1%
UTILITIES 4.6%
ENERGY 3.2%
TRANSPORTATION 2.3%
<TABLE>
<CAPTION>
LARGEST HOLDINGS
(EXCLUDING SHORT-TERM INVESTMENTS) % OF TOTAL INVESTMENTS
- ------------------------------------------------------------------------------
<S> <C>
CAPITAL RE CORP. 3.4%
(FINANCE)
DEKALB GENETICS CORP. -- CLASS B 3.3%
(BASIC INDUSTRIES)
COMMERCIAL METALS CO. 2.0%
(BASIC INDUSTRIES)
D.R. HORTON, INC. 1.4%
(CONSUMER GOODS & SERVICES)
INTERMET CORP. 1.4%
(INDUSTRIAL PRODUCTS & SERVICES)
CENTRAL HUDSON GAS & ELECTRIC CORP. 1.3%
(UTILITIES)
MARINER HEALTH GROUP, INC. 1.3%
(HEALTH CARE)
IMAX CORP. 1.3%
(CONSUMER GOODS & SERVICES)
WABASH NATIONAL CORP. 1.3%
(INDUSTRIAL PRODUCTS & SERVICES)
CENTRAL LOUISIANA ELECTRIC CO. 1.2%
(UTILITIES)
</TABLE>
18
<PAGE>
JPM International
Equity Portfolio
Portfolio review
We are pleased to report that as international equities continued to provide
exceptional opportunities for global investors, JPM International Equity
Portfolio provided an impressive 10.38% return for the six months ended June
30, 1997. Although the Portfolio's results were strong for the period, it
trailed the 11.21% return of its benchmark, the MSCI EAFE Index. The
Portfolio's relative underperformance is largely attributable to its low
weighting in Japan, as Japanese stocks reversed their poor performance of the
last year and ended June with a very strong rally.
The Japanese yen -- which had been very weak against the U.S. dollar over the
previous two years -- recovered sharply in May. By the end of the reporting
period, Japan had outperformed many other markets (in dollar terms) in which
the Portfolio was more heavily invested.
The Portfolio's net asset value per share increased from $11.73 on December
31, 1996 to $12.73 at the end of the six months under review, after making
distributions of $0.09 from income, $0.05 from long-term capital gains and
$0.06 from short-term capital gains. In addition, the Portfolio's net assets
advanced from $6.2 million on December 31, 1996 to $7.1 million on June 30,
1997.
The table below presents the Portfolio's average annual total return over
various time periods, as well as on a since-inception basis. Total returns
for periods of less than one year are not annualized and provide a picture of
how the Portfolio has performed over the short term
<TABLE>
<CAPTION>
PERFORMANCE TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS
---------------------- ----------------------------
THREE SIX ONE SINCE
AS OF JUNE 30, 1997 MONTHS MONTHS YEAR INCEPTION*
- ------------------------------------------------ ----------------------------
<S> <C> <C> <C> <C>
JPM International Equity
Portfolio 9.46% 10.38% 16.93% 14.54%
MSCI EAFE Index** 12.98% 11.21% 12.84% 11.46%
Lipper Variable Annuity
International Equity
Average 10.55% 12.13% 16.75% 18.42%
</TABLE>
*1/3/95 -- COMMENCEMENT OF OPERATIONS.
**MSCI EAFE INDEX IS AN UNMANAGED INDEX USED TO TRACK THE AVERAGE PERFORMANCE OF
OVER 900 SECURITIES LISTED ON THE STOCK EXCHANGES OF COUNTRIES IN EUROPE,
AUSTRALASIA, AND THE FAR EAST. THE INDEX DOES NOT INCLUDE FEES OR OPERATING
EXPENSES AND IS NOT AVAILABLE FOR DIRECT INVESTMENT.
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. PORTFOLIO RETURNS ARE
NET OF PORTFOLIO EXPENSES ONLY, INCLUDE REINVESTMENT OF DIVIDENDS AND REFLECT
THE REIMBURSEMENT OF CERTAIN PORTFOLIO EXPENSES AS DESCRIBED IN THE
PROSPECTUS FOR THE PORTFOLIO. HAD EXPENSES NOT BEEN SUBSIDIZED, THE
PORTFOLIO'S RETURN WOULD HAVE BEEN LOWER. PORTFOLIO RETURNS DO NOT REFLECT
ANY SEPARATE ACCOUNT EXPENSES IMPOSED ON THE VARIABLE CONTRACTS WHICH MAY
INCLUDE A SALES CHARGE, PREMIUM TAX CHARGE, DAC TAX SALES CHARGE, COST OF
INSURANCE, MORTALITY EXPENSES, SURRENDER AND OTHER CHARGES.
LIPPER ANALYTICAL SERVICES, INC. IS A LEADING SOURCE FOR MUTUAL FUND DATA.
19
<PAGE>
PORTFOLIO MANAGER Q&A
Following is an interview with PAUL A. QUINSEE, a member of the portfolio
management team for JPM International Equity Portfolio. Paul joined Morgan in
1992 as an international equity portfolio manager. Previously, he worked for
five years as an equity portfolio manager with Citibank and for two years
with Schroder Capital Management in London. This interview was conducted on
July 31, 1997 and reflects Paul's views on that date.
MOST INTERNATIONAL EQUITY MARKETS THROUGHOUT THE WORLD CONTINUED A POSITIVE
TREND DURING THE SIX-MONTH PERIOD ENDING JUNE 30, 1997. EVEN JAPAN REVERSED
ITS POOR PERFORMANCE, ENDING THE PERIOD ON A RALLY. CAN YOU EXPLAIN WHAT IS
BEHIND THIS OVERALL STRENGTH?
PAQ: There's been a strong market for equity returns in most of the world;
the European markets in particular have been strong for awhile, which
continued throughout the six-month period.
The European markets were helped by low and, actually, declining interest
rates. The region also benefited from a favorable currency environment and
growing signs of economic recovery in the continental countries, which
produced a string of upgrades to earnings forecasts. At the same time, there
was generally favorable news regarding corporate restructurings from large
European companies. For example, in Germany, KRUPP-HOESCH made a bid for
Thyssen. While forced to drop its bid, there is a belief that some
restructuring is likely to occur. We also saw very aggressive restructuring
plans announced by PHILIPS ELECTRONICS NV, a technology company in the
Netherlands, which announced a joint venture with Lucent, the U.S.
communications equipment company.
So, the European markets continued to perform well during the six-month
period. In fact, many of theEuropean markets have been outperforming the U.S.
markets in the last year. The change during this period, however, was that
the Japanese market joined in. The Japanese stock market had been
considerably underperforming other markets since last year, which continued
through January and February of 1997. In March, however, the Japanese market
began to rally, and during this period the returns from investing in Japan
actually matched those in Europe.
WHAT WAS BEHIND THIS TURNAROUND IN JAPAN?
PAQ: The Japanese market benefited from diminishing concerns over its
financial companies, helped in part, by an acceleration in the pace of
deregulation in that sector. Japan also benefited from increasing signs that
the economy was continuing to recover, despite tax increases the government
put in place at the beginning of April. Corporate profits released during the
period also matched expectations. In general, there were no real
disappointments.
Furthermore, the Japanese yen -- which had been very weak against the U.S.
dollar over the previous two years -- recovered sharply in May. The recovery
of the yen was due to investors noticing that Japan's current account surplus
had begun to rise again and the expectation that Japan's economic recovery
would bring an end to its current environment of abnormally low interest
rates.
20
<PAGE>
In addition, comments from the Japanese authorities that the yen was too low
sparked a dramatic recovery. Over the period, the yen strengthened against
the U.S. dollar and, in dollar terms, Japan outperformed many other markets.
IN CONTRAST TO THE POSITIVE PERFORMANCE IN JAPAN, OTHER MARKETS IN ASIA DID
NOT PERFORM SO WELL -- SPECIFICALLY MALAYSIA AND THAILAND. WHY?
PAQ: With the exception of Japan, most Asian markets lost ground overall.
Specifically, the Malaysian market, which was affected by great concern
throughout the region about possible implications of over-development in its
real estate market. The Malaysian real estate market has been very strong for
a number of years, which in turn encouraged a tremendous amount of new
construction. Analysts, therefore, began to worry about what this could mean
for occupancy levels and rental values in the future.
The catalyst for much of this worry was problems in Thailand's real estate
market. Thailand had enjoyed a similar real estate boom, which began to
unwind, creating a very negative impact on the Thai stock market.
Consequently, investors have been looking at the Asian markets as a whole and
anticipating where new problems might surface. Malaysian stocks were weak and
Thai stocks collapsed.
Looking on the brighter side, however, Hong Kong performed reasonably well in
the run-up to its handover to Chinese rule. In addition, markets in Latin
America were extremely strong during this period, particularly Brazil.
Economic news from Latin America remained excellent, and long-term interest
rates on foreign debt continued to fall. Therefore, most emerging market
stocks did well during the period.
ON THE POLITICAL FRONT, THERE WERE SOME CONSIDERABLE CHANGES IN EUROPE THAT
CAUSED SOME VOLATILITY IN THOSE MARKETS. CAN YOU COMMENT ON SPECIFIC EVENTS?
PAQ: In both the U.K. and France, although for unconnected reasons, we saw
the ruling conservative right-wing parties lose in elections. In the U.K.,
this came as no surprise. The British conservative party had been in power
since 1979, and the switch of the government to the Labour Party was widely
expected, particularly in light of the party's move to the "center." While
there was uncertainty surrounding any election, the U.K.'s volatility was
really only temporary. In fact, one of the first actions of the U.K.'s new
Labour Party was to grant independence to the Bank of England, which was well
received by the financial markets. Long-term interest rates in the U.K. fell,
even though short-term rates were raised to head off the continuing strength
of the economy.
The election result in France was much more surprising. It appears that
voters were fed up with austerity policies of the right-wing parties and
voted for a socialist administration instead. Initially, markets reacted
badly to the news. However, French stocks recovered all of their losses, as
it became apparent that the Socialist election rhetoric was unlikely to be
followed immediately with policy initiatives, and that the French economy was
still recovering.
WHILE THE PORTFOLIO PRODUCED STRONG RETURNS FOR THE SIX MONTHS UNDER REVIEW,
IT STILL SLIGHTLY UNDERPERFORMED ITS BENCHMARK (THE MSCI EAFE INDEX) FOR THE
PERIOD. WHAT SPECIFICALLY CONTRIBUTED TO THE PORTFOLIO'S STRONG PERFORMANCE,
AND WHAT KEPT IT FROM BEATING ITS BENCHMARK?
PAQ: The Portfolio underperformed its benchmark for the period because it
maintained a lower weighting
21
<PAGE>
in Japan relative to the benchmark. As we mentioned earlier, Japan's
performance in the second quarter of 1997 was very strong. Japan's economy
continued to recover, corporate profits were in line with expectations, and
diminishing investor fears regarding the financial sector all contributed to
a quick turnaround of Japanese equities. Since the Portfolio was less exposed
to Japan, it benefited less from this rally.
However, the Portfolio did produce very favorable results, helped by the
overall strength of the markets, as well as by individual stock-selection
decisions. Specifically, the Portfolio fared very well by large gains from
German auto and insurance stocks. VOLKSWAGEN was one of those holdings, and
Munich Reinsurance (MUENCHENER RUECKVERSICHERUNGS-GESELLSCHAFT) was another.
These stocks benefited from aggressive restructurings and improved earnings.
The Portfolio's holding in the Swiss firm NOVARTIS AG contributed to its
performance, as well. The Portfolio also benefited from the strong
performance of PHILIPS ELECTRONICS NV (a technology company in the
Netherlands), as it appreciated on the announcement of a joint venture with
Lucent, the U.S. communications equipment company.
So all in all, our stock-selection decisions, driven by thorough fundamental
research analysis, helped the performance of the Portfolio for the six-month
period under review.
MOVING TOWARD THE SECOND HALF OF 1997, HOW ARE YOU POSITIONING THE PORTFOLIO?
WHICH MARKETS DO YOU BELIEVE WILL ADD MOST VALUE?
PAQ: It's not easy to find undervalued situations right now, with such
strong performance coming from most markets over the past two to three years.
The two markets we have been focusing on recently, however, are Australia and
New Zealand. In the past year, companies in these markets have provided
relatively disappointing results. We now feel that period is over and that
stocks in those markets represent relatively good value. We think these are
some of the best values that are offered around the world.
We also expect to increase the Portfolio's positions in the U.K., which is
another market that has lagged. The U.K. market has been held back by the
increasing overvaluation of Sterling, which has hurt profits. In addition, we
feel there are a number of companies in the U.K. which are undervalued. Thus,
the U.K. is an area where we expect to increase the Portfolio's allocation.
It's more difficult to choose between the major continental markets and Japan
at this point, with the relative performance of the European markets being so
strong. The valuation gap between the two has narrowed, but we continued to
emphasize Germany in the Portfolio. We think companies there will benefit
from the restructuring and cost cutting that now seems to be the trend in
Germany's corporate sector. We have reduced the Portfolio's exposure to
France and expect to maintain that reduced position going forward. The
French market has already done quite well, and we believe it is no longer
undervalued.
Regarding Japan, we feel investors are generally overemphasizing Japan's
economic difficulties. We believe the Japanese economy will continue to
recover at a healthy rate this year, helped by its low interest-rate
environment. We are not likely to add significant positions in Japan; while
the valuation gap has narrowed, we still feel Japan is no bargain --
especially given that many European companies have been enthusiastically
restructuring.
22
<PAGE>
PORTFOLIO FACTS
INVESTMENT OBJECTIVE
JPM International Equity Portfolio seeks to pro-vide a high total return from
a portfolio comprised of equity securities of foreign corporations. The
Portfolio is designed for investors with a long-term investment horizon who
want to diversify their investments by adding international equities and take
advantage of investment opportunities outside the U.S. As an international
investment, the Portfolio is subject to foreign market, political, and
currency risks.
- --------------------------------------------------
COMMENCEMENT OF OPERATIONS
1/3/95
- --------------------------------------------------
NET ASSETS AS OF 6/30/97
$7,075,748
- --------------------------------------------------
DIVIDEND PAYABLE DATES
12/24/97 AND 4/29/98
- --------------------------------------------------
CAPITAL GAIN PAYABLE DATES (IF APPLICABLE)
12/24/97 AND 4/29/98
EXPENSE RATIO
The Portfolio's annualized expense ratio of 1.20% covers shareholders'
expenses for custody, tax reporting, investment advisory and shareholder
services, after reimbursement. The Portfolio is no-load and does not charge
any sales, redemption, or exchange fees. There are no additional charges for
buying, selling, safekeeping Portfolio shares, or for wiring redemption
proceeds from the Portfolio.
PORTFOLIO HIGHLIGHTS
ALL DATA AS OF JUNE 30, 1997
PORTFOLIO ALLOCATION
(AS A PERCENTAGE OF TOTAL INVESTMENTS)
[GRAPH]
EUROPE 50.7%
ASIA PACIFIC 19.5%
JAPAN 15.7%
LATIN AMERICA 9.6%
CANADA 3.1
AFRICA 1.4%
<TABLE>
<CAPTION>
LARGEST HOLDINGS
(EXCLUDING SHORT-TERM INVESTMENTS) % OF TOTAL INVESTMENTS
- ------------------------------------------------------------------------------
<S> <C>
EMPRESA NACIONAL DE ELECTRICIDAD
SA (SPON. ADR) (CHILE) 1.4%
TELECOMUNICACOES BRASILEIRAS SA
(ADR) (BRAZIL) 1.3%
TELECOM CORPORATION OF NEW ZEALAND
(NEW ZEALAND) 1.3%
CEMENTOS MEXICANOS SA DE CV
(MEXICO) 1.2%
TELECOM ITALIA SPA (ITALY) 1.2%
ENI SPA(ITALY) 1.2%
GLAXO WELLCOME PLC(U.K.) 1.1%
BROKEN HILL PROPRIETARY COMPANY LTD.
(AUSTRALIA) 1.1%
WESTPAC BANKING CORP. LTD.
(AUSTRALIA) 1.0%
MUENCHENER RUECKVERSICHE-
RUNGS-GESELLSCHAFT AG (GERMANY) 0.9%
</TABLE>
23
<PAGE>
This report must be preceded or accompanied by the prospectus for the
Portfolios in the JPM Series Trust II and, if applicable, the prospectus of
the separate accounts for which the Portfolios serve as investment options.
The prospectuses for the Portfolios and the separate accounts contain more
complete information, including contract charges and deductions, and
Portfolio fees and expenses. Please read the prospectuses for complete
details including risk considerations.
Funds Distributor, Inc. is the distributor for the Portfolios. J.P. Morgan
Investment Management Inc. ("Morgan") is the Portfolios' investment adviser.
Shares of the Portfolios presently are offered only to variable annuity and
variable life insurance separate accounts established by insurance companies
to fund variable annuity contracts and variable life insurance policies and
qualified pension and retirement plans outside the separate account context.
Shares of the Portfolios and investments in the variable contracts are not
deposits or obligations of, or guaranteed or endorsed by, any bank. The
shares and the variable contracts are not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board or any other
governmental agency. Investment return and principal value of an investment
in any of the Portfolios can fluctuate, so an investor's shares when redeemed
may be worth more or less than their original cost.
Reference to specific securities and their issuers are for illustrative
purposes only and should not be interpreted as recommendations to purchase or
sell these securities. There is no assurance the Portfolio will continue to
hold these securities.
24
<PAGE>
JPM TREASURY MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YIELD TO
PRINCIPAL MATURITY/
AMOUNT SECURITY DESCRIPTION MATURITY DATES RATE VALUE
- -------------- ------------------------------------------------- -------------- --------- -----------
<C> <S> <C> <C> <C>
U.S. TREASURY OBLIGATIONS (98.8%)
$ 200,000 United States Treasury Bills..................... 07/17/97 4.230% $ 199,624
285,000 United States Treasury Bills..................... 07/24/97 4.750 284,135
484,000 United States Treasury Bills..................... 08/21/97 4.860-5.140 480,571
500,000 United States Treasury Notes..................... 08/15/97 6.500-8.625 501,281
-----------
TOTAL U.S. TREASURY OBLIGATIONS.............. 1,465,611
-----------
OTHER INVESTMENT COMPANIES (1.0%)
15,495 Seven Seas Money Market Fund..................... 07/01/97 5.560 15,495
-----------
TOTAL INVESTMENTS (COST $1,481,106) (99.8%).................................. 1,481,106
OTHER ASSETS IN EXCESS OF LIABILITIES (0.2%)................................. 2,773
-----------
NET ASSETS (100.0%).......................................................... $ 1,483,879
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
25
<PAGE>
JPM BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P
PRINCIPAL RATING
AMOUNT SECURITY DESCRIPTION (UNAUDITED) VALUE
- ------------ ------------------------------------------------- ------------ ------------
<C> <S> <C> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS AND ASSET BACKED SECURITIES (3.0%)
FINANCIAL SERVICES (3.0%)
$ 60,000 Green Tree Financial Corp., Series 94-1, Class
A4, 7.20% due 04/15/19......................... Aa2/NA $ 61,003
26,524 Green Tree Recreational, Equipment & Consumer
Trust, Series 96-A, Class A1, 5.55% due
02/15/18....................................... Aaa/AAA 26,227
17,098 Premier Auto Trust, Series 93-6, 4.65% due
11/02/99....................................... Aaa/AAA 17,001
50,000 World Omni Automobile Lease Securitization Trust,
Series 97-A, Class A2, Sequential Payer,
Callable, 6.75% due 06/25/03................... Aaa/AAA 50,359
------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS AND
ASSET BACKED SECURITIES (COST $153,392).... 154,590
------------
CONVERTIBLE BONDS (0.2%)
RETAIL (0.2%)
10,000 Corporate Express Inc., 4.50% due 07/01/00 (cost
$8,559)........................................ B3/B 8,937
------------
CORPORATE OBLIGATIONS (26.3%)
AEROSPACE (1.0%)
50,000 Lockheed Martin Corp., 6.55% due 05/15/99........ A3/BBB+ 50,185
------------
BANKING (2.2%)
15,000 First Nationwide Holdings Inc., 10.625% due
10/01/03....................................... Ba3/NA 16,537
50,000 Keycorp, 8.40% due 04/01/99...................... A2/BBB+ 51,609
50,000 Mellon Capital I, Series A, 7.72% due 12/01/26... A2/BBB+ 48,184
------------
116,330
------------
BROADCASTING & PUBLISHING (0.3%)
27,000 Capstar Broadcasting Partners, (144A), 12.75% due
02/01/09....................................... NA/NA 17,347
------------
BUILDING MATERIALS (0.6%)
15,000 Johns Manville International Group Inc., 10.875%
due 12/15/04................................... Ba3/BB- 16,687
15,000 USG Corp., Series B, 9.25% due 09/15/01.......... Ba2/BB+ 15,787
------------
32,474
------------
DIVERSIFIED MANUFACTURING (0.3%)
15,000 Polymer Group Inc., (144A), 9.00% due 07/01/07... B2/B 14,759
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
26
<PAGE>
JPM BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P
PRINCIPAL RATING
AMOUNT SECURITY DESCRIPTION (UNAUDITED) VALUE
- ------------ ------------------------------------------------- ------------ ------------
<C> <S> <C> <C>
ELECTRIC (2.9%)
$ 50,000 Niagara Mohawk Power Corp., 8.00% due 06/01/04... Ba3/BB- $ 50,105
100,000 Southern Co. Capital Trust I, (144A), 8.19% due
02/01/37....................................... A3/A- 101,401
------------
151,506
------------
ELECTRONICS (1.0%)
50,000 Motorola Inc., 7.50% due 05/15/25................ Aa3/AA 51,112
------------
FINANCIAL SERVICES (11.9%)
45,000 Associates Corp. North America, 5.96% due
05/15/37....................................... Aa3/AA- 45,106
50,000 BankBoston Capital Trust II, Series B, 7.75% due
12/15/26....................................... Baa1/BBB 47,758
50,000 Chrysler Financial Corp., 6.32% due 07/14/99..... A3/A 49,951
50,000 First Union Institutional Capital I, (144A),
8.04% due 12/01/26............................. A1/BBB+ 50,264
50,000 Fleet Capital Trust II, 7.92% due 12/11/26....... A2/BBB 49,589
50,000 Ford Motor Credit Co., 6.375% due 09/15/99....... A1/A+ 50,009
40,000 General Motors Acceptance Corp., 5.70% due
12/22/97....................................... A3/A- 40,029
50,000 General Motors Acceptance Corp., 5.90% due
03/06/00....................................... A3/A- 49,137
50,000 Household Finance Co., 6.78% due 04/17/01........ A2/A 49,977
50,000 Sears Roebuck Acceptance Corp., 6.22% due
03/25/99....................................... A2/A- 49,986
40,000 US West Capital Funding Inc., 7.90% due
02/01/27....................................... Baa1/BBB+ 40,355
100,000 Washington Mutual Capital I, 8.375% due
06/01/27....................................... A3/BBB- 101,679
------------
623,840
------------
HEALTH SERVICES (0.2%)
10,000 Paracelsus Healthcare Corp., 10.00% due
08/15/06....................................... B3/B- 10,225
------------
NATURAL GAS (1.3%)
50,000 Atlantic Richfield Co., 8.25% due 02/01/22....... A2/A 54,470
15,000 Lomak Petroleum Inc., 8.75% due 01/15/07......... B1/B 14,813
------------
69,283
------------
OIL-PRODUCTION (0.3%)
15,000 Plains Resources Inc., Series B, 10.25% due
03/15/06....................................... B2/B 16,125
------------
PERSONAL CARE (0.9%)
50,000 Procter & Gamble Co., 6.45% due 01/15/26......... Aa2/AA 44,749
------------
POLLUTION CONTROL (0.1%)
5,000 Allied Waste North America Inc., (144A), 10.25%
due 12/01/06................................... B3/B+ 5,388
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
27
<PAGE>
JPM BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P
PRINCIPAL RATING
AMOUNT SECURITY DESCRIPTION (UNAUDITED) VALUE
- ------------ ------------------------------------------------- ------------ ------------
<C> <S> <C> <C>
RETAIL (0.3%)
$ 15,000 Proffitt's Inc., (144A), 8.125% due 05/15/04..... Ba2/BB $ 14,963
------------
TELECOMMUNICATION SERVICES (0.4%)
10,000 McLeod Inc., (144A), 0.00% due 03/01/07.......... B3/B 6,363
15,000 Paging Network Inc., 10.00% due 10/15/08......... B2/B 14,438
------------
20,801
------------
TELECOMMUNICATIONS (2.3%)
60,000 Bellsouth Telecommunications, 6.75% due
10/15/33....................................... Aaa/AAA 53,444
30,000 Jacor Communications Co., (144A), 8.75% due
06/15/07....................................... B2/B 29,625
15,000 MFS Communications, 9.375% due 01/15/04.......... Ba3/BBB- 13,894
20,000 TCI Communications Inc., 8.75% due 08/01/15...... Ba1/BBB- 20,898
------------
117,861
------------
TEXTILES (0.3%)
15,000 WestPoint Stevens Inc., 8.75% due 12/15/01....... Ba3/BB- 15,544
------------
TOTAL CORPORATE OBLIGATIONS (COST
$1,362,053)................................ 1,372,492
------------
FOREIGN CORPORATE OBLIGATIONS (3.2%)
CANADA (0.6%)
FOREST PRODUCTS & PAPER
6,000 Canadian Pacific Forest Products Ltd., 9.25% due
06/15/02....................................... Ba1/NR 6,251
------------
FOOD, BEVERAGES & TOBACCO
25,000 Cott Corp., 8.50% due 05/01/07................... Ba3/B+ 24,938
------------
31,189
------------
CHINA (1.0%)
FINANCIAL SERVICES
50,000 Guangdong International Trust & Investment Corp.,
(144A), 8.75% due 10/24/16..................... Baa2/BBB- 52,398
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
28
<PAGE>
JPM BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P
PRINCIPAL RATING
AMOUNT SECURITY DESCRIPTION (UNAUDITED) VALUE
- ------------ ------------------------------------------------- ------------ ------------
<C> <S> <C> <C>
MEXICO (1.0%)
FOREST PRODUCTS & PAPER
$ 35,000 Copamex Industrias S.A., (144A), 11.375% due
04/30/04....................................... B1/NA $ 37,800
------------
BROADCASTING & PUBLISHING
15,000 Grupo Televisa, (144A), 11.375% due 05/15/03..... Ba3/BB 16,444
------------
54,244
------------
PHILLIPINES (0.3%)
TELEPHONE
15,000 Philippine Long Distance Telephone, Series E,
7.85% due 03/06/07............................. Ba2/BB+ 14,449
------------
VENEZUELA (0.3%)
FINANCIAL SERVICES
15,000 CANTV Finance Ltd., 9.25% due 02/01/04........... Ba2/B+ 15,244
------------
TOTAL FOREIGN CORPORATE OBLIGATIONS (COST
$164,811).................................. 167,524
------------
SOVEREIGN BONDS (2.4%)
ARGENTINA (0.5%)
25,000 Republic of Argentina Bonos del Tesoro, Series
BT02, 8.75% due 05/09/02....................... B1/NA 25,000
------------
CANADA (1.7%)
100,000 Government of Canada, Series A-76, 9.00% due
06/01/25....................................... Aa1/AAA 91,241
------------
POLAND (0.2%)
15,000 Republic of Poland, 4.00%* due 10/27/14.......... Baa3/BBB- 12,807
------------
TOTAL SOVEREIGN BONDS (COST $126,933)........ 129,048
------------
U.S. GOVERNMENT AGENCY OBLIGATIONS (31.7%)
FEDERAL HOME LOAN MORTGAGE CORP. (0.9%)
43,459 8.00% due 11/01/26............................... 44,474
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
29
<PAGE>
JPM BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P
PRINCIPAL RATING
AMOUNT SECURITY DESCRIPTION (UNAUDITED) VALUE
- ------------ ------------------------------------------------- ------------ ------------
<C> <S> <C> <C>
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (30.8%)
$ 134,241 6.50% due 12/15/23............................... $ 129,978
184,804 7.50% due 08/15/25............................... 185,377
345,077 7.50% due 03/15/26............................... 346,154
181,115 7.50% due 06/15/26............................... 181,680
495,000 8.00% due 06/15/27............................... 506,291
247,500 9.00% due 06/15/16............................... 260,561
------------
1,610,041
------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(COST $1,648,726).......................... 1,654,515
------------
U.S. TREASURY OBLIGATIONS (14.6%)
U.S. TREASURY BONDS (5.3%)
229,000 6.50% due 11/15/26............................... 219,306
40,000 6.75% due 08/15/26............................... 39,568
15,000 10.375% due 11/15/12............................. 19,022
------------
277,896
------------
U.S. TREASURY NOTES (9.3%)
15,000 5.75% due 08/15/03............................... 14,480
70,000 6.25% due 02/15/03............................... 69,460
98,000 6.375% due 09/30/01.............................. 97,979
25,000 6.625% due 06/30/01.............................. 25,230
102,000 6.875% due 05/15/06.............................. 104,058
50,000 7.25% due 08/15/04............................... 52,074
120,000 7.875% due 11/15/99.............................. 124,454
------------
487,735
------------
TOTAL U.S. TREASURY OBLIGATIONS (COST
$760,052).................................. 765,631
------------
<CAPTION>
SHARES
- ------------
<C> <S> <C> <C>
CONVERTIBLE PREFERRED STOCKS (2.4%)
INDUSTRIAL (2.4%)
100 Home Ownership Funding, (144A), 13.331% due
12/30/06....................................... Aaa/NA 96,591
15 JWS Hampshire Properties, (144A), 13.957% due
12/30/06....................................... NA/NA 14,625
15 Lazara Properties, (144A), 13.547% due
12/31/99....................................... NA/NA 14,610
------------
TOTAL CONVERTIBLE PREFERRED STOCKS (COST
$130,242).................................. 125,826
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
30
<PAGE>
JPM BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY DESCRIPTION VALUE
- ----------- ------------------------------------------------- ------------
<S> <S> <C>
SHORT-TERM INVESTMENTS (15.8%)
U.S. TREASURY OBLIGATIONS (15.5%)
$ 336,000 United States Treasury Bills, 4.905-5.16%, due
8/21/97........................................ $ 333,623
477,000 United States Treasury Bills, 5.17% due 8/7/97... 474,466
------------
808,089
------------
OTHER INVESTMENT COMPANIES (0.3%)
14,585 Seven Seas Money Market Fund, 5.56% due
07/01/97....................................... 14,585
------------
TOTAL SHORT-TERM INVESTMENTS (COST $822,674)... 822,674
------------
TOTAL INVESTMENTS (COST $5,177,442) (99.6%)...... 5,201,237
OTHER ASSETS IN EXCESS OF LIABILITIES (0.4%)..... 21,649
------------
NET ASSETS (100.0%).............................. $ 5,222,886
------------
------------
</TABLE>
- ------------------------------
Abbreviations used in the schedule of investments are as follows:
* - Rate shown reflects current rate on variable rate instrument or instrument
with step coupon rates.
144A - Securities restricted for resale to Qualified Institutional Buyers.
NA - Not Available.
NR - Not Rated.
The Accompanying Notes are an Integral Part of the Financial Statements.
31
<PAGE>
JPM EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -----------
<S> <C> <C>
COMMON STOCK (95.5%)
BASIC INDUSTRIES (7.1%)
CHEMICALS (3.0%)
E.I. Du Pont De Nemours & Co..................... 1,400 $ 88,025
Union Carbide Corp............................... 3,000 141,187
-----------
229,212
-----------
FOREST PRODUCTS & PAPER (0.9%)
Temple-Inland, Inc............................... 1,200 64,800
-----------
METALS & MINING (3.2%)
Allegheny Teledyne, Inc.......................... 6,600 178,200
Aluminum Company of America...................... 900 67,837
-----------
246,037
-----------
TOTAL BASIC INDUSTRIES......................... 540,049
-----------
CONSUMER GOODS & SERVICES (23.8%)
AUTOMOTIVE (0.8%)
General Motors Corp.............................. 1,100 61,256
-----------
BROADCASTING & PUBLISHING (2.9%)
TCI Satellite Entertainment, Inc. - Class A+..... 3,000 23,719
Tele-Communications TCI - Series A+.............. 13,200 195,937
-----------
219,656
-----------
ENTERTAINMENT, LEISURE & MEDIA (4.5%)
Circus Circus Enterprises, Inc.+................. 3,700 91,112
International Game Technology.................... 4,500 79,875
Time Warner, Inc................................. 3,500 168,875
-----------
339,862
-----------
FOOD, BEVERAGES & TOBACCO (7.2%)
CPC International, Inc........................... 400 36,925
General Mills, Inc............................... 2,300 149,787
Philip Morris Companies, Inc..................... 2,700 119,812
Ralston Purina Co................................ 1,600 131,500
Unilever NV (ADR)................................ 500 109,000
-----------
547,024
-----------
HOUSEHOLD PRODUCTS (2.8%)
Procter & Gamble Co.............................. 1,500 211,875
-----------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -----------
<S> <C> <C>
RETAIL (5.0%)
Circuit City Stores, Inc......................... 2,500 $ 88,906
Circuit City Stores, Inc. - CarMax Group+........ 1,800 25,763
General Nutrition Companies, Inc.+............... 400 11,175
Toys 'R' Us, Inc.+............................... 4,700 164,500
Wal-Mart Stores, Inc............................. 2,600 87,913
-----------
378,257
-----------
TEXTILES (0.6%)
Fruit of the Loom, Inc. - Class A+............... 1,600 49,600
-----------
TOTAL CONSUMER GOODS & SERVICES................ 1,807,530
-----------
ENERGY (8.0%)
OIL-PRODUCTION (8.0%)
Anadarko Petroleum Corp.......................... 1,200 72,000
Ashland, Inc..................................... 1,500 69,563
British Petroleum Co. (ADR)...................... 1,000 74,875
Exxon Corp....................................... 2,900 178,350
Mobil Corp....................................... 1,400 97,825
Tosco Corp....................................... 3,700 110,769
-----------
603,382
-----------
TOTAL ENERGY................................... 603,382
-----------
FINANCE (12.3%)
BANKING (7.7%)
Banc One Corp.................................... 1,500 72,656
Crestar Financial Corp........................... 600 23,325
Dime Bancorp, Inc................................ 2,800 49,000
First Chicago NBD Corp........................... 2,200 133,100
Fleet Financial Group, Inc....................... 1,100 69,575
NationsBank Corp................................. 1,800 116,100
Providian Financial Corp.+....................... 2,700 86,738
Washington Mutual, Inc........................... 500 29,891
-----------
580,385
-----------
FINANCIAL SERVICES (1.7%)
Citicorp......................................... 500 60,281
Salomon, Inc..................................... 1,300 72,313
-----------
132,594
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
32
<PAGE>
JPM EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -----------
<S> <C> <C>
INSURANCE (2.9%)
Aegon NV (ARS)................................... 1,173 $ 82,178
AMBAC, Inc....................................... 900 68,738
Marsh & McLennan Companies, Inc.................. 1,000 71,375
-----------
222,291
-----------
TOTAL FINANCE.................................. 935,270
-----------
HEALTH CARE (11.5%)
HEALTH SERVICES (2.8%)
Columbia / HCA Healthcare Corp................... 1,700 66,831
United Healthcare Corp........................... 2,800 145,600
-----------
212,431
-----------
MEDICAL SUPPLIES (2.0%)
Bausch & Lomb, Inc............................... 3,200 150,800
-----------
PHARMACEUTICALS (6.7%)
Alza Corp.+...................................... 2,800 81,200
American Home Products Corp...................... 900 68,850
Forest Laboratories, Inc.+....................... 1,300 54,113
Schering-Plough Corp............................. 2,400 114,900
Warner-Lambert Co................................ 1,500 186,375
-----------
505,438
-----------
TOTAL HEALTH CARE.............................. 868,669
-----------
INDUSTRIAL PRODUCTS & SERVICES (7.5%)
BUILDING MATERIALS (0.4%)
Johns Manville Corp.............................. 2,900 34,256
-----------
COMMERCIAL SERVICES (1.0%)
ADT Ltd.+........................................ 2,200 72,600
-----------
DIVERSIFIED MANUFACTURING (3.9%)
AlliedSignal, Inc................................ 1,700 142,800
Cooper Industries, Inc........................... 3,100 154,225
-----------
297,025
-----------
ELECTRICAL EQUIPMENT (0.8%)
Anixter International, Inc.+..................... 3,600 61,875
-----------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -----------
<S> <C> <C>
POLLUTION CONTROL (1.4%)
Waste Management, Inc............................ 3,400 $ 109,225
-----------
TOTAL INDUSTRIAL PRODUCTS & SERVICES........... 574,981
-----------
TECHNOLOGY (15.6%)
AEROSPACE (2.6%)
Boeing Co........................................ 2,800 148,575
Coltec Industries, Inc.+......................... 2,400 46,800
-----------
195,375
-----------
COMPUTER SOFTWARE (0.5%)
Autodesk, Inc.................................... 900 34,509
-----------
COMPUTER SYSTEMS (4.7%)
EMC Corp./ Mass.+................................ 3,700 144,300
International Business Machines Corp............. 1,200 108,225
Sun Microsystems, Inc.+.......................... 2,800 104,213
-----------
356,738
-----------
ELECTRONICS (4.6%)
Bay Networks, Inc.+.............................. 3,700 98,281
Cabletron Systems, Inc.+......................... 2,400 67,950
Cisco Systems, Inc.+............................. 700 47,009
Perkin-Elmer Corp................................ 1,000 79,563
Sensormatic Electronics Corp..................... 4,600 59,225
-----------
352,028
-----------
INFORMATION PROCESSING (0.5%)
First Data Corp.................................. 900 39,544
-----------
SEMICONDUCTORS (0.8%)
National Semiconductor Corp.+.................... 1,900 58,188
-----------
TELECOMMUNICATIONS-EQUIPMENT (1.9%)
General Instrument Corp.+........................ 5,700 142,500
-----------
TOTAL TECHNOLOGY............................... 1,178,882
-----------
TRANSPORTATION (1.8%)
RAILROADS (1.8%)
CSX Corp......................................... 2,400 133,200
-----------
TOTAL TRANSPORTATION........................... 133,200
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
33
<PAGE>
JPM EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -----------
<S> <C> <C>
UTILITIES (7.9%)
ELECTRIC (2.0%)
Dominion Resources, Inc.......................... 1,500 $ 54,938
Duke Power Co.................................... 1,500 71,906
Northern States Power Co......................... 500 25,875
-----------
152,719
-----------
TELEPHONE (5.9%)
Bell Atlantic Corp............................... 1,000 75,875
GTE Corp......................................... 1,600 70,200
MCI Communications Corp.......................... 1,800 68,906
SBC Communications, Inc.......................... 1,200 74,250
Sprint Corp...................................... 1,000 52,625
WorldCom, Inc.+.................................. 3,200 102,300
-----------
444,156
-----------
TOTAL UTILITIES................................ 596,875
-----------
TOTAL COMMON STOCK (COST $6,116,754)........... 7,238,838
-----------
<CAPTION>
PRINCIPAL
AMOUNT
-----------
<S> <C> <C>
SHORT-TERM INVESTMENTS (3.9%)
U.S. TREASURY OBLIGATIONS (3.8%)
U.S. Treasury Bill 4.91-4.93% due 08/21/97....... $ 154,000 $ 152,929
U.S. Treasury Bill 5.17% due 08/07/97............ 136,000 135,277
-----------
TOTAL U.S. TREASURY OBLIGATIONS................ 288,206
-----------
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------- ----------- -----------
<S> <C> <C>
OTHER INVESTMENT COMPANIES (0.1%)
Seven Seas Money Market Fund, 5.56% due
07/01/97....................................... $ 5,858 $ 5,858
-----------
TOTAL SHORT-TERM INVESTMENTS (COST $294,064)... 294,064
-----------
TOTAL INVESTMENTS (COST $6,410,818)
(99.4%)..................................................... 7,532,902
OTHER ASSETS IN EXCESS
OF LIABILITIES (0.6%)....................................... 42,681
-----------
NET ASSETS (100.0%)........................................... $ 7,575,583
-----------
-----------
</TABLE>
- ------------------------------
Note: Based on the cost of securities of $6,420,203 for Federal Income Tax
purposes at June 30, 1997, the aggregate gross unrealized appreciation and
depreciation was $1,192,326 and $79,627, respectively, resulting in net
unrealized appreciation of $1,112,699.
+ Non-income producing security.
ADR - American Depositary Receipt.
ARS - American Registered Shares.
The Accompanying Notes are an Integral Part of the Financial Statements.
34
<PAGE>
JPM SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -----------
<S> <C> <C>
COMMON STOCK (96.4%)
BASIC INDUSTRIES (10.0%)
AGRICULTURE (3.3%)
Dekalb Genetics Corp. - Class B.................. 2,100 $ 167,475
-----------
CHEMICALS (0.5%)
General Chemical Group, Inc...................... 300 8,025
Landec Corp.+.................................... 200 1,200
Minerals Technologies, Inc....................... 300 11,250
OM Group, Inc.................................... 150 4,969
-----------
25,444
-----------
FOREST PRODUCTS & PAPER (2.1%)
American Pad & Paper Co.+........................ 2,500 42,187
Caraustar Industries, Inc........................ 1,400 48,475
Universal Forest Products, Inc................... 1,000 14,562
-----------
105,224
-----------
METALS & MINING (4.1%)
Commercial Metals Co............................. 3,200 103,200
Oregon Steel Mills, Inc.......................... 400 7,975
Schnitzer Steel Industries, Inc. - Class A....... 1,900 55,812
Steel Technologies, Inc.......................... 3,700 39,312
-----------
206,299
-----------
TOTAL BASIC INDUSTRIES......................... 504,442
-----------
CONSUMER GOODS & SERVICES (15.1%)
AUTOMOTIVE (1.1%)
Amcast Industrial Corp........................... 1,100 27,500
Excel Industries, Inc............................ 800 15,600
Simpson Industries, Inc.......................... 1,300 13,894
-----------
56,994
-----------
BROADCASTING & PUBLISHING (1.0%)
Banta Corp....................................... 600 16,350
Digital Generation Systems, Inc.+................ 300 1,369
Heritage Media Corp. - Class A+.................. 700 13,212
K-III Communications Corp.+...................... 1,400 16,800
-----------
47,731
-----------
CONSTRUCTION & HOUSING (1.5%)
D.R. Horton, Inc................................. 7,054 73,185
-----------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -----------
<S> <C> <C>
ENTERTAINMENT, LEISURE & MEDIA (2.3%)
Education Management Corp.+...................... 300 $ 7,725
Imax Corp.+...................................... 2,600 64,187
Steiner Leisure Ltd.+............................ 600 16,987
WMS Industries, Inc.+............................ 1,100 27,569
-----------
116,468
-----------
FOOD, BEVERAGES & TOBACCO (0.7%)
Morningstar Group, Inc.+......................... 600 17,644
Savannah Foods & Industries, Inc................. 600 10,537
Twinlab Corp.+................................... 200 4,800
-----------
32,981
-----------
HOUSEHOLD APPLIANCES FURNISHINGS (1.6%)
Aaron Rents, Inc. - Class B...................... 1,500 19,781
Bush Industries, Inc. - Class A.................. 1,900 45,125
LADD Furniture, Inc.+............................ 300 4,162
Royal Appliance Manufacturing Co.+............... 300 2,569
Stanley Furniture Co., Inc.+..................... 300 6,937
-----------
78,574
-----------
HOUSEHOLD PRODUCTS (0.7%)
Bush Boake Allen, Inc.+.......................... 700 21,787
Safety 1st, Inc.+................................ 2,550 14,503
-----------
36,290
-----------
PERSONAL CARE (0.1%)
French Fragrances, Inc.+......................... 300 2,850
-----------
RESTAURANTS & HOTELS (1.4%)
Candlewood Hotel Company, Inc.+.................. 1,800 14,625
Extended Stay America, Inc.+..................... 1,100 16,397
Papa John's International, Inc.+................. 1,000 36,937
-----------
67,959
-----------
RETAIL (4.4%)
Best Buy Co., Inc.+.............................. 400 5,950
Catherines Stores Corp.+......................... 400 1,525
Charming Shoppes, Inc.+.......................... 2,300 12,039
Delia's, Inc.+................................... 300 5,550
Duckwall-Alto Stores, Inc.+...................... 600 7,650
Garden Ridge Corp.+.............................. 4,100 51,506
Gymboree Corp.+.................................. 600 14,381
JLK Direct Distribution - Class A+............... 100 2,562
Lazare Kaplan International, Inc.+............... 600 10,050
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
35
<PAGE>
JPM SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -----------
<S> <C> <C>
RETAIL (CONTINUED)
Linens 'N Things, Inc.+.......................... 300 $ 8,887
Lithia Motors, Inc. - Class A+................... 600 6,750
One Price Clothing Stores, Inc.+................. 2,700 10,125
Pacific Sunwear of California+................... 200 6,500
Party City Corp.+................................ 1,100 18,081
Peapod, Inc...................................... 400 4,600
Penn Traffic Co.+................................ 1,700 13,387
ShopKo Stores, Inc............................... 200 5,100
Urban Outfitters, Inc.+.......................... 2,500 34,531
-----------
219,174
-----------
TEXTILES (0.3%)
Ashworth, Inc.+.................................. 1,300 13,203
Worldtex, Inc.+.................................. 400 3,200
-----------
16,403
-----------
TOTAL CONSUMER GOODS & SERVICES................ 748,609
-----------
ENERGY (3.3%)
GAS EXPLORATION (1.2%)
Devon Energy Corp................................ 300 11,025
K N Energy, Inc.................................. 300 12,637
Newfield Exploration Co.+........................ 1,400 28,000
Ocean Energy, Inc.+.............................. 200 9,250
-----------
60,912
-----------
OIL-PRODUCTION (1.1%)
Monterey Resources, Inc.......................... 700 10,412
Patterson Energy, Inc.+.......................... 300 13,575
Plains Resources, Inc.+.......................... 1,100 16,225
Snyder Oil Corp.................................. 700 12,862
-----------
53,074
-----------
OIL-SERVICES (1.0%)
Dreco Energy Services Ltd. - Class A+............ 300 15,787
Hanover Compressor Co.+.......................... 200 3,900
Input/Output, Inc.+.............................. 900 16,312
Seacor Smit, Inc.+............................... 300 15,694
-----------
51,693
-----------
TOTAL ENERGY................................... 165,679
-----------
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -----------
FINANCE (23.9%)
BANKING (9.4%)
Bank United Corp. - Class A...................... 1,400 $ 53,462
Banknorth Group, Inc............................. 1,100 50,600
Colonial BancGroup, Inc.......................... 1,500 36,375
Commercial Federal Corporation................... 500 18,562
Community First Bankshares, Inc.................. 400 15,300
Eagle Bancshares, Inc............................ 200 3,512
First Alliance Corp.+............................ 200 5,725
First Hawaiian, Inc.............................. 400 13,625
First Republic Bancorp, Inc.+.................... 500 11,625
FirstFed Financial Corp.+........................ 700 21,744
Flagstar Bancorp, Inc.+.......................... 600 9,675
GBC Bancorp...................................... 1,000 40,937
Hamilton Bancorp, Inc.+.......................... 100 2,662
HUBCO, Inc....................................... 2,130 61,371
InterWest Bancorp, Inc........................... 200 7,925
Irwin Financial Corp............................. 300 8,737
National Commerce Bancorporation................. 1,500 33,375
New Century Financial Corp.+..................... 200 2,875
Pinnacle Financial Services, Inc................. 700 20,212
Security First Network Bank+..................... 300 2,044
Trustco Bank Corp................................ 1,100 23,444
Trustmark Corp................................... 100 2,837
Westamerica Bancorporation....................... 300 22,725
-----------
469,349
-----------
FINANCIAL SERVICES (2.2%)
Amresco, Inc.+................................... 1,100 23,719
Hambrecht & Quist Group, Inc.+................... 700 22,925
Litchfield Financial Corp........................ 705 11,765
Ocwen Financial Corp.+........................... 300 9,694
Southwest Securities Group, Inc.................. 1,100 21,244
WFS Financial, Inc.+............................. 700 11,462
Willis Lease Finance Corp.+...................... 700 8,706
-----------
109,515
-----------
INSURANCE (5.0%)
Capital Re Corp.................................. 3,200 171,200
Chartwell Re Corp................................ 600 18,000
Hartford Life, Inc. - Class A+................... 100 3,750
RenaissanceRe Holdings, Ltd...................... 1,500 57,187
-----------
250,137
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
36
<PAGE>
JPM SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -----------
<S> <C> <C>
REAL ESTATE INVESTMENT TRUSTS (7.3%)
American General Hospitality Corp................ 700 $ 17,325
Arden Realty Group, Inc.......................... 400 10,400
Boston Properties, Inc........................... 500 13,750
Brandywine Realty Trust.......................... 400 8,100
Burnham Pacific Properties, Inc.................. 700 9,625
Chelsea GCA Realty, Inc.......................... 200 7,600
Colonial Properties Trust........................ 300 8,812
Columbus Realty Trust............................ 1,200 27,300
Developers Diversified Realty Corp............... 1,000 40,000
Evans Withycombe Residential, Inc................ 300 6,225
Excel Realty Trust, Inc.......................... 400 10,550
Gables Residential Trust......................... 1,900 47,975
Healthcare Realty Trust, Inc..................... 600 16,725
Liberty Property Trust........................... 900 22,387
Oasis Residential, Inc........................... 2,000 47,000
Post Properties, Inc............................. 600 24,338
Price REIT, Inc.................................. 600 21,825
TriNet Corporate Realty Trust, Inc............... 300 9,919
Weeks Corp....................................... 300 9,375
Westfield America, Inc.+......................... 400 6,750
-----------
365,981
-----------
TOTAL FINANCE.................................. 1,194,982
-----------
HEALTH CARE (9.4%)
BIOTECHNOLOGY (2.1%)
ArQule, Inc.+.................................... 300 5,175
Human Genome Sciences, Inc.+..................... 1,100 36,644
IDEC Pharmaceuticals Corp.+...................... 200 4,888
Incyte Pharmaceuticals, Inc.+.................... 300 19,763
Mycogen Corp.+................................... 200 3,900
SangStat Medical Corp.+.......................... 600 13,688
Sequana Therapeutics, Inc.+...................... 900 9,731
Transkaryotic Therapies, Inc.+................... 100 3,081
Vertex Pharmaceuticals, Inc.+.................... 100 3,813
Vical, Inc.+..................................... 400 5,150
-----------
105,833
-----------
HEALTH SERVICES (4.6%)
Apple Orthodontix, Inc. - Class A+............... 200 1,825
Applied Analytical Industries, Inc.+............. 700 14,263
Arbor Health Care Co.+........................... 200 6,300
Kapson Senior Quarters Corp.+.................... 1,100 12,581
Lifeline Systems, Inc.+.......................... 500 9,500
Mariner Health Group, Inc.+...................... 4,200 64,838
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -----------
<S> <C> <C>
HEALTH SERVICES (CONTINUED)
Paracelsus Healthcare Corp.+..................... 600 $ 3,038
Sierra Health Services, Inc.+.................... 1,900 59,375
Sterling House Corp.+............................ 700 11,463
Summit Care Corp.+............................... 850 11,581
Ventana Medical Systems, Inc.+................... 2,500 31,250
Youth Services, Inc.+............................ 500 6,156
-----------
232,170
-----------
MEDICAL SUPPLIES (2.6%)
Arterial Vascular Energy, Inc.+.................. 300 9,647
CellPro, Inc.+................................... 1,200 7,275
Closure Medical Corp.+........................... 300 5,700
CONMED Corp.+.................................... 400 6,850
Eclipse Surgical Technologies+................... 400 3,275
Heartstream, Inc.+............................... 1,100 9,488
IDEXX Laboratories, Inc.+........................ 1,100 13,647
Kensey Nash Corp.+............................... 2,300 25,588
KeraVision, Inc.+................................ 2,450 22,663
Medi-Ject Corp.+................................. 2,000 6,250
Physio-Control International Corp.+.............. 300 4,500
Sola International, Inc.+........................ 500 16,750
-----------
131,633
-----------
PHARMACEUTICALS (0.1%)
Kos Pharmaceuticals, Inc.+....................... 200 5,425
-----------
TOTAL HEALTH CARE.............................. 475,061
-----------
INDUSTRIAL PRODUCTS & SERVICES (12.5%)
BUSINESS & PUBLIC SERVICES (0.6%)
American Residential Services, Inc.+............. 900 20,925
Comfort Systems USA, Inc.+....................... 200 3,125
Service Experts, Inc.+........................... 300 7,350
-----------
31,400
-----------
CAPITAL GOODS (5.7%)
ABC Rail Products Corp.+......................... 300 5,194
Applied Power, Inc. - Class A.................... 900 46,463
Collins & Aikman Corp.+.......................... 2,400 24,000
Greenfield Industries, Inc....................... 1,100 29,975
IDEX Corp........................................ 1,250 41,250
MagneTek, Inc.+.................................. 2,500 41,563
Modine Manufacturing Co.......................... 400 11,950
Perceptron, Inc.+................................ 400 10,725
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
37
<PAGE>
JPM SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -----------
<S> <C> <C>
CAPITAL GOODS (CONTINUED)
Shaw Group, Inc.+................................ 500 $ 8,125
Wabash National Corp............................. 2,300 64,113
-----------
283,358
-----------
COMMERCIAL SERVICES (1.5%)
DeVry, Inc.+..................................... 1,400 37,800
Equity Corp. International+...................... 200 4,838
Pinkertons, Inc.+................................ 400 12,300
Robert Half International, Inc.+................. 400 18,825
-----------
73,763
-----------
DIVERSIFIED MANUFACTURING (2.5%)
Brady (W.H.) Co. - Class A....................... 600 17,381
Hexcel Corp.+.................................... 400 6,900
Intermet Corp.................................... 4,500 72,422
Mueller Industries, Inc.+........................ 700 30,625
-----------
127,328
-----------
ELECTRICAL EQUIPMENT (0.7%)
Bolder Technologies Corp.+....................... 400 5,500
Encore Wire Corp.+............................... 900 27,225
-----------
32,725
-----------
POLLUTION CONTROL (1.5%)
American Disposal Services, Inc.+................ 1,500 33,938
Dames & Moore, Inc............................... 1,000 12,375
Sevenson Environmental Services, Inc............. 600 12,525
Tetra Technologies, Inc.+........................ 700 16,581
-----------
75,419
-----------
TOTAL INDUSTRIAL PRODUCTS & SERVICES........... 623,993
-----------
TECHNOLOGY (15.3%)
AEROSPACE (1.4%)
DeCrane Aircraft Holdings, Inc.+................. 400 5,900
Orbital Sciences Corp.+.......................... 2,250 35,859
Rohr Industries, Inc.+........................... 1,300 28,519
-----------
70,278
-----------
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -----------
COMPUTER PERIPHERALS (0.6%)
In Focus Systems, Inc.+.......................... 500 $ 12,906
Pinnacle Systems, Inc.+.......................... 800 13,650
Raster Graphics, Inc.+........................... 600 4,275
-----------
30,831
-----------
COMPUTER SOFTWARE (3.4%)
Aspen Technology, Inc.+.......................... 600 22,556
Avid Technology, Inc.+........................... 900 23,794
Ciber, Inc.+..................................... 100 3,419
Computer Horizons Corp.+......................... 100 3,419
Edify Corp.+..................................... 1,400 20,563
MathSoft, Inc.+.................................. 1,250 3,711
Metromail Corp.+................................. 500 12,375
Network General Corp.+........................... 900 13,359
Pure Atria Corp.+................................ 100 1,419
Red Brick Systems, Inc.+......................... 200 1,453
Transaction Systems Architects, Inc. - Class
A+............................................. 900 30,994
Tripos, Inc.+.................................... 900 13,781
Viasoft, Inc.+................................... 100 5,088
Visigenic Software, Inc.+........................ 1,700 14,875
-----------
170,806
-----------
COMPUTER SYSTEMS (1.0%)
International Network Services+.................. 1,100 28,566
Quickturn Design System, Inc.+................... 900 10,631
Sapient Corp.+................................... 200 9,800
-----------
48,997
-----------
ELECTRONICS (1.5%)
Adept Technology, Inc.+.......................... 900 7,931
Flextronics International, Ltd.+................. 200 5,363
Integrated Device Technology, Inc.+.............. 2,000 21,063
Itron, Inc.+..................................... 700 17,981
Nimbus CD International, Inc.+................... 800 8,800
Sipex Corp.+..................................... 100 3,563
Uniphase Corp.+.................................. 200 11,600
-----------
76,301
-----------
INFORMATION PROCESSING (0.7%)
Checkfree Corp.+................................. 1,400 24,631
Remedy Corp.+.................................... 200 7,969
-----------
32,600
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
38
<PAGE>
JPM SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -----------
<S> <C> <C>
SEMICONDUCTORS (3.0%)
Actel Corp.+..................................... 1,200 $ 20,400
Advanced Technology Materials, Inc.+............. 1,500 44,063
Credence Systems Corp.+.......................... 400 11,988
Micrel, Inc.+.................................... 200 10,150
Oak Technology, Inc.+............................ 1,100 10,759
Ontrack Systems, Inc.+........................... 100 2,988
SDL, Inc.+....................................... 1,900 36,338
Silicon Valley Group, Inc.+...................... 200 5,263
Vitesse Semiconductor Corp.+..................... 200 6,531
-----------
148,480
-----------
TELECOMMUNICATION SERVICES (0.5%)
Aware, Inc....................................... 200 2,938
ICG Communications, Inc.+........................ 700 13,431
Iridium World Communications Ltd.+............... 300 5,438
Qwest Communications International, Inc.+........ 200 5,438
-----------
27,245
-----------
TELECOMMUNICATIONS (1.2%)
Omnipoint Corp.+................................. 1,400 23,231
Premiere Technologies, Inc.+..................... 1,400 36,488
-----------
59,719
-----------
TELECOMMUNICATIONS-EQUIPMENT (2.0%)
Aspect Telecommunications Corp.+................. 700 15,488
Digital Microwave Corp.+......................... 600 17,775
Glenayre Technologies, Inc.+..................... 1,100 18,047
Natural Microsystems Corp.+...................... 500 17,984
P-COM, Inc.+..................................... 600 19,725
Proxim Inc.+..................................... 500 12,094
-----------
101,113
-----------
TOTAL TECHNOLOGY............................... 766,370
-----------
TRANSPORTATION (2.3%)
AIRLINES (0.3%)
ASA Holdings, Inc................................ 600 17,156
-----------
RAILROADS (0.4%)
Genesee & Wyoming Inc. - Class A+................ 700 18,900
-----------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -----------
<S> <C> <C>
TRUCK & FREIGHT CARRIERS (1.6%)
Allied Holdings, Inc.+........................... 300 $ 3,281
American Freightways Corp.+...................... 700 10,981
Rollins Truck Leasing Corp....................... 2,400 35,700
Werner Enterprises, Inc.......................... 1,500 29,250
-----------
79,212
-----------
TOTAL TRANSPORTATION........................... 115,268
-----------
UTILITIES (4.6%)
ELECTRIC (3.0%)
Calpine Corp.+................................... 600 11,400
Central Hudson Gas & Electric Corp............... 1,900 65,431
Central Louisiana Electric Co.................... 2,200 61,875
Otter Tail Power Company......................... 200 6,525
Saint Joseph Light & Power Co.................... 400 6,550
-----------
151,781
-----------
NATURAL GAS (0.8%)
Energen Corporation.............................. 100 3,369
United Cities Gas Co............................. 500 11,875
Wicor, Inc....................................... 600 23,363
-----------
38,607
-----------
WATER (0.8%)
E'Town Corp...................................... 700 21,613
SJW Corp......................................... 100 5,250
Southern California Water Co..................... 600 14,700
-----------
41,563
-----------
TOTAL UTILITIES................................ 231,951
-----------
TOTAL COMMON STOCK (COST $4,250,523)........... 4,826,355
-----------
<CAPTION>
PRINCIPAL
AMOUNT
-----------
<S> <C> <C>
SHORT-TERM INVESTMENTS (5.2%)
U.S. TREASURY OBLIGATIONS (4.8%)
United States Treasury Bills, 4.91 - 5.06% due
08/21/97....................................... $ 222,000 $ 220,370
United States Treasury Bills, 5.17% due
08/07/97....................................... 19,000 18,899
-----------
TOTAL U.S. TREASURY OBLIGATIONS................ 239,269
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
39
<PAGE>
JPM SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------- ----------- -----------
<S> <C> <C>
OTHER INVESTMENT COMPANIES (0.4%)
Seven Seas Money Market Fund, 5.56% due
07/01/97....................................... $ 21,613 $ 21,613
-----------
TOTAL SHORT-TERM INVESTMENTS (COST $260,948)... 260,882
-----------
TOTAL INVESTMENTS
(COST $4,511,471) (101.6%).................................. 5,087,237
LIABILITIES IN EXCESS OF
OTHER ASSETS (-1.6%)........................................ (78,716)
-----------
NET ASSETS (100.0%)........................................... $ 5,008,521
-----------
-----------
</TABLE>
- ------------------------------
Note: Based on the cost of securities of $4,530,402 for Federal Income Tax
purposes at June 30, 1997, the aggregate gross unrealized appreciation and
depreciation was $723,670 and $166,834, respectively, resulting in net
unrealized appreciation of $556,836.
+ Non-income producing security.
The Accompanying Notes are an Integral Part of the Financial Statements.
40
<PAGE>
JPM INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -----------
<S> <C> <C>
COMMON STOCK (90.9%)
ARGENTINA (1.0%)
Telecom Argentina Stet - France Telecom SA (Spon.
ADR) (Telecommunication Services).............. 700 $ 36,750
YPF Sociedad Anonima (Spon. ADR)
(Oil-Production)............................... 1,000 30,750
-----------
67,500
-----------
AUSTRALIA (6.5%)
Amcor Ltd. (Packaging & Containers).............. 3,300 21,755
Broken Hill Proprietary Company Ltd. (Metals &
Mining)........................................ 5,240 76,481
CSR Ltd. (Building Materials).................... 10,200 39,200
E-mail Ltd. (Manufacturing)...................... 6,500 23,081
Fosters Brewing Group Ltd. (Food, Beverages &
Tobacco)....................................... 10,400 19,166
Mayne Nickless Ltd. (Commercial Services)........ 5,000 28,917
National Australia Bank Ltd. (Banking)........... 2,100 29,844
North Ltd. (Metals & Mining)..................... 6,600 24,969
Rio Tinto Ltd. (Metals & Mining)................. 2,400 40,598
Southcorp Holdings Ltd. (Food, Beverages &
Tobacco)....................................... 7,600 28,240
Westpac Banking Corporation Ltd. (Banking)....... 11,000 65,678
WMC Ltd. (Metals & Mining)....................... 9,800 61,303
-----------
459,232
-----------
BELGIUM (1.8%)
Arbed SA (Metals & Mining)....................... 40 4,618
Credit Communal Holding/Dexia (Banking).......... 150 16,127
Delhaize Le Lion (Retail)........................ 94 4,942
Electrabel SA (Utilities)........................ 138 29,596
Fortis AG (Insurance)............................ 140 28,935
Groupe Bruxelles Lambert SA (Multi - Industry)... 82 13,754
PetroFina SA (Oil-Production)+................... 55 20,845
Solvay SA (Chemicals)............................ 10 5,897
-----------
124,714
-----------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -----------
<S> <C> <C>
BRAZIL (1.8%)
Companhia Paranaense de Energia - Copel
(Electric)..................................... 2,000,000 $ 34,369
Electrolux do Brasil SA (ADR) (Electric)......... 3,400 26,845
Iochpe-Maxion SA (Spon. ADR) (Diversified
Manufacturing)+................................ 12,700 37,748
Makro Atacadista SA (Spon. ADR) (Retail)+........ 2,100 25,725
-----------
124,687
-----------
CANADA (3.0%)
Alcan Aluminum Ltd. (Metals & Mining)............ 400 13,875
BCE Inc. (Telecommunication Services)............ 1,200 33,402
Magna International Inc. (Class A) (Automotive
Supplies)...................................... 800 48,131
National Bank of Canada (Banking)................ 3,100 38,762
Noranda Inc. (Metals & Mining)................... 1,900 40,973
Petro - Canada (Oil-Production).................. 2,300 37,345
-----------
212,488
-----------
CHILE (1.3%)
Empresa Nacional de Electricidad SA (Spon. ADR)
(Utilities).................................... 4,100 92,506
-----------
CHINA (0.2%)
Yizheng Chemical Fibre Co. Ltd. (Series H)
(Chemicals).................................... 92,000 16,388
-----------
FINLAND (0.4%)
Metra OY (Industrial)............................ 400 12,052
UPM-Kymmene Corp. (Forest Products & Paper)...... 600 13,861
-----------
25,913
-----------
FRANCE (6.2%)
Carrefour Supermarche SA (Retail)................ 32 23,263
Compagnie de Saint Gobain SA (Building
Materials)..................................... 185 27,005
Compagnie Generale des Eaux (Utilities).......... 271 34,758
Credit Local de France (Financial Services)...... 130 12,666
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
41
<PAGE>
JPM INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -----------
<S> <C> <C>
FRANCE (CONTINUED)
Elf Aquitaine SA (Oil-Services).................. 299 $ 32,289
Eridania Beghin Say SA (Food, Beverages &
Tobacco)....................................... 150 22,484
L'Air Liquide SA (Chemicals)..................... 147 23,361
Lagardere S.C.A. (Entertainment, Leisure &
Media)......................................... 610 17,740
Montupet (Automotive Supplies)................... 70 7,631
Pathe SA (Entertainment, Leisure & Media)........ 60 11,916
Peugeot SA (Automotive).......................... 90 8,707
Promodes (Retail)................................ 85 33,140
Sanofi SA (Pharmaceuticals)...................... 130 12,754
Schneider SA (Electronics)....................... 210 11,189
SEITA (Food, Beverages & Tobacco)................ 690 21,860
SGS Thomson Microelectronics NV (Electronics)+... 380 30,033
Societe Generale (Banking)....................... 210 23,465
Synthelabo (Pharmaceuticals)..................... 230 29,970
Total SA (Oil-Services).......................... 260 26,306
Union des Assurances Federales (Insurance)....... 160 18,832
Usinor Sacilor (Metals & Mining)................. 660 11,916
-----------
441,285
-----------
GERMANY (8.1%)
Allianz AG (Insurance)........................... 120 25,136
AVA Allgemeine Handelsgesellschaft der
Verbraucher AG (Retail)+....................... 30 8,539
BASF AG (Chemicals).............................. 350 12,945
Bayer AG (Chemicals)............................. 860 33,077
Bayerische Hypotheken-und Wechsel Bank AG
(Banking)...................................... 1,690 50,578
Bilfinger & Berger Bau AG (Construction &
Housing)....................................... 290 11,816
Continental AG (Automotive)...................... 1,290 32,055
Deutsche Bank AG (Banking)....................... 100 5,848
Deutsche Pfandbrief & Hypothekenbank AG
(Banking)...................................... 100 5,756
Deutsche Telekom AG (Utilities).................. 1,710 41,216
Douglas Holding AG (Retail)...................... 350 13,960
Dresdner Bank AG (Banking)....................... 510 17,648
Fried, Krupp AG Hoesch Krupp (Multi -
Industry)...................................... 200 39,138
Henkel KGAA (Chemicals).......................... 490 26,011
Lufthansa AG (Airlines).......................... 900 17,277
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -----------
GERMANY (CONTINUED)
Muenchener Rueckversicherungs-Gesellschaft AG
(Insurance).................................... 23 $ 64,544
Papierwerke Waldhof-Aschaffenburg AG (Forest
Products & Paper).............................. 100 17,102
SAP AG (Computer Software)....................... 130 26,111
Siemens AG (Electrical Equipment)................ 850 50,511
SKW Trostberg AG (Chemicals)..................... 590 19,943
VEBA AG (Utilities).............................. 980 55,115
-----------
574,326
-----------
GREECE (0.2%)
National Mortgage Bank of Greece (Banking)....... 240 14,507
-----------
HONG KONG (0.4%)
Bank of East Asia Ltd. (Banking)................. 40 167
Yue Yuen Industrial Holdings Ltd. (Retail)....... 14,000 29,004
-----------
29,171
-----------
HUNGARY (0.3%)
Magyar Olaj ES Gas (Natural Gas)................. 800 17,739
-----------
INDIA (1.5%)
Indian Petrochemicals Corp. Ltd. (GDR)
(Chemicals).................................... 2,700 37,125
Steel Authority of India Ltd. (GDR) (Metals &
Mining)........................................ 3,900 34,125
Wockhardt Ltd. (GDR) (Pharmaceuticals)........... 5,300 34,450
-----------
105,700
-----------
INDONESIA (1.4%)
P.T. Niaga Bank (Banking)........................ 7,000 19,864
P.T. Pabrik Kertas Tjiwi Kimia (Metals &
Mining)........................................ 40,000 46,473
P.T. Semen Cibinong (Building Materials)......... 12,000 31,462
-----------
97,799
-----------
IRELAND (1.9%)
Allied Irish Banks PLC (Banking)................. 3,000 22,960
Bank of Ireland PLC (Banking).................... 1,200 13,125
CRH PLC (Building Materials)..................... 1,200 12,528
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
42
<PAGE>
JPM INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -----------
<S> <C> <C>
IRELAND (CONTINUED)
Greencore Group PLC (Food, Beverages &
Tobacco)....................................... 2,400 $ 11,767
Irish Life PLC (Insurance)....................... 4,000 20,517
Jefferson Smurfit Group PLC (Forest Products &
Paper)......................................... 11,700 33,889
Waterford Wedgwood PLC (Household Products)...... 17,000 22,184
-----------
136,970
-----------
ITALY (4.3%)
ENI SPA (Oil-Services)........................... 14,000 79,195
Fiat SPA (Automotive)............................ 8,000 28,775
Instituto Mobiliare Italiano SPA (Financial
Services)...................................... 4,000 35,968
Instituto Nazionale Delle Assicurazioni
(Insurance).................................... 39,000 59,365
Mediaset SPA (Broadcasting & Publishing)......... 4,000 16,962
Telecom Italia SPA (Telecommunications).......... 25,000 80,517
-----------
300,782
-----------
JAPAN (14.4%)
Asahi Bank Ltd. (Banking)........................ 3,000 25,561
Ashikaga Bank Ltd. (Banking)..................... 3,000 11,011
Cosmo Oil Co. Ltd. (Oil-Production).............. 1,000 4,789
Daiwa Bank Ltd. (Banking)........................ 4,000 18,981
DDI Corp. (Telecommunications)................... 3 22,180
Ebara Corp. (Machinery).......................... 1,000 15,031
Fujitsu Ltd. (Computer Systems).................. 2,000 27,790
Furukawa Co. Ltd. (Machinery).................... 3,000 10,775
Hitachi Cable Ltd. (Electrical Equipment)........ 2,000 16,552
Hitachi Ltd. (Electrical Equipment).............. 3,000 33,558
Ishihara Sangyo Kaisha (Chemicals)+.............. 6,000 17,775
Iyo Bank (Banking)............................... 2,000 14,367
Izumiya Co. Ltd. (Retail)........................ 2,000 32,159
Japan Tobacco, Inc. (Food, Beverages &
Tobacco)....................................... 4 31,635
Marubeni Corp. (Multi - Industry)................ 8,000 36,354
Matsushita Electric Industries Co. Ltd.
(Electronics).................................. 2,000 40,374
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -----------
JAPAN (CONTINUED)
Mitsubishi Electric Corp. Ltd. (Electrical
Equipment)..................................... 3,000 $ 16,805
Mitsubishi Heavy Industries Ltd. (Machinery)..... 3,000 23,045
Mitsubishi Rayon Co. Ltd. (Textiles)............. 4,000 16,499
Mitsui Fudosan Co. Ltd. (Real Estate)............ 2,000 27,615
Mizuno Corp. (Retail)............................ 2,000 13,073
Murata Manufacturing Co. Ltd. (Electrical
Equipment)..................................... 1,000 39,850
Nippon Express Co. Ltd. (Transport & Services)... 2,000 15,992
Nippon Oil Co. Ltd. (Oil-Production)............. 1,000 5,479
Nippon Steel Corp. (Metals & Mining)............. 9,000 28,786
Nippon Telegraph & Telephone Corp.
(Telecommunications)........................... 2 19,226
Nishimatsu Construction Co. Ltd. (Construction &
Housing)....................................... 2,000 13,982
Nissan Fire & Marine Insurance Co. Ltd.
(Insurance).................................... 4,000 22,022
Nissan Motor Co. Ltd. (Automotive)............... 6,000 46,614
Nomura Securities Co. Ltd. (Financial
Services)...................................... 2,000 27,615
NSK Ltd. (Machinery)............................. 3,000 19,322
Sakura Bank Ltd. (Banking)....................... 4,000 30,691
Sekisui Chemical Co. Ltd. (Chemicals)............ 2,000 20,274
Shin-Etsu Chemical Co. (Chemicals)............... 1,000 26,566
Sony Corp. (Electronics)......................... 200 17,460
Sumitomo Forestry Co. Ltd. (Forest Products &
Paper)......................................... 1,000 11,011
Taisei Corp. (Construction & Housing)............ 3,000 13,921
The Bank of Tokyo - Mitsubishi Ltd. (Banking).... 2,000 40,199
The Long-Term Credit Bank of Japan Ltd.
(Banking)...................................... 2,000 8,652
Tokyo Electric Power Co., Inc. (Electric)........ 1,000 21,061
Toyota Motor Corporation (Automotive)............ 2,000 59,075
West Japan Railway Co. (Railroads)............... 8 31,390
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
43
<PAGE>
JPM INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -----------
<S> <C> <C>
JAPAN (CONTINUED)
Yamanouchi Pharmaceutical Co. Ltd.
(Pharmaceuticals).............................. 1,000 $ 26,916
Yokohama Rubber Co. Ltd. (Automotive Supplies)... 4,000 17,128
-----------
1,019,161
-----------
MEXICO (2.6%)
Cementos Mexicanos SA de CV (Building
Materials)..................................... 17,000 82,708
Cemex SA de CV (Spon. ADR) (B Shares) (Building
Materials)..................................... 3,100 26,350
Cifra SA de CV (Class B) (Retail)................ 23,000 42,793
Telefonos de Mexico SA de CV (Spon. ADR) (Class
L) (Telecommunications)........................ 740 35,335
-----------
187,186
-----------
NETHERLANDS (2.2%)
Aegon NV (Insurance)............................. 140 9,789
Heineken NV (Food, Beverages & Tobacco).......... 25 4,274
ING Groep NV (Financial Services)................ 675 31,178
Koninklijke PTT Nederland NV
(Telecommunications)........................... 150 5,895
Philips Electronics NV (Electronics)............. 410 29,421
Royal Dutch Petroleum Co. (Oil-Services)......... 760 39,604
Unilever NV (Food, Beverages & Tobacco).......... 150 31,633
Wolters Kluwer NV (Broadcasting & Publishing).... 50 6,099
-----------
157,893
-----------
NEW ZEALAND (2.8%)
Brierley Investments Ltd. (Financial Services)... 21,000 20,495
Carter Holt Harvey Ltd. (Forest Products &
Paper)......................................... 8,000 20,657
Fletcher Challenge Building Division Ltd.
(Building Materials)........................... 5,800 17,414
Fletcher Challenge Forests - New (Forest Products
& Paper)....................................... 560 1,176
Fletcher Challenge Paper Division Ltd. (Forest
Products & Paper).............................. 8,200 19,840
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -----------
NEW ZEALAND (CONTINUED)
Lion Nathan Ltd. (Food, Beverages & Tobacco)..... 11,100 $ 28,060
Telecom Corporation of New Zealand
(Telecommunications)........................... 17,300 87,935
-----------
195,577
-----------
NORWAY (2.5%)
Kvaerner ASA (Series B) (Capital Goods).......... 800 44,804
Norsk Hydro ASA (Oil-Services)................... 1,000 54,502
Nycomed ASA (Series B) (Medical Supplies)........ 2,400 34,422
Orkla ASA (Multi - Industry)..................... 290 19,688
Storebrand ASA (A Shares) (Insurance)+........... 4,000 23,877
-----------
177,293
-----------
PAKISTAN (0.3%)
Hub Power Co. (GDR) (Utilities)+................. 400 9,800
Pakistan Telecommunications Corp. (GDR)
(Telecommunications)+.......................... 200 14,400
-----------
24,200
-----------
PHILIPPINES (0.8%)
Manila Electric Company (Class B) (Electric)..... 11,700 57,666
-----------
PORTUGAL (0.4%)
Portugal Telecom SA (ADR) (Telecommunications)... 700 28,088
-----------
RUSSIA (1.1%)
Lukoil Oil Co (Spon. ADR) (Oil-Production)....... 450 35,100
Tatneft (Spon. ADR) (144A) (Oil-Production)+..... 400 42,600
-----------
77,700
-----------
SINGAPORE (1.0%)
Singapore Airlines Ltd. (Airlines)............... 2,000 17,904
Singapore Press Holdings Ltd.
(Entertainment, Leisure & Media)............... 1,000 20,142
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
44
<PAGE>
JPM INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -----------
<S> <C> <C>
SINGAPORE (CONTINUED)
Singapore Telecommunications Ltd.
(Telecommunications)........................... 5,000 $ 9,232
United Overseas Bank Ltd. (Banking).............. 2,000 20,562
-----------
67,840
-----------
SOUTH AFRICA (1.3%)
De Beers Consolidated Mines Ltd. (Centenary
Linked Units) (Metals & Mining)................ 1,000 36,931
JD Group Ltd. (Retail)........................... 3,100 19,138
Pepkor Ltd. (Spon. ADR) (Retail)................. 3,200 37,393
-----------
93,462
-----------
SOUTH KOREA (1.5%)
Korea Electric Power Corp. (ADR) (Electric)...... 2,900 54,194
Pohang Iron & Steel Co. Ltd. (ADR) (Metals &
Mining)........................................ 1,700 54,400
-----------
108,594
-----------
SPAIN (2.2%)
Acerinox SA (Metals & Mining).................... 40 7,509
Banco Bilbao Vizcaya SA (Banking)................ 430 34,998
Banco Popular Espanol SA (Banking)............... 80 19,637
Fuerzas Electric de Cataluna SA (Electric)+...... 1,151 10,996
Hidroelectrica del Cantabrico SA (Electric)...... 300 12,198
Iberdrola SA (Electric).......................... 3,600 45,529
Repsol SA (Gas Exploration)...................... 600 25,416
-----------
156,283
-----------
SWEDEN (1.2%)
Autoliv, Inc. (SDR) (Automotive Supplies)+....... 1,200 46,169
Avesta Sheffield AB (Metals & Mining)............ 1,400 16,205
Svenska Handelsbanken (Banking).................. 700 22,270
-----------
84,644
-----------
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -----------
SWITZERLAND (1.9%)
Georg Fischer AG (Automotive Supplies)........... 11 $ 15,317
Nestle SA (Food, Beverages & Tobacco)............ 11 14,532
Novartis AG (Pharmaceuticals).................... 30 48,030
Roche Holding AG (Pharmaceuticals)............... 2 18,116
Schweizerische Rueckversicherungs-Gesellschaft
(Insurance).................................... 9 12,748
Union Bank of Switzerland (Banking).............. 20 22,910
-----------
131,653
-----------
TAIWAN (1.2%)
Asia Cement Corp. (Spon. GDR) (Building
Materials)..................................... 2,472 39,125
China Steel Corp. (Spon. GDR) (Metals &
Mining)........................................ 2,300 49,151
-----------
88,276
-----------
THAILAND (0.5%)
Siam Cement Public Co. Ltd. (Building
Materials)..................................... 1,900 32,859
-----------
TURKEY (0.2%)
Koc Holding AS (Multi - Industry)................ 69,000 16,268
-----------
UNITED KINGDOM (12.2%)
Allied Colloids Group PLC (Chemicals)............ 8,128 16,977
Associated British Foods PLC (Food, Beverages &
Tobacco)....................................... 2,600 22,636
British Airways PLC (Airlines)................... 1,650 18,797
British Petroleum Co. PLC (Oil-Services)......... 3,675 45,689
Cadbury Schweppes PLC (Food, Beverages &
Tobacco)....................................... 2,800 24,978
Compass Group PLC (Food, Beverages & Tobacco).... 1,800 20,131
Glaxo Wellcome PLC (Pharmaceuticals)............. 3,700 76,512
Glynwed International PLC (Metals & Mining)...... 3,000 11,603
Great Universal Stores PLC (Retail).............. 2,500 25,360
Guardian Royal Exchange PLC (Insurance).......... 5,800 26,207
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
45
<PAGE>
JPM INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -----------
<S> <C> <C>
UNITED KINGDOM (CONTINUED)
Guinness PLC (Food, Beverages & Tobacco)......... 3,600 $ 35,230
HSBC Holdings PLC (75p) (Banking)................ 2,000 61,529
Lucas Varity PLC (Automotive Supplies)........... 10,100 34,964
MEPC PLC (Real Estate)........................... 2,000 16,368
National Westminster Bank PLC (Banking).......... 700 9,407
Racal Electronic PLC
(Telecommunications-Equipment)................. 3,700 14,779
Rank Group PLC (Entertainment, Leisure &
Media)......................................... 3,950 25,014
Reed International PLC (Broadcasting &
Publishing).................................... 2,000 19,306
RMC Group PLC (Building Materials)............... 2,200 35,626
Royal Bank of Scotland Group PLC (Banking)....... 6,700 62,668
Sainsbury (J.) PLC (Retail)...................... 5,400 32,713
Scottish Power PLC (Electric).................... 5,200 33,752
Sears PLC (Retail)............................... 17,000 19,239
Shell Transport & Trading Co. (Oil-Services)..... 2,100 14,330
Standard Chartered PLC (Banking)................. 1,420 21,648
Tomkins PLC (Multi - Industry)................... 4,300 18,607
Vodafone Group PLC (Telecommunications).......... 9,900 48,276
Wessex Water PLC (Water)......................... 4,900 33,191
Willis Corroon Group PLC (Insurance)............. 5,000 10,652
Zeneca Group PLC (Pharmaceuticals)............... 820 27,108
-----------
863,297
-----------
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -----------
VENEZUELA (0.3%)
Compania Anonima Nacional Telefonos de Venezuela
(ADR) (Telecommunication Services)............. 500 $ 21,563
-----------
TOTAL COMMON STOCK (COST $5,753,759)........... 6,431,210
-----------
PREFERRED STOCK (3.9%)
ARGENTINA (0.4%)
Quilmes Industrial SA (Spon. ADR non-voting)
(Food, Beverages & Tobacco).................... 2,400 27,900
-----------
AUSTRALIA (0.6%)
News Corporation Ltd. (Broadcasting &
Publishing).................................... 11,200 43,798
-----------
BRAZIL (1.8%)
Companhia Acos Especiais Itabira (ADR) (Metals &
Mining)........................................ 5,700 21,375
Copene Petroquimica do Nordeste SA (Spon. ADR)
(Class A) (Chemicals).......................... 1,000 18,113
Telecomunicacoes Brasileiras SA (ADR)
(Telecommunications)........................... 600 90,975
-----------
130,463
-----------
GERMANY (1.1%)
CKAG Colonia Konzern AG (Insurance).............. 100 8,436
MAN AG (Capital Goods)........................... 105 26,634
RWE AG (Utilities)............................... 1,120 39,014
-----------
74,084
-----------
TOTAL PREFERRED STOCK (COST $252,627).......... 276,245
-----------
WARRANTS (0.7%)
GERMANY (0.7%)
Volkswagen AG, Expiring 10/27/98 (Automotive)+... 115 48,243
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
46
<PAGE>
JPM INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -----------
<S> <C> <C>
SINGAPORE (0.0%)*
United Overseas Land Ltd., Expiring 5/28/01
(Building Materials)........................... 300 $ 163
-----------
TOTAL WARRANTS (COST $24,607).................. 48,406
-----------
<CAPTION>
PRINCIPAL
AMOUNT
-----------
<S> <C> <C>
CONVERTIBLE BONDS (0.7%)
(IN JPY)
-----------
JAPAN (0.7%)
STB Cayman Capital, 0.50% due 10/01/07 (Financial
Services) (cost $43,262)....................... 5,000,000 49,266
-----------
TOTAL INVESTMENTS (COST $6,074,255)
(96.2%)..................................................... 6,805,127
OTHER ASSETS IN EXCESS OF
LIABILITIES (3.8%).......................................... 270,621
-----------
NET ASSETS (100.0%)........................................... $ 7,075,748
-----------
-----------
</TABLE>
- ------------------------------
Note: For Federal Income Tax Purposes, the cost of securities at June 30, 1997,
was substantially the same as the cost for financial statement purposes.
* Less than 0.1%.
+ Non-income producing security.
ADR - American Depositary Receipt.
Spon. ADR - Sponsored ADR.
GDR - Global Depositary Receipt.
Spon. GDR - Sponsored GDR.
SDR - Swedish Depositary Receipt.
144A - Securities restricted for resale to Qualified Institutional Buyers.
The Accompanying Notes are an Integral Part of the Financial Statements.
47
<PAGE>
JPM INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY DIVERSIFICATION
PERCENT OF
PORTFOLIO
-----------
<S> <C>
Banking......................................................................... 11.01%
Metals & Mining................................................................. 8.54%
Telecommunications.............................................................. 6.50%
Retail.......................................................................... 5.30%
Building Materials.............................................................. 5.06%
Food, Beverages & Tobacco....................................................... 5.06%
Insurance....................................................................... 4.87%
Utilities....................................................................... 4.44%
Electric........................................................................ 4.36%
Oil-Services.................................................................... 4.29%
Chemicals....................................................................... 4.03%
Pharmaceuticals................................................................. 4.02%
Automotive...................................................................... 3.28%
Financial Services.............................................................. 2.60%
Oil-Production.................................................................. 2.60%
Automotive Supplies............................................................. 2.49%
Electrical Equipment............................................................ 2.31%
Multi-Industry.................................................................. 2.11%
Electronics..................................................................... 1.89%
Forest Products & Paper......................................................... 1.73%
Telecommunications Services..................................................... 1.35%
Broadcasting & Publishing....................................................... 1.27%
Entertainment, Leisure & Media.................................................. 1.10%
Capital Goods................................................................... 1.05%
Machinery....................................................................... 1.00%
Airlines........................................................................ 0.79%
Real Estate..................................................................... 0.65%
Construction & Housing.......................................................... 0.58%
Diversified Manufacturing....................................................... 0.55%
Hospital Supplies............................................................... 0.51%
Water........................................................................... 0.49%
Railroads....................................................................... 0.46%
Commercial Services............................................................. 0.42%
Computer Systems................................................................ 0.41%
Computer Software............................................................... 0.38%
Gas Exploration................................................................. 0.37%
Manufacturing................................................................... 0.34%
Household Products.............................................................. 0.33%
Packaging & Container........................................................... 0.32%
Natural Gas..................................................................... 0.26%
Textiles & Apparel.............................................................. 0.24%
Transport & Services............................................................ 0.24%
Telecommunciations-Equipment.................................................... 0.22%
Industrial...................................................................... 0.18%
-----------
100.00%
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
48
<PAGE>
This page intentionally left blank
49
<PAGE>
JPM SERIES TRUST II
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JPM JPM JPM
TREASURY JPM JPM SMALL INTERNATIONAL
MONEY MARKET BOND EQUITY COMPANY EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments, at Cost $ 1,481,106 $5,177,442 $6,410,818 $4,511,471 $ 6,074,255
------------ ---------- ---------- ---------- -------------
------------ ---------- ---------- ---------- -------------
Investments, at Value $ 1,481,106 $5,201,237 $7,532,902 $5,087,237 $ 6,805,127
Cash -- -- -- 180 39,761
Foreign Currency at Value -- -- -- -- 221,504
Receivable for Investments Sold -- -- 116,995 15,869 160,444
Dividends Receivable -- -- 5,950 3,661 39,624
Interest Receivable 13,872 47,223 111 139 --
Foreign Tax Reclaim Receivable -- -- -- -- 26,998
Receivable for Expense Reimbursement 3,783 6,843 9,903 14,134 22,095
Unrealized Appreciation of Forward Foreign
Currency Contracts -- -- -- -- 36,141
Deferred Organization Expenses 4,944 4,944 4,944 4,944 4,944
Prepaid Trustees' Fees 508 2,403 3,969 2,283 3,973
Prepaid Expenses and Other Assets 1,328 2,700 5,334 3,730 10,546
------------ ---------- ---------- ---------- -------------
Total Assets 1,505,541 5,265,350 7,680,108 5,132,177 7,371,157
------------ ---------- ---------- ---------- -------------
LIABILITIES
Payable for Investments Purchased -- 14,759 64,802 83,832 232,592
Payable for Shares of Beneficial Interest
Redeemed 6 93 135 67 122
Advisory Fee Payable 244 1,287 2,476 2,408 3,438
Custody Fee Payable 1,565 4,793 6,783 11,621 13,465
Administration Fee Payable -- 12 13 7 11
Unrealized Depreciation of Forward Foreign
Currency Contracts -- -- -- -- 11,155
Accrued Expenses 19,847 21,520 30,316 25,721 30,450
Other Liabilities -- -- -- -- 4,176
------------ ---------- ---------- ---------- -------------
Total Liabilities 21,662 42,464 104,525 123,656 295,409
------------ ---------- ---------- ---------- -------------
NET ASSETS $ 1,483,879 $5,222,886 $7,575,583 $5,008,521 $ 7,075,748
------------ ---------- ---------- ---------- -------------
------------ ---------- ---------- ---------- -------------
Shares of Beneficial Interest Outstanding (no par
value, unlimited shares authorized) 143,744 479,118 476,650 392,749 555,750
------------ ---------- ---------- ---------- -------------
------------ ---------- ---------- ---------- -------------
Net Asset Value, Offering and Redemption Price
per Share $ 10.32 $ 10.90 $ 15.89 $ 12.75 $ 12.73
------------ ---------- ---------- ---------- -------------
------------ ---------- ---------- ---------- -------------
ANALYSIS OF NET ASSETS
Paid-in Capital $ 1,450,514 $5,027,515 $5,724,333 $4,272,571 $ 5,877,397
Undistributed (Distributions in Excess of) Net
Investment Income 33,189 149,760 28,957 9,859 (2,013)
Accumulated Net Realized Gain on Investments and
Foreign Currency Transactions 176 21,395 700,209 150,325 446,073
Net Unrealized Appreciation of Investments and
Foreign Currency Translations -- 24,216 1,122,084 575,766 754,291
------------ ---------- ---------- ---------- -------------
Net Assets $ 1,483,879 $5,222,886 $7,575,583 $5,008,521 $ 7,075,748
------------ ---------- ---------- ---------- -------------
------------ ---------- ---------- ---------- -------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
50
<PAGE>
JPM SERIES TRUST II
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JPM JPM JPM
TREASURY JPM JPM SMALL INTERNATIONAL
MONEY MARKET BOND EQUITY COMPANY EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ --------- ---------- -------- -------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend Income $ -- $ -- $ 51,076 $ 28,734 $ 100,082
Interest Income 37,562 168,143 8,843 6,333 --
Less: Foreign Taxes Withheld -- (9) (330) -- (12,943)
------------ --------- ---------- -------- -------------
Total Investment Income 37,562 168,134 59,589 35,067 87,139
EXPENSES
Custodian Fees and Expenses 1,977 9,991 15,876 26,020 45,209
Advisory Fee 1,458 7,349 13,614 13,152 19,706
Professional Fees and Expenses 3,496 5,483 13,953 9,361 14,158
Trustees' Fees and Expenses 2,669 5,748 9,215 6,469 9,865
Transfer Agent Expense 8,114 8,121 8,114 8,114 8,114
Printing Expenses 5,951 5,951 5,951 5,951 5,951
Insurance Expense 1,303 2,653 5,243 3,665 5,855
Amortization of Organization Expense 976 976 976 976 976
Administration Fee 15 48 66 43 64
Miscellaneous 462 576 490 506 619
------------ --------- ---------- -------- -------------
Total Expenses 26,421 46,896 73,498 74,257 110,517
Less: Reimbursement of Expenses (22,048) (28,523) (42,866) (49,049) (71,105)
------------ --------- ---------- -------- -------------
NET EXPENSES 4,373 18,373 30,632 25,208 39,412
------------ --------- ---------- -------- -------------
NET INVESTMENT INCOME 33,189 149,761 28,957 9,859 47,727
NET REALIZED GAIN ON
Investment Transactions 176 21,393 708,282 166,721 369,405
Foreign Currency Transactions -- -- -- -- 44,530
------------ --------- ---------- -------- -------------
Net Realized Gain 176 21,393 708,282 166,721 413,935
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) OF
Investments (217) (17,720) 361,982 198,501 198,372
Foreign Currency Contracts and Translations -- 421 -- -- 5,659
------------ --------- ---------- -------- -------------
Net Change in Unrealized Appreciation
(Depreciation) (217) (17,299) 361,982 198,501 204,031
------------ --------- ---------- -------- -------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $ 33,148 $ 153,855 $1,099,221 $375,081 $ 665,693
------------ --------- ---------- -------- -------------
------------ --------- ---------- -------- -------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
51
<PAGE>
JPM SERIES TRUST II
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
JPM JPM
TREASURY MONEY MARKET BOND
PORTFOLIO PORTFOLIO
-------------------------- --------------------------
FOR THE FOR THE
SIX MONTHS FOR THE SIX MONTHS FOR THE
ENDED FISCAL YEAR ENDED FISCAL YEAR
JUNE 30, ENDED JUNE 30, ENDED
1997 DECEMBER 31, 1997 DECEMBER 31,
(UNAUDITED) 1996 (UNAUDITED) 1996
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 33,189 $ 60,586 $ 149,761 $ 123,899
Net Realized Gain on Investments and
Foreign Currency Transactions 176 70 21,393 19,950
Net Change in Unrealized Appreciation
(Depreciation) of Investments and
Foreign Currency Translations (217) (422) (17,299) (52,031)
----------- ------------ ----------- ------------
Net Increase in Net Assets Resulting
from Operations 33,148 60,234 153,855 91,818
----------- ------------ ----------- ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income -- (60,586) (1,025) (122,875)
Net Realized Gain (2) (68) (19,948) (2,043)
----------- ------------ ----------- ------------
Total Distributions to Shareholders (2) (60,654) (20,973) (124,918)
----------- ------------ ----------- ------------
SHAREHOLDER TRANSACTIONS
Proceeds from Shares Sold 78,595 1,348,912 2,216,961 1,555,123
Reinvestment of Dividends and
Distributions 60,656 56,408 143,848 103,293
Cost of Shares Redeemed (75,036) (1,291,314) (52,884) (259,931)
----------- ------------ ----------- ------------
Net Increase from Shareholder
Transactions 64,215 114,006 2,307,925 1,398,485
----------- ------------ ----------- ------------
Total Increase in Net Assets 97,361 113,586 2,440,807 1,365,385
NET ASSETS
Beginning of Period 1,386,518 1,272,932 2,782,079 1,416,694
----------- ------------ ----------- ------------
End of Period $ 1,483,879 $ 1,386,518 $ 5,222,886 $ 2,782,079
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
Undistributed (Distributions in Excess
of ) Net Investment Income $ 33,189 -- $ 149,760 $ 1,024
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
52
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
JPM JPM JPM
EQUITY SMALL COMPANY INTERNATIONAL EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO
-------------------------- -------------------------- --------------------------
FOR THE FOR THE FOR THE
SIX MONTHS FOR THE SIX MONTHS FOR THE SIX MONTHS FOR THE
ENDED FISCAL YEAR ENDED FISCAL YEAR ENDED FISCAL YEAR
JUNE 30, ENDED JUNE 30, ENDED JUNE 30, ENDED
1997 DECEMBER 31, 1997 DECEMBER 31, 1997 DECEMBER 31,
(UNAUDITED) 1996 (UNAUDITED) 1996 (UNAUDITED) 1996
----------- ------------ ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 28,957 $ 77,204 $ 9,859 $ 19,209 $ 47,727 $ 64,964
Net Realized Gain on Investments and
Foreign Currency Transactions 708,282 530,898 166,721 619,860 413,935 338,690
Net Change in Unrealized Appreciation
(Depreciation) of Investments and
Foreign Currency Translations 361,982 363,239 198,501 105,584 204,031 295,017
----------- ------------ ----------- ------------ ----------- ------------
Net Increase in Net Assets Resulting
from Operations 1,099,221 971,341 375,081 744,653 665,693 698,671
----------- ------------ ----------- ------------ ----------- ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income -- (77,204) -- (19,209) (49,740) (48,894)
Net Realized Gain (62,472) (542,542) (217,066) (518,489) (64,086) (248,948)
----------- ------------ ----------- ------------ ----------- ------------
Total Distributions to Shareholders (62,472) (619,746) (217,066) (537,698) (113,826) (297,842)
----------- ------------ ----------- ------------ ----------- ------------
SHAREHOLDER TRANSACTIONS
Proceeds from Shares Sold 652,032 1,586,005 374,176 1,722,979 221,386 1,941,265
Reinvestment of Dividends and
Distributions 609,219 321,572 635,751 431,401 411,670 138,377
Cost of Shares Redeemed (61,700) (1,064,347) (26,423) (1,030,591) (359,101) (222,820)
----------- ------------ ----------- ------------ ----------- ------------
Net Increase from Shareholder
Transactions 1,199,551 843,230 983,504 1,123,789 273,955 1,856,822
----------- ------------ ----------- ------------ ----------- ------------
Total Increase in Net Assets 2,236,300 1,194,825 1,141,519 1,330,744 825,822 2,257,651
NET ASSETS
Beginning of Period 5,339,283 4,144,458 3,867,002 2,536,258 6,249,926 3,992,275
----------- ------------ ----------- ------------ ----------- ------------
End of Period $ 7,575,583 $ 5,339,283 $ 5,008,521 $ 3,867,002 $ 7,075,748 $ 6,249,926
----------- ------------ ----------- ------------ ----------- ------------
----------- ------------ ----------- ------------ ----------- ------------
Undistributed (Distributions in Excess
of ) Net Investment Income $ 28,957 -- $ 9,859 -- $ (2,013) $ 32,138
----------- ------------ ----------- ------------ ----------- ------------
----------- ------------ ----------- ------------ ----------- ------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
53
<PAGE>
JPM SERIES TRUST II
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share outstanding throughout each period are as follows:
<TABLE>
<CAPTION>
JPM
TREASURY MONEY MARKET
PORTFOLIO
-------------------------------------------------------
FOR THE PERIOD
JANUARY 3, 1995
FOR THE (COMMENCEMENT OF
SIX MONTHS ENDED FOR THE FISCAL OPERATIONS) TO
JUNE 30, 1997 YEAR ENDED DECEMBER 31,
(UNAUDITED) DECEMBER 31, 1996 1995
---------------- ----------------- ----------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.09 $10.06 $10.00
---------------- ----------------- ----------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.23 0.44 0.45
Net Realized and Unrealized Gain (Loss) on
Investments and Foreign Currency Transactions (0.00)(a) 0.03 0.06
---------------- ----------------- ----------------
Total from Investment Operations 0.23 0.47 0.51
---------------- ----------------- ----------------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income -- (0.44) (0.45)
Net Realized Gain (0.00)(a) -- --
---------------- ----------------- ----------------
Total Distributions to Shareholders (0.00)(a) (0.44) (0.45)
---------------- ----------------- ----------------
NET ASSET VALUE, END OF PERIOD $10.32 $10.09 $10.06
---------------- ----------------- ----------------
---------------- ----------------- ----------------
RATIOS AND SUPPLEMENTAL DATA
Total Return 2.28%(b) 4.69% 5.09%(b)
Net Assets, End of Period (in thousands) $1,484 $1,387 $1,273
Ratios to Average Net Assets
Expenses 0.60%(c) 0.60% 0.60%(c)
Net Investment Income 4.55%(c) 4.56% 4.95%(c)
Decrease Reflected in Expense Ratio due to
Expense Reimbursement 3.02%(c) 1.42% 2.17%(c)
Portfolio Turnover N/A N/A N/A
Average Broker Commission Per Share N/A N/A N/A
</TABLE>
- ------------------------
(a) Less than $0.01.
(b) Not annualized.
(c) Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
54
<PAGE>
JPM SERIES TRUST II
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share outstanding throughout each period are as follows:
<TABLE>
<CAPTION>
JPM
BOND
PORTFOLIO
-------------------------------------------------------
FOR THE PERIOD
JANUARY 3, 1995
FOR THE (COMMENCEMENT OF
SIX MONTHS ENDED FOR THE FISCAL OPERATIONS) TO
JUNE 30, 1997 YEAR ENDED DECEMBER 31,
(UNAUDITED) DECEMBER 31, 1996 1995
---------------- ----------------- ----------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.65 $10.91 $10.00
---------------- ----------------- ----------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.31 0.47 0.58
Net Realized and Unrealized Gain (Loss) on
Investments and Foreign Currency Transactions (0.02) (0.25) 1.11
---------------- ----------------- ----------------
Total from Investment Operations 0.29 0.22 1.69
---------------- ----------------- ----------------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (0.00)(a) (0.47) (0.58)
Net Realized Gain (0.04) (0.01) (0.20)
---------------- ----------------- ----------------
Total Distributions to Shareholders (0.04) (0.48) (0.78)
---------------- ----------------- ----------------
NET ASSET VALUE, END OF PERIOD $10.90 $10.65 $10.91
---------------- ----------------- ----------------
---------------- ----------------- ----------------
RATIOS AND SUPPLEMENTAL DATA
Total Return 2.78%(b) 2.09% 16.85%(b)
Net Assets, End of Period (in thousands) $5,223 $2,782 $1,417
Ratios to Average Net Assets
Expenses 0.75%(c) 0.75% 0.75%(c)
Net Investment Income 6.11%(c) 5.91% 6.00%(c)
Decrease Reflected in Expense Ratio due to
Expense Reimbursement 1.16%(c) 1.43% 2.15%(c)
Portfolio Turnover 118% 198% 239%
Average Broker Commission Per Share N/A N/A N/A
</TABLE>
- ------------------------
(a) Less than $0.01.
(b) Not annualized.
(c) Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
55
<PAGE>
JPM SERIES TRUST II
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share outstanding throughout each period are as follows:
<TABLE>
<CAPTION>
JPM
EQUITY
PORTFOLIO
-------------------------------------------------------
FOR THE PERIOD
JANUARY 3, 1995
FOR THE (COMMENCEMENT OF
SIX MONTHS ENDED FOR THE FISCAL OPERATIONS) TO
JUNE 30, 1997 YEAR ENDED DECEMBER 31,
(UNAUDITED) DECEMBER 31, 1996 1995
---------------- ----------------- ----------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $13.68 $12.63 $10.00
---------------- ----------------- ----------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.06 0.20 0.12
Net Realized and Unrealized Gain on Investments
and Foreign Currency Transactions 2.28 2.44 3.26
---------------- ----------------- ----------------
Total from Investment Operations 2.34 2.64 3.38
---------------- ----------------- ----------------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income -- (0.20) (0.12)
Net Realized Gain (0.13) (1.39) (0.63)
---------------- ----------------- ----------------
Total Distributions to Shareholders (0.13) (1.59) (0.75)
---------------- ----------------- ----------------
NET ASSET VALUE, END OF PERIOD $15.89 $13.68 $12.63
---------------- ----------------- ----------------
---------------- ----------------- ----------------
RATIOS AND SUPPLEMENTAL DATA
Total Return 17.26%(b) 21.14% 33.91%(b)
Net Assets, End of Period (in thousands) $7,576 $5,339 $4,144
Ratios to Average Net Assets
Expenses 0.90%(c) 0.90% 0.90%(c)
Net Investment Income 0.85%(c) 1.49% 1.48%(c)
Decrease Reflected in Expense Ratio due to
Expense Reimbursement 1.26%(c) 1.23% 1.80%(c)
Portfolio Turnover 59% 90% 66%
Average Broker Commission Per Share $0.0459 $0.0534 N/A
</TABLE>
- ------------------------
(b) Not annualized.
(c) Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
56
<PAGE>
JPM SERIES TRUST II
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share outstanding throughout each period are as follows:
<TABLE>
<CAPTION>
JPM
SMALL COMPANY
PORTFOLIO
-------------------------------------------------------
FOR THE PERIOD
JANUARY 3, 1995
FOR THE (COMMENCEMENT OF
SIX MONTHS ENDED FOR THE FISCAL OPERATIONS) TO
JUNE 30, 1997 YEAR ENDED DECEMBER 31,
(UNAUDITED) DECEMBER 31, 1996 1995
---------------- ----------------- ----------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $12.53 $11.83 $10.00
---------------- ----------------- ----------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.03 0.06 0.11
Net Realized and Unrealized Gain on Investments
and Foreign Currency Transactions 0.81 2.43 3.18
---------------- ----------------- ----------------
Total from Investment Operations 0.84 2.49 3.29
---------------- ----------------- ----------------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income -- (0.06) (0.11)
Net Realized Gain (0.62) (1.73) (1.35)
---------------- ----------------- ----------------
Total Distributions to Shareholders (0.62) (1.79) (1.46)
---------------- ----------------- ----------------
NET ASSET VALUE, END OF PERIOD $12.75 $12.53 $11.83
---------------- ----------------- ----------------
---------------- ----------------- ----------------
RATIOS AND SUPPLEMENTAL DATA
Total Return 7.49%(b) 21.74% 32.91%(b)
Net Assets, End of Period (in thousands) $5,009 $3,867 $2,536
Ratios to Average Net Assets
Expenses 1.15%(c) 1.15% 1.15%(c)
Net Investment Income 0.45%(c) 0.54% 0.99%(c)
Decrease Reflected in Expense Ratio due to
Expense Reimbursement 2.24%(c) 1.54% 2.07%(c)
Portfolio Turnover 51% 144% 100%
Average Broker Commission Per Share $0.0442 $0.0427 N/A
</TABLE>
- ------------------------
(b) Not annualized.
(c) Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
57
<PAGE>
JPM SERIES TRUST II
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share outstanding throughout each period are as follows:
<TABLE>
<CAPTION>
JPM
INTERNATIONAL EQUITY
PORTFOLIO
-------------------------------------------------------
FOR THE PERIOD
JANUARY 3, 1995
FOR THE (COMMENCEMENT OF
SIX MONTHS ENDED FOR THE FISCAL OPERATIONS) TO
JUNE 30, 1997 YEAR ENDED DECEMBER 31,
(UNAUDITED) DECEMBER 31, 1996 1995
---------------- ----------------- ----------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.73 $10.86 $10.00
---------------- ----------------- ----------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.08 0.20 0.15
Net Realized and Unrealized Gain on Investments
and Foreign Currency Transactions 1.12 1.23 1.08
---------------- ----------------- ----------------
Total from Investment Operations 1.20 1.43 1.23
---------------- ----------------- ----------------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (0.09) (0.09) (0.09)
Net Realized Gain (0.11) (0.47) (0.18)
Return of Capital -- -- (0.10)
---------------- ----------------- ----------------
Total Distributions to Shareholders (0.20) (0.56) (0.37)
---------------- ----------------- ----------------
NET ASSET VALUE, END OF PERIOD $12.73 $11.73 $10.86
---------------- ----------------- ----------------
---------------- ----------------- ----------------
RATIOS AND SUPPLEMENTAL DATA
Total Return 10.38%(b) 13.12% 12.38%(b)
Net Assets, End of Period (in thousands) $7,076 $6,250 $3,992
Ratios to Average Net Assets
Expenses 1.20%(c) 1.20% 1.20%(c)
Net Investment Income 1.45%(c) 1.25% 1.06%(c)
Decrease Reflected in Expense Ratio due to
Expense Reimbursement 2.16%(c) 1.98 1.96%(c)
Portfolio Turnover 91% 71% 68%
Average Broker Commission Per Share $0.0050 $0.0020 N/A
</TABLE>
- ------------------------
(b) Not annualized.
(c) Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
58
<PAGE>
JPM SERIES TRUST II
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
JPM Series Trust II (the "Trust") is registered under the Investment Company Act
of 1940, as amended, as an open-end diversified management investment company.
The Trust was organized as a Delaware Business Trust on October 28, 1993 for the
purpose of funding flexible premium variable life insurance policies. The Trust
is composed of five separate portfolios (each, a "Portfolio" and collectively,
the "Portfolios") which operate as distinct investment vehicles. The names and
investment objectives of the Portfolios are as follows: JPM Treasury Money
Market Portfolio seeks to provide current income, maintain a high level of
liquidity and preserve capital. JPM Bond Portfolio seeks to provide a high total
return consistent with moderate risk of capital and maintenance of liquidity.
JPM Equity Portfolio seeks to provide a high total return from a portfolio
comprised of selected equity securities. JPM Small Company Portfolio seeks to
provide a high total return from a portfolio of equity securities of small
companies. JPM International Equity Portfolio seeks to provide a high total
return from a portfolio of equity securities of foreign corporations. Prior to
January 1, 1997, the Trust and the Portfolios' names were Chubb Series Trust,
Resolute Treasury Money Market Portfolio, Resolute Bond Portfolio, Resolute
Equity Portfolio, Resolute Small Company Portfolio and Resolute International
Equity Portfolio, respectively.
Investments in international markets may involve certain considerations and
risks not typically associated with investments in the United States. Future
economic and political developments in foreign countries could adversely effect
the liquidity or value, or both, of such securities in which the Portfolios are
invested. The ability of issuers of the debt securities held by the Portfolios
to meet their obligations may be affected by economic and political developments
in a specific industry or region.
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 Portfolios:
a) The value of each security for which readily available market quotations
exist is based on a decision as to the broadest and most representative
market for each security. The value of such security will be based either
on the last sale price on a national securities exchange or, in the
absence of recorded sales, at the average of readily available closing
bid and asked prices on such exchanges. Securities listed on a foreign
exchange are valued at the last quoted sale price available before the
time when net assets are valued. Unlisted securities are valued at the
average of the quoted bid and asked prices in the over-the-counter
market. Securities or other assets for which market quotations are not
readily available are valued at fair value in accordance with procedures
established by the Trustees. Such procedures include the use of
independent pricing services, which use prices based upon yields or
prices of securities of comparable quality, coupon, maturity and type;
indications as to values from dealers; and general market conditions. All
portfolio securities with a remaining maturity of less than 60 days are
valued at amortized cost.
Trading in securities on most foreign exchanges and over-the-counter
markets is normally completed before the close of the domestic market and
may also take place on days on which the domestic market is closed. If
events materially affecting the value of foreign securities occur between
the time when the
59
<PAGE>
JPM SERIES TRUST II
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
exchange on which they are traded closes and the time when the
Portfolio's net asset value is calculated, such securities will be valued
at fair value in accordance with procedures established by and under the
general supervision of the Trustees.
b) The books and records of the Portfolios are maintained in U.S. dollars.
The market value of investment securities, other assets and liabilities,
and foreign currency contracts used by certain Portfolios are translated
at the prevailing exchange rates at the end of the period. Purchases,
sales, income and expenses are translated at the exchange rates
prevailing on the respective dates of such transactions. Translation
gains and losses resulting from changes in the exchange rates during the
reporting period and gains and losses realized upon settlement of foreign
currency transactions are reported in the Statement of Operations.
Although the net assets of the Portfolios are presented at the exchange
rates and market values prevailing at the end of the period, the
Portfolios do not isolate the portion of the results of operations
arising as a result of changes in foreign exchange rates from the
fluctuations arising from changes in the market prices of securities
during the period.
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 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 first-in first-out
method.
d) Distributions to shareholders of net investment income and net realized
capital gains, if any, are declared and paid at least annually. All
dividends and distributions will be automatically reinvested in
additional shares of the Portfolio with respect to which dividends have
been declared, at net asset value, as of the ex-dividend date of such
dividends.
e) Certain Portfolios may enter into forward and spot foreign currency
contracts to protect securities and related receivables and payables
against fluctuations in future foreign currency rates. A forward contract
is an agreement to buy or sell currencies of different countries on a
specified future date at a specified rate. Risks associated with such
contracts include the movement in the value of the foreign currency
relative to the U.S. dollar and the ability of the counterparty to
perform.
The market value of the contract will fluctuate with changes in currency
exchange rates. Contracts are valued daily based on procedures
established by and under the general supervision of the Trustees, and the
change in the market value is recorded by the Portfolios as unrealized
appreciation or
60
<PAGE>
JPM SERIES TRUST II
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
depreciation of foreign currency translations. At June 30, 1997, the JPM
International Equity Portfolio had open forward foreign currency
contracts as follows:
SUMMARY OF OPEN FORWARD FOREIGN CURRENCY CONTRACTS
<TABLE>
<CAPTION>
U.S. DOLLAR NET UNREALIZED
COST/ VALUE AT APPRECIATION/
PURCHASE CONTRACTS PROCEEDS JUNE 30, 1997 (DEPRECIATION)
- ------------------------------------------------- -------- ------------- --------------
<S> <C> <C> <C>
British Pound 64,036, expiring 8/21/97........... $104,742 $ 106,476 $ 1,734
German Mark 294,575, expiring 08/21/97........... 175,000 169,537 (5,463)
German Mark 118,216, expiring 08/2/197........... 70,000 68,037 (1,963)
Japanese Yen 27,842,973, expiring 8/21/97........ 245,000 244,754 (246)
Japanese Yen 8,033,340, expiring 8/21/97......... 70,000 70,617 617
</TABLE>
<TABLE>
<CAPTION>
SALES CONTRACTS
- -------------------------------------------------
<S> <C> <C> <C>
Australian Dollar 313,560, expiring 8/21/97...... $242,068 $ 237,099 $ 4,969
British Pound 175,637, expiring 8/21/97.......... 288,557 292,040 (3,483)
French Franc 1,036,240, expiring 8/21/97......... 182,533 176,935 5,598
German Mark 560,331, expiring 8/21/97............ 331,788 322,487 9,301
Irish Pound 35,522, expiring 8/21/97............. 54,455 53,734 721
Italian Lira 131,101,740, expiring 8/21/97....... 78,466 77,012 1,454
Japanese Yen 90,025,921, expiring 8/21/97........ 803,121 791,374 11,747
--------------
NET UNREALIZED APPRECIATION ON FORWARD FOREIGN
CURRENCY CONTRACTS.............................. $ 24,986
--------------
--------------
</TABLE>
f) Each Portfolio incurred organizational expenses in the amount of $9,834.
These expenses were deferred and are being amortized on a straight-line
basis over a period not to exceed five years beginning with the
commencement of operations.
g) Each Portfolio is treated as a separate entity for federal income tax
purposes. Each Portfolio intends to comply with the provisions of the
Internal Revenue Code of 1986, as amended, (the "Code") 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. Each Portfolio is also a segregated portfolio of
assets for insurance purposes and intends to comply with the
diversification requirements of Subchapter L of the Code.
2. TRANSACTIONS WITH AFFILIATES
a) The Trust, on behalf of the Portfolios, has an Investment Advisory
Agreement with J.P. Morgan Investment Management Inc. ("Morgan"), a
wholly owned subsidiary of J.P. Morgan & Co. Incorporated. Under the
Investment Advisory Agreement, Morgan is responsible for the overall
management and supervision of each Portfolio. Morgan makes each
Portfolio's day-to-day investment decisions, arranges for the execution
of portfolio transactions and generally manages each Portfolio's
61
<PAGE>
JPM SERIES TRUST II
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
investments. Morgan is paid a fee for its services, computed daily and
paid monthly, at an annual rate of: 0.20% of the average daily net
assets of JPM Treasury Money Market Portfolio; 0.30% of the average daily
net assets of JPM Bond Portfolio; 0.40% of the average daily net assets
of JPM Equity Portfolio; 0.60% of the average daily net assets of JPM
Small Company Portfolio and 0.60% of the average daily net assets of JPM
International Equity Portfolio. For the six months ended June 30, 1997,
Morgan's fees for these services amounted to $1,458, $7,349, $13,614,
$13,152, and $19,706, respectively.
b) The Trust, on behalf of each Portfolio, has retained Funds Distributor,
Inc. ("FDI"), a registered broker-dealer, to serve as co-administrator
and distributor for each Portfolio. Under a Co-Administration Agreement
between FDI and the Trust, on behalf of each Portfolio, FDI provides
administrative services necessary for the operations of each Portfolio,
furnishes office space and facilities required for conducting the
business of each Portfolio and pays the compensation of the Portfolios'
officers affiliated with FDI. Under the Co-Administration Agreement, each
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 each Portfolio is based on the ratio of its 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 June 30, 1997, the fee for these services amounted to: $15
for JPM Treasury Money Market Portfolio, $48 for JPM Bond Portfolio, $66
for JPM Equity Portfolio, $43 for JPM Small Company Portfolio and $64 for
JPM International Equity Portfolio.
Morgan Guaranty is responsible for the payment of FDI's fees under the
Co-Administration Agreement. See Note 2 c.
c) The Trust, on behalf of each Portfolio, has an Administrative Services
Agreement (the "Services Agreement") with Morgan Guaranty under which
Morgan Guaranty may receive a fee, based on the percentages described
below, for overseeing certain aspects of the administration and operation
of the Portfolios. The Services Agreement is also designed to provide an
expense limit for certain expenses of the Portfolios. If total expenses
of the Portfolios, excluding the advisory fees, exceed the expense limits
of: 0.60% of the average daily net assets of JPM Treasury Money Market
Portfolio, 0.75% of the average daily net assets of JPM Bond Portfolio,
0.90% of the average daily net assets of JPM Equity Portfolio, 1.15% of
the average daily net assets of JPM Small Company Portfolio and 1.20% of
the average daily net assets of JPM International Equity Portfolio,
Morgan Guaranty will reimburse the Portfolios for the excess expense
amount and receive no fee. Should such expenses be less than the expense
limits, Morgan Guaranty's fee would be limited to the difference between
such expenses and the fees calculated under the Services Agreement. For
the six months ended June 30, 1997, Morgan Guaranty has agreed to
reimburse the Portfolios for expenses under this agreement as follows:
$22,048, $28,523, $42,866, $49,049 and $71,105, respectively.
d) An aggregate annual fee of $20,000 is paid to each Trustee for serving as
a Trustee of the Trust. The Trustees' Fees and Expenses shown in the
financial statements represent the Portfolios' allocated portion of the
total fees and expenses.
62
<PAGE>
JPM SERIES TRUST II
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
3. SHAREHOLDER TRANSACTIONS
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares. Transactions in shares of beneficial interest of
each Portfolio were as follows:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE FISCAL
JUNE 30, 1997 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1996
-------------- -----------------
<S> <C> <C>
JPM TREASURY MONEY MARKET PORTFOLIO
Shares sold...................................... 7,728 130,402
Reinvestment of dividends and distributions...... 6,010 5,606
Shares redeemed.................................. (7,369) (125,133)
-------------- -----------------
Net Increase..................................... 6,369 10,875
-------------- -----------------
-------------- -----------------
</TABLE>
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
JUNE 30, FOR THE FISCAL
1997 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1996
------------ -----------------
<S> <C> <C>
JPM BOND PORTFOLIO
Shares sold...................................... 209,253 146,230
Reinvestment of dividends and distributions...... 13,527 9,476
Shares redeemed.................................. (4,931) (24,337)
------------ -----------------
Net Increase..................................... 217,849 131,369
------------ -----------------
------------ -----------------
</TABLE>
63
<PAGE>
JPM SERIES TRUST II
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
JUNE 30, FOR THE FISCAL
1997 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1996
------------ -----------------
<S> <C> <C>
JPM EQUITY PORTFOLIO
Shares sold...................................... 46,128 119,491
Reinvestment of dividends and distributions...... 44,460 25,185
Shares redeemed.................................. (4,255) (82,429)
------------ -----------------
Net Increase..................................... 86,333 62,247
------------ -----------------
------------ -----------------
</TABLE>
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
JUNE 30, FOR THE FISCAL
1997 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1996
------------ -----------------
<S> <C> <C>
JPM SMALL COMPANY PORTFOLIO
Shares sold...................................... 33,224 143,575
Reinvestment of dividends and distributions...... 53,047 36,193
Shares redeemed.................................. (2,172) (85,441)
------------ -----------------
Net Increase..................................... 84,098 94,327
------------ -----------------
------------ -----------------
</TABLE>
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
JUNE 30, FOR THE FISCAL
1997 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1996
------------ -----------------
<S> <C> <C>
JPM INTERNATIONAL EQUITY PORTFOLIO
Shares sold...................................... 18,718 172,202
Reinvestment of dividends and distributions...... 35,183 12,740
Shares redeemed.................................. (31,058) (19,591)
------------ -----------------
Net Increase..................................... 22,843 165,351
------------ -----------------
------------ -----------------
</TABLE>
From time to time, certain Portfolios may have a concentration of several
shareholders holding a significant percentage of shares outstanding. Investment
activities of these shareholders could have a material impact on the Portfolio.
64
<PAGE>
JPM SERIES TRUST II
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
4. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the six months
ended June 30, 1997, were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
------------ ------------
<S> <C> <C>
JPM Bond Portfolio
U.S. Government and Agency Obligations................................... $ 4,639,301 $ 3,338,978
Corporate, Collateralized Mortgage and Other Obligations................. 1,969,098 1,339,543
JPM Equity Portfolio....................................................... 4,181,756 3,793,184
JPM Small Company Portfolio................................................ 2,494,217 2,140,085
JPM International Equity Portfolio......................................... 5,794,044 6,012,262
</TABLE>
65
<PAGE>
JPM
SERIES
TRUST II
JPM TREASURY MONEY MARKET PORTFOLIO
JPM BOND PORTFOLIO
JPM EQUITY PORTFOLIO
JPM SMALL COMPANY PORTFOLIO
JPM INTERNATIONAL EQUITY PORTFOLIO
SEMI-ANNUAL REPORT
JUNE 30, 1997