================================================================================
================================================================================
- --------------------------------------------------------------------------------
----------------------
JMP
----------------------
Series
----------------------
Trust II
----------------------
Formerly Known as
CHUBB SERIES TRUST
ANNUAL REPORT
DECEMBER 31, 1996
JPM Treasury Money Market Portfolio
JPM Bond Portfolio
JPM Equity Portfolio
JPM Small Company Portfolio
JPM International Equity Portfolio
<PAGE>
================================================================================
Advisor's Letter
================================================================================
JPM SERIES TRUST II
- --------------------------------------------------------------------------------
Dear Shareholder:
Several significant changes have been made over the past year, which became
effective on January 1, 1997. First, the Chubb Series Trust has been renamed the
JPM Series Trust II, and the names of the investment portfolios within the Trust
have been renamed the "JPM Portfolios" from the "Resolute Portfolios."
In addition, J.P. Morgan Investment Management, Inc. has been named the
investment advisor for the JPM Series Trust II, and Morgan Guaranty Trust
Company of New York has assumed responsibilities for administrative services to
the Trust. Funds Distributor, Inc. has been named the co-administrator and
distributor; State Street Bank & Trust has been named the custodian and dividend
disbursing agent; and Price Waterhouse LLP has been named the auditor for the
Trust.
Finally, several enhancements were made to the investment guidelines of the
Trust's Portfolios during the fourth quarter of 1996. First, the JPM Bond
Portfolio may now invest up to 20% of its assets in non-U.S. dollar denominated
securities, and up to 10% of its assets in below investment grade securities
rated BB or B by Standard & Poor's. Second, the comparable index for the JPM
Small Company Portfolio has been changed from the Russell 2500 to the Russell
2000. Lastly, the JPM International Equity Portfolio may invest a portion of its
assets in the securities of lesser-developed countries outside of the Morgan
Stanley EAFE universe.
On the investment side, the big news in 1996 was the continued spectacular run
of the U.S. stock market, particularly large cap stocks. Although 1995's amazing
Standard & Poor's return of 37.6% was not equalled, 1996 did produce an S&P
number of 23.0%, outperforming all but three of the last ten years. Significant
cash inflows and a positive interest rate environment both contributed to a
market that favored size, and large cap equity investors have good reason to be
satisfied with the year's results.
Small cap investors also have reason to be happy, although not as much reason as
their large cap brethren. The Russell 2000 returned 16.5%, a more than
respectable showing, disappointing only when compared with the S&P. We think
small cap valuations continue to be more rational than their larger counterparts
and offer promise of relatively better results when the large cap momentum
finally exhausts itself.
International equity investors saw a positive annual return of 6.4% for
MSCI-EAFE Index. European markets turned in very healthy returns, but negative
results in Japan depressed the international markets overall. The strength of
the U.S. dollar also had a dampening effect on the returns from overseas
markets.
On the fixed income side, steadily rising interest rates held back performance.
Although the year started off well, with a Federal Reserve easing, interest
rates surged in February as the economy revealed itself to be stronger than
originally believed. A bond market rally in the fourth quarter helped to offset
eight months of falling returns, but the Salomon Broad Investment Grade Index, a
good indicator of the general bond market, showed a return of only 3.6% for the
year, most of which can be attributed to fourth quarter performance.
We look forward to continuing to meet your investment needs in 1997.
Sincerely,
/s/ Thomas M. Luddy
Thomas M. Luddy
Chief Investment Officer
J.P. Morgan Investment Management, Inc.
<PAGE>
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<PAGE>
================================================================================
JPM Treasury Money Market Portfolio
================================================================================
JPM SERIES TRUST II
- --------------------------------------------------------------------------------
Portfolio Facts
-----------------------------------------------
Inception Date
January 3, 1995
-----------------------------------------------
Fund Manager
J.P. Morgan Investment Management, Inc.
-----------------------------------------------
Investment Objective and Strategy
The JPM Treasury Money Market
Portfolio's investment objective is to provide
current income, maintain a high level of
liquidity and preserve capital. The Portfolio
will invest in Treasury Bills, Notes and
Bonds, all of which are backed as to principal
and interest payments by the full faith and
credit of the United States of America.
-----------------------------------------------
Net Assets as of 12/31/96
$1,386,518
-----------------------------------------------
Number of Holdings
6
-----------------------------------------------
Portfolio Quality
AAA-100%
-----------------------------------------------
Dollar Weighted Average Maturity
58.02 days
-----------------------------------------------
=================================
- ---------------------------------
IN THIS SECTION
- ---------------------------------
Portfolio Facts
Portfolio Composition
Schedule of Portfolio Investments
=================================
1
<PAGE>
================================================================================
JPM Treasury Money Market Portfolio
================================================================================
JPM SERIES TRUST II
- --------------------------------------------------------------------------------
Portfolio Composition
================================================================================
LIST OF TOP HOLDINGS
================================================================================
Percent of
Total Investments
U.S. Treasury Bill, 4.910%, due 03/06/97 37.49%
U.S. Treasury Bill, 4.975%, due 01/23/97 34.77
U.S. Treasury Bill, 5.110%, due 04/17/97 16.85
U.S. Treasury Bill, 4.850%, due 03/06/97 6.78
U.S. Treasury Bill, 5.235%, due 04/03/97 2.70
U.S. Treasury Bill, 5.330%, due 05/01/97 1.41
- --------------------------------------------------------------------------------
TOTAL 100.00%
- --------------------------------------------------------------------------------
See notes to financial statements.
2
<PAGE>
================================================================================
JPM Treasury Money Market Portfolio
================================================================================
JPM SERIES TRUST II
- --------------------------------------------------------------------------------
Advisor's Investment Review
12-month period ended December 31, 1996
Market Review: During the first two quarters of 1996, yields rose as economic
data reported continued growth, leading investors to expect Federal Reserve
tightening. Mixed economic data in the third quarter showed strong employment
growth combined with benign consumer and producer inflation figures.
Shorter-term U.S. Treasury yields fell and yields on maturities one year and
longer remained unchanged. During the fourth quarter, shorter-term yields rose
while yields declined on instruments with maturities one year and longer.
Portfolio Review: The Portfolio returned 4.69% for the year ended December 31,
1996. Drawing upon proprietary economic research, we manage the Portfolio's
duration around our outlook for short-term interest rates. Although extended
slightly in October, for most of the year the Portfolio held an average life of
around 50-60 days.
The Portfolio invests in Treasury Bills, Bonds and Notes, all of which are
backed as to principal and interest payments by the full faith and credit of the
United States of America.
Outlook: Although recent figures have reinforced investor hopes that economic
growth has slowed to a sustainable pace, we suspect that warning signs of
impending inflation may accumulate sufficiently over the next few months and
convince the Federal Reserve's less hawkish members to engineer a significant
economic slowdown during 1997. Higher interest rates would be necessary to
accomplish this slowdown. Entering 1997, we will continue to maintain the
Portfolio's average life of 50-60 days.
3
<PAGE>
================================================================================
JPM Treasury Money Market Portfolio
================================================================================
JPM SERIES TRUST II
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments
================================================================================
SHORT-TERM OBLIGATIONS--105.47%
================================================================================
Principal Market Value
U.S. Treasury Bills Amount (Note B)
------------------- --------- ------------
4.975%, due 01/23/97 $510,000 $ 508,449
4.850%, due 03/06/97 100,000 99,135
4.910%, due 03/06/97 553,000 548,219
5.235%, due 04/03/97 40,000 39,493
5.110%, due 04/17/97 250,000 246,361
5.330%, due 05/01/97 21,000 20,650
----------
Total Short-Term Obligations
(Cost $1,462,090) $1,462,307
==========
- --------------------------------------------------------------------------------
================================================================================
SUMMARY OF TOTAL NET ASSETS
================================================================================
Market Value
(Note B)
------------
Total Investments
(Cost $1,462,090)* 105.47% $1,462,307
Other assets, less liabilities (5.47) (75,789)
------ ----------
Total Net Assets 100.00% $1,386,518
====== ==========
- --------------------------------------------------------------------------------
*Aggregate cost for Federal income tax purposes.
See notes to financial statements.
4
<PAGE>
================================================================================
JPM Bond Portfolio
================================================================================
JPM SERIES TRUST II
- --------------------------------------------------------------------------------
Portfolio Facts
-------------------------------------------
Inception Date
January 3, 1995
-------------------------------------------
Fund Manager
J.P. Morgan Investment Management, Inc.
-------------------------------------------
Investment Objective and Strategy
To provide a high total return consistent
with moderate risk of capital and
maintenance of liquidity. Total return
will consist of income plus realized and
unrealized capital gains and losses.
-------------------------------------------
Net Assets as of 12/31/96
$2,782,079
-------------------------------------------
Number of Holdings
45
-------------------------------------------
Portfolio Turnover
198.40%
-------------------------------------------
Portfolio Quality
AAA-61.47%
AA - 5.50%
A -13.90%
BBB-19.13%
-------------------------------------------
Average Maturity
16.50 years
-------------------------------------------
=================================
- ---------------------------------
IN THIS SECTION
- ---------------------------------
Portfolio Facts
Investment Comparison
Portfolio Composition
Schedule of Portfolio Investments
=================================
5
<PAGE>
================================================================================
JPM Bond Portfolio
================================================================================
JPM SERIES TRUST II
- --------------------------------------------------------------------------------
Investment Comparison
================================================================================
JPM Bond Portfolio
and the Salomon Investment Grade Bond Index
Comparison of change in value of $10,000 investment
================================================================================
- -----------------------------------------
Average Annual Total Returns for 12/31/96
- -----------------------------------------
This Since
Quarter 1 Year Inception
Portfolio 3.04% 2.09% 9.25%
Index 3.02% 3.62% 10.58%
- -----------------------------------------
(The folowing table was represented as a line chart in the printed material.)
Salomon
Investment
Bond Grade Bond
Portfolio Index
--------- ----------
01/31/95 $10,146 $10,207
02/28/95 10,320 10,446
03/31/95 10,360 10,506
04/28/95 10,488 10,650
05/31/95 10,907 11,073
06/30/95 11,003 11,151
07/31/95 10,950 11,128
08/31/95 11,090 11,256
09/30/95 11,191 11,362
10/31/95 11,356 11,515
11/30/95 11,518 11,694
12/31/95 11,685 11,856
01/31/96 11,761 11,936
02/29/96 11,498 11,733
03/31/96 11,388 11,649
04/30/96 11,304 11,583
05/31/96 11,258 11,557
06/30/96 11,408 11,706
07/31/96 11,427 11,857
08/31/96 11,391 11,889
09/30/96 11,577 11,871
10/31/96 11,825 12,138
11/30/96 12,023 12,339
12/31/96 11,929 12,230
Commencement of Operations January 3, 1995. Past performance is not predictive
of future performance.
This graph compares an initial $10,000 investment made in the JPM Bond Portfolio
at its inception with a similar investment in the Salomon Investment Grade Bond
Index. For the purpose of this graph and the accompanying table, the total
return for the Portfolio reflects all recurring expenses and includes the
reinvestment of all dividends and distributions. Total returns for periods of
less than one year have not been annualized.
Shares of the Portfolio 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.
Total returns do not reflect any separate account expenses imposed on the
policies which may include a sales charge, premium tax charge, DAC tax sales
charge, cost of insurance, mortality expenses, surrender and other charges.
The Salomon Investment Grade Bond Index is an unmanaged index and includes the
reinvestment of all dividends, but does not reflect the payment of transaction
costs, advisory fees or expenses that are associated with an investment in the
Portfolio.
6
<PAGE>
================================================================================
JPM Bond Portfolio
================================================================================
JPM SERIES TRUST II
- --------------------------------------------------------------------------------
Advisor's Investment Review
12-month period ended December 31, 1996
Market Review: Although seesawing concerns about the pace of economic growth
grabbed headlines throughout most of the year, U.S. bonds were able to close out
1996 in an environment of moderate economic growth and subdued inflation. The
modest 3.6% gain for the Salomon Brothers Broad Investment Grade Bond Index
during 1996 was largely attributable to its fourth quarter performance. During
the year, shorter maturities outperformed longer maturities, despite the fourth
quarter rally on maturities of one year or longer.
Portfolio Review: The Portfolio provided a total return of 2.09% for the year
ended December 31, 1996. Our investment process involves three key decisions:
duration management, sector allocation, and security selection. By making
decisions based on these multiple, unrelated investment insights, we seek to
diversify the ways we can add value to the Portfolio.
The Portfolio's duration decision slightly detracted from its relative returns
in 1996. The negative impact of a longer-than-benchmark duration during the
first half of the year more than offset the positive impact when a similar
strategy was pursued during the second half.
During 1996, we actively managed the Portfolio's allocation to U.S. Treasury,
corporate, and mortgage-backed securities based on their relative
attractiveness. Throughout the year, our overweighted positions in
mortgage-backed and corporate securities and our underweighted position in U.S.
Treasuries added to performance. In particular, the Portfolio's aggressive
investment in mortgage-backed securities fueled relative returns, as this sector
was one of the market's best performers during 1996.
Security selection also added value to performance. The Portfolio focused on
high-quality issues, keeping the average quality of its holdings between AA and
AAA.
Outlook: Although recent figures have reinforced investor hopes that economic
growth has slowed to a sustainable pace, we suspect that warning signs of
impending inflation may accumulate sufficiently over the next few months and
convince the Federal Reserve's less hawkish members to engineer a significant
economic slowdown during 1997. Higher interest rates would be necessary to
accomplish this slowdown.
Given this uncertain environment, we plan to maintain the Portfolio's duration
at close to neutral in the short-term, despite yields being above our long-term
equilibrium assumption. We continue to find mortgage-backed and corporate
securities attractive relative to U.S. Treasuries and plan to maintain the
Portfolio's current overweighted positions in these sectors.
7
<PAGE>
================================================================================
JPM Bond Portfolio
================================================================================
JPM SERIES TRUST II
- --------------------------------------------------------------------------------
Portfolio Composition
(The folowing table was represented as a pie chart in the printed material.)
U.S.Government & Agency Obligations 39.30%
Corporate Bonds 37.43%
Short-Term Obligations 14.23%
Asset-Backed Securities 8.34%
Foreign Government Obligations 0.70%
================================================================================
LIST OF TOP TEN LONG-TERM HOLDINGS
================================================================================
Percent of
Total
Investments
Government National Mortgage Association, 8.000%, due 09/15/26 11.98%
Government National Mortgage Association, 7.500%, due 08/15/25 6.68
U.S. Treasury Bond, 9.250%, due 02/15/16 6.22
Government National Mortgage Association, 6.500%, due 12/15/23 4.97
U.S. Treasury Note, 7.875%, due 11/15/99 4.37
U.S. Bancorp, 8.270%, due 12/15/26 3.56
U.S. Treasury Note, 6.875%, due 05/15/06 3.48
Access Financial MHL, 6.375%, due 05/15/21 2.42
Greentree Financial Corp., 7.200%, due 04/15/19 2.11
Atlantic Richfield Co., 8.250%, due 02/01/22 1.92
Balance - 35 Security Positions 52.29
- --------------------------------------------------------------------------------
TOTAL 100.00%
- --------------------------------------------------------------------------------
8
<PAGE>
================================================================================
JPM Bond Portfolio
================================================================================
JPM SERIES TRUST II
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments
================================================================================
CORPORATE BONDS--38.71%
================================================================================
Principal Market Value
Company Amount (Note B)
------- ---------- ----------
Aerospace--1.81%
Lockheed Martin Corp.,
6.550%, due 05/15/99 $ 50,000 $ 50,223
----------
Banking--9.08%
Chase Capital I,
7.670%, due 12/01/26 50,000 49,302
KeyCorp,
8.400%, due 04/01/99 50,000 52,159
Mellon Capital I,
7.720%, due 12/01/26 50,000 48,920
U.S. Bancorp,
8.270%, due 12/15/26 100,000 102,327
----------
252,708
----------
Electronics--1.87%
Motorola, Inc.,
7.500%, due 05/15/25 50,000 51,916
----------
Financial Services--14.74%
Aames Financial Corp.,
Senior Notes,
9.125%, due 11/01/03 15,000 15,337
Chrysler Financial Corp.,
6.320%, due 07/14/99 50,000 50,088
Ford Motor Credit Co.,
5.625%, due 03/03/97 55,000 55,001
Ford Motor Credit Co.,
6.375%, due 09/15/99 50,000 50,056
GMAC Medium Term Note,
5.700%, due 12/22/97 40,000 39,943
GMAC Medium Term Note,
5.900%, due 03/06/00 50,000 49,304
Guangdong International
Trust & Investment Corp.,
8.750%, due 10/24/16 50,000 51,588
Household Finance Co.,
6.780%, due 04/17/01 50,000 50,341
Marshall & Ilsley,
7.650%, due 12/01/26 50,000 48,512
----------
410,170
----------
Household Products--1.63%
Procter & Gamble Co.,
6.450%, due 01/15/26 50,000 45,477
----------
Health Services--0.87%
Mariner Health Group,
Senior Sub. Notes,
9.500%, due 04/01/06 15,000 14,775
Paracelsus Healthcare,
10.000%, due 08/15/06 10,000 9,425
----------
24,200
Merchandising--1.80%
Sears Roebuck Acceptance
Medium Term Note,
6.220%, due 03/25/99 50,000 50,015
----------
Oil - Integrated--1.99%
Atlantic Richfield Co.,
8.250%, due 02/01/22 50,000 55,319
----------
Pollution Control--0.19%
Allied Waste North America,
Senior Sub. Notes,
10.250%, due 12/01/06 5,000 5,269
----------
Steel Producer--0.55%
AK Steel,
9.125%, due 12/15/06 15,000 15,216
----------
- --------------------------------------------------------------------------------
See notes to financial statements.
9
<PAGE>
================================================================================
JPM Bond Portfolio
================================================================================
JPM SERIES TRUST II
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments
================================================================================
CORPORATE BONDS (CONTINUED)
================================================================================
Principal Market Value
Company Amount (Note B)
------- ---------- ----------
Telecommunication Equipment--2.39%
Bellsouth Telecommunication,
7.000%, due 10/01/25 $ 50,000 $ 49,026
TCI Communications, Inc.,
7.875%, due 02/15/26 20,000 17,344
----------
66,370
----------
Utilities - Electric--1.79%
Texas Utilities Electric Co.,
1st Mortgage, 7.875%,
due 04/01/24 50,000 49,932
----------
Total Corporate Bonds
(Cost $1,059,812) $1,076,815
----------
- --------------------------------------------------------------------------------
================================================================================
ASSET-BACKED SECURITIES--8.63%
================================================================================
Principal Market Value
Company Amount (Note B)
------- ---------- ----------
Access Financial MHL,
6.375%, due 05/15/21 $ 70,000 $ 69,485
Greentree Financial Corp.,
7.200%, due 04/15/19 60,000 60,787
Greentree Recreational
Equipment Trust,
5.550%, due 02/15/18 34,139 33,274
Premier Auto Trust,
4.650%, due 11/02/99 26,426 26,185
World Omni Auto Lease
Securitization,
6.300%, due 06/25/02 50,000 50,357
----------
Total Asset-Backed Securities
(Cost $240,104) $ 240,088
----------
- --------------------------------------------------------------------------------
================================================================================
FOREIGN GOVERNMENT
OBLIGATIONS--0.72%
================================================================================
Principal Market Value
Agency Amount (Note B)
------ ---------- ----------
United Mexican States,
7.563%, due 08/06/01 $ 20,000 $ 20,076
----------
Total Foreign Government
Obligations
(Cost $20,030) $ 20,076
----------
- --------------------------------------------------------------------------------
================================================================================
U.S. GOVERNMENT AND AGENCY
OBLIGATIONS--40.63%
================================================================================
Principal Market Value
Agency Amount (Note B)
------ ---------- ----------
Federal Home Loan
Mortgage Corporation,
8.000%, due 11/01/26 $ 44,973 $ 45,830
Government National
Mortgage Association,
6.500%, due 12/15/23 149,609 142,923
Government National
Mortgage Association,
7.500%, due 08/15/25 191,900 192,260
Government National
Mortgage Association,
8.000%, due 09/15/26 337,564 344,737
----------
725,750
----------
U.S. Treasury Bonds
-------------------
9.250%, due 02/15/16 141,000 178,938
----------
U.S. Treasury Notes
-------------------
7.875%, due 11/15/99 120,000 125,775
6.875%, due 05/15/06 97,000 100,031
----------
$ 225,806
----------
Total U.S. Government and Agency
Obligations
(Cost $1,106,071) $1,130,494
----------
- --------------------------------------------------------------------------------
See notes to financial statements.
10
<PAGE>
================================================================================
JPM Bond Portfolio
================================================================================
JPM SERIES TRUST II
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments
================================================================================
SHORT-TERM OBLIGATIONS--14.71%
================================================================================
Principal Market Value
U.S. Treasury Bills Amount (Note B)
------------------- ---------- ----------
4.920%, due 01/23/97 $ 11,000 $ 10,966
4.820%, due 03/06/97 50,000 49,568
4.825%, due 03/06/97 93,000 92,196
4.850%, due 03/06/97 44,000 43,620
4.900%, due 03/06/97 12,000 11,896
5.000%, due 03/06/97 88,000 87,239
4.940%, due 03/20/97 115,000 113,817
----------
Total Short-Term Obligations
(Cost $409,243) $ 409,302
----------
- --------------------------------------------------------------------------------
================================================================================
SUMMARY OF TOTAL NET ASSETS
================================================================================
Market Value
(Note B)
----------
Total Investments
(Cost $2,835,260)* 103.40% $2,876,775
Other assets, less liabilities (3.40) (94,696)
----------
Total Net Assets 100.00% $2,782,079
==========
- --------------------------------------------------------------------------------
*Aggregate cost for Federal income tax purposes.
See notes to financial statements.
11
<PAGE>
[This page intentionally left blank]
<PAGE>
================================================================================
JPM Equity Portfolio
================================================================================
JPM SERIES TRUST II
- --------------------------------------------------------------------------------
Portfolio Facts
-----------------------------------------
Inception Date
January 3, 1995
-----------------------------------------
Fund Manager
J.P. Morgan Investment Management, Inc.
-----------------------------------------
Investment Objective and Strategy
To provide a high total return from a
portfolio comprised of selected
equity securities.
Portfolio invests primarily in the common
stock of large and medium sized U.S.
corporations with market capitalization
above $1.5 billion.
-----------------------------------------
Net Assets as of 12/31/96
$5,339,283
-----------------------------------------
Number of Holdings
96
-----------------------------------------
Portfolio Turnover
89.77%
-----------------------------------------
=================================
- ---------------------------------
IN THIS SECTION
- ---------------------------------
Portfolio Facts
Investment Comparison
Portfolio Composition
Schedule of Portfolio Investments
=================================
13
<PAGE>
================================================================================
JPM Equity Portfolio
================================================================================
JPM SERIES TRUST II
- --------------------------------------------------------------------------------
Investment Comparison
================================================================================
JPM Equity Portfolio
and the S&P 500 Index
Comparison of change in value of $10,000 investment
================================================================================
- -----------------------------------------
Average Annual Total Returns for 12/31/96
- -----------------------------------------
This Since
Quarter 1 Year Inception
Portfolio 7.99% 21.14% 27.45%
Index 8.33% 22.96% 30.82%
- -----------------------------------------
(The folowing table was represented as a line chart in the printed material.)
Equity S&P 500
Portfolio Index
--------- --------
01/03/95 $10,000 $10,000
01/31/95 10,207 10,262
02/28/95 10,647 10,662
03/31/95 11,041 10,976
04/28/95 11,290 11,299
05/31/95 11,717 11,750
06/30/95 11,938 12,023
07/31/95 12,370 12,421
08/31/95 12,416 12,452
09/30/95 12,784 12,977
10/31/95 12,436 12,931
11/30/95 13,161 13,498
12/31/95 13,391 13,758
01/31/96 13,740 14,226
02/29/96 14,038 14,358
03/31/96 14,316 14,497
04/30/96 14,608 14,710
05/31/96 14,793 15,090
06/30/96 14,616 15,147
07/31/96 13,839 14,478
08/31/96 14,361 14,783
09/30/96 15,021 15,615
10/31/96 15,236 16,046
11/30/96 16,504 17,259
12/31/96 16,222 17,090
Commencement of Operations January 3, 1995. Past performance is not predictive
of future performance.
This graph compares an initial $10,000 investment made in the JPM Equity
Portfolio at its inception with a similar investment in the S&P 500 Index. For
the purpose of this graph and the accompanying table, the total return for the
Portfolio reflects all recurring expenses and includes the reinvestment of all
dividends and distributions. Total returns for periods of less than one year
have not been annualized.
Shares of the Portfolio 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.
Total returns do not reflect any separate account expenses imposed on the
policies which may include a sales charge, premium tax charge, DAC tax sales
charge, cost of insurance, mortality expenses, surrender and other charges.
The S&P 500 Index is an unmanaged index and includes the reinvestment of all
dividends, but does not reflect the payment of transaction costs, advisory fees
or expenses that are associated with an investment in the Portfolio.
14
<PAGE>
================================================================================
JPM Equity Portfolio
================================================================================
JPM SERIES TRUST II
- --------------------------------------------------------------------------------
Advisor's Investment Review
12-month period ended December 31, 1996
Market Review: During the first half of 1996, a calming of inflation and
interest rate fears drove stock prices to new highs. The rally was fueled by a
combination of declining interest rates, expanding corporate earnings and
profitability, continued prospects for benign inflation, and record flows of
money into domestic stock funds. Volatility in the market, however, increased
dramatically.
The stock market continued its record setting pace in the second half of the
year, despite a veiled warning from Alan Greenspan, the Federal Reserve
chairman. Positive market influences included weaker economic data that
alleviated concerns about inflationary pressures, profit announcements which
exceeded expectations, and the November election results. The S&P 500 climbed
7.6% in November, its strongest one-month advance in five years, and 22.96% for
the year. The largest capitalization and defensive growth stocks that have led
the market over the past two years continued their outperformance. Traditional
value factors such as price-to-book were less effective during 1996, as growth
stocks outperformed value stocks by approximately 4%.
Portfolio Review: The Portfolio provided a total return of 21.14% for the year
ended December 31, 1996. Our approach to investing, which avoids dependence on
the strength of a few stocks or industry sectors, can underperform the broader
market when buying is heavily focused on certain subsets of the market, as in
1996. Our investment strategy involves maintaining a sector neutral approach
coupled with a continued focus on individual stock selection with an emphasis on
holding a highly diversified selection of value stocks.
During 1996, the biggest contributions to performance came from stock selection
in the services and insurance sectors. International Gaming Technology and AMBAC
were two stocks from these sectors which positively impacted performance over
the year. Stockpicking in the technology and healthcare sectors lagged during
the year. General Instrument and Humana were two examples of stocks from those
sectors that negatively impacted performance. Please refer to pages 18-20 for a
complete schedule of portfolio investments.
Outlook: The investing environment entering 1997 is remarkably similar to what
it was at the beginning of 1996. Despite some recent slowing, profit growth has
been robust, with margins at or near record levels. We believe that some of
these influences are losing momentum or coming to an end, as higher wage costs
due to the tight labor market, plus an inability to pass along cost increases to
the consumer, will generally put pressure on profit margins. Our diversified
approach and aversion to overvalued stocks and market timing should benefit the
Portfolio, as the largest blue-chip stocks that have scored impressive gains as
of late turn out of favor as breadth continues to return to the market.
15
<PAGE>
================================================================================
JPM Equity Portfolio
================================================================================
JPM SERIES TRUST II
- --------------------------------------------------------------------------------
Portfolio Composition
(The folowing table was represented as a pie chart in the printed material.)
Common Stock 98.51%
Short-Term Obligations 1.49%
================================================================================
LIST OF TOP TEN LONG-TERM HOLDINGS
================================================================================
Percent of
Total Investments
Exxon Corp. 3.01%
Philip Morris Companies, Inc. 2.69
WMX Technologies, Inc. 2.56
Tele-Communications, TCI Group, Class A 2.45
Procter & Gamble Co. 2.38
Wal-Mart Stores, Inc. 2.26
General Motors Corp. 2.00
Warner-Lambert Co. 1.92
MCI Communications Corp. 1.89
Boeing Co. 1.81
Balance - 86 Security Positions 77.03
- --------------------------------------------------------------------------------
TOTAL 100.00%
- --------------------------------------------------------------------------------
16
<PAGE>
================================================================================
JPM Equity Portfolio
================================================================================
JPM SERIES TRUST II
- --------------------------------------------------------------------------------
Portfolio Composition (continued)
================================================================================
LIST OF TOP TEN INDUSTRIES
================================================================================
Percent of
Total Investments
Consumer Products 7.33%
Financial Services 7.07
Telecommunications 6.57
Oil - Production 6.56
Retail 6.15
Pharmaceuticals 5.18
Electrical Equipment 4.51
Computer - Software 4.30
Banking 4.22
Entertainment & Leisure 4.05
- --------------------------------------------------------------------------------
TOTAL 55.94%
- --------------------------------------------------------------------------------
17
<PAGE>
================================================================================
JPM Equity Portfolio
================================================================================
JPM SERIES TRUST II
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments
================================================================================
COMMON STOCK--108.25%
================================================================================
Number Market Value
Company of Shares (Note B)
------- --------- ------------
Aerospace--2.31%
Boeing Co. 1,000 $ 106,375
Coltec Industries, Inc.+ 900 16,987
----------
123,362
----------
Automotive--2.19%
General Motors Corp. 2,100 117,075
----------
Banking--4.64%
Crestar Financial Corp. 500 37,188
First Hawaiian, Inc. 500 17,500
Fleet Financial Group, Inc. 2,100 104,738
NationsBank Corp. 900 87,975
----------
247,401
----------
Broadcasting--0.48%
TCI Satellite
Entertainment, Inc.+ 2,600 25,675
----------
Chemical--3.17%
Du Pont (E.I.) de Nemours
& Co. 800 75,500
Union Carbide Corp. 2,300 94,012
----------
169,512
----------
Computer - Peripherals--3.16%
Bay Networks, Inc.+ 1,000 20,875
International Business
Machines Corp. 600 90,600
Quantum Corp.+ 2,000 57,250
----------
168,725
----------
Computer - Software--4.72%
Autodesk, Inc. 1,000 28,000
Cisco Systems, Inc.+ 700 44,537
EMC Corp.+ 3,100 102,687
First Data Corp. 1,400 51,100
The Learning Co.+ 1,800 25,875
----------
252,199
----------
Consumer Products--8.06%
Colgate Palmolive Co. 300 27,675
Kellogg Co. 400 26,250
PepsiCo, Inc. 2,700 78,975
Philip Morris Companies, Inc. 1,400 157,675
Procter & Gamble Co. 1,300 139,750
----------
430,325
----------
Electrical Equipment--4.95%
Advanced Micro-Devices,
Inc.+ 1,600 41,200
Anixter International, Inc.+ 3,800 61,275
General Instruments Corp.+ 3,600 77,850
Grainger (W.W.), Inc. 1,000 80,250
Magnetek, Inc.+ 300 3,863
----------
264,438
----------
Electronics--2.88%
General Electric Co. 700 69,212
Intel Corp. 300 39,281
Perkin-Elmer Corp. 400 23,550
Sensormatic Electronics Corp. 1,300 21,775
----------
153,818
----------
Entertainment & Leisure--4.45%
Tele-Communications,
TCI Group, Class A+ 11,000 143,687
Time Warner, Inc. 2,500 93,750
----------
237,437
----------
Financial Services--7.77%
AMBAC, Inc. 1,000 66,375
Dean Witter Discover & Co. 1,500 99,375
First Chicago NBD Corp 1,800 96,750
First USA, Inc. 1,000 34,625
Firstar Corp. 800 42,000
Great Western Financial Corp. 400 11,600
Mercury Finance Co. 600 7,350
Salomon, Inc. 1,200 56,550
----------
414,625
----------
Food Processing--3.62%
CPC International, Inc. 700 54,250
- --------------------------------------------------------------------------------
See notes to financial statements.
18
<PAGE>
================================================================================
JPM Equity Portfolio
================================================================================
JPM SERIES TRUST II
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments
================================================================================
COMMON STOCK (CONTINUED)
================================================================================
Number Market Value
Company of Shares (Note B)
------- --------- ------------
Food Processing (continued)
Ralston Purina Group 700 $ 51,362
Unilever, NV, ADR 500 87,625
----------
193,237
----------
Funeral Services--1.05%
Service Corp. International 2,000 56,000
----------
Furniture & Appliances--0.47%
Furniture Brands, Inc.+ 1,800 25,200
----------
Health Supplies--3.84%
Bausch & Lomb, Inc. 2,700 94,500
Columbia/HCA Healthcare 1,500 61,125
Forest Laboratories, Inc.+ 1,500 49,125
----------
204,750
----------
Home Construction--1.38%
Schuller Corp. 2,800 29,750
USG Corp.+ 1,300 44,038
----------
73,788
----------
Insurance--4.40%
Humana, Inc.+ 1,500 28,688
Providian Corp. 2,000 102,750
United Healthcare Corp. 2,300 103,500
----------
234,938
----------
Manufacturing--2.88%
Allied Signal, Inc. 1,200 80,400
Cooper Industries, Inc. 1,747 73,592
----------
153,992
----------
Metal & Mining--3.66%
Allegheney Teledyne Corp. 3,295 75,785
Aluminum Company of
America 1,400 89,250
MAPCO, Inc. 900 30,600
----------
195,635
----------
Oil - Production--7.21%
Anadarko Petroleum Corp. 1,000 64,750
Cooper Cameron Corp.+ 569 43,529
Exxon Corp. 1,800 176,400
Royal Dutch Petroleum Co., ADR 300 51,225
Texaco, Inc. 500 49,063
----------
384,967
----------
Oil - Services--3.13%
Ashland, Inc. 1,300 57,037
Enron Corp 1,200 51,750
Input/Output, Inc.+ 200 3,700
Ultramar Diamond
Shamrock Corp. 1,734 54,838
----------
167,325
----------
Packaging & Containers--0.71%
Temple Inland, Inc. 700 37,888
----------
Pharmaceuticals--5.69%
Alza Corp., Class A+ 1,700 43,988
American Home Products
Corp. 1,400 82,075
Bristol Myers Squibb Co. 600 65,250
Warner-Lambert Co. 1,500 112,500
----------
303,813
----------
Pollution Control--2.81%
WMX Technologies, Inc. 4,600 150,075
----------
Retail--6.76%
Circuit City Stores, Inc. 1,900 57,237
Federated Department
Stores, Inc.+ 1,600 54,600
General Nutrition
Companies, Inc.+ 2,100 35,437
Toys "R" Us, Inc.+ 2,700 81,000
Wal-Mart Stores, Inc. 5,800 132,675
----------
360,949
----------
Telecommunications--7.22%
AT&T Corp. 1,500 65,250
- --------------------------------------------------------------------------------
See notes to financial statements.
19
<PAGE>
================================================================================
JPM Equity Portfolio
================================================================================
JPM SERIES TRUST II
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments
================================================================================
COMMON STOCK (CONTINUED)
================================================================================
Number Market Value
Company of Shares (Note B)
------- --------- ------------
Telecommunications (continued)
Bell Atlantic Corp. 900 $ 58,275
GTE Corp. 1,200 54,600
MCI Communications Corp. 3,400 111,137
Paging Network, Inc.+ 400 6,100
U.S. West, Inc. 1,900 61,275
WorldCom, Inc.+ 1,100 28,669
----------
385,306
----------
Trucking & Freight Carriers--2.03%
Consolidated Freightways
Corp.+ 900 7,988
Consolidated Freightways,Inc 1,800 40,050
Union Pacific Corp. 1,000 60,125
----------
108,163
----------
Utilities - Electric--2.61%
Dominion Resources, Inc. 700 26,950
Duke Power 1,300 60,125
Northern States Power Co. 500 22,938
Pacific Gas & Electric Co. 1,400 29,400
----------
139,413
----------
Total Common Stock
(Cost $5,026,889) $5,780,031
----------
- --------------------------------------------------------------------------------
================================================================================
SHORT-TERM OBLIGATIONS--1.64%
================================================================================
Principal Market Value
U.S. Treasury Bills Amount (Note B)
------------------- --------- ------------
4.825%, due 03/06/97 $33,000 $ 32,715
4.850%, due 03/06/97 55,000 54,524
----------
Total Short-Term Obligations
(Cost $87,236) $ 87,239
----------
- --------------------------------------------------------------------------------
================================================================================
SUMMARY OF TOTAL NET ASSETS
================================================================================
Market Value
(Note B)
------------
Total Investments
(Cost $5,114,125)* 109.89% $5,867,270
Other assets, less liabilities (9.89) (527,987)
-------- ----------
Total Net Assets 100.00% $5,339,283
======== ==========
- --------------------------------------------------------------------------------
*Aggregate cost for Federal income tax purposes.
+Non-income producing security.
See notes to financial statements.
20
<PAGE>
================================================================================
JPM Small Company Portfolio
================================================================================
JPM SERIES TRUST II
- --------------------------------------------------------------------------------
Portfolio Facts
-----------------------------------------
Inception Date
January 3, 1995
-----------------------------------------
Fund Manager
J.P. Morgan Investment Management, Inc.
-----------------------------------------
Investment Objective and Strategy
To provide a high total return from a
portfolio 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 less than
$1.0 billion.
-----------------------------------------
Net Assets as of 12/31/96
$3,867,002
-----------------------------------------
Number of Holdings
291
-----------------------------------------
Portfolio Turnover
144.44%
-----------------------------------------
=================================
- ---------------------------------
IN THIS SECTION
- ---------------------------------
Portfolio Facts
Investment Comparison
Portfolio Composition
Schedule of Portfolio Investments
=================================
21
<PAGE>
================================================================================
JPM Small Company Portfolio
================================================================================
JPM SERIES TRUST II
- --------------------------------------------------------------------------------
Investment Comparison
================================================================================
JPM Small Company Portfolio
and the Russell 2000 Index
Comparison of change in value of $10,000 investment
================================================================================
- -----------------------------------------
Average Annual Total Returns for 12/31/96
- -----------------------------------------
This Since
Quarter 1 Year Inception
Portfolio 8.47% 21.74% 27.29%
Russell 2500 5.57% 19.03% 25.17%
Russell 2000 5.20% 16.49% 22.32%
- -----------------------------------------
(The folowing table was represented as a line chart in the printed material.)
Small
Company Russell Russell
Portfolio 2500 Index 2000 Index
--------- ---------- ----------
01/31/95 $10,009 $ 9,980 $ 9,874
02/28/95 10,441 10,482 10,285
03/31/95 10,754 10,739 10,461
04/28/95 10,990 10,930 10,693
05/31/95 11,155 11,161 10,877
06/30/95 11,758 11,696 11,441
07/31/95 12,390 12,386 12,100
08/31/95 12,647 12,584 12,351
09/30/95 12,855 12,819 12,572
10/31/95 12,408 12,418 12,010
11/30/95 13,028 12,948 12,514
12/31/95 13,291 13,170 12,845
01/31/96 13,380 13,263 12,831
02/29/96 13,933 13,663 13,231
03/31/96 14,154 13,943 13,499
04/30/96 14,914 14,587 14,222
05/31/96 15,472 14,982 14,782
06/30/96 14,780 14,522 14,174
07/31/96 13,724 13,459 12,937
08/30/96 14,334 14,233 13,689
09/30/96 14,916 14,850 14,224
10/31/96 15,012 14,752 14,005
11/30/96 15,466 15,465 14,582
12/31/96 16,180 15,677 14,964
Commencement of Operations January 3, 1995. Past performance is not predictive
of future performance.
This graph compares an initial $10,000 investment made in the JPM Small Company
Portfolio at its inception with a similar investment in the Russell 2500 Index
and the Russell 2000 Index. The Russell 2000 Index more accurately represents
the market capitalization of the Portfolio's total assets. For the purpose of
this graph and the accompanying table, the average annual total return for the
Portfolio reflects all recurring expenses and includes the reinvestment of all
dividends and distributions. Total returns for periods of less than one year
have not been annualized.
Shares of the Portfolio 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.
Total returns do not reflect any separate account expenses imposed on the
policies which may include a sales charge, premium tax charge, DAC tax sales
charge, cost of insurance, mortality expenses, surrender and other charges.
The Russell 2500 Index and the Russell 2000 Index are unmanaged indexes and
include the reinvestment of all dividends, but do not reflect the payment of
transaction costs, advisory fees or expenses that are associated with an
investment in the Portfolio.
22
<PAGE>
================================================================================
JPM Small Company Portfolio
================================================================================
JPM SERIES TRUST II
- --------------------------------------------------------------------------------
Advisor's Investment Review
12-month period ended December 31, 1996
Market Review: Despite the strong sell-off in July, the small cap market posted
strong gains in the months that followed and finished 1996 at a level similar to
its peak in mid-May. Even with the strong performance of small cap stocks later
in the year, the Russell 2000 Index's return of 16.5% and the Russell 2500
Index's return of 19.03% continued to trail the 22.96% return of the S&P 500 for
the year. Small cap stocks did end the year on a positive note, however, as they
regained some ground on large cap stocks during the final days of the year. In
fact, December was the first month since August that small cap stocks
outperformed large cap stocks.
The energy, bank, savings and loan, and REIT sectors of the Russell 2000 were
the strongest sectors during the year, particularly during the fourth quarter.
Similarly, the healthcare sector was the most significant underperformer for the
year.
Portfolio Review: The Portfolio provided a total return of 21.74% for the year
ended December 31, 1996. In particular, the fourth quarter was the best quarter
of the year for the Portfolio. Stock selection was particularly strong across
mostly all economic sectors. The sectors which contributed the most to
performance were basic industry and insurance, both helped by the two largest
holdings in the Portfolio. Dekalb Genetics, had a particularly strong fourth
quarter and was the best performing security in the Portfolio during the year.
Dekalb continues to be the largest security in the Portfolio and we continue to
believe that the stock is attractive. Capital Re, the second largest holding in
the Portfolio, also contributed to outperformance over the 12 month period. The
sectors detracting from performance included media/entertainment and energy.
Please refer to pages 26-32 for a complete schedule of portfolio investments.
Outlook: The investing environment entering 1997 is remarkably similar to what
it was at the beginning of 1996. Despite some recent slowing, profit growth has
been robust, with margins at or near record levels. However, we see some
particularly strong positives for the small cap market. First, we expect
improved relative valuation of small cap stocks due to their prolonged
underperformance versus large cap stocks. Finally, the likelihood of a stable or
additional strengthening of the dollar should benefit small cap stocks relative
to large cap stocks.
23
<PAGE>
================================================================================
JPM Small Company Portfolio
================================================================================
JPM SERIES TRUST II
- --------------------------------------------------------------------------------
Portfolio Composition
(The folowing table was represented as a pie chart in the printed material.)
Common Stock 95.74%
Short-Term Obligations 4.26%
================================================================================
LIST OF TOP TEN LONG-TERM HOLDINGS
================================================================================
Percent of
Total Investments
Dekalb Genetics Corp. 3.21%
Capital Re Corp. 3.15
Commercial Metals Co. 1.83
Intermet Corp. 1.82
MMI Companies, Inc. 1.50
Roosevelt Financial Group, Inc. 1.25
Network General Corp. 1.13
Applied Power, Inc. 1.11
Central Hudson Gas & Electric Corp. 1.10
Steel Technologies, Inc. 1.08
Balance - 281 Security Positions 82.82
- --------------------------------------------------------------------------------
TOTAL 100.00%
- --------------------------------------------------------------------------------
24
<PAGE>
================================================================================
JPM Small Company Portfolio
================================================================================
JPM SERIES TRUST II
- --------------------------------------------------------------------------------
Portfolio Composition (continued)
================================================================================
LIST OF TOP TEN INDUSTRIES
================================================================================
Percent of
Total Investments
Financial Services 9.62%
Real Estate 8.02
Computer - Software 6.27
Consumer Products 4.98
Electronics 4.10
Metals & Mining 3.94
Automotive Parts & Accessories 3.51
Banking 3.43
Telecommunications 3.32
Medical Management & Services 2.98
- --------------------------------------------------------------------------------
TOTAL 50.17%
- --------------------------------------------------------------------------------
25
<PAGE>
================================================================================
JPM Small Company Portfolio
================================================================================
JPM SERIES TRUST II
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments
================================================================================
COMMON STOCK--106.12%
================================================================================
Number Market Value
Company of Shares (Note B)
------- --------- ------------
Aerospace--1.69%
Orbital Sciences Corp.+ 1,950 $ 33,638
Rohr Industries, Inc.+ 1,400 31,675
----------
65,313
----------
Airline--0.12%
Mesa Air Group, Inc.+ 700 4,725
----------
Automotive--0.50%
Lithia Motors, Inc.+ 400 4,450
Wabash National Corp. 800 14,700
----------
19,150
----------
Automotive Parts & Accessories--3.89%
Excel Industries, Inc. 2,250 37,406
Intermet Corp. 4,850 78,206
Simpson Industries, Inc. 3,200 34,850
----------
150,462
----------
Banking--3.81%
American Federal Bank, FSB 200 3,775
CCB Financial Corp. 200 13,650
Cole Taylor Financial Group 200 5,300
Colonial BancGroup, Inc. 1,100 44,000
First Hawaiian, Inc. 300 10,500
First Republic Bancorp., Inc.+ 400 6,700
FirstFed Financial Corp.+ 500 11,000
Irwin Financial Corp. 400 9,900
North Fork Bancorp, Inc. 200 7,125
Pinnacle Financial Services, Inc. 400 9,450
Security First Network Bank+ 300 3,075
Sterling Bancshares, Inc. 600 11,325
Trustco Bank Corp., NY 530 11,329
----------
147,129
----------
Biopharmaceuticals--1.42%
Human Genome Sciences, Inc.+ 700 28,525
Incyte Pharmaceuticals+ 300 15,450
Somatogen, Inc.+ 1,000 11,000
----------
54,975
----------
Broadcasting--0.50%
Digital Generation Systems+ 300 2,512
Heartland Wireless+ 500 6,562
Heritage Media Corp.+ 900 10,125
----------
19,199
----------
Building Materials--0.06%
BMC West Corp.+ 200 2,450
----------
Chemical--1.17%
Bush Boake Allen, Inc.+ 600 15,975
General Chemical Group, Inc. 600 14,175
Hexcel Corp.+ 300 4,875
Landec Corp.+ 200 1,525
OM Group, Inc. 150 4,050
Synalloy Corp. 300 4,725
----------
45,325
----------
Commercial Services--2.18%
Equity Corp. Intl.+ 550 11,000
Measurex Corp. 800 19,200
National Processing, Inc.+ 200 3,200
Pinkertons, Inc.+ 600 15,075
Robert Half International, Inc.+ 600 20,625
Steiner Leisure, Ltd.+ 500 10,063
Whittman-Hart, Inc.+ 200 5,125
----------
84,288
----------
Communication Services--0.53%
BBN Corp.+ 700 15,750
May & Speh, Inc.+ 400 4,900
----------
20,650
----------
Computer - Peripherals--0.33%
In Focus Systems, Inc.+ 400 8,650
VideoServer, Inc.+ 100 4,250
----------
12,900
----------
Computer - Software--6.95%
Acxiom Corp.+ 400 9,600
Adept Technology+ 900 6,637
Analogy, Inc.+ 500 2,250
- --------------------------------------------------------------------------------
See notes to financial statements.
26
<PAGE>
================================================================================
JPM Small Company Portfolio
================================================================================
JPM SERIES TRUST II
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments
================================================================================
COMMON STOCK (CONTINUED)
================================================================================
Number Market Value
Company of Shares (Note B)
------- --------- ------------
Computer - Software (continued)
Aspen Technologies, Inc.+ 100 $ 8,025
Avid Technology, Inc.+ 400 4,150
BA Merchant Services, Inc.+ 400 7,150
Checkfree Corp.+ 600 10,275
DST Systems, Inc.+ 400 12,550
Edify Corp.+ 700 11,200
Forte Software, Inc.+ 100 3,275
Inso Corp.+ 300 11,925
Legato Systems, Inc.+ 100 3,262
Mathsoft, Inc.+ 1,150 4,312
Metatools, Inc.+ 200 2,350
Metromail Corp.+ 400 7,300
Microware Systems Corp.+ 200 2,850
Network General Corp.+ 1,600 48,400
Oak Technology, Inc.+ 1,400 15,750
Objective Systems
Integrators, Inc.+ 600 14,325
Pinnacle Systems, Inc.+ 800 8,400
Raster Graphics, Inc.+ 500 5,938
Red Brick Systems, Inc.+ 300 6,900
Sapient Corp.+ 200 8,425
Simulation Sciences, Inc.+ 400 5,950
Transaction Systems
Architects, Inc.+ 500 16,625
Tripos,Inc.+ 1,100 12,925
Vanstar Corp.+ 300 7,350
Visigenic Software, Inc.+ 700 10,675
----------
268,774
----------
Consumer Products--5.52%
Consolidated Cigar
Holdings, Inc.+ 200 4,950
Coors, Adolph Co., Class B 500 9,500
Dekalb Genetics Corp. 2,700 137,700
Dreyers Grand Ice Cream, Inc. 400 11,600
Eskimo Pie Corp. 300 3,337
French Fragrances, Inc.+ 900 6,975
Lazare Kaplan
International, Inc.+ 400 6,850
Libbey, Inc. 800 22,300
Riviana Foods, Inc. 600 10,350
----------
213,562
----------
Education Services--1.14%
DeVry, Inc., Delaware+ 1,600 37,600
Education Management
Corp.+ 300 6,300
----------
43,900
----------
Electrical Equipment--1.52%
Bolder Technologies Corp.+ 400 6,575
Encore Wire Corp.+ 1,200 20,700
Flextronics International, Ltd.+ 100 2,775
Kuhlman Corp. 300 5,812
Micrel, Inc.+ 500 15,812
Microchip Technologies, Inc.+ 100 5,088
Silicon Valley Group, Inc.+ 100 2,012
----------
58,774
----------
Electronics--4.54%
Actel Corp.+ 1,600 38,000
Advanced Technology
Materials, Inc.+ 2,350 40,537
American Residential
Services, Inc.+ 100 2,712
ESS Technology+ 400 11,250
Gemstar International
Group, Ltd.+ 200 3,500
Input/Output, Inc.+ 600 11,100
Itron, Inc.+ 1,000 17,750
Mentor Graphics Corp.+ 88 858
Nimbus CD
International, Inc.+ 1,000 8,500
SDL, Inc.+ 1,575 41,344
----------
175,551
----------
Entertainment & Leisure--2.35%
Ascent Entertainment
Group, Inc.+ 900 14,512
IMAX Corp.+ 900 27,900
- --------------------------------------------------------------------------------
See notes to financial statements.
27
<PAGE>
================================================================================
JPM Small Company Portfolio
================================================================================
JPM SERIES TRUST II
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments
================================================================================
COMMON STOCK (CONTINUED)
================================================================================
Number Market Value
Company of Shares (Note B)
------- --------- ------------
Entertainment & Leisure (Continued)
Johnson Worldwide
Association, Inc., Class A+ 300 $ 3,975
SCP Pool Corp.+ 400 8,300
WMS Industries, Inc.+ 1,800 36,000
----------
90,687
----------
Financial Services--10.66%
Amresco, Inc.+ 300 8,025
Bank United Corp. 300 8,025
Banknorth Group, Inc. 600 24,900
Capital Re Corp. 2,900 135,212
Charter One Financial, Inc. 300 12,600
Community First
Bankshares, Inc. 255 7,012
Emergent Group, Inc.+ 200 2,100
First Alliance Corp.+ 200 6,050
GBC Bancorp 1,000 28,125
HUBCO, Inc. 1,130 27,684
Hambrecht & Quist Group+ 300 6,487
Litchfield Financial Corp. 505 7,449
National Commerce Bancorp 500 19,125
Roosevelt Financial
Group, Inc. 2,550 53,550
Southwest Securities
Group, Inc. 1,250 18,750
Trans Financial, Inc. 200 4,600
WFS Financial, Inc.+ 500 9,938
Westamerica Bancorp 400 23,100
Willis Lease Finance Corp.+ 300 3,863
Winthrop Resources Corp. 200 5,750
----------
412,345
----------
Food Processing--0.68%
Calgene, Inc.+ 500 2,500
Morningstar Group, Inc.+ 600 11,775
Sanderson Farms, Inc. 400 6,700
Savannah Foods &
Industries, Inc. 400 5,400
----------
26,375
----------
Forest Products & Paper--0.60%
Caraustar Industries, Inc. 500 16,625
Universal Forest Products, Inc. 500 6,625
----------
23,250
----------
Furniture & Appliances--0.55%
Aaron Rents, Inc. 500 5,937
Bush Industries, Inc. 800 15,400
----------
21,337
----------
Health Services--0.36%
Summit Care Corp.+ 850 13,919
----------
Home Construction--1.11%
D.R. Horton, Inc.+ 3,954 43,000
----------
Hospital Services & Supplies--0.98%
Cellpro, Inc.+ 1,100 13,750
Mariner Health Group, Inc.+ 2,400 20,100
PerSeptive Biosystems, Inc.+ 600 4,162
----------
38,012
----------
Insurance--2.80%
Chartwell Re Corp 400 10,700
MMI Companies, Inc. 2,000 64,500
RenaissanceRe Holdings, Ltd. 1,000 33,000
----------
108,200
----------
Lodging--1.28%
Candlewood Hotel Co., Inc.+ 600 5,775
Doubletree Corp.+ 300 13,500
Extended Stay America, Inc.+ 1,500 30,187
----------
49,462
----------
Machinery--2.97%
Applied Power, Inc. 1,200 47,550
Credence Systems Corp.+ 400 8,050
Greenfield Industries, Inc. 400 12,250
IDEX Corp 400 15,950
Modine Manufacturing Co. 300 8,025
- --------------------------------------------------------------------------------
See notes to financial statements.
28
<PAGE>
================================================================================
JPM Small Company Portfolio
================================================================================
JPM SERIES TRUST II
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments
================================================================================
COMMON STOCK (CONTINUED)
================================================================================
Number Market Value
Company of Shares (Note B)
------- --------- ------------
Machinery (continued)
National-Oilwell, Inc.+ 600 $ 18,450
Shaw Group, Inc.+ 200 4,674
----------
114,949
----------
Manufacturing--1.87%
ABC Rail Products Corp.+ 300 5,963
Amcast Industrial Corp. 600 14,850
Safety 1st, Inc.+ 2,250 23,063
Strategic Manufacturing, Inc.+ 1,100 8,662
W.H. Brady Co., Class A 800 19,700
----------
72,238
----------
Medical - Biotechnology--1.41%
Affymetrix, Inc.+ 200 4,037
Kensey Nash Corp. 1,000 15,000
Keravision, Inc.+ 1,450 19,938
Mycogen Corp.+ 100 2,150
Sequana Therapeutics, Inc.+ 700 11,725
Virus Research Institute, Inc.+ 300 1,725
----------
54,575
----------
Medical - Mgmt. & Services--3.30%
Applied Analytical+ 200 3,825
Arqule, Inc.+ 200 3,150
Diagnostic Health
Services, Inc.+ 500 4,000
Eclipse Surgical
Technologies, Inc.+ 400 3,500
Heartstream, Inc.+ 600 7,500
Kapson Senior Quarters Corp.+ 600 4,800
Lifeline Systems, Inc.+ 300 5,250
Medi-Ject Corp.+ 1,100 3,987
Paracelsus Healthcare Corp.+ 500 1,813
Physio-Control
International Corp.+ 300 6,750
Research Medical, Inc.+ 800 18,400
Sunrise Assisted Living, Inc.+ 200 5,575
Sierra Health Services, Inc.+ 1,000 24,625
Sola International, Inc.+ 300 11,400
Sterling House Corp.+ 600 5,250
Transkaryotic Therapies, Inc.+ 100 1,850
Ventana Medical Systems+ 1,100 15,950
----------
127,625
----------
Metals & Mining--4.37%
Commercial Metals Co. 2,600 78,325
Mueller Industries, Inc.+ 400 15,400
Oregon Steel Mills, Inc. 500 8,375
Schnitzer Steel Industries,
Inc., Class A 800 20,500
Steel Technologies, Inc. 3,500 46,375
----------
168,975
----------
Office Products--0.96%
American Pad & Paper Co.+ 1,500 33,938
Nu-Kote Holdings, Inc.+ 300 3,075
----------
37,013
----------
Oil - Production--2.42%
Devon Energy Corp. 500 17,375
Flores & Rucks, Inc.+ 500 26,625
Monterey Resources, Inc.+ 500 8,063
Newfield Exploration Co.+ 600 15,600
Texas Meridian Resources
Corp.+ 400 6,850
Vastar Resources, Inc. 500 19,000
----------
93,513
----------
Oil - Services--1.18%
Camco International, Inc. 300 13,838
Dreco Energy Services, Ltd.+ 500 18,313
Smith International, Inc.+ 300 13,462
----------
45,613
----------
Pharmaceuticals--1.50%
Agouron
Pharmaceuticals, Inc.+ 100 6,775
Houghton
Pharmaceuticals, Inc.+ 700 3,675
- --------------------------------------------------------------------------------
See notes to financial statements.
29
<PAGE>
================================================================================
JPM Small Company Portfolio
================================================================================
JPM SERIES TRUST II
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments
================================================================================
COMMON STOCK (CONTINUED)
================================================================================
Number Market Value
Company of Shares (Note B)
------- --------- ------------
Pharmaceuticals (continued)
IDEC Pharmaceuticals
Corp.+ 300 $ 7,125
Onyx Pharmaceuticals, Inc.+ 300 3,338
Sangstat Medical Corp.+ 700 18,550
Vertex Pharmaceuticals, Inc.+ 300 12,075
Vical, Inc.+ 400 6,600
----------
58,138
----------
Pollution Control-2.32%
American Disposal
Services, Inc.+ 1,000 18,500
Culligan Water Technology+ 300 12,150
Dames & Moore, Inc. 1,850 27,056
Sevenson Environmental
Services, Inc. 500 9,125
Tetra Technologies+ 900 22,725
----------
89,556
----------
Publishing & Printing--1.60%
Banta Corp. 500 11,438
Consolidated Graphics, Inc.+ 600 33,600
K-III Communications Corp.+ 700 7,525
Norwood Promotional
Products, Inc.+ 500 9,125
----------
61,688
----------
Railroad--0.45%
Genesee & Wyoming,Inc.+ 500 17,375
----------
Real Estate--8.89%
Arden Realty Group, Inc. 400 11,100
Bay Apartment
Communities, Inc. 500 18,000
Brandywine Realty Trust 200 3,900
Cali Realty Corp. 600 18,525
Capstone Capital Trust, Inc. 1,000 22,375
Chelsea GCA Realty,Inc 700 24,238
Colonial Properties 900 27,338
Columbus Realty Trust 1,100 25,025
Developer Diversified
Realty Corp. 1,000 37,125
Gables Residential Trust 800 23,200
Healthcare Realty 600 15,900
Highwood Properties, Inc. 600 20,250
Liberty Property Trust 500 12,875
Oasis Residential, Inc. 800 18,200
Patriot American
Hospitality, Inc. 300 12,937
Price Reits, Inc. 300 11,550
Public Storage, Inc. 400 12,400
Starwood Lodging, Inc. 400 22,050
Weeks Corp. 200 6,650
----------
343,638
----------
Restaurants--0.89%
Landry's Seafood
Restaurants, Inc.+ 800 17,100
Papa John's
International, Inc.+ 450 15,188
Planet Hollywood
International, Inc.+ 100 1,975
----------
34,263
----------
Retail Stores--3.01%
Books-a-Million, Inc.+ 800 5,500
Catherine Stores Corp.+ 1,400 7,700
Charming Shoppes, Inc.+ 2,100 10,631
dELia*s, Inc.+ 100 1,988
Dominick's Supermarkets, Inc.+ 300 6,525
Duckwall-Alco Stores, Inc.+ 200 2,850
Garden Ridge Corp.+ 2,300 19,838
Linens' N Things, Inc.+ 500 9,812
Loehmann's Holdings, Inc.+ 400 9,200
One Price Clothing
Stores, Inc.+ 1,300 3,737
Pacific Sunwear of California+ 100 2,575
Party City Corp.+ 600 10,200
Penn Traffic Co.+ 1,550 5,619
Stage Sores, Inc.+ 400 7,300
Urban Outfitters+ 1,000 13,000
----------
116,475
----------
- --------------------------------------------------------------------------------
See notes to financial statements.
30
<PAGE>
================================================================================
JPM Small Company Portfolio
================================================================================
JPM SERIES TRUST II
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments
================================================================================
COMMON STOCK (CONTINUED)
================================================================================
Number Market Value
Company of Shares (Note B)
------- --------- ------------
Telecommunications--3.68%
DSP Communications+ 100 $ 1,938
Digital Microwave
Corp.+ 1,300 36,238
ICG Communications, Inc.+ 400 7,050
Omnipoint Corp.+ 600 11,550
P-Com, Inc.+ 500 14,813
Paging Network, Inc.+ 2,350 35,838
Premiere Technologies, Inc.+ 1,000 25,000
Proxim, Inc.+ 400 9,200
Wireless One, Inc.+ 100 663
----------
142,290
----------
Textiles & Shoes--0.60%
Ashworth, Inc.+ 400 2,300
Collins & Aikman+ 1,300 8,125
Wolverine World Wide Inc. 350 10,150
Worldtex, Inc.+ 300 2,663
----------
23,238
----------
Transportation--0.29%
Allied Holdings, Inc.+ 200 1,600
Trico Marine Services, Inc.+ 200 9,600
----------
11,200
----------
Trucking & Leasing--1.63
American Freightways Corp.+ 1,250 13,906
Caliber System, Inc. 300 5,775
Rollins Truck Leasing 1,750 22,094
USA Truck, Inc.+ 400 3,200
Werner Enterprises, Inc. 1,000 18,125
----------
63,100
----------
Utilities - Electric--2.42%
Black Hills Corp. 200 5,625
Calpine Corp.+ 300 6,000
Central Hudson Gas &
Electric Corp. 1,500 47,063
Central Louisiana Electric, Inc. 1,100 30,388
St. Joseph Light & Power Co. 300 4,612
----------
93,688
----------
Utilities - Gas--1.49%
New Jersey Resources Corp. 200 5,850
Providence Energy Corp. 800 14,000
United Cities Gas Co. 1,200 27,000
Wicor, Inc. 300 10,763
----------
57,613
----------
Utilities - Oil--0.51%
K N Energy,Inc 500 19,625
----------
Utilities - Water & Sewer--1.12%
Aquarion Co. 200 5,575
E'Town Corp. 500 15,812
SJW Corp. 100 4,687
Southern California Water Co. 800 17,400
----------
43,474
----------
Total Common Stock
(Cost $3,746,053) $4,103,576
----------
- --------------------------------------------------------------------------------
See notes to financial statements.
31
<PAGE>
================================================================================
JPM Small Company Portfolio
================================================================================
JPM SERIES TRUST II
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments
================================================================================
SHORT-TERM OBLIGATIONS--4.72%
================================================================================
Principal Market Value
U.S. Treasury Bills Amount (Note B)
------------------- --------- ------------
4.670%, due 01/23/97 $ 16,000 $ 15,954
4.845%, due 01/23/97 24,000 23,929
4.820%, due 03/06/97 15,000 14,871
4.850%, due 03/06/97 61,000 60,473
4.890%, due 03/06/97 18,000 17,844
4.910%, due 03/06/97 20,000 19,827
5.000%, due 03/06/97 30,000 29,741
----------
Total Short-Term Obligations
(Cost $182,631) $ 182,639
----------
- --------------------------------------------------------------------------------
================================================================================
SUMMARY OF TOTAL NET ASSETS
================================================================================
Market Value
(Note B)
------------
Total Investments
(Cost $3,928,684)* 110.84% $4,286,215
Other assets, less liabilities (10.84) (419,213)
------ ----------
Total Net Assets 100.00% $3,867,002
====== ==========
- --------------------------------------------------------------------------------
*Aggregate cost for Federal income tax purposes.
+Non-income producing security.
See notes to financial statements.
32
<PAGE>
================================================================================
JPM International Equity Portfolio
================================================================================
JPM SERIES TRUST II
- --------------------------------------------------------------------------------
Portfolio Facts
---------------------------------------------
Inception Date
January 3, 1995
---------------------------------------------
Fund Manager
J.P. Morgan Investment Management, Inc.
---------------------------------------------
Investment Objective and Strategy
To provide a high total return from a
portfolio of equity securities of
foreign corporations.
The Portfolio seeks to achieve its investment
objective through country allocation and
stock valuation and selection.
---------------------------------------------
Net Assets as of 12/31/96
$6,249,926
---------------------------------------------
Number of Holdings
256
---------------------------------------------
Portfolio Turnover
71.24%
---------------------------------------------
=================================
- ---------------------------------
IN THIS SECTION
- ---------------------------------
Portfolio Facts
Investment Comparison
Portfolio Composition
Schedule of Portfolio Investments
=================================
33
<PAGE>
================================================================================
JPM International Equity Portfolio
================================================================================
JPM SERIES TRUST II
- --------------------------------------------------------------------------------
Investment Comparison
================================================================================
JPM International Equity Portfolio
and the MSCI EAFE Index
Comparison of change in value of $10,000 investment
================================================================================
(The folowing table was represented as a line chart in the printed material.)
International Modified MSCI
Equity MSCI EAFE EAFE
Portfolio Index Index
--------- ---------- ----------
01/31/95 $ 9,847 $ 9,616 $ 9,616
02/28/95 9,637 9,588 9,588
03/31/95 10,155 10,186 10,186
04/28/95 10,426 10,569 10,569
05/31/95 10,320 10,631 10,444
06/30/95 10,229 10,540 10,261
07/31/95 10,910 11,145 10,900
08/31/95 10,579 10,725 10,464
09/30/95 10,749 10,970 10,688
10/31/95 10,595 10,759 10,401
11/30/95 10,805 10,979 10,690
12/31/95 11,238 11,391 11,121
01/31/96 11,383 11,495 11,166
02/28/96 11,443 11,597 11,204
03/31/96 11,598 11,807 11,442
04/30/96 11,865 12,068 11,775
05/31/96 11,849 11,955 11,558
06/30/96 11,999 12,026 11,623
07/31/96 11,630 11,720 11,283
08/30/96 11,746 11,871 11,308
09/30/96 12,057 12,168 11,609
10/31/96 12,158 12,277 11,491
11/30/96 12,653 12,805 11,948
12/31/96 12,713 12,740 11,794
- -------------------------------------------------
Average Annual Total Returns for 12/31/96
- -------------------------------------------------
This Since
Quarter 1 Year Inception
Portfolio 5.44% 13.12% 12.79%
Modified MSCI EAFE 3.87% 10.94% 12.85%
MSCI EAFE 1.67% 6.36% 8.93%
- -------------------------------------------------
Commencement of Operations January 3, 1995. Past performance is not predictive
of future performance.
This graph compares an initial $10,000 investment made in the JPM International
Equity Portfolio at its inception with a similar investment in the Modified MSCI
EAFE Index and the MSCI EAFE Index. The Modified MSCI EAFE Index reflects actual
portfolio composition for the period. For the purpose of this graph and the
accompanying table, the total return for the Portfolio reflects all recurring
expenses and includes the reinvestment of all dividends and distributions. Total
returns for periods of less than one year have not been annualized.
Shares of the Portfolio 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.
Total returns do not reflect any separate account expenses imposed on the
policies which may include a sales charge, premium tax charge, DAC tax sales
charge, cost of insurance, mortality expenses, surrender and other charges.
The Modified MSCI EAFE Index and the MSCI EAFE Index are unmanaged indexes and
include the reinvestment of all dividends, but do not reflect the payment of
transaction costs, advisory fees or expenses that are associated with an
investment in the Portfolio.
34
<PAGE>
================================================================================
JPM International Equity Portfolio
================================================================================
JPM SERIES TRUST II
- --------------------------------------------------------------------------------
Advisor's Investment Review
12-month period ended December 31, 1996
Market Review: In 1996, the performance of international equity markets
continued to be overshadowed by the impressive returns of the U.S. stock market.
While the S&P 500 Index was up 22.96%, international returns as measured by the
Modified MSCI EAFE Index and the MSCI EAFE Index were up 10.94% and 6.36%,
respectively, in local currency terms.
Returns in many European markets were ahead of the U.S. market. The strongest
European markets in 1996 were Spain, Finland, Sweden and the Netherlands. The
50% advance in Spain was driven mostly by lowered interest rates and increased
liquidity flows in the equity markets by private investors moving away from less
attractive money market funds. The strength of Finland's equity market, which
rose over 40%, was primarily due to one stock. Nokia, which makes up 43% of the
Finnish market, was up almost 50% for the year. The Dutch equity market rose
over 37% in 1996, though performance near the end of the year was mixed. The
fourth quarter started off with a series of profit warnings, but was then
boosted by strong results in the financial sector, in particular ABN Amro's
decision to buy Standard Federal Bank in the U.S. Finally, the weakest market in
Europe was Italy which rose only 7.9% over the year.
The Japanese equity market continued its downward trend, ending 1996 with a loss
of nearly 8.0%. Although driven by aggressive buying into international blue
chips such as Honda Motor by a handful of large U.S. investors in November, the
market evidently remained unexcited about the general election of Japan's Diet
in October. Hong Kong, the top performing market in the Pacific Rim, returned
over 33% during 1996, driven by lower U.S. rates, a continuing economic recovery
and a strengthening property market. Please refer to pages 38-43 for a complete
schedule of portfolio investments.
Portfolio Review: The Portfolio provided a total return of 13.12% for the year
ended December 31, 1996, significantly outperforming the broad market index. The
Portfolio seeks to diversify its sources of value-added from independent country
allocation, stock selection, and currency allocation decisions. All three
investment decisions added to outperformance during 1996. Country allocations
within Europe, particularly our decisions to overweight the strong Spanish,
French, German, and Norwegian markets, contributed positively to performance.
However, underweighting the strong markets of Sweden, Switzerland, the
Netherlands and Malaysia offset some of these gains. Our stock selection
decisions within markets, which have consistently been the most reliable source
of excess return, added the greatest value during 1996. Within the Pacific Rim,
stock picking in Japan, Hong Kong, Australia and Singapore was particularly
strong. Within Europe, stock picking in Germany, Italy, and Switzerland
contributed to performance. Finally, our currency decisions to continue to hedge
a portion of our Japanese Yen exposure into the U.S. Dollar and to take
advantage of the strong Sterling appreciation during the fourth quarter were
both positive moves for the Portfolio.
Outlook: In an environment of continued low interest rates and a positive
earnings cycle in both Continental Europe and Japan, there exists potential for
reasonable equity terms close to the long-term average. Although markets would
inevitably be hurt by a sudden fall in U.S. stock prices, we believe that,
fundamentally, European valuations are more reasonable, and we expect that these
markets may outperform the U.S. in 1997.
As valuations in the major markets within Europe are now close to fair value, we
are looking to reduce our overweighted positions slightly in France and Germany.
For the near term, we believe that there is still positive earnings momentum in
these markets. Our strategy also favors the smaller markets of Spain, Belgium
and Ireland, where valuations are more compelling.
In the Pacific Rim, we remain neutral on Japanese stocks. Although valuations
are improving, oversupply and sagging investor confidence is still weighing on
the market. We will continue to favor New Zealand and Australian stocks, while
holding relatively neutral positions in Singapore and Hong Kong and
underweighted positions in Malaysia.
35
<PAGE>
================================================================================
JPM International Equity Portfolio
================================================================================
JPM SERIES TRUST II
- --------------------------------------------------------------------------------
Portfolio Composition
(The folowing table was represented as a pie chart in the printed material.)
Australia 3.74%
Switerland 3.00%
Other Countries 11.41%
Japan 19.71%
United Kingdom 19.42%
Germany 13.25%
France 11.70%
Netherlands 4.66%
Hong Kong 4.47%
Italy 4.47%
Spain 4.17%
================================================================================
LIST OF TOP TEN COUNTRIES
================================================================================
Percent of
Total Investments
Japan 19.71%
United Kingdom 19.42
Germany 13.25
France 11.70
Netherlands 4.66
Hong Kong 4.47
Italy 4.47
Spain 4.17
Australia 3.74
Switzerland 3.00
- --------------------------------------------------------------------------------
TOTAL 88.59%
- --------------------------------------------------------------------------------
36
<PAGE>
================================================================================
JPM International Equity Portfolio
================================================================================
JPM SERIES TRUST II
- --------------------------------------------------------------------------------
Portfolio Composition (continued)
================================================================================
LIST OF TOP TEN INDUSTRIES
================================================================================
Percent of
Total Investments
Banking 9.68%
Utilities 7.35
Chemicals & Plastics 6.81
Oil & Gas-Integrated 5.63
Insurance 5.42
Automobiles, Trucks & Parts 5.23
Financial Services 5.10
Telecommunications 4.93
Publishing & Printing 4.18
Pharmaceuticals 4.03
- --------------------------------------------------------------------------------
TOTAL 58.58%
- --------------------------------------------------------------------------------
================================================================================
LIST OF TOP TEN LONG-TERM HOLDINGS
================================================================================
Percent of
Total Investments
BASF, A.G. 1.84%
Volkswagen, A.G., Pfd. 1.63
Royal Dutch Petroleum Co. 1.60
Veba, A.G. 1.54
British Petroleum, PLC 1.34
Toyota Motor Co., Ltd. 1.33
Novartix, A.G. 1.18
Munchener Ruckversicherungs 1.16
Broken Hill Properties Co., Ltd. 1.02
Glaxo Wellcome, PLC 1.01
Balance - 246 Security Positions 86.35
- --------------------------------------------------------------------------------
TOTAL 100.00%
- --------------------------------------------------------------------------------
37
<PAGE>
================================================================================
JPM International Equity Portfolio
================================================================================
JPM SERIES TRUST II
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments
================================================================================
COMMON STOCK--99.75%
================================================================================
Number Market Value
Company of Shares (Note B)
------- --------- ------------
Australia--3.48%
Broken Hill Properties
Co., Ltd. 4,640 $ 66,044
C.S.R., Ltd. 6,800 23,765
National Australia
Bank, Ltd. 4,300 50,548
News Corporation, Ltd. 3,000 15,822
Southcorp Holdings, Ltd. 7,600 24,146
WMC, Ltd. 5,900 37,162
----------
217,487
----------
Belgium--2.46%
Arbed, NPV 100 10,861
Electrabel, NPV 188 44,448
Fortis, A.G 190 30,446
Generale de Banque, NPV 43 15,398
Petrofina, S.A 70 22,258
Solvay, S.A 50 30,577
----------
153,988
----------
Finland--1.50%
Kemira, OY, ADR 500 12,584
Metra, OY 200 11,195
Nokia, OY, AB, Class A 700 40,520
Outokumpu, OY 500 8,516
Rautaruukki, OY 900 8,299
UPM - Kymmene, OY+ 600 12,562
----------
93,676
----------
France--12.08%
Air Liquide (L') 127 19,788
Alcatel Alsthom 150 12,026
Bouygues 188 19,456
Canal Plus 50 11,022
Carrefour 37 24,028
Christian Dior, S.A 190 30,590
Cie Generale des Eaux 350 43,290
Credit Commercial de France 430 19,851
Credit Local de France 360 31,300
Elf Aquitane 614 55,782
Eridania Beghin-Say, S.A 120 19,274
Groupe Danone 292 40,609
Lagardere Groupe 600 16,435
Montupet 170 16,350
Pathe, Inc.+ 50 12,022
Peugot, S.A 150 16,850
Pinault Printemps Redoute 50 19,793
Promodes 170 47,906
Rexel 100 30,296
Rhone-Poulenc, S.A., Class A 710 24,160
Saint Gobain 140 19,766
Sanofi 375 37,221
Schneider, S.A 200 9,229
Sidel 280 19,228
Societe Generale 211 22,769
Synthelabo 380 41,006
Television Francaise 130 12,403
Total, S.A., Class B 373 30,278
Union Assurance Federal 270 33,239
Usinor Sacilor 1,310 19,025
----------
754,992
----------
Germany--10.80%
AVA Allegemeine Handels
der Verbraucher, A.G.+ 70 20,031
Allianz, A.G. Holding 28 50,328
BASF, A.G 3,100 118,681
Bayerische Hypotheken-und
Wechsel Bank, A.G 1,190 35,829
Bilfinger and Berger, A.G 450 16,702
Deutsche Pfandbrief &
Hypothekenbank, A.G 500 22,516
Douglas Holding, A.G 350 14,081
Dresdner Bank, A.G 2,060 61,489
Fried Krupp, A.G 250 40,637
Henkel+ 750 35,794
Munchener
Ruckversicherungs 31 75,131
S.A.P., A.G 150 20,489
Seimens, A.G 1,380 63,954
Veba, A.G 1,730 99,348
----------
675,010
----------
- --------------------------------------------------------------------------------
See notes to financial statements.
38
<PAGE>
================================================================================
JPM International Equity Portfolio
================================================================================
JPM SERIES TRUST II
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments
================================================================================
COMMON STOCK (CONTINUED)
================================================================================
Number Market Value
Company of Shares (Note B)
------- --------- ------------
Hong Kong--4.62%
Bank of East Asia,Ltd 4,200 $ 18,679
Cheung Kong Holdings, Ltd. 5,000 44,441
HSBC Holdings, PLC 800 17,117
Henderson Land
Development Co., Ltd. 5,000 50,421
Hong Kong
Telecommunications, Ltd. 10,800 17,384
Hong Kong Electric
Holdings, Ltd. 6,000 19,936
Hutchinson Whampoa, Ltd. 6,000 47,124
Sun Hung Kai
Properties, Ltd. 1,000 12,250
Swire Pacific, Ltd., Class A 3,500 33,371
Television Broadcast, Ltd. 7,000 27,964
----------
288,687
----------
Ireland--1.57%
Bank of Ireland 3,200 28,978
CRH, PLC 1,200 12,390
Greencore Goup, PLC 2,400 15,233
Irish Life, PLC 4,000 18,551
Jefferson Smurfit
Group, PLC 7,700 22,678
----------
97,830
----------
Italy--4.56%
Assicurasioni Generali, SPA 2,300 43,489
Arnoldo Mondadori
Editore, SPA 2,400 19,494
Ente Nazionale
Ibrocarburi, SPA (ENI) 11,300 57,856
Fiat, SPA 8,500 25,659
Instituto Mobiliare Italiano 3,300 28,214
Montedison, SPA 29,700 20,197
Parmalat Finanziaria, SPA 12,600 19,225
Stet Societa' Finanziara
Telefonica, SPA 7,400 24,942
Telecom Italia, SPA 17,800 46,124
----------
285,200
----------
Japan--20.14%
Asahi Bank, Ltd. 3,000 26,622
Asatsu, Inc. 200 6,341
Cosmo Oil Co., Ltd. 3,000 14,396
Daiichi Pharmaceutical Co.+ 1,000 16,025
Dai-Ichi Kangyo Bank, Ltd. 1,000 14,388
Daiwa Bank 5,000 35,035
Daiwa Securities Co. 1,000 8,874
East Japan Railway Co. 9 40,398
Ebari Corp. 2,000 26,019
Family Mart 300 11,967
Fuji Fire & Marine Industries 2,000 7,461
Fujitsu, Ltd. 2,000 18,609
Fukui Bank 2,000 8,702
Gakken Co., Ltd. 2,000 11,286
Gunze, Ltd. 2,000 10,356
Hitachi, Ltd. 6,000 55,828
Hokkaido Takushoku Bank 3,000 5,815
Hokuriku Bank 2,000 9,787
Iyo Bank 2,000 13,096
Japan Tobacco, Inc. 3 20,289
Matsushita Electric
Industrial Co., Ltd. 2,000 32,567
Mitsubishi Electric Corp. 3,000 17,834
Mitsubishi Heavy
Industries, Ltd. 4,000 31,705
Mitsui Mining and
Smelting Co. 5,000 17,016
Mitsui Petrochemical Industries 2,000 10,339
Mitsui Toatsu Chemicals, Inc. 9,000 27,371
Mizuno Corp. 3,000 22,693
Nippon Hodo Co. 1,000 11,545
Nippon Sheet Glass Co. 2,000 7,082
Nippon Steel Corp. 12,000 35,358
Nishimatsu
Construction Co., Ltd. 2,000 17,403
Nissan Diesel Motor Co. 1,000 4,575
Nissan Motor, Ltd. 4,000 23,158
Nissei Sangyo Co., Ltd. 2,000 23,434
Nomura Securities Corp., Ltd. 2,000 29,982
OJI Paper Co., Ltd. 1,666 10,521
Ricoh Co. 2,000 22,917
- --------------------------------------------------------------------------------
See notes to financial statements.
39
<PAGE>
================================================================================
JPM International Equity Portfolio
================================================================================
JPM SERIES TRUST II
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments
================================================================================
COMMON STOCK (CONTINUED)
================================================================================
Number Market Value
Company of Shares (Note B)
------- --------- ------------
Japan (continued)
Sanwa Bank 2,000 $ 27,225
Sakura Bank, Ltd. 5,000 35,668
Sanden Corp. 1,000 7,995
Sekisui Chemical Co. 2,000 20,160
Sony Corp. 500 32,696
Sumitomo Forestry Co. 2,000 24,296
Sumitomo Realty and
Development 3,000 18,868
Takashimaya Co., Ltd. 2,000 23,951
The Bank of Tokyo-
Mitsubishi 2,000 37,047
Toho Gas Co., Ltd. 2,000 5,255
Tohoku Electric Power
Co., Inc. 900 17,834
Tokai Bank 1,000 10,425
Tokio Marine & Fire
Insurance Co. 1,000 9,391
Tokyo Electric Power Co. 600 13,130
Tokyo Gas Co., Ltd. 2,000 5,411
Toyo Construction Co. 3,000 9,150
Toyo Trust and
Banking Co., Ltd. 4,000 32,222
Toyota Motor Co., Ltd. 3,000 86,069
Tsubakimoto Chain 2,000 10,683
UBE Industries, Ltd. 5,000 14,129
UNYCo., Ltd. 1,000 18,265
Yamaha Motor Co., Ltd. 1,000 8,960
Yamanouchi
Pharmaceutical Co., Ltd. 1,000 20,505
Yamato Transport Co., Ltd. 2,000 20,677
Yamazaki Baking Co., Ltd. 1,000 15,939
Yokohama Rubber Co., Ltd. 3,000 13,931
Yuasa Trading Co. 3,000 12,148
----------
1,258,824
----------
Malaysia--2.16%
Commerce Asset-Holdings
Berhad 3,000 22,570
IOI Corp. Berhad 8,000 12,291
New Straits Times Press
Berhad 5,000 28,905
Sime Darby Berhad 12,000 47,278
Tenega Nasional Berhad 5,000 23,956
----------
135,000
----------
Netherlands--4.82%
Aegon, NV 610 38,828
Dutch State Mines, NV 225 22,166
Internationale Nederlanden
Groep, NV 575 20,677
Koninklijke PTTNederland, NV 550 20,955
Philips Electronics, N.V 510 20,639
Polygram, N.V 360 18,315
Royal Dutch Petroleum Co. 590 103,319
Unilever, NV, CVA 190 33,569
Wolters Kluwer, N.V 170 22,556
----------
301,024
----------
New Zealand--1.32%
Fletcher Challenge, Ltd. 15,100 31,047
Lion Nathan, Ltd. 9,900 23,713
Telecom Corp. of
New Zealand, Ltd. 5,400 27,548
----------
82,308
----------
Norway--1.79%
Kvaerner, A.S., Class B 500 21,690
Norsk Hydro, A.S 1,000 54,030
Nycomed, A.S., Class B+ 400 6,139
Orkla, A.S., Class B 290 18,394
Storebrand, A.S., Class A+ 2,000 11,589
----------
111,842
----------
Singapore--0.99%
Development Bank of
Singapore 1,000 13,512
Keppel Corp., Ltd. 1,000 7,792
Singapore Airlines, Ltd. 1,000 9,079
Singapore Press
Holdings, Ltd. 1,000 19,731
- --------------------------------------------------------------------------------
See notes to financial statements.
40
<PAGE>
================================================================================
JPM International Equity Portfolio
================================================================================
JPM SERIES TRUST II
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments
================================================================================
COMMON STOCK (CONTINUED)
================================================================================
Number Market Value
Company of Shares (Note B)
------- --------- ------------
Singapore (continued)
Singapore
Telecommunications, Ltd. 5,000 $ 11,796
----------
61,910
----------
Spain--4.30%
Autopistas Concesionaria
Espanola, S.A 400 5,505
Banco Bilbao Vizcaya, S.A 250 13,473
Banco Popular Espanol, S.A 140 27,446
Bankinter 240 37,142
Cortefiel, S.A 300 8,995
Cubiertas y Mzov, S.A 100 7,688
Expresa Nacional de
Electridad, S.A 300 21,311
Fuerzas Electridad de
Cataluna, S.A., Class A 1,151 11,326
Hidroelectrica del
Cantabrico, S.A 300 11,428
Iberdrola, S.A 3,400 48,095
Repsol, S.A 950 36,371
Repsol, ADR 200 7,625
Telefonica De Espana, S.A 1,400 32,451
----------
268,856
----------
Switzerland--3.10%
Fischer George, A.G 11 11,388
Nestle, S.A 28 29,966
Novartix, A.G 67 76,183
Roche Holdings
Genusscheine, NPV 3 23,270
Schweizerische
Ruckversicherungs
Geselleschaft 15 15,964
Schweizerischer Bankverein 195 36,961
----------
193,732
----------
United Kingdom--20.06%
Abbey National, PLC 2,000 26,151
Allied Colloids Group, PLC 5,000 10,311
Allied Domecq, PLC 3,700 29,002
Amersham Int'l., PLC 500 9,841
B.A.T. Industries, PLC 4,400 36,485
BOC Group, PLC 700 10,465
BTR, PLC 3,000 14,582
British Aerospace, PLC 700 15,311
British Airways, PLC 2,650 27,507
British Petroleum, PLC 7,207 86,403
British Telecommunications,
PLC 5,650 38,147
Cadbury Schweppes, PLC 2,000 16,858
Dalgety, PLC 2,800 17,395
EMI, PLC 600 14,171
General Cable, PLC+ 1,700 5,644
General Electric, PLC 1,700 11,114
Glaxo Wellcome, PLC 4,000 64,898
Glynwed International, PLC 3,000 17,200
Guardian Royal
Exchange, PLC 6,900 33,006
Guinness, PLC 1,800 14,094
HSBC Holdings, PLC 2,300 51,409
Hillsdown Holding, PLC 7,500 25,672
Hyder, PLC 1,600 20,428
J. Sainsbury, PLC 5,100 33,866
Kingfisher, PLC 2,600 28,100
Ladbroke Group, PLC 8,300 32,956
Lloyds Bank, PLC 6,680 49,274
Lucas Variety, PLC+ 4,600 17,517
MEPC, PLC 2,800 20,750
Marks & Spencer, PLC 350 2,941
National Grid Group, PLC 6,800 22,694
National Power, PLC 2,950 24,689
Pilkington, PLC 5,800 15,684
Prudential Corp., PLC 3,100 26,103
R.M.C. Group, PLC 500 8,557
RTZ Corp., PLC 950 15,226
Racal Electronics, PLC 3,700 16,211
Rank Group, PLC 3,950 29,441
Reuter's Holding, PLC 1,950 25,080
Rolls Royce, PLC 5,000 22,035
Royal Bank of Scotland, PLC 3,600 34,718
Scottish Power, PLC 4,000 24,029
Sears, PLC 17,000 27,640
- --------------------------------------------------------------------------------
See notes to financial statements.
41
<PAGE>
================================================================================
JPM International Equity Portfolio
================================================================================
JPM SERIES TRUST II
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments
================================================================================
COMMON STOCK (CONTINUED)
================================================================================
Number Market Value
Company of Shares (Note B)
------- --------- ------------
United Kingdom (continued)
Smithkline Beecham 2,164 $ 29,925
Standard Chartered, PLC 1,500 18,458
Tarmac, PLC 12,000 20,127
Tesco, PLC 3,700 22,417
Tomkins, PLC 4,800 22,057
Vodafone Group, PLC 7,100 30,014
Zeneca Group, PLC 1,320 37,219
----------
1,253,822
Total Common Stock
(Cost $5,718,791) $6,234,188
----------
- --------------------------------------------------------------------------------
================================================================================
PREFERRED STOCK--3.27%
================================================================================
Number Market Value
Company of Shares (Note B)
------- --------- ------------
Australia--0.38%
News Corp., Ltd. 5,400 $ 24,019
----------
Germany--2.89%
M.A.N., A.G 185 37,190
RWE, A.G 1,140 38,096
Volkswagen, A.G 330 105,139
----------
180,425
----------
Total Preferred Stock
(Cost $186,838) $ 204,444
----------
- --------------------------------------------------------------------------------
================================================================================
RIGHTS AND WARRANTS--0.02%
================================================================================
Number Market Value
Company of Shares (Note B)
------- --------- ------------
Japan--0.02%
Dowa Mining Co., exp. 1997 2 $ 763
----------
Singapore--0.00%
United Overseas Land,
exp. 2001 300 181
----------
Switzerland--0.00%
Canon Sales Co., Inc.,
exp. 1997 2 185
----------
United Kingdom--0.00%
Allied Colloids Group,
exp. 1997 1,428 61
----------
Total Rights and Warrants
(Cost $3,005) $ 1,190
----------
- --------------------------------------------------------------------------------
================================================================================
CORPORATE BONDS--0.20%
================================================================================
Principal Market Value
Company Amount (Note B)
------- --------- ------------
Japan--0.20%
NEC Corp.,
Conv, 1.900%,
due 03/30/01 JPY 1,000,000 $ 12,492
----------
Total Corporate Bonds
(Cost $11,203) $ 12,492
----------
- --------------------------------------------------------------------------------
See notes to financial statements.
42
<PAGE>
================================================================================
JPM International Equity Portfolio
================================================================================
JPM SERIES TRUST II
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments
================================================================================
GOVERNMENT BONDS--0.05%
================================================================================
Principal Market Value
Amount (Note B)
--------- ------------
Italy--0.05%
Republic of Italy,
Conv, 6.500%,
due 06/28/01 ITL 5,000,000 $ 3,272
----------
Total Government Bonds
(Cost $3,249) $ 3,272
----------
- --------------------------------------------------------------------------------
================================================================================
SUMMARY OF TOTAL NET ASSETS
================================================================================
Market Value
(Note B)
------------
Total Investments
(Cost $5,923,086)* 103.29% $6,455,586
Other assets, less liabilities (3.29) (205,660)
----------
Total Net Assets 100.00% $6,249,926
==========
- --------------------------------------------------------------------------------
*Aggregate cost for Federal income tax purposes.
+Non-income producing security.
================================================================================
INDUSTRY DIVERSIFICATION
================================================================================
Percent of
Total Investments
Banking 9.68%
Utilities 7.35
Chemicals & Plastics 6.81
Oil & Gas-Integrated 5.63
Insurance 5.42
Automobiles, Trucks & Parts 5.23
Financial Services 5.10
Telecommunications 4.93
Publishing & Printing 4.18
Pharmaceuticals 4.03
Food Processing 3.76
Metals/Mining 3.69
Manufacturing Diversified 3.68
Retail Stores 3.29
Engineering & Construction 2.60
Real Estate 2.32
Electronics 2.20
Transportation 1.81
Aerospace/Defense 1.64
Broadcast Media/Cable 1.53
Building Materials 1.24
Healthcare/Medical Products 1.18
Wine & Spirits 1.04%
Leisure/Entertainment 1.01
Oil & Gas Exploration and Products 0.91
Oil & Gas Equipment Services 0.90
Tobacco 0.88
Electrical Equipment 0.86
Forest Products & Paper 0.84
Medical: Biotechnology 0.84
Machinery 0.82
Retail: Food & Drug 0.71
Computer Software 0.61
Household Products 0.58
Agriculture 0.49
Retail: Specialty 0.49
Beverages 0.37
Office Equipment 0.36
Containers & Packaging 0.35
Grocery Stores 0.35
Textile/Apparel 0.14
Advertising 0.10
Foreign Corporate 0.05
- --------------------------------------------------------------------------------
TOTAL 100.00%
- --------------------------------------------------------------------------------
43
<PAGE>
================================================================================
Statement of Assets and Liabilities
================================================================================
JPM SERIES TRUST II
- --------------------------------------------------------------------------------
December 31, 1996
<TABLE>
<CAPTION>
JPM
Treasury JPM JPM
Money JPM JPM Small International
Market Bond Equity Company Equity
Portfolio Portfolio Portfolio Portfolio Portfolio
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Assets
Investments, at cost--see accompanying
Schedule of Portfolio Investments $1,462,090 $2,835,260 $5,114,125 $3,928,684 $5,923,086
========== ========== ========== ========== ==========
Investments, at market value (Note B) $1,462,307 $2,876,775 $5,867,270 $4,286,215 $6,455,586
Cash 1,449 10,245 54,172
Accrued investment income 28,108 10,546 4,247 33,383
Receivable for portfolio securities sold 253,956 13,935 23,299
Receivable for foreign forward contracts (Note B) 17,602
Receivable from Chubb Life Insurance
Company of America 764
Deferred organization costs (Note F) 5,920 5,920 5,920 5,920 5,920
---------- ---------- ---------- ---------- ----------
Total Assets 1,469,676 3,164,759 5,907,916 4,320,445 6,566,663
Liabilities
Due to custodian bank 151,402 1,599
Due to Chubb Life Insurance Company
of America 15,818 130 405 365
Dividends payable 60,654 122,875 546,747 418,664 297,842
Payable for portfolio securities purchased 100,440 10,900 23,055 6,427
Accrued expenses 766 1,913 4,661 4,205 6,183
Payable to Chubb America Service Corp. (Note F) 5,920 5,920 5,920 5,920 5,920
---------- ---------- ---------- ---------- ----------
Total Liabilities 83,158 382,680 568,633 453,443 316,737
---------- ---------- ---------- ---------- ----------
Net Assets $1,386,518 $2,782,079 $5,339,283 $3,867,002 $6,249,926
========== ========== ========== ========== ==========
Net Assets Consist Of:
Paid in capital $1,386,299 $2,719,590 $4,524,782 $3,289,067 $5,603,442
Undistributed net investment income 1,024
Accumulated net realized gain from
investments 2 19,950 61,356 220,404 64,086
Undistributed net realized gain from
foreign currency transactions 32,138
Net unrealized gain on investments (Note C) 217 41,515 753,145 357,531 532,500
Net unrealized gain on translation of assets
and liabilities in foreign currencies (Note C) 17,760
---------- ---------- ---------- ---------- ----------
Net Assets $1,386,518 $2,782,079 $5,339,283 $3,867,002 $6,249,926
========== ========== ========== ========== ==========
Shares of common stock outstanding
(no par value, unlimited shares authorized) 137,375 261,269 390,317 308,651 532,907
========== ========== ========== ========== ==========
Net asset value and offering price per share $ 10.09 $ 10.65 $ 13.68 $ 12.53 $ 11.73
========== ========== ========== ========== ==========
</TABLE>
See notes to financial statements.
44
<PAGE>
================================================================================
Statement of Operations
================================================================================
JPM SERIES TRUST II
- --------------------------------------------------------------------------------
For the year ended January 1, 1996 to December 31, 1996
<TABLE>
<CAPTION>
JPM
Treasury JPM JPM
Money JPM JPM Small International
Market Bond Equity Company Equity
Portfolio Portfolio Portfolio Portfolio Portfolio
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Investment Income
Income:
Interest $ 68,554 $ 139,491 $ 10,624 $ 9,828 $ 3,432
Dividends 113,804 50,459 136,573
Foreign taxes withheld (683) (164) (11,989)
--------- --------- --------- --------- ---------
Total investment
income 68,554 139,491 123,745 60,123 128,016
Expenses:
Advisory fees (Note D) 5,312 10,395 31,027 28,462 42,035
Custodian fees 664 2,079 7,757 7,164 13,326
Shareholder reports 1,886 2,682 7,327 4,913 7,181
Professional fees 7,245 11,364 28,185 19,307 28,674
Director's fees 4,961 7,716 19,355 13,277 19,611
Security valuation 2,628 6,501 10,112 17,388 50,155
Insurance expense 655 965 2,561 1,741 2,540
Miscellaneous expenses 1,545 1,564 1,677 1,620 1,673
Amortization of deferred organization
costs (Note F) 1,984 1,984 1,984 1,984 1,984
--------- --------- --------- --------- ---------
Total expenses 26,880 45,250 109,985 95,856 167,179
Expenses reimbursed by Chubb Life
and Morgan (Note D) (18,912) (29,658) (63,444) (54,942) (104,127)
--------- --------- --------- --------- ---------
Net expenses 7,968 15,592 46,541 40,914 63,052
--------- --------- --------- --------- ---------
Net investment income 60,586 123,899 77,204 19,209 64,964
Realized and Unrealized Gain (Loss) on
Investments and Foreign Currency
Net realized gain on investments 70 19,950 530,898 619,860 305,504
Net realized gain from foreign
currency transactions 33,186
Net unrealized gain (loss) on investments (422) (52,031) 363,239 105,584 282,325
Net unrealized gain on translation of
assets and liabilities in foreign currencies 12,692
--------- --------- --------- --------- ---------
Net realized and unrealized gain (loss) on
investments and foreign currency (352) (32,081) 894,137 725,444 633,707
--------- --------- --------- --------- ---------
Net increase in net assets
from operations $ 60,234 $ 91,818 $ 971,341 $ 744,653 $ 698,671
========= ========= ========= ========= =========
</TABLE>
See notes to financial statements.
45
<PAGE>
================================================================================
Statement of Changes in Net Assets
================================================================================
JPM SERIES TRUST II
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JPM JPM
Treasury Money Market Bond
Portfolio Portfolio
--------------------------------- ---------------------------------
Year Period Year Period
Ended January 3 to Ended January 3 to
December 31, December 31, December 31, December 31,
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income $ 60,586 $ 56,330 $ 123,899 $ 75,133
Net realized gain (loss) on investments 70 78 19,950 28,160
Net realized foreign exchange gain
Net unrealized gain (loss) on
investments (422) 639 (52,031) 93,546
Net unrealized gain on translation of
assets and liabilities in
foreign currencies
----------- ----------- ----------- -----------
Net increase in net assets resulting
from operations 60,234 57,047 91,818 196,839
Distributions to shareholders from
net investment income (60,586) (56,330) (122,875) (75,133)
Distributions to shareholders in excess
of net investment income
Distributions to shareholders from
realized capital gains (68) (78) (2,043) (26,117)
Increase in net assets derived from
shareholder transactions (Note E) 114,006 1,272,283 1,398,485 1,321,095
----------- ----------- ----------- -----------
Net increase in net assets 113,586 1,272,922 1,365,385 1,416,684
Net Assets:
Beginning of period 1,272,932 10 1,416,694 10
----------- ----------- ----------- -----------
End of period $ 1,386,518 $ 1,272,932 $ 2,782,079 $ 1,416,694
=========== =========== =========== ===========
Undistributed net investment
income $ 0 $ 0 $ 1,024 $ 0
=========== =========== =========== ===========
</TABLE>
See notes to financial statements.
46
<PAGE>
================================================================================
Statement of Changes in Net Assets
================================================================================
JPM SERIES TRUST II
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JPM JPM JPM
Equity Small Company International Equity
Portfolio Portfolio Portfolio
----------------------------- ----------------------------- -----------------------------
Year Period Year Period Year Period
Ended January 3 to Ended January 3 to Ended January 3 to
December 31, December 31, December 31, December 31, December 31, December 31,
1996 1995 1996 1995 1996 1995
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
$ 77,204 $ 40,918 $ 19,209 $ 23,804 $ 64,964 $ 32,909
530,898 280,654 619,860 407,597 305,504 (14,394)
33,186 110,274
363,239 389,906 105,584 251,947 282,325 250,175
12,692 5,068
----------- ----------- ----------- ----------- ----------- -----------
971,341 711,478 744,653 683,348 698,671 384,032
(77,204) (40,918) (19,209) (23,804) (48,894) (32,909)
(38,008)
(542,542) (207,654) (518,489) (288,564) (248,948) (67,460)
843,230 3,681,542 1,123,789 2,165,268 1,856,822 3,746,610
----------- ----------- ----------- ----------- ----------- -----------
1,194,825 4,144,448 1,330,744 2,536,248 2,257,651 3,992,265
4,144,458 10 2,536,258 10 3,992,275 10
----------- ----------- ----------- ----------- ----------- -----------
$ 5,339,283 $ 4,144,458 $ 3,867,002 $ 2,536,258 $ 6,249,926 3,992,275
=========== =========== =========== =========== =========== =========
$ 0 $ 0 $ 0 $ 0 $ 32,138 $ (17,118)
=========== =========== =========== =========== =========== ===========
</TABLE>
47
<PAGE>
================================================================================
Notes to Financial Statements
================================================================================
JPM SERIES TRUST II
- --------------------------------------------------------------------------------
December 31, 1996
NOTE A--ORGANIZATION
JPM Series Trust II (the "Trust"), formerly known as Chubb Series Trust,
effective January 1, 1997, is an open-end management investment company
registered under the Investment Company Act of 1940. The Trust was organized as
a Delaware Business Trust on October 28, 1993 for the purpose of funding
Flexible Premium Variable Life Insurance Policies issued by Chubb Life Insurance
Company of America ("Chubb Life"). The Trust is composed of five separate
portfolios: the JPM Treasury Money Market Portfolio, the JPM Bond Portfolio, the
JPM Equity Portfolio, the JPM Small Company Portfolio and the JPM International
Equity Portfolio. Chubb Life's ownership at December 31, 1996 is as follows:
Percentage of
Portfolio Shares Owned Shares Outstanding
JPM Treasury Money Market Portfolio 104,432 76.02%
JPM Bond Portfolio 107,290 41.06%
JPM Equity Portfolio 107,578 27.56%
JPM Small Company Portfolio 158,257 51.27%
JPM International Equity Portfolio 206,933 38.83%
NOTE B--SIGNIFICANT ACCOUNTING POLICIES
Valuation of Investments: An equity security listed on a stock exchange is
valued at the closing sale price on the exchange on which such security is
principally traded. If no sale took place, the mean of the bid and asked prices
at the close of trading is used. A security not listed on a stock exchange is
valued at the closing sale price as reported on a readily available market
quotation system, or, if no sales took place, the mean of the bid and asked
prices at the close of trading in the over-the-counter market. Quotations of
foreign securities in foreign currencies are converted to U.S. dollar
equivalents using appropriately translated foreign market closing prices.
Securities listed on a foreign exchange are valued at the last quoted sale price
available before the time when net assets are valued. Securities or other assets
for which market quotations are not readily available are valued at fair value
in accordance with procedures established by the Portfolios' Trustees. All
portfolio securities with a remaining maturity of less than 60 days are valued
by the amortized cost method which approximates market value. U.S. Treasury
securities and other obligations issued or guaranteed by the U.S. Government,
its agencies, or instrumentalities with remaining maturities of more than 60
days, are valued at representative quoted prices from bond pricing services.
Long-term publicly traded corporate bonds are valued at prices obtained from a
bond pricing service when such prices are available or, when appropriate, from
broker-dealers who make a market in those securities.
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
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 Portfolios' Trustees.
48
<PAGE>
================================================================================
Notes to Financial Statements
================================================================================
JPM SERIES TRUST II
- --------------------------------------------------------------------------------
December 31, 1996
NOTE B--SIGNIFICANT ACCOUNTING POLICIES--(Continued)
The books and records of the Portfolios are maintained in U.S. dollars. The
market values of investment securities, other assets and liabilities and forward
contracts stated in foreign currencies are translated at the prevailing exchange
rates at the end of the period. Purchases, sales, income and expense are
translated at the exchange rate prevailing on the respective dates of such
transactions.
Since 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 on securities from the fluctuations arising from changes
in the market prices of securities held during the period. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net realized gain or loss from foreign currency transactions arise from
sales and maturities of short-term securities, sales of foreign currencies,
currency gains or losses realized between the trade and settlement dates on
securities transactions, the difference between the amounts of dividends,
interest, and foreign withholding taxes recorded on the Portfolio's books, and
the U.S. dollar equivalent of the amounts actually received or paid. Net
unrealized gain or loss from foreign currency transactions arises from changes
in the value of assets and liabilities other than investments in securities at
fiscal year end, resulting from changes in the exchange rate.
The Portfolios may enter into forward 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 and the change in
the market value is recorded by the Portfolio as unrealized appreciation or
depreciation of foreign currency translations. At December 31, 1996, the JPM
International Equity Portfolio had the following open forward foreign currency
contracts:
<TABLE>
<CAPTION>
=======================================================================================================
SUMMARY OF OPEN FORWARD FOREIGN CURRENCY CONTRACTS
=======================================================================================================
U.S. Dollar
Foreign Currency Contracts to Value at Net Unrealized
Purchase Contracts Settlement Date Receive Cost 12/31/96 Depreciation
------------------ --------------- ------- ---- -------- ------------
<S> <C> <C> <C> <C> <C>
Deutsche Mark 02/20/97 120,869 $ 81,000 $ 77,979 $(3,021)
Japanese Yen 02/20/97 18,692,217 168,000 162,159 (5,841)
<CAPTION>
U.S. Dollar
Foreign Currency Contracts to Value at Net Unrealized
Sale Contracts Settlement Date Deliver Proceeds 12/31/96 Appreciation
-------------- --------------- ------- -------- -------- ------------
<S> <C> <C> <C> <C> <C>
Deutsche Mark 02/20/97 600,882 $394,414 $387,668 $6,746
French Franc 02/20/97 1,117,542 220,858 213,861 6,997
Japanese Yen 02/20/97 36,473,668 329,137 316,416 12,721
- ------------------------------------------------------------------------------------------------------
</TABLE>
49
<PAGE>
================================================================================
Notes to Financial Statements
================================================================================
JPM SERIES TRUST II
- --------------------------------------------------------------------------------
December 31, 1996
NOTE B--SIGNIFICANT ACCOUNTING POLICIES--(Continued)
Security Transactions and Investment Income: Security transactions are recorded
on a trade date basis. Realized gains and losses on investments sold are
recorded on the basis of the first-in, first-out method. Interest income,
including, where applicable, amortization of discount on investments, is
recorded on the accrual basis. Dividend income is recorded on the ex-dividend
date, except for certain dividends from foreign securities, which are recorded
as soon as the Portfolios are informed of the dividend.
Dividends and Distributions to Shareholders: Dividends and distributions to
shareholders from ordinary income and net realized capital gains are declared
and distributed at least once annually. The Trust distinguishes between
dividends on a tax basis and a financial reporting basis and only distributions
in excess of tax basis earnings and profits are reported in the financial
statements as a return of capital. Differences in the recognition or
classification of income between the financial statements and tax earnings and
profits which result in temporary over-distributions for financial statements
purposes are classified as dividends in excess of net investment income or
accumulated net realized gains.
Federal Taxes: It is the policy of the Trust that each Portfolio intends to
qualify as a regulated investment company by complying with the requirements of
the Internal Revenue Code applicable to regulated investment companies, and by
distributing substantially all of its taxable earnings to its shareholders.
Therefore, no Federal tax provision is required.
NOTE C--INVESTMENTS
The aggregate cost of investments owned for Federal income tax purposes is the
same as for financial reporting purposes.
As of December 31, 1996, gross unrealized gains and losses were as follows:
Gross Gross Net
Unrealized Unrealized Unrealized
Gains Losses Gain
---------- ---------- ----------
JPM Treasury Money Market Portfolio $ 219 $ 2 $ 217
JPM Bond Portfolio 48,179 6,664 41,515
JPM Equity Portfolio 863,534 110,389 753,145
JPM Small Company Portfolio 547,459 189,928 357,531
JPM International Equity Portfolio 822,003 289,503 532,500
As of December 31, 1996, the International Equity Portfolio had a net unrealized
foreign currency translation gain of $17,760.
50
<PAGE>
================================================================================
Notes to Financial Statements
================================================================================
JPM SERIES TRUST II
- --------------------------------------------------------------------------------
December 31, 1996
NOTE C--INVESTMENTS--(Continued)
Purchases and sales of investment securities for the period ended December 31,
1996, other than short-term obligations, were as follows:
Proceeds
Cost of from
Investment Investment
Securities Securities
Purchased Sold
---------- ----------
JPM Bond Portfolio $5,014,152 $3,909,240
JPM Equity Portfolio 5,078,723 4,468,447
JPM Small Company Portfolio 5,470,717 4,861,594
JPM International Equity Portfolio 5,442,955 3,618,336
NOTE D--INVESTMENT ADVISORY FEES, MANAGEMENT AGREEMENTS
The Trust had an investment management agreement with Chubb Investment Advisory
Corporation, ("Chubb Investment"), a wholly-owned subsidiary of Chubb Life.
Under the agreement, Chubb Investment provided investment management,
administrative and transfer agency services for the Trust. Chubb Investment was
paid a fee for its services, computed daily and paid monthly, at the annual rate
of: .40% of average daily net assets of the JPM Treasury Money Market Portfolio;
.50% of average daily net assets of the JPM Bond Portfolio; .60% of average
daily net assets of the JPM Equity Portfolio; .80% of average daily net assets
of the JPM Small Company Portfolio, and .80% of average daily net assets of the
JPM International Equity Portfolio.
Morgan Guaranty Trust Company of New York ("Morgan") served as sub-investment
manager to the Trust, providing investment advice and management services for
each Portfolio. As compensation for its services, Morgan was entitled to receive
fees from Chubb Investment (and not from the Portfolios), computed daily and
paid monthly, at an annual rate of: .20% of average daily net assets of the JPM
Treasury Money Market Portfolio; .30% of average daily net assets of the JPM
Bond Portfolio; .40% of average daily net assets of the JPM Equity Portfolio;
.60% of average daily net assets of the JPM Small Company Portfolio, and .60% of
the average daily net assets of the JPM International Equity Portfolio.
During the period, Chubb Life and Morgan assumed the expenses of each Portfolio
of the Trust in excess of .60%, .75%, .90%, 1.15% and 1.20% of the average daily
net assets, respectively, of the JPM Treasury Money Market, Bond, Equity, Small
Company and International Equity Portfolios.
51
<PAGE>
================================================================================
Notes to Financial Statements
================================================================================
JPM SERIES TRUST II
- --------------------------------------------------------------------------------
December 31, 1996
NOTE E--SHAREHOLDERS' TRANSACTIONS
Following is a summary of transactions with shareholders for each Portfolio.
<TABLE>
<CAPTION>
======================================================================
JPM TREASURY MONEY MARKET PORTFOLIO
======================================================================
For the Period
Year Ended January 3, 1995 to
December 31, 1996 December 31, 1995
Shares Dollars Shares Dollars
-------- ----------- ------- -----------
<S> <C> <C> <C> <C>
Shares sold 130,402 $ 1,348,912 146,904 $ 1,483,290
Shares issued as
reinvestment of dividends 5,606 56,408 -- --
Shares redeemed (125,133) (1,291,314) (20,405) (211,007)
-------- ----------- ------- -----------
Net increase 10,875 $ 114,006 126,499 $ 1,272,283
======== =========== ======= ===========
----------------------------------------------------------------------
<CAPTION>
======================================================================
JPM BOND PORTFOLIO
======================================================================
For the Period
Year Ended January 3, 1995 to
December 31, 1996 December 31, 1995
Shares Dollars Shares Dollars
-------- ----------- ------- -----------
<S> <C> <C> <C> <C>
Shares sold 146,230 $ 1,555,123 132,729 $ 1,351,277
Shares issued as
reinvestment of dividends 9,476 103,293 -- --
Shares redeemed (24,337) (259,931) (2,830) (30,182)
-------- ----------- ------- -----------
Net increase 131,369 $ 1,398,485 129,899 $ 1,321,095
======== =========== ======= ===========
----------------------------------------------------------------------
<CAPTION>
======================================================================
JPM EQUITY PORTFOLIO
======================================================================
For the Period
Year Ended January 3, 1995 to
December 31, 1996 December 31, 1995
Shares Dollars Shares Dollars
-------- ----------- ------- -----------
<S> <C> <C> <C> <C>
Shares sold 119,491 $ 1,586,005 332,783 $ 3,738,063
Shares issued as
reinvestment of dividends 25,185 321,572 -- --
Shares redeemed (82,429) (1,064,347) (4,714) (56,521)
-------- ----------- ------- -----------
Net increase 62,247 $ 843,230 328,069 $ 3,681,542
======== =========== ======= ===========
----------------------------------------------------------------------
</TABLE>
52
<PAGE>
================================================================================
Notes to Financial Statements
================================================================================
JPM SERIES TRUST II
- --------------------------------------------------------------------------------
December 31, 1996
NOTE E--SHAREHOLDERS' TRANSACTIONS--(Continued)
<TABLE>
<CAPTION>
======================================================================
JPM SMALL COMPANY PORTFOLIO
======================================================================
For the Period
Year Ended January 3, 1995 to
December 31, 1996 December 31, 1995
Shares Dollars Shares Dollars
-------- ----------- ------- -----------
<S> <C> <C> <C> <C>
Shares sold 143,575 $ 1,722,979 215,696 $ 2,181,106
Shares issued as
reinvestment of dividends 36,193 431,401 -- --
Shares redeemed (85,441) (1,030,591) (1,373) (15,838)
-------- ----------- ------- -----------
Net increase 94,327 $ 1,123,789 214,323 $ 2,165,268
======== =========== ======= ===========
----------------------------------------------------------------------
<CAPTION>
======================================================================
JPM INTERNATIONAL EQUITY PORTFOLIO
======================================================================
For the Period
Year Ended January 3, 1995 to
December 31, 1996 December 31, 1995
Shares Dollars Shares Dollars
-------- ----------- ------- -----------
<S> <C> <C> <C> <C>
Shares sold 172,202 $ 1,941,265 373,752 $ 3,810,249
Shares issued as
reinvestment of dividends 12,740 138,377 -- --
Shares redeemed (19,591) (222,820) (6,197) (63,639)
-------- ----------- ------- -----------
Net increase 165,351 $ 1,856,822 367,555 $ 3,746,610
======== =========== ======= ===========
----------------------------------------------------------------------
</TABLE>
NOTE F--ORGANIZATION COSTS
Costs incurred in connection with the initial organization of the Trust are
being amortized on a straight-line basis over a period of five years. At
December 31, 1996, the balances reported as deferred organization costs are
payable to Chubb America Service Corp., an affiliated entity, and have been
included as a liability in the Statement of Assets and Liabilities.
NOTE G--SHAREHOLDER MEETING
On December 12, 1996 shareholders of the Trust approved the selection of J.P.
Morgan Investment Management, Inc. as investment advisor (formerly the Trust's
sub-advisor); approved and ratified the selection of Price Waterhouse, LLP as
independent auditors for the fiscal year ended December 31, 1997; and duly
elected three Trustees.
Effective January 1, 1997 the name of the Trust was changed from Chubb Series
Trust to JPM Series Trust II and the portfolios within the trust were renamed
the "JPM Portfolios" from the "Resolute Portfolios".
53
<PAGE>
================================================================================
Financial Highlights
================================================================================
JPM SERIES TRUST II
- --------------------------------------------------------------------------------
For a share outstanding throughout the period
<TABLE>
<CAPTION>
JPM JPM
Treasury Money Market Bond
Portfolio Portfolio
--------------------------------- ---------------------------------
Year Period Year Period
Ended January 3 to Ended January 3 to
December 31, December 31, December 31, December 31,
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.06 $ 10.00 $ 10.91 $ 10.00
Income From Investment
Operations
Net investment income 0.44 0.45 0.47 0.58
Net gains and losses on securities
(both realized and unrealized) 0.03 0.06 (0.25) 1.11
---------- ---------- ---------- ----------
Total from investment
operations 0.47 0.51 0.22 1.69
Less Distributions to
Shareholders
Dividends from net
investment income (0.44) (0.45) (0.47) (0.58)
Dividends in excess of net
investment income
Dividends from net
capital gains (0.01) (0.20)
---------- ---------- ---------- ----------
Total distributions (0.44) (0.45) (0.48) (0.78)
---------- ---------- ---------- ----------
Net asset value, end of period $ 10.09 $ 10.06 $ 10.65 $ 10.91
========== ========== ========== ==========
Total Return (A) 4.69% 5.09% 2.09% 16.85%
Ratios to average net assets:
(Annualized)
Expenses (B) 0.60% 0.60% 0.75% 0.75%
Net investment income 4.56% 4.95% 5.91% 6.00%
Portfolio turnover rate N/A N/A 198.40% 238.96%
Average Commission Rate Paid N/A N/A N/A N/A
Net assets, at end of period $1,386,518 $1,272,932 $2,782,079 $1,416,694
</TABLE>
(A) Total return assumes reinvestment of all dividends during the period and
does not reflect deduction of account fees and charges. Investment returns
and principal values will fluctuate and shares, when redeemed, may be worth
more or less than the original cost. Total returns for periods of less than
one year have not been annualized.
(B) All related party fees have been waived and all other expenses of the
Portfolios have been assumed in part for 1996 and 1995 by Chubb Life and
Morgan. Had the fees not been waived and expenses not been assumed, the
ratios of expenses to average net assets would have been 2.02%, 2.18%,
2.13%, 2.69%, and 3.18% in 1996 and 2.77%, 2.90%, 2.70%, 3.22% and 3.16% in
1995, for the JPM Treasury Money Market Portfolio, JPM Bond Portfolio, JPM
Equity Portfolio, JPM Small Company Portfolio, and JPM International Equity
Portfolio, respectively.
54
<PAGE>
================================================================================
Financial Highlights
================================================================================
JPM SERIES TRUST II
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JPM JPM JPM
Equity Small Company International Equity
Portfolio Portfolio Portfolio
----------------------------------- ----------------------------------- -----------------------------------
Year Period Year Period Year Period
Ended January 3 to Ended January 3 to Ended January 3 to
December 31, December 31, December 31, December 31, December 31, December 31,
1996 1995 1996 1995 1996 1995
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
$ 12.63 $ 10.00 $ 11.83 $ 10.00 $ 10.86 $ 10.00
0.20 0.12 0.06 0.11 0.20 0.15
2.44 3.26 2.43 3.18 1.23 1.08
---------- ---------- ---------- ---------- ---------- ----------
2.64 3.38 2.49 3.29 1.43 1.23
(0.20) (0.12) (0.06) (0.11) (0.09) (0.09)
(0.10)
(1.39) (0.63) (1.73) (1.35) (0.47) (0.18)
---------- ---------- ---------- ---------- ---------- ----------
(1.59) (0.75) (1.79) (1.46) (0.56) (0.37)
---------- ---------- ---------- ---------- ---------- ----------
$ 13.68 $ 12.63 $ 12.53 $ 11.83 $ 11.73 $ 10.86
========== ========== ========== ========== ========== ==========
21.14% 33.91% 21.74% 32.91% 13.12% 12.38%
0.90% 0.90% 1.15% 1.15% 1.20% 1.20%
1.49% 1.48% 0.54% 0.99% 1.25% 1.06%
89.77% 65.60% 144.44% 100.43% 71.24% 68.00%
$0.0534 N/A $0.0427 N/A $0.0020 N/A
$5,339,283 $4,144,458 $3,867,002 $2,536,258 $6,249,926 $3,992,275
</TABLE>
55
<PAGE>
================================================================================
Independent Auditors Report
================================================================================
JPM SERIES TRUST II
- --------------------------------------------------------------------------------
Report of Independent Auditors
To the Board of Directors and Shareholders
JPM Series Trust II
We have audited the accompanying statement of assets and liabilities of the JPM
Series Trust II (the "Trust", comprising, respectively, the JPM Treasury Money
Market Portfolio, JPM Bond Portfolio, JPM Equity Portfolio, JPM Small Company
Portfolio and JPM International Equity Portfolio), including the related
schedules of portfolio investments as of December 31, 1996 on pages 4, 9, 10,
11, 18, 19, 20, 26, 27, 28, 29, 30, 31, 32, 38, 39, 40, 41, 42, 43, and the
related statement of operations, statement of changes in net assets, and the
financial highlights for the year ended December 31, 1996 and the statement of
changes in net assets and financial highlights for the period from January 3,
1995 (Commencement of Operations) to December 31, 1995. Effective January 1,
1997 the Trust's name was changed from the Chubb Series Trust to JPM Series
Trust II and the investment portfolios within the Trust were renamed from the
"Resolute Portfolios" to the "JPM Portfolios". These financial statements and
financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1996 by correspondence with the custodian and brokers, or other
appropriate auditing procedures where replies from brokers were not received, or
verification by examination. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective portfolios constituting the JPM Series Trust at December 31,
1996, the results of their operations, the changes in their net assets and the
financial highlights for the year ended December 31, 1996 and the changes in net
assets and financial highlights for the period from January 3, 1995
(Commencement of Operations) to December 31, 1995, in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 14, 1997
56
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<PAGE>
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<PAGE>
================================================================================
================================================================================
- --------------------------------------------------------------------------------
Funds Distributor, Inc. is the distributor of the JPM Series
Trust II (the "Trust").
Chubb Securities Corporation served as the Trust's distributor
prior to January 1, 1997.
J. P. Morgan Investment Management serves as investment advisor for the
Trust and makes the Portfolios available solely in its
capacity as shareholder servicing agent for customers.
More complete information about the Trust, including management fees
and expenses, is provided in the Prospectus, which should be read carefully
before investing. You may obtain additional copies of the Prospectus
by calling Funds Distributor, Inc. at (800) 221-7930.
Distributed By:
Funds Distributor, Inc.
60 State Street, Suite 1300
Boston, Massachusetts 02109
Form 3-00769 Ed. 2/97
