<PAGE>
J.P. MORGAN SERIES TRUST II
J.P. MORGAN TREASURY MONEY MARKET PORTFOLIO
J.P. MORGAN BOND PORTFOLIO
J.P. MORGAN U.S. DISCIPLINED EQUITY PORTFOLIO
J.P. MORGAN SMALL COMPANY PORTFOLIO
J.P. MORGAN INTERNATIONAL OPPORTUNITIES PORTFOLIO
SEMIANNUAL REPORT
JUNE 30, 1999
IM0537
<PAGE>
LETTER TO THE SHAREHOLDERS OF THE J.P. MORGAN-SERIES TRUST II
August 2, 1999
Dear Shareholder,
We are pleased to provide you with the June 30, 1999, semiannual report for the
J.P. Morgan Series Trust II.
Over the past six months, global economic growth began to stabilize and turn
positive, with evidence of a clear upturn in Asia, increasing signs of bottoming
and recovery in Japan, a strong European consumer sector, and
better-than-expected results in Latin America. In the U.S., growth in virtually
all sectors continued to be robust, and the equity market continued to thrive.
As concerns about global financial and economic fragility receded, the U.S.
Federal Reserve was free to focus on domestic price stability. At its June 30
meeting, the Fed announced a 25 basis point increase in the federal funds rate
and a return to a neutral policy bias. The shift to a neutral bias was
interpreted positively by many market participants, but we believe more Fed
tightening will be necessary.
The report that follows includes detailed information on the J.P. Morgan Series
Trust II portfolios, as well as interviews with members of the portfolio
management teams. In the interviews, portfolio managers review the major events
of the previous six months and discuss their portfolio strategy.
As chairman and president of Asset Management Services, we appreciate your
investment in the J.P. Morgan Series Trust II. If you have any comments or
questions, please call the trust's distributor - Funds Distributor, Inc. - at
(800) 221-7930.
Sincerely yours,
/s/ Ramon de Oliveira /s/ Keith M. Schappert
Ramon de Oliveira Keith M. Schappert
Chairman of Asset Management Services President of Asset Management Services
J.P. Morgan & Co. Incorporated J.P. Morgan & Co. Incorporated
TABLE OF CONTENTS
LETTER TO THE SHAREHOLDERS ..................................................1
PORTFOLIO REVIEWS:
J.P. MORGAN TREASURY MONEY MARKET PORTFOLIO .................................2
J.P. MORGAN BOND PORTFOLIO ..................................................6
J.P. MORGAN U.S. DISCIPLINED EQUITY PORTFOLIO ..............................12
J.P. MORGAN SMALL COMPANY PORTFOLIO ........................................17
J.P. MORGAN INTERNATIONAL OPPORTUNITIES PORTFOLIO ..........................22
FINANCIAL STATEMENTS .......................................................28
1
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J.P. MORGAN-TREASURY MONEY MARKET PORTFOLIO
PORTFOLIO REVIEW
The J.P. Morgan Treasury Money Market Portfolio returned 1.88% for the six
months ended June 30, 1999. The portfolio's net assets stood at approximately
$1.8 million at the end of the reporting period. The portfolio's net asset
value increased to $9.31 per share on June 30, 1999, from $9.20 per share on
December 31, 1998. During the period, the portfolio made distributions of
approximately $0.06 per share from net investment income.
EXAMINING PERFORMANCE
One way to look at performance is to review a portfolio's average annual total
return. This figure takes the portfolio's actual (or cumulative) return and
shows what would have happened if the portfolio had achieved that return by
performing at a constant rate each year. Average annual total returns represent
the average yearly change of a portfolio's value over various time periods,
typically one, five, or ten years (or since inception). Total returns for
periods of less than one year are not annualized and provide a picture of how a
portfolio has performed over the short term.
<TABLE>
<CAPTION>
PERFORMANCE TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS
---------------------- -----------------------------------------
THREE SIX ONE THREE SINCE
AS OF JUNE 30, 1999 MONTHS MONTHS YEAR YEARS INCEPTION*
- ----------------------------------------------------------------------------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
J.P. Morgan Treasury Money Market Portfolio 0.90% 1.88% 3.93% 4.41% 4.58%
IBC Money Fund Report Government
& Agency Retail Fund Average** 1.01% 2.04% 4.35% 4.63% 4.75%
Lipper Variable Annuity Money Market Average 1.09% 2.21% 4.77% 5.02% 5.13%
</TABLE>
*THE PORTFOLIO COMMENCED OPERATIONS ON JANUARY 3, 1995, AND HAS PROVIDED AN
AVERAGE ANNUAL TOTAL RETURN OF 4.58% FROM THAT DATE THROUGH JUNE 30, 1999. FOR
THE PURPOSES OF COMPARISON, THE "SINCE INCEPTION" RETURNS ARE CALCULATED FROM
DECEMBER 31, 1994, THE FIRST DATE WHEN DATA FOR THE PORTFOLIO, ITS BENCHMARK,
AND ITS LIPPER CATEGORY WERE AVAILABLE.
**IBC MONEY FUND REPORT GOVERNMENT & AGENCY RETAIL FUND AVERAGE REPRESENTS THE
AVERAGE PERFORMANCE OF SIMILARLY MANAGED FUNDS. THE AVERAGE DOES NOT INCLUDE
FEES OR OPERATING EXPENSES, AND IS NOT AVAILABLE FOR DIRECT INVESTMENT.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. PORTFOLIO RETURNS ARE NET OF
PORTFOLIO EXPENSES ONLY, INCLUDE REINVESTMENT OF DIVIDENDS, AND REFLECT THE
REIMBURSEMENT OF CERTAIN PORTFOLIO EXPENSES AS DESCRIBED IN THE PROSPECTUS FOR
THE PORTFOLIO. HAD EXPENSES NOT BEEN SUBSIDIZED, THE PORTFOLIO'S RETURN WOULD
HAVE BEEN LOWER. PORTFOLIO RETURNS DO NOT REFLECT ANY SEPARATE ACCOUNT EXPENSES
IMPOSED ON THE VARIABLE CONTRACTS, WHICH MAY INCLUDE A SALES CHARGE, PREMIUM TAX
CHARGE, DAC TAX SALES CHARGE, COST OF INSURANCE, MORTALITY EXPENSES, OR
SURRENDER AND OTHER CHARGES. LIPPER ANALYTICAL SERVICES, INC. IS A LEADING
SOURCE FOR MUTUAL FUND DATA.
2
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PORTFOLIO MANAGER Q&A
The following is an interview with ROBERT R. ("SKIP") JOHNSON, vice president, a
member of the portfolio management team for the J.P. Morgan Treasury Money
Market Portfolio. Prior to joining Morgan in 1988, Skip held positions with the
Bank of Montreal and U.S. Steel, and founded the merchant banking firm of R.R.
Johnson Associates. He is a graduate of Dartmouth College. This interview was
conducted on July 19, 1999, and reflects Skip's views on that date.
WHAT FACTORS HAVE MOST INFLUENCED THE MONEY MARKETS OVER THE PAST SIX MONTHS?
RRJ: In the U.S., the economy has continued to be strong throughout the past six
months, even stronger than we had expected. The strength of the equity markets,
and the tremendous wealth effect that has resulted for both households and
corporations, has driven this economic growth. Our economist believes this
wealth effect was a major reason the U.S. was able to shrug off the economic
sluggishness seen globally through much of 1998. Globally, economic conditions
have improved considerably over the past six months, particularly in the second
quarter, led by renewed strength in Asia.
As concerns about global financial and economic instability receded, the U.S.
Federal Reserve was able to concentrate on domestic price stability. Though
inflation has continued to be benign, domestic labor markets are showing signs
of increasing tightness, driving labor costs up and causing inflationary
concern. Yields were fairly stable in the first quarter of 1999, but the yield
curve shifted upward and interest rate volatility increased in the second
quarter in light of inflation fears and the accompanying expectation of a
preemptive tightening of monetary policy by the Fed. On the last day of the
quarter, the Fed announced a 25 bp increase in the Fed Funds rate and, somewhat
unexpectedly, a return to a neutral policy bias; it had taken a tightening
stance only in May.
TO WHAT DO YOU ATTRIBUTE THE PORTFOLIO'S PERFORMANCE OVER THE PERIOD?
RRJ: The portfolio is comprised of a single one-month Treasury bill that we roll
forward on a monthly basis. Many of the funds in the Lipper average and the
benchmark have the benefit of owning higher-yielding repurchase agreements.
WHAT DO YOU SEE ON THE HORIZON IN THE MONEY MARKETS?
RRJ: The wealth effect from the strong equity market is bolstering consumer
confidence and implying continued solid demand in the U.S.; we raised our
expectation of 1999 GDP to 4.25% from 4.00%. This, combined with improving
domestic manufacturing activity and signs of renewed economic life in Europe and
3
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Asia, leads us to believe that the Fed will continue to raise interest rates,
despite its recent switch to a neutral bias. We expect that another 25 bp move
by the Fed will most likely occur in August. Though an increase could happen at
the October meeting, we think it's unlikely that the Fed would move to raise
rates in the fourth quarter, as that would further hamper liquidity at a time
when it may already be a concern due to potential Y2K-related problems.
4
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PORTFOLIO FACTS
INVESTMENT OBJECTIVE
J.P. Morgan Treasury Money Market Portfolio seeks to provide current income,
maintain a high level of liquidity, and preserve capital. The portfolio seeks to
achieve its investment objective by investing in direct obligations of the U.S.
Treasury and engaging in repurchase agreements with respect to those
obligations.
- -------------------------------------------------------------------------------
COMMENCEMENT OF OPERATIONS
1/3/95
- -------------------------------------------------------------------------------
NET ASSETS AS OF 6/30/99
$1,779,298
- -------------------------------------------------------------------------------
AVERAGE MATURITY
15 DAYS
- -------------------------------------------------------------------------------
DIVIDEND PAYABLE DATE (IF APPLICABLE)
12/13/99
- -------------------------------------------------------------------------------
CAPITAL GAIN PAYABLE DATE (IF APPLICABLE)
12/13/99
EXPENSE RATIO
The portfolio's current annualized expense ratio of 0.60% covers shareholders'
expenses for custody, tax reporting, investment advisory and shareholder
services, after reimbursement. The portfolio is no-load and does not charge any
sales, redemption, or exchange fees. There are no additional charges for buying,
selling, safekeeping portfolio shares, or for wiring redemption proceeds from
the portfolio.
PORTFOLIO HIGHLIGHTS
ALL DATA AS OF JUNE 30, 1999
PORTFOLIO ALLOCATION
(AS A PERCENTAGE OF TOTAL INVESTMENTS)
[CHART]
/ / U.S TREASURY OBLIGATIONS 97.6%
/ / OTHER INVESTMENTS 2.4%
5
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J.P. MORGAN BOND PORTFOLIO
PORTFOLIO REVIEW
The J.P. Morgan Bond Portfolio returned negative 1.92% for the six months ended
June 30, 1999. This was short of the benchmark Salomon Smith Barney BIG Bond
Index's return of negative 1.39% but ahead of the Lipper Variable Annuity
Corporate Debt A-Rated Average of negative 2.20%.
The portfolio's net asset value decreased to $11.33 per share on June 30, 1999,
from $11.67 per share on December 31, 1998. During the period, the portfolio
made distributions of approximately $0.08 per share from net investment income,
approximately $0.01 per share from short-term capital gains, and approximately
$0.03 per share from long-term capital gains. The portfolio's net assets grew to
$40.1 million on June 30, 1999, from $32.5 million on December 31, 1998.
EXAMINING PERFORMANCE
One way to look at performance is to review a portfolio's average annual total
return. This figure takes the portfolio's actual (or cumulative) return and
shows what would have happened if the portfolio had achieved that return by
performing at a constant rate each year. Average annual total returns represent
the average yearly change of a portfolio's value over various time periods,
typically one, five, or ten years (or since inception). Total returns for
periods of less than one year are not annualized and provide a picture of how
the portfolio has performed over the short term.
<TABLE>
<CAPTION>
PERFORMANCE TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS
---------------------- -----------------------------------------
THREE SIX ONE THREE SINCE
AS OF JUNE 30, 1999 MONTHS MONTHS YEAR YEARS INCEPTION*
- ----------------------------------------------------------------------------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
J.P. Morgan Bond Portfolio -1.58% -1.92% 1.99% 6.62% 7.46%
Salomon Smith Barnet Broad
Investment Grade Bond Index** -0.93% -1.39% 3.12% 7.24% 8.50%
Lipper Variable Annuity -1.36% -2.20% 1.79% 6.65% 7.98%
Corporate Debt A-Rated Average
</TABLE>
*THE PORTFOLIO COMMENCED OPERATIONS ON JANUARY 3, 1995, AND HAS PROVIDED AN
AVERAGE ANNUAL TOTAL RETURN OF 7.47% FROM THAT DATE THROUGH JUNE 30, 1999. FOR
THE PURPOSES OF COMPARISON, THE "SINCE INCEPTION" RETURNS ARE CALCULATED FROM
DECEMBER 31, 1994, THE FIRST DATE WHEN DATA FOR THE PORTFOLIO, ITS BENCHMARK,
AND ITS LIPPER CATEGORY WERE AVAILABLE.
**THE SALOMON SMITH BARNEY BROAD INVESTMENT GRADE BOND INDEX IS AN UNMANAGED,
MARKET-WEIGHTED INDEX THAT CONTAINS APPROXIMATELY 4,700 INDIVIDUALLY PRICED
INVESTMENT-GRADE BONDS. THE INDEX DOES NOT INCLUDE FEES OR EXPENSES, AND IS NOT
AVAILABLE FOR ACTUAL INVESTMENT.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. PORTFOLIO RETURNS ARE NET OF
PORTFOLIO EXPENSES ONLY, INCLUDE REINVESTMENT OF DIVIDENDS AND REFLECT THE
REIMBURSEMENT OF CERTAIN PORTFOLIO EXPENSES AS DESCRIBED IN THE PROSPECTUS FOR
THE PORTFOLIO. HAD EXPENSES NOT BEEN SUBSIDIZED, THE PORTFOLIO'S RETURN WOULD
HAVE BEEN LOWER. PORTFOLIO RETURNS DO NOT REFLECT ANY SEPARATE ACCOUNT EXPENSES
IMPOSED ON THE VARIABLE CONTRACTS WHICH MAY INCLUDE A SALES CHARGE, PREMIUM TAX
CHARGE, DAC TAX SALES CHARGE, COST OF INSURANCE, MORTALITY EXPENSES, OR
SURRENDER AND OTHER CHARGES. LIPPER ANALYTICAL SERVICES, INC. IS A LEADING
SOURCE FOR MUTUAL FUND DATA.
6
<PAGE>
PORTFOLIO MANAGER Q&A
The following is an interview with WILLIAM G. TENNILLE, vice president, a member
of the portfolio management team for the J.P. Morgan Bond Portfolio. Bill joined
Morgan in 1992 and has extensive experience across a broad range of markets,
including mortgage securities and derivatives. He is a graduate of the
University of North Carolina. This interview was conducted on July 21, 1999, and
reflects Bill's views on that date.
WHAT FACTORS HAVE MOST INFLUENCED THE BOND MARKET OVER THE PAST SIX MONTHS?
WGT: Global economic growth began to stabilize and turn positive over the past
six months, with evidence of a clear upturn in Asia, increasing signs of
bottoming and recovery in Japan, a strong European consumer sector, and
better-than-expected results in Latin America. In the U.S., growth in virtually
all sectors continued to be robust. Strong investment spending was supported by
both the current low cost of capital and high levels of consumption and housing
activity due to strong employment, high income levels, and the wealth effect of
the thriving equity market. While productivity growth remains strong, and
inflation has continued to be benign, labor markets are showing signs of
increasing tightness. Payroll employment growth has been above sustainable
levels, and, after a brief pause earlier in the year, labor costs have resumed
their upward trajectory.
As concerns about global financial and economic fragility receded, the Federal
Reserve was free to focus on domestic price stability. Toward the end of the
period, it became increasingly evident that the Fed would likely act
preemptively and begin to tighten monetary policy at its June meeting. As these
expectations filtered into the bond market, the yield curve shifted upward and
interest rate volatility increased. At its -June 30 meeting, the Fed announced a
25 basis point increase in the Federal Funds rate and a return to a neutral
policy bias. The shift to a neutral bias was interpreted positively by many
market participants, causing a significant "relief rally" at the end of that
day's trading session.
A combination of uncertainties about future Federal Reserve actions and weak
market technicals caused yield spreads in most investment-grade sectors to widen
during the period. In the credit sectors, there were large new-issuance flows
and a looming future calendar. In addition, market liquidity declined
substantially due to the reduced risk appetite of securities dealers, fear of
potential Year 2000-related disruptions, and the overweight spread product
position of many investors. In the agency residential mortgage sector, strong
supply and increased investor caution at the end of the second quarter widened
spreads significantly. The emerging markets debt sector, though volatile during
the period, was the best performer due both to its yield advantage and spread
tightening, particularly toward the end of the six-month period. Yields on
30-year U.S. Treasuries were up around 90 basis points since the beginning of
the year, to nearly 6.00%.
7
<PAGE>
TO WHAT DO YOU ATTRIBUTE THE PORTFOLIO'S PERFORMANCE OVER THE PERIOD?
WGT: The portfolio underperformed the benchmark for the six months ended June
30, losing 1.92% compared with the Salomon Smith Barney Investment Grade Index's
1.39% decline. We did, however, beat the peer average of a 2.20% loss. Interest
rates rose through much of the period in anticipation of a Fed tightening,
negatively affecting total return performance.
We began the year with a long duration position, prompted by the belief that
domestic activity would slow in the second half of 1999 and the Fed would be
responsive to this slowing. As it became apparent that the U.S. economy was more
resilient than expected and international prospects continued improving, we
moved to a short duration stance.
Toward the end of the six months, we decided to reduce our risk positions in
anticipation of the Fed's move to tighten monetary policy, the increasing
illiquidity of the summer months, and the likelihood of real or perceived
Y2K-related disruptions as the year progresses. We made significant reductions
in our corporate, asset-backed, high-yield, and emerging markets holdings. We
remained significantly overweight in prepayment-sensitive residential mortgages
and non-call mortgages.
WHAT DO YOU SEE ON THE HORIZON IN THE BOND MARKET, AND HOW WILL YOU POSITION THE
PORTFOLIO?
WGT: We expect global recovery to carry forward; our global GDP forecast is 1.8%
for 1999 and 2.0% for 2000. Non-U.S. growth should continue to improve, albeit
moderately and with pockets of lingering weakness. In the U.S., we expect the
economy to sustain its above-trend growth for the intermediate term; in fact, we
recently raised our 1999 GDP forecast to 4.25% from 4.00%. The persistent growth
should continue to pressure labor markets. Both labor costs and commodity prices
appear to have bottomed. Though we do not expect a sharp increase in inflation,
the trajectory of price changes will likely shift upward.
In this environment, we expect that the Fed will be preemptive in its policy
action. Despite the Fed's switch back to a neutral policy bias, we think two
additional 25 bp increases in the Federal Funds rate are likely by early 2000.
This would erase all of the easing the central bank enacted last fall. If growth
does not slow or if signs of inflation emerge, further tightening moves are
likely next year. We do not believe that the market has fully priced all this
future Fed action; hence, we believe that interest rates have the potential to
increase further. Our forecast for the yield on the 30 year U.S. Treasury is
6.35% over the next three months and 6.70% over the next 12 months. Given this
outlook, we expect to maintain a moderately short duration position relative to
the index in the near term. Should opportunities present themselves, we will
tactically trade this position or add to it.
In the near term, rising rates, large new-issue flows, constrained liquidity,
and Y2K-induced caution will continue to pressure spread sectors. Though credit
quality in the corporate and high-yield sectors has probably peaked, credit
fundamentals will likely remain firm. Wider spreads should again create a value
opportunity for investors.
8
<PAGE>
We intend to remain conservatively positioned in the corporate, asset-backed,
high-yield, and emerging -markets debt sectors until we see our way clear of
current adverse technical market conditions. As we move through the second half
of 1999, we will look for opportunities to reposition in these sectors at wider
spread levels. Since a moderately rising rate environment tends to be
constructive for residential mortgages and non-call mortgages, we expect to
maintain our overweight position in these sectors.
9
<PAGE>
PORTFOLIO FACTS
INVESTMENT OBJECTIVE
J.P. Morgan Bond Portfolio seeks to provide a high total return consistent with
moderate risk of capital and maintenance of liquidity. The portfolio is designed
for investors who seek a total return over time that is higher than that
generally available from a portfolio of short-term obligations while
acknowledging greater price fluctuation of longer-term instruments.
- -------------------------------------------------------------------------------
COMMENCEMENT OF OPERATIONS
1/3/95
- -------------------------------------------------------------------------------
NET ASSETS AS OF 6/30/99
$40,131,762
- -------------------------------------------------------------------------------
DIVIDEND PAYABLE DATE (IF APPLICABLE)
12/13/99
- -------------------------------------------------------------------------------
CAPITAL GAIN PAYABLE DATE (IF APPLICABLE)
12/13/99
EXPENSE RATIO
The portfolio's current annualized expense ratio of 0.75% covers shareholders'
expenses for custody,-tax reporting, investment advisory and shareholder
services. The portfolio is no-load and does not charge any sales, redemption, or
exchange fees. There are no additional charges for buying, selling, safekeeping
portfolio shares, or for wiring redemption proceeds from the portfolio.
PORTFOLIO HIGHLIGHTS
ALL DATA AS OF JUNE 30, 1999
PORTFOLIO ALLOCATION
(PERCENTAGE OF TOTAL INVESTMENTS)
[CHART]
/ / U.S. GOVERNMENT AGENCY OBLIGATIONS 38.0%
/ / CORPORATE OBLIGATIONS 14.1%
/ / U.S. TREASURY OBLIGATIONS 11.8%
/ / COLLATERALIZED MORTGAGE OBLIGATIONS AND ASSET-BACKED SECURITIES 3.3%
/ / FOREIGN CORPORATE OBLIGATIONS 1.7%
/ / FOREIGN GOVERNMENT OBLIGATIONS 1.6%
/ / SOVERIGN BONDS 0.3%
/ / CERTIFICATES OF DEPOSIT - FOREIGN 0.2%
/ / CONVERTIBLE PREFERRED STOCKS 0.2%
/ / SHORT-TERM INVESTMENTS 28.8%
30-DAY SEC YIELD
5.21%
DURATION
4.65 years
QUALITY BREAKDOWN
AAA* 83%
AA 3%
A 6%
Other 8%
*INCLUDES U.S. GOVERNMENT AGENCY OBLIGATIONS, U.S. TREASURY OBLIGATIONS, AND
SHORT-TERM INVESTMENTS.
10
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LARGEST HOLDINGS % OF TOTAL INVESTMENTS
- -------------------------------------------------------------------------------
FNMA TBA, 6.50% DUE 7/1/29 12.6%
GNMA, 7.00% DUE 3/15/29 5.0%
U.S. TREASURY NOTE, 6.875% DUE 5/15/06 4.2%
FNMA, 7.00% DUE 8/1/28 3.0%
FNMA TBA, 6.00% DUE 7/1/29 2.5%
U.S. TREASURY BOND, 6.75% DUE 8/15/26 2.5%
FHLMC, 7.00% DUE 2/1/28 2.4%
FNMA TBA, 6.50% DUE 7/1/14 2.1%
FHLMC, 5.125% DUE 10/15/08 2.0%
FHLMC, REMIC: SEQUENTIAL PAYER, SERIES 2080,
CLASS Z, PARTIALLY CALLABLE, 6.500% DUE 8/15/28 1.5%
11
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J.P. MORGAN U.S. DISCIPLINED EQUITY PORTFOLIO
PORTFOLIO REVIEW
The J.P. Morgan U.S. Disciplined Equity Portfolio, which had been named the J.P.
Morgan Equity Portfolio prior to July 1, 1999, returned 13.84% for the six
months ended June 30, 1999. The portfolio outperformed both its benchmark and
its peers, as the S&P 500 returned 12.38% and the Lipper Variable Annuity Growth
& Income Average returned 11.75%.
The portfolio's net asset value increased to $17.83 per share on June 30, 1999,
from $15.84 per share on December 31, 1998. During the period, the portfolio
made distributions of approximately $0.01 per share from net income,
approximately $0.09 from short-term capital gains, and approximately $0.09 from
long-term capital gains. The portfolio's net assets grew to $29.6 million on
June 30, 1999, from $18.5 million on December 31, 1998.
EXAMINING PERFORMANCE
One way to look at performance is to review a portfolio's average annual total
return. This figure takes the portfolio's actual (or cumulative) return and
shows what would have happened if the portfolio had achieved that return by
performing at a constant rate each year. Average annual total returns represent
the average yearly change of a portfolio's value over various time periods,
typically one, five, or ten years (or since inception). Total returns for
periods of less than one year are not annualized and provide a picture of how a
portfolio has performed over the short term.
<TABLE>
<CAPTION>
PERFORMANCE TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS
---------------------- -----------------------------------------
THREE SIX ONE THREE SINCE
AS OF JUNE 30, 1999 MONTHS MONTHS YEAR YEARS INCEPTION*
- ----------------------------------------------------------------------------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
J.P. Morgan U.S. Disciplined Equity Portfolio 10.63% 13.84% 22.32% 25.70% 26.72%
S&P 500 Index** 7.05% 12.38% 22.76% 29.11% 30.03%
Lipper Variable Annuity Growth & Income Average 9.39% 11.75% 15.61% 22.08% 24.01%
</TABLE>
*THE PORTFOLIO COMMENCED OPERATIONS ON JANUARY 3, 1995, AND HAS PROVIDED AN
AVERAGE ANNUAL TOTAL RETURN OF 26.75% FROM THAT DATE THROUGH JUNE 30, 1999. FOR
THE PURPOSES OF COMPARISON, THE "SINCE INCEPTION" RETURNS ARE CALCULATED FROM
DECEMBER 31, 1994, THE FIRST DATE WHEN DATA FOR THE PORTFOLIO, ITS BENCHMARK,
AND ITS LIPPER CATEGORY WERE AVAILABLE.
**THE S&P-500 INDEX IS AN UNMANAGED INDEX THAT MEASURES THE AVERAGE PERFORMANCE
OF 500 WIDELY HELD U.S. LARGE-CAP STOCKS. THE INDEX DOES NOT INCLUDE FEES OR
OPERATING EXPENSES, AND IS NOT AVAILABLE FOR DIRECT INVESTMENT.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. PORTFOLIO RETURNS ARE NET OF
FEES, ASSUME THE REINVESTMENT OF PORTFOLIO DISTRIBUTIONS, AND REFLECT THE
REIMBURSEMENT OF PORTFOLIO EXPENSES AS DESCRIBED IN THE PROSPECTUS. HAD EXPENSES
NOT BEEN SUBSIDIZED, RETURNS WOULD HAVE BEEN LOWER. PORTFOLIO RETURNS DO NOT
REFLECT ANY SEPARATE ACCOUNT EXPENSES IMPOSED ON THE VARIABLE CONTRACTS. THESE
EXPENSES MAY INCLUDE A SALES CHARGE, PREMIUM TAX CHARGE, DAC TAX SALES CHARGE,
COST OF INSURANCE, MORTALITY EXPENSES, OR SURRENDER AND OTHER CHARGES. LIPPER
ANALYTICAL SERVICES, INC. IS A LEADING SOURCE FOR MUTUAL FUND DATA.
12
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PORTFOLIO MANAGER Q&A
The following is an interview with HENRY D. CAVANNA, managing director, a member
of the portfolio management team for the J.P. Morgan U.S. Disciplined Equity
Portfolio (formerly the J.P. Morgan U.S. Equity Portfolio). Henry joined Morgan
in 1971 and is a senior U.S. equity portfolio manager in the U.S. Equity and
Balanced Accounts Group. Prior to joining Morgan, Henry was with Harris Upham &
Co. He received his B.A. from Boston College and his L.L.B. from the University
of Pennsylvania. This interview took place on July 9, 1999, and reflects Henry's
views on that date.
HOW HAS THE U.S. EQUITY MARKET PERFORMED OVER THE PAST SIX MONTHS?
HDC: Overall, the market continued to thrive thus far in 1999; in fact, the S&P
500 Index hit an all-time high on the last day of June. The composition of this
strength, however, changed significantly from the first quarter of the year to
the second.
The first few months of 1999 were a continuation of the trend that had been
dominating the market for quite some time, as the index's surge was led by a
narrow group of larger-cap growth issues, often referred to as the "Nifty
Fifty." The strong U.S. economy was a big reason for the success of the equity
market during the first quarter and the preceding periods, as it buoyed
corporate profits of domestically focused companies in industries like autos,
homebuilding, and retailing. In the tech field, the emergence of e-commerce and
a rash of Internet-related IPOs generated some excitement. Low interest rates
kept the cost of capital attractive, also helping the market.
The second quarter, however, saw the leadership of the market shift to include
stocks across the market-cap spectrum; the second-quarter advance of the "Nifty
Fifty" trailed that of the other 450 stocks that comprise the S&P 500. The index
was led by value, rather than growth, stocks. An improved global economic
outlook helped, as Asia began to bounce back from its 1998 crisis and Japan
began to stabilize after its protracted decline.
Rising interest rates helped drive the shift in market sentiment, as well. The
more sanguine global economic conditions allowed the U.S. Federal Reserve to
concentrate on domestic price stability. As the fixed income market began to
anticipate at least a 25 bp preemptive tightening by the Fed, interest rates
drifted up across the board, triggering a dramatic broadening to cyclically
sensitive stocks. The market also moved away from its heavy reliance on the
Nifty Fifty and into the rest of the S&P 500, as well as into small and mid-cap
offerings. On the last day of the quarter, the Fed announced a 25 bp increase in
the Fed Funds rate and, somewhat unexpectedly, a return to a neutral policy
bias.
HOW DID THE PORTFOLIO PERFORM DURING THE PERIOD?
HDC: The portfolio beat its benchmark for the period, returning 13.84% for the
six months ended June 30 compared with the S&P 500's return of 12.38%. We also
outperformed our peers, as measured by the Lipper
13
<PAGE>
Variable Annuity Growth & Income Fund Average return of 11.75%. The performance
of the portfolio can be broken into two distinct parts. With the narrow
first-quarter market, we lagged the market-cap-weighted S&P 500 because of the
more diversified composition of our portfolio and our valuation discipline.
Since March, however, market leadership began to broaden, to the benefit of our
portfolio and to active equity portfolio managers in general. Basic industry,
transportation, capital goods, and energy were among the sectors that began to
see some better returns.
WHICH STOCKS CONTRIBUTED TO THE PORTFOLIO'S PERFORMANCE?
HDC: Like everyone else, we're excited about the investment possibilities in the
technology and telecommunications sectors due to the growth of the Internet. We
think that a less risky way to take advantage of this trend is to invest in
those companies that provide the infrastructure that supports the Internet. In
this realm, we've seen strong performance from Sun Microsystems and EMC.
Sun is the leading vendor of UNIX-based computer systems and has successfully
made the transition from technical workstations to enterprise servers. A recent
agreement with the America Online/Netscape combination has solidified Sun's
position as the premier Internet server company. Our outlook for the company is
still positive, and we continue to consider Sun a core holding.
EMC stands as the leading provider of mainframe and open systems storage
equipment, a niche that should grow hand in hand with the growth of
Internet-based initiatives. Though we believe EMC is well positioned to
capitalize on the opportunities before it, the stock seems to have gotten ahead
of itself and we, therefore, reduced our position.
Specialty retailer Circuit City proved to be a great turnaround story. Six
months ago, Circuit City was one of our bigger disappointments. We stuck with
the stock, however, and were rewarded. The company's sales and earnings
benefited from the continued strength in the domestic economy and the rollout of
a number of exciting digital-based products. We reduced our position in this
stock to take some profits.
Tyco International was another strong performer for us during the period. This
diversified manufacturing and services company has consistently demonstrated its
ability to make earnings-accretive acquisitions, and its stock has benefited
from it. Tyco can also boast of a strong management team and solid organic
growth. We remain positive on the company.
WHICH STOCKS HINDERED THE PORTFOLIO'S PERFORMANCE?
HDC: The drug and agriculture biotechnology company Monsanto has had a tough
time of late. The stock was punished significantly in October, when Monsanto's
proposed merger with American Home Products fell through. However, we still
think the stock offers a lot of value owing to its strong product pipeline.
Service Corp. International is another name that has struggled over the past six
months. This deathcare services company has reported disappointing earnings over
the past couple of quarters owing to a slowing deathrate and loss of market
share because of management-execution issues. We've lowered our expectations
14
<PAGE>
for the company, but we still think the stock is attractive at its currently
depressed level. We think Service Corp. has a good business that could benefit
from growth in its international operations and some improvement in its U.S.
business.
WHAT IS YOUR OUTLOOK FOR THE COMING MONTHS?
HDC: Our outlook is on the cautious side. The market has done so well for so
long, and appears richly valued. And there is some concern about what steps the
Federal Reserve will take in its efforts to slow down the domestic economy;
despite its return to a neutral policy bias, we think it's likely that the Fed
will raise short-term interest rates at least once more before the end of the
year. Should the economy continue to plow ahead, we think the Fed would become
more aggressive in its efforts.
But with continued strength in the domestic economy, corporate profits should
continue to be robust. And despite all the concerns about inflation, it still
remains very low. The global economy appears to be on its way back; this should
have a positive effect on companies in industries with global exposures, like
metals and chemicals.
We think we're in a transition period, as market leadership continues to filter
down to companies across the market-capitalization spectrum. Such a process can
often be a fragile one, and we wouldn't be surprised to see continued volatility
as a result.
Please note that as of July 1, the name of this portfolio changed to the J.P.
Morgan U.S. Disciplined Equity Portfolio, and it is now managed by James C.
Wiess and Timothy J. Devlin.
15
<PAGE>
PORTFOLIO FACTS
INVESTMENT OBJECTIVE
The J.P. Morgan U.S. Disciplined Equity Portfolio seeks returns that modestly
exceed those of the S&P 500 over the long term with virtually the same level of
volatility. The portfolio invests primarily in the shares of large- and
medium-capitalization U.S. companies. Industry by industry, the portfolio's
weightings are similar to those of the S&P 500. Within each industry, the
portfolio modestly overweights stocks that are ranked as undervalued or fairly
valued while modestly underweighting or not holding stocks that appear
overvalued.
- -------------------------------------------------------------------------------
COMMENCEMENT OF OPERATIONS
1/3/95
- -------------------------------------------------------------------------------
NET ASSETS AS OF 6/30/99
$29,619,177
- -------------------------------------------------------------------------------
DIVIDEND PAYABLE DATE (IF APPLICABLE)
12/20/99
- -------------------------------------------------------------------------------
CAPITAL GAIN PAYABLE DATE (IF APPLICABLE)
12/20/99
EXPENSE RATIO
The portfolio's current annualized expense ratio -of 0.90% covers shareholders'
expenses for custody,-tax reporting, investment advisory and shareholder
services, after reimbursement. The portfolio is no-load and does not charge any
sales, redemption, or exchange fees. There are no additional charges for buying,
selling, safekeeping portfolio shares, or for wiring redemption proceeds from
the portfolio.
PORTFOLIO HIGHLIGHTS
ALL DATA AS OF JUNE 30, 1999
PORTFOLIO ALLOCATION
(AS A PERCENTAGE OF TOTAL INVESTMENTS)
[CHART]
/ / CONSUMER GOODS & SERVICES 18.3%
/ / TECHNOLOGY 17.3%
/ / FINANCE 13.6%
/ / UTILITIES 9.9%
/ / HEALTHCARE 9.5%
/ / INDUSTRIAL PRODUCTS & SERVICES 9.3%
/ / ENERGY 5.4%
/ / BASIC INDUSTRIES 2.2%
/ / TRANSPORTATION 0.8%
/ / SHORT-TERM & OTHER INVESTMENTS 13.7%
LARGEST HOLDINGS % OF TOTAL INVESTMENTS
- -------------------------------------------------------------------------------
MICROSOFT CORP. (TECHNOLOGY) 2.6%
INTERNATIONAL BUSINESS 2.6%
MACHINES CORP. (TECHNOLOGY)
CISCO SYSTEMS, INC. (TECHNOLOGY) 2.3%
LUCENT TECHNOLOGIES, INC. (TECHNOLOGY) 2.3%
INTEL CORP. (TECHNOLOGY) 2.2%
MCI WORLDCOM, INC. (TECHNOLOGY) 2.0%
BRISTOL-MYERS SQUIBB CO. (HEALTHCARE) 2.0%
GENERAL ELECTRIC CO. 1.9%
(INDUSTRIAL PRODUCTS & SERVICES)
WAL-MART STORES INC. 1.9%
(CONSUMER GOODS & SERVICES)
CITIGROUP, INC. (FINANCE) 1.8%
16
<PAGE>
J.P. MORGAN SMALL COMPANY PORTFOLIO
PORTFOLIO REVIEW
The J.P. Morgan Small Company Portfolio returned 6.16% for the six months ended
June 30, 1999. This was short of the Frank Russell 2000 Index's return of 9.28%
and the Lipper Variable Annuity Small Cap Funds Average of 9.98%.
The portfolio's net asset value increased to $12.58 per share on June 30, 1999,
from $11.86 per share on December 31, 1998. During the period, the portfolio
made distributions of approximately $0.007 per share from net income and
approximately $0.003 per share from long-term capital gains. The portfolio's net
assets grew to nearly $9 million on June 30, 1999, from $6.8 million on December
31, 1998.
EXAMINING PERFORMANCE
One way to look at performance is to review a portfolio's average annual total
return. This figure takes the portfolio's actual (or cumulative) return and
shows what would have happened if the portfolio had achieved that return by
performing at a constant rate each year. Average annual total returns represent
the average yearly change of a portfolio's value over various time periods,
typically one, five, or ten years (or since inception). Total returns for
periods of less than one year are not annualized and provide a picture of how a
portfolio has performed over the short term.
<TABLE>
<CAPTION>
PERFORMANCE TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS
---------------------- -----------------------------------------
THREE SIX ONE THREE SINCE
AS OF JUNE 30, 1999 MONTHS MONTHS YEAR YEARS INCEPTION*
- ----------------------------------------------------------------------------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
J.P. Morgan Small Company Portfolio 11.23% 6.16% -4.38% 10.40% 16.50%
Russel 2000 Index** 15.55% 9.28% 1.50% 11.22% 16.00%
Lipper Variable Annuity Small Cap Funds Average 15.36% 9.98% 4.67% 11.52% 17.60%
</TABLE>
*THE PORTFOLIO COMMENCED OPERATIONS ON JANUARY 3, 1995, AND HAS PROVIDED AN
AVERAGE ANNUAL TOTAL RETURN OF 16.52% FROM THAT DATE THROUGH JUNE 30, 1999. FOR
THE PURPOSES OF COMPARISON, THE "SINCE INCEPTION" RETURNS ARE CALCULATED FROM
DECEMBER 31, 1994, THE FIRST DATE WHEN DATA FOR THE PORTFOLIO, ITS BENCHMARK,
AND ITS LIPPER CATEGORY WERE AVAILABLE.
**THE RUSSELL 2000 INDEX IS-AN UNMANAGED INDEX THAT MEASURES THE AVERAGE
PERFORMANCE OF 2,000 U.S. SMALL-CAP STOCKS. THE INDEX DOES NOT INCLUDE FEES OR
OPERATING EXPENSES, AND IS NOT AVAILABLE FOR DIRECT INVESTMENT.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. PORTFOLIO RETURNS ARE NET OF
FEES, ASSUME THE REINVESTMENT OF PORTFOLIO DISTRIBUTIONS, AND REFLECT THE
REIMBURSEMENT OF PORTFOLIO EXPENSES AS DESCRIBED IN THE PROSPECTUS. HAD EXPENSES
NOT BEEN SUBSIDIZED, RETURNS WOULD HAVE BEEN LOWER. PORTFOLIO RETURNS DO NOT
REFLECT ANY SEPARATE ACCOUNT EXPENSES IMPOSED ON THE VARIABLE CONTRACTS. THESE
EXPENSES MAY INCLUDE A SALES CHARGE, PREMIUM TAX CHARGE, DAC TAX SALES CHARGE,
COST OF INSURANCE, MORTALITY EXPENSES, OR SURRENDER AND OTHER CHARGES.
HISTORICALLY SMALL-COMPANY STOCKS HAVE BEEN MORE VOLATILE THAN LARGE-COMPANY
STOCKS. LIPPER ANALYTICAL SERVICES, INC. IS A LEADING SOURCE FOR MUTUAL FUND
DATA.
17
<PAGE>
PORTFOLIO MANAGER Q&A
The following is an interview with STEPHEN J. RICH, vice president, a member of
the portfolio management team for the J.P. Morgan Small Company Portfolio. Steve
joined Morgan in 1991, and has held positions in Morgan's structured equity and
balanced/equity groups. He received an A.B. from Princeton University and an
M.B.A. from New York University. This interview took place on July 8, 1999, and
reflects Steve's views on that date.
HOW HAS THE U.S. EQUITY MARKET PERFORMED OVER THE PAST SIX MONTHS?
SJR: The U.S. equity market continued to be strong in the first half of 1999,
though the source of the strength varied for the first time in a while. The
first quarter of the year was very similar to much of 1998, with the market
dominated by large-cap growth stocks, the Internet names being hot, and most
smaller-cap issues foundering. The strong U.S. economy was a big reason for the
success of the equity market during this period, as it buoyed corporate profits
of domestically focused companies in industries like automaking, homebuilding,
and retailing. In the tech field, the emergence of e-commerce and a rash of
Internet-related IPOs generated some excitement. Large U.S. stocks were also
seen as a liquid and stable haven, shielding assets from the uncertainties
shaking the global economy. Small-cap issues were punished for their perceived
lack of quality and limited liquidity, regardless of their fundamentals.
The second quarter, however, was another story. In fact, it marked the first
quarter since third-quarter 1997 that the Russell 2000 Index outperformed the
S&P 500, and it also marked the index's second-largest degree of outperformance
ever relative to the S&P 500. And despite its extreme underperformance in the
first quarter of the year, the Russell 2000's year-to-date return trails the S&P
500's by only 3.1 percentage points as a result of this solid second quarter.
Value stocks across the market-cap spectrum began to come back into favor in the
second quarter, owing in part to renewed strength in the global economy, which
appeared to give investors the confidence to move away from the safe haven of
large-cap U.S. stocks. And as concerns about global financial and economic
instability further receded, the U.S. Federal Reserve was free to concentrate on
domestic price stability. In light of this, interest rates rose during the
quarter as expectations of a preemptive Fed tightening filtered into the fixed
income market; this accentuated the broadening of the equity market. On the last
day of the quarter, the Fed announced a 25 bp increase in the Fed Funds rate
and, somewhat unexpectedly, a return to a neutral policy bias.
HOW DID THE PORTFOLIO PERFORM DURING THE PERIOD?
SJR: The fund fell short of its benchmark for the period, returning 6.16% for
the six-month period ended June 30, compared with the Russell 2000's return of
9.28%, even though we beat the Russell in the first
18
<PAGE>
quarter of the year. In April and May, it seemed that you needed to own either
the largest Internet stocks in the index or the cheapest, most down-and-out ones
to be successful; not having a large concentration of either, the portfolio
lagged. We bounced back in June, however, as some of the stocks that contributed
to our April and May underperformance came roaring back.
I think this is the first time we've seen the fund's performance hurt by not
owning particular stocks. Usually an individual stock's relative weighting
within the Russell 2000, a market-cap weighted index, is not large enough to
have a meaningful effect on the index as a whole. However, in the past six
months three names in particular saw their market caps grow to the point that
their success accounted for a significant amount of the index's advance; these
stocks were CMGI, E*Trade, and Excite, none of which did we own. However, as a
result of the June 30 reconstitution of the Russell 2000, these companies have
been removed from the index.
WHICH STOCKS CONTRIBUTED TO THE PORTFOLIO'S PERFORMANCE?
SJR: Like everyone else, we're excited about the investment possibilities in the
technology sector due to -the growth of the Internet. We think that a less risky
way to take advantage of this trend is to invest in those companies that provide
the infrastructure of the Internet rather than the "dot-coms" that are relying
on advertising revenue for cash flow. In this realm, we've seen strong
performance from Exodus Communications, SDL, and Concentric Network.
Exodus, the leader in high-end mission-critical Web site outsourcing, was the
best performing stock in the portfolio. Exodus has been helped by the boom in
outsourcing of Web site management and the general growth in Internet traffic.
SDL, a leading provider of high-powered semiconductor lasers, was another top
performer. SDL's lasers are used to enhance the optical signal during long-haul
terrestrial and undersea transmission of data. We feel the company is well
positioned to take advantage of the growth in spending by communication
companies as they build global communication networks. Concentric, a leading
provider of IP network services for small to medium-sized companies, was also
strong. Concentric offers services such as high-speed DSL access, Web hosting,
e-commerce services, and Virtual Private Networks.
WHAT STOCKS HINDERED THE PORTFOLIO'S PERFORMANCE?
SJR: The stock of Alterra Healthcare has been mostly down since the beginning of
the year, but we think it can rebound from its decline. The assisted-living
company recently lowered its guidance for 1999 and 2000 earnings as a result of
buying in joint ventures that it had been keeping off its balance sheet.
Additionally, Alterra reported that its occupancy fill rate was coming in lower
than expected. However, we consider Alterra a fundamentally strong company, and
expect that its franchise and earnings should be driven by an aging U.S.
population. Plus, this buying in of off-balance-sheet joint ventures should
result in better earnings visibility going forward.
The stock of Orbital Sciences has been struggling of late, as the market has
been punishing the company for a couple of earnings disappointments. The
company, which launches commercial rockets and is in the process of building a
satellite network, has done a really poor job of managing Street expectations;
last quarter, it
19
<PAGE>
guided quarterly earnings estimates lower, only to report actual earnings even
lower than the revised numbers. The company's business is not a problem, but
we've lost confidence in management and have liquidated our position in the
stock.
WHAT IS YOUR OUTLOOK FOR THE COMING MONTHS?
SJR: We expect the equity market broadening that began in the second quarter to
continue, to the benefit of small-cap names. Even though the Federal Reserve
changed its stance on interest rates back to a neutral bias from a tightening
one, we believe it's likely to enact at least one more 25 bp rate increase
before the end of the year; rising interest rates and continued improvement in
the global economy should accentuate the market's broadening.
Certainly, from a valuation standpoint, we believe small-cap stocks are
attractive relative to large caps. And we're not alone in this assertion. There
has been a significant amount of merger and acquisition activity in the
small-cap arena, with larger companies swooping in and buying smaller ones; this
has been prevalent in the utility, REIT, service, and tech industries. To us,
this means that the larger companies are finding attractive values in the
small-cap sector, which is a good sign that investors may increasingly do the
same.
From a sectoral standpoint, we believe opportunities will continue to exist in
the communications arena. The services area also continues to hold our interest;
we see investment possibilities among several education companies. We're warming
up to the basic industry sector as well, namely chemicals, as the global economy
begins to recover and commodity prices have started to firm.
20
<PAGE>
PORTFOLIO FACTS
INVESTMENT OBJECTIVE
J.P. Morgan Small Company Portfolio seeks to provide a high total return from a
portfolio comprised of equity securities of small companies.The portfolio
invests at least 65% of the value of its total assets in the common stock of
small U.S. companies, -primarily those with market capitalizations of less than
$1 billion. The portfolio is designed for investors who are willing to assume
the somewhat higher risk of investing in small companies in order to seek a
higher return over time than might be expected from a portfolio of stocks of
large companies.
- -------------------------------------------------------------------------------
COMMENCEMENT OF OPERATIONS
1/3/95
- -------------------------------------------------------------------------------
NET ASSETS AS OF 6/30/99
$8,984,722
- -------------------------------------------------------------------------------
DIVIDEND PAYABLE DATE (IF APPLICABLE)
12/13/99
- -------------------------------------------------------------------------------
CAPITAL GAIN PAYABLE DATE (IF APPLICABLE)
12/13/99
EXPENSE RATIO
The portfolio's current annualized expense ratio of 1.15% covers shareholders'
expenses for custody, tax reporting, investment advisory and shareholder
services after reimbursement. The portfolio is no-load and does not charge any
sales, redemption, or exchange fees. There are no additional charges for buying,
selling, safekeeping portfolio shares, or for wiring redemption proceeds from
the portfolio.
PORTFOLIO HIGHLIGHTS
ALL DATA AS OF JUNE 30, 1999
PORTFOLIO ALLOCATION
(AS A PERCENTAGE OF TOTAL INVESTMENTS)
[CHART]
/ / TECHNOLOGY 19.3%
/ / CONSUMET GOODS & SERVICES 17.8%
/ / FINANCE 17.3%
/ / HEALTHCARE 11.0%
/ / INDUSTRIAL PRODUCTS & SERVICES 8.9%
/ / BASIC INDUSTRIES 8.6%
/ / ENERGY 3.9%
/ / TELECOMMUNICATIONS 3.3%
/ / UTILITIES 3.1%
/ / TRANSPORTATION 2.1%
/ / SHERT-TERM & OTHER INVESTMENTS 4.7%
LARGEST HOLDINGS % OF TOTAL INVESTMENTS
- -------------------------------------------------------------------------------
MUELLER INDUSTRIES, INC. (BASIC INDUSTRIES) 1.5%
APPLIED MICRO CIRCUITS CORP. (TECHNOLOGY) 1.5%
HUMAN GENOME SCIENCES, INC. (HEALTHCARE) 1.3%
CINAR CORP., CLASS B
(CONSUMER GOODS & SERVICES) 1.2%
IDEC PHARMACEUTICALS CORP. (HEALTHCARE) 1.2%
GEON CO. (BASIC INDUSTRIES) 1.2%
ATMI INC. (TECHNOLOGY) 1.1%
BANK UNITED CORP., CLASS A (FINANCE) 1.1%
NATIONAL COMMERCE
BANCORPORATION (FINANCE) 1.1%
WELLMAN, INC. (BASIC INDUSTRIES) 1.1%
21
<PAGE>
J.P. MORGAN-INTERNATIONAL OPPORTUNITIES PORTFOLIO
PORTFOLIO REVIEW
The J.P. Morgan International Opportunities Portfolio delivered a solid return
of 11.57% for the six months ended June 30, 1999, exceeding its benchmarks and
the Lipper Variable Annuity International Funds Average.
The portfolio's net asset value per share increased to $11.69 per share on June
30, 1999, from $10.52 on -December 31, 1998 after paying an income dividend of
almost $0.04 per share. The portfolio's net assets rose to nearly $14.3 million
on June 30 from $9.8 million on December 31, 1998.
EXAMINING PERFORMANCE
One way to look at performance is to review a portfolio's average annual total
return. This figure takes the portfolio's actual (or cumulative) return and
shows what would have happened if the portfolio had achieved that return by
performing at a constant rate each year. Average annual total returns represent
the average yearly change of a portfolio's value over various time periods,
typically one, five, or ten years (or since inception). Total returns for
periods of less than one year are not annualized and provide a picture of how a
portfolio has performed over the short term.
<TABLE>
<CAPTION>
PERFORMANCE TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS
---------------------- -----------------------------------------
THREE SIX ONE THREE SINCE
AS OF JUNE 30, 1999 MONTHS MONTHS YEAR YEARS INCEPTION*
- ----------------------------------------------------------------------------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
J.P. Morgan International Opportunities Portfolio 7.39% 11.57% 7.73% 9.28% 10.49%
MSCI All Country World Free ex-U.S. Index** 4.67% 7.15% 9.52% 8.22% 8.90%
MSCI All Country World ex-U.S. Index+ 5.20% 7.94% 10.27% 8.15% 8.60%
MSCI EAFE Index++ 2.54% 3.97% 7.62% 8.81% 9.39%
Lipper Variable Annuity International Funds Average 5.48% 8.06% 5.35% 9.74% 12.30%
</TABLE>
*THE PORTFOLIO COMMENCED OPERATIONS ON JANUARY 3, 1995, AND HAS PROVIDED AN
AVERAGE ANNUAL TOTAL RETURN OF 10.50% FROM THAT DATE THROUGH JUNE 30, 1999. FOR
THE PURPOSES OF COMPARISON, THE "SINCE INCEPTION" RETURNS ARE CALCULATED FROM
DECEMBER 31, 1994, THE FIRST DATE WHEN DATA FOR THE PORTFOLIO, ITS BENCHMARK,
AND ITS LIPPER CATEGORY WERE AVAILABLE.
**MSCI ALL COUNTRY WORLD FREE EX-U.S. INDEX IS AN UNMANAGED INDEX THAT MEASURES
DEVELOPED AND EMERGING FOREIGN STOCK MARKET PERFORMANCE.
+MSCI ALL COUNTRY WORLD EX-U.S. INDEX IS AN UNMANAGED INDEX THAT MEASURES
DEVELOPED AND EMERGING FOREIGN STOCK MARKET PERFORMANCE.
++MSCI-EAFE-INDEX IS AN UNMANAGED INDEX THAT TRACKS THE AVERAGE PERFORMANCE OF
OVER 900 SECURITIES LISTED ON THE STOCK EXCHANGES OF COUNTRIES IN EUROPE,
AUSTRALIA, AND THE FAR EAST.THE INDICES DO NOT INCLUDE FEES OR OPERATING
EXPENSES, AND ARE NOT AVAILABLE FOR ACTUAL INVESTMENT.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. PORTFOLIO RETURNS ARE NET OF
FEES, ASSUME THE REINVESTMENT OF PORTFOLIO DISTRIBUTIONS, AND REFLECT THE
REIMBURSEMENT OF PORTFOLIO EXPENSES AS DESCRIBED IN THE PROSPECTUS. HAD EXPENSES
NOT BEEN SUBSIDIZED, RETURNS WOULD HAVE BEEN LOWER. PORTFOLIO RETURNS DO NOT
REFLECT ANY SEPARATE ACCOUNT EXPENSES IMPOSED ON THE VARIABLE CONTRACTS. THESE
EXPENSES MAY INCLUDE A SALES CHARGE, PREMIUM TAX CHARGE, DAC TAX SALES CHARGE,
COST OF INSURANCE, MORTALITY EXPENSES, OR SURRENDER AND OTHER CHARGES. FOREIGN
INVESTING INVOLVES SPECIAL RISK, INCLUDING ECONOMIC AND POLITICAL INSTABILITY
AND CURRENCY FLUCTUATIONS. LIPPER ANALYTICAL SERVICES, INC. IS A LEADING SOURCE
FOR MUTUAL FUND DATA.
22
<PAGE>
PORTFOLIO MANAGER Q&A
Following is an interview with NIGEL F. EMMETT, vice president, and a member of
the portfolio management team of the J.P. Morgan International Opportunities
Portfolio. Nigel joined J.P. Morgan in 1997. Previously, he was employed by
Brown Brothers Harriman & Co. in New York and Gartmore Investment Management in
London. Nigel earned a B.A. degree in Economics from Manchester University, is
an Associate Member of the Institute of Investment Management and Research
(AIIMR), and is a Chartered Financial Analyst. This interview was conducted on
July 15, 1999, and reflects his views on that date.
THE FUND OUTPERFORMED ITS COMPETITION AND ITS INDEX. HOW DID YOU DO IT?
NE: We outperformed mostly due to stock selection - we owned more of the
undervalued stocks that the market began to favor over the last six months. At
Morgan, we have fundamental, in-house analysts who look for attractively priced
securities. We have a slight bias toward value. Last year, the financial markets
were more interested in growth stocks and were very narrow in their focus. But
early this year, the market leadership broadened and value stocks came back into
favor. Investors have begun to question the valuations of many "growth"
companies.
WHERE WERE THE BRIGHT SPOTS WORLDWIDE?
NE: We don't select stocks by the country in which they are located. We look for
the best values internationally, regardless of location. But the Japanese market
clearly was stronger than most others in the last six months. Foreign buyers
were optimistic that the focus there was on restructuring. Although the world's
second largest economy still has its problems, the situation is slowly
improving. In Brazil, investors were surprised at the resilience of the economy
after the local currency devaluation. Economic growth continued to be strong in
the U.S. and rebounded nicely in Asia. The United Kingdom's economy seems to be
headed for a soft landing, while Continental Europe is starting to show some
signs of a pickup in the second half of this year.
IF YOU DON'T SELECT STOCKS BY COUNTRIES, THEN HOW DO YOU SELECT THEM?
NE: We hold exposure to each industrial sector, but look to purchase the most
undervalued companies within each sector. Take YPF, an example of a stock we
held during the period. We did not buy it because it was the largest stock in
Argentina. We bought it because it was an attractively priced, well-managed oil
company. We wanted to own stock in an oil company, but we are not restricted on
where the company might be located. So after looking at all the major oil
companies internationally, one of our choices was YPF. We bought it because it
was priced right - it happened to be located in Argentina. The subsequent bid
for the company by Repsol of Spain simply confirmed that we had made the right
decision.
23
<PAGE>
YOU SAID JAPAN DID WELL. TELL US WHAT WORKED THERE.
NE: We've actually been underweight Japan versus the benchmark, but we have
purchased a number of attractive Japanese companies which have served us well,
including Yamanouchi Pharmaceutical, which announced in May that it had been
able to extend patents on its drug Gaster (sold under the name of Pepsid in the
U.S.), which represents 50% of its profits. The company is a global competitor,
with a strong new product pipeline that includes treatments for asthma,
hypertension, diabetes and osteoporosis.
EUROPEAN RESTRUCTURING HAS PRESENTED OPPORTUNITIES IN BANK STOCKS, RIGHT?
NE: Yes. Last year, European mergers and acquisitions totaled $570 billion on
the continent. In the first quarter of this year, we already have $350 billion.
One banking merger attracted a lot of attention because it involved three
different French institutions. At first, Societe Generale and Paribas announced
plans to merge. Their share prices did not benefit from the news. But when
Banque Nationale de Paris (BNP) bid for both of them, prices increased
dramatically.
Also in Europe, we owned a stock that fared poorly last year but has risen
nicely this year - Philips Electronics, the Dutch consumer electronics company.
AND BRAZIL?
NE: Tele Norte Leste, which provides local telecommunications services to the
northern and eastern regions of Brazil, rose sharply after foreign investors
regained confidence in the country's currency and economy. Tele Norte Leste
remains attractively valued when compared with other global telecommunications
companies. It is the only provider left in Brazil that does not have a major
international partner.
WHAT IS YOUR OUTLOOK?
NE: We're optimistic. International markets are attractively priced when
compared with the U.S. European markets have not performed particularly well
this year due to concerns over weakness in the region's largest economies;
however, we expect economic growth to improve later in the year, helped by
stronger export demand and the increased competitiveness of the euro. In Japan,
we expect the authorities to take every step possible to sustain a recovery in
the domestic economy. Corporate restructuring is underway, albeit slowly, and
the outlook for the equity market is less troubling than has been the case for
most of the last 10 years. And within emerging markets the economic recovery
still seems to be moving forward. As we explained earlier, we construct this
portfolio stock by stock, focusing on undervalued, attractively priced
companies. There are still plenty of opportunities in international
markets.
24
<PAGE>
PORTFOLIO FACTS
INVESTMENT OBJECTIVE
J.P. Morgan International Opportunities Portfolio seeks to provide a high total
return from a portfolio comprised of equity securities of foreign corporations.
The portfolio is designed for investors with a long-term investment horizon who
want to diversify their investments by adding international equities and take
advantage of investment opportunities outside the U.S. As an international
investment, the portfolio is subject to foreign market, political, and currency
risks.
- -------------------------------------------------------------------------------
COMMENCEMENT OF OPERATIONS
1/3/95
- -------------------------------------------------------------------------------
NET ASSETS AS OF 6/30/99
$14,326,592
- -------------------------------------------------------------------------------
DIVIDEND PAYABLE DATE (IF APPLICABLE)
12/20/99
- -------------------------------------------------------------------------------
CAPITAL GAIN PAYABLE DATE (IF APPLICABLE)
12/20/99
EXPENSE RATIO
The portfolio's annualized expense ratio of 1.20% -covers shareholders' expenses
for custody, tax reporting, investment advisory and shareholder-services, after
reimbursement. The portfolio is no-load and does not charge any sales,
redemption, or exchange fees. There are no additional charges for buying,
selling, safekeeping portfolio shares, or for wiring redemption proceeds from
the portfolio.
PORTFOLIO HIGHLIGHTS
ALL DATA AS OF JUNE 30, 1999
PORTFOLIO ALLOCATION
(AS A PERCENTAGE OF TOTAL INVESTMENTS)
[CHART]
/ / EUROPE/AFRICA 57.8%
/ / JAPAN 17.3%
/ / ASIA PACIFIC 12.1%
/ / LATIN AMERICA 3.4%
/ / CANADA 0.6%
/ / SHORT-TERM AND OTHER INVESTMENTS 8.8%
LARGEST HOLDINGS % OF TOTAL INVESTMENTS
- -------------------------------------------------------------------------------
PHILIPS ELECTRONICS (NETHERLANDS) 2.3%
IBERDOLA SA (SPAIN) 2.0%
HONG KONG ELECTRIC HOLDINGS LTD. (HONG KONG) 1.9%
TOTAL FINA SA, B SHARES (FRANCE) 1.8%
DDI CORP. (JAPAN) 1.7%
FINLAYSON GLOBAL, ZERO COUPON DUE 02/19/04 (SINGAPORE) 1.5%
TELEFONICA SA (SPAIN) 1.5%
SWISSCOM AG (SWITZERLAND) 1.5%
VEBA AG (GERMANY) 1.4%
SCHWEIZERISCHE RUECKVERSICHERUNGS-GESELLSCHAFT (SWITZERLAND) 1.4%
25
<PAGE>
J.P. MORGAN TREASURY MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT YIELD TO
(IN THOUSANDS) SECURITY DESCRIPTION MATURITY DATES MATURITY VALUE
- -------------- ------------------------------------------------- -------------- -------- -----------
<C> <S> <C> <C> <C>
U.S. TREASURY OBLIGATIONS (98.5%)
$ 1,755 Bills............................................ 07/15/99 3.650% $ 1,752,059
-----------
OTHER INVESTMENT COMPANIES (2.4%)
43 SSGA Money Market Fund........................... 07/01/99 4.687 43,326
-----------
TOTAL INVESTMENTS (COST $1,795,385) (100.9%)................................ 1,795,385
LIABILITIES IN EXCESS OF OTHER ASSETS (-0.9%)............................... (16,087)
-----------
NET ASSETS (100.0%)......................................................... $ 1,779,298
-----------
-----------
</TABLE>
- ------------------------------
Note: For federal income tax purposes, the cost of securities at June 30, 1999,
was substantially the same as the cost for financial
statement purposes.
The Accompanying Notes are an Integral Part of the Financial Statements.
28
<PAGE>
J.P. MORGAN BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT SECURITY DESCRIPTION RATING VALUE
- ------------------- ------------------------------------------------- ------------ ------------
<C> <S> <C> <C>
CERTIFICATES OF DEPOSIT-FOREIGN (0.2%)
$ 75,000 Canadian Imperial Bank of Commerce, N.Y., 6.200%
due 08/01/00 (cost $75,008).................... Aa3/AA- $ 75,052
------------
COLLATERALIZED MORTGAGE OBLIGATIONS AND ASSET BACKED SECURITIES (3.9%)
FINANCIAL SERVICES (3.9%)
200,000 Bear Stearns Structured Securities Inc.,
Sequential Payer, Series 1997-2, Class 1A5,
Callable, (144A), 7.000% due 08/25/36 (s)...... Aaa/NR 192,875
200,000 Chase Funding Mortgage Loan, Series 1998-2, Class
IIA2, 5.875% due 03/25/17...................... Aaa/AAA 198,281
310,000 Citibank Credit Card Master Trust I, PO, Series
1997-6, Class A, Callable, 6.523% due 08/15/06
(y)............................................ Aaa/AAA 223,101
155,000 COMM, Sequential Payer, Series 1999-1, Class A2,
Partially Callable, 6.455% due 09/15/08........ Aaa/NR 149,720
170,917 CS First Boston Mortgage Securities Corp.,
Sequential Payer, Series 1997-C2, Class A1,
Callable, 6.400% due 02/17/04.................. Aaa/AAA 170,383
100,000 CS First Boston Mortgage Securities Corp.,
Subordinated Bond, Series 1997-C2, Class B,
Callable, 6.720% due 11/17/07.................. Aa2/NR 97,531
160,000 Morgan Stanley Capital I, Inc., Sequential Payer,
Series 1998-XL2, Class A2, Partially Callable,
6.170% due 10/03/08............................ NR/AAA 150,500
200,000 Morgan Stanley Capital I, Inc., Subordinated
Bond, CSTR, Series 1997-RR, Class D, Callable,
(144A), 7.753% due 04/30/39 (s)(v)............. NR/NR 150,437
255,000 Nomura Asset Securities Corp., Sequential Payer,
Series 1998-D6, Class BB A1B, Partially
Callable, 6.590% due 03/17/28.................. Aaa/AAA 248,426
------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS AND
ASSET BACKED SECURITIES (COST
$1,655,669)................................ 1,581,254
------------
CONVERTIBLE BONDS (0.0%)
RETAIL (0.0%)
10,000 Corporate Express, Inc., Callable, 4.500% due
07/01/00 (cost $9,471)......................... B3/B- 8,987
------------
CORPORATE OBLIGATIONS (16.5%)
AEROSPACE (0.3%)
100,000 Northrop Grumman Corp., Callable, 9.375% due
10/15/24....................................... Baa3/BBB- 106,093
------------
APPARELS & TEXTILES (0.1%)
25,000 Fruit of the Loom, Inc., Refunding, 6.500% due
11/15/03....................................... Ba1/BB 22,563
15,000 Polymer Group, Inc., Series B, Callable, 9.000%
due 07/01/07................................... B2/B 14,662
20,000 Westpoint Stevens, Inc., Callable, 7.875% due
06/15/05 (s)................................... Ba3/BB 19,550
------------
56,775
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
29
<PAGE>
J.P. MORGAN BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT SECURITY DESCRIPTION RATING VALUE
- ------------------- ------------------------------------------------- ------------ ------------
<C> <S> <C> <C>
BROADCASTING & PUBLISHING (0.1%)
$ 27,000 Capstar Broadcasting, Callable, 12.750% due
02/01/09 (v)................................... B3/B- $ 22,815
40,000 Clear Channel Communication, Inc., Callable,
7.250% due 10/15/27............................ Baa3/BBB- 36,707
------------
59,522
------------
BUILDING MATERIALS (0.9%)
350,000 Armstrong World, Inc., 6.350% due 08/15/03 (t)... Baa1/A- 343,976
------------
CHEMICALS (0.4%)
150,000 Cytec Industries, Inc., MOPPRS, 6.846% due
05/11/05 (s)(v)................................ Baa2/BBB 142,074
------------
COMMERCIAL SERVICES (1.8%)
700,000 Cendant Corp., Callable, 7.750% due 12/01/03
(t)............................................ Baa1/BBB 708,827
------------
ELECTRIC (0.8%)
71,000 Calpine Corp., 7.625% due 04/15/06............... Ba2/BB 68,763
8,000 Calpine Corp., 7.875% due 04/01/08............... Ba2/BB 7,660
125,000 East Coast Power LLC, Callable, (144A), 7.536%
due 06/30/17................................... Baa3/BBB- 117,029
40,000 East Coast Power LLC, Callable, Sinking Fund,
(144A), 7.066% due 03/31/12.................... Baa3/BBB- 37,833
50,000 Niagara Mohawk Power Corp., Series B, Callable,
7.000% due 10/01/00............................ Baa3/BBB- 50,176
50,000 Pacific Corp., Series H, MTN, Callable, 6.750%
due 07/15/04................................... A2/A+ 50,408
------------
331,869
------------
ELECTRONICS (0.1%)
50,000 Motorola, Inc., 7.500% due 05/15/25.............. A1/A+ 50,618
------------
ENERGY SOURCE (0.3%)
7,000 Cogentrix Energy, Inc., Callable, 8.750% due
10/15/08....................................... Ba1/BB+ 7,087
100,000 NGC Corp., Callable, 7.625% due 10/15/26......... Baa2/BBB+ 94,930
------------
102,017
------------
ENTERTAINMENT, LEISURE & MEDIA (0.3%)
30,000 Fox/Liberty Networks LLC, Callable, 8.875% due
08/15/07....................................... B1/B 31,200
30,000 Jacor Communications Co., Series B, Callable,
8.750% due 06/15/07............................ Ba2/BB+ 31,875
50,000 Lamar Advertising Co., Callable, 8.625% due
09/15/07....................................... B1/B 50,750
------------
113,825
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
30
<PAGE>
J.P. MORGAN BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT SECURITY DESCRIPTION RATING VALUE
- ------------------- ------------------------------------------------- ------------ ------------
<C> <S> <C> <C>
FINANCIAL SERVICES (5.4%)
$ 45,000 Associates Corp. N.A., Putable, 5.960% due
05/15/37....................................... Aa3/AA- $ 45,019
100,000 Banc One Corp., 7.625% due 10/15/26.............. A1/A 100,135
100,000 Bank of America Corp., 7.250% due 10/15/25....... Aa3/A 96,407
50,000 FCB/NC Capital Trust I, Callable, 8.050% due
03/01/28....................................... Baa3/BB+ 47,361
50,000 General Motors Acceptance Corp., MTN, 5.900% due
03/06/00....................................... A2/A 50,055
300,000 Household Finance Corp., Series E, MTN, 5.455%
due 06/17/05 (t)(v)............................ A2/A 299,013
100,000 Keystone Financial Mid-Atlantic Funding, MTN,
6.500% due 05/31/08............................ Baa2/BBB+ 94,312
450,000 Norwest Financial, Inc., 7.200% due 04/01/04
(s)............................................ Aa3/A+ 460,287
100,000 Safeco Capital Trust I, Callable, 8.072% due
07/15/37 (s)................................... A3/A- 94,861
150,000 Southern Co. Capital Trust I, Callable, 8.190%
due 02/01/37 (s)............................... A3/BBB+ 151,076
250,000 Southern Co. Capital Trust II, Callable, 8.140%
due 02/15/27 (s)............................... A3/BBB+ 246,455
500,000 Toyota Motor Credit Corp., 5.625% due 11/13/03
(s)............................................ Aa1/AAA 484,190
------------
2,169,171
------------
HEALTH SERVICES (0.2%)
10,000 Paracelsus Healthcare Corp., Callable, 10.000%
due 08/15/06................................... B3/B- 7,800
15,000 Tenet Healthcare Corp., Callable, 8.625% due
01/15/07....................................... Ba3/BB- 14,795
40,000 Tenet Healthcare Corp., Series B, Callable,
7.625% due 06/01/08............................ Ba1/BB+ 37,400
------------
59,995
------------
METALS & MINING (0.1%)
50,000 P&L Coal Holdings Corp., Series B, Callable,
9.625% due 05/15/08............................ B2/B 50,375
------------
NATURAL GAS (0.1%)
50,000 Atlantic Richfield Co., 8.250% due 02/01/22...... A2/A 55,847
------------
OIL-PRODUCTION (1.7%)
675,000 Coastal Corp., 6.500% due 05/15/06............... Baa2/BBB 650,363
15,000 Plains Resources Inc., Series D, Callable,
10.250% due 03/15/06........................... B2/B- 15,263
30,000 Pogo Producing Co., Series B, Callable, 10.375%
due 02/15/09................................... B2/B+ 31,200
------------
696,826
------------
PERSONAL CARE (0.1%)
50,000 Procter & Gamble Co., Callable, 6.450% due
01/15/26....................................... Aa2/AA 45,727
------------
POLLUTION CONTROL (0.0%)
5,000 Allied Waste North America, Inc., Series B,
Callable, 7.625% due 01/01/06.................. Ba3/BB 4,650
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
31
<PAGE>
J.P. MORGAN BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT SECURITY DESCRIPTION RATING VALUE
- ------------------- ------------------------------------------------- ------------ ------------
<C> <S> <C> <C>
RAILROADS (0.7%)
$ 300,000 Union Pacific Corp., 5.780% due 10/15/01 (s)..... Baa3/BBB- $ 295,314
------------
TELECOMMUNICATIONS (0.1%)
15,000 McLeodUSA, Inc., Callable, 9.250% due 07/15/07... B2/B+ 14,888
10,000 Qwest Communications International, Inc., Series
B, Callable, 10.875% due 04/01/07.............. Ba1/BB+ 11,334
------------
26,222
------------
TELEPHONE (1.4%)
170,000 AT&T Corp., Callable, 6.000% due 03/15/09........ A1/AA- 159,764
250,000 Pacific Bell, 6.125% due 02/15/08 (t)............ A1/AA- 240,078
175,000 US West Capital Funding, Inc., Callable, 6.250%
due 07/15/05 (s)............................... Baa1/A- 169,622
------------
569,464
------------
TRANSPORTATION (0.3%)
15,000 Atlantic Express Transportation Corp., Callable,
10.750% due 02/01/04........................... B2/B 14,963
115,000 Federal Express Corp., Series 1999-1, Class C,
8.250% due 01/15/19............................ Baa1/BBB+ 117,047
------------
132,010
------------
UTILITIES (1.3%)
200,000 Atmos Energy Corp., Callable, 6.750% due 07/15/28
(t)............................................ A3/A- 177,956
350,000 Texas Utilities Co., Callable, Putable, 5.940%
due 10/15/01 (s)(v)............................ Baa3/BBB 346,364
------------
524,320
------------
TOTAL CORPORATE OBLIGATIONS (COST
$6,827,179)................................ 6,645,517
------------
FOREIGN CORPORATE OBLIGATIONS (2.0%)
CANADA (1.3%)
FINANCIAL SERVICES (0.5%)
200,000 McKesson Finance of Canada, (144A), 6.550% due
11/01/02 (s)................................... Baa1/BBB+ 195,972
------------
GAS-PIPELINES (0.1%)
50,000 Trans-Canada Pipelines, MTN, Callable, 7.060% due
10/14/25....................................... A2/A- 47,208
------------
OIL PRODUCTION (0.1%)
49,940 Express Pipeline LP, Series B, Callable, Sinking
Fund, (144A), 7.390% due 12/31/17.............. Baa3/BBB- 43,822
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
32
<PAGE>
J.P. MORGAN BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT SECURITY DESCRIPTION RATING VALUE
- ------------------- ------------------------------------------------- ------------ ------------
<C> <S> <C> <C>
TELECOMMUNICATIONS (0.0%)
$ 15,000 Rogers Cablesystems Ltd., Callable, 10.000% due
12/01/07....................................... Ba3/BB+ $ 16,125
------------
TRANSPORT & SERVICES (0.6%)
250,000 Laidlaw, Inc., 6.500% due 05/01/05 (s)........... Baa3/BBB 230,660
------------
533,787
------------
UNITED KINGDOM (0.7%)
ELECTRIC (0.7%)
300,000 United Utilities PLC, Callable, 6.250% due
08/15/05 (s)................................... A2/A 286,998
------------
TOTAL FOREIGN CORPORATE OBLIGATIONS (COST
$862,065).................................. 820,785
------------
FOREIGN GOVERNMENT OBLIGATIONS (2.0%)
CANADA (1.7%)
175,000 Hydro-Quebec, Series HQ, 9.500% due 11/15/30
(s)............................................ A2/A+ 218,575
200,000 Province of Ontario, 5.500% due 10/01/08......... Aa3/AA- 184,048
250,000 Province of Ontario, 7.625% due 06/22/04 (t)..... Aa3/AA- 263,513
------------
666,136
------------
ITALY (0.3%)
100,000 Republic of Italy, 6.875% due 09/27/23 (s)....... Aa3/AA 100,527
------------
TOTAL FOREIGN GOVERNMENT OBLIGATIONS (COST
$789,173).................................. 766,663
------------
SOVEREIGN BONDS (0.4%)
MEXICO (0.2%)
65,000 United Mexican States Global Bonds, 11.500% due
05/15/26....................................... Ba2/BB 72,475
------------
PANAMA (0.1%)
64,158 Republic of Panama PDI, Series 20 Year, Sinking
Fund, 6.4625% due 07/17/16 (v)................. Ba1/BB+ 47,076
------------
PERU (0.1%)
60,000 Republic of Peru PDI, Series 20 Year, Sinking
Fund, 4.500% due 03/07/17 (v).................. NR/BB 36,750
------------
TOTAL SOVEREIGN BONDS (COST $164,476)........ 156,301
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
33
<PAGE>
J.P. MORGAN BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY DESCRIPTION VALUE
- ------------------- --------------------------------------------------------------- ------------
<C> <S> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS (44.7%)
FEDERAL HOME LOAN MORTGAGE CORP. (8.4%)
$ 1,070,000 5.125% due 10/15/08............................................ $ 958,816
98,328 6.000% due 04/01/11............................................ 95,347
76,086 7.000% due 02/01/26............................................ 75,278
1,136,638 7.000% due 02/01/28............................................ 1,124,556
21,764 8.000% due 11/01/26............................................ 22,362
67,220 8.500% due 08/01/26............................................ 70,223
310,000 REMIC: Pac(11), Series 1694, Class PQ, Partially Callable,
6.500% due 09/15/23 (t)...................................... 309,126
791,630 REMIC: Sequential Payer, Series 2080, Class Z, Partially
Callable, 6.500% due 08/15/28................................ 712,712
------------
3,368,420
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (27.1%)
170,000 6.160% due 08/07/28............................................ 159,003
311,577 7.000% due 05/01/28............................................ 307,973
1,420,914 7.000% due 08/01/28............................................ 1,404,474
64,672 8.500% due 05/01/09............................................ 67,446
300,000 REMIC: Pac-1(11), Series 1993-78, Class G, 6.500% due 11/25/07
(t).......................................................... 300,279
1,245,000 TBA, 6.000% due 07/01/29....................................... 1,169,528
1,000,000 TBA, 6.500% due 07/01/14....................................... 985,310
6,155,000 TBA, 6.500% due 07/01/29....................................... 5,937,667
540,000 TBA, 7.000% due 07/01/29....................................... 533,758
------------
10,865,438
------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (9.2%)
83,643 6.500% due 12/15/23............................................ 80,898
297,577 7.000% due 08/15/12............................................ 299,993
498,700 7.000% due 07/15/28............................................ 491,998
371,864 7.000% due 09/15/28............................................ 366,866
2,403,028 7.000% due 03/15/29............................................ 2,370,731
74,966 7.500% due 02/15/27............................................ 75,668
------------
3,686,154
------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (COST
$18,218,634)............................................. 17,920,012
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
34
<PAGE>
J.P. MORGAN BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY DESCRIPTION VALUE
- ------------------- --------------------------------------------------------------- ------------
<C> <S> <C> <C>
U.S. TREASURY OBLIGATIONS (13.9%)
U.S. TREASURY BONDS (4.9%)
580,000 5.250% due 11/15/28 (s)........................................ $ 514,118
100,000 5.500% due 08/15/28 (s)........................................ 91,562
200,000 6.500% due 11/15/26 (s)........................................ 207,782
1,083,000 6.750% due 08/15/26 (s)(t)..................................... 1,159,481
------------
1,972,943
------------
U.S. TREASURY NOTES (9.0%)
$ 85,000 5.375% due 06/30/03 (s)........................................ 83,977
390,000 5.500% due 05/15/09............................................ 380,979
225,000 6.500% due 08/15/05 (s)........................................ 231,926
485,000 6.625% due 06/30/01 (s)........................................ 494,778
15,000 6.625% due 03/31/02 (s)........................................ 15,373
1,888,000 6.875% due 05/15/06 (s)........................................ 1,987,705
375,000 7.875% due 11/15/04............................................ 410,156
------------
3,604,894
------------
TOTAL U.S. TREASURY OBLIGATIONS (COST $5,773,940).......... 5,577,837
------------
<CAPTION>
MOODY'S/S&P
RATING
------------
<C> <S> <C> <C>
CONVERTIBLE PREFERRED STOCKS (0.2%)
INDUSTRIAL PRODUCTS & SERVICES (0.2%)
100 Home Ownership Funding, (144A), 13.331% due
12/30/06 (v) (cost $100,104)................... Aaa/NR 85,170
------------
SHORT-TERM INVESTMENTS (33.9%)
CORPORATE OBLIGATIONS (0.1%)
50,000 Chrysler Financial Corp., Series P, MTN, 6.320% due 07/14/99... 50,011
------------
U.S. TREASURY OBLIGATIONS (31.2%)
700,000 Bills, 4.170% due 07/22/99 (y)................................. 698,289
11,822,258 Bills, 3.650% due 07/15/99 (y)................................. 11,822,258
------------
12,520,547
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
35
<PAGE>
J.P. MORGAN BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY DESCRIPTION VALUE
- ------------------- --------------------------------------------------------------- ------------
<C> <S> <C> <C>
OTHER INVESTMENT COMPANIES (2.6%)
$ 1,017,625 SSGA Money Market Fund, 4.687% due 07/01/99 (y)................ $ 1,017,625
------------
TOTAL SHORT-TERM INVESTMENTS (COST $13,588,168)............ 13,588,183
------------
TOTAL INVESTMENTS (COST $48,063,887) (117.7%).................. 47,225,761
LIABILITIES IN EXCESS OF OTHER ASSETS (-17.7%)................. (7,093,999)
------------
NET ASSETS (100.0%)............................................ $ 40,131,762
------------
------------
</TABLE>
- ------------------------------
Note: Based on the cost of investments of $48,063,982 for federal income tax
purposes at June 30, 1999, the aggregate gross unrealized appreciation and
depreciation was $41,365 and $879,586, respectively, resulting in net unrealized
depreciation of $838,221.
(s) Security is fully or partially segregated with custodian as collateral for
futures contracts or with broker as initial margin for futures contracts.
$5,829,918 of the market value has been segregated.
(t) All or a portion of the security has been segregated as collateral for TBA
securities.
(v) Rate shown reflects current rate on variable or floating rate instrument or
instrument with step coupon rate.
(y) Yield to maturity.
144A -- Securities restricted for resale to Qualified Institutional Buyers.
CSTR -- Collateral Strip Rate.
MOPPRS -- Mandatory Par Put Remarked Securities.
MTN -- Medium Term Note.
NR -- Not Rated.
PDI -- Past Due Interest.
PO -- Principal Only.
REMIC -- Real Estate Mortgage Investment Conduit.
TBA -- Security purchased on a forward commitment basis with an approximate
principal amount and no definite maturity date. The actual principal amount and
maturity date will be determined upon settlement.
The Accompanying Notes are an Integral Part of the Financial Statements.
36
<PAGE>
J.P. MORGAN U.S. DISCIPLINED EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
COMMON STOCKS (97.7%)
BASIC INDUSTRIES (2.4%)
CHEMICALS (1.6%)
Dow Chemical Co.................................. 1,500 $ 190,312
IMC Global, Inc.................................. 800 14,100
Lyondell Chemical Co............................. 800 16,500
PPG Industries, Inc.............................. 1,200 70,875
Praxair, Inc..................................... 1,100 53,831
Rohm & Haas Co.(s)............................... 1,800 77,175
Solutia, Inc.+................................... 800 17,050
Union Carbide Corp............................... 900 43,875
------------
483,718
------------
FOREST PRODUCTS & PAPER (0.5%)
Bowater, Inc..................................... 200 9,450
Fort James Corp.................................. 1,000 37,875
International Paper Co........................... 1,500 75,750
Louisiana-Pacific Corp........................... 500 11,875
Temple-Inland, Inc............................... 400 27,300
------------
162,250
------------
METALS & MINING (0.3%)
Allegheny Teledyne, Inc.......................... 1,600 36,200
Freeport-McMoran Copper & Gold, Inc.+............ 1,400 25,112
Nucor Corp....................................... 200 9,487
USX-U.S. Steel Group............................. 500 13,500
------------
84,299
------------
TOTAL BASIC INDUSTRIES......................... 730,267
------------
CONSUMER GOODS & SERVICES (20.9%)
APPARELS & TEXTILES (0.1%)
Jones Apparel Group, Inc.+....................... 500 17,156
------------
AUTOMOTIVE (2.0%)
Dana Corp........................................ 700 32,244
Delphi Automotive Systems Corp................... 2,300 42,694
Ford Motor Co.................................... 4,400 248,325
General Motors Corp.............................. 2,700 178,200
Genuine Parts Co................................. 700 24,500
Goodyear Tire and Rubber Co...................... 600 35,287
Lear Corp.+...................................... 600 29,850
------------
591,100
------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
BROADCASTING & PUBLISHING (2.6%)
Comcast Corp., Class A........................... 6,600 $ 253,687
Knight - Ridder, Inc............................. 700 38,456
MediaOne Group, Inc.+............................ 4,200 312,375
New York Times Co., Class A...................... 1,700 62,581
Times Mirror Co. New............................. 700 41,475
Washington Post Co., Class B..................... 100 53,775
------------
762,349
------------
ENTERTAINMENT, LEISURE & MEDIA (2.4%)
America Online, Inc.+............................ 3,500 386,750
International Game Technology.................... 3,100 57,350
Mattel, Inc...................................... 1,700 44,944
Seagram Company Ltd.(i).......................... 4,300 216,612
------------
705,656
------------
FOOD, BEVERAGES & TOBACCO (4.6%)
Bestfoods........................................ 1,500 74,250
Coca-Cola Co..................................... 1,600 100,000
H.J. Heinz Co.................................... 1,500 75,187
Hershey Foods Corp............................... 600 35,625
Kellogg Co....................................... 1,300 42,900
Nabisco Holdings Corp. - Class A................. 200 8,650
Pepsi Bottling Group, Inc........................ 1,400 32,287
PepsiCo, Inc..................................... 6,700 259,206
Philip Morris Companies, Inc.(s)................. 10,300 413,931
Ralston-Ralston Purina Group..................... 1,900 57,831
Sara Lee Corp.................................... 3,800 86,212
Unilever NV (ADR)................................ 2,700 188,325
------------
1,374,404
------------
HOUSEHOLD APPLIANCES & FURNISHINGS (0.1%)
Leggett & Platt, Inc............................. 800 22,250
------------
HOUSEHOLD PRODUCTS (2.0%)
Kimberly-Clark Corp.............................. 2,300 131,100
Procter & Gamble Co.............................. 5,100 455,175
------------
586,275
------------
PERSONAL CARE (0.5%)
Gillette Co...................................... 3,700 151,700
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
37
<PAGE>
J.P. MORGAN U.S. DISCIPLINED EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
RESTAURANTS & HOTELS (0.5%)
Hilton Hotels Corp............................... 2,400 $ 34,050
Mandalay Resort Group+........................... 900 19,012
Mirage Resorts, Inc.+............................ 1,900 31,825
Starwood Hotels & Resorts Worldwide, Inc.(s)..... 1,700 51,956
------------
136,843
------------
RETAIL (6.1%)
Abercrombie & Fitch Co., Class A+................ 500 24,000
AutoZone, Inc.+.................................. 800 24,100
Dayton Hudson Corp............................... 2,200 143,000
Dillard's, Inc., Class A......................... 500 17,562
Federated Department Stores, Inc.+............... 1,400 74,112
Gap, Inc......................................... 3,700 186,387
Hannaford Brothers Co............................ 200 10,700
Home Depot, Inc.................................. 2,400 154,650
J.C. Penney, Inc................................. 1,300 63,131
Kmart Corp.+..................................... 2,500 41,094
Kroger Co.+...................................... 2,100 58,669
May Department Stores Co......................... 1,700 69,487
Nordstrom, Inc................................... 700 23,450
Safeway, Inc.+................................... 2,500 123,750
Sears, Roebuck & Co.............................. 1,600 71,300
TJX Companies, Inc............................... 1,600 53,300
Toys 'R' Us, Inc.+............................... 1,300 26,894
Wal-Mart Stores, Inc............................. 13,100 632,075
------------
1,797,661
------------
TOTAL CONSUMER GOODS & SERVICES................ 6,145,394
------------
ENERGY (6.0%)
GAS-PIPELINES (0.1%)
Columbia Energy Group............................ 500 31,344
------------
OIL-PRODUCTION (5.7%)
Chevron Corp..................................... 1,800 171,337
Conoco, Inc...................................... 600 16,725
Exxon Corp....................................... 6,700 516,737
Mobil Corp....................................... 3,600 356,400
Phillips Petroleum Co............................ 1,100 55,344
Royal Dutch Petroleum Co. (ADR).................. 7,100 427,775
Texaco, Inc...................................... 1,800 112,500
Tosco Corp.(s)................................... 1,100 28,531
------------
1,685,349
------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
OIL-SERVICES (0.2%)
Amerada Hess Corp................................ 300 $ 17,850
Cooper Cameron Corp.+............................ 300 11,119
ENSCO International, Inc......................... 500 9,969
Global Marine, Inc.+............................. 600 9,262
Smith International, Inc.+....................... 200 8,687
------------
56,887
------------
TOTAL ENERGY................................... 1,773,580
------------
FINANCE (15.4%)
BANKING (8.9%)
Associated Banc Corp............................. 200 8,300
Astoria Financial Corp........................... 500 21,953
Bank of America Corp.(s)......................... 6,701 491,267
Bank One Corp.................................... 3,600 214,425
Charter One Financial, Inc....................... 600 16,669
Citigroup, Inc................................... 12,500 593,750
Comerica, Inc.................................... 600 35,662
Compass Bancshares, Inc.......................... 400 10,912
Dime Bancorp, Inc................................ 400 8,050
First American Corp.............................. 800 33,250
First Union Corp................................. 3,900 183,300
FirstMerit Corp.................................. 300 8,419
Golden West Financial Corp....................... 200 19,600
GreenPoint Financial Corp........................ 400 13,125
Hibernia Corp., Class A.......................... 600 9,412
KeyCorp.......................................... 2,100 67,462
Mellon Bank Corp................................. 1,900 69,112
Mercantile Bankshares Corp....................... 300 10,603
National City Corp............................... 1,000 65,500
National Commerce Bancorporation................. 400 8,762
North Fork Bancorporation, Inc................... 500 10,656
PNC Bank Corp.................................... 1,100 63,387
Regions Financial Corp........................... 800 30,600
Southtrust Corp.................................. 600 23,006
Sovereign Bancorp, Inc........................... 600 7,294
Summit Bancorp................................... 600 25,087
SunTrust Bank, Inc............................... 1,200 83,325
TCF Financial Corp............................... 300 8,362
U.S. Bancorp..................................... 3,100 105,400
Union Planters Corp.............................. 500 22,344
Washington Mutual, Inc.(s)....................... 2,600 91,975
Wells Fargo Co................................... 6,100 260,775
------------
2,621,744
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
38
<PAGE>
J.P. MORGAN U.S. DISCIPLINED EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
FINANCIAL SERVICES (3.0%)
Associates First Capital Corp., Class A.......... 2,700 $ 119,644
Bear Stearns Companies, Inc...................... 400 18,700
CIT Group, Inc., Class A......................... 300 8,662
Federal Home Loan Mortgage Corp.................. 2,500 145,000
Federal National Mortgage Association............ 3,300 225,637
Franklin Resources, Inc.......................... 900 36,562
Goldman Sachs Group, Inc.+....................... 1,600 115,600
Household International, Inc..................... 1,800 85,275
Merrill Lynch & Company, Inc..................... 1,300 103,919
Paine Webber Group Inc........................... 500 23,375
The FINOVA Group, Inc............................ 200 10,525
------------
892,899
------------
INSURANCE (3.5%)
Allstate Corp.................................... 5,800 208,075
Ambac Financial Group, Inc....................... 700 39,987
American International Group, Inc................ 800 93,650
Aon Corp......................................... 1,800 74,250
Chubb Corp....................................... 800 55,600
CIGNA Corp....................................... 1,300 115,700
Equitable Companies, Inc......................... 700 46,900
Marsh & McLennan Companies, Inc.................. 2,100 158,550
MBIA, Inc........................................ 700 45,325
Mercury General Corp............................. 400 13,600
St. Paul Companies, Inc.......................... 1,600 50,900
Torchmark Corp................................... 1,000 34,125
Travelers Property Casualty Corp., Class A....... 500 19,562
UNUM Corp.+...................................... 1,700 93,075
------------
1,049,299
------------
TOTAL FINANCE.................................. 4,563,942
------------
HEALTHCARE (10.7%)
BIOTECHNOLOGY (1.1%)
Amgen, Inc.+..................................... 3,400 206,869
Chiron Corp.+.................................... 1,200 24,862
Genzyme Corp.+................................... 800 38,775
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
BIOTECHNOLOGY (CONTINUED)
MedImmune, Inc.+................................. 400 $ 27,163
PE Corp.- PE Biosystems Group.................... 300 34,425
------------
332,094
------------
HEALTH SERVICES (1.1%)
Aetna, Inc....................................... 900 80,494
Columbia / HCA Healthcare Corp................... 3,400 77,563
HCR Manor Care, Inc.+............................ 700 16,931
Health Management Associates, Inc., Class A+..... 1,600 18,000
HEALTHSOUTH Corp.+............................... 2,600 38,838
Humana, Inc.+.................................... 1,000 12,938
Pacificare Health Systems, Class B+.............. 200 14,394
Tenet Healthcare Corp.+.......................... 1,900 35,269
Wellpoint Health Networks, Inc.+................. 400 33,950
------------
328,377
------------
MEDICAL SUPPLIES (0.3%)
Becton, Dickinson & Co........................... 1,600 48,000
Genzyme Surgical Products+....................... 788 3,471
Medtronic, Inc................................... 400 31,150
------------
82,621
------------
PHARMACEUTICALS (8.2%)
ALZA Corp.+...................................... 1,100 55,963
American Home Products Corp...................... 8,700 500,250
Bristol-Myers Squibb Co.(s)...................... 9,300 655,069
Eli Lilly & Co................................... 4,500 322,313
Forest Laboratories, Inc.+....................... 1,100 50,875
Johnson & Johnson................................ 200 19,600
Merck & Co., Inc................................. 1,800 133,200
Monsanto Co.(s).................................. 6,000 236,625
Pfizer, Inc...................................... 400 43,900
Warner-Lambert Co................................ 5,600 388,500
Watson Pharmaceuticals, Inc.+.................... 600 21,038
------------
2,427,333
------------
TOTAL HEALTHCARE............................... 3,170,425
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
39
<PAGE>
J.P. MORGAN U.S. DISCIPLINED EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
INDUSTRIAL PRODUCTS & SERVICES (10.4%)
AEROSPACE (1.8%)
Boeing Co........................................ 5,700 $ 251,869
Lockheed Martin Corp............................. 3,400 126,650
Raytheon Co., Class A............................ 2,400 165,300
------------
543,819
------------
BUILDING MATERIALS (0.1%)
Sherwin-Williams Co.............................. 700 19,425
USG Corp......................................... 200 11,200
------------
30,625
------------
CAPITAL GOODS (0.2%)
Eaton Corp....................................... 400 36,800
PACCAR, Inc...................................... 400 21,363
------------
58,163
------------
COMMERCIAL SERVICES (1.0%)
Cendant Corp.+................................... 8,000 164,000
Equifax, Inc..................................... 1,400 49,963
R.R. Donnelley & Sons Co......................... 1,200 44,475
Service Corp. International...................... 2,600 50,050
------------
308,488
------------
DIVERSIFIED MANUFACTURING (5.9%)
Alcoa, Inc....................................... 2,100 129,938
Cooper Industries, Inc........................... 800 41,600
Deere & Co....................................... 1,200 47,550
Eastman Kodak Co................................. 2,500 169,375
General Electric Co.............................. 5,600 632,800
Harris Corp...................................... 600 23,513
Hubbell, Inc., Class B........................... 300 13,613
ITT Industries, Inc.............................. 700 26,688
Parker Hannifin Corp............................. 600 27,450
Tenneco, Inc..................................... 1,300 31,038
Tyco International Ltd.(i)....................... 3,600 341,100
Xerox Corp....................................... 4,200 248,063
------------
1,732,728
------------
ELECTRICAL EQUIPMENT (0.5%)
Emerson Electric Co.............................. 2,100 132,038
W.W. Grainger, Inc............................... 500 26,906
------------
158,944
------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
MACHINERY (0.1%)
Dover Corp....................................... 1,100 $ 38,500
------------
PACKAGING & CONTAINERS (0.1%)
Smurfit-Stone Container Corp.+................... 1,000 20,531
------------
POLLUTION CONTROL (0.7%)
Waste Management, Inc.+.......................... 4,100 220,375
------------
TOTAL INDUSTRIAL PRODUCTS & SERVICES........... 3,112,173
------------
TECHNOLOGY (21.9%)
COMPUTER PERIPHERALS (0.4%)
EMC Corp.+....................................... 1,500 82,500
Quantum Corp.+................................... 600 14,438
Seagate Technology, Inc.+........................ 800 20,500
------------
117,438
------------
COMPUTER SOFTWARE (3.5%)
BMC Software, Inc.+.............................. 600 32,381
Computer Associates International, Inc........... 2,000 110,000
Electronic Arts Inc.+............................ 200 10,825
Microsoft Corp.+................................. 9,700 874,213
------------
1,027,419
------------
COMPUTER SYSTEMS (4.7%)
Apple Computer, Inc.+............................ 600 27,825
Dell Computer Corp.+............................. 7,100 262,478
Gateway, Inc.+................................... 600 35,400
International Business Machines Corp............. 6,700 865,975
Sun Microsystems, Inc.+.......................... 3,100 213,609
------------
1,405,287
------------
ELECTRONICS (2.8%)
3Com Corp.+...................................... 1,300 34,653
Cisco Systems, Inc.+............................. 11,900 766,434
Symbol Technologies, Inc......................... 700 25,813
------------
826,900
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
40
<PAGE>
J.P. MORGAN U.S. DISCIPLINED EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
INFORMATION PROCESSING (1.0%)
Automatic Data Processing, Inc................... 2,300 $ 101,200
DoubleClick, Inc.+............................... 100 9,153
Electronic Data System Corp...................... 1,800 101,813
Exodus Communications, Inc.+..................... 100 11,997
First Data Corp.................................. 1,600 78,300
------------
302,463
------------
SEMICONDUCTORS (4.3%)
Applied Materials, Inc.+......................... 1,400 103,381
Intel Corp....................................... 12,300 731,466
Motorola, Inc.................................... 2,200 208,450
National Semiconductor Corp.+.................... 600 15,188
Texas Instruments, Inc........................... 1,500 217,500
------------
1,275,985
------------
TELECOMMUNICATION SERVICES (2.3%)
MCI WorldCom, Inc.+.............................. 7,800 671,044
------------
TELECOMMUNICATIONS-EQUIPMENT (2.9%)
Commscope, Inc.+................................. 3,166 97,355
Lucent Technologies, Inc......................... 11,300 762,044
------------
859,399
------------
TOTAL TECHNOLOGY............................... 6,485,935
------------
TRANSPORTATION (1.0%)
AIRLINES (0.3%)
AMR Corp.+....................................... 600 40,950
Continental Airlines, Inc.+...................... 200 7,525
Southwest Airlines Co............................ 900 28,013
------------
76,488
------------
RAILROADS (0.7%)
Burlington Northern Railroad Co.................. 1,800 55,800
CSX Corp......................................... 800 36,250
Norfolk Southern Corp............................ 1,400 42,175
Union Pacific Corp.(s)........................... 1,100 64,144
------------
198,369
------------
TOTAL TRANSPORTATION........................... 274,857
------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
UTILITIES (9.0%)
ELECTRIC (2.2%)
Allegheny Energy, Inc............................ 600 $ 19,238
Ameren Corp...................................... 800 30,700
Central & South West Corp........................ 2,900 67,788
Cinergy Corp..................................... 900 28,800
CMS Energy Corp.................................. 700 29,313
Constellation Energy Group....................... 800 23,700
Dominion Resources, Inc.......................... 1,100 47,644
Duke Energy Corp................................. 2,000 108,750
Entergy Corp..................................... 1,400 43,750
FPL Group, Inc................................... 1,000 54,625
NiSource, Inc.................................... 700 18,069
Northeast Utilities+............................. 800 14,150
Northern States Power Co......................... 900 21,769
Pinnacle West Capital Corp....................... 500 20,125
PP&L Resources, Inc.............................. 900 27,675
TECO Energy, Inc................................. 700 15,925
Texas Utilities Co............................... 1,600 66,000
Wisconsin Energy Corp............................ 600 15,038
------------
653,059
------------
NATURAL GAS (0.3%)
Consolidated Natural Gas Company................. 500 30,375
El Paso Energy Corp.............................. 700 24,631
Reliant Energy, Inc.............................. 1,600 44,200
------------
99,206
------------
TELEPHONE (6.5%)
Ameritech Corp................................... 4,700 345,450
AT & T Corp...................................... 2,800 156,275
Bell Atlantic Corp.(s)........................... 4,900 320,338
GTE Corp......................................... 5,700 431,775
Level 3 Communications, Inc.+.................... 1,500 90,188
SBC Communications, Inc.......................... 8,000 464,000
US WEST, Inc..................................... 2,200 129,250
------------
1,937,276
------------
TOTAL UTILITIES................................ 2,689,541
------------
TOTAL COMMON STOCKS (COST $26,569,635)......... 28,946,114
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
41
<PAGE>
J.P. MORGAN U.S. DISCIPLINED EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
SHORT-TERM INVESTMENTS (15.6%)
OTHER INVESTMENT COMPANIES (1.7%)
SSGA Money Market Fund, 4.687% due 07/01/99
(y)............................................ $ 495,766 $ 495,766
------------
U.S. TREASURY OBLIGATIONS (13.9%)
Bills, 3.650% due 07/15/99(s)(y)................. 3,872,000 3,866,229
Bills, 4.897% due 11/12/99(y).................... 150,000 147,509
Notes, 5.875% due 11/15/99 (s)................... 100,000 100,297
------------
TOTAL U.S. TREASURY OBLIGATIONS................ 4,114,035
------------
TOTAL SHORT-TERM INVESTMENTS
(COST $4,609,962)............................. 4,609,801
------------
TOTAL INVESTMENTS (COST $31,179,597) (113.3%).................
33,555,915
LIABILITIES IN EXCESS OF OTHER ASSETS (-13.3%)................
(3,936,738)
------------
NET ASSETS (100.0%)........................................... $ 29,619,177
------------
------------
</TABLE>
- ------------------------------
Note: Based on the cost of investments of $31,258,073 for federal income tax
purposes at June 30, 1999, the aggregate gross unrealized appreciation and
depreciation was $2,598,231 and $300,389 respectively, resulting in net
unrealized appreciation of $2,297,842.
+ Non-income producing security.
(i) Foreign security.
(s) Security is fully or partially segregated with custodian as collateral for
futures contracts or with broker as initial margin for futures contracts.
$5,745,337 of the market value has been segregated.
(y) Yield to maturity.
ADR - American Depository Receipt.
The Accompanying Notes are an Integral Part of the Financial Statements.
42
<PAGE>
J.P. MORGAN SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------- -----------
<S> <C> <C>
COMMON STOCKS (95.0%)
BASIC INDUSTRIES (8.5%)
CHEMICALS (4.4%)
Albemarle Corp................................... 2,900 $ 67,062
Bush Boake Allen, Inc.+.......................... 1,300 38,025
General Chemical Group, Inc...................... 2,900 9,062
Geon Co. ........................................ 3,200 103,200
Georgia Gulf Corp................................ 3,900 65,812
Minerals Technologies, Inc. ..................... 400 22,325
Wellman, Inc..................................... 5,900 94,031
-----------
399,517
-----------
FOREST PRODUCTS & PAPER (1.5%)
Caraustar Industries, Inc........................ 3,000 73,875
Universal Forest Products, Inc................... 3,000 64,312
-----------
138,187
-----------
METALS & MINING (2.6%)
Commercial Metals Co............................. 1,400 39,900
Kennametal, Inc.................................. 800 24,800
Mueller Industries, Inc.+........................ 4,000 135,750
Schnitzer Steel Industries, Inc., Class A........ 1,400 31,412
-----------
231,862
-----------
TOTAL BASIC INDUSTRIES......................... 769,566
-----------
CONSUMER GOODS & SERVICES (17.8%)
APPARELS & TEXTILES (0.1%)
Columbia Sportwear Co.+.......................... 700 10,697
-----------
AUTOMOTIVE (0.3%)
Amcast Industrial Corp........................... 400 6,525
Sonic Automotive, Inc.+.......................... 1,300 17,875
-----------
24,400
-----------
AUTOMOTIVE SUPPLIES (0.8%)
Dura Automotive Systems, Inc.+................... 700 23,362
Tower Automotive, Inc.+.......................... 1,900 48,331
-----------
71,693
-----------
BROADCASTING & PUBLISHING (1.9%)
Citadel Communications Corp.+.................... 900 32,597
Entercom Communications Corp.+................... 1,400 59,850
HA-LO Industries, Inc.+.......................... 5,850 57,769
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------- -----------
<S> <C> <C>
BROADCASTING & PUBLISHING (CONTINUED)
Radio One, Inc.+................................. 200 $ 9,275
TV Guide, Inc., Class A+......................... 300 10,959
-----------
170,450
-----------
BUSINESS & PUBLIC SERVICES (1.2%)
Kroll-O'Gara Co.+................................ 1,500 33,234
Metzler Group, Inc.+............................. 500 13,797
Realty Information Group, Inc.+.................. 700 30,231
Tetra Tech, Inc.+................................ 1,625 27,016
-----------
104,278
-----------
EDUCATION (0.7%)
Education Management Corp.+...................... 3,100 64,228
-----------
ENTERTAINMENT, LEISURE & MEDIA (4.5%)
About. com, Inc.+................................ 100 5,169
American Classic Voyages Co.+.................... 800 19,050
Anchor Gaming+................................... 1,300 62,522
Cinar Corp., Class B+(i)......................... 4,500 111,094
Florida Panthers Holdings, Inc.+................. 1,500 16,031
Media Metrix, Inc.+.............................. 100 5,312
MGM Grand, Inc.+................................. 1,400 68,600
Nielsen Media Research, Inc.+.................... 1,100 32,175
Steiner Leisure Ltd.+(i)......................... 2,000 60,375
Sunterra Corp.................................... 900 12,544
Vistana, Inc..................................... 600 9,337
-----------
402,209
-----------
FOOD, BEVERAGES & TOBACCO (1.5%)
American Italian Pasta Co., Class A+............. 1,300 39,487
Beringer Wine Estates Holdings, Inc., Class B+... 500 20,859
Coors (Adolph) Co................................ 300 14,850
Keebler Foods Co.+............................... 1,900 57,712
-----------
132,908
-----------
HOUSEHOLD APPLIANCES & FURNISHINGS (1.1%)
Furniture Brands International, Inc. ............ 1,600 44,600
Stanley Furniture Co., Inc.+..................... 2,300 51,462
-----------
96,062
-----------
HOUSEHOLD PRODUCTS (0.1%)
Blyth Industries, Inc.+.......................... 300 10,312
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
43
<PAGE>
J.P. MORGAN SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------- -----------
<S> <C> <C>
MISCELLANEOUS (0.3%)
Carriage Services, Inc., Class A+................ 400 $ 7,500
WESCO International, Inc.+....................... 1,100 22,550
-----------
30,050
-----------
RESTAURANTS & HOTELS (0.5%)
Extended Stay America, Inc.+..................... 2,100 25,200
Sun International Hotels Ltd.+(i)................ 500 22,375
-----------
47,575
-----------
RETAIL (4.8%)
Alloy Online, Inc.+.............................. 500 5,734
Ames Department Stores, Inc.+.................... 1,400 63,787
barnesandnoble.com, inc.+........................ 500 8,984
eToys, Inc.+..................................... 300 12,253
General Nutrition Companies, Inc.+............... 1,200 27,937
Lithia Motors, Inc., Class A+.................... 1,200 24,600
Pacific Sunwear of California, Inc.+............. 450 10,983
Regis Corp....................................... 1,600 30,650
School Specialty, Inc.+.......................... 3,200 51,300
Shoe Carnival, Inc.+............................. 500 8,516
ShopKo Stores, Inc. ............................. 2,200 79,750
Stamps.com, Inc.+................................ 700 12,294
The Finish Line, Inc., Class A+.................. 2,500 28,047
Williams-Sonoma, Inc.+........................... 500 17,406
Zale Corp.+...................................... 1,200 48,000
-----------
430,241
-----------
TOTAL CONSUMER GOODS & SERVICES................ 1,595,103
-----------
ENERGY (3.9%)
GAS EXPLORATION (1.4%)
Barrett Resources Corp.+......................... 300 11,512
Devon Energy Corp. .............................. 1,600 57,200
Newfield Exploration Co.+........................ 2,100 59,719
-----------
128,431
-----------
OIL-SERVICES (2.5%)
Cooper Cameron Corp.+............................ 2,400 88,950
ENSCO International, Inc......................... 1,700 33,894
Global Marine, Inc.+............................. 1,600 24,700
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------- -----------
<S> <C> <C>
OIL-SERVICES (CONTINUED)
National-Oilwell, Inc.+.......................... 2,000 $ 28,000
Smith International, Inc.+....................... 1,100 47,781
-----------
223,325
-----------
TOTAL ENERGY................................... 351,756
-----------
FINANCE (17.3%)
BANKING (7.7%)
BancorpSouth, Inc. .............................. 300 5,437
Bank of Commerce................................. 1,100 22,516
Bank United Corp., Class A....................... 2,400 96,375
Banknorth Group, Inc............................. 1,100 36,128
Colonial BancGroup, Inc.......................... 4,100 57,144
Commercial Federal Corp.......................... 2,250 52,172
Community First Bankshares, Inc.................. 2,100 50,006
FirstFed Financial Corp.+........................ 1,800 34,650
GBC Bancorp...................................... 1,400 28,569
Gold Banc Corp., Inc. ........................... 500 6,594
Hamilton Bancorp, Inc.+.......................... 1,600 38,300
Hudson United Bancorp............................ 2,416 73,990
National Commerce Bancorporation................. 4,300 94,197
Prime Bancshares, Inc............................ 800 14,250
Republic Security Financial Corp. ............... 2,000 16,719
Sterling Bancshares, Inc. ....................... 200 2,669
Summit Bancshares, Inc. ......................... 200 3,475
Sun Bancorp, Inc.+............................... 835 14,769
Trustco Bank Corp. .............................. 12,053
Westamerica Bancorporation....................... 800 29,175
-----------
689,188
-----------
FINANCIAL SERVICES (3.6%)
Allied Capital Corp.+............................ 2,100 50,334
Creditrust Corp.................................. 400 11,050
Donaldson, Lufkin & Jenrette, Inc-DLJdirect+..... 300 8,850
Franchise Finance Corporation of America......... 800 17,600
Gabelli Asset Management, Inc.,
Class A+....................................... 1,300 20,556
Heller Financial, Inc. .......................... 1,100 30,594
Intelligent Life Corp.+.......................... 500 3,266
Litchfield Financial Corp........................ 2,205 37,967
MicroFinancial, Inc.............................. 500 7,156
Ocwen Financial Corp.+........................... 2,000 17,750
Rare Medium Group, Inc.+......................... 700 8,684
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
44
<PAGE>
J.P. MORGAN SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------- -----------
<S> <C> <C>
FINANCIAL SERVICES (CONTINUED)
TD Waterhouse Group, Inc+........................ 600 $ 15,037
Willis Lease Finance Corp.+...................... 4,300 70,278
Wit Capital Group, Inc.+......................... 700 23,778
-----------
322,900
-----------
INSURANCE (2.3%)
Annuity and Life Re (Holdings), Ltd.(i).......... 2,400 53,925
E.W. Blanch Holdings, Inc........................ 700 47,731
Fremont General Corp............................. 1,700 32,087
RenaissanceRe Holdings Ltd.(i)................... 2,000 74,000
-----------
207,743
-----------
REAL ESTATE (0.2%)
Mission West Properties, Inc..................... 1,800 14,850
-----------
REAL ESTATE INVESTMENT TRUSTS (3.5%)
Arden Realty, Inc................................ 1,700 41,862
Burnham Pacific Properties, Inc.................. 1,700 20,931
CenterPoint Properties Corp...................... 300 10,987
Cousins Properties, Inc.......................... 1,300 43,956
Manufactured Home Communities, Inc. ............. 1,900 49,400
Mills Corp....................................... 800 17,350
National Golf Properties, Inc.................... 1,200 29,175
Post Properties, Inc. ........................... 1,669 68,429
Macerich Co. .................................... 1,200 31,500
-----------
313,590
-----------
TOTAL FINANCE.................................. 1,548,271
-----------
HEALTHCARE (10.9%)
BIOTECHNOLOGY (5.1%)
Affymetrix, Inc.+................................ 1,200 59,025
Applied Analytical Industries, Inc.+............. 1,400 15,794
Human Genome Sciences, Inc.+..................... 2,900 114,369
IDEC Pharmaceuticals Corp.+...................... 1,400 107,844
Incyte Pharmaceuticals, Inc.+.................... 300 7,922
Inhale Therapeutics Systems+..................... 300 7,172
Millennium Pharmaceuticals, Inc.+................ 1,100 39,566
MiniMed, Inc.+................................... 200 15,394
Novoste Corp.+................................... 400 8,387
Osteotech, Inc.+................................. 1,050 30,220
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------- -----------
<S> <C> <C>
BIOTECHNOLOGY (CONTINUED)
SangStat Medical Corp.+.......................... 3,100 $ 52,797
Trimeris, Inc.+.................................. 300 4,359
-----------
462,849
-----------
HEALTH SERVICES (3.2%)
Alterra Healthcare Corp.+........................ 5,160 70,950
CareInsite, Inc.+................................ 300 14,231
drkoop. com, Inc.+............................... 300 4,791
IDX Systems Corp.+............................... 700 15,772
LCA-Vision, Inc.+................................ 1,700 13,600
MedQuist, Inc.+.................................. 1,100 48,091
Renal Care Group, Inc.+.......................... 950 24,552
Sunrise Assisted Living, Inc.+................... 2,200 76,587
Women First HealthCare, Inc.+.................... 1,400 18,725
-----------
287,299
-----------
MEDICAL SUPPLIES (1.7%)
CONMED Corp.+.................................... 1,700 52,009
IDEXX Laboratories, Inc.......................... 1,600 37,150
Kensey Nash Corp.+............................... 2,100 16,931
ResMed, Inc.+.................................... 800 26,525
Xomed Surgical Products, Inc.+................... 400 19,375
-----------
151,990
-----------
PHARMACEUTICALS (0.9%)
Ligand Pharmaceuticals, Inc., Class B+........... 5,700 62,878
U.S. Bioscience, Inc.+........................... 2,100 20,475
-----------
83,353
-----------
TOTAL HEALTHCARE............................... 985,491
-----------
INDUSTRIAL PRODUCTS & SERVICES (8.8%)
BUILDING MATERIALS (0.7%)
Comfort Systems USA, Inc.+....................... 1,200 21,600
Elcor Corp. ..................................... 500 21,844
Service Experts, Inc.+........................... 1,000 21,937
-----------
65,381
-----------
CAPITAL GOODS (2.0%)
ABC Rail Products Corp.+......................... 500 10,203
Applied Power, Inc., Class A..................... 1,700 46,431
IDEX Corp.+...................................... 2,050 67,394
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
45
<PAGE>
J.P. MORGAN SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------- -----------
<S> <C> <C>
CAPITAL GOODS (CONTINUED)
Milacron, Inc. .................................. 1,400 $ 25,900
Shaw Group, Inc.+................................ 1,900 30,162
-----------
180,090
-----------
COMMERCIAL SERVICES (1.3%)
Central Parking Corp. ........................... 1,300 44,525
Newgen Results Corp.+............................ 200 2,406
On Assignment, Inc.+............................. 1,400 36,488
Romac International, Inc.+....................... 1,500 13,266
Source Information Management Co.+............... 1,400 18,856
-----------
115,541
-----------
DIVERSIFIED MANUFACTURING (0.8%)
Gentek, Inc.+.................................... 3,400 47,175
Intermet Corp. .................................. 1,600 24,100
-----------
71,275
-----------
MACHINERY (1.3%)
Manitowoc Co., Inc............................... 500 20,813
New Holland N.V.(i).............................. 2,200 37,675
Terex Corp.+..................................... 2,000 60,875
-----------
119,363
-----------
MANUFACTURING (2.0%)
AptarGroup, Inc.................................. 800 24,000
Herman Miller, Inc............................... 800 16,775
HON Industries, Inc.............................. 300 8,756
JAKKS Pacific, Inc.+............................. 400 11,888
Mettler-Toledo International, Inc.+.............. 2,200 54,588
MKS Instruments, Inc.+........................... 2,100 39,178
National R.V. Holdings, Inc.+.................... 1,000 24,250
Rock of Ages Corp.+.............................. 400 4,113
-----------
183,548
-----------
PACKAGING & CONTAINERS (0.7%)
Gaylord Container Corp., Class A+................ 2,300 18,256
Ivex Packaging Corp.+............................ 1,900 41,800
-----------
60,056
-----------
TOTAL INDUSTRIAL PRODUCTS & SERVICES........... 795,254
-----------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------- -----------
<S> <C> <C>
TECHNOLOGY (19.2%)
AEROSPACE (1.1%)
Armor Holdings, Inc.+............................ 1,400 $ 14,613
L-3 Communications Holdings, Inc.+............... 1,700 82,131
-----------
96,744
-----------
COMPUTER SOFTWARE (5.7%)
Acxiom Corp.+.................................... 1,000 24,969
Aspect Development, Inc.+........................ 1,700 31,397
Concord Communications, Inc.+.................... 1,600 71,400
Concur Technologies, Inc.+....................... 600 16,950
Excalibur Technologies Corp.+.................... 1,000 14,281
I2 Technologies, Inc.+........................... 800 34,450
Legato Systems, Inc.+............................ 400 23,113
Macromedia, Inc.+................................ 300 10,659
Mentor Graphics Corp.+........................... 900 11,503
MicroStrategy, Inc.+............................. 2,000 75,813
New Era of Networks, Inc.+....................... 1,200 52,688
SalesLogix Corp.+................................ 1,000 14,938
Sanchez Computer Associates, Inc.+............... 1,400 48,388
Unify Corp.+..................................... 2,200 29,631
Wind River Systems, Inc.+........................ 3,100 49,697
-----------
509,877
-----------
COMPUTER SYSTEMS (1.2%)
Allaire Corp.+................................... 300 20,447
Brocade Communications Systems, Inc.+............ 100 9,684
Equant NV-NY Registered Shares+.................. 800 75,300
-----------
105,431
-----------
INFORMATION PROCESSING (6.0%)
24 / 7 Media, Inc.+.............................. 800 30,850
CAIS Internet, Inc.+............................. 200 3,681
CCC Information Services Group, Inc.+............ 1,100 14,025
Computer Horizons Corp.+......................... 1,400 19,294
Covad Communications Group, Inc.+................ 400 21,313
Digital Island, Inc.............................. 1,200 21,525
Juniper Networks, Inc.+.......................... 300 44,747
Mpath Interactive, Inc.+......................... 1,000 22,063
Multex.com, Inc.+................................ 500 13,094
Net Perceptions, Inc.+........................... 1,000 21,875
NorthPoint Communications Group, Inc.+........... 200 7,288
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
46
<PAGE>
J.P. MORGAN SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------- -----------
<S> <C> <C>
INFORMATION PROCESSING (CONTINUED)
Pegasus Systems, Inc. ........................... 400 $ 15,038
Profit Recovery Group International, Inc.+....... 1,500 70,922
Proxicom, Inc.+.................................. 300 7,659
Rhythms NetConnections, Inc.+.................... 400 23,375
Safeguard Scientifics, Inc.+..................... 100 6,200
TheStreet.com, Inc.+............................. 200 7,194
TMP Worldwide, Inc.+............................. 400 25,475
USWeb Corp.+..................................... 1,900 42,216
Viant Corp.+..................................... 200 6,963
Visual Networks, Inc.+........................... 1,300 41,559
WorldGate Communications, Inc.+.................. 1,100 56,341
Xoom.com, Inc.+.................................. 400 20,913
-----------
543,610
-----------
SEMICONDUCTORS (4.9%)
Applied Micro Circuits Corp.+.................... 1,600 132,900
Applied Science and Technology, Inc.+............ 800 18,150
ATMI, Inc.+...................................... 3,300 97,763
Exar Corp.+...................................... 1,400 35,088
hi / fn, inc.+................................... 400 30,338
Kopin Corp.+..................................... 200 4,781
Lam Research Corp.+.............................. 800 37,325
Maker Communications, Inc.+...................... 300 9,263
PLX Technology, Inc.+............................ 100 4,741
SDL, Inc.+....................................... 1,400 71,531
-----------
441,880
-----------
TELECOMMUNICATIONS-EQUIPMENT (0.3%)
ANTEC Corp.+..................................... 900 28,772
-----------
TOTAL TECHNOLOGY............................... 1,726,314
-----------
TELECOMMUNICATIONS (3.3%)
TELECOMMUNICATION SERVICES (3.3%)
Allegiance Telecom, Inc.+........................ 1,400 76,956
American Mobile Satellite Corp.+................. 1,900 31,172
CapRock Communications Corp.+.................... 1,200 48,563
Concentric Network Corp.+........................ 1,700 67,522
Network Plus Corp.+.............................. 300 4,800
NEXTLINK Communications, Inc., Class A+.......... 800 59,475
SeaChange International, Inc.+................... 400 7,363
-----------
TOTAL TELECOMMUNICATIONS....................... 295,851
-----------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------- -----------
<S> <C> <C>
TRANSPORTATION (2.2%)
AIRLINES (0.2%)
Alaska Air Group, Inc.+.......................... 400 $ 16,700
-----------
TRANSPORT & SERVICES (1.0%)
C.H. Robinson Worldwide, Inc..................... 2,000 73,250
Forward Air Corp.+............................... 500 14,047
-----------
87,297
-----------
TRUCK & FREIGHT CARRIERS (1.0%)
American Freightways Corp.+...................... 800 15,625
Werner Enterprises, Inc. ........................ 3,575 74,181
-----------
89,806
-----------
TOTAL TRANSPORTATION........................... 193,803
-----------
UTILITIES (3.1%)
ELECTRIC (0.8%)
Cleco Corp.+..................................... 2,300 69,863
-----------
NATURAL GAS (1.3%)
Atmos Energy Corp. .............................. 2,300 57,500
Public Service Company of North Carolina, Inc.... 700 20,475
Wicor, Inc....................................... 1,300 36,319
-----------
114,294
-----------
TELEPHONE (0.5%)
ITC DeltaCom, Inc.+.............................. 1,500 41,953
-----------
WATER (0.5%)
E'Town Corp. .................................... 1,100 50,325
-----------
TOTAL UTILITIES................................ 276,435
-----------
TOTAL COMMON STOCKS (COST $7,660,148).......... 8,537,844
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
47
<PAGE>
J.P. MORGAN SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------- --------- -----------
<S> <C> <C>
SHORT-TERM INVESTMENTS (4.7%)
OTHER INVESTMENT COMPANIES (2.9%)
SSGA Money Market Fund 4.687%, due 07/01/99
(y)............................................ $255,992 $ 255,992
-----------
U.S. TREASURY OBLIGATIONS (1.8%)
Bills, 3.650%, due 07/15/99 (y).................. 165,000 164,736
-----------
TOTAL SHORT-TERM INVESTMENTS
(COST $420,728)............................... 420,728
-----------
TOTAL INVESTMENTS (cost $8,080,876) (99.7%)...... 8,958,572
OTHER ASSETS IN EXCESS OF LIABILITIES (0.3%)..... 26,150
-----------
NET ASSETS (100.0%)......................................... $ 8,984,722
-----------
-----------
</TABLE>
- ------------------------------
Note: Based on the cost of investments of $8,136,836 for federal income tax
purposes at June 30, 1999, the aggregate gross unrealized appreciation and
depreciation was $1,240,485 and $418,749 respectively, resulting in net
unrealized appreciation of $821,736.
+ Non-income producing security.
(i) Foreign security.
(y) Yield to maturity.
The Accompanying Notes are an Integral Part of the Financial Statements.
48
<PAGE>
J.P. MORGAN INTERNATIONAL OPPORTUNITIES PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
COMMON STOCK (84.5%)
AUSTRALIA (2.1%)
Australia & New Zealand Banking Group Ltd.
(Banking)(s)................................... 15,600 $ 114,711
News Corp. Ltd. (Broadcasting & Publishing)(s)... 10,800 92,147
North Ltd. (Metals & Mining)(s).................. 44,900 90,944
------------
297,802
------------
AUSTRIA (0.7%)
Bank Austria AG (Banking)(s)..................... 1,800 94,671
------------
CANADA (0.6%)
Royal Bank of Canada (Banking)(s)................ 1,850 81,247
------------
CHILE (0.5%)
Compania de Telecomunicaciones de Chile SA (Spon.
ADR) (Telecommunication Services)(s)........... 63 1,559
Enersis SA (Spon. ADR)
(Electric)(s).................................. 3,000 68,625
------------
70,184
------------
DENMARK (0.7%)
Danisco A/S (Food, Beverages & Tobacco)(s)....... 2,231 100,820
------------
FINLAND (2.0%)
Rautaruukki OYJ, K Shares (Metals & Mining)(s)... 18,500 111,991
Sampo Insurance Co. Ltd., A Shares
(Insurance)(s)................................. 2,000 57,958
Stora Enso OYJ, R Shares (Forest Products &
Paper)(s)...................................... 11,005 119,089
------------
289,038
------------
FRANCE (10.8%)
Carrefour SA (Retail)(s)......................... 1,000 146,956
Christian Dior SA (Retail)(s).................... 950 154,794
Compagnie de Saint Gobain SA (Building
Materials)(s).................................. 320 50,986
Compagnie Financiere de Paribas (Financial
Services)(s)................................... 1,625 182,161
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
FRANCE (CONTINUED)
Elf Aquitaine SA (Oil-Services)(s)............... 1,278 $ 187,547
Groupe Danone (Food, Beverages & Tobacco)(s)..... 490 126,331
Rhodia SA (Chemicals)(s)......................... 6,894 130,816
Sanofi-Synthelabo SA (Pharmaceuticals)(s)+....... 966 40,994
Societe Generale, A shares (Banking)(s).......... 1,039 183,118
Total Fina SA (Oil-Services)(s).................. 450 0
Total Fina SA, B Shares (Oil-Services)(s)+....... 1,961 252,993
Vivendi (Utilities)(s)........................... 1,143 92,590
------------
1,549,286
------------
GERMANY (7.0%)
Bayerische Hypo-Und Vereinsbank AG
(Banking)(s)................................... 1,050 68,219
Hoechst AG (Holding
Companies)(s).................................. 3,600 162,982
Merck KGaA (Pharmaceuticals)(s).................. 1,200 39,032
Muenchener Rueckversicherungs-Gesellschaft AG
(Insurance)(s)................................. 546 101,072
Muenchener Rueckversicherungs-Gesellschaft AG- New
Shares (Insurance)(s).......................... 396 72,284
RWE AG (Utilities)(s)............................ 3,760 174,065
Schering AG (Pharmaceuticals)(s)................. 1,703 180,543
VEBA AG (Utilities)(s)........................... 3,510 206,327
------------
1,004,524
------------
HONG KONG (3.7%)
Cheung Kong Holdings Ltd. (Real Estate)(s)....... 14,000 124,507
Guoco Group Ltd. (Financial Services)(s)......... 14,000 37,533
Hong Kong Electric Holdings Ltd. (Electric)(s)... 82,300 265,189
Wharf Holdings Ltd. (Real
Estate)(s)..................................... 35,000 109,169
------------
536,398
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
49
<PAGE>
J.P. MORGAN INTERNATIONAL OPPORTUNITIES PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
INDIA (0.6%)
Industrial Credit & Investment Ltd. (Spon. GDR)
(Financial
Services)(s)................................... 1,200 $ 12,450
Reliance Industries Ltd. (GDR) (Chemicals)(s).... 6,900 69,690
------------
82,140
------------
ITALY (0.6%)
Bayerische Vita SPA (Insurance)(s)............... 3,000 13,056
Mediaset SpA (Broadcasting & Publishing)(s)...... 8,000 71,117
------------
84,173
------------
JAPAN (16.6%)
Asahi Breweries Ltd. (Food, Beverages &
Tobacco)(s).................................... 4,000 49,770
DDI Corp.
(Telecommunications)(s)........................ 40 248,851
Fanuc Ltd. (Machinery)(s)........................ 3,200 171,849
Fujitsu Ltd. (Computer Systems)(s)............... 9,000 181,062
Honda Motor Co. Ltd. (Automotive)(s)............. 2,000 84,768
Ito - Yokado Co. Ltd. (Retail)(s)................ 1,000 66,922
Mitsubishi Chemical Corp. (Chemicals)(s)......... 47,000 162,703
Mitsubishi Corp. (Wholesale & International
Trade)(s)...................................... 24,000 162,596
Mitsui Trust & Banking Co. Ltd. (Banking)(s)..... 37,000 58,999
Rohm Co. Ltd. (Electronics)(s)................... 1,000 156,565
Shohkoh Fund & Co. Ltd. (Financial
Services)(s)................................... 140 100,400
Softbank Corp. (Computer Software)(s)............ 600 121,501
Sony Corp. (Electronics)(s)...................... 1,200 129,383
Sumitomo Bakelite Co. Ltd. (Chemicals)(s)........ 2,000 15,400
Suzuki Motor Corp.
(Automotive)(s)................................ 4,000 63,617
Taiheiyo Cement Corp. (Building Materials)(s).... 33,000 94,608
Takeda Chemical Industries (Chemicals)(s)........ 2,700 125,144
Tostem Corp. (Construction & Housing)(s)......... 6,000 115,255
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
JAPAN (CONTINUED)
West Japan Railway Co.
(Railroads)(s)................................. 21 $ 80,505
Yamanouchi Pharmaceutical Co. Ltd.
(Pharmaceuticals)(s)........................... 5,000 191,265
------------
2,381,163
------------
MEXICO (1.5%)
Consorcio Ara SA (Construction & Housing)(s)+.... 15,200 60,976
Grupo Televisa SA (Spon. GDR) (Broadcasting &
Publishing)(s)+................................ 3,300 147,881
------------
208,857
------------
NETHERLANDS (7.4%)
ABN AMRO Holding NV (Banking)(s)................. 5,690 123,227
Akzo Nobel NV (Chemicals)(s)..................... 2,000 84,152
ING Groep NV (Financial
Services)(s)................................... 900 48,728
Laurus NV (Retail)(s)............................ 6,070 140,846
Philips Electronics NV
(Electronics)(s)............................... 3,350 330,456
STMicroelectronics NV (Semiconductors)(s)........ 2,600 173,213
Unilever NV (Food, Beverages & Tobacco)(s)....... 285 19,207
Vedior NV (Business & Public Services)(s)........ 2,500 42,540
Vendex NV (Retail)(s)............................ 2,600 69,446
Wolters Kluwer NV (Broadcasting &
Publishing)(s)................................. 788 31,368
------------
1,063,183
------------
NEW ZEALAND (0.3%)
Fletcher Challenge Paper Division Ltd. (Forest
Products & Paper)(s)........................... 48,700 36,388
------------
NORWAY (1.1%)
Sparebanken NOR (Banking)(s)..................... 4,260 79,548
Stolt - Nielsen SA (Spon. ADR)
(Transportation)(s)............................ 4,550 78,203
------------
157,751
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
50
<PAGE>
J.P. MORGAN INTERNATIONAL OPPORTUNITIES PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
PAKISTAN (0.4%)
Pakistan Telecommunications Corp. (GDR)
(Telecommunication Services)(s)+............... 1,590 $ 57,240
------------
PHILIPPINES (0.5%)
First Philippine Holdings Corp., Class B (Multi -
Industry)(s)................................... 61,500 69,503
------------
PORTUGAL (0.9%)
Banco Pinto & Sotto Mayor SA (Banking)(s)........ 4,226 75,047
Portugal Telecom SA (Telecommunications)(s)+..... 1,500 61,026
------------
136,073
------------
RUSSIA (0.6%)
Surgutneftegaz (Spon. ADR) (Oil-Production)(s)... 10,400 85,800
------------
SINGAPORE (0.9%)
Overseas Union Bank Ltd. (Banking)(s)............ 25,900 124,748
------------
SOUTH AFRICA (1.7%)
Anglo American PLC (Metals & Mining)(s)+......... 1,300 60,752
AngloGold Ltd. (Metals & Mining)(s).............. 2,589 111,552
South African Breweries PLC (Food, Beverages &
Tobacco)(s).................................... 8,400 72,943
------------
245,247
------------
SOUTH KOREA (0.4%)
Housing & Commercial Bank, (GDR) (Banking)(s).... 2,013 62,604
------------
SPAIN (4.9%)
Acerinox SA (Metals & Mining)(s)................. 2,126 62,157
Actividades de Construccion y Servicios SA
(Construction & Housing)(s).................... 3,600 103,061
Iberdrola SA (Electric)(s)....................... 18,900 287,883
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
SPAIN (CONTINUED)
Indra Sistemas SA (Electronics)(s)............... 3,909 $ 42,126
Telefonica SA (Telecommunications)(s)............ 4,346 209,350
------------
704,577
------------
SWEDEN (0.5%)
ABB Ltd. (Multi - Industry)(s)+.................. 816 76,271
------------
SWITZERLAND (7.3%)
Barry Callebaut AG (Food, Beverages &
Tobacco)(s).................................... 100 15,310
Geberit International AG (Construction &
Housing)(s)+................................... 150 34,205
Nestle SA (Food, Beverages & Tobacco)(s)......... 90 162,159
Roche Holding AG (Pharmaceuticals)(s)............ 18 185,026
Schweizerische Rueckversicherungs-Gesellschaft
(Insurance)(s)................................. 103 196,116
Swisscom AG (Telecommunication Services)(s)...... 550 206,968
UBS AG (Banking)(s).............................. 600 179,083
Zurich Allied AG (Insurance)(s).................. 110 62,550
------------
1,041,417
------------
UNITED KINGDOM (9.7%)
Allied Zurich PLC (Insurance)(s)................. 11,550 145,195
Cable & Wireless Communications PLC
(Telecommunications)(s)........................ 12,000 153,027
Glaxo Wellcome PLC (Pharmaceuticals)(s).......... 3,300 91,708
Hays PLC (Commercial Services)(s)................ 2,100 22,145
Lloyds TSB Group PLC
(Banking)(s)................................... 5,100 69,257
National Power PLC (Electric)(s)................. 9,400 68,307
Norwich Union PLC (Insurance)(s)................. 10,400 70,410
PIC International Group PLC (Food, Beverages &
Tobacco)(s)+................................... 26,900 24,593
Railtrack Group PLC (Transportation)(s).......... 5,400 110,401
Royal & Sun Alliance Insurance Group PLC
(Insurance)(s)................................. 11,263 100,931
Select Appointments Holdings PLC (Business &
Public Services)(s)+........................... 4,700 56,083
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
51
<PAGE>
J.P. MORGAN INTERNATIONAL OPPORTUNITIES PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
Shell Transport & Trading Co. (Oil-
Services)(s)................................... 22,200 $ 166,571
SmithKline Beecham PLC (Pharmaceuticals)(s)...... 9,100 118,341
Tate & Lyle PLC (Food, Beverages & Tobacco)(s)... 19,100 118,924
Unilever PLC (Food, Beverages & Tobacco)(s)...... 9,171 81,389
------------
1,397,282
------------
VENEZUELA (0.5%)
Compania Anonima Nacional Telefonos de Venezuela
(ADR) (Telecommunication Services)(s).......... 2,400 65,400
------------
TOTAL COMMON STOCK (COST $11,049,567).......... 12,103,787
------------
PREFERRED STOCK (3.0%)
AUSTRALIA (1.3%)
News Corp. Ltd. (Broadcasting & Publishing)(s)... 24,000 182,849
------------
BRAZIL (0.9%)
Tele Norte Leste Participacoes SA (ADR)
(Telecommunication Services)(s)................ 7,049 130,847
------------
GERMANY (0.8%)
GEA AG (Manufacturing)(s)........................ 3,000 81,213
Volkswagen AG (Automotive)(s).................... 780 28,837
------------
110,050
------------
TOTAL PREFERRED STOCK (COST $373,697).......... 423,746
------------
RIGHTS (0.0%)
PORTUGAL (0.0%)
Portugal Telecom SA (Telecommunications) (cost
$0)............................................ 1,500 16
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNTl VALUE
- ------------------------------------------------- ---------------- ----------------
<S> <C> <C>
CONVERTIBLE BONDS (3.6%)
JAPAN (0.5%)
Softbank Corp., 0.50% due 03/29/02 (Computer
Software)...................................... JPY 3,000,000 $ 75,473
----------------
SINGAPORE (1.9%)
Finlayson Global, Zero Coupon due 02/19/04
(Financial Services)........................... EUR 120,000 214,092
Natsteel Electronics Ltd, 1.50% due 06/30/04
(Electronics).................................. 50,000 51,625
----------------
265,717
----------------
UNITED KINGDOM (0.7%)
Compass Group PLC, 5.75% due 10/05/07 (Food,
Beverages & Tobacco)........................... GBP 40,000 102,460
----------------
UNITED STATES (0.5%)
Bell Atlantic Financial Services, 4.25% due
09/15/05 (Telephone)........................... 75,000 76,781
----------------
TOTAL CONVERTIBLE
BONDS (COST $420,460)......................... 520,431
----------------
SHORT-TERM INVESTMENTS (8.3%)
U.S. TREASURY OBLIGATIONS (0.7%)
Bills, 4.847% due 03/02/00 (y)................... 100,000 96,760
----------------
OTHER INVESTMENT COMPANIES (4.9%)
SSGA Money Market Fund, 4.687% due 07/01/99
(y)............................................ 710,972 710,972
----------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
52
<PAGE>
J.P. MORGAN INTERNATIONAL OPPORTUNITIES PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNTl VALUE
- ------------------------------------------------- ---------------- ----------------
<S> <C> <C>
TIME DEPOSITS--FOREIGN (2.7%)
State Street Bank Cayman Islands, 2.750% due
07/01/99....................................... $ 384,000 $ 384,000
----------------
TOTAL SHORT-TERM INVESTMENTS (COST
$1,191,732)................................... 1,191,732
----------------
TOTAL INVESTMENTS (cost $13,035,456) (99.4%)..... 14,239,712
OTHER ASSETS IN EXCESS OF LIABILITIES (0.6%)..... 86,880
----------------
NET ASSETS (100.0%)................................................ $ 14,326,592
----------------
----------------
</TABLE>
- ------------------------------
Note: Based on the cost of investments of $13,058,251 for federal income tax
purposes at June 30, 1999 the aggregate gross unrealized appreciation and
depreciation was $1,691,243 and $509,782, respectively, resulting in net
unrealized appreciation of $1,181,461.
+ - Non-income producing security.
l - Denominated in United States Dollar unless otherwise indicated.
(s) - Security is fully or partially segregated with custodian as collateral for
futures contracts or with broker as initial margin for futures contracts.
$4,403,428 of the market value has been segregated.
(y) - Yield to maturity.
ADR - American Depository Receipt.
EUR - Euro.
GBP - British Pound.
GDR - Global Depository Receipt.
JPY - Japanese Yen.
Spon. ADR - Sponsored ADR.
Spon. GDR - Sponsored GDR.
The Accompanying Notes are an Integral Part of the Financial Statements.
53
<PAGE>
J.P. MORGAN INTERNATIONAL OPPORTUNITIES PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY DIVERSIFICATION
PERCENT OF
PORTFOLIO
-----------
<S> <C>
Banking......................................................................... 9.2%
Short Term Investments.......................................................... 8.4%
Food, Beverage & Tobacco........................................................ 6.1%
Pharmaceuticals................................................................. 5.9%
Insurance....................................................................... 5.8%
Electronics..................................................................... 5.0%
Telecommunications.............................................................. 4.7%
Electric........................................................................ 4.4%
Oil-Services.................................................................... 4.3%
Financial Services.............................................................. 4.2%
Chemicals....................................................................... 4.1%
Retail.......................................................................... 4.1%
Utilities....................................................................... 3.8%
Broadcasting & Publishing....................................................... 3.7%
Telecommunication-Services...................................................... 3.3%
Metals & Mining................................................................. 3.1%
Construction & Housing.......................................................... 2.2%
Real Estate..................................................................... 1.6%
Computer Software............................................................... 1.4%
Transportation.................................................................. 1.3%
Computer Systems................................................................ 1.3%
Automotive...................................................................... 1.2%
Semiconductors.................................................................. 1.2%
Machinery....................................................................... 1.2%
Holding Companies............................................................... 1.1%
Wholesale & International Trade................................................. 1.1%
Forest Products & Paper......................................................... 1.1%
Multi-Industry.................................................................. 1.0%
Building Materials.............................................................. 1.0%
Business & Public Service....................................................... 0.7%
Oil-Production.................................................................. 0.6%
Manufacturing................................................................... 0.6%
Railroads....................................................................... 0.6%
Telephone....................................................................... 0.5%
Commercial Services............................................................. 0.2%
-----------
100.0%
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
54
<PAGE>
J.P. MORGAN SERIES TRUST II
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
J.P. MORGAN J.P. MORGAN J.P. MORGAN J.P. MORGAN
TREASURY J.P. MORGAN U.S. DISCIPLINED SMALL INTERNATIONAL
MONEY MARKET BOND EQUITY COMPANY OPPORTUNITIES
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ----------- ---------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments, at Cost $ 1,795,385 $48,063,887 $ 31,179,597 $8,080,876 $ 13,035,456
Foreign Currency, at Cost -- -- -- -- 315,824
------------ ----------- ---------------- ----------- -------------
------------ ----------- ---------------- ----------- -------------
Investments, at Value $ 1,795,385 $47,225,761 $ 33,555,915 $8,958,572 $ 14,239,712
Cash -- -- 438 -- --
Foreign Currency, at Value -- -- -- -- 312,446
Receivable for Shares Sold -- 27,680 56,357 19,700 115,890
Receivable for Investments Sold -- 1,552,352 12,197,403 135,061 80,831
Unrealized Appreciation of Forward Foreign
Currency Contracts -- -- -- -- 76,998
Dividends Receivable -- -- 25,015 5,252 22,969
Receivable for Expense Reimbursement 5,996 -- 1,263 23,561 21,589
Foreign Tax Reclaim Receivable -- -- -- -- 19,510
Interest Receivable 210 287,799 2,721 731 3,450
Prepaid Trustees' Fees 595 19,718 7,000 63 1,087
Deferred Organization Expenses 1,002 1,002 1,002 1,002 1,002
Variation Margin Receivable -- -- 18,569 -- --
Prepaid Expenses and Other Assets 437 6,524 3,147 1,106 2,618
------------ ----------- ---------------- ----------- -------------
Total Assets 1,803,625 49,120,836 45,868,830 9,145,048 14,898,102
------------ ----------- ---------------- ----------- -------------
LIABILITIES
Payable for Investments Purchased -- 8,879,425 16,186,498 107,543 460,624
Custody Fee Payable 1,594 7,917 15,946 16,283 39,568
Unrealized Depreciation of Forward Foreign
Currency Contracts -- -- -- -- 24,362
Advisory Fee Payable 653 9,684 9,118 4,129 6,460
Payable for Shares Redeemed 10 43,686 247 1,563 229
Administration Fee Payable 24 64 48 -- 9
Variation Margin Payable -- 18,125 -- -- --
Accrued Expenses 22,046 30,173 37,796 30,808 40,258
------------ ----------- ---------------- ----------- -------------
Total Liabilities 24,327 8,989,074 16,249,653 160,326 571,510
------------ ----------- ---------------- ----------- -------------
NET ASSETS $ 1,779,298 $40,131,762 $ 29,619,177 $8,984,722 $ 14,326,592
------------ ----------- ---------------- ----------- -------------
------------ ----------- ---------------- ----------- -------------
Shares of Beneficial Interest Outstanding (no par
value, unlimited shares authorized) 191,046 3,540,847 1,661,662 714,269 1,225,670
------------ ----------- ---------------- ----------- -------------
------------ ----------- ---------------- ----------- -------------
Net Asset Value, Offering and Redemption Price
per Share $ 9.31 $ 11.33 $ 17.83 $ 12.58 $ 11.69
------------ ----------- ---------------- ----------- -------------
------------ ----------- ---------------- ----------- -------------
ANALYSIS OF NET ASSETS
Paid-in Capital $ 1,742,459 $40,580,937 $ 24,553,656 $8,149,148 $ 13,253,214
Undistributed Net Investment Income 36,874 946,105 94,153 5,934 45,543
Accumulated (Distributions in Excess of) Net
Realized Gain (Loss) on Investments, Futures
and Foreign Currency Contracts and Transactions (35) (531,547) 2,564,106 (48,056) (226,413)
Net Unrealized Appreciation (Depreciation) of
Investments, Futures and Foreign Currency
Contracts and Translations -- (863,733) 2,407,262 877,696 1,254,248
------------ ----------- ---------------- ----------- -------------
Net Assets $ 1,779,298 $40,131,762 $ 29,619,177 $8,984,722 $ 14,326,592
------------ ----------- ---------------- ----------- -------------
------------ ----------- ---------------- ----------- -------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
55
<PAGE>
J.P. MORGAN SERIES TRUST II
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
J.P. MORGAN J.P. MORGAN J.P. MORGAN J.P. MORGAN
TREASURY J.P. MORGAN U.S. DISCIPLINED SMALL INTERNATIONAL
MONEY MARKET BOND EQUITY COMPANY OPPORTUNITIES
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ----------- ---------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend Income $ -- $ -- $ 137,134 $ 33,621 $ 169,931
Interest Income 42,672 1,093,557 58,935 14,476 10,416
Less: Foreign Taxes Withheld -- -- (975) (34) (20,185)
------------ ----------- ---------------- ----------- -------------
Total Investment Income 42,672 1,093,557 195,094 48,063 160,162
EXPENSES
Custodian Fees and Expenses 2,619 25,369 20,985 44,562 53,307
Administrative Services Fee -- 7,556 -- -- --
Advisory Fee 1,933 54,194 45,085 21,980 33,324
Professional Fees and Expenses 8,340 14,133 16,585 13,723 17,389
Trustees' Fees and Expenses 1,160 11,038 9,323 4,027 7,738
Transfer Agent Expense 8,019 8,128 8,253 8,052 8,092
Printing Expenses 7,572 8,785 8,942 8,481 8,797
Insurance Expense 99 1,156 545 184 515
Amortization of Organization Expense 976 976 976 976 976
Registration Fees -- 1,517 61 61 268
Administration Fee 8 163 101 33 50
Miscellaneous 1,011 2,469 190 1,637 1,832
------------ ----------- ---------------- ----------- -------------
Total Expenses 31,737 135,484 111,046 103,716 132,288
Less: Reimbursement of Expenses (25,939) -- (10,105) (61,587) (65,640)
------------ ----------- ---------------- ----------- -------------
NET EXPENSES 5,798 135,484 100,941 42,129 66,648
------------ ----------- ---------------- ----------- -------------
NET INVESTMENT INCOME 36,874 958,073 94,153 5,934 93,514
NET REALIZED GAIN (LOSS) ON
Investment Transactions (19) (574,967) 2,280,966 206,781 396,368
Futures Contracts -- 44,755 350,465 -- --
Foreign Currency Contracts and Transactions -- 11,965 -- -- 67,542
------------ ----------- ---------------- ----------- -------------
Net Realized Gain (Loss) (19) (518,247) 2,631,431 206,781 463,910
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) OF
Investments -- (1,105,104) 481,928 340,256 709,660
Futures Contracts -- (38,481) (32,626) -- --
Foreign Currency Contracts and Translations -- (11,239) -- -- 44,451
------------ ----------- ---------------- ----------- -------------
Net Change in Unrealized Appreciation
(Depreciation) -- (1,154,824) 449,302 340,256 754,111
------------ ----------- ---------------- ----------- -------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $ 36,855 $ (714,998) $ 3,174,886 $ 552,971 $ 1,311,535
------------ ----------- ---------------- ----------- -------------
------------ ----------- ---------------- ----------- -------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
56
<PAGE>
(This page has been left blank intentionally.)
57
<PAGE>
J.P. MORGAN SERIES TRUST II
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
J.P. MORGAN J.P. MORGAN
TREASURY MONEY MARKET BOND
PORTFOLIO PORTFOLIO
-------------------------------- --------------------------------
FOR THE SIX FOR THE SIX
MONTHS ENDED MONTHS ENDED
JUNE 30, FOR THE FISCAL JUNE 30, FOR THE FISCAL
1999 YEAR ENDED 1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998 (UNAUDITED) DECEMBER 31, 1998
------------ ----------------- ------------ -----------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 36,874 $ 75,073 $ 958,073 $ 1,189,503
Net Realized Gain (Loss) on Investments,
Futures and Foreign Currency Contracts
and Transactions (19) (16) (518,247) 386,889
Net Change in Unrealized Appreciation
(Depreciation) of Investments, Futures
and Foreign Currency Contracts and
Translations -- 8 (1,154,824) 92,828
------------ ----------------- ------------ -----------------
Net Increase (Decrease) in Net
Assets Resulting from Operations 36,855 75,065 (714,998) 1,669,220
------------ ----------------- ------------ -----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (11,946) (290,681) (241,081) (978,066)
Net Realized Gain -- -- (137,587) (313,174)
In Excess of Net Realized Gain -- -- -- --
------------ ----------------- ------------ -----------------
Total Distributions to Shareholders (11,946) (290,681) (378,668) (1,291,240)
------------ ----------------- ------------ -----------------
TRANSACTIONS IN SHARES OF BENEFICIAL
INTEREST
Proceeds from Shares Sold 67,621 414,157 10,452,104 24,436,288
Reinvestment of Dividends and
Distributions 11,946 290,677 378,683 1,291,238
Cost of Shares Redeemed (416,893) (14,738) (2,146,815) (9,463,175)
------------ ----------------- ------------ -----------------
Net Increase (Decrease) from
Shareholder Transactions (337,326) 690,096 8,683,972 16,264,351
------------ ----------------- ------------ -----------------
Total Increase (Decrease) in Net
Assets (312,417) 474,480 7,590,306 16,642,331
NET ASSETS
Beginning of Period 2,091,715 1,617,235 32,541,456 15,899,125
------------ ----------------- ------------ -----------------
End of Period $ 1,779,298 $ 2,091,715 $40,131,762 $ 32,541,456
------------ ----------------- ------------ -----------------
------------ ----------------- ------------ -----------------
Undistributed Net Investment Income $ 36,874 $ 11,946 $ 946,105 $ 229,113
------------ ----------------- ------------ -----------------
------------ ----------------- ------------ -----------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
58
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
J.P. MORGAN
J.P. MORGAN J.P. MORGAN INTERNATIONAL
U.S. DISCIPLINED EQUITY SMALL COMPANY OPPORTUNITIES
PORTFOLIO PORTFOLIO PORTFOLIO
-------------------------------- -------------------------------- ------------
FOR THE SIX FOR THE SIX FOR THE SIX
MONTHS ENDED MONTHS ENDED MONTHS ENDED
JUNE 30, FOR THE FISCAL JUNE 30, FOR THE FISCAL JUNE 30,
1999 YEAR ENDED 1999 YEAR ENDED 1999
(UNAUDITED) DECEMBER 31, 1998 (UNAUDITED) DECEMBER 31, 1998 (UNAUDITED)
------------ ----------------- ------------ ----------------- ------------
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 94,153 $ 102,632 $ 5,934 $ 15,957 $ 93,514
Net Realized Gain (Loss) on Investments,
Futures and Foreign Currency Contracts
and Transactions 2,631,431 1,738,097 206,781 (85,540) 463,910
Net Change in Unrealized Appreciation
(Depreciation) of Investments, Futures
and Foreign Currency Contracts and
Translations 449,302 987,041 340,256 (288,812) 754,111
------------ ----------------- ------------ ----------------- ------------
Net Increase (Decrease) in Net
Assets Resulting from Operations 3,174,886 2,827,770 552,971 (358,395) 1,311,535
------------ ----------------- ------------ ----------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (13,606) (89,495) (4,416) (9,395) (46,803)
Net Realized Gain (258,185) (1,645,803) (2,168) (74,714) --
In Excess of Net Realized Gain -- -- -- (167,917) --
------------ ----------------- ------------ ----------------- ------------
Total Distributions to Shareholders (271,791) (1,735,298) (6,584) (252,026) (46,803)
------------ ----------------- ------------ ----------------- ------------
TRANSACTIONS IN SHARES OF BENEFICIAL
INTEREST
Proceeds from Shares Sold 9,112,060 8,311,939 2,651,741 3,344,904 7,879,655
Reinvestment of Dividends and
Distributions 271,795 1,735,296 6,584 252,063 46,803
Cost of Shares Redeemed (1,178,661) (1,521,131) (1,050,844) (1,351,537) (4,652,208)
------------ ----------------- ------------ ----------------- ------------
Net Increase (Decrease) from
Shareholder Transactions 8,205,194 8,526,104 1,607,481 2,245,430 3,274,250
------------ ----------------- ------------ ----------------- ------------
Total Increase (Decrease) in Net
Assets 11,108,289 9,618,576 2,153,868 1,635,009 4,538,982
NET ASSETS
Beginning of Period 18,510,888 8,892,312 6,830,854 5,195,845 9,787,610
------------ ----------------- ------------ ----------------- ------------
End of Period $29,619,177 $ 18,510,888 $ 8,984,722 $ 6,830,854 $14,326,592
------------ ----------------- ------------ ----------------- ------------
------------ ----------------- ------------ ----------------- ------------
Undistributed Net Investment Income $ 94,153 $ 13,606 $ 5,934 $ 4,416 $ 45,543
------------ ----------------- ------------ ----------------- ------------
------------ ----------------- ------------ ----------------- ------------
<CAPTION>
FOR THE FISCAL
YEAR ENDED
DECEMBER 31, 1998
-----------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 37,242
Net Realized Gain (Loss) on Investments,
Futures and Foreign Currency Contracts
and Transactions (122,891)
Net Change in Unrealized Appreciation
(Depreciation) of Investments, Futures
and Foreign Currency Contracts and
Translations 297,042
-----------------
Net Increase (Decrease) in Net
Assets Resulting from Operations 211,393
-----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (115,445)
Net Realized Gain (318,085)
In Excess of Net Realized Gain --
-----------------
Total Distributions to Shareholders (433,530)
-----------------
TRANSACTIONS IN SHARES OF BENEFICIAL
INTEREST
Proceeds from Shares Sold 4,229,642
Reinvestment of Dividends and
Distributions 433,529
Cost of Shares Redeemed (1,433,325)
-----------------
Net Increase (Decrease) from
Shareholder Transactions 3,229,846
-----------------
Total Increase (Decrease) in Net
Assets 3,007,709
NET ASSETS
Beginning of Period 6,779,901
-----------------
End of Period $ 9,787,610
-----------------
-----------------
Undistributed Net Investment Income --
-----------------
-----------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
59
<PAGE>
J.P. MORGAN SERIES TRUST II
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share outstanding throughout each period are as follows:
<TABLE>
<CAPTION>
J.P. MORGAN
TREASURY MONEY MARKET PORTFOLIO
------------------------------------------------------------------------------
FOR THE
SIX MONTHS FOR THE PERIOD
ENDED FOR THE FISCAL JANUARY 3, 1995
JUNE 30, YEAR ENDED DECEMBER 31, (COMMENCEMENT OF
1999 -------------------------------------- OPERATIONS) THROUGH
(UNAUDITED) 1998 1997 1996 DECEMBER 31, 1995
----------- ---------- ----------- ------- -------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.20 $ 10.56 $ 10.09 $ 10.06 $ 10.00
----------- ---------- ----------- ------- -------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.17(d) 0.41(d) 0.51(d) 0.44 0.45
Net Realized and Unrealized Gain (Loss)
on Investments 0.00(a)(d) 0.00(a)(d) (0.04)(d) 0.03 0.06
----------- ---------- ----------- ------- -------------------
Total from Investment Operations 0.17 0.41 0.47 0.47 0.51
----------- ---------- ----------- ------- -------------------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (0.06) (1.77) (0.00)(a) (0.44) (0.45)
Net Realized Gain -- -- (0.00)(a) -- --
----------- ---------- ----------- ------- -------------------
Total Distributions to Shareholders (0.06) (1.77) (0.00)(a) (0.44) (0.45)
----------- ---------- ----------- ------- -------------------
NET ASSET VALUE, END OF PERIOD $ 9.31 $ 9.20 $ 10.56 $ 10.09 $ 10.06
----------- ---------- ----------- ------- -------------------
----------- ---------- ----------- ------- -------------------
RATIOS AND SUPPLEMENTAL DATA
Total Return 1.88%(b) 4.28% 4.69% 4.69% 5.09%(b)
Net Assets, End of Period (in thousands) $1,779 $ 2,092 $ 1,617 $ 1,387 $ 1,273
Ratios to Average Net Assets
Net Expenses 0.60%(c) 0.60% 0.60% 0.60% 0.60%(c)
Net Investment Income 3.82%(c) 4.20% 7.23% 4.56% 4.95%(c)
Expenses without Reimbursement 3.28%(c) 4.13% 1.35% 2.02% 2.77%(c)
</TABLE>
- ------------------------
(a) Less than $0.01.
(b) Not annualized.
(c) Annualized.
(d) Based on Average Daily Shares Outstanding.
The Accompanying Notes are an Integral Part of the Financial Statements.
60
<PAGE>
J.P. MORGAN SERIES TRUST II
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share outstanding throughout each period are as follows:
<TABLE>
<CAPTION>
J.P. MORGAN
BOND PORTFOLIO
--------------------------------------------------------------------------------
FOR THE FISCAL FOR THE PERIOD
FOR THE YEAR ENDED JANUARY 3, 1995
SIX MONTHS ENDED DECEMBER 31, (COMMENCEMENT OF
JUNE 30, 1999 ----------------------------------- OPERATIONS) THROUGH
(UNAUDITED) 1998 1997 1996 DECEMBER 31, 1995
---------------- --------- --------- ------- -------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.67 $ 11.29 $ 10.65 $ 10.91 $ 10.00
---------------- --------- --------- ------- -------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.26 0.45 0.68(d) 0.47 0.58
Net Realized and Unrealized Gain (Loss)
on Investments, Futures and Foreign
Currency Transactions (0.48) 0.45 0.31(d) (0.25) 1.11
---------------- --------- --------- ------- -------------------
Total from Investment Operations (0.22) 0.90 0.99 0.22 1.69
---------------- --------- --------- ------- -------------------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (0.08) (0.39) (0.27) (0.47) (0.58)
Net Realized Gain (0.04) (0.13) (0.08) (0.01) (0.20)
---------------- --------- --------- ------- -------------------
Total Distributions to Shareholders (0.12) (0.52) (0.35) (0.48) (0.78)
---------------- --------- --------- ------- -------------------
NET ASSET VALUE, END OF PERIOD $ 11.33 $ 11.67 $ 11.29 $ 10.65 $ 10.91
---------------- --------- --------- ------- -------------------
---------------- --------- --------- ------- -------------------
RATIOS AND SUPPLEMENTAL DATA
Total Return (1.92)%(b) 8.01% 9.38% 2.09% 16.85%(b)
Net Assets, End of Period (in thousands) $ 40,132 $ 32,541 $ 15,899 $ 2,782 $ 1,417
Ratios to Average Net Assets
Net Expenses 0.75%(c) 0.75% 0.75% 0.75% 0.75%(c)
Net Investment Income 5.30%(c) 5.39% 6.20% 5.91% 6.00%(c)
Expenses without Reimbursement 0.75%(c) 1.02% 1.91% 2.18% 2.90%(c)
Portfolio Turnover 211% 179% 184% 198% 239%
</TABLE>
- ------------------------
(b) Not annualized.
(c) Annualized.
(d) Based on Average Daily Shares Outstanding.
The Accompanying Notes are an Integral Part of the Financial Statements.
61
<PAGE>
J.P. MORGAN SERIES TRUST II
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share outstanding throughout each period are as follows:
<TABLE>
<CAPTION>
J.P. MORGAN
U.S. DISCIPLINED
EQUITY PORTFOLIO
-------------------------------------------------------------------------
FOR THE FISCAL FOR THE PERIOD
FOR THE YEAR ENDED JANUARY 3, 1995
SIX MONTHS ENDED DECEMBER 31, (COMMENCEMENT OF
JUNE 30, 1999 ------------------------------ OPERATIONS) THROUGH
(UNAUDITED) 1998 1997 1996 DECEMBER 31, 1995
---------------- -------- -------- -------- -------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 15.84 $ 14.33 $ 13.68 $ 12.63 $ 10.00
---------------- -------- -------- -------- -------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.05 0.10 0.11 0.20 0.12
Net Realized and Unrealized Gain (Loss)
on Investments, Futures and Foreign
Currency Transactions 2.13 3.15 3.51 2.44 3.26
---------------- -------- -------- -------- -------------------
Total from Investment Operations 2.18 3.25 3.62 2.64 3.38
---------------- -------- -------- -------- -------------------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (0.01) (0.09) (0.11) (0.20) (0.12)
Net Realized Gain (0.18) (1.65) (2.86) (1.39) (0.63)
---------------- -------- -------- -------- -------------------
Total Distributions to Shareholders (0.19) (1.74) (2.97) (1.59) (0.75)
---------------- -------- -------- -------- -------------------
NET ASSET VALUE, END OF PERIOD $ 17.83 $ 15.84 $ 14.33 $ 13.68 $ 12.63
---------------- -------- -------- -------- -------------------
---------------- -------- -------- -------- -------------------
RATIOS AND SUPPLEMENTAL DATA
Total Return 13.84%(b) 23.28% 27.50% 21.14% 33.91%(b)
Net Assets, End of Period (in thousands) $ 29,619 $ 18,511 $ 8,892 $ 5,339 $ 4,144
Ratios to Average Net Assets
Net Expenses 0.90%(c) 0.90% 0.90% 0.90% 0.90%(c)
Net Investment Income 0.84%(c) 0.81% 0.75% 1.49% 1.48%(c)
Expenses without Reimbursement 0.99%(c) 1.48% 2.31% 2.13% 2.70%(c)
Portfolio Turnover 90% 82% 119% 90% 66%
</TABLE>
- ------------------------
(b) Not annualized
(c) Annualized
The Accompanying Notes are an Integral Part of the Financial Statements.
62
<PAGE>
J.P. MORGAN SERIES TRUST II
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share outstanding throughout each period are as follows:
<TABLE>
<CAPTION>
J.P. MORGAN
SMALL COMPANY PORTFOLIO
-------------------------------------------------------------------------
FOR THE FISCAL FOR THE PERIOD
FOR THE YEAR ENDED JANUARY 3, 1995
SIX MONTHS ENDED DECEMBER 31, (COMMENCEMENT OF
JUNE 30, 1999 ------------------------------ OPERATIONS) THROUGH
(UNAUDITED) 1998 1997 1996 DECEMBER 31, 1995
---------------- -------- -------- -------- -------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.86 $ 13.09 $ 12.53 $ 11.83 $ 10.00
---------------- -------- -------- -------- -------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.01 0.03 0.04 0.06 0.11
Net Realized and Unrealized Gain (Loss)
on Investments 0.72 (0.74) 2.53 2.43 3.18
---------------- -------- -------- -------- -------------------
Total from Investment Operations 0.73 (0.71) 2.57 2.49 3.29
---------------- -------- -------- -------- -------------------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (0.01) (0.02) (0.04) (0.06) (0.11)
Net Realized Gain (0.00)(a) (0.15) (1.97) (1.73) (1.35)
In Excess of Net Realized Gain -- (0.35) -- -- --
---------------- -------- -------- -------- -------------------
Total Distributions to Shareholders (0.01) (0.52) (2.01) (1.79) (1.46)
---------------- -------- -------- -------- -------------------
NET ASSET VALUE, END OF PERIOD $ 12.58 $ 11.86 $ 13.09 $ 12.53 $ 11.83
---------------- -------- -------- -------- -------------------
---------------- -------- -------- -------- -------------------
RATIOS AND SUPPLEMENTAL DATA
Total Return 6.16%(b) (5.51)% 22.50% 21.74% 32.91%(b)
Net Assets, End of Period (in thousands) $ 8,985 $ 6,831 $ 5,196 $ 3,867 $ 2,536
Ratios to Average Net Assets
Net Expenses 1.15%(c) 1.15% 1.15% 1.15% 1.15%(c)
Net Investment Income 0.16%(c) 0.28% 0.28% 0.54% 0.99%(c)
Expenses without Reimbursement 2.83%(c) 3.43% 3.81% 2.69% 3.22%(c)
Portfolio Turnover 68% 67% 85% 144% 100%
</TABLE>
- ------------------------
(a) Less than $0.01.
(b) Not annualized
(c) Annualized
The Accompanying Notes are an Integral Part of the Financial Statements.
63
<PAGE>
J.P. MORGAN SERIES TRUST II
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share outstanding throughout each period are as follows:
<TABLE>
<CAPTION>
J.P. MORGAN
INTERNATIONAL OPPORTUNITIES PORTFOLIO
-------------------------------------------------------------------------
FOR THE FISCAL FOR THE PERIOD
FOR THE YEAR ENDED JANUARY 3, 1995
SIX MONTHS ENDED DECEMBER 31, (COMMENCEMENT OF
JUNE 30, 1999 ------------------------------ OPERATIONS) THROUGH
(UNAUDITED) 1998 1997 1996 DECEMBER 31, 1995
---------------- -------- -------- -------- -------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.52 $ 10.60 $ 11.73 $ 10.86 $ 10.00
---------------- -------- -------- -------- -------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.08 0.14 0.15 0.20 0.15
Net Realized and Unrealized Gain on
Investments and Foreign Currency
Transactions 1.13 0.40 0.44 1.23 1.08
---------------- -------- -------- -------- -------------------
Total from Investment Operations 1.21 0.54 0.59 1.43 1.23
---------------- -------- -------- -------- -------------------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (0.04) (0.16) (0.41) (0.09) (0.09)
Net Realized Gain -- -- (1.31) (0.47) (0.18)
In Excess of Net Realized Gain -- (0.46) -- -- --
Return of Capital -- -- -- -- (0.10)
---------------- -------- -------- -------- -------------------
Total Distributions to Shareholders (0.04) (0.62) (1.72) (0.56) (0.37)
---------------- -------- -------- -------- -------------------
NET ASSET VALUE, END OF PERIOD $ 11.69 $ 10.52 $ 10.60 $ 11.73 $ 10.86
---------------- -------- -------- -------- -------------------
---------------- -------- -------- -------- -------------------
RATIOS AND SUPPLEMENTAL DATA
Total Return 11.57%(b) 4.73% 5.43% 13.12% 12.38%(b)
Net Assets, End of Period (in thousands) $ 14,327 $ 9,788 $ 6,780 $ 6,250 $ 3,922
Ratios to Average Net Assets
Net Expenses 1.20%(c) 1.20% 1.20% 1.20% 1.20%(c)
Net Investment Income 1.68%(c) 0.44% 0.88% 1.25% 1.06%(c)
Expenses without Reimbursement 2.38%(c) 3.26% 4.25% 3.18% 3.16%(c)
Portfolio Turnover 34% 127% 149% 71% 68%
</TABLE>
- ------------------------
(b) Not annualized
(c) Annualized
The Accompanying Notes are an Integral Part of the Financial Statements.
64
<PAGE>
J.P. MORGAN SERIES TRUST II
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
J.P. Morgan Series Trust II (the "trust") is registered under the Investment
Company Act of 1940, as amended, as an open-end diversified management
investment company. The trust was organized as a Delaware Business Trust on
October 28, 1993 for the purpose of funding flexible premium variable life
insurance policies. The trust is composed of five separate portfolios (each, a
"portfolio" and collectively, the "portfolios") which operate as distinct
investment vehicles. The names and investment objectives of the portfolios are
as follows: J.P. Morgan Treasury Money Market Portfolio seeks to provide current
income, maintain a high level of liquidity and preserve capital; J.P. Morgan
Bond Portfolio seeks to provide a high total return consistent with moderate
risk of capital and maintenance of liquidity; J.P. Morgan U.S. Disciplined
Equity Portfolio (Prior to July 1, 1999, the portfolio's name was J.P. Morgan
Equity Portfolio) seeks to provide a high total return from a portfolio of
selected equity securities; J.P. Morgan Small Company Portfolio seeks to provide
a high total return from a portfolio of small company stocks; J.P. Morgan
International Opportunities Portfolio seeks to provide a high total return from
a portfolio of equity securities of foreign companies.
J.P. Morgan Bond Portfolio and J.P. Morgan International Opportunities Portfolio
may have elements of risk not typically associated with investments in the
United States due to concentrated investments in a limited number of countries
or regions which may vary throughout the year. Such concentrations may subject
these portfolios to additional risks resulting from political or economic
conditions in such countries or regions and the possible imposition of adverse
governmental laws or currency restrictions affecting such countries or regions
which could cause the securities and their markets to be less liquid and prices
more volatile than those comparable to the United States. The ability of issuers
of debt, asset-backed and mortgage securities held by the J.P. Morgan Bond
Portfolio to meet their obligations may be affected by economic and political
developments in a specific industry or region. The value of asset-backed and
mortgage securities can be significantly affected by changes in interest rates
or rapid principal payments including pre-payments.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual amounts could differ from
those estimates. The following is a summary of the significant accounting
policies of the portfolios:
a) The portfolios value securities that are listed on an exchange using
prices supplied daily by an independent pricing service that are based on
the last traded price on a national securities exchange or, in the
absence of recorded trades, at the readily available mean of the bid and
asked prices on such exchange, if such exchange or market constitutes the
broadest and most representative market for the security. Securities
listed on a foreign exchange are valued at the last traded price or, in
the absence of recorded trades, at the readily available mean of the bid
and asked prices on such exchange available before the time when net
assets are valued. Independent pricing service procedures may also
include the use of prices based upon yields or prices of securities of
comparable quality, coupon, maturity and type; indications as to values
from dealers; and general market conditions. Unlisted securities are
valued at the average of the quoted bid and asked prices in the
over-the-counter market provided by a principal market maker or dealer.
If prices are not supplied by the portfolios' independent pricing service
or
65
<PAGE>
J.P. MORGAN SERIES TRUST II
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
principal market maker or dealer, such securities are priced using fair
values in accordance with procedures established by the portfolios'
trustees. All short-term securities with a remaining maturity of sixty
days or less are valued using the amortized cost method.
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 portfolios' net assets are calculated, such securities will be
valued at fair value in accordance with procedures established by and
under the general supervision of the portfolios' trustees.
b) The books and records of the portfolios are maintained in U.S. dollars.
The market value of investment securities, other assets and liabilities
and foreign currency contracts used by certain portfolios are translated
at the prevailing exchange rates at the end of the period. Purchases,
sales, income and expenses are translated at the exchange rates
prevailing on the respective dates of such transactions. Translation
gains and losses resulting from changes in exchange rates during the
reporting period and gains and losses realized upon settlement of foreign
currency transactions are reported in the Statement of Operations.
Although the net assets of the portfolios are presented at the exchange
rates and market values prevailing at the end of the period, the
portfolios do not isolate the portion of the results of operations
arising as a result of changes in foreign exchange rates from the
fluctuations arising from changes in the market prices of securities
during the period.
c) Securities transactions are recorded on a trade date basis. Dividend
income is recorded on the ex-dividend date or as of the time that the
relevant ex-dividend date and amount becomes known. Interest income,
which includes the amortization of premiums and discounts, if any, is
recorded on an accrual basis. For financial and tax reporting purposes,
realized gains and losses are determined on the basis of first in first
out.
d) Distributions to shareholders of net investment income and net realized
capital gains, if any, are declared and paid semi-annually.
e) Each portfolio incurred organization expenses in the amount of $9,834.
These costs were deferred and are being amortized on a straight-line
basis over a five-year period from the commencement of operations.
f) Expenses incurred by the trust with respect to any two or more portfolios
in the trust are allocated in proportion to the net assets of each
portfolio in the trust, except where allocations of direct expenses to
each portfolio can otherwise be made fairly. Expenses directly
attributable to a portfolio are charged to that portfolio.
g) Certain portfolios may enter into forward and spot foreign currency
contracts to protect securities and related receivables and payables
against fluctuations in future foreign currency rates and to enhance
returns. A forward currency contract is an agreement to buy or sell
currencies of different countries on
66
<PAGE>
J.P. MORGAN SERIES TRUST II
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
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 at the current foreign
exchange rates, and the change in the market value is recorded by the
portfolio as unrealized appreciation or depreciation of forward foreign
currency contract translations.
h) Futures -- A futures contract is an agreement to purchase/sell a
specified quantity of an underlying instrument at a specified future date
or to make/receive a cash payment based on the value of a securities
index. The price at which the purchase and sale will take place is fixed
when the portfolio enters into the contract. Upon entering into such a
contract, the portfolio is required to pledge to the broker an amount of
cash and/or liquid securities equal to the minimum "initial margin"
requirements of the exchange. Pursuant to the contract, the portfolio
agrees to receive from, or pay to, the broker an amount of cash equal to
the daily fluctuation in the value of the contract. Such receipts or
payments are known as "variation margin" and are recorded by the
portfolio as unrealized gains or losses. When the contract is closed, the
portfolio records a realized gain or loss equal to the difference between
the value of the contract at the time it was opened and the value at the
time when it was closed. The portfolio invests in futures contracts for
the purpose of hedging its existing portfolio securities, or securities
the portfolio intends to purchase, against fluctuations in value caused
by changes in prevailing market interest rates or securities movements.
The use of futures transactions involves the risk of imperfect
correlation in movements in the price of futures contracts, interest
rates and the underlying hedged assets, and the possible inability of
counterparties to meet the terms of their contracts.
i) Each portfolio intends to comply with the provisions of the Internal
Revenue Code of 1986, as amended, (the "code") applicable to regulated
investment companies and to distribute substantially all of its income,
including net realized capital gains, if any, within the prescribed time
periods. Accordingly, no provision for federal income or excise tax is
necessary. Each portfolio is also a segregated portfolio of assets for
insurance purposes and intends to comply with the diversification
requirements of Subchapter L of the code. The J.P. Morgan Bond Portfolio
and the J.P Morgan International Opportunities Portfolio may be subject
to taxes imposed by countries in which they invest. Such taxes are
generally based on income and/or capital gains earned. Taxes are accrued
and applied to net investment income, net realized capital gains and net
unrealized appreciation, as applicable, as the income and/or capital
gains are earned.
j) For federal income tax purposes, the J.P. Morgan Treasury Money Market
Portfolio and the J.P. Morgan International Opportunities Portfolio had
capital loss carryforwards of $16 and $523,955, respectively, which will
expire in the year 2006. To the extent that these capital losses are used
to offset future capital gains, it is probable that the gains so offset
will not be distributed to shareholders.
2. TRANSACTIONS WITH AFFILIATES
a) The trust, on behalf of each portfolio, has an Investment Advisory
Agreement with J.P. Morgan Investment Management Inc. ("Morgan"), an
affiliate of Morgan Guaranty Trust Company of New
67
<PAGE>
J.P. MORGAN SERIES TRUST II
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
York ("Morgan Guaranty") and a wholly owned subsidiary of J.P. Morgan &
Co. Incorporated. Under the terms of the agreement, Morgan is paid a fee
for its services, computed daily and paid monthly, at an annual rate of:
0.20% of the average daily net assets of J.P. Morgan Treasury Money
Market Portfolio; 0.30% of the average daily net assets of J.P. Morgan
Bond Portfolio; 0.40% of the average daily net assets of J.P. Morgan U.S.
Disciplined Equity Portfolio; 0.60% of the average daily net assets of
J.P. Morgan Small Company Portfolio and 0.60% of the average daily net
assets of J.P. Morgan International Opportunities Portfolio. For the six
months ended June 30, 1999, Morgan's fee for these services amounted to:
$1,933 for J.P. Morgan Treasury Money Market Portfolio, $54,194 for J.P.
Morgan Bond Portfolio, $45,085 for J.P. Morgan U.S. Disciplined Equity
Portfolio, $21,980 for J.P. Morgan Small Company Portfolio and $33,324
for J.P. Morgan International Opportunities Portfolio.
b) The trust, on behalf of each portfolio, has retained Funds Distributor,
Inc. ("FDI"), a registered broker-dealer, to serve as the
co-administrator and distributor for each portfolio. Under a Co-
Administration Agreement between FDI and the trust on behalf of each
portfolio, FDI provides administrative services necessary for the
operations of each portfolio, furnishes office space and facilities
required for conducting the business of each portfolio and pays the
compensation of the portfolios' officers affiliated with FDI. Each
portfolio has agreed to pay FDI fees equal to its allocable share of an
annual complex-wide charge of $425,000 plus FDI's out-of-pocket expenses.
The amount allocable to each portfolio is based on the ratio of the
portfolio's net assets to the aggregate net assets of the trust and
certain other investment companies subject to similar agreements with
FDI. For the six months ended June 30, 1999, the fee for these services
amounted to: $8 for J.P. Morgan Treasury Money Market Portfolio, $163 for
J.P. Morgan Bond Portfolio, $101 for J.P. Morgan U.S. Disciplined Equity
Portfolio, $33 for J.P. Morgan Small Company Portfolio and $50 for J.P.
Morgan International Opportunities Portfolio.
c) The trust, on behalf of each portfolio, has an Administrative Services
Agreement (the "Services Agreement") with Morgan Guaranty, under which
Morgan Guaranty is responsible for certain aspects of the administration
and operation of each portfolio. Under the Services Agreement, each
portfolio has agreed to pay Morgan Guaranty a fee based on the
percentages described below. If total expenses of each portfolio,
excluding the advisory fees, exceed the expense limits of: 0.40% of the
average daily net assets of J.P. Morgan Treasury Money Market Portfolio,
0.45% of the average daily net assets of J.P. Morgan Bond Portfolio,
0.50% of the average daily net assets of J.P. Morgan U.S. Disciplined
Equity Portfolio, 0.55% of the average daily net assets of J.P. Morgan
Small Company Portfolio and 0.60% of the average daily net assets of J.P.
Morgan International Opportunities Portfolio, Morgan Guaranty will
reimburse each portfolio for the excess expense amount and receive no
fee. Should such expenses be less than the expense limits, Morgan
Guaranty's fee would be limited to the difference between such expenses
and the fees calculated under the Services Agreement. For the six months
ended June 30, 1999, the fee for these services amounted to $7,556 for
the J.P. Morgan Bond Portfolio and Morgan Guaranty has agreed to
reimburse the portfolios for expenses under this agreement as follows:
$25,939 for J.P. Morgan Treasury Money Market Portfolio, $10,105 for J.P.
Morgan U.S. Disciplined Equity Portfolio, $61,587 for J.P. Morgan Small
Company Portfolio and $65,640 for J.P. Morgan International Opportunities
Portfolio.
68
<PAGE>
J.P. MORGAN SERIES TRUST II
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
d) An aggregate annual fee of $20,000 is paid to each trustee for serving as
a trustee of the trust. The Trustees' Fees and Expenses shown in the
financial statements represent the portfolios' allocated portion of the
total fees and expenses.
3. SHAREHOLDER TRANSACTIONS
The Declaration of Trust permits the trustees to issue an unlimited number of
full and fractional shares. Transactions in shares of beneficial interest of
each portfolio were as follows:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
JUNE 30, FOR THE FISCAL
1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998
------------ -----------------
<S> <C> <C>
J.P. MORGAN TREASURY MONEY MARKET PORTFOLIO
Shares sold...................................... 7,287 44,162
Reinvestment of dividends........................ 1,291 31,530
Shares redeemed.................................. (44,877) (1,563)
------------ -----------------
Net Increase (Decrease).......................... (36,299) 74,129
------------ -----------------
------------ -----------------
</TABLE>
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
JUNE 30, FOR THE FISCAL
1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998
------------ -----------------
<S> <C> <C>
J.P. MORGAN BOND PORTFOLIO
Shares sold...................................... 905,223 2,080,565
Reinvestment of dividends and distributions...... 32,701 110,506
Shares redeemed.................................. (186,381) (810,528)
------------ -----------------
Net Increase..................................... 751,543 1,380,543
------------ -----------------
------------ -----------------
</TABLE>
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
JUNE 30, FOR THE FISCAL
1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998
------------ -----------------
<S> <C> <C>
J.P. MORGAN U.S. DISCIPLINED EQUITY PORTFOLIO
Shares sold...................................... 549,431 532,283
Reinvestment of dividends and distributions...... 15,894 114,071
Shares redeemed.................................. (72,176) (98,193)
------------ -----------------
Net Increase..................................... 493,149 548,161
------------ -----------------
------------ -----------------
</TABLE>
69
<PAGE>
J.P. MORGAN SERIES TRUST II
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
JUNE 30, FOR THE FISCAL
1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998
------------ -----------------
<S> <C> <C>
J.P. MORGAN SMALL COMPANY PORTFOLIO
Shares sold...................................... 230,069 265,858
Reinvestment of dividends and distributions...... 555 20,952
Shares redeemed.................................. (92,365) (107,855)
------------ -----------------
Net Increase..................................... 138,259 178,955
------------ -----------------
------------ -----------------
</TABLE>
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
JUNE 30, FOR THE FISCAL
1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998
------------ -----------------
<S> <C> <C>
J.P. MORGAN INTERNATIONAL OPPORTUNITIES PORTFOLIO
Shares sold...................................... 698,492 4,229,642
Reinvestment of dividends and distributions...... 4,124 433,529
Shares redeemed.................................. (406,997) (1,433,325)
------------ -----------------
Net Increase..................................... 295,619 3,229,846
------------ -----------------
------------ -----------------
</TABLE>
From time to time, each portfolio may have a concentration of several
shareholders holding a significant percentage of shares outstanding. Investment
activities of these shareholders could have a material impact on that portfolio.
4. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the six months
ended June 30, 1999, were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
------------- -------------
<S> <C> <C>
J.P. Morgan Bond Portfolio
U.S. Government Agency Obligations.................................... $ 58,488,334 $ 50,303,398
Corporate, Collateralized Mortgage and Other Obligations.............. 57,944,510 49,097,957
J.P. Morgan U.S. Disciplined Equity Portfolio........................... 28,228,987 18,648,837
J.P. Morgan Small Company Portfolio..................................... 6,406,535 4,781,255
J.P. Morgan International Opportunities Portfolio....................... 6,426,331 3,565,088
</TABLE>
70
<PAGE>
J.P. MORGAN SERIES TRUST II
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
Open forward foreign currency contracts at June 30, 1999 are summarized as
follows:
J.P. MORGAN INTERNATIONAL OPPORTUNITIES PORTFOLIO
<TABLE>
<CAPTION>
U.S. DOLLAR NET UNREALIZED
CONTRACTUAL VALUE AT APPRECIATION/
PURCHASE CONTRACTS VALUE 6/30/99 (DEPRECIATION)
- ------------------------------------------------- ----------------- ----------- --------------
<S> <C> <C> <C>
Australian Dollar 134,000, expiring 8/19/99...... $ 87,533 $ 88,628 $ 1,095
Euro 799,000, expiring 8/19/99................... 837,382 826,676 (10,706)
Japanese Yen 51,115,820, expiring 8/19/99........ 430,000 425,583 (4,417)
</TABLE>
<TABLE>
<CAPTION>
SETTLEMENT
SALES CONTRACTS VALUE
- ------------------------------------------------- -----------------
<S> <C> <C> <C>
Australian Dollar 318,935,
expiring 8/19/99................................ 210,038 210,943 (905)
Euro 2,040,403, expiring 8/19/99................. 2,174,438 2,111,079 63,359
Hong Kong Dollar 587,500, expiring 8/19/99....... 75,680 75,646 34
Japanese Yen 83,001,845, expiring 8/19/99........ 689,248 691,062 (1,814)
South African Rand 691,370, expiring 8/19/99..... 108,877 113,369 (4,492)
Swiss Franc 412,897, expiring 8/19/99............ 277,484 267,002 10,482
--------------
NET UNREALIZED APPRECIATION ON FORWARD FOREIGN
CURRENCY CONTRACTS.............................. $ 52,636
--------------
--------------
</TABLE>
Open futures contracts at June 30, 1999 are summarized as follows:
J.P. MORGAN BOND PORTFOLIO
<TABLE>
<CAPTION>
NET UNREALIZED CURRENT MARKET VALUE
CONTRACTS SHORT DEPRECIATION OF CONTRACTS
------------------- -------------- --------------------
<S> <C> <C> <C>
U.S. Ten Year Note, expiring September 1999...... 22 $ (25,464) $ 2,223,750
------------------- -------------- --------------------
------------------- -------------- --------------------
</TABLE>
J.P. MORGAN U.S. DISCIPLINED EQUITY PORTFOLIO
<TABLE>
<CAPTION>
NET UNREALIZED CURRENT MARKET VALUE
CONTRACTS LONG APPRECIATION OF CONTRACTS
-------------- ------------------ --------------------
<S> <C> <C> <C>
S&P 500, expiring September 1999................. 3 $ 30,944 $ 1,036,275
-------------- ------------------ --------------------
-------------- ------------------ --------------------
</TABLE>
71
<PAGE>
DISTRIBUTED BY FUNDS DISTRIBUTOR, INC. J.P. MORGAN INVESTMENT MANAGEMENT INC. IS
THE TRUST'S INVESTMENT ADVISOR. SHARES OF THE PORTFOLIOS PRESENTLY ARE OFFERED
ONLY TO VARIABLE ANNUITY AND VARIABLE LIFE INSURANCE SEPARATE ACCOUNTS
ESTABLISHED BY INSURANCE COMPANIES TO FUND VARIABLE ANNUITY CONTRACTS AND
VARIABLE LIFE INSURANCE POLICIES AND QUALIFIED PENSION AND RETIREMENT PLANS
OUTSIDE THE SEPARATE ACCOUNT CONTEXT.
Shares of the portfolios and investments in the variable contracts are not bank
deposits and are not guaranteed by any bank, government entity, or the FDIC.
Return and share price will fluctuate and redemption value may be more or less
than original cost.
Foreign investing involves special risks, including currency fluctuation and
political uncertainty; prospective investors should refer to the prospectus
for a discussion of these risks. Reference to specific securities and their
issuers are for illustrative purposes only and should not be interpreted as
recommendations to purchase or sell these securities. There is no assurance
the portfolios will continue to hold these securities. Opinions expressed
herein are subject to change without notice.
PLEASE CALL (800) 221-7930 FOR A PROSPECTUS WHICH CONTAINS MORE COMPLETE
INFORMATION, INCLUDING CONTRACT CHARGES AND DEDUCTIONS, AND PORTFOLIO FEES AND
EXPENSES. PLEASE READ THE PROSPECTUSES FOR COMPLETE DETAILS INCLUDING RISK
CONSIDERATIONS.
26
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