<PAGE>
LETTER TO THE SHAREHOLDERS OF THE J.P. MORGAN U.S. DISCIPLINED EQUITY PORTFOLIO
February 1, 2000
Dear Shareholder:
The J.P. Morgan U.S. Disciplined Equity Portfolio returned 18.54% for the
year ended December 31, 1999. The portfolio surpassed the Lipper Variable
Annuity Growth & Income Average, which returned 14.51%, but underperformed
the 21.04% return of the S&P 500 Index.
The portfolio's net asset value per share increased from $15.84 on December
31, 1998, to $17.35 on December 31, 1999. The portfolio made distributions
during the year of approximately $0.06 per share from ordinary income,
approximately $0.92 per share from short-term capital gains, and
approximately $0.40 per share from long-term capital gains. In addition, the
portfolio's net assets advanced from approximately $18.5 million on December
31, 1998, to approximately $39.5 million on December 31, 1999.
The report that follows includes detailed performance information about the
J.P. Morgan U.S. Disciplined Equity Portfolio, as well as an interview with
Timothy Devlin, the portfolio manager primarily responsible for the
portfolio. In this interview, Tim discusses events in the equity markets,
portfolio performance, and what he sees on the horizon.
As chairman and president of Asset Management Services, we thank you for your
participation in the J.P. Morgan U.S. Disciplined Equity Portfolio. We look
forward to sharing Morgan's insights regarding financial markets with you in
the future. If you have any comments or questions, please call the trust's
distributor, Funds Distributor, Inc. at (888) 756-8645.
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 FACTS AND HIGHLIGHTS........6
PORTFOLIO PERFORMANCE...........2 FINANCIAL STATEMENTS..................8
PORTFOLIO MANAGER Q&A...........3
- ------------------------------------------------------------------------------
1
<PAGE>
PORTFOLIO PERFORMANCE
EXAMINING PERFORMANCE
There are several ways to evaluate a mutual fund's historical performance
record. One approach is to look at the growth of a hypothetical investment of
$10,000. The chart at right shows that $10,000 invested in the portfolio on
January 3, 1995,* would have been worth $30,230 at December 31, 1999.
Another 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 fund's value over various time
periods, typically one, five, or ten years (or since inception). Total
returns for periods of less than one year are not annualized and provide a
picture of how a fund has performed over the short term.
GROWTH OF $10,000 SINCE INCEPTION
JANUARY 3, 1995 -- DECEMBER 31, 1999
[GRAPH]
<TABLE>
<CAPTION>
J.P. Morgan Lipper Variable
U.S. Disciplined S&P 500 Annuity Growth &
Equity Portfolio Index Income Average
--------------------- --------- ---------------------
<S> <C> <C> <C>
12/31/94 10,000 10,000 10,000
1/31/95 10,210 10,259 10,148
2/28/95 10,650 10,659 10,520
3/31/95 11,040 10,974 10,787
4/30/95 11,290 11,297 11,039
5/31/95 11,720 11,748 11,396
6/30/95 11,940 12,021 11,646
7/31/95 12,370 12,420 12,045
8/31/95 12,420 12,451 12,157
9/30/95 12,780 12,977 12,542
10/31/95 12,440 12,930 12,390
11/30/95 13,160 13,498 12,964
12/31/95 13,378 13,758 13,175
1/31/96 13,738 14,226 13,536
2/29/96 14,035 14,358 13,732
3/31/96 14,318 14,496 13,918
4/30/96 14,609 14,710 14,163
5/31/96 14,792 15,089 14,438
6/30/96 14,620 15,147 14,399
7/31/96 13,845 14,478 13,784
8/31/96 14,361 14,783 14,178
9/30/96 15,018 15,615 14,819
10/31/96 15,233 16,046 15,115
11/30/96 16,502 17,258 16,084
12/31/96 16,223 16,917 15,934
1/31/97 17,148 17,974 16,626
2/28/97 17,219 18,114 16,741
3/31/97 16,653 17,370 16,156
4/30/97 17,336 18,407 16,745
5/31/97 18,461 19,528 17,764
6/30/97 19,024 20,403 18,443
7/31/97 20,664 22,026 19,765
8/31/97 19,922 20,792 19,127
9/30/97 20,784 21,931 20,085
10/31/97 19,910 21,198 19,400
11/30/97 20,377 22,180 19,912
12/31/97 20,685 22,561 20,243
1/31/98 20,815 22,810 20,281
2/28/98 22,302 24,455 21,661
3/31/98 23,197 25,707 22,661
4/30/98 23,632 25,966 22,824
5/31/98 23,471 25,520 22,375
6/30/98 23,734 26,556 22,731
7/31/98 23,209 26,273 22,142
8/31/98 19,620 22,475 18,980
9/30/98 21,123 23,915 19,995
10/31/98 22,654 25,860 21,471
11/30/98 24,332 27,427 22,553
12/31/98 25,501 29,008 23,546
1/31/99 26,194 30,221 23,974
2/28/99 25,147 29,281 23,260
3/31/99 26,242 30,453 24,060
4/30/99 27,713 31,632 25,568
5/31/99 27,371 30,886 25,277
6/30/99 29,032 32,600 26,326
7/31/99 28,039 31,582 25,583
8/31/99 27,892 31,424 25,092
9/30/99 27,078 30,563 24,264
10/31/99 28,511 32,497 25,252
11/30/99 28,967 33,157 25,570
12/31/99 30,230 35,110 26,600
24.76% 28.55%
</TABLE>
<TABLE>
<CAPTION>
PERFORMANCE TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS
------------------ ------------------------------------
THREE SIX ONE THREE SINCE
AS OF DECEMBER 31, 1999 MONTHS MONTHS YEAR YEARS INCEPTION*
- -------------------------------------------------------------------- ------------------------------------
<S> <C> <C> <C> <C> <C>
J.P. Morgan U.S. Disciplined Equity Portfolio 11.64% 4.13% 18.54% 23.06% 24.76%
S&P 500 Index** 14.88% 7.70% 21.04% 27.56% 28.55%
Lipper Variable Annuity Growth & Income Average 9.73% 1.69% 14.51% 18.76% 21.78%
</TABLE>
*1/3/95 -- COMMENCEMENT OF OPERATIONS.
**THE S&P 500 INDEX IS AN UNMANAGED INDEX WHICH 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.
2
<PAGE>
PORTFOLIO MANAGER Q&A
[PHOTO]
Following is an interview with TIMOTHY J. DEVLIN, vice president and member
of the portfolio management team for the portfolio. Tim joined J.P. Morgan in
1996 after spending nine years at Mitchell Hutchins Asset Management Inc.,
where he managed quantitatively driven equity portfolios for institutional
and retail investors. Tim was educated at Union College, where he received a
B.A. in Economics. This interview was conducted on January 25, 2000, and
reflects Tim's views on that date.
WHAT WERE THE KEY TRENDS IN THE U.S EQUITY MARKET OVER THE PAST YEAR?
TJD: On the macro level, we saw four main trends affecting the equity market
over the past year. First, the U.S. economy continued to be strong, although
there have been some recent signs of moderation, including a slowing in
housing starts and retail chain stores sales. Overall, however, the economy
continues to chug along. Second, we are in a rising interest rate
environment. With three quarter-point rate hikes in June, August, and
November, the Federal Reserve took back all the easing it had added last year
in the face of the global economic crisis. Third, and directly related to Fed
activity, is the fact that inflation continues to be benign. The Fed has
remained ever alert for the specter of inflation to rear its head, and for
the most part it has not. Wage pressures have remained dormant; it is in
industrial commodity prices that pressure has been building. This has been
concentrated in oil prices, which have more than doubled last year and we
expect they still have room to go up, particularly with Iraq's latest
cessation of production. Fourth, global growth on the whole has been showing
signs of improvement. The recent data coming out of Europe, Japan, and the
emerging markets indicates that growth finally is taking hold.
For the U.S. equity markets, the twelve-month period was a highly volatile
one. After establishing new highs during the summer, the markets corrected in
the first part of the third quarter, only to recover to new highs in the
fourth quarter on positive economic growth and earnings announcements. Rising
interest rates and fears of Y2K-related problems as the year-end approached
created an environment of extreme uncertainty. This caused the market to
favor some of the stocks that have already done well this year, as they
looked for certainty.
The S&P 500 was up 21.0% for the year, 14.9% in the fourth quarter alone. Led
by technology stocks, positive earnings announcements and forecasts for
future strong earnings propelled this market forward. On the flip side, any
company that missed consensus expectations, even by a penny or two, was
punished by the market.
The spread between sectors manifested itself even further between growth
versus value. For the year, the S&P 500/BARRA Growth was up 28.25%, whereas
the S&P 500/BARRA Value was up 12.72%. This disparity is even more striking
in the small-cap arena where, for the same twelve-month period, the Russell
2000 Growth returned 43.09% versus the negative 1.49% return of the Russell
2000 Value.
3
<PAGE>
Within the S&P 500, six of the 16 industrial sectors were in negative
territory for the twelve-month period, some significantly. Reflective of the
over-rewarding of good earnings and knockdown of underperformers, the
performance among different sectors was at extremes. For example, consumer
non-durables were down 12.9%, utilities were down 9.7%, and drugs were down
9.3%. However, technology - which currently accounts for almost 30% of the
market, compared to the 10% it comprised a few years ago - was up 77.7% for
the year and telecom was up 19.8%. The leadership of the market narrowed even
further, driven by the continued dramatic performance of tech stocks. This
has been fueled by optimism about spending by both consumers and businesses
on technology and telecom products and services, much of which is driven by
the increased importance of the Internet and e-commerce applications. Strong
Internet sales were recorded over the holidays, and businesses, having
addressed Y2K issues, are starting to pour money into e-commerce; the
"realization" is that a company can't survive unless it's on the Web.
HOW DID THE PORTFOLIO PERFORM IN THIS ENVIRONMENT?
TJD: The portfolio underperformed S&P 500 in 1999. The exceptionally
near-term focus described above can create a difficult environment for our
longer-term valuation process. However, the shortfall was limited by the risk
controls of our process. You may recall that the portfolio is always sector-
and style-neutral to the market. In an environment where, over a six-month
period, one sector returns 35% and another is down 17%, the penalty for not
choosing the winning sector is severe. Our process relies on selecting the
most attractive stocks - and more importantly, avoiding the unattractive
stocks - within each sector, while matching the sector weights and style
characteristics of the benchmark.
WHICH HOLDINGS ADDED TO PERFORMANCE?
TJD: Among the positions that added the most to relative performance were
overweights in Sun Microsystems, Warner Lambert, and Procter & Gamble.
Sun Microsystems continues to be a top performer for us. The leading vendor
of UNIX-based systems transformed itself from technical workstations to
enterprise servers with a focus on mission critical applications. Sun more
than doubled over the period as sales of its servers continued to benefit
from growth in the Internet. Pharmaceutical giant Warner Lambert rose
following its friendly merger proposal to American Home Products, upon which
Pfizer stepped in as a hostile suitor. Procter & Gamble, the household
products manufacturer, has been a beneficiary of positive consumer spending
trends.
An underweight position in Hewlett-Packard helped performance, as the stock
underperformed the technology sector last year. HP, the computer
manufacturer, made profit warnings twice in October, saying that
fourth-quarter profits would be hurt by softness in its UNIX server business.
Analysts cut estimates and downgraded the stock on fears that softness would
continue through year-end (it has since bounced back).
4
<PAGE>
WHICH ONES DETRACTED FROM PERFORMANCE?
TJD: Our long-term valuation approach to investing was seriously challenged
by the momentum-driven market, particularly in the fourth quarter of 1999.
This challenge was most obvious with a couple of high-flying
telecommunications technology companies, Qualcomm and Nortel Networks, in
which we were modestly underweight versus the benchmark. Qualcomm rose an
astounding 2600% in 1999 and was added to the S&P 500 mid-year, while Nortel
climbed more than 300% last year. Both companies are benefiting from
increased spending on telecommunications and wireless technology in
particular.
In addition to the hostile market environment, company-specific events hurt
performance. Waste Management, in particular, detracted. The company's shares
were down 63% last year. During the summer, it restated first- and
second-quarter earnings and fired both the CFO and CEO. Our relatively modest
overweight hurt performance.
Our overweight in IBM detracted from performance. In October, Big Blue
announced that slowing mainframe sales resulting from the end of Y2K spending
would reduce earnings for the coming quarters. Likewise our overweight in
Xerox hurt us as its 3Q99 earnings reported in October fell short of
expectations.
WHAT IS YOUR OUTLOOK FOR THE COMING MONTHS?
TJD: We remain somewhat cautious as the overall level of the equity market
remains high. The leadership has become too narrow, focused on too few
companies. Moreover, the extremely high valuations of technology companies do
not allow for anything less than perfection. We expect the volatility of the
past year to continue in 2000. According to our valuations, the spread
between the most attractive and the fairly valued stocks is the largest we
have ever seen, indicating a lot of pent-up value in the market and
opportunities ahead for us.
5
<PAGE>
PORTFOLIO FACTS
INVESTMENT OBJECTIVE
J.P. Morgan U.S. Disciplined Equity Portfolio seeks to
provide a high total return from a portfolio comprised of selected equity
securities. The portfolio invests primarily in the common stocks of U.S.
corporations with market capitalizations above $1.5 billion. The portfolio is
designed for investors who want an actively managed portfolio of selected
equity securities that seeks to outperform the S&P 500 Index.
- ------------------------------------------------------------------------------
COMMENCEMENT OF INVESTMENT OPERATIONS
1/3/95
- ------------------------------------------------------------------------------
NET ASSETS AS OF 12/31/99
$39,484,152
- ------------------------------------------------------------------------------
DIVIDEND PAYABLE DATES (IF APPLICABLE)
4/21/00, 12/20/00
- ------------------------------------------------------------------------------
CAPITAL GAIN PAYABLE DATES (IF APPLICABLE)
4/21/00, 12/20/00
EXPENSE RATIO
The portfolio's current annualized expense ratio of 0.85% 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 DECEMBER 31, 1999
PORTFOLIO ALLOCATION
(AS A PERCENTAGE OF TOTAL INVESTMENTS)
[CHART]
TECHNOLOGY 22.9%
CONSUMER GOODS & SERVICES 19.8%
FINANCE 12.9%
HEALTHCARE 9.2%
UTILITIES 9.0%
INDUSTRIAL PRODUCTS & SERVICES 8.2%
TELECOMMUNICATIONS 6.4%
ENERGY 5.5%
BASIC INDUSTRIES 2.6%
TRANSPORTATION 0.6%
SHORT-TERM & OTHER INVESTMENTS 2.9%
<TABLE>
<CAPTION>
LARGEST EQUITY HOLDINGS % OF TOTAL INVESTMENTS
..............................................................
<S> <C>
MICROSOFT CORP. (TECHNOLOGY) 5.8%
GENERAL ELECTRIC CO. 4.0%
(INDUSTRIAL PRODUCTS & SERVICES)
CISCO SYSTEMS, INC. (TECHNOLOGY) 3.8%
INTEL CORP. (TECHNOLOGY) 3.1%
EXXON MOBIL CORP. (ENERGY) 3.0%
LUCENT TECHNOLOGIES, INC. (TELECOMMUNICATIONS) 2.7%
WAL-MART STORES, INC. 2.2%
(CONSUMER GOODS & SERVICES)
AMERICA ONLINE, INC. 1.9%
(TELECOMMUNICATIONS)
SBC COMMUNICATIONS, INC. (UTILITIES) 1.8%
BRISTOL-MYERS SQUIBB CO. (HEALTHCARE) 1.8%
</TABLE>
6
<PAGE>
DISTRIBUTED BY FUNDS DISTRIBUTOR, INC. J.P. MORGAN INVESTMENT MANAGEMENT INC.
IS THE TRUST'S INVESTMENT ADVISOR. SHARES OF THE PORTFOLIO PRESENTLY ARE
OFFERED ONLY TO VARIABLE ANNUITY AND VARIABLE LIFE INSURANCE SEPARATE
ACCOUNTS ESTABLISHED BY INSURANCE COMPANIES TO FUND VARIABLE ANNUITY
CONTRACTS AND VARIABLE LIFE INSURANCE POLICIES AND QUALIFIED PENSION AND
RETIREMENT PLANS OUTSIDE THE SEPARATE ACCOUNT CONTEXT.
Shares of the portfolio 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.
Reference to specific securities and their issuers are for illustrative
purposes only and should not be interpreted as recommendations to purchase or
sell these securities. There is no assurance the portfolio will continue to
hold these securities. Opinions expressed herein are subject to change
without notice.
PLEASE CALL (888) 756-8645 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.
7
<PAGE>
J.P. MORGAN U.S. DISCIPLINED EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ ------------
<S> <C> <C>
COMMON STOCKS (97.0%)
BASIC INDUSTRIES (2.6%)
CHEMICALS (1.3%)
Air Products and Chemicals, Inc.................. 3,000 $ 100,687
IMC Global, Inc.................................. 1,100 18,012
Lyondell Chemical Co............................. 1,800 22,950
PPG Industries, Inc.............................. 300 18,769
Praxair, Inc..................................... 200 10,062
Rohm & Haas Co................................... 3,400 138,337
Solutia, Inc..................................... 1,800 27,787
Union Carbide Corp............................... 2,500 166,875
-----------
503,479
-----------
FOREST PRODUCTS & PAPER (0.5%)
Bowater, Inc..................................... 500 27,156
Fort James Corp.................................. 1,900 52,012
Georgia-Pacific Group............................ 800 40,600
International Paper Co........................... 200 11,287
Louisiana-Pacific Corp........................... 500 7,125
Smurfit-Stone Container Corp.+................... 1,900 46,491
Temple-Inland, Inc............................... 500 32,969
-----------
217,640
-----------
METALS & MINING (0.8%)
Alcoa, Inc....................................... 2,400 199,200
Allegheny Technologies, Inc...................... 800 17,950
Freeport - McMoran Copper & Gold, Inc., Class
B+............................................. 1,600 33,800
Reynolds Metals Co............................... 600 45,975
USX-U.S. Steel Group............................. 800 26,400
-----------
323,325
-----------
TOTAL BASIC INDUSTRIES......................... 1,044,444
-----------
CONSUMER GOODS & SERVICES (19.8%)
APPARELS & TEXTILES (0.1%)
Jones Apparel Group, Inc.+....................... 1,100 29,837
-----------
AUTOMOTIVE (1.5%)
Dana Corp........................................ 1,500 44,906
Delphi Automotive Systems Corp................... 4,900 77,175
Ford Motor Co.................................... 7,300 390,094
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ ------------
<S> <C> <C>
AUTOMOTIVE (CONTINUED)
Genuine Parts Co................................. 1,200 $ 29,775
Goodyear Tire and Rubber Co...................... 1,400 39,462
Lear Corp.+...................................... 600 19,200
-----------
600,612
-----------
BROADCASTING & PUBLISHING (4.2%)
AT&T Corp. - Liberty Media Group, Class A........ 8,700 493,725
Comcast Corp., Class A+.......................... 4,700 237,497
Gannett Co., Inc................................. 3,200 261,000
Knight-Ridder, Inc............................... 1,200 71,400
MediaOne Group, Inc.+............................ 6,400 491,600
New York Times Co., Class A...................... 1,300 63,862
Times Mirror Co., Class A........................ 600 40,200
Washington Post Co., Class B..................... 11 6,115
-----------
1,665,399
-----------
ENTERTAINMENT, LEISURE & MEDIA (0.7%)
International Game Technology.................... 3,100 62,969
Seagram Company Ltd.(i).......................... 4,600 206,712
-----------
269,681
-----------
FOOD, BEVERAGES & TOBACCO (3.1%)
Bestfoods........................................ 1,400 73,587
Coca-Cola Co..................................... 4,600 267,950
General Mills, Inc............................... 2,100 75,075
H.J. Heinz Co.................................... 2,400 95,550
Hershey Foods Corp............................... 900 42,750
Nabisco Holdings Corp., Class A.................. 200 6,325
PepsiCo, Inc..................................... 200 7,050
Philip Morris Companies, Inc..................... 16,000 371,000
Sara Lee Corp.................................... 6,000 132,375
Unilever NV (ADR)(i)............................. 3,000 163,312
-----------
1,234,974
-----------
HOUSEHOLD APPLIANCES & FURNISHINGS (0.1%)
Herman Miller, Inc............................... 500 11,484
Leggett & Platt, Inc............................. 1,700 36,444
-----------
47,928
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
8
<PAGE>
J.P. MORGAN U.S. DISCIPLINED EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ ------------
<S> <C> <C>
HOUSEHOLD PRODUCTS (2.1%)
Clorox Co........................................ 1,600 $ 80,600
Kimberly-Clark Corp.............................. 1,100 71,775
Procter & Gamble Co.............................. 6,300 690,244
Water Pik Technologies, Inc.+.................... 5 48
-----------
842,667
-----------
PERSONAL CARE (0.7%)
Gillette Co...................................... 7,000 288,312
-----------
RESTAURANTS & HOTELS (0.7%)
Hilton Hotels Corp............................... 2,600 25,025
Mandalay Resort Group+........................... 900 18,112
McDonald's Corp.................................. 3,600 145,125
Mirage Resorts, Inc.+............................ 2,700 41,344
Starwood Hotels & Resorts Worldwide, Inc......... 1,900 44,650
-----------
274,256
-----------
RETAIL (6.6%)
Abercrombie & Fitch Co., Class A+................ 800 21,350
Albertson's, Inc................................. 1,900 61,275
Circuit City Stores, Inc......................... 400 18,025
CVS Corp......................................... 1,000 39,937
Dayton Hudson Corp............................... 3,500 257,031
Federated Department Stores, Inc.+............... 1,700 85,956
Gap, Inc......................................... 6,800 312,800
Hasbro, Inc...................................... 1,300 24,781
Home Depot, Inc.................................. 4,950 339,384
J.C. Penney, Inc................................. 1,500 29,906
Kmart Corp.+..................................... 3,800 38,237
Kroger Co.+...................................... 6,600 124,575
Mattel, Inc...................................... 2,800 36,750
May Department Stores Co......................... 2,600 83,850
Nordstrom, Inc................................... 1,100 28,806
Safeway, Inc.+................................... 4,000 142,250
Sears, Roebuck & Co.............................. 300 9,131
TJX Companies, Inc............................... 2,500 51,094
Wal-Mart Stores, Inc............................. 12,800 884,800
-----------
2,589,938
-----------
TOTAL CONSUMER GOODS & SERVICES................ 7,843,604
-----------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ ------------
<S> <C> <C>
ENERGY (5.4%)
GAS EXPLORATION (0.0%)
Union Pacific Resources Group, Inc............... 1,000 $ 12,750
-----------
OIL-PRODUCTION (5.2%)
Chevron Corp..................................... 2,600 225,225
Conoco, Inc., Class B............................ 2,600 64,675
Exxon Mobil Corp................................. 14,700 1,184,269
Phillips Petroleum Co............................ 1,400 65,800
Royal Dutch Petroleum Co. (ADR)(i)............... 8,000 483,500
Tosco Corp....................................... 1,100 29,906
Ultramar Diamond Shamrock Corp................... 500 11,344
-----------
2,064,719
-----------
OIL-SERVICES (0.2%)
Cooper Cameron Corp.+............................ 300 14,681
ENSCO International, Inc......................... 800 18,300
Global Marine, Inc.+............................. 1,000 16,625
R&B Falcon Corp.+................................ 1,100 14,575
Smith International, Inc.+....................... 300 14,906
-----------
79,087
-----------
TOTAL ENERGY................................... 2,156,556
-----------
FINANCE (12.9%)
BANKING (6.6%)
AmSouth Bancorporation........................... 2,600 50,212
Astoria Financial Corp........................... 400 12,212
Bank of America Corp............................. 11,301 567,169
Bank One Corp.................................... 7,600 243,675
Charter One Financial, Inc....................... 1,400 26,775
Citigroup, Inc................................... 3,500 194,469
Comerica, Inc.................................... 1,000 46,687
Compass Bancshares, Inc.......................... 700 15,641
Dime Bancorp, Inc................................ 900 13,612
First Tennessee National Corp.................... 800 22,800
First Union Corp................................. 7,000 229,687
First Virginia Banks, Inc........................ 200 8,600
Firstar Corp..................................... 6,200 130,975
FirstMerit Corp.................................. 600 13,987
FleetBoston Financial Corp....................... 6,100 212,356
Golden West Financial Corp....................... 1,200 40,200
GreenPoint Financial Corp........................ 800 19,050
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
9
<PAGE>
J.P. MORGAN U.S. DISCIPLINED EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ ------------
<S> <C> <C>
BANKING (CONTINUED)
Hibernia Corp., Class A.......................... 800 $ 8,500
Huntington Bancshares, Inc....................... 1,500 35,766
KeyCorp.......................................... 2,900 64,162
M & T Bank Corp.................................. 100 41,425
Mercantile Bankshares Corp....................... 400 12,787
National City Corp............................... 4,100 97,119
North Fork Bancorporation, Inc................... 800 14,000
Peoples Heritage Financial Group, Inc............ 500 7,516
PNC Bank Corp.................................... 2,100 93,450
Regions Financial Corp........................... 1,500 37,641
Southtrust Corp.................................. 1,100 41,559
Sovereign Bancorp, Inc........................... 800 5,962
Summit Bancorp................................... 1,100 33,687
TCF Financial Corp............................... 500 12,437
U.S. Bancorp..................................... 5,000 119,062
Union Planters Corp.............................. 900 35,494
Washington Mutual, Inc........................... 4,100 106,600
-----------
2,615,274
-----------
FINANCIAL SERVICES (3.5%)
Associates First Capital Corp., Class A.......... 4,800 131,700
AXA Financial, Inc............................... 1,800 60,975
Bear Stearns Companies, Inc...................... 700 29,925
CIT Group, Inc., Class A......................... 1,600 33,800
Countrywide Credit Industries, Inc............... 700 17,675
E*TRADE Group, Inc.+............................. 900 23,541
Fannie Mae....................................... 3,600 224,775
Franklin Resources, Inc.......................... 1,700 54,506
Freddie Mac...................................... 4,600 216,487
Goldman Sachs Group, Inc......................... 2,000 188,375
Household International, Inc..................... 3,100 115,475
Merrill Lynch & Co., Inc......................... 2,300 192,050
Paine Webber Group, Inc.......................... 900 34,931
TD Waterhouse Group, Inc.+....................... 2,200 36,162
The FINOVA Group, Inc............................ 400 14,200
-----------
1,374,577
-----------
INSURANCE (2.8%)
Allstate Corp.................................... 9,500 228,000
Ambac Financial Group, Inc....................... 800 41,750
American International Group, Inc................ 1,200 129,750
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ ------------
<S> <C> <C>
INSURANCE (CONTINUED)
Aon Corp......................................... 3,000 $ 120,000
CIGNA Corp....................................... 1,300 104,731
Hartford Financial Services Group, Inc........... 2,600 123,175
MBIA, Inc........................................ 1,200 63,375
Mercury General Corp............................. 400 8,900
Safeco Corp...................................... 1,600 39,750
St. Paul Companies, Inc.......................... 2,600 87,588
Torchmark Corp................................... 1,200 34,875
Travelers Property Casualty Corp., Class A....... 600 20,550
UnumProvident Corp............................... 2,900 92,981
-----------
1,095,425
-----------
TOTAL FINANCE.................................. 5,085,276
-----------
HEALTH CARE (9.2%)
BIOTECHNOLOGY (0.2%)
Genzyme Corp.+................................... 500 22,469
Human Genome Sciences, Inc.+..................... 100 15,256
IDEC Pharmaceuticals Corp.+...................... 200 19,631
-----------
57,356
-----------
HEALTH SERVICES (0.8%)
Aetna, Inc....................................... 900 50,231
Columbia / HCA Healthcare Corp................... 3,500 102,594
HEALTHSOUTH Corp.+............................... 2,600 13,975
Humana, Inc.+.................................... 900 7,369
Manor Care, Inc.+................................ 700 11,200
Tenet Healthcare Corp.+.......................... 2,800 65,800
United Healthcare Corp........................... 600 31,875
Wellpoint Health Networks, Inc.+................. 500 32,969
-----------
316,013
-----------
MEDICAL SUPPLIES (0.6%)
Becton, Dickinson & Co........................... 1,600 42,800
Boston Scientific Corp.+......................... 2,200 48,125
Medtronic, Inc................................... 2,200 80,163
PE Corp.- PE Biosystems Group.................... 400 48,125
St. Jude Medical, Inc.+.......................... 500 15,344
-----------
234,557
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
10
<PAGE>
J.P. MORGAN U.S. DISCIPLINED EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ ------------
<S> <C> <C>
PHARMACEUTICALS (7.6%)
Abbott Laboratories.............................. 8,300 $ 301,394
ALZA Corp.+...................................... 1,100 38,088
American Home Products Corp...................... 8,700 343,106
Bristol-Myers Squibb Co.......................... 10,900 699,644
Eli Lilly & Co................................... 6,500 432,250
Forest Laboratories, Inc.+....................... 1,100 67,581
Johnson & Johnson................................ 700 65,188
Merck & Co., Inc................................. 2,600 174,363
Monsanto Co...................................... 6,000 213,750
Pfizer, Inc...................................... 2,000 64,875
Schering-Plough Corp............................. 3,300 139,219
Warner-Lambert Co................................ 5,200 426,075
Watson Pharmaceuticals, Inc.+.................... 600 21,488
-----------
2,987,021
-----------
TOTAL HEALTH CARE.............................. 3,594,947
-----------
INDUSTRIAL PRODUCTS & SERVICES (8.2%)
BUILDING MATERIALS (0.1%)
USG Corp......................................... 400 18,850
-----------
CAPITAL GOODS (0.2%)
Eaton Corp....................................... 700 50,838
PACCAR, Inc...................................... 500 22,141
-----------
72,979
-----------
COMMERCIAL SERVICES (0.7%)
Cendant Corp.+................................... 8,500 225,781
Equifax, Inc..................................... 1,500 35,344
Lanier Worldwide, Inc.+.......................... 300 1,163
Service Corp. International...................... 2,900 20,119
-----------
282,407
-----------
DIVERSIFIED MANUFACTURING (6.6%)
B.F. Goodrich Co................................. 1,400 38,500
Caterpillar, Inc................................. 1,300 61,181
Cooper Industries, Inc........................... 900 36,394
Deere & Co....................................... 2,300 99,763
Eastman Kodak Co................................. 3,200 212,000
General Electric Co.............................. 10,200 1,578,450
Ingersoll-Rand Co................................ 1,200 66,075
ITT Industries, Inc.............................. 1,200 40,125
Teledyne Technologies, Inc.+..................... 5 47
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ ------------
<S> <C> <C>
DIVERSIFIED MANUFACTURING (CONTINUED)
Tyco International Ltd.(i)....................... 9,700 $ 377,088
Xerox Corp....................................... 5,800 131,588
-----------
2,641,211
-----------
ELECTRICAL EQUIPMENT (0.3%)
Emerson Electric Co.............................. 1,800 103,275
-----------
ELECTRONICS (0.0%)
Hubbell, Inc., Class B........................... 400 10,900
-----------
POLLUTION CONTROL (0.3%)
Waste Management, Inc............................ 7,200 123,750
-----------
TOTAL INDUSTRIAL PRODUCTS & SERVICES........... 3,253,372
-----------
TECHNOLOGY (22.9%)
AEROSPACE (1.1%)
Honeywell International, Inc..................... 4,100 236,519
Lockheed Martin Corp............................. 5,000 109,375
Raytheon Co., Class A............................ 3,000 74,438
Raytheon Co., Class B............................ 500 13,281
-----------
433,613
-----------
COMPUTER PERIPHERALS (5.7%)
Cisco Systems, Inc.+............................. 14,100 1,510,022
EMC Corp.+....................................... 5,900 644,575
Lexmark International Group, Inc., Class A+...... 400 36,200
Quantum Corp.- DLT & Storage Systems+............ 800 12,100
Seagate Technology, Inc.+........................ 1,100 51,219
-----------
2,254,116
-----------
COMPUTER SOFTWARE (6.7%)
Adobe Systems, Inc............................... 600 40,350
BMC Software, Inc.+.............................. 1,400 111,869
Citrix Systems, Inc.+............................ 400 49,188
Computer Associates International, Inc........... 600 41,963
Microsoft Corp.+(s).............................. 19,600 2,287,688
Network Associates, Inc.+........................ 700 18,659
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
11
<PAGE>
J.P. MORGAN U.S. DISCIPLINED EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ ------------
<S> <C> <C>
COMPUTER SOFTWARE (CONTINUED)
Novell, Inc.+.................................... 1,700 $ 67,841
Siebel Systems, Inc.+............................ 400 33,650
-----------
2,651,208
-----------
COMPUTER SYSTEMS (3.0%)
3Com Corp.+...................................... 1,500 70,453
Compaq Computer Corp............................. 8,600 232,738
International Business Machines Corp.(s)......... 2,300 248,400
Sun Microsystems, Inc.+.......................... 8,000 619,250
-----------
1,170,841
-----------
ELECTRONICS (0.0%)
Symbol Technologies, Inc......................... 100 6,356
-----------
INFORMATION PROCESSING (1.3%)
Automatic Data Processing, Inc................... 2,300 123,913
DoubleClick, Inc................................. 300 75,984
Electronic Data Systems Corp..................... 2,000 133,875
Exodus Communications, Inc.+..................... 800 71,075
First Data Corp.................................. 2,100 103,556
-----------
508,403
-----------
SEMICONDUCTORS (4.8%)
Applied Materials, Inc.+......................... 1,500 189,984
Intel Corp.(s)................................... 15,100 1,242,447
National Semiconductor Corp.+.................... 900 38,531
Texas Instruments, Inc........................... 4,000 387,500
Xilinx, Inc.+.................................... 400 18,188
-----------
1,876,650
-----------
TELECOMMUNICATION SERVICES (0.1%)
Sprint Corp. (PCS Group)+........................ 500 51,250
-----------
TELECOMMUNICATIONS-EQUIPMENT (0.2%)
Nortel Networks Corp.(i)......................... 700 70,700
-----------
TOTAL TECHNOLOGY............................... 9,023,137
-----------
TELECOMMUNICATIONS (6.4%)
TELECOMMUNICATION SERVICES (2.4%)
America Online, Inc.+............................ 9,900 746,831
Yahoo, Inc.+..................................... 500 216,359
-----------
963,190
-----------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ ------------
<S> <C> <C>
TELECOMMUNICATIONS-EQUIPMENT (4.0%)
Lucent Technologies, Inc......................... 14,200 $ 1,062,338
Motorola, Inc.................................... 3,100 456,475
QUALCOMM, Inc.+.................................. 400 70,438
-----------
1,589,251
-----------
TOTAL TELECOMMUNICATIONS....................... 2,552,441
-----------
TRANSPORTATION (0.6%)
AIRLINES (0.2%)
AMR Corp.+....................................... 600 40,200
Northwest Airlines Corp.......................... 300 6,656
Southwest Airlines Co............................ 1,900 30,756
-----------
77,612
-----------
RAILROADS (0.4%)
Burlington Northern Santa Fe Corp................ 2,000 48,500
CSX Corp......................................... 900 28,238
Norfolk Southern Corp............................ 1,600 32,800
Union Pacific Corp............................... 1,200 52,350
-----------
161,888
-----------
TRUCK & FREIGHT CARRIERS (0.0%)
CNF Transportation, Inc.......................... 200 6,900
-----------
TOTAL TRANSPORTATION........................... 246,400
-----------
UTILITIES (9.0%)
ELECTRIC (1.9%)
Allegheny Energy, Inc............................ 800 21,550
Carolina Power & Light Co........................ 2,100 63,919
Central & South West Corp........................ 3,700 74,000
Cinergy Corp..................................... 1,100 26,538
CMS Energy Corp.................................. 800 24,950
Constellation Energy Group....................... 600 17,400
Dominion Resources, Inc.......................... 1,700 66,725
DTE Energy Co.................................... 1,100 34,513
Entergy Corp..................................... 100 2,575
FPL Group, Inc................................... 1,300 55,656
GPU, Inc......................................... 900 26,944
NiSource, Inc.................................... 900 16,088
Northern States Power Co......................... 2,400 46,800
PG&E Corp........................................ 2,800 57,400
Pinnacle West Capital Corp....................... 600 18,338
PP&L Resources, Inc.............................. 1,100 25,163
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
12
<PAGE>
J.P. MORGAN U.S. DISCIPLINED EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ ------------
<S> <C> <C>
ELECTRIC (CONTINUED)
Reliant Energy, Inc.............................. 1,300 $ 29,738
TECO Energy, Inc................................. 900 16,706
Texas Utilities Co............................... 2,000 71,125
Unicom Corp...................................... 700 23,450
Wisconsin Energy Corp............................ 800 15,400
-----------
734,978
-----------
NATURAL GAS (0.2%)
Columbia Energy Group............................ 500 31,625
Consolidated Natural Gas Co...................... 500 32,469
-----------
64,094
-----------
TELEPHONE (6.9%)
AT&T Corp........................................ 7,800 395,850
Bell Atlantic Corp............................... 3,000 184,688
Global Crossing Ltd. +(i)........................ 3,300 164,897
GTE Corp......................................... 5,900 416,319
Level 3 Communications, Inc.+.................... 1,600 130,900
MCI WorldCom, Inc.+.............................. 13,050 692,058
SBC Communications, Inc.......................... 14,900 726,375
-----------
2,711,087
-----------
TOTAL UTILITIES................................ 3,510,159
-----------
TOTAL COMMON STOCKS (COST $35,216,263)......... 38,310,336
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
------------
<S> <C> <C>
FIXED INCOME SECURITIES (0.3%)
U.S. TREASURY OBLIGATIONS (0.3%)
Notes, 5.375% due 07/31/00 (cost $99,921)........ $ 100,000 99,703
-----------
</TABLE>
<TABLE>
<CAPTION>
SHORT-TERM INVESTMENTS (2.6%)
<S> <C> <C>
OTHER INVESTMENT COMPANIES (0.9%)
SSGA Money Market Fund, 4.997%(y) due 01/03/00... 357,906 357,906
-----------
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------- ------------ ------------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS (1.7%)
Bills, 5.165%(y), due 1/20/2000.................. $ 247,000 $ 246,327
Bills, 5.180%(y), due 1/20/2000.................. 435,000 433,811
-----------
TOTAL U.S. TREASURY OBLIGATIONS................ 680,138
-----------
TOTAL SHORT-TERM INVESTMENTS (COST
$1,038,043)................................... 1,038,044
-----------
TOTAL INVESTMENTS (COST $36,354,228) (99.9%)...................
39,448,083
OTHER ASSETS IN EXCESS OF LIABILITIES (0.1%)...................
36,069
-----------
NET ASSETS (100.0%)............................................ $39,484,152
===========
</TABLE>
- ------------------------------
Note: Based on the cost of investments of $36,486,663 for federal income tax
purposes at December 31, 1999, the aggregate gross unrealized appreciation and
depreciation was $6,163,642 and $3,202,222 respectively, resulting in net
unrealized appreciation of $2,961,420.
+ - 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.
$1,940,425 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.
13
<PAGE>
J.P. MORGAN U.S. DISCIPLINED EQUITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $36,354,228 ) $39,448,083
Dividends Receivable 47,401
Receivable for Shares of Beneficial Interest Sold 21,372
Prepaid Trustees' Fees 5,585
Interest Receivable 4,231
Variation Margin Receivable 2,550
Prepaid Expenses and Other Assets 2,381
-----------
Total Assets 39,531,603
-----------
LIABILITIES
Advisory Fee Payable 11,318
Administrative Services Fee Payable 5,554
Payable for Shares of Beneficial Interest
Redeemed 1,435
Administration Fee Payable 24
Accrued Expenses 29,120
-----------
Total Liabilities 47,451
-----------
NET ASSETS
Applicable to 2,276,398 Shares of Beneficial
Interest Outstanding
(no par value, unlimited shares authorized) $39,484,152
===========
Net Asset Value, Offering and Redemption Price
per Share $17.35
-----
-----
ANALYSIS OF NET ASSETS
Paid-in Capital $35,170,186
Undistributed Net Investment Income 107,867
Accumulated Net Realized Gain on Investments and
Futures Contracts 1,076,363
Net Unrealized Appreciation of Investments and
Futures Contracts 3,129,736
-----------
Net Assets $39,484,152
===========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
14
<PAGE>
J.P. MORGAN U.S. DISCIPLINED EQUITY PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividend Income (Net of Foreign Withholding Tax
of $2,120 ) $ 367,257
Interest Income 86,185
----------
Investment Income 453,442
FUND EXPENSES
Advisory Fee $ 104,133
Custodian Fees and Expenses 35,378
Professional Fees and Expenses 31,575
Trustees' Fees and Expenses 23,081
Printing Expenses 20,724
Transfer Agent Expense 16,371
Administrative Services Fee 7,543
Amortization of Organization Expense 1,978
Administration Fee 238
Miscellaneous 3,823
----------
NET FUND EXPENSES 244,844
----------
NET INVESTMENT INCOME 208,598
NET REALIZED GAIN ON
Investments 3,109,968
Futures Contracts 442,607
----------
Net Realized Gain 3,552,575
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) OF
Investments 1,199,465
Futures Contracts (27,689)
----------
Net Change in Unrealized Appreciation 1,171,776
----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $4,932,949
==========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
15
<PAGE>
J.P. MORGAN U.S. DISCIPLINED EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
----------------- -----------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 208,598 $ 102,632
Net Realized Gain on Investments and Futures
Contracts 3,552,575 1,738,097
Net Change in Unrealized Appreciation of
Investments and Futures Contracts 1,171,776 987,041
---------------- ----------------
Net Increase in Net Assets Resulting from
Operations 4,932,949 2,827,770
---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (114,337) (89,495)
Net Realized Gain (2,667,072) (1,645,803)
---------------- ----------------
Total Distributions to Shareholders (2,781,409) (1,735,298)
---------------- ----------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Proceeds from Shares of Beneficial Interest Sold 18,504,253 8,311,939
Reinvestment of Dividends and Distributions 2,780,648 1,735,296
Cost of Shares of Beneficial Interest Redeemed (2,463,177) (1,521,131)
---------------- ----------------
Net Increase from Transactions in Shares of
Beneficial Interest 18,821,724 8,526,104
---------------- ----------------
Total Increase in Net Assets 20,973,264 9,618,576
NET ASSETS
Beginning of Year 18,510,888 8,892,312
---------------- ----------------
End of Year (including undistributed net
investment income of $107,867 and $13,606,
respectively.) $ 39,484,152 $ 18,510,888
================ ================
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
16
<PAGE>
J.P. MORGAN U.S. DISCIPLINED EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share outstanding throughout each period is as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 3, 1995
FOR THE YEAR ENDED DECEMBER 31, (COMMENCEMENT OF
---------------------------------------------------------- OPERATIONS) THROUGH
1999 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 0.09 0.10 0.11 0.20 0.12
Net Realized and Unrealized Gain (Loss) on
Investments and Futures Contracts 2.80 3.15 3.51 2.44 3.26
------- ------- ------ ------ ------
Total from Investment Operations 2.89 3.25 3.62 2.64 3.38
------- ------- ------ ------ ------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (0.06) (0.09) (0.11) (0.20) (0.12)
Net Realized Gain (1.32) (1.65) (2.86) (1.39) (0.63)
------- ------- ------ ------ ------
Total Distributions to Shareholders (1.38) (1.74) (2.97) (1.59) (0.75)
------- ------- ------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 17.35 $ 15.84 $14.33 $13.68 $12.63
======= ======= ====== ====== ======
RATIOS AND SUPPLEMENTAL DATA
Total Return 18.54% 23.28% 27.50% 21.14% 33.91%(a)
Net Assets, End of Period (in thousands) $39,484 $18,511 $8,892 $5,339 $4,144
Ratios to Average Net Assets
Expenses 0.87% 0.90% 0.90% 0.90% 0.90%(b)
Net Investment Income 0.74% 0.81% 0.75% 1.49% 1.48%(b)
Expenses Without Reimbursement 0.87% 1.48% 2.31% 2.13% 2.70%(b)
Portfolio Turnover 104% 82% 119% 90% 66%
</TABLE>
- ------------------------
(a) Not Annualized.
(b) Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
17
<PAGE>
J.P. MORGAN U.S. DISCIPLINED EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
J.P. Morgan U.S. Disciplined Equity Portfolio (the "portfolio") is one of four
portfolios comprising J.P. Morgan Series Trust II (the "trust"). The trust is
registered under the Investment Company Act of 1940, as amended, as a no-load
diversified, open-end 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. Prior to December 30, 1999,
the trust was composed of five separate portfolios which operated as distinct
investment vehicles. J.P. Morgan Treasury Money Market Portfolio was terminated
on December 30, 1999. Prior to July 1, 1999, the portfolio's name was J.P.
Morgan Equity Portfolio. The portfolio seeks to provide a high total return from
a portfolio of selected equity securities.
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts and disclosures. Actual amounts
could differ from those estimates. The following is a summary of the significant
accounting policies of the portfolio:
a) The portfolio values securities that are listed on an exchange using
prices supplied daily by an independent pricing service that are based on
the last traded price on a national securities exchange or, in the absence
of recorded trades, at the readily available mean of the bid and asked
prices on such exchange, if such exchange or market constitutes the
broadest and most representative market for the security. Securities
listed on a foreign exchange are valued at the last traded price or, in
the absence of recorded trades, at the readily available mean of the bid
and asked prices on such exchange available before the time when net
assets are valued. Independent pricing service procedures may also include
the use prices based upon yields or prices of securities of comparable
quality, coupon, maturity and type, indications as to values from dealers,
operating data, and general market conditions. Unlisted securities are
valued at the average of the quoted bid and asked prices in the
over-the-counter market provided by a principal market maker or dealer. If
prices are not supplied by the portfolio's independent pricing service or
principal market maker or dealer, such securities are priced using fair
values in accordance with procedures established by the portfolio's
trustees. All short-term securities with a remaining maturity of sixty
days or less are valued using the amortized cost method.
b) Securities transactions are recorded on a trade date basis. Dividend
income is recorded on the ex-dividend date or as of the time that the
relevant ex-dividend date and amount become known. Interest income, which
includes the amortization of premiums and discounts, if any, is recorded
on an accrual basis. For financial and tax reporting purposes, realized
gains and losses are determined on the basis of first in first out.
c) Distributions to shareholders of net investment income and net realized
capital gains, if any, are declared and paid semi-annually.
d) The 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.
18
<PAGE>
J.P. MORGAN U.S. DISCIPLINED EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
e) 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.
f) 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. Up on 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.
g) The portfolio is treated as a separate entity for federal income tax
purposes and intends to comply with the provisions of the Internal Revenue
Code of 1986, as amended, (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.
The portfolio is also a segregated portfolio of assets for insurance
purposes and intends to comply with the diversification requirements of
Subchapter L of the code.
2. TRANSACTIONS WITH AFFILIATES
a) The trust, on behalf of the portfolio, has an Investment Advisory
Agreement with J.P. Morgan Investment Management Inc. ("JPMIM"), an
affiliate of Morgan Guaranty Trust Company of New York ("Morgan") and a
wholly owned subsidiary of J.P. Morgan & Co. Incorporated ("J.P. Morgan").
Under the terms of the agreement, JPMIM is paid a fee for its services,
computed daily and paid monthly, at an annual rate of 0.35% of the
portfolio's average daily net assets. Prior to July 1, 1999, the rate was
0.40%. For the fiscal year ended December 31, 1999, such fees amounted to
$104,133.
b) The trust, on behalf of the portfolio, has retained Funds Distributor,
Inc. ("FDI"), a registered broker-dealer, to serve as the co-administrator
and distributor for the portfolio. Under a Co-Administration Agreement
between FDI and the trust on behalf of the portfolio, FDI provides
administrative services necessary for the operations of the portfolio,
furnishes office space and facilities required for conducting the business
of each portfolio and pays the compensation of the portfolio's officers
affiliated with FDI. The portfolio has agreed to pay FDI fees equal to its
allocable share of an annual complex-wide charge of $425,000 plus FDI's
out-of-pocket expenses. The amount allocable to the portfolio is based on
the
19
<PAGE>
J.P. MORGAN U.S. DISCIPLINED EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
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 fiscal year ended December 31, 1999, the fee for these
services amounted to $238.
c) The trust, on behalf of the portfolio, has an Administrative Services
Agreement (the "Services Agreement") with Morgan, under which Morgan is
responsible for certain aspects of the administration and operation of the
portfolio. Under the Services Agreement, the portfolio has agreed to pay
Morgan a fee based on the following: if total expenses of the portfolio,
excluding the advisory fees, exceed the expense limit of 0.50% of the
average daily net assets of the portfolio, Morgan will reimburse the
portfolio for the excess expense amount and receive no fee. Should such
expenses be less than the expense limit, Morgan's fee would be limited to
the difference between such expenses and the fees calculated under the
Services Agreement. For the fiscal year ended December 31, 1999, the fee
for these services amounted to $7,543 and there will be no reimbursement
to the portfolio from Morgan under this agreement.
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 portfolio's allocated portion of the
total fees and expenses.
3. TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the trustees to issue an unlimited number of
full and fractional shares. Transactions in shares of beneficial interest of the
portfolio is as follows:
<TABLE>
<CAPTION>
FOR THE FISCAL FOR THE FISCAL
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
----------------- -----------------
<S> <C> <C>
Shares sold...................................... 1,089,647 532,283
Reinvestment of dividends and distributions...... 163,997 114,071
Shares redeemed.................................. (145,759) (98,193)
---------------- ----------------
Net Increase (Decrease).......................... 1,107,885 548,161
================ ================
</TABLE>
From time to time, the portfolio may have a concentration of several
shareholders having a significant percentage of shares outstanding. Investment
activities of these shareholders could have a material impact on the portfolio.
20
<PAGE>
J.P. MORGAN U.S. DISCIPLINED EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
4. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the year ended
December 31, 1999, were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
- --------- -----------
<S> <C>
$45,103,440...... $27,705,110
</TABLE>
Open futures contracts at December 31, 1999 are summarized as follows:
<TABLE>
<CAPTION>
NET UNREALIZED
APPRECIATION/ MARKET VALUE
CONTRACTS LONG (DEPRECIATION) OF CONTRACTS
-------------- -------------- ------------
<S> <C> <C> <C>
S&P 500, expiring March 2000..................... 3 $ 35,881 $ 1,113,150
</TABLE>
21
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of
J.P. Morgan U.S. Disciplined Equity Portfolio
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statement of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of J.P. Morgan U.S. Disciplined Equity
Portfolio (one of the series constituting J.P. Morgan Series Trust II, hereafter
referred to as the "portfolio") at December 31, 1999, the results of its
operations for the year ended, the changes in its net assets for each of the two
years in the period then ended and the financial highlights for each of the
three years in the period then ended, in conformity with accounting principles
generally accepted in the United States. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the portfolio's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities at
December 31, 1999 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above. The financial highlights for
the year ended December 31, 1996 and for the period January 3, 1995
(commencement of operations) through December 31, 1995 were audited by other
independent accountants whose report dated February 14, 1997 expressed an
unqualified opinion on those statements.
PricewaterhouseCoopers LLP
New York, New York
February 16, 2000
22
<PAGE>
J.P. MORGAN SERIES TRUST II PORTFOLIOS
BOND PORTFOLIO
INTERNATIONAL OPPORTUNITIES PORTFOLIO
SMALL COMPANY PORTFOLIO
U.S. DISCIPLINED EQUITY PORTFOLIO
FOR MORE INFORMATION ON THE J.P. MORGAN SERIES TRUST II PORTFOLIOS, CALL
FUNDS DISTRIBUTOR, INC. AT (888) 756-8645.
IMAR377
J.P. MORGAN U.S. DISCIPLINED EQUITY PORTFOLIO
ANNUAL REPORT
DECEMBER 31, 1999
