<PAGE>
LETTER TO THE SHAREHOLDERS OF THE J.P. MORGAN U.S. DISCIPLINED EQUITY PORTFOLIO
August 1, 2000
Dear Shareholder:
The J.P. Morgan U.S. Disciplined Equity Portfolio returned -1.41% for the six
months ended June 30, 2000. The portfolio underperformed both the S&P 500 and
the Lipper Variable Annuity Growth & Income Fund Average, which returned -0.42%
and -1.13%, respectively.
The portfolio's net asset value per share decreased from $17.35 on December 31,
1999, to $16.57 on June 30, 2000. The portfolio made distributions during the
six months of approximately $0.04 per share from ordinary income, approximately
$0.22 per share from short-term capital gains, and approximately $0.26 per share
from long-term capital gains. In addition, the portfolio's net assets advanced
from approximately $39.5 million on December 31, 1999, to approximately $49.1
million on June 30, 2000.
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..........7
PORTFOLIO PERFORMANCE..............2 FINANCIAL STATEMENTS...................10
PORTFOLIO MANAGER Q&A..............3
--------------------------------------------------------------------------------
1
<PAGE>
Portfolio performance
EXAMINING PERFORMANCE
One way to look at performance is to review a fund's average annual total
return. This figure takes the fund's actual (or cumulative) return and shows
what would have happened if the fund had achieved that return by performing at a
constant rate each year. Average annual total returns represent the average
yearly change of a fund's value over various time periods, typically one, five,
or ten years (or since inception). Total returns for periods of less than one
year are not annualized and provide a picture of how a fund has performed over
the short term.
<TABLE>
<CAPTION>
PERFORMANCE TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS
------------------- -----------------------------------------
THREE SIX ONE THREE FIVE SINCE
AS OF JUNE 30, 2000 MONTHS MONTHS YEAR YEARS YEARS INCEPTION*
--------------------------------------------------------------------- -----------------------------------------
<S> <C> <C> <C> <C> <C> <C>
J.P. Morgan U.S. Disciplined Equity Portfolio -3.36% -1.41% 2.66% 16.15% 20.08% 21.96%
S&P 500 Index** -2.66% -0.42% 7.24% 19.66% 23.80% 25.55%
Lipper Variable Annuity
Growth & Income Average*** -2.77% -1.13% 1.44% 12.63% 17.55% 19.26%
</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.
***DESCRIBES THE AVERAGE TOTAL RETURN FOR ALL FUNDS IN THE INDICATED LIPPER
CATEGORY, AS DEFINED BY LIPPER INC., AND DOES NOT TAKE INTO ACCOUNT APPLICABLE
SALES CHARGES. LIPPER ANALYTICAL SERVICES, INC. IS A LEADING SOURCE FOR FUND
DATA.
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.
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 July 25, 2000, and reflects Tim's
views on that date.
WHAT WOULD YOU SAY WERE THE PRINCIPAL EVENTS THAT IMPACTED U.S. EQUITIES OVER
THE PAST SIX MONTHS?
TJD: Certainly, the string of interest rate hikes by the Fed was very
influential. In an effort to cool what was perceived to be an overheated
economy, the Fed starting raising rates last June, beginning with five
consecutive quarter-point increases and culminating, at least for now, in a
half-point increase in mid-May of this year. The first five increases were
generally disregarded by a marketplace that seemed to embrace growth at any
price. In fact, our economy grew at the incredible pace of 7.3% in 1999's fourth
quarter and 5.4% in the first quarter of 2000. It was during this period that
the stock market almost literally shot through the roof, particularly the
tech-heavy Nasdaq, which set new records, seemingly on a weekly basis.
This all came to an end during the closing days of the first quarter of 2000,
when investors got the message that the Fed was serious about slowing our
economic growth. Looking ahead to a slower growth economy, they began to
re-evaluate the earnings prospects of many of the technology companies that had
dominated the market until then. The result was a significant correction in the
Nasdaq during April and most of May. While the market recovered somewhat during
June, it remains quite volatile to this day.
The other major event would be the continued advances of technology in virtually
every business sector. Until recently, investors were focused almost purely on
technology-related companies, particularly those that were perceived to be
leading the growth of the Internet. What we've seen lately is a broadening of
investor interest to include those companies, tech or not tech, that are using
new technologies to leapfrog the competition and create new operating
environments. In the business-to-business arena, you can see this most
prominently in ongoing efforts to create Internet-based exchanges for virtually
anything from auto parts to basic commodities. You also see it in individual
efforts to improve customer service, streamline distribution, and do just about
everything more efficiently by utilizing the technological tools at hand.
Investors have taken note and are paying significant premiums for companies that
are successful in their efforts to adapt and use technology, knowing that they
will be best positioned to compete in the new economy. Those that haven't been
able to adapt have really been thrashed. I think this division between the
technological haves and have-nots will be a key investment theme for some time
yet to come.
3
<PAGE>
YOU MENTIONED INTEREST RATES, THE STORY THAT'S BEEN ON VIRTUALLY EVERYONE'S
MINDS THESE DAYS. WHAT DO YOU THINK THE FEDERAL RESERVE BOARD IS GOING TO DO IN
COMING MONTHS?
TJD: In our view, the most likely economic scenario going forward is that the
Fed succeeds in its efforts to engineer a soft landing for the U.S. economy.
We've already seen some signs of a cooling economy, including a fairly recent
decline in job growth, a significant reduction in new home sales and weaker than
expected retail sales, particularly in the interest rate-sensitive durable goods
sector. Between now and year-end, we think we'll see additional tightening, on
the order of 25 basis points or so. This should serve to slow our economy's
growth, without slowing it down too far, too fast.
HOW HAVE INVESTORS' PERCEPTIONS CHANGED SINCE THE NEAR COLLAPSE OF THE NASDAQ?
TJD: One thing we are seeing is a move away from the kind of momentum-based
investing that ruled the market in late 1999 and early 2000, to a more rational,
valuation-based investment process.
WHAT MAKES YOU THINK VALUATION WILL STAGE A COMEBACK?
TJD: The price of any investment ultimately MUST relate in some way to its
ability to earn money for the investor. It's common sense. Hype can only drive
the market for a little while, before investors start to look beyond it and
focus on real earnings, or earnings potential.
HOW DO YOU MANAGE THE PORTFOLIO IN SUCH AN ENVIRONMENT?
TJD: Much the same way we always have. For us, valuation investing is a process
of forecasting a company's future earnings, discounting these back to the stock
price, and comparing stocks based on their Dividend Discount Rate (DDR), or
internal rate of return. By ranking stocks within each sector by their DDR, we
can identify and avoid the priciest stocks in each sector, while maintaining
portfolio characteristics and sector weightings similar to the S&P 500 Index.
The end result is a diversified portfolio that relies exclusively on
valuation-based stock selection in an effort to outperform the market.
LET'S MOVE ON TO PERFORMANCE. HOW DID YOU DO OVER THE PAST SIX MONTHS?
TJD: For the six months ended June 30, 2000, the portfolio returned -1.41%. This
compares with the -0.42% returned by the S&P 500 and the -1.13% return of the
Lipper VA Growth & Income Average.
While we are certainly disappointed with this recent performance, we are
optimistic about the portfolio's prospects over the next twelve months. One
reason for this is that, by our reckoning, the valuation spread between certain
stocks that we own and the market at large is wider than it has ever been. These
are very good companies, with solid business plans and excellent long term
potential, but they have been largely overlooked by investors who remain focused
on a very few sectors. As investors settle down and broaden their focus, we
think these companies will be "rediscovered," and this valuation spread should
narrow. When this happens, our holdings in these presently undervalued equities
should appreciate.
4
<PAGE>
WHICH HOLDINGS DID WELL OVER THE PAST SIX MONTHS?
Overweight positions in Intel, Nortel, and Cisco helped us a great deal, as all
performed admirably. Intel has benefited from continued strong PC demand,
including a larger percentage of higher margin laptops, stable average selling
price (asp's), and strong server/PC demand fueled by the explosive growth of the
Internet. Intel has also lowered costs through shrinking line width and improved
packaging. Nortel, a leader in the business of making fiber-optic components,
was the beneficiary of continued strong investor interest in this tech
sub-sector.
Cisco is a fantastic company. Even though it trades at 85X next year's earnings,
it still looks attractive relative to other companies in its sector. Its
management is excellent, as is its track record in successfully identifying and
integrating new acquisitions. We are highly confident in our earnings forecast
for the company, as are we in management's ability to deliver these earnings. We
are less so with Cisco's competitors. Given this level of confidence and Cisco's
premier position as a primary provider of Internet-related infrastructure
products and services, we believe it deserves the premium that the market has
assigned to it.
WHICH DIDN'T PERFORM UP TO EXPECTATIONS?
TJD: As noted, we had generally good stock selection in the tech sector, but we
were hurt by underweighting Oracle and Corning, both of which were up
substantially during this time. We were hurt as well by an overweight position
in Microsoft, which declined quite a bit during the recent Department of Justice
antitrust proceedings.
Beyond the technology sector, an underweight position in Disney detracted from
performance. Disney's success from 1990 to 1997 has been largely driven by home
video sales. As a result, the market for home videos has been saturated and will
need time to regenerate. Additionally, theme park attendance has been slowing as
competition has been intense. Disney's surprising success this year has been on
the back of the phenomenally popular ABC television show "Who Wants to Be a
Millionaire?" Much the same was true of Viacom, an underweight position in the
portfolio, which benefited from the surprise hit, "Survivor," on its CBS
television subsidiary. In both cases, we thought there were better places to be
in this sector, but the market didn't agree with us.
GIVEN THE VOLATILITY OF THE MARKET AND ITS IMPACT ON THE PORTFOLIO, DO YOU PLAN
TO MAKE ANY CHANGES IN YOUR MANAGEMENT STYLE?
TJD: No. As I said, we are confident that valuation investing will rise from the
ashes of momentum, and that the portfolio will benefit when it does. We have,
however, elected to refine our process in ways that will enable us to better
manage risk in a volatile marketplace.
One of these refinements is the re-mapping of our industry sectors to better
reflect the structural changes in the U.S. market that have resulted from the
explosive growth of new economy companies. Our second was the addition of
consensus earnings estimate revisions. This will help to enhance Morgan's DDR,
which is used to rank stocks in each sector. Both of these process improvements
were the result of Morgan's continu-
5
<PAGE>
ous efforts to develop improved risk management techniques that address the
demands of a highly variable and sometimes explosive market environment.
Going forward, these improvements should allow us to better adjust to what will
likely be ongoing, periodic peaks in market volatility, such as we've
experienced since new economy companies came to the fore.
6
<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 6/30/00
$49,067,236
--------------------------------------------------------------------------------
DIVIDEND PAYABLE DATES (IF APPLICABLE)
12/20/00
--------------------------------------------------------------------------------
CAPITAL GAIN PAYABLE DATES (IF APPLICABLE)
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 JUNE 30, 2000
PORTFOLIO ALLOCATION
(AS A PERCENTAGE OF TOTAL INVESTMENTS)
[CHART]
TECHNOLOGY 31.7%
CONSUMER GOODS & SERVICES 18.7%
FINANCE 13.1%
HEALTHCARE 11.0%
INDUSTRIAL PRODUCTS & SERVICES 8.4%
ENERGY 5.6%
UTILITIES 5.6%
BASIC INDUSTRIES 2.0%
TRANSPORTATION 0.5%
SHORT-TERM & OTHER INVESTMENTS 3.4%
<TABLE>
<CAPTION>
LARGEST EQUITY HOLDINGS % OF TOTAL INVESTMENTS
--------------------------------------------------------------------------------
<S> <C>
INTEL CORP. (TECHNOLOGY) 4.4%
CISCO SYSTEMS, INC. (TECHNOLOGY) 4.4%
MICROSOFT CORP. (TECHNOLOGY) 4.2%
GENERAL ELECTRIC CO. 3.9%
(INDUSTRIAL PRODUCTS & SERVICES)
EXXON MOBIL CORP. (ENERGY) 2.7%
NORTEL NETWORKS CORP. (TECHNOLOGY) 2.6%
WAL-MART STORES, INC. 2.5%
(CONSUMER GOODS & SERVICES)
CITIGROUP, INC. (FINANCE) 2.5%
SUN MICROSYSTEMS (TECHNOLOGY) 1.9%
SBC COMMUNICATIONS, INC. (UTILITIES) 1.5%
</TABLE>
7
<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 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 and other fund data presented 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.
8
<PAGE>
THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY
<PAGE>
J.P. MORGAN U.S. DISCIPLINED EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
JUNE 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ----------- ------------
<S> <C> <C>
COMMON STOCKS (97.2%)
BASIC INDUSTRIES (2.1%)
CHEMICALS (1.0%)
Air Products and Chemicals, Inc.................. 3,400 $ 104,762
Dow Chemical Co.................................. 2,400 72,450
PPG Industries, Inc.............................. 2,400 106,350
Praxair, Inc..................................... 1,900 71,131
Rohm & Haas Co................................... 3,400 117,300
-----------
471,993
-----------
FOREST PRODUCTS & PAPER (0.5%)
Bowater, Inc..................................... 200 8,825
Fort James Corp.................................. 2,500 57,812
Georgia-Pacific Group............................ 1,200 31,500
International Paper Co........................... 3,100 92,419
Smurfit-Stone Container Corp.+................... 2,000 25,750
Temple-Inland, Inc............................... 600 25,200
-----------
241,506
-----------
METALS & MINING (0.6%)
Alcoa, Inc....................................... 7,884 228,636
Allegheny Technologies, Inc...................... 800 14,400
Freeport-McMoran Copper & Gold, Inc., Class B+... 600 5,550
Nucor Corp....................................... 700 23,231
Phelps Dodge Corp................................ 500 18,594
-----------
290,411
-----------
TOTAL BASIC INDUSTRIES......................... 1,003,910
-----------
CONSUMER GOODS & SERVICES (17.8%)
APPARELS & TEXTILES (0.1%)
Jones Apparel Group, Inc.+....................... 1,500 35,250
-----------
AUTOMOTIVE (1.7%)
Dana Corp........................................ 1,800 38,137
Delphi Automotive Systems Corp................... 4,900 71,356
Ford Motor Co.................................... 8,800 378,400
General Motors Corp.............................. 4,700 272,894
Goodyear Tire and Rubber Co...................... 2,900 58,000
Lear Corp.+...................................... 600 12,000
Visteon Corp.+................................... 1,152 13,968
-----------
844,755
-----------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ----------- ------------
<S> <C> <C>
BROADCASTING & PUBLISHING (2.2%)
AT&T Corp. - Liberty Media Group, Class A+....... 5,200 $ 126,100
Comcast Corp., Class A+.......................... 5,800 234,900
Gannett Co., Inc................................. 3,200 191,400
Knight-Ridder, Inc............................... 1,200 63,825
MediaOne Group, Inc.+............................ 6,400 424,408
New York Times Co., Class A...................... 600 23,700
-----------
1,064,333
-----------
COMMERCIAL SERVICES (0.2%)
Cendant Corp.+................................... 8,500 119,000
-----------
ENTERTAINMENT, LEISURE & MEDIA (2.1%)
Fox Entertainment Group, Inc., Class A+.......... 2,100 63,787
International Game Technology+................... 2,600 68,900
Seagram Company Ltd. (i)......................... 5,300 307,400
Time Warner, Inc................................. 8,100 615,600
-----------
1,055,687
-----------
FOOD, BEVERAGES & TOBACCO (2.9%)
Bestfoods........................................ 2,100 145,425
Coca-Cola Co..................................... 2,200 126,362
General Mills, Inc............................... 1,900 72,675
H.J. Heinz Co.................................... 3,100 135,625
Kellogg Co....................................... 3,500 104,125
Nabisco Holdings Corp., Class A.................. 200 10,500
Philip Morris Companies, Inc..................... 20,500 544,531
Quaker Oats Co................................... 1,200 90,150
Ralston-Ralston Purina Group..................... 1,400 27,912
Unilever NV-NY Shares(i)......................... 3,300 141,900
-----------
1,399,205
-----------
HOUSEHOLD PRODUCTS (1.9%)
Clorox Co........................................ 2,000 89,625
Kimberly-Clark Corp.............................. 4,600 263,925
Procter & Gamble Co.............................. 10,200 583,950
-----------
937,500
-----------
</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 (UNAUDITED) (CONTINUED)
JUNE 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ----------- ------------
<S> <C> <C>
PERSONAL CARE (0.7%)
Estee Lauder Companies, Inc.,
Class A........................................ 700 $ 34,606
Gillette Co...................................... 9,000 314,437
-----------
349,043
-----------
RESTAURANTS & HOTELS (0.4%)
Marriott International, Inc., Class A............ 3,000 108,187
McDonald's Corp.+................................ 1,300 42,819
Starwood Hotels & Resorts Worldwide, Inc......... 1,900 61,869
-----------
212,875
-----------
RETAIL (5.6%)
Circuit City Stores-Circuit City Group........... 1,600 53,100
Federated Department Stores, Inc.+............... 1,700 57,375
Gap, Inc......................................... 6,900 215,625
Hasbro, Inc...................................... 1,400 21,087
Home Depot, Inc.................................. 5,900 294,631
J.C. Penney, Inc................................. 1,900 35,031
Kroger Co.+...................................... 6,100 134,581
Limited Inc...................................... 3,400 73,525
Lowe's Companies, Inc............................ 2,700 110,869
Mattel, Inc...................................... 4,200 55,387
May Department Stores Co......................... 2,700 64,800
Nordstrom, Inc................................... 700 16,887
Safeway, Inc.+................................... 200 9,025
Sears, Roebuck & Co.............................. 2,800 91,350
Target Corp...................................... 3,600 208,800
TJX Companies, Inc............................... 2,500 46,875
Wal-Mart Stores, Inc............................. 21,700 1,250,462
-----------
2,739,410
-----------
TOTAL CONSUMER GOODS & SERVICES................ 8,757,058
-----------
ENERGY (5.9%)
GAS EXPLORATION (0.1%)
Union Pacific Resources Group, Inc............... 2,500 55,000
-----------
GAS-PIPELINES (0.5%)
Columbia Energy Group............................ 500 32,812
Dynegy, Inc., Class A............................ 700 47,819
El Paso Energy Corp.............................. 1,100 56,031
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ----------- ------------
<S> <C> <C>
GAS-PIPELINES (CONTINUED)
Enron Corp....................................... 400 $ 25,800
Williams Companies, Inc.......................... 2,100 87,544
-----------
250,006
-----------
OIL-PRODUCTION (5.1%)
Apache Corp...................................... 500 29,406
Chevron Corp..................................... 3,100 262,919
Conoco, Inc., Class A............................ 200 4,400
Conoco, Inc., Class B............................ 2,800 68,775
Devon Energy Corp................................ 400 22,475
Exxon Mobil Corp................................. 16,800 1,318,800
Phillips Petroleum Co............................ 700 35,481
Royal Dutch Petroleum Co.-NY Shares(i)........... 10,400 640,250
Texaco, Inc...................................... 2,700 143,775
-----------
2,526,281
-----------
OIL-SERVICES (0.2%)
Baker Hughes, Inc................................ 1,700 54,400
Cooper Cameron Corp. +........................... 300 19,800
ENSCO International, Inc......................... 600 21,487
Global Marine, Inc. +............................ 1,000 28,187
-----------
123,874
-----------
TOTAL ENERGY................................... 2,955,161
-----------
FINANCE (13.4%)
BANKING (3.0%)
Bank of America Corp............................. 4,500 193,500
Bank One Corp.................................... 6,600 175,312
Banknorth Group, Inc............................. 900 13,781
Charter One Financial, Inc....................... 1,400 32,200
Comerica, Inc.................................... 900 40,387
Compass Bancshares, Inc.......................... 400 6,825
Dime Bancorp, Inc................................ 1,300 20,475
First Tennessee National Corp.................... 900 14,906
First Union Corp................................. 6,800 168,725
Firstar Corp..................................... 3,000 63,187
FleetBoston Financial Corp....................... 4,500 153,000
Golden West Financial Corp....................... 800 32,650
GreenPoint Financial Corp........................ 800 15,000
Hibernia Corp., Class A.......................... 800 8,700
KeyCorp.......................................... 3,000 52,875
Marshall & Ilsley Corp........................... 700 29,050
Mercantile Bankshares Corp....................... 400 11,925
</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 (UNAUDITED) (CONTINUED)
JUNE 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ----------- ------------
<S> <C> <C>
BANKING (CONTINUED)
North Fork Bancorporation, Inc................... 1,400 $ 21,175
PNC Financial Services Group..................... 2,100 98,437
Regions Financial Corp........................... 1,100 21,862
SouthTrust Corp.................................. 1,200 27,150
Summit Bancorp................................... 1,100 27,087
TCF Financial Corp............................... 500 12,844
U.S. Bancorp..................................... 5,300 102,025
Union Planters Corp.............................. 700 19,556
Washington Mutual, Inc........................... 3,200 92,400
-----------
1,455,034
-----------
FINANCIAL SERVICES (7.2%)
A.G. Edwards, Inc................................ 600 23,400
Ameritrade Holding Corp.,
Class A+....................................... 1,200 13,950
Associates First Capital Corp.,
Class A........................................ 5,300 118,256
Bear Stearns Companies, Inc...................... 800 33,300
Capital One Financial Corp....................... 1,300 58,012
Charles Schwab Corp.............................. 10,232 344,051
CIT Group, Inc., Class A......................... 1,900 30,875
Citigroup, Inc................................... 20,500 1,235,125
Countrywide Credit Industries, Inc............... 100 3,031
E*TRADE Group, Inc.+............................. 2,300 37,950
Fannie Mae....................................... 5,900 307,906
Franklin Resources, Inc.......................... 1,800 54,675
Freddie Mac...................................... 4,600 186,300
Goldman Sachs Group, Inc......................... 3,300 313,087
Household International, Inc..................... 300 12,469
Lehman Brothers Holdings, Inc.................... 1,000 94,562
Merrill Lynch & Co., Inc......................... 3,100 356,500
Morgan Stanley Dean Witter & Co.................. 1,200 99,900
Paine Webber Group, Inc.......................... 1,000 45,500
Providian Financial Corp......................... 1,100 99,000
TD Waterhouse Group, Inc.+....................... 2,700 46,744
-----------
3,514,593
-----------
INSURANCE (3.2%)
Aetna, Inc....................................... 1,500 96,281
Allstate Corp.................................... 11,300 251,425
Ambac Financial Group, Inc....................... 900 49,331
American International Group, Inc................ 1,700 199,750
Aon Corp......................................... 2,800 86,975
AXA Financial, Inc............................... 4,200 142,800
CIGNA Corp....................................... 1,600 149,600
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ----------- ------------
<S> <C> <C>
INSURANCE (CONTINUED)
Hartford Financial Services Group, Inc........... 2,400 $ 134,250
John Hancock Financial Services, Inc.+........... 4,300 101,856
Lincoln National Corp............................ 2,000 72,250
MBIA, Inc........................................ 1,300 62,644
MetLife, Inc.+................................... 8,600 181,137
Torchmark Corp................................... 1,700 41,969
-----------
1,570,268
-----------
TOTAL FINANCE.................................. 6,539,895
-----------
HEALTH CARE (10.8%)
BIOTECHNOLOGY (0.2%)
Genzyme Corp.+................................... 500 29,719
Human Genome Sciences, Inc. +.................... 300 40,012
Incyte Genomics, Inc.+........................... 200 16,437
-----------
86,168
-----------
HEALTH SERVICES (0.6%)
HCA - The Healthcare Corp........................ 3,800 115,425
Tenet Healthcare Corp.+.......................... 3,800 102,600
UnitedHealth Group, Inc.......................... 500 42,875
Wellpoint Health Networks, Inc.+................. 600 43,462
-----------
304,362
-----------
MEDICAL SUPPLIES (0.7%)
Baxter International, Inc.+...................... 100 7,031
Becton, Dickinson and Co......................... 2,700 77,456
Boston Scientific Corp.+......................... 2,800 61,425
C. R. Bard, Inc.................................. 400 19,250
Guidant Corp.+................................... 100 4,950
Medtronic, Inc................................... 3,100 154,419
PE Corp.- PE Biosystems Group.................... 100 6,588
St. Jude Medical, Inc.+.......................... 800 36,700
-----------
367,819
-----------
PHARMACEUTICALS (9.3%)
Abbott Laboratories.............................. 8,400 374,325
ALZA Corp.+...................................... 1,100 65,038
American Home Products Corp...................... 8,700 511,125
Bristol-Myers Squibb Co.......................... 10,900 634,925
Eli Lilly and Co................................. 6,500 649,188
Forest Laboratories, Inc.+....................... 500 50,500
</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 (UNAUDITED) (CONTINUED)
JUNE 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ----------- ------------
<S> <C> <C>
PHARMACEUTICALS (CONTINUED)
IDEC Pharmaceuticals Corp.+...................... 200 $ 23,463
Johnson & Johnson................................ 3,900 397,313
Merck & Co., Inc................................. 4,600 352,475
Pfizer, Inc...................................... 12,925 620,400
Pharmacia Corp................................... 8,900 460,019
Schering-Plough Corp............................. 7,900 398,950
Watson Pharmaceuticals, Inc.+.................... 500 26,875
-----------
4,564,596
-----------
TOTAL HEALTH CARE.............................. 5,322,945
-----------
INDUSTRIAL PRODUCTS & SERVICES (8.3%)
AEROSPACE (0.4%)
B.F. Goodrich Co................................. 1,300 44,281
Lockheed Martin Corp............................. 2,800 69,475
Raytheon Co., Class A............................ 2,400 46,650
Raytheon Co., Class B............................ 800 15,400
-----------
175,806
-----------
BUILDING MATERIALS (0.0%)
USG Corp......................................... 400 12,150
-----------
BUSINESS & PUBLIC SERVICES (0.1%)
FedEx Corp.+..................................... 800 30,400
-----------
CAPITAL GOODS (0.1%)
PACCAR, Inc...................................... 700 27,781
-----------
DIVERSIFIED MANUFACTURING (7.0%)
Agilent Technologies, Inc.+...................... 2,059 151,851
Cooper Industries, Inc........................... 1,400 45,588
Corning, Inc..................................... 500 134,938
Eastman Kodak Co................................. 2,600 154,700
Eaton Corp....................................... 900 60,300
General Electric Co.(s).......................... 36,700 1,945,100
Honeywell International, Inc..................... 8,200 276,238
ITT Industries, Inc.............................. 1,100 33,413
Johnson Controls, Inc............................ 800 41,050
Parker Hannifin Corp............................. 100 3,425
Tyco International Ltd. (i)...................... 11,000 521,125
Xerox Corp....................................... 2,300 47,725
-----------
3,415,453
-----------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ----------- ------------
<S> <C> <C>
ELECTRICAL EQUIPMENT (0.4%)
Emerson Electric Co.............................. 2,900 $ 175,088
W.W. Grainger, Inc............................... 800 24,650
-----------
199,738
-----------
MACHINERY (0.3%)
Caterpillar, Inc................................. 2,700 91,463
Ingersoll-Rand Co................................ 1,800 72,450
-----------
163,913
-----------
TOTAL INDUSTRIAL PRODUCTS & SERVICES........... 4,025,241
-----------
TECHNOLOGY (24.9%)
COMPUTER PERIPHERALS (0.8%)
EMC Corp.+....................................... 1,700 130,794
Lexmark International Group, Inc., Class A+...... 800 53,800
Seagate Technology, Inc.+........................ 3,600 198,000
-----------
382,594
-----------
COMPUTER SOFTWARE (6.6%)
Adobe Systems, Inc............................... 700 91,000
Autodesk, Inc.................................... 400 13,875
BMC Software, Inc.+.............................. 1,400 51,078
Citrix Systems, Inc.+............................ 1,000 18,938
Computer Associates International, Inc........... 3,700 189,394
Microsoft Corp.+................................. 25,900 2,072,000
Network Associates, Inc.+........................ 800 16,300
Oracle Corp.+.................................... 4,300 361,469
Siebel Systems, Inc.+............................ 1,300 212,631
Symantec Corp.+.................................. 300 16,181
Tibco Software, Inc.+............................ 500 53,617
Veritas Software Corp. +......................... 1,200 135,619
-----------
3,232,102
-----------
COMPUTER SYSTEMS (5.6%)
3Com Corp.+...................................... 2,300 132,538
Apple Computer, Inc.+............................ 2,000 104,750
Compaq Computer Corp............................. 8,900 227,506
Dell Computer Corp.+............................. 10,900 537,506
Hewlett-Packard Co............................... 4,400 549,450
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
13
<PAGE>
J.P. MORGAN U.S. DISCIPLINED EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ----------- ------------
<S> <C> <C>
COMPUTER SYSTEMS (CONTINUED)
International Business Machines Corp............. 2,500 $ 273,906
Sun Microsystems, Inc.+.......................... 10,400 945,750
-----------
2,771,406
-----------
ELECTRONICS (4.5%)
Cisco Systems, Inc.+(s).......................... 33,800 2,148,413
Rockwell International Corp...................... 2,500 78,750
-----------
2,227,163
-----------
INFORMATION PROCESSING (0.2%)
DoubleClick, Inc.+............................... 800 30,500
Electronic Data Systems Corp..................... 1,300 53,625
-----------
84,125
-----------
SEMICONDUCTORS (7.2%)
Advanced Micro Devices, Inc.+.................... 1,000 77,250
Altera Corp.+.................................... 700 71,356
Applied Materials, Inc.+......................... 5,000 453,125
Intel Corp.(s)................................... 16,400 2,192,475
Lattice Semiconductor Corp.+..................... 300 20,738
National Semiconductor Corp.+.................... 1,100 62,425
Texas Instruments, Inc........................... 9,800 673,138
-----------
3,550,507
-----------
TOTAL TECHNOLOGY............................... 12,247,897
-----------
TELECOMMUNICATIONS (5.9%)
TELECOMMUNICATION SERVICES (1.4%)
America Online, Inc.+............................ 10,600 559,150
Yahoo, Inc.+..................................... 1,100 136,263
-----------
695,413
-----------
TELECOMMUNICATIONS-EQUIPMENT (4.5%)
JDS Uniphase Corp.+.............................. 100 11,988
Lucent Technologies, Inc......................... 4,700 278,475
Motorola, Inc.................................... 12,600 366,188
Nortel Networks Corp. (i)........................ 18,600 1,269,450
QUALCOMM, Inc.+.................................. 1,000 60,000
Tellabs, Inc.+................................... 2,900 198,469
-----------
2,184,570
-----------
TOTAL TELECOMMUNICATIONS....................... 2,879,983
-----------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ----------- ------------
<S> <C> <C>
TRANSPORTATION (0.6%)
AIRLINES (0.1%)
Delta Air Lines, Inc............................. 100 $ 5,056
Southwest Airlines Co............................ 1,400 26,513
-----------
31,569
-----------
RAILROADS (0.5%)
Burlington Northern Santa Fe Corp................ 3,300 75,694
CSX Corp......................................... 1,300 27,544
Norfolk Southern Corp............................ 1,900 28,263
Union Pacific Corp............................... 2,500 92,969
-----------
224,470
-----------
TOTAL TRANSPORTATION........................... 256,039
-----------
UTILITIES (7.5%)
ELECTRIC (1.7%)
Allegheny Energy, Inc............................ 700 19,163
Ameren Corp...................................... 100 3,375
American Electric Power Co....................... 1,340 39,698
Cinergy Corp..................................... 1,300 33,069
CMS Energy Corp.................................. 1,100 24,338
Consolidated Edison, Inc......................... 1,700 50,363
CP&L , Inc....................................... 2,800 89,425
Dominion Resources, Inc.......................... 1,300 55,738
DTE Energy Co.................................... 1,400 42,788
Edison International............................. 2,800 57,400
Entergy Corp..................................... 1,900 51,656
FPL Group, Inc................................... 1,500 74,250
GPU, Inc......................................... 1,100 29,769
NiSource, Inc.................................... 1,000 18,625
Northern States Power Co......................... 400 8,075
PG&E Corp........................................ 3,100 76,338
Pinnacle West Capital Corp....................... 800 27,100
PPL Corp......................................... 1,300 28,519
TXU Corp......................................... 2,300 67,850
Wisconsin Energy Corp............................ 1,100 21,794
-----------
819,333
-----------
TELEPHONE (5.8%)
Allegiance Telecom, Inc.+........................ 500 32,000
ALLTEL Corp...................................... 800 49,550
AT&T Corp........................................ 8,900 281,463
Bell Atlantic Corp.+............................. 4,200 213,413
Global Crossing Ltd.+ (i)........................ 5,500 144,719
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
14
<PAGE>
J.P. MORGAN U.S. DISCIPLINED EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ----------- ------------
<S> <C> <C>
TELEPHONE (CONTINUED)
GTE Corp......................................... 6,300 $ 392,175
Level 3 Communications, Inc.+.................... 500 44,000
SBC Communications, Inc.......................... 16,500 713,625
Sprint Corp. (PCS Group)+........................ 4,000 238,000
US West, Inc..................................... 1,100 94,325
WorldCom, Inc.+.................................. 14,300 656,013
-----------
2,859,283
-----------
TOTAL UTILITIES................................ 3,678,616
-----------
TOTAL COMMON STOCKS (COST $44,665,017)......... 47,666,745
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
-----------
<S> <C> <C>
FIXED INCOME SECURITIES (0.4%)
U.S. TREASURY NOTES (0.4%)
US Treasury Note, 5.38% due 07/31/00............. $ 100,000 99,976
US Treasury Note, 5.25% due 05/31/01............. 120,000 118,706
-----------
TOTAL U.S. TREASURY NOTES...................... 218,682
-----------
TOTAL FIXED INCOME SECURITIES (COST
$218,567)..................................... 218,682
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
------------------------------------------------- ----------- ------------
<S> <C> <C>
SHORT-TERM INVESTMENTS (3.0%)
U.S. GOVERNMENT AGENCY OBLIGATIONS (3.0%)
(COST $1,464,465)
Freddie Discount Note, 6.570%(y), due 07/03/00... $1,465,000 $ 1,464,198
-----------
TOTAL INVESTMENTS (COST $46,348,049) (100.6%)................. 49,349,625
LIABILITIES IN EXCESS OF OTHER ASSETS (-0.6%)................. (282,389)
-----------
NET ASSETS (100.0%)........................................... $49,067,236
===========
</TABLE>
------------------------------
Note: Based on the cost of investments of $46,348,049 for federal income tax
purposes at June 30, 2000, the aggregate gross unrealized appreciation and
depreciation was $6,813,965 and $3,812,389 respectively, resulting in net
unrealized appreciation of $3,001,576.
+ - 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.
$2,447,263 of the market value has been segregated.
(y) - Yield to maturity.
The Accompanying Notes are an Integral Part of the Financial Statements.
15
<PAGE>
J.P. MORGAN U.S. DISCIPLINED EQUITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $46,348,049 ) $49,349,625
Cash 737
Receivable for Investments Sold 226,051
Receivable for Shares of Beneficial Interest Sold 65,514
Dividends and Interest Receivable 47,372
Variation Margin Receivable 10,100
Prepaid Trustees' Fees 7,339
Receivable for Expense Reimbursements 1,686
Prepaid Expenses and Other Assets 1,916
-----------
Total Assets 49,710,340
-----------
LIABILITIES
Payable for Investments Purchased 588,692
Advisory Fee Payable 13,808
Administrative Services Fee Payable 2,367
Payable for Shares of Beneficial Interest
Redeemed 1,595
Administration Fee Payable 29
Accrued Expenses 36,613
-----------
Total Liabilities 643,104
-----------
NET ASSETS
Applicable to 2,961,313 shares outstanding (no
par value, unlimited shares authorized) $49,067,236
===========
Net Asset Value, Offering and Redemption Price
per Share $16.57
-----
-----
ANALYSIS OF NET ASSETS
Paid-in Capital $46,457,692
Undistributed Net Investment Income 131,886
Accumulated Net Realized Loss on Investments (517,301)
Net Unrealized Appreciation of Investments 2,994,959
-----------
Net Assets $49,067,236
===========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
16
<PAGE>
J.P. MORGAN U.S. DISCIPLINED EQUITY PORTFOLIO
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividend Income (Net of Foreign Withholding Tax
of $2,516 ) $ 272,011
Interest Income 39,114
---------
Investment Income 311,125
EXPENSES
Advisory Fee $ 73,514
Custodian Fees and Expenses 33,616
Professional Fees and Expenses 16,819
Administrative Services Fee 16,434
Trustees' Fees and Expenses 10,875
Fund Accounting Fees and Expenses 10,540
Transfer Agent Fee 8,249
Administration Fee 140
Amortization of Organization Expense 49
Miscellaneous 9,001
--------
Total Expenses 179,237
---------
NET INVESTMENT INCOME 131,888
NET REALIZED LOSS ON
Investments (317,799)
Futures Contracts (31,186)
--------
Net Realized Loss (348,985)
NET CHANGE IN UNREALIZED DEPRECIATION OF
Investments (92,279)
Futures Contracts (42,498)
--------
Net Change in Unrealized Depreciation (134,777)
---------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS $(351,874)
=========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
17
<PAGE>
J.P. MORGAN U.S. DISCIPLINED EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE FISCAL
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
------------- -----------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 131,888 $ 208,598
Net Realized Gain (Loss) on Investments and
Futures Contracts (348,985) 3,552,575
Net Change in Unrealized Appreciation
(Depreciation) of Investments and Futures
Contracts (134,777) 1,171,776
----------- ----------------
Net Increase (Decrease) in Net Assets
Resulting from Operations (351,874) 4,932,949
----------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (107,869) (114,337)
Net Realized Gain (1,244,679) (2,667,072)
----------- ----------------
Total Distributions to Shareholders (1,352,548) (2,781,409)
----------- ----------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Proceeds from Shares of Beneficial Interest Sold 14,493,413 18,504,253
Reinvestment of Dividends 1,353,339 2,780,648
Cost of Shares of Beneficial Interest Redeemed (4,559,246) (2,463,177)
----------- ----------------
Net Increase from Shareholder Transactions 11,287,506 18,821,724
----------- ----------------
Total Increase in Net Assets 9,583,084 20,973,264
NET ASSETS
Beginning of Period 39,484,152 18,510,888
----------- ----------------
End of Period (including undistributed net
investment income of $131,886 and $107,867,
respectively.) $49,067,236 $ 39,484,152
=========== ================
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
18
<PAGE>
J.P. MORGAN U.S. DISCIPLINED EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
Selected data for a share outstanding throughout each period are as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 3, 1995
FOR THE (COMMENCEMENT
SIX MONTHS ENDED FOR THE FISCAL YEAR ENDED DECEMBER 31, OF OPERATIONS)
JUNE 30, 2000 -------------------------------------------- THROUGH
(UNAUDITED) 1999 1998 1997 1996 DECEMBER 31, 1995
---------------- ------- ------- ------ ------ --------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 17.35 $ 15.84 $ 14.33 $13.68 $12.63 $ $10.00
--------------- ------- ------- ------ ------ -------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.04 0.09 0.10 0.11 0.20 0.12
Net Realized and Unrealized
Gain (Loss) on Investments
and Futures (0.29) 2.80 3.15 3.51 2.44 3.26
--------------- ------- ------- ------ ------ -------------------
Total from Investment
Operations (0.25) 2.89 3.25 3.62 2.64 3.38
--------------- ------- ------- ------ ------ -------------------
LESS DISTRIBUTIONS TO
SHAREHOLDERS FROM
Net Investment Income (0.04) (0.06) (0.09) (0.11) (0.20) (0.12)
Net Realized Gain (0.49) (1.32) (1.65) (2.86) (1.39) (0.63)
--------------- ------- ------- ------ ------ -------------------
Total distributions to
Shareholders (0.53) (1.38) (1.74) (2.97) (1.59) (0.75)
--------------- ------- ------- ------ ------ -------------------
NET ASSET VALUE, END OF PERIOD $ 16.57 $ 17.35 $ 15.84 $14.33 $13.68 $ $12.63
=============== ======= ======= ====== ====== ===================
RATIOS AND SUPPLEMENTAL DATA
Total Return (1.41)%(a) 18.54% 23.28% 27.50% 21.14% 33.91%(a)
Net Assets, End of Period (in
thousands) $ 49,067 $39,484 $18,511 $8,892 $5,339 $ $4,144
Ratios to Average Net Assets
Net Expenses 0.85%(b) 0.87% 0.90% 0.90% 0.90% 0.90%(b)
Net Investment Income 0.62%(b) 0.74% 0.81% 0.75% 1.49% 1.48%(b)
Expenses without
Reimbursement 0.85%(b) 0.87% 1.48% 2.31% 2.13% 2.70%(b)
Portfolio Turnover 27%(a) 104% 82% 119% 90% 66%
</TABLE>
------------------------
(a) Not Annualized.
(b) Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
J.P. MORGAN U.S. DISCIPLINED EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2000
--------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
J.P. Morgan U.S. Disciplined Equity Portfolio (the "portfolio") is one of four
portfolios comprising the 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. 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 of prices based on 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 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.
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 were amortized on a straight-line basis over
a five-year period from the commencement of operations.
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.
20
<PAGE>
J.P. MORGAN U.S. DISCIPLINED EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 2000
--------------------------------------------------------------------------------
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. 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.
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. For the six months ended
June 30, 2000, such fees amounted to $73,514.
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 the portfolio and pays the compensation of the portfolios' officers
affiliated with FDI. The portfolio has agreed to pay FDI fees equal to its
allocable share of an annual complex-wide charge of $425,000 plus FDI's
out-of-pocket expenses. The amount allocable to the portfolio is based on
the ratio of the portfolio's net assets to the aggregate net assets of the
trust and certain other investment companies subject to similar agreements
with FDI. For the six months ended June 30, 2000, the fee for these
services amounted to $140.
21
<PAGE>
J.P. MORGAN U.S. DISCIPLINED EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 2000
--------------------------------------------------------------------------------
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 limits 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 six months ended June 30, 2000, the fee for
these services amounted to $16,434 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 were as follows:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE FISCAL
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31,1999
-------------- ----------------
<S> <C> <C>
Shares sold...................................... 878,972 1,089,647
Reinvestment of dividends and distributions...... 82,974 163,997
Shares redeemed.................................. (277,031) (145,759)
----------- ---------------
Net Increase..................................... 684,915 1,107,885
=========== ===============
</TABLE>
From time to time, the 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 the portfolio.
4. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the six months
ended June 30, 2000, were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
----------- -----------
<S> <C>
$20,511,554 $11,229,761
</TABLE>
Open futures contracts at June 30, 2000 are summarized as follows:
<TABLE>
<CAPTION>
NET UNREALIZED
APPRECIATION/ MARKET VALUE
CONTRACTS LONG (DEPRECIATION) OF CONTRACTS
-------------- --------------- ------------
<S> <C> <C> <C>
S&P 500, expiring September 2000................. 4 $ (6,616) $ 1,468,100
============= ============== ===========
</TABLE>
22
<PAGE>
J.P. MORGAN SERIES TRUST II PORTFOLIOS J.P. Morgan
U.S. Disciplined
BOND PORTFOLIO Equity Portfolio
INTERNATIONAL OPPORTUNITIES PORTFOLIO
SMALL COMPANY PORTFOLIO
U.S. DISCIPLINED EQUITY PORTFOLIO
SEMIANNUAL REPORT
JUNE 30, 2000
FOR MORE INFORMATION ON THE J.P. MORGAN
SERIES TRUST II PORTFOLIOS, CALL FUNDS
DISTRIBUTOR, INC. AT (888) 756-8645.
IMSAR377
