<PAGE>
LETTER TO THE SHAREHOLDERS OF THE J.P. MORGAN SMALL COMPANY PORTFOLIO
August 1, 2000
Dear Shareholder:
For the six months ended June 30, 2000, the J.P. Morgan Small Company Portfolio
returned -1.80%. The portfolio underperformed both the Russell 2000 Index and
the Lipper Variable Annuity Small Cap Funds Average, which returned 3.04% and
6.89%, respectively.
The portfolio's net asset value per share decreased from $16.73 on December 31,
1999, to $15.97 on June 30, 2000. The portfolio made distributions during the
six months of approximately $0.34 per share from short-term capital gains and
approximately $0.09 per share from long-term capital gains. In addition, the
portfolio's net assets advanced from approximately $16.4 million on December 31,
1999 to approximately $29.9 million on June 30, 2000.
The report that follows includes detailed performance information about the J.P.
Morgan Small Company Portfolio, as well as an interview with Marian Pardo, the
portfolio manager primarily responsible for the portfolio. In this interview,
Marian discusses the events in the small-cap equity markets, portfolio
performance, and what she sees on the horizon.
As chairman and president of Asset Management Services, we thank you for your
participation in the J.P. Morgan Small Company 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>
<CAPTION>
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TABLE OF CONTENTS
<S> <C>
LETTER TO THE SHAREHOLDERS.....................1 PORTFOLIO FACTS AND HIGHLIGHTS.................7
PORTFOLIO PERFORMANCE..........................2 FINANCIAL STATEMENTS..........................10
PORTFOLIO MANAGER Q&A..........................3
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</TABLE>
<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 Small Company Portfolio -7.96% -1.80% 33.57% 15.15% 17.70% 19.46%
Russell 2000 Index** -3.98% 3.04% 14.32% 10.57% 14.27% 15.69%
Lipper Variable Annuity
Small Cap Funds Average*** -3.50% 6.89% 34.61% 18.09% 18.91% 20.27%
</TABLE>
*1/3/95 -- COMMENCEMENT OF OPERATIONS.
**THE RUSSELL 2000 INDEX IS AN UNMANAGED INDEX WHICH MEASURES THE AVERAGE
PERFORMANCE OF 2000 U.S. SMALL-CAP STOCKS. THE INDEX DOES NOT INCLUDE FEES OR
OPERATING EXPENSES AND IS NOT AVAILABLE FOR DIRECT INVESTMENT.
***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.
HISTORICALLY SMALL-COMPANY STOCKS HAVE BEEN MORE VOLATILE THAN LARGE-COMPANY
STOCKS.
2
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Portfolio manager Q&A
[PHOTO]
Following is an interview with Marian U. Pardo, managing director and member of
the portfolio management team for the portfolio. As head of the small company
investment team, Marian co-manages Morgan's various small-cap mutual funds as
well as significant separate account assets for institutional clients. Marian
has held a number of positions at Morgan. Among her most recent accomplishments,
she helped launch and manage the J.P. Morgan U.S. Small Company Opportunities
Fund. Before that, she managed equity and convertible funds and large-cap equity
portfolios for individual clients, including the large-cap mutual funds. Marian
joined J.P. Morgan in 1968, and joined the investment management business in
1980 as a research analyst. She has her B.A. from Barnard College. This
interview took place on July 17, 2000, and reflects Marian's views on that date.
IT WASN'T THAT LONG AGO THAT LARGE- AND SUPER LARGE-CAP GROWTH EQUITIES
DOMINATED THE INVESTMENT LANDSCAPE, OFTEN AT THE EXPENSE OF MID- AND SMALL-CAP
ISSUES. HOW HAS THIS CHANGED, AND WHAT IMPACT HAS IT HAD ON YOUR STRATEGY, IF
ANY?
MP: Investor preference for large and super large caps - an investment theme
that ruled the market in the late 1990s - shifted to so-called "new economy"
stocks in 1999 and the first quarter of 2000, cutting across market cap lines.
Last year, the traditional large, stable growth companies - like Coca-Cola,
Pfizer, certain other drug companies, etc. - didn't do particularly well.
Calendar year 1999 was, in fact, the first time in a while that small stocks, as
represented by the Russell 2000 Index, marginally outperformed large stocks, as
represented by the S&P 500.
I would note that large caps have impacted our portfolio in a roundabout - and
positive - manner. Many of these new economy companies, principally those in the
telecommunications, media, technology and, perhaps, biotechnology sectors, began
last year as small caps, or IPOs. Significant investor enthusiasm for these
issues provided a powerful boost to the small-cap sector in 1999 and the first
quarter of 2000. However, large-, mid-, and small-cap stocks all had a difficult
time during the second quarter of this year, as technology- related shares fell
dramatically in late March, April, and most of May. In fact, small- and mid-cap
value names were some of the top performers during the second quarter.
For our part, it generally makes little difference if the market is favoring new
economy stocks one day and old economy stocks the next. Our aim is to be broadly
diversified across market sectors, investing in good companies at good prices
that we believe will appreciate over a 12-18 month time frame.
WHAT ARE YOU LOOKING FOR WHEN YOU CONSIDER ADDING COMPANIES TO THE PORTFOLIO?
MP: Most importantly, we have to like the company's business plan and believe
its management is capable of implementing it successfully. Beyond this, we look
at the company's prospects for cash flow, as well as past and projected earnings
growth. We are also looking for catalysts of value creation, those changes in a
company's
3
<PAGE>
operating environment that will ignite its business and cause its underlying
value to be realized in its stock price. Such catalysts might be the winning of
significant new clients, legislative changes that favor the company's business
environment, or the successful introduction of a new product line.
CONVERSELY, WHAT WOULD PROMPT YOU TO SELL A COMPANY?
MP: New information, or price. Perhaps the information on which we based our buy
decision changed, so that the stock no longer looked as attractive as other
available opportunities. We would also sell if an issue appreciated to the point
that it had reached or exceeded our price target. And, while we like to continue
holding successful companies, we will put them on our sell list when they grow
too large.
LOOKING AT THE SMALL-CAP UNIVERSE IN PARTICULAR, WHAT WOULD YOU SAY WERE THE
MOST SIGNIFICANT EVENTS THAT IMPACTED IT OVER THE PAST SIX MONTHS?
MP: Carrying over from last year, the major event impacting small caps since the
beginning of 2000 was the active new issue market. It increased interest in new
economy names, and it re-ignited interest in biotech companies. The huge amount
of new capital that was drawn to these issues created opportunities not only for
the companies that went public, but also for companies in other sectors, that
benefited from their spending on things like radio advertising, computer
purchases, etc.
We have been happy with the IPO pipeline thus far this year, even though it has
been leaner than last year. Last year's enormous new issue market was probably
an anomaly that won't be repeated any time soon. Despite recent volatility, this
year has still been positive, if not on the exceptional scale of last year.
In terms of negative impacts, certainly the rise in interest rates hurt the
market, most particularly from mid-March 2000 to this day. When investors
finally took note of the fact that the Federal Reserve Board was serious about
putting the brakes on the economy, they revalued their holdings. As always,
high-multiple stocks were the most affected, including those in the once adored
telecommunications-media-technology sectors. This turnabout hurt not only the
many small-cap stocks in these sectors, but many larger names as well - in fact,
one could argue that Microsoft's run-in with the U.S. Justice Department helped
spark the recent tech correction. Also very hard hit were the smaller regional
banks, which make most of their money from lending activities and thus are more
sensitive to rising interest rates than, say, the money center banks, which tend
to have broader sources of revenues.
Elsewhere, rising interest rates hurt some of the more traditionally valued
companies, those valued on cash flow. Anticipating this, we substantially
reduced our radio company holdings because of their historically high multiples.
If not an event per se, the continued strong economy in 1999 and the first
quarter of this year was certainly a highly beneficial operating environment for
many of the companies in which we invest. One of the ways we took advantage of
it was by increasing our investments in chemical companies, which, among other
commodity-intensive firms, typically outperform in a successful domestic and
global economy. We also increased our allocations to the energy and oil services
sectors for much the same reason.
4
<PAGE>
HOW HAS THE FUND PERFORMED OVER THE PAST SIX MONTHS?
MP: For the six months ended June 30, 2000, the portfolio was down 1.80%, versus
the Russell 2000 Index, which was up 3.04%, and the Lipper Variable Annuity
Small Cap Funds Average, which appreciated 6.89% over this period. Our recent
underperformance is mainly the result of poor security selection, particularly
in the consumer services, software and health services areas.
WHAT HELPED PERFORMANCE OVER THIS PERIOD?
MP: Among the investments that helped performance the most was Human Genome
Sciences, which develops products that predict, prevent, detect, and cure
diseases, all based on gene-related research. It is a good example of a biotech
company that benefited from re-ignited interest in the sector. We have held this
stock for a long time, and we were pleased that it appreciated significantly
over our six-month reporting period.
The bottom line for the company's success is its proven ability to turn its gene
research into marketable drugs. The stock was also propelled by positive news
throughout 1999 and into this year. For example, the company registered well
over 100 patents in the U.S., one of which was a therapy for the treatment of
AIDS. Recently, the company received FDA approval to commence human trials of
one of its drugs, a protein that is one of the body's primary weapons against
infection.
Applied Micro Circuits was another winner. This company designs, develops, and
makes silicon solutions used in the creation of communications infrastructure,
the networks over which telecommunications happen, both hardwire and wireless.
It benefited from extraordinarily positive coverage by the brokerage community,
a 2-for-1 stock split, and an additional public offering. As a result, its stock
rose substantially. We were fortunate to have recognized and invested in the
company's story early on in this price appreciation cycle. Applied Micro
Circuits actually survived the tech downdraft in April, and in May helped itself
by introducing significant new products.
Another holding that contributed to performance was Vertex Pharmaceuticals,
which develops and commercializes small molecule drugs for the treatment of
diseases for which there are limited - or no - effective treatments. Shares of
Vertex were up strongly for the period.
We have followed Vertex for a number of years, and viewed it as a
fundamentally strong company that was intelligently building a portfolio of
potentially promising drugs. Vertex came into favor during the period because
of this product pipeline - it has a number of drugs in clinical trials - and
its strong technology platform, which enables the company to capitalize on the
wealth of gene-related research currently underway worldwide. Recently, the
stock has been propelled by news of a successful collaboration with Novartis,
another drug company, as well as strong financial results.
AND WHAT WERE A FEW OF THE COMPANIES IN THE PORTFOLIO THAT PERFORMED LESS WELL
THAN EXPECTED?
MP: One investment that underperformed was Mediaplex. The company provides
technology-based marketing solutions - it will plan, execute, monitor, and
analyze Internet ad campaigns. Through a technology called "MOJO," Mediaplex
allows advertisers to deliver real-time, customized advertising to consumers.
The stock has been the subject of very positive press and broker research, and
reached an all-time high in January;
5
<PAGE>
however, it seemed to get caught up in some of the indiscriminant selling of
tech-related shares that we saw in the second quarter. As a result, Mediaplex
was down in our portfolio.
Another name that detracted from performance was Checkfree Holdings, which
develops and markets services that enable its customers to pay and collect bills
electronically. Shares of Checkfree began the year on a negative note when the
company announced disappointing financial results. It was also negatively
impacted by news that the rollout of the company's on-line bill paying service
to Yahoo! subscribers was moving slower than expected. Checkfree continued to
suffer during the tech correction in March, April, and May, and concluded the
six-month period well off its high for the year.
Geon Company, a petrochemical company that supplies specialty PVC resins and
compounds, also detracted from performance for the period. Geon has suffered
from persistently high oil prices since last year, which presents it with the
challenge of keeping its prices steady and maintaining margins, against the
backdrop of rising costs and little-to-no inflation.
RISING INTEREST RATES HAVE BEEN AND CONTINUE TO BE THE DOMINANT INVESTMENT STORY
OF LATE, ONE THAT TOLD A RATHER SAD TALE FOR STOCKS IN THIS YEAR'S SECOND
QUARTER. HOW DO YOU ADDRESS THIS ISSUE IN THE MANAGEMENT OF THE PORTFOLIO?
MP: Since we are not top-down investors, we do not over- and underweight sectors
based on an interest rate view. Rather, in a rising rate environment, we would
look for companies in each sector that are least vulnerable to adverse interest
rate developments. The way different kinds of companies are affected by a
particular set of economic circumstances would lead us to underweight or
eliminate those that are likely to deliver sub-par performance over our targeted
time frame.
This said, small-cap stocks as a group tend to be sensitive to interest rate
increases, both because of high P/Es and the impact that rate increases can have
on earnings and a company's ability to raise capital. Good research can help you
stay ahead of this curve over time.
LOOKING AHEAD, WHAT DEVELOPMENTS DO YOU SEE FOR THE SMALL-CAP UNIVERSE?
MP: If rates should continue to rise, I think we may see more small-cap woes,
for the reasons cited earlier. You'll probably also continue to see volatility
play a large role and liquidity be one of the major issues. Beyond this, we will
likely see a broadening of the small-cap market, as opposed to what happened
last year and the early part of this one when technology, telecommunications,
and biotech drove the market.
Hopefully, what we will see is a number of winners, spread out more evenly
between the new and old economy sectors. We see attractive opportunities
throughout the small-cap area - from energy and chemical stocks to technology
and telecomm. We will participate broadly, but on balance we still see
relatively stronger fundamentals in new industrial America and will tilt the
portfolio accordingly.
6
<PAGE>
Portfolio facts
INVESTMENT OBJECTIVE
J.P. Morgan Small Company Portfolio seeks to provide a high total return from a
portfolio comprised of equity securities of small companies. The portfolio
invests at least 65% of the value of its total assets in the common stock of
small U.S. companies, primarily those with market capitalizations of less than
$1 billion. The portfolio is designed for investors who are willing to assume
the somewhat higher risk of investing in small companies in order to seek a
higher return over time than might be expected from a portfolio of stocks of
large companies.
------------------------------------------
COMMENCEMENT OF INVESTMENT OPERATIONS
1/3/95
------------------------------------------
NET ASSETS AS OF 6/30/00
$29,855,047
------------------------------------------
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 1.14% 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)
[PIE CHART]
- TECHNOLOGY 22.4%
- FINANCE 13.0%
- CONSUMER GOODS & SERVICES 11.2%
- HEALTHCARE 9.6%
- TELECOMMUNICATIONS 7.9%
- INDUSTRIAL PRODUCTS & SERVICES 7.4%
- BASIC INDUSTRIES 6.5%
- ENERGY 4.9%
- UTILITIES 2.5%
- TRANSPORTATION 2.2%
- SHORT-TERM & OTHER INVESTMENTS 12.4%
<TABLE>
<CAPTION>
LARGEST HOLDINGS
(EXCLUDING SHORT-TERM INVESTMENTS) % OF TOTAL INVESTMENTS
----------------------------------------------------------
<S> <C>
HUMAN GENOME SCIENCES, INC. (HEALTHCARE) 1.5%
EXAR CORP. (TECHNOLOGY) 1.1%
C.H. ROBINSON WORLDWIDE, INC. (TRANSPORTATION)1.1%
RENAISSANCE RE HOLDINGS, LTD. (FINANCE) 1.1%
ADVANCED FIBRE COMMUNICATIONS, INC. 1.0%
(TELECOMMUNICATIONS)
WELLMAN INC. (BASIC INDUSTRIES) 1.0%
NEWFIELD EXPLORATION CO. (ENERGY) 1.0%
NATIONAL OILWELL, INC. (ENERGY) 1.0%
BANK UNITED CORP., CLASS A (FINANCE) 1.0%
CLECO CORP. (UTILITIES) 0.9%
</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
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THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY
<PAGE>
J.P. MORGAN SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
JUNE 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ----------- ------------
<S> <C> <C>
COMMON STOCKS (92.3%)
BASIC INDUSTRIES (7.0%)
CHEMICALS (5.0%)
Albemarle Corp................................... 8,600 $ 169,850
Bush Boake Allen, Inc............................ 1,700 74,375
General Chemical Group, Inc.+.................... 4,400 3,025
Geon Co.......................................... 12,800 236,800
Georgia Gulf Corp................................ 9,900 206,044
Minerals Technologies, Inc....................... 5,100 234,600
Solutia, Inc..................................... 4,800 66,000
Symyx Technologies, Inc.+........................ 4,000 170,437
Wellman, Inc..................................... 19,800 320,512
-----------
1,481,643
-----------
FOREST PRODUCTS & PAPER (1.5%)
Buckeye Technologies, Inc........................ 6,200 136,012
Caraustar Industries, Inc........................ 10,200 154,275
Universal Forest Products, Inc................... 10,400 143,000
-----------
433,287
-----------
METALS & MINING (0.5%)
Mueller Industries, Inc.+........................ 4,300 120,400
Schnitzer Steel Industries, Inc., Class A........ 1,700 26,987
-----------
147,387
-----------
TOTAL BASIC INDUSTRIES....................... 2,062,317
-----------
CONSUMER GOODS & SERVICES (11.8%)
APPARELS & TEXTILES (0.3%)
Genesco, Inc.+................................... 2,900 46,581
Vans, Inc.+...................................... 2,300 33,637
-----------
80,218
-----------
AUTOMOTIVE (0.4%)
BorgWarner, Inc.................................. 2,500 87,812
Sonic Automotive, Inc.+.......................... 2,900 30,994
-----------
118,806
-----------
BROADCASTING & PUBLISHING (3.8%)
Entercom Communications Corp.+................... 3,100 151,125
Hearst-Argyle Television, Inc.+.................. 2,900 56,550
iBEAM Broadcasting Corp.+........................ 6,400 115,200
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
10
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J.P. MORGAN SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ----------- ------------
<S> <C> <C>
BROADCASTING & PUBLISHING (CONTINUED)
Mediaplex, Inc................................... 5,300 $ 102,356
SmartForce Public Limited Co., Sponsored
ADR(i)......................................... 4,400 211,200
Spanish Broadcasting System, Inc., Class A+...... 11,200 230,300
Valassis Communications, Inc.+................... 7,300 278,312
-----------
1,145,043
-----------
ENTERTAINMENT, LEISURE & MEDIA (2.3%)
American Classic Voyages Co. +................... 3,900 80,437
Anchor Gaming+................................... 5,600 268,450
ARTISTdirect, Inc.+.............................. 1,400 4,375
Concord Camera Corp.+............................ 1,400 29,225
Insight Communications Co., Inc.+................ 4,000 62,500
JAKKS Pacific, Inc.+............................. 5,400 79,650
Lifeminders, Inc.+............................... 1,300 38,431
Promotions.com, Inc.+............................ 2,000 10,000
Quokka Sports, Inc.+............................. 2,400 19,275
Ticketmaster Online-CitySearch, Inc., Class B+... 5,500 87,656
-----------
679,999
-----------
FOOD, BEVERAGES & TOBACCO (1.4%)
American Italian Pasta Co., Class A +............ 3,400 70,337
Beringer Wine Estates Holdings, Inc., Class B+... 2,100 74,156
Keebler Foods Co................................. 7,000 259,875
-----------
404,368
-----------
HOUSEHOLD APPLIANCES & FURNISHINGS (0.5%)
Furniture Brands International, Inc. +........... 2,100 31,762
Stanley Furniture Co., Inc.+..................... 6,000 132,000
-----------
163,762
-----------
HOUSEHOLD PRODUCTS (0.6%)
Alberto-Culver Co., Class B...................... 5,600 171,150
-----------
RESTAURANTS & HOTELS (0.6%)
Aztar Corp. +.................................... 4,300 66,650
Boca Resorts, Inc., Class A+..................... 4,100 40,487
Extended Stay America, Inc. +.................... 3,000 27,750
Sun International Hotels Ltd.+................... 2,000 40,000
-----------
174,887
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
11
<PAGE>
J.P. MORGAN SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ----------- ------------
<S> <C> <C>
RETAIL (1.9%)
Alloy Online, Inc. +............................. 6,100 $ 68,625
BJ's Wholesale Club, Inc.+....................... 1,000 33,000
Cost Plus, Inc. +................................ 5,000 143,437
Lithia Motors, Inc., Class A+.................... 3,400 45,475
Pacific Sunwear of California, Inc.+............. 2,400 45,000
School Specialty, Inc............................ 11,600 215,325
Stamps.com, Inc. +............................... 3,300 24,131
-----------
574,993
-----------
TOTAL CONSUMER GOODS & SERVICES.............. 3,513,226
-----------
ENERGY (5.2%)
GAS EXPLORATION (1.3%)
Newfield Exploration Co.+........................ 7,900 309,087
Spinnaker Exploration Co.+....................... 2,700 69,187
-----------
378,274
-----------
GAS-PIPELINES (0.5%)
Kinder Morgan, Inc............................... 3,900 134,794
-----------
OIL-PRODUCTION (0.1%)
Devon Energy Corp.+.............................. 200 11,237
Unit Corp........................................ 2,100 28,350
-----------
39,587
-----------
OIL-SERVICES (3.3%)
Cooper Cameron Corp.+............................ 2,900 191,400
Core Laboratories NV(i).......................... 2,900 84,100
Global Industries, Ltd........................... 2,800 52,850
Gulf Island Fabrication, Inc..................... 1,100 18,700
McDermott International, Inc..................... 18,500 163,031
National-Oilwell, Inc.+.......................... 9,100 299,162
Smith International, Inc.+....................... 1,800 131,062
Universal Compression Holdings, Inc.+............ 1,700 56,950
-----------
997,255
-----------
TOTAL ENERGY................................. 1,549,910
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
12
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J.P. MORGAN SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ----------- ------------
<S> <C> <C>
FINANCE (13.8%)
BANKING (2.5%)
Bank United Corp., Class A....................... 8,500 $ 299,094
Capital Crossing Bank +.......................... 1,600 16,400
City National Corp............................... 2,700 93,825
Commercial Federal Corp.......................... 4,150 64,584
Hamilton Bancorp, Inc.+.......................... 1,900 33,250
National Commerce Bancorporation................. 5,100 81,919
Pacific Century Financial Corp................... 4,200 61,425
Sterling Bancshares, Inc......................... 1,400 15,137
Summit Bancshares, Inc........................... 200 3,450
Sun Bancorp, Inc.+............................... 2,011 12,066
Westamerica Bancorporation....................... 2,300 60,087
-----------
741,237
-----------
FINANCIAL SERVICES (4.3%)
Allied Capital Corp.............................. 11,700 198,900
American Capital Strategies, Ltd................. 2,000 47,750
American Home Mortgage Holdings, Inc.+........... 4,200 19,162
CheckFree Holdings Corp.......................... 3,200 165,000
Donaldson, Lufkin & Jenrette, Inc. - DLJ
Direct......................................... 1,400 59,412
Doral Financial Corp............................. 6,700 76,631
eSPEED, Inc., Class A............................ 5,100 221,531
Gabelli Asset Management, Inc., Class A+......... 2,000 50,000
Heller Financial, Inc............................ 9,400 192,700
LendingTree, Inc.+............................... 1,000 7,500
Medallion Financial Corp......................... 1,800 27,787
MicroFinancial, Inc.............................. 600 6,000
Ocwen Financial Corp.+........................... 8,000 44,500
Southwest Securities Group, Inc.................. 2,100 78,225
Web Street, Inc.+................................ 2,300 5,750
Willis Lease Finance Corp.+...................... 9,800 61,250
-----------
1,262,098
-----------
INSURANCE (3.2%)
E. W. Blanch Holdings, Inc....................... 2,500 50,781
Fremont General Corp............................. 8,500 33,469
HealthExtras, Inc.+.............................. 6,100 32,787
Hooper Holmes, Inc............................... 12,100 96,800
MIIX Group, Inc.................................. 500 6,000
Nationwide Financial Services, Inc., Class A..... 6,300 207,112
Protective Life Corp............................. 3,800 101,175
Quotesmith.com, Inc.+............................ 6,700 14,447
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
13
<PAGE>
J.P. MORGAN SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ----------- ------------
<S> <C> <C>
INSURANCE (CONTINUED)
RenaissanceRe Holdings Ltd....................... 7,800 $ 339,787
StanCorp Financial Group, Inc.................... 2,400 77,100
-----------
959,458
-----------
REAL ESTATE INVESTMENT TRUSTS (3.8%)
Arden Realty, Inc................................ 5,500 129,250
CenterPoint Properties Corp...................... 2,700 110,025
Cousins Properties, Inc.......................... 4,100 157,850
General Growth Properties, Inc................... 4,700 149,225
Manufactured Home Communities, Inc............... 6,000 143,625
Mills Corp....................................... 2,200 41,387
Mission West Properties, Inc..................... 7,200 75,600
Post Properties, Inc............................. 6,069 267,036
The Macerich Co.................................. 3,200 70,600
-----------
1,144,598
-----------
TOTAL FINANCE................................ 4,107,391
-----------
HEALTH CARE (10.1%)
BIOTECHNOLOGY (4.3%)
Aclara Biosciences, Inc. +....................... 600 30,562
Affymetrix, Inc. +............................... 1,100 181,637
Charles River Laboratories International,
Inc.+.......................................... 900 19,969
Corixa Corp.+.................................... 2,100 90,169
Diversa Corp.+................................... 1,100 36,437
Exelixis, Inc.+.................................. 1,800 60,075
Gene Logic, Inc.+................................ 900 32,119
Human Genome Sciences, Inc. +.................... 3,600 480,150
Maxygen, Inc. +.................................. 600 34,059
Millennium Pharmaceuticals, Inc. +............... 300 33,562
Neurocrine Biosciences, Inc.+.................... 2,600 92,462
Nexell Therapeutics Inc.+........................ 12 178
Orchid Biosciences +............................. 4,700 178,453
Vical, Inc.+..................................... 100 1,925
-----------
1,271,757
-----------
HEALTH SERVICES (0.8%)
Accredo Health, Inc.+............................ 3,200 110,600
Allscripts, Inc. +............................... 3,100 71,300
Community Health Care+........................... 1,500 24,281
HealthGate Data Corp.+........................... 4,300 6,987
Omnicare, Inc.................................... 4,100 37,156
-----------
250,324
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
14
<PAGE>
J.P. MORGAN SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ----------- ------------
<S> <C> <C>
MEDICAL SUPPLIES (1.1%)
Cyberonics Inc.+................................. 2,100 $ 25,200
Eclipse Surgical Technologies, Inc.+............. 7,300 31,937
I-STAT Corp.+.................................... 6,000 104,625
ORATEC Interventions, Inc.+...................... 2,100 70,088
ResMed, Inc.+.................................... 2,800 74,900
Sonic Innovations, Inc.+......................... 1,100 20,419
-----------
327,169
-----------
PHARMACEUTICALS (3.9%)
Abgenix, Inc.+................................... 1,100 131,845
Akorn, Inc.+..................................... 7,700 61,119
Bindley Western Industries, Inc.................. 4,900 129,544
Enzon Inc.+...................................... 1,300 55,250
Gilead Sciences, Inc.+........................... 300 21,338
IDEC Pharmaceuticals Corp.+...................... 1,800 211,163
ILEX Oncology, Inc.+............................. 900 31,725
Ligand Pharmaceuticals, Inc., Class B+........... 15,800 208,363
Trimeris, Inc.+.................................. 1,400 97,913
Vertex Pharmaceuticals, Inc.+.................... 2,100 221,288
-----------
1,169,548
-----------
TOTAL HEALTH CARE............................ 3,018,798
-----------
INDUSTRIAL PRODUCTS & SERVICES (7.8%)
BUILDING MATERIALS (0.4%)
Elcor Corp....................................... 5,600 128,800
-----------
BUSINESS & PUBLIC SERVICES (0.8%)
Act Manufacturing, Inc.+......................... 4,100 190,394
Obie Media Corp.................................. 2,700 21,600
Vicinity Corp.+.................................. 1,300 25,513
-----------
237,507
-----------
CAPITAL GOODS (0.9%)
Shaw Group, Inc.+................................ 5,900 278,038
-----------
COMMERCIAL SERVICES (2.0%)
CoStar Group, Inc.+.............................. 2,000 50,125
Fargo Electronics+............................... 4,400 15,675
On Assignment, Inc.+............................. 9,000 274,500
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
15
<PAGE>
J.P. MORGAN SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ----------- ------------
<S> <C> <C>
COMMERCIAL SERVICES (CONTINUED)
Optimal Robotics Corp.+.......................... 4,800 $ 184,200
Source Information Management Co.+............... 4,000 61,000
-----------
585,500
-----------
CONSTRUCTION & HOUSING (0.2%)
Dycom Industries, Inc.+.......................... 1,500 69,000
-----------
DIVERSIFIED MANUFACTURING (0.5%)
GenTek, Inc...................................... 11,920 133,355
-----------
MACHINERY (0.6%)
Capstone Turbine Corp............................ 500 22,531
IDEX Corp........................................ 3,400 107,313
Manitowoc Co., Inc............................... 2,100 56,175
-----------
186,019
-----------
MANUFACTURING (2.4%)
Meade Instruments Corp.+......................... 4,300 108,038
Mettler-Toledo International, Inc.+.............. 6,800 272,000
Monaco Coach Corp.+.............................. 5,100 69,488
National R.V. Holdings, Inc.+.................... 5,900 61,950
Rayovac Corp.+................................... 6,800 152,150
Snap-on, Inc..................................... 2,100 55,913
-----------
719,539
-----------
TOTAL INDUSTRIAL PRODUCTS & SERVICES......... 2,337,758
-----------
TECHNOLOGY (23.7%)
AEROSPACE (0.6%)
L-3 Communications Holdings, Inc.+............... 1,500 85,594
Titan Corp.+..................................... 2,000 89,500
-----------
175,094
-----------
COMPUTER PERIPHERALS (0.9%)
Integrated Circuit Systems, Inc.+................ 3,400 58,225
JNI Corp.+....................................... 700 22,138
M-Systems Flash Disk Pioneers Ltd................ 1,900 147,963
StorageNetworks, Inc.+........................... 500 45,125
-----------
273,451
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
16
<PAGE>
J.P. MORGAN SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ----------- ------------
<S> <C> <C>
COMPUTER SOFTWARE (10.6%)
Accrue Software, Inc. +.......................... 2,300 $ 81,650
Agile Software Corp.+............................ 2,900 204,994
Alteon Websystems, Inc. +........................ 1,300 130,081
Art Technology Group, Inc.+...................... 2,500 252,344
Certicom Corp.................................... 2,400 164,363
Clarent Corp..................................... 2,900 207,350
click2learn.com, Inc............................. 4,400 77,550
Corillian Corp................................... 2,300 38,238
E.piphany, Inc.+................................. 500 53,594
Excalibur Technologies Corp.+.................... 2,300 91,856
FASTNET Corp.+................................... 2,700 10,125
Informatica Corp. +.............................. 2,500 204,844
Information Resource Engineering, Inc.+.......... 100 2,525
Informix Corp.+.................................. 8,000 59,500
ISS Group, Inc.+................................. 1,100 108,608
Keynote Systems, Inc.+........................... 1,600 112,900
Metasolv Software, Inc. +........................ 1,100 48,400
Nuance Communications, Inc.+..................... 300 24,994
Packeteer, Inc.+................................. 2,500 72,813
Peregrine Systems, Inc.+......................... 4,300 149,156
Precise Software Solutions Ltd.+................. 600 14,400
Quest Software, Inc.+............................ 300 16,613
Retek, Inc.+..................................... 2,900 92,800
Sequoia Software Corp.+.......................... 2,000 32,750
Software Technlogies Corp.+...................... 3,200 98,200
Sonic Foundry, Inc.+............................. 2,900 60,900
Tumbleweed Communications Corp.+................. 2,600 132,275
Ulticom, Inc.+................................... 600 14,409
Virata Corp.+.................................... 1,800 107,325
Watchguard Technologies, Inc.+................... 2,700 148,331
Websense, Inc.+.................................. 1,100 27,638
WebTrends Corp.+................................. 2,500 96,719
Wind River Systems, Inc.+........................ 3,100 117,413
Witness Systems, Inc.+........................... 3,800 92,625
-----------
3,148,283
-----------
ELECTRONICS (2.1%)
Applied Science and Technology, Inc.+............ 2,900 75,038
August Technology Corp.+......................... 900 14,794
DDi Corp. +...................................... 7,300 208,050
Manufacturers' Services Ltd.+.................... 1,400 28,788
Molecular Devices Corp.+......................... 300 20,756
Power-One, Inc.+................................. 2,500 284,844
-----------
632,270
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
17
<PAGE>
J.P. MORGAN SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ----------- ------------
<S> <C> <C>
INFORMATION PROCESSING (3.2%)
Computer Horizons Corp.+......................... 10,100 $ 135,719
Diamond Technology Partners, Inc.+............... 2,100 184,800
Digital Island, Inc.+............................ 2,300 111,838
Digitas, Inc.+................................... 1,200 19,575
eFunds Corp.+.................................... 4,825 56,091
Gartner Group, Inc., Class A+.................... 7,400 88,800
Net Perceptions, Inc. +.......................... 3,100 49,213
NetRatings, Inc. +............................... 4,000 102,500
Visual Networks, Inc.+........................... 5,400 153,900
WorldGate Communications, Inc.+.................. 3,800 67,450
-----------
969,886
-----------
SEMICONDUCTORS (6.3%)
ATMI, Inc. +..................................... 5,700 265,050
C-Cube Microsystems Inc.+........................ 5,200 102,050
Cirrus Logic, Inc.+.............................. 2,600 41,600
Exar Corp. +..................................... 4,100 357,469
Genesis Microchip, Inc.+......................... 1,300 23,238
Kopin Corp.+..................................... 3,800 263,150
Lam Research Corp. +............................. 3,500 131,250
Lattice Semiconductor Corp.+..................... 2,900 200,463
MKS Instruments, Inc. +.......................... 3,200 125,200
MMC Networks, Inc.+.............................. 1,500 80,156
PRI Automation, Inc.+............................ 1,800 117,703
Silicon Image, Inc. +............................ 1,800 89,775
Silicon Laboratories, Inc.+...................... 800 42,500
Therma-Wave, Inc.+............................... 100 2,231
TranSwitch Corp.+................................ 500 38,594
-----------
1,880,429
-----------
TOTAL TECHNOLOGY............................. 7,079,413
-----------
TELECOMMUNICATIONS (8.1%)
TELECOMMUNICATION SERVICES (3.5%)
CapRock Communications Corp. +................... 4,400 85,800
Choice One Communications, Inc.+................. 2,900 118,356
ECtel Ltd.+...................................... 1,000 23,000
GoAmerica, Inc.+................................. 2,100 32,419
iBasis, Inc. +................................... 5,400 232,538
ITC DeltaCom, Inc.+.............................. 4,300 95,944
MGC Communications, Inc.+........................ 3,400 203,788
Motient Corp.+................................... 6,100 95,694
Net2Phone, Inc................................... 2,100 74,944
PNV.net, Inc..................................... 1,700 2,338
SeaChange International, Inc..................... 2,250 64,969
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
18
<PAGE>
J.P. MORGAN SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ----------- ------------
<S> <C> <C>
TELECOMMUNICATION SERVICES (CONTINUED)
TeleCorp PCS, Inc................................ 500 $ 20,156
U.S. Wireless Corp............................... 300 6,413
-----------
1,056,359
-----------
TELECOMMUNICATIONS-EQUIPMENT (4.6%)
Accelerated Networks, Inc.+...................... 400 16,875
Advanced Fibre Communications, Inc. +............ 7,200 326,250
Aether Systems, Inc. +........................... 500 102,500
Exfo Electro-Optical Engineering, Inc.+.......... 300 13,163
FLAG Telecom Holdings Ltd.+(i)................... 2,600 38,675
Metawave Communications Corp.+................... 2,300 61,381
Netro Corp.+..................................... 1,400 80,325
New Focus, Inc.+................................. 900 73,913
ONI Systems Corp.+............................... 600 70,322
Plantronics, Inc.+............................... 500 57,750
Polycom, Inc.+................................... 2,200 207,006
Stratos Lightwave, Inc.+......................... 675 18,816
Turnstone Systems, Inc.+......................... 500 82,836
Vyyo, Inc.+...................................... 1,700 45,900
Williams Communication Group, Inc.+.............. 2,100 69,694
World Access, Inc.+.............................. 8,900 98,456
-----------
1,363,862
-----------
TOTAL TELECOMMUNICATIONS..................... 2,420,221
-----------
TRANSPORTATION (2.2%)
RAILROADS (0.4%)
Wisconsin Central Transportation Corp.+.......... 10,200 132,600
-----------
TRANSPORT & SERVICES (1.4%)
C.H. Robinson Worldwide, Inc..................... 7,000 346,500
GATX Corp........................................ 2,000 68,000
-----------
414,500
-----------
TRUCK & FREIGHT CARRIERS (0.4%)
Werner Enterprises, Inc.......................... 11,075 128,055
-----------
TOTAL TRANSPORTATION......................... 675,155
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
J.P. MORGAN SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ----------- ------------
<S> <C> <C>
UTILITIES (2.6%)
ELECTRIC (1.6%)
Cleco Corp....................................... 8,600 $ 288,100
CMS Energy Corp.................................. 9,100 201,338
-----------
489,438
-----------
NATURAL GAS (0.5%)
Atmos Energy Corp................................ 8,500 148,750
-----------
WATER (0.5%)
E'Town Corp...................................... 2,300 152,806
-----------
TOTAL UTILITIES.............................. 790,994
-----------
TOTAL COMMON STOCKS (COST $25,481,350)....... 27,555,183
-----------
</TABLE>
<TABLE>
<CAPTION>
PREFERRED STOCK (0.3%)
<S> <C> <C>
CONVERTIBLE PREFERRED STOCKS (0.3%)
ENTERTAINMENT, LEISURE & MEDIA (0.1%)
AMCV Capital Trust I, 7.00%, due 02/15/15........ 700 29,225
-----------
TELECOMMUNICATION SERVICES (0.2%)
Verio, Inc., Series A, 6.75%, 08/01/02........... 1,000 59,125
-----------
TOTAL CONVERTIBLE PREFERRED STOCKS........... 88,350
-----------
TOTAL PREFERRED STOCK (COST $90,375)......... 88,350
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
-----------
<S> <C> <C>
SHORT-TERM INVESTMENTS (13.1%)
U.S. GOVERNMENT AGENCY OBLIGATIONS (13.1%)
Federal Home Loan Mortgage Corp. Discount Note,
6.57%, due 07/03/00............................ $3,914,000 3,911,857
-----------
TOTAL INVESTMENTS (COST $29,484,297) (105.7%)................. 31,555,390
LIABILITIES IN EXCESS OF OTHER ASSETS (-5.7%)................. (1,700,343)
-----------
NET ASSETS (100.0%)........................................... $29,855,047
===========
</TABLE>
------------------------------
Note: The aggregate gross unrealized appreciation and depreciation was
$4,353,092 and $2,281,999, respectively, resulting in net unrealized
appreciation of investments of $2,071,093.
+ Non income Producing
(i) Foreign Security.
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
J.P. MORGAN SMALL COMPANY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $29,484,297) $31,555,390
Receivable for Investments Sold 301,437
Interest Receivable 16,733
Receivable for Shares Sold 10,273
Prepaid Trustees' Fees 1,627
Prepaid Expenses and Other Assets 700
-----------
Total Assets 31,886,160
-----------
LIABILITIES
Payable for Investments Purchased 1,625,642
Payable to Custodian 329,983
Payable for Shares Redeemed 20,612
Advisory Fee Payable 13,473
Custody Fee Payable 2,493
Administration Fee Payable 1,364
Accrued Expenses 37,546
-----------
Total Liabilities 2,031,113
-----------
NET ASSETS
Applicable to 1,869,302 Shares of Beneficial
Interest Outstanding
(no par value, unlimited shares authorized) $29,855,047
===========
Net Asset Value, Offering and Redemption Price
per Share $15.97
===========
ANALYSIS OF NET ASSETS
Paid-in Capital $26,368,365
Undistributed Net Investment Income 32,481
Accumulated Net Realized Gain on Investments 1,383,108
Net Unrealized Appreciation of Investments 2,071,093
-----------
Net Assets $29,855,047
===========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
J.P. MORGAN SMALL COMPANY 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 $80) $ 82,643
Interest Income 83,513
-----------
Investment Income 166,156
EXPENSES
Advisory Fee $ 69,910
Custodian Fees and Expenses 35,486
Professional Fees and Expenses 13,028
Printing Expenses 8,388
Transfer Agent Expense 8,142
Trustees' Fees and Expenses 4,484
Insurance Expense 283
Administration Fee 77
Amortization of Organization Expense 17
Miscellaneous 2,049
--------
Total Expenses 141,864
Less: Reimbursement of Expenses (7,260)
--------
NET EXPENSES 134,604
-----------
NET INVESTMENT INCOME 31,552
NET REALIZED GAIN ON INVESTMENTS 1,430,103
NET CHANGE IN UNREALIZED DEPRECIATION OF
INVESTMENTS (1,817,460)
-----------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS $ (355,805)
===========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
J.P. MORGAN SMALL COMPANY 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 $ 31,552 $ 6,140
Net Realized Gain on Investments 1,430,103 1,165,003
Net Change in Unrealized Appreciation
(Depreciation) of Investments (1,817,460) 3,351,113
----------- ----------------
Net Increase (Decrease) in Net Assets
Resulting from Operations (355,805) 4,522,256
----------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income -- (6,555)
Net Realized Gain (644,449) (317,952)
----------- ----------------
Total Distributions to Shareholders (644,449) (324,507)
----------- ----------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Proceeds from Shares of Beneficial Interest Sold 18,754,675 7,391,609
Reinvestment of Dividends and Distributions 644,440 324,507
Cost of Shares of Beneficial Interest Redeemed (4,968,498) (2,320,035)
----------- ----------------
Net Increase from Transactions of Beneficial
Interest 14,430,617 5,396,081
----------- ----------------
Total Increase in Net Assets 13,430,363 9,593,830
NET ASSETS
Beginning of Period 16,424,684 6,830,854
----------- ----------------
End of Period (including undistributed net
investment income of $32,481 and $929
respectively) $29,855,047 $ 16,424,684
=========== ================
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
23
<PAGE>
J.P. MORGAN SMALL COMPANY PORTFOLIO
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
Selected data for a share outstanding throughout each period are as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX JANUARY 3, 1995
MONTHS ENDED FOR THE FISCAL YEAR ENDED DECEMBER 31, (COMMENCEMENT OF
JUNE 30, 2000 -------------------------------------------- OPERATIONS) THROUGH
(UNAUDITED) 1999 1998 1997 1996 DECEMBER 31, 1995
------------- -------- -------- -------- -------- -------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 16.73 $ 11.86 $13.09 $12.53 $11.83 $10.00
------- ------- ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.02 0.00(c) 0.03 0.04 0.06 0.11
Net Realized and Unrealized
Gain (Loss) on Investments
and Foreign Currency
Transactions (0.35) 5.23 (0.74) 2.53 2.43 3.18
------- ------- ------ ------ ------ ------
Total from Investment
Operations (0.33) 5.23 (0.71) 2.57 2.49 3.29
------- ------- ------ ------ ------ ------
LESS DISTRIBUTIONS TO
SHAREHOLDERS FROM
Net Investment Income -- (0.01) (0.02) (0.04) (0.06) (0.11)
Net Realized Gain (0.43) (0.35) (0.15) (1.97) (1.73) (1.35)
In excess of Net Investment
Income -- -- (0.35) -- -- --
------- ------- ------ ------ ------ ------
Total Distributions to
Shareholders (0.43) (0.36) (0.52) (2.01) (1.79) (1.46)
------- ------- ------ ------ ------ ------
NET ASSET VALUE, END OF
PERIOD $ 15.97 $ 16.73 $11.86 $13.09 $12.53 $11.83
======= ======= ====== ====== ====== ======
RATIOS AND SUPPLEMENTAL DATA
Total Return (1.80)%(a) 44.39% (5.51)% 22.50% 21.74% 32.91%(a)
Net Assets, End of Period
(in thousands) $29,855 $16,425 $6,831 $5,196 $3,867 $2,536
Ratios to Average Net Assets
Expenses 1.14% 1.15% 1.15% 1.15% 1.15% 1.15%(b)
Net Investment Income 0.27% 0.07% 0.28% 0.28% 0.54% 0.99%(b)
Expenses Without
Reimbursement 1.21% 2.57% 3.43% 3.81% 2.69% 3.22%(b)
Portfolio Turnover 49% 121% 67% 85% 144% 100%
</TABLE>
------------------------
(a) Not Annualized.
(b) Annualized.
(c) Less than $0.01.
The Accompanying Notes are an Integral Part of the Financial Statements.
24
<PAGE>
J.P. MORGAN SMALL COMPANY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2000
--------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
J.P. Morgan Small Company 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. The investment objective of the portfolio seeks to provide a high
total return from a portfolio of small company stock.
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.
25
<PAGE>
J.P. MORGAN SMALL COMPANY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 2000
--------------------------------------------------------------------------------
e) Expenses incurred by the trust with respect to any two or more portfolio
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) 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 0.60% of the
portfolio's average daily net assets. For the six months ended June 30,
2000, such fees amounted to $69,910.
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 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 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 $77.
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, each 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 0.55% 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 Morgan has
agreed to reimburse the portfolio $7,260.
26
<PAGE>
J.P. MORGAN SMALL COMPANY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 2000
--------------------------------------------------------------------------------
d) An aggregate annual fee of $21,500 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
each 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.................................... 1,131,777 570,880
Reinvestment of dividends and distributions.... 44,691 21,133
Shares redeemed................................ (288,731) (186,458)
---------- --------
Net Increase................................... 887,737 405,555
========== ========
</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>
$ 23,562,195 $ 10,521,162
</TABLE>
27
<PAGE>
J.P. MORGAN SERIES TRUST II PORTFOLIOS J.P. Morgan
BOND PORTFOLIO Small Company
INTERNATIONAL OPPORTUNITIES PORTFOLIO Portfolio
SMALL COMPANY PORTFOLIO
U.S. DISCIPLINED EQUITY PORTFOLIO
FOR MORE INFORMATION ON THE J.P. MORGAN SEMIANNUAL REPORT
SERIES TRUST II PORTFOLIOS, CALL FUNDS JUNE 30, 2000
DISTRIBUTOR, INC. AT (888) 756-8645.
IMSAR385
