<PAGE>
LETTER TO THE SHAREHOLDERS OF THE J.P. MORGAN INTERNATIONAL OPPORTUNITIES
PORTFOLIO
February 1, 2000
Dear Shareholder:
We are pleased to report that the J.P. Morgan International Opportunities
Portfolio of the J.P. Morgan Series Trust II delivered a strong return of
36.66% for the 12 months ended December 31, 1999, exceeding its benchmark.
The fund's net asset value as of December 31 was $13.83 per share, up from
$10.52 per share a year earlier after paying current income dividends of
approximately $0.11 per share, short-term capital gains of $0.18 per share,
and long-term capital gains of $0.22 per share over the 12-month period.
Included in this report is an interview with Nigel F. Emmett, a member of the
portfolio management team. This interview is designed to reflect what
happened during the reporting period, as well as provide an outlook for the
months ahead.
As chairman and president of Asset Management Services, we thank you for
investing with J.P. Morgan. Should you have any comments or questions, please
telephone J.P. Morgan Funds Services 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 FUND FACTS AND HIGHLIGHTS ...........5
PORTFOLIO PERFORMANCE...............2 FINANCIAL STATEMENTS.................8
PORTFOLIO MANAGER Q&A...............3
- ------------------------------------------------------------------------------
1
<PAGE>
PORTFOLIO PERFORMANCE
EXAMINING PERFORMANCE
There are several ways to evaluate a historical performance record. One
approach is to look at the growth of a hypothetical investment of $10,000. The
chart at right shows that $10,000 invested in the portfolio on January 3,
1995* would have been worth $19,187 at December 31, 1999.
Another way to look at performance is to review the average annual total return.
This figure takes the actual (or cumulative) return and shows what would have
happened if the portfolio had achieved that return by performing at a constant
rate each year. Average annual total returns represent the average yearly change
of a fund's value over various time periods, typically one, five or 10 years (or
since inception). Total returns for periods of less than one year are not
annualized and provide a picture of how a portfolio has performed over the short
term.
GROWTH OF $10,000 SINCE INCEPTION
3 JANUARY 1995 -- 31 DECEMBER 1999
<TABLE>
<CAPTION>
ST2 INTL OPPS MSCI ALL
PORTFOLIO - Job MSCI ALL COUNTRY Initial Investment 10,000
#1905 Initial Investment 10,000 COUNTRY Initial Investment 10,000 WORLD FREE
WORLD EX US EX US
MONTHLY RETURNS PLOT POINTS MONTHLY RETURNS PLOT POINTS MONTHLY RETURNS PLOT POINTS
--------------- ----------- --------------- ----------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
----------- ----------- -----------
12/31/94 10,000 12/31/94 10,000 12/31/94 10,000
----------- ----------- -----------
1/31/95 -1.50% 9,850 1/31/95 -4.83% 9,517 01/31/95 -4.54% 9,546
2/28/95 -2.13% 9,640 2/28/95 -0.55% 9,465 02/28/95 -0.54% 9,494
3/31/95 5.39% 10,160 3/31/95 5.57% 9,992 03/31/95 5.65% 10,031
4/30/95 2.66% 10,430 4/30/95 3.56% 10,348 04/30/95 3.90% 10,422
5/31/95 -1.05% 10,320 5/31/95 -0.54% 10,292 05/31/95 -0.45% 10,376
6/30/95 -0.87% 10,230 6/30/95 -1.39% 10,149 06/30/95 -1.38% 10,233
7/31/95 6.65% 10,910 7/31/95 5.45% 10,702 07/31/95 5.67% 10,813
8/31/95 -3.02% 10,580 8/31/95 -3.56% 10,321 08/31/95 -3.47% 10,438
9/30/95 1.61% 10,750 9/30/95 1.85% 10,512 09/30/95 1.71% 10,616
10/31/95 -1.40% 10,600 10/31/95 -2.66% 10,232 10/31/95 -2.67% 10,333
11/30/95 1.89% 10,800 11/30/95 2.09% 10,447 11/30/95 2.35% 10,576
12/31/95 4.04% 11,236 12/31/95 3.89% 10,853 12/31/95 3.96% 10,994
1/31/96 1.29% 11,381 1/31/96 1.12% 10,974 01/31/96 1.37% 11,145
2/29/96 0.55% 11,443 2/29/96 0.02% 10,976 02/29/96 0.00% 11,145
3/31/96 1.36% 11,599 3/31/96 1.94% 11,190 03/31/96 1.87% 11,353
4/30/96 2.32% 11,868 4/30/96 3.56% 11,587 04/30/96 3.03% 11,697
5/31/96 -0.17% 11,847 5/31/96 -1.67% 11,394 05/31/96 -1.50% 11,521
6/30/96 1.31% 12,002 6/30/96 0.59% 11,461 06/30/96 0.51% 11,580
7/31/96 -3.10% 11,630 7/31/96 -3.43% 11,068 07/31/96 -3.32% 11,195
8/31/96 0.98% 11,743 8/31/96 0.57% 11,131 08/31/96 0.59% 11,261
9/30/96 2.64% 12,054 9/30/96 2.46% 11,405 09/30/96 2.48% 11,541
10/31/96 0.86% 12,157 10/31/96 -1.03% 11,287 10/31/96 -1.00% 11,425
11/30/96 4.09% 12,654 11/30/96 3.79% 11,716 11/30/96 3.86% 11,865
12/31/96 0.48% 12,715 12/31/96 -1.20% 11,574 12/31/96 -1.16% 11,728
1/31/97 -1.53% 12,520 1/31/97 -1.76% 11,371 01/31/97 -1.84% 11,513
2/28/97 1.39% 12,693 2/28/97 1.88% 11,585 02/28/97 1.83% 11,724
3/31/97 1.01% 12,822 3/31/97 -0.17% 11,565 03/31/97 -0.21% 11,699
4/30/97 0.86% 12,932 4/30/97 0.91% 11,670 04/30/97 0.85% 11,798
5/31/97 3.75% 13,417 5/31/97 6.04% 12,375 05/31/97 6.17% 12,526
6/30/97 4.60% 14,034 6/30/97 5.58% 13,065 06/30/97 5.52% 13,218
7/31/97 3.22% 14,486 7/31/97 2.05% 13,333 07/31/97 2.02% 13,485
8/31/97 -6.62% 13,527 8/31/97 -7.65% 12,314 08/31/97 -7.87% 12,424
9/30/97 6.28% 14,376 9/30/97 5.05% 12,936 09/30/97 5.41% 13,096
</TABLE>
<TABLE>
<CAPTION>
ST2 INTL OPPS MSCI ALL
PORTFOLIO - Job MSCI ALL COUNTRY Initial Investment 10,000
#1905 Initial Investment 10,000 COUNTRY Initial Investment 10,000 WORLD FREE
WORLD EX US EX US
MONTHLY RETURNS PLOT POINTS MONTHLY RETURNS PLOT POINTS MONTHLY RETURNS PLOT POINTS
--------------- ----------- --------------- ----------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
10/31/97 -8.51% 13,152 10/31/97 -8.79% 11,799 10/31/97 -8.52% 11,981
11/30/97 -0.42% 13,097 11/30/97 -1.28% 11,648 11/30/97 -1.25% 11,831
12/31/97 2.35% 13,406 12/31/97 1.07% 11,773 12/31/97 1.15% 11,968
1/31/98 1.51% 13,608 1/31/98 2.97% 12,122 01/31/98 2.99% 12,326
2/28/98 5.48% 14,354 2/28/98 6.80% 12,947 02/28/98 6.67% 13,148
3/31/98 4.05% 14,936 3/31/98 3.38% 13,384 03/31/98 3.46% 13,602
4/30/98 1.45% 15,153 4/30/98 0.62% 13,467 04/30/98 0.72% 13,700
5/31/98 -2.46% 14,780 5/31/98 -1.94% 13,206 05/31/98 -1.82% 13,451
6/30/98 -1.62% 14,540 6/30/98 -0.44% 13,147 06/30/98 -0.37% 13,401
7/31/98 0.82% 14,660 7/31/98 0.96% 13,274 07/31/98 0.95% 13,528
8/31/98 -16.80% 12,197 8/31/98 -14.14% 11,396 08/31/98 -14.10% 11,620
9/30/98 -4.91% 11,598 9/30/98 -2.05% 11,162 09/30/98 -2.11% 11,375
10/31/98 12.28% 13,022 10/31/98 10.47% 12,331 10/31/98 10.47% 12,566
11/30/98 5.32% 13,715 11/30/98 5.36% 12,991 11/30/98 5.37% 13,242
12/31/98 2.37% 14,040 12/31/98 3.39% 13,431 12/31/98 3.45% 13,698
1/31/99 1.43% 14,240 1/31/99 -0.10% 13,417 01/31/99 -0.11% 13,683
2/28/99 -3.00% 13,813 2/28/99 -2.12% 13,132 02/28/99 -2.24% 13,377
3/31/99 5.60% 14,587 3/31/99 4.93% 13,780 03/31/99 4.83% 14,023
4/30/99 4.81% 15,289 4/30/99 5.11% 14,485 04/30/99 5.00% 14,724
5/31/99 -2.89% 14,847 5/31/99 -4.54% 13,828 05/31/99 -4.70% 14,032
6/30/99 5.51% 15,664 6/30/99 4.84% 14,497 06/30/99 4.60% 14,677
7/31/99 2.65% 16,080 7/31/99 2.13% 14,806 07/31/99 2.35% 15,022
8/31/99 1.00% 16,241 8/31/99 0.57% 14,891 08/31/99 0.35% 15,074
9/30/99 0.41% 16,308 9/30/99 0.53% 14,970 09/30/99 0.68% 15,176
10/31/99 2.63% 16,736 10/31/99 3.78% 15,535 10/31/99 3.72% 15,741
11/30/99 4.80% 17,540 11/30/99 3.96% 16,150 11/30/99 4.00% 16,370
12/31/99 9.39% 19,187 12/31/99 9.61% 17,701 12/31/99 9.54% 17,931
13.92% 12.10% 12.39%
</TABLE>
<TABLE>
<CAPTION>
LIPPER VA
INTERNATIONAL
MSCI EAFE Initial Investment 10,000 FUNDS AVG. Initial Investment 10,000
MONTHLY RETURNS PLOT POINTS MONTHLY RETURNS PLOT POINTS
--------------- ----------- --------------- -----------
<S> <C> <C> <S> <C> <C>
---------------- ----------------
12/31/94 10,000 12/31/94 10,000
---------------- ----------------
01/31/95 -3.84% 9,616 1/31/95 -4.15% 9,585
02/28/95 -0.29% 9,588 2/28/95 0.45% 9,628
03/31/95 6.24% 10,186 3/31/95 2.88% 9,905
04/30/95 3.76% 10,569 4/30/95 3.54% 10,256
05/31/95 -1.19% 10,443 5/31/95 1.25% 10,384
06/30/95 -1.75% 10,260 6/30/95 0.45% 10,431
07/31/95 6.23% 10,899 7/31/95 5.27% 10,981
08/31/95 -3.81% 10,483 8/31/95 -1.73% 10,791
09/30/95 1.95% 10,688 9/30/95 1.85% 10,990
10/31/95 -2.69% 10,401 10/31/95 -1.77% 10,796
11/30/95 2.78% 10,690 11/30/95 1.02% 10,906
12/31/95 4.03% 11,121 12/31/95 2.93% 11,226
01/31/96 0.41% 11,166 1/31/96 2.38% 11,493
02/29/96 0.34% 11,204 2/29/96 0.90% 11,596
03/31/96 2.12% 11,442 3/31/96 1.79% 11,804
04/30/96 2.91% 11,775 4/30/96 3.27% 12,190
05/31/96 -1.84% 11,558 5/31/96 0.14% 12,207
06/30/96 0.56% 11,623 6/30/96 0.68% 12,290
07/31/96 -2.92% 11,283 7/31/96 -3.44% 11,867
08/31/96 0.22% 11,308 8/31/96 1.55% 12,051
09/30/96 2.66% 11,609 9/30/96 1.91% 12,281
10/31/96 -1.02% 11,490 10/31/96 -0.33% 12,241
11/30/96 3.98% 11,947 11/30/96 4.25% 12,761
12/31/96 -1.29% 11,793 12/31/96 0.61% 12,839
01/31/97 -3.50% 11,381 1/31/97 -0.17% 12,817
02/28/97 1.64% 11,567 2/28/97 1.50% 13,009
03/31/97 0.36% 11,609 3/31/97 0.18% 13,032
04/30/97 0.53% 11,670 4/30/97 0.14% 13,051
05/31/97 6.51% 12,430 5/31/97 5.71% 13,796
06/30/97 5.51% 13,115 6/30/97 4.43% 14,407
07/31/97 1.62% 13,327 7/31/97 2.87% 14,821
08/31/97 -7.47% 12,332 8/31/97 -7.07% 13,773
09/30/97 5.60% 13,023 9/30/97 6.24% 14,632
</TABLE>
<TABLE>
<CAPTION>
LIPPER VA
INTERNATIONAL
MSCI EAFE Initial Investment 10,000 FUNDS AVG. Initial Investment 10,000
MONTHLY RETURNS PLOT POINTS MONTHLY RETURNS PLOT POINTS
--------------- ----------- --------------- -----------
<S> <C> <C> <S> <C> <C>
10/31/97 -7.69% 12,022 10/31/97 -7.27% 13,568
11/30/97 -1.02% 11,899 11/30/97 -0.73% 13,469
12/31/97 0.87% 12,003 12/31/97 0.72% 13,566
01/31/98 4.57% 12,552 1/31/98 2.21% 13,866
02/28/98 6.42% 13,357 2/28/98 6.62% 14,784
03/31/98 3.08% 13,769 3/31/98 5.14% 15,544
04/30/98 0.79% 13,878 4/30/98 1.60% 15,793
05/31/98 -0.49% 13,810 5/31/98 0.36% 15,850
06/30/98 0.76% 13,915 6/30/98 -0.51% 15,769
07/31/98 1.01% 14,056 7/31/98 1.28% 15,971
08/31/98 -12.39% 12,314 8/31/98 -14.00% 13,735
09/30/98 -3.07% 11,937 9/30/98 -3.87% 13,203
10/31/98 10.42% 13,181 10/31/98 7.36% 14,175
11/30/98 5.12% 13,856 11/30/98 5.13% 14,902
12/31/98 3.94% 14,403 12/31/98 3.25% 15,386
01/31/99 -0.30% 14,361 1/31/99 1.39% 15,600
02/28/99 -2.38% 14,018 2/28/99 -2.55% 15,202
03/31/99 4.17% 14,604 3/31/99 3.66% 15,759
04/30/99 4.05% 15,195 4/30/99 4.60% 16,484
05/31/99 -5.15% 14,413 5/31/99 -3.99% 15,826
06/30/99 3.90% 14,975 6/30/99 5.21% 16,651
07/31/99 2.97% 15,420 7/31/99 2.84% 17,123
08/31/99 0.37% 15,476 8/31/99 0.78% 17,257
09/30/99 1.01% 15,632 9/30/99 0.50% 17,343
10/31/99 3.75% 16,217 10/31/99 3.64% 17,975
11/30/99 3.47% 16,781 11/30/99 8.29% 19,465
12/31/99 8.98% 18,287 12/31/99 12.39% 21,876
12.83% 16.95%
</TABLE>
<TABLE>
<CAPTION>
J.P. Morgan International MSCI All Country World Free Lipper Variable Annuity International
Opportunities Portfolio Ex-U.S. Index Opportunities Fund Average
<S> <C> <C> <C>
Dec-94 $10,000 $10,000 $10,000
Dec-95 $11,236 $10,994 $11,226
Dec-96 $12,715 $11,728 $12,839
Dec-97 $13,608 $11,968 $13,566
Dec-98 $14,040 $13,698 $15,386
Dec-99 $19,187 $17,931 $21,876
</TABLE>
<TABLE>
<CAPTION>
PERFORMANCE TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS
- ----------------------------------------------------------------------------------------------------------------
THREE SIX ONE THREE SINCE
AS OF DECEMBER 31, 1999 MONTHS MONTHS YEAR YEARS INCEPTION*
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
J.P. Morgan International
Opportunities Portfolio 17.66% 22.49% 36.66% 14.70% 13.92%
MSCI All Country World Free ex-U.S. Index** 18.16% 22.17% 30.91% 15.20% 12.39%
Lipper Variable Annuity
International Funds Average 26.58% 31.94% 42.88% 18.95% 17.31%
</TABLE>
* 1/3/95 -- COMMENCEMENT OF OPERATIONS.
** MSCI ALL COUNTRY WORLD FREE EX-U.S. INDEX IS AN UNMANAGED INDEX THAT MEASURES
DEVELOPED AND EMERGING FOREIGN STOCK MARKET PERFORMANCE. THE INDEX DOES NOT
INCLUDE FEES OR OPERATING EXPENSES, AND IS NOT AVAILABLE FOR ACTUAL INVESTMENT.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. PORTFOLIO RETURNS ARE NET OF
FEES, ASSUME THE REINVESTMENT OF PORTFOLIO DISTRIBUTIONS, AND REFLECT THE
REIMBURSEMENT OF PORTFOLIO EXPENSES AS DESCRIBED IN THE PROSPECTUS. HAD EXPENSES
NOT BEEN SUBSIDIZED, RETURNS WOULD HAVE BEEN LOWER. PORTFOLIO RETURNS DO NOT
REFLECT ANY SEPARATE ACCOUNT EXPENSES IMPOSED ON THE VARIABLE CONTRACTS. THESE
EXPENSES MAY INCLUDE A SALES CHARGE, PREMIUM TAX CHARGE, DAC TAX SALES CHARGE,
COST OF INSURANCE, MORTALITY EXPENSES, OR SURRENDER AND OTHER CHARGES. FOREIGN
INVESTING INVOLVES SPECIAL RISK, INCLUDING ECONOMIC AND POLITICAL INSTABILITY
AND CURRENCY FLUCTUATIONS. LIPPER ANALYTICAL SERVICES, INC. IS A LEADING SOURCE
FOR MUTUAL FUND DATA.
2
<PAGE>
PORTFOLIO MANAGER Q&A
[PHOTO]
Following is an interview with NIGEL F. EMMETT, vice president, and a member of
the team that manages the master portfolio in which the fund invests. Nigel
joined J.P. Morgan in 1997. Previously, he was employed by Brown Brothers
Harriman & Co. in New York and Gartmore Investment Management in London. Nigel
holds a B.A. in economics from Manchester University. He is a Chartered
Financial Analyst. This interview was conducted on January 27, 2000, and
reflects his views on that date.
THE FUND HAS HAD AN OUTSTANDING YEAR IN ABSOLUTE RETURN. IT OUTPERFORMED ITS
INDEX. HOW DID YOU DO IT?
NE: Stock selection has been the largest source of added value. We use our
internal research capabilities to identify the most attractive shares in each
sector/industry, and this commitment to research has paid off in the last 12
months.
WHAT HAS DRIVEN THE INTERNATIONAL MARKETS HIGHER OVER THE PAST 12 MONTHS?
NE: Global economic growth has been strong over the last 12 months. The U.S.
economy continued to surprise to the upside, Asia experienced a bounceback, the
Japanese economy started to grow again, continental Europe benefited from the
global trend, and the United Kingdom improved after a difficult 1998. This
economic backdrop was particularly beneficial for equity markets.
GIVEN THIS STRONGER ECONOMIC GROWTH, HOW DO YOU FIND STRONG STOCKS?
NE: This portfolio invests in both developed and emerging markets outside the
U.S. It is structured to capture upside potential in markets outside the United
States, wherever they are. We construct this portfolio from the bottom up, so we
seek to broadly represent all the sectors, using our extensive in-house research
to identify the cheapest stocks within each sector. While we may overweight or
underweight a particular country or region, it reflects our views on individual
stocks, and not a top down view.
TELL US ABOUT SOME OF YOUR SUCCESSES.
NE: One of our best performers was ST Microelectronics, the French semiconductor
maker. The semiconductor industry was at the bottom of its cycle last September.
It rebounded sharply in the fourth quarter of 1998 and has continued to perform
well to date in 1999. We liked ST Microelectronics because it was selling at an
attractive price/earnings multiple, it offered exposure to the semiconductor
industry, it made very good chips used in the popular Nokia cellular telephones,
and it had good capacity management, a big issue in this industry.
Another European technology stock we liked was Philips, the Dutch consumer
electronics company with interests in electronics and semiconductors. It has
done very well by restructuring, and it has been able to drive its cost-cutting
gains through to earnings.
3
<PAGE>
JAPAN WAS THE LEADING INDUSTRIALIZED STOCK MARKET IN THE WORLD DURING THE
PERIOD. WHAT DID THE FUND OWN THERE?
NE: Softbank, one of the world's largest investors in the Internet, has produced
strong returns. Softbank most recently announced a number of new ventures,
including a joint venture with News Corp. and Vivendi to set up a new European
exchange backed by NASDAQ. It also has announced an intention to buy the
nationalized Nippon Credit Bank in a venture with Ito Yokado.
The Japanese electronics company, Fujitsu, also did well. It has been one of the
Internet boom beneficiaries as a result of its strong software development
capability.
Also, in the early part of the year, we benefited from owning DDI, the Japanese
mobile telecommunications provider, which generated strong subscription growth
in its cellular telephone business.
Outside of technology, another Japanese stock that worked well for us was
Mitsubishi Chemical, where management has been increasingly proactive in
managing costs and profitability has improved. Also, we believe the market is
beginning to realize it has a fairly significant and successful pharmaceutical
business which has never been priced into its stock before.
WHAT HAS WORKED IN EUROPE?
NE: Most recently, telecommunications stocks have risen strongly, inspired by
merger and acquisition activity. For example, Mannesmann, Germany's engineering
and telecommunications giant, received a hostile takeover bid from Vodafone of
the United Kingdom.
WHAT IS YOUR OUTLOOK?
NE: We anticipate continued strong economic growth outside the United States,
particularly in continental Europe. There are signs of change in Japan, and
continuing upside in some of the Latin and Asian equity markets. All of this
suggests that the outlook for international markets is good.
4
<PAGE>
PORTFOLIO FACTS
INVESTMENT OBJECTIVE
J.P. Morgan International Opportunities Portfolio seeks to provide a high total
return from a portfolio comprised of equity securities of foreign corporations.
The portfolio is designed for investors with a long-term investment horizon who
want to diversify their investments by adding international equities and take
advantage of investment opportunities outside the U.S. As an international
investment, the portfolio is subject to foreign market, political, economic, and
currency risks.
- -------------------------------------------------------------------------------
COMMENCEMENT OF INVESTMENT OPERATIONS
1/3/95
- -------------------------------------------------------------------------------
NET ASSETS AS OF 12/31/99
$22,304,266
- -------------------------------------------------------------------------------
DIVIDEND PAYABLE DATES (IF APPLICABLE)
4/21/00, 12/20/00
- -------------------------------------------------------------------------------
CAPITAL GAIN PAYABLE DATES (IF APPLICABLE)
4/21/00, 12/20/00
EXPENSE RATIO The portfolio's annualized expense ratio of 1.20% covers
shareholders' expenses for custody, tax reporting, investment advisory and
shareholder services, after reimbursement. The portfolio is no-load and does
not charge any sales, redemption, or exchange fees. There are no additional
charges for buying, selling, safekeeping portfolio shares, or for wiring
redemption proceeds from the portfolio.
PORTFOLIO HIGHLIGHTS
ALL DATA AS OF DECEMBER 31, 1999
PORTFOLIO ALLOCATION
(AS A PERCENTAGE OF TOTAL INVESTMENTS)
[CHART]
EUROPE/AFRICA 51.60%
JAPAN 20.10%
ASIA PACIFIC 12.40%
LATIN AMERICA 4.10%
CANADA 0.40%
SHORT-TERM INVESTMENTS 11.40%
<TABLE>
<CAPTION>
LARGEST HOLDINGS
(EXCLUDING SHORT-TERM HOLDINGS) % OF TOTAL INVESTMENTS
- ----------------------------------------------------------------
<S> <C>
TOTAL FINA SA, B SHARES (FRANCE) 2.76%
ROHM CO., LTD. (JAPAN) 2.66%
SOFTBANK CORP. (JAPAN) 2.66%
FUJITSU LTD. (JAPAN) 2.53%
KONINKLIJKE (ROYAL) PHILLIPS
ELECTRONICS NV (NETHERLANDS) 2.25%
SONY CORP. (JAPAN) 2.20%
EMBRATEL PARTICIPACOES SA (ADR)
(BRAZIL) 1.89%
BANQUE NATIONALE DE PARIS (FRANCE) 1.76%
NORTH LTD. (AUSTRALIA) 1.66%
SUEZ LYONNAISSE DES EAUX (FRANCE) 1.58%
</TABLE>
5
<PAGE>
DISTRIBUTED BY FUNDS DISTRIBUTOR, INC. J.P. MORGAN INVESTMENT MANAGEMENT INC.
IS THE TRUST'S INVESTMENT ADVISOR. SHARES OF THE PORTFOLIO PRESENTLY ARE
OFFERED ONLY TO VARIABLE ANNUITY AND VARIABLE LIFE INSURANCE SEPARATE
ACCOUNTS ESTABLISHED BY INSURANCE COMPANIES TO FUND VARIABLE ANNUITY
CONTRACTS AND VARIABLE LIFE INSURANCE POLICIES AND QUALIFIED PENSION AND
RETIREMENT PLANS OUTSIDE THE SEPARATE ACCOUNT CONTEXT.
Shares of the portfolio and investments in the variable contracts are not
bank deposits and are not guaranteed by any bank, government entity, or the
FDIC. Return and share price will fluctuate and redemption value may be more
or less than original cost. Reference to specific securities and their
issuers are for illustrative purposes only and should not be interpreted as
recommendations to purchase or sell these securities. There is no assurance
the portfolios will continue to hold these securities. Opinions expressed
herein are subject to change without notice.
PLEASE CALL (888) 756-8645 FOR A PROSPECTUS WHICH CONTAINS MORE COMPLETE
INFORMATION, INCLUDING CONTRACT CHARGES AND DEDUCTIONS, AND PORTFOLIO FEES
AND EXPENSES. PLEASE READ THE PROSPECTUSES FOR COMPLETE DETAILS INCLUDING
RISK CONSIDERATIONS.
6
<PAGE>
THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY
<PAGE>
J.P. MORGAN INTERNATIONAL OPPORTUNITIES PORTFOLIO
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
COMMON STOCK (79.4%)
AUSTRALIA (2.1%)
News Corp. Ltd. (Broadcasting & Publishing)(s)... 10,800 $ 104,497
North Ltd. (Metals & Mining)(s).................. 152,400 357,923
-----------
462,420
-----------
AUSTRIA (0.4%)
Bank Austria AG (Banking)(s)..................... 1,800 101,541
-----------
CANADA (0.4%)
Royal Bank of Canada (Banking)(s)................ 1,850 81,062
-----------
CHILE (0.4%)
Enersis SA (Spon. ADR) (Electric)(s)............. 4,100 96,350
-----------
CHINA (0.4%)
Huaneng Power International, Inc. (Spon. ADR)
(Energy Source)(s)............................. 5,200 54,925
Huaneng Power International, Inc., H Shares
(Energy Source)(s)............................. 120,000 28,559
-----------
83,484
-----------
FINLAND (1.3%)
Sampo Insurance Co. Ltd., A Shares
(Insurance)(s)................................. 2,000 69,910
Stora Enso OYJ, R Shares (Forest Products &
Paper)(s)...................................... 12,905 221,662
-----------
291,572
-----------
FRANCE (13.3%)
Aventis SA (Pharmaceuticals)(s).................. 3,451 200,578
AXA (Insurance)(s)............................... 360 50,190
Banque Nationale de Paris (Financial
Services)(s)................................... 4,109 379,151
Carrefour SA (Retail)(s)......................... 1,100 202,890
Christian Dior SA (Retail)(s).................... 950 235,418
Coflexip SA (Oil-Services)(s)+................... 1,600 116,288
Compagnie de Saint Gobain SA (Building
Materials)(s).................................. 420 78,990
Groupe Danone (Food, Beverages & Tobacco)(s)..... 325 76,609
Rhodia SA (Chemicals)(s)......................... 8,194 185,225
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
FRANCE (CONTINUED)
STMicroelectronics NV (Electronics)(s)........... 1,950 $ 300,150
Suez Lyonnaise des Eaux (Utilities)(s)........... 2,130 341,374
Total Fina SA (Oil-Services)(s)+................. 450 5
Total Fina SA, B Shares (Oil-Services)(s)........ 4,461 595,427
Total Fina SA, B Shares (Oil-Services)(s)........ 450 60,516
Vivendi (Utilities)(s)........................... 1,603 144,765
-----------
2,967,576
-----------
GERMANY (4.6%)
BASF AG (Chemicals)(s)........................... 1,100 56,512
Celanese AG (Chemicals)(s)+...................... 360 6,564
Entrium Direct Bankers AG (Banking)(s)+.......... 1,100 16,843
Mannesmann AG (Diversified Manufacturing)(s)..... 1,150 277,449
Merck KGaA (Pharmaceuticals)(s).................. 1,200 37,232
Schering AG (Pharmaceuticals)(s)................. 2,773 335,206
Stinnes AG (Transport & Services)(s)+............ 1,600 33,847
VEBA AG (Utilities)(s)........................... 2,810 136,579
Volkswagen AG (Automotive)(s).................... 1,400 78,906
WWL Internet AG (Computer Software)(s)+.......... 1,663 49,419
-----------
1,028,557
-----------
HONG KONG (1.4%)
Guoco Group Ltd. (Financial Services)(s)......... 15,000 45,732
Hongkong Electric Holdings Ltd. (Electric)(s).... 82,300 257,270
-----------
303,002
-----------
INDIA (0.8%)
ICICI Ltd. (GDR) (Financial Services)(s)+........ 4,152 61,242
ICICI Ltd. (Spon. ADR) (Financial
Services)(s)+.................................. 1,136 15,762
Reliance Industries (GDR) (Diversified
Manufacturing)(s)+............................. 6,900 100,050
-----------
177,054
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
8
<PAGE>
J.P. MORGAN INTERNATIONAL OPPORTUNITIES PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
IRELAND (0.3%)
Eircom PLC (Telecommunication Services)(s)....... 7,000 $ 28,558
Greencore Group PLC (Food, Beverages &
Tobacco)(s).................................... 11,500 35,333
-----------
63,891
-----------
ITALY (2.3%)
Bayerische Vita SPA (Insurance)(s)............... 3,000 23,663
Mediaset SPA (Broadcasting & Publishing)(s)...... 8,000 124,428
Telecom Italia SPA - RNC (Telecommunication
Services)(s)................................... 40,000 243,779
UniCredito Italiano SPA (Financial
Services)(s)................................... 23,700 116,506
-----------
508,376
-----------
JAPAN (19.5%)
Asahi Breweries Ltd. (Food, Beverages &
Tobacco)(s).................................... 4,000 43,744
Daicel Chemical Industries Ltd. (Chemicals)(s)... 36,000 100,362
Fujitsu Ltd. (Computer Systems)(s)............... 12,000 547,002
Honda Motor Co. Ltd. (Automotive)(s)............. 2,000 74,342
Ito - Yokado Co. Ltd. (Retail)(s)................ 2,000 217,157
Mitsubishi Chemical Corp. (Chemicals)(s)......... 53,000 186,638
Mitsubishi Corp. (Wholesale & International
Trade)(s)...................................... 29,000 223,819
Mitsui Trust & Banking Co., Ltd. (Banking)(s).... 48,000 108,461
Nippon Yusen Kabushiki Kaisha
(Transportation)(s)............................ 32,000 130,842
Nisshin Steel Co., Ltd. (Metals & Mining)(s)+.... 75,000 82,901
Rohm Co., Ltd. (Electronics)(s).................. 1,400 575,174
Softbank Corp. (Computer Software)(s)............ 600 574,000
Sony Corp. (Electronics)(s)...................... 1,600 474,225
Suzuki Motor Corp. (Automotive)(s)............... 5,000 72,924
Taiheiyo Cement Corp. (Building Materials)(s).... 33,000 62,946
Takeda Chemical Industries (Chemicals)(s)........ 3,500 172,894
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
JAPAN (CONTINUED)
The Fuji Bank Ltd. (Banking)(s).................. 22,000 $ 213,695
Toppan Forms Co., Ltd. (Broadcasting &
Publishing)(s)................................. 2,000 53,800
Tostem Corp. (Construction & Housing)(s)......... 7,000 125,648
West Japan Railway Co. (Railroads)(s)............ 29 102,690
Yamanouchi Pharmaceutical Co., Ltd.
(Pharmaceuticals)(s)........................... 6,000 209,528
-----------
4,352,792
-----------
MEXICO (1.4%)
Consorcio Ara SA de CV (Construction &
Housing)(s)+................................... 54,000 89,430
Grupo Televisa SA de CV (Spon. GDR)
(Broadcasting & Publishing)(s)+................ 3,300 225,225
-----------
314,655
-----------
NETHERLANDS (5.7%)
Akzo Nobel NV (Chemicals)(s)..................... 2,000 100,332
ING Groep NV (Financial Services)(s)............. 3,350 202,275
Koninklijke (Royal) Philips Electronics NV
(Electronics)(s)............................... 3,570 485,492
Laurus NV (Retail)(s)............................ 6,070 109,452
Unilever NV (Food, Beverages & Tobacco)(s)....... 285 15,744
Vedior NV (Business & Public Services)(s)........ 2,500 25,687
Vendex NV (Retail)(s)............................ 3,800 101,057
Wolters Kluwer NV (Broadcasting &
Publishing)(s)................................. 6,688 226,368
-----------
1,266,407
-----------
NEW ZEALAND (0.1%)
Fletcher Challenge Paper (Forest Products &
Paper)(s)...................................... 48,700 34,039
-----------
NORWAY (0.8%)
Sparebanken NOR (Banking)(s)+.................... 4,260 98,952
Stolt - Nielsen SA (Spon. ADR)
(Transportation)(s)............................ 4,550 80,194
-----------
179,146
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
9
<PAGE>
J.P. MORGAN INTERNATIONAL OPPORTUNITIES PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
PAKISTAN (0.3%)
Pakistan Telecommunications Corp. (GDR)
(Telecommunication Services)(s)................ 1,590 $ 61,215
-----------
PHILIPPINES (0.6%)
ABS- CBN Broadcasting Corporation
(Broadcasting & Publishing)(s)+................ 70,000 86,849
First Philippine Holdings Corp.
(Multi - Industry)(s).......................... 61,500 52,649
-----------
139,498
-----------
PORTUGAL (0.9%)
Banco Pinto & Sotto Mayor SA (Banking)(s)........ 4,226 90,590
Portugal Telecom SA (Telecommunication
Services)(s)+.................................. 10,150 111,346
-----------
201,936
-----------
RUSSIA (0.8%)
Surgutneftegaz (Spon. ADR) (Oil-
Production)(s)................................. 10,400 174,200
-----------
SINGAPORE (3.1%)
Chartered Semiconductor Manufacturing Ltd.
(Semiconductors)(s)+........................... 2,210 160,225
DBS Group Holdings Ltd. (Financial
Services)(s)................................... 14,506 237,703
Neptune Orient Lines Ltd. (Transport &
Services)(s)+.................................. 108,000 144,562
Overseas Union Bank Ltd. (Banking)(s)............ 24,667 144,360
-----------
686,850
-----------
SOUTH AFRICA (0.4%)
South African Breweries PLC (Food, Beverages &
Tobacco)(s).................................... 8,400 85,433
-----------
SOUTH KOREA (0.3%)
Housing & Commercial Bank (GDR) (Banking)(s)+.... 2,100 62,475
-----------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
SPAIN (2.3%)
Acerinox SA (Metals & Mining)(s)................. 2,126 $ 84,808
Actividades de Construccion y Servicios SA
(Construction & Housing)(s).................... 3,600 85,403
Banco Bilbao Vizcaya SA (Banking)(s)............. 6,700 95,434
Banco Santander Central Hispano SA
(Banking)(s)+.................................. 16,400 185,691
Indra Sistemas SA (Electronics)(s)+.............. 3,909 73,439
-----------
524,775
-----------
SWEDEN (0.3%)
ForeningsSparbanken AB (Banking)(s).............. 4,800 70,588
-----------
SWITZERLAND (6.3%)
ABB Ltd. (Electrical Equipment)(s)+.............. 1,514 184,708
Barry Callebaut AG (Food, Beverages &
Tobacco)(s).................................... 250 36,349
Nestle SA (Food, Beverages & Tobacco)(s)......... 123 225,343
Roche Holding AG (Pharmaceuticals)(s)............ 21 249,278
Schweizerische Rueckversicherungs-Gesellschaft
(Insurance)(s)................................. 121 248,581
Swisscom AG (Telecommunication Services)(s)...... 680 275,041
UBS AG (Banking)(s).............................. 710 191,747
-----------
1,411,047
-----------
UNITED KINGDOM (8.6%)
Allied Zurich PLC (Insurance)(s)................. 20,950 246,944
Anglian Water PLC (Pollution Control)(s)+........ 5,500 49,200
British Airways PLC (Airlines)(s)................ 18,500 120,683
British American Tobacco PLC (Food, Beverages &
Tobacco)(s).................................... 8,900 50,298
Cable & Wireless PLC (Telecommunications)(s)..... 17,000 287,126
Glaxo Wellcome PLC (Pharmaceuticals)(s).......... 5,900 167,099
Lloyds TSB Group PLC (Banking)(s)................ 5,100 63,327
National Power PLC (Electric)(s)................. 9,400 54,186
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
10
<PAGE>
J.P. MORGAN INTERNATIONAL OPPORTUNITIES PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
UNITED KINGDOM (CONTINUED)
Norwich Union PLC (Insurance)(s)................. 10,400 $ 79,682
PIC International Group PLC (Food, Beverages &
Tobacco)(s)+................................... 26,900 18,156
Railtrack Group PLC (Transportation)(s).......... 5,400 90,682
Royal & Sun Alliance Insurance Group PLC
(Insurance)(s)................................. 21,263 159,307
Shell Transport & Trading Co. (Oil-
Services)(s)................................... 22,200 184,429
Tate & Lyle PLC (Food, Beverages & Tobacco)(s)... 19,100 122,284
Tesco PLC (Retail)(s)............................ 33,300 101,087
Unilever PLC (Food, Beverages & Tobacco)(s)...... 9,171 67,378
Woolwich PLC (Financial Services)(s)............. 9,977 53,404
-----------
1,915,272
-----------
VENEZUELA (0.3%)
Compania Anonima Nacional Telefonos de Venezuela
(ADR) (Telecommunication Services)(s).......... 3,000 73,875
-----------
TOTAL COMMON STOCK (COST $14,056,409).......... 17,719,088
-----------
</TABLE>
<TABLE>
<CAPTION>
CONVERTIBLE PREFERRED STOCKS (0.8%)
<S> <C> <C>
AUSTRALIA (0.8%)
National Australia Bank (Banking)
(COST $187,228)................................ 6,600 182,325
-----------
</TABLE>
<TABLE>
<CAPTION>
PREFERRED STOCK (3.5%)
<S> <C> <C>
AUSTRALIA (1.4%)
News Corp. Ltd. (Broadcasting &
Publishing)(s)................................. 37,400 319,295
-----------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
BRAZIL (1.9%)
Embratel Participacoes SA (ADR)
(Telecommunication Services)(s)................ 15,000 $ 408,750
-----------
GERMANY (0.2%)
Volkswagen AG (Automotive)(s).................... 1,280 41,003
-----------
TOTAL PREFERRED STOCK (COST $540,519).......... 769,048
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT{::}
---------------------------
<S> <C> <C>
CONVERTIBLE BONDS (2.1%)
CHINA (0.7%)
Huaneng Power Inernational, 1.75% due 05/21/04
(Energy Source)................................ $ 150,000 154,500
-----------
NETHERLANDS (1.4%)
Telefonica Europe BV, 2.00% due 07/15/02
(Telecommunication Services)................... 121,000 308,248
-----------
TOTAL CONVERTIBLE BONDS (COST $339,005)........ 462,748
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT{::}
----------------
<S> <C> <C>
SHORT-TERM INVESTMENTS (11.0%)
OTHER INVESTMENT COMPANIES (4.9%)
SSGA Money Market Fund, 4.997%(y) due 01/03/00... 1,095,419 1,095,419
-----------
TIME DEPOSITS-FOREIGN (5.3%)
State Street Bank Cayman Islands, 3.000% due
01/03/00....................................... 1,180,000 1,180,000
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
11
<PAGE>
J.P. MORGAN INTERNATIONAL OPPORTUNITIES PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT{::} VALUE
- ------------------------------------------------- ---------------- ------------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS (0.8%)
U.S. Treasury Bills, 5.244%(y) due 03/02/00(s)... $ 180,000 $ 178,559
-----------
TOTAL SHORT-TERM INVESTMENTS (COST
$2,453,978)................................... 2,453,978
-----------
TOTAL INVESTMENTS (COST $17,577,139) (96.8%).......................
21,587,187
OTHER ASSETS IN EXCESS OF LIABILITIES (3.2%).......................
717,079
-----------
NET ASSETS (100.0%)................................................ $22,304,266
===========
</TABLE>
- ------------------------------
Note: Based on the cost of investments of $17,639,205 for federal income tax
purposes at December 31, 1999 the aggregate gross unrealized appreciation and
depreciation was $4,625,979 and $677,997, respectively, resulting in net
unrealized appreciation of $3,947,982.
+ - Non-income producing security.
{::} - Denominated in United States Dollar unless otherwise indicated.
(s) - Security is fully or partially segregated with custodian as collateral for
futures contracts or with broker as initial margin for futures contracts.
$7,203,172 of the market value has been segregated.
(y) - Yield to maturity.
ADR - American Depository Receipt.
GDR - Global Depository Receipt.
Spon. ADR - Sponsored ADR.
Spon. GDR - Sponsored GDR.
The Accompanying Notes are an Integral Part of the Financial Statements.
12
<PAGE>
J.P. MORGAN INTERNATIONAL OPPORTUNITIES PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
INDUSTRY DIVERSIFICATION
<TABLE>
<CAPTION>
PERCENT OF
PORTFOLIO
----------------
<S> <C>
Short Term Investments............................ 10.53%
Electronics....................................... 8.84%
Banking........................................... 7.91%
Telecommunication Services........................ 7.00%
Pharmaceuticals................................... 5.55%
Broadcasting & Publishing......................... 5.28%
Financial Services................................ 5.15%
Retail............................................ 4.48%
Oil - Services.................................... 4.43%
Insurance......................................... 4.07%
Chemicals......................................... 3.74%
Food, Beverage & Tobacco.......................... 3.60%
Utilities......................................... 2.89%
Computer Software................................. 2.89%
Computer Systems.................................. 2.53%
Metals & Mining................................... 2.43%
Electric.......................................... 1.89%
Diversified Manufacturing......................... 1.75%
Transportation.................................... 1.40%
Construction & Housing............................ 1.39%
Telecommunications................................ 1.33%
Automotive........................................ 1.24%
Forest Products & Paper........................... 1.18%
Energy Source..................................... 1.10%
Wholesale & International Trade................... 1.04%
Electrical Equipment.............................. 0.86%
Government Obligations............................ 0.83%
Transport & Services.............................. 0.83%
Oil - Production.................................. 0.81%
Semiconductors.................................... 0.74%
Building Materials................................ 0.66%
Airlines.......................................... 0.56%
Railroads......................................... 0.48%
Multi-Industry.................................... 0.24%
Pollution Control................................. 0.23%
Business & Public Services........................ 0.12%
------
100.00%
======
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
13
<PAGE>
J.P. MORGAN INTERNATIONAL OPPORTUNITIES PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $17,577,139 ) $21,587,187
Foreign Currency at Value (Cost $626,766 ) 626,234
Variation Margin Receivable 56,971
Receivable for Shares of Beneficial Interest Sold 54,948
Dividends Receivable 24,397
Foreign Tax Reclaim Receivable 18,203
Receivable for Expense Reimbursement 13,324
Unrealized Appreciation of Forward Foreign
Currency Contracts 9,307
Interest Receivable 3,351
Prepaid Trustees' Fees 2,602
Prepaid Expenses and Other Assets 1,367
-----------
Total Assets 22,397,891
-----------
LIABILITIES
Payable for Investments Purchased 22,888
Advisory Fee Payable 10,115
Custody Fee Payable 8,991
Unrealized Depreciation of Forward Foreign
Currency Contracts 7,337
Administration Fee Payable 1,493
Payable for Shares of Beneficial Interest
Redeemed 596
Accrued Expenses 42,205
-----------
Total Liabilities 93,625
-----------
NET ASSETS
Applicable to 1,613,135 Shares of Beneficial
Interest Outstanding
(no par value, unlimited shares authorized) $22,304,266
===========
Net Asset Value, Offering and Redemption Price
per Share $13.83
-----
-----
ANALYSIS OF NET ASSETS
Paid-in Capital $18,182,007
Undistributed Net Investment Income 317
Accumulated Net Realized Loss on Investments,
Futures and Foreign Currency Contracts and
Transactions (12,144)
Net Unrealized Appreciation of Investments,
Futures and Foreign Currency Contracts and
Translations 4,134,086
-----------
Net Assets $22,304,266
===========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
14
<PAGE>
J.P. MORGAN INTERNATIONAL OPPORTUNITIES PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividend Income (Net of Foreign Withholding Tax
of $30,634) $ 242,813
Interest Income (Net of Foreign Withholding Tax
of $6) 41,350
----------
Investment Income 284,163
EXPENSES
Custodian Fees and Expenses $ 99,565
Advisory Fee 83,195
Professional Fees and Expenses 34,801
Printing Expenses 20,407
Transfer Agent Expense 16,336
Trustees' Fees and Expenses 12,900
Amortization of Organization Expense 1,978
Insurance Expense 1,775
Administration Fee 117
Miscellaneous 3,460
----------
Total Expenses 274,534
Less: Reimbursement of Expenses (108,143)
----------
NET EXPENSES 166,391
----------
NET INVESTMENT INCOME 117,772
NET REALIZED GAIN ON
Investment Transactions 979,436
Futures Contracts 230,433
Foreign Currency Contracts and Transactions 95,841
----------
Net Realized Gain 1,305,710
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) OF
Investments 3,515,452
Futures Contracts 123,704
Foreign Currency Contracts and Translations (5,207)
----------
Net Change in Unrealized Appreciation 3,633,949
----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $5,057,431
==========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
15
<PAGE>
J.P. MORGAN INTERNATIONAL OPPORTUNITIES PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FISCAL FOR THE FISCAL
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
----------------- -----------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 117,772 $ 37,242
Net Realized Gain (Loss) on Investments, Futures
and Foreign Currency Contracts and Transactions 1,305,710 (122,891)
Net Change in Unrealized Appreciation of
Investments, Futures and Foreign Currency
Contracts and Translations 3,633,949 297,042
---------------- ----------------
Net Increase in Net Assets Resulting from
Operations 5,057,431 211,393
---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (142,033) (115,445)
Net Realized Gain (601,784) --
In Excess of Net Realized Gain -- (318,085)
---------------- ----------------
Total Distributions to Shareholders (743,817) (433,530)
---------------- ----------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Proceeds from Shares of Beneficial Interest Sold 36,812,761 4,229,642
Reinvestment of Dividends and Distributions 743,825 433,529
Cost of Shares of Beneficial Interest Redeemed (29,353,544) (1,433,325)
---------------- ----------------
Net Increase from Transactions in Shares of
Beneficial Interest 8,203,042 3,229,846
---------------- ----------------
Total Increase in Net Assets 12,516,656 3,007,709
NET ASSETS
Beginning of Fiscal Year 9,787,610 6,779,901
---------------- ----------------
End of Fiscal Year (including undistributed net
investment income of $317 and $0, respectively) $ 22,304,266 $ 9,787,610
================ ================
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
16
<PAGE>
J.P. MORGAN INTERNATIONAL OPPORTUNITIES 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 FISCAL YEAR ENDED DECEMBER 31, (COMMENCEMENT OF
-------------------------------------------- OPERATIONS) THROUGH
1999 1998 1997 1996 DECENBER 31, 1995
-------- -------- -------- -------- -------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $ 10.52 $10.60 $11.73 $ 10.86 $ 10.00
------- ------ ------ ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.11 0.14 0.15 0.20 0.15
Net Realized and Unrealized Gain on
Investments, Futures, and Foreign
Currency Contracts and Transactions 3.71 0.40 0.44 1.23 1.08
------- ------ ------ ------- -------
Total from Investment Operations 3.82 0.54 0.59 1.43 1.23
------- ------ ------ ------- -------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (0.11) (0.16) (0.41) (0.09) (0.09)
Net Realized Gain (0.40) -- (1.31) (0.47) (0.18)
In Excess of Net Realized Gain -- (0.46) -- -- --
Return of Capital -- -- -- -- (0.10)
------- ------ ------ ------- -------
Total Distributions to Shareholders (0.51) (0.62) (1.72) (0.56) (0.37)
------- ------ ------ ------- -------
NET ASSET VALUE, END OF PERIOD $ 13.83 $10.52 $10.60 $ 11.73 $ 10.86
======= ====== ====== ======= =======
RATIOS AND SUPPLEMENTAL DATA
Total return 36.66% 4.73% 5.43% 13.12% 12.38%(a)
Net Assets, End of Period (in
thousands) $22,304 $9,788 $6,780 $ 6,250 $ 3,992
Ratios to Average Net Assets
Net Expenses 1.20% 1.20% 1.20% 1.20% 1.20%(b)
Net Investment Income 0.85% 0.44% 0.88% 1.25% 1.06%(b)
Expenses Without Reimbursement 1.98% 3.26% 4.25% 3.18% 3.16%(b)
Portfolio Turnover 66% 127% 149% 71% 68%
</TABLE>
- ------------------------
(a) Not annualized.
(b) Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
17
<PAGE>
J.P. MORGAN INTERNATIONAL OPPORTUNITIES PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
J.P. Morgan International Opportunities Portfolio (the "portfolio") is one of
four portfolios comprising J.P. Morgan Series Trust II (the "trust"). The trust
is registered under the Investment Company Act of 1940, as amended, as a no-load
diversified, open-end management investment company. The trust was organized as
a Delaware Business Trust on October 28, 1993 for the purpose of funding
flexible premium variable life insurance policies. Prior to December 30, 1999,
the trust was composed of five separate portfolios which operated as distinct
investment vehicles. J.P. Morgan Treasury Money Market Portfolio was terminated
on December 30, 1999. The investment objective of the portfolio is to provide a
high total return from a portfolio of equity securities of foreign corporations.
The portfolio may have elements of risk not typically associated with
investments in the United States due to concentrated investments in a limited
number of countries or regions which may vary throughout the year. Such
concentrations may subject the portfolio to additional risks resulting from
political or economic conditions in such countries or regions and the possible
imposition of adverse governmental laws or currency exchange restrictions
affecting such countries or regions which could cause the securities and their
markets to be less liquid and prices more volatile than those comparable to the
United States. The ability of the issuers of the debt securities held by the
portfolio to meet their obligations may be affected by economic and political
developments in a specific industry or region.
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.
Trading in securities on most foreign exchanges and over-the-counter
markets is normally completed before the close of the domestic market and
may also take place on days on which the domestic market is closed. If
events materially affecting the value of foreign securities occur between
the time when the
18
<PAGE>
J.P. MORGAN INTERNATIONAL OPPORTUNITIES PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
exchange on which they are traded closes and the time when the portfolio's
net assets are calculated, such securities will be valued at fair value in
accordance with procedures established by and under the general
supervision of the portfolio's trustees.
b) The books and records of the portfolio are maintained in U.S. dollars. The
market value of investment securities, other assets and liabilities and
foreign currency contracts are translated at the prevailing exchange rates
at the end of the period. Purchases, sales, income and expenses are
translated at the exchange rates prevailing on the respective dates of
such transactions. Translation gains and losses resulting from changes in
exchange rates during the reporting period and gains and losses realized
upon settlement of foreign currency transactions are reported in the
Statement of Operations. Although the net assets of the portfolio are
presented at the exchange rates and market values prevailing at the end of
the period, the portfolio does not isolate the portion of the results of
operations arising as a result of changes in foreign exchange rates from
the fluctuations arising from changes in the market prices of securities
during the period.
c) Securities transactions are recorded on a trade date basis. Dividend
income is recorded on the ex-dividend date or as of the time that the
relevant ex-dividend date and amount becomes known. Interest income, which
includes the amortization of premiums and discounts, if any, is recorded
on an accrual basis. For financial and tax reporting purposes, realized
gains and losses are determined on the basis of first in first out.
d) Distributions to shareholders of net investment income and net realized
capital gains, if any, are declared and paid semi-annually.
e) 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.
f) Expenses incurred by the trust with respect to any two or more portfolios
in the trust are allocated in proportion to the net assets of each
portfolio in the trust, except where allocations of direct expenses to
each portfolio can otherwise be made fairly. Expenses directly
attributable to a portfolio are charged to that portfolio.
g) The portfolio may enter into forward and spot foreign currency contracts
to protect securities and related receivables and payables against
fluctuations in future foreign currency rates and to enhance returns. A
forward foreign currency contract is an agreement to buy or sell
currencies of different countries on a specified future date at a
specified rate. Risks associated with such contracts include the movement
in the value of the foreign currency relative to the U.S. dollar and the
ability of the counterparty to perform.
The market value of the contract will fluctuate with changes in currency
exchange rates. Contracts are valued daily at the current foreign exchange
rates, and the change in the market value is recorded by the portfolio as
unrealized appreciation or depreciation of forward foreign currency
contract translations.
h) 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
19
<PAGE>
J.P. MORGAN INTERNATIONAL OPPORTUNITIES PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
price at which the purchase and sale will take place is fixed when the
portfolio enters into the contract. Upon entering into such a contract,
the portfolio is required to pledge to the broker an amount of cash and/or
liquid securities equal to the minimum "initial margin" requirements of
the exchange. Pursuant to the contract, the portfolio agrees to receive
from, or pay to, the broker an amount of cash equal to the daily
fluctuation in the value of the contract. Such receipts or payments are
known as "variation margin" and are recorded by the portfolio as
unrealized gains or losses. When the contract is closed, the portfolio
records a realized gain or loss equal to the difference between the value
of the contract at the time it was opened and the value at the time when
it was closed. The portfolio invests in futures contracts for the purpose
of hedging its existing portfolio securities, or securities the portfolio
intends to purchase, against fluctuations in value caused by changes in
prevailing market interest rates or securities movements. The use of
futures transactions involves the risk of imperfect correlation in
movements in the price of futures contracts, interest rates and the
underlying hedged assets, and the possible inability of counterparties to
meet the terms of their contracts.
i) 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. The portfolio may be subject to taxes imposed by
countries in which it invests. Such taxes are generally based on income
and/ or capital gains earned. Taxes are accrued and applied to net
investment income, net realized capital gains and net unrealized
appreciation, as applicable, as the income and/or capital gains are
earned.
j) The portfolio accounts for and reports distributions to shareholders in
accordance with Statements of Position 93-2 "Determination, Disclosure,
and Financial Statement Presentation of Income, Capital Gain, and Return
of Capital Distribution by Investment Companies." The effect of applying
this statement was to increase Undistributed Net Investment Income by
$25,746 and increase Accumulated Net Realized Loss on Investments by
$25,746. The adjustments are primarily attributable to foreign currency
reclasses. Net investment income, net realized gains and net assets were
not affected by this change.
k) The portfolio utilized the entire $523,955 of its capital loss
carryforward in the current year.
l) For federal income tax purposes, the portfolio incurred approximately
$16,472 of foreign currency losses in the period from November 1, 1999 to
December 31, 1999. These losses were deferred for tax purposes until
January 1, 2000.
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").
20
<PAGE>
J.P. MORGAN INTERNATIONAL OPPORTUNITIES PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
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 fiscal year ended
December 31, 1999, such fees amounted to $83,195.
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 fiscal year ended December 31, 1999, the fee for these
services amounted to $117.
c) The trust, on behalf of the portfolio, has an Administrative Services
Agreement (the "Services Agreement") with Morgan, under which Morgan is
responsible for certain aspects of the administration and operation of the
portfolio. Under the Services Agreement, the portfolio has agreed to pay
Morgan a fee based on the following: if total expenses of the portfolio,
excluding the advisory fees, exceed the expense limit of 0.60% of the
average daily net assets of the portfolio, Morgan will reimburse the
portfolio for the excess expense amount and receive no fee. Should such
expenses be less than the expense limit, Morgan's fee would be limited to
the difference between such expenses and the fees calculated under the
Services Agreement. For the fiscal year ended December 31, 1999, Morgan
has agreed to reimburse the portfolio $108,143 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:
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
<TABLE>
<CAPTION>
FOR THE FISCAL FOR THE FISCAL
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
-------------------- -----------------
<S> <C> <C>
Shares sold...................................... 3,059,271 393,562
Reinvestment of dividends and distributions...... 57,413 38,938
Shares redeemed.................................. (2,433,600) (141,984)
------------------- ----------------
Net Increase..................................... 683,084 290,516
=================== ================
</TABLE>
21
<PAGE>
J.P. MORGAN INTERNATIONAL OPPORTUNITIES PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
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 fiscal year
ended December 31, 1999, were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
----------- ----------
<S> <C> <C> <C>
$13,863,846 $8,435,708
</TABLE>
At December 31, 1999 the portfolio had open forward foreign currency contracts
as follows:
SUMMARY OF OPEN FORWARD FOREIGN CURRENCY CONTRACTS
<TABLE>
<CAPTION>
U.S. DOLLAR NET UNREALIZED
CONTRACTUAL VALUE AT APPRECIATION/
PURCHASE CONTRACTS VALUE 12/31/99 (DEPRECIATION)
- ------------------ ----------- ----------- --------------
<S> <C> <C> <C>
Euro 300,000, expiring 02/22/00.................. $ 303,789 $ 303,435 $ (354)
</TABLE>
<TABLE>
<CAPTION>
SETTLEMENT
SALES CONTRACTS VALUE
- --------------- -----------
<S> <C> <C> <C>
Australian Dollar 501,935, expiring 02/22/00..... $ 322,825 $ 329,761 (6,936)
Euro 400,000, expiring 02/22/00.................. 409,407 404,580 4,827
Hong Kong Dollar 1,601,564, expiring 02/22/00.... 205,947 205,994 (47)
Norwegian Krone 892,787, expiring 02/22/00....... 112,534 111,506 1,028
Singapore Dollar 455,567, expiring 02/22/00...... 274,984 274,422 562
Swiss Franc 149,252, expiring 02/22/00........... 97,214 94,324 2,890
-------------
Net Unrealized Appreciation on Forward Foreign
Currency Contracts.............................. $ 1,970
=============
</TABLE>
At December 31, 1999 the portfolio had open futures contracts as follows:
SUMMARY OF OPEN FUTURES CONTRACTS AT DECEMBER 31, 1999
<TABLE>
<CAPTION>
NET UNREALIZED
APPRECIATION/ MARKET VALUE
CONTRACTS LONG (DEPRECIATION) OF CONTRACTS
-------------- -------------- ------------
<S> <C> <C> <C>
Australian All Ord. Index, expiring March 2000... 2 $ 939 $ 102,644
DAX Index, expiring March 2000................... 3 44,675 530,898
CAC 40 Index, expiring January 2000.............. 5 24,191 300,440
IBEX Plus Index, expiring January 2000........... 1 3,216 117,670
FTSE 100 Index, expiring March 2000.............. 5 16,452 563,388
Hang Seng Index, expiring January 2000........... 1 5,677 109,153
Topix Index, expiring March 2000................. 4 28,554 669,862
------------- ------------- -----------
Totals........................................... 21 $ 123,704 $ 2,394,055
============= ============= ===========
</TABLE>
22
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of
J.P. Morgan International Opportunities Portfolio
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of J.P. Morgan International
Opportunities Portfolio (one of the series constituting J.P. Morgan
Series Trust II, hereafter referred to as the "portfolio") at December 31, 1999,
the results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended and the financial
highlights for each of the three years in the period then ended, in conformity
with accounting principles generally accepted in the United States. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the portfolio's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with auditing standards generally accepted in the United States,
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 1999 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above. The financial highlights for the year ended December 31, 1996 and for the
period January 3, 1995 (commencement of operations) through December 31, 1995
were audited by other independent accountants whose report dated February 14,
1997 expressed an unqualified opinion on those statements.
PricewaterhouseCoopers LLP
New York, New York
February 16, 2000
23
<PAGE>
J.P. MORGAN SERIES TRUST II PORTFOLIOS
BOND PORTFOLIO
INTERNATIONAL OPPORTUNITIES PORTFOLIO
SMALL COMPANY PORTFOLIO
U.S. DISCIPLINED EQUITY PORTFOLIO
FOR MORE INFORMATION ON THE J.P. MORGAN SERIES TRUST II PORTFOLIOS, CALL J.P.
MORGAN FUNDS SERVICES AT (888) 756-8645.
IMAR386
J.P. MORGAN INTERNATIONAL OPPORTUNITIES PORTFOLIO
ANNUAL REPORT
DECEMBER 31, 1999
