<PAGE>
LETTER TO THE SHAREHOLDERS OF THE J.P. MORGAN GLOBAL STRATEGIC INCOME FUND
June 1, 2000
Dear Shareholder:
We are pleased to report that the J.P. Morgan Global Strategic Income Fund
delivered a strong total return of 2.41% for the six months ended April 30,
2000. The fund handily exceeded its benchmark, the Lehman Brothers Aggregate
Bond Index, as well as the Lipper Multi-Sector Income Funds Average, which
returned 1.41% and 1.24%, respectively.
The fund's net asset value on April 30 was $9.29 per share, decreasing from
$9.40 per share on October 31, 1999, after paying an income dividend of nearly
$0.34 per share over the six-month period. The fund's net assets stood at
approximately $7.1 million on April 30, while the total net assets of The Global
Strategic Income Portfolio, in which the fund invests, totaled approximately
$166.8 million.
Included in this report is an interview with Mark E. Smith, managing director,
and 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 your Morgan representative or J.P. Morgan Funds Services at
800-521-5411.
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.............7
FUND PERFORMANCE.....................2 FINANCIAL STATEMENTS.................10
PORTFOLIO MANAGER Q&A................3
--------------------------------------------------------------------------------
1
<PAGE>
FUND 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 SINCE
AS OF APRIL 30, 2000 MONTHS MONTHS YEAR YEARS INCEPTION*
--------------------------------------------------------------------------- ------------------------------------
<S> <C> <C> <C> <C> <C>
J.P. Morgan Global Strategic Income Fund 1.60% 2.41% 0.46% 4.25% 4.71%
Lehman Brothers Aggregate Bond Index** 2.25% 1.41% 1.26% 6.07% 6.42%
Lipper Multi-Sector Income Funds Average*** 0.16% 1.24% -1.10% 3.66% 3.88%
AS OF MARCH 31, 2000
--------------------------------------------------------------------------- ------------------------------------
J.P. Morgan Global Strategic Income Fund 1.40% 3.81% 2.75% 5.09% 5.09%
Lehman Brothers Aggregate Bond Index** 2.21% 2.08% 1.88% 6.70% 6.70%
Lipper Multi-Sector Income Funds Average*** 0.53% 2.66% 2.13% 4.46% 4.46%
</TABLE>
*REFLECTS PERFORMANCE OF THE J.P. MORGAN INSTITUTIONAL GLOBAL STRATEGIC INCOME
FUND, THE PREDECESSOR ENTITY TO THE J.P. MORGAN GLOBAL STRATEGIC INCOME FUND,
FROM MARCH 17, 1997 THROUGH NOVEMBER 5, 1997 (COMMENCEMENT OF OPERATIONS) AT A
LOWER EXPENSE RATIO. THEREFORE, THESE RETURNS MAY BE HIGHER THAN THE FUND'S
WOULD HAVE BEEN HAD IT EXISTED DURING THE SAME PERIOD. FOR THE PURPOSE OF
COMPARISON, THE "SINCE INCEPTION" RETURNS ARE CALCULATED FROM MARCH 31, 1997,
THE FIRST DATE WHEN DATA FOR THE FUND, ITS BENCHMARK, AND ITS LIPPER CATEGORY
WERE AVAILABLE. THE FUND'S AVERAGE ANNUAL TOTAL RETURN SINCE THE INCEPTION DATE
ON NOVEMBER 5, 1997 THROUGH APRIL 30, 2000 IS 4.28%.
**THE LEHMAN BROTHERS AGGREGATE BOND INDEX IS AN UNMANAGED INDEX WHICH MEASURES
BOND MARKET PERFORMANCE. THE INDEX DOES NOT INCLUDE FEES OR EXPENSES AND IS NOT
AVAILABLE FOR ACTUAL INVESTMENT.
***DESCRIBES THE AVERAGE TOTAL RETURN FOR ALL THE 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 MUTUAL
FUND DATA.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. FUND RETURNS ARE NET OF
FEES, ASSUME THE REINVESTMENT OF DISTRIBUTIONS AND REFLECT REIMBURSEMENT OF
CERTAIN FUND AND PORTFOLIO EXPENSES AS DESCRIBED IN THE PROSPECTUS. HAD EXPENSES
NOT BEEN SUBSIDIZED, RETURNS WOULD HAVE BEEN LOWER.
2
<PAGE>
PORTFOLIO MANAGER Q&A
[PHOTO]
The following is an interview with MARK E. SMITH, managing director and member
of the portfolio management team of The Global Strategic Income Portfolio in
which the fund invests. He leads the investment team with responsibility for
J.P. Morgan Investment Management's global extended markets and extended active
fixed income investment strategies. Prior to joining J.P. Morgan Investment in
1994, Mark was with Allied Signal Inc. for ten years, where he was an internal
fixed income portfolio manager. For five years, he had similar responsibilities
at Armco Inc. Mark is a graduate of Ohio Northern University and earned his
M.B.A. at the University of Cincinnati. This interview was conducted on May 11,
2000, and reflects his views on that date.
TO GET RIGHT OUT IN FRONT OF EVERYTHING ELSE, HOW DID YOU DO OVER THE PAST SIX
MONTHS, AND HOW DID YOU DO IT?
MS: We gained 2.41% for the six months ended April 30, significantly
outperforming the aggregate fixed income market return of 1.41% over this time
period. As for how we did it, I'd like to put things in perspective by briefly
examining the extraordinarily turbulent, perhaps unprecedented, environment for
fixed income investments since late last year.
In its ongoing efforts to fight inflation and slow our speeding economy, the
Federal Reserve Board has raised short-term interest rates no less than five
times, in quarter point increments, since June of last year. Over the last six
months alone, interest rates have risen 83 basis points, as measured by the
6-month Treasury bill. This rising interest rate environment has, in itself,
limited the returns that could be achieved in fixed income markets.
Also during this period, the government announced and President Clinton made
clear in his State of the Union address, that a significant portion of the
budget surplus, both now and in the future, would be dedicated to paying down
the country's long term debt. And, in fact, the Treasury recently affirmed that
it will retire $30 billion in debt this year. The net effect of this effort was
to reduce long term rates by about 19 basis points over the past six months.
Rapidly rising short rates, coupled with falling long rates, inevitably resulted
in a severely inverted yield curve, one that persists to this day. So, over the
past six months, we experienced an unusually turbulent interest rate
environment, one where returns varied widely depending on where one was invested
along the yield curve at any given point in time.
Added to this already incendiary mix were very strong GDP numbers for the fourth
quarter of last year and this year's first quarter, which fueled concerns that
the Fed would continue to raise rates, on the order of 50 basis points, at its
next meeting in May. Marginal investors, looking to get out of the way of what
they saw as greater risk going forward, became much more risk averse, which they
demonstrated by selling just about any fixed income asset - mortgages,
corporates, high yield - that wasn't a U.S. government asset.
3
<PAGE>
The result was that, while the aggregate market returned 1.52% over the past six
months, corporates returned essentially nothing, mortgages trailed the overall
marketplace by 25-30 basis points, and high yield fixed income assets were
negative.
For fixed income investors, it was like being on a battlefield where one had to
estimate when and where the bombs were going to land. If you chose correctly,
then you weren't there when they landed. If not, you just blew up, as several
did.
This has been a difficult time period for our strategy, which for the most part
seeks to take advantage of the higher yielding sectors. Despite weakness among
high yields, we managed to generate significant excess returns in a market that
didn't want to give them to you. We did this by being very tactical as to which
investments we made.
WHAT DO YOU MEAN BY "TACTICAL" IN THIS INSTANCE?
MS: We were tactical in the sense that we were very, very careful about which
sectors we wanted to be in and, importantly, when we wanted to be in them. The
best example would be in the emerging market debt sector.
During the fourth quarter of last year, we held about 20% of the portfolio in
emerging market debt assets. Early in the first quarter of 2000, our analysis
indicated that this market had gotten ahead of itself as far as pricing was
concerned, so we reduced our allocation to 16%. Then, when we saw prices
beginning to erode in late January and move toward levels we thought were
attractive, we increased our exposure to nearly 25%. This move proved to be
fortuitous as we received the benefit of a very strong February and early March.
So, timing and accurate portfolio weightings were critical to getting the most
from this kind of debt during this period.
Also strongly contributing to returns was our decision to overweight certain
elements of the mortgage and non-dollar sectors. Both of these added
significantly to overall results during a period when corporates, high yield and
other sectors came under extreme pressure. Here and elsewhere, we were able to
tactically allocate away from the weakest performing sectors, while enjoying the
benefits of those that outperformed.
YOU BRING UP EMERGING MARKET DEBT, A FAIRLY BROAD UNIVERSE TO BE SURE.
SPECIFICALLY, WHICH EMERGING MARKET SECTORS WERE BETTER AND WHY?
MS: The best place to be invested in emerging markets during the latter part of
last year through March 2000 was in the Latin American countries, particularly
Mexico and Brazil. Mexico achieved investment grade status on March 7, when
Moody's upgraded its debt to "BBB" credit quality - well ahead of schedule, I
might add. As it entered the investment grade universe, it captured many new
international investors, particularly those who are limited to investment grade
debt. On top of that, it brought with it the perception that Brazil was due for
a substantial upgrade, perhaps in a year or two. As a consequence, Brazil was
also a very strong investment during the early part of this year.
4
<PAGE>
We took strong large positions in both of these assets before many others and
thus benefited as their value began to be realized. In fact, Mexico has been a
sizeable holding for a significant period, as we had been anticipating its
eventual upgrade.
WHAT ABOUT OTHER EMERGING MARKET DEBT SECTORS?
MS: We steered away from Asia a little bit, owing largely to volatility in the
Japanese economy, which tends to drive the region as a whole. On the other hand,
we saw opportunity in certain eastern European countries, such as Bulgaria. In
fact, you can go all the way to the Middle East and find some value. We consider
Qatar, for example, to be a high quality asset in the emerging debt market, one
that represents a fairly stable position.
AND, WESTERN EUROPE?
MS: There, we were concerned about the likelihood of rising interest rates. This
said, they shouldn't rise as much or as quickly as in the U.S.; therefore, we
think there is some marginal opportunity in non-dollar denominated assets hedged
backed into the U.S. dollar. Unfortunately, the euro has come under such
sufficient pressure that the European debt market has not been a great
investment in recent months.
CLOSER TO HOME, GIVEN THE INVERSION OF THE YIELD CURVE, THE PROSPECT OF A
SUBSTANTIAL ADDITIONAL RISE IN SHORT-TERM RATES AND SO ON, HOW DO YOU FIND VALUE
IN THE DOMESTIC FIXED INCOME MARKETPLACE?
MS: With short-term rates rising and yield spreads widening, one has to be very
astute in picking the part of the yield curve in which to invest. For example,
in this particular environment, you want to be out a little bit longer than the
front end of the yield curve. You also have to be fairly flexible about the
timing of your entry into some of these sectors, particularly high yield and
other sectors that have come under significant pressure.
Yield spreads have widened dramatically within the high yield market and the
investment grade corporate market, yet they've reached levels that ultimately
look to be very attractive. Having said that, we believe there will continue to
be additional pressure on yield spreads. For our part, we feel there is value
building within these sectors and are looking for the entry point to get back
into them in a significant way, but we feel that point has not yet arrived.
IS THERE ANY VALUE IN THE SPREAD SECTORS AT PRESENT?
MS: As a long-term investor, looking at a time frame of a year to 18 months, we
think that this sector can be a great investment. However, if you're looking at
the next three months, we think you need to be very cautious about how you
enter. We've been focusing on the more liquid instruments that enable us to
transition and take advantage of the coming opportunity. An example in the high
yield market, one that we are actively pursuing, might be in telecommunications
and cable industry debt. We see these as fairly stable industries to be in when
the environment is volatile. These assets are currently priced at very
attractive
5
<PAGE>
levels for the long-term investor, and may provide better future returns than
some other sectors. So, by being very selective about the assets we choose
within these markets, we can do an effective job of investing even now. But, we
believe the best opportunities are still a few months away.
IS THIS THE SAME SITUATION WITH MORTGAGES?
MS: Mortgages are a little bit different animal in that you have extremely high
credit quality, so the credit risk is not an issue. They have been hurt recently
by speculation about whether Washington will withdraw its support from the
quasi-governmental agencies - Fannie Mae, Freddie Mac, and so on. We don't see
this happening, but it's a good time to take advantage of today's widened
spreads to buy some excellent mortgage products.
HOW IS THE PORTFOLIO ALLOCATED NOW, AND HOW MIGHT YOU SEE THAT CHANGING, IF AT
ALL, OVER THE NEXT THREE MONTHS OR SO?
MS: Backing up what I just said, we now have about 27% of the portfolio in the
mortgage market. International is the second highest allocation, where we have
25% of the portfolio in hedged, non-dollar assets. There, we are seeking the
highest quality assets and the least exposure to credit risk, if you will. The
high yield market would normally represent about 23% of the portfolio, given the
strategy we employ. However, for various reasons already mentioned and others,
we've elected to reduce this exposure to 19% for the time being, at least until
some of the pressure they've been experiencing relents. We have reduced our
emerging market debt exposure to 17% of the portfolio, because there is more
incremental risk now that the stock markets have come under severe pressure and
the Fed is strongly hinting at higher rates. We are once again awaiting the
opportunity to reenter on the expectation that yield spreads in that sector will
eventually back off. And, in the corporate market, we're carrying a 12%
allocation, which reflects our view that investment grade corporates don't
provide a significant opportunity right now. Again, we expect this sector to
come back soon, but not yet.
FINALLY, GIVEN THE TIME FRAME YOU ARE REPORTING ON, I WOULD BE REMISS IF I
DIDN'T ASK WHAT IMPACT Y2K HAD ON FIXED INCOME MARKETS.
MS: That's a great question! It meant something if you were a fixed income
investor in June of 1999, because the market realigned and reassessed itself
then in fear of that event. But, as you roll through the last three months of
1999, the market realized that Y2K was going to be a non-event, that it was not
going to have an impact on the ability of securities to settle, on the ability
of economies to sustain themselves, or on the ability of businesses to operate.
As that realization took hold in the marketplace, you saw extraordinary
repricing of those assets where Y2K-related fears had been most significant. A
good deal of that repricing took place in Latin America, where it helped
contribute to the region's fourth-quarter gains in fixed income assets. In the
end, people got out ahead of Y2K, fixed their computer problems and focused on
business as usual, so it was not a problem once this much anticipated moment
finally arrived and was left behind.
6
<PAGE>
FUND FACTS
INVESTMENT OBJECTIVE
J.P. Morgan Global Strategic Income Fund's investment objective is high total
return from a portfolio of fixed income securities of foreign and domestic
issuers. It is designed for investors who seek exposure to high-yielding,
international and emerging debt markets in their investment portfolios.The
portfolio's benchmark is the Lehman Brothers Aggregate Bond Index.
--------------------------------------------------------------------------------
COMMENCEMENT OF INVESTMENT OPERATIONS
11/5/97
--------------------------------------------------------------------------------
FUND NET ASSETS AS OF 4/30/00
$7,068,811
--------------------------------------------------------------------------------
PORTFOLIO NET ASSETS AS OF 4/30/00
$166,772,189
--------------------------------------------------------------------------------
DIVIDEND PAYABLE DATE
MONTHLY
--------------------------------------------------------------------------------
CAPITAL GAIN PAYABLE DATE (IF APPLICABLE)
12/20/00
EXPENSE RATIO
The fund's current annualized expense ratio of 1.00% covers shareholders'
expenses for custody, tax reporting, investment advisory and shareholder
services,after reimbursement. The fund is no-load and does not charge any sales,
redemption, or exchange fees. There are no additional charges for buying,
selling, or safekeeping fund shares, or for wiring redemption proceeds from the
fund.
FUND HIGHLIGHTS
ALL DATA AS OF APRIL 30, 2000
PORTFOLIO ALLOCATION
(AS A PERCENTAGE OF TOTAL INVESTMENTS)
[CHART]
SOVEREIGN GOVERNMENTS AND AGENCIES 30.7%
SHORT-TERM HOLDINGS 21.5%
CORPORATE OBLIGATIONS 18.6%
CMOs AND ABSs 11.4%
PRIVATE PLACEMENTS 9.8%
FOREIGN CORPORATE OBLIGATIONS 5.4%
U.S. GOVERNMENT AGENCIES 1.3%
U.S. TREASURIES 1.3%
30-DAY SEC YIELD
6.85%*
DURATION
4.88 years
*YIELD REFLECTS REIMBURSEMENT OF EXPENSES AS DESCRIBED IN THE PROSPECTUS. HAD
EXPENSES NOT BEEN SUBSIDIZED, THE 30-DAY SEC YIELD WOULD HAVE BEEN LOWER.
YIELDS WILL FLUCTUATE.
7
<PAGE>
DISTRIBUTED BY FUNDS DISTRIBUTOR, INC. J.P. MORGAN INVESTMENT MANAGEMENT INC.
SERVES AS INVESTMENT ADVISOR. SHARES OF THE FUND 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.
Opinions expressed herein, and other fund data presented, are based on current
market conditions and are subject to change without notice. The fund invests
through a master portfolio (another fund with the same objective). The fund
invests in below investment-grade debt obligations and foreign securities
(including emerging markets), mortgage-backed securities, interest rate swaps,
futures contracts, and other derivatives, which are subject to special risks
that may make the fund more volatile.
CALL J.P. MORGAN FUNDS SERVICES AT (800) 521-5411 FOR A PROSPECTUS CONTAINING
MORE COMPLETE INFORMATION ABOUT THE FUND INCLUDING MANAGEMENT FEES AND OTHER
EXPENSES. PLEASE READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
8
<PAGE>
THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY
<PAGE>
J.P. MORGAN GLOBAL STRATEGIC INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment in The Global Strategic Income
Portfolio ("Portfolio"), at value $7,106,487
Receivable for Expense Reimbursements 19,036
Deferred Organization Expenses 16,502
Prepaid Expenses and Other Assets 1,755
----------
Total Assets 7,143,780
----------
LIABILITIES
Dividends Payable to Shareholders 43,293
Shareholder Servicing Fee Payable 1,514
Administrative Services Fee Payable 147
Accrued Trustees' Fees and Expenses 16
Administration Fee Payable 7
Fund Services Fee Payable 5
Accrued Expenses 29,987
----------
Total Liabilities 74,969
----------
NET ASSETS
Applicable to 761,289 Shares of Beneficial
Interest Outstanding
(par value $0.001, unlimited shares authorized) $7,068,811
==========
Net Asset Value, Offering and Redemption Price
Per Share $9.29
----
----
ANALYSIS OF NET ASSETS
Paid-in Capital $8,046,469
Undistributed Net Investment Income 66,912
Accumulated Net Realized Loss on Investment (845,440)
Net Unrealized Depreciation of Investment (199,130)
----------
Net Assets $7,068,811
==========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
10
<PAGE>
J.P. MORGAN GLOBAL STRATEGIC INCOME FUND
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME ALLOCATED FROM PORTFOLIO
Allocated Interest and Dividend Income $ 330,986
Allocated Portfolio Expenses (Net of
Reimbursement of $879) (24,500)
---------
Net Investment Income Allocated from
Portfolio 306,486
FUND EXPENSES
Transfer Agent Fees $ 11,800
Shareholder Servicing Fee 10,046
Registration Fees 8,500
Professional Fees 5,647
Printing Expenses 5,133
Amortization of Organization Expenses 3,278
Administrative Services Fee 989
Fund Services Fee 68
Administration Fee 48
Trustees' Fees and Expenses 39
Miscellaneous 15,082
--------
Total Fund Expenses 60,630
Less: Reimbursement of Expenses (45,727)
--------
NET FUND EXPENSES 14,903
---------
NET INVESTMENT INCOME 291,583
NET REALIZED LOSS ON INVESTMENT ALLOCATED FROM
PORTFOLIO (197,087)
NET CHANGE IN UNREALIZED APPRECIATION OF
INVESTMENT ALLOCATED FROM PORTFOLIO 111,929
---------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $ 206,425
=========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
11
<PAGE>
J.P. MORGAN GLOBAL STRATEGIC INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE FISCAL
APRIL 30, 2000 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1999
-------------- ----------------
<S> <C> <C>
DECREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 291,583 $ 629,922
Net Realized Loss on Investment Allocated from
Portfolio (197,087) (204,533)
Net Change in Unrealized Appreciation
(Depreciation) of Investment Allocated from
Portfolio 111,929 (182,264)
----------- ---------------
Net Increase in Net Assets Resulting from
Operations 206,425 243,125
----------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (286,169) (600,679)
----------- ---------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Proceeds from Shares of Beneficial Interest Sold 963,828 4,089,641
Reinvestment of Dividends 209,424 445,558
Cost of Shares of Beneficial Interest Redeemed (3,097,924) (5,270,738)
----------- ---------------
Net Decrease from Transactions in Shares of
Beneficial Interest (1,924,672) (735,539)
----------- ---------------
Total Decrease in Net Assets (2,004,416) (1,093,093)
NET ASSETS
Beginning of Period 9,073,227 10,166,320
----------- ---------------
End of Period (including undistributed net
investment income of $66,912 and $61,498,
respectively) $ 7,068,811 $ 9,073,227
=========== ===============
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
12
<PAGE>
J.P. MORGAN GLOBAL STRATEGIC INCOME FUND
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
Selected data for a share outstanding throughout each period are as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE NOVEMBER 5, 1997
SIX MONTHS ENDED FOR THE FISCAL (COMMENCEMENT OF
APRIL 30, 2000 YEAR ENDED OPERATIONS) THROUGH
(UNAUDITED) OCTOBER 31, 1999 OCTOBER 31, 1998
---------------- ---------------- -------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.40 $ 9.77 $ 10.21
------ ------ -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.36 0.60 0.70
Net Realized and Unrealized Loss on Investment
Allocated from Portfolio (0.13) (0.38) (0.49)
------ ------ -------
Total from Investment Operations 0.23 0.22 0.21
------ ------ -------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (0.34) (0.59) (0.63)
Return of Capital -- -- (0.02)
------ ------ -------
Total Distributions to Shareholders (0.34) (0.59) (0.65)
------ ------ -------
NET ASSET VALUE, END OF PERIOD $ 9.29 $ 9.40 $ 9.77
====== ====== =======
RATIOS AND SUPPLEMENTAL DATA
Total Return 2.41%(a) 2.26% 1.97%(a)
Net Assets, End of Period (in thousands) $7,069 $9,073 $10,166
Ratios to Average Net Assets
Net Expenses 1.00%(b) 1.00% 1.00%(b)
Net Investment Income 7.26%(b) 6.35% 6.24%(b)
Expenses without Reimbursement 2.15%(b) 1.54% 1.89%(b)
</TABLE>
------------------------
(a) Not Annualized.
(b) Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
13
<PAGE>
J.P. MORGAN GLOBAL STRATEGIC INCOME FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
APRIL 30, 2000
--------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
J.P. Morgan Global Strategic Income Fund (the "fund") is a separate series of
J.P. Morgan Funds, a Massachusetts business trust (the "trust") which was
organized on November 4, 1992. The trust is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The fund commenced operations on November 5, 1997.
The fund invests all of its investable assets in The Global Strategic Income
Portfolio (the "portfolio"), a no-load, diversified, open-end management
investment company having the same investment objective as the fund. The value
of such investment included in the Statement of Assets and Liabilities reflects
the fund's proportionate interest in the net assets of the portfolio (4% at
April 30, 2000). The performance of the fund is directly affected by the
performance of the portfolio. The financial statements of the portfolio,
including the Schedule of Investments, are included elsewhere in this report and
should be read in conjunction with the fund's financial statements.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual amounts could differ from
those estimates. The following is a summary of the significant accounting
policies of the fund:
a) Valuation of securities by the portfolio is discussed in Note 1a of the
portfolio's Notes to Financial Statements which are included elsewhere in
this report.
b) The fund records its share of net investment income, realized and
unrealized gain and loss and adjusts its investment in the portfolio each
day. All net investment income and realized and unrealized gain and loss
of the portfolio is allocated pro rata among the fund and other investors
in the portfolio at the time of such determination.
c) Substantially all the fund's net investment income is declared as
dividends daily and paid monthly. Distributions to shareholders of
realized net capital gains, if any, are declared and paid annually.
d) The portfolio incurred organization expenses in the amount of $32,800.
These costs were deferred and are being amortized on a straight-line basis
over a five year period from the commencement of operations of the
portfolio.
e) Expenses incurred by the trust with respect to any two or more funds in
the trust are allocated in proportion to the net assets of each fund in
the trust, except where allocations of direct expenses to each fund can
otherwise be made fairly. Expenses directly attributable to a fund are
charged to that fund.
f) The fund 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, 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.
14
<PAGE>
J.P. MORGAN GLOBAL STRATEGIC INCOME FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
g) For federal income tax purposes, the fund had a capital loss carryforward
at October 31, 1999 of $178,038, of which $624,674 expires in the year
2006 and $446,636 expires in the year 2007. To the extent that this
capital loss is used to offset future capital gains, it is probable that
gains so offset will not be distributed to shareholders.
2. TRANSACTIONS WITH AFFILIATES
a) The trust, on behalf of the fund, has retained Funds Distributor, Inc.
("FDI"), a registered broker-dealer, to serve as the co-administrator and
distributor for the fund. Under a Co-Administration Agreement between FDI
and the trust, on behalf of the fund, FDI provides administrative services
necessary for the operations of the fund, furnishes office space and
facilities required for conducting the business of the fund and pays the
compensation of the fund's officers affiliated with FDI. The fund 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 fund is based on ratio of the fund'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
April 30, 2000, the fee for these services amounted to $48.
b) The trust, on behalf of the fund, has an Administrative Services Agreement
(the "Services Agreement") with Morgan Guaranty Trust Company of New York
("Morgan"), a wholly owned subsidiary of J.P. Morgan & Co., Incorporated
("J.P. Morgan"), under which Morgan is responsible for certain aspects of
the administration and operation of the fund. Under the Services
Agreement, the fund has agreed to pay Morgan a fee equal to its allocable
share of an annual complex-wide charge. This charge is calculated based on
the aggregate average daily net assets of the portfolio and the other
portfolios in which the trust and J.P. Morgan Institutional Funds invest
(the "master portfolios") and J.P. Morgan Series Trust in accordance with
the following annual schedule: 0.09% on the first $7 billion of their
aggregate average daily net assets and 0.04% of their aggregate average
daily net assets in excess of $7 billion less the complex-wide fees
payable to FDI. The portion of this charge payable by the fund is
determined by the proportionate share that its net assets bear to the net
assets of the trust, the master portfolios, other investors in the master
portfolios for which Morgan provides similar services, and J.P. Morgan
Series Trust. For the six months ended April 30, 2000, the fee for these
services amounted to $989.
In addition, J.P. Morgan has agreed to reimburse the fund to the extent
necessary to maintain the total operating expenses of the fund, including
the expenses allocated to the fund from the portfolio, at no more than
1.00% of the average daily net assets of the fund through February 28,
2001. This reimbursement arrangement can be changed or terminated at any
time after February 28, 2001 at the option of J.P. Morgan. For the six
months ended April 30, 2000, J.P. Morgan has agreed to reimburse the fund
$46,606 for expenses under this agreement.
c) The trust, on behalf of the fund, has a Shareholder Servicing Agreement
with Morgan to provide account administration and personal account
maintenance service to fund shareholders. The agreement
15
<PAGE>
J.P. MORGAN GLOBAL STRATEGIC INCOME FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
provides for the fund to pay Morgan a fee for these services which is
computed daily and paid monthly at an annual rate of 0.25% of the average
daily net assets of the fund. For the six months ended April 30, 2000, the
fee for these services amounted to $10,046.
Morgan, Charles Schwab & Co. ("Schwab") and the trust are parties to
separate services and operating agreements (the "Schwab Agreements")
whereby Schwab makes fund shares available to customers of investment
advisors and other financial intermediaries who are Schwab's clients. The
fund is not responsible for payments to Schwab under the Schwab
Agreements; however, in the event the services agreement with Schwab is
terminated for reasons other than a breach by Schwab and the relationship
between the trust and Morgan is terminated, the fund would be responsible
for the ongoing payments to Schwab with respect to pre-termination shares.
d) The trust, on behalf of the fund, has a Fund Services Agreement with
Pierpont Group, Inc. ("Group") to assist the trustees in exercising their
overall supervisory responsibilities for the trust's affairs. The trustees
of the trust represent all the existing shareholders of Group. The fund's
allocated portion of Group's costs in performing its services amounted to
$68 for the six months ended April 30, 2000.
e) An aggregate annual fee of $75,000 is paid to each trustee for serving as
a trustee of the trust, the J.P. Morgan Institutional Funds, the master
portfolios and J.P. Morgan Series Trust. The Trustees' Fees and Expenses
shown in the financial statements represents the fund's allocated portion
of the total fees and expenses. The trust's Chairman and Chief Executive
Officer also serves as Chairman of Group and receives compensation and
employee benefits from Group in his role as Group's Chairman. The
allocated portion of such compensation and benefits included in the Fund
Services Fee shown in the financial statements was $100.
3. TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the trustees to issue an unlimited number of
full and fractional shares of beneficial interest of one or more series.
Transactions in shares of beneficial interest of the fund were as follows:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE FISCAL
APRIL 30, 2000 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1999
-------------- ----------------
<S> <C> <C>
Shares sold...................................... 104,410 418,022
Reinvestment of dividends and distributions...... 22,318 46,169
Shares redeemed.................................. (330,608) (540,109)
----------- ---------------
Net Decrease..................................... (203,880) (75,918)
=========== ===============
</TABLE>
From time to time, the fund 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 fund and portfolio.
16
<PAGE>
J.P. MORGAN GLOBAL STRATEGIC INCOME FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
4. CREDIT AGREEMENT
The trust, on behalf of the fund, together with other affiliated investment
companies (the "funds"), entered into a revolving line of credit agreement (the
"Agreement") on May 26, 1999, with unaffiliated lenders. Additionally, since all
of the investable assets of the fund are in the portfolio, the portfolio is
party to certain covenants of the Agreement. The Agreement expired on May 26,
2000, however, the fund as party to the Agreement has renewed the Agreement and
will continue its participation therein for an additional 364 days until
May 23, 2001. The maximum borrowing under the Agreement is $150,000,000. The
purpose of the Agreement is to provide another alternative for settling large
fund shareholder redemptions. Interest on any such borrowings outstanding will
approximate market rates. The funds pay a commitment fee at an annual rate of
0.085% on the unused portion of the committed amount. This is allocated to the
funds in accordance with procedures established by their respective trustees.
There were no outstanding borrowings pursuant to the Agreement at April 30,
2000.
17
<PAGE>
The Global Strategic Income Portfolio
Semiannual Report April 30, 2000
(unaudited)
(The following pages should be read in conjunction
with J.P. Morgan Global Strategic Income Fund
Semiannual Financial Statements)
18
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT{::} SECURITY DESCRIPTION RATING VALUE
---------------- ----------------------------------------------------------------- ------------ -------------
<C> <S> <C> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS AND ASSET BACKED SECURITIES (11.8%)
FINANCIAL SERVICES (11.8%)
$ 110,699 Home Mac Mortgage Securities Corp., Series 1985-1, secured by
GNMA, 11.375% due 08/01/15..................................... NR/NR $ 109,039
57,488 Salomon Brothers Mortgage Securities V, Inc., Series 1985-1,
secured by GNMA, 12.000% due 04/01/15.......................... NR/NR 57,488
1,495,343 Chase Manhattan Bank - First Union National, Sequential Payer,
Series 1999-1, Class A1, 7.134% due 07/15/07................... NR/AAA 1,465,905
500,000 Comm, Subordinated Bond, Series 2000-FL1A, Class H, (144A),
7.410% due 03/16/03(v)......................................... Baa3/NR 487,460
12,180,890 CS First Boston Mortgage Securities Corp, REMIC:IO, CSTR, NTL,
Series 1997-2, Class X, (144A), 1.013% due 06/25/20(v)......... NR/NR 216,978
1,500,000 CS First Boston Mortgage Securities Corp., Series 1999-C1, Class
A2, Sequential Payer, 7.290% due 09/15/09...................... Aaa/NR 1,476,094
588,367 DLJ Mortgage Acceptance Corp., CSTR, Series 1997-D, (144A),
8.250% due 07/25/27(v)......................................... NR/NR 538,356
3,529,056 Federal National Mortgage Association, PO, Series 1994-53, Class
G, Zero Coupon, 2.112%(y) due 11/25/23......................... NR/NR 2,150,501
1,383,146 First Union Commercial Mortgage Trust, Sequential Payer, Series
1999-C1, Class A1, 5.730% due 01/15/08......................... NR/AAA 1,290,216
1,500,000 GMAC Commercial Mortgage Securities Inc., Sequential Payer,
Series 1998-C2, Class A2, 6.420% due 08/15/08.................. Aaa/AAA 1,386,094
2,500,000 Green Tree Financial Corp., Subordinated Bond, Series 1999-2,
Class B1, 8.410% due 12/01/30.................................. NR/BBB+ 2,221,875
2,000,000 Green Tree Financial Corp., Subordinated Bond, Series 1999-3,
Class B1, 8.370% due 02/01/31.................................. NR/BBB+ 1,773,740
1,200,000 Heller Financial Commercial Mortgage Asset Co., Sequential Payer,
Series 1999-PH1, Class A2, 6.847% due 05/15/31................. Aaa/NR 1,136,437
1,500,000 Morgan Stanley Capital I, Inc., Sequential Payer, Series
1998-XL1, Class A3, 6.480% due 06/03/30........................ NR/AAA 1,398,750
1,661,015 Morgan Stanley Capital I, Inc., Sequential Payer, Series
1999-WF-1, Class A1, 5.910% due 04/15/08....................... Aaa/NR 1,559,797
1,000,000 Morgan Stanley Capital I, Inc., Subordinated Bond, Series
1997-XL1, Class G, (144A), 7.695% due 10/03/30................. Ba3/BB 821,094
300,000 Morgan Stanley Capital I, Inc., Subordinated Bond, CSTR,
Series 2000-HG, Class E, (144A), 7.932% due 12/03/05(v)........ Baa2/NR 293,062
1,440,000 Nomura Asset Securities Corp., Sequential Payer, Series 1998-D6,
Class A1B, 6.590% due 03/17/28................................. Aaa/AAA 1,305,000
------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS AND ASSET BACKED
SECURITIES (COST $20,994,060).............................. 19,687,886
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT{::} SECURITY DESCRIPTION RATING VALUE
---------------- ----------------------------------------------------------------- ------------ -------------
<C> <S> <C> <C>
CORPORATE OBLIGATIONS (19.2%)
AEROSPACE (0.6%)
$ 500,000 Northrop-Grumman Corp., 9.375% due 10/15/24...................... Baa3/BBB- $ 500,670
500,000 Truserv Corp., 10.100% due 07/01/08(f)........................... NR/NR 446,100
------------
946,770
------------
AGRICULTURE (0.3%)
500,000 Scotts Co., (144A), 8.625% due 01/15/09.......................... B2/B+ 475,000
------------
AUTOMOTIVE SUPPLIES (0.2%)
400,000 Federal-Mogul Corp., 7.500% due 01/15/09......................... Ba2/BB+ 304,804
------------
BANKING (0.5%)
750,000 First Union Corp., 8.125% due 06/24/02........................... A2/A- 757,597
------------
BROADCASTING & PUBLISHING (1.3%)
400,000 American Media Operation, Inc., 10.250% due 05/01/09............. B2/B- 382,000
400,000 AMFM, Inc., 9.250% due 07/01/07.................................. B1/B 401,000
400,000 AMFM, Inc., Series B, 8.750% due 06/15/07........................ B1/B 399,000
500,000 Echostar DBS Corp., 9.375% due 02/01/09.......................... B2/B 480,000
600,000 Emmis Communications Corp., Series B, 8.125% due 03/15/09........ B2/B- 564,000
------------
2,226,000
------------
CHEMICALS (0.2%)
300,000 Huntsman ICI Chemicals, 10.125% due 07/01/09..................... B2/B+ 297,000
------------
COMPUTER SOFTWARE (0.9%)
500,000 PSINet, Inc., 10.500% due 12/01/06............................... B3/B- 440,000
500,000 PSINet, Inc., Series B, 10.000% due 02/15/05..................... B3/B- 440,000
700,000 Verio, Inc., 11.250% due 12/01/08................................ B3/B- 698,250
------------
1,578,250
------------
ELECTRIC (0.4%)
300,000 Calpine Corp., 7.875% due 04/01/08............................... Ba1/BB+ 282,000
400,000 CMS Energy Corp., Series B, 6.750% due 01/15/04.................. Ba3/BB 374,380
------------
656,380
------------
ELECTRONICS (0.1%)
355,000 Protection One Alarm Monitoring, Inc., 7.375% due 08/15/05....... B2/B+ 244,950
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT{::} SECURITY DESCRIPTION RATING VALUE
---------------- ----------------------------------------------------------------- ------------ -------------
<C> <S> <C> <C>
ENERGY (0.2%)
$ 400,000 Cogentrix Energy, Inc., 8.750% due 10/15/08...................... Ba1/BB+ $ 392,000
------------
ENTERTAINMENT, LEISURE & MEDIA (2.0%)
700,000 Ackerly Group, Inc., Series B, 9.000% due 01/15/09............... B2/B 658,000
500,000 CSC Holdings, Inc., 10.500% due 05/15/16......................... Ba3/BB- 541,250
750,000 Destination Film Funding Corp., (144A), 6.250% due 10/15/03...... NR/NR 695,100
500,000 Fox Family Worldwide, Inc., 9.250% due 11/01/07.................. B1/B 435,000
450,000 Lamar Media Corp., 8.625% due 09/15/07........................... B1/B 418,500
700,000 Premier Parks, Inc., 12.206%(y) due 04/01/08(v).................. B3/B- 455,000
200,000 Time Warner Telecom LLC, 9.750% due 07/15/08..................... B2/B 197,500
------------
3,400,350
------------
FINANCIAL SERVICES (2.1%)
325,000 Enterprise Rent-a-Car USA Finance Co., MTN, (144A), 9.125% due
12/15/04....................................................... Baa1/BBB+ 338,179
1,000,000 Ford Motor Credit Co., 7.375% due 10/28/09....................... A2/A 969,000
1,500,000 Ford Motor Credit Co., 7.500% due 03/15/05....................... A2/A 1,480,965
750,000 Sears Roebuck Acceptance Corp., 6.750% due 09/15/05.............. A3/A- 704,205
------------
3,492,349
------------
FOOD, BEVERAGES & TOBACCO (0.3%)
500,000 Aurora Foods, Inc., Series B, 8.750% due 07/01/08................ Caa1/CCC+ 285,000
350,000 Smithfield Foods, Inc., 7.625% due 02/15/08...................... Ba3/BB+ 304,937
------------
589,937
------------
HEALTH SERVICES (0.6%)
700,000 Mariner Post-Acute Network, Inc., Series B, 9.500% due
04/01/06{/\}................................................... C/D 3,500
565,000 McKesson HBOC, Inc., 6.400% due 03/01/08......................... Baa2/BBB 443,785
500,000 Triad Hospitals Holdings, Inc., Series B, 11.000% due 05/15/09... B3/B- 520,000
------------
967,285
------------
INSURANCE (0.4%)
695,000 Prudential Insurance Co., (144A), 6.375% due 07/23/06............ A2/A+ 636,808
------------
MANUFACTURING (0.3%)
500,000 Polymer Group, Inc., Series B, 9.000% due 07/01/07............... B2/B 455,000
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT{::} SECURITY DESCRIPTION RATING VALUE
---------------- ----------------------------------------------------------------- ------------ -------------
<C> <S> <C> <C>
METALS & MINING (0.7%)
$ 400,000 P&L Coal Holdings Corp., Series B, 9.625% due 05/15/08........... B2/B $ 356,000
600,000 Ryerson Tull, Inc., 8.500% due 07/15/01.......................... Baa3/BBB 594,000
100,000 Ryerson Tull, Inc., 9.125% due 07/15/06.......................... Baa3/BBB 97,500
120,000 WHX Corp., 10.500% due 04/15/05.................................. B3/B- 109,200
------------
1,156,700
------------
MISCELLANEOUS CONSUMER GOODS (0.2%)
400,000 Sun World International, Inc., Series B, 11.250% due 04/15/04.... B2/B 374,000
------------
NATURAL GAS (0.5%)
100,000 Ras Laffan Liquified Natural Gas, (144A), 8.294% due 03/15/14.... Baa3/BBB+ 93,120
750,000 Williams Companies, Inc., 6.200% due 08/01/02.................... Baa2/BBB- 725,902
------------
819,022
------------
OIL-PRODUCTION (0.5%)
300,000 Ocean Energy, Inc., Series B, 8.875% due 07/15/07................ Ba3/BB- 295,500
300,000 Pogo Producing Co., Series B, 10.375% due 02/15/09............... B2/BB- 306,000
350,000 Range Resources Corp., 8.750% due 01/15/07....................... B3/B- 300,125
------------
901,625
------------
OIL-SERVICES (1.0%)
500,000 Lasmo (USA), Inc., 7.500% due 06/30/06........................... Baa2/BBB 473,945
1,000,000 Newpark Resources, Inc., Series B, 8.625% due 12/15/07........... B2/B+ 857,500
289,873 Oil Purchase Co., (144A), 7.100% due 04/30/02.................... Ba2/BBB- 276,829
------------
1,608,274
------------
PACKAGING & CONTAINERS (0.6%)
500,000 Riverwood International Corp., 10.625% due 08/01/07.............. B3/B- 492,500
500,000 Stone Container Corp., 12.250% due 04/01/02(v)................... B3/B- 502,500
------------
995,000
------------
PRINTING & PUBLISHING (0.5%)
800,000 TV Guide, Inc., 8.125% due 03/01/09.............................. Ba3/B+ 784,000
------------
TELECOMMUNICATIONS (3.9%)
500,000 Adelphia Communications, Inc., Series B, 8.125% due 07/15/03..... B1/NR 462,500
500,000 Alaska Communications Systems, 9.375% due 05/15/09............... B3/B+ 451,250
400,000 Charter Communications Holdings LLC, , 13.644%(y) due
04/01/11(v).................................................... B2/B+ 220,000
250,000 Charter Communications Holdings LLC, 10.000% due 04/01/09........ B2/B+ 240,000
650,000 Crown Castle Int'l Corp., 11.738%(y) due 05/15/11(v)............. B3/B 383,500
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT{::} SECURITY DESCRIPTION RATING VALUE
---------------- ----------------------------------------------------------------- ------------ -------------
<C> <S> <C> <C>
TELECOMMUNICATIONS (CONTINUED)
$ 200,000 Intermedia Communications, Inc., Series B, 8.500% due 01/15/08... B2/B $ 182,000
200,000 Intermedia Communications, Inc., Series B, 9.500% due 03/01/09... B2/B 190,000
300,000 ITC Deltacom, Inc., 8.875% due 03/01/08.......................... B2/B+ 279,000
200,000 ITC Deltacom, Inc., 9.750% due 11/15/08.......................... B2/B+ 194,000
300,000 Level 3 Communications, 9.125% due 05/01/08...................... B3/B 260,250
500,000 Metromedia Fiber Network, Inc., Series B, 10.000% due 11/15/08... B2/B+ 478,750
325,000 McLeodUSA, Inc., 9.500% due 11/01/08............................. B1/B+ 315,250
300,000 Nextlink Communications, 10.750% due 11/15/08.................... B2/B 294,000
100,000 Nextlink Communications, 12.500% due 04/15/06.................... B2/B 104,000
500,000 Nextel Communications, 9.375% due 11/15/09....................... B1/B 473,750
500,000 NTL Communications Corp., Series B, 11.500% due 10/01/08......... B3/B- 506,250
450,000 RCN Corp., 10.000% due 10/15/07.................................. B3/B- 405,000
400,000 RCN Corp., Series B, 13.768%(y) due 02/15/08(v).................. B3/B- 237,000
600,000 Tritel PCS, Inc., 4.646%(y) due 05/15/09(v)...................... B3/NR 396,000
400,000 Voicestream Wireless Co. (144A), 10.375% due 11/15/09............ B2/B- 408,000
------------
6,480,500
------------
TELEPHONE (0.2%)
440,000 Viatel, Inc., 11.250% due 04/15/08............................... B3/B- 391,600
------------
TRANSPORT & SERVICES (0.3%)
500,000 Atlantic Express Transportation Corp., 10.750% due 02/01/04...... B2/B 450,000
------------
UTILITIES (0.4%)
750,000 Kincaid Generation LLC, (144A), 7.330% due 06/15/20.............. Baa3/BBB- 661,762
------------
TOTAL CORPORATE OBLIGATIONS (COST $35,084,287)............... 32,042,963
------------
FOREIGN CORPORATE OBLIGATIONS (5.6%)
ARGENTINA (0.2%)
BROADCASTING & PUBLISHING
300,000 Cablevision SA, 13.750% due 05/01/09............................. B1/BB 286,875
------------
AUSTRALIA (0.2%)
BANKING
300,000 National Australia Bank Ltd., 6.600% due 12/10/07................ A1/AA- 279,108
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
23
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT{::} SECURITY DESCRIPTION RATING VALUE
---------------- ----------------------------------------------------------------- ------------ -------------
<C> <S> <C> <C>
BERMUDA (0.7%)
TELECOMMUNICATIONS
$ 615,000 Flag Ltd., 8.250% due 01/30/08................................... Ba3/BB- $ 547,350
600,000 Global Crossing Holdings Ltd., Inc. (144A), 9.125% due
11/15/06....................................................... Ba2/BB 583,500
------------
1,130,850
------------
BRAZIL (0.1%)
METALS & MINING
100,000 CSN Iron SA, 9.125% due 06/01/07................................. B2/NR 82,500
------------
TELECOMMUNICATIONS
100,000 Globo Communicacoes Participacoes, 10.625% due 12/05/08.......... B2/NR 84,000
------------
166,500
------------
CANADA (1.2%)
TELECOMMUNICATIONS
275,000 Call-Net Enterprises, Inc., 17.450%(y) due 08/15/07(v)........... B2/B+ 137,500
465,000 Clearnet Communications, Inc., 10.543%(y) due 12/15/05(v)........ B3/B 467,325
510,000 Microcell Telecommunications, Inc., Series B , 11.093%(y) due
06/01/06(v).................................................... B3/NR 459,000
500,000 Rogers Cablesystems Ltd., 10.000% due 12/01/07................... Ba1/BB+ 522,500
350,000 Worldwide Fiber, Inc., 12.500% due 12/15/05...................... B3/B+ 351,750
------------
1,938,075
------------
TRANSPORT & SERVICES
200,000 Laidlaw, Inc., 6.650% due 10/01/04............................... B2/BB- 76,000
110,000 Laidlaw, Inc., 6.720% due 10/01/27............................... B2/BB- 37,400
------------
113,400
------------
2,051,475
------------
COLOMBIA (0.1%)
BANKING
225,000 Financiera Energetica Nacional, (144A), 9.375% due 06/15/06...... NR/BB+ 177,750
------------
INDONESIA (0.1%)
CHEMICALS
250,000 Reliance Industries Ltd., (144A), 10.375% due 06/24/16........... Ba2/BB 244,690
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
24
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT{::} SECURITY DESCRIPTION RATING VALUE
---------------- ----------------------------------------------------------------- ------------ -------------
<C> <S> <C> <C>
KOREA (0.5%)
BANKING
$ 400,000 Cho Hung Bank, (144A), 11.500% due 04/01/10(v)................... B1/B+ $ 392,000
400,000 Hanvit Bank, (144A), 11.750% due 03/01/10(v)..................... B1/B 392,500
------------
784,500
------------
LIBERIA (0.2%)
TRANSPORT & SERVICES
400,000 Teekay Shipping Corp., 8.320% due 02/01/08....................... Ba2/BB+ 366,000
------------
MEXICO (0.2%)
BROADCASTING & PUBLISHING
100,000 Grupo Televisa SA, 11.123%(y) due 05/15/08(v).................... Baa3/BB+ 98,326
100,000 TV Azteca SA de CV, Series B, 10.500% due 02/15/07............... B1/B+ 91,250
------------
189,576
------------
TELECOMMUNICATIONS
100,000 Grupo Iusacell SA de CV, (144A), 14.250% due 12/01/06............ B1/B+ 105,750
------------
295,326
------------
NETHERLANDS (0.3%)
TELECOMMUNICATIONS
400,000 United Pan-Europe Communications, (144A), 10.875% due 11/01/07... B2/B 374,000
100,000 Turkcell Iletisim Hizmet, (144A), 12.750% due 08/01/05........... B1/B 102,250
------------
476,250
------------
PHILIPPINES (0.2%)
TELECOMMUNICATIONS
250,000 Globe Telecom, (144A), 13.000% due 08/01/09...................... B1/B 267,500
------------
UTILITIES
50,000 Ce Casecnan Water & Energy, Inc., Series B, 11.950% due
11/15/10....................................................... Ba2/BB+ 46,000
------------
313,500
------------
POLAND (0.1%)
TELECOMMUNICATIONS
250,000 PTC International Finance II SA., (144A), 11.250% due 12/01/09... B2/B+ 260,000
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
25
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT{::} SECURITY DESCRIPTION RATING VALUE
---------------- ----------------------------------------------------------------- ------------ -------------
<C> <S> <C> <C>
SPAIN (0.6%)
BANKING
$ 1,000,000 BSCH Issuance Ltd., 7.625% due 11/03/09.......................... A1/A $ 980,540
------------
UNITED KINGDOM (0.9%)
CHEMICALS
300,000 Avecia Group PLC, 11.000% due 07/01/09........................... B2/B 306,000
------------
UTILITIES
750,000 United Utilities PLC, 6.250% due 08/15/05........................ A3/BBB+ 684,855
------------
WATER
500,000 Anglian Water PLC, Series B , 6.840% due 01/15/13(f)............. NR/NR 448,800
------------
1,439,655
------------
TOTAL FOREIGN CORPORATE OBLIGATIONS (COST $9,658,213)........ 9,253,019
------------
PRIVATE PLACEMENT (10.1%)
FINANCIAL SERVICES (0.4%)
734,415 Huntington National Bank Republic, 7.240% due 12/05/20(f)........ NR/NR 653,291
------------
METALS & MINING (0.3%)
23,077 P&L Coal Holdings Corp., Tranche 1, 8.563% due 06/04/06(v)....... NR/NR 22,990
115,385 P&L Coal Holdings Corp., Tranche 2, 7.688% due 06/04/06(v)....... NR/NR 114,952
307,692 P&L Coal Holdings Corp., Tranche 3, 8.688% due 06/04/06(v)....... NR/NR 305,923
------------
443,865
------------
OIL-PRODUCTION (0.2%)
163,187 Amerada Hess Corp. Leveraged Lease, 7.330% due 01/01/14(f)....... NR/NR 154,504
320,715 Amerada Hess Corp. Leveraged Lease, Series A, 6.140% due
01/01/14(f).................................................... NR/NR 282,479
------------
436,983
------------
REAL ESTATE (9.2%)
2,902,040 127-129-131 West 96th St. Corp. (1st Mortgage Agreement on
Cooperative Building in
New York City), 6.850% due 12/01/18(f)......................... NR/NR 2,702,235
1,076,288 14-16 East 17th St. (1st Mortgage Agreement on Cooperative
Building in New York City), 7.000% due 03/01/21(f)............. NR/NR 1,005,738
1,537,983 270 Fifth Ave. (1st Mortgage Agreement on Cooperative Building in
Brooklyn, New York), 6.930% due 09/01/18(f).................... NR/NR 1,441,306
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
26
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT{::} SECURITY DESCRIPTION RATING VALUE
---------------- ----------------------------------------------------------------- ------------ -------------
<C> <S> <C> <C>
REAL ESTATE (CONTINUED)
$ 484,295 31-33 Mercer Street (1st Mortgage Agreement on Cooperative
Building in New York City), 7.490% due 04/01/23(f)............. NR/NR $ 468,545
610,082 3512 Oxford Avenue (1st Mortgage Agreement on Cooperative
Building in Riverdale, New York), 8.450% due 06/01/17(f)....... NR/NR 631,435
610,295 3810 Greystone Avenue (1st Mortgage Agreement on Cooperative
Building in Riverdale, New York), 8.500% due 06/01/17(f)....... NR/NR 627,438
797,479 421 West 57th Street (1st Mortgage Agreement on Cooperative
Building in New York City), 8.980% due 07/01/22(f)............. NR/NR 854,252
483,673 482 East 9th Street, Kensington Gardens Corp. (1st Mortgage
Agreement on Cooperative Building in New York City), 6.850% due
12/01/18(f).................................................... NR/NR 447,330
594,183 86-06/86-42 155th Ave., Dartmouth Cooperative Corp. (1st Mortgage
Agreement on Cooperative Building in Howard Beach, New York),
7.000% due 01/01/14(f)......................................... NR/NR 562,258
1,586,045 PC Bel Clare Estates, 33 Claroma St., St. Joseph Township,
Minnesota, 6.930% due 09/01/18(f).............................. NR/NR 1,465,997
1,347,681 PC Northstar Terrace, 101 Jupiter Drive, East Grand Forks,
Minnesota, 6.625% due 10/01/18(f).............................. NR/NR 1,209,679
1,623,287 PC Shangri-La, 3526 North Cascade Ave., Colorado Springs,
Colorado, 6.520% due 10/01/08(f)............................... NR/NR 1,464,156
1,290,020 PC Three Lakes Estates, 2151 Three Lakes Road, Albany, Oregon,
6.180% due 10/01/13(f)......................................... NR/NR 1,110,372
1,386,904 Walgreen-Benderson, 7.625% due 11/15/13(f)....................... NR/NR 1,318,308
------------
15,309,049
------------
TOTAL PRIVATE PLACEMENT (COST $17,976,914)................... 16,843,188
------------
SOVEREIGN GOVERNMENTS AND AGENCIES (31.8%)
ARGENTINA (1.8%)
190,000 City of Buenos Aires (144a), 11.250% due 04/11/07................ B1/NR $ 175,275
726,400 Republic of Argentina Bearer Bonds, Series FRB, 7.375% due
03/31/05(v).................................................... B1/BB 675,552
81,102 Republic of Argentina Bocon, Series Pre-4, 6.131% due
09/01/02(v).................................................... B1/NR 78,396
509,603 Republic of Argentina Bocon, Series Pro-2, 6.178% due
04/01/07(v).................................................... B1/NR 447,036
400,000 Republic of Argentina Discount Bonds Series L-GL, 6.875% due
03/31/23(v).................................................... B1/BB 340,500
125,000 Republic of Argentina Global Bonds, 9.750% due 09/19/27.......... B1/BB 104,750
200,000 Republic of Argentina Global Bonds, 11.375% due 03/15/10......... B1/BB 192,000
210,000 Republic of Argentina Global Bonds, 12.000% due 02/01/20......... B1/BB 207,375
350,000 Republic of Argentina Global Bonds, 12.125% due 02/25/19......... B1/BB 345,975
250,000 Republic of Argentina Global Bonds, Series BGL5, 11.375% due
01/30/17....................................................... B1/BB 238,000
240,000 Republic of Argentina Par Bonds, Series L-GP, 6.000% due
03/31/23(v).................................................... B1/BB 167,700
------------
2,972,559
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
27
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT{::} SECURITY DESCRIPTION RATING VALUE
---------------- ----------------------------------------------------------------- ------------ -------------
<C> <S> <C> <C>
BRAZIL (2.6%)
$ 760,000 Republic of Brazil Bearer Bonds, Series NMB-L, 7.43% due
04/15/09(v).................................................... B2/B+ $ 623,200
1,054,087 Republic of Brazil C Bonds, Series 20 Year, 8.000% due
04/15/14....................................................... B2/B+ 755,649
92,356 Republic of Brazil C Bonds, Series L, 8.000% due 04/15/14........ B2/B+ 66,208
180,000 Republic of Brazil DCB L, Series RG, 7.438% due 04/15/12(v)...... B2/B+ 129,600
450,000 Republic of Brazil Discount Bonds, Series 30 Year ZL, 7.375% due
04/15/24(v).................................................... B2/NR 347,625
250,000 Republic of Brazil Global Bonds, 10.125% due 05/15/27............ B2/B+ 193,750
100,000 Republic of Brazil Global Bonds, 11.625% due 04/15/04............ B2/B+ 99,000
500,000 Republic of Brazil Global Bonds, 12.750% due 01/15/20............ B2/B+ 479,250
676,000 Republic of Brazil Global Bonds, 14.500% due 10/15/09............ B2/B+ 712,166
200,000 Republic of Brazil Par Bonds, Series Z-L 30 Year, 6.000% due
04/15/24(v).................................................... B2/B+ 127,500
967,200 Republic of Brazil, Series EI-L, 7.375% due 04/15/06(v).......... B2/B+ 863,226
------------
4,397,174
------------
BULGARIA (1.3%)
1,500,000 Republic of Bulgaria Discount Bonds, Series A, 7.063% due
07/28/24(v).................................................... B2/NR 1,147,500
600,000 Republic of Bulgaria FLIRB Bearer Bonds, Series A, 2.750% due
07/28/12(v).................................................... B2/NR 417,000
225,000 Republic of Bulgaria Registered IAB, Series RPDI, 7.063% due
07/28/11(v).................................................... B2/NR 169,875
630,000 Republic of Bulgaria IAB, Series PDI, 7.063% due 07/28/11(v)..... B2/NR 475,650
------------
2,210,025
------------
CANADA (0.4%)
CAD 980,000 Government of Canada, Series WH31, 6.000% due 06/01/08(s)........ Aa1/AAA 653,724
------------
COLOMBIA (0.7%)
400,000 Republic of Colombia, 9.750% due 04/23/09........................ Ba2/BB+ 314,000
150,000 Republic of Colombia, 10.875% due 03/09/04....................... Ba2/BB+ 140,250
400,000 Republic of Colombia, 11.750% due 02/25/20....................... Ba2/BB+ 339,000
200,000 Republic of Colombia, Series NOV, 9.750% due 04/23/09............ Ba2/BB+ 174,000
150,000 Republic of Colombia, Series REGS, 7.270% due 06/15/03........... Ba2/BB+ 133,350
------------
1,100,600
------------
DENMARK (0.7%)
DKK 9,265,000 Kingdom of Denmark, 8.000% due 05/15/03(s)....................... Aaa/AAA 1,213,628
------------
FRANCE (7.4%)
EURO 2,970,000 BTAN, Five-Year French Treasury Note, 3.500% due 07/12/04(s)..... Aaa/NR 2,557,004
EURO 2,155,857 BTAN, Five-Year French Treasury Note, 4.750% due 03/12/02(s)..... Aaa/NR 1,968,638
EURO 6,830,000 BTAN, Two-Year French Treasury Note, 3.000% due 07/12/01(s)...... Aaa/NR 6,121,420
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
28
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT{::} SECURITY DESCRIPTION RATING VALUE
---------------- ----------------------------------------------------------------- ------------ -------------
<C> <S> <C> <C>
FRANCE (CONTINUED)
EURO 819,000 Government of France, 4.000% due 04/25/09(s)..................... Aaa/AAA $ 674,291
EURO 1,080,000 Government of France, 6.000% due 10/25/25(s)..................... Aaa/AAA 1,025,872
------------
12,347,225
------------
GERMANY (3.3%)
EURO 1,448,098 Republic of Germany, Series 124, 4.500% due 08/19/02(s).......... Aaa/AAA 1,313,700
EURO 2,650,000 Republic of Germany, Series 97, 6.000% due 01/04/07(s)........... Aaa/NR 2,513,081
EURO 1,895,000 Republic of Germany, Series 98, 5.625% due 01/04/28(s)........... Aaa/AAA 1,709,195
------------
5,535,976
------------
ITALY (3.1%)
EURO 2,590,000 Government of Italy, 3.000% due 02/15/02(s)...................... Aa3/AA 2,290,736
EURO 2,655,000 Government of Italy, 3.250% due 04/15/04(s)...................... Aa3/AA 2,260,161
EURO 600,000 Government of Italy, 7.250% due 11/01/26(s)...................... Aa3/AA 642,482
------------
5,193,379
------------
JAPAN (0.4%)
JPY 75,000,000 Government of Japan 10 Year, Series 217, 1.800% due
12/21/09(s).................................................... Aa1/AAA 692,228
------------
LEBANON (0.1%)
$ 150,000 Republic of Lebanon, (144A), 10.250% due 10/06/09................ B1/BB- 150,000
------------
MEXICO (3.1%)
200,000 Banco Nacional Obra Serv, 9.625% due 11/15/03.................... Baa3/BB+ 202,500
200,000 Petroleos Mexicanos, 8.850% due 09/15/07......................... Baa3/BB+ 192,000
400,000 Petroleos Mexicanos, 9.500% due 09/15/27......................... Baa3/BB+ 386,000
350,000 Petroleos Mexicanos, Series P, 9.500% due 09/15/27............... Baa3/BB+ 350,437
250,000 United Mexican States Discount Bonds, Series D, 6.903% due
12/31/19(v).................................................... Baa3/BB+ 245,000
500,000 United Mexican States Global Bonds, 8.625% due 03/12/08.......... Baa3/BB+ 476,750
665,000 United Mexican States Global Bonds, 9.875% due 01/15/07.......... Baa3/BB+ 683,288
475,000 United Mexican States Global Bonds, 11.375% due 09/15/16......... Baa3/BB+ 536,750
385,000 United Mexican States Global Bonds, 11.500% due 05/15/26......... Baa3/BB+ 455,263
775,000 United Mexican States Global Bonds, Series XW, 10.375% due
02/17/09....................................................... Baa3/BB+ 814,525
250,000 United Mexican States Par Bonds, Series W-A, 6.250% due
12/31/19....................................................... Baa3/BB+ 205,625
350,000 United Mexican States Par Bonds, Series W-B, 6.250% due
12/31/19....................................................... Baa3/BB+ 287,875
400,000 United Mexican States, Series B, 6.943% due 12/31/19(v).......... Baa3/BB+ 392,000
------------
5,228,013
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
29
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT{::} SECURITY DESCRIPTION RATING VALUE
---------------- ----------------------------------------------------------------- ------------ -------------
<C> <S> <C> <C>
MOROCCO (0.3%)
$ 558,421 Kingdom of Morocco Restructuring & Consolidation Agreement,
Series A, 6.844% due 01/01/09(v)............................... NR/NR $ 498,391
------------
NETHERLANDS (0.7%)
EURO 1,280,000 Government of the Netherlands, Series 1 & 2, 6.000% due
01/15/06(s).................................................... Aaa/AAA 1,209,705
------------
PANAMA (1.0%)
200,000 Republic of Panama Global Bonds, 8.250% due 04/22/08............. Ba1/BB+ 177,000
200,000 Republic of Panama Global Bonds, 8.875% due 09/30/27............. Ba1/BB+ 168,500
225,000 Republic of Panama Global Bonds, 9.375% due 04/01/29............. Ba1/BB+ 211,500
840,000 Republic of Panama IRB, Series 18 Year, 4.250% due 07/17/14(v)... Ba1/BB+ 661,500
464,716 Republic of Panama PDI, Series 20 Year, 7.063% due 07/17/16(v)... Ba1/BB+ 374,097
------------
1,592,597
------------
PERU (1.0%)
400,000 Republic of Peru Discount Bonds, Series 30 Year, 7.188% due
03/08/27(v).................................................... Ba3/BB 272,000
525,000 Republic of Peru FLIRB, Series 20 Year , 3.750% due
03/07/17(v).................................................... Ba3/BB 320,250
1,500,000 Republic of Peru PDI, Series 20 Year, 4.500% due 03/07/17(v)..... Ba3/BB 1,003,125
------------
1,595,375
------------
PHILIPPINES (0.8%)
350,000 Bangko Sentral Pilipinas, 8.600% due 06/15/27.................... Ba1/BB+ 262,500
265,000 Republic of Philippines Global Bonds, 8.875% due 04/15/08........ Ba1/BB+ 242,475
620,000 Republic of Philippines Global Bonds, 9.875% due 01/15/19........ Ba1/BB+ 548,700
293,900 Republic of Philippines Global Bonds, 10.625% due 03/16/25....... Ba1/BB+ 271,490
------------
1,325,165
------------
QATAR (0.1%)
100,000 State of Qatar, (144A), 9.500% due 05/21/09...................... Baa2/BBB 103,000
------------
SOUTH AFRICA (0.1%)
200,000 Republic of South Africa, 9.125% due 05/19/09.................... Baa3/BBB- 193,000
------------
SWEDEN (0.4%)
SEK 5,800,000 Government of Sweden, Series 1039, 5.500% due 04/12/02(s)........ NR/AAA 653,153
------------
TRINIDAD AND TOBAGO (0.3%)
450,000 Republic of Trinidad and Tobago, (144A), 9.875% due 10/01/09..... Baa3/BBB- 463,500
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
30
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT{::} SECURITY DESCRIPTION RATING VALUE
---------------- ----------------------------------------------------------------- ------------ -------------
<C> <S> <C> <C>
TURKEY (1.1%)
$ 1,000,000 Republic of Turkey, 11.875% due 01/15/30......................... B1/B+ $ 1,081,250
220,000 Republic of Turkey, 12.000% due 12/15/08......................... B1/B+ 234,575
450,000 Republic of Turkey, 12.375% due 06/15/09......................... B1/B+ 484,875
------------
1,800,700
------------
UNITED KINGDOM (0.9%)
450,000 United Kingdom Treasury Gilt, 6.750% due 11/26/04(s)............. Aaa/AAA 731,576
444,000 United Kingdom Treasury Gilt, 7.250% due 12/07/07(s)............. Aaa/AAA 766,979
------------
1,498,555
------------
VENEZUELA (0.2%)
190,475 Republic of Venezuela DCB, Series DL , 7.000% due 12/18/07(v).... B2/B 149,166
250,000 Republic of Venezuela Par, Series W-A, 6.750% due 03/31/20....... B2/B 174,375
------------
323,541
------------
TOTAL SOVEREIGN GOVERNMENTS AND AGENCIES (COST
$53,794,520)............................................... 52,951,213
------------
U.S. GOVERNMENT AGENCY OBLIGATIONS (1.4%)
FEDERAL NATIONAL MORTGAGE ASSOCIATION (1.4%)
2,300,000 TBA, May, 8.000% due 05/01/30 (cost $2,310,780).................. 2,296,412
------------
U.S. TREASURY OBLIGATIONS (1.3%)
U.S. TREASURY BONDS (0.1%)
85,000 United States Treasury Bonds, 5.500% due 08/15/28................ 77,204
150,000 United States Treasury Bonds, 6.125% due 08/15/29................ 150,351
------------
227,555
------------
U.S. TREASURY NOTES (1.2%)
150,000 United States Treasury Notes, 4.250% due 11/15/03................ 139,149
1,700,000 United States Treasury Notes, 6.250% due 02/28/02................ 1,686,723
100,000 United States Treasury Notes, 6.625% due 05/15/07................ 100,656
55,000 United States Treasury Notes, 6.875% due 05/15/06................ 55,894
------------
1,982,422
------------
TOTAL U.S. TREASURY OBLIGATIONS (COST $2,264,393)............ 2,209,977
------------
RIGHTS (0.0%)
MEXICO (0.0%)
768,000 United Mexican States Value Recovery, Series A Par, Expiring
06/20/03 (cost $0) (+)......................................... 0
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
31
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT{::} SECURITY DESCRIPTION VALUE
---------------- ------------------------------------------------------------------------------- -------------
<C> <S> <C>
SHORT-TERM INVESTMENTS (22.2%)
OTHER INVESTMENT COMPANIES (11.7%)
$ 19,597,473 J.P. Morgan Institutional Prime Money Market Fund.............................. $ 19,597,473
------------
SOVEREIGN BONDS (0.0%)
42,054 Republic of Argentina Bocon, Series Pre-2, 6.1308% due 4/1/01(v)............... 41,559
------------
TIME DEPOSITS (10.2%)
17,000,000 Bank of New York, 5.875% due 5/3/00(s)......................................... 17,000,000
------------
U.S. TREASURY OBLIGATIONS (0.3%)
310,000 United States Treasury Bills, 6.11%(y) due 10/12/00(s)......................... 301,723
140,000 United States Treasury Notes, 5.625% due 11/30/00.............................. 139,387
------------
441,110
------------
TOTAL SHORT-TERM INVESTMENTS (COST $37,079,604)............................ 37,080,142
------------
TOTAL INVESTMENTS (COST $179,162,771) (103.4%)................................. 172,364,800
LIABILITIES IN EXCESS OF OTHER ASSETS (-3.4%).................................. (5,592,611)
------------
NET ASSETS (100.0%)............................................................ $166,772,189
============
</TABLE>
------------------------------
Note: Based on the cost of investments of $179,162,771 for federal income tax
purposes at April 30, 2000, the aggregate gross unrealized appreciation and
depreciation was $1,779,617 and $8,577,588, respectively, resulting in net
unrealized depreciation of $6,797,971.
+ Non-income producing security.
(f) Fair valued security. Approximately 10.03% of the market value of the
securities have been valued at fair value. (See Note 1a)
(s)Security is fully or partially segregated with custodian as collateral for
TBA and when issued securities or futures contracts or with broker as initial
margin for futures contracts, $18,722,910 of the market value has been
segregated.
(v) Rate shown reflects current rate on variable or floating rate instrument or
instrument with step-up coupon rate.
(y) Yield to maturity.
{/\} Defaulted security.
{::} Denominated in USD unless otherwise indicated.
144A - Securities restricted for resale to Qualified Institutional Buyers.
C - Capitalization.
CAD - Canadian Dollar.
CSTR - Collateral Strip Rate.
DCB - Debt Conversion Bond.
DKK - Danish Krone.
EURO - Euro.
The Accompanying Notes are an Integral Part of the Financial Statements.
32
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
FLIRB - Floating Interest Rate Bond.
FRB - Federal Reserve Board.
GNMA - Government National Mortgage Association.
GBP - British Pound.
IAB - Interest in Arrears Bond.
IDU - Interest Due and Unpaid Bond.
IO - Interest Only.
IRB - Interest Reduction Bond.
JPY - Japanese Yen.
NR - Not Rated.
NTL - Notional Principal.
PO - Principal Only.
PDI - Past Due Interest.
REMIC - Real Estate Mortgage Investment Conduit.
SEK - Swedish Krona.
TBA - Security purchased on a forward commitment basis with an approximate
principal amount and no definite maturity date. The actual principal
amount and maturity will be determined upon settlement date.
The Accompanying Notes are an Integral Part of the Financial Statements.
33
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $179,162,771 ) $172,364,800
Foreign Currency at Value (Cost $396,875 ) 391,606
Receivable for Investments Sold 11,773,074
Interest Receivable 2,161,228
Unrealized Appreciation of Forward Foreign
Currency Contracts 965,712
Variation Margin Receivable 92,544
Deferred Organization Expenses 9,137
Receivable for Expense Reimbursement 3,190
Prepaid Trustees' Fees 389
Prepaid Expenses and Other Assets 810
------------
Total Assets 187,762,490
------------
LIABILITIES
Payable for Investments Purchased 20,167,999
Payable to Custodian 517,584
Unrealized Depreciation of Forward Foreign
Currency Contracts 89,272
Variation Margin Payable 67,110
Advisory Fee Payable 60,145
Administrative Services Fee Payable 3,238
Fund Services Fee Payable 114
Accrued Expenses 84,839
------------
Total Liabilities 20,990,301
------------
NET ASSETS
Applicable to Investors' Beneficial Interests $166,772,189
============
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
34
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest and Dividend Income $ 7,008,590
-----------
EXPENSES
Advisory Fee $ 385,649
Custodian Fees and Expenses 96,260
Professional Fees and Expenses 25,649
Administrative Services Fee 21,094
Amortization of Organization Expense 2,419
Fund Services Fee 1,459
Trustees' Fees and Expenses 1,118
Administration Fee 604
Miscellaneous 5,048
-----------
Total Expenses 539,300
Less: Reimbursement of Expenses (18,698)
-----------
NET EXPENSES 520,602
-----------
NET INVESTMENT INCOME 6,487,988
NET REALIZED GAIN (LOSS) ON
Investment Transactions (5,930,482)
Futures Contracts 471,229
Foreign Currency Contracts and Transactions 1,415,850
-----------
Net Realized Loss (4,043,403)
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) OF
Investment Transactions 1,415,179
Futures Contracts (41,722)
Foreign Currency Contracts and Translations 644,972
-----------
Net Change in Unrealized Appreciation 2,018,429
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $ 4,463,014
===========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
35
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE FISCAL
APRIL 30, 2000 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1999
-------------- ----------------
<S> <C> <C>
DECREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 6,487,988 $ 16,042,565
Net Realized Loss on Investments, Futures and
Foreign Currency Contracts and Transactions (4,043,403) (5,508,827)
Net Change in Unrealized Appreciation
(Depreciation) of Investments, Futures and
Foreign Currency Contracts and Translations 2,018,429 (4,818,228)
------------ ---------------
Net Increase in Net Assets Resulting from
Operations 4,463,014 5,715,510
------------ ---------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 35,040,395 87,676,750
Withdrawals (65,421,050) (134,856,430)
------------ ---------------
Net Decrease from Investors' Transactions (30,380,655) (47,179,680)
------------ ---------------
Total Decrease in Net Assets (25,917,641) (41,464,170)
NET ASSETS
Beginning of Period 192,689,830 234,154,000
------------ ---------------
End of Period $166,772,189 $ 192,689,830
============ ===============
</TABLE>
--------------------------------------------------------------------------------
SUPPLEMENTARY DATA
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FISCAL FOR THE PERIOD
FOR THE YEAR ENDED MARCH 17, 1997
SIX MONTHS ENDED OCTOBER 31, (COMMENCEMENT OF
APRIL 30, 2000 -------------- OPERATIONS) THROUGH
(UNAUDITED) 1999 1998 OCTOBER 31, 1997
---------------- ------ ------ -------------------
<S> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Net Expenses 0.60%(a) 0.60% 0.63% 0.65%(a)
Net Investment Income 7.53%(a) 6.73% 6.59% 7.09%(a)
Expenses without Reimbursement 0.63%(a) 0.61% 0.63% 0.80%(a)
Portfolio Turnover 111%(b) 318% 368% 212%(b)
</TABLE>
------------------------
(a) Annualized.
(b)Not Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
36
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
APRIL 30, 2000
--------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Global Strategic Income Portfolio (the "portfolio") is one of two subtrusts
(portfolios) comprising Series Portfolio II. Series Portfolio II is registered
under the Investment Company Act of 1940, as amended, as a no-load, diversified,
open-end management investment company which was organized as a trust under the
laws of the State of New York on January 9, 1997. The portfolio commenced
operations on March 17, 1997 and received a contribution of certain assets and
liabilities including securities, with a value of $41,072,730 on that date from
the J.P. Morgan Institutional Global Strategic Income Fund in exchange for a
beneficial interest in the portfolio. The portfolio's investment objective is to
provide a high total return from a portfolio of fixed income securities of
foreign and domestic issuers. The Declaration of Trust permits the trustees to
issue an unlimited number of beneficial interests in the portfolio.
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 debt, asset-backed, and mortgage
securities held by the portfolio to meet their obligations may be affected by
economic and political developments in a specific industry or region. The value
of asset-backed and mortgage securities can be significantly affected by changes
in interest rates or rapid principal payments including pre-payments.
A percentage (10.3% at April 30, 2000) of the investments of the portfolio may
be highly illiquid, and there can be no assurance that the portfolio will be
able to realize such investments in a timely manner.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual amounts could differ from
those estimates. The following is a summary of the significant accounting
policies of the 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 the 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
37
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
pricing service or principal market maker or dealer, such securities are
priced using fair values in accordance with procedures adopted 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 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.
The portfolio's custodian takes possession of the collateral pledged for
investments in repurchase agreements on behalf of the portfolio. It is the
policy of the portfolio to value the underlying collateral daily on a
mark-to-market basis to determine that the value, including accrued
interest, is at least equal to the repurchase price plus accrued interest.
In the event of default of the obligation to repurchase, the portfolio has
the right to liquidate the collateral and apply the proceeds in
satisfaction of the obligation. Under certain circumstances, in the event
of default or bankruptcy by the other party to the agreement, realization
and/or retention of the collateral or proceeds may be subject to legal
proceedings.
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 specific lot
identification.
d) The portfolio incurred organization expenses in the amount of $23,505.
These costs were deferred and are being amortized on a straight-line basis
over five-year period from the commencement of operations of the
portfolio.
e) Expenses incurred by Series Portfolio II with respect to any two or more
portfolios in the Series Portfolio are allocated in proportion to the net
assets of each portfolio in Series Portfolio II, 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.
38
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
f) 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.
g) A futures contract is an agreement to purchase/sell a specified quantity
of an underlying instrument at a specified future date or to make/receive
a cash payment based on the value of a securities index. The price at
which the purchase and sale will take place is fixed when the portfolio
enters into the contract. Upon entering into such a contract, the
portfolio is required to pledge to the broker an amount of cash and/or
liquid securities equal to the minimum "initial margin" requirements of
the exchange. Pursuant to the contract, the portfolio agrees to receive
from, or pay to, the broker an amount of cash equal to the daily
fluctuation in the value of the contract. Such receipts or payments are
known as "variation margin" and are recorded by the portfolio as
unrealized gains or losses. When the contract is closed, the portfolio
records a realized gain or loss equal to the difference between the value
of the contract at the time it was opened and the value at the time when
it was closed. The portfolio invests in futures contracts for the purpose
of hedging its existing portfolio securities, or securities the portfolio
intends to purchase, against fluctuations in value caused by changes in
prevailing market interest rates or securities movements. The use of
futures transactions involves the risk of imperfect correlation of
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.
h) The portfolio may enter into commitments to buy and sell investments to
settle on future dates as part of its normal investment activities. These
commitments are reported at market value in the financial statements.
Credit risk exists on these commitments to the extent of any unrealized
gains on the underlying securities purchased and any unrealized losses on
the underlying securities sold. Market risk exists on these commitments to
the same extent as if the security were owned on a settled basis and gains
and losses are recorded and reported in the same manner. However, during
the commitment period, these investments earn no interest or dividends.
i) The portfolio intends to be treated as a partnership for federal income
tax purposes. As such, each investor in the portfolio will be taxed on its
share of the portfolio's ordinary income and capital gains. It is intended
that the portfolio's assets will be managed in such a way that an investor
in the portfolio will be able to satisfy the requirements of Subchapter M
of the Internal Revenue Code. The portfolio earns foreign in come which
may be subject to foreign withholding taxes at various rates.
39
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
2. TRANSACTIONS WITH AFFILIATES
a) The portfolio has an Investment Advisor Agreement with J.P. Morgan
Investment Management, Inc. ("JPMIM"), an affiliate of Morgan Guaranty
Trust Company of New York ("Morgan") and wholly-owned subsidiary of J.P.
Morgan & Co. Incorporated ("J.P. Morgan"). Under the terms of the
agreement, the portfolio pays Morgan at an annual rate of 0.45% of the
portfolio's average daily net assets. For the six months ended April 30,
2000, such fees amounted to $385,649.
b) The portfolio has retained Funds Distributor, Inc. ("FDI"), a registered
broker-dealer, to serve as the co-administrator and exclusive placement
agent. Under a Co-Administration Agreement between FDI and 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 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
portfolio and certain other investment companies subject to similar
agreements with FDI. For the six months ended April 30, 2000, the fee for
these services amounted to $604.
c) 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 equal to
its allocable share of an annual complex-wide charge. This charge is
calculated based on the aggregate average daily net assets of the
portfolio and other portfolios in which the trust, the J.P.Morgan Funds,
and the J.P.Morgan Institutional Funds invest (the "master portfolios")
and J.P.Morgan Series Trust in accordance with the following annual
schedule: 0.09% on the first $7 billion of their aggregate average daily
net assets and 0.04% of their aggregate average daily net assets in excess
of $7 billion less the complex-wide fees payable to FDI. The portion of
this charge payable by the portfolio is determined by the proportionate
share that its net assets bear to the net assets of the master portfolios,
other investors in the master portfolios for which Morgan provides similar
services and J.P. Morgan Series Trust. For the six months ended April 30,
2000, the fee for these services amounted to $21,094.
In addition, J.P. Morgan has agreed to reimburse the portfolio to the
extent necessary to maintain the total operating expenses of the portfolio
at no more than 0.65% of the average daily net assets of the portfolio
through February 28, 2001. This reimbursement arrangement can be changed
or terminated at any time after February 28, 2001, at the option of J.P.
Morgan. For the six months ended April 30, 2000, J.P.Morgan has agreed to
reimburse the portfolio $18,698 for expenses under this agreement.
d) The portfolio has a Fund Services Agreement with Pierpont Group, Inc.
("Group") to assist the trustees in exercising their overall supervisory
responsibilities for the portfolio's affairs. The trustees of the
portfolio represent all the existing shareholders of Group. The
portfolio's allocated portion of Group's costs in performing its services
amounted to $1,459 for the six months ended April 30, 2000.
e) An aggregate annual fee of $75,000 is paid to each trustee for serving as
a trustee of the trust, the J.P. Morgan Funds, the J.P. Morgan
Institutional Funds, the master portfolios and J.P. Morgan Series Trust.
The Trustees' Fees and Expenses shown in the financial statements
represents the portfolio's allocated
40
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
portion of the total fees and expenses. The portfolio's Chairman and Chief
Executive Officer also serves as Chairman of Group and receives
compensation and employee benefits from Group in his role as Group's
Chairman. The allocated portion of such compensation and benefits included
in the Fund Services Fee shown in the financial statements was $300.
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the fiscal year
ended April 30, 2000 were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
----------------- ------------
<S> <C> <C>
U.S. Government and Agency Obligations........... $ 97,598,975 $118,706,038
Corporate and Collateralized Obligations......... 71,730,899 95,647,107
---------------- ------------
$ 169,329,874 $214,353,145
================ ============
</TABLE>
At April 30, 2000, the portfolio had open forward currency contracts as follows:
<TABLE>
<CAPTION>
U.S. DOLLAR NET UNREALIZED
CONTRACTUAL VALUE AT APPRECIATION/
PURCHASE CONTRACTS VALUE 4/30/00 (DEPRECIATION)
------------------ ----------- ----------- --------------
<S> <C> <C> <C>
Danish Krone 190,000, expiring 06/28/00.......... $ 24,026 $ 23,298 $ (728)
Euro 7,700,000, expiring 05/03/00................ 7,099,400 7,016,585 $ (82,815)
Euro 225,000, expiring 06/28/00.................. 208,463 205,859 $ (2,604)
Swedish Krona 319,000, expiring 06/28/00......... 36,921 35,764 $ (1,157)
</TABLE>
<TABLE>
<CAPTION>
SETTLEMENT
SALES CONTRACTS VALUE
--------------- -----------
<S> <C> <C> <C>
Canadian Dollar 950,318, expiring 06/28/00....... $ 640,376 $ 642,345 $ (1,969)
Danish Krone 9,950,198, expiring 06/28/00........ 1,262,715 1,220,126 $ 42,589
Euro 27,701,177, expiring 06/28/00............... 26,213,787 25,344,638 $ 869,149
British Pound 933,408, expiring 06/28/00......... 1,475,176 1,461,305 $ 13,871
Japanese Yen 65,801,380, expiring 06/28/00....... 638,372 615,259 $ 23,113
Swedish Krona 6,005,011, expiring 06/28/00....... 690,232 673,241 $ 16,991
-------------
NET UNREALIZED APPRECIATION ON FORWARD FOREIGN
CURRENCY CONTRACTS.............................. $ 876,440
=============
</TABLE>
41
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
Open futures contracts at April 30, 2000 are summarized as follows:
<TABLE>
<CAPTION>
NET UNREALIZED
APPRECIATION/ MARKET VALUE
CONTRACTS LONG (DEPRECIATION) OF CONTRACTS
--------------- -------------- --------------
<S> <C> <C> <C>
Eurex Ten Year Euro Bond, expiring June 2000..... 108 $ 32,701 $ 10,336,468
U.S. Five Year Note, expiring June 2000.......... 19 (6,636) 1,853,984
U.S. Ten Year Note, expiring June 2000........... 25 (20,997) 2,423,828
U.S. Long Bond, expiring June 2000............... 66 81,676 6,373,125
-------------- ------------- -------------
Totals........................................... 218 $ 86,744 $ 20,987,405
============== ============= =============
</TABLE>
<TABLE>
<CAPTION>
CONTRACTS SHORT
---------------
<S> <C> <C> <C>
U.S. Five Year Note, expiring June 2000.......... 13 ($ 2,915) $ 1,268,516
U.S. Ten Year Note, expiring June 2000........... 61 (54,820) 5,914,141
-------------- ------------- -------------
Totals........................................... 74 ($ 57,735) $ 7,182,657
============== ============= =============
</TABLE>
4. CREDIT AGREEMENT
The portfolio is party to a revolving line of credit agreement (the "Agreement")
as discussed more fully in Note 4 of the fund's Notes to the Financial
Statements which are included elsewhere in this report.
42
<PAGE>
J.P. MORGAN FUNDS
PRIME MONEY MARKET FUND
FEDERAL MONEY MARKET FUND
TAX EXEMPT MONEY MARKET FUND
TAX AWARE ENHANCED INCOME FUND: SELECT SHARES
SHORT TERM BOND FUND
BOND FUND
GLOBAL STRATEGIC INCOME FUND
EMERGING MARKETS DEBT FUND
TAX EXEMPT BOND FUND
NEW YORK TAX EXEMPT BOND FUND
CALIFORNIA BOND FUND: SELECT SHARES
DIVERSIFIED FUND
DISCIPLINED EQUITY FUND
U.S. EQUITY FUND
U.S. SMALL COMPANY FUND
U.S. SMALL COMPANY OPPORTUNITIES FUND
TAX AWARE U.S. EQUITY FUND: SELECT SHARES
INTERNATIONAL EQUITY FUND
EUROPEAN EQUITY FUND
INTERNATIONAL OPPORTUNITIES FUND
EMERGING MARKETS EQUITY FUND
GLOBAL 50 FUND: SELECT SHARES
FOR MORE INFORMATION ON THE J.P. MORGAN FUNDS, CALL J.P. MORGAN FUNDS SERVICES
AT (800) 521-5411.
IMSAR200
J.P. MORGAN GLOBAL STRATEGIC INCOME FUND
SEMIANNUAL REPORT
APRIL 30, 2000
