<PAGE>
LETTER TO THE SHAREHOLDERS OF THE J.P. MORGAN INSTITUTIONAL EMERGING MARKETS
EQUITY FUND
June 1, 2000
Dear Shareholder:
The J.P. Morgan Institutional Emerging Markets Equity Fund returned 12.64%
for the six months ended April 30, 2000. Although it posted a solid return,
the fund underperformed the Lipper Emerging Markets Equity Fund Average and
the MSCI Emerging Markets Free Index, which returned 21.35% and 13.87%
respectively.
The fund's net asset value on April 30 was $8.08 per share, increasing from
$7.22 per share on October 31, 1999, after paying an income dividend of
approximately $0.06 per share over the six-month period. The fund's net
assets were $137.9 million on April 30 while the total net assets of The
Emerging Markets Equity Portfolio, in which the fund invests, totaled $177.3
million.
Included in this report is an interview with Douglas Dooley, managing
director, who is 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
800-766-7722.
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
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TABLE OF CONTENTS
LETTER TO THE SHAREHOLDERS........... 1 FUND FACTS AND HIGHLIGHTS........... 9
FUND PERFORMANCE..................... 2 FINANCIAL STATEMENTS................12
PORTFOLIO MANAGER Q&A................ 3
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1
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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 FIVE SINCE
AS OF APRIL 30, 2000 MONTHS MONTHS YEAR YEARS YEARS INCEPTION*
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<S> <C> <C> <C> <C> <C> <C>
J.P. Morgan Institutional Emerging Markets
Equity Fund -8.70% 12.64% 17.86% -5.77% 0.07% -0.52%
Emerging Markets Benchmark** -7.84% 13.87% 22.11% -2.14% 2.26% 1.58%
Lipper Emerging Markets Equity Fund Average*** -6.95% 21.35% 29.84% -0.69% 3.86% 0.50%
AS OF MARCH 31, 2000
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J.P. Morgan Institutional Emerging Markets
Equity Fund -2.34% 22.94% 46.14% -3.32% 2.41% 0.77%
Emerging Markets Benchmark** 2.42% 28.48% 51.59% 1.23% 5.23% 3.21%
Lipper Emerging MarketsEquity Fund Average*** 3.94% 42.02% 65.41% 3.57 7.30% 2.41%
</TABLE>
* THE FUND COMMENCED OPERATIONS ON NOVEMBER 15, 1993 AND PROVIDED A TOTAL
RETURN OF (0.20%) FROM THAT DATE THROUGH APRIL 30, 2000. FOR THE PURPOSE OF
COMPARISON, THE "SINCE INCEPTION" RETURNS IN THE TABLE ABOVE ARE CALCULATED
FROM NOVEMBER 30, 1993, THE FIRST DATE WHEN DATA FOR THE FUND, ITS BENCHMARK,
AND ITS LIPPER CATEGORY AVERAGE WERE AVAILABLE.
** INTERNATIONAL FINANCE CORPORATION (IFC) GLOBAL INDEX ADJUSTED FOR
LIMITED-ACCESS COUNTRIES (CAPPED WEIGHTS OF 5% IN CHILE, INDIA, KOREA AND
TAIWAN, AND 15% IN MALAYSIA THROUGH AUGUST 31, 1993, FROM SEPTEMBER 1, 1993,
FORWARD MALAYSIA NOT CAPPED) THROUGH DECEMBER 31, 1994. FROM JANUARY 1, 1995,
THROUGH DECEMBER 31, 1995, IFC INVESTABLE INDEX (EXCLUDING SOUTH AFRICA AFTER
APRIL 1, 1995) AND THE MSCI EMERGING MARKETS FREE INDEX THEREAFTER. THESE
INDICES ARE UNMANAGED PORTFOLIOS WHICH MEASURE EMERGING MARKET EQUITY
PERFORMANCE. THEY DO NOT INCLUDE FEES OR EXPENSES AND ARE NOT AVAILABLE FOR
ACTUAL INVESTMENT.
*** DESCRIBES THE AVERAGE TOTAL RETURN FOR ALL FUNDS IN THE INDICATED LIPPER
CATEGORY, AS DEFINED BY LIPPER INC., AND DOES NOT TAKE INTO ACCOUNT
APPLICABLE SALES CHARGES. LIPPER ANALYTICAL SERVICES, INC. IS A LEADING
SOURCE FOR MUTUAL FUND DATA.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. RETURNS ARE NET OF FEES,
ASSUME THE REINVESTMENT OF DISTRIBUTIONS AND REFLECT THE REIMBURSEMENT OF
CERTAIN FUND EXPENSES AS DESCRIBED IN THE PROSPECTUS. HAD EXPENSES NOT BEEN
SUBSIDIZED, RETURNS WOULD HAVE BEEN LOWER.
2
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PORTFOLIO MANAGER Q&A
[PHOTO]
The following is an interview with DOUGLAS DOOLEY, managing director and a
member of the portfolio management team of the J.P. Morgan Emerging Market
Equity Fund. Doug joined J.P. Morgan in 1979. He is product manager and
portfolio manager for emerging markets equity, co-founding the strategy in
1990. He is also a member of the country allocation strategy team. Prior to
this appointment, he was head of the International Research Group in London,
leading a team responsible for equity research and country allocation models
for the developed non-U.S. markets. He first joined Morgan's U.S. Equity
research department and subsequently managed U.S. domestic, balanced, and
global balanced institutional accounts. Doug holds a B.S. from American
University and an M.B.A. from Columbia University. He is a CFA charterholder
and serves on the Advisory Board of the EM Quarterly.
HOW ABOUT TAKING US ON A TOUR OF THE EMERGING MARKETS OVER THE PAST SIX MONTHS?
DD: For perhaps the first time, a single sector drove emerging market returns
globally, that being the telecommunications, media, and technology (TMT)
sector, a juggernaut that ran most markets around the world during this
period.
To illustrate, during the first quarter of this year, only two sectors had
positive returns: information technology and communications. All others
declined in value. This performance advantage was reflected in returns over
the past six months as well. While up 14% in the first quarter of 2000, the
emerging TMT sector also scored a 25% return during the fourth quarter of
1999, soundly beating all other sectors, even though others turned in strong,
positive results as well. TMT continues to be a powerful driver, some might
say usurper, of the global economy, despite recent gyrations in the NASDAQ.
This near-exclusive investor concentration on a single sector worked to the
disadvantage of our value-focused investment discipline. Our stock selection
methodologies are geared toward uncovering high potential, yet still
undervalued, emerging equities across a number of sectors, a diversification
strategy that has worked well over time. Yet, it was not immune to the
irresistible enthusiasm that TMT stocks enjoyed for much of last year
extending through the beginning of this one. And, so, as investors drew money
from these broader sectors in which we invest to chase the latest dot-com, or
equivalent, our holdings underperformed.
We stayed true to our investment discipline, however, but it had a price
attached to it. By not pursuing the TMT momentum strategy, we ended up doing
comparatively poorly. And yet, if we had done so, we wouldn't presently find
ourselves on the right side of the markets, a place we occupy now that some
of the blush has come off the technological rose.
MANY REVIEWS OF EMERGING MARKETS HAVE ENDED WITH THE CAVEAT: "BARRING A MAJOR
STOCK MARKET CORRECTION, OR A MAJOR INCREASE IN U.S. INTEREST RATES, WE WOULD
EXPECT EMERGING MARKETS TO CONTINUE TO MOVE UPWARD." WELL,
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WE'VE HAD BOTH OF THESE OCCUR TO VARYING DEGREES. HAS THE IMPACT BEEN AS GREAT
AS EVERYONE ANTICIPATED, OR HAS IT BEEN SOMETHING THAT THE EMERGING MARKETS HAVE
BEEN ABLE TO SHRUG OFF?
DD: Going into and through April, when the NASDAQ and, to a lesser extent,
the larger markets in general sold off, emerging markets were down 8-9%. So
there was certainly some correlation with the behavior of U.S. equities. On
the other hand, they didn't sell off with the rise in U.S. interest rates,
which began last summer. In fact, emerging markets turned in a 60% year in
1999 and a 2.5% first quarter in 2000, despite steadily increasing rates in
the U.S. So, thus far, rising U.S. interest rates haven't proven to be as
much of a factor in determining emerging market returns as one might expect.
Where interest rates come to the fore is when they affect the DEGREE of
economic growth. To be sure, if rising rates slow growth in the developed
world, then export-intensive emerging markets will likely slow as well. But,
if rate increases do no more than take the developed world from unsustainable
levels of growth to more sustainable levels of growth, then I'm not sure they
are that much of an issue. After all, a number of emerging markets were able
to reduce interest rates (e.g., Brazil), albeit from very high levels, while
U.S. rates rose. So far, emerging markets are not following lockstep with the
upward march in interest rates in developed markets.
I would say that the two biggest reasons interest rates in emerging markets
are able to go in a slightly different direction from those in developed
markets is that their inflationary pattern is different and long term fixed
capital investment continues to be strong. Inflation in emerging markets is
on a downward trend, while inflation in developed markets has risen a bit and
continues to rise, although slowly. This being the case, there is less
pressure in emerging markets to raise rates in order to quell inflation, a
marked contrast to the scenario now playing out in the U.S.
WOULD YOU SAY THAT INVESTORS HAVE HAD THEIR FILL OF THE U.S. AND OTHER
DEVELOPED MARKETS FOR THE TIME BEING AND HAVE MOVED INTO HIGHER POTENTIAL
EMERGING MARKETS TO RECAPITALIZE THEM?
DD: Well, there has been some of that, but capital inflows from equity
investors have been modest at best. Small positive flows from global funds
have been countered for the most part by a slight pull-back by regional
funds. Instead, most capital investments have been made by direct investors:
international corporations that are putting plant and equipment in place, or
buying assets and market share directly within emerging markets. One example
is Telefonica Espanol, which has been buying significant telephone assets in
Brazil. Similarly, BBV, the Spanish bank, has been buying banks in Brazil and
Mexico. Here and elsewhere, direct investment has been and continues to be
very strong.
AS AN INVESTOR, HOW DO YOU PLAY EMERGING MARKETS, IF MOST OF THE ACTIVITY IS
IN DIRECT INVESTMENTS?
DD: We don't need corporate activity to do well. After all, our markets were
up 60% last year. That's enough activity for us to do just fine.
Where direct investment comes into play is when it legitimizes other economic
good news. It means that knowledgeable corporate investors believe in a
country's future prospects. It means currencies can be stable,
4
<PAGE>
and emerging countries can receive hard currency flows. All that is good. But
we don't need to stand in that flow to benefit.
We benefit when corporate activity changes the risk profile of the whole
country. It acts as a signal that a country's assets are attractive, in that
one has a knowledgeable buyer within the industry - not a stock market
investor -who is willing to step up and pay for them. It acts more as a
catalyst for the realization of intrinsic value than anything else.
The way we play these markets is to look for companies and countries that are
relatively inexpensive by our measures of value. We do that by looking at
earnings and dividends that the whole country index provides, or a company
provides, and compare that to what we estimate to be a fair rate. This gives
us a measure of potential return that is not dependent on capital flows.
Although flows can help to trigger an investment decision on our part, it is
not dependent on this activity.
In making our investment decisions, we look for catalysts that can drive
performance in a country's stock market. In some countries, the catalyst may
be a major change in its ability to stimulate foreign exchange, such as an
increase in oil prices. An example of this would be Russia, or Venezuela,
both of which are very oil dependent. Last year's tremendous rise in oil
prices made these markets much more attractive, as revenues generated from
oil boosted overall economic activity. We were sensitive to this catalyst of
change early on and thus overweighted Venezuela, and took a position in
Russia, thereby boosting portfolio returns. On the other hand, our catalyst
might not be much more exciting than the existence of good companies that are
extremely undervalued. Our presumption, one often proven right, is that other
people will eventually identify these opportunities, and that the market will
step in and bridge this valuation gap in the form of higher share prices.
Take a look at Mexico. Despite its recent outperformance, we think it is
still cheap based on such catalysts as the upgrade of its sovereign debt
rating to investment-grade on March 7 of this year, and its establishment of
credit lines to protect itself from potential volatility during the upcoming
presidential election. These and other improving macroeconomic fundamentals
coincide nicely with some corporate activity there. Different kinds of
companies, such as chemical companies, are making substantial investments in
plant and equipment. There has also been some major mergers and acquisitions
activity, such as in the banking sector. These are the kinds of catalysts we
look for when evaluating whether a market may be ripe for investment.
SO, WHAT KINDS OF COMPANIES HAVE YOU PUT YOUR MONEY IN?
DD: Despite their substantial outperformance, we still see some value in
certain Onew economyO stocks. One such company is Aptech, an Indian company
whose business is providing training for engineers who want to be software
writers. Aptech is, in effect, creating inexpensive software engineering
talent to write code that will be exported to the U.S. and Western Europe. By
doing so, it is helping to provide the very infrastructure that makes India
competitive in the world of technology. We think that's a compelling story
and have held a sizeable position in this company for some time.
On a far different note, we like Iscor, a South African steel company. This
stock didn't provide a good return for us during the first quarter, but we
can't help but expect it to going forward. Iscor suffered a major
5
<PAGE>
decline when old economy stocks around the world were sold off to fund the
purchase of new economy stocks. It also suffered from a delivery problem last
year when unusually heavy rainfalls cut some major distribution routes,
resulting in poor interim results. Despite this, we think it'll have 50%
earnings growth before interest and taxes this year, and another 60% next
year. We're not alone. The consensus is for a 700% increase in 2001 earnings
per share. From a valuation standpoint, the company's steel assets are
trading at $90 per ton of crude steel capacity. If we look at 50 steel stocks
around the world that are similar to Iscor, their average is $500 a ton. With
this kind of differential, we believe there is tremendous upside potential.
The two couldn't be more different. Aptech trades on premium multiples of
90-100 times earnings, but we think growth is so strong we're willing to
reach out and ride along with them. Iscor is the other way around. It doesn't
have a compelling story, but we think it has incredible value. Each remains
in the portfolio, but for far different reasons.
Aptech and a few other new economy stocks are the exceptions, in our view.
We're still underweight manyTMT companies, because we just don't see the
growth that will justify the multiples at which they're trading.
GIVEN THE VOLATILITY THAT EMERGING MARKETS HAVE EXPERIENCED IN RECENT YEARS,
HOW WELL WOULD YOU SAY THAT THEY ARE INSULATED AGAINST THE KINDS OF
CRISES-INDUCING PHENOMENA THAT OCCURRED A FEW YEARS AGO IN RUSSIA AND
THAILAND?
DD: The emerging world is now a very different place, owing to lessons
learned during these crises, so much so that there is little reason to expect
the same crises to recur. One of the biggest shock absorbers in place today,
one that did not exist when Thailand had its currency crisis, is floating
exchange rates. Emerging governments generally have stopped the practice of
allowing their currencies to become overvalued in order to maintain an
inappropriate predetermined relationship with some set of developed market
currencies, a practice that was widespread when the Asian crises occurred.
Now, by allowing marketplace pricing of their currencies, they have gained a
shock absorber for a number of the macroeconomic stresses that precipitated
their troubles, stresses that will continue to be felt in the years ahead.
For example, we don't doubt that there will be times when large capital flows
to the market will have to be absorbed, or times when outward flows will need
to be addressed. But, with more flexible currencies, those movements of
capital shouldn't lead to the same pressures, or the same excesses, that
occurred in the past.
When currencies were managed to be at levels that implied little or no risk,
it meant that investors didn't really know when the country was becoming
expensive. A country's loss of competitiveness, as reflected in a rising
current account deficit, wasn't being mirrored in price, price being the
currency. In most instances, this is no longer the case.
EVEN SO, THERE ARE SOME COUNTRIES THAT ARE RISKIER THAN OTHERS. HOW ARE THEY
DEALING WITH THE "NEW WORLD ORDER"?
DD: Economic cycles continue to move up and down, but we don't see any
country teetering on the edge of crisis. Some of our most risky countries -
Indonesia, Russia, Pakistan - have weathered storms in recent
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quarters that suggest a lessening of the risk they represent. They are still
at the risky end of the spectrum, but less so than before.
Russia, for example, took a giant step forward with the election of a new
and, so far, market-friendly president. Indonesia, long a hotbed of political
instability, has proven to be able to finesse the changing of its military
leadership, a considerable achievement given its past history. And then there
is Pakistan. Granted, it's got a ways to go, but its leadership is at least
listening to voices of moderation with regard to its border war with India.
With Indonesia and Russia, the enormous surge in oil revenues also reduced
some of their risk.
Sure, we've had some of our riskiest countries continue to be our riskiest,
but less so than a year, or even six months ago. That is why local returns in
these countries have been very good, by the way. Some of the most substantial
returns in the emerging markets universe during the fourth quarter of 1999
were from these riskiest of countries. As noted, the TMT sector was
explosive, but so were the markets in Russia, Indonesia, and Pakistan, none
of which has any substantive tech plays.
The scale of returns from the reduction in country risk in these countries
and a few others was sizeable. Russia was up 22% in the first quarter of
2000. Last year, it was up 200%. Indonesia was up 90% last year. Pakistan was
up 50% this past quarter, and 40% during 1999. Again, they haven't become low
risk, but their degree of risk lowered our opinion of them.
WHAT SECTORS ARE YOU OVERWEIGHT AND UNDERWEIGHT?
DD: Anticipating nearly full economic recovery over the near term in many
emerging markets, we are investing in sectors that do well in improving
economic cycles. For example, we are overweight materials (i.e., steel, pulp
and paper, etc.) and consumer staples. We are also overweight in healthcare -
hospitals and pharmaceuticals - with companies such as Teva Pharmaceuticals
in Israel. We remain somewhat overweight in telecommunications, which still
has some room to grow. We are most underweight in information technology,
followed by energy, both of which appear to have run their respective courses
for the time being.
DO YOU THINK THE TELECOM REVOLUTION WILL CONTINUE?
DD: Yes. However, the opportunities within it are difficult to evaluate, so
we are being very, very selective. One of the critical nuances that comes
into play when evaluating the investment potential of telecom stocks is the
difference between fixed line and wireless. Fixed line is an opportunity when
valuations are particularly cheap. Wireless is a growth opportunity. One has
to be careful in either case that you are getting what you think you are,
meaning that you don't want to pay for growth in fixed line, and you want to
make sure there IS growth in wireless. We think growth might be starting to
taper off in some of the Brazilian wireless companies, for example, so
investment candidates there have to pass through a few more screens than
others might. In any event, to answer your question directly, there is still
opportunity in telecom, but it's not an easy opportunity.
7
<PAGE>
WHAT SIGNIFICANT EVENTS ARE LIKELY TO TAKE PLACE IN EMERGING ECONOMIES OVER
THE NEXT QUARTER, AND HOW ARE YOU POSITIONING THE PORTFOLIO TO TAKE ADVANTAGE
OF THEM?
DD: The way April has gone provides a general indication of what lies ahead
over the next 3-4 months. There has been a general reassessment of the
valuations that are demanded of the new economy, not just in emerging
markets, but those in the U.S. and Europe. In many cases, they have been
judged far too high. As a result, attention has turned to greatly undervalued
old economy industrial and consumer stocks, several of which have appreciated
in recent weeks. We expect to see this rebalancing of value versus growth
continue.
As I alluded to before, a key force driving many emerging economies in coming
months will be domestic consumption. Last year, we had a recovery in the
export sector, which had a highly positive impact on many emerging economies.
This year, we are seeing that effect spread to the consumer side of the
equation, the result of improving domestic fundamentals. That means that
consumer stocks -retailers, beverage companies, food packaging, and the like
- will likely be able to start showing better results. In line with this, we
expect investors who have become disillusioned with the technology sector to
diversify into such domestic recovery plays. We are well positioned for
exactly this kind of turnaround in investor sentiment.
8
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FUND FACTS
INVESTMENT OBJECTIVE
J.P. Morgan Institutional Emerging Markets Equity Fund seeks to provide a high
total return from a portfolio of equity securities of companies in emerging
markets. It is designed for long-term investors who want to diversify their
investments by adding exposure to the rapidly growing emerging markets. As an
international investment, the fund is subject to foreign market, political
and currency risk.
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COMMENCEMENT OF INVESTMENT OPERATIONS
11/15/93
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FUND NET ASSETS AS OF 4/30/00
$137,867,810
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PORTFOLIO NET ASSETS AS OF 4/30/00
$177,270,520
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CAPITAL GAIN PAYABLE DATE (IF APPLICABLE)
12/20/00
EXPENSE RATIO
The fund's current expense ratio of 1.45% 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
COUNTRY ALLOCATION
(PERCENTAGE OF TOTAL INVESTMENTS)
[PIE CHART]
ASIA 33.2%
LATIN AMERICA 27.3%
AFRICA/MIDDLE EAST 18.4%
EUROPE 14.8%
OTHER 6.3%
<TABLE>
<CAPTION>
LARGEST EQUITY HOLDINGS % OF TOTAL INVESTMENTS
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<S> <C>
SAMSUNG ELECTRONICS CO. LTD. (SPON. GDR) (144A)
(PREFERRED) (SOUTH KOREA) 4.7%
TELEFONOS DE MEXICO SA DE CV, CLASS L
(SPON. ADR) (MEXICO) 3.6%
KOREA ELECTRIC POWER CORP. (SOUTH KOREA) 1.9%
APTECH LTD. SERIES BPARTICIPATORY NOTES,
04/16/02 (INDIA) 1.6%
TAIWAN SEMICONDUCTOR MANUFACTURING CO. (TAIWAN) 1.5%
RELIANCE INDUSTRIES (GDR) (INDIA) 1.4%
CIFRA SA DE CV (MEXICO) 1.3%
BOE LTD. (SOUTH AFRICA) 1.3%
TEVA PHARMACEUTICAL INDUSTRIES LTD. (ADR) (ISRAEL) 1.3%
SILCONWARE PRECISION INDUSTRIES CO. (TAIWAN) 1.2%
</TABLE>
9
<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.
References to specific securities are for illustrative purposes only and are
not intended to be, and should not be interpreted as recommendations to
purchase or sell such securities. 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 foreign securities which
are subject to special risks; prospective investors should refer to the
fund's prospectus for a discussion of these risks. Because emerging markets
carry higher risks than developed markets, the fund's performance is likely
to be more volatile than many other international equity funds.
CALL J.P. MORGAN FUNDS SERVICES AT (800) 766-7722 FOR A PROSPECTUS CONTAINING
MORE COMPLETE INFORMATION ABOUT THE FUND, INCLUDING MANAGEMENT FEES AND OTHER
EXPENSES. PLEASE READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
10
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THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY
<PAGE>
J.P. MORGAN INSTITUTIONAL EMERGING MARKETS EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment in The Emerging Markets Equity
Portfolio ("Portfolio"), at value $ 136,905,327
Receivable for Expense Reimbursements 16,326
Prepaid Trustees' Fees 3,780
Prepaid Expenses and Other Assets 914
-------------
Total Assets 136,926,347
-------------
LIABILITIES
Shareholder Servicing Fee Payable 10,836
Administration Fee Payable 2,929
Fund Service Fee Payable 96
Accrued Expenses 44,676
-------------
Total Liabilities 58,537
-------------
NET ASSETS
Applicable to 16,943,232 Shares of Beneficial
Interest Outstanding
(par value $0.001, unlimited shares authorized) $ 136,867,810
=============
Net Asset Value, Offering and Redemption Price
Per Share $8.08
----
----
ANALYSIS OF NET ASSETS
Paid-in Capital $ 192,458,260
Distributions in Excess of Net Investment Income (2,894,528)
Accumulated Net Realized Loss on Investment (111,607,357)
Net Unrealized Appreciation of Investment 58,911,435
-------------
Net Assets $ 136,867,810
=============
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
12
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J.P. MORGAN INSTITUTIONAL EMERGING MARKETS EQUITY FUND
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME ALLOCATED FROM PORTFOLIO
Allocated Dividend Income (Net of Foreign
Withholding Tax of $127,704) $ 1,160,683
Allocated Interest Income 76,355
Allocated Portfolio Expenses (911,991)
-----------
Net Investment Income Allocated from
Portfolio 325,047
FUND EXPENSES
Shareholder Servicing Fee $ 69,539
Administrative Services Fee 14,298
Financial and Fund Accounting Services Fee 13,135
Transfer Agent Fees 9,974
Printing Expenses 7,768
Registration Fees 6,811
Professional Fees 5,923
Administration Fee 3,644
Interest Expense 3,088
Fund Services Fee 1,162
Miscellaneous 5,264
--------
Total Fund Expenses 140,606
Less: Reimbursement of Expenses (40,801)
--------
NET FUND EXPENSES 99,805
-----------
NET INVESTMENT INCOME 225,242
NET REALIZED GAIN ON INVESTMENT ALLOCATED FROM
PORTFOLIO 6,690,757
NET CHANGE IN UNREALIZED APPRECIATION OF
INVESTMENT ALLOCATED FROM PORTFOLIO 11,685,966
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $18,601,965
===========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
13
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J.P. MORGAN INSTITUTIONAL EMERGING MARKETS EQUITY 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>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 225,242 $ 1,329,389
Net Realized Gain (Loss) on Investment Allocated
from Portfolio 6,690,757 (26,398,442)
Net Change in Unrealized Appreciation of
Investment Allocated from Portfolio 11,685,966 63,534,517
------------ ---------------
Net Increase in Net Assets Resulting from
Operations 18,601,965 38,465,464
------------ ---------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (920,339) (6,850,369)
In Excess of Net Investment Income -- (1,892,372)
------------ ---------------
Total Distributions to Shareholders (920,339) (8,742,741)
------------ ---------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Proceeds from Shares of Beneficial Interest Sold 30,728,972 66,907,069
Reinvestment of Dividends and Distributions 678,435 5,348,892
Cost of Shares of Beneficial Interest Redeemed (43,267,264) (91,334,422)
------------ ---------------
Net Decrease from Transactions in Shares of
Beneficial Interest (11,859,857) (19,078,461)
------------ ---------------
Total Increase in Net Assets 5,821,769 10,644,262
NET ASSETS
Beginning of Period 131,046,041 120,401,779
------------ ---------------
End of Period $136,867,810 $ 131,046,041
============ ===============
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
14
<PAGE>
J.P. MORGAN INSTITUTIONAL EMERGING MARKETS EQUITY FUND
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
Selected data for a unit outstanding throughout each period are as follows:
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS ENDED FOR THE FISCAL YEAR ENDED OCTOBER 31,
APRIL 30, 2000 -----------------------------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
---------------- --------- --------- --------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE PER UNIT,
BEGINNING OF PERIOD $ 7.22 $ 5.91 $ 9.86 $ 10.27 $ 9.71 $ 12.47
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.01 0.14 0.14+ 0.11 0.08 0.08
Net Realized and Unrealized Gain
(Loss) on Investments 0.91 1.68 (3.44)+ (0.43) 0.56 (2.66)
-------- -------- -------- -------- -------- --------
Total from Investment Operations 0.92 1.82 (3.30) (0.32) 0.64 (2.58)
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS TO SHAREHOLDERS
FROM
Net Investment Income (0.06) (0.40) (0.13) (0.09) (0.08) (0.05)
Net Realized Gain -- -- (0.52) -- -- (0.13)
In Excess of Net Investment Income -- (0.11) -- -- -- --
-------- -------- -------- -------- -------- --------
Total distributions to Shareholders (0.06) (0.51) (0.65) (0.09) (0.08) (0.18)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE PER UNIT,
END OF PERIOD $ 8.08 $ 7.22 $ 5.91 $ 9.86 $ 10.27 $ 9.71
======== ======== ======== ======== ======== ========
RATIOS AND SUPPLEMENTAL DATA
Total Return 12.64%(a) 33.76% (35.50)% (3.15)% 6.64% (20.81)%
Net Assets, End of Period
(in thousands) $$136,868 $$131,046 $$120,402 $$306,381 $$293,594 $$186,023
Ratios to Average Net Assets
Net Expenses 1.45%(b) 1.42% 1.46% 1.37% 1.41% 1.43%
Net Investment Income 0.32%(b) 0.99% 1.43% 0.95% 0.96% 0.96%
Expenses without Reimbursement and
including Interest Expense 1.51%(b) 1.52% 1.54% 1.37% 1.41% 1.44%
Interest Expenses 0.00%(c) 0.02% 0.04% -- -- --
</TABLE>
------------------------
(a) Not Annualized.
(b) Annualized.
(c) less than 0.01%.
+ Based on amounts prior to Statement of Position 93-2 Adjustments.
The Accompanying Notes are an Integral Part of the Financial Statements.
15
<PAGE>
J.P. MORGAN INSTITUTIONAL EMERGING MARKETS EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
APRIL 30, 2000
--------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The J.P. Morgan Institutional Emerging Markets Equity Fund (the "fund") is a
separate series of the J.P. Morgan Institutional 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 15,
1993.
The fund invests all of its investable assets in The Emerging Markets Equity
Portfolio (the "portfolio"), a 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 (approximately
77% 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 1 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 the 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) Distributions to shareholders of net investment income and net realized
capital gain, if any, are declared and paid annually.
d) 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.
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.
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 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
16
<PAGE>
J.P. MORGAN INSTITUTIONAL EMERGING MARKETS EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
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 the 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
$3,644.
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") 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 daily based on the
aggregate average net assets of the portfolio and the other portfolios
(the "master portfolios") in which the trust and the J.P. Morgan Funds
invest 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 $14,298.
In addition, Morgan has agreed to reimburse the fund to the extent
necessary to maintain the total operating expenses of the fund, including
the expenes allocated to the fund from the portfolio, at no more than
1.45% 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, Morgan has agreed to reimburse the fund
$40,801 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 and account
maintenance services to fund shareholders. The agreement provides for the
fund to pay Morgan a fee for these services which is computed daily and
paid monthly at an annual rate of 0.10% of the average daily net assets of
the fund. For the six months ended April 30, 2000, the fee for these
services amounted to $69,539.
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
$1,162 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 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
17
<PAGE>
J.P. MORGAN INSTITUTIONAL EMERGING MARKETS EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
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 $200.
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...................................... 3,587,241 10,637,187
Reinvestment of dividends and distributions...... 79,629 990,536
Shares redeemed.................................. (4,877,281) (13,848,510)
----------- ---------------
Net Decrease..................................... (1,210,411) (2,220,787)
=========== ===============
</TABLE>
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. The maximum borrowing
under the Agreement was $150,000,000. The Agreement expired on May 23, 2000,
however, the fund as party to the Agreement has extended the Agreement and
continues its participation therein for an additional 364 days until May 23,
2001. The maximum borrowing under the new 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. Under the Agreement, the commitment fee is at an
annual rate of 0.085% on the unused portion of the committed amount. The
commitment fee is allocated to the funds in accordance with the procedures
established by their respective trustees or directors. There were no outstanding
borrowings pursuant to the Agreement at April 30, 2000. The average daily
balance outstanding for the six months ended April 30, 2000 was $100,000 at a
weighted average interest rate of 6.11%. The average amount of debt per share
for the six months ended April 30, 2000 was $0.01.
18
<PAGE>
The Emerging Markets Equity Portfolio
Semi-Annual Report April 30, 2000
(The following pages should be read in conjunction
with the J.P. Morgan Institutional Emerging Markets Equity Fund
Semi-Annual Financial Statements)
19
<PAGE>
THE EMERGING MARKETS EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ------------ -------------
<S> <C> <C>
COMMON STOCK (76.6%)
ARGENTINA (0.6%)
Banco de Galicia y Buenos Aires SA de CV (Spon.
ADR) (Banking)................................. 25,400 $ 439,737
PC Holdings S.A. (Spon. ADR) (Financial
Services)...................................... 9,421 144,259
Siderar Saic (Metals & Mining)................... 133,400 509,945
------------
1,093,941
------------
BRAZIL (0.8%)
Ceval Alimentos SA (Food, Beverages & Tobacco)... 731 1
Companhia Siderurgica Nacional (Metals &
Mining)........................................ 5,509 155,669
Perdigao SA (Food, Beverages & Tobacco).......... 47,234,895 57,588
Santista Alimentos SA (Food, Beverages &
Tobacco)....................................... 130,387 25,290
Seara Alimentos SA (Food, Beverages & Tobacco)... 731 0
Souza Cruz SA (Food, Beverages & Tobacco)........ 199,600 1,216,736
------------
1,455,284
------------
CHILE (2.4%)
Administradora de Fondos de Pensiones Provida SA
(Spon. ADR) (Banking).......................... 24,500 505,312
Banco Santander Chile SA (Spon. ADR) (Banking)... 39,500 585,094
Compania de Telecomunicaciones
de Chile SA (Spon. ADR) (Telecommunication
Services)...................................... 52,283 967,235
Embotelladora Andina SA (ADR) (Food, Beverages &
Tobacco)....................................... 36,900 428,962
Empresa Nacional de Electricidad SA (Spon. ADR)
(Utilities).................................... 60,028 690,322
Gener SA (Spon. ADR) (Electric).................. 1,600 21,900
Madeco SA (Spon. ADR) (Construction & Housing)... 47,824 430,416
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ------------ -------------
<S> <C> <C>
CHILE (CONTINUED)
Sociedad Quimica y Minera de Chile SA, Class A
(Spon. ADR) (Chemicals)........................ 1,261 $ 36,431
Sociedad Quimica y Minera de Chile SA, Class B
(Spon. ADR) (Chemicals)........................ 25,240 624,690
------------
4,290,362
------------
CHINA (0.3%)
Zhenhai Refining & Chemical Co. Ltd. Series H
(Chemicals).................................... 3,928,100 534,559
------------
COLOMBIA (0.1%)
Cementos Diamante SA (ADR) (Building
Materials)..................................... 84,700 71,148
Corporacion Financiera Del Valle SA (Spon. ADR)
(144A) (Banking)............................... 9,482 22,946
------------
94,094
------------
CROATIA (0.4%)
Pliva D.D. (GDR) (144A) (Pharmaceuticals)........ 55,860 698,250
------------
CZECH REPUBLIC (1.0%)
Ceske Energeticke Zavody AS (Electric)........... 297,500 871,426
SPT Telecom AS (Telecommunication Services)...... 48,700 907,885
------------
1,779,311
------------
EGYPT (0.5%)
MobiNil (Telecommunication Services)............. 22,800 869,191
------------
GREECE (1.3%)
Alpha Credit Bank SA (Banking)................... 12,850 709,364
Hellenic Telecommunication Organization SA (OTE)
(Telecommunications)........................... 52,261 1,175,653
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE EMERGING MARKETS EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ------------ -------------
<S> <C> <C>
GREECE (CONTINUED)
National Bank of Greece SA (Banking)............. 11,179 $ 476,920
Silver & Baryte Ores Mining Co. SA (Metals &
Mining)........................................ 1 29
------------
2,361,966
------------
HONG KONG (0.8%)
China Telecom (Hong Kong) Ltd. (Spon. ADR)
(Telecommunication Services)................... 9,899 1,452,060
------------
HUNGARY (1.8%)
Matav RT (Telecommunications).................... 290,018 1,990,224
MOL Magyar Olaj-es Gazipari RT
(Oil-Production)............................... 50,600 893,051
OTP Bank RT (Banking)............................ 7,600 337,477
------------
3,220,752
------------
INDIA (5.6%)
Apollo Hospitals Enterprise (Health Services).... 116,900 682,804
Asian Paints Ltd. (Manufacturing)................ 6,517 60,621
Bajaj Auto Ltd. (Transportation)................. 61,400 500,679
Hindalco Industries Ltd. (Spon. GDR) (Metals &
Mining)+....................................... 18,500 314,500
ICICI Ltd. (Financial Services).................. 635,650 1,942,294
ITC Ltd. (Food, Beverages & Tobacco)............. 58,900 769,009
Larsen & Toubro Ltd. (GDR) (Diversified
Manufacturing)................................. 91,300 1,250,810
Reliance Industries Ltd. (GDR) (Diversified
Manufacturing)................................. 99,200 2,544,480
Tata Engineering & Locomotive Co. Ltd. (Spon.
GDR) (Automotive).............................. 194,200 582,600
United Breweries Ltd. (Food, Beverages &
Tobacco)....................................... 265,700 416,892
Wockhardt Life Sciences Ltd. (GDR)
(Pharmaceuticals).............................. 73,500 91,875
Wockhardt Ltd. (GDR) (Pharmaceuticals)(f)........ 73,500 740,766
------------
9,897,330
------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ------------ -------------
<S> <C> <C>
INDONESIA (1.9%)
P.T. Indosat (ADR) (Telecommunication Services).. 39,000 $ 519,187
P.T. International Nickel Indonesia (Metals &
Mining)........................................ 1,193,700 1,182,403
P.T. Unilever Indonesia (Food, Beverages &
Tobacco)....................................... 148,605 1,650,125
------------
3,351,715
------------
ISRAEL (6.4%)
Bank Hapoalim Ltd. (Banking)..................... 439,223 1,350,367
Bank Leumi Le-Israel (Banking)................... 647,800 1,409,063
Bezeq Israeli Telecommunication Corp. Ltd.
(Telephone).................................... 337,300 1,791,580
Check Point Software Technologies Ltd. (Computer
Software)...................................... 11,600 2,006,800
Delta-Galil Industries Ltd. (Manufacturing)...... 21,986 448,816
ECI Telecom Ltd. (Telecommunications-
Equipment)..................................... 21,200 589,625
Israel Chemicals Ltd. (Chemicals)................ 702,500 852,085
Koor Industries Ltd. (Spon. ADR)
(Multi-Industry)............................... 43,600 763,000
Teva Pharmaceutical Industries Ltd. (ADR)
(Pharmaceuticals).............................. 49,400 2,173,600
------------
11,384,936
------------
MALAYSIA (1.1%)
Gamuda Berhad (Construction & Housing)........... 84,000 111,632
Genting Berhad (Holding Companies)............... 69,000 277,816
IJM Corp. Berhad (Building Materials)............ 92,000 89,095
Industrial Oxygen, Inc. Berhad (Agriculture)..... 282,000 207,789
Malakoff Berhad (Agriculture).................... 102,000 263,053
Malayan Banking Berhad (Banking)................. 106,000 440,737
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE EMERGING MARKETS EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ------------ -------------
<S> <C> <C>
MALAYSIA (CONTINUED)
Nestle Berhad (Food, Beverages & Tobacco)........ 92,000 $ 440,632
Telekom Malaysia Berhad (Telecommunications)..... 52,000 180,632
------------
2,011,386
------------
MEXICO (13.4%)
ALFA SA de CV (Multi - Industry)................. 286,000 903,861
Cementos Pacasmayo SAA (Building Materials)...... 1,225,184 440,232
Cemex SA de CV (Spon. ADR) (Building
Materials)..................................... 64,743 1,416,253
Cemex SA de CV, B Shares (Building Materials).... 2 9
Cifra SA de CV (Retail).......................... 984,400 2,274,468
Controladora Comercial Mexicana SA de CV (Food,
Beverages & Tobacco)........................... 1,099,100 1,155,903
Empaques Ponderosa SA de CV, Series B (Forest
Products & Paper)+............................. 875,000 488,925
Empresas ICA Sociedad Controladora SA de CV
(Spon. ADR) (Construction & Housing)........... 155,128 358,733
Fomento Economico Mexicano SA de CV (Spon. ADR)
(Food, Beverages & Tobacco).................... 24,600 1,014,750
Grupo Carso SA de CV, Class A (Multi-Industry)... 201,100 683,614
Grupo Financiero Banamex Accival, SA de CV, Class
O (Financial Services)......................... 416,600 1,504,690
Grupo Financiero Bancomer, SA de CV, Class O
(Financial Services)........................... 1,561,000 709,734
Grupo Financiero Probursa SA de CV, Class B
(Financial Services)........................... 231 24
Grupo Giagante SA de CV (Food, Beverages &
Tobacco)....................................... 443,333 682,884
Grupo Iusacell SA (ADR) (Telecommunications)..... 106,882 1,703,432
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ------------ -------------
<S> <C> <C>
MEXICO (CONTINUED)
Grupo Modelo SA de CV (Series C) (Food, Beverages
& Tobacco)..................................... 215,000 $ 452,223
Grupo Televisa SA de CV (Spon. GDR) (Broadcasting
& Publishing)+................................. 26,100 1,655,719
Panamerican Beverages, Inc. (ADR) (Food,
Beverages & Tobacco)........................... 45,000 739,687
Telefonos de Mexico SA de CV, Class L (Spon. ADR)
(Telecommunications)........................... 110,158 6,478,667
Tubos de Acero de Mexico SA (Manufacturing)...... 76,640 1,123,527
------------
23,787,335
------------
PAKISTAN (1.0%)
Hub Power Co. Ltd. (Spon. GDR) (Utilities)....... 90,800 1,112,300
Pakistan Telecommunications Corp. (Spon. GDR)
(144A) (Telecommunication Services)............ 10,707 606,766
------------
1,719,066
------------
PERU (0.4%)
Compania de Minas Buenaventura SA (Spon. ADR)
(Metals & Mining).............................. 43,800 755,550
------------
PHILIPPINES (0.3%)
First Philippine Holdings Corp.
(Multi-Industry)............................... 413,740 240,517
Manila Electric Co., Class B (Electric).......... 155,518 278,753
------------
519,270
------------
POLAND (1.8%)
Bank Slaski SA (Banking)......................... 4,630 279,611
Elektrim Spolka Akcyjna SA (Electrical
Equipment)..................................... 39,384 493,307
KGHM Polska Miedz SA (Metals & Mining)........... 55,600 365,621
Polski Koncern Naftowy SA (GDR)
(Oil-Production)............................... 38,200 381,072
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE EMERGING MARKETS EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ------------ -------------
<S> <C> <C>
POLAND (CONTINUED)
Polski Koncern Naftowy SA (GDR) (144A) (Oil-
Production).................................... 37,300 $ 373,000
Telekomunikacja Polska SA (GDR) (144A)
(Telecommunication Services)................... 176,200 1,292,674
------------
3,185,285
------------
RUSSIA (1.4%)
Lukoil Holding (Spon. ADR) (Oil-Production)...... 19,221 1,158,642
Surgutneftegaz (Spon. ADR) (Oil-Production)...... 30,719 466,161
Vimpel-Communications (Spon. ADR)
(Telecommunication Services)................... 25,600 857,600
------------
2,482,403
------------
SLOVAKIA (0.3%)
Slovakofarma AS (Pharmaceuticals)................ 12,700 503,725
------------
SOUTH AFRICA (10.8%)
ABSA Group Ltd. (Banking)........................ 18,000 63,722
Anglo American PLC (Metals & Mining)+............ 14,900 631,648
AngloGold Ltd. (Metals & Mining)................. 16,517 628,569
Billiton PLC (Metals & Mining)................... 302,700 1,160,882
BOE Ltd. (Financial Services).................... 2,809,200 2,245,868
DataTec Ltd. (Computer Systems).................. 36,800 267,607
De Beers Consolidated Mines Ltd. (Centenary
Linked Units) (Metals & Mining)................ 80,700 1,654,591
Dimension Data Holdings Ltd. (Computer
Systems)....................................... 125,200 821,801
FirstRand Ltd. (Financial Services).............. 982,300 1,159,142
Gold Fields Ltd. (Metals & Mining)............... 125,800 408,231
Highveld Steel & Vanadium Corp. Ltd. (Metals &
Mining)........................................ 250,703 647,142
Iscor Ltd. (Metals & Mining)..................... 492,720 1,090,169
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ------------ -------------
<S> <C> <C>
SOUTH AFRICA (CONTINUED)
JD Group Ltd. (Retail)........................... 154,200 $ 1,039,448
Liberty Life Association of Africa Ltd.
(Insurance).................................... 150,311 1,407,884
Sanlam Ltd. (Financial Services)................. 896,075 1,090,437
Sasol Ltd. (Oil-Production)...................... 148,500 871,790
South African Breweries PLC (Food, Beverages &
Tobacco)....................................... 229,664 1,693,812
Standard Bank Investment Corp. Ltd. (Banking).... 367,696 1,355,911
Wooltru Ltd. (Metals & Mining)................... 649,772 872,177
------------
19,110,831
------------
SOUTH KOREA (7.3%)
H&CB (GDR) (Banking)............................. 74,457 1,286,245
Hansol Paper Co. Ltd. (GDS) (Forest Products &
Paper)......................................... 755 2,586
Hyundai Electronics Industries Co.
(Electronics).................................. 50,180 795,826
Kookmin Bank (Banking)........................... 75,600 817,481
Korea Electric Power Corp. (Electric)............ 117,015 3,426,887
Korea Telecom Corp. (Spon. ADR)
(Telecommunication Services)+.................. 16,209 559,210
LG Chemical Ltd. (Manufacturing)................. 28,700 659,473
Pohang Iron & Steel Co. Ltd. (Metals & Mining)... 10,600 837,379
Pohang Iron & Steel Co. Ltd. (Spon. ADR) (Metals
& Mining)...................................... 7,900 165,900
Samsung Electronics (GDR) (144A)
(Electronics)+................................. 5,210 840,113
Samsung Fire & Marine Insurance (Insurance)...... 44,142 902,919
Samsung Heavy Industries (Manufacturing)......... 69,000 245,596
SK Corp. (Oil-Services).......................... 40,900 772,115
SK Telecom Co. Ltd. (ADR) (Telecommunication
Services)...................................... 48,900 1,567,856
------------
12,879,586
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
23
<PAGE>
THE EMERGING MARKETS EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ------------ -------------
<S> <C> <C>
TAIWAN (7.5%)
Asia Cement Corp. (Building Materials)........... 832,832 $ 622,846
Asia Cement Corp. (GDS) (Building Materials)..... 58,960 448,096
Asustek Computer, Inc. (Computer Systems)........ 65,000 719,616
Cathay Life Insurance Co. Ltd. (Insurance)....... 371,000 896,589
China Steel Corp. (Metals & Mining).............. 1,273,050 902,179
China Steel Corp. (Spon. GDR) (Metals &
Mining)........................................ 41,806 593,227
Evergreen Marine Corp. (Transport & Services).... 860,720 674,623
Evergreen Marine Corp. (Spon. GDR) (Transport &
Services)...................................... 4,816 38,046
Nan Ya Plastic Corp. (Chemicals)................. 554,000 1,185,056
President Enterprises Corp. (GDR) (144A) (Food,
Beverages & Tobacco)........................... 107,511 739,138
Siliconware Precision Industries Co.
(Semiconductors)............................... 954,000 2,165,314
Siliconware Precision Industries Co. (GDR)
(Semiconductors)+.............................. 18,346 249,047
Taiwan Semiconductor Manufacturing Co. Ltd.
(Semiconductors)............................... 114,000 733,430
Taiwan Semiconductor Manufacturing Co. Ltd.
(144A) (Semiconductors)........................ 429,694 2,764,479
Yang Ming Marine Transport (Transportation)...... 1,118,860 650,404
------------
13,382,090
------------
THAILAND (0.6%)
Advanced Info Service Public Co. Ltd.
(Telecommunications)........................... 35,500 415,728
Dhana Siam Finance and Securities Public Co. Ltd.
(Financial Services)(f)........................ 136 0
TelecomAsia Corp. Public Co. Ltd.
(Telecommunications)........................... 423,400 566,979
------------
982,707
------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ------------ -------------
<S> <C> <C>
TURKEY (4.9%)
Aksa Akrilik Kimya Sanayii AS (Textiles)......... 8,604,000 $ 605,707
Arcelik AS (Appliances & Household Durables)..... 7,917,000 673,997
Eregli Demir Ve Celik Fabrikalari AS (Metals &
Mining)........................................ 28,507,000 1,563,472
Ford Otomotive Sanayii AS (Automotive)+.......... 10,322,000 675,955
Haci Omer Sabanci Holding AS (Holding
Companies)..................................... 42,652,800 691,316
Northern Electric Telekomunikasyon AS
(Telecommunications-Equipment)................. 4,769,000 804,190
Sarkuysan Elektrolitik Bakir Sanayi ve Ticaret AS
(Manufacturing)................................ 7,500,000 291,621
Turkiye Is Bankasi (Banking)..................... 32,317,875 1,772,481
Yapi ve Kredi Bankasi AS (Banking)............... 51,697,677 1,650,439
------------
8,729,178
------------
VENEZUELA (1.9%)
C.A. La Electricidad de Caracas (Electric)....... 2,465,724 642,429
Compania Anonima Nacional Telefonos de Venezuela
(ADR) (Telecommunication Services)............. 65,000 1,885,000
Corimon CA (Chemicals)+.......................... 675 2
International Briquettes Holding, Inc. (Metals &
Mining)........................................ 36,166 81,374
Mavesa SA (Spon. ADR) (Food, Beverages &
Tobacco)....................................... 242,230 635,854
Mercantil Servicios Financieros, Class B
(Financial Services)........................... 83,000 52,220
------------
3,296,879
------------
TOTAL COMMON STOCK (COST $126,042,079)......... 135,829,042
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
24
<PAGE>
THE EMERGING MARKETS EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ------------ -------------
<S> <C> <C>
PREFERRED STOCK (13.1%)
BRAZIL (7.9%)
Companhia Brasileira de Distribuicao Grupo Pao de
Acucar (Spon. ADR) (Food, Beverages &
Tobacco)....................................... 28,026 $ 798,741
Companhia Cervejaria Brahma (Spon. ADR) (Food,
Beverages & Tobacco)........................... 112,359 1,741,564
Companhia Paranaense de Energia-Copel
(Utilities).................................... 18,227,000 871,388
Companhia Vale Do Rio Doce SA (Spon. ADR) (Metals
& Mining)...................................... 37,200 921,522
Copene Petroquimica do Nordeste SA (Chemicals)... 4,167,000 1,406,296
Eletropaulo Metropolitana - Electicidade de Sao
Paulo SA (Electric)............................ 3,020 174,054
Embratel Participacoes SA (ADR)
(Telecommunication Services)................... 95,309 2,144,452
Itausa-Investimentos Itau SA (Holding
Companies)..................................... 505,000 419,784
Petroleo Brasileiro SA (Oil-Production).......... 6,341,450 1,502,338
Tele Celular Sul Participacoes SA (ADR)
(Telecommunication Services)................... 16,056 620,163
Tele Nordeste Celular Participacoes SA (ADR)
(Telecommunication Services)................... 1,140 59,280
Tele Norte Leste Participacoes SA (ADR)
(Telecommunication Services)................... 99,324 1,769,209
Telemig Celular Participacoes SA (ADR)
(Telecommunication Services)................... 626 36,621
Ultrapar Participacoes SA (Spon. ADR) (Holding
Companies)..................................... 42,000 378,000
Usinas Siderurgicas de Minas Gerais SA (Spon.
ADR) (Metals & Mining)......................... 276,700 1,151,598
------------
13,995,010
------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ------------ -------------
<S> <C> <C>
COLOMBIA (0.3%)
Bancolombia SA (Spon. ADR) (Banking)............. 158,500 $ 515,125
------------
GREECE (0.0%)
Delta Dairy SA (Food, Beverages & Tobacco)....... 836 9,753
------------
SOUTH KOREA (4.9%)
Daishin Securities Co. (Financial Services)...... 54,600 213,775
Samsung Electronics (Spon. GDR) (Electronics).... 104,064 8,418,778
------------
8,632,553
------------
TOTAL PREFERRED STOCK (COST $18,813,380)....... 23,152,441
------------
</TABLE>
<TABLE>
<CAPTION>
UNITS
------------
<S> <C> <C>
PARTNERSHIPS (2.1%)
RUSSIA (2.1%)
New Century Holdings Ltd. (Partnership III; Group
B) (f)+........................................ 800 231,200
New Century Holdings Ltd. (Partnership IV; Group
I) (f)+........................................ 900 276,300
New Century Holdings Ltd. (Partnership V; Group
I) (f)+........................................ 1,600 603,200
New Century Holdings Ltd. (Partnership X) (f)+... 2,617 2,101,451
New Century Holdings Ltd. (Partnership XIV; Group
I) (f)+........................................ 2,500 455,000
------------
TOTAL PARTNERSHIPS (COST $7,240,200)........... 3,667,151
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
------------
<S> <C> <C>
PRIVATE PLACEMENTS (3.5%)
INDIA (3.5%)
Aptech Ltd. Series B Participatory Notes,
04/16/02 (Computer Software)................... 132,600 2,821,861
Hindalco Industries Ltd. Participatory Notes,
03/31/02 (Metals & Mining)..................... 50,000 809,200
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
25
<PAGE>
THE EMERGING MARKETS EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ------------ -------------
<S> <C> <C>
INDIA (CONTINUED)
Infosys Technologies Ltd. Participatory Notes,
04/07/04 (Computer Software)................... 8,200 $ 1,549,800
Mahanagar Telephone Nigam Ltd. Participatory
Notes, 04/19/02 (Telecommunication Services)... 203,000 1,040,578
------------
TOTAL PRIVATE PLACEMENTS (COST $5,595,659)..... 6,221,439
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
------------
<S> <C> <C>
SHORT-TERM INVESTMENTS (6.4%)
UNITED STATES (6.4%)
OTHER INVESTMENT COMPANIES (6.4%)
Hamilton Money Fund, 5.65%(y) due 05/01/00 (cost
$11,327,014)................................... $11,327,014 11,327,014
------------
TOTAL INVESTMENTS (COST
$169,018,332) (101.7%)....................................... 180,197,087
LIABILITIES IN EXCESS OF OTHER
ASSETS(-1.7%)................................................ (2,926,567)
------------
NET ASSETS (100.0%)............................................ $177,270,520
============
</TABLE>
------------------------------
The aggregate gross unrealized appreciation and depreciation was $38,735,442 and
$27,556,687, respectively, resulting in net unrealized appreciation of
$11,178,755.
+ - Non-income producing security.
ADR - American Depositary Receipt.
GDR - Global Depositary Receipt.
GDS - Global Depositary Shares.
Spon. ADR - Sponsored ADR.
Spon. GDR - Sponsored GDR.
144A - Securities restricted for resale to Qualified Institutional Buyers.
(f) - Fair valued security. Approximately 2.5% of the market value of the
securities have been valued at fair value. (See Note 1a and 4)
The Accompanying Notes are an Integral Part of the Financial Statements.
26
<PAGE>
THE EMERGING MARKETS EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
INDUSTRY DIVERSIFICATION
<TABLE>
<CAPTION>
PERCENT OF
TOTAL
INVESTMENTS
----------------
<S> <C>
Agriculture....................................... 0.3%
Appliances & Household Durables................... 0.4%
Automotive........................................ 0.7%
Banking........................................... 7.8%
Broadcasting & Publishing......................... 0.9%
Building Materials................................ 1.7%
Chemicals......................................... 2.6%
Computer Software................................. 3.5%
Computer Systems.................................. 1.0%
Construction & Housing............................ 0.5%
Diversified Manufacturing......................... 2.1%
Electric.......................................... 3.0%
Electrical Equipment.............................. 0.3%
Electronics....................................... 5.6%
Financial Services................................ 11.4%
Food, Beverages & Tobacco......................... 8.1%
Forest Products & Paper........................... 0.3%
Health Services................................... 0.4%
Holding Companies................................. 1.0%
Insurance......................................... 1.8%
Manufacuring...................................... 1.6%
Metals & Mining................................... 9.7%
Multi-Industry.................................... 1.4%
Oil Production.................................... 3.1%
Oil Services...................................... 0.4%
Partnerships...................................... 2.0%
Pharmaceuticals................................... 2.3%
Retail............................................ 1.8%
Semiconductors.................................... 3.3%
Telecommunication Services........................ 9.5%
Telecommunications................................ 6.9%
Telecommunications Equipment...................... 0.8%
Telephone......................................... 1.0%
Textiles.......................................... 0.3%
Transport & Services.............................. 0.4%
Transportation.................................... 0.6%
Utilities......................................... 1.5%
-----
100.0%
=====
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
27
<PAGE>
THE EMERGING MARKETS EQUITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $169,018,332 ) $180,197,087
Cash 106,879
Foreign Currency at Value (Cost $5,048,798 ) 4,982,475
Dividend and Interest Receivable 543,707
Receivable for Investments Sold 290,012
Prepaid Trustees' Fees 6,211
Prepaid Expenses and Other Assets 1,893
------------
Total Assets 186,128,264
------------
LIABILITIES
Payable for Investments Purchased 8,579,112
Advisory Fee Payable 141,830
Administrative Services Fee Payable 3,435
Fund Services Fee Payable 125
Accrued Expenses 133,242
------------
Total Liabilities 8,857,744
------------
NET ASSETS
Applicable to Investors' Beneficial Interests $177,270,520
============
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
28
<PAGE>
THE EMERGING MARKETS EQUITY PORTFOLIO
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividend Income (Net of Foreign Witholding Tax of
$166,225) $ 1,509,721
Interest Income 100,249
-----------
Investment Income 1,609,970
EXPENSES
Advisory Fee $ 907,665
Custodian Fees and Expenses 225,931
Professional Fees and Expenses 25,725
Administrative Services Fee 22,332
Printing Expenses 3,485
Fund Services Fee 1,507
Administration Fee 781
Trustees' Fees and Expenses 661
Insurance Expense 226
Miscellaneous 913
-----------
Total Expenses 1,189,226
-----------
NET INVESTMENT INCOME 420,744
NET REALIZED GAIN (LOSS) ON INVESTMENTS
Investment Transactions (including foreign
capital gains tax of $48,288) 8,840,045
Foreign Currency Contracts and Transactions (83,369)
-----------
Net Realized Gain 8,756,676
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) OF
Investments (net of foreign capital gains tax
of $7,816) 13,875,639
Foreign Currency Contracts and Translations (68,898)
-----------
Net Change in Unrealized Appreciation 13,806,741
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $22,984,161
===========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
29
<PAGE>
THE EMERGING MARKETS EQUITY 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>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 420,744 $ 1,897,361
Net Realized Gain (Loss) on Investments 8,756,676 (31,028,225)
Net Change in Unrealized Appreciation of
Investments 13,806,741 76,321,203
------------ ------------
Net Increase in Net Assets Resulting from
Operations 22,984,161 47,190,339
------------ ------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 59,393,680 168,310,686
Withdrawals (72,160,931) (193,661,035)
------------ ------------
Net Decrease from Investors' Transactions (12,767,251) (25,350,349)
------------ ------------
Total Increase in Net Assets 10,216,910 21,839,990
NET ASSETS
Beginning of Period 167,053,610 145,213,620
------------ ------------
End of Period $177,270,520 $167,053,610
============ ============
</TABLE>
--------------------------------------------------------------------------------
SUPPLEMENTARY DATA
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS
ENDED FOR THE FISCAL YEAR ENDED OCTOBER 31,
APRIL 30, 2000 --------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
-------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Expenses 1.31%(a) 1.30% 1.30% 1.20% 1.23% 1.31%
Net Investment Income 0.46%(a) 1.14% 1.14% 1.10% 1.14% 1.07%
Portfolio Turnover 25%(b) 87% 44% 55% 31% 41%
</TABLE>
------------------------
(a) Annualized.
(b) Not Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
30
<PAGE>
THE EMERGING MARKETS EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
APRIL 30, 2000
--------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Emerging Markets Equity Portfolio (the "portfolio") is registered under the
Investment Company Act of 1940, as amended, (the "Act") 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 June 16, 1993. The portfolio
commenced operations on November 15, 1993. The portfolio's investment objective
is to provide a high total return from a portfolio of equity securities of
companies in emerging markets. The Declaration of the Trust permits the Trustees
to issue an unlimited number of beneficial interests in the portfolio.
Investments in emerging markets may involve certain considerations and risks not
typically associated with investments in the Unites States. Future economic and
political developments in emerging market countries could adversely affect the
liquidity or value, or both, of such securities in which the portfolio is
invested. The ability of the issuers of the debt securities held by the
portfolio to meet their obligations may be affected by economic and political
developments in a specific industry or region.
The preparation of financial statements in accordance with 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 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 the 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 portfolios independent 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 or designated subcustodians, as the case may be
under tri-party repurchase agreements, 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
31
<PAGE>
THE EMERGING MARKETS EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
mark-to-market basis to determine that the value, including accrued
interest, is at least equal to the repurchase price plus the 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 stated in foreign currencies are translated at
the prevailing exchange rates at the end of the period when net assets are
valued. Purchases, sales, income and expense 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 may enter into forward and spot foreign currency contracts
to protect securities and related receivables and payables against
fluctuations in future foreign currency rates. A forward 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 and spot foreign
currency contract translations.
e) 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 may be subject to taxes
imposed by countries in which it invests. Such taxes are generally based
on income and/or capital gains earned. Taxes are accrued and applied to
net investment income, net realized capital gains and net unrealized
appreciation, as applicable, as the income and/or capital gains are
earned.
32
<PAGE>
THE EMERGING MARKETS EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
2. TRANSACTIONS WITH AFFILIATES
a) The portfolio has an Investment Advisory Agreement with J.P. Morgan
Investment Management, Inc. ("JPMIM"), a wholly owned subsidiary of J.P.
Morgan & Co. Inc. ("J.P. Morgan"). Under the terms of the Agreement, the
portfolio pays JPMIM at an annual rate of 1.00% of the portfolios average
daily net assets. For the six months ended April 30, 2000, such fees
amounted to $907,665.
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 portfolio's
officers affiliated with FDI. The portfolio has agreed to pay FDI fees
equal to its allocable share of an annual complex-wide charge of $425,000
plus FDI's out-of-pocket expenses. The amount allocable to the portfolio
is based on the ratio of the portfolio's net assets, 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 $781.
c) The portfolio 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, 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 certain other portfolios for which JPMIM acts as investment
advisor (the "master portfolios") and J.P. Morgan Series Trust in
accordance with the following annual schedule: 0.09% on the first $7
billion of the aggregate average daily net assets and 0.04% of the
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 $22,332.
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 $1,507 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
represent the portfolio's allocated 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.
33
<PAGE>
THE EMERGING MARKETS EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the six months
ended April 30, 2000 were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
----------- -----------
<S> <C> <C>
$45,715,960 $58,643,423
</TABLE>
4. RESTRICTED SECURITIES
<TABLE>
<CAPTION>
SHARES DATE ACQUIRED U.S. $ COST
------ ------------- -----------
<S> <C> <C> <C>
New Century Holdings Ltd. Partnership III........ 800 4/11/94 $ 492,000
New Century Holdings Ltd. Partnership IV......... 900 6/16/94 900,000
New Century Holdings Ltd. Partnership V.......... 1,600 11/9/94 731,000
New Century Holdings Ltd. Partnership X.......... 2,617 1/21/97 2,617,000
New Century Holdings Ltd. Partnership XIV........ 2,500 9/22/97 2,500,000
</TABLE>
The securities shown above are restricted as to sale and have been valued at
fair value in accordance with the procedures described in Note 1a. The value of
these securities at April 30, 2000 is $3,667,151 representing 2.1% of the
portfolio's net assets.
5. CREDIT AGREEMENT
The portfolio is party to a revolving line of credit agreement as discussed more
fully in Note 4 of the fund's Notes to the Financial Statements which are
included elsewhere in this report.
34
<PAGE>
J.P. MORGAN INSTITUTIONAL FUNDS
PRIME MONEY MARKET FUND
TREASURY MONEY MARKET FUND
FEDERAL MONEY MARKET FUND
TAX EXEMPT MONEY MARKET FUND
TAX AWARE ENHANCED INCOME FUND:
INSTITUTIONAL SHARES
SHORT TERM BOND FUND
BOND FUND
GLOBAL STRATEGIC INCOME FUND
TAX EXEMPT BOND FUND
NEW YORK TOTAL RETURN BOND FUND
CALIFORNIA BOND FUND: INSTITUTIONAL SHARES
DIVERSIFIED FUND
DISCIPLINED EQUITY FUND
U.S. EQUITY FUND
U.S. SMALL COMPANY FUND
TAX AWARE DISCIPLINED EQUITY FUND:
INSTITUTIONAL SHARES
INTERNATIONAL EQUITY FUND
EUROPEAN EQUITY FUND
INTERNATIONAL OPPORTUNITIES FUND
EMERGING MARKETS EQUITY FUND
SMARTINDEX-TM- FUND
FOR MORE INFORMATION ON THE J.P. MORGAN INSTITUTIONAL FUNDS, CALL J.P. MORGAN
FUNDS SERVICES AT (800) 766-7722.
IMSAR389
J.P. MORGAN INSTITUTIONAL EMERGING MARKETS EQUITY FUND
SEMIANNUAL REPORT
APRIL 30, 2000
