<PAGE>
LETTER TO THE SHAREHOLDERS OF THE J.P. MORGAN INSTITUTIONAL EMERGING MARKETS
EQUITY FUND
December 1, 1999
Dear Shareholder:
We are pleased to report that the J.P. Morgan Institutional Emerging Markets
Equity Fund delivered an exceptional return of 33.76% for the 12 months ended
October 31, 1999.
This was the highest annual return in the fund's history, and its strongest of
any 12-month period. Still, the fund did underperform the Lipper Emerging
Markets Equity Fund Average and the MSCI Emerging Markets Free Index. Of course,
the index return is exclusive of fees and expenses.
The fund's net asset value rose to $7.22 per share from $5.91 after paying an
income dividend of approximately $0.51 per share over the 12-month period.
Included in this report is an interview with Douglas Dooley, managing director,
and a senior manager on 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
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
<S> <C> <C> <C>
LETTER TO THE SHAREHOLDERS...........1 FUND FACTS AND HIGHLIGHTS...........5
FUND PERFORMANCE.....................2 FINANCIAL STATEMENTS................8
PORTFOLIO MANAGER Q&A................3
- -------------------------------------------------------------------------------
</TABLE>
1
<PAGE>
FUND PERFORMANCE
EXAMINING PERFORMANCE
There are several ways to evaluate a mutual fund's historical performance.
One way is to look at the growth of a hypothetical investment. The chart at
right shows that $500,000 invested on November 30, 1993,* would have declined
to $429,256 on October 31, 1999.
Another way is to review a fund's average annual total return. This calculation
takes the fund's actual 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.
GROWTH OF $500,000 SINCE FUND INCEPTION* NOVEMBER 30, 1993 - OCTOBER 31, 1999
[GRAPH]
<TABLE>
<CAPTION>
EMERGING MKTS
JPM INST EMERGING MSCI EMERGING LIPPER EMERGING BLENDED
MKTS EQUITY MKTS FREE MKTS FUNDS INDEX BENCHMARK
<S> <C> <C> <C> <C>
11/30/93 500,000 500,000 500,000 500,000
12/31/93 574,634 582,641 572,450 596,281
1/31/94 612,683 593,249 599,756 614,047
2/28/94 599,024 582,695 583,982 593,113
3/31/94 548,293 529,964 537,731 543,823
4/30/94 531,707 519,365 521,007 546,905
5/31/94 541,951 537,141 532,782 561,309
6/30/94 528,780 522,335 511,471 550,954
7/31/94 554,634 554,808 539,551 585,937
8/31/94 605,854 623,673 589,459 649,716
9/30/94 619,024 630,760 596,002 670,092
10/31/94 608,293 619,385 584,201 655,903
11/30/94 584,878 587,173 558,146 627,827
12/31/94 533,329 540,021 514,499 593,144
1/31/95 468,337 482,567 467,268 513,858
2/28/95 455,934 470,190 459,278 507,216
3/31/95 465,856 473,178 464,927 505,897
4/30/95 481,732 494,403 483,338 530,474
5/31/95 501,577 520,701 504,943 561,677
6/30/95 504,058 522,245 506,357 564,891
7/31/95 524,399 533,963 523,927 586,682
8/31/95 510,011 521,387 513,187 565,551
9/30/95 505,050 518,913 512,674 556,172
10/31/95 481,732 499,052 491,500 524,623
11/30/95 467,345 490,151 482,014 516,035
12/31/95 481,701 511,890 497,391 531,447
1/31/96 518,716 548,272 540,116 569,220
2/29/96 516,215 539,560 535,688 560,175
3/31/96 522,718 543,758 538,366 564,533
4/30/96 539,725 565,497 560,331 587,103
5/31/96 543,727 562,978 566,551 584,488
6/30/96 545,227 566,490 569,837 588,134
7/31/96 519,216 527,779 536,103 547,943
8/31/96 530,721 541,284 550,685 561,965
9/30/96 528,220 545,970 554,319 566,830
10/31/96 513,714 531,417 540,517 551,721
11/30/96 519,717 540,319 552,894 560,962
12/31/96 524,299 542,765 562,791 563,502
1/31/97 566,687 579,788 608,096 601,940
2/28/97 582,330 604,615 630,717 627,715
3/31/97 580,816 588,726 617,787 611,219
4/30/97 577,788 589,773 622,050 612,306
5/31/97 598,478 606,646 647,554 629,824
6/30/97 628,755 639,111 683,752 663,529
7/31/97 649,444 648,656 704,265 673,439
8/31/97 581,825 566,111 642,078 587,740
9/30/97 604,028 581,801 667,184 604,029
10/31/97 497,554 486,332 565,772 504,913
11/30/97 483,425 468,592 545,178 486,495
12/31/97 483,876 479,881 554,010 498,216
1/31/98 448,113 442,244 515,617 459,141
2/28/98 476,290 488,404 561,300 507,064
3/31/98 499,048 509,598 583,135 529,068
4/30/98 503,383 504,047 587,975 523,305
5/31/98 430,774 434,972 512,773 451,591
6/30/98 381,465 389,345 466,675 404,221
7/31/98 394,755 401,690 482,168 417,037
8/31/98 282,356 285,545 346,438 296,455
9/30/98 292,672 303,659 356,173 315,261
10/31/98 320,908 335,635 386,554 348,458
11/30/98 338,284 363,549 409,013 377,439
12/31/98 337,102 358,280 404,064 371,969
1/31/99 328,184 352,500 397,639 365,968
2/28/99 322,239 355,929 394,260 369,527
3/31/99 359,100 402,833 435,341 418,224
4/30/99 410,231 452,676 491,675 469,971
5/31/99 404,880 450,042 486,954 467,237
6/30/99 444,119 501,119 543,977 520,265
7/31/99 435,201 487,505 532,227 506,131
8/31/99 436,985 491,941 526,319 510,736
9/30/99 426,878 475,293 507,372 493,452
10/31/99 429,256 485,413 525,333 503,959
</TABLE>
<TABLE>
<CAPTION>
PERFORMANCE TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS
----------------- ------------------------------------------
THREE SIX ONE THREE FIVE SINCE
AS OF OCTOBER 31, 1999 MONTHS MONTHS YEAR YEARS YEARS INCEPTION*
- ----------------------------------------------------------------------------- ------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
J.P. Morgan Institutional Emerging Markets Equity Fund -1.37% 4.64% 33.76% -5.81% -6.73% -2.55%
MSCI Emerging Markets Free Index -0.43% 7.23% 44.63% -2.97% -4.76% -0.50%
Lipper Emerging Markets Equity Fund Index -1.75% 5.28% 36.41% -4.30% -4.74% N/A
Emerging Markets Benchmark** -0.43% 7.23% 44.63% -2.97% -5.13% 0.13%
As of September 30, 1999
- ----------------------------------------------------------------------------- ------------------------------------------
J.P. Morgan Institutional Emerging Markets Equity Fund -3.88% 18.87% 45.86% -6.85% -7.16% -2.31%
MSCI Emerging Markets Free Index -5.15% 17.99% 56.52% -4.52% -5.50% -0.86%
Lipper Emerging Markets Equity Fund Index -6.99% 16.40% 45.14% -5.98% -5.71% N/A
Emerging Markets Benchmark** -5.15% 17.99% 56.52% -4.52% -5.94% -0.23%
</TABLE>
*The fund commenced operations on November 15, 1993 and has provided an average
annual return of 2.31% from that date through October 31, 1999. 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.
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. Lipper Analytical Services, Inc.
is a leading source for mutual fund data.
2
<PAGE>
PORTFOLIO MANAGER Q&A
[PHOTO]
Following is an interview with DOUGLAS DOOLEY, managing director, and a senior
manager on the portfolio management team. Doug has senior responsibility for
emerging markets equity investing at J.P. Morgan Investment Management. Prior to
accepting this position, he headed international research in London. He joined
Morgan's U.S. equity research in 1979 and subsequently managed institutional and
balanced accounts. He holds a B.S. from American University and an M.B.A. from
Columbia University. He is a Chartered Financial Analyst. This interview was
conducted on November 9, 1999, and reflects his views on that date.
THIS HAS BEEN THE FUND'S BEST YEAR SINCE ITS INCEPTION. WHAT HAPPENED?
DD: We've never had a 12-month period with this kind of return. it's so strong
because we are coming off the excessively depressed levels following the Asian
market crisis last year, the Russian debt default, and the rescue of Long Term
Capital. Prices were very low at that time compared to what companies were worth
because investors wanted to avoid all types of risk.
Now, a year later, there's been a remarkable improvement. First, the
International Monetary Fund, the World Bank, and the U.S. Treasury successfully
engineered confidence in the financial system by providing liquidity last fall.
Second, at the country level, the improvement has been dramatic. Korea, for
example, has been able to swing its current account deficit into a surplus,
increasing net exports by 10% of GDP - an enormous change. Finally, at the
company level, there has been considerable evidence of restructuring, as
companies sold off businesses that didn't fit and raised huge amounts of new
capital.
HAS THE LANDSCAPE BEEN PERMANENTLY ALTERED?
DD: There's no question that We're on a reform path. At all three levels:
international policy, local government policy, and corporate policy, events over
the last 12 months have reestablished confidence. For example, the risk premium
in emerging market bonds has contracted from 1200-1300 to 900 basis points.
After being downgraded below investment grade, Korea is now once again
investment grade. The largest Chaebols (conglomerates) in that country have sold
off 62 subsidiaries in the first half of this year, over twice the 29 sold off
all of last year to further their restructuring.
WHAT REGIONS PERFORMED THE BEST OVER THE LAST 12 MONTHS?
DD: The strongest performing region by far was Asia - up close to 70% - paced
by Korea, which gained more than 160%. Europe and the Middle East returned 57%
while Latin America trailed by rising 18%.
3
<PAGE>
HOW DID THE FUND FARE VERSUS ITS COMPETITION AND THE INDEX?
DD: We trailed, largely by underweighting the Greek market, which doubled on
enthusiasm that the country would join the European Monetary Union. We thought
the prices we were being asked to pay were too high - four to five times book
value for banks and 30 times earnings for industrial companies. It seemed
completely out of line.
AFTER A RECORD YEAR, I WONDER, IS THIS AS GOOD AT IT GETS?
DD: Remember, this great return follows a very difficult 1998, when we were down
more than 30%. The loss was painful. The recovery comes out of that. But no, we
don't think it's as good as it gets. Maybe it's as good as it gets in
acceleration off the bottom, but the prices we are paying for emerging markets
equity still appear reasonable to us. A year ago everything was cheap. That's
begun to change now. We're more discriminating. There are a few markets we are
willing to underweight now, such as Korea, Thailand and the Philippines, where
we were overweighted a year ago.
JUST HOW REASONABLE ARE PRICES NOW IN THE EMERGING MARKETS?
DD: On a price to book measure, emerging markets are still priced at about
one-third of the United States and about one half that of the international
developed markets. Now I don't think we can say that emerging, underdeveloped
markets should trade at the same level as developed markets, but that's a wide
gap. There's a good valuation differential.
WHAT ABOUT GROWTH POTENTIAL?
DD: Emerging markets are a direct beneficiary of the global recovery in
industrial production. In 1998, we effectively had a recession in the global
industrial economy - it declined by 1.5%. Emerging markets supply these
producers as well as produce themselves. The larger environment is very
different now, with the injection of credit, the end of the inventory
contraction in Asia, and a noticeable pickup in economic activity in Europe as
well as Japan. The industrial production growth rate is now close to 5%. That's
a big swing from -1.5% a year ago. Emerging markets will benefit from that,
just as they were earlier hurt.
A second benefit is the strengthening of commodity prices that We've seen as a
result of improved industrial production. Because we believe that industrial
production will be relatively robust for the next 18 months, the pressure will
be on prices to rise.
YOUR OUTLOOK?
DD: We're positive. We think that the emerging markets can continue to provide
corporate earnings and dividends growth that is compelling and that prices can
rise further to account for good, balanced growth and modest valuations.
4
<PAGE>
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.
- -------------------------------------------------------------------------------
COMMENCEMENT OF INVESTMENT OPERATIONS
11/15/93
- -------------------------------------------------------------------------------
FUND NET ASSETS AS OF 10/31/99
$131,046,041
- -------------------------------------------------------------------------------
PORTFOLIO NET ASSETS AS OF 10/31/99
$167,053,610
- -------------------------------------------------------------------------------
CAPITAL GAIN PAYABLE DATE (IF APPLICABLE)
12/20/99
EXPENSE RATIO
The fund's current expense ratio of 1.42% 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 OCTOBER 31, 1999
COUNTRY ALLOCATION
(PERCENTAGE OF TOTAL INVESTMENTS)
[CHART]
- - ASIA 35.4%
- - LATIN AMERICA 29.3%
- - AFRICA/MIDDLE EAST 18.8%
- - EUROPE 14.5%
- - OTHER 2.0%
<TABLE>
<CAPTION>
LARGEST EQUITY HOLDINGS % OF TOTAL INVESTMENTS
- ----------------------------------------------------------------------------------------------------
<S> <C>
TELEFONOS DE MEXICO SA DE CV, CLASS L (SPON. ADR) (MEXICO) 4.0%
SAMSUNG ELECTRONICS CO. LTD. (GDR) (144A) (SOUTH KOREA) 3.5%
LARSEN & TOUBRO LTD. (GDR) (INDIA) 2.1%
KOREA ELECTRIC POWER CORP. (SOUTH KOREA) 2.0%
P.T. UNILEVER INDONESIA (INDONESIA) 1.7%
HOUSING & COMMERCIAL BANK, KOREA (GDR) (SOUTH KOREA) 1.6%
DE BEERS CONSOLIDATED MINES LTD. (SOUTH AFRICA) 1.5%
HELLENIC TELECOMMUNICATION ORGANIZATION SA (OTE) (GREECE) 1.5%
COMPANIA ANONIMA NACIONAL TELEFONOS DE VENEZUELA (ADR) (VENEZUELA) 1.5%
ISCOR LTD. (SOUTH AFRICA) 1.3%
</TABLE>
5
<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 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.
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.
6
<PAGE>
THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY
<PAGE>
J.P. MORGAN INSTITUTIONAL EMERGING MARKETS EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment in The Emerging Markets Equity
Portfolio ("Portfolio"), at value $ 131,145,075
Receivable for Expense Reimbursements 43,589
Receivable for Shares of Beneficial Interest Sold 7,663
Prepaid Trustees' Fees 3,451
Prepaid Expenses and Other Assets 1,104
-------------
Total Assets 131,200,882
-------------
LIABILITIES
Payable for Shares of Beneficial Interest
Redeemed 88,495
Shareholder Servicing Fee Payable 23,648
Administrative Services Fee Payable 2,807
Administration Fee Payable 148
Fund Services Fee Payable 75
Accrued Expenses 39,668
-------------
Total Liabilities 154,841
-------------
NET ASSETS
Applicable to 18,153,643 Shares of Beneficial
Interest Outstanding
(par value $0.001, unlimited shares authorized) $ 131,046,041
=============
Net Asset Value, Offering and Redemption Price
Per Share $7.22
----
----
ANALYSIS OF NET ASSETS
Paid-in Capital $ 204,318,117
Distributions in Excess of Net Investment Income (2,199,431)
Accumulated Net Realized Loss on Investment (118,298,114)
Net Unrealized Appreciation of Investment 47,225,469
-------------
Net Assets $ 131,046,041
=============
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
8
<PAGE>
J.P. MORGAN INSTITUTIONAL EMERGING MARKETS EQUITY FUND
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME ALLOCATED FROM PORTFOLIO
Allocated Dividend Income (Net of Foreign
Withholding Tax of $320,941) $ 3,152,276
Allocated Interest Income 97,553
Allocated Portfolio Expenses (1,732,295)
------------
Net Investment Income Allocated from
Portfolio 1,517,534
FUND EXPENSES
Shareholder Servicing Fee $132,803
Administrative Services Fee 34,406
Interest Expense 31,748
Transfer Agent Fees 19,661
Registration Fees 16,897
Printing Expenses 11,958
Professional Fees 10,200
Fund Services Fee 2,713
Administration Fee 1,980
Trustees' Fees and Expenses 933
Insurance Expense 905
Amortization of Organization Expenses 378
Miscellaneous 18,535
--------
Total Fund Expenses 283,117
Less: Reimbursement of Expenses (94,972)
--------
NET FUND EXPENSES 188,145
------------
NET INVESTMENT INCOME 1,329,389
NET REALIZED LOSS ON INVESTMENT ALLOCATED FROM
PORTFOLIO (26,398,442)
NET CHANGE IN UNREALIZED APPRECIATION OF
INVESTMENT ALLOCATED FROM PORTFOLIO 63,534,517
------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $ 38,465,464
============
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
9
<PAGE>
J.P. MORGAN INSTITUTIONAL EMERGING MARKETS EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FISCAL FOR THE FISCAL
YEAR ENDED YEAR ENDED
OCTOBER 31, 1999 OCTOBER 31, 1998
---------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 1,329,389 $ 3,007,343
Net Realized Loss on Investment Allocated from
Portfolio (26,398,442) (115,081,021)
Net Change in Unrealized Appreciation of
Investment Allocated from Portfolio 63,534,517 23,421,418
--------------- ---------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 38,465,464 (88,652,260)
--------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (6,850,369) (2,992,855)
Net Realized Gain -- (12,225,229)
In Excess of Net Investment Income (1,892,372) --
--------------- ---------------
Total Distributions to Shareholders (8,742,741) (15,218,084)
--------------- ---------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Proceeds from Shares of Beneficial Interest Sold 66,907,069 113,548,857
Reinvestment of Dividends and Distributions 5,348,892 10,807,134
Cost of Shares of Beneficial Interest Redeemed (91,334,422) (206,464,558)
--------------- ---------------
Net Decrease from Transactions in Shares of
Beneficial Interest (19,078,461) (82,108,567)
--------------- ---------------
Total Increase (Decrease) in Net Assets 10,644,262 (185,978,911)
NET ASSETS
Beginning of Fiscal Year 120,401,779 306,380,690
--------------- ---------------
End of Fiscal Year (including undistributed net
investment income of $0 and $5,520,980,
respectively) $ 131,046,041 $ 120,401,779
=============== ===============
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
10
<PAGE>
J.P. MORGAN INSTITUTIONAL EMERGING MARKET EQUITY FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a unit outstanding throughout each period are as follows:
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED OCTOBER 31,
----------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE PER UNIT, BEGINNING OF YEAR $ 5.91 $ 9.86 $ 10.27 $ 9.71 $ 12.47
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.14 0.14+ 0.11 0.08 0.08
Net Realized and Unrealized Gain (Loss) on
Investments 1.68 (3.44)+ (0.43) 0.56 (2.66)
-------- -------- -------- -------- --------
Total from Investment Operations 1.82 (3.30) (0.32) 0.64 (2.58)
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (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 (0.51) (0.65) (0.09) (0.08) (0.18)
-------- -------- -------- -------- --------
NET ASSET VALUE PER UNIT, END OF YEAR $ 7.22 $ 5.91 $ 9.86 $ 10.27 $ 9.71
======== ======== ======== ======== ========
RATIOS AND SUPPLEMENTAL DATA
Total Return 33.76% (35.50)% (3.15)% 6.64% (20.81)%
Net Assets, End of Year (in thousands) $131,046 $120,402 $306,381 $293,594 $186,023
Ratio to Average Net Assets
Expenses 1.42% 1.46% 1.37% 1.41% 1.43%
Net Investment Income 0.99% 1.43% 0.95% 0.96% 0.96%
Expenses without Reimbursement and including
Interest Expense 1.52% 1.54% 1.37% 1.41% 1.44%
Interest Expenses 0.02% 0.04% -- -- --
</TABLE>
- ------------------------
+ Based on amounts prior to Statement of Position 93-2 Adjustments.
The Accompanying Notes are an Integral Part of the Financial Statements.
11
<PAGE>
J.P. MORGAN INSTITUTIONAL EMERGING MARKETS EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1999
- --------------------------------------------------------------------------------
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
79% at October 31, 1999). 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 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 incurred organization expenses in the amount of $49,154 which
were deferred and are being amortized on a straight-line basis over a
period not to exceed five years beginning with the commencement of
operations of the fund.
e) 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.
f) 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.
g) The fund accounts for and reports distributions to shareholders in
accordance with Statement of Position 93-2 "Determination, Disclosure and
Financial Statement Presentation of Income, Capital
12
<PAGE>
J.P. MORGAN INSTITUTIONAL EMERGING MARKETS EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1999
- --------------------------------------------------------------------------------
Gain, and Return of Capital Distributions by Investment Companies." The
effect of applying this statement for the year ended October 31, 1999 was
to decrease undistributed net investment income by $307,059, increase
accumulated net realized loss on investment and foreign currency
transactions by $165,532 and increase paid-in-capital by $472,591. The
adjustments are primarily attributable to foreign currency losses. Net
investment income, net realized gains and net assets were not affected by
this change.
h) For federal income tax purposes, the fund had a capital loss carryforward
at October 31, 1999 of $110,198,476, of which $82,073,263 expires in the
year 2006, and $28,125,213 expires in 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 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 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
fiscal year ended October 31, 1999, the fee for these services amounted to
$1,980.
b) The trust, on behalf of the fund, 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 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 fiscal year ended October 31, 1999, the
fee for these services amounted to $34,406.
In addition, 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
1.45% of the average daily net assets of the fund until further notice.
For the fiscal year ended October 31, 1999, Morgan has agreed to reimburse
the fund $94,972 for expenses under this agreement.
13
<PAGE>
J.P. MORGAN INSTITUTIONAL EMERGING MARKETS EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1999
- --------------------------------------------------------------------------------
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 fiscal year ended October 31, 1999, the fee for these
services amounted to $132,803.
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
$2,713 for the fiscal year ended October 31, 1999.
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 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 $500.
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 FISCAL FOR THE FISCAL
YEAR ENDED YEAR ENDED
OCTOBER 31, 1999 OCTOBER 31, 1998
------------------- -------------------
<S> <C> <C>
Shares sold...................................... 10,637,187 13,131,554
Reinvestment of dividends and distributions...... 990,536 1,265,143
Shares redeemed.................................. (13,848,510) (25,097,716)
------------------ ------------------
Net Decrease..................................... (2,220,787) (10,701,019)
================== ==================
</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.
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 27, 1998, 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,
1999, 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, 2000. The maximum borrowing under the new agreement is $150,000,000. The
purpose of the Agreement is
14
<PAGE>
J.P. MORGAN INSTITUTIONAL EMERGING MARKETS EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1999
- --------------------------------------------------------------------------------
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% (0.065% prior to May 26,
1999) 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 October 31,
1999. The average daily balance outstanding for the fiscal year ended
October 31, 1999 was $580,000 at a weighted average interest rate of 5.41%.
15
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of
J.P. Morgan Institutional Emerging Markets Equity Fund
In our opinion, the accompanying statement of assets and liabilities and the
related statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
J.P. Morgan Institutional Emerging Markets Equity Fund (one of the series
constituting part of J.P. Morgan Institutional Funds, hereafter referred to as
the "fund") at October 31, 1999, and the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and financial highlights for each of the five years in the
period then ended, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards, which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
New York, New York
December 17, 1999
16
<PAGE>
The Emerging Markets Equity Portfolio
Annual Report October 31, 1999
(The following pages should be read in conjunction
with the J.P. Morgan Institutional Emerging Markets Equity Fund
Annual Financial Statements)
17
<PAGE>
THE EMERGING MARKETS EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------- -------------
<S> <C> <C>
COMMON STOCK (85.1%)
ARGENTINA (1.0%)
Perez Companc SA (Spon. ADR) (Oil-Services)...... 33,542 $ 402,504
Siderar Saic (Metals & Mining)................... 216,800 815,566
Telefonica de Argentina SA (Spon. ADR)
(Telecommunications)........................... 20,100 515,062
------------
1,733,132
------------
BRAZIL (1.1%)
Ceval Alimentos SA (Food, Beverages & Tobacco)... 731 1
Companhia Energetica de Minas Gerais SA (Spon.
ADR Represents Non-Voting Shares)
(Telecommunications)........................... 39,500 565,245
Perdigao SA (Food, Beverages & Tobacco).......... 30,885,895 44,303
Santista Alimentos SA (Food, Beverages &
Tobacco)....................................... 130,387 27,386
Seara Alimentos SA (Food, Beverages & Tobacco)... 731 0
Souza Cruz SA (Food, Beverages & Tobacco)........ 199,600 1,140,110
------------
1,777,045
------------
CHILE (4.7%)
Administradora de Fondos de Pensiones Provida SA
(Spon. ADR) (Banking).......................... 51,900 895,275
Banco Santander Chile SA (Spon. ADR) (Banking)... 49,900 817,112
Compania de Telecomunicaciones de Chile SA (Spon.
ADR) (Telecommunication Services).............. 83,183 1,388,116
Embotelladora Andina SA (ADR) (Food, Beverages &
Tobacco)....................................... 36,900 599,625
Empresa Nacional de Electricidad SA (Spon. ADR)
(Utilities).................................... 60,028 765,357
Enersis SA (Spon. ADR) (Electric)................ 80,188 1,804,230
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------- -------------
<S> <C> <C>
CHILE (CONTINUED)
Madeco SA (Spon. ADR) (Construction & Housing)... 73,962 $ 730,375
Sociedad Quimica y Minera de Chile SA, Class A
(Spon. ADR) (Chemicals)........................ 1,261 34,835
Sociedad Quimica y Minera de Chile SA, Class B
(Spon. ADR) (Chemicals)........................ 25,240 733,537
------------
7,768,462
------------
CHINA (0.5%)
Zhenhai Refining & Chemical Co. Ltd. Series H
(Chemicals).................................... 3,928,100 798,814
------------
COLOMBIA (0.1%)
Cementos Diamante SA (ADR) (Building
Materials)..................................... 84,700 84,700
Corporacion Financiera Del Valle SA (Spon. ADR)
(144A) (Banking)............................... 9,407 8,278
------------
92,978
------------
CROATIA (0.4%)
Pliva D.D. (GDR) (144A) (Pharmaceuticals)........ 55,860 608,874
------------
CZECH REPUBLIC (1.7%)
Ceske Energeticke Zavody AS (Electric)........... 309,200 800,130
SPT Telecom AS (Telecommunication Services)...... 137,900 2,079,679
------------
2,879,809
------------
EGYPT (0.6%)
MobiNil (Telecommunication Services)............. 32,500 838,365
Paints & Chemicals Industry Co. (GDR) (144A)
(Chemicals).................................... 34,600 218,845
------------
1,057,210
------------
ESTONIA (0.3%)
Estonian Telecom Ltd. (GDR) (144A) (Holding
Companies)..................................... 33,200 526,220
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
18
<PAGE>
THE EMERGING MARKETS EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------- -------------
<S> <C> <C>
GREECE (3.6%)
Alpha Credit Bank SA (Banking)................... 17,730 $ 1,355,915
Hellenic Telecommunication Organization SA (OTE)
(Telecommunications)........................... 116,791 2,474,819
National Bank of Greece SA (Banking)............. 18,785 1,346,809
Silver & Baryte Ores Mining Co. SA (Metals &
Mining)........................................ 1 39
Titan Cement Co. SA (Building Materials)......... 7,160 793,971
------------
5,971,553
------------
HUNGARY (1.3%)
Borsodchem RT (Chemicals)+....................... 3,600 107,660
Matav RT (Telecommunications).................... 177,385 1,031,796
MOL Magyar Olaj-es Gazipari RT
(Oil-Production)............................... 22,600 455,224
OTP Bank RT (Banking)............................ 12,100 549,378
------------
2,144,058
------------
INDIA (6.6%)
Asian Paints Ltd. (Manufacturing)................ 6,517 57,563
Bajaj Auto Ltd. (Transportation)................. 61,400 623,339
Hindalco Industries Ltd. (Spon. GDR) (Metals &
Mining)+....................................... 18,500 392,200
ICICI Ltd. (Financial Services).................. 768,450 1,399,113
ITC Ltd. (Food, Beverages & Tobacco)............. 58,900 944,856
Larsen & Toubro Ltd. (GDR) (Diversified
Manufacturing)................................. 163,200 3,541,440
Mahanagar Telephone Nigam Ltd. (GDR)
(Telecommunication Services)................... 37,900 315,517
Reliance Industries Ltd. (GDR) (Diversified
Manufacturing)................................. 99,200 1,222,640
Tata Engineering & Locomotive Co. Ltd. (Spon.
GDR) (Automotive).............................. 194,200 1,233,170
Wockhardt Ltd. (GDR) (Pharmaceuticals)........... 117,300 1,348,950
------------
11,078,788
------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------- -------------
<S> <C> <C>
INDONESIA (2.8%)
P.T. Indosat (ADR) (Telecommunication
Services)...................................... 39,000 $ 621,562
P.T. International Nickel Indonesia (Metals &
Mining)........................................ 1,467,200 1,327,465
P.T. Unilever Indonesia (Food, Beverages &
Tobacco)....................................... 260,105 2,810,654
------------
4,759,681
------------
ISRAEL (4.7%)
Bank Hapoalim Ltd. (Banking)..................... 439,223 1,044,239
Bank Leumi Le-Israel (Banking)................... 647,800 1,142,131
Bezeq Israeli Telecommunication Corp. Ltd.
(Telephone).................................... 337,300 1,374,380
ECI Telecom Ltd. (Telecommunications
Equipment)..................................... 21,200 614,800
Israel Chemicals Ltd. (Chemicals)................ 702,500 649,879
Koor Industries Ltd. (Spon. ADR) (Multi -
Industry)...................................... 62,100 1,047,937
Supersol Ltd. (Food, Beverages & Tobacco)........ 239,800 682,447
Teva Pharmaceutical Industries Ltd. (ADR)
(Pharmaceuticals).............................. 27,200 1,314,950
------------
7,870,763
------------
MALAYSIA (1.0%)
Commerce Asset-Holding Berhad (Banking).......... 52,000 114,948
Gamuda Berhad (Construction & Housing)........... 71,000 142,935
Genting Berhad (Holding Companies)............... 50,000 178,948
IJM Corp. Berhad (Building Materials)............ 154,000 115,095
Industrial Oxygen, Inc. Berhad (Agriculture)..... 348,000 183,158
Malakoff Berhad (Agriculture).................... 102,000 238,895
Malayan Banking Berhad (Banking)................. 70,000 237,632
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
THE EMERGING MARKETS EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------- -------------
<S> <C> <C>
MALAYSIA (CONTINUED)
Nestle Berhad (Food, Beverages & Tobacco)........ 82,000 $ 302,106
Telekom Malaysia Berhad (Telecommunications)..... 52,000 160,106
------------
1,673,823
------------
MEXICO (13.3%)
ALFA SA de CV (Multi - Industry)................. 230,000 881,078
Cemex SA de CV (Spon. ADR) (Building
Materials)..................................... 82,443 1,854,967
Cemex SA de CV, B Shares (Building Materials).... 2 9
Cifra SA de CV (Retail).......................... 513,200 805,561
Controladora Comercial Mexicana SA de CV (Food,
Beverages & Tobacco)........................... 1,099,100 908,260
Empaques Ponderosa SA de CV, Series B (Forest
Products & Paper)+............................. 875,000 543,212
Empresas ICA Sociedad Controladora SA de CV
(Spon. ADR) (Construction & Housing)........... 155,128 397,515
Fomento Economico Mexicano SA de CV (Spon. ADR)
(Food, Beverages & Tobacco).................... 24,600 807,188
Grupo Carso SA de CV, Class A (Multi -
Industry)...................................... 201,100 841,351
Grupo Financiero Banamex Accival, SA de CV, Class
O (Financial Services)......................... 599,600 1,497,052
Grupo Financiero Bancomer, SA de CV, Class O
(Financial Services)........................... 2,083,100 551,455
Grupo Financiero Probursa SA de CV, Class B
(Financial Services)........................... 231 24
Grupo Gigante SA de CV, Class B (Food,
Beverages & Tobacco)........................... 1,330,000 497,066
Grupo Iusacell SA (ADR) (Telecommunications)..... 97,082 1,152,849
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------- -------------
<S> <C> <C>
MEXICO (CONTINUED)
Grupo Modelo SA de CV (Series C) (Food, Beverages
& Tobacco)..................................... 215,000 $ 524,525
Grupo Radio Centro SA de CV (Spon. ADR)
(Broadcasting & Publishing).................... 45,200 211,875
Grupo Televisa SA (Spon. GDR) (Broadcasting &
Publishing)+................................... 50,000 2,125,000
Panamerican Beverages, Inc. (ADR) (Food,
Beverages & Tobacco)........................... 34,500 554,156
Savia SA de CV (Agriculture)..................... 25,800 551,475
Telefonos de Mexico SA de CV, Class L (Spon. ADR)
(Telecommunications)........................... 78,571 6,717,821
Tubos de Acero de Mexico SA (Manufacturing)...... 76,640 823,486
------------
22,245,925
------------
PAKISTAN (1.2%)
Hub Power Co. Ltd. (Spon. GDR) (Utilities)....... 124,600 1,027,950
Pakistan State Oil Co. Ltd. (Oil-Production)+.... 247,441 655,916
Pakistan Telecommunications Corp. (Spon. GDR)
(144A) (Telecommunications).................... 10,707 385,452
------------
2,069,318
------------
PERU (1.3%)
Banco Latinoamericano de Exportaciones Ltd.
(Banking)...................................... 35,600 852,175
Cementos Pacasmayo SAA (Building Materials)...... 1,225,184 578,206
Compania de Minas Buenaventura SA (Spon. ADR)
(Metals & Mining).............................. 43,800 744,600
------------
2,174,981
------------
PHILIPPINES (1.2%)
Equitable PCI Bank (Banking)..................... 142,350 251,727
First Philippine Holdings Corp., Class B (Multi -
Industry)...................................... 413,740 350,365
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE EMERGING MARKETS EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------- -------------
<S> <C> <C>
PHILIPPINES (CONTINUED)
Manila Electric Co., Class B (Electric).......... 224,913 $ 616,199
Philippine Long Distance Telephone Co. (Spon.
ADR) (Telecommunications)...................... 39,604 814,357
------------
2,032,648
------------
POLAND (1.8%)
Bank Slaski SA (Banking)......................... 4,630 252,346
Elektrim Spolka Akcyjna SA (Electrical
Equipment)..................................... 154,207 1,333,781
Telekomunikacja Polska SA (GDR) (144A)
(Telecommunication Services)................... 233,800 1,174,845
Wielkopolski Bank Kredytowy SA (Banking)......... 34,418 202,267
------------
2,963,239
------------
RUSSIA (0.4%)
Surgutneftegaz (Spon. ADR) (Oil-Production)...... 85,200 702,900
------------
SLOVAKIA (0.4%)
Slovakofarma AS (Pharmaceuticals)................ 12,700 610,951
------------
SOUTH AFRICA (12.2%)
Anglo American PLC (Metals & Mining)+............ 17,800 947,203
AngloGold Ltd. (Metals & Mining)................. 24,817 1,401,374
Billiton PLC (Metals & Mining)................... 368,400 1,606,681
BOE Ltd. (Financial Services).................... 2,471,300 2,155,586
De Beers Consolidated Mines Ltd. (Centenary
Linked Units) (Metals & Mining)................ 93,900 2,564,087
Highveld Steel & Vanadium Corp. Ltd. (Metals &
Mining)........................................ 250,703 652,762
Iscor Ltd. (Metals & Mining)..................... 5,582,200 2,162,009
Liberty Life Association of Africa Ltd.
(Insurance).................................... 144,611 1,341,378
Sanlam Ltd. (Financial Services)................. 1,049,600 1,204,171
Sappi Ltd. (Forest Products & Paper)+............ 134,900 1,117,390
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------- -------------
<S> <C> <C>
SOUTH AFRICA (CONTINUED)
Sasol Ltd. (Oil-Production)...................... 148,500 $ 1,014,965
South African Breweries Ltd. (Food, Beverages &
Tobacco)....................................... 162,064 1,418,874
Standard Bank Investment Corp. Ltd. (Banking).... 454,696 1,553,873
Wooltru Ltd. (Metals & Mining)................... 762,143 1,302,270
------------
20,442,623
------------
SOUTH KOREA (8.4%)
Daehan City Gas Co. (Gas-Pipelines).............. 35,650 1,031,309
Daewoo Heavy Industries (Transport & Services)... 12,574 20,756
Hansol Paper (Spon. GDR) (Forest Products &
Paper)......................................... 1,081 5,135
Hansol Paper Co. Ltd. (GDS) (Forest Products &
Paper)......................................... 1,748 8,303
Hanwha Chemical Corp. (Chemicals)+............... 128,771 1,164,790
Housing & Commercial Bank (GDR) (144A)
(Banking)...................................... 100,905 2,673,983
Hyundai Motor Co. Ltd. (Spon. GDR)
(Automotive)................................... 43,300 385,370
Korea Electric Power Corp. (Electric)............ 114,096 3,338,699
Korea Telecom Corp. (Spon. ADR)
(Telecommunication Services)+.................. 46,809 1,650,017
Pohang Iron & Steel Co. Ltd. (Metals & Mining)... 10,600 1,272,530
Samsung Co. Ltd. (Spon. GDR) (Electronics)+...... 3,048 24,140
Samsung Electronics (GDR) (144A)
(Electronics)+................................. 8,910 755,123
Samsung Fire & Marine Insurance (Insurance)...... 39,770 1,757,240
------------
14,087,395
------------
TAIWAN (6.7%)
Asia Cement Corp. (GDR) (144A) (Building
Materials)..................................... 832,832 655,979
Asia Cement Corp. (GDS) (Building Materials)..... 58,943 527,537
Asustek Computer Inc. (Computer Systems)......... 129,000 1,353,402
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE EMERGING MARKETS EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------- -------------
<S> <C> <C>
TAIWAN (CONTINUED)
Cathay Life Insurance Co. Ltd. (Insurance)....... 618,000 $ 1,596,596
China Steel Corp. (Metals & Mining).............. 1,722,050 1,323,818
China Steel Corp. (Spon. GDR) (Metals &
Mining)........................................ 41,806 703,386
Evergreen Marine Corp. (Transport & Services).... 860,720 805,399
Evergreen Marine Corp. (Spon. GDR) (Transport &
Services)...................................... 4,816 51,892
Nan Ya Plastic Corp. (Chemicals)................. 554,000 968,714
President Enterprises Corp. (GDR) (144A) (Food,
Beverages & Tobacco)........................... 107,511 698,822
Siliconware Precision Industries Co.
(Semiconductors)............................... 954,000 1,713,231
Siliconware Precision Industries Co. (GDR)
(Semiconductors)+.............................. 18,346 197,678
Yang Ming Marine Transport (Transportation)...... 1,118,860 623,939
------------
11,220,393
------------
THAILAND (1.8%)
Advanced Info Service Public Co. Ltd.
(Telecommunications)........................... 50,700 591,062
Bangkok Bank Public Co. Ltd. (Banking)........... 251,900 587,331
Banpu Public Co. Ltd. (Metals & Mining).......... 239,000 349,831
Dhana Siam Finance and Securities Public Co. Ltd.
(Financial Services)(f)........................ 136 0
Shinawatra Computer Public Co. Ltd. (Computer
Systems)....................................... 113,900 469,173
Siam Cement Public Co. Ltd. (Building
Materials)+.................................... 36,100 935,232
------------
2,932,629
------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------- -------------
<S> <C> <C>
TURKEY (3.5%)
Aksa Akrilik Kimya Sanayii AS (Textiles)......... 8,604,000 $ 173,594
Arcelik AS (Appliances & Household Durables)..... 19,585,000 723,077
Eregli Demir Ve Celik Fabrikalari AS (Metals &
Mining)........................................ 51,559,000 1,286,911
Ford Otomotive Sanayii AS (Automotive)+.......... 33,243,000 504,761
Haci Omer Sabanci Holding AS (Holding
Companies)..................................... 17,848,000 529,014
Migros Turk AS (Food, Beverages & Tobacco)....... 1,281,000 552,879
Petrol Ofisi AS (Gas-Pipelines).................. 1,434,784 247,701
Turkiye Is Bankasi (Banking)..................... 32,317,875 638,600
Yapi ve Kredi Bankasi AS (Banking)............... 76,697,677 1,116,716
------------
5,773,253
------------
VENEZUELA (2.5%)
C.A. La Electricidad de Caracas (Electric)....... 2,465,724 929,570
Ceramica Carabobo CA, Class A (Spon. ADR)
(Building Materials)........................... 85,176 106,470
Ceramica Carabobo CA, Class B (Spon. ADR)
(Building Materials)........................... 21,266 26,583
Compania Anonima Nacional Telefonos de Venezuela
(ADR) (Telecommunication Services)............. 84,500 2,181,156
Corimon CA (Chemicals)+.......................... 675 2
International Briquettes Holding, Inc. (Metals &
Mining)........................................ 36,166 79,113
Mavesa SA (Spon. ADR) (Food, Beverages &
Tobacco)....................................... 257,230 819,921
------------
4,142,815
------------
TOTAL COMMON STOCK (COST $140,162,499)......... 142,140,280
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE EMERGING MARKETS EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------- -------------
<S> <C> <C>
PREFERRED STOCK (8.4%)
BRAZIL (5.0%)
Compania Paranaense de Energia-Copel
(Utilities).................................... 162,576,000 $ 1,099,365
Copene Petroquimica do Nordeste SA (Chemicals)... 4,167,000 783,431
Embratel Participacoes SA (ADR)
(Telecommunication Services)................... 72,117 928,506
Petroleo Brasileiro SA (Oil-Production).......... 6,340,000 1,008,469
Tele Norte Leste Participacoes SA (ADR)
(Telecommunication Services)................... 95,443 1,610,601
Ultrapar Participacoes SA (Spon. ADR) (Holding
Companies)..................................... 42,000 467,250
Usinas Siderurgicas de Minas Gerais SA (ADR)
(Metals & Mining).............................. 276,700 913,110
Votorantim Celulose e Papel SA (ADR) (Forest
Products & Paper).............................. 101,950 1,529,250
------------
8,339,982
------------
COLOMBIA (0.4%)
Bancolombia SA (Spon. ADR) (Banking)............. 158,500 688,484
------------
GREECE (0.0%)
Delta Dairy SA (Food, Beverages & Tobacco)....... 697 25,786
------------
SOUTH KOREA (3.0%)
Samsung Corp. (Spon. GDR) (144A) (Electronics)... 3,199 19,418
Samsung Electronics (Spon. GDR) (Electronics).... 85,249 5,008,379
------------
5,027,797
------------
TOTAL PREFERRED STOCK (COST $13,514,807)....... 14,082,049
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT{::} VALUE
- ------------------------------------------------- ---------------- -------------
<S> <C> <C>
CONVERTIBLE BONDS (1.1%)
TAIWAN (1.1%)
Taiwan Semiconductor Manufacturing Co. 0.00% due
07/03/02 (Manufacturing) (cost $1,752,548)..... $ 1,200,000 $ 1,788,000
------------
</TABLE>
<TABLE>
<CAPTION>
UNITS
-------------
<S> <C> <C>
PARTNERSHIPS (1.3%)
RUSSIA (1.3%)
New Century Holdings Ltd. (Partnership III; Group
B) (f)+........................................ 800 120,000
New Century Holdings Ltd. (Partnership IV; Group
I) (f)+........................................ 900 236,700
New Century Holdings Ltd. (Partnership V; Group
I) (f)+........................................ 1,600 435,200
New Century Holdings Ltd. (Partnership X) (f)+... 2,617 1,008,068
New Century Holdings Ltd. (Partnership XIV;
Group I) (f)+.................................. 2,500 290,250
------------
TOTAL PARTNERSHIPS (COST $7,240,200)........... 2,090,218
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
-------------
<S> <C> <C>
PRIVATE PLACEMENTS (2.2%)
INDIA (2.2%)
Aptech Ltd. Series B Participatory Notes,
04/16/02 (Computer Software)................... 103,400 2,097,055
Hindalco Industries Ltd. Participatory Notes,
03/31/02 (Metals & Mining)..................... 50,000 841,200
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
23
<PAGE>
THE EMERGING MARKETS EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------- -------------
<S> <C> <C>
INDIA (CONTINUED)
Mahanagar Telephone Nigam Ltd. Participatory
Notes, 04/19/02 (Telecommunication Services)... 203,000 $ 816,466
------------
TOTAL PRIVATE PLACEMENTS (COST $3,848,980)..... 3,754,721
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT{::}
----------------
<S> <C> <C>
SHORT-TERM INVESTMENTS (2.0%)
REPURCHASE AGREEMENT (2.0%)
State Street Bank and Trust Co., 4.25% due
11/01/99, dated 10/29/99, proceeds $3,339,182
(collateralized by US Treasury Note, 5.50% due
03/31/03, valued at $3,408,828) (Banking)
(cost $3,338,000).............................. $ 3,338,000 3,338,000
------------
TOTAL INVESTMENTS
(COST $169,857,034) (100.1%)..................................... 167,193,268
LIABILITIES IN EXCESS OF OTHER
ASSETS (-0.1%)................................................... (139,658)
------------
NET ASSETS (100.0%)................................................ $167,053,610
============
</TABLE>
- ------------------------------
Note: Based on the cost of investments of $183,025,473 for federal income tax
purposes at October 31, 1999 the aggregate gross unrealized appreciation and
depreciation was $27,177,231 and $43,009,436, respectively, resulting in net
unrealized depreciation of $15,832,205.
+ - Non-income producing security
{::} - Denominated in USD unless otherwise indicated.
ADR - American Depositary Receipt
ADS - American Depositary Shares
GDR - Global Depositary Receipt
GDS - Global Depositary Shares
Spon. ADR - Sponsored ADR
Spon. GDR - Sponsored GDR
USD - United States Dollar
144A - Securities restricted for resale to Qualified Institutional Buyers.
(f) - Fair valued security. Approximately 1.3% of the market value of the
securities have been valued at fair value. (See Notes 1a and 4)
The Accompanying Notes are an Integral Part of the Financial Statements.
24
<PAGE>
THE EMERGING MARKETS EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1999
- --------------------------------------------------------------------------------
INDUSTRY DIVERSIFICATION
<TABLE>
<CAPTION>
PERCENT OF
TOTAL INVESTMENTS
-----------------
<S> <C>
Agriculture....................................... 0.6%
Appliances & Household Durables................... 0.4%
Automotive........................................ 1.3%
Banking........................................... 11.8%
Broadcasting & Publishing......................... 1.4%
Building Materials................................ 3.4%
Chemicals......................................... 3.3%
Computer Software................................. 1.2%
Computer Systems.................................. 1.1%
Construction & Housing............................ 0.8%
Diversified Manufacturing......................... 2.8%
Electric.......................................... 4.5%
Electrical Equipment.............................. 0.8%
Electronics....................................... 3.5%
Financial Services................................ 4.1%
Food, Beverages & Tobacco......................... 8.0%
Forest Products & Paper........................... 1.9%
Gas - Pipelines................................... 0.8%
Holding Companies................................. 1.0%
Insurance......................................... 2.8%
Manufacturing..................................... 1.6%
Metals & Mining................................... 12.4%
Multi-Industry.................................... 1.9%
Oil Production.................................... 2.3%
Oil Services...................................... 0.2%
Partnerships...................................... 1.3%
Pharmaceuticals................................... 2.3%
Retail............................................ 0.5%
Semiconductors.................................... 1.1%
Telecommunication Services........................ 8.2%
Telecommunications................................ 8.5%
Telecommunications Equipment...................... 0.4%
Telephone......................................... 0.8%
Textiles.......................................... 0.1%
Transport & Services.............................. 0.5%
Transportation.................................... 0.7%
Utilities......................................... 1.7%
-----
100.0%
=====
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
25
<PAGE>
THE EMERGING MARKETS EQUITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $169,857,034 ) $167,193,268
Cash 328
Foreign Currency at Value (Cost $377,398) 371,738
Receivable for Investments Sold 515,007
Dividend and Interest Receivable 676,427
Prepaid Trustees' Fees 5,761
Prepaid Expenses and Other Assets 1,330
------------
Total Assets 168,763,859
------------
LIABILITIES
Payable for Investments Purchased 1,385,798
Advisory Fee Payable 141,358
Custody Fee Payable 78,433
Accrued Foreign Capital Gains Taxes 40,934
Administrative Services Fee Payable 3,556
Fund Services Fee Payable 95
Accrued Expenses 60,075
------------
Total Liabilities 1,710,249
------------
NET ASSETS
Applicable to Investors' Beneficial Interests $167,053,610
============
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
26
<PAGE>
THE EMERGING MARKETS EQUITY PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividend Income (Net of Foreign Withholding Tax
of $395,190 ) $ 3,917,829
Interest Income 119,457
------------
Investment Income 4,037,286
EXPENSES
Advisory Fee $ 1,648,556
Custodian Fees and Expenses 378,569
Professional Fees and Expenses 53,460
Administrative Services Fee 42,701
Printing Expenses 8,088
Fund Services Fee 3,334
Administration Fee 2,073
Trustees' Fees and Expenses 1,561
Insurance Expense 1,092
Amortization of Organization Expense 62
Miscellaneous 429
------------
Total Expenses 2,139,925
------------
NET INVESTMENT INCOME 1,897,361
NET REALIZED LOSS ON INVESTMENTS
Investment Transactions (including foreign
capital gains tax of $125,410) (30,471,553)
Foreign Currency Contracts and Transactions (556,672)
------------
Net Realized Loss (31,028,225)
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) OF
Investments (net of foreign capital gains tax
of $40,934) 76,337,039
Foreign Currency Contracts and Translations (15,836)
------------
Net Change in Unrealized Appreciation 76,321,203
------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $ 47,190,339
============
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
27
<PAGE>
THE EMERGING MARKETS EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FISCAL FOR THE FISCAL
YEAR ENDED YEAR ENDED
OCTOBER 31, 1999 OCTOBER 31, 1998
---------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 1,897,361 $ 4,717,244
Net Realized Loss on Investments (31,028,225) (186,695,773)
Net Change in Unrealized Appreciation of
Investments and Foreign Currency Contracts and
Translations 76,321,203 24,461,955
--------------- ---------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 47,190,339 (157,516,574)
--------------- ---------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 168,310,686 292,356,504
Withdrawals (193,661,035) (786,290,579)
--------------- ---------------
Net Decrease from Investors' Transactions (25,350,349) (493,934,075)
--------------- ---------------
Total Increase (Decrease) in Net Assets 21,839,990 (651,450,649)
NET ASSETS
Beginning of Fiscal Year 145,213,620 796,664,269
--------------- ---------------
End of Fiscal Year $ 167,053,610 $ 145,213,620
=============== ===============
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED OCTOBER 31,
--------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Expenses 1.30% 1.30% 1.20% 1.23% 1.31%
Net Investment Income 1.14% 1.32% 1.10% 1.14% 1.07%
Portfolio Turnover 87% 44% 55% 31% 41%
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
28
<PAGE>
THE EMERGING MARKETS EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1999
- --------------------------------------------------------------------------------
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 United 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 values from dealers,
operating data, and general market conditions. Unlisted securities are
valued at the average of the quoted bid and asked price in the
over-the-counter market provided by a principal market maker or dealer. If
prices are not supplied by the portfolio's independent pricing service or
principal market maker or dealer, such securities are priced using fair
values in accordance with procedures 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.
b) 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 mark-
29
<PAGE>
THE EMERGING MARKETS EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1999
- --------------------------------------------------------------------------------
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.
c) 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 the 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.
d) 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.
e) The portfolio incurred organization expenses in the amount of $7,629 which
were deferred and are being amortized on a straight-line basis over a
period not to exceed five years beginning with the commencement of
operations of the portfolio.
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. 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. At October 31, 1999, the portfolio had no
open forward foreign currency contracts.
g) 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.
30
<PAGE>
THE EMERGING MARKETS EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1999
- --------------------------------------------------------------------------------
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 portfolio's average
daily net assets. For the fiscal year ended October 31, 1999, such fees
amounted to $1,648,556.
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 to 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 fiscal year ended October 31, 1999
the fee for these services amounted to $2,073.
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 JPMIM provides similar service and J.P. Morgan
Series Trust. For the fiscal year ended October 31, 1999, the fee for
these services amounted to $42,701.
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 $3,334 for the fiscal year ended October 31, 1999.
e) An aggregate annual fee of $75,000 is paid to each trustee for serving as
a trustee of 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 $600.
31
<PAGE>
THE EMERGING MARKETS EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1999
- --------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the fiscal year
ended October 31, 1999 were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
- --------- ------------
<S> <C>
$137,488,888 $162,924,964
</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 11/9/94 731,200
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 October 31, 1999 is $2,090,218 representing 1.3% 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.
32
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Investors of
The Emerging Markets Equity Portfolio
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the supplementary data present fairly, in all material
respects, the financial position of The Emerging Markets Equity Portfolio (the
"portfolio") at October 31, 1999, and the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the supplementary data for the each of the five years in
the period then ended, in conformity with generally accepted accounting
principles. These financial statements and supplementary data (hereafter
referred to as "financial statements") are the responsibility of the portfolio's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards, which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 1999 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
New York, New York
December 17, 1999
33
<PAGE>
J.P. MORGAN INSTITUTIONAL FUNDS
FEDERAL MONEY MARKET FUND
PRIME MONEY MARKET FUND
TREASURY MONEY MARKET FUND
TAX AWARE ENHANCED INCOME FUND:
INSTITUTIONAL SHARES
TAX EXEMPT MONEY MARKET FUND
SHORT TERM BOND FUND
BOND FUND
GLOBAL STRATEGIC INCOME FUND
TAX EXEMPT BOND FUND
CALIFORNIA BOND FUND: INSTITUTIONAL SHARES
NEW YORK TOTAL RETURN BOND FUND
DIVERSIFIED FUND
DISCIPLINED EQUITY FUND
LARGE CAP GROWTH FUND: INSTITUTIONAL SHARES
TAX AWARE DISCIPLINED EQUITY FUND:
INSTITUTIONAL SHARES
U.S. EQUITY FUND
U.S. SMALL COMPANY FUND
EMERGING MARKETS EQUITY FUND
EUROPEAN EQUITY FUND
INTERNATIONAL EQUITY FUND
INTERNATIONAL OPPORTUNITIES FUND
SMARTINDEX-TM- FUND: INSTITUTIONAL SHARES
FOR MORE INFORMATION ON THE J.P. MORGAN INSTITUTIONAL
FUNDS, CALL J.P. MORGAN FUNDS SERVICES AT
(800) 766-7722.
IM0767I
J.P. MORGAN
INSTITUTIONAL
EMERGING MARKETS
EQUITY FUND
ANNUAL REPORT
OCTOBER 31, 1999
