<PAGE>
LETTER TO THE SHAREHOLDERS OF THE J.P. MORGAN EMERGING MARKETS EQUITY FUND
June 1, 1998
Dear Shareholder:
It has been a turbulent six-month period in global emerging markets. While many
markets in Europe and Latin America provided impressive returns, most Asian
markets, which remained troubled in the wake of the region's crisis, continued
to struggle for stability.
For the six months ended April 30, 1998, the J.P. Morgan Emerging Markets Equity
Fund gained 1.39%. While the portfolio's currency decisions contributed
positively to performance, country-allocation and stock-selection decisions
detracted from its return, causing the portfolio to underperform the 3.64%
return of its benchmark for the period.
The fund's net asset value increased from $9.78 per share to $9.83 per share
after paying an income dividend of approximately $0.08 per share during the
period. The fund's net assets totaled $58.1 million on April 30, while the total
net assets of the Emerging Markets Equity Portfolio, in which the fund invests,
totaled $318.1 million.
Included in this report is a Q&A with Alejandro Baez-Sacasa, a member of the
fund's portfolio management team and leader of the Emerging Markets Equity
Strategy Team. This interview is designed to answer commonly asked questions
about the fund, elaborate on what happened during the reporting period, and
provide an outlook for the months ahead. We hope you find it informative.
As chairman and president of Asset Management Services, we appreciate your
investment in the fund. If you have any comments or questions, please call
your Morgan representative or J.P. Morgan Funds Services at (800) 521-5411.
Sincerely yours,
/s/ Ramon de Oliveira /s/ Keith M Schappert
Ramon de Oliveira Keith M Schappert
Chairman of Asset Management Services President of Asset Management Services
J.P. Morgan & Co. Incorporated J.P. Morgan & Co. Incorporated
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<S> <C> <C> <C>
LETTER TO THE SHAREHOLDERS . 1 FUND FACTS AND HIGHLIGHTS. . . . 6
FUND PERFORMANCE . . . . . . 2 SPECIAL FUND-BASED SERVICES. . . 7
PORTFOLIO MANAGER Q&A. . . . 3 FINANCIAL STATEMENTS . . . . . .10
- --------------------------------------------------------------------------------
</TABLE>
1
<PAGE>
FUND PERFORMANCE
EXAMINING PERFORMANCE
One way to look at performance is to review a fund's average annual total
return. This figure takes the fund's actual (or cumulative) return and shows
what would have happened if the fund had achieved that return by performing at a
constant rate each year. Average annual total returns represent the average
yearly change of a fund's value over various time periods, typically one, five,
or ten years (or since inception). Total returns for periods of less than one
year are not annualized and provide a picture of how a fund has performed over
the short term.
<TABLE>
<CAPTION>
PERFORMANCE TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS
------------------ -------------------------------
THREE SIX ONE THREE SINCE
AS OF APRIL 30, 1998 MONTHS MONTHS YEAR YEARS INCEPTION*
- --------------------------------------------------------------- -------------------------------
<S> <C> <C> <C> <C> <C>
J.P. Morgan Emerging
Markets Equity Fund 12.21% 1.39% -12.79% 1.31% -0.09%
Emerging Markets Benchmark** 13.98% 3.64% -14.54% -0.44% -2.09%
Lipper Emerging Markets Equity Fund Index 12.60% 0.89% -13.41% 2.42% N/A
AS OF MARCH 31, 1998
- --------------------------------------------------------------- -------------------------------
J.P. Morgan Emerging
Markets Equity Fund 3.17% -17.14% -13.95% 2.14% -0.28%
Emerging Markets Benchmark** 6.19% -12.41% -13.44% 1.50% -1.89%
Lipper Emerging Markets Equity Fund Index 4.55% -16.13% -13.59% 3.43% N/A
</TABLE>
*11/15/93 -- COMMENCEMENT OF OPERATIONS (AVERAGE ANNUAL TOTAL RETURNS BASED ON
MONTH END FOLLOWING INCEPTION). THE FUND'S AVERAGE ANNUAL TOTAL RETURN SINCE ITS
COMMENCEMENT OF OPERATIONS ON 11/15/93 THRU 4/30/98 IS 0.38%.
**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. THE 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 AND
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]
The following is an interview with ALEJANDRO BAEZ-SACASA, a member of the
portfolio management team for the Emerging Markets Equity Portfolio in which the
fund invests. Alejandro joined Morgan Private Banking in 1982. Before moving to
the Emerging Markets equities team in 1995, he spent ten years managing
international balanced portfolios for private clients. This interview was
conducted May 22, 1998 and reflects Alejandro's views on that date.
HOW HAVE EMERGING MARKETS BEHAVED OVER THE PAST SIX MONTHS?
ABS: For the six months ending April 30, the MSCI EM Free Index increased by
3.6%. Although the index was in positive territory for the period, there was a
great deal of dispersion and volatility among individual markets and regions.
Currencies in Asia played a major role in returns over the last six months. The
period also encapsulated some of the more difficult, as well as positive, events
for the emerging markets asset class since the Mexican devaluation of 1994 --
namely: the International Monetary Fund (IMF) rescue of Korea and Indonesia, as
well as the inclusion of Greece's currency (the Drachma) into Europe's exchange
rate mechanism (ERM). It is during these types of market environments where a
well diversified portfolio can help smooth out individual market and regional
volatility.
CAN YOU SPEAK ABOUT THE SPECIFIC REGIONS WITHIN THE EMERGING MARKETS UNIVERSE --
LATIN AMERICA, ASIA, EUROPE -- AND HOW THEY PERFORMED RELATIVE TO EACH OTHER?
ABS: In dollar terms, the best performing region during the period was emerging
Europe; its composite index gained 17%. The strength of the European index was
primarily driven by Greece, whose market advanced by 50% as a result of the
inclusion of its currency into the ERM in March. Investors became enthusiastic
about Greece's prospects, extrapolating that this event would stabilize the
currency, and act as a catalyst for Greek inflation and interest rates to
"converge" with other countries in the European Union (EU). The only market that
disappointed in the European region was Russia, as political uncertainty,
currency worries, and weak oil prices resulted in an 18% decline for that
market.
Looking at Asia, its regional composite declined by 12% over the period, with
the Asian crisis hitting its low points in December and January. Most markets
and currencies then recovered during February and March, giving forward momentum
during April. Korea and Indonesia were the focus of attention throughout the
period. Korea went through a successful presidential election, with the new
administration putting in place a series of measures that were positively
received by investors: a more flexible labor policy, higher interest rates,
increased limits on foreign equity investment, and tougher banking regulations
were among them. These
3
<PAGE>
measures, coupled with the $57 billion bailout by the IMF, helped stabilize
Korea's currency and equity markets. Indonesia was also the beneficiary of an
IMF program; however its government's indecisive approach to reforms, along with
doubts about the stability of the Suharto government, resulted in the 62%
decline in Indonesia's equity market. Happily for investors, Indonesia is a
small component of our universe, accounting for only 2% of the portfolio's
benchmark. It is also important to point out that not all of the Asian markets
provided negative returns. The Philippines and Taiwan were up 7% and 1%,
respectively.
Lastly, focusing on Latin America, its composite closed the period up 8%.
Markets were mixed during the period; while the larger markets were up around
14% (Mexico and Brazil), the smaller markets (Venezuela and Colombia)
underperformed the global composite. Also, the Asian crisis affected Latin
America in several major ways. First, it negatively impacted the prices of
copper and oil, two key commodities for the region. Secondly, it forced
governments to increase interest rates to defend their currencies, and to cut
back spending. However, compared with the much slower corrective action taken by
governments in Asia, the prompt responses by the Latin governments were well
received by investors.
GIVEN THE MARKET SUMMARY YOU JUST PROVIDED, HOW DID THE FUND PERFORM FOR THE
REPORTING PERIOD? WHAT CONTRIBUTED OR DETRACTED FROM ITS RETURN?
ABS: Unfortunately, the fund trailed its benchmark for the period. While
currency decisions contributed positively to performance, country-allocation and
stock-selection decisions detracted from the fund's return.
Specifically, country allocation was mildly negative due primarily to the
portfolio's underweight positions in Portugal, Mexico, and Greece, and its
overweight positions in Korea, Russia, and Thailand. The negative impact of
these allocation decisions offset the positive contributions that came from the
portfolio's underweights in Indonesia, Malaysia, Taiwan, and its overweights in
Argentina, Turkey, and Poland.
Security selection was positive in Chile, Korea, Ghana, Mexico, Peru, Venezuela,
and Taiwan. However, selections in Brazil hurt fund returns, as the portfolio
was exposed to commodity-sensitive and retail stocks, which were both severely
impacted by the Asian crisis. Stock holdings in Russia also detracted from
performance: the portfolio's exposure to oil stocks hurt the fund when oil
prices severely declined.
LOOKING AHEAD INTO THE SECOND HALF OF 1998, HOW DO YOU FORESEE THINGS PANNING
OUT, AND HOW IS THE PORTFOLIO BEING POSITIONED ACCORDINGLY?
ABS: We still think that emerging markets remain very attractive. Given the
positive global interest-rate and inflation environment, combined with the high
valuations of the developed markets (i.e. the U.S. and Europe), we believe an
allocation to emerging markets makes sense for a well diversified investor.
In terms of price-earnings (P/E) ratios, emerging markets are selling at 15
times (15x) this year's earnings, compared to 23x for the U.S. market and 22x
for the EAFE Index. We believe that investors are, to a certain degree,
beginning to recognize the overvaluation of the developed markets, as the inflow
of assets into emerging-markets funds has been positive year to date.
4
<PAGE>
Specifically, we are positioning the portfolio in the following way: regionally,
we expect to maintain the portfolio's underweight in Asia and South Africa, and
an overweight in Latin America and Eastern Europe. In terms of specific country
allocation, the portfolio's largest overweights are in Brazil, Russia, South
Korea, Philippines, China, Russia, Czech Republic, and Turkey. The portfolio's
largest underweights continue to be in Taiwan, Malaysia, South Africa, and
Mexico.
Even though our outlook for emerging markets remains positive, there are certain
risks that could affect returns in the coming year. It is possible that the
Asian crisis is more protracted than investors realize. Although J.P. Morgan's
economists do not expect a devaluation in China, investors may become concerned
about this issue in weeks to come. Also, Russia and Brazil will remain a focus
of attention, due to their political and fiscal situations. Overall, however,
our outlook remains positive for emerging market equities.
5
<PAGE>
FUND FACTS
INVESTMENT OBJECTIVE
J.P. Morgan 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 OPERATIONS
11/15/93
- --------------------------------------------------------------------------------
FUND NET ASSETS AS OF 4/30/98
$58,055,677
- --------------------------------------------------------------------------------
PORTFOLIO NET ASSETS AS OF 4/30/98
$318,132,751
- --------------------------------------------------------------------------------
CAPITAL GAIN PAYABLE DATE (IF APPLICABLE)
12/18/98
EXPENSE RATIO
The fund's current expense ratio of 1.75% 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, 1998
COUNTRY ALLOCATION
(PERCENTAGE OF TOTAL INVESTMENTS)
[CHART]
<TABLE>
<S> <C>
LATIN AMERICA 41%
ASIA 26.7%
EUROPE 17.0%
AFRICA/MIDDLE EAST 15.0%
OTHER 0.2%
</TABLE>
<TABLE>
(PERCENTAGE OF
LARGEST EQUITY HOLDINGS TOTAL INVESTMENTS)
- ------------------------------------------------------------------------
<S> <C>
TELECOMUNICACOES BRASILEIERAS SA (BRAZIL) 2.5%
YPF SOCIEDAD ANONIMA SA 2.1%
(SPON. ADR) (ARGENTINA)
TELEFONOS DE MEXICO SA DE CV 2.0%
(SPON. ADR) (CLASS L) (MEXICO)
PETROLEO BRASILEIRO SA (PREFERRED) (BRAZIL) 1.8%
ITC LTD. (INDIA) 1.7%
TATA ENGINEERING & LOCOMOTIVE CO. LTD.
(SPON. GDR) (INDIA) 1.6%
TELECOMUNICACOES BRASILEIRAS SA
(ADR) (PREFERRED) (BRAZIL) 1.6%
SOUTH AFRICA BREWERIES LTD. (SOUTH AFRICA) 1.6%
AYALA LAND, INC. (CLASS B) (PHILIPPINES) 1.5%
ABSA GROUP LTD. (SOUTH AFRICA) 1.5%
</TABLE>
6
<PAGE>
SPECIAL FUND-BASED SERVICES
PIERPONT ASSET ALLOCATION SERVICE (PAAS) For many investors, a diversified
portfolio -- including short-term instruments, bonds, and stocks -- can offer
an excellent opportunity to achieve one's investment objectives. PAAS
provides investors with a comprehensive management program for their
portfolios. Through this service, investors can:
- Create and maintain an asset allocation that is specifically targeted at
meeting their most critical investment objectives.
- Make ongoing tactical adjustments in the actual asset mix of their
portfolios to capitalize on shifting market trends.
- Make investments through the J.P. Morgan Funds, a family of diversified
mutual funds.
PAAS is available to clients who invest a
minimum of $500,000 in the J.P. Morgan Funds.
IRA MANAGEMENT SERVICE
As one of the few remaining investments that can help your assets grow tax-
deferred until retirement, the IRA enables more of your dollars to work for you
longer. Morgan offers an IRA Rollover plan that helps you to build well-balanced
long-term investment portfolios, diversified across a wide array of mutual
funds. From money markets to emerging markets, the J.P. Morgan Funds provide an
excellent way to help you accumulate long-term wealth for retirement.
7
<PAGE>
DISTRIBUTED BY FUNDS DISTRIBUTOR, INC. MORGAN GUARANTY TRUST COMPANY OF NEW
YORK SERVES AS AN INVESTMENT ADVISOR AND MAKES THE FUND AVAILABLE SOLELY IN ITS
CAPACITY AS SHAREHOLDER SERVICING AGENT. 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.
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) 521-5411 FOR A PROSPECTUS CONTAINING
MORE COMPLETE INFORMATION ABOUT THE FUND, INCLUDING MANAGEMENT FEES AND OTHER
EXPENSES. PLEASE READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
8
<PAGE>
J.P. MORGAN EMERGING MARKETS EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
APRIL 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment in The Emerging Markets Equity
Portfolio ("Portfolio"), at value $ 58,072,224
Receivable for Shares of Beneficial Interest Sold 38,099
Deferred Organization Expenses 4,762
Prepaid Trustees' Fees 101
Prepaid Administration Fees 44
Prepaid Expenses and Other Assets 6,841
------------
Total Assets 58,122,071
------------
LIABILITIES
Payable for Shares of Beneficial Interest
Redeemed 17,023
Shareholder Servicing Fee Payable 12,219
Administrative Services Fee Payable 1,422
Fund Services Fee Payable 193
Accrued Expenses 35,537
------------
Total Liabilities 66,394
------------
NET ASSETS
Applicable to 5,905,603 Shares of Beneficial
Interest Outstanding
(par value $0.001, unlimited shares authorized) $ 58,055,677
------------
------------
Net Asset Value, Offering and Redemption Price
Per Share $9.83
----
----
ANALYSIS OF NET ASSETS
Paid-in Capital $ 63,140,759
Distributions in Excess of Net Investment Income (52,346)
Accumulated Net Realized Loss on Investment and
Foreign Currency Contracts and Transactions (8,328,167)
Net Unrealized Appreciation of Investment and
Foreign Currency Contracts and
Translations 3,295,431
------------
Net Assets $ 58,055,677
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
10
<PAGE>
J.P. MORGAN EMERGING MARKETS EQUITY FUND
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED APRIL 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME ALLOCATED FROM PORTFOLIO
Allocated Dividend Income (Net of Foreign
Withholding Tax of $52,196) $ 639,583
Allocated Interest Income 30,643
Allocated Portfolio Expenses (347,727)
-----------
Net Investment Income Allocated from
Portfolio 322,499
FUND EXPENSES
Shareholder Servicing Fee $ 65,460
Transfer Agent Fees 17,871
Registration Fees 8,902
Administrative Services Fee 7,815
Printing Expenses 6,533
Professional Fees 5,912
Amortization of Organization Expenses 4,351
Line of Credit Expense 1,191
Fund Services Fee 851
Administration Fee 638
Trustees' Fees and Expenses 495
Insurance Expense 146
Miscellaneous 790
--------
Total Fund Expenses 120,955
Less: Reimbursement of Expenses (11,572)
--------
NET FUND EXPENSES 109,383
-----------
NET INVESTMENT INCOME 213,116
NET REALIZED LOSS ON INVESTMENT AND FOREIGN
CURRENCY CONTRACTS AND TRANSACTIONS ALLOCATED
FROM PORTFOLIO (7,143,718)
NET CHANGE IN UNREALIZED APPRECIATION OF
INVESTMENT AND FOREIGN CURRENCY CONTRACTS AND
TRANSLATIONS ALLOCATED FROM PORTFOLIO 8,977,562
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $ 2,046,960
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
11
<PAGE>
J.P. MORGAN EMERGING MARKETS EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
APRIL 30, FOR THE FISCAL
1998 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1997
------------ ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 213,116 $ 369,246
Net Realized Gain (Loss) on Investment and
Foreign Currency Contracts and Transactions
Allocated from Portfolio (7,143,718) 4,134,189
Net Change in Unrealized Appreciation
(Depreciation) of Investment and Foreign
Currency Contracts and Translations Allocated
from Portfolio 8,977,562 (5,358,891)
------------ ----------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 2,046,960 (855,456)
------------ ----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (262,242) (323,280)
In Excess of Net Investment Income (52,346) --
------------ ----------------
(314,588) (323,280)
------------ ----------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Proceeds from Shares of Beneficial Interest Sold 35,779,353 25,423,835
Reinvestment of Dividends 270,492 265,307
Cost of Shares of Beneficial Interest Redeemed (25,170,262) (38,174,151)
------------ ----------------
Net Increase (Decrease) from Transactions in
Shares of Beneficial Interest 10,879,583 (12,485,009)
------------ ----------------
Total Increase (Decrease) in Net Assets 12,611,955 (13,663,745)
NET ASSETS
Beginning of Period 45,443,722 59,107,467
------------ ----------------
End of Period (including distributions in excess
of net investment income of $52,346 and
undistributed net investment income of $49,126,
respectively) $ 58,055,677 $ 45,443,722
------------ ----------------
------------ ----------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
12
<PAGE>
J.P. MORGAN EMERGING MARKETS EQUITY FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share outstanding throughout each period are as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
NOVEMBER 15, 1993
FOR THE FOR THE FISCAL YEAR ENDED (COMMENCEMENT OF
SIX MONTHS ENDED OCTOBER 31, OPERATIONS)
APRIL 30, 1998 --------------------------- THROUGH
(UNAUDITED) 1997 1996 1995 OCTOBER 31, 1994
---------------- ------- ------- ------- -----------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.78 $ 10.18 $ 9.65 $ 12.43 $ 10.00
---------------- ------- ------- ------- -----------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.06 0.08 0.08 0.05 0.02
Net Realized and Unrealized Gain (Loss) on
Investment and Foreign Currency Transactions 0.07 (0.42) 0.53 (2.66) 2.41
---------------- ------- ------- ------- -----------------
Total from Investment Operations 0.13 (0.34) 0.61 (2.61) 2.43
---------------- ------- ------- ------- -----------------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (0.07) (0.06) (0.08) (0.03) --
Net Realized Gain -- -- -- (0.14) --
In Excess of Net Investment Income (0.01) -- -- -- --
---------------- ------- ------- ------- -----------------
Total Distributions to Shareholders (0.08) (0.06) (0.08) (0.17) --
---------------- ------- ------- ------- -----------------
NET ASSET VALUE, END OF PERIOD $ 9.83 $ 9.78 $ 10.18 $ 9.65 $ 12.43
---------------- ------- ------- ------- -----------------
---------------- ------- ------- ------- -----------------
RATIOS AND SUPPLEMENTAL DATA
Total Return 1.39%(a) (3.34%) 6.31% (21.15%) 24.30%(a)
Net Assets, End of Period (in thousands) $58,056 $45,444 $59,107 $49,295 $53,431
Ratios to Average Net Assets
Expenses 1.75%(b) 1.65% 1.69% 1.80% 1.84%(b)
Expenses Without Reimbursement 1.79%(b) 1.65% 1.69% 1.80% 1.96%(b)
Net Investment Income 0.81%(b) 0.62% 0.68% 0.55% 0.25%(b)
</TABLE>
- ------------------------
(a) Not annualized.
(b) Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
13
<PAGE>
J.P. MORGAN EMERGING MARKETS EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
APRIL 30, 1998
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The J.P. Morgan Emerging Markets Equity Fund (the "fund") is a separate series
of the J.P. Morgan Funds, a Massachusetts business trust (the "trust") which was
organized on November 4, 1992. The trust is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The fund commenced operations on November 15, 1993. Prior to January 1, 1998,
the trust's and the fund's names were The JPM Pierpont Funds and The JPM
Pierpont Emerging Markets Equity Fund, respectively.
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
18% at April 30, 1998). 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 $43,837. Morgan
Guaranty Trust Company of New York ("Morgan") has paid the organization
expenses of the fund. The fund has agreed to reimburse Morgan for these
costs which are being deferred and amortized on a straight-line basis over
a period not to exceed five years beginning with the commencement of
operations of the fund.
e) Expenses incurred by the trust with respect to any two or more funds in
the trust are allocated in proportion to the net assets of each fund in
the trust, except where allocations of direct expenses to each fund can
otherwise be made fairly. Expenses directly attributable to a fund are
charged to that fund.
f) The fund is treated as a separate entity for federal income tax purposes
and intends to comply with the provisions of the Internal Revenue Code of
1986, as amended, applicable to regulated investment companies and to
distribute substantially all of its income, including net realized capital
gains, if any, within the prescribed time periods. Accordingly, no
provision for federal income or excise tax is necessary.
14
<PAGE>
J.P. MORGAN EMERGING MARKETS EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1998
- --------------------------------------------------------------------------------
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 six
months ended April 30, 1998, the fee for these services amounted to $638.
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 based on the aggregate average daily net assets of the
portfolio and the other portfolios (the "master portfolios") in which the
trust and the J.P. Morgan Institutional Funds (formerly The JPM
Institutional Funds) invest and J.P. Morgan Series Trust (formerly JPM
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,
1998, the fee for these services amounted to $7,815 .
Beginning January 26, 1998, 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 1.75% of the average daily net assets of the fund until further
notice. For the period from January 26, 1998 through April 30, 1998,
Morgan has agreed to reimburse the fund $11,572 for expenses under this
agreement.
c) The trust, on behalf of the fund, has a Shareholder Servicing Agreement
with Morgan to provide account administration and personal account
maintenance service to fund shareholders. The agreement provides for the
fund to pay Morgan a fee for these services which is computed daily and
paid monthly at an annual rate of 0.25% of the average daily net assets of
the fund. For the six months ended April 30, 1998, the fee for these
services amounted to $65,460.
Morgan, Charles Schwab & Co. ("Schwab") and the trust are parties to
separate services and operating agreements (the "Schwab Agreements")
whereby Schwab makes fund shares available to customers of investment
advisors and other financial intermediaries who are Schwab's clients. The
fund is not responsible for payments to Schwab under the Schwab
Agreements; however, in the event the services
15
<PAGE>
J.P. MORGAN EMERGING MARKETS EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1998
- --------------------------------------------------------------------------------
agreement with Schwab is terminated for reasons other than a breach by
Schwab and the relationship between the trust and Morgan is terminated,
the fund would be responsible for the ongoing payments to Schwab with
respect to pre-termination shares.
d) The trust, on behalf of the fund, has a Fund Services Agreement with
Pierpont Group, Inc. ("Group") to assist the trustees in exercising their
overall supervisory responsibilities for the trust's affairs. The trustees
of the trust represent all the existing shareholders of Group. The fund's
allocated portion of Group's costs in performing its services amounted to
$851 for the six months ended April 30, 1998.
e) An aggregate annual fee of $75,000 is paid to each trustee for serving as
a trustee of the trust, the J.P. Morgan Institutional Funds, the master
portfolios and J.P. Morgan Series Trust. The Trustees' Fees and Expenses
shown in the financial statements represents the fund's allocated portion
of the total fees and expenses. The trust's Chairman and Chief Executive
Officer also serves as Chairman of Group and receives compensation and
employee benefits from Group in his role as Group's Chairman. The
allocated portion of such compensation and benefits included in the Fund
Services Fee shown in the financial statements was $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
APRIL 30, FOR THE FISCAL
1998 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1997
------------ ----------------
<S> <C> <C>
Shares sold...................................... 3,905,221 2,229,006
Reinvestment of dividends and distributions...... 29,724 25,934
Shares redeemed.................................. (2,677,139) (3,413,201)
------------ ----------------
Net Increase (Decrease).......................... 1,257,806 (1,158,261)
------------ ----------------
------------ ----------------
</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 28, 1997, 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 maximum commitment borrowing
under the Agreement is $100,000,000. Prior to January 26, 1998, the maximum
borrowing under the Agreement was $150,000,000. The Agreement expires on May 27,
1998, however, the fund as party to the Agreement has extended the Agreement and
will continue its participation therein for an additional 364 days until May 26,
1999. The maximum borrowing under the new Agreement will be $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.
16
<PAGE>
J.P. MORGAN EMERGING MARKETS EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1998
- --------------------------------------------------------------------------------
The funds pay a commitment fee at an annual rate of 0.065% on the unused portion
of the committed amount which is allocated to the funds in accordance with
procedures established by their respective trustees or directors. There were no
outstanding borrowings pursuant to the Agreement at April 30, 1998.
5. OTHER MATTERS
Prior to January 23, 1998, the fund invested in the portfolio along with another
registered management investment company and a non-U.S. fund both managed by
Morgan. On January 23, 1998, the non-U.S. fund withdrew its interest in the
portfolio through an in-kind withdrawal amounting to $381,757,617. The
withdrawal did not create a taxable event to the fund or reduce the net assets
of the fund, but did reduce the net assets of the portfolio.
17
<PAGE>
The Emerging Markets Equity Portfolio
Semi-Annual Report April 30, 1998
(unaudited)
(The following pages should be read in conjunction
with the J.P. Morgan Emerging Markets Equity Fund
Semi-Annual Financial Statements)
18
<PAGE>
THE EMERGING MARKETS EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
APRIL 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
COMMON STOCK (83.4%)
ARGENTINA (5.1%)
Banco de Galicia y Buenos Aires SA (ADR)
(Banking)...................................... 56,505 $ 1,382,607
Banco Frances del Rio de la Plata SA (ADR)
(Banking)...................................... 1,907 55,422
Capex SA (Utilities)............................. 74,310 406,524
Corcemar SA, Class B (Building Materials)........ 226,692 1,360,315
Molinos Rio de la Plata SA (Food, Beverages &
Tobacco)....................................... 366,747 843,619
Nobleza Piccardo SA, Class B (Food, Beverages &
Tobacco)....................................... 198,900 1,004,566
Perez Companc SA (Spon. ADR) (Oil-Services)...... 119,012 1,398,391
Quilmes Industrial SA (Registered) (Spon. ADR)
(Food, Beverages & Tobacco).................... 38,750 337,125
Telefonica de Argentina SA (Spon. ADR)
(Telecommunications)........................... 71,300 2,749,506
YPF Sociedad Anonima (Spon. ADR)
(Oil-Production)............................... 193,800 6,758,775
-------------
16,296,850
-------------
BRAZIL (5.9%)
Bompreco Supermercados do Norde SA (GDR) (144A)
(Food, Beverages & Tobacco).................... 47,799 860,382
Ceval Alimentos SA (Food, Beverages & Tobacco)... 241,693,731 1,003,519
Companhia de Saneamento Basico do Estado de Sao
Paulo (Utilities).............................. 19,888,000 4,519,925
Makro Atacadista SA (Spon. GDS) (144A)
(Retail)+...................................... 148,500 1,622,556
Perdigao SA (Food, Beverages & Tobacco).......... 18,314,000 28,815
Santista Alimentos SA (Food, Beverages &
Tobacco)....................................... 689,653 578,720
Souza Cruz SA (Food, Beverages & Tobacco)........ 263,600 2,154,387
Telecomunicacoes Brasileiras SA
(Telecommunication Services)................... 80,702,000 8,006,578
-------------
18,774,882
-------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
CHILE (4.5%)
Administradora de Fondos de Pensiones Provida SA
(ADR) (Banking)................................ 106,000 $ 1,894,750
Banco Santander Chile SA (ADS) (Banking)......... 126,600 1,772,400
Compania Cervecerias Unidas SA (ADR) (Food,
Beverages & Tobacco)........................... 84,500 2,318,469
Compania de Telecomunicaciones de Chile SA (Spon.
ADR) (Telecommunication Services).............. 86,125 2,158,508
Embotelladora Andina SA (ADR) (Food, Beverages &
Tobacco)....................................... 97,400 2,197,587
Enersis SA (ADR) (Utilities)..................... 45,300 1,333,519
Madeco SA (Spon. ADR) (Construction & Housing)... 53,200 851,200
Sociedad Quimica y Minera de Chile SA (ADR)
(Chemicals).................................... 44,046 1,913,248
-------------
14,439,681
-------------
CHINA (0.5%)
Beijing North Star Co. Ltd., Series H (Real
Estate)........................................ 2,356,000 699,556
Luoyang Glass Co. Ltd., Series H (Building
Materials)+.................................... 1,206,000 79,403
Shanghai Erfangji Co. Ltd., Series B (Capital
Goods)+........................................ 80,452 7,241
Shanghai Tyre and Rubber Co. Ltd., Series B
(Metals & Mining).............................. 1,332,790 285,217
Tsingtao Brewery Co. Ltd., Series B (Food,
Beverages & Tobacco)+.......................... 2,772,000 540,368
-------------
1,611,785
-------------
COLOMBIA (0.4%)
Banco de Colombia SA (GDR)(144A) (Banking)....... 103,400 464,266
Cementos Diamante SA (ADR) (Building
Materials)..................................... 103,900 921,593
Corporacion Financiera Del Valle SA (ADR) (144A)
(Banking)...................................... 9,407 25,870
-------------
1,411,729
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
THE EMERGING MARKETS EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
CROATIA (0.5%)
Pliva D.D. (GDR) (144A) (Pharmaceuticals)........ 88,260 $ 1,597,506
-------------
CZECH REPUBLIC (1.6%)
Central European Media Enterprises Ltd. (Class A)
(Entertainment, Leisure & Media)+.............. 50,800 1,420,812
Cokoladovny AS (Food, Beverages & Tobacco)....... 14,900 2,380,014
Elektrarny Opatovice AS (Telecommunications)..... 12,600 1,320,282
-------------
5,121,108
-------------
ECUADOR (0.2%)
La Cemento Nacional CA (GDS) (144A) (Building
Materials)..................................... 4,240 712,320
-------------
EGYPT (0.5%)
Commercial International Bank of Egypt (GDR)
(144A) (Banking)+.............................. 70,350 1,188,915
Paints & Chemicals Industry Co. (GDR)
(Chemicals).................................... 34,600 398,765
-------------
1,587,680
-------------
GABON (0.3%)
Elf Gabon SA (Oil-Production).................... 5,200 890,032
-------------
GHANA (1.0%)
Guinness Ghana Ltd. (Food, Beverages &
Tobacco)+...................................... 761,545 432,826
Pioneer Tobacco Co. (Food, Beverages &
Tobacco)+...................................... 1,175,500 424,647
Social Security Bank Ltd. (Banking)+............. 1,464,303 2,269,744
Unilever Ghana Ltd. (Food, Beverages &
Tobacco)+...................................... 185,700 199,892
-------------
3,327,109
-------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
GREECE (3.1%)
Hellenic Bottling Co. SA (Food, Beverages &
Tobacco)....................................... 104,224 $ 3,878,009
Hellenic Telecommunication Organization SA (OTE)
(Telecommunications)........................... 37,900 1,084,768
National Mortgage Bank of Greece (Banking)....... 41,523 3,156,035
Papastratos Cigarettes SA (Food, Beverages &
Tobacco)....................................... 3,830 73,081
Silver & Baryte Ores Mining (Metals & Mining).... 36,520 1,528,417
-------------
9,720,310
-------------
HONG KONG (0.8%)
Concord Land Development Co. Ltd. (Real
Estate)........................................ 84,400 29,691
Yue Yuen Industrial Holdings Ltd. (Retail)....... 1,227,000 2,368,129
-------------
2,397,820
-------------
HUNGARY (1.8%)
EGIS RT (Pharmaceuticals)........................ 17,200 896,874
Matav RT (Telecommunications).................... 213,468 1,246,676
MOL Magyar Olaj-es Gazipari RT
(Oil-Production)............................... 51,400 1,561,821
OTP Bank RT (Banking)............................ 39,600 1,877,177
-------------
5,582,548
-------------
INDIA (7.2%)
Bajaj Auto Ltd. (GDR) (Automotive)............... 32,200 611,800
EIH Ltd. (GDR) (Restaurants & Hotels)............ 125,350 1,504,200
ITC Ltd. (Food, Beverages & Tobacco)............. 267,800 5,315,203
Larsen & Toubro Ltd. (GDR) (Diversified
Manufacturing)................................. 185,300 2,404,267
Raymond Ltd. (GDR) (Textiles).................... 74,650 475,894
Reliance Industries Ltd. (GDR) (Chemicals)....... 489,900 4,470,337
SIEL Ltd. (GDR) (Multi - Industry)+.............. 116,400 174,600
SIEL Ltd. (GDR) (144A) (Multi - Industry)+....... 127,800 191,700
</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, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
INDIA (CONTINUED)
Steel Authority of India Ltd. (GDR) (Metals &
Mining)........................................ 204,400 $ 894,250
Tata Engineering & Locomotive Company Limited
(Spon. GDR) (Automotive)....................... 721,900 5,161,585
Videocon International Ltd. (GDS) (144A)
(Entertainment, Leisure & Media)............... 489,200 1,051,780
Wockhardt Ltd. (GDR) (Pharmaceuticals)........... 117,300 630,487
-------------
22,886,103
-------------
INDONESIA (0.8%)
P.T. Fastfood Indonesia (Food, Beverages &
Tobacco)....................................... 81,500 8,327
P.T. Goodyear Indonesia (Capital Goods).......... 13,000 2,616
P.T. Indorama Synthetic (Textiles)............... 267,500 68,738
P.T. International Nickel Indonesia (Metals &
Mining)........................................ 1,467,200 1,453,570
P.T. Modern Photo Film Co. (Wholesale &
International Trade)........................... 311,500 54,970
P.T. Multi Bintang Indonesia (Food, Beverages &
Tobacco)....................................... 82,500 408,668
P.T. Pakuwon Jati (Real Estate).................. 4,480,000 208,049
P.T. Surya Toto Indonesia (Capital Goods)........ 371,500 111,565
P.T. Unilever Indonesia (Food, Beverages &
Tobacco)....................................... 19,605 106,826
-------------
2,423,329
-------------
ISRAEL (3.1%)
Bank Hapoalim Ltd. (Banking)..................... 371,600 996,247
Bank Leumi Le-Israel (Banking)................... 1,124,500 2,052,335
Israel Chemicals Ltd. (Chemicals)................ 1,853,700 2,232,114
Koor Industries Ltd. (Spon. ADR) (Multi -
Industry)...................................... 118,800 3,014,550
Teva Pharmaceutical Industries Ltd. (ADR)
(Pharmaceuticals).............................. 37,500 1,598,437
-------------
9,893,683
-------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
MALAYSIA (2.8%)
Antah Holdings Berhad (Multi - Industry)......... 200 $ 41
Box Pak Berhad (Packaging & Containers).......... 896 420
Golden Hope Plantations Berhad (Metals &
Mining)........................................ 1,240,166 1,531,965
Lion Corp. Berhad (Multi - Industry)............. 473,600 124,098
London & Pacific Insurance Co. Berhad
(Insurance).................................... 15,000 21,357
Malaysian Airline System Berhad (Airlines)....... 297,000 235,852
Malaysian Assurance Alliance Berhad
(Insurance).................................... 566,000 983,687
Malaysian Tobacco Co. Berhad (Food, Beverages &
Tobacco)....................................... 133,000 72,901
Matsushita Electric Co. Berhad (Electronics)..... 400 1,476
Nestle Berhad (Food, Beverages & Tobacco)........ 285,000 1,531,680
Nylex Berhad (Chemicals)......................... 267,000 132,072
Perlis Plantations Berhad (Transport &
Services)...................................... 462,000 648,527
Shell Refining Co. Berhad (Oil-Production)....... 411,500 819,697
Telekom Malaysia Berhad (Telecommunications)..... 986,000 2,952,718
UMW Holdings Berhad (Holding Companies).......... 200 180
-------------
9,056,671
-------------
MEXICO (10.0%)
Cemex SA de CV (Building Materials).............. 521,675 3,133,909
Desc SA de CV, Class B (Multi - Industry)........ 35,700 248,106
Empaques Ponderosa SA de CV, Series B (Forest
Products & Paper)+............................. 1,995,000 1,574,468
Empresas ICA Sociedad Controladora SA de CV
(Spon. ADR) (Construction & Housing)........... 95,112 1,182,955
</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, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
MEXICO (CONTINUED)
Empresas La Moderna SA de CV (ADR) (Food,
Beverages & Tobacco)+.......................... 62,700 $ 1,257,919
Fomento Economico Mexicano SA de CV, Class B
(Food, Beverages & Tobacco).................... 257,000 1,901,118
Gruma SA de CV (Food, Beverages & Tobacco)+...... 297,168 681,879
Grupo Carso SA de CV, Class A (Multi -
Industry)...................................... 246,600 1,551,138
Grupo Casa Autrey SA de CV (Spon. ADR) (Food,
Beverages & Tobacco)........................... 45,300 600,225
Grupo Financiero Banamex Accival SA de CV, Class
B (Banking)+................................... 1,477,000 4,610,442
Grupo Financiero Banamex Accival SA de CV, Class
L (Banking)+................................... 6,960 17,790
Grupo Financiero Probursa SA de CV, Class B
(Financial Services)+.......................... 231 47
Grupo Gigante SA DW CV, Class B (Food, Beverages
& Tobacco)..................................... 2,990,000 1,313,700
Grupo Iusacell SA (ADR) (Telecommunications)+.... 97,500 1,889,062
Grupo Radio Centro SA de CV (Spon. ADR)
(Broadcasting & Publishing).................... 20,200 282,800
Pan-American Beverages Inc. (ADR) (Food,
Beverages & Tobacco)........................... 71,300 2,843,088
Sigma Alimentos SA de CV, Series B (Food,
Beverages & Tobacco)........................... 142,000 2,308,254
Telefonos de Mexico SA de CV, Class L (Spon. ADR)
(Telecommunications)........................... 114,020 6,456,383
-------------
31,853,283
-------------
MOROCCO (0.0%)*
Banque Commerciale Du Maroc (Banking)............ 85 7,044
-------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
PAKISTAN (1.6%)
Fauji Fertilizer Co. Ltd. (Chemicals)+........... 842,100 $ 1,660,504
Hub Power Co. (GDR) (Utilities).................. 86,900 2,237,675
Pakistan State Oil Co. Ltd. (Oil-Production)+.... 206,201 1,040,596
-------------
4,938,775
-------------
PERU (2.2%)
Cementos Norte Pacasmayo SA, Class T (Building
Materials)..................................... 576,728 909,109
Compania de Minas Buenaventura SA (Spon. ADR)
(Metals & Mining).............................. 56,800 880,400
Creditcorp Ltd. (Financial Services)............. 65,559 1,098,112
Luz del Sur SA (Spon. ADR) (Electric)............ 10,885 173,888
Telefonica del Peru SA (ADR) (Telecommunication
Services)...................................... 131,100 2,900,588
Telefonica del Peru SA, Class B
(Telecommunication Services)................... 441,700 973,202
-------------
6,935,299
-------------
PHILIPPINES (3.0%)
Ayala Land Inc., Class B (Real Estate)........... 12,298,590 4,824,471
First Philippine Holdings Corp., Class B (Multi -
Industry)...................................... 774,840 569,309
Philippine Commercial International Bank
(Banking)...................................... 38,750 173,723
Philippine Long Distance Telephone Co. (ADR)
(Telecommunications)........................... 132,842 3,586,734
Philippine National Bank (Banking)+.............. 183,423 367,759
Uniwide Holdings Inc. (Wholesale & International
Trade)+........................................ 5,200,100 186,504
-------------
9,708,500
-------------
POLAND (1.7%)
Bank Slaski SA (Banking)......................... 7,200 625,345
Elektrim Spolka Akcyjna SA (Electrical
Equipment)..................................... 216,486 3,218,819
</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, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
POLAND (CONTINUED)
Wielkopolski Bank Kredytowy SA (Banking)......... 48,518 $ 382,825
Zyweic SA (Food, Beverages & Tobacco)............ 12,662 1,248,859
-------------
5,475,848
-------------
RUSSIA (2.2%)
Lukoil Holding (Spon. ADR) (Oil-Production)...... 31,100 2,060,375
Unified Energy Systems (Spon. ADR) (Electric).... 149,593 4,786,976
Vimpel-Communications (Spon. ADR)
(Telecommunication Services)+.................. 1,900 102,600
-------------
6,949,951
-------------
SLOVAKIA (0.5%)
Slovakofarma AS (Pharmaceuticals)................ 12,700 1,523,778
-------------
SOUTH AFRICA (9.8%)
ABSA Group Ltd. (Banking)........................ 553,800 4,791,587
Anglo-American Corp. of South Africa Ltd. (Multi
- Industry).................................... 31,500 1,862,645
Billiton PLC (Metals & Mining)................... 1,041,200 2,944,547
Distillers Corporation Ltd. (Food, Beverages &
Tobacco)....................................... 237,400 446,018
Edgars Stores Ltd. (Retail)...................... 100,300 1,755,467
Engen Ltd. (Oil-Production)...................... 456,628 1,941,553
Highveld Steel & Vanadium Corp. Ltd. (Metals &
Mining)........................................ 384,203 1,215,707
Investec Group Ltd. (Financial Services)......... 17,900 863,756
Kersaf Investments Ltd. (Entertainment, Leisure &
Media)......................................... 53,959 368,156
Murray & Roberts Holdings Ltd. (Construction &
Housing)....................................... 718,200 1,335,124
Omni Media Corp. Ltd. (Entertainment, Leisure &
Media)......................................... 86,465 1,709,971
Plate Glass & Shatterprufe Industries Ltd.
(Automotive Supplies).......................... 61,565 1,040,994
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
SOUTH AFRICA (CONTINUED)
Sappi Ltd. (Forest Products & Paper)+............ 231,600 $ 1,346,586
Sasol Ltd. (Oil-Production)...................... 288,100 2,905,774
South Africa Breweries Ltd. (Food, Beverages &
Tobacco)....................................... 146,800 4,923,798
Sun International Ltd. (Entertainment, Leisure &
Media)......................................... 907,600 538,473
Trans-Natal Coal Corp. Ltd. (Metals & Mining).... 294,400 1,094,571
-------------
31,084,727
-------------
SOUTH KOREA (2.1%)
Hansol Paper Co. Ltd. (GDS) (Forest Products &
Paper)......................................... 131,362 459,767
Hanwha Chemical Corp. (Chemicals)+............... 813,396 1,594,536
Kia Motors Corp. (GDR) (144A) (Automotive)+...... 474 948
Korea Electric Power Corp. (Electric)............ 74,850 1,019,281
Korea Long Term Credit Bank (Banking)+........... 73,825 255,750
Korea Zinc Co. Ltd. (Metals & Mining)............ 43,080 390,025
Pohang Iron & Steel Co. Ltd. (Metals & Mining)... 32,560 1,751,028
Pohang Iron & Steel Co. Ltd. (ADR) (Metals &
Mining)........................................ 51,600 919,125
Samsung Corp. (GDR) (144A) (Electronics)+........ 292 201
Samsung Electronics Co. Ltd. (GDR)(144A)
(Electronics)+................................. 6,340 178,471
-------------
6,569,132
-------------
TAIWAN (3.3%)
Asia Cement Corp. (Building Materials)........... 676,000 709,323
Asia Cement Corp. (GDS) (Building Materials)..... 93,929 997,996
China Steel Corp. (GDR) (Metals & Mining)........ 125,116 1,579,590
Evergreen Marine Corp. (Spon. GDR) (Transport &
Services)...................................... 198,550 2,010,319
</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, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
TAIWAN (CONTINUED)
Hocheng Group Corp. (GDR) (144A) (Building
Materials)..................................... 204,955 $ 1,055,518
Microelectronics Technology Inc. (GDS)
(Telecommunications)+.......................... 25,440 120,840
Pacific Electric Wire & Cable
(Telecommunications-Equipment)+................ 377,859 355,233
President Enterprises Corp. (GDR) (144A) (Food,
Beverages & Tobacco)+.......................... 97,782 1,026,711
Siliconware Precision Industries Co. (GDR)
(Semiconductors)+.............................. 76,300 1,154,038
Yageo Corp. (GDR) (Electronics)+................. 117,920 1,400,300
-------------
10,409,868
-------------
THAILAND (2.3%)
Advanced Info Service Public Co. Ltd.
(Telecommunications)........................... 83,600 583,632
American Standard Sanitaryware Ltd. (Building
Materials)..................................... 39,100 192,088
Banpu Public Co. Ltd. (Metals & Mining).......... 74,500 512,397
Charoen Pokphand Feedmill Public Co. Ltd.
(Agriculture).................................. 210,300 240,614
Dhana Siam Finance and Securities Public Co. Ltd.
(Financial Services)+.......................... 136 47
Krung Thai Bank Public Co. Ltd. (Banking)........ 2,199,693 568,763
Sahavirya Steel Industries Public Co. Ltd.
(Metals & Mining)+............................. 1,660,900 137,424
Shinawatra Computer Public Co. Ltd. (Computer
Systems)....................................... 247,400 1,548,047
Siam Cement Public Co. Ltd. (Building
Materials)+.................................... 234,700 3,313,407
TelecomAsia Corp. Public Co. Ltd.
(Telecommunications)+.......................... 1,020,400 369,375
-------------
7,465,794
-------------
TURKEY (3.4%)
Aksigorta AS (Insurance)......................... 18,154,050 1,343,265
Arcelik AS (Appliances & Household Durables)..... 8,242,000 923,012
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
TURKEY (CONTINUED)
Ford Otomotive Sanayii AS (Automotive)........... 1,765,000 $ 1,270,673
Haci Omer Sabanci Holding AS (Holding
Companies)..................................... 14,709,000 1,073,649
Migros Turk AS (Food, Beverages & Tobacco)....... 996,000 975,982
Turkiye Is Bankasi (Banking)..................... 13,921,000 1,753,870
Yapi ve Kredi Bankasi AS (Banking)............... 70,397,000 3,449,108
-------------
10,789,559
-------------
VENEZUELA (1.2%)
Ceramica Carabobo CA, Class A (Spon. ADR)
(Building Materials)........................... 85,176 349,452
Ceramica Carabobo CA, Class B (Spon. ADR)
(Building Materials)........................... 21,266 116,893
Compania Anonima Nacional Telefonos de Venezuela
(ADR) (Telecommunication Services)............. 91,700 3,071,950
Corimon CA (Chemicals)+.......................... 675 8
International Briquettes Holding Ltd. (Metals &
Mining)+....................................... 36,166 289,328
-------------
3,827,631
-------------
ZIMBABWE (0.0%)*
Trans Zambezi Industries Ltd. (Holding
Companies)..................................... 4,100 615
-------------
TOTAL COMMON STOCK (COST $314,994,335)......... 265,270,950
-------------
</TABLE>
<TABLE>
<S> <C> <C>
PREFERRED STOCK (11.7%)
ARGENTINA (0.3%)
Quilmes Industrial SA (Spon. ADR) (Food,
Beverages & Tobacco)........................... 70,325 777,970
-------------
BRAZIL (10.6%)
Banco Itau SA (Banking).......................... 3,433,000 2,310,635
Ceval Participacoes SA (Food, Beverages &
Tobacco)+...................................... 23,960,000 104,719
</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, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------- -------------
<S> <C> <C>
BRAZIL (CONTINUED)
Companhia Brasileira de Distribuicao Grupo Pao de
Acucar (Food, Beverages & Tobacco)............. 53,516,000 $ 1,440,792
Companhia Brasileira de Distribuicao Grupo Pao de
Acucar (Spon. ADR) (Food, Beverages &
Tobacco)....................................... 114,000 3,035,250
Companhia Cervejaria Brahma (ADR) (Food,
Beverages & Tobacco)........................... 185,600 2,447,600
Companhia Energetica de Sao Paulo SA
(Utilities)+................................... 31,771,000 1,541,312
Companhia Hering (Holding Companies)+............ 23,960,000 25,132
Compania Paranaense de Energia-Copel
(Utilities).................................... 162,576,000 2,273,753
Copene Petroquimica do Nordeste SA, Class A
(Spon. ADR) (Chemicals)........................ 71,200 1,032,400
Copene-Petroquimica do Nordeste SA (Chemicals)... 4,167,000 1,249,351
Iochpe Maxion SA (Automotive)+................... 9,185,000 634,268
Lojas Arapua SA (Electronics).................... 173,221,000 484,526
Petrobras Distribuidora SA (Oil-Production)...... 11,429,000 202,801
Petroleo Brasileiro SA (Oil-Production).......... 22,625,000 5,735,263
Telecomunicacoes Brasileiras SA (ADR)
(Telecommunications)........................... 41,063 5,001,987
Uniao de Bancos Brasileiros SA (Spon. GDR)
(Banking)+..................................... 90,200 3,585,450
Varig SA (Airlines).............................. 54,000 127,445
Votorantim Celulose e Papel SA (Forest Products &
Paper)......................................... 39,756,000 764,526
Votorantim Celulose e Papel SA (ADR) (Forest
Products & Paper).............................. 189,250 1,797,875
-------------
33,795,085
-------------
COLOMBIA (0.2%)
Banco Ganadero SA (ADR) (Banking)................ 21,900 407,888
Bancolombia SA (Spon. ADR) (Banking)............. 12,500 189,063
-------------
596,951
-------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------- -------------
<S> <C> <C>
GREECE (0.0%)*
Delta Dairy SA (Food, Beverages & Tobacco)....... 697 $ 9,642
-------------
SOUTH KOREA (0.6%)
Samsung Co. Ltd. (GDR) (144A) (Electronics)+..... 3,199 2,207
Samsung Electronics Co. Ltd. (GDR) (144A)
(Electronics).................................. 179,403 2,039,812
-------------
2,042,019
-------------
TOTAL PREFERRED STOCK (COST $37,212,278)....... 37,221,667
-------------
</TABLE>
<TABLE>
<S> <C> <C>
RIGHTS (0.0%)*
BRAZIL (0.0%)*
Iochpe Maxion SA, Expiring 05/28/98
(Automotive)+(f)............................... 489,547 0
-------------
SOUTH KOREA (0.0%)*
Samsung Electronics Co. Ltd., Expiring 05/27/98
(Electronics)+(f).............................. 14,777 149,511
-------------
TAIWAN (0.0%)*
Yageo Corp., Expiring 05/18/98
(Electronics)+(f).............................. 9,128 0
-------------
THAILAND (0.0%)*
Dhana Siam Finance and Securities Public Co.
Ltd., Expiring 05/19/98 (Financial
Services)+(f).................................. 68 6
-------------
TOTAL RIGHTS
(COST $43).................................... 149,517
-------------
</TABLE>
<TABLE>
<S> <C> <C>
WARRANTS (0.0%)*
MALAYSIA (0.0%)*
UMW Holdings Berhad, Expiring 01/26/00 (Holding
Companies)+.................................... 200 31
-------------
</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, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------- -------------
<S> <C> <C>
THAILAND (0.0%)*
Dhana Siam Finance and Securities Public Co.
Ltd., Expiring 12/31/02 (Financial
Services)+..................................... 17 $ 1
-------------
TOTAL WARRANTS (COST $46)...................... 32
-------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT{::}
----------------
<S> <C> <C>
CONVERTIBLE BONDS (1.5%)
MEXICO (0.2%)
Telmex Prides, 11.25% due 05/15/98
(Telecommunications)........................... 10,000 570,000
-------------
SOUTH KOREA (0.0%)*
Daewoo Heavy Industries Ltd., 3.00% due 12/31/01
(Capital Goods)................................ 85,000 60,350
-------------
TAIWAN (1.0%)
Far Eastern Department Stores Ltd., 3.00% due
07/06/01 (Retail).............................. 2,130,000 1,980,900
Yageo Corp., 1.25% due 07/24/03 (Electronics).... 521,000 870,070
Yieh Loong Co. Ltd., 2.00% due 12/31/00 (Metals &
Mining)........................................ CHF 1,050,000 451,518
-------------
3,302,488
-------------
THAILAND (0.3%)
Bangkok Bank Public Co., 3.25% due 03/03/04
(Banking)...................................... 2,257,000 1,015,650
-------------
TOTAL CONVERTIBLE BONDS (COST $5,844,611)...... 4,948,488
-------------
</TABLE>
<TABLE>
<CAPTION>
SECURITY DESCRIPTION UNITS VALUE
- ------------------------------------------------- ------------- -------------
<S> <C> <C>
UNIT TRUSTS/PARTNERSHIPS (2.6%)
GHANA (0.2%)
Blakeney Investors+(f)........................... 41,300 $ 590,590
-------------
RUSSIA (2.2%)
New Century Holdings Ltd. (Partnership III; Group
B)+(f)......................................... 800 372,800
New Century Holdings Ltd. (Partnership IV; Group
I)+(f)......................................... 900 779,400
New Century Holdings Ltd. (Partnership V; Group
I)+(f)......................................... 1,600 769,600
New Century Holdings Ltd. (Partnership X)+(f).... 2,617 3,849,607
New Century Holdings Ltd. (Partnership XIV; Group
I)+(f)......................................... 2,500 1,292,500
-------------
7,063,907
-------------
TAIWAN (0.2%)
R.O.C. Taiwan Fund............................... 57,800 491,300
-------------
TOTAL UNIT TRUSTS/ PARTNERSHIPS (COST
$8,274,550)................................... 8,145,797
-------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------- ------------- -------------
<S> <C> <C>
SHORT-TERM INVESTMENTS (0.2%)
REPURCHASE AGREEMENT (0.2%)
State Street Bank and Trust Repurchase Agreement,
5.00% due 05/01/98, dated 04/30/98, proceeds
$630,088 (collateralized by U.S. Treasury Bond,
5.75% due 11/30/02, valued at $644,963)
(Banking)...................................... 630,000 630,000
-------------
</TABLE>
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, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
-------------
<S> <C> <C>
TOTAL INVESTMENTS (COST $366,955,863) (99.4%)...................
$ 316,366,451
OTHER ASSETS IN EXCESS OF LIABILITIES (0.6%)....................
1,766,300
-------------
NET ASSETS (100.0%)............................................. $ 318,132,751
-------------
-------------
</TABLE>
- ------------------------------
Note: Based on the cost of investments of $367,336,445 for federal income tax
purposes at April 30, 1998, the aggregate gross unrealized appreciation and
depreciation was $44,152,973 and $95,122,967, respectively, resulting in net
unrealized depreciation of $50,969,994.
+ - Non-income producing security
* - Less than 0.1%
{::} - Denominated in USD unless otherwise indicated.
ADR - American Depositary Receipt
ADS - American Depositary Shares
CHF - Swiss Franc
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 2.5% of the market value of the
securities have been valued at fair value. (See Note 1a)
The Accompanying Notes are an Integral Part of the Financial Statements.
27
<PAGE>
THE EMERGING MARKETS EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY DIVERSIFICATION
PERCENT OF
TOTAL
INVESTMENTS
---------------
<S> <C>
Food, Beverages & Tobacco................................................... 17.1%
Banking..................................................................... 13.4%
Telecommunications.......................................................... 8.8%
Oil-Production.............................................................. 7.6%
Metals & Mining............................................................. 5.6%
Telecommunications-Services................................................. 5.4%
Chemicals................................................................... 5.1%
Building Materials.......................................................... 4.4%
Utilities................................................................... 4.0%
Unit Trusts/Partnerships.................................................... 2.6%
Automotive.................................................................. 2.4%
Multi-Industry.............................................................. 2.4%
Retail...................................................................... 2.4%
Pharmaceuticals............................................................. 2.0%
Electric.................................................................... 1.9%
Forest Products & Paper..................................................... 1.9%
Real Estate................................................................. 1.8%
Electronics................................................................. 1.6%
Entertainment, Leisure & Media.............................................. 1.6%
Construction & Housing...................................................... 1.1%
Electrical Equipment........................................................ 1.0%
Diversified Manufacturing................................................... 0.8%
Transport & Services........................................................ 0.8%
Insurance................................................................... 0.7%
Financial Services.......................................................... 0.6%
Restaurants & Hotels........................................................ 0.5%
Oil-Services................................................................ 0.4%
Semiconductors.............................................................. 0.4%
Appliances & Household Durables............................................. 0.3%
Automotive Supplies......................................................... 0.3%
Holding Companies........................................................... 0.3%
Textiles & Apparels......................................................... 0.2%
Agriculture................................................................. 0.1%
Airlines.................................................................... 0.1%
Broadcasting & Publishing................................................... 0.1%
Capital Goods............................................................... 0.1%
Telecommunications-Equipment................................................ 0.1%
Wholesale & International Trade............................................. 0.1%
---------------
100.0%
---------------
---------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
28
<PAGE>
THE EMERGING MARKETS EQUITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
APRIL 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $366,955,863 ) $316,366,451
Cash 714
Foreign Currency at Value (Cost $2,059,677 ) 2,046,612
Receivable for Investments Sold 582,213
Dividends Receivable 908,337
Interest Receivable 74,854
Prepaid Trustees' Fees 2,811
Deferred Organization Expenses 894
Prepaid Administration Fees 531
Prepaid Expenses and Other Assets 2,151
------------
Total Assets 319,985,568
------------
LIABILITIES
Payable for Investments Purchased 1,232,092
Custody Fee Payable 270,459
Advisory Fee Payable 262,714
Administrative Services Fee Payable 7,644
Accrued Foreign Capital Gains Taxes 6,085
Fund Services Fee Payable 1,025
Accrued Expenses 72,798
------------
Total Liabilities 1,852,817
------------
NET ASSETS
Applicable to Investors' Beneficial Interests $318,132,751
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
29
<PAGE>
THE EMERGING MARKETS EQUITY PORTFOLIO
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED APRIL 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividend Income (Net of Foreign Withholding Tax
of $364,221) $ 5,355,196
Interest Income 357,405
-------------
Investment Income 5,712,601
EXPENSES
Advisory Fee $ 2,571,540
Custodian Fees and Expenses 617,090
Administrative Services Fee 77,165
Professional Fees and Expenses 27,193
Fund Services Fee 8,484
Administration Fee 5,441
Printing Expenses 3,937
Trustees' Fees and Expenses 3,527
Insurance Expense 2,339
Amortization of Organization Expenses 816
Registration Fees 119
Miscellaneous 33,661
-------------
Total Expenses 3,351,312
-------------
NET INVESTMENT INCOME 2,361,289
NET REALIZED GAIN (LOSS)
Investment Transactions (117,972,309)
Foreign Currency Contracts and Transactions 12,415,507
-------------
Net Realized Loss (105,556,802)
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) OF
Investments 62,949,455
Foreign Currency Contracts and Translations (10,144,398)
-------------
Net Change in Unrealized Appreciation 52,805,057
-------------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS $ (50,390,456)
-------------
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
30
<PAGE>
THE EMERGING MARKETS EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
APRIL 30, FOR THE FISCAL
1998 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1997
------------- ----------------
<S> <C> <C>
DECREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 2,361,289 $ 10,403,473
Net Realized Gain (Loss) on Investments and
Foreign Currency Contracts and Transactions (105,556,802) 57,180,706
Net Change in Unrealized Appreciation
(Depreciation) of Investments and Foreign
Currency Contracts and Translations 52,805,057 (97,850,207)
------------- ----------------
Net Decrease in Net Assets Resulting from
Operations (50,390,456) (30,266,028)
------------- ----------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 263,869,694 342,652,801
Withdrawals (692,010,756) (375,081,272)
------------- ----------------
Net Decrease from Investors' Transactions (428,141,062) (32,428,471)
------------- ----------------
Total Decrease in Net Assets (478,531,518) (62,694,499)
NET ASSETS
Beginning of Period 796,664,269 859,358,768
------------- ----------------
End of Period $ 318,132,751 $ 796,664,269
------------- ----------------
------------- ----------------
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
NOVEMBER 15, 1993
FOR THE FOR THE FISCAL YEAR (COMMENCEMENT OF
SIX MONTHS ENDED ENDED OCTOBER 31, OPERATIONS)
APRIL 30, 1998 ------------------------ THROUGH
(UNAUDITED) 1997 1996 1995 OCTOBER 31, 1994
---------------- ------- ------- ---- -----------------
<S> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Expenses 1.30%(a) 1.20% 1.23% 1.31% 1.36%(a)
Net Investment Income 0.92%(a) 1.10% 1.14% 1.07% 0.66%(a)
Portfolio Turnover 24% 55% 31% 41% 27%
Average Broker Commissions $0.0005 $0.0009 $0.0006 -- --
</TABLE>
- ------------------------
(a) Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
31
<PAGE>
THE EMERGING MARKETS EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
APRIL 30, 1998
- --------------------------------------------------------------------------------
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 and received a contribution of certain
assets and liabilities, including securities, with a value of $223,722,513 on
that date from the JPM Emerging Markets Equity Fund, Ltd. in exchange for a
beneficial interest in the portfolio. The portfolio's investment objective is to
provide a high total return from a portfolio of 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 value of each security for which readily available market quotations
exist is based on a decision as to the broadest and most representative
market for such security. The value of such security will be based either
on the last sale price on a national securities exchange or, in the
absence of recorded sales, at the average of readily available closing bid
and asked prices on such exchanges. Securities listed on a foreign
exchange are valued at the last quoted sale price available before the
time when net assets are valued. Unlisted securities are valued at the
average of the quoted bid and asked prices in the over-the-counter market.
Securities or other assets for which market quotations are not readily
available are valued at fair value in accordance with procedures
established by the portfolio's trustees. Such procedures include the use
of independent pricing services, which use prices based upon yields or
prices of securities of comparable quality, coupon, maturity and type;
indications as to values from dealers; and general market conditions. All
short term portfolio securities with a remaining maturity of less than 60
days are valued by the amortized cost method.
Trading in securities on most foreign exchanges and over-the-counter
markets is normally completed before the close of the domestic market and
may also take place on days on which the domestic market is closed. If
events materially affecting the value of foreign securities occur between
the time when the exchange on which they are traded closes and the time
when the portfolio's net assets are calculated, such securities will be
valued at fair value in accordance with procedures established by and
under the general supervision of the portfolio's trustees.
The portfolio's custodian takes possession of the collateral pledged for
investments in repurchase agreements on behalf of the portfolio. It is the
policy of the portfolio to value the underlying collateral daily on a
mark-to-market basis to determine that the value, including accrued
interest, is at least equal
32
<PAGE>
THE EMERGING MARKETS EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1998
- --------------------------------------------------------------------------------
to the repurchase price plus accrued interest. In the event of default of
the obligation to repurchase, the portfolio has the right to liquidate the
collateral and apply the proceeds in satisfaction of the obligation. Under
certain circumstances, in the event of default or bankruptcy by the other
party to the agreement, realization and/or retention of the collateral or
proceeds may be subject to legal proceedings.
b) The books and records of the portfolio are maintained in U.S. dollars. The
market value of investment securities, other assets and liabilities and
foreign currency contracts are translated at the prevailing exchange rates
at the end of the period. Purchases, sales, income and 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 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 April 30, 1998, the portfolio had no
open forward foreign currency contracts.
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.
f) The portfolio incurred organization expenses in the amount of $7,629.
Morgan Guaranty Trust Company of New York ("Morgan") has paid the
organization expenses of the portfolio. The portfolio
33
<PAGE>
THE EMERGING MARKETS EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1998
- --------------------------------------------------------------------------------
has agreed to reimburse Morgan for these costs which are being deferred
and amortized on a straight-line basis over a period not to exceed five
years beginning with the commencement of operations of the portfolio.
2. TRANSACTIONS WITH AFFILIATES
a) The portfolio has an Investment Advisory Agreement with Morgan. Under the
terms of the agreement, the portfolio pays Morgan at an annual rate of
1.00% of the portfolio's average daily net assets. For the six months
ended April 30, 1998, such fees amounted to $2,571,540.
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 to the aggregate net
assets of the portfolio and certain other investment companies subject to
similar agreements with FDI. For the six months ended April 30, 1998, the
fee for these services amounted to $5,441.
c) The portfolio has an Administrative Services Agreement (the "Services
Agreement") with Morgan under which Morgan is responsible for certain
aspects of the administration and operation of the portfolio. Under the
Services Agreement, the portfolio has agreed to pay Morgan a fee equal to
its allocable share of an annual complex-wide charge. This charge is
calculated based on the aggregate average daily net assets of the
portfolio and certain other portfolios for which Morgan 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, 1998, the fee for
these services amounted to $77,165.
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 $8,484 for the six months ended April 30, 1998.
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
34
<PAGE>
THE EMERGING MARKETS EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1998
- --------------------------------------------------------------------------------
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 $1,800.
3. INVESTMENT TRANSACTIONS:
Investment transactions (excluding short-term investments) for the six months
ended April 30, 1998 were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
------------ ------------
<S> <C>
$119,741,318 $176,192,638
</TABLE>
4. RESTRICTED SECURITIES
<TABLE>
<CAPTION>
SHARES DATE ACQUIRED U.S. $ COST
------ ------------- -----------
<S> <C> <C> <C>
Blakeney Investors............................... 41,300 11/1/96 $ 413,000
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 April 30, 1998 is $7,654,497 representing 2.4% of the
portfolio's net assets.
5. CREDIT AGREEMENT
The portfolio is party to a revolving line of credit agreement (the "Agreement")
as discussed more fully in Note 4 of the fund's Notes to the Financial
Statements which are included elsewhere in this report.
6. OTHER MATTERS
On January 23, 1998, the portfolio received a withdrawal request in the amount
of $381,757,617 as discussed in Note 5 of the fund's Notes to Financial
Statements which are included elsewhere in this report. This amount is included
in Withdrawals shown on the Statement of Changes in Net Assets. The withdrawal
which was made in-kind by transferring certain assets and liabilities, including
securities, directly to a non-U.S. fund resulted in a net realized loss on
transfer of the securities in the amount of $74,439,112, which is included in
Net Realized Loss on Investment Transactions in the Statement of Operations.
35
<PAGE>
J.P. MORGAN FUNDS
PRIME MONEY MARKET FUND
FEDERAL MONEY MARKET FUND
TAX EXEMPT MONEY MARKET FUND
CALIFORNIA MONEY MARKET FUND
SHORT TERM BOND FUND
BOND FUND
GLOBAL STRATEGIC INCOME FUND
EMERGING MARKETS DEBT FUND
TAX EXEMPT BOND FUND
NEW YORK TOTAL RETURN BOND FUND
CALIFORNIA BOND FUND: SELECT SHARES
DIVERSIFIED FUND
DISCIPLINED EQUITY FUND
U.S. EQUITY FUND
U.S. SMALL COMPANY FUND
U.S. SMALL COMPANY OPPORTUNITIES FUND
TAX AWARE U.S. EQUITY FUND: SELECT SHARES
INTERNATIONAL EQUITY FUND
EUROPEAN EQUITY FUND
JAPAN EQUITY FUND
INTERNATIONAL OPPORTUNITIES FUND
EMERGING MARKETS EQUITY FUND
GLOBAL 50 FUND: SELECT SHARES
FOR MORE INFORMATION ON THE J.P. MORGAN FUNDS,
CALL J.P. MORGAN FUNDS SERVICES AT
(800) 521-5411.
J.P. MORGAN
EMERGING MARKETS
EQUITY FUND
SEMI-ANNUAL REPORT
APRIL 30, 1998
