<PAGE>
LETTER TO THE SHAREHOLDERS OF THE J.P. MORGAN
INTERNATIONAL OPPORTUNITIES FUND
July 1, 1999
Dear Shareholder:
We are pleased to report that the J.P. Morgan International Opportunities
Fund delivered a solid return of 10.02% for the six months ended May 31,
1999, exceeding both its benchmark, the MSCI All Country World Index Free
ex-U.S., and the Lipper International Equity Funds Average.
The fund's net asset value on May 31 was $10.79 per share, increasing from
$10.04 per share on November 30, 1998, after paying a current income dividend
of $0.23 a share. The fund's net assets stood at approximately $50 million on
May 31 while the total net assets of The International Opportunities
Portfolio, in which the fund invests, totaled almost $326 million.
Included in this report is an interview with Nigel F. Emmett, a member of the
portfolio management team. This interview is designed to reflect what
happened during the reporting period, as well as provide an outlook for the
months ahead.
As chairman and president of Asset Management Services, we thank you for
investing with J.P. Morgan. Should you have any comments or questions, please
telephone 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 ......... 5
FUND PERFORMANCE .................. 2 FINANCIAL STATEMENTS .............. 8
PORTFOLIO MANAGER Q&A ............. 3
- --------------------------------------------------------------------------------
</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 SINCE
AS OF MAY 31, 1999 MONTHS MONTHS YEAR INCEPTION*
- ------------------------------------------------------------------------- ----------------------------
<S> <C> <C> <C> <C>
J.P. Morgan International Opportunities Fund 8.33% 10.02% 0.15% 5.21%
MSCI All Country World Index Free ex-U.S 4.90% 5.97% 4.32% 8.32%
MSCI All Country World Index ex-U.S 5.29% 6.44% 4.71% 8.18%
Lipper International Equity Funds Average 3.83% 4.98% -1.23% 8.27%
AS OF MARCH 31, 1999
- ------------------------------------------------------------------------- -----------------------------
J.P. Morgan International Opportunities Fund 4.14% 26.85% -3.46% 4.59%
MSCI All Country World Index Free ex-U.S 2.37% 23.28% 3.09% 8.98%
MSCI All Country World Index ex-U.S 2.60% 23.45% 2.96% 8.69%
Lipper International Equity Funds Average 1.54% 18.22% 0.02% 8.96%
</TABLE>
*The fund commenced operations on February 26, 1997, and has provided an
average annual total return of 5.00% from that date through May 31, 1999. For
the purpose of comparison, the "since inception" returns are calculated from
February 28, 1997, the first date when data for the fund's benchmark and its
Lipper category average were available.
Prior to September 1, 1998, the benchmark was the MSCI All Country World
Index ex-U.S. Commencing September 1, 1998, the benchmark is the MSCI All
Country World Index Free ex-U.S. The MSCI All Country World Index Free
ex-U.S. is an unmanaged index that measures developed and emerging foreign
stock market performance. It does not include fees or expenses and is not
available for actual investment.
Past performance is no guarantee of future results. Fund returns are net of
fees, assume the reinvestment of distributions and reflect the reimbursement
of certain fund and portfolio expenses as described in the prospectus. Had
expenses not been subsidized, returns would have been lower. The MSCI All
Country World ex-U.S. Index is an unmanaged index that measures developed and
emerging foreign stock market performance. It does not include fees or
expenses and is not available for actual investment. Lipper Analytical
Services, Inc. is a leading source for mutual fund data.
2
<PAGE>
PORTFOLIO MANAGER Q&A
[PHOTO]
Following is an interview with NIGEL F. EMMETT, vice president, and a member
of the portfolio management team of the J.P. Morgan International
Opportunities Portfolio. Nigel joined J.P. Morgan in 1997. Previously, he was
employed by Brown Brothers Harriman & Co. in New York and Gartmore Investment
Management in London. Nigel earned a B.A. degree in Economics from Manchester
University and is an Associate Member of the Institute of Investment
Management and Research (AIIMR), and is a Chartered Financial Analyst. This
interview was conducted on June 14, 1999, and reflects his views on that date.
THE FUND OUTPERFORMED ITS COMPETITION AND ITS INDEX. HOW DID YOU DO IT?
NFE: We outperformed mostly due to stock selection - we owned more of the
undervalued stocks that the market began to favor over the last six months.
At Morgan, we have fundamental, in-house analysts who look for attractively
priced securities. We have a slight bias toward value. Last year, the
financial markets were more interested in growth stocks and were very narrow
in their focus. But early this year, the market leadership broadened and
value stocks came back into favor. Investors have begun to question the
valuations of many "growth" companies.
WHERE WERE THE BRIGHT SPOTS WORLDWIDE?
NFE: We don't select stocks by the country in which they are located. We look
for the best values internationally, regardless of location. But the Japanese
market clearly was stronger than most others in the last six months. Foreign
buyers were optimistic that the focus there was on restructuring. Although
the world's second largest economy still has its problems, the situation is
slowly improving. In Brazil, investors were surprised at the resilience of
the economy after the local currency devaluation. Economic growth continued
to be strong in the U.S. and rebounded nicely in Asia. The United Kingdom's
economy seems to be headed for a soft landing, while Continental Europe is
starting to show some signs of a pickup in the second half of this year.
IF YOU DON'T SELECT STOCKS BY COUNTRIES, THEN HOW DO YOU SELECT THEM?
NFE: We hold exposure to each industrial sector, but look to purchase the
most undervalued companies within each sector. Take YPF, for example. We did
not buy it because it was the largest stock in Argentina. We bought it
because it was an attractively priced, well-managed oil company. We wanted to
own stock in an oil company, but we are not restricted on where the company
might be located. So after looking at all the major oil companies
internationally, one of our choices was YPF. We bought it because it was
priced right -- it happened to be located in Argentina. The subsequent bid
for the company by Repsol of Spain simply confirmed that we had made the
right decision.
3
<PAGE>
YOU SAID JAPAN DID WELL. TELL US WHAT WORKED THERE.
NFE: We've actually been underweight Japan versus the benchmark, but we have
purchased a number of attractive Japanese companies which have served us
well, including Yamanouchi Pharmaceutical, which announced in May that it had
been able to extend patents on its drug Gaster (sold under the name of Pepsid
in the U.S.), which represents 50% of its profits. The company is a global
competitor, with a strong new product pipeline that includes treatments for
asthma, hypertension, diabetes and osteoporosis.
EUROPEAN RESTRUCTURING HAS PRESENTED OPPORTUNITIES IN BANK STOCKS, RIGHT?
NFE: Yes. Last year, European mergers and acquisitions totaled $570 billion
on the continent. In the first quarter of this year, we already have $350
billion. One banking merger attracted a lot of attention because it involved
three different French institutions. At first, Societe Generale and Paribas
announced plans to merge. Their share prices did not benefit from the news.
But when Banque Nationale de Paris (BNP) bid for both of them, prices
increased dramatically.
Also in Europe, we owned a stock that fared poorly last year but has risen
nicely this year -- Phillips Electronics, the Dutch consumer electronics
company.
AND BRAZIL?
NFE: Tele Norte Leste, which provides local telecommunications services to
the northern and eastern regions of Brazil, rose sharply after foreign
investors regained confidence in the country's currency and economy. Tele
Norte Leste remains attractively valued when compared with other global
telecommunications companies. It is the only provider left in Brazil that
does not have a major international partner.
WHAT IS YOUR OUTLOOK?
NFE: We're optimistic. International markets are attractively priced when
compared with the U.S. European markets have not performed particularly well
this year due to concerns over weakness in the region's largest economies;
however, we expect economic growth to improve later in the year, helped by
stronger export demand and the increased competitiveness of the euro. In
Japan, we expect the authorities to take every step possible to sustain a
recovery in the domestic economy. Corporate restructuring is underway, albeit
slowly, and the outlook for the equity market is less troubling than has been
the case for most of the last 10 years. And, within emerging markets the
economic recovery still seems to be moving forward. As we explained earlier,
we construct this portfolio stock by stock, focusing on undervalued,
attractively priced companies. We believe there are still plenty of
opportunities in international markets.
4
<PAGE>
FUND FACTS
INVESTMENT OBJECTIVE
J.P. Morgan International Opportunities Fund seeks to provide a high total
return from a portfolio of equity securities of foreign companies in
developed and, to a lesser extent, developing markets. It is designed for
investors with a long-term investment horizon who want to diversify their
portfolios by investing in an actively managed portfolio of non-U.S. equity
securities that seeks to outperform the MSCI All Country World Index Free
ex-U.S. As an international investment, the Fund is subject to foreign
market, political, and currency risks.
- --------------------------------------------------------------------------------
COMMENCEMENT OF OPERATIONS
2/26/97
- --------------------------------------------------------------------------------
FUND NET ASSETS AS OF 5/31/99
$49,842,663
- --------------------------------------------------------------------------------
PORTFOLIO NET ASSETS AS OF 5/31/99
$326,101,168
- --------------------------------------------------------------------------------
CAPITAL GAIN PAYABLE DATE (IF APPLICABLE)
12/18/99
EXPENSE RATIO
The fund's annualized expense ratio of 1.20% 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 MAY 31, 1999
PORTFOLIO ALLOCATION
(AS A PERCENTAGE OF TOTAL INVESTMENTS)
[CHART]
- - EUROPE/AFRICA 65.7%
- - JAPAN 17.2%
- - ASIA PACIFIC EX-JAPAN 10.2%
- - LATIN AMERICA 4.2%
- - CANADA 0.7%
- - OTHER 2.0%
<TABLE>
<CAPTION>
LARGEST PORTFOLIO % OF TOTAL
HOLDINGS (EXCLUDING SHORT-TERM INVESTMENTS) INVESTMENTS
- ----------------------------------------------------------------------
<S> <C>
IBERDROLA SA (SPAIN) 2.3%
PHILIPS ELECTRONICS NV (NETHERLANDS) 2.3%
NEWS CORP. LTD. (AUSTRALIA) 1.8%
VEBA AG (GERMANY) 1.7%
SCHWEIZERISCHE RUECKVERSICHERUNGS-
GESELLSCHAFT (SWITZERLAND) 1.6%
TELEFONICA SA (SPAIN) 1.6%
DDI CORP. (JAPAN) 1.6%
ROCHE HOLDING AG (SWITZERLAND) 1.5%
UBS AG (SWITZERLAND) 1.5%
SOCIETE GENERALE (FRANCE) 1.5%
</TABLE>
5
<PAGE>
DISTRIBUTED BY FUNDS DISTRIBUTOR, INC. J.P. MORGAN INVESTMENT MANAGEMENT INC.
SERVES AS AN INVESTMENT ADVISOR. SHARES OF THE FUND ARE NOT BANK DEPOSITS AND
ARE NOT GUARANTEED BY ANY BANK, GOVERNMENT ENTITY, OR THE FDIC. AN INVESTMENT
IN THE FUND WILL FLUCTUATE AND MAY LOSE VALUE.
References to specific securities and their issuers are for illustrative
purposes only and are not intended to be, and should not be interpreted as,
recommendations to purchase or sell securities. Opinions expressed herein are
based on current market conditions and are subject to change without notice.
The fund invests in foreign securities which are subject to special risks
including economic and political uncertainty and currency fluctuations;
prospective investors should refer to the fund's prospectus for a discussion
of these risks. The fund invests through a master portfolio (another fund
with the same objective).
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.
6
<PAGE>
J.P. MORGAN INTERNATIONAL OPPORTUNITIES FUND
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
MAY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment in The International Opportunities
Portfolio ("Portfolio"), at value $50,302,347
Foreign Tax Reclaims Receivable 103,410
Receivable for Expense Reimbursements 7,377
Deferred Organization Expenses 6,585
Receivable for Shares of Beneficial Interest Sold 4,270
Prepaid Administration Fee 128
Prepaid Expenses and Other Assets 20,141
-----------
Total Assets 50,444,258
-----------
LIABILITIES
Payable for Shares of Beneficial Interest
Redeemed 544,751
Shareholder Servicing Fee Payable 10,640
Organization Expenses Payable 3,209
Administrative Services Fee Payable 1,099
Accrued Trustees' Fees 53
Fund Services Fee Payable 44
Accrued Expenses 41,799
-----------
Total Liabilities 601,595
-----------
NET ASSETS
Applicable to 4,618,249 Shares of Beneficial
Interest Outstanding
(par value $0.001, unlimited shares authorized) $49,842,663
-----------
-----------
Net Asset Value, Offering and Redemption Price
Per Share $10.79
-----
-----
ANALYSIS OF NET ASSETS
Paid-in Capital $49,817,544
Undistributed Net Investment Income 118,317
Accumulated Net Realized Loss on Investment (5,471,090)
Net Unrealized Appreciation of Investment 5,377,892
-----------
Net Assets $49,842,663
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
8
<PAGE>
J.P. MORGAN INTERNATIONAL OPPORTUNITIES FUND
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED MAY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME ALLOCATED FROM PORTFOLIO
Allocated Dividend Income (Net of Foreign
Withholding Tax of $99,489) $ 527,121
Allocated Interest Income (Net of Foreign
Withholding Tax of $238) 40,273
Allocated Portfolio Expenses (219,298)
----------
Net Investment Income Allocated from
Portfolio 348,096
FUND EXPENSES
Shareholder Servicing Fee $ 65,295
Transfer Agent Fees 14,388
Printing Expenses 8,014
Administrative Services Fee 6,827
Professional Fees 5,900
Registration Fees 5,835
Interest Expense 2,593
Amortization of Organization Expenses 1,196
Fund Services Fee 563
Administration Fee 393
Trustees' Fees and Expenses 293
Miscellaneous 6,572
--------
Total Fund Expenses 117,869
Less: Reimbursement of Expenses (21,156)
--------
NET FUND EXPENSES 96,713
----------
NET INVESTMENT INCOME 251,383
NET REALIZED GAIN ON INVESTMENT 1,219,081
NET CHANGE IN UNREALIZED APPRECIATION OF
INVESTMENT 3,617,801
----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $5,088,265
----------
----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
9
<PAGE>
J.P. MORGAN INTERNATIONAL OPPORTUNITIES FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE FISCAL
MAY 31, 1999 YEAR ENDED
(UNAUDITED) NOVEMBER 30, 1998
------------ -----------------
<S> <C> <C>
DECREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 251,383 $ 712,961
Net Realized Gain (Loss) on Investment 1,219,081 (4,925,305)
Net Change in Unrealized Appreciation of
Investment 3,617,801 4,016,109
------------ -----------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 5,088,265 (196,235)
------------ -----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (1,233,656) (718,464)
Net Realized Gain -- (13,720)
------------ -----------------
Total Distributions to Shareholders (1,233,656) (732,184)
------------ -----------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Proceeds from Shares of Beneficial Interest Sold 29,117,237 59,789,376
Reinvestment of Dividends 1,091,715 656,014
Cost of Shares of Beneficial Interest Redeemed (39,270,429) (67,406,208)
------------ -----------------
Net Decrease from Transactions in Shares of
Beneficial Interest (9,061,477) (6,960,818)
------------ -----------------
Total Decrease in Net Assets (5,206,868) (7,889,237)
NET ASSETS
Beginning of Period 55,049,531 62,938,768
------------ -----------------
End of Period (including undistributed net
investment income of $118,317 and $1,100,590,
respectively) $ 49,842,663 $ 55,049,531
------------ -----------------
------------ -----------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
10
<PAGE>
J.P. MORGAN INTERNATIONAL OPPORTUNITIES FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share outstanding throughout each period are as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FEBRUARY 26, 1997
MONTHS ENDED FOR THE FISCAL (COMMENCEMENT OF
MAY 31, 1999 YEAR ENDED OPERATIONS) THROUGH
(UNAUDITED) NOVEMBER 30, 1998 NOVEMBER 30, 1997
------------ -------------------- -------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.04 $ 9.92 $ 10.00
------------ -------------------- -------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.05(c) 0.23 0.06
Net Realized and Unrealized Gain (Loss) on
Investment 0.93(c) (0.01) (0.14)
------------ -------------------- -------------------
Total from Investment Operations 0.98(c) 0.22 (0.08)
------------ -------------------- -------------------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (0.23) (0.10) --
Net Realized Gain -- -- --
------------ -------------------- -------------------
Total Distributions to Shareholders (0.23) (0.10) --
------------ -------------------- -------------------
NET ASSET VALUE, END OF PERIOD $ 10.79 $ 10.04 $ 9.92
------------ -------------------- -------------------
------------ -------------------- -------------------
RATIOS AND SUPPLEMENTAL DATA
Total Return 10.02%(a) 2.30% (0.80)%(a)
Net Assets, End of Period (in thousands) $ 49,843 $ 55,050 $ 62,939
Ratios to Average Net Assets
Net Expense (excluding Interest Expense) 1.20%(b) 1.20% 1.20%(b)
Net Investment Income 0.96%(b) 0.96% 1.08%(b)
Expenses without Reimbursement and including
Interest Expense 1.29%(b) 1.24% 1.51%(b)
Interest Expense 0.01%(b) -- --
</TABLE>
- ------------------------
(a) Not Annualized.
(b) Annualized.
(c) Based on average daily shares outstanding throughout the period.
The Accompanying Notes are an Integral Part of the Financial Statements.
11
<PAGE>
J.P. MORGAN INTERNATIONAL OPPORTUNITIES FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
MAY 31, 1999
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
J.P. Morgan International Opportunities Fund (the "fund") is a separate series
of J.P. Morgan Funds, a Massachusetts business trust (the "trust") which was
organized on November 4, 1992. The trust is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The fund commenced operations on February 26, 1997.
The fund invests all of its investable assets in The International
Opportunitiets 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 15% at May 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 1 of the
portfolio's Notes to Financial Statements which are included elsewhere in
this report.
b) The fund records its share of net investment income, realized and
unrealized gain and loss and adjusts its investment in the portfolio each
day. All the net investment income and realized and unrealized gain and
loss of the portfolio is allocated pro rata among the fund and other
investors in the portfolio at the time of such determination.
c) Distributions to shareholders of net investment income and net realized
capital gains, if any, are declared and paid annually.
d) The fund incurred organization expenses in the amount of $12,000. Morgan
Guaranty Trust Company of New York ("Morgan"), a wholly owned subsidiary
of J.P. Morgan & Co. Incorporated ("J.P. 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 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.
12
<PAGE>
J.P. MORGAN INTERNATIONAL OPPORTUNITIES FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
MAY 31, 1999
- --------------------------------------------------------------------------------
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 May 31, 1999, the fee for these services amounted to $393.
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 in which the trust and the J.P. Morgan
Institutional Funds invest (the "master portfolios") and J.P. Morgan
Series Trust in accordance with the following annual schedule: 0.09% on
the first $7 billion of their aggregate average daily net assets and 0.04%
of their aggregate average daily net assets in excess of $7 billion less
the complex-wide fees payable to FDI. The portion of this charge payable
by the 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 May 31,
1999, the fee for these services amounted $6,827.
In addition, J.P. Morgan has agreed to reimburse the fund to the extent
necessary to maintain the total operating expenses of the fund, including
the expenses allocated to the fund from the portfolio, at no more than
1.20% of the average daily net assets of the fund until further
notification. For the six months ended May 31, 1999, J.P. Morgan has
agreed to reimburse the fund $21,156 for expenses under this agreement.
c) The trust, on behalf of the fund, has a Shareholder Servicing Agreement
with Morgan to provide account administration and personal and account
maintenance services to fund shareholders. The agreement provides for the
fund to pay Morgan a fee for these services which is computed daily and
paid monthly at an annual rate of 0.25% of the average daily net assets of
the fund. For the six months ended May 31, 1999, the fee for these
services amounted to $65,295.
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
13
<PAGE>
J.P. MORGAN INTERNATIONAL OPPORTUNITIES FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
MAY 31, 1999
- --------------------------------------------------------------------------------
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
$563 for the six months ended May 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 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 these total fees and expenses. The trust's Chairman and Chief Executive
Officer also serves as Chairman of Group and receives compensation and
employee benefits from Group in his role as Group's Chairman. The
allocated portion of such compensation and benefits included in the Fund
Services Fee shown in the financial statements was $100.
3. TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the trustees to issue an unlimited number of
full and fractional shares of beneficial interest of one or more series.
Transactions in shares of beneficial interest of the fund were as follows:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE FISCAL
MAY 31, 1999 YEAR ENDED
(UNAUDITED) NOVEMBER 30, 1998
------------ -----------------
<S> <C> <C>
Shares sold...................................... 2,799,021 5,845,535
Reinvestment of dividends and distributions...... 111,971 66,548
Shares redeemed.................................. (3,776,353) (6,773,542)
------------ -----------------
Net Decrease..................................... (865,361) (861,459)
------------ -----------------
------------ -----------------
</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 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 purpose of the Agreement is to provide another alternative for
settling large fund shareholder redemptions. Interest on any such borrowing
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 May 31, 1999. The average daily balance
outstanding for the six months ended May 31, 1999 was $101,648 at a weighted
average interest rate of 5.13%.
14
<PAGE>
The International Opportunities Portfolio
Semiannual Report May 31, 1999
(The following pages should be read in conjunction
with the J.P. Morgan International Opportunities Fund
Semiannual Financial Statements)
15
<PAGE>
THE INTERNATIONAL OPPORTUNITIES PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
MAY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
COMMON STOCK (90.2%)
ARGENTINA (1.0%)
YPF Sociedad Anonima (Spon. ADR)
(Oil-Production)(s)............................ 81,880 $ 3,449,195
-------------
AUSTRALIA (1.4%)
Australia & New Zealand Banking Group Ltd.
(Banking)(s)................................... 364,400 2,649,630
North Ltd. (Metals & Mining)(s).................. 1,052,500 1,913,066
-------------
4,562,696
-------------
AUSTRIA (0.7%)
Bank Austria AG (Banking)(s)..................... 42,732 2,193,841
-------------
BELGIUM (0.5%)
PetroFina SA (Oil-Production)(s)................. 2,900 1,567,686
-------------
CANADA (0.7%)
Royal Bank of Canada (Banking)(s)................ 47,900 2,196,625
-------------
CHILE (0.4%)
Enersis SA (Spon. ADR) (Electric)(s)............. 72,600 1,424,775
-------------
DENMARK (0.9%)
Danisco A/S (Food, Beverages & Tobacco)(s)....... 59,300 2,854,125
-------------
FINLAND (2.3%)
Rautaruukki OYJ, K Shares (Metals & Mining)(s)... 481,700 2,971,660
Sampo Insurance Co. Ltd., A Shares
(Insurance)(s)................................. 56,000 1,698,073
Stora Enso OYJ, R Shares (Forest Products &
Paper)(s)...................................... 276,664 2,807,517
-------------
7,477,250
-------------
FRANCE (12.5%)
Carrefour SA (Retail)(s)......................... 23,070 3,034,580
Christian Dior SA (Retail)(s).................... 23,100 3,282,478
Compagnie de Saint Gobain SA (Building
Materials)(s).................................. 8,935 1,406,052
Compagnie Financiere de Paribas (Financial
Services)(s)................................... 42,100 4,578,106
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
FRANCE (CONTINUED)
Elf Aquitaine SA (Oil-Services)(s)............... 29,944 $ 4,345,800
Groupe Danone (Food, Beverages & Tobacco)(s)..... 6,209 1,713,942
Lagardere S.C.A. (Multi - Industry)(s)........... 31,783 1,244,564
Rhodia SA (Chemicals)(s)+........................ 172,500 2,941,802
Sanofi-Synthelabo SA (Pharmaceuticals)(s)........ 73,072 3,086,759
Societe Generale (Banking)(s).................... 25,853 4,709,009
STMicroelectronics NV (Electronics)(s)........... 34,459 3,999,411
Total SA, B Shares (Oil-Services)(s)............. 33,400 4,068,580
Vivendi (Utilities)(s)........................... 33,879 2,515,124
-------------
40,926,207
-------------
GERMANY (7.4%)
Bayerische Hypo-Und Vereinsbank AG
(Banking)(s)................................... 24,381 1,320,540
Hoechst AG (Holding Companies)(s)................ 101,700 4,540,663
Merck KGaA (Pharmaceuticals)(s).................. 36,900 1,271,312
Muenchener Rueckversicherungs-Gesellschaft AG
(Insurance)(s)................................. 14,684 2,518,017
Munchener Rueckversicherungs-Gesellschaft AG -
New Shares (Insurance)(s)+..................... 11,384 1,928,325
RWE AG (Utilities)(s)............................ 91,500 4,099,608
Schering AG (Pharmaceuticals)(s)................. 25,180 2,698,671
VEBA AG (Utilities)(s)........................... 92,775 5,306,262
Volkswagen AG (Automotive)(s).................... 7,520 467,062
-------------
24,150,460
-------------
HONG KONG (2.7%)
Cheung Kong Holdings Ltd. (Real Estate)(s)....... 220,000 1,787,351
Hongkong Electric Holdings Ltd. (Electric)(s).... 1,115,000 3,494,039
New World Development Co. Ltd. (Real
Estate)(s)..................................... 1,447,000 3,536,098
-------------
8,817,488
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
16
<PAGE>
THE INTERNATIONAL OPPORTUNITIES PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
MAY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
INDIA (0.4%)
Reliance Industries Ltd. (GDR) (Chemicals)(s).... 139,700 $ 1,229,360
-------------
ITALY (0.7%)
Bayerische Vita SPA (Insurance)(s)............... 139,300 639,420
Mediaset SPA (Broadcasting & Publishing)(s)...... 198,000 1,608,632
-------------
2,248,052
-------------
JAPAN (16.6%)
Asahi Breweries Ltd. (Food, Beverages &
Tobacco)(s).................................... 119,000 1,513,847
DDI Corp. (Telecommunications)(s)................ 1,080 4,987,915
Fanuc Ltd. (Machinery)(s)........................ 84,200 3,630,872
Fujitsu Ltd. (Computer Systems)(s)............... 223,000 3,728,356
Honda Motor Co. Ltd. (Automotive)(s)............. 37,000 1,518,954
Ito-Yokado Co. Ltd. (Retail)(s).................. 37,000 2,207,995
Mitsubishi Chemical Corp. (Chemicals)(s)......... 1,310,000 3,719,003
Mitsubishi Corp. (Wholesale & International
Trade)(s)...................................... 697,000 4,240,150
Mitsui Trust & Banking Co. Ltd. (Banking)(s)..... 1,062,000 1,608,558
Rohm Co. Ltd. (Electronics)(s)................... 33,000 4,323,704
Shohkoh Fund & Co. Ltd. (Financial
Services)(s)................................... 3,800 2,126,138
Sony Corp. (Electronics)(s)...................... 30,100 2,830,127
Sumitomo Bakelite Co. Ltd. (Chemicals)(s)........ 23,000 175,137
Suzuki Motor Corp. (Automotive)(s)............... 124,000 1,761,165
Taiheiyo Cement Corp. (Building Materials)(s).... 724,000 1,935,540
Takeda Chemical Industries (Chemicals)(s)........ 86,100 3,826,824
Tostem Corp. (Construction & Housing)(s)......... 173,000 3,329,125
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
JAPAN (CONTINUED)
West Japan Railway Co. (Railroads)(s)............ 529 $ 2,123,531
Yamanouchi Pharmaceutical Co. Ltd.
(Pharmaceuticals)(s)........................... 128,000 4,417,811
-------------
54,004,752
-------------
MEXICO (1.1%)
Grupo Televisa SA (Spon. GDR) (Broadcasting &
Publishing)(s)+................................ 85,100 3,558,244
-------------
NETHERLANDS (7.0%)
ABN Amro Holding NV (Banking)(s)................. 156,138 3,469,269
Akzo Nobel NV (Chemicals)(s)..................... 43,500 1,810,267
ING Groep NV (Financial Services)(s)............. 27,000 1,446,865
Laurus NV (Retail)(s)............................ 156,940 3,610,163
Philips Electronics NV (Electronics)(s).......... 84,400 7,258,532
Unilever NV (Food, Beverages & Tobacco)(s)....... 4,375 291,628
Vedior NV (Business & Public Services)(s)........ 72,207 1,340,134
Vendex NV (Retail)(s)............................ 84,400 2,470,989
Wolters Kluwer NV (Broadcasting &
Publishing)(s)................................. 25,716 1,036,569
-------------
22,734,416
-------------
NEW ZEALAND (0.3%)
Fletcher Challenge Paper Division Ltd. (Forest
Products & Paper)(s)........................... 1,080,000 920,651
-------------
NORWAY (1.1%)
Sparebanken NOR (Banking)(s)..................... 99,760 1,890,964
Stolt - Nielsen SA (Spon. ADR)
(Transportation)(s)............................ 121,410 1,733,887
-------------
3,624,851
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
17
<PAGE>
THE INTERNATIONAL OPPORTUNITIES PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
MAY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
PAKISTAN (0.0%)
Pakistan Telecommunications Corp. (GDR)
(Telecommunication Services)(s)+............... 953 $ 42,885
-------------
PHILIPPINES (0.6%)
First Philippine Holdings Corp., Class B (Multi -
Industry)(s)................................... 1,491,920 1,882,052
-------------
PORTUGAL (1.3%)
Banco Pinto & Sotto Mayor SA (Banking)(s)........ 117,519 2,334,706
Portugal Telecom SA (Telecommunications)(s)...... 39,900 1,810,644
-------------
4,145,350
-------------
RUSSIA (1.0%)
Surgutneftegaz (Spon. ADR) (Oil-Production)(s)... 464,500 3,425,688
-------------
SINGAPORE (1.2%)
Natsteel Electronics Ltd. (Electronics)(s)....... 240,300 801,128
Overseas Union Bank Ltd. (Banking)(s)............ 586,300 3,008,454
-------------
3,809,582
-------------
SOUTH AFRICA (1.8%)
Anglo American PLC (Metals & Mining)(s)+......... 33,800 1,531,359
AngloGold Ltd. (Metals & Mining)(s).............. 63,746 2,524,283
South African Breweries PLC (Food, Beverages &
Tobacco)(s)+................................... 216,308 1,737,394
-------------
5,793,036
-------------
SOUTH KOREA (0.5%)
Korea Telecom Corp. (ADR) (Telecommunication
Services)(s)+.................................. 47,719 1,518,061
-------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
SPAIN (5.6%)
Acerinox SA (Metals & Mining)(s)................. 46,500 $ 1,337,076
Actividades de Construccion y Servicios SA
(Construction & Housing)(s).................... 97,800 2,986,016
Iberdrola SA (Electric)(s)....................... 524,900 7,541,083
Indra Sistemas SA (Electronics)(s)............... 116,364 1,103,561
Telefonica SA (Telecommunications)(s)............ 108,194 5,201,667
-------------
18,169,403
-------------
SWEDEN (0.8%)
ABB AB, A Shares (Machinery)(s).................. 205,300 2,801,724
-------------
SWITZERLAND (7.7%)
Barry Callebaut AG (Food, Beverages &
Tobacco)(s).................................... 3,200 476,788
Nestle SA (Food, Beverages & Tobacco)(s)......... 2,330 4,198,055
Roche Holding AG (Pharmaceuticals)(s)............ 467 4,953,453
Schweizerische Rueckversicherungs-Gesellschaft
(Insurance)(s)................................. 2,720 5,172,104
Swisscom AG (Telecommunication Services)(s)...... 11,700 4,223,752
UBS AG (Banking)(s).............................. 16,575 4,808,678
Zurich Allied AG (Insurance)(s).................. 2,500 1,473,554
-------------
25,306,384
-------------
UNITED KINGDOM (11.6%)
Allied Zurich PLC (Insurance)(s)................. 221,200 2,819,656
Anglian Water PLC (Pollution Control)(s)......... 136,100 1,506,978
Cable & Wireless Communications PLC
(Telecommunications)(s)........................ 293,100 3,607,015
Glaxo Wellcome PLC (Pharmaceuticals)(s).......... 71,100 1,994,925
Hays PLC (Commercial Services)(s)................ 65,300 606,893
Lloyds TSB Group PLC (Banking)(s)................ 133,600 1,783,291
National Power PLC (Electric)(s)................. 176,000 1,374,859
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
18
<PAGE>
THE INTERNATIONAL OPPORTUNITIES PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
MAY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
UNITED KINGDOM (CONTINUED)
Norwich Union PLC (Insurance)(s)................. 280,000 $ 1,985,373
PIC International Group PLC (Food, Beverages &
Tobacco)(s)+................................... 1,103,600 1,158,307
Railtrack Group PLC (Transportation)(s).......... 132,700 2,715,393
Royal & Sun Alliance Insurance Group PLC
(Insurance)(s)................................. 271,818 2,215,699
Schroders PLC (Banking)(s)....................... 132,800 2,751,487
Select Appointments Holdings PLC (Business &
Public Services)(s)............................ 131,500 1,611,974
Shell Transport & Trading Co.
(Oil-Services)(s).............................. 562,700 4,077,804
SmithKline Beecham PLC (Pharmaceuticals)(s)...... 304,800 3,968,343
Tate & Lyle PLC (Food, Beverages & Tobacco)(s)... 227,300 1,493,324
Unilever PLC (Food, Beverages & Tobacco)(s)...... 242,857 2,144,239
-------------
37,815,560
-------------
VENEZUELA (0.4%)
Compania Anonima Nacional Telefonos de Venezuela
(ADR) (Telecommunication Services)(s).......... 63,600 1,482,675
-------------
TOTAL COMMON STOCK (COST $265,417,425)......... 294,133,074
-------------
</TABLE>
<TABLE>
<S> <C> <C>
PREFERRED STOCK (3.8%)
AUSTRALIA (1.7%)
News Corp. Ltd. (Broadcasting & Publishing)(s)... 751,000 5,741,056
-------------
BRAZIL (1.1%)
Tele Norte Leste Participacoes SA (ADR)
(Telecommunication Services)(s)+............... 219,721 3,597,931
-------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
GERMANY (1.0%)
GEA AG (Manufacturing)(s)........................ 105,900 $ 2,513,577
ProSieben Media AG (Broadcasting &
Publishing)(s)................................. 95 4,068
Volkswagen AG (Automotive)(s).................... 17,500 622,139
-------------
3,139,784
-------------
SOUTH KOREA (0.0%)
Samsung Electronics Co. Ltd. (GDR)(144A)
(Electronics)(s)............................... 420 15,708
-------------
TOTAL PREFERRED STOCK (COST $10,742,137)....... 12,494,479
-------------
</TABLE>
<TABLE>
<S> <C> <C>
RIGHTS (0.0%)
SOUTH KOREA (0.0%)
Samsung Electronics Co. Ltd. (Electronics) (COST
$0)(s)+........................................ 34 269
-------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT{::}
----------------
<S> <C> <C>
CONVERTIBLE BONDS (2.5%)
JAPAN (0.3%)
Softbank Corp., 0.50% due 03/29/02 (Computer
Software)...................................... JPY 77,000,000 1,083,430
-----------
SINGAPORE (1.3%)
Finlayson Global, Zero Coupon due 02/19/04
(Airlines)+.................................... EUR 3,060,000 4,303,424
-----------
UNITED KINGDOM (0.9%)
Compass Group PLC, 5.75% due 10/05/07 (Food,
Beverages & Tobacco)........................... GBP 1,035,000 2,719,913
-----------
TOTAL CONVERTIBLE BONDS (COST $7,242,602)...... 8,106,767
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
THE INTERNATIONAL OPPORTUNITIES PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
MAY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
SHORT-TERM INVESTMENTS (1.9%)
REPURCHASE AGREEMENT (1.8%)
State Street Bank and Trust, 4.00% due 06/01/99, dated
05/28/99, proceeds $5,769,563, (collateralized by $5,700,000
U.S. Treasury Note, 6.25% due 8/31/02, valued at
5,885,250)...................................... $5,767,000 $5,767,000....
-------------
U.S. TREASURY OBLIGATIONS (0.1%)
U.S. Treasury Bills, 4.51%(y) due 07/15/99(s).... $ 540,000 $ 537,116
-------------
TOTAL SHORT-TERM INVESTMENTS (COST
$6,304,116)................................... 6,304,116
-------------
TOTAL INVESTMENTS (COST $289,706,280) (98.4%)..................
321,038,705
OTHER ASSETS IN EXCESS OF LIABILITIES (1.6%)...................
5,062,463
-------------
NET ASSETS (100.0%)............................................ $ 326,101,168
-------------
-------------
</TABLE>
- ------------------------------
Note: Based on the cost of investments of $290,323,687 for federal income tax
purposes at May 31, 1999 the aggregate gross unrealized appreciation and
depreciation was $44,360,929 and $13,645,911, respectively, resulting in net
unrealized appreciation of $30,715,018.
+ - Non-income producing security.
F - Denominated in United States Dollar unless otherwise indicated.
(s) - Security is fully or partially segregated with custodian as collateral for
futures contracts or with broker as initial margin for futures contracts.
$121,739,116 of the market value has been segregated.
(y) - Yield to maturity.
ADR - American Depository Receipt.
EUR - Euro.
GBP - British Pound.
GDR - Global Depository Receipt.
JPY - Japanese Yen.
Spon. ADR - Sponsored ADR.
Spon. GDR - Sponsored GDR.
144A - Securities restricted for resale to Qualified Institutional Buyers.
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE INTERNATIONAL OPPORTUNITIES PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
MAY 31, 1999
- --------------------------------------------------------------------------------
INDUSTRY DIVERSIFICATION
<TABLE>
<CAPTION>
PERCENT OF
TOTAL INVESTMENT
-----------------
<S> <C>
Banking........................................... 12.6%
Pharmaceuticals................................... 7.0%
Insurance......................................... 6.3%
Electronics....................................... 6.3%
Food, Beverages & Tobacco......................... 6.3%
Telecommunications................................ 4.9%
Retail............................................ 4.5%
Electric.......................................... 4.3%
Chemicals......................................... 4.3%
Oil - Services.................................... 3.9%
Broadcasting & Publishing......................... 3.7%
Utilities......................................... 3.7%
Telecommunication Services........................ 3.4%
Metals & Mining................................... 3.2%
Automotive........................................ 2.7%
Oil - Production.................................. 2.6%
Financial Services................................ 2.5%
Machinery......................................... 2.0%
Construction & Housing............................ 2.0%
Real Estate....................................... 1.7%
Holding Companies................................. 1.4%
Transportation.................................... 1.4%
Wholesale & International Trade................... 1.3%
Computer Systems.................................. 1.2%
Forest Products & Paper........................... 1.2%
Building Materials................................ 1.0%
Multi-Industry.................................... 1.0%
Business & Public Services........................ 0.9%
Manufacturing..................................... 0.8%
Railroads......................................... 0.7%
Pollution Control................................. 0.5%
Computer Software................................. 0.3%
Comsumer Services................................. 0.2%
Government Obligations............................ 0.2%
-----------------
100.0%
-----------------
-----------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE INTERNATIONAL OPPORTUNITIES PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
MAY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $289,706,280 ) $321,038,705
Cash 466
Foreign Currency at Value (Cost $1,176,621) 1,163,597
Receivable for Investments Sold 48,010
Unrealized Appreciation of Forward Foreign
Currency Contracts 2,875,240
Dividends Receivable 1,783,493
Foreign Tax Reclaim Receivable 530,093
Interest Receivable 17,928
Deferred Organization Expenses 7,682
Prepaid Administration Fee 890
Prepaid Expenses and Other Assets 2,576
------------
Total Assets 327,468,680
------------
LIABILITIES
Payable for Investments Purchased 307,740
Unrealized Depreciation of Forward Foreign
Currency Contracts 489,572
Custody Fee Payable 182,634
Advisory Fee Payable 171,296
Foreign Tax Withholding Payable 156,314
Administrative Services Fee Payable 7,370
Variation Margin Payable 7,366
Organization Expenses Payable 2,538
Accrued Trustees' Fees 422
Fund Services Fee Payable 301
Accrued Expenses 41,959
------------
Total Liabilities 1,367,512
------------
NET ASSETS
Applicable to Investors' Beneficial Interests $326,101,168
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE INTERNATIONAL OPPORTUNITIES PORTFOLIO
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED MAY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividend Income (Net of Foreign Withholding Tax
of $624,082) $ 4,131,947
Interest Income (Net of Foreign Withholding Tax
of $1,557) 253,464
-----------
Investment Income 4,385,411
EXPENSES
Advisory Fee $ 995,001
Custodian Fees and Expenses 315,758
Administrative Services Fee 43,353
Professional Fees and Expenses 26,218
Fund Services Fee 3,669
Administration Fee 2,136
Trustees' Fees and Expenses 1,959
Amortization of Organization Expense 1,396
Miscellaneous 5,085
-----------
Total Expenses 1,394,575
-----------
NET INVESTMENT INCOME 2,990,836
NET REALIZED GAIN ON
Investment Transactions 4,648,544
Futures 1,510,720
Foreign Currency Contracts and Transactions 1,188,592
-----------
Net Realized Gain 7,347,856
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) OF
Investments Transactions 18,365,506
Futures (742,418)
Foreign Currency Contracts and Translations 4,262,430
-----------
Net Change in Unrealized Appreciation 21,885,518
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $32,224,210
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
23
<PAGE>
THE INTERNATIONAL OPPORTUNITIES PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE FISCAL
MAY 31, 1999 YEAR ENDED
(UNAUDITED) NOVEMBER 30, 1998
------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 2,990,836 $ 4,784,491
Net Realized Gain (Loss) on Investments, Futures
and Foreign Currency Contracts and Transactions 7,347,856 (31,808,619)
Net Change in Unrealized Appreciation of
Investments, Futures and Foreign Currency
Contracts and Translations 21,885,518 21,154,264
------------- -----------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 32,224,210 (5,869,864)
------------- -----------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 105,988,947 358,018,439
Withdrawals (192,369,191) (245,865,781)
------------- -----------------
Net Increase (Decrease) from Investors'
Transactions (86,380,244) 112,152,658
------------- -----------------
Total Increase (Decrease) in Net Assets (54,156,034) 106,282,794
NET ASSETS
Beginning of Period 380,257,202 273,974,408
------------- -----------------
End of Period $ 326,101,168 $ 380,257,202
------------- -----------------
------------- -----------------
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FEBRUARY 26, 1997
MONTHS ENDED FOR THE FISCAL (COMMENCEMENT OF
MAY 31, 1999 YEAR ENDED OPERATIONS) THROUGH
(UNAUDITED) NOVEMBER 30, 1998 NOVEMBER 30, 1997
------------ ----------------- -------------------
<S> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Net Expenses 0.84%(a) 0.85% 0.89%(a)
Net Investment Income 1.80%(a) 1.07% 1.26%(a)
Expenses without Reimbursement 0.84%(a) 0.85% 0.92%(a)
Portfolio Turnover 35%(b) 143% 72%
</TABLE>
- ------------------------
(a) Annualized.
(b) Not Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
24
<PAGE>
THE INTERNATIONAL OPPORTUNITIES PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
MAY 31, 1999
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The International Opportunities Portfolio (the "portfolio") is one of eight
subtrusts (portfolios) comprising The Series Portfolio (the "series portfolio").
The series portfolio is registered under the Investment Company Act of 1940, as
amended, as a no-load open-end management investment company which was organized
as a trust under the laws of the State of New York on June 24, 1994. The
portfolio's investment objective is to provide a high total return from a
portfolio of equity securities of foreign companies in developed and, to a
lesser extent, developing markets. The portfolio commenced operations on
February 26, 1997. The Declaration of Trust permits the trustees to issue an
unlimited number of beneficial interests in the portfolio.
The portfolio may have elements of risk not typically associated with
investments in the United States due to concentrated investments in a limited
number of countries or regions which may vary throughout the year. Such
concentrations may subject the portfolio to additional risks resulting from
political or economic conditions in such countries or regions and the possible
imposition of adverse governmental laws or currency exchange restrictions
affecting such countries or regions which could cause the securities and their
markets to be less liquid and prices more volatile than those comparable to the
United States. The ability of the issuers of debt 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 prices in the
over-the-counter market provided by a principal market maker or dealer. If
prices are not supplied by the portfolio's independent pricing service or
principal market maker or dealer, such securities are priced using fair
values in accordance with procedures 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.
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THE INTERNATIONAL OPPORTUNITIES PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
MAY 31, 1999
- --------------------------------------------------------------------------------
The portfolio's custodian takes possession of the collateral pledged for
investments in repurchase agreements on behalf of the portfolio. It is the
policy of the portfolio to value the underlying collateral daily on a
mark-to-market basis to determine that the value, including accrued
interest, is at least equal to the repurchase price plus accrued interest.
In the event of default of the obligation to repurchase, the portfolio has
the right to liquidate the collateral and apply the proceeds in
satisfaction of the obligation. Under certain circumstances, in the event
of default or bankruptcy by the other party to the agreement, realization
and/or retention of the collateral or proceeds may be subject to legal
proceedings.
b) The books and records of the portfolio are maintained in U.S. dollars. The
market value of investment securities, other assets and liabilities and
foreign currency contracts are translated at the prevailing exchange rates
at the end of the period. Purchases, sales, income and 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 become known. Interest income, which
includes the amortization of premiums and discounts, if any, is recorded
on an accrual basis. For financial and tax reporting purposes, realized
gains and losses are determined on the basis of specific lot
identification.
d) The portfolio incurred organization expenses in the amount of $14,000.
Morgan Guaranty Trust Company of New York ("Morgan"), a wholly owned
subsidiary of J.P. Morgan & Co. Incorporated ("J.P. Morgan") has paid the
organization expenses of the portfolio. The portfolio 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.
e) Expenses incurred by the series portfolio with respect to any two or more
portfolios in the series portfolio are allocated in proportion to the net
assets of each portfolio in the series portfolio, except where allocations
of direct expenses to each portfolio can otherwise be made fairly.
Expenses directly attributable to a portfolio are charged to that
portfolio.
f) The portfolio may enter into forward and spot foreign currency contracts
to protect securities and related receivables and payables against
fluctuations in future foreign currency rates and to enhance returns. A
forward contract is an agreement to buy or sell currencies of different
countries on a specified future date at a specified rate. Risks associated
with such contracts include the movement in the value of the foreign
currency relative to the U.S. dollar and the ability of the counterparty
to perform.
The market value of the contract will fluctuate with changes in currency
exchange rates. Contracts are valued daily at the current foreign exchange
rates, and the change in the market value is recorded by the portfolio as
unrealized appreciation or depreciation of forward foreign currency
contract translations.
26
<PAGE>
THE INTERNATIONAL OPPORTUNITIES PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
MAY 31, 1999
- --------------------------------------------------------------------------------
g) Futures -- A futures contract is an agreement to purchase/sell a specified
quantity of an underlying instrument at a specified future date or to
make/receive a cash payment based on the value of a securities index. The
price at which the purchase and sale will take place is fixed when the
portfolio enters into the contract. Upon entering into such a contract,
the portfolio is required to pledge to the broker an amount of cash and/or
liquid securities equal to the minimum "initial margin" requirements of
the exchange. Pursuant to the contract, the portfolio agrees to receive
from, or pay to, the broker an amount of cash equal to the daily
fluctuation in the value of the contract. Such receipts or payments are
known as "variation margin" and are recorded by the portfolio as
unrealized gains or losses. When the contract is closed, the portfolio
records a realized gain or loss equal to the difference between the value
of the contract at the time it was opened and the value at the time when
it was closed. The portfolio invests in futures contracts for the purpose
of hedging its existing portfolio securities, or securities the portfolio
intends to purchase, against fluctuations in value caused by changes in
prevailing market interest rates or securities movements. The use of
futures transactions involves the risk of imperfect correlation in
movements in the price of futures contracts, interest rates and the
underlying hedged assets, and the possible inability of counterparties to
meet the terms of their contracts.
h) The portfolio intends to be treated as a partnership for federal income
tax purposes. As such, each investor in the portfolio will be taxed on its
share of the portfolio's ordinary income and capital gains. It is intended
that the portfolio's assets will be managed in such a way that an investor
in the portfolio will be able to satisfy the requirements of Subchapter M
of the Internal Revenue Code. The portfolio earns foreign income which may
be subject to foreign witholding taxes imposed by countries in which it
invests.
2. TRANSACTIONS WITH AFFILIATES
a) The portfolio has an Investment Advisory Agreement with J.P. Morgan
Investment Management Inc. ("JPMIM"), an affiliate of Morgan and
wholly-owned subsidiary of J.P. Morgan. Under the terms of the agreement,
the portfolio pays JPMIM at an annual rate of 0.60% of the portfolio's
average daily net assets. For the six months ended May 31, 1999, such fees
amounted to $995,001.
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 May 31, 1999, the
fee for these services amounted to $2,136.
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
27
<PAGE>
THE INTERNATIONAL OPPORTUNITIES PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
MAY 31, 1999
- --------------------------------------------------------------------------------
average daily net assets of the portfolio and the other portfolios in
which the trust and the J.P. Morgan Funds, the J.P. Morgan Institutional
Funds invest (the "master portfolios") and J.P. Morgan Series Trust in
accordance with the following annual schedule: 0.09% on the first $7
billion of their aggregate average daily net assets and 0.04% of their
aggregate average daily net assets in excess of $7 billion less the
complex-wide fees payable to FDI. The portion of this charge payable by
the portfolio is determined by the proportionate share that its net assets
bear to the net assets of the portfolio, 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 May 31,
1999, the fee for these services amounted to $43,353.
In addition, J.P. Morgan has agreed to reimburse the portfolio to the
extent necessary to maintain the total operating expenses of the portfolio
at no more than 1.00% of the average daily net assets of the portfolio
until further notification. For the six months ended May 31, 1999, there
was no reimbursement to the fund.
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 $3,669 for the six months ended May 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 represents 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 $800.
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the six months
ended May 31, 1999 were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
- ----------------- ------------
<S> <C>
$112,183,897...... $183,808,270
</TABLE>
Open futures contracts at May 31, 1999 are summarized as follows:
<TABLE>
<CAPTION>
NET UNREALIZED
APPRECIATION/ PRINCIPAL AMOUNT
CONTRACTS LONG (DEPRECIATION) OF CONTRACTS
-------------- -------------- ----------------
<S> <C> <C> <C>
FTSE 100 Index, expiring June 1999............... 33 $ (199,497) $ 3,498,817
-------------- -------------- ----------------
-------------- -------------- ----------------
</TABLE>
28
<PAGE>
THE INTERNATIONAL OPPORTUNITIES PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
MAY 31, 1999
- --------------------------------------------------------------------------------
At May 31, 1999, the portfolio had open forward currency contracts as follows:
<TABLE>
<CAPTION>
U.S. DOLLAR NET UNREALIZED
CONTRACTUAL VALUE AT APPRECIATION/
PURCHASE CONTRACTS VALUE 5/31/99 (DEPRECIATION)
- ------------------------------------------------- ----------- ----------- --------------
<S> <C> <C> <C>
Australian Dollar 3,500,000, expiring
7/15/99......................................... $ 2,237,795 $ 2,288,736 $ 50,941
British Pound 2,030,000 for EUR 3,047,590,
expiring 7/15/99................................ 3,196,841 3,251,605 54,764
British Pound 11,487,035, expiring 7/15/99....... 21,816,785 21,651,263 (165,522)
Canadian Dollar 14,241,639, expiring
7/15/99......................................... 9,558,147 9,678,780 120,633
Euro 7,245,769, expiring 7/15/99................. 7,720,718 7,600,619 (120,099)
Singapore Dollar 1,750,329, expiring
7/15/99......................................... 1,026,586 1,018,844 (7,742)
Swedish Krone 42,281,227, expiring 7/15/99....... 5,081,877 4,944,173 (137,704)
</TABLE>
<TABLE>
<CAPTION>
SETTLEMENT
SALES CONTRACTS VALUE
- ------------------------------------------------- -----------
<S> <C> <C> <C>
Australian Dollar 3,426,344, expiring 7/15/99.... $ 2,182,067 $ 2,240,571 $ (58,504)
British Pound 1,500,000, expiring 7/15/99........ 2,421,780 2,402,664 19,116
Danish Krone 18,251,361, expiring 7/15/99........ 2,669,108 2,575,056 94,052
Euro 49,966,836, expiring 7/15/99................ 54,303,090 52,413,883 1,889,207
Japanese Yen 3,115,551,479, expiring 7/15/99 .... 26,216,422 25,955,754 260,668
Norwegian Krone 21,032,974, expiring 7/15/99..... 2,706,947 2,661,009 45,938
South African Rand 30,847,595, expiring
7/15/99......................................... 4,899,553 4,883,960 15,593
Swedish Krone 20,956,491, expiring 7/15/99....... 2,536,184 2,450,556 85,628
Swiss Franc 11,698,507 expiring 7/15/99.......... 7,958,167 7,719,468 238,699
--------------
NET UNREALIZED APPRECIATION OF FORWARD FOREIGN
CURRENCY CONTRACTS.............................. $ 2,385,668
--------------
--------------
</TABLE>
4. 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.
29
<PAGE>
J.P. MORGAN FUNDS
FEDERAL MONEY MARKET FUND
PRIME MONEY MARKET FUND
TAX EXEMPT MONEY MARKET FUND
TAX AWARE ENHANCED INCOME FUND: SELECT SHARES
SHORT TERM BOND FUND
BOND FUND
GLOBAL STRATEGIC INCOME FUND
EMERGING MARKETS DEBT FUND
TAX EXEMPT BOND FUND
CALIFORNIA BOND FUND: SELECT SHARES
NEW YORK TAX EXEMPT BOND FUND
DIVERSIFIED FUND
DISCIPLINED EQUITY FUND
TAX AWARE U.S. EQUITY FUND: SELECT SHARES
U.S. EQUITY FUND
U.S. SMALL COMPANY FUND
U.S. SMALL COMPANY OPPORTUNITIES FUND
EMERGING MARKETS EQUITY FUND
EUROPEAN EQUITY FUND
INTERNATIONAL EQUITY FUND
INTERNATIONAL OPPORTUNITIES 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.
IM0472-M
J.P. MORGAN
INTERNATIONAL
OPPORTUNITIES FUND
SEMIANNUAL REPORT
MAY 31, 1999
