<PAGE>
LETTER TO THE SHAREHOLDERS OF THE J.P. MORGAN INTERNATIONAL OPPORTUNITIES FUND
July 1, 2000
Dear Shareholder:
The J.P. Morgan International Opportunities Fund delivered a return of 0.75% for
the six months ended May 31, 2000, underperforming both its benchmark, the MSCI
All Country World Index Free ex-U.S., and the Lipper International Equity Funds
Average, which returned 1.57% and 2.25%, respectively.
The fund's net asset value on May 31, 2000 was $12.84 per share, decreasing from
$12.88 per share on November 30, 1999, after paying a current income dividend of
$0.14 a share. The fund's net assets stood at approximately $82.0 million on May
31, 2000 while the total net assets of The International Opportunities
Portfolio, in which the fund invests, totaled almost $531.9 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 OF CONTENTS
LETTER TO THE SHAREHOLDERS...........1 FUND FACTS AND HIGHLIGHTS.............6
FUND PERFORMANCE.....................2 FINANCIAL STATEMENTS..................8
PORTFOLIO MANAGER Q&A................3
--------------------------------------------------------------------------------
1
<PAGE>
FUND PERFORMANCE
EXAMINING PERFORMANCE
One way to look at performance is to review a fund's average annual total
return. This figure takes the fund's actual (or cumulative) return and shows
what would have happened if the fund had achieved that return by performing at a
constant rate each year. Average annual total returns represent the average
yearly change of a fund's value over various time periods, typically one, five,
or ten years (or since inception). Total returns for periods of less than one
year are not annualized and provide a picture of how a fund has performed over
the short term.
<TABLE>
<CAPTION>
PERFORMANCE TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS
----------------------- --------------------------------
THREE SIX ONE SINCE
AS OF MAY 31, 2000 MONTHS MONTHS YEAR INCEPTION*
----------------------------------------------------------------------------------------- --------------------------------
<S> <C> <C> <C> <C>
J.P. Morgan International Opportunities Fund -5.24% 0.75% 21.00% 9.83%
MSCI All Country World Index Free ex-U.S.** -4.53% 1.57% 18.49% 11.09%
Lipper International Equity Funds Average*** -8.55% 2.25% 25.62% 13.10%
AS OF MARCH 31, 2000
----------------------------------------------------------------------------------------- --------------------------------
J.P. Morgan International Opportunities Fund -2.43% 15.26% 31.22% 12.58%
MSCI All Country World Index Free ex-U.S.** 0.78% 19.08% 28.87% 14.79%
Lipper International Equity Funds Average*** 0.73% 27.02% 39.77% 17.56%
</TABLE>
*THE FUND COMMENCED OPERATIONS ON FEBRUARY 26, 1997, AND HAS PROVIDED AN AVERAGE
ANNUAL TOTAL RETURN OF 9.67% FROM THAT DATE THROUGH MAY 31, 2000. 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. 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.
***DESCRIBES THE AVERAGE TOTAL RETURN FOR ALL FUNDS IN THE INDICATED LIPPER
CATEGORY, AS DEFINED BY LIPPER INC., AND DOES NOT TAKE INTO ACCOUNT APPLICABLE
SALES CHARGES. LIPPER ANALYTICAL SERVICES, INC. IS A LEADING SOURCE FOR MUTUAL
FUND DATA.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. FUND RETURNS ARE NET OF
FEES, ASSUME THE REINVESTMENT OF DISTRIBUTIONS, AND REFLECT THE REIMBURSEMENT OF
CERTAIN FUND EXPENSES AS DESCRIBED IN THE PROSPECTUS.
2
<PAGE>
PORTFOLIO MANAGER Q&A
[PHOTO]
The 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 holder of the Chartered Financial Analyst designation. This
interview was conducted on June 23, 2000, and reflects his views on that date.
HOW IS THE FUND MANAGED?
NFE: With this portfolio, our aim is to be invested in the most attractively
priced international securities within all sectors. In doing so, we invest
selectively in both developed and emerging markets, outside of the United
States. I would note that our overall allocation to any given country/region is
a reflection primarily of fundamental, bottom-up stock selection, rather than a
strategic country view, although we do undertake active currency management.
HOW DID THE PORTFOLIO PERFORM OVER THE PAST SIX MONTHS?
NFE: There are really two benchmarks for this portfolio. The standard benchmark
is the Morgan Stanley Capital International All Country World Index Free ex-U.S.
To track how well we are doing relative to the competition, however, we use the
Lipper International Equity Funds Average. Over the first three months of this
reporting period, we didn't do well against the competition. Much of the
competition aggressively overweighted the telecommunications-media-technology
(TMT) sectors. We operate a broadly sector neutral policy, and were therefore
more diversified. However, as the market broadened out with a correction in many
technology stocks, our more diversified portfolio outperformed.
WHICH COMPANIES HELPED PERFORMANCE?
NFE: Philips Electronics was a good performer over the six-month period. It was
helped by a broad range of profitable product lines, from semi-conductors to
consumer electronics. These businesses performed very well in calendar 1999, and
continued to do well in the first five months of this year, helping the company
outperform many of its peers. Back in April, for example, Philips reported
quarterly profits that were nearly double those of the comparable quarter of
1999. It has already achieved a 25% return on net assets, which exceeds the
company's 24% target for this year. In recent years, the management of Philips
has achieved better than average returns by directing capital to high growth
businesses and away from non-core businesses. Lately, the company has benefited
from a strong dollar and yen, which in conjunction with a weak euro, helps
European producers. Overall, we've seen relatively good top line sales growth,
and Philips continues to be one of our favorite stocks in Europe.
3
<PAGE>
Another stock that did well over the period was Alcatel, a French technology
company. The first quarter's news flow was particularly encouraging, including
its report of strong earnings and news of progress on several business fronts.
For example, it acquired Newbridge Networks, which provided it with a
competitive router offering. Also, the company forecast sales of 20 million GSM
mobile phones this year. If achieved, as seems likely, this would represent a
doubling of its 1999 sales and a 10% global market share. Alcatel also announced
a major joint venture with Fujitsu involving the W-CDMA mobile telephone
business in Europe and Asia, which gives the company access to the Japanese
market.
Embratel, Brazil's leading long distance and data communications provider, was a
positive-negative-positive story over the period. It benefited substantially
from the recovery in the domestic Brazilian market in 1999 and from strong
investor interest in telecoms throughout the world at the end of last year and
the beginning of this one. In the middle of the period, however, the stock
suffered from widespread profit taking, as investors sought to lock in profits.
Our faith in the company's fundamentals were such that we resisted the urge to
sell during this period. Subsequently, the stock's price started to recover.
Going forward, we like the company for a number of reasons. One is management's
proven ability to attract strong strategic partners, such as MCI WorldCom and
America Online. The company is currently in the process of working with AOL's
Brazilian Division, for example, to create an Internet access system for 25
cities in Brazil, with a combined population of over 30 million. It is also
continuing to build on its broadband services, and is adding more capacity to
its international routes.
HOW ABOUT THOSE THAT HURT PERFORMANCE?
NFE: One stock that hurt performance was Swisscom, the recently privatized Swiss
national telephone company. While still a favored portfolio holding, Swisscom
has been largely ignored by a market that remains focused on the larger players.
While sometimes overlooked by investors, Swisscom has begun to implement its own
wireless and Internet strategy. Among its actions in this regard is a joint
venture with Commerce One to create a business-to-business marketplace for
central Europe. It also announced its first Wireless Application Portal, which
enables it to offer mobile phone customers a basket of high demand services,
such as e-mail, data application, stock price quotes, and so on.
Another company that hurt performance, but that we also continue to like, was
Royal and Sun Alliance. This European insurance company saw its 1999 profits and
its stock price negatively impacted by storm damage claims in Europe and the
Americas. The stock was also hurt during this reporting period by speculators
who hoped the company would be acquired. When a bid was not forthcoming, they
sold their positions. The combination of these two factors, in our view, helped
to make an attractively priced stock even more attractive. From a bottom-up
perspective, Royal and Sun continues to be a very well managed company, with a
strong balance sheet, and a good book of business.
A company that has also experienced both good and bad performance is Softbank, a
Japanese company giving exposure to a range of Internet businesses. We did very
well with this company during the December
4
<PAGE>
1999-February 2000 time period, then reduced our exposure. Afterwards, the
company's stock plunged, the victim of a general re-rating of TMT issues in late
March and April. We have recently increased the position again, believing that
there is significant upside potential from current prices.
WHAT IS YOUR OUTLOOK FOR THE INTERNATIONAL ARENA OVER THE MONTHS AHEAD?
NFE: We continue to view international markets as more attractive than the U.S.
In particular, we are finding attractively priced securities in continental
Europe, Latin America, and certain Asian nations - excluding Japan. Within the
U.K. there are fewer opportunities.
This said, our focus remains on finding the best opportunities within each
sector, wherever those opportunities may be. In the finance sector, for example,
we currently hold no Japanese banking stocks, although we do hold a Japanese
consumer finance company. On the other hand, we like several banking and finance
companies in continental Europe. So, we end up being underweight Japan and
overweight Europe in this sector, simply because the best opportunities within
it happen to be in Europe at this point in time. On the other hand, we think
many European healthcare providers are expensive, while several Japanese
healthcare concerns are attractively priced. For this reason, we are overweight
the Japanese healthcare sector and underweight Europe. Geography, really, has
little to do with it.
WHAT WILL RISING U.S. INTEREST RATES MEAN FOR THE REST OF THE WORLD?
NFE: The U.S. remains the engine for global economic growth, particularly among
Asian nations. If U.S. rates continue to go up and there is a hard landing in
the United States, then global growth everywhere is going to slow and global
equity markets, especially emerging markets, will suffer the consequences.
Elsewhere, it looks like continental European interest rates are set to rise
again, although we may have reached a peak in the U.K. Even in Japan, where the
domestic economy is very weak, the Bank of Japan is hinting at bringing to an
end its zero interest rate policy. So, at the moment, we are walking a tightrope
between the efforts of central bankers to control growth and inflation and the
possibility that they may go too far in raising rates, and, in doing so, slow
the global economy.
For our part, we side with the view that the Federal Reserve Board will engineer
a soft landing for the U.S. economy, one in which we will still see good growth,
if not at the rapid pace of recent years. If so, international markets, which
tend to lag the United States in their recovery cycles, should prosper.
5
<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 5/31/00
$81,993,064
--------------------------------------------------------------------------------
PORTFOLIO NET ASSETS AS OF 5/31/00
$531,863,259
--------------------------------------------------------------------------------
CAPITAL GAIN PAYABLE DATE (IF APPLICABLE)
12/20/00
EXPENSE RATIO
The fund's annualized expense ratio of 1.17% 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, 2000
PORTFOLIO ALLOCATION
(AS A PERCENTAGE OF TOTAL INVESTMENTS)
[CHART]
EUROPE/AFRICA 60.0%
JAPAN 18.6%
ASIA PACIFIC EX-JAPAN 14.5%
LATIN AMERICA 3.9%
CANADA 0.6%
OTHER 2.4%
<TABLE>
<CAPTION>
LARGEST PORTFOLIO % OF TOTAL
HOLDINGS (EXCLUDING SHORT-TERM INVESTMENTS) INVESTMENTS
--------------------------------------------------------------------------------
<S> <C>
VODAFONE AIRTOUCH PLC (UNITED KINGDOM) 4.2%
TOTAL FINA ELF (B SHARES) (FRANCE) 3.5%
KONINKLIJKE (ROYAL) PHILIPS ELECTRONICS NV
(NETHERLANDS) 3.5%
ALCATEL (FRANCE) 3.0%
ROHM CO. LTD. (JAPAN) 2.3%
TAKEDA CHEMICAL INDUSTRIES LTD. (JAPAN) 2.1%
BANQUE NATIONALE DE PARIS (FRANCE) 2.0%
SUEZ LYONNAIS DES EAUX SA (FRANCE) 1.9%
FUJITSU LTD. (JAPAN) 1.8%
NESTLE SA (SWITZERLAND) 1.8%
</TABLE>
6
<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 and
other fund data presented 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; 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.
7
<PAGE>
J.P. MORGAN INTERNATIONAL OPPORTUNITIES FUND
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
MAY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment in The International Opportunities
Portfolio ("Portfolio"), at value $82,041,018
Prepaid Expenses and Other Assets 10,693
Deferred Organization Expenses 3,535
Receivable for Expense Reimbursements 236
Prepaid Trustees' Fees 194
-----------
Total Assets 82,055,676
-----------
LIABILITIES
Shareholder Servicing Fee Payable 16,936
Administrative Services Fee Payable 1,652
Administration Fee Payable 74
Fund Services Fee Payable 70
Accrued Expenses 43,880
-----------
Total Liabilities 62,612
-----------
NET ASSETS
Applicable to 6,385,375 Shares of Beneficial
Interest Outstanding
(par value $0.001, unlimited shares authorized) $81,993,064
===========
Net Asset Value, Offering and Redemption Price
Per Share $12.84
-----
-----
ANALYSIS OF NET ASSETS
Paid-in Capital $71,764,084
Undistributed Net Investment Income 136,842
Accumulated Net Realized Gain on Investment 495,335
Net Unrealized Appreciation of Investment 9,596,803
-----------
Net Assets $81,993,064
===========
</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, 2000
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME ALLOCATED FROM PORTFOLIO
Allocated Dividend Income (Net of Foreign
Withholding Tax of $137,516) $ 696,389
Allocated Interest Income 92,689
Allocated Portfolio Expenses (286,094)
-----------
Net Investment Income Allocated from
Portfolio 502,984
FUND EXPENSES
Shareholder Servicing Fee $ 96,875
Fund Accounting Expense 17,511
Transfer Agent Fees 13,963
Registration Fees 12,310
Administrative Services Fee 9,486
Printing Expenses 5,921
Professional Fees 5,839
Amortization of Organization Expenses 1,017
Fund Services Fee 644
Administration Fee 445
Trustees' Fees and Expenses 292
Miscellaneous 4,895
--------
Total Fund Expenses 169,198
Less: Reimbursement of Expenses (370)
--------
NET FUND EXPENSES 168,828
-----------
NET INVESTMENT INCOME 334,156
NET REALIZED GAIN ON INVESTMENT ALLOCATED FROM
PORTFOLIO 2,426,646
NET CHANGE IN UNREALIZED DEPRECIATION OF
INVESTMENT ALLOCATED FROM PORTFOLIO (2,314,591)
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $ 446,211
===========
</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, 2000 YEAR ENDED
(UNAUDITED) NOVEMBER 30, 1999
------------ -----------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 334,156 $ 262,134
Net Realized Gain on Investment Allocated from
Portfolio 2,426,646 5,516,343
Net Change in Unrealized Appreciation
(Depreciation) of Investment Allocated from
Portfolio (2,314,591) 10,151,303
------------ ----------------
Net Increase in Net Assets Resulting from
Operations 446,211 15,929,780
------------ ----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (756,015) (1,585,589)
------------ ----------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Proceeds from Shares of Beneficial Interest Sold 92,961,498 73,766,113
Reinvestment of Dividends 588,768 1,364,605
Cost of Shares of Beneficial Interest Redeemed (78,790,584) (76,981,254)
------------ ----------------
Net Increase (Decrease) from Transactions in
Shares of Beneficial Interest 14,759,682 (1,850,536)
------------ ----------------
Total Increase in Net Assets 14,449,878 12,493,655
NET ASSETS
Beginning of Period 67,543,186 55,049,531
------------ ----------------
End of Period (including undistributed net
investment income of $136,842 and $558,701,
respectively) $ 81,993,064 $ 67,543,186
============ ================
</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 is as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE FOR THE FISCAL YEAR FEBRUARY 26, 1997
SIX MONTHS ENDED ENDED NOVEMBER 30, (COMMENCEMENT OF
MAY 31, 2000 -------------------- OPERATIONS) THROUGH
(UNAUDITED) 1999 1998 NOVEMBER 30, 1997
---------------- --------- --------- -------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.88 $ 10.04 $ 9.92 $ 10.00
--------------- ------- ------- ------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.06 0.21 0.23 0.06
Net Realized and Unrealized Gain (Loss) on
Investments 0.04 2.93 (0.01) (0.14)
--------------- ------- ------- ------------------
Total from Investment Operations 0.10 3.14 0.22 (0.08)
--------------- ------- ------- ------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (0.14) (0.30) (0.10) --
--------------- ------- ------- ------------------
NET ASSET VALUE, END OF PERIOD $ 12.84 $ 12.88 $ 10.04 $ 9.92
=============== ======= ======= ==================
RATIOS AND SUPPLEMENTAL DATA
Total Return 0.75%(a) 32.13% 2.30% (0.80)%(a)
Net Assets, End of Period (in thousands) $ 81,993 $67,543 $55,050 $ 62,939
Ratio to Average Net Assets
Net Expenses (excluding Interest Expense) 1.17%(b) 1.18% 1.20% 1.20%(b)
Net Investment Income 0.86%(b) 0.47% 0.96% 1.08%(b)
Expenses without reimbursement including
Interest Expense 1.17%(b) 1.24% 1.24% 1.51%(b)
Interest Expense -- 0.01% -- --
</TABLE>
------------------------
(a) Not Annualized.
(b) Annualized.
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, 2000
--------------------------------------------------------------------------------
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 Opportunities
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, 2000). The performance of the fund is directly affected by the
performance of the portfolio. The financial statements of the portfolio,
including the Schedule of Investments, are included elsewhere in this report and
should be read in conjunction with the fund's financial statements.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual amounts could differ from
those estimates. The following is a summary of the significant accounting
policies of the fund:
a) Valuation of securities by the portfolio is discussed in Note 1 of the
portfolio's Notes to Financial Statements which are included elsewhere in
this report.
b) The fund records its share of net investment income, realized and
unrealized gain and loss and adjusts its investment in the portfolio each
day. All the net investment income and realized and unrealized gain and
loss of the portfolio is allocated pro rata among the fund and other
investors in the portfolio at the time of such determination.
c) Distributions to shareholders of net investment income and net realized
capital gains, if any, are declared and paid annually.
d) The fund incurred organization expenses in the amount of $12,000. These
costs were deferred and are being amortized on a straight-line basis over
a five-year period from the commencement of operations.
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.
g) For federal income tax purposes, the fund had a capital loss carryforward
of $1,881,180 at November 30, 1999, which will expire in the year 2006. To
the extent that this capital loss is used to offset future capital gains,
it is probable that the gains so offset will not be distributed to
shareholders.
12
<PAGE>
J.P. MORGAN INTERNATIONAL OPPORTUNITIES FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
MAY 31, 2000
--------------------------------------------------------------------------------
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, 2000, the fee for these services amounted to $445.
b) The trust, on behalf of the fund, has an Administrative Services Agreement
(the "Services Agreement") with Morgan Guaranty Trust Company of New York
("Morgan"), a wholly owned subsidiary of J.P. Morgan & Co. Incorporated
("J.P. Morgan"), under which Morgan is responsible for certain aspects of
the administration and operation of the fund. Under the Services
Agreement, the fund has agreed to pay Morgan a fee equal to its allocable
share of an annual complex-wide charge. This charge is calculated based on
the aggregate average daily net assets of the portfolio and the other
portfolios in which the trust and 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, 2000, the fee
for these services amounted $9,486.
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 through March 1, 2000.
For the six months ended May 31, 2000, J.P. Morgan has agreed to reimburse
the fund $370 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, 2000, the fee for these
services amounted to $96,875.
Morgan, Charles Schwab & Co. ("Schwab") and the trust are parties to
separate services and operating agreements (the "Schwab Agreements")
whereby Schwab makes fund shares available to customers of investment
advisors and other financial intermediaries who are Schwab's clients. The
fund is not responsible for payments to Schwab under the Schwab
Agreements; however, in the event the Services Agreement with Schwab is
terminated for reasons other than a breach by Schwab and the relationship
between the trust and Morgan is terminated, the fund would be responsible
for the ongoing payments to Schwab with respect to pre-termination shares.
13
<PAGE>
J.P. MORGAN INTERNATIONAL OPPORTUNITIES FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
MAY 31, 2000
--------------------------------------------------------------------------------
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
$644 for the six months ended May 31, 2000.
e) An aggregate annual fee of $75,000 is paid to each trustee for serving as
a trustee of the trust, the J.P. Morgan Institutional Funds, the master
portfolios and J.P. Morgan Series Trust. The Trustees' Fees and Expenses
shown in the financial statements represents the fund's allocated portion
of 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, 2000 YEAR ENDED
(UNAUDITED) NOVEMBER 30, 1999
---------------- -----------------
<S> <C> <C>
Shares of Beneficial Interest Sold............... 7,015,834 6,533,338
Reinvestment of Dividends and Distributions...... 44,705 135,496
Shares of Beneficial Interest Redeemed........... (5,921,060) (6,906,548)
--------------- ----------------
Net Increase (Decrease).......................... 1,139,479 (237,714)
=============== ================
</TABLE>
From time to time the fund may have a concentration of several shareholders
holding a significant percentage of shares outstanding. Investment activities of
these shareholders could have a material impact on the fund.
4. CREDIT AGREEMENT
The trust, on behalf of the fund, together with other affiliated investment
companies (the "funds"), entered into a revolving line of credit agreement (the
"Agreement") on May 26, 1999, with unaffiliated lenders. The maximum borrowing
under the Agreement was $150,000,000. The Agreement expired on May 23, 2000,
however, the fund as party to the Agreement has extended the Agreement and
continues its participation therein for an additional 364 days until May 23,
2001. The maximum borrowing under the new Agreement is $150,000,000. The purpose
of the Agreement is to provide another alternative for settling large fund
shareholder redemptions. Interest on any such borrowings outstanding will
approximate market rates. Under the Agreement, the commitment fee is at an
annual rate of 0.085% on the unused portion of the committed amount. The
commitment fee is allocated to the funds in accordance with the procedures
established by their respective trustees or directors. There were no outstanding
borrowings pursuant to the Agreement at May 31, 2000.
14
<PAGE>
The International Opportunities Portfolio
Semi-Annual Report May 31, 2000
(The following pages should be read in conjunction
with The J.P. Morgan International Opportunities Fund
Semi-Annual Financial Statements)
15
<PAGE>
THE INTERNATIONAL OPPORTUNITIES PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
MAY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ----------- -------------
<S> <C> <C>
COMMON STOCK (89.3%)
AUSTRALIA (2.4%)
Santos Ltd. (Oil-Production)(s).................. 1,443,506 $ 3,705,732
Southern Pacific Petroleum NL
(Oil-Services)+(s)............................. 1,636,411 1,913,767
WMC Ltd. (Metals & Mining)(s).................... 1,727,400 7,082,448
------------
12,701,947
------------
AUSTRIA (0.4%)
Bank Austria AG (Banking)(s)..................... 50,489 2,383,279
------------
CANADA (0.6%)
Royal Bank of Canada (Banking)(s)................ 56,600 2,942,051
------------
CHINA (0.6%)
Huaneng Power International, Inc. (Spon. ADR)
(Energy Source)(s)............................. 270,000 2,683,124
Huaneng Power International, Inc., H Shares
(Energy Source)(s)............................. 3,000,000 746,920
------------
3,430,044
------------
FINLAND (1.2%)
Sampo Insurance Co. Ltd., A Shares
(Insurance)(s)................................. 66,400 2,771,028
Stora Enso OYJ, R Shares (Forest Products &
Paper)(s)...................................... 367,164 3,523,764
------------
6,294,792
------------
FRANCE (17.6%)
Alcatel (Telecommunications-Equipment)(s)........ 283,000 15,563,294
Banque Nationale de Paris (Financial
Services)(s)................................... 115,810 10,391,002
Carrefour SA (Retail)(s)......................... 59,940 4,216,312
Christian Dior SA (Retail)(s).................... 27,500 6,248,261
Coflexip SA (Oil-Services)+(s)................... 57,697 6,709,825
Compagnie de Saint- Gobain (Building
Materials)+(s)................................. 10,570 1,465,469
Groupe Danone (Food, Beverages & Tobacco)(s)..... 9,489 2,209,671
Rhodia SA (Chemicals)(s)......................... 335,900 5,544,858
Sidel SA (Machinery)+(s)......................... 50,000 3,361,773
STMicroelectronics NV (Electronics)(s)........... 65,460 3,879,156
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ----------- -------------
<S> <C> <C>
FRANCE (CONTINUED)
Suez Lyonnaise des Eaux SA (Utilities)(s)........ 58,500 $ 9,765,371
Total Fina Elf SA (Oil-Services)+(s)............. 13,050 121
Total Fina Elf, B Shares (Oil-Services)+(s)...... 117,346 18,380,543
Vivendi SA (Utilities)(s)........................ 53,711 5,728,244
------------
93,463,900
------------
GERMANY (2.8%)
BASF AG (Chemicals)(s)........................... 31,500 1,280,975
Marschollek, Lautenschlaeger und Partner AG
(Financial Services)(s)........................ 4,000 1,886,303
Merck KGaA (Pharmaceuticals)(s).................. 44,100 1,359,849
Schering AG (Pharmaceuticals)(s)................. 39,680 5,913,545
Stinnes AG (Transport & Services)+(s)............ 40,400 760,568
Veba AG (Diversified Manufacturing)(s)........... 75,600 3,799,981
------------
15,001,221
------------
HONG KONG (2.4%)
Guoco Group Ltd. (Financial Services)(s)......... 403,000 801,656
Hongkong Electric Holdings Ltd. (Electric)(s).... 2,525,100 8,458,048
Hutchison Whampoa Ltd. (Multi - Industry)........ 324,700 3,750,385
i-CABLE Communications Ltd. (Telecommunication
Services)+(s).................................. 2,000 757
------------
13,010,846
------------
INDIA (0.7%)
Reliance Industries Ltd. (GDR) (Diversified
Manufacturing)(s).............................. 148,100 3,628,450
------------
IRELAND (0.1%)
Greencore Group PLC (Food, Beverages &
Tobacco)(s).................................... 293,600 789,613
------------
</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, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ----------- -------------
<S> <C> <C>
ITALY (0.8%)
Bayerische Vita SPA (Insurance)(s)............... 139,300 $ 1,211,754
UniCredito Italiano SPA (Financial
Services)(s)................................... 650,000 2,857,275
------------
4,069,029
------------
JAPAN (18.2%)
Dai Nippon Printing Co. Ltd. (Business & Public
Services)(s)................................... 147,000 2,507,908
Fujitsu Ltd. (Computer Systems)(s)............... 331,000 9,375,900
Honda Motor Co. Ltd. (Automotive)(s)............. 111,000 3,659,624
Mitsubishi Chemical Corp. (Chemicals)(s)......... 1,821,000 7,119,954
Mitsubishi Corp. (Wholesale & International
Trade)(s)...................................... 824,000 6,841,477
Nippon Yusen Kabushiki Kaisha
(Transportation)(s)............................ 892,000 3,843,863
Nisshin Steel Co. Ltd. (Metals & Mining)(s)...... 2,200,000 2,308,800
Paris Miki, Inc. (Retail)(s)..................... 40,302 2,672,452
Rohm Co. Ltd. (Electronics)(s)................... 39,000 12,169,956
Softbank Corp. (Computer Software)(s)............ 15,900 2,436,499
Sony Corp. (Electronics)(s)...................... 58,000 5,251,915
Taiheiyo Cement Corp. (Building Materials)(s).... 857,000 1,281,421
Takeda Chemical Industries Ltd. (Chemicals)(s)... 156,689 10,695,743
The Chuo Mitsui Trust and Banking Co. Ltd.
(Banking)(s)................................... 376,800 1,515,249
The Fuji Bank Ltd. (Banking)(s).................. 640,000 4,951,196
The Tokio Marine & Fire Insurance Co. Ltd.
(Insurance)(s)................................. 540,000 5,892,733
Toppan Printing Co. Ltd. (Broadcasting &
Publishing)(s)................................. 224,000 2,375,742
Tostem Corp. (Construction & Housing)(s)......... 204,000 3,362,898
West Japan Railway Co. (Railroads)(s)............ 840 3,549,570
Yamanouchi Pharmaceutical Co. Ltd.
(Pharmaceuticals)(s)........................... 105,000 4,788,019
------------
96,600,919
------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ----------- -------------
<S> <C> <C>
MEXICO (1.4%)
Consorcio ARA SA de CV (Construction &
Housing)+(s)................................... 1,595,000 $ 2,013,148
Grupo Televisa SA (Spon. GDR) (Broadcasting &
Publishing)+(s)................................ 101,200 5,635,575
------------
7,648,723
------------
NETHERLANDS (5.7%)
Akzo Nobel NV (Chemicals)(s)..................... 139,000 5,273,569
Equant NV (Computer Systems)+(s)................. 50,500 2,194,593
Heineken Holding NV, Class A (Food, Beverages &
Tobacco)(s).................................... 56,400 1,841,120
Koninklijke Philips Electronics NV
(Electronics)(s)............................... 409,792 18,188,487
Laurus NV (Retail)(s)............................ 188,264 1,903,067
Vedior NV (Business & Public Services)(s)........ 76,507 879,799
------------
30,280,635
------------
NORWAY (0.4%)
Stolt - Nielsen SA (Spon. ADR)
(Transportation)(s)............................ 96,810 1,911,997
------------
PHILIPPINES (0.5%)
ABS- CBN Broadcasting Corporation (Broadcasting &
Publishing)(s)................................. 2,010,000 2,050,059
First Philippine Holdings Corp. (Multi -
Industry)+(s).................................. 1,581,220 797,098
------------
2,847,157
------------
RUSSIA (1.3%)
Surgutneftegaz (Spon. ADR) (Oil-
Production)(s)................................. 481,700 6,888,310
------------
SINGAPORE (3.6%)
Chartered Semiconductor Manufacturing Ltd.
(Semiconductors)+(s)........................... 75,800 6,082,950
DBS Group Holdings Ltd. (Financial
Services)(s)................................... 419,414 4,186,396
Neptune Orient Lines Ltd. (Transport &
Services)+(s).................................. 2,736,500 2,068,322
</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, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ----------- -------------
<S> <C> <C>
SINGAPORE (CONTINUED)
Overseas Union Bank Ltd. (Banking)(s)............ 753,378 $ 2,586,314
Singapore Press Holdings Ltd. (Broadcasting &
Publishing)(s)................................. 284,000 4,276,714
------------
19,200,696
------------
SOUTH AFRICA (0.3%)
South African Breweries PLC (Food, Beverages &
Tobacco)(s).................................... 256,208 1,563,365
------------
SOUTH KOREA (0.7%)
H&CB (GDR) (Banking)(s).......................... 70,935 1,264,416
Hyundai Motor Co. Ltd. (GDR) (Automotive)(s)..... 449,000 2,323,575
Samsung Electronics (GDR) (144A)
(Electronics)(s)............................... 454 71,789
------------
3,659,780
------------
SPAIN (3.8%)
Acerinox SA (Metals & Mining)(s)................. 73,800 2,491,255
Actividades de Construccion y Servicios SA
(Construction & Housing)(s).................... 115,700 3,132,044
Banco Bilbao Vizcaya Argentaria SA
(Banking)(s)................................... 522,500 7,268,385
Banco Santander Central Hispano SA
(Banking)(s)................................... 472,500 4,605,374
Indra Sistemas SA (Electronics)+(s).............. 116,364 2,492,821
------------
19,989,879
------------
SWEDEN (1.6%)
Autoliv, Inc. (SDR) (Automotive Supplies)(s)..... 120,000 3,295,240
Skandia Forsakrings AB (Insurance)(s)............ 89,164 2,275,349
Skandinaviska Ensklida Banken (Banking)(s)....... 250,600 2,724,820
------------
8,295,409
------------
SWITZERLAND (9.9%)
ABB Ltd. (Electrical Equipment)(s)............... 43,233 5,276,412
Barry Callebaut AG (Food, Beverages &
Tobacco)(s).................................... 6,400 843,894
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ----------- -------------
<S> <C> <C>
SWITZERLAND (CONTINUED)
Credit Suisse Group (Financial Services)+(s)..... 34,400 $ 6,392,920
Nestle SA (Food, Beverages & Tobacco)(s)......... 4,870 9,251,563
Novartis AG (Pharmaceuticals)(s)................. 4,080 5,993,628
Roche Holding AG (Pharmaceuticals)(s)............ 600 6,300,885
Swiss Re (Insurance)+(s)......................... 3,505 6,714,298
Swisscom AG (Telecommunication Services)+(s)..... 19,300 6,752,153
UBS AG (Banking)(s).............................. 39,150 5,260,420
------------
52,786,173
------------
UNITED KINGDOM (11.5%)
Allied Zurich PLC (Insurance)(s)................. 510,500 5,723,094
British Airways PLC (Airlines)(s)................ 544,000 2,943,617
British American Tobacco PLC (Food, Beverages &
Tobacco)(s).................................... 262,300 1,533,024
Cable & Wireless PLC (Telecommunications)(s)..... 207,700 3,461,667
CGNU PLC (Insurance)(s).......................... 158,784 2,411,428
Glaxo Wellcome PLC (Pharmaceuticals)(s).......... 167,500 4,732,063
Lloyds TSB Group PLC (Banking)(s)................ 126,800 1,372,245
National Power PLC (Electric)(s)................. 187,000 1,027,242
Railtrack Group PLC (Transportation)(s).......... 157,600 1,978,834
Royal & Sun Alliance Insurance Group PLC
(Insurance)(s)................................. 996,818 5,930,248
Shell Transport & Trading Co.
(Oil-Services)(s).............................. 666,400 5,510,999
Tesco PLC (Retail)(s)............................ 954,200 2,881,142
Vodafone AirTouch PLC (Telecommunications)+(s)... 4,774,178 21,765,684
------------
61,271,287
------------
VENEZUELA (0.8%)
Compania Anonima Nacional Telefonos de Venezuela
(ADR) (Telecommunication Services)(s).......... 150,600 4,282,687
------------
TOTAL COMMON STOCK (COST $420,416,145)......... 474,942,189
------------
</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, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ----------- -------------
<S> <C> <C>
CONVERTIBLE PREFERRED STOCKS (1.0%)
AUSTRALIA (1.0%)
National Australia Bank (Banking)
(COST $5,588,740).............................. 201,000 $ 5,200,875
------------
PREFERRED STOCK (3.1%)
AUSTRALIA (1.5%)
News Corp. Ltd. (Broadcasting & Publishing)(s)... 814,400 7,819,243
------------
BRAZIL (1.6%)
Embratel Participacoes SA (ADR)
(Telecommunication Services)(s)................ 410,100 8,586,469
------------
TOTAL PREFERRED STOCK (COST $12,185,840)....... 16,405,712
------------
<CAPTION>
PRINCIPAL
AMOUNT
-----------
<S> <C> <C>
CONVERTIBLE BONDS (2.1%)
CHINA (0.8%)
Huaneng Power International PLC, 1.750% due
05/21/04 (Energy Source)....................... $3,800,000 4,104,000
------------
NETHERLANDS (1.3%)
Telefonica Europe BV, 2.000% due 07/15/02
(Telecommunication Services)................... 3,471,000 7,248,386
------------
TOTAL CONVERTIBLE BONDS (COST $9,798,767)...... 11,352,386
------------
SHORT-TERM INVESTMENTS (2.4%)
OTHER INVESTMENT COMPANIES (2.2%)
Hamilton Money Fund.............................. 11,597,069 11,597,070
------------
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
------------------------------------------------- ----------- -------------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS (0.2%)
United States Treasury Bills, 5.978%(y) due
10/12/00(s).................................... $1,010,000 $ 988,174
------------
TOTAL SHORT-TERM INVESTMENTS
(COST $12,585,335)............................ 12,585,244
------------
TOTAL INVESTMENTS
(COST $460,574,827) (97.9%)................................. 520,486,406
OTHER ASSETS IN EXCESS OF LIABILITIES (2.1%)..................
11,376,853
------------
NET ASSETS (100.0%)........................................... $531,863,259
============
</TABLE>
------------------------------
Note: The aggregate gross unrealized appreciation and depreciation was
$88,808,811 and $28,897,232, respectively, resulting in net unrealized
appreciation of $59,911,579.
+ - Non-income producing security.
(s) - Security is fully or partially segregated with custodian as collateral for
futures contracts or with broker as initial margin for futures contracts.
$191,698,228 of the market value has been segregated.
(y) - Yield to maturity.
144A - Securities restricted for resale to Qualified Institutional Buyers.
ADR - American Depository Receipt.
GDR - Global Depository Receipt.
Spon. ADR - Sponsored ADR.
Spon. GDR - Sponsored GDR.
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
THE INTERNATIONAL OPPORTUNITIES PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
MAY 31, 2000
--------------------------------------------------------------------------------
INDUSTRY DIVERSIFICATION
<TABLE>
<CAPTION>
PERCENT OF
TOTAL INVESTMENTS
-----------------
<S> <C>
Electronics....................................... 8.8%
Banking........................................... 8.1%
Insurance......................................... 6.3%
Oil - Services.................................... 6.3%
Chemicals......................................... 5.7%
Telecommunication Services........................ 5.7%
Pharmaceuticals................................... 5.6%
Financial Services................................ 5.1%
Telecommunications................................ 4.9%
Broadcasting & Publishing......................... 4.3%
Utilities......................................... 3.7%
Food, Beverage & Tobacco.......................... 3.5%
Retail............................................ 3.4%
Telecommunications - Equipment.................... 3.0%
Short-Term........................................ 2.4%
Metals & Mining................................... 2.3%
Computer Systems.................................. 2.2%
Oil - Production.................................. 2.0%
Electric.......................................... 1.8%
Construction & Housing............................ 1.6%
Transport & Services.............................. 1.5%
Energy Source..................................... 1.4%
Wholesale & International Trade................... 1.3%
Automotive........................................ 1.2%
Semiconductors.................................... 1.2%
Electrical Equipment.............................. 1.0%
Multi-Industry.................................... 0.9%
Forest Products & Paper........................... 0.7%
Railroads......................................... 0.7%
Automotive Supplies............................... 0.6%
Airlines.......................................... 0.6%
Business & Public Services........................ 0.6%
Machinery......................................... 0.6%
Building Materials................................ 0.5%
Computer Software................................. 0.5%
-----
100.0%
=====
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE INTERNATIONAL OPPORTUNITIES PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
MAY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $460,574,827 ) $520,486,406
Foreign Currency at Value (Cost $17,906,133 ) 17,758,025
Receivable for Investments Sold 2,990,362
Unrealized Appreciation of Forward Foreign
Currency Contracts 1,530,528
Dividends Receivable 1,380,834
Foreign Tax Reclaim Receivable 1,155,836
Variation Margin Receivable 487,346
Interest Receivable 57,809
Deferred Organization Expenses 4,465
Prepaid Expenses and Other Assets 1,582
Prepaid Trustees' Fees 937
------------
Total Assets 545,854,130
------------
LIABILITIES
Payable for Investments Purchased 7,917,849
Unrealized Depreciation of Forward Foreign
Currency Contracts 3,654,440
Payable to Custodian 1,990,118
Advisory Fee Payable 265,161
Administrative Services Fee Payable 10,774
Administration Fee Payable 493
Fund Services Fee Payable 444
Accrued Expenses 151,592
------------
Total Liabilities 13,990,871
------------
NET ASSETS
Applicable to Investors' Beneficial Interests $531,863,259
============
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE INTERNATIONAL OPPORTUNITIES PORTFOLIO
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED MAY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividend Income (Net of Foreign Withholding Tax
of $897,423) $ 4,523,450
Interest Income 602,527
------------
Investment Income 5,125,977
EXPENSES
Advisory Fee $ 1,509,438
Custodian Fees and Expenses 243,604
Administrative Services Fee 61,578
Professional Fees and Expenses 26,159
Printing Expenses 4,365
Fund Services Fee 4,161
Administration Fee 1,949
Trustees' Fees and Expenses 1,877
Amortization of Organization Expense 1,285
Miscellaneous 722
------------
Total Expenses 1,855,138
------------
NET INVESTMENT INCOME 3,270,839
NET REALIZED GAIN ON
Investment Transactions 13,206,047
Futures Contracts 1,170,067
Foreign Currency Contracts and Transactions 1,235,167
------------
Net Realized Gain 15,611,281
NET CHANGE IN UNREALIZED DEPRECIATION OF
Investment Transactions (13,377,055)
Futures Contracts (946,354)
Foreign Currency Contracts and Translations (2,869,895)
------------
Net Change in Unrealized Depreciation (17,193,304)
------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $ 1,688,816
============
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE INTERNATIONAL OPPORTUNITIES PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE FISCAL
MAY 31, 2000 YEAR ENDED
(UNAUDITED) NOVEMBER 30, 1999
------------- -----------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 3,270,839 $ 4,482,162
Net Realized Gain on Investments, Futures and
Foreign Currency Contracts and Transactions 15,611,281 34,344,844
Net Change in Unrealized Appreciation
(Depreciation) of Investments, Futures and
Foreign Currency Contracts and Translations (17,193,304) 63,164,934
------------- ----------------
Net Increase in Net Assets Resulting from
Operations 1,688,816 101,991,940
------------- ----------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 268,654,645 252,736,681
Withdrawals (176,872,570) (296,593,455)
------------- ----------------
Net Increase (Decrease) from Investors'
Transactions 91,782,075 (43,856,774)
------------- ----------------
Total Increase in Net Assets 93,470,891 58,135,166
NET ASSETS
Beginning of Period 438,392,368 380,257,202
------------- ----------------
End of Period $ 531,863,259 $ 438,392,368
============= ================
</TABLE>
--------------------------------------------------------------------------------
SUPPLEMENTARY DATA
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FOR THE PERIOD
FOR THE SIX FISCAL YEAR ENDED FEBRUARY 26, 1997
MONTHS ENDED NOVEMBER 30, (COMMENCEMENT OF
MAY 31, 2000 ------------------- OPERATIONS) THROUGH
(UNAUDITED) 1999 1998 NOVEMBER 30, 1997
------------ --------- -------- -------------------
<S> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Net Expenses 0.74%(a) 0.79% 0.85% 0.89%(a)
Net Investment Income 1.30%(a) 1.26% 1.07% 1.26%(a)
Expenses without Reimbursement 0.74%(a) 0.79% 0.85% 0.92%(a)
Portfolio Turnover 31%(b) 80% 143% 72%(b)
</TABLE>
------------------------
(a) Annualized.
(b) Not Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
23
<PAGE>
THE INTERNATIONAL OPPORTUNITIES PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
MAY 31, 2000
--------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The International Opportunities Portfolio (the "portfolio") is one of five
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.
24
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THE INTERNATIONAL OPPORTUNITIES PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
MAY 31, 2000
--------------------------------------------------------------------------------
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 $12,800.
These costs were deferred and are being amortized on a straight-line basis
over a five-year period from the commencement of operations.
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.
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
25
<PAGE>
THE INTERNATIONAL OPPORTUNITIES PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
MAY 31, 2000
--------------------------------------------------------------------------------
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. 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 unrealized appreciation, as applicable, as the
income and/or capital gains are earned.
2. TRANSACTIONS WITH AFFILIATES
a) The portfolio has an Investment Advisory Agreement with J.P. Morgan
Investment Management Inc. ("JPMIM"), an affiliate of Morgan Guaranty
Trust Company of New York ("Morgan"), a wholly-owned subsidiary of
J.P. Morgan & Co. Incorporated ("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,
2000, such fees amounted to $1,509,438.
b) The trust, on behalf of 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, 2000, the fee for these services amounted
to $1,949.
c) The trust, on behalf of 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
26
<PAGE>
THE INTERNATIONAL OPPORTUNITIES PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
MAY 31, 2000
--------------------------------------------------------------------------------
the aggregate average daily net assets of the portfolio and certain other
portfolios for which JPMIM acts as Investment Advisor (the "master
portfolios") and J.P. Morgan Series Trust in accordance with the following
annual schedule: 0.09% on the first $7 billion of 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, 2000, the fee for these services amounted
to $61,578.
d) The trust, on behalf of 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 $4,161 for the six months ended May 31, 2000
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, 2000 were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
--------- ------------
<S> <C>
$250,750,773..... $146,384,209
</TABLE>
Open futures contracts at May 31, 2000 are summarized as follows:
<TABLE>
<CAPTION>
NET UNREALIZED
APPRECIATION/ CURRENT MARKET VALUE
CONTRACTS LONG (DEPRECIATION) OF CONTRACTS
-------------- -------------- --------------------
<S> <C> <C> <C>
Dow Jones Euro Stoxx 50 Index, expiring June
2000............................................ 78 $ 167,212 $ 3,764,370
FTSE 100 Index, expiring June, 2000.............. 32 92,666 3,045,780
TOPIX Index, expiring June 2000.................. 30 (155,370) 4,243,325
------------- ------------- -------------------
Totals........................................... 140 $ 104,508 $ 11,053,475
============= ============= ===================
</TABLE>
27
<PAGE>
THE INTERNATIONAL OPPORTUNITIES PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
MAY 31, 2000
--------------------------------------------------------------------------------
At May 31, 2000, the portfolio had open forward currency contracts as follows:
<TABLE>
<CAPTION>
U.S. DOLLAR NET UNREALIZED
CONTRACTUAL VALUE AT APPRECIATION/
PURCHASE CONTRACTS VALUE 5/31/00 (DEPRECIATION)
------------------ ------------ ------------ --------------
<S> <C> <C> <C>
Canadian Dollar 28,120,957, expiring 07/25/00.... $ 19,071,521 $ 18,800,952 $ (270,569)
Euro 43,439,798, expiring 07/25/00............... 40,318,768 40,436,030 117,262
Japanese Yen 4,740,803,240, expiring 07/25/00.... 45,233,852 44,488,570 (745,282)
Pound Sterling 23,375,600, expiring 07/25/00..... 36,951,062 34,976,293 (1,974,769)
Swedish Krona 48,289,503, expiring 07/25/00...... 5,556,905 5,382,220 (174,685)
</TABLE>
<TABLE>
<CAPTION>
SETTLEMENT
SALES CONTRACTS VALUE
--------------- ------------
<S> <C> <C> <C>
Australian Dollar 18,348,872, expiring
07/25/00........................................ $ 10,844,447 $ 10,478,556 $ 365,891
Euro 25,102,000, expiring 07/25/00............... 22,961,194 23,366,252 (405,058)
Euro 2,715,000, expiring 07/26/00................ 2,622,513 2,536,572 85,941
Hong Kong Dollar 83,839,973, expiring 07/25/00... 10,760,234 10,758,968 1,266
Japanese Yen 4,281,080,250, expiring 07/25/00.... 40,160,776 40,174,445 (13,669)
Pound Sterling 3,149,110, expiring 07/26/00...... 5,000,000 4,711,931 288,069
Singapore Dollar 31,245,651, expiring 07/25/00... 18,550,576 18,137,103 413,473
Swedish Krona 32,686,828, expiring 07/25/00...... 3,572,780 3,643,188 (70,408)
Swiss Franc 31,936,419, expiring 07/25/00........ 19,212,863 18,954,237 258,626
-----------
NET UNREALIZED DEPRECIATION ON FORWARD FOREIGN
CURRENCY CONTRACTS.............................. $(2,123,912)
===========
</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.
28
<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.
IMSAR239
J.P. MORGAN INTERNATIONAL OPPORTUNITIES FUND
SEMIANNUAL REPORT
MAY 31, 2000
