<PAGE>
LETTER TO THE SHAREHOLDERS OF THE J.P. MORGAN INTERNATIONAL EQUITY FUND
June 1, 2000
Dear Shareholder:
We are pleased to report that the J.P. Morgan International Equity Fund
delivered a return of 7.88% for the six months ended April 30, 2000, exceeding
its benchmark, the MSCI EAFE Index, which returned 6.72%, but underperforming
the Lipper International Funds Average, which posted a 14.14% return.
The fund's net asset value on April 30, 2000 was $12.18 per share, falling from
$12.41 per share on October 31, 1999. During the period, the fund made
distributions of approximately $0.16 per share from ordinary income,
approximately $0.29 per share from short-term capital gains, and approximately
$0.76 per share from long-term capital gains. The fund's net assets stood at
$58.7 million on April 30 while the total net assets of The International Equity
Portfolio, in which the fund invests, totaled $546.3 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............7
FUND PERFORMANCE ..............2 FINANCIAL STATEMENTS ...............10
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 THREE FIVE SINCE
AS OF APRIL 30, 2000 MONTHS MONTHS YEAR YEARS YEARS INCEPTION*
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
J.P. Morgan International Equity Fund 0.16% 7.88% 16.22% 12.24% 9.99% 6.90%
MSCI EAFE Index** 1.06% 6.72% 13.89% 14.04% 10.36% 7.78%
Lipper International Funds Average*** -0.06% 14.14% 24.76% 15.38% 13.16% 9.42%
AS OF MARCH 31, 2000
---------------------------------------------------------------------------------------------------------------------------
J.P. MorganInternational Equity Fund 0.78% 19.21% 28.80% 14.73% 12.01% 7.64%
MSCI EAFE Index** -0.11% 16.86% 25.09% 16.31% 12.39% 8.44%
Lipper International Funds Average*** 0.73% 27.02% 39.77% 18.02% 15.42% 10.20%
</TABLE>
*6/1/90 -- COMMENCEMENT OF OPERATIONS.
** MSCIEAFE INDEX IS AN UNMANAGED INDEX USED TO TRACK THE AVERAGE PERFORMANCE OF
OVER 900 SECURITIES LISTED ON THE STOCK EXCHANGES OF COUNTRIES IN EUROPE,
AUSTRALASIA, AND THE FAR EAST. THE INDEX 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
AND ASSUME THE REINVESTMENT OF DISTRIBUTIONS.
2
<PAGE>
PORTFOLIO MANAGER Q&A
[PHOTO]
The following is an interview with NIGEL F. EMMETT, vice president and member of
the portfolio management team. 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 May 12, 2000, and reflects his views on that date.
IF YOU WOULD, PLEASE TELL US A LITTLE ABOUT HOW THE FUND OPERATES AND HOW YOU
DID OVER THE PAST SIX MONTHS.
NE: Certainly. This fund is run as what we would call a "core" portfolio. Our
goal is to outperform the Morgan Stanley Capital International Europe,
Australasia, and Far East benchmark, while investing only in these selfsame
markets. Our investment decisions are based on highly focused fundamental
research that stresses three sources of added value: 1) active country, or
regional allocation; 2) active stock selection within each region; and 3) active
currency management.
Our aim is to make most of our performance from stock selection, which is
exactly what happened for the six months ending April 30, 2000. During this
period, the portfolio outperformed its benchmark, and all three sources of value
- stock selection, country and currency - contributed. Of the three, however,
stock selection was by far the most successful. In effect, it did what it was
meant to do.
IN THE STOCK SELECTION AREA, WHERE DID YOU ADD VALUE?
NE: On a regional basis, stock selection within continental Europe, excluding
the U.K., was most successful. We were basically neutral on the U.K. and
positive on Japan.
WHERE WERE YOU ON TARGET WITH THE TYPES OF STOCKS YOU INVESTED IN? WHAT WERE
SOME OF THE BIG GAINERS IN EUROPE, FOR EXAMPLE?
NE: Looking at some of the so-called "new economy" names, the portfolio was
overweight in ConSors, which is a German financial stock and that country's
largest online broker. During this reporting period, ConSors enjoyed a dramatic
rerating relative to other banks and more traditional finance companies,
primarily due to its successful management of its Internet-related business. Due
to this focus, it was able to grow much faster than its brick and mortar
counterparts, booking 100,000 new clients during the first quarter of 2000
alone. This represented a 50% increase in new customers since the end of 1999.
At present, it has a 25% share of the German online brokerage market and 34% of
the online trading accounts. Stocks like that did well in the portfolio,
including Banca Fideuram, a traditional Italian bank that is also successfully
expanding in the online banking business.
3
<PAGE>
Beyond this, we held Mannesmann, which benefited substantially from the
initially hostile takeover by Vodafone Airtouch. On the flip side, we also held
Vodafone Airtouch, which did well along with Mannesmann. We also held PT
Multimedia, the Internet spin-off of Portugal Telecom. It has a major share in
Portugal's largest cable company, which is also an Internet service provider and
owner of the Portuguese yellow pages. It, too, has done very well since we
bought it. There are similar stories, to be sure, over the past six months
throughout Europe's telecommunications, media, and technology (TMT) sectors.
Beyond the European portfolio, other stocks that outperformed included Cable &
Wireless in the U.K. It didn't do well last year but did very well in the first
quarter of this year. Another was News Corp., an Australian stock in the media
sector that operates on a global basis in newspapers and television, both
traditional broadcast and satellite. For instance, it controls BSkyB in the U.K.
and The Fox Network in the U.S. For some time, we have believed it to be a very
undervalued stock, especially in light of the value of content in these kinds of
media companies. Eventually, other investors took note, and News Corp.'s share
price appreciated accordingly.
Over the six-month period, some holdings in Japan also did well. A couple of
pharmaceutical stocks - Yamanouchi and Takeda Chemical - did particularly well.
By our measures, both were undervalued relative to the market. Yamanouchi, which
is one of our largest positions in Japan, benefited from its launch of a new
anti-cholesterol drug, Lipitor, that was developed by Warner Lambert and enjoyed
huge success in the U.S. Many expect this to be the most successful drug launch
this year in Japan. The company also announced an extension of its patent on
Gaster, a drug that is widely used in the treatment of ulcers. Both events are
catalysts for future growth, the kinds we look for before we invest in any
company.
WITH YOUR STRATEGY, HOW DO YOU DETERMINE VALUE? IF YOU'RE NOT PLAYING OFF SECTOR
PERFORMANCE, WHAT ARE YOU LOOKING FOR?
NE: With the country decision, we break the international world into five
blocks: Japan, the U.K., Europe, Hong Kong/Singapore, and Australia/New Zealand.
We begin by using macro research to rank these regions, from the most to the
least attractive. From this, we decide where to over- and underweight. This
process paid off over the past six months, particularly our overweight position
in Europe.
In stock selection, we have a team of over 70 analysts around the world who rank
stocks within individual sectors, mostly on a regional basis. This fundamental
research process worked particularly well over the six-month period.
Here, we added value relative to the benchmark without taking the kind of big
sector bets that are typical of many managers. Over the last six months, you had
managers who were massively overweighted in technology and, as a consequence of
strong momentum in this sector, did very well. On the other hand, you had those
who were underweight new economy stocks and massively overweight the old value
sectors. These, of course, did very badly until recently when value began to
raise itself from the floor.
We have a much more balanced approach. We are in all sectors, at all points in
time. We're looking to identify beneficial changes in the business models of
individual companies, looking for stocks within sectors that are attractively
priced.
4
<PAGE>
The portfolio managers work with our analysts to identify catalysts that can
help to release the value in the undervalued equities we select. Yamanouchi was
a case in point, with its introduction of what is likely to be a major new drug
product. Other types of catalysts might be significant restructurings, or
short-term price underperformance, to name a few.
WHAT IS YOUR SELL DISCIPLINE?
NE: Two things will make us sell a stock. Either the fundamentals change, so as
to change our views on its long return numbers. Or, the stock will perform so
well relative to its peer group that it no longer looks undervalued. In this
case, we take advantage of its outperformance and move on to a more attractively
priced company.
WHAT KIND OF PORTFOLIO TURNOVER DO YOU USUALLY HAVE?
NE: Typically, we would expect turnover to be in the 60% range.
GIVEN ALL THAT'S TRANSPIRED WITH REGARD TO RAPIDLY CHANGING FUNDAMENTALS IN THE
U.S., AND THEIR LAG EFFECT THROUGHOUT THE GLOBAL ECONOMY, HOW DO YOU SEE
POSITIONING THE PORTFOLIO FOR THE MONTHS AHEAD?
NE: Again, we continue to feel that the best way forward is to take a balanced
approach. Despite the advantage gained by some who took big sector bets over
this period of high technology momentum, we have absolutely no desire to expose
our investors to the on again/off again risks of such concentrated plays. The
risks of doing so are illustrated by the rapidly changing market environment
over the past six months. If you were on the "right" side of telecommunications,
media, and technology (TMT) during the first four months, you realized
substantial gains. But the last two months witnessed somewhat of a reversal.
While we continue to focus on what we consider to be the best undervalued stocks
within a sector, we also realize that the operating environment is changing.
Take a look at banks. Many banks, like the U.K. savings banks, have a high
return on equity, but aren't necessarily going to make those returns in the
future. This is due to the hard fact that new banking operations, such as the
online bankers, are invading their turf. These new entrants have a much lower
cost basis than banks with large branch networks to support; thus, they are able
to take market share and alter the pricing structure of the industry as a whole.
In other words, we are reading between the lines that we believe will inevitably
separate the future winners from the losers. The latter group is typified by
corporate managers who rest on past laurels. The former have active management
teams that are looking to take advantage of the changing marketplace, in
particular how to use new technology and the Internet to improve their
operations. An example might be Reuters in the U.K., a company that has been in
the information delivery business for a long time. The management team has
developed several high growth businesses to supplement and complement its
traditional business. One of these would be Instinet, an electronic brokering
business, which has been growing very quickly. Reuters is also developing a
business in the management of the B2B exchanges. So, we have a business that has
been around a long time, one that has a proven management team and strong cash
flow and one that is adapting to take advantage of new opportunities. This is
the kind of forward-thinking company we like a great deal.
5
<PAGE>
The key to successful investing in today's world is to avoid extremes. You don't
want to be an ostrich burying your head in the sand pretending the world isn't
changing. On the other hand, you don't want to simply chase the newest headline
and buy only the latest dot.com. You want a more balanced approach, one that
incorporates change into your valuation models. The result should be a steadier
and healthier portfolio over time.
6
<PAGE>
FUND FACTS
INVESTMENT OBJECTIVE
J.P. Morgan International Equity Fund seeks to provide a high total return from
a portfolio of equity securities of foreign companies. 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. securities
that seeks to outperform the MSCIEAFE Index. As an international investment, the
fund is subject to foreign market, political, and currency risks.
--------------------------------------------------------------------------------
COMMENCEMENT OF INVESTMENT OPERATIONS
6/1/90
--------------------------------------------------------------------------------
FUND NET ASSETS AS OF 4/30/00
$58,672,204
--------------------------------------------------------------------------------
PORTFOLIO NET ASSETS AS OF 4/30/00
$546,263,584
--------------------------------------------------------------------------------
CAPITAL GAIN PAYABLE DATE (IF APPLICABLE)
12/20/00
--------------------------------------------------------------------------------
EXPENSE RATIO
The fund's current expense ratio of 1.22% covers shareholders' expenses for
custody, tax reporting, investment advisory and shareholder services. The fund
is no-load and does not charge any sales, redemption, or exchange fees. There
are no additional charges for buying, selling, or safekeeping fund shares, or
for wiring redemption proceeds from the fund.
FUND HIGHLIGHTS
ALL DATA AS OF APRIL 30, 2000
PORTFOLIO ALLOCATION
(AS A PERCENTAGE OF TOTAL INVESTMENTS)
[CHART]
JAPAN 27.6%
UNITED KINGDOM 19.8%
FRANCE 10.9%
GERMANY 8.2%
SWITZERLAND 6.8%
NETHERLANDS 5.6%
SWEDEN 3.7%
SPAIN 3.6%
ITALY 3.1%
FINLAND 3.0%
AUSTRIA 2.6%
OTHER 5.1%
<TABLE>
<CAPTION>
LARGEST COMMON
STOCK HOLDINGS % OF TOTAL INVESTMENTS
----------------------------------------------------------
<S> <C>
VODAFONE AIRTOUCH PLC (UNITED KINGDOM) 3.1%
NOKIA OYJ (FINLAND) 2.2%
ERICSSON LM, B SHARES (SWEDEN) 2.1%
BP AMOCO PLC (UNITED KINGDOM) 1.9%
NIPPON TELEGRAPH & TELEPHONE CORP. (JAPAN) 1.7%
VIVENDI (FRANCE) 1.7%
TOTAL FINA SA, B SHARES (FRANCE) 1.7%
GLAXO WELLCOME PLC (UNITED KINGDOM) 1.4%
ROCHE HOLDING AG (SWITZERLAND) 1.2%
DEUTSCHE TELEKOM (GERMANY) 1.1%
</TABLE>
7
<PAGE>
DISTRIBUTED BY FUNDS DISTRIBUTOR, INC. J.P. MORGAN INVESTMENT MANAGEMENT INC.
SERVES AS INVESTMENT ADVISOR. SHARES OF THE FUND ARE NOT BANK DEPOSITS AND ARE
NOT GUARANTEED BY ANY BANK, GOVERNMENT ENTITY, OR THE FDIC. RETURN AND SHARE
PRICE WILL FLUCTUATE AND REDEMPTION VALUE MAY BE MORE OR LESS THAN ORIGINAL
COST.
References to specific securities are for illustrative purposes only and are not
intended to be, and should not be interpreted as, recommendations to purchase or
sell such securities. Opinions expressed herein and other fund data presented
are based on current market conditions and are subject to change without notice.
The fund invests through a master portfolio (another fund with the same
objective). The fund invests in foreign securities which are subject to special
risks; prospective investors should refer to the fund's prospectus for a
discussion of these risks.
CALL J.P. MORGAN FUNDS SERVICES AT (800) 521-5411 FOR A PROSPECTUS CONTAINING
MORE COMPLETE INFORMATION ABOUT THE FUND INCLUDING MANAGEMENT FEES AND OTHER
EXPENSES. PLEASE READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
8
<PAGE>
THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY
9
<PAGE>
J.P. MORGAN INTERNATIONAL EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment in The International Equity Portfolio
("Portfolio"), at value $58,722,107
Prepaid Trustees' Fees 225
Prepaid Expenses and Other Assets 311
-----------
Total Assets 58,722,643
-----------
LIABILITIES
Shareholder Servicing Fee Payable 12,343
Administrative Services Fee Payable 1,196
Administration Fee Payable 58
Fund Services Fee Payable 44
Accrued Expenses 36,798
-----------
Total Liabilities 50,439
-----------
NET ASSETS
Applicable to 4,816,598 Shares of Beneficial
Interest Outstanding
(par value $0.001, unlimited shares authorized) $58,672,204
===========
Net Asset Value, Offering and Redemption Price
Per Share $12.18
-----
-----
ANALYSIS OF NET ASSETS
Paid-in Capital $35,269,599
Distributions in Excess of Net Investment Income (517,871)
Accumulated Net Realized Gain on Investment 4,650,005
Net Unrealized Appreciation of Investment 19,270,471
-----------
Net Assets $58,672,204
===========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
10
<PAGE>
J.P. MORGAN INTERNATIONAL EQUITY FUND
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME ALLOCATED FROM PORTFOLIO
Allocated Dividend Income (Net of Foreign
Withholding Tax $64,507) $ 373,118
Allocated Interest Income 36,070
Allocated Portfolio Expenses (243,603)
----------
Net Investment Income Allocated from
Portfolio 165,585
FUND EXPENSES
Shareholder Servicing Fee $78,893
Transfer Agent Fees 18,350
Financial and Fund Accounting Services Fee 13,226
Administrative Services Fee 7,762
Registration Fees 7,264
Professional Fees 5,852
Printing Expenses 5,599
Fund Services Fee 541
Administration Fee 375
Trustees' Fees and Expenses 368
Insurance Expense 144
Miscellaneous 2,741
-------
Total Fund Expenses 141,115
----------
NET INVESTMENT INCOME 24,470
NET REALIZED GAIN ON INVESTMENT ALLOCATED FROM
PORTFOLIO 4,789,424
NET CHANGE IN UNREALIZED APPRECIATION OF
INVESTMENT ALLOCATED
FROM PORTFOLIO 887,041
----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $5,700,935
==========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
11
<PAGE>
J.P. MORGAN INTERNATIONAL EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE FISCAL
APRIL 30, 2000 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1999
--------------- ----------------
<S> <C> <C>
DECREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 24,470 $ 369,066
Net Realized Gain on Investment Allocated from
Portfolio 4,789,424 5,823,564
Net Change in Unrealized Appreciation of
Investment Allocated from Portfolio 887,041 8,973,165
-------------- ---------------
Net Increase in Net Assets Resulting from
Operations 5,700,935 15,165,795
-------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (816,824) (2,063,807)
Net Realized Gain (5,211,077) (2,020,384)
-------------- ---------------
Total Distributions to Shareholders (6,027,901) (4,084,191)
-------------- ---------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Proceeds from Shares of Beneficial Interest Sold 68,201,224 75,760,494
Reinvestment of Dividends and Distributions 4,142,499 2,904,000
Cost of Shares of Beneficial Interest Redeemed (78,204,268) (101,358,827)
-------------- ---------------
Net Decrease from Transactions in Shares of
Beneficial Interest (5,860,545) (22,694,333)
-------------- ---------------
Total Decrease in Net Assets (6,187,511) (11,612,729)
NET ASSETS
Beginning of Period 64,859,715 76,472,444
-------------- ---------------
End of Period (including undistributed net
investment income of $0 and $274,483,
respectively) $ 58,672,204 $ 64,859,715
============== ===============
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
12
<PAGE>
J.P. MORGAN INTERNATIONAL EQUITY FUND
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
Selected data for a share outstanding throughout each period are as follows:
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS ENDED FOR THE FISCAL YEAR ENDED OCTOBER 31,
APRIL 30, 2000 ---------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
---------------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.41 $ 10.56 $ 10.97 $ 11.38 $ 10.68 $ 11.50
------- ------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income -- 0.16 0.34 0.15 0.12 0.09
Net Realized and Unrealized Gain (Loss) on
Investments, Futures and Foreign Currency
Contracts and Transactions 0.98 2.30 0.14 0.23 1.16 (0.42)
------- ------- -------- -------- -------- --------
Total from Investment Operations 0.98 2.46 0.48 0.38 1.28 (0.33)
------- ------- -------- -------- -------- --------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (0.16) (0.31) (0.42) (0.25) (0.24) --
Net Realized Gain (1.05) (0.30) (0.47) (0.54) (0.34) (0.49)
------- ------- -------- -------- -------- --------
Total distributions to Shareholders (1.21) (0.61) (0.89) (0.79) (0.58) (0.49)
------- ------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 12.18 $ 12.41 $ 10.56 $ 10.97 $ 11.38 $ 10.68
======= ======= ======== ======== ======== ========
RATIOS AND SUPPLEMENTAL DATA
Total Return 7.88%(a) 24.41% 4.87% 3.46% 12.31% (2.71)%
Net Assets, End of Period
(in thousands) $58,672 $64,860 $ 76,472 $146,659 $200,720 $185,541
Ratio to Average Net Assets
Net Expenses 1.22%(b) 1.21% 1.17% 1.12% 1.14% 1.28%
Net Investment Income 0.08%(b) 0.55% 0.73% 1.11% 1.00% 0.80%
Interest Expense -- -- 0.01% -- -- --
</TABLE>
------------------------
(a) Not annualized.
(b) Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
13
<PAGE>
J.P. MORGAN INTERNATIONAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
APRIL 30, 2000
--------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
J.P. Morgan International Equity 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, prior
to its tax-free reorganization on October 3, 1993, to a series of the trust,
operated as a stand-alone mutual fund. Costs related to the reorganization were
borne by Morgan Guaranty Trust Company of New York ("Morgan"), a wholly owned
subsidiary of J.P. Morgan & Co. Incorporated ("J.P. Morgan").
The fund invests all of its investable assets in The International Equity
Portfolio (the "portfolio"), a diversified open-end management investment
company having the same investment objective as the fund. The value of such
investment included in the Statement of Assets and Liabilities reflects the
fund's proportionate interest in the net assets of the portfolio (11% at April
30, 2000). The performance of the fund is directly affected by the performance
of the portfolio. The financial statements of the portfolio, including the
Schedule of Investments, are included elsewhere in this report and should be
read in conjunction with the fund's financial statements.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual amounts could differ from
those estimates. The following is a summary of the significant accounting
policies of the fund:
a) Valuation of securities by the portfolio is discussed in Note 1a of the
portfolio's Notes to Financial Statements which are included elsewhere in
this report.
b) The fund records its share of net investment income, realized and
unrealized gain and loss and adjusts its investment in the portfolio each
day. All the net investment income and realized and unrealized gain and
loss of the portfolio is allocated pro rata among the fund and other
investors in the portfolio at the time of such determination.
c) Distributions to shareholders of net investment income and net realized
capital gains, if any, are declared and paid annually.
d) 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.
e) The fund is treated as a separate entity for federal income tax purposes
and intends to comply with the provisions of the Internal Revenue Code of
1986, as amended, applicable to regulated investment companies and to
distribute substantially all of its income, including net realized capital
gains, if any, within the prescribed time periods. Accordingly, no
provision for federal income or excise tax is necessary.
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
14
<PAGE>
J.P. MORGAN INTERNATIONAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
Agreement between FDI and the trust on behalf of the fund, FDI provides
administrative services necessary for the operations of the fund,
furnishes office space and facilities required for conducting the business
of the fund and pays the compensation of the fund's officers affiliated
with FDI. The fund has agreed to pay FDI fees equal to its allocable share
of an annual complex-wide charge of $425,000 plus FDI's out-of-pocket
expenses. The amount allocable to the fund is based on the ratio of the
fund's net assets to the aggregate net assets of the trust and certain
other investment companies subject to similar agreements with FDI. For the
six months ended April 30, 2000, the fee for these services amounted to
$375.
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 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 April 30,
2000, the fee for these services amounted to $7,762.
c) The trust, on behalf of the fund, has a Shareholder Servicing Agreement
with Morgan to provide account administration and personal account
maintenance service to fund shareholders. The agreement provides for the
fund to pay Morgan a fee for these services which is computed daily and
paid monthly at an annual rate of 0.25 % of the average daily net assets
of the fund. For the six months ended April 30, 2000, the fee for these
services amounted to $78,893.
Morgan, Charles Schwab & Co. ("Schwab") and the trust are parties to
separate services and operating agreements (the "Schwab Agreement")
whereby Schwab makes the 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.
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
$541 for the six months ended April 30, 2000.
e) An aggregate annual fee of $75,000 is paid to each trustee for serving as
a trustee of the trust, the J.P. Morgan 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
15
<PAGE>
J.P. MORGAN INTERNATIONAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
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 Funds 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 FOR THE FISCAL
MONTHS ENDED YEAR ENDED
APRIL 30, 2000 OCTOBER 31,
(UNAUDITED) 1999
-------------- --------------
<S> <C> <C>
Shares sold...................................... 5,409,880 6,663,150
Reinvestment of dividends and distributions...... 339,549 277,099
Shares redeemed.................................. (6,158,288) (8,956,052)
---------- ----------
Net Decrease..................................... (408,859) (2,015,803)
========== ==========
</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 27, 1999, 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 will expire 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 Agreement was $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. The funds pay a commitment fee 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 procedures established by their
respective trustees. There were no outstanding borrowings pursuant to the
Agreement at April 30, 2000.
16
<PAGE>
The International Equity Portfolio
Semi-Annual Report April 30, 2000
(The following pages should be read in conjunction
with the J.P. Morgan International Equity Fund
Semi-Annual Financial Statements)
17
<PAGE>
THE INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ------------ -------------
<S> <C> <C>
COMMON STOCK (95.4%)
AUSTRALIA (1.9%)
AMP Ltd. (Insurance)(s).......................... 149,100 $ 1,304,995
Broken Hill Proprietary Co. Ltd. (Metals &
Mining)(s)..................................... 101,105 1,087,861
CSR Ltd. (Building Materials)(s)................. 477,400 1,044,608
Lend Lease Corp. Ltd. (Financial Services)(s).... 58,100 629,072
National Australia Bank Ltd. (Banking)(s)........ 123,605 1,692,014
Southcorp Ltd. (Food, Beverages & Tobacco)(s).... 402,500 1,254,378
Telstra Corp. Ltd. (Telecommunication
Services)(s)................................... 329,200 1,409,924
Telstra Corp. Ltd.- Installment Receipt
(Telecommunication Services)(s)................ 138,596 354,213
Westpac Banking Corp. Ltd. (Banking)(s).......... 178,100 1,135,858
WMC Ltd. (Metals & Mining)(s).................... 178,900 742,198
------------
10,655,121
------------
AUSTRIA (0.1%)
Bank Austria AG (Banking)(s)..................... 12,731 566,132
------------
BELGIUM (0.1%)
Real Software (Computer Software)+(s)............ 3,355 227,305
Ubizen (Computer Software)+(s)................... 3,601 508,616
------------
735,921
------------
DENMARK (0.2%)
Novo Nordisk A/S (Pharmaceuticals)(s)............ 6,782 911,838
------------
FINLAND (3.0%)
Nokia OYJ (Telecommunications-Equipment)(s)...... 208,383 11,981,928
Sampo Insurance Co. Ltd., A Shares
(Insurance)(s)................................. 11,069 419,601
Sonera OYJ (Telecommunication Services)(s)....... 16,248 895,757
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ------------ -------------
<S> <C> <C>
FINLAND (CONTINUED)
Stora Enso OYJ, R Shares (Forest Products &
Paper)(s)...................................... 206,524 $ 2,087,616
Tietoenator OYJ Abp (Computer Software)(s)....... 17,202 830,787
------------
16,215,689
------------
FRANCE (10.6%)
Alcatel (Telecommunications-Equipment)(s)........ 22,365 5,196,897
Alstom SA (Railroads)(s)......................... 59,251 1,479,925
Aventis SA (Pharmaceuticals)(s).................. 16,155 890,630
AXA (Insurance)(s)............................... 24,931 3,705,345
Banque Nationale de Paris (Financial
Services)(s)................................... 38,137 3,089,465
Carrefour SA (Retail)(s)......................... 21,814 1,423,257
Castorama Dubois Investissement SA (Retail)(s)... 4,255 930,563
Christian Dior SA (Retail)(s).................... 6,659 1,586,776
CNP Assurances (Insurance)(s).................... 21,900 639,798
Coface (insurance)+(s)........................... 7,894 726,530
Coflexip SA (Oil-Services)+(s)................... 7,798 760,330
Fimatex (Financial Services)+(s)................. 57,066 1,180,425
France Telecom SA (Telecommunication
Services)(s)................................... 11,571 1,794,591
Genset SA (Biotechnology)+(s).................... 12,636 949,945
Groupe Danone (Food, Beverages & Tobacco)(s)..... 12,062 2,643,440
Havas Advertising SA (Broadcasting &
Publishing)(s)................................. 1,820 910,498
Lafarge (Building Materials)(s).................. 25,373 2,106,324
Lagardere S.C.A. (Multi - Industry)(s)........... 17,144 1,163,867
Louis Vuitton Moet Hennessy (Food, Beverages &
Tobacco)(s).................................... 3,161 1,329,613
Pinault-Printemps-Redoute SA (Retail)(s)......... 3,194 645,843
Renault SA (Automotive)(s)....................... 28,744 1,309,641
Rhodia SA (Chemicals)(s)......................... 4,700 87,370
Sanofi-Synthelabo SA (Pharmaceuticals)+(s)....... 39,874 1,491,551
STMicroelectronics NV (Electronics)(s)........... 9,311 1,780,918
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
18
<PAGE>
THE INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ------------ -------------
<S> <C> <C>
FRANCE (CONTINUED)
Suez Lyonnaise des Eaux SA (Utilities)(s)........ 10,315 $ 1,621,412
Total Fina SA, B Shares (Oil-Services)(s)........ 58,214 8,853,578
Usinor SA (Metals & Mining)(s)................... 65,153 857,901
Vivendi (Utilities)(s)........................... 89,907 8,913,688
------------
58,070,121
------------
GERMANY (7.8%)
Allianz AG (Insurance)(s)........................ 9,615 3,708,793
BASF AG (Chemicals)(s)........................... 77,936 3,415,293
Bayer AG (Chemicals)(s).......................... 83,858 3,502,107
Brokat Infosystems AG (Computer Software)+(s).... 7,602 925,485
Consors Discount Broker AG (Financial
Services)+(s).................................. 10,410 1,175,323
DaimlerChrysler AG (Automotive)(s)............... 32,602 1,905,794
Deutsche Bank AG (Banking)(s).................... 43,684 2,941,724
Deutsche Lufthansa AG (Airlines)(s).............. 21,500 447,672
Deutsche Telekom (Utilities)(s).................. 91,598 5,958,795
Dresdener Bank AG (Banking)(s)................... 17,540 724,200
Entrium Direct Bankers AG (Banking)+(s).......... 25,900 970,011
Intershop Communications AG (Computer
Software)+(s).................................. 1,950 868,864
Marschollek, Lautenschlaeger und Partner AG
(Financial Services)(s)........................ 3,485 1,856,031
Marshollek, Lautenschlaeger und Parner AG
(Insurance)(s)................................. 200 70,530
Metallgesellschaft AG (Diversified
Manufacturing)(s).............................. 29,428 456,410
Metro AG (Retail)(s)............................. 26,422 1,030,492
PrimaCom AG (Broadcasting)+(s)................... 14,839 1,142,606
SAP AG (Computer Software)(s).................... 3,837 1,800,670
Schering AG (Pharmaceuticals)(s)................. 10,848 1,537,146
Siemens AG (Electrical Equipment)(s)............. 23,621 3,508,496
ThyssenKrupp AG (Diversified
Manufacturing)+(s)............................. 49,697 1,046,110
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ------------ -------------
<S> <C> <C>
GERMANY (CONTINUED)
Veba AG (Utilities)(s)........................... 45,089 $ 2,268,009
Viag AG (Diversified Manufacturing)(s)........... 59,309 1,159,806
------------
42,420,367
------------
HONG KONG (1.8%)
Bank of East Asia Ltd. (Banking)(s).............. 558,800 1,208,825
Cheung Kong Holdings Ltd. (Real Estate)(s)....... 174,000 2,077,492
China Telecom Ltd. (Telecommunication
Services)+(s).................................. 162,000 1,169,889
Hongkong Electric Holdings Ltd. (Electric)(s).... 325,500 1,015,464
Hutchison Whampoa Ltd.
(Multi - Industry)(s).......................... 192,000 2,797,720
SmarTone Telecommunications Holdings Ltd.
(Telecommunication Services)(s)................ 269,000 842,654
Sunevision Holdings Ltd. (Computer
Systems)+(s)................................... 599,000 780,549
------------
9,892,593
------------
IRELAND (0.6%)
Bank of Ireland (Banking)(s)..................... 51,833 349,521
CRH PLC (Building Materials)(s).................. 51,400 824,348
Fyffes PLC (Wholesale & International
Trade)(s)...................................... 11,000 18,544
Irish Life and Permanent PLC (Financial
Services)(s)................................... 71,498 592,885
Jefferson Smurfit Group PLC (Forest Products &
Paper)(s)...................................... 570,629 1,247,958
------------
3,033,256
------------
ITALY (3.0%)
Banca Fideuram SPA (Financial Services)(s)....... 87,496 1,307,576
Banca Popolare di Milano (Banking)(s)............ 127,947 764,837
Bipop (Financial Services)(s).................... 10,018 912,885
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
THE INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ------------ -------------
<S> <C> <C>
ITALY (CONTINUED)
Credito Emiliano SpA (Banking)(s)................ 193,374 $ 549,778
ENI SPA (Oil-Services)(s)........................ 471,787 2,351,626
Fiat SpA (Automotive)(s)......................... 36,000 884,746
Mediolanum SPA (Financial Services)(s)........... 83,064 1,381,372
Saipem SpA (Oil-Services)(s)..................... 136,800 678,141
Telecom Italia Mobile SpA
(Telecommunications)(s)........................ 388,010 3,712,507
Telecom Italia SPA (Telecommunication
Services)(s)................................... 189,476 2,655,496
UniCredito Italiano SPA (Financial
Services)(s)................................... 287,272 1,167,517
------------
16,366,481
------------
JAPAN (26.0%)
Advantest Corp. (Electronics)(s)................. 5,600 1,280,370
Aiful Corp. (Banking)(s)......................... 8,625 869,882
Ajinomoto Co., Inc. (Food, Beverages &
Tobacco)(s).................................... 125,000 1,428,406
Asahi Bank Ltd. (Banking)(s)..................... 280,000 1,347,213
Bank of Fukuoka Ltd. (Banking)(s)................ 174,000 1,147,925
Bank of Tokyo - Mitsubishi Ltd. (Banking)(s)..... 226,000 2,915,050
Bridgestone Corp. (Chemicals)(s)................. 92,000 1,996,206
Citizen Watch Co. (Retail)+(s)................... 144,000 1,079,251
Daiwa Securities Group, Inc. (Financial
Services)+(s).................................. 43,000 656,489
DDI Corp. (Telecommunications)(s)................ 149 1,709,554
Ebara Corp. (Machinery)(s)....................... 252,000 2,912,311
Fuji Bank Ltd. (Banking)(s)...................... 208,000 1,732,130
Fuji Heavy Industries, Ltd. (Truck & Freight
Carriers)(s)................................... 176,000 1,343,511
Fujitsu Ltd. (Computer Systems)(s)............... 188,000 5,322,970
Hitachi Ltd. (Electrical Equipment)(s)........... 204,000 2,434,976
Hitachi Software Engineering Co. (Computer
Software)(s)................................... 5,100 521,443
Honda Motor Co. Ltd. (Automotive)(s)............. 116,000 5,184,178
Ito - Yokado Co. Ltd. (Retail)(s)................ 18,000 1,314,087
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ------------ -------------
<S> <C> <C>
JAPAN (CONTINUED)
Kaken Pharmaceutical Co., Ltd.
(Pharmaceuticals)(s)........................... 58,000 $ 327,365
Kawasaki Steel Corp. (Metals & Mining)(s)........ 559,000 868,952
Macnica, Inc. (Distributors)(s).................. 3,900 690,326
Marui Co. Ltd. (Retail)(s)....................... 70,000 1,314,828
Matsushita Electric Industrial Co., Ltd.
(Electronics)(s)............................... 130,000 3,440,204
Minebea Co. Ltd. (Capital Goods)(s).............. 251,000 3,065,649
Mitsubishi Chemical Corp. (Chemicals)(s)......... 956,000 3,830,192
Mitsubishi Corp. (Wholesale & International
Trade)(s)...................................... 435,000 3,783,484
Mitsubishi Estate Co. Ltd. (Real Estate)(s)...... 112,000 1,259,126
Mitsui Marine & Fire Insurance Co. Ltd.
(Insurance)(s)................................. 137,000 602,128
NAMCO Ltd. (Entertainment, Leisure & Media)(s)... 29,000 1,183,345
NEC Corp. (Computer Systems)(s).................. 138,000 3,754,060
Nintendo Co. Ltd. (Retail)(s).................... 9,400 1,565,579
Nippon Meat Packers, Inc. (Food, Beverages &
Tobacco)(s).................................... 4,000 50,520
Nippon Telegraph & Telephone Corp.
(Telecommunications)(s)........................ 747 9,261,901
Nippon Yusen Kabushiki Kaisha (Transport &
Services)(s)................................... 811,000 3,226,741
Nishimatsu Construction Co., Ltd.
(Construction & Housing)(s).................... 423,000 1,350,312
Nissan Motor Co. Ltd. (Automotive)+(s)........... 373,000 1,694,592
Nisshin Steel Co. Ltd. (Metals & Mining)(s)...... 29,000 29,248
Omron Corp. (Electrical Equipment)(s)............ 25,000 680,083
Oriental Land Co. Ltd. (Restaurants &
Hotels)(s)..................................... 8,800 933,944
Osaka Gas Co. Ltd. (Natural Gas)(s).............. 562,000 1,534,027
Paris Miki, Inc. (Retail)(s)..................... 3,640 231,721
Pioneer Corp. (Electronics)(s)................... 86,000 2,347,444
Promise Co. Ltd (Financial Services)(s).......... 33,800 2,736,526
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ------------ -------------
<S> <C> <C>
JAPAN (CONTINUED)
Ricoh Co. Ltd. (Electrical Equipment)(s)......... 124,000 $ 2,615,961
Rohm Co. Ltd. (Electronics)(s)................... 9,400 3,148,554
Sanyo Electric Co. Ltd. (Electronics)(s)......... 124,000 827,240
Sekisui Chemical Co. Ltd. (Chemicals)(s)......... 217,000 795,114
Shohkoh Fund & Co. Ltd. (Financial
Services)(s)................................... 3,280 585,741
Snow Brand Milk Products Co. Ltd. (Food,
Beverages & Tobacco)(s)........................ 165,000 641,221
Softbank Corp. (Computer Software)(s)............ 17,400 4,282,582
Sony Corp. (Electronics)(s)...................... 40,700 4,673,486
Sony Corp.- New (Electronics)+(s)................ 40,700 4,707,379
Sumitomo Bakelite Co. Ltd. (Chemicals)(s)........ 70,000 770,113
Sumitomo Bank Ltd. (Banking)(s).................. 91,000 1,137,553
Sumitomo Rubber Industries Ltd. (Automotive
Supplies)(s)................................... 253,000 1,322,646
Sumitomo Trust and Banking Co. (Banking)(s)...... 157,000 1,147,629
Suzuki Motor Corp. (Automotive)(s)............... 73,000 1,086,810
Taiheiyo Cement Corp. (Building Materials)(s).... 239,000 340,560
Takeda Chemical Industries Ltd. (Chemicals)(s)... 71,000 4,670,923
Takefuji Corp. (Financial Services)(s)........... 9,900 1,047,023
TDK Corp. (Computer Peripherals)(s).............. 7,000 937,220
The Chuo Mitsui Trust and Banking Co. Ltd.
(Banking)(s)................................... 48,300 217,646
Tokuyama Corp. (Chemicals)(s).................... 170,000 811,659
Tokyo Electric Power Co., Inc. (Electric)(s)..... 76,500 1,804,997
Tokyo Electron Ltd. (Electronics)(s)............. 15,000 2,444,136
Tokyo Gas Co. Ltd. (Natural Gas)(s).............. 387,000 852,241
Tokyo Steel Manufacturing Co. Ltd. (Metals &
Mining)(s)..................................... 153,000 383,650
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ------------ -------------
<S> <C> <C>
JAPAN (CONTINUED)
Toppan Printing Co. Ltd. (Broadcasting &
Publishing)(s)................................. 203,000 $ 2,122,508
Tostem Corp. (Construction & Housing)(s)......... 81,000 1,192,422
Toyo Trust & Banking Co. Ltd. (Banking)(s)....... 274,000 1,001,434
Toyota Motor Corp. Ltd. (Automotive)(s).......... 92,000 4,571,270
Uny Co. Ltd. (Retail)(s)......................... 141,000 1,487,300
Welfide Corp. (Pharmaceuticals)(s)............... 62,000 871,987
West Japan Railway Co. (Railroads)(s)............ 881 3,032,450
Yamaha Corp. (Electronics)(s).................... 13,000 88,050
Yamanouchi Pharmaceutical Industries Ltd.
(Pharmaceuticals)(s)........................... 23,000 1,215,175
York - Benimaru Co. Ltd. (Retail)(s)............. 15,000 383,067
------------
142,175,996
------------
LUXEMBOURG (0.3%)
Carrier 1 International SA (Telecommunication
Services)+(s).................................. 8,098 667,823
Compagnie Luxembourgeoise pour l'Audio-Visuel et
la Finance (Audiofina) (Broadcasting &
Publishing)(s)................................. 7,673 947,413
------------
1,615,236
------------
NETHERLANDS (5.4%)
Buhrmann NV (Wholesale & International
Trade)(s)...................................... 23,100 596,761
Equant NV (Information Processing)+(s)........... 33,473 2,597,253
Getronics NV (Computer Systems)(s)............... 19,361 1,157,355
Heineken NV (Food, Beverages & Tobacco)(s)....... 46,022 2,558,176
ING Groep NV (Financial Services)(s)............. 54,890 3,002,094
Koninklijke (Royal) Philips Electronics NV
(Electronics)(s)............................... 125,840 5,626,908
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ------------ -------------
<S> <C> <C>
NETHERLANDS (CONTINUED)
Koninklijke Numico NV (Food, Beverages &
Tobacco)(s).................................... 21,984 $ 819,342
KPN NV (Telecommunication Services)(s)........... 34,510 3,485,906
Lycos Europe N.V. (Computer Systems)+(s)......... 50,932 779,713
Royal Dutch Petroleum Co. (Oil-Services)(s)...... 81,603 4,714,443
United Pan-Europe Communications N.V.
(Broadcasting)+(s)............................. 47,052 1,716,322
Versatel Telecom International NV
(Telecommunication Services)+(s)............... 28,139 1,130,791
VIA NET.WORKS, Inc. (Computer Software)+(s)...... 28,279 510,228
VNU NV (Broadcasting & Publishing)(s)............ 20,300 1,088,623
------------
29,783,915
------------
NEW ZEALAND (0.5%)
Fletcher Challenge Building (Building
Materials)(s).................................. 252,500 239,389
Fletcher Challenge Energy (Gas Exploration)(s)... 141,100 325,858
Fletcher Challenge Paper (Forest Products &
Paper)(s)...................................... 700,500 786,734
Telecom Corp. of New Zealand Ltd.
(Telecommunications)(s)........................ 287,300 1,215,242
------------
2,567,223
------------
NORWAY (0.1%)
EDB Business Partner ASA (Computer
Software)(s)................................... 3,303 43,563
EDB Business Partner ASA (Computer
Software)(s)................................... 3,303 869
Schibsted ASA (Broadcasting & Publishing)(s)..... 21,474 446,425
------------
490,857
------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ------------ -------------
<S> <C> <C>
PORTUGAL (0.1%)
PT MULTIMEDIA - Servicos de Telecomunicacoes e
Multimedia SGPS SA (Telecommunication
Services)+(s).................................. 11,602 $ 811,421
------------
SINGAPORE (0.7%)
DBS Group Holdings Ltd. (144A) (Financial
Services)(s)................................... 155,265 2,136,883
Singapore Press Holdings Ltd. (Broadcasting &
Publishing)(s)................................. 53,000 1,036,720
Venture Manufacturing Ltd. (Manufacturing)(s).... 65,000 761,347
------------
3,934,950
------------
SPAIN (3.6%)
Amadeus Global Travel Distribution SA
(Transport & Services)+(s)..................... 63,529 787,310
Banco Bilbao Vizcaya SA (Banking)(s)............. 130,194 1,779,579
Banco Santander Central Hispano, SA
(Banking)(s)................................... 168,151 1,757,510
Endesa SA (Electric)(s).......................... 182,913 3,976,949
Iberdrola SA (Electric)(s)....................... 75,169 966,498
Indra Sistemas SA (Electronics)(s)............... 46,897 1,103,836
Repsol-YFP, SA (Oil-Production)(s)............... 154,802 3,173,907
Telefonica SA (Telecommunication Services)+(s)... 263,560 5,879,305
------------
19,424,894
------------
SWEDEN (3.6%)
Autoliv, Inc. (SDR) (Automotive Supplies)(s)..... 38,113 1,068,509
Ericsson LM, B Shares (Telecommunications-
Equipment)(s).................................. 123,661 11,008,357
Hennes & Mauritz AB (H&M) (Retail)(s)............ 18,817 500,217
Investor AB (Holding Companies)(s)............... 71,998 1,013,263
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ------------ -------------
<S> <C> <C>
SWEDEN (CONTINUED)
Modern Times Group MTG AB (Broadcasting &
Publishing)+(s)................................ 15,905 $ 783,436
OM Gruppen AB (Financial Services)(s)............ 300 12,465
Skandia Forsakrings AB (Insurance)(s)............ 60,461 2,897,104
Skandinaviska Ensklida Banken (SEB)
(Banking)(s)................................... 150,798 1,650,643
Tele1 Europe Holding AB
(Telecommunications)(s)........................ 34,908 549,763
------------
19,483,757
------------
SWITZERLAND (6.6%)
ABB Ltd. (Holding Companies)(s).................. 15,881 1,786,093
ABB Ltd. (Holding Companies)(s).................. 9,165 1,023,679
Compagnie Financiere Richemont AG (Food,
Beverages & Tobacco)(s)........................ 719 1,751,008
Credit Suisse Group (Financial Services)(s)...... 22,707 4,111,148
Fantastic Corp. (Computer Software)+(s).......... 21,315 390,406
Nestle SA (Food, Beverages & Tobacco)(s)......... 2,855 5,044,580
Novartis AG (Pharmaceuticals)(s)................. 3,376 4,726,989
Roche Holding AG (Pharmaceuticals)+(s)........... 618 6,469,154
Schweizerische Lebensversicherungs-und
Rentenanstalt (Insurance)(s)................... 1,762 935,022
SGS-Thomson Microelectronics NV
(Electronics)(s)............................... 590 919,035
Swisscom AG (Telecommunication Services)(s)...... 7,826 2,765,596
The Swatch Group (Electronics)(s)................ 457 490,867
UBS AG (Banking)+(s)............................. 15,761 3,870,400
Zurich Allied AG (Insurance)(s).................. 4,684 1,995,566
------------
36,279,543
------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ------------ -------------
<S> <C> <C>
UNITED KINGDOM (19.4%)
3i Group PLC (Financial Services)(s)............. 68,900 $ 1,389,643
ARM Holdings PLC (Computer Software)+(s)......... 109,500 1,122,242
AstraZeneca Group PLC (Pharmaceuticals)(s)....... 34,500 1,451,580
Baltimore Technologies PLC (Computer
Systems)(s).................................... 2,400 242,704
Bank of Scotland (Banking)(s).................... 76,657 683,088
BG Group PLC (Gas Exploration)(s)................ 214,677 1,286,517
Billiton PLC (Metals & Mining)(s)................ 264,300 986,317
BP Amoco PLC (Oil-Production)(s)................. 1,187,812 10,305,770
British Aerospace PLC (Aerospace)(s)............. 208,983 1,288,363
British Airways PLC (Airlines)(s)................ 60,000 312,392
British American Tobacco PLC (Food, Beverages &
Tobacco)(s).................................... 47,499 288,554
British Sky Broadcasting Group PLC
(Broadcasting & Publishing)+(s)................ 103,300 2,545,728
British Telecommunications PLC
(Telecommunications)(s)........................ 329,900 5,941,400
Cable & Wireless Communications PLC
(Telecommunications)(s)........................ 56,700 943,078
Cable & Wireless Communications PLC
(Telecommunications)(s)........................ 25,700 386,043
Cadbury Schweppes PLC (Food, Beverages &
Tobacco)(s).................................... 283,700 1,948,745
Carlton Communications PLC (Entertainment,
Leisure & Media)(s)............................ 52,000 629,761
Celltec Group PLC (Pharmaceuticals)+(s).......... 39,000 641,965
CMG PLC (Computer Systems)(s).................... 10,900 709,157
Compass Group PLC (Food, Beverages &
Tobacco)(s).................................... 81,000 1,154,608
Corus Group PLC (Metals & Mining)(s)............. 297,700 400,598
Dixons Group PLC (Retail)(s)..................... 188,619 773,246
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
23
<PAGE>
THE INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ------------ -------------
<S> <C> <C>
UNITED KINGDOM (CONTINUED)
Enterprise Oil PLC (Oil-Production)(s)........... 44,200 $ 326,953
FirstGroup PLC (Transport & Services)(s)......... 101,000 237,842
Glaxo Wellcome PLC (Pharmaceuticals)(s).......... 232,900 7,219,135
Glynwed International PLC (Metals & Mining)(s)... 236,101 820,129
Great Universal Stores PLC (Retail)(s)........... 136,100 825,203
Hanson PLC (Building Materials)(s)............... 120,500 889,939
Hays PLC (Commercial Services)(s)................ 121,200 836,794
Hilton Group Lpc. (Restaurants & Hotels)(s)...... 178,900 754,398
HSBC Holdings PLC (Financial Services)(s)........ 282,100 3,138,368
Imperial Chemical Industries PLC
(Chemicals)(s)................................. 70,000 602,410
Jazztel PLC (Telecommunication Services)+(s)..... 8,687 431,421
Kingfisher PLC (Retail)(s)....................... 114,500 941,924
Lloyds TSB Group PLC (Banking)(s)................ 435,250 4,276,905
Marconi PLC (Telecommunications-Equipment)(s).... 183,000 2,295,016
MEPC PLC (Real Estate)(s)........................ 166,565 1,132,413
MFI Furniture Group PLC (Household
Products)(s)................................... 438,958 473,918
National Power PLC (Electric)(s)................. 126,589 576,395
Newco (Finance)(s)............................... 27,900 130,965
Northern Foods PLC (Food, Beverages &
Tobacco)(s).................................... 211,421 335,773
Nycomed Amersham PLC (Medical Supplies)(s)....... 105,464 810,246
Ocean Group PLC (Transport & Services)(s)........ 46,000 884,588
Pearson PLC (Broadcasting & Publishing)(s)....... 62,000 2,144,923
Prudential Corp. PLC (Insurance)(s).............. 125,700 1,939,293
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ------------ -------------
<S> <C> <C>
UNITED KINGDOM (CONTINUED)
Reckitt Benckiser PLC (Household Products)(s).... 108,293 $ 1,111,566
Reuters Group PLC (Broadcasting &
Publishing)(s)................................. 125,200 2,250,897
Royal & Sun Alliance Insurance Group PLC
(Insurance)(s)................................. 231,554 1,298,891
Royal Bank of Scotland Group PLC (Banking)(s).... 98,300 1,532,717
Schroders PLC (Financial Services)(s)............ 27,900 426,511
ScottishPower PLC (Electric)(s).................. 152,900 1,230,306
Sema Group PLC (Computer Software)(s)............ 46,700 754,098
Smith & Nephew PLC (Medical Supplies)(s)......... 181,200 524,519
SmithKline Beecham PLC (Pharmaceuticals)(s)...... 384,300 5,282,547
Standard Chartered PLC (Banking)(s).............. 87,900 1,184,195
Tesco PLC (Retail)(s)............................ 424,700 1,455,317
The Sage Goup PLC (Broadcasting &
Publishing)(s)................................. 109,500 1,218,190
TI Group PLC (Diversified Manufacturing)(s)...... 68,000 371,069
Trinity Mirror PLC (Broadcasting &
Publishing)(s)................................. 47,000 366,601
United News & Media PLC (Broadcasting &
Publishing)(s)................................. 39,000 498,560
Vodafone AirTouch PLC (Telecommunications)(s).... 3,624,901 16,703,698
Williams PLC (Diversified Manufacturing)(s)...... 95,000 538,844
Woolwich PLC (Financial Services)(s)............. 147,200 718,035
WPP Group PLC (Broadcasting & Publishing)(s)..... 61,200 990,155
------------
105,913,166
------------
TOTAL COMMON STOCK (COST $398,571,660)......... 521,348,477
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
24
<PAGE>
THE INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ------------ -------------
<S> <C> <C>
CONVERTIBLE PREFERRED STOCKS (0.1%)
JAPAN (0.1%)
AB International Cayman Trust, 0.500% (Banking)
(cost $340,225)................................ 56,000,000 $ 541,476
------------
PREFERRED STOCK (0.9%)
AUSTRALIA (0.6%)
News Corp. Ltd. (Broadcasting &
Publishing)(s)................................. 319,863 3,437,902
------------
GERMANY (0.3%)
ProSieben Media AG (Broadcasting &
Publishing)(s)................................. 9,034 808,401
Volkswagen AG (Automotive)(s).................... 30,361 686,124
------------
1,494,525
------------
TOTAL PREFERRED STOCK (COST $3,795,717)........ 4,932,427
------------
<CAPTION>
PRINCIPAL
AMOUNT
------------
<S> <C> <C>
CONVERTIBLE BONDS (0.9%)
(IN JPY)
-----------
JAPAN (0.9%)
Sanwa International Finance Trust, 1.25% due
07/31/05....................................... $60,000,000 567,661
Yamanouchi Pharmaceutical Co. Ltd., 1.25% due
03/31/14....................................... 60,000,000 4,253,861
------------
TOTAL CONVERTIBLE BONDS (COST $2,186,436)...... 4,821,522
------------
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
------------------------------------------------- ------------ -------------
<S> <C> <C>
SHORT-TERM INVESTMENTS (0.5%)
U.S. TREASURY OBLIGATIONS (0.5%)
(IN USD)
-----------
United States Treasury Bills, 6.11%(y) due
10/12/00, (cost $2,803,342).................... $ 2,880,000 $ 2,803,104
------------
TOTAL INVESTMENTS (COST $407,697,380) (97.8%)..................
534,447,006
OTHER ASSETS IN EXCESS OF LIABILITIES (2.2%)...................
11,816,578
------------
NET ASSETS (100.0%)............................................ $546,263,584
============
</TABLE>
------------------------------
Note: The aggregate gross unrealized appreciation and depreciation was
$150,587,417 and $23,837,791, respectively, resulting in net unrealized
appreciation of investments of $126,749,626.
+ - 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.
$209,108,193 of the market value has been segregated.
(y) Yield to maturity.
SDR - Swedish Depository receipt
JPY - Japanese Yen
The Accompanying Notes are an Integral Part of the Financial Statements.
25
<PAGE>
THE INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
INDUSTRY DIVERSIFICATION
<TABLE>
<CAPTION>
PERCENT OF
TOTAL INVESTMENTS
-----------------
<S> <C>
Telecommunications................................ 7.6%
Pharmaceuticals................................... 7.5%
Banking........................................... 7.4%
Electronics....................................... 6.2%
Financial Services................................ 6.1%
Telecommunications - Equipment.................... 5.7%
Telecommunications - Services..................... 4.5%
Broadcasting & Publishing......................... 4.3%
Food, Beverages & Tobacco......................... 4.0%
Chemicals......................................... 3.8%
Insurance......................................... 3.8%
Utilities......................................... 3.5%
Retail............................................ 3.3%
Automotive........................................ 3.2%
Oil - Services.................................... 3.2%
Computer Peripherals.............................. 2.6%
Oil - Production.................................. 2.6%
Computer Software................................. 2.4%
Electric.......................................... 1.8%
Electrical Equipment.............................. 1.7%
Metals & Mining................................... 1.2%
Building Materials................................ 1.0%
Transport & Services.............................. 1.0%
Forest Products & Paper........................... 0.8%
Real Estate....................................... 0.8%
Wholesale & International Trade................... 0.8%
Diversified Manufacturing......................... 0.7%
Holding Companies................................. 0.7%
Multi-Industry.................................... 0.7%
Capital Goods..................................... 0.6%
Machinery......................................... 0.6%
Railroads......................................... 0.6%
Construction & Housing............................ 0.5%
Information Processing............................ 0.5%
Short-Term........................................ 0.5%
Automotive Supplies............................... 0.4%
Natural Gas....................................... 0.4%
Aerospace......................................... 0.3%
Communications.................................... 0.3%
Entertainment, Leisure & Media.................... 0.3%
Gas Exploration................................... 0.3%
Household Products................................ 0.3%
Restaurants & Hotels.............................. 0.3%
Truck & Freight Carriers.......................... 0.3%
Airlines.......................................... 0.2%
Biotechnology..................................... 0.2%
Medical Supplies.................................. 0.2%
Distributors...................................... 0.1%
Finance........................................... 0.1%
Manufacturing..................................... 0.1%
-----
100.0%
=====
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
26
<PAGE>
THE INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $407,697,380 ) $534,447,006
Foreign Currency at Value (Cost $15,223,513 ) 15,093,129
Receivable for Investments Sold 4,571,596
Unrealized Appreciation of Forward Foreign
Currency Contracts 3,020,660
Dividends and Interest Receivable 1,190,617
Foreign Tax Reclaim Receivable 682,769
Prepaid Trustees' Fees 517
Prepaid Expenses and Other Assets 1,927
------------
Total Assets 559,008,221
------------
LIABILITIES
Payable for Investments Purchased 6,426,437
Unrealized Depreciation of Forward Foreign
Currency Contracts 3,094,286
Payable to Custodian 2,726,577
Advisory Fee Payable 280,349
Variation Margin Payable 82,397
Administrative Services Fee Payable 11,318
Administration Fee Payable 523
Fund Services Fee Payable 419
Accrued Expenses 122,331
------------
Total Liabilities 12,744,637
------------
NET ASSETS
Applicable to Investors' Beneficial Interests $546,263,584
============
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
27
<PAGE>
THE INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividend Income (Net of Foreign Withholding Tax
of $599,619) $ 3,471,154
Interest Income 332,886
-----------
Investment Income 3,804,040
EXPENSES
Advisory Fee $ 1,735,754
Custodian Fees and Expenses 382,170
Administrative Services Fee 71,127
Professional Fees and Expenses 26,680
Fund Services Fee 4,873
Printing Expenses 4,310
Trustees' Fees and Expenses 3,468
Administration Fee 2,465
Insurance Expense 827
Miscellaneous 62
-----------
Total Expenses 2,231,736
-----------
NET INVESTMENT INCOME 1,572,304
NET REALIZED GAIN ON
Investment Transactions 36,055,175
Futures Contracts 6,834,702
Foreign Currency Transactions 1,024,747
-----------
Net Realized Gain 43,914,624
NET CHANGE IN UNREALIZED APPRECIATION OF
Investments 1,725,473
Futures Contracts (836,625)
Foreign Currency Contracts and Translations (571,099)
-----------
Net Change in Unrealized Appreciation 317,749
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $45,804,677
===========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
28
<PAGE>
THE INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE FISCAL
APRIL 30, 2000 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1999
-------------- ----------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 1,572,304 $ 4,569,191
Net Realized Gain on Investments 43,914,624 28,815,778
Net Change in Unrealized Appreciation of
Investments 317,749 70,990,877
------------ ---------------
Net Increase in Net Assets Resulting from
Operations 45,804,677 104,375,846
------------ ---------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 219,289,357 281,385,364
Withdrawals (254,886,066) (293,180,212)
------------ ---------------
Net Decrease from Investors' Transactions (35,596,709) (11,794,848)
------------ ---------------
Total Increase in Net Assets 10,207,968 92,580,998
NET ASSETS
Beginning of Period 536,055,616 443,474,618
------------ ---------------
End of Period $546,263,584 $ 536,055,616
============ ===============
</TABLE>
--------------------------------------------------------------------------------
SUPPLEMENTARY DATA
--------------------------------------------------------------------------------
Selected data for a share outstanding throughout each period are as follows:
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS ENDED FOR THE FISCAL YEAR ENDED OCTOBER 31,
APRIL 30, 2000 --------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
---------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Net Expenses 0.77%(a) 0.80% 0.79% 0.77% 0.79% 0.82%
Net Investment Income 0.54%(a) 0.95% 1.09% 1.47% 1.39% 1.31%
Portfolio Turnover 40% 70% 74% 67% 57% 59%
</TABLE>
------------------------
(a) Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
29
<PAGE>
THE INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
APRIL 30, 2000
--------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The International Equity Portfolio (the "portfolio") is registered under the
Investment Company Act of 1940, as amended, as a no-load, diversified, open-end
management investment company which was organized as a trust under the laws of
the State of New York. The portfolio commenced operations on October 4, 1993.
The portfolio's investment objective is to provide a high total return from a
portfolio of equity securities of foreign companies. The Declaration of Trust
permits the trustees to issue an unlimited number of beneficial interests in the
portfolio.
Investments in international markets may involve certain considerations and
risks not typically associated with investments in the United States. Future
economic and political developments in foreign countries could adversely affect
the liquidity or value, or both, of such securities in which the portfolio is
invested. The ability of the issuers of debt securities held by the portfolio to
meet their obligations may be affected by economic and political developments in
a specific industry or region.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual amounts could differ from
those estimates. The following is a summary of the significant accounting
policies of the portfolio:
a) The portfolio values securities that are listed on an exchange using
prices supplied daily by an independent pricing service that are based on
the last traded price on a national securities exchange or in the absence
of recorded trades, at the readily available mean of the bid and asked
prices on such exchange, if such exchange or market constitutes the
broadest and most representative market for the security. Securities
listed on a foreign exchange are valued at the last traded price or in the
absence of recorded trades, at the readily available mean of the bid and
asked prices on such exchange available before the time when net assets
are valued. Independent pricing service procedures may also include the
use of prices based on yields or prices of securities of comparable
quality, coupon, maturity and type, indications as to the values from
dealers, operating data, and general market conditions. Unlisted
securities are valued at the average of the quoted bid and asked prices in
the over-the-counter market provided by a principal market maker or
dealer. If prices are not supplied by the portfolio's independent pricing
service or principal market maker or dealer, such securities are priced
using fair values in accordance with procedures adopted by the portfolio's
trustees. All short-term securities with a remaining maturity of sixty
days or less are valued using the amortized cost method.
Trading in securities on most foreign exchanges and over-the-counter
markets is normally completed before the close of the domestic market and
may also take place on days on which the domestic market is closed. If
events materially affecting the value of foreign securities occur between
the time when the exchange on which they are traded closes and the time
when the portfolio's net assets are calculated, such securities will be
valued at fair value in accordance with procedures established by and
under the general supervision of the portfolio's trustees.
b) The 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 expenses are
translated at the
30
<PAGE>
THE INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
exchange rates prevailing on the respective dates of such transactions.
Translation gains and losses resulting from changes in the exchange rates
during the reporting period and gains and losses realized upon settlement
of foreign currency transactions are reported in the Statement of
Operations. Although the net assets of the portfolio are presented at the
exchange rates and market values prevailing at the end of the period, the
portfolio does not isolate the portion of the results of operations
arising as a result of changes in foreign exchange rates from the
fluctuations arising from changes in the market prices of securities
during the period.
c) Securities transactions are recorded on a trade-date basis. Dividend
income is recorded on the ex-dividend date or as 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. Amortization is calculated using the scientific
method. For financial and tax reporting purposes, realized gains and
losses are determined on the basis of specific lot identification.
d) The portfolio may enter into forward and spot foreign currency contracts
to protect securities and related receivables and payables against
fluctuations in future foreign currency rates. A forward contract is an
agreement to buy or sell currencies of different countries on a specified
future date at a specified rate. Risks associated with such contracts
include the movement in the value of the foreign currency relative to the
U.S. dollar and the ability of the counterparty to perform.
The market value of the contract will fluctuate with changes in currency
exchange rates. Contracts are valued daily at the current foreign exchange
rates, and the change in the market value is recorded by the portfolio as
unrealized appreciation or depreciation of forward foreign currency
contract translations.
e) 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.
f) 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
31
<PAGE>
THE INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
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 withholding taxes at various rates.
2. TRANSACTIONS WITH AFFILIATES
a) The portfolio has an Investment Advisory Agreement with J.P. Morgan
Investment Management Inc. ("JPMIM"), a wholly owned subsidiary of J.P.
Morgan & Co. 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 April 30,
2000, such fees amounted to $1,735,754.
b) The portfolio has retained Funds Distributor, Inc. ("FDI"), a registered
broker-dealer, to serve as the co-administrator and exclusive placement
agent for the portfolio. Under a Co-Administration Agreement between FDI
and the portfolio, FDI provides administrative services necessary for the
operation of the portfolio, furnishes office space and facilities required
for conducting the business of the portfolio and pays the compensation of
the officers affiliated with FDI. The portfolio has agreed to pay FDI fees
equal to its allocable share of an annual complex-wide charge of $425,000
plus FDI's out-of-pocket expenses. The amount allocable to the portfolio
is based on the ratio of the portfolio's net assets to the aggregate net
assets of the portfolio and certain other investment companies subject to
similar agreements with FDI. For the six months ended April 30, 2000, the
fee for these services amounted to $2,465.
c) The portfolio has an Administrative Services Agreement (the "Services
Agreement") with Morgan Guaranty Trust Co. of New York ("Morgan"), a
wholly owned subsidiary of J.P. Morgan, under which Morgan is responsible
for certain aspects of the administration and operation of the portfolio.
Under the Services Agreement, the portfolio has agreed to pay Morgan a fee
equal to its allocable share of an annual complex-wide charge. This charge
is calculated based on the aggregate average daily net assets of the
portfolio and 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 master portfolios, other investors in the master portfolios
for which Morgan provides similar services, and J.P. Morgan Series Trust.
For the six months ended April 30, 2000, the fee for these services
amounted to $71,127.
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 $4,873 for the six months ended April 30, 2000.
e) An aggregate annual fee of $75,000 is paid to each trustee for serving as
a trustee of the J.P. Morgan Funds, the J.P. Morgan Institutional Funds,
the master portfolios and J.P. Morgan Series Trust. The Trustees' Fees and
Expenses, shown in the financial statements represent the portfolio's
allocated
32
<PAGE>
THE INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
portion of the total fees and expenses. The portfolio's Chairman and Chief
Executive Officer also serves as Chairman of Group and received
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 $900.
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the six
months ended April 30, 2000 were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
------------ ------------
<S> <C> <C>
$218,971,218 $221,193,653
</TABLE>
At April 30, 2000, the portfolio had open forward currency contracts as
follows:
<TABLE>
<CAPTION>
U.S. DOLLAR NET UNREALIZED
CONTRACTUAL VALUE AT APPRECIATION/
PURCHASE CONTRACTS VALUE 4/30/00 (DEPRECIATION)
------------------ ----------- ----------- --------------
<S> <C> <C> <C>
British Pound, 4,188,918, expiring 06/21/00...... $ 6,605,612 $ 6,557,589 $ (48,023)
Euro, 44,720,341, expiring 06/21/00.............. 42,760,189 40,900,286 (1,859,903)
Hong Kong Dollar, 33,814,232 expiring 06/21/00... 4,344,069 4,339,089 (4,980)
Japanese Yen, 3,798,789,425 expiring 06/21/00.... 36,660,746 35,480,632 (1,180,114)
Swiss Franc, 1,000,000, expiring 05/02/00........ 580,414 581,226 812
</TABLE>
<TABLE>
<CAPTION>
U.S. DOLLAR NET UNREALIZED
SETTLEMENT VALUE AT APPRECIATION/
SALES CONTRACTS VALUE 4/30/00 (DEPRECIATION)
--------------- ----------- ----------- --------------
<S> <C> <C> <C>
Australian Dollar 4,272,623, expiring 06/21/00... $ 2,630,483 $ 2,494,227 $ 136,256
British Pound, 4,188,918, expiring 06/21/00...... 6,632,945 6,557,588 75,357
British Pound, 1,368,053, expiring 05/02/00...... 2,149,614 2,140,593 9,021
Euro, 26,798,413, expiring 06/21/00.............. 25,730,720 24,509,267 1,221,453
Hong Kong Dollar, 22,676,748, expiring
06/21/00........................................ 2,911,000 2,909,912 1,088
Japanese Yen, 4,181,878,612, expiring 06/21/00... 40,245,282 39,058,679 1,186,603
New Zealand Dollar, 3,887,563, expiring
06/21/00........................................ 1,906,850 1,889,999 16,851
Swedish Krona, 16,747,000, expiring 06/21/00..... 1,927,158 1,876,899 50,259
Swiss Franc, 12,990,003, expiring 06/21/00....... 7,908,439 7,586,745 321,694
-------------
NET UNREALIZED APPRECIATION ON FORWARD FOREIGN
CURRENCY CONTRACTS.............................. $ (73,626)
=============
</TABLE>
33
<PAGE>
THE INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
At April 30, 2000, the portfolio had open future contracts as follows:
<TABLE>
<CAPTION>
NET
UNREALIZED
APPRECIATION/ CURRENT MARKET VALUE
CONTRACTS LONG (DEPRECIATION) OF CONTRACTS
-------------- -------------- --------------------
<S> <C> <C> <C>
FTSE 100 Index, expiring June 2000............... 8 $ 14,299 $ 799,186
Hang Seng Index, expiring May 2000............... 86 (116,894) 8,551,199
Topix Index, expiring June 2000.................. 93 (134,411) 14,263,012
------------- ------------- -------------------
Totals........................................... 187 $ (237,006) $ 23,613,397
============= ============= ===================
</TABLE>
<TABLE>
<CAPTION>
NET
UNREALIZED
APPRECIATION/ CURRENT MARKET VALUE
CONTRACTS SHORT (DEPRECIATION) OF CONTRACTS
--------------- -------------- --------------------
<S> <C> <C> <C>
SPI Futures, expiring June 2000.................. 74 $ 111,916 $ 3,428,784
DJ Euro Stoxx 50 Index, expiring June 2000....... 159 (108,363) 7,690,651
-------------- ------------- -------------------
Totals........................................... 233 $ 3,553 $ 11,119,435
============== ============= ===================
</TABLE>
4. CREDIT AGREEMENT
The portfolio is party to a revolving line of credit agreement (the "Agreement")
as discussed more fully in Note 4 of the fund's Notes to the Financial
Statements which are included elsewhere in this report.
34
<PAGE>
J.P. MORGAN FUNDS
PRIME MONEY MARKET FUND
FEDERAL 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
NEW YORK TAX EXEMPT BOND FUND
CALIFORNIA BOND FUND: SELECT SHARES
DIVERSIFIED FUND
DISCIPLINED EQUITY FUND
U.S. EQUITY FUND
U.S. SMALL COMPANY FUND
U.S. SMALL COMPANY OPPORTUNITIES FUND
TAX AWARE U.S. EQUITY FUND: SELECT SHARES
INTERNATIONAL EQUITY FUND
EUROPEAN EQUITY FUND
INTERNATIONAL OPPORTUNITIES FUND
EMERGING MARKETS EQUITY FUND
GLOBAL 50 FUND: SELECT SHARES
FOR MORE INFORMATION ON THE J.P. MORGAN FUNDS,
CALL J.P. MORGAN FUNDS SERVICES AT
(800) 521-5411.
IMSAR296
J.P. MORGAN
INTERNATIONAL
EQUITY FUND
SEMIANNUAL REPORT
APRIL 30, 2000
