<PAGE>
THE EMERGING MARKETS EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------- -------------
<S> <C> <C>
COMMON STOCK (85.4%)
ARGENTINA (5.1%)
Astra Compania Argentina de Petroleo SA
(Oil-Production)............................... 1,301,030 $ 2,030,817
Banco Frances del Rio de la Plata SA (ADR)
(Banking)...................................... 4,707 115,910
Capex SA (Utilities)............................. 379,700 2,013,610
Corcemar SA (Class B) (Building Materials)....... 549,392 2,682,632
Molinos Rio de la Plata SA (Food, Beverages &
Tobacco)....................................... 888,947 2,197,008
Nobleza Piccardo SA (B Shares) (Food, Beverages &
Tobacco)....................................... 346,101 1,835,429
Perez Companc SA (Spon. ADR) (Oil-Services)...... 288,512 3,534,272
Quilmes Industrial SA (Registered) (Spon. ADR)
(Food, Beverages & Tobacco).................... 93,850 1,173,125
Telecom Argentina Stet - France Telecom SA (Spon.
ADR) (Telecommunication Services).............. 129,500 3,277,969
Telefonica de Argentina (ADR)
(Telecommunications)........................... 143,600 4,038,750
YPF Sociedad Anonima (Spon. ADR)
(Oil-Production)............................... 560,400 17,932,800
-------------
40,832,322
-------------
BRAZIL (6.7%)
Bompreco Supermercados do Norde SA (GDR) (144A)
(Food, Beverages & Tobacco).................... 53,799 1,183,578
Companhia de Saneamento Basico do Estado de Sao
Paulo (Utilities).............................. 48,200,000 8,919,036
Electrolux do Brasil SA (ADR) (Appliances &
Household Durables)............................ 366,171 2,125,696
Makro Atacadista (Spon. GDS) (144A) (Retail)..... 360,000 3,600,000
Perdigao SA (Food, Beverages & Tobacco).......... 44,384,000 90,584
Santista Alimentos SA (Food, Beverages &
Tobacco)....................................... 3,632,500 7,413,595
Souza Cruz SA (Food, Beverages & Tobacco)........ 638,600 5,195,915
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------- -------------
<S> <C> <C>
BRAZIL (CONTINUED)
Telecomunicacoes Brasileiras SA
(Telecommunication Services)................... 195,586,000 $ 17,384,421
Votorantim Celulose e Papel SA (Forest Products &
Paper)......................................... 96,350,000 2,299,393
Votorantim Celulose e Papel SA (ADR) (Forest
Products & Paper).............................. 458,650 5,472,841
-------------
53,685,059
-------------
CHILE (5.4%)
Administradora de Fondos de Pensiones Provida SA
(ADR) (Banking)................................ 256,900 4,303,075
Banco Santander Chile SA (ADS) (Banking)......... 306,900 3,989,700
Compania Cervecerias Unidas SA (ADR) (Food,
Beverages & Tobacco)........................... 204,700 5,015,150
Compania de Telecomunicaciones de Chile SA (Spon.
ADR) (Telecommunication Services).............. 208,625 5,789,344
Embotelladora Andina SA (Food, Beverages &
Tobacco)....................................... 206,100 4,946,400
Empresa Nacional de Electricidad SA (Spon. ADR)
(Utilities).................................... 339,500 6,832,437
Enersis SA (ADR) (Utilities)..................... 109,800 3,623,400
Madeco SA (Spon. ADR) (Construction & Housing)... 129,000 2,725,125
Sociedad Quimica y Minera de Chile SA (ADR)
(Chemicals).................................... 106,746 5,537,449
-------------
42,762,080
-------------
CHINA (0.5%)
Dongfang Electrical Machinery Co. Ltd.
(Electrical Equipment)......................... 1,472,000 333,269
Luoyang Glass Co. Ltd. (Series H) (Building
Materials)+.................................... 3,574,000 499,375
Shanghai Erfangji Co. Ltd. (Series B) (Capital
Goods)+........................................ 195,052 19,505
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
18
<PAGE>
THE EMERGING MARKETS EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------- -------------
<S> <C> <C>
CHINA (CONTINUED)
Shanghai Tyre and Rubber Co. Ltd. (Series B)
(Metals & Mining).............................. 3,229,990 $ 930,237
Tsingtao Brewery Co. Ltd. (Series B) (Food,
Beverages & Tobacco)+.......................... 6,720,000 2,282,165
-------------
4,064,551
-------------
COLOMBIA (0.8%)
Banco de Colombia SA (GDR)(144A) (Banking)....... 271,400 1,458,775
Banco Ganadero SA (ADR) (Banking)................ 53,000 1,272,000
Banco Industrial Colombiano SA (ADR) (Banking)... 30,400 486,400
Cementos Diamante SA (ADR) (Building
Materials)..................................... 251,900 3,085,775
Corporacion Financiera Del Valle SA (ADR) (144A)
(Banking)...................................... 20,677 56,862
-------------
6,359,812
-------------
CROATIA (0.4%)
Pliva D.D. (GDR) (144A) (Pharmaceuticals)........ 213,860 3,314,830
-------------
CZECH REPUBLIC (1.6%)
Central European Media Enterprises Ltd.
(Entertainment, Leisure & Media)+.............. 123,000 3,582,375
Cokoladovny AS (Food, Beverages & Tobacco)....... 36,100 5,202,482
Elektrarny Opatovice AS (Telecommunications)..... 30,500 3,882,407
Synthesia AS (Chemicals)+........................ 63,000 333,932
-------------
13,001,196
-------------
ECUADOR (0.3%)
La Cemento Nacional CA (GDS) (144A) (Building
Materials)..................................... 10,240 2,222,080
-------------
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------- -------------
EGYPT (0.6%)
Commercial International Bank of Egypt (GDR)
(144A) (Banking)............................... 170,550 $ 3,709,462
Paints & Chemicals Industry Co. (GDR)
(Chemicals)+................................... 83,800 838,000
-------------
4,547,462
-------------
GABON (0.3%)
Elf Gabon SA (Oil-Production).................... 12,500 2,393,139
-------------
GHANA (0.5%)
Guiness Ghana Ltd. (Food, Beverages &
Tobacco)+...................................... 1,845,745 531,705
Pioneer Tobacco Co. (Food, Beverages &
Tobacco)+...................................... 2,848,800 495,442
Social Security Bank Ltd. (Banking)+............. 3,548,903 2,666,616
Unilever Ghana Ltd. (Food, Beverages &
Tobacco)....................................... 450,000 188,628
-------------
3,882,391
-------------
GREECE (1.2%)
Hellenic Bottling Co. SA (Food, Beverages &
Tobacco)....................................... 126,302 5,223,599
National Mortgage Bank of Greece (Banking)....... 78,896 4,669,689
-------------
9,893,288
-------------
HONG KONG (0.8%)
Concord Land Development Co. Ltd. (Real
Estate)........................................ 202,400 77,902
Guangdong Brewery Holdings Ltd. (Food, Beverages
& Tobacco)+.................................... 398,000 73,117
Yue Yuen Industrial Holdings Ltd. (Retail)....... 2,974,000 6,502,438
-------------
6,653,457
-------------
HUNGARY (0.4%)
OTP Bank RT (Banking)............................ 95,900 3,058,146
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
THE EMERGING MARKETS EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------- -------------
<S> <C> <C>
INDIA (8.0%)
Bajaj Auto Ltd. (GDR) (Automotive)............... 97,950 $ 1,743,510
EIH Ltd. (GDR) (Restaurants & Hotels)............ 468,750 7,218,750
Hindalco Industries Ltd. (GDR) (Metals &
Mining)+....................................... 130,150 3,761,335
ITC Ltd. (Food, Beverages & Tobacco)............. 551,500 8,523,108
ITC Ltd. (GDR) (Food, Beverages & Tobacco)....... 476,800 8,725,440
Larsen & Toubro Ltd. (GDR) (Diversified
Manufacturing)................................. 449,000 4,714,500
Raymond Ltd. (GDR) (Textiles).................... 194,850 725,351
Reliance Industries Ltd. (GDR) (Chemicals)+...... 593,700 12,467,700
SIEL Ltd. (GDR) (Multi-Industry)+................ 235,000 587,500
SIEL Ltd. (GDR) (144A) (Multi-Industry)+......... 258,000 645,000
Steel Authority of India Ltd. (GDR) (Metals &
Mining)........................................ 495,400 2,662,775
Tata Engineering & Locomotive Co. Ltd. (Spon.
GDR) (Automotive).............................. 768,700 7,994,480
Videocon International Ltd. (GDS) (144A)
(Entertainment, Leisure & Media)............... 1,185,500 1,481,875
Wockhardt Ltd. (GDR) (Pharmaceuticals)........... 284,400 2,204,100
-------------
63,455,424
-------------
INDONESIA (2.4%)
P.T. Bank Niaga (Banking)........................ 820,280 130,835
P.T. Fastfood Indonesia (Food, Beverages &
Tobacco)....................................... 197,000 213,120
P.T. Goodyear Indonesia (Capital Goods).......... 39,000 15,146
P.T. Indorama Synthetic (Textiles)............... 648,000 390,957
P.T. International Nickel Indonesia (Metals &
Mining)........................................ 3,555,700 6,805,633
P.T. Matahari Putra Prima (Retail)............... 14,436,000 2,803,104
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------- -------------
<S> <C> <C>
INDONESIA (CONTINUED)
P.T. Modern Photo Film Co. (Wholesale &
International Trade)........................... 755,000 $ 780,131
P.T. Multi Bintang Indonesia (Food, Beverages &
Tobacco)....................................... 200,000 1,664,353
P.T. Pakuwon Jati (Real Estate).................. 11,158,000 1,857,086
P.T. Putra Surya Perkasa (Building Materials).... 1,350,000 720,873
P.T. Semen Cibinong (Building Materials)......... 11,526,000 1,518,681
P.T. Surya Toto Indonesia (Capital Goods)........ 900,000 973,647
P.T. Tempo Scan Pacific (Pharmaceuticals)........ 664,000 474,285
P.T. Unilever Indonesia (Food, Beverages &
Tobacco)....................................... 47,605 369,747
-------------
18,717,598
-------------
ISRAEL (2.8%)
First International Bank of Israel Ltd.
(Banking)...................................... 10,500 6,603,647
Israel Chemicals Ltd. (Chemicals)................ 4,492,500 5,627,967
Koor Industries Ltd. (Spon. ADR)
(Multi-Industry)............................... 287,900 6,153,862
Teva Pharmaceutical Industries Ltd. (ADR)
(Pharmaceuticals).............................. 90,900 4,246,734
-------------
22,632,210
-------------
MALAYSIA (3.0%)
Antah Holdings Berhad (Multi-Industry)........... 200 93
Box Pak (Malaysia) Berhad (Packaging &
Containers).................................... 1,896 1,472
Golden Hope Plantations Berhard (Metals &
Mining)........................................ 3,005,166 3,911,212
Hong Leong Industries Berhard (Multi-Industry)... 161,800 221,208
Kuala Lumpur Kepong Berhad (Metals & Mining)..... 1,117,500 2,668,664
Lion Corp. Berhad (Multi-Industry)............... 1,048,000 1,007,334
London & Pacific Insurance Co. Berhad
(Insurance).................................... 36,000 82,746
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE EMERGING MARKETS EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------- -------------
<S> <C> <C>
MALAYSIA (CONTINUED)
Malayan Cement Berhad (Building Materials)....... 1,204,250 $ 984,971
Malaysia Mining Corp. Berhad (Metals & Mining)... 1,758,600 971,170
Malaysian Airline System Berhad (Airlines)....... 2,950,000 3,874,637
Malaysian Tobacco Co. Berhad (Food, Beverages &
Tobacco)....................................... 322,000 211,463
Matsushita Electric Co. Malaysia Berhad
(Electronics).................................. 402 1,320
Nestle Malaysia Berhad (Food, Beverages &
Tobacco)....................................... 809,000 4,081,235
Nylex Malaysia Berhad (Chemicals)................ 232,000 124,657
Perlis Plantations Berhad (Transport &
Services)...................................... 1,845,000 3,359,561
Putera Capital Berhad (Real Estate).............. 1,000 552
Shell Refining Company Malaysia Berhad (Oil-
Production).................................... 996,500 1,963,259
UMW Holdings Berhad (Holding Companies).......... 200 233
-------------
23,465,787
-------------
MEXICO (9.7%)
ALFA SA de CV (Multi-Industry)................... 683,700 4,969,410
Cemex SA de CV (Building Materials).............. 1,265,675 5,531,691
Cifra SA de CV (Class A) (Retail)................ 208,508 380,861
Cifra SA de CV (Class B) (Retail)................ 296,057 586,488
Desc SA de CV (Class A) (Multi-Industry)......... 268,000 2,291,686
Desc SA de CV (Class B) (Multi-Industry)......... 342,000 2,924,465
Desc SA de CV (Class C) (Multi-Industry)......... 15,893 134,203
Empaques Ponderosa SA de CV (Series B) (Forest
Products & Paper)+............................. 4,840,000 3,621,377
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------- -------------
MEXICO (CONTINUED)
Empresas ICA Sociedad Controladora SA de CV
(Spon. ADR) (Construction & Housing)........... 230,512 $ 3,068,691
Empresas La Moderna SA de CV (ADR) (Food,
Beverages & Tobacco)+.......................... 152,000 2,973,500
Fomento Economico Mexicano SA de CV (Class B)
(Food, Beverages & Tobacco).................... 624,000 4,372,446
Gruma SA de CV (Food, Beverages & Tobacco)+...... 719,168 2,801,509
Grupo Carso SA de CV (Class A)
(Multi-Industry)............................... 598,600 3,775,019
Grupo Casa Autrey SA de CV (Spon. ADR) (Food,
Beverages & Tobacco)........................... 109,700 1,878,612
Grupo Financiero Banamex Accival SA de CV (Class
B) (Banking)+.................................. 3,581,000 7,059,928
Grupo Financiero Banamex Accival SA de CV (Class
L) (Banking)+.................................. 18,960 34,497
Grupo Financiero Probursa SA de CV (Class B)
(Banking)+..................................... 208 67
Grupo Iusacell SA (ADR) (Telecommunications)+.... 178,700 3,216,600
Pan-American Beverages Inc. (ADR) (Food,
Beverages & Tobacco)........................... 172,700 5,353,700
Sigma Alimentos SA de CV (Series B) (Food,
Beverages & Tobacco)........................... 343,000 4,668,384
Telefonos de Mexico SA de CV (Spon. ADR) (Class
L) (Telecommunications)........................ 415,020 17,949,615
-------------
77,592,749
-------------
MOROCCO (0.0%)(1)
Banque Commerciale Du Maroc (Banking)............ 85 6,793
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE EMERGING MARKETS EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------- -------------
<S> <C> <C>
PAKISTAN (2.5%)
Fauji Fertilizer Co. Ltd. (Chemicals)+........... 2,512,200 $ 5,594,589
Hub Power Co. (GDR) (Utilities)+................. 297,400 9,368,100
Pakistan State Oil Co. Ltd. (Oil-Production)+.... 417,000 4,501,088
-------------
19,463,777
-------------
PERU (1.7%)
Cementos Norte Pacasmayo SA (Class T) (Building
Materials)..................................... 1,346,646 1,962,823
Compania de Minas Buenaventura SA (Spon. ADR)
(Metals & Mining).............................. 137,600 2,468,200
Creditcorp Ltd. (Financial Services)............. 144,499 2,591,951
Telefonica del Peru SA (ADR) (Telecommunication
Services)...................................... 232,000 4,582,000
Telefonica del Peru SA (Class B)
(Telecommunication Services)................... 1,070,500 2,137,049
-------------
13,742,023
-------------
PHILIPPINES (1.3%)
Ayala Land, Inc. (B Shares) (Real Estate)........ 3,805,625 1,479,217
Filinvest Land Inc. (Building Materials)+........ 11,354,700 1,027,138
Petron Corp. (Oil-Services)...................... 5,352,013 567,351
Philippine Long Distance Telephone Co. (ADR)
(Telecommunications)........................... 191,942 4,654,593
Philippine National Bank (Banking)+.............. 444,523 1,036,696
Universal Robina Corp. (Food, Beverages &
Tobacco)....................................... 4,829,800 614,391
Uniwide Holdings Inc. (Wholesale & International
Trade)+........................................ 17,786,000 824,566
-------------
10,203,952
-------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------- -------------
<S> <C> <C>
POLAND (1.0%)
Elektrim Spolka Akcyjna SA (Electrical
Equipment)..................................... 524,586 $ 4,967,431
Wielkopolski Bank Kredytowy SA (Banking)......... 81,018 430,104
Zyweic SA (Food, Beverages & Tobacco)............ 29,968 2,235,782
-------------
7,633,317
-------------
PORTUGAL (1.5%)
Banco Commercial Portugues SA (Banking).......... 298,954 6,089,991
Cimpor Cimentos de Portugal SA (Building
Materials)..................................... 121,789 3,083,879
Corporacao Industrial do Norte SA (Building
Materials)..................................... 40 2,413
Electricidade de Portugal SA (Spon. ADR)
(Electric)+.................................... 2,837 99,118
Portugal Telecom SA (ADR) (Telecommunications)... 54,260 2,238,225
-------------
11,513,626
-------------
RUSSIA (1.8%)
Rostelecom (RDC) (Registered)
(Telecommunications)+.......................... 295 9,676,000
Tatneft (Spon. ADR) (144A) (Oil-Production)...... 31,300 4,491,550
-------------
14,167,550
-------------
SLOVAKIA (0.6%)
Slovakofarma AS (Pharmaceuticals)................ 30,700 4,702,364
-------------
SOUTH AFRICA (7.2%)
Amalgamated Banks of South Africa Ltd.
(Banking)...................................... 1,231,735 7,294,414
Anglo-American Corp. of South Africa Ltd.
(Multi-Industry)............................... 43,700 1,789,473
Billiton PLC (Metals & Mining)+.................. 1,867,100 5,470,348
De Beers Consolidated Mines Ltd. (Centenary
Linked Units) (Metals & Mining)................ 134,700 3,213,200
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE EMERGING MARKETS EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------- -------------
<S> <C> <C>
SOUTH AFRICA (CONTINUED)
Distillers Corporation (South Africa) Ltd. (Food,
Beverages & Tobacco)........................... 850,000 $ 2,490,384
Engen Ltd. (Oil-Production)...................... 1,106,628 5,518,756
Highveld Steel & Vanadium Corp. Ltd. (Metals &
Mining)........................................ 662,584 2,202,872
Iscor Ltd. (Metals & Mining)..................... 24,912 12,941
Kersaf Investments Ltd. (Entertainment, Leisure &
Media)......................................... 131,000 815,260
Murray & Roberts Holdings Ltd. (Construction &
Housing)....................................... 1,740,500 3,254,954
Omni Media Corp. Ltd. (Entertainment, Leisure &
Media)......................................... 209,465 2,698,556
Plate Glass & Shatterprufe Industries Ltd.
(Automotive Supplies).......................... 146,700 4,054,245
Sappi Ltd. (Forest Products & Paper)............. 561,200 3,556,688
Sasol Ltd. (Oil-Production)...................... 698,200 8,414,651
South Africa Breweries Ltd. (Food, Beverages &
Tobacco)....................................... 101,000 2,686,331
Sun International (South Africa) Ltd.
(Entertainment, Leisure & Media)............... 2,199,600 1,234,058
Trans-Natal Coal Corp. Ltd. (Metals & Mining).... 713,400 2,816,534
-------------
57,523,665
-------------
SOUTH KOREA (3.4%)
Dong Ah Construction Industrial Co. Ltd. (EDR)
(Building Materials)+.......................... 172,166 804,876
Hansol Paper Co. Ltd. (GDS) (Forest Products &
Paper)+........................................ 315,156 2,521,248
Hanwha Chemical Corp. (Chemicals)+............... 434,766 2,027,826
Hyundai Motor Co. Ltd. (GDS) (Automotive)+....... 628,600 2,372,965
Kia Motors Corp. (GDR) (144A) (Automotive)+...... 1,074 7,518
Korea Electric Power Corp. (Electric)............ 181,400 2,575,850
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------- -------------
SOUTH KOREA (CONTINUED)
Korea Electric Power Corp. (ADR) (Electric)...... 382,900 $ 3,134,994
Korea Long Term Credit Bank (Banking)............ 117,856 947,930
Korea Zinc Co. Ltd. (Metals & Mining)............ 104,400 1,255,224
Pohang Iron & Steel Co. Ltd. (Metals & Mining)... 78,900 3,459,235
Pohang Iron & Steel Co. Ltd. (ADR) (Metals &
Mining)........................................ 125,000 2,031,250
Samsung Electronics Co. Ltd. (GDR represents 1/2
non-voting common share)(144A)
(Electronics)+................................. 8,491 19,105
Samsung Electronics Co. Ltd. (GDR represents 1/2
non-voting preferred share) (144A)
(Electronics).................................. 434,903 4,403,393
Samsung Electronics Co. Ltd. (GDR represents 1/2
voting common share)(144A) (Electronics)+...... 15,340 319,072
Shinhan Bank (Banking)........................... 185,000 1,418,947
-------------
27,299,433
-------------
TAIWAN (4.2%)
Asia Cement Corp. (Building Materials)........... 676,000 769,150
Asia Cement Corp. (GDS) (Building Materials)..... 421,829 4,629,573
China Steel Corp. (GDR) (Metals & Mining)........ 275,742 4,122,343
Evergreen Marine Corp. (GDR) (Transport &
Services)...................................... 481,250 4,956,875
Hocheng Group Corp. (GDR) (144A) (Building
Materials)..................................... 717,955 3,625,675
Microelectronics Technology Inc. (GDS)
(Telecommunications)+.......................... 61,540 184,620
Pacific Electrical Wire & Cable
(Telecommunications-Equipment)+................ 377,859 383,514
President Enterprises Corp. (GDR) (144A) (Food,
Beverages & Tobacco)+.......................... 562,382 5,905,015
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
23
<PAGE>
THE EMERGING MARKETS EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------- -------------
<S> <C> <C>
TAIWAN (CONTINUED)
Siliconware Precision Industries Co. (GDR)
(Semiconductors)+.............................. 185,000 $ 1,780,625
Yageo Corp. (GDR) (Electronics)+................. 285,820 2,858,200
Yang Ming Marine Transport (GDR) (Transport &
Services)+..................................... 682,800 4,540,620
-------------
33,756,210
-------------
THAILAND (2.6%)
Advanced Info Service Public Co. Ltd.
(Telecommunications)........................... 202,500 1,120,474
American Standard Sanitaryware (Thailand) Ltd.
(Building Materials)........................... 94,800 432,117
Bangkok Bank Public Co. Ltd. (Banking)........... 855,700 2,920,119
Charoen Pokphand Feedmill Public Co. Ltd.
(Agriculture).................................. 509,700 1,304,532
Dhana Siam Finance and Securities Public Co. Ltd.
(Financial Services)........................... 68 31
I.C.C. International Public Co. Ltd. (Retail).... 262,040 510,985
Krung Thai Bank Public Co. Ltd. (Banking)........ 2,271,600 775,195
Land & House Public Co. Ltd. (Real Estate)....... 1,811,869 1,545,773
Lanna Lignite Public Co. Ltd. (Metals &
Mining)........................................ 454,400 1,572,815
Phatra Thanakit Public Co. Ltd. (Financial
Services)...................................... 666,600 568,701
Sahavirya Steel Industries Public Co. Ltd.
(Metals & Mining)+............................. 4,025,400 196,241
Shinawatra Computer Public Co. Ltd. (Computer
Systems)....................................... 599,500 2,352,697
Siam Cement Public Co. Ltd. (Building
Materials)..................................... 568,700 4,740,894
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------- -------------
THAILAND (CONTINUED)
TelecomAsia Corp. Public Co. Ltd.
(Telecommunications)+.......................... 2,472,900 $ 1,085,001
Thai Farmers Bank Public Co. Ltd. (Banking)...... 711,600 1,908,005
-------------
21,033,580
-------------
TURKEY (5.4%)
Aksa Akrilik Kimya Sanayii AS (Textiles)......... 27,520,290 2,362,095
Aksigorta AS (Insurance)......................... 52,044,700 4,041,618
Ege Biracilik Ve Malt Sanayii AS (Food, Beverages
& Tobacco)..................................... 3,929,000 385,406
Erciyas Biracilik ve Malt Sanayii AS (Food,
Beverages & Tobacco)........................... 18,253,586 2,586,339
Ford Otomotive Sanayii AS (Automotive)........... 4,278,000 3,730,135
Koc Holding AS (Multi-Industry).................. 40,219,000 15,123,218
Sarkuysan Elektrolitik Bakir AS
(Telecommunications-Equipment)................. 29,909,000 3,259,836
Turkiye Garanti Bankasi AS (Banking)............. 142,070,603 7,355,152
Yapi Kredi Bankasi AS (Banking).................. 134,701,000 4,110,765
-------------
42,954,564
-------------
VENEZUELA (1.7%)
Ceramicas Carabobo CA (Spon. ADR) (Class A)
(Building Materials)........................... 1,877,333 1,994,854
Ceramicas Carabobo CA (Spon. ADR) (Class B)
(Building Materials)........................... 469,330 545,737
Compania Anonima Nacional Telefonos de Venezuela
(ADR) (Telecommunication Services)............. 222,300 9,725,625
Corimon CA (Chemicals)+.......................... 1,575 41
Venprecar CA (GDS) (Metals & Mining)............. 263,000 1,604,300
-------------
13,870,557
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
24
<PAGE>
THE EMERGING MARKETS EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------- -------------
<S> <C> <C>
ZIMBABWE (0.0%)(1)
Trans Zambezi Industries Ltd. (Holding
Companies)+.................................... 10,000 $ 6,102
-------------
TOTAL COMMON STOCK (COST $801,661,843)......... 680,411,094
-------------
PREFERRED STOCK (8.0%)
ARGENTINA (0.3%)
Quilmes Industrial SA (Spon. ADR non-voting)
(Food, Beverages & Tobacco).................... 170,325 2,107,772
-------------
BRAZIL (7.7%)
Banco Itau SA (Banking).......................... 8,320,000 3,358,335
Ceval Partcipacoes SA (Food, Beverages &
Tobacco)+...................................... 58,068,000 460,878
Companhia Acos Especiais Itabira (ADR) (Metals &
Mining)........................................ 420,000 1,155,000
Companhia Brasileira de Distribuicao Grupo Pao de
Acucar (Food, Beverages & Tobacco)............. 129,700,000 2,470,586
Companhia Cervejaria Brahma (ADR) (Food,
Beverages & Tobacco)........................... 201,263 2,591,261
Companhia Energetica de Minas Gerais SA (ADR)
(Utilities).................................... 174,066 6,788,574
Companhia Energetica de Sao Paulo SA
(Utilities)+................................... 77,000,000 4,819,262
Companhia Hering (Holding Companies)+............ 58,068,000 65,840
Compania Paranaense de Energia-Copel
(Utilities).................................... 322,000,000 3,887,538
Copene Petroquimica do Nordeste SA (Spon. ADR)
(Class A) (Chemicals).......................... 166,200 2,368,350
Copene-Petroquimica do Nordeste SA (Chemicals)... 10,100,000 3,023,264
Iochpe Maxion SA (Automotive)+................... 22,260,000 1,928,276
Lojas Arapua SA (Electronics)+................... 405,878,000 2,429,854
Perdigao SA (Food, Beverages & Tobacco).......... 900,000,000 1,591,907
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------- -------------
<S> <C> <C>
BRAZIL (CONTINUED)
Petroleo Brasileiro SA (Oil-Production).......... 71,633,000 $ 13,320,107
Telecomunicacoes Brasileiras SA (ADR)
(Telecommunications)........................... 54,663 5,548,294
Uniao de Bancos Brasileiros SA (GDR)
(Banking)+..................................... 206,100 5,616,225
Varig SA (Airlines)+............................. 130,000 271,214
-------------
61,694,765
-------------
GREECE (0.0%)(1)
Delta Dairy SA (Food, Beverages & Tobacco)....... 1,697 18,341
-------------
TOTAL PREFERRED STOCK (COST $61,182,482)....... 63,820,878
-------------
RIGHTS (0.2%)
INDONESIA (0.2%)
P.T. Matahari Putra Prima (Expire 12/03/97)
(Retail)+(f ).................................. 28,872,000 1,601,774
-------------
BRAZIL (0.0%)(1)
Companhia Hering (Expire 11/04/97)
(Textiles)+(f )................................ 358,572,499 0
-------------
TOTAL RIGHTS (COST $3,177,179)................. 1,601,774
-------------
WARRANTS (0.0%)(1)
MALAYSIA (0.0%)(1)
UMW Holdings Berhad (Expire 01/26/00) (Holding
Companies)+.................................... 200 69
-------------
THAILAND (0.0%)(1)
Thai Farmers Bank Public Co Ltd. (Expire
09/15/02) (Banking)+........................... 41,263 14,332
-------------
TOTAL WARRANTS (COST $40,712).................. 14,401
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
25
<PAGE>
THE EMERGING MARKETS EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------- ------------- -------------
<S> <C> <C>
CONVERTIBLE BONDS (1.7%)
HONG KONG (0.3%)
Pacific Concord Holdings Ltd., 4.75% due 12/10/98
(Diversified Manufacturing).................... $ 2,406,000 $ 2,189,460
-------------
MEXICO (0.1%)
Telmex Prides, 11.25% due 05/15/98
(Telecommunications)........................... 25,000 1,059,375
-------------
SOUTH KOREA (0.0%)(1)
Daewoo Heavy Industries Ltd., 3.00% due 12/31/01
(Capital Goods)................................ 200,000 150,000
-------------
TAIWAN (1.0%)
Far Eastern Department Stores Ltd., 3.00% due
07/06/01 (Retail).............................. 5,162,000 4,981,330
Yageo Corp., 1.25% due 07/24/03 (Electronics).... 1,263,000 1,894,500
Yieh Loong Co. Ltd., 2.00% due 12/31/00 (Metals &
Mining)........................................ 2,500,000 725,086
-------------
7,600,916
-------------
THAILAND (0.3%)
Bangkok Bank Public Co. Ltd., 3.25% due 03/03/04
(Banking)...................................... 5,141,000 2,519,090
-------------
TOTAL CONVERTIBLE BONDS (COST $16,472,076)..... 13,518,841
-------------
<CAPTION>
UNITS
-------------
<S> <C> <C>
UNIT TRUSTS/PARTNERSHIPS (3.7%)
GHANA (0.2%)
Blakeney Investors+(f ).......................... 100,000 1,339,000
-------------
RUSSIA (3.3%)
New Century Holdings Ltd. (Partnership III; Group
B)+(f )........................................ 1,800 1,107,000
New Century Holdings Ltd. (Partnership IV; Group
I)+(f )........................................ 2,000 4,788,000
<CAPTION>
SECURITY DESCRIPTION UNITS VALUE
- ------------------------------------------------- ------------- -------------
<S> <C> <C>
RUSSIA (CONTINUED)
New Century Holdings Ltd. (Partnership V; Group
I)+(f )........................................ 3,800 $ 1,736,600
New Century Holdings Ltd. (Partnership X)+(f )... 6,317 13,335,187
New Century Holdings Ltd. (Partnership XIV; Group
I)+(f )........................................ 6,000 5,772,000
-------------
26,738,787
-------------
TAIWAN (0.2%)
R.O.C. Taiwan Fund............................... 140,000 1,216,250
-------------
TOTAL UNIT TRUSTS/ PARTNERSHIPS (COST
$19,665,600).................................. 29,294,037
-------------
TOTAL INVESTMENTS
(COST $902,199,892) (99.0%)................................... 788,661,025
OTHER ASSETS IN EXCESS OF LIABILITIES (1.0%)....................
8,003,244
-------------
NET ASSETS (100.0%)............................................. $ 796,664,269
-------------
-------------
</TABLE>
- ------------------------------
Note: Based on the cost of investments of $903,205,501 for Federal Income Tax
purposes at October 31, 1997 the aggregate gross unrealized appreciation and
depreciation was $117,425,039 and $231,969,515 respectively, resulting in net
unrealized depreciation of $114,544,476.
+ - Non-income producing securities.
1 - Less than 0.1%.
ADR - American Depositary Receipt.
ADS - American Depositary Shares.
Spon. ADR - Sponsored ADR.
EDR - European Depositary Receipt.
GDR - Global Depositary Receipt.
GDS - Global Depositary Shares.
RDC - Russian Depositary Certificate.
144A - Securities restricted for resale to Qualified Institutional Buyers.
(f) - Fair valued securities approximately 3.8% of portfolio. See Note 1a.
The Accompanying Notes are an Integral Part of the Financial Statements.
26
<PAGE>
THE EMERGING MARKETS EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
INDUSTRY DIVERSIFICATION
<TABLE>
<CAPTION>
PERCENT OF
PORTFOLIO
-----------
<S> <C>
Food, Beverages & Tobacco............................................................................. 14.59%
Banking............................................................................................... 10.83%
Oil-Production........................................................................................ 7.68%
Telecommunications.................................................................................... 7.20%
Metals & Mining....................................................................................... 6.85%
Utilities............................................................................................. 5.86%
Building Materials.................................................................................... 5.18%
Telecommunications-Services........................................................................... 5.17%
Multi-Industry........................................................................................ 5.02%
Chemicals............................................................................................. 4.81%
Unit Trusts/Partnerships.............................................................................. 3.71%
Retail................................................................................................ 2.66%
Automotive............................................................................................ 2.25%
Forest Products & Paper............................................................................... 2.22%
Pharmaceuticals....................................................................................... 1.89%
Transport & Services.................................................................................. 1.63%
Electronics........................................................................................... 1.51%
Entertainment, Leisure & Media........................................................................ 1.24%
Construction & Housing................................................................................ 1.15%
Restaurants & Hotels.................................................................................. 0.92%
Diversified Manufacturing............................................................................. 0.88%
Electric.............................................................................................. 0.74%
Electrical Equipment.................................................................................. 0.67%
Real Estate........................................................................................... 0.63%
Airlines.............................................................................................. 0.53%
Insurance............................................................................................. 0.52%
Oil-Services.......................................................................................... 0.52%
Automotive Supplies................................................................................... 0.51%
Telecommunications-Equipment.......................................................................... 0.46%
Textiles & Apparels................................................................................... 0.44%
Financial Services.................................................................................... 0.40%
Computers-Systems..................................................................................... 0.30%
Appliances & Household Durables....................................................................... 0.27%
Semiconductors........................................................................................ 0.23%
Wholesale & International Trade....................................................................... 0.20%
Agriculture........................................................................................... 0.17%
Capital Goods......................................................................................... 0.15%
Holding Companies..................................................................................... 0.01%
-----------
100.00%
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
27
<PAGE>
THE EMERGING MARKETS EQUITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $902,199,892 ) $788,661,025
Foreign Currency at Value (Cost $15,119,178 ) 14,812,494
Receivable for Investments Sold 24,535,322
Unrealized Appreciation of Forward Foreign
Currency Contracts 10,234,690
Dividends Receivable 877,720
Interest Receivable 257,862
Prepaid Trustees' Fees 2,198
Deferred Organization Expenses 1,710
Prepaid Expenses and Other Assets 7,115
------------
Total Assets 839,390,136
------------
LIABILITIES
Payable for Investments Purchased 29,205,912
Payable to Custodian 12,216,236
Advisory Fee Payable 804,770
Custody Fee Payable 386,998
Administrative Services Fee Payable 24,223
Administration Fee Payable 2,014
Fund Services Fee Payable 1,366
Accrued Foreign Capital Gains Taxes 35,133
Accrued Expenses 49,215
------------
Total Liabilities 42,725,867
------------
NET ASSETS
Applicable to Investors' Beneficial Interests $796,664,269
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
28
<PAGE>
THE EMERGING MARKETS EQUITY PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividend Income (Net of Foreign Withholding Tax
of $2,046,248 ) $ 19,701,145
Interest Income 2,010,980
------------
Investment Income 21,712,125
EXPENSES
Advisory Fee $ 9,422,758
Custodian Fees and Expenses 1,477,976
Administrative Services Fee 292,269
Fund Services Fee 34,045
Administration Fee 22,642
Professional Fees and Expenses 20,355
Trustees' Fees and Expenses 17,215
Printing Expenses 14,145
Insurance Expense 4,489
Amortization of Organization Expense 1,646
Registration Fees 610
Miscellaneous 502
------------
Total Expenses 11,308,652
------------
NET INVESTMENT INCOME 10,403,473
NET REALIZED GAIN (LOSS) ON INVESTMENTS
Investment Transactions 58,754,870
Foreign Currency Transactions (1,574,164)
------------
Net Realized Gain 57,180,706
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) OF
Investments (107,688,090)
Foreign Currency Contracts and Translations 9,837,883
------------
Net Change in Unrealized Depreciation (97,850,207)
------------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS $(30,266,028)
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
29
<PAGE>
THE EMERGING MARKETS EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED
OCTOBER 31,
---------------------------
1997 1996
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 10,403,473 $ 8,894,888
Net Realized Gain (Loss) on Investment and
Foreign Currency Transactions 57,180,706 (7,216,715)
Net Change in Unrealized Appreciation
(Depreciation) of Investment and Foreign
Currency Translations (97,850,207) 42,113,769
------------ ------------
Net Increase (Decrease) in Net Assets
Resulting from Operations (30,266,028) 43,791,942
------------ ------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 342,652,801 449,754,895
Withdrawals (375,081,272) (253,675,258)
------------ ------------
Net Increase (Decrease) from Investors'
Transactions (32,428,471) 196,079,637
------------ ------------
Total Increase (Decrease) in Net Assets (62,694,499) 239,871,579
NET ASSETS
Beginning of Fiscal Year 859,358,768 619,487,189
------------ ------------
End of Fiscal Year $796,664,269 $859,358,768
------------ ------------
------------ ------------
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
NOVEMBER 15,
FOR THE FISCAL YEAR 1993
ENDED OCTOBER 31, (COMMENCEMENT OF
------------------------ OPERATIONS) TO
1997 1996 1995 OCTOBER 31, 1994
------- ------- ---- ----------------
<S> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Expenses 1.20% 1.23% 1.31% 1.36%(a)
Net Investment Income 1.10% 1.14% 1.07% 0.66%(a)
Portfolio Turnover 55% 31% 41% 27%
Average Broker Commissions $0.0009 $0.0006 -- --
</TABLE>
- ------------------------
(a) Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
30
<PAGE>
THE EMERGING MARKETS EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Emerging Markets 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 on June 16, 1993. The Portfolio commenced operations on
November 15, 1993 and received a contribution of certain assets and liabilities,
including securities, with a value of $223,722,513 on that date from the JPM
Emerging Markets Equity Fund, Ltd. in exchange for a beneficial interest in the
Portfolio. The Portfolio's investment objective is to provide a high total
return from a portfolio of equity securities of companies in emerging markets.
The Declaration of the Trust permits the Trustees to issue an unlimited number
of beneficial interests in the Portfolio.
Investments in emerging markets may involve certain considerations and risks not
typically associated with investments in the United States. Future economic and
political developments in emerging market countries could adversely affect the
liquidity or value, or both, of such securities in which the Portfolio is
invested. The ability of the issuers of the debt securities held by the
Portfolio to meet their obligations may be affected by economic and political
developments in a specific industry or region.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual amounts could differ from
those estimates. The following is a summary of the significant accounting
policies of the Portfolio:
a) The value of each security for which readily available market quotations
exists is based on a decision as to the broadest and most representative
market for such security. The value of such security will be based either
on the last sale price on a national securities exchange, or, in the
absence of recorded sales, at the average of readily available closing bid
and asked prices on such exchanges. Securities listed on a foreign
exchange are valued at the last quoted sale price available before the
time when net assets are valued. Unlisted securities are valued at the
average of the quoted bid and asked prices in the over-the-counter market.
Securities or other assets for which market quotations are not readily
available are valued at fair value in accordance with procedures
established by the Portfolio's Trustees. Such procedures include the use
of independent pricing services, which use prices based upon yields or
prices of securities of comparable quality, coupon, maturity and type;
indications as to values from dealers; operating data and general market
conditions. All portfolio securities with a remaining maturity of less
than 60 days are valued at amortized cost.
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 values 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
31
<PAGE>
THE EMERGING MARKETS EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
exchange rates prevailing on the respective dates of such transactions.
Translation gains and losses resulting from changes in exchange rates
during the reporting period and gains and losses realized upon settlement
of foreign currency transactions are reported in the Statement of
Operations.
Although the net assets of the Portfolio are presented at the exchange
rates and market values prevailing at the end of the period, the Portfolio
does not isolate the portion of the results of operations arising as a
result of changes in foreign exchange rates from the fluctuations arising
from changes in the market prices of securities during the period.
c) Securities transactions are recorded on a trade date basis. Dividend
income is recorded on the ex-dividend date or as of the time that the
relevant ex-dividend date and amount becomes known. Interest income, which
includes the amortization of premiums and discounts, if any, is recorded
on an accrual basis. For financial and tax reporting purposes, realized
gains and losses are determined on the basis of specific lot
identification.
d) The Portfolio may enter into forward and spot foreign currency contracts
to protect securities and related receivables 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 based on procedures established
by and under the general supervision of the Portfolio's Trustees and the
change in the market value is recorded by the Portfolio as unrealized
appreciation or depreciation of forward and spot foreign currency contract
translations. At October 31, 1997, the Portfolio had open forward foreign
currency contracts as follows:
SUMMARY OF OPEN FORWARD FOREIGN CURRENCY CONTRACTS
<TABLE>
<CAPTION>
U.S. DOLLAR
VALUE AT NET UNREALIZED
PROCEEDS 10/31/97 APPRECIATION
----------- ----------- --------------
<S> <C> <C> <C>
SALES CONTRACTS
Thailand Baht 808,500,000, expiring 11/21/97..... $30,000,000 $19,765,310 $ 10,234,690
</TABLE>
e) The Portfolio intends to be treated as a partnership for federal income
tax purposes. As such, each investor in the Portfolio will be taxed on its
share of the Portfolio's ordinary income and capital gains. It is intended
that the Portfolio's assets will be managed in such a way that an investor
in the Portfolio will be able to satisfy the requirements of Subchapter M
of the Internal Revenue Code. The Portfolio may be subject to taxes
imposed by countries in which it invests. Such taxes are generally based
on income and/or capital gains earned. Taxes are accrued and applied to
net investment income, net realized capital gains and net unrealized
appreciation, as applicable, as the income and/or capital gains are
earned.
f) The Portfolio incurred organization expenses in the amount of $7,629.
Morgan Guaranty Trust Company of New York ("Morgan") has paid the
organization expenses of the Portfolio. The Portfolio
32
<PAGE>
THE EMERGING MARKETS EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
has agreed to reimburse Morgan for these costs which are being deferred
and amortized on a straight-line basis over a period not to exceed five
years beginning with the commencement of operations of the Portfolio.
g) 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.
2. TRANSACTIONS WITH AFFILIATES
a) The Portfolio has an Investment Advisory Agreement with Morgan. Under the
terms of the investment advisory agreement, the Portfolio pays Morgan at
an annual rate of 1.00% of the Portfolio's average daily net assets. For
the fiscal year ended October 31, 1997, such fees amounted to $9,422,758.
b) The Portfolio has retained Funds Distributor, Inc. ("FDI"), a registered
broker-dealer, to serve as the co-administrator and exclusive placement
agent. Under a Co-Administration Agreement between FDI and the Portfolio,
FDI provides administrative services necessary for the operations of the
Portfolio, furnishes office space and facilities required for conducting
the business of the Portfolio and pays the compensation of the 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 fiscal year ended October 31, 1997, the fee
for these services amounted to $22,642.
c) The Portfolio has an Administrative Services Agreement (the "Services
Agreement") with Morgan under which Morgan is responsible for overseeing
certain aspects of the administration and operation of the Portfolio.
Under the Services Agreement, the Portfolio has agreed to pay Morgan a fee
equal to its allocable share of an annual complex-wide charge. This charge
is calculated based on the aggregate average daily net assets of the
Portfolio and certain other portfolios for which Morgan acts as investment
advisor (the "Master Portfolios") and JPM Series Trust in accordance with
the following annual schedule: 0.09% on the first $7 billion of the
aggregate average daily net assets and 0.04% of the aggregate average
daily net assets in excess of $7 billion less the complex-wide fees
payable to FDI. The portion of this charge payable by the Portfolio is
determined by the proportionate share that its net assets bear to the net
assets of the Master Portfolios, other investors in the Master Portfolios
for which Morgan provides similar services and JPM Series Trust. For the
fiscal year ended October 31, 1997, the fee for these services amounted to
$292,269.
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
33
<PAGE>
THE EMERGING MARKETS EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
the Portfolio represent all the existing shareholders of Group. The
Portfolio's allocated portion of Group's costs in performing its services
amounted to $34,045 for the fiscal year ended October 31, 1997.
e) An aggregate annual fee of $75,000 is paid to each Trustee for serving as
a Trustee of The JPM Pierpont Funds, The JPM Institutional Funds, the
Master Portfolios and JPM Series Trust. The Trustees' Fees and Expenses
shown in the financial statements represents the Portfolio's allocated
portion of the total fees and expenses. Prior to April 1, 1997, the
aggregate annual Trustee Fee was $65,000. 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 $6,900.
3. INVESTMENT TRANSACTIONS:
Investment transactions (excluding short-term investments) for the fiscal year
ended October 31, 1997 were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
- --------------- ---------------
<S> <C>
$564,093,503 $ 490,063,489
</TABLE>
4. RESTRICTED SECURITIES:
<TABLE>
<CAPTION>
UNITS DATE ACQUIRED U.S. $ COST
------- ------------- -----------
<S> <C> <C> <C>
Blakeney Investors............................... 100,000 11/1/96 $ 1,000,000
New Century Holdings Ltd. Partnership III........ 1,800 4/11/94 $ 1,107,000
New Century Holdings Ltd. Partnership IV......... 2,000 6/16/94 $ 2,000,000
New Century Holdings Ltd. Partnership V.......... 3,800 11/9/94 $ 1,736,600
New Century Holdings Ltd. Partnership X.......... 6,317 1/21/97 $ 6,317,000
New Century Holdings Ltd. Partnership XIV........ 6,000 9/22/97 $ 6,000,000
</TABLE>
The securities shown above are restricted as to sale and have been valued at
fair value in accordance with the procedures described in Note 1a. The value of
these securities at October 31, 1997 is $28,077,787 representing 3.5% of net
assets.
5. CREDIT AGREEMENT
The Portfolio is party to a revolving line of credit (the "Agreement") as
discussed more fully in Note 4 of the Fund's Notes to the Financial Statements
which are included elsewhere in this report.
6. SUBSEQUENT EVENT
The Portfolio expects to receive a substantial redemption request in January,
1998 as more fully discussed in Note 5 to the Fund's Financial Statements which
are included elsewhere in this report.
34
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Investors of
The Emerging Markets Equity Portfolio
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the supplementary data present fairly, in all material
respects, the financial position of The Emerging Markets Equity Portfolio (the
"Portfolio") at October 31, 1997, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the supplementary data for the each of the three years in
the period then ended and for the period November 15, 1993 (commencement of
operations) through October 31, 1994, in conformity with generally accepted
accounting principles. These financial statements and supplementary data
(hereafter referred to as "financial statements") are the responsibility of the
Portfolio's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 1997 by correspondence with the
custodian and brokers and the application of alternative auditing procedures
where confirmations from brokers were not received, provide a reasonable basis
for the opinion expressed above.
PRICE WATERHOUSE LLP
New York, New York
December 22, 1997
35
