[front cover]
J.P. Morgan Institutional
International Opportunities Fund
Annual Report
November 30, 2000
LETTER TO THE SHAREHOLDERS
- --------------------------------------------------------------------------------
January 8, 2001
Dear Shareholder,
It was a difficult year for U.S. investors allocating money overseas.
Volatile international equity markets and global economic uncertainty pulled
down investment returns. For the twelve months ended November 30, 2000, the J.P.
Morgan Institutional International Opportunities Fund had a total return of -
- -10.55%.
The Fund's benchmark index, the MSCI All Country World Index Free ex-U.S.,
and peer group, as measured by the Lipper International Equity Funds Average,
fared little better. The Fund's benchmark had a total return of -9.93% for the
twelve months ended November 30, 2000, while the Fund's peer group had a total
return of -8.92% for the same time period.
The Fund's net asset value on November 30, 2000, was $11.39 per share,
decreasing from $12.92 per share after paying income dividends of approximately
$0.19 per share over twelve months. The Fund's net assets were approximately
$461 million on November 30, while the total net assets of The International
Opportunities Portfolio, in which the fund invests, totaled $542 million.
This report includes an interview with Nigel Emmett, a member of the
portfolio management team for The International Opportunities Portfolio. Nigel
explains the factors that influenced Fund performance during the fiscal period,
and provides insight in regard to positioning the Portfolio for the coming
months.
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
contact your Morgan representative, or call J.P. Morgan Funds Services at (800)
766-7722.
Sincerely yours,
/signature/ /signature/
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
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Letter to the Shareholders 1
Fund Performance 2
Portfolio Manager Q&A 3
Fund Facts & Highlights 5
Financial Statements 6
1
FUND PERFORMANCE
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EXAMINING PERFORMANCE
There are several ways to evaluate a mutual fund's historical performance.
One way is to look at the growth of a hypothetical investment. The chart at
right shows that $1,000,000 invested on February 28, 1997, would have increased
to $1,208,932 on November 30, 2000.
Another way is to review a fund's average annual total return. This
calculation takes the Fund's actual 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, and 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.
GROWTH OF $1,000,000 SINCE FUND INCEPTION*
February 28, 1997-November 30, 2000
[data from line chart]
Lipper International Equity Funds Average $1,343,956
MSCI All Country World Index Free ex-U.S.** $1,255,691
J.P. Morgan Institutional International Opportunities Fund $1,208,932
PERFORMANCE
AVERAGE ANNUAL
TOTAL RETURNS TOTAL RETURNS
---------------- --------------------------------
ONE THREE SINCE
YEAR YEARS INCEPTION*
AS OF NOVEMBER 30, 2000
J.P. Morgan Institutional International
Opportunities Fund (10.55)% 6.60% 5.19%
MSCI All Country World Index Free ex-U.S.** (9.93)% 7.69% 6.26%
Lipper International Equity Funds Average (8.92)% 8.75% 7.89%
AS OF SEPTEMBER 30, 2000
J.P. Morgan Institutional International
Opportunities Fund 6.29% 6.34% 8.38%
MSCI All Country World Index Free ex-U.S.** 5.17% 6.77% 8.94%
Lipper International Equity Funds Average 10.76% 8.25% 10.73%
* 2/26/97--commencement of operations (average annual total returns based on
month end following inception). The Fund's average annual total return since
it's commencement of operations on 2/26/97 is 5.07%
** The MSCI All Country World Index Free ex-U.S. is an unmanaged index that
measures developed and emerging foreign stock market performance.
It does not include fees or expenses and is not available for actual investment
Past performance is no guarantee of future results. Fund returns are net of
fees, assume the reinvestment of distributions and reflect reimbursement of
certain fund and portfolio expenses as described in the prospectus. Had expenses
not been subsidized, returns would have been lower. Lipper Analytical Services,
Inc. is a leading source of mutual fund data.
2
PORTFOLIO MANAGER Q&A
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[photo of Nigel F. Emmett]
The following is an interview with NIGEL F. EMMETT, vice president and
portfolio manager with J.P. Morgan Investment Management's International Equity
Group since joining Morgan in 1997. Nigel earned a B.A. degree in economics from
Manchester University, and is the holder of a CFA designation. This interview
was conducted on December 15, 2000, and reflects Nigel's views on that date.
FROM AN INTERNATIONAL PERSPECTIVE, WHAT DROVE EQUITY MARKETS DURING THIS
REPORTING PERIOD?
The first part of this period was dominated by a global bull market in New
Economy growth companies, primarily in the technology-media- telecommunications
(TMT) sectors. During the second half, these high growth companies collectively
suffered a marked reversal, as investors found their valuations to be excessive
in light of what is expected to be a slowing global economy next year. In search
of more reasonable valuations and more stable growth prospects, investor
sentiment subsequently shifted from growth to value stocks, many of which had
been beaten down during the tech run-up of late last year and early 2000.
Also, during the latter part of this reporting period, hard evidence began
to surface that the U.S. economy was slowing--perhaps faster than desired. This,
in turn, fueled speculation about a hard landing for the U.S. economy next year,
and the consequent impact on the global economy. Uncertainty in this regard
helped to destabilize all international markets, but it had the greatest impact
on emerging markets, which had a very poor year, doing even worse than the
developed international markets.
WHICH STOCKS IN THE PORTFOLIO OUTPERFORMED DURING THIS VOLATILE PERIOD?
Among our more attractive holdings during this reporting period was
Schering, the German pharmaceutical company. This stock was helped by the
company's higher-than-expected sales, both from its acquisitions and from new
products going to market earlier than expected.
Another stock that performed strongly over the period was Mannesmann, the
German telecom. Vodafone's successful acquisition of this company earlier in the
period helped to boost Mannesmann's share price. However, even before the
Vodafone deal, we had invested in it as a potentially strong performer in its
own right. So, the acquisition by Vodafone was more or less icing on the cake,
serving to realize the value of this investment even more quickly than we had
anticipated.
Also contributing to performance was a Spanish bank, Banco Boval (BBVA).
BBVA was one of the most attractive stocks in the financial services sector over
the period, both in Europe and globally. It was attractive from a valuation
standpoint, relative to many other European banks that we thought were
overpriced, and it was more attractive than Japanese banks from a balance sheet
perspective.
WHICH STOCKS UNDERPERFORMED YOUR EXPECTATIONS?
Skandia, a Scandinavian financial services company, was hurt by
slower-than-expected sales of global annuities and other mutual fund-related
products. When the U.S. market began to slow, its sales also slowed, and
investors became concerned that the company would miss its full-year earnings
estimate.
While we were helped by Mannesmann, our investment in Vodafone detracted
from performance over the period. It was hurt by the general pullback from New
Economy stocks, and by investor concerns about the very high prices being paid
for cellular phone licenses in Europe, particularly in Germany. For our part, we
think it remains a very attractive long-term investment, as it has the best
collection of mobile assets around the world and is thus destined to be a
dominant player in the global mobile telephone sector going forward.
A stock that hurt at the end of the period, but that we still like, is
Vivendi, a French company with broad exposure to the media, services, Internet,
and mobile telephone industries. During this period, Vivendi acquired Seagram's,
the Canadian company that owns
3
PORTFOLIO MANAGER Q&A
- --------------------------------------------------------------------------------
(Continued)
Universal Studios and has substantial assets in music and beverages. Although
Seagram's will provide Vivendi with quality content for its media and Internet
delivery businesses, many investors thought Vivendi had paid too much for it. We
didn't, but the market disagreed and punished the company's stock. We continue
to think that it's a well managed company and elected to keep it in the
portfolio, with the expectation that its value will be realized once investors
have had more time to digest the deal.
ADDRESSING THE ISSUE OF MARKET VOLATILITY, HOW IS THE PORTFOLIO GEARED TO MANAGE
IT?
By what we do, as well as by what we don't do. Basically, we continue to
focus on the best stocks in each global sector, regardless of where these
companies happen to be located. Our long-term experience strongly suggests that
if you buy well-managed companies, with strong franchises and good balance
sheets, your investments in them will appreciate over time.
On the other hand, we don't try to play short-term market sentiment, which
can be quite painful if you're on the wrong side of it. For example, investors
that made and kept big sector bets on New Economy stocks earlier in the period
achieved tremendous returns, only to give them up later in the period when
stocks corrected sharply and value stocks came into vogue. In other words, we
don't try to manage volatility by seeking to anticipate which direction the
market will take. Rather, we stick with quality companies that perform well
year-in and year-out, as these will continue to thrive long after the latest
investment fad has run its course.
WHAT IS YOUR OUTLOOK OVER THE NEAR TERM, AND HOW ARE YOU POSITIONING THE
PORTFOLIO IN LIGHT OF IT?
We believe that the risk of a hard landing in the U.S. has markedly
increased in recent months. This said, do we expect a hard landing in other
markets? No, but we think that their growth will be much slower than in recent
years. Even so, we expect growth will be better in the non-U.S. markets than in
the U.S., particularly in Europe, which is only now beginning to receive the
benefits of numerous corporate restructurings, the like of which has helped to
improve the fortunes of many U.S. companies in recent years.
International markets, in general, are much more attractively priced than
the U.S. market. In particular, we like some of the European and Asian names,
and so we are overweight continental Europe and the developed Far East
(Australia, Singapore, Hong Kong, and New Zealand). We're very light, relative
to the benchmark, in emerging markets, as we can't find that many stocks that we
like. There appear to be better opportunities elsewhere. We are still
underweight Japan, although on a case-by-case basis, we are finding some
Japanese companies that are coming to grips with their problems and are
otherwise satisfying our bottom-up investment criteria.
FINALLY, IF NEW INVESTORS WERE TO ASK YOU WHY THEY SHOULD BE IN THIS PORTFOLIO
AT THE PRESENT TIME, WHAT WOULD TO SAY?
I would say that now is an excellent time to consider investing in overseas
markets, as valuations are very attractive, and their near-term growth potential
is greater than that of the U.S. Why this portfolio? Because we possess the
substantial analytical resources needed to continuously monitor all global
markets and identify the best companies within each sector, wherever they may
be. I would add that we also offer the experience, the insights and the
discipline needed to realize the investment potential of a long-term,
international investment program and, as such, deserve serious consideration by
anyone who seeks the diversification and return that can be achieved in
international markets.
4
FUND FACTS
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INVESTMENT OBJECTIVE
J.P. Morgan Institutional International Opportunities Fund seeks to provide
a high total return from a portfolio comprised of equity securities of foreign
corporations. The portfolio is designed for investors with a long-term
investment horizon who want to diversify their investments by adding
international equities and take advantage of investment opportunities outside
the U.S. As an international investment, the portfolio is subject to foreign
market, political, economic, and currency risks.
- --------------------------------------------------------------------------------
Inception Date: 2/26/1997
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Fund Net Assets as of 11/30/2000: $461,016,020
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Portfolio Net Assets as of 11/30/2000:
$542,025,322
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Dividend Payable Date
(if applicable): 12/19/2000
- --------------------------------------------------------------------------------
Capital Gain Payable Date
(if applicable): 12/19/2000
EXPENSE RATIOS
The Fund's current annual expense ratio of 0.91% 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 November 30, 2000
PORTFOLIO ALLOCATION
(As a percentage of total investment securities)
[data from pie chart]
Europe/Africa 57.6%
Japan 17.8%
Asia/Pacific (ex-Japan) 13.4%
Short-Term Investments 9.1%
Latin America 1.3%
Canada 0.8%
LARGEST EQUITY % OF TOTAL
HOLDINGS COUNTRY INVESTMENTS
- ----------------------------------------------------------------------------
Vodafone Group Plc United Kingdom 3.4%
Total Fina Elf S.A., B Shares France 3.0%
Koninklijke (Royal) Philips
Electronics NV Netherlands 2.8%
Nestle S.A. Switzerland 2.7%
Roche Holding AG Switzerland 2.5%
Zurich Financial Services AG Switzerland 2.4%
Invensys Plc United Kingdom 2.3%
Takeda Chemical
Industries Ltd. Japan 2.0%
Rohm Co. Ltd. Japan 2.0%
Vivendi S.A. France 2.0%
DISTRIBUTED BY FUNDS DISTRIBUTOR, INC. J.P. MORGAN INVESTMENT MANAGEMENT INC.
SERVES AS INVESTMENT ADVISOR. SHARES OF THE FUND ARE NOT INSURED BY THE FDIC,
ARE NOT BANK DEPOSITS OR OTHER OBLIGATIONS OF THE FINANCIAL INSTITUTION AND ARE
NOT GUARANTEED BY THE FINANCIAL INSTITUTION. SHARES OF THE FUND ARE SUBJECT TO
INVESTMENT RISK, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL INVESTED.
References to specific securities and their issuers are for illustrative
purposes only and are not intended to be, and should not be interpreted as,
recommendations to purchase or sell securities. Opinions expressed herein and
other Fund data presented are based on current market conditions and are subject
to change without notice. The Fund invests in foreign securities which involve
special risks including economic and political instability and currency
fluctuations; prospective investors should refer to Fund's prospectus for
discussion of these risks. The Fund invests through a master portfolio (another
Fund with the same objective).
CALL J.P. MORGAN FUNDS SERVICES AT (800) 521-5411 FOR A PROSPECTUS CONTAINING
MORE COMPLETE INFORMATION ABOUT THE FUND, INCLUDING MANAGEMENT FEES AND OTHER
EXPENSES. PLEASE READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
5
J.P. MORGAN INSTITUTIONAL INTERNATIONAL OPPORTUNITIES FUND
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
NOVEMBER 30, 2000
ASSETS
Investment in The International Opportunities
Portfolio ("Portfolio"), at value $462,287,389
Receivable for Shares of Beneficial Interest Sold 60,040
Deferred Organization Expenses 3,659
Prepaid Trustees' Fees and Expenses 509
Prepaid Expenses and Other Assets 848
------------------
TOTAL ASSETS 462,352,445
------------------
LIABILITIES
Payable for Shares of Beneficial Interest Redeemed 1,211,753
Shareholder Servicing Fee Payable 38,954
Administrative Services Fee Payable 9,266
Fund Services Fee Payable 317
Administration Fee Payable 168
Accrued Expenses and Other Liabilities 75,967
------------------
TOTAL LIABILITIES 1,336,425
==================
NET ASSETS
Applicable to 40,484,027 Shares of Beneficial Interest Outstanding
(par value $0.001, unlimited shares authorized) $461,016,020
==================
Net Asset Value, Offering and Redemption Price Per Share $11.39
==================
ANALYSIS OF NET ASSETS
Paid-in Capital $468,696,791
Undistributed Net Investment Income 1,276,511
Accumulated Net Realized Gain on Investment 3,688,221
Net Unrealized Depreciation on Investment (12,645,503
------------------
NET ASSETS $461,016,020
==================
The Accompanying Notes are an Integral Part of the Financial Statements.
6
J.P. MORGAN INSTITUTIONAL INTERNATIONAL OPPORTUNITIES FUND
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
FOR THE YEAR ENDED NOVEMBER 30, 2000
INVESTMENT INCOME
INCOME
Allocated Investment Income from Portfolio $ 8,083,318
Allocated Portfolio Expenses (3,478,604)
-------------------
Investment Income 4,604,714
-------------------
FUND EXPENSES
Shareholder Servicing Fee 461,918
Administrative Services Fee 111,950
Financial and Fund Accounting Services Fee 42,742
Registration Fees 37,080
Transfer Agent Fees 32,640
Professional Fees 15,180
Printing Expenses 8,101
Fund Services Fee 7,064
Administration Fee 5,089
Trustees' Fees and Expenses 4,098
Amortization of Organization Expenses 2,956
Miscellaneous 14,756
-------------------
Total Fund Expenses 743,574
-------------------
NET INVESTMENT INCOME 3,861,140
-------------------
REALIZED AND UNREALIZED GAIN (LOSS)
NET REALIZED GAIN ON INVESTMENT ALLOCATED FROM PORTFOLIO 11,838,741
-------------------
NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION)
ON INVESTMENT ALLOCATED FROM PORTFOLIO (75,486,528)
-------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(59,786,647)
===================
The Accompanying Notes are an Integral Part of the Financial Statements.
7
J.P. MORGAN INSTITUTIONAL INTERNATIONAL OPPORTUNITIES FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
FOR THE YEARS ENDED NOVEMBER 30
INCREASE IN NET ASSETS
2000 1999
FROM OPERATIONS
Net Investment Income $ 3,861,140 $ 2,283,600
Net Realized Gain on Investment Allocated from Portfolio 11,838,741 28,828,501
Net Change in Unrealized Appreciation (Depreciation)
on Investment Allocated from Portfolio (75,486,528) 52,971,916
------------------ -------------------
Net Increase (Decrease) in Net Assets Resulting from Operations (59,786,647) 84,084,017
------------------ -------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (5,681,844) (8,982,091)
------------------ -------------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Proceeds from Shares of Beneficial Interest Sold 369,444,246 137,481,093
Reinvestment of Distributions 1,418,151 2,948,397
Cost of Shares of Beneficial Interest Redeemed (214,645,692) (169,181,904)
------------------ -------------------
Net Increase (Decrease) from Transactions in
Shares of Beneficial Interest 156,216,705 (28,752,414)
------------------ -------------------
Total Increase in Net Assets 90,748,214 46,349,512
------------------ -------------------
NET ASSETS
Beginning of Year 370,267,806 323,918,294
------------------ -------------------
End of Year $ 461,016,020 $ 370,267,806
================== ===================
Undistributed Net Investment Income $1,276,511 $4,171,574
================== ===================
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Shares of Beneficial Interest Sold 28,151,478 11,952,452
Shares of Beneficial Interest Reinvested 107,589 296,229
Shares of Beneficial Interest Redeemed (16,442,530) (15,635,430)
------------------ -------------------
Net Increase (Decrease) in Shares of Beneficial Interest 11,816,537 (3,386,749)
================== ===================
The Accompanying Notes are an Integral Part of the Financial Statements.
8
J.P. MORGAN INSTITUTIONAL INTERNATIONAL OPPORTUNITIES FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT
EACH PERIOD IS AS FOLLOWS:
FOR THE PERIOD
FEBRUARY 26, 1997
FOR THE YEARS ENDED NOVEMBER 30 (COMMENCEMENT OF
----------------------------------------- OPERATIONS) THROUGH
2000 1999 1998 NOVEMBER 30, 1997
------------------------------------------------------------------
NET ASSET VALUE PER SHARE, BEGINNING OF PERIOD $12.92 $10.11 $9.94 $10.00
------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.08 0.25 0.22 0.07
Net Realized and Unrealized Gain(Loss) on Investment (1.42) 2.88 0.05 (0.13)
------------------------------------------------------------------
Total From Investment Operations (1.34) 3.13 0.27 (0.06)
------------------------------------------------------------------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (0.19) (0.32) (0.10) -
------------------------------------------------------------------
NET ASSET VALUE PER SHARE, END OF PERIOD $11.39 $12.92 $10.11 $9.94
==================================================================
RATIOS AND SUPPLEMENTAL DATA
Total Return (10.55)% 31.87% 2.69% (0.60)%(a)
Net Assets, End of Period (in thousands) $461,016 $370,268 $323,918 $211,229
Ratios to Average Net Assets
Net Expenses 0.91% 0.94% 0.99% 0.99%(b)
Net Investment Income 0.84% 0.76% 1.13% 1.35%(b)
Expenses without Reimbursement and
including Interest Expense 0.91% 0.95% 1.02% 1.17%(b)
Interest Expense - 0.01% - -
(a) Not annualized
(b) Annualized
The Accompanying Notes are an Integral Part of the Financial Statements.
9
J.P. MORGAN INSTITUTIONAL INTERNATIONAL OPPORTUNITIES FUND
NOTES TO FINANCIAL STATEMENTS
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NOVEMBER 30, 2000
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION--J.P. Morgan Institutional International Opportunities Fund
(the "Fund") is a separate series of J.P. Morgan Institutional Funds, a
Massachusetts business trust (the "Trust") which was organized on November 4,
1992. The Trust is registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company. The Fund commenced
operations on February 26, 1997.
The Fund invests all of its investable assets in The International
Opportunities Portfolio (the "Portfolio"), a diversified open-end management
investment company having the same investment objective as the Fund. The value
of such investment included in the Statement of Assets and Liabilities reflects
the Fund's proportionate interest in the net assets of the Portfolio
(approximately 85.3% at November 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 accounting
principles generally accepted in the United States of America 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:
SECURITY VALUATION--Valuation of securities by the Portfolio is discussed in
Note 1 of the Portfolio's Notes to Financial Statements that are included
elsewhere in this report.
INVESTMENT INCOME--The Fund earns income, net of expenses, daily on its
investment in the Portfolio. All net investment income, realized and unrealized
gains and losses of the Portfolio is allocated pro-rata among the Fund and other
investors in the Portfolio at the time of such determination.
EXPENSES--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.
ORGANIZATION EXPENSES--The Fund incurred organization expenses in the amount
of $12,000, which have been deferred and are being amortized on a straight-line
basis over a period not to exceed five years beginning with the commencement of
operations of the Fund.
INCOME TAX STATUS--It is the Fund's policy to distribute all net investment
income and net realized gains to shareholders and to otherwise qualify as a
regulated investment company under the provisions of the Internal Revenue Code.
Accordingly, no provision has been made for federal or state income taxes.
DISTRIBUTIONS TO SHAREHOLDERS--Distributions to a shareholder are recorded
on the ex-dividend date. Distributions from net investment income and
distributions from net realized gains, if any, are paid annually.
- --------------------------------------------------------------------------------
2. TRANSACTIONS WITH AFFILIATES
ADMINISTRATIVE SERVICES--The Trust has an Administrative Services Agreement
(the "Services Agreement") with Morgan Guaranty Trust Company of New York
("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 Trust and certain other registered investment companies
for which J.P. Morgan Investment Management, Inc. ("JPMIM") acts as investment
advisor 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 Funds Distributor, Inc. 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 and certain other investment companies for which Morgan
provides similar services.
ADMINISTRATION--The Trust has retained Funds Distributor, Inc. ("FDI"), a
registered broker-dealer, to serve as the co-administrator and distributor for
the Fund. Under a Co-Administration Agreement between FDI and the Trust, 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 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 and certain other investment
companies for which FDI provides similar services.
10
J.P. MORGAN INSTITUTIONAL INTERNATIONAL OPPORTUNITIES FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 2000
- --------------------------------------------------------------------------------
2. TRANSACTIONS WITH AFFILIATES (CONTINUED)
SHAREHOLDER SERVICING--The Trust has a Shareholder Servicing Agreement with
Morgan under which Morgan provides account administration and personal account
maintenance service to Fund shareholders. The agreement provides for the Fund to
pay Morgan a fee for these services that is computed daily and paid monthly at
an annual rate of 0.10% of the average daily net assets of the Fund.
FUND SERVICES--The Trust has a Fund Services Agreement with Pierpont Group,
Inc. ("PGI") 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 PGI.
TRUSTEES--Each Trustee receives an aggregate annual fee of $75,000 for
serving on the boards of the Trust, the J.P. Morgan Funds, the J.P. Morgan
Institutional Funds, and other registered investment companies in which they
invest. The Trustees' fees and expenses shown in the financial statements
represent the Fund's allocated portion of the total Trustees' fees and expenses.
The Trust's Chairman and Chief Executive Officer also serves as Chairman of PGI
and receives compensation and employee benefits from PGI. The allocated portion
of such compensation and benefits included in the Fund Services Fee shown on the
Statement of Operations was $1,300.
- --------------------------------------------------------------------------------
3. FEDERAL INCOME TAXES
For federal income tax purposes, the Fund utilized its capital loss
carryforward of $8,924,231.
The Fund elected to treat net capital losses of approximately $2,042,801 and
foreign currency losses of $1,893,558 incurred in the one month period ended
November 30, 2000 as having been incurred in the current fiscal year.
Income distributions and capital gain distributions, if any, are determined
in accordance with income tax regulations which may differ from generally
accepted accounting principles. These differences are primarily due to the
differing treatment of net operating losses, foreign currency and tax
allocation. Accordingly, these permanent differences in the character of income
and distributions between financials statements and tax basis have been
reclassified to paid-in-capital. During the year ended November 30, 2000, the
following reclassifications were made: undistributed net investment income was
decreased by $1,074,359, accumulated net realized gain on investment was
increased by $1,078,568, and paid-in-capital was decreased by $4,209. The
adjustments are primarily attributable to foreign currency reclasses. Net
investment income, net realized gains and net assets were not affected by this
change.
- --------------------------------------------------------------------------------
4. BANK LOANS
The Fund may borrow money for temporary or emergency purposes, such as
funding shareholder redemptions. Effective May 23, 2000, the Fund, along with
certain other Funds managed by JPMIM, entered into a $150,000,000 bank line of
credit agreement with DeutscheBank. Borrowings under the agreement will bear
interest at approximate market rates. A commitment fee is charged at an annual
rate of 0.085% on the unused portion of the committed amount.
- --------------------------------------------------------------------------------
5. CONCENTRATIONS OF RISK
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.
- --------------------------------------------------------------------------------
6. SUBSEQUENT EVENT
The merger of J.P. Morgan & Co. Incorporated, the former parent company of
the Fund's adviser, J.P. Morgan Investment Management, Inc. ("JPMIM"), with and
into The Chase Manhattan Corporation was consummated on December 31, 2000. J.P.
Morgan Chase & Co. will be the new parent company of JPMIM, which will
continue to serve as the Fund's adviser.
11
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Trustees and Shareholders of
J.P. Morgan Institutional International Opportunities Fund
In our opinion, the accompanying statement of assets and liabilities and the
related statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
J.P. Morgan Institutional International Opportunities Fund (one of the series
constituting part of J.P. Morgan Institutional Funds, hereafter referred to as
the "Fund") at November 30, 2000, 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 financial highlights for each of the three years in
the period then ended and for the period February 26, 1997 (commencement of
operations) through November 30, 1997, in conformity with accounting principles
generally accepted in the United States of America. These financial statements
and financial highlights (hereafter referred to as "financial statements") are
the responsibility of the Fund'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 auditing standards
generally accepted in the United States of America, 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 provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
January 16, 2001
12
THE INTERNATIONAL OPPORTUNITIES PORTFOLIO
Annual Report November 30, 2000
(The following pages should be read in conjunction
with J.P. Morgan Institutional International Opportunities Fund
Annual Financial Statements)
13
THE INTERNATIONAL OPPORTUNITIES PORTFOLIO
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
NOVEMBER 30, 2000
SHARES VALUE
- ----------------------------------------------------------------------------------------
COMMON STOCKS - 89.0%
AUSTRALIA - 3.7%
306,000 AMP Ltd.(s) $ 3,019,457
2,271,200 Santos Ltd.(s) 7,367,668
2,100,000 Southern Pacific Petroleum(s)(+) 2,373,817
1,961,000 WMC Ltd.(s) 7,464,585
-------------------------------
20,225,527
-------------------------------
CANADA - 0.8%
121,400 Nortel Networks Corp.(s) 4,549,834
--------------------------------
DENMARK - 0.6%
17,552 Novo Nordisk A/S Cl B(s) 3,401,153
-------------------------------
FINLAND - 1.4%
72,700 Sampo Insurance Co. Ltd., A Shares(s) 3,588,170
402,164 Stora Enso Oyj, R Shares(s) 3,969,911
------------------------------
7,558,081
------------------------------
FRANCE - 13.1%
160,000 Air France(s) 2,976,323
40,000 Alcatel Optronics(s)(+) 2,016,017
213,700 Alcatel S.A.(s) 10,603,151
131,610 BNP Paribas S.A.(s) 10,173,196
1,336 Cie Generale D'Optique Essilor
International S.A.(s) 388,891
60,597 Coflexip Stena Offshore(s) 7,226,488
10,570 Compagnie de Saint-Gobain S.A.(s) 1,458,343
54,700 Sidel S.A.(s) 2,714,049
37,900 Suez Lyonnaise des Eaux S.A.(s) 6,423,337
13,050 Total Fina Elf S.A.(s)(+) 114
114,100 Total Fina Elf S.A., B Shares(s) 16,318,445
171,711 Vivendi S.A.(s) 10,612,363
-------------------------------
70,910,717
-------------------------------
GERMANY - 3.8%
23,400 Allianz AG(s) 8,078,377
214,000 Commerzbank AG(s) 5,420,787
75,000 Dresdner Bank AG(s) 2,772,023
44,100 Merck KGaA(s) 1,715,938
43,114 Schering AG(s) 2,352,355
-------------------------------
20,339,480
-------------------------------
HONG KONG - 2.7%
632,000 DAO Heng Bank Group Ltd.(s) 3,087,156
2,869,100 Hong Kong Electric Holdings Ltd.(s) 9,894,971
2,000 i-Cable Communications Ltd.(s)(+) 763
3,668,000 Sunevision Holdings Ltd.(s)(+) 1,481,346
-------------------------------
14,464,236
-------------------------------
INDIA - 0.9%
360,500 Reliance Industries Ltd. GDR(s) 4,938,850
-------------------------------
IRELAND - 0.5%
271,100 Greencore Group Plc(s) 578,164
SHARES VALUE
- ----------------------------------------------------------------------------------------
201,435 Trintech Group Plc(s)(+) $ 1,413,271
99,100 Trintech Group Plc ADR(s)(+) 718,475
-------------------------------
2,709,910
-------------------------------
ITALY - 0.7%
712,000 Unicredito Italiano SPA(s) 3,563,719
-------------------------------
JAPAN - 17.8%
1,026,000 Chuo Mitsui Trust & Banking Co.(s) 3,241,706
760,000 Hitachi, Ltd.(s) 7,251,818
22,000 Macnica Inc.(s) 2,544,076
412,000 Matsushita Electric Industrial Co. Ltd.(s) 10,339,517
2,068,000 Mitsubishi Chemical Corp.(s) 5,787,226
936,000 Mitsubishi Corp.(s) 7,165,228
1,017,000 Nippon Yusen Kabushiki Kaisha(s) 4,360,867
129,600 Promise Co., Ltd.(s) 9,546,703
355,000 Ricoh Co., Ltd.(s) 6,310,043
44,700 Rohm Co. Ltd.(s) 10,774,002
98,000 Taiheiyo Cement Corp.(s) 162,780
177,000 Takeda Chemical Industries Ltd.(s) 10,961,137
613,000 Tokio Marine & Fire Insurance Co., Ltd.(s) 6,911,641
465,000 Tostem Corp.(s) 6,665,944
920 West Japan Railway Co.(s) 4,135,951
-------------------------------
96,158,639
-------------------------------
MEXICO - 0.8%
1,745,000 Consorcio ARA S.A. de C.V.(s)(+) 2,132,458
220,000 TV Azteca S.A. de C.V. ADR(s) 2,200,000
-------------------------------
4,332,458
-------------------------------
NETHERLANDS - 5.1%
85,000 Akzo Nobel NV(s) 4,036,168
238,700 Heineken Holding NV(s) 8,674,900
450,658 Koninklijke (Royal) Philips
Electronics NV(s) 14,910,786
-------------------------------
27,621,854
-------------------------------
PHILIPPINES - 0.5%
2,200,000 ABS-CBN Broadcasting Corp. PDR(s) 2,061,461
1,581,220 First Philippine Holdings Corp.(s)(+) 693,028
-------------------------------
2,754,489
-------------------------------
RUSSIAN FEDERATION - 1.0%
146,000 OAO Lukoil Holding(s) 5,320,240
-------------------------------
SINGAPORE - 2.9%
555,414 DBS Group Holdings Ltd.(s) 6,301,447
3,001,500 Neptune Orient Lines Ltd.(s)(+) 2,361,499
448,000 Singapore Press Holdings Ltd.(s) 6,972,862
-------------------------------
15,635,808
-------------------------------
SOUTH KOREA - 0.8%
154,852 H&CB ADR(s)(+) 1,577,555
492,000 Hyundai Motor Co. Ltd. GDR(s) 2,829,000
454 Samsung Electronics GDR 144A(s) 28,897
-------------------------------
4,435,452
-------------------------------
The Accompanying Notes are an Integral Part of the Financial Statements.
14
THE INTERNATIONAL OPPORTUNITIES PORTFOLIO
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 2000
SHARES/PRINCIPAL AMOUNT VALUE
- -----------------------------------------------------------------------------------------
SPAIN - 5.8%
80,800 Acerinox S.A.(s) $ 2,102,994
593,400 Banco Bilbao Vizcaya Argentaria S.A.(s) 7,934,039
341,726 Endesa S.A.(s) 5,529,845
77,060 Indra Sistemas S.A.(s) 603,708
390,000 Repsol YPF S.A.(s) 6,375,522
552,000 Telefonica S.A.(s)(+) 8,673,050
-----------------------------
31,219,158
-----------------------------
SWEDEN - 2.2%
131,400 Autoliv, Inc. SDR(s) 2,699,013
402,264 Skandia Forsakrings AB(s) 6,136,842
274,600 Skandinaviska Enskilda Banken Cl A(s) 2,943,414
-----------------------------
11,779,269
-----------------------------
SWITZERLAND - 14.2%
6,400 Barry Callebaut AG(s) 848,024
3,280 Compagnie Financiere Richemont AG A Units(s) 9,053,163
39,000 Credit Suisse Group(s) 6,796,578
6,795 Nestle S.A.(s) 14,758,123
4,670 Novartis AG(s) 7,576,173
1,345 Roche Holding AG(s) 13,327,573
2,440 Swiss Re(s) 5,430,188
4,670 Syngenta AG(s)(+) 209,851
44,450 UBS AG(s) 6,145,869
23,610 Zurich Financial Services AG(s) 12,731,283
-----------------------------
76,876,825
-----------------------------
UNITED KINGDOM - 9.2%
456,000 BBA Group Plc(s) 2,493,296
287,300 British American Tobacco Plc(s) 2,040,217
235,900 Cable & Wireless Plc(s) 2,915,731
5,080,000 Invensys Plc(s) 12,348,972
106,000 Stolt Nielson ADR(s) 1,855,000
2,344,400 Tesco Plc(s) 9,404,184
5,420,378 Vodafone Group Plc(s) 18,535,310
-----------------------------
49,592,710
-----------------------------
VENEZUELA - 0.5%
171,000 Compania Anonima Nacional Telefonos
de Venezuela ADR(s) 2,725,313
-----------------------------
TOTAL COMMON STOCKS 481,113,722
-----------------------------
(Cost $491,869,955)
CONVERTIBLE BONDS - 0.1%
HONG KONG - 0.1%
$633,000 China Mobile (Hong Kong) Ltd.,
2.25%, 11/3/05 621,923
-----------------------------
(Cost $633,000)
SHARES/PRINCIPAL AMOUNT VALUE
- -----------------------------------------------------------------------------------------
PREFERRED STOCKS - 1.8%
AUSTRALIA - 1.8%
1,236,100 News Corp. Ltd.(s) $ 9,524,859
-----------------------------
(Cost $9,756,563)
SHORT-TERM INVESTMENTS - 9.1%
INVESTMENT COMPANIES - 3.9%
21,151,193 Hamilton Money Fund 21,151,193
-----------------------------
TIME DEPOSITS - 4.6%
$25,000,000 Bank of New York, 6.43%,
12/4/00(s) 25,000,000
-----------------------------
U.S. TREASURY SECURITIES - 0.6%
3,140,000 U.S. Treasury Bills, 6.19%,
3/22/01(s)(y) 3,081,815
-----------------------------
TOTAL SHORT-TERM INVESTMENTS 49,233,008
-----------------------------
(Cost $49,233,504)
TOTAL INVESTMENT SECURITIES - 100.0% $540,493,512
=============================
(Cost $551,493,022)
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
CONTRACTS SETTLEMENT CONTRACTUAL VALUE AT APPRECIATION
TO BUY DATE VALUE 11/30/00 (DEPRECIATION)
- ---------------------------------------------------------------------------------------------------
3,690,000 AUD for
2,989,084 CAD 01/24/01 $ 1,941,716 $ 1,935,906 $ (5,810)
4,031,000 EUR for
6,109,182 CHF 01/24/01 3,429,663 3,410,098 (19,565)
9,000,000 EUR for
5,407,650 GBP 01/24/01 7,611,392 7,791,147 179,755
1,898,938 GBP for
4,791,021 CHF 01/24/01 2,665,305 2,586,121 (79,184)
66,988,083 HKD for
6,073,262 GBP 01/29/01 8,600,819 8,579,102 (21,717)
308,658,510 JPY for
3,359,000 EUR 01/24/01 2,916,391 2,797,932 (118,459)
62,700,378 JPY for
689,000 EUR 01/24/01 592,431 562,556 (29,875)
243,437,250 JPY for
2,670,000 EUR 01/24/01 2,304,745 2,193,184 (111,561)
7,448,334 SGD for
3,003,360 GBP 01/26/01 4,309,309 4,317,803 8,494
34,049,421 CAD 01/24/01 22,594,174 22,184,756 (409,418)
55,000,000 DKK 01/24/01 6,336,406 6,433,602 97,196
55,024,892 DKK 12/04/00 6,404,574 6,423,189 18,615
10,467,070 EUR 01/24/01 8,784,698 9,135,731 351,033
The Accompanying Notes are an Integral Part of the Financial Statements.
15
THE INTERNATIONAL OPPORTUNITIES PORTFOLIO
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 2000
UNREALIZED
CONTRACTS SETTLEMENT CONTRACTUAL VALUE AT APPRECIATION
TO BUY DATE VALUE 11/30/00 (DEPRECIATION)
- -------------------------------------------------------------------------------------------------------------
7,010,000 EUR 01/24/01 $ 5,897,303 $ 6,118,376 $ 221,073
6,672,000 EUR 01/24/01 5,647,448 5,823,367 175,919
4,703,000 EUR 01/24/01 3,988,614 4,104,811 116,197
6,722,000 EUR 01/24/01 5,810,228 5,867,008 56,780
3,970,000 EUR 01/24/01 3,423,291 3,465,043 41,752
8,000,000 EUR 01/24/01 6,896,000 6,982,455 86,455
3,305,000 EUR 01/24/01 2,831,592 2,884,627 53,035
3,305,000 EUR 01/24/01 2,825,544 2,884,627 59,083
1,300,000 EUR 01/24/01 1,107,444 1,134,649 27,205
3,000,000 EUR 01/24/01 2,558,100 2,618,421 60,321
3,000,000 EUR 01/24/01 2,607,000 2,611,421 4,421
33,124,055 GBP 01/24/01 48,211,400 47,015,599 (1,195,801)
8,000,000 GBP 01/24/01 11,404,000 11,355,035 (48,965)
2,836,000 GBP 01/24/01 4,103,891 4,025,360 (78,531)
1,200,000 GBP 01/24/01 1,707,312 1,703,255 (4,057)
25,793,400 HKD 01/29/01 3,311,856 3,311,155 (701)
1,323,245,984 JPY 01/24/01 12,413,189 12,060,860 (352,329)
500,000,000 JPY 01/24/01 4,694,836 4,557,301 (137,535)
548,500,000 JPY 01/24/01 5,000,000 4,999,359 (641)
45,579,508 SEK 01/24/01 4,461,406 4,563,868 102,462
-----------------------------------------------------------------
$217,392,077 $216,437,724 $ (954,353)
=================================================================
UNREALIZED
CONTRACTS SETTLEMENT SETTLEMENT VALUE AT APPRECIATION
TO SELL DATE VALUE 11/30/00 (DEPRECIATION)
- --------------------------------------------------------------------------------------------------------------
39,607,823 AUD 01/24/01 $ 20,912,336 $ 20,842,040 $ 70,296
66,239,854 CHF 01/24/01 37,192,506 38,359,744 (1,167,238)
65,000,000 DKK 01/24/01 7,540,603 7,603,348 (62,745)
55,024,892 DKK 01/24/01 6,415,775 6,436,514 (20,739)
6,000,000 EUR 01/24/01 4,980,000 5,236,841 (256,841)
14,635,000 EUR 01/24/01 12,789,234 12,773,528 15,706
2,020,000 EUR 01/24/01 1,736,756 1,763,070 (26,314)
6,000,000 EUR 01/24/01 5,196,000 5,236,841 (40,841)
3,000,000 EUR 01/24/01 2,613,135 2,618,421 (5,286)
3,170,000 GBP 01/24/01 4,441,392 4,499,432 (58,040)
85,668,000 HKD 01/29/01 11,000,000 10,997,388 2,612
80,457,995 HKD 01/23/01 10,334,870 10,327,375 7,495
937,104,992 JPY 01/24/01 8,672,000 8,541,339 130,661
472,750,902 JPY 01/24/01 4,338,000 4,308,936 29,064
998,339,240 JPY 01/24/01 9,160,000 9,099,464 60,536
1,000,000,000 JPY 01/24/01 9,199,632 9,114,602 85,030
359,745,696 JPY 01/24/01 3,306,000 3,278,939 27,061
484,920,392 JPY 01/24/01 4,444,000 4,419,856 24,144
146,523,986 JPY 01/24/01 1,343,000 1,335,508 7,492
219,146,337 JPY 01/24/01 2,007,000 1,997,432 9,568
400,000,000 JPY 01/24/01 3,773,585 3,645,841 127,744
229,697,270 JPY 01/24/01 2,090,000 2,093,599 (3,599)
31,736,628 SEK 01/24/01 3,164,170 3,177,783 (13,613)
25,414,600 SGD 01/26/01 14,622,900 14,575,113 47,787
-----------------------------------------------------------------
$191,272,894 $192,282,954 $(1,010,060)
=================================================================
FUTURES CONTRACTS
UNREALIZED
UNDERLYING FACE APPRECIATION PURCHASED
PURCHASED EXPIRATION DATE AMOUNT AT VALUE (DEPRECIATION)
- ------------------------------------------------------------------------------------------------------------
424 D.J. EURO STOXX 50 Index December 2000 $17,730,641 $(805,256)
122 FTSE 100 Index December 2000 10,627,229 (451,955)
88 TOPIX Index December 2000 10,855,518 (231,142)
------------------------------------------------------
$39,213,388 $(1,488,353)
======================================================
% OF TOTAL
MARKET SECTOR INVESTMENTS
INDUSTRIAL CYCLICAL 18.7%
FINANCE 12.9%
SHORT-TERM INVESTMENTS 9.1%
INSURANCE 8.5%
PHARMACEUTICALS 7.3%
ENERGY 7.0%
TELECOMMUNICATIONS 6.5%
CONSUMER CYCLICAL 5.7%
SEMICONDUCTORS 5.5%
CONSUMER STABLE 5.0%
CONSUMER SERVICES 3.8%
SOFTWARE & SERVICES 3.7%
RETAIL 3.4%
UTILITIES 2.9%
ADR - American Depositary Receipt
AUD - Australian Dollar
CAD - Canadian Dollar
CHF - Swiss Franc
DKK - Danish Krone
EUR - Euro
GBP - British Pound
GDR - Global Depositary Receipt
HKD - Hong Kong Dollar
JPY - Japanese Yen
PDR - Philippine Depositary Receipt
SEK - Swedish Krona
SDR - Swedish Depositary Receipt
SGD - Singapore Dollar
144A - Securities restricted for resale to Qualified Institutional Buyers
(s) Security is fully or partially segregated with custodian as collateral for
futures
or with brokers as initial margin for futures contracts.
(y) Yield to maturity
(z) Category is less than 0.05%.
(+) Non-income producing security
The Accompanying Notes are an Integral Part of the Financial Statements.
16
THE INTERNATIONAL OPPORTUNITIES PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
NOVEMBER 30, 2000
ASSETS
Investments at Value (Cost $551,493,022) $540,493,512
Foreign Currency at Value (Cost $7,093,400) 7,067,624
Receivable for Investments Sold 17,598,322
Unrealized Appreciation of Forward Foreign Currency Contracts 2,304,992
Foreign Tax Reclaim Receivable 1,451,994
Dividend and Interest Receivable 475,907
Prepaid Trustees' Fees and Expenses 599
Deferred Organization Expenses 3,180
Prepaid Expenses and Other Assets 1,005
----------------
TOTAL ASSETS 569,397,135
----------------
LIABILITIES
Payable for Investments Purchased 10,435,220
Due to Custodian 11,555,736
Unrealized Depreciation of Forward Foreign Currency Contracts 4,269,405
Variation Margin Payable 630,452
Advisory Fee Payable 276,209
Administrative Services Fee Payable 10,951
Fund Services Fee Payable 379
Administration Fee Payable 300
Accrued Expenses 193,161
----------------
TOTAL LIABILITIES 27,371,813
----------------
NET ASSETS
Applicable to Investors' Beneficial Interests $542,025,32
================
The Accompanying Notes are an Integral Part of the Financial Statements.
17
THE INTERNATIONAL OPPORTUNITIES PORTFOLIO
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
FOR THE YEAR ENDED NOVEMBER 30, 2000
INVESTMENT INCOME
INCOME
Dividend Income (Net of Foreign Withholding Tax of $1,290,896) $ 8,007,926
Interest Income 1,531,888
--------------------
Investment Income 9,539,814
--------------------
EXPENSES
Advisory Fee 3,268,904
Custodian Fees and Expenses 616,278
Administrative Services Fee 132,072
Professional Fee 53,353
Fund Services Fee 8,347
Trustees' Fees and Expenses 5,359
Administration Fee 3,736
Organization Expenses 2,570
Miscellaneous Expenses 11,664
--------------------
Total Expenses 4,102,283
--------------------
NET INVESTMENT INCOME 5,437,531
--------------------
REALIZED AND UNREALIZED GAIN (LOSS)
NET REALIZED GAIN (LOSS) ON
Investment Transactions 17,983,724
Futures Contracts 621,663
Foreign Currency Transactions (2,675,831)
--------------------
Net Realized Gain 15,929,556
--------------------
NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON
Investment Transactions (84,288,144
Futures Contracts (2,539,215)
Foreign Currency Contracts and Translations (2,792,975)
--------------------
Net Change in Unrealized Appreciation (Depreciation) (89,620,334)
--------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(68,253,247)
====================
The Accompanying Notes are an Integral Part of the Financial Statements.
18
THE INTERNATIONAL OPPORTUNITIES PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
FOR THE YEARS ENDED NOVEMBER 30
INCREASE IN NET ASSETS 2000 1999
FROM OPERATIONS
Net Investment Income $ 5,437,531 $ 4,482,162
Net Realized Gain on Investment, Futures, and
Foreign Currency Transactions 15,929,556 34,344,844
Net Change in Unrealized Appreciation (Depreciation) on
Investments, Futures and Foreign Currency
Contracts and Translations (89,620,334) 63,164,934
------------------- ------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations (68,253,247) 101,991,940
------------------- ------------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 610,156,921 252,736,681
Withdrawals (438,270,720) (296,593,455)
------------------- ------------------
Net Increase (Decrease) from Transactions in
Investors' Beneficial Interests 171,886,201 (43,856,774)
------------------- ------------------
Total Increase in Net Assets 103,632,954 58,135,166
------------------- ------------------
NET ASSETS
Beginning of Year 438,392,368 380,257,202
------------------- ------------------
End of Year $ 542,025,322 $ 438,392,368
=================== ==================
SUPPLEMENTARY DATA
FOR THE YEARS ENDED NOVEMBER 30 (EXCEPT AS NOTED)
2000 1999 1998 1997(a)
------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
Net Expenses 0.76% 0.79% 0.85% 0.89%(b)
Net Investment Income 1.00% 1.26% 1.07% 1.26%(b)
Expenses without Reimbursement 0.76% 0.79% 0.85% 0.92%(b)
Portfolio Turnover 86% 80% 143% 72%(c)
(a) For the period February 26, 1997 (commencement of operations) through
November 30, 1997.
(b) Annualized
(c) Not annualized
The Accompanying Notes are an Integral Part of the Financial Statements.
19
THE INTERNATIONAL OPPORTUNITIES PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOVEMBER 30, 2000
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION--The International Opportunities Portfolio (the "Portfolio") is
one of five subtrusts (Portfolios) comprising The Series Portfolio (the "Series
Portfolio"). The Series Portfolio is registered under the Investment Company Act
of 1940, as amended, as a diversified no-load open-end management investment
company, which was organized as a trust under the laws of the State of New York
on June 24, 1994. The Portfolio's investment objective is to provide a high
total return from a Portfolio of equity securities of foreign companies in
developed and, to a lesser extent, developing markets. The Portfolio commenced
operations on February 26, 1997. The Declaration of Trust permits the Trustees
to issue an unlimited number of beneficial interests in the Portfolio.
The preparation of financial statements in accordance with accounting
principles generally accepted in the United States of America 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:
SECURITY VALUATIONS--Securities traded on principal securities exchanges are
valued at the last reported sales price, or mean of the latest bid and asked
prices when no last sales price is available. Securities traded over-the-counter
and certain foreign securities are valued at the quoted bid price from a market
maker or dealer. When valuations are not readily available, securities are
valued at fair value as determined in accordance with procedures adopted by the
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 when 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 adopted by the Trustees.
SECURITY TRANSACTIONS--Security transactions are accounted for as of the
trade date. Realized gains and losses are determined on the identified cost
basis, which is also used for federal income tax purposes.
INVESTMENT INCOME--Dividend income less foreign taxes withheld (if any) is
recorded as of the ex-dividend date or as of the time that the relevant
ex-dividend and amount becomes known. Interest income is recorded on the accrual
basis and includes accretion of discounts and amortization of premiums.
ORGANIZATION EXPENSES--The Portfolio incurred organization expenses in the
amount of $12,800 which have been deferred and are being amortized on a
straight-line basis over a period not to exceed five years beginning with the
commencement of operations of the Portfolio.
FUTURES CONTRACTS--The Portfolio may enter into futures contracts in order
to hedge 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 and to manage exposure to changing
interest rates and securities prices. The risks of entering into futures
contracts include the possibility that the change in value of the contract may
not correlate with the changes in value of the underlying securities. Upon
entering into a futures contract, the Portfolio is required to deposit either
cash or securities in an amount equal to a certain percentage of the contract
value (initial margin). Subsequent payments (variation margin) are made or
received daily, in cash, by the Portfolio. The variation margin is equal to the
daily change in the contract value and is recorded as unrealized gain or loss.
The Portfolio will recognize a gain or loss when the contract is closed or
expires.
FOREIGN CURRENCY TRANSACTIONS--All assets and liabilities initially
expressed in foreign currencies are translated into U.S. dollars at prevailing
exchange rates at period end. Purchases and sales of investment securities,
dividend and interest income, and certain expenses are translated at the rates
of exchange prevailing on the respective dates of such transactions. Realized
and unrealized gains and losses from foreign currency translations arise from
changes in currency exchange rates and 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 from changes in foreign
exchange rates from the fluctuations arising from changes in the market prices
of securities during the period.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS-- The Portfolio may enter into
forward foreign currency exchange contracts to facilitate transactions of
securities denominated in a foreign currency, to manage the Portfolio's exposure
to foreign currency exchange fluctuations or to adjust the Portfolio's exposure
relative to the benchmark. The net U.S. dollar value of foreign currency
underlying all contractual commitments held by the Portfolio and the
20
THE INTERNATIONAL OPPORTUNITIES PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
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(Continued)
NOVEMBER 30, 2000
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1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
resulting unrealized appreciation or depreciation are determined daily using
prevailing exchange rates. The Portfolio bears the risk of an unfavorable change
in the foreign currency exchange rate underlying the forward contract.
Additionally, losses may arise if the counterparties do not perform under the
contract terms.
INCOME TAX STATUS--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 requirement of Subchapter
M of the Internal Revenue Code.
FOREIGN TAXES--The Portfolio may be subject to foreign taxes on income,
gains on investments or currency repatriation, a portion of which may be
recoverable. The Portfolio will accrue such taxes and recoveries as applicable,
based upon their current interpretation of tax rules and regulations that exist
in the markets in which they invest.
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2. TRANSACTIONS WITH AFFILIATES
ADVISORY--The Portfolio has an Investment Advisory Agreement with J.P.
Morgan Investment Management, Inc. ("JPMIM"), an affiliate of Morgan Guaranty
Trust Company of New York ("Morgan") and 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.
The Portfolio may invest in one or more affiliated money market funds: J.P.
Morgan Institutional Prime Money Market Fund, J.P. Morgan Institutional Tax
Exempt Money Market Fund, J.P. Morgan Institutional Federal Money Market Fund
and J.P. Morgan Institutional Treasury Money Market Fund. The Advisor has agreed
to reimburse its advisory fee from the Portfolio in an amount to offset any
investment advisory, administrative fee and shareholder servicing fees related
to a Portfolio investment in an affiliated money market fund.
ADMINISTRATIVE SERVICES--The Portfolio has an Administrative Services
Agreement (the "Services Agreement") with Morgan under which Morgan is
responsible for certain aspects of the administration and operation of the
Portfolio. Under the Services Agreement, the Portfolio has agreed to pay Morgan
a fee equal to its allocable share of an annual complex-wide charge. This charge
is calculated based on the aggregate average daily net assets of the Portfolio
and certain other registered investment companies for which JPMIM acts as
investment advisor 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 Funds Distributor, Inc. 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 Trust and certain other investment
companies for which Morgan provides similar services.
ADMINISTRATION--The Portfolio has retained Funds Distributor, Inc. ("FDI"),
a registered broker-dealer, to serve as the co-administrator and distributor for
the Portfolio. Under a Co-Administration Agreement between FDI and the
Portfolio, FDI provides administrative services necessary for the operations of
the Portfolio, furnishes office space and facilities required for conducting the
business of the Portfolio and pays the compensation of the Portfolio's officers
affiliated with FDI. The Portfolio has agreed to pay FDI fees equal to its
allocable share of an annual complex-wide charge of $425,000 plus FDI's
out-of-pocket expenses. The 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 Trust and certain other investment companies for which FDI provides
similar services.
FUND SERVICES--The Portfolio has a Fund Services Agreement with Pierpont
Group, Inc. ("PGI") 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 PGI.
TRUSTEES--Each Trustee receives an aggregate annual fee of $75,000 for
serving on the boards of the Trust, the J.P. Morgan Funds, the J.P. Morgan
Institutional Funds, and other registered investment companies in which they
invest. The Trustees' fees and expenses shown in the financial statements
represent the Portfolio's allocated portion of the total Trustees' fees and
expenses. The Trust's Chairman and Chief Executive Officer also serves as
Chairman of PGI and receives compensation and employee benefits from PGI. The
allocated portion of such compensation and benefits included in the Fund
Services Fee shown on the Statement of Operations was $1,600.
21
THE INTERNATIONAL OPPORTUNITIES PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 2000
- --------------------------------------------------------------------------------
3. FEDERAL INCOME TAXES
As of November 30, 2000, accumulated net unrealized depreciation was
$13,436,401, based on the aggregate cost of investments for federal income tax
purposes of $553,929,913, which consisted of unrealized appreciation of
$37,841,075 and unrealized depreciation of $51,277,476.
- --------------------------------------------------------------------------------
4. INVESTMENT TRANSACTIONS
During the year ended November 30, 2000, the Portfolio purchased
$588,523,716 of investment securities and sold $435,007,448 of investment
securities other than U.S. government securities and short-term investments.
- --------------------------------------------------------------------------------
5. CONCENTRATIONS OF RISK
The Portfolio may have elements of risk not typically associated with
investments in the United States due to concentrated investments in a limited
number of countries or regions which may vary throughout the year. Such
concentrations may subject the Portfolio to additional risks resulting from
political or economic conditions in such countries or regions and the possible
imposition of adverse governmental laws or currency exchange restrictions could
cause the securities and their markets to be less liquid and their prices more
volatile than those of comparable U.S. securities.
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6. 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.
- --------------------------------------------------------------------------------
7. SUBSEQUENT EVENT
The merger of J.P. Morgan & Co. Incorporated, the former parent company of
the Portfolio's adviser, J.P. Morgan Investment Management, Inc. ("JPMIM"),
with and into The Chase Manhattan Corporation was consummated on December 31,
2000. J.P. Morgan Chase & Co. will be the new parent company of JPMIM, which
will continue to serve as the Portfolio's adviser.
22
REPORT OF INDEPENDENT ACCOUNTANTS
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To the Trustees and Investors of
The International Opportunities 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 International Opportunities Portfolio
(one of the portfolios comprising part of The Series Portfolio, hereafter
referred to as the "Portfolio") at November 30, 2000, 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 each of
the three years in the period then ended and for the period February 26, 1997
(commencement of operations) through November 30, 1997, in conformity with
accounting principles generally accepted in the United States of America. 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 auditing standards generally accepted in the United States of America,
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 November 30, 2000 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
January 16, 2001
23
NOTES
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24
[back cover]
J.P. MORGAN INSTITUTIONAL FUNDS
Federal Money Market Fund
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Prime Money Market Fund
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Treasury Money Market Fund
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Tax Aware Enhanced Income Fund:
Institutional Shares
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Tax Exempt Money Market Fund
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Short Term Bond Fund
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Bond Fund
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Global Strategic Income Fund
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Tax Exempt Bond Fund
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California Bond Fund:
Institutional Shares
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New York Tax Exempt Bond Fund
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Diversified Fund
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Disciplined Equity Fund
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Large Cap Growth Fund:
Institutional Shares
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Market Neutral Fund:
Institutional Shares
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Tax Aware U.S. Equity Fund:
Institutional Shares
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Tax Aware Disciplined Equity Fund:
Institutional Shares
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U.S. Equity Fund
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U.S. Small Company Fund
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Emerging Markets Equity Fund
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European Equity Fund
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International Equity Fund
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International Opportunities Fund
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SmartIndex(tm) Fund:
Institutional Shares
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For more information on the J.P. Morgan
Institutional Funds, call J.P.
Morgan Funds Services at (800) 766-7722.
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Morgan Guaranty Trust Company MAILING
500 Stanton Christiana Road INFORMATION
Newark, Delaware 19713-2107
IN-ANN-24238 0101