<PAGE>
LETTER TO THE SHAREHOLDERS OF THE JPM INSTITUTIONAL EUROPEAN EQUITY FUND
August 27, 1996
Dear Shareholder:
Thank you for investing in The JPM Institutional European Equity Fund. If you
are a first-time investor in The JPM Institutional Funds, let me take this
opportunity to welcome you to our shareholder family. Let me also express the
hope that you will explore additional JPM Institutional Funds as a way to
diversify your investment portfolio and gain broad exposure to financial
opportunities in domestic and international markets.
In the months ahead, we will be sending you detailed reports on the Fund's
performance and its strategies as it pursues its investment objective. The
Fund's objective is to provide a high total return from a portfolio
of equity securities of European companies. It is designed for investors who
want an actively managed portfolio of European equity securities that seeks to
outperform the Morgan Stanley Capital International (MSCI) Europe Index. The
MSCI Europe Index is comprised of more than 500 companies in fourteen European
countries. The first of these reports covers the period from the Fund's
commencement of operations on February 29, 1996 to June 30, 1996. Going forward,
these reports will be provided to you on both a semi-annual and an annual basis.
To introduce the in-depth reporting you deserve, we have included a portfolio
manager Q&A with Paul A. Quinsee, a member of our international portfolio
management team. It should be noted that this interview pertains to The European
Equity Portfolio, a separate investment company in which the Fund invests all of
its assets. The performance of the Fund is directly related to the performance
of the Portfolio.
We welcome your comments and questions as well as any suggestions on how we can
improve your financial reports. Please call J.P. Morgan Funds Services, toll
free, at (800) 766-7722.
Sincerely yours,
/s/Evelyn E. Guernsey
Evelyn E. Guernsey
J.P. Morgan Funds Services
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TABLE OF CONTENTS
LETTER TO THE SHAREHOLDERS.....1 FUND FACTS AND HIGHLIGHTS.......6
PORTFOLIO MANAGER Q&A..........2 FINANCIAL STATEMENTS............9
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1
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PORTFOLIO MANAGER Q&A
[PHOTO]
Following is an interview with PAUL A. QUINSEE, who is a member of the portfolio
management team for The European Equity Portfolio in which the Fund invests.
Paul joined Morgan in 1992 as an international equity portfolio manager.
Previously, he worked for five years as an equity portfolio manager with
Citibank and for two years with Schroder Capital Management in London. This
interview was conducted on August 26, 1996 and reflects Paul's views on that
date.
THE MSCI EUROPE INDEX SHOWED A CONTINUED UPTURN IN THE REGION'S EQUITY MARKETS
FOR THE SIX MONTHS ENDED JUNE 30, 1996. WHAT FACTORS, IN YOUR VIEW, WERE KEY IN
HELPING EUROPEAN STOCKS TO MOVE FORWARD DURING THIS PERIOD?
PAQ: I think a number of factors contributed to the very strong performance of
the region's equity markets. In local currency terms, European stocks did better
than either the U.S. or Japanese markets in the first half of this year.
The interest rate environment in Europe was helpful. Interest rates at the
short end continued to drift downward in both Continental Europe and the U.K., a
reflection of weak economic growth in the region. And although economic growth
was weak, particularly in the core countries of Germany and France, toward the
end of the period there were perhaps the first signs of recovery. For example,
some of the industrial production numbers in Germany were helpful. Weak economic
growth helped to get interest rates down, but there were also signs that
economic growth was beginning to revive toward the end of the period.
Another important factor is that the currency environment was much more
helpful for European companies, particularly those in the core countries of
Germany and France. The deutsche mark and its neighboring currencies actually
weakened slightly versus the U.S. dollar during this period, and weakened quite
considerably against some of the smaller peripheral European currencies.
Companies in Italy and Sweden had been getting a big boost to their
competitiveness from very favorable currency rates and that was to some extent
reversed during the first part of the year which helped the big markets of
France and Germany.
Another theme increasingly discussed in Europe has been corporate
restructuring. At the risk of sounding rather cliche-ed, there are very real and
important changes going on, in our opinion, as European companies look to deal
with both the difficult environment that they've found themselves in during the
past few years and structurally low profitability. The most spectacular example
was the merger between CIBA-GEIGY and SANDOZ, with the objective of creating a
world-scale drug company, and those stocks gained between 20% and 30% on the day
after that announcement was made. There have been a whole number of
restructuring-type announcements made across Europe that have generally
surprised investors positively and that helped equity returns throughout the
region.
2
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THE PORTFOLIO SEEKS TO ADD VALUE FOR SHAREHOLDERS THROUGH TWO MAIN INVESTMENT
DECISIONS: COUNTRY ALLOCATION AND STOCK SELECTION. IN GENERAL TERMS, HOW MUCH
DID EACH OF THESE DECISIONS CONTRIBUTE TO THE PORTFOLIO'S OUT-PERFORMANCE OF ITS
BENCHMARK FOR THE PERIOD?
PAQ: As you point out, the Portfolio generally outperformed its benchmark during
the first half of this year. The main reason -- and this has been very much the
case for the Portfolio's longer-term record in Europe -- was our success in
individual securities selection.
In a number of markets, the stocks that our analysts identified as being
undervalued went on to considerably outperform the local market returns. This
was particularly true in Germany and France, also in Switzerland (for example,
we benefited from the merger I just mentioned between Ciba-Geigy and Sandoz). In
the U.K., a number of our stock selection picks also helped out over the period
under review. And stock selection wasn't just important in Europe's major
markets. Even in smaller markets, such as Finland and Belgium, stock selection
made an important contribution as well.
Meanwhile, the Portfolio's country allocation decisions provided a modest
positive contribution for the period. The Portfolio was underweighted in the
weak Italian and U.K. markets and overweighted in France and Germany. Both
France and Germany were very strong performers, particularly in the first
quarter of the year, so this country allocation strategy generally paid off.
THE LARGE WEIGHTINGS OF FRANCE AND GERMANY WITHIN THE INDEX MAKE THE PORTFOLIO'S
INVESTMENT APPROACH TO THESE MARKETS IMPORTANT FACTORS IN ITS OVERALL RETURNS.
HOW DID THE PORTFOLIO'S INVESTMENT STRATEGY FOR FRANCE AND GERMANY EVOLVE DURING
THE PERIOD AND, IN TERMS OF STOCK SELECTION, WERE THERE ANY INVESTMENTS THAT
PROVED ESPECIALLY REWARDING OR DISAPPOINTING TO OVERALL RETURNS?
PAQ: To provide you with more detail on the Portfolio's stock selection,
particularly in Germany, we had purchased in the Portfolio a number of medium-
sized companies that we thought offered better value than the market leaders.
These medium-sized investments really paid off during the second quarter as the
market was prepared to look down the capitalization scale a bit.
I'm thinking in particular of DEPFA BANK, a mortgage bank with a very solid
book of credit in our opinion, which the market was penalizing for one mistake
that the company made in East Germany. The stock was very undervalued and it
rallied by more than 20% in May -- considerably outperforming the larger banks
that dominated the Index. Also, KRUPP-HOESCH, our selection in the materials
sector, a merger of two steel companies, has been performing very well. In the
insurance sector, concentrating on COLONIA and MUNICH RE, rather than giant
Allianz, also added value. So I think that shows you that in Europe, just as in
the U.S., you can often find real value by focusing on perhaps the less obvious
opportunities. Our experience has been that, sooner or later, the market catches
up and these stocks can perform quite well.
3
<PAGE>
PERHAPS THE BIGGEST NEWS IN THE U.K. HAS BEEN INCREASED ACTIVITY IN THE MERGER
AND ACQUISITIONS AREA, AS WELL AS CONCERN THAT THE OPPOSITION LABOUR PARTY MIGHT
COME TO POWER -- A POTENTIAL SETBACK FOR BUSINESS -- FOR THE FIRST TIME IN MORE
THAN 15 YEARS. HOW WELL DID THE PORTFOLIO'S STOCK SELECTION CAPTURE PRICE
APPRECIATION OPPORTUNITIES CREATED BY VARIOUS TAKEOVER BIDS, AND DO YOU PLAN TO
CHANGE THE PORTFOLIO'S INVESTMENT STRATEGY GOING FORWARD, GIVEN THE U.K.'S
RELATIVE UNDERPERFORMANCE IN THE PAST SIX MONTHS?
PAQ: Benefiting from takeover stocks in the U.K. is something of a "lottery," if
you will, because of course we never know in advance when companies are going to
be taken over. Unfortunately, speculation in advance of a bid can often make the
stock fundamentally expensive and sometimes we sell it.
We did benefit from one of the takeovers within the utilities industry;
that is, SOUTHWEST WATER, where we had a significant stake in the company. The
stock jumped about 30% on the announcement, which was of course very, very
positive. On the other hand, ZENECA, one of the large drug stocks, was
continually pushed higher on bid speculation. Because we were aware of the
possibility of a bid, the Portfolio had some positions there but we were
underweighted versus the Index as the stock, after all, was fundamentally
overvalued, so we suffered there. On balance, therefore, I would say that the
sort of corporate activity that has been going on in the U.K. has been a neutral
influence on the Portfolio's stock selection.
In terms of the U.K. overall, as you point out, the U.K. market was one of
the weakest during the first half of this year, held back by these political
concerns and also by the strengthening of sterling versus other European
currencies. That helped stocks in Germany and France and tended to hold back the
U.K. At this point we think U.K. stocks are much more reasonably valued than
they were at the beginning of the year, if not yet cheap. We are looking to add
selectively to that market when we can. We have, in fact, had the Portfolio move
up further toward a normal weighting in the U.K. during the past few months, and
the market has begun to perform better so far during the third quarter, with the
previous underperformance creating some value.
Politics, of course, will continue to be an issue in the U.K, but we do
think those concerns have been largely discounted. We don't think there's
anything too much to fear from a change of administration either. So, while
there's not a tremendous range of opportunities there, we are happy to buy U.K.
stocks after their poor performance.
SPEAKING OF POLITICS, AS YOU'VE MENTIONED, THE MARKET'S PERCEPTION OF AN
IMPROVED POLITICAL CLIMATE FOLLOWING NATIONAL ELECTIONS HELPED SPAIN AND ITALY
TO OUTPERFORM IN RELATIVE TERMS DURING THE SECOND QUARTER OF 1996. DO WE EXPECT
THAT EUROPE'S SMALLER MARKETS WILL CONTINUE TO RUN AHEAD OF THEIR REGIONAL
COMPETITORS IN THE MONTHS AHEAD, OR ARE WE CALLING FOR THESE MARKETS TO BECOME
MORE SUBDUED IN THE SECOND HALF OF THIS YEAR?
PAQ: With regard to Europe's smaller markets, we continue to find value in a
couple that we have liked for some time. There are some good quality companies
in the Belgian market that we think are attractively valued. These companies are
found not only in the utilities area but in some of the industrial areas and
financials as well. Belgium tends to be a market that is undercovered and
underanalyzed and perhaps that's why it looks cheap. We've also been adding to
Finland, both in some of the cyclical stocks that we think will do
4
<PAGE>
very well as the European economies continue to pick up, and also in market
leader NOKIA, which got crushed last year as the company ran into problems with
its rapidly growing mobile telephone business. We think those problems have been
addressed and that this stock, trading at half the price it was a year ago,
looks much more attractive to us now.
On the other hand, not all of the smaller markets are attractive. Stocks in
Denmark continue to look relatively fully valued and, in Italy, while prices
have come down a long way over the past few weeks, they're still not exactly a
bargain and the Portfolio remains underweighted in both markets.
SUMMING UP, WHAT TRENDS DO YOU EXPECT WILL BE KEY TO EUROPEAN MARKETS DURING THE
SECOND HALF OF 1996 AND HOW DO YOU EXPECT TO POSITION THE PORTFOLIO IN ORDER TO
ADD VALUE FOR SHAREHOLDERS?
PAQ: In terms of the macro environment in Europe, I think that the main things
we'll be watching for as the year goes on are signs of revival in growth in the
core economies, although sentiment at the moment is very depressed. You also
have interest rates there at record lows, and with a more stable currency
environment we can imagine that growth will begin to recover in the core of
Europe moving into next year.
On the other hand, government efforts to reduce their budget deficits will
make that recovery a relatively slow one. You see very little upwards pressure
on interest rates. The Bundesbank has just cut interest rates again, and while
it's hard to see rates falling much further in Europe, we think a relatively
accommodative monetary environment will continue, and that of course will be
helpful for financial markets.
Corporate earnings should begin to recover, particularly the more cyclical
areas, although some of this is already discounted by the markets. And we'll be
looking for progress on restructuring as well. Perhaps short term that's been a
little over-emphasized, but we think on a medium- to longer-term view, there's
still a lot of work that can be done to assist conglomerate companies that
dominate the market indices in the divestiture of poorly performing or unfocused
divisions, and that of course will bring about positive returns. Even though a
lot of people have talked about restructuring, it's noticeable that when
announcements are made -- for example, BASF, our favorite chemical stock in
Germany, announced the disposal of two divisions that don't fit with their
business last week -- stocks are responding well to those sorts of
announcements. BASF jumped about 4% or 5% in the week after that came out, and
these were relatively small-scale disposals.
So, we think that better economic growth, not much room for interest rates
to come down, a more stable currency environment, and the efforts of management,
all mean that Europe is a relatively promising area for investment, and our
value analysis tells us that European stocks still remain attractive compared to
those in either the U.S. or Japanese markets.
5
<PAGE>
FUND FACTS
INVESTMENT OBJECTIVE
The JPM Institutional European Equity Fund seeks to provide a high total return
from a portfolio of equity securities of European companies. It is designed for
investors who want an actively managed portfolio of European equity securities
that seeks to outperform the Morgan Stanley Capital International Europe Index,
which is comprised of more than 500 companies in fourteen European countries. As
an international investment, the Fund is subject to foreign market, political,
and currency risks.
- ------------------------------------------------------------------------------
COMMENCEMENT OF OPERATIONS
2/29/96
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NET ASSETS AS OF 6/30/96
$5,475,860
- ------------------------------------------------------------------------------
CAPITAL GAIN PAYABLE DATE (IF APPLICABLE)
12/27/96
EXPENSE RATIO
The Fund's annualized expense ratio of 1.00%, after reimbursement, 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 JUNE 30, 1996
PORTFOLIO ALLOCATION
(AS A PERCENTAGE OF TOTAL INVESTMENTS)
[PIE CHART]
UNITED KINGDOM 28.6%
FRANCE 18.4%
GERMANY 15.9%
SWITZERLAND 8.4%
NETHERLANDS 6.4%
SPAIN 5.3%
ITALY 4.5%
OTHER 12.5%
TOP 10 HOLDINGS
(EXCLUDING SHORT-TERM INVESTMENTS) % OF TOTAL INVESTMENTS
- ---------------------------------------------------------------------------
GLAXO WELLCOME PLC (U.K.) 1.8%
ROYAL DUTCH PETROLEUM CO. (NETHERLANDS) 1.6%
TOTAL SA (FRANCE) 1.5%
BASF AG (GERMANY) 1.3%
SIEMENS AG (GERMANY) 1.3%
ROCHE HOLDINGS AG (SWITZERLAND) 1.3%
CIBA GEIGY AG (SWITZERLAND) 1.2%
MUNCHENER RUECKVERSICHERUNGS-
GESELLSCHAFT (GERMANY) 1.2%
GROUPE DANONE (FRANCE) 1.1%
NORSK HYDRO AS (NORWAY) 1.0%
6
<PAGE>
FUNDS DISTRIBUTOR, INC. IS THE DISTRIBUTOR FOR THE JPM INSTITUTIONAL EUROPEAN
EQUITY FUND (THE "FUND"). SIGNATURE BROKER-DEALER SERVICES, INC. WAS THE FUND'S
DISTRIBUTOR PRIOR TO AUGUST 1, 1996.
MORGAN GUARANTY TRUST COMPANY OF NEW YORK ("MORGAN") SERVES AS INVESTMENT
ADVISOR TO THE EUROPEAN EQUITY PORTFOLIO (THE "PORTFOLIO") AND MAKES THE FUND
AVAILABLE SOLELY IN ITS CAPACITY AS SERVICES AGENT FOR CUSTOMERS. INVESTMENTS IN
THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY,
MORGAN OR ANY OTHER BANK. SHARES OF THE FUND ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENTAL AGENCY. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN
THE FUND CAN FLUCTUATE, SO AN INVESTOR'S SHARES WHEN REDEEMED MAY BE WORTH MORE
OR LESS THAN THEIR ORIGINAL COST.
The Fund invests all of its investable assets in The European Equity Portfolio,
a separately registered investment company which is not available to the public
but only to other collective investment vehicles such as the Fund. The Portfolio
invests in foreign securities which are subject to special risks.
FOR A DISCUSSION OF THESE RISKS AND MORE COMPLETE INFORMATION ABOUT THE FUND OR
OTHER JPM INSTITUTIONAL FUNDS, INCLUDING MANAGEMENT FEES AND OTHER EXPENSES,
PROSPECTIVE INVESTORS SHOULD REFER TO THE PROSPECTUSES FOR THE FUNDS, WHICH
SHOULD BE READ CAREFULLY BEFORE INVESTING. YOU MAY OBTAIN ADDITIONAL COPIES OF
THE PROSPECTUSES FOR THE FUNDS BY CALLING J.P. MORGAN FUNDS SERVICES AT (800)
766-7722.
7
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THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY
8
<PAGE>
THE JPM INSTITUTIONAL EUROPEAN EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 1996
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<TABLE>
<S> <C>
ASSETS
Investment in The European Equity Portfolio ("Portfolio"), at value $5,480,559
Deferred Organization Expenses 29,845
Prepaid Expenses and Other Assets 1,253
----------
Total Assets 5,511,657
----------
LIABILITIES
Organization Expenses Payable 14,820
Transfer Agent Fee Payable 7,058
Printing Expense Payable 6,000
Professional Fees Payable 3,484
Shareholder Servicing Fee Payable 451
Administrative Services Fee Payable 110
Accrued Trustees' Fees and Expenses 71
Administration Fee Payable 57
Fund Services Fee Payable 16
Other Payables 3,730
----------
Total Liabilities 35,797
----------
NET ASSETS
Applicable to 524,984 Shares of Beneficial Interest Outstanding
(par value $0.001, unlimited shares authorized) $5,475,860
----------
----------
Net Asset Value, Offering and Redemption Price Per Share $10.43
-----
-----
ANALYSIS OF NET ASSETS
Paid-in Capital $5,285,075
Undistributed Net Investment Income 36,812
Accumulated Net Realized Gain on Investment and Foreign Currency Transactions 19,930
Net Unrealized Appreciation of Investment and Foreign Currency Translations 134,043
----------
Net Assets $5,475,860
----------
----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
9
<PAGE>
THE JPM INSTITUTIONAL EUROPEAN EQUITY FUND
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE PERIOD FEBRUARY 29, 1996 (COMMENCEMENT OF OPERATIONS) THROUGH JUNE 30,
1996
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<TABLE>
<S> <C> <C>
INVESTMENT INCOME ALLOCATED FROM PORTFOLIO
Allocated Dividend Income (Net of Foreign Withholding Taxes of $14,940) $ 45,423
Allocated Interest Income (Net of Foreign Withholding Taxes of $29) 1,815
Allocated Portfolio Expenses (9,420)
---------
Net Investment Income Allocated from Portfolio 37,818
FUND EXPENSES
Registration Fees $ 9,216
Transfer Agent Fees 7,107
Printing Expenses 6,000
Professional Fees 3,484
Amortization of Organization Expenses 2,155
Shareholder Servicing Fee 1,043
Administrative Services Fee 256
Administration Fee 134
Trustees' Fees and Expenses 79
Fund Services Fee 51
Miscellaneous 1,249
---------
Total Fund Expenses 30,774
Less: Reimbursement of Expenses (29,768)
---------
NET FUND EXPENSES 1,006
---------
NET INVESTMENT INCOME 36,812
NET REALIZED GAIN ON INVESTMENT AND FOREIGN CURRENCY TRANSACTIONS
ALLOCATED FROM PORTFOLIO 19,930
NET CHANGE IN UNREALIZED APPRECIATION OF INVESTMENT AND FOREIGN CURRENCY
TRANSLATIONS ALLOCATED FROM PORTFOLIO 134,043
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 190,785
---------
---------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
10
<PAGE>
THE JPM INSTITUTIONAL EUROPEAN EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
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<TABLE>
<CAPTION>
FOR THE PERIOD
FEBRUARY 29,
1996
(COMMENCEMENT
OF
OPERATIONS)
THROUGH
JUNE 30, 1996
(UNAUDITED)
---------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 36,812
Net Realized Gain on Investment and Foreign Currency Transactions
Allocated from Portfolio 19,930
Net Change in Unrealized Appreciation of Investment and Foreign
Currency Translations Allocated from Portfolio 134,043
---------------
Net Increase in Net Assets Resulting from Operations 190,785
---------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Proceeds from Shares of Beneficial Interest Sold 5,615,075
Cost of Shares of Beneficial Interest Redeemed (330,000)
---------------
Net Increase from Transactions in Shares of Beneficial Interest 5,285,075
---------------
Total Increase in Net Assets 5,475,860
NET ASSETS
Beginning of Period 0
---------------
End of Period (including undistributed net investment income of
$36,812) $ 5,475,860
---------------
---------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
11
<PAGE>
THE JPM INSTITUTIONAL EUROPEAN EQUITY FUND
FINANCIAL HIGHLIGHTS
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Selected data for a share outstanding throughout the period are as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
FEBRUARY 29,
1996
(COMMENCEMENT
OF
OPERATIONS)
THROUGH
JUNE 30, 1996
(UNAUDITED)
---------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
---------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.07
Net Realized and Unrealized Gain on Investment and Foreign Currency 0.36
---------------
Total from Investment Operations 0.43
---------------
NET ASSET VALUE, END OF PERIOD $ 10.43
---------------
---------------
Total Return 4.30%(a)
---------------
---------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (in thousands) $ 5,476
Ratios to Average Net Assets
Expenses 1.00%(b)
Net Investment Income 3.52%(b)
Decrease Reflected in Expense Ratio due to Expense Reimbursement 1.50%(b)(c)
</TABLE>
- ------------------------
(a)Not Annualized.
(b)Annualized.
(c)After consideration of certain state limitations.
The Accompanying Notes are an Integral Part of the Financial Statements.
12
<PAGE>
THE JPM INSTITUTIONAL EUROPEAN EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1996
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1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The JPM Institutional European Equity Fund (the "Fund") is a separate series of
The JPM 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 a no-load open-end management investment
company. The Fund commenced investment operations on February 29, 1996.
The Fund invests all of its investable assets in The European Equity Portfolio
(the "Portfolio"), a diversified open-end management investment company having
the same investment objective as the Fund. The value of such investment included
in the Statement of Assets and Liabilities reflects the Fund's proportionate
interest in the net assets of the Portfolio (less than 1% at June 30, 1996). The
performance of the Fund is directly affected by the performance of the
Portfolio. The financial statements of the Portfolio, including the schedule of
investments, are included elsewhere in this report and should be read in
conjunction with the Fund's financial statements.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual amounts could differ from
those estimates. The following is a summary of the significant accounting
policies of the Fund:
a)Valuation of securities by the Portfolio is discussed in Note 1 of the
Portfolio's Notes to Financial Statements which are included elsewhere in
this report.
b)The Fund records its share of net investment income, realized and
unrealized gain and loss and adjusts its investment in the Portfolio each
day. All the net investment income and realized and unrealized gain and
loss of the Portfolio is allocated pro rata among the Fund and other
investors in the Portfolio at the time of such determination.
c)Distributions to shareholders of net investment income and net realized
capital gain, if any, are declared and paid annually.
d)The Fund incurred organization expenses in the amount of $32,000. These
costs were deferred and are being amortized on a straight-line basis over
a five-year period from the commencement of operations.
e)The Fund is treated as a separate entity for federal income tax purposes
and intends to comply with the provisions of the Internal Revenue Code of
1986, as amended, applicable to regulated investment companies and to
distribute substantially all of its income, including net realized capital
gains, if any, within the prescribed time periods. Accordingly, no
provision for federal income or excise tax is necessary.
f)Expenses incurred by the Trust with respect to any two or more funds in
the Trust are allocated in proportion to the net assets of each fund in
the Trust, except where allocations of direct expenses to each fund can
otherwise be made fairly. Expenses directly attributable to a fund are
charged to that fund.
13
<PAGE>
THE JPM INSTITUTIONAL EUROPEAN EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1996
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2. TRANSACTIONS WITH AFFILIATES
a)The Trust has retained Signature Broker-Dealer Services, Inc.
("Signature") to serve as administrator and distributor. Signature
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 Signature. The Administration Agreement provided for a fee to be paid
to Signature equal to the Fund's proportionate share of a complex-wide fee
based on the following annual schedule: 0.03% on the first $7 billion of
the aggregate average daily net assets of the Portfolio and the other
portfolios (the "Master Portfolios") in which the Trust, The Pierpont
Funds, or The JPM Advisor Funds invest and 0.01% on the aggregate average
daily net assets of the Master Portfolios in excess of $7 billion. The
portion of this charge payable by the Fund is determined by the
proportionate share its net assets bear to the total net assets of the
Trust, The Pierpont Funds, The JPM Advisor Funds and the Master
Portfolios. For the period February 29, 1996 (commencement of operations)
through June 30, 1996, Signature's fee for these services amounted to
$134.
Effective August 1, 1996, administrative functions provided by Signature
will be provided by Funds Distributor, Inc. ("FDI"), a registered
broker-dealer, and by Morgan Guaranty Trust Company of New York
("Morgan"). FDI will also become the Fund's distributor. Under a
Co-Administration Agreement between FDI and the Trust on behalf of the
Fund, FDI's fees are to be paid by the Fund (see Note 2b).
b)The Trust, on behalf of the Fund, has an Administrative Services Agreement
(the "Services Agreement") with Morgan under which Morgan is responsible
for certain aspects of the administration and operation of the Fund. Under
the Services Agreement, the Fund has agreed to pay Morgan a fee equal to
its proportionate share of an annual complex-wide charge. This fee is
calculated daily based on the aggregate net assets of the Master
Portfolios in accordance with the following annual schedule: 0.06% on the
first $7 billion of the Master Portfolios' aggregate average daily net
assets and 0.03% of the Master Portfolios' aggregate average daily net
assets in excess of $7 billion. The portion of this charge payable by the
Fund is determined by the proportionate share that the Fund's net assets
bear to the net assets of the Trust, the Master Portfolios and other
investors in the Master Portfolios for which Morgan provides similar
services. For the period from February 29, 1996 (commencement of
operations) through June 30, 1996, Morgan's fee for these services
amounted to $256.
Effective August 1, 1996, the Services Agreement will be amended such that
the aggregate complex-wide fees to be paid by the Fund under both the
amended Services Agreement and the Co-Administration Agreement (See Note
2a) will be calculated daily based on the aggregate net assets of the
Master Portfolios in accordance with the following annual schedule: 0.09%
on the first $7 billion of the Masters Portfolios' aggregate average daily
net assets and 0.04% of the Master Portfolios' aggregate average daily net
assets in excess of $7 billion.
c)The Trust, on behalf of the Fund, has a Shareholder Servicing Agreement
with Morgan. The agreement provides for the Fund to pay Morgan a fee for
these services which is computed daily
14
<PAGE>
THE JPM INSTITUTIONAL EUROPEAN EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
and paid monthly at an annual rate of 0.10% of the average daily net
assets of the Fund. For the period February 29, 1996 (commencement of
operations) through June 30, 1996, Morgan's fee for these services
amounted to $1,043.
In addition, Morgan has agreed to reimburse the Fund to the extent
necessary to maintain the total operating expenses of the Fund, including
the expenses allocated to the Fund from the Portfolio, at no more than
1.00% of the average daily net assets of the Fund through December 31,
1996. For the period February 29, 1996 (commencement of operations)
through June 30, 1996, Morgan has agreed to reimburse the Fund $29,768 for
expenses under this agreement.
d)The Trust, on behalf of the Fund, has a Fund Services Agreement with
Pierpont Group, Inc. ("Group") to assist the Trustees in exercising their
overall supervisory responsibilities for the Trust's affairs. The Trustees
of the Trust represent all the existing shareholders of Group. The Fund's
allocated portion of Group's costs in performing its services amounted to
$51 for the period from February 29, 1996 (commencement of operations)
through June 30, 1996.
e)An aggregate annual fee of $65,000 is paid to each Trustee for serving as
a Trustee of the Trust, The Pierpont Funds and the Master Portfolios. The
Trustees' Fees and Expenses shown in the financial statements represents
the Fund's allocated portion of the total fees and expenses. The Trustee
who serves as Chairman and Chief Executive Officer of the Trust also
serves as Chairman of Group and received compensation and employee
benefits from Group in his role as Group's Chairman. The allocated portion
of such compensation and benefits included in the Funds Services Fee shown
in the financial statements was $7.
3. TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest of one or more series.
Transactions in shares of beneficial interest of the Fund were as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD FEBRUARY 29, 1996
(COMMENCEMENT OF OPERATIONS)
THROUGH JUNE 30, 1996
---------------------------------------
<S> <C>
Shares of beneficial interest sold................... 556,992
Shares of beneficial interest redeemed............... (32,008)
-------
Net increase......................................... 524,984
-------
-------
</TABLE>
15
<PAGE>
The European Equity Portfolio
Semi-Annual Report June 30, 1996
(unaudited)
(The following pages should be read in conjunction
with The JPM Institutional European Equity Fund
Semi-Annual Financial Statements)
16
<PAGE>
THE EUROPEAN EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
SECURITY DESCRIPTION SHARES VALUE
- ---------------------------- ------------ ------------
COMMON STOCK (92.2%)
AUSTRIA (0.1%)
Bohler Uddeholm (Metals &
Mining) .................. 4,100 $ 317,672
------------
BELGIUM (3.0%)
Arbed SA (Metals &
Mining)+ . 9,190 1,051,618
Banque Bruxelles Lambert SA
(Banking) ................ 14,660 2,732,752
Delhaize Le Lion
(Retail) ................. 17,000 854,639
Electrabel SA (Electric) ... 11,000 2,362,986
Fortis AG (Insurance) ...... 14,464 1,909,050
Generale De Banque SA
(Banking) ................ 2,590 911,448
PetroFina SA (Oil-
Production) .............. 8,390 2,653,928
Powerfin SA (Electric) ..... 3,820 523,087
Solvay SA (Chemicals) ...... 4,890 3,024,156
Tractebel (Electric) ....... 4,560 1,892,177
------------
17,915,841
------------
FINLAND (1.5%)
Metra OY (Industrial) ...... 24,000 1,074,496
Nokia AB
(Telecommunications-
Equipment) ............... 90,700 3,338,363
Rautaruukki OY (Metals &
Mining) .................. 150,300 1,090,232
Sampo Insurance Company Ltd.
(Insurance) .............. 22,000 1,273,811
UPM-Kymmene Corporation
(Forest Products &
Paper)+ .................. 85,100 1,760,285
------------
8,537,187
------------
FRANCE (18.0%)
Alcatel Alsthom
(Telecommunications-
Equipment) ............... 25,267 2,203,708
AXA (Multi - Industry) ..... 52,448 2,868,901
AXA - Non Negotiable
Certificates (Multi -
Industry)+ ............... 1,267 69,305
Banque Nationale de Paris
(Financial Services) ..... 29,852 1,047,817
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ---------------------------- ------------ ------------
<S> <C> <C>
</TABLE>
FRANCE (CONTINUED)
<TABLE>
<S> <C> <C>
BIC (Manufacturing) ........ 8,000 $ 1,135,955
Bouygues (Construction &
Housing) ................. 17,718 1,975,516
Canal Plus (Broadcasting &
Publishing) .............. 7,000 1,711,897
Carrefour Supermarche
(Retail) ................. 5,285 2,960,699
Castorama Dubois
(Retail) ................. 8,700 1,713,607
CEP Communications
(Broadcasting &
Publishing) . 13,400 1,132,265
Cetelem (Financial
Services) ................ 6,500 1,460,833
Chargeurs International SA
(Multi - Industry)+ ...... 6,060 270,859
Christian Dior SA
(Retail) ................. 37,225 4,844,662
Compagnie de Saint Gobain
(Building Materials) ..... 20,110 2,691,443
Compagnie Financiere de Cic
et de l'Union Europeenne
(Banking) ................ 13,070 926,664
Compagnie Generale des Eaux
(Water) .................. 44,365 4,955,212
Credit Commercial de France
(Banking) ................ 37,400 1,733,389
Credit Local de France
(Financial Services) ..... 35,600 2,897,464
Essilor International
(Health Services) ........ 5,305 1,502,439
Genset ADR
(Biotechnology)+ ......... 12,000 225,750
Groupe Danone (Food,
Beverages & Tobacco) ..... 43,236 6,542,397
Groupe Danone - Non
Negotiable Certificates
(Food, Beverages &
Tobacco)+ ................ 702 106,225
Havas Advertising SA
(Business & Public
Services) ................ 10,100 1,137,898
Imetal (Building
Materials) ............... 4,874 691,134
L'Air Liquide
(Chemicals) .............. 22,680 4,004,616
L'Oreal (Health & Personal
Care) .................... 7,300 2,423,365
Lafarge SA (Building
Materials) ............... 17,743 1,073,591
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
17
<PAGE>
THE EUROPEAN EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ---------------------------- ------------ ------------
<S> <C> <C>
</TABLE>
FRANCE (CONTINUED)
<TABLE>
<S> <C> <C>
Lagardere Groupe
(Entertainment, Leisure &
Media) ................... 75,150 $ 1,937,108
Pathe SA (Entertainment,
Leisure & Media)+ ........ 6,060 1,421,980
Peugeot SA (Automotive) .... 21,705 2,904,912
Pinault-Printemps-Redoute SA
(Retail) ................. 6,850 2,396,394
Promodes (Retail) .......... 13,730 3,957,841
Rexel SA (Electrical
Equipment) ............... 4,690 1,295,467
Rhone-Poulenc
(Chemicals) .............. 73,020 1,919,082
Roussel Uclaf
(Pharmaceuticals) ........ 7,785 1,867,581
Sanofi (Pharmaceuticals) ... 30,800 2,308,165
Schneider SA
(Electronics) ............ 49,750 2,609,221
SEITA (Food, Beverages &
Tobacco) ................. 49,700 2,278,360
SGS - Thomson
Microelectronics NV
(Electronics)+ ........... 16,900 594,182
Sidel, SA (Machinery) ...... 9,900 2,517,264
Societe Generale
(Banking) ................ 35,320 3,883,212
Societe Industrielle de
Transports Automobiles SA
(Sita) (Pollution
Control) ................. 6,500 1,604,770
Sommer Allibert (Diversified
Manufacturing) ........... 3,305 839,717
Synthelabo
(Pharmaceuticals) ........ 24,710 2,087,930
Television Francaise 1
(Broadcasting &
Publishing) . 15,430 1,762,370
Total SA (Oil-Services) .... 119,515 8,863,644
Union des Assurances
Federales (Insurance) .... 17,960 2,215,307
Usinor Sacilor (Metals &
Mining) .................. 116,200 1,675,933
Valeo SA (Automotive) ...... 29,400 1,573,341
------------
106,821,392
------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ---------------------------- ------------ ------------
<S> <C> <C>
GERMANY (13.3%)
Allgemeine
Handelsgesellschaft der
Verbraucher AG
(Retail) ................. 4,306 $ 1,329,589
Allianz AG Holding
(Insurance) .............. 2,131 3,689,009
Bankgesellschaft Berlin AG
(Banking) ................ 7,170 1,523,839
BASF AG (Chemicals) ........ 27,300 7,801,850
Bayer AG (Chemicals) ....... 121,240 4,281,245
Beiersdorf AG (Health &
Personal Care) ........... 2,590 2,552,329
Bilfinger & Berger Bau AG
(Construction &
Housing) ................. 7,460 3,146,441
Colonia Konzern AG
(Insurance) .............. 2,425 1,959,578
Continental AG
(Automotive) . 133,990 2,174,278
Daimler-Benz AG
(Automotive) ............. 5,250 2,809,287
Deutsche Bank AG
(Banking) ................ 99,935 4,727,111
Deutsche Lufthansa AG
(Transportation) ......... 11,700 1,652,609
Deutsche Pfandbrief &
Hypothekenbank AG
(Banking) ................ 55,900 2,210,823
Douglas Holding AG
(Retail) ................. 29,900 1,192,355
Dresdner Bank AG
(Banking) ................ 160,500 4,033,222
Fried, Krupp AG Hoesch Krupp
(Machinery) .............. 17,785 2,734,106
Karstadt AG (Retail) ....... 1,000 404,365
MAN AG (Automotive) ........ 5,800 1,443,390
Mannesmann AG
(Machinery) .............. 5,180 1,790,034
Munchener
Rueckversicherungs-
Gesellschaft
(Insurance) .............. 3,407 7,028,254
RWE AG (Oil-Services) ...... 23,000 896,042
SAP AG (Computer Software) . 22,850 3,385,154
Siemens AG (Electrical
Equipment)+ .............. 140,800 7,520,364
VEBA AG (Oil-Services) ..... 96,450 5,124,310
Volkswagen AG
(Automotive) ............. 9,576 3,557,644
------------
78,967,228
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
18
<PAGE>
THE EUROPEAN EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ---------------------------- ------------ ------------
<S> <C> <C>
IRELAND (1.5%)
Allied Irish Banks PLC
(Banking) ................ 227,300 $ 1,191,062
Bank of Ireland PLC
(Banking) ................ 246,000 1,677,141
CRH PLC (Building
Materials) ............... 151,000 1,519,772
Greencore Group PLC (Food,
Beverages & Tobacco) ..... 326,000 1,713,462
Irish Life PLC
(Insurance) .............. 319,000 1,268,969
Jefferson Smurfit Group PLC
(Forest Products &
Paper) ................... 645,000 1,741,436
------------
9,111,842
------------
ITALY (4.4%)
Arnoldo Mondadori Editore
SPA (Entertainment,
Leisure & Media) ......... 199,000 1,505,854
Assicurazioni Generali
(Insurance) .............. 166,000 3,827,977
Banca Fideuram SPA
(Financial Services) ..... 503,000 1,089,376
Banca Populare di Bergamo
(Banking) ................ 81,000 1,233,797
ENI SPA (Oil-Services) ..... 644,000 3,211,701
Fiat SPA (Automotive) ...... 756,000 2,532,410
Instituto Mobiliare Italiano
SPA (Financial
Services) ................ 108,000 901,790
Instituto Nazionale Delle
Assicurazioni
(Insurance) .............. 1,031,000 1,536,797
Mediolanum SPA
(Insurance)+ ............. 53,000 527,251
Montedison SPA
(Chemicals)+ ............. 2,525,000 1,467,611
Olivetti & C SPA (Computer
Software)+ ............... 2,375,000 1,281,271
Parmalat Finanziaria SPA
(Agriculture) ............ 968,000 1,300,811
Telecom Italia
(Telecommunications) ..... 933,000 1,609,827
Telecom Italia Mobile SPA
(Telecommunications) ..... 647,000 1,445,562
Telecom Italia SPA
(Telecommunications) ..... 1,186,000 2,549,247
------------
26,021,282
------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ---------------------------- ------------ ------------
<S> <C> <C>
NETHERLANDS (6.3%)
ABN Amro Holdings NV
(Banking) ................ 51,800 $ 2,779,699
Aegon NV (Insurance) ....... 33,902 1,561,063
Dutch State Mines NV
(Chemicals) .............. 19,000 1,886,670
European Vinyls Corporation
Vinyls International NV
(Packaging &
Containers) .............. 30,000 931,472
ING Groep NV (Financial
Services)+ ............... 55,250 1,647,489
Konin Bijenkorf Beheer
(Retail) ................. 19,000 1,605,061
Koninklijke Hoogovens NV
(Metals & Mining) ........ 37,000 1,369,908
Koninklijke PTT Nederland NV
(Commercial Services) .... 76,200 2,883,766
Moeara Enim Petroleum MIJ -
New Shares
(Oil-Services) ........... 144 2,480,175
Moeara Enim Petrol MIJ (Oil-
Services) ................ 1,000 1,341,554
Philips Electronics NV
(Electronics) ............ 75,270 2,447,302
Royal Dutch Petroleum Co.
(Oil-Services) ........... 60,340 9,318,013
Unilever NV (Food, Beverages
& Tobacco) ............... 34,100 4,934,281
Wolters Kluwer NV
(Broadcasting &
Publishing) . 19,600 2,226,417
------------
37,412,870
------------
NORWAY (1.8%)
Aker AS, Series B
(Industrial) .............. 15,000 267,843
Hafslund AS, Series B
(Medical Supplies) ....... 50,000 315,563
Kvaerner AS, Series B
(Construction &
Housing) ................. 57,000 2,202,320
Norsk Hydro AS (Oil-
Services) ................ 121,000 5,923,035
Nycomed AS, Series B
(Medical Supplies) ....... 50,000 692,699
Uni Storebrand ASA
(Insurance)+ ............. 301,000 1,352,948
------------
10,754,408
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
THE EUROPEAN EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ---------------------------- ------------ ------------
<S> <C> <C>
PORTUGAL (0.0%)*
Banco Espirito Santo
(Banking) ................ 7,260 $ 116,479
Cimpor Cimentos de Portugal
SA (Building
Materials) ............... 5,820 120,861
------------
237,340
------------
SPAIN (5.3%)
Acerinox SA (Metals &
Mining) .................. 5,000 520,627
Banco Intercontinental
Espanol (Financial
Services) ................ 23,900 2,671,278
Banco Pastor (Banking) ..... 22,000 1,372,738
Banco Popular Espanol SA
(Banking) ................ 23,700 4,222,012
Cubiertas y Mzov SA
(Construction &
Housing) ................. 6,600 429,839
Ebro Agricolas Compania de
Alimentacion SA
(Miscellaneous) .......... 75,800 874,996
Empresa Nacional de
Electricidad
(Electric) ............... 45,300 2,823,059
Fomento de Construcciones y
Contras SA (Construction &
Housing) ................. 4,520 373,697
Fuerzas Electric de Cataluna
SA (Electric) ............ 193,700 1,578,778
Hidroelectrica del
Cantabrico SA
(Electric) ............... 28,000 974,020
Iberdrola SA (Electric) .... 365,200 3,745,688
Repsol SA (Gas
Exploration) ............. 137,900 4,791,671
Telefonica de Espana
(Telecommunications) ..... 297,500 5,476,133
Telefonica de Espana SA ADR
(Telecommunications) ..... 17,200 948,150
Vallehermoso SA (Real
Estate) .................. 24,300 479,515
------------
31,282,201
------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ---------------------------- ------------ ------------
<S> <C> <C>
SWEDEN (1.3%)
Astra AB, Series B
(Pharmaceuticals) ........ 43,000 $ 1,872,813
Ericsson (LM), Series B
(Telecommunications-
Equipment) ............... 65,000 1,400,804
Nordbanken AB (Banking) .... 20,000 385,805
SKF AB, Series A (Capital
Goods) ................... 50,000 1,160,430
Stadshypotek AB
(Banking) ................ 32,500 724,892
Svenska Cellulosa AB, Series
B (Forest Products &
Paper) ................... 50,000 1,028,563
Volvo AB, Series B
(Automotive) ............. 40,000 910,259
------------
7,483,566
------------
SWITZERLAND (7.6%)
ABB AG (Machinery) ......... 830 1,026,524
Ciba Geigy AG
(Pharmaceuticals) ........ 5,982 7,288,472
Compagnie Financiere
Richemont AG (Food,
Beverages & Tobacco) ..... 960 1,518,646
CS Holding AG (Banking) .... 32,275 3,068,552
Georg Fischer AG (Automotive
Supplies) ................ 1,110 1,281,478
Holderbank Financiere Glaris
AG (Building
Materials) ............... 1,227 980,313
Julius Baer Holdings AG
(Banking) ................ 930 1,003,083
Liechtenstein Global Trust
AG (Banking) ............. 1,800 877,248
Nestle SA (Food, Beverages &
Tobacco) ................. 4,740 5,411,664
Roche Holding AG
(Pharmaceuticals) ........ 967 7,374,331
Sandoz AG
(Pharmaceuticals) ........ 4,690 5,362,073
Schweizerische
Rueckversicherungs-
Gesellschaft
(Insurance) .............. 890 913,720
Schweizerischer Bankverein
(Banking) ................ 19,360 3,820,520
SGS-Thomson Microelectronics
NV (Electronics) ......... 370 885,358
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE EUROPEAN EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ---------------------------- ------------ ------------
<S> <C> <C>
</TABLE>
SWITZERLAND (CONTINUED)
<TABLE>
<S> <C> <C>
Societe Generale de
Surveillance Holding SA
(Commercial Services) .... 2,800 $ 1,230,385
Swissair AG (Airlines)+ .... 750 725,647
Zurich
Versicherungsgesellschaft
(Insurance) .............. 7,000 1,907,096
------------
44,675,110
------------
UNITED KINGDOM (28.1%)
Abbey National PLC
(Banking) ................ 267,900 2,251,985
Allied Colloids Group PLC
(Chemicals) .............. 1,102,000 2,225,976
Allied Domecq PLC (Food,
Beverages & Tobacco) ..... 356,000 2,505,784
Amersham International PLC
(Biotechnology) .......... 101,700 1,659,227
Barclays PLC (Banking) ..... 278,000 3,336,866
Bass PLC (Food, Beverages &
Tobacco) ................. 188,000 2,361,747
BAT Industries PLC (Food,
Beverages & Tobacco) ..... 570,800 4,443,418
BICC PLC (Electrical
Equipment) ............... 223,000 1,072,410
BOC Group PLC
(Chemicals) .............. 122,000 1,750,621
Britannic Assurance PLC
(Insurance) .............. 175,800 1,964,008
British Aerospace PLC
(Aerospace) .............. 154,100 2,338,139
British Airways PLC
(Airlines) . 192,000 1,649,764
British Gas PLC (Natural
Gas) ..................... 616,120 1,713,617
British Petroleum Company
PLC (Oil-Services) ....... 661,718 5,809,207
British Telecommunications
PLC (Telecommunications) . 783,500 4,212,215
BTR PLC (Multi -
Industry) ................ 991,000 3,895,737
Cable & Wireless PLC
(Telecommunications) ..... 374,000 2,472,673
Caradon PLC (Multi -
Industry) ................ 454,000 1,520,192
Courtaulds Textile PLC
(Textiles) ............... 240,000 1,338,755
Dalgety PLC (Food, Beverages
& Tobacco) ............... 165,000 903,730
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ---------------------------- ------------ ------------
<S> <C> <C>
</TABLE>
UNITED KINGDOM (CONTINUED)
<TABLE>
<S> <C> <C>
General Cable PLC
(Broadcasting &
Publishing)+ ............. 581,600 $ 1,762,197
General Electric Company PLC
(Electrical Equipment) ... 485,000 2,611,202
Glaxo Wellcome PLC
(Pharmaceuticals) ........ 764,800 10,302,969
Glynwed International PLC
(Metals & Mining) ........ 304,700 1,496,081
Guardian Royal Exchange PLC
(Insurance) .............. 727,000 2,801,441
Guinness PLC (Food,
Beverages & Tobacco) ..... 447,000 3,250,490
Hanson PLC (Multi -
Industry) ................ 601,000 1,680,902
Hillsdown Holdings PLC
(Food, Beverages &
Tobacco) ................. 975,000 2,627,502
HSBC Holdings PLC
(Banking) ................ 296,000 4,636,045
Hyder PLC (Water) .......... 197,116 2,185,301
Inchcape PLC (Commercial
Services) ................ 123,704 563,179
Kingfisher PLC (Retail) .... 254,700 2,558,544
Ladbroke Group PLC
(Entertainment, Leisure &
Media) ................... 607,000 1,683,536
Lloyds TSB Group PLC
(Banking) ................ 1,209,260 5,918,691
Lucas Industries PLC
(Automotive) ............. 377,000 1,326,799
Marks & Spencer PLC
(Retail) ................. 536,800 3,924,349
MEPC PLC (Real Estate) ..... 443,100 2,795,266
National Grid Group PLC
(Electric) ............... 394,000 1,043,797
National Power PLC
(Electric) ............... 285,000 2,302,733
National Westminster Bank
PLC (Banking) ............ 234,000 2,232,439
Pace Micro Technology PLC
(Electronics)+ ........... 137,000 400,197
Pearson PLC (Broadcasting &
Publishing) .............. 208,000 2,145,986
Peninsular & Orient Steam
Navigation Co.
(Transportation) ......... 113,600 854,317
Prudential Corporation PLC
(Insurance) .............. 340,000 2,144,867
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE EUROPEAN EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ---------------------------- ------------ ------------
<S> <C> <C>
</TABLE>
UNITED KINGDOM (CONTINUED)
<TABLE>
<S> <C> <C>
Racal Electronic PLC
(Telecommunications-
Equipment) ............... 469,000 $ 2,222,635
Rank Organisation PLC
(Entertainment, Leisure &
Media) ................... 410,000 3,169,366
Reuters Holdings
(Broadcasting &
Publishing) .............. 359,000 4,345,376
Rolls-Royce PLC
(Aerospace) .............. 624,000 2,171,841
RTZ Corp. PLC (Metals &
Mining) .................. 276,465 4,093,818
Sainsbury (J.) PLC
(Retail) ................. 608,841 3,585,408
Sears PLC (Retail) ......... 1,235,000 1,899,755
Shell Transport & Trading
Co. (Oil-Services) ....... 315,000 4,620,383
SmithKline Beecham PLC
(Pharmaceuticals) ........ 394,350 4,218,725
South West Water PLC
(Water) .................. 129,000 1,310,880
Standard Chartered PLC
(Banking) ................ 231,000 2,300,729
Tarmac PLC (Construction &
Housing) ................. 1,245,100 2,128,102
Tesco PLC (Retail) ......... 773,000 3,531,200
THORN EMI PLC
(Entertainment, Leisure &
Media) ................... 123,900 3,453,736
Tomkins PLC (Multi -
Industry) ................ 269,000 1,011,493
Unilever PLC (Food,
Beverages & Tobacco) ..... 185,000 3,679,401
Vodafone Group PLC
(Telecommunications) ..... 1,026,500 3,819,970
Zeneca Group PLC
(Pharmaceuticals) ........ 86,000 1,902,847
------------
166,140,566
------------
TOTAL COMMON STOCK (COST
$489,889,111) ........... 545,678,505
------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ---------------------------- ------------ ------------
<S> <C> <C>
PREFERRED STOCK (1.7%)
GERMANY (1.7%)
GEA AG (Machinery) ......... 4,300 $ 1,429,436
Henkel KGAA (Chemicals) .... 6,850 2,956,662
Jungheinrich AG
(Machinery) . 8,850 1,569,830
RWE AG (Oil-Services) ...... 130,370 4,008,383
------------
9,964,311
------------
TOTAL PREFERRED STOCK
(COST $9,326,636)........ 9,964,311
------------
RIGHTS (0.2%)
FRANCE (0.2%)
Carrefour Supermarkets
(Retail)+ ................ 5,285 1,459,817
------------
TOTAL RIGHTS
(COST $910,055)........ . 1,459,817
------------
WARRANTS (0.8%)
GERMANY (0.8%)
Allianz AG Holding, Expiring
2/23/98 (Insurance)+ ..... 15,740 801,405
Krupp Hoesch Stahl AG,
Expiring 8/1/96 (Multi -
Industry)+ ............... 3,643 344,641
Veba International Finance,
Expiring 4/6/98 (Oil-
Services)+ ............... 8,120 2,315,216
Volkswagen AG, Expiring
10/27/98 (Automotive)+ ... 10,320 1,206,828
------------
4,668,090
------------
SWITZERLAND (0.0%)*
Schweizerischer Bankverein,
Expiring 6/30/00
(Banking)+ ............... 2,300 7,534
------------
TOTAL WARRANTS (COST
$3,687,775) ............. 4,675,624
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE EUROPEAN EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ---------------------------- ------------ ------------
<S> <C> <C>
CONVERTIBLE BONDS (1.1%)
(IN DEM)
GERMANY (0.0%)*
Commerzbank AG, 8.00% due
06/01/07 (Banking) ....... 3,000 $ 2,198
------------
(IN ITL)
ITALY (0.1%)
Istituto Nazionale delle
Assicurazioni, 6.50% due
06/ 28/01 (Insurance) .... 810,000,000 536,924
------------
(IN CHF)
SWITZERLAND (0.7%)
Sandoz Capital BVI. Ltd.,
1.25% due 10/23/02
(Financial Services) ..... 2,725,000 3,042,556
Swiss Re Finance Bermuda,
2.00% due 07/06/00
(Financial Services) ..... 1,370,000 1,455,625
------------
4,498,181
------------
(IN GBP)
UNITED KINGDOM (0.3%)
BPB Industries, 7.25% due
08/ 25/08 (Industrial) .... 869,000 1,689,504
------------
TOTAL CONVERTIBLE BONDS
(COST $6,170,924) ....... 6,726,807
------------
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ---------------------------- ------------ ------------
<S> <C> <C>
SHORT-TERM INVESTMENTS (3.2%)
(IN USD)
U.S. TREASURY OBLIGATIONS (0.0%)*
United States Treasury
Bills, 5.03% due
10/10/96++ ............... 110,000 $ 108,366
TIME DEPOSITS--FOREIGN (3.2%)
State Street Bank Cayman
Islands (Banking), 4.88%
due 07/01/96 ............. 18,880,000 18,880,000
------------
TOTAL SHORT-TERM
INVESTMENTS (COST
$18,988,419) ............ 18,988,366
------------
TOTAL INVESTMENTS (COST $528,972,920)
(99.2%) ................................ 587,493,430
OTHER ASSETS IN EXCESS OF LIABILITIES
(0.8%) ................................. 4,611,858
------------
NET ASSETS (100.0%) ...................... $592,105,288
------------
------------
</TABLE>
- ------------------------
* Less than 0.1%.
+ Non-Income-Producing Security.
++ These securities are segregated as collateral for
initial margin on futures contracts.
ADR -- ADR after the name of a foreign holdings
stands for American Depository Receipt, representing ownership of foreign
securities on deposit with a domestic custodian bank.
The Accompanying Notes are an Integral Part of the Financial Statements.
23
<PAGE>
THE EUROPEAN EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
INDUSTRY DIVERSIFICATION
<TABLE>
<CAPTION>
PERCENT OF
TOTAL
INVESTMENTS
---------------
<S> <C>
Banking............................................................... 14.4%
Oil-Services.......................................................... 9.2%
Pharmaceuticals....................................................... 7.6%
Food, Beverages & Tobacco............................................. 7.2%
Insurance............................................................. 6.7%
Retail................................................................ 6.5%
Chemicals............................................................. 5.3%
Telecommunications.................................................... 3.8%
Automotive............................................................ 3.5%
Electric.............................................................. 2.9%
Financial Services.................................................... 2.7%
Broadcasting & Publishing............................................. 2.6%
Entertainment, Leisure & Media........................................ 2.2%
Electrical Equipment.................................................. 2.1%
Metals & Mining....................................................... 2.0%
Multi-Industry........................................................ 2.0%
Machinery............................................................. 1.9%
Construction & Housing................................................ 1.7%
Telecommunication-Equipment........................................... 1.6%
Water................................................................. 1.4%
Building Materials.................................................... 1.2%
Electronics........................................................... 1.2%
Health & Personal Care................................................ 0.9%
Aerospace............................................................. 0.8%
Commercial Services................................................... 0.8%
Computer Software..................................................... 0.8%
Forest Products & Paper............................................... 0.8%
Gas Exploration....................................................... 0.8%
Real Estate........................................................... 0.6%
Industrial............................................................ 0.5%
Oil-Production........................................................ 0.5%
Miscellaneous......................................................... 3.8%
---------------
100.0%
---------------
---------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
24
<PAGE>
THE EUROPEAN EQUITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $528,972,920) $587,493,430
Cash 2,387,842
Foreign Currency at Value (Cost $9,469,457) 9,550,577
Receivable for Investments Sold 11,795,793
Dividends and Interest Receivable 2,119,986
Deferred Organization Expenses 25,663
Unrealized Appreciation on Open Spot Foreign Currency Contracts 1,735
Variation Margin Receivable 433
------------
Total Assets 613,375,459
------------
LIABILITIES
Payable for Investments Purchased 20,741,211
Advisory Fee Payable 307,521
Custody Fee Payable 142,339
Administrative Services Fee Payable 23,060
Administration Fee Payable 5,977
Fund Services Fee Payable 1,637
Unrealized Depreciation on Open Spot Foreign Currency Contracts 638
Accrued Trustees' Fees and Expenses 438
Accrued Expenses 47,350
------------
Total Liabilities 21,270,171
------------
NET ASSETS
Applicable to Investors' Beneficial Interests $592,105,288
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
25
<PAGE>
THE EUROPEAN EQUITY PORTFOLIO
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends (Net of $2,536,808 Foreign Withholding Taxes) $ 8,129,554
Interest (Net of $4,909 Foreign Withholding Taxes) 555,153
-----------
Investment Income 8,684,707
EXPENSES
Advisory Fee $ 1,670,174
Custodian Fees and Expenses 380,317
Administrative Services Fee 64,388
Administration Fee 32,409
Professional Fees 30,570
Fund Services Fee 14,050
Trustees' Fees and Expenses 4,816
Amortization of Organization Expenses 2,655
Miscellaneous 4,490
-----------
Total Expenses (2,203,869)
-----------
NET INVESTMENT INCOME 6,480,838
NET REALIZED GAIN (LOSS) ON
Investment Transactions 9,489,058
Foreign Currency Transactions (40,859)
-----------
Net Realized Gain 9,448,199
NET CHANGE IN UNREALIZED APPRECIATION OF
Investments (including $636 net unrealized gains from future
contracts) 21,623,570
Foreign Currency Contracts and Translations 48,454
-----------
Net Change in Unrealized Appreciation 21,672,024
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $37,601,061
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
26
<PAGE>
THE EUROPEAN EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
MARCH 28, 1995
FOR THE SIX (COMMENCEMENT
MONTHS ENDED OF OPERATIONS)
JUNE 30, THROUGH
1996 DECEMBER 31,
(UNAUDITED) 1995
------------ --------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 6,480,838 $ 4,300,747
Net Realized Gain on Investments and Foreign Currency
Transactions 9,448,199 6,759,498
Net Change in Unrealized Appreciation of Investments and
Foreign Currency Translations 21,672,024 36,897,712
------------ --------------
Net Increase in Net Assets Resulting from Operations 37,601,061 47,957,957
------------ --------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 173,887,337 432,918,641
Withdrawals (51,276,075) (48,983,833)
------------ --------------
Net Increase from Investors' Transactions 122,611,262 383,934,808
------------ --------------
Total Increase in Net Assets 160,212,323 431,892,765
NET ASSETS
Beginning of Period 431,892,965 200
------------ --------------
End of Period $592,105,288 $431,892,965
------------ --------------
------------ --------------
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
MARCH 28, 1995
FOR THE SIX (COMMENCEMENT OF
MONTHS ENDED OPERATIONS)
JUNE 30, 1996 THROUGH DECEMBER
(UNAUDITED) 31, 1995
--------------- -----------------
<S> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Expenses 0.86%(a) 0.90%(a)
Net Investment Income 2.52%(a) 1.67%(a)
Portfolio Turnover 27%(b) 36%(b)
</TABLE>
- ------------------------
(a)Annualized.
(b)Not Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
27
<PAGE>
THE EUROPEAN EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The European Equity Portfolio (the "Portfolio"), one of three Portfolios
comprising The Series Portfolio (the "Series Portfolio"), is registered under
the Investment Company Act of 1940, as amended (the "Act"), as a no-load
open-end management investment company which was organized as a trust under the
laws of the State of New York on June 24, 1994. The Portfolio's investment
objective is to provide a high total return from a portfolio of equity
securities of European companies. The Portfolio commenced operations on March
28, 1995. The Series Portfolio's Declaration of Trust permits the Trustees to
issue an unlimited number of beneficial interests in the Portfolio.
Investments in European markets may involve certain considerations and risks not
typically associated with investments in the United States. Future economic and
political developments in European 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 readily available closing bid price on
such exchange, or at the quoted bid price in the over-the-counter market.
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 by the amortized
cost method.
Trading in securities on most foreign exchanges and over-the-counter
markets is normally completed before the close of the domestic market and
may also take place on days on which the domestic market is closed. If
events materially affecting the value of foreign securities occur between
the time when the exchange on which they are traded closes and the time
when the Portfolio's net asset value is calculated, such securities will
be valued at fair value in accordance with procedures established by and
under the general supervision of the Portfolio's Trustees.
b)The books and records of the Portfolio are maintained in U.S. dollars. The
market value of investment securities, other assets and liabilities and
forward contracts stated in foreign currencies are translated at the
prevailing exchange rates at the end of the period. Purchases, sales,
income and expense are translated at the exchange rates prevailing on the
respective dates of such
28
<PAGE>
THE EUROPEAN EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
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 at 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 and payables against
fluctuations in future foreign currency rates. A forward contract is an
agreement to buy or sell currencies of different countries on a specified
future date at a specified rate. Risks associated with such contracts
include the movement in the value of the foreign currency relative to the
U.S. dollar and the ability of the counterparty to perform.
The market value of the contract will fluctuate with changes in currency
exchange rates. Contracts are valued daily 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 June 30, 1996, the Portfolio had open foreign currency
contracts as follows:
SUMMARY OF OPEN SPOT FOREIGN CURRENCY CONTRACTS
<TABLE>
<CAPTION>
U.S. DOLLAR NET UNREALIZED
VALUE AT APPRECIATION
PURCHASE CONTRACTS COST 06/30/96 (DEPRECIATION)
- ------------------------------------------------------------- ------------ ------------ ---------------
<S> <C> <C> <C>
German Mark 140,000, for GBP 59,587, expiring 07/01/96 $ 91,976 $ 92,587 $ (611)
Spanish Peseta 580,000,000, expiring 07/01/96 4,522,064 4,523,796 1,732
SALES CONTRACTS
- -------------------------------------------------------------
German Mark 2,400, expiring 07/01/96 $ 1,570 $ 1,577 $ (7)
German Mark 18,400, expiring 07/02/96 12,091 12,088 3
British Pounds 2,600, expiring 07/02/96 4,020 4,040 (20)
------
NET UNREALIZED APPRECIATION ON OPEN SPOT FOREIGN CURRENCY
CONTRACTS $ 1,097
------
------
</TABLE>
e)Futures -- A futures contract is an agreement to purchase/sell a specified
quantity of an underlying instrument at a specified future date or to
make/receive a cash payment based on the value of a securities index. The
price at which the purchase and sale will take place is fixed when the
29
<PAGE>
THE EUROPEAN EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
Portfolio enters into the contract. Upon entering into such a contract the
Portfolio is required to pledge to the broker an amount of cash and/or
securities equal to the minimum "initial margin" requirements of the
exchange. Pursuant to the contract, the Portfolio agrees to receive from
or pay to the broker an amount of cash equal to the daily fluctuation in
the value of the contract. Such receipts or payments are known as
"variation margin" and are recorded by the Portfolio as unrealized gains
or losses. When the contract is closed, the Portfolio records a realized
gain or loss equal to the difference between the value of the contract at
the time it was opened and the value at the time when it was closed. The
Portfolio invests in futures contracts solely for the purpose of hedging
its existing portfolio securities, or securities the Portfolio intends to
purchase, against fluctuations in value caused by changes in prevailing
market interest rates. The use of futures transactions involves the risk
of imperfect correlation in movements in the price of futures contracts,
interest rates and the underlying hedged assets, and the possible
inability of counterparties to meet the terms of their contracts. Futures
transactions during the six months ended June 30, 1996 are summarized as
follows:
<TABLE>
<CAPTION>
NUMBER PRINCIPAL AMOUNT
OF CONTRACTS OF CONTRACTS
------------- -----------------
<S> <C> <C>
Contracts opened 16 $ 2,509,639
Contracts closed 0 0
------ -----------------
Open at end of period 16 $ 2,509,639
------ -----------------
------ -----------------
</TABLE>
<TABLE>
<CAPTION>
NET UNREALIZED
CONTRACTS APPRECIATION
SUMMARY OF OPEN CONTRACTS AT JUNE 30, 1996 LONG (DEPRECIATION)
- -------------------------------------------------------- ------------- -----------------
<S> <C> <C>
Financial Times-Stock Exchange 100-Share Index,
expiring 09/01/96 8 $ (3,441 )
German Stock Exchange Index,
expiring 09/01/96 8 4,077
------ -----------------
Totals 16 $ 636
------ -----------------
------ -----------------
</TABLE>
Of the $2,387,842 held as cash at June 30, 1996, $2,386,989 is segregated
as collateral for initial margin on futures contracts.
f)The Portfolio intends to be treated as a partnership for federal income
tax purposes. As such, each investor in the Portfolio will be taxable on
its share of the Portfolio's ordinary income and capital gains. It is
intended that the Portfolio's assets will be managed in such a way that an
investor in the Portfolio will be able to satisfy the requirements of
Subchapter M of the Internal Revenue Code. The Portfolio earns foreign
income which may be subject to foreign withholding taxes at various rates.
g)The Portfolio incurred organization expenses in the amount of $33,000.
These costs were deferred and are being amortized on a straight-line basis
over a five-year period from the commencement of operations.
30
<PAGE>
THE EUROPEAN EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
h)Expenses incurred by the Series Portfolio with respect to any two or more
portfolios in the Series Portfolios are allocated in proportion to the net
assets of each portfolio in the Series Portfolio, except where allocations
of direct expenses to each portfolio can otherwise be made fairly.
Expenses directly attributable to a portfolio are charged to that
portfolio.
2. TRANSACTIONS WITH AFFILIATES
a)The Portfolio has an Investment Advisory Agreement with Morgan Guaranty
Trust Company of New York ("Morgan"). Under the terms of the agreement,
the Portfolio pays Morgan at an annual rate of 0.65% of the Portfolio's
average daily net assets. For the six months ended June 30, 1996 such fees
amounted to $1,670,174.
b)The Portfolio has retained Signature Broker-Dealer Services, Inc.
("Signature") to serve as administrator and exclusive placement agent.
Signature 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 Signature. The Administration
Agreement provides for a fee to be paid to Signature equal to the
Portfolio's proportionate share of a complex-wide fee based on the
following annual schedule: 0.03% on the first $7 billion of the aggregate
average daily net assets of the Portfolio and the other portfolios (the
"Master Portfolios") in which The Pierpont Funds, The JPM Institutional
Funds or The JPM Advisor Funds invest and 0.01% on the aggregate average
daily net assets of the Master Portfolios in excess of $7 billion. The
portion of this charge payable by the Portfolio is determined by the
proportionate share its net assets bear to the total net assets of The
Pierpont Funds, The JPM Institutional Funds, The JPM Advisor Funds and the
Master Portfolios. For the six months ended June 30, 1996 such fees
amounted to $32,409.
Effective August 1, 1996, administrative functions provided by Signature
will be provided by Funds Distributor, Inc. ("FDI"), a registered
broker-dealer, and by Morgan. FDI will also become the Portfolio's
exclusive placement agent. Under a Co-Administration Agreement between FDI
and the Portfolio, FDI's fees are to be paid by the Portfolio (see Note
2c).
c)The Portfolio has an Administrative Services Agreement (the "Services
Agreement") with Morgan under which Morgan is responsible for certain
aspects of the administration and operation of the Portfolio. Under the
Services Agreement, the Portfolio has agreed to pay Morgan a fee equal to
its proportionate share of an annual complex-wide charge. This charge is
calculated daily based on the aggregate net assets of the Master
Portfolios in accordance with the following annual schedule: 0.06% on the
first $7 billion of the Master Portfolios' aggregate average daily net
assets and 0.03% of the Master Portfolios' aggregate average daily net
assets in excess of $7 billion. The portion of this charge payable by the
Portfolio is determined by the proportionate share that the Portfolio's
net assets bear to the net assets of the Master Portfolios and investors
in the Master Portfolios for which Morgan provides similar services. For
the six months ended June 30, 1996 such fees amounted to $64,388.
Effective August 1, 1996, the Services Agreement will be amended such that
the aggregate complex-wide fees to be paid by the Portfolio under both the
amended Services Agreement and the Co-Administration Agreement (see Note
2b) will be calculated daily based on the aggregate
31
<PAGE>
THE EUROPEAN EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
average daily net assets of the Master Portfolios in accordance with the
following annual schedule: 0.09% on the first $7 billion of the Master
Portfolios' aggregate average daily net assets and 0.04% of the Master
Portfolios' aggregate average daily net assets in excess of $7 billion.
d)The Portfolio has a Fund Services Agreement with Pierpont Group, Inc.
("Group") to assist the Trustees in exercising their overall supervisory
responsibilities for the Portfolio's affairs. The Trustees of the
Portfolio represent all the existing shareholders of Group. The
Portfolio's allocated portion of Group's costs in performing its services
amounted to $14,050 for the six months ended June 30, 1996.
e)An aggregate annual fee of $65,000 is paid to each Trustee for serving as
a Trustee of The Pierpont Funds, The JPM Institutional Funds and the
Master Portfolios. The Trustees' Fees and Expenses shown in the financial
statements represents the Portfolio's allocated portion of the total fees
and expenses. The Portfolio's Chairman and Chief Executive also serves as
Chairman of Group and received compensation and employee benefits from
Group in his role as Group's Chairman. The allocated portion of such
compensation and benefits included in the Fund Services Fee shown in the
financial statements was $1,800.
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the six months
ended June 30, 1996 were as follows:
<TABLE>
<S> <C>
COST OF PROCEEDS FROM
PURCHASES SALES
- -------------- --------------
$ 257,572,512 $ 133,033,451
</TABLE>
32
<PAGE>
THE JPM INSTITUTIONAL MONEY MARKET FUND
THE JPM INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND
THE JPM INSTITUTIONAL TREASURY MONEY MARKET FUND
THE JPM INSTITUTIONAL SHORT TERM BOND FUND
THE JPM INSTITUTIONAL BOND FUND
THE JPM INSTITUTIONAL TAX EXEMPT BOND FUND
THE JPM INSTITUTIONAL NEW YORK TOTAL RETURN BOND FUND
THE JPM INSTITUTIONAL INTERNATIONAL BOND FUND
THE JPM INSTITUTIONAL DIVERSIFIED FUND
THE JPM INSTITUTIONAL SELECTED U.S. EQUITY FUND
THE JPM INSTITUTIONAL U.S. SMALL COMPANY FUND
THE JPM INSTITUTIONAL INTERNATIONAL EQUITY FUND
THE JPM INSTITUTIONAL EUROPEAN EQUITY FUND
THE JPM INSTITUTIONAL JAPAN EQUITY FUND
THE JPM INSTITUTIONAL ASIA GROWTH FUND
THE JPM INSTITUTIONAL EMERGING MARKETS EQUITY FUND
FOR MORE INFORMATION ON THE JPM INSTITUTIONAL FAMILY OF FUNDS, CALL J.P. MORGAN
FUNDS SERVICES AT (800)766-7722.
THE
JPM
INSTITUTIONAL
EUROPEAN EQUITY
FUND
SEMI-ANNUAL REPORT
JUNE 30, 1996
