<PAGE>
LETTER TO THE SHAREHOLDERS OF THE JPM INSTITUTIONAL INTERNATIONAL EQUITY FUND
December 11, 1996
Dear Shareholder:
We are pleased to report that, during a period of renewed strength for
non-U.S. equity markets, the active professional management and diversified
investment decisions of The JPM Institutional International Equity Fund
enabled it to substantially outperform both its benchmark, the MSCIEAFE
Index, and its competitors, as measured by the Lipper International Fund
Universe, for the fiscal year ended October 31, 1996. The Fund's return for
the period was 12.54% versus 10.47% for the Index and 10.73% for Funds
included in the Lipper Universe. We feel it is important to note that the
Fund's benchmark is an unmanaged index whose performance is not reduced by
fees or operating expenses and which is not available to individual and/or
institutional investors.
The Fund's net asset value rose from $10.40 per share on November 1, 1995 to
$11.43 per share at the end of the reporting period, after paying
approximately $0.24 per share in dividends from ordinary income,
approximately $0.03 per share in dividends from short-term capital gains, and
approximately $0.03 per share in dividends from long-term capital gains. The
Fund's net assets were $726.8 million at the end of the reporting period, up
from $467.5 million on October 31, 1995. The net assets of The Non-U.S.
Equity Portfolio, in which the Fund invests, totaled approximately $926.7
million on October 31, 1996.
The report that follows includes a portfolio manager Q&A with Paul A.
Quinsee, a member of our port-folio management team. This interview is
designed to answer commonly asked questions about the Fund, elaborate on what
happened during the reporting period, and provide our outlook for the months
ahead.
As always, we welcome your comments, questions, or any suggestions on how we
can further improve your financial reports. Please call J.P. Morgan Funds
Services, toll free, at (800) 766-7722.
Sincerely yours,
/s/ EVELYN GUERNSEY
Evelyn E. Guernsey
J.P. Morgan Funds Services
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
LETTER TO THE SHAREHOLDERS. . . . . . . . . 1
FUND PERFORMANCE. . . . . . . . . . . . . . 2
PORTFOLIO MANAGER Q&A . . . . . . . . . . . 3
FUND FACTS AND HIGHLIGHTS . . . . . . . . . 6
FINANCIAL STATEMENTS. . . . . . . . . . . . 9
- --------------------------------------------------------------------------------
1
<PAGE>
Fund performance
EXAMINING PERFORMANCE
There are several ways to evaluate a mutual fund's historical performance
record. One approach is to look at the growth of a hypothetical investment.
The minimum initial investment in the Fund is $1,000,000. The chart at right
shows that the minimum invested at the Fund's inception would have grown to
$1,342,882 at October 31, 1996.
Another way to look at performance is to review a fund's average annual total
return. This figure takes the fund's actual (or cumulative) return and shows
you 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 1, 5, or 10 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 INCEPTION*
JUNE 1, 1990 - OCTOBER 31, 1996
[CHART]
PLOT POINTS
JPM EAFE
------------ ------------
Oct '90 933,000 902,749.06
Oct '91 987,930.82 965,520.73
Oct '92 878,497.23 837,904.46
Oct '93 1,152,393.68 1,151,762.12
Oct '94 1,223,391.84 1,268,022.47
Oct '95 1,193,284.08 1,263,308.18
Oct '96 1,342,881.98 1,395,592.19
<TABLE>
<CAPTION>
TOTAL RETURNS AVERAGE ANNUAL RETURNS
--------------- ----------------------------
THREE SIX ONE FIVE SINCE
AS OF OCTOBER 31, 1996 MONTHS MONTHS YEAR YEAR INCEPTION*
- ----------------------------------------------------- -----------------------------
<S> <C> <C> <C> <C> <C>
The JPM Institutional International
Equity Fund 2.42% -1.12% 12.54% 6.33% 4.70%
MSCI EAFE Index 1.83% -2.42% 10.47% 7.65% 5.33%
Lipper International Fund Average 2.54% -0.89% 10.73% 9.36% 7.01%
AS OF SEPTEMBER 31, 1996
- ----------------------------------------------------- -----------------------------
The JPM Institutional International
Equity Fund -0.43% 2.68% 10.68% 6.64% 4.86%
MSCI EAFE Index -0.13% 1.45% 8.61% 8.17% 5.58%
Lipper International Fund Average -0.56% 2.95% 9.36% 9.52% 7.19%
</TABLE>
*REFLECTS PERFORMANCE OF THE PIERPONT INTERNATIONAL EQUITY FUND, INC., THE
PREDECESSOR ENTITY TO THE JPM INSTITUTIONAL INTERNATIONAL EQUITY FUND, FROM
JUNE 1, 1990 THROUGH OCTOBER 4, 1993 (COMMENCEMENT OF OPERATIONS OF THE JPM
INSTITUTIONAL INTERNATIONAL EQUITY FUND).
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. FUND RETURNS ASSUME
THE REINVESTMENT OF DISTRIBUTIONS AND REFLECT REIMBURSEMENT OF CERTAIN FUND
AND PORTFOLIO EXPENSES AS DESCRIBED IN THE PROSPECTUS. LIPPER ANALYTICAL
SERVICES, INC. IS A LEADING SOURCE FOR MUTUAL FUND DATA. ALTHOUGH GATHERED
FROM RELIABLE SOURCES, DATA ACCURACY AND COMPLETENESS CANNOT BE GUARANTEED.
THE JPM INSTITUTIONAL INTERNATIONAL EQUITY FUND INVESTS ALL OF ITS INVESTABLE
ASSETS IN THE NON-U.S. 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.
2
<PAGE>
PORTFOLIO MANAGER Q&A
Following is an interview with PAUL A. QUINSEE, who is a member of
the portfolio management team for The Non-U.S. Equity Portfolio in
which the Fund invests. Paul joined Morgan in 1992 as an
[PHOTO] 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 December 10, 1996 and reflects Paul's views on
that date.
THE PORTFOLIO SUBSTANTIALLY OUTPERFORMED THE MSCI EAFE INDEX FOR THE FISCAL
YEAR. HOW EFFECTIVE WERE EACH OF THE PORTFOLIO'S THREE INVESTMENT DECISIONS
IN ACHIEVING THESE FAVORABLE RELATIVE RESULTS?
PAQ: All three of the investment decisions that we take in the Portfolio --
COUNTRY ALLOCATION, STOCK SELECTION, AND CURRENCY HEDGING -- added value over
the last year. Hedging was particularly effective. For a long time, we felt
the yen had been overvalued against the U.S. dollar, and that view has been
realized over the past 12 months as the yen has fallen significantly against
the dollar and is now closer to our assessment of its fair value. Stock
selection has had another good year, as it has in the past. The choice of
individual companies to invest within Japan and within the major European
markets has been especially helpful this year. Country allocation has much
improved, particularly the emphasis on Japanese stocks towards the end of
last year, and the more recent move to underweight Japan and favor some of
the Continental European markets.
MORGAN'S PROPRIETARY RESEARCH CONTINUES TO FIND EUROPEAN MARKETS MORE
ATTRACTIVELY VALUED THAN OTHER DEVELOPED INTERNATIONAL MARKETS. WHERE IN
EUROPE WAS THE PORTFOLIO MOST SUCCESSFUL DURING THE PAST YEAR, AND HOW MUCH
OF THAT RELATIVE OUTPERFORMANCE WAS ATTRIBUTABLE TO COUNTRY ALLOCATION AND
HOW MUCH TO STOCK SELECTION?
PAQ: We've been very pleased about the returns achieved in some of the
European markets this year -- particularly in local currency terms, which the
strength of the U.S. dollar has somewhat offset. The best gains have come in
our favorite markets, France and Germany. Stock prices in both countries
benefitted from signs of gradual economic recovery, a more favorable currency
environment, and particularly a positive attitude of many European company
managements towards improving poor levels of profitability. All three factors
have helped produce a strong rise in European stock prices over the last
year.
The Portfolio's European stock selection has been particularly successful in
Germany, where the Portfolio did well by holding VOLKSWAGEN in the automobile
sector. Stock selection has also added considerable value in France, where we
managed to avoid investing in "problem"companies. Another very profitable
opportunity were the shares the Portfolio held in two Swiss pharmaceutical
companies, CIBA and SANDOZ, which agreed to merge in March. Realizing the
value we had felt was in those companies for some time, their stock prices
jumped by 30% shortly after the merger announcement, thus having a very
positive impact on Portfolio and Fund results.
3
<PAGE>
ONE OF THE YEAR'S BIGGEST STORIES WAS THE RISE OF JAPANESE STOCKS FROM
SIGNIFICANT LOWS IN MID-1995 THROUGH MID-1996, FOLLOWED BY THE MORE RECENT
UNDERPERFORMANCE WHICH SINGLE-HANDEDLY HELD BACK EAFE RETURNS IN OCTOBER
1996. HOW DID THE PORTFOLIO ATTACK THIS KEY MARKET FROM A COUNTRY ALLOCATION
STANDPOINT AND WHAT WERE SOME OF THE STOCK SELECTIONS THAT HELPED YOUR TEAM
ADD VALUE EVEN AT TIMES WHEN JAPAN LAGGED THE INDEX?
PAQ: Going back to mid-1995,we had felt at that time that Japanese stocks
were undervalued. The market had performed very poorly and we had been buying
stocks in anticipation of a recovery that hadn't yet developed, but we
decided to stick with that position. As the Bank of Japan moved more
decisively to ease monetary policy in mid-1995 and was successful in
engineering a sharp depreciation of the yen, so the environment within Japan
began to improve. Stock prices rallied strongly. The market, at one stage,
recorded a gain of more than 50% from the July 1995 lows, although that gain
was largely offset by weakness in Japa-nese currency for U.S. investors.
However, the Portfolio did benefit from the position in Japanese stocks and
from the hedging activity away from the yen that we previously discussed.
Stock selection has been good in Japan this year. The Portfolio has done well
from its holdings in some of the companies that are beginning to benefit from
the yen's weakness, like Honda in the automotive sector, and some of the
other big export stocks, particularly consumer electronics and heavy
industrials. Meanwhile, we've also avoided some of the companies that had
high exposures to semi-conductors.
WHAT IS YOUR CURRENT OUTLOOK FOR THE INTERNATIONAL EQUITY MARKETS AND WHAT
CHANGES SHOULD WE LOOK FOR IN THE PORTFOLIO'S INVESTMENT STRATEGY GOING
FORWARD?
PAQ: In managing the Non-U.S. Equity Portfolio, we have to attend to the fact
that most markets around the world have performed pretty well during the past
year or so, even if that performance isn't entirely apparent in the U.S.
dollar returns because of the weakness of many foreign currencies. Now that
these markets have performed well, of course, valuations in them are not as
reasonable as they were. However, with the exception of a couple of the
smaller European markets, we feel equities around the world outside the
United States are at least reasonably valued, if not outstandingly cheap. We
lack some of the concerns about the major markets in Europe or Japan that we
have in the U.S. equity market.
We continue to hold a large part of the Portfolio in Europe, particularly in
Continental Europe, and we're very happy with the investments we have there.
More recently, we've been adding to positions in some of the markets that
have not performed as well in the region, particularly Italy. We think
long-term fundamental improvements are now taking place in Italy, although
they have been obscured to many investors due to some of the short-term
difficulties that Italian companies can have in adapting to a stronger lira
and European Monetary Union.
We have sold a lot of Japanese stocks this year. However, after the recent
correction, we don't feel the Japa-nese market is particularly expensive. We
remain confident that the Japanese economy is recovering and we don't feel
that rising profits will particularly surprise investors.The Portfolio is
therefore holding a slightly-below-normal weighting in Japan and we're not
particularly concerned about valuations in that market.
4
<PAGE>
GROWING CONFIDENCE THAT EUROPEAN MONETARY UNION WILL COME TO PASS HAS
RECENTLY HAD A MAJOR POSITIVE IMPACT ON EUROPEAN FIXED INCOME MARKETS. ARE
THE REGION'S EQUITY MARKETS LIKELY TO FOLLOW THE SAME TREND IN YOUR VIEW?
PAQ: It is interesting that the impact of Monetary Union has been more
positive, so far, for bond markets than it has been for stocks. This is due
to investors having begun to discount lower rates of inflation and lower risk
on government debt in some of those countries that have had problems in the
past, particularly Italy. At the same time, as currencies in those regions
have strengthened, it hasn't helped their local stock markets, with profit
margins squeezed for big exporters.
However, a more stable currency and lower inflation are long-term positives
for stocks as well as for bonds, and we feel there may be some opportunities
developing in these markets as they underperform and are offering better
value. A year ago, we had no investments in Italy, but now we are beginning
to establish Portfolio positions in some of the stocks we feel have become
undervalued as a result of the market's weakness.
DO YOU PLAN TO REVISE THE PORTFOLIO'S PRESENT CURRENCY MANAGEMENT STRATEGY IF
THE U.S. DOLLAR GAINS ADDITIONAL STRENGTH IN RELATIVE TERMS DURING THE MONTHS
AHEAD?
PAQ: It's true that hedging from the yen into the U.S. dollar has proved
successful in terms of adding to the Portfolio's returns over the past year.
At this point, we feel the yen is clearly less overvalued than it was. We
still have some hedges out of the yen into the dollar because we feel that
interest rates in Japan are very low and are likely to stay low. The yen may
be under pressure in the short term, but the big move in the yen's relative
value is essentially behind us and we'll be looking to lock in those gains
and repurchase foreign currencies if the dollar strengthens over the next few
weeks.
5
<PAGE>
Fund facts
INVESTMENT OBJECTIVE
The JPM Institutional International Equity Fund seeks to provide a high total
return from a portfolio of equity securities of foreign companies. It is
de-signed for investors with a long-term investment horizon who want to
diversify their portfolios by investing in an actively managed portfolio of
non-U.S. securities that seeks to outperform the MSCI EAFE Index. As an
international investment, the Fund is subject to foreign market, political,
and currency risks.
- -----------------------------------------------------------------------------
COMMENCEMENT OF OPERATIONS
10/4/93
- -----------------------------------------------------------------------------
NET ASSETS AS OF 10/31/96
$726,863,690
- -----------------------------------------------------------------------------
CAPITAL GAIN PAYABLE DATE (IF APPLICABLE)
12/27/96
EXPENSE RATIO
The Fund's annualized expense ratio of 0.95% 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 OCTOBER 31, 1996
PORTFOLIO ALLOCATION
(AS A PERCENTAGE OF TOTAL INVESTMENTS)
[CHART]
LARGEST COMMON
STOCK HOLDINGS % OF TOTAL INVESTMENTS
TOYOTA MOTOR CORP. (JAPAN) 1.2%
NOMURA SECURITIES CO. LTD. (JAPAN) 1.0%
BASFAG (GERMANY) 1.0%
ROYAL DUTCH PETROLEUM CO.
(THE NETHERLANDS) 0.9%
SAKURA BANK LTD. (JAPAN) 0.9%
6
<PAGE>
FUNDS DISTRIBUTOR, INC. IS THE DISTRIBUTOR OF THE JPM INSTITUTIONAL
INTERNATIONAL EQUITY FUND (THE "FUND"). SIGNATURE BROKER-DEALER SERVICES,
INC. SERVED AS THE FUND'S DISTRIBUTOR PRIOR TO AUGUST 1, 1996.
MORGAN GUARANTY TRUST COMPANY OF NEW YORK ("MORGAN") SERVES AS PORTFOLIO
INVESTMENT ADVISOR AND MAKES THE FUND AVAILABLE SOLELY IN ITS CAPACITY AS
SHAREHOLDER SERVICING 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.
Performance data quoted herein represent past performance. Please remember
that past performance is not a guarantee of future performance. Fund returns
are net of fees, assume the reinvestment of Fund distributions, and reflect
the reimbursement of Fund expenses. Had expenses not been subsidized, returns
would have been lower. The Fund invests all of its investable assets in The
Non-U.S. Equity Portfolio (the "Portfolio"), a separately registered
investment company which is not available to the public but only to other
collective investment vehicles such as the Fund. Consistent with applicable
regulatory guidance, performance for the Fund prior to October 4, 1993
reflects the performance of The Pierpont International Equity Fund, Inc., the
predecessor entity to the Portfolio, which had a substantially similar
investment objective and restrictions as the Fund. Performance for the period
prior to October 4, 1993, reflects deduction of the charges and expenses of
The Pierpont International Equity Fund, Inc., which were higher than the
estimated charges and expenses for the Fund, after reimbursements. The
Portfolio invests in foreign securities which are subject to special risk.
MORE COMPLETE INFORMATION ABOUT THE FUND, INCLUDING MANAGEMENT FEES AND OTHER
EXPENSES, IS PROVIDED IN THE PROSPECTUS, WHICH SHOULD BE READ CAREFULLY
BEFORE INVESTING. YOU MAY OBTAIN ADDITIONAL COPIES OF THE PROSPECTUS BY
CALLING J.P. MORGAN FUNDS SERVICES AT (800) 766-7722.
7
<PAGE>
THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY
<PAGE>
THE JPM INSTITUTIONAL INTERNATIONAL EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment in The Non-U.S. Equity
Portfolio ("Portfolio"), at value $726,143,430
Receivable for Shares of Beneficial
Interest Sold 942,168
Deferred Organization Expenses 20,048
Receivable for Expense Reimbursements 13,499
Prepaid Expenses and Other Assets 3,377
------------
Total Assets 727,122,522
------------
LIABILITIES
Registration Fee Payable 90,141
Shareholder Servicing Fee Payable 62,027
Payable for Shares of Beneficial
Interest Redeemed 52,204
Administrative Services Fee Payable 19,752
Administration Fee Payable 3,180
Fund Services Fee Payable 346
Accrued Expenses 31,182
------------
Total Liabilities 258,832
------------
NET ASSETS
Applicable to 63,584,982 Shares of
Beneficial Interest Outstanding
(par value $0.001, unlimited shares
authorized) $726,863,690
------------
------------
Net Asset Value, Offering and
Redemption Price Per Share $11.43
-----
-----
ANALYSIS OF NET ASSETS
Paid-in Capital $669,663,133
Undistributed Net Investment Income 15,748,341
Accumulated Net Realized Gain on
Investment and Foreign Currency
Transactions 12,724,613
Net Unrealized Appreciation of
Investment and Foreign Currency
Translations 28,727,603
------------
Net Assets $726,863,690
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
9
<PAGE>
THE JPM INSTITUTIONAL INTERNATIONAL EQUITY FUND
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME ALLOCATED FROM
PORTFOLIO
Allocated Dividend Income (Net of
Foreign Withholding Tax of
$1,960,681) $12,356,397
Allocated Interest Income (Net of
Foreign Withholding Tax of
$24,724) 1,576,161
Allocated Portfolio Expenses (5,022,904)
-----------
Net Investment Income Allocated
from Portfolio 8,909,654
FUND EXPENSES
Shareholder Servicing Fee $ 596,245
Administrative Services Fee 150,350
Registration Fees 114,638
Administration Fee 75,276
Printing Expenses 37,096
Fund Services Fee 29,774
Transfer Agent Fees 23,724
Professional Fees 14,095
Trustees' Fees and Expenses 11,565
Amortization of Organization
Expenses 10,176
Insurance Expense 5,951
Miscellaneous 6,236
----------
Total Fund Expenses 1,075,126
Less: Reimbursement of Expenses (36,089)
----------
NET FUND EXPENSES 1,039,037
-----------
NET INVESTMENT INCOME 7,870,617
NET REALIZED GAIN ON INVESTMENT AND
FOREIGN CURRENCY TRANSACTIONS
ALLOCATED FROM PORTFOLIO 22,039,113
NET CHANGE IN UNREALIZED APPRECIATION
OF INVESTMENT AND FOREIGN CURRENCY
TRANSLATIONS ALLOCATED FROM
PORTFOLIO 35,202,924
-----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $65,112,654
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
10
<PAGE>
THE JPM INSTITUTIONAL INTERNATIONAL EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE
FOR THE FISCAL FISCAL
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1996 1995
-------------- -------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 7,870,617 $ 4,166,605
Net Realized Gain on Investment and
Foreign Currency Transactions
Allocated from Portfolio 22,039,113 8,133,955
Net Change in Unrealized Appreciation
(Depreciation) of Investment and
Foreign Currency Translations
Allocated from Portfolio 35,202,924 (13,848,328)
-------------- -------------
Net Increase (Decrease) in Net
Assets Resulting from Operations 65,112,654 (1,547,768)
-------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (11,369,691) --
Net Realized Gain (2,641,547) (2,540,846)
-------------- -------------
Total Distributions to
Shareholders (14,011,238) (2,540,846)
-------------- -------------
TRANSACTIONS IN SHARES OF BENEFICIAL
INTEREST
Proceeds from Shares of Beneficial
Interest Sold 319,281,413 316,979,569
Reinvestment of Dividends and
Distributions 5,467,324 2,307,778
Cost of Shares of Beneficial
Interest Redeemed (116,497,638) (60,806,120)
-------------- -------------
Net Increase from Transactions in
Shares of Beneficial Interest 208,251,099 258,481,227
-------------- -------------
Total Increase in Net Assets 259,352,515 254,392,613
NET ASSETS
Beginning of Fiscal Year 467,511,175 213,118,562
-------------- -------------
End of Fiscal Year (including
undistributed net investment income
of $15,748,341 and $10,103,133,
respectively) $ 726,863,690 $467,511,175
-------------- -------------
-------------- -------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
11
<PAGE>
THE JPM INSTITUTIONAL INTERNATIONAL EQUITY FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share outstanding throughout each period are as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
OCTOBER 4, 1993
(COMMENCEMENT
FOR THE FISCAL YEAR ENDED OF
OCTOBER 31, OPERATIONS) TO
------------------------- OCTOBER 31,
1996 1995 1994 1993
------- ------- ------- ---------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.44 $ 10.83 $ 10.20 $ 10.00
------- ------- ------- ---------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.12 0.06 0.06 --
Net Realized and Unrealized Gain (Loss)
on Investment and Foreign Currency
Allocated from Portfolio 1.17 (0.33) 0.57 0.20
------- ------- ------- ---------------
Total from Investment Operations 1.29 (0.27) 0.63 0.20
------- ------- ------- ---------------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (0.24) -- -- --
Net Realized Gain (0.06) (0.12) -- --
------- ------- ------- ---------------
Total Distributions to Shareholders (0.30) (0.12) -- --
------- ------- ------- ---------------
NET ASSET VALUE, END OF PERIOD $ 11.43 $ 10.44 $ 10.83 $ 10.20
------- ------- ------- ---------------
------- ------- ------- ---------------
Total Return 12.54% (2.46%) 6.18% 2.00%(a)
------- ------- ------- ---------------
------- ------- ------- ---------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (in
thousands) $726,864 $467,511 $213,119 $ -- (b)
Ratios to Average Net Assets
Expenses 0.95% 0.92% 1.00% -- (c)
Net Investment Income 1.24% 1.24% 0.95% -- (c)
Decrease Reflected in Expense Ratio
due to Expense Reimbursement 0.01% 0.02% 0.16% 2.50%(c)
</TABLE>
- ------------------------
(a)Not annualized.
(b)Net assets at October 31, 1993 were $204.
(c)Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
12
<PAGE>
THE JPM INSTITUTIONAL INTERNATIONAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1996
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The JPM Institutional International 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 diversified open-end
management investment company. The Fund commenced operations on October 4, 1993.
The Fund invests all of its investable assets in The Non-U.S. Equity Portfolio
(the "Portfolio"), a diversified open-end management investment company having
the same investment objectives as the Fund. The value of such investment
reflects the Fund's proportionate interest in the net assets of the Portfolio
(78% at October 31, 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 gains, if any, are declared and paid annually.
d)Each series of the Trust is treated as a separate entity for federal
income tax purposes. The Fund 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.
e)The Fund incurred organization expenses in the amount of $54,625. These
costs were deferred and are being amortized on a straight-line basis over
a five-year period from the commencement of operations.
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.
g)The Fund accounts for and reports distributions to shareholders in
accordance with Statement of Position 93-2 "Determination, Discosure, and
Financial Statement Presentation of Income, Capital Gain, and Return of
Capital Distributions by Investment Companies." The effect of applying
this
13
<PAGE>
THE JPM INSTITUTIONAL INTERNATIONAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1996
- --------------------------------------------------------------------------------
statement as of October 31, 1996, was to decrease accumulated net realized
gain on investment and foreign currency transactions by $9,163,366,
increase undistributed net investment income by $9,144,282, and increase
paid-in-capital by $19,084. The adjustments are primarily attributable to
foreign currency gains. Net investment income, net realized gains and net
assets were not effected by this change.
2. TRANSACTIONS WITH AFFILIATES
a)The Trust has retained Signature Broker-Dealer Services, Inc.
("Signature") to serve as administrator and distributor. Under an
Administrative Agreement, Signature provided administrative services
necessary for the operations of the Fund, furnished office space and
facilities required for conducting the business of the Fund and paid the
compensation of the Fund's officers affiliated with Signature. Until
December 28, 1995, the agreement provided for a fee to be paid to
Signature at an annual rate determined by the following schedule: 0.04%
of the first $1 billion of the aggregate average daily net assets of the
Trust, as well as two other affiliated fund families for which Signature
acted as administrator, 0.032% of the next $2 billion of such net assets,
0.024% of the next $2 billion of such net assets, and 0.016% of such net
assets in excess of $5 billion. The daily equivalent of the fee rate was
applied each day to the net assets of the Fund. For the period November 1,
1995 through December 28, 1995, Signature's fee for these services
amounted to $20,097.
Effective December 29, 1995, the Administration Agreement was amended such
that the fee charged was 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
series of the Trust, The JPM Pierpont Funds or The JPM Advisor Funds
invest and 0.01% of the aggregate average daily net assets of the Master
Portfolios in excess of $7 billion. The portion of this charge payable by
the Fund was determined by the proportionate share its net assets bear to
the total net assets of the Trust, The JPM Pierpont Funds, The JPM Advisor
Funds and the Master Portfolios. For the period from December 29, 1995
through July 31, 1996, Signature's fee for these services amounted to
$48,554. The Administration Agreement with Signature was terminated July
31, 1996.
Effective August 1, 1996, certain administrative functions formerly
provided by Signature are provided by Funds Distributor, Inc. ("FDI"), a
registered broker-dealer, and by Morgan Guaranty Trust Company of New York
("Morgan"). FDI also serves as the Fund's distributor. Under a Co-
Administration Agreement between FDI and the Trust on behalf of the Fund,
the Fund has agreed to pay FDI fees equal to its allocable share of an
annual complex-wide charge of $425,000 plus FDI's out-of-pocket expenses.
The amount allocable to the Fund is based on the ratio of the Fund's net
assets to the aggregate net assets of the Trust, The JPM Pierpont Funds,
The JPM Advisor Funds and the Master Portfolios. For the period from
August 1, 1996 through October 31, 1996, the fee for these services
amounted to $6,625.
b)Until August 31, 1995, the Trust, on behalf of the Fund, had a Financial
and Fund Accounting Services Agreement with Morgan which provided that
Morgan would receive a fee, based on the percentage described below, for
overseeing certain aspects of the administration and operation of the Fund
and
14
<PAGE>
THE JPM INSTITUTIONAL INTERNATIONAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1996
- --------------------------------------------------------------------------------
that was also designed to provide an expense limit for certain expenses
of the Fund. This fee was calculated exclusive of the shareholder
servicing fee, the fund services fee and amortization of organization
expenses, at 0.05% of the Fund's average daily net assets. From September
1, 1995 until December 28, 1995, an interim agreement between the Trust,
on behalf of the Fund, and Morgan provided for the continuation of the
oversight functions that were outlined under the prior agreement and that
Morgan should bear all of its expenses incurred in connection with these
services.
Effective December 29, 1995, the Trust, on behalf of the Fund, entered
into 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 had agreed to pay Morgan a fee equal to its proportionate share
of an annual complex-wide charge. Until July 31, 1996, this charge was
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 paid by the
Fund was determined by the proportionate share its net assets bore to the
net assets of the Trust, the Master Portfolios and other investors in the
Master Portfolios for which Morgan provided similar services. For the
period from December 29, 1995 through July 31, 1996, Morgan's fee for
these services amounted to $92,759.
Effective August 1, 1996, the Services Agreement was amended such that the
annual complex-wide charge is calculated daily based on the aggregate net
assets of the Master Portfolios in accordance with the following 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 less the complex-wide fees
payable to FDI. The allocation of the Fund's portion of this charge is
described above. For the period August 1, 1996 through October 31, 1996,
the fee for these services amounted to $57,591.
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 January 31,
1997. For the fiscal year ended October 31, 1996, Morgan has agreed to
reimburse the Fund $36,089 for expenses under this agreement.
c)The Trust, on behalf of the Fund, has a Shareholder Servicing Agreement
with Morgan. Until December 28, 1995, the agreement provided for the Fund
to pay Morgan a fee for these services which was computed daily and paid
monthly at an annual rate of 0.05% of the average daily net assets of the
Fund. For the period November 1, 1995 through December 28, 1995, the fee
for these services amounted to $39,152.
Effective December 29, 1995, the Shareholder Servicing Agreement was
amended such that the annual rate for providing these services was changed
to 0.10% of the average daily net assets of the Fund. For the period from
December 29, 1995 through October 31, 1996, the fee for these services
amounted to $557,093.
15
<PAGE>
THE JPM INSTITUTIONAL INTERNATIONAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1996
- --------------------------------------------------------------------------------
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
$29,774 for the fiscal year ended October 31, 1996.
e)An aggregate annual fee of $65,000 is paid to each Trustee for serving as
a Trustee of the Trust, The JPM 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 Trust's Chairman and Chief Executive Officer also serves as Chairman
of Group and received compensation and employee benefits from Group in his
role as Group's Chairman. The allocated portion of such compensation and
benefits included in the Funds Services Fee shown in the financial
statements was $3,800.
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 FOR THE
FISCAL FISCAL
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1996 1995
------------ -----------
<S> <C> <C>
Shares sold.......................... 28,823,191 30,753,019
Reinvestment of dividends and
distributions....................... 509,062 228,233
Shares redeemed...................... (10,512,172) (5,897,843)
------------ -----------
Net Increase......................... 18,820,081 25,083,409
------------ -----------
------------ -----------
</TABLE>
16
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of
The JPM Institutional International Equity 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
The JPM Institutional International Equity Fund (one of the series constituting
part of The JPM Institutional Funds, hereafter referred to as the "Fund") at
October 31, 1996, 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 October 4, 1993 (commencement of operations) through
October 31, 1993, in conformity with generally accepted accounting principles.
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 generally accepted auditing standards which require that we plan and
perform the audits 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 the opinion expressed
above.
PRICE WATERHOUSE LLP
New York, New York
December 26, 1996
17
<PAGE>
The Non-U.S. Equity Portfolio
Annual Report October 31, 1996
(The following pages should be read in conjunction
with The JPM Institutional International Equity Fund
Annual Financial Statements)
18
<PAGE>
THE NON-U.S. EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- --------------------------------------- ------------ ------------
<S> <C> <C>
COMMON STOCK (87.8%)
AUSTRALIA (2.7%)
Broken Hill Proprietary Company Ltd.
(Metals & Mining).................... 396,105 $ 5,261,539
CRA Ltd. (Metals & Mining)............. 69,700 1,093,319
CSR Ltd. (Building Materials).......... 705,033 2,370,626
E-mail Ltd. (Manufacturing)............ 100,000 275,180
Fosters Brewing Group Ltd. (Food,
Beverages & Tobacco)................. 575,705 1,050,063
National Australia Bank Ltd.
(Banking)............................ 328,405 3,607,009
News Corporation Ltd. (Broadcasting &
Publishing).......................... 280,630 1,597,888
North Ltd. (Metals & Mining)........... 211,500 602,133
Santos Ltd. (Oil-Production)........... 164,000 655,484
Southcorp Holdings Ltd. (Food,
Beverages & Tobacco)................. 531,800 1,619,449
TNT Ltd. (Transportation)+............. 396,700 764,462
Westpac Banking Corporation Ltd.
(Banking)............................ 504,000 2,877,734
WMC Ltd. (Metals & Mining)............. 594,000 3,735,488
------------
25,510,374
------------
BELGIUM (1.6%)
Arbed SA (Metals & Mining)............. 17,650 2,071,144
Banque Bruxelles Lambert SA
(Banking)............................ 3,800 782,174
Electrabel SA (Electric)............... 19,616 4,553,377
Fortis AG (Insurance).................. 16,600 2,331,132
Generale De Banque SA (Banking)........ 4,200 1,467,778
PetroFina SA (Oil-Production).......... 7,500 2,306,027
Solvay SA (Chemicals).................. 3,100 1,856,124
------------
15,367,756
------------
FINLAND (0.8%)
Metra OY (Industrial).................. 34,500 1,924,633
Outokumpu OY (Metals & Mining)......... 91,400 1,542,977
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- --------------------------------------- ------------ ------------
<S> <C> <C>
FINLAND (CONTINUED)
Rautaruukki OY (Metals & Mining)....... 151,200 $ 1,334,638
UPM-Kymmene Corporation (Forest
Products & Paper)+................... 114,300 2,320,523
------------
7,122,771
------------
FRANCE (10.3%)
Alcatel Alsthom (Telecommunications-
Equipment)........................... 36,953 3,154,046
AXA (Multi - Industry)................. 39,498 2,468,913
Bouygues (Construction & Housing)...... 26,787 2,627,203
Canal Plus (Broadcasting &
Publishing).......................... 5,607 1,389,620
Carrefour Supermarche (Retail)......... 3,540 1,966,049
Castorama Dubois (Retail).............. 11,575 1,982,717
Chargeurs International SA (Multi -
Industry)+........................... 3,900 169,492
Christian Dior SA (Retail)............. 31,795 4,232,525
Compagnie de Saint Gobain (Building
Materials)........................... 21,663 2,926,169
Compagnie Generale des Eaux (Water).... 38,935 4,657,074
Credit Commercial de France
(Banking)............................ 61,600 2,772,372
Credit Local de France (Financial
Services)............................ 39,000 3,357,775
Elf Aquitaine SA (Oil-Services)........ 43,334 3,467,939
Erid Beghin Say (Insurance)............ 12,400 1,975,959
Essilor International (Health
Services)............................ 8,382 2,206,997
Groupe Danone (Food, Beverages &
Tobacco)............................. 35,974 4,929,678
L'Air Liquide (Chemicals).............. 11,266 1,740,117
L'Air Liquide-New Shares (Chemicals)... 7,720 1,192,411
Lagardere Groupe (Entertainment,
Leisure & Media)..................... 98,480 3,113,525
Lyonnaise des Eaux SA (Multi -
Industry)............................ 10,000 884,851
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
THE NON-U.S. EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- --------------------------------------- ------------ ------------
<S> <C> <C>
FRANCE (CONTINUED)
Pathe SA (Entertainment, Leisure &
Media)+.............................. 6,900 $ 1,862,709
Peugeot SA (Automotive)................ 17,125 1,786,856
Pinault-Printemps-Redoute SA
(Retail)............................. 5,410 2,041,907
Promodes (Retail)...................... 15,560 4,203,591
Rhone-Poulenc (Chemicals).............. 86,289 2,559,174
Sanofi (Pharmaceuticals)............... 41,108 3,726,773
Schneider SA (Electronics)............. 40,775 1,995,564
SEB SA (Household Products)............ 5,000 1,013,076
SGS - Thomson Microelectronics NV
(Electronics)+....................... 30,000 1,590,970
Sidel SA (Machinery)+.................. 44,400 2,964,807
Societe Generale (Banking)............. 36,748 3,963,849
Sommer Allibert (Diversified
Manufacturing)+...................... 22,600 628,244
Synthelabo (Pharmaceuticals)........... 32,365 3,091,913
Total SA (Oil-Services)................ 95,752 7,496,025
Union des Assurances Federales
(Insurance).......................... 19,680 2,215,260
Usinor Sacilor (Metals & Mining)....... 97,800 1,452,199
Valeo SA (Automotive).................. 33,950 2,039,045
------------
95,847,394
------------
GERMANY (8.8%)
Allgemeine Handelsgesellschaft der
Verbraucher AG (Retail).............. 7,090 1,874,170
Allianz AG Holding (Insurance)......... 2,346 4,213,862
BASF AG (Chemicals).................... 269,000 8,604,001
Bayer AG (Chemicals)+.................. 146,180 5,527,626
Bayerische Hypotheken-und Wechsel Bank
AG (Banking)......................... 132,200 3,874,609
Bilfinger & Berger Bau AG (Construction
& Housing)........................... 56,250 2,278,693
Colonia Konzern (Insurance)+........... 13,450 1,004,393
Continental AG (Automotive)............ 129,870 2,274,351
Daimler Benz AG (Automotive)+.......... 53,080 3,118,426
SECURITY DESCRIPTION SHARES VALUE
- --------------------------------------- ------------ ------------
GERMANY (CONTINUED)
Deutsche Pfandbrief & Hypothekenbank AG
(Banking)............................ 50,500 $ 2,075,795
Douglas Holding AG (Retail)............ 54,600 2,291,233
Dresdner Bank AG (Banking)............. 246,560 6,599,035
Fried, Krupp AG Hoesch Krupp
(Machinery).......................... 28,000 4,413,155
Henkel KGAA (Chemicals)................ 8,625 383,599
MAN AG (Automotive).................... 11,625 2,830,957
Mannesmann AG (Machinery).............. 4,385 1,703,922
Munchener Rueckversicherungs-
Gesellschaft (Insurance)............. 3,162 7,564,378
RWE AG (Oil-Services).................. 30,000 1,235,921
SAP AG (Computer Software)............. 13,650 1,849,223
Schering AG (Pharmaceuticals).......... 22,500 1,811,803
Siemens AG (Electrical Equipment)+..... 147,670 7,636,237
VEBA AG (Oil-Services)................. 97,050 5,180,223
Volkswagen AG (Automotive)............. 8,010 3,156,194
------------
81,501,806
------------
HONG KONG (3.5%)
Cheung Kong Holdings Ltd. (Real
Estate).............................. 859,000 6,887,718
Hang Seng Bank (Banking)............... 103,300 1,225,736
Henderson Land Development Company Ltd.
(Real Estate)........................ 458,000 4,072,196
Hong Kong Electric Holdings Ltd.
(Electric)........................... 703,500 2,251,800
Hong Kong Telecommunications Ltd.
(Telecommunications)................. 1,583,200 2,794,853
HSBC Holdings PLC (Banking)............ 186,800 3,804,941
Hutchison Whampoa Ltd. (Multi -
Industry)............................ 353,000 2,465,239
Sing Tao Holdings (Broadcasting &
Publishing).......................... 2,544,000 1,225,558
Sun Hung Kai Properties Ltd. (Real
Estate).............................. 241,000 2,742,775
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE NON-U.S. EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- --------------------------------------- ------------ ------------
<S> <C> <C>
HONG KONG (CONTINUED)
Swire Pacific Ltd. (Multi -
Industry)............................ 387,500 $ 3,420,305
Television Broadcast Ltd.
(Entertainment, Leisure & Media)..... 452,000 1,584,157
------------
32,475,278
------------
IRELAND (0.8%)
Allied Irish Banks PLC (Banking)....... 171,000 1,085,654
Bank of Ireland PLC (Banking).......... 188,000 1,554,721
CRH PLC (Building Materials)........... 195,000 2,009,413
Irish Life PLC (Insurance)............. 332,000 1,426,832
Jefferson Smurfit Group PLC (Forest
Products & Paper).................... 664,000 1,805,159
------------
7,881,779
------------
ITALY (1.7%)
Arnoldo Mondadori Editore SPA
(Entertainment, Leisure & Media)..... 157,000 1,159,627
Assicurazioni Generali (Insurance)..... 96,800 1,870,439
Banca Fideuram SPA (Financial
Services)............................ 272,000 576,701
Banca Populare di Bergamo (Banking).... 53,000 831,866
ENI SPA (Oil-Services)................. 494,000 2,366,808
Fiat SPA (Automotive).................. 1,146,000 1,662,677
Instituto Mobiliare Italiano SPA
(Financial Services)................. 81,000 641,280
Instituto Nazionale Delle Assicurazioni
(Insurance).......................... 542,000 748,831
Montedison SPA (Chemicals)+............ 1,450,000 948,594
Olivetti & C SPA (Computer
Software)+........................... 1,504,000 437,408
Parmalat Finanziaria SPA
(Agriculture)........................ 594,000 852,013
SECURITY DESCRIPTION SHARES VALUE
- --------------------------------------- ------------ ------------
ITALY (CONTINUED)
Telecom Italia Mobile SPA
(Telecommunications)................. 517,000 $ 1,068,879
Telecom Italia SPA
(Telecommunications)................. 1,061,000 2,365,008
------------
15,530,131
------------
JAPAN (28.3%)
Aichi Corp. (Machinery)................ 90,000 739,845
Asahi Bank Ltd. (Banking).............. 581,000 5,976,523
Asahi Glass Co. Ltd. (Building
Materials)........................... 130,000 1,371,549
Asatsu Inc. (Commercial Services)...... 47,000 1,739,669
Ashikaga Bank Ltd. (Banking)........... 100,000 535,431
Canon Sales Co. Inc. (Miscellaneous)... 85,000 2,159,749
Chugai Pharmaceutical Co. Ltd.
(Pharmaceuticals).................... 337,000 3,081,412
Chuo Trust & Banking Co. Ltd.
(Banking)............................ 200,000 2,039,739
Cosmo Oil Co. Ltd. (Oil-Production).... 600,000 3,249,515
Dai-Ichi Kangyo Bank Ltd. (Banking).... 380,000 6,180,760
Dai-Tokyo Fire & Marine Insurance Co.
Ltd. (Insurance)..................... 100,000 625,110
Daido Hoxan Inc. (Chemicals)........... 50,000 288,377
Daido Steel Co. Ltd. (Metals &
Mining).............................. 500,000 2,066,115
Daiei Inc. (Retail).................... 300,000 2,663,969
Daikin Industries Ltd. (Machinery)..... 100,000 949,534
Daiwa Bank Ltd. (Banking).............. 1,050,000 5,954,367
Daiwa Danchi Co. Ltd. (Real Estate)+... 233,000 1,280,332
East Japan Railway Co. (Railroads)..... 1,025 4,713,159
Ebara Corp. (Machinery)................ 180,000 2,595,392
Familymart Co. Ltd. (Retail)........... 25,000 1,046,245
Fuji Denki Reiki Co. Ltd. (Multi -
Industry)............................ 115,000 1,203,182
Fuji Electric Co. Ltd. (Electrical
Equipment)........................... 544,000 2,472,726
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE NON-U.S. EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- --------------------------------------- ------------ ------------
<S> <C> <C>
JAPAN (CONTINUED)
Fuji Fire & Marine Insurance Co. Ltd.
(Insurance).......................... 305,000 $ 1,386,363
Fujitsu Ltd. (Computer Systems)........ 230,000 2,022,155
Fukui Bank Ltd. (Banking).............. 200,000 900,299
Fukuoka Chuo Bank (Banking)............ 43,000 323,237
Gakken Co. Ltd. (Broadcasting &
Publishing).......................... 270,000 1,827,852
Gunze Ltd. (Textiles).................. 211,000 1,187,269
Hiroshima Bank Ltd. (Banking).......... 100,000 540,707
Hitachi Ltd. (Electrical Equipment).... 900,000 7,991,908
Hitachi Plant Engineering and
Construction Co. Ltd. (Construction &
Housing)............................. 64,000 444,522
Hokkai Can Co. Ltd. (Packaging &
Containers).......................... 125,000 830,842
Hokkaido Takushoku Bank (Banking)...... 850,000 1,995,339
Hokuriku Bank Ltd. (Banking)........... 100,000 553,015
Honda Motor Co. (Automotive)........... 40,000 956,567
Itoham Foods Inc. (Food, Beverages &
Tobacco)............................. 250,000 1,626,516
Izumi Co. Ltd. (Retail)................ 105,000 1,652,452
Izumiya Co. Ltd. (Retail).............. 160,000 2,546,157
Japan Tobacco, Inc. (Food, Beverages &
Tobacco)............................. 250 1,767,188
Kaken Pharmaceuticals
(Pharmaceuticals).................... 50,000 339,370
Kawasaki Kisen Kaisha Ltd. (Transport &
Services)+........................... 700,000 1,858,624
Keiyo Co. Ltd. (Retail)................ 65,000 702,919
Kinden Corp. (Building Materials)...... 7,500 104,844
Kinki Nippon Railway (Railroads)....... 154,500 1,025,562
Kitz Corp. (Machinery)................. 145,000 627,220
Koa Corp. (Personal Care).............. 100,000 1,178,125
Kyocera Corp. (Electronics)............ 15,000 990,416
Matsushita Electric Industries Co. Ltd.
(Electronics)........................ 400,000 6,400,560
SECURITY DESCRIPTION SHARES VALUE
- --------------------------------------- ------------ ------------
JAPAN (CONTINUED)
Matsushita Refrigeration Co.
(Electrical Equipment)............... 75,000 $ 517,628
Minolta Co. Ltd. (Electrical
Equipment)........................... 125,000 755,011
Mitsubishi Heavy Industries Ltd.
(Machinery).......................... 809,000 6,223,621
Mitsui Mining & Smelting Co. Ltd.
(Metals & Mining).................... 350,000 1,270,880
Mitsui Petrochemical Industries Ltd.
(Chemicals).......................... 100,000 607,526
Mitsui Toatsu Chemicals Inc.
(Chemicals).......................... 650,000 2,274,485
Mitsui Trust & Banking Co. Ltd.
(Banking)............................ 200,000 1,934,235
Mizuno Corp. (Retail).................. 262,000 2,029,382
Mycal Corp. (Retail)................... 100,000 1,538,596
Nagase & Co. Ltd. (Wholesale &
International Trade)................. 100,000 852,822
New Oji Paper Co. Ltd. (Forest Products
& Paper)............................. 280,000 2,050,641
Nihon Matai Co. Ltd. (Wholesale &
International Trade)................. 94,000 498,347
Nippon Express Co. Ltd. (Transport &
Services)............................ 200,000 1,626,516
Nippon Hodo Co. Ltd. (Construction &
Housing)............................. 130,000 1,817,302
Nippon Meat Packers Inc. (Food,
Beverages & Tobacco)................. 50,000 655,002
Nippon Road Co. Ltd. (Construction &
Housing)............................. 130,000 933,796
Nippon Sheet Glass Co. Ltd. (Household
Products)............................ 225,000 939,643
Nippon Steel Corp. (Metals & Mining)... 2,400,000 7,005,448
Nippon Suisan Kaisha Ltd. (Food,
Beverages & Tobacco)+................ 202,000 774,327
Nippon Telegraph & Telephone Corp.
(Telecommunications)................. 284 1,985,053
Nippon Zeon Company, Ltd.
(Chemicals).......................... 180,000 878,319
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE NON-U.S. EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- --------------------------------------- ------------ ------------
<S> <C> <C>
JAPAN (CONTINUED)
Nishimatsu Construction Co. Ltd.
(Construction & Housing)............. 320,000 $ 2,954,104
Nissan Diesel Motor Co. Ltd.
(Automotive)......................... 394,000 1,926,006
Nissan Motor Co. Ltd. (Automotive)..... 600,000 4,541,936
Nissei Sangyo Co. Ltd. (Electrical
Equipment)........................... 125,000 1,637,506
Nomura Securities Co. Ltd. (Financial
Services)............................ 559,000 9,239,665
North Pacific Bank Ltd. (Banking)...... 220,000 1,176,015
NSK Corp. (Machinery).................. 365,000 2,419,640
Oji Paper Co. Ltd. (Forest Products &
Paper)............................... 161,666 1,182,575
Okamura Corp. (Industrial)............. 140,000 1,095,480
Ono Pharmaceuticals Co. Ltd.
(Pharmaceuticals).................... 100,000 3,121,152
Osaka Gas Co. Ltd. (Natural Gas)....... 519,000 1,606,189
Osaka Sanso Kogyo Ltd. (Chemicals)..... 300,000 994,373
Pokka Corp. (Food, Beverages &
Tobacco)............................. 50,000 514,331
Ricoh Corp. Ltd. (Electrical
Equipment)........................... 326,000 3,238,789
Rohm Co. Ltd. (Semiconductors)......... 25,000 1,483,646
Ryobi Ltd. (Metals & Mining)........... 400,000 1,825,215
Ryoyo Electro Corp. (Electronics)...... 30,000 532,794
Sakura Bank Ltd. (Banking)............. 868,000 8,241,952
San-In Godo Bank Ltd. (Banking)........ 100,000 733,251
Sanden Corp. (Machinery)............... 50,000 372,780
Sankyo Aluminum Industries Co. Ltd.
(Building Materials)................. 75,000 383,110
Sansei Yusoki Co. Ltd. (Entertainment,
Leisure & Media)..................... 79,000 972,393
Sanwa Bank Ltd. (Banking).............. 200,000 3,411,287
Sekisui Chemical Co. Ltd.
(Chemicals).......................... 200,000 2,233,162
SECURITY DESCRIPTION SHARES VALUE
- --------------------------------------- ------------ ------------
JAPAN (CONTINUED)
Shikoku Electric Power Inc.
(Electric)........................... 100,000 $ 2,022,155
Snow Brand Milk Products Co. Ltd.
(Food, Beverages & Tobacco).......... 300,000 1,859,503
Sony Corp. (Electronics)............... 73,000 4,383,592
Sumitomo Bakelite Co. Ltd.
(Chemicals).......................... 270,000 1,756,637
Sumitomo Bank Ltd. (Banking)........... 270,000 4,747,668
Sumitomo Forestry Co. Ltd. (Forest
Products & Paper).................... 250,000 3,538,771
Sumitomo Light Metal Industries Ltd.
(Metals & Mining)+................... 150,000 502,462
Sumitomo Realty & Development Co. Ltd.
(Building Materials)................. 300,000 2,183,927
Sumitomo Trust & Banking Co. Ltd.
(Banking)............................ 190,000 2,104,799
SXL Corp. (Construction & Housing)..... 60,000 523,299
Tadano Ltd. (Machinery)................ 100,000 860,735
Takashimaya Co. Ltd. (Retail).......... 200,000 2,866,185
The Kagawa Bank Ltd. (Banking)......... 115,000 970,634
Toenec Corp. (Construction &
Housing)............................. 50,000 377,615
Toho Bank Ltd. (Banking)............... 140,000 952,699
Toho Gas Co. Ltd. (Natural Gas)........ 247,000 714,462
Tohoku Electric Power Co. Inc.
(Electric)........................... 80,000 1,624,757
Tokai Bank Ltd. (Banking).............. 300,000 3,481,623
Tokio Marine & Fire Insurance Co. Ltd.
(Insurance).......................... 261,000 2,868,383
Tokyo Electric Power Co. Ltd.
(Electric)........................... 195,000 4,474,677
Tomen Corp. (Wholesale & International
Trade)............................... 500,000 1,639,704
Toppan Printing Co. Ltd. (Broadcasting
& Publishing)........................ 130,000 1,588,710
Topy Industries Ltd. (Manufacturing)... 150,000 634,341
Tosoh Corp. (Chemicals)+............... 755,000 2,953,885
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
23
<PAGE>
THE NON-U.S. EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- --------------------------------------- ------------ ------------
<S> <C> <C>
JAPAN (CONTINUED)
Toyo Trust & Banking Co. Ltd.
(Banking)............................ 210,000 $ 1,794,618
Toyoda Gosei Co. Ltd. (Automotive)..... 139,000 1,057,103
Toyota Motor Corp. (Automotive)........ 456,000 10,784,592
Tsubakimoto Chain Co.
(Manufacturing)...................... 200,000 1,229,118
Ube Industries Ltd. (Diversified
Manufacturing)....................... 570,000 1,844,205
West Japan Railway Co. (Railroads)..... 450 1,471,777
Yamaha Motor Co. Ltd. (Automotive)..... 100,000 896,782
Yamanouchi Pharmaceutical Co. Ltd.
(Pharmaceuticals).................... 30,000 609,284
Yamazaki Baking Co. Ltd. (Food,
Beverages & Tobacco)................. 60,000 954,809
Yokohama Rubber Company Ltd.
(Automotive)......................... 700,000 3,815,718
Yuasa Trading Co. Ltd. (Wholesale &
International Trade)................. 139,000 626,930
------------
262,434,818
------------
MALAYSIA (1.0%)
Commerce Asset-Holding Berhad
(Banking)............................ 351,000 2,292,164
Industrial Oxygen Incorporated Berhad
(Agriculture)........................ 1,136,000 1,789,435
New Straits Times Press Berhad
(Entertainment, Leisure & Media)..... 205,000 1,079,096
Sime Darby Berhad (Multi - Industry)... 499,800 1,766,516
Sime UEP Properties Berhad (Real
Estate).............................. 334,000 865,230
Tenaga Nasional Berhad
(Telecommunications)................. 392,000 1,566,975
------------
9,359,416
------------
SECURITY DESCRIPTION SHARES VALUE
- --------------------------------------- ------------ ------------
NETHERLANDS (3.3%)
ABN Amro Holdings NV (Banking)......... 17,030 $ 963,016
Aegon NV (Insurance)................... 48,370 2,461,428
Dutch State Mines NV (Chemicals)....... 21,790 2,087,906
ING Groep NV (Financial Services)...... 77,850 2,428,368
Koninklijke PTT Nederland NV
(Commercial Services)................ 47,700 1,726,979
Moeara Enim Petroleum MIJ
(Oil-Services)....................... 160 2,953,008
Philips Electronics NV (Electronics)... 54,000 1,904,124
PolyGram NV (Entertainment, Leisure &
Media)............................... 16,700 784,829
Royal Dutch Petroleum Co.
(Oil-Services)....................... 49,940 8,251,197
Unilever NV (Food, Beverages &
Tobacco)............................. 27,175 4,134,181
Wolters Kluwer NV (Broadcasting &
Publishing).......................... 24,100 3,099,367
------------
30,794,403
------------
NEW ZEALAND (1.3%)
Brierley Investments Ltd. (Financial
Services)............................ 1,482,000 1,352,306
Fletcher Challenge Building (Building
Materials)........................... 170,000 460,558
Fletcher Challenge Paper (Forest
Products & Paper).................... 1,263,500 2,287,979
Lion Nathan Ltd. (Food, Beverages &
Tobacco)............................. 931,600 2,405,245
Telecom Corporation of New Zealand
(Telecommunications)................. 993,600 5,165,779
------------
11,671,867
------------
NORWAY (1.6%)
Aker AS, Series B (Industrial)......... 70,000 1,361,523
Kvaerner AS, Series B (Construction &
Housing)............................. 64,820 2,257,185
Norsk Hydro AS (Oil-Services).......... 139,600 6,437,806
Nycomed ASA, Series B (Medical
Supplies)+........................... 70,000 955,262
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
24
<PAGE>
THE NON-U.S. EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- --------------------------------------- ------------ ------------
<S> <C> <C>
NORWAY (CONTINUED)
Orkla ASA (Multi - Industry)........... 39,000 $ 2,281,805
Storebrand ASA (Insurance)+............ 197,300 1,157,454
------------
14,451,035
------------
SINGAPORE (1.0%)
Development Bank Singapore (Banking)... 153,125 1,836,644
Hotel Properties Limited (Restaurants &
Hotels).............................. 424,000 649,998
Keppel Corporation Ltd. (Multi -
Industry)............................ 187,000 1,393,551
Singapore Airlines Ltd. (Airlines)..... 106,600 938,147
Singapore Press Holdings
(Entertainment, Leisure & Media)..... 54,000 896,813
Singapore Telecommunications Ltd.
(Telecommunications)................. 990,000 2,304,630
United Overseas Bank Ltd. (Banking).... 133,000 1,293,196
------------
9,312,979
------------
SPAIN (3.1%)
Banco Intercontinental Espanol
(Financial Services)................. 33,100 3,970,182
Banco Pastor (Banking)................. 26,200 1,562,032
Banco Popular Espanol SA (Banking)..... 19,700 3,769,233
Fuerzas Electric de Cataluna SA
(Electric)........................... 403,300 3,227,033
Hidroelectrica del Cantabrico SA
(Electric)........................... 72,300 2,410,473
Iberdrola SA (Electric)................ 454,700 4,833,249
Repsol SA (Gas Exploration)............ 141,000 4,606,903
Telefonica de Espana
(Telecommunications)................. 198,000 3,976,309
------------
28,355,414
------------
SWITZERLAND (2.4%)
Ciba Geigy AG (Pharmaceuticals)........ 3,610 4,465,465
Compagnie Financiere Richemont AG
(Food, Beverages & Tobacco).......... 600 917,599
SECURITY DESCRIPTION SHARES VALUE
- --------------------------------------- ------------ ------------
SWITZERLAND (CONTINUED)
Georg Fischer AG (Automotive
Supplies)............................ 1,150 $ 1,102,747
Julius Baer Holdings AG (Banking)...... 490 517,359
Liechtenstein Global Trust AG
(Banking)............................ 1,250 595,843
Nestle SA (Food, Beverages &
Tobacco)............................. 2,655 2,896,049
Roche Holding AG (Pharmaceuticals)..... 257 1,951,919
Sandoz AG (Pharmaceuticals)............ 3,430 3,981,211
Schweizerischer Bankverein (Banking)... 14,816 2,866,162
SGS-Thomson Microelectronics NV
(Electronics)........................ 350 798,033
Swissair AG (Airlines)+................ 880 688,636
TAG Heuer International SA ADR
(Apparels & Textiles)+............... 13,000 208,000
Valora Holding AG (Retail)............. 5,640 958,879
------------
21,947,902
------------
UNITED KINGDOM (15.6%)
Abbey National PLC (Banking)........... 395,000 4,103,729
Allied Colloids Group PLC
(Chemicals).......................... 545,300 1,291,991
Allied Domecq PLC (Food, Beverages &
Tobacco)............................. 328,000 2,531,705
Amersham International PLC
(Biotechnology)...................... 79,000 1,337,893
Barclays PLC (Banking)................. 91,400 1,435,520
BAT Industries PLC (Food, Beverages &
Tobacco)............................. 535,200 3,712,672
BOC Group PLC (Chemicals).............. 111,100 1,567,630
Britannic Assurance PLC (Insurance).... 172,000 2,047,419
British Aerospace PLC (Aerospace)...... 106,000 2,014,362
British Airways PLC (Airlines)......... 204,000 1,837,030
British Petroleum Company PLC
(Oil-Services)....................... 632,004 6,794,994
British Telecommunications PLC
(Telecommunications)................. 468,000 2,705,423
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
25
<PAGE>
THE NON-U.S. EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- --------------------------------------- ------------ ------------
<S> <C> <C>
UNITED KINGDOM (CONTINUED)
BTR PLC (Multi - Industry)............. 579,000 $ 2,427,821
Cadbury Schweppes PLC (Food, Beverages
& Tobacco)........................... 252,000 2,101,026
Dalgety PLC (Food, Beverages &
Tobacco)............................. 359,600 1,815,274
EMI Group PLC (Entertainment, Leisure &
Media)............................... 111,000 2,181,680
General Cable PLC (Broadcasting &
Publishing)+......................... 132,000 457,841
General Electric Company PLC
(Electrical Equipment)............... 315,000 1,949,194
Glaxo Wellcome PLC (Pharmaceuticals)... 514,600 8,086,452
Glynwed International PLC (Metals &
Mining).............................. 300,200 1,720,736
Guardian Royal Exchange PLC
(Insurance).......................... 889,000 3,648,070
Guinness PLC (Food, Beverages &
Tobacco)............................. 308,000 2,206,807
Hillsdown Holdings PLC (Food, Beverages
& Tobacco)........................... 935,000 2,649,243
HSBC Holdings PLC (Banking)............ 370,000 7,778,375
Hyder PLC (Water)...................... 287,800 3,299,319
Inchcape PLC (Commercial Services)..... 215,000 1,004,804
Kingfisher PLC (Retail)................ 328,200 3,500,586
Ladbroke Group PLC (Entertainment,
Leisure & Media)..................... 771,000 2,504,714
Lloyds TSB Group PLC (Banking)......... 811,850 5,149,252
Lucas Varity PLC (Automotive
Supplies)+........................... 479,900 1,941,950
Marks & Spencer PLC (Retail)........... 276,100 2,319,941
MEPC PLC (Real Estate)................. 290,000 2,018,808
National Grid Group PLC (Electric)..... 861,900 2,526,331
National Power PLC (Electric).......... 305,000 2,011,480
SECURITY DESCRIPTION SHARES VALUE
- --------------------------------------- ------------ ------------
UNITED KINGDOM (CONTINUED)
Orange PLC (Telecommunication
Services)+........................... 607,000 $ 1,833,553
Pilkington PLC (Building Materials).... 526,000 1,464,680
Racal Electronic PLC
(Telecommunications-Equipment)....... 417,000 1,880,948
Rank Group PLC (Entertainment, Leisure
& Media)+............................ 399,000 2,654,152
Reuters Holdings (Broadcasting &
Publishing).......................... 237,100 2,953,615
RMC Group PLC (Building Materials)..... 53,000 936,843
Rolls-Royce PLC (Aerospace)............ 589,000 2,440,979
Royal Bank of Scotland Group
(Banking)............................ 302,300 2,476,093
RTZ Corp. PLC (Metals & Mining)........ 147,000 2,353,053
Sainsbury (J.) PLC (Retail)............ 497,000 2,929,718
Scottish Power PLC (Electric).......... 376,000 1,922,553
Sears PLC (Retail)..................... 1,608,000 2,278,065
Shell Transport & Trading Co.
(Oil-Services)....................... 196,300 3,218,924
SmithKline Beecham PLC
(Pharmaceuticals).................... 405,666 5,013,849
South West Water PLC (Water)........... 128,000 1,214,656
Tarmac PLC (Construction & Housing).... 921,500 1,343,010
Tesco PLC (Retail)..................... 576,000 3,123,400
Tomkins PLC (Multi - Industry)......... 705,000 2,961,895
Vodafone Group PLC
(Telecommunications)................. 783,000 3,028,212
Zeneca Group PLC (Pharmaceuticals)..... 135,000 3,680,020
------------
144,388,290
------------
TOTAL COMMON STOCK (COST
$777,623,712)....................... 813,953,413
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
26
<PAGE>
THE NON-U.S. EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- --------------------------------------- ------------ ------------
<S> <C> <C>
PREFERRED STOCK (2.3%)
AUSTRALIA (0.2%)
News Corporation Ltd. (Broadcasting &
Publishing).......................... 458,963 $ 2,020,032
------------
FINLAND (0.8%)
Nokia AB (Telecommunications-
Equipment)........................... 159,180 7,355,581
------------
GERMANY (1.3%)
GEA AG (Machinery)..................... 3,815 1,283,261
Henkel KGAA (Chemicals)................ 45,175 2,028,572
Jungheinrich AG (Machinery)............ 10,530 1,395,229
RWE AG (Oil-Services).................. 75,260 2,556,408
SAP AG (Computer Software)............. 11,000 1,481,493
Volkswagen AG (Automotive)............. 10,800 3,279,534
------------
12,024,497
------------
TOTAL PREFERRED STOCK (COST
$19,844,083)........................ 21,400,110
------------
WARRANTS (0.7%)
FRANCE (0.0%)*
Lagardere Groupe, Expiring 6/30/97
(Entertainment, Leisure & Media)+.... 16,000 21,612
------------
GERMANY (0.4%)
Allianz AG Holding, Expiring 2/23/98
(Insurance)+......................... 17,330 910,476
Veba International Finance, Expiring
4/6/98 (Oil-Services)+............... 8,870 2,514,686
------------
3,425,162
------------
JAPAN (0.1%)
Dowa Mining Co. Ltd., Expiring 12/9/97
(Metals & Mining)+................... 441 325,237
Lion Corp., Expiring 6/18/99
(Industrial)+........................ 2,000 243,104
Maeda Corp., Expiring 2/5/97
(Construction & Housing)+............ 315 133,875
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- --------------------------------------- ------------ ------------
<S> <C> <C>
JAPAN (CONTINUED)
New Oji Paper Co. Ltd., Expiring
07/30/98 (Forest Products &
Paper)+.............................. 18 $ 12,344
Rohm Co., Expiring 11/20/97
(Semiconductors)+.................... 800 626,033
------------
1,340,593
------------
MALAYSIA (0.2%)
Petronas Dagangan Berhad,+ Expiring
2/24/99 (Retail)..................... 805,000 1,414,599
------------
SINGAPORE (0.0%)*
United Overseas Land Ltd., Expiring
5/28/01 (Building Materials)+........ 900 537
------------
SWITZERLAND (0.0%)*
Schweizerischer Bankverein, Expiring
6/30/00 (Banking)+................... 1,880 4,854
------------
TOTAL WARRANTS (COST $6,283,450)..... 6,207,357
------------
PRINCIPAL
AMOUNT
------------
CONVERTIBLE BONDS (3.5%)
MALAYSIA (0.1%)
(IN USD)
------------
Telekom Malaysia Berhad, 4.00% due
10/03/04 (Telecommunications)........ 390,000 407,794
------------
FRANCE (0.0%)*
(IN FRF)
------------
Sanofi SA, 12.40% due 01/01/00
(Pharmaceuticals).................... 372,500 360,562
------------
ITALY (0.0%)*
(IN ITL)
------------
Republic of Italy, 6.50% due 06/28/01
(Insurance).......................... 420,000,000 280,789
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
27
<PAGE>
THE NON-U.S. EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- --------------------------------------- ------------ ------------
<S> <C> <C>
JAPAN (3.2%)
(IN JPY)
------------
BOT Cayman Finance Ltd., 4.25% due
03/31/49 (Financial Services)........ 950,000,000 $ 11,776,854
Canon Inc., 1.30% due 12/19/08
(Electric)........................... 111,000,000 1,447,274
Daido Hoxan Inc., 1.60% due 03/29/02
(Chemicals).......................... 30,000,000 283,541
NEC Corp., 1.90% due 03/30/01 (Computer
Systems)............................. 700,000,000 7,939,156
SXL Corp., 2.70% due 03/29/02
(Construction & Housing)............. 60,000,000 577,106
Toyota Motor Corp., 1.20% due 01/28/98
(Automotive)......................... 300,000,000 3,668,892
Yamanouchi Pharmaceutical Co. Ltd.,
1.25% due 03/31/14 (Commercial
Services)............................ 190,000,000 1,971,161
Yamato Transport Co. Ltd., 3.90% due
03/30/01 (Transportation)............ 132,000,000 1,472,727
------------
29,136,711
------------
SWITZERLAND (0.2%)
(IN CHF)
------------
Swiss Re Finance Ltd. Bermuda, 2.00%
due 07/06/00 (Financial Services).... 1,790,000 2,008,156
------------
TOTAL CONVERTIBLE BONDS (COST
$32,515,449)........................ 32,194,012
------------
SHORT-TERM INVESTMENTS (1.8%)
EURO DOLLAR TIME DEPOSITS (1.7%)
(IN USD)
------------
State Street Bank Euro Dollar, 4.88%
due 11/01/96 (Banking)............... 15,548,000 15,548,000
------------
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- --------------------------------------- ------------ ------------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS (0.1%)
(IN USD)
------------
United States Treasury Bills, 4.63% due
01/09/97 Government Obligations
(a).................................. 1,460,000 $ 1,445,891
------------
TOTAL SHORT-TERM INVESTMENTS (COST
$16,993,891)........................ 16,993,891
------------
TOTAL INVESTMENTS (COST $853,260,585) (96.1%)........
890,748,783
OTHER ASSETS IN EXCESS OF LIABILITIES (3.9%).........
36,023,172
------------
NET ASSETS (100.0%).................................. $926,771,955
------------
------------
</TABLE>
- ------------------------------
Note:For Federal Income Tax purposes, the cost of securities owned at October
31, 1996 was substantially the same as the cost of securities for financial
statement purposes.
(a)$1,460,000 par segregated as collateral for initial margin on futures
contracts.
+ Non-income producing security
* Less than 0.1%
ADR - Securities whose value is determined or significantly influenced by
trading on exchanges not located in the US or Canada. ADR after the name of
a foreign holding 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.
28
<PAGE>
THE NON-U.S. EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1996
- --------------------------------------------------------------------------------
INDUSTRY DIVERSIFICATION
<TABLE>
<CAPTION>
PERCENT OF
TOTAL INVESTMENTS
--------------------
<S> <C>
Banking........................................................................................ 16.1%
Oil-Services................................................................................... 5.9%
Retail......................................................................................... 5.6%
Automotive..................................................................................... 5.4%
Pharmaceuticals................................................................................ 4.9%
Chemicals...................................................................................... 4.7%
Food, Beverages & Tobacco...................................................................... 4.6%
Insurance...................................................................................... 4.4%
Financial Services............................................................................. 4.0%
Metals & Mining................................................................................ 3.8%
Electric....................................................................................... 3.7%
Machinery...................................................................................... 3.0%
Electrical Equipment........................................................................... 3.0%
Telecommunications............................................................................. 2.5%
Multi-Industry................................................................................. 2.4%
Entertainment, Leisure & Media................................................................. 2.1%
Electronics.................................................................................... 2.1%
Real Estate.................................................................................... 2.0%
Broadcasting & Publishing...................................................................... 1.8%
Construction & Housing......................................................................... 1.8%
Building Materials............................................................................. 1.6%
Forest Products & Paper........................................................................ 1.5%
Telecommunications-Equipment................................................................... 1.4%
Computer Systems............................................................................... 1.1%
Water.......................................................................................... 1.0%
Railroads...................................................................................... 0.8%
Telecommunication Services..................................................................... 0.8%
Commercial Services............................................................................ 0.7%
Oil-Production................................................................................. 0.7%
Gas Exploration................................................................................ 0.5%
Industrial..................................................................................... 0.5%
Manufacturing.................................................................................. 0.5%
Aerospace...................................................................................... 0.5%
Computer Software.............................................................................. 0.4%
Wholesale & International Trade................................................................ 0.4%
Airlines....................................................................................... 0.4%
Transport & Services........................................................................... 0.4%
Automotive Supplies............................................................................ 0.3%
Agriculture.................................................................................... 0.3%
Natural Gas.................................................................................... 0.3%
Health Services................................................................................ 0.3%
Transportation................................................................................. 0.3%
Miscellaneous.................................................................................. 0.2%
Semiconductors................................................................................. 0.2%
Household Products............................................................................. 0.2%
Biotechnology.................................................................................. 0.2%
Government Obligations......................................................................... 0.2%
Personal Care.................................................................................. 0.1%
Textiles....................................................................................... 0.1%
Medical Supplies............................................................................... 0.1%
Packaging & Containers......................................................................... 0.1%
Restaurants & Hotels........................................................................... 0.1%
--------------------
100.0%
--------------------
--------------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
29
<PAGE>
THE NON-U.S. EQUITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost
$853,260,585) $ 890,748,783
Cash (including 23,781,623 segregated
as collateral on futures contracts) 23,784,975
Foreign Currency at Value (Cost
$11,609,180) 11,695,465
Receivable for Investments Sold 3,746,810
Dividends Receivable 1,718,299
Foreign Tax Reclaim Receivable 1,283,683
Interest Receivable 95,146
Prepaid Trustees' Fees 2,981
Prepaid Expenses and Other Assets 3,160
-------------
Total Assets 933,079,302
-------------
LIABILITIES
Payable for Investments Purchased 4,737,236
Unrealized Depreciation of Forward
Foreign Currency Contracts 636,054
Advisory Fee Payable 475,229
Custody Fee Payable 316,884
Variation Margin Payable 54,686
Administrative Services Fee Payable 15,895
Administration Fee Payable 11,692
Fund Services Fee Payable 443
Accrued Expenses 59,228
-------------
Total Liabilities 6,307,347
-------------
NET ASSETS
Applicable to Investors' Beneficial
Interests $ 926,771,955
-------------
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
30
<PAGE>
THE NON-U.S. EQUITY PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividend Income (Net of Foreign
Withholding Tax of $2,557,066 ) $ 16,120,940
Interest Income (Net of Foreign
Withholding Tax of $32,502 ) 2,076,287
------------
Investment Income 18,197,227
EXPENSES
Advisory Fee $ 5,007,993
Custodian Fees and Expenses 1,159,797
Administrative Services Fee 196,299
Professional Fees and Expenses 76,934
Administration Fee 76,409
Fund Services Fee 39,391
Trustees' Fees and Expenses 15,029
Insurance Expense 6,950
Printing Expenses 6,822
Registration Fees 861
Miscellaneous 1,940
------------
Total Expenses 6,588,425
------------
NET INVESTMENT INCOME 11,608,802
NET REALIZED GAIN ON
Investment (including $788,996 net
realized gain from futures
contracts) 20,547,185
Foreign Currency Transactions 13,765,882
------------
Net Realized Gain 34,313,067
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) OF
Investment (including $23,253 net
unrealized loss from futures
contracts) 45,775,898
Foreign Currency Contracts and
Translations (2,360,045)
------------
Net Change in Unrealized
Appreciation (Depreciation) 43,415,853
------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 89,337,722
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
31
<PAGE>
THE NON-U.S. EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FISCAL FOR THE FISCAL
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1996 1995
-------------- --------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 11,608,802 $ 6,919,031
Net Realized Gain on Investments and
Foreign Currency Transactions 34,313,067 15,078,850
Net Change in Unrealized Appreciation
(Depreciation) of Investments and
Foreign Currency Translations 43,415,853 (27,987,331)
-------------- --------------
Net Increase (Decrease) in Net
Assets Resulting from Operations 89,337,722 (5,989,450)
-------------- --------------
TRANSACTIONS IN INVESTORS' BENEFICIAL
INTERESTS
Contributions 369,388,677 373,795,232
Withdrawals (185,257,400) (138,078,647)
-------------- --------------
Net Increase from Investors'
Transactions 184,131,277 235,716,585
-------------- --------------
Total Increase in Net Assets 273,468,999 229,727,135
NET ASSETS
Beginning of Fiscal Year 653,302,956 423,575,821
-------------- --------------
End of Fiscal Year $ 926,771,955 $ 653,302,956
-------------- --------------
-------------- --------------
</TABLE>
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
OCTOBER 4, 1993
FOR THE FISCAL (COMMENCEMENT
YEAR ENDED OF
OCTOBER 31, OPERATIONS) TO
---------------- OCTOBER 31,
1996 1995 1994 1993
---- ---- ---- ---------------
<S> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Expenses 0.79% 0.82% 0.95% 0.99%(a)
Net Investment Income 1.39% 1.31% 0.93% 0.43%(a)
Decrease Reflected in Expense Ratio
due to Expense Reimbursement -- -- -- 0.17%(a)
Portfolio Turnover 57% 59% 56% 54%(b)
Average Broker Commissions .0020 -- -- --
</TABLE>
- ------------------------
(a) Annualized.
(b) Portfolio turnover for the fiscal year ended October 31, 1993, included the
portfolio activity of The Pierpont International Equity Fund, Inc. for the
period November 1, 1992 through October 3, 1993, prior to conversion when The
Pierpont International Equity Fund, Inc. contributed all of its investable
assets to the Portfolio.
The Accompanying Notes are an Integral Part of the Financial Statements.
32
<PAGE>
THE NON-U.S. EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1996
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Non-U.S. Equity Portfolio (the "Portfolio") is registered under the
Investment Company Act of 1940, as amended, (the "Act") as a no-load,
diversified, open-end management investment company which was organized as a
trust under the laws of the State of New York. The Portfolio's investment
objective is to provide a high total return from a portfolio of equity
securities of foreign companies. The Portfolio commenced operations on October
4, 1993 and received a contribution of certain assets and liabilities, including
securities, with a value of $160,213,973 on that date from the Pierpont
International Equity Fund, Inc. in exchange for a beneficial interest in the
Portfolio. At that date, net unrealized appreciation of $11,116,204 was included
in the contributed securities. The Declaration of Trust permits the Trustees to
issue an unlimited number of beneficial interests in the Portfolio.
Investments in international markets may involve certain considerations and
risks not typically associated with investments in the United States. Future
economic and political developments in foreign countries could adversely affect
the liquidity or value, or both, of such securities in which the Portfolio is
invested. The ability of the issuers of 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 exchanges, 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; 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
33
<PAGE>
THE NON-U.S. EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1996
- --------------------------------------------------------------------------------
the prevailing exchange rates at the end of the period. Purchases, sales,
income and expenses are translated at the exchange rates prevailing on the
respective dates of such transactions. Translation gains and losses
resulting from changes in the exchange rates during the reporting period
and gains and losses realized upon settlement of foreign currency
transactions are reported in the Statement of Operations.
Although the net assets of the Portfolio are presented at the exchange
rates and market values prevailing at the end of the period, the Portfolio
does not isolate the portion of the results of operations arising as a
result of changes in foreign exchange rates from the fluctuations arising
from changes in the market prices of securities during the period.
c)Securities transactions are recorded on a trade date basis. Dividend
income is recorded on the ex-dividend date or 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 foreign currency translations. At October
31, 1996, the Portfolio had open foreign currency contracts as follows:
SUMMARY OF OPEN FORWARD FOREIGN CURRENCY CONTRACTS
<TABLE>
<CAPTION>
U.S. NET
DOLLAR UNREALIZED
VALUE AT APPRECIATION/
PURCHASE CONTRACTS COST/PROCEEDS 10/31/96 (DEPRECIATION)
- --------------------------------------- ------------- ---------- -------------
<S> <C> <C> <C>
Japanese Yen 262,424,500, expiring
1/28/97............................... $ 2,350,000 $2,337,844 $ (12,156)
SALES CONTRACTS
- ---------------------------------------
German Mark 29,114,937, expiring
1/28/97............................... $ 18,998,328 $19,360,293 $ (361,965)
French Franc 117,210,233,600, expiring
1/28/97............................... 22,617,852 23,065,234 (447,382)
Japanese Yen 3,002,771,460, expiring
1/28/97 .............................. 26,976,655 26,750,594 226,061
Japanese Yen 736,024,107, expiring
1/28/97............................... 6,531,000 6,556,970 (25,970)
Japanese Yen 734,752,521, expiring
1/28/97............................... 6,531,000 6,545,642 (14,642)
-------------
Net Unrealized Depreciation on Forward
Foreign Currency Contracts............ $ (636,054)
-------------
-------------
</TABLE>
34
<PAGE>
THE NON-U.S. EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1996
- --------------------------------------------------------------------------------
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
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 the contracts. Futures
transactions during the fiscal year ended October 31, 1996 are summarized
as follows:
<TABLE>
<CAPTION>
PRINCIPAL
NUMBER OF AMOUNT
CONTRACTS OF CONTRACTS
--------- -------------
<S> <C> <C>
Contracts opened....................... 1,288 114,426,676
Contracts closed....................... (1,049) (87,713,424)
--------- -------------
Contracts open at end of year.......... 239 $ 26,713,252
--------- -------------
--------- -------------
</TABLE>
SUMMARY OF OPEN CONTRACTS AT OCTOBER 31, 1996
<TABLE>
<CAPTION>
NET
UNREALIZED
CONTRACTS APPRECIATION/
LONG (DEPRECIATION)
--------- -------------
<S> <C> <C>
Australian All Ord. Index, expiring
December 1996......................... 100 $ 12,277
Financial Times-Stock Exchange
100-Share Index, expiring December
1996.................................. 95 (54,328)
German Stock Exchange Index, expiring
December 1996......................... 13 29,700
Tokyo Stock Exchange Index, expiring
December 1996......................... 31 (10,902)
--------- -------------
Totals................................. 239 ($23,253)
--------- -------------
--------- -------------
</TABLE>
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.
35
<PAGE>
THE NON-U.S. EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1996
- --------------------------------------------------------------------------------
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 investment
advisory agreement, the Portfolio pays Morgan at an annual rate of 0.60%
of the Portfolio's average daily net assets. For the fiscal year ended
October 31, 1996, such fees amounted to $5,007,993.
b)The Portfolio had retained Signature Broker-Dealer Services, Inc.
("Signature") to serve as administrator and exclusive placement agent.
Under an Administration Agreement, Signature provided administrative
services necessary for the operations of the Portfolio, furnished office
space and facilities required for conducting the business of the Portfolio
and paid the compensation of the Portfolio's officers affiliated with
Signature. Until December 28, 1995, the agreement provided for a fee to be
paid to Signature at an annual rate determined by the following schedule:
0.01% of the first $1 billion of the aggregate average daily net assets of
the Portfolio and the other portfolios subject to the agreement, 0.008% of
the next $2 billion of such net assets, 0.006% of the next $2 billion of
such net assets, and 0.004% of such net assets in excess of $5 billion.
The daily equivalent of the fee rate was applied each day to the net
assets of the Portfolio. For the period November 1, 1995 through December
28, 1995, such fees amounted to $9,619.
Effective December 29, 1995, the Administration Agreement was amended such
that the fee charged was 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
JPM 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 paid by the
Portfolio was determined by the proportionate share its net assets bore to
the total net assets of The JPM Pierpont Funds, The JPM Institutional
Funds, The JPM Advisor Funds and the Master Portfolios. For the period
from December 29, 1995 through July 31, 1996, such fees amounted to
$60,578. The Administration Agreement with Signature was terminated July
31, 1996.
Effective August 1, 1996, certain administrative functions formerly
provided by Signature are provided by Funds Distributor, Inc. ("FDI"), a
registered broker dealer, and by Morgan. FDI also serves as the
Portfolio's exclusive placement agent. Under a Co-Administration Agreement
between FDI and the Portfolio, the Portfolio has agreed to pay FDI fees
equal to its allocable share of an annual complex-wide charge of $425,000
plus FDI's out-of-pocket expenses. The amount allocable to the Portfolio
is based on the ratio of the Portfolio's net assets to the aggregate net
assets of The JPM Pierpont Funds, The JPM Institutional Funds, The JPM
Advisor Funds and the Master Portfolios. For the period August 1, 1996
through October 31, 1996, the fee for these services amounted to $6,212.
c)Until August 31, 1995, the Portfolio had a Financial and Fund Accounting
Services Agreement with Morgan which provided that Morgan would receive a
fee, based on the percentages described below, for overseeing certain
aspects of the administration and operation of the Portfolio and was also
designed to provide an expense limit for certain expenses of the
Portfolio. This fee was calculated exclusive of the advisory fee, custody
expenses, fund services fee, and brokerage costs at 0.15% of the
Portfolio's average
36
<PAGE>
THE NON-U.S. EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1996
- --------------------------------------------------------------------------------
daily net assets up to $200 million, 0.10% of the next $200 million of
average daily net assets, and 0.05% of the next $200 million of average
daily net assets and 0.03% on any excess over $600 million. From September
1, 1995 until December 28, 1995, an interim agreement between the
Portfolio and Morgan provided for the continuation of the oversight
functions that were outlined under the prior agreement and that Morgan
should bear all of its expenses incurred in connection with these
services.
Effective December 29, 1995, the Portfolio entered into an Administrative
Services Agreement (the "Services Agreement") with Morgan under which
Morgan was responsible for overseeing certain aspects of the
administration and operation of the Portfolio. Under the Services
Agreement, the Portfolio had agreed to pay Morgan a fee equal to its
proportionate share of an annual complex-wide charge. Until July 31, 1996,
this charge was 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 aggregate average daily net assets in excess
of $7 billion. The portion of this charge paid by the Portfolio was
determined by the proportionate share it's net assets bore to the net
assets of the Master Portfolios and investors in the Master Portfolios for
which Morgan provided similar services. For the period December 29, 1995
through July 31, 1996, the fee for these services amounted to $121,902.
Effective August 1, 1996, the Services Agreement was amended such that the
annual complex-wide charge is 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 Master Portfolios'
aggregate average daily net assets and 0.04% of the Master Portfolios'
aggregate average daily net assets in excess of $7 billion less the
complex-wide fees payable to FDI. The allocation of the Fund's portion of
this charge is described above. For the period from August 1, 1996 through
October 31, 1996, the fee for these services amounted to $74,397.
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 $39,391 for the fiscal year ended October 31, 1996.
e)An aggregate annual fee of $65,000 is paid to each Trustee for serving as
a Trustee of The JPM Pierpont Funds, The JPM Institutional Funds and the
Master Portfolios. The Trustees' Fees and Expenses shown in the financial
statements represent the Portfolio's allocated portion of the total fees
and expenses. The Portfolio's Chairman and Chief Executive Officer also
serves as Chairman of Group and 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 $5,000.
37
<PAGE>
THE NON-U.S. EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1996
- --------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the fiscal year
ended October 31,1996 were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
----------- -----------
<S> <C> <C>
634,647,966 445,347,627
</TABLE>
38
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of
The Non-U.S. Equity Portfolio
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the supplementary data present fairly, in all material
respects, the financial position of The Non-U.S. Equity Portfolio (the
"Portfolio") at October 31, 1996, 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 October 4, 1993 (commencement of
operations) through October 31, 1993, in conformity with generally accepted
accounting principles. These financial statements and supplementary data
(hereafter referred to as "financial statements") are the responsibility of the
Portfolio's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audits to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 1996 by correspondence with the
custodians and brokers and the application of alternative auditing procedures
where confirmations from brokers were not received, provide a reasonable basis
for the opinion expressed above.
PRICE WATERHOUSE LLP
New York, New York
December 26, 1996
39
<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 EMERGING MARKETS EQUITY FUND
THE JPM INSTITUTIONAL EUROPEAN EQUITY FUND
THE JPM INSTITUTIONAL JAPAN EQUITY FUND
THE JPM INSTITUTIONAL ASIA GROWTH FUND
FOR MORE INFORMATION ON THE JPM INSTITUTIONAL FAMILY OF FUNDS, CALL J.P.
MORGAN FUNDS SERVICES AT (800)766-7722.
THE
JPM INSTITUTIONAL
INTERNATIONAL
EQUITY FUND
ANNUAL REPORT
OCTOBER 31, 1996
