<PAGE>
LETTER TO THE SHAREHOLDERS OF THE J.P. MORGAN EUROPEAN EQUITY FUND
January 3, 2000
Dear Shareholder:
The J.P. Morgan European Equity Fund delivered a return of 12.61% for the 12
months ended November 30, 1999, exceeding its benchmark, the MSCI Europe Index.
The fund's net asset value on November 30, 1999 was $17.06 per share, increasing
from $15.42 per share after paying dividends of approximately $0.27 per share,
including a current income dividend of approximately $0.20 per share and
approximately $0.07 per share in long-term capital gains over the 12-month
period.
Included in this report is an interview with Nigel F. Emmett, a member of the
portfolio management team. This interview is designed to reflect what happened
during the reporting period, as well as provide an outlook for the months ahead.
As chairman and president of Asset Management Services, we thank you for
investing with J.P. Morgan. Should you have any comments or questions, please
telephone your Morgan representative or J.P. Morgan Funds Services at
800-521-5411.
Sincerely yours,
/s/ Ramon de Oliveira /s/ Keith M. Schappert
Ramon de Oliveira Keith M. Schappert
Chairman of Asset Management Services President of Asset Management Services
J.P. Morgan & Co. Incorporated J.P. Morgan & Co. Incorporated
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
<S> <C> <C> <C>
LETTER TO THE SHAREHOLDERS..........1 FUND FACTS AND HIGHLIGHTS...........5
FUND PERFORMANCE....................2 FINANCIAL STATEMENTS................8
PORTFOLIO MANAGER Q&A...............3
- -------------------------------------------------------------------------------
</TABLE>
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 of
$10,000. The chart at right shows that $10,000 invested on February 29, 1996*,
would have grown to $18,699 on November 30, 1999.
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
what would have happened if the fund had achieved that return by performing
at a constant rate each year. Average annual total returns represent the
average yearly change of a fund's value over various time periods, typically
one, five, or ten years (or since inception). Total returns for periods of
less than one year are not annualized and provide a picture of how a fund has
performed over the short term.
GROWTH OF $10,000 SINCE INCEPTION*
FEBRUARY 29, 1996 - NOVEMBER 30, 1999
[CHART]
<TABLE>
<CAPTION>
J.P. Morgan European Lipper European
Equity Fund MSCI Europe Index Region Funds Average
<S> <C> <C> <C>
Feb-96 10000 10000 10000
10111 10209 10120
10191 10392 10193
10344 10652 10272
10475 10740 10385
10273 10461 10255
10516 10754 10559
10729 10916 10781
10972 11119 11031
Nov-96 11510 11623 11590
11774 11863 11815
11723 11968 11847
11855 12102 12003
12291 12386 12391
12230 12205 12329
12697 12664 12856
13285 13249 13499
13792 13648 14132
13062 13038 13324
14340 14144 14616
13599 13511 13898
Nov-97 13822 13610 14111
14376 13889 14627
14925 14386 15236
16056 15527 16427
17036 16730 17597
17337 17199 17938
17649 17806 18302
17789 17778 18502
17994 18087 18868
15507 15578 16494
14559 14709 15835
15883 15637 17102
Nov-98 16605 16386 18012
17208 16991 18800
17230 17110 18679
16835 16622 18205
17044 16642 18404
17712 17110 18952
16846 16422 18042
17296 16992 18346
17548 17233 18517
17701 17410 18705
17449 17224 18560
18140 17772 19243
Nov-99 18699 18977 19762
</TABLE>
<TABLE>
<CAPTION>
PERFORMANCE TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS
----------------- ----------------------------------
THREE SIX ONE THREE SINCE
AS OF NOVEMBER 30, 1999 MONTHS MONTHS YEAR YEARS INCEPTION*
- ----------------------------------------------------------------------- ----------------------------------
<S> <C> <C> <C> <C> <C>
J.P. Morgan European Equity Fund 5.63% 11.00% 12.61% 17.56% 18.16%
MSCI Europe Index 5.65% 9.54% 9.72% 19.47% 19.92%
Lipper European Region Funds Average 9.16% 16.46% 14.03% 17.47% 18.47%
AS OF SEPTEMBER 30, 1999
- ----------------------------------------------------------------------- ----------------------------------
J.P. Morgan European Equity Fund 0.89% 2.38% 19.85% 17.60% 16.81%
MSCI Europe Index 1.17% 0.85% 17.21% 19.85% 18.84%
Lipper European Region Funds Average 0.95% 1.91% 15.40% 16.35% 16.22%
</TABLE>
*J.P. MORGAN EUROPEAN EQUITY FUND'S RETURNS INCLUDE HISTORICAL RETURNS OF THE
J.P. MORGAN INSTITUTIONAL EUROPEAN EQUITY FUND FROM FEBRUARY 29, 1996 THROUGH
MAY 13, 1996 (THE FUND'S INCEPTION).
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. FUND RETURNS ARE NET OF
FEES, ASSUME REINVESTMENT OF DIVIDENDS AND REFLECT THE REIMBURSEMENT OF EXPENSES
AS DESCRIBED IN THE PROSPECTUS. HAD EXPENSES NOT BEEN SUBSIDIZED, RETURNS WOULD
HAVE BEEN LOWER. THE MSCI EUROPE INDEX IS AN UNMANAGED INDEX WHICH MEASURES
EUROPEAN STOCK MARKET PERFORMANCE. IT DOES NOT INCLUDE FEES OR OPERATING
EXPENSES AND IS NOT AVAILABLE FOR ACTUAL INVESTMENT. LIPPER ANALYTICAL SERVICES,
INC. IS A LEADING RESOURCE FOR MUTUAL FUND DATA.
2
<PAGE>
PORTFOLIO MANAGER Q&A
[PHOTO]
Following is an interview with NIGEL F. EMMETT, vice president, and a
member of the team that manages the master portfolio in which the fund invests.
Nigel joined J.P. Morgan in 1997. Previously, he was employed by Brown Brothers
Harriman & Co. in New York and Gartmore Investment Management in London. Nigel
earned a B.A. degree in economics from Manchester University. He is a Chartered
Financial Analyst. This interview was conducted on December 10, 1999, and
reflects his views on that date.
EUROPEAN STOCK PRICES HAVE ADVANCED SMARTLY IN RECENT MONTHS, AFTER A RATHER
LACKLUSTER PERFORMANCE EARLIER IN THE PERIOD. WHAT HAS CHANGED?
NE: Europe was hurt in the first half of the period by the collapse of the Asian
economies and worries about a slowdown in global growth, so its own domestic
markets failed to rally. But in the second half, Europe has benefited from the
recovery in Asia and strong growth in the United States. Plus, domestic demand
is starting to pick up. So going forward, everything is firing on all cylinders.
And strong mergers and acquisitions activity and restructuring are providing a
floor for the market. We expect this activity to result in better margins and
therefore better earnings as well.
THE FUND BEAT THE BENCHMARK, THE MSCI EUROPE INDEX. WHAT WENT WELL?
NE: We outperformed primarily in stock selection, reflecting our commitment to
research, but also in country and currency selection as well. The fund did
exactly what we wanted it to do - beat the benchmark in a risk-managed way.
AT THIS POINT, DO YOU FAVOR THE CONTINENT OR THE UNITED KINGDOM?
NE: We are overweighted in continental Europe and underweighted in the United
Kingdom. We have had a solid bounceback in economic growth on the continent this
year, as a result of a stronger than expected global economy. We expect the Year
2000 to be even stronger.
CAN WE EXPECT THAT WILL TRANSLATE INTO HIGHER CORPORATE EARNINGS?
NE: Analysts have been upgrading corporate earnings estimates in continental
Europe. In fact, forecast earnings growth for the Year 2000 is higher than it is
in the United States. This reflects not only a better economic backdrop, but
also continued management focus on margins/costs. Against an environment of
mergers and acquisitions activity and restructuring, the emphasis in corporate
Europe is very much on efficiency and improved profitability, and therefore
earnings.
3
<PAGE>
TELL US ABOUT SOME OF YOUR STRONGEST PERFORMING HOLDINGS.
NE: One of our best performers was ST Microelectronics, the French semiconductor
maker. The semiconductor industry was at the bottom of its cycle last September.
It rebounded sharply in the fourth quarter of 1998 and has continued to perform
well to date in 1999. We liked ST Microelectronics because it was selling at an
attractive price/earnings multiple, it offered exposure to the semiconductor
industry, it made very good chips used in the popular Nokia cellular telephones,
and it had good capacity management, a big issue in this industry.
Another European technology stock we liked was Philips (Netherlands), a consumer
electronics company with interests in electronics and semiconductors. It has
done very well by restructuring, and it has been able to drive its cost-cutting
gains through to earnings.
ANY OTHERS?
NE: Our U.K. stocks also did well. Billiton (metals/materials/paper) advanced
on anticipation of global economic growth and takeover speculation, and Vickers
(capital goods) rose substantially on a 50% premium takeover bid from Rolls
Royce.
INTEREST RATES ARE RISING. COULD THAT CRIMP ECONOMIC GROWTH?
NE: It is true that interest rates have risen recently on both sides of the
English Channel. The European Central Bank (ECB) has increased short-term rates
from 2.5% to 3.0%, while in the United Kingdom, the Bank of England has been,
perhaps, the most proactive of all the central banks. However, we do not find
these increases to be particularly worrisome. They merely reflect a withdrawal
of the stimulus put in place during the economic slowdown experienced in the
second half of 1998. As the economic environment has improved, this excess
stimulus is no longer required. The ECB is unlikely to increase rates further in
the first half of 2000, although another move by the Bank of England should not
be unexpected.
CURRENCY HAS CONSTRAINED RETURNS THIS YEAR FOR INVESTORS IN THE UNITED STATES,
HASN'T IT?
NE: Yes, the euro has been remarkably weak. We think it is fundamentally
undervalued. Although European stocks have performed well in local currency
terms over the 12 months, U.S. based investors have suffered due to the euro
weakness.
WILL THE PERCEPTION OF CURRENCY WEAKNESS LIMIT INVESTOR INTEREST IN EUROPE?
NE: It's a concern, but not an overriding one. Even the most negative analysts
see the potential for a fair amount of upside - certainly not immediately, but
perhaps a little way off. GDP is very strong and Europe is still a very
attractive place to be. We are still finding value in very efficient, well run
companies that are focused on delivering shareholder value.
4
<PAGE>
FUND FACTS
INVESTMENT OBJECTIVE
J.P. Morgan European Equity Fund seeks to provide a high total return from a
portfolio of equity securities of European companies. It is designed for
investors who want an actively managed portfolio of European equity securities
that seeks to outperform the MSCI Europe Index, which is comprised of more than
500 companies in 14 European countries. As an international investment, the fund
is subject to foreign market, political and currency risks.
- --------------------------------------------------------------------------------
COMMENCEMENT OF INVESTMENT OPERATIONS
5/13/96
- --------------------------------------------------------------------------------
FUND NET ASSETS AS OF 11/30/99
$13,261,518
- --------------------------------------------------------------------------------
PORTFOLIO NET ASSETS AS OF 11/30/99
$25,429,857
- --------------------------------------------------------------------------------
CAPITAL GAIN PAYABLE DATE (IF APPLICABLE)
12/20/99
EXPENSE RATIO
The fund's current annualized expense ratio of 1.48% covers shareholders'
expenses for custody, tax reporting, investment advisory and shareholder
services, after reimbursement. The fund is no-load and does not charge any
sales, redemption, or exchange fees. There are no additional charges for buying,
selling, or safekeeping fund shares, or for wiring redemption proceeds from the
fund.
FUND HIGHLIGHTS
ALL DATA AS OF NOVEMBER 30, 1999
COUNTRY ALLOCATION
(PERCENTAGE OF TOTAL INVESTMENTS)
[CHART]
UNITED KINGDOM 28.6%
GERMANY 13.8%
FRANCE 13.5%
NETHERLANDS 10.6%
SWITZERLAND 8.4%
SPAIN 5.7%
ITALY 4.4%
SWEDEN 3.8%
OTHER COUNTRIES 6.5%
SHORT-TERM INVESTMENTS 4.7%
LARGEST HOLDINGS % OF TOTAL
(EXCLUDING SHORT-TERM INVESTMENTS) INVESTMENTS
- -------------------------------------------------------
BP Amoco PLC (United Kingdom) 3.3%
Mannesmann AG (Germany) 2.7%
Total Fina, B Shares (France) 2.6%
Vodafone Group PLC (United Kingdom) 2.5%
Ericsson LM, B Shares (Sweden) 2.5%
Lloyds TSB Group PLC (United Kingdom) 2.2%
Nokia OYJ (Finland) 2.1%
Roche Holding (Switzerland) 2.1%
Telefonica SA (Spain) 2.0%
Glaxo Wellcome PLC (United Kingdom) 1.9%
5
<PAGE>
DISTRIBUTED BY FUNDS DISTRIBUTOR, INC. J.P. MORGAN INVESTMENT MANAGEMENT
INC. SERVES AS INVESTMENT ADVISOR. SHARES OF THE FUND ARE NOT BANK DEPOSITS AND
ARE NOT GUARANTEED BY ANY BANK, GOVERNMENT ENTITY, OR THE FDIC. RETURN AND SHARE
PRICE WILL FLUCTUATE AND REDEMPTION VALUE MAY BE MORE OR LESS THAN ORIGINAL
COST.
References to specific securities and their issuers are for illustrative
purposes only and are not intended to be, and should not be interpreted as,
recommendations to purchase or sell securities. Opinions expressed herein are
based on current market conditions and are subject to change without notice.The
fund invests in foreign securities which are subject to special risks including
economic and political uncertainty and currency fluctuations; prospective
investors should refer to the fund's prospectus for a discussion of these risks.
The fund invests through a master portfolio (another fund with the same
objective).
CALL J.P. MORGAN FUNDS SERVICES AT (800) 521-5411 FOR A PROSPECTUS CONTAINING
MORE COMPLETE INFORMATION ABOUT THE FUND INCLUDING MANAGEMENT FEES AND OTHER
EXPENSES. PLEASE READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
6
<PAGE>
THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY
7
<PAGE>
J.P. MORGAN EUROPEAN EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment in The European Equity Portfolio
("Portfolio"), at value $13,790,313
Tax Reclaim Receivable 57,740
Receivable for Shares of Beneficial Interest Sold 5,973
Receivable for Expense Reimbursements 4,734
Deferred Organization Expenses 120
Prepaid Expenses and Other Assets 105
-----------
Total Assets 13,858,985
-----------
LIABILITIES
Payable for Shares of Beneficial Interest
Redeemed 562,928
Shareholder Servicing Fee Payable 2,717
Administrative Services Fee Payable 273
Accrued Trustees' Fees and Expenses 21
Administration Fee Payable 7
Accrued Expenses 31,521
-----------
Total Liabilities 597,467
-----------
NET ASSETS
Applicable to 777,419 Shares of Beneficial
Interest Outstanding
(par value $0.001, unlimited shares authorized) $13,261,518
===========
Net Asset Value, Offering and Redemption Price
Per Share $17.06
-----
-----
ANALYSIS OF NET ASSETS
Paid-in Capital $11,570,545
Undistributed Net Investment Income 68,468
Accumulated Net Realized Loss on Investment (49,343)
Net Unrealized Appreciation of Investment 1,671,848
-----------
Net Assets $13,261,518
===========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
8
<PAGE>
J.P. MORGAN EUROPEAN EQUITY FUND
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME ALLOCATED FROM PORTFOLIO
Allocated Dividend Income (Net of Foreign
Withholding Tax of $41,480) $ 270,147
Allocated Interest Income 8,540
Allocated Portfolio Expenses (Net of
Reimbursement of $80,648) (137,374)
----------
Net Investment Income Allocated from
Portfolio 141,313
FUND EXPENSES
Shareholder Servicing Fee $ 34,421
Transfer Agent Fees 24,494
Registration Fees 19,783
Professional Fees 11,369
Printing Expenses 7,958
Administrative Services Fee 3,546
Fund Services Fee 274
Administration Fee 201
Trustees' Fees and Expenses 131
Amortization of Organization Expenses 87
Miscellaneous 3,535
--------
Total Fund Expenses 105,799
Less: Reimbursement of Expenses (41,517)
--------
NET FUND EXPENSES 64,282
----------
NET INVESTMENT INCOME 77,031
NET REALIZED GAIN ON INVESTMENT ALLOCATED FROM
PORTFOLIO 267,376
NET CHANGE IN UNREALIZED APPRECIATION OF
INVESTMENT
ALLOCATED FROM PORTFOLIO 1,265,048
----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $1,609,455
==========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
9
<PAGE>
J.P. MORGAN EUROPEAN EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FISCAL FOR THE ELEVEN
YEAR ENDED MONTHS ENDED
NOVEMBER 30, 1999 NOVEMBER 30, 1998
----------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 77,031 $ 107,572
Net Realized Gain (Loss) on Investment Allocated
from Portfolio 267,376 (202,822)
Net Change in Unrealized Appreciation of
Investment Allocated from Portfolio 1,265,048 277,635
---------------- ----------------
Net Increase in Net Assets Resulting from
Operations 1,609,455 182,385
---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (192,325) --
Net Realized Gain (9,673) --
In Excess of Net Realized Gain (58,137) --
---------------- ----------------
Total Distributions to Shareholders (260,135) --
---------------- ----------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Proceeds from Shares of Beneficial Interest Sold 7,234,203 18,370,344
Reinvestment of Dividends and Distributions 223,008 --
Cost of Shares of Beneficial Interest Redeemed (10,446,563) (8,482,921)
---------------- ----------------
Net Increase (Decrease) from Transactions in
Shares of Beneficial Interest (2,989,352) 9,887,423
---------------- ----------------
Total Increase (Decrease) in Net Assets (1,640,032) 10,069,808
NET ASSETS
Beginning of Period 14,901,550 4,831,742
---------------- ----------------
End of Period (including undistributed net
investment income of $68,468 and $111,101,
respectively) $ 13,261,518 $ 14,901,550
================ ================
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
10
<PAGE>
J.P. MORGAN EUROPEAN EQUITY FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share outstanding throughout each period are as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 13, 1996
FOR THE FISCAL FOR THE ELEVEN FOR THE FISCAL (COMMENCEMENT OF
YEAR ENDED MONTHS ENDED YEAR ENDED OPERATIONS) THROUGH
NOVEMBER 30, 1999 NOVEMBER 30, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996
----------------- ----------------- ----------------- -------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 15.42 $ 13.35 $ 11.61 $ 10.00
---------------- ---------------- ---------------- ------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.17 0.12 0.10 0.01
Net Realized and Unrealized Gain on Investment 1.74 1.95 2.45 1.60
---------------- ---------------- ---------------- ------------------
Total from Investment Operations 1.91 2.07 2.55 1.61
---------------- ---------------- ---------------- ------------------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (0.20) -- (0.07) --
Net Realized Gain (0.01) -- (0.74) (0.00)(d)
In Excess of Net Realized Gain (0.06) -- -- --
---------------- ---------------- ---------------- ------------------
Total Distributions to Shareholders (0.27) -- (0.81) (0.00)(d)
---------------- ---------------- ---------------- ------------------
NET ASSET VALUE, END OF PERIOD $ 17.06 $ 15.42 $ 13.35 $ 11.61
================ ================ ================ ==================
RATIOS AND SUPPLEMENTAL DATA
Total Return 12.61% 15.51%(a) 22.10% 16.10%(a)
Net Assets, End of Year (in thousands) $ 13,262 $ 14,902 $ 4,832 $ 2,072
Ratio to Average Net Assets
Net Expenses 1.48% 1.42%(b) 1.42% 1.42%(b)
Net Investment Income 0.57% 0.91%(b) 0.91% 0.29%(b)
Expenses without Reimbursment 2.38% 2.03%(b) 3.78% 2.50%(c)
</TABLE>
- ------------------------
(a) Not Annualized.
(b) Annualized.
(c) After consideration of certain state limitations.
(d) Less than $0.01.
The Accompanying Notes are an Integral Part of the Financial Statements.
11
<PAGE>
J.P. MORGAN EUROPEAN EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1999
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
J.P. Morgan European Equity Fund (the "fund") is a separate series of J.P.
Morgan Funds, a Massachusetts business trust (the "Trust") which was organized
on November 4, 1992. The trust is registered under the Investment Company Act of
1940, as amended, as an open-end management investment company. The fund
commenced operations on May 13, 1996. At a meeting on November 12, 1998, the
trustees elected to change the fund's fiscal year end from December 31 to
November 30.
The fund invests all of its investable assets in The European Equity Portfolio
(the "portfolio"), a diversified open-end management investment company having
the same investment objective as the fund. The value of such investment included
in the Statement of Assets and Liabilities reflects the fund's proportionate
interest in the net assets of the portfolio (approximately 54% at November 30,
1999). The performance of the fund is directly affected by the performance of
the portfolio. The financial statements of the portfolio, including the Schedule
of Investments, are included elsewhere in this report and should be read in
conjunction with the fund's financial statements.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual amounts could differ from
those estimates. The following is a summary of the significant accounting
policies of the fund:
a) Valuation of securities by the portfolio is discussed in Note 1a of the
portfolio's Notes to Financial Statements which are included elsewhere in
this report.
b) The fund records its share of net investment income, realized and
unrealized gain and loss and adjusts its investment in the portfolio each
day. All the net investment income and realized and unrealized gain and
loss of the portfolio is allocated pro rata among the fund and other
investors in the portfolio at the time of such determination.
c) Distributions to shareholders of net investment income and net realized
capital gains, if any, are declared and paid annually.
d) The fund incurred organization expenses in the amount of $5,800. These
costs were deferred and are being amortized on a straight-line basis over
a period not to exceed five years beginning with the commencement of
operations.
e) Expenses incurred by the trust with respect to any two or more funds 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.
f) The fund is treated as a separate entity for federal income tax purposes
and intends to comply with the provisions of the Internal Revenue Code of
1986, as amended, applicable to regulated investment companies and to
distribute substantially all of its income, including net realized capital
gains, if any, within the prescribed time periods. Accordingly, no
provision for federal income or excise tax is necessary.
g) The fund accounts for and reports distributions to shareholders in
accordance with Statement of Position 93-2 "Determination, Disclosure, and
Financial Statement Presentation of Income, Capital Gain, and Return of
Capital Distributions by Investments Companies." The effect of applying
this
12
<PAGE>
J.P. MORGAN EUROPEAN EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 1999
- --------------------------------------------------------------------------------
statement was to increase Undistributed Net Investment Income by $72,661,
increase Accumulated Net Realized Loss on Investment by $36,566, and
decrease Paid in Capital by $36,095. The adjustments are primarily
attributable to foreign currency reclasses. Net investment income, net
realized gains and net assets were not affected by this change.
h) For federal income tax purposes, the fund had a capital loss carryforward
of $22,137 at November 30, 1999, which will expire in the year 2006. The
fund utilized $135,226 of its capital loss carryforward in the current
year. To extent that this capital loss is used to offset future capital
gains, it is probable that the gains so offset will not be distributed to
shareholders.
i) For federal income tax purposes, the fund incurred approximately $27,645
of realized foreign currency losses in the period from November 1, 1999 to
November 30, 1999. These losses were deferred for tax purposes until the
first day of the next taxable year.
2. TRANSACTIONS WITH AFFILIATES
a) The trust, on behalf of the fund, has retained Fund Distributor, Inc.
("FDI"), a registered broker-dealer, to serve as co-administrator and
distributor for the fund. Under a Co-Administration Agreement between FDI
and the trust on behalf of the fund, FDI provides administrative services
necessary for the operations of the fund, furnishes office space and
facilities required for conducting the business of the fund and pays the
compensation of the fund's officers affiliated with FDI. The fund has
agreed to pay FDI fees equal to its allocable share of an annual
complex-wide charge of $425,000 plus FDI's out-of-pocket expenses. The
amount allocable to the fund is based on the ratio of the fund's net
assets to the aggregate net assets of the trust and certain other
investment companies subject to similar agreements with FDI. For the
fiscal year ended November 30, 1999, the fees for these services amounted
to $201.
b) The trust, on behalf of the fund, has an Administrative Services Agreement
(the "Services Agreement") with Morgan Guaranty Trust Company of New York
("Morgan"), a wholly owned subsidiary of J.P. Morgan & Co. Incorporated
("J.P. Morgan"), under which Morgan is responsible for certain aspects of
the administration and operation of the fund. Under the Services
Agreement, the fund has agreed to pay Morgan a fee equal to its allocable
share of an annual complex-wide charge. This charge is calculated based on
the aggregate average daily net assets of the portfolio and the other
portfolios in which the trust and the J.P. Morgan Institutional Funds
invest (the "master portfolios") and J.P. Morgan Series Trust in
accordance with the following annual schedule: 0.09% on the first $7
billion of their aggregate average daily net assets and 0.04% of their
aggregate average daily net assets in excess of $7 billion less the
complex-wide fees payable to FDI. The portion of this charge payable by
the fund is determined by the proportionate share that its net assets bear
to the net assets of the trust, the master portfolios, other investors in
the master portfolios for which Morgan provides similar services, and J.P.
Morgan Series Trust. For the fiscal year ended November 30, 1999, the fee
for these services amounted to $3,546.
In addition, J.P. 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
1.50% (1.42% prior to May 1, 1999) of the average daily net assets of the
fund until further notification. For the fiscal year ended November 30,
1999, Morgan has agreed to reimburse the fund $122,165 for the expenses
under this agreement.
13
<PAGE>
J.P. MORGAN EUROPEAN EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 1999
- --------------------------------------------------------------------------------
c) The trust, on behalf of the fund, has a Shareholder Servicing Agreement
with Morgan to provide account administration and personal and account
maintenance services to fund shareholders. The agreement provides for the
fund to pay Morgan a fee for these services which is computed daily and
paid monthly at an annual rate of 0.25% of the average daily net assets of
the fund. For the fiscal year ended November 30, 1999, the fee for these
services amounted to $34,421.
Morgan, Charles Schwab & Co. ("Schwab") and the trust are parties to
separate services and operating agreements (the "Schwab Agreements")
whereby Schwab makes fund shares available to customers of investment
advisors and other financial intermediaries who are Schwab's clients. The
fund is not responsible for payments to Schwab under the Schwab
Agreements; however, in the event the Services Agreement with Schwab is
terminated for reasons other than breach by Schwab and the relationship
between the trust and Morgan is terminated, the fund would be responsible
for the ongoing payments to Schwab with respect to pre-termination shares.
d) The trust, on behalf of the fund, has a Fund Services Agreement with
Pierpont Group, Inc. ("Group") to assist the trustees in exercising their
overall supervisory responsibilities for the trust's affairs. The trustees
of the trust represent all the existing shareholders of Group. The fund's
allocated portion of Group's costs in performing its services amounted to
$274 for the fiscal year ended November 30, 1999.
e) An aggregate annual fee of $75,000 is paid to each trustee for serving as
a trustee of the trust, the J.P. Morgan Institutional Funds, the master
portfolios and J.P. Morgan Series Trust. The Trustees' Fees and Expenses
shown in the financial statements represents the fund's allocated portion
of the total fees and expenses. The trust's Chairman and Chief Executive
Officer also serves as Chairman of Group and receives compensation and
employee benefits from Group in his role as Group's Chairman. The
allocated portion of such compensation and benefits included in the Fund
Services Fee shown in the financial statements was $50.
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 FISCAL FOR THE ELEVEN
YEAR ENDED MONTHS ENDED
NOVEMBER 30, 1999 NOVEMBER 30, 1998
----------------- -----------------
<S> <C> <C>
Shares sold...................................... 446,971 1,151,414
Reinvestment of dividends and distributions...... 14,808 --
Shares redeemed.................................. (650,449) (547,192)
---------------- ----------------
Net Increase (Decrease).......................... (188,670) 604,222
================ ================
</TABLE>
From time to time the fund may have a concentration of several shareholders
holding a significant percentage of shares outstanding. Investment activities of
these shareholders could have a material impact on the fund and the portfolio.
14
<PAGE>
J.P. MORGAN EUROPEAN EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 1999
- --------------------------------------------------------------------------------
4. CREDIT AGREEMENT
The trust, on behalf of the fund, together with other affiliated investment
companies (the "funds"), entered into a revolving line of credit agreement (the
"Agreement") on May 27, 1998, with unaffiliated lenders. Additionally, since all
of the investable assets of the fund are in the portfolio, the portfolio is
party to certain covenants of the Agreement. The maximum borrowing under the
Agreement is $150,000,000. The Agreement expired on
May 26, 1999, however, the fund as party to the Agreement has renewed the
Agreement and will continue its participation therein for an additional 364 days
until May 23, 2000. The purpose of the Agreement is to provide another
alternative for settling large fund shareholder redemptions. Interest on any
such borrowing outstanding will approximate market rates. The funds pay a
commitment fee at an annual rate of 0.085% (0.065% prior to May 26, 1999) on the
unused portion of the committed amount. This is allocated to the funds in
accordance with procedures established by their respective trustees. There were
no outstanding borrowings pursuant to the Agreement at November 30, 1999.
15
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of
J.P. Morgan European 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
J.P. Morgan European Equity Fund (one of the series constituting part of
J.P. Morgan Funds, hereafter referred to as the "fund") at November 30, 1999,
and the results of its operations for the year then ended, the changes in net
assets for the year then ended and for the eleven months ended November 30, 1998
and the financial highlights for the year then ended, for the eleven months
ended November 30, 1998, for the year ended December 31, 1997 and for the period
May 13, 1996 (commencement of operations) through December 31, 1996, in
conformity with accounting principles generally accepted in the United States.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States, which require
that we plan and perform the audit to obtain resonable 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.
PricewaterhouseCoopers LLP
New York, New York
January 14, 2000
16
<PAGE>
The European Equity Portfolio
Annual Report November 30, 1999
(The following pages should be read in conjunction
with the J.P. Morgan Institutional European Equity Fund
Annual Financial Statements)
17
<PAGE>
THE EUROPEAN EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS
NOVEMBER 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
COMMON STOCK (93.6%)
AUSTRIA (0.5%)
Bank Austria AG (Banking)(s)..................... 2,433 $ 128,637
-----------
BELGIUM (0.6%)
Fortis B (Insurance)+............................ 4,900 168,883
-----------
DENMARK (0.2%)
Ratin A/S, B Shares (Holding Companies)(s)....... 396 46,097
-----------
FINLAND (3.2%)
Helsingin Puhelin OYJ (Telecommunication
Services)...................................... 100 6,645
Nokia AB OYJ (Telecommunications-
Equipment)(s).................................. 3,782 535,414
Stora Enso OYJ, R Shares (Forest Products &
Paper)(s)...................................... 14,224 204,968
Tietoenator OYJ (Computer Software)(s)........... 1,286 57,621
-----------
804,648
-----------
FRANCE (13.7%)
Alcatel (Telecommunications-Equipment)(s)........ 708 137,229
Alstom SA (Railroads)(s)+........................ 3,533 100,317
Axa (Insurance)(s)............................... 2,087 281,375
Banque Nationale de Paris (Financial
Services)(s)................................... 2,755 252,433
Carrefour SA (Retail)(s)......................... 1,116 194,398
Castorama Dubois Investissement SA (Retail)(s)... 349 90,663
Christian Dior SA (Retail)(s).................... 282 50,684
Compagnie de Saint-Gobain SA (Building
Materials)(s).................................. 642 109,246
Credit Lyonnais SA (Financial Services)(s)+...... 4,022 134,329
France Telecom SA (Telecommunication
Services)(s)................................... 1,856 215,098
Groupe Danone (Food, Beverages & Tobacco)(s)..... 600 139,132
Lagardere S.C.A. (Multi - Industry)(s)........... 1,950 91,889
Louis Vuitton Moet Hennessy (Food, Beverages &
Tobacco)(s).................................... 190 61,640
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
FRANCE (CONTINUED)
Pinault-Printemps-Redoute SA (Retail)(s)......... 368 $ 76,701
Renault SA (Automotive)(s)....................... 2,275 99,942
Rhodia SA (Chemicals)(s)......................... 3,700 67,432
Rhone-Poulenc SA (Pharmaceuticals)(s)............ 2,861 177,164
SEITA (Food, Beverages & Tobacco)(s)............. 2 103
STMicroelectronics NV (Electronics)(s)........... 646 87,811
Total Fina SA, B Shares (Oil-Services)(s)+....... 4,966 660,529
Usinor SA (Metals & Mining)(s)+.................. 1,908 29,201
Vivendi (Utilities)(s)........................... 5,321 425,935
-----------
3,483,251
-----------
GERMANY (13.3%)
BASF AG (Chemicals)(s)........................... 3,733 172,713
Bayerische Hypo-Und Vereinsbank AG
(Banking)(s)................................... 2,841 176,212
Bilfinger & Berger Bau AG (Construction &
Housing)(s).................................... 2,129 38,586
Celanese AG (Chemicals)(s)+...................... 341 5,253
Consors Discount Broker AG (Financial
Services)(s)+.................................. 700 45,109
DaimlerChrysler AG (Automotive)(s)............... 3,816 259,739
Deutsche Bank AG (Banking)(s).................... 1,800 118,622
Deutsche Lufthansa AG (Airlines)(s).............. 3,200 70,434
Deutsche Telekom AG (Utilities)(s)............... 5,028 287,812
Dresdener Bank (Banking)(s)...................... 2,066 97,563
Hochtief AG (Construction & Housing)(s).......... 2,250 85,410
Hoechst AG (Holding Companies)(s)+............... 3,415 155,422
Karstadt AG (Retail)(s).......................... 1,820 62,948
Mannesmann AG (Diversified Manufacturing)(s)..... 3,227 670,643
Metro AG (Retail)(s)............................. 1,160 62,137
Muenchener Rueckversicherungs-Gesellschaft AG
(Insurance)(s)................................. 654 136,311
SAP AG (Computer Software)(s).................... 257 84,359
Schering AG (Pharmaceuticals)(s)................. 1,078 127,538
SGL Carbon AG (Chemicals)(s)..................... 1,261 66,405
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
18
<PAGE>
THE EUROPEAN EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
NOVEMBER 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
GERMANY (CONTINUED)
Siemens AG (Electrical Equipment)(s)............. 2,823 $ 284,530
Stinnes AG (Transport & Services)(s)+............ 2,044 39,721
VEBA AG (Utilities)(s)........................... 5,504 268,784
Volkswagen AG (Automotive)(s).................... 1,240 58,182
-----------
3,374,433
-----------
IRELAND (0.7%)
CRH PLC (Building Materials)(s).................. 2,468 49,477
Eircom PLC (Telecommunication Services)(s)....... 5,600 22,329
Irish Life and Permanent PLC (Financial
Services)(s)................................... 4,408 43,940
Jefferson Smurfit Group PLC (Forest Products &
Paper)(s)...................................... 21,494 58,434
-----------
174,180
-----------
ITALY (4.3%)
Assicurazioni Generali SPA (Insurance)(s)........ 3,482 100,271
Banca Fideuram SPA (Financial Services)(s)....... 5,600 43,022
Bayerische Vita SPA (Insurance)(s)............... 8,400 54,553
Enel SPA (Electric)(s)+.......................... 14,940 66,039
ENI SPA (Oil-Services)(s)........................ 28,900 158,299
Mediaset SPA (Broadcasting & Publishing)(s)...... 4,152 47,241
Saipem SPA (Oil-Services)(s)..................... 13,700 53,522
Telecom Italia Mobile SPA
(Telecommunications)(s)........................ 19,200 150,792
Telecom Italia SPA (Telecommunication
Services)(s)................................... 13,779 151,781
Telecom Italia SPA - RNC (Telecommunication
Services)(s)................................... 27,610 148,731
UniCredito Italiano SPA (Financial
Services)(s)................................... 26,234 122,300
-----------
1,096,551
-----------
NETHERLANDS (10.1%)
ABN Amro Holding NV (Banking)(s)................. 6,296 153,223
Aegon NV (Insurance)(s).......................... 3,076 278,748
Akzo Nobel NV (Chemicals)(s)..................... 3,230 138,221
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
NETHERLANDS (CONTINUED)
Equant NV (Information Processing)(s)+........... 500 $ 48,331
Getronics NV (Computer Systems)(s)............... 797 48,751
Heineken NV (Food, Beverages & Tobacco)(s)....... 2,600 125,660
ING Groep NV (Financial Services)(s)............. 4,840 272,177
Koninklijke (Royal) Philips Electronics NV
(Electronics)(s)............................... 3,146 382,814
Koninklijke Ahold NV (Retail)(s)................. 1,154 36,729
Koninklijke Numico NV (Food, Beverages &
Tobacco)(s).................................... 1,260 46,307
KPN NV (Telecommunication Services)(s)........... 3,868 215,374
Laurus NV (Retail)(s)............................ 3,071 57,360
Royal Dutch Petroleum Co. (Oil-Services)(s)...... 3,777 222,211
Unilever NV (Food, Beverages & Tobacco)(s)....... 1,257 69,232
United Pan-Europe Communications NV
(Telecommunication Services)(s)+............... 1,107 108,676
Vedior NV (Business & Public Services)(s)........ 4,228 46,616
Vendex NV (Retail)(s)............................ 5,103 134,620
VNU NV (Broadcasting & Publishing)(s)............ 1,800 71,318
Wolters Kluwer NV (Broadcasting &
Publishing)(s)................................. 3,466 104,522
-----------
2,560,890
-----------
PORTUGAL (1.2%)
Banco Pinto & Sotto Mayor SA (Banking)(s)........ 8,179 175,413
Electricidade de Portugal SA (Electric)(s)....... 2,900 45,377
Portugal Telecom SA (Telecommunication
Services)(s)................................... 4,340 41,733
PT Multimedia - Servicos de Telecomunicacoes
(Telecommunication Services)(s)+............... 1,200 47,268
-----------
309,791
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
THE EUROPEAN EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
NOVEMBER 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
SPAIN (5.6%)
Actividades de Construccion y Servicios SA
(Construction & Housing)(s).................... 1,173 $ 28,334
Banco Bilbao Vizcaya SA (Banking)(s)............. 8,322 116,054
Banco Santander Central Hispano SA
(Banking)(s)................................... 22,339 245,398
Endesa SA (Electric)(s).......................... 11,301 224,164
Iberdrola SA (Electric)(s)....................... 351 4,891
Repsol-YFP SA (Oil-Production)(s)................ 7,811 170,667
Sogecable SA (Entertainment, Leisure &
Media)(s)+..................................... 1,060 33,503
Tabacalera SA (Food, Beverages & Tobacco)(s)..... 2,679 44,211
Telefonica SA (Telecommunication Services)(s)+... 23,613 491,682
Union Electricia Fenosa SA (Electric)............ 3,617 60,966
-----------
1,419,870
-----------
SWEDEN (3.8%)
Autoliv, Inc. (SDR) (Automotive Supplies)(s)..... 3,891 116,716
Electrolux AB (Appliances & Household
Durables)(s)................................... 3,973 77,581
Ericsson LM, B Shares (Telecommunications-
Equipment)(s).................................. 12,827 622,411
ForeningsSparbanken AB (Banking)(s).............. 4,000 61,640
Skandia Forsakrings AB (Insurance)(s)............ 3,378 80,863
-----------
959,211
-----------
SWITZERLAND (8.2%)
Geberit International AG (Construction &
Housing)(s)+................................... 150 48,087
Holderbank Financiere Glarus AG (Building
Materials)(s).................................. 37 46,352
Nestle SA (Food, Beverages & Tobacco)(s)......... 188 338,212
Novartis AG (Pharmaceuticals)(s)................. 163 253,995
Roche Holding AG (Pharmaceuticals)(s)............ 44 531,026
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
SWITZERLAND (CONTINUED)
Schweizerische Lebensversicherungs-und
Rentenanstalt (Insurance)(s)................... 100 $ 56,384
Swisscom AG (Telecommunication Services)(s)...... 730 247,787
UBS AG (Banking)(s).............................. 1,418 387,728
Zurich Allied AG (Insurance)(s).................. 322 184,389
-----------
2,093,960
-----------
UNITED KINGDOM (28.2%)
Allied Zurich PLC (Insurance)(s)................. 7,700 93,205
ARM Holdings PLC (Electronics)(s)+............... 700 36,803
Arriva PLC (Diversified Manufacturing)(s)........ 7,900 38,754
AstraZeneca Group PLC (Pharmaceuticals)(s)....... 4,704 209,328
Barclays PLC (Banking)(s)........................ 5,900 170,084
Bass PLC (Food, Beverages & Tobacco)(s).......... 3,718 41,718
BG PLC (Gas Exploration)(s)...................... 10,600 55,670
Billiton PLC (Metals & Mining)(s)................ 19,600 94,665
BP Amoco PLC (Oil-Production)(s)................. 80,916 825,443
British Aerospace PLC (Aerospace)(s)............. 14,545 83,859
British American Tobacco PLC (Food, Beverages &
Tobacco)(s).................................... 7,600 47,752
British Sky Broadcasting Group PLC (Broadcasting
& Publishing)(s)............................... 8,600 113,002
British Telecommunications PLC
(Telecommunications)(s)........................ 13,700 274,495
Cable & Wireless PLC (Telecommunications)(s)..... 15,600 197,899
Cadbury Schweppes PLC (Food, Beverages &
Tobacco)(s).................................... 12,600 79,871
CMG PLC (Computer Systems)(s).................... 600 31,679
Compass Group PLC (Food, Beverages &
Tobacco)(s).................................... 13,100 158,569
Corus Group PLC (Metals & Mining)(s)............. 33,900 68,975
Diageo PLC (Food, Beverages & Tobacco)(s)........ 10,270 92,826
Dixons Group PLC (Retail)(s)..................... 3,300 71,638
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE EUROPEAN EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
NOVEMBER 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
UNITED KINGDOM (CONTINUED)
Enterprice Oil PLC (Oil-Production)(s)........... 3,000 $ 21,501
FirstGroup PLC (Transport & Services)(s)......... 7,000 30,102
Glaxo Wellcome PLC (Pharmaceuticals)(s).......... 16,200 484,040
Glynwed International PLC (Metals & Mining)(s)... 19,421 68,978
Great Universal Stores PLC (Retail)(s)........... 6,200 41,671
Hanson PLC (Building Materials)(s)............... 8,400 71,509
Hays PLC (Commercial Services)(s)................ 2,700 41,068
HSBC Holdings PLC (Banking)(s)................... 18,700 242,140
Imperial Chemical Industries PLC
(Chemicals)(s)................................. 4,800 49,004
Kingfisher PLC (Retail)(s)....................... 8,600 79,581
Lloyds TSB Group PLC (Banking)(s)................ 43,660 559,079
Marconi PLC (Electronics)(s)+.................... 8,500 108,304
MEPC PLC (Real Estate)(s)........................ 9,451 70,747
Meyer International PLC (Building
Materials)(s).................................. 12,200 72,866
MFI Furniture Group PLC (Household
Products)(s)................................... 34,492 21,425
National Power PLC (Electric)(s)................. 13,790 88,457
Northern Foods PLC (Food, Beverages &
Tobacco)(s).................................... 2,400 3,861
Northern Rock PLC (Financial Services)(s)........ 4,900 34,261
Norwich Union PLC (Insurance)(s)................. 3,900 27,703
Nycomed Amersham PLC (Medical Supplies)(s)....... 6,104 37,915
Nycomed Amersham PLC (Medical Supplies)(s)....... 8,100 52,248
Ocean Group PLC (Transport & Services)(s)........ 3,400 59,621
Pearson PLC (Broadcasting & Publishing)(s)....... 4,400 105,118
Pilkington PLC (Building Materials)(s)........... 17,700 24,667
Prudential Corp. PLC (Insurance)(s).............. 8,300 136,821
Racal Electronic PLC (Telecommunications-
Equipment)(s).................................. 10,300 85,305
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
UNITED KINGDOM (CONTINUED)
Reckitt & Colman PLC (Household Products)(s)..... 4,100 $ 49,792
Reuters Group PLC (Broadcasting &
Publishing)(s)................................. 5,600 62,478
Royal & Sun Alliance Insurance Group PLC
(Insurance)(s)................................. 12,027 73,365
Royal Bank of Scotland Group PLC (Banking)(s).... 4,100 79,210
ScottishPower PLC (Electric)(s).................. 8,000 70,461
SEMA Group PLC (Computer Software)(s)............ 1,600 27,267
Smith & Nephew PLC (Medical Supplies)(s)......... 9,000 31,249
SmithKline Beecham PLC (Pharmaceuticals)(s)...... 21,900 294,039
Tate & Lyle PLC (Food, Beverages & Tobacco)(s)... 5,000 33,745
Tesco PLC (Retail)(s)............................ 31,800 86,101
Thames Water PLC (Water)(s)...................... 2,500 35,079
The Sage Group PLC (Broadcasting &
Publishing)(s)................................. 400 28,669
Thus PLC (Telecommunication Services)(s)......... 5,000 31,217
TI Group PLC (Diversified Manufacturing)(s)...... 6,700 45,886
Unilever PLC (Food, Beverages & Tobacco)(s)...... 8,982 65,949
Vodafone Group PLC (Telecommunications)(s)....... 134,500 633,014
Williams PLC (Diversified Manufacturing)(s)...... 7,000 36,178
Woolwich PLC (Financial Services)(s)............. 14,800 85,743
-----------
7,173,669
-----------
TOTAL COMMON STOCK (COST $19,444,070).......... 23,794,071
-----------
</TABLE>
<TABLE>
<CAPTION>
PREFERRED STOCK (0.3%)
<S> <C> <C>
GERMANY (0.3%)
SAP AG (Computer Software)(s) (cost $88,600)..... 200 80,853
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE EUROPEAN EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
NOVEMBER 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
FIXED INCOME SECURITIES (0.0%)
UNITED KINGDOM (0.0%)
British Aerospace PLC, 7.45% due 03/31/03
(Aerospace) (cost $1,227)...................... $ 1,151 $ 1,806
-----------
</TABLE>
<TABLE>
<CAPTION>
SHORT-TERM INVESTMENTS (4.7%)
<S> <C> <C>
TIME DEPOSITS--FOREIGN (4.2%)
State Street Eurodollar, 4.00% due 12/01/99
(Banking)...................................... 1,082,000 1,082,000
-----------
U.S. TREASURY OBLIGATIONS (0.5%)
United States Treasury Bill, 5.30%(y) due
03/02/00 (Government Obligations)(s)........... 120,000 118,423
-----------
TOTAL SHORT-TERM INVESTMENTS (COST
$1,200,637)................................... 1,200,423
-----------
TOTAL INVESTMENTS
(COST $20,734,534) (98.6%).................................. 25,077,153
OTHER ASSETS IN EXCESS OF
LIABILITIES (1.4%).......................................... 352,704
-----------
NET ASSETS (100.0%)........................................... $25,429,857
===========
</TABLE>
- ------------------------------
+ Non-income producing security.
(s) - Security is fully or partially segregated with custodian as collateral for
future contracts or with brokers as initial margin for futures contracts.
$9,969,733 of the market value has been segregated.
(y) - Yield to maturity.
SDR - Swedish Depository Receipt.
Note: Based on the cost of investments of $20,784,057 for federal income tax
purposes at November 30, 1999 the aggregated gross unrealized appreciation and
depreciation was $5,260,476 and $967,380, respectively, resulting in net
unrealized appreciation of $4,293,096.
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE EUROPEAN EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
NOVEMBER 30, 1999
- --------------------------------------------------------------------------------
INDUSTRY DIVERSIFICATION
<TABLE>
<CAPTION>
PERCENT OF
PORTFOLIO
----------------
<S> <C>
Banking........................................... 15.1%
Pharmaceuticals................................... 8.3%
Telecommunication Services........................ 6.9%
Insurance......................................... 6.7%
Telecommunications Equipment...................... 5.5%
Food, Beverages & Tobacco......................... 5.4%
Telecommunications................................ 5.0%
Oil Services...................................... 4.4%
Retail............................................ 4.2%
Financial services................................ 4.1%
Oil Production.................................... 4.0%
Utilities......................................... 3.9%
Diversified Manufacturing......................... 3.2%
Electronics....................................... 2.5%
Electric.......................................... 2.2%
Broadcasting & Publishing......................... 2.1%
Chemicals......................................... 2.0%
Automotive........................................ 1.7%
Building Materials................................ 1.5%
Forest Products & Paper........................... 1.1%
Electrical Equipment.............................. 1.1%
Metals & Mining................................... 1.0%
Computer Software................................. 1.0%
Holding Companies................................. 0.8%
Construction & Housing............................ 0.8%
Transport & Services.............................. 0.5%
Medical Supplies.................................. 0.5%
Automotive Supplies............................... 0.5%
Government Obligations............................ 0.5%
Railroads......................................... 0.4%
Multi-Industry.................................... 0.4%
Aerospace......................................... 0.3%
Computer Systems.................................. 0.3%
Appliances and Household Durable.................. 0.3%
Household Products................................ 0.3%
Real Estate....................................... 0.3%
Airlines.......................................... 0.2%
Gas Exploration................................... 0.2%
Information Processing............................ 0.2%
Business & Public Services........................ 0.2%
Commercial Services............................... 0.2%
Entertainment Leisure & Media..................... 0.1%
Water............................................. 0.1%
-----
100.0%
=====
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
23
<PAGE>
THE EUROPEAN EQUITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $20,734,534) $25,077,153
Cash 212
Foreign Currency at Value (Cost $627,944 ) 608,107
Receivable for Investments Sold 518,063
Receivable for Expense Reimbursement 24,917
Dividends Receivable 17,744
Unrealized Appreciation of Forward Foreign
Currency Contracts 7,513
Deferred Organization Expenses 1,394
Interest Receivable 120
Prepaid Expenses and Other Assets 310
-----------
Total Assets 26,255,533
-----------
LIABILITIES
Payable for Investments Purchased 675,859
Custody Fee Payable 31,044
Unrealized Depreciation of Forward Foreign
Currency Contracts 29,342
Variation Margin Payable 14,432
Advisory Fee Payable 13,269
Payable for Shares Redeemed 610
Administrative Services Fee Payable 510
Administration Fee Payable 21
Fund Services Fee Payable 14
Accrued Trustees' Fees and Expenses 6
Accrued Expenses 60,569
-----------
Total Liabilities 825,676
-----------
NET ASSETS
Applicable to Investors' Beneficial Interests $25,429,857
===========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
24
<PAGE>
THE EUROPEAN EQUITY PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividend Income (Net of Foreign Withholding Tax
of $77,873 ) $ 458,333
Interest Income 15,494
----------
Investment Income 473,827
EXPENSES
Custodian Fees and Expenses $ 164,366
Advisory Fee 163,353
Professional Fees and Expenses 50,187
Administrative Services Fee 6,472
Amortization of Organization Expense 4,347
Fund Services Fee 498
Administration Fee 308
Trustees' Fees and Expenses 281
Miscellaneous 8,571
----------
Total Expenses 398,383
Less: Reimbursement of Expenses (147,071)
----------
NET EXPENSES 251,312
----------
NET INVESTMENT INCOME 222,515
NET REALIZED GAIN ON
Investment Transactions 84,026
Futures Contracts 254,864
Foreign Currency Contracts and Transactions 101,595
----------
Net Realized Gain 440,485
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) OF
Investments 2,466,510
Futures Contracts (15,676)
Foreign Currency Contracts and Translations (42,158)
----------
Net Change in Unrealized Appreciation 2,408,676
----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $3,071,676
==========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
25
<PAGE>
THE EUROPEAN EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FISCAL FOR THE ELEVEN
YEAR ENDED MONTHS ENDED
NOVEMBER 30, 1999 NOVEMBER 30, 1998
----------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 222,515 $ 301,273
Net Realized Gain (Loss) on Investments, Futures
and Foreign Currency Contracts and Transactions 440,485 (358,521)
Net Change in Unrealized Appreciation of
Investments, Futures and Foreign Currency
Contracts and Translations 2,408,676 67,260
---------------- ----------------
Net Increase in Net Assets Resulting from
Operations 3,071,676 10,012
---------------- ----------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 14,558,410 47,559,507
Withdrawals (19,480,002) (35,281,967)
---------------- ----------------
Net Increase (Decrease) from Investors'
Transactions (4,921,592) 12,277,540
---------------- ----------------
Total Increase (Decrease) in Net Assets (1,849,916) 12,287,552
NET ASSETS
Beginning of Period 27,279,773 14,992,221
---------------- ----------------
End of Period $ 25,429,857 $ 27,279,773
================ ================
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
26
<PAGE>
THE EUROPEAN EQUITY PORTFOLIO
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FISCAL FOR THE PERIOD
YEAR ENDED MARCH 28, 1995
FOR THE FISCAL FOR THE ELEVEN DECEMBER 31 (COMMENCEMENT OF
YEAR ENDED MONTHS ENDED -------------------------------- OPERATIONS) THROUGH
NOVEMBER 30, 1999 NOVEMBER 30, 1998 1997 1996 DECEMBER 31, 1995
----------------- ----------------- ------------ ---------------- -------------------
<S> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Net Expenses 1.00% 0.87%(a) 0.88% 0.84% 0.90%(a)
Net Investment Income 0.89% 1.17%(a) 1.47% 1.65% 1.67%(a)
Expenses without
Reimbursement 1.59% 1.11%(a) 0.89% 0.84% 0.90%(a)
Portfolio Turnover 68% 99%(b) 65% 57% 36%(b)
</TABLE>
- ------------------------
(a) Annualized.
(b) Not Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
27
<PAGE>
THE EUROPEAN EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1999
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The European Equity Portfolio (the "portfolio") is one of five subtrusts
(portfolios) comprising The Series Portfolio (the "series portfolio"). The
series portfolio is registered under the Investment Company Act of 1940, as
amended, as a no-load open-end management investment company which was organized
as a trust under the laws of the State of New York on June 24, 1994. The
portfolio's investment objective is to provide a high total return from a
portfolio of equity securities of European companies. The portfolio commenced
operations on March 28, 1995. The Declaration of the Trust permits the trustees
to issue an unlimited number of beneficial interests in the portfolio. At a
meeting on November 12, 1998, the trustees elected to change the portfolio's
fiscal year end from December 31 to November 30.
The portfolio may have elements of risk not typically associated with
investments in the United States, due to concentrated investments in a limited
number of countries or regions, which may vary throughout the year. Such
concentrations may subject the portfolio to additional risks resulting from
political or economic conditions in such countries or regions and the possible
imposition of adverse governmental laws or currency exchange restrictions
affecting such countries or regions which could cause the securities and their
markets to be less liquid and prices more volatile than those comparable to the
United States.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual amounts could differ from
those estimates. The following is a summary of the significant accounting
policies of the portfolio:
a) The portfolio values securities that are listed on an exchange using
prices supplied daily by an independent pricing service that are based on
the last traded price on a national securities exchange or in the absence
of recorded trades, at the readily available mean of the bid and asked
prices on such exchange, if such exchange or market constitutes the
broadest and most representative market for the security. Securities
listed on a foreign exchange are valued at the last traded price or, in
the absence of recorded trades, at the readily available mean of the bid
and asked prices on such exchange available before the time when net
assets are valued. Independent pricing service procedures may also include
the use of prices based on yields or prices of securities of comparable
quality, coupon, maturity and type, indications as to values from dealers,
operating data, and general market conditions. Unlisted securities are
valued at the average of the quoted bid and asked prices in the
over-the-counter market provided by a principal market maker or dealer. If
prices are not supplied by the portfolio's independent pricing service or
principal market maker or dealer, such securities are priced using fair
values in accordance with procedures adopted by the portfolio's trustees.
All short-term portfolio securities with a remaining maturity of less than
60 days are valued using the amortized cost method.
Trading in securities on most foreign exchanges and over-the-counter
markets is normally completed before the close of the domestic market and
may also take place on days on which the domestic market is closed. If
events materially affecting the value of foreign securities occur between
the time when the exchange on which they are traded closes and the time
when the portfolio's net assets are calculated, such securities will be
valued at fair value in accordance with procedures established by and
under the general supervision of the portfolio's trustees.
28
<PAGE>
THE EUROPEAN EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 1999
- --------------------------------------------------------------------------------
b) The books and records of the portfolio are maintained in U.S. dollars. The
market value of investment securities, other assets and liabilities and
foreign currency contracts are translated at the prevailing exchange rates
at the end of the period. Purchases, sales, income and expenses are
translated at the exchange rates prevailing on the respective dates of
such transactions. Translation gains and losses resulting from changes in
exchange rates during the reporting period and gains and losses realized
upon settlement of foreign currency transactions are reported in the
Statement of Operations. Although the net assets of the portfolio are
presented at the exchange rates and market values prevailing at the end of
the period, the portfolio does not isolate the portion of the results of
operations arising as a result of changes in foreign exchange rates from
the fluctuations arising from changes in the market prices of securities
during the period.
c) Securities transactions are recorded on a trade date basis. Dividend
income is recorded on the ex-dividend date or as of the time that the
relevant ex-dividend date and amount become 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 incurred organization expenses in the amount of $27,700.
These costs were deferred and are being amortized on a straight-line basis
over a period not to exceed five years beginning with the commencement of
operations.
e) Expenses incurred by the series portfolio with respect to any two or more
portfolios in the series portfolio are allocated in proportion to the net
assets of each portfolio in the series portfolio, except where allocations
of direct expenses to each portfolio can otherwise be made fairly.
Expenses directly attributable to a portfolio are charged to that
portfolio.
f) 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 and to enhance returns. A
forward contract is an agreement to buy or sell currencies of different
countries on a specified future date at a specified rate. Risks associated
with such contracts include the movement in the value of the foreign
currency relative to the U.S. dollar and the ability of the counterparty
to perform.
The market value of the contract will fluctuate with changes in currency
exchange rates. Contracts are valued daily at the current foreign exchange
rates and the change in the market value is recorded by the portfolio as
unrealized appreciation or depreciation of forward and spot foreign
currency translations.
g) A futures contract is an agreement to purchase/sell a specified quantity
of an underlying instrument at a specified future date or to make/receive
a cash payment based on the value of a securities index. The price at
which the purchase and sale will take place is fixed when the portfolio
enters into the contract. Upon entering into such a contract, the
portfolio is required to pledge to the broker an amount of cash and/or
liquid securities equal to the minimum "initial margin" requirements of
the exchange. Pursuant to the contract, the portfolio agrees to receive
from, or pay to, the broker an amount of cash equal to the daily
fluctuation in the value of the contract. Such receipts or payments are
known as "variation margin" and are recorded by the portfolio as
unrealized gains or losses. When the contract is closed, the portfolio
records a realized gain or loss equal to the difference between the value
of the contract at the
29
<PAGE>
THE EUROPEAN EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 1999
- --------------------------------------------------------------------------------
time it was opened and the value at the time when it was closed. The
portfolio invests in futures contracts for the purpose of hedging its
existing portfolio securities, or securities the portfolio intends to
purchase, against fluctuations in value caused by changes in prevailing
market interest rates or securities movements. The use of futures
transactions involves the risk of imperfect correlation in movements in
the price of futures contracts, interest rates and the underlying hedged
assets, and the possible inability of counterparties to meet the terms of
their contracts.
h) The portfolio intends to be treated as a partnership for federal income
tax purposes. As such, each investor in the portfolio will be taxed on its
share of the portfolio's ordinary income and capital gains. It is intended
that the portfolio's assets will be managed in such a way that an investor
in the portfolio will be able to satisfy the requirements of Subchapter M
of the Internal Revenue Code. The portfolio earns foreign income which may
be subject to foreign withholding taxes at various rates.
2. TRANSACTIONS WITH AFFILIATES
a) The portfolio has an Investment Advisory Agreement with J.P. Morgan
Investment Management Inc. ("JPMIM"), an affiliate of Morgan Guaranty
Trust Company of New York ("Morgan"), a wholly-owned subsidiary of
J.P. Morgan & Co. Incorporated ("J.P. Morgan"). Under the terms of the
agreement, the portfolio pays JPMIM at an annual rate of 0.65% of the
portfolio's average daily net assets. For the fiscal year ended
November 30, 1999 such fees amounted to $163,353.
b) The trust, on behalf of the portfolio, has retained Funds
Distributor, Inc. ("FDI"), a registered broker-dealer, to serve as the
co-administrator and exclusive placement agent. Under a Co-Administration
Agreement between FDI and the portfolio, FDI provides administrative
services necessary for the operations of the portfolio, furnishes office
space and facilities required for conducting the business of the portfolio
and pays the compensation of the officers affiliated with FDI. The
portfolio has agreed to pay FDI fees equal to its allocable share of an
annual complex-wide charge of $425,000 plus FDI's out-of-pocket expenses.
The amount allocable to the portfolio is based on the ratio of the
portfolio's net assets to the aggregate net assets of the portfolio and
certain other investment companies subject to similar agreements with FDI.
For the fiscal year ended November 30, 1999, the fee for these services
amounted to $308.
c) The trust, on behalf of the portfolio, has an Administrative Services
Agreement (the "Services Agreement") with Morgan under which Morgan is
responsible for certain aspects of the administration and operation of the
portfolio. Under the Services Agreement, the portfolio has agreed to pay
Morgan a fee equal to its allocable share of an annual complex-wide
charge. This charge is calculated based on the aggregate average daily net
assets of the portfolio and certain other portfolios for which JPMIM acts
as investment advisor (the "master portfolios") and J.P. Morgan Series
Trust in accordance with the following annual schedule: 0.09% on the first
$7 billion of their aggregate average daily net assets and 0.04% of their
aggregate average daily net assets in excess of $7 billion less the
complex-wide fees payable to FDI. The portion of this charge payable by
the portfolio is determined by the proportionate share that its net assets
bear to the net assets of the master portfolios, other investors in the
master portfolios for which Morgan provides similar services, and J.P.
Morgan Series Trust. For the fiscal year ended November 30, 1999, the fee
for these services amounted to $6,472.
30
<PAGE>
THE EUROPEAN EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 1999
- --------------------------------------------------------------------------------
In addition, J.P. Morgan has agreed to reimburse the portfolio to the
extent necessary to maintain the total operating expenses of the portfolio
at no more than 1.00% of the average daily net assets of the portfolio
until further notification. For the fiscal year ended November 30, 1999,
Morgan has agreed to reimburse the portfolio $147,071 for expenses under
this agreement.
d) The trust, on behalf of 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 $498 for the fiscal year ended November 30, 1999.
e) An aggregate annual fee of $75,000 is paid to each trustee for serving as
a trustee of the J.P. Morgan Funds, the J.P. Morgan Institutional Funds,
the master portfolios and J.P. Morgan Series Trust. The Trustees' Fees and
Expenses shown in the financial statements represents 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 receives
compensation and employee benefits from Group in his role as Group's
Chairman. The allocated portion of such compensation and benefits included
in the Fund Services Fee shown in the financial statements was $100.
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the fiscal year
ended November 30, 1999 were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
- --------- ------------
<S> <C>
$16,460,432 $21,483,106
</TABLE>
Open futures contracts at November 30, 1999 are summarized as follows:
<TABLE>
<CAPTION>
NET UNREALIZED
APPRECIATION/ CURRENT MARKET VALUE
CONTRACTS LONG (DEPRECIATION) OF CONTRACTS
-------------- -------------- --------------------
<S> <C> <C> <C>
CAC 40 Index, expiring December 1999............. 6 $ (1,195) $ 325,024
Dax Index, expiring December 1999................ 3 2,440 445,021
IBEX Plus Index, expiring December 1999.......... 1 3,030 110,491
FTSE 100 Index, expiring December 1999........... 4 2,690 422,065
------------- ------------- -------------------
Totals........................................... 14 $ 6,965 $ 1,302,601
============= ============= ===================
</TABLE>
31
<PAGE>
THE EUROPEAN EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 1999
- --------------------------------------------------------------------------------
At November 30, 1999 the portfolio had open forward currency contracts as
follows:
<TABLE>
<CAPTION>
U.S. DOLLAR NET UNREALIZED
CONTRACTUAL VALUE AT APPRECIATION/
VALUE 11/30/99 (DEPRECIATION)
----------- ----------- --------------
<S> <C> <C> <C>
PURCHASE CONTRACTS
Danish Krone 1,929,685, expiring 2/28/2000....... $ 267,987 $ 262,712 $ (5,275)
Euro 764,688, expiring 2/28/2000................. 780,601 775,139 (5,462)
Norwegian Krone 765,027, expiring 2/28/2000...... 96,729 94,966 (1,763)
Pound Sterling 433,244, expiring 2/28/2000....... 700,309 690,431 (9,878)
Swiss Franc 469,217, expiring 2/28/2000.......... 305,039 298,075 (6,964)
</TABLE>
<TABLE>
<CAPTION>
SETTLEMENT
VALUE
-----------
<S> <C> <C> <C>
SALES CONTRACTS
Euro 571,928, expiring 2/28/2000................. $ 582,405 $ 579,744 $ 2,661
Pound Sterling 160,917, expiring 2/28/2000....... 257,000 256,441 559
Swedish Krona 1,797,941, expiring 2/28/2000...... 217,129 212,836 4,293
-------------
NET UNREALIZED DEPRECIATION ON FORWARD FOREIGN
CURRENCY CONTRACTS.............................. $ (21,829)
=============
</TABLE>
4. CREDIT AGREEMENT
The portfolio is party to a revolving line of credit agreement as discussed more
fully in Note 4 of the fund's Notes to the Financial Statements which are
included elsewhere in this report.
32
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Investors of
The European 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 European Equity Portfolio (one of the
portfolios comprising part of The Series Portfolio, hereafter referred to as the
"portfolio") at November 30, 1999, and the results of its operations for the
year then ended, the changes in its net assets for the year then ended and for
the eleven months ended November 30, 1998 and the supplementary data for the
year then ended, for the eleven months ended November 30, 1998, for each of the
two years in the period ended December 31, 1997 and for the period March 28,
1995 (commencement of operations) through December 31, 1995, in conformity with
accounting principles generally accepted in the United States. These financial
statements and supplementary data (hereafter referred to as "financial
statements") are the responsibility of the portfolio's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States, which require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of securities at November 30, 1999 by correspondence with the custodian and
brokers, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
January 14, 2000
33
<PAGE>
J.P. MORGAN FUNDS
FEDERAL MONEY MARKET FUND
PRIME MONEY MARKET FUND
TAX EXEMPT MONEY MARKET FUND
TAX AWARE ENHANCED INCOME FUND: SELECT SHARES
SHORT TERM BOND FUND
BOND FUND
EMERGING MARKETS DEBT FUND
GLOBAL STRATEGIC INCOME FUND
TAX EXEMPT BOND FUND
CALIFORNIA BOND FUND: SELECT SHARES
NEW YORK TAX EXEMPT BOND FUND
DIVERSIFIED FUND
DISCIPLINED EQUITY FUND
TAX AWARE U.S. EQUITY FUND: SELECT SHARES
U.S. EQUITY FUND
U.S. SMALL COMPANY FUND
U.S. SMALL COMPANY OPPORTUNITIES FUND
EMERGING MARKETS EQUITY FUND
EUROPEAN EQUITY FUND
GLOBAL 50 FUND: SELECT SHARES
INTERNATIONAL EQUITY FUND
INTERNATIONAL OPPORTUNITIES FUND
FOR MORE INFORMATION ON THE J.P. MORGAN FUNDS, CALL J.P. MORGAN FUNDS SERVICES
AT (800) 521-5411.
IM0862-M
J.P. MORGAN EUROPEAN EQUITY FUND
ANNUAL REPORT
NOVEMBER 30, 1999
