<PAGE>
THE JAPAN EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------- -------------
<S> <C> <C>
COMMON STOCK (86.0%)
BASIC INDUSTRIES (7.7%)
BUSINESS & PUBLIC SERVICES (0.7%)
Dai Nippon Printing Co. Ltd...................... 100,000 $ 2,263,392
-------------
CHEMICALS (2.6%)
Asahi Chemical Industry Co. Ltd.................. 162,000 969,763
Ishihara Sangyo Kaisha Ltd....................... 583,000 1,727,143
Japan Synthetic Rubber Co.
Ltd............................................ 233,000 1,995,455
Mitsui Petrochemical Industries Ltd.............. 160,000 771,825
Mitsui Toatsu Chemicals, Inc..................... 150,000 412,916
Nippon Zeon Co. Ltd.............................. 73,000 361,077
Sekisui Chemical Co. Ltd......................... 70,000 709,604
Takeda Chemical Industries
Ltd............................................ 75,000 2,110,460
-------------
9,058,243
-------------
DIVERSIFIED MANUFACTURING (0.3%)
Central Glass Co. Ltd............................ 390,000 1,138,338
-------------
FOREST PRODUCTS & PAPER (1.2%)
New Oji Paper Co. Ltd............................ 200,000 1,239,185
Sumitomo Forestry Co. Ltd........................ 269,000 2,961,985
-------------
4,201,170
-------------
METALS & MINING (2.9%)
Godo Steel Ltd................................... 389,000 1,339,386
Komai Tekko, Inc................................. 82,000 440,706
Mitsui Mining & Smelting Co. Ltd................. 202,000 898,523
Nippon Steel Corp................................ 1,800,000 5,757,230
Tokyo Steel Manufacturing Co.Ltd................. 121,000 1,353,491
-------------
9,789,336
-------------
TOTAL BASIC INDUSTRIES......................... 26,450,479
-------------
CONSUMER GOODS & SERVICES (16.4%)
APPARELS & TEXTILES (0.3%)
Tomiya Apparel Co. Ltd........................... 229,000 952,582
-------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------- -------------
<S> <C> <C>
AUTOMOTIVE (5.0%)
Hino Motors Ltd.................................. 130,000 $ 829,328
Nissan Motor Co. Ltd............................. 1,640,000 12,741,061
Toyota Motor Corp. Ltd........................... 85,000 2,510,705
Yamaha Motor Co. Ltd............................. 100,000 996,242
-------------
17,077,336
-------------
AUTOMOTIVE SUPPLIES (1.3%)
Sumitomo Rubber Industries Ltd................... 189,000 1,273,433
Tochigi Fuji Industrial Co.
Ltd............................................ 85,000 407,804
Toyo Tire & Rubber Co. Ltd....................... 298,000 942,725
Yokohama Rubber Co. Ltd.......................... 462,000 1,978,327
-------------
4,602,289
-------------
BROADCASTING & PUBLISHING (0.7%)
Toppan Printing Co. Ltd.......................... 148,000 2,328,060
-------------
ENTERTAINMENT, LEISURE & MEDIA (0.6%)
Kinki Nippon Tourist Co.
Ltd.+.......................................... 192,000 1,058,743
Kyodo Printing Co. Ltd........................... 90,000 865,157
-------------
1,923,900
-------------
FOOD, BEVERAGES & TOBACCO (2.6%)
Itoham Foods, Inc................................ 379,000 2,093,227
Japan Tobacco, Inc............................... 431 3,408,677
Maruha Corp...................................... 732,000 1,912,680
Pokka Corp....................................... 28,000 199,668
Snow Brand Milk Products Co. Ltd................. 263,000 1,356,025
-------------
8,970,277
-------------
HOUSEHOLD PRODUCTS (0.3%)
Nippon Sheet Glass Co. Ltd....................... 245,000 903,522
-------------
MULTI - INDUSTRY (0.8%)
Fuji Denki Reiki Co. Ltd......................... 141,000 1,108,975
Marubeni Corp.................................... 345,000 1,567,770
-------------
2,676,745
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
16
<PAGE>
THE JAPAN EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------- -------------
<S> <C> <C>
RETAIL (4.4%)
Aoyama Trading Co. Ltd........................... 61,000 $ 1,961,723
Izumi Co. Ltd.................................... 184,000 2,701,389
Izumiya Co. Ltd.................................. 306,000 4,920,387
Keiyo Co. Ltd.................................... 45,000 420,781
Matsuzakaya Co. Ltd.............................. 272,000 2,010,941
Mizuno Corp...................................... 109,000 712,505
Shimachu Co. Ltd................................. 8,300 249,515
Xebio Co. Ltd.................................... 18,700 460,841
York - Benimaru Co. Ltd.......................... 52,400 1,648,518
-------------
15,086,600
-------------
TEXTILES (0.4%)
Mitsubishi Rayon Co. Ltd......................... 150,000 618,719
Seiren Co. Ltd................................... 150,000 688,193
-------------
1,306,912
-------------
TOTAL CONSUMER GOODS & SERVICES................ 55,828,223
-------------
ENERGY (1.2%)
OIL-PRODUCTION (1.2%)
Cosmo Oil Co. Ltd................................ 429,000 2,054,461
Nippon Oil Co. Ltd............................... 279,000 1,528,733
Showa Shell Sekiyu K. K.......................... 40,000 377,523
-------------
3,960,717
-------------
TOTAL ENERGY................................... 3,960,717
-------------
FINANCE (22.5%)
BANKING (15.3%)
Asahi Bank Ltd................................... 431,000 3,672,331
Ashikaga Bank Ltd................................ 200,000 734,073
Bank of Iwate Ltd................................ 22,630 1,283,480
Bank of the Ryukyus Ltd.......................... 58,500 1,226,951
Chuo Trust & Banking Co.
Ltd............................................ 86,000 571,179
Dai-Ichi Kangyo Bank Ltd......................... 322,000 4,389,757
Daiwa Bank Ltd................................... 1,279,000 6,069,185
Fukui Bank Ltd................................... 638,000 2,369,570
Fukuoka Chuo Bank Ltd............................ 20,000 126,016
Fukushima Bank Ltd............................... 225,000 670,497
Hiroshima Bank Ltd............................... 200,000 908,852
Hyakugo Bank Ltd................................. 360,000 2,063,794
Keiyo Bank Ltd................................... 250,000 1,046,491
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------- -------------
<S> <C> <C>
BANKING (CONTINUED)
Kita-Nippon Bank Ltd............................. 13,900 $ 728,830
Mitsui Trust & Banking Co.
Ltd............................................ 100,000 755,920
Nanto Bank Ltd................................... 252,000 1,567,980
North Pacific Bank Ltd........................... 71,000 341,877
Sakura Bank Ltd.................................. 862,000 6,613,963
San-In Godo Bank Ltd............................. 31,000 257,092
Shinwa Bank Ltd.................................. 159,000 778,117
Sumitomo Trust & Banking Co. Ltd................. 602,000 6,470,854
The Bank of Tokyo - Mitsubishi Ltd............... 1,400 28,139
The Kagawa Bank Ltd.............................. 260,000 1,908,590
The Long-Term Credit Bank of Japan Ltd........... 1,000,000 4,325,787
Tokai Bank Ltd................................... 213,000 2,196,451
Toyo Trust & Banking Co.
Ltd............................................ 175,000 1,475,793
-------------
52,581,569
-------------
COMMERCIAL SERVICES (1.2%)
Asatsu, Inc...................................... 78,000 2,890,150
Sanki Engineering Co. Ltd........................ 120,000 1,216,464
-------------
4,106,614
-------------
FINANCIAL SERVICES (2.8%)
Daiwa Securities Co. Ltd......................... 186,000 1,469,404
Nomura Securities Co. Ltd........................ 600,000 8,284,538
-------------
9,753,942
-------------
INSURANCE (1.7%)
Chiyoda Fire & Marine Insurance Co. Ltd.......... 284,000 1,402,254
Fuji Fire & Marine Insurance Co. Ltd............. 429,000 1,870,759
Koa Fire & Marine Insurance Co. Ltd.............. 110,000 666,171
Nissan Fire & Marine Insurance Co. Ltd........... 194,000 1,068,076
Tokio Marine & Fire Insurance Co. Ltd............ 73,000 956,917
-------------
5,964,177
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
17
<PAGE>
THE JAPAN EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------- -------------
<S> <C> <C>
REAL ESTATE (1.5%)
Daikyo, Inc...................................... 65,000 $ 254,479
Daiwa Danchi Co. Ltd.+........................... 208,000 854,321
Mitsui Fudosan Co. Ltd........................... 283,000 3,907,541
-------------
5,016,341
-------------
TOTAL FINANCE.................................. 77,422,643
-------------
HEALTHCARE (2.0%)
PHARMACEUTICALS (2.0%)
Daiichi Pharmaceutical Co.
Ltd............................................ 208,000 3,671,763
Kissei Pharmaceutical Co. Ltd.................... 37,000 814,821
Ono Pharmaceuticals Co. Ltd...................... 25,000 882,635
Santen Pharmaceutical Co.
Ltd............................................ 49,000 989,163
Shionogi & Co. Ltd............................... 80,000 620,816
-------------
6,979,198
-------------
TOTAL HEALTHCARE............................... 6,979,198
-------------
INDUSTRIAL PRODUCTS & SERVICES (15.9%)
BUILDING MATERIALS (0.3%)
Sankyo Aluminum Industries Co. Ltd............... 330,000 1,067,028
-------------
CONSTRUCTION & HOUSING (3.7%)
Matsui Construction Co. Ltd...................... 200,000 997,990
Nishimatsu Construction Co. Ltd.................. 507,000 3,544,524
Sekisui House Ltd................................ 90,000 912,348
Taisei Corp...................................... 700,000 3,248,273
Toda Construction Co............................. 200,000 1,401,730
Toenec Corp...................................... 62,000 378,729
Tostem Corp...................................... 82,800 2,293,768
-------------
12,777,362
-------------
ELECTRICAL EQUIPMENT (6.3%)
Fuji Electric Co. Ltd............................ 500,000 2,272,131
Hitachi Ltd...................................... 719,000 8,042,644
Mitsubishi Electric Corp. Ltd.................... 942,000 5,276,779
Murata Manufacturing Co.
Ltd............................................ 26,000 1,036,092
Nissei Sangyo Co. Ltd............................ 152,000 1,859,652
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------- -------------
<S> <C> <C>
ELECTRICAL EQUIPMENT (CONTINUED)
Ricoh Corp. Ltd.................................. 94,000 $ 1,232,194
Rohm Co. Ltd..................................... 20,000 2,062,396
-------------
21,781,888
-------------
INDUSTRIAL (0.6%)
Okamura Corp..................................... 300,000 1,992,484
-------------
MACHINERY (4.2%)
Aichi Corp....................................... 184,000 1,141,658
Ebara Corp....................................... 110,000 1,653,412
Fanuc Ltd........................................ 80,000 3,076,116
Mitsubishi Heavy Industries
Ltd............................................ 666,000 5,115,912
NSK Ltd.......................................... 73,000 470,165
Sansei Yusoki Co. Ltd............................ 95,000 804,465
Shin Nippon Machinery Co. Ltd.................... 48,000 190,859
Toshiba Tungaloy Co. Ltd......................... 400,000 2,027,440
-------------
14,480,027
-------------
MANUFACTURING (0.8%)
Topy Industries Ltd.............................. 51,000 187,189
Tsubakimoto Chain Co............................. 407,000 2,489,731
-------------
2,676,920
-------------
TOTAL INDUSTRIAL PRODUCTS & SERVICES........... 54,775,709
-------------
TECHNOLOGY (11.4%)
COMPUTER SYSTEMS (0.7%)
Fujitsu Ltd...................................... 168,000 2,334,352
-------------
ELECTRONICS (8.3%)
Alpine Electronics, Inc.......................... 191,000 2,904,308
Fuji Photo Film Co. Ltd.......................... 88,000 3,545,223
Kyocera Corp..................................... 12,000 954,295
Matsushita Electric Industries Co. Ltd........... 579,000 11,688,278
Secom Co. Ltd.................................... 31,000 2,278,335
Sony Corp........................................ 70,000 6,111,158
Tokai Rika Co. Ltd............................... 147,000 1,163,873
-------------
28,645,470
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
18
<PAGE>
THE JAPAN EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------- -------------
<S> <C> <C>
SEMICONDUCTORS (0.2%)
Tokyo Ohka Kogyo Co. Ltd......................... 26,300 $ 795,228
-------------
TELECOMMUNICATIONS (2.2%)
DDI Corp......................................... 491 3,630,044
Nippon Telegraph & Telephone Corp................ 417 4,008,563
-------------
7,638,607
-------------
TOTAL TECHNOLOGY............................... 39,413,657
-------------
TRANSPORTATION (6.4%)
RAILROADS (3.3%)
East Japan Railway Co............................ 200 1,027,702
Nishi-Nippon Railroad Co.
Ltd............................................ 313,000 1,028,471
Tobu Railway Co. Ltd............................. 200,000 924,582
West Japan Railway Co............................ 2,140 8,396,922
-------------
11,377,677
-------------
TRANSPORT & SERVICES (1.7%)
Itochu Warehouse Co. Ltd......................... 47,000 149,506
Kawasaki Kisen Kaisha Ltd.+...................... 642,000 1,296,006
Nippon Express Co. Ltd........................... 303,000 2,422,834
Sankyu, Inc...................................... 435,000 1,353,316
Senko Co. Ltd.................................... 136,000 560,972
-------------
5,782,634
-------------
WHOLESALE & INTERNATIONAL TRADE (1.4%)
Kamei Corp....................................... 50,000 550,555
Kawasho Corp..................................... 152,000 472,883
Nagase & Co. Ltd................................. 124,000 982,854
Tomen Corp....................................... 305,000 772,961
Yuasa Trading Co. Ltd............................ 525,000 2,004,937
-------------
4,784,190
-------------
TOTAL TRANSPORTATION........................... 21,944,501
-------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------- -------------
<S> <C> <C>
UTILITIES (2.5%)
ELECTRIC (1.8%)
Shikoku Electric Power Co., Inc.................. 83,180 $ 1,417,469
Tohoku Electric Power Co.,
Inc............................................ 100,000 1,782,749
Tokyo Electric Power Co.,
Inc............................................ 145,000 3,053,831
-------------
6,254,049
-------------
NATURAL GAS (0.7%)
Hokuriku Gas Co. Ltd............................. 204,000 632,876
Osaka Gas Co. Ltd................................ 550,000 1,581,316
-------------
2,214,192
-------------
TOTAL UTILITIES................................ 8,468,241
-------------
TOTAL COMMON STOCK (COST $304,603,093)......... 295,243,368
-------------
WARRANTS (1.9%)
BASIC INDUSTRIES (0.5%)
CHEMICALS (0.4%)
Shin-Etsu Chemical Co. Ltd., Expiring 8/1/00+.... 488 1,348,100
-------------
METALS & MINING (0.1%)
Dowa Mining Co. Ltd., Expiring 12/09/97+......... 330 103,125
-------------
TOTAL BASIC INDUSTRIES......................... 1,451,225
-------------
CONSUMER GOODS & SERVICES (0.1%)
MERCHANDISING (0.1%)
Canon Sales Co. Inc., Expiring 11/11/97+......... 2,700 338,924
-------------
INDUSTRIAL PRODUCTS & SERVICES (0.0%)*
MACHINERY (0.0%)*
Ebara Corp., Expiring
10/8/99+....................................... 318 60,858
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
THE JAPAN EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------- -------------
<S> <C> <C>
TECHNOLOGY (1.3%)
COMPUTER SYSTEMS (0.1%)
Fujitsu Ltd., Expiring
6/12/98+....................................... 868 $ 336,399
-------------
ELECTRICAL EQUIPMENT (0.7%)
Rohm Co. Ltd., Expiring 11/20/97+................ 1,350 2,488,682
-------------
ELECTRONICS (0.5%)
Kyocera Corp., Expiring 1/23/98+................. 610 1,235,250
Merrill Lynch Intl.- Sony Corp., Expiring
6/14/01+....................................... 300 566,250
-------------
1,801,500
-------------
TOTAL TECHNOLOGY............................... 4,626,581
-------------
TOTAL WARRANTS (COST $3,799,244)............... 6,477,588
-------------
<CAPTION>
PRINCIPAL
AMOUNT
(IN JPY)
-------------
<S> <C> <C>
FIXED INCOME SECURITIES (2.1%)
BASIC INDUSTRIES (0.9%)
CHEMICALS (0.9%)
Sumitomo Bakelite Co. Ltd., 1.2% due 09/29/06.... $ 288,000,000 3,269,351
-------------
FINANCE (1.2%)
FINANCIAL SERVICES (1.2%)
STB Cayman Capital, 0.5% due 10/01/07............ 410,000,000 4,039,805
-------------
TOTAL FIXED INCOME SECURITIES
(COST $6,325,848)............................. 7,309,156
-------------
CONVERTIBLE BONDS (5.9%)
CONSUMER GOODS & SERVICES (2.2%)
AUTOMOTIVE (2.2%)
Toyota Motor Corp., 1.2% due 01/28/98............ 500,000,000 7,646,594
-------------
<CAPTION>
PRINCIPAL
AMOUNT
SECURITY DESCRIPTION (IN JPY) VALUE
- ------------------------------------------------- ------------- -------------
<S> <C> <C>
FINANCE (2.1%)
FINANCIAL SERVICES (2.1%)
BOT Cayman Finance Ltd., 4.25% due 03/31/49...... $ 620,000,000 $ 7,287,423
-------------
HEALTH CARE (1.2%)
PHARMACEUTICALS (1.2%)
Yamanouchi Pharmaceutical Co. Ltd., 1.25% due
03/31/14....................................... 300,000,000 4,135,715
-------------
TECHNOLOGY (0.4%)
COMPUTER SYSTEMS (0.4%)
Ricoh Co. Ltd., 1.5% due 03/29/02................ 100,000,000 1,319,584
-------------
TOTAL CONVERTIBLE BONDS
(COST $17,019,098)............................ 20,389,316
-------------
TOTAL INVESTMENTS
(COST $331,747,283) (95.9%)................................... 329,419,428
OTHER ASSETS IN EXCESS OF LIABILITIES (4.1%)....................
14,115,563
-------------
NET ASSETS (100.0%)............................................. $ 343,534,991
-------------
-------------
</TABLE>
- ------------------------------
+ Non-income producing security
* Less than 0.1%
Note: Based on the cost of investments of $330,005,851 for Federal Income Tax
purposes at June 30, 1997 the aggregate gross unrealized appreciation was
$33,426,380, and the aggregate gross unrealized depreciation was $35,754,235,
resulting in net unrealized depreciation of investments of $2,327,855.
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE JAPAN EQUITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $331,747,283) $329,419,428
Cash 5,250,352
Foreign Currency at Value (Cost $5,239,255) 5,222,892
Receivable for Investments Sold 7,998,500
Dividends Receivable 1,480,033
Interest Receivable 103,920
Deferred Organization Expenses 18,076
------------
Total Assets 349,493,201
------------
LIABILITIES
Payable for Investments Purchased 5,548,508
Advisory Fee Payable 180,722
Custody Fee Payable 174,538
Administrative Services Fee Payable 19,680
Administration Fee Payable 953
Fund Services Fee Payable 285
Accrued Trustees' Fees and Expenses 221
Accrued Expenses 33,303
------------
Total Liabilities 5,958,210
------------
NET ASSETS
Applicable to Investors' Beneficial Interests $343,534,991
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE JAPAN EQUITY PORTFOLIO
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividend Income (Net of Foreign Withholding Tax
of $366,178) $ 1,464,230
Interest Income (Net of Foreign Withholding Tax
of $416) 493,624
-----------
Investment Income 1,957,854
EXPENSES
Advisory Fee $ 1,104,268
Custodian Fees and Expenses 226,127
Administrative Services Fee 53,195
Professional Fees and Expenses 27,499
Fund Services Fee 5,830
Administration Fee 4,213
Printing Expenses 3,864
Trustees' Fees and Expenses 3,397
Amortization of Organization Expense 3,269
Insurance Expense 1,207
Miscellaneous 298
-----------
Total Expenses 1,433,167
-----------
NET INVESTMENT INCOME 524,687
NET REALIZED LOSS ON
Investment Transactions (including $689,588 net
realized gain from futures contracts) (31,489,655)
Foreign Currency Transactions (504,028)
-----------
Net Realized Loss (31,993,683)
NET CHANGE IN UNREALIZED APPRECIATION OF
Investments 57,492,664
Foreign Currency Contracts and Translations 242,771
-----------
Net Change in Unrealized Appreciation 57,735,435
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $26,266,439
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE JAPAN EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
JUNE 30, FOR THE FISCAL
1997 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1996
------------ -----------------
<S> <C> <C>
DECREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income (Loss) $ 524,687 $ (163,669)
Net Realized Loss on Investments and Foreign
Currency Transactions (31,993,683) (2,268,850)
Net Change in Unrealized Appreciation
(Depreciation) of Investments
and Foreign Currency Translations 57,735,435 (67,037,516)
------------ -----------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 26,266,439 (69,470,035)
------------ -----------------
------------ -----------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 76,948,328 290,426,062
Withdrawals (140,025,334) (253,101,673)
------------ -----------------
Net Increase (Decrease) from Investors'
Transactions (63,077,006) 37,324,389
------------ -----------------
Total Decrease in Net Assets (36,810,567) (32,145,646)
NET ASSETS
Beginning of Period 380,345,558 412,491,204
------------ -----------------
End of Period $343,534,991 $ 380,345,558
------------ -----------------
------------ -----------------
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE MARCH 28, 1995
SIX MONTHS ENDED FOR THE FISCAL (COMMENCEMENT OF
JUNE 30, 1997 YEAR ENDED OPERATIONS) TO
(UNAUDITED) DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- ----------------- -----------------
<S> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Expenses 0.84%(a) 0.81% 0.87%(a)
Net Investment Income 0.31%(a) (0.03)% 0.12%(a)
Portfolio Turnover 42%(b) 86% 60%(b)
Average Broker Commissions 0.0004 0.0005 --
</TABLE>
- ------------------------
(a) Annualized.
(b) Not Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
23
<PAGE>
THE JAPAN EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Japan Equity Portfolio (the "Portfolio"), is one of eight subtrusts
(portfolios) comprising The Series Portfolio (the "Series Portfolio"). The
Series Portfolio is registered under the Investment Company Act of 1940, as
amended (the "Act"), as a no-load, open-end management investment company which
was organized as a trust under the laws of the State of New York on June 24,
1994. The Portfolio's investment objective is to provide a high total return
from a portfolio of equity securities of issuers that have their principal
activities in Japan or are organized under Japanese law. The Portfolio commenced
operations on March 28, 1995. The Declaration of Trust permits the Trustees to
issue an unlimited number of beneficial interests in the Portfolio.
Investments in Japanese markets may involve certain considerations and risks not
typically associated with investments in the United States. Future economic and
political developments in Japan 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
exist 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 and asked
prices 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 at amortized cost.
Trading in securities on most foreign exchanges and over-the-counter
markets is normally completed before the close of the domestic market and
may also take place on days on which the domestic market is closed. If
events materially affecting the value of foreign securities occur between
the time when the exchange on which they are traded closes and the time
when the Portfolio's net assets are calculated, such securities will be
valued at fair value in accordance with procedures established by and
under the general supervision of the Portfolio's Trustees.
b)The books and records of the Portfolio are maintained in U.S. dollars. The
market 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 expense are
translated at the
24
<PAGE>
THE JAPAN EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
exchange rate 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 at 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 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.
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 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 or securities movements of
counterparties to meet the terms of their contracts.
f)The Portfolio intends to be treated as a partnership for federal income
tax purposes. As such, each investor in the Portfolio will be taxed on its
share of the Portfolio's ordinary income and capital gains. It
25
<PAGE>
THE JAPAN EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
is intended that the Portfolio's assets will be managed in such a way that
an investor in the Portfolio will be able to satisfy the requirements of
Subchapter M of the Internal Revenue Code. The Portfolio earns foreign
income which may be subject to foreign withholding taxes at various rates.
g)The Portfolio incurred organization expenses in the amount of $33,000.
Morgan Guaranty Trust Company of New York ("Morgan") has agreed to pay the
organization expenses of the Portfolio. The Portfolio has agreed to
reimburse Morgan for these costs which are being deferred and will be
amortized on a straight-line basis over a period not to exceed five years
beginning with the commencement of operations of the Portfolio.
h)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.
2. TRANSACTIONS WITH AFFILIATES
a)The Portfolio has an Investment Advisory Agreement with Morgan . Under the
terms of the agreement, the Portfolio pays Morgan at an annual rate of
0.65% of the Portfolio's average daily net assets. For the six months
ended June 30, 1997, such fees amounted to $1,104,268.
b)The Portfolio has retained Funds Distributor, Inc. ("FDI"), a registered
broker-dealer, to serve as the co-administrator and exclusive placement
agent. Under a Co-Administration Agreement between FDI and the Portfolio,
FDI provides administrative services necessary for the operations of the
Portfolio, furnishes office space and facilities required for conducting
the business of the Portfolio and pays the compensation of the officers
affiliated with FDI. The Portfolio has agreed to pay FDI fees equal to its
allocable share of an annual complex-wide charge of $425,000 plus FDI's
out-of-pocket expenses. The amount allocable to the Portfolio is based on
the ratio of the Portfolio's net assets to the aggregate net assets of The
JPM Pierpont Funds, The JPM Institutional Funds, the Portfolio, the other
portfolios in which The JPM Pierpont Funds and The JPM Institutional Funds
invest (the "Master Portfolios"), JPM Series Trust, JPM Series Trust II
and certain other investment companies subject to similar agreements with
FDI. For the six months ended June 30, 1997, the fee for these services
amounted to $4,213.
c)The Portfolio has an Administrative Services Agreement (the "Services
Agreement") with Morgan under which Morgan is responsible for overseeing
certain aspects of the administration and operation of the Portfolio.
Under the Services Agreement, the Portfolio has agreed to pay Morgan a fee
equal to its allocable share of an annual complex-wide charge. This charge
is calculated daily based on the aggregate average daily net assets of the
Master Portfolios and JPM 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 its net
26
<PAGE>
THE JAPAN EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
assets bear to the net assets of the Master Portfolios, other investors in
the Master Portfolios for which Morgan provides similar services and JPM
Series Trust. For the six months ended June 30, 1997 , the fee for these
services amounted to $53,195.
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 $5,830 for the six months ended June 30, 1997.
e)An aggregate annual fee of $75,000 is paid to each Trustee for serving as
a Trustee of The JPM Pierpont Funds, The JPM Institutional Funds, the
Master Portfolios and JPM Series Trust. The Trustees' Fees and Expenses
shown in the financial statements represents the Portfolio's allocated
portion of the total fees and expenses. Prior to April 1, 1997, the
aggregate annual Trustee fee was $65,000. The Portfolio's Chairman and
Chief Executive Officer also serves as Chairman of Group and receives
compensation and employee benefits from Group in his role as Group's
Chairman. The allocated portion of such compensation and benefits included
in the Fund Services Fee shown in the financial statements was $1,200.
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the six months
ended June 30, 1997 were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS FROM
PURCHASES SALES
- --------------- ---------------
<S> <C>
$133,362,605 $ 168,521,319
</TABLE>
27
