<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
