JPM INSTITUTIONAL FUNDS, N-30D, 1995-05-04

JPM INSTITUTIONAL FUNDS
N-30D, 1995-05-04

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<PAGE>

JPM INSTITUTIONAL MONEY MARKET FUND The
JPM INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND JPM Institutional
JPM INSTITUTIONAL TREASURY MONEY MARKET FUND Selected U.S.
JPM INSTITUTIONAL SHORT TERM BOND FUND Equity Fund
JPM INSTITUTIONAL BOND FUND
JPM INSTITUTIONAL TAX EXEMPT BOND FUND
JPM INSTITUTIONAL NEW YORK TOTAL RETURN BOND FUND
JPM INSTITUTIONAL DIVERSIFIED FUND
JPM INSTITUTIONAL SELECTED U.S. EQUITY FUND
JPM INSTITUTIONAL U.S. SMALL COMPANY FUND
JPM INSTITUTIONAL INTERNATIONAL EQUITY FUND
JPM INSTITUTIONAL EMERGING MARKETS EQUITY FUND

FOR MORE INFORMATION ON HOW THE JPM INSTITUTIONAL ANNUAL REPORT
FAMILY OF FUNDS CAN HELP YOU PLAN FOR YOUR FUTURE, MAY 31, 1994
CALL J.P. MORGAN FUNDS SERVICES AT (800) 766-7722.

<PAGE>

TABLE OF CONTENTS

Letter to the shareholders.............. 1 Fund performance............ 4

Fund facts and highlights............... 3 Financial statements........ 5

MORGAN SERVES AS PORTFOLIO INVESTMENT ADVISOR AND MAKES THE FUND AVAILABLE
SOLELY IN ITS CAPACITY AS SHAREHOLDER SERVICING AGENT FOR CUSTOMERS. THE FUND'S
DISTRIBUTOR IS SIGNATURE BROKER-DEALER SERVICES, INC. INVESTMENTS IN THE FUND
ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, MORGAN
GUARANTY TRUST COMPANY OF NEW YORK OR ANY OTHER BANK. SHARES OF THE FUND ARE NOT
FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER AGENCY. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE JPM INSTITUTIONAL SELECTED U.S. EQUITY FUND CAN FLUCTUATE, SO
AN INVESTOR'S SHARES WHEN REDEEMED MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST.

The performance data quoted herein represent past performance. Please remember
that past performance is not a guarantee of future performance. Fund returns are
net of fees. All returns assume the reinvestment of Fund distributions and
reflect the reimbursement of certain Fund expenses as described in the
Prospectus. Had expenses not been subsidized, returns would have been lower. The
JPM Institutional Selected U.S. Equity Fund invests all of its investable assets
in The Selected U.S. Equity Portfolio, a separately registered investment
company which is not available to the public but only to other collective
investment vehicles such as the Fund. The Portfolio may invest in foreign
securities which are subject to special risks; prospective investors should
refer to the Fund's Prospectus for a discussion of these risks. Consistent with
applicable regulatory guidance, performance for the period prior to The JPM
Institutional Selected U.S. Equity Fund's inception reflects the performance of
The Pierpont Equity Fund, the predecessor entity to the Selected U.S. Equity
Portfolio, which had a substantially similar investment objective and
restrictions as the Portfolio. The performance for this prior period reflects
deduction of the charges and expenses of The Pierpont Equity Fund, which were
higher than the estimated charges and expenses for The JPM Institutional
Selected U.S. Equity Fund, after reimbursement.

MORE COMPLETE INFORMATION ABOUT THE FUND, INCLUDING MANAGEMENT FEES AND OTHER
EXPENSES, IS PROVIDED IN THE PROSPECTUS, WHICH SHOULD BE READ CAREFULLY BEFORE
INVESTING. YOU MAY OBTAIN A COPY OF THE PROSPECTUS BY CALLING (800) 766-7722.

<PAGE>

LETTER TO THE SHAREHOLDERS OF THE JPM INSTITUTIONAL SELECTED U.S. EQUITY FUND

July 22, 1994

Dear Shareholder:

In this age of challenging markets, we are particularly pleased to tell you
about the outstanding performance results achieved by The JPM Institutional
Selected U.S. Equity Fund (the "Fund") during the fiscal year ended on May 31,
1994.

Your investment advisor, Morgan Guaranty Trust Company of New York, seeks to
outperform the S&P 500 Index through disciplined stock selection, while also
reducing various risks associated with sector rotation or market timing. The
advisor's experience has shown that ranking individual securities within
economic sectors (through the combined use of proprietary fundamental research
and a quantitative valuation model) is a powerful tool for individual stock
selection. A structured decision-making process, based on these rankings, is
used to allocate the Portfolio across attractively priced stocks. For the period
from July 19, 1993, the Fund's commencement of operations, to May 31, 1994, The
JPM Institutional Selected U.S. Equity Fund provided a total return of 9.61%. By
comparison, the Fund's benchmark, the S&P 500 Index, provided a total return of
4.37% for the period July 31, 1993 to May 31, 1994.

During the period July 19, 1993 to May 31, 1994, the Fund's net asset value per
share increased from $10.00 to $10.92 and the Fund paid $0.04 per share in
dividends. We are pleased to report that the Fund's net assets reached $47
million at May 31, 1994, the end of its first fiscal year. More significantly,
The Selected U.S. Equity Portfolio (the "Portfolio"), in which the Fund invests,
reached $437 million.

THE YEAR IN REVIEW

The fiscal year ending May 1994 began amid signs of general economic softness
and declining interest rates. When the federal budget debate increased investor
concerns about the economy in June and July, stocks moved sideways.

By August, further interest rate declines and continued record inflows of assets
into equity mutual funds provided a firm outlook for a market concerned about
domestic economic health, disarray in Russia, and the upcoming anniversary of
the October 1987 crash. There was considerable volatility within the market as
stocks became increasingly polarized within "good news" and "bad news" camps.
Those 1980s darlings, the Health Care and Consumer stable sectors, also
indiscriminately underperformed. Applying our valuation disciplines, we were
able to take advantage of this volatility by adding positions in the Health
Care, Consumer Cyclical and Technology sectors, while reducing positions in
those sectors in which individual stocks appeared overvalued, such as Utilities
and Consumer Service.

1
<PAGE>

As 1993 came to a close, widespread evidence that the economy and earnings
outlooks were on the upswing overcame moderately higher interest rates and
massive new issue activity, and the market pushed higher, led by the more
economically sensitive issues. The Fund's Portfolio particularly benefited from
holdings in the Technology and Consumer Cyclical sectors.

Stocks moved higher in January, but then the Federal Reserve made news by
raising interest rates on February 4, the first such tightening move in five
years. The subsequent loss of investor confidence, exacerbated by fears
regarding hedge fund liquidations, trade wars, North Korea and Whitewater,
pummeled the bond market and let to a sharp 10% selloff from January highs. Amid
this uncertainty, we reduced our moderate underweightings in the Utility and
Health Care sectors, while cutting back in strong groups like Basic Industry and
Technology. The fiscal year performance managed to end on a strong note,
however, as bonds stabilized and good earnings reports were abundant.

The advisor's emphasis on stock selection served the Portfolio well during the
fiscal year ending May, 1994. This emphasis added value in 10 of the 19 economic
sectors targeted for investment by the Portfolio, and contributed the bulk of
the overall outperformance, relative to the benchmark. Most notable in this
regard was the Health Care sector, which declined in value amid concern over the
impact of reform legislation. The holdings of the Fund's Portfolio, however, led
by COLUMBIA HEALTHCARE and MEDCO CONTAINMENT, rose 15% in value, adding more
than a full 100 basis points to the excess return over the benchmark achieved
during the year.

THE INVESTMENT OUTLOOK

Going forward, we believe the market is likely to be sensitive to developments
in the currency and bond markets, as valuation is less compelling than earlier
in the year. Also, robust economic growth argues for further interest rate hikes
by the Federal Reserve. Should the central bank meet its devoutly wished but
rarely achieved goal of a "soft landing" for the economy, the investment outlook
would considerably brighten. The advisor will continue to strive to
systematically outperform the benchmark return, using the information available
in its research to take advantage of emerging opportunities.

As always, we welcome your comments or questions. Please call J.P. Morgan Fund
Services toll free at (800) 766-7722.

Sincerely yours,

Evelyn E. Guernsey
J.P. Morgan Funds Services

2
<PAGE>

FUND FACTS

INVESTMENT OBJECTIVE

The JPM Institutional Selected U.S. Equity Fund seeks to provide a high total
return from a portfolio of selected equity securities. It is designed for
investors who want an actively managed portfolio of selected equity securities
that seeks to outperform the S&P 500 Index.
- -------------------------------------------
NET ASSETS AS OF 5/31/94 ($ MILLIONS)
47
- -------------------------------------------
EX-DIVIDEND DATES
3/30/94, 7/11/94, 12/19/94
- -------------------------------------------
DIVIDEND PAYABLE DATES
3/31/94, 7/12/94, 12/20/94
- -------------------------------------------
CAPITAL GAIN PAYABLE DATES (IF ANY)
7/12/94, 12/20/94

EXPENSE RATIO

The Fund's current annual expense ratio of 0.60% covers shareholders' expenses
for custody, tax reporting, investment advisory and shareholder services. The
Fund is no-load and does not charge any sales, redemption, or exchange fees.
There are no additional charges for buying, selling, or safekeeping Fund shares,
or for wiring dividend or redemption proceeds from the Fund.

FUND HIGHLIGHTS
(ALL DATA AS OF MAY 31, 1994)

SECTOR ALLOCATION

Pie chart depicting the allocation of the Fund's investment securities held at
May 31, 1994 by industry classification. The pie is broken in pieces
representing industries in the following percentages:

INDUSTRY PERCENTAGE
<S> <C>
Consumer Goods & Services 24.1%
Industrial Products & Services 15.1%
Finance 12.8%
Energy 12.0%
Utilities 9.9%
Basic Industries 8.8%
Health Care 6.6%
Technology 5.6%
Short Term and other 3.0%
Transportation 2.1%
</TABLE>

LARGEST EQUITY HOLDINGS % OF PORTFOLIO
<S> <C>
- ------------------------------------------
GENERAL MOTORS 2.4

MELVILLE 2.2

ROYAL DUTCH PETROLEUM 2.0

GENERAL ELECTRIC 1.9

U S WEST 1.8

CROWN CORK & SEAL 1.8

COOPER INDUSTRIES 1.8

EXXON 1.7

TYCO INTERNATIONAL 1.7

ARCHER-DANIELS-MIDLAND 1.7
</TABLE>

3
<PAGE>

FUND PERFORMANCE

EXAMINING PERFORMANCE

There are several ways to evaluate a mutual fund's performance. One approach is
to look at the growth of a hypothetical investment of $10,000. The chart at
right shows that $10,000 invested at inception of the Fund's predecessor fund
would have grown to $32,693 by May 31, 1994.

Another way to look at performance is to review a fund's average annual total
returns; these figures represent the average yearly change of the fund's value
over various time periods, typically 1, 5 or 10 years (or since inception). For
example, a hypothetical fund whose value increased by 4.0% in 1992 and 6.0% in
1993 had an average annual total return of 5.0% over the two-year period. Total
returns for periods of less than one year can also provide a picture of how a
fund has performed in the short term.

GROWTH OF $10,000 SINCE INCEPTION

JUNE 27, 1985 -- MAY 31, 1994
- -------------------------------------------

Line graph with two axes: the X-axis represents years of operations; the Y-axis
represents dollar value. The graph plots two lines: the first line represents
the growth of a ten thousand dollar investment in the Fund from June 27, 1985
(inception) to May 31, 1994; the second line represents the growth of a ten
thousand dollar investment in a portfolio of securities reflecting the
composition of the S&P 500 index for the same time period. The graph points are
as follows:

Year Fund S&P 500
<S> <C> <C>

0 $ 10,000 $ 10,000
1 13,096 13,361
2 15,195 16,187
3 13,968 15,133
4 17,476 19,189
5 20,753 22,376
6 23,826 25,014
7 27,305 27,478
8 30,041 30,668
9 32,693 31,975

</TABLE>

<TABLE>
<CAPTION>
PERFORMANCE TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS
---------------------------------------------------------------------
THREE YEAR ONE FIVE SINCE
AS OF MAY 31, 1994 MONTHS TO DATE YEAR YEARS INCEPTION*
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
The JPM Institutional Selected U.S. Equity
Fund -1.02% 1.08% 8.80% 13.34% 14.20%
S&P 500 Index -1.54% -0.96% 4.26% 10.75% 13.92%

<CAPTION>
AS OF MARCH 31, 1994
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
The JPM Institutional Selected U.S. Equity
Fund -2.07% -2.07% 5.69% 14.92% 14.07%
S&P 500 Index -3.79% -3.79% 1.47% 12.12% 13.83%

<FN>
*JUNE 27, 1985, THE INCEPTION DATE OF THE FUND'S PREDECESSOR, THE PIERPONT
EQUITY FUND.

PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. ALL RETURNS ASSUME THE
REINVESTMENT OF DISTRIBUTIONS AND THE FUND'S RETURNS REFLECT REIMBURSEMENT OF
CERTAIN FUND EXPENSES AS DESCRIBED IN THE PROSPECTUS.
</TABLE>
4

<PAGE>
THE JPM INSTITUTIONAL SELECTED U.S. EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1994
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS:
Investment in The Selected U.S. Equity Portfolio ("Portfolio"), at value $47,463,377
Receivable for Fund Shares Sold 3,702
Tax Reclaim Receivable 3,362
Deferred Organization Expense (Note 1d) 41,151
Receivable for Expense Reimbursements (Note 2b) 70,944
Prepaid Expenses 108
-----------
Total Assets 47,582,644
-----------

LIABILITIES:
Payable for Fund Shares Redeemed 33,116
Shareholder Servicing Fee Payable (Note 2c) 7,303
Administration Fee Payable (Note 2a) 1,194
Fund Services Fee Payable (Note 2d) 539
Organization Expenses Payable (Note 1d) 31,460
Accrued Expenses 36,072
-----------
Total Liabilities 109,684
-----------

NET ASSETS:
Applicable to 4,346,123 Shares of Beneficial Interest Outstanding $47,472,960
-----------
-----------
Net Asset Value, Offering and Redemption Price Per Share $10.92
-----------
-----------

ANALYSIS OF NET ASSETS:
Paid-in Capital $46,368,903
Undistributed Net Investment Income 186,297
Accumulated Net Realized Gain 651,698
Net Unrealized Appreciation 266,062
-----------
Net Assets $47,472,960
-----------
-----------
</TABLE>

See Accompanying Notes.

5
<PAGE>
THE JPM INSTITUTIONAL SELECTED U.S. EQUITY FUND
STATEMENT OF OPERATIONS
FOR THE PERIOD JULY 19, 1993 (COMMENCEMENT OF OPERATIONS) TO MAY 31, 1994
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
INVESTMENT INCOME FROM PORTFOLIO (NOTE 1B):
Dividend Income (Net of Withholding Tax of $5,460) $ 362,449
Interest Income 20,534
Allocated Portfolio Expenses (86,128)
---------
Net Investment Income from Portfolio 296,855

EXPENSES:
Shareholder Servicing Fee (Note 2c) $ 8,191
Administration Fee (Note 2a) 4,845
Trustees' Fees and Expenses (Note 2e) 1,852
Fund Services Fee (Note 2d) 1,564
Registration Fees 21,389
Transfer Agent Fee 14,007
Printing and Postage 12,432
Audit Fees 5,850
Legal Fees 3,819
Amortization of Organization Expense (Note 1d) 8,644
Miscellaneous 517
---------
Total Expenses 83,110
Less: Reimbursements of Expenses (Note 2b) (70,944)
---------
NET EXPENSES 12,166
----------

NET INVESTMENT INCOME 284,689

NET REALIZED GAIN FROM PORTFOLIO 651,698
NET CHANGE IN UNREALIZED APPRECIATION FROM PORTFOLIO 266,062
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $1,202,449
----------
----------
</TABLE>

See Accompanying Notes.

6
<PAGE>
THE JPM INSTITUTIONAL SELECTED U.S. EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 19, 1993
(COMMENCEMENT OF
OPERATIONS) TO
MAY 31, 1994
-----------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net Investment Income $ 284,689
Net Realized Gain from Portfolio 651,698
Net Change in Unrealized Appreciation from Portfolio 266,062
-----------------
Net Increase in Net Assets Resulting from Operations 1,202,449
-----------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net Investment Income (98,392)
-----------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST (NOTE 3):
Proceeds from Shares of Beneficial Interest Sold 48,560,304
Reinvestment of Dividends 90,835
Cost of Shares of Beneficial Interest Redeemed (2,282,336)
-----------------
Net Increase from Transactions in Shares of Beneficial Interest 46,368,803
-----------------
Total Increase in Net Assets 47,472,860
NET ASSETS:
Beginning of Period 100
-----------------
End of Period (including undistributed net investment income
of $186,297) (Note 4) $ 47,472,960
-----------------
-----------------
</TABLE>

See Accompanying Notes.

7
<PAGE>
THE JPM INSTITUTIONAL SELECTED U.S. EQUITY FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------

Selected data for a share outstanding throughout the period are as follows:

<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 19, 1993
(COMMENCEMENT OF
OPERATIONS) TO
MAY 31, 1994
-----------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
-----
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income 0.08
Net Realized and Unrealized Gain from Portfolio 0.88
-----
Total from Investment Operations 0.96
-----
LESS DIVIDENDS TO SHAREHOLDERS FROM:
Net Investment Income (0.04)
-----
NET ASSET VALUE, END OF PERIOD $10.92
--------
--------
Total Return 9.61%(a)
RATIOS AND SUPPLEMENTAL DATA:
Net Assets at End of Period (in thousands) $47,473
Ratios to Average Net Assets (annualized):
Expenses* 0.60%
Net Investment Income* 1.74%
<FN>

* Reflects the Fund's proportionate share of the Portfolio's expenses and a
reimbursement of expenses by Morgan. If this agreement to reimburse the Fund
for excess expenses had not been in place for the period ended May 31, 1994,
the annualized ratios of expenses and net investment income to average net
assets would have been 1.03% and 1.31%, respectively.
(a) Not annualized.
</TABLE>

See Accompanying Notes.

<PAGE>
THE JPM INSTITUTIONAL SELECTED U.S. EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The JPM Institutional Selected U.S. Equity Fund (the "Fund") is a separate
series of The JPM Institutional Funds, a Massachusetts business trust (the
"Trust") which was organized on November 4, 1992. The Trust is registered under
the Investment Company Act of 1940, as amended, as a diversified open-end
management investment company. The Fund commenced operations on July 19, 1993.

The Fund invests all of its investable assets in The Selected U.S. Equity
Portfolio (the "Portfolio"), a diversified open-end management investment
company having the same investment objective as the Fund. The value of such
investment reflects the Fund's proportionate interest in the net assets of the
Portfolio (10.8% at May 31, 1994). 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.

1. SIGNIFICANT ACCOUNTING POLICIES:

The following is a summary of the significant accounting policies of the Fund:

a) Valuation of securities by the Portfolio is discussed in Note 1 of the
Portfolio's Notes to Financial Statements which are included elsewhere in
this report.

b) The Fund records its share of net investment income, realized and
unrealized gain and loss and adjusts its investment in the Portfolio each
day. All the net investment income and realized and unrealized gain and
loss of the Portfolio is allocated pro rata among the Fund and other
investors in the Portfolio at the time of such determination.

c) Substantially all the Fund's net investment income is declared as dividends
and paid quarterly. Distributions of realized net capital gains, if any,
are declared and paid annually.

d) The Fund incurred organization expenses in the amount of $49,795. These
costs were deferred and are being amortized by the Fund on a straight-line
basis over a five-year period from the commencement of operations.

f) Expenses incurred by the Trust with respect to any two or more funds in the
Trust are allocated in proportion to the net assets of each fund in the
Trust, except where allocations of direct expenses to each fund can
otherwise be made fairly. Expenses directly attributable to a fund are
charged to that fund.

a) The Trust retains Signature Broker-Dealer Services, Inc. ("Signature") to
serve as Administrator and Distributor. Signature provides administrative
services necessary for the operations of the Fund, furnishes office space
and facilities required for conducting the business of the Fund and pays
the compensation of the Fund's officers affiliated with Signature.
Effective October 1, 1993, Signature receives a fee at an annual rate of
0.04% of the first $1 billion of the aggregate average daily net assets of
the Fund, the other funds in the Trust, The Pierpont Funds, and The JPM
Institutional Plus Funds (the "aggregate funds"), 0.032% of the next $2
billion of the aggregate funds' average daily net assets, 0.024% of the
next $2 billion of the aggregate funds' average daily net assets, and
0.016% of the aggregate funds' average daily net assets in excess of $5
billion. (Prior to October 1, 1993, the administration fee was at an annual
rate of 0.05% of the first $1 billion of the aggregate funds' average daily
net assets, 0.04% of the next $2 billion of the aggregate funds' average
daily net assets, 0.03% of the next $2 billion of the aggregate funds'
average daily net assets, and 0.02% of the aggregate funds' average daily
net assets in excess of $5 billion.) For the period July 19, 1993 to May
31, 1994, the Fund's portion of Signature's fee for these services amounted
to $4,845.

b) The Trust, on behalf of the Fund, has a Financial and Fund Accounting
Services Agreement ("Services Agreement") with Morgan Guaranty Trust
Company of New York ("Morgan") under which Morgan receives a fee, based on
the percentage described below, for overseeing certain aspects of the
administration and operation of the Fund. The Services Agreement is also
designed to provide an expense cap for certain expenses of the Fund. If
total expenses of the Fund, excluding the shareholder servicing fee, the
fund services fee and amortization of organization expenses, exceed the
expense cap of 0.05% of the Fund's average daily net assets, Morgan will
reimburse the Fund for the excess expense amount and receive no fee. Should
such expenses be less than the expense cap, Morgan's fee would be limited
to the difference between such expenses and the fee calculated under the
Services Agreement. For the period ended July 19, 1993 to May 31, 1994,
Morgan agreed to reimburse the Fund $56,520 for excess expenses. In
addition to the expenses that Morgan assumes under the Services Agreement,
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 0.60% of the average daily
net assets of the Fund through May 31, 1995. For the period July 19, 1993
to May 31, 1994, Morgan has agreed to reimburse the Fund $14,424.

c) The Trust, on behalf of the Fund, has a Shareholder Servicing Agreement
with Morgan. The Agreement provides for the Fund to pay Morgan a fee for
these services which is computed daily and may be paid monthly at an annual
rate of 0.05% of the average daily net assets of the Fund. For the period
July 19, 1993 to May 31, 1994, the fee for these services amounted to
$8,191.

<PAGE>
THE JPM INSTITUTIONAL SELECTED U.S. EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
d) Effective January 15, 1994, 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 Chairman and sole shareholder of Group is also a
Trustee of the Trust. The Fund's allocated portion of Group's costs in
performing its services amounted to $1,564 for the period January 15, 1994
to May 31, 1994.

e) Each Trustee is paid a $55,000 annual fee for serving as a Trustee of the
aggregate funds and their corresponding Portfolios. The Trustee fee expense
shown in the financial statements represents the Fund's allocated portion
of the total fees and expenses.

3. SHARES OF BENEFICIAL INTEREST:

The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (par value $0.001) of one or
more series. To date, the Trust has authorized shares of fourteen series, of
which the Fund's shares represent one series. Transactions in shares of
beneficial interest of the Fund were as follows:

<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 19, 1993
(COMMENCEMENT OF
OPERATIONS) TO
MAY 31, 1994
-----------------
<S> <C>
Shares Sold 4,549,461
Reivestment of Dividends 8,480
------------
4,557,941
Shares Redeemed (211,828)
------------
Net Increase 4,346,113
------------
------------
</TABLE>

4. DIVIDENDS AND DISTRIBUTIONS:

The Fund declared to shareholders of record on July 11, 1994, an income dividend
of $0.02981 per share and a capital gain distribution of $0.12475 per share.
Such dividends and distributions were paid on July 12, 1994.

<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Trustees and Shareholders of
The JPM Institutional Selected U.S. Equity Fund

In our opinion, the accompanying statement of assets and liabilities and the
related statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
The JPM Institutional Selected U.S. Equity Fund (the "Fund") at May 31, 1994,
and the results of its operations, the changes in its net assets and the
financial highlights for the period July 19, 1993 (commencement of operations)
through May 31, 1994, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit of these financial
statements in accordance with generally accepted auditing standards 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 audit provides a
reasonable basis for the opinion expressed above.

PRICE WATERHOUSE
New York, New York
July 22, 1994

<PAGE>
THE SELECTED U.S. EQUITY PORTFOLIO
ANNUAL REPORT MAY 31, 1994

(THE FOLLOWING PAGES SHOULD BE READ IN CONJUNCTION
WITH THE JPM INSTITUTIONAL SELECTED U.S. EQUITY FUND
ANNUAL FINANCIAL STATEMENTS)
<PAGE>
THE SELECTED U.S. EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS
MAY 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS (93.6%) SHARES (NOTE 1A)
--------- ---------
<S> <C> <C>
BASIC INDUSTRIES (8.7%)
CHEMICALS (3.3%)
Albemarle Corp........................... 92,750 $ 1,495,594
Du Pont (E.I.) de Nemours & Co., Inc..... 82,000 5,084,000
Ethyl Corp............................... 180,000 2,340,000
Georgia Gulf Corp. (a)................... 172,200 5,445,825
-----------
14,365,419
-----------
METALS & MINING (3.5%)
Crown Cork & Seal Co., Inc. (a).......... 218,200 7,882,475
Freeport McMoRan Copper & Gold Inc.,
Cl. A.................................. 100,000 2,462,500
Pegasus Gold Inc......................... 102,700 1,720,225
Phelps Dodge Corp........................ 60,200 3,341,100
-----------
15,406,300
-----------
PAPER & FOREST PRODUCTS (1.9%)
Bowater Inc.............................. 169,800 4,117,650
Champion International Corp.............. 127,400 4,156,425
-----------
8,274,075
-----------
Total Basic Industries 38,045,794
-----------
CONSUMER GOODS & SERVICES (24.1%)
AUTOMOTIVE (2.4%)
General Motors Corp...................... 197,700 10,626,375
-----------
BEVERAGES, FOOD, SOAP & TOBACCO (7.7%)
Archer-Daniels-Midland Co................ 308,200 7,435,325
Coca-Cola (The) Co....................... 155,300 6,270,237
Coca-Cola Enterprises, Inc............... 205,300 3,387,450
CPC International, Inc................... 109,800 5,325,300
PepsiCo., Inc............................ 187,000 6,732,000
Philip Morris Cos., Inc.................. 91,400 4,501,450
-----------
33,651,762
-----------
ENTERTAINMENT, LEISURE & MEDIA (4.0%)
Carnival Cruise Lines, Inc., Cl. A....... 90,900 4,249,575
Circus Circus Enterprises, Inc. (a)...... 175,000 4,046,875
CBS Inc.................................. 19,000 4,959,000

ENTERTAINMENT, LEISURE & MEDIA (CONTINUED)
Tele-Communications, Inc., Cl. A (a)..... 200,000 $ 4,162,500
-----------
17,417,950
-----------
HOUSEHOLD PRODUCTS (1.7%)
Interco, Inc. (a)........................ 262,900 3,286,250
Procter & Gamble Co...................... 74,100 4,177,388
-----------
7,463,638
-----------
MERCHANDISING (7.1%)
Charming Shoppes, Inc.................... 310,300 2,967,244
Dayton Hudson Corp....................... 31,300 2,460,963
Fruit of the Loom Inc., Cl. A (a)........ 168,500 4,949,687
Hechinger Co., Cl. A..................... 130,000 1,998,750
Limited Inc. (The)....................... 412,100 7,263,263
Melville Corp............................ 233,100 9,469,687
Price/Costco Inc. (a).................... 152,700 2,013,731
-----------
31,123,325
-----------
PERSONAL SERVICES (1.2%)
Service Corp. International.............. 206,100 5,049,450
-----------
Total Consumer Goods & Services 105,332,500
-----------
ENERGY (10.8%)
OIL-PRODUCTION (8.2%)
British Petroleum Co. PLC (ADR).......... 89,600 6,294,400
Exxon Corp............................... 123,300 7,521,300
Mobil Corp............................... 80,700 6,536,700
Oryx Energy Co........................... 174,500 3,053,750
Repsol S.A. (ADR)........................ 118,100 3,764,438
Royal Dutch Petroleum Co. (ADR).......... 82,200 8,785,125
-----------
35,955,713
-----------
OIL-SERVICES (2.6%)
Schlumberger Ltd......................... 129,300 7,402,425
Smith International, Inc. (a)............ 165,400 2,501,675
Western Co. of North America (a)......... 105,000 1,286,250
-----------
11,190,350
-----------
Total Energy 47,146,063
-----------
</TABLE>

See Accompanying Notes.

<PAGE>
THE SELECTED U.S. EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
--------- ---------
<S> <C> <C>
FINANCE (12.6%)
BANKING (5.8%)
BankAmerica Corp......................... 115,800 $ 5,616,300
Bank of New York Co., Inc................ 61,600 1,817,200
Citicorp................................. 66,800 2,638,600
Continental Bank Corp.................... 148,900 5,546,525
Golden West Financial Corp............... 114,800 4,534,600
NationsBank Corp......................... 92,072 5,098,487
-----------
25,251,712
-----------
BROKERAGE (0.5%)
Charles Schwab Corp...................... 77,000 2,329,250
-----------
INSURANCE (5.2%)
Allstate Corp............................ 168,800 4,409,900
American Express Co...................... 139,900 3,864,737
American International Group, Inc........ 55,700 5,200,988
First Colony Corp........................ 83,656 1,850,889
Providian Corp........................... 193,700 6,053,125
USLIFE Corp.............................. 43,600 1,591,400
-----------
22,971,039
-----------
FINANCIAL SERVICES (1.1%)
Household International, Inc............. 128,000 4,352,000
Lehman Brothers Holdings Inc. (a)........ 27,980 503,640
-----------
4,855,640
-----------
Total Finance 55,407,641
-----------
HEALTHCARE (5.4%)
PHARMACEUTICALS (5.4%)
Abbott Laboratories...................... 200,000 5,975,000
Alza Corp. Cl. A (a)..................... 189,800 4,721,275
Bausch & Lomb Inc........................ 58,400 2,890,800
Gensia Inc............................... 75,100 957,525
Johnson & Johnson Inc.................... 115,500 5,110,875
Merck & Co. Inc.......................... 134,300 4,096,150
-----------
Total Healthcare 23,751,625
-----------
INDUSTRIAL PRODUCTS & SERVICES (15.1%)
COMMERCIAL PRINTING (1.2%)
R.R. Donnelley & Sons Co................. 191,100 5,255,250
-----------
DIVERSIFIED MANUFACTURING (10.7%)
Allied Signal, Inc....................... 175,700 $ 6,171,462
Coltec Industries Inc. (a)............... 49,300 955,188
Cooper Industries, Inc................... 215,700 7,819,125
Cooper Tire & Rubber Co.................. 237,600 6,296,400
General Electric Co...................... 168,200 8,346,925
ITT Corp................................. 82,900 6,922,150
Manville Corp............................ 374,600 2,903,150
Tyco International Ltd................... 156,700 7,443,250
-----------
46,857,650
-----------
ELECTRONICS (0.5%)
MagneTek Inc. (a)........................ 155,600 2,256,200
-----------
MACHINERY (1.2%)
General Signal Corp...................... 51,400 1,580,550
Tenneco Inc.............................. 77,000 3,686,375
-----------
5,266,925
-----------
POLLUTION CONTROL (1.5%)
Browning-Ferris Industries, Inc.......... 69,100 2,003,900
Laidlaw Inc., Cl. B...................... 340,000 2,316,250
WMX Technologies Inc..................... 80,000 2,190,000
-----------
6,510,150
-----------
Total Industrial
Products & Services 66,146,175
-----------
TECHNOLOGY (5.3%)
COMPUTERS-PERIPHERALS (3.3%)
Conner Peripherals Inc. (a).............. 270,700 4,128,175
International Business Machines Corp..... 94,500 5,977,125
Read-Rite Corp. (a)...................... 336,100 4,264,269
-----------
14,369,569
-----------
INFORMATION PROCESSING (1.0%)
Novell, Inc. (a)......................... 246,100 4,399,037
-----------
TELECOMMUNICATIONS-EQUIPMENT (1.0%)
Synoptics Communications Inc. (a)........ 204,000 4,207,500
-----------
Total Technology 22,976,106
-----------
</TABLE>

See Accompanying Notes.

15
<PAGE>
THE SELECTED U.S. EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
--------- ---------
<S> <C> <C>
TRANSPORTATION (1.7%)
AIRLINES (0.7%)
AMR Corp. (a)............................ 54,600 $ 3,016,650
-----------
RAILROADS (1.0%)
Union Pacific Corp....................... 78,200 4,613,800
-----------
Total Transportation 7,630,450
-----------
UTILITIES (9.9%)
ELECTRIC (3.2%)
Baltimore Gas & Electric Co.............. 93,800 2,133,950
Entergy Corp............................. 200,000 5,775,000
FPL Group Inc............................ 40,400 1,282,700
Potomac Electric Power Co................ 54,100 1,061,712
Texas Utilities Co....................... 114,500 3,778,500
-----------
14,031,862
-----------
TELEPHONE (6.7%)
BellSouth Corp........................... 78,100 4,646,950
GTE Corp................................. 199,900 6,171,912
MCI Communications Corp.................. 239,800 5,770,188
Northern Telecom Ltd..................... 147,600 4,594,050
US West, Inc............................. 200,000 8,025,000
-----------
29,208,100
-----------
Total Utilities 43,239,962
-----------
TOTAL COMMON STOCKS (COST $399,258,499).. 409,676,316
-----------
CONVERTIBLE PREFERRED STOCKS (3.1%)
ENERGY (1.2%)
OIL-PRODUCTION (0.9%)
Occidental Petroleum Corp., $3.00........ 87,500 3,850,000
-----------
OIL-SERVICES (0.3%)
Reading & Bates Corp., $1.625............ 20,000 500,000
Chiles Offshore Corp., $1.50............. 32,500 702,813
-----------
1,202,813
-----------
Total Energy 5,052,813
-----------
FINANCE (0.2%)
BANKING (0.2%)
FNB Corp., $1.875, Series B.............. 25,000 750,000
-----------
HEALTHCARE (1.0%)
HOSPITAL SERVICES & SUPPLIES (0.9%)
United States Surgical Corp., $9.76...... 177,400 $ 3,924,975
-----------
PHARMACEUTICALS (0.1%)
Gensia Inc., $3.75 (144A)................ 20,000 685,000
-----------
Total Healthcare 4,609,975
-----------
TECHNOLOGY (0.3%)
COMPUTER-PERIPHERALS (0.3%)
Dell Computer Corp., $7.00, Series A..... 9,800 1,232,350
Storage Technology Corp., $3.50.......... 1,500 110,250
-----------
Total Technology 1,342,600
-----------
TRANSPORTATION (0.4%)
AIRLINES (0.4%)
AMR Corp., $3.00, Series A (144A)........ 38,000 1,624,500
-----------
TOTAL CONVERTIBLE PREFERRED
STOCKS (COST $13,956,608)...... 13,379,888
-----------
<CAPTION>

PRINCIPAL
AMOUNT
---------
<S> <C> <C>
CONVERTIBLE BONDS (0.3%)
BASIC INDUSTRIES (0.1%)
PAPER & FOREST PRODUCTS (0.1%)
Champion International Corp. 6.50%
Subordinated Debentures due 04/15/11... $ 350,000 361,812
-----------
HEALTHCARE (0.2%)
HOSPITAL SERVICES & SUPPLIES (0.2%)
Genzyme Corp. 6.75% Subordinated
Debentures due 10/01/01 (144A)......... 1,000,000 940,000
-----------
TOTAL CONVERTIBLE BONDS
(COST $1,426,937)....................... 1,301,812
-----------
</TABLE>

See Accompanying Notes.

<PAGE>
THE SELECTED U.S. EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 1994
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
SHORT-TERM INVESTMENTS (4.4%) PRINCIPAL VALUE
AMOUNT (NOTE 1A)
--------- ---------
<S> <C> <C>
COMMERCIAL PAPER (2.1%)
Ford Motor Credit Corp., 4.25% due
06/01/94............................... $ 9,408,000 $ 9,408,000
-----------
U.S. GOVERNMENT AGENCY OBLIGATIONS (2.3%)
Federal Home Loan Mortgage Corp.,
4.10%-4.20% due 06/23/94-06/30/94...... 10,000,000 9,970,372
------------
TOTAL SHORT-TERM INVESTMENTS
(COST $19,378,372)............. 19,378,372
------------
TOTAL INVESTMENTS (COST $434,020,416)
(101.4%)........................... 443,736,388
LIABILITIES IN EXCESS OF OTHER ASSETS
(-1.4%)............................ (5,989,228)
------------
NET ASSETS (100.0%).................. $437,747,160
------------
------------
<FN>
(a) Non-income-producing security.

Note: The cost of investments for Federal Income Tax purposes at May 31, 1994,
was $434,856,203, the aggregate gross unrealized appreciation and depreciation
was $28,919,516 and $20,039,331, respectively, resulting in net unrealized
appreciation of $8,880,185.

(ADR) - Securities whose value is determined or significantly influenced by
trading on exchanges not located in the United States or Canada. ADR after the
name of a foreign holdings stands for American Depository Receipt, representing
ownership of foreign securities on deposit with a domestic custodian bank.

(144A) - Securities restricted for resale to institutional investors.
</TABLE>
See Accompanying Notes.

<PAGE>
THE SELECTED U.S. EQUITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1994
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS:
Investments at Value (Cost $434,020,416) (Note 1a) $443,736,388
Cash 1,647
Receivable for Investments Sold 5,001,615
Dividends and Interest Receivable 1,230,139
Prepaid Expenses 2,262
------------
Total Assets 449,972,051
------------

LIABILITIES:
Payable for Investments Purchased 11,193,412
Advisory Fee Payable (Note 2a) 571,586
Financial and Fund Accounting Services Fee Payable (Note 2c) 155,348
Custody Fees Payable 135,018
Fund Services Fee Payable (Note 2d) 4,760
Administration Fee Payable (Note 2b) 2,522
Trustees' Fees and Expenses Payable (Note 2e) 228
Accrued Expenses 53,800
Withholding Taxes Payable 108,217
------------
Total Liabilities 12,224,891
------------

NET ASSETS:
Applicable to Investor's Beneficial Interests $437,747,160
------------
------------
</TABLE>

See Accompanying Notes.

<PAGE>
THE SELECTED U.S. EQUITY PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM JULY 19, 1993 (COMMENCEMENT OF OPERATIONS) TO MAY 31, 1994
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
INVESTMENT INCOME (NOTE 1B):
Dividends (Net of Withholding Tax of $117,497) $6,917,434
Interest 399,354
----------
Investment Income 7,316,788

EXPENSES:
Advisory Fee (Note 2a) $1,263,048
Custodian Fees and Expenses 135,018
Financial and Fund Accounting Services Fee (Note 2c) 155,348
Fund Services Fee (Note 2d) 20,385
Administration Fee (Note 2b) 19,348
Professional Fees 53,922
Trustees' Fees and Expenses (Note 2e) 7,003
Miscellaneous 7,353
---------
Total Expenses 1,661,425
----------

NET INVESTMENT INCOME 5,655,363

NET REALIZED GAIN ON INVESTMENTS 26,272,769
NET CHANGE IN UNREALIZED APPRECIATION OF INVESTMENTS (2,323,580)
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $29,604,552
----------
----------
</TABLE>

See Accompanying Notes.

<PAGE>
THE SELECTED U.S. EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 19, 1993
(COMMENCEMENT OF
OPERATIONS) TO
MAY 31, 1994
-----------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net Investment Income $ 5,655,363
Net Realized Gain on Investments 26,272,769
Net Change in Net Unrealized Appreciation (2,323,580)
----------------
Net Increase in Net Assets Resulting from Operations 29,604,552
----------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST:
Contributions 585,309,492
Withdrawals (177,266,984)
----------------
Net Increase from Investors' Transactions 408,042,508
----------------
Total Increase in Net Assets 437,647,060
NET ASSETS:
Beginning of Period 100,100
----------------
End of Period $ 437,747,160
----------------
----------------
</TABLE>

- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA:
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 19, 1993
(COMMENCEMENT OF
OPERATIONS) TO
MAY 31, 1994
-----------------
<S> <C>
RATIOS (ANNUALIZED):
Expenses to Average Net Assets 0.53%
Net Investment Income to Average Net Assets 1.79%
Portfolio Turnover 76%*

<FN>
*Includes activity of The Pierpont Equity Fund for the period June 1, 1993 to
July 18, 1993, prior to the contribution of all of its investable assets to the
Portfolio.
</TABLE>

See Accompanying Notes.

<PAGE>

THE SELECTED U.S. EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

The Selected U.S. Equity Portfolio (the "Portfolio") is registered under the
Investment Company Act of 1940, as amended, as a no-load, diversified, open-end
management investment company which was organized as a trust under the laws of
the State of New York on January 29, 1993. The Portfolio commenced operations on
July 19, 1993 and received a contribution of certain assets and liabilities,
including securities, with a value of $209,477,219 on that date from The
Pierpont Equity Fund, in exchange for a beneficial interest in the Portfolio. At
that date, net unrealized appreciation of $12,039,552 was included in the
contributed securities. On October 1, 1993, the Portfolio received a
contribution of securities and certain assets and liabilities, with a market
value and cost of $128,337,342 from The JPM North America Fund, Ltd., in
exchange for a beneficial interest in the Portfolio. The Declaration of Trust
permits the Trustees to issue an unlimited number of beneficial interests in the
Portfolio.

1. SIGNIFICANT ACCOUNTING POLICIES:

The following is a summary of the significant accounting policies of the
Portfolio:

a) The value of each security for which readily available market quotations
exists is based on a decision as to the broadest and most representative
market for such security. The value of such security will be based either
on the last sale price on a national securities exchange, or, in the
absence of recorded sales, at the readily available closing bid price on
such exchanges, or at the quoted bid price in the over-the-counter market.
Securities listed on a foreign exchange are valued at the last quoted sale
price available before the time when net assets are valued. Unlisted
securities are valued at the average of the quoted bid and asked prices in
the over-the-counter market. Securities or other assets for which market
quotations are not readily available are valued at fair value in accordance
with procedures established by the Portfolio's Trustees. Such procedures
include the use of independent pricing services, which use prices based
upon yields or prices of securities of comparable quality, coupon, maturity
and type; indications as to values from dealers; and general market
conditions. All Portfolio securities with a remaining maturity of less than
60 days are valued at amortized cost.

b) 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 becomes known. Interest income, which includes
the amortization of premiums and discounts, if any, is recorded on an
accrual basis. For financial and tax reporting purposes, realized gains and
losses are determined on the basis of specific lot identification.

c) The Portfolio will be treated as a partnership for federal income tax
purposes. As such, each investor in the Portfolio will be subject to
taxation 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.

2. TRANSACTIONS WITH AFFILIATES:

a) The Portfolio has an investment advisory agreement with Morgan Guaranty
Trust Company of New York ("Morgan"). Under the terms of the investment
advisory agreement, the Portfolio pays Morgan at an annual rate of 0.40% of
the Portfolio's average daily net assets. For the period July 19, 1993 to
May 31, 1994, Morgan's fee for these services amounted to $1,263,048.

21
<PAGE>
THE SELECTED U.S. EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------

b) The Portfolio has retained Signature Broker-Dealer Services, Inc.
("Signature") to serve as Administrator. Certain officers of Signature
serve as officers of the Portfolio. Under the Administration Agreement,
Signature provides management and administrative services necessary for the
operations of the Portfolio, furnishes office space and facilities required
for conducting the business of the Portfolio and pays the compensation of
the Portfolio's officers affiliated with Signature. Effective October 1,
1993, Signature receives a fee for these services at an annual rate of
0.01% of the first $1 billion of aggregate average daily net assets of the
Portfolio and the other portfolios subject to the Administration Agreement
(the "aggregate portfolios"), 0.008% of the next $2 billion of the
aggregate portfolios' average daily net assets, 0.006% of the next $2
billion of the aggregate portfolios' average daily net assets, and 0.004%
of the aggregate portfolios' average daily net assets in excess of $5
billion. Prior to October 1, 1993, no administration fee was charged to the
Portfolio. For the period October 1, 1993 to May 31, 1994, the Portfolio's
portion of Signature's fee for these services amounted to $19,348.

c) The Portfolio has a Financial and Fund Accounting Services Agreement
("Services Agreement") with Morgan under which Morgan receives a fee, based
on the percentages described below, for overseeing certain aspects of the
administration and operation of the Portfolio. The Services Agreement is
also designed to provide an expense cap for certain expenses of the
Portfolio. If total expenses of the Portfolio, excluding the advisory fee,
custody expenses, fund services fee, and brokerage costs, exceed the
expense cap of 0.10% of the Portfolio's average daily net assets up to $200
million, 0.05% of the next $200 million of average daily net assets, and
0.03% of average daily net assets thereafter, Morgan will reimburse the
Portfolio for the excess expense amount and receive no fee. Should such
expenses be less than the expense cap, Morgan's fee would be limited to the
difference between such expenses and the fee calculated under the Services
Agreement. For the period July 19, 1993 to May 31, 1994, Morgan's fee for
these services amounted to $155,348.

d) Effective January 15, 1994, the Portfolio entered into 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 Chairman and sole shareholder of Group is also a Trustee of
the Portfolio. The Portfolio's allocated portion of Group's costs in
performing its services amounted to $20,385 for the period January 15, 1994
to May 31, 1994.

e) Each Trustee is paid a $55,000 annual fee for serving as the Trustee of The
Pierpont Funds, The JPM Institutional Funds, The JPM Institutional Plus
Funds and their corresponding Portfolios, in the aggregate. The Trustee fee
expense shown in the financial statements represents the Portfolio's
allocated portion of the total fees.

3. INVESTMENT TRANSACTIONS:

Investment transactions (excluding short-term investments) for the fiscal year
ended May 31, 1994, including activity of The Pierpont Equity Fund from June 1,
1993 to July 18, 1993, were as follows:

COST OF PROCEEDS FROM
PURCHASES SALES
- ---------------- ------------------
<S> <C>
$468,956,934 $258,595,564
</TABLE>

<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Trustees and Investors of
The Selected U.S. Equity Portfolio

In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of operations
and of changes in net assets and the supplementary data present fairly, in all
material respects, the financial position of The Selected U.S. Equity Portfolio
(the "Portfolio") at May 31, 1994, and the results of its operations, the
changes in its net assets and its supplementary data for the period July 19,
1993 (commencement of operations) through May 31, 1994, in conformity with
generally accepted accounting principles. These financial statements and
supplementary data (hereafter referred to as "financial statements") are the
responsibility of the Portfolio's management; our responsibility is to express
an opinion on these financial statements based on our audit. We conducted our
audit of these financial statements in accordance with generally accepted
auditing standards 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
audit, which included confirmation of securities at May 31, 1994 by
correspondence with the custodian and brokers, and the application of
alternative auditing procedures where confirmations from brokers were not
received, provides a reasonable basis for the opinion expressed above.

PRICE WATERHOUSE
New York, New York
July 22, 1994

<PAGE>

JPM INSTITUTIONAL MONEY MARKET FUND The
JPM INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND JPM
JPM INSTITUTIONAL TREASURY MONEY MARKET FUND Institutional
JPM INSTITUTIONAL SHORT TERM BOND FUND U.S. Small
JPM INSTITUTIONAL BOND FUND Company Fund
JPM INSTITUTIONAL TAX EXEMPT BOND FUND
JPM INSTITUTIONAL NEW YORK TOTAL RETURN BOND FUND
JPM INSTITUTIONAL DIVERSIFIED FUND
JPM INSTITUTIONAL SELECTED U.S. EQUITY FUND
JPM INSTITUTIONAL U.S. SMALL COMPANY FUND
JPM INSTITUTIONAL INTERNATIONAL EQUITY FUND
JPM INSTITUTIONAL EMERGING MARKETS EQUITY FUND

FOR MORE INFORMATION ON HOW THE JPM ANNUAL REPORT
INSTITUTIONAL FAMILY OF FUNDS CAN HELP MAY 31, 1994
YOU PLAN FOR YOUR FUTURE, CALL J.P.
MORGAN FUNDS SERVICES AT (800) 766-7722.

<PAGE>

<TABLE>
<S> <C> <C> <C>
TABLE OF CONTENTS

Letter to the shareholders.............. 1 Fund performance........................ 4

Fund facts and highlights............... 3 Financial statements.................... 5
</TABLE>

MORGAN SERVES AS PORTFOLIO INVESTMENT ADVISOR AND MAKES THE FUND AVAILABLE
SOLELY IN ITS CAPACITY AS SHAREHOLDER SERVICING AGENT FOR CUSTOMERS. THE FUND'S
DISTRIBUTOR IS SIGNATURE BROKER-DEALER SERVICES, INC. INVESTMENTS IN THE FUND
ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, MORGAN
GUARANTY TRUST COMPANY OF NEW YORK OR ANY OTHER BANK. SHARES OF THE FUND ARE NOT
FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER GOVERNMENTAL AGENCY. INVESTMENT RETURN AND PRINCIPAL
VALUE OF AN INVESTMENT IN THE JPM INSTITUTIONAL U.S. SMALL COMPANY FUND CAN
FLUCTUATE, SO AN INVESTOR'S SHARES WHEN REDEEMED MAY BE WORTH MORE OR LESS THAN
THEIR ORIGINAL COST.

The performance data quoted herein represents past performance. Please remember
that past performance is not a guarantee of future performance. Fund returns are
net of fees. All returns assume the reinvestment of Fund distributions and
reflect the reimbursement of certain Fund expenses as described in the
Prospectus. Had expenses not been subsidized, returns would have been lower. The
JPM Institutional U.S. Small Company Fund invests all of its investable assets
in The U.S. Small Company Portfolio, a separately registered investment company
which is not available to the public but only to other collective investment
vehicles such as the Fund. The Portfolio may invest in foreign securities which
are subject to special risks; prospective investors should refer to the Fund's
Prospectus for a discussion of these risks. Consistent with applicable
regulatory guidance, performance for the period prior to The JPM Institutional
U.S. Small Company Fund's inception reflects the performance of The Pierpont
Capital Appreciation Fund, the predecessor entity to the U.S. Small Company
Portfolio, which had a substantially similar investment objective and
restrictions as the Portfolio. The performance for this prior period reflects
deduction of the charges and expenses of The Pierpont Capital Appreciation Fund,
which were higher than the estimated charges and expenses for The JPM
Institutional U.S. Small Company Fund, after reimbursement.

July 22, 1994

Dear Shareholder:

The shareholders of The JPM Institutional U.S. Small Company Fund (the "Fund")
will remember fiscal year 1994 for its inevitable, market-led retrenchment that
followed a full year of solid outperformance. In a market that presented special
challenges for small-capitalization stocks, the Fund's net asset value per share
increased from $10.00 to $10.03 during the year, and it paid $0.0122 per share
in dividends. The Fund's net assets reached slightly over $71 million at the end
of this first fiscal year. The net assets of The U.S. Small Company Portfolio
(the "Portfolio"), in which the Fund invests, totaled $634.5 million at May 31,
1994.

Our shareholders will recall that the Fund's predecessor posted one-year results
of 25.41% during fiscal year ended 1993, versus a performance in the Russell
2000 of 19.30%. For the period from July 19, 1993, the Fund's commencement of
operations, to May 31, 1994, The JPM Institutional U.S. Small Company Fund
provided a total return of 0.42%. By comparison, the Fund's benchmark, the
Russell 2500, provided a total return of 5.41% for the period July 31, 1993 to
May 31, 1994.

THE YEAR IN REVIEW

The 1994 fiscal year just past saw the portfolio substantially underperform its
benchmark, largely because of negative stock selection. A key consideration to
bear in mind when assessing relatively poor performance in the "small-cap" area
should be the fairly unique emphasis that your investment advisor, Morgan
Guaranty, places on long-term normalized earnings in its stock selection
process. This is contrary to the market's current preference for valuing stocks
based on short-term events.

Small capitalization stocks traditionally involve higher price-to-earnings
ratios than their more highly capitalized brethren. But when a stock's
attractiveness to the average investor is based almost exclusively on its
expected future earnings, the smallest dip in its current earnings can (1) cause
widespread concern about the attainability of the company's future earnings
stream and (2) lead to a steep decline in the stock's market price. The reverse,
of course, would likely be true if reported earnings exceed expectations.

Given these realities of the current marketplace, when several stocks we had
selected for large positions reported disappointed earnings, their market value
fell significantly (as is to be expected), and consequently lowered the Fund's
net asset value. We interpret these results to mean simply that small-cap stocks
are highly susceptible to short-term fluctuations in price -- considerably more
so than medium- and large-cap issues, the long track records of which often
serve as a protective buffer to dramatic price swings. We continue to believe
that the current market is overly focused on short-term performance, and do not
believe that the Portfolio's recent underperformance compromises the fundamental
attractiveness of our small-cap selections. In fact, we are hopeful that the
short-term underperformance seen in the Portfolio will be rectified over the
longer term as the small-cap stocks we have selected reach their long-term
performance potential.

1
<PAGE>
Looking on the brighter side, the Fund slightly outperformed its benchmark
during the third quarter, fueled by positive stock selection in the technology,
basic industry and services sectors. Several top-performing technology stocks
were sold after becoming overvalued in our methodology -- and we rotated into
relatively undervalued technology stocks.

As the fiscal year-end neared, extreme volatility took hold of virtually all
markets, especially the small-cap markets in which the Portfolio participates.
We used the underperformance of our holdings during this period as an
opportunity to increase our positions in the stocks we find fundamentally
attractive.

THE INVESTMENT OUTLOOK

In addition to the long-term valuation approach explained above, which often
results in our purchasing stocks after earnings disappointments, or at or near
historic lows, shareholders should also be aware of our commitment to
researching a broader spectrum of small-capitalization stocks than many of our
competitors. Over the long term, we expect that this in-depth coverage will help
us identify undervalued opportunities with strong future earnings prospects, and
thus enable our shareholders to benefit from early participation in tomorrow's
small-cap market leaders.

As always, we welcome your comments or questions. Please call J.P. Morgan Funds
Services toll free at (800) 766-7722.

Sincerely yours,

Evelyn E. Guernsey
J.P. Morgan Fund Services

<PAGE>
FUND FACTS

INVESTMENT OBJECTIVE

The JPM Institutional U.S. Small Company Fund seeks to provide a high total
return from a portfolio of equity securities of small companies. It is designed
for investors who are willing to assume the somewhat higher risk of investing in
small companies in order to seek a higher total return over time than might be
expected from a portfolio of stocks of large companies.
- -------------------------------------------
NET ASSETS AS OF 5/31/94 ($ MILLIONS)
71
- -------------------------------------------
EX DIVIDEND DATES
7/11/94, 12/19/94
- -------------------------------------------
CAPITAL GAIN PAYABLE DATES (IF ANY)
7/12/94, 12/20/94

EXPENSE RATIO

The Fund's current annual expense ratio of 0.80% covers shareholders' expenses
for custody, tax reporting, investment advisory and shareholder services. The
Fund is no-load and does not charge any sales, redemption, or exchange fees.
There are no additional charges for buying, selling, or safekeeping Fund shares,
or for wiring dividend or redemption proceeds from the Fund.

FUND HIGHLIGHTS
(ALL DATA AS OF MAY 31, 1994)

SECTOR ALLOCATION

INDUSTRY PERCENTAGE
<S> <C>
Finance 20.5%
Consumer Goods & Services 18.5%
Technology 13.3%
Industrial Products & Services 10.8%
Health Care 9.9%
Short Term and other 7.1%
Basic Industries 7.0%
Utilities 5.9%
Energy 4.5%
Transportation 2.5%
</TABLE>

<TABLE>
<CAPTION>
LARGEST EQUITY HOLDINGS % OF PORTFOLIO
<S> <C>
- ------------------------------------------------
SBARRO 1.8

CIRRUS LOGIC 1.5

CHARMING SHOPPES 1.4

HEALTH CARE AND RETIREMENT 1.4

KENDALL INTERNATIONAL 1.3

FIRST COMMERCE 1.3

XILINX 1.2

GENERAL SIGNAL 1.2

SOUTHTRUST 1.2

HEALTH MANAGEMENT 1.2
</TABLE>

3
<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 the right shows that $10,000 invested at the inception of
the Fund's predecessor fund would have grown to $27,439 at May 31, 1994.

Another way to look at performance is to review a fund's average annual total
returns; these figures represent the average yearly change of a fund's value
over various time periods, typically 1, 5 or 10 years (or since inception if a
fund has not existed for one or more of those periods). For example, a
hypothetical fund whose value increased by 4.0% in 1992 and 6.0% in 1993 had an
average annual total return of 5.0% over the two-year period. Total returns for
periods of less than one year can also provide a picture of how a fund has
performed in the short term.

GROWTH OF $10,000 SINCE INCEPTION

JUNE 27, 1985 -- MAY 31, 1994
- -------------------------------------------

Line graph with two axes: the X-axis represents years of operations; the Y-axis
represents dollar value. The graph plots two lines: the first line represents
the growth of a ten thousand dollar investment in the Fund from June 27, 1985
(inception) to May 31, 1994; the second line represents the growth of a ten
thousand dollar investment in a portfolio of securities reflecting the
composition of the Russell 2500 index for the same time period. The graph
points are as follows:

Year Fund Russell 2500
<S> <C> <C>

0 $ 10,000 $ 10,000
1 14,386 13,471
2 15,944 14,803
3 13,672 13,686
4 17,823 17,096
5 19,782 17,522
6 19,406 19,328
7 21,618 22,332
8 27,111 26,624
9 27,439 28,539

</TABLE>

PERFORMANCE TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS
---------------------------------------------------
THREE YEAR ONE FIVE SINCE
AS OF MAY 31, 1994 MONTHS TO DATE YEAR YEARS INCEPTION*
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
JPM Institutional U.S. Small Company Fund -7.39% -6.17% 1.21% 9.01% 11.95%
Russell 2500 -5.30% -2.66% 7.19% 10.79% 12.48%
<CAPTION>
AS OF MARCH 31, 1994
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
JPM Institutional U.S. Small Company Fund -3.09% -3.09% 4.58% 12.70% 12.61%
Russell 2500 -2.22% -2.22% 8.80% 12.88% 12.79%

<FN>
*JUNE 27, 1985, THE INCEPTION DATE OF THE FUND'S PREDECESSOR, THE PIERPONT
CAPITAL APPRECIATION FUND.

PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE PERFORMANCE. ALL RETURNS ASSUME
THE REINVESTMENT OF DISTRIBUTIONS AND THE FUND'S RETURNS REFLECT REIMBURSEMENT
OF CERTAIN FUND EXPENSES AS DESCRIBED IN THE PROSPECTUS.
</TABLE>

<PAGE>
THE JPM INSTITUTIONAL U.S. SMALL COMPANY FUND
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1994
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS:
Investment in The U.S. Small Company Portfolio
("Portfolio"), at value $71,117,659
Receivable for Fund Shares Sold 1,168
Tax Reclaim Receivable 210
Deferred Organization Expense (Note 1d) 41,178
Receivable for Expense Reimbursements (Note 2b) 73,953
Prepaid Expenses 104
-----------
Total Assets 71,234,272
-----------

LIABILITIES:
Shareholder Servicing Fee Payable (Note 2c) 13,012
Administration Fee Payable (Note 2a) 1,670
Fund Services Fee Payable (Note 2d) 756
Trustees' Fees and Expenses Payable (Note 2e) 35
Organization Expenses Payable (Note 1d) 31,460
Accrued Expenses 46,564
-----------
Total Liabilities 93,497
-----------

NET ASSETS:
Applicable to 7,094,338 Shares of Beneficial Interest
Outstanding $71,140,775
-----------
-----------
Net Asset Value, Offering and Redemption Price Per
Share $10.03
------
------
ANALYSIS OF NET ASSETS:
Paid-in Capital $75,456,552
Undistributed Net Investment Income 227,894
Accumulated Net Realized Loss from Portfolio (603,482)
Net Unrealized Depreciation from Portfolio (3,940,189)
-----------
Net Assets $71,140,775
-----------
-----------
</TABLE>

See Accompanying Notes.

<PAGE>
THE JPM INSTITUTIONAL U.S. SMALL COMPANY FUND
STATEMENT OF OPERATIONS
FOR THE PERIOD JULY 19, 1993 (COMMENCEMENT OF OPERATIONS) TO MAY 31, 1994
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
INVESTMENT INCOME FROM PORTFOLIO (NOTE 1B):
Dividend Income (Net of Withholding Tax of $291) $ 394,128
Interest Income 86,610
Allocated Portfolio Expenses (201,067)
------------
Net Investment Income from Portfolio 279,671

EXPENSES:
Shareholder Servicing Fee (Note 2c) $ 13,854
Administration Fee (Note 2a) 8,177
Fund Services Fee (Note 2d) 3,005
Trustees' Fees and Expenses (Note 2e) 1,225
Registration Fees 31,443
Printing and Postage 12,373
Professional Fees 9,845
Transfer Agent Fee 5,529
Amortization of Organization Expense (Note 1d) 8,617
Miscellaneous 495
---------
Total Expenses 94,563
Less: Reimbursements of Expenses (Note 2b) (73,953)
---------
NET EXPENSES 20,610
------------

NET INVESTMENT INCOME 259,061
NET REALIZED LOSS FROM PORTFOLIO (603,482)
NET CHANGE IN UNREALIZED DEPRECIATION FROM PORTFOLIO (3,940,189)
------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (4,284,610)
------------
------------
</TABLE>

See Accompanying Notes.

6
<PAGE>
THE JPM INSTITUTIONAL U.S. SMALL COMPANY FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 19, 1993
(COMMENCEMENT OF
OPERATIONS) TO
MAY 31, 1994
----------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net Investment Income $ 259,061
Net Realized Loss from Portfolio (603,482)
Net Change in Unrealized Depreciation from Portfolio (3,940,189)
-------------
Net Decrease in Net Assets Resulting from
Operations (4,284,610)
-------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net Investment Income (31,167)
-------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST (NOTE 3):
Proceeds from Shares of Beneficial Interest Sold 87,480,356
Reinvestment of Dividends 22,937
Cost of Shares of Beneficial Interest Redeemed (12,046,841)
-------------
Net Increase from Transactions in Shares of
Beneficial Interest 75,456,452
-------------
Total Increase in Net Assets 71,140,675
NET ASSETS:
Beginning of Period 100
-------------
End of Period (including undistributed net investment
income of $227,894) (Note 4) $ 71,140,775
-------------
-------------
</TABLE>

See Accompanying Notes.

<PAGE>
THE JPM INSTITUTIONAL U.S. SMALL COMPANY FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------

Selected data for a share outstanding throughout the period are as follows:

<TABLE>
<CAPTION>
MAY 31, 1994
-----------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
-----
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income 0.04
Net Realized and Unrealized Loss from Portfolio (0.00)
-----
Net Increase in Net Assets Resulting from Operations 0.04
-----
LESS DIVIDENDS:
From Net Investment Income (0.01)
-----
NET ASSET VALUE, END OF PERIOD $10.03
--------
--------
Total Return 0.42%(a)
RATIOS AND SUPPLEMENTAL DATA:
Net Assets at end of Period (in thousands) $ 71,141
Ratios to Average Net Assets (annualized):
Expenses* 0.80%
Net Investment Income* 0.93%

<FN>
* Reflects the Fund's proportionate share of the Portfolio's expenses and a
reimbursement of expenses by Morgan. If this agreement to reimburse the Fund
for excess expenses had not been in place for the period ended May 31, 1994,
the annualized ratios of expenses and net investment income to average net
assets would have been 1.07% and 0.66%, respectively.
(a) Not annualized.

</TABLE>

See Accompanying Notes.

8
<PAGE>
THE JPM INSTITUTIONAL U.S. SMALL COMPANY FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The JPM U.S. Institutional Small Company Fund (the "Fund") is a separate series
of The JPM Institutional Funds, a Massachusetts business trust (the "Trust")
which was organized on November 4, 1992. The Trust is registered under the
Investment Company Act of 1940, as amended, as a diversified open-end management
investment company. The Fund commenced operations on July 19, 1993.

The Fund invests all of its investable assets in The U.S. Small Company
Portfolio (the "Portfolio"), a diversified open-end management investment
company having the same investment objective as the Fund. The value of such
investment reflects the Fund's proportionate beneficial interest in the net
assets of the Portfolio (11.2% at May 31, 1994). 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.

1. SIGNIFICANT ACCOUNTING POLICIES:

The following is a summary of the significant accounting policies of the Fund:

a) Valuation of securities by the Portfolio is discussed in Note 1 of the
Portfolio's Notes to Financial Statements which are included elsewhere in
this report.

c) Substantially all the Fund's net investment income is declared as dividends
and paid semi-annually. Distributions to shareholders of net realized
capital gains, if any, are declared and paid annually.

e) Each series of the Trust is treated as a separate entity for federal income
tax purposes. The Fund's policy is 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. As of May 31, 1994, the Fund incurred and elected to defer
post-October losses of approximately $609,000 until the next taxable year.
To the 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.

9
<PAGE>
THE JPM INSTITUTIONAL U.S. SMALL COMPANY FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
f) Expenses incurred by the Trust with respect to any two or more funds in the
Trust are allocated in proportion to the average 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.

2. TRANSACTIONS WITH AFFILIATES:

b) The Trust, on behalf of the Fund, has a Financial and Fund Accounting
Services Agreement ("Services Agreement") with Morgan Guaranty Trust
Company of New York ("Morgan") under which Morgan receives a fee, based on
the percentage described below, for overseeing certain aspects of the
administration and operation of the Fund. The Services Agreement is also
designed to provide an expense cap for certain expenses of the Fund. If
total expenses of the Fund, excluding the shareholder servicing fee, the
fund services fee and amortization of organization expenses, exceed the
expense cap of 0.05% of the Fund's average daily net assets, Morgan will
reimburse the Fund for the excess expense amount and receive no fee. Should
such expenses be less than the expense cap, Morgan's fee would be limited
to the difference between such expenses and the fee calculated under the
Services Agreement. For the period July 19, 1993 to May 31, 1994, Morgan
agreed to reimburse the fund $55,233 for excess expenses. In addition to
the expenses that Morgan assumes under the Services Agreement, 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 0.80% of the average daily net
assets of the Fund through May 31, 1995. For the period July 19, 1993 to
May 31, 1994, Morgan has agreed to reimburse the Fund $18,720.

<PAGE>
THE JPM INSTITUTIONAL U.S. SMALL COMPANY FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
d) Effective January 15, 1994, the Trust, on behalf of the Fund, entered into
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 Chairman and sole shareholder of Group is also a
Trustee of the Trust. The Fund's allocated portion of Group's costs in
performing its services amounted to $3,005 for the period January 15, 1994
to May 31, 1994.

3. SHARES OF BENEFICIAL INTEREST:

<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 19, 1993
(COMMENCEMENT OF
OPERATIONS) TO
MAY 31, 1994
----------------
<S> <C>
Shares Sold 8,243,588
Reinvestment of Dividends 2,195
----------------
8,245,783
Shares Redeemed (1,151,455)
----------------
Net Increase 7,094,328
----------------
----------------
</TABLE>

4. DIVIDENDS AND DISTRIBUTIONS:

The Fund declared to shareholders of record on July 11, 1994, an income dividend
of $0.02757 per share, which was paid on July 12, 1994.

11
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Trustees and Shareholders of
The JPM Institutional U.S. Small Company Fund

In our opinion, the accompanying statement of assets and liabilities and the
related statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
The JPM Institutional U.S. Small Company Fund (the "Fund") at May 31, 1994, and
the results of its operations, the changes in its net assets and its financial
highlights for the period July 19, 1993 (commencement of operations) through May
31, 1994, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these financial statements in accordance
with generally accepted auditing standards 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 audit provides a reasonable basis for the opinion expressed
above.

PRICE WATERHOUSE
New York, New York
July 22, 1994

<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
ANNUAL REPORT MAY 31, 1994

(THE FOLLOWING PAGES SHOULD BE READ IN CONJUNCTION
WITH THE JPM INSTITUTIONAL U.S. SMALL COMPANY FUND
ANNUAL FINANCIAL STATEMENTS)
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS
MAY 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS (92.9%) SHARES (NOTE 1A)
----------- ------------
<S> <C> <C>
BASIC INDUSTRIES (7.0%)
AGRICULTURE (0.3%)
Dekalb Genetics Corp..................... 57,600 $ 1,900,800
------------
CHEMICALS (1.4%)
Ethyl Corp............................... 300,000 3,900,000
Georgia Gulf Corp. (a)................... 156,000 4,933,500
------------
8,833,500
------------
METALS & MINING (5.3%)
Allegheny Ludlum Corp.................... 301,100 5,269,250
Commercial Metals Co..................... 198,066 4,307,936
Freeport McMoran Copper & Gold Inc. CL.A. 235,400 5,796,725
Gibraltor Steel Corp. (a)................ 24,600 307,500
Maverick Tubecorp (a).................... 80,300 702,625
Minera Rayrock Inc....................... 838,700 1,677,520
Oregon Steel Mills, Inc.................. 86,800 1,844,500
Panhandle Eastern Corp................... 115,000 2,278,150
Pegasus Gold Inc......................... 357,100 5,981,425
Rouge Steel Co........................... 21,700 566,913
Steel Technologies Inc................... 296,600 4,671,450
------------
33,403,994
------------
Total Basic Industries 44,138,294
------------
CONSUMER GOODS & SERVICES (18.5%)
AUTOMOTIVE SUPPLIES (2.7%)
Arvin Industries, Inc.................... 100,000 2,512,500
Cooper Tire & Rubber Co.................. 235,500 6,240,750
Excel Industries, Inc.................... 206,500 3,510,500
Simpson Industries, Inc.................. 192,500 3,705,625
TBC Corp. (a)............................ 90,000 1,153,125
------------
17,122,500
------------
BEVERAGES, FOOD, SOAP & TOBACCO (0.3%)
Brock Candy Co........................... 67,500 590,625
Bush Boake Allen, Inc. (a)............... 96,000 1,512,000
------------
2,102,625
------------
ENTERTAINMENT, LEISURE & MEDIA (1.3%)
Boyd Gaming Corp. (a).................... 294,100 4,448,263
Lottery Enterprises Inc. (a)............. 18,100 221,725
Paging Network Inc. (a).................. 36,900 904,050
People's Choice TV Corp. (a)............. 14,500 366,125

ENTERTAINMENT, LEISURE & MEDIA (CONTINUED)
Reader's Digest Assn., Inc. CL.A......... 50,000 $ 2,075,000
------------
8,015,163
------------
HOME CONSTRUCTION (0.3%)
D.R. Horton Inc. (a)..................... 143,508 1,757,974
Oakwood Homes Corp....................... 13,400 289,775
Schult Homes Corp........................ 9,100 121,713
------------
2,169,462
------------
MERCHANDISING (5.5%)
Arbor Drugs Inc.......................... 68,300 1,109,875
Brauns Fashions Corp. (a)................ 100,000 425,000
Catherines Stores Corp. (a).............. 135,900 1,325,025
Charming Shoppes, Inc.................... 942,000 9,007,875
Fruit of the Loom, Inc. CL.A (a)......... 100,000 2,937,500
Hechinger Co. CL.A....................... 27,700 425,888
Holson Burnes Group Inc. (a)............. 39,200 284,200
K-Swiss Inc. CL.A........................ 91,600 2,061,000
Lechters Inc. (a)........................ 187,500 2,250,000
Musicland Stores Inc. (a)................ 53,100 949,160
Nine West Group, Inc. (a)................ 70,000 1,916,250
One Price Clothing Stores, Inc. (a)...... 227,700 4,326,300
Penn Traffic Co. (a)..................... 69,600 2,531,700
Safety 1st Inc. (a)...................... 8,600 222,525
TJX Cos. Inc............................. 116,100 2,815,425
Trans World Music Corp. (a).............. 207,400 2,307,325
------------
34,895,048
------------
MISCELLANEOUS (0.7%)
DeVRY, Inc. (a).......................... 50,000 1,356,250
Johnson Worldwide Associates Inc. (a).... 133,279 3,165,376
------------
4,521,626
------------
PERSONAL SECURITY (1.3%)
ADT Ltd. (a)............................. 653,800 6,292,825
Pinkerton's, Inc. (a).................... 124,700 2,135,488
------------
8,428,313
------------
PERSONAL SERVICES (1.4%)
National Service Industries, Inc......... 98,900 2,534,313
Service Corp. International.............. 245,300 6,009,850
</TABLE>

See Accompanying Notes.

14
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
----------- ------------
<S> <C> <C>
PERSONAL SERVICES (CONTINUED)
Xpedite Systems, Inc. (a)................ 6,000 $ 102,000
------------
8,646,163
------------
RESTAURANTS & HOTELS (5.0%)
Argosy Gaming Corp. (a).................. 41,000 625,250
Buffets Inc. (a)......................... 226,500 4,360,125
Cracker Barrel Old Country Store, Inc.... 244,000 5,947,500
O'Charleys Inc. (a)...................... 51,000 905,250
Players International Inc. (a)........... 74,900 1,526,088
Royal Caribbean Cruises Ltd.............. 185,500 5,402,687
Sbarro Inc............................... 311,300 11,362,450
Taco Cabana Inc. (a)..................... 100,000 1,550,000
------------
31,679,350
------------
Total Consumer Goods & Services 117,580,250
------------
ENERGY (4.5%)
OIL-PRODUCTION (2.1%)
Devon Energy Corp........................ 104,600 2,222,750
Oryx Energy Co........................... 291,600 5,103,000
TransCanada Pipelines Ltd................ 187,400 2,436,200
Vintage Petroleum Inc.................... 180,500 3,519,750
------------
13,281,700
------------
OIL-SERVICES (2.4%)
Dreco Energy Services Ltd. CL.A (a)...... 111,700 1,075,112
Global Marine Inc. (a)................... 1,081,100 4,324,400
Holly Corp............................... 92,800 2,818,800
Noble Drilling Corp. (a)................. 255,800 1,822,575
Oceaneering International Inc. (a)....... 185,300 2,246,762
Smith International Inc. (a)............. 79,500 1,202,438
Sonat Offshore Drilling, Inc............. 100,000 1,875,000
------------
15,365,087
------------
Total Energy 28,646,787
------------
FINANCE (20.5%)
BANKING (11.2%)
Bankcorp South Inc....................... 24,700 750,263
Banknorth Group Inc...................... 123,200 2,541,000
Bay View Capital......................... 169,200 4,187,700
CCB Financial Corp....................... 29,200 1,062,150
Central Mortgage Bancshares, Inc......... 26,600 402,325

BANKING (CONTINUED)
Charter One Financial, Inc............... 177,300 $ 4,011,413
Colonial BancGroup, Inc. CL.A............ 75,700 1,703,250
Commerce Bancorp Inc..................... 71,700 1,362,300
Commercial Bank NY....................... 53,500 488,188
Commercial Bankshares, Inc. (a).......... 24,300 264,263
Community First Bankshares, Inc.......... 83,500 1,106,375
Continental Bank Corp.................... 191,200 7,122,200
First Commercial Corp.................... 26,800 613,050
First Commerce Corp...................... 274,725 8,173,068
First Financial Holdings, Inc............ 30,600 459,000
First National Bancorp. GA............... 88,400 1,845,350
First Tennessee National Corp............ 50,000 2,125,000
Hubco Inc................................ 73,300 1,630,925
Mercantile Bankshares Corp............... 37,500 745,312
Metropolitan Financial Corp.............. 90,700 1,496,550
Mississippi Valley Bankshares, Inc....... 75,800 1,184,375
National Commerce Bancorp................ 22,700 519,262
Roosevelt Financial Group, Inc........... 142,200 2,435,175
Seacoast Banking Corp. of Florida CL.A... 46,800 824,850
Shawmut National Corp.................... 106,000 2,557,250
Silicon Valley Bancshares (a)............ 60,500 620,125
SouthTrust Corp.......................... 348,400 7,338,175
Southwest Bancorp Inc., Oklahoma......... 23,200 292,900
Sterling Bancshares, Inc................. 29,600 492,100
Sterling Financial Corp. Wash. (a)....... 49,100 626,025
Trustco Bank Corp. NY.................... 69,600 1,365,900
U.S. Trust Corp.......................... 24,400 1,262,700
U.S. Bancorp Inc......................... 900 21,712
Victoria Bankshares, Inc................. 62,900 1,533,188
Westamerica Bancorporation............... 83,600 2,466,200
Wilmington Trust Co...................... 202,000 5,201,500
------------
70,831,119
------------
FINANCIAL SERVICES (2.0%)
American Residential Holding Corp........ 53,500 969,686
Charles Schwab Corp...................... 83,300 2,519,825
Cole Taylor Financial Group Inc. (a)..... 15,400 211,750
Dreyfus Corp............................. 50,000 2,506,250
Financial Federal Corp. (a).............. 31,700 463,613
Mills Corp............................... 39,300 918,638
</TABLE>

See Accompanying Notes.

15
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
----------- ------------
<S> <C> <C>
FINANCIAL SERVICES (CONTINUED)
Payco American Corp. (a)................ 42,500 $ 377,188
SPS Transaction Services, Inc. (a)...... 64,400 3,340,750
Southwest Securities Group, Inc......... 173,900 1,391,200
------------
12,698,900
------------
INSURANCE (4.2%)
AMBAC Inc................................ 95,000 3,800,000
CMAC Investment Corp..................... 64,500 1,685,062
Capital ReCorp........................... 193,400 3,843,825
EquiCredit Corp. (a)..................... 21,000 357,000
Fidelity National Financial Inc.......... 18,100 298,650
First Colony Corp........................ 181,900 4,024,538
Freemont General Corp.................... 103,100 2,422,850
Hilb, Rogal & Hamilton Co................ 158,600 1,942,850
Kemper Corp.............................. 43,200 2,511,000
MMI Cos. Inc............................. 163,600 2,085,900
Providian Corp........................... 120,100 3,753,125
------------
26,724,800
------------
REAL ESTATE (3.1%)
Bay Apartment Community Inc.............. 18,000 387,000
Chelsea GCA Realty Inc................... 10,100 282,800
Colonial Properties Trust................ 53,400 1,201,500
Developers Diversified Realty............ 91,800 2,776,950
Gables Residential Trust................. 43,700 1,065,188
Health & Rehabilitiation Properties
Trust................................... 339,000 5,085,000
Healthcare Realty Trust.................. 98,700 2,085,038
MerryLand & Investment Co................ 37,000 837,125
Property Trust American.................. 50,000 987,500
RFS Hotel Investments, Inc............... 66,800 1,185,700
ROC Communities, Inc..................... 29,000 696,000
Southwestern Properties Trust............ 120,500 1,551,436
Summit Properties........................ 15,300 328,950
Tucker Properties Corp................... 47,200 796,500
Wellsford Residential Properties Trust... 1,700 44,200
Winston Hotels........................... 8,100 91,125
------------
19,402,012
------------
Total Finance 129,656,831
------------
HEALTHCARE (9.9%)
BIOTECHNOLOGY (2.8%)
Affymax N.V. (a)......................... 65,300 767,275
Amylin Pharmaceuticals (a)............... 91,100 808,513

BIOTECHNOLOGY (CONTINUED)
Athena Neurosciences Inc. (a)............ 113,200 $ 940,975
CellPro Inc. (a)......................... 183,300 3,895,125
Cephalon Inc. (a)........................ 51,100 613,200
Gensia Inc. (a).......................... 200,000 2,550,000
Inhale Therapeutic Systems (a)........... 74,600 578,150
Northfield Laboratories Inc. (a)......... 99,500 702,718
Oncor, Inc. (a).......................... 310,300 1,939,375
Perspective Biosystems, Inc. (a)......... 117,800 2,179,300
Shaman Pharmaceuticals Inc. (a).......... 62,500 437,500
Targeted Genetics Corp. (a).............. 99,500 609,438
Vertex Pharmaceuticals, Inc. (a)......... 97,000 1,200,375
Vical Inc. (a)........................... 55,300 532,262
------------
17,754,206
------------
HEALTH SERVICES (4.3%)
Abbey Healthcare Group Inc. (a).......... 190,500 3,619,500
Advocat Inc. (a)......................... 121,800 1,172,325
Clintrials Inc. (a)...................... 8,500 76,500
Healthcare Compare Corp. (a)............. 28,800 574,200
Health Care & Retirement Corp. (a)....... 331,300 8,613,800
Health Management Associates CL.A (a).... 201,600 7,358,400
Health Risk Management Inc. (a).......... 28,500 199,500
Mariner Health Group Inc. (a)............ 114,200 2,605,188
Quintiles Transnational Co. (a).......... 23,400 418,275
Rotech Medical Corp (a).................. 80,900 1,658,450
Summit Care Corp. (a).................... 57,000 1,168,500
------------
27,464,638
------------
HOSPITAL SUPPLIES (2.8%)
Biocircuits Corp. (a).................... 183,800 195,287
Bioject Medical Technologies Inc. (a).... 108,800 292,400
1 Stat Corp. (a)......................... 161,200 2,216,500
Isomedix Inc. (a)........................ 57,100 1,042,075
Kendall International Inc. (a)........... 172,100 8,303,825
Protocol Systems Inc. (a)................ 93,000 732,375
Puritan Bennett Corp..................... 178,800 3,576,000
Vital Signs, Inc. (a).................... 190,400 1,594,600
------------
17,953,062
------------
Total Healthcare 63,171,906
------------
</TABLE>

See Accompanying Notes.

<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
----------- ------------
<S> <C> <C>
INDUSTRIAL PRODUCTS & SERVICES (10.8%)
CAPITAL GOODS (0.2%)
Gardner Denver Machinery, Inc. (a)....... 116,500 $ 1,077,625
------------
COMMERCIAL SERVICES (1.4%)
Advo Inc................................. 227,300 3,864,100
CAI Wireless System Inc. (a)............. 15,000 166,875
Emmis Broadcasting Corp. CL.A (a)........ 26,000 334,750
Granite Construction Inc................. 23,900 501,900
Greiner Engineering, Inc................. 19,800 247,500
Hooper Holmes, Inc....................... 132,300 1,587,600
Michael Baker Corp. (a).................. 222,000 1,581,750
Nu-kote Holding Inc. (a) CL.A............ 27,800 503,875
------------
8,788,350
------------
DIVERSIFIED MANUFACTURING (2.9%)
Apogee Enterprises, Inc.................. 125,300 1,503,600
Brady (W.H.) Co., Class A non-voting..... 142,500 6,661,875
Greenfield Industries Inc................ 28,400 532,500
Guardsman Products, Inc.................. 20,800 231,400
Kaydon Corp.............................. 234,127 5,121,528
Libbey Inc............................... 104,500 1,907,125
Modine Manufacturing Co.................. 93,800 2,462,250
Worldtex Inc. (a)........................ 46,000 224,250
------------
18,644,528
------------
ELECTRICAL EQUIPMENT (0.2%)
Charter Power Systems Inc................ 79,200 1,079,100
Encore Wire Corp. (a).................... 14,000 197,750
------------
1,276,850
------------
CAPITAL GOODS (0.1%)
Wolverine Tube, Inc. (a)................. 28,300 569,538
------------
MACHINERY (4.0%)
Applied Power Inc........................ 133,200 2,564,100
Black & Decker Corp...................... 247,700 4,582,450
Coltec Industries Inc. (a)............... 42,300 819,563
General Signal Corp...................... 246,700 7,586,025
Internet Corp............................ 382,900 3,063,200
Measurex Corp............................ 50,000 918,750
Regal Boloit Corp........................ 71,200 1,922,400
Sundstrand Corp.......................... 82,200 3,873,675
------------
25,330,163
------------
PACKAGING (0.3%)
Paxar Corp. (a).......................... 127,200 $ 1,812,600
------------
POLLUTION CONTROL (1.7%)
Dames & Moore Inc........................ 366,400 5,541,800
Emcon (a)................................ 186,800 1,365,975
Matrix Services Co. (a).................. 102,700 770,250
Mid-American Waste System Inc............ 267,400 1,303,575
TETRA Technologies Inc. (a).............. 243,500 2,191,500
------------
11,173,100
------------
Total Industrial Products & Services 68,672,754
------------
TECHNOLOGY (13.3%)
AEROSPACE (0.4%)
Orbital Sciences Corp. (a)............... 100,000 2,162,500
Rohr Industries, Inc. (a)................ 69,100 656,450
------------
2,818,950
------------
COMPUTER PERIPHERALS (0.6%)
Evans & Sutherland Computer Corp. (a).... 42,100 699,912
Komag Inc. (a)........................... 28,600 647,075
Read-Rite Corp. (a)...................... 211,300 2,803,938
------------
4,150,925
------------
COMPUTER-SOFTWARE (4.9%)
Adobe Systems Inc........................ 204,200 5,845,225
Aldus Corp. (a).......................... 71,400 1,994,736
Alias Research Inc. (a).................. 76,400 1,031,400
Autodesk, Inc............................ 99,100 5,140,813
Davidson & Associates Inc. (a)........... 67,100 1,283,288
InfoSoft International Inc. (a).......... 16,400 412,050
Intersolv Inc. (a)....................... 138,900 1,597,350
Intuit Inc. (a).......................... 55,300 1,900,938
Landmark Graphics Corp. (a).............. 21,900 733,650
Learning (The), Co. (a).................. 56,700 864,675
Mentor Graphics Corp..................... 14,800 158,175
NetManage, Inc. (a)...................... 95,200 1,582,700
Phoenix Technology Ltd. (a).............. 24,800 125,550
Progress Software Corp. (a).............. 80,200 2,977,425
Project Software & Development Inc. (a).. 82,300 823,000
S3 Inc. (a).............................. 201,900 1,930,669
Software Professional Inc. (a)........... 46,500 191,813
Spectrum Holobyte Inc. (a)............... 21,200 174,900
</TABLE>

See Accompanying Notes.

17
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
----------- ------------
<S> <C> <C>
COMPUTER-SOFTWARE (CONTINUED)
Symantec Corp. (a)....................... 162,100 $ 2,188,350
------------
30,956,707
------------
ELECTRONICS (0.3%)
Dynamics Corp. of America................ 52,900 780,275
KEMET Corp. (a).......................... 66,500 1,088,938
------------
1,869,213
------------
INFORMATION PROCESSING (0.6%)
NetFRAME Systems, Inc. (a)............... 282,900 2,864,362
Network Computing Devices (a)............ 145,000 797,500
------------
3,661,862
------------
SEMICONDUCTORS (3.9%)
Advanced Technology Materials, Inc. (a).. 138,700 667,494
Asyst Technologies Inc. (a).............. 114,100 1,312,150
Brooktree Corp. (a)...................... 314,400 2,200,800
Cirrus Logic Inc. (a).................... 282,400 9,601,600
Credence Systems Corp. (a)............... 84,500 1,584,375
Sierra Semiconductors Corp. (a).......... 204,600 1,649,586
Xilinx, Inc. (a)......................... 189,000 7,678,125
------------
24,694,130
------------
TELECOMMUNICATIONS EQUIPMENT (2.6%)
American Mobile Satellite (a)............ 169,600 2,544,000
Applied Signal Technology Inc. (a)....... 174,500 828,875
Avid Technology Inc. (a)................. 27,200 754,800
Brooktrout Technology, Inc. (a).......... 60,000 742,500
Dialogic Corp. (a)....................... 32,400 498,150
Fore Systems (a)......................... 7,500 195,938
Network Equipment Technologies, Inc. (a). 164,800 1,236,000
Pacific Telecom, Inc..................... 140,800 3,185,600
PictureTel Corp. (a)..................... 229,800 2,987,400
Synoptics Communications Inc. (a)........ 157,200 3,242,250
XcelleNet Inc. (a)....................... 5,300 63,600
------------
16,279,113
------------
Total Technology 84,430,900
------------
TRANSPORTATION (2.5%)
AIRLINES (0.9%)
Mesa Airlines, Inc. (a).................. 453,900 $ 5,560,275
------------
RAILROADS (0.1%)
ABC Railroad Products Corp. (a).......... 45,600 855,000
------------
TRUCKING & FREIGHT CARRIERS (1.5%)
Harper Group Inc......................... 80,300 1,194,462
Interpool, Inc. (a)...................... 78,000 1,121,250
Intertrans Corp.......................... 55,900 705,738
Rollins Truck Leasing Corp............... 57,800 1,062,075
Wabash National Corp..................... 71,500 3,396,250
Werner Enterprises, Inc.................. 78,900 2,189,475
------------
9,669,250
------------
Total Transportation 16,084,525
------------
UTILITIES (5.9%)
ELECTRIC (4.5%)
Central Maine Power Co................... 100,000 1,125,000
Central Hudson Gas & Electric Corp....... 114,800 3,085,250
Commonwealth Energy Systems.............. 48,500 1,940,000
Maine Public Service Co.................. 38,100 971,550
Midwest Resources, Inc................... 142,200 2,115,225
Oklahoma Gas & Electric Co............... 71,900 2,210,925
Orange & Rockland Utilities, Inc......... 68,900 2,282,312
Pinnacle West Capital Corp............... 150,000 2,606,250
Portland General Corp.................... 60,000 1,072,500
Potomac Electric Power Co................ 100,800 1,978,200
Rochester Gas & Electric Corp............ 162,000 3,665,250
Washington Water Power Co................ 333,200 5,247,900
------------
28,300,362
------------
NATURAL GAS (0.4%)
Chesapeake Utilities Corp................ 36,900 502,763
EnergyNorth, Inc......................... 11,100 185,925
Providence Energy Corp................... 2,600 43,680
United Cities Gas Co..................... 21,200 336,550
Valero Energy Co......................... 63,500 1,238,250
------------
2,307,168
------------
WATER (1.0%)
Aquarion Co.............................. 88,000 2,145,000
Connecticut Water Service, Inc........... 18,300 459,788
E'town Corp.............................. 50,700 1,419,600
Philadelphia Suburban Corp............... 85,000 1,519,375
</TABLE>

See Accompanying Notes.

Federal Home Loan Mortgage Corp.,
4.20% due 06/30/94..................... $ 5,000,000 $ 4,983,083
------------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS (COST $34,934,623).......... 34,934,623
------------
U.S. GOVERNMENT TREASURY OBLIGATIONS (0.3%)
U.S. Treasury Bills 3.51% due 07/07/94
(COST $2,077,682)...................... 2,085,000 2,077,682
------------
TOTAL SHORT-TERM DEBT OBLIGATIONS
(COST $44,502,305)...................... 44,502,305
------------
TOTAL INVESTMENTS (99.9%)
(COST $659,947,430)........................ 634,032,064
OTHER ASSETS NET OF LIABILITIES (0.1%)....... 514,960
------------
NET ASSETS (100.00%)......................... $634,547,024
------------
------------
<FN>

(a) Non-income-producing security.

Note: Based on the cost of investments of $661,002,231 for Federal Income Tax
purposes at May 31, 1994, the aggregate gross unrealized appreciation and
depreciation was $30,296,037 and $57,266,204, respectively, resulting in net
unrealized depreciation of $26,970,167.

</TABLE>

See Accompanying Notes.

19
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1994
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS:
Investment at Value (Cost $659,947,430) (Note 1a) $634,032,064
Cash 1,322
Receivable for Investments Sold 16,913,029
Dividends Receivable 777,113
------------
Total Assets 651,723,528
------------

LIABILITIES:
Payable for Investments Purchased 15,256,496
Advisory Fee Payable (Note 2a) 1,218,139
Financial and Fund Accounting Services Fee Payable
(Note 2c) 203,764
Administration Fee Payable (Note 2b) 3,761
Fund Services Fee Payable (Note 2d) 7,476
Trustees' Fees and Expenses Payable (Note 2e) 345
Accrued Expenses 316,102
Withholding Taxes Payable 170,421
------------
Total Liabilities 17,176,504
------------

NET ASSETS:
Applicable to Investors' Beneficial Interests $634,547,024
------------
------------
</TABLE>

See Accompanying Notes.

<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM JULY 19, 1993 (COMMENCEMENT OF OPERATIONS) TO MAY 31, 1994
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
INVESTMENT INCOME (NOTE 1B):
Dividends (Net of Withholding Tax of $13,514) $ 6,979,327
Interest 1,344,094
-------------
Investment Income 8,323,421

EXPENSES:
Advisory Fee (Note 2a) $2,912,670
Custodian Fees and Expenses 272,615
Financial and Fund Accounting Services Fees
(Note 2c) 203,764
Fund Services Fee (Note 2d) 33,435
Administration Fee (Note 2b) 30,420
Professional Fees 46,962
Trustees' Fees and Expenses (Note 2e) 10,849
Miscellaneous 5,482
----------
Total Expenses 3,516,197
-------------
NET INVESTMENT INCOME 4,807,224
NET REALIZED GAIN ON INVESTMENTS 33,091,201
NET CHANGE IN UNREALIZED APPRECIATION OF INVESTMENTS (55,373,439)
-------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (17,475,014)
-------------
-------------
</TABLE>

See Accompanying Notes.

21
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 19, 1993
(COMMENCEMENT OF
OPERATIONS) TO
MAY 31, 1994
----------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net Investment Income $ 4,807,224
Net Realized Gain on Investments 33,091,201
Net Change in Net Unrealized Appreciation of
Investments (55,373,439)
----------------
Net Decrease in Net Assets Resulting from
Operations (17,475,014)
----------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST:
Contributions 903,848,399
Withdrawals (251,926,461)
----------------
Net Increase from Investors' Transactions 651,921,938
----------------
Total Increase in Net Assets 634,446,924
NET ASSETS:
Beginning of Period 100,100
----------------
End of Period $ 634,547,024
----------------
----------------

- ------------------------------------------------------------------------------

FOR THE PERIOD
JULY 19, 1993
(COMMENCEMENT OF
OPERATIONS) TO
MAY 31, 1994
----------------
<S> <C>
SUPPLEMENTARY DATA:
Ratios (annualized):
Expenses to Average Net Assets 0.72%
Net Investment Income to Average Net Assets 0.99%
Portfolio Turnover 97%*

<FN>
* Includes activity of The Pierpont Capital Appreciation Fund for the period
June 1, 1993 to July 18, 1993, prior to contribution of all of its investable
assets to the Portfolio.
</TABLE>

See Accompanying Notes.

<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

The U.S. Small Company Portfolio (the "Portfolio") is registered under the
Investment Company Act of 1940, as amended, as a no-load, diversified, open-end
management investment company which was organized as a trust under the laws of
the State of New York on January 29, 1993. The Portfolio commenced operations on
July 19, 1993 and received a contribution of certain assets and liabilities,
including securities, with a value of $200,358,103 on that date from The
Pierpont Capital Appreciation Fund, in exchange for a beneficial interest in the
Portfolio. At that date, net unrealized appreciation of $29,458,073 was included
in the contributed securities. The Declaration of Trust permits the Trustees to
issue an unlimited number of beneficial interests in the Portfolio.

1. SIGNIFICANT ACCOUNTING POLICIES:

The following is a summary of the significant accounting policies of the
Portfolio:

a) The value of each security for which readily available market quotations
exists is based on a decision as to the broadest and most representative
market for such security. The value of such security will be based either
on the last sale price on a national securities exchange, or, in the
absence of recorded sales, at the readily available closing bid price on
such exchanges, or at the quoted bid price in the over-the-counter market.
Securities listed on a foreign exchange are valued at the last quoted sale
price available before the time when net assets are valued. Unlisted
securities are valued at the average of the quoted bid and asked prices in
the over-the-counter market. Securities or other assets for which market
quotations are not readily available are valued at fair value in accordance
with procedures established by the Portfolio's Trustees. Such procedures
include the use of independent pricing services, which use prices based
upon yields or prices of securities of comparable quality, coupon, maturity
and type; indications as to values from dealers; and general market
conditions. All portfolio securities with a remaining maturity of less than
60 days are valued at amortized cost.

b) 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 becomes known. Interest income, which
includes the amortization of premiums and discounts, if any, is recorded on
an accrual basis. For financial and tax reporting purposes, realized gains
and losses are determined on the basis of specific lot identification.

2. TRANSACTIONS WITH AFFILIATES:

a) The Portfolio has an investment advisory agreement with Morgan Guaranty
Trust Company of New York ("Morgan"). Under the terms of the investment
advisory agreement, the Portfolio pays Morgan at an annual rate of 0.60% of
the Portfolio's average daily net assets. For the period July 19, 1993 to
May 31, 1994, Morgan's fee for these services amounted to $2,912,670.

23
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------

b) The Portfolio has retained Signature Broker - Dealer Services, Inc.
("Signature") to serve as Administrator. Certain officers of Signature
serve as officers of the Portfolio. Under the Administration Agreement,
Signature provides management and administrative services necessary for the
operations of the Portfolio, furnishes office space and facilities required
for conducting the business of the Portfolio and pays the compensation of
the Portfolio's officers affiliated with Signature. Effective October 1,
1993, Signature receives a fee for these services at an annual rate of
0.01% of the first $1 billion of aggregate average daily net assets of the
Portfolio and the other portfolios subject to the Administration Agreement
(the "aggregate portfolios"), 0.008% of the next $2 billion of the
aggregate portfolios' average daily net assets, 0.006% of the next $2
billion of the aggregate portfolios' average daily net assets, and 0.004%
of the aggregate portfolios' average daily net assets in excess of $5
billion. Prior to October 1, 1993, no administration fee was charged to the
Portfolio. For the period October 1, 1993 to May 31, 1994, the Portfolio's
portion of Signature's fee for these services amounted to $30,420.

d) Effective January 15, 1994, 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
Chairman and sole shareholder of Group is also a Trustee of the Portfolio.
The Portfolio's allocated portion of Group's costs in performing its
services amounted to $33,435 for the period January 15, 1994 to May 31,
1994.

3. INVESTMENT TRANSACTIONS:

Investment transactions (excluding short-term investments) for the fiscal year
ended May 31, 1994, including activity of The Pierpont Capital Appreciation Fund
from June 1, 1993 to July 18, 1993 were as follows:

<TABLE>
<CAPTION>
COST OF PROCEEDS FROM
PURCHASES SALES
- ------------ -------------
<S> <C>
$894,676,027 $462,186,775
</TABLE>

<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Trustees and Investors of
The U.S. Small Company 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 U.S. Small Company Portfolio
(the "Portfolio") at May 31, 1994, and the results of its operations, the
changes in its net assets and its supplementary data for the period July 19,
1993 (commencement of operations) through May 31, 1994, in conformity with
generally accepted accounting principles. These financial statements and
supplementary data (hereafter referred to as "financial statements") are the
responsibility of the Portfolio's management; our responsibility is to express
an opinion on these financial statements based on our audit. We conducted our
audit of these financial statements in accordance with generally accepted
auditing standards 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
audit, which included confirmation of securities at May 31, 1994 by
correspondence with the custodian and brokers, and the application of
alternative auditing procedures where confirmations from brokers were not
received, provides a reasonable basis for the opinion expressed above.

PRICE WATERHOUSE
New York, New York
July 22, 1994