<PAGE>
LETTER TO THE SHAREHOLDERS OF THE JPM INSTITUTIONAL SHORT TERM BOND FUND
December 15, 1995
Dear Shareholder:
Bond investors enjoyed an unexpectedly delightful 1995, as the bond market
produced attractive returns due to a falling interest rate environment. This was
in sharp contrast to 1994, when returns dipped into negative territory for much
of the year as rates increased. In the changing interest rate environment, The
JPM Institutional Short Term Bond Fund returned 8.81% for its fiscal year ended
October 31, 1995. For the same period, the average bond mutual fund, as measured
by the Composite High Quality Short-Term Bond Fund Average*, returned 7.87%, and
the Merrill Lynch 1-3 Year Treasury Index returned 8.95%.
The Fund seeks to reduce risk and increase consistency of returns by
diversifying its holdings and its sources of added value. This diversified
strategy proved especially beneficial during the period as the Fund's sector and
security selection decisions added value, while its defensive duration position
held it back slightly early in 1995. Specifically, we maintained a lower risk,
defensive strategy with regard to interest rates during the first quarter --
when the bond bull market commenced. As evidence of the economic slowdown
accumulated, we moved to a slightly constructive posture on interest rates,
which has added value throughout the remainder of the year.
The Fund's net asset value went from $9.60 on October 31, 1994 to $9.83 at
October 31, 1995, after paying approximately $0.59 per share in dividends from
ordinary income during the period. The Fund's net assets stood at $18.9 million
at the end of the reporting period. The net assets of The Short Term Bond
Portfolio, in which the Fund invests, totaled $29.3 million on October 31, 1995.
MARKET ENVIRONMENT
After declining dramatically in 1994, the bond market switched direction in
early 1995. Rapid economic growth and fears of inflation early in the period
caused the Federal Reserve to continue its program of raising short-term
interest rates. As a result, Treasury yields of all maturities rose. As the
economy began showing signs of a slowdown and it became clearer that additional
rate increases were unlikely, Treasury yields declined and prices rallied. By
the time the Fed lowered rates in July, however, the bond market had already
priced-in this action. By the end of the period, mixed to weak economic data
caused the market to anticipate another Fed easing, as indicated by longer-term
note and bond rates falling below the Fed funds level.
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
LETTER TO THE SHAREHOLDERS.............1 FUND PERFORMANCE.............4
FUND FACTS AND HIGHLIGHTS..............3 FINANCIAL STATEMENTS.........6
- --------------------------------------------------------------------------------
1
<PAGE>
PORTFOLIO REVIEW
The Portfolio's investment process involves three key decisions: duration
management, sector allocation, and security selection. This diversified approach
is designed to help consistently add value under all market conditions.
DURATION MANAGEMENT. Duration is the measurement of a fund's sensitivity to
interest rate changes, which is closely related to the average maturity of the
bonds in a portfolio. At the beginning of the period, we maintained a duration
that was approximately four-tenths of a year shorter than the Merrill Lynch 1-3
Year Treasury Index. As mentioned previously, we began to extend the Portfolio's
duration to a neutral position relative to the Index after the first quarter of
1995.
SECTOR ALLOCATION. Sector allocation added value to Fund performance for the
period. At the end of April, the Portfolio had invested over half of its assets
in high-quality (A or better) corporate bonds, mortgage obligations, agencies,
and asset-backed securities, which offered higher yields than comparable
maturity Treasuries.
SECURITY SELECTION. Viewed overall, individual security selection (particularly
in corporates, mortgages, and asset-backed securities) also added value to
performance during the period. Moreover, the Portfolio continued to focus on
high-quality bonds, with 78% of the securities rated AA or better.
INVESTMENT OUTLOOK
We plan to continue to hold corporate and asset-backed securities and mortgages,
as we expect that, over time, the potentially higher yields they offer will
contribute positively to performance. The Portfolio also has a slightly longer
duration than the Index in the current low interest rate environment. The
economy continues to exhibit sluggish growth, and measures of its performance
are mixed. Over the longer term, the bond market should be helped by deficit
reduction action in Washington and by benign inflation data.
As always, we welcome your comments or questions. Please call J.P. Morgan Funds
Services toll free at (800) 766-7722.
Sincerely yours,
/s/ Evelyn E. Guernsey
Evelyn E. Guernsey
J.P. Morgan Funds Services
*THE COMPOSITE HIGH QUALITY SHORT-TERM BOND FUND AVERAGE PERFORMANCE IS COMPUTED
ON ALL 63 FUNDS IN THE MORNINGSTAR UNIVERSE HAVING A HIGH-QUALITY CORPORATE BOND
INVESTMENT OBJECTIVE AND A SHORT-TERM MATURITY.
2
<PAGE>
FUND FACTS
INVESTMENT OBJECTIVE
The JPM Institutional Short Term Bond Fund seeks to provide high total return
while attempting to limit the likelihood of negative quarterly returns. It is
designed for investors who do not require the stable net asset value typical of
a money market fund, but who seek less price fluctuation than is typical of a
long-term bond fund.
- --------------------------------------------------------------------------------
COMMENCEMENT OF OPERATIONS
7/8/93
- --------------------------------------------------------------------------------
NET ASSETS AS OF 10/31/95
$18,915,610
- --------------------------------------------------------------------------------
DIVIDEND PAYABLE DATES
MONTHLY
- --------------------------------------------------------------------------------
CAPITAL GAIN PAYABLE DATE (IF APPLICABLE)
12/18/95
EXPENSE RATIO
The Fund's annualized expense ratio of 0.45% covers shareholders' expenses for
custody, tax reporting, investment advisory and shareholder services, after
reimbursement. The Fund is no-load and does not charge any sales, redemption,
or exchange fees. There are no additional charges for buying, selling, or
safekeeping Fund shares, or for wiring redemption proceeds from the Fund.
FUND HIGHLIGHTS
ALL DATA AS OF OCTOBER 31, 1995
PORTFOLIO ALLOCATION
(PERCENTAGE OF TOTAL INVESTMENTS)
[pie graph]
/ / COLLATERALIZED MORTGAGE OBLIGATIONS AND ASSET BACKED
SECURITES 28.1%
/ / U.S. TREASURIES 26.9%
/ / CORPORATE DEBT OBLIGATIONS 25.5%
/ / U.S. GOVERNMENT AGENCIES 16.3%
/ / OTHER 3.2%
30-DAY SEC YIELD
5.69%
DURATION
1.8 years
QUALITY BREAKDOWN
AAA* 66%
AA 12%
A 11%
Other 11%
*INCLUDES U.S. GOVERNMENT AGENCY AND TREASURY OBLIGATIONS, AND REPURCHASE
AGREEMENTS
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.
The minimum initial investment in the Fund is $5,000,000. The chart at right
shows that the minimum invested at the Fund's inception would have grown to
$5,548,780 at October 31, 1995.
Another way to look at performance is to review a fund's average annual total
return. This figure takes the fund's actual (or cumulative) return and shows you
what would have happened if the fund had achieved that return by performing at a
constant rate each year. Average annual total returns represent the average
yearly change of a fund's value over various time periods, typically 1, 5, or 10
years (or since inception). Total returns for periods of less than one year are
not annualized and provide a picture of how a fund has performed over the short
term.
GROWTH OF $5,000,000 SINCE INCEPTION*
JULY 8, 1993 - OCTOBER 31, 1995
THE JPM INSTITUTIONAL SHORT TERM BOND FUND
DOLLARS IN THOUSANDS
THE JPM
INSTITUTIONAL MERRILL LYNCH
SHORT TERM 1-3 YEAR
BOND FUND INDEX
7/93 5000.00 5000.00
10/93 5055.55 5069.91
10/94 5099.44 5130.14
10/95 5548.78 5589.15
<TABLE>
<CAPTION>
PERFORMANCE TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS
----------------------------------------------
THREE SIX ONE FIVE SINCE
AS OF OCTOBER 31, 1995 MONTHS MONTHS YEAR YEARS INCEPTION*
- ------------------------------------------------ ----------------------------
<S> <C> <C> <C> <C> <C>
JPM Inst. Short Term Bond Fund 1.99% 4.65% 8.81% - 4.73%
Merrill Lynch 1-3 Year
Treasury Index 1.94% 4.71% 8.95% - 5.08%
Composite High Quality
S-T Bond Fund Avg. 1.92% 4.28% 7.87% - 4.22%
AS OF SEPTEMBER 30, 1995
- ------------------------------------------------ ----------------------------
JPM Inst. Short Term Bond Fund 1.50% 4.91% 8.28% - 4.59%
Merrill Lynch 1-3 Year
Treasury Index 1.50% 4.76% 8.28% - 4.87%
Composite High Quality
S-T Bond Fund Avg. 1.42% 4.49% 7.63% - 4.04%
</TABLE>
*7/8/93 -- COMMENCEMENT OF OPERATIONS (AVERAGE ANNUAL TOTAL RETURNS BASED ON THE
MONTH END FOLLOWING INCEPTION)
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. ALL RETURNS ASSUME THE
REINVESTMENT OF DISTRIBUTIONS AND REFLECT REIMBURSEMENT OF CERTAIN FUND AND
PORTFOLIO EXPENSES AS DESCRIBED IN THE PROSPECTUS. THE COMPOSITE HIGH QUALITY
SHORT-TERM BOND FUND AVERAGE PERFORMANCE IS COMPUTED ON ALL FUNDS IN THE
MORNINGSTAR UNIVERSE HAVING A HIGH QUALITY CORPORATE BOND INVESTMENT OBJECTIVE
AND A SHORT-TERM MATURITY. MORNINGSTAR, INC. IS A LEADING RESOURCE FOR MUTUAL
FUND DATA. ALTHOUGH GATHERED FROM RELIABLE SOURCES, DATA ACCURACY AND
COMPLETENESS CANNOT BE GUARANTEED. THE JPM INSTITUTIONAL SHORT TERM BOND FUND
INVESTS ALL OF ITS INVESTABLE ASSETS IN THE SHORT TERM BOND PORTFOLIO, A
SEPARATELY REGISTERED INVESTMENT COMPANY WHICH IS NOT AVAILABLE TO THE PUBLIC
BUT ONLY TO OTHER COLLECTIVE INVESTMENT VEHICLES SUCH AS THE FUND.
4
<PAGE>
SIGNATURE BROKER-DEALER SERVICES, INC. IS THE DISTRIBUTOR OF THE JPM
INSTITUTIONAL SHORT TERM BOND FUND (THE "FUND").
MORGAN GUARANTY TRUST COMPANY OF NEW YORK ("MORGAN") SERVES AS PORTFOLIO
INVESTMENT ADVISOR AND MAKES THE FUND AVAILABLE SOLELY IN ITS CAPACITY AS
SHAREHOLDER SERVICING AGENT FOR CUSTOMERS. INVESTMENTS IN THE FUND ARE NOT
DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, MORGAN OR ANY OTHER
BANK. SHARES OF THE FUND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENTAL
AGENCY. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND CAN
FLUCTUATE, SO AN INVESTOR'S SHARES WHEN REDEEMED MAY BE WORTH MORE OR LESS THAN
THEIR ORIGINAL COST.
Performance data quoted herein represent past performance. Please remember that
past performance is not a guarantee of future performance. Fund returns are net
of fees, assume the reinvestment of Fund distributions, and reflect the
reimbursement of Fund expenses. Had expenses not been subsidized, returns would
have been lower. The Fund invests all of its investable assets in The Short Term
Bond Portfolio, a separately registered investment company which is not
available to the public but only to other collective investment vehicles such as
the Fund.
MORE COMPLETE INFORMATION ABOUT THE FUND, INCLUDING MANAGEMENT FEES AND OTHER
EXPENSES, IS PROVIDED IN THE PROSPECTUS, WHICH SHOULD BE READ CAREFULLY BEFORE
INVESTING. YOU MAY OBTAIN ADDITIONAL COPIES OF THE PROSPECTUS BY CALLING J.P.
MORGAN FUNDS SERVICES AT (800) 766-7722.
5
<PAGE>
THE JPM INSTITUTIONAL SHORT TERM BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment in The Short Term Bond Portfolio ("Portfolio"), at value $ 18,927,251
Deferred Organization Expenses 29,025
Receivable for Expense Reimbursements 15,767
Prepaid Expenses 368
------------
Total Assets 18,972,411
------------
LIABILITIES
Shareholder Servicing Fee Payable 15,498
Dividends Payable to Shareholders 8,439
Payable for Shares of Beneficial Interest Redeemed 5,049
Administration Fee Payable 480
Fund Services Fee Payable 165
Accrued Expenses 27,170
------------
Total Liabilities 56,801
------------
NET ASSETS
Applicable to 1,923,840 Shares of Beneficial Interest Outstanding $ 18,915,610
(unlimited shares authorized, par value $0.001)
------------
------------
Net Asset Value, Offering and Redemption Price Per Share $9.83
------------
------------
ANALYSIS OF NET ASSETS
Paid-In Capital $ 19,230,298
Distributions in Excess of Net Investment Income (10,716)
Accumulated Net Realized Loss on Investment (446,429)
Net Unrealized Appreciation of Investment 142,457
------------
Net Assets $ 18,915,610
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
6
<PAGE>
THE JPM INSTITUTIONAL SHORT TERM BOND FUND
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME ALLOCATED FROM PORTFOLIO
$ 3,180,772
Allocated Interest Income
52,321
Allocated Dividend Income
(201,998)
Allocated Portfolio Expenses (Net of Reimbursement of $16,529)
-----------
3,031,095
Net Investment Income Allocated from Portfolio
FUND EXPENSES
Shareholder Servicing Fee $ 24,729
Transfer Agent Fees 16,276
Printing Expense 15,000
Registration Fees 14,093
Administration Fee 13,185
Amortization of Organization Expenses 10,811
Professional Fees 9,260
Fund Services Fee 4,748
Trustees' Fees and Expenses 1,204
Miscellaneous 2,635
----------
Total Fund Expenses 111,941
Less: Reimbursement of Expenses (91,382)
----------
(20,559)
Net Fund Expenses
-----------
3,010,536
NET INVESTMENT INCOME
331,910
NET REALIZED GAIN ON INVESTMENT ALLOCATED FROM PORTFOLIO
917,422
NET CHANGE IN UNREALIZED APPRECIATION OF INVESTMENT ALLOCATED FROM
PORTFOLIO
-----------
$ 4,259,868
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
7
<PAGE>
THE JPM INSTITUTIONAL SHORT TERM BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED
---------------------------
OCTOBER 31, OCTOBER 31,
INCREASE (DECREASE) IN NET ASSETS 1995 1994
------------ ------------
<S> <C> <C>
FROM OPERATIONS
Net Investment Income $ 3,010,536 $ 1,937,033
Net Realized Gain (Loss) on Investment Allocated from
Portfolio 331,910 (852,893)
Net Change in Unrealized Appreciation (Depreciation) of
Investment Allocated from Portfolio 917,422 (695,665)
------------ ------------
Net Increase in Net Assets Resulting from Operations 4,259,868 388,475
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (3,024,230) (1,934,055)
------------ ------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Proceeds from Shares of Beneficial Interest Sold 23,575,445 34,658,759
Reinvestment of Dividends 2,976,238 1,928,332
Cost of Shares of Beneficial Interest Redeemed (56,550,359) (14,968,151)
------------ ------------
Net Increase (Decrease) from Transactions in Shares of
Beneficial Interest (29,998,676) 21,618,940
------------ ------------
Total Increase (Decrease) in Net Assets (28,763,038) 20,073,360
NET ASSETS
Beginning of Fiscal Year 47,678,648 27,605,288
------------ ------------
End of Fiscal Year (including undistributed net
investment income of $(10,716) and $2,978,
respectively) $18,915,610 $47,678,648
------------ ------------
------------ ------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
8
<PAGE>
THE JPM INSTITUTIONAL SHORT TERM BOND FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share outstanding throughout each period are as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD JULY
8, 1993
FOR THE FISCAL YEAR ENDED (COMMENCEMENT OF
---------------------------------- OPERATIONS) THROUGH
OCTOBER 31, 1995 OCTOBER 31, 1994 OCTOBER 31, 1993
---------------- ---------------- -------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.60 $ 9.99 $ 10.00
------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.58 0.47 0.11
Net Realized and Unrealized Gain (Loss) on Investment
Allocated from Portfolio 0.24 (0.39) (0.01)
------- ------- -------
Total from Investment Operations 0.82 0.08 0.10
------- ------- -------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (0.59) (0.47) (0.11)
------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 9.83 $ 9.60 $ 9.99
------- ------- -------
------- ------- -------
Total Return 8.81% 0.87% 1.01%(a)
------- ------- -------
------- ------- -------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (in thousands) $ 18,916 $ 47,679 $ 27,605
Ratios to Average Net Assets:
Expenses 0.45% 0.45% 0.46%(b)
Net Investment Income 6.09% 4.96% 3.92%(b)
Decrease Reflected in Expense Ratio due to Expense
Reimbursement 0.22% 0.33% 0.84%(b)
<FN>
- ------------------------
(a) Not annualized.
(b) Annualized.
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
9
<PAGE>
THE JPM INSTITUTIONAL SHORT TERM BOND FUND
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The JPM Institutional Short Term Bond Fund (the "Fund") is a separate series of
The JPM Institutional Funds, a Massachusetts business trust (the "Trust"). 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 8, 1993.
The Fund invests all of its investable assets in The Short Term Bond Portfolio
(the "Portfolio"), a diversified open-end management investment company having
the same investment objectives as the Fund. The value of such investment
reflects the Fund's proportionate interest in the net assets of the Portfolio
(65% at October 31, 1995). The performance of the Fund is directly affected by
the performance of the Portfolio. The financial statements of the Portfolio,
including the schedule of investments, are included elsewhere in this report and
should be read in conjunction with the Fund's financial statements.
The 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 daily and paid monthly. Distributions to shareholders of net
realized capital gain, 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 on a straight-line basis over
a five-year period from the commencement of operations.
e)Each series of the Trust is treated as a separate entity for federal
income tax purposes. The Fund intends to comply with the provisions of the
Internal Revenue Code of 1986, as amended, applicable to regulated
investment companies and to distribute substantially all of its income,
including net realized capital gains, if any, within the prescribed time
periods. Accordingly, no provision for federal income or excise tax is
necessary.
f)Expenses incurred by the Trust with respect to any two or more funds in
the Trust are allocated in proportion to the net assets of each fund in
the Trust, except where allocations of direct expenses to each fund can
otherwise be made fairly. Expenses directly attributable to a fund are
charged to that fund.
g)The Fund accounts for and reports distributions to shareholders in
accordance with Statement of Position 93-2 "Determination, Disclosure, and
Financial Statement Presentation of Income, Capital Gain, and Return of
Capital Distributions by Investment Companies". The effect of applying
this
10
<PAGE>
THE JPM INSTITUTIONAL SHORT TERM BOND FUND
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
statement was to increase Paid-In Capital by $1,034 and increase
Accumulated Net Realized Loss on Investment by $1,034. Net investment
income, net realized loss and net assets were not affected by this change.
h)For United States federal income tax purposes, the Fund had a capital loss
carryforward at October 31, 1995 of approximately $451,000 which will
expire in the year 2002. Such carryforward is after utilization of
approximately $317,000 to offset the Fund's net taxable gains realized and
recognized in the year ended October 31, 1995. No capital gains
distribution is expected to be paid to shareholders until future net gains
have been realized in excess of such carryforward.
2. TRANSACTIONS WITH AFFILIATES
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. The
agreement provides for a fee to be paid to Signature at an annual rate
determined by the following schedule: 0.04% of the first $1 billion of the
aggregate average daily net assets of the Trust, as well as two other
affiliated fund families for which Signature acts as administrator, 0.032%
of the next $2 billion of such net assets, 0.024% of the next $2 billion
of such net assets, and 0.016% of such net assets in excess of $5 billion.
The daily equivalent of the fee rate is applied each day to the net assets
of the Fund. For the fiscal year ended October 31, 1995, Signature's fee
for these services amounted to $13,185.
b)During the period November 1, 1994 through August 31, 1995, the Trust, on
behalf of the Fund, had a Financial and Fund Accounting Services Agreement
("Services Agreement") with Morgan Guaranty Trust Company of New York
("Morgan") under which Morgan may have received a fee, based on the
percentage described below, for overseeing certain aspects of the
administration and operation of the Fund and which was also designed to
provide an expense limit for certain expenses of the Fund. This fee was
calculated exclusive of the shareholder servicing fee, the fund services
fee and amortization of organization expenses, at 0.05% of the Fund's
average daily net assets. For the period November 1, 1994 through August
31, 1995, Morgan agreed to reimburse the Fund $37,947 for expenses that
exceeded this limit. Effective September 1, 1995, the Services Agreement
was terminated and an interim agreement was entered into between the
Trust, on behalf of the Fund, and Morgan which provides for the
continuation of the oversight services that were outlined under the prior
agreement and that Morgan shall bear all of its expenses incurred in
connection with these services. In addition, Morgan has agreed to
reimburse the Fund to the extent necessary to maintain the total operating
expenses of the Fund, including the expenses allocated to the Fund from
the Portfolio, at no more than 0.45% of the average daily net assets of
the Fund through October 31, 1996. For the fiscal year ended October 31,
1995, Morgan has agreed to reimburse the Fund $53,435 for expenses under
this agreement.
11
<PAGE>
THE JPM INSTITUTIONAL SHORT TERM BOND FUND
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
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
fiscal year ended October 31, 1995, the fee for these services amounted to
$24,729.
d)The Trust, on behalf of the Fund, has a Fund Services Agreement with
Pierpont Group, Inc. ("Group") to assist the Trustees in exercising their
overall supervisory responsibilities for the Trust's affairs. The Trustees
of the Trust represent all the existing shareholders of Group. The Fund's
allocated portion of Group's costs in performing its services amounted to
$4,748 for the fiscal year ended October 31, 1995.
e)An aggregate annual fee of $65,000 is paid to each Trustee for serving as
a Trustee of The Pierpont Funds, The JPM Institutional Funds, and their
corresponding Portfolios. The Trustees' Fees and Expenses shown in the
financial statements represent the Fund's allocated portion of the total
fees and expenses. Prior to April 1, 1995, the aggregate annual Trustee
Fee was $55,000. The Trustee who serves as Chairman and Chief Executive
Officer of these Funds and Portfolios also serves as Chairman of Group and
received compensation and employee benefits from Group in his role as
Group's Chairman. The allocated portion of such compensation and benefits
included in the Fund Services Fee shown in the financial statements was
$600.
3. TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest of one or more series.
Transactions in shares of beneficial interest of the Fund were as follows:
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED FOR THE FISCAL YEAR ENDED
OCTOBER 31, 1995 OCTOBER 31, 1994
------------------------- -------------------------
<S> <C> <C>
Shares sold 2,447,762 3,531,620
Reinvestment of dividends 307,140 197,897
Shares redeemed (5,796,583) (1,526,550)
---------- ----------
Net increase (decrease) (3,041,681) 2,202,967
---------- ----------
---------- ----------
</TABLE>
12
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of
The JPM Institutional Short Term Bond 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 Short Term Bond Fund (one of the series constituting part
of The JPM Institutional Funds, hereafter referred to as the "Fund") at October
31, 1995, the results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then ended, and the
financial highlights for each of the two years in the period then ended and for
the period July 8, 1993 (commencement of operations) through October 31, 1993,
in conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
New York, New York
December 15, 1995
13
<PAGE>
The Short Term Bond Portfolio
Annual Report October 31, 1995
(The following pages should be read in conjunction
with The JPM Institutional Short Term Bond Fund
Annual Financial Statements)
14
<PAGE>
THE SHORT TERM BOND PORTFOLIO
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P
PRINCIPAL RATING
AMOUNT SECURITY DESCRIPTION (UNAUDITED) VALUE
- ----------- -------------------------------------------------- ----------- -----------
<C> <S> <C> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS
AND ASSET BACKED SECURITIES (27.8%)
$ 917,479 CIT River Owners Trust, Series 1995-A, Class A,
Sequential Payer, Callable, 6.25% due
01/15/11........................................ Aaa/AAA $ 918,378
967,048 Chase Manhattan Grantor Trust, Series 1995-A, Pass
Through, 6.00% due 09/17/01..................... Aaa/AAA 967,350
761,660 Equicon Home Equity Loan Trust, Series 1992-7,
Remic: Sequential Payer, Class A, 5.90% due
09/18/05........................................ Aaa/AAA 750,205
685,347 Fleetwood Credit Corp. Grantor Trust, Series
1994-A, Class A, Sequential Payer, Callable,
4.70% due 07/15/09.............................. Aaa/AAA 653,176
1,400,000 Greentree Financial Corp Series 1993-3, Class A3,
Sequential Payer, Callable, 5.20% due
10/15/18........................................ Aa2/AA 1,370,348
831,446 Merrill Lynch Mortgage Investors, Inc., Remic:
Series 1994-C1, Class A, Callable, 8.72% due
11/25/20........................................ Aaa /AAA 855,221
741,808 Old Kent Auto Receivables Trust, Series 1995-A,
Class A, Sequential Payer, 6.20% due 08/15/01... Aaa/AAA 744,626
922,174 Prudential Home Mortgage Securities, Remic:
Sequential Payer, Series 1992-44, Class A1,
6.00% due 01/25/98.............................. Aaa/AAA 905,363
1,000,000 Queens Center Funding Corp., Class B, 144A, 8.12%
due 01/01/04.................................... Baa2/BBB 1,000,000
-----------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS AND
ASSET BACKED SECURITIES (COST $8,168,895)....... 8,164,667
-----------
CORPORATE OBLIGATIONS (25.3%)
BANKING (3.5%)
1,000,000 Chase Manhattan Corp., 7.50% due 12/01/97......... A3/A- 1,030,590
-----------
DEPARTMENT STORES (3.5%)
1,000,000 Sears Roebuck & Co., 7.25% due 08/05/97........... Baa/BBB 1,020,230
-----------
FINANCE (11.2%)
1,000,000 Associates Corp., North America, 7.55% due
09/01/99........................................ Aa3/AA- 1,043,520
1,000,000 Chrysler Financial Corp., 6.21% due 07/21/97...... A3/A- 1,000,200
1,250,000 Ford Motor Credit Corp., 5.75% due 05/14/98....... A1/A+ 1,238,988
-----------
3,282,708
-----------
UTILITIES -- ELECTRIC (3.7%)
1,000,000 Hydro Quebec, 9.75% due 09/29/98.................. Aa3/AA 1,089,380
-----------
OIL AND GAS (3.4%)
1,000,000 Occidental Petroleum Corp., 5.76% due 06/15/98.... Baa3/BBB 985,890
-----------
TOTAL CORPORATE OBLIGATIONS (COST $7,275,383)..... 7,408,798
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
15
<PAGE>
THE SHORT TERM BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY DESCRIPTION VALUE
- ----------- -------------------------------------------------- -----------
U.S. GOVERNMENT AGENCY OBLIGATIONS (16.1%)
<C> <S> <C> <C>
$ 753,910 Federal Home Loan Mortgage Corporation, 9.00% due
05/01/97........................................ $ 785,710
Federal National Mortgage Association
1,500,000 Remic: PAC-1(11), Series 1994-7, Class PB, 5.60%
due 07/25/03.................................... 1,483,050
1,500,000 Remic: PAC-1(11), Series 1994-12, Class PC, 5.25%
due 04/25/03.................................... 1,475,340
1,000,000 Remic: PAC-1(11), Series 1994-33, Class D, 5.50%
due 04/25/05.................................... 978,480
-----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (COST
$4,732,640)..................................... 4,722,580
-----------
U.S. TREASURY OBLIGATIONS (26.7%)
U.S. Treasury Notes
4,250,000 6.50% due 05/15/97 (a)............................ 4,303,635
1,000,000 6.50% due 04/30/99................................ 1,023,450
1,100,000 5.50% due 07/31/97 (b)............................ 1,097,723
1,410,000 5.125% due 11/30/98............................... 1,386,918
-----------
TOTAL U.S.TREASURY OBLIGATIONS (COST
$7,742,928)..................................... 7,811,726
-----------
SHORT-TERM HOLDINGS (3.1%)
REPURCHASE AGREEMENT (3.1%)
916,000 Goldman Sachs Repurchase Agreement dated 10/31/95
due 11/01/95, at 5.880%, proceeds $916,150
(collateralized by $918,000 U.S. Treasury Note,
5.875% due 07/31/97, valued at $935,066) (cost
$916,000)....................................... 916,000
-----------
OTHER INVESTMENT COMPANIES (0.0%)*
<CAPTION>
SHARES
- -----------
<C> <S> <C> <C>
834 Seven Seas Money Market Fund (cost $834).......... 834
-----------
TOTAL SHORT-TERM HOLDINGS (COST $916,834)......... 916,834
-----------
TOTAL INVESTMENTS (COST $28,836,680) (99.0%) 29,024,605
OTHER ASSETS IN EXCESS OF LIABILITIES (1.0%) 281,971
-----------
NET ASSETS (100.0%) $29,306,576
-----------
-----------
</TABLE>
Note: Based on the cost of investments of $28,836,680 for federal income tax
purposes at October 31, 1995, the aggregate gross unrealized appreciation
and depreciation was $281,136 and $93,211, respectively, resulting in net
unrealized appreciation of $187,925.
(a) $1,000,000 par segregated as collateral for initial margin on futures
contracts.
(b) $100,000 par segregated as collateral for initial margin on futures
contracts.
* Less than 0.1%.
144A - Securities restricted for resale to Qualified Institutional Buyers.
The Accompanying Notes are an Integral Part of the Financial Statements.
16
<PAGE>
THE SHORT TERM BOND PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $28,836,680) $ 29,024,605
Interest Receivable 355,668
Deferred Organization Expenses 3,665
Prepaid Expenses and Other Assets 460
------------
Total Assets 29,384,398
------------
LIABILITIES
Custody Fee Payable 38,432
Advisory Fee Payable 13,342
Variation Margin Payable on Futures Contracts 312
Fund Services Fee Payable 238
Administration Fee Payable 161
Accrued Expenses 25,337
------------
Total Liabilities 77,822
------------
NET ASSETS
Applicable to Investors' Beneficial Interests $ 29,306,576
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
17
<PAGE>
THE SHORT TERM BOND PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest Income $ 3,757,520
Dividend Income 60,424
-----------
Total Income 3,817,944
EXPENSES
Advisory Fee $ 146,335
Custodian Fees and Expenses 55,346
Professional Fees 35,280
Printing Expense 12,000
Fund Services Fee 5,573
Administration Fee 4,485
Trustees' Fees and Expenses 1,424
Amortization of Organization Expenses 1,365
Miscellaneous 2,260
----------
Total Expenses 264,068
Less: Reimbursement of Expenses (21,070)
----------
NET EXPENSES (242,998)
-----------
NET INVESTMENT INCOME 3,574,946
NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FUTURES (including
$23,562 net realized losses from futures contracts) 407,824
NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) OF
INVESTMENTS AND FUTURES (including $7,272 unrealized loss on
futures contracts) 1,076,791
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 5,059,561
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
18
<PAGE>
THE SHORT TERM BOND PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED
INCREASE (DECREASE) IN NET ASSETS OCTOBER 31, 1995 OCTOBER 31, 1994
---------------- ----------------
<S> <C> <C>
FROM OPERATIONS
Net Investment Income $ 3,574,946 $ 2,272,212
Net Realized Gain (Loss) on Investments 407,824 (1,015,882)
Net Change in Unrealized Appreciation
(Depreciation) of Investments 1,076,791 (804,516)
---------------- ----------------
Net Increase in Net Assets Resulting from
Operations 5,059,561 451,814
---------------- ----------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 32,690,159 41,445,030
Withdrawals (61,766,958) (23,001,490)
---------------- ----------------
Net Increase (Decrease) from Investors'
Transactions (29,076,799) 18,443,540
---------------- ----------------
Total Increase (Decrease) in Net Assets (24,017,238) 18,895,354
NET ASSETS
Beginning of Fiscal Year 53,323,814 34,428,460
---------------- ----------------
End of Fiscal Year $29,306,576 $53,323,814
---------------- ----------------
---------------- ----------------
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE
PERIOD
JULY 8, 1993
(COMMENCEMENT
OF
OPERATIONS)
THROUGH
FOR THE FISCAL YEAR ENDED OCTOBER 31,
OCTOBER 31, 1995 OCTOBER 31, 1994 1993
---------------- ---------------- -------------
<S> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Expenses 0.42% 0.36% 0.37%(a)
Net Investment Income 6.11% 5.01% 3.99%(a)
Decrease in Expense Ratio due to Expense
Reimbursement by Morgan 0.04% 0.05% 1.00%(a)
Portfolio Turnover 177% 230% 116%
</TABLE>
- ------------------------
(a) Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
THE SHORT TERM BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Short Term Bond 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. The Portfolio commenced operations on July 8, 1993. The
Declaration of Trust permits the Trustees to issue an unlimited number of
beneficial interests in the Portfolio.
The following is a summary of the significant accounting policies of the
Portfolio:
a)Portfolio securities with a maturity of 60 days or more, including
securities that are listed on an exchange or traded over the counter, are
valued using prices supplied daily by an independent pricing service or
services that (i) are based on the last sale price on a national
securities exchange, or in the absence of recorded sales, at the readily
available bid price on such exchange or at the quoted bid price in the
over-the-counter market, if such exchange or market constitutes the
broadest and most representative market for the security and (ii) in other
cases, take into account various factors affecting market value, including
yields and prices of comparable securities, indication as to value from
dealers and general market conditions. If such prices are not supplied by
the Portfolio's independent pricing services, such securities are priced
in accordance with procedures adopted by the Trustees. All portfolio
securities with a remaining maturity of less than 60 days are valued by
the amortized cost method.
b)Futures -- A futures contract is an agreement to purchase/sell a specified
quantity of an underlying instrument at a specified future date. The price
at which the purchase and sale will take place is fixed when the Portfolio
enters in the contract. Upon entering into such a contract the Portfolio
is required to pledge to the broker an amount of cash and/or securities
equal to the minimum "initial margin" requirements of the exchange.
Pursuant to the contract, the Portfolio agrees to receive from or pay to
the broker an amount of cash equal to the daily fluctuation in value of
the contract. Such receipts or payments are known as "variation margin"
and are recorded by the Portfolio as unrealized gains or losses. When the
contract is closed, the Portfolio records a realized gain or loss equal to
the difference between the value of the contract at the time it was opened
and the value at the time when it was closed. The Portfolio invests in
futures contracts solely for the purpose of hedging its existing portfolio
securities, or securities the Portfolio intends to purchase, against
fluctuations in value caused by changes in prevailing market interest
rates. The use of futures transactions involves the risk of imperfect
correlation in movements in the price of futures contracts, interest rates
and the underlying hedged assets, and the possible inability of
counterparties to meet the terms of their contracts. Futures transactions
in U.S. Treasury securities during the fiscal year ended October 31, 1995
are summarized as follows:
<TABLE>
<CAPTION>
SALES OF FUTURES CONTRACTS
--------------------------------------
PRINCIPAL AMOUNT
NUMBER OF CONTRACTS OF CONTRACTS
------------------- ----------------
<S> <C> <C>
Contracts opened 248 $ 36,681,681
Contracts closed (238) (35,605,672)
--- ----------------
Open at end of the fiscal year 10 $ 1,076,009
--- ----------------
--- ----------------
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF OPEN CONTRACTS
AT OCTOBER 31, 1995
-------------------------------
NET UNREALIZED
CONTRACTS LONG DEPRECIATION
-------------- --------------
<S> <C> <C>
Five-Year U.S. Treasury, expiring December
1995 10 $7,272
-
-
------
------
</TABLE>
20
<PAGE>
THE SHORT TERM BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
c)Securities transactions are recorded on a trade date basis. Interest
income, which includes the amortization of premiums and discounts, if any,
is recorded on an accrual basis. For financial and tax reporting purposes,
realized gains and losses are determined on the basis of specific lot
identification.
d)The Portfolio intends to be treated as a partnership for federal income
tax purposes. As such, each investor in the Portfolio will be taxable on
its share of the Portfolio's ordinary income and capital gains. It is
intended that the Portfolio's assets will be managed in such a way that an
investor in the Portfolio will be able to satisfy the requirements of
Subchapter M of the Internal Revenue Code.
e)The Portfolio incurred organization expenses in the amount of $5,380.
These costs were deferred and are being amortized on a straight-line basis
over a five-year period from the commencement of operations.
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 0.25%
of the Portfolio's average daily net assets. For the fiscal year ended
October 31, 1995, such fees amounted to $146,335.
b)The Portfolio has retained Signature Broker-Dealer Services, Inc.
("Signature") to serve as Administrator and exclusive placement agent.
Signature provides administrative services necessary for the operations of
the Portfolio, furnishes office space and facilities required for
conducting the business of the Portfolio and pays the compensation of the
Portfolio's officers affiliated with Signature. The agreement provides for
a fee to be paid to Signature at an annual rate determined by the
following schedule: 0.01% of the first $1 billion of the aggregate average
daily net assets of the Portfolio and the other portfolios subject to the
Administrative Services Agreement, 0.008% of the next $2 billion of such
net assets, 0.006% of the next $2 billion of such net assets, and 0.004%
of such net assets in excess of $5 billion. The daily equivalent of the
fee rate is applied each day to the net assets of the Portfolio. For the
fiscal year ended October 31, 1995, Signature's fee for these services
amounted to $4,485.
c)During the period November 1, 1994 through August 31, 1995, the Portfolio
had a Financial and Fund Accounting Services Agreement ("Services
Agreement") with Morgan under which Morgan may receive a fee based on the
percentages described below, for overseeing certain aspects of the
administration and operation of the Portfolio and which was also designed
to provide an expense limit for certain expenses of the Portfolio. This
fee was calculated exclusive of the advisory fee, custody expenses, fund
services fee, amortization of organization expenses, and brokerage costs
at 0.05% of the Portfolio's average daily net assets up to and including
$200 million and 0.03% on any excess over $200 million. For the period
November 1, 1994 through August 31, 1995, Morgan agreed to reimburse the
Fund $21,070 for expenses that exceeded this limit. Effective September 1,
1995, the Services Agreement was terminated and an interim agreement was
entered into between
21
<PAGE>
THE SHORT TERM BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
the Portfolio and Morgan which provides for the continuation of the
oversight services that were outlined under the prior agreement and that
Morgan shall bear all of its expenses incurred in connection with these
services.
d)The Portfolio has a Fund Services Agreement with Pierpont Group, Inc.
("Group") to assist the Trustees in exercising their overall supervisory
responsibilities for the Portfolio's affairs. The Trustees of the
Portfolio represent all the existing shareholders of Group. The
Portfolio's allocated portion of Group's costs in performing its services
amounted to $5,573 for the fiscal year ended October 31, 1995.
e)An aggregate annual fee of $65,000 is paid to each Trustee for serving as
a Trustee of The Pierpont Funds, The JPM Institutional Funds, and their
corresponding Portfolios. The Trustees' Fees and Expenses shown in the
financial statements represent the Portfolio's allocated portion of the
total fees and expenses. Prior to April 1, 1995, the aggregate annual
Trustee Fee was $55,000. The Trustee who serves as Chairman and Chief
Executive Officer of these Funds and Portfolios also serves as Chairman of
Group and received compensation and employee benefits from Group in his
role as Group's Chairman. The allocated portion of such compensation and
benefits included in the Fund Services Fee shown in the financial
statements was $700.
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the fiscal year
were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
-------------- --------------
<S> <C> <C>
U.S. Government and Agency Obligations $ 74,510,169 $ 98,274,504
Corporate and Collateralized Obligations 25,683,032 26,983,195
-------------- --------------
$ 100,193,201 $ 125,257,699
-------------- --------------
-------------- --------------
</TABLE>
22
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Investors of
The Short Term Bond 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 Short Term Bond Portfolio (the
"Portfolio") at October 31, 1995, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended, and its supplementary data for each of the two years in the
period then ended and for the period July 8, 1993 (commencement of operations)
through October 31, 1993, in conformity with generally accepted accounting
principles. These financial statements and supplementary data (hereafter
referred to as "financial statements") are the responsibility of the Portfolio's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 1995 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
New York, New York
December 15, 1995
23
<PAGE>
THE JPM INSTITUTIONAL SHORT TERM BOND FUND
JPM INSTITUTIONAL MONEY MARKET FUND
JPM INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND
JPM INSTITUTIONAL TREASURY MONEY MARKET FUND
JPM INSTITUTIONAL SHORT TERM BOND FUND
JPM INSTITUTIONAL BOND FUND
JPM INSTITUTIONAL TAX EXEMPT BOND FUND
JPM INSTITUTIONAL NEW YORK TOTAL RETURN BOND FUND
JPM INSTITUTIONAL INTERNATIONAL 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 THE JPM INSTITUTIONAL FAMILY OF FUNDS, CALL J.P. MORGAN
FUNDS SERVICES AT (800)766-7722.
ANNUAL REPORT
OCTOBER 31, 1995
