JP MORGAN INSTITUTIONAL FUNDS, N-30D, 2000-07-26

JP MORGAN INSTITUTIONAL FUNDS
N-30D, 2000-07-26

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LETTER TO THE SHAREHOLDERS OF J.P. MORGAN INSTITUTIONAL U.S. SMALL COMPANY FUND
July 1, 2000

Dear Shareholder:

For the fiscal year ended May 31, 2000, the J.P. Morgan Institutional U.S. Small
Company Fund posted a 26.23% return, significantly outperforming the 9.91%
return of the Russell 2000 Index and the 22.35% return of the Lipper Small-Cap
Core Funds Average.

The fund's net asset value increased to $15.11 on May 31, 2000, from $11.98 on
May 31, 1999. During the year, the fund made distributions of approximately
$0.01 per share from ordinary income. On May 31, 2000, the net assets of the
fund were approximately $358.1 million, while the assets of The U.S. Small
Company Portfolio, in which the fund invests, amounted to approximately $650.6
million.

This report includes a discussion with Marian U. Pardo, a member of the
portfolio management team for The U.S. Small Company Portfolio. In this
interview, Marian talks about the events of the previous year that had the
greatest effect on the portfolio and discusses her investment strategy.

As chairman and president of Asset Management Services, we appreciate your
investment in the fund. If you have any comments or questions, please call your
Morgan representative or J.P. Morgan Funds Services at (800) 766-7722.

Sincerely yours,

/s/Ramon de Oliveira /s/Keith M. Schappert

Ramon de Oliveira Keith M. Schappert
Chairman of Asset Management Services President of Asset Management Services
J.P. Morgan & Co. Incorporated J.P. Morgan & Co. Incorporated

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TABLE OF CONTENTS

LETTER TO THE SHAREHOLDERS..........1 FUND FACTS AND HIGHLIGHTS.............8
FUND PERFORMANCE....................2 FINANCIAL STATEMENTS.................10
PORTFOLIO MANAGER Q&A...............3

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1
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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
$1,000,000 (the minimum investment in the fund). The chart at right shows that
$1,000,000 invested on May 31, 1990*, would have grown to $3,214,873 on May 31,
2000.

Another way to look at performance is to review a fund's average annual total
return. This figure takes the fund's actual (or cumulative) return and shows
what would have happened if the fund had achieved that return by performing at a
constant rate each year. Average annual total returns represent the average
yearly change of a fund's value over various time periods, typically one, five,
or ten years (or since inception). Total returns for periods of less than one
year are not annualized and provide a picture of how a fund has performed over
the short term.

[CHART]

GROWTH OF $1,000,000 OVER 10 YEARS*
MAY 31, 1990 - MAY 31, 2000

[EDGAR REPRESENTATION OF PLOT POINTS USED IN PRINTED GRAPHIC]

<TABLE>
<CAPTION>
JPM INSTITUTIONAL LIPPER SMALL-CAP RUSSELL
SMALL COMPANY FUND CORE FUNDS AVERAGE 2000 INDEX
------------------ ------------------ ----------
<S> <C> <C> <C>
5/31/90 1,000,000 1,000,000 1,000,000
6/30/90 997,368 1,010,551 1,002,640
7/31/90 935,715 981,797 958,684
8/31/90 807,497 877,505 830,451
9/30/90 697,830 819,729 756,615
10/31/90 652,545 784,472 710,424
11/30/90 691,829 832,100 764,622
12/31/90 716,927 857,580 794,649
1/31/91 786,219 910,016 866,247
2/28/91 868,605 987,179 963,396
3/31/91 959,176 1,031,655 1,030,959
4/30/91 939,534 1,032,131 1,028,299
5/31/91 981,000 1,073,466 1,077,277
6/30/91 877,335 1,022,533 1,014,978
7/31/91 952,628 1,062,588 1,050,492
8/31/91 1,001,187 1,092,826 1,089,235
9/30/91 1,001,187 1,092,144 1,097,731
10/31/91 1,057,385 1,114,114 1,126,755
11/30/91 997,914 1,069,788 1,074,608
12/31/91 1,144,136 1,155,257 1,160,599
1/31/92 1,211,791 1,220,517 1,254,723
2/29/92 1,227,614 1,252,617 1,291,349
3/31/92 1,176,327 1,213,834 1,247,649
4/30/92 1,089,576 1,174,972 1,203,844
5/31/92 1,092,849 1,180,427 1,219,855
6/30/92 1,036,106 1,140,756 1,162,534
7/31/92 1,101,033 1,174,978 1,202,944
8/31/92 1,062,841 1,150,951 1,168,925
9/30/92 1,099,942 1,161,349 1,195,845
10/31/92 1,155,048 1,196,469 1,233,586
11/30/92 1,285,994 1,280,331 1,328,054
12/31/92 1,361,287 1,321,904 1,374,270
1/31/93 1,390,750 1,359,897 1,420,748
2/28/93 1,319,821 1,336,837 1,387,986
3/31/93 1,370,017 1,370,495 1,433,012
4/30/93 1,311,092 1,328,826 1,393,619
5/31/93 1,370,563 1,387,766 1,455,258
6/30/93 1,376,037 1,394,619 1,464,295
7/31/93 1,374,896 1,404,409 1,484,517
8/31/93 1,421,676 1,465,627 1,548,619
9/30/93 1,450,771 1,492,837 1,592,321
10/31/93 1,468,457 1,530,523 1,633,323
11/30/93 1,433,747 1,482,606 1,580,109
12/31/93 1,478,261 1,528,658 1,634,102
1/31/94 1,518,364 1,564,844 1,685,298
2/28/94 1,497,621 1,554,391 1,679,181
3/31/94 1,432,627 1,484,526 1,590,738
4/30/94 1,421,565 1,482,362 1,600,171
5/31/94 1,386,993 1,474,515 1,582,169
6/30/94 1,335,828 1,432,309 1,528,787
7/31/94 1,363,188 1,459,316 1,553,920
8/31/94 1,428,366 1,521,928 1,640,473
9/30/94 1,415,885 1,515,683 1,634,912
10/31/94 1,425,593 1,524,159 1,628,307
11/30/94 1,363,188 1,475,980 1,562,507
12/31/94 1,392,344 1,489,853 1,604,336
1/31/95 1,389,554 1,502,265 1,584,073
2/28/95 1,455,125 1,554,945 1,650,018
3/31/95 1,501,164 1,585,396 1,678,299
4/30/95 1,537,438 1,610,371 1,715,591
5/31/95 1,556,970 1,643,058 1,745,082
6/30/95 1,637,887 1,718,602 1,835,617
7/31/95 1,721,595 1,816,633 1,941,348
8/31/95 1,756,552 1,865,009 1,981,515
9/30/95 1,786,664 1,905,376 2,016,905
10/31/95 1,727,873 1,842,077 1,926,709
11/30/95 1,799,569 1,909,692 2,007,650
12/31/95 1,836,200 1,960,178 2,060,612
1/31/96 1,848,290 1,975,870 2,058,386
2/29/96 1,914,786 2,045,112 2,122,546
3/31/96 1,941,989 2,095,592 2,165,740
4/30/96 2,041,733 2,213,033 2,281,542
5/31/96 2,111,252 2,297,911 2,371,458
6/30/96 2,025,109 2,220,755 2,274,085
7/31/96 1,884,561 2,048,531 2,075,467
8/31/96 1,983,937 2,151,231 2,195,968
9/30/96 2,063,870 2,248,751 2,281,787
10/31/96 2,075,061 2,218,260 2,246,625
11/30/96 2,151,797 2,296,805 2,339,185
12/31/96 2,218,801 2,328,014 2,400,496
1/31/97 2,266,358 2,390,762 2,448,457
2/28/97 2,217,161 2,342,553 2,389,082
3/31/97 2,108,927 2,221,107 2,276,342
4/30/97 2,095,807 2,215,148 2,282,693
5/31/97 2,310,636 2,449,958 2,536,642
6/30/97 2,418,870 2,565,805 2,645,363
7/31/97 2,574,661 2,704,412 2,768,451
8/31/97 2,626,167 2,750,886 2,831,793
9/30/97 2,789,979 2,966,980 3,039,052
10/31/97 2,672,724 2,864,599 2,905,547
11/30/97 2,684,795 2,844,084 2,886,748
12/31/97 2,722,414 2,853,232 2,937,266
1/31/98 2,642,178 2,820,205 2,890,916
2/28/98 2,890,349 3,031,610 3,104,670
3/31/98 3,041,490 3,166,059 3,232,707
4/30/98 3,017,233 3,181,185 3,250,584
5/31/98 2,854,896 3,021,585 3,075,507
6/30/98 2,836,237 3,020,562 3,081,966
7/31/98 2,589,932 2,820,732 2,832,481
8/31/98 2,081,176 2,300,095 2,282,470
9/30/98 2,223,415 2,422,618 2,461,096
10/31/98 2,290,791 2,513,103 2,561,459
11/30/98 2,403,085 2,642,261 2,695,654
12/31/98 2,578,756 2,794,866 2,862,461
1/31/99 2,583,008 2,797,028 2,900,503
2/28/99 2,359,785 2,606,492 2,665,591
3/31/99 2,453,326 2,628,615 2,707,201
4/30/99 2,585,134 2,814,604 2,949,794
5/31/99 2,546,867 2,877,834 2,992,890
6/30/99 2,738,201 3,026,762 3,128,229
7/31/99 2,725,446 3,001,783 3,042,390
8/31/99 2,685,089 2,908,348 2,929,791
9/30/99 2,761,684 2,895,208 2,930,436
10/31/99 2,887,215 2,926,117 2,942,304
11/30/99 3,253,170 3,085,143 3,117,989
12/31/99 3,721,252 3,380,262 3,470,945
1/31/00 3,702,103 3,281,177 3,415,202
2/29/00 4,429,758 3,623,099 3,979,188
3/31/00 4,029,761 3,588,502 3,716,841
4/30/00 3,455,297 3,370,002 3,493,161
5/31/00 3,214,873 3,193,389 3,289,580
</TABLE>

LIPPER PERFORMANCE AVERAGES ARE CALCULATED BY TAKING AN ARITHMETIC AVERAGE OF
THE RETURNS OF THE FUNDS IN THE GROUP. THE AVERAGE ANNUALIZED RETURNS THAT
RESULT FROM THIS METHODOLOGY WILL DIFFER FROM ANNUALIZING THE GROWTH OF THE
MINIMUM INITIAL INVESTMENT.

<TABLE>
<CAPTION>
PERFORMANCE TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS
------------------------------------------------------------------------ -----------------------------------
THREE SIX ONE THREE FIVE TEN
AS OF MAY 31, 2000 MONTHS MONTHS YEAR YEARS YEARS YEARS*
------------------------------------------------------------------------ -----------------------------------
<S> <C> <C> <C> <C> <C> <C>
J.P. Morgan Institutional U.S. Small Company Fund -27.43% -1.18% 26.23% 11.64% 15.61% 12.39%
Russell 2000 Index** -17.33% 5.50% 9.91% 9.05% 13.52% 12.65%
Lipper Small-Cap Core Funds Average*** -12.28% 9.18% 22.35% 11.36% 14.65% 12.14%

AS OF MARCH 31, 2000
------------------------------------------------------------------------ ------------------------------------
<S> <C> <C> <C> <C> <C> <C>
J.P. Morgan Institutional U.S. Small Company Fund 8.29% 45.92% 64.26% 24.09% 21.83% 16.15%
Russell 2000 Index** 7.08% 26.84% 37.29% 17.75% 17.24% 14.43%
Lipper Small-Cap Core Funds Average*** 11.44% 36.05% 54.26% 20.20% 18.19% 13.81%
</TABLE>

* J.P. MORGAN INSTITUTIONAL U.S. SMALL COMPANY FUND'S RETURNS PRIOR TO NOVEMBER
4, 1993 (COMMENCEMENT OF OPERATIONS), INCLUDE HISTORICAL RETURNS OF J.P. MORGAN
SMALL COMPANY FUND, A SEPARATE FEEDER FUND INVESTING IN THE SAME MASTER
PORTFOLIO, WHICH HAD A HIGHER EXPENSE RATIO.

**THE RUSSELL 2000 IS AN UNMANAGED INDEX USED TO MEASURE THE AVERAGE STOCK
PERFORMANCE OF U.S. SMALL-CAP STOCKS. IT DOES NOT INCLUDE FEES OR OPERATING
EXPENSES AND IS NOT AVAILABLE FOR ACTUAL INVESTMENT.

***DESCRIBES THE AVERAGE TOTAL RETURN FOR ALL FUNDS IN THE INDICATED LIPPER
CATEGORY, AS DEFINED BY LIPPER INC., AND DOES NOT TAKE INTO ACCOUNT APPLICABLE
SALES CHARGES. LIPPER ANALYTICAL SERVICES, INC. IS A LEADING SOURCE FOR MUTUAL
FUND DATA.

PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. FUND RETURNS ARE NET OF
FEES, 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.

<PAGE>

PORTFOLIO MANAGER Q&A

[PHOTO]

The following is an interview with MARIAN U. PARDO, managing director and member
of the portfolio management team for The U.S. Small Company Portfolio. As head
of the small company investment team, Marian co-manages Morgan's various
small-cap mutual funds as well as significant separate account assets for
institutional clients. Marian has held a number of positions at Morgan. Among
her most recent accomplishments, she helped launch and manage the J.P. Morgan
U.S. Small Company Opportunities Fund. Before that, she managed equity and
convertible funds and large-cap equity portfolios for individual clients,
including the large-cap mutual funds. Marian joined J.P. Morgan in 1968, and
joined the investment management business in 1980 as a research analyst. She has
her B.A. from Barnard College. This interview took place on June 11, 2000, and
reflects Marian's views on that date.

IT WASN'T THAT LONG AGO THAT LARGE- AND SUPER LARGE-CAP GROWTH EQUITIES
DOMINATED THE INVESTMENT LANDSCAPE, OFTEN AT THE EXPENSE OF MID- AND SMALL-CAP
ISSUES. HOW HAS THIS CHANGED, AND WHAT IMPACT HAS IT HAD ON YOUR STRATEGY, IF
ANY?

MUP: Investor preference for large and super large caps - an investment theme
that ruled the market in the late 1990s - shifted to so-called "new economy"
stocks in 1999 and the first quarter of 2000, cutting across market cap lines.
Many of these new economy companies, principally those in the
telecommunications, media, technology and, perhaps, biotechnology sectors, began
last year as small-caps, or IPOs. Significant investor enthusiasm for these
issues provided a powerful boost to the small-cap sector.

Last year, the traditional large, stable growth companies - like Coca Cola,
Pfizer, certain other drug companies, etc. - didn't do particularly well.
Calendar year 1999 was, in fact, the first time in a while that small stocks, as
represented by the Russell 2000 Index, marginally outperformed large stocks, as
represented by the S&P 500. I would note that large caps have impacted our
portfolio in a roundabout - and positive - manner. Several of the small caps in
which we invested appreciated significantly and moved rapidly into the large-cap
universe, the beneficiaries of red-hot investor demand for tech and
Internet-related names. We recognized opportunities in several of these names
early on and stayed with them as their market capitalizations grew.

For our part, it generally makes little difference if the market is favoring new
economy stocks one day and old economy stocks the next. Our aim is to be broadly
diversified across market sectors, investing in good companies at good prices
that we believe will appreciate over a 12-18 month time frame.

WHAT ARE YOU LOOKING FOR WHEN YOU CONSIDER ADDING COMPANIES TO THE PORTFOLIO?

MUP: Most importantly, we have to like the company's business plan and believe
its management is capable of implementing it successfully. Beyond this, we look
at the company's prospects for cash flow, as well as past and projected earnings
growth. We are also looking for catalysts of value creation, those changes in a
company's operating environment that will ignite its business and cause its
underlying value to be realized in its stock

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price. Such catalysts might be the winning of significant new clients,
legislative changes that favor the company's business environment, or the
successful introduction of a new product line.

CONVERSELY, WHAT WOULD PROMPT YOU TO SELL A COMPANY?

MUP: New information, or price. Perhaps the information on which we based our
buy decision changed, so that the stock no longer looked as attractive as other
available opportunities. We would also sell if an issue appreciated to the point
that it had reached or exceeded our price target. And, while we like to continue
holding successful companies, we will put them on our sell list when they grow
too large.

LOOKING AT THE SMALL-CAP UNIVERSE IN PARTICULAR, WHAT WOULD YOU SAY WERE THE
MOST SIGNIFICANT EVENTS THAT IMPACTED IT OVER THE PAST 12 MONTHS?

MUP: The major event impacting small-caps since this time last year was the
active new issue market. It increased interest in new economy names, and it
re-ignited interest in biotech companies. The huge amount of new capital that
was drawn to these issues created opportunities not only for the companies that
went public, but also for companies in other sectors, that benefited from their
spending on things like radio advertising, computer purchases, etc.

The other major event of 1999 was the recognition that businesses and consumers
want additional bandwidth and are willing to pay for it. This was a big reason
why we saw technology and telecom companies driving the performance of the
market at large for much of 1999 and the early part of this year.

In terms of negative impacts, certainly the rise in interest rates hurt the
market, most particularly from mid-March 2000 to this day. When investors
finally took note of the fact that the Federal Reserve Board was serious about
putting the brakes on the economy, they revalued their holdings. As always, high
multiple stocks were the most affected, including those in the once adored
telecommunications-media-technology sectors. This turnabout hurt not only the
many small-cap stocks in these sectors, but many larger names as well - in fact,
one could argue that Microsoft's run-in with the U.S. Justice Department helped
spark the recent tech correction. Also very hard hit were the smaller regional
banks, which make most of their money from lending activities and thus are more
sensitive to rising interest rates than, say, the money center banks, which tend
to have broader sources of revenues.

Elsewhere, rising interest rates hurt some of the more traditionally valued
companies, those valued on cash flow. Anticipating this, we substantially
reduced our radio company holdings because of their historically high multiples.

If not an event per se, the continued strong economy in 1999 and the first
quarter of this year was certainly a highly beneficial operating environment for
many of the companies in which we invest. One of the ways we took advantage of
it was by increasing our investments in chemical companies, which, among other
commodity-intensive firms, typically outperform in a successful domestic and
global economy. We also increased our allocations to the energy and oil services
sectors for much the same reason.

<PAGE>

YOU MENTIONED THE LARGE NEW ISSUE MARKET IN 1999 AND THE OPPORTUNITIES IT
GENERATED. HOW ABOUT THIS YEAR? HAS RECENT STOCK MARKET VOLATILITY CLOSED THE
NEW ISSUE PIPELINE?

MUP: We have been happy with the IPO pipeline. However, if you're looking to
make comparisons with 1999, you can stop right there. Last year's enormous new
issue market was probably an anomaly that won't be repeated any time soon.
Despite recent volatility, this year has still been positive, if not on the
exceptional scale of last year.

HOW HAS THE FUND PERFORMED OVER THE PAST 12 MONTHS?

MUP: For the one year ended May 31, 2000, we were up 26.23%, versus the Russell
2000 Index, which was up 9.91%. The Lipper Small-Cap Core Funds Average was up
22.35% over this period, so we performed very well relative to the index and the
competition.

WHAT HELPED PERFORMANCE OVER THIS PERIOD?

MUP: Three things impacted performance for the period. One was strong stock
selection, which is where one would expect to see us add the most value. Another
was the robust IPO market. Investors had just a tremendous appetite for new
issues, particularly technology names. The last was our conscious decision in
1999 to slightly overweight three sectors - technology, telecommunications, and
biotechnology - all of which performed very well up until the market correction
that took place in April of this year. To get the extra money to put into these
sectors, we took money out of utilities, industrials, and REITs. These sectors
of the index were down approximately 20% over the past year, while
tech-telecom-biotech went up by about 120%. So, we were rewarded with inordinate
returns for taking a relatively small risk. This won't happen every year, but it
is certainly welcome when it does.

Among the investments that helped performance the most was Human Genome
Sciences, which develops products that predict, prevent, detect, and cure
diseases, all based on gene-related research. We have held this stock for a long
time, so we were pleased that it was one of this year's success stories. It's
also a good example of a biotech company that benefited from re-ignited interest
in the sector. Shares of Human Genome appreciated significantly over our
12-month reporting period. The bottom line for the company's success is that it
has had the most tangible results with respect to turning its gene research into
drugs. The stock was also propelled by positive news throughout the year. For
example, the company registered well over 100 patents in the U.S., one of which
was a therapy for the treatment of AIDS.

Applied Micro Circuits was another winner. This company designs, develops, and
makes silicon solutions used in the creation of communications infrastructure,
the networks over which telecommunications happen, both hardwire and wireless.
It benefited from extraordinarily positive coverage by the brokerage community,
a 2-for-1 stock split, and an additional public offering during the year. As a
result, its stock rose substantially. We were fortunate to recognize and invest
in the company's story early along in this price appreciation cycle. Applied
Micro Circuits actually survived the tech downdraft in April, and in May helped
itself by introducing significant new products.

<PAGE>

Another holding that contributed to performance was Vertex Pharmaceuticals,
which develops and commercializes small molecule drugs for the treatment of
diseases for which there are limited - or no - effective treatments. We have
followed Vertex for a number of years, and the stock hadn't really done anything
for a while. However, the company was building its portfolio of drugs, and we
consistently saw it as fundamentally strong. Vertex came into favor during the
period because of its product pipeline - it has a number of drugs in clinical
trials - and its strong technology platform, which enables the company to
capitalize on the wealth of gene-related research that is being done. Shares of
Vertex were up strongly for the year. Recently, the stock has been propelled by
news of a successful collaboration with Novartis, another drug company, as well
as strong financial results.

AND WHAT WERE A FEW OF THE COMPANIES IN THE PORTFOLIO THAT PERFORMED LESS WELL
THAN EXPECTED?

MUP: One investment that underperformed was Sunrise Assisted Living, a company
that develops senior residence facilities, providing a full range of assisted
living services. Over this period, the stock fell. While demand for product was
high, over-building in many markets led to increased supply. We realized our
assumptions were wrong and we sold the stock.

Mediaplex is another stock whose performance for the year disappointed. The
company provides technology based marketing solutions - it will plan,
execute, monitor, and analyze Internet ad campaigns. Through a technology
called "MOJO," Mediaplex enables advertisers to deliver real-time, customized
advertising to consumers. The stock has been the subject of very positive
press and broker research, and reached an all-time high in January; however,
it seemed to get caught up in some of the indiscriminant selling of
tech-related shares that we saw in March, April, and part of May. As a
result, Mediaplex was down in our portfolio.

Another holding that detracted from performance was Digital Impact, which offers
Internet direct marketing services to businesses that want to reach customers
through e-mail. The company can manage, track, and report on the effectiveness
of an ad campaign. Digital Impact announced an alliance with a subsidiary of
Young & Rubicam, a well-known ad agency, and was the subject of other positive
press, but was still down for the year.

So we saw a little bit of a pattern with some of our tech-related holdings:
shares were punished at the end of the first quarter and the start of the
second, not necessarily as a result of specific negative news, but because of
what seemed to be a combination of discomfort with valuations (i.e., stocks
trading at such high multiples of revenue with no earnings), margin calls, and
rising interest rates.

RISING INTEREST RATES HAVE BEEN AND CONTINUE TO BE THE DOMINANT INVESTMENT STORY
OF LATE, ONE THAT TOLD A RATHER SAD TALE FOR STOCKS IN THIS YEAR'S SECOND
QUARTER. HOW DO YOU ADDRESS THIS ISSUE IN THE MANAGEMENT OF THE PORTFOLIO?

MUP: Since we are not top-down investors, we do not over- and underweight
sectors based on an interest rate view. Rather, in a rising rate environment, we
would look for companies in each sector that are least vulnerable to adverse
interest rate developments. The way different kinds of companies are affected by
a particular set of economic circumstances would lead us to underweight or
eliminate those that are likely to deliver sub-par performance over our targeted
time frame.

6
<PAGE>

This said, small-cap stocks as a group tend to be sensitive to interest rate
increases, both because of high P/Es and the impact that rate increases can have
on earnings and a company's ability to raise capital. Good research can help you
stay ahead of this curve over time. Ours certainly has.

LOOKING AHEAD, WHAT DEVELOPMENTS DO YOU SEE FOR THE SMALL-CAP UNIVERSE?

MUP: If rates should continue to rise, I think we may see more small-cap woes,
for the reasons cited earlier. You'll probably also continue to see volatility
play a large role and liquidity be one of the major issues. Beyond this, we will
likely see a broadening of the small-cap market, as opposed to what happened
last year and the early part of this one when technology, telecommunications,
and biotech drove the market.

Hopefully, what we will see is more winners, spread out more evenly between the
new and old economy sectors. We see attractive opportunities throughout the
small-cap area - from energy and chemical stocks to technology and
telecommunications. We will participate broadly, but on balance we still see
relatively stronger fundamentals in new industrial America and will tilt the
portfolio accordingly.

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<PAGE>

FUND FACTS

INVESTMENT OBJECTIVE
J.P. Morgan Institutional U.S. Small Company Fund seeks to provide a high total
return from a portfolio of equity securities of small companies. The fund seeks
to outperform the Russell 2000 Index. The fund 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.

--------------------------------------------------------------------------------
COMMENCEMENT OF INVESTMENT OPERATIONS
7/19/93

--------------------------------------------------------------------------------
FUND NET ASSETS AS OF 5/31/00
$358,074,028

--------------------------------------------------------------------------------
PORTFOLIO NET ASSETS AS OF 5/31/00
$650,619,472

--------------------------------------------------------------------------------
DIVIDEND PAYABLE DATES
8/18/00, 12/20/00

--------------------------------------------------------------------------------
CAPITAL GAIN PAYABLE DATE (IF APPLICABLE)
12/20/00

EXPENSE RATIO

The fund's current annualized expense ratio of 0.80% 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 MAY 31, 2000

[CHART]

<TABLE>
<CAPTION>
PORTFOLIO ALLOCATION
(AS A PERCENTAGE OF TOTAL INVESTMENTS)
<S> <C>
TECHNOLOGY 26.1%
FINANCE 13.3%
CONSUMER GOODS & SERVICES 11.0%
HEALTHCARE 10.7%
INDUSTRIAL PRODUCTS & SERVICES 8.5%
ENERGY 8.3%
TELECOMMUNICATIONS 6.8%
BASIC INDUSTRIES 6.5%
SHORT-TERM & OTHER INVESTMENTS 5.8%
TRANSPORTATION 1.9%
UTILITIES 1.1%
</TABLE>

<TABLE>
<CAPTION>
LARGEST EQUITY HOLDINGS % OF TOTAL INVESTMENTS
----------------------------------------------------------
<S> <C>
HUMAN GENOME SCIENCES, INC. (HEALTHCARE) 2.2%
ADVANCED FIBRE COMMUNICATIONS, INC. 1.6%
(TELECOMMUNICATIONS)
KOPIN CORP. (TECHNOLOGY) 1.4%
COOPER CAMERON CORP. (ENERGY) 1.3%
EXAR CORP. (TECHNOLOGY) 1.2%
WIND RIVER SYSTEMS, INC. (TECHNOLOGY) 1.2%
APPLIED MICRO CIRCUITS CORP. (TECHNOLOGY) 1.1%
METTLER-TOLEDO INTERNATIONAL, INC. 1.1%
(INDUSTRIAL PRODUCTS & SERVICES)
C.H. ROBINSON WORLDWIDE, INC. 1.1%
(TRANSPORTATION)
MERCURY INTERACTIVE CORP. (TECHNOLOGY) 1.0%
</TABLE>

<PAGE>

DISTRIBUTED BY FUNDS DISTRIBUTOR, INC. J.P. MORGAN INVESTMENT MANAGEMENT INC.
SERVES AS INVESTMENT ADVISOR. SHARES OF THE FUND ARE NOT BANK DEPOSITS AND ARE
NOT GUARANTEED BY ANY BANK, GOVERNMENT ENTITY, OR THE FDIC. RETURN AND SHARE
PRICE WILL FLUCTUATE AND REDEMPTION VALUE MAY BE MORE OR LESS THAN ORIGINAL
COST.

References to specific securities and their issuers are for illustrative
purposes only and are not intended to be, and should not be interpreted as,
recommendations to purchase or sell such securities. Opinion expressed herein
and other fund data presented are based on current market conditions and are
subject to change without notice. The fund invests in a master portfolio
(another fund with the same objective). Historically small-company stocks have
been more volatile than large-company stocks.

CALL J.P. MORGAN FUNDS SERVICES AT (800) 766-7722 FOR A PROSPECTUS CONTAINING
MORE COMPLETE INFORMATION ABOUT THE FUND INCLUDING MANAGEMENT FEES AND OTHER
EXPENSES. PLEASE READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.

9
<PAGE>
J.P. MORGAN INSTITUTIONAL U.S. SMALL COMPANY FUND
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 2000
--------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS
Investment in The U.S. Small Company Portfolio
("Portfolio"), at value $366,082,414
Receivable for Shares of Beneficial Interest Sold 2,592
Receivable for Expense Reimbursements 34,566
Prepaid Trustees' Fees 1,477
Prepaid Expenses and Other Assets 1,318
------------
Total Assets 366,122,367
------------
LIABILITIES
Payable for Shares of Beneficial Interest
Redeemed 7,943,124
Shareholder Servicing Fee Payable 32,002
Administrative Services Fee Payable 7,802
Fund Services Fee Payable 339
Administration Fee Payable 337
Accrued Expenses 64,735
------------
Total Liabilities 8,048,339
============
NET ASSETS
Applicable to 23,703,521 Shares of Beneficial
Interest Outstanding
(par value $0.001, unlimited shares authorized) $358,074,028
============
Net Asset Value, Offering and Redemption Price
Per Share $15.11
-----
-----
ANALYSIS OF NET ASSETS
Paid-in Capital $278,349,421
Accumulated Net Investment Income 624,378
Accumulated Net Realized Gain on Investment 33,590,263
Net Unrealized Appreciation of Investment 45,509,966
------------
Net Assets $358,074,028
============
</TABLE>

The Accompanying Notes are an Integral Part of the Financial Statements.

10
<PAGE>
J.P. MORGAN INSTITUTIONAL U.S. SMALL COMPANY FUND
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED MAY 31, 2000
--------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
INVESTMENT INCOME ALLOCATED FROM PORTFOLIO
Allocated Dividend Income (Net of Foreign
Withholding Tax of $8,550) $ 2,769,639
Allocated Interest Income 1,409,907
Allocated Portfolio Expenses (2,598,869)
-----------
Net Investment Income Allocated from
Portfolio 1,580,677
FUND EXPENSES
Shareholder Servicing Fee $394,165
Administrative Services Fee 97,973
Registration Fees 29,486
Transfer Agent Fees 22,308
Printing Expenses 14,454
Professional Fees 13,820
Line of Credit Expenses 7,291
Fund Services Fee 6,792
Administration Fee 4,988
Trustees' Fees and Expenses 4,480
Insurance Expense 1,082
Miscellaneous 26,467
--------
Total Fund Expenses 623,306
Less: Reimbursement of Expenses (79,145)
--------
NET FUND EXPENSES 544,161
-----------
NET INVESTMENT INCOME 1,036,516
NET REALIZED GAIN ON INVESTMENT ALLOCATED FROM
PORTFOLIO 73,587,141
NET CHANGE IN UNREALIZED APPRECIATION OF
INVESTMENT ALLOCATED FROM PORTFOLIO 12,834,793
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $87,458,450
===========
</TABLE>

The Accompanying Notes are an Integral Part of the Financial Statements.

11
<PAGE>
J.P. MORGAN INSTITUTIONAL U.S. SMALL COMPANY FUND
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
FOR THE FISCAL FOR THE FISCAL
YEAR ENDED YEAR ENDED
MAY 31, 2000 MAY 31, 1999
-------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 1,036,516 $ 1,962,267
Net Realized Gain (Loss) on Investment Allocated
from Portfolio 73,587,141 (39,569,548)
Net Change in Unrealized Appreciation
(Depreciation) of Investment Allocated from
Portfolio 12,834,793 (14,775,646)
------------- -------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 87,458,450 (52,382,927)
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (275,058) (2,077,609)
Net Realized Gain -- (36,917,961)
------------- -------------
Total Distributions to Shareholders (275,058) (38,995,570)
------------- -------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Proceeds from Shares of Beneficial Interest Sold 94,035,000 214,714,113
Reinvestment of Dividends and Distributions 161,594 16,128,603
Cost of Shares of Beneficial Interest Redeemed (168,082,281) (215,100,689)
------------- -------------
Net (Decrease) Increase from Transactions in
Shares of Beneficial Interest (73,885,687) 15,742,027
------------- -------------
Total Increase (Decrease) in Net Assets 13,297,705 (75,636,470)
NET ASSETS
Beginning of Fiscal Year 344,776,323 420,412,793
------------- -------------
End of Fiscal Year (including undistributed net
investment income of $624,378 and $0,
respectively) $ 358,074,028 $ 344,776,323
============= =============
</TABLE>

The Accompanying Notes are an Integral Part of the Financial Statements.

12
<PAGE>
J.P. MORGAN INSTITUTIONAL U.S. SMALL COMPANY FUND
FINANCIAL HIGHLIGHTS

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

<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED MAY 31,
------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $ 11.98 $ 15.30 $ 14.09 $ 13.97 $ 11.16
-------- -------- -------- -------- --------

INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.04 0.08 0.09 0.10 0.13
Net Realized and Unrealized Gain (Loss) on
Investment 3.10 (1.83) 3.04 1.07 3.66
-------- -------- -------- -------- --------
Total from Investment Operations 3.14 (1.75) 3.13 1.17 3.79
-------- -------- -------- -------- --------

LESS DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (0.01) (0.08) (0.08) (0.13) (0.12)
Net Realized Gain -- (1.49) (1.84) (0.92) (0.86)
-------- -------- -------- -------- --------
Total Distributions to Shareholders (0.01) (1.57) (1.92) (1.05) (0.98)
-------- -------- -------- -------- --------

NET ASSET VALUE , END OF YEAR $ 15.11 $ 11.98 $ 15.30 $ 14.09 $ 13.97
======== ======== ======== ======== ========

RATIOS AND SUPPLEMENTAL DATA
Total Return 26.23% (10.79)% 23.55% 9.44% 35.60%
Net Assets, End of Year (in thousands) $358,074 $344,776 $420,413 $401,797 $291,931
Ratio to Average Net Assets
Net Expenses 0.80% 0.80% 0.80% 0.80% 0.80%
Net Investment Income 0.26% 0.55% 0.55% 0.81% 1.20%
Expenses without Reimbursement and including
Interest Expense 0.82% 0.85% 0.85% 0.85% 0.83%
Interest Expenses -- -- 0.00%(a) -- --
</TABLE>

------------------------
(a) Less than 0.01%.

The Accompanying Notes are an Integral Part of the Financial Statements.

13
<PAGE>
J.P. MORGAN INSTITUTIONAL U.S. SMALL COMPANY FUND
NOTES TO FINANCIAL STATEMENTS
MAY 31, 2000
--------------------------------------------------------------------------------

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

J.P. Morgan Institutional U.S. Small Company Fund (the "fund") is a separate
series of J.P. Morgan 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 an open-end management
investment company. The inception date of the fund is July 19, 1993, and the
fund commenced investment operations on November 4, 1993 when the first public
shareholder was admitted.

The fund invests all of its investable assets in The U.S. Small Company
Portfolio (the "portfolio"), a no-load diversified, open-end management
investment company having the same investment objective as the fund. The value
of such investment included in the Statement of Assets and Liabilities reflects
the fund's proportionate interest in the net assets of the portfolio (56% at
May 31, 2000 ). The performance of the fund is directly affected by the
performance of the portfolio. The financial statements of the portfolio,
including the Schedule of Investments, are included elsewhere in this report and
should be read in conjunction with the fund's financial statements.

The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual amounts could differ from
those estimates. The following is a summary of the significant accounting
policies of the fund:

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

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

c) Distributions to shareholders of net investment income are declared and
paid as dividends semi-annually. Distributions to shareholders of net
realized capital gains, if any, are declared and paid annually.

d) 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.

e) The fund is treated as a separate entity for federal income tax purposes
and intends to comply with the provisions of the Internal Revenue Code of
1986, as amended, applicable to regulated investment companies and to
distribute substantially all of its income, including net realized capital
gains, if any, within the prescribed time periods. Accordingly, no
provision for federal income or excise tax is necessary.

f) 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 statement as of May 31, 2000 was to decrease undistributed net
investment income by $137,080,

14
<PAGE>
J.P. MORGAN INSTITUTIONAL U.S. SMALL COMPANY FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 2000
--------------------------------------------------------------------------------
increase accumulated net realized gain on investment by $71,693 and
increase paid in-capital by $65,387. Net investment income, net realized
gains and net assets were not affected by this change. This adjustment is
primarily attributable to reclassification of dividend income.

g) For Federal income tax purposes, the fund utilized its capital loss
carryforward of $22,884,767.

2. TRANSACTIONS WITH AFFILIATES

a) The trust, on behalf of the fund, has retained Funds Distributor, Inc.
("FDI"), a registered broker-dealer, to serve as the co-administrator and
distributor for the fund. Under a Co-Administration Agreement between FDI
and the trust, on behalf of the fund, FDI provides administrative services
necessary for the operations of the fund, furnishes office space and
facilities required for conducting the business of the fund and pays the
compensation of the fund's officers affiliated with FDI. The fund has
agreed to pay FDI fees equal to its allocable share of an annual
complex-wide charge of $425,000 plus FDI's out-of-pocket expenses. The
amount allocable to the fund is based on the ratio of the fund's net
assets to the aggregate net assets of the trust and certain other
investment companies subject to similar agreements with FDI. For the
fiscal year ended May 31, 2000, the fee for these services amounted
$4,988.

b) The trust, on behalf of the fund, has an Administrative Services Agreement
(the "Services Agreement") with Morgan Guaranty Trust Company of New York
("Morgan"), a wholly owned subsidiary of J.P. Morgan & Co. Inc. ("J.P.
Morgan"), under which Morgan is responsible for certain aspects of the
administration and operation of the fund. Under the Services Agreement,
the fund has agreed to pay Morgan a fee equal to its allocable share of an
annual complex-wide charge. This charge is calculated based on the
aggregate average daily net assets of the portfolio and the other
portfolios in which the trust and the J.P. Morgan Funds invest (the
"master portfolios") and J.P. Morgan Series Trust in accordance with the
following annual schedule: 0.09 % on the first $7 billion of their
aggregate average daily net assets and 0.04% of their aggregate average
daily net assets in excess of $7 billion less the complex-wide fees
payable to FDI. The portion of this charge payable by the fund is
determined by the proportionate share that its net assets bear to the net
assets of the trust, the master portfolios, other investors in the master
portfolios for which Morgan provides similar services, and J.P. Morgan
Series Trust. For the fiscal year ended May 31, 2000, the fee for these
services amounted to $97,973.

In addition, J.P. Morgan has agreed to reimburse the fund to the extent
necessary to maintain the total operating expenses of the fund, including
the expenses allocated to the fund from the portfolio, at no more than
0.80% of the average daily net assets of the fund. This reimbursement
arrangement can be changed or terminated at any time at the option of J.P.
Morgan. For the fiscal year ended May 31, 2000, J.P. Morgan has agreed to
reimburse the fund $79,145 for expenses under this agreement.

c) The trust, on behalf of the fund, has a Shareholder Servicing Agreement
with Morgan to provide account administration and personal account
maintenance service to fund shareholders. The agreement provides for the
fund to pay Morgan a fee for these services which is computed daily and
paid monthly at an annual rate of 0.10% of the average daily net assets of
the fund. For the fiscal year ended May 31, 2000, the fee for these
services amounted to $394,165.

15
<PAGE>
J.P. MORGAN INSTITUTIONAL U.S. SMALL COMPANY FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 2000
--------------------------------------------------------------------------------

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
$6,792 for the fiscal year ended May 31, 2000.

e) An aggregate annual fee of $75,000 is paid to each trustee for serving as
a trustee of the trust, the J.P. Morgan Funds, the master portfolios and
J.P. Morgan Series Trust. The Trustees' Fees and Expenses shown in the
financial statements represent the fund's allocated portion of the total
fees and expenses. The trust's Chairman and Chief Executive Officer also
serves as Chairman of Group and receives compensation and employee
benefits from Group in his role as Group's Chairman. The allocated portion
of such compensation and benefits included in the Fund Services Fee shown
in the financial statements was $1,300.

3. TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST

The Declaration of Trust permits the trustees to issue an unlimited number of
full and fractional shares of beneficial interest of one or more series.
Transactions in shares of beneficial interest of the fund were as follows:

<TABLE>
<CAPTION>
FOR THE FISCAL FOR THE FISCAL
YEAR ENDED YEAR ENDED
MAY 31, 2000 MAY 31, 1999
-------------- --------------
<S> <C> <C>
Shares of Beneficial Interest Sold............... 5,731,771 17,760,637
Reinvestment of Dividends and Distributions...... 13,021 1,433,027
Shares of Beneficial Interest Redeemed........... (10,817,761) (17,891,323)
------------- -------------
Net Increase (Decrease).......................... (5,072,969) 1,302,341
============= =============
</TABLE>

From time to time, the fund may have a concentration of several shareholders
which may include affiliates of J.P. Morgan holding a significant percentage of
shares outstanding. Investment activities of these shareholders could have a
material impact on the fund and portfolio.

4. CREDIT AGREEMENT

The trust, on behalf of the fund, together with other affiliated investment
companies (the "funds"), entered into a revolving line of credit agreement (the
"Agreement") on May 26, 1999, with unaffiliated lenders. The maximum borrowing
under the Agreement was $150,000,000. The Agreement expired on May 23, 2000,
however, the fund as party to the Agreement has extended the Agreement and
continues its participation therein for an additional 364 days until May 21,
2001. The maximum borrowing under the new Agreement is $150,000,000. The purpose
of the Agreement is to provide another alternative for settling large fund
shareholder redemptions. Interest on any such borrowings outstanding will
approximate market rates. Under the Agreement, the commitment fee is at an
annual rate of 0.085% on the unused portion of the committed amount. The
commitment fee is allocated to the funds in accordance with the procedures
established by their respective trustees or directors. There were no outstanding
borrowings pursuant to the Agreement as of May 31, 2000.

16
<PAGE>
J.P. MORGAN INSTITUTIONAL U.S. SMALL COMPANY FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 2000
--------------------------------------------------------------------------------

* * * * *

5. TAX INFORMATION NOTICE (UNAUDITED)

For corporate taxpayers 83.29% of the ordinary income distributions paid during
the fiscal year ended May 31, 2000 qualify for the corporate dividends received
deductions.

17
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Trustees and Shareholders of
J.P. Morgan 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
J.P. Morgan Institutional U.S. Small Company Fund (one of the series
constituting part of the J.P. Morgan Institutional Funds, hereafter referred to
as the "fund") at May 31, 2000, 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 five years in the period
then ended, in conformity with accounting principles generally accepted in the
United States. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with auditing standards generally accepted in the
United States, which require that we plan and perform the audit to obtain
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.

PricewaterhouseCoopers LLP
New York, New York
July 14, 2000

18
<PAGE>
The U.S. Small Company Portfolio
Annual Report May 31, 2000
(The following pages should be read in conjunction
with J.P. Morgan Institutional U.S. Small Company Fund
Annual Financial Statements)

19
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS
MAY 31, 2000
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- --------- -------------
<S> <C> <C>
COMMON STOCKS (93.0%)
BASIC INDUSTRIES (6.4%)
CHEMICALS (5.1%)
Albemarle Corp................................... 229,900 $ 5,057,800
Bush Boake Allen, Inc.+.......................... 95,000 3,099,375
General Chemical Group, Inc.+.................... 207,100 200,628
Geon Co.......................................... 207,700 4,465,550
Georgia Gulf Corp................................ 224,600 5,615,000
Minerals Technologies, Inc....................... 113,700 5,258,625
Solutia, Inc..................................... 120,500 1,461,062
Symyx Technologies, Inc.+........................ 77,800 2,256,200
Wellman, Inc..................................... 305,000 6,004,687
------------
33,418,927
------------

FOREST PRODUCTS & PAPER (0.7%)
Caraustar Industries, Inc........................ 289,400 4,793,187
------------

METALS & MINING (0.6%)
Mueller Industries, Inc.+........................ 124,100 3,645,437
------------
TOTAL BASIC INDUSTRIES......................... 41,857,551
------------

CONSUMER GOODS & SERVICES (10.7%)
AUTOMOTIVE (0.3%)
BorgWarner, Inc.................................. 39,300 1,562,175
Sonic Automotive, Inc.+.......................... 67,500 658,125
------------
2,220,300
------------
BROADCASTING & PUBLISHING (3.3%)
Entercom Communications Corp.+................... 75,900 3,453,450
Hearst-Argyle Television, Inc.+.................. 79,100 1,497,956
iBEAM Broadcasting Corp.+........................ 122,100 1,556,775
Lightspan, Inc.+................................. 35,800 297,588
Mediaplex, Inc.+................................. 90,200 1,381,188
SmartForce Public Limited Co., Spon. ADR+(i)..... 96,500 4,059,031
Spanish Broadcasting System, Inc., Class A+...... 135,000 2,295,000
TV Guide, Inc., Class A+......................... 141,600 3,643,987
Valassis Communications, Inc.+................... 100,200 3,306,600
------------
21,491,575
------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- --------- -------------
<S> <C> <C>

ENTERTAINMENT, LEISURE & MEDIA (2.5%)
American Classic Voyages Co.+.................... 62,400 $ 1,185,600
Anchor Gaming+................................... 117,300 5,241,844
ARTISTdirect, Inc.+.............................. 33,900 156,787
Insight Communications Co., Inc.+................ 90,500 1,283,969
JAKKS Pacific, Inc.+............................. 88,900 1,289,050
Lifeminders.com, Inc.+........................... 35,300 1,189,169
Media Metrix, Inc.+.............................. 50,500 1,407,687
NBC Internet, Inc., Class A+..................... 16,400 325,950
Promotions.com, Inc.+............................ 61,600 354,200
Ticketmaster Online-CitySearch, Inc., Class B+... 199,700 3,619,563
------------
16,053,819
------------

FOOD, BEVERAGES & TOBACCO (1.4%)
American Italian Pasta Co., Class A+............. 92,200 2,264,662
Beringer Wine Estates Holdings, Inc.,
Class B+....................................... 52,500 1,995,000
Keebler Foods Co................................. 131,900 4,781,375
------------
9,041,037
------------

HOUSEHOLD APPLIANCES & FURNISHINGS (0.5%)
Furniture Brands International, Inc.+............ 60,200 959,437
Stanley Furniture Co., Inc.+..................... 86,200 1,944,887
------------
2,904,324
------------

HOUSEHOLD PRODUCTS (0.5%)
Alberto-Culver Co., Class B...................... 113,700 2,991,731
------------

RESTAURANTS & HOTELS (0.7%)
Aztar Corp.+..................................... 113,600 1,448,400
Boca Resorts, Inc., Class A+..................... 149,000 1,285,125
Extended Stay America, Inc.+..................... 87,300 785,700
Sun International Hotels Ltd.+(i)................ 72,400 1,307,725
------------
4,826,950
------------

RETAIL (1.5%)
Alloy Online, Inc.+.............................. 153,500 1,822,812
Cost Plus, Inc.+................................. 89,800 2,621,037
Lithia Motors, Inc., Class A+.................... 100,500 1,218,562
</TABLE>

The Accompanying Notes are an Integral Part of the Financial Statements.

20
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- --------- -------------
<S> <C> <C>
RETAIL (CONTINUED)
Pacific Sunwear of California, Inc.+............. 38,900 $ 624,831
School Specialty, Inc.+.......................... 233,500 3,765,187
------------
10,052,429
------------
TOTAL CONSUMER GOODS & SERVICES................ 69,582,165
------------

ENERGY (8.2%)
ELECTRIC (1.3%)
Cleco Corp....................................... 169,200 5,795,100
CMS Energy Corp.................................. 104,600 2,379,650
------------
8,174,750
------------

GAS EXPLORATION (1.1%)
Newfield Exploration Co.+........................ 141,900 5,942,062
Spinnaker Exploration Co.+....................... 56,000 1,428,000
------------
7,370,062
------------

GAS-PIPELINES (0.7%)
Kinder Morgan, Inc............................... 135,600 4,423,950
------------

OIL-PRODUCTION (1.2%)
Callon Petroleum Co.+............................ 218,900 3,338,225
Devon Energy Corp................................ 41,600 2,488,200
Unit Corp.+...................................... 128,400 1,693,275
------------
7,519,700
------------

OIL-SERVICES (3.9%)
Cooper Cameron Corp.+............................ 121,600 8,481,600
Global Industries Ltd.+.......................... 72,100 1,270,762
Gulf Island Fabrication, Inc.+................... 34,200 592,087
McDermott International, Inc..................... 412,000 4,120,000
National-Oilwell, Inc. +......................... 203,400 5,288,400
Smith International, Inc.+....................... 64,700 5,115,344
Universal Compression Holdings, Inc.+............ 39,800 947,737
------------
25,815,930
------------
TOTAL ENERGY................................... 53,304,392
------------

FINANCE (13.2%)
BANKING (3.2%)
Bank United Corp., Class A....................... 158,000 5,668,250
Capital Crossing Bank+........................... 47,900 484,987
City National Corp............................... 86,400 3,369,600
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- --------- -------------
<S> <C> <C>
BANKING (CONTINUED)

Colonial BancGroup, Inc.......................... 31,900 $ 305,044
Commercial Federal Corp.......................... 129,349 2,061,500
Hamilton Bancorp, Inc.+.......................... 95,000 1,638,750
National Commerce Bancorporation................. 122,300 2,323,700
Pacific Century Financial Corp................... 91,200 2,052,000
Republic Security Financial Corp................. 12,700 51,594
Sterling Bancshares, Inc......................... 36,200 400,462
Summit Bancshares, Inc........................... 34,000 578,000
Sun Bancorp, Inc.+............................... 88,050 610,847
Westamerica Bancorporation....................... 41,500 1,185,344
------------
20,730,078
------------

FINANCIAL SERVICES (3.5%)
Allied Capital Corp.............................. 257,400 4,391,887
American Capital Strategies, Ltd................. 44,200 919,912
American Home Mortgage Holdings, Inc.+........... 101,000 492,375
Donaldson, Lufkin & Jenrette, Inc. - DLJ
Direct......................................... 31,200 1,218,750
Doral Financial Corp............................. 150,900 1,678,762
eSPEED, Inc., Class A+........................... 117,700 3,045,488
Gabelli Asset Management, Inc., Class A+......... 88,700 1,785,087
Heller Financial, Inc............................ 206,200 3,892,025
LendingTree, Inc.+............................... 26,100 141,919
MicroFinancial, Inc.............................. 46,200 438,900
Ocwen Financial Corp.+........................... 178,600 1,026,950
Southwest Securities Group, Inc.................. 50,500 1,464,500
Vicinity Corp.+.................................. 16,400 250,100
Web Street, Inc.+................................ 69,400 177,837
Willis Lease Finance Corp.+...................... 198,200 1,548,437
------------
22,472,929
------------

INSURANCE (3.0%)
E.W. Blanch Holdings, Inc........................ 64,700 1,661,981
Fremont General Corp............................. 232,700 1,018,062
HealthExtras, Inc.+.............................. 141,500 663,281
Hooper Holmes, Inc............................... 184,200 1,888,050
MIIX Group, Inc.................................. 23,700 282,919
Nationwide Financial Services, Inc., Class A..... 135,300 3,839,137
Protective Life Corp............................. 83,200 2,288,000
Quotesmith.com, Inc.+............................ 167,400 502,200
</TABLE>

The Accompanying Notes are an Integral Part of the Financial Statements.

21
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- --------- -------------
<S> <C> <C>
INSURANCE (CONTINUED)
RenaissanceRe Holdings Ltd.(i)................... 136,600 $ 5,916,487
StanCorp Financial Group, Inc.................... 53,600 1,708,500
------------
19,768,617
------------

REAL ESTATE INVESTMENT TRUSTS (3.5%)
Arden Realty, Inc................................ 135,100 3,107,300
CenterPoint Properties Corp...................... 54,900 2,014,144
Cousins Properties, Inc.......................... 103,800 3,976,837
Macerich Co...................................... 86,700 1,891,144
Manufactured Home Communities, Inc............... 105,500 2,545,187
Mills Corp....................................... 90,500 1,600,719
Mission West Properties, Inc..................... 133,300 1,233,025
Post Properties, Inc............................. 147,500 6,471,562
------------
22,839,918
------------
TOTAL FINANCE.................................. 85,811,542
------------

HEALTH CARE (10.7%)
BIOTECHNOLOGY (4.7%)
Aclara Biosciences, Inc.+........................ 14,600 385,075
Affymetrix, Inc.+................................ 30,200 3,586,250
Corixa Corp.+.................................... 58,900 1,877,437
Diversa Corp.+................................... 31,900 701,800
Exelixis, Inc.+.................................. 49,600 1,202,800
Gene Logic, Inc.+................................ 23,900 504,887
Human Genome Sciences, Inc.+..................... 158,400 13,899,600
Maxygen, Inc.+................................... 13,100 540,375
Millennium Pharmaceuticals, Inc.+................ 41,400 3,462,075
Molecular Devices Corp.+......................... 8,900 475,037
Neurocrine Biosciences, Inc.+.................... 79,000 1,678,750
Nexell Therapeutics Inc.+........................ 3,206 11,121
Orchid Biosciences+.............................. 131,200 1,574,400
Vical, Inc.+..................................... 35,500 674,500
------------
30,574,107
------------
HEALTH SERVICES (0.8%)
Accredo Health, Inc.+............................ 57,350 1,376,400
Allscripts, Inc.+................................ 113,900 3,160,725
HealthGate Data Corp.+........................... 159,500 358,875
------------
4,896,000
------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- --------- -------------
<S> <C> <C>

MEDICAL SUPPLIES (1.7%)
Cytyc Corp.+..................................... 52,600 $ 2,639,863
Eclipse Surgical Technologies, Inc.+............. 195,400 696,113
I-STAT Corp.+.................................... 133,300 1,932,850
ORATEC Interventions, Inc.+...................... 40,900 1,543,975
ResMed, Inc.+.................................... 143,500 3,444,000
Sonic Innovations, Inc.+......................... 33,500 554,844
------------
10,811,645
------------

PHARMACEUTICALS (3.5%)
Abgenix, Inc.+................................... 36,400 2,875,600
Akorn, Inc.+..................................... 189,100 1,512,800
Bindley Western Industries, Inc.................. 104,700 1,995,844
Gilead Sciences, Inc.+........................... 11,200 612,500
IDEC Pharmaceuticals Corp.+...................... 48,900 3,120,431
ILEX Oncology, Inc.+............................. 34,300 855,356
Ligand Pharmaceuticals, Inc.,
Class B+....................................... 338,200 3,614,513
SangStat Medical Corp.+.......................... 47,700 1,270,013
Trimeris, Inc.+.................................. 42,700 1,878,800
Vertex Pharmaceuticals, Inc.+.................... 72,100 5,326,388
------------
23,062,245
------------
TOTAL HEALTH CARE.............................. 69,343,997
------------

INDUSTRIAL PRODUCTS & SERVICES (8.4%)
BUILDING & CONSTRUCTION (0.3%)
Dycom Industries, Inc.+.......................... 40,950 1,983,516
------------

BUILDING MATERIALS (0.8%)
Elcor Corp....................................... 130,150 2,480,984
Universal Forest Products, Inc................... 208,700 2,739,188
------------
5,220,172
------------

BUSINESS & PUBLIC SERVICES (0.5%)
ACT Manufacturing, Inc.+......................... 99,700 3,140,550
Obie Media Corp.+................................ 60,340 490,263
------------
3,630,813
------------

CAPITAL GOODS (1.6%)
IDEX Corp........................................ 72,900 2,433,038
SeaChange International, Inc.+................... 93,900 2,406,188
Shaw Group, Inc.+................................ 127,500 5,562,188
------------
10,401,414
------------
</TABLE>

The Accompanying Notes are an Integral Part of the Financial Statements.

22
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- --------- -------------
<S> <C> <C>
COMMERCIAL SERVICES (1.9%)
CoStar Group, Inc.+.............................. 52,400 $ 1,097,125
Fargo Electronics+............................... 111,400 821,575
On Assignment, Inc.+............................. 222,000 5,772,000
Optimal Robotics Corp.+.......................... 88,000 2,959,000
Source Information Management Co.+............... 107,600 1,479,500
------------
12,129,200
------------

DIVERSIFIED MANUFACTURING (0.9%)
Buckeye Technologies, Inc.+...................... 138,900 2,647,781
GenTek, Inc...................................... 245,160 3,309,660
------------
5,957,441
------------

MACHINERY (0.2%)
Manitowoc Co., Inc............................... 39,400 1,287,888
------------

MANUFACTURING (2.2%)
Meade Instruments Corp.+......................... 29,200 1,454,525
Mettler-Toledo International, Inc.+.............. 174,300 6,830,381
Monaco Coach Corp.+.............................. 116,700 1,677,563
National R.V. Holdings, Inc.+.................... 94,900 1,073,556
Rayovac Corp.+................................... 170,800 3,031,700
------------
14,067,725
------------
TOTAL INDUSTRIAL PRODUCTS & SERVICES........... 54,678,169
------------

TECHNOLOGY (25.9%)
AEROSPACE (0.4%)
L-3 Communications Holdings, Inc.+............... 41,600 2,329,600
------------

COMMERCIAL SERVICES (0.7%)
CheckFree Holdings Corp.+........................ 116,700 4,879,519
------------
COMPUTER PERIPHERALS (0.9%)
Integrated Circuit Systems, Inc.+................ 97,000 1,164,000
JNI Corp.+....................................... 64,500 1,677,000
M-Systems Flash Disk Pioneers Ltd.+(i)........... 53,900 3,260,950
------------
6,101,950
------------

COMPUTER SOFTWARE (10.7%)
Accrue Software, Inc.+........................... 64,100 1,538,400
Agile Software Corp.+............................ 93,700 3,923,688
Allaire Corp.+................................... 25,200 1,047,375
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- --------- -------------
<S> <C> <C>
COMPUTER SOFTWARE (CONTINUED)

Alteon Websystems, Inc.+......................... 34,000 $ 1,727,625
Art Technology Group, Inc.+...................... 97,200 5,704,425
Certicom Corp.+.................................. 68,000 2,163,250
Clarent Corp.+................................... 82,300 3,487,463
click2learn.com, Inc.+........................... 134,500 1,614,000
Corillian Corp.+................................. 30,100 466,550
E.piphany, Inc.+................................. 17,600 1,375,000
Excalibur Technologies Corp.+.................... 39,500 1,135,625
FASTNET Corp.+................................... 148,100 657,194
Informatica Corp.+............................... 78,600 3,163,650
Informix Corp.+.................................. 316,300 2,293,175
ISS Group, Inc.+................................. 29,600 2,190,400
Looksmart, Ltd.+................................. 50,600 702,075
Mercury Interactive Corp.+....................... 79,100 6,703,725
Metasolv Software, Inc.+......................... 25,500 1,007,250
Nuance Communications, Inc.+..................... 8,600 339,700
Numerical Technologies, Inc.+.................... 12,300 509,681
Peregrine Systems, Inc.+......................... 120,200 2,494,150
Quest Software, Inc.+............................ 51,400 2,056,000
Retek, Inc.+..................................... 78,100 1,610,813
Sequoia Software Corp.+.......................... 33,600 226,800
Software Technlogies Corp.+...................... 87,100 1,959,750
Software.com, Inc.+.............................. 31,800 2,679,150
Sonic Foundry, Inc.+............................. 73,700 1,036,406
The 3DO Co.+..................................... 134,500 756,563
Tumbleweed Communications Corp.+................. 64,100 2,223,469
Ulticom, Inc.+................................... 16,500 424,875
Watchguard Technologies, Inc.+................... 75,000 2,071,875
Websense, Inc.+.................................. 31,800 675,253
Webtrends Corp.+................................. 70,000 1,793,750
Wind River Systems, Inc.+........................ 206,300 7,478,375
Witness Systems, Inc.+........................... 67,800 478,838
------------
69,716,318
------------

COMPUTER SYSTEMS (0.1%)
eMachines, Inc.+................................. 105,300 417,909
------------

ELECTRONICS (1.6%)
C-Cube Microsystems Inc.+........................ 113,100 1,943,906
DDi Corp.+....................................... 153,800 2,057,075
Power-One, Inc.+................................. 73,600 6,449,200
------------
10,450,181
------------
</TABLE>

The Accompanying Notes are an Integral Part of the Financial Statements.

23
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- --------- -------------
<S> <C> <C>
INFORMATION PROCESSING (2.9%)
Computer Horizons Corp.+......................... 183,100 $ 2,059,875
Diamond Technology Partners, Inc.+............... 39,000 2,457,000
Digitas, Inc.+................................... 32,800 399,750
Gartner Group, Inc., Class A..................... 176,900 2,354,981
Go2Net, Inc.+.................................... 16,800 766,500
Net Perceptions, Inc.+........................... 91,400 1,359,575
NetRatings, Inc.+................................ 99,800 1,889,963
Proxicom, Inc.+.................................. 50,400 2,312,100
Visual Networks, Inc.+........................... 84,700 4,203,238
WorldGate Communications, Inc.+.................. 53,100 776,588
------------
18,579,570
------------

SEMICONDUCTORS (8.6%)
Applied Micro Circuits Corp.+.................... 70,400 6,987,200
Applied Science and Technology, Inc.+............ 83,900 1,704,219
ATMI, Inc.+...................................... 158,900 6,097,788
Cirrus Logic, Inc.+.............................. 80,700 1,402,163
Exar Corp.+...................................... 112,550 7,737,813
Genesis Microchip, Inc.+......................... 36,900 666,506
Kopin Corp.+..................................... 126,800 8,994,875
Lam Research Corp.+.............................. 114,000 3,662,250
Lattice Semiconductor Corp.+..................... 78,500 4,656,031
MKS Instruments, Inc.+........................... 95,200 3,748,500
PRI Automation, Inc.+............................ 50,600 2,600,366
SDL, Inc.+....................................... 15,200 3,443,750
Silicon Image, Inc.+............................. 49,900 1,799,519
Silicon Laboratories, Inc.+...................... 20,700 953,494
Therma-Wave, Inc.+............................... 20,700 393,300
TranSwitch Corp.+................................ 17,200 1,077,150
------------
55,924,924
------------
TOTAL TECHNOLOGY............................... 168,399,971
------------

TELECOMMUNICATIONS (6.5%)
TELECOMMUNICATION SERVICES (1.9%)
CapRock Communications Corp.+.................... 57,800 1,156,000
Choice One Communications, Inc.+................. 55,000 1,306,250
GoAmerica, Inc.+................................. 53,300 333,125
iBasis, Inc.+.................................... 80,500 1,132,031
ITC DeltaCom, Inc.+.............................. 72,800 1,324,050
MGC Communications, Inc.+........................ 74,200 3,042,200
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- --------- -------------
<S> <C> <C>
TELECOMMUNICATION SERVICES (CONTINUED)

Motient Corp.+................................... 183,000 $ 1,658,438
Net2Phone, Inc.+................................. 49,100 1,448,450
PNV.net, Inc.+................................... 142,300 364,644
TeleCorp PCS, Inc.+.............................. 22,100 671,288
------------
12,436,476
------------

TELECOMMUNICATIONS-EQUIPMENT (4.6%)
Advanced Fibre Communications+................... 225,900 10,391,400
Aether Systems, Inc.+............................ 11,200 1,539,300
Avanex Corp.+.................................... 8,900 605,200
FLAG Telecom Holdings Ltd.+(i)................... 94,600 1,342,138
Metawave Communications Corp.+................... 49,400 1,475,825
Netro Corp.+..................................... 37,000 1,105,375
New Focus, Inc.+................................. 12,700 820,738
ONI Systems Corp.+............................... 16,100 402,500
Polycom, Inc.+................................... 60,800 5,111,000
Turnstone Systems, Inc.+......................... 14,100 1,240,139
UTStarcom, Inc.+................................. 32,700 1,250,775
Vyyo, Inc.+...................................... 81,700 1,205,075
Williams Communication Group, Inc.+.............. 41,700 1,529,869
World Access, Inc.+.............................. 171,200 1,797,600
------------
29,816,934
------------
TOTAL TELECOMMUNICATIONS....................... 42,253,410
------------

TRANSPORTATION (1.9%)
RAILROADS (0.4%)
Wisconsin Central Transportation Corp.+.......... 214,300 2,785,900
------------

TRANSPORT & SERVICES (1.1%)
C.H. Robinson Worldwide, Inc..................... 151,900 6,826,006
------------

TRUCK & FREIGHT CARRIERS (0.4%)
Werner Enterprises, Inc.......................... 229,825 2,786,628
------------
TOTAL TRANSPORTATION........................... 12,398,534
------------

UTILITIES (1.1%)
NATURAL GAS (0.4%)
Atmos Energy Corp................................ 161,800 2,962,963
------------
</TABLE>

The Accompanying Notes are an Integral Part of the Financial Statements.

24
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- --------- -------------
<S> <C> <C>
WATER (0.7%)
E'Town Corp...................................... 65,000 $ 4,310,313
------------
TOTAL UTILITIES................................ 7,273,276
------------
TOTAL COMMON STOCKS (COST $532,591,504)........ 604,903,007
------------
</TABLE>

<TABLE>
<CAPTION>
CONVERTIBLE PREFERRED STOCKS (0.4%)
<S> <C> <C>
ENTERTAINMENT, LEISURE & MEDIA (0.1%)
AMCV Capital Trust I+............................ 25,900 1,087,800
------------
TELECOMMUNICATION SERVICES (0.3%)
Verio, Inc., Series A............................ 29,800 1,802,900
------------
TOTAL CONVERTIBLE PREFERRED STOCKS (COST
$2,921,594)................................... 2,890,700
------------
</TABLE>

<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
------------------------------------------------- ------------ -------------
<S> <C> <C>
SHORT-TERM INVESTMENTS (5.8%)
OTHER INVESTMENT COMPANIES (5.8%)
J.P. Morgan Institutional Prime Money Market Fund
(cost $37,627,748)*............................ $37,627,748 $ 37,627,748
------------
TOTAL INVESTMENTS
(COST $573,140,846) (99.2%).................................. 645,421,455
OTHER ASSETS IN EXCESS OF LIABILITIES (0.8%)...................
5,198,017
------------
NET ASSETS (100.0%)............................................ $650,619,472
============
</TABLE>

------------------------------
Note: Based on the cost of investments of $579,456,374 for federal income tax
purposes at May 31, 2000, the aggregate gross unrealized appreciation and
depreciation was $150,606,831 and $84,641,750 respectively, resulting in net
unrealized appreciation of $65,965,081.

+ - Non-income producing security.

(i) - Foreign security.

Spon. ADR - Sponsored American Depository Receipt.

*Money Market mutual fund registered under the Investment Company Act of 1940,
as amended, and advised by J.P. Morgan Investment Management, Inc.

The Accompanying Notes are an Integral Part of the Financial Statements.

25
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 2000
--------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $573,140,846) $645,421,455
Cash 176,888
Receivable for Investments Sold 8,967,643
Dividends and Interest Receivable 436,455
Prepaid Trustees' Fees 1,919
Prepaid Expenses and Other Assets 7,759
------------
Total Assets 655,012,119
------------
LIABILITIES
Payable for Investments Purchased 3,947,654
Advisory Fee Payable 340,056
Custody Fee Payable 62,000
Administrative Services Fee Payable 13,817
Administration Fee Payable 896
Fund Services Fee Payable 599
Accrued Expenses 27,625
------------
Total Liabilities 4,392,647
------------
NET ASSETS
Applicable to Investors' Beneficial Interests $650,619,472
============
</TABLE>

The Accompanying Notes are an Integral Part of the Financial Statements.

26
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED MAY 31, 2000
--------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividend Income (Net of Foreign Withholding Tax
of $13,318) $ 4,565,821
Interest Income 2,317,761
------------
Investment Income 6,883,582
EXPENSES
Advisory Fee $3,870,586
Custodian Fees and Expenses 193,866
Administrative Services Fee 162,199
Professional Fees and Expenses 45,037
Fund Services Fee 11,170
Printing Expenses 9,603
Trustees' Fees and Expenses 7,234
Administration Fee 6,159
Insurance Expense 1,739
Miscellaneous 108
----------
Total Expenses 4,307,701
------------
NET INVESTMENT INCOME 2,575,881
NET REALIZED GAIN ON INVESTMENTS 111,618,260
NET CHANGE IN UNREALIZED APPRECIATION OF
INVESTMENTS 19,782,827
------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $133,976,968
============
</TABLE>

The Accompanying Notes are an Integral Part of the Financial Statements.

27
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
SUPPLEMENTARY DATA
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED MAY 31,
---------------------------------
2000 1999 1998 1997 1996
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Net Expenses 0.66% 0.68% 0.68% 0.68% 0.67%
Net Investment Income 0.39% 0.67% 0.68% 0.92% 1.33%
Portfolio Turnover 104% 104% 96% 98% 93%
</TABLE>

The Accompanying Notes are an Integral Part of the Financial Statements.

28
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
MAY 31, 2000
--------------------------------------------------------------------------------

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

The U.S. Small Company Portfolio (the "portfolio") is registered under the
Investment Company Act of 1940, as amended, as 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 19, 1993. The portfolio's
investment objective is to provide a high total return from a portfolio of small
company stocks. The Declaration of Trust permits the trustees to issue an
unlimited number of beneficial interests in the portfolio.

The preparation of financial statements in accordance with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts and disclosures. Actual amounts
could differ from those estimates. The following is a summary of the significant
accounting policies of the portfolio:

a) The portfolio values securities that are listed on an exchange using
prices supplied daily by an independent pricing service that are based on
the last traded price on a national securities exchange or in the absence
of recorded trades, at the readily available mean of the bid and asked
prices on such exchange, if such exchange or market constitutes the
broadest and most representative market for the security. Securities
listed on a foreign exchange are valued at the last traded price or, in
the absence of recorded trades, at the readily available mean of the bid
and asked prices on such exchange available before the time when net
assets are valued. Independent pricing service procedures may also include
the use of prices based on yields or prices of securities of comparable
quality, coupon, maturity and type, indications as to values from dealers,
operating data, and general market conditions. Unlisted securities are
valued at the average of the quoted bid and asked prices in the
over-the-counter market provided by a principal market maker or dealer. If
prices are not supplied by the portfolio's independent pricing service or
principal market maker or dealer, such securities are priced using fair
values in accordance with procedures adopted by the portfolio's trustees.
All short-term securities with a remaining maturity of sixty days or less
are valued using the amortized cost method.

b) The portfolio's custodian or designated sub custodians, as the case may be
under tri-party repurchase agreements, takes possession of the collateral
pledged for investments in repurchase agreements on behalf of the
portfolio. It is the policy of the portfolio to value the underlying
collateral daily on a mark-to-market basis to determine that the value,
including accrued interest, is at least equal to the repurchase price plus
accrued interest. In the event of default of the obligation to repurchase,
the portfolio has the right to liquidate the collateral and apply the
proceeds in satisfaction of the obligation. Under certain circumstances,
in the event of default or bankruptcy by the other party to the agreement,
realization and/or retention of the collateral or proceeds may be subject
to legal proceedings.

c) Securities transactions are recorded on a trade date basis. Dividend
income is recorded on the ex-dividend date or as of the time that the
relevant ex-dividend date and amount 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.

29
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 2000
--------------------------------------------------------------------------------

d) The portfolio intends to be treated as a partnership for federal income
tax purposes. As such, each investor in the portfolio will be taxed on its
share of the portfolio's ordinary income and capital gains. It is intended
that the portfolio's assets will be managed in such a way that an investor
in the portfolio will be able to satisfy the requirements of Subchapter M
of the Internal Revenue Code.

2. TRANSACTIONS WITH AFFILIATES

a) The portfolio has an Investment Advisory Agreement with J.P. Morgan
Investment Management Inc. ("JPMIM"), an affiliate of Morgan Guaranty
Trust Company of New York ("Morgan"), a wholly-owned subsidiary of
J.P. Morgan & Co. Incorporated ("J.P. Morgan"). Under the terms of the
agreement, the portfolio paid JPMIM at an annual rate of 0.60% of the
portfolio's average daily net assets. For the fiscal year ended May 31,
2000, such fees paid amounted to $3,918,665.

The trust, on behalf of the portfolio, may invest in one or more
affiliated money market funds: J.P. Morgan Institutional Prime Money
Market Fund, J.P. Morgan Institutional Tax Exempt Money Market Fund,
J.P. Morgan Institutional Federal Money Market Fund and J.P. Morgan
Institutional Treasury Money Market Fund. The Advisor has agreed to
reimburse its advisory fee from the portfolio in an amount to offset any
doubling of investment advisory and shareholder servicing fees. For the
fiscal year ended May 31, 2000, J.P. Morgan has agreed to reimburse the
portfolio $48,079 under this agreement. Interest income included in the
Statement of Operations for the year ended May 31, 2000 includes
$1,169,918 of interest income from investments in affiliated Money Market
Funds.

b) The trust, on behalf of the portfolio, has retained Funds Distributor,
Inc. ("FDI"), a registered broker-dealer, to serve as the co-administrator
and exclusive placement agent. Under a Co-Administration Agreement between
FDI and the portfolio, FDI provides administrative services necessary for
the operations of the portfolio, furnishes office space and facilities
required for conducting the business of the portfolio and pays the
compensation of the portfolio's officers affiliated with FDI. The
portfolio has agreed to pay FDI fees equal to its allocable share of an
annual complex-wide charge of $425,000 plus FDI's out-of-pocket expenses.
The amount allocable to the portfolio is based on the ratio of the
portfolio's net assets to the aggregate net assets of the portfolio and
certain other investment companies subject to similar agreements with FDI.
For the fiscal year ended May 31, 2000, the fee for these services
amounted to $6,159.

c) The trust, on behalf of the portfolio, has an Administrative Services
Agreement (the "Services Agreement") with Morgan, under which Morgan is
responsible for certain aspects of the administration and operation of the
portfolio. Under the Services Agreement, the portfolio has agreed to pay
Morgan a fee equal to its allocable share of an annual complex-wide
charge. This charge is calculated based on the aggregate average daily net
assets of the portfolio and certain other portfolios for which JPMIM acts
as investment advisor (the "master portfolios") and J.P. Morgan Series
Trust in accordance with the following annual schedule: 0.09% on the first
$7 billion of their aggregate average daily net assets and 0.04% of their
aggregate average daily net assets in excess of $7 billion less the
complex-wide fees payable to FDI. The portion of this charge payable by
the portfolio is determined by

30
<PAGE>
THE U.S. SMALL COMPANY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 2000
--------------------------------------------------------------------------------
the proportionate share that its net assets bear to the net assets of the
master portfolios, other investors in the master portfolios for which
Morgan provides similar services, and J.P. Morgan Series Trust. For the
fiscal year ended May 31, 2000, the fee for these services amounted to
$162,199.

d) The trust, on behalf of the portfolio, has a Fund Services Agreement with
Pierpont Group, Inc. ("Group") to assist the trustees in exercising their
overall supervisory responsibilities for the portfolio's affairs. The
trustees of the portfolio represent all the existing shareholders of
Group. The portfolio's allocated portion of Group's costs in performing
its services amounted to $11,170 for the fiscal year ended May 31, 2000.

e) An aggregate annual fee of $75,000 is paid to each trustee for serving as
a trustee of the portfolio, the J.P. Morgan Funds, the J.P. Morgan
Institutional Funds, the master portfolios and J.P. Morgan Series Trust.
The Trustees' Fees and Expenses shown in the financial statements
represents the portfolio's allocated portion of the total fees and
expenses. The portfolio's Chairman and Chief Executive Officer also serves
as Chairman of Group and receives compensation and employee benefits from
Group in his role as Group's Chairman. The allocated portion of such
compensation and benefits included in the Fund Services Fee shown in the
financial statements was $2,100.

3. INVESTMENT TRANSACTIONS

Investment transactions (excluding short-term investments) for the fiscal year
ended May 31, 2000 were as follows:

<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
--------- ------------
<S> <C>
633,640,799..... 676,595,162
</TABLE>

4. CREDIT AGREEMENT

The portfolio is party to a revolving line of credit agreement (the "Agreement")
as discussed more fully in Note 4 of the fund's Notes to the Financial
Statements which are included elsewhere in this report.

31
<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, 2000, 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 supplementary data for each of the five years in the period
then ended, in conformity with accounting principles generally accepted in the
United States. These financial statements and supplementary data (hereafter
referred to as "financial statements") are the responsibility of the portfolio's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with auditing standards generally accepted in the
United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at May 31, 2000 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.

PricewaterhouseCoopers LLP
New York, New York
July 14, 2000

32
<PAGE>

J.P. MORGAN INSTITUTIONAL FUNDS
PRIME MONEY MARKET FUND
TREASURY MONEY MARKET FUND
FEDERAL MONEY MARKET FUND
TAX EXEMPT MONEY MARKET FUND
TAX AWARE ENHANCED INCOME FUND:
INSTITUTIONAL SHARES
SHORT TERM BOND FUND
BOND FUND
GLOBAL STRATEGIC INCOME FUND
TAX EXEMPT BOND FUND
NEW YORK TAX EXEMPT BOND FUND
CALIFORNIA BOND FUND: INSTITUTIONAL SHARES
DIVERSIFIED FUND
DISCIPLINED EQUITY FUND
LARGE CAP GROWTH FUND: INSTITUTIONAL SHARES
U.S. EQUITY FUND
U.S. SMALL COMPANY FUND
TAX AWARE DISCIPLINED EQUITY FUND:
INSTITUTIONAL SHARES
INTERNATIONAL EQUITY FUND
EUROPEAN EQUITY FUND
INTERNATIONAL OPPORTUNITIES FUND
EMERGING MARKETS EQUITY FUND
SMART INDEX -TM- FUND: INSTITUTIONAL SHARES
MARKET NEUTRAL FUND: INSTITUTIONAL SHARES

FOR MORE INFORMATION ON THE J.P. MORGAN
INSTITUTIONAL FUNDS, CALL J.P. MORGAN FUNDS
SERVICES AT (800)766-7722.
IMAR384

J.P. MORGAN INSTITUTIONAL
U.S. SMALL
COMPANY FUND

ANNUAL REPORT
MAY 31, 2000