<PAGE>
LETTER TO THE SHAREHOLDERS OF THE JPM PIERPONT EQUITY FUND
January 15, 1997
Dear Shareholder:
The six months ended November 30, 1996 saw U.S. stocks continue their record-
setting pace. Indeed, results from the national election that left the balance
of power in Washington unchanged helped the S&P 500 to climb 7.6% in November,
its strongest one-month advance in five years.
We are pleased to report that The JPM Pierpont Equity Fund provided a solid
absolute return of 11.46% during this period. While the Fund's performance
trails the 14.38% return posted over the the same period by the Fund's
benchmark, the S&P 500, it exceeded the 11.40% return provided by its
competitors as measured by the Lipper Equity Growth and Income Fund Average. It
should be noted that the Fund's benchmark is an unmanaged index whose
performance does not include fees or operating expenses and is not available to
individual and/or institutional investors.
The Fund's investment strategy seeks to add long-term value for shareholders by
relying on Morgan's proprietary research in order to identify undervalued large
cap stocks. We believe it is this actively managed approach to U.S. large cap
stocks that has enabled the Fund to provide shareholders with an average annual
total return of 14.81% over the last ten years. While this is below the 15.22%
average annual total return provided by the S&P 500 over the same period, it is
also considerably superior to the 13.01% ten-year average annual total return
provided by the Lipper average.
The Fund's net asset value increased from $22.15 per share to $22.92 at the
close of the six-month period, after making distributions during the year of
$0.80 from long-term capital gains, $0.65 from short-term capital gains, and
$0.09 from ordinary income. In addition, the Fund's net assets advanced from
$330.0 million on May 31, 1996 to $362.2 million at the end of the period under
review. The net assets of The Selected U.S. Equity Portfolio, in which the Fund
invests, totaled approximately $804.5 million at November 30, 1996.
The report that follows includes a portfolio manager Q&A with William B.
Petersen, a member of the portfolio management team. This interview is
designed to answer commonly asked questions about the Fund, elaborate on what
happened during the reporting period, and provide an outlook for the months
ahead.
As always, we welcome your comments, questions, or any suggestions on how we
can further improve your financial reports. Please call J.P. Morgan Funds
Services, toll free, at (800) 521-5411.
Sincerely yours,
/s/ Evelyn E. Guernsey
Evelyn E. Guernsey
J.P. Morgan Funds Services
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
LETTER TO THE SHAREHOLDERS . . . 1 FUND FACTS AND HIGHLIGHTS. . . . . . 7
FUND PERFORMANCE . . . . . . . . 2 SPECIAL FUND-BASED SERVICES. . . . . 8
PORTFOLIO MANAGER Q&A. . . . . . 3 FINANCIAL STATEMENTS . . . . . . . . 10
- --------------------------------------------------------------------------------
1
<PAGE>
FUND PERFORMANCE
EXAMINING PERFORMANCE
One 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 in 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.
<TABLE>
<CAPTION>
PERFORMANCE TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS
--------------------- ---------------------------------------------------
THREE SIX ONE THREE FIVE TEN
AS OF NOVEMBER 30, 1996 MONTHS MONTHS YEAR YEARS YEARS YEARS
- ------------------------------------------------------------ ---------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
The JPM Pierpont Equity Fund 15.06% 11.46% 25.33% 18.26% 17.05% 14.81%
S&P 500 16.75% 14.38% 27.86% 20.96% 18.21% 15.22%
Lipper Equity Growth and
Income Fund Average 13.53% 11.40% 23.79% 17.46% 16.21% 13.01%
AS OF SEPTEMBER 30, 1996
- ------------------------------------------------------------ ---------------------------------------------------
The JPM Pierpont Equity Fund 2.45% 4.80% 17.04% 15.56% 14.56% 14.30%
S&P 500 3.09% 7.72% 20.33% 17.42% 15.23% 14.99%
Lipper Equity Growth and
Income Fund Average 2.90% 6.39% 17.24% 14.30% 13.69% 12.69%
</TABLE>
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. FUND RETURNS ASSUME THE
REINVESTMENT OF DISTRIBUTIONS. LIPPER ANALYTICAL SERVICES, INC. IS A LEADING
SOURCE FOR MUTUAL FUND DATA. ALTHOUGH BENCHMARK RETURNS ARE GATHERED FROM
RELIABLE SOURCES, DATA ACCURACY AND COMPLETENESS CANNOT BE GUARANTEED. THE JPM
PIERPONT EQUITY FUND INVESTS ALL OF ITS INVESTABLE ASSETS IN THE SELECTED U.S.
EQUITY PORTFOLIO, A SEPARATELY REGISTERED INVESTMENT COMPANY WHICH IS NOT
AVAILABLE TO THE PUBLIC BUT ONLY TO OTHER COLLECTIVE INVESTMENT VEHICLES SUCH AS
THE FUND.
2
<PAGE>
PORTFOLIO MANAGER Q&A
[PHOTOGRAPH]
Following is an interview with WILLIAM B. PETERSEN, who is a member of the
portfolio management team for The Selected U.S. Equity Portfolio in which the
Fund invests. Bill originally joined Morgan in 1972 as a research analyst and
joined the firm's portfolio management team in 1977. This interview was
conducted on January 9, 1997 and reflects Bill's views on that date.
THE SIX MONTHS ENDED NOVEMBER 30, 1996 SAW THE CONTINUATION OF A TWO-YEAR SURGE
FOR THE S&P 500, WITH NOVEMBER PROVIDING THE LARGEST ONE-MONTH ADVANCE IN FIVE
YEARS. IN YOUR VIEW, WHAT FACTORS HAVE BEEN RESPONSIBLE FOR THIS MOVE FORWARD?
WBP: I'd have to say that the recent market has been fueled as much by what
didn't happen as by what did. First, fears of a possible slowdown in the
economy or a decline in earnings following the pause we had last summer didn't
really materialize. Interest rates drifted down somewhat in the second half of
the year, which is always good news for stocks. And then the catalyst for the
big move in November was "business as usual" in Washington. No major changes
emerged from the national elections, and people could immediately figure that
the last two years with a Democratic president and a Republican-controlled
Congress had been pretty good -- why shouldn't they continue to be good going
forward?
TECHNOLOGY AND FINANCE STOCKS HAVE CONTINUED TO LEAD THE MARKET, DESPITE SOME
VOLATILITY IN TECHNOLOGY AND A BACKUP IN INTEREST RATES THAT MIGHT HAVE BEEN
EXPECTED TO COMPROMISE FINANCE. HOW DO YOU EXPLAIN THE CONTINUED STRENGTH OF
THESE SECTORS AND DO YOU EXPECT IT TO CONTINUE GOING FORWARD?
WBP: We think that one good way to characterize the current market is to say
"what has been working continues to work." Both technology and finance had been
strong sectors and remained strong despite a number of short-term setbacks.
Technology weakened considerably during the summer months on concerns of an
economic slowdown. But when that slowdown didn't materialize, the sector zoomed
again. The performance turned in by bank stocks was also pretty strong
throughout most of the period, except at those times when day-to-day concerns
related to interest rates became more pervasive in the market.
In the case of technology stocks, we believe it has become very easy for people
to talk enthusiastically about the information revolution, without fully
understanding its ramifications or product marketability. Although we would
never question that these breakthroughs are very real, we are becoming a little
bit concerned that the market's love affair with things high tech is perhaps
being carried to an extreme over the short term.
I might also mention that the Portfolio's asset allocation earlier in the period
under review was somewhat underweighted in the technology sector. We continue to
always be on the lookout for opportunities in technology, but we think that it
might be time for things to cool down just a bit in that sector.
3
<PAGE>
Turning to finance, we think it is important to remember that stocks in this
sector have enjoyed a five-year period during which no credit cycles were
readily apparent. In fact, barring minor concerns on the consumer credit card
side, people seem to have forgotten that banks can occasionally make bad loans.
This kind of forgetfulness, paired with an industry that is clearly being better
managed in terms of improving returns and returning value to the shareholders
through share repurchases, has resulted in an uptick in the valuations of the
industry, back to levels that we really haven't seen in quite some time.
The Portfolio continues to be fully represented in the finance sector, although
we are now finding fewer opportunities in traditional banks themselves.We are
increasingly attracted to financial companies with exposure to other parts of
the financial industry, such as brokerage and credit cards.
COULD YOU NAME A FEW OF THE STOCKS THAT ALSO HELPED THE PORTFOLIO'S RELATIVE
RETURNS FOR THE PERIOD?
WBP: One of the technology stocks that helped the Fund's relative performance
during the period under review was EMC CORPORATION, which is followed by our
analyst Le-Ellen Spelman. The Portfolio remained invested in EMC during the
entire six months, and the stock was up over 45% during the period as the
competitive situation in the mainframe disc drive business had stabilized. More
importantly, the company is coming out with some exciting new products that are
designed to address a potentially huge market on the Internet for storage. The
stock continues to be a sizable holding within the Portfolio.
ALLIEDSIGNAL, INC., followed by analyst Ted Wheeler, is a diversified company
with interests in aerospace, automotive, and engineered materials. The Portfolio
has held this stock for several years now, and it continues to be one of its
fairly large holdings. The company has convinced many analysts to believe
earnings growth may be a little bit faster than was previously thought, but it
is the type of stock that has generally been favored by this market. In theory
at least, AlliedSignal has a lot of earnings visibility, a valuation that is not
excessive, and a strong management team.
Another key contributor to the Fund's relative returns during this period was
TELEDYNE, INC., which the Portfolio purchased as a way to get ALLEGHENY
TELEDYNE, INC. Allegheny Ludlum Corp. has acquired Teledyne. We have known the
management of Allegheny, which has been followed by analyst Susan Ulick, for a
very long time, and we are fascinated by the opportunities that the merger of
these two companies presents to a very sound management team at Allegheny.
WHICH OF THE PORTFOLIO'S UNDERVALUED SELECTIONS THAT HAVE LAGGED SHORT TERM
CONTINUE TO BE HELD BECAUSE WE BELIEVE IN THEIR LONG-TERM CAPITAL APPRECIATION
POTENTIAL?
WBP: The worst-performing stock in the Portfolio during the last six months was
GENERAL INSTRUMENT CORP., which came out with an earnings disappointment yet
again. We have now added to the position, and it is a fairly large holding in
the Portfolio. We think that there is an exciting new product cycle coming with
the digital set-top boxes and other products in that area. Just as importantly,
in our view, General Instrument has only very recently announced that it is
splitting into three companies. While this has not resulted in any
4
<PAGE>
immediate increase in valuation, we think it will provide greater clarity to the
business that we think is really the most exciting, which is the new digital
communications products division.
TELECOMMUNICATIONS, INC., the largest cable company in the country, is another
stock that has been one of the Portfolio's poor performers. This is a position
the Portfolio has held for some time. It's been disappointing as people have
become concerned about competition from direct satellite and possibly from the
phone companies. We believe both concerns are overblown, in part because of some
of the technology coming out of General Instrument in the digital set-top box
area. We have also been pleased to note that John Malone, who is the president
of Telecommunications, Inc., is getting much more involved in the business's
day-to-day operations and has actually embarked on a whirlwind series of
restructuring moves, cost-cuttings, and spinning off of assets that were hidden
on the balance sheet. The stock currently represents one of the larger holdings
in the Portfolio. We think the pieces are now falling into place for
Telecommunications, Inc.
THE FUND UNDERPERFORMED THE INDEX FOR THE PERIOD BUT WAS ABLE TO KEEP PACE WITH
LIPPER COMPETITORS. WHY HAS IT BEEN SO DIFFICULT FOR ACTIVE MANAGERS TO
OUTPERFORM THE INDEX DURING THE PAST FEW YEARS?
WBP: Six years into a bull market and economic recovery, investors are
obviously getting increasingly nervous about how sustainable this will be. It is
quite typical at this stage of a market cycle that investors tend to focus more
on the larger, more stable names. This has been going on now for the better part
of two years, and it's rare to find many companies with both very large market
capitalizations and reasonably stable earnings outlooks that appear to be
undervalued at this point. The Portfolio is now underweighted in these stocks,
as most value managers would recommend at this point in the cycle.
Momentum investing has also become more fashionable this cycle than perhaps it
was during previous cycles. As a consequence, the market just seems to
increasingly wait for signs of improvement in an under-valued situation before
climbing on board. Given this environment, companies that look cheap tend to
stay cheap until the market perception begins to shift -- usually with signs of
improving near-term earnings.
THE MARKETS RETURNED TO BROADER-BASED BUYING IN NOVEMBER, WHICH HAS GENERALLY
PROVED A FAVORABLE ENVIRONMENT FOR INVESTING BY THE PORTFOLIO. GIVEN PROJECTIONS
FOR A SLOWDOWN IN THE U.S. MARKET, DO YOU EXPECT THIS TYPE OF MARKET TO BE
SUSTAINED IN 1997?
WBP: Our general expectation is that corporate profits are likely to slow to
something like 5% this year, with margins high and sales growth still difficult
to come by. Without a meaningful change in interest rates, it's difficult for us
to envision the market having the same sort of returns, or even anything
approaching them, than it has had during the last few years. And in a market
that continues to have a generally favorable backdrop, without any major upward
price momentum, a lot more people will need to be more and more willing to look
beyond the stocks that have been working to find opportunities to make money.
5
<PAGE>
When the market is up 25%, you don't have to care so much about looking for
interesting pockets of ideas to make money (you just have to be there). But if
the market is going to have more returns in a slowing profit environment, people
are going to have to look beyond the big names. We think our broad look at the
market will produce opportunities that people will care about in 1997 in the
kind of environment I've described.
GIVEN THOSE CIRCUMSTANCES, WHERE WILL THE PORTFOLIO BE MOST LIKELY TO SEEK OUT
VALUE IN THE MONTHS AHEAD?
WBP: We plan to keep the Portfolio relatively sector neutral, which we think is
a good thing going forward, given continued anxiety about the magnitude of the
strength in the economy. We'll just continue to do what we believe we do best -
- - that is to uncover stock opportunities within market sectors which appear to
be undervalued based on our research.
6
<PAGE>
FUND FACTS
INVESTMENT OBJECTIVE
The JPM Pierpont Equity Fund seeks to provide a high total return from a
portfolio of selected equity securities. It is designed for investors who want
an actively managed portfolio of selected equity securities that seeks to
outperform the S&P 500 Index.
- -------------------------------------------------------
COMMENCEMENT OF OPERATIONS
6/27/85
- -------------------------------------------------------
NET ASSETS AS OF 11/30/96
$362,241,771
- -------------------------------------------------------
CAPITAL GAIN PAYABLE DATE
12/27/96
EXPENSE RATIO
The Fund's current annualized expense ratio of 0.82% covers shareholders'
expenses for custody, tax reporting, investment advisory and shareholder
services. The Fund is no-load and does not charge any sales, redemption, or
exchange fees. There are no additional charges for buying, selling, or
safekeeping Fund shares, or for wiring redemption proceeds from the Fund.
FUND HIGHLIGHTS
ALL DATA AS OF NOVEMBER 30, 1996
PORTFOLIO ALLOCATION
(AS A PERCENTAGE OF TOTAL INVESTMENTS)
[PIE CHART]
CONSUMER GOODS 22.7%
FINANCE 14.4%
INDUSTRIAL 14.1%
TECHNOLOGY 11.3%
HEALTH CARE 9.9%
ENERGY 9.9%
UTILITIES 8.9%
BASIC INDUSTRIES 6.8%
TRANSPORTATION 1.5%
SHORT-TERM HOLDINGS 0.5%
LARGEST EQUITY HOLDINGS % OF TOTAL INVESTMENTS
- -------------------------------------------------------
EXXON CORP. 2.9%
WMX TECHNOLOGIES, INC. 2.5%
WAL-MART STORES, INC. 2.5%
PHILIP MORRIS COMPANIES, INC. 2.4%
PROCTER & GAMBLE CO. 2.4%
7
<PAGE>
SPECIAL FUND-BASED SERVICES
PIERPONT ASSET ALLOCATION SERVICE (PAAS)
For many investors, a diversified portfolio -- including short-term instruments,
bonds, and stocks -- can offer an excellent opportunity to achieve one's
investment objectives. PAAS provides investors with a comprehensive management
program for their portfolios. Through this service, investors can:
- - create and maintain an asset allocation that is specifically targeted at
meeting their most critical investment objectives;
- - make ongoing tactical adjustments in the actual asset mix of their
portfolios to capitalize on shifting market trends;
- - make investments through The JPM Pierpont Funds, a family of diversified
mutual funds.
PAAS is available to clients who invest a minimum of $500,000 in The JPM
Pierpont Funds.
IRA MANAGEMENT SERVICE
As one of the few remaining investments that can help your assets grow tax-
deferred until retirement, the IRA enables more of your dollars to work for you
longer. Morgan offers an IRA Rollover plan that helps you to build well-balanced
long-term investment portfolios, diversified across a wide array of mutual
funds. From money markets to emerging markets, The JPM Pierpont Funds provide an
excellent way to help you accumulate long-term wealth for retirement.
KEOGH
In early 1995, Morgan introduced a Keogh program for its clients. Keoghs provide
another excellent vehicle to help individuals who are self-employed or are
employees of unincorporated businesses to accumulate retirement savings. A Keogh
is a tax-deferred pension plan that can allow you to contribute the lesser of
$30,000 or 25% of your annual earned gross compensation. The JPM Pierpont Funds
can help you build a comprehensive investment program designed to maximize the
retirement dollars in your Keogh account.
8
<PAGE>
FUNDS DISTRIBUTOR, INC. IS THE DISTRIBUTOR OF THE JPM PIERPONT EQUITY FUND (THE
"FUND"). SIGNATURE BROKER-DEALER SERVICES, INC. SERVED AS THE FUND'S DISTRIBUTOR
PRIOR TO AUGUST 1, 1996.
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 and assume reinvestment of income. The Fund invests all of its
investable assets in The Selected U.S. Equity Portfolio, a separately registered
investment company which is not available to the public but only to other
collective investment vehicles such as the Fund. References to specific
securities and their issuers are for illlustrative purposes only and should not
be interpreted as recommendations to purchase or sell such securities. Opinions
expressed herein on current market conditions and are subject to change without
notice.
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) 521-5411.
9
<PAGE>
THE JPM PIERPONT EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
NOVEMBER 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment in The Selected U.S. Equity Portfolio
("Portfolio"), at value $362,325,858
Receivable for Shares of Beneficial Interest Sold 39,420
Prepaid Trustees' Fees 1,022
Prepaid Expenses and Other Assets 30,832
------------
Total Assets 362,397,132
------------
LIABILITIES
Payable for Shares of Beneficial Interest
Redeemed 12,452
Shareholder Servicing Fee Payable 71,376
Administrative Services Fee Payable 9,006
Administration Fee Payable 2,489
Fund Services Fee Payable 464
Accrued Expenses 59,574
------------
Total Liabilities 155,361
------------
NET ASSETS
Applicable to 15,804,456 Shares of Beneficial
Interest Outstanding
(par value $0.001, unlimited shares authorized) $362,241,771
------------
------------
Net Asset Value, Offering and Redemption Price
Per Share $22.92
-----
-----
ANALYSIS OF NET ASSETS
Paid-in Capital $277,792,584
Undistributed Net Investment Income 3,430,452
Accumulated Net Realized Gain on Investment 14,362,412
Net Unrealized Appreciation of Investment 66,656,323
------------
Net Assets $362,241,771
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
10
<PAGE>
THE JPM PIERPONT EQUITY FUND
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME ALLOCATED FROM PORTFOLIO
Allocated Dividend Income (Net of Foreign
Withholding Tax of $34,238) $ 2,974,636
Allocated Interest Income 290,868
Allocated Portfolio Expenses (785,228)
-----------
Net Investment Income Allocated from
Portfolio 2,480,276
FUND EXPENSES
Shareholder Servicing Fee $410,185
Administrative Services Fee 48,119
Transfer Agent Fees 39,898
Registration Fees 28,171
Printing Expenses 14,712
Administration Fee 10,773
Fund Services Fee 5,833
Professional Fees 5,517
Trustees' Fees and Expenses 2,726
Insurance Expense 168
Miscellaneous 2,925
--------
Total Fund Expenses 569,027
-----------
NET INVESTMENT INCOME 1,911,249
NET REALIZED GAIN ON INVESTMENT ALLOCATED FROM
PORTFOLIO 16,723,894
NET CHANGE IN UNREALIZED APPRECIATION OF
INVESTMENT ALLOCATED FROM PORTFOLIO 18,358,311
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $36,993,454
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
11
<PAGE>
THE JPM PIERPONT EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE FISCAL
NOVEMBER 30, 1996 YEAR ENDED
(UNAUDITED) MAY 31, 1996
----------------- --------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 1,911,249 $ 5,549,516
Net Realized Gain on Investment Allocated from
Portfolio 16,723,894 33,751,745
Net Change in Unrealized Appreciation of
Investment Allocated from Portfolio 18,358,311 27,600,018
----------------- --------------
Net Increase in Net Assets Resulting from
Operations 36,993,454 66,901,279
----------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (1,401,758) (4,147,758)
Net Realized Gain (21,655,812) (22,306,715)
----------------- --------------
Total Distributions to Shareholders (23,057,570) (26,454,473)
----------------- --------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Proceeds from Shares of Beneficial Interest Sold 22,462,513 65,395,622
Reinvestment of Dividends and Distributions 21,585,850 24,774,964
Cost of Shares of Beneficial Interest Redeemed (25,756,154) (59,941,484)
----------------- --------------
Net Increase from Transactions in Shares of
Beneficial Interest 18,292,209 30,229,102
----------------- --------------
Total Increase in Net Assets 32,228,093 70,675,908
NET ASSETS
Beginning of Period 330,013,678 259,337,770
----------------- --------------
End of Period (including undistributed net
investment income of $3,430,452 and $2,920,961,
respectively) $ 362,241,771 $ 330,013,678
----------------- --------------
----------------- --------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
12
<PAGE>
THE JPM PIERPONT EQUITY FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share outstanding throughout each period are as follows:
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS ENDED FOR THE FISCAL YEAR ENDED MAY 31,
NOVEMBER 30, 1996 ----------------------------------------------------
(UNAUDITED) 1996 1995 1994 1993 1992
----------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 22.15 $ 19.42 $ 19.38 $ 19.30 $ 19.02 $ 18.21
----------------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.11 0.38 0.32 0.27 0.38 0.37
Net Realized and Unrealized Gain on Investment 2.20 4.23 2.17 1.32 1.35 2.13
----------------- -------- -------- -------- -------- --------
Total from Investment Operations 2.31 4.61 2.49 1.59 1.73 2.50
----------------- -------- -------- -------- -------- --------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (0.09) (0.29) (0.28) (0.29) (0.36) (0.40)
Net Realized Gain (1.45) (1.59) (2.17) (1.22) (1.09) (1.29)
----------------- -------- -------- -------- -------- --------
Total Distributions to Shareholders (1.54) (1.88) (2.45) (1.51) (1.45) (1.69)
----------------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 22.92 $ 22.15 $ 19.42 $ 19.38 $ 19.30 $ 19.02
----------------- -------- -------- -------- -------- --------
----------------- -------- -------- -------- -------- --------
Total Return 11.46%+ 25.18% 15.11% 8.54% 10.02% 14.60%
----------------- -------- -------- -------- -------- --------
----------------- -------- -------- -------- -------- --------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (in thousands) $ 362,242 $330,014 $259,338 $231,306 $202,474 $109,246
Ratios to Average Net Assets
Expenses 0.82%(b) 0.81% 0.90% 0.90% 0.90% 0.90%
Net Investment Income 1.16%(b) 1.87% 1.74% 1.43% 2.20% 2.16%
Decrease Reflected in Expense Ratio due to
Expense Reimbursement -- -- 0.01% 0.03% 0.08% 0.19%
Portfolio Turnover -- -- -- 10%(a) 60% 99%
</TABLE>
- ------------------------
+ Not Annualized
(a)1994 Portfolio Turnover reflects the period from June 1, 1993 to July 18,
1993. After July 18, 1993, all of the Fund's investable assets were invested
in The Selected U.S. Equity Portfolio.
(b) Annualized
The Accompanying Notes are an Integral Part of the Financial Statements.
13
<PAGE>
THE JPM PIERPONT EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOVEMBER 30, 1996
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The JPM Pierpont Equity Fund (the "Fund") is a separate series of The JPM
Pierpont Funds, a Massachusetts business trust (the "Trust"). The Trust is
registered under the Investment Company Act of 1940, as amended, as an open-end
management investment company. The Fund, prior to its tax-free reorganization on
July 18, 1993, to a series of the Trust, operated as a stand-alone mutual fund.
Costs related to the reorganization were borne by Morgan Guaranty Trust Company
of New York ("Morgan"). This report includes periods which preceded the Fund's
reorganization and reflects the operations of the predecessor entity. Prior to
October 10, 1996, the Trust's and the Fund's name were The Pierpont Funds and
The Pierpont Equity Fund, respectively.
The Fund invests all of its investable assets in The Selected U.S. Equity
Portfolio (the "Portfolio"), a diversified open-end management investment
company having the same investment objective as the Fund. The value of such
investment included in the Statement of Assets and Liabilities reflects the
Fund's proportionate interest in the net assets of the Portfolio (45% at
November 30, 1996). 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 prepared in accordance with generally
accepted accounting principals 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 1 of the
Portfolio's Notes to Financial Statements which are included elsewhere in
this report.
b)The Fund records its share of net investment income, realized and
unrealized gain and loss and adjusts its investment in the Portfolio each
day. All the net investment income and realized and unrealized gain and
loss of the Portfolio is allocated pro rata among the Fund and other
investors in the Portfolio at the time of such determination.
c)Substantially all the Fund's net investment income is declared as
dividends and paid semi-annually. Distributions to shareholders of net
realized capital gain, if any, are declared and paid annually.
d)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.
e)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.
14
<PAGE>
THE JPM PIERPONT EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOVEMBER 30, 1996
- --------------------------------------------------------------------------------
2. TRANSACTIONS WITH AFFILIATES
a)The Trust had retained Signature Broker-Dealer Services, Inc.
("Signature") to serve as administrator and distributor. Under an
Administrative Agreement, Signature provided administrative services
necessary for the operations of the Fund, furnished office space and
facilities required for conducting the business of the Fund and paid the
compensation of the Fund's officers affiliated with Signature. Effective
December 29, 1995, the Administration Agreement provided for a fee to be
paid to Signature such that the fee charged was equal to the Fund's
proportionate share of a complex-wide fee based on the following annual
schedule: 0.03% on the first $7 billion of the aggregate average daily net
assets of the Portfolio and the other portfolios (the "Master Portfolios")
in which the Trust, The JPM Institutional Funds or The JPM Advisor Funds
invest and 0.01% on the aggregate average daily net assets of the Master
Portfolios in excess of $7 billion. The portion of this charge paid by the
Fund was determined by the proportionate share its net assets bore to the
total net assets of the Trust, The JPM Institutional Funds, The JPM
Advisor Funds and the Master Portfolios. For the period from June 1, 1996
through July 31, 1996 Signature's fee for these services amounted to
$6,777. The Administration Agreement with Signature was terminated July
31, 1996.
Effective August 1, 1996, certain administrative functions formerly
provided by Signature are provided by Funds Distributor, Inc. ("FDI"), a
registered broker-dealer, and by Morgan. FDI also serves as the Fund's
distributor. Under a Co-Administration Agreement between FDI and the Trust
on behalf of the Fund, 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,
The JPM Institutional Funds, The JPM Advisor Funds and the Master
Portfolios. For the period August 1, 1996 through November 30, 1996, the
fee for these services amounted to $3,996.
On November 15, 1996, The JPM Advisor Funds terminated operations and were
being liquidated. Subsequent to that date, the net assets of The JPM
Advisor Funds are no longer included in the calculation of the allocation
of FDI's fees.
b)Effective December 29, 1995, the Trust, on behalf of the Fund, entered
into an Administrative Services Agreement with Morgan (the "Services
Agreement") under which Morgan is responsible for overseeing certain
aspects of the administration and operation of the Fund. Under the
Services Agreement, the Fund had agreed to pay Morgan a fee equal to its
proportionate share of an annual complex-wide charge. Until July 31, 1996,
this charge was calculated daily based on the aggregate net assets of the
Master Portfolios in accordance with the following annual schedule: 0.06%
on the first $7 billion of the Master Portfolios' aggregate average daily
net assets and 0.03% of the aggregate average daily net assets in excess
of $7 billion. The portion of this charge paid by the Fund was determined
by the proportionate share that the Fund's net assets bore to the average
daily net assets of the Trust, the Master Portfolios and other investors
in the Master Portfolios for which Morgan provided similar services. For
the period from June 1, 1996 through July 31, 1996, such fees amounted to
$13,061.
Effective August 1, 1996, the Services Agreement was amended such that the
annual complex-wide charge is calculated daily based on the aggregate net
assets of the Master Portfolios' in accordance with
15
<PAGE>
THE JPM PIERPONT EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOVEMBER 30, 1996
- --------------------------------------------------------------------------------
the following schedule: 0.09% on the first $7 billion of the Master
Portfolios' aggregate average daily net assets and 0.04% of the aggregate
average daily net assets in excess of $7 billion less the complex-wide
fees payable to FDI. The allocation of the Fund's portion of this charge
is described above. For the period August 1, 1996 through November 30,
1996 the fee for these services amounted to $35,058.
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 paid monthly at an annual rate
of 0.25% of the average daily net assets of the Fund. For the six months
ended November 30, 1996, the fee for these services amounted to $410,185.
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. For the six
months ended November 30, 1996, the Fund's allocated portion of Group's
costs in performing its services amounted to $5,833.
e)An aggregate annual fee of $65,000 is paid to each Trustee for serving as
a Trustee of The Trust, The JPM Institutional Funds, and the Master
Portfolios. 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 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. 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 SIX
MONTHS ENDED FOR THE FISCAL
NOVEMBER 30, 1996 YEAR ENDED
(UNAUDITED) MAY 31, 1996
----------------- --------------
<S> <C> <C>
Shares of beneficial interest sold............... 1,048,719 3,196,800
Reinvestment of dividends and distributions...... 1,076,064 1,254,715
Shares of beneficial interest redeemed........... (1,217,871) (2,905,230)
----------------- --------------
Net increase..................................... 906,912 1,546,285
----------------- --------------
----------------- --------------
</TABLE>
16
<PAGE>
The Selected U.S. Equity Portfolio
Semi-Annual Report November 30, 1996
(unaudited)
(The following pages should be read in conjunction with
The JPM Pierpont Equity Fund
Semi-Annual Financial Statements)
17
<PAGE>
THE SELECTED U.S. EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
NOVEMBER 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -------------
<S> <C> <C>
COMMON STOCKS (98.9%)
BASIC INDUSTRIES (6.8%)
CHEMICALS (3.2%)
E.I. Du Pont De Nemours & Co..................... 114,300 $ 10,772,775
Union Carbide Corp............................... 316,100 14,580,112
Wellman, Inc..................................... 32,300 520,837
-------------
25,873,724
-------------
FOREST PRODUCTS & PAPER (0.7%)
Temple-Inland, Inc............................... 105,400 5,665,250
-------------
METALS & MINING (2.9%)
Allegheny Teledyne, Inc.......................... 487,955 11,405,948
Aluminum Company of America (ALCOA).............. 191,200 12,165,100
-------------
23,571,048
-------------
TOTAL BASIC INDUSTRIES......................... 55,110,022
-------------
CONSUMER GOODS & SERVICES (22.7%)
AUTOMOTIVE (2.2%)
Cooper Tire & Rubber............................. 67,500 1,383,750
General Motors Corp.............................. 281,600 16,227,200
-------------
17,610,950
-------------
BROADCASTING & PUBLISHING (2.1%)
Tele-Communications TCI, Series A+............... 1,259,300 17,079,256
-------------
ENTERTAINMENT, LEISURE & MEDIA (1.7%)
Time Warner Inc.................................. 336,500 13,712,375
-------------
FOOD, BEVERAGES & TOBACCO (7.6%)
CPC International, Inc........................... 101,500 8,449,875
Kellogg Co....................................... 56,700 3,848,512
PepsiCo., Inc.................................... 359,900 10,752,012
Philip Morris Companies, Inc..................... 190,900 19,686,562
Ralston Purina Co................................ 87,400 6,686,100
Unilever NV (ADR)................................ 67,700 11,720,562
-------------
61,143,623
-------------
HOUSEHOLD APPLIANCES FURNISHINGS (0.4%)
Furniture Brands International, Inc.+............ 244,300 3,023,212
-------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -------------
<S> <C> <C>
HOUSEHOLD PRODUCTS (2.9%)
Colgate-Palmolive Co............................. 41,500 $ 3,843,937
Procter & Gamble Co.............................. 177,430 19,295,512
-------------
23,139,449
-------------
RETAIL (5.8%)
Circuit City Stores, Inc......................... 220,000 7,342,500
Federated Department Stores, Inc.+............... 219,600 7,493,850
General Nutrition Companies, Inc.+............... 294,900 5,105,456
Toys 'R' Us, Inc.+............................... 204,400 7,051,800
Wal-Mart Stores, Inc............................. 785,560 20,031,780
-------------
47,025,386
-------------
TOTAL CONSUMER GOODS & SERVICES................ 182,734,251
-------------
ENERGY (10.0%)
GAS EXPLORATION (1.0%)
Enron Corp....................................... 173,600 7,942,200
-------------
OIL-PRODUCTION (8.9%)
Anadarko Petroleum Corp.......................... 128,200 8,573,375
Ashland Inc...................................... 176,700 8,481,600
Cooper Cameron Corp.+............................ 65,812 4,327,139
Diamond Shamrock, Inc............................ 250,800 8,151,000
Exxon Corp....................................... 245,200 23,202,050
MAPCO, Inc....................................... 117,900 3,979,125
Royal Dutch Petroleum Co. (ADR).................. 47,100 8,001,112
Texaco Inc....................................... 66,900 6,631,483
-------------
71,346,884
-------------
OIL-SERVICES (0.1%)
Input/Output, Inc.+.............................. 19,500 468,000
-------------
TOTAL ENERGY................................... 79,757,084
-------------
FINANCE (14.4%)
BANKING (7.7%)
Crestar Financial Corp........................... 25,000 1,740,625
First Chicago NBD Corp........................... 240,300 14,117,625
First Hawaiian, Inc.............................. 35,300 1,145,044
Firstar Corp..................................... 74,750 3,989,781
Fleet Financial Group, Inc....................... 264,800 14,663,300
Great Western Financial Corp..................... 130,600 4,064,925
NationsBank Corp................................. 122,500 12,694,062
Standard Federal Bancorporation.................. 166,000 9,358,250
-------------
61,773,612
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
18
<PAGE>
THE SELECTED U.S. EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
NOVEMBER 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -------------
<S> <C> <C>
FINANCIAL SERVICES (3.4%)
Dean Witter Discover & Co........................ 208,900 $ 14,283,537
First USA, Inc................................... 126,800 4,168,550
Mercury Finance Co............................... 78,500 912,563
Salomon, Inc..................................... 167,400 7,637,625
-------------
27,002,275
-------------
INSURANCE (3.3%)
AMBAC, Inc....................................... 185,300 12,693,050
Providian Corp................................... 263,600 14,102,600
-------------
26,795,650
-------------
TOTAL FINANCE.................................. 115,571,537
-------------
HEALTH CARE (9.9%)
HEALTH SERVICES (3.2%)
Columbia / HCA Healthcare Corp................... 199,500 7,980,000
Humana, Inc.+.................................... 200,600 3,786,325
United Healthcare Corp........................... 314,800 13,575,750
-------------
25,342,075
-------------
PHARMACEUTICALS (6.7%)
Alza Corp.+...................................... 233,900 6,607,675
American Home Products Corp...................... 73,000 4,690,250
Bausch & Lomb, Inc............................... 299,400 11,115,225
Bristol-Myers Squibb Co.......................... 79,700 9,065,875
Forest Laboratories, Inc.+....................... 190,900 7,397,375
Gensia, Inc.+.................................... 1,082 4,970
Warner-Lambert Co................................ 209,000 14,943,500
-------------
53,824,870
-------------
TOTAL HEALTH CARE.............................. 79,166,945
-------------
INDUSTRIAL PRODUCTS & SERVICES (13.6%)
BUILDING MATERIALS (1.1%)
Schuller Corp.................................... 357,500 3,440,938
USG Corp.+....................................... 182,500 5,703,125
-------------
9,144,063
-------------
COMMERCIAL SERVICES (1.9%)
First Data Corp.................................. 180,800 7,209,400
Service Corp. International...................... 257,000 7,742,125
-------------
14,951,525
-------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -------------
<S> <C> <C>
DIVERSIFIED MANUFACTURING (4.2%)
AlliedSignal, Inc................................ 161,000 $ 11,793,250
Cooper Industries, Inc........................... 259,700 10,777,550
General Electric Co.............................. 105,650 10,987,600
-------------
33,558,400
-------------
ELECTRICAL EQUIPMENT (3.9%)
Anixter International, Inc.+..................... 511,500 8,567,625
General Instrument Corp.+........................ 488,000 10,797,000
Grainger (W.W.), Inc............................. 131,100 10,422,450
MagneTek, Inc.+.................................. 152,800 1,910,000
-------------
31,697,075
-------------
POLLUTION CONTROL (2.5%)
WMX Technologies, Inc............................ 561,500 20,214,000
-------------
TOTAL INDUSTRIAL PRODUCTS & SERVICES........... 109,565,063
-------------
TECHNOLOGY (11.2%)
AEROSPACE (2.5%)
Boeing Co........................................ 131,500 13,067,813
Coltec Industries, Inc.+......................... 390,425 7,222,863
-------------
20,290,676
-------------
COMPUTER PERIPHERALS (1.3%)
Quantum Corp.+................................... 318,600 8,562,375
Read-Rite Corp.+................................. 99,000 2,196,563
-------------
10,758,938
-------------
COMPUTER SOFTWARE (1.2%)
Autodesk, Inc.................................... 140,600 3,919,225
Cisco Systems, Inc.+............................. 89,300 6,066,819
-------------
9,986,044
-------------
COMPUTER SYSTEMS (3.3%)
EMC Corp.+....................................... 449,520 14,497,020
International Business Machines Corp............. 75,300 12,000,938
-------------
26,497,958
-------------
ELECTRONICS (1.4%)
Bay Networks, Inc.+.............................. 131,900 3,528,325
Perkin-Elmer Corp................................ 58,100 3,580,413
Sensormatic Electronics Corp..................... 200,900 4,018,000
-------------
11,126,738
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
THE SELECTED U.S. EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
NOVEMBER 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -------------
<S> <C> <C>
SEMICONDUCTORS (1.2%)
Advanced Micro Devices, Inc.+.................... 212,200 $ 5,145,850
Intel Corp....................................... 34,600 4,387,713
-------------
9,533,563
-------------
TELECOMMUNICATIONS (0.3%)
Paging Network, Inc.+............................ 145,700 2,385,838
-------------
TOTAL TECHNOLOGY............................... 90,579,755
-------------
TRANSPORTATION (1.5%)
RAILROADS (1.0%)
Union Pacific Corp............................... 134,800 7,852,100
-------------
TRUCK & FREIGHT CARRIERS (0.5%)
Consolidated Freightways, Inc.................... 174,700 4,214,638
-------------
TOTAL TRANSPORTATION........................... 12,066,738
-------------
UTILITIES (8.8%)
ELECTRIC (2.9%)
Dominion Resources, Inc.......................... 97,200 3,705,750
Duke Power Co.................................... 146,700 6,803,213
Northern States Power Co......................... 74,500 3,510,813
P P & L Resources, Inc........................... 97,400 2,228,025
Pacific Gas & Electric Co........................ 185,600 4,477,600
Pinnacle West Capital Corp....................... 96,300 2,997,338
-------------
23,722,739
-------------
TELEPHONE (5.9%)
AT & T Corp...................................... 201,900 7,924,575
Bell Atlantic Corp............................... 118,700 7,463,263
GTE Corp......................................... 150,200 6,740,225
MCI Communications Corp.......................... 450,300 13,762,294
US West Communications Group..................... 254,600 7,956,250
WorldCom, Inc.+.................................. 155,700 3,610,294
-------------
47,456,901
-------------
TOTAL UTILITIES................................ 71,179,640
-------------
TOTAL COMMON STOCKS (COST $645,437,484)........ 795,731,035
-------------
CONVERTIBLE PREFERRED STOCKS (0.5%)
HEALTH CARE (0.0%)*
PHARMACEUTICALS (0.0%)*
Gensia, Inc., $3.75 (144A)....................... 20,000 320,000
-------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- -------------
<S> <C> <C>
INDUSTRIAL PRODUCTS & SERVICES (0.5%)
BUILDING MATERIALS (0.5%)
Owens Corning LLC, 6.5% (144A)................... 62,500 $ 3,562,500
-------------
TOTAL CONVERTIBLE PREFERRED STOCKS (COST
$4,220,219)................................... 3,882,500
-------------
<CAPTION>
PRINCIPAL
AMOUNT
-----------
<S> <C> <C>
SHORT-TERM INVESTMENTS (0.5%)
REPURCHASE AGREEMENT (0.5%)
Goldman Sachs Repurchase Agreements, dated
11/27/96 through 11/29/96, due 12/02/96,
proceeds $4,374,367 (collateralized by U.S.
Treasury Note, 7.25%, due 08/15/04, valued at
$4,460,282)
(cost $4,372,000).............................. 4,372,000 4,372,000
-------------
TOTAL INVESTMENTS (COST $654,029,703) (99.9%).................
803,985,535
OTHER ASSETS IN EXCESS OF LIABILITIES (0.1%)..................
558,069
-------------
NET ASSETS (100.0%)........................................... $ 804,543,604
-------------
-------------
</TABLE>
- ------------------------------
<TABLE>
<S> <C>
Note: The cost of securities for Federal Income Tax purposes at November 30,
1996, was $654,715,836, the aggregate gross unrealized appreciation and
depreciation was $157,950,775 and $8,681,076, respectively, resulting in net
unrealized appreciation of $149,269,699.
+ Non-income producing security.
(ADR) -- Securities whose value is determined or significantly influenced by
trading on exchanges not located in the United States or Canada. ADR after the
name of a foreign holdings stands for American Depository Receipt,
representing ownership of foreign securities on deposit with a domestic
custodian bank.
144A -- Securities restricted for resale to Qualified Institutional Buyers.
* -- Less than 0.1%
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE SELECTED U.S. EQUITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
NOVEMBER 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $654,029,703 ) $803,985,535
Cash 540
Receivable for Investments Sold 13,537,749
Dividends Receivable 1,611,333
Prepaid Trustees' Fees 1,818
Interest Receivable 1,689
Prepaid Expenses and Other Assets 9,202
------------
Total Assets 819,147,866
------------
LIABILITIES
Payable for Investments Purchased 14,239,205
Advisory Fee Payable 255,266
Custody Fee Payable 62,532
Administrative Services Fee Payable 20,130
Administration Fee Payable 3,553
Fund Services Fee Payable 1,044
Accrued Expenses 22,532
------------
Total Liabilities 14,604,262
------------
NET ASSETS
Applicable to Investors' Beneficial Interests $804,543,604
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE SELECTED U.S. EQUITY PORTFOLIO
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividend Income (Net of Foreign Withholding Tax
of $75,783 ) $ 6,584,094
Interest Income 643,007
-----------
Investment Income 7,227,101
EXPENSES
Advisory Fee $1,455,233
Administrative Services Fee 107,393
Custodian Fees and Expenses 105,282
Professional Fees and Expenses 29,260
Administration Fee 21,230
Fund Services Fee 12,937
Trustees' Fees and Expenses 7,500
Registration Fees 303
Miscellaneous 922
----------
Total Expenses 1,740,060
-----------
NET INVESTMENT INCOME 5,487,041
NET REALIZED GAIN ON INVESTMENTS 38,385,276
NET CHANGE IN UNREALIZED APPRECIATION OF
INVESTMENTS 41,651,186
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $85,523,503
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE SELECTED U.S. EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE FISCAL
NOVEMBER 30, 1996 YEAR ENDED
(UNAUDITED) MAY 31, 1996
----------------- --------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 5,487,041 $ 15,066,796
Net Realized Gain on Investments 38,385,276 78,377,073
Net Change in Unrealized Appreciation of
Investments 41,651,186 63,227,280
----------------- --------------
Net Increase in Net Assets Resulting from
Operations 85,523,503 156,671,149
----------------- --------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 97,890,419 222,740,564
Withdrawals (98,082,367) (262,953,448)
----------------- --------------
Net Decrease from Investors' Transactions (191,948) (40,212,884)
----------------- --------------
Total Increase in Net Assets 85,331,555 116,458,265
NET ASSETS
Beginning of Period 719,212,049 602,753,784
----------------- --------------
End of Period $ 804,543,604 $ 719,212,049
----------------- --------------
----------------- --------------
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FISCAL FOR THE PERIOD
FOR THE YEAR ENDED MAY JULY 19, 1993
SIX MONTHS ENDED 31, (COMMENCEMENT OF
NOVEMBER 30, 1996 --------------- OPERATIONS) TO
(UNAUDITED) 1996 1995 MAY 31, 1994
-------------------- ------ ------ ----------------
<S> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Expenses 0.48%(a) 0.46% 0.51% 0.53%(a)
Net Investment Income 1.50%(a) 2.20% 2.12% 1.79%(a)
Portfolio Turnover 46.49% 84.55% 71.00% 76.00%+
Average Broker Commissions $ 0.05 -- -- --
</TABLE>
- ------------------------
(a) Annualized.
+Portfolio Turnover is for the twelve month period ended May 31, 1994, and
includes the portfolio activity of the Portfolio's predecessor entity, The
Pierpont Equity Fund, for the period June 1, 1993 to July 18, 1993.
The Accompanying Notes are an Integral Part of the Financial Statements.
23
<PAGE>
THE SELECTED U.S. EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOVEMBER 30, 1996
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Selected U.S. Equity Portfolio (the "Portfolio") is registered under the
Investment Company Act of 1940, as amended (the "Act"), 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 19, 1993 and received a contribution of certain assets and
liabilities, including securities, with a value of $209,477,219 on that date
from The Pierpont Equity Fund in exchange for a beneficial interest in the
Portfolio. At that date, net unrealized appreciation of $12,039,552 was included
in the contributed securities. On October 31, 1993, the Portfolio received a
contribution of securities and certain assets and liabilities, with a market
value and cost of $128,337,342 from the JPM North America Fund, Ltd., in
exchange for a beneficial interest in the Portfolio. The Portfolio's investment
objective is to provide a high total return from a portfolio of selected equity
securities. The Declaration of Trust permits the Trustees to issue an unlimited
number of beneficial interests in the Portfolio.
The preparation of financial statements prepared in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures. Actual amounts
could differ from those estimates. The following is a summary of the significant
accounting policies of the Portfolio:
a)The value of each security for which readily available market quotations
exists is based on a decision as to the broadest and most representative
market for such security. The value of such security will be based either
on the last sale price on a national securities exchange, or, in the
absence of recorded sales, at the average of readily available closing bid
and asked prices on such exchanges. Securities listed on a foreign
exchange are valued at the last quoted sale price available before the
time when net assets are valued. Unlisted securities are valued at the
average of the quoted bid and asked prices in the over-the-counter market.
Securities or other assets for which market quotations are not readily
available are valued at fair value in accordance with procedures
established by the Portfolio's Trustees. Such procedures include the use
of independent pricing services, which use prices based upon yields or
prices of securities of comparable quality, coupon, maturity and type;
indications as to values from dealers; and general market conditions. All
portfolio securities with a remaining maturity of less than 60 days are
valued at amortized cost.
b)Futures -- A futures contract is an agreement to purchase/sell a specified
quantity of an underlying instrument at a specified future date or to
make/receive a cash payment based on the value of a securities index. The
price at which the purchase and sale will take place will be fixed when
the Portfolio enters into the contract. Upon entering into such a contract
the Portfolio is required to pledge to the broker an amount of cash and/or
securities equal to the minimum "initial margin" requirements of the
exchange. Pursuant to the contract, the Portfolio agrees to receive from
or pay to the broker an amount of cash equal to the daily fluctuation in
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
24
<PAGE>
THE SELECTED U.S. EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOVEMBER 30, 1996
- --------------------------------------------------------------------------------
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. There
were no futures transactions during the six months ended November 30,
1996.
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.
d)The Portfolio intends to be treated as a partnership for federal income
tax purposes. As such, each investor in the Portfolio will be subject to
taxation on its share of the Portfolio's ordinary income and capital
gains. It is intended that the Portfolio's assets will be managed in such
a way that an investor in the Portfolio will be able to satisfy the
requirements of Subchapter M of the Internal Revenue Code.
e)The Portfolio's custodian 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.
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 agreement,
the Portfolio pays Morgan at an annual rate of 0.40% of the Portfolio's
average daily net assets. For the six months ended November 30, 1996 this
fee amounted to $1,455,233.
b)The Portfolio had retained Signature Broker-Dealer Services, Inc.
("Signature") to serve as administrator and exclusive placement agent.
Under an Administration Agreement, Signature provided administrative
services necessary for the operations of the Portfolio, furnished office
space and facilities required for conducting the business of the Portfolio
and paid the compensation of the Portfolio's officers affiliated with
Signature. Effective December 29, 1995, the Administration Agreement
provided for a fee to be paid to Signature such that the fee charged would
be equal to the Portfolio's proportionate share of a complex-wide fee
based on the following annual schedule: 0.03% on the first $7 billion of
the aggregate average daily net assets of the Portfolio and the other
portfolios (the "Master Portfolios") in which The JPM Pierpont Funds
(formerly The Pierpont Funds), The JPM Institutional Funds or The JPM
Advisor Funds invest and 0.01% on the aggregate average daily net assets
of the Master Portfolios in excess of $7 billion. The portion of this
charge paid by the Portfolio was determined by the proportionate share its
net assets bore to the total net assets of The JPM Pierpont
25
<PAGE>
THE SELECTED U.S. EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOVEMBER 30, 1996
- --------------------------------------------------------------------------------
Funds, The JPM Institutional Funds, The JPM Advisor Funds and the Master
Portfolios. For the period from June 1, 1996 through July 31, 1996,
Signature's fee for these services amounted to $14,675. The Administrative
Agreement with Signature was terminated July 31, 1996.
Effective August 1, 1996, certain administrative functions formerly
provided by Signature are provided by Funds Distributor, Inc. ("FDI"), a
registered broker-dealer, and by Morgan. FDI also serves as the
Portfolio's exclusive placement agent. Under a Co-Administration Agreement
between FDI and the Portfolio, the Portfolio has agreed to pay FDI fees
equal to its allocable share of an annual complex-wide charge of $425,000
plus FDI's out-of-pocket expenses. The amount allocable to the portfolio
is based on the ratio of the Portfolio's net assets to the aggregate net
assets of The JPM Pierpont Funds, The JPM Institutional Funds, The JPM
Advisor Funds and the Master Portfolios. For the period August 1, 1996
through November 30, 1996, the fee for these services amounted to $6,555.
On November 15, 1996, The JPM Advisor Funds terminated operations and were
being liquidated. Subsequent to that date, the net assets of the JPM
Advisor Funds are no longer included in the calculation of the allocation
of FDI's fees.
c)Effective December 29, 1995, the Portfolio entered into an Administrative
Services Agreement (the "Services Agreement") with Morgan under which
Morgan was responsible for overseeing certain aspects of the
administration and operation of the Portfolio. Under the Services
Agreement, the Portfolio had agreed to pay Morgan a fee equal to its
proportionate share of an annual complex-wide charge. Until July 31, 1996
this charge was calculated daily based on the aggregate net assets of the
Master Portfolios, in accordance with the following annual schedule: 0.06%
on the first $7 billion of the Master Portfolios' aggregate average daily
net assets and 0.03% of the aggregate average daily net assets in excess
of $7 billion. The portion of this charge paid by the Portfolio was
determined by the proportionate share that its net assets bore to the net
assets of the Master Portfolios and other investors in the Master
Portfolios for which Morgan provided similar services. For the period from
June 1, 1996 through July 31,1996, the fee for these services amounted to
$28,287.
Effective August 1, 1996, the Services Agreement was amended such that the
annual complex-wide charge is calculated daily based on the aggregate net
assets of the Master Portfolios in accordance with the following annual
schedule: 0.09% on the first $7 billion of the Master Portfolios'
aggregate average daily net assets and 0.04% of the aggregate average
daily net assets in excess of $7 billion less the complex-wide fees
payable to FDI. The allocation of the Fund's portion of this charge is
described above (see Note 2b). For the period from August 1, 1996 through
November 30, 1996, the fee for these services amounted to $79,106.
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 $12,937 for the six months ended November 30, 1996.
e)An aggregate annual fee of $65,000 is paid to each Trustee for serving as
a Trustee of The JPM Pierpont Funds, The JPM Institutional Funds, and the
Master Portfolios. The Trustees' Fees and Expenses
26
<PAGE>
THE SELECTED U.S. EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOVEMBER 30, 1996
- --------------------------------------------------------------------------------
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 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 $1,700.
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the six months
ended November 30, 1996 were as follows:
<TABLE>
<S> <C>
COST OF PROCEEDS
PURCHASES FROM SALES
- --------------- ---------------
$ 355,736,279 $ 330,016,086
</TABLE>
27
<PAGE>
JPM Pierpont Money Market Fund
JPM Pierpont Tax Exempt Money Market Fund
JPM Pierpont Federal Money Market Fund
JPM Pierpont Short Term Bond Fund
JPM Pierpont Bond Fund
JPM Pierpont Tax Exempt Bond Fund
JPM Pierpont New York Total Return Bond Fund
JPM Pierpont Diversified Fund
JPM Pierpont Equity Fund
JPM Pierpont Shares: Tax Aware Equity Fund
JPM Pierpont Capital Appreciation Fund
JPM Pierpont International Equity Fund
JPM Pierpont Emerging Markets Equity Fund
JPM Pierpont European Equity Fund
JPM Pierpont Japan Equity Fund
JPM Pierpont Asia Growth Fund
THE
JPM PIERPONT
EQUITY FUND
FOR MORE INFORMATION ON HOW THE JPM PIERPONT FAMILY OF FUNDS CAN HELP YOU PLAN
FOR YOUR FUTURE, CALL J.P. MORGAN FUNDS SERVICES AT (800) 521-5411.
SEMI-ANNUAL REPORT
NOVEMBER 30, 1996
