The Selected U.S. Equity Portfolio
Annual Report May 31, 1995
(The following pages should be read in conjunction
with The Pierpont Equity Fund
Annual Financial Statements)
16
<PAGE>
THE SELECTED U.S. EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS
MAY 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1a)
------------------ ------------
COMMON STOCKS (91.2%)
<S> <C> <C>
BASIC INDUSTRIES (5.7%)
CHEMICALS (2.8%)
Du Pont (E.I.) de Nemours & Co., Inc.... 46,055 $ 3,125,983
Monsanto Co............................. 29,800 2,480,850
Union Carbide Corp...................... 172,000 5,031,000
Wellman Inc............................. 254,400 6,391,800
------------
17,029,633
------------
METALS & MINING (2.9%)
Crown Cork & Seal Co., Inc. (a)......... 59,500 2,796,500
Freeport McMoRan Inc. (a)............... 200,000 3,450,000
Freeport McMoRan Copper & Gold Inc., Cl.
A..................................... 184,762 3,787,621
Reynolds Metals Co...................... 153,000 7,554,375
------------
17,588,496
------------
TOTAL BASIC INDUSTRIES................ 34,618,129
------------
CONSUMER GOODS & SERVICES (24.9%)
AUTOMOTIVE (2.3%)
General Motors Corp..................... 295,000 14,160,000
------------
BEVERAGES, FOOD, SOAP & TOBACCO (6.1%)
Archer-Daniels-Midland Co............... 252,700 4,674,950
CPC International, Inc.................. 69,800 4,240,350
Darden Restaurants Inc. (a)............. 109,500 1,204,500
General Mills Inc....................... 109,500 5,680,313
PepsiCo., Inc........................... 201,100 9,853,900
Philip Morris Cos., Inc................. 155,000 11,295,625
------------
36,949,638
------------
ENTERTAINMENT, LEISURE & MEDIA (5.5%)
Circus Circus Enterprises Inc. (a)...... 300,000 10,012,500
CBS Inc................................. 126,410 8,469,470
International Game Technology........... 349,800 5,640,525
Tele-Communications Inc., Cl. A (a)..... 426,300 8,978,944
------------
33,101,439
------------
FOOTWEAR APPAREL (0.1%)
Converse Inc. (a)....................... 87,633 591,523
Florsheim Shoe Co. (a).................. 43,816 205,387
------------
796,910
------------
HOUSEHOLD PRODUCTS (1.9%)
First Brands Corp....................... 110,500 4,558,125
Interco Inc. (a)........................ 392,200 2,402,225
Procter & Gamble Co..................... 59,760 4,295,250
------------
11,255,600
------------
MERCHANDISING (5.8%)
Charming Shoppes, Inc................... 123,900 538,191
<CAPTION>
VALUE
SHARES (NOTE 1a)
------------------ ------------
<S> <C> <C>
MERCHANDISING (5.8%) (CONTINUED)
Hechinger Co., Cl. A.................... 130,000 $ 983,125
Limited Inc............................. 354,700 7,892,075
Melville Corp........................... 273,900 10,887,525
Price Costco Inc. (a)................... 312,900 4,400,156
Wal Mart Stores, Inc.................... 398,000 9,950,000
------------
34,651,072
------------
PERSONAL CARE (0.9%)
Avon Products Inc....................... 82,400 5,551,700
------------
PERSONAL SERVICES (1.4%)
Service Corp. International............. 286,600 8,203,925
------------
TEXTILE MANUFACTURING (0.9%)
Fruit of the Loom Inc., Cl. A (a)....... 209,000 5,564,625
------------
TOTAL CONSUMER GOODS & SERVICES....... 150,234,909
------------
ENERGY (10.4%)
OIL-PRODUCTION (9.0%)
Diamond Shamrock Inc.................... 164,900 4,472,913
Exxon Corp.............................. 58,200 4,154,025
Mobil Corp.............................. 27,000 2,710,125
Occidental Petroleum Corp............... 349,300 8,033,900
Oryx Energy Co. (a)..................... 483,600 6,951,750
Repsol S.A. (ADR)....................... 131,900 4,303,237
Royal Dutch Petroleum Co. (ADR)......... 58,320 7,392,060
Sun Inc................................. 181,800 5,726,700
Texaco Inc.............................. 152,000 10,412,000
------------
54,156,710
------------
OIL-SERVICES (1.4%)
Schlumberger Ltd........................ 133,000 8,645,000
------------
TOTAL ENERGY.......................... 62,801,710
------------
FINANCE (10.9%)
BANKING (6.4%)
BankAmerica Corp........................ 235,115 12,284,759
Citicorp................................ 65,100 3,482,850
Firstar Corp............................ 46,500 1,470,563
Fleet Financial Group Inc............... 208,000 7,254,000
Great Western Financial Corp............ 138,000 3,018,750
NationsBank Corp........................ 200,572 11,357,389
------------
38,868,311
------------
INSURANCE (3.8%)
AMBAC Inc............................... 206,300 8,252,000
First Colony Corp....................... 53,300 1,259,212
Providian Corp.......................... 316,500 11,512,687
USLIFE Corp............................. 43,600 1,754,900
------------
22,778,799
------------
</TABLE>
See Accompanying Notes.
17
<PAGE>
THE SELECTED U.S. EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1a)
------------------ ------------
FINANCIAL SERVICES (0.7%)
<S> <C> <C>
Dean Witter Discover & Co............... 84,600 $ 4,029,075
------------
TOTAL FINANCE......................... 65,676,185
------------
HEALTH CARE (7.9%)
HOSPITAL SERVICES & SUPPLIES (1.8%)
Columbia/HCA Healthcare Corp............ 263,700 10,778,738
------------
PHARMACEUTICALS (6.1%)
Alza Corp. Cl. A (a).................... 239,800 5,005,825
American Home Products Corp............. 32,300 2,378,087
Bausch & Lomb Inc....................... 336,200 13,658,125
Eli Lilly & Co.......................... 132,500 9,887,812
Warner - Lambert Co..................... 70,000 5,801,250
------------
36,731,099
------------
TOTAL HEALTHCARE...................... 47,509,837
------------
INDUSTRIAL PRODUCTS & SERVICES (16.0%)
COMMERCIAL PRINTING (1.0%)
R.R. Donnelley & Sons Co................ 169,600 6,190,400
------------
DIVERSIFIED MANUFACTURING (11.5%)
Allied Signal, Inc...................... 210,700 8,507,013
Coltec Industries Inc. (a).............. 431,500 7,659,125
Cooper Industries, Inc.................. 289,500 10,711,500
Cooper Tire & Rubber Co................. 197,000 4,777,250
General Electric Co..................... 120,000 6,960,000
ITT Corp................................ 99,100 11,086,813
Johnson Controls Inc.................... 75,200 4,305,200
Manville Corp. (a)...................... 577,700 7,221,250
Tyco International Ltd.................. 150,000 8,118,750
------------
69,346,901
------------
ELECTRONICS (2.7%)
Grainger (W.W.) Inc..................... 70,000 4,191,250
Harris Corp............................. 176,400 9,371,250
Magnetek Inc. (a)....................... 171,300 2,590,913
------------
16,153,413
------------
ENVIRONMENTAL CONTROL (0.7%)
Wheelabrator Technologies Inc........... 268,000 4,087,000
------------
MACHINERY (0.1%)
General Signal Corp..................... 11,800 436,600
------------
TOTAL INDUSTRIAL PRODUCTS &
SERVICES............................ 96,214,314
------------
<CAPTION>
VALUE
SHARES (NOTE 1a)
------------------ ------------
<S> <C> <C>
TECHNOLOGY (4.8%)
COMPUTERS-PERIPHERALS (1.8%)
Conner Peripherals Inc. (a)............. 305,700 $ 3,935,887
International Business Machines......... 34,500 3,217,125
Read Rite Corp. (a)..................... 153,300 3,458,831
------------
10,611,843
------------
INFORMATION PROCESSING (1.5%)
Novell, Inc. (a)........................ 455,900 8,804,569
------------
TELECOMMUNICATIONS-EQUIPMENT (1.5%)
Bay Networks Inc........................ 254,600 9,276,988
------------
TOTAL TECHNOLOGY...................... 28,693,400
------------
TRANSPORTATION (1.9%)
RAILROADS (1.9%)
Canadian Pacific Limited................ 350,000 5,993,750
Union Pacific Corp...................... 94,700 5,244,012
------------
TOTAL TRANSPORTATION.................. 11,237,762
------------
UTILITIES (8.7%)
ELECTRIC (2.7%)
Allegheny Power System Inc.............. 110,000 2,736,250
Dominion Resources Inc.................. 73,000 2,710,125
Entergy Corp............................ 231,500 5,729,625
Scecorp................................. 280,000 4,865,000
------------
16,041,000
------------
TELEPHONE (6.0%)
AT&T.................................... 172,700 8,764,525
BellSouth Corp.......................... 111,000 6,812,625
MCI Communications Corp................. 387,300 7,818,619
Pacific Telesis Group................... 191,100 5,111,925
Telefonos de Mexico, Cl. L (ADR)........ 95,000 2,671,875
U.S. West, Inc.......................... 126,500 5,218,125
------------
36,397,694
------------
TOTAL UTILITIES....................... 52,438,694
------------
TOTAL COMMON STOCKS
(COST $504,468,266)................. 549,424,940
------------
</TABLE>
See Accompanying Notes.
18
<PAGE>
THE SELECTED U.S. EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1a)
------------------ ------------
CONVERTIBLE PREFERRED STOCK (0.0%+)
<S> <C> <C>
HEALTHCARE (0.0%+)
PHARMACEUTICALS (0.0%+)
Gensia Inc., $3.75 (144A)............... 20,000 $ 160,000
------------
TOTAL CONVERTIBLE PREFERRED STOCK
(COST $1,000,000)................... 160,000
------------
<CAPTION>
PRINCIPAL
AMOUNT
------------------
<S> <C> <C>
CONVERTIBLE BONDS (1.0%)
BASIC INDUSTRIES (0.1)
PAPER & FOREST PRODUCTS (0.1%)
Champion International Corp. 6.50%
Subordinated Debentures due
04/15/11.............................. $ 350,000 454,562
------------
INDUSTRIAL PRODUCTS & SERVICES (0.4%)
ENVIRONMENTAL CONTROL (0.4%)
WMX Technologies Inc. 2.00% Subordinated
Debentures due 01/24/05............... 2,836,000 2,336,155
------------
TECHNOLOGY (0.2%)
COMPUTERS-PERIPHERALS (0.2%)
Conner Peripherals Inc. 6.50% Debentures
due 03/01/02.......................... 1,750,000 1,452,500
------------
TRANSPORTATION (0.3%)
AIRLINES (0.3%)
AMR Corp. 6.125% Subordinated Debentures
due 11/01/24 (144A)................... 1,900,000 1,814,500
------------
TOTAL CONVERTIBLE BONDS
(COST $5,575,943)................... 6,057,717
------------
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1a)
------------------ ------------
<S> <C> <C>
SHORT-TERM INVESTMENTS (7.6%)
U.S. TREASURY OBLIGATIONS (7.6%)
U.S. Treasury Bills 5.75%
due 6/22/95(b)........................ $ 22,283,000 $ 22,208,649
U.S. Treasury Bills 5.72%
due 6/22/95(b)........................ 15,000,000 14,949,994
U.S. Treasury Bills 5.61%
due 6/01/95........................... 8,798,000 8,798,000
U.S. Treasury Bills 5.60%
due 6/01/95........................... 207,000 207,000
------------
TOTAL SHORT-TERM INVESTMENTS
(COST $46,163,643).................. 46,163,643
------------
TOTAL INVESTMENTS
(COST $557,207,852) (99.8%)......... 601,806,300
------------
OTHER ASSETS
NET OF LIABILITIES (0.2%)........... 947,484
------------
NET ASSETS (100.0%)................... $602,753,784
------------
------------
<FN>
Note: The cost of investments for Federal Income Tax purposes at May 31, 1995,
was $557,451,085, the aggregate gross unrealized appreciation and
depreciation was $57,749,363 and $13,394,148, respectively, resulting in
net unrealized appreciation of $44,355,215.
(a) Non-income-producing security.
(b) Segregated as collateral for futures contracts.
+ -- less than 0.1%.
(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.
</TABLE>
See Accompanying Notes.
19
<PAGE>
THE SELECTED U.S. EQUITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $557,207,852) (Note 1a) $ 601,806,300
Cash 1,416
Receivable for Investments Sold 22,688,022
Dividends Receivable 1,815,580
Interest Receivable 61,203
Prepaid Insurance 3,792
--------------
Total Assets 626,376,313
--------------
LIABILITIES
Payable for Investments Purchased 22,385,564
Advisory Fee Payable (Note 2a) 625,009
Financial and Fund Accounting Services Fee Payable (Note 2c) 391,885
Custody Fee Payable 178,609
Fund Services Fee Payable (Note 2d) 5,006
Administration Fee Payable (Note 2b) 3,012
Accrued Expenses 33,444
--------------
Total Liabilities 23,622,529
--------------
NET ASSETS
Applicable to Investors' Beneficial Interests $ 602,753,784
--------------
--------------
</TABLE>
See Accompanying Notes.
20
<PAGE>
THE SELECTED U.S. EQUITY PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED MAY 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividend Income (Net of Foreign Withholding Tax of $176,403) $11,915,899
Interest Income 1,411,831
-----------
Investment Income 13,327,730
EXPENSES
Advisory Fee (Note 2a) $ 2,025,936
Financial and Fund Accounting Services Fees (Note 2c) 236,537
Custodian Fees and Expenses 160,253
Fund Services Fee (Note 2d) 52,948
Professional Fees 37,910
Administration Fee (Note 2b) 32,670
Insurance 12,659
Trustees' Fees and Expenses (Note 2e) 12,169
-----------
Total Expenses 2,571,082
-----------
NET INVESTMENT INCOME 10,756,648
NET REALIZED GAIN ON INVESTMENTS (including $391,381
net realized gains from futures contracts) 31,481,163
NET CHANGE IN UNREALIZED APPRECIATION OF INVESTMENTS (including
$478,918 net unrealized appreciation from futures contracts) 35,361,393
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $77,599,204
-----------
-----------
</TABLE>
See Accompanying Notes.
21
<PAGE>
THE SELECTED U.S. EQUITY PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 19, 1993
(COMMENCEMENT
FOR THE FISCAL OF OPERATIONS)
YEAR ENDED MAY TO MAY 31,
INCREASE (DECREASE) IN NET ASSETS 31, 1995 1994
-------------- --------------
<S> <C> <C>
FROM OPERATIONS
Net Investment Income $ 10,756,648 $ 5,655,363
Net Realized Gain on Investments 31,481,163 26,272,769
Net Change in Unrealized Appreciation (Depreciation) of
Investments 35,361,393 (2,323,580)
-------------- --------------
Net Increase in Net Assets Resulting from Operations 77,599,204 29,604,552
-------------- --------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST
Contributions 266,876,529 585,309,492
Withdrawals (179,469,109) (177,266,984)
-------------- --------------
Net Increase from Investors' Transactions 87,407,420 408,042,508
-------------- --------------
Total Increase in Net Assets 165,006,624 437,647,060
NET ASSETS
Beginning of Period 437,747,160 100,100
-------------- --------------
End of Period $ 602,753,784 $ 437,747,160
-------------- --------------
-------------- --------------
</TABLE>
- - --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 19, 1993
FOR THE FISCAL (COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO
MAY 31, 1995 MAY 31, 1994
--------------- -----------------
<S> <C> <C>
Ratios to Average Net Assets:
Net Investment Income 2.12% 1.79%(a)
Expenses 0.51% 0.53%(a)
Portfolio Turnover 71% 76%+
<FN>
- - ------------------------
(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.
</TABLE>
See Accompanying Notes.
22
<PAGE>
THE SELECTED U.S. EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1995
- - --------------------------------------------------------------------------------
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, 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 Declaration of Trust permits the Trustees to
issue an unlimited number of beneficial interests in the Portfolio.
The following is a summary of the significant accounting policies of the
Portfolio:
a)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 is fixed when the
Portfolio enters into the contract. Upon entering into such a contract the
Portfolio is required to pledge to the broker an amount of cash and/or
securities equal to the minimum "initial margin" requirements of the
exchange. Pursuant to the contract, the Portfolio agrees to receive from
or pay to the broker an amount of cash equal to the daily fluctuation in
value of the contract. Such receipts or payments are known as "variation
margin" and are recorded by the Portfolio as unrealized gains or losses.
When the contract is closed, the Portfolio records a realized gain or loss
equal to the difference between the value of the contract at the time it
was opened and the value at the time when it was closed. The Portfolio
invests in futures contracts solely for the purpose of hedging its
existing portfolio securities, or securities the Portfolio intends to
purchase, against fluctuations in value caused by changes in prevailing
market interest rates. The use of futures transactions involves the risk
of imperfect correlation in movements in the price of futures
23
<PAGE>
THE SELECTED U.S. EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1995
- - --------------------------------------------------------------------------------
contracts, interest rates and the underlying hedged assets, and the
possible inability of counterparties to meet the terms of their contracts.
S&P 500 futures transactions during the fiscal year ended May 31, 1995 are
summarized as follows:
<TABLE>
<CAPTION>
FUTURES CONTRACTS
--------------------------------------------------------------
PRINCIPAL AMOUNT OF
NUMBER OF CONTRACTS CONTRACTS
-------------------- --------------------
<S> <C> <C>
Contracts opened 192 $49,222,100
Contracts closed (75) (18,520,850)
-------------------- --------------------
Open at end of period 117 $30,701,250
-------------------- --------------------
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF OPEN CONTRACTS AT MAY 31, 1995
--------------------------------------------------------------
NET UNREALIZED
CONTRACTS APPRECIATION
LONG (DEPRECIATION)
-------------------- --------------------
<S> <C> <C>
S&P 500, due June 1995 83 $ 540,448
S&P 500, due September 1995 34 (61,530)
--------
Net Unrealized Appreciation on Futures
Contracts $ 478,918
--------
</TABLE>
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.
24
<PAGE>
THE SELECTED U.S. EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1995
- - --------------------------------------------------------------------------------
2. TRANSACTIONS WITH AFFILIATES
a)The Portfolio has an investment advisory agreement with Morgan Guaranty
Trust Company of New York ("Morgan"). Under the terms of the investment
advisory agreement, the Portfolio pays Morgan at an annual rate of 0.40%
of the Portfolio's average daily net assets. For the fiscal year ended May
31, 1995, this fee amounted to $2,025,936.
b)The Portfolio retains Signature Broker-Dealer Services, Inc. ("Signature")
to serve as Administrator and exclusive placement agent. Signature
provides administrative services necessary for the operations of the
Portfolio, furnishes office space and facilities required for conducting
the business of the Portfolio and pays the compensation of the Portfolio's
officers affiliated with Signature. The agreement provides for a fee to be
paid to Signature at an annual rate determined by the following schedule:
0.01% of the first $1 billion of the aggregate average daily net assets of
the Portfolio and the other portfolios subject to the Administrative
Services Agreement, 0.008% of the next $2 billion of such net assets,
0.006% of the next $2 billion of such net assets, and 0.004% of such net
assets in excess of $5 billion. The daily equivalent of the fee rate is
applied to the daily net assets of the Portfolio. For the fiscal year
ended May 31, 1995, Signature's fee for these services amounted to
$32,670.
c)The Portfolio has a Financial and Fund Accounting Services Agreement
("Services Agreement") with Morgan under which Morgan receives a fee,
based on the percentages described below, for overseeing certain aspects
of the administration and operation of the Portfolio. The Services
Agreement is also designed to provide an expense limit for certain
expenses of the Portfolio. If total expenses of the Portfolio, excluding
the advisory fee, custody expenses, fund services fee, and brokerage
costs, exceed the expense limit of 0.10% of the Portfolio's average daily
net assets up to $200 million, 0.05% of the next $200 million of average
daily net assets, and 0.03% of average daily net assets thereafter, Morgan
will reimburse the Portfolio for the excess expense amount and receive no
fee. Should such expenses be less than the expense limit, Morgan's fee
would be limited to the difference between such expenses and the fee
calculated under the Services Agreement. For the fiscal year ended May 31,
1995, this fee amounted to $236,537.
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 $52,948 for the fiscal year ended May 31, 1995.
e)An aggregate annual fee of $65,000 is paid to each Trustee for serving as
a Trustee of the Pierpont Funds, the JPM Institutional Funds, their
corresponding Portfolios and The Series Portfolio. The Trustees' Fees and
Expenses shown in the financial statements represents the Portfolio's
allocated portion of the total fees and expenses. Prior to April 1, 1995,
the aggregate annual Trustee Fee was $55,000. The Trustee who serves as
Chairman and Chief Executive Officer of these Funds and Portfolios also
serves as Chairman of Group and received compensation and employee
benefits from Group in his role as Group's Chairman. The allocated portion
of such compensation and benefits included in the Fund Services Fee shown
in the financial statements was $6,200.
25
<PAGE>
THE SELECTED U.S. EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1995
- - --------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the fiscal year
ended May 31, 1995 were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
-------------- --------------
<S> <C> <C>
$ 410,494,813 $ 345,261,473
</TABLE>
26
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Investors of
The Selected U.S. Equity Portfolio
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the supplementary data present fairly, in all material
respects, the financial position of The Selected U.S. Equity Portfolio (the
"Portfolio") at May 31, 1995, the results of its operations for the year then
ended, and the changes in its net assets and its supplementary data for the year
then ended and for the period July 19, 1993 (commencement of operations) through
May 31, 1994, in conformity with generally accepted accounting principles. These
financial statements and supplementary data (hereafter referred to as "financial
statements") are the responsibility of the Portfolio's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at May 31,
1995 by correspondence with the custodian and brokers and the application of
alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
New York, New York
July 26, 1995
