<PAGE>
THE TREASURY MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL YIELD TO
AMOUNT MATURITY MATURITY/
(IN THOUSANDS) SECURITY DESCRIPTION DATE RATE VALUE
- -------------- ------------------------------------------------- --------- --------- -------------
<C> <S> <C> <C> <C>
U.S. TREASURY OBLIGATIONS (17.4%)
$ 15,000 U.S. Treasury Notes.............................. 1/31/99 5.875% $ 15,015,151
15,000 U.S. Treasury Notes.............................. 2/28/99 5.875 15,014,293
30,000 U.S. Treasury Notes.............................. 4/30/99 6.375 30,123,283
42,500 U.S. Treasury Notes.............................. 5/31/99 6.250 42,659,852
20,000 U.S. Treasury Notes.............................. 7/31/99 5.875 20,052,397
-------------
TOTAL U.S. TREASURY OBLIGATIONS.............. 122,864,976
-------------
REPURCHASE AGREEMENTS (81.3%)
30,000 Bear Stearns Repurchase Agreement, dated
10/30/98, at 5.400%, proceeds include interest
$30,009,000 (collateralized by $44,257,000 U.S.
Treasury Strips, 7.625% through 7.750%, due
2/15/99 through 2/15/25, valued at
$30,633,062)................................... 11/2/98 5.400 30,000,000
30,000 Chase Repurchase Agreement, dated 10/30/98, at
5.380%, proceeds include interest $30,008,967
(collateralized by $28,224,000 U.S. Treasury
Notes, 5.875% through 6.375%, due 7/31/02
through 9/30/02, valued at $30,601,836)........ 11/2/98 5.380 30,000,000
32,000 Credit Suisse First Boston Repurchase Agreement,
dated 10/30/98, at 5.350%, proceeds include
interest $32,009,511 (collateralized by
$29,598,000 U.S. Treasury Notes, 7.500% through
7.875%, due 8/15/01 through 11/15/01, valued at
$32,949,612)................................... 11/2/98 5.350 32,000,000
160,288 Goldman Sachs Repurchase Agreement, dated
10/30/98, at 5.380%, proceeds include interest
$160,335,908 (collateralized by $154,408,000
U.S. Treasury Notes, 5.500% through 7.875%, due
5/31/99 through 12/31/00, valued at
$160,288,810).................................. 11/2/98 5.380 160,288,000
32,000 Greenwich Capital Repurchase Agreement, dated
10/30/98, at 5.420%, proceeds include interest
$32,009,636 (collateralized by $30,490,000 U.S.
Treasury Notes, 5.625% through 7.750%, due
11/30/99 through 5/15/08, valued at
$32,645,455)................................... 11/2/98 5.420 32,000,000
30,000 HSBC Repurchase Agreement, dated 10/30/98, at
5.420%, proceeds include interest $30,009,033
(collateralized by $21,015,000 U.S. Treasury
Bond, 8.875%, due 2/15/19, valued at
$30,600,760)................................... 11/2/98 5.420 30,000,000
34,000 Lehman Brothers Repurchase Agreement, dated
10/30/98, at 5.420%, proceeds include interest
$34,010,238 (collateralized by $33,820,000 U.S.
Treasury Note, 5.125%, due 8/31/00, valued at
$34,678,167)................................... 11/2/98 5.420 34,000,000
165,000 Merrill Lynch Repurchase Agreement, dated
10/30/98, at 5.350%, proceeds include interest
$165,049,042 (collateralized by $576,797,000
U.S. Treasury Strips, 7.125% through 8.750%,
due 5/15/20 through 2/15/23, valued at
$168,300,036).................................. 11/2/98 5.350 165,000,000
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
18
<PAGE>
THE TREASURY MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL YIELD TO
AMOUNT MATURITY MATURITY/
(IN THOUSANDS) SECURITY DESCRIPTION DATE RATE VALUE
- -------------- ------------------------------------------------- --------- --------- -------------
<C> <S> <C> <C> <C>
REPURCHASE AGREEMENTS (CONTINUED)
$ 30,000 State Street Repurchase Agreement, dated
10/30/98, at 5.350%, proceeds include interest
$30,008,917 (collateralized by $26,935,000 U.S.
Treasury Note, 6.500%, due 8/15/05, valued at
$30,604,894)................................... 11/2/98 5.350% $ 30,000,000
30,000 Westdeutshe Landesbank Repurchase Agreement,
dated 10/30/98, at 5.420%, proceeds include
interest $30,009,003(e)........................ 11/2/98 5.420 30,000,000
-------------
TOTAL REPURCHASE AGREEMENTS.................. 573,288,000
-------------
TOTAL INVESTMENTS AT AMORTIZED COST AND VALUE (98.7%)................... 696,152,976
OTHER ASSETS IN EXCESS OF LIABILITIES (1.3%)............................ 8,893,698
-------------
NET ASSETS (100.0%)..................................................... $ 705,046,674
-------------
-------------
</TABLE>
- ------------------------------
(e) Collateralized partially by:
FMAC $75,000,000, 6.000% due 3/15/25
U.S. Treasury Bonds $379,000, 7.250% through 12.000%, due 8/15/13 through
11/15/21
U.S. Treasury Notes $3,379,000, 4.500% through 6.250%, due 2/28/99 through
12/31/02
Valued at $77,481,606
Abbreviations used in the Schedule of Investments are as follows:
FMAC-First Home Mortgage Acceptance Corp.
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
THE TREASURY MONEY MARKET PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Amortized Cost and Value $122,864,976
Repurchase Agreements at Amortized Cost and Value 573,288,000
Cash 437
Receivable for Investments Sold 5,900,000
Interest Receivable 3,096,810
Receivable for Expense Reimbursement 129,452
Prepaid Expenses and Other Assets 5,357
------------
Total Assets 705,285,032
------------
LIABILITIES
Advisory Fee Payable 124,936
Custody Fee Payable 67,101
Administrative Services Fee Payable 17,739
Administration Fee Payable 1,486
Trustees' Fee Payable 1,316
Fund Services Fee Payable 630
Accrued Expenses 25,150
------------
Total Liabilities 238,358
------------
NET ASSETS
Applicable to Investors' Beneficial Interests $705,046,674
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE TREASURY MONEY MARKET PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest Income $29,552,603
EXPENSES
Advisory Fee $1,080,743
Administrative Services Fee 155,752
Custodian Fees and Expenses 126,938
Professional Fees and Expenses 49,488
Fund Services Fee 15,548
Trustees' Fees and Expenses 8,100
Administration Fee 7,258
Amortization of Organization Expenses 1,603
Miscellaneous 9,828
----------
Total Expenses 1,455,258
Less: Reimbursement of Expenses (828,462)
----------
NET EXPENSES 626,796
-----------
NET INVESTMENT INCOME 28,925,807
NET REALIZED LOSS ON INVESTMENTS (11,600)
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $28,914,207
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE TREASURY MONEY MARKET PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 7, 1997
FOR THE FISCAL (COMMENCEMENT OF
YEAR ENDED OPERATIONS) THROUGH
OCTOBER 31, 1998 OCTOBER 31, 1997
---------------- -------------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 28,925,807 $ 1,356,330
Net Realized Gain (Loss) on Investments (11,600) 3,337
---------------- -------------------
Net Increase in Net Assets Resulting from
Operations 28,914,207 1,359,667
---------------- -------------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 5,803,822,953 154,888,508
Withdrawals (5,244,794,486) (39,144,175)
---------------- -------------------
Net Increase from Investors' Transactions 559,028,467 115,744,333
---------------- -------------------
Total Increase in Net Assets 587,942,674 117,104,000
NET ASSETS
Beginning of Period 117,104,000 --
---------------- -------------------
End of Period $ 705,046,674 $ 117,104,000
---------------- -------------------
---------------- -------------------
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 7, 1997
FOR THE FISCAL (COMMENCEMENT OF
YEAR ENDED OPERATIONS) THROUGH
OCTOBER 31, 1998 OCTOBER 31, 1997
---------------- -------------------
<S> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Expenses 0.12% 0.04%(a)
Net Investment Income 5.35% 5.52%(a)
Expenses without reimbursement 0.27% 0.52%(a)
</TABLE>
- ------------------------
(a) Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE TREASURY MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Treasury Money Market Portfolio (the "portfolio") is one of two subtrusts
("portfolios") comprising Series Portfolio II. Series Portfolio II is registered
under the Investment Company Act of 1940, as amended, as a no-load, open-end
management investment company which was organized as a trust under the laws of
the State of New York on January 9, 1997. The portfolio commenced operations on
July 7, 1997. The portfolio's investment objective is to provide high current
income consistent with the preservation of capital and same-day liquidity. The
Declaration of Trust permits the trustees to issue an unlimited number of
beneficial interests in the portfolio.
The preparation of financial statements in accordance with 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) Investments are valued at amortized cost which approximates market value.
The amortized cost method of valuation values a security at its cost at
the time of purchase and thereafter assumes a constant amortization to
maturity of any discount or premium, regardless of the impact of
fluctuating interest rates on the market value of the instruments.
The portfolio's custodian or designated subcustodians, as the case may be
under tri-party repurchase agreements, takes possession of the collateral
pledged for investments in repurchase agreements on behalf of the
portfolio. It is the policy of the portfolio to value the underlying
collateral daily on a mark-to-market basis to determine that the value,
including accrued interest, is at least equal to the repurchase price plus
accrued interest. In the event of default of the obligation to repurchase,
the portfolio has the right to liquidate the collateral and apply the
proceeds in satisfaction of the obligation. Under certain circumstances,
in the event of default or bankruptcy by the other party to the agreement,
realization and/or retention of the collateral or proceeds may be subject
to legal proceedings.
b) Securities transactions are recorded on a trade date basis. Interest
income, which includes the amortization of premiums and discounts, if any,
is recorded on an accrual basis. For financial and tax reporting purposes,
realized gains and losses are determined on the basis of specific lot
identification.
c) The portfolio intends to be treated as a partnership for federal income
tax purposes. As such, each investor in the portfolio will be taxed on its
share of the portfolio's ordinary income and capital gains. It is intended
that the portfolio's assets will be managed in such a way that an investor
in the portfolio will be able to satisfy the requirements of Subchapter M
of the Internal Revenue Code. The cost of securities is substantially the
same for book and tax purposes.
d) The portfolio incurred organization expenses in the amount of $14,000
which were deferred and are amortized on a straight-line basis over a
period not to exceed five years beginning with the commencement of
operations of the portfolio.
23
<PAGE>
THE TREASURY MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
2. TRANSACTIONS WITH AFFILIATES
a) Prior to October 1, 1998, the portfolio had an Investment Advisory
Agreement with Morgan Guaranty Trust Company of New York ("Morgan"), a
wholly owned subsidiary of J.P. Morgan & Co. Incorporated ("J.P. Morgan").
Under the terms of the agreement, the portfolio paid Morgan at an annual
rate of 0.20% of the portfolio's average daily net assets up to $1 billion
and 0.10% on any excess over $1 billion. Effective October 1, 1998 the
portfolio's investment advisor is J.P. Morgan Investment Management Inc.,
("JPMIM"), an affiliate of Morgan and a wholly owned subsidiary of J.P.
Morgan, and the terms of the agreement have remained the same. For the
fiscal year ended October 31, 1998, such fees amounted to $1,080,743.
b) The portfolio has retained Funds Distributor, Inc. ("FDI"), a registered
broker-dealer, to serve as the co-administrator and exclusive placement
agent. Under a Co-Administration Agreement between FDI and the portfolio,
FDI provides administrative services necessary for the operations of the
portfolio, furnishes office space and facilities required for conducting
the business of the portfolio and pays the compensation of the officers
affiliated with FDI. The portfolio has agreed to pay FDI fees equal to its
allocable share of an annual complex-wide charge of $425,000 plus FDI's
out-of-pocket expenses. The amount allocable to the portfolio is based on
the ratio of the portfolio's net assets to the aggregate net assets of the
portfolio and certain other investment companies subject to similar
agreements with FDI. For the fiscal year ended October 31, 1998, the fee
for these services amounted to $7,258.
c) The portfolio has an Administrative Services Agreement (the "Services
Agreement") with Morgan under which Morgan is responsible for certain
aspects of the administration and operation of the portfolio. Under the
Services Agreement, the portfolio has agreed to pay Morgan a fee equal to
its allocable share of an annual complex-wide charge. This charge is
calculated based on the aggregate average daily net assets of the
portfolio and certain other portfolios for which JPMIM acts as investment
advisor (the "master portfolios") and J.P. Morgan Series Trust in
accordance with the following annual schedule: 0.09% on the first $7
billion of their aggregate average daily net assets and 0.04% of their
aggregate average daily net assets in excess of $7 billion less the
complex-wide fees payable to FDI. The portion of this charge payable by
the portfolio is determined by the proportionate share that its net assets
bear to the net assets of the master portfolios, other investors in the
master portfolios for which Morgan provides similar services, and J.P.
Morgan Series Trust. For the fiscal year ended October 31, 1998, the fee
for these services amounted to $155,752.
In addition, J.P. Morgan has agreed to reimburse the portfolio to the
extent necessary to maintain the total operating expenses of the portfolio
at no more than the following respective percentages of average daily net
assets of the portfolio for the periods indicated below:
<TABLE>
<S> <C>
November 1, 1997-November 30, 1997......................... 0.05%
December 1, 1997-July 31, 1998............................. 0.10%
August 1, 1998-November 30, 1998........................... 0.15%
December 1, 1998-February 28, 1999......................... 0.20%
</TABLE>
For the fiscal year ended October 31, 1998, J.P. Morgan has agreed to
reimburse the portfolio $828,462 for expenses under this agreement. The
total operating expenses for the portfolio is a blended ratio
24
<PAGE>
THE TREASURY MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
which is based on reimbursements in effect for the fiscal year ended
October 31, 1998 and may not necessarily represent the actual amount
incurred by an interest holder. This reimbursement arrangement can be
changed or terminated at any time after February 28, 1999 at the option of
J.P. Morgan.
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 $15,548 for the fiscal year ended October 31, 1998.
e) An aggregate annual fee of $75,000 is paid to each trustee for serving as
a trustee of the trust, the J.P. Morgan Funds, the J.P. Morgan
Institutional Funds, the master portfolios and J.P. Morgan Series Trust.
The Trustees' Fees and Expenses shown in the financial statements
represents the portfolio's allocated portion of the total fees and
expenses. The portfolio's Chairman and Chief Executive Officer also serves
as Chairman of Group and receives compensation and employee benefits from
Group in his role as Group's Chairman. The allocated portion of such
compensation and benefits included in the Fund Services Fee shown in the
financial statements was $3,300.
25
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Investors of
The Treasury Money Market 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 Treasury Money Market Portfolio (the
"portfolio") at October 31, 1998, the results of its operations for the year
then ended, and the changes in its net assets and the supplementary data for the
year then ended and for the period July 7, 1997 (commencement of operations)
through October 31, 1997, in conformity with generally accepted accounting
principles. These financial statements and supplementary data (hereafter
referred to as "financial statements") are the responsibility of the portfolio's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 1998 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
New York, New York
December 17, 1998
26
