THE TREASURY MONEY MARKET PORTFOLIO
Annual Report October 31, 2000
(The following pages should be read in conjunction with J.P. Morgan
Institutional Service Treasury Money Market Fund Annual Financial Statements)
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THE TREASURY MONEY MARKET PORTFOLIO - SCHEDULE OF INVESTMENTS
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OCTOBER 31, 2000
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PRINCIPAL AMOUNT VALUE
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REPURCHASE AGREEMENTS - 71.5%
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$50,000,000 Chase Repurchase Agreement, 6.56%, dated
10/31/00, proceeds include interest
$50,009,111, due 11/01/00 (collateralized
by $49,563,000 U.S. Treasury Notes, 6.50%,
due 08/31/01 through 02/15/10,
valued at $50,989,865) $ 50,000,000
50,000,000 Credit Suisse First Boston Repurchase
Agreement, 6.52% dated 10/31/00,
proceeds include interest $50,009,056, due
11/1/00 (a) 50,000,000
200,000,000 Deutsche Morgan Grenfel Repurchase
Agreement, 6.55%, dated 10/31/00,
proceeds include interest $200,036,389, due
11/1/00 (b) 200,000,000
133,650,000 Goldman Sachs Repurchase Agreement,
6.55%, dated 10/31/00, proceeds include
interest $133,674,317, due 11/1/00 (c) 133,650,000
50,000,000 Greenwich Repurchase Agreement, 6.55%,
dated 10/31/00, proceeds include interest
$50,009,097, due 11/1/00 (collateralized by
$50,380,000 U.S. Treasury Notes, 5.50%,
due 5/31/03, valued at $51,003,290) 50,000,000
50,000,000 Lehman Repurchase Agreement, 6.56%,
dated 10/31/00, proceeds include interest
$50,009,111, due 11/1/00 (collateralized
by $47,615,000 U.S. Treasury Note,
4.25% due 1/15/10, valued at $51,004,911) 50,000,000
50,000,000 Merrill Lynch Repurchase Agreement, 6.50%,
dated 10/31/00, proceeds include interest
$50,009,028, due 11/1/00 (d) 50,000,000
50,000,000 Morgan Stanley Repurchase Agreement,
6.48%, dated 10/31/00, proceeds include
interest $50,009,000, due 11/1/00 (e) 50,000,000
200,000,000 Salomon Repurchase Agreement, 6.56%,
dated 10/31/00, proceeds include interest
$200,036,444, due 11/1/00 (f) 200,000,000
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TOTAL REPURCHASE AGREEMENTS 833,650,000
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U.S. TREASURY SECURITIES - 28.5%
$200,000,000 United States Treasury Bills,
6.31%, 12/21/00 $ 198,250,000
35,000,000 United States Treasury Notes,
4.50%, 1/31/01 34,831,646
25,000,000 United States Treasury Notes, 4.88%,
3/31/01 24,831,022
40,000,000 United States Treasury Notes, 5.63%,
5/15/01 39,830,350
35,000,000 United States Treasury Notes, 6.50%,
8/31/01 35,047,852
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TOTAL U.S. TREASURY SECURITIES 332,790,870
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TOTAL INVESTMENTS AT AMORTIZED
COST AND VALUE - 100% $1,166,440,870
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(a) Collateralized by:
U.S. Treasury Note $14,792,000, 6.13% due 12/31/01
U.S. Treasury Note $12,678,000, 6.50% due 5/31/02
U.S. Treasury Note $23,425,000, 5.75% due 10/31/02
Valued at $51,510,530
(b) Collateralized by:
U.S. Treasury Bond $41,395,000, 14.25% due 2/15/02
U.S. Treasury Bond $8,933,000, 12.50% due 8/15/14
U.S. Treasury Bond $43,158,000, 10.38% due 11/15/12
U.S. Treasury Bond $66,933,000, 3.63% due 4/15/28
U.S. Treasury STRIP $67,235,000 due 11/15/21
Valued at $200,000,081
(c) Collateralized by:
U.S. Treasury Note $97,885,000, 5.88% due 11/15/04
U.S. Treasury Bond $22,000,000, 14.00% due 11/15/11
U.S. Treasury STRIP $6,919,000 due 2/15/14 through 11/15/14
Valued at $133,650,624
(d) Collateralized by:
U.S. Treasury Bills $250,000, 14.00% due 11/15/11
U.S. Treasury Bonds $22,580,000, 9.00% due 11/15/18
U.S. Treasury Note $2,016,000, 5.25% due 5/31/01
U.S. Treasury STRIP $33,843,000 due 11/15/11
Valued at $51,001,202
(e) Collateralized by:
U.S. Treasury Bills $42,100,000 due 04/19/01 through 08/30/01
U.S. Treasury Note $12,000,000, 5.00% due 04/30/01
Valued at $51,530,566
(f) Collateralized by:
U.S. Treasury Note $172,475,000, 5.63% due 5/15/08
U.S. Treasury Note $28,760,000, 6.13% due 8/15/07
Valued at $200,462,878
STRIP - Separate Trading of Registered Interest and Principal.
The Accompanying Notes are an Integral Part of the Financial Statements.
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THE TREASURY MONEY MARKET PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
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OCTOBER 31, 2000
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ASSETS
Investments at Amortized Cost and Value $332,790,870
Repurchase Agreement at Amortized Cost and Value 833,650,000
Interest Receivable 2,085,769
Prepaid Trustees' Fees and Expenses 1,866
Prepaid Expenses and Other Assets 1,832
Receivable for Expense Reimbursement 23,122
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Total Assets 1,168,553,459
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LIABILITIES
Advisory Fee Payable 179,762
Due to Custodian 28,450
Administrative Services Fee Payable 22,731
Fund Services Fee Payable 747
Administration Fee Payable 290
Accrued Expenses and Other Liabilities 81,180
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Total Liabilities 313,160
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NET ASSETS
Applicable to Investors' Beneficial Interests $1,168,240,299
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The Accompanying Notes are an Integral Part of the Financial Statements.
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THE TREASURY MONEY MARKET PORTFOLIO
STATEMENT OF OPERATIONS
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FOR THE YEAR ENDED OCTOBER 31, 2000
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INVESTMENT INCOME
INCOME
Interest Income $61,912,210
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EXPENSES
Advisory Fee 2,000,272
Administrative Services Fee 251,048
Custodian Fees and Expenses 110,976
Professional Fees 40,739
Fund Services Fee 16,550
Trustees' Fees and Expenses 12,280
Administration Fee 6,803
Miscellaneous Expenses 12,798
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Total Expenses 2,451,466
Less: Reimbursement of Expenses (394,705)
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Net Expenses 2,056,761
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NET INVESTMENT INCOME 59,855,449
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NET REALIZED LOSS ON INVESTMENTS (267,969)
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NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $59,587,480
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The Accompanying Notes are an Integral Part of the Financial Statements.
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THE TREASURY MONEY MARKET PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
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FOR THE YEARS ENDED OCTOBER 31
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INCREASE (DECREASE) IN NET ASSETS 2000 1999
FROM OPERATIONS
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Net Investment Income $ 59,855,449 $ 41,654,130
Net Realized Loss on Investments (267,969) (49,014)
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Net Increase in Net Assets Resulting from Operations 59,587,480 41,605,116
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TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 4,912,395,308 4,599,123,657
Withdrawals (4,978,197,544) (4,171,320,392)
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Net Increase (Decrease) from Investors' Transactions (65,802,236) 427,803,265
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Total Increase (Decrease) in Net Assets (6,214,756) 469,408,381
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NET ASSETS
Beginning of Year 1,174,455,055 705,046,674
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End of Year $1,168,240,299 $1,174,455,055
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SUPPLEMENTARY DATA
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<CAPTION>
FOR THE PERIOD
JULY 7, 1997
(COMMENCEMENT OF
FOR THE YEARS ENDED OCTOBER 31 OPERATIONS) THROUGH
2000 1999 1998 OCTOBER 31, 1997
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RATIOS TO AVERAGE NET ASSETS
Net Expenses 0.20% 0.20% 0.12% 0.04%(a)
Net Investment Income 5.82% 4.75% 5.35% 5.52%(a)
Expenses without Reimbursement 0.24% 0.24% 0.27% 0.52%(a)
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(a) Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
5
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THE TREASURY MONEY MARKET PORTFOLIO NOTES TO FINANCIAL STATEMENTS
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OCTOBER 31, 2000
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1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION--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 diversified, 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 accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts and disclosures.
Actual amounts could differ from those estimates. The following is a summary of
the significant accounting policies of the Portfolio:
SECURITY VALUATIONS--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.
REPURCHASE AGREEMENTS--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 mark-to-market
the collateral on a daily 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. In the event of default or bankruptcy by the seller of the
agreement, realization and/or retention of the collateral or proceeds may be
subject to legal proceedings.
SECURITY TRANSACTIONS--Security transactions are accounted for as of the
trade date. Realized gains and losses are determined on the identified cost
basis, which is also used for federal income tax purposes.
INVESTMENT INCOME--Interest income is recorded on the accrual basis and
includes accretion of discounts and amortization of premiums.
EXPENSES--Expenses incurred by Series Portfolio II with respect to any two
or more portfolios in Series Portfolio II, are allocated in proportion to the
net asssets of each portfolio in Series Portfolio II, except where allocations
of direct expenses to each portfolio can otherwise be made fairly. Expenses
directly attributable to a portfolio are charged to that portfolio.
INCOME TAX STATUS--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 provisions of the Internal
Revenue Code. The cost of securities is substantially the same for book and
tax purposes.
DISTRIBUTION TO SHAREHOLDERS--Distributions to a shareholder are recorded
on the ex-dividend date. Distributions from net investment income are declared
daily and paid monthly. Distributions from net short-term realized gains, if
any, will be distributed in accordance with the requirements of the Internal
Revenue Code of 1986 (the "Code"), as amended, and may be reflected in the
Fund's daily dividends. Distributions from net long-term realized gains, if any,
will be distributed annually, except that an additional capital gains
distribution may be made in a given year to the extent necessary to avoid the
imposition of federal excise tax on the Fund.
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2. TRANSACTIONS WITH AFFILIATES
ADVISORY--The Portfolio has an Investment Advisory Agreement with J.P.
Morgan Investment Management Inc. ("JPMIM"), an affiliate of Morgan Guaranty
Trust Company of New York ("Morgan") and a wholly owned subsidiary of J.P.
Morgan & Co. Incorporated ("J.P. Morgan"). Under the terms of the agreement,
the Portfolio pays JPMIM 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.
ADMINISTRATIVE SERVICES--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 registered
6
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THE TREASURY MONEY MARKET PORTFOLIO NOTES TO FINANCIAL STATEMENTS
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(Continued)
OCTOBER 31, 2000
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2. TRANSACTIONS WITH AFFILIATES (CONTINUED)
investment companies for which JPMIM acts as investment advisor 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
Funds Distributor, Inc. 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 Trust and certain other investment companies for which Morgan
provides similar services.
Morgan has agreed to reimburse the Portfolio to the extent necessary to
maintain the total operating expenses (which excludes interest and dividend
expenses, taxes and extraordinary items) of the Portfolio at no more than
0.20% of the average daily net assets of the Portfolio. This reimbursement
arrangement can be changed or terminated at any time after February 28, 2001,
at the option of J.P. Morgan.
ADMINISTRATION--The Portfolio has retained Funds Distributor, Inc. ("FDI"),
a registered broker-dealer, to serve as the co-administrator and distributor
for the Fund. Under a Co-Administration Agreement between FDI and the Portfolio,
FDI provides administrative services necessary for the operations of the
Portfolio, furnishes office space and facilities required for conducting the
business of the Portfolio and pays the compensation of the Portfolio's officers
affiliated with FDI. The Portfolio has agreed to pay FDI fees equal to its
allocable share of an annual complex-wide charge of $425,000 plus FDI's out-of-
pocket expenses. The 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 Trust and certain other investment companies for which FDI
provides similar services.
FUND SERVICES--The Portfolio has a Fund Services Agreement with Pierpont
Group, Inc. ("PGI") 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 PGI.
Each Trustee receives an aggregate annual fee of $75,000 for serving on the
boards of the Trust, the J.P. Morgan Funds, the J.P. Morgan Institutional Funds,
and other registered investment companies in which they invest. The Trustees'
Fees and Expenses shown in the financial statements represent the Portfolio's
allocated portion of the total Trustees' fees and expenses. The Trust's Chairman
and Chief Executive Officer also serves as Chairman of PGI and receives
compensation and employee benefits from PGI. The allocated portion of such
compensation and benefits included in the Fund Services Fee shown on the
Statement of Operations was $3,100.
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3. SUBSEQUENT EVENTS
On September 13, 2000, J.P. Morgan & Co. Incorporated and The Chase
Manhattan Corporation announced that they have entered into an agreement and
plan of merger. The transaction is expected to close in December 2000 and is
subject to approval by shareholders of both companies.
7
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REPORT OF INDEPENDENT ACCOUNTANTS
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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, 2000, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the supplementary data for each of the three years in the
period then ended and for the period July 7, 1997 (commencement of operations)
through October 31, 1997, in conformity with accounting principles generally
accepted in the United States of America. These financial statements and
supplementary data (hereafter referred to as "financial statements") are the
responsibility of the Portfolio's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States of America, 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, 2000 by correspondence with the custodian and brokers, provide a reasonable
basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
December 21, 2000
8
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[back cover]
J.P. MORGAN INSTITUTIONAL SERVICE FUNDS
Prime Money Market Fund
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Treasury Money Market Fund
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Federal Money Market Fund
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Tax Exempt Money Market Fund
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For more information on the J.P. Morgan
Institutional Funds, call J.P.
Morgan Funds Services at (800) 766-7722.
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Morgan Guaranty Trust Company MAILING
500 Stanton Christiana Road INFORMATION
Newark, Delaware 19713-2107
IN-ANN-23745 1000
