<PAGE>
LETTER TO THE SHAREHOLDERS OF THE J.P. MORGAN INSTITUTIONAL TAX EXEMPT MONEY
MARKET FUND
October 1, 1998
Dear Shareholder:
The previous 12-month period was largely dominated by events in Asia and more
recently, Russia, where a breakdown in currency and default on debt occurred
in August. U.S. financial markets reacted with an abrupt and broad drop in
asset values, along with major stock markets around the world, which fell
anywhere from 10% to 20%. Emerging markets equity indices were hit the
hardest, plunging nearly 30% during the period. Investors continued to look
to money market funds as a traditional safe haven. During this period, the
J.P. Morgan Institutional Tax Exempt Money Market Fund posted a 3.45% return,
while its benchmark, the IBC Tax Free Money Fund Average posted a gain of
3.04%. The fund's current average 7-day yield of 3.21% translates to a tax
equivalent yield of 5.31%, assuming a 39.6% federal income tax rate.
The fund maintained a stable $1.00 net asset value over the period. On August
31, 1998, the net assets of the fund were approximately $594.3 million while the
net assets of The Tax Exempt Money Market Portfolio, in which the fund invests,
were approximately $1.8 billion. Dividends of approximately $0.03 per share were
paid from ordinary income, all of which is exempt from federal income taxes.
This report includes a discussion with Dan Mulvey, the portfolio manager
primarily responsible for The Tax Exempt Money Market Portfolio. In this
interview, Dan talks about the events of the previous 12 months that had the
greatest effect on the portfolio, and discuss how our investment strategy was
used to protect assets in a difficult environment.
As chairman and president of Asset Management Services, we appreciate your
investment in the fund. If you have any comments or questions, please call your
Morgan representative or J.P. Morgan Funds Services at (800) 766-7722.
Sincerely yours,
/s/ Ramon de Oliveira /s/ Keith M. Schappert
Ramon de Oliveira Keith M. Schappert
Chairman of Asset Management Services President of Asset Management Services
J.P. Morgan & Co. Incorporated J.P. Morgan & Co. Incorporated
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<S> <C> <C> <C>
LETTER TO THE SHAREHOLDERS . . . . . . . 1 GLOSSARY OF TERMS. . . . . . . 5
FUND PERFORMANCE . . . . . . . . . . . . 2 FUND FACTS AND HIGHLIGHTS. . . 6
PORTFOLIO MANAGER Q&A. . . . . . . . . . 3 FINANCIAL STATEMENTS . . . . . 8
- --------------------------------------------------------------------------------
</TABLE>
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
what would have happened if the fund had achieved that return by performing at a
constant rate each year. Average annual total returns represent the average
yearly change of a fund's value over various time periods, typically one, five,
or ten years (or since inception). Total returns for periods of less than one
year are not annualized and provide a picture of how a fund has performed over
the short term.
<TABLE>
<CAPTION>
PERFORMANCE TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS
---------------------- ---------------------------------------------
THREE SIX ONE THREE FIVE TEN
AS OF AUGUST 31, 1998 MONTHS MONTHS YEAR YEARS YEARS YEARS*
- -------------------------------------------------------------- ---------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
J.P. Morgan Institutional Tax Exempt
Money Market Fund 0.83% 1.69% 3.45% 3.39% 3.21% 3.77%
IBC Tax Free Money Fund Average 0.72% 1.48% 3.04% 3.03% 2.87% 3.54%
Lipper Institutional Tax Exempt
Money Market Average 0.79% 1.64% 3.31% 3.32% 3.13% 3.79%
AS OF JUNE 30, 1998
- -------------------------------------------------------------- ---------------------------------------------
J.P. Morgan Institutional Tax Exempt
Money Market Fund 0.87% 1.67% 3.46% 3.40% 3.16% 3.80%
IBC Tax Free Money Fund Average 0.78% 1.49% 3.07% 3.05% 2.83% 3.58%
Lipper Institutional Tax Exempt
Money Market Average 0.85% 1.62% 3.34% 3.33% 3.09% 3.82%
</TABLE>
*REFLECTS PERFORMANCE OF THE J.P. MORGAN TAX EXEMPT MONEY MARKET FUND FROM
AUGUST 31, 1988 THROUGH AUGUST 5, 1993 (COMMENCEMENT OF INVESTMENT OPERATAIONS).
THE PERFORMANCE FOR SUCH PERIOD REFLECTS THE DEDUCTION OF THE EXPENSES OF THE
J.P. MORGAN TAX EXEMPT MONEY MARKET FUND, WHICH WERE HIGHER THAN THE EXPENSES OF
THE FUND.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. FUND RETURNS ARE NET OF
FEES, ASSUME THE REINVESTMENT OF DISTRIBUTIONS, AND REFLECT REIMBURSEMENT OF
CERTAIN FUND AND PORTFOLIO EXPENSES AS DESCRIBED IN THE PROSPECTUS. HAD EXPENSES
NOT BEEN SUBSIDIZED, RETURNS WOULD HAVE BEEN LOWER. IBC TAX FREE MONEY FUND
AVERAGE IS AN AVERAGE OF ALL MAJOR TAX-FREE MONEY MARKET FUND RETURNS. THIS
COMPARATIVE INFORMATION IS AVAILABLE TO THE PUBLIC FROM THE IBC ORGANIZATION,
INC. LIPPER ANALYTICAL SERVICES, INC. IS A LEADING SOURCE FOR MUTUAL FUND DATA.
2
<PAGE>
PORTFOLIO MANAGER Q&A
[PHOTO]
The following is an interview with DAN MULVEY, VICE PRESIDENT, responsible for
managing The Tax Exempt Money Market Portfolio, in which the fund invests. Dan
joined Morgan in September 1991 after six years at Equitable Life where he was a
trader for money market, government, and corporate securities. He earned a BA in
economics from the University of Illinois and an MBA from Fordham University.
This interview was conducted on September 21, 1998, and represents Dan's views
on that date.
DURING THE PERIOD UNDER REVIEW, THE FUND'S PERFORMANCE BECAME MORE COMPETITIVE,
STACKING UP FAVORABLY AGAINST OUR COMPETITORS. WHAT FACTORS CONTRIBUTED?
DM: Specifically, we reduced our holdings in floating rate paper and increased
our holdings in commercial paper and notes. In June, we took advantage of
attractive percentages versus taxables and seasonal note issuance to extend the
average maturity of the portfolio. We also increased our holdings in synthetic
Variable Rate Demand Notes (VRDNs), which offer additional yield versus generic
VRDNs. We think these decisions combined contributed five additional basis
points of yield to the portfolio during this year.
THE FLIGHT TO QUALITY CONTINUES AS INVESTORS SEEK A HAVEN FROM VOLATILITY.
PLEASE COMMENT ON HOW THIS HAS AFFECTED THE PORTFOLIO.
DM: What we're seeing is a more pronounced flow to fixed income funds and still
a decent flow to money market funds.
A RELATED ISSUE IS THE CURRENT EXPECTATION THAT THE FEDERAL RESERVE WILL EASE IN
THE NEAR TERM. PLEASE COMMENT.
DM: We expect to see some easing -- and we believe the volatility that we're
seeing in the markets will prompt an ease in monetary policy. We originally
expected this easing to occur some time at the end of 1998 or early 1999.
However, the kind of volatility we've seen lately could very well push the Fed
to do something, sooner than later. The good news for the fund is, if that
should happen, we're positioned to perform well under those circumstances.
PLEASE EXPLAIN.
DM: In anticipation of this action by the Fed, we've gotten the portfolio as
laddered as possible, recognizing that additional assets may be invested at
increasingly lower rates. So we're trying to manage this position with a keen
eye, if you will, while carefully maintaining liquidity in the fund should
monies go out, as well.
This is exactly the rationale behind our decision to increase weightings in
commercial paper and notes. Unlike the LIBOR curve, there's some steepness, or
slope to the tax exempt curve right now, so even if nothing happens with the Fed
the portfolio will still benefit.
3
<PAGE>
WHAT IS YOUR OUTLOOK FOR THE MONTHS AHEAD? AND HOW ARE YOU POSITIONING THE
PORTFOLIO IN LIGHT OF YOUR FORECAST?
DM: We're going to maintain the laddered structure to the portfolio. We think
this offers us the best possible liquidity and the best structure in these
rather uncertain markets with uncertain asset flows. Given our expectations for
lower taxable rates, it makes being laddered not a really risky bet for the
portfolio, which we believe is in the fund's best interest.
As well, it's imperative that we maintain the highest credit quality -- this
allows us to remain liquid if market trends reverse themselves. Another
important point to note is that given the short-term taxable money market is
seeing an inverted yield curve right now, and the tax exempt curve has some
slope, as we mentioned earlier, we see it as an opportunity to extend the
average maturity and not adversely affect the overall yield of the portfolio.
4
<PAGE>
GLOSSARY OF TERMS
AVERAGE MATURITY: The weighted average time to maturity of the entire portfolio
with the weights equal to the percentage of the portfolio invested in each
security (see Maturity).
CREDIT RATING: The rating assigned to a bond or note by independent rating
agencies such as Standard & Poor's Corporation and Moody's Investors Service. In
evaluating creditworthiness, these agencies assess the issuer's present
financial condition and future ability and willingness to make principal and
interest payments when due.
CREDIT RISK: Financial risk that an obligation will not be paid and a loss will
result.
LETTER OF CREDIT: Instrument or document issued by a bank guaranteeing the
payment of a customer's drafts up to a stated amount and eliminating the
seller's risk.
MATURITY: The date on which the life of a financial instrument ends through cash
or physical settlement or expiration with no value or the date a security comes
due and fully payable.
VARIABLE RATE DEMAND NOTE: Note representing borrowings that is payable on
demand and that bears interest tied to a base money market rate, usually the
bank prime rate. The rate on the note is adjusted upward or downward each time
the base rate changes.
YIELD: Coupon rate of interest on a bond divided by the purchase price. As a
bond's price falls, its yield rises and vice versa.
YIELD CURVE: A graph showing the term structure or level of interest rates
ranging from the shortest to the longest maturities. The resulting curve shows
if short-term interest rates are higher or lower than long-term rates. Normally,
the longer the bond, the higher the yield it offers, resulting in a positive
yield curve. An inverted yield curve can occur when there are supply/demand
imbalances for various maturities, which results in short-term rates at higher
levels than longer-term instruments.
YIELD SPREAD: The difference in yield between different types of securities. For
example, if a Treasury bond is yielding 6.00% and a municipal is yielding 5.00%,
the yield spread is 1.00% or 100 basis points.
5
<PAGE>
FUND FACTS
INVESTMENT OBJECTIVE
J.P. Morgan Institutional Tax Exempt Money Market Fund seeks to provide a high
level of current income exempt from federal income tax and maintain a high level
of liquidity and preserve capital. It is designed for investors who seek to
preserve capital and earn current income exempt from federal income tax.
- --------------------------------------------------------------------------------
INCEPTION DATE
07/12/93
- --------------------------------------------------------------------------------
FUND NET ASSETS AS OF 8/31/98
$594,291,242
- --------------------------------------------------------------------------------
PORTFOLIO NET ASSETS AS OF 8/31/98
$1,844,135,927
- --------------------------------------------------------------------------------
DIVIDEND PAYABLE DATES
MONTHLY
- --------------------------------------------------------------------------------
CAPITAL GAIN PAYABLE DATE (IF APPLICABLE)
12/11/98
EXPENSE RATIO
The fund's current annual expense ratio of 0.22% covers shareholders' expenses
for custody, tax reporting, investment advisory and shareholder services, after
fee waivers and reimbursement. The fund is no-load and does not charge any
sales, redemption, or exchange fees. There are no additional charges for buying,
selling, or safekeeping fund shares, or for wiring redemption proceeds from the
fund.
FUND HIGHLIGHTS
ALL DATA AS OF AUGUST 31, 1998
PORTFOLIO ALLOCATION
(PERCENTAGE OF TOTAL INVESTMENTS)
[CHART]
<TABLE>
<S> <C>
VARIABLE RATE DEMAND NOTES 71.7%
COMMERCIAL PAPER 16.8%
TAX REVENUE ANTICIPATION NOTES 4.0%
THIRD PARTY PUT BONDS 3.2%
TAX ANTICIPATION NOTES 1.3%
REVENUE ANTICIPATION NOTES 1.3%
OPTIONAL PUT BONDS 1.2%
REVENUE ANTICIPATION WARRANTS 0.5%
</TABLE>
AVERAGE 7-DAY YIELD
3.21%*
AVERAGE MATURITY
35 days
*YIELDS ARE NET OF FEES, ASSUME REINVESTMENT OF FUND DISTRIBUTIONS AND REFLECT
THE REIMBURSEMENT OF CERTAIN FUND EXPENSES AS DESCRIBED IN THE PROSPECTUS. HAD
THESE EXPENSES NOT BEEN SUBSIDIZED, THE 7-DAY YIELD WOULD HAVE BEEN 3.12%.
6
<PAGE>
DISTRIBUTED BY FUNDS DISTRIBUTOR, INC. MORGAN GUARANTY TRUST COMPANY OF NEW YORK
SERVES AS INVESTMENT ADVISOR AND MAKES THE FUND AVAILABLE SOLELY IN ITS CAPACITY
AS SHAREHOLDER SERVICING AGENT. EFFECTIVE OCTOBER 1, 1998 THE PORTFOLIO'S
INVESTMENT ADVISOR WILL BE J.P. MORGAN INVESTMENT MANAGEMENT INC., A WHOLLY
OWNED SUBSIDIARY OF J.P. MORGAN & CO. INC. SHARES OF THE FUND ARE NOT BANK
DEPOSITS AND ARE NOT GUARANTEED BY ANY BANK, GOVERNMENT ENTITY, OR THE FDIC.
WHILE THE FUND SEEKS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE,
THERE CAN BE NO ASSURANCE THAT IT WILL BE ABLE TO CONTINUE TO DO SO.
Opinions expressed herein are based on current market conditions and are subject
to change without notice. The fund invests through a master portfolio (another
fund with the same objective). Income may be subject to some state or local
taxes. Some income may be subject to the Federal alternative minimum tax for
certain investors. Capital gains are not exempt from taxes.
CALL J.P. MORGAN FUNDS SERVICES AT (800) 766-7722 FOR A PROSPECTUS CONTAINING
MORE COMPLETE INFORMATION ABOUT THE FUND INCLUDING MANAGEMENT FEES AND OTHER
EXPENSES. PLEASE READ IT CAREFULLY BEFORE INVESTING.
7
<PAGE>
J.P. MORGAN INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment in The Tax Exempt Money Market
Portfolio ("Portfolio"), at value $594,749,453
Receivable for Expense Reimbursements 92,042
Prepaid Trustees' Fees 1,722
Prepaid Expenses and Other Assets 84
------------
Total Assets 594,843,301
------------
LIABILITIES
Dividends Payable to Shareholders 381,738
Administrative Services Fee Payable 22,162
Administration Fee Payable 1,984
Fund Services Fee Payable 629
Accrued Expenses 145,546
------------
Total Liabilities 552,059
------------
NET ASSETS
Applicable to 594,301,042 Shares of Beneficial
Interest Outstanding
(par value $0.001, unlimited shares authorized) $594,291,242
------------
------------
Net Asset Value, Offering and Redemption Price
Per Share $1.00
----
----
ANALYSIS OF NET ASSETS
Paid-in Capital $594,300,537
Accumulated Net Realized Loss on Investment (9,295)
------------
Net Assets $594,291,242
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
8
<PAGE>
J.P. MORGAN INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED AUGUST 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME ALLOCATED FROM PORTFOLIO
Allocated Interest Income $18,091,478
Allocated Portfolio Expenses (1,092,577)
-----------
Net Investment Income Allocated from
Portfolio 16,998,901
FUND EXPENSES
Shareholder Servicing Fee $ 278,809
Administrative Services Fee 147,096
Registration Fees 124,722
Professional Fees 19,220
Transfer Agent Fees 17,282
Fund Services Fee 14,685
Administration Fee 11,546
Amortization of Organization Expenses 9,124
Trustees' Fees and Expenses 4,243
Miscellaneous 19,806
---------
Total Fund Expenses 646,533
Less: Reimbursement/Waiver of Expenses (646,533)
---------
NET FUND EXPENSES --
-----------
NET INVESTMENT INCOME 16,998,901
NET REALIZED GAIN ON INVESTMENT ALLOCATED FROM
PORTFOLIO 16,861
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $17,015,762
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
9
<PAGE>
J.P. MORGAN INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FISCAL FOR THE FISCAL
YEAR ENDED YEAR ENDED
AUGUST 31, 1998 AUGUST 31, 1997
--------------- ---------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 16,998,901 $ 6,392,549
Net Realized Gain (Loss) on Investment Allocated
from Portfolio 16,861 (1,955)
--------------- ---------------
Net Increase in Net Assets Resulting from
Operations 17,015,762 6,390,594
--------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (16,998,901) (6,392,549)
--------------- ---------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST (AT A CONSTANT $1.00
PER SHARE)
Proceeds from Shares of Beneficial Interest Sold 3,041,853,798 615,734,369
Reinvestment of Dividends 11,998,593 3,931,041
Cost of Shares of Beneficial Interest Redeemed (2,750,521,384) (492,288,692)
--------------- ---------------
Net Increase from Transactions in Shares of
Beneficial Interest 303,331,007 127,376,718
--------------- ---------------
Total Increase in Net Assets 303,347,868 127,374,763
NET ASSETS
Beginning of Fiscal Year 290,943,374 163,568,611
--------------- ---------------
End of Fiscal Year $ 594,291,242 $ 290,943,374
--------------- ---------------
--------------- ---------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
10
<PAGE>
J.P. MORGAN INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share outstanding throughout each year are as follows:
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED AUGUST 31,
----------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.0339 0.0330 0.0331 0.0352 0.0228
Net Realized Gain (Loss) on Investment 0.0000(a) (0.0000)(a) (0.0000)(a) (0.0002) (0.0000)(a)
-------- -------- -------- -------- --------
Total from Investment Operations 0.0339 0.0330 0.0331 0.0350 0.0228
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (0.0339) (0.0330) (0.0331) (0.0352) (0.0228)
Net Realized Gain -- -- -- -- (0.0000)(a)
-------- -------- -------- -------- --------
Total Distributions to Shareholders (0.0339) (0.0330) (0.0331) (0.0352) (0.0228)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF YEAR $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
RATIOS AND SUPPLEMENTAL DATA
Total Return 3.45% 3.35% 3.36% 3.57% 2.30%
Net Assets, End of Period (in thousands) $594,291 $290,943 $163,569 $100,142 $ 46,083
Ratios to Average Net Assets
Expenses 0.22% 0.29% 0.35% 0.35% 0.35%
Net Investment Income 3.37% 3.29% 3.28% 3.49% 2.34%
Expenses without reimbursement/waiver 0.35% 0.39% 0.42% 0.50% 1.00%
</TABLE>
- ------------------------
(a) Less than $0.0001.
The Accompanying Notes are an Integral Part of the Financial Statements.
11
<PAGE>
J.P. MORGAN INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1998
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The J.P. Morgan Institutional Tax Exempt Money Market Fund (the "fund") is a
separate series of the J.P. Morgan Institutional Funds, a Massachusetts business
trust (the "trust") which was organized on November 4, 1992 .The trust is
registered under the Investment Company Act of 1940, as amended, as an open-end
management investment company. The fund commenced operations on July 12, 1993.
Prior to January 1, 1998, the trust's and the fund's names were The JPM
Institutional Funds and The JPM Institutional Tax Exempt Money Market Fund,
respectively.
The fund invests all of its investable assets in The Tax Exempt Money Market
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 (33% at August
31, 1998). The performance of the fund is directly affected by the performance
of the portfolio. The financial statements of the portfolio, including the
Schedule of Investments, are included elsewhere in this report and should be
read in conjunction with the fund's financial statements.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual amounts could differ from
those estimates. The following is a summary of the significant accounting
policies of the fund:
a) Valuation of securities by the portfolio is discussed in Note 1a of the
portfolio's Notes to Financial Statements which are included elsewhere in
this report.
b) The fund records its share of net investment income, realized gain and
loss and adjusts its investment in the portfolio each day. All the net
investment income and realized 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 and net realized
capital gains, if any, are declared as dividends daily and paid monthly.
Net short-term capital gains, if any, will be distributed in accordance
with the requirements of the Internal Revenue Code of 1986, as amended
(the "Code"), and may be reflected in the fund's daily dividends.
Substantially all the realized net long-term capital gains, if any, are
declared and paid 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.
d) The fund incurred organization expenses in the amount of $58,457, which
were deferred and amortized on a straight-line basis over period not to
exceed five years beginning with the commencement of operations of the
fund.
e) The fund is treated as a separate entity for federal income tax purposes
and intends to comply with the provisions of the Code, 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. For United States federal
income tax purposes, the fund had a capital loss carryforward at August
31, 1998 of $7,763, of which $6,639 expires in 2004 and $1,124 expires in
2005. The fund utilized $15,851 of its capital loss
12
<PAGE>
J.P. MORGAN INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AUGUST 31, 1998
- --------------------------------------------------------------------------------
carryforward in the current year. To the extent that this capital loss is
used to offset future capital gains, it is probable that gains so offset
will not be distributed to shareholders. The fund incurred approximately
$1,867 of realized long term capital losses in the period from November 1,
1997 to August 31, 1998. These losses were deferred for tax purposes until
September 1, 1998.
f) 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.
2. TRANSACTIONS WITH AFFILIATES
a) The trust, on behalf of the fund, has retained Funds Distributor, Inc.
("FDI"), a registered broker-dealer, to serve as the co-administrator and
distributor for the fund. Under a Co-Administration Agreement between FDI
and the trust on behalf of the fund, FDI provides administrative services
necessary for the operations of the fund, furnishes office space and
facilities required for conducting the business of the fund and pays the
compensation of the fund's officers affiliated with FDI. The fund has
agreed to pay FDI fees equal to its allocable share of an annual
complex-wide charge of $425,000 plus FDI's out-of-pocket expenses. The
amount allocable to the fund is based on the ratio of the fund's net
assets to the aggregate net assets of the trust, and certain other
investment companies subject to similar agreements with FDI. For the
fiscal year ended August 31, 1998, the fee for these services amounted to
$11,546.
b) The trust, on behalf of the fund, has an Administrative Services Agreement
(the "Services Agreement") with Morgan Guaranty Trust Company of New York
("Morgan") under which Morgan is responsible for certain aspects of the
administration and operation of the fund. Under the Services Agreement,
the fund has agreed to pay Morgan a fee equal to its allocable share of an
annual complex-wide charge. This charge is calculated based on the
aggregate average daily net assets of the portfolio and the other
portfolios in which the trust and the J.P. Morgan Funds (formerly The JPM
Pierpont Funds) invest (the "master portfolios") and J.P. Morgan Series
Trust (formerly JPM Series Trust) in accordance with the following annual
schedule: 0.09% on the first $7 billion of their aggregate average daily
net assets and 0.04% of their aggregate average daily net assets in excess
of $7 billion less the complex-wide fees payable to FDI. The portion of
this charge payable by the fund is determined by the proportionate share
that its net assets bear to the net assets of the trust, the master
portfolios, other investors in the master portfolios for which Morgan
provides similar services, and J.P. Morgan Series Trust. For the fiscal
year ended August 31, 1998, the fee for these services amounted to
$147,096.
Effective February 10, 1997, Morgan has agreed to reimburse the fund (in
addition to waiving it shareholder servicing fee, see Note 2c) for the
remainder of the fund's expenses (excluding extraordinary expenses and
expenses allocated to the fund from the portfolio), thereby reducing
current total operating expenses of the fund. In addition, Morgan has
agreed to reimburse the fund to the extent necessary to maintain the total
operating expenses of the fund, including the expenses allocated to the
fund from the portfolio, at no more than 0.35% of the average daily net
assets of the fund. This
13
<PAGE>
J.P. MORGAN INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AUGUST 31, 1998
- --------------------------------------------------------------------------------
waiver and reimbursement arrangement is in effect until December 31, 1998.
There is no assurance that Morgan will continue this arrangement beyond
that date. For the fiscal year ended August 31, 1998, Morgan has agreed to
reimburse/waive $646,533 of expenses of the fund under these arrangements.
c) The trust, on behalf of the fund, has a Shareholder Servicing Agreement
with Morgan to provide account administration and personal account
maintenance service to fund shareholders. The Agreement provides for the
fund to pay Morgan a fee for these services which is computed daily and
paid monthly at an annual rate. This rate was 0.05% of the average daily
net assets of the fund from September 1, 1997 through July 31, 1998.
Effective August 1, 1998 the rate was increased to 0.10%. In addition,
Morgan has agreed to waive the expenses of the Agreement until December
31, 1998. There is no assurance that Morgan will continue this arrangement
beyond that date. For the fiscal year ended August 31, 1998, the fee of
$278,809 for these services was waived.
d) The trust, on behalf of the fund, has a Fund Services Agreement with
Pierpont Group, Inc. ("Group") to assist the trustees in exercising their
overall supervisory responsibilities for the trust's affairs. The trustees
of the trust represent all the existing shareholders of Group. The fund's
allocated portion of Group's costs in performing its services amounted to
$14,685 for the fiscal year ended August 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 master portfolios and
J.P. Morgan Series Trust. The Trustees' Fees and Expenses shown in the
financial statements represents the fund's allocated portion of the total
fees and expenses. The trust's Chairman and Chief Executive Officer also
serves as Chairman of Group and receives compensation and employee
benefits from Group in his role as Group's Chairman. The allocated portion
of such compensation and benefits included in the Fund Services Fee shown
in the financial statements was $3,100.
14
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of
J.P. Morgan Institutional Tax Exempt Money Market Fund
In our opinion, the accompanying statement of assets and liabilities and the
related statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
J.P. Morgan Institutional Tax Exempt Money Market Fund (one of the series
constituting part of the J.P. Morgan Institutional Funds, hereafter referred to
as the "fund") at August 31, 1998, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the five years in the
period then ended, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with 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 provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
New York, New York
October 15, 1998
15
<PAGE>
J.P. MORGAN INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND
SUPPLEMENTAL PROXY INFORMATION
- --------------------------------------------------------------------------------
A Joint Special Meeting of Shareholders of the J.P. Morgan Family of Funds was
held on June 25, 1998, adjourned to August 20, 1998. Each of the applicable
funds voted in favor of adopting the following proposals, therefore, the results
are aggregated for the Trust unless otherwise, specified.
1. To elect a slate of five Trustees to hold office for a term of unlimited
duration subject to the current retirement age of 70 (applicable to J.P.
Morgan Funds, J.P. Morgan Institutional Funds and J.P. Morgan Series Trust):
<TABLE>
<CAPTION>
VOTES IN VOTES
FAVOR OF AGAINST
----------- -------
<S> <C> <C>
Frederick S. Addy................................ 2,592,561,591 8,840,251
William G. Burns................................. 2,592,561,591 8,840,251
Arthur C. Eschenlauer............................ 2,592,561,591 8,840,251
Matthew Healey................................... 2,592,561,591 8,840,251
Michael P. Mallardi.............................. 2,592,561,591 8,840,251
</TABLE>
2. To standardize the funds' and their corresponding portfolios' fundamental
investment restrictions:
2a. Diversification of investments (applicable to all funds and portfolios
except for J.P. Morgan Japan Equity, J.P. Morgan Institutional Equity, J.P.
Morgan Institutional International Bond, J.P. New York Total Return Bond, J.P.
Morgan Institutional New York Total Return Bond, J.P. Morgan Emerging Markets
Debt and J.P. Morgan California Bond Funds and their corresponding portfolios)
<TABLE>
<CAPTION>
VOTES IN VOTES VOTES
FAVOR OF AGAINST ABSTAINED
- ---------------- ------- ---------
<S> <C> <C>
354,691,768..... 0 0
</TABLE>
2b. Concentration of assets in a particular industry (applicable to all funds
and portfolios)
<TABLE>
<CAPTION>
VOTES IN VOTES VOTES
FAVOR OF AGAINST ABSTAINED
- ---------------- ------- ---------
<S> <C> <C>
354,691,768..... 0 0
</TABLE>
2c. Issuance of senior securities (applicable to all funds and portfolios)
<TABLE>
<CAPTION>
VOTES IN VOTES VOTES
FAVOR OF AGAINST ABSTAINED
- ---------------- ------- ---------
<S> <C> <C>
354,691,768..... 0 0
</TABLE>
2d. Borrowing (applicable to all funds and portfolios)
<TABLE>
<CAPTION>
VOTES IN VOTES VOTES
FAVOR OF AGAINST ABSTAINED
- ---------------- ------- ---------
<S> <C> <C>
354,691,768..... 0 0
</TABLE>
16
<PAGE>
J.P. MORGAN INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND
SUPPLEMENTAL PROXY INFORMATION (CONTINUED)
- --------------------------------------------------------------------------------
2e. Underwriting (applicable to all funds and portfolios)
<TABLE>
<CAPTION>
VOTES IN VOTES VOTES
FAVOR OF AGAINST ABSTAINED
- ---------------- ------- ---------
<S> <C> <C>
354,691,768..... 0 0
</TABLE>
2f. Investment in Real Estate (applicable to all funds and portfolios)
<TABLE>
<CAPTION>
VOTES IN VOTES VOTES
FAVOR OF AGAINST ABSTAINED
- ---------------- ------- ---------
<S> <C> <C>
354,691,768..... 0 0
</TABLE>
2g. Commodities (applicable to all funds and portfolios)
<TABLE>
<CAPTION>
VOTES IN VOTES VOTES
FAVOR OF AGAINST ABSTAINED
- ---------------- ------- ---------
<S> <C> <C>
354,691,768..... 0 0
</TABLE>
2h. Lending (applicable to all funds and portfolios)
<TABLE>
<CAPTION>
VOTES IN VOTES VOTES
FAVOR OF AGAINST ABSTAINED
- ---------------- ------- ---------
<S> <C> <C>
354,691,768..... 0 0
</TABLE>
2i. Reclassification of Other Fundamental Restrictions as Nonfundamental
(applicable to all funds and portfolios)
<TABLE>
<CAPTION>
VOTES IN VOTES VOTES
FAVOR OF AGAINST ABSTAINED
- ---------------- ------- ---------
<S> <C> <C>
354,660,624..... 31,144 0
</TABLE>
3. Reclassification of Investment Objectives from Fundamental to Nonfundamental
(applicable to all funds and portfolios except for J.P. Morgan Disciplined
Equity, J.P. Morgan Institutional Disciplined Equity, J.P. Morgan
International Opportunities, J.P. Morgan Institutional International
Opportunities, J.P. Morgan Global Strategic Income, J.P. Morgan Institutional
Global Strategic Income, J.P. Morgan Emerging Markets Debt, J.P. Morgan U.S.
Small Company Opportunities, J.P. Morgan Tax Aware U.S. Equity, J.P. Morgan
California Bond, J.P. Morgan Institutional Treasury Money Market and J.P.
Morgan Institutional Service Treasury Money Market Funds)
<TABLE>
<CAPTION>
VOTES IN VOTES VOTES
FAVOR OF AGAINST ABSTAINED
- ---------------- ----------- -----------
<S> <C> <C>
354,691,768..... 0 0
</TABLE>
4. Approval of New Investment Advisory Agreement (applicable to all funds and
portfolios)
<TABLE>
<CAPTION>
VOTES IN VOTES VOTES
FAVOR OF AGAINST ABSTAINED
- ---------------- ------- ---------
<S> <C> <C>
354,691,768..... 0 0
</TABLE>
17
<PAGE>
J.P. MORGAN INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND
SUPPLEMENTAL PROXY INFORMATION (CONTINUED)
- --------------------------------------------------------------------------------
5. Amendment of the Declaration of Trust (applicable to J.P. Morgan Funds and
J.P. Morgan Institutional Funds)
<TABLE>
<CAPTION>
VOTES IN VOTES VOTES
FAVOR OF AGAINST ABSTAINED
- ---------------- --------- -----------
<S> <C> <C>
2,411,567,264... 7,638,329 179,591,823
</TABLE>
6. Ratification of the selection of independent accountants,
PricewaterhouseCoopers LLP (applicable to J.P. Morgan Funds, J.P. Morgan
Institutional Funds and J.P. Morgan Series Trust)
<TABLE>
<CAPTION>
VOTES IN VOTES VOTES
FAVOR OF AGAINST ABSTAINED
- ---------------- ---------- -----------
<S> <C> <C>
2,402,592,025... 19,567,729 179,242,087
</TABLE>
18
<PAGE>
The Tax Exempt Money Market Portfolio
Annual Report August 31, 1998
(The following pages should be read in conjunction
with J.P. Morgan Institutional Tax Exempt Money Market Fund
Annual Financial Statements)
19
<PAGE>
THE TAX EXEMPT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
AUGUST 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE DATE RATE VALUE
- -------------- ------------------------------------------------- -------- ------------------ ------ -----------
<C> <S> <C> <C> <C> <C>
ALABAMA (2.3%)
$ 9,000 Birmingham-Carraway Special Care Facilities
Financing Authority, (Carraway Methodist
Health, Series A, due 08/15/28), LOC Amsouth
Bank........................................... VRDN 09/02/98(b) 3.220% $ 9,000,000
9,000 Huntsville Health Care Authority, (Series A, due
06/01/27), MBIA Insured........................ VRDN 09/02/98(b) 3.150 9,000,000
2,250 Jefferson County, (Public Improvement Revenue
Warrant, Briarwood Presbyterian Church Project,
Series 1988, due 05/01/08), LOC Amsouth Bank... VRDN 09/01/98(b) 5.015 2,250,000
900 Stevenson Industrial Development Board,
(Refunding, Mead Corp. Project, due 11/01/16),
LOC CS First Boston............................ VRDN 09/01/98(b) 3.300 900,000
20,900 West Jefferson Industrial Development Board,
(Refunding, PCR, Power Co. Project, due
06/01/28)...................................... VRDN 09/01/98(b) 3.250 20,900,000
-----------
42,050,000
-----------
ALASKA (0.8%)
5,100 Alaska State Housing Finance Corp., (Series
1991C, due 06/01/26), LOC Swiss Bank........... VRDN 09/02/98(b) 3.220 5,100,000
9,300 Valdez Marine Terminal, (Refunding, Exxon
Pipeline Co. Project, Series A, due
12/01/33)...................................... VRDN 09/01/98(b) 3.200 9,300,000
-----------
14,400,000
-----------
ARIZONA (1.5%)
7,700 Apache County, (IDR, Tuscon Power Co.,
Springerville Project, due 12/01/20), LOC
Barclays Bank International.................... VRDN 09/02/98(b) 3.250 7,700,000
1,800 Casa Grande Industrial Development Authority,
(IDR, Frito-Lay Inc./Pepsico., due 12/01/03)... VRDN 09/01/98(b) 4.675 1,800,000
4,700 Maricopa County Pollution Control Corp., (PCR, El
Paso Electric Co., due 12/01/14), LOC CS First
Boston......................................... VRDN 09/02/98(b) 3.250 4,700,000
10,000 Maricopa County Pollution Control Corp., (PCR,
Refunding, Series D, due 05/01/29), LOC Bank of
America N.T. & S.A............................. VRDN 09/01/98(b) 3.250 10,000,000
3,705 Pima County Industrial Development Authority,
(MFHR, Refunding, La Cholla Apartments Project,
due 12/01/25), LOC Texas Commerce Bank......... VRDN 09/03/98(b) 3.300 3,705,000
-----------
27,905,000
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE TAX EXEMPT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE DATE RATE VALUE
- -------------- ------------------------------------------------- -------- ------------------ ------ -----------
<C> <S> <C> <C> <C> <C>
ARKANSAS (0.3%)
$ 5,175 Texarkana, (IDR, Refunding, Cooper Tire & Rubber
Co. Project, Series 1991, due 03/01/21)........ VRDN 09/03/98(b) 3.950% $ 5,175,000
-----------
CALIFORNIA (2.2%)
2,000 Fresno, (IDR, Fresno MSA Limited Partnership
Project, due 08/01/05), LOC Bank of Nova
Scotia......................................... VRDN 09/01/98(b) 5.252 2,000,000
25,000 Los Angeles County, (Series A)................... TRAN 06/30/99 4.500 25,165,312
1,500 Los Angeles Regional Airports Improvement Corp.,
(American Airlines - LA International, Series
B, due 12/01/24), LOC Wachovia Bank of
Georgia........................................ VRDN 09/01/98(b) 3.375 1,500,000
5,000 Los Angeles, (Unified School District)........... TRAN 10/01/98 4.500 5,002,761
7,000 Orange County.................................... CP 09/09/98 3.700 7,000,000
100 Pico Rivera Redevelopment Agency, (Crossroads
Plaza Project, due 12/01/10), LOC Wachovia Bank
of Georgia..................................... VRDN 09/01/98(b) 2.750 100,000
300 Turlock Irrigation District, (Series A, due
01/01/14), LOC Societe Generale................ VRDN 09/02/98(b) 2.500 300,000
-----------
41,068,073
-----------
COLORADO (0.6%)
4,025 Denver City & County Airport, (Series 13, due
11/01/23)...................................... VRDN 09/02/98(b) 3.600 4,025,000
1,400 Douglas County, (MFHR, Autumn Chase Project, due
07/01/06), LOC Citibank N.A.................... VRDN 09/03/98(b) 3.350 1,400,000
5,000 Smith Creek Metro District, (due 10/01/35), LOC
Nationsbank of Texas........................... VRDN 09/03/98(b) 3.300 5,000,000
-----------
10,425,000
-----------
DISTRICT OF COLUMBIA (0.8%)
2,200 District of Columbia, (Refunding, Series 1992
A-1, due 10/01/07), LOC National Westminster
Bank PLC....................................... VRDN 09/01/98(b) 3.450 2,200,000
1,600 District of Columbia, (Refunding, Series 1992
A-2, due 10/01/07), LOC Canadian Imperial
Bank........................................... VRDN 09/01/98(b) 3.450 1,600,000
1,800 District of Columbia, (Refunding, Series 1992
A-5, due 10/01/07), LOC Bank of Nova Scotia.... VRDN 09/01/98(b) 3.450 1,800,000
10,000 District of Columbia, (Refunding, Series 1992
A-6, due 10/01/07), LOC National Westminster
Bank PLC....................................... VRDN 09/01/98(b) 3.450 10,000,000
-----------
15,600,000
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE TAX EXEMPT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE DATE RATE VALUE
- -------------- ------------------------------------------------- -------- ------------------ ------ -----------
<C> <S> <C> <C> <C> <C>
FLORIDA (3.1%)
$ 5,000 Alachua County Health Facilities Authority,
(Shands Teaching Hospital, Series B, due
12/01/26)...................................... VRDN 09/02/98(b) 3.220% $ 5,000,000
5,800 Citrus Park Community Development District,
(Florida Capital Improvement Project, due
11/01/16), LOC Dresdner Bank................... VRDN 09/02/98(b) 3.220 5,800,000
8,200 Dade County Health Facilities Authority, (Miami
Children's Hospital Project, due 09/01/25),
AMBAC Insured.................................. VRDN 09/02/98(b) 3.150 8,200,000
10,800 Dade County, (Water & Sewer System, Series 1994,
due 10/05/22), FGIC Insured.................... VRDN 09/02/98(b) 3.150 10,800,000
10,700 Florida Municipal Power Agency, (Refunding, Sub-
Stanton II Project, due 10/01/27).............. VRDN 09/02/98(b) 3.220 10,700,000
7,290 Jacksonville, (Refunding, Florida Power & Light
Co. Project, Series 1995, due 05/01/29)........ VRDN 09/01/98(b) 3.200 7,290,000
1,550 St. Lucie County, (PCR, Refunding, Florida Power
& Light Co. Project, due 03/01/27)............. VRDN 09/01/98(b) 3.200 1,550,000
7,300 Tampa Occupational License Tax, (Series A, due
10/01/18), FGIC Insured........................ VRDN 09/02/98(b) 3.220 7,300,000
-----------
56,640,000
-----------
GEORGIA (6.3%)
1,500 Appling County Development Authority, (PCR,
Georgia Power Co. - Hatch Project, due
09/01/29)...................................... VRDN 09/01/98(b) 3.250 1,500,000
1,700 Bartow County Development Authority, (PCR,
Georgia Power Co., 1st Series, due 06/01/23)... VRDN 09/01/98(b) 3.250 1,700,000
17,800 Burke County Development Authority, (PCR, Georgia
Power Co., Series 1997, Vogtle Project -1st
Series, due 04/01/32).......................... VRDN 09/01/98(b) 3.250 17,800,000
17,800 Burke County Development Authority, (PCR,
Oglethorpe Power Corp., Series 1994A, due
01/01/19), FGIC Insured........................ VRDN 09/02/98(b) 3.150 17,800,000
1,660 Clayton County Housing Authority, (MFHR,
Refunding, Huntington Woods Project, Series
1990A, FSA, due 01/01/21), LOC Barclays Bank
PLC............................................ VRDN 09/02/98(b) 3.400 1,660,000
4,000 DeKalb County Development Authority, (Metro
Atlanta YMCA Project, Series 1995, due
06/01/20), LOC Wachovia Bank of Georgia........ VRDN 09/02/98(b) 3.200 4,000,000
25,000 Fulton County.................................... TAN 12/31/98 4.250 25,050,024
13,500 Georgia, (due 04/01/10).......................... VRDN 09/03/98(b) 3.450 13,500,000
1,000 Heard County Development Authority, (PCR, Georgia
Power Co., Wansley Project, due 09/01/29)...... VRDN 09/01/98(b) 3.250 1,000,000
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE TAX EXEMPT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE DATE RATE VALUE
- -------------- ------------------------------------------------- -------- ------------------ ------ -----------
<C> <S> <C> <C> <C> <C>
GEORGIA (CONTINUED)
$ 7,500 Monroe County Development Authority, (PCR,
Georgia Power Co. Scherer Plant, due
09/01/29....................................... VRDN 09/01/98(b) 3.250% $ 7,500,000
7,500 Monroe County Development Authority, (PCR,
Georgia Power Co., Scherer Project-2nd Series,
due 07/01/25).................................. VRDN 09/01/98(b) 3.850 7,500,000
8,300 Putnam County Development Authority, (PCR,
Georgia Power Co., due 03/01/24)............... VRDN 09/01/98(b) 3.250 8,300,000
5,200 Putnam County Development Authority, (PCR,
Georgia Power Co., due 04/01/32)............... VRDN 09/01/98(b) 3.850 5,200,000
4,100 Putnam County Development Authority, (PCR,
Georgia Power Co., Series 1, due 06/01/23)..... VRDN 09/01/98(b) 3.250 4,100,000
-----------
116,610,024
-----------
ILLINOIS (10.3%)
10,000 Chicago, (MFHR, Waveland Association Project, due
11/01/10), LOC Swiss Bank...................... VRDN 09/01/98(b) 3.200 10,000,000
6,000 Chicago, (O'Hare International Airport, 2nd Lien,
Series A, due 01/01/15), LOC Societe
Generale....................................... VRDN 09/02/98(b) 3.220 6,000,000
4,500 Chicago, (O'Hare International Airport, General
Airport 2nd Lien, Series 1984B, due 01/01/15),
LOC Societe Generale........................... VRDN 09/02/98(b) 3.220 4,500,000
34,110 Chicago, (Series 1998, due 01/01/28)............. VRDN 09/03/98(b) 3.450 34,110,000
21,000 Chicago, (Wastewater Transmission Revenue, due
01/01/25)...................................... VRDN 09/03/98(b) 3.450 21,000,000
10,000 Illinois Development Finance Authority, (Chicago
Symphony Project, due 06/01/31), LOC Bank of
America........................................ VRDN 09/02/98(b) 3.200 10,000,000
1,600 Illinois Development Finance Authority, (Olin
Corp. Project, Series A, due 06/01/04), LOC
Wachovia Bank of South Carolina................ VRDN 09/01/98(b) 3.300 1,600,000
4,540 Illinois Development Finance Authority, (Olin
Corp. Project, Series D, due 03/01/16), LOC
Wachovia Bank of South Carolina................ VRDN 09/01/98(b) 3.300 4,540,000
5,200 Illinois Development Finance Authority, (PCR,
Illinois Power Co. Project, Series 1993B, due
11/01/28), LOC Canadian Imperial Bank.......... VRDN 09/02/98(b) 3.220 5,200,000
19,250 Illinois Educational Facilities Authority,
(University Pooled Financing Program, due
12/01/05), FGIC Insured........................ VRDN 09/02/98(b) 3.250 19,250,000
3,900 Illinois Health Facilities Authority, (Children's
Memorial Hospital Project, Series B, due
11/01/15), LOC First National Bank of
Chicago........................................ VRDN 09/02/98(b) 3.250 3,900,000
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
23
<PAGE>
THE TAX EXEMPT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE DATE RATE VALUE
- -------------- ------------------------------------------------- -------- ------------------ ------ -----------
<C> <S> <C> <C> <C> <C>
ILLINOIS (CONTINUED)
$ 2,400 Illinois Health Facilities Authority, (Loyola
University Health System, Series B, due
07/01/24), MBIA Insured........................ VRDN 09/02/98(b) 3.150% $ 2,400,000
14,300 Illinois Health Facilities Authority, (Swedish
Covenant Hospital Project, Series 1995, due
08/01/25), AMBAC Insured....................... VRDN 09/02/98(b) 3.300 14,300,000
10,000 Illinois Toll Highway Authority, (Refunding,
Series 1993B, due 01/01/10), LOC Societe
Generale....................................... VRDN 09/02/98(b) 3.150 10,000,000
26,785 Illinois, (due 04/01/23)......................... VRDN 09/03/98(b) 3.450 26,785,000
6,500 Illinois, (Series 40, due 08/05/12).............. VRDN 09/03/98(b) 3.460 6,500,000
7,600 Oak Forest, (Weekly Mode - Homewood Pool, due
07/01/24), LOC First National Bank of
Chicago........................................ VRDN 09/02/98(b) 3.250 7,600,000
3,000 Saint Charles, (IDR, Pier 1 Imports-Midwest
Project, Series 1986, due 12/15/26), LOC Bank
One Texas...................................... VRDN 09/02/98(b) 3.420 3,000,000
-----------
190,685,000
-----------
INDIANA (5.2%)
75,800 Indiana Bond Bank................................ CP 11/05/98 3.550 75,800,000
5,900 Indiana Development Finance Authority, (Bayer
Corp. Project, due 03/01/09)................... VRDN 09/01/98(b) 3.300 5,900,000
1,200 Jasper County, (PCR, Refunding, Northern Indiana
Public Service, Series B, due 06/01/13)........ VRDN 09/01/98(b) 3.300 1,200,000
2,100 Princeton, (PCR, Refunding, PSI Energy Inc.
Project, due 03/01/19), LOC Canadian Imperial
Bank........................................... VRDN 09/01/98(b) 3.300 2,100,000
4,050 Rockport, (PCR, Indiana and Michigan Electric Co.
Project, Series 1985A, due 01/14/08), LOC Swiss
Bank Corp...................................... VRDN 09/02/98(b) 3.450 4,050,000
6,400 South Bend Redevelopment Authority, (Rental-
College Football, due 02/01/19), LOC Landesbank
Hessen......................................... VRDN 09/02/98(b) 3.250 6,400,000
-----------
95,450,000
-----------
IOWA (0.5%)
10,000 Iowa School Cash Anticipation Program, (Iowa
School Corp., Warrant Certificates, Series B),
FSA Insured.................................... RAW 01/28/99 4.250 10,027,595
-----------
KANSAS (0.1%)
2,000 Garden City, (IDR, Inland Container Corp.
Project, Series 1983, due 01/01/08), LOC CS
First Boston................................... VRDN 09/01/98(b) 3.500 2,000,000
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
24
<PAGE>
THE TAX EXEMPT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE DATE RATE VALUE
- -------------- ------------------------------------------------- -------- ------------------ ------ -----------
<C> <S> <C> <C> <C> <C>
KENTUCKY (0.8%)
$ 9,400 Kentucky Turnpike Authority, (Resource Recovery,
Series 17, due 07/01/03), FSA Insured.......... VRDN 09/02/98(b) 3.600% $ 9,400,000
6,000 Mayfield, (Multi-City Lease Revenue, Kentucky
League of Cities Funding Trust, due 07/01/26),
LOC PNC Bank................................... VRDN 09/02/98(b) 3.500 6,000,000
-----------
15,400,000
-----------
LOUISIANA (1.5%)
4,500 Ascension Parish, (PCR, Refunding, Borden Inc.
Project, Series 1992, due 12/01/09), LOC CS
First Boston................................... VRDN 09/02/98(b) 3.220 4,500,000
7,000 Lake Charles Harbor and Terminal District,
(Reynolds Metals Co. Project, due 05/01/06),
LOC Canadian Imperial Bank..................... VRDN 09/02/98(b) 3.220 7,000,000
7,355 Louisiana Public Facilities Authority,
(Refunding, Series 1985, due 12/01/00), MBIA
Insured........................................ VRDN 09/02/98(b) 3.400 7,355,000
5,400 Louisiana Public Facilities Authority, (Sisters
of Charity, Series E, due 07/01/23)............ VRDN 09/02/98(b) 3.300 5,400,000
3,800 South Louisiana Communication Port, (Refunding,
Occidental Petroleum Co., due 07/01/18), LOC
Wachovia Bank of Georgia....................... VRDN 09/02/98(b) 3.300 3,800,000
-----------
28,055,000
-----------
MARYLAND (3.1%)
10,000 Anne Arundel County, (PCR, Baltimore Gas and
Electric Co. Project, Series 1984, due
07/01/14)...................................... TPP 07/01/99(v) 3.730 10,000,000
14,000 Baltimore County Metro District.................. CP 12/08/98 3.550 14,000,000
7,195 Maryland Health & Higher Education Facilities
Authority, (due 07/01/16)...................... VRDN 09/03/98(b) 3.450 7,195,000
13,200 Montgomery County Housing Opportunities
Commision, (MFHR, Grosvenor, Series A, due
07/15/07), FNMA Insured........................ VRDN 09/02/98(b) 3.220 13,200,000
13,300 Montgomery County, (Series 1995)................. CP 10/08/98 3.550 13,300,000
-----------
57,695,000
-----------
MASSACHUSETTS (4.5%)
20,900 Massachusetts Bay Transportation Authority, LOC
West Deutsche Landesbank....................... CP 09/04/98-10/19/98 3.550-3.600 20,900,000
23,380 Massachusetts Health & Education Facilities
Authority, (Cap Assets Program, Series D, due
01/01/35), MBIA Insured........................ VRDN 09/01/98(b) 3.050 23,380,000
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
25
<PAGE>
THE TAX EXEMPT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE DATE RATE VALUE
- -------------- ------------------------------------------------- -------- ------------------ ------ -----------
<C> <S> <C> <C> <C> <C>
MASSACHUSETTS (CONTINUED)
$ 18,680 Massachusetts Health & Education Facilities
Authority, (Harvard University, due
02/01/16)...................................... VRDN 09/03/98(b) 3.100% $18,680,000
9,915 Massachusetts Housing Finance Agency, (Class A
Certificates, Series A, due 07/01/18).......... VRDN 09/03/98(b) 3.370 9,915,000
9,290 Massachusetts Housing Finance Agency, (due
07/01/18)...................................... VRDN 09/03/98(b) 3.430 9,290,000
-----------
82,165,000
-----------
MICHIGAN (3.2%)
25,700 Michigan......................................... GO 09/30/98 4.500 25,717,293
3,000 Michigan Job Development Authority, (Gordon Food
Service Project, due 08/01/15), LOC Rabobank
Nederland...................................... VRDN 09/03/98(b) 3.200 3,000,000
8,000 Michigan Strategic Fund Ltd., (Lutheran Homes of
Michigan Project, due 09/01/17), LOC National
Bank of Detroit................................ VRDN 09/02/98(b) 3.250 8,000,000
6,900 Michigan Strategic Fund Ltd., (Reserve 1, Series
1995, due 09/01/30), LOC Barclays Bank PLC..... VRDN 09/01/98(b) 3.250 6,900,000
9,025 Midland County Economic Development Corp., (Dow
Chemical Co. Project, Refunding, Series B, due
12/01/15)...................................... VRDN 09/01/98(b) 3.300 9,025,000
5,900 Regents of the University of Michigan, (Series
A)............................................. CP 09/14/98 3.450 5,900,000
-----------
58,542,293
-----------
MINNESOTA (0.4%)
7,690 Minnesota, (due 06/01/15)........................ VRDN 09/03/98(b) 3.450 7,690,000
-----------
MISSOURI (1.8%)
13,600 Missouri Development Finance Board, (Sci City
Union Station, Series C, due 12/01/03), LOC
Canadian Imperial Bank......................... TPP 09/01/98(v) 3.850 13,600,000
1,100 Missouri Environmental Impact Authority & Energy
Resource Authority, (Bayer Corp. Project,
Refunding, due 03/01/09)....................... VRDN 09/01/98(b) 3.300 1,100,000
11,000 Missouri Environmental Improvement and Energy
Resources Authority, (PCR, Union Electric Co.
Project, Series 1984B due 06/01/14), LOC Union
Bank of Switzerland............................ TPP 06/01/99(v) 3.750 11,000,000
6,730 Missouri Infrastructure Facilities Development
Finance Board, (Sci City Union Station, Series
C, due 12/01/03), LOC Canadian Imperial Bank... VRDN 09/01/98(b) 3.850 6,730,000
-----------
32,430,000
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
26
<PAGE>
THE TAX EXEMPT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE DATE RATE VALUE
- -------------- ------------------------------------------------- -------- ------------------ ------ -----------
<C> <S> <C> <C> <C> <C>
NEBRASKA (0.6%)
$ 11,900 Lancaster County Hospital Authority, (Refunding,
Bryan Memorial Hospital Project #1, due
06/01/12), MBIA Insured........................ VRDN 09/02/98(b) 3.150% $11,900,000
-----------
NEVADA (0.4%)
7,600 Clark County, (Refunding, Airport Improvement
Revenue, Series A, due 07/01/12), MBIA
Insured........................................ VRDN 09/02/98(b) 3.150 7,600,000
-----------
NEW YORK (10.8%)
16,000 Long Island Power Authority, (Series 4).......... CP 09/08/98 3.700 16,000,000
5,000 Metropolitan Transportation Commuter Facilities
Authority, (due 07/01/26)...................... VRDN 09/03/98(b) 3.430 5,000,000
12,000 New York City, (due 08/01/17).................... VRDN 09/03/98(b) 3.460 12,000,000
8,000 New York City Municipal Assistance Corp.,
(Subseries K-2, due 07/01/08).................. VRDN 09/02/98(b) 2.750 8,000,000
15,900 New York City Municipal Water Finance Authority,
(Water and Sewer Systems, due 06/15/24)........ VRDN 09/03/98(b) 3.460 15,900,000
6,100 New York City Municipal Water Finance Authority,
(Water and Sewer Systems, Series 29, due
06/15/30)...................................... VRDN 09/02/98(b) 3.600 6,100,000
8,940 New York Dormitory Authority, (due 07/01/25)..... VRDN 09/02/98(b) 3.600 8,940,000
19,255 New York Environmental Facilities Corp., (PCR,
due 06/15/12).................................. VRDN 09/03/98(b) 3.430 19,255,000
15,900 New York Local Government Assistance Corp.,
(Series SG-99, due 04/01/11)................... VRDN 09/03/98(b) 3.360 15,900,000
8,140 New York Medical Care Facilities Finance Agency,
(due 02/15/29)................................. VRDN 09/03/98(b) 3.370 8,140,000
22,000 New York State and Local Government Assistance
Corp., (Series G, due 04/01/25), LOC Bank of
Nova Scotia.................................... VRDN 09/02/98(b) 2.750 22,000,000
12,000 New York State Energy Research and Development
Authority, (PCR, Lilco Project, Series 1985B,
due 03/01/16), LOC Deutsche Bank AG............ OP 03/01/99(v) 3.580 12,000,000
9,735 New York State Energy Research and Development
Authority, (PCR, New York Electric and Gas,
Series 1985D, due 12/01/15), LOC Union Bank of
Switzerland.................................... OP 12/01/98(v) 3.600 9,735,000
8,650 New York Urban Development Corp., (Series SG-33,
due 01/01/25).................................. VRDN 09/03/98(b) 3.360 8,650,000
5,300 Niagara Falls Bridge Commission, (Series A, due
10/01/19), FGIC Insured........................ VRDN 09/02/98(b) 2.800 5,300,000
13,090 Port Authority of New York & New Jersey, (Private
Placement, due 12/01/14)....................... VRDN 09/01/98(b) 3.637 13,090,000
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
27
<PAGE>
THE TAX EXEMPT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE DATE RATE VALUE
- -------------- ------------------------------------------------- -------- ------------------ ------ -----------
<C> <S> <C> <C> <C> <C>
NEW YORK (CONTINUED)
$ 7,200 State of New York................................ CP 10/01/98 3.500% $ 7,200,000
5,000 Triborough Bridge & Tunnel Authority, (Special
Obligation, due 01/01/24), FGIC Insured........ VRDN 09/02/98(b) 2.800 5,000,000
-----------
198,210,000
-----------
NORTH CAROLINA (4.1%)
2,200 Charlotte, (Refunding, Airport Revenue, Series A,
due 07/01/16), MBIA Insured.................... VRDN 09/02/98(b) 3.150 2,200,000
4,000 Greensboro Enterprise Systems, (Series B, due
06/01/22), LOC Credit Local De France.......... VRDN 09/02/98(b) 3.150 4,000,000
7,700 North Carolina Educational Facilities Finance
Agency, (Bowman Grey School Medical Project,
due 09/01/20), LOC Wachovia Bank & Trust....... VRDN 09/03/98(b) 3.220 7,700,000
6,000 North Carolina Educational Facilities Finance
Agency, (Bowman Grey School Medical Project,
due 09/01/26), LOC Wachovia Bank............... VRDN 09/02/98(b) 3.220 6,000,000
10,310 North Carolina Educational Facilities Finance
Agency, (Elon College, due 01/01/21), LOC
Nationsbank N.A................................ VRDN 09/02/98(b) 3.200 10,310,000
6,500 North Carolina Educational Facilities Finance
Agency, (Greensboro College, due 09/01/27)..... VRDN 09/02/98(b) 3.200 6,500,000
4,955 North Carolina Educational Facilities Finance
Agency, (Guilford College, due 05/01/24), MBIA
Insured........................................ VRDN 09/02/98(b) 3.400 4,955,000
20,500 North Carolina Medical Care Community Health
System, (Catholic Health East, Series D, due
11/15/28), AMBAC Insured....................... VRDN 09/02/98(b) 3.300 20,500,000
10,175 North Carolina, (due 03/01/11)................... VRDN 09/03/98(b) 3.450 10,175,000
4,000 Wake County Industrial Facilities and Pollution
Control Financing Authority, (PCR, Carolina
Power & Light Project, Series 1985A, due
05/01/15), LOC CS First Boston................. VRDN 09/02/98(b) 3.220 4,000,000
-----------
76,340,000
-----------
OHIO (2.1%)
18,445 Hamilton County Hospital Facilities Revenue,
(Health Alliance, Series A, due 01/01/18), MBIA
Insured........................................ VRDN 09/02/98(b) 3.220 18,445,000
4,900 Ohio Air Quality Development Authority,
(Refunding, Cincinnati Gas & Electric, Series
1985A, due 09/01/30), LOC ABN Amro Bank........ VRDN 09/01/98(b) 3.200 4,900,000
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
28
<PAGE>
THE TAX EXEMPT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE DATE RATE VALUE
- -------------- ------------------------------------------------- -------- ------------------ ------ -----------
<C> <S> <C> <C> <C> <C>
OHIO (CONTINUED)
$ 7,000 Student Loan Funding Corp., (Cincinnati Student
Loan Revenue, Series 1983A, due 12/29/98), LOC
Bank of America................................ VRDN 09/02/98(b) 3.200% $ 7,000,000
8,225 Warren County Health Care Facilities, (Refunding
& Improvement - Otterbein, Series A, due
07/01/21), LOC Fifth Third Bank................ VRDN 09/02/98(b) 3.300 8,225,000
-----------
38,570,000
-----------
OTHER (2.7%)
50,000 Puttable Floating Option/ Tax Exempt Receipt (due
10/01/30), LOC Societe Generale................ TPP 09/03/98(v) 3.650 50,000,000
-----------
PENNSYLVANIA (4.3%)
25,000 Delaware County Regional Finance Authority, (Mode
1, due 08/01/16), LOC Credit Suisse First
Boston......................................... VRDN 09/02/98(b) 3.200 25,000,000
11,900 Delaware County, (Series 1998-B)................. CP 09/01/98 3.500 11,900,000
11,600 Delaware Valley Regional Finance Authority,
(Series C, due 12/01/20), LOC CS First
Boston......................................... VRDN 09/02/98(b) 3.200 11,600,000
2,100 Delaware Valley Regional Finance Authority,
(Series D, due 12/01/20), LOC CS First
Boston......................................... VRDN 09/02/98(b) 3.200 2,100,000
7,000 Montgomery County Industrial Development
Authority, (Pico Energy Project)............... CP 11/09/98 3.600 7,000,000
22,000 Philadelphia, (Series A)......................... TRAN 06/30/99 4.25 22,107,874
-----------
79,707,874
-----------
SOUTH CAROLINA (0.2%)
4,300 Berkeley County, (Refunding, Bayer Corp. Project,
due 03/01/09).................................. VRDN 09/01/98(b) 3.300 4,300,000
-----------
SOUTH DAKOTA (0.5%)
9,000 Lawrence County, (PCR, Refunding, Homestake
Mining, Series B, due 07/01/32), LOC Chase
Manhattan Bank................................. VRDN 09/01/98(b) 3.250 9,000,000
-----------
TENNESSEE (2.0%)
4,100 Bradley County Industrial Development Board,
(Olin Corp. Project, Series C, due 11/01/17),
LOC Wachovia Bank.............................. VRDN 09/01/98(b) 3.300 4,100,000
3,100 Collierville Industrial Development Board, (due
03/01/00), LOC National City Bank of
Cleveland...................................... VRDN 09/03/98(b) 5.525 3,100,000
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
29
<PAGE>
THE TAX EXEMPT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE DATE RATE VALUE
- -------------- ------------------------------------------------- -------- ------------------ ------ -----------
<C> <S> <C> <C> <C> <C>
TENNESSEE (CONTINUED)
$ 6,500 Knox County Industrial Development Board, (IDR,
Professional Plaza Project, due 06/01/06)...... VRDN 09/15/98(b) 3.500% $ 6,500,000
9,700 Metro Government Nashville & Davidson County,
(due 05/15/25)................................. VRDN 09/03/98(b) 3.450 9,700,000
5,200 Tennessee State, (Series A, due 07/02/01)........ VRDN 09/02/98(b) 3.150 5,200,000
9,000 Tennessee State, (Series C, due 07/02/01)........ VRDN 09/02/98(b) 3.150 9,000,000
-----------
37,600,000
-----------
TEXAS (12.3%)
7,000 Bexar County, (Health Facilities Development
Corporation, Warm Springs Haelthcare Systems,
due 09/01/27), LOC Texas Commerce Bank......... VRDN 09/01/98(b) 3.409 7,000,000
8,707 Dallas, (Waterworks & Sewer Authority, Series
B)............................................. CP 11/19/98 3.550 8,707,000
1,500 El Paso Industrial Development Authority, (Contel
Cellular of El Paso Inc. Project, Series 1985,
due 02/01/04), LOC Bank of Nova Scotia......... VRDN 09/03/98(b) 5.525 1,500,000
9,000 Grayson County Industrial Development Corp.,
(Aluminum Co. of America, Refunding, Series
1992, due 12/01/02)............................ VRDN 09/03/98(b) 3.350 9,000,000
3,700 Guadalupe-Blanco River Authority, (PCR,
Refunding, Central Power & Light Co. Project,
due 11/01/15), LOC ABN Amro Bank N.V........... VRDN 09/01/98(b) 3.300 3,700,000
1,400 Gulf Coast Waste Disposal Authority, (PCR,
Refunding, Amoco Oil Co. Project, due
10/01/17)...................................... VRDN 09/01/98(b) 3.200 1,400,000
6,200 Harris County Health Facilities Development
Corp., (Memorial Hospital Systems Project,
Series B, due 06/01/24) MBIA Insured........... VRDN 09/02/98(b) 3.150 6,200,000
45,800 Harris County Health Facilities, (Series
1997A)......................................... CP 09/08/98 3.550 45,800,000
2,790 Harris County Industrial Development Corp.,
(Johann Haltermann Project, Series 1996A, due
04/01/08), LOC Texas Commerce Bank............. VRDN 09/03/98(b) 3.300 2,790,000
2,090 Harris County Industrial Development Corp.,
(Johann Haltermann Project, Series 1996B, due
04/01/08), LOC Texas Commerce Bank............. VRDN 09/03/98(b) 3.300 2,090,000
10,900 Houston Water & Sewer Systems, (due 12/01/23).... VRDN 09/03/98(b) 3.400 10,900,000
8,000 Houston Water & Sewer Systems, (Series PZ-11, due
12/01/28)...................................... VRDN 09/03/98(b) 3.610 8,000,000
400 Lone Star Airport Improvement Authority,
(Multiple Mode, Series A-1, due 12/01/14), LOC
Royal Bank of Canada........................... VRDN 09/01/98(b) 3.375 400,000
400 Lone Star Airport Improvement Authority,
(Multiple Mode, Series B-1, due 12/01/14), LOC
Royal Bank of Canada........................... VRDN 09/01/98(b) 3.375 400,000
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
30
<PAGE>
THE TAX EXEMPT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE DATE RATE VALUE
- -------------- ------------------------------------------------- -------- ------------------ ------ -----------
<C> <S> <C> <C> <C> <C>
TEXAS (CONTINUED)
$ 1,400 Lone Star Texas Airport Improvement Authority,
(Series 1984 B-3, due 12/01/14), LOC Royal Bank
of Canada...................................... VRDN 09/01/98(b) 3.375% $ 1,400,000
4,500 Mansfield Industrial Development Corp., (Pier 1
Import-Texas Inc. Project, Series 1986, due
11/01/26), LOC Bank of Texas................... VRDN 09/02/98(b) 3.420 4,500,000
3,900 Port Development Corp., (Refunding, Stolt Marine
Terminal Project, due 01/15/14), LOC Canadian
Imperial Bank.................................. VRDN 09/02/98(b) 3.200 3,900,000
2,550 Sabine River Authority, (PCR, Series 1995B, due
06/01/30), LOC Union Bank of Switzerland....... VRDN 09/01/98(b) 3.850 2,550,000
7,600 Tarrant County Health Facilities, (due
02/15/17)...................................... VRDN 09/03/98(b) 3.450 7,600,000
1,040 Texas Higher Education Authority Inc, (Series
1985B, due 02/01/25), FGIC Insured............. VRDN 09/02/98(b) 3.400 1,040,000
28,100 Texas Public Financial Authority................. CP 09/15/98 3.650 28,100,000
37,500 Texas State...................................... TRAN 08/31/99 4.500 37,890,375
10,240 Texas State, (due 10/01/14)...................... VRDN 09/03/98(b) 3.610 10,240,000
12,475 Texas, (Veterans Housing Assistance - Fund I, due
12/01/16), VA Gauranteed....................... VRDN 09/02/98(b) 3.150 12,475,000
7,800 Travis County Health Facilities Development
Corp., (Charity Obligation Group, Series E, due
11/01/27)...................................... VRDN 09/02/98(b) 3.150 7,800,000
2,200 Waller County Industrial Development Corp., (IDR,
Refunding, Tubular Steel Project, due
09/01/99), LOC Wachovia Bank of Georgia........ VRDN 09/02/98(b) 3.250 2,200,000
-----------
227,582,375
-----------
UTAH (3.5%)
2,565 Carbon County, (PCR, Refunding, Pacificorp
Project, Series 1994, due 11/01/24), LOC Bank
of New York.................................... VRDN 09/01/98(b) 3.300 2,565,000
9,000 Intermountain Power Agency, (Utah Power Supply
Revenue, Series 1985F, due 07/01/15), LOC Swiss
Bank........................................... TPP 03/15/99(v) 3.450 9,000,000
31,400 Intermountain Power Authority, LOC Bank of
America........................................ CP 10/15/98-11/18/98 3.500-3.550 31,400,000
21,825 Utah State, (due 07/01/11)....................... VRDN 09/03/98(b) 3.450 21,825,000
-----------
64,790,000
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
31
<PAGE>
THE TAX EXEMPT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE DATE RATE VALUE
- -------------- ------------------------------------------------- -------- ------------------ ------ -----------
<C> <S> <C> <C> <C> <C>
VERMONT (0.4%)
$ 6,600 Vermont Student Loan Assistance Corp., (Series
1985, due 01/01/04), LOC National Westminster
Bank PLC....................................... VRDN 09/01/98(b) 3.550% $ 6,600,000
-----------
VIRGINIA (2.1%)
36,900 Loudoun County Industrial Development Authority,
(Refunding, Falcons Landing Project, due
11/01/28), LOC Bank of Scotland................ VRDN 09/02/98(b) 3.250 36,900,000
1,000 Virginia Beach Industrial Development Authority,
(IDR, Norfolk Virginia Beach, Portsmouth MSA
Limited Partnership Project, due 12/01/04), LOC
Bank of Nova Scotia............................ VRDN 09/01/98(b) 5.525 1,000,000
50 Virginia State Housing Development Authority,
(AHC Service Corp., Series 1987A, due
09/01/17), LOC Mitsubishi Ltd.................. VRDN 09/02/98(b) 3.800 50,000
-----------
37,950,000
-----------
WASHINGTON (1.2%)
6,400 Seattle, (Water System Revenue, Series 1995, due
09/01/25), LOC Bayerische Landesbank........... VRDN 09/02/98(b) 3.220 6,400,000
5,000 Washington Public Power Supply System,
(Refunding, Project No. 2, Series 2A-1, due
07/01/12), MBIA Insured........................ VRDN 09/02/98(b) 3.150 5,000,000
2,850 Washington State Health Care Facilities
Authority, (VA Mason Medical Center, Refunding,
Series B, due 02/15/27), MBIA Insured.......... VRDN 09/01/98(b) 3.375 2,850,000
7,000 Washington State, (Series SG-37, due 07/01/17)... VRDN 09/03/98(b) 3.400 7,000,000
-----------
21,250,000
-----------
WEST VIRGINIA (0.6%)
10,400 Marshall County, (Refunding, Bayer Corporation
Project, due 03/01/09)......................... VRDN 09/01/98(b) 3.330 10,400,000
-----------
WISCONSIN (2.2%)
6,500 Milwaukee, (Series 22-D)......................... TRAN 02/25/99 4.000 6,500,000
25,000 Milwaukee, (Series A)............................ RAN 02/25/99 4.000 25,171,207
9,200 Wisconsin Health & Educational Facilities
Authority, (St. Luke's Medical Center,
Remarketed 03/10/97, due 12/01/17), LOC First
National Bank of Chicago....................... VRDN 09/02/98(b) 3.250 9,200,000
-----------
40,871,207
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
32
<PAGE>
THE TAX EXEMPT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE DATE RATE VALUE
- -------------- ------------------------------------------------- -------- ------------------ ------ -----------
<C> <S> <C> <C> <C> <C>
WYOMING (1.8%)
$ 20,550 Platte County, (PCR, Tri-State G&T, Series A, due
07/01/14), LOC Societe Generale................ VRDN 09/01/98(b) 3.850% $20,550,000
8,700 Sweetwater County, (PCR, Refunding, Pacificorp
Project, Series A, due 07/01/15), LOC Credit
Suisse......................................... VRDN 09/02/98(b) 3.300 8,700,000
3,000 Sweetwater County, (PCR, Refunding, Pacificorp
Project, Series B, due 01/01/14), LOC Canadian
Imperial Bank.................................. VRDN 09/01/98(b) 3.850 3,000,000
-----------
32,250,000
-----------
TOTAL INVESTMENTS AT AMORTIZED COST AND VALUE (101.1%)................................... 1,864,934,441
-----------
LIABILITIES IN EXCESS OF OTHER ASSETS (-1.1%)............................................ (20,798,514)
-----------
NET ASSETS (100.0%)...................................................................... $1,844,135,927
-----------
-----------
</TABLE>
- ------------------------------
(b) Variable Rate Demand Note tender dates and/or interest rates are reset at
specified intervals which coincide with their tender feature. The actual
maturity date is indicated in the security description.
(v) Rate shown reflects current rate on variable or floating rate instrument or
instrument with step coupon rate. The due date in the security description
reflects the final maturity date.
Abbreviations used in the Schedule of Investments are as follows:
AMBAC - Ambac Indemnity Corp., CP - Commercial Paper, FGIC - Financial Guaranty
Insurance Co., FSA - Financial Securities Assistance, GO - General Obligation,
IDR - Industrial Development Revenue, LOC - Letter of Credit, MBIA - Municipal
Bond Investors Assurance Corp., MFHR - Multi-family Housing Revenue, OP -
Optional Put, PCR - Pollution Control Revenue, RAN - Revenue Anticipation Note,
RAW - Revenue Anticipation Warrant, RB - Revenue Bond, TAN - Tax Anticipation
Note, TPP - Third Party Put, TRAN - Tax Revenue Anticipation Note, VRDN -
Variable Rate Demand Note.
Refunding - Bonds for which the issuer has issued new bonds and canceled the old
issue.
The Accompanying Notes are an Integral Part of the Financial Statements.
33
<PAGE>
THE TAX EXEMPT MONEY MARKET PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Amortized Cost and Value $1,864,934,441
Cash 3,265,686
Receivable for Investments Sold 4,100,000
Interest Receivable 10,116,965
Prepaid Trustees' Fees 3,770
Prepaid Expenses and Other Assets 471
--------------
Total Assets 1,882,421,333
--------------
LIABILITIES
Payable for Investments Purchased 37,890,375
Advisory Fee Payable 243,377
Custody Fee Payable 48,192
Administrative Services Fee Payable 45,284
Administration Fee Payable 5,209
Fund Services Fee Payable 1,799
Accrued Expenses 51,170
--------------
Total Liabilities 38,285,406
--------------
NET ASSETS
Applicable to Investors' Beneficial Interests $1,844,135,927
--------------
--------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
34
<PAGE>
THE TAX EXEMPT MONEY MARKET PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED AUGUST 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest Income $61,493,341
EXPENSES
Advisory Fee $2,710,567
Administrative Services Fee 502,654
Custodian Fees and Expenses 317,400
Professional Fees and Expenses 64,559
Fund Services Fee 53,097
Administration Fee 24,913
Trustees' Fees and Expenses 21,621
Miscellaneous 17,586
----------
Total Expenses 3,712,397
-----------
NET INVESTMENT INCOME 57,780,944
NET REALIZED GAIN ON INVESTMENTS 58,974
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $57,839,918
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
35
<PAGE>
THE TAX EXEMPT MONEY MARKET PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FISCAL FOR THE FISCAL
YEAR ENDED YEAR ENDED
AUGUST 31, 1998 AUGUST 31, 1997
--------------- ---------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 57,780,944 $ 42,392,039
Net Realized Gain (Loss) on Investments 58,974 (28,778)
--------------- ---------------
Net Increase in Net Assets Resulting from
Operations 57,839,918 42,363,261
--------------- ---------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 8,287,690,613 4,757,986,948
Withdrawals (7,897,457,444) (4,618,864,155)
--------------- ---------------
Net Increase from Investors' Transactions 390,233,169 139,122,793
--------------- ---------------
Total Increase in Net Assets 448,073,087 181,486,054
NET ASSETS
Beginning of Fiscal Year 1,396,062,840 1,214,576,786
--------------- ---------------
End of Fiscal Year $ 1,844,135,927 $ 1,396,062,840
--------------- ---------------
--------------- ---------------
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED AUGUST
31,
--------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Expenses 0.22% 0.24% 0.25% 0.25% 0.25%
Net Investment Income 3.38% 3.34% 3.40% 3.61% 2.37%
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
36
<PAGE>
THE TAX EXEMPT MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1998
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Tax Exempt Money Market Portfolio (the "portfolio") is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company which was organized as a trust under the laws of
the State of New York on January 29, 1993. The portfolio commenced operations on
July 12, 1993 and received a contribution of certain assets and liabilities,
including securities, with a value of $955,814,753 on that date from The
Pierpont Tax Exempt Money Market Fund in exchange for a beneficial interest in
the portfolio. The portfolio's investment objective is to provide a high level
of current income exempt from federal income tax and maintain a high level of
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.
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.
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 0.20% 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 will
be J.P. Morgan Investment Management Inc., a wholly owned subsidiary of
J.P. Morgan & Co. Inc., and the terms of the Agreement will remain the
same. For the fiscal year ended August 31, 1998, such fees amounted to
$2,710,567.
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
37
<PAGE>
THE TAX EXEMPT MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AUGUST 31, 1998
- --------------------------------------------------------------------------------
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 August 31, 1998, the fee for these services amounted to $24,913.
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 Morgan acts as investment
advisor (the "master portfolios") and J.P. Morgan Series Trust (formerly
JPM 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 August
31, 1998, the fee for these services amounted to $502,654.
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 $53,097 for the fiscal year ended August 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 (formerly The JPM Pierpont
Funds), the J.P. Morgan Institutional Funds (formerly The JPM
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 $11,200.
38
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Investors of
The Tax Exempt 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 Tax Exempt Money Market Portfolio (the
"portfolio") at August 31, 1998, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and the supplementary data for each of the five years in the period
then ended, in conformity with 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 August
31, 1998 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
October 15, 1998
39
<PAGE>
J.P. MORGAN INSTITUTIONAL FUNDS
PRIME MONEY MARKET FUND
TREASURY MONEY MARKET FUND
FEDERAL MONEY MARKET FUND
TAX EXEMPT MONEY MARKET FUND
SHORT TERM BOND FUND
BOND FUND
INTERNATIONAL BOND FUND
GLOBAL STRATEGIC INCOME FUND
TAX EXEMPT BOND FUND
NEW YORK TOTAL RETURN BOND FUND
CALIFORNIA BOND FUND: INSTITUTIONAL SHARES
DIVERSIFIED FUND
DISCIPLINED EQUITY FUND
U.S. EQUITY FUND
U.S. SMALL COMPANY FUND
TAX AWARE DISCIPLINED EQUITY FUND:
INSTITUTIONAL SHARES
INTERNATIONAL EQUITY FUND
EUROPEAN EQUITY FUND
INTERNATIONAL OPPORTUNITIES FUND
EMERGING MARKETS EQUITY FUND
FOR MORE INFORMATION ON THE J.P. MORGAN INSTITUTIONAL
FUNDS, CALL J.P. MORGAN FUNDS SERVICES AT
(800)766-7722.
J.P. MORGAN
INSTITUTIONAL
TAX EXEMPT
MONEY MARKET
FUND
ANNUAL REPORT
AUGUST 31, 1998
JP381AR_988
