<PAGE>
LETTER TO THE SHAREHOLDERS OF THE J.P. MORGAN INSTITUTIONAL TREASURY MONEY
MARKET FUND
June 1, 1998
Dear Shareholder:
We are pleased to report that the J.P. Morgan Institutional Treasury Money
Market Fund outperformed its benchmark, the IBC U.S. Treasury & Repo Money Fund
Average, for the six months ended April 30, 1998. The fund returned 2.74% for
the period versus a benchmark return of 2.41%. Security selection and active
maturity management contributed to the fund's return for the period. These
investment decisions have helped the fund to outperform its benchmark (see table
on page two).
The fund maintained a stable $1.00 net asset value over the period. The fund's
total net assets were approximately $199.3 million while the net assets of the
Treasury Money Market Portfolio, in which the fund invests, totaled
approximately $559.1 million on April 30 1998, at the end of the reporting
period.
We call your attention to the Portfolio Manager Q&A on page three, in which
Robert Johnson, the lead portfolio manager, discusses some of the events
affecting the market and how the Portfolio was positioned to respond to them.
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 OF CONTENTS
<TABLE>
<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
--------------------------------------------------
THREE SIX SINCE
AS OF APRIL 30, 1998 MONTHS MONTHS INCEPTION*
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
J.P. Morgan Institutional Treasury
Money Market Fund 1.33% 2.74% 4.18%
IBC U.S. Treasury
& Repo Money Fund Average 1.19% 2.41% 3.62
Lipper Institutional U.S.
Treasury Money Market Fund Average 1.27% 2.61% 3.94%
AS OF MARCH 31, 1998
- ----------------------------------------------------------------------------------------------------
J.P. Morgan Institutional Treasury
Money Market Fund 1.34% 2.76% 3.72%
IBC U.S. Treasury
& Repo Money Fund Average 1.19% 2.40% 3.22%
Lipper Institutional U.S.
Treasury Money Market Fund Average 1.14% 2.38% 3.22%
</TABLE>
*THE FUND COMMENCED OPERATIONS ON JULY 8, 1997 AND HAS PROVIDED A TOTAL RETURN
OF 4.58% FROM THAT DATE THROUGH APRIL 30, 1998. FOR THE PURPOSE OF COMPARISON,
THE "SINCE INCEPTION" RETURNS IN THE TABLE ABOVE ARE CALCULATED FROM JULY 31,
1997, THE FIRST DATE WHEN DATA FOR THE FUND, ITS BENCHMARK, AND ITS LIPPER
CATEGORY AVERAGE WERE ALL AVAILABLE.
PERFORMANCE OF THE IBC U.S. TREASURY & REPO MONEY FUND AVERAGE IS THAT OF AN
AVERAGE OF FUNDS MANAGED SIMILARLY TO 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. IBC IS A
NATIONALLY-RECOGNIZED SOURCE OF MONEY MARKET FUND DATA. LIPPER ANALYTICAL
SERVICES, INC. IS A LEADING SOURCE FOR MUTUAL FUND DATA.
2
<PAGE>
PORTFOLIO MANAGER Q&A
[PHOTO]
Following is an interview with ROBERT R. ("SKIP") JOHNSON, a member of the
portfolio management team for the Treasury Money Market Portfolio, in which the
fund invests. Prior to joining Morgan in 1988, he held senior positions with the
Bank of Montreal and U.S. Steel. This interview was conducted on May 25, 1998
and reflects Skip's views on that date.
COULD YOU DESCRIBE THE ENVIRONMENT FOR SHORT-TERM FIXED-INCOME MARKETS DURING
THE SIX-MONTH REPORTING PERIOD?
RRJ: Interest rates rose late in 1997 and have declined so far in 1998. Most of
that decline was in January, as prices for short-term securities rallied
strongly. Overall, rates have declined over 20 basis points on the very front
end of the yield curve. More recently, rates have been stable, and investors
have refocused on the intentions of the Federal Reserve.
WE'VE HEARD A LOT ABOUT ASIA IN THE FINANCIAL PRESS. HOW HAVE EVENTS IN ASIA
AFFECTED YOUR MARKET?
RRJ: The consensus was that weaker economies and currencies in Asia would
result in a drop off in demand for U.S. products, which would in turn slow down
U.S. growth. If the Asian crisis had not occurred, many believe the Fed would
have raised interest rates to accomplish the same thing. Even though inflation
has been very well behaved, the Fed tries to anticipate inflation before it
appears. And the Fed seems concerned over labor pressures and employment costs.
The other consequence the Asian turmoil had on the markets was the so
called flight to quality. This triggered the rally we saw in January. Demand
was strong for short-term Treasury securities during this period, and other
domestic short-term securities followed.
YOU SAID RATES ARE CURRENTLY STABLE. HOW DOES THIS AFFECT THE WAY YOU MANAGE
MONEY?
RRJ: When there's no immediate threat of Fed tightening, it usually allows us
to extend the average maturity of the fund further out on the yield curve. Right
now, however, the yield curve is very flat, and there's little or no reward for
extending the portfolio's maturity.
FOR THE REPORTING PERIOD, THE FUND HAS OUTPERFORMED ITS PEERS, AS MEASURED BY
THE IBC U.S. TREASURY & REPO MONEY FUND AVERAGE. HOW HAVE YOU MANAGED THE
PORTFOLIO IN THE ENVIRONMENT YOU DESCRIBED ABOVE, AND WHAT FACTORS CONTRIBUTED
TO THE FUND'S STRONG PERFORMANCE?
RRJ: We maintained a barbell structure in the portfolio, with several 8-12
months Treasury securities balanced by overnight repurchase agreements.
Continuing to emphasize the fully collateralizd repos certainly helped
performance.
3
<PAGE>
Another contributor to performance was the effective management of the
portfolio's liquidity. We've been able to space out our maturity dates so that
we don't have excess cash on hand at times when rates were not attractive.
Conversely, we've been able to have cash ready when reinvestment rates were
favorable.
THE U.S. TREASURY HAS STOPPED ISSUING THREE-YEAR NOTES. WILL THIS HAVE ANY
SIGNIFICANT EFFECT ON THE MARKET OR THE FUND?
RRJ: It may have a slight effect, but not on the front end of the yield curve,
which is where money market funds invest. In general, it reflects the budget
surplus and the U.S. Government's reduced need for financing, which is resulting
in a reduced supply of Treasury issuance in general.
WHAT IS YOUR OUTLOOK FOR THE UPCOMING MONTHS?
RRJ: The threat of Fed tightening at some point should eventually lead to rates
moving up a bit, which will prevent us from extending the portfolio's average
maturity too far. If we see continued strength in economy, concerns over Fed
tightening will grow.
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. MorganInstitutional Treasury Money Market Fund seeks to provide current
income, maintain a high level of liquidity and preserve capital. It is designed
for investors who seek to preserve capital and earn current income from a
portfolio of direct obligations of the U.S. Treasury and obligations of certain
U.S. government agencies.
- --------------------------------------------------------------------------------
COMMENCEMENT OF OPERATIONS
7/8/97
- --------------------------------------------------------------------------------
FUND NET ASSETS AS OF 4/30/98
$199,251,122
- --------------------------------------------------------------------------------
PORTFOLIO NET ASSESTS AS OF 4/30/98
$559,078,767
- --------------------------------------------------------------------------------
DIVIDEND PAYABLE DATES
MONTHLY
- --------------------------------------------------------------------------------
SHORT-TERM CAPITAL GAIN PAYABLE DATE (IF APPLICABLE)
MONTHLY
LONG-TERM CAPITAL GAIN PAYABLE DATE (IF APPLICABLE)
12/11/98
EXPENSE RATIO
The fund's current expense ratio of 0.09% covers shareholders' expenses for
custody, tax reporting, investment advisory and shareholder services, after
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 APRIL 30, 1998
DAYS TO MATURITY
(PERCENTAGE OF TOTAL INVESTMENTS)
[CHART]
<TABLE>
<S> <C>
- - 0-30 DAYS 80.8%
- - 90+ DAYS 19.2%
</TABLE>
AVERAGE 7-DAY YIELD
5.31%*
AVERAGE LIFE
56.25 days
*YIELD REFLECTS THE REIMBURSEMENT OF CERTAIN FUND EXPENSES AS DESCRIBED IN THE
PROSPECTUS. HAD EXPENSES NOT BEEN SUBSIDIZED, THE AVERAGE 7-DAY CURRENT YIELD
WOULD HAVE BEEN 4.98%.
6
<PAGE>
DISTRIBUTED BY FUNDS DISTRIBUTOR, INC. MORGAN GUARANTY TRUST COMPANY OF NEW
YORKSERVES AS AN INVESTMENT ADVISOR AND MAKES THE FUND AVAILABLE SOLELY IN ITS
CAPACITY AS SHAREHOLDER SERVICING AGENT. 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 IS NO ASSURANCE THAT IT WILL CONTINUE TO DO SO.
Had expenses not been subsidized, returns would have been lower. The fund
invests through a master portfolio(another fund with the same objective).
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 THE PROSPECTUS CAREFULLY BEFORE INVESTING.
7
<PAGE>
J.P. MORGAN INSTITUTIONAL TREASURY MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
APRIL 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment in The Treasury Money Market Portfolio
("Portfolio"), at value $199,779,171
Receivable for Expense Reimbursements 16,486
Deferred Organization Expenses 9,211
Prepaid Trustees' Fees 313
Prepaid Expenses and Other Assets 88
------------
Total Assets 199,805,269
------------
LIABILITIES
Dividends Payable to Shareholders 462,927
Shareholder Servicing Fee Payable 7,169
Administrative Services Fee Payable 4,133
Organization Expenses Payable 434
Fund Services Fee Payable 526
Administration Fee Payable 193
Accrued Expenses 78,765
------------
Total Liabilities 554,147
------------
NET ASSETS
Applicable to 199,255,121 Shares of Beneficial
Interest Outstanding
(par value $0.001, unlimited shares authorized) $199,251,122
------------
------------
Net Asset Value, Offering and Redemption Price
Per Share $1.00
----
----
ANALYSIS OF NET ASSETS
Paid-in Capital $199,255,121
Accumulated Net Realized Loss on Investment (3,999)
------------
Net Assets $199,251,122
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
8
<PAGE>
J.P. MORGAN INSTITUTIONAL TREASURY MONEY MARKET FUND
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED APRIL 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME ALLOCATED FROM PORTFOLIO
Allocated Interest Income $3,851,088
Allocated Portfolio Expenses (Net of
Reimbursement of $118,194) (65,067)
----------
Net Investment Income Allocated from
Portfolio 3,786,021
FUND EXPENSES
Shareholder Servicing Fee $ 34,739
Registration Fees 25,155
Administrative Services Fee 20,577
Transfer Agent Fees 11,056
Printing Expenses 6,959
Professional Fees 5,881
Fund Services Fee 2,002
Administration Fee 1,674
Amortization of Organization Expenses 1,090
Trustees' Fees and Expenses 579
Miscellaneous 2,098
--------
Total Fund Expenses 111,810
Less: Reimbursement of Expenses (111,810)
--------
NET FUND EXPENSES --
----------
NET INVESTMENT INCOME 3,786,021
NET REALIZED LOSS ON INVESTMENT ALLOCATED FROM
PORTFOLIO (5,119)
----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $3,780,902
----------
----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
9
<PAGE>
J.P. MORGAN INSTITUTIONAL TREASURY MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX FOR THE PERIOD
MONTHS ENDED JULY 8, 1997
APRIL 30, (COMMENCEMENT OF
1998 OPERATIONS) TO
(UNAUDITED) OCTOBER 31, 1997
------------- ----------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 3,786,021 $ 885,282
Net Realized Gain (Loss) on Investment Allocated
from Portfolio (5,119) 2,300
------------- ----------------
Net Increase in Net Assets Resulting from
Operations 3,780,902 887,582
------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (3,786,021) (885,282)
Net Realized Gain (1,075) (105)
------------- ----------------
Total Distributions to Shareholders (3,787,096) (885,387)
------------- ----------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST (AT
A CONSTANT $1.00 PER SHARE)
Proceeds from Shares of Beneficial Interest Sold 799,865,595 85,148,187
Reinvestment of Dividends and Distributions 1,894,572 835,427
Cost of Shares of Beneficial Interest Redeemed (683,426,982) (5,061,678)
------------- ----------------
Net Increase from Transactions in Shares of
Beneficial Interest 118,333,185 80,921,936
------------- ----------------
Total Increase in Net Assets 118,326,991 80,924,131
NET ASSETS
Beginning of Period 80,924,131 --
------------- ----------------
End of Period $ 199,251,122 $ 80,924,131
------------- ----------------
------------- ----------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
10
<PAGE>
J.P. MORGAN INSTITUTIONAL TREASURY MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share outstanding throughout each period are as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE JULY 8, 1997
SIX MONTHS ENDED (COMMENCEMENT OF
APRIL 30, 1998 OPERATIONS) THROUGH
(UNAUDITED) OCTOBER 31, 1997
---------------- -------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00
---------------- -------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.0271 0.0176
Net Realized Gain (Loss) on Investment (0.0000)(a) (0.0000)(a)
---------------- -------------------
Total from Investment Operations (0.0271) (0.0176)
---------------- -------------------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (0.0271) (0.0176)
Net Realized Gain (0.0000)(a) (0.0000)(a)
---------------- -------------------
Total Distributions to Shareholders (0.0271) (0.0176)
---------------- -------------------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00
---------------- -------------------
---------------- -------------------
RATIOS AND SUPPLEMENTAL DATA
Total Return 2.74%(b) 1.77%(b)
Net Assets, End of Period (in thousands) $ 199,251 $ 80,924
Ratios to Average Net Assets
Expenses 0.09%(c) 0.04%(c)
Net Investment Income 5.45%(c) 5.53%(c)
Decrease Reflected in Expense Ratio due to
Expense Reimbursement 0.33%(c) 1.06%(c)
</TABLE>
- ------------------------
(a) Less than $0.0001.
(b) Not annualized.
(c) Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
11
<PAGE>
J.P. MORGAN INSTITUTIONAL TREASURY MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
APRIL 30, 1998
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The J.P. Morgan Institutional Treasury 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 8, 1997.
Prior to January 1, 1998 the trust's and the fund's names were The JPM
Institutional Funds and The JPM Institutional Treasury Money Market Fund,
respectively.
The fund invests all of its investable assets in The Treasury 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 (36% at April
30, 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, of the
fund 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 $11,000. Morgan
Guaranty Trust Company of New York ("Morgan") has paid the organization
expenses of the fund. The fund has agreed to reimburse Morgan for these
costs which are being deferred and amortized on a straight-line basis over
a 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 Internal Revenue Code of
1986, as amended, applicable to regulated investment companies and to
distribute substantially all of its income, including net realized capital
gains, if any, within the prescribed time periods. Accordingly, no
provision for federal income or excise tax is necessary.
12
<PAGE>
J.P. MORGAN INSTITUTIONAL TREASURY MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 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 six
months ended April 30, 1998, the fee for these services amounted to
$1,674.
b) The trust, on behalf of the fund, 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 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 the 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 six months ended April 30, 1998, the fee for these
services amounted to $20,577.
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 the
following respective percentages of average daily net assets of the fund
for the periods indicated below:
<TABLE>
<S> <C>
November 1, 1997-November 30, 1998......................... 0.05%
December 1, 1997-May 31, 1998.............................. 0.10%
June 1, 1998-November 30, 1998............................. 0.15%
December 1, 1998-February 28, 1999......................... 0.20%
</TABLE>
13
<PAGE>
J.P. MORGAN INSTITUTIONAL TREASURY MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1998
- --------------------------------------------------------------------------------
For the six months ended April 30, 1998, Morgan has agreed to reimburse
the fund $111,970 for expenses under this agreement. The total operating
expenses for the fund is a blended ratio which is based on reimbursements
in effect for the six months ended April 30, 1998 and may not necessarily
represent the actual amount incurred by the shareholder.
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 of 0.05% of the average daily net assets of
the fund. For the six months ended April 30, 1998, the fee for these
services amounted to $34.739.
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
$2,002 for the six months ended April 30, 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 these
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 $400.
14
<PAGE>
The Treasury Money Market Portfolio
Semi-annual Report April 30, 1998
(unaudited)
(The following pages should be read in conjunction
with J.P. Morgan Institutional Treasury Money Market Fund
Semi-annual Financial Statements)
15
<PAGE>
THE TREASURY MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
APRIL 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL YIELD TO
AMOUNT MATURITY MATURITY/
(IN THOUSANDS) SECURITY DESCRIPTION DATE RATE VALUE
- -------------- ------------------------------------------------- --------- --------- -------------
<C> <S> <C> <C> <C>
U.S. TREASURY OBLIGATIONS (40.6%)
$ 46,000 United States Treasury Bills..................... 5/7/98 4.383% $ 45,971,250
74,000 United States Treasury Bills..................... 5/14/98 4.215 73,901,128
15,000 United States Treasury Notes..................... 10/31/98 4.750 14,952,183
3,000 United States Treasury Notes..................... 8/15/98 5.875 3,001,892
3,000 United States Treasury Notes..................... 8/31/98 6.125 3,003,294
5,900 United States Treasury Notes..................... 10/31/98 5.875 5,907,128
35,000 United States Treasury Notes..................... 1/31/99 5.875 35,106,835
15,000 United States Treasury Notes..................... 2/28/99 6.875 15,036,393
30,000 United States Treasury Notes..................... 4/30/99 6.375 30,249,305
-------------
227,129,408
-------------
REPURCHASE AGREEMENTS (59.3%)
15,108 Goldman Sachs Repurchase Agreement, dated
4/30/98, at 5.52%, proceeds include interest
$15,110,317 (e)................................ 5/1/98 5.520 15,108,000
241,157 Goldman Sachs Repurchase Agreement, dated
4/30/98, at 5.35%, proceeds include interest
$241,192,839 (e)............................... 5/1/98 5.350 241,157,000
25,000 Greenwich Repurchase Agreement, dated 4/30/98, at
5.50%, proceeds include interest $25,003,819
(collateralized by $50,283,000 U.S. Treasury
Strips 5.81% through 5.99%, due 5/15/08 through
5/15/13, valued at $25,501,644)................ 5/1/98 5.500 25,000,000
25,000 Merrill Lynch Repurchase Agreement, dated
4/30/98, at 5.45%, proceeds include interest
$25,003,784 (collateralized by $22,470,000 U.S.
Treasury Bonds 7.125%, due 2/15/23 valued at
$25,503,860)................................... 5/1/98 5.450 25,000,000
25,000 State Street Repurchase Agreement, dated 4/30/98,
at 5.30%, proceeds include interest $25,003,381
(collateralized by $25,140,000 U.S. Treasury
Bonds 5.125%, due 12/31/98 valued at
$25,504,253)................................... 5/1/98 5.300 25,000,000
-------------
TOTAL REPURCHASE AGREEMENTS.................. 331,265,000
-------------
TOTAL INVESTMENTS AT AMORTIZED COST AND VALUE (99.9%)................... 558,394,408
OTHER ASSETS IN EXCESS OF LIABILITIES (0.1%)............................ 684,359
-------------
NET ASSETS (100.0%)..................................................... $ 559,078,767
-------------
-------------
</TABLE>
- ------------------------------
(e) Collateralized partially by:
TVDB $5,600,000, 6.00% through 8.25%, due 11/1/00 through 12/15/43
SLMA $2,735,000, 6.07% through 7.20%, due 5/19/00 through 2/14/02
FNMA $103,938,000, 4.88% through 9.40%, due 7/1/98 through 6/23/25
FMAC $54,510,000, 0.00% through 8.00%, due 5/8/98 through 7/12/21
FHLB $64,485,000, 0.00% through 9.25%, due 5/1/98 through 7/28/17
FCNT $24,355,000, 5.42% through 7.13%, due 8/4/98 through 12/3/07
Total Market Value $261,390,518
Abbreviations used in the Schedule of Investments are as follows:
FCNT-Federal Farm Credit Note, FHLB-Federal Home Loan Bank, FMAC-First Home
Mortgage Acceptance Corp., FNMA-Federal National Mortgage Association,
SLMA-Student Loan Marketing Association, TVDB-Tennesee Valley Authority
Development Bank
The Accompanying Notes are an Integral Part of the Financial Statements.
16
<PAGE>
THE TREASURY MONEY MARKET PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
APRIL 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Amortized Cost and Value $227,129,408
Repurchase Agreements at Amortized Cost and Value 331,265,000
Cash 651
Interest Receivable 784,683
Receivable for Expense Reimbursement 60,098
Deferred Organization Expenses 11,715
Prepaid Trustees' Fees 1,651
Prepaid Expenses and Other Assets 156
------------
Total Assets 559,253,362
------------
LIABILITIES
Advisory Fee Payable 99,858
Custody Fee Payable 22,687
Administrative Services Fee Payable 15,194
Organization Expenses Payable 11,500
Fund Services Fee Payable 2,716
Administration Fee Payable 627
Accrued Expenses 22,013
------------
Total Liabilities 174,595
------------
NET ASSETS
Applicable to Investors' Beneficial Interests $559,078,767
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
17
<PAGE>
THE TREASURY MONEY MARKET PORTFOLIO
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED APRIL 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest Income $10,787,683
EXPENSES
Advisory Fee $ 389,864
Administrative Services Fee 57,416
Custodian Fees and Expenses 21,731
Professional Fees and Expenses 16,511
Fund Services Fee 5,983
Administration Fee 2,853
Amortization of Organization Expenses 1,388
Trustees' Fees and Expenses 829
Miscellaneous 4,833
---------
Total Expenses 501,408
Less: Reimbursement of Expenses (311,744)
---------
NET EXPENSES 189,664
-----------
NET INVESTMENT INCOME 10,598,019
NET REALIZED LOSS ON INVESTMENTS (6,813)
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $10,591,206
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
18
<PAGE>
THE TREASURY MONEY MARKET PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX JULY 7, 1997
MONTHS ENDED (COMMENCEMENT OF
APRIL 30, 1998 OPERATIONS) THROUGH
(UNAUDITED) OCTOBER 31, 1997
--------------- -------------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 10,598,019 $ 1,356,330
Net Realized Gain (Loss) on Investments (6,813) 3,337
--------------- -------------------
Net Increase in Net Assets Resulting from
Operations 10,591,206 1,359,667
--------------- -------------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 3,699,381,143 154,888,508
Withdrawals (3,267,997,582) (39,144,175)
--------------- -------------------
Net Increase from Investors' Transactions 431,383,561 115,744,333
--------------- -------------------
Total Increase in Net Assets 441,974,767 117,104,000
NET ASSETS
Beginning of Period 117,104,000 --
--------------- -------------------
End of Period $ 559,078,767 $ 117,104,000
--------------- -------------------
--------------- -------------------
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE JULY 7, 1997
SIX MONTHS ENDED (COMMENCEMENT OF
APRIL 30, 1998 OPERATIONS) THROUGH
(UNAUDITED) OCTOBER 31, 1997
------------------- -------------------------
<S> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Expenses 0.10%(a) 0.04%(a)
Net Investment Income 5.42%(a) 5.52%(a)
Decrease Reflected in Expense Ratio due to
Expense Reimbursement 0.16%(a) 0.48%(a)
</TABLE>
- ------------------------
(a) Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
THE TREASURY MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
APRIL 30, 1998
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Treasury Money Market Portfolio (the "portfolio") is one of two subtrusts
("portfolios") comprising Series Portfolio II. Series Portfolio II is registered
under the Investment Company Act of 1940, as amended, as a no-load, open-end
management investment company which was organized as a trust under the laws of
the State of New York on January 9, 1997. The portfolio commenced operations on
July 7, 1997. The portfolio's investment objective is to provide current income,
maintain a high level of liquidity and preserve capital. The Declaration of
Trust permits the trustees to issue an unlimited number of beneficial interests
in the portfolio.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual amounts could differ from
those estimates. The following is a summary of the significant accounting
policies of the portfolio:
a) Investments are valued at amortized cost which approximates market value.
The amortized cost method of valuation values a security at its cost at
the time of purchase and thereafter assumes a constant amortization to
maturity of any discount or premium, regardless of the impact of
fluctuating interest rates on the market value of the instruments.
The portfolio's custodian or designated subcustodians, as the case may be
under tri-party repurchase agreements, takes possession of the collateral
pledged for investments in repurchase agreements on behalf of the
portfolio. It is the policy of the portfolio to value the underlying
collateral daily on a mark-to-market basis to determine that the value,
including accrued interest, is at least equal to the repurchase price plus
accrued interest. In the event of default of the obligation to repurchase,
the portfolio has the right to liquidate the collateral and apply the
proceeds in satisfaction of the obligation. Under certain circumstances,
in the event of default or bankruptcy by the other party to the agreement,
realization and/or retention of the collateral or proceeds may be subject
to legal proceedings.
b) Securities transactions are recorded on a trade date basis. Interest
income, which includes the amortization of premiums and discounts, if any,
is recorded on an accrual basis. For financial and tax reporting purposes,
realized gains and losses are determined on the basis of specific lot
identification.
c) The portfolio intends to be treated as a partnership for federal income
tax purposes. As such, each investor in the portfolio will be taxed on its
share of the portfolio's ordinary income and capital gains. It is intended
that the portfolio's assets will be managed in such a way that an investor
in the portfolio will be able to satisfy the requirements of Subchapter M
of the Internal Revenue Code. The cost of securities is substantially the
same for book and tax purposes.
d) The portfolio incurred organization expenses in the amount of $14,000.
Morgan Guaranty Trust Company of New York ("Morgan") has paid the
organization expenses of the portfolio. The portfolio has agreed to
reimburse Morgan for these costs which are being deferred and amortized on
a straight-line basis over a period not to exceed five years beginning
with the commencement of operations of the portfolio.
20
<PAGE>
THE TREASURY MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1998
- --------------------------------------------------------------------------------
2. TRANSACTIONS WITH AFFILIATES
a) The portfolio has an Investment Advisory Agreement with 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. For the six months ended April 30,
1998, such fees amounted to $389,864.
b) The portfolio has retained Funds Distributor, Inc. ("FDI"), a registered
broker-dealer, to serve as the co-administrator and exclusive placement
agent. Under a Co-Administration Agreement between FDI and the portfolio,
FDI provides administrative services necessary for the operations of the
portfolio, furnishes office space and facilities required for conducting
the business of the portfolio and pays the compensation of the officers
affiliated with FDI. The portfolio has agreed to pay FDI fees equal to its
allocable share of an annual complex-wide charge of $425,000 plus FDI's
out-of-pocket expenses. The amount allocable to the portfolio is based on
the ratio of the portfolio's net assets to the aggregate net assets of the
portfolio and certain other investment companies subject to similar
agreements with FDI. For the six months ended April 30, 1998, the fee for
these services amounted to $2,853.
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 six months ended April 30,
1998, the fee for these services amounted to $57,416.
In addition, Morgan has agreed to reimburse the portfolio to the extent
necessary to maintain the total operating expenses of the portfolio,
including the expenses allocated to the fund from the portfolio, at no
more than the following respective percentages of average daily net assets
of the portfolio for the periods indicated below:
<TABLE>
<S> <C>
November 1, 1997-November 30, 1997......................... 0.05%
December 1, 1997-May 31, 1998.............................. 0.10%
June 1, 1998-November 30, 1998............................. 0.15%
December 1, 1998-February 28, 1999......................... 0.20%
</TABLE>
For the six months ended April 30, 1998, Morgan has agreed to reimburse
the portfolio $311,744 for expenses under this agreement. The total
operating expenses for the Fund is a blended ratio which is based on
reimbursements in effect for the six months ended April 30, 1998 and may
not necessarily represent the actual amount incurred by the shareholder.
21
<PAGE>
THE TREASURY MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1998
- --------------------------------------------------------------------------------
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 $5,983 for the six months ended April 30, 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 $1,300.
22
<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
JAPAN 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
TREASURY MONEY MARKET FUND
SEMI-ANNUAL REPORT
APRIL 30, 1998
