[front cover]
J.P. MORGAN
TREASURY MONEY MARKET RESERVES FUND
[jp morgan logo]
Annual Report
October 31, 2000
<PAGE>
LETTER TO THE SHAREHOLDERS
--------------------------------------------------------------------------------
December 1, 2000
Dear Shareholder,
The J.P. Morgan Treasury Money Market Reserves Fund provided a total return
of 5.44% for the 12 months ended October 31, 2000. The Fund was competitive
with its peer group, the Lipper Institutional U.S. Treasury Money Market Funds
Average, which had a total return of 5.59% over the same time period.
The Fund maintained a stable net asset value of $1.00 throughout the year.
On October 31, 2000, the net assets of the Fund were approximately $460
million, while the assets of the Treasury Money Market Portfolio, in which the
Fund invests, totaled approximately $1.2 billion. Dividends of approximately
$0.05 per share were paid from ordinary income during the period.
On the pages that follow, the Fund's lead portfolio manager, Mark Settles,
discusses the fixed-income market in detail. Mark also explains the factors
that influenced fund performance during the fiscal period, and provides insight
in regard to positioning the Fund for the coming months.
As chairman and president of Asset Management Services, we appreciate your
investment in the Fund. If you have any comments or questions, please contact
your Morgan representative, or call J.P. Morgan Funds Services at (800)
766-7722.
Sincerely yours,
/signature/ /signature/
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
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Letter to the Shareholders 1
Fund Performance 2
Portfolio Manager Q&A 3
Fund Facts & Highlights 5
Financial Statements 6
1
<PAGE>
FUND PERFORMANCE
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EXAMINING PERFORMANCE
One way to look at performance is to review a fund's average annual total
return. This calculation takes the fund's actual return and shows what would
have happened if the fund achieved that return by performing at a constant rate
each year. Average annual total returns represent the average yearly change in 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>
AVERAGE ANNUAL TOTAL RETURNS
----------------------------------
ONE THREE SINCE
YEAR YEARS INCEPTION*
AS OF OCTOBER 31, 2000
<S> <C> <C> <C>
J.P. Morgan Treasury Money Market
Reserves Fund 5.44% 5.05% 5.09%
Lipper Institutional U.S. Treasury
Money Market Fund Average 5.59% 5.07% 5.08%
<CAPTION>
AS OF SEPTEMBER 30, 2000
<S> <C> <C> <C>
J.P. Morgan Treasury Money Market
Reserves Fund 5.33% 5.03% 5.06%
Lipper Institutional U.S. Treasury
Money Market Fund Average 5.47% 5.04% 5.05%
</TABLE>
* The Fund commenced operations on June 1, 1999, and has provided an average
annual total return of 5.11% from that date through October 31, 2000. For the
purpose of comparison, the "three years" and "since inception" returns in the
table above reflect the performance of the J.P. Morgan Institutional Service
Treasury Money Market Fund, which had a lower expense ratio, and are calculated
from July 31, 1997, the first date when data for the Fund, and its Lipper
category average were both available.
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. Lipper Analytical Services,
Inc. is a leading source for mutual fund data.
2
<PAGE>
PORTFOLIO MANAGER Q&A
--------------------------------------------------------------------------------
[photo of Mark Settles]
The following is an interview with MARK SETTLES, vice president and member
of the portfolio management team for the Treasury Money Market Portfolio. Mark
joined Morgan in 1994, and spent five years trading fixed-income products in
our New York and London offices before coming to J.P. Morgan Investment
Management. Prior to joining Morgan, he was a foreign exchange trader at The
First National Bank of Chicago, and a teacher of government at the Paideia
School in Atlanta, Georgia. Mark holds a B.A. in economics from Columbia
University, and a Masters of Management from Northwestern University. This
interview was conducted on November 9, 2000, and reflects Mark's views on that
date.
What themes dominated fixed income markets over the past year?
One key theme of interest to our clients was the announcement--and
subsequent implementation-- of a program by the U.S. Treasury to buy back
government debt and issue fewer securities in the future. An effective reduction
in the supply, of what is globally perceived to be the lowest-risk investment,
had a profound effect on fixed income markets. It also spurred a search for
investment alternatives that can take the place of Treasuries in conservative
portfolios and hedging strategies.
Another key theme surfaced last spring when a senior Treasury official
questioned the nature of implied guarantees associated with certain government
sponsored entities. These agencies have traditionally funded themselves at
quasi-government type levels due to their near "risk-free" status. Investors
have long assumed that the U.S. government would stand behind such securities
with "full faith and credit." This questioning of the government's commitment
led to significant volatility in the agency and mortgage-backed securities
markets.
Also during this period, the Federal Reserve continued to raise interest
rates in an effort to tame economic growth. The Fed's last increase of 50 basis
points (0.50%) to 6.5% in May 2000, marked the sixth consecutive rate
increase--totaling 175 basis points (1.75%)--since June 1999. These moves, along
with an announced bias toward further tightening, served to markedly increase
volatility in U.S. and global equity markets. Around the same time, evidence
emerged that our economy was indeed slowing from its previous red-hot pace, and
that global growth was following suit.
As we moved toward the end of this reporting period, we also experienced a
major surge in energy prices. For the most part, corporations lacked the pricing
power to pass along higher costs, and we began to hear talk of a hard landing
for the U.S. economy. The equity markets fell, and the Treasury curve steepened
Is the U.S. Treasury's reduction of debt issuance across the entire maturity
spectrum, or is it focused on specific segments?
The Treasury is attempting to use part of the budget surplus to shorten the
average maturity of the country's outstanding debt. As a consequence, the very
existence of the 30-year bond has been called into question, and auctions for
the one-year bill, and two-, five-, and 10-year notes have all been reduced.
For example, the traditional monthly auction for the one-year bill has now moved
to a quarterly auction.
How was the Fund positioned while interest rates were rising?
The portfolio was positioned to take advantage of rising and very
attractive overnight rates through a significant allocation to overnight
repurchase agreements. This enabled us to capture most of the increases in the
Fed funds rate as it moved upward to 6.5%. We also looked to opportunistically
purchase one-year securities on price declines.
How are fixed income markets adjusting to changing dynamics?
Short-term fixed income mandates revolve around three essential
requirements: safety, liquidity, and return. With the present and expected
future decline in the availability of low risk Treasuries, all three of these
requirements have to be reevaluated and reintegrated into an investment
strategy. For example, we are searching for acceptable alternatives to
Treasuries, such as agency bonds.
3
<PAGE>
PORTFOLIO MANAGER Q&A
--------------------------------------------------------------------------------
(Continued)
How are you dealing with these changes at J.P. Morgan?
We're spending a good deal of time educating our clients on the uses of
credit in a conservative portfolio, in particular the tools and strategies
needed to outperform in this market environment.
We've also taken significant steps toward reengineering our credit process
to take advantage of changing market dynamics. One of these steps has been the
development and implementation of improved guidelines regarding concentration
limits per credit.
Beyond this, we are continuing to forge closer relationships with both buy-
and sell-side analysts, and we're examining new electronic-based trading
solutions. These steps and others are helping us to fine-tune our credit
process so that we can meet the demands of today's marketplace.
How do you see things playing out in the fixed income markets over the coming
months?
We anticipate a bond friendly environment, one marked by continued
moderation in U.S. growth. As far as the Fed is concerned, the present behavior
of the market for Fed fund futures suggests that its next move might be an
easing of credit conditions. However, the recent surge in energy prices, the
firmness in unit labor costs, and associated inflationary fears, should keep the
Fed on hold for the time being.
How are you positioning the Fund in light of this outlook?
We are looking for additional opportunities to put more money to work in
one-year maturities, as the LIBOR curve steepens. Even so, we will likely
maintain a significant concentration in repurchase agreements, particularly if
the Fed Funds rate stays at 6.5% over the coming months. This is only sensible,
when you consider that the yield curve has been inverted during much of the last
six months. This means we have been able to pick up a higher yield from
shorter-term treasuries, without the price risk associated with longer-term
bonds.
4
<PAGE>
FUND FACTS
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INVESTMENT OBJECTIVE
The J.P. Morgan Treasury Money Market Reserves Fund seeks to provide high
current income consistent with the preservation of capital and same-day
liquidity. The Fund is designed for investors who seek to preserve capital and
earn current income from a portfolio of direct obligations primarily issued by
the U.S. Treasury.
--------------------------------------------------------------------------------
Inception Date: 6/1/1999
--------------------------------------------------------------------------------
Fund Net Assets as of 10/31/2000:
$459,957,365
--------------------------------------------------------------------------------
Portfolio Net Assets as of 10/31/2000:
$1,168,240,299
--------------------------------------------------------------------------------
Dividend Payable Dates: MONTHLY
--------------------------------------------------------------------------------
Short-term Capital Gain Payable Date
(if applicable): MONTHLY
--------------------------------------------------------------------------------
Long-term Capital Gain Payable Date
(if applicable): 12/13/2000
EXPENSE RATIO
The Fund's current annualized expense ratio of 0.70% 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 October 31, 2000
DAYS TO MATURITY
(As of percentage of total investment securities)
[data from pie chart]
0-30 Days 71.5%
31-60 Days 17.0%
90+ Days 11.5%
--------------------------------------------------------------------------------
Average 7-day Yield: 5.89%*
--------------------------------------------------------------------------------
Average Maturity: 30.0 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 5.66%
DISTRIBUTED BY FUNDS DISTRIBUTOR, INC. J.P. MORGAN INVESTMENT MANAGEMENT INC.
SERVES AS INVESTMENT ADVISOR. SHARES OF THE FUND ARE NOT INSURED BY THE FDIC,
ARE NOT BANK DEPOSITS OR OTHER OBLIGATIONS OF THE FINANCIAL INSTITUTION AND ARE
NOT GUARANTEED BY THE FINANCIAL INSTITUTION. SHARES OF THE FUND ARE SUBJECT TO
INVESTMENT RISK, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL INVESTED. WHILE THE
FUND SEEKS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE, IT IS
POSSIBLE TO LOSE MONEY BY INVESTING IN THIS FUND.
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).
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.
5
<PAGE>
J.P. MORGAN TREASURY MONEY MARKET RESERVES FUND
STATEMENT OF ASSETS AND LIABILITIES
--------------------------------------------------------------------------------
OCTOBER 31, 2000
<TABLE>
<S> <C>
ASSETS
Investment in The Treasury Money Market
Portfolio ("Portfolio"), at value $462,167,478
Receivable for Expense Reimbursements 92,790
Prepaid Trustees' Fee 935
Prepaid Expenses and Other Assets 80
------------------
TOTAL ASSETS 462,261,283
------------------
LIABILITIES
Dividends Payable to Shareholders 1,931,138
Shareholder Servicing Fee Payable 19,826
Administrative Services Fee Payable 9,533
Fund Services Fee Payable 328
Administration Fee Payable 235
Accrued Expenses and Other Liabilities 342,858
------------------
TOTAL LIABILITIES 2,303,918
------------------
NET ASSETS
Applicable to 460,011,713 Shares of Beneficial
Interest Outstanding (par value $0.001,
unlimited shares authorized) $459,957,365
==================
Net Asset Value, Offering and Redemption Price Per Share $1.00
==================
ANALYSIS OF NET ASSETS
Paid-in Capital $460,011,713
Accumulated Net Realized Loss on Investments (54,348)
------------------
NET ASSETS $459,957,365
==================
</TABLE>
6 The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
J.P. MORGAN TREASURY MONEY MARKET RESERVES FUND
STATEMENT OF OPERATIONS
--------------------------------------------------------------------------------
FOR THE YEAR ENDED OCTOBER 31, 2000
INVESTMENT INCOME
<TABLE>
<S> <C>
INCOME
Allocated Interest Income $14,686,794
Allocated Portfolio Expenses (Net of Reimbursement $73,828) (465,583)
------------------
Net Investment Income Allocated from Portfolio 14,221,211
------------------
FUND EXPENSES
Shareholder Servicing Fee 696,365
Distribution Fee 580,304
Registration Fees 155,913
Administrative Services Fee 55,947
Transfer Agent Fees 21,368
Financial and Fund Accounting Services Fee 12,688
Professional Fees 11,300
Printing Expenses 9,634
Fund Services Fee 3,493
Administration Fee 2,522
Trustees' Fees and Expenses 1,211
Miscellaneous 2,621
------------------
Total Fund Expenses 1,553,366
Less: Reimbursement of Expenses (393,942)
------------------
Net Fund Expenses 1,159,424
------------------
NET INVESTMENT INCOME 13,061,787
------------------
NET REALIZED LOSS ON INVESTMENT ALLOCATED FROM PORTFOLIO (46,759)
------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $13,015,028
==================
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements. 7
<PAGE>
J.P. MORGAN TREASURY MONEY MARKET RESERVES FUND
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
FOR THE YEARS ENDED OCTOBER 31
<TABLE>
<CAPTION>
INCREASE IN NET ASSETS 2000 1999*
<S> <C> <C>
FROM OPERATIONS
Net Investment Income $ 13,061,787 $ 1,932,769
Net Realized Loss on Investment Allocated from Portfolio (46,759) (7,589)
----------------- ----------------
Net Increase in Net Assets Resulting from Operations 13,015,028 1,925,180
----------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (13,061,787) (1,932,769)
----------------- ----------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
(AT A CONSTANT $1.00 PER SHARE)
Proceeds from Shares of Beneficial Interest Sold 1,535,487,167 385,553,639
Reinvestment of Dividends 3,407,333 1,016,463
Cost of Shares of Beneficial Interest Redeemed (1,167,519,167) (297,933,722)
----------------- ----------------
Net Increase from Transactions in
Shares of Beneficial Interest 371,375,333 88,636,380
----------------- ----------------
Total Increase in Net Assets 371,328,574 88,628,791
----------------- ----------------
NET ASSETS
Beginning of Year 88,628,791 -
----------------- ----------------
End of Year $ 459,957,365 $ 88,628,791
================= ================
</TABLE>
*For the Period June 1, 1999 (commencement of operations)
through October 31, 1999.
8
<PAGE>
The Accompanying Notes are an Integral Part of the Financial Statements.
J.P. MORGAN TREASURY MONEY MARKET RESERVES FUND
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT
EACH PERIOD ARE AS FOLLOWS:
<TABLE>
<CAPTION>
FOR THE PERIOD
JUNE 1, 1999
FOR THE (COMMENCEMENT OF
YEAR ENDED OPERATIONS) THROUGH
OCTOBER 31, 2000 OCTOBER 31, 1999
------------------- --------------------
<S> <C> <C>
NET ASSET VALUE PER SHARE, BEGINNING OF PERIOD $1.00 $1.00
----------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.05 0.02
Net Realized and Unrealized Gain on Investment 0.00(a) 0.00(a)
----------------------------------------
Total from Investment Operations 0.05 0.02
----------------------------------------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (0.05) (0.02)
Net Realized Gain 0.00 0.00
----------------------------------------
Total Distributions to Shareholders (0.05) (0.02)
----------------------------------------
NET ASSET VALUE PER SHARE, END OF PERIOD $1.00 $1.00
========================================
RATIOS AND SUPPLEMENTAL DATA
Total Return 5.44% 1.82%(b)
Net Assets, End of Period (in thousands) $459,957 $88,629
Ratio to Average Net Assets
Net Expenses 0.70% 0.70%(c)
Net Investment Income 5.63% 4.38%(c)
Expenses without Reimbursement 0.90% 0.94%(c)
</TABLE>
(a) Less than $0.005.
(b) Not annualized.
(c) Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
9
<PAGE>
J.P. MORGAN TREASURY MONEY MARKET RESERVES FUND
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
OCTOBER 31, 2000
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1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION--J.P. Morgan Treasury Money Market Reserves Fund (the "Fund")
is a separate series of 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 June
1, 1999.
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 (approximately
40% at October 31, 2000). 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 accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts and disclosures.
Actual amounts could differ from those estimates. The following is a summary of
the significant accounting policies of the Fund:
SECURITY VALUATION--Valuation of securities by the Portfolio is discussed in
Note 1 of the Portfolio's Notes to Financial Statements that are included
elsewhere in this report.
INVESTMENT INCOME--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.
EXPENSES--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.
FEDERAL INCOME TAXES--Income distributions and capital gain distributions,
if any, are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles. These differences are
primarily due to the differing treatment of net operating losses, foreign
currency and tax allocation. Accordingly, these permanent differences in the
character of income and distributions between financials statements and tax
basis have been reclassified to paid-in-capital.
For federal income tax purposes, the fund had a capital loss carry forward at
October 31, 2000 of $54,348 of which $7,589 expires in 2007 and $46,759 expires
in 2008. To the extent that this capital loss is used to offset future capital
gains, it is probable that gains to offset will not be distributed to
shareholders.
DISTRIBUTION TO SHAREHOLDERS--Distributions to a shareholder are recorded
on the ex-dividend date. Distributions from net investment income are declared
daily and paid monthly. Distributions from net short-term realized gains, if
any, will be distributed in accordance with the requirements of the Internal
Revenue Code of 1986 (the "Code"), as amended, and may be reflected in the
Fund's daily dividends. Distributions from net long-term realized gains, if any,
will be distributed annually, except that an additional capital gains
distribution may be made in a given year to the extent necessary to avoid the
imposition of federal excise tax on the Fund.
--------------------------------------------------------------------------------
2. TRANSACTIONS WITH AFFILIATES
ADMINISTRATIVE SERVICES--The Trust has an Administrative Services Agreement
(the "Services Agreement") with Morgan Guaranty Trust Company of New York
("Morgan") a wholly owned subsidiary of J.P. Morgan & Co. Incorporated ("J.P.
Morgan"), under which Morgan is responsible for certain aspects of the
administration and operation of the Fund. Under the Services Agreement, the
Trust 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 Trust and certain other registered investment companies
for which J.P. Morgan Investment Management, Inc. ("JPMIM") acts as investment
advisor in accordance with the following annual schedule: 0.09% on the first $7
billion of their aggregate average daily net assets and 0.04% of their aggregate
average daily net assets in excess of $7 billion less the complex-wide fees
payable to Funds Distributor, Inc. The portion of this charge payable by the
Fund is determined by the proportionate share that its net assets bear to the
net assets of the Trust and certain other investment companies for which Morgan
provides similar services.
Morgan has agreed to reimburse the Fund to the extent necessary to maintain
the total operating expenses (which excludes interest and dividend expenses,
taxes and
10
<PAGE>
J.P. MORGAN TREASURY MONEY MARKET RESERVES FUND
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
(Continued)
OCTOBER 31, 2000
--------------------------------------------------------------------------------
2. TRANSACTIONS WITH AFFILIATES (CONTINUED)
extraordinary items) of the Fund, including the expenses allocated to the
Fund from the Portfolio, at no more than 0.70% of the average daily net assets
of the Fund. This reimbursement arrangement can be changed or terminated at
any time after February 28, 2001, at the option of Morgan.
ADMINISTRATION--The Trust 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, 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 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 and certain other investment
companies for which FDI provides similar services.
DISTRIBUTION PLAN--The Trust, on behalf of the Fund, has a Distribution Plan
with respect to services related to distributing fund shares, which authorizes
it to compensate certain financial institutions, securities dealers, and other
industry professionals that have entered into written agreements with the Fund
in respect to these services. The agreement provides for the Fund to pay a fee
for these services which is computed daily and paid monthly at an annual rate
not to exceed 0.25% of the value of the average daily net assets of the Fund.
The amount paid to such institutions is based on the daily value of shares owned
by their clients.
SHAREHOLDER SERVICING--The Trust has a Shareholder Servicing Agreement with
Morgan under which Morgan provides account administration and personal account
maintenance service to Fund shareholders. The agreement provides for the Fund to
pay Morgan a fee for these services that is computed daily and paid monthly at
an annual rate of 0.05% of the average daily net assets of the Fund.
The Trust on behalf of the Fund, has a service Plan with respect to fund
shares which authorizes it to compensate Service Organizations for providing
account administration and other services to their customers who are beneficial
owners of such shares. The Fund will enter into agreements with Service
Organizations which purchase shares on behalf of their customers ("Service
Agreements"). The Service Agreements provide that the Fund pay Service
Organizations a fee which is computed daily and paid monthly at an annual rate
of up to 0.25% of the average daily net assets of the Fund with respect to the
shares of the Fund attributable to or held in the name of the Service
Organization for its customers.
FUND SERVICES--The Trust has a Fund Services Agreement with Pierpont Group,
Inc. ("PGI") 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 PGI.
Each Trustee receives an aggregate annual fee of $75,000 for serving on the
boards of the Trust, the J.P. Morgan Funds, the J.P. Morgan Institutional Funds,
and other registered investment companies in which they invest. The Trustees'
Fees and Expenses shown in the financial statements represent the Fund's
allocated portion of the total Trustees' fees and expenses. The Trust's Chairman
and Chief Executive Officer also serves as Chairman of PGI and receives
compensation and employee benefits from PGI. The allocated portion of such
compensation and benefits included in the Fund Services Fee shown on the
Statement of Operations was $700.
--------------------------------------------------------------------------------
3. SUBSEQUENT EVENTS
On September 13, 2000, J.P. Morgan & Co. Incorporated and The Chase
Manhattan Corporation announced that they have entered into an agreement and
plan of merger. The transaction is expected to close in December 2000 and is
subject to approval by shareholders of both companies.
11
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
--------------------------------------------------------------------------------
To the Trustees and Shareholders of
J.P. Morgan Treasury Money Market Reserves 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 Treasury Money Market Reserves Fund (one of the series constituting
part of the J.P. Morgan Institutional Funds, hereafter referred to as the
"Fund") at October 31, 2000, the results of its operations for the year then
ended, and the changes in its net assets and the financial highlights for the
year then ended and for the period June 1, 1999 (commencement of operations)
through October 31, 1999, in conformity with accounting principles generally
accepted in the United States of America. 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 auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
December 21, 2000
12
<PAGE>
THE TREASURY MONEY MARKET PORTFOLIO
Annual Report October 31, 2000
(The following pages should be read in conjunction with J.P. Morgan Treasury
Money Market Reserves Fund Annual Financial Statements)
13
<PAGE>
THE TREASURY MONEY MARKET PORTFOLIO - SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------
OCTOBER 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
--------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENTS - 71.5%
$ 50,000,000 Chase Repurchase Agreement, 6.56%, dated
10/31/00, proceeds include interest
$50,009,111, due 11/01/00
(collateralized by $49,563,000
U.S. Treasury Notes, 6.50%,
due 08/31/01 through 02/15/10,
valued at $50,989,865) $ 50,000,000
50,000,000 Credit Suisse First Boston Repurchase
Agreement, 6.52% dated 10/31/00,
proceeds include interest
$50,009,056, due 11/1/00 (a) 50,000,000
200,000,000 Deutsche Morgan Grenfel Repurchase
Agreement, 6.55%, dated 10/31/00,
proceeds include interest
$200,036,389, due 11/1/00 (b) 200,000,000
133,650,000 Goldman Sachs Repurchase Agreement,
6.55%, dated 10/31/00, proceeds include
interest $133,674,317,
due 11/1/00 (c) 133,650,000
50,000,000 Greenwich Repurchase Agreement, 6.55%,
dated 10/31/00, proceeds include interest
$50,009,097, due 11/1/00 (collateralized by
$50,380,000 U.S. Treasury Notes, 5.50%,
due 5/31/03, valued at
$51,003,290) 50,000,000
50,000,000 Lehman Repurchase Agreement, 6.56%,
dated 10/31/00, proceeds include interest
$50,009,111, due 11/1/00 (collateralized
by $47,615,000 U.S.
Treasury Note, 4.25% due 1/15/10,
valued at $51,004,911) 50,000,000
50,000,000 Merrill Lynch Repurchase Agreement, 6.50%,
dated 10/31/00, proceeds include interest
$50,009,028, due 11/1/00 (d) 50,000,000
50,000,000 Morgan Stanley Repurchase Agreement,
6.48%, dated 10/31/00, proceeds include
interest $50,009,000,
due 11/1/00 (e) 50,000,000
200,000,000 Salomon Repurchase Agreement, 6.56%,
dated 10/31/00, proceeds include interest
$200,036,444, due 11/1/00 (f) 200,000,000
------------------
TOTAL REPURCHASE AGREEMENTS 833,650,000
------------------
</TABLE>
<TABLE>
<CAPTION>
U.S. TREASURY SECURITIES - 28.5%
<S> <C> <C>
$200,000,000 United States Treasury Bills, 6.31%, 12/21/00 $ 198,250,000
35,000,000 United States Treasury Notes, 4.50%, 1/31/01 34,831,646
25,000,000 United States Treasury Notes, 4.88%, 3/31/01 24,831,022
40,000,000 United States Treasury Notes, 5.63%, 5/15/01 39,830,350
35,000,000 United States Treasury Notes, 6.50%, 8/31/01 35,047,852
------------------
TOTAL U.S. TREASURY SECURITIES 332,790,870
------------------
TOTAL INVESTMENTS AT AMORTIZED
COST AND VALUE - 100% $1,166,440,870
==================
</TABLE>
<TABLE>
<S> <C>
(a) Collateralized by:
U.S. Treasury Note $14,792,000, 6.13% due 12/31/01
U.S. Treasury Note $12,678,000, 6.50% due 5/31/02
U.S. Treasury Note $23,425,000, 5.75% due 10/31/02
Valued at $51,510,530
(b) Collateralized by:
U.S. Treasury Bond $41,395,000, 14.25% due 2/15/02
U.S. Treasury Bond $8,933,000, 12.50% due 8/15/14
U.S. Treasury Bond $43,158,000, 10.38% due 11/15/12
U.S. Treasury Bond $66,933,000, 3.63% due 4/15/28
U.S. Treasury STRIP $67,235,000 due 11/15/21
Valued at $200,000,081
(c) Collateralized by:
U.S. Treasury Note $97,885,000, 5.88% due 11/15/04
U.S. Treasury Bond $22,000,000, 14.00% due 11/15/11
U.S. Treasury STRIP $6,919,000 due 2/15/14 through 11/15/14
Valued at $133,650,624
(d) Collateralized by:
U.S. Treasury Bills $250,000, 14.00% due 11/15/11
U.S. Treasury Bonds $22,580,000, 9.00% due 11/15/18
U.S. Treasury Note $2,016,000, 5.25% due 5/31/01
U.S. Treasury STRIP $33,843,000 due 11/15/11
Valued at $51,001,202
(e) Collateralized by:
U.S. Treasury Bills $42,100,000 due 04/19/01 through 08/30/01
U.S. Treasury Note $12,000,000, 5.00% due 04/30/01
Valued at $51,530,566
(f) Collateralized by:
U.S. Treasury Note $172,475,000, 5.63% due 5/15/08
U.S. Treasury Note $28,760,000, 6.13% due 8/15/07
Valued at $200,462,878
</TABLE>
STRIP - Separate Trading of Registered Interest and Principal.
14 The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
THE TREASURY MONEY MARKET PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
--------------------------------------------------------------------------------
OCTOBER 31, 2000
<TABLE>
<S> <C>
ASSETS
Investments at Amortized Cost and Value $ 332,790,870
Repurchase Agreement at Amortized Cost and Value 833,650,000
Interest Receivable 2,085,769
Prepaid Trustees' Fees and Expenses 1,866
Prepaid Expenses and Other Assets 1,832
Receivable for Expense Reimbursement 23,122
--------------------
Total Assets 1,168,553,459
--------------------
LIABILITIES
Advisory Fee Payable 179,762
Due to Custodian 28,450
Administrative Services Fee Payable 22,731
Fund Services Fee Payable 747
Administration Fee Payable 290
Accrued Expenses and Other Liabilities 81,180
--------------------
Total Liabilities 313,160
--------------------
NET ASSETS
Applicable to Investors' Beneficial Interests $1,168,240,299
====================
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements. 15
<PAGE>
THE TREASURY MONEY MARKET PORTFOLIO
STATEMENT OF OPERATIONS
--------------------------------------------------------------------------------
FOR THE YEAR ENDED OCTOBER 31, 2000
<TABLE>
<S> <C>
INVESTMENT INCOME
INCOME
Interest Income $61,912,210
--------------------
EXPENSES
Advisory Fee 2,000,272
Administrative Services Fee 251,048
Custodian Fees and Expenses 110,976
Professional Fees 40,739
Fund Services Fee 16,550
Trustees' Fees and Expenses 12,280
Administration Fee 6,803
Miscellaneous Expenses 12,798
--------------------
Total Expenses 2,451,466
Less: Reimbursement of Expenses (394,705)
--------------------
Net Expenses 2,056,761
--------------------
NET INVESTMENT INCOME 59,855,449
--------------------
NET REALIZED LOSS ON INVESTMENTS (267,969)
--------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $59,587,480
====================
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
16
<PAGE>
THE TREASURY MONEY MARKET PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
FOR THE YEARS ENDED OCTOBER 31
<TABLE>
<CAPTION>
INCREASE (DECREASE) IN NET ASSETS 2000 1999
<S> <C> <C>
FROM OPERATIONS
Net Investment Income $ 59,855,449 $ 41,654,130
Net Realized Loss on Investments (267,969) (49,014)
------------------ -----------------
Net Increase in Net Assets Resulting from Operations 59,587,480 41,605,116
------------------ -----------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 4,912,395,308 4,599,123,657
Withdrawals (4,978,197,544) (4,171,320,392)
------------------ -----------------
Net Increase (Decrease) from Investors' Transactions (65,802,236) 427,803,265
------------------ -----------------
Total Increase (Decrease) in Net Assets (6,214,756) 469,408,381
------------------ -----------------
NET ASSETS
Beginning of Year 1,174,455,055 705,046,674
------------------ -----------------
End of Year $1,168,240,299 $1,174,455,055
================== =================
</TABLE>
SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 7, 1997
(COMMENCEMENT OF
FOR THE YEARS ENDED OCTOBER 31 OPERATIONS) THROUGH
2000 1999 1998 OCTOBER 31, 1997
-------------------------------------------------------------
<S> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Net Expenses 0.20% 0.20% 0.12% 0.04%(a)
Net Investment Income 5.82% 4.75% 5.35% 5.52%(a)
Expenses without Reimbursement 0.24% 0.24% 0.27% 0.52%(a)
</TABLE>
(a) Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
17
<PAGE>
THE TREASURY MONEY MARKET PORTFOLIO NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
OCTOBER 31, 2000
--------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION--The Treasury Money Market Portfolio (the "Portfolio") is one
of two subtrusts ("Portfolios") comprising Series Portfolio II. Series Portfolio
II is registered under the Investment Company Act of 1940, as amended, as a
no-load diversified, open-end management investment company which was organized
as a trust under the laws of the State of New York on January 9, 1997. The
Portfolio commenced operations on July 7, 1997. The Portfolio's investment
objective is to provide high current income consistent with the preservation of
capital and same-day liquidity. The Declaration of Trust permits the Trustees to
issue an unlimited number of beneficial interests in the Portfolio.
The preparation of financial statements in accordance with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts and disclosures.
Actual amounts could differ from those estimates. The following is a summary of
the significant accounting policies of the Portfolio:
SECURITY VALUATIONS--Investments are valued at amortized cost which
approximates market value. The amortized cost method of valuation values a
security at its cost at the time of purchase and thereafter assumes a constant
amortization to maturity of any discount or premium, regardless of the impact
of fluctuating interest rates on the market value of the instruments.
REPURCHASE AGREEMENTS--The Portfolio's custodian (or designated
subcustodians, as the case may be under tri-party repurchase agreements) takes
possession of the collateral pledged for investments in repurchase agreements
on behalf of the Portfolio. It is the policy of the Portfolio to mark-to-market
the collateral on a daily basis to determine that the value, including accrued
interest, is at least equal to the repurchase price plus accrued interest. In
the event of default of the obligation to repurchase, the Portfolio has the
right to liquidate the collateral and apply the proceeds in satisfaction of the
obligation. In the event of default or bankruptcy by the seller of the
agreement, realization and/or retention of the collateral or proceeds may be
subject to legal proceedings.
SECURITY TRANSACTIONS--Security transactions are accounted for as of the
trade date. Realized gains and losses are determined on the identified cost
basis, which is also used for federal income tax purposes.
INVESTMENT INCOME--Interest income is recorded on the accrual basis and
includes accretion of discounts and amortization of premiums.
EXPENSES--Expenses incurred by Series Portfolio II with respect to any two
or more portfolios in Series Portfolio II, are allocated in proportion to the
net asssets of each portfolio in Series Portfolio II, except where allocations
of direct expenses to each portfolio can otherwise be made fairly. Expenses
directly attributable to a portfolio are charged to that portfolio.
INCOME TAX STATUS--The Portfolio intends to be treated as a partnership for
federal income tax purposes. As such, each investor in the Portfolio will be
taxed on its share of the Portfolio's ordinary income and capital gains. It is
intended that the Portfolio's assets will be managed in such a way that an
investor in the Portfolio will be able to satisfy the provisions of the Internal
Revenue Code. The cost of securities is substantially the same for book and
tax purposes.
DISTRIBUTION TO SHAREHOLDERS--Distributions to a shareholder are recorded
on the ex-dividend date. Distributions from net investment income are declared
daily and paid monthly. Distributions from net short-term realized gains, if
any, will be distributed in accordance with the requirements of the Internal
Revenue Code of 1986 (the "Code"), as amended, and may be reflected in the
Fund's daily dividends. Distributions from net long-term realized gains, if any,
will be distributed annually, except that an additional capital gains
distribution may be made in a given year to the extent necessary to avoid the
imposition of federal excise tax on the Fund.
--------------------------------------------------------------------------------
2. TRANSACTIONS WITH AFFILIATES
ADVISORY--The Portfolio has an Investment Advisory Agreement with J.P.
Morgan Investment Management Inc. ("JPMIM"), an affiliate of Morgan Guaranty
Trust Company of New York ("Morgan") and a wholly owned subsidiary of J.P.
Morgan & Co. Incorporated ("J.P. Morgan"). Under the terms of the agreement,
the Portfolio pays JPMIM at an annual rate of 0.20% of the Portfolio's average
daily net assets up to $1 billion and 0.10% on any excess over $1 billion.
ADMINISTRATIVE SERVICES--The Portfolio has an Administrative Services
Agreement (the "Services Agreement") with Morgan under which Morgan is
responsible for certain aspects of the administration and operation of the
Portfolio. Under the Services Agreement, the Portfolio has agreed to pay Morgan
a fee equal to its allocable share of an annual complex-wide charge. This charge
is calculated based on the aggregate average daily net assets of the Portfolio
and certain other registered
18
<PAGE>
THE TREASURY MONEY MARKET PORTFOLIO NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
(Continued)
OCTOBER 31, 2000
--------------------------------------------------------------------------------
2. TRANSACTIONS WITH AFFILIATES (CONTINUED)
investment companies for which JPMIM acts as investment advisor in
accordance with the following annual schedule: 0.09% on the first $7 billion of
their aggregate average daily net assets and 0.04% of their aggregate average
daily net assets in excess of $7 billion less the complex-wide fees payable to
Funds Distributor, Inc. The portion of this charge payable by the Portfolio is
determined by the proportionate share that its net assets bear to the net
assets of the Trust and certain other investment companies for which Morgan
provides similar services.
Morgan has agreed to reimburse the Portfolio to the extent necessary to
maintain the total operating expenses (which excludes interest and dividend
expenses, taxes and extraordinary items) of the Portfolio at no more than
0.20% of the average daily net assets of the Portfolio. This reimbursement
arrangement can be changed or terminated at any time after February 28, 2001,
at the option of J.P. Morgan.
ADMINISTRATION--The Portfolio has retained Funds Distributor, Inc. ("FDI"),
a registered broker-dealer, to serve as the co-administrator and distributor
for the Fund. Under a Co-Administration Agreement between FDI and the Portfolio,
FDI provides administrative services necessary for the operations of the
Portfolio, furnishes office space and facilities required for conducting the
business of the Portfolio and pays the compensation of the Portfolio's officers
affiliated with FDI. The Portfolio has agreed to pay FDI fees equal to its
allocable share of an annual complex-wide charge of $425,000 plus FDI's out-of-
pocket expenses. The portion of this charge payable by the Portfolio is
determined by the proportionate share that its net assets bear to the net
assets of the Trust and certain other investment companies for which FDI
provides similar services.
FUND SERVICES--The Portfolio has a Fund Services Agreement with Pierpont
Group, Inc. ("PGI") to assist the Trustees in exercising their overall
supervisory responsibilities for the Portfolio's affairs. The Trustees of the
Portfolio represent all the existing shareholders of PGI.
Each Trustee receives an aggregate annual fee of $75,000 for serving on the
boards of the Trust, the J.P. Morgan Funds, the J.P. Morgan Institutional Funds,
and other registered investment companies in which they invest. The Trustees'
Fees and Expenses shown in the financial statements represent the Portfolio's
allocated portion of the total Trustees' fees and expenses. The Trust's Chairman
and Chief Executive Officer also serves as Chairman of PGI and receives
compensation and employee benefits from PGI. The allocated portion of such
compensation and benefits included in the Fund Services Fee shown on the
Statement of Operations was $3,100.
--------------------------------------------------------------------------------
3. SUBSEQUENT EVENTS
On September 13, 2000, J.P. Morgan & Co. Incorporated and The Chase
Manhattan Corporation announced that they have entered into an agreement and
plan of merger. The transaction is expected to close in December 2000 and is
subject to approval by shareholders of both companies.
19
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
--------------------------------------------------------------------------------
To the Trustees and Investors of
The Treasury Money Market Portfolio
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the supplementary data present fairly, in all material
respects, the financial position of The Treasury Money Market Portfolio (the
"Portfolio") at October 31, 2000, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the supplementary data for each of the three years in the
period then ended and for the period July 7, 1997 (commencement of operations)
through October 31, 1997, in conformity with accounting principles generally
accepted in the United States of America. These financial statements and
supplementary data (hereafter referred to as "financial statements") are the
responsibility of the Portfolio's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at October
31, 2000 by correspondence with the custodian and brokers, provide a reasonable
basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
December 21, 2000
[back cover]
J.P. MORGAN INSTITUTIONAL FUNDS
Prime Money Market Reserves Fund
---------------------------------------------------------------------
Treasury Money Market Reserves Fund
---------------------------------------------------------------------
For more information on the J.P. Morgan Institutional Funds, call J.P.
Morgan Funds Services at (800) 766-7722.
---------------------------------------------------------------------
Morgan Guaranty Trust Company MAILING
500 Stanton Christiana Road INFORMATION
Newark, Delaware 19713-2107
IN-ANN-23746 1000
