<PAGE>
LETTER TO THE SHAREHOLDERS OF THE JPM PIERPONT PRIME MONEY MARKET FUND
July 15, 1997
Dear Shareholder:
We are pleased to report that The JPM Pierpont Prime Money Market Fund produced
a total return of 2.63% for the six months ended May 31, 1997, outperforming the
2.43% return of its benchmark, the IBC/Donoghue First Tier Money Fund Average.
In a relatively stable environment for money market interest rates, active
management of the Portfolio's average maturity, as well as its security
selections, were responsible for the Fund's relative success during the period.
Shareholders will be gratified to learn that The JPM Pierpont Prime Money Market
Fund was rated AAA by Standard & Poor's and by Moody's in May and June,
respectively, the highest rating these agencies assign to money market funds.
The Fund's net asset value remained $1.00 per share. The Fund's net assets were
approximately $2.3 billion at the end of the reporting period, while the net
assets of The Prime Money Market Portfolio, in which the Fund invests, totalled
approximately $3.9 billion on May 31, 1997.
This report also includes a Q&A with Robert R. ("Skip") Johnson, the lead
portfolio manager for The Prime Money Market Portfolio, in which the Fund
invests. In this section Skip reviews portfolio activity over the previous six
months, discusses some of the factors relevant to money market portfolios in
general, and this one in particular, and offers an outlook for the months ahead.
As chairman and president of Asset Management Services, we look forward to
sharing Morgan's insights regarding money markets with you going forward. If
you have any comments or questions, please call your Morgan representative or
J.P. Morgan Funds Services at (800) 521-5411.
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
LETTER TO THE SHAREHOLDERS. . . . 1 FUND FACTS AND HIGHLIGHTS . . . . . 6
FUND PERFORMANCE. . . . . . . . . 2 SPECIAL FUND-BASED SERVICES . . . . 7
PORTFOLIO MANAGER Q&A . . . . . . 3 FINANCIAL STATEMENTS. . . . . . . . 9
- --------------------------------------------------------------------------------
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 a 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 a specified time period, typically 1, 5, or
10 years (or since inception). Total returns for periods of less than one year
are not annualized and provide a picture of how a fund has performed over the
short term.
<TABLE>
<CAPTION>
PERFORMANCE TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS
---------------- ------------------------------------
THREE SIX ONE THREE FIVE TEN
AS OF MAY 31, 1997 MONTHS MONTHS YEAR YEARS YEARS YEARS
- ------------------------------------------------------------- ------------------------------------
<S> <C> <C> <C> <C> <C> <C>
The JPM Pierpont Prime Money Market Fund 1.32% 2.63% 5.25% 5.28% 4.38% 5.80%
IBC/Donoghue Money Fund Benchmark* 1.21% 2.43% 4.87% 4.96% 4.12% 5.52%
Lipper Retail Money Fund Average 1.20% 2.38% 4.79% 4.90% 4.06% 5.49%
AS OF MARCH 31, 1997
- ------------------------------------------------------------- ------------------------------------
The JPM Pierpont Prime Money Market Fund 1.26% 2.59% 5.19% 5.17% 4.33% 5.81%
IBC/Donoghue Money Fund Benchmark* 1.19% 2.40% 4.84% 4.87% 4.07% 5.53%
Lipper Retail Money Fund Average 1.16% 2.35% 4.76% 4.81% 4.01% 5.50%
</TABLE>
*CONSISTS OF THE IBC/DONOGHUE TAXABLE MONEY FUND AVERAGE FROM INCEPTION THROUGH
NOVEMBER 30, 1995 AND THE IBC/DONOGHUE FIRST TIER MONEY FUND AVERAGE THEREAFTER.
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. ALL FUND RETURNS ARE NET
OF FEES, ASSUME THE REINVESTMENT OF DISTRIBUTIONS. THE IBC/DONOGHUE MONEY FUND
AVERAGES ARE AVERAGES OF MAJOR MONEY MARKET FUND RETURNS. THIS COMPARATIVE
INFORMATION IS AVAILABLE TO THE PUBLIC FROM THE IBC/DONOGHUE ORGANIZATION, INC.
NO REPRESENTATION IS MADE THAT THE INFORMATION GATHERED FROM THIS SOURCE IS
ACCURATE OR COMPLETE. THE FUND INVESTS ALL OF ITS INVESTABLE ASSETS IN THE PRIME
MONEY MARKET PORTFOLIO, A SEPARATELY REGISTERED INVESTMENT COMPANY WHICH IS NOT
AVAILABLE TO THE PUBLIC BUT ONLY TO OTHER COLLECTIVE INVESTMENT VEHICLES SUCH AS
THE FUND.
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 Prime Money Market Portfolio, in which the
Fund invests. Prior to joining Morgan in 1988, Skip held senior positions with
the Bank of Montreal and U.S. Steel. This interview was conducted on July 9,
1997 and reflects his views on that date.
THE PAST SIX MONTHS HAVE BEEN QUITE REMARKABLE, REALLY. ECONOMIC GROWTH HAS BEEN
IMPRESSIVE, WITH FOURTH QUARTER 1996 GDP INCREASING AT AN ANNUALIZED RATE OF
3.9% AND THE FIRST QUARTER OF 1997 COMING IN AT A FORCEFUL 5.9% (ANNUALIZED).
THE UNEMPLOYMENT RATE FELL TO 4.9% IN MARCH, ITS LOWEST LEVEL SINCE DECEMBER OF
1973. CONSUMER CONFIDENCE MEASURED AT HISTORIC HIGHS, AND CONSUMER CREDIT HAS
STEADILY BEEN INCREASING. DESPITE ALL OF THIS, INFLATION REMAINED SLIGHT, WITH
CPI RISING AT AN ANNUALIZED RATE OF 2.6% FOR THE FIRST FIVE MONTHS OF 1997 WHILE
PPI HAS ACTUALLY FALLEN 3.9% (ANNUALIZED) OVER THE SAME PERIOD. THE FEDERAL
RESERVE, ACTING PREEMPTIVELY AGAINST THE POTENTIAL FOR INFLATION, RAISED THE
FEDERAL FUNDS RATE FROM 5.25% TO 5.50% AT ITS MARCH MEETING. WAS THERE ANY MONEY
MARKET REACTION TO THIS ROBUST ECONOMY?
RRJ: The money markets have principally tracked the Fed. After the two quarters
cited - the fourth quarter of 1996 and the first quarter of 1997 - came in very
strong, the Fed did indeed raise the Fed Funds rate and the money markets moved
up with it. Since then, we've seen Treasury bills showing lower than normal
yields, attributed to strong demand by foreign central banks. Essentially,
though, the rates rose through the first quarter, in anticipation of - and
shortly following - the Fed tightening. Since then, the longer end of the money
market has rallied, and at the end of the 6-month period ending May 31, rates
are not significantly changed from what they were at the beginning of the
period.
OVER THE PREVIOUS 6-MONTH PERIOD, 3-MONTH YIELDS VARIED WITHIN A 38 BASIS POINT
RANGE WHILE 6-MONTH YIELDS FLUCTUATED BY 26 BASIS POINTS AND 1-YEAR YIELDS BY 51
BASIS POINTS (ALL MEASURES TAKEN AT MONTH END). IN YOUR EXPERIENCE WOULD THIS
MUCH VARIATION BE REGARDED AS SHOWING VOLATILITY?
RRJ: Although compared to recent periods volatility may be up, historically it's
within normal ranges, lower, for instance, than back in 1994 and 1995.
CERTIFICATES OF DEPOSIT HAVE CONSISTENTLY BEEN THE BACKBONE OF THE PRIME MONEY
MARKET PORTFOLIO, RELIABLY MAKING UP 40 TO 50 PERCENT OF THE PORTFOLIO, MONTH
AFTER MONTH. WHAT CHARACTERISTICS MAKE THEM DESIRABLE?
RRJ: Again, this has recently been true, but if you look at the Portfolio two
years ago, you would have seen it dominated by commercial paper. We don't have
a preference for any particular kind of security - we pick the security that we
think will give the Portfolio the best return. Commercial paper issuance is down
a bit
3
<PAGE>
right now, a byproduct of the current flat yield curve, which allows
corporations to issue longer-maturity paper at little additional cost in
interest. The Portfolio's current emphasis on certificates of deposit is largely
a function of the attractive spreads that we have seen from time to time on
Japanese bank CDs. Even though Japanese banks are likely to continue to suffer
from headline events about problems in Japan as they get their financial house
in order, we continue to feel comfortable with them. We purchase only from the
five largest Japanese banks, and when the spreads are significant enough, 10 to
15 basis points over other deposits, we are generally interested in buying them.
AS NOTED EARLIER, THE FED FUNDS RATE, THE RATE BANKS CHARGE EACH OTHER FOR
OVERNIGHT LOANS, WAS INCREASED FROM 5.25% TO 5.50% LAST MARCH. 3-MONTH TREASURY
BILLS, BY CONTRAST YIELDED SIGNIFICANTLY LESS, LAGGING BY MORE THAN 50 BASIS
POINTS AT THE END OF MAY. IF YIELDS RISE AS MATURITY INCREASES, WHY WOULD AN
OVERNIGHT RATE BE HIGHER THAN A 3-MONTH RATE?
RRJ: Well, the Fed Funds rate is, as you point out, basically a bank rate, and
banks pay more than the government to borrow, so 3-month Treasury bills will
generally yield less than overnight interbank loans. As a matter of fact, the
yield curve at extremely short maturities is inverted, starting at the overnight
rate, falling as it approaches 3 months, then continuing its normal climb out to
30-year bond levels. Another rate that tracks the Fed Funds rate closely is
LIBOR (London Interbank Offered Rate). One cannot invest directly in LIBOR,
except for floating rate instruments, but it's another interbank rate, used
offshore. Commercial paper more or less offers the same kinds of yields as these
bank rates, hence is usually more attractive than Treasuries.
THE JPM PIERPONT PRIME MONEY MARKET FUND HAS SHOWN EXCELLENT RETURNS OVER THE
PREVIOUS SIX MONTHS, OUTPERFORMING THE IBC/DONOGHUE FIRST TIER MONEY MARKET FUND
AVERAGE BY 20 BASIS POINTS AND THE LIPPER RETAIL MONEY MARKET FUND AVERAGE BY 25
BASIS POINTS. DID WE DO ANYTHING SPECIAL TO PRODUCE THESE NUMBERS?
RRJ: It's been a combination of finding the right securities, as well as
adjusting the maturity. When the yield on 1-year government agencies rose to 6%,
we saw that as an opportunity to stock up, and we're glad we did because
interest rates have since fallen. Of course, in a money market fund, which
requires a high level of liquidity, you normally have funds available to take
advantage of rate surges when they happen. We also opportunistically bought
Japanese bank deposits when they looked good, and that added to total returns.
In money markets, you try to anticipate where you will get a return in six
months that you can ride down as it goes to maturity. Of course, you also have
to analyze where rates are likely to go, so that a purchase at what seems like
an attractive rate is not undercut by rates rising to even more attractive
levels. It is also very important to find the right security. The size of the
Portfolio helps significantly because we have a lot of money to put to work
every day, and that gives us a chance to take advantage of opportunities that
may arise.
We have recently increased our percentage of floating rate notes, which
offers an opportunity to approach a LIBOR-like rate, such as I mentioned
earlier. Floaters are generally pegged to Fed Funds, Treasury bills or LIBOR,
and we tend, because it is a more stable rate, to prefer LIBOR-based notes.
4
<PAGE>
SINCE ITS MARCH 25 MEETING, THE FEDERAL RESERVE HAS DECLINED TO MAKE FURTHER
CHANGES IN THE FED FUNDS RATE, SUGGESTING THAT IT IS COMFORTABLE WITH ECONOMIC
GROWTH AS IT IS NOW. DO WE SHARE THIS VIEW? WHAT ECONOMIC SCENARIO DO WE FORESEE
OVER THE NEXT SIX MONTHS, AND WHAT EFFECT WOULD THIS BE LIKELY TO HAVE ON THE
MONEY MARKETS?
RRJ: We expect the economy to reaccelerate. It clearly decelerated in the second
quarter to a 2% growth rate after a 6% rate in the first quarter. We're looking
for 4% growth in the second half of the year, and should this happen, I expect
that the Fed will be preemptive and raise interest rates again, perhaps 50 basis
points by year end. We believe that consumption will continue to be strong, as
house sales are now relatively strong and employment, also. So, if we see the
Fed likely to tighten, we would tend to keep maturity short, trying to
anticipate when the move might be. It appears that we may have to wait until the
end of the first quarter of 1998 to see the economy slow again to sustainable
levels. If, however, the 2% growth rate of the second quarter appears to be
sustainable, the Fed can simply bow out and leave things alone. As always, the
state of economy will require continuous monitoring.
5
<PAGE>
FUND FACTS
INVESTMENT OBJECTIVE
The JPM Pierpont Prime Money Market Fund seeks to maximize current income and
maintain a high level of liquidity. It is designed for investors who seek to
preserve capital and earn current income from a portfolio of high quality money
market instruments.
- --------------------------------------------------------------------------------
COMMENCEMENT OF OPERATIONS
10/01/82
- --------------------------------------------------------------------------------
NET ASSETS AS OF 5/31/97
$2,250,371,768
- --------------------------------------------------------------------------------
DIVIDEND PAYABLE DATES
MONTHLY
- --------------------------------------------------------------------------------
CAPITAL GAIN PAYABLE DATE (IF APPLICABLE)
12/19/97
EXPENSE RATIO
The Fund's annualized expense ratio of 0.38% covers shareholders' expenses for
custody, tax reporting, investment advisory, and shareholder services. 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 MAY 31, 1997
PORTFOLIO ALLOCATION
(PERCENTAGE OF TOTAL INVESTMENTS)
[CHART]
CERTIFICATES OF DEPOSIT-FOREIGN 35.7%
COMMERCIAL PAPER-FOREIGN 22.7%
FLOATING RATE NOTES 11.9%
COMMERCIAL PAPER-DOMESTIC 9.8%
CERTIFICATES OF DEPOSIT-DOMESTIC 6.3%
TIME DEPOSITS-FOREIGN 5.2%
U.S. GOVERNMENT AGENCIES 3.4%
CORPORATE OBLIGATIONS 1.5%
OTHER 3.5%
AVERAGE 7-DAY YIELD
5.29%
AVERAGE MATURITY
55 days
6
<PAGE>
SPECIAL FUND-BASED SERVICES
PIERPONT ASSET ALLOCATION SERVICE (PAAS)
For many investors, a diversified portfolio -- including short-term instruments,
bonds, and stocks -- can offer an excellent opportunity to achieve one's
investment objectives. PAAS provides investors with a comprehensive management
program for their portfolios. Through this service, investors can:
- create and maintain an asset allocation that is specifically targeted at
meeting their most critical investment objectives;
- make ongoing tactical adjustments in the actual asset mix of their
portfolios to capitalize on shifting market trends;
- make investments through The JPM Pierpont Funds, a family of diversified
mutual funds.
PAAS is available to clients who invest a minimum of $500,000 in The JPM
Pierpont Funds.
IRA MANAGEMENT SERVICE
As one of the few remaining investments that can help your assets grow tax-
deferred until retirement, the IRA enables more of your dollars to work for you
longer. Morgan offers an IRA Rollover plan that helps you to build well-balanced
long-term investment portfolios, diversified across a wide array of mutual
funds. From money markets to emerging markets, The JPM Pierpont Funds provide an
excellent way to help you accumulate long-term wealth for retirement.
KEOGH
In early 1995, Morgan introduced a Keogh program for its clients. Keoghs provide
another excellent vehicle to help individuals who are self-employed or are
employees of unincorporated businesses to accumulate retirement savings. A Keogh
is a tax-deferred pension plan that can allow you to contribute the lesser of
$30,000 or 25% of your annual earned gross compensation. The JPM Pierpont Funds
can help you build a comprehensive investment program designed to maximize the
retirement dollars in your Keogh account.
7
<PAGE>
FUNDS DISTRIBUTOR, INC. IS THE DISTRIBUTOR OF THE JPM PIERPONT PRIME MONEY
MARKET FUND (THE "FUND").
MORGAN GUARANTY TRUST COMPANY OF NEW YORK ("MORGAN") SERVES AS PORTFOLIO
INVESTMENT ADVISOR AND MAKES THE FUND AVAILABLE SOLELY IN ITS CAPACITY AS
SHAREHOLDER SERVICING AGENT FOR CUSTOMERS. INVESTMENTS IN THE FUND ARE NOT
DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, MORGAN OR ANY OTHER
BANK. SHARES OF THE FUND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENTAL
AGENCY. ALTHOUGH THE FUND SEEKS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00
PER SHARE, THERE CAN BE NO ASSURANCE THAT IT WILL BE ABLE TO CONTINUE TO DO SO.
Performance data quoted herein represent past performance. Please remember that
past performance is not a guarantee of future results. Fund returns are net of
fees and assume the reinvestment of distributions.
MORE COMPLETE INFORMATION ABOUT THE FUND, INCLUDING MANAGEMENT FEES AND OTHER
EXPENSES, IS PROVIDED IN THE PROSPECTUS, WHICH SHOULD BE READ CAREFULLY
BEFORE INVESTING. YOU MAY OBTAIN ADDITIONAL COPIES OF THE PROSPECTUS BY
CALLING J.P. MORGAN FUNDS SERVICES AT (800) 521-5411.
8
<PAGE>
THE JPM PIERPONT PRIME MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
MAY 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment in The Prime Money Market Portfolio
("Portfolio"), at value $2,251,883,048
Prepaid Trustees' Fees 9,196
Prepaid Expenses and Other Assets 6,093
--------------
Total Assets 2,251,898,337
--------------
LIABILITIES
Dividends Payable to Shareholders 1,057,016
Shareholder Servicing Fee Payable 278,318
Administrative Services Fee Payable 60,448
Administration Fee Payable 11,599
Fund Services Fee Payable 1,603
Accrued Expenses 117,585
--------------
Total Liabilities 1,526,569
--------------
NET ASSETS
Applicable to 2,250,575,915 Shares of Beneficial
Interest Outstanding
(par value $0.001, unlimited shares authorized) $2,250,371,768
--------------
--------------
Net Asset Value, Offering and Redemption
Price Per Share $1.00
--------------
--------------
ANALYSIS OF NET ASSETS
Paid-in Capital $2,250,926,731
Accumulated Net Realized Loss on Investment (554,963)
--------------
Net Assets $2,250,371,768
--------------
--------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
9
<PAGE>
THE JPM PIERPONT PRIME MONEY MARKET FUND
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED MAY 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME ALLOCATED FROM PORTFOLIO
Allocated Interest Income $62,601,220
Allocated Portfolio Expenses (2,053,908)
-----------
Net Investment Income Allocated from
Portfolio 60,547,312
FUND EXPENSES
Shareholder Servicing Fee $1,628,473
Administrative Services Fee 355,234
Transfer Agent Fees 87,828
Fund Services Fee 38,249
Administration Fee 37,922
Trustees' Fees and Expenses 18,415
Miscellaneous 76,804
----------
Total Fund Expenses 2,242,925
-----------
NET INVESTMENT INCOME 58,304,387
NET REALIZED LOSS ON INVESTMENT ALLOCATED FROM
PORTFOLIO (41,599)
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $58,262,788
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
10
<PAGE>
THE JPM PIERPONT PRIME MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE FISCAL
MAY 31, 1997 YEAR ENDED
(UNAUDITED) NOVEMBER 30, 1996
-------------- -----------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 58,304,387 $ 107,555,270
Net Realized Gain (Loss) on Investment Allocated
from Portfolio (41,599) 164,473
-------------- -----------------
Net Increase in Net Assets Resulting from
Operations 58,262,788 107,719,743
-------------- -----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (58,304,387) (107,555,270)
Net Realized Gain (614,695) (1,163,884)
-------------- -----------------
Total Distributions to Shareholders (58,919,082) (108,719,154)
-------------- -----------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
(AT A CONSTANT $1.00 PER SHARE)
Proceeds from Shares of Beneficial Interest Sold 7,084,655,335 11,935,880,480
Reinvestment of Dividends and Distributions 51,610,050 106,615,817
Cost of Shares of Beneficial Interest Redeemed (7,040,595,348) (12,039,607,579)
-------------- -----------------
Net Increase from Transactions in Shares of
Beneficial Interest 95,670,037 2,888,718
-------------- -----------------
Total Increase in Net Assets 95,013,743 1,889,307
NET ASSETS
Beginning of Period 2,155,358,025 2,153,468,718
-------------- -----------------
End of Period $2,250,371,768 $ 2,155,358,025
-------------- -----------------
-------------- -----------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
11
<PAGE>
THE JPM PIERPONT PRIME MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share outstanding throughout each period are as follows:
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS
ENDED FOR THE FISCAL YEAR ENDED NOVEMBER 30,
MAY 31, 1997 -------------------------------------------------------
(UNAUDITED) 1996 1995 1994 1993
---------------- ---------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------------- ---------------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.0257 0.0509 0.0557 0.0367 0.0281
Net Realized Gain (Loss) on Investments (0.0000)(a) 0.0001 0.0005 (0.0000)(a) 0.0003
---------------- ---------------- ---------- ---------- ----------
Total from Investment Operations 0.0257 0.0510 0.0562 0.0367 0.0284
---------------- ---------------- ---------- ---------- ----------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (0.0257) (0.0509) (0.0557) (0.0367) (0.0281)
Net Realized Gain (0.0003) (0.0005) -- -- (0.0003)
---------------- ---------------- ---------- ---------- ----------
Total Distributions to Shareholders (0.0260) (0.0514) (0.0557) (0.0367) (0.0284)
---------------- ---------------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------------- ---------------- ---------- ---------- ----------
---------------- ---------------- ---------- ---------- ----------
Total Return 2.63%(b) 5.27% 5.71% 3.73% 2.89%
---------------- ---------------- ---------- ---------- ----------
---------------- ---------------- ---------- ---------- ----------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (in thousands) $ 2,250,372 $ 2,155,358 $2,153,469 $2,003,690 $2,562,713
Ratios to Average Net Assets
Expenses 0.38%(c) 0.40% 0.41% 0.43% 0.43%
Net Investment Income 5.16%(c) 5.09% 5.56% 3.64% 2.82%
Decrease Reflected in Expense Ratio due to
Expense Reimbursement -- 0.00%(d) 0.00%(d) 0.01% 0.01%
<CAPTION>
1992
----------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00
----------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.0371
Net Realized Gain (Loss) on Investments 0.0006
----------
Total from Investment Operations 0.0377
----------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (0.0371)
Net Realized Gain (0.0006)
----------
Total Distributions to Shareholders (0.0377)
----------
NET ASSET VALUE, END OF PERIOD $ 1.00
----------
----------
Total Return 3.83%
----------
----------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (in thousands) $2,700,392
Ratios to Average Net Assets
Expenses 0.43%
Net Investment Income 3.74%
Decrease Reflected in Expense Ratio due to
Expense Reimbursement 0.01%
</TABLE>
- --------------------------
(a) Less than $0.0001.
(b) Not Annualized.
(c) Annualized.
(d) Less than 0.01%
The Accompanying Notes are an Integral Part of the Financial Statements.
12
<PAGE>
THE JPM PIERPONT PRIME MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
MAY 31, 1997
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The JPM Pierpont Prime Money Market Fund (the "Fund") is a separate series of
The JPM Pierpont Funds, a Massachusetts business trust (the "Trust"). The Trust
is registered under the Investment Company Act of 1940, as amended, as an
open-end management investment company. The Fund, prior to its tax-free
reorganization on July 11, 1993 to a series of the Trust, operated as a
stand-alone mutual fund. Costs related to the reorganization were borne by
Morgan Guaranty Trust Company of New York ("Morgan"). Prior to May 12, 1997, the
Fund's name was The JPM Pierpont Money Market Fund, and prior to October 10,
1996, the Trust's and the Fund's names were The Pierpont Funds and The Pierpont
Money Market Fund, respectively.
The Fund invests all of its investable assets in The Prime 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 (58% at May 31,
1997). 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 1 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)All the Fund's net investment income is declared as dividends daily and
paid monthly. Distributions to shareholders of net realized capital gain,
if any, are declared and paid annually.
d)Each series of the Trust is treated as a separate entity for federal
income tax purposes. The Fund 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.
e)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.
13
<PAGE>
THE JPM PIERPONT PRIME MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
MAY 31, 1997
- --------------------------------------------------------------------------------
2. TRANSACTIONS WITH AFFILIATES
a)The Trust has retained Funds Distributor, Inc. ("FDI"), a registered
broker-dealer, to serve as co-administrator and distributor. 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,
The JPM Institutional Funds, the Portfolio and other portfolios (the
"Master Portfolios") in which the Trust, The JPM Institutional Funds
invest, JPM Series Trust and JPM Series Trust II. For the six months ended
May 31, 1997, the fee for these services amounted to $37,922.
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 daily based on the aggregate net assets of the Master
Portfolios and 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 JPM
Institutional Funds, the Master Portfolios, other investors in the Master
Portfolios for which Morgan provides similar services, and JPM Series
Trust. For the six months ended May 31, 1997, the fee for these services
amounted to $355,234.
In addition, Morgan has agreed to reimburse the Fund to the extent
necessary to maintain the total operating expenses of the Fund, including
the expenses allocated to the Fund from the Portfolio, at no more than
0.40% of the average daily net assets of the Fund through March 31, 1998.
For the six months ended May 31, 1997, there was no reimbursement
necessary for expenses under this agreement. [Paragraph not applicable.]
c)The Trust, on behalf of the Fund, has a Shareholder Servicing Agreement
with Morgan. 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 0.15% of the average daily net assets of the Fund up to and including
$2 billion and 0.10% on any excess over $2 billion. For the six months
ended May 31, 1997, the fee for these services amounted to $1,628,473.
Morgan, Charles Schwab & Co. ("Schwab") and the Trust are parties to
separate services and operating agreements (the "Schwab Agreements")
whereby Schwab makes Fund shares available to customers of investment
advisors and other financial intermediaries who are Schwab's clients. The
Fund is not responsible for payments to Schwab under the Schwab
Agreements; however, in the event the Services Agreement with Schwab is
terminated for reasons other than a breach by Schwab and the relationship
between the Trust and Morgan is terminated, the Fund would be responsible
for the ongoing payments to Schwab with respect to pre-termination shares.
14
<PAGE>
THE JPM PIERPONT PRIME MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
MAY 31, 1997
- --------------------------------------------------------------------------------
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
$38,249 for the six months ended May 31, 1997.
e)An aggregate annual fee of $75,000 is paid to each Trustee for serving as
a Trustee of the Trust, The JPM Institutional Funds, the Master Portfolios
and JPM Series Trust. The Trustees' Fees and Expenses shown in the
financial statements represents the Fund's allocated portion of the total
fees and expenses. Prior to April 1, 1997, the aggregate annual Trustee
Fee was $65,000. 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 $7,700.
3. TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
From time to time, the Fund may have a concentration of several shareholders
holding a significant percentage of shares outstanding. Investment activities of
these shareholders could have a material impact on the Fund and Portfolio.
15
<PAGE>
The Prime Money Market Portfolio
Semi-annual Report May 31, 1997
(unaudited)
(The following pages should be read in conjunction with
The JPM Pierpont Prime Money Market Fund
Semi-annual Financial Statements)
16
<PAGE>
THE PRIME MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
MAY 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL YIELD TO
AMOUNT MATURITY/
(IN THOUSANDS) SECURITY DESCRIPTION MATURITY DATES RATE VALUE
- -------------- ------------------------------------------------- ------------------ ------------ ---------------
<C> <S> <C> <C> <C>
CERTIFICATES OF DEPOSIT -- DOMESTIC (6.2%)
$ 31,500 Bank of America, Chicago......................... 11/07/97 5.570% $ 31,447,887
49,400 Republic National Bank........................... 06/30/97 5.590 49,400,792
40,000 Bankers Trust Co................................. 12/10/97 5.500 39,979,813
119,000 Harris Trust & Savings Bank...................... 06/05/97-06/27/97 5.540-5.550 118,999,764
---------------
239,828,256
TOTAL CERTIFICATES OF DEPOSIT -- DOMESTIC....
---------------
CERTIFICATES OF DEPOSIT -- FOREIGN (35.5%)
44,000 ABN AMRO Bank Yankee CD.......................... 06/23/97 5.530 44,000,268
25,000 Bank of Nova Scotia.............................. 08/08/97 5.720 25,000,000
76,000 Bank of Tokyo Mitsubishi......................... 06/06/97-07/15/97 5.580-5.850 76,000,098
166,000 Bayerische Landesbank............................ 06/25/97-11/21/97 5.500-5.530 165,994,397
125,000 Bayerische Vereinsbank AG, New York.............. 06/24/97-10/28/97 5.510-5.680 124,990,698
135,790 Canadian Imperial Bank of Commerce............... 06/30/97-08/20/97 5.590-5.740 135,789,777
50,500 Commerzbank Agency, New York..................... 07/10/97 5.680 50,498,187
400 Creditanstalt Bankverein......................... 07/03/97 5.570 400,004
56,100 Dai-Ichi Kangyo Bank............................. 06/13/97-07/28/97 5.570-5.860 56,101,365
48,000 Dai-Ichi Kangyo Yankee CD........................ 06/26/97 5.800 48,000,000
139,500 Deutsche Bank, New York.......................... 07/02/97-02/06/98 5.550-5.760 139,469,379
62,000 Industrial Bank of Japan Ltd..................... 06/06/97 5.750 62,000,257
75,000 Landesbank Hessen Thuringen...................... 07/18/97 6.010 75,030,432
12,000 National Westminster Bank, PLC................... 10/02/97-05/26/98 5.660-6.060 11,998,125
10,000 Rabobank Nederland Inst. CTF..................... 03/24/98 5.990 9,996,126
50,000 Rabobank Nederland N.V........................... 06/23/97 5.530 50,000,304
23,000 Royal Bank of Canada, New York................... 05/12/98 6.140 22,993,777
116,000 Societe Generale, New York....................... 06/02/97-08/06/97 5.420-5.720 116,000,903
38,000 Societe Generale Bank Yankee CD.................. 10/06/97 5.840 37,996,205
28,000 Sumitomo Bank Yankee CD.......................... 07/01/97 5.680 28,000,423
50,000 Swiss Bank Corp., New York....................... 03/19/98 5.980 49,992,380
35,000 Westpac Banking Corp. Yankee CD.................. 03/23/98 5.970 34,978,337
---------------
1,365,231,442
TOTAL CERTIFICATES OF DEPOSIT -- FOREIGN.....
---------------
COMMERCIAL PAPER -- DOMESTIC (9.7%)
25,476 AIG Funding...................................... 06/10/97 5.510 25,440,907
35,000 AT&T Corp........................................ 06/24/97 5.480 34,877,461
9,100 Chase Manhattan Bank............................. 06/19/97 5.600 9,074,520
20,000 Chevron Transport Corp........................... 07/07/97 5.500 19,890,000
191,500 General Electric Capital Corp.................... 06/05/97-10/27/97 5.530-5.720 190,457,424
79,636 Koch Industries Inc.............................. 06/02/97 5.610 79,623,590
16,000 NationsBank Corp................................. 08/01/97 5.630 15,847,364
---------------
375,211,266
TOTAL COMMERCIAL PAPER -- DOMESTIC...........
---------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
17
<PAGE>
THE PRIME MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
MAY 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL YIELD TO
AMOUNT MATURITY/
(IN THOUSANDS) SECURITY DESCRIPTION MATURITY DATES RATE VALUE
- -------------- ------------------------------------------------- ------------------ ------------ ---------------
<C> <S> <C> <C> <C>
COMMERCIAL PAPER -- FOREIGN (22.7%)
$ 16,780 ABN AMRO......................................... 06/19/97-08/19/97 5.340-5.615% $ 16,600,072
161,000 Abbey National North America..................... 07/08/97-08/12/97 5.300-5.620 159,360,925
33,400 BBL North America Inc............................ 07/01/97 5.620 33,243,577
52,249 Bank of Montreal................................. 06/05/97-06/06/97 5.520-5.543 52,212,258
50,000 Bank of Nova Scotia.............................. 06/12/97 5.365 49,918,035
90,000 Caisse D'Amortissement........................... 06/06/97 5.290 89,933,875
52,500 Cregem North America Inc......................... 06/11/97-06/13/97 5.290 52,413,303
50,000 Electricite de France............................ 06/23/97 5.480 49,832,555
47,000 KFW International Finance, Inc................... 06/10/97 5.500 46,935,375
193,820 Korea Development Bank........................... 06/09/97-08/22/97 5.580-5.650 191,874,050
35,500 Lloyds Bank PLC.................................. 08/22/97 5.650 35,043,135
25,000 Province de Quebec............................... 10/28/97 5.730 24,407,104
25,000 Royal Bank of Scotland, PLC...................... 07/28/97 5.640 24,776,750
47,000 San Paolo U.S. Finance Co........................ 08/21/97 5.670 46,400,397
3,352 UBS Finance Delaware Inc......................... 06/02/97 5.580 3,351,480
---------------
876,302,891
TOTAL COMMERCIAL PAPER -- FOREIGN............
---------------
CORPORATE OBLIGATIONS (1.5%)
34,000 Abbey National Treasury Services, PLC............ 11/26/97-02/05/98 5.500-5.750 33,958,024
25,000 John Deere Capital Corp.......................... 07/03/97 5.850 24,998,466
---------------
58,956,490
TOTAL CORPORATE OBLIGATIONS..................
---------------
FLOATING RATE NOTES (11.9%) (A)
72,500 Asset Backed Securities Investment Trust, Series 06/13/97(b) 5.688 72,500,000
1996-M, (resets monthly to one month LIBOR, due
10/15/97) (144A)...............................
60,000 Bankers Trust, (resets daily to Prime rate -281 06/02/97(b) 5.690 59,974,063
basis points, due 04/23/98)....................
20,000 Federal National Mortgage Association, (resets 06/03/97(b) 5.580 19,999,576
weekly to six month Treasury Bill rate +10
basis points, due 06/11/97)....................
20,000 First Union Bank of North Carolina, (resets 06/19/97(b) 5.720 20,000,000
monthly to one month LIBOR, due 12/19/97)......
150,000 Liquid Asset Backed Securities Trust, Series 06/28/97(b) 5.688 150,000,000
1997-2, (resets monthly to one month LIBOR, due
06/30/98) (144A)...............................
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
18
<PAGE>
THE PRIME MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
MAY 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL YIELD TO
AMOUNT MATURITY/
(IN THOUSANDS) SECURITY DESCRIPTION MATURITY DATES RATE VALUE
- -------------- ------------------------------------------------- ------------------ ------------ ---------------
<C> <S> <C> <C> <C>
FLOATING RATE NOTES (CONTINUED)
$ 94,622 Natwest Asset Trust Securities, Series R-13/14A, 06/16/97(b) 5.708% $ 94,622,000
(resets monthly to one month LIBOR +2 basis
points, due 09/15/03) (144A)...................
40,000 Society National Bank of Cleveland, (resets daily 06/02/97(b) 5.640 39,997,239
to the Fed Funds rate +8 basis points, due
07/08/97)......................................
---------------
457,092,878
TOTAL FLOATING RATE NOTES....................
---------------
GOVERNMENT OBLIGATIONS (1.3%)
CANADA (1.3%)
50,000 Canadian Treasury Bills.......................... 07/08/97 5.260 49,729,694
---------------
TIME DEPOSITS -- DOMESTIC (0.9%)
33,429 Wachovia Bank & Trust, Grand Cayman.............. 06/02/97 5.620 33,429,000
---------------
TIME DEPOSITS -- FOREIGN (5.2%)
40,000 Bank of Nova Scotia.............................. 06/02/97 5.625 40,000,000
100,000 Bank of Tokyo Mitsubishi......................... 06/02/97 5.750 100,000,000
30,000 Societe Generale, Grand Cayman................... 06/02/97 5.625 30,000,000
30,000 Westdeutsche Landesbank.......................... 06/02/97 5.687 30,000,000
---------------
200,000,000
TOTAL TIME DEPOSITS -- FOREIGN...............
---------------
U.S. GOVERNMENT AGENCY OBLIGATIONS (3.4%)
16,155 Federal Home Loan Banks.......................... 06/02/97 5.550 16,152,509
25,000 Federal Home Loan Banks.......................... 06/05/97 5.460 24,984,833
16,000 Federal Home Loan Mortgage Corp.................. 04/08/98 5.840 15,971,139
75,000 Federal National Morgage Association............. 06/06/97 5.370 74,944,063
---------------
132,052,544
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS.....
---------------
U.S. TREASURY OBLIGATIONS (0.2%)
8,000 United States Treasury Notes..................... 02/28/98 5.125 7,958,103
---------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
THE PRIME MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
MAY 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL YIELD TO
AMOUNT MATURITY/
(IN THOUSANDS) SECURITY DESCRIPTION MATURITY DATES RATE VALUE
- -------------- ------------------------------------------------- ------------------ ------------ ---------------
<C> <S> <C> <C> <C>
REPURCHASE AGREEMENT (0.9%)
$ 33,705 State Street Repurchase Agreement, dated 5/30/97, 06/02/97 5.470% $ 33,705,000
proceeds $33,720,364 (collateralized by
$33,440,000 U.S. Treasury Notes 6.250%, due
05/31/00 valued at $34,379,965) (cost
$33,705,000)...................................
---------------
3,829,497,564
TOTAL INVESTMENTS AT AMORTIZED COST AND VALUE (99.4%)
21,522,417
OTHER ASSETS IN EXCESS OF LIABILITIES (0.6%)
---------------
$ 3,851,019,981
NET ASSETS (100.0%)
---------------
---------------
</TABLE>
- ------------------------------
(a) The Coupon rate shown on floating or adjustable rate securities represents
the rate at the end of the reporting period. The due date in the security
description reflects the final maturity date.
(b) Reflects the next interest rate reset date.
144A -- Securities restricted for resale to Qualified Institutional Buyers.
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE PRIME MONEY MARKET PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
MAY 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Amortized Cost and Value $3,829,497,564
Interest Receivable 22,202,128
Prepaid Trustees' Fees 13,141
Prepaid Expenses and Other Assets 3,651
--------------
Total Assets 3,851,716,484
--------------
LIABILITIES
Advisory Fee Payable 424,864
Custody Fee Payable 117,046
Administrative Services Fee Payable 106,368
Administration Fee Payable 11,638
Fund Services Fee Payable 2,780
Accrued Expenses 33,807
--------------
Total Liabilities 696,503
--------------
NET ASSETS
Applicable to Investors' Beneficial Interests $3,851,019,981
--------------
--------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE PRIME MONEY MARKET PORTFOLIO
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED MAY 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest Income $111,885,340
EXPENSES
Advisory Fee $2,523,337
Administrative Services Fee 636,014
Custodian Fees and Expenses 315,508
Fund Services Fee 68,278
Administration Fee 50,720
Trustees' Fees and Expenses 30,589
Miscellaneous 47,412
----------
Total Expenses 3,671,858
------------
NET INVESTMENT INCOME 108,213,482
NET REALIZED LOSS ON INVESTMENTS (72,774)
------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $108,140,708
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE PRIME MONEY MARKET PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE FISCAL
MAY 31, 1997 YEAR ENDED
(UNAUDITED) NOVEMBER 30, 1996
--------------- -----------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 108,213,482 $ 185,209,978
Net Realized Gain (Loss) on Investments (72,774) 267,432
--------------- -----------------
Net Increase in Net Assets Resulting from
Operations 108,140,708 185,477,410
--------------- -----------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 10,393,686,669 18,847,392,256
Withdrawals (10,499,057,313) (18,519,575,165)
--------------- -----------------
Net Increase (Decrease) from Investors'
Transactions (105,370,644) 327,817,091
--------------- -----------------
Total Increase in Net Assets 2,770,064 513,294,501
NET ASSETS
Beginning of Period 3,848,249,917 3,334,955,416
--------------- -----------------
End of Period $ 3,851,019,981 $ 3,848,249,917
--------------- -----------------
--------------- -----------------
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE FISCAL JULY 12, 1993
FOR THE SIX YEAR ENDED (COMMENCEMENT OF
MONTHS ENDED NOVEMBER 30, OPERATIONS) TO
MAY 31, 1997 ------------------ NOVEMBER 30,
(UNAUDITED) 1996 1995 1994 1993
------------ ---- ---- ---- ----------------
<S> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Expenses 0.18%(a) 0.19% 0.19% 0.20% 0.19%(a)
Net Investment Income 5.34%(a) 5.29% 5.77% 3.90% 2.98%(a)
Decrease Reflected in Expense Ratio due to
Expense Reimbursement -- 0.00%(b) -- 0.00%(b) --
</TABLE>
- ------------------------
(a) Annualized.
(b) Less than 0.01%.
The Accompanying Notes are an Integral Part of the Financial Statements.
23
<PAGE>
THE PRIME MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
MAY 31, 1997
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Prime Money Market Portfolio (the "Portfolio") is registered under the
Investment Company Act of 1940, as amended (the "Act"), 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. The Portfolio's investment
objective is to maximize current income and maintain a high level of liquidity.
The Portfolio commenced operations on July 12, 1993. The Declaration of Trust
permits the Trustees to issue an unlimited number of beneficial interests in the
Portfolio. Prior to May 12, 1997, the Portfolio's name was The Money Market
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, take 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. Investment
income consists of interest income, which includes the amortization of
premiums and discounts, 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 subject to
taxation 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 the same for book and tax purposes.
2. TRANSACTIONS WITH AFFILIATES
a)The Portfolio has an Investment Advisory Agreement with Morgan Guaranty
Trust Company of New York ("Morgan"). Under the terms of the agreement,
the Portfolio pays Morgan at an annual rate of 0.20% of the Portfolio's
average daily net assets up to $1 billion and 0.10% on any excess over $1
billion. For the six months ended May 31, 1997, this fee amounted to
$2,523,337.
24
<PAGE>
THE PRIME MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
MAY 31, 1997
- --------------------------------------------------------------------------------
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
JPM Pierpont Funds, The JPM Institutional Funds, the Portfolio and the
other portfolios (the "Master Portfolios") in which The JPM Pierpont Funds
and The JPM Institutional Funds invest, JPM Series Trust and JPM Series
Trust II. For the six months ended May 31, 1997, the fee for these
services amounted to $50,720.
c)The Portfolio has an Administrative Services Agreement (the "Services
Agreement") with Morgan under which Morgan is responsible for overseeing
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 daily based on the aggregate net assets of the Master
Portfolios and 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,
investors in the Master Portfolios for which Morgan provides similar
services, The JPM Pierpont Funds, The JPM Institutional Funds and JPM
Series Trust. For the six months ended May 31, 1997, the fee for these
services amounted to $636,014.
In addition, Morgan has agreed to reimburse the Portfolio to the extent
necessary to maintain the total operating expenses of the Portfolio at no
more than 0.20% of the average daily net assets of the Portfolio through
March 31, 1998. For the six months ended May 31, 1997, there was no
reimbursement necessary for expenses under this agreement.
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 $68,278 for the six months ended May 31, 1997.
e)An aggregate annual fee of $75,000 is paid to each Trustee for serving as
a Trustee of The JPM Pierpont Funds, The JPM Institutional Funds, the
Master Portfolios and JPM Series Trust. The Trustees' Fees and Expenses
shown in the financial statements represents the Portfolio's allocated
portion of the total fees and expenses. Prior to April 1, 1997, the
aggregate annual Trustee Fee was $65,000. 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 $13,800.
25
<PAGE>
JPM PIERPONT PRIME MONEY MARKET FUND
JPM PIERPONT TAX EXEMPT MONEY MARKET FUND
JPM PIERPONT FEDERAL MONEY MARKET FUND
JPM PIERPONT SHORT TERM BOND FUND
JPM PIERPONT BOND FUND
JPM PIERPONT TAX EXEMPT BOND FUND
JPM PIERPONT NEW YORK TOTAL RETURN BOND FUND
JPM PIERPONT SHARES: CALIFORNIA BOND FUND
JPM PIERPONT EMERGING MARKETS DEBT FUND
JPM PIERPONT DIVERSIFIED FUND
JPM PIERPONT U.S. EQUITY FUND
JPM PIERPONT SHARES: TAX AWARE U.S. EQUITY FUND
JPM PIERPONT SHARES: TAX AWARE DISCIPLINED EQUITY FUND
JPM PIERPONT U.S. SMALL COMPANY FUND
JPM PIERPONT U.S. SMALL COMPANY OPPORTUNITIES FUND
JPM PIERPONT INTERNATIONAL EQUITY FUND
JPM PIERPONT INTERNATIONAL OPPORTUNITIES FUND
JPM PIERPONT EMERGING MARKETS EQUITY FUND
JPM PIERPONT EUROPEAN EQUITY FUND
JPM PIERPONT JAPAN EQUITY FUND
JPM PIERPONT ASIA GROWTH FUND
FOR MORE INFORMATION ON HOW THE JPM PIERPONT
FAMILY OF FUNDS CAN HELP YOU PLAN FOR YOUR FUTURE, CALL
J.P. MORGAN FUNDS SERVICES AT (800) 521-5411.
THE
JPM PIERPONT
PRIME MONEY MARKET
FUND
SEMI-ANNUAL REPORT
MAY 31, 1997
