<PAGE>
LETTER TO THE SHAREHOLDERS OF J.P. MORGAN PRIME MONEY MARKET FUND
July 1, 1999
Dear Shareholder,
The previous six-month period was marked by continued strength in the U.S.
economy coupled with benign inflation and a steepening yield curve. During this
period, the J.P. Morgan Prime Money Market Fund posted a 2.35% return, besting
the 2.13% return of the IBC First Tier Money Fund Average and the 2.13% return
of the Lipper Retail Money Fund Average. The fund's current average seven-day
yield is 4.55%.
The fund maintained a stable net asset value of $1.00 over the period. On May
31, 1999, the net assets of the fund were approximately $2.9 billion, while the
assets of The Prime Money Market Portfolio, in which the fund invests, amounted
to approximately $12.4 billion. Dividends of approximately $0.023 per share were
paid from ordinary income.
This report includes a discussion with Robert Johnson, the portfolio manager
primarily responsible for The Prime Money Market Portfolio. In this interview,
Skip talks about the events of the previous six months that had the greatest
effect on the portfolio and discusses his investment strategy.
As chairman and president of Asset Management Services, we appreciate your
investment in the fund. If you have any comments or questions, please call your
Morgan representative or J.P. Morgan Funds Services at (800) 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>
<CAPTION>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<S> <C> <C> <C>
LETTER TO THE SHAREHOLDERS ........ 1 FUND FACTS AND HIGHLIGHTS ......... 5
FUND PERFORMANCE .................. 2 FINANCIAL STATEMENTS .............. 8
PORTFOLIO MANAGER Q&A ............. 3
- --------------------------------------------------------------------------------
</TABLE>
1
<PAGE>
FUND PERFORMANCE
EXAMINING PERFORMANCE
One way to look at performance is to review a fund's average annual total
return. This figure takes the fund's actual (or cumulative) return and shows
what would have happened if the fund had achieved that return by performing at a
constant rate each year. Average annual total returns represent the average
yearly change 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>
PERFORMANCE TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS
--------------------- -----------------------------------
THREE SIX ONE THREE FIVE TEN
AS OF MAY 31, 1999 MONTHS MONTHS YEAR YEARS YEARS YEARS
- ------------------------------------------------------------------------- -----------------------------------
<S> <C> <C> <C> <C> <C> <C>
J.P. Morgan Prime Money Market Fund 1.15% 2.35% 5.02% 5.26% 5.27% 5.34%
IBC First Tier Money Fund Average* 1.04% 2.13% 4.57% 4.84% 4.91% 5.03%
Lipper Retail Money Fund Average 1.04% 2.13% 4.58% 4.79% 4.89% 5.02%
AS OF MARCH 31, 1999
- ------------------------------------------------------------------------- -----------------------------------
J.P. Morgan Prime Money Market Fund 1.16% 2.42% 5.16% 5.28% 5.23% 5.42%
IBC First Tier Money Fund Average* 1.06% 2.21% 4.70% 4.87% 4.88% 5.12%
Lipper Retail Money Fund Average 1.05% 2.20% 4.70% 4.82% 4.85% 5.11%
</TABLE>
*IBC TAXABLE MONEY FUND AVERAGE THROUGH NOVEMBER 30, 1995, AND THE IBC FIRST
TIER MONEY FUND AVERAGE THEREAFTER.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. FUND RETURNS ARE NET OF FEES
AND ASSUME THE REINVESTMENT OF DISTRIBUTIONS. IBC FIRST TIER MONEY FUND AVERAGE
IS THAT OF AN AVERAGE OF FUNDS MANAGED SIMILARLY TO THE FUND. IBC IS A
NATIONALLY RECOGNIZED SOURCE OF MONEY MARKET FUND DATA. LIPPER ANALYTICAL
SERVICES, INC. IS A LEADING SOURCE FOR MUTUAL FUND DATA.
2
<PAGE>
PORTFOLIO MANAGER Q&A
[PHOTO]
The following is an interview with ROBERT R. ("SKIP") JOHNSON, vice president, 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 positions
with the Bank of Montreal and U.S. Steel, and founded the merchant banking firm
of R.R. Johnson Associates. He is a graduate of Dartmouth College. This
interview was conducted on June 9, 1999, and reflects Skip's views on that date.
WHAT FACTORS HAVE MOST INFLUENCED THE MONEY MARKETS OVER THE PAST SIX MONTHS?
RRJ: In the U.S., the economy has continued to be strong throughout the past six
months, even stronger than we had expected. In late 1998, there was some concern
that global economic instability would spill over into the U.S.; in fact, the
Federal Reserve eased rates three times in October and November owing to global
difficulties. However, GDP data released in mid-January indicated a
stronger-than-anticipated economy, dispelling the notion that the U.S would be
tarred with the same brush. The strength of the equity markets, and the
resultant wealth effect for households and lower cost of capital for
corporations, has driven this economic growth. Our economist believes this
wealth affect was a major reason the U.S. was able to shrug off the economic
sluggishness seen globally.
Such persistent strength, particularly when coupled with signs of a rebound in
global economic growth like we have been seeing, would often incite the Federal
Reserve to bump up interest rates. But with inflation remaining in check, the
Fed maintained its neutral stance throughout the six-month period. However, in
mid-May the Fed announced a shift to a tightening bias from a neutral one,
pushing interest rates upward in the following weeks. We saw a modest steepening
of the yield curve since the mid-January GDP announcement; prior to that, it had
been flat to inverted.
Globally, things are beginning to settle down. Of late, there have been
indications that the global economy is beginning to stabilize, as evinced by
industrial production growth in Japan and firming prices of oil and other
commodities. This, combined with benign inflation, is bolstering investor
confidence and our confidence that non-U.S. growth is bottoming.
TO WHAT DO YOU ATTRIBUTE THE FUND'S PERFORMANCE OVER THE PERIOD?
RRJ: Our performance over the last six months has been strong; we posted a
return of 2.35% compared with the 2.13% returns of the IBC First Tier Money Fund
Average and the Lipper Retail Money Fund Average. In February, we increased our
holding of floating-rate notes to about 40% and stayed around that level for the
remainder of the period. We continued to hold asset-backed commercial paper, and
it now makes up a significant portion of our total commercial paper holdings. We
also have been holding a fair amount of dollar-denominated paper of foreign
issuers, which has performed well.
3
<PAGE>
We extended the portfolio's duration in January and kept the average maturity
long within its target range throughout the six-month period. Of course, at the
same time, we always need to focus on managing the portfolio's liquidity and
maturity so we can have assets available to take advantage of any investment
opportunities. Toward the end of May, in anticipation of higher rates, we
invested the portfolio in a more barbelled fashion, moving away from the
laddered profile it had for much of the period; we invested heavily in very
short-term securities that we believe will benefit from a Fed tightening, as
well as in attractive issues with maturities near one year.
WHAT DO YOU SEE ON THE HORIZON IN THE MONEY MARKETS, AND HOW WILL YOU POSITION
THE PORTFOLIO?
RRJ: U.S. economic growth still looks solid and global growth continues to
improve, leading us to agree with the consensus that the Fed is likely to raise
interest rates. It appears to us that the market has priced in the Fed
tightening rates once or twice within the next three months, and three times in
total by the end of 1999. We think any rate changes made by the Fed would be
likely to happen sooner rather than later, as a tightening toward the end of the
year may further hamper liquidity at a time when it may already be a concern due
to potential Year 2000-related problems.
To account for the anticipated increase in rates by the Fed, we're planning to
age-in the duration of the portfolio, meaning that we won't sell longer-term
issues specifically to manage duration, but we will use much of our investable
assets to purchase shorter-term issues and bring the portfolio's average
maturity down. We'll likely keep the portfolio fairly barbelled, with much of it
invested in floaters and asset-backed commercial paper.
4
<PAGE>
FUND FACTS
INVESTMENT OBJECTIVE
J.P. Morgan Prime Money Market Fund seeks to maximize current income consistent
with the preservation of capital and same-day 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 INVESTMENT OPERATIONS
10/01/82
- --------------------------------------------------------------------------------
FUND NET ASSETS AS OF 5/31/99
$2,863,619,700
- --------------------------------------------------------------------------------
PORTFOLIO NET ASSETS AS OF 5/31/99
$12,391,536,825
- --------------------------------------------------------------------------------
DIVIDEND PAYABLE DATES
MONTHLY
- --------------------------------------------------------------------------------
SHORT-TERM CAPITAL GAIN PAYABLE DATES (IF APPLICABLE)
MONTHLY
LONG-TERM CAPITAL GAIN PAYABLE DATE (IF APPLICABLE)
12/13/99
EXPENSE RATIO
The fund's current expense ratio of 0.45% 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, 1999
PORTFOLIO ALLOCATION
(PERCENTAGE OF TOTAL INVESTMENTS)
[CHART]
- - FLOATING RATE NOTES 40.1%
- - COMMERCIAL PAPER - DOMESTIC 28.9%
- - CERTFICATES OF DEPOSIT - FOREIGN 17.0%
- - TIME DEPOSITS - FOREIGN 7.3%
- - TIME DEPOSITS - DOMESTIC 3.4%
- - CERTIFICATES OF DEPOSIT - DOMESTIC 1.9%
- - TAXABLE MUNICIPALS 0.7%
- - CORPORATE BONDS 0.4%
- - COMMERCIAL PAPER - FOREIGN 0.3%
AVERAGE 7-DAY CURRENT YIELD
4.55%
AVERAGE MATURITY
54.0 days
5
<PAGE>
DISTRIBUTED BY FUNDS DISTRIBUTOR, INC. J.P. MORGAN INVESTMENT MANAGEMENT INC.
SERVES AS INVESTMENT ADVISOR. SHARES OF THE FUND ARE NOT BANK DEPOSITS AND ARE
NOT GUARANTEED BY ANY BANK, GOVERNMENT ENTITY, OR THE FDIC. WHILE THE FUND SEEKS
TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE, THERE CAN BE NO
ASSURANCE THAT IT WILL CONTINUE TO DO SO.
Opinions expressed herein are based on current market conditions and are subject
to change without notice. The fund invests through a master portfolio (another
fund with the same objective).
CALL J.P. MORGAN FUNDS SERVICES AT (800) 521-5411 FOR A PROSPECTUS CONTAINING
MORE COMPLETE INFORMATION ABOUT THE FUND, INCLUDING MANAGEMENT FEES AND OTHER
EXPENSES. PLEASE READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
6
<PAGE>
THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY
<PAGE>
J.P. MORGAN PRIME MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
MAY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment in The Prime Money Market Portfolio
("Portfolio"), at value $2,868,233,386
Prepaid Trustees' Fees 2,128
Prepaid Expenses and Other Assets 16,585
--------------
Total Assets 2,868,252,099
--------------
LIABILITIES
Dividends Payable to Shareholders 3,843,820
Shareholder Servicing Fee Payable 607,742
Administrative Services Fee Payable 62,835
Administration Fee Payable 3,728
Fund Services Fee Payable 2,452
Accrued Expenses 111,822
--------------
Total Liabilities 4,632,399
--------------
NET ASSETS
Applicable to 2,863,784,037 Shares of Beneficial
Interest Outstanding
(par value $0.001, unlimited shares authorized) $2,863,619,700
--------------
--------------
Net Asset Value, Offering and Redemption Price
Per Share $1.00
----
----
ANALYSIS OF NET ASSETS
Paid-in Capital $2,864,144,057
Accumulated Distributions in Excess of Net
Realized Gain (311,222)
Accumulated Net Realized Loss on Investment (213,135)
--------------
Net Assets $2,863,619,700
--------------
--------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
8
<PAGE>
J.P. MORGAN PRIME MONEY MARKET FUND
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED MAY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME ALLOCATED FROM PORTFOLIO
Allocated Interest Income $76,685,799
Allocated Portfolio Expenses (2,242,145)
-----------
Net Investment Income Allocated from
Portfolio 74,443,654
FUND EXPENSES
Shareholder Servicing Fee $3,738,650
Administrative Services Fee 390,683
Fund Services Fee 31,645
Administration Fee 22,440
Trustees' Fees and Expenses 15,357
Miscellaneous 225,037
----------
Total Fund Expenses 4,423,812
-----------
NET INVESTMENT INCOME 70,019,842
NET REALIZED LOSS ON INVESTMENT ALLOCATED FROM
PORTFOLIO (131,895)
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $69,887,947
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
9
<PAGE>
J.P. MORGAN PRIME MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE FISCAL
MAY 31, 1999 YEAR ENDED
(UNAUDITED) NOVEMBER 30, 1998
--------------- -----------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 70,019,842 $ 137,758,043
Net Realized Loss on Investment Allocated from
Portfolio (131,895) (24,422)
--------------- -----------------
Net Increase in Net Assets Resulting from
Operations 69,887,947 137,733,621
--------------- -----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (69,883,343) (137,683,198)
--------------- -----------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST (AT
A CONSTANT $1.00 PER SHARE)
Proceeds from Shares of Beneficial Interest Sold 12,283,952,946 18,357,223,341
Reinvestment of Dividends 44,100,999 109,585,123
Cost of Shares of Beneficial Interest Redeemed (12,270,927,162) (17,978,806,833)
--------------- -----------------
Net Increase from Transactions in Shares of
Beneficial Interest 57,126,783 488,001,631
--------------- -----------------
Total Increase in Net Assets 57,131,387 488,052,054
NET ASSETS
Beginning of Period 2,806,488,313 2,318,436,259
--------------- -----------------
End of Period $ 2,863,619,700 $ 2,806,488,313
--------------- -----------------
--------------- -----------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
10
<PAGE>
J.P. MORGAN 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, 1999 ----------------------------------------------------------
(UNAUDITED) 1998 1997 1996 1995 1994
---------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.0233 0.0528 0.0524 0.0509 0.0557 0.0367
Net Realized Gain (Loss) on Investment (0.0000)(a) (0.0000 (a) (0.0000 (a) 0.0001 0.0005 (0.0000)(a)
---------------- ---------- ---------- ---------- ---------- ----------
Total from Investment Operations 0.0233 0.0528 0.0524 0.0510 0.0562 0.0367
---------------- ---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (0.0233) (0.0528) (0.0524) (0.0509) (0.0557) (0.0367)
Net Realized Gain -- -- (0.0003) (0.0005) -- --
---------------- ---------- ---------- ---------- ---------- ----------
Total Distributions to Shareholders (0.0233) (0.0528) (0.0527) (0.0514) (0.0557) (0.0367)
---------------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------------- ---------- ---------- ---------- ---------- ----------
---------------- ---------- ---------- ---------- ---------- ----------
RATIOS AND SUPPLEMENTAL DATA
Total Return 2.35%(b) 5.40% 5.40% 5.27% 5.71% 3.73%
Net Assets, End of Period (in thousands) $2,863,620 $2,806,488 $2,318,436 $2,155,358 $2,153,469 $2,003,690
Ratios to Average Net Assets
Net Expenses 0.45%(c) 0.40% 0.38% 0.40% 0.41% 0.43%
Net Investment Income 4.68%(c) 5.27% 5.25% 5.09% 5.56% 3.64%
Expenses without Reimbursement 0.45%(c) 0.40% 0.38% 0.40% 0.41% 0.44%
</TABLE>
- --------------------------
(a) Less than $0.0001.
(b) Not Annualized.
(c) Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
11
<PAGE>
J.P. MORGAN PRIME MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
MAY 31, 1999
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
J.P. Morgan Prime Money Market Fund (the "fund") is a separate series of J.P.
Morgan 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 October 1, 1982.
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 (23% at May 31,
1999). The performance of the fund is directly affected by the performance of
the portfolio. The financial statements of the portfolio, including the Schedule
of Investments, are included elsewhere in this report and should be read in
conjunction with the fund's financial statements.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual amounts could differ from
those estimates. The following is a summary of the significant accounting
policies of the fund:
a) Valuation of securities by the portfolio is discussed in Note 1a of the
portfolio's Notes to Financial Statements which are included elsewhere in
this report.
b) The fund records its share of net investment income, realized gain and
loss and adjusts its investment in the portfolio each day. All the net
investment income and realized gain and loss of the portfolio is allocated
pro rata among the fund and other investors in the portfolio at the time
of such determination.
c) Substantially all the fund's net investment income and net realized
capital gain, if any, are declared as dividends daily and paid monthly.
Net short-term capital gains, if any, will be distributed in accordance
with the requirements of the Internal Revenue Code of 1986 (the "Code"),
as amended, and may be reflected in the fund's daily dividends.
Substantially all the realized net long-term capital gains, if any, are
declared and paid annually, except that an additional capital gains
distribution may be made in a given year to the extent necessary to avoid
the imposition of federal excise tax on the fund.
d) 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.
e) The fund is treated as a separate entity for federal income tax purposes
and intends to comply with the provisions of the Code, as amended,
applicable to regulated investment companies and to distribute
substantially all of its income, including net realized capital gains, if
any, within the prescribed time periods. Accordingly, no provision for
federal income or excise tax is necessary.
f) For federal income tax purposes, the fund had a capital loss carryforward
at November 30, 1998 of $81,240, of which $56,817 expires in the year 2005
and $24,423 expires in the year 2006. To the extent that this capital loss
is used to offset future capital gains, it is probable that gains so
offset will not be distributed to shareholders.
12
<PAGE>
J.P. MORGAN PRIME MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
MAY 31, 1999
- --------------------------------------------------------------------------------
2. TRANSACTIONS WITH AFFILIATES
a) The trust, on behalf of the fund, has retained Funds Distributor, Inc.
("FDI"), a registered broker-dealer, to serve as co-administrator and
distributor for the fund. Under a Co-Administration Agreement between FDI
and the trust on behalf of the fund, FDI provides administrative services
necessary for the operations of the fund, furnishes office space and
facilities required for conducting the business of the fund and pays the
compensation of the fund's officers affiliated with FDI. The fund has
agreed to pay FDI fees equal to its allocable share of an annual
complex-wide charge of $425,000 plus FDI's out-of-pocket expenses. The
amount allocable to the fund is based on the ratio of the fund's net
assets to the aggregate net assets of the trust and certain other
investment companies subject to similar agreements with FDI. For the six
months ended May 31, 1999, the fee for these services amounted to $22,440.
b) The trust, on behalf of the fund, has an Administrative Services Agreement
(the "Services Agreement") with Morgan Guaranty Trust Company of New York
("Morgan"), 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 fund has agreed to pay Morgan a fee equal to its allocable
share of an annual complex-wide charge. This charge is calculated based on
the aggregate average daily net assets of the portfolio and the other
portfolios in which the trust and the J.P. Morgan Institutional Funds
invest (the "master portfolios") and J.P. Morgan 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 its net assets bear to
the net assets of the trust, the master portfolios, other investors in the
master portfolios for which Morgan provides similar services, and J.P.
Morgan Series Trust. For the six months ended May 31, 1999, the fee for
these services amounted to $390,683.
c) The trust, on behalf of the fund, has a Shareholder Servicing Agreement
with Morgan to provide account administration and personal account
maintenance service to fund shareholders. The agreement provides for the
fund to pay Morgan a fee for these services which is computed daily and
paid monthly at an annual rate of 0.25% of the average daily net assets of
the fund. For the six months ended May 31, 1999, the fee for these
services amounted to $3,738,650.
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.
13
<PAGE>
J.P. MORGAN PRIME MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
MAY 31, 1999
- --------------------------------------------------------------------------------
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
$31,645 for the six months ended May 31, 1999.
e) An aggregate annual fee of $75,000 is paid to each trustee for serving as
a trustee of the trust, the J.P. Morgan Institutional Funds, the master
portfolios and J.P. Morgan Series Trust. The Trustees' Fees and Expenses
shown in the financial statements represents the fund's allocated portion
of the total fees and expenses. The trust's Chairman and Chief Executive
Officer also serves as Chairman of Group and receives compensation and
employee benefits from Group in his role as Group's Chairman. The
allocated portion of such compensation and benefits included in the Fund
Services Fee shown in the financial statements was $6,600.
14
<PAGE>
The Prime Money Market Portfolio
Semiannual Report May 31, 1999
(The following pages should be read in conjunction
with J.P. Morgan Prime Money Market Fund
Semiannual Financial Statements)
15
<PAGE>
THE PRIME MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
MAY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL YIELD TO
AMOUNT MATURITY/
(IN THOUSANDS) SECURITY DESCRIPTION MATURITY DATES RATE VALUE
- -------------- ------------------------------------------------- --------------------- ------------ ----------------
<C> <S> <C> <C> <C>
CERTIFICATES OF DEPOSIT -- DOMESTIC (1.9%)
$ 171,000 Nationsbank Corp................................. 01/05/00 5.000% $ 170,980,293
59,000 State Street Bank & Trust Co..................... 06/16/99 4.810 59,000,000
----------------
TOTAL CERTIFICATES OF DEPOSIT -- DOMESTIC.... 229,980,293
----------------
CERTIFICATES OF DEPOSIT -- FOREIGN (16.9%)
350,000 Abbey National PLC............................... 06/11/99-05/11/00 5.220-5.720 349,902,455
110,000 Bank of Nova Scotia.............................. 02/25/00 5.160 109,981,482
285,000 Barclays Bank PLC................................ 01/10/00 4.980 284,980,802
325,000 Bayerische Hypo Vereinsbank...................... 02/22/00-04/25/00 5.130-5.150 324,887,861
50,000 Bayerische Landesbank............................ 07/22/99 5.645 49,994,979
100,000 Canadian Imperial Bank........................... 02/07/00 5.010 99,980,106
124,500 Commerzbank...................................... 01/10/00-02/08/00 5.010-5.050 124,471,526
150,000 Credit Suisse First Boston....................... 07/20/99 5.710 150,000,000
125,000 Deutsche Bank.................................... 01/11/00-02/02/00 4.970-5.020 124,973,676
100,000 Norddeutsche Landesbank Girozentra............... 02/18/00 5.090 99,972,332
75,000 Rabobank Nederland............................... 01/10/00 4.980 74,973,487
300,000 Union Bank of Switzerland........................ 01/13/00-05/19/00 5.080-5.285 299,900,126
----------------
TOTAL CERTIFICATES OF DEPOSIT -- FOREIGN..... 2,094,018,832
----------------
COMMERCIAL PAPER -- DOMESTIC (28.7%)
542,078 Alpine Securitization Corp....................... 06/01/99-07/09/99 4.820-4.950 541,830,483
120,000 Aspen Funding Corp............................... 06/01/99 4.930 120,000,000
180,000 Asset Securitization Corp........................ 06/23/99 4.810 179,470,900
374,700 Bavaria Trust.................................... 06/14/99-07/23/99 4.820-4.830 373,869,047
191,622 Citibank Capital Market.......................... 06/11/99-06/14/99 4.870 191,338,022
505,839 CXC, Inc......................................... 06/01/99-06/23/99 4.800-4.930 505,575,657
42,000 General Electric Capital Corp.................... 06/14/99 4.790 41,927,352
224,695 Monte Rosa Capital............................... 06/16/99-07/07/99 4.830-4.950 223,831,919
273,000 Morgan Stanley Dean Witter & Co.................. 06/09/99-06/10/99 4.810-4.830 272,705,005
300,000 Newport Funding Corp............................. 06/01/99-06/17/99 4.820-4.930 299,785,778
175,842 Receivable Capital Corp.......................... 06/09/99-06/18/99 4.810 175,511,405
60,000 Suntrust Bank, Inc............................... 06/09/99 4.790 59,936,133
118,479 Trident Capital, Inc............................. 06/03/99-06/11/99 4.810-4.840 118,373,573
459,296 Windmill Funding Corp............................ 06/04/99-06/18/99 4.810 458,610,797
----------------
TOTAL COMMERCIAL PAPER -- DOMESTIC........... 3,562,766,071
----------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
16
<PAGE>
THE PRIME MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
MAY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL YIELD TO
AMOUNT MATURITY/
(IN THOUSANDS) SECURITY DESCRIPTION MATURITY DATES RATE VALUE
- -------------- ------------------------------------------------- --------------------- ------------ ----------------
<C> <S> <C> <C> <C>
COMMERCIAL PAPER -- FOREIGN (0.3%)
$ 37,000 Halifax PLC...................................... 07/13/99 4.730% $ 36,795,822
----------------
CORPORATE BONDS (0.4%)
50,000 IBM Credit Corp.................................. 08/10/99 5.625 49,991,082
----------------
FLOATING RATE NOTES (40.0%)(v)
50,000 American Express Centurion Bank, (resets monthly
to one month LIBOR -6 basis points)............ 06/18/99 4.840 50,000,000
50,000 Asset Backed Securities Investment Trust, Series
1997-E, Class N, (resets monthly to one month
LIBOR, due 10/15/03) (144A).................... 06/15/99(a) 4.903 50,000,000
60,000 Banc One Corp., (resets monthly to one month
LIBOR -6 basis points, due 10/01/99)........... 06/01/99(a) 4.841 59,992,621
150,000 Bankers Trust Co., (resets quarterly to one month
LIBOR -2.5 basis points, due 04/14/00)......... 07/14/99(a) 4.975 149,936,139
75,000 Barclays Bank PLC, (resets daily to Prime rate
-296 basis points, due 08/24/99)............... 06/01/99(a) 4.790 74,987,918
98,000 Bayerische Hypo Vereinsbank, (resets monthly to
one month LIBOR -8 basis points, due
05/15/00)...................................... 06/15/99(a) 4.823 97,938,417
51,000 CIT Group, Inc., (resets daily to Prime rate -280
basis points, due 10/20/99).................... 06/01/99(a) 4.950 51,001,911
25,000 CIT Group, Inc., (resets daily to Prime rate -282
basis points, due 11/02/99).................... 06/01/99(a) 4.930 24,995,716
62,000 CIT Group, Inc., (resets quarterly to three month
LIBOR -2.5 basis points, due 01/14/00)......... 07/14/99(a) 4.975 61,989,947
50,000 CIT Group, Inc., (resets daily to Prime rate -275
basis points, due 02/14/00).................... 06/01/99(a) 5.000 49,986,108
200,000 CIT Group, Inc., (resets daily to Prime rate -285
basis points, due 03/14/00).................... 06/01/99(a) 4.900 199,938,190
22,500 Citigroup, Inc., (resets quarterly to one month
LIBOR +10 basis points, due 02/03/00).......... 08/03/99(a) 5.095 22,520,625
125,000 Comerica Bank, (resets monthly to one month LIBOR
-6 basis points, due 01/20/00)................. 06/21/99(a) 4.861 124,968,082
100,000 Comerica Bank, (resets monthly to one month LIBOR
-4.5 basis points, due 02/14/00)............... 06/14/99(a) 4.855 99,982,567
148,500 Comerica Bank, (resets daily to Prime rate -285
basis points, due 03/22/00).................... 06/01/99(a) 4.900 148,454,852
200,000 Commerzbank, (resets daily to Prime rate -284.5
basis points, due 02/11/00).................... 06/01/99(a) 4.905 199,952,493
66,000 Commerzbank, (resets daily to Prime rate -285
basis points, due 02/23/00).................... 06/01/99(a) 4.900 65,980,897
</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, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL YIELD TO
AMOUNT MATURITY/
(IN THOUSANDS) SECURITY DESCRIPTION MATURITY DATES RATE VALUE
- -------------- ------------------------------------------------- --------------------- ------------ ----------------
<C> <S> <C> <C> <C>
FLOATING RATE NOTES (continued)
$ 100,000 Crestar Bank, (resets daily to Prime rate -276
basis points, due 03/01/00).................... 06/01/99(a) 4.990% $ 99,993,779
200,000 Deutsche Bank, (resets daily to Prime rate -284
basis points, due 02/11/00).................... 06/01/99(a) 4.910 199,959,479
350,000 First Union National Bank, (resets quarterly to
three month LIBOR -5.5 basis points, due
03/10/00)...................................... 08/18/99(a) 4.973 349,977,259
25,000 General Electric Capital Corp., Series A, (resets
quarterly to three month LIBOR -5 basis points,
due 04/13/00).................................. 07/13/99(a) 4.950 25,000,000
200,000 General Electric Capital Corp., Series A, (resets
quarterly to three month LIBOR -5 basis points,
due 05/03/00).................................. 08/03/99(a) 4.945 200,000,000
100,000 IBM Corp., (resets quarterly to three month LIBOR
-3.5 basis points, due 10/22/99)............... 07/22/99(a) 4.965 99,978,805
48,000 Key Bank NA, (resets daily to Prime rate -291.5
basis points, due 09/03/99).................... 06/01/99(a) 4.835 47,996,975
25,000 Key Bank NA, (resets daily to Prime rate -287
basis points, due 10/13/99).................... 06/01/99(a) 4.880 24,998,820
401,000 LINCS, Series 1998-3, (resets monthly to one
month LIBOR, due 02/15/00)..................... 06/11/99(a) 4.904 401,000,000
325,000 LINCS, Series 1998-4, Class 1, (resets monthly to
one month LIBOR, due 02/18/00) (144A).......... 06/18/99(a) 4.903 325,000,000
191,870 Liquid Asset Backed Securities Trust, Series
1998-2, Class A, (resets monthly to one month
LIBOR, due 11/26/99) (144A).................... 06/26/99(a) 4.921 191,831,549
110,000 National City Bank, (resets daily to Prime rate
-285 basis points, due 02/10/00)............... 06/01/99(a) 4.900 109,962,492
200,000 National City Bank, (resets daily to Prime rate
-286 basis points, due 03/10/00)............... 06/01/99(a) 4.890 199,916,468
150,000 Pepsico, Inc., (resets quarterly to three month
LIBOR -19 basis points)........................ 08/19/99 4.838 149,963,366
220,000 RACERS 1998-MM-7-1, (resets monthly to one month
LIBOR -1 basis point, due 08/13/99) (144A)..... 06/17/99(a) 4.893 220,000,000
200,000 RACERS 1998-MM-8-5, (resets monthly to one month
LIBOR -1 basis point, due 09/02/99) (144A)..... 06/02/99(a) 4.891 200,000,000
248,500 Royal Bank of Canada, (resets daily to Prime rate
-285.5 basis points, due 02/17/00)............. 06/01/99(a) 4.895 248,421,478
103,387 Steers, (resets monthly to one month LIBOR +3
basis points, due 11/15/99).................... 06/17/99(a) 4.933 103,387,190
</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, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL YIELD TO
AMOUNT MATURITY/
(IN THOUSANDS) SECURITY DESCRIPTION MATURITY DATES RATE VALUE
- -------------- ------------------------------------------------- --------------------- ------------ ----------------
<C> <S> <C> <C> <C>
FLOATING RATE NOTES (continued)
$ 100,957 Steers, Series 1997-A 36, (resets monthly to one
month LIBOR + 3 basis points, due 11/15/99).... 06/17/99(a) 4.933% $ 100,957,519
100,000 Toyota Motor Credit Corp., (resets quarterly to
three month LIBOR + 4 basis points, due
10/22/99)...................................... 07/22/99(a) 5.040 100,000,000
21,000 Wells Fargo Co., Series J, (resets quarterly to
three month LIBOR -11 basis points, due
03/10/00)...................................... 06/10/99(a) 4.891 20,990,122
----------------
TOTAL FLOATING RATE NOTES.................... 4,951,961,784
----------------
TAXABLE MUNICIPALS (0.7%)(v)
43,690 Jacksonville Health Facilities Authority Hospital
Revenue, (resets weekly, due 08/15/19)......... 06/02/99(a) 4.900 43,690,000
41,145 Sacramento County, Series A, (resets quarterly to
three month LIBOR + 5 basis points, due
08/15/14)...................................... 08/17/99(a) 5.100 41,142,155
6,200 Wake Forest University, (resets weekly, due
07/01/17)...................................... 06/02/99(a) 4.920 6,200,000
----------------
TOTAL TAXABLE MUNICIPALS..................... 91,032,155
----------------
TIME DEPOSITS -- DOMESTIC (3.3%)
414,343 Suntrust Bank Cayman............................. 06/01/99 4.750 414,343,000
----------------
TIME DEPOSITS -- FOREIGN (7.3%)
100,000 Bank of Nova Scotia Toronto...................... 06/01/99 4.844 100,000,000
200,000 Bayerische Hypo Vereinsbank...................... 06/01/99 4.875 200,000,000
200,000 Dresdner Bank Grand Cayman....................... 06/01/99 4.813 200,000,000
400,000 Westdeutsche Landesbank.......................... 06/01/99 4.875 400,000,000
----------------
TOTAL TIME DEPOSITS -- FOREIGN............... 900,000,000
----------------
TOTAL INVESTMENTS AT AMORTIZED COST AND VALUE (99.5%).................................. 12,330,889,039
OTHERS ASSETS IN EXCESS OF LIABILITIES (0.5%).......................................... 60,647,786
----------------
NET ASSETS (100.0%).................................................................... $ 12,391,536,825
----------------
----------------
</TABLE>
- ------------------------------
(a)The date listed under the heading maturity date represents an optional tender
date or the next interest rate reset date. The final maturity date is
indicated in the security description.
(v) Rate shown reflects current rate on variable or floating rate instrument or
instrument with step coupon rate.
144A -- Securities restricted for resale to Qualified Institutional Buyers.
LIBOR -- London Interbank Offered Rate.
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
THE PRIME MONEY MARKET PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
MAY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Amortized Cost and Value $12,330,889,039
Interest Receivable 63,927,462
Receivable for Investments Sold 439,827
Prepaid Trustees' Fees 3,203
Prepaid Expenses and Other Assets 38,430
---------------
Total Assets 12,395,297,961
---------------
LIABILITIES
Due to Custodian 2,257,255
Advisory Fee Payable 1,120,087
Administrative Services Fee Payable 267,496
Administration Fee Payable 12,628
Fund Services Fee Payable 9,665
Accrued Expenses 94,005
---------------
Total Liabilities 3,761,136
---------------
NET ASSETS
Applicable to Investors' Beneficial Interests $12,391,536,825
---------------
---------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE PRIME MONEY MARKET PORTFOLIO
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED MAY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest Income $287,830,786
EXPENSES
Advisory Fee $6,141,104
Administrative Services Fee 1,469,698
Custodian Fees and Expenses 514,294
Fund Services Fee 114,876
Administration Fee 71,722
Trustees' Fees and Expenses 47,007
Miscellaneous 69,858
----------
Total Expenses 8,428,559
------------
NET INVESTMENT INCOME 279,402,227
NET REALIZED LOSS ON INVESTMENTS (524,332)
------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $278,877,895
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE PRIME MONEY MARKET PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE FISCAL
MAY 31, 1999 YEAR ENDED
(UNAUDITED) NOVEMBER 30, 1998
--------------- -----------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 279,402,227 $ 339,699,391
Net Realized Loss on Investments (524,332) (55,967)
--------------- -----------------
Net Increase in Net Assets Resulting from
Operations 278,877,895 339,643,424
--------------- -----------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 55,639,729,840 48,705,487,837
Withdrawals (51,307,294,816) (45,584,553,162)
--------------- -----------------
Net Increase from Investors' Transactions 4,332,435,024 3,120,934,675
--------------- -----------------
Total Increase in Net Assets 4,611,312,919 3,460,578,099
NET ASSETS
Beginning of Period 7,780,223,906 4,319,645,807
--------------- -----------------
End of Period $12,391,536,825 $ 7,780,223,906
--------------- -----------------
--------------- -----------------
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX FOR THE FISCAL YEAR ENDED NOVEMBER
MONTHS ENDED 30,
MAY 31, 1999 -------------------------------------
(UNAUDITED) 1998 1997 1996 1995 1994
------------ ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Net Expenses 0.15%(a) 0.17% 0.18% 0.19% 0.19% 0.20%
Net Investment Income 4.95%(a) 5.48% 5.43% 5.29% 5.77% 3.90%
</TABLE>
- ------------------------
(a) Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE PRIME MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
MAY 31, 1999
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Prime Money Market Portfolio (the "portfolio") is registered under the
Investment Company Act of 1940, as amended, as a no-load, open-end management
investment company which was organized as a trust under the laws of the State of
New York on November 4, 1992. The portfolio's investment objective is to
maximize current income consistent with the preservation of capital and same-day
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.
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 the tri-party repurchase agreements, takes possession of the
collateral pledged for investments in repurchase agreements on behalf of
the portfolio. It is the policy of the portfolio to value the underlying
collateral daily on a mark-to-market basis to determine that the value,
including accrued interest, is at least equal to the repurchase price plus
accrued interest. In the event of default of the obligation to repurchase,
the portfolio has the right to liquidate the collateral and apply the
proceeds in satisfaction of the obligation. Under certain circumstances,
in the event of default or bankruptcy by the other party to the agreement,
realization and/or retention of the collateral or proceeds may be subject
to legal proceedings.
b) Securities transactions are recorded on a trade date basis. Interest
income, which includes the amortization of premiums and discounts, if any,
is recorded on an accrual basis. For financial and tax reporting purposes,
realized gains and losses are determined on the basis of specific lot
identification.
c) The portfolio intends to be treated as a partnership for federal income
tax purposes. As such, each investor in the portfolio will be taxed on its
share of the portfolio's ordinary income and capital gains. It is intended
that the portfolio's assets will be managed in such a way that an investor
in the portfolio will be able to satisfy the requirements of Subchapter M
of the Internal Revenue Code. The cost of securities is substantially the
same for book and tax purposes.
2. TRANSACTIONS WITH AFFILIATES
a) 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
23
<PAGE>
THE PRIME MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
MAY 31, 1999
- --------------------------------------------------------------------------------
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. For the six months ended May 31, 1999, such fees
amounted to $6,141,104.
b) The portfolio has retained Funds Distributor, Inc. ("FDI"), a registered
broker-dealer, to serve as the co-administrator and exclusive placement
agent. Under a Co-Administration Agreement between FDI and the portfolio,
FDI provides administrative services necessary for the operations of the
portfolio, furnishes office space and facilities required for conducting
the business of the portfolio and pays the compensation of the officers
affiliated with FDI. The portfolio has agreed to pay FDI fees equal to its
allocable share of an annual complex-wide charge of $425,000 plus FDI's
out-of-pocket expenses. The amount allocable to the portfolio is based on
the ratio of the portfolio's net assets to the aggregate net assets of the
portfolio and certain other investment companies subject to similar
agreements with FDI. For the six months ended May 31, 1999, the fee for
these services amounted to $71,722.
c) The portfolio has an Administrative Services Agreement (the "Services
Agreement") with Morgan under which Morgan is responsible for certain
aspects of the administration and operation of the portfolio. Under the
Services Agreement, the portfolio has agreed to pay Morgan a fee equal to
its allocable share of an annual complex-wide charge. This charge is
calculated based on the aggregate average daily net assets of the
portfolio and certain other portfolios for which JPMIM acts as investment
advisor (the "master portfolios") and J.P. Morgan Series Trust in
accordance with the following annual schedule: 0.09% on the first $7
billion of their aggregate average daily net assets and 0.04% of their
aggregate average daily net assets in excess of $7 billion less the
complex-wide fees payable to FDI. The portion of this charge payable by
the portfolio is determined by the proportionate share that its net assets
bear to the net assets of the master portfolios, other investors in the
master portfolios for which Morgan provides similar services, and J.P.
Morgan Series Trust. For the six months ended May 31, 1999, the fee for
these services amounted to $1,469,698.
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 $114,876 for the six months ended May 31, 1999.
e) An aggregate annual fee of $75,000 is paid to each trustee for serving as
a trustee of the trust, the J.P. Morgan Funds, the J.P. Morgan
Institutional Funds, the master portfolios and J.P. Morgan Series Trust.
The Trustees' Fees and Expenses shown in the financial statements
represents the portfolio's allocated portion of the total fees and
expenses. The portfolio's Chairman and Chief Executive Officer also serves
as Chairman of Group and receives compensation and employee benefits from
Group in his role as Group's Chairman. The allocated portion of such
compensation and benefits included in the Fund Services Fee shown in the
financial statements was $24,100.
24
<PAGE>
J.P. MORGAN FUNDS
PRIME MONEY MARKET FUND
FEDERAL MONEY MARKET FUND
TAX EXEMPT MONEY MARKET FUND
TAX AWARE ENHANCED INCOME FUND: SELECT SHARES
SHORT TERM BOND FUND
BOND FUND
GLOBAL STRATEGIC INCOME FUND
EMERGING MARKETS DEBT FUND
TAX EXEMPT BOND FUND
NEW YORK TAX EXEMPT BOND FUND
CALIFORNIA BOND FUND: SELECT SHARES
DIVERSIFIED FUND
DISCIPLINED EQUITY FUND
U.S. EQUITY FUND
U.S. SMALL COMPANY FUND
U.S. SMALL COMPANY OPPORTUNITIES FUND
TAX AWARE U.S. EQUITY FUND: SELECT SHARES
INTERNATIONAL EQUITY FUND
EUROPEAN EQUITY FUND
INTERNATIONAL OPPORTUNITIES FUND
EMERGING MARKETS EQUITY FUND
GLOBAL 50 FUND: SELECT SHARES
FOR MORE INFORMATION ON THE J.P. MORGAN FUNDS,
CALL J.P. MORGAN FUNDS SERVICES AT
(800) 521-5411.
IM0475-M
J.P. MORGAN
PRIME MONEY
MARKET FUND
SEMIANNUAL REPORT
MAY 31, 1999
