<PAGE>
LETTER TO THE SHAREHOLDERS OF THE J.P. MORGAN
PRIME MONEY MARKET FUND
January 3, 2000
Dear Shareholder:
We are pleased to report that the J.P. Morgan Prime Money Market Fund
produced a total return of 4.88% for the fiscal year ended November 30, 1999,
outperforming the 4.43% return of the Lipper Retail Money Market Funds
Average. In a changing interest rate environment, active management of the
portfolio's average maturity, security selection, and careful liquidity
management were the reasons for the fund's relative success during the period.
The fund maintained a stable $1.00 net asset value over the period while
paying approximately $0.05 per share in dividends from ordinary income. The
fund's total net assets were approximately $2.9 billion, while the net assets
of the master portfolio, in which the fund invests, totaled approximately
$15.4 billion on November 30, 1999, the end of the reporting period.
This report includes an interview with Mark Settles, the portfolio manager
primarily responsible for the master portfolio. In this interview, Mark
discusses events in the fixed income markets, portfolio performance, and his
outlook for the months ahead.
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 President of Asset Management
Services Services
J.P. Morgan & Co. Incorporated J.P. Morgan & Co. Incorporated
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
TABLE OF CONTENTS
<S> <C> <C> <C>
LETTER TO THE SHAREHOLDERS ....... 1 GLOSSARY OF TERMS ................ 5
FUND PERFORMANCE ................. 2 FUND FACTS AND HIGHLIGHTS ........ 6
PORTFOLIO MANAGER Q&A ............ 3 FINANCIAL STATEMENTS ............. 8
- ------------------------------------------------------------------------------
</TABLE>
1
<PAGE>
Fund performance
EXAMINING PERFORMANCE
One way to look at performance is to review a fund's average annual total
return. This figure takes the fund's actual (or cumulative) return and shows
what would have happened if the fund had achieved that return by performing
at a constant rate each year. Average annual total returns represent the
average yearly change 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 NOVEMBER 30, 1999 MONTHS MONTHS YEAR YEARS YEARS YEARS
- ---------------------------------------------------------------------- -------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
J.P. Morgan Prime Money Market Fund 1.27% 2.47% 4.88% 5.23% 5.33% 5.14%
Lipper Retail Money Market Funds Average 1.16% 2.26% 4.43% 4.76% 4.94% 4.82%
AS OF SEPTEMBER 30, 1999
- ---------------------------------------------------------------------- -------------------------------------------------
J.P. Morgan Prime Money Market Fund 1.22% 2.37% 4.85% 5.23% 5.32% 5.20%
Lipper Retail Money Market Funds Average 1.11% 2.16% 4.41% 4.77% 4.95% 4.88%
</TABLE>
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. FUND RETURNS ARE NET OF
FEES AND ASSUME THE REINVESTMENT OF DISTRIBUTIONS. LIPPER ANALYTICAL
SERVICES, INC. IS A LEADING SOURCE FOR MUTUAL FUND DATA.
2
<PAGE>
PORTFOLIO MANAGER Q&A
[PHOTO]
Following is an interview with MARK SETTLES, vice president and member of the
portfolio management team for the master portfolio, in which the fund
invests. Mark joined Morgan in 1994. He spent five years trading dollar- and
euro-denominated fixed income products in our New York and London offices
before coming to J.P. Morgan Investment Management. Prior to joining Morgan,
he was a foreign exchange trader at The First National Bank of Chicago and a
teacher of government at The Paideia School in Atlanta, Georgia. Mark holds a
B.A. in Economics from Columbia University and a Masters of Management from
Northwestern University. This interview was conducted on December 15, 1999
and reflects Mark's views on that date.
WHAT HAPPENED IN THE U.S. MONEY MARKETS OVER PAST 12 MONTHS?
MS: The disinflationary forces in the global markets caused by last fall's
economic crisis receded, allowing the Federal Reserve to focus on the
prospect of unsustainable growth at home. The Fed raised rates three times
this year - at its June, August, and November meetings - taking back all of
last year's stimulus, and bringing the fed funds rate back up to 5.50%.
Although inflation has remained benign and wage pressures are still subdued,
the Fed has embarked on a path of incremental tightening in a proactive
attempt to keep inflation at bay. At mid-year, when the Fed began tightening,
credit and swap spreads both widened and the equity market tumbled. Since
October, however, spreads have narrowed and the equity market has rebounded
largely due to the vigilance of the Fed, and its adoption of a neutral
stance. We expect to finish the year with higher yields due to the lingering
probability of additional Fed action, global synchronized growth, and
uncertainty about when the previous moves will begin to slow U.S. growth.
HOW DID THE PORTFOLIO PERFORM IN THIS ENVIRONMENT?
MS: When the Fed started tightening in June, we initiated a barbell strategy
in the portfolio, meaning we invested at the very short end of the curve for
liquidity while at the same time investing farther out the curve (though
still less than 1-year) to capture higher yields. At the same time, our
significant allocation to floating-rate notes also added to performance.
These securities reset regularly (usually quarterly); therefore, we benefit
in a rising rate environment. Because of the barbell structure in the
portfolio and the floating-rate note allocation we did very well versus our
peer group.
DO YOU HAVE ANY ADDITIONAL COMMENTS IN LIGHT OF Y2K BEING RIGHT AROUND THE
CORNER?
MS: In light of extensive preparation, Y2K fears have remained largely
subdued. The Fed added liquidity through a currency facility, a bank loan
facility (through the discount loan window), and a temporarily expanded repo
facility. In addition to the accommodative actions of the Fed, the Treasury
is issuing cash management bills over the year-end and Fannie Mae has
instituted weekly 3- and 6-month auctions.
3
<PAGE>
Another sign that Y2K anxiety is dispersing is the drop from 14% to 10% in
the federal funds "turn" premium (turn is the yield you would require to
invest on the last business day of the year with settlement on the first
business day of the new year). This rate going down indicates that investors
are less concerned about a Y2K upheaval. It may, in fact, prove to be an
investment opportunity.
WHAT IS YOUR OUTLOOK GOING FORWARD? HOW ARE YOU POSITIONING THE PORTFOLIO IN
LIGHT OF THIS?
MS: We expect the rising rate environment to continue, with a 25 basis point
hike expected from the Fed at its February meeting. Eventually, these
incremental steps will bring about the desired slowdown and "soft landing."
We think that the current strength in oil prices will translate into
increasing headline inflation, noticeable as early as the first quarter of
2000. Global growth will also continue its positive trend which will have
implications down the road for U.S. assets as other countries' assets become
more attractive on a relative value basis.
In the meantime, we will continue the barbell strategy to maintain liquidity
while seeking to capture higher yields. We will be opportunistic over
year-end.
4
<PAGE>
GLOSSARY OF TERMS
AVERAGE MATURITY: The weighted average time to maturity of the entire
portfolio with the weights equal to the percentage of the portfolio invested
in each security (see Maturity).
CREDIT RATING: The rating assigned to a bond or note by independent rating
agencies such as Standard & Poor's Corporation and Moody's Investors Service.
In evaluating creditworthiness, these agencies assess the issuer's present
financial condition and future ability and willingness to make principal and
interest payments when due.
CREDIT RISK: Financial risk that an obligation will not be paid and a loss
will result.
LETTER OF CREDIT: Instrument or document issued by a bank guaranteeing the
payment of a customer's drafts up to a stated amount and eliminating the
seller's risk.
MATURITY: The date on which the life of a financial instrument ends through
cash or physical settlement or expiration with no value or the date a
security comes due and fully payable.
VARIABLE RATE DEMAND NOTE: Note representing borrowings that is payable on
demand and that bears interest tied to a base money market rate, usually the
bank prime rate. The rate on the note is adjusted upward or downward each
time the base rate changes.
YIELD: Coupon rate of interest on a bond divided by the purchase price. As a
bond's price falls, its yield rises and vice versa.
YIELD CURVE: A graph showing the term structure or level of interest rates
ranging from the shortest to the longest maturities. The resulting curve
shows if short-term interest rates are higher or lower than long-term rates.
Normally, the longer the bond, the higher the yield it offers, resulting in a
positive yield curve. An inverted yield curve can occur when there are
supply/demand imbalances for various maturities, which results in short-term
rates at higher levels than longer-term instruments.
YIELD SPREAD: The difference in yield between different types of securities.
For example, if a Treasury bond is yielding 6.00% and a municipal is yielding
5.00%, the yield spread is 1.00% or 100 basis points.
5
<PAGE>
FUND FACTS
INVESTMENT OBJECTIVE
J.P. Morgan Prime Money Market Fund seeks to provide current income, maintain
a high level of liquidity, and preserve capital. It is designed for investors
who seek to preserve capital and earn current income from a portfolio of high
quality money market instruments.
- -------------------------------------------------------------------------------
COMMENCEMENT OF INVESTMENT OPERATIONS
10/01/82
- -------------------------------------------------------------------------------
FUND NET ASSETS AS OF 11/30/99
$2,884,940,430
- -------------------------------------------------------------------------------
PORTFOLIO NET ASSETS AS OF 11/30/99
$15,425,709,973
- -------------------------------------------------------------------------------
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 NOVEMBER 30, 1999
PORTFOLIO ALLOCATION
(PERCENTAGE OF TOTAL INVESTMENTS)
[CHART]
FLOATING RATE NOTES 35.6%
COMMERCIAL PAPER - DOMESTIC 33.4%
CERTIFICATES OF DEPOSIT - FOREIGN 15.9%
REPURCHASE AGREEMENTS 5.3%
TIME DEPOSITS - FOREIGN 3.9%
TIME DEPOSITS - DOMESTIC 2.8%
COMMERCIAL PAPER - FOREIGN 1.7%
CERTIFICATES OF DEPOSIT - DOMESTIC 1.1%
TAXABLE MUNICIPALS - 0.3%
AVERAGE 7-DAY CURRENT YIELD
5.33%
AVERAGE MATURITY
48 DAYS
6
<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, IT IS
POSSIBLE TO LOSE MONEY BY INVESTING IN THIS FUND.
Opinions expressed herein are based on current market conditions and are
subject to change without notice. The fund invests through a master portfolio
(another fund with the same objective).
CALL J.P. MORGAN FUNDS SERVICES AT (800) 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.
7
<PAGE>
J.P. MORGAN PRIME MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment in The Prime Money Market Portfolio
("Portfolio"), at value $2,891,075,004
Prepaid Trustees' Fees 5,457
Prepaid Expenses and Other Assets 16,445
--------------
Total Assets 2,891,096,906
--------------
LIABILITIES
Dividends Payable to Shareholders 5,330,906
Shareholder Servicing Fee Payable 582,582
Administrative Services Fee Payable 57,838
Administration Fee Payable 2,834
Fund Services Fee Payable 1,660
Accrued Expenses 180,656
--------------
Total Liabilities 6,156,476
--------------
NET ASSETS
Applicable to 2,884,963,908 Shares of Beneficial
Interest Outstanding
(par value $0.001, unlimited shares authorized) $2,884,940,430
==============
Net Asset Value, Offering and Redemption Price
Per Share $1.00
----
----
ANALYSIS OF NET ASSETS
Paid-in Capital $2,885,323,928
Accumulated Distributions In Excess of Net
Realized Gain (173,970)
Accumulated Net Realized Loss on Investment (209,528)
--------------
Net Assets $2,884,940,430
==============
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
8
<PAGE>
J.P. MORGAN PRIME MONEY MARKET FUND
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME ALLOCATED FROM PORTFOLIO
Allocated Interest Income $152,753,082
Allocated Portfolio Expenses (4,419,066)
------------
Net Investment Income Allocated from
Portfolio 148,334,016
FUND EXPENSES
Shareholder Servicing Fee $7,303,649
Administrative Services Fee 751,623
Fund Services Fee 57,054
Administration Fee 42,493
Trustees' Fees and Expenses 23,574
Miscellaneous 460,943
----------
Total Fund Expenses 8,639,336
------------
NET INVESTMENT INCOME 139,694,680
NET REALIZED LOSS ON INVESTMENT ALLOCATED FROM
PORTFOLIO (128,288)
------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $139,566,392
============
</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 FISCAL FOR THE FISCAL
YEAR ENDED YEAR ENDED
NOVEMBER 30, 1999 NOVEMBER 30, 1998
----------------- -----------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 139,694,680 $ 137,758,043
Net Realized Loss on Investment Allocated from
Portfolio (128,288) (24,422)
---------------- ----------------
Net Increase in Net Assets Resulting from
Operations 139,566,392 137,733,621
---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (139,420,929) (137,683,198)
---------------- ----------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST (AT
A CONSTANT $1.00 PER SHARE)
Proceeds from Shares of Beneficial Interest Sold 22,155,197,904 18,357,223,341
Reinvestment of Dividends 84,845,383 109,585,123
Cost of Shares of Beneficial Interest Redeemed (22,161,736,633) (17,978,806,833)
---------------- ----------------
Net Increase from Transactions in Shares of
Beneficial Interest 78,306,654 488,001,631
---------------- ----------------
Total Increase in Net Assets 78,452,117 488,052,054
NET ASSETS
Beginning of Fiscal Year 2,806,488,313 2,318,436,259
---------------- ----------------
End of Fiscal Year $ 2,884,940,430 $ 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 year are as follows:
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED NOVEMBER 30,
------------------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
YEAR $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.0478 0.0528 0.0524 0.0509 0.0557
Net Realized Gain (Loss) on
Investment (0.0000)(a) (0.0000)(a) (0.0000)(a) 0.0001 0.0005
---------- ---------- ---------- ---------- ----------
Total from Investment Operations 0.0478 0.0528 0.0524 0.0510 0.0562
---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS TO
SHAREHOLDERS FROM
Net Investment Income (0.0478) (0.0528) (0.0524) (0.0509) (0.0557)
Net Realized Gain -- -- (0.0003) (0.0005) --
---------- ---------- ---------- ---------- ----------
Total Distributions to
Shareholders (0.0478) (0.0528) (0.0527) (0.0514) (0.0557)
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF YEAR $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ========== ==========
RATIOS AND SUPPLEMENTAL DATA
Total Return 4.88% 5.40% 5.40% 5.27% 5.71%
Net Assets, End of Year (in
thousands) $2,884,940 $2,806,488 $2,318,436 $2,155,358 $2,153,469
Ratios to Average Net Assets
Net Expenses 0.45% 0.40% 0.38% 0.40% 0.41%
Net Investment Income 4.78% 5.27% 5.25% 5.09% 5.56%
</TABLE>
- ------------------------
(a) Less than $0.0001.
The Accompanying Notes are an Integral Part of the Financial Statements.
11
<PAGE>
J.P. MORGAN PRIME MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 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 invests all of its investable assets in The Prime Money Market
Portfolio (the "portfolio"), a no-load 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 (19% at
November 30, 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 gains, if any, are declared as dividends daily and paid monthly.
Net short-term capital gains, if any, will be distributed in accordance
with the requirements of the Internal Revenue Code of 1986 (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, 1999 of $209,528, of which $56,817 expires in the year
2005, $24,423 expires in the year 2006 and $128,288 will expire in the
year 2007. 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 (CONTINUED)
NOVEMBER 30, 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 the
fiscal year ended November 30, 1999, the fee for these services amounted
to $42,493.
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 fiscal year ended November 30, 1999, the fee
for these services amounted to $751,623.
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 fiscal year ended November 30, 1999, the fee for these
services amounted to $7,303,649.
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.
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
13
<PAGE>
J.P. MORGAN PRIME MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 1999
- --------------------------------------------------------------------------------
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 $57,054 for the fiscal year ended November 30, 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 $11,000.
14
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of
J.P. Morgan Prime Money Market Fund
In our opinion, the accompanying statement of assets and liabilities and the
related statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
J.P. Morgan Prime Money Market Fund (one of the series constituting part of J.P.
Morgan Funds, hereafter referred to as the "fund") at November 30, 1999, and the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended and the financial highlights
for each of the five years in the period then ended, in conformity with
accounting principles generally accepted in the United States. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the fund's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with auditing
standards generally accepted in the United States, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
New York, New York
January 14, 2000
15
<PAGE>
The Prime Money Market Portfolio
Annual Report November 30, 1999
(The following pages should be read in conjunction
with J.P. Morgan Prime Money Market Fund
Annual Financial Statements)
16
<PAGE>
THE PRIME MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
NOVEMBER 30, 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 (1.1%)
$171,000 Nationsbank Corp., (Series 1)......... 01/05/00 5.000% $ 170,996,836
---------------
CERTIFICATES OF DEPOSIT -- FOREIGN (16.0%)
200,000 Abbey National PLC, (MTN, Series
1A)................................. 05/11/00 5.220 199,957,288
50,000 Bank of Nova Scotia................... 02/25/00 5.160 49,994,327
50,000 Barclays Bank PLC..................... 01/10/00 4.980 49,996,830
325,000 Bayerische Hypo Vereinsbank........... 02/22/00-04/25/00 5.130-5.150 324,953,011
452,000 Bayerische Landesbank................. 08/04/00-10/02/00 5.875-5.930 451,530,943
100,000 Canadian Imperial Bank................ 02/07/00 5.010 99,994,610
124,500 Commerzbank........................... 01/10/00-02/08/00 5.050-5.010 124,493,949
375,000 Deutsche Bank......................... 01/11/00-12/1/00 4.970-6.190 374,826,960
75,000 Dresdner Bank......................... 01/07/00 6.350 75,000,000
100,000 Norddeutsche Landesbank Girozentra.... 02/18/00 5.090 99,991,657
75,000 Rabobank Nederland.................... 01/10/00 4.980 74,995,245
500,000 Union Bank of Switzerland............. 01/13/00-07/03/00 5.080-5.760 499,915,330
50,000 Westdeutsche Landesbank Girozentra.... 01/26/00 6.030 50,000,000
---------------
TOTAL CERTIFICATES OF DEPOSIT --
FOREIGN......................... 2,475,650,150
---------------
COMMERCIAL PAPER -- DOMESTIC (33.8%)
675,847 Alpine Securitization Corp............ 12/14/99-02/29/00 5.490-6.753 670,005,360
397,450 Aspen Funding Corp.................... 12/01/99-01/19/00 5.490-6.430 396,989,569
230,000 Asset Securitization Corp............. 12/03/99-01/28/00 5.597-6.446 228,259,425
106,643 Associates Corp....................... 12/01/99 5.600 106,643,000
250,000 Associates First Capital Corp......... 12/01/99 5.600 250,000,000
50,000 BankAmerica Corp...................... 01/25/00 6.442 49,546,250
65,750 Bavaria Trust Corp.................... 03/17/00 6.140 64,591,138
83,000 BBL North America Funding Corp........ 12/07/99-01/21/00 5.608-6.438 82,360,878
440,000 Citibank Capital Markets Corp......... 12/07/99-02/10/00 5.608-6.435 436,146,951
417,000 CXC, Inc.............................. 12/02/99-02/22/00 5.597-6.442 414,582,981
188,846 Enterprise Funding Corp............... 12/02/99-12/15/99 5.598-5.667 188,601,374
100,000 General Electric Capital Corp......... 02/23/00 6.156 98,665,334
43,562 General Electric Co................... 12/01/99 5.600 43,562,000
451,000 General Motors Acceptance Corp........ 02/16/00-03/17/00 6.140-6.149 444,255,887
59,905 Gillette Co........................... 12/01/99 5.600 59,905,000
117,763 Monte Rosa Capital Corp............... 12/07/99-01/18/00 5.608-6.434 117,174,099
555,150 Newport Funding Corp.................. 12/01/1999-02/04/00 5.600-6.436 553,917,258
10,598 Parthenon Receivable Funding LLC...... 01/26/00 6.443 10,499,580
386,557 Receivable Capital Corp............... 12/01/99-01/27/00 5.600-6.445 384,195,040
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
17
<PAGE>
THE PRIME MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
NOVEMBER 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL YIELD TO
AMOUNT MATURITY/
(IN THOUSANDS) SECURITY DESCRIPTION MATURITY DATES RATE VALUE
- --------------------- -------------------------------------- ----------------------- ----------- ---------------
<C> <S> <C> <C> <C>
COMMERCIAL PAPER -- DOMESTIC (CONTINUED)
$263,700 Trident Capital, Inc.................. 12/10/99-01/21/00 5.490-6.112% $ 262,760,038
346,848 Windmill Funding Corp................. 12/01/99-02/01/00 5.489-6.443 345,404,975
---------------
TOTAL COMMERCIAL PAPER --
DOMESTIC........................ 5,208,066,137
---------------
COMMERCIAL PAPER -- FOREIGN (1.8%)
150,000 CS First Boston, Inc.................. 02/11/00-02/16/00 6.149-6.183 148,179,444
123,516 France Telecommunication.............. 01/27/00-02/10/00 6.202-6.445 122,187,091
---------------
TOTAL COMMERCIAL PAPER --
FOREIGN......................... 270,366,535
---------------
FLOATING RATE NOTES (35.9%) (V)
200,000 American Express Centurion Bank, (due
06/12/00)........................... 12/13/99(a) 5.720 200,000,000
25,000 AT&T Capital Corp., (due 06/14/00).... 12/14/99(a) 6.963 25,187,833
16,500 AT&T Capital Corp., (Series G, due
12/01/00)........................... 01/07/00(a) 6.830 16,610,037
150,000 Bankers Trust Co., (due 04/14/00)..... 01/14/00(a) 6.149 149,972,889
98,000 Bayerische Hypo Vereinsbank, (due
05/15/00)........................... 12/15/99(a) 5.348 97,970,708
62,000 CIT Group, Inc........................ 01/14/00 6.149 61,998,052
200,000 CIT Group, Inc........................ 02/14/00 5.750 199,977,604
50,000 CIT Group, Inc., (due 03/14/00)....... 12/14/99(a) 5.650 49,995,962
175,000 CIT Group, Inc., (MTN, due
08/14/00)........................... 02/15/00(a) 5.750 174,880,230
228,000 Citicorp, (due 08/02/00).............. 12/02/99(a) 5.439 228,000,000
22,500 Citigroup, Inc........................ 02/03/00 6.261 22,505,344
125,000 Comerica Bank, (due 01/20/00)......... 12/20/99(a) 5.533 124,993,150
100,000 Comerica Bank, (due 02/14/00)......... 12/14/99(a) 5.383 99,994,932
148,500 Comerica Bank, (due 03/22/00)......... 02/22/00(a) 5.650 148,482,860
266,000 Commerzbank........................... 02/11/00- 02/23/00 5.650-5.655 265,980,578
100,000 Crestar Bank, (due 03/01/00).......... 02/03/00(a) 5.740 99,997,934
401,000 CS First Boston, Inc. LINCS, (Series
1998-3, due 02/15/00)............... 12/11/99(a) 5.478 401,000,000
350,000 CS First Boston, Inc. LINCS, (Series
1998-4, Class 1, due 02/18/00)
(144A).............................. 12/17/00(a) 5.493 349,998,388
375,000 CS First Boston, Inc SPARCS, (Series
1999, Class 4, due 01/24/00)........ 01/23/00(a) 6.220 375,000,000
200,000 Deutsche Bank......................... 02/11/00 5.660 199,988,560
350,000 First Union National Bank, (due
03/10/00)........................... 02/17/00(a) 6.015 349,991,964
163,000 Fleet Financial Group, (MTN, Series N,
due 07/28/00)....................... 01/28/00(a) 6.274 163,105,519
25,000 General Electric Capital Corp., (due
04/13/00)........................... 01/13/00(a) 6.124 25,000,000
200,000 General Electric Capital Corp., (due
05/03/00)........................... 02/03/00(a) 6.111 200,000,000
75,000 Key Bank NA, (due 09/07/00)........... 12/07/99(a) 5.551 75,025,852
180,000 Key Bank NA, (due 05/19/00)........... 12/20/99(a) 5.693 179,982,298
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
18
<PAGE>
THE PRIME MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
NOVEMBER 30, 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)
$220,000 Lehman RACERS 1998-MM-7-1, (due
08/11/00) (144A).................... 12/18/99(a) 5.509% $ 220,000,000
292,000 Lehman RACERS 1999-25-MM-MBS, (due
09/06/00) (144A).................... 12/06/99(a) 5.485 292,000,000
25,497 Merrill Lynch STEERS, (Series 1998,
Class A, due 01/15/00).............. 12/15/99(a) 5.538 25,497,358
200,000 National City Bank, (due 03/10/00).... 12/10/99(a) 5.640 199,970,484
110,000 National City Bank.................... 02/10/00 5.650 109,989,515
248,500 Royal Bank of Canada.................. 02/17/00 5.645 248,476,532
138,000 Southtrust Bank NA, (due 05/17/00).... 02/17/00(a) 5.640 137,942,207
21,000 Wells Fargo Co., (Series J, MTN, due
03/10/00)........................... 12/10/99(a) 5.409 20,996,508
---------------
TOTAL FLOATING RATE NOTES......... 5,540,513,298
---------------
REPURCHASE AGREEMENT (5.3%)
820,000 Goldman Sachs Repurchase Agreement,
proceeds $820,128,694
(collateralized by $284,525,780
Federal Home Loan Mortgage Corp.,
5.500%-16.000% due
12/15/99-11/01/29, valued at
$28,464,638; $1,116,667,088 Federal
National Mortgage Association,
5.500%-12.500% due 12/25/99-12/01/29
valued at $807,935,363)............. 12/01/99 5.650 820,000,000
---------------
TAXABLE MUNICIPALS (0.3%) (V)
41,145 Sacramento County, (Series A, due
08/15/14), MBIA Insured............. 02/13/00(a) 6.220 41,142,249
6,200 Wake Forest University, (Series 1997,
due 07/01/17), LOC-Wachovia Bank.... 12/01/99(a) 5.590 6,200,000
---------------
TOTAL TAXABLE MUNICIPALS.......... 47,342,249
---------------
TIME DEPOSITS -- DOMESTIC (2.8%)
436,639 Suntrust Bank Cayman.................. 12/01/99 5.438-5.563 436,639,000
---------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
THE PRIME MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
NOVEMBER 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL YIELD TO
AMOUNT MATURITY/
(IN THOUSANDS) SECURITY DESCRIPTION MATURITY DATES RATE VALUE
- --------------------- -------------------------------------- ----------------------- ----------- ---------------
<C> <S> <C> <C> <C>
TIME DEPOSITS -- FOREIGN (4.0%)
$150,000 Bank of Montreal...................... 12/01/99 5.500% $ 150,000,000
356,529 Chase Nassau.......................... 12/01/99 5.500-5.625 356,529,000
100,000 Dresdner Bank Grand Cayman............ 12/01/99 5.500 100,000,000
---------------
TOTAL TIME DEPOSITS -- FOREIGN.... 606,529,000
---------------
TOTAL INVESTMENTS AT AMORTIZED COST AND VALUE (101.0%).......................... 15,576,103,205
OTHERS LIABILITIES IN EXCESS OF ASSETS (-1.0%).................................. (150,393,232)
---------------
NET ASSETS (100.0%)............................................................. $15,425,709,973
===============
</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.
LOC - Letter of Credit.
MBIA - Municipal Bond Investors Assurance Corp.
MTN - Medium Term Note.
RACERS - Restructured Asset Certificates.
SPARCS - Structured Product Asset Return.
STEERS - Structured Enhanced Return Trust.
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE PRIME MONEY MARKET PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Amortized Cost and Value $15,576,103,205
Cash 1,160
Interest Receivable 101,273,087
Prepaid Trustees' Fees 7,258
Prepaid Expenses and Other Assets 45,489
---------------
Total Assets 15,677,430,199
---------------
LIABILITIES
Payable for Investments Purchased 249,832,729
Advisory Fee Payable 1,252,710
Administrative Services Fee Payable 285,605
Fund Services Fee Payable 7,663
Accrued Expenses 341,519
---------------
Total Liabilities 251,720,226
---------------
NET ASSETS
Applicable to Investors' Beneficial Interests $15,425,709,973
===============
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE PRIME MONEY MARKET PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest Income $638,947,545
EXPENSES
Advisory Fee $13,226,942
Administrative Services Fee 3,127,566
Custodian Fees and Expenses 1,467,725
Fund Services Fee 228,328
Administration Fee 147,749
Trustees' Fees and Expenses 93,415
Miscellaneous 159,724
-----------
Total Expenses 18,451,449
------------
NET INVESTMENT INCOME 620,496,096
NET REALIZED LOSS ON INVESTMENTS (502,599)
------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $619,993,497
============
</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 FISCAL FOR THE FISCAL
YEAR ENDED YEAR ENDED
NOVEMBER 30, 1999 NOVEMBER 30, 1998
----------------- -----------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 620,496,096 $ 339,699,391
Net Realized Loss on Investments (502,599) (55,967)
----------------- ----------------
Net Increase in Net Assets Resulting from
Operations 619,993,497 339,643,424
----------------- ----------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 108,543,399,809 48,705,487,837
Withdrawals (101,517,907,239) (45,584,553,162)
----------------- ----------------
Net Increase from Investors' Transactions 7,025,492,570 3,120,934,675
----------------- ----------------
Total Increase in Net Assets 7,645,486,067 3,460,578,099
NET ASSETS
Beginning of Fiscal Year 7,780,223,906 4,319,645,807
----------------- ----------------
End of Fiscal Year $ 15,425,709,973 $ 7,780,223,906
================= ================
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED NOVEMBER 30,
--------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Net Expenses 0.15% 0.17% 0.18% 0.19% 0.19%
Net Investment Income 5.07% 5.48% 5.43% 5.29% 5.77%
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
23
<PAGE>
THE PRIME MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 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 diversified, 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
24
<PAGE>
THE PRIME MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 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 fiscal year ended November 30, 1999 such
fees amounted to $13,226,942.
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 fiscal year ended November 30, 1999, the fee
for these services amounted to $147,749.
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 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 fiscal year ended November 30, 1999, the fee for these services
amounted to $3,127,566.
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 $228,328 for the fiscal year ended November 30, 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 $43,400.
25
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Investors of
The Prime Money Market Portfolio
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the supplementary data present fairly, in all material
respects, the financial position of The Prime Money Market Portfolio (the
"portfolio") at November 30, 1999, and the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended and the supplementary data for each of the five years in the
period then ended, in conformity with accounting principles generally accepted
in the United States. These financial statements and supplementary data
(hereafter referred to as "financial statements") are the responsibility of the
portfolio's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards generally accepted in
the United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at November 30, 1999 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
January 14, 2000
26
<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.
IM0874-M
J.P. MORGAN
PRIME MONEY MARKET FUND
ANNUAL REPORT
NOVEMBER 30, 1999
