<PAGE>
THE FEDERAL MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL YIELD TO
AMOUNT MATURITY MATURITY/
(IN THOUSANDS) SECURITY DESCRIPTION DATE RATE VALUE
- -------------- ------------------------------------------------- --------- ----------- ------------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS (99.8%)
$ 10,000 Federal Farm Credit Bank......................... 12/02/97 5.400% $ 9,997,371
11,000 Federal Farm Credit Bank Discount Note........... 12/05/97 5.380 10,944,108
9,000 Federal Farm Credit Bank Discount Note........... 12/11/97 5.380 8,946,200
16,000 Federal Farm Credit Bank Discount Note........... 12/16/97 5.380 15,892,400
10,000 Federal Farm Credit Bank Discount Note........... 11/05/97 5.400 9,994,000
25,000 Federal Home Loan Bank (due 9/17/98)............. 11/17/97(a) 5.400 24,982,757
50,000 Federal Home Loan Bank (due 8/18/98)............. 11/18/97(a) 5.405 49,970,603
25,000 Federal Home Loan Bank (due 12/16/97)............ 11/16/97(a) 5.465 24,999,063
15,000 Federal Home Loan Bank........................... 10/16/98 5.682 14,984,510
5,000 Federal Home Loan Bank........................... 06/12/98 5.800 4,998,857
10,000 Federal Home Loan Bank........................... 06/09/98 5.960 9,997,649
15,000 Student Loan Marketing Association Discount
Note........................................... 11/12/97 5.000 14,974,883
41,785 Student Loan Marketing Association Discount
Note........................................... 12/03/97 5.380 41,585,175
84,300 Student Loan Marketing Association Discount
Note........................................... 11/03/97 5.630 84,273,633
50,000 Tennessee Valley Authority Discount Note......... 12/11/97 5.430 49,698,333
------------
TOTAL INVESTMENTS AT AMORTIZED COST AND VALUE
(99.8%).......................................... 376,239,542
OTHER ASSETS IN EXCESS OF LIABILITIES (0.2%)..... 744,265
------------
NET ASSETS (100.0%) $376,983,807
------------
------------
</TABLE>
- ------------------------------
(a)The date listed under the heading maturity date represents the next interest
rate reset date. The actual maturity date is indicated in the security
description.
The Accompanying Notes are an Integral Part of the Financial Statements.
17
<PAGE>
THE FEDERAL MONEY MARKET PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Amortized Cost and Value $376,239,542
Cash 4,289
Interest Receivable 830,545
Receivable for Expense Reimbursement 25,492
Prepaid Trustees' Fees 1,788
Deferred Organization Expenses 974
Prepaid Expenses and Other Assets 1,931
------------
Total Assets 377,104,561
------------
LIABILITIES
Advisory Fee Payable 66,863
Custody Fee Payable 16,814
Administrative Services Fee Payable 10,031
Administration Fee Payable 854
Fund Services Fee Payable 549
Accrued Expenses 25,643
------------
Total Liabilities 120,754
------------
NET ASSETS
Applicable to Investors' Beneficial Interests $376,983,807
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
18
<PAGE>
THE FEDERAL MONEY MARKET PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest Income $17,760,327
EXPENSES
Advisory Fee $659,707
Administrative Services Fee 101,963
Custodian Fees and Expenses 66,249
Professional Fees and Expenses 38,631
Fund Services Fee 12,004
Administration Fee 6,218
Amortization of Organization Expenses 5,552
Trustees' Fees and Expenses 5,273
Miscellaneous 14,487
--------
Total Expenses 910,084
Less: Reimbursement of Expenses (250,377)
--------
NET EXPENSES 659,707
-----------
NET INVESTMENT INCOME 17,100,620
NET REALIZED GAIN ON INVESTMENTS 36,079
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $17,136,699
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
THE FEDERAL MONEY MARKET PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FISCAL FOR THE FISCAL
YEAR ENDED YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
---------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 17,100,620 $ 16,581,846
Net Realized Gain on Investments 36,079 169,188
---------------- ----------------
Net Increase in Net Assets Resulting from
Operations 17,136,699 16,751,034
---------------- ----------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 2,410,983,122 1,895,749,425
Withdrawals (2,346,071,346) (1,935,444,581)
---------------- ----------------
Net Increase (Decrease) from Investors'
Transactions 64,911,776 (39,695,156)
---------------- ----------------
Total Increase (Decrease) in Net Assets 82,048,475 (22,944,122)
NET ASSETS
Beginning of Fiscal Year 294,935,332 317,879,454
---------------- ----------------
End of Fiscal Year $ 376,983,807 $ 294,935,332
---------------- ----------------
---------------- ----------------
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE FISCAL YEAR ENDED JANUARY 4, 1993
OCTOBER 31, (COMMENCEMENT OF
------------------------- OPERATIONS) TO
1997 1996 1995 1994 OCTOBER 31, 1993
---- ---- ---- ---- ----------------
<S> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Expenses 0.20% 0.20% 0.20% 0.22% 0.26%(a)
Net Investment Income 5.18% 5.08% 5.55% 3.65% 2.75%(a)
Decrease Reflected in Expense Ratio due to
Expense Reimbursement 0.08% 0.07% 0.06% 0.05% 0.07%(a)
</TABLE>
- ------------------------
(a) Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE FEDERAL MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Federal Money Market Portfolio (the "Portfolio") is registered under the
Investment Company Act of 1940, as amended, as a 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 commenced operations on
January 4, 1993. The Portfolio's investment objective is to provide current
income, maintain a high level of liquidity and preserve capital. The Declaration
of Trust permits the Trustees to issue an unlimited number of beneficial
interests in the Portfolio. Prior to January 9, 1997 the Portfolio's name was
The Treasury Money Market Portfolio.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual amounts could differ from
those estimates. The following is a summary of the significant accounting
policies of the Portfolio:
a) Investments are valued at amortized cost which approximates market value.
The amortized cost method of valuation values a security at its cost at
the time of purchase and thereafter assumes a constant amortization to
maturity of any discount or premium, regardless of the impact of
fluctuating interest rates on the market value of the instruments.
The Portfolio's custodian or designated subcustodians, as the case may be
under triparty 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. Investment
income consists of interest income, which includes the amortization of
premiums and discounts, and is recorded on an accrual basis. For financial
and tax reporting purposes, realized gains and losses are determined on
the basis of specific lot identification.
c) The Portfolio intends to be treated as a partnership for federal income
tax purposes. As such, each investor in the Portfolio will be taxed on its
share of the Portfolio's ordinary income and capital gains. It is intended
that the Portfolio's assets will be managed in such a way that an investor
in the Portfolio will be able to satisfy the requirements of Subchapter M
of the Internal Revenue Code. The cost of securities is substantially the
same for book and tax purposes.
d) The Portfolio incurred organization expenses in the amount of $27,491.
Morgan Guaranty Trust Company of New York ("Morgan") has agreed to pay the
organization expenses of the Portfolio. The Portfolio has agreed to
reimburse Morgan for these costs which are being deferred and will be
amortized on a straight-line basis over a period not to exceed five years
beginning with the commencement of operations of the Portfolio.
21
<PAGE>
THE FEDERAL MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
2. TRANSACTIONS WITH AFFILIATES
a) The Portfolio has an Investment Advisory Agreement with Morgan. Under the
terms of the agreement, the Portfolio pays Morgan at an annual rate of
0.20% of the Portfolio's average daily net assets up to $1 billion and
0.10% on any excess over $1 billion. For the fiscal year ended October 31,
1997, such fees amounted to $659,707.
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 October 31, 1997, the fee
for these services amounted to $6,218.
c) The Portfolio has an Administrative Services Agreement (the "Services
Agreement") with Morgan under which Morgan is responsible for overseeing
certain aspects of the administration and operation of the Portfolio.
Under the Services Agreement, the Portfolio has agreed to pay Morgan a fee
equal to its allocable share of an annual complex-wide charge. This charge
is calculated based on the aggregate average daily net assets of the
Portfolio and certain other portfolios for which Morgan acts as investment
advisor (the "Master Portfolios") and JPM Series Trust in accordance with
the following annual schedule: 0.09% on the first $7 billion of their
aggregate average daily net assets and 0.04% of their aggregate average
daily net assets in excess of $7 billion, less the complex-wide fees
payable to FDI. The portion of this charge payable by the Portfolio is
determined by the proportionate share that its net assets bear to the net
assets of the Master Portfolios, other investors in the Master Portfolios
for which Morgan provides similar services, and JPM Series Trust. For the
fiscal year ended October 31, 1997, the fee for these services amounted to
$101,963.
Morgan has agreed to reimburse the Portfolio to the extent necessary to
maintain the total operating expenses of the Portfolio at no more than
0.20% of the average daily net assets of the Portfolio through February
28, 1998. For the fiscal year ended October 31, 1997, Morgan has agreed to
reimburse the Portfolio $250,377 for expenses under this agreement.
d) The Portfolio has a Fund Services Agreement with Pierpont Group, Inc.
("Group") to assist the Trustees in exercising their overall supervisory
responsibilities for the Portfolio's affairs. The Trustees of the
Portfolio represent all the existing shareholders of Group. The
Portfolio's allocated portion of Group's costs in performing its services
amounted to $12,004 for the fiscal year ended October 31, 1997.
e) An aggregate annual fee of $75,000 is paid to each Trustee for serving as
a Trustee of The JPM Pierpont Funds, The JPM Institutional Funds, the
Master Portfolios and JPM Series Trust. The Trustees' Fees and Expenses
shown in the financial statements represents the Portfolio's allocated
portion of the total fees and expenses. Prior to April 1, 1997, the
aggregate annual Trustee Fee was $65,000. The Portfolio's
22
<PAGE>
THE FEDERAL MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
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
$2,400.
23
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Investors of
The Federal 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 Federal Money Market Portfolio (the
"Portfolio") at October 31, 1997, 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 four years in the
period then ended and for the period January 4, 1993 (commencement of
operations) to October 31, 1993, in conformity with generally accepted
accounting principles. 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 generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 1997 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
New York, New York
December 17, 1997
24
