<PAGE>
THE FEDERAL MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
APRIL 30, 1998
- --------------------------------------------------------------------------------
<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 (101.7%)
$ 25,000 Federal Farm Credit Bank (due 1/14/99).... 05/01/98 5.540%(a) $ 24,994,879
50,000 Federal Farm Credit Bank (due 2/10/99).... 05/01/98 5.510(a) 49,982,934
40,000 Federal Farm Credit Bank.................. 03/02/99-05/03/99 5.375-5.600 39,954,995
50,010 Federal Farm Credit Bank Discount Note.... 05/28/98-06/05/98 5.380-5.390 49,778,122
100,000 Federal Home Loan Bank (due 3/10/99)...... 05/01/98 5.270(a) 99,949,749
50,000 Federal Home Loan Bank (due 2/11/99)...... 05/11/98 5.456(a) 49,973,171
25,000 Federal Home Loan Bank (due 9/17/98)...... 05/17/98 5.431(a) 24,992,510
50,000 Federal Home Loan Bank (due 8/18/98)...... 05/18/98 5.436(a) 49,988,951
84,500 Federal Home Loan Bank.................... 06/09/98-04/27/99 5.415-5.960 84,474,568
29,910 Federal Home Loan Bank Discount Note...... 05/15/98 5.400 29,847,189
50,000 Student Loan Marketing Association (due
1/27/99)................................ 05/01/98 5.290(a) 49,985,454
39,700 Student Loan Marketing Association........ 09/16/98-02/10/99 5.400-5.854 39,687,756
193,472 Student Loan Marketing Association
Discount Note........................... 05/01/98 5.430 193,472,000
224,900 Tennessee Valley Authority Discount
Note.................................... 05/01/98-06/03/98 5.380-5.440 224,372,390
---------------
TOTAL INVESTMENTS AT AMORTIZED COST AND VALUE (101.7%)............................ 1,011,454,668
LIABILITIES IN EXCESS OF OTHER ASSETS (-1.7%)..................................... (16,424,193)
---------------
NET ASSETS (100.0%)............................................................... $ 995,030,475
---------------
---------------
</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.
18
<PAGE>
THE FEDERAL MONEY MARKET PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
APRIL 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Amortized Cost and Value $1,011,454,668
Cash 3,831
Interest Receivable 3,726,520
Receivable for Expense Reimbursement 36,867
Prepaid Trustees' Fees 1,841
Prepaid Expenses and Other Assets 563
--------------
Total Assets 1,015,224,290
--------------
LIABILITIES
Payable for Investments Purchased 19,981,400
Advisory Fee Payable 159,892
Administrative Services Fee Payable 23,843
Administration Fee Payable 1,358
Fund Services Fee Payable 3,200
Accrued Expenses 24,122
--------------
Total Liabilities 20,193,815
--------------
NET ASSETS
Applicable to Investors' Beneficial Interests $ 995,030,475
--------------
--------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
THE FEDERAL MONEY MARKET PORTFOLIO
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED APRIL 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest Income $18,389,876
EXPENSES
Advisory Fee $658,839
Administrative Services Fee 97,914
Custodian Fees and Expenses 35,506
Professional Fees and Expenses 20,472
Fund Services Fee 9,640
Administration Fee 4,908
Trustees' Fees and Expenses 4,107
Amortization of Organization Expenses 974
Miscellaneous 5,006
--------
Total Expenses 837,366
Less: Reimbursement of Expenses (175,288)
--------
NET EXPENSES 662,078
-----------
NET INVESTMENT INCOME 17,727,798
NET REALIZED GAIN ON INVESTMENTS 154
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $17,727,952
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE FEDERAL MONEY MARKET PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE FISCAL
APRIL 30, 1998 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1997
-------------- ----------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 17,727,798 $ 17,100,620
Net Realized Gain on Investments 154 36,079
-------------- ----------------
Net Increase in Net Assets Resulting from
Operations 17,727,952 17,136,699
-------------- ----------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 2,623,664,030 2,410,983,122
Withdrawals (2,023,345,314) (2,346,071,346)
-------------- ----------------
Net Increase from Investors' Transactions 600,318,716 64,911,776
-------------- ----------------
Total Increase in Net Assets 618,046,668 82,048,475
NET ASSETS
Beginning of Period 376,983,807 294,935,332
-------------- ----------------
End of Period $ 995,030,475 $ 376,983,807
-------------- ----------------
-------------- ----------------
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE FOR THE FISCAL YEAR ENDED JANUARY 4, 1993
SIX MONTHS ENDED OCTOBER 31, (COMMENCEMENT OF
APRIL 30, 1998 ------------------------- OPERATIONS) THROUGH
(UNAUDITED) 1997 1996 1995 1994 OCTOBER 31, 1993
---------------- ---- ---- ---- ---- -------------------
<S> <C> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Expenses 0.20%(a) 0.20% 0.20% 0.20% 0.22% 0.26%(a)
Net Investment Income 5.36%(a) 5.18% 5.08% 5.55% 3.65% 2.75%(a)
Decrease Reflected in Expense Ratio due to
Expense Reimbursement 0.05%(a) 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.
21
<PAGE>
THE FEDERAL MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
APRIL 30, 1998
- --------------------------------------------------------------------------------
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's investment objective
is to provide current income, maintain a high level of liquidity and preserve
capital. The portfolio commenced operations on January 4, 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 rated on the market value of the instruments.
The portfolio's custodian or designated subcustodians, as the case may be
under tri-party repurchase agreements, takes possession of the collateral
pledged for investments in repurchase agreements on behalf of the
portfolio. It is the policy of the portfolio to 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.
d) The portfolio incurred organization expenses in the amount of $27,491.
Morgan Guaranty Trust Company of New York ("Morgan") has paid the
organization expenses of the portfolio. The portfolio has agreed to
reimburse Morgan for these costs which are being deferred and amortized on
a straight-line basis over a period not to exceed five years beginning
with the commencement of operations of the portfolio.
22
<PAGE>
THE FEDERAL MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1998
- --------------------------------------------------------------------------------
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 six months ended April 30,
1998, such fees amounted to $658,839.
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 April 30, 1998, the fee for
these services amounted to $4,908.
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 Morgan acts as investment
advisor (the "master portfolios") and J.P. Morgan Series Trust (formerly
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 J.P. Morgan Series Trust. For the six months ended April 30,
1998, the fee for these services amounted to $97,914.
In addition, Morgan has agreed to reimburse the portfolio to the extent
necessary to maintain the total operating expenses of the portfolio at no
more than 0.20% of the average daily net assets of the portfolio through
February 28, 1999. For the six months ended April 30, 1998, Morgan has
agreed to reimburse the portfolio $175,288 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 $9,640 for the six months ended April 30, 1998.
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 (formerly, The JPM Pierpont
Funds), the J.P. Morgan Institutional Funds (formerly The JPM
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 $2,000.
23
