<PAGE>
THE FEDERAL MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL YIELD TO
AMOUNT MATURITY/
(IN THOUSANDS) SECURITY DESCRIPTION MATURITY DATES RATE VALUE
- -------------- ------------------------------------------------- --------------------- ------------ ---------------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS (99.6%)
$ 180,000 Federal Farm Credit Bank......................... 12/01/99-04/03/00 4.800-5.302% $ 179,980,104
200,000 Federal Farm Credit Bank (due 02/01/2000)........ 11/01/99(a) 5.230 199,990,069
100,000 Federal Farm Credit Bank (due 05/03/2000)........ 11/03/99(a) 5.220 99,980,092
15,000 Federal Farm Credit Bank Discount Note........... 11/09/99 5.140 14,982,867
100,000 Federal Farm Credit Bank Discount Note (due
10/10/2010).................................... 11/10/99(a) 5.239 100,000,000
90,000 Federal Home Loan Bank........................... 02/08/00-05/17/00 4.915-5.100 89,965,764
120,000 Federal Home Loan Bank (due 01/26/2000).......... 11/01/99(a) 5.350 120,000,000
75,000 Federal Home Loan Bank (due 04/14/2000).......... 11/01/99(a) 5.355 74,983,094
90,000 Federal Home Loan Bank (due 05/11/2000).......... 11/01/99(a) 5.305 89,981,115
100,000 Federal Home Loan Bank (due 09/01/2000).......... 11/01/99(a) 5.380 99,967,500
100,000 Federal Home Loan Bank (due 10/10/2000).......... 11/03/99(a) 5.380 99,935,731
150,000 Federal Home Loan Bank (due 10/04/2000).......... 12/04/99(a) 5.924 149,904,737
901,008 Federal Home Loan Bank Discount Note............. 11/01/99-03/15/00 5.100-5.540 892,578,953
40,000 Student Loan Marketing Association............... 02/08/00 4.930 40,000,000
20,300 Tennessee Valley Authority Discount Note......... 11/08/99 5.050 20,280,066
--------------
TOTAL INVESTMENTS AT AMORTIZED COST AND VALUE (99.6%)................................. 2,272,530,092
OTHER ASSETS IN EXCESS OF LIABILITIES (0.4%).......................................... 8,292,958
--------------
NET ASSETS (100.0%)................................................................... $2,280,823,050
==============
</TABLE>
- ------------------------------
(a)Date listed 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, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Amortized Cost and Value $2,272,530,092
Cash 616
Interest Receivable 8,692,199
Prepaid Trustees' Fees 1,916
Prepaid Expenses and Other Assets 7,389
--------------
Total Assets 2,281,232,212
--------------
LIABILITIES
Advisory Fee Payable 267,870
Administrative Services Fee Payable 45,945
Administration Fee Payable 1,449
Fund Services Fee Payable 1,165
Accrued Expenses 92,733
--------------
Total Liabilities 409,162
--------------
NET ASSETS
Applicable to Investors' Beneficial Interests $2,280,823,050
==============
</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, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest Income $93,690,613
EXPENSES
Advisory Fee $2,858,791
Administrative Services Fee 480,385
Custodian Fees and Expenses 242,170
Professional Fees and Expenses 50,369
Fund Services Fee 36,961
Administration Fee 16,872
Trustees' Fees and Expenses 16,454
Miscellaneous 14,081
----------
Total Expenses 3,716,083
Less: Reimbursement of Expenses (63,027)
----------
NET EXPENSES 3,653,056
-----------
NET INVESTMENT INCOME 90,037,557
NET REALIZED (LOSS) ON INVESTMENTS (93,004)
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $89,944,553
===========
</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, 1999 OCTOBER 31, 1998
---------------- ----------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 90,037,557 $ 48,874,713
Net Realized Gain (Loss) on Investments (93,004) 178
--------------- ---------------
Net Increase in Net Assets Resulting from
Operations 89,944,553 48,874,891
--------------- ---------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 9,653,493,366 6,623,456,255
Withdrawals (8,926,190,523) (5,585,739,299)
--------------- ---------------
Net Increase from Investors' Transactions 727,302,843 1,037,716,956
--------------- ---------------
Total Increase in Net Assets 817,247,396 1,086,591,847
NET ASSETS
Beginning of Fiscal Year 1,463,575,654 376,983,807
--------------- ---------------
End of Fiscal Year $ 2,280,823,050 $ 1,463,575,654
=============== ===============
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
Selected data for a share outstanding throughout each year are as follows:
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED OCTOBER 31,
---------------------------------------------------------
1999 1998 1997 1996 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Net Expenses 0.20% 0.20% 0.20% 0.20% 0.20%
Net Investment Income 4.85% 5.31% 5.18% 5.08% 5.55%
Expenses without Reimbursement 0.20% 0.25% 0.28% 0.27% 0.26%
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE FEDERAL MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1999
- --------------------------------------------------------------------------------
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 high current income consistent with the preservation of capital
and same-day liquidity. 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 rates on the market value of the instruments.
The portfolio's custodian or designated subcustodians, as the case may be
under tri-party repurchase agreements, 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"), a wholly owned subsidiary of J.P.
Morgan & Co. Incorporated ("J.P. Morgan"). Under the terms of the
21
<PAGE>
THE FEDERAL MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 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 fiscal year ended October 31, 1999, such
fees amounted to $2,858,791.
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, 1999, the fee
for these services amounted to $16,872.
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 October 31, 1999, the fee for these services
amounted to $480,385.
In addition, J.P. 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, 2001. This reimbursement arrangement can be changed
or terminated at any time after February 28, 2001 at the option of J.P.
Morgan. For the fiscal year ended October 31, 1999, J.P. Morgan has agreed
to reimburse the portfolio $63,027 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 $36,961 for the fiscal year ended October 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 $7,600.
22
<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, 1999, 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 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, 1999 by correspondence with the custodian, provide
a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
December 17, 1999
23
