J.P. Morgan Institutional Service
Tax Exempt Money Market Fund
Annual Report
November 30, 2000
LETTER TO THE SHAREHOLDERS
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January 8, 2001
Dear Shareholder,
We are pleased to report that the J.P. Morgan Institutional Service Tax
Exempt Money Market Fund was competitive with its peer group, as measured by the
Lipper Institutional Tax Exempt Money Market Funds Average, for the 12 months
ended November 30, 2000. The Fund provided a total return of 3.68% for the
fiscal year, while its peer group had a return of 3.79%.
The Fund maintained a stable net asset value of $1.00 throughout the fiscal
year. On November 30, 2000, the net assets of the Fund were approximately $40
million, while the net assets of the Tax Exempt Money Market Portfolio, in which
the Fund invests, amounted to approximately $3.1 billion. During the fiscal
year, dividends of approximately $0.04 per share were paid from ordinary
income, all of which is exempt from federal income tax.
On the pages that follow, The Tax Exempt Money Market Portfolio's lead
portfolio manager, Abigail J. Feder, discusses the fixed-income market in
detail. Abigail explains the factors that influenced investment performance
during the fiscal year, and provides insight in regard to positioning the
Portfolio for the coming months.
As chairman and president of Asset Management Services, we appreciate your
investment in the Fund. If you have any comments or questions, please contact
your Morgan representative, or call J.P. Morgan Funds Services at (800)
766-7722.
Sincerely yours,
/signature/ /signature/
Ramon de Oliveira Keith M. Schappert
Chairman of Asset Management Services President of Asset Management Services
J.P. Morgan & Co. Incorporated J.P. Morgan & Co. Incorporated
TABLE OF CONTENTS
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Letter to the Shareholders 1
Fund Performance 2
Portfolio Manager Q&A 3
Fund Facts & Highlights 5
Financial Statements 6
1
FUND PERFORMANCE
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EXAMINING PERFORMANCE
One way to look at performance is to review a fund's average annual total
return. This calculation takes the Fund's actual 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
of a fund's value over various time periods, typically one, five, and ten years,
(or since inception).
PERFORMANCE
TOTAL AVERAGE ANNUAL
RETURNS TOTAL RETURN
------------ ----------------------------------
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
AS OF NOVEMBER 30, 2000
J.P. Morgan Institutional Service Tax Exempt Money
Market Fund 3.68% 3.35% 3.29% 3.15%
Lipper Institutional Tax Exempt Money Market
Funds Average** 3.79% 3.31% 3.31% 3.21%
AS OF SEPTEMBER 30, 2000
J.P. Morgan Institutional Service Tax Exempt Money
Market Fund 3.54% 3.31% 3.27% 3.18%
Lipper Institutional Tax Exempt Money Market
Funds Average** 3.64% 3.28% 3.29% 3.23%
* The Fund commenced operations on November 4, 1997. Performance prior to
November 4, 1997 is the performance of the J.P. Morgan Tax Exempt Money Market
Fund, a separate feeder fund investing in the same master portfolio, which had a
lower expense ratio.
** Describes the average annual total return for all funds in the indicated
Lipper category, as defined by Lipper Inc., and does not take into account
applicable sales charges. Lipper Analytical Services, Inc. is a leading source
for mutual fund data.
Past performance is no guarantee of future results. Fund returns are net of
fees and assume the reinvestment of distributions, and reflect reimbursement of
certain fund and portfolio expenses as described in the prospectus. Had these
expenses not been subsidized returns would have been lower. The 7-day yield
more closely reflects the current earnings of the money market fund than the
total return quotation.
2
PORTFOLIO MANAGER Q&A
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[photo of Abigal J. Feder]
The following is an interview with ABIGAIL J. FEDER, vice president and
member of the portfolio management team for The Tax Exempt Money Market
Portfolio, in which the Fund invests. Abigail is head of the short-term and tax
aware product group, and specializes in short-term taxable and tax-aware fixed
income strategies. She became a J.P. Morgan Investment Management employee in
2000, after 14 years with Morgan Stanley Dean Witter Investment Management
(MSDW) where she was responsible for managing short-term fixed income
portfolios. Within this capacity, she managed both taxable and tax-aware
portfolios, investing in a broad range of fixed income instruments across much
of the yield curve. She was a senior member of the MSDW corporate team
representing the asset-backed security sector. Prior to her work as a portfolio
manager, she held an analyst position within Morgan Stanley's investment
banking division. Abigail holds a B.A. from Vassar College. This interview was
conducted on December 11, 2000, and represents Abigail's views on that date.
WHAT HAPPENED IN THE TAX-EXEMPT BOND MARKET FOR THE YEAR ENDED NOVEMBER 30,
2000?
Yields in the municipal money market sector were volatile near the end of
1999 as risk-averse dealers sold down their inventories, and were reluctant to
hold large positions over year-end. In both the taxable and tax-exempt markets,
many issuers pushed up issuance and extended maturities out into late
January/early February to avoid potential year-end complications. The Federal
Reserve interest rate increase in November pushed short-term tax-exempt yields
higher in sympathy with their taxable counterparts. In addition, concerns that
Y2K might affect the availability of investments over the year-end caused a
great deal of speculation and positioning leading up to December 31, 1999.
During the first few months of 2000, the explosive combination of very
strong economic growth, the continued tightening of monetary policy by the
Federal Reserve, and the U.S. Treasury's announcement that it would begin
repurchasing outstanding long Treasury bonds wreaked havoc in the fixed income
markets. Despite the inversion in the Treasury yield curve, the AAA tax-exempt
yield curve remained upwardly sloped, albeit slightly flatter than in December.
Variable rate demand notes were relatively expensive because January
coupon-related buying was prolonged into the beginning of the calendar year by
lower note and derivative issuance.
In April, investors sold securities to meet income tax obligations, causing
larger than expected redemptions in the municipal market. The increased supply
caused yields--particularly for variable municipals--to widen dramatically.
Furthermore, investors were slower to come back to the market than they had been
in previous years. By the end of June, and continuing through July, the
municipal sector became introspective as rates dropped as much as two percentage
points. Most state and local governments have June fiscal year ends; laws
prohibit these entities from having their short-term notes mature over the
fiscal year end. Therefore, the market experiences a significant decrease in
notes outstanding each June. Once June was over, the supply began to build again
as governments reissued notes. As usual, the summer activity culminated in
August when the state of Texas issued its tax and revenue notes in the amount
of $3.9 billion, helping liquidity in the market.
September, often a difficult month for municipals, had a more intense
imbalance in supply and demand than history dictated as corporations took more
money out of the tax-exempt market to pay taxes. In response, interest rates on
variable securities increased radically. Eventually, daily variables peaked at
6.2% and weeklies at 5.7%. A month later, yields dropped to more normal levels
with dailies falling 1.5% to 4.7%. In November, the municipal bond market's
supply/demand dynamics improved and liquidity became much better.
HOW DID YOU MANAGE THE PORTFOLIO DURING THE YEAR?
We sought to maximize yield while insuring liquidity within the tax-exempt
market's seasonal
3
PORTFOLIO MANAGER Q&A
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(Continued)
fluctuations of supply and demand. The supply of securities in the
municipal money market sector follows a certain pattern, causing ebb and flow
based largely on investor demand and the available supply. This in turn causes
volatility in short municipal rates. We managed the portfolio throughout the
year to take advantage of attractive yields in different portions of the
curve, and to position the Portfolio with the appropriate weighted average
maturity-- all while providing investors adequate liquidity. At the beginning
of the fiscal year, the Portfolio held approximately 60% of its assets in
variable rate securities to insure that we had adequate liquidity as we
entered Y2K. This was a period during which variable rate securities were
extremely attractive and thus an added benefit for our investors.
As 2000 unfolded, we looked for opportunities to lock in yield further out
on the money market curve, and to migrate to a longer weighted average maturity
(WAM). April arrived with considerable outflows in municipal
securities--creating a sizeable increase in variable rates and inverting the
curve. We positioned the Portfolio to take advantage of the inversion through
the end of the month and into May. The majority of our tax-exempt note
positions matured in late June, leading us to reduce both the allocation to
notes and the weighted average maturity of the Portfolio. Not until August,
when the state of Texas issued $3.9 billion in tax and revenue notes, did we
find opportunities to position the portfolio with a longer WAM. In September,
when variable rate securities were very inexpensive, we took advantage of the
opportunity to add value by increasing our allocation to this sector.
We continued to increase the maturity of the Portfolio toward the end of the
fiscal year so we would be well-positioned to take advantage of the drop in
variable rates. We ended November with 18% allocated to notes, and 11% in
tax-exempt commercial paper. With more than 20% of the Portfolio locked into
issues with fixed interest rates, we are cushioned from some of the volatility
in the prices of variable securities, which have their coupons reset on a daily
or weekly basis.
WHAT IS THE OUTLOOK FOR THE NEXT FEW MONTHS?
We expect the usual patterns of supply and demand to continue. Rates
typically drop at the start of a new year, and we plan to extend the Portfolio
as we find opportunity. Currently, we have a weighted average maturity of 40
days, leaving us room to roll down the curve and still hold onto attractive
yields.
4
FUND FACTS
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INVESTMENT OBJECTIVE
J.P. Morgan Institutional Service Tax Exempt Money Market Fund seeks to
maximize current income that is exempt from federal income tax consistent with
the preservation of capital and same-day liquidity. It is designed for
investors who seek to preserve capital and earn current income exempt from
federal income tax.
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Inception Date: 11/4/1997
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Fund Net Assets as of 11/30/2000: $40,324,352
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Portfolio Net Assets as of 11/30/2000:
$3,068,738,731
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Dividend Payable Dates: MONTHLY
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Capital Gain Payable Dates
(if applicable): 12/13/2000
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EXPENSE RATIOS
The Fund's current annual expense ratio of 0.45% covers shareholders'
expenses for custody, tax reporting, investment advisory, and shareholder
services, after reimbursement. 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
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All data as of November 30, 2000
PORTFOLIO ALLOCATION
(As a percentage of total investment securities)
[data from pie chart]
Variable Rate Demand Notes 64.9%
Revenue Bonds 17.6%
Commercial Paper 11.12%
General Obligations 5.3%
Tax Revenue Anticipation Notes 1.0%
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Average 7-Day Yield: 3.84%*
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Average Maturity: 37 DAYS
* Yield reflects the reimbursement of certain fund expenses as described in the
prospectus. Had these expenses not been subsidized, the average 7-day current
yield would have been lower. Yields represent past performance and will
fluctuate.
DISTRIBUTED BY FUNDS DISTRIBUTOR, INC. J.P. MORGAN MANAGEMENT, INC. SERVES AS
INVESTMENT ADVISOR. SHARES OF THE FUND ARE NOT INSURED BY THE FDIC, ARE NOT BANK
DEPOSITS OR OTHER OBLIGATIONS OF THE FINANCIAL INSTITUTION AND ARE NOT
GUARANTEED BY THE FINANCIAL INSTITUTION. SHARES OF THE FUND ARE SUBJECT TO
INVESTMENT RISK, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL INVESTED. WHILE THE
FUND SEEKS TO MAINTAIN A STABLE ASSET VALUE OF $1.00 PER SHARE, IT IS POSSIBLE
TO LOSE MONEY BY INVESTING IN THIS FUND.
References to specific securities and their issuers are for illustrative
purposes only and are not intended to be, and should not be interpreted as,
recommendations to purchase or sell securities. Opinions expressed herein and
other Fund data presented 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). Income may be subject to some state and local
taxes. Some income may be subject to the Federal alternative minimum tax for
certain investors. Capital gains are not exempt from taxes.
CALL J.P. MORGAN FUNDS SERVICES AT (800) 766-7722 FOR A PROSPECTUS CONTAINING
MORE COMPLETE INFORMATION ABOUT THE FUND, INCLUDING MANAGEMENT FEES AND OTHER
EXPENSES. PLEASE READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
5
J.P. MORGAN INSTITUTIONAL SERVICE TAX EXEMPT MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
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NOVEMBER 30, 2000
ASSETS
Investment in The Tax Exempt Money Market
Portfolio ("Portfolio"), at value $40,493,427
Receivable for Expense Reimbursements 7,087
Deferred Organization Expenses 5,242
Prepaid Trustees' Fees and Expenses 88
Prepaid Expenses and Other Assets 18
-------------
TOTAL ASSETS 40,505,862
-------------
LIABILITIES
Dividends Payable to Shareholders 127,159
Shareholder Servicing Fee Payable 1,629
Administrative Services Fee Payable 774
Fund Services Fee Payable 24
Administration Fee Payable 6
Accrued Expenses and Other Liabilities 51,918
-------------
TOTAL LIABILITIES 181,510
-------------
NET ASSETS
Applicable to 40,325,780 Shares of Beneficial Interest Outstanding
(par value $0.001, unlimited shares authorized) $40,324,352
=============
Net Asset Value, Offering and Redemption Price Per Share $1.00
=============
ANALYSIS OF NET ASSETS
Paid-in Capital $40,325,780
Accumulated Net Realized Loss on Investment (1,428)
-------------
NET ASSETS $40,324,352
=============
The Accompanying Notes are an Integral Part of the Financial Statements.
6
J.P. MORGAN INSTITUTIONAL SERVICE TAX EXEMPT MONEY MARKET FUND
STATEMENT OF OPERATIONS
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FOR THE YEAR ENDED NOVEMBER 30, 2000
INVESTMENT INCOME ALLOCATED FROM PORTFOLIO
INCOME
Allocated Interest Income $1,583,106
Allocated Portfolio Expenses (68,494)
-------------
Net Investment Income Allocated from Portfolio 1,514,612
--------------
FUND EXPENSES
Service Organization Fee 95,641
Shareholder Servicing Fee 19,128
Transfer Agent Fees 16,622
Professional Fees 14,383
Financial and Fund Accounting Services Fee 14,356
Administrative Services Fee 9,225
Printing Expenses 5,249
Registration Fees 3,721
Amortization of Organization Expenses 2,725
Fund Services Fee 532
Administration Fee 411
Trustees' Fees and Expenses 269
Miscellaneous 16,994
--------------
Total Fund Expenses 199,256
Less: Reimbursement of Expenses (95,598)
--------------
Net Fund Expenses 103,658
--------------
NET INVESTMENT INCOME 1,410,954
--------------
NET REALIZED LOSS ON INVESTMENT ALLOCATED FROM PORTFOLIO (381)
--------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $1,410,573
==============
The Accompanying Notes are an Integral Part of the Financial Statements.
7
J.P. MORGAN INSTITUTIONAL SERVICE TAX EXEMPT MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
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FOR THE YEARS ENDED NOVEMBER 30 (EXCEPT AS NOTED)
INCREASE IN NET ASSETS 2000 1999(a) 1999(b)
FROM OPERATIONS
Net Investment Income $1,410,954 $60,387 $315,352
Net Realized Gain (Loss) on Investment Allocated from Portfolio (381) (1,148) 204
---------------- --------------- ---------------
Net Increase in Net Assets Resulting from Operations 1,410,573 59,239 315,556
---------------- --------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (1,410,954) (60,387) (315,352)
---------------- --------------- ---------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
(AT A CONSTANT $1.00 PER SHARE)
Proceeds from Shares of Beneficial Interest Sold 137,724,826 10,397,974 80,507,274
Reinvestment of Distributions 8,708 - 161,987
Cost of Shares of Beneficial Interest Redeemed (102,833,871) (13,290,296) (80,588,137)
---------------- --------------- ---------------
Net Increase (Decrease) from Transactions in Shares
of Beneficial Interest 34,899,663 (2,892,322) 81,124
---------------- --------------- ---------------
Total Increase (Decrease) in Net Assets 34,899,282 (2,893,470) 81,328
---------------- --------------- ---------------
NET ASSETS
Beginning of Period 5,425,070 8,318,540 8,237,214
--------------- ---------------- ---------------
End of Period $40,324,352 $5,425,070 $8,318,542
=============== ================ ===============
(a) For the three months ended November 30, 1999.
(b) For the year ended August 31, 1999.
The Accompanying Notes are an Integral Part of the Financial Statements.
8
J.P. MORGAN INSTITUTIONAL SERVICE TAX EXEMPT MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
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SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT
EACH PERIOD IS AS FOLLOWS:
FOR THE PERIOD
FOR THE NOVEMBER 4, 1997
FOR THE THREE MONTHS FOR THE (COMMENCEMENT OF
YEAR ENDED ENDED YEAR ENDED OPERATIONS) THROUGH
NOVEMBER 30, 2000 NOVEMBER 30, 1999 AUGUST 31, 1999 AUGUST 31, 1998
-------------------------------------------------------------------------
NET ASSET VALUE PER SHARE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00
-------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.04 0.01 0.03 0.03
Net Realized Gain (Loss) on Investment (0.00)(a) (0.00)(a) 0.00(a) (0.00)(a)
-------------------------------------------------------------------------
Total From Investment Operations 0.04 0.01 0.03 0.03
-------------------------------------------------------------------------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (0.04) (0.01) (0.03) (0.03)
-------------------------------------------------------------------------
Net Asset Value Per Share, End of Period $1.00 $1.00 $1.00 $1.00
=========================================================================
RATIOS AND SUPPLEMENTAL DATA
Total Return 3.68% 0.76(b) 2.78% 2.80%(b)
Net Assets, End of Period (in thousands) $40,324 $5,425 $8,319 $8,237
Ratios to Average Net Assets
Net Expenses 0.45% 0.45%(c) 0.48% 0.60%(c)
Net Investment Income 3.69% 3.04%(c) 2.66% 2.95%(c)
Expenses without Reimbursement 0.70% 1.64%(c) 1.13% 5.83%(c)
(a) Less than $0.005
(b) Not annualized
(c) Annualized
The Accompanying Notes are an Integral Part of the Financial Statements.
9
J.P. MORGAN INSTITUTIONAL SERVICE TAX EXEMPT MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
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NOVEMBER 30, 2000
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1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION--J.P. Morgan Institutional Service Tax Exempt Money Market Fund
(the "Fund") is a separate series of the J.P. Morgan Institutional Funds, a
Massachusetts business trust (the "Trust") which was organized on November 4,
1992. The Trust is registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company. The Fund commenced
operations on November 4, 1997.
The Fund invests all of its investable assets in The Tax Exempt Money Market
Portfolio (the "Portfolio''), a diversified open-end management investment
company having the same investment objective as the Fund. The value of such
investment included in the Statement of Assets and Liabilities reflects the
Fund's proportionate interest in the net assets of the Portfolio (approximately
1% at November 30, 2000). 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 accounting
principles generally accepted in the United States of America 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:
SECURITY VALUATION--Valuation of securities by the Portfolio is discussed in
Note 1 of the Portfolio's Notes to Financial Statements that are included
elsewhere in this report.
INVESTMENT INCOME--The Fund earns income, net of expenses, daily on its
investment in the Portfolio. All net investment income, realized and unrealized
gains and losses of the Portfolio are allocated pro-rata among the Fund and
other investors in the Portfolio at the time of such determination.
EXPENSES--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.
INCOME TAX STATUS--It is the Fund's policy to distribute all net investment
income and net realized gains to shareholders and to otherwise qualify as a
regulated investment company under the provisions of the Internal Revenue Code.
Accordingly, no provision has been made for federal or state income taxes.
DISTRIBUTIONS TO SHAREHOLDERS--Distributions to a shareholder are recorded
on the ex-dividend date. Distributions from net investment income are declared
daily and paid monthly. Distributions from net short-term realized 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. Distributions from net realized gains, if any, will be
distributed 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.
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2. TRANSACTIONS WITH AFFILIATES
ADMINISTRATIVE SERVICES--The Trust has an Administrative Services Agreement
(the "Services Agreement") with Morgan Guaranty Trust Company of New York
("Morgan") under which Morgan is responsible for certain aspects of the
administration and operation of the Fund. Under the Services Agreement, the
Trust 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 Trust and certain other registered investment companies
for which J.P. Morgan Investment Management, Inc. ("JPMIM") acts as investment
advisor 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 Funds Distributor, Inc. The portion of this charge
payable by the Fund is determined by the proportionate share that its net
assets bear to the net assets of the Trust and certain other investment
companies for which Morgan provides similar services.
10
J.P. MORGAN INSTITUTIONAL SERVICE TAX EXEMPT MONEY MARKET FUND NOTES TO
FINANCIAL STATEMENTS
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(Continued)
NOVEMBER 30, 2000
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2. TRANSACTIONS WITH AFFILIATES (CONTINUED)
Morgan has agreed to reimburse the Fund to the extent the total operating
expenses (excluding interest, taxes and extraordinary expenses) of the Fund,
including the expenses allocated to the Fund from the Portfolio, exceed 0.45% of
the Fund's average daily net assets through February 28, 2001.
ADMINISTRATION--The Trust has retained Funds Distributor, Inc. ("FDI"), a
registered broker-dealer, to serve as the co-administrator and distributor for
the Fund. Under a Co-Administration Agreement between FDI and the Trust, FDI
provides administrative services necessary for the operations of the Trust,
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 portion
of this charge payable by the Fund is determined by the proportionate share that
its net assets bear to the net assets of the Trust and certain other investment
companies for which FDI provides similar services.
SHAREHOLDER SERVICING--The Trust has a Shareholder Servicing Agreement with
Morgan under which Morgan provides account administration and personal account
maintenance service to Fund shareholders. The agreement provides for the Fund to
pay Morgan a fee for these services that is computed daily and paid monthly at
an annual rate of 0.05% of the average daily net assets of the Fund.
SERVICE PLAN--The Trust on behalf of the Fund has a Service Plan with
respect to fund shares which authorizes it to compensate Service Organizations
for providing account administration and other services to their customers who
are beneficial owners of such shares. The Fund will enter into agreements with
Service Organizations that purchase shares on behalf of their customers
("Service Agreements"). The Service Agreements provide that the Fund pay Service
Organizations a fee which is computed daily and paid monthly at an annual rate
of up to 0.25% of the average daily net assets of the Fund with respect to the
shares of the Fund attributable to or held in the name of the Service
Organization for its customers.
FUND SERVICES--The Trust has a Fund Services Agreement with Pierpont Group,
Inc. ("PGI") to assist the Trustees in exercising their overall supervisory
responsibilities for the Trust's affairs. The Trustees of the Trust represent
all the existing shareholders of PGI.
TRUSTEES--Each Trustee receives an aggregate annual fee of $75,000 for
serving on the boards of the Trust, the J.P. Morgan Funds, the J.P. Morgan
Institutional Funds, and other registered investment companies in which they
invest. The trustees' fees and expenses shown in the financial statements
represent the Fund's allocated portion of the total Trustees' fees and
expenses. The Trust's Chairman and Chief Executive Officer also serves as
Chairman of PGI and receives compensation and employee benefits from PGI. The
allocated portion of such compensation and benefits included in the Fund
Services Fee shown on the Statement of Operations was $100.
- --------------------------------------------------------------------------------
3. FEDERAL INCOME TAXES
For federal income tax purposes, the Fund had a capital loss carryforward as
of November 30, 2000, of approximately $1,529 of which, $1,148 expires in 2007
and $381 expires in 2008. Accordingly, no capital gains distribution is
expected to be paid to shareholders until net gains have been realized in excess
of this amount.
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4. CONCENTRATIONS OF RISK
From time to time, the Fund may have a concentration of several shareholders
holding a significant percentage of shares outstanding. Investment activities of
these shareholders could have a material impact on the Fund.
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5. SUBSEQUENT EVENT
The merger of J.P. Morgan & Co. Incorporated, the former parent company of
the Fund's adviser, J.P. Morgan Investment Management, Inc. ("JPMIM"), with and
into The Chase Manhattan Corporation was consummated on December 31, 2000. J.P.
Morgan Chase & Co. will be the new parent company of JPMIM, which will
continue to serve as the Fund's adviser.
11
REPORT OF INDEPENDENT ACCOUNTANTS
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To the Trustees and Shareholders of
J.P. Morgan Institutional Service Tax Exempt 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 Institutional Service Tax Exempt Money Market Fund (one of the
series constituting part of J.P. Morgan Institutional Funds, hereafter referred
to as the "Fund") at November 30, 2000, the results of its operations for the
year then ended, the changes in its net assets for the year then ended, for the
three months ended November 30, 1999 and for the year ended August 31, 1999 and
the financial highlights for the year then ended, for the three months ended
November 30, 1999, for the year ended August 31, 1999 and for the period
November 4, 1997 (commencement of operations) through August 31, 1998, in
conformity with accounting principles generally accepted in the United States of
America. 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 of America, 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 our opinion.
PricewaterhouseCoopers LLP
New York, New York
January 16, 2001
12
THE TAX EXEMPT MONEY MARKET PORTFOLIO
Annual Report November 30, 2000
(The following pages should be read in conjunction with J.P. Morgan
Institutional Service Tax Exempt Money Market Fund Annual Financial Statements
13
THE TAX EXEMPT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
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NOVEMBER 30, 2000
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 100.00%
ALABAMA - 3.3%
$52,700,000 Alabama Special Care Facilities Financing
Auth. Mobile Rev., Series 1999 B,
(Ascension Health Credit), VRDN,
4.40%, 12/7/00 $ 52,700,000
14,000,000 Birmingham-Carraway Special Care
Facilities Financing Auth. Rev.,
Series 1998 A, (Carraway
Methodist Health), VRDN, 4.15%,
12/6/00 (LOC: Amsouth Bank) 14,000,000
33,200,000 West Jefferson Industrial Development
Board Pollution Control Rev., (Alabama
Power Co.), VRDN, 4.20%, 12/1/00 33,200,000
-------------------------------
99,900,000
-------------------------------
ALASKA - 1.3%
21,000,000 Anchorage, Tax Anticipation Notes,
4.75%, 2/2/01 21,022,921
11,300,000 Valdez Marine Terminal Rev., Series 1993 A,
(Exxon Pipeline Co.), VRDN, 4.20%, 12/1/00 11,300,000
7,000,000 Valdez Marine Terminal Revenue,
Series 1993 C, (Exxon Pipeline Co.),
VRDN, 4.20%, 12/1/00 7,000,000
-------------------------------
39,322,921
-------------------------------
ARIZONA - 0.6%
7,700,000 Apache County Industrial Development
Auth. Industrial Development Rev.,
(Tucson Electric Power), VRDN, 4.20%,
12/6/00 (LOC: Toronto Dominion Bank) 7,700,000
10,542,500 Salt River Project Agricultural Improvement
& Power District Elec, Series 2000-274,
VRDN, 4.22%, 12/7/00 10,542,500
1,000,000 University of Arizona COP, Series 2000 A,
(Main Campus & Research), VRDN,
4.00%, 12/6/00 (AMBAC) 1,000,000
-------------------------------
19,242,500
-------------------------------
CALIFORNIA - 3.8%
11,300,000 California Pollution Control Financing
Auth. Pollution Control, Series 1986 D,
(Southern California Edison), VRDN,
4.60%, 12/1/00 11,300,000
53,390,000 California Statewide Communities
Development Auth., Series
2000 N-6, Registered D, VRDN,
4.20%, 12/7/00 53,390,000
16,800,000 Los Angeles, Series 2000 N8, Registered D,
VRDN, 4.20%, 12/6/00 16,800,000
34,850,000 Los Angeles Regional Airports Improvement
Corp. Lease Rev., (Sublease-LA International
LAX), VRDN, 4.15%, 12/1/00
(LOC: Societe Generale) 34,850,000
-------------------------------
116,340,000
-------------------------------
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------------------
COLORADO - 1.9%
$7,510,000 Colorado Springs Utilities Rev.,
Series 1991 C, 6.75%, 11/15/01,
Prerefunded at 102% of Par $ 7,818,832
4,925,000 Colorado Water Resources & Power
Development Auth. Drinking Water,
Series 2000 PA-695, VRDN, 4.22%, 12/7/00 4,925,000
11,965,000 Denver City & County Airport Rev.,
Series 1999 A-16, Registered D, VRDN,
4.35%, 12/6/00 (MBIA) 11,965,000
14,315,000 Denver City & County COP, Series 2000
PA-733, VRDN, 4.22%,12/7/00 (AMBAC) 14,315,000
8,370,000 Platte River Power Auth. Rev., Series 2000
PA-729R, VRDN, 4.22%, 12/7/00 8,370,000
10,950,000 Smith Creek Metropolitan District,
VRDN, 4.20%, 12/7/00 (LOC:
Bank of America N.A.) 10,950,000
-------------------------------
58,343,832
-------------------------------
CONNECTICUT - 0.2%
4,715,000 Connecticut Health & Educational
Facilities Auth. Rev., Series 1999 U,
(Yale University), VRDN, 4.00%, 12/7/00 4,715,000
-------------------------------
DISTRICT OF COLUMBIA - 3.5%
5,800,000 District of Columbia, Series 1991 B-1,
(General Fund Recovery), VRDN, 4.60%,
12/1/00 (LOC: Bank of America NT & S.A.) 5,800,000
6,000,000 District of Columbia, Series 1991 B-2,
(General Fund Recovery), VRDN, 4.60%,
12/1/00 (LOC: Bank of America NT & S.A.) 6,000,000
11,900,000 District of Columbia, Series 1991 B-3,
(General Fund Recovery), VRDN, 4.60%,
12/1/00 (LOC: Bank of America NT & S.A.) 11,900,000
28,900,000 District of Columbia Rev., (The American
University Issue), VRDN, 4.20%, 12/6/00
(AMBAC) 28,900,000
7,000,000 District of Columbia Rev., Series 1996 A,
(The American University Issue), VRDN,
4.20%, 12/6/00 (AMBAC) 7,000,000
5,000,000 District of Columbia Rev., Series 2000 B,
(Multimodal Smithsonian), VRDN, 4.05%,
12/7/00 5,000,000
35,360,000 District of Columbia Rev., Series 2000 C,
(George Washington University), VRDN,
4.20%, 12/6/00 (MBIA) 35,360,000
5,970,000 District of Columbia Water & Sewer Auth.
Public Utility Rev., Series 2000 PT-373,
VRDN, 4.22%, 12/7/00 (FSA) 5,970,000
-------------------------------
105,930,000
-------------------------------
FLORIDA - 5.8%
4,000,000 Dade County Water & Sewer System Rev.,
VRDN, 4.00%, 12/6/00 (FGIC) 4,000,000
7,000,000 Florida State Board of Education, Series 2000
PT-1223, VRDN, 4.22%, 12/7/00 7,000,000
64,000,000 Miami-Dade County School District, Tax
Anticipation Notes, 5.00%, 6/28/01 64,258,661
The Accompanying Notes are an Integral Part of the Financial Statements.
14
THE TAX EXEMPT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 2000
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------------------
$58,315,000 Sunshine State Governmental Financing
Commission, (Lehman Conversion),
VRDN, 4.20%, 12/6/00 (AMBAC) $ 58,315,000
21,400,000 Sunshine State Finance Commission CP,
4.30%, 1/2/01 21,400,000
10,775,000 Tampa Occupational License Tax, Series
1996 A, VRDN, 4.05%, 12/6/00 (FGIC) 10,775,000
12,500,000 University Athletic Association Inc.,
(University of Florida Stadium), VRDN,
4.60%, 12/1/00 (LOC: Suntrust Bank
Central Florida) 12,500,000
-------------------------------
178,248,661
-------------------------------
GEORGIA - 7.7%
10,550,000 Appling County Development Auth.,
(Georgia Power Co. Plant Hatch Project),
VRDN, 4.20%, 12/1/00 10,550,000
23,445,000 Bartow County Development Auth.,
Series 1996, (Georgia Power Co. Bowen),
VRDN, 4.20%, 12/1/00 23,445,000
43,300,000 Burke County Development Auth.,
(Georgia Power Co. Plant Vogtle-1st),
VRDN, 4.20%, 12/1/00 43,300,000
9,100,000 Burke County Development Auth.,
(Georgia Power Co. Plant Vogtle-4th),
VRDN, 4.20%, 12/1/00 9,100,000
5,200,000 Burke County Development Auth.,
(Georgia Power Co. Plant Vogtle-4th),
VRDN, 4.60%, 12/1/00 5,200,000
28,770,000 Burke County Development Auth.,
(Georgia Power Co. Plant Vogtle-5th),
VRDN, 4.25%, 12/1/00 28,770,000
8,015,000 Georgia, Series 2000-213, VRDN,
4.22%, 12/7/00 8,015,000
67,787,446 Georgia Municipal Association Inc. Pool Bond
COP, VRDN, 4.20%, 12/7/00 (MBIA) 67,787,446
2,000,000 Heard County Development Auth.,
(Georgia Power Co. Plant Wansley),
VRDN, 4.20%, 12/1/00 2,000,000
10,000,000 Metropolitan Atlanta Rapid Transportation
Auth., Series 2000 B, VRDN, 4.05%,
12/6/00 (LOC: Bayerische Landesbank) 10,000,000
4,200,000 Monroe County Development Auth., (Georgia
Power Co. Plant Scherer-2nd Series),
VRDN, 4.60%, 12/1/00 4,200,000
18,157,000 Municipal Electric Auth. of Georgia, VRDN,
4.25%, 12/7/00 (LOC: ABN Amro Bank N.V.) 18,157,000
5,400,000 Putnam County Development Auth.,
(Georgia Power Co. Plant Branch), VRDN,
4.60%, 12/1/00 5,400,000
-------------------------------
235,924,446
-------------------------------
ILLINOIS - 3.3%
18,800,000 Chicago O'Hare International Airport, Series
1984 A, (General Airport 2nd Lien), VRDN,
4.15%, 12/6/00 (LOC: Societe Generale) 18,800,000
4,160,000 Chicago O'Hare International Airport, Series
1984 B, (General Airport 2nd Lien), VRDN,
4.15%, 12/6/00 (LOC: Societe Generale) 4,160,000
8,000,000 Chicago Park District, Tax Anticipation
Warrants, 5.13%, 9/21/01 8,051,019
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------------------
$17,900,000 Illinois Development Finance Auth.,
(Chicago Symphony Orchestra), VRDN,
4.05%, 12/6/00 (LOC: Northern Trust
Company) $ 17,900,000
2,100,000 Illinois Development Finance Auth.,
Series 1993 A, (Olin Corp. Project), VRDN,
4.20%, 12/1/00 (LOC: Wachovia Bank
of South Carolina) 2,100,000
5,200,000 Illinois Development Finance Auth.
Pollution Control Rev., Series 1993 B,
(Illinois Power Co. Project), VRDN, 4.15%,
12/6/00 (LOC: ABN Amro Bank N.V.) 5,200,000
3,000,000 Illinois State, Series 2000-257, VRDN,
4.22%, 12/7/00 3,000,000
16,600,000 Illinois State Toll Highway Auth., Series
1993 B, VRDN, 4.10%, 12/6/00 (MBIA)
(LOC: Societe Generale) 16,600,000
10,200,000 Illinois State Toll Highway Auth., Series
1998 B, VRDN, 4.05%, 12/7/00 (FSA) 10,200,000
3,400,000 Illinois State Toll Highway Auth., Series
1998 B, VRDN, 4.05%, 12/7/00 (FSA) 3,400,000
10,000,000 Regional Transportation Auth. Illinois, Series
1996 SG-82, VRDN, 4.22%, 12/7/00 10,000,000
-------------------------------
99,411,019
-------------------------------
INDIANA - 3.4%
11,500,000 Indiana Health Facility Financing Auth.,
Series 1999 B, (Ascension Health Credit),
VRDN, 4.40%, 12/6/00 11,500,000
60,000,000 Indiana Office Building Commission CP,
4.30%, 2/7/01 60,000,000
9,995,000 Indianapolis Local Public Improvement
Bond Bank, Series 2000 PT-382, VRDN,
4.22%, 12/7/00 9,995,000
11,000,000 Princeton Pollution Control Rev.,
(PSI Energy Inc.), VRDN, 4.25%, 12/1/00
(LOC: Canadian Imperial Bank) 11,000,000
5,000,000 Purdue University Rev.,
Series 1991 B, (Purdue University
Dorm), VRDN, 6.75%, 7/1/11,
Prerefunded at 102% of Par (AMBAC) 5,164,445
6,200,000 South Bend Redevelopment Auth.,
(Rental College Football), VRDN, 4.15%,
12/6/00 (LOC: Landesbank Hessen-Thrgn) 6,200,000
-------------------------------
103,859,445
-------------------------------
KANSAS - 0.5%
14,000,000 Burlington Pollution Control Rev.,
Series 2000 A-15, Registered D, VRDN,
4.30%, 12/6/00 (MBIA) 14,000,000
-------------------------------
KENTUCKY - 2.6%
15,000,000 Kentucky Asset Liability Commission,
Series 2000 A, Tax and Revenue
Anticipation Notes, 5.25%, 6/27/01 15,058,587
9,500,000 Kentucky Asset Liability Commission,
Series 2000 B, Tax and Rev.
Anticipation Notes, 5.00%, 6/27/01 9,535,333
16,910,000 Kentucky Turnpike Auth., Series 1997-17,
VRDN, 4.30%, 12/6/00 (FSA) 16,910,000
The Accompanying Notes are an Integral Part of the Financial Statements.
15
THE TAX EXEMPT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 2000
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------------------
$37,500,000 Louisville & Jefferson County Metropolitan
Sewer District, Series 1999 TRS-A80,
Registered D, VRDN, 4.30%, 12/6/00 (FGIC) $ 37,500,000
-------------------------------
79,003,920
-------------------------------
LOUISIANA - 0.9%
1,400,000 Calcasieu Parish Industrial Development
Board Industrial Rev., Series 1993 B,
(Olin Corp. Project), VRDN, 4.20%,
12/1/00 (LOC: Wachovia Bank) 1,400,000
6,200,000 Louisiana Offshore Terminal Auth.
Deepwater Port Rev., (1st Stage A-Loop
Inc.), VRDN, 4.25%, 12/1/00 (LOC: Suntrust
Bank of Nashville) 6,200,000
20,000,000 Louisiana State University & Agricultural
& Mechanical College, (Auxiliary), VRDN,
4.15%, 12/6/00 (FGIC) 20,000,000
-------------------------------
27,600,000
-------------------------------
MARYLAND - 3.6%
10,000,000 Baltimore County CP, 4.25%, 12/5/00 10,000,000
32,000,000 Baltimore County CP, 4.20%, 12/7/00 32,000,000
7,900,000 Baltimore County CP, 4.35%, 4/10/01 7,900,000
11,000,000 Baltimore County CP, 4.45%, 4/10/01 11,000,000
8,700,000 Montgomery County CP, 4.40%, 2/5/01 8,700,000
15,000,000 Montgomery County CP, 4.40%, 2/5/01 15,000,000
6,500,000 Montgomery County, Series 2000 A,
(Consumer Public Improvement),
5.00%, 1/1/01 6,505,236
3,495,000 Montgomery County, Series 2000 PA-713,
VRDN, 4.22%, 12/7/00 3,495,000
15,000,000 Montgomery County Housing Opportunities
Commission Housing Rev., Series
1988 A, (Multifamily-Grosvenor), VRDN,
4.10%, 12/6/00 (FNMA) 15,000,000
-------------------------------
109,600,236
-------------------------------
MASSACHUSETTS - 2.3%
3,000,000 Lawrence, Anticipation Notes, 5.25%, 2/8/01 3,004,825
19,400,000 Massachusetts, Series 2000 PA-716, VRDN,
4.06%, 12/7/00 19,400,000
37,000,000 Massachusetts Bay Transportation Auth. GO,
(General Transportation System), VRDN,
3.95%, 12/6/00 37,000,000
3,750,000 Massachusetts Turnpike Auth., Series
2000 PA-672, VRDN, 4.06%, 12/7/00
(MBIA) 3,750,000
6,350,000 Massachusetts Water Resources Auth. GO,
Series 1991 A, 6.50%, 12/1/19, Prerefunded
at 102% of Par 6,604,967
-------------------------------
69,759,792
-------------------------------
MICHIGAN - 3.9%
28,600,000 Detroit Sewer Disposal System Rev.,
Series 1999 TRS-A75, Registered D,
VRDN, 4.30%, 12/6/00 (FGIC) 28,600,000
6,205,000 Michigan Municipal Bond Auth., Series
2000 PT-397, VRDN, 4.22%, 12/7/00 6,205,000
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------------------
$ 50,000,000 Michigan State Building Auth. CP, 4.35%,
1/15/01 $ 50,000,000
22,500,000 Michigan State Building Auth. CP, 4.40%,
3/1/01 22,500,000
6,800,000 Michigan State Strategic Fund Limited
Obligation, (Lutheran Homes of Michigan
Project), VRDN, 4.20%, 12/6/00 (LOC:
Bank One Michigan) 6,800,000
3,995,000 Rochester Community School District,
Series 2000 PA-707, VRDN, 4.22%,
12/7/00 (FGIC) 3,995,000
-------------------------------
118,100,000
-------------------------------
MINNESOTA - 0.3%
5,000,000 Minnesota, 4.63%, 8/1/01 5,010,472
2,700,000 Minnesota Public Facilities Auth.
Water Pollution Control Rev., Series
1998 II-TR-1, VRDN, 4.22%, 12/7/00 2,700,000
-------------------------------
7,710,472
-------------------------------
MISSISSIPPI - 0.8%
23,000,000 Perry County Pollution Control Rev.,
(Leaf River Forest Project), VRDN, 4.30%,
12/1/00 (LOC: Wachovia Bank) 23,000,000
-------------------------------
MISSOURI - 0.1%
2,200,000 Missouri Development Finance Board,
Series 1997 C, (Science City Union
Station), VRDN, 4.50%, 12/1/00
(LOC: Canadian Imperial Bank) 2,200,000
1,600,000 Missouri State Environmental
Improvement & Energy Resources
Auth., (Bayer Corp. Project), VRDN,
4.25%, 12/1/00 1,600,000
-------------------------------
3,800,000
-------------------------------
NEVADA - 1.4%
20,300,000 Clark County Airport Improvement Rev.,
Series 1993 A, 4.10%, 12/6/00 (MBIA)
(LOC: Bayerische Hypo-Und Verein) 20,300,000
12,100,000 Clark County Airport Rev., Series 1999 B-2,
(Sub Lien), VRDN, 4.15%, 12/7/00 (LOC:
Bayerische Landesbank) 12,100,000
9,000,000 Nevada, Series 1996 SG-39, VRDN, 4.22%,
12/7/00 9,000,000
-------------------------------
41,400,000
-------------------------------
NEW HAMPSHIRE - 0.5%
4,000,000 New Hampshire Housing Finance Auth.,
Series 1999 A70-TRS, Registered D, VRDN,
4.40%, 12/6/00 4,000,000
10,000,000 State of New Hampshire CP, 4.25%, 12/6/00 10,000,000
-------------------------------
14,000,000
-------------------------------
NEW JERSEY - 0.6%
11,725,000 New Jersey Economic Development Auth.,
Series 2000 N-3-TRS, Registered D, VRDN,
4.10%, 12/6/00 11,725,000
The Accompanying Notes are an Integral Part of the Financial Statements.
16
THE TAX EXEMPT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 2000
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------------------
$ 3,400,000 New Jersey Turnpike Auth., Series
2000 PA-614, VRDN, 4.12%, 12/7/00
(AMBAC) $ 3,400,000
4,000,000 New Jersey Turnpike Auth., Series 2000
PA-681, VRDN, 4.05%, 12/7/00 (MBIA) 4,000,000
-------------------------------
19,125,000
-------------------------------
NEW MEXICO - 0.8%
23,000,000 New Mexico, Tax & Revenue Anticipation
Notes, 5.00%, 6/29/01 23,081,793
-------------------------------
NEW YORK - 11.1%
15,000,000 Long Island Power Auth., Series 1998-2,
VRDN, 3.80%, 12/6/00 (LOC: Westdeutsche
Landesbank) 15,000,000
300,000 Long Island Power Auth., Series 1998-7-A,
VRDN, 3.90%, 12/7/00 (MBIA) 300,000
18,900,000 Long Island Power Auth., Series 1998-7-B,
VRDN, 3.80%, 12/6/00 (MBIA) 18,900,000
2,400,000 New York, Series 1992 B, VRDN, 4.50%,
12/1/00 (FGIC) 2,400,000
4,300,000 New York, Series 1992 B, VRDN, 4.50%,
12/1/00 (FGIC) 4,300,000
1,955,000 New York, Series 1992 B, VRDN, 4.50%,
12/1/00 (FGIC) 1,955,000
24,085,000 New York, Series 1998 PT-1038, VRDN,
4.18%, 12/7/00 (MBIA-IBC) 24,085,000
3,000,000 New York City Municipal Water Finance
Auth., Series 1994 G, VRDN, 4.25%,
12/1/00 (FGIC) 3,000,000
10,000,000 New York City Municipal Water Finance
Auth., Series 1995 A, VRDN, 4.50%,
12/1/00 (FGIC) 10,000,000
7,300,000 New York City Municipal Water Finance
Auth., Series 1997 SGB-27, VRDN,
4.14%, 12/7/00 (FSA) 7,300,000
28,790,000 New York City Municipal Water Finance
Auth., Series 1997 TRS-FR-6, VRDN,
4.20%, 12/6/00 (MBIA) 28,790,000
6,960,000 New York City Municipal Water Finance
Auth., Series 1998-11-TRS, VRDN,
4.20%, 12/6/00 (FSA) 6,960,000
22,215,000 New York City Transitional Finance Auth.,
Series 1998 A-1, (Future Tax Secured),
VRDN, 4.05%, 12/7/00 22,215,000
7,900,000 New York City Transitional Finance Auth.,
Series 1998 C, (Future Tax Secured), VRDN,
4.20%, 12/1/00 7,900,000
10,000,000 New York Local Government Assistance
Corp., Series 1991 A, 7.00%, 4/1/16,
Prerefunded at 102% of Par 10,289,695
22,350,000 New York Local Government Assistance
Corp., Series 1995, VRDN, 3.85%,
12/6/00 (LOC: Landesbank Hessen-thrgn) 22,350,000
13,300,000 New York State Thruway Auth., (Local
Highway & Bridge), 7.25%, 1/1/01,
Prerefunded at 102% of Par 13,597,301
11,000,000 New York State Urban Development
Corp., Series 1991-2, (Correctional
Capital Facilities), 7.50%, 1/1/18,
Prerefunded at 102% of Par 11,247,490
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------------------
$13,090,000 Port Authority of New York & New Jersey,
4.60%, 12/1/00 $ 13,090,000
26,200,000 Triborough Bridge & Tunnel Auth.,
Series 1999 C, (General Purpose), VRDN,
3.80%, 12/7/00 (AMBAC) 26,200,000
88,530,000 Tsasc Inc., Series 2000 PA-797, VRDN,
4.32%, 12/5/00 88,530,000
-------------------------------
338,409,486
-------------------------------
NORTH CAROLINA - 2.4%
100,000 Charlotte Airport Rev., Series 1993-A,
VRDN, 4.10%, 12/6/00 (MBIA) 100,000
2,100,000 Durham Water & Sewer Utility System
Rev., VRDN, 4.20%, 12/6/00 2,100,000
9,180,000 Mecklenburg County, Series 2000 PA-710,
4.22%, 12/7/00 9,180,000
7,500,000 North Carolina State, Series 1997 A, 5.10%,
3/1/01 7,519,279
17,050,000 North Carolina State, Series 2000-14, VRDN,
4.30%, 12/7/00 17,050,000
6,000,000 North Carolina Educational Facilities Finance
Agency, (Bowman Grey Medical Project
School), VRDN, 4.10%, 12/6/00
(LOC: Wachovia Bank) 6,000,000
9,100,000 North Carolina Educational Facilities Finance
Agency, (Bowman Grey School Medical
Project), VRDN, 4.10%, 12/7/00 (LOC:
Wachovia B&T Co. N.A.) 9,100,000
10,310,000 North Carolina Educational Facilities Finance
Agency, (Elon College), VRDN, 4.15%,
12/6/00 (LOC: Bank of America N.A.) 10,310,000
11,600,000 North Carolina Educational Facilities Finance
Agency, Series 1992 (Duke A, University
Project), VRDN, 4.30%, 12/1/00 11,600,000
-------------------------------
72,959,279
-------------------------------
OHIO - 0.9%
4,800,000 Cleveland Income Tax Rev., VRDN, 4.10%,
12/6/00 (AMBAC) 4,800,000
20,000,000 Ohio, Series 1998 C, (Highway Capital
Improvement), VRDN, 4.50%, 5/1/01 20,021,023
2,200,000 Ohio Air Quality Development Auth.,
Series 1995 A, (Cincinnati Gas & Electric),
VRDN, 4.25%, 12/1/00 (LOC: Barclays
Bank Plc) 2,200,000
-------------------------------
27,021,023
-------------------------------
OREGON - 0.3%
10,000,000 Multnomah County, Series 2000 R-17,
VRDN, 4.22%, 12/7/00 10,000,000
-------------------------------
PENNSYLVANIA - 1.3%
15,800,000 Delaware Valley Regional Financial Auth.,
Series 1985 C, VRDN, 4.15%, 12/6/00
(LOC: CS First Boston) 15,800,000
12,000,000 Delaware Valley Regional Financial Auth.,
Series 1985 D, VRDN, 4.15%, 12/6/00
(LOC: CS First Boston) 12,000,000
7,190,000 Pennsylvania Intergovernmental Cooperative
Auth., 144A, Series 1995 SG-16, VRDN,
4.15%, 12/7/00 7,190,000
The Accompanying Notes are an Integral Part of the Financial Statements.
17
THE TAX EXEMPT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 2000
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------------------
>
$6,000,000 Pittsburgh, Series 1996 SG-71, VRDN,
4.15%, 12/7/00 $ 6,000,000
-------------------------------
40,990,000
-------------------------------
RHODE ISLAND - 0.8%
5,400,000 Rhode Island, Series 1999 B, (Conservation
Capital Development Loan), VRDN, 4.00%,
12/7/00 5,400,000
20,365,000 Rhode Island State & Providence Plantations,
Series 2000 A, (Conservation Capital
Development Loan), VRDN, 4.00%, 12/7/00 20,365,000
-------------------------------
25,765,000
-------------------------------
SOUTH CAROLINA - 1.4%
15,600,000 South Carolina State Public Service Auth. Rev.,
FLOATER, 4.30%, 12/6/00 (FGIC) 15,600,000
9,300,000 South Carolina, Series 2000-7, VRDN, 4.22%,
12/7/00 (State Aid Withholding) 9,300,000
17,900,000 South Carolina State Public Service Auth.
Rev., Series 1991 B, 7.10%, 7/1/01,
Prerefunded at 102% of Par 18,531,882
-------------------------------
43,431,882
-------------------------------
TENNESSEE - 0.7%
2,100,000 Bradley County Industrial Development
Board Industrial Rev., Series 1993 C
(Olin Corp. Project), VRDN, 4.20%,
12/1/00 (LOC: Wachovia Bank) 2,100,000
10,000,000 State of Tennessee CP, 4.20%, 12/8/00 10,000,000
9,600,000 State of Tennessee CP, 4.30%, 12/12/00 9,600,000
-------------------------------
21,700,000
-------------------------------
TEXAS - 9.7%
20,000,000 City of Houston CP, 4.40%, 5/10/01 20,000,000
6,355,000 Dallas Water Works & Sewers CP, 4.35%,
12/13/00 6,355,000
10,000,000 Dallas Water Works & Sewers CP, 4.45%,
12/13/00 10,000,000
3,000,000 Houston, Series 2000-728R, VRDN, 4.22%,
12/7/00 3,000,000
17,500,000 Houston Airport System Rev., Series
2000 SG-149, VRDN, 4.22%, 12/7/00 (FSA) 17,500,000
28,600,000 Houston Water & Sewer System Rev.,
Series 1997 SG-120, 4.22%, 12/7/00 28,600,000
7,700,000 Houston Water & Sewer System Rev.,
Series 1999 A-29, Registered D, VRDN,
4.30%, 12/6/00 (FGIC) 7,700,000
17,050,000 New Caney Independent School District,
Series 2000 SG-142, VRDN, 4.22%,
12/7/00 (PSF) 17,050,000
6,000,000 Spring Independent School District, Series
2000 PA-714, VRDN, 4.22%, 12/7/00 (PSF) 6,000,000
39,400,000 Texas, Series 2000 A-18-TRS, Registered D,
VRDN, 4.65%, 12/1/00 39,400,000
4,200,000 Texas, Series 2000-290, VRDN, 4.22%,
12/7/00, Prerefunded at 100% of Par 4,200,000
99,375,000 Texas, Tax & Revenue Anticipation Notes,
5.25%, 8/31/01 100,074,979
485,000 Texas, (Veterans Housing Assistance), VRDN,
4.10%, 12/6/00 (VA Guaranteed) 485,000
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------------------
$ 19,000,000 Texas Public Finance Auth. CP, 4.35%,
1/16/01 $ 19,000,000
17,575,000 Texas Turnpike Auth., Series 2000 N-2-TRS,
Registered D, VRDN, 4.30%, 12/6/00 17,575,000
-------------------------------
296,939,979
-------------------------------
UTAH - 0.7%
11,800,000 Intermountain Power Agency CP, 4.35%,
2/13/01 11,800,000
6,550,000 Salt Lake City Airport Rev., Series
1999 A10, Registered D, VRDN,
4.30%, 12/6/00 (FGIC) 6,550,000
4,025,000 Utah Housing Finance Agency, Series 2000-1,
(Single Family Mortgage), VRDN, 4.20%,
12/6/00 4,025,000
-------------------------------
22,375,000
-------------------------------
VERMONT - 0.2%
5,700,000 Vermont Student Assistance Corp.
Student Loan Rev., VRDN, 4.40%,
12/1/00 (LOC: State Street B&T Co.) 5,700,000
-------------------------------
VIRGINIA - 1.2%
23,590,000 Virginia Commonwealth Transportation
Board Transportation Rev., Series 2000
SG-137, VRDN, 4.22%, 12/7/00 23,590,000
11,385,000 Virginia Public School Auth., Series
2000 PT-431, VRDN, 4.15%, 12/7/00 11,385,000
2,500,000 York County Industrial Development Auth.
Pollution Control Rev., (Virginia Electric &
Power Co.), VRDN, 4.50%, 12/1/00 2,500,000
-------------------------------
37,475,000
-------------------------------
WASHINGTON - 5.2%
1,500,000 Lewis County Public Utility District No. 1,
(Cowlitz Falls Hydro Project), 7.00%,
10/1/01, VRDN, Prerefunded at 102% of Par 1,560,847
36,140,000 Port of Seattle Rev., Series 1999 A
(Sub Lien), VRDN, 4.25%, 12/7/00
(LOC: Commerzbank A.G.) 36,140,000
19,885,000 Seattle Drain & Wastewater Utility Rev.,
Series 2000 SG-135, VRDN, 4.22%,
12/7/00 (MBIA) 19,885,000
7,495,000 Seattle Municipal Light & Power Rev.,
Series 2000 PT-422, VRDN, 4.22%, 12/7/00 7,495,000
6,915,000 Seattle Municipality of Metropolitan Seattle,
Series 2000 PA-731R, VRDN, 4.22%,
12/7/00 (AMBAC) 6,915,000
9,900,000 Seattle Water System Rev., VRDN, 4.15%,
12/6/00 (LOC: Bayerische Landesbank) 9,900,000
8,000,000 Tacoma Electric System Rev., (Linked
Savers & Ribs), 6.51%, 12/5/00,
Prerefunded at 102% of Par (AMBAC) 8,173,655
7,000,000 Washington, Series 1995 SG-37, VRDN,
4.22%, 12/7/00 7,000,000
32,400,000 Washington, Series 1996 A-VR, VRDN,
4.00%, 12/6/00 32,400,000
5,000,000 Washington Public Power Supply System,
Series 1990 C, 7.38%, 7/1/01, Prerefunded
at 102% of Par (FGIC) 5,112,131
The Accompanying Notes are an Integral Part of the Financial Statements.
18
THE TAX EXEMPT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 2000
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------------------
$ 5,000,000 Washington Public Power Supply System,
Series 1991 A, 6.88%, 7/1/01, Prerefunded
at 102% of Par $ 5,170,032
17,235,000 Washington Public Power Supply
System Project No. 2 Electric Rev., Series
1998 2A-1, VRDN, 4.10%, 12/6/00 (MBIA) 17,235,000
-------------------------------
156,986,665
-------------------------------
WEST VIRGINIA - 0.0%(z)
1,400,000 Marshall County Rev., (Bayer Corp.
Project), VRDN, 4.25%, 12/1/00 1,400,000
-------------------------------
WISCONSIN - 0.7%
7,020,000 State of Wisconsin CP, 4.35%, 3/6/01 7,020,000
5,830,000 Wisconsin Clean Water Rev., Series
2000 PA-718, VRDN, 4.22%, 12/7/00,
Prerefunded at 100% of Par 5,830,000
8,630,000 Wisconsin Health & Education Facilities
Auth., (St. Lukes Medical Center),
VRDN, 4.20%, 12/6/00 (LOC: Bank One
Chicago N.A.) 8,630,000
-------------------------------
21,480,000
-------------------------------
WYOMING - 1.3%
7,510,000 Gillette Pollution Control Rev., VRDN,
4.25%,12/6/00 (LOC: Commerzbank A.G.) 7,510,000
32,000,000 Sweetwater County Pollution Control
Rev., Series 1990 A, (Pacificorp),
VRDN, 4.10%, 12/6/00 (LOC:
Commerzbank A.G.) 32,000,000
-------------------------------
39,510,000
-------------------------------
OTHER - 9.0%
31,495,000 ABN Amro Munitops Certificate Trust, Series
1999-6, VRDN, 4.23%, 12/6/00 (PSF) 31,495,000
10,000,000 ABN Amro Munitops Certificate Trust,
144A, Series 1999-9, VRDN, 4.23%,
12/6/00 (PSF) 10,000,000
16,610,000 ABN Amro Munitops Certificate Trust,
144A, Series-4, VRDN, 4.23%, 12/6/00
(FGIC) 16,610,000
6,650,000 ABN Amro Munitops Certificate Trust,
144A, Series 2000-10, VRDN, 4.23%,
12/7/00 (MBIA) 6,650,000
14,990,000 ABN Amro Munitops Certificate Trust, Series
2000-11, VRDN, 4.30%, 12/6/00 (PSF) 14,990,000
14,185,000 ABN Amro Munitops Certificate Trust, Series
2000-13, VRDN, 4.35%, 2/1/01 (PSF) 14,185,000
30,795,000 ABN Amro Munitops Certificate Trust, Series
2000-16, VRDN, 4.45%, 12/1/00 (FGIC) 30,795,000
12,140,000 IBM Tax Exempt Grantor, 4.37%, 12/7/00 12,140,000
137,960,000 Puttable Floating Tax Exempt Receipts, 4.65%,
1/31/01 137,960,000
-------------------------------
274,825,000
-------------------------------
TOTAL INVESTMENTS AT AMORTIZED COST
AND VALUE - 100.0% $3,048,387,351
===============================
AMBAC - AMBAC Assurance Corporation
COP - Certificates of Participation
CP - Commercial Paper
FGIC - Financial Guaranty Insurance Co.
FHA - Federal Housing Authority
FNMA - Federal National Mortgage Association
FSA - Financial Security Assurance Inc.
GO - General Obligation
LOC - Letter of Credit
MBIA - MBIA Insurance Corp.
PSF - Permanent School Fund
VRDN - Variable Rate Demand Note. Interest reset date is indicated and used in
(s) calculating the weighted average portfolio maturity. Rate shown is effective
November 30, 2000.
144A - Securities restricted for resale to Qualified Institutional Buyers.
(z) Category is less than 0.05% of total investment securities.
The Accompanying Notes are an Integral Part of the Financial Statements.
19
THE TAX EXEMPT MONEY MARKET PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
NOVEMBER 30, 2000
ASSETS
Investments at Amortized Cost and Value
$3,048,387,351
Cash 463,501
Receivable for Investment Sold 25,286,196
Interest Receivable 25,845,117
Prepaid Trustees' Fees and Expenses 3,422
Prepaid Expenses and Other Assets 4,234
------------------
TOTAL ASSETS 3,099,989,821
------------------
LIABILITIES
Payable for Investments Purchased 30,795,000
Advisory Fee Payable 332,434
Administrative Service Fee Payable 58,386
Fund Services Fee Payable 1,884
Administration Fee Payable 520
Accrued Expenses and Other Liabilities 62,866
-----------------
TOTAL LIABILITIES 31,251,090
-----------------
NET ASSETS
Applicable to Investors' Beneficial Interests $3,068,738,731
=================
The Accompanying Notes are an Integral Part of the Financial Statements.
20
THE TAX EXEMPT MONEY MARKET PORTFOLIO
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
FOR THE YEAR ENDED NOVEMBER 30, 2000
INVESTMENT INCOME
INCOME
Interest Income $103,685,089
-------------
EXPENSES
Advisory Fee 3,549,154
Administrative Services Fee 609,231
Custodian Fees and Expenses 276,937
Professional Fees 51,912
Fund Services Fee 38,016
Administration Fee 16,111
Trustees' Fees and Expenses 27,619
Printing Expenses 11,251
Insurance Expenses 5,021
Miscellaneous 494
-------------
Total Expenses 4,585,746
-------------
NET INVESTMENT INCOME 99,099,343
-------------
NET REALIZED LOSS ON INVESTMENT TRANSACTIONS (30,651)
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $99,068,692
=============
The Accompanying Notes are an Integral Part of the Financial Statements.
21
THE TAX EXEMPT MONEY MARKET PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
FOR THE YEARS ENDED NOVEMBER 30 AND AUGUST 31 (EXCEPT AS NOTED)
INCREASE IN NET ASSETS 2000 1999(a) 1999(b)
FROM OPERATIONS
Net Investment Income $ 99,099,343 $ 16,790,180 $ 61,617,426
Net Realized Loss on Investments (30,651) (242,070) (34,717)
---------------- ----------------- -----------------
Net Increase in Net Assets Resulting from Operations 99,068,692 16,548,110 61,582,709
---------------- ----------------- -----------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 12,072,050,659 2,001,929,620 9,900,983,737
Withdrawals (11,168,958,728) (2,016,389,311) (9,742,212,684)
----------------- ---------------- -----------------
Net Increase (Decrease) from Investors' Transactions 903,091,931 (14,459,691) 158,771,053
----------------- ---------------- -----------------
Total Increase in Net Assets 1,002,160,623 2,088,419 220,353,762
----------------- ---------------- ------------------
NET ASSETS
Beginning of Period 2,066,578,108 2,064,489,689 1,844,135,927
---------------- ---------------- ------------------
End of Period $ 3,068,738,731 $ 2,066,578,108 $ 2,064,489,689
================ ================ ==================
SUPPLEMENTARY DATA
FOR THE YEARS ENDED NOVEMBER 30 FOR THE YEARS ENDED AUGUST 31
----------------------------------- ----------------------------------------
2000 1999(A) 1999 1998 1997 1996
----------------------------------- -----------------------------------------
RATIOS TO AVERAGE NET ASSETS
Expenses 0.18% 0.20%(c) 0.20% 0.22% 0.24% 0.25%
Net Investment Income 3.89% 3.29%(c) 3.00% 3.38% 3.34% 3.40%
(a) For the three months ended November 30, 1999
(b) For the year ended August 31, 1999
(c) Annualized
The Accompanying Notes are an Integral Part of the Financial Statements.
22
THE TAX EXEMPT MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOVEMBER 30, 2000
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION--The Tax Exempt 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 January 29, 1993. The Portfolio
commenced operations on July 12, 1993. The Portfolio's investment objective is
to provide a high level of current income exempt from federal income tax and
maintain a high level of liquidity. 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 accounting
principles generally accepted in the United States of America 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:
SECURITY VALUATIONS--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.
SECURITY TRANSACTIONS--Security transactions are accounted for as of the
trade date. Realized gains and losses are determined on the identified cost
basis, which is also used for federal income tax purposes.
INVESTMENT INCOME--Interest income is recorded on the accrual basis and
includes accretion of discounts and amortization of premiums.
INCOME TAX STATUS--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.
- --------------------------------------------------------------------------------
2. TRANSACTIONS WITH AFFILIATES
ADVISORY--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 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.
ADMINISTRATIVE SERVICES--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 registered investment companies for which JPMIM acts as
investment advisor 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 Funds Distributor, Inc. 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 Trust and certain other investment
companies for which Morgan provides similar services.
ADMINISTRATION--The Portfolio has retained Funds Distributor, Inc. ("FDI"),
a registered broker-dealer, to serve as the co-administrator and distributor for
the Fund. 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 Portfolio's 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 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 Trust and
certain other investment companies for which FDI provides similar services.
23
THE TAX EXEMPT MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 2000
- --------------------------------------------------------------------------------
2. TRANSACTIONS WITH AFFILIATES (CONTINUED)
FUND SERVICES--The Portfolio has a Fund Services Agreement with Pierpont
Group, Inc. ("PGI") 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 PGI.
TRUSTEES--Each Trustee receives an aggregate annual fee of $75,000 for
serving on the boards of the Trust, the J.P. Morgan Funds, the J.P. Morgan
Institutional Funds, and other registered investment companies in which they
invest. The Trustees' Fees and Expenses shown in the financial statements
represent the Fund's allocated portion of the total Trustees' fees and expenses.
The Trust's Chairman and Chief Executive Officer also serves as Chairman of PGI
and receives compensation and employee benefits from PGI. The allocated portion
of such compensation and benefits included in the Fund Services Fee shown on
the Statement of Operations was $7,220.
- --------------------------------------------------------------------------------
3. SUBSEQUENT EVENT
The merger of J.P. Morgan & Co. Incorporated, the former parent company of
the Portfolio's adviser, J.P. Morgan Investment Management, Inc. ("JPMIM"), with
and into The Chase Manhattan Corporation was consummated on December 31, 2000.
J.P. Morgan Chase & Co. will be the new parent company of JPMIM, which will
continue to serve as the Portfolio's adviser.
24
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Trustees and Investors of
The Tax Exempt 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 Tax Exempt Money Market Portfolio (the
"Portfolio") at November 30, 2000, the results of its operations for the year
then ended, the changes in its net assets for the year then ended, for the three
months ended November 30, 1999 and for the year ended August 31, 1999 and the
supplementary data for the year then ended, for the three months ended November
30, 1999 and for each of the four years in the period ended August 31, 1999, in
conformity with accounting principles generally accepted in the United States of
America. These financial statements and financial highlights (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 of America, 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, 2000 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
New York, New York
January 16, 2001
25
NOTES
- --------------------------------------------------------------------------------
26
NOTES
- --------------------------------------------------------------------------------
27
NOTES
- --------------------------------------------------------------------------------
28
[back cover]
J.P. MORGAN INSTITUTIONAL SERVICE FUNDS
Prime Money Market Fund
---------------------------------------------------------------------
Treasury Money Market Fund
---------------------------------------------------------------------
Federal Money Market Fund
---------------------------------------------------------------------
Tax Exempt Money Market Fund
---------------------------------------------------------------------
For more information on the J.P. Morgan
Institutional Funds, call J.P.
Morgan Funds Services at (800) 766-7722.
---------------------------------------------------------------------
Morgan Guaranty Trust Company MAILING
500 Stanton Christiana Road INFORMATION
Newark, Delaware 19713-2107