<PAGE>
JPM INSTITUTIONAL MONEY MARKET FUND The
JPM INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND JPM
JPM INSTITUTIONAL TREASURY MONEY MARKET FUND Institutional
JPM INSTITUTIONAL SHORT TERM BOND FUND Tax Exempt
JPM INSTITUTIONAL BOND FUND Money Market
JPM INSTITUTIONAL TAX EXEMPT BOND FUND Fund
JPM INSTITUTIONAL NEW YORK TOTAL RETURN BOND FUND
JPM INSTITUTIONAL DIVERSIFIED FUND
JPM INSTITUTIONAL SELECTED U.S. EQUITY FUND
JPM INSTITUTIONAL U.S. SMALL COMPANY FUND
JPM INSTITUTIONAL INTERNATIONAL EQUITY FUND
JPM INSTITUTIONAL EMERGING MARKETS EQUITY FUND
FOR MORE INFORMATION ON HOW THE JPM ANNUAL REPORT
INSTITUTIONAL FAMILY OF FUNDS CAN HELP YOU PLAN AUGUST 31, 1994
FOR YOUR FUTURE, CALL J.P. MORGAN FUNDS SERVICES
AT (800) 766-7722.
<PAGE>
LETTER TO THE SHAREHOLDERS OF THE JPM INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND
October 17, 1994
Dear Shareholder:
We are pleased to report the positive performance results achieved by The JPM
Institutional Tax Exempt Money Market Fund (the "Fund") for the fiscal year
ended August 31, 1994.
Your investment advisor, Morgan Guaranty, manages the Fund to provide a high
level of current tax exempt income while also maintaining a high level of
liquidity. For the fiscal year ended August 31, 1994, the Fund provided a total
return of 2.30%, versus a 2.00% total return for its Donoghue's Tax Free Money
Market Fund benchmark during the same period.
During the fiscal year ended August 31, 1994, the Fund paid $0.02 per share in
dividends exempt from federal income taxes. The Fund's net assets stood at
$46,083,359 at the end of the reporting period, up from the $35,003,766 held by
the Fund on August 31, 1993. The net assets of The Tax Exempt Money Market
Portfolio (the "Portfolio"), in which the Fund invests, totaled $1,021,846,224
at August 31, 1994.
FISCAL YEAR REVIEW
The fiscal year saw the implementation of long-awaited increases in the Fed
funds rate. These increases came in five stages, most recently in August, and
totaled 1.75% -- leaving the Fed funds rate at 4.75% by the end of this
reporting period, up from the 3.00% rate it had maintained since September 1992.
This activity by the Fed caused a general increase in money market rates,
ranging from overnight funds to one-year securities. The Portfolio's average
maturity stood at 70.3 days as of August 31, 1994.
INVESTMENT OUTLOOK
Going forward, the Portfolio plans to pursue an appropriate average maturity
target, investing in securities that represent no more than minimal credit risk.
Given this framework, our ongoing objectives will be to participate in maximized
tax exempt yield opportunities whenever possible.
As always, we welcome your comments or questions. Please call J.P. Morgan Funds
Services toll free at
(800) 766-7722.
Sincerely yours,
Evelyn E. Guernsey
J.P. Morgan Fund Services
<TABLE>
<S> <C> <C> <C>
TABLE OF CONTENTS
Letter to the shareholders........... 1 Fund performance..................... 3
Fund facts and highlights............ 2 Financial statements................. 5
</TABLE>
1
<PAGE>
FUND FACTS
INVESTMENT OBJECTIVE
The JPM Institutional Tax Exempt Money Market Fund seeks to provide a high level
of current income that is exempt from federal income tax and to maintain a high
level of liquidity. It is designed for investors who seek current income exempt
from income tax, stability of capital and liquidity.
- -------------------------------------------
INCEPTION DATE
7/12/93
- -------------------------------------------
NET ASSETS AS OF 8/31/94 ($ MILLIONS)
46
- -------------------------------------------
DIVIDEND PAYABLE DATE
MONTHLY
- -------------------------------------------
CAPITAL GAIN PAYABLE DATE (IF APPLICABLE)
12/15/94
EXPENSE RATIO
The Fund's current annual expense ratio of 0.35% covers shareholder's 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 dividend or redemption proceeds from the
Fund.
FUND HIGHLIGHTS
(ALL DATA AS OF AUGUST 31, 1994)
SECTOR ALLOCATION
Pie chart depicting the allocation of the Fund's investment
securities held at August 31, 1994 by investment categories. The
pie is broken in pieces representing investment categories in the
following percentages:
<TABLE>
<CAPTION>
INVESTMENT CATEGORY PERCENTAGE
<S> <C>
Demand notes 62.1%
Revenue bonds 15.1%
Notes 6.8%
Commercial paper 6.2%
Third party put bonds 6.1%
General obligation bonds 5.1%
Warrants 0.1%
Other (1.5)%
</TABLE>
<TABLE>
<CAPTION>
LARGEST HOLDINGS % OF PORTFOLIO
<S> <C>
NATIONAL WESTMINSTER BANK* 5.9
F.G.I.C. INSURED* 5.9
SWISS BANK CORP.* 5.7
ILLINOIS GENERAL OBLIGATIONS 4.3
OKLAHOMA STATE WATER RESERVE 4.2
</TABLE>
AVERAGE 7-DAY YIELD
2.98%
MATURITY
70.3 days
QUALITY BREAKDOWN
<TABLE>
<S> <C>
AAA 93.2%
Other 6.8%
</TABLE>
*THESE INSTITUTIONS PROVIDE CREDIT ENHANCEMENTS FOR VARIOUS MUNICIPAL SECURITIES
HELD IN THE PORTFOLIO.
2
<PAGE>
FUND PERFORMANCE
EXAMINING PERFORMANCE
One way to look at performance is to review a fund's average annual total
returns; these figures represent the average yearly change of the fund's value
over various time periods, typically 1, 5 or 10 years (or since inception if a
fund has not existed for one or more of those periods). For example, a
hypothetical fund whose value increased by 2.0% in 1992 and 4.0% in 1993 had an
average annual total return of 3.0% over the two-year period. Total returns for
periods of less than one year can also provide a picture of how a fund has
performed in the short term.
<TABLE>
<CAPTION>
PERFORMANCE TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS
--------------------------------------------------------
THREE YEAR ONE FIVE TEN
AS OF AUGUST 31, 1994 MONTHS TO DATE YEAR YEARS YEARS
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
The JPM Institutional Tax Exempt Money 0.63% 1.55% 2.30% 3.60% 4.27%
Market Fund
Donoghue's Tax Free Money Market 0.54% 1.34% 2.00% 3.41% 4.06%
Fund Average
Micropal Municipal Money Market 0.62% 1.51% 2.15% 3.67% 4.32%
Fund Average
<CAPTION>
AS OF JUNE 30, 1994
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
The JPM Institutional Tax Exempt Money 0.59% 1.11% 2.21% 3.72% 4.33%
Market Fund
Donoghue's Tax Free Money Market 0.52% 0.97% 1.94% 3.52% N/A
Fund Average
Micropal Municipal Money Market 0.59% 1.04% 2.02% 3.66% 4.39%
Fund Average
</TABLE>
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. ALL RETURNS ASSUME THE
REINVESTMENT OF DISTRIBUTIONS AND REFLECT REIMBURSEMENT OF CERTAIN FUND AND
PORTFOLIO EXPENSES AS DESCRIBED IN THE PROSPECTUS.
THE MICROPAL MUTUAL FUND RATING SERVICE IS A LEADING RESOURCE FOR MUTUAL FUND
DATA. MICROPAL CONTAINS PERFORMANCE INFORMATION AND PORTFOLIO CHARACTERISTICS
FOR OVER 20,000 FUNDS WORLDWIDE, INCLUDING NEARLY 5,000 IN THE U.S. THE JPM
INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND INVESTS ALL OF ITS INVESTABLE ASSETS
IN THE TAX EXEMPT MONEY MARKET PORTFOLIO, A SEPERATELY REGISTERED INVESTMENT
COMPANY WHICH IS NOT AVAILABLE TO THE PUBLIC BUT ONLY TO OTHER COLLECTIVE
INVESTMENT VEHICLES SUCH AS THE FUND.
3
<PAGE>
MORGAN SERVES AS PORTFOLIO INVESTMENT ADVISOR AND MAKES THE FUND AVAILABLE
SOLELY IN ITS CAPACITY AS SHAREHOLDER SERVICING AGENT FOR CUSTOMERS. THE FUND'S
DISTRIBUTOR IS SIGNATURE BROKER-DEALER SERVICES, INC. INVESTMENTS IN THE FUND
ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, MORGAN
GUARANTY TRUST COMPANY OF NEW YORK OR ANY OTHER BANK. SHARES OF THE FUND ARE NOT
FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER GOVERNMENTAL AGENCY. ALTHOUGH THE JPM INSTITUTIONAL
TAX EXEMPT MONEY MARKET FUND SEEKS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00
PER SHARE, THERE CAN BE NO ASSURANCE THAT IT WILL BE ABLE TO CONTINUE TO DO SO.
The performance data quoted herein represent past performance. Please remember
that past performance is not a guarantee of future performance. Fund returns are
net of fees. All returns assume the reinvestment of Fund distributions and
reflect the reimbursement of certain Fund expenses as described in the
Prospectus. The JPM Institutional Tax Exempt Money Market Fund, which commenced
operations in July, 1993, invests all of its investable assets in The Tax Exempt
Money Market Portfolio, a separately registered investment company which is not
available to the public but only to other collective investment vehicles such as
the Fund. Consistent with applicable regulatory guidance, performance for the
period prior to The JPM Institutional Tax Exempt Money Market Fund's inception
reflects the performance of The Pierpont Tax Exempt Money Market Fund, the
predecessor entity to the Tax Exempt Money Market Portfolio, which had
substantially similar investment objectives and restrictions as the Portfolio.
The performance for this prior period reflects deduction of the charges and
expenses of The Pierpont Tax Exempt Money Market Fund, which were higher than
the estimated charges and expenses for The JPM Institutional Tax Exempt Money
Market Fund, after reimbursement. Donoghue's Tax Free Money Market Fund Average
is an average of all major money market fund returns. This comparative
information is available to the public from the IBC/Donoghue Organization, Inc.
No representation is made that information gathered from this source is accurate
or complete.
MORE COMPLETE INFORMATION ABOUT THE FUND, INCLUDING MANAGEMENT FEES AND OTHER
EXPENSES, IS PROVIDED IN THE PROSPECTUS, WHICH SHOULD BE READ CAREFULLY BEFORE
INVESTING. YOU MAY OBTAIN A COPY OF THE PROSPECTUS BY CALLING (800) 766-7722.
4
<PAGE>
THE JPM INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS
Investment in The Tax Exempt Money Market Portfolio ("Portfolio"), at
value $46,078,793
Receivable for Expense Reimbursements 89,245
Deferred Organization Expense (Note 1d) 45,181
Prepaid Expenses 221
----------
Total Assets 46,213,440
----------
LIABILITIES
Dividend Payable to Shareholders 55,572
Shareholder Servicing Fee Payable (Note 2c) 20,855
Administration Fee Payable (Note 2a) 5,854
Fund Services Fee Payable (Note 2d) 176
Trustees' Fees and Expenses Payable (Note 2e) 2,000
Accrued Expenses 45,624
----------
Total Liabilities 130,081
----------
NET ASSETS
Applicable to 46,084,794 Shares of Beneficial Interest Outstanding
(par value $0.001) $46,083,359
----------
----------
Net Asset Value, Offering and Redemption Price Per Share $1.00
----------
----------
ANALYSIS OF NET ASSETS
Paid-in Capital $46,084,794
Accumulated Net Realized Loss on Investment (1,101)
Distribution in Excess of Net Realized Gain (334)
----------
Net Assets $46,083,359
----------
----------
</TABLE>
See Accompanying Notes.
5
<PAGE>
THE JPM INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME ALLOCATED FROM PORTFOLIO (NOTE 1B)
Allocated Interest Income $ 545,179
Allocated Portfolio Expenses (51,483)
---------
Net Investment Income Allocated from Portfolio 493,696
FUND EXPENSES
Shareholder Servicing Fee (Note 2c) $ 22,282
Administration Fee (Note 2a) 5,854
Fund Services Fee (Note 2d) 1,745
Trustees' Fees and Expenses (Note 2e) 10,729
Registration Fees 32,454
Printing 21,763
Professional Fees 12,757
Transfer Agent Fee 22,971
Amortization of Organization Expense (Note 1d) 13,316
Miscellaneous 7,142
---------
Total Fund Expenses 151,013
Less: Reimbursements of Expenses (Note 2b) (131,607)
---------
NET FUND EXPENSES 19,406
---------
NET INVESTMENT INCOME 474,290
NET REALIZED LOSS ALLOCATED FROM PORTFOLIO (883)
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 473,407
---------
---------
</TABLE>
See Accompanying Notes.
6
<PAGE>
THE JPM INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 12, 1993
FOR THE FISCAL (COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO
AUGUST 31, 1994 AUGUST 31, 1993
--------------- -------------------
<S> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS
Net Investment Income $ 474,290 $ 56,095
Net Realized Loss allocated from Portfolio (883) (218)
--------------- -------------------
Net Increase in Net Assets Resulting from Operations 473,407 55,877
--------------- -------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (474,290) (56,095)
In Excess of Net Realized Gain (334) 0
--------------- -------------------
Total Distributions (474,624) (56,095)
--------------- -------------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST (AT A CONSTANT $1.00 PER
SHARE)
Proceeds from Shares of Beneficial Interest Sold 73,193,632 35,003,884
Reinvestment of Dividends 445,438 0
Cost of Shares of Beneficial Interest Redeemed (62,558,260) 0
--------------- -------------------
Net Increase from Transactions in Shares of Beneficial Interest 11,080,810 35,003,884
--------------- -------------------
Total Increase in Net Assets 11,079,593 35,003,666
NET ASSETS
Beginning of Period 35,003,766 100
--------------- -------------------
End of Period $ 46,083,359 $ 35,003,766
--------------- -------------------
--------------- -------------------
</TABLE>
See Accompanying Notes.
7
<PAGE>
THE JPM INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share outstanding throughout each period are as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 12, 1993
FOR THE FISCAL (COMMENCEMENT OF
YEAR ENDED OPERATIONS)
AUGUST 31, 1994 TO AUGUST 31, 1993
--------------- -------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00
-------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.0228 0.0040
Net Realized Loss allocated from Portfolio (0.0000)(c) (0.0000)(c)
-------- --------
Total from Investment Operations 0.0228 0.0040
-------- --------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (0.0228) (0.00400)
--------- --------
(0.0228) (0.00400)
--------- --------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00
--------- --------
--------- --------
Total Return 2.30% 0.40%(b)
RATIOS AND SUPPLEMENTAL DATA
Net Assets at end of Period (in thousands) $ 46,083 $ 35,004
Ratios to Average Net Assets:
Expenses 0.35% 0.35%(a)
Net Investment Income 2.34% 2.25%(a)
Decrease reflected in above Expense ratios due to Reimbursements by
Morgan 0.65% 1.08%(a)
<FN>
(a) Annualized.
(b) Not Annualized.
(c) Less than $0.0001
</TABLE>
See Accompanying Notes.
8
<PAGE>
THE JPM INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1994
- --------------------------------------------------------------------------------
The JPM Institutional Tax Exempt Money Market Fund (the "Fund") is a separate
series of The JPM Institutional Funds, which was organized on November 4, 1992
as a Massachusetts business trust (the "Trust"). The Trust is registered under
the Investment Company Act of 1940, as amended, as a diversified open-end
management investment company. The Fund commenced operations on July 12, 1993.
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 objectives as the Fund. The value of such
investment reflects the Fund's proportionate interest in the net assets of the
Portfolio (4.5% at August 31, 1994). 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.
1. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of the significant accounting policies of the Fund:
a)Valuation of securities by the Portfolio is discussed in Note 1 of the
Portfolio's Notes to Financial Statements which are included elsewhere in
this report.
b)The Fund records its share of net investment income, realized gain and
loss and adjusts its investment in the Portfolio each day. All the net
investment income and realized gain and loss of the Portfolio is allocated
pro rata among the Fund and the other investors in the Portfolio at the
time of such determination.
c)All the Fund's net investment income is declared as dividends daily and
paid monthly. Distributions to shareholders of net realized capital gain,
if any, are declared and paid annually.
d)The Fund incurred organization expenses in the amount of $59,872. These
costs were deferred and are being amortized by the Fund on a straight-line
basis over a five-year period from the commencement of operations.
e)Each series of the Trust is treated as a separate entity for federal
income tax purposes. The Fund's policy is to comply with the provisions of
the Internal Revenue Code of 1986, as amended, applicable to regulated
investment companies and to distribute substantially all of its income,
including net realized capital gains, if any, within the prescribed time
periods. Accordingly, no provision for federal income or excise tax is
necessary.
f)Expenses incurred by the Trust with respect to any two or more funds in
the Trust are allocated in proportion to the net assets of each fund in
the Trust, except where allocations of direct expenses to each fund can
otherwise be made fairly. Expenses directly attributable to a fund are
charged to that fund.
9
<PAGE>
THE JPM INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
2. TRANSACTIONS WITH AFFILIATES:
a)The Trust retains Signature Broker-Dealer Services, Inc. ("Signature") to
serve as Administrator and Distributor. Signature provides administrative
services necessary for the operations of the Fund, furnishes office space
and facilities required for conducting the business of the Fund and pays
the compensation of the Fund's officers affiliated with Signature.
Effective October 1, 1993, Signature receives a fee at an annual rate of
0.04% of the first $1 billion of the aggregate average daily net assets of
the Fund, the other funds in the Trust, The Pierpont Funds, and The JPM
Institutional Plus Fund (the "aggregate funds"), 0.032% of the next $2
billion of the aggregate funds' average daily net assets, 0.024% of the
next $2 billion of the aggregate funds' average daily net assets, and
0.016% of the aggregate funds' average daily net assets in excess of $5
billion. (Prior to October 1, 1993, the administration fee was at the
annual rate of 0.05% of the first $1 billion of the aggregate funds'
average daily net assets, 0.04% of the next $2 billion of the aggregate
funds' average daily net assets, 0.03% of the next $2 billion of the
aggregate funds' average daily net assets, and 0.02% of the aggregate
funds' average daily net assets in excess of $5 billion). For the fiscal
year ended August 31, 1994, the Fund's portion of Signature's fee for
these services amounted to $5,854.
b)The Trust, on behalf of the Fund, has a Financial and Fund Accounting
Services Agreement ("Services Agreement") with Morgan Guaranty Trust
Company of New York ("Morgan") under which Morgan receives a fee, based on
the percentage described below, for overseeing certain aspects of the
administration and operation of the Fund. The Services Agreement is also
designed to provide an expense limit for certain expenses of the Fund. If
total expenses of the Fund, excluding the shareholder servicing fee, the
fund services fee and amortization of organization expenses, exceed the
expense limit of 0.05% of the Fund's average daily net assets, Morgan will
reimburse the Fund for the excess expense amount and receive no fee.
Should such expenses be less than the expense limit, Morgan's fee would be
limited to the difference between such expenses and the fee calculated
under the Services Agreement. For the fiscal year ended August 31, 1994,
Morgan agreed to reimburse the Fund $103,541 for excess expenses. In
addition to the expenses that Morgan assumes under the Services Agreement,
Morgan has agreed to reimburse the Fund to the extent necessary to
maintain the total operating expenses of the Fund, including the expenses
allocated to the Fund from the Portfolio, at no more than 0.35% of the
average daily net assets of the Fund through August 31, 1994. For the
fiscal year ended August 31, 1994, Morgan has agreed to reimburse the Fund
$28,066.
c)The Trust, on behalf of the Fund, has a Shareholder Servicing Agreement
with Morgan. The Agreement provides for the Fund to pay Morgan a fee for
these services which is computed daily and may be paid monthly at an
annual rate of 0.11% of the average daily net assets of the Fund. For the
fiscal year ended August 31, 1994 the fee for these services amounted to
$22,282.
d)Effective January 15, 1994, the Trust, on behalf of the Fund, entered into
a Fund Services Agreement with Pierpont Group, Inc. ("Group") to assist
the Trustees in exercising their overall
10
<PAGE>
THE JPM INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
supervisory responsibilities for the Trust's affairs. The Trustees of the
Trust are the sole shareholders of Group. The Fund's allocated portion of
Group's costs in performing its services amounted to $1,745 for the period
January 15, 1994 to August 31, 1994.
e)An aggregate annual fee of $55,000 is paid to each Trustee for serving as
a Trustee of The Pierpont Funds, The JPM Institutional Funds, The JPM
Institutional Plus Fund and their corresponding Portfolios. The Trustee
fee expense shown in the financial statements represents the Fund's
allocated portion of the total fees and services.
11
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of
The JPM Institutional 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
The JPM Institutional Tax Exempt Money Market Fund (the "Fund") at August 31,
1994, the results of its operations for the year then ended, and the changes in
its net assets and the financial highlights for the year then ended and for the
period July 12, 1993 (commencement of operations) to August 31, 1993, in
conformity with generally accepted accounting principles. 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 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 provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
New York, New York
October 25, 1994
12
<PAGE>
THE TAX EXEMPT MONEY MARKET PORTFOLIO
ANNUAL REPORT AUGUST 31, 1994
(THE FOLLOWING PAGES SHOULD BE READ IN CONJUNCTION
WITH THE JPM INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND
ANNUAL FINANCIAL STATEMENTS)
13
<PAGE>
THE TAX EXEMPT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT SECURITY MATURITY VALUE
(IN THOUSANDS) SECURITY DESCRIPTION TYPE DATE RATE (NOTE 1A)
------------------ ---------------------------------- -------- ----------- ----- --------------
<S> <S> <C> <C> <C> <C>
ALABAMA (6.4%)
$ 10,500 McIntosh, (Industrial Development
Authority, IDR, Ciba Geigy Corp.
Project, Series 1986 ) LOC
Credit Suisse................... VRDN (A) 3.15% $ 10,500,000
9,500 Evergreen, (Industrial Development
Board, IDR, Polyfelt U.S. Inc.
Project, Series 1985) LOC
Creditanstalt-Bankverein........ VRDN (A) 3.37 9,500,000
9,100 Anniston, (Industrial Development
Board, PCR, Monsanto Co.
Project, Series 1992)........... VRDN (A) 3.10 9,100,000
5,925 Decatur County, (Industrial
Development Board, PCR,
Refunding Monsanto Co. Project,
Series 1990).................... VRDN (A) 3.10 5,925,000
5,300 Red Bay County, (Industrial
Development Board, IDR
Refunding, Gates Rubber Co.
Project, Series 1987) LOC
National Bank of Detroit........ VRDN (A) 3.26 5,300,000
9,000 North Alabama, Environmental
Improvement Authority, (PCR,
Reynold Metals Inc., Project,
Series 1985) LOC Bank of Nova
Scotia.......................... VRDN (A) 2.90 9,000,000
4,270 Birmingham, (Medical Clinic Board
St. Martins'-in-the-Pines
Medical Clinic Revenue
Refunding, St. Martins' Project,
Series 1989) LOC Fuji Bank
Ltd............................. VRDN (A) 3.10 4,270,000
3,875 Birmingham, (Medical Clinic Board
St. Martins'-in-the-Pines
Medical Clinic Revenue
Refunding, St. Martins' Project,
Series 1989) LOC First Alabama
Bank............................ VRDN (A) 3.26 3,875,000
2,250 Jefferson County (Public
Improvement Revenue Warrant,
Briarwood Presbyterian Church
Project, Series 1988) LOC
Amsouth Bank.................... VRDN (A) 5.04 2,250,000
2,230 Anniston Solid Waste Disposal
Authority (PCR, Monsanto Co.
Project, Series 1992)........... VRDN (A) 3.10 2,230,000
</TABLE>
See Accompanying Notes.
14
<PAGE>
THE TAX EXEMPT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT SECURITY MATURITY VALUE
(IN THOUSANDS) SECURITY DESCRIPTION TYPE DATE RATE (NOTE 1A)
------------------ ---------------------------------- -------- ----------- ----- --------------
<S> <S> <C> <C> <C> <C>
ALABAMA (CONTINUED)
$ 1,930 Birmingham, (Medical Clinic Board
Baptist Medical Center, Clinic
Revenue Series 1990-A, Western
Medical Systems, Inc. Project)
LOC Fuji Bank Ltd............... VRDN (A) 3.10% $ 1,930,000
1,000 Stevenson, (Industrial Development
Board, Mead Project) LOC Credit
Suisse.......................... VRDN (A) 2.90 1,000,000
600 City of Montgomery, (Finance
Authority, Montgomery Project)
LOC Barclays Bank
International................... VRDN (A) 3.00 600,000
--------------
Total Alabama..................... 65,480,000
--------------
ALASKA (0.7%)
5,295 Alaska, (Industrial Development
and Export Authority, IDR,
American President Lines Ltd.,
Series 1991) LOC Industrial Bank
of Japan Ltd.................... VRDN (A) 3.30 5,295,000
1,485 Alaska, (Industrial Development
Authority, IDR, Providence
Medical Office Building
Associates Project, Series 1985)
LOC Barclay's Bank
International................... VRDN (A) 2.75 1,485,000
--------------
Total Alaska...................... 6,780,000
--------------
ARIZONA (1.1%)
6,600 Maricopa County, (Pollution
Control Corporation, PCR, Public
Service Co. of New Mexico, Palo
Verde Project, Series 1992A) LOC
Canadian Imperial Bank.......... VRDN (A) 3.10 6,600,000
3,200 Tucson, (Industrial Development
Authority, Reliance Group Inc.,
Parking Garage Revenue) LOC
Societe Generale................ VRDN (A) 3.40 3,200,000
1,000 Casa Grande, (Industrial
Development Authority, IDR,
Abbott Labs Project, Series
1983)........................... VRDN (A) 4.26 1,000,000
800 Casa Grande, (Industrial
Development Authority, PCR,
Abbott Labs Project, Series
1984)........................... VRDN (A) 4.26 800,000
--------------
Total Arizona..................... 11,600,000
--------------
</TABLE>
See Accompanying Notes.
15
<PAGE>
THE TAX EXEMPT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT SECURITY MATURITY VALUE
(IN THOUSANDS) SECURITY DESCRIPTION TYPE DATE RATE (NOTE 1A)
------------------ ---------------------------------- -------- ----------- ----- --------------
<S> <S> <C> <C> <C> <C>
ARKANSAS (0.6%)
$ 5,175 Texarkana, (Industrial Development
Board, Cooper Tire and Rubber
Co. Project, Series 1991)....... VRDN (A) 3.90% $ 5,175,000
750 North Little Rock, (IDR,
Refunding, Noland Co. Project,
Series 1989) LOC Wachovia Bank
and Trust....................... VRDN (A) 3.26 750,000
--------------
Total Arkansas.................... 5,925,000
--------------
CALIFORNIA (9.1%)
43,125 California, (Series 1994 - 95A)... RAN 06/28/95 5.00 43,465,471
24,700 Los Angeles County (1994 - 95).... TRAN 06/30/95 4.50 24,808,780
11,000 California, (School Cash Reserve
Program, Authority Primary &
Secondary School Revenue, Series
1994A).......................... RB 07/05/95 4.50 11,066,800
6,000 California Higher Education Loan
Authority, Inc (Student Loan
Revenue Bond Refunding, Series
1987 A, Maturity 06/01/01) LOC
National Westminster Bank PLC... RB 05/01/95(B) 3.60 6,000,000
5,100 California, (PCR, Southern
California Edison, Series 1986
A).............................. VRDN (A) 3.25 5,100,000
2,000 Fresno, (IDR, Fresno MSA Limited
Partnership Project) LOC Bank of
Nova Scotia..................... VRDN (A) 5.04 2,000,000
500 California (Warrants)............. RAW 12/21/94 3.75 500,615
--------------
Total California.................. 92,941,666
--------------
COLORADO (1.1%)
5,300 Denver, (Multi-Family Housing
Revenue, Lincoln Cottonwood
Creek Limited Partnership,
Series 1989A) LOC Sumitomo Bank
Ltd............................. VRDN (A) 3.25 5,300,000
3,000 Colorado, (Student Obligation Bond
Authority, Student Loan Revenue,
Series 1990C) LOC Fuji Bank
Ltd............................. VRDN (A) 3.20 3,000,000
</TABLE>
See Accompanying Notes.
16
<PAGE>
THE TAX EXEMPT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT SECURITY MATURITY VALUE
(IN THOUSANDS) SECURITY DESCRIPTION TYPE DATE RATE (NOTE 1A)
------------------ ---------------------------------- -------- ----------- ----- --------------
<S> <S> <C> <C> <C> <C>
COLORADO (CONTINUED)
$ 2,700 Cherry Creek County, (Southern
Metropolitan District #1, Series
1986) LOC Dresdner Bank......... VRDN (A) 3.40% $ 2,700,000
--------------
Total Colorado.................... 11,000,000
--------------
DISTRICT OF COLUMBIA (3.3%)
8,840 Washington DC, (Metropolitan
Transportation Series PA-4L)
FGIC Insured.................... TPP (A) 3.35 8,840,000
7,600 District of Columbia, (Series 1992
A-1) LOC Sumitomo Bank and
Trust........................... VRDN (A) 3.10 7,600,000
6,200 District of Columbia, (Series 1992
A-2) LOC Sanwa Bank Ltd......... VRDN (A) 3.10 6,200,000
4,800 District of Columbia, (Series 1992
A-4) LOC Industrial Bank of
Japan Ltd....................... VRDN (A) 3.10 4,800,000
3,000 District of Columbia, (Series 1992
A-6) LOC National Westminster
Bank PLC........................ VRDN (A) 3.10 3,000,000
2,900 District of Columbia, (Columbia
Hospital for Women Issue, 1988
Series A) LOC Mitsubishi Bank
Ltd............................. VRDN (A) 3.15 2,900,000
--------------
Total District of Columbia........ 33,340,000
--------------
FLORIDA (3.8%)
15,360 City of Jackson, (PCR, Florida
Power & Light Co. Series 1994).. RB 11/08/94 3.00 15,360,000
15,000 Dade County, Water & Sewer
System.......................... VRDN (A) 3.10 15,000,000
5,750 Hernando County, (IDR, Refunding,
Moore McCormack Resource Inc.
Project, Series 1988) LOC
Societe Generale................ VRDN (A) 3.26 5,750,000
2,000 Florida, (Housing Finance Agency,
Carlton Arms II Project, Multi
Family Housing Revenue Series
1985 - EEE) LOC Sumitomo Bank
Ltd............................. VRDN (A) 3.15 2,000,000
575 County of Orange, (Industrial
Development Authority, IDR
Refunding Noland Co. Project,
Series 1989) LOC Wachovia Bank
and Trust....................... VRDN (A) 3.26 575,000
--------------
Total Florida..................... 38,685,000
--------------
</TABLE>
See Accompanying Notes.
17
<PAGE>
THE TAX EXEMPT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT SECURITY MATURITY VALUE
(IN THOUSANDS) SECURITY DESCRIPTION TYPE DATE RATE (NOTE 1A)
------------------ ---------------------------------- -------- ----------- ----- --------------
<S> <S> <C> <C> <C> <C>
GEORGIA (5.8%)
$ 31,100 Burke County, (Development
Authority, PCR, Georgia Power
Co. Project).................... VRDN (A) 3.30% $ 31,100,000
10,000 Georgia, (Series 1993 C, BT
#149)........................... TPP (A) 3.25 10,000,000
9,200 Burke County, (Development
Authority, PCR, Oglethorpe
Project) LOC Credit Suisse...... CP 10/12/94 2.85 9,200,000
7,000 Burke County, (Development
Authority, PCR, Oglethorpe Power
Corp. Series 1993 A Vogtle
Project) FGIC Insured........... VRDN (A) 3.10 7,000,000
1,500 County of DeKalb, (Development
Authority, IDR, Refunding Noland
Co. Project, Series 1989) LOC
Wachovia Bank and Trust......... VRDN (A) 3.26 1,500,000
690 Cobb County, (Development
Authority, IDR Refunding, Noland
Co. Project, Series 1989) LOC
Wachovia Bank and Trust......... VRDN (A) 3.26 690,000
--------------
Total Georgia..................... 59,490,000
--------------
HAWAII (1.2%)
4,800 Hawaii, (Housing Finance and
Development Corporation,
Affordable Rental Housing
Program, Housing Program
Revenue, Kauhole Kakoaka Project
Series 1993 -A) LOC Barclays
Bank, PLC....................... VRDN (A) 3.20 4,800,000
7,000 Hawaii, (Custodial Receipts BT
127)............................ TPP (A) 2.60 7,000,000
--------------
Total Hawaii...................... 11,800,000
--------------
ILLINOIS (6.6%)
45,000 Illinois, (Series 1994)........... GO 06/15/95 4.75 45,249,982
5,000 Illinois, (Education Facilities
Authority, Cultural Pooled
Finance Authority Project,
Series 1985) LOC Commonwealth
Bank of Australia............... VRDN (A) 3.10 5,000,000
</TABLE>
See Accompanying Notes.
18
<PAGE>
THE TAX EXEMPT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT SECURITY MATURITY VALUE
(IN THOUSANDS) SECURITY DESCRIPTION TYPE DATE RATE (NOTE 1A)
------------------ ---------------------------------- -------- ----------- ----- --------------
<S> <S> <C> <C> <C> <C>
ILLINOIS (CONTINUED)
$ 5,000 Illinois, (Housing Development
Authority, Illinois Center
Apartments, Series 1985) LOC
Fuji Bank Ltd................... VRDN (A) 3.05% $ 5,000,000
2,840 Illinois, (Development Finance
Authority, Olin Corp Project
1993 D) LOC Credit Suisse....... VRDN (A) 3.20 2,840,000
2,500 Illinois, (Health Facilities
Authority, Series1985 F) LOC
Swiss Bank Corp................. VRDN (A) 3.05 2,500,000
2,000 Illinois, (Health Facilities
Authority, University of Chicago
Hospital Project Series 1985 C)
LOC First National Bank of
Chicago......................... VRDN (A) 3.20 2,000,000
1,640 County of Coles (Servistar Corp.
Project, Series 1988) LOC
Algemene Bank Nederlande N.V.... VRDN (A) 3.26 1,640,000
1,300 Illinois, (Development Finance
Authority, Limited Obligation
Revenue Bond, Dart Container
Corp of Illinios Project, Series
1984) LOC National Bank of
Detroit......................... VRDN (A) 3.26 1,300,000
1,000 Illinois, (Health Facilities
Authority, Revolving Fund Pooled
Program Series 1985 B) LOC Swiss
Bank Corp....................... VRDN (A) 3.05 1,000,000
1,000 North Chicago, (Lake County, IDR,
Abbott Labs Project, Series
1983)........................... VRDN (A) 4.26 1,000,000
--------------
Total Illinois.................... 67,529,982
--------------
INDIANA (0.8%)
8,000 Indiana, (Health Facilities
Authority, Deaconess Hospital
Inc) LOC Fuji Bank Ltd.......... VRDN (A) 3.20 8,000,000
--------------
KANSAS (0.7%)
3,300 Wichita, (CSJ Health System of
Wichita,Inc Revenue, Series 25
1985) LOC Sumitomo Bank Ltd..... VRDN (A) 3.05 3,300,000
2,000 Garden City, (IDR Refunding,
Inland Container Corp Project,
Series 1983) LOC Credit Suisse.. VRDN (A) 2.70 2,000,000
</TABLE>
See Accompanying Notes.
19
<PAGE>
THE TAX EXEMPT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT SECURITY MATURITY VALUE[caad 214]
(IN THOUSANDS) SECURITY DESCRIPTION TYPE DATE RATE (NOTE 1A)
------------------ ---------------------------------- -------- ----------- ----- --------------
<S> <S> <C> <C> <C> <C>
KANSAS (CONTINUED)
$ 1,650 Wichita, (Airport Authority
Adjustable Mode Facility Revenue
Refunding, Flight Safety
International Inc., Project,
Series 1990) LOC Wachovia Bank
and Trust....................... VRDN (A) 3.15% $ 1,650,000
--------------
Total Kansas...................... 6,950,000
--------------
LOUISIANA (8.8%)
26,600 Louisiana, (Recovery District
Sales Tax, Series 1988) FGIC
Insured......................... VRDN (A) 3.20 26,600,000
24,600 Calcasieu Parish, (Recovery
District Sales Tax, Road
Improvement) LOC National
Westminster Bank................ VRDN (A) 3.15 24,600,000
12,900 Louisiana, (Recovery District
Sales Tax, Series 1988) MBIA
Insured......................... VRDN (A) 2.90 12,900,000
12,100 West Baton Rouge, (Industrial
Development Authority, PCR, Dow
Chemical Co Project Series
1989)........................... VRDN (A) 3.25 12,100,000
7,700 Louisiana, (Public Facilities
Authority, College and
University Equipment, Facilities
Revenue Series 1985 A) FGIC
Insured......................... VRDN (A) 3.15 7,700,000
6,100 Louisiana, (Series 1991A), LOC
Fuji Bank Ltd................... CP 09/08/94 3.05 6,100,000
--------------
Total Louisiana................... 90,000,000
--------------
MASSACHUSETTS (3.5%)
12,500 Massachusetts, (Dedicated Income
Tax) LOC National Westminster
Bank PLC........................ VRDN (A) 2.90 12,500,000
8,500 Massachusetts, (Dedicated Income
Tax) LOC Sakura Ltd............. VRDN (A) 2.90 8,500,000
6,800 Commonwealth of Massachusetts,
FGIC Insured.................... VRDN (A) 3.30 6,800,000
4,800 Massachusetts, (Series P-5) MBIA
Insured......................... TPP (A) 3.35 4,800,000
3,000 Commonwealth of Massachusetts,
(Dedicated Income Tax) LOC ABN
Amro Bank N.V................... VRDN (A) 2.90 3,000,000
--------------
Total Massachusetts............... 35,600,000
--------------
</TABLE>
See Accompanying Notes.
20
<PAGE>
THE TAX EXEMPT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT SECURITY MATURITY VALUE
(IN THOUSANDS) SECURITY DESCRIPTION TYPE DATE RATE (NOTE 1A)
------------------ ---------------------------------- -------- ----------- ----- --------------
<S> <S> <C> <C> <C> <C>
MARYLAND (2.6%)
$ 10,000 Anne Arundel, (PCR, Baltimore Gas
and Electric Co. Project, Series
1989, Maturity 07/01/14)........ RB 07/01/95(B) 3.65% $ 10,000,000
7,960 Harford County, (PA 48)........... TPP (A) 3.30 7,960,000
4,000 Mayor & City Council of Baltimore,
(Port Facilities Revenue
Occidental-Petroleum Corp.
Project, Series 1981) LOC
National Westminster Bank PLC... VRDN (A) 2.60 4,000,000
3,000 Washington, (Suburban Sanitation
District) LOC Toronto Dominion
Bank............................ VRDN (A) 2.95 3,000,000
1,655 Frederick County (IDR Refunding,
Noland Co. Project, Series 1989)
LOC Wachovia Bank and Trust..... VRDN (A) 3.26 1,655,000
--------------
Total Maryland.................... 26,615,000
--------------
MICHIGAN (0.7%)
4,600 Michigan,(Housing Development
Authority, Rental Housing
Revenue Series 1992B) LOC
Sumitomo Bank Ltd............... VRDN (A) 3.15 4,600,000
2,200 Michigan Strategic Fund, (PCR,
Consumer Power Co Project 1988A)
LOC Union Bank of Switzerland... VRDN (A) 3.00 2,200,000
--------------
Total Michigan.................... 6,800,000
--------------
MINNESOTA (0.4%)
2,500 Minnesota......................... TPP (A) 3.45 2,500,000
1,700 St Louis Park, (Tax Increment
Revenue, Series 1987B) LOC
Sumitomo Bank Ltd............... VRDN (A) 3.15 1,700,000
--------------
Total Minnesota................... 4,200,000
--------------
MISSISSIPPI (1.2%)
11,200 Jackson County, (Port Facilities
Authority, Chevron USA Inc.,
Project, Series 1993)........... VRDN (A) 3.00 11,200,000
535 Columbus, (IDR, Refunding Noland
Co. Project, Series 1989) LOC
Wachovia Bank and Trust......... VRDN (A) 3.26 535,000
400 Jackson County, (Port Facilities
Authority, Chevron USA Inc.,
Project, Series 1993)........... VRDN (A) 3.00 400,000
--------------
Total Mississippi................. 12,135,000
--------------
</TABLE>
See Accompanying Notes.
21
<PAGE>
THE TAX EXEMPT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT SECURITY MATURITY VALUE
(IN THOUSANDS) SECURITY DESCRIPTION TYPE DATE RATE (NOTE 1A)
------------------ ---------------------------------- -------- ----------- ----- --------------
<S> <S> <C> <C> <C> <C>
MISSOURI (1.4%)
$ 11,000 Missouri, (Environmental
Improvement and Energy Resources
Authority, PCR, Union Electric
Co. Project, Series 1984B)
06/01/14 LOC Union Bank of
Switzerland..................... RB 06/01/95(B) 3.75% $ 11,000,000
3,800 Missouri, (Environmental
Improvement and Energy Resources
Authority, PCR, Union Electric
Co. Project, Series 1985A) LOC
West Deutsche Landes Bank....... CP 10/18/94 3.10 3,800,000
--------------
Total Missouri.................... 14,800,000
--------------
NEW HAMPSHIRE (0.8%)
7,755 New Hampshire, (Higher Educational
and Health Facilities Authority,
Dartmouth Educational Loan Corp,
Student Loan Revenue, Series
1985)........................... RB 06/01/95 3.63 7,755,000
--------------
NEW JERSEY (0.3%)
2,985 New Jersey, (Economic Development
Authority, Schavitz Engineering
Project, Series 1989) LOC
National Westminster Bank PLC... VRDN (A) 3.26 2,985,000
--------------
NEW YORK (4.3%)
25,000 New York City, (Series 1995 B).... NTS 06/30/95 4.75 25,142,767
10,600 New York State (Energy Research &
Development Authority, Niagra
Mohawk Power Corp, Series 1985A)
LOC Toronto Dominion Bank....... VRDN (A) 3.35 10,600,000
6,500 New York, (Series 1993B) FGIC
Insured......................... VRDN (A) 3.30 6,500,000
</TABLE>
See Accompanying Notes.
22
<PAGE>
THE TAX EXEMPT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT SECURITY MATURITY VALUE
(IN THOUSANDS) SECURITY DESCRIPTION TYPE DATE RATE (NOTE 1A)
------------------ ---------------------------------- -------- ----------- ----- --------------
<S> <S> <C> <C> <C> <C>
NEW YORK (CONTINUED)
$ 2,100 New York City, (Municipal Finance
Authority, Water and Sewer
System Series 1994C) FGIC
Insured......................... VRDN (A) 3.15% $ 2,100,000
--------------
Total New York.................... 44,342,767
--------------
NORTH CAROLINA (2.3%)
4,800 Wake County, (Industrial
Facilities and Pollution Control
Financing Authority, PCR,
Carolina Power & Light Co.) LOC
Fuji Bank Ltd................... CP 12/12/94 3.40 4,800,000
4,000 North Carolina Eastern Municipal
Power Agency.................... CP 09/12/94 3.15 4,000,000
4,000 Wake County, (Industrial
Facilities and Pollution Control
Financing Authority, PCR,
Carolina Power & Light Project,
Series 1985A) LOC Credit
Suisse.......................... VRDN (A) 3.00 4,000,000
2,600 Wake County, (Industrial
Facilities and Pollution Control
Financing Authority, PCR,
Carolina Power & Light Co.
Project, Series 1985 B) LOC
Sumitomo Bank Ltd............... VRDN (A) 3.20 2,600,000
2,140 County of Davidson, (Industrial
Facilities and Pollution Control
Financing Authority, IDR
Refunding, Lowes Co., Inc.
Project, Series 1990) LOC
National Westminster Bank PLC... VRDN (A) 3.26 2,140,000
2,100 Ashe County, (Industrial
Facilities and Pollution Control
Finance Authority, IDR
Refunding, Gates Rubber Co.
Project, Series 1988) LOC
National Bank of Detroit........ VRDN (A) 3.26 2,100,000
2,000 Mecklenburg County, (Industrial
Facilities and Pollution Control
Financing Authority, IDR, Allied
Corp. Project, Series 1984) LOC
Algemene Bank Nederlande N.
V............................... VRDN (A) 3.40 2,000,000
</TABLE>
See Accompanying Notes.
23
<PAGE>
THE TAX EXEMPT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT SECURITY MATURITY VALUE
(IN THOUSANDS) SECURITY DESCRIPTION TYPE DATE RATE (NOTE 1A)
------------------ ---------------------------------- -------- ----------- ----- --------------
<S> <S> <C> <C> <C> <C>
NORTH CAROLINA (CONTINUED)
$ 1,700 North Carolina, (Educational
Facilities Finance Agency,
Guilford College Project, Series
1993) LOC Wachovia Bank and
Trust........................... VRDN (A) 2.80% $ 1,700,000
--------------
Total North Carolina.............. 23,340,000
--------------
OHIO (1.1%)
5,840 Ohio State........................ TPP (A) 3.25 5,840,000
4,400 Wooster, (IDR, Allen Group Inc.
Project, Series 1985) LOC Union
Bank of Switzerland............. VRDN (A) 3.10 4,400,000
1,400 Warren County, (IDR, Leggett &
Platt Inc. Project, Series 1984)
LOC National Westminster Bank
PLC............................. VRDN (A) 3.35 1,400,000
--------------
Total Ohio........................ 11,640,000
--------------
OKLAHOMA (6.4%)
23,290 Oklahoma, (Water Resources Board,
State Loan Revenue Program,
Series 1994 A).................. RB 09/01/94 2.85 23,290,000
20,000 Oklahoma, (Water Resources Board,
State Loan Revenue Program) LOC
Swiss Bank Corp................. RB 03/01/95 3.85 20,000,000
8,425 Washington County, (Medical
Authority, Hospital Revenue,
Jane Philips Episcopal Hospital
Series 1989B)................... RB 09/01/94 3.25 8,425,000
5,760 Oklahoma, (Industrial Development
Authority, St Anthony's
Physicians Building PJ Medical
Practice) LOC Mitsubishi Bank
and Trust....................... RB 12/01/94 3.55 5,760,000
5,400 Tulsa, (Industrial Development
Authority, Hillcrest Medical
Center Project, Series 88) LOC
Sumitomo Bank................... VRDN (A) 3.15 5,400,000
2,480 Oklahoma, (Industrial Development
Authority, St Anthony Parking
Garage Project) LOC Mitsubishi
Bank and Trust.................. RB 12/01/94 3.55 2,480,000
--------------
Total Oklahoma.................... 65,355,000
--------------
</TABLE>
See Accompanying Notes.
24
<PAGE>
THE TAX EXEMPT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT SECURITY MATURITY VALUE
(IN THOUSANDS) SECURITY DESCRIPTION TYPE DATE RATE (NOTE 1A)
------------------ ---------------------------------- -------- ----------- ----- --------------
<S> <S> <C> <C> <C> <C>
OREGON (1.6%)
$ 16,600 Port of Portland, (PCR, Revenue
Bonds, Reynolds Metal Co.,
Series 1985) LOC Bank of Nova
Scotia.......................... VRDN (A) 2.90% $ 16,600,000
--------------
PENNSYLVANIA (12.3%)
15,771 Pennsylvania, (Higher Education
Facilities Authority, Series
B).............................. VRDN (A) 3.22 15,771,000
14,130 Allegheny County, (Hospital
Development Authority,
Presbyterian University
Hospital, Series 1988B-1) LOC
PNC Financial................... VRDN (A) 3.20 14,130,000
13,500 Delaware County, (Industrial
Development Authority, Multi
Family Housing, United Parcel
Service Project Series 1985).... VRDN (A) 3.20 13,500,000
13,189 Pennsylvania, (Higher Education
Facilities Authority, Series
A).............................. VRDN (A) 3.22 13,189,000
10,000 Philadelphia, (Series 1990) LOC
Fuji Bank Ltd................... CP 10/13/94 3.20 10,000,000
10,000 Pennsylvania, (Energy Development
Authority, Continental Energy
Associates Project, Series 1985)
LOC Swiss Bank Corp............. VRDN (A) 3.25 10,000,000
8,000 Temple University (Commonwealth
System of Higher Education,
Series 1994).................... CP 05/24/95 4.50 8,039,138
7,800 Washington County, (Higher
Education Authority, Pooled
Equipment Lease, Revenue Series
1985A) LOC Sanwa Bank Ltd....... VRDN (A) 3.10 7,800,000
6,800 Allegheny County, (Hospital
Development Authority,
Presbyterian University Hospital
Series 90 D) LOC Credit Suisse.. VRDN (A) 3.20 6,800,000
6,000 Allegheny County, (Industrial
Development Authority, IDR
Refunding, Dowty Corp, Project,
Series 1986) LOC Mellon Bank.... VRDN (A) 3.15 6,000,000
5,580 Allegheny County, (Hospital
Development Authority,
Presbyterian University
Hospital, Series 1988B-2) LOC
PNC Financial................... VRDN (A) 3.20 5,580,000
</TABLE>
See Accompanying Notes.
25
<PAGE>
THE TAX EXEMPT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT SECURITY MATURITY VALUE
(IN THOUSANDS) SECURITY DESCRIPTION TYPE DATE RATE (NOTE 1A)
------------------ ---------------------------------- -------- ----------- ----- --------------
<S> <S> <C> <C> <C> <C>
PENNSYLVANIA (CONTINUED)
$ 4,300 Allegheny County, (Hospital
Development Authority,
Presbyterian University Hospital
Series 90 B) MBIA Insured....... VRDN (A) 3.20% $ 4,300,000
3,500 Clinton County, (Industrial
Development Authority, IDR
Mellon Bank, Central National
Assistance Project, 1985 Series)
LOC Mellon Bank................. VRDN (A) 3.20 3,500,000
2,545 Allegheny County, (Hospital
Development Authority,
Presbyterian University
Hospital, Series 1988B-3) LOC
PNC Financial................... VRDN (A) 3.20 2,545,000
2,000 Clinton County, (IDR, Armstrong
World Industries Inc. Project,
Series 1985) LOC Mellon Bank.... VRDN (A) 3.20 2,000,000
1,000 Allegheny County, (Hospital
Development Authority,
Presbyterian University Hospital
Series 1990A) MBIA Insured...... VRDN (A) 3.20 1,000,000
1,000 Philadelphia (Series 1994-95C),
LOC Dresdner Bank............... TRAN 06/15/95 4.75 1,006,824
500 Allegheny County, (Hospital
Development Authority,
Presbyterian University Hospital
Series 1990C) MBIA Insured...... VRDN (A) 3.20 500,000
--------------
Total Pennsylvania................ 125,660,962
--------------
RHODE ISLAND (0.5%)
4,760 Rhode Island, (Convention Center
Authority, Series AA - 75) MBIA
Insured......................... TPP (A) 3.40 4,760,000
--------------
SOUTH CAROLINA (2.0%)
9,250 Allendale County, (IDR, King
Seeley Thermos Co Project) LOC
PNC Financial................... VRDN (A) 3.26 9,250,000
7,500 York County, (Pollution Control
Facility, PCR, Duke Power Co
Project, Series 1990)........... CP 11/29/94 3.30 7,500,000
1,900 Lauren County, (IDR, Asten Press
Fabrics, Inc., Project, Series
1991) LOC Wachovia Bank and
Trust........................... VRDN (A) 3.15 1,900,000
</TABLE>
See Accompanying Notes.
26
<PAGE>
THE TAX EXEMPT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT SECURITY MATURITY VALUE
(IN THOUSANDS) SECURITY DESCRIPTION TYPE DATE RATE (NOTE 1A)
------------------ ---------------------------------- -------- ----------- ----- --------------
<S> <S> <C> <C> <C> <C>
SOUTH CAROLINA (CONTINUED)
$ 1,150 Charleston County, (IDR, Asten
Press Fabrics, Inc., Project,
Series 1991) LOC Wachovia Bank
and Trust....................... VRDN (A) 3.15% $ 1,150,000
1,060 County of Spartanburg, (IDR,
Refunding, Holmberg Electronic
Corp Project, Series 1989 A) LOC
Wachovia Bank and Trust......... VRDN (A) 3.15 1,060,000
--------------
Total South Carolina.............. 20,860,000
--------------
TENNESSEE (3.0%)
10,000 Metropolitan Government (Nashville
Health and Education Board,
Vanderbilt University, Tennessee
Health Revenue Series 1985A,
Maturity 01/15/14).............. RB 01/15/95(B) 2.60 10,000,000
6,500 County of Knox, (Industrial
Development Board, IDR, Moore
McCormack Resources Inc. Project
Series 1988) LOC Societe
Generale........................ VRDN (A) 3.02 6,500,000
5,000 Metropolitan Government Nashville
& Davidson County (Health and
Education Facilities Board,
Vanderbilt University, Maturity
05/01/13)....................... RB 05/01/95(B) 3.55 5,000,000
3,100 Collierville, (Industrial
Development Board, IDR, Imperial
Clevite Inc., Series 1985) LOC
National City Bank of
Cleveland....................... VRDN (A) 5.04 3,100,000
2,300 Sullivan County, (Industrial
Development Board, PCR, Mead
Corp Project, Series 1986) LOC
Union Bank of Switzerland....... VRDN (A) 2.90 2,300,000
2,100 Bradley County, (Industrial
Development Board, IDR, Olin
Corp Project, Series C) LOC
Credit Suisse................... VRDN (A) 3.20 2,100,000
1,365 Franklin County, (Industrial
Development Board, IDR Refunding
Noland Co. Project, Series 1989)
LOC Wachovia Bank and Trust..... VRDN (A) 3.26 1,365,000
</TABLE>
See Accompanying Notes.
27
<PAGE>
THE TAX EXEMPT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT SECURITY MATURITY VALUE
(IN THOUSANDS) SECURITY DESCRIPTION TYPE DATE RATE (NOTE 1A)
------------------ ---------------------------------- -------- ----------- ----- --------------
<S> <S> <C> <C> <C> <C>
TENNESSEE (CONTINUED)
$ 700 County of Knox, (Industrial
Development Board, IDR, Lowes
Investment Corp. Project, Series
1985) LOC Fuji Bank Ltd......... VRDN (A) 3.05% $ 700,000
--------------
Total Tennessee................... 31,065,000
--------------
TEXAS (2.9%)
10,000 Texas (Public Finance Authority,
Series 1993 A).................. CP 10/27/94 2.50 10,000,000
9,000 Grayson County, (Industrial
Development Corp, Aluminum Co of
America)........................ VRDN (A) 3.53 9,000,000
5,400 Harris County, (Health Facilities
Development Corp, Texas Health
Care System Sisters of Charity
Incarnate, Series 1985)......... VRDN (A) 3.30 5,400,000
2,400 Texas (Public Finance Authority,
Series P - 3)................... TPP (A) 3.30 2,400,000
1,700 Texas, (Higher Education
Authority, Education & Equipment
Revenue, Series 1985A) FGIC
Insured......................... VRDN (A) 3.10 1,700,000
1,500 El Paso, (Industrial Development
Authority, IDR (Contel Cellular
of El Paso Inc. Project, Series
1985) LOC Bank of Nova Scotia... VRDN (A) 5.04 1,500,000
--------------
Total Texas....................... 30,000,000
--------------
VIRGINIA (0.9%)
4,900 Virginia, (Peninsula Port
Authority, Coal Terminal Revenue
Refunding Dominion Terminal
Associates Inc., Series 1987D)
LOC National Westminster PLC.... VRDN (A) 2.90 4,900,000
2,945 Chesterfield County, (Improvement
and Refunding Bond, Series
1991)........................... VRDN (A) 3.25 2,945,000
1,000 Virginia Beach, (Development
Authority, IDR, Norfolk Virginia
Beach, Portsmouth MSA Limited
Partnership Project) LOC Bank of
Nova Scotia..................... VRDN (A) 5.04 1,000,000
--------------
Total Virginia.................... 8,845,000
--------------
</TABLE>
See Accompanying Notes.
28
<PAGE>
THE TAX EXEMPT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT SECURITY MATURITY VALUE
(IN THOUSANDS) SECURITY DESCRIPTION TYPE DATE RATE (NOTE 1A)
------------------ ---------------------------------- -------- ----------- ----- --------------
<S> <S> <C> <C> <C> <C>
WASHINGTON (1.0%)
$ 7,500 City of Seattle, (Municipal Light
and Power Project).............. RB 11/01/94 2.85% $ 7,505,505
2,900 Port of Seattle (Industrial
Development Corporation, IDR,
Douglas Management Co. Project,
1985 Series) LOC Banque
Paribas......................... VRDN (A) 3.20 2,900,000
--------------
Total Washington.................. 10,405,505
--------------
WEST VIRGINIA (0.1%)
1,000 County of Mercer, (IDR Refunding,
Noland Co. Project, Series 1989)
LOC Wachovia Bank and Trust..... VRDN (A) 3.26 1,000,000
--------------
WISCONSIN (2.2%)
10,000 Wisconsin......................... RB 06/15/95 4.50 10,043,729
8,500 Wisconsin (Custodial Receipt
Certificates)................... TPP (A) 3.25 8,500,000
2,500 Marshfield, (IDR, Beatrice Cheese
Inc., Project, Series 1984) LOC
Wachovia Bank and Trust......... VRDN (A) 3.26 2,500,000
1,300 Seymour, (IDR, Beatrice Cheese
Inc., Project, Series 1984) LOC
Wachovia Bank and Trust......... VRDN (A) 3.26 1,300,000
--------------
Total Wisconsin................... 22,343,729
--------------
TOTAL INVESTMENTS (101.5%) -- (COST $1,036,629,611)............. 1,036,629,611
OTHER ASSETS NET OF LIABILITIES (-1.5%)..... (14,783,387)
--------------
NET ASSETS (100.0%)......................... $1,021,846,224
--------------
--------------
<FN>
(A) Variable Rate Demand Note tender dates and/or interest rates are reset at
specified intervals which coincide with their tender feature.
(B) The date listed under the heading maturity date represents an optional
tender date. The actual maturity date is indicated in the security
description.
</TABLE>
See Accompanying Notes.
29
<PAGE>
THE TAX EXEMPT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 1994
- --------------------------------------------------------------------------------
Note: Abbreviations used in the schedule of investments are as
follows:
CP - Commercial Paper
FGIC - Financial Guaranty Insurance Company
GO - General Obligation
IDR - Industrial Development Revenue
LOC - Letter of Credit
MBIA - Municipal Bond Investors Assurance Corp
NTS - Debt Obligation with an original maturity of two years
or less
RAN - Revenue Anticipation Notes
PCR - Pollution Control Revenue
RAW - Revenue Anticipation Warrants
RB - Revenue Bond
TPP - Third Party Put
TRAN - Tax Revenue Anticipation Note
VRDN - Variable Rate Demand Note
See Accompanying Notes.
30
<PAGE>
TAX EXEMPT MONEY MARKET PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Amortized Cost and Value (Note 1a) $1,036,629,611
Cash 1,273,122
Interest Receivable 4,557,294
Prepaid Expenses 2,685
--------------
Total Assets 1,042,462,712
--------------
LIABILITIES
Payable for Investments Purchased 20,000,000
Advisory Fee Payable (Note 2a) 167,330
Financial and Fund Accounting Services Fee Payable (Note
2c) 153,204
Administration Fee Payable (Note 2b) 5,716
Fund Services Fee Payable (Note 2d) 9,528
Trustees' Fees and Expenses Payable (Note 2e) 5,000
Custody Fee Payable 233,625
Accrued Expenses 42,085
--------------
Total Liabilities 20,616,488
--------------
NET ASSETS
Applicable to Investors' Beneficial Interests $1,021,846,224
--------------
--------------
</TABLE>
See Accompanying Notes.
31
<PAGE>
TAX EXEMPT MONEY MARKET PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME (NOTE 1B)
Interest $27,063,011
EXPENSES
Advisory Fee (Note 2a) $2,021,476
Custodian Fees and Expenses 206,394
Financial and Fund Accounting Services Fees (Note 2c) 153,204
Fund Services Fee (Note 2d) 79,046
Administration Fee (Note 2b) 62,565
Professional Fees 57,224
Trustees' Fees and Expenses (Note 2e) 22,521
Miscellaneous 14,076
----------
Total Expenses 2,616,506
----------
NET INVESTMENT INCOME 24,446,505
NET REALIZED LOSS ON INVESTMENTS (13,933)
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $24,432,572
-----------
-----------
</TABLE>
See Accompanying Notes.
32
<PAGE>
TAX EXEMPT MONEY MARKET PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 12, 1993
FOR THE FISCAL (COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO
AUGUST 31, 1994 AUGUST 31, 1993
----------------- -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income $ 24,446,505 $ 3,098,240
Net Realized Loss on Investments (13,933) (6,529)
----------------- -------------------
Net Increase in Net Assets Resulting from Operations 24,432,572 3,091,711
----------------- -------------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST
Contributions 4,178,991,353 1,436,727,721
Withdrawals (4,226,184,823) (395,312,410)
----------------- -------------------
Net Increase (Decrease) from Investors' Transactions (47,193,470) 1,041,415,311
----------------- -------------------
Total Increase (Decrease) in Net Assets (22,760,898) 1,044,507,022
NET ASSETS
Beginning of Period 1,044,607,122 100,100
----------------- -------------------
End of Period $ 1,021,846,224 $ 1,044,607,122
----------------- -------------------
----------------- -------------------
-------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 12, 1993
FOR THE FISCAL (COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO
SUPPLEMENTARY DATA AUGUST 31, 1994 AUGUST 31, 1993
---------------- -------------------
<S> <C> <C>
Ratios:
Expenses to Average Net Assets 0.25% 0.25%(a)
Net Investment Income to Average Net Assets 2.37% 2.28%(a)
<FN>
- ------------------------
(a) Annualized
</TABLE>
See Accompanying Notes.
33
<PAGE>
THE TAX EXEMPT MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1994
- --------------------------------------------------------------------------------
The Tax Exempt Money Market Portfolio (the "Portfolio") is registered under the
Investment Company Act of 1940, as amended, (the "Act") 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 and received a contribution of certain
assets and liabilities, including securities, with a value of $955,814,753 on
that date from The Pierpont Tax Exempt Money Market Fund in exchange for a
beneficial interest in the Portfolio. The Declaration of Trust permits the
Trustees to issue an unlimited number of beneficial interests in the Portfolio.
The following is a summary of the significant accounting policies of the
Portfolio:
1. SIGNIFICANT ACCOUNTING POLICIES:
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.
b)Securities transactions are recorded on a trade date basis. Investment
income consists of interest income, which includes the amortization of
premiums and discounts. For financial and tax reporting purposes, realized
gains and losses are determined on the basis of specific lot
identification.
c)The Portfolio will be treated as a partnership for federal income tax
purposes. As such, each investor in the Portfolio will be subject to
taxation 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.
2. TRANSACTIONS WITH AFFILIATES:
a)The Portfolio has an investment advisory agreement with Morgan Guaranty
Trust Company of New York ("Morgan"). Under the terms of the investment
advisory agreement, the Portfolio pays Morgan at an annual rate of 0.20%
of the Portfolio's average daily net assets up to $1 billion and 0.10% on
any excess over $1 billion. For the fiscal year ended August 31, 1994,
this fee amounted to $2,021,476.
b)The Portfolio has retained Signature Broker-Dealer Services, Inc.
("Signature") to serve as Administrator. Certain officers of Signature
serve as officers of the Portfolio. Under the Administrative Services
Agreement, Signature provides management and 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 Signature.
Effective October 1, 1993, Signature receives a fee at an annual rate of
0.01% of the first $1 billion of aggregate average daily net assets of the
Portfolio and the other portfolios subject to the Administrative Services
Agreement (the "aggregate portfolios"), 0.008% of the next $2 billion of
the aggregate portfolios' average daily net assets, 0.006% of the next
34
<PAGE>
THE TAX EXEMPT MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AUGUST 31, 1994
- --------------------------------------------------------------------------------
$2 billion of the aggregate portfolios' average daily net assets, and
0.004% of the aggregate portfolios' average daily net assets in excess of
$5 billion. Prior to October 1, 1993 Signature received no fee for these
services. For the period October 1, 1993 to August 31, 1994, the
Portfolio's portion of Signature's fee for these services amounted to
$62,565.
c)The Portfolio has entered into a Financial and Fund Accounting Services
Agreement ("Services Agreement") with Morgan under which Morgan receives a
fee, based on the percentages described below, for overseeing certain
aspects of the administration and operation of the Portfolio. The Services
Agreement is also designed to provide an expense limit for certain
expenses of the Portfolio. If total expenses of the Portfolio, excluding
the advisory fee, custody expenses, Fund Services Fee, and brokerage
costs, exceed the expense limit of 0.03% of the Portfolio's average daily
net assets, Morgan will reimburse the Portfolio for the excess expense
amount and receive no fee. Should such expenses be less than the expense
limit, Morgan's fee would be limited to the difference between such
expenses and the fee calculated under the Services Agreement. For the
fiscal year ended August 31, 1994, this fee amounted to $153,204.
d)Effective January 15, 1994 the Portfolio entered into 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 Portfolios are the sole shareholders of
Group. The Portfolio's allocated portion of Group's costs in performing
its services amounted to $79,046 for the period January 15, 1994 to August
31, 1994.
e)An aggregate annual fee of $55,000 is paid to each Trustee for serving as
a Trustee of The Pierpont Funds, The JPM Institutional Funds, The JPM
Institutional Plus Fund and their corresponding Portfolios. The Trustee
fee expense shown in the financial statements represents the Portfolio's
allocated portion of the total fees.
35
<PAGE>
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 August 31, 1994, the results of its operations for the year then
ended, and the changes in its net assets and its supplementary data for the year
then ended and for the period July 12, 1993 (commencement of operations) through
August 31, 1993, in conformity with generally accepted accounting principles.
These financial statements and supplementary data (hereafter referred to as
"financial statements") are the responsibility of the Portfolio's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at August
31, 1994 by correspondence with the custodian and brokers and the application of
alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
New York, New York
October 25, 1994
36
<PAGE>
JPM INSTITUTIONAL MONEY MARKET FUND The
JPM INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND JPM
JPM INSTITUTIONAL TREASURY MONEY MARKET FUND Institutional
JPM INSTITUTIONAL SHORT TERM BOND FUND Tax Exempt
JPM INSTITUTIONAL BOND FUND Bond Fund
JPM INSTITUTIONAL TAX EXEMPT BOND FUND
JPM INSTITUTIONAL NEW YORK TOTAL RETURN BOND FUND
JPM INSTITUTIONAL DIVERSIFIED FUND
JPM INSTITUTIONAL SELECTED U.S. EQUITY FUND
JPM INSTITUTIONAL U.S. SMALL COMPANY FUND
JPM INSTITUTIONAL INTERNATIONAL EQUITY FUND
JPM INSTITUTIONAL EMERGING MARKETS EQUITY FUND
FOR MORE INFORMATION ON HOW THE JPM ANNUAL REPORT
INSTITUTIONAL FAMILY OF FUNDS CAN HELP YOU PLAN AUGUST 31, 1994
FOR YOUR FUTURE, CALL J.P. MORGAN FUNDS SERVICES
AT (800) 766-7722.
<PAGE>
LETTER TO THE SHAREHOLDERS OF THE JPM INSTITUTIONAL TAX EXEMPT BOND FUND
October 17, 1994
Dear Shareholder:
We are pleased to report that, in a year punctuated by dramatic
inflation-fighting actions from the U.S. Federal Reserve, The JPM
Institutional Tax Exempt Bond Fund (the "Fund") was able to provide its
shareholders with a positive overall return of 1.36% for the fiscal year
ending August 31, 1994 -- outperforming the Micropal Intermediate Municipal
Bond Fund Average by 79 basis points. The objective of this Fund is to
provide a high level of current income that is exempt from federal tax,
consistent with moderate risk of capital and maintenance of liquidity.
During the period under review, the Fund's net asset value declined from
$10.07 per share to end at $9.75 per share, and the Fund paid $0.48 per share
in dividends. The Fund's net assets grew to $16,351,218 at the end of the
reporting period, up from $202 held by the Fund on August 31, 1993. The net
assets of The Tax-Exempt Bond Portfolio (the "Portfolio"), in which The JPM
Institutional Tax Exempt Bond Fund invests, totaled approximately $410
million at August 31, 1994.
FISCAL YEAR REVIEW
Given our expectation that economic conditions would improve in the U.S.
during 1994, and hence bring on slightly higher rates in a shrinking universe
of municipal issues, we sought to emphasize flexibility within the Portfolio
during the first third of the fiscal year just past. As a result, the
Portfolio maintained a fairly neutral average maturity, relative to its
benchmark, of 5.5 years, and also sought to enhance its ongoing "barbell"
structure of balanced municipals in order to benefit from an expected
flattening of the yield curve.
<TABLE>
<S> <C> <C> <C>
TABLE OF CONTENTS
Letter to the shareholders........... 1 Special fund-based services.......... 5
Fund facts and highlights............ 3 Financial statements................. 6
Fund performance..................... 4
</TABLE>
1
<PAGE>
At the beginning of calendar year 1994, the Portfolio was tactically positioned
in anticipation of an interest rate rise. When the U.S. Federal Reserve raised
its Fed funds rate not once but five times during the second half of the fiscal
year (to 4.75%, from the 3.00% rate it had maintained since September 1992), we
positioned the Portfolio's average maturity to as little as 4.6 years, and were
therefore able to capitalize on the higher rates for municipal bonds, which are
directly attributable to higher rates on Treasuries (an inevitable
consequence of the Fed's actions).
Expecting that the Fed will additionally raise its short-term rates to as
high as 5.75% by calendar year-end 1994, the Fund closed out the fiscal year
with a duration of 5.0 years - 38 basis points shorter than its benchmark.
INVESTMENT OUTLOOK
We believe that interest rates will continue to trend upward as the U.S.
Federal Reserve aims to slow down economic growth in the U.S. We anticipate,
however, that most of these rising interest rates will occur at the short end
of the yield curve. One reason for this projection is that rate increases for
long-maturity instruments have already become pervasive and are fundamentally
attractive. We therefore think they are unlikely to undergo significant
change as additional rate actions are announced by the Fed.
Given this outlook, we believe that a duration more neutral to its benchmark is
in order, and we have structured the Portfolio so that it is well-positioned to
benefit from a continued yield curve flattening.
As always, we welcome your comments or questions. Please call J.P. Morgan Funds
Services toll free at (800) 521-5411.
Sincerely yours,
Evelyn E. Guernsey
J.P. Morgan Fund Services
MORGAN SERVES AS PORTFOLIO INVESTMENT ADVISOR, AND MAKES THE FUND AVAILABLE
SOLELY IN ITS CAPACITY AS SHAREHOLDER SERVICING AGENT FOR CUSTOMERS. THE
FUND'S DISTRIBUTOR IS SIGNATURE BROKER-DEALER SERVICES, INC. INVESTMENTS IN
THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY,
MORGAN GUARANTY TRUST COMPANY OF NEW YORK OR ANY OTHER BANK. SHARES OF THE
FUND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENTAL AGENCY. INVESTMENT
RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE JPM INSTITUTIONAL TAX
EXEMPT BOND FUND CAN FLUCTUATE, SO AN INVESTOR'S SHARES WHEN REDEEMED MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
Performance data quoted herein represent past performance. Please remember
that past performance is not a guarantee of future performance. Fund returns
are net of fees. All returns assume the reinvestment of Fund distributions.
The JPM Institutional Tax Exempt Bond Fund invests all of its investable
assets in The Tax Exempt Bond Portfolio, a separately registered investment
company which is not available to the public but only to other collective
investment vehicles such as the Fund. Consistent with applicable regulatory
guidance, performance for The JPM Institutional Tax Exempt Bond Fund prior to
December 31, 1993, reflects the performance of The Pierpont Tax Exempt Bond
Fund, the predecessor entity to The Tax Exempt Bond Portfolio which had a
substantially similar investment objective and restrictions as the Portfolio.
The performance reflects deduction of the charges and expenses of The
Pierpont Tax Exempt Bond Fund, which were higher than the estimated charges
and expenses for The JPM Institutional Tax Exempt Bond Fund, after waiver.
MORE COMPLETE INFORMATION ABOUT THE FUND, INCLUDING MANAGEMENT FEES AND OTHER
EXPENSES, IS PROVIDED IN THE PROSPECTUS, WHICH SHOULD BE READ CAREFULLY
BEFORE INVESTING. YOU MAY OBTAIN A COPY OF THE PROSPECTUS BY CALLING (800)
766-7722.
2
<PAGE>
FUND FACTS
INVESTMENT OBJECTIVE
The JPM Institutional Tax Exempt Bond Fund seeks to provide a high level of
current income that is exempt from federal income tax and to maintain a high
level of liquidity. It is designed for investors who seek current income exempt
from income tax, stability of capital and liquidity.
- -------------------------------------------
INCEPTION DATE
7/12/93
- -------------------------------------------
NET ASSETS AS OF 8/31/94 ($ MILLIONS)
16
- -------------------------------------------
EX-DIVIDEND DATES
8/29/94, 12/19/94
- -------------------------------------------
DIVIDEND PAYABLE DATES
MONTHLY
- -------------------------------------------
CAPITAL GAIN PAYABLE DATES (IF ANY)
12/12/94
EXPENSE RATIO
The Fund's current annual expense ratio of .50% 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 dividend or redemption
proceeds from the Fund.
FUND HIGHLIGHTS
(ALL DATA AS OF AUGUST 31, 1994)
SECTOR ALLOCATION
Pie chart depicting the allocation of the Fund's investment
securities held at August 31, 1994 by investment categories. The
pie is broken in pieces representing investment categories in the
following percentages:
<TABLE>
<CAPTION>
INVESTMENT CATEGORY PERCENTAGE
<S> <C>
Insured 26.7%
Revenue 24.3%
General Obligations 22.3%
Pre-refunded 22.2%
Crossover refunded 2.6%
Cash 1.4%
Private Placements 0.5%
</TABLE>
30-DAY SEC YIELD
4.86%
DURATION
5.0 years
QUALITY BREAKDOWN
AAA 50%
AA 30%
A 20%
3
<PAGE>
FUND PERFORMANCE
EXAMINING PERFORMANCE
There are several ways to evaluate a mutual fund's historical performance
record. One approach is to look at the growth of a hypothetical investment of
$10,000. The chart at right shows that $10,000 invested at the inception of the
Fund's predecessor fund would have grown to $19,753 by August 31, 1994.
Another way to look at performance is to review a fund's average annual total
returns; these figures represent the average yearly change of the Fund's value
over various time periods, typically 1, 5 or 10 years (or since inception). For
example, a hypothetical fund whose value increased by 4.0% in 1992 and 6.0% in
1993 had an average annual total return of 5.0% over the two-year
period.
Line graph with two axes: the X-axis represents years of
operations; the Y-axis represents dollar value. The graph plots
three lines: the first line represents the growth of a ten
thousand dollar investment in the Fund from October 3, 1984
(inception) to August 31, 1994; the second line represents the
growth of a ten thousand dollar investment in a portfolio of
securities reflecting the composition of the Lehman Brothers
Quality Intermediate Municipal Bond index for the same time
period; the third line represents the growth of a ten thousand
dollar investment in a portfolio of securities reflecting the
composition of the Micropal Intermediate Municipal Bond Fund
Average for the same time period. The graph points are as
follows:
<TABLE>
<CAPTION>
Year Fund investment Lehman investment Micropal investment
<S> <C> <C> <C>
0 $ 10,000 $ 10,000 $ 10,000
1 11,684 11,890
2 12,134 12,590
3 12,818 13,119
4 13,858 14,191
5 14,641 15,128
6 16,203 16,802
7 17,737 18,576
8 19,488 20,594
9 19,753 20,890
10 21,525 23,928 20,951
</TABLE>
<TABLE>
<CAPTION>
PERFORMANCE TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS
---------------------------------------------------------------
THREE YEAR ONE FIVE SINCE
AS OF AUGUST 31, 1994 MONTHS TO DATE YEAR YEARS INCEPTION*
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
The JPM Institutional Tax Exempt Bond Fund 1.29% -0.80% 1.36% 7.35% 8.17%
Lehman Brothers Quality Intermediate Municipal
Bond 1.58% -0.94% 1.44% 8.04% 9.20%
Micropal Intermediate Municipal Bond Fund Average 1.31% -1.47% 0.57% 6.99% 7.70%
<CAPTION>
AS OF JUNE 30, 1994
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
The JPM Institutional Tax Exempt Bond Fund 0.77% -2.28% 1.42% 7.14% 8.15%
Lehman Brothers Quality Intermediate Municipal
Bond 1.17% -2.71% 1.42% 7.82% 9.16%
Micropal Intermediate Municipal Bond Fund Average 0.95% -3.06% 0.62% 6.80% 7.66%
<FN>
*10/3/84 IS THE INCEPTION DATE OF FUND'S PREDECESSOR FUND, THE PIERPONT TAX
EXEMPT BOND FUND.
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. ALL RETURNS ASSUME THE
REINVESTMENT OF DISTRIBUTIONS AND REFLECT REIMBURSEMENT OF CERTAIN FUND AND
PORTFOLIO EXPENSES AS DESCRIBED IN THE PROSPECTUS. THE MICROPAL MUTUAL FUND
RATING SERVICE IS A LEADING RESOURCE FOR MUTUAL FUND DATA. MICROPAL CONTAINS
PERFORMANCE INFORMATION AND PORTFOLIO CHARACTERISTICS FOR OVER 20,000 FUNDS
WORLDWIDE, INCLUDING NEARLY 5,000 IN THE U.S. THE JPM INSTITUTIONAL TAX
EXEMPT BOND FUND INVESTS ALL OF ITS INVESTABLE ASSETS IN THE TAX EXEMPT BOND
PORTFOLIO, A SEPARATELY REGISTERED INVESTMENT COMPANY WHICH IS NOT AVAILABLE
TO THE PUBLIC BUT ONLY TO OTHER COLLECTIVE INVESTMENT VEHICLES SUCH AS THE
FUND.
</TABLE>
4
<PAGE>
THE JPM INSTITUTIONAL TAX EXEMPT BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment in The Tax Exempt Bond Portfolio ("Portfolio") at value $16,352,127
Deferred Organization Expense (Note 1d) 37,471
Receivable for Expense Reimbursements 53,343
----------
Total Assets 16,442,941
----------
LIABILITIES
Shareholder Servicing Fee Payable (Note 2c) 2,695
Dividend Payable (Note 1c) 529
Administration Fee Payable (Note 2a) 392
Fund Services Fee Payable (Note 2d) 161
Accrued Expenses 24,555
----------
Total Liabilities 28,332
----------
NET ASSETS
Applicable to 1,682,747 Shares of Beneficial Interest Outstanding (par
value $0.001) $16,414,609
----------
----------
Net Asset Value, Offering and Redemption Price Per Share $9.75
----------
----------
ANALYSIS OF NET ASSETS
Paid-in Capital $16,633,055
Accumulated Net Realized Loss on Investments (64,769)
Net Unrealized Depreciation of Investments (153,677)
----------
Net Assets $16,414,609
----------
----------
</TABLE>
See Accompanying Notes.
5
<PAGE>
THE JPM INSTITUTIONAL TAX EXEMPT BOND FUND
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME ALLOCATED FROM PORTFOLIO (NOTE 1B)
Allocated Interest Income $ 329,709
Allocated Portfolio Expenses (26,738)
---------
Net Investment Income Allocated from Portfolio 302,971
---------
EXPENSES
Printing Expense $ 29,421
Registration Fees 24,658
Transfer Agent Fees 13,779
Professional Fees 13,757
Amortization of Organization Expense (Note 1d) 9,705
Shareholder Servicing Fee (Note 2c) 3,172
Administration Fee (Note 2a) 1,859
Miscellaneous 1,218
Fund Services Fee (Note 2d) 686
Trustees' Fees and Expenses (Note 2e) 569
---------
Total Expenses 98,824
Less: Reimbursement of Expenses (Note 2b) (93,846)
---------
NET EXPENSES 4,978
---------
NET INVESTMENT INCOME 297,993
NET REALIZED LOSS ON INVESTMENTS ALLOCATED FROM PORTFOLIO (83,505)
NET CHANGE IN UNREALIZED APPRECIATION OF INVESTMENTS ALLOCATED FROM
PORTFOLIO (153,679)
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 60,809
---------
---------
</TABLE>
See Accompanying Notes.
6
<PAGE>
THE JPM INSTITUTIONAL TAX EXEMPT BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD JULY
12, 1993
FOR THE FISCAL (COMMENCEMENT OF
YEAR ENDED OPERATIONS) THROUGH
AUGUST 31, 1994 AUGUST 31, 1993
--------------- ---------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 297,993 $ 1
Net Realized Loss on Investments Allocated from Portfolio (83,505) --
Net Change in Unrealized Appreciation of Investments Allocated from
Portfolio (153,679) 2
--------------- ---
Net Increase in Net Assets Resulting from Operations 60,809 3
--------------- ---
DIVIDENDS TO SHAREHOLDERS FROM
Net Investment Income (297,993) (1)
--------------- ---
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST (NOTE 3)
Proceeds from Shares of Beneficial Interest Sold 18,838,099 100
Reinvestment of Dividends 293,542 --
Cost of Shares of Beneficial Interest Redeemed (2,480,050) --
--------------- ---
Net Increase from Transactions in Shares of Beneficial Interest 16,651,591 100
--------------- ---
Total Increase in Net Assets 16,414,407 102
NET ASSETS
Beginning of Period 202 100
--------------- ---
End of Period $ 16,414,609 $ 202
--------------- ---
--------------- ---
</TABLE>
See Accompanying Notes.
7
<PAGE>
THE JPM INSTITUTIONAL TAX EXEMPT BOND FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share outstanding throughout each period are as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD JULY
12, 1993
FOR THE FISCAL (COMMENCEMENT OF
YEAR ENDED OPERATIONS) THROUGH
AUGUST 31, 1994 AUGUST 31, 1993
--------------- --------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.07 $ 10.00
------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.48 0.06
Net Realized and Unrealized
Gain (Loss) on Investments Allocated from Portfolio (0.32) 0.07
------ ------
Total from Investment Operations 0.16 0.13
------ ------
LESS DIVIDENDS TO SHAREHOLDERS FROM
Net Investment Income (0.48) (0.06)
------ ------
NET ASSET VALUE, END OF PERIOD $ 9.75 $ 10.07
------ ------
------ ------
Total Return 1.61% 1.39+
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (in Thousands) $16,415 --*
Ratios to Average Net Assets:
Expenses 0.50% 0.00%(a)
Net Investment Income 4.70% 3.56%(a)
Decrease Reflected in above Expense Ratios due to Reimbursements and Fee
Waivers by Morgan 1.48% 2.50%(a)
<FN>
(+) Not annualized.
(a) Annualized.
(*) Net Assets at August 31, 1993 were $202.
</TABLE>
See Accompanying Notes.
8
<PAGE>
THE JPM INSTITUTIONAL TAX EXEMPT BOND FUND
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1994
- --------------------------------------------------------------------------------
The JPM Institutional Tax Exempt Bond Fund (the "Fund") is a separate series of
The JPM 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 a diversified open-end management investment
company. The Fund commenced operations on July 12, 1993.
The Fund invests all of its investable assets in The Tax Exempt Bond Portfolio
(the "Portfolio"), a diversified open-end management investment company having
the same investment objectives as the Fund. The value of such investment
reflects the Fund's proportionate interest in the net assets of the Portfolio
(4% at August 31, 1994). 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.
1. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of the significant accounting policies of the Fund:
a)Valuation of securities by the Portfolio is discussed in Note 1 of the
Portfolio's Notes to Financial Statements which are included elsewhere in
this report.
b)The Fund records its share of net investment income, realized and
unrealized gain and loss and adjusts its investment in the Portfolio each
day. All the net investment income and realized and unrealized gain and
loss of the Portfolio is allocated pro rata among the Fund and other
investors in the Portfolio at the time of such determination.
c)Substantially all the Fund's net investment income is declared as
dividends daily and paid monthly. Distributions to shareholders of net
realized capital gain, if any, are declared and paid annually.
d)The Fund incurred organization expenses in the amount of $48,567. These
costs were deferred and are being amortized by the Fund on a straight-line
basis over a five-year period from the commencement of operations.
e)Each series of the Trust is treated as a separate entity for federal
income tax purposes. The Fund's policy is to comply with the provisions of
the Internal Revenue Code of 1986, as amended, applicable to regulated
investment companies and to distribute substantially all of its income,
including net realized capital gains, if any, within the prescribed time
periods. Accordingly, no provision for federal income or excise tax is
necessary.
f)The Fund intends to elect for Federal income tax purposes to treat
approximately $64,769 of net capital losses that arose after October 31,
1993 ("post-October losses") within the taxable year as if arising on the
first business day of the Fund's next taxable year.
g)Expenses incurred by the Trust with respect to any two or more funds in
the Trust are allocated in proportion to the net assets of each fund in
the Trust, except where allocations of direct expenses to each fund can
otherwise be made fairly. Expenses directly attributable to a fund are
charged to that fund.
9
<PAGE>
THE JPM INSTITUTIONAL TAX EXEMPT BOND FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
h)The Fund has adopted Statement of Position 93-2 in Determination,
Disclosure, and Financial Statement Presentation of Income, Capital Gain
and Return of Capital Distributions by Investment Companies. Accordingly,
permanent book and tax basis differences relating to shareholder
distributions are reclassified to paid-in capital. The cumulative effect
of such differences totaling $18,736 were reclassified from accumulated
net realized loss, to paid-in capital. Net investment income, net realized
gains, and net assets were not affected by this change.
2. TRANSACTIONS WITH AFFILIATES:
a)The Trust retains Signature Broker-Dealer Services, Inc. ("Signature") to
serve as Administrator and Distributor. Signature provides administrative
services necessary for the operations of the Fund, furnishes office space
and facilities required for conducting the business of the Fund and pays
the compensation of the Fund's officers affiliated with Signature.
Effective October 1, 1993, Signature receives a fee at an annual rate of
0.04% of the first $1 billion of the aggregate average daily net assets of
the Fund, the other funds in the Trust, The Pierpont Funds, and The JPM
Institutional Plus Fund (the "aggregate funds"), 0.032% of the next $2
billion of the aggregate funds' average daily net assets, 0.024% of the
next $2 billion of the aggregate funds' average daily net assets, and
0.016% of the aggregate funds' average daily net assets in excess of $5
billion. Prior to October 1, 1993, the administration fee was at the
annual rate of 0.05% of the first $1 billion of the aggregate funds'
average daily net assets, 0.04% of the next $2 billion of the aggregate
funds' average daily net assets, 0.03% of the next $2 billion of the
aggregate funds' average daily net assets, and 0.02% of the aggregate
funds' average daily net assets in excess of $5 billion. For the fiscal
year ended August 31, 1994, the Fund's portion of Signature's fee for
these services amounted to $1,859.
b)The Trust, on behalf of the Fund, has a Financial and Fund Accounting
Services Agreement ("Services Agreement") with Morgan Guaranty Trust
Company of New York ("Morgan") under which Morgan receives a fee, based on
the percentage described below, for overseeing certain aspects of the
administration and operation of the Fund. The Services Agreement is also
designed to provide an expense limit for certain expenses of the Fund. If
total expenses of the Fund, excluding the shareholder servicing fee, the
fund services fee and amortization of organization expenses, exceed the
expense limit of 0.05% of the Fund's average daily net assets, Morgan will
reimburse the Fund for the excess expense amount and receive no fee.
Should such expenses be less than the expense limit, Morgan's fee would be
limited to the difference between such expenses and the fee calculated
under the Services Agreement. For the fiscal year ended August 31, 1994,
Morgan agreed to reimburse the Fund $82,093 for excess expenses. In
addition to the expenses that Morgan assumes under the Services Agreement,
Morgan has agreed to reimburse the Fund to the extent necessary to
maintain the total operating expenses of the Fund, including the expenses
allocated to the Fund from the Portfolio, at no more than 0.50% of the
average daily net assets of the Fund through August 31, 1994. For the
fiscal year ended August 31, 1994, Morgan has agreed to reimburse the Fund
$11,753 for expenses which exceeded this limit.
10
<PAGE>
THE JPM INSTITUTIONAL TAX EXEMPT BOND FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
c)The Trust, on behalf of the Fund, has a Shareholder Servicing Agreement
with Morgan. The Agreement provides for the Fund to pay Morgan a fee for
these services which is computed daily and may be paid monthly at an
annual rate of 0.05% of the average daily net assets of the Fund. For the
fiscal year ended August 31, 1994, the fee for these services amounted to
$3,172.
d)Effective January 15, 1994, the Trust, on behalf of the Fund, entered into
a Fund Services Agreement with Pierpont Group, Inc. ("Group") to assist
the Trustees in exercising their overall supervisory responsibilities for
the Trust's affairs. The Trustees of the Trust are the sole shareholders
of Group. The Fund's allocated portion of Group's costs in performing its
services amounted to $686 for the period January 15, 1994 to August 31,
1994.
e)An aggregate annual fee of $55,000 is paid to each Trustee for serving as
a Trustee of the Pierpont Funds, The JPM Institutional Funds, The JPM
Institutional Plus Fund and their corresponding Portfolios. The trustee
fee expense shown in the financial statements represents the Fund's
allocated portion of the total fees and expenses.
3. TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST:
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest of one or more series. To date
the Trust has authorized shares of fourteen series of which the Fund's shares
represent one series. Transactions in shares of beneficial interest of the Fund
were as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD JULY 12,
FOR THE FISCAL 1993 (COMMENCEMENT OF
YEAR ENDED OPERATIONS) THROUGH
AUGUST 31, 1994 AUGUST 31, 1993
--------------- -------------------------
<S> <C> <C>
Shares sold 1,908,685 10
Reinvestment of dividends 29,981 --
Shares redeemed (255,939) --
--
---------------
Net Increase 1,682,727 10
--------------- --
--------------- --
</TABLE>
11
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of
The JPM Institutional Tax Exempt Bond 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
The JPM Institutional Tax Exempt Bond Fund (the "Fund") at August 31, 1994, the
results of its operations for the year then ended, and the changes in its net
assets and the financial highlights for the year then ended and for the period
July 12, 1993 (commencement of operations) through August 31, 1993, in
conformity with generally accepted accounting principles. 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 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 provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
New York, New York
October 25, 1994
12
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
ANNUAL REPORT AUGUST 31, 1994
(THE FOLLOWING PAGES SHOULD BE READ IN CONJUNCTION
WITH THE JPM INSTITUTIONAL TAX EXEMPT BOND FUND
ANNUAL FINANCIAL STATEMENTS)
13
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS
AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
PRINCIPAL MOODY'S/S&P MATURITY
AMOUNT SECURITY DESCRIPTION TYPE OF SECURITY (UNAUDITED) DATE RATE VALUE
- ----------- ------------------------------ ------------------ --------- ----------- ------- ------------
<S> <S> <C> <C> <C> <C> <C>
ALABAMA (2.5%)
$ 5,400,000 Birmingham (Crossover
Refunded, Series K)......... General Obligation A1/AA 10/01/95(A) 9.80% $ 5,816,772
2,180,000 Childersburg Industrial
Development Board, PCR,
(Kimberly Clark Corp.
Project, Escrowed to
Maturity)................... Revenue Bond Aa2/AA 11/15/99 7.40 2,304,478
1,000,000 Alabama Mental Health Finance
Authority (Series 1989) MBIA
Insured..................... Revenue Bond Aaa/AAA 05/01/01 7.375 1,108,250
1,000,000 Daphne Special Care Facilities
Financing Authority
(Presbyterian Retirement,
Series A, Prerefunded)...... Revenue Bond NR/NR 08/15/01(A) 7.30 1,125,570
------------
Total Alabama 10,355,070
------------
ALASKA (1.8%)
1,000,000 Anchorage (Series 1990A) AMBAC
Insured..................... General Obligation Aaa/AAA 02/01/00 6.85 1,082,840
3,000,000 North Slope Borough (Series
1992A) MBIA Insured......... General Obligation Aaa/AAA 06/30/00 5.55 3,080,820
2,000,000 Anchorage (Refunding, Series
1991) MBIA Insured.......... General Obligation Aaa/AAA 07/01/02 6.60 2,143,680
1,075,000 Anchorage (Refunding, Series
1989) AMBAC Insured......... General Obligation Aaa/AAA (B) 7.10 1,159,355
------------
Total Alaska 7,466,695
------------
ARIZONA (0.8%)
2,000,000 Mesa (Series 1991) AMBAC
Insured..................... General Obligation Aaa/AAA 07/01/00 5.90 2,094,060
1,000,000 Maricopa County, School
District #11 (Peoria Unified
School Improvement, Series
1990H, Prerefunded) MBIA
Insured..................... General Obligation Aaa/AAA 07/01/01(A) 7.00 1,110,200
------------
Total Arizona 3,204,260
------------
CALIFORNIA (4.3%)
4,000,000 Los Angeles Department of
Water & Power (California
Electric Plant, Crossover
Refunded)................... Revenue Bond Aa/AA 05/15/00(A) 7.125 4,441,480
2,500,000 Los Angeles Transportation
Commission (Sales Tax
Revenue, Series 1992B) FGIC
Insured..................... Revenue Bond Aaa/AAA 07/01/01 5.75 2,599,850
</TABLE>
See Accompanying Notes.
14
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
PRINCIPAL MOODY'S/S&P MATURITY
AMOUNT SECURITY DESCRIPTION TYPE OF SECURITY (UNAUDITED) DATE RATE VALUE
- ----------- ------------------------------ ------------------ --------- ----------- ------- ------------
<S> <S> <C> <C> <C> <C> <C>
CALIFORNIA (CONTINUED)
$ 8,740,000 California Public Works Board
Lease Revenue (State
Prisons, Refunding) AMBAC
Insured..................... Revenue Bond Aaa/AAA 12/01/05 5.25% $ 8,586,351
1,850,000 Kaweah Delta Hospital
District, Tubre County,
Series G.................... Revenue Bond NR/NR 06/01/14 6.40 1,850,000
------------
Total California 17,477,681
------------
COLORADO (1.9%)
4,200,000 Colorado Post Secondary
Educational Facilities
Authority (Auraria Higher
Education Center,
Certificates of
Participation,
Prerefunded)................ Revenue Bond NR/AAA 09/01/95(A) 9.75 4,509,120
3,100,000 Denver City and County
Airport, (Stapleton
International Airport,
Series 1982, Escrowed to
Maturity)................... Revenue Bond Aaa/AAA 12/01/95 10.00 3,310,397
------------
Total Colorado 7,819,517
------------
CONNECTICUT (3.5%)
2,000,000 Connecticut Housing Finance
Authority (Housing Mortgage
Finance Program, Series
1987B)...................... Revenue Bond Aa/AA 11/15/97 8.10 2,119,920
5,000,000 Connecticut (Special Tax
Obligation, Transportation
Infrastructure, Series
1987A)...................... Revenue Bond A1/AA- 09/01/01 4.75 4,890,850
2,815,000 Connecticut (Special Tax
Obligation, Transportation
Infrastructure, Series
1991A)...................... Revenue Bond A1/AA- 06/01/04 6.60 3,039,637
4,150,000 Connecticut (Special Tax
Obligation, Transportation
Infrastructure, Series B)... Revenue Bond A1/AA- 09/01/06 6.00 4,300,977
------------
Total Connecticut 14,351,384
------------
DISTRICT OF COLUMBIA (2.8%)
7,500,000 District of Columbia
(Refunding, Series C) FGIC
Insured..................... General Obligation Aaa/AAA 12/01/03 5.25 7,338,225
3,000,000 District of Columbia
(Refunding, Series A) MBIA
Insured..................... General Obligation Aaa/AAA 06/01/07 6.00 3,007,590
1,000,000 Washington, D.C.
Transportation Authority
(Refunding, Series 1993)
FGIC Insured................ Revenue Bond Aaa/AAA 07/01/07 6.00 1,023,280
------------
Total District of Columbia 11,369,095
------------
</TABLE>
See Accompanying Notes.
15
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
PRINCIPAL MOODY'S/S&P MATURITY
AMOUNT SECURITY DESCRIPTION TYPE OF SECURITY (UNAUDITED) DATE RATE VALUE
- ----------- ------------------------------ ------------------ --------- ----------- ------- ------------
<S> <S> <C> <C> <C> <C> <C>
FLORIDA (1.0%)
$ 1,535,000 Florida Board of Education
(Capital Outlay, Series
1986C, Escrowed to
Maturity)................... General Obligation Aaa/AA 06/01/01 7.00% $ 1,632,964
465,000 Florida Board of Education
(Outlay, Full Faith and
Credit, Series 1986C)....... General Obligation Aa/AA 06/01/01 7.00 488,236
2,000,000 Volusia County, School
District (Refunding, Series
1991) FGIC Insured.......... General Obligation Aaa/AAA 08/01/02 6.10 2,134,160
------------
Total Florida 4,255,360
------------
GEORGIA (4.6%)
1,155,000 Georgia Residential Finance
Authority (Single Family
Insured Mortgages, 1986A)
FHA Insured................. Revenue Bond Aa/AA+ 12/01/98 6.60 1,214,921
8,070,000 Georgia (Series C)............ General Obligation Aaa/AA+ 07/01/05 6.50 8,838,668
1,000,000 Georgia Municipal Electric
Power Authority (Series
D).......................... Revenue Bond A/A+ 01/01/06 6.00 1,020,500
1,520,000 Georgia (Series D)............ General Obligation Aaa/AA+ 08/01/06 6.80 1,689,556
2,705,000 Georgia (Series D)............ General Obligation Aaa/AA+ 08/01/08 6.50 2,921,643
3,000,000 Georgia (Series B)............ General Obligation Aaa/AA+ 03/01/10 6.30 3,183,420
------------
Total Georgia 18,868,708
------------
HAWAII (0.5%)
2,000,000 Honolulu (City & County
Refunding and Improvement,
Series B)................... General Obligation Aa/AA 10/01/11 5.50 1,900,060
------------
ILLINOIS (7.0%)
3,775,000 Cook County (Illinois
Community College, District
508, Series C) MBIA
Insured..................... General Obligation Aaa/AAA 12/01/95 6.90 3,893,309
1,640,000 Illinois (Prerefunded)........ General Obligation Aa/AAA 06/01/97(A) 7.50 1,790,306
2,500,000 Cook County (Series 1991)
AMBAC Insured............... General Obligation Aaa/AAA 11/01/98 6.10 2,620,250
950,000 Kendall Kane & Will Counties
Community Unit School
District #308, FGIC
Insured..................... General Obligation Aaa/AAA 03/01/99 6.20 995,809
3,350,000 Illinois Sales Tax Revenue
(Series R).................. Revenue Bond Aa/AAA 06/15/01 4.60 3,219,283
4,000,000 Illinois (Series 1992)........ General Obligation Aa/AA- 10/01/01 6.00 4,160,960
1,000,000 University of Illinois
(Auxiliary Facilities,
Series 1992N, Escrowed to
Maturity)................... Revenue Bond Aaa/AAA 10/01/01 6.00 1,041,430
</TABLE>
See Accompanying Notes.
16
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
PRINCIPAL MOODY'S/S&P MATURITY
AMOUNT SECURITY DESCRIPTION TYPE OF SECURITY (UNAUDITED) DATE RATE VALUE
- ----------- ------------------------------ ------------------ --------- ----------- ------- ------------
<S> <S> <C> <C> <C> <C> <C>
ILLINOIS (CONTINUED)
$ 2,000,000 Illinois (Series 1986)........ General Obligation Aa/AA- 12/01/01 6.25% $ 2,081,220
2,000,000 Illinois (Refunding, Series
1987)....................... General Obligation Aa/AA- 04/01/02 6.50 2,093,040
2,000,000 Illinois (Building Sales Tax
Revenue, Series 1991O)...... Revenue Bond Aa/AAA 06/15/02 6.00 2,096,000
3,280,000 Cook County (Refunding, Series
C) FGIC Insured............. General Obligation Aaa/AAA 11/15/04 5.80 3,376,366
1,500,000 Chicago O'Hare International
Airport (Refunding, Series
C-1) MBIA Insured........... Revenue Bond Aaa/AAA 01/01/09 5.75 1,476,855
------------
Total Illinois 28,844,828
------------
INDIANA (1.9%)
4,175,000 Indiana Bond Bank Common
School Fund, AMBAC Insured.. Revenue Bond Aaa/AAA 02/01/97 4.10 4,119,180
3,915,000 Indiana Transportation Finance
Authority (Highway Revenue
Refunding, Series A) AMBAC
Insured..................... Revenue Bond Aaa/AAA 06/01/09 5.25 3,637,074
------------
Total Indiana 7,756,254
------------
KENTUCKY (1.4%)
885,000 Kentucky Higher Education
Student Loan Corp., (Insured
Student Loan Revenue, Series
1985A)...................... Revenue Bond A/A+ 12/01/94 8.40 898,470
4,400,000 Kentucky Turnpike Authority,
(Series A, Escrowed to
Maturity)................... Revenue Bond Aaa/AAA 07/01/02 7.10 4,836,788
------------
Total Kentucky 5,735,258
------------
LOUISIANA (0.7%)
2,900,000 Louisiana (Series A).......... General Obligation Baa1/A 02/01/96 5.50 2,929,000
------------
MARYLAND (2.3%)
1,000,000 Maryland Department of
Transportation, (Series
1990, Prerefunded).......... Revenue Bond Aaa/AAA 08/15/99(A) 6.70 1,093,010
3,150,000 Montgomery County (Public
Improvement Refunding,
Series 1992A)............... General Obligation Aaa/AAA 07/01/00 5.20 3,216,402
3,000,000 Maryland (3rd Series)......... General Obligation Aaa/AAA 07/15/03 6.40 3,219,690
</TABLE>
See Accompanying Notes.
17
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
PRINCIPAL MOODY'S/S&P MATURITY
AMOUNT SECURITY DESCRIPTION TYPE OF SECURITY (UNAUDITED) DATE RATE VALUE
- ----------- ------------------------------ ------------------ --------- ----------- ------- ------------
<S> <S> <C> <C> <C> <C> <C>
MARYLAND (CONTINUED)
$ 2,000,000 Montgomery County (Public
Improvement Refunding,
Series 1992A)............... General Obligation Aaa/AAA 07/01/05 5.70% $ 2,061,780
------------
Total Maryland 9,590,882
------------
MASSACHUSETTS (4.3%)
2,890,000 Massachusetts Municipal
Wholesale Electric Co.,
(Power Supply System
Revenue, Refunding, Series
A, Prerefunded)............. Revenue Bond Aaa/AAA 01/01/95(A) 13.00 3,043,604
6,500,000 Massachusetts (Refunding,
Series B)................... General Obligation A/A+ 11/01/01 5.00 6,445,530
1,060,000 Wareham School Project Loan
Bonds, AMBAC Insured........ General Obligation Aaa/AAA 01/15/03 6.80 1,167,049
5,000,000 Massachusetts (Refunding,
Series B)................... General Obligation A/A+ 11/01/06 5.40 4,877,700
1,800,000 Massachusetts Bay
Transportation Authority
(General Transportation
System, Refunding, Series
A).......................... Revenue Bond A/A+ 03/01/08 7.00 1,989,594
------------
Total Massachusetts 17,523,477
------------
MINNESOTA (2.5%)
6,065,000 Western Minnesota Municipal
Power Agency (Series 1983A,
Prerefunded)................ Revenue Bond Aaa/AAA 01/01/99(A) 10.125 7,001,315
1,380,000 Metropolitan Council Minnesota
(Minneapolis-St. Paul
Metropolitan Area,
Refunding, Series B)........ Revenue Bond Aaa/AAA 02/01/99 4.50 1,363,647
1,685,000 Minnesota (Series 1992)....... General Obligation Aa1/AA+ 08/01/00 5.60 1,748,373
------------
Total Minnesota 10,113,335
------------
MISSOURI (0.6%)
2,500,000 Missouri Higher Education Loan
Authority (Series 1992A).... Revenue Bond Aa/NR 02/15/96 4.875 2,503,900
------------
NEBRASKA (1.0%)
4,000,000 Nebraska Public Power District
(Nuclear Facilities,
Refunding).................. Revenue Bond A1/A+ 07/01/00 5.20 4,051,840
------------
</TABLE>
See Accompanying Notes.
18
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
PRINCIPAL MOODY'S/S&P MATURITY
AMOUNT SECURITY DESCRIPTION TYPE OF SECURITY (UNAUDITED) DATE RATE VALUE
- ----------- ------------------------------ ------------------ --------- ----------- ------- ------------
<S> <S> <C> <C> <C> <C> <C>
NEVADA (2.1%)
$ 2,000,000 Clark County Flood Control
Group #1 (Series 1991) AMBAC
Insured..................... General Obligation Aaa/AAA 11/01/99 5.70% $ 2,066,560
500,000 Carson City School District,
(Series 1990, Prerefunded)
FGIC Insured................ General Obligation Aaa/AAA 04/01/00(A) 6.75 549,990
1,330,000 Nevada LT Prison Facilities,
(Series 1990A,
Prerefunded)................ General Obligation Aa/AA 08/01/00(A) 7.00 1,484,573
1,685,000 Las Vegas (Clark County
Library District, Series
1991A, Prerefunded) FGIC
Insured..................... General Obligation Aaa/AAA 06/01/01(A) 6.60 1,841,654
1,200,000 Las Vegas (Clark County
Library District, Series
1991A, Prerefunded) FGIC
Insured..................... General Obligation Aaa/AAA 06/01/01(A) 6.70 1,318,344
1,280,000 Las Vegas (Clark County
Library District, Refunding,
Series B) FGIC Insured...... General Obligation Aaa/AAA 08/01/04 6.70 1,386,842
------------
Total Nevada 8,647,963
------------
NEW HAMPSHIRE (0.5%)
1,720,000 New Hampshire (Series
1991A)...................... General Obligation Aa/AA 06/15/03 6.60 1,877,260
------------
NEW JERSEY (4.1%)
3,180,000 New Jersey (Prerefunded)...... General Obligation NR/AA+ 04/15/97(A) 7.30 3,424,860
1,500,000 New Jersey Sports & Exposition
Authority (Sports Complex
Refunding, Escrowed to
Maturity)................... General Obligation Aa1/NR 01/01/00 8.10 1,715,175
7,600,000 New Jersey Economic
Development Authority
(Market Transition
Facilities Series A) MBIA
Insured..................... Revenue Bond Aaa/AAA 07/01/00 5.125 7,631,692
4,000,000 New Jersey Economic
Development Authority
(Market Transition
Facilities Series A) MBIA
Insured..................... Revenue Bond Aaa/AAA 07/01/02 5.40 4,040,360
------------
Total New Jersey 16,812,087
------------
NEW YORK (6.2%)
5,000,000 New York Medical Care
Facilities Finance Agency
(Insured Mortgage Hospital,
FHA Brooklyn Caladonia Long
Island Hospital,
Prerefunded)................ General Obligation NR/AAA 01/15/96(A) 8.50 5,386,150
</TABLE>
See Accompanying Notes.
19
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
PRINCIPAL MOODY'S/S&P MATURITY
AMOUNT SECURITY DESCRIPTION TYPE OF SECURITY (UNAUDITED) DATE RATE VALUE
- ----------- ------------------------------ ------------------ --------- ----------- ------- ------------
<S> <S> <C> <C> <C> <C> <C>
NEW YORK (CONTINUED)
$ 4,050,000 Triborough Bridge & Tunnel
Authority (Series T
Prerefunded)................ Revenue Bond AAA/A+ 01/01/01 7.00% $ 4,548,596
2,560,000 New York City (Series E)...... General Obligation Baa1/A- 08/01/01 5.125 2,498,074
4,675,000 New York City (Series H1)..... General Obligation Baa1/A- 08/01/01 5.50 4,658,824
1,000,000 Municipal Assistance Corp. for
the City of New York,
Custodial Receipt
Certificates, Series
1987-61, MBIA Insured....... Revenue Bond Aaa/AAA 07/01/07 6.875 1,069,270
2,645,000 New York City (Refunding,
Series A)................... General Obligation Baa1/A- 08/01/02 5.75 2,656,506
2,100,000 Monroe County Public
Improvement AMBAC Insured... General Obligation Aaa/AAA 06/01/09 6.00 2,107,896
1,000,000 New York Dormitory Authority,
(Iona College Series 1988)
MBIA Insured................ Revenue Bond Aaa/AAA 07/01/09 7.625 1,103,650
1,415,000 Monroe County Public
Improvement, AMBAC Insured.. General Obligation Aaa/AAA 06/01/10 6.00 1,420,561
------------
Total New York 25,449,527
------------
NORTH CAROLINA (0.4%)
1,500,000 Durham Public Improvement..... General Obligation Aa1/AAA 02/01/06 5.00 1,432,050
------------
OHIO (3.1%)
3,000,000 Cleveland (Ohio Waterworks
Revenue, Series E,
Prerefunded)................ Revenue Bond Aaa/AAA 01/01/97(A) 7.75 3,259,800
4,000,000 Summit County (Justice
Facilities, Prerefunded)
AMBAC Insured............... General Obligation Aaa/AAA 12/01/97(A) 8.00 4,472,200
3,815,000 Ohio Water Development
Authority (Series Safe Water
II, Escrowed to Maturity)... Revenue Bond Aaa/AAA 12/01/10 9.375 4,762,837
------------
Total Ohio 12,494,837
------------
OKLAHOMA (0.0%)
50,000 Oklahoma, Housing Finance
Agency (Single Family
Mortgage, Series 1984A) MBIA
Insured..................... Revenue Bond Aaa/AAA 03/01/97 9.90 51,000
------------
PENNSYLVANIA (1.2%)
1,175,000 Bethel Park School District,
(Series 1991B, Prerefunded)
AMBAC Insured............... General Obligation Aaa/AAA 02/01/00(A) 6.55 1,262,725
</TABLE>
See Accompanying Notes.
20
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
PRINCIPAL MOODY'S/S&P MATURITY
AMOUNT SECURITY DESCRIPTION TYPE OF SECURITY (UNAUDITED) DATE RATE VALUE
- ----------- ------------------------------ ------------------ --------- ----------- ------- ------------
<S> <S> <C> <C> <C> <C> <C>
PENNSYLVANIA (CONTINUED)
$ 970,000 Pennsylvania Higher Education
Assistance Agency, (Student
Loan Refunding, Series
1985A) FGIC Insured......... Revenue Bond Aaa/AAA 12/01/00 6.80% $ 1,040,577
1,000,000 Pennsylvania (Refunding and
Projects, Custodial Receipt
Certificates, 1st Series A)
AMBAC Insured............... General Obligation Aaa/AAA 01/01/01 6.60 1,074,630
1,500,000 Pennsylvania (2nd Series
1991A) MBIA Insured......... General Obligation Aaa/AAA 11/01/04 6.50 1,611,270
------------
Total Pennsylvania 4,989,202
------------
RHODE ISLAND (2.7%)
2,000,000 Rhode Island (Series 1990B
Prerefunded)................ General Obligation A1/AA- 10/15/99(A) 6.70 2,194,320
5,000,000 Rhode Island State Public
Buildings Authority (Public
Projects Refunding, Series
A) AMBAC Insured............ Revenue Bond Aaa/AAA 02/01/00 4.70 4,900,350
3,785,000 Rhode Island (Series 1991B)... General Obligation A1/AA- 05/15/00 6.00 3,957,142
------------
Total Rhode Island 11,051,812
------------
TENNESSEE (0.5%)
2,000,000 Chattanooga Industrial
Development Board, (IDR,
Gerber/Buster Brown
Manufacturing, Inc.)........ Revenue Bond A1/NR 11/01/95(A) 4.00 1,966,880
------------
TEXAS (15.8%)
120,000 Katy Independent School
District (Series 1986,
Prerefunded) MBIA Insured... General Obligation Aaa/AAA 08/01/95(A) 7.35 123,544
3,000,000 Texas State Public Finance
Authority Revenue
(Refunding, Series A)....... Revenue Bond A/A+ 02/01/96 3.80 2,980,680
4,400,000 San Antonio Electric & Gas
(Refunding, Series B,
Prerefunded)................ Revenue Bond Aaa/AAA 02/01/96(A) 9.00 4,742,452
750,000 Texas A&M University (Series
1989, Prerefunded).......... Revenue Bond Aa1/AAA 07/01/97(A) 6.60 802,958
880,000 Katy Independent School
District (Refunding, Series
1986) MBIA Insured.......... General Obligation Aaa/AAA 08/01/97 7.35 904,130
2,000,000 Austin Water Sewer & Electric
(Refunding)................. General Obligation A/A- 11/15/97 13.50 2,516,340
</TABLE>
See Accompanying Notes.
21
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
PRINCIPAL MOODY'S/S&P MATURITY
AMOUNT SECURITY DESCRIPTION TYPE OF SECURITY (UNAUDITED) DATE RATE VALUE
- ----------- ------------------------------ ------------------ --------- ----------- ------- ------------
<S> <S> <C> <C> <C> <C> <C>
TEXAS (CONTINUED)
$ 3,805,000 Fort Worth Independent School
District (Refunding, Series
1987)....................... General Obligation Aa/AA 02/15/98 6.00% $ 3,959,749
1,835,000 Canyon Independent School
District, (Series 1986) MBIA
Insured..................... General Obligation Aaa/AAA 02/15/98 6.50 1,936,769
700,000 Texas A&M University (Series
1989)....................... Revenue Bond Aa1/AA+ 07/01/98 6.50 743,169
2,000,000 Texas Public Finance Authority
(Series 1988A).............. General Obligation Aa/AA 10/01/98 6.60 2,139,580
975,000 Conroe Independent School
District (Schoolhouse and
Refunding, Series 1989
Prerefunded) MBIA Insured... General Obligation Aaa/AAA 02/01/99(A) 7.10 1,057,192
1,050,000 Austin Independent School
District, (Permanent School
Fund Guarantee, Refunding,
Series 1991) PSFG Insured... General Obligation Aaa/AAA 08/01/99 6.20 1,106,605
2,175,000 Texas, Public Finance (Series
1990B, Prerefunded)......... General Obligation Aa/AA 10/01/99(A) 6.80 2,362,898
1,700,000 Harris County Road Improvement
Authority (Series 1989,
Prerefunded) MBIA Insured... General Obligation Aaa/AAA 11/01/99(A) 7.00 1,863,489
5,000,000 Texas Veterans (Series 1985,
Prerefunded)................ General Obligation NR/AAA 12/01/99(A) 8.30 5,782,950
11,700,000 Texas National Research
Laboratory Commission
(Superconducter,
Prerefunded)................ General Obligation Aaa/NR 04/01/00(A) 7.125 13,087,152
1,000,000 Arlington (Series 1989) AMBAC
Insured..................... General Obligation Aaa/AAA 08/01/00 6.85 1,081,060
1,500,000 Addison (Refunding, Series
1991) FGIC Insured.......... General Obligation Aaa/AAA 09/01/00 6.25 1,564,995
2,000,000 Texas Public Finance Authority
(Refunding, Series 1991A,
Prerefunded)................ General Obligation Aa/AA 10/01/00(A) 6.30 2,138,060
1,000,000 Texas Public Finance Authority
(Refunding, Series 1991A,
Prerefunded)................ General Obligation Aa/AA 10/01/00(A) 6.50 1,078,880
25,000 Conroe Independent School
District (Schoolhouse and
Refunding, Series 1989) MBIA
Insured..................... General Obligation Aaa/AAA 02/01/01 7.10 26,831
2,000,000 Plano Independent School
District (Refunding, Series
1991B, Prerefunded) FGIC
Insured..................... General Obligation Aaa/AAA 02/15/01(A) 6.55 2,157,740
</TABLE>
See Accompanying Notes.
22
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
PRINCIPAL MOODY'S/S&P MATURITY
AMOUNT SECURITY DESCRIPTION TYPE OF SECURITY (UNAUDITED) DATE RATE VALUE
- ----------- ------------------------------ ------------------ --------- ----------- ------- ------------
<S> <S> <C> <C> <C> <C> <C>
TEXAS (CONTINUED)
$ 2,500,000 University of Texas (Permanent
University Fund, Refunding,
Series 1991)................ Revenue Bond Aa1/AA+ 07/01/01 6.30% $ 2,674,025
1,650,000 El Paso Independent School
District, (Permanent School
Fund Guarantee, Series 1991,
Prerefunded)................ General Obligation Aaa/AAA 07/01/01(A) 6.55 1,790,399
1,500,000 Austin Utilities System
Revenue (Series 6, Escrowed
to Maturity)................ Revenue Bond Aaa/AAA 10/01/01 6.50 1,625,295
1,100,000 Conroe Independent School
District (Schoolhouse and
Refunding).................. General Obligation Aaa/AAA 02/01/02 6.50 1,188,407
2,000,000 University of Texas (Permanent
University Fund, Refunding,
Series 1992A)............... Revenue Bond Aa1/AA+ 07/01/02 5.90 2,096,820
1,265,000 Conroe Independent School
District (Schoolhouse and
Refunding, Series 1993)..... General Obligation Aaa/AAA 02/01/03 6.50 1,369,603
------------
Total Texas 64,901,772
------------
UTAH (0.0%)
25,000 Utah Housing Finance Agency
(Single Family Mortgage,
Series 1984A)............... Revenue Bond Aa/AA 01/01/95 9.90 25,816
------------
VIRGINIA (3.6%)
4,445,000 Virginia Public School
Authority (Refunding, Series
B).......................... Revenue Bond Aa/AA 01/01/00 4.50 4,335,697
5,000,000 Virginia Public School
Authority (Refunding, Series
1991C)...................... Revenue Bond Aa/AA 01/01/02 6.00 5,259,500
2,000,000 Virginia Public School
Authority, (Series A)....... Revenue Bond Aa/AA 08/01/04 6.50 2,151,920
3,000,000 Richmond (Public Improvement
and Refunding, Series A).... General Obligation Aa/AA 01/15/07 5.40 2,938,860
------------
Total Virginia 14,685,977
------------
WASHINGTON (7.1%)
2,955,000 Seattle Municipal Sewer
Revenue (Series T,
Prerefunded)................ Revenue Bond Aaa/AA- 01/01/00(A) 6.875 3,258,183
5,480,000 Seattle Municipal Light &
Power (Refunding)........... Revenue Bond Aa/AA 05/01/00 4.60 5,333,081
1,960,000 Seattle Water System Revenue
(Refunding)................. Revenue Bond Aa/AA 12/01/00 4.70 1,926,562
</TABLE>
See Accompanying Notes.
23
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
PRINCIPAL MOODY'S/S&P MATURITY
AMOUNT SECURITY DESCRIPTION TYPE OF SECURITY (UNAUDITED) DATE RATE VALUE
- ----------- ------------------------------ ------------------ --------- ----------- ------- ------------
<S> <S> <C> <C> <C> <C> <C>
WASHINGTON (CONTINUED)
$ 5,265,000 Washington Public Power Supply
System (Nuclear Project #2,
Refunding, Series A)........ Revenue Bond Aa/AA 07/01/01 6.30% $ 5,529,198
2,000,000 Washington Public Power Supply
System (Nuclear Project #2,
Refunding, Series C) FGIC
Insured..................... Revenue Bond Aaa/AAA 07/01/01 7.00 2,202,220
1,500,000 Washington Public Power Supply
System (Nuclear Project #2,
Refunding, Series 1990C).... Revenue Bond Aa/AA 07/01/02 7.50 1,687,455
1,000,000 Washington (Series 1990B)..... General Obligation Aa/AA 08/01/02 6.75 1,075,910
1,750,000 Washington Refunding Bonds
(Series R-92A).............. General Obligation Aa/AA 09/01/02 6.30 1,873,952
1,555,000 North Shore School District
#417, (King & Snohomish
Counties, Series 1991) FGIC
Insured..................... General Obligation Aaa/AAA 12/01/02 6.60 1,662,046
1,000,000 Pierce County School District
#320, (Sumner Washington,
Custodial Receipt
Certificates, Series 1991)
MBIA Insured................ General Obligation Aaa/AAA 12/01/02 6.60 1,084,190
1,250,000 Snohomish County Washington
School District #2,
(Everett, Custodial Receipt
Certificates, Refunding,
Series A) MBIA Insured...... General Obligation Aaa/AAA 12/01/02 6.70 1,349,550
2,000,000 Washington Public Power Supply
System (Nuclear Project #2,
Refunding, Series 1990A).... Revenue Bond Aa/AA 07/01/06 7.25 2,262,080
------------
Total Washington 29,244,427
------------
WEST VIRGINIA (0.3%)
1,000,000 Berkeley County, Board of
Education (Series 1988) MBIA
Insured..................... General Obligation Aaa/AAA 04/01/01 7.30 1,115,150
------------
WISCONSIN (3.4%)
2,000,000 Wisconsin (Refunding, Series
1988B, Prerefunded)......... General Obligation Aaa/AA 05/01/97(A) 6.90 2,130,700
1,500,000 Racine Unified School District
AMBAC Insured............... General Obligation Aaa/AAA 04/01/01 6.50 1,585,410
5,000,000 Wisconsin Transportation
(Refunding, Series A)....... Revenue Bond A1/AA- 07/01/06 4.60 4,431,950
</TABLE>
See Accompanying Notes.
24
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
PRINCIPAL MOODY'S/S&P MATURITY
AMOUNT SECURITY DESCRIPTION TYPE OF SECURITY (UNAUDITED) DATE RATE VALUE
- ----------- ------------------------------ ------------------ --------- ----------- ------- ------------
<S> <S> <C> <C> <C> <C> <C>
WISCONSIN (CONTINUED)
$ 5,725,000 Wisconsin Health & Education
Facilities Authority (Mercy
Hospital)................... Revenue Bond NR/NR 02/01/09 3.20% $ 5,725,000
------------
Total Wisconsin 13,873,060
------------
WYOMING (1.3%)
3,600,000 Platte County Pollution
Control (Basin Electric
Power Cooperative,
Refunding).................. Revenue Bond A2/A 01/01/06 4.95 3,437,244
2,115,000 Platte County Pollution
Control (Basin Electric
Power Cooperative,
Refunding).................. Revenue Bond A2/A 01/01/07 5.05 2,010,392
------------
5,447,636
------------
TOTAL INVESTMENTS (97.7%) (COST $391,369,699) 400,183,060
OTHER ASSETS NET OF LIABILITIES (2.3%) 9,429,797
------------
NET ASSETS (100.0%) $409,612,857
------------
<FN> ------------
(A) The date shown represents a mandatory/optional put date or call date.
(B) Variable rate demand note tender dates and/or interest rates reset at
specified intervals which coincide with their tender feature.
1. Based on the cost of investments of $391,472,384 for federal income tax
purposes at August 31, 1994, the aggregate gross unrealized appreciation and
depreciation was $11,239,066 and $2,528,390, respectively, resulting in net
unrealized appreciation of investments of $8,710,676.
2. Abbreviations used in the schedule of investments are as follows: AMBAC --
Ambac Indemnity Corp., FHA -- Federal Housing Authority, FGIC -- Financial
Guaranty Insurance Company, IDR -- Industrial Development Revenue, LOC --
Letter of Credit, MBIA -- Municipal Bond Investors Assurance Corp., PCR --
Pollution Control Revenue.
3. Crossover Refunded -- Bonds for which the issuer of the bond invests the
proceeds from a subsequent bond issue in cash and/or securities which have
been deposited with a third party to cover the principal payment at the
refunded date of the bond.
Escrowed to Maturity -- Bonds for which cash and/or securities have been
deposited with a third party to cover the payments of principal and interest
at the maturity of the bond.
Prerefunded -- Bonds for which the issuer of the bond invests the proceeds from
a subsequent bond issuance in treasury securities, whose maturity coincides
with the first call date of the first bond.
Refunding -- Bonds for which the issuer has issued new bonds and cancelled the
old issue.
</TABLE>
See Accompanying Notes.
25
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS
Investments at Value (Cost $391,369,699) (Note 1a) $400,183,060
Receivable for Investments Sold 8,540,236
Interest Receivable 5,657,334
-----------
Total Assets 414,380,630
-----------
LIABILITIES
Payable for Securities Purchased 3,187,095
Payable to Custodian 1,182,155
Financial and Fund Accounting Services Fee Payable (Note 2c) 210,795
Advisory Fee Payable (Note 2a) 104,791
Fund Services Fee Payable (Note 2d) 4,297
Administration Fee Payable (Note 2b) 2,675
Trustees' Fees and Expenses Payable (Note 2e) 1,604
Accrued Expenses 74,361
-----------
Total Liabilities 4,767,773
-----------
NET ASSETS
Applicable to Investors' Beneficial Interests $409,612,857
-----------
-----------
</TABLE>
See Accompanying Notes.
26
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME (NOTE 1B)
Interest $23,478,787
EXPENSES:
Advisory Fee (Note 2a) $1,383,986
Financial and Fund Accounting Services Fees (Note 2c) 210,795
Custodian Fees and Expenses 161,465
Professional Fees 57,423
Fund Services Fee (Note 2d) 35,243
Administration Fee (Note 2b) 28,345
Trustees' Fees and Expenses (Note 2e) 14,164
Miscellaneous 7,671
---------
Total Expenses 1,899,092
-----------
NET INVESTMENT INCOME 21,579,695
NET REALIZED GAIN ON INVESTMENTS 1,199,109
NET CHANGE IN UNREALIZED APPRECIATION OF INVESTMENTS (16,878,531)
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 5,900,273
-----------
-----------
</TABLE>
See Accompanying Notes.
27
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD JULY
12, 1993
FOR THE FISCAL (COMMENCEMENT OF
YEAR ENDED AUGUST OPERATIONS) TO
31, 1994 AUGUST 31, 1993
----------------- --------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 21,579,695 $ 3,048,331
Net Realized Gain on Investments 1,199,109 820,997
Net Change in Unrealized Appreciation of Investments (16,878,531) 25,691,892
----------------- --------------------
Net Increase in Net Assets Resulting from Operations 5,900,273 29,561,220
----------------- --------------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST
Contributions 246,505,829 521,270,850
Withdrawals (328,342,574) (65,382,841)
----------------- --------------------
Net Increase (Decrease) from Investors' Transactions (81,836,745) 455,888,009
----------------- --------------------
Total Increase (Decrease) in Net Assets (75,936,472) 485,449,229
NET ASSETS
Beginning of Period 485,549,329 100,100
----------------- --------------------
End of Period $ 409,612,857 $ 485,549,329
----------------- --------------------
----------------- --------------------
- -------------------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- -------------------------------------------------------------------------------------------
Ratios:
<CAPTION>
FOR THE PERIOD
JULY 12, 1993
FOR THE FISCAL (COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO
AUGUST 31, 1994 AUGUST 31, 1993
----------------- --------------------
<S> <C> <C>
Ratios:
Expenses to Average Net Assets 0.41% 0.40%(a)
Net Investment Income to Average Net Assets 4.68% 4.58%(a)
Decrease reflected in above Expense Ratios due to Reimbursements
and Waivers by Morgan -- 0.01%(a)
Portfolio Turnover 32.57% 42.82%(+)
<FN>
- ------------------------
(a) Annualized.
(+) Portfolio turnover is for the twelve month period ended August 31, 1993,
and includes the portfolio activity of the Portfolio's predecessor entity,
The Pierpont Tax Exempt Bond Fund, for the period September 1, 1992 through
July 11, 1993.
</TABLE>
See Accompanying Notes.
28
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1994
- --------------------------------------------------------------------------------
The Tax Exempt Bond 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 and received a contribution of certain assets and liabilities,
including securities, with a value of $466,873,082 on that date from The
Pierpont Tax Exempt Bond Fund in exchange for a beneficial interest in the
Portfolio. The Declaration of Trust permits the Trustees to issue an unlimited
number of beneficial interests in the Portfolio. The following is a summary of
the significant accounting policies of the Portfolio:
1. Significant Accounting Policies:
a)Portfolio securities with a maturity of 60 days or more, including
securities that are listed on an exchange or traded over the counter, are
valued using prices supplied daily by an independent pricing service or
services that (i) are based on the last sale price on a national
securities exchange, or in the absence of recorded sales, at the readily
available bid price on such exchange or at the quoted bid price in the
over-the-counter market, if such exchange or market constitutes the
broadest and most representative market for the security and (ii) in other
cases, take into account various factors affecting market value, including
yields and prices of comparable securities, indication as to value from
dealers and general market conditions. If such prices are not supplied by
the Portfolio's independent pricing service, such securities are priced in
accordance with procedures adopted by the Trustees. All portfolio
securities with a remaining maturity of less than 60 days are valued by
the amortized cost method. Because of the large number of municipal bond
issues outstanding and the varying maturity dates, coupons and risk
factors applicable to each issuer's books, no readily available market
quotations exist for most municipal securities.
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 will 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:
a)The Portfolio has an investment advisory agreement with Morgan Guaranty
Trust Company of New York ("Morgan"). Under the terms of the investment
advisory agreement, the Portfolio pays Morgan at an annual rate of 0.30%
of the Portfolio's average daily net assets. For the fiscal year ended
August 31, 1994, this fee amounted to $1,383,986.
29
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
b)The Portfolio has retained Signature Broker -- Dealer Services, Inc.
("Signature") to serve as Administrator. Certain officers of Signature
serve as officers of the Portfolio. Under the Administrative Services
Agreement, Signature provides management and 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 Signature.
Effective October 1, 1993, Signature receives a fee at an annual rate of
0.01% of the first $1 billion of aggregate average daily net assets of the
Portfolio and the other portfolios subject to the Administrative Services
Agreement (the "aggregate portfolios"), 0.008% of the next $2 billion of
the aggregate portfolios' average daily net assets, 0.006% of the next $2
billion of the aggregate portfolios' average daily net assets, and 0.004%
of the aggregate portfolios' average daily net assets in excess of $5
billion. Prior to October 1, 1993 no administration fee was charged to the
Portfolio. For the period October 1, 1993 to August 31, 1994, the
Portfolio's portion of Signature's fee for these services amounted to
$28,345.
c)The Portfolio has a Financial and Fund Accounting Services Agreement
("Services Agreement") with Morgan under which Morgan receives a fee,
based on the percentages described below, for overseeing certain aspects
of the administration and operation of the Portfolio. The Services
Agreement is also designed to provide an expense limit for certain
expenses of the Portfolio. If total expenses of the Portfolio, excluding
the advisory fee, custody expenses, fund services fee, and brokerage
costs, exceed the expense limit of 0.10% of the Portfolio's average daily
net assets up to $200 million, 0.05% of the next $200 million of average
daily net assets, and 0.03% of average daily net assets thereafter, Morgan
will reimburse the Portfolio for the excess expense amount and receive no
fee. Should such expenses be less than the expense cap, Morgan's fee would
be limited to the difference between such expenses and the fee calculated
under the Services Agreement. For the fiscal year ended August 31, 1994,
this fee amounted to $210,795.
d)Effective January 15, 1994, the Portfolio entered into 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 Portfolios are the sole shareholders of
Group. The Portfolio's allocated portion of Group's costs in performing
its services amounted to $35,243 for the period January 15, 1994 to August
31, 1994.
e)An aggregate annual fee of $55,000 is paid to each Trustee for serving as
a Trustee of The Pierpont Funds, The JPM Institutional Funds, The JPM
Institutional Plus Fund and their corresponding Portfolios. The Trustee
fee expense shown in the financial statements represents the Portfolio's
allocated portion of the total fees.
3. Investment Transactions:
Investment transactions (excluding short-term investments) for the fiscal year
ended August 31, 1994, were as follows:
<TABLE>
<CAPTION>
Cost of Proceeds
Purchases from Sales
- -------------- --------------
<S> <C>
$143,372,626 $195,395,899
</TABLE>
30
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Investors of
The Tax Exempt Bond 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 Bond Portfolio (the
"Portfolio") at August 31, 1994, the results of its operations for the year then
ended, and the changes in its net assets and its supplementary data for the year
then ended and for the period July 12, 1993 (commencement of operations) through
August 31, 1993, in conformity with generally accepted accounting principles.
These financial statements and supplementary data (hereafter referred to as
"financial statements") are the responsibility of the Portfolio's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at August
31, 1994 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
PRICE WATERHOUSE LLP
New York, New York
October 25, 1994
31
