<PAGE>
THE PIERPONT MONEY MARKET FUND THE
THE PIERPONT TAX EXEMPT MONEY MARKET FUND PIERPONT
THE PIERPONT TREASURY MONEY MARKET FUND TAX EXEMPT
THE PIERPONT SHORT TERM BOND FUND MONEY MARKET
THE PIERPONT BOND FUND FUND
THE PIERPONT TAX EXEMPT BOND FUND
THE PIERPONT NEW YORK TOTAL RETURN BOND FUND
THE PIERPONT DIVERSIFIED FUND
THE PIERPONT EQUITY FUND
THE PIERPONT CAPITAL APPRECIATION FUND
THE PIERPONT INTERNATIONAL EQUITY FUND
THE PIERPONT EMERGING MARKETS EQUITY FUND
FOR MORE INFORMATION ON HOW THE PIERPONT FAMILY ANNUAL REPORT
OF FUNDS CAN HELP YOU PLAN FOR YOUR FUTURE, CALL AUGUST 31, 1994
J.P. MORGAN FUNDS SERVICES AT (800) 521-5411.
<PAGE>
LETTER TO THE SHAREHOLDERS OF THE PIERPONT TAX EXEMPT MONEY MARKET FUND
October 17, 1994
Dear Shareholder:
We are pleased to report the positive performance results achieved by The
Pierpont 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 2.14%, 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
$973,599,494 at the end of the reporting period, down from $1,007,330,143 on
August 31, 1993. The net assets of The Tax-Exempt Money Market Portfolio (the
"Portfolio"), in which the Fund invests, totaled $1,021,846,224 at August 31,
1994.
FISCAL YEAR REVIEW
The fiscal year saw the implementation of long-awaited increases in the Fed
funds rate. These increases came in five stages, most recently in August, and
totaled 1.75% -- leaving the Fed funds rate at 4.75% by the end of this
reporting period, up from the 3.00% rate it had maintained since September 1992.
This activity by the Fed caused a general increase in money market rates,
ranging from overnight funds to one-year securities. The Portfolio's average
maturity stood at 70.3 days as of August 31, 1994.
INVESTMENT OUTLOOK
Going forward, the Portfolio plans to pursue an appropriate average maturity
target, investing in securities that represent no more than minimal credit risk.
Given this framework, our ongoing objectives will be to participate in maximized
tax exempt yield opportunities whenever possible.
As always, we welcome your comments or questions. Please call J.P. Morgan Funds
Services toll free at (800) 521-5411.
Sincerely yours,
[LOGO]
Evelyn E. Guernsey
J.P. Morgan Fund Services
<TABLE>
<S> <C> <C> <C>
TABLE OF CONTENTS
Letter to the shareholders............. 1 Fund performance....................... 4
Fund facts and highlights.............. 2 Financial statements................... 6
Special fund-based services............ 3
</TABLE>
1
<PAGE>
FUND FACTS
INVESTMENT OBJECTIVE
The Pierpont Tax Exempt Money Market Fund seeks to provide a high level of
current income that is exempt from federal income tax and to maintain a high
level of liquidity. It is designed for investors who seek current income exempt
from income tax, stability of capital and liquidity.
- -------------------------------------------
INCEPTION DATE
10/3/84
- -------------------------------------------
NET ASSETS AS OF 8/31/94 ($ MILLIONS)
974
- -------------------------------------------
DIVIDEND PAYABLE DATE
MONTHLY
- -------------------------------------------
CAPITAL GAIN PAYABLE DATE (IF APPLICABLE)
12/15/94
EXPENSE RATIO
The Fund's current annual expense ratio of 0.52% 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
[LOGO]
<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
2.82%
MATURITY
70.3 days
QUALITY BREAKDOWN
AAA 93.2%
Other 6.8%
*THESE INSTITUTIONS PROVIDE CREDIT ENHANCEMENTS FOR VARIOUS MUNICIPAL SECURITIES
HELD IN THE PORTFOLIO.
2
<PAGE>
SPECIAL FUND-BASED
SERVICES
PIERPONT ASSET ALLOCATION SERVICE (PAAS)
For many investors, a diversified portfolio -- including short-term instruments,
bonds and stocks -- can offer an excellent opportunity to achieve one's
investment objectives. Through the Pierpont Asset Allocation Service (PAAS),
clients can work with Morgan investment professionals in order to determine
their investment goals. Our investment professionals will then:
- - Recommend an asset allocation strategy that is specifically targeted at
meeting the client's investment objectives;
- - Execute the chosen strategy by making strategic investments in one or more
Pierpont Funds;
- - Make agreed-upon ongoing tactical adjustments in the actual asset mix of the
client's portfolio in an effort to capitalize on shifting market trends. These
adjustments are usually made in small increments and within set limits, so
that the essential characteristics of the portfolio are always preserved.
The Pierpont Asset Allocation Service thus provides the investor with a
comprehensive asset allocation and investment management program for his or her
portfolio. PAAS is available to clients who invest a minimum of $500,000 in The
Pierpont Funds. The fees begin at $5,000 for the first year, followed by $2,500
each subsequent year.
IRA MANAGEMENT SERVICE
As one of the few remaining investments that can help your assets grow
tax-deferred until retirement, the IRA enables more of your dollars to work for
you longer. Morgan offers an IRA Rollover plan that helps you to build well-
balanced long-term investment portfolios, diversified across a wide array of
mutual funds. From money markets to emerging markets, The Pierpont Funds provide
an excellent way to help you accumulate long-term wealth for retirement. The IRA
Rollover plan is available to clients who invest at least $10,000 in any given
Pierpont Fund.
KEOGH
Beginning this fall, Morgan will introduce a Keogh program for its clients.
Keoghs provide another excellent vehicle to help individuals who are
self-employed or are employees of unincorporated businesses to accumulate
retirement savings. A Keogh is a tax-deferred pension plan which can allow for
you to contribute the lesser of $30,000 or 25% of your annual earned gross
compensation. The Pierpont Funds can help you build a comprehensive investment
program designed to maximize the retirement dollars in your Keogh account. The
Keogh plan also requires a minimum investment of $10,000 in any given Pierpont
Fund.
3
<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 in 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> <C>
The Pierpont Tax Exempt Money Market Fund 0.59% 1.44% 2.14% 3.57% 4.25%
Donoghue's Tax Free Money Market Fund Average 0.54% 1.34% 2.00% 3.41% 4.06%
Micropal Municipal Money Market Fund Average 0.62% 1.51% 2.15% 3.67% 4.32%
<CAPTION>
AS OF JUNE 30, 1994
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
The Pierpont Tax Exempt Money Market Fund 0.55% 1.03% 2.06% 3.69% 4.31%
Donoghues Tax Free Money Market Fund Average 0.52% 0.97% 1.94% 3.52% N/A
Micropal Municipal Money Market Fund Average 0.59% 1.04% 2.02% 3.66% 4.39%
</TABLE>
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. ALL RETURNS ASSUME THE
REIMBURSEMENT 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 PIERPONT
TAX EXEMPT MONEY MARKET FUND 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.
4
<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 PIERPONT 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.
Donoghue's Tax Free Money Market Fund Average is an average of all major tax
exempt 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. The Pierpont
Tax Exempt Money Market Fund 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.
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) 521-5411.
5
<PAGE>
THE PIERPONT TAX EXEMPT MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment in The Tax Exempt Money Market Portfolio ("Portfolio"), at
value $975,767,431
Receivable for Expense Reimbursements 98,653
Prepaid Expenses 11,657
-----------
Total Assets 975,877,741
-----------
LIABILITIES
Dividend Payable to Shareholders 2,029,254
Shareholder Servicing Fee Payable (Note 2c) 171,679
Administration Fee Payable (Note 2a) 23,694
Fund Services Fee Payable (Note 2d) 5,589
Trustees' Fees and Expenses Payable (Note 2e) 5,000
Accrued Expenses 43,031
-----------
Total Liabilities 2,278,247
-----------
NET ASSETS
Applicable to 973,280,609 Shares of Beneficial Interest Outstanding
(par value $0.001) $973,599,494
-----------
-----------
Net Asset Value, Offering and Redemption Price Per Share $1.00
-----------
-----------
ANALYSIS OF NET ASSETS
Paid-in Capital $973,625,489
Accumulated Net Realized Loss on Investments (13,050)
Distribution in Excess of Net Realized Gains (27,541)
Undistributed Net Investment Income 14,596
-----------
Net Assets $973,599,494
-----------
-----------
</TABLE>
See Accompanying Notes.
6
<PAGE>
THE PIERPONT TAX EXEMPT MONEY MARKET 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 $26,517,832
Allocated Portfolio Expenses (2,565,023)
----------
Net Investment Income Allocated from Portfolio 23,952,809
FUND EXPENSES
Shareholder Servicing Fee (Note 2c) $2,121,421
Administration Fee (Note 2a) 306,768
Fund Services Fee (Note 2d) 175,737
Trustees' Fees and Expenses (Note 2e) 27,797
Registration Fees 31,245
Printing 25,706
Professional Fees 12,707
Transfer Agent Fee 69,383
Miscellaneous 59,299
---------
Total Fund Expenses 2,830,063
Less: Reimbursements of Expenses (Note 2b) (98,653)
---------
NET FUND EXPENSES 2,731,410
----------
NET INVESTMENT INCOME 21,221,399
NET REALIZED LOSS ON INVESTMENTS ALLOCATED FROM PORTFOLIO (13,050)
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $21,208,349
----------
----------
</TABLE>
See Accompanying Notes.
7
<PAGE>
THE PIERPONT TAX EXEMPT MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED AUGUST 31,
------------------------------------
1994 1993
----------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income $ 21,221,399 $ 21,062,657
Net Realized Gain (Loss) on Investments (13,050) 107,453
----------------- -----------------
Net Increase in Net Assets Resulting from Operations 21,208,349 21,170,110
----------------- -----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (21,206,803) (21,062,657)
Net Realized Gain (128,699) (202,795)
----------------- -----------------
Total Distributions to Shareholders (21,335,502) (21,265,452)
----------------- -----------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST (AT A CONSTANT $1.00 PER
SHARE)
Proceeds from Shares of Beneficial Interest Sold 4,105,836,629 3,616,500,403
Reinvestment of Dividends and Distributions 19,654,664 20,092,546
Cost of Shares of Beneficial Interest Redeemed (4,159,094,789) (3,551,524,977)
----------------- -----------------
Net Increase (Decrease) from Transactions in Shares of
Beneficial Interest (33,603,496) 85,067,972
----------------- -----------------
Total Increase (Decrease) in Net Assets (33,730,649) 84,972,630
NET ASSETS
Beginning of Year 1,007,330,143 922,357,513
----------------- -----------------
End of Year (including undistributed income of $14,596, and $0
respectively) $ 973,599,494 $ 1,007,330,143
----------------- -----------------
----------------- -----------------
</TABLE>
See Accompanying Notes.
8
<PAGE>
THE PIERPONT TAX EXEMPT MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share outstanding throughout the period are as follows:
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED AUGUST 31,
------------------------------------------------------------
1994 1993 1992 1991 1990
---------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ------------ ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.0212 0.0214 0.0317 0.0460 0.0550
Net Realized Gain (Loss) (0.0000)(a) 0.0001 0.0002 (0.0000)(a) (0.0000)(a)
---------- ------------ ---------- ---------- ----------
Net Increase in Net Assets Resulting from
Operations 0.0212 0.0215 0.0319 0.0460 0.0550
---------- ------------ ---------- ---------- ----------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (0.0212) (0.0214) (0.0317) (0.0460) (0.0550)
Net Realized Gain (0.0000)(a) (0.0002) -- -- (0.0000)(a)
---------- ------------ ---------- ---------- ----------
(0.0212) (0.0216) (0.0317) (0.0460) (0.0550)
---------- ------------ ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ------------ ---------- ---------- ----------
---------- ------------ ---------- ---------- ----------
Total Return 2.14% 2.15% 3.19% 4.60% 5.50%
RATIOS AND SUPPLEMENTAL DATA
Net Assets at end of Period (in thousands) $ 973,599 $ 1,007,330 $ 922,358 $ 877,422 $ 903,157
Ratios to Average Net Assets:
Expenses 0.52% 0.52% 0.53% 0.55% 0.57%
Net Investment Income 2.10% 2.14% 3.16% 4.60% 5.51%
Decrease reflected in above Expense Ratios due to
Reimbursements by Morgan 0.01% 0.01% 0.01% 0.01% --
<FN>
(a) Less than $0.0001
</TABLE>
See Accompanying Notes.
9
<PAGE>
THE PIERPONT TAX EXEMPT MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1994
- --------------------------------------------------------------------------------
The Pierpont Tax Exempt Money Market Fund (the "Fund") is a separate series of
The Pierpont Funds (the "Trust"), a Massachusetts business 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, prior to its tax-free reorganization on July 11,
1993, to a series of the Trust, operated as a stand-alone mutual fund. Costs
related to the reorganization were borne by Morgan Guaranty Trust Company of New
York ("Morgan"). This report includes periods which preceded the Fund's
reorganization and reflects the operations of the predecessor entity.
The Fund seeks to achieve its investment objective by investing all of its
investable assets in The Tax Exempt Money Market Portfolio (the "Portfolio"), a
diversified, open-end management company having the same investment objective as
the Fund. The value of such investment included in the Statement of Assets and
Liabilities reflects the Fund's proportionate beneficial interest in the net
assets of the Portfolio (95.5% at August 31, 1994). 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 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)Each series of the Trust is treated as a separate entity for federal
income tax purposes. The Fund intends 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. As of August 31, 1994, the Fund incurred and elected to defer
Post-October losses of approximately $46,000 until the next taxable year.
To the extent that this capital loss is used to offset future capital
gains, it is probable that the gains so offset will not be distributed to
shareholders.
e)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.
10
<PAGE>
THE PIERPONT 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 JPM Institutional 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 $306,768.
b)The Trust, on behalf of the Fund, has entered into 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, and the fund services fee, exceed the expense limit of 0.043% 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 $98,653 for excess expenses.
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 0.21% of the average daily net assets of the Fund up to and
including $1.5 billion and 0.16% on any excess over $1.5 billion, which
may be paid no more frequently than monthly. For the fiscal year ended
August 31, 1994, Morgan's fee for these services amounted to $2,121,421.
d)The Trust, on behalf of the Fund, has 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 $175,737
for the fiscal year ended August 31, 1994.
11
<PAGE>
THE PIERPONT TAX EXEMPT MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
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.
3. SHARES OF BENEFICIAL INTEREST:
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (par value $.001) 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 FISCAL YEAR ENDED FOR THE FISCAL YEAR ENDED
AUGUST 31, 1994 AUGUST 31, 1993
------------------------- -------------------------
<S> <C> <C>
Shares sold 4,105,491,749 3,616,500,403
Reinvestment of dividends and distributions 19,654,664 20,092,546
Shares redeemed (4,159,094,789) (3,551,524,977)
------------------------- -------------------------
Net Increase/Decrease (33,948,376) 85,067,972
------------------------- -------------------------
------------------------- -------------------------
</TABLE>
12
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of
The Pierpont 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 Pierpont 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 years ended August 31, 1994 and
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. The financial highlights for each of the three years in the period ended
August 31, 1992 were audited by other independent accountants whose report dated
October 8, 1992 expressed an unqualified opinion on those statements.
PRICE WATERHOUSE LLP
New York, New York
October 25, 1994
13
<PAGE>
THE TAX EXEMPT MONEY MARKET PORTFOLIO
ANNUAL REPORT AUGUST 31, 1994
(THE FOLLOWING PAGES SHOULD BE READ IN CONJUNCTION
WITH THE PIERPONT TAX EXEMPT MONEY MARKET FUND
ANNUAL FINANCIAL STATEMENTS)
14
<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)
- ---------------- ---------------------------------- -------- ----------- ----- --------------
<C> <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.
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>
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.
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>
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.
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>
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.
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>
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.
19
<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.
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>
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.
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>
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.
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>
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.
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>
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.
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>
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.
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>
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.
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>
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.
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>
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.
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>
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.
29
<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.
30
<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.
31
<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.
32
<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.
33
<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)
</TABLE>
<TABLE>
<S> <C>
<FN>
- ------------------------
(a) Annualized
</TABLE>
See Accompanying Notes.
34
<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
35
<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 percentage 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.
36
<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
37
<PAGE>
THE PIERPONT MONEY MARKET FUND The
THE PIERPONT TAX EXEMPT MONEY MARKET FUND Pierpont
THE PIERPONT TREASURY MONEY MARKET FUND Tax Exempt
THE PIERPONT SHORT TERM BOND FUND Bond Fund
THE PIERPONT BOND FUND
THE PIERPONT TAX EXEMPT BOND FUND
THE PIERPONT NEW YORK TOTAL RETURN BOND FUND
THE PIERPONT DIVERSIFIED FUND
THE PIERPONT EQUITY FUND
THE PIERPONT CAPITAL APPRECIATION FUND
THE PIERPONT INTERNATIONAL EQUITY FUND
THE PIERPONT EMERGING MARKETS EQUITY FUND
FOR MORE INFORMATION ON HOW THE PIERPONT FAMILY ANNUAL REPORT
OF FUNDS CAN HELP YOU PLAN FOR YOUR FUTURE, CALL AUGUST 31, 1994
J.P. MORGAN FUNDS SERVICES AT (800) 766-7722.
<PAGE>
LETTER TO THE SHAREHOLDERS OF THE PIERPONT 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 Pierpont Tax
Exempt Bond Fund (the "Fund") was able to provide its shareholders with a
positive overall return of 1.35% for the fiscal year ending August 31, 1994. 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 $12.04
per share to end at $11.45 per share, and for the fiscal year ended August 31,
1994 the Fund paid $0.51 per share in dividends exempt from federal income
taxes, $0.04 per share in short-term and $0.20 per share in long-term capital
gain distributions. The Fund's net assets stood at $392,460,324 at the end of
the reporting period, down from $485,013,335 on August 31, 1993. The net assets
of The Tax Exempt Bond Portfolio (the "Portfolio"), in which the 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 in order to
benefit from an expected flattening of the yield curve.
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.
Expecting that the Fed will additionally raise short-term rates to as high as
5.75% by calendar year-
end 1994, the Portfolio closed out the fiscal year with a duration of 5.0 years
- -- 38 basis points shorter than its benchmark.
<TABLE>
<S> <C> <C> <C>
TABLE OF CONTENTS
Letter to the shareholders............. 1 Fund performance....................... 5
Fund facts and highlights.............. 3 Financial statements................... 6
Special fund-based services............ 4
</TABLE>
1
<PAGE>
INVESTMENT OUTLOOK
We believe that interest rates will continue to trend upward as the 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. The main 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 the benchmark is in order, and 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,
[LOGO]
Evelyn E. Guernsey
J.P. Morgan Fund Services
MORGAN SERVES AS PORTFOLIO INVESTMENT ADVISOR AND MAKES THE PIERPONT TAX EXEMPT
BOND FUND (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 AGENCY. INVESTMENT RETURN
AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND CAN FLUCTUATE, SO AN INVESTOR'S
SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
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. Had expenses not been subsidized, returns would have been lower. The
Fund invests all of its investable assets in The Tax Exempt Bond Portfolio (the
"Portfolio"), a separately registered investment company which is not available
to the public but only to other collective investment vehicles such as the Fund.
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 AN ADDITIONAL COPY OF THE PROSPECTUS BY CALLING (800)
521-5411.
2
<PAGE>
FUND FACTS
INVESTMENT OBJECTIVE
The Pierpont 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
10/3/84
- -------------------------------------------
NET ASSETS AS OF 8/31/94 ($MILLIONS)
392
- -------------------------------------------
DIVIDEND PAYABLE DATES
MONTHLY
- -------------------------------------------
CAPITAL GAIN PAYABLE DATES (IF ANY)
12/12/94
EXPENSE RATIO
The Fund's current annual expense ratio of 0.71% covers shareholders' expenses
for custody, tax reporting, investment advisory and shareholder services. 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
[LOGO]
30-DAY SEC YIELD
4.86%
DURATION
5.0 years
QUALITY BREAKDOWN
AAA 50%
AA 30%
A 20%
3
<PAGE>
SPECIAL FUND-BASED SERVICES
PIERPONT ASSET ALLOCATION SERVICE (PAAS)
For many investors, a diversified portfolio -- including short-term instruments,
bonds and stocks -- can offer an excellent opportunity to achieve one's
investment objectives. Through the Pierpont Asset Allocation Service (PAAS),
clients can work with Morgan investment professionals who will:
- - Recommend an asset allocation strategy that is specifically targeted at
meeting the client's investment objectives;
- - Execute the chosen strategy by making strategic investments in one or more
Pierpont Funds;
- - Make agreed-upon ongoing tactical adjustments in the actual asset mix of the
client's portfolio in an effort to capitalize on shifting market trends. These
adjustments are usually made in small increments and within set limits, so
that the essential characteristics of the portfolio are always preserved.
The Pierpont Asset Allocation Service thus provides the investor with a
comprehensive asset allocation and investment management program for his or her
portfolio. PAAS is available to clients who invest a minimum of $500,000 in The
Pierpont Funds. The fees begin at $5,000 for the first year, followed by $2,500
each subsequent year.
IRA MANAGEMENT SERVICE
As one of the few remaining investments that can help your assets grow
tax-deferred until retirement, the IRA enables more of your dollars to work for
you longer. Morgan offers an IRA Rollover plan that helps you to build well-
balanced long-term investment portfolios, diversified across a wide array of
mutual funds. From money markets to emerging markets, The Pierpont Funds provide
an excellent way to help you accumulate long-term wealth for retirement. The IRA
Rollover plan is available to clients who invest at least $10,000 in any given
Pierpont Fund.
KEOGH
Beginning this fall, Morgan will introduce a Keogh program for its clients.
Keoghs provide another excellent vehicle to help individuals who are
self-employed or are employees of unincorporated businesses to accumulate
retirement savings. A Keogh is a tax-deferred pension plan that can allow for
you to contribute the lesser of $30,000 or 25% of your annual earned gross
compensation. The Pierpont Funds can help you build a comprehensive investment
program designed to maximize the retirement dollars in your Keogh account. The
Keogh plan also requires a minimum investment of $10,000 in any given Pierpont
Fund.
4
<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 $21,560 by August 31, 1994.
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 Lehman Micropal
<S> <C> <C> <C>
0 $ 10,000 $ 10,000 $ 10,000
1 11,694 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 21,560 23,928 20,951
</TABLE>
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.
<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> <C>
The Pierpont Tax Exempt Bond Fund 1.40% (0.81)% 1.35% 7.35% 8.10%
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> <C>
The Pierpont Tax Exempt Bond Fund 0.69% (2.41)% 1.29% 7.11% 8.14%
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%
</TABLE>
*10/3/84
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 PIERPONT 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.
5
<PAGE>
THE PIERPONT TAX EXEMPT BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS
Investment in the Tax Exempt Bond Portfolio ("Portfolio") at value $393,260,730
Receivable for Fund Shares Sold 7,700
Prepaid Expenses 5,762
-----------
Total Assets 393,274,192
-----------
LIABILITIES
Payable for Fund Shares Redeemed 303,452
Dividend Payable (Note 1c) 194,453
Financial and Fund Accounting Services Fee Payable (Note 2b) 179,891
Shareholder Servicing Fee Payable (Note 2c) 60,164
Administration Fee Payable (Note 2a) 9,687
Fund Services Fee Payable (Note 2d) 4,133
Accrued Expenses 62,088
-----------
Total Liabilities 813,868
-----------
NET ASSETS
Applicable to 34,286,820 Shares of Beneficial Interest Outstanding
(par value $0.001) $392,460,324
-----------
-----------
$11.45
-----------
-----------
Net Asset Value, Offering and Redemption Price Per Share
ANALYSIS OF NET ASSETS
Paid-in Capital $383,391,735
Accumulated Net Realized Gain on Investments 101,551
Net Unrealized Appreciation of Investments 8,967,038
-----------
Net Assets $392,460,324
-----------
-----------
</TABLE>
See Accompanying Notes.
6
<PAGE>
THE PIERPONT TAX EXEMPT BOND 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 $23,149,078
Allocated Portfolio Expenses (1,872,354)
-----------
Net Investment Income Allocated from Portfolio 21,276,724
EXPENSES
Shareholder Servicing Fee (Note 2c) $ 816,408
Financial & Fund Accounting Services Fee (Note 2b) 179,891
Administration Fee (Note 2a) 137,890
Fund Services Fee (Note 2d) 80,810
Transfer Agent Fees 55,510
Printing 44,153
Trustees' Fees and Expenses (Note 2e) 12,552
Registration Fees 12,430
Professional Fees 11,620
Miscellaneous 18,262
---------
Net Expenses 1,369,526
-----------
NET INVESTMENT INCOME 19,907,198
NET REALIZED GAIN ON INVESTMENTS ALLOCATED FROM PORTFOLIO 1,282,614
NET CHANGE IN UNREALIZED APPRECIATION OF INVESTMENTS ALLOCATED
FROM PORTFOLIO (16,724,852)
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 4,464,960
-----------
-----------
</TABLE>
See Accompanying Notes.
7
<PAGE>
THE PIERPONT TAX EXEMPT BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED AUGUST 31,
------------------------------------
1994 1993
--------------- ---------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 19,907,198 $ 19,101,879
Net Realized Gain on Investments from Portfolio 1,282,614 9,842,479
Net Change in Unrealized Appreciation (16,724,852) 9,820,595
--------------- ---------------
Net Increase in Net Assets Resulting from Operations 4,464,960 38,764,953
--------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (19,907,198) (19,101,879)
Net Realized Gain on Investments (9,310,621) (3,881,104)
--------------- ---------------
(29,217,819) (22,982,983)
--------------- ---------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST (NOTE 3)
Proceeds from Shares of Beneficial Interest Sold 227,484,769 343,364,355
Reinvestment of Dividends and Distributions 25,994,109 18,054,073
Cost of Shares of Beneficial Interest Redeemed (321,279,030) (252,530,215)
--------------- ---------------
Net Increase (Decrease) from Transactions in Shares of Beneficial
Interest (67,800,152) 108,888,213
--------------- ---------------
Total Increase (Decrease) in Net Assets (92,553,011) 124,670,183
NET ASSETS
Beginning of Year 485,013,335 360,343,152
--------------- ---------------
End of Year $ 392,460,324 $ 485,013,335
--------------- ---------------
--------------- ---------------
</TABLE>
See Accompanying Notes.
8
<PAGE>
THE PIERPONT TAX EXEMPT BOND FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share outstanding throughout each year are as follows:
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED AUGUST 31,
----------------------------------------------------------
1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $ 12.04 $ 11.60 $ 11.19 $ 10.75 $ 10.85
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.51 0.55 0.62 0.68 0.70
Net Realized and Unrealized Gain (Loss) on
Investments (0.35) 0.56 0.41 0.44 (0.10)
---------- ---------- ---------- ---------- ----------
Total from Investment Operations 0.16 1.11 1.03 1.12 0.60
---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (0.51) (0.55) (0.62) (0.68) (0.70)
Net Realized Gains (0.24) (0.12) -- -- --
---------- ---------- ---------- ---------- ----------
Total Distributions (0.75) (0.67) (0.62) (0.68) (0.70)
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF YEAR $ 11.45 $ 12.04 $ 11.60 $ 11.19 $ 10.75
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total Return 1.35% 9.88% 9.47% 10.67% 5.65%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Year (in thousands) $ 392,460 $ 485,013 $ 360,343 $ 239,709 $ 151,755
Ratios to Average Net Assets:
Expenses 0.71% 0.74% 0.77% 0.78% 0.79%
Net Investment Income 4.39% 4.64% 5.45% 6.12% 6.43%
Decrease Reflected in above Expense
Ratio due to Reimbursements and
Fee Waivers by Morgan -- 0.01% 0.01% 0.02% 0.04%
Portfolio Turnover -- 40.80%* 19.94% 16.39% 7.45%
<FN>
* 1993 Portfolio Turnover reflects the period September 1, 1992 to July 11,
1993. After July 11, 1993 all the Fund's investable assets are invested in The
Tax Exempt Bond Portfolio.
</TABLE>
See Accompanying Notes.
9
<PAGE>
THE PIERPONT TAX EXEMPT BOND FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The Pierpont Tax Exempt Bond Fund (the "Fund") is a separate series of The
Pierpont 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, prior to its tax-free reorganization on July 11, 1993, to a series of the
Trust, operated as a stand-alone mutual fund. Costs related to the
reorganization were borne by Morgan Guaranty Trust Company of New York
("Morgan"). This report includes periods which preceded the Fund's
reorganization and reflects the operations of the predecessor entity.
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
(96% 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)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.
e)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.
f)The Fund has adopted Statement of Position 93-2 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
10
<PAGE>
THE PIERPONT TAX EXEMPT BOND FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
shareholder distributions are reclassified to paid-in capital. The Fund
reclassified $12,420 from accumulated net realized gain on investments 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 JPM Institutional 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 $137,890.
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 percentages 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 and
the fund services fee, exceed the expense limit of 0.12% of the first $100
million of the Fund's average daily net assets and 0.10% of average daily
net assets over $100 million, 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, this fee amounted to $179,891.
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 0.18% of the average daily net assets of the Fund. For the
fiscal year ended August 31, 1994, the fee for these services amounted to
$816,408.
d)The Trust, on behalf of the Fund, has a Fund Services Agreement with
Pierpont Group, Inc. ("Group") to assist the Trustees in exercising their
overall supervisory responsibilities for the
11
<PAGE>
THE PIERPONT TAX EXEMPT BOND FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
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 $80,810 for the fiscal year ended 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 FISCAL YEAR ENDED
AUGUST 31,
--------------------------
1994 1993
------------ ------------
<S> <C> <C>
Shares sold 19,307,047 29,027,689
Reinvestment of dividends and distributions 2,211,538 1,704,339
Shares redeemed (27,525,462) (21,503,635)
------------ ------------
Net Increase (Decrease) (6,006,877) 9,228,393
------------ ------------
------------ ------------
</TABLE>
12
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of
The Pierpont 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 Pierpont 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 years ended August 31, 1994 and 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. The financial highlights for each of the three years in the period ended
August 31, 1992 were audited by other independent accountants whose report dated
October 8, 1992 expressed an unqualified opinion on those statements.
PRICE WATERHOUSE LLP
New York, New York
October 25, 1994
13
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
ANNUAL REPORT AUGUST 31, 1994
(THE FOLLOWING PAGES SHOULD BE READ IN CONJUNCTION
WITH THE PIERPONT TAX EXEMPT BOND FUND
ANNUAL FINANCIAL STATEMENTS)
14
<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
----------- ---------------------------------- ------------------ ----------- ----------- ------- ------------
<C> <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.
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>
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.
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>
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.
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>
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.
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>
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.
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>
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.
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>
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.
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>
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.
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)
$ 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.
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>
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.
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>
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.
25
<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.
26
<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.
27
<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.
28
<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.
29
<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.
30
<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 Portfolio 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 and expenses.
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>
31
<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
32
