<PAGE>
LETTER TO THE SHAREHOLDERS OF THE JPM PIERPONT TAX EXEMPT BOND FUND
October 15, 1996
Dear Shareholder:
The previous year was a lean one for fixed income investors, as rising interest
rates undercut the value of bond portfolios. Despite this The JPM Pierpont Tax
Exempt Bond Fund posted a positive 4.01% return. By comparison, its benchmark,
the Lehman Quality Intermediate Municipal Bond Index, posted a gain of 3.97%
over the same period. The Fund's 30-day SEC yield, at 4.41% translates to a pre-
tax equivalent yield of 7.30%, assuming a 39.6% tax rate.
The Fund's net asset value, at $11.63 on August 31, 1996, was down slightly from
$11.73 per share on August 31, 1995. Dividends of $0.55 per share were paid of
which $0.55 was tax exempt. Distributions were made of $0.02 per share, of which
$0.01 was from short-term capital gains and $0.01 from long-term capital gains.
The Fund's net assets increased to $369,987,472 from $352,005,484 while the net
assets of The Tax Exempt Bond Portfolio, in which the Fund invests, were
$491,383,959.
This report also includes a discussion with Elizabeth Augustin, who is the
portfolio manager primarily responsible for The JPM Pierpont Tax Exempt Bond
Fund. In this interview, Elizabeth talks about the events of the previous year
that had the greatest effect on the Portfolio and also discusses how our
investment strategy was used to protect assets in a difficult environment. We
hope this helps you to understand some of the factors that affect how your money
is managed.
As always, we welcome your comments, questions, or any suggestions on how we can
further improve our financial reports. Please call J.P. Morgan Funds Services
toll free at (800) 521-5411.
Sincerely yours,
/s/ Evelyn E. Guernsey
Evelyn E. Guernsey
J.P. Morgan Funds Services
TABLE OF CONTENTS
LETTER TO THE SHAREHOLDERS . . . . . . . . . . . . . . . . 1
FUND PERFORMANCE . . . . . . . . . . . . . . . . . . . . . 2
PORTFOLIO MANAGER Q & A. . . . . . . . . . . . . . . . . . 3
GLOSSARY OF TERMS . . . . . . . . . . . . . . . . . . . . 6
FUND FACTS AND HIGHLIGHTS. . . . . . . . . . . . . . . . . 7
SPECIAL FUND-BASED SERVICES. . . . . . . . . . . . . . . . 8
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . .10
1
<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 $100,000 (the minimum investment in the Fund). The chart at right shows that
$100,000 invested in the Fund on September 1, 1986 would have grown to $189,234
by August 31, 1996.
Another way to look at performance is to review a fund's average annual total
return. This figure takes a fund's actual (or cumulative) return and shows you
what would have happened if the fund had achieved that return by performing at a
constant rate each year. Average annual total returns represent the average
yearly change of a fund's value over various time periods, typically 1, 5, or 10
years (or since inception). Total returns for periods of less than one year are
not annualized and provide a picture of how a fund has performed over the short
term.
GROWTH OF $100,000 OVER TEN YEARS
SEPTEMBER 1, 1986 - AUGUST 31, 1996
[Line Graph]
Plot Points for Graph
JPM Pierpont Lehman Quality Intermediate
DATE Tax Exempt Bond Fund Municipal Bond Index
- ---- -------------------- ---------------------------
8/86 100,000.00 100,000.00
8/87 103,851.87 105,886.50
8/88 109,706.11 110,328.59
8/89 118,604.82 119,343.48
8/90 125,302.12 127,217.66
8/91 138,672.72 141,300.02
8/92 151,799.33 156,217.63
8/93 166,769.00 173,175.79
8/94 169,049.65 175,675.65
8/95 181,946.80 190,766.84
8/96 189,234.39 198,339.62
<TABLE>
<CAPTION>
PERFORMANCE TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS
---------------- -----------------------------------
THREE SIX ONE THREE FIVE TEN
AS OF AUGUST 31, 1996 MONTHS MONTHS YEAR YEARS YEARS YEARS
- ---------------------------------------------------------------------------- -----------------------------------
<S> <C> <C> <C> <C> <C> <C>
The JPM Pierpont Tax Exempt Bond Fund 1.61% 0.12% 4.01% 4.30% 6.41% 6.59%
Lehman Quality Inter. Muni Bond Index 1.62% 0.36% 3.97% 4.63% 7.02% 7.09%
Composite HQ Inter. Muni. Bond Funds Avg. 1.50% 0.20% 3.85% 3.96% 6.10% 6.54%
AS OF JUNE 30, 1996
- ---------------------------------------------------------------------------- -----------------------------------
The JPM Pierpont Tax Exempt Bond Fund 0.23% -0.49% 4.72% 4.45% 6.65% 6.91%
Lehman Quality Inter. Muni. Bond Index 0.43% 0.19% 5.54% 4.95% 7.34% 7.40%
Composite HQ Inter. Muni. Bond Funds Avg. 0.38% -0.03% 4.72% 4.22% 6.30% 6.71%
</TABLE>
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. FUND RETURNS ASSUME THE
REINVESTMENT OF DISTRIBUTIONS AND REFLECT REIMBURSEMENT OF CERTAIN FUND AND
PORTFOLIO EXPENSES AS DESCRIBED IN THE PROSPECTUS. THE LEHMAN QUALITY
INTERMEDIATE MUNICIPAL BOND INDEX IS AN INDEX CREATED BY LEHMAN BROTHERS OF HIGH
QUALITY MUNICIPAL BONDS RATED A OR BETTER WITH INTERMEDIATE MATURITIES
(APPROXIMATELY 7 YEARS). THE COMPOSITE HQ INTERMEDIATE MUNICIPAL BOND FUND
AVERAGE PERFORMANCE IS COMPUTED ON ALL FUNDS IN THE MORNINGSTAR UNIVERSE HAVING
A NATIONAL MUNICIPAL BOND OBJECTIVE, HIGH QUALITY, AND AN INTERMEDIATE MATURITY.
MORNINGSTAR, INC. IS A LEADING RESOURCE FOR MUTUAL FUND DATA. ALTHOUGH GATHERED
FROM RELIABLE SOURCES, DATA ACCURACY AND COMPLETENESS CANNOT BE GUARANTEED.
2
<PAGE>
PORTFOLIO MANAGER Q&A
[Photo]
This interview was conducted with ELIZABETH AUGUSTIN, Portfolio Manager for the
Tax Exempt Bond Portfolio in which the Fund invests. Elizabeth joined Morgan in
1983 and has extensive experience across a broad range of markets including
mortgages, convertibles, money markets, and tax exempt securities. This
interview was conducted on October 9, 1996 and represents her views on that
date.
ELIZABETH, WHAT WERE THE MOST SIGNIFICANT EVENTS IN THE TAX EXEMPT BOND MARKET
IN THE PREVIOUS YEAR?
EA: The flat tax fears that characterized the market last year have not risen
again, despite the coming election. The increase in rates held back some new
issuance, while demand remained constant. As a result, the municipal market
performed very well.
In the last six months Treasury yields rose by more than municipal yields,
and there was also a significant tightening of quality spreads, that is, the
difference in yield between AAA and BBB narrowed.
HOW DID WE POSITION THE PORTFOLIO TO RESPOND TO THESE EVENTS?
EA: With a rising rate environment such as we have seen for the last year or so,
premium bonds (bonds priced above par value) have had better price performance.
The Portfolio had substantial holdings of premiums and this was beneficial to
our performance. As a complement to those investments, over the course of the
last six months we've also purchased zero coupon bonds. The combination of these
with the premiums creates a "current coupon like" investment, but with a
relatively high yield and the lower volatility of premiums. With interest rates
leveling off, the Portfolio maintained an essentially neutral duration to its
benchmark over the period. It also remained 100% invested in municipal bonds.
Over this period, credit spreads tightened to such an extent that we did not
believe investors were being compensated for assuming the additional risk of
lower-rated securities.
ARE TAX EXEMPT BOND FUNDS SUBJECT TO CYCLICAL SUPPLY AND DEMAND FACTORS AND IF
SO, WHAT ARE SOME OF THESE FACTORS?
EA: Yes. Early in the year, when rates were lower, there was some refunding by
issuers which provided ample supply to the market. Subsequent to that period,
with the rise in rates, supply has diminished, particularly since early July,
and in this environment we have seen municipals outperform their taxable
counterparts.
In this environment of low supply, there continues to be very strong demand
which can make it difficult to find attractive investments. However, the traders
on our dedicated trading desk have been resourceful in uncovering pockets of
supply. They cover the market widely, and as a volume buyer, we are a priority
to broker-dealers. As a result, we have been able to remain fully invested in
municipals.
3
<PAGE>
IN THE PREVIOUS YEAR, TAX EXEMPT YIELDS ROSE MORE SLOWLY THAN TAXABLE YIELDS.
WHAT DO YOU SEE AS SOME OF THE REASONS FOR THIS?
EA: As I mentioned, the current higher rates have resulted in a low level of
issuance and at the same time the fear of tax reform has abated, bringing buyers
back into the market. As a result, tax exempt prices have held up reasonably
well.
ORANGE COUNTY EMERGED FROM BANKRUPTCY IN JUNE 1996. HAS THE MUNICIPAL MARKET
RETURNED TO PRE-ORANGE COUNTY CONDITIONS, OR DOES IT APPEAR TO HAVE BEEN
PERMANENTLY CHANGED BY THE BANKRUPTCY? IF SO, IN WHAT WAYS?
EA: The market appears to have fully recovered from the Orange County
bankruptcy. Indeed, recovery bonds were issued this year by Orange County,
although the Portfolio did not participate in the offering because we felt the
yields were too low for the risk level. However, the problems in Orange County
and in other parts of the municipal market highlight the importance of
continuous credit analysis on municipal bonds, and that's what our municipal
team does every day. In terms of investing in California, the Portfolio has
holdings in high quality credits, including general obligations, and these have
performed well relative to other bonds in the market, as California's economy
has improved.
THE JPM PIERPONT PERFORMANCE WAS IN LINE WITH ITS LIPPER COMPETITIVE UNIVERSE.
DO MOST MUNICIPAL BOND MANAGERS USE THE SAME STRATEGIES THAT WE DO?
EA: While performance was similar to the Lipper universe, competitive numbers
are not risk-adjusted. Over time Fund performance has proven to be less volatile
than the competition in general; its returns have been comparable to our
competitors but it has assumed less risk.
Competitive performance is also reported on a before-tax basis. A portfolio
that holds tax exempt securities can still incur substantial tax liabilities as
a result of net capital gains and income tax due to accretion of discount bonds.
We consider these potential liabilities in the management of the Portfolio in
order to maximize performance after taxes. We believe on an after-tax basis,
which is what ultimately matters to the investor, overall performance is better
than that of the competitive universe.
WHAT IS YOUR OUTLOOK FOR THE MUNICIPAL BOND MARKET OVER THE NEXT SIX MONTHS? DO
YOU EXPECT ANY FED TIGHTENING?
EA: While the low levels of unemployment still represent some inflation risk to
the economy, we see the economy as past its peak, and therefore feel that
inflation risk is minimal. Therefore, we're positive on the bond market in
general. Unless there is a resurgence of supply in the municipal market, we
expect municipals to perform strongly as well.
Although the Federal Reserve may intervene and raise short-term interest
rates, we do not believe any increase will be as aggressive as was expected
earlier in the year.
4
<PAGE>
HOW DO YOU EXPECT TO POSITION THE PORTFOLIO GOING FORWARD?
EA: We plan to continue positioning the Portfolio in the intermediate part of
the yield curve. This part of the curve has been and continues to be the most
attractive area: over time intermediate-term tax exempts have captured three-
quarters of the return of long-term tax exempts with half the volatility.
Given our positive view on the market, we expect to remain 100% invested in
municipals and to look for longer positions whenever interest rates rise. We
expect to continue the Portfolio's premium and zero coupon strategy and to seek
high quality private placements as a source of higher yield. The Portfolio's
high quality will be maintained through continuous credit analysis, to protect
shareholder investments while seeking to enhance return.
5
<PAGE>
GLOSSARY OF TERMS
BASIS POINT: A measure used in quoting bond yields. One basis point equals 0.01%
of yield. For example if a bond's yield changed from 10.25% to 11.00%, it would
have moved 75 basis points.
CREDIT RATING: The rating assigned to a bond by independent rating agencies such
as Standard & Poor's and Moody's. In evaluating creditworthiness, these agencies
assess the issuer's present financial condition and future ability and
willingness to make principal and interest payments when due.
DURATION: Duration is used as a measure of the relative sensitivity of the price
of the security to a change in interest rates. The longer the duration the more
sensitive the bond is to interest rate moves. For example, a bond with a 5-year
duration will experience an approximate 5% increase in price if interest rates
drop 100 basis points (1%) while a bond with a 10-year duration would see its
price rise by approximately 10%.
MATURITY: The date on which the life of a financial instrument ends through cash
or physical settlement or expiration with no value. Or the date a security comes
due and fully payable. Average maturity refers to the average time to maturity
of the entire portfolio.
YIELD CURVE: A graph showing the term structure of interest rates at a point in
time from the shortest to the longest available. The resulting curve shows if
short-term interest rates are higher or lower than long-term rates.
YIELD SPREAD: The difference in yield between different types of securities. For
example, if a Treasury bond is yielding 6.5% and a municipal is yielding 5.5%,
the spread is 1.0% or 100 basis points.
ZERO COUPON BOND: A debt instrument sold at a discount to its face value. The
bond makes no payments until maturity, at which time it is redeemed at face
value. Effectively, the interest received is the difference between face value
and the price paid for the security.
6
<PAGE>
FUND FACTS
INVESTMENT OBJECTIVE
The JPM Pierpont Tax Exempt Bond Fund seeks to provide a high level of current
income that is exempt from federal income tax consistent with moderate risk of
capital and maintenance of liquidity. It is designed for investors who seek tax
exempt yields greater than those generally available from a portfolio of short-
term tax exempt obligations and who are willing to incur the greater price
fluctuation of longer-term instruments.
- ---------------------------------------------
INCEPTION DATE
10/03/84
- ---------------------------------------------
NET ASSETS AS OF 8/31/96
$369,987,472
- ---------------------------------------------
DIVIDEND PAYABLE DATES
MONTHLY
- ---------------------------------------------
CAPITAL GAIN PAYABLE DATES (IF APPLICABLE)
12/20/96
EXPENSE RATIO
The Fund's annual expense ratio of 0.64% 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, 1996
PORTFOLIO ALLOCATION
(PERCENTAGE OF TOTAL INVESTMENTS)
[Pie Chart]
REVENUE BONDS 5.16%
GENERAL OBLIGATIONS 44.4%
SHORT-TERM 3.1%
PRIVATE PLACEMENTS 0.7%
SPECIAL OBLIGATIONS 0.2%
30-DAY SEC YIELD
4.41%
DURATION
5.38 years
7
<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. PAAS provides investors with a comprehensive management
program for their portfolios. Through this service, investors can:
- - Create and maintain an asset allocation that is specifically targeted at
meeting their most critical investment objectives;
- - Make ongoing tactical adjustments in the actual asset mix of their
portfolios to capitalize on shifting market trends;
- - Make investments through The JPM Pierpont Funds, a family of diversified
mutual funds.
PAAS is available to clients who invest a minimum of $500,000 in The JPM
Pierpont Funds.
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 JPM
Pierpont Funds provide an excellent way to help you accumulate long-term
wealth for retirement.
KEOGH
In early 1995, Morgan introduced 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 you to contribute the lesser of
$30,000 or 25% of your annual earned gross compensation. The JPM Pierpont Funds
can help you build a comprehensive investment program designed to maximize the
retirement dollars in your Keogh account.
8
<PAGE>
FUNDS DISTRIBUTOR, INC. IS THE DISTRIBUTOR FOR THE JPM PIERPONT TAX EXEMPT BOND
FUND (THE "FUND"). SIGNATURE BROKER-DEALER SERVICES, INC. SERVED AS THE FUND'S
DISTRIBUTOR PRIOR TO AUGUST 1, 1996.
MORGAN GUARANTY TRUST COMPANY OF NEW YORK ("MORGAN") SERVES AS PORTFOLIO
INVESTMENT ADVISOR AND MAKES THE FUND AVAILABLE SOLELY IN ITS CAPACITY AS
SHAREHOLDER SERVICING AGENT FOR CUSTOMERS. INVESTMENTS IN THE FUND ARE NOT
DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, MORGAN OR ANY OTHER
BANK. SHARES OF THE FUND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENTAL
AGENCY. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE 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 AND ASSUME THE REINVESTMENT OF FUND DISTRIBUTIONS. THE 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.
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 J.P.
MORGAN FUNDS SERVICES AT (800) 521-5411.
9
<PAGE>
THE JPM PIERPONT TAX EXEMPT BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment in The Tax Exempt Bond
Portfolio ("Portfolio"), at value $370,193,508
Receivable for Shares of Beneficial
Interest Sold 189,597
Prepaid Trustees' Fees 1,342
Prepaid Expenses and Other Assets 2,532
-----------
Total Assets 370,386,979
-----------
LIABILITIES
Dividends and Distributions Payable to
Shareholders 277,079
Shareholder Servicing Fee Payable 62,837
Administrative Services Fee Payable 9,915
Administration Fee Payable 5,142
Fund Services Fee Payable 702
Accrued Expenses 43,832
-----------
Total Liabilities 399,507
-----------
NET ASSETS
Applicable to 31,810,900 Shares of
Beneficial Interest Outstanding
(par value $0.001, unlimited shares
authorized) $369,987,472
-----------
-----------
Net Asset Value, Offering and
Redemption Price Per Share $11.63
-----
-----
ANALYSIS OF NET ASSETS
Paid-in Capital $357,155,466
Undistributed Net Investment Income 2,388
Accumulated Net Realized Gain on
Investment 181,748
Net Unrealized Appreciation of
Investment 12,647,870
-----------
Net Assets $369,987,472
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
10
<PAGE>
THE JPM PIERPONT TAX EXEMPT BOND FUND
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED AUGUST 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME ALLOCATED FROM
PORTFOLIO
Allocated Interest Income $19,268,090
Allocated Portfolio Expenses (1,372,108)
----------
Net Investment Income Allocated
from Portfolio 17,895,982
FUND EXPENSES
Shareholder Servicing Fee $702,939
Administrative Services Fee 63,000
Administration Fee 59,033
Transfer Agent Fees 46,629
Printing Expenses 20,997
Registration Fees 20,769
Fund Services Fee 20,062
Professional Fees 15,309
Trustees' Fees and Expenses 6,537
Miscellaneous 7,222
-------
NET FUND EXPENSES 962,497
----------
NET INVESTMENT INCOME 16,933,485
NET REALIZED GAIN ON INVESTMENT
ALLOCATED FROM PORTFOLIO 534,849
NET CHANGE IN UNREALIZED APPRECIATION
OF INVESTMENT ALLOCATED FROM
PORTFOLIO (3,837,571)
----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $13,630,763
----------
----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
11
<PAGE>
THE JPM PIERPONT TAX EXEMPT BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FISCAL FOR THE FISCAL
YEAR ENDED YEAR ENDED
AUGUST 31, AUGUST 31,
1996 1995
-------------- --------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 16,933,485 $ 17,204,362
Net Realized Gain on Investment
Allocated from Portfolio 534,849 292,405
Net Change in Unrealized Appreciation
of Investment Allocated from
Portfolio (3,837,571) 7,518,403
-------------- --------------
Net Increase in Net Assets
Resulting from Operations 13,630,763 25,015,170
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (16,931,097) (17,204,362)
Net Realized Gain (455,297) (273,413)
-------------- --------------
Total Distributions to Shareholders (17,386,394) (17,477,775)
-------------- --------------
TRANSACTIONS IN SHARES OF BENEFICIAL
INTEREST
Proceeds from Shares of Beneficial
Interest Sold 139,892,566 163,344,760
Reinvestment of Dividends and
Distributions 14,124,800 14,555,056
Cost of Shares of Beneficial Interest
Redeemed (132,279,747) (225,892,051)
-------------- --------------
Net Increase (Decrease) from
Transactions in Shares of
Beneficial Interest 21,737,619 (47,992,235)
-------------- --------------
Total Increase (Decrease) in Net
Assets 17,981,988 (40,454,840)
NET ASSETS
Beginning of Fiscal Year 352,005,484 392,460,324
-------------- --------------
End of Fiscal Year (including
undistributed net investment income
of
$2,388 and $0, respectively) $ 369,987,472 $ 352,005,484
-------------- --------------
-------------- --------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
12
<PAGE>
THE JPM PIERPONT TAX EXEMPT BOND FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share outstanding throughout each period are as follows:
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED AUGUST 31,
-------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $ 11.73 $ 11.45 $ 12.04 $ 11.60 $ 11.19
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.55 0.55 0.51 0.55 0.62
Net Realized and Unrealized Gain (Loss)
on Investment (0.08) 0.29 (0.35) 0.56 0.41
------- ------- ------- ------- -------
Total from Investment Operations 0.47 0.84 0.16 1.11 1.03
------- ------- ------- ------- -------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (0.55) (0.55) (0.51) (0.55) (0.62)
Net Realized Gain (0.02) (0.01) (0.24) (0.12) --
------- ------- ------- ------- -------
Total Distributions to Shareholders (0.57) (0.56) (0.75) (0.67) (0.62)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF YEAR $ 11.63 $ 11.73 $ 11.45 $ 12.04 $ 11.60
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Total Return 4.01% 7.63% 1.35% 9.88% 9.47%
------- ------- ------- ------- -------
------- ------- ------- ------- -------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Year (in thousands) $369,987 $352,005 $392,460 $485,013 $360,343
Ratios to Average Net Assets
Expenses 0.64% 0.71% 0.71% 0.74% 0.77%
Net Investment Income 4.67% 4.87% 4.39% 4.64% 5.45%
Decrease Reflected in Expense Ratio
due to Expense Reimbursement -- -- -- 0.01% 0.01%
Portfolio Turnover -- -- -- 41%+ 20%
</TABLE>
- ------------------------
+ 1993 Portfolio Turnover reflects the period September 1, 1992 to July 11,
1993. After July 11, 1993, all the Fund's investable assets were invested in The
Tax Exempt Bond Portfolio.
The Accompanying Notes are an Integral Part of the Financial Statements.
13
<PAGE>
THE JPM PIERPONT TAX EXEMPT BOND FUND
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1996
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The JPM Pierpont Tax Exempt Bond Fund (the "Fund") is a separate series of The
JPM Pierpont Funds, a Massachusetts business trust (the "Trust"). The Trust is
registered under the Investment Company Act of 1940, as amended, as an 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. Prior to
October 10, 1996, the Trust's and the Fund's names were The Pierpont Funds and
The Pierpont Tax Exempt Bond Fund, respectively.
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 objective as the Fund. The value of such investment included
in the Statement of Assets and Liabilities reflects the Fund's proportionate
interest in the net assets of the Portfolio (75% at August 31, 1996). The
performance of the Fund is directly affected by the performance of the
Portfolio. The financial statements of the Portfolio, including the Schedule of
Investments, are included elsewhere in this report and should be read in
conjunction with the Fund's financial statements.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual amounts could differ from
those estimates. The following is a summary of the significant accounting
policies of the 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 gains, 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.
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.
14
<PAGE>
THE JPM PIERPONT TAX EXEMPT BOND FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AUGUST 31, 1996
- --------------------------------------------------------------------------------
f)The Fund accounts for and reports distributions to shareholders in
accordance with "Statement of Position 93-2 Determination, Disclosure, and
Financial Statement Presentation of Income, Capital Gain, and Return of
Capital Distributions by Investment Companies." The effect of applying
this statement was to increase Undistributed Net Investment Income by
$124,000, increase Accumulated Net Realized Gain on Investment by $3,012
and decrease Paid-in Capital by $127,012. The adjustments are primarily
attributable to tax treatment of partnership allocations of capital gains
and losses. Net investment income, net realized gains and net assets were
not affected by this change.
2. TRANSACTIONS WITH AFFILIATES
a)The Trust had retained Signature Broker-Dealer Services, Inc.
("Signature") to serve as administrator and distributor. Under an
Administration Agreement, Signature provided administrative services
necessary for the operations of the Fund, furnished office space and
facilities required for conducting the business of the Fund and paid the
compensation of the Fund's officers affiliated with Signature. Until
December 28, 1995, the agreement provided for a fee to be paid to
Signature at an annual rate determined by the following schedule: 0.04% of
the first $1 billion of the aggregate average daily net assets of the
Trust, as well as two other affiliated fund families for which Signature
acted as administrator, 0.032% of the next $2 billion of such net assets,
0.024% of the next $2 billion of such net assets, and 0.016% of such net
assets in excess of $5 billion. The daily equivalent of the fee rate was
applied each day to the net assets of the Fund. For the period from
September 1, 1995 through December 28, 1995, Signature's fee for these
services amounted to $30,467.
Effective December 29, 1995, the Administration Agreement was amended such
that the fee charged was equal to the Fund's proportionate share of a
complex-wide fee based on the following annual schedule: 0.03% on the
first $7 billion of the aggregate average daily net assets of the
Portfolio and the other portfolios (the "Master Portfolios") in which
series of the Trust, The JPM Institutional Funds or The JPM Advisor Funds
invest and 0.01% on the aggregate average daily net assets of the Master
Portfolios in excess of $7 billion. The portion of this charge paid by the
Fund was determined by the proportionate share its net assets bore to the
total net assets of the Trust, The JPM Institutional Funds, The JPM
Advisor Funds and the Master Portfolios. For the period from December 29,
1995 through July 31, 1996, Signature's fee for these services amounted to
$27,397. The Administration Agreement with Signature was terminated July
31, 1996.
Effective August 1, 1996, certain administrative functions formerly
provided by Signature are provided by Funds Distributor, Inc. ("FDI"), a
registered broker-dealer, and by Morgan. FDI also serves as the Fund's
distributor. Under a Co-Administration Agreement between FDI and the Trust
on behalf of the Fund, FDI's fees are paid by the Fund (see Note 2b). For
the period from August 1, 1996 through August 31, 1996, the fee for these
services amounted to $1,169.
b)Until August 31, 1995, the Trust, on behalf of the Fund, had a Financial
and Fund Accounting Services Agreement with Morgan which provided that
Morgan would receive a fee, based on the percentage described below, for
overseeing certain aspects of the administration and operation of the Fund
and that was also designed to provide an expense limit for certain
expenses of the Fund. This fee was calculated exclusive of the shareholder
servicing fee and the fund services fee at 0.12% of the Fund's average
daily
15
<PAGE>
THE JPM PIERPONT TAX EXEMPT BOND FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AUGUST 31, 1996
- --------------------------------------------------------------------------------
net assets up to and including $100 million and 0.10% on any excess over
$100 million. From September 1, 1995 until December 28, 1995, an interim
agreement between the Trust, on behalf of the Fund, and Morgan provided
for the continuation of the oversight functions that were outlined under
the prior agreement and that Morgan should bear all of its expenses
incurred in connection with these services.
Effective December 29, 1995, the Trust, on behalf of the Fund, entered
into an Administrative Services Agreement (the "Services Agreement") with
Morgan under which Morgan was responsible for certain aspects of the
administration and operation of the Fund. Under the Services Agreement,
the Fund had agreed to pay Morgan a fee equal to its proportionate share
of an annual complex-wide charge. Until July 31, 1996, this charge was
calculated daily based on the aggregate net assets of the Master
Portfolios in accordance with the following annual schedule: 0.06% on the
first $7 billion of the Master Portfolios' aggregate average daily net
assets and 0.03% of the Master Portfolios' aggregate average daily net
assets in excess of $7 billion. The portion of this charge paid by the
Fund was determined by the proportionate share its net assets bore to the
net assets of the Trust, the Master Portfolios and other investors in the
Master Portfolios for which Morgan provided similar services. For the
period from December 29, 1995 through July 31, 1996, the fee for these
services amounted to $53,085.
Effective August 1, 1996, the Services Agreement was amended such that the
aggregate complex-wide fees to be paid by the Fund under both the amended
Services Agreement and the Co-Administration Agreement (see Note 2a) is
calculated daily based on the aggregate net assets of the Master
Portfolios in accordance with the following annual schedule: 0.09% on the
first $7 billion of the Master Portfolios' aggregate average daily net
assets and 0.04% of the Master Portfolios' aggregate average daily net
assets in excess of $7 billion. For the period from August 1, 1996 through
August 31, 1996, the fee for these services amounted to $9,915.
c)The Trust, on behalf of the Fund, has a Shareholder Servicing Agreement
with Morgan. Until December 28, 1995, the agreement provided for the Fund
to pay Morgan a fee for these services which was computed daily and paid
monthly at an annual rate of 0.18% of the average daily net assets of the
Fund. For the period September 1, 1995 through December 28, 1995, the fee
for these services amounted to $209,697.
Effective December 29, 1995, the Shareholder Servicing Agreement was
amended such that the annual rate for providing these services was changed
to 0.20% of the average daily net assets of the Fund. For the period from
December 29, 1995 through August 31, 1996, the fee for these services
amounted to $493,242.
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 represent all the existing shareholders of Group. The Fund's
allocated portion of Group's costs in performing its services amounted to
$20,062 for the fiscal year ended August 31, 1996.
e)An aggregate annual fee of $65,000 is paid to each Trustee for serving as
a Trustee of the Trust, The JPM Institutional Funds and the Master
Portfolios. The Trustees' Fees and Expenses shown in the financial
statements represents the Fund's allocated portion of the total fees and
expenses. The Trust's
16
<PAGE>
THE JPM PIERPONT TAX EXEMPT BOND FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AUGUST 31, 1996
- --------------------------------------------------------------------------------
Chairman and Chief Executive Officer also serves as Chairman of Group and
received compensation and employee benefits from Group in his role as
Group's Chairman. The allocated portion of such compensation and benefits
included in the Fund Services Fee shown in the financial statements was
$2,600.
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.
Transactions in shares of beneficial interest of the Fund were as follows:
<TABLE>
<CAPTION>
FOR THE FISCAL FOR THE FISCAL
YEAR ENDED YEAR ENDED
AUGUST 31, AUGUST 31,
1996 1995
-------------- --------------
<S> <C> <C>
Shares of beneficial interest sold..... 11,886,968 14,491,547
Reinvestment of dividends and
distributions......................... 1,202,045 1,280,695
Shares of beneficial interest
redeemed.............................. (11,275,482 ) (20,061,693 )
-------------- --------------
Net Increase (Decrease)................ 1,813,531 (4,289,451 )
-------------- --------------
-------------- --------------
</TABLE>
17
<PAGE>
Report of Independent Accountants
To the Trustees and Shareholders of
The JPM 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 JPM Pierpont Tax Exempt Bond Fund (one of the series constituting part of
The JPM Pierpont Funds, hereafter referred to as the "Fund") at August 31, 1996,
the results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and the financial
highlights for each of the four years in the period then ended, 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 the period ended August 31, 1992 was 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 16, 1996
18
<PAGE>
The Tax Exempt Bond Portfolio
Annual Report August 31, 1996
(The following pages should be read in conjunction
with The JPM Pierpont Tax Exempt Bond Fund
Annual Financial Statements)
19
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS
AUGUST 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S
AMOUNT SECURITY S&P MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE (UNAUDITED) DATE RATE VALUE
- -------------- ------------------------------------------------- ------- --------------- ---------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
LONG-TERM INVESTMENTS (96.1%)
ALABAMA (0.8%)
$ 1,000 Alabama Mental Health Finance Authority, (Special
Tax Obligation, Prerefunded, Series 1989, due
05/01/01), MBIA Insured ....................... RB Aaa/AAA 05/01/99(b) 7.375% $ 1,090,820
1,810 Childersburg Industrial Development Board, PCR,
Kimberly Clark Corp. Project, (Escrowed to
Maturity, due 11/15/99) ....................... RB Aa2/AA 11/15/96(b) 7.400 1,887,052
1,000 Daphne Special Care Facilities Financing
Authority, (Presbyterian Retirement,
Prerefunded, Series A, due 08/15/18) .......... RB NR/NR 08/15/01(b) 7.300 1,106,340
------------
TOTAL ALABAMA ............................... 4,084,212
------------
ALASKA (2.5%)
2,000 Anchorage, (Prerefunded, Series 1991, due
07/01/02), MBIA Insured ....................... GO Aaa/AAA 07/01/01(b) 6.600 2,162,700
1,075 Anchorage, (Refunding, Series 1989, due
06/01/03), AMBAC Insured ...................... GO Aaa/AAA 06/01/99(b) 7.100 1,144,509
1,000 Anchorage, (Series 1990A), AMBAC Insured ........ GO Aaa/AAA 02/01/00 6.850 1,069,350
3,000 North Slope Borough, (Series 1992A), MBIA
Insured ....................................... GO Aaa/AAA 06/30/00 5.550 3,098,910
5,500 North Slope Borough, Capital Appreciation, Zero
Coupon, (Series 1996A), MBIA Insured .......... GO Aaa/AAA 06/30/99 0.000 4,816,350
------------
TOTAL ALASKA ................................ 12,291,819
------------
ARIZONA (1.2%)
1,000 Maricopa County School District #11, Peoria
Unified School Improvement, (Prerefunded,
Series 1990H, due 07/01/05), MBIA Insured ..... GO Aaa/AAA 07/01/01(b) 7.000 1,098,830
1,325 Maricopa County School District #3, Tempe
Elementary Projects of 1991, (Prerefunded,
Series C, due 07/01/08) ....................... GO A1/AA 07/01/06(b) 6.000 1,407,799
1,750 Phoenix, (Refunding, Series C) .................. GO Aa1/AA+ 07/01/02 6.375 1,899,817
1,235 Salt River Project Agricultural Improvement and
Power District Electric System, (Prerefunded,
Series A, due 01/01/28) ....................... RB Aaa/AAA 01/01/98(b) 7.875 1,318,572
------------
TOTAL ARIZONA ............................... 5,725,018
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S
AMOUNT SECURITY S&P MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE (UNAUDITED) DATE RATE VALUE
- -------------- ------------------------------------------------- ------- --------------- ---------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
CALIFORNIA (3.4%)
$ 2,520 California Department of Water Resources, Central
Valley Project, Water Systems Service,
(Refunding, Series J-1) ....................... RB Aa/AA 12/01/12 7.000% $ 2,887,114
594 Kaweah Delta Hospital District, Tulare County,
(Series D, due 06/01/14) ...................... PP NR/A+ 06/01/97(b) 4.700 595,485
1,160 Kaweah Delta Hospital District, Tulare County,
(Series E, due 06/01/14) ...................... PP NR/A+ 06/01/97(b) 5.250 1,171,693
1,695 Kaweah Delta Hospital District, Tulare County,
(Series G, due 06/01/14) ...................... PP NR/A+ 06/01/04(b) 6.400 1,795,530
3,000 Los Angeles County Public Works, (Refunding,
Series A), MBIA Insured ....................... RB Aaa/AAA 09/01/05 6.000 3,204,150
2,500 Los Angeles County Public Works, (Refunding,
Series A), MBIA Insured ....................... RB Aaa/AAA 09/01/06 6.000 2,666,500
4,000 Los Angeles Department of Water & Power,
California Electric Plant, (Crossover Refunded,
due 05/15/30) ................................. RB A1/AA- 05/15/00(b) 7.125 4,410,840
------------
TOTAL CALIFORNIA ............................ 16,731,312
------------
CONNECTICUT (1.0%)
2,000 Connecticut Housing Finance Authority, Housing
Mortgage Finance Program, (Refunding, Series
1987B) ........................................ RB Aa/AA 11/15/97 8.100 2,063,520
2,815 Connecticut Transportation Infrastructure,
Special Tax Obligation, (Prerefunded, Series
1991A, due 06/01/04) .......................... RB A1/AA- 06/01/03(b) 6.600 3,082,312
------------
TOTAL CONNECTICUT ........................... 5,145,832
------------
DISTRICT OF COLUMBIA (2.7%)
3,000 District of Columbia, (Refunding, Series A), MBIA
Insured ....................................... GO Aaa/AAA 06/01/07 6.000 3,125,190
7,500 District of Columbia, (Refunding, Series C), FGIC
Insured ....................................... GO Aaa/AAA 12/01/03 5.250 7,530,750
2,600 District of Columbia, (Series B), MBIA
Insured ....................................... GO Aaa/AAA 06/01/02 6.000 2,715,154
------------
TOTAL DISTRICT OF COLUMBIA .................. 13,371,094
------------
FLORIDA (2.7%)
1,535 Florida Board of Education, Capital Outlay,
(Escrowed to Maturity, Series 1986C, due
06/01/01) ..................................... GO Aaa/AAA 06/01/97(b) 7.000 1,612,318
465 Florida Board of Education, Capital Outlay,
(Unrefunded Balance, Series 1986C, due
06/01/01) ..................................... GO Aa/AA 06/01/97(b) 7.000 475,518
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S
AMOUNT SECURITY S&P MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE (UNAUDITED) DATE RATE VALUE
- -------------- ------------------------------------------------- ------- --------------- ---------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
FLORIDA (CONTINUED)
$ 5,475 Florida Turnpike Authority Department of
Transportation, (Series A), AMBAC Insured ..... RB Aaa/AAA 07/01/01 5.500% $ 5,681,298
3,200 Jacksonville Electric Authority, St. Johns River,
Issue 2, (Crossover Refunded, Series 5, due
10/01/09) ..................................... RB Aa1/AA 10/01/99(b) 7.000 3,436,224
2,000 Volusia County School District, (Refunding,
Series 1991, due 08/01/02), FGIC Insured ...... GO Aaa/AAA 08/01/01(b) 6.100 2,139,940
------------
TOTAL FLORIDA ............................... 13,345,298
------------
GEORGIA (8.6%)
3,750 Atlanta Airport Facilities, (Refunding), AMBAC
Insured ....................................... RB Aaa/AAA 01/01/98 5.000 3,786,412
2,630 Fulton County School District, (Refunding) . GO Aa/AA 05/01/14 6.375 2,856,548
4,265 Georgia Municipal Electric Authority, (Crossover
Refunded, Series O, due 01/01/17) ............. RB A/A 01/01/98(b) 8.125 4,540,391
1,000 Georgia Municipal Electric Authority, (Refunding,
Series D) ..................................... RB A/A 01/01/06 6.000 1,036,780
1,155 Georgia Residential Finance Authority, Single
Family Insured Mortgages, (Refunding, Series
1986A, due 12/01/98), FHA Insured ............. RB Aa/AA+ 12/01/96(b) 6.600 1,195,991
6,000 Georgia, (Series B) ............................. GO Aaa/AA+ 03/01/07 7.200 6,996,720
3,000 Georgia, (Series B) ............................. GO Aaa/AA+ 03/01/10 6.300 3,262,500
4,470 Georgia, (Series C) ............................. GO Aaa/AA+ 07/01/11 5.700 4,559,489
3,000 Georgia, (Series D) ............................. GO Aaa/AA+ 09/01/13 3.250 2,233,290
2,500 Gwinnett County School District, (Refunding,
Series B) ..................................... GO Aa1/AA 02/01/08 6.400 2,742,200
5,000 Metropolitan Atlanta Rapid Transit Authority,
Sales Tax Revenue, (Refunding, Series P), AMBAC
Insured ....................................... RB Aaa/AAA 07/01/11 6.250 5,366,000
1,000 Municipal Electric Authority, (First Crossover,
General Resolution) ........................... SO A/A 01/01/12 6.500 1,070,370
2,500 Municipal Electric Authority, Project 1, (Sixth
Crossover), AMBAC Insured ..................... RB Aaa/AAA 01/01/08 7.000 2,856,150
------------
TOTAL GEORGIA ............................... 42,502,841
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S
AMOUNT SECURITY S&P MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE (UNAUDITED) DATE RATE VALUE
- -------------- ------------------------------------------------- ------- --------------- ---------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
HAWAII (0.8%)
$ 2,000 Hawaii, (Series BZ) ............................. GO Aa/AA 10/01/12 6.000% $ 2,083,980
2,000 Honolulu, City & County Improvement, (Refunding,
Series B) ..................................... GO Aa/AA 10/01/11 5.500 1,989,760
------------
TOTAL HAWAII ................................ 4,073,740
------------
ILLINOIS (9.8%)
2,000 Chicago, (Refunding, Series B), FGIC Insured .... GO Aaa/AAA 01/01/00 5.000 2,020,040
1,500 Chicago, (Series 1995), AMBAC Insured ........... GO Aaa/AAA 01/01/05 6.500 1,634,655
1,000 Chicago, Board of Education Lease Certificates,
(Series A), MBIA Insured ...................... RB Aaa/AAA 01/01/06 6.125 1,063,840
4,130 Chicago, Board of Education Lease Certificates,
(Series A), MBIA Insured ...................... RB Aaa/AAA 01/01/07 6.125 4,406,586
4,000 Chicago, Equipment Notes, (Series 1996), AMBAC
Insured ....................................... GO Aaa/AAA 01/01/04 5.600 4,133,160
1,500 Chicago, O'Hare International Airport,
(Refunding, Series C-1), MBIA Insured ......... RB Aaa/AAA 01/01/09 5.750 1,526,415
3,280 Cook County, (Refunding, Series C), FGIC
Insured ....................................... GO Aaa/AAA 11/15/04 5.800 3,454,168
10,000 Cook County, Community School District #54,
Schaumburg Township, Zero Coupon, (Capital
Appreciation, Prerefunded, Series B, due
01/01/11), FGIC Insured ....................... GO Aaa/AAA 01/01/03(b) 0.000 4,325,600
1,375 Du Page County, Illinois Alternative Revenue Jail
Project, (Prerefunded, Series C-1, due
01/01/21) ..................................... GO Aaa/AAA 01/01/02(b) 6.550 1,510,657
1,640 Illinois, (Prerefunded, due 06/01/03) ........... GO A1/AAA 06/01/97(b) 7.500 1,715,325
2,000 Illinois, (Refunding, Series 1987, due
04/01/02) ..................................... GO A1/AA- 04/01/97(b) 6.500 2,066,360
2,000 Illinois, (Series 1986, due 12/01/01) ........... GO A1/AA- 12/01/96(b) 6.250 2,051,800
3,000 Illinois, Sales Tax Revenue, (Refunding, Series
Q) ............................................ RB A1/AAA 06/15/09 6.000 3,130,590
3,250 Illinois, Sales Tax Revenue, (Refunding, Series
Q) ............................................ RB A1/AAA 06/15/12 6.000 3,360,597
3,350 Illinois, Sales Tax Revenue, (Series R) ......... RB A1/AAA 06/15/01 4.600 3,335,561
950 Kendall Kane & Will Counties, Community Unit
School District #308, FGIC Insured ............ GO Aaa/AAA 03/01/99 6.200 988,057
2,500 Metropolitan Pier & Exposition Authority,
McCormick Place Expansion Project, (Series
A) ............................................ RB A/A+ 06/15/06 8.500 3,096,025
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
23
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S
AMOUNT SECURITY S&P MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE (UNAUDITED) DATE RATE VALUE
- -------------- ------------------------------------------------- ------- --------------- ---------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
ILLINOIS (CONTINUED)
$ 2,810 Regional Transportation Authority, (Series D),
FGIC Insured .................................. RB Aaa/AAA 06/01/07 7.750% $ 3,343,478
1,000 University of Illinois, Auxiliary Facilities,
(Escrowed to Maturity, Series 1992N, due
10/01/01) ..................................... RB Aaa/AAA 10/01/96(b) 6.000 1,032,640
------------
TOTAL ILLINOIS .............................. 48,195,554
------------
INDIANA (0.8%)
3,915 Indiana, Transportation Finance Authority,
Highway Revenue, (Refunding, Series A), AMBAC
Insured ....................................... RB Aaa/AAA 06/01/09 5.250 3,839,832
------------
KENTUCKY (0.9%)
3,900 Kentucky, Turnpike Authority, (Escrowed to
Maturity, Series A, due 07/01/02) ............. RB Aaa/NR 07/01/97(b) 7.100 4,202,484
------------
LOUISIANA (1.7%)
8,000 Louisiana, (Refunding, Series A), FGIC
Insured ....................................... GO Aaa/AAA 08/01/00 6.000 8,394,240
------------
MARYLAND (0.9%)
1,000 Maryland Department of Transportation,
(Prerefunded, Series 1990, due 08/15/05) . RB Aaa/AAA 08/15/99(b) 6.700 1,080,710
3,000 Maryland, (3rd Series, due 07/15/03) ............ GO Aaa/AAA 07/15/01(b) 6.400 3,224,880
------------
TOTAL MARYLAND .............................. 4,305,590
------------
MASSACHUSETTS (1.9%)
5,650 Massachusetts Bay Transportation Authority,
General Transportation System, (Refunding,
Series A) ..................................... RB A1/A+ 03/01/08 7.000 6,437,949
1,495 Massachusetts, College Building Authority,
(Refunding, Series A) ......................... RB A1/A+ 05/01/11 7.500 1,783,131
1,060 Wareham, School Project Loan Bonds, (due
01/15/03), AMBAC Insured ...................... GO Aaa/AAA 01/15/01(b) 6.800 1,163,392
------------
TOTAL MASSACHUSETTS ......................... 9,384,472
------------
MINNESOTA (1.2%)
5,265 Western Minnesota Municipal Power Agency,
(Prerefunded, Series 1983A, due 01/01/04), MBIA
Insured ....................................... RB Aaa/AAA 01/01/97(b) 10.125 5,854,522
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
24
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S
AMOUNT SECURITY S&P MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE (UNAUDITED) DATE RATE VALUE
- -------------- ------------------------------------------------- ------- --------------- ---------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
MISSISSIPPI (2.4%)
$ 11,000 Mississippi, (Refunding, Escrowed to
Maturity) ..................................... GO Aaa/AAA 02/01/08 6.200% $ 11,955,570
------------
MISSOURI (0.9%)
4,000 St. Louis County Regional Convention & Sports
Complex Authority, (Prerefunded, Series B, due
08/15/21) ..................................... RB Aaa/AAA 08/15/03(b) 7.000 4,480,120
------------
NEBRASKA (0.8%)
4,000 Nebraska Public Power District, Nuclear
Facilities, (Refunding) ....................... RB A1/A+ 07/01/00 5.200 4,079,040
------------
NEVADA (4.5%)
500 Carson City School District, (Prerefunded, Series
1990, due 04/01/03), FGIC Insured ............. GO Aaa/AAA 04/01/00(b) 6.750 541,095
8,200 Clark County School District, (Series A), MBIA
Insured ....................................... GO Aaa/AAA 06/01/11 7.000 9,404,006
3,000 Clark County School District, FGIC Insured . GO Aaa/AAA 06/15/03 6.000 3,177,780
3,000 Clark County, Passenger Facilities, Las Vegas
McCarran International Airport, (Series A),
AMBAC Insured ................................. RB Aaa/AAA 07/01/08 6.250 3,245,190
1,685 Las Vegas, Clark County Library District,
(Prerefunded, Series 1991A, due 06/01/03), FGIC
Insured ....................................... GO Aaa/AAA 06/01/01(b) 6.600 1,820,744
1,200 Las Vegas, Clark County Library District,
(Prerefunded, Series 1991A, due 06/01/04), FGIC
Insured ....................................... GO Aaa/AAA 06/01/01(b) 6.700 1,301,292
1,280 Las Vegas, Clark County Library District,
(Refunding, Series B, due 08/01/04), FGIC
Insured ....................................... GO Aaa/AAA 08/01/01(b) 6.700 1,397,274
1,330 Nevada, Prison Facilities, (Prerefunded, Series
1990A, due 08/01/04) .......................... GO Aa/AA 08/01/00(b) 7.000 1,461,949
------------
TOTAL NEVADA ................................ 22,349,330
------------
NEW HAMPSHIRE (0.4%)
1,720 New Hampshire, (Series 1991A, due 06/15/03) ..... GO Aa/AA+ 06/15/01(b) 6.600 1,881,474
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
25
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S
AMOUNT SECURITY S&P MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE (UNAUDITED) DATE RATE VALUE
- -------------- ------------------------------------------------- ------- --------------- ---------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
NEW JERSEY (8.1%)
$ 2,200 New Jersey, Economic Development Authority,
Market Transition Facilities, (Series A), MBIA
Insured ....................................... RB Aaa/AAA 07/01/00 5.125% $ 2,242,372
7,000 New Jersey, Economic Development Authority,
Market Transition Facilities, (Series A), MBIA
Insured ....................................... RB Aaa/AAA 07/01/02 5.400 7,221,900
1,325 New Jersey, Economic Development Authority, New
Jersey Performing Arts Center, (Series PJ-A),
AMBAC Insured ................................. RB Aaa/AAA 06/15/07 6.000 1,405,957
1,990 New Jersey, Economic Development Authority, New
Jersey Performing Arts Center, (Series PJ-C),
AMBAC Insured ................................. RB Aaa/AAA 06/15/06 6.000 2,115,489
1,500 New Jersey, Sports & Exposition Authority, Sports
Complex, (Refunding, Escrowed to Maturity) .... RB Aa1/NR 01/01/00 8.100 1,659,480
6,000 New Jersey, Transportation Authority, (Refunding,
Series B), MBIA Insured ....................... RB Aaa/AAA 06/15/01 6.000 6,349,140
6,000 New Jersey, Transportation Authority, (Refunding,
Series B), MBIA Insured ....................... RB Aaa/AAA 06/15/05 6.000 6,408,900
7,000 New Jersey, Transportation Traffic Authority,
(Refunding, Series B), MBIA Insured ........... RB Aaa/AAA 06/15/10 6.500 7,734,160
2,500 New Jersey, Turnpike Authority, (Refunding,
Series A), MBIA Insured ....................... RB Aaa/AAA 01/01/00 6.200 2,622,225
1,000 New Jersey, Turnpike Authority, (Refunding,
Series A), MBIA Insured ....................... RB Aaa/AAA 01/01/01 5.700 1,039,940
1,000 Ocean County, (General Improvement) ............. GO Aa/NR 04/15/00 6.375 1,060,630
------------
TOTAL NEW JERSEY ............................ 39,860,193
------------
NEW YORK (7.2%)
110 Monroe County, Public Improvement, (Prerefunded,
due 06/01/09), AMBAC Insured .................. GO Aaa/AAA 06/01/04(b) 6.000 117,755
120 Monroe County, Public Improvement, (Prerefunded,
due 06/01/10), AMBAC Insured .................. GO Aaa/AAA 06/01/04(b) 6.000 128,460
1,990 Monroe County, Public Improvement, (Unrefunded
Balance, due 06/01/09), AMBAC Insured ......... GO Aaa/AAA 06/01/04(b) 6.000 2,100,724
1,295 Monroe County, Public Improvement, (Unrefunded
Balance, due 06/01/10), AMBAC Insured ......... GO Aaa/AAA 06/01/04(b) 6.000 1,361,887
1,000 Municipal Assistance Corp. for the City of New
York, (Custodial Receipt Certificates,
Refunding, Series 1987-61, due 7/01/07), MBIA
Insured ....................................... RB Aaa/AAA 07/01/97(b) 6.875 1,043,360
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
26
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S
AMOUNT SECURITY S&P MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE (UNAUDITED) DATE RATE VALUE
- -------------- ------------------------------------------------- ------- --------------- ---------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
NEW YORK (CONTINUED)
$ 1,500 Municipal Assistance Corp. for the City of New
York, (Refunding, Series D), AMBAC Insured .... RB Aaa/AAA 07/01/02 5.250% $ 1,536,195
2,000 Municipal Assistance Corp. for the City of New
York, (Series E) .............................. RB Aa/A+ 07/01/06 6.000 2,129,740
1,465 New York City, (Escrowed to Maturity, Series
B) ............................................ GO Aaa/AAA 06/01/01 8.000 1,668,620
4,675 New York City, (Refunding, Series H, Subseries
H-1) .......................................... GO Baa1/BBB+ 08/01/01 5.500 4,716,795
2,645 New York City, (Series A) ....................... GO Baa1/BBB+ 08/01/02 5.750 2,677,877
2,000 New York City, (Series F) ....................... GO Baa1/BBB+ 02/15/02 6.100 2,055,860
3,425 New York City, (Series F) ....................... GO Baa1/BBB+ 02/15/03 6.200 3,510,762
1,500 New York, Urban Development Correctional Capital
Facilities, (Prerefunded, Series 1, due
01/01/14) ..................................... RB Aaa/NR 01/01/00(b) 7.750 1,676,625
4,000 Triborough Bridge & Tunnel Authority, (Refunding,
Series V, due 01/01/05), FGIC Insured ......... RB Aaa/AAA 01/01/01(b) 6.875 4,406,080
5,500 Triborough Bridge & Tunnel Authority, (Refunding,
Series X) ..................................... RB Aa/A+ 01/01/12 6.625 6,104,670
------------
TOTAL NEW YORK .............................. 35,235,410
------------
OHIO (0.9%)
3,525 Ohio Water Development Authority, (Refunding,
Series Safe Water II, Escrowed to Maturity, due
12/01/10) ..................................... RB Aaa/AAA 12/01/96(b) 9.375 4,352,247
------------
PENNSYLVANIA (3.0%)
1,175 Bethel Park School District, (Prerefunded, Series
1991B, due 02/01/02), AMBAC Insured ........... GO Aaa/AAA 02/01/00(b) 6.550 1,250,506
2,800 Pennsylvania Higher Educational Facilities
Authority, Health Services Revenue, University
of Pennsylvania, (Series A) ................... RB Aa/AA 01/01/06 6.000 2,953,188
5,000 Pennsylvania Intergovernmental Coop Authority
Special Tax Revenue, (Refunding), FGIC
Insured ....................................... RB Aaa/AAA 06/15/01 6.000 5,262,450
1,500 Pennsylvania, (2nd Series 1991A, due 11/01/04),
MBIA Insured .................................. GO Aaa/AAA 11/01/01(b) 6.500 1,635,885
1,000 Pennsylvania, Custodial Receipt Certificates,
(Refunding and Projects, 1st Series A), AMBAC
Insured ....................................... GO Aaa/AAA 01/01/01 6.600 1,075,540
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
27
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S
AMOUNT SECURITY S&P MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE (UNAUDITED) DATE RATE VALUE
- -------------- ------------------------------------------------- ------- --------------- ---------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
PENNSYLVANIA (CONTINUED)
$ 970 Pennsylvania, Higher Education Assistance Agency,
Student Loan, (Refunding, Series 1985A), FGIC
Insured ....................................... RB Aaa/AAA 12/01/00 6.800% $ 1,037,580
1,310 Pennsylvania, Higher Education Facilities
Authority College, (Refunding, Series A) ...... RB Aa/AA 09/01/02 6.500 1,424,953
------------
TOTAL PENNSYLVANIA .......................... 14,640,102
------------
PUERTO RICO (0.9%)
2,000 Puerto Rico Commonwealth Aqueduct & Sewer
Authority, (Refunding) ........................ RB Baa1/A 07/01/98 4.400 2,000,940
2,000 Puerto Rico Commonwealth Highway & Transportation
Authority, Highway Revenue, (Refunding, Series
Z), MBIA Insured .............................. RB Aaa/AAA 07/01/05 6.250 2,190,100
------------
TOTAL PUERTO RICO ........................... 4,191,040
------------
RHODE ISLAND (2.3%)
2,000 Rhode Island, (Prerefunded, Series 1990B, due
10/15/01) ..................................... GO A1/AA- 10/15/99(b) 6.700 2,159,660
3,785 Rhode Island, (Series 1991B) .................... GO A1/AA- 05/15/00 6.000 3,945,143
5,000 Rhode Island, Public Buildings Authority, Public
Projects, (Refunding, Series A), AMBAC
Insured ....................................... RB Aaa/AAA 02/01/00 4.700 4,999,800
------------
TOTAL RHODE ISLAND .......................... 11,104,603
------------
SOUTH CAROLINA (0.2%)
1,000 Piedmont Municipal Power Agency, (Escrowed to
Maturity), MBIA Insured ....................... RB Aaa/AAA 01/01/08 6.200 1,074,990
------------
TENNESSEE (0.4%)
2,000 Chattanooga, Industrial Development Board, (IDR,
Gerber/Buster Brown Manufacturing, Inc., due
11/01/05) ..................................... RB A1/NR 11/01/96(b) 4.000 2,000,720
------------
TEXAS (6.8%)
1,500 Addison, (Refunding, Series 1991, due 09/01/00),
FGIC Insured .................................. GO Aaa/AAA 09/01/98(b) 6.250 1,543,365
1,000 Arlington, Permanent Improvement School Fund
Guarantee, (Series 1989, due 08/01/00), AMBAC
Insured ....................................... GO Aaa/AAA 08/01/99(b) 6.850 1,061,890
1,050 Austin, Independent School District, (Refunding,
Series 1991), PSFG Insured .................... GO Aaa/AAA 08/01/99 6.200 1,100,033
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
28
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S
AMOUNT SECURITY S&P MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE (UNAUDITED) DATE RATE VALUE
- -------------- ------------------------------------------------- ------- --------------- ---------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
TEXAS (CONTINUED)
$ 1,500 Austin, Utilities System, (Escrowed to Maturity,
Series 6, due 10/01/01) ....................... RB Aaa/AAA 10/01/96(b) 6.500% $ 1,621,515
335 Austin, Water Sewer & Electric, (Refunding,
Escrowed to Maturity) ......................... RB A/A- 11/15/97 13.500 371,401
25 Conroe, Independent School District, (Partially
Prerefunded, Series 1989, due 02/01/01), MBIA
Insured ....................................... GO Aaa/AAA 02/01/99(b) 7.100 26,338
975 Conroe, Independent School District,
(Prerefunded, Series 1989, due 02/01/01), MBIA
Insured ....................................... GO Aaa/AAA 02/01/99(b) 7.100 1,035,899
1,265 Conroe, Independent School District, Lot A, PSFG
Insured ....................................... GO Aaa/AAA 02/01/03 6.500 1,378,901
2,260 Corpus Christi, Independent School District,
(Refunding), PSFG Insured ..................... GO Aaa/AAA 08/15/05 6.000 2,408,098
1,305 Dallas County, Flood Control District #1,
(Prerefunded, due 04/01/10) ................... GO Aaa/NR 04/01/08(b) 9.250 1,738,169
1,650 El Paso, Independent School District,
(Prerefunded, Series 1991, due 07/01/03), PSFG
Insured ....................................... GO Aaa/AAA 07/01/01(b) 6.550 1,780,994
3,805 Fort Worth, Independent School District,
(Refunding, Series 1987) ...................... GO Aa/AA 02/15/98 6.000 3,899,212
1,700 Harris County, Road Improvement Authority,
(Prerefunded, Series 1989, due 11/01/03), MBIA
Insured ....................................... GO Aaa/AAA 11/01/99(b) 7.000 1,827,007
3,805 Lewisville, Independent School District,
(Refunding), PSFG Insured ..................... GO Aaa/NR 08/15/03 6.000 4,053,809
2,000 Plano, Independent School District, (Prerefunded,
Series 1991B, due 02/15/04), FGIC Insured ..... GO Aaa/AAA 02/15/01(b) 6.550 2,150,540
750 Texas A & M University, (Prerefunded, Series
1989, due 07/01/99) ........................... RB Aaa/AAA 07/01/97(b) 6.600 780,953
700 Texas A & M University, (Refunding, Series 1989,
due 07/01/98) ................................. RB Aaa/AAA 07/01/97(b) 6.500 727,391
2,000 Texas, Public Finance Authority, (Prerefunded,
Series 1988A, due 10/01/02) ................... GO NR/AA 10/01/00(b) 6.300 2,128,300
1,000 Texas, Public Finance Authority, (Prerefunded,
Series 1991A, due 10/01/05) ................... GO NR/AA 10/01/00(b) 6.500 1,071,530
2,500 University of Texas, Permanent University Fund,
(Refunding, Series 1991) ...................... RB Aaa/AAA 07/01/01 6.300 2,676,625
------------
TOTAL TEXAS ................................. 33,381,970
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
29
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S
AMOUNT SECURITY S&P MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE (UNAUDITED) DATE RATE VALUE
- -------------- ------------------------------------------------- ------- --------------- ---------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
UTAH (3.8%)
$ 1,625 Intermountain Power Agency, (Refunding, Series
B), MBIA Insured .............................. RB Aaa/AAA 07/01/09 6.500% $ 1,779,343
5,130 Intermountain Power Agency, (Refunding, Series
C), MBIA Insured .............................. RB Aaa/AAA 07/01/00 6.000 5,379,575
4,155 Intermountain Power Agency, (Refunding, Series
C), MBIA Insured .............................. RB Aaa/AAA 07/01/01 6.000 4,385,935
6,645 Intermountain Power Agency, (Refunding, Series
C), MBIA Insured .............................. RB Aaa/AAA 07/01/02 6.000 7,046,159
------------
TOTAL UTAH .................................. 18,591,012
------------
VIRGINIA (1.5%)
5,000 Virginia Public School Authority, (Refunding,
Series 1991C) ................................. RB Aa/AA 01/01/02 6.000 5,283,950
2,000 Virginia Public School Authority, (Series A, due
08/01/04) ..................................... RB Aa/AA 08/01/01(b) 6.500 2,175,320
------------
TOTAL VIRGINIA .............................. 7,459,270
------------
WASHINGTON (6.5%)
1,555 King & Snohomish Counties, School District #417,
(due 12/01/02), FGIC Insured .................. GO Aaa/AAA 12/01/00(b) 6.600 1,657,428
6,355 King County, (Refunding, Series B) .............. GO Aa1/AA+ 01/01/01 6.700 6,861,303
1,000 Pierce County, School District #320, Sumner
Washington, Custodial Receipt Certificates,
(Series 1991, due 12/01/02), MBIA Insured ..... GO Aaa/AAA 12/01/01(b) 6.600 1,081,930
2,955 Seattle, Municipal Sewer Revenue, (Prerefunded,
Series T, due 01/01/31) ....................... RB Aaa/AA- 01/01/00(b) 6.875 3,211,169
1,250 Snohomish County, School District #2, Everett,
Custodial Receipt Certificates, (Refunding,
Series A, due 12/01/02), MBIA Insured ......... GO Aaa/AAA 06/01/01(b) 6.700 1,343,150
1,000 Washington, (Prerefunded, Series 1990B, due
08/01/02) ..................................... GO Aa/AA 08/01/00(b) 6.750 1,074,410
3,000 Washington, (Refunding, Series 1995C, AT-8 and
R-95 B) ....................................... GO Aa/AA 07/01/02 5.750 3,144,900
1,750 Washington, (Refunding, Series R-92-A, due
09/01/02) ..................................... GO Aa/AA 09/01/01(b) 6.300 1,879,325
2,000 Washington, Public Power Supply System, Nuclear
Project #2, (Refunding, Series 1990A) ......... RB Aa1/AA- 07/01/06 7.250 2,218,800
1,500 Washington, Public Power Supply System, Nuclear
Project #2, (Refunding, Series 1990C, due
07/01/02) ..................................... RB Aa1/AA- 01/01/01(b) 7.500 1,644,285
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
30
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S
AMOUNT SECURITY S&P MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE (UNAUDITED) DATE RATE VALUE
- -------------- ------------------------------------------------- ------- --------------- ---------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
WASHINGTON (CONTINUED)
$ 5,265 Washington, Public Power Supply System, Nuclear
Project #2, (Refunding, Series A) ............. RB Aa1/AA- 07/01/01 6.300% $ 5,534,621
2,000 Washington, Public Power Supply System, Nuclear
Project #2, (Refunding, Series C, due
07/01/01), FGIC Insured ....................... RB Aaa/AAA 01/01/01(b) 7.000 2,173,340
------------
TOTAL WASHINGTON ............................ 31,824,661
------------
WEST VIRGINIA (0.2%)
1,000 Berkeley County, Board of Education, (Escrowed to
Maturity, Series 1988), MBIA Insured .......... GO Aaa/AAA 04/01/01 7.300 1,107,350
------------
WISCONSIN (3.2%)
1,500 Racine, Unified School District, (due 04/01/01),
AMBAC Insured ................................. GO Aaa/AAA 04/01/99(b) 6.500 1,564,575
4,000 Wisconsin, (Refunding) .......................... GO Aa/AA 05/01/03 6.000 4,259,160
5,000 Wisconsin, (Series A) ........................... GO Aa/AA 05/01/99 5.750 5,167,900
5,000 Wisconsin, Transportation, (Refunding, Series
A) ............................................ RB A1/AA- 07/01/06 4.600 4,715,000
------------
TOTAL WISCONSIN ............................. 15,706,635
------------
WYOMING (1.2%)
3,600 Platte County, Pollution Control, Basin Electric
Power Cooperative, (Refunding) ................ RB A2/A 01/01/06 4.950 3,603,744
2,115 Platte County, Pollution Control, Basin Electric
Power Cooperative, (Refunding) ................ RB A2/A 01/01/07 5.050 2,134,373
------------
TOTAL WYOMING ............................... 5,738,117
------------
TOTAL LONG TERM INVESTMENTS (COST
$459,167,698) ............................. 472,461,714
------------
SHORT-TERM INVESTMENTS (3.1%)
CALIFORNIA (2.6%)
12,000 California, (Revenue Anticipation Notes, Series
A) ............................................ RAN MIGI/Sp1+ 06/30/97(b) 4.500 12,065,760
600 Los Angeles, (California Regional Airports
Improvement Corp., Los Angeles International
Airport, Series 1985, due 12/01/25), LOC
Societe Generale .............................. VRDN NR/A-1+ 09/03/96(a) 3.700 600,000
------------
12,665,760
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
31
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S
AMOUNT SECURITY S&P MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE (UNAUDITED) DATE RATE VALUE
- -------------- ------------------------------------------------- ------- --------------- ---------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
COLORADO (0.2%)
$ 800 Moffat County, (Pollution Control Revenue,
Pacificorp Projects, due 05/01/13), AMBAC
Insured ....................................... VRDN VMIGI/A-1 09/03/96(a) 3.850% $ 800,000
------------
NEW YORK (0.3%)
500 New York City Municipal Water Finance Authority,
(Water and Sewer Systems, Series 1995A, due
06/15/25), FGIC Insured ....................... VRDN VMIGI/A-1+ 09/03/96(a) 4.000 500,000
1,100 New York State, Energy Research & Development
Authority, (Niagara Mohawk Power Corp., Series
1985A, due 07/01/15), LOC Toronto Dominion
Bank .......................................... VRDN NR/A-1+ 09/03/96(a) 3.950 1,100,000
------------
1,600,000
------------
TOTAL SHORT-TERM INVESTMENTS (COST
$15,050,603) .............................. 15,065,760
------------
TOTAL INVESTMENTS (COST $474,218,301) (99.2%) ................................................. 487,527,474
OTHER ASSETS IN EXCESS OF LIABILITIES (0.8%) .................................................. 3,856,485
------------
NET ASSETS (100.0%) ........................................................................... $491,383,959
------------
------------
</TABLE>
- ------------------------------
Note: Based on the cost of investments of $474,218,301 for federal income tax
purposes at August 31, 1996, the aggregate gross unrealized appreciation and
depreciation was $14,999,285 and $1,690,112, respectively, resulting in net
unrealized appreciation of investments of $13,309,173.
(a) Variable Rate Demand Note tender dates and/or interest rates are reset at
specified intervals which coincide with their tender feature. The actual
maturity date is indicated in the security description.
(b) The date listed under the heading maturity date represents an optional
tender date. The actual maturity date is indicated in the security
description.
AMBAC - Ambac Indemnity Corp., FHA - Federal Housing Authority, FGIC -
Financial Guaranty Insurance Company, GO - General Obligation, IDR -
Industrial Development Revenue, LOC - Letter of Credit, MBIA - Municipal Bond
Investors Assurance Corp., PCR - Pollution Control Revenue, PP - Private
Placement, PSFG - Permanent School Fund Guarantee, RAN - Revenue Anticipation
Note, RB - Revenue Bond, SO - Special Obligation, VRDN - Variable Rate Demand
Note.
Crossover Refunded - Bonds for which the issuer of the bond invests the
proceeds from a susequent bond issue in cash and/or securities which have been
deposited.
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 susequent 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.
The Accompanying Notes are an Integral Part of the Financial Statements.
32
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $474,218,301 ) $487,527,474
Cash 15,654
Interest Receivable 5,890,338
Prepaid Expenses and Other Assets 1,411
------------
Total Assets 493,434,877
------------
LIABILITIES
Payable for Investments Purchased 1,802,863
Advisory Fee Payable 124,357
Custody Fee Payable 38,866
Administrative Services Fee Payable 13,585
Administration Fee Payable 5,893
Fund Services Fee Payable 909
Accrued Trustees' Fees and Expenses 784
Accrued Expenses 63,661
------------
Total Liabilities 2,050,918
------------
NET ASSETS
Applicable to Investors' Beneficial Interests $491,383,959
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
33
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED AUGUST 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest Income $23,902,214
EXPENSES
Advisory Fee $1,354,145
Custodian Fees and Expenses 126,668
Administrative Services Fee 80,281
Professional Fees and Expenses 50,685
Administration Fee 44,074
Fund Services Fee 24,602
Trustees' Fees and Expenses 10,586
Printing Expenses 8,589
Insurance Expense 2,377
Registration Fees 860
Miscellaneous 1,500
---------
Total Expenses 1,704,367
-----------
NET INVESTMENT INCOME 22,197,847
NET REALIZED GAIN ON INVESTMENTS 605,789
NET CHANGE IN UNREALIZED APPRECIATION OF
INVESTMENTS (4,888,459)
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $17,915,177
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
34
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FISCAL FOR THE FISCAL
YEAR ENDED YEAR ENDED
AUGUST 31, AUGUST 31,
1996 1995
-------------- --------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 22,197,847 $ 20,242,631
Net Realized Gain on Investments 605,789 377,206
Net Change in Unrealized Appreciation of
Investments (4,888,459) 9,384,271
-------------- --------------
Net Increase in Net Assets Resulting from
Operations 17,915,177 30,004,108
-------------- --------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 224,578,237 221,887,625
Withdrawals (163,747,318) (248,866,727)
-------------- --------------
Net Increase (Decrease) from Investors'
Transactions 60,830,919 (26,979,102)
-------------- --------------
Total Increase in Net Assets 78,746,096 3,025,006
NET ASSETS
Beginning of Fiscal Year 412,637,863 409,612,857
-------------- --------------
End of Fiscal Year $ 491,383,959 $ 412,637,863
-------------- --------------
-------------- --------------
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE FISCAL YEAR JULY 12, 1993
ENDED AUGUST 31, (COMMENCEMENT OF
------------------- OPERATIONS) TO
1996 1995 1994 AUGUST 31, 1993
----- ----- ----- ----------------
<S> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Expenses 0.38% 0.42% 0.41% 0.40%(a)
Net Investment Income 4.92% 5.15% 4.68% 4.58%(a)
Decrease Reflected in Expense Ratio due to
Expense Reimbursement -- -- -- 0.01%(a)
PORTFOLIO TURNOVER 25% 47% 33% 43%(b)+
</TABLE>
- ------------------------
(a)Annualized.
(b)Not annualized.
+ Portfolio's turnover is for the twelve month period ended August 31, 1993, and
includes the portfolio activity of the Portfolio's predecessor entity, The JPM
Pierpont Tax Exempt Bond Fund, for the period September 1, 1992 through July
11, 1993.
The Accompanying Notes are an Integral Part of the Financial Statements.
35
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1996
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Tax Exempt Bond 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. 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 JPM Pierpont Tax Exempt Bond Fund, (formerly The Pierpont Tax Exempt
Bond Fund), in exchange for a beneficial interest in the Portfolio. The
Portfolio's investment objective is to provide a high level of current income
exempt from federal income tax consistent with moderate risk of capital and
maintenance of liquidity. The Declaration of Trust permits the Trustees to issue
an unlimited number of beneficial interests in the Portfolio.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual amounts could differ from
those estimates. The following is a summary of the significant accounting
policies of the Portfolio:
a)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 services, 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 intends to be treated as a partnership for federal income
tax purposes. As such, each investor in the Portfolio will be taxed on its
share of the Portfolio's ordinary income and capital gains. It is intended
that the Portfolio's assets will be managed in such a way that an investor
in the Portfolio will be able to satisfy the requirements of Subchapter M
of the Internal Revenue Code.
36
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AUGUST 31, 1996
- --------------------------------------------------------------------------------
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 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, 1996, such
fees amounted to $1,354,145.
b)The Portfolio had retained Signature Broker-Dealer Services, Inc.
("Signature") to serve as administrator and exclusive placement agent.
Under an Administration Agreement, Signature provided administrative
services necessary for the operations of the Portfolio, furnished office
space and facilities required for conducting the business of the Portfolio
and paid the compensation of the Portfolio's officers affiliated with
Signature. Until December 28, 1995, the agreement provided for a fee to be
paid to Signature at an annual rate determined by the following schedule:
0.01% of the first $1 billion of the aggregate average daily net assets of
the Portfolio and the other portfolios subject to the agreement, 0.008% of
the next $2 billion of such net assets, 0.006% of the next $2 billion of
such net assets, and 0.004% of such net assets in excess of $5 billion.
The daily equivalent of the fee rate was applied each day to the net
assets of the Portfolio. For the period from September 1, 1995 through
December 28, 1995, Signature's fee for these services amounted to $8,718.
Effective December 29, 1995, the Administration Agreement was amended such
that the fee charged was equal to the Portfolio's proportionate share of a
complex-wide fee based on the following annual schedule: 0.03% on the
first $7 billion of the aggregate average daily net assets of the
Portfolio and the other portfolios (the "Master Portfolios") in which The
JPM Pierpont Funds, The JPM Institutional Funds or The JPM Advisor Funds
invest and 0.01% on the aggregate average daily net assets of the Master
Portfolios in excess of $7 billion. The portion of this charge paid by the
Portfolio was determined by the proportionate share its net assets bore to
the total net assets of the The JPM Pierpont Funds, The JPM Institutional
Funds, The JPM Advisor Funds and the Master Portfolios. For the period
from December 29, 1995 through July 31, 1996, such fees amounted to
$34,436. The Administration Agreement with Signature was terminated July
31, 1996.
Effective August 1, 1996, certain administrative functions formerly
provided by Signature are provided by Funds Distributor, Inc. ("FDI"), a
registered broker-dealer, and by Morgan. FDI also serves as the
Portfolio's exclusive placement agent. Under a Co-Administration Agreement
between FDI and the Portfolio, FDI's fees are to be paid by the Portfolio
(see Note 2c). For the period from August 1, 1996 through August 31, 1996,
the fee for these services amounted to $920.
c)Until August 31, 1995, the Portfolio had a Financial and Fund Accounting
Services Agreement with Morgan which provided that Morgan would receive a
fee, based on the percentage described below, for overseeing certain
aspects of the administration and operation of the Portfolio and that was
also designed to provide an expense limit for certain expenses of the
Portfolio. This fee was calculated exclusive of the advisory fee, custody
expenses, fund services fee and brokerage costs at 0.10% of the
Portfolio's average daily net assets up to and including $200 million,
0.05% of the next $200 million of average daily net assets, and 0.03% on
any excess over $400 million. From September 1, 1995 until
37
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AUGUST 31, 1996
- --------------------------------------------------------------------------------
December 28, 1995, an interim agreement between the Portfolio and Morgan
provided for the continuation of the oversight functions that were
outlined under the prior agreement and that Morgan should bear all of its
expenses incurred in connection with these services.
Effective December 29, 1995, the Portfolio entered into an Administrative
Services Agreement (the "Services Agreement") with Morgan under which
Morgan was responsible for overseeing certain aspects of the
administration and operation of the Portfolio. Under the Services
Agreement, the Portfolio had agreed to pay Morgan a fee equal to its
proportionate share of an annual complex-wide charge. Until July 31, 1996,
this charge was calculated daily based on the aggregate net assets of the
Master Portfolios in accordance with the following annual schedule: 0.06%
on the first $7 billion of the Master Portfolios' aggregate average daily
net assets and 0.03% of the Master Portfolios' aggregate average daily net
assets in excess of $7 billion. The portion of this charge paid by the
Portfolio was determined by the proportionate share its net assets bore to
the net assets of the Master Portfolios and investors in the Master
Portfolios for which Morgan provided similar services. For the period from
December 29, 1995 through July 31, 1996, the fee for these services
amounted to $66,696.
Effective August 1, 1996, the Services Agreement was amended such that the
aggregate complex-wide fees to be paid by the Portfolio under both the
amended Services Agreement and the Co-Administration Agreement (see Note
2b) is calculated daily based on the aggregate net assets of the Master
Portfolios in accordance with the following annual schedule: 0.09% on the
first $7 billion of the Master Portfolios' aggregate average daily net
assets and 0.04% of the Master Portfolio's aggregate average daily net
assets in excess of $7 billion. For the period from August 1, 1996 through
August 31, 1996, the fee for these services amounted to $13,585.
d)The Portfolio has a Fund Services Agreement with Pierpont Group, Inc.
("Group") to assist the Trustees in exercising their overall supervisory
responsibilities for the Portfolio's affairs. The Trustees of the
Portfolio represent all the existing shareholders of Group. The
Portfolio's allocated portion of Group's costs in performing its services
amounted to $24,602 for the fiscal year ended August 31, 1996.
e)An aggregate annual fee of $65,000 is paid to each Trustee for serving as
a Trustee of The JPM Pierpont Funds, The JPM Institutional Funds and the
Master Portfolios. The Trustees' Fees and Expenses shown in the financial
statements represents the Portfolio's allocated portion of the total fees
and expenses. The Portfolio's Chairman and Chief Executive Officer also
serves as Chairman of Group and received compensation and employee
benefits from Group in his role as Group's Chairman. The allocated portion
of such compensation and benefits included in the Fund Services Fee shown
in the financial statements was $3,200.
3. INVESTMENT TRANSACTIONS
Investments transactions (excluding short-term investments) for the fiscal year
ended August 31, 1996 were as follows:
COST OF PROCEEDS
PURCHASES FROM SALES
------------ ------------
$194,873,159 $108,569,465
38
<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, 1996, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended, and its supplementary data for each of the three years in the period
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, 1996 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
PRICE WATERHOUSE LLP
New York, New York
October 16, 1996
39
<PAGE>
JPM PIERPONT MONEY MARKET FUND
JPM PIERPONT TAX EXEMPT MONEY MARKET FUND
JPM PIERPONT TREASURY MONEY MARKET FUND
JPM PIERPONT SHORT TERM BOND FUND
JPM PIERPONT BOND FUND
JPM PIERPONT TAX EXEMPT BOND FUND
JPM PIERPONT NEW YORK TOTAL RETURN BOND FUND
JPM PIERPONT DIVERSIFIED FUND
JPM PIERPONT EQUITY FUND
JPM PIERPONT CAPITAL APPRECIATION FUND
JPM PIERPONT INTERNATIONAL EQUITY FUND
JPM PIERPONT EMERGING MARKETS EQUITY FUND
JPM PIERPONT EUROPEAN EQUITY FUND
JPM PIERPONT JAPAN EQUITY FUND
JPM PIERPONT ASIA GROWTH FUND
FOR MORE INFORMATION ON HOW THE JPM PIERPONT FAMILY OF FUNDS CAN HELP YOU PLAN
FOR YOUR FUTURE, CALL J.P. MORGAN FUNDS SERVICES AT (800) 521-5411.
THE JPM PIERPONT TAX EXEMPT BOND FUND
ANNUAL REPORT
AUGUST 31, 1996
