<PAGE>
LETTER TO THE SHAREHOLDERS OF THE J.P. MORGAN TAX EXEMPT BOND FUND
March 1, 2000
Dear Shareholder:
The J.P. Morgan Tax Exempt Bond Fund declined 0.29% over the six months ended
January 31, 2000, as interest rates rose, eroding net asset values somewhat. The
fund outperformed its competition, which fell 1.30% over the same period, as
measured by the Lipper Intermediate Municipal Debt Funds Average, but
underperformed its benchmark, the Lehman Brothers 1-16 year Municipal Bond
Index, which returned -0.17%. Higher interest rates also mean that the fund's
30-day SEC yield increased to 4.70% as of January 31, which is a tax equivalent
yield of 7.78% at a 39.6% federal income tax rate.
The fund's net asset value as of January 31, 2000 was $11.37, down from $11.77
on July 31, 1999, after payments over the six-month period of dividends of
approximately $0.26 per share, a long-term capital gain of almost $0.11 a share,
and a short-term capital gain of less than $0.01 per share. During the period,
the fund's net assets declined from approximately $431.7 million to $385.4
million. In addition, the portfolio's net assets declined from approximately
$821.9 million to $782.4 million.
The report that follows includes an interview with Benjamin S. Thompson and
Robert Meiselas, who manage the fund. This interview is designed to reflect what
happened during the months past, as well as provide an outlook for the future.
As chairman and president of Asset Management Services, we thank you for
investing with J.P. Morgan. Should you have any comments or questions, please
telephone your Morgan representative or J.P. Morgan Funds Services at
800-521-5411.
Sincerely yours,
/s/ Ramon de Oliveira /s/ Keith M. Schappert
Ramon de Oliveira Keith M. Schappert
Chairman of Asset Management Services President of Asset Management Services
J.P. Morgan & Co. Incorporated J.P. Morgan & Co. Incorporated
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
LETTER TO THE SHAREHOLDERS...........1 GLOSSARY OF TERMS....................5
FUND PERFORMANCE.....................2 FUND FACTS AND HIGHLIGHTS............6
PORTFOLIO MANAGER Q&A................3 FINANCIAL STATEMENTS.................8
- --------------------------------------------------------------------------------
1
<PAGE>
FUND PERFORMANCE
EXAMINING PERFORMANCE
One way to look at performance is to review a fund's average annual total
return. This figure takes the fund's actual (or cumulative) return and shows
what would have happened if the fund had achieved that return by performing at a
constant rate each year. Average annual total returns represent the average
yearly change of a fund's value over various time periods, typically one, five,
or ten 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.
<TABLE>
<CAPTION>
PERFORMANCE TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS
----------------- ----------------------------------------
THREE SIX ONE THREE FIVE TEN
AS OF JANUARY 31, 2000 MONTHS MONTHS YEAR YEARS YEARS YEARS
- ---------------------------------------------------------------------- ----------------------------------------
<S> <C> <C> <C> <C> <C> <C>
J.P. Morgan Tax Exempt Bond Fund 0.17% -0.29% -2.41% 3.76% 5.25% 6.00%
Lehman Brothers 1-16 year
Municipal Bond Index 0.29% -0.17% -1.48% 4.47% 6.06% N/A
Lehman Quality Intermediate
Muni Bond Index 0.23% 0.11% -1.07% 4.32% 5.82% 6.60%
Lipper Intermed. Muni Debt Funds Avg. -0.11% -1.30% -3.19% 3.41% 5.02% 5.91%
AS OF DECEMBER 31, 1999
- ---------------------------------------------------------------------- ----------------------------------------
J.P. Morgan Tax Exempt Bond Fund -0.09% 0.38% -0.88% 3.94% 5.69% 6.00%
Lehman Brothers 1-16 year
Municipal Bond Index -0.04% 0.54% -0.06% 4.66% 6.54% N/A
Lehman Quality Intermediate
Muni Bond Index 0.02 0.86% 0.30% 4.50% 6.25% 6.60%
Lipper Intermed. Muni Debt Funds Avg. -0.38% -0.38% -1.65% 3.66% 5.55% 5.91%
</TABLE>
THE FUND'S CURRENT BENCHMARK IS THE LEHMAN BROTHERS 1-16 YEAR MUNICIPAL BOND
INDEX. SINCE THIS INDEX DID NOT EXIST PRIOR TO JULY 31, 1993, THE TABLE ALSO
INCLUDES THE PERFORMANCE DATA FOR THE LEHMAN QUALITY INTERMEDIATE MUNICIPAL BOND
INDEX, THE FUND'S BENCHMARK UNTIL MAY 1, 1997. BOTH ARE UNMANAGED INDICES THAT
MEASURE MUNICIPAL BOND MARKET PERFORMANCE. THEY DO NOT INCLUDE FEES OR EXPENSES
AND ARE NOT AVAILABLE FOR ACTUAL INVESTMENT. LIPPER ANALYTICAL SERVICES, INC. IS
A LEADING SOURCE FOR MUTUAL FUND DATA.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. RETURNS ARE NET OF FEES AND
ASSUME THE REINVESTMENT OF FUND DISTRIBUTIONS.
2
<PAGE>
PORTFOLIO MANAGER Q&A
[PHOTO]
Benjamin S. Thompson and Robert Meiselas are both members of the portfolio
management team responsible for managing the portfolio in which the fund
invests. They sat down on February 22, 2000 to discuss the fund's performance
over the six months ended January 31, 2000. Below are highlights of that
discussion, which represent the views of both Ben and Bob as of that date.
[PHOTO]
BENJAMIN S. THOMPSON, vice president, is senior fixed income portfolio manager
and head of J.P. Morgan's municipal bond strategies. His responsibilities
include coordination of strategy and research, portfolio structuring and trade
execution for U.S. tax-aware fixed income accounts. Prior to joining Morgan in
1999, Ben was a senior fixed income portfolio manager at Goldman Sachs Asset
Management. Earlier, he was in the structured finance group of the Chase
Manhattan Bank. He holds a B.A. in economics from Colorado College.
[PHOTO]
ROBERT MEISELAS, vice president, is a portfolio manager with the U.S. Fixed
Income Group responsible for managing municipal bonds, including tax exempt
private placements. Bob is a CPA and joined Morgan's financial group in 1982,
after spending 10 years at Coopers & Lybrand. He also spent five years in J.P.
Morgan's Private Banking Investment Management Group, and moved to J.P. Morgan
Investment Management in 1997. Bob holds a B.S. in accounting from St. John's
University and a M.S. in taxation from Long Island University.
THE LAST SIX MONTHS HAVE BEEN DIFFICULT FOR BOND INVESTORS. WHAT HAPPENED?
Municipal bond yields rose dramatically along with interest rates in general in
the United States during the six months ended January 31. For example, 30-year
municipal yields (AAA general obligation debt) rose by 62 basis points during
the reporting period. Yields in the 10-year sector, where this fund is focused,
rose by a somewhat smaller margin, 48 basis points. So fortunately, the 10-year
sector was less volatile and outperformed longer-term holdings, although returns
were still negative.
DESPITE THIS TURBULENCE, THE FUND DID PERFORM BETTER THAN ITS PEERS. HOW DID YOU
DO IT?
J.P. Morgan Investment Management's overall defensive posture benefited
shareholders. We held the portfolio's duration shorter than that of most funds
within the Lipper Intermediate Municipal Debt peer group, and that helped
performance. Morgan's core fixed income strategy (primarily focusing on
investments in the short and intermediate parts of the yield curve) also
contributed to greater price insulation in a bearish environment.
3
<PAGE>
IN WHAT WAY?
Our conservative yield curve strategy focused primarily on short and
intermediate maturities (between 3 and 15 years as opposed to 20+ years). For
example, over the six months ended January 31, 5- and 10-year municipal yields
rose approximately 60 and 48 basis points, respectively, as compared to 78 and
62 bps for 20- and 30-year maturities. Therefore, fund investors clearly
benefited from underexposure to the longer maturities where significant price
volatility and depreciation occurred.
DID COUPON STRATEGY HELP?
The fund's return was also enhanced by a conservative coupon strategy focusing
largely on higher coupon premium bonds rather than bonds priced at or near the
coupon or at a significant discount. These premium coupons insulated the fund's
price as interest rates rose rapidly.
ANYTHING ELSE?
Other factors that helped performance include opportunistic relative value
trading, credit-specific analysis, and taking advantage of various
state-specific supply/demand imbalances.
WHAT IS YOUR MARKET OUTLOOK?
After having been bearish for the past year or so, we are now beginning to adopt
a less negative outlook on interest rates. We also feel that the bond market
currently has priced in at least one more tightening by the Federal Reserve in
March and perhaps one more soon after that. In the municipal bond market, a
decrease in new issue supply could provide price stability and boost relative
asset class performance. At substantially higher rates we feel that many issuers
would be reluctant to take on additional debt and most potential refunding
candidates would be out-of-the-money. The dramatic treasury yield curve
inversion also should have a flattening "pull" on the municipal market over the
next several months. Credit quality spreads are relatively tight within the
investment grade sector but remain quite wide in higher-yielding sectors that
still carry a significant degree of event risk such as health care.
HOW IS THE FUND POSITIONED?
We intend to incorporate more of a barbell position on the yield curve to take
advantage of the flattening that we anticipate. We intend to upgrade credit
quality within the investment grade sector while continuing to perform rigorous
credit research on isolated situations in the more esoteric and seemingly better
yielding sectors such as health care and private placements.
4
<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 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 line graph showing interest rates at a point in time, from the
shortest maturity to the longest available. The resulting curve shows if
short-term interest rates are higher or lower than long-term rates.
Typically interest rates rise with increasing time to maturity.
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.
5
<PAGE>
FUND FACTS
INVESTMENT OBJECTIVE
J.P. Morgan 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.
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.
- --------------------------------------------------------------------------------
COMMENCEMENT OF OPERATIONS
10/3/84
- --------------------------------------------------------------------------------
Fund net assets as of 1/31/00
$385,385,832
- --------------------------------------------------------------------------------
PORTFOLIO NET ASSETS AS OF 1/31/00
$782,424,946
- --------------------------------------------------------------------------------
DIVIDEND PAYABLE DATES
MONTHLY
- --------------------------------------------------------------------------------
CAPITAL GAIN PAYABLE DATES (IF APPLICABLE)
12/13/00
EXPENSE RATIO
The fund's current annualized expense ratio of 0.66% 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 JANUARY 31, 2000
PORTFOLIO ALLOCATION
(PERCENTAGE OF TOTAL INVESTMENTS)
[CHART]
REVENUE BONDS 56.7%
GENERAL OBLIGATIONS 36.8%
PRIVATE PLACEMENTS 3.9%
SHORT-TERM 2.6%
30-DAY SEC YIELD
4.70%
DURATION
5.3 years
6
<PAGE>
DISTRIBUTED BY FUNDS DISTRIBUTOR, INC. J.P. MORGAN INVESTMENT MANAGEMENT INC.
SERVES AS INVESTMENT ADVISOR. SHARES OF THE FUND ARE NOT BANK DEPOSITS AND ARE
NOT GUARANTEED BY ANY BANK, GOVERNMENT ENTITY, OR THE FDIC. RETURN AND SHARE
PRICE WILL FLUCTUATE AND REDEMPTION VALUE MAY BE MORE OR LESS THAN ORIGINAL
COST.
Opinions expressed herein are based on current market conditions and are
subject to change without notice. The fund invests in a master portfolio
(another fund with the same objective). Income may be subject to some state and
local taxes. Some income may be subject to the Federal alternative minimum tax
for certain investors. Capital gains are not exempt from taxes.
CALL J.P. MORGAN FUNDS SERVICES AT (800) 521-5411 FOR A PROSPECTUS CONTAINING
MORE COMPLETE INFORMATION ABOUT THE FUND INCLUDING MANAGEMENT FEES AND OTHER
EXPENSES. PLEASE READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
7
<PAGE>
J.P. MORGAN TAX EXEMPT BOND FUND
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment in The Tax Exempt Bond Portfolio
("Portfolio"), at value $388,063,264
Receivable for Shares of Beneficial Interest Sold 1,137,588
Prepaid Trustees' Fees 1,840
------------
Total Assets 389,202,692
------------
LIABILITIES
Payable for Shares of Beneficial Interest
Redeemed 3,272,657
Dividends Payable to Shareholders 432,678
Shareholder Servicing Fee Payable 82,143
Administrative Services Fee Payable 8,121
Administration Fee Payable 387
Fund Services Fee Payable 131
Accrued Expenses 20,743
------------
Total Liabilities 3,816,860
------------
NET ASSETS
Applicable to 33,903,337 Shares of Beneficial
Interest Outstanding
(par value $0.001, unlimited shares authorized) $385,385,832
============
Net Asset Value, Offering and Redemption Price
Per Share $11.37
-----
-----
ANALYSIS OF NET ASSETS
Paid-in Capital $384,566,203
Distributions in Excess of Net Investment Income (93,326)
Accumulated Net Realized Loss on Investment (5,195,632)
Net Unrealized Appreciation of Investment 6,108,587
------------
Net Assets $385,385,832
============
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
8
<PAGE>
J.P. MORGAN TAX EXEMPT BOND FUND
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JANUARY 31, 2000
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME ALLOCATED FROM PORTFOLIO
Allocated Interest Income $10,342,190
Allocated Portfolio Expenses (764,132)
-----------
Net Investment Income Allocated from
Portfolio 9,578,058
FUND EXPENSES
Shareholder Servicing Fee $521,943
Administrative Services Fee 52,473
Transfer Agent Fees 18,726
Professional Fees 8,191
Registration Fees 8,029
Fund Services Fee 3,537
Administration Fee 2,808
Trustees' Fees and Expenses 1,870
Miscellaneous 9,321
--------
Total Fund Expenses 626,898
-----------
NET INVESTMENT INCOME 8,951,160
NET REALIZED LOSS ON INVESTMENT ALLOCATED FROM
PORTFOLIO (5,143,122)
NET CHANGE IN UNREALIZED DEPRECIATION OF
INVESTMENT ALLOCATED FROM PORTFOLIO (5,147,710)
-----------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS $(1,339,672)
===========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
9
<PAGE>
J.P. MORGAN TAX EXEMPT BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE ELEVEN
JANUARY 31, 2000 MONTHS ENDED
(UNAUDITED) JULY 31, 1999
---------------- --------------
<S> <C> <C>
DECREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 8,951,160 $ 17,347,608
Net Realized Gain (Loss) on Investment Allocated
from Portfolio (5,143,122) 4,012,628
Net Change in Unrealized Depreciation of
Investment Allocated from Portfolio (5,147,710) (17,484,081)
--------------- ------------
Net Increase (Decrease) in Net Assets
Resulting from Operations (1,339,672) 3,876,155
--------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (8,951,160) (17,346,461)
Net Realized Gain (4,016,116) (780,645)
Distributions in Excess of Net Investment Income (210,987) --
--------------- ------------
Total Distributions to Shareholders (13,178,263) (18,127,106)
--------------- ------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Proceeds from Shares of Beneficial Interest Sold 54,375,356 152,936,932
Reinvestment of Dividends and Distributions 9,463,220 13,753,851
Cost of Shares of Beneficial Interest Redeemed (95,619,410) (159,980,035)
--------------- ------------
Net Increase (Decrease) from Transactions in
Shares of Beneficial Interest (31,780,834) 6,710,748
--------------- ------------
Total Decrease in Net Assets (46,298,769) (7,540,203)
NET ASSETS
Beginning of Period 431,684,601 439,224,804
--------------- ------------
End of Period (including undistributed net
investment income of $0 and $117,661,
respectively) $ 385,385,832 $431,684,601
=============== ============
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
10
<PAGE>
J.P. MORGAN TAX EXEMPT BOND FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share outstanding throughout each period are as follows:
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS ENDED FOR THE ELEVEN FOR THE FISCAL YEAR ENDED AUGUST 31,
JANUARY 31, 2000 MONTHS ENDED --------------------------------------------
(UNAUDITED) JULY 31, 1999 1998 1997 1996 1995
---------------- -------------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 11.77 $ 12.15 $ 11.85 $ 11.63 $ 11.73 $ 11.45
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.25 0.46 0.54 0.55 0.55 0.55
Net Realized and
Unrealized Gain
(Loss) on Investment (0.28) (0.36) 0.30 0.24 (0.08) 0.29
-------- -------- -------- -------- -------- --------
Total from Investment
Operations (0.03) 0.10 0.84 0.79 0.47 0.84
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS TO
SHAREHOLDERS FROM
Net Investment Income (0.25) (0.46) (0.54) (0.55) (0.55) (0.55)
Net Realized Gain (0.11) (0.02) (0.00)(a) (0.02) (0.02) (0.01)
Distributions in Excess
of Net Investment
Income (0.01) -- -- -- -- --
-------- -------- -------- -------- -------- --------
Total Distributions to
Shareholders (0.37) (0.48) (0.54) (0.57) (0.57) (0.56)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF
PERIOD $ 11.37 $ 11.77 $ 12.15 $ 11.85 $ 11.63 $ 11.73
======== ======== ======== ======== ======== ========
RATIOS AND SUPPLEMENTAL
DATA
Total Return (0.29)%(b) 0.83%(b) 7.21% 6.95% 4.01% 7.63%
Net Assets, End of
Period (in thousands) $385,385 $431,685 $439,225 $401,007 $369,987 $352,005
Ratios to Average Net
Assets
Net Expenses 0.66%(c) 0.68%(c) 0.64% 0.64% 0.64% 0.71%
Net Investment Income 4.28%(c) 4.21%(c) 4.44% 4.67% 4.67% 4.87%
</TABLE>
- ------------------------
(a) Less than $0.01 per share.
(b) Not Annualized.
(c) Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
11
<PAGE>
J.P. MORGAN TAX EXEMPT BOND FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
J.P. Morgan Tax Exempt Bond Fund (the "fund") is a separate series of the J.P.
Morgan Funds, a Massachusetts business trust (the "trust") which was organized
on November 4, 1992. The trust is registered under the Investment Company Act of
1940, as amended, as an open-end management investment company. The fund, prior
to its tax-free reorganization on July 11, 1993 to a series of the trust,
operated as a stand-alone mutual fund.
The fund invests all of its investable assets in The Tax Exempt Bond Portfolio
(the "portfolio"), a no-load 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 (50% at January 31,
2000). The performance of the fund is directly affected by the performance of
the portfolio. The financial statements of the portfolio, including the Schedule
of Investments, are included elsewhere in this report and should be read in
conjunction with the fund's financial statements.
The preparation of financial statements in accordance with 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 1a 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) 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.
e) The fund is treated as a separate entity for federal income tax purposes
and 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.
2. TRANSACTIONS WITH AFFILIATES
a) The trust, on behalf of the fund, has retained Funds Distributor, Inc.
("FDI"), a registered broker-dealer, to serve as co-administrator and
distributor for the fund. Under a Co-Administration Agreement between FDI
and the trust on behalf of the fund, FDI provides administrative services
12
<PAGE>
J.P. MORGAN TAX EXEMPT BOND FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
necessary for the operations of the fund, furnishes office space and
facilities required for conducting the business of the fund and pays the
compensation of the fund's officers affiliated with FDI. The fund has
agreed to pay FDI fees equal to its allocable share of an annual
complex-wide charge of $425,000 plus FDI's out-of-pocket expenses. The
amount allocable to the fund is based on the ratio of the fund's net
assets to the aggregate net assets of the trust and certain other
investment companies subject to similar agreements with FDI. For the six
months ended January 31, 2000, the fee for these services amounted to
$2,808.
b) The trust, on behalf of the fund, has an Administrative Services Agreement
(the "Services Agreement") with Morgan Guaranty Trust Company of New York
("Morgan"), under which Morgan is responsible for certain aspects of the
administration and operation of the fund. Under the Services Agreement,
the fund has agreed to pay Morgan a fee equal to its allocable share of an
annual complex-wide charge . This charge is calculated based on the
aggregate average daily net assets of the portfolio and other portfolios
in which the trust and the J.P. Morgan Institutional Funds invest (the
"master portfolios") and J.P. Morgan Series Trust in accordance with the
following annual schedule: 0.09% on the first $7 billion of their
aggregate average daily net assets and 0.04% of their aggregate average
daily net assets in excess of $7 billion less the complex-wide fees
payable to FDI. The portion of this charge payable by the fund is
determined by the proportionate share that its net assets bear to the net
assets of the trust, the master portfolios, other investors in the master
portfolios for which Morgan provides similar services, and J.P. Morgan
Series Trust. For the six months ended January 31, 2000, the fee for these
services amounted to $52,473.
c) The trust, on behalf of the fund, has a Shareholder Servicing Agreement
with Morgan to provide account administration and personal account
maintenance service to fund shareholders. The Agreement provides for the
fund to pay Morgan a fee for these services which is computed daily and
paid monthly at an annual rate of 0.25 % of the average daily net assets
of the fund. For the six months ended January 31, 2000, the fee for these
services amounted to $521,943.
Morgan, Charles Schwab & Co. ("Schwab") and the trust are parties to
separate services and operating agreements (the "Schwab Agreements")
whereby Schwab makes fund shares available to customers of investment
advisors and other financial intermediaries who are Schwab's clients. The
fund is not responsible for payments to Schwab under the Schwab
Agreements; however, in the event the services agreement with Schwab is
terminated for reasons other than a breach by Schwab and the relationship
between the trust and Morgan is terminated, the fund would be responsible
for the ongoing payments to Schwab with respect to pre-termination shares.
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
$3,537 for the six months ended January 31, 2000.
e) An aggregate annual fee of $75,000 is paid to each trustee for serving as
a trustee of the trust, the J.P. Morgan Institutional Funds, the master
portfolios and J.P. Morgan Series Trust. The Trustees' Fees and Expenses
shown in the financial statements represents the fund's allocated portion
of the total fees and
13
<PAGE>
J.P. MORGAN TAX EXEMPT BOND FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
expenses. The trust's Chairman and Chief Executive Officer also serves as
Chairman of Group and receives compensation and employee benefits from
Group in his role as Group's Chairman. The allocated portion of such
compensation and benefits included in the Fund Services Fee shown in the
financial statements was $700.
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 ELEVEN
FOR THE FISCAL MONTHS ENDED
YEAR ENDED JULY 31, 1999
JANUARY 31, 2000 (UNAUDITED)
---------------- --------------
<S> <C> <C>
Shares sold...................................... 4,698,197 12,616,673
Reinvestment of dividends and distributions...... 819,026 1,136,791
Shares redeemed.................................. (8,284,170) (13,228,589)
--------------- ------------
Net Increase (Decrease).......................... (2,766,947) 524,875
=============== ============
</TABLE>
4. CREDIT AGREEMENT
The trust, on behalf of the fund, together with other affiliated investment
companies (the "funds"), entered into a revolving line of credit agreement (the
"Agreement") on May 27, 1998, with unaffiliated lenders. Additionally, since all
of the investable assets of the fund are in the portfolio, the portfolio is
party to certain covenants of the Agreement. The Agreement expired on May 26,
1999, however, the fund as party to the Agreement has renewed the Agreement and
will continue its participation therein for an additional 364 days until May 23,
2000. The maximum borrowing under the Agreement is $150,000,000. The purpose of
the Agreement is to provide another alternative for settling large fund
shareholder redemptions. Interest on any such borrowings outstanding will
approximate market rates. The funds pay a commitment fee at an annual rate of
0.085% (0.065% prior to May 26, 1999) on the unused portion of the committed
amount. This is allocated to the funds in accordance with procedures established
by their respective trustees. There were no outstanding borrowings pursuant to
the Agreement as of January 31, 2000.
14
<PAGE>
The Tax Exempt Bond Portfolio
Semiannual Report January 31, 2000
(unaudited)
(The following pages should be read in conjunction
with The J.P. Morgan Tax Exempt Bond Fund
Semiannual Financial Statements)
15
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY MOODY'S/ MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE S&P RATINGS DATE RATE VALUE
- -------------- ------------------------------------- -------- ----------- ----------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
LONG-TERM INVESTMENTS (96.8%)
ALABAMA (0.1%)
$ 1,000 Daphne Special Care Facilities
Financing Authority, (Presbyterian
Retirement, Prerefunded, Series A,
due 08/15/18)...................... RB NR/NR 08/15/01(a) 7.300% $ 1,041,770
------------
ALASKA (0.3%)
2,000 Anchorage, (Prerefunded, due
07/01/02), MBIA Insured............ GO Aaa/AAA 07/01/01(a) 6.600 2,058,080
------------
ARIZONA (0.8%)
1,000 Maricopa County School District #11,
(Peoria Unified School Improvement,
Prerefunded, Series H, due
07/01/05), MBIA Insured............ GO Aaa/AAA 07/01/01(a) 7.000 1,034,870
1,750 Phoenix, (Refunding, Series C)....... GO Aa1/AA+ 07/01/02 6.375 1,817,200
3,315 Salt River Project, (Agricultural
Improvement & Power District,
Electric System Revenue, Refunding,
Series A).......................... RB Aa2/AA 01/01/06 6.000 3,463,015
------------
TOTAL ARIZONA.................... 6,315,085
------------
CALIFORNIA (4.5%)
6,000 California........................... GO Aa3/AA- 02/01/08 6.500 6,558,960
2,520 California Department of Water
Resources, (Central Valley Project,
Water Systems Service, Refunding,
Series J-1)........................ RB Aa2/AA 12/01/12 7.000 2,904,048
2,750 California Pollution Control
Financing Authority, (PCR, Laidlaw
Environmental, Refunding,
Series A).......................... RB NR/NR 07/01/07 6.700 2,720,795
13,675 California Statewide Community
Development Authority, (Catholic
Healthcare West)................... RB Baa1/BBB+ 07/01/09 6.000 13,237,126
1,049 Kaweah Delta Hospital District,
Tulare County, (Series E).......... PP NR/A+ 06/01/14 5.250 1,052,583
1,479 Kaweah Delta Hospital District,
Tulare County, (Series G).......... PP NR/A+ 06/01/04 6.400 1,540,260
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
16
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY MOODY'S/ MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE S&P RATINGS DATE RATE VALUE
- -------------- ------------------------------------- -------- ----------- ----------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
CALIFORNIA (CONTINUED)
$ 2,500 Los Angeles County Public Works
Financing Authority, (Lease
Revenue, Refunding, Series A), MBIA
Insured............................ RB Aaa/AAA 09/01/06 6.000% $ 2,668,625
4,200 Los Angeles County Public Works
Financing Authority, (Regional Park
and Open Space District, Refunding,
Series A).......................... RB Aa3/AA 10/01/07 5.375 4,334,148
------------
TOTAL CALIFORNIA................. 35,016,545
------------
CONNECTICUT (0.6%)
2,000 Connecticut Health & Educational
Facilities Authority, (St. Mary's
Hospital, Series D)................ RB Baa1/NR 07/01/01 5.750 2,016,300
2,815 Connecticut, (Special Tax Obligation,
Transportation Infrastructure,
Prerefunded, Series A, due
06/01/04).......................... RB NR/AAA 06/01/03(a) 6.600 2,960,057
------------
TOTAL CONNECTICUT................ 4,976,357
------------
DISTRICT OF COLUMBIA (7.4%)
220 District of Columbia, (Escrowed to
Maturity, Series A), MBIA-IBC
Insured............................ GO Aaa/AAA 06/01/07 6.000 230,184
2,600 District of Columbia, (Escrowed to
Maturity, Series B), MBIA
Insured............................ GO NR/AAA 06/01/02 6.000 2,671,786
6,795 District of Columbia, (Escrowed to
Maturity, Series C), FGIC
Insured............................ GO Aaa/AAA 12/01/03 5.250 6,888,431
10,645 District of Columbia, (Escrowed to
Maturity, Series A)................ GO Aaa/BBB 06/01/04 5.800 10,946,892
18,520 District of Columbia, (Refunding,
Series B), FSA Insured............. GO Aaa/AAA 06/01/09 5.500 18,535,557
705 District of Columbia, (Unrefunded
Balance, Refunding, Series C), FGIC
Insured............................ GO Aaa/AAA 12/01/03 5.250 711,507
2,780 District of Columbia, (Unrefunded
Balance, Series A), MBIA-IBC
Insured............................ GO Aaa/AAA 06/01/07 6.000 2,881,220
3,665 Metropolitan Airport, (General
Airport Revenue, Series A), FGIC
Insured............................ RB Aaa/AAA 10/01/10 7.250 3,787,594
1,000 Metropolitan Airport, (General
Airport Revenue, Series B), FGIC
Insured............................ RB Aaa/AAA 10/01/03 5.750 1,030,460
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
17
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY MOODY'S/ MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE S&P RATINGS DATE RATE VALUE
- -------------- ------------------------------------- -------- ----------- ----------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
DISTRICT OF COLUMBIA (CONTINUED)
$ 4,015 Metropolitan Airport, (General
Airport Revenue, Series B), FGIC
Insured............................ RB Aaa/AAA 10/01/05 6.000% $ 4,189,412
5,745 Metropolitan Airport, (General
Airport Revenue, Series B), FGIC
Insured............................ RB Aaa/AAA 10/01/06 6.000 5,990,024
------------
TOTAL DISTRICT OF COLUMBIA....... 57,863,067
------------
FLORIDA (1.6%)
5,765 Dade County School District,
(Refunding), MBIA Insured.......... GO Aaa/AAA 07/15/05 6.000 6,038,088
465 Florida State Board of Education,
(Capital Outlay, Unrefunded
Balance, Series C)................. GO Aa2/AA+ 06/01/01 7.000 470,115
2,000 Jacksonville Health Facilities
Authority, (Hospital Revenue,
Charity Obligated Group, Refunding,
Series A), MBIA Insured............ RB Aaa/AAA 08/15/06 5.500 2,042,560
2,000 Tampa, (Health System Revenue,
Catholic Health, Refunding,
Series A-1), MBIA Insured.......... RB Aaa/AAA 11/15/04 5.250 2,027,720
2,000 Volusia County School District,
(Refunding), FGIC Insured.......... GO Aaa/AAA 08/01/02 6.100 2,068,040
------------
TOTAL FLORIDA.................... 12,646,523
------------
GEORGIA (7.1%)
3,200 De Kalb County (Water & Sewer
Revenue, Refunding)................ RB Aa/AA 10/01/02 6.000 3,302,688
2,630 Fulton County School District,
(Refunding)........................ GO Aa2/AA 05/01/14 6.375 2,821,990
4,500 Georgia Municipal Electric Authority,
(Power Revenue, Crossover
Refunding, Series DD), AMBAC-TCRS
Insured............................ RB Aaa/AAA 01/01/08 7.000 4,986,270
1,250 Georgia Municipal Electric Authority,
(Power Revenue, Refunding,
Series A).......................... RB A3/A 01/01/12 6.500 1,342,937
4,000 Georgia Municipal Electric Authority,
(Power Revenue, Series A), MBIA-IBC
Insured............................ RB Aaa/AAA 01/01/12 6.500 4,286,600
4,895 Georgia, (Refunding, Series E)....... GO Aaa/AAA 07/01/03 5.500 5,010,669
5,820 Georgia, (Refunding, Series E)....... GO Aaa/AAA 02/01/05 5.000 5,830,534
6,000 Georgia, (Series B).................. GO Aaa/AAA 03/01/07 7.200 6,729,120
3,000 Georgia, (Series B).................. GO Aaa/AAA 03/01/10 6.300 3,228,000
4,470 Georgia, (Series C).................. GO Aaa/AAA 07/01/11 5.700 4,596,501
5,265 Georgia, (Series C).................. GO Aaa/AAA 09/01/10 5.750 5,448,117
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
18
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY MOODY'S/ MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE S&P RATINGS DATE RATE VALUE
- -------------- ------------------------------------- -------- ----------- ----------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
GEORGIA (CONTINUED)
$ 2,500 Gwinnett County School District,
(Refunding, Series B).............. GO Aa1/AA+ 02/01/08 6.400% $ 2,692,750
5,000 Metropolitan Atlanta Rapid Transit
Authority, (Sales Tax Revenue,
Refunding, Series P), AMBAC
Insured............................ RB Aaa/AAA 07/01/11 6.250 5,334,400
------------
TOTAL GEORGIA.................... 55,610,576
------------
HAWAII (0.5%)
2,000 Hawaii, (Series BZ).................. GO A1/A+ 10/01/12 6.000 2,078,400
510 Honolulu, City & County, (Escrowed to
Maturity, Series B)................ GO Aaa/AA- 10/01/11 5.500 514,131
1,490 Honolulu, City & County, (Unrefunded
Balance, Series B)................. GO Aa3/AA- 10/01/11 5.500 1,480,419
------------
TOTAL HAWAII..................... 4,072,950
------------
ILLINOIS (6.8%)
4,130 Chicago Board of Education, (Lease
Certificates, Refunding,
Series A), MBIA Insured............ RB Aaa/AAA 01/01/07 6.125 4,326,918
7,000 Chicago, (City Colleges Capital
Improvement), FGIC Insured......... GO Aaa/AAA 01/01/10 6.000 7,260,960
5,500 Chicago, (City Colleges Capital
Improvement), FGIC Insured......... GO Aaa/AAA 01/01/11 6.000 5,679,685
4,000 Chicago, (Equipment Notes), AMBAC
Insured............................ GO Aaa/AAA 01/01/04 5.600 4,085,520
3,000 Chicago, (Refunding, Series A-2),
AMBAC Insured...................... GO Aaa/AAA 01/01/11 6.000 3,098,010
3,280 Cook County, (Refunding, Series C),
FGIC Insured....................... GO Aaa/AAA 11/15/04 5.800 3,394,505
4,440 Hoffman Estates, Tax Increment
Revenue, (Economic Development
Project Area, Refunding), AMBAC
Insured............................ RB Aaa/AAA 11/15/04 5.500 4,544,562
3,000 Illinois Development Finance
Authority, (Industrial Development
Revenue Bonds, Riverside Health &
Fitness Center Project,
Series 1998-C)..................... PP NR/NR 08/01/28 4.900 2,802,690
3,000 Illinois Sales Tax Revenue,
(Refunding, Series Q).............. RB Aa2/AAA 06/15/09 6.000 3,102,450
4,175 Illinois Sales Tax Revenue,
(Refunding, Series Q).............. RB Aa2/AAA 06/15/12 6.000 4,260,212
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY MOODY'S/ MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE S&P RATINGS DATE RATE VALUE
- -------------- ------------------------------------- -------- ----------- ----------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
ILLINOIS (CONTINUED)
$ 180 Metropolitan Pier & Exposition
Authority, (Dedicated State Tax
Revenue, McCormick Place Expansion
Project, Escrowed to Maturity,
Series A).......................... RB NR/AAA 06/15/06 8.500% $ 212,256
940 Metropolitan Pier & Exposition
Authority, (Dedicated State Tax
Revenue, Escrowed to Maturity,
Series A).......................... RB Aaa/NR 06/15/06 8.500 1,108,448
3,300 Metropolitan Pier & Exposition
Authority, (Dedicated State Tax
Revenue, Refunding)................ RB Aa3/AA- 06/01/04 6.500 3,491,334
1,380 Metropolitan Pier & Exposition
Authority, (Dedicated State Tax
Revenue, Unrefunded Balance,
Series A).......................... RB Aa3/AA- 06/15/06 8.500 1,618,202
2,810 Regional Transportation Authority,
(Series D), FGIC Insured........... RB Aaa/AAA 06/01/07 7.750 3,216,073
1,000 University of Illinois, (Escrowed to
Maturity).......................... RB Aaa/AAA 10/01/01 6.000 1,021,910
------------
TOTAL ILLINOIS................... 53,223,735
------------
INDIANA (2.0%)
2,065 Indiana Bond Bank, (Special Program,
Refunding, Series A)............... GO NR/A+ 02/01/03 5.500 2,089,945
1,610 Indiana Bond Bank, (Special Program,
Refunding, Series A)............... GO NR/A+ 02/01/04 5.500 1,629,529
1,035 Indiana Bond Bank, (Special Program,
Refunding, Series A)............... GO NR/A+ 02/01/06 5.500 1,042,628
45 Indiana Health Facilities Financing
Authority, (Hospital Revenue,
Sisters of St. Frances Health
Services, Escrowed to Maturity,
Refunding, Series A), MBIA
Insured............................ RB Aaa/AAA 11/01/05 5.500 45,972
3,910 Indiana Health Facilities Financing
Authority, (Hospital Revenue,
Sisters of St. Frances Health
Services, Unrefunded Balance,
Series A), MBIA Insured............ RB Aaa/AAA 11/01/05 5.500 3,972,091
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY MOODY'S/ MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE S&P RATINGS DATE RATE VALUE
- -------------- ------------------------------------- -------- ----------- ----------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
INDIANA (CONTINUED)
$ 5,000 Indiana Municipal Power Agency,
(Power Supply System Revenue,
Refunding, Series B), MBIA
Insured............................ RB Aaa/AAA 01/01/07 5.750% $ 5,148,500
2,000 Indiana Municipal Power Agency,
(Power Supply System Revenue,
Refunding, Series B), MBIA
Insured............................ RB Aaa/AAA 01/01/13 6.000 2,042,500
------------
TOTAL INDIANA.................... 15,971,165
------------
KENTUCKY (0.3%)
2,150 Kentucky Turnpike Authority, (Road
Recovery Revenue, Escrowed to
Maturity).......................... RB Aaa/NR 07/01/02 7.100 2,202,245
------------
MAINE (0.6%)
4,050 Maine Municipal Bond Bank,
(Prerefunded, Series E, due
11/01/12).......................... RB Aa3/NR 11/01/02(a) 6.250 4,274,370
------------
MARYLAND (1.1%)
5,435 Maryland Health & Higher Educational
Facilities Authority, (John Hopkins
University, Refunding)............. RB Aa2/AA- 07/01/03 5.750 5,628,269
3,000 Maryland, (3rd Series)............... GO Aaa/AAA 07/15/03 6.400 3,084,180
------------
TOTAL MARYLAND................... 8,712,449
------------
MASSACHUSETTS (3.4%)
5,650 Massachusetts Bay Transportation
Authority, (General Transportation
System, Refunding, Series A)....... RB Aa3/AA- 03/01/08 7.000 6,282,856
1,495 Massachusetts State College Building
Authority, (Refunding,
Series A).......................... RB Aa3/AA- 05/01/11 7.500 1,749,464
8,250 Massachusetts State Water Resource
Authority, (Series A).............. RB A1/A 07/15/08 6.500 8,860,170
9,500 Massachusetts State Water Resource
Authority, (Pollution Abatement
Trust, Abatement MWRA Progaram,
Sub-Series A)...................... RB Aa1/AA 08/01/15 6.000 9,583,790
------------
TOTAL MASSACHUSETTS.............. 26,476,280
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY MOODY'S/ MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE S&P RATINGS DATE RATE VALUE
- -------------- ------------------------------------- -------- ----------- ----------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
MICHIGAN (6.0%)
$10,000 Detroit Water Supply System,
(Prerefunded, due 07/01/22), FGIC
Insured............................ RB Aaa/AAA 07/01/02(a) 6.375% $ 10,553,600
4,575 Michigan Building Authority,
(Prerefunded, Series I, due
10/01/03).......................... RB Aa2/AA 10/01/02(a) 5.400 4,727,805
3,045 Michigan Building Authority,
Facilites Program, (Refunding,
Series I), AMBAC Insured........... RB Aaa/AAA 10/01/04 6.000 3,177,732
13,050 Michigan Hospital Finance Authority,
(Ascension Health Credit Corp.,
Series A).......................... RB Aaa/AAA 11/15/15 6.250 13,340,493
10,500 Michigan Hospital Finance Authority,
(Genesys Health System,
Prerefunded, Refunding, Series A,
due 10/01/21)...................... RB Baa2/AAA 10/01/05(a) 8.125 12,252,555
2,905 Michigan Hospital Finance Authority,
(Mercy Health Services, Refunding,
Series T).......................... RB Aa3/AA- 08/15/04 5.750 2,955,721
------------
TOTAL MICHIGAN................... 47,007,906
------------
MINNESOTA (1.3%)
5,000 University of Minnesota, (Refunding,
Series A).......................... RB Aa2/AA 07/01/10 5.750 5,163,650
5,000 University of Minnesota, (Refunding,
Series A).......................... RB Aa2/AA 07/01/15 5.750 5,013,750
------------
TOTAL MINNESOTA.................. 10,177,400
------------
MISSISSIPPI (1.5%)
10,895 Mississippi, (Escrowed to Maturity,
Refunding)......................... GO Aaa/AAA 02/01/08 6.200 11,501,960
------------
MISSOURI (1.2%)
5,000 Missouri Convention & Sports Complex
Authority, (Prerefunded, Series A,
due 08/15/21)...................... RB Aaa/AAA 08/15/03(a) 6.900 5,320,700
4,000 St. Louis County Regional Convention
& Sports Complex Authority,
(Prerefunded, Series B, due
08/15/21).......................... RB Aaa/AAA 08/15/03(a) 7.000 4,282,800
------------
TOTAL MISSOURI................... 9,603,500
------------
NEBRASKA (0.7%)
5,245 Nebhelp Inc. (Sub-Series A-5B), MBIA
Insured............................ RB Aaa/NR 06/01/13 6.200 5,362,278
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY MOODY'S/ MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE S&P RATINGS DATE RATE VALUE
- -------------- ------------------------------------- -------- ----------- ----------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
NEVADA (3.0%)
$ 500 Carson City School District,
(Prerefunded, due 04/01/03), FGIC
Insured............................ GO Aaa/AAA 04/01/00(a) 6.750% $ 512,150
8,200 Clark County School District,
(Series A), MBIA Insured........... GO Aaa/AAA 06/01/11 7.000 9,178,916
3,000 Clark County, (Passenger Facilities
Charge Revenue, Las Vegas McCarran
International Airport,
Series A).......................... RB A/A 07/01/08 6.250 3,154,200
1,200 Las Vegas, (Clark County Library
District, Prerefunded, Series A,
due 06/01/04), FGIC Insured........ GO Aaa/AAA 06/01/01(a) 6.700 1,247,244
1,280 Las Vegas, (Clark County Library
District, Refunding, Series B),
FGIC Insured....................... GO Aaa/AAA 08/01/04 6.700 1,324,339
1,330 Nevada, (Prison Facilities,
Prerefunded, due 08/01/04)......... GO Aa2/AA 08/01/00(a) 7.000 1,375,087
1,985 Nevada, (Refunding, Series A-2)...... GO Aa2/AA 05/15/10 6.000 2,069,005
4,730 Washoe County School District, FSA
Insured............................ GO Aaa/AAA 06/01/09 5.625 4,804,356
------------
TOTAL NEVADA..................... 23,665,297
------------
NEW HAMPSHIRE (1.7%)
4,900 New Hampshire Higher Educational &
Health Facilities Authority,
(Dartmouth College, Refunding)..... RB Aaa/AAA 06/01/07 6.750 5,395,194
5,775 New Hampshire Municipal Bond Bank,
(Series B), FSA Insured............ GO Aaa/AAA 08/15/04 5.000 5,793,249
1,720 New Hampshire, (Prerefunded,
Series A, due 06/15/03)............ GO Aa2/AA+ 06/15/01(a) 6.600 1,799,602
------------
TOTAL NEW HAMPSHIRE.............. 12,988,045
------------
NEW JERSEY (4.1%)
4,180 Jersey City, (Refunding,
Series A).......................... GO Aa3/AA 10/01/11 6.250 4,434,228
7,000 New Jersey Economic Development
Authority, (Market Transition
Facilities Revenue, Sr. Lien,
Series A), MBIA Insured............ RB Aaa/AAA 07/01/02 5.400 7,108,570
4,100 New Jersey Economic Development
Authority, (Transition Project
Sublease, Series A), FSA Insured... RB Aaa/AAA 05/01/11 5.750 4,200,327
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
23
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY MOODY'S/ MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE S&P RATINGS DATE RATE VALUE
- -------------- ------------------------------------- -------- ----------- ----------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
NEW JERSEY (CONTINUED)
$10,000 New Jersey Transportation Authority,
(Refunding, Series A).............. RB Aa2/AA- 06/15/08 5.500% $ 10,161,100
6,000 New Jersey Transportation Authority,
(Refunding, Series B), MBIA
Insured............................ RB Aaa/AAA 06/15/05 6.000 6,277,200
------------
TOTAL NEW JERSEY................. 32,181,425
------------
NEW YORK (7.4%)
75 Monroe County, (Public Improvement,
Unrefunded Balance, Series 1995),
AMBAC Insured...................... GO Aaa/AAA 06/01/10 6.000 79,496
7,000 Municipal Assistance Corp for City of
New York, (Series H)............... RB Aa2/AA 07/01/06 6.250 7,414,610
3,090 Nassau County Tobacco Settlement
Corp., Asset Backed A Plan......... RB A1/A+ 07/15/03 4.200 3,045,195
1,465 New York City, (Escrowed to Maturity,
Series B).......................... GO Aaa/AAA 06/01/01 8.000 1,534,089
805 New York City, (Escrowed to Maturity,
Series F).......................... GO Aaa/A- 02/15/02 6.100 827,693
50 New York City, (Escrowed to Maturity,
Series A).......................... GO A3/A- 08/01/02 5.750 51,210
7,000 New York City, (Refunding,
Series A).......................... GO A3/A1 08/01/04 6.750 7,452,830
4,480 New York City, (Refunding,
Series G).......................... GO A3/A- 08/01/03 5.000 4,477,133
3,425 New York City, (Series F)............ GO A3/A- 02/15/03 6.200 3,537,340
2,595 New York City, (Unrefunded Balance,
Series A).......................... GO A3/A- 08/01/02 5.750 2,646,199
10,000 New York Convention Center Operating
Corp., (Yale Building Acquisition
Project)........................... PP NR/NR 12/01/04 6.500 9,885,200
5,000 New York State Dormitory Authority,
(FHA Hospital New York &
Presbyterian, Refunding), AMBAC-FHA
Insured............................ RB Aaa/AAA 08/01/13 4.400 4,924,000
2,850 New York State Dormitory Authority,
(Secured Hospital, Interfaith
Medical Center, Series D).......... RB Baa1/BBB+ 02/15/04 5.500 2,846,380
8,700 Triborough Bridge & Tunnel Authority,
(General Purpose, Refunding,
Series X).......................... RB Aa3/A+ 01/01/12 6.625 9,433,932
------------
TOTAL NEW YORK................... 58,155,307
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
24
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY MOODY'S/ MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE S&P RATINGS DATE RATE VALUE
- -------------- ------------------------------------- -------- ----------- ----------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
NORTH CAROLINA (2.0%)
$ 6,275 North Carolina Municipal Power
Agency, (No. 1 Catawba Electric
Revenue, Series B)................. RB Baa1/BBB+ 01/01/07 6.250% $ 6,386,381
8,900 North Carolina Municipal Power
Agency, (No.1 Catawba Electric
Revenue, Series B)................. RB Baa1/BBB+ 01/01/06 6.125 9,026,914
------------
TOTAL NORTH CAROLINA............. 15,413,295
------------
OHIO (0.7%)
2,000 Ohio State Building Authority, (State
Facilities, Administration Building
Fund Project, Series A)............ RB Aa2/AA- 10/01/06 5.500 2,037,520
2,795 Ohio Water Development Authority,
(Escrowed to Maturity,
Refunding)......................... RB Aaa/AAA 12/01/10 9.375 3,315,429
------------
TOTAL OHIO....................... 5,352,949
------------
OREGON (0.7%)
5,535 Washington County, (Criminal Justice
Facilities, Prerefunded, due
12/01/10).......................... GO Aa1/AAA 12/01/04(a) 6.000 5,778,983
------------
PENNSYLVANIA (3.2%)
1,175 Bethel Park School District,
(Prerefunded, Series B, due
02/01/02), AMBAC Insured........... GO Aaa/AAA 02/01/00(a) 6.550 1,175,000
1,310 Pennsylvania Higher Education
Facilities Authority, (College &
University Revenue, University of
Pennsylvania, Refunding,
Series A).......................... RB A1/AA 09/01/02 6.500 1,365,911
2,800 Pennsylvania Higher Education
Facilities Authority, (Health
Services Revenue, University of
Pennsylvania Health Services,
Refunding, Series A)............... RB A3/A 01/01/06 6.000 2,781,212
1,500 Pennsylvania, (2nd Series A,
Prerefunded, due 11/01/04), MBIA
Insured............................ GO Aaa/AAA 11/01/01(a) 6.500 1,568,925
4,250 Philadelphia Authority for Industrial
Development, (Academy of Natural
Sciences).......................... PP NR/NR 01/01/18 4.750 4,226,667
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
25
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY MOODY'S/ MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE S&P RATINGS DATE RATE VALUE
- -------------- ------------------------------------- -------- ----------- ----------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
PENNSYLVANIA (CONTINUED)
$ 8,785 Philadelphia Authority for Industrial
Development, (Airport Revenue,
Philadelphia Airport System
Project, Series A), FGIC Insured... RB Aaa/AAA 07/01/04 5.000% $ 8,770,153
5,000 Philadelphia Water & Waste, (Water
Revenue), AMBAC-TCRS Insured....... RB Aaa/AAA 06/15/09 5.625 5,101,050
------------
TOTAL PENNSYLVANIA............... 24,988,918
------------
PUERTO RICO (0.6%)
5,000 Puerto Rico Municipal Finance Agency,
(Refunding, Series B).............. GO Baa1/A- 08/01/02 5.500 5,016,250
------------
SOUTH CAROLINA (3.9%)
1,620 Charleston County, (Prerefunded, due
06/01/07).......................... GO Aa3/AA 06/01/06(a) 5.625 1,664,501
1,000 Piedmont Municipal Power Agency,
(Electric Power Revenue, Escrowed
to Maturity, Refunding), MBIA
Insured............................ RB Aaa/AAA 01/01/08 6.200 1,060,800
15,000 Piedmont Municipal Power Agency,
(Electric Revenue, Refunding), FGIC
Insured............................ RB Aaa/AAA 01/01/20 6.750 16,222,500
5,385 South Carolina, (Capital Improvement,
Series A).......................... GO Aaa/AAA 10/01/09 5.500 5,482,953
5,655 South Carolina, (Capital Improvement,
Series A).......................... GO Aaa/AAA 10/01/10 5.500 5,738,694
------------
TOTAL SOUTH CAROLINA............. 30,169,448
------------
TEXAS (8.6%)
1,500 Austin Utilities System, (Escrowed to
Maturity).......................... RB Aaa/AAA 10/01/01 6.500 1,545,930
7,500 Austin Utilities System, (Refunding,
Series A), FSA Insured............. RB Aaa/AAA 11/15/03 5.750 7,730,175
4,040 Austin, Public Improvement........... GO Aa2/AA 09/01/12 5.750 4,085,167
2,260 Austin, Public Improvement........... GO Aa2/AA 09/01/13 5.750 2,275,255
4,500 Austin, Public Improvement........... GO Aa2/AA 09/01/14 5.750 4,500,720
2,260 Corpus Christi Independent School
District, (Refunding), PSFG
Insured............................ GO Aaa/AAA 08/15/05 6.000 2,367,418
1,305 Dallas County Flood Control District
#1, (Prerefunded, due 04/01/10).... GO Aaa/NR 04/01/08(a) 9.250 1,642,134
1,650 El Paso Independent School District,
(Prerefunded, due 07/01/03), PSFG
Insured............................ GO Aaa/AAA 07/01/01(a) 6.550 1,696,794
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
26
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY MOODY'S/ MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE S&P RATINGS DATE RATE VALUE
- -------------- ------------------------------------- -------- ----------- ----------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
TEXAS (CONTINUED)
$ 3,805 Lewisville Independent School
District, (Refunding), PSFG
Insured............................ GO Aaa/NR 08/15/03 6.000% $ 3,954,194
10,000 Lower Colorado River Authority,
(Refunding, Series B).............. RB Aaa/AAA 05/15/10 6.000 10,423,200
2,000 Plano Independent School District,
(Prerefunded, Series B, due
02/15/04), FGIC Insured............ GO Aaa/AAA 02/15/01(a) 6.550 2,047,000
1,500 San Antonio, (General Improvement,
Refunding)......................... GO Aa2/AA+ 08/01/07 6.000 1,573,710
7,000 Texas Water Development Board,
(Revolving Fund, Sr. Lien,
Series B).......................... RB Aa1/AAA 07/15/12 5.750 7,091,630
2,000 Texas, (Public Finance Authority,
Prerefunded, due 10/01/02)......... GO NR/AA 10/01/00(a) 6.300 2,028,920
1,000 Texas, (Public Finance Authority,
Prerefunded, due 10/01/05)......... GO NR/AA 10/01/00(a) 6.500 1,015,750
4,000 Texas, (Public Finance Authority,
Refunding, Series B)............... GO Aa2/AA 10/01/03 6.000 4,159,120
6,180 University of Texas, (Financing
System Revenue, Series A).......... RB Aa1/AAA 08/15/07 6.000 6,500,680
2,500 University of Texas, (Permanent
University Fund, Refunding)........ RB Aaa/AAA 07/01/01 6.300 2,561,775
------------
TOTAL TEXAS...................... 67,199,572
------------
UTAH (2.2%)
1,625 Intermountain Power Agency, (Utah
Power Supply Revenue, Refunding,
Series B), MBIA Insured............ RB Aaa/AAA 07/01/09 6.500 1,742,244
4,155 Intermountain Power Agency, (Utah
Power Supply Revenue, Refunding,
Series C), MBIA Insured............ RB Aaa/AAA 07/01/01 6.000 4,239,679
6,645 Intermountain Power Agency, (Utah
Power Supply Revenue, Refunding,
Series C), MBIA Insured............ RB Aaa/AAA 07/01/02 6.000 6,819,631
4,180 Jordan School District,
(Refunding)........................ GO Aa3/AA 06/15/06 6.050 4,311,545
------------
TOTAL UTAH....................... 17,113,099
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
27
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY MOODY'S/ MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE S&P RATINGS DATE RATE VALUE
- -------------- ------------------------------------- -------- ----------- ----------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
VIRGINIA (2.3%)
$10,000 Fairfax County, (Industrial
Development Authority Revenue,
Prerefunded, due 08/29/23)......... RB Aaa/AA 08/28/01(a) 6.801% $ 10,517,500
2,000 Virginia Public School Authority,
(Prerefunded, Series A)............ RB Aa2/AA 08/01/04 6.500 2,094,620
5,000 Virginia Public School Authority,
(Refunding)........................ RB Aa/AA 01/01/02 6.000 5,121,850
------------
TOTAL VIRGINIA................... 17,733,970
------------
WASHINGTON (5.5%)
1,555 King & Snohomish Counties School
District #417, FGIC Insured........ GO Aaa/AAA 12/01/02 6.600 1,578,201
1,000 Pierce County School District #320,
(Prerefunded, due 12/01/02),
MBIA-IBC Insured................... GO Aaa/AAA 12/01/01(a) 6.600 1,035,310
1,250 Snohomish County School District #2,
(Refunding, Series A), MBIA-IBC
Insured............................ GO Aaa/AAA 12/01/02 6.700 1,281,225
4,815 Washington Public Power Supply
System, (Nuclear Project #1,
Refunding, Series A), MBIA
Insured............................ RB Aaa/AAA 07/01/06 6.000 4,989,881
4,000 Washington Public Power Supply
System, (Nuclear Project #1,
Refunding, Series B)............... RB Aa1/AA- 07/01/03 5.750 4,085,280
2,000 Washington Public Power Supply
System, (Nuclear Project #2,
Refunding, Series A)............... RB Aa1/AA- 07/01/06 7.250 2,210,460
5,265 Washington Public Power Supply
System, (Nuclear Project #2,
Refunding, Series A)............... RB Aa1/AA- 07/01/01 6.300 5,383,515
4,000 Washington Public Power Supply
System, (Nuclear Project #2,
Refunding, Series A)............... RB Aa1/AA- 07/01/09 5.750 4,052,800
1,500 Washington Public Power Supply
System, (Nuclear Project #2,
Refunding, Series C)............... RB Aa1/AA- 07/01/02 7.500 1,563,765
2,000 Washington Public Power Supply
System, (Nuclear Project #2,
Refunding, Series C), FGIC
Insured............................ RB Aaa/AAA 07/01/01 7.000 2,062,260
5,000 Washington Public Power Supply
System, (Nuclear Project #3,
Refunding, Series A)............... RB Aa1/AA- 07/01/03 5.000 4,990,500
1,000 Washington, (Prerefunded, Series B,
due 08/01/02)...................... GO Aa1/AA+ 08/01/00(a) 6.750 1,013,080
1,750 Washington, (Refunding,
Series R-92-A)..................... GO Aa1/AA+ 09/01/02 6.300 1,808,013
3,075 Washington, (Series A)............... GO Aa1/AA+ 01/01/07 5.250 3,076,292
4,000 Washington, (Series B & AT-7)........ GO Aa1/AA+ 06/01/17 6.400 4,224,760
------------
TOTAL WASHINGTON................. 43,355,342
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
28
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY MOODY'S/ MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE S&P RATINGS DATE RATE VALUE
- -------------- ------------------------------------- -------- ----------- ----------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
WEST VIRGINIA (0.5%)
$ 1,000 Berkeley County Board of Education,
(Escrowed to Maturity), BIG
Insured............................ GO Aaa/AAA 04/01/01 7.300% $ 1,032,970
2,790 West Virginia Public Energy
Authority, (Morgantown Association
Project, Series A), LOC Swiss Bank
Corp............................... RB Aa1/AA+ 07/01/08 5.050 2,788,968
------------
TOTAL WEST VIRGINIA.............. 3,821,938
------------
WISCONSIN (2.6%)
6,250 Wisconsin Health & Educational
Facilities......................... PP NR/NR 05/01/19 5.950 5,456,438
6,250 Wisconsin Health & Educational
Facilities......................... PP NR/NR 05/01/14 5.700 5,602,125
4,000 Wisconsin, (Series A)................ GO Aa2/AA 05/01/05 6.000 4,162,200
5,270 Wisconsin, (Series C)................ GO Aa2/AA 05/01/10 5.750 5,398,272
------------
TOTAL WISCONSIN.................. 20,619,035
------------
TOTAL LONG TERM INVESTMENTS (COST $759,148,398).............................. 757,667,114
------------
SHORT-TERM INVESTMENTS (2.6%)
ALASKA (0.5%)
1,000 Anchorage, (Series A), AMBAC
Insured............................ GO Aaa/AAA 02/01/00 6.850 1,000,000
3,000 North Slope Borough, (Series A), MBIA
Insured............................ GO Aaa/AAA 06/30/00 5.550 3,019,170
------------
TOTAL ALASKA..................... 4,019,170
------------
PENNSYLVANIA (0.3%)
970 Pennsylvania Higher Education
Assistance Agency, (Student Loan
Revenue, Refunding, Series A), FGIC
Insured............................ RB Aaa/AAA 12/01/00 6.800 989,914
1,000 Pennsylvania, (Refunding and
Projects, 1st Series A), AMBAC-TCRS
Insured............................ GO Aaa/AAA 01/01/01 6.600 1,021,910
------------
2,011,824
------------
RHODE ISLAND (0.5%)
3,785 Rhode Island, (Construction Capital
Development Loan, Series B)........ GO Aa3/AA- 05/15/00 6.000 3,805,325
------------
TEXAS (0.3%)
1,500 Addison, (Refunding), FGIC Insured... GO Aaa/AAA 09/01/00 6.250 1,501,680
1,000 Arlington, AMBAC Insured............. GO Aaa/AAA 08/01/00 6.850 1,014,110
------------
2,515,790
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
29
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY MOODY'S/ MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE S&P RATINGS DATE RATE VALUE
- -------------- ------------------------------------- -------- ----------- ----------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
WASHINGTON (0.8%)
$ 605 King County, (Escrowed to Maturity,
Series B).......................... GO Aa1/AA+ 01/01/01 6.700% $ 618,625
5,750 King County, (Unrefunded Balance,
Series B).......................... GO Aa1/AA+ 01/01/01 6.700 5,879,490
------------
6,498,115
------------
OTHER INVESTMENT COMPANIES (0.2%)
</TABLE>
<TABLE>
<CAPTION>
SHARES
- ------------
<C> <S> <C> <C> <C> <C> <C>
1,154,128 J.P. Morgan Institutional Tax Exempt
Money Market Fund..................... Aaa/AAA 3.200(y) 1,154,128
------------
TOTAL SHORT TERM INVESTMENTS (COST $19,824,460)........................... 20,004,352
------------
TOTAL INVESTMENTS (COST $778,972,858) (99.4%)................................. 777,671,466
OTHER ASSETS IN EXCESS OF LIABILITIES (0.6%).................................. 4,753,480
------------
NET ASSETS (100.0%)........................................................... $782,424,946
============
</TABLE>
- ------------------------------
Note: Based on the cost of the investments of $779,266,429 for federal income
tax purposes at January 31, 2000, the aggregate gross unrealized appreciation
and depreciation was $7,160,096 and $8,755,059, respectively, resulting in net
unrealized depreciation of investments of $1,301,392.
(a) The date listed under the heading maturity date represents an optional
tender date. The actual maturity date is indicated in the security description.
(y) Yield to maturity.
AMBAC - Ambac Indemnity Corp., BIG - Bond Investors Guaranty Insurance Co.,
FGIC - Financial Guaranty Insurance Co., FHA - Federal Housing Authority,
FSA - Financial Securities Assurance, GO - General Obligation, IBC - IBC
Financial Data, Inc., LOC - Letter of Credit, MBIA - Municipal Bond Assurance
Corp., NR - Not Rated, PCR - Pollution Control Revenue, PP - Private Placement,
PSFG - Permanent School Fund Guarantee, RB - Revenue Bond, TCRS -Transferable
Custodial Receipts, WI - When and if issued securities.
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 which coincides with the first call date of the first bond.
The Accompanying Notes are an Integral Part of the Financial Statements.
30
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $778,972,858 ) $777,671,466
Interest Receivable 10,497,635
Receivable for Investments Sold 2,438,273
Prepaid Expenses and Other Assets 3,243
Prepaid Trustees' Fees 3,090
------------
Total Assets 790,613,707
------------
LIABILITIES
Payable for Investments Purchased 7,872,819
Advisory Fee Payable 194,811
Administrative Services Fee Payable 16,314
Administration Fee Payable 478
Fund Services Fee Payable 264
Accrued Expenses 104,075
------------
Total Liabilities 8,188,761
------------
NET ASSETS
Applicable to Investors' Beneficial Interests $782,424,946
============
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
31
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JANUARY 31, 2000
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest Income $ 20,047,387
EXPENSES
Advisory Fee $1,212,075
Custodian Fees and Expenses 121,858
Administrative Services Fee 101,868
Professional Fees and Expenses 25,333
Fund Services Fee 6,815
Trustees' Fees and Expenses 3,657
Administration Fee 3,199
Miscellaneous 5,684
----------
Total Expenses 1,480,489
------------
NET INVESTMENT INCOME 18,566,898
NET REALIZED GAIN (LOSS) ON INVESTMENTS (9,967,427)
NET CHANGE IN UNREALIZED DEPRECIATION OF
INVESTMENTS (10,037,520)
------------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS $ (1,438,049)
============
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
32
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE ELEVEN
JANUARY 31, 2000 MONTHS ENDED
(UNAUDITED) JULY 31, 1999
---------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 18,566,898 $ 34,387,277
Net Realized Gain (Loss) on Investments (9,967,427) 4,500,130
Net Change in Unrealized Depreciation of
Investments (10,037,520) (30,158,895)
--------------- ------------
Net Increase (Decrease) in Net Assets
Resulting from Operations (1,438,049) 8,728,512
--------------- ------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 167,219,900 417,545,311
Withdrawals (205,226,661) (361,383,038)
--------------- ------------
Net Increase (Decrease) from Investors'
Transactions (38,006,761) 56,162,273
--------------- ------------
Total Increase (Decrease) in Net Assets (39,444,810) 64,890,785
NET ASSETS
Beginning of Period 821,869,756 756,978,971
--------------- ------------
End of Period $ 782,424,946 $821,869,756
=============== ============
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS ENDED FOR THE ELEVEN FOR THE FISCAL YEAR ENDED AUGUST 31,
JANUARY 31, 2000 MONTHS ENDED --------------------------------------
(UNAUDITED) JULY 31, 1999 1998 1997 1996 1995
---------------- -------------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Net Expenses 0.37%(a) 0.37% 0.37% 0.38% 0.38% 0.42%
Net Investment Income 4.58%(a) 4.49% 4.70% 4.93% 4.92% 5.15%
Portfolio Turnover 43%(b) 29% 16% 25% 25% 47%
</TABLE>
- ------------------------
(a) Annualized.
(b) Not Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
33
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Tax Exempt Bond Portfolio (the "portfolio") is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company which was organized as a trust under the laws of
the State of New York on January 29, 1993. The portfolio commenced operations on
July 12, 1993 and received a contribution of certain assets and liabilities,
including securities, with a value of $865,660,724 on that date from the J.P.
Morgan 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 that is exempt from
federal income tax consistent with moderate risk of capital. 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) The portfolio values securities that are listed on an exchange using
prices supplied by an independent pricing service that are based on the
last traded price on a national securities exchange or, in the absence of
recorded trades, at the readily available mean of the bid and asked prices
on such exchange, if such exchange or market constitutes the broadest and
most representative market for such security. Independent pricing services
procedures may also included the use of prices based upon yields or prices
of securities of comparable quality, coupon, maturity and type:
indications as to value from dealers, operating data, and general market
conditions. Unlisted securities are valued at the average of the quoted
bid and asked prices in the over-the-counter market provided by a
principal market maker or dealer. If prices are not supplied by the
portfolios independent pricing service or principal market maker or dealer
such securities are priced using fair values in accordance with procedures
adopted by the portfolios trustees. All short-term portfolio securities
with a remaining maturity of less than 60 days are valued by the amortized
cost method.
b) Securities transactions are recorded on a trade date basis. Interest
income, which includes the amortization of premiums and discounts, if any,
is recorded on an accrual basis. For financial and tax reporting purposes,
realized gains and losses are determined on the basis of specific lot
identification.
c) The portfolio intends to be treated as a partnership for federal income
tax purposes. As such, each investor in the portfolio will be taxed on its
share of the portfolio's ordinary income and capital gains. It is intended
that the portfolio's assets will be managed in such a way that an investor
in the portfolio will be able to satisfy the requirements of Subchapter M
of the Internal Revenue Code. The cost of securities is substantially the
same for book and tax purposes.
2. TRANSACTIONS WITH AFFILIATES
a) The portfolio has an Investment Advisory Agreement with J.P. Morgan
Investment Management Inc. ("JPMIM"), a wholly owned subsidiary of J.P.
Morgan & Co. Incorporated ("J.P. Morgan"). Under the terms of the
Agreement, the portfolio pays JPMIM at an annual rate of 0.30% of the
portfolio's average daily net assets. For the six months ended
January 31, 2000, such fees amounted to $1,216,143.
34
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
The portfolio may invest in one or more affiliated money market funds:
J.P. Morgan Institutional Prime Money Market Fund, J.P. Morgan
Institutional Tax Exempt Money Market Fund, J.P. Morgan Institutional
Federal Money Market Fund and J.P. Morgan Institutional Treasury Money
Market Fund. The Advisor has agreed to reimburse its advisory fee from the
portfolio in an amount to offset any doubling of investment advisory and
shareholder servicing fees. For the six months ended January 31, 2000,
J.P. Morgan has agreed to reimburse the portfolio $4,068 under this
agreement.
b) The portfolio has retained Funds Distributor, Inc. ("FDI"), a registered
broker-dealer, to serve as the co-administrator and exclusive placement
agent. Under a Co-Administration Agreement between FDI and the portfolio,
FDI provides administrative services necessary for the operations of the
portfolio, furnishes office space and facilities required for conducting
the business of the portfolio and pays the compensation of the portfolio's
officers affiliated with FDI. The portfolio has agreed to pay FDI fees
equal to its allocable share of an annual complex-wide charge of $425,000
plus FDI's out-of-pocket expenses. The amount allocable to the portfolio
is based on the ratio of the portfolio's net assets to the aggregate net
assets of the portfolio and certain other investment companies subject to
similar agreements with FDI. For the six months ended January 31, 2000,
the fee for these services amounted to $3,199.
c) The portfolio has an Administrative Services Agreement (the "Services
Agreement") with Morgan under which Morgan is responsible for certain
aspects of the administration and operation of the portfolio. Under the
Services Agreement, the portfolio has agreed to pay Morgan a fee equal to
its allocable share of an annual complex-wide charge. This charge is
calculated based on the aggregate average daily net assets of the
portfolio and the other portfolios for which JPMIM acts as investment
advisor (the "master portfolios") and J.P. Morgan Series Trust in
accordance with the following annual schedule: 0.09% on the first
$7 billion of their aggregate average daily net assets and 0.04% of their
aggregate average daily net assets in excess of $7 billion less the
complex-wide fees payable to FDI. The portion of this charge payable by
the portfolio is determined by the proportionate share that its net assets
bear to the net assets of the master portfolios, other investors in the
master portfolios for which Morgan provides similar services, and J.P.
Morgan Series Trust. For the six months ended January 31, 2000, the fee
for these services amounted to $101,868.
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 $6,815 for the six months ended January 31, 2000.
e) An aggregate annual fee of $75,000 is paid to each trustee for serving as
a trustee of the trust, the J.P. Morgan Funds, the J.P. Morgan
Institutional Funds, the master portfolios and J.P. Morgan Series Trust.
The Trustees' Fees and Expenses shown in the financial statements
represents the portfolio's allocated portion of the total fees and
expenses. The portfolio's Chairman and Chief Executive Officer also serves
as Chairman of Group and receives compensation and employee benefits from
Group in his role as Group's Chairman. The allocated portion of such
compensation and benefits included in the Fund Services Fee shown in the
financial statements was $1,300.
35
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS
Investments transactions (excluding short-term investments) for the six months
ended January 31, 2000 were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
- --------- ------------
<S> <C>
$351,349,345 $338,054,049
</TABLE>
4. CREDIT AGREEMENT
The portfolio is party to a revolving line of credit agreement (the "Agreement")
as discussed more fully in Note 4 of the fund's Notes to the Financial
Statements which are included elsewhere in this report.
36
<PAGE>
J.P. MORGAN FUNDS
FEDERAL MONEY MARKET FUND
PRIME MONEY MARKET FUND
TAX EXEMPT MONEY MARKET FUND
TAX AWARE ENHANCED INCOME FUND: SELECT SHARES
SHORT TERM BOND FUND
BOND FUND
EMERGING MARKETS DEBT FUND
GLOBAL STRATEGIC INCOME FUND
TAX EXEMPT BOND FUND
CALIFORNIA BOND FUND: SELECT SHARES
NEW YORK TAX EXEMPT BOND FUND
DIVERSIFIED FUND
DISCIPLINED EQUITY FUND
TAX AWARE U.S. EQUITY FUND: SELECT SHARES
U.S. EQUITY FUND
U.S. SMALL COMPANY FUND
U.S. SMALL COMPANY OPPORTUNITIES FUND
EMERGING MARKETS EQUITY FUND
EUROPEAN EQUITY FUND
GLOBAL 50 FUND: SELECT SHARES
INTERNATIONAL EQUITY FUND
INTERNATIONAL OPPORTUNITIES FUND
FOR MORE INFORMATION ON THE J.P. MORGAN
FUNDS, CALL J.P. MORGAN FUNDS SERVICES AT
(800) 521-5411.
IMSAR206
J.P. Morgan
Tax Exempt
Bond Fund
SEMIANNUAL REPORT
JANUARY 31, 2000
