<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
FEBRUARY 29, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL RATINGS MATURITY
AMOUNT SECURITY DESCRIPTION SECURITY SECTOR MOODY'S/S&P DATE RATE VALUE
- --------------------------------------------------- ------------------ ----------- ----------- ------- ------------
<C> <S> <C> <C> <C> <C> <C>
ALABAMA (0.9%)
$ 1,000,000 Alabama Mental Health Finance Authority
(Special Tax Obligation, Series 1989)
MBIA Insured......................... Aaa/AAA 05/01/99(A) 7.375% $ 1,115,580
Prerefunded
1,890,000 Childersburg Industrial Development
Board, PCR, (Kimberly Clark Corp.
Project, Escrowed to Maturity)....... Aa2/AA 05/15/96(A) 7.400 2,026,779
Revenue Bond
1,000,000 Daphne Special Care Facilities
Financing Authority (Presbyterian
Retirement, Series A)................ NR/NR 08/15/01(A) 7.300 1,138,360
Prerefunded
------------
Total Alabama 4,280,719
------------
ALASKA (2.7%)
1,075,000 Anchorage (Refunding, Series 1989)
AMBAC Insured........................ Aaa/AAA 06/01/99(A) 7.100 1,164,397
Insured
1,000,000 Anchorage (Series 1990A) AMBAC
Insured.............................. Aaa/AAA 02/01/00 6.850 1,091,470
Insured
2,000,000 Anchorage (Series 1991) MBIA Insured... Aaa/AAA 07/01/01(A) 6.600 2,220,240
Prerefunded
3,000,000 North Slope Borough (Series 1992A) MBIA
Insured.............................. Aaa/AAA 06/30/00 5.550 3,146,730
Insured
5,500,000 North Slope Borough (Series 1996A) MBIA
Insured.............................. Aaa/AAA 06/30/99 0.000 4,773,780
Insured
------------
Total Alaska 12,396,617
------------
ARIZONA (1.6%)
1,325,000 Maricopa County, School District #3
(Projects of 1991, Series C)......... A1/AA 07/01/06(A) 6.000 1,457,831
Prerefunded
1,000,000 Maricopa County, School District #11
(Peoria Unified School Improvement,
Series 1990H) MBIA Insured........... Aaa/AAA 07/01/99(A) 7.000 1,129,030
Prerefunded
1,750,000 Phoenix Arizona (Refunding, Series
C)................................... Aa1/AA+ 07/01/02 6.375 1,953,595
General Obligation
1,575,000 Pima County, School District # 1
(Project of 1989, Series G) MBIA
Insured.............................. Aaa/AAA 07/01/00 8.000 1,811,360
Insured
1,235,000 Salt River Electric Agricultural
Improvement and Power District
Electric System (Series A)........... NRR/AAA 01/01/98(A) 7.875 1,347,916
Prerefunded
------------
Total Arizona 7,699,732
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
17
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
FEBRUARY 29, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL RATINGS MATURITY
AMOUNT SECURITY DESCRIPTION SECURITY SECTOR MOODY'S/S&P DATE RATE VALUE
- --------------------------------------------------- ------------------ ----------- ----------- ------- ------------
<C> <S> <C> <C> <C> <C> <C>
CALIFORNIA (6.8%)
$ 2,520,000 California Department of Water
Resources Revenue, Water Systems
Service, (Refunding, Series J-1)..... Aa/AA 12/01/12 7.000% $ 2,985,343
Revenue Bond
1,757,000 Kaweah Delta Hospital District, Tulare
County (Series G).................... NR/NR 06/01/04(A) 6.400 1,898,105
Private Placement
1,160,000 Kaweah Delta Hospital District, Tulare
County (Series E).................... NR/NR 06/01/97(A) 5.250 1,174,384
Private Placement
600,000 Kaweah Delta Hospital District, Tulare
County (Series D).................... NR/NR 06/01/96(A) 4.700 600,000
Private Placement
4,000,000 Los Angeles Department of Water & Power
(California Electric Plant, Crossover
Refunded)............................ Aa/AA- 05/15/00(A) 7.125 4,464,680
Revenue Bond
1,200,000 Los Angeles Regional Airport Corporate
Lease LOC-Societe Generale, NY....... NR/A-1+ 03/01/96(A) 3.500(B) 1,200,000
Revenue Bond
1,175,000 Los Angeles County Metropolitan
Transportation Authority and Sales
Tax Revenue (Series A) AMBAC
Insured.............................. Aaa/AAA 07/01/06 5.900 1,293,381
Insured
10,805,000 Paramount Redevelopment Agency
Redevelopment Project Area #1........ NR/AAA 08/01/01(A) 7.350 12,577,776
Prerefunded
2,000,000 Riverside County Transportation
(Refunding, Series A) FGIC Insured... Aaa/AAA 06/01/07 6.000 2,212,160
Insured
3,000,000 Sacramento Sanitation District......... Aa/AA 12/01/03 5.500 3,198,390
Revenue Bond
------------
Total California 31,604,219
------------
CONNECTICUT (2.1%)
4,250,000 Connecticut State Economic Recovery
Notes (Refunding).................... Aa/AA- 06/15/98 5.000 4,357,058
General Obligation
2,000,000 Connecticut Housing Finance Authority
(Housing Mortgage Finance Program,
Refunding, Series 1987B)............. Aa/AA 11/15/97 8.100 2,095,220
Revenue Bond
2,815,000 Connecticut (Special Tax Obligation,
Transportation Infrastructure, Series
1991A)............................... A1/AA- 06/01/03(A) 6.600 3,179,092
Prerefunded
------------
Total Connecticut 9,631,370
------------
DISTRICT OF COLUMBIA (3.2%)
7,500,000 District of Columbia (Refunding, Series
C) FGIC Insured...................... Aaa/AAA 12/01/03 5.250 7,760,025
Insured
3,000,000 District of Columbia (Refunding, Series
A) MBIA Insured...................... Aaa/AAA 06/01/07 6.000 3,215,490
Insured
2,600,000 District of Columbia (Series B) MBIA
Insured.............................. Aaa/AAA 06/01/02 6.000 2,801,578
Insured
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
18
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
FEBRUARY 29, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL RATINGS MATURITY
AMOUNT SECURITY DESCRIPTION SECURITY SECTOR MOODY'S/S&P DATE RATE VALUE
- --------------------------------------------------- ------------------ ----------- ----------- ------- ------------
<C> <S> <C> <C> <C> <C> <C>
DISTRICT OF COLUMBIA (CONTINUED)
$ 1,000,000 Washington, D.C. Transportation
Authority (Refunding, Series 1993)
FGIC Insured......................... Aaa/AAA 07/01/07 6.000% $ 1,095,660
Insured
------------
Total District of Columbia 14,872,753
------------
FLORIDA (2.2%)
1,535,000 Florida Board of Education (Capital
Outlay, Series 1986C, Escrowed to
Maturity)............................ NRR/AAA 06/01/96(A) 7.000 1,662,666
Prerefunded
465,000 Florida Board of Education (Capital
Outlay, Series 1986C)................ Aa/AA 06/01/96(A) 7.000 478,108
General Obligation
5,475,000 Florida State Turnpike Authority
Revenue Department of Transportation
(Series A) AMBAC Insured............. Aaa/AAA 07/01/01 5.500 5,814,614
Insured
2,000,000 Volusia County, School District
(Refunding, Series 1991) FGIC
Insured.............................. Aaa/AAA 08/01/01(A) 6.100 2,201,261
Insured
------------
Total Florida 10,156,649
------------
GEORGIA (7.4%)
300,000 Burke County Development Authority
(PCR, Georgia Power Authority, Vogtle
Project)............................. VMIG1/A-1 03/01/96(A) 3.450(B) 300,000
Revenue Bond
2,630,000 Fulton County Georgia School
District(Refunding).................. Aa/AA 05/01/14 6.375 2,960,302
General Obligation
6,000,000 Georgia (Series B)..................... Aaa/AA+ 03/01/07 7.200 7,254,420
General Obligation
3,000,000 Georgia (Series B)..................... Aaa/AA+ 03/01/10 6.300 3,379,710
General Obligation
4,470,000 Georgia (Series C)..................... Aaa/AA+ 07/01/11 5.700 4,728,187
General Obligation
3,000,000 Georgia (Series O)..................... Aaa/AA+ 09/01/13 3.250 2,312,670
General Obligation
1,000,000 Georgia Municipal Electric Authority
(Crossover Refunded) A/A 01/01/97(A) 6.500 1,108,100
Revenue Bond
2,500,000 Georgia Municipal Electric Authority
(Crossover Refunded) AMBAC Insured... Aaa/AAA 01/01/98(A) 7.000 2,944,925
Insured
4,265,000 Georgia Municipal Electric Authority
Power Revenue (Series O, Crossover
Refunded)............................ A/A 01/01/98(A) 8.125 4,609,186
Revenue Bond
1,000,000 Georgia Municipal Electric Authority
Power Revenue (Refunding, Series
D)................................... A/A 01/01/06 6.000 1,075,280
Revenue Bond
1,155,000 Georgia Residential Finance Authority
(Single Family Insured Mortgages,
Refunding, Series 1986A) FHA
Insured.............................. Aa/AA+ 12/01/96(A) 6.600 1,210,313
Insured
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
FEBRUARY 29, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL RATINGS MATURITY
AMOUNT SECURITY DESCRIPTION SECURITY SECTOR MOODY'S/S&P DATE RATE VALUE
- --------------------------------------------------- ------------------ ----------- ----------- ------- ------------
<C> <S> <C> <C> <C> <C> <C>
GEORGIA (CONTINUED)
$ 2,500,000 Gwinnett County Georgia School District
(Refunding, Series B)................ Aa1/AA 02/01/08 6.400% $ 2,842,750
Revenue Bond
------------
Total Georgia 34,725,843
------------
HAWAII (0.9%)
2,000,000 Hawaii (Series BZ)..................... Aa/AA 10/01/12 6.000 2,157,720
General Obligation
2,000,000 Honolulu (City & County Refunding and
Improvement, Series B)............... Aa/AA 10/01/11 5.500 2,054,820
General Obligation
------------
Total Hawaii 4,212,540
------------
ILLINOIS (9.3%)
1,500,000 Chicago (Series 1995) AMBAC Insured.... Aaa/AAA 01/01/05 6.500 1,686,405
Insured
2,000,000 Chicago (Refunding, Series B) FGIC
Insured.............................. Aaa/AAA 01/01/00 5.000 2,056,080
Insured
1,000,000 Chicago Board of Education Lease
Certificates (Series A) MBIA
Insured.............................. Aaa/AAA 01/01/06 6.125 1,097,110
Insured
4,130,000 Chicago Board of Education Lease
Certificates (Series A) MBIA
Insured.............................. Aaa/AAA 01/01/07 6.125 4,573,190
Insured
1,500,000 Chicago O'Hare International Airport
(Refunding, Series C-1) MBIA
Insured.............................. Aaa/AAA 01/01/09 5.750 1,611,435
Insured
2,500,000 Cook County (Series 1991) AMBAC
Insured.............................. Aaa/AAA 11/01/98 6.100 2,642,025
Insured
3,280,000 Cook County (Refunding, Series C) FGIC
Insured.............................. Aaa/AAA 11/15/04 5.800 3,559,620
Insured
1,375,000 Du Page County (Illinois Alternative
Revenue Jail Project, Series C-1).... NRR/AAA 01/01/02(A) 6.550 1,549,268
Prerefunded
2,000,000 Illinois (Series 1986)................. A1/AA- 12/01/96(A) 6.250 2,063,620
General Obligation
2,000,000 Illinois (Refunding, Series 1987)...... A1/AA- 04/01/97(A) 6.500 2,080,040
General Obligation
1,640,000 Illinois (Building Sales Tax Revenue,
Series 1991O)........................ A1/AAA 06/01/97(A) 7.500 1,752,586
Prerefunded
3,000,000 Illinois Sales Tax Revenue (Refunding,
Series Q)............................ A1/AAA 06/15/09 6.000 3,228,000
Revenue Bond
3,250,000 Illinois Sales Tax Revenue (Refunding,
Series Q)............................ A1/AAA 06/15/12 6.000 3,477,500
Revenue Bond
3,350,000 Illinois Sales Tax Revenue (Series
R)................................... A1/AAA 06/15/01 4.600 3,396,934
Revenue Bond
950,000 Kendall Kane & Will Counties (Community
Unit School District #308) FGIC
Insured.............................. Aaa/AAA 03/01/99 6.200 1,007,257
Insured
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
FEBRUARY 29, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL RATINGS MATURITY
AMOUNT SECURITY DESCRIPTION SECURITY SECTOR MOODY'S/S&P DATE RATE VALUE
- --------------------------------------------------- ------------------ ----------- ----------- ------- ------------
<C> <S> <C> <C> <C> <C> <C>
ILLINOIS (CONTINUED)
$ 2,500,000 Metropolitan Pier & Exposition
Authority (McCormick Place Expansion
Project, Series A)................... A/A+ 06/15/06 8.500% $ 3,185,500
Revenue Bond
2,810,000 Regional Transportation Authority
(Series D) FGIC Insured.............. Aaa/AAA 06/01/07 7.750 3,457,761
Insured
1,000,000 University of Illinois (Auxiliary
Facilities, Series 1992N, Escrowed to
Maturity)............................ NR/AAA 04/01/96(A) 6.000 1,053,160
Revenue Bond
------------
Total Illinois 43,477,491
------------
INDIANA (0.9%)
3,915,000 Indiana Transportation Finance
Authority (Highway Revenue Refunding,
Series A) AMBAC Insured.............. Aaa/AAA 06/01/09 5.250 3,989,698
Insured
------------
KENTUCKY (1.0%)
4,400,000 Kentucky Turnpike Authority (Series A
Escrowed to Maturity)................ NR/NR 07/01/96(A) 7.100 4,906,396
Revenue Bond
------------
LOUISIANA (0.3%)
500,000 Louisiana Recovery District Sales Tax
Revenue FGIC Insured................. VMIG1/A-1+ 03/01/96(A) 3.500(B) 500,000
Insured
800,000 Louisiana Recovery District Sales Tax
Revenue MBIA Insured................. VMIG1/A-1+ 03/01/96(A) 3.500(B) 800,000
Insured
------------
Total Louisiana 1,300,000
------------
MARYLAND (0.9%)
3,000,000 Maryland (3rd Series).................. Aaa/AAA 07/15/01(A) 6.400 3,306,810
General Obligation
1,000,000 Maryland Department of Transportation
(Series 1990)........................ NRR/AAA 08/15/99(A) 6.700 1,102,170
Prerefunded
------------
Total Maryland 4,408,980
------------
MASSACHUSETTS (2.7%)
4,950,000 Massachusetts Bay Transportation
Authority (General Transportation
System, Refunding, Series A)......... A1/A+ 03/01/08 7.000 5,865,206
Revenue Bond
1,495,000 Massachusetts College Building
Authority (Refunding, Series A)...... A1/A+ 05/01/11 7.500 1,845,458
Revenue Bond
3,500,000 Massachusetts Turnpike Authority (Bond
Anticipation Notes, Refunding, Series
A)................................... A1/A+ 06/01/99 5.000 3,599,155
General Obligation
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
FEBRUARY 29, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL RATINGS MATURITY
AMOUNT SECURITY DESCRIPTION SECURITY SECTOR MOODY'S/S&P DATE RATE VALUE
- --------------------------------------------------- ------------------ ----------- ----------- ------- ------------
<C> <S> <C> <C> <C> <C> <C>
MASSACHUSETTS (CONTINUED)
$ 1,060,000 Wareham School Project Loan Bonds AMBAC
Insured.............................. Aaa/AAA 01/15/01(A) 6.800% $ 1,191,239
Insured
------------
Total Massachusetts 12,501,058
------------
MINNESOTA (1.3%)
5,265,000 Western Minnesota Municipal Power
Agency (Series 1983A) MBIA Insured... NRR/AAA 01/01/97(A) 10.125 5,911,226
Prerefunded
------------
MISSISSIPPI (2.4%)
10,000,000 Mississippi (Refunding Bonds, Escrowed
to Maturity)......................... NR/AAA 02/01/08 6.200 11,039,100
General Obligation
------------
MISSOURI (1.0%)
4,000,000 St. Louis County Regional Convention
Sports Complex Authority (Series
B)................................... NRR/AAA 08/15/03(A) 7.000 4,635,960
Prerefunded
------------
NEBRASKA (0.9%)
4,000,000 Nebraska Public Power District (Nuclear
Facilities, Refunding)............... A1/A+ 07/01/00 5.200 4,152,120
Revenue Bond
------------
NEVADA (4.5%)
500,000 Carson City School District, (Series
1990) FGIC Insured................... Aaa/AAA 04/01/00(A) 6.750 556,460
Prerefunded
3,000,000 Clark County Nevada Passenger
Facilities (Las Vegas McCarran
International Airport, Series A)
AMBAC Insured........................ Aaa/AAA 07/01/08 6.250 3,359,610
Insured
1,000,000 Clark County Nevada School District
Group #2 FGIC Insured................ NRR/AAA 05/01/00(A) 7.550 1,144,960
Prerefunded
8,200,000 Clark County Nevada School District
(Series A) MBIA Insured.............. Aaa/AAA 06/01/11 7.000 9,702,158
Insured
1,685,000 Las Vegas (Clark County Library
District, Series Series 1991A) FGIC
Insured.............................. Aaa/AAA 06/01/01(A) 6.600 1,881,437
Prerefunded
1,200,000 Las Vegas (Clark County Library
District, Series 1991A) FGIC
Insured.............................. Aaa/AAA 06/01/01(A) 6.700 1,345,488
Prerefunded
1,280,000 Las Vegas (Clark County Library
District, Refunding, Series B) FGIC
Insured.............................. Aaa/AAA 08/01/01(A) 6.700 1,414,400
Insured
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
FEBRUARY 29, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL RATINGS MATURITY
AMOUNT SECURITY DESCRIPTION SECURITY SECTOR MOODY'S/S&P DATE RATE VALUE
- --------------------------------------------------- ------------------ ----------- ----------- ------- ------------
<C> <S> <C> <C> <C> <C> <C>
NEVADA (CONTINUED)
$ 1,330,000 Nevada Prison Facilities, (Series
1990A)............................... Aa/AA 08/01/00(A) 7.000% $ 1,501,530
Prerefunded
------------
Total Nevada 20,906,043
------------
NEW HAMPSHIRE (0.4%)
1,720,000 New Hampshire (Series 1991A)........... Aa/AA+ 06/15/01(A) 6.600 1,921,567
General Obligation
------------
NEW JERSEY (8.0%)
2,200,000 New Jersey Economic Development
Authority (Market Transition
Facilities, Series A) MBIA Insured... Aaa/AAA 07/01/00 5.125 2,279,838
Insured
7,000,000 New Jersey Economic Development
Authority (Market Transition
Facilities, Series A) MBIA Insured... Aaa/AAA 07/01/02 5.400 7,383,110
Insured
1,500,000 New Jersey Sports & Exposition
Authority (Sports Complex, Refunding,
Escrowed to Maturity)................ Aa1/NR 01/01/00 8.100 1,707,000
Revenue Bond
6,000,000 New Jersey Transportation Authority
(Refunding, Series B) MBIA Insured... Aaa/AAA 06/15/01 6.000 6,513,420
Insured
6,000,000 New Jersey Transportation Authority
(Refunding, Series B) MBIA Insured... Aaa/AAA 06/15/05 6.000 6,638,580
Insured
7,000,000 New Jersey Transportation Authority
(Refunding, Series B) MBIA Insured... Aaa/AAA 06/15/10 6.500 8,016,190
Insured
2,500,000 New Jersey Turnpike Authority
(Refunding, Series A) MBIA Insured... Aaa/AAA 01/01/00 6.200 2,698,375
Insured
1,000,000 New Jersey Turnpike Authority
(Refunding, Series A) MBIA Insured... Aaa/AAA 01/01/01 5.700 1,061,410
Insured
1,000,000 Ocean County General Improvement....... Aa/NR 04/15/00 6.375 1,084,340
General Obligation
------------
Total New Jersey 37,382,263
------------
NEW YORK (7.7%)
110,000 Monroe County Public Improvement AMBAC
Insured.............................. NR/AAA 06/01/04(A) 6.000 122,187
Prerefunded
120,000 Monroe County Public Improvement AMBAC
Insured.............................. NR/AAA 06/01/04(A) 6.000 133,295
Prerefunded
1,990,000 Monroe County Public Improvement
(Unrefunded Balance) AMBAC Insured... Aaa/AAA 06/01/04(A) 6.000 2,174,931
Insured
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
23
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
FEBRUARY 29, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL RATINGS MATURITY
AMOUNT SECURITY DESCRIPTION SECURITY SECTOR MOODY'S/S&P DATE RATE VALUE
- --------------------------------------------------- ------------------ ----------- ----------- ------- ------------
<C> <S> <C> <C> <C> <C> <C>
NEW YORK (CONTINUED)
$ 1,295,000 Monroe County Public Improvement
(Unrefunded Balance) AMBAC Insured... Aaa/AAA 06/01/04(A) 6.000% $ 1,402,174
Insured
1,500,000 Municipal Assistance Corp. for the City
of New York (Refunding, Series D)
AMBAC Insured........................ Aaa/AAA 07/01/02 5.250 1,573,155
Insured
1,000,000 Municipal Assistance Corp. for the City
of New York (Custodial Receipt
Certificates, Refunding, Series
1987-61) MBIA Insured................ Aaa/AAA 07/01/97(A) 6.875 1,057,370
Insured
1,465,000 New York City (Escrowed to Maturity,
Series B)............................ NR/AAA 06/01/01 8.000 1,724,202
General Obligation
4,675,000 New York City (Refunding, Series H
Subseries H-1)....................... Baa1/BBB+ 08/01/01 5.500 4,729,324
General Obligation
2,645,000 New York City (Refunding, Series A).... Baa1/BBB+ 08/01/02 5.750 2,694,541
General Obligation
2,000,000 New York (Series F).................... Baa1/BBB+ 02/15/02 6.100 2,070,500
General Obligation
3,425,000 New York City (Series F)............... Baa1/BBB+ 02/15/03 6.200 3,557,993
General Obligation
1,000,000 New York City (Series B) FGIC
Insured.............................. VMIG1/A-1+ 03/01/96(A) 3.350(B) 1,000,000
Insured
100,000 New York City (SubSer B-4) LOC-Union
Bank of Switzerland.................. VMIG1/A-1+ 03/01/96(A) 3.350(B) 100,000
General Obligation
1,000,000 New York Dormitory Authority, (Iona
College, Series 1988) MBIA Insured... Aaa/AAA 07/01/98(A) 7.625 1,091,490
Prerefunded
300,000 New York Energy Research & Development
Authority PCR, Niagara Mohawk Power,
Series A LOC-Toronto Dominion Bank... NR/A-1+ 03/01/96(A) 3.500(B) 300,000
Revenue Bond
1,500,000 New York Urban Development Correctional
Capital Facilities (Series 1)........ NRR/NR 01/01/00(A) 7.750 1,718,775
Prerefunded
4,000,000 Triborough Bridge & Tunnel Authority
(Refunding, Series V) FGIC Insured... Aaa/AAA 01/01/01(A) 6.875 4,467,600
Insured
5,500,000 Triborough Bridge & Tunnel Authority
(Refunding, Series X )............... Aa/A+ 01/01/12 6.625 6,274,015
Revenue Bond
------------
Total New York 36,191,552
------------
NORTH CAROLINA (2.0%)
8,500,000 North Carolina Eastern Municipal Power
Agency Systems Revenue (Refunding,
Series A)............................ NRR/BBB+ 01/01/99(A) 7.250 9,398,280
Prerefunded
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
24
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
FEBRUARY 29, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL RATINGS MATURITY
AMOUNT SECURITY DESCRIPTION SECURITY SECTOR MOODY'S/S&P DATE RATE VALUE
- --------------------------------------------------- ------------------ ----------- ----------- ------- ------------
<C> <S> <C> <C> <C> <C> <C>
OHIO (1.0%)
$ 3,525,000 Ohio Water Development Authority
(Refunding, Series Safe Water II,
Escrowed to Maturity)................ NRR/AAA 06/01/96(A) 9.375% $ 4,536,005
Revenue Bond
------------
PENNSYLVANIA (1.4%)
1,175,000 Bethel Park School District, (Series
1991B) AMBAC Insured................. Aaa/AAA 02/01/00(A) 6.550 1,275,169
Prerefunded
1,000,000 Pennsylvania (Refunding and Projects,
Custodial Receipt Certificates, 1st
Series A) AMBAC Insured.............. Aaa/AAA 01/01/01 6.600 1,100,360
Insured
1,500,000 Pennsylvania (2nd Series 1991A) MBIA
Insured.............................. Aaa/AAA 11/01/01(A) 6.500 1,663,695
Insured
970,000 Pennsylvania Higher Education
Assistance Agency, (Student Loan
Refunding, Series 1985A) FGIC
Insured.............................. Aaa/AAA 12/01/00 6.800 1,058,406
Insured
1,310,000 Pennsylvania Higher Education
Facilities Authority College
(Refunding, Series A)................ Aa/AA 09/01/02 6.500 1,465,733
Revenue Bond
------------
Total Pennsylvania 6,563,363
------------
PUERTO RICO (1.1%)
5,000,000 Puerto Rico Commonwealth Aqueduct...... Baa1/A 07/01/98 4.400 5,037,350
Revenue Bond
------------
RHODE ISLAND (2.4%)
2,000,000 Rhode Island (Refunding, Series
1990B)............................... A1/AA- 10/15/99(A) 6.700 2,210,180
Prerefunded
3,785,000 Rhode Island (Series 1991B)............ A1/AA- 05/15/00 6.000 4,027,164
General Obligation
5,000,000 Rhode Island State Public Buildings
Authority (Public Projects Refunding,
Series A) AMBAC Insured.............. Aaa/AAA 02/01/00 4.700 5,071,300
Insured
------------
Total Rhode Island 11,308,644
------------
SOUTH CAROLINA (0.2%)
1,000,000 Piedmont Municipal Power Agency
Electric (Refunding) MBIA Insured.... Aaa/AAA 01/01/08 6.200 1,111,850
Insured
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
25
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
FEBRUARY 29, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL RATINGS MATURITY
AMOUNT SECURITY DESCRIPTION SECURITY SECTOR MOODY'S/S&P DATE RATE VALUE
- --------------------------------------------------- ------------------ ----------- ----------- ------- ------------
<C> <S> <C> <C> <C> <C> <C>
TENNESSEE (0.7%)
$ 1,400,000 Metropolitan Nashville Airport
Authority (Refunding, Series B)
LOC-Bayerische Landesbank............ NR/A-1+ 03/01/96(A) 3.500%(B) $ 1,400,000
Revenue Bond
2,000,000 Chattanooga Industrial Development
Board (IDR, Gerber/Buster Brown
Manufacturing, Inc.)................. A1/NR 11/01/96(A) 4.000(B) 2,001,980
Revenue Bond
------------
Total Tennessee 3,401,980
------------
TEXAS (7.2%)
1,500,000 Addison (Refunding, Series 1991) FGIC
Insured.............................. Aaa/AAA 09/01/98(A) 6.250 1,568,776
Insured
1,000,000 Arlington Permanent Improvement School
Fund Guarantee (Series 1989) AMBAC
Insured.............................. Aaa/AAA 08/01/99(A) 6.850 1,075,690
Insured
1,050,000 Austin Independent School District
(Refunding, Series 1991) PSFG
Insured.............................. Aaa/AAA 08/01/99 6.200 1,122,807
Insured
1,500,000 Austin Utilities System (Series 6,
Escrowed to Maturity)................ NRR/AAA 04/01/96(A) 6.500 1,664,685
Revenue Bond
1,000,000 Austin Utility System (Prerefunded).... NRR/AAA 11/15/99(A) 11.300 1,245,400
Revenue Bond
335,000 Austin Water Sewer & Electric
(Refunding, Escrowed to Maturity).... A/A- 11/15/97 13.500 388,597
Revenue Bond
975,000 Conroe Independent School District
(Schoolhouse and Refunding, Series
1989) MBIA Insured................... Aaa/AAA 02/01/99(A) 7.100 1,057,534
Prerefunded
25,000 Conroe Independent School District
(Schoolhouse and Partially
Prerefunded, Refunding, Series 1989)
MBIA Insured......................... Aaa/AAA 02/01/99(A) 7.100 26,891
Insured
1,100,000 Conroe Independent School District
(Schoolhouse and Refunding) PSFG
Insured.............................. Aaa/AAA 02/01/02 6.500 1,224,080
Insured
1,265,000 Conroe Independent School District
(Schoolhouse and Refunding, Series
1993) PSFG Insured................... Aaa/AAA 02/01/03 6.500 1,420,393
Insured
1,500,000 Corpus Christie Independent School
(Refunding) PSFG Insured............. Aaa/NR 08/15/02 5.350 1,582,815
Insured
1,305,000 Dallas County Tax Flood Control
District #1 (Refunding).............. NRR/NR 04/01/08(A) 9.250 1,810,387
Prerefunded
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
26
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
FEBRUARY 29, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL RATINGS MATURITY
AMOUNT SECURITY DESCRIPTION SECURITY SECTOR MOODY'S/S&P DATE RATE VALUE
- --------------------------------------------------- ------------------ ----------- ----------- ------- ------------
<C> <S> <C> <C> <C> <C> <C>
TEXAS (CONTINUED)
$ 1,650,000 El Paso Independent School District,
(Series 1991) PSFG Insured........... Aaa/AAA 07/01/01(A) 6.550% $ 1,827,788
Prerefunded
3,805,000 Fort Worth Independent School District
(Refunding, Series 1987)............. Aa/AA 02/15/98 6.000 3,965,343
General Obligation
1,700,000 Harris County Road Improvement
Authority (Series 1989) MBIA
Insured.............................. Aaa/AAA 11/01/99(A) 7.000 1,869,405
Prerefunded
700,000 Lone Star Airport Improvement Authority
LOC-Royal Bank of Canada............. VMIGI/NR 03/01/96(A) 3.500(B) 700,000
Revenue Bond
2,000,000 Plano Independent School District
(Series 1991B) FGIC Insured.......... Aaa/AAA 02/15/01(A) 6.550 2,201,900
Prerefunded
1,500,000 Sabine River Authority Pollution
Control (Refunding).................. VMIG1/A-1+ 03/01/96(A) 3.500(B) 1,500,000
Revenue Bond
700,000 Texas A&M University (Refunding, Series
1989)................................ Aaa/AA+ 07/01/97(A) 6.500 738,472
Revenue Bond
750,000 Texas A&M University (Refunding, Series
1989)................................ Aaa/AAA 07/01/97(A) 6.600 794,123
Prerefunded
2,000,000 Texas Public Finance Authority (Series
1988A)............................... NR/AA 10/01/00(A) 6.300 2,174,420
Prerefunded
1,000,000 Texas Public Finance Authority (Series
1991A)............................... NR/AA 10/01/00(A) 6.500 1,095,480
Prerefunded
2,500,000 University of Texas (Permanent
University Fund, Refunding, Series
1991)................................ Aaa/AA+ 07/01/01 6.300 2,746,075
Revenue Bond
------------
Total Texas 33,801,061
------------
UTAH (3.7%)
5,130,000 Intermountain Power Agency (Refunding,
Series C) MBIA Insured............... Aaa/AAA 07/01/00 6.000 5,470,735
Insured
4,155,000 Intermountain Power Agency (Refunding,
Series C) MBIA Insured............... Aaa/AAA 07/01/01 6.000 4,469,201
Insured
6,645,000 Intermountain Power Agency (Refunding,
Series C) MBIA Insured............... Aaa/AAA 07/01/02 6.000 7,193,744
Insured
------------
Total Utah 17,133,680
------------
VIRGINIA (2.3%)
2,000,000 Fairfax County Water Authority
(Prerefunded)........................ NRR/AAA 01/01/00(A) 6.125 2,138,720
Revenue Bond
2,000,000 Virginia Public School Authority
(Series A)........................... Aa/AA 08/01/01(A) 6.500 2,220,880
Revenue Bond
5,000,000 Virginia Public School Authority
(Refunding, Series 1991C)............ Aa/AA 01/01/02 6.000 5,431,750
Revenue Bond
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
27
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
FEBRUARY 29, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL RATINGS MATURITY
AMOUNT SECURITY DESCRIPTION SECURITY SECTOR MOODY'S/S&P DATE RATE VALUE
- --------------------------------------------------- ------------------ ----------- ----------- ------- ------------
<C> <S> <C> <C> <C> <C> <C>
VIRGINIA (CONTINUED)
$ 1,000,000 Virginia State Transportation Board
(Route 28 Project, Refunding)........ Aa/AA 04/01/01 5.800% $ 1,071,640
Revenue Bond
------------
Total Virginia 10,862,990
------------
WASHINGTON (7.0%)
6,355,000 King County Washington (Refunding,
Series B)............................ Aa1/AA+ 01/01/01 6.700 7,023,228
General Obligation
1,555,000 North Shore School District #417, (King
& Snohomish Counties, Series 1991)
FGIC Insured......................... Aaa/AAA 12/01/00(A) 6.600 1,696,039
Insured
1,000,000 Pierce County School District #320,
(Sumner Washington, Custodial Receipt
Certificates, Series 1991) MBIA
Insured.............................. Aaa/AAA 12/01/01(A) 6.600 1,110,700
Insured
2,955,000 Seattle Municipal Sewer Revenue
(Prerefunded, Series T).............. NRR/AA- 01/01/00(A) 6.875 3,288,294
Revenue Bond
1,250,000 Snohomish County Washington School
District #2, (Everett, Custodial
Receipt Certificates, Refunding,
Series A) MBIA Insured............... Aaa/AAA 06/01/01(A) 6.700 1,377,325
Insured
1,750,000 Washington (Refunding, Series
R-92-A).............................. Aa/AA 09/01/01(A) 6.300 1,926,575
General Obligation
1,000,000 Washington (Prerefunded, Series
1990B)............................... Aa/AA 08/01/00(A) 6.750 1,102,320
General Obligation
3,000,000 Washington (Refunding, Series 1995C,
AT-8 and R-95 B)..................... Aa/AA 07/01/02 5.750 3,225,150
General Obligation
2,000,000 Washington Public Power Supply System
(Nuclear Project #2, Refunding,
Series 1990A)........................ Aa/AA 07/01/06 7.250 2,335,000
Revenue Bond
2,000,000 Washington Public Power Supply System
(Nuclear Project #2, Refunding,
Series C) FGIC Insured............... Aaa/AAA 01/01/01(A) 7.000 2,234,800
Insured
1,500,000 Washington Public Power Supply System
(Nuclear Project #2, Refunding,
Series 1990C)........................ Aa/AA 01/01/01(A) 7.500 1,700,925
Revenue Bond
5,265,000 Washington Public Power Supply System
(Nuclear Project #2, Refunding,
Series A)............................ Aa/AA 07/01/01 6.300 5,686,621
Revenue Bond
------------
Total Washington 32,706,977
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
28
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
FEBRUARY 29, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL RATINGS MATURITY
AMOUNT SECURITY DESCRIPTION SECURITY SECTOR MOODY'S/S&P DATE RATE VALUE
- --------------------------------------------------- ------------------ ----------- ----------- ------- ------------
<C> <S> <C> <C> <C> <C> <C>
WEST VIRGINIA (0.2%)
$ 1,000,000 Berkeley County, Board of Education
(Escrowed to Maturity, Series 1988)
MBIA Insured......................... Aaa/AAA 04/01/01 7.300% $ 1,137,230
Insured
------------
WISCONSIN (3.4%)
1,500,000 Racine Unified School District AMBAC
Insured.............................. Aaa/AAA 04/01/99(A) 6.500 1,594,425
Insured
5,000,000 Wisconsin (Series A)................... Aa/AA 05/01/99 5.750 5,260,999
General Obligation
5,000,000 Wisconsin Transportation (Refunding,
Series A)............................ A1/AA- 07/01/06 4.600 4,891,049
Revenue Bond
4,000,000 Wisconsin (Refunding).................. Aa/AA 05/01/03 6.000 4,381,999
General Obligation
------------
Total Wisconsin 16,128,472
------------
WYOMING (1.2%)
3,600,000 Platte County Pollution Control (Basin
Electric Power Cooperative,
Refunding)........................... A2/A 01/01/06 4.950 3,644,531
Revenue Bond
2,115,000 Platte County Pollution Control (Basin
Electric Power Cooperative,
Refunding)........................... A2/A 01/01/07 5.050 2,160,937
Revenue Bond
------------
Total Wyoming 5,805,468
------------
TOTAL INVESTMENTS (102.9%) (COST $457,419,692) $481,237,246
LIABILITIES IN EXCESS OF OTHER ASSETS (-2.9%) (13,500,323)
------------
NET ASSETS (100.0%) $467,736,923
------------
------------
</TABLE>
(A) The date shown represents a mandatory/optional put date or call date, or
interest reset date.
(B) Variable rate demand note tender dates and/or interest rates are reset at
specified intervals which coincide with their tender feature. The rates
shown are the current rates at February 29, 1996.
1. Abbreviations used in the schedule of investments are as follows: AMBAC -
American Municipal Bond Assurance Corp., FHA - Federal Housing Authority,
FGIC - Financial Guaranty Insurance Company, IDR - Industrial Development
Revenue, LOC - Letter of Credit, MBIA - Municipal Bond Investors Assurance
Corp., PCR - Pollution Control Revenue, PSFG - Permanent School Fund
Guarantee, NRR -- Not Rerated, NR -- Not Rated.
2. Definition of Terms Used: Crossover Refunded - Bonds for which the issuer
of the bond invests the proceeds from a subsequent bond issue in cash
and/or securities which have been deposited with a third party to cover the
payments of principal and interest at the maturity of the bond.
Escrowed to Maturity - Bonds for which cash and/or securities have been
deposited with a third party to cover the payments of principal and
interest at the maturity of the bond.
Prerefunded - Bonds for which the issuer of the bond invests the proceeds
from a subsequent bond issuance in treasury securities, whose maturity
coincides with the first call date of the first bond.
Refunding - Bonds for which the issuer has issued new bonds and canceled
the old issue.
The Accompanying Notes are an Integral Part of the Financial Statements.
29
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
FEBRUARY 29, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $457,419,692) $481,237,246
Cash 1,779,635
Interest Receivable 5,630,770
Prepaid Insurance 1,320
Prepaid Trustees' Fees 649
-----------
Total Assets 488,649,620
-----------
LIABILITIES
Payable for Investments Purchased 20,720,280
Advisory Fee Payable 110,969
Administrative Services Fee Payable 19,702
Custody Fee Payable 14,304
Administration Fee Payable 4,813
Fund Services Fee Payable 1,158
Accrued Expenses 41,471
-----------
Total Liabilities 20,912,697
-----------
NET ASSETS
Applicable to Investors' Beneficial Interests $467,736,923
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
30
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED FEBRUARY 29, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
$ 11,529,278
Interest Income
EXPENSES
Advisory Fee $654,786
Custodian Fees and Expenses 42,343
Professional Fees 24,643
Fund Services Fee 12,858
Administrative Services Fee 19,702
Administration Fee 18,571
Printing Expense 5,984
Trustees' Fees and Expenses 4,477
Insurance Expense 2,468
Registration Expense 304
Miscellaneous 996
--------
(787,132)
Net Expenses
------------
10,742,146
NET INVESTMENT INCOME
556,635
NET REALIZED GAIN ON INVESTMENTS
5,619,922
NET CHANGE IN UNREALIZED APPRECIATION OF INVESTMENTS
------------
$ 16,918,703
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
31
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED FEBRUARY 29, FOR THE FISCAL
1996 YEAR ENDED
(UNAUDITED) AUGUST 31, 1995
------------------ ---------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 10,742,146 $ 20,242,631
Net Realized Gain on Investments 556,635 377,206
Net Change in Unrealized Appreciation of Investments 5,619,922 9,384,271
------------------ ---------------
Net Increase in Net Assets Resulting from Operations 16,918,703 30,004,108
------------------ ---------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 111,974,617 221,887,625
Withdrawals (73,794,260) (248,866,727)
------------------ ---------------
Net Decrease from Investors' Transactions 38,180,357 (26,979,102)
------------------ ---------------
Total Increase (Decrease) in Net Assets 55,099,060 3,025,006
NET ASSETS
Beginning of Period 412,637,863 409,612,857
------------------ ---------------
End of Period $ 467,736,923 $ 412,637,863
------------------ ---------------
------------------ ---------------
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX JULY 12, 1993
MONTHS ENDED FOR THE FISCAL FOR THE FISCAL (COMMENCEMENT OF
FEBRUARY 29, 1996 YEAR ENDED YEAR ENDED OPERATIONS) TO
(UNAUDITED) AUGUST 31, 1995 AUGUST 31, 1994 AUGUST 31, 1993
-------------------- ---------------- ---------------- -------------------
<S> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Expenses 0.36%(a) 0.42% 0.41% 0.04%(a)
Net Investment Income 4.89%(a) 5.15% 4.68% 4.58%(a)
Decrease Reflected in Expense Ratio
due to Expense Reimbursement -- -- -- 0.01%(a)
Portfolio Turnover 12% 47% 33% 43%+
</TABLE>
- ------------------------
(a) Annualized
(+) Portfolio turnover is for the twelve month period ended August 31, 1993, and
includes the portfolio activity of the Portfolio's predecessor entity, The
Pierpont Tax Exempt Bond Fund, for the period September 1, 1992 through July
11, 1993.
The Accompanying Notes are an Integral Part of the Financial Statements.
32
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
FEBRUARY 29, 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 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 prepared 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.
33
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
FEBRUARY 29, 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 investment
advisory agreement, the Portfolio pays Morgan at an annual rate of 0.30%
of the Portfolio's average daily net assets. For the six months ended
February 29, 1996, such fees amounted to $654,786.
b)The Portfolio retains Signature Broker-Dealer Services, Inc. ("Signature")
to serve as Administrator and exclusive placement agent. Signature
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 Signature. 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 Administration
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 is applied each
day to the net assets of the Portfolio. For the period from September 1,
1995 through December 28, 1995, such fees amounted to $8,718.
Effective December 29, 1995, the Administration Agreement was amended such
that the fee charged would be 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 subject to this agreement (the "Master
Portfolios") and 0.01% on the aggregate average daily net assets of the
Master Portfolios in excess of $7 billion. The portion of this charge
payable by the Portfolio is determined by the proportionate share its net
assets bear to the total net assets of the The Pierpont Funds, The JPM
Institutional Funds, The JPM Advisor Funds and the Master Portfolios. For
the period December 29, 1995 through February 29, 1996, such fees amounted
to $9,853.
c)Effective December 29, 1995, the Portfolio entered into an Administrative
Services Agreement with Morgan under which Morgan is responsible for
overseeing certain aspects of the administration and operation of the
Portfolio. Under the agreement, the Portfolio has agreed to pay Morgan a
fee equal to its proportionate share of an annual complex-wide charge.
This charge is 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 aggregate average daily net assets in excess
of $7 billion. The portion of this charge payable by the Portfolio is
determined by the proportionate share that the Portfolio's net assets bear
to the net assets of the Master Portfolios and other investors in the
Master Portfolios for which Morgan provides similar services. For the
period from December 29, 1995 through February 29, 1996, such fees
amounted to $19,702.
34
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
FEBRUARY 29, 1996
- --------------------------------------------------------------------------------
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 $12,858 for the six months ended February 29, 1996.
e)An aggregate annual fee of $65,000 is paid to each Trustee for serving as
a Trustee of The Pierpont Funds, The JPM Institutional Funds, and their
corresponding Portfolios. The Trustees' Fees and Expenses shown in the
financial statements represents the Portfolio's allocated portion of the
total fees and expenses. The Trustee who serves as Chairman and Chief
Executive Officer of these Funds and Portfolios 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 $1,600.
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the six months
ended February 29, 1996 were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
------------ ------------
<S> <C>
$ 27,585,439 $ 51,662,583
</TABLE>
35
