<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
FEBRUARY 28, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY MOODY'S MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE S&P DATE RATE VALUE
- -------------- ------------------------------------------------- ------- --------------- ---------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
LONG-TERM INVESTMENTS (99.0%)
ALABAMA (0.7%)
$ 1,000 Alabama Mental Health Finance Authority, Special
Tax Obligation, (Prerefunded, Series 1989, due
05/01/01), MBIA Insured........................ RB Aaa/AAA 05/01/99(b) 7.375% $ 1,086,370
1,630 Childersburg Industrial Development Board, PCR,
(Kimberly Clark Corp. Project, Escrowed to
Maturity, due 11/15/99)........................ RB Aa2/AA 05/15/97(b) 7.400 1,719,585
1,000 Daphne Special Care Facilities Financing
Authority, (Presbyterian Retirement,
Prerefunded, Series A, due 08/15/18)........... RB NR/NR 08/15/01(b) 7.300 1,109,940
------------
TOTAL ALABAMA................................ 3,915,895
------------
ALASKA (2.6%)
2,000 Anchorage, (Prerefunded, Series 1991, due
07/01/02), MBIA Insured........................ GO Aaa/AAA 07/01/01(b) 6.600 2,173,340
1,075 Anchorage, (Refunding, Series 1989, due
06/01/03), AMBAC Insured....................... GO Aaa/AAA 06/01/99(b) 7.100 1,146,391
1,000 Anchorage, (Series 1990A), AMBAC Insured......... GO Aaa/AAA 02/01/00 6.850 1,070,370
3,000 North Slope Borough, (Series 1992A), MBIA
Insured........................................ GO Aaa/AAA 06/30/00 5.550 3,120,030
5,500 North Slope Borough, Zero Coupon, (Capital
Appreciation, Series 1996A), MBIA Insured...... GO Aaa/AAA 06/30/99 0.000 4,966,555
2,200 North Slope Borough, Zero Coupon, (Capital
Appreciation, Series 1996B), MBIA Insured...... GO Aaa/AAA 06/30/01 0.000 1,797,026
------------
TOTAL ALASKA................................. 14,273,712
------------
ARIZONA (0.8%)
1,000 Maricopa County School District #11, (Peoria
Unified School Improvement, Prerefunded, Series
1990H, due 07/01/05), MBIA Insured............. GO Aaa/AAA 07/01/99(b) 7.000 1,104,150
1,325 Maricopa County School District #3, (Tempe
Elementary, Projects of 1991, Prerefunded,
Series C, due 07/01/08)........................ GO A1/AA 07/01/06(b) 6.000 1,444,515
1,750 Phoenix, (Refunding, Series C)................... GO Aa1/AA+ 07/01/02 6.375 1,911,507
------------
TOTAL ARIZONA................................ 4,460,172
------------
</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 28, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY MOODY'S MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE S&P DATE RATE VALUE
- -------------- ------------------------------------------------- ------- --------------- ---------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
CALIFORNIA (5.9%)
$ 2,520 California Department of Water Resources,
(Central Valley Project, Water Systems Service,
Refunding, Series J-1)......................... RB Aa/AA 12/01/12 7.000% $ 2,982,521
6,000 California State................................. GO A1/A+ 02/01/08 6.500 6,766,440
9,000 California State................................. GO A1/A+ 06/01/06 6.750 10,226,520
1,000 California State, (AMBAC/MBIA Insured)........... GO Aaa/AAA 09/01/06 6.500 1,126,120
594 Kaweah Delta Hospital District, Tulare County,
(Series D, due 06/01/14)....................... PP NR/A+ 06/01/97(b) 4.350 595,455
1,160 Kaweah Delta Hospital District, Tulare County,
(Series E, due 06/01/14)....................... PP NR/A+ 06/01/97(b) 5.250 1,164,037
1,695 Kaweah Delta Hospital District, Tulare County,
(Series G, due 06/01/14)....................... PP NR/A+ 06/01/04(b) 6.400 1,831,380
3,000 Los Angeles County Public Works, (Refunding,
Series A), MBIA Insured........................ RB Aaa/AAA 09/01/05 6.000 3,233,820
2,500 Los Angeles County Public Works, (Refunding,
Series A), MBIA Insured........................ RB Aaa/AAA 09/01/06 6.000 2,695,200
2,000 Los Angeles Department of Water & Power,
(California Electric Plant, Crossover Refunded,
due 05/15/30).................................. RB Aa3/A+ 05/15/00(b) 7.125 2,205,800
------------
TOTAL CALIFORNIA............................. 32,827,293
------------
COLORADO (0.8%)
1,295 Adams County School District #12, FGIC Insured... GO Aaa/AAA 12/15/06 6.000 1,410,993
3,180 Lower Colorado River Authority, (Refunding)...... RB Aa/A+ 01/01/99 5.000 3,235,745
------------
TOTAL COLORADO............................... 4,646,738
------------
CONNECTICUT (0.9%)
1,755 Connecticut Housing Finance Authority, (Housing
Mortgage Finance Program, Refunding, Series
1987B)......................................... RB Aa/AA 11/15/97 8.100 1,786,783
2,815 Connecticut Transportation Infrastructure,
Special Tax Obligation, (Prerefunded, Series
1991A, due 06/01/04)........................... RB NR/AA- 06/01/03(b) 6.600 3,117,894
------------
TOTAL CONNECTICUT............................ 4,904,677
------------
</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 28, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY MOODY'S MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE S&P DATE RATE VALUE
- -------------- ------------------------------------------------- ------- --------------- ---------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
DISTRICT OF COLUMBIA (2.5%)
$ 3,000 District of Columbia, (Refunding, Series A), MBIA
Insured........................................ GO Aaa/AAA 06/01/07 6.000% $ 3,188,670
7,500 District of Columbia, (Refunding, Series C), FGIC
Insured........................................ GO Aaa/AAA 12/01/03 5.250 7,692,225
2,600 District of Columbia, (Series B), MBIA Insured... GO Aaa/AAA 06/01/02 6.000 2,758,132
------------
TOTAL DISTRICT OF COLUMBIA................... 13,639,027
------------
FLORIDA (2.8%)
5,765 Dade County School District, (Refunding), MBIA
Insured........................................ GO Aaa/AAA 07/15/05 6.000 6,262,231
1,535 Florida Board of Education, Capital Outlay,
(Escrowed to Maturity, Series 1986C, due
06/01/01)...................................... GO Aaa/AAA 06/01/97(b) 7.000 1,605,733
1,300 Florida Board of Education, Capital Outlay,
(Refunding, Series B).......................... GO Aa2/AA 01/01/99 4.250 1,308,645
465 Florida Board of Education, Capital Outlay,
(Unrefunded Balance, Series 1986C, due
06/01/01)...................................... GO Aa/AA 06/01/97(b) 7.000 475,788
3,200 Jacksonville Electric Authority, (St. Johns
River, Issue 2, Crossover Refunded, Series 5,
due 10/01/09).................................. RB Aa1/AA 10/01/99(b) 7.000 3,444,384
2,000 Volusia County School District, (Refunding,
Series 1991, due 08/01/02), FGIC Insured....... GO Aaa/AAA 08/01/01(b) 6.100 2,160,820
------------
TOTAL FLORIDA................................ 15,257,601
------------
GEORGIA (6.3%)
2,630 Fulton County School District, (Refunding)....... GO Aa/AA 05/01/14 6.375 2,936,474
1,000 Georgia Municipal Electric Authority, (Refunding,
Series D)...................................... RB A/A 01/01/06 6.000 1,059,680
1,000 Georgia Municipal Electric Authority, (Series
A)............................................. RB A/A 01/01/12 6.500 1,100,460
1,155 Georgia Residential Finance Authority, (Single
Family Insured Mortgages, Refunding, Series
1986A, due 12/01/98), FHA Insured.............. RB Aa/AA+ 12/01/97(b) 6.600 1,192,064
6,000 Georgia, (Series B).............................. GO Aaa/AA+ 03/01/07 7.200 7,097,100
3,000 Georgia, (Series B).............................. GO Aaa/AA+ 03/01/10 6.300 3,348,330
4,470 Georgia, (Series C).............................. GO Aaa/AA+ 07/01/11 5.700 4,726,131
2,500 Gwinnett County School District, (Refunding,
Series B)...................................... GO Aa1/AA 02/01/08 6.400 2,800,725
</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 28, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY MOODY'S MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE S&P DATE RATE VALUE
- -------------- ------------------------------------------------- ------- --------------- ---------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
GEORGIA (CONTINUED)
$ 5,000 Metropolitan Atlanta Rapid Transit Authority,
Sales Tax Revenue, (Refunding, Series P)....... RB Aaa/AAA 07/01/11 6.250% $ 5,509,650
4,500 Municipal Electric Authority, (Project 1, Sixth
Crossover), AMBAC Insured...................... RB Aaa/AAA 01/01/08 7.000 5,229,405
------------
TOTAL GEORGIA................................ 35,000,019
------------
HAWAII (1.4%)
2,000 Hawaii, (Series BZ).............................. GO Aa/AA 10/01/12 6.000 2,156,020
3,055 Hawaii, (Series CK).............................. GO Aa/AA 09/01/04 6.000 3,305,815
2,000 Honolulu City & County Improvement, (Refunding,
Series B)...................................... GO Aa/AA 10/01/11 5.500 2,042,220
------------
TOTAL HAWAII................................. 7,504,055
------------
ILLINOIS (11.1%)
1,000 Chicago Board of Education, (Lease Certificates,
Series A), MBIA Insured........................ RB Aaa/AAA 01/01/06 6.125 1,080,270
4,130 Chicago Board of Education, (Lease Certificates,
Series A), MBIA Insured........................ RB Aaa/AAA 01/01/07 6.125 4,487,369
4,000 Chicago, (Equipment Notes, Series 1996), AMBAC
Insured........................................ GO Aaa/AAA 01/01/04 5.600 4,189,200
3,000 Chicago, (Refunding, Series A-2), AMBAC
Insured........................................ GO Aaa/AAA 01/01/11 6.000 3,197,820
2,000 Chicago, (Refunding, Series B), FGIC Insured..... GO Aaa/AAA 01/01/00 5.000 2,038,560
1,500 Chicago, (Series 1995), AMBAC Insured............ GO Aaa/AAA 01/01/05 6.500 1,654,590
1,500 Chicago, O'Hare International Airport,
(Refunding, Series C-1), MBIA Insured.......... RB Aaa/AAA 01/01/09 5.750 1,569,450
3,280 Cook County, (Refunding, Series C), FGIC
Insured........................................ GO Aaa/AAA 11/15/04 5.800 3,501,761
10,000 Cook County, Community School District #54,
Schaumburg Township, Zero Coupon, (Capital
Appreciation, Prerefunded, Series B, due
01/01/11), FGIC Insured........................ GO Aaa/AAA 01/01/03(b) 0.000 4,528,500
1,375 Du Page County, (Illinois Alternative Revenue
Jail Project, Prerefunded, due 01/01/21)....... GO Aaa/AAA 01/01/02(b) 6.550 1,519,609
2,000 Illinois, (Refunding, Series 1987, due
04/01/02)...................................... GO Aa3/AA- 04/01/97(b) 6.500 2,044,800
2,000 Illinois, (Series 1986, due 12/01/01)............ GO Aa3/AA- 05/01/97(b) 6.250 2,049,740
3,000 Illinois, Sales Tax Revenue, (Refunding, Series
Q)............................................. RB Aa3/AAA 06/15/09 6.000 3,207,300
3,250 Illinois, Sales Tax Revenue, (Refunding, Series
Q)............................................. RB Aa3/AAA 06/15/12 6.000 3,457,967
</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 28, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY MOODY'S MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE S&P DATE RATE VALUE
- -------------- ------------------------------------------------- ------- --------------- ---------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
ILLINOIS (CONTINUED)
$ 3,350 Illinois, Sales Tax Revenue, (Series R).......... RB Aa3/AAA 06/15/01 4.600% $ 3,367,956
950 Kendall Kane & Will Counties Community Unit
School District #308, FGIC Insured............. GO Aaa/AAA 03/01/99 6.200 990,128
2,500 Metropolitan Pier & Exposition Authority,
(McCormick Place Expansion Project, Series
A)............................................. RB A/A+ 06/15/06 8.500 3,148,250
5,420 Metropolitan Pier & Exposition Authority, Zero
Coupon, (Capital Appreciation, McCormick Place
Expansion Project, Refunding), MBIA Insured.... RB Aaa/AAA 06/15/14 0.000 2,019,438
11,000 Metropolitan Pier & Exposition Authority, Zero
Coupon, (Capital Appreciation, McCormick Place
Expansion Project, Refunding, Series A), MBIA
Insured........................................ RB Aaa/AAA 12/15/11 0.000 4,830,210
9,705 Metropolitan Pier & Exposition Authority, Zero
Coupon, (Capital Appreciation, McCormick Place
Expansion Project, Refunding, Series A), MBIA
Insured........................................ RB Aaa/AAA 06/15/12 0.000 4,113,949
2,810 Regional Transportation Authority, (Series D),
FGIC Insured................................... RB Aaa/AAA 06/01/07 7.750 3,394,508
1,000 University of Illinois, Auxiliary Facilities,
(Escrowed to Maturity, due 10/01/01)........... RB Aaa/AAA 04/01/97(b) 6.000 1,029,950
------------
TOTAL ILLINOIS............................... 61,421,325
------------
INDIANA (1.1%)
2,000 Indiana Municipal Power Agency, Power Supply
System Revenue, (Refunding, Series B), MBIA
Insured........................................ RB Aaa/AAA 01/01/13 6.000 2,137,540
3,915 Indiana, Transportation Finance Authority,
Highway Revenue, (Refunding, Series A), AMBAC
Insured........................................ RB Aaa/AAA 06/01/09 5.250 3,928,742
------------
TOTAL INDIANA................................ 6,066,282
------------
KENTUCKY (0.8%)
3,900 Kentucky Turnpike Authority, (Escrowed to
Maturity, Series A, due 07/01/02).............. RB Aaa/NR 07/01/97(b) 7.100 4,272,957
------------
LOUISIANA (1.5%)
8,000 Louisiana, (Refunding, Series A), FGIC Insured... GO Aaa/AAA 08/01/00 6.000 8,436,320
------------
</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 28, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY MOODY'S MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE S&P DATE RATE VALUE
- -------------- ------------------------------------------------- ------- --------------- ---------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
MARYLAND (1.1%)
$ 1,560 Anne Arundel County.............................. GO Aa/AA+ 09/01/06 6.000% $ 1,695,361
1,000 Maryland Department of Transportation,
(Prerefunded, Series 1990, due 08/15/05)....... RB Aaa/AAA 08/15/99(b) 6.700 1,081,120
3,000 Maryland, (3rd Series, due 07/15/03)............. GO Aaa/AAA 07/15/01(b) 6.400 3,237,750
------------
TOTAL MARYLAND............................... 6,014,231
------------
MASSACHUSETTS (1.7%)
5,650 Massachusetts Bay Transportation Authority,
(General Transportation System, Refunding,
Series A)...................................... RB A1/A+ 03/01/08 7.000 6,566,486
1,495 Massachusetts, College Building Authority,
(Refunding, Series A).......................... RB A1/A+ 05/01/11 7.500 1,831,584
1,060 Wareham, School Project Loan Bonds, (due
01/15/03), AMBAC Insured....................... GO Aaa/AAA 01/15/01(b) 6.800 1,168,205
------------
TOTAL MASSACHUSETTS.......................... 9,566,275
------------
MINNESOTA (2.8%)
5,000 University of Minnesota, (Series A).............. RB Aa3/AA 07/01/10 5.750 5,242,200
5,000 University of Minnesota, (Series A).............. RB Aa3/AA 07/01/15 5.750 5,160,400
4,800 Western Minnesota Municipal Power Agency,
(Prerefunded, Series 1983A, due 01/01/04), MBIA
Insured........................................ RB Aaa/AAA 01/01/98(b) 10.125 5,314,128
------------
TOTAL MINNESOTA.............................. 15,716,728
------------
MISSISSIPPI (2.6%)
6,000 Mississippi Home Corp Residual Revenue, Zero
Coupon, (Capital Appreciation, Refunded, Series
C)............................................. RB AAA/NR 09/01/13 0.000 2,364,900
11,000 Mississippi, (Escrowed to Maturity).............. GO Aaa/AAA 02/01/08 6.200 12,273,140
------------
TOTAL MISSISSIPPI............................ 14,638,040
------------
MISSOURI (0.8%)
4,000 St. Louis County Regional Convention & Sports
Complex Authority, (Prerefunded, Series B, due
08/15/21)...................................... RB Aaa/AAA 08/15/03(b) 7.000 4,536,240
------------
NEBRASKA (0.7%)
4,000 Nebraska Public Power District, (Nuclear
Facilities, Refunding)......................... RB A1/A+ 07/01/00 5.200 4,109,440
------------
</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 28, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY MOODY'S MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE S&P DATE RATE VALUE
- -------------- ------------------------------------------------- ------- --------------- ---------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
NEVADA (4.1%)
$ 500 Carson City School District, (Prerefunded, Series
1990, due 04/01/03), FGIC Insured.............. GO Aaa/AAA 04/01/00(b) 6.750% $ 542,180
8,200 Clark County School District, (Series A), MBIA
Insured........................................ GO Aaa/AAA 06/01/11 7.000 9,599,740
3,000 Clark County School District, FGIC Insured....... GO Aaa/AAA 06/15/03 6.000 3,216,960
3,000 Clark County, (Passenger Facilities, Las Vegas
McCarran International Airport, Series A),
AMBAC Insured.................................. RB Aaa/AAA 07/01/08 6.250 3,318,660
1,685 Las Vegas, Clark County Library District,
(Prerefunded, Series 1991A, due 06/01/03), FGIC
Insured........................................ GO Aaa/AAA 06/01/01(b) 6.600 1,830,837
1,200 Las Vegas, Clark County Library District,
(Prerefunded, Series 1991A, due 06/01/04), FGIC
Insured........................................ GO Aaa/AAA 06/01/01(b) 6.700 1,308,264
1,280 Las Vegas, Clark County Library District,
(Refunding, Series 1991B, due 08/01/04), FGIC
Insured........................................ GO Aaa/AAA 08/01/01(b) 6.700 1,400,154
1,330 Nevada, (Prison Facilities, Prerefunded, Series
1990A, due 08/01/04)........................... GO Aa/AA 08/01/00(b) 7.000 1,465,274
------------
TOTAL NEVADA................................. 22,682,069
------------
NEW HAMPSHIRE (1.4%)
4,900 New Hampshire Higher Educational & Health
Facilities Authority, (Dartmouth College,
Refunding)..................................... RB Aaa/NR 06/01/07 6.750 5,589,626
1,720 New Hampshire, (Prerefunded, Series 1991A, due
06/15/03)...................................... GO Aa/AA+ 06/15/01(b) 6.600 1,896,214
------------
TOTAL NEW HAMPSHIRE.......................... 7,485,840
------------
NEW JERSEY (6.7%)
4,180 Jersey City, (Refunding, Series H)............... GO A/AA 10/01/11 6.250 4,611,167
7,000 New Jersey Economic Development Authority,
(Market Transition Facilities, Series A), MBIA
Insured........................................ RB Aaa/AAA 07/01/02 5.400 7,268,800
1,325 New Jersey Economic Development Authority, (New
Jersey Performing Arts Center, Series PJ-A),
AMBAC Insured.................................. RB Aaa/AAA 06/15/07 6.000 1,433,849
1,990 New Jersey Economic Development Authority, (New
Jersey Performing Arts Center, Series PJ-C),
AMBAC Insured.................................. RB Aaa/AAA 06/15/06 6.000 2,150,195
</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 28, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY MOODY'S MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE S&P DATE RATE VALUE
- -------------- ------------------------------------------------- ------- --------------- ---------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
NEW JERSEY (CONTINUED)
$ 1,500 New Jersey Sports & Exposition Authority, (Sports
Complex, Refunding, Escrowed to Maturity)...... RB Aa1/NR 01/01/00 8.100% $ 1,649,880
6,000 New Jersey Transportation Authority, (Refunding,
Series B), MBIA Insured........................ RB Aaa/AAA 06/15/05 6.000 6,491,760
7,500 New Jersey Transportation Authority, (Refunding,
Series B), MBIA Insured........................ RB Aaa/AAA 06/15/10 6.500 8,473,125
2,500 New Jersey Turnpike Authority, (Refunding, Series
A), MBIA Insured............................... RB Aaa/AAA 01/01/00 6.200 2,630,400
1,000 New Jersey Turnpike Authority, (Refunding, Series
A), MBIA Insured............................... RB Aaa/AAA 01/01/01 5.700 1,046,500
1,000 Ocean County, (General Improvement).............. GO Aa/NR 04/15/00 6.375 1,064,630
------------
TOTAL NEW JERSEY............................. 36,820,306
------------
NEW YORK (7.8%)
1,990 Monroe County, Public Improvement, (Partially
Prerefunded, due 06/01/09), AMBAC Insured...... GO Aaa/AAA 06/01/08(b) 6.000 2,155,349
1,295 Monroe County, Public Improvement, (Partially
Prerefunded, due 06/01/10), AMBAC Insured...... GO Aaa/AAA 06/01/08(b) 6.000 1,397,836
110 Monroe County, Public Improvement, (Prerefunded,
due 06/01/09), AMBAC Insured................... GO Aaa/AAA 06/01/08(b) 6.000 120,602
120 Monroe County, Public Improvement, (Prerefunded,
due 06/01/10), AMBAC Insured................... GO Aaa/AAA 06/01/08(b) 6.000 131,566
1,000 Municipal Assistance Corp. for the City of New
York, (Refunding, Series 1987-61, due 7/01/07),
MBIA Insured................................... RB Aaa/AAA 07/01/97(b) 6.875 1,030,710
2,000 Municipal Assistance Corp. for the City of New
York, (Series E)............................... RB Aa2/AA- 07/01/06 6.000 2,161,620
1,465 New York City, (Escrowed to Maturity, Series
B)............................................. GO Aaa/AAA 06/01/01 8.000 1,659,713
2,645 New York City, (Refunding, Series A)............. GO Baa1/BBB+ 08/01/02 5.750 2,735,591
4,675 New York City, (Refunding, Series H, SubSeries
H-1)........................................... GO Baa1/BBB+ 08/01/01 5.500 4,787,060
1,000 New York City, (Series E), FGIC Insured.......... GO Aaa/AAA 02/15/06 6.500 1,103,480
2,000 New York City, (Series F)........................ GO Baa1/BBB+ 02/15/02 6.100 2,093,100
3,425 New York City, (Series F)........................ GO Baa1/BBB+ 02/15/03 6.200 3,601,113
2,000 New York City, (Series G), AMBAC Insured......... GO Aaa/AAA 10/15/07 6.000 2,144,460
</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 28, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY MOODY'S MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE S&P DATE RATE VALUE
- -------------- ------------------------------------------------- ------- --------------- ---------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
NEW YORK (CONTINUED)
$ 2,000 New York State Local Government Assistance Corp,
(Refunding, Series A), AMBAC Insured........... RB Aaa/AAA 04/01/06 6.000% $ 2,159,740
1,500 New York State Urban Development Corp.,
(Correctional Capital Facilities, Prerefunded,
Series 1, due 01/01/14)........................ RB Aaa/NR 01/01/00(b) 7.750 1,668,195
4,000 Triborough Bridge & Tunnel Authority, (Refunding,
Series V, due 01/01/05), FGIC Insured.......... RB Aaa/AAA 01/01/01(b) 6.875 4,379,520
8,700 Triborough Bridge & Tunnel Authority, (Refunding,
Series X)...................................... RB Aa/A+ 01/01/12 6.625 9,946,101
------------
TOTAL NEW YORK............................... 43,275,756
------------
OHIO (1.1%)
2,000 Ohio State Building Authority, (Admin Building
Fund, Series A)................................ RB Aa3/AA- 10/01/06 5.500 2,086,200
3,365 Ohio Water Development Authority, (Refunding,
Escrowed to Maturity, due 12/01/10)............ RB Aaa/AAA 06/01/97(b) 9.375 4,249,995
------------
TOTAL OHIO................................... 6,336,195
------------
PENNSYLVANIA (1.7%)
1,175 Bethel Park School District, (Prerefunded, Series
1991B, due 02/01/02), AMBAC Insured............ GO Aaa/AAA 02/01/00(b) 6.550 1,249,142
970 Pennsylvania Higher Education Assistance Agency,
Student Loan Revenue, (Refunding, Series
1985A), FGIC Insured........................... RB Aaa/AAA 12/01/00 6.800 1,039,336
1,310 Pennsylvania Higher Education Facilities
Authority, College & University Revenue,
University of Pennsylvania, (Refunding, Series
A)............................................. RB Aa2/AA 09/01/02 6.500 1,436,769
2,800 Pennsylvania Higher Educational Facilities
Authority, Health Services Revenue, University
of Pennsylvania, (Series A).................... RB Aa3/AA 01/01/06 6.000 3,008,264
1,500 Pennsylvania, (2nd Series 1991A, due 11/01/04),
MBIA Insured................................... GO Aaa/AAA 11/01/01(b) 6.500 1,640,040
1,000 Pennsylvania, (Refunding and Projects, 1st Series
A), AMBAC Insured.............................. GO Aaa/AAA 01/01/01 6.600 1,078,590
------------
TOTAL PENNSYLVANIA........................... 9,452,141
------------
</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 28, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY MOODY'S MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE S&P DATE RATE VALUE
- -------------- ------------------------------------------------- ------- --------------- ---------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
PUERTO RICO (0.8%)
$ 2,000 Puerto Rico Commonwealth Aqueduct & Sewer
Authority, (Refunding)......................... RB Baa1/A 07/01/98 4.400% $ 2,010,520
2,000 Puerto Rico Commonwealth Highway & Transportation
Authority, Highway Revenue, (Refunding, Series
Z), MBIA Insured............................... RB Aaa/AAA 07/01/05 6.250 2,211,740
------------
TOTAL PUERTO RICO............................ 4,222,260
------------
RHODE ISLAND (2.0%)
5,000 Rhode Island Public Buildings Authority,
(Refunding, Series A), AMBAC Insured........... RB Aaa/AAA 02/01/00 4.700 5,047,400
2,000 Rhode Island, (Prerefunded, Series 1990B, due
10/15/01)...................................... GO A1/AA- 10/15/99(b) 6.700 2,160,960
3,785 Rhode Island, (Series 1991B)..................... GO A1/AA- 05/15/00 6.000 3,966,680
------------
TOTAL RHODE ISLAND........................... 11,175,040
------------
SOUTH CAROLINA (0.2%)
1,000 Piedmont Municipal Power Agency, (Escrowed to
Maturity, Refunding), MBIA Insured............. RB Aaa/AAA 01/01/08 6.200 1,102,060
------------
TENNESSEE (0.4%)
2,000 Chattanooga, Industrial Development Board, IDR,
(Gerber/Buster Brown Manufacturing, Inc., due
11/01/05)...................................... RB A1/NR 11/01/97(b) 4.000 2,004,780
------------
TEXAS (7.8%)
1,500 Addison, (Refunding, Series 1991, due 09/01/00),
FGIC Insured................................... GO Aaa/AAA 09/01/98(b) 6.250 1,541,175
1,000 Arlington, (Series 1989, due 08/01/00), AMBAC
Insured........................................ GO Aaa/AAA 08/01/99(b) 6.850 1,058,940
1,050 Austin Independent School District, (Refunding,
Series 1991), PSFG Insured..................... GO Aaa/AAA 08/01/99 6.200 1,102,101
1,500 Austin, Utilities System, (Escrowed to Maturity,
due 10/01/01).................................. RB Aaa/AAA 04/01/97(b) 6.500 1,632,195
335 Austin, Water Sewer & Electric, (Refunding,
Escrowed to Maturity).......................... RB A/NR 11/15/97 13.500 357,914
25 Conroe Independent School District, (Partially
Prerefunded, Series 1989, due 02/01/01), MBIA
Insured........................................ GO Aaa/AAA 02/01/99(b) 7.100 26,241
</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 28, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY MOODY'S MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE S&P DATE RATE VALUE
- -------------- ------------------------------------------------- ------- --------------- ---------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
TEXAS (CONTINUED)
$ 975 Conroe Independent School District, (Prerefunded,
Series 1989, due 02/01/01), MBIA Insured....... GO Aaa/AAA 02/01/99(b) 7.100% $ 1,031,394
1,265 Conroe Independent School District, Lot A, PSFG
Insured........................................ GO Aaa/AAA 02/01/03 6.500 1,391,804
2,260 Corpus Christi Independent School District,
(Refunding), PSFG Insured...................... GO Aaa/AAA 08/15/05 6.000 2,443,512
1,305 Dallas County, Flood Control District #1,
(Prerefunded, due 04/01/10).................... GO Aaa/NR 04/01/08(b) 9.250 1,768,301
1,650 El Paso Independent School District,
(Prerefunded, Series 1991, due 07/01/03), PSFG
Insured........................................ GO Aaa/AAA 07/01/01(b) 6.550 1,791,273
3,805 Fort Worth Independent School District,
(Refunding, Series 1987)....................... GO Aa/AA 02/15/98 6.000 3,887,454
1,320 Grapevine, (Certificates of Obligation), FGIC
Insured........................................ GO Aaa/AAA 02/15/05 6.800 1,491,125
1,700 Harris County, Road Improvement Authority,
(Prerefunded, Series 1989, due 11/01/03), MBIA
Insured........................................ GO Aaa/AAA 11/01/99(b) 7.000 1,825,494
3,350 Houston Independent School District, (Asbestos
Abatement Notes)............................... GO Aa3/AA+ 07/15/99 5.000 3,424,437
3,805 Lewisville Independent School District,
(Refunding), PSFG Insured...................... GO Aaa/NR 08/15/03 6.000 4,097,681
2,325 Northwest Independent School District, Zero
Coupon, (Capital Appreciation, Refunding), PSFG
Insured........................................ GO Aaa/NR 08/15/03 0.000 1,714,315
2,320 Northwest Independent School District, Zero
Coupon, (Capital Appreciation, Refunding), PSFG
Insured........................................ GO Aaa/NR 08/15/04 0.000 1,620,010
2,000 Plano Independent School District, (Prerefunded,
Series 1991B, due 02/15/04), FGIC Insured...... GO Aaa/AAA 02/15/01(b) 6.550 2,160,700
1,500 San Antonio, (Refunding)......................... GO Aa/AA 08/01/07 6.000 1,558,035
750 Texas A & M University, (Prerefunded, Series
1989, due 07/01/99)............................ RB Aaa/AAA 07/01/97(b) 6.600 772,605
700 Texas A & M University, (Refunding, Series 1989,
due 07/01/98).................................. RB Aaa/AAA 07/01/97(b) 6.500 720,468
2,000 Texas, Public Finance Authority, (Prerefunded,
Series 1988A, due 10/01/02).................... GO NR/AA 10/01/00(b) 6.300 2,133,780
</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 28, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY MOODY'S MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE S&P DATE RATE VALUE
- -------------- ------------------------------------------------- ------- --------------- ---------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
TEXAS (CONTINUED)
$ 1,000 Texas, Public Finance Authority, (Prerefunded,
Series 1991A, due 10/01/05).................... GO NR/AA 10/01/00(b) 6.500% $ 1,073,480
2,500 University of Texas, Permanent University Fund,
(Refunding, Series 1991)....................... RB Aaa/AAA 07/01/01 6.300 2,690,800
------------
TOTAL TEXAS.................................. 43,315,234
------------
UTAH (3.4%)
1,625 Intermountain Power Agency, (Refunding, Series
B), MBIA Insured............................... RB Aaa/AAA 07/01/09 6.500 1,836,120
5,130 Intermountain Power Agency, (Refunding, Series
C), MBIA Insured............................... RB Aaa/AAA 07/01/00 6.000 5,396,811
4,155 Intermountain Power Agency, (Refunding, Series
C), MBIA Insured............................... RB Aaa/AAA 07/01/01 6.000 4,404,757
6,645 Intermountain Power Agency, (Refunding, Series
C), MBIA Insured............................... RB Aaa/AAA 07/01/02 6.000 7,095,265
------------
TOTAL UTAH................................... 18,732,953
------------
VIRGINIA (1.4%)
5,000 Virginia Public School Authority, (Refunding,
Series 1991)................................... RB Aa/AA 01/01/02 6.000 5,340,600
2,000 Virginia Public School Authority, (Series A, due
08/01/04)...................................... RB Aa/AA 08/01/01(b) 6.500 2,188,260
------------
TOTAL VIRGINIA............................... 7,528,860
------------
WASHINGTON (8.0%)
1,555 King & Snohomish Counties, School District #417,
(due 12/01/02), FGIC Insured................... GO Aaa/AAA 12/01/00(b) 6.600 1,669,230
2,500 King County, (Refunding, Series A)............... GO Aa1/AA+ 01/01/99 5.000 2,548,275
6,355 King County, (Refunding, Series B)............... GO Aa1/AA+ 01/01/01 6.700 6,878,144
1,000 Pierce County School District #320, Sumner
Washington, (Series 1991, due 12/01/02), MBIA
Insured........................................ GO Aaa/AAA 12/01/01(b) 6.600 1,088,340
2,955 Seattle, Municipal Sewer Revenue, (Prerefunded,
Series T, due 01/01/31)........................ RB Aaa/AA- 01/01/00(b) 6.875 3,213,622
1,250 Snohomish County School District #2, (Refunding,
Series A, due 12/01/02), MBIA Insured.......... GO Aaa/AAA 06/01/01(b) 6.700 1,350,950
4,815 Washington Public Power Supply System, (Nuclear
Project #1, Refunding, Series A), MBIA
Insured........................................ RB Aaa/AAA 07/01/06 6.000 5,144,539
</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 28, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY MOODY'S MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE S&P DATE RATE VALUE
- -------------- ------------------------------------------------- ------- --------------- ---------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
WASHINGTON (CONTINUED)
$ 4,000 Washington Public Power Supply System, (Nuclear
Project #1, Refunding, Series B)............... RB Aa1/AA- 07/01/03 5.750% $ 4,192,000
2,000 Washington Public Power Supply System, (Nuclear
Project #2, Refunding, Series 1990A)........... RB Aa1/AA- 07/01/06 7.250 2,300,960
5,265 Washington Public Power Supply System, (Nuclear
Project #2, Refunding, Series 1990A)........... RB Aa1/AA- 07/01/01 6.300 5,596,221
2,000 Washington Public Power Supply System, (Nuclear
Project #2, Refunding, Series 1990C, due
07/01/01), FGIC Insured........................ RB Aaa/AAA 01/01/01(b) 7.000 2,189,260
1,500 Washington Public Power Supply System, (Nuclear
Project #2, Refunding, Series 1990C, due
07/01/02)...................................... RB Aa1/AA- 01/01/01(b) 7.500 1,659,825
1,000 Washington, (Prerefunded, Series 1990B, due
08/01/02)...................................... GO Aa/AA 08/01/00(b) 6.750 1,077,210
3,000 Washington, (Refunding, Series 1995C, AT-8 and
R-95 B)........................................ GO Aa/AA 07/01/02 5.750 3,176,820
1,750 Washington, (Refunding, Series R-92-A, due
09/01/02)...................................... GO Aa/AA 09/01/01(b) 6.300 1,891,785
------------
TOTAL WASHINGTON............................. 43,977,181
------------
WEST VIRGINIA (0.2%)
1,000 Berkeley County Board of Education, (Escrowed to
Maturity, Series 1988), MBIA Insured........... GO Aaa/AAA 04/01/01 7.300 1,109,030
------------
WISCONSIN (2.1%)
1,500 Racine Unified School District, (due 04/01/01),
AMBAC Insured.................................. GO Aaa/AAA 04/01/99(b) 6.500 1,561,905
5,000 Wisconsin, (Series A)............................ GO Aa/AA 05/01/99 5.750 5,185,500
5,000 Wisconsin, Transportation Revenue, (Refunding,
Series A)...................................... RB A1/AA- 07/01/06 4.600 4,857,700
------------
TOTAL WISCONSIN.............................. 11,605,105
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
29
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
FEBRUARY 28, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY MOODY'S MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE S&P DATE RATE VALUE
- -------------- ------------------------------------------------- ------- --------------- ---------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
WYOMING (1.0%)
$ 3,600 Platte County, PCR, (Basin Electric Power
Cooperative, Refunding)........................ RB A2/A 01/01/06 4.950% $ 3,572,316
2,115 Platte County, PCR, (Basin Electric Power
Cooperative, Refunding)........................ RB A2/A 01/01/07 5.050 2,101,591
------------
TOTAL WYOMING................................ 5,673,907
------------
TOTAL LONG TERM INVESTMENTS (COST $526,863,219)............................................ 547,705,744
------------
SHORT-TERM INVESTMENTS (1.1%)
FLORIDA (0.0%)
100 Hillsborough County, Florida Industrial
Development Authority, PCR, (Refunding, due
05/15/18)...................................... VRDN VMIG1/A-1+ 03/03/97(a) 3.450 100,000
------------
GEORGIA (0.1%)
500 Bartow County, Georgia Development Authority,
PCR, (Georgia Power Co., 1st Series, due
06/01/23)...................................... VRDN VMIG1/NR 03/03/97(a) 3.450 500,000
300 Burke County, (Development Authority, PCR,
Georgia Power Plant, Series 1994, Vogtle
Project-4th. Series, due 07/01/24)............. VRDN VMIG1/A-1 03/03/97(a) 3.550 300,000
------------
800,000
------------
LOUISIANA (0.0%)
50 Louisiana, Public Facilities Authority, (Colleges
& University Equipment and Capital-Series A,
due 09/01/10), FGIC Insured.................... VRDN VMIG1/A-1 03/11/97(a) 3.300 50,000
------------
MICHIGAN (0.7%)
3,900 Midland County, Economic Development Corp.,
Limited Obligation Revenue, (Dow Chemical Co.
Project, Refunding, Series 1993B, due
12/01/15)...................................... VRDN P-1/A-1 03/03/97(a) 3.450 3,900,000
------------
NEW YORK (0.2%)
800 New York, (Sub-Series B-4, due 08/15/22),
LOC-Union Bank of Switzerland.................. VRDN VMIG1/A-1+ 03/03/97(a) 3.550 800,000
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
30
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
FEBRUARY 28, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY MOODY'S MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE S&P DATE RATE VALUE
- -------------- ------------------------------------------------- ------- --------------- ---------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
OREGON (0.1%)
$ 700 Port St. Helens, PCR, (Portland, Oregon General
Electric Co, due 04/01/10), LOC-Canadian
Imperial Bank.................................. VRDN VMIG1/A-1+ 03/03/97(a) 3.450% $ 700,000
------------
TOTAL SHORT-TERM INVESTMENTS (COST $6,350,000)............................................. 6,350,000
------------
TOTAL INVESTMENTS (COST $533,213,219) (100.1%)................................................. 554,055,744
LIABILITIES IN EXCESS OF OTHER ASSETS (-0.1%).................................................. (797,404)
------------
NET ASSETS (100.0%)............................................................................ $553,258,340
------------
------------
</TABLE>
- ------------------------------
Note: Based on the cost of investments of $533,213,219 for federal income tax
purposes at February 28, 1997, the aggregate gross unrealized appreciation and
depreciation was $21,361,633 and $519,108, respectively, resulting in net
unrealized appreciation of investments of $20,842,525.
(a) Variable Rate Demand Note tender dates and/or interest rates are reset at
specified intervals which coincide with their tender feature. The actual
maturity date is indicated in the security description.
(b) The date listed under the heading maturity date represents an optional
tender date. The actual maturity date is indicated in the security
description.
AMBAC - Ambac Indemnity Corp., FHA - Federal Housing Authority, FGIC -
Financial Guaranty Insurance Company, GO - General Obligation, IDR -
Industrial Development Revenue, LOC - Letter of Credit, MBIA - Municipal
Bond Investors Assurance Corp., PCR - Pollution Control Revenue, PP -
Private Placement, PSFG - Permanent School Fund Guarantee, RB - Revenue
Bond, VRDN - Variable Rate Demand Note.
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.
Escrowed to Maturity - Bonds for which cash and/or securities have been
deposited with a third party to cover the payments of principal and interest
at the maturity of the bond.
Prerefunded - Bonds for which the issuer of the bond invests the proceeds
from a subsequent bond issuance in treasury securities, whose maturity
coincides with the first call date of the first bond.
Refunding - Bonds for which the issuer has issued new bonds and cancelled
the old issue.
The Accompanying Notes are an Integral Part of the Financial Statements.
31
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
FEBRUARY 28, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $533,213,219 ) $554,055,744
Cash 39,983
Interest Receivable 6,509,529
Prepaid Expenses and Other Assets 6,110
------------
Total Assets 560,611,366
------------
LIABILITIES
Payable for Investments Purchased 7,128,181
Advisory Fee Payable 126,219
Custody Fee Payable 38,616
Administrative Services Fee Payable 13,238
Administration Fee Payable 2,189
Fund Services Fee Payable 1,056
Accrued Trustees' Fees and Expenses 356
Accrued Expenses 43,171
------------
Total Liabilities 7,353,026
------------
NET ASSETS
Applicable to Investors' Beneficial Interests $553,258,340
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
32
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED FEBRUARY 28, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest Income $13,926,876
EXPENSES
Advisory Fee $775,954
Custodian Fees and Expenses 89,324
Administrative Services Fee 82,134
Professional Fees and Expenses 18,578
Fund Services Fee 10,138
Administration Fee 5,477
Trustees' Fees and Expenses 4,163
--------
Total Expenses 985,768
-----------
NET INVESTMENT INCOME 12,941,108
NET REALIZED GAIN ON INVESTMENTS 612,683
NET CHANGE IN UNREALIZED APPRECIATION OF
INVESTMENTS 7,533,352
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $21,087,143
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
33
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE FISCAL
FEBRUARY 28, 1997 YEAR ENDED
(UNAUDITED) AUGUST 31, 1996
----------------- ---------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 12,941,108 $ 22,197,847
Net Realized Gain on Investments 612,683 605,789
Net Change in Unrealized Appreciation
(Depreciation) of Investments 7,533,352 (4,888,459)
----------------- ---------------
Net Increase in Net Assets Resulting from
Operations 21,087,143 17,915,177
----------------- ---------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 134,710,086 224,578,237
Withdrawals (93,922,848) (163,747,318)
----------------- ---------------
Net Increase from Investors' Transactions 40,787,238 60,830,919
----------------- ---------------
Total Increase in Net Assets 61,874,381 78,746,096
NET ASSETS
Beginning of Period 491,383,959 412,637,863
----------------- ---------------
End of Period $ 553,258,340 $ 491,383,959
----------------- ---------------
----------------- ---------------
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FOR THE PERIOD
FOR THE FISCAL YEAR JULY 12, 1993
SIX MONTHS ENDED ENDED AUGUST 31, (COMMENCEMENT OF
FEBRUARY 28, 1997 ------------------ OPERATIONS) TO
(UNAUDITED) 1996 1995 1994 AUGUST 31, 1993
----------------- ---- ---- ---- ----------------
<S> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Expenses 0.38%(a) 0.38% 0.42% 0.41% 0.40%(a)
Net Investment Income 4.99%(a) 4.92% 5.15% 4.68% 4.58%(a)
Decrease Reflected in Expense Ratio due to
Expense Reimbursement -- -- -- -- 0.01%(a)
PORTFOLIO TURNOVER 13%(b) 25% 47% 33% 43%(b)+
</TABLE>
- ------------------------
(a) Annualized.
(b) Not annualized.
+ Portfolio's turnover is for the twelve month period ended August 31, 1993, and
includes the portfolio activity of the Portfolio's predecessor entity, The JPM
Pierpont Tax Exempt Bond Fund, for the period September 1, 1992 through July
11, 1993.
The Accompanying Notes are an Integral Part of the Financial Statements.
34
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
FEBRUARY 28, 1997
- --------------------------------------------------------------------------------
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 no-load, diversified, open-end
management investment company which was organized as a trust under the laws of
the State of New York. The Portfolio commenced operations on July 12, 1993 and
received a contribution of certain assets and liabilities, including securities,
with a value of $466,873,082 on that date from The JPM Pierpont Tax Exempt Bond
Fund in exchange for a beneficial interest in the Portfolio. The Portfolio's
investment objective is to provide a high level of current income exempt from
federal income tax consistent with moderate risk of capital and maintenance of
liquidity. The Declaration of Trust permits the Trustees to issue an unlimited
number of beneficial interests in the Portfolio.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual amounts could differ from
those estimates. The following is a summary of the significant accounting
policies of the Portfolio:
a)Portfolio securities with a maturity of 60 days or more, including
securities that are listed on an exchange or traded over the counter, are
valued using prices supplied daily by an independent pricing service or
services that (i) are based on the last sale price on a national
securities exchange, or in the absence of recorded sales, at the readily
available bid price on such exchange or at the quoted bid price in the
over-the-counter market, if such exchange or market constitutes the
broadest and most representative market for the security and (ii) in other
cases, take into account various factors affecting market value, including
yields and prices of comparable securities, indication as to value from
dealers and general market conditions. If such prices are not supplied by
the Portfolio's independent pricing services, such securities are priced
in accordance with procedures adopted by the Trustees. All portfolio
securities with a remaining maturity of less than 60 days are valued by
the amortized cost method. Because of the large number of municipal bond
issues outstanding and the varying maturity dates, coupons and risk
factors applicable to each issuer's books, no readily available market
quotations exist for most municipal securities.
b)Securities transactions are recorded on a trade date basis. Interest
income, which includes the amortization of premiums and discounts, if any,
is recorded on an accrual basis. For financial and tax reporting purposes,
realized gains and losses are determined on the basis of specific lot
identification.
c)The Portfolio intends to be treated as a partnership for federal income
tax purposes. As such, each investor in the Portfolio will be taxes on its
share of the Portfolio's ordinary income and capital gains. It is intended
that the Portfolio's assets will be managed in such a way that an investor
in the Portfolio will be able to satisfy the requirements of Subchapter M
of the Internal Revenue Code.
2. TRANSACTIONS WITH AFFILIATES
a)The Portfolio has an Investment Advisory Agreement with Morgan Guaranty
Trust Company of New York ("Morgan"). Under the terms of the 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 28, 1997, this
fee amounted to $775,954.
35
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
FEBRUARY 28, 1997
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b)The Portfolio has retained Funds Distributor, Inc. ("FDI"), a registered
broker-dealer, to serve as co-administrator and exclusive placement agent.
Under a Co-Administration Agreement, 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. Under
the Co-Administration Agreement, 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 JPM Pierpont Funds, The JPM Institutional Funds, The JPM
Advisor Funds, the Portfolio and other portfolios (the "Master
Portfolios") in which The JPM Pierpont Funds, The JPM Institutional Funds
and The JPM Advisor Funds invest, JPM Series Trust and JPM Series Trust
II. For the six months ended February 28, 1997, the fee for these services
amounted to $5,477.
On November 15, 1996, The JPM Advisor Funds terminated operations and were
liquidated. Subsequent to that date, the net assets of The JPM Advisor
Funds were no longer included in the calculation of the allocation of
FDI's fees.
c)The Portfolio has an Administrative Services Agreement (the "Services
Agreement") with Morgan under which Morgan is responsible for overseeing
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 proportionate share of an annual complex-wide charge. This
charge is calculated daily based on the aggregate net assets of the Master
Portfolios and JPM 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 paid by the Portfolio is determined by the proportionate share
that its net assets bear to the net assets of the Master Portfolios,
investors in the Master Portfolios for which Morgan provides similar
services, and JPM Series Trust. For the six months ended February 28,
1997, the fee for these services amounted to $82,134.
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 $10,138 for the six months ended February 28, 1997.
e)An aggregate annual fee of $65,000 is paid to each Trustee for serving as
a Trustee of The JPM Pierpont Funds, The JPM Institutional Funds, the
Master Portfolios and JPM Series Trust. The Trustee's Fees and Expenses
shown in the financial statements represents the Portfolio's allocated
portion of the total fees and expenses. The Portfolio's Chairman and Chief
Executive Officer also serves as Chairman of Group and received
compensation and employee benefits from Group in his role as Group's
Chairman. The allocated portion of such compensation and benefits included
in the Fund Services Fee shown in the financial statements was $1,300.
36
<PAGE>
THE TAX EXEMPT BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
FEBRUARY 28, 1997
- --------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS
Investments transactions (excluding short-term investments) for the six months
ended February 28, 1997 were as follows:
COST OF PROCEEDS
PURCHASES FROM SALES
------------ ------------
$132,908,932 $ 65,278,445
37
