<PAGE>
LETTER TO THE SHAREHOLDERS OF THE JPM PIERPONT NEW YORK TOTAL RETURN BOND FUND
November 18, 1997
Dear Shareholder:
We are pleased to report that The JPM Pierpont New York Total Return Bond
Fund outperformed its competitors, as measured by the Lipper Intermediate
Municipal Debt Bond Fund Average, for the six months ended September 30,
1997. In a challenging environment for municipal bond fund managers, we
believe that careful credit analysis in the Fund's Portfolio helped it
outperform its competitors.
For the reporting period, the Fund returned 5.61% compared with 5.40% for the
Lipper Intermediate Municipal Debt Bond Fund Average. The Fund fell short,
however, of the 5.69% return of its benchmark, the Lehman Brothers 1-16 year
Muncipal Bond Index. We feel it is important to note that this benchmark is
an unmanaged index whose performance does not include fees or operating
expenses, and which is not available to individual and/or institutional
investors.
The Fund's net asset value increased from $10.28 per share to $10.62 at
September 30, 1997 after making distributions of $0.23 per share from
ordinary income, all of which were tax exempt. The Fund's net assets stood at
$67.5 million as of September 30, 1997, up from $56.2 million on March 31,
1997. The net assets of The New York Total Return Bond Portfolio, in which
the Fund invests, totaled approximately $169.6 million at September 30, 1997.
The report that follows includes an interview with Elaine Young and Robert
Meiselas, members of the portfolio management team responsible for the Fund.
This interview is designed to answer commonly asked questions about the Fund,
elaborate on what happened during the reporting period, and provide an
outlook for the months ahead.
As chairman and president of Asset Management Services, we look forward to
sharing Morgan's insights regarding global markets with you going forward. If
you have any comments or questions, please call your Morgan representative or
J.P. Morgan Funds Services at (800) 521-5411.
Sincerely yours,
/s/ Ramon de Oliveira /s/ Keith M Schappert
Ramon de Oliveira Keith M Schappert
Chairman of Asset Management Services President of Asset Management Services
J.P. Morgan & Co. Incorporated J.P. Morgan & Co. Incorporated
- --------------------------------------------------------------------------------
TABLE OF CONTENTS GLOSSARY OF TERMS. . . . . . . . 6
LETTER TO THE SHAREHOLDERS. . . . 1 FUND FACTS AND HIGHLIGHTS. . . . 7
FUND PERFORMANCE. . . . . . . . . 2 SPECIAL FUND-BASED SERVICES. . . 8
PORTFOLIO MANAGER Q & A . . . . . 3 FINANCIAL STATEMENTS. . . . . . 10
-------------------------------------------------------------------------------
1
<PAGE>
FUND PERFORMANCE
EXAMINING PERFORMANCE
One way to look at performance is to review a fund's average annual total
return. This figure takes the fund's actual (or cumulative) return and shows
what would have happened if the Fund had achieved that return by performing at a
constant rate each year. Average annual total returns represent the average
yearly change of a fund's value over a specified time period, typically 1, 5, or
10 years (or since inception). Total returns for periods of less than one year
are not annualized and provide a picture of how a fund has performed over the
short term.
<TABLE>
<CAPTION>
PERFORMANCE TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS
--------------------- ------------------------------
THREE SIX ONE SINCE
AS OF SEPTEMBER 30, 1997 MONTHS MONTHS YEAR INCEPTION*
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
The JPM Pierpont New York
Total Return Bond Fund 2.54% 5.61% 7.63% 6.46%
Lehman Brothers 1-16 year
Municipal Bond Index** 2.62% 5.69% 8.42% 7.45%
Lehman Brothers 1-15 year
Municipal Bond Index 2.81% 6.08% 8.82% 7.57%
Lipper Intermediate
Municipal Debt Bond Fund Average 2.50% 5.40% 7.42% 6.24%
</TABLE>
*4/11/94 -- COMMENCEMENT OF OPERATIONS (AVERAGE ANNUAL TOTAL RETURNS BASED ON
MONTH END FOLLOWING INCEPTION; AVERAGE ANNUAL RETURN SINCE ACTUAL INCEPTION IS
6.41%).
** PRIOR TO MAY 1, 1997 THE BENCHMARK WAS COMPOSED OF THE LEHMAN BROTHERS 1-15
YEAR MUNICIPAL BOND INDEX. COMMENCING MAY 1, 1997 THE BENCHMARK IS THE LEHMAN
BROTHERS 1-16 YEAR MUNICIPAL BOND INDEX. BOTH ARE UNMANAGED INDICES THAT MEASURE
MUNICIPAL BOND MARKET PERFORMANCE. THEY DO NOT INCLUDE FEES OR EXPENSES AND ARE
NOT AVAILABLE FOR ACTUAL INVESTMENT. LIPPER ANALYTICAL SERVICES, INC. IS A
LEADING RESOURCE FOR MUTUAL FUND DATA.
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. FUND RETURNS ARE NET OF
FEES, ASSUME THE REINVESTMENT OF DISTRIBUTIONS AND REFLECT REIMBURSEMENT OF
CERTAIN FUND AND PORTFOLIO EXPENSES AS DESCRIBED IN THE PROSPECTUS.
2
<PAGE>
Portfolio manager Q&A
This interview was conducted on November 17, 1997 with Elaine Young and Robert
Meiselas, both members of the portfolio management team responsible for managing
The New York Total Return Bond Portfolio, in which the Fund invests. It
represents both Bob and Elaine's views on that date.
[PHOTO]
ELAINE YOUNG, VICE PRESIDENT, is a portfolio manager with the U.S. Fixed Income
Group and responsible for managing municipal bonds. In Ms. Young's previous
position at Morgan, she traded tax-exempt securities. Elaine joined Morgan in
1994 after five years of municipal trading experience at Scudder, Stevens, and
Clark. She graduated from New York University with a B.S. degree in 1986 and an
M.B.A. in Finance in 1989. Elaine is also a Chartered Financial Analyst.
[PHOTO]
ROBERT MEISELAS, VICE PRESIDENT, is a portfolio manager with the U.S. Fixed
Income Group responsible for managing municipal bonds, including tax exempt
private placements. Mr. Meiselas is a CPA and joined J.P. Morgan's financial
group in 1982, after having spent 10 years at Coopers & Lybrand. Bob also spent
five years in J.P. Morgan's Private Banking Investment Management Group, and
moved to J.P. Morgan Investment Management in 1997. Bob is a graduate of St.
Johns University and has completed graduate work at Long Island University in
the field of taxation.
PLEASE COMMENT ON WHAT HAS HAPPENED IN THE NEW YORK MUNICIPAL MARKET OVER THE
PAST SIX MONTHS: HAVE YOU SEEN ANY NEW TRENDS DEVELOP?
RM: We've seen the continuation of a bull market for tax-exempt bonds caused by
lower interest rates and fewer tax efficient investments. Also, municipal bonds
are trading in a relatively narrow range as most new bond issues are issued with
bond insurance. The predominance of bond insurance has heightened demand for
uninsured investment-grade bonds and caused the credit spread for these bonds to
narrow as well. These factors have led to favorable investment returns for muni
bond investors.
Prices for New York bonds rose as investors saw an improvement in New York
State and New York City's financial health. Also, New York issues were in short
supply during the summer months. The lack of New York supply was due, in large
part, to a long delay before legislative approval of the New York State budget.
After the budget was approved, the pace of new issues dramatically increased and
prices for most New York issues modestly weakened.
3
<PAGE>
WHEN WE LAST SPOKE TO YOUR INVESTMENT TEAM (SIX MONTHS AGO), YOU INDICATED THAT
THERE WAS A CONTINUING SHORT SUPPLY OF TAX-EXEMPT ISSUES. IS SHORT SUPPLY STILL
A PROBLEM?
EY: As Bob pointed out, the supply of New York bonds has fluctuated during
the last six months. I wouldn't say that the varying levels of supply is a
"problem" for Morgan, however, as we are a large institutional investor.
While it's true that tight supply can inhibit some short-term opportunities
to add value, we are also able to take advantage of supply fluctuations to
buy or sell securities at attractive prices.
HOW HAS NEW YORK'S ECONOMY AFFECTED ITS MUNI MARKET?
RM: The favorable economic climate has helped to improve the financial health
of New York State and its municipal subdivisions. Job growth and spending
have led to increased tax revenues which have helped to balance budgets and,
in some cases, created small budget surpluses. At the same time, Federal and
State officials have paid more attention to contain the growth of
expenditures. These factors and some other related issues have stimulated
greater confidence in the credit standing of many muni borrowers. As such,
lower perceived risk contributed to higher bond prices.
Although it is theoretically possible that a balanced budget could reduce
the need for borrowing, we believe that New York faces some challenges to
improve and repair its municipal infrastructure. Rather than curtail
borrowing plans, New York's improved financial health may allow it to
increase borrowing in order to finance some much needed repairs.
Lastly, New York State and New York City have enacted modest reductions
in their income tax rates. While tax reductions reduce the after-tax
efficiency of municipal bonds, the reductions have been too small to
significantly affect muni bond prices.
SPECIFICALLY REGARDING THE FUND'S PERFORMANCE, WE NOTICE THAT IT RANKED
FAVORABLY AGAINST ITS COMPETITORS FOR THE REPORTING PERIOD, AS MEASURED BY THE
LIPPER INTERMEDIATE MUNICIPAL DEBT BOND FUND AVERAGE. WHAT WERE SOME OF THE
FACTORS THAT CONTRIBUTED TO THE FUND'S PERFORMANCE?
EY: Performance has been relatively good, but investors should bear in mind
that we are equally interested in managing risk and volatility. Our muni bond
funds target segments of the muni bond market where risk and return are
attractively balanced. Some competitors are able to obtain higher short-term
return, but introduce much greater risk and volatility in doing so. Also, we
strive to take the impact of income taxes into consideration when making
investment decisions. At a future date, other mutual funds may report better
results than our Portfolio, but investors must be careful to weigh the
incremental risk that may accompany those higher returns.
We think our success is due to our disciplined investment process. We make
investments when we believe that we have an information advantage that we can
apply in the market. Based on our internal analysis, we try to buy undervalued
securities and sell those bonds whose prices may have peaked. During this
reporting period, our success was largely attributable to our security selection
process. Success in this area comes back to having the right tools and
resources, a process that works, as well as the experience and expertise to
manage bond portfolios.
4
<PAGE>
RM: I would add that good fundamental credit analysis has enabled us to stay
ahead of the market. This has always been a Morgan hallmark and has served us
well during this reporting period.
Our analysts, for example, have long believed that the market price for New
York City bonds was not reflecting its improved financial position. In the last
year, prices for New York City bonds have skyrocketed as the rest of the market
came around to this realization.
WHAT IS YOUR OUTLOOK FOR THE NEXT SIX MONTHS, AND HOW ARE YOU POSITIONING THE
PORTFOLIO ACCORDINGLY?
RM: Earlier on, we said that New York had profited by a strong national
economy. It's likely that this financial improvement will slow or even stop as
the nation's economic cycle begins to change. We don't expect this to signal a
return to past conditions, but the portion of the New York muni bond rally that
is being sparked by improved financial performance could end.
EY: Generally, we expect current market conditions to persist. In order to
continue to succeed in this tight market, we know that we are going to have to
work harder to find opportunities. We will continue to favor more complex
instruments such as zero coupon bonds, AMT bonds, and tax-exempt private
placements because we have the tools to take advantage of these investments and
avoid the pitfalls. We will also utilize our municipal credit research group to
help us stay ahead of any issuer specific bond price fluctuations.
Muni bond yields have been fluctuating within a relatively narrow range.
The bond market has been shifting abruptly within this range based on the latest
economic news and as the opinions of Fed-watchers change. In view of the run-up
in bond prices, we have found it difficult to take advantage of interest rate
shifts without incurring capital gains that may outweigh the return. We recently
moved the Portfolio duration to be "neutral" to its benchmark until we identify
a trend that we can take advantage of.
5
<PAGE>
GLOSSARY OF TERMS
BASIS POINT: A measure used in quoting bond yields. One basis point equals 0.01%
of yield. For example if a bond's yield changed from 10.25% to 11.00%, it would
have moved 75 basis points.
CREDIT RATING: The rating assigned to a bond by independent rating agencies such
as Standard & Poor's or Moody's. In evaluating creditworthiness, these agencies
assess the issuer's present financial condition and future ability and
willingness to make principal and interest payments when due.
DURATION: Duration is used as a measure of the relative sensitivity of the price
of the security to a change in interest rates. The longer the duration the more
sensitive the bond is to interest rate moves. For example, a bond with a 5-year
duration will experience an approximate 5% increase in price if interest rates
drop 100 basis points (1%) while a bond with a 10-year duration would see its
price rise by approximately 10%.
MATURITY: The date on which the life of a financial instrument ends through cash
or physical settlement, or expiration with no value, or the date a security
comes due and fully payable. Average maturity refers to the average time to
maturity of the entire portfolio.
YIELD CURVE: A graph showing the term structure of interest rates at a point in
time, ranging from the shortest to the longest available. The resulting curve
shows if short-term interest rates are higher or lower than long-term rates.
YIELD SPREAD: The difference in yield between different types of securities. For
example, if a Treasury bond is yielding 6.5% and a municipal is yielding 5.5%,
the spread is 1% or 100 basis points.
ZERO COUPON BOND: A debt instrument sold at a discount to its face value. The
bond makes no payment until maturity, at which time it is redeemed at face
value. Effectivly, the interest received is the difference between face value
and the price paid for the security.
6
<PAGE>
FUND FACTS
INVESTMENT OBJECTIVE
The JPM Pierpont New York Total Return Bond Fund seeks to provide a high
after-tax total return for New York residents consistent with moderate risk
of capital. It is designed for investors subject to federal and New York
State income taxes who seek a high after-tax total return and who are willing
to receive some taxable income and capital gains to achieve that return.
- -------------------------------------------------------------------------------
COMMENCEMENT OF OPERATIONS
4/11/94
- -------------------------------------------------------------------------------
NET ASSETS AS OF 9/30/97
$67,490,598
- -------------------------------------------------------------------------------
DIVIDEND PAYABLE DATES
MONTHLY
- -------------------------------------------------------------------------------
CAPITAL GAIN PAYABLE DATES (IF APPLICABLE)
12/19/97
EXPENSE RATIO
The Fund's current annual expense ratio of 0.70% covers shareholders'
expenses for custody, tax reporting, investment advisory and shareholder
services, after reimbursement. The Fund is no-load and does not charge any
sales, redemption, or exchange fees. There are no additional charges for
buying, selling, or safekeeping Fund shares, or for wiring redemption
proceeds from the Fund.
FUND HIGHLIGHTS
ALL DATA AS OF SEPTEMBER 30, 1997
PORTFOLIO ALLOCATION
(PERCENTAGE OF TOTAL INVESTMENTS)
[CHART]
REVENUE BOND 70.5%
GENERAL OBLIGATIONS 23.4%
SHORT TERM/OTHER 3.4%
SPECIAL OLBIGATIONS 1.5%
PRIVATE PLACEMENTS 1.2%
30-DAY SEC YIELD 4.09%
DURATION 5.79 years
QUALITY PROFILE
AAA-A 69%
Other 31%
7
<PAGE>
SPECIAL FUND-BASED SERVICES
PIERPONT ASSET ALLOCATION SERVICE (PAAS)
For many investors, a diversified portfolio -- including short-term
instruments, bonds, and stocks -- can offer an excellent opportunity to
achieve one's investment objectives. PAAS provides investors with a
comprehensive management program for their portfolios. Through this service,
investors can:
- - Create and maintain an asset allocation that is specifically targeted at
meeting their most critical investment objectives;
- - Make ongoing tactical adjustments in the actual asset mix of their
portfolios to capitalize on shifting market trends;
- - Make investments through The JPM Pierpont Funds, a family of diversified
mutual funds.
PAAS is available to clients who invest a minimum of $500,000 in The JPM
Pierpont Funds.
IRA MANAGEMENT SERVICE
As one of the few remaining investments that can help your assets grow
tax-deferred until retirement, the IRA enables more of your dollars to work
for you longer. Morgan offers an IRA Rollover plan that helps you to build
well-balanced long-term investment portfolios, diversified across a wide
array of mutual funds. From money markets to emerging markets, The JPM
Pierpont Funds provide an excellent way to help you accumulate long-term
wealth for retirement.
KEOGH
A Keogh provides another excellent vehicle to help individuals who are
self-employed or are employees of unincorporated businesses to accumulate
retirement savings. A Keogh is a tax-deferred pension plan that can allow you
to contribute the lesser of $30,000 or 25% of your annual earned gross
compensation. The JPM Pierpont Funds can help you build a comprehensive
investment program designed to maximize the retirement dollars in your Keogh
account.
8
<PAGE>
DISTRIBUTED BY FUNDS DISTRIBUTOR, INC. MORGAN GUARANTY TRUST COMPANY OF NEW
YORK SERVES AS AN INVESTMENT ADVISOR AND MAKES THE FUND AVAILABLE SOLELY IN ITS
CAPACITY AS SHAREHOLDER SERVICING AGENT. SHARES OF THE FUND ARE NOT BANK
DEPOSITS AND ARE NOT GUARANTEED BY ANY BANK, GOVERNMENT ENTITY, OR THE FDIC. AN
INVESTMENT IN THE FUND WILL FLUCTUATE AND MAY LOSE VALUE.
Past performance is no guarantee for future performance. Returns are net of
fees, assume the reinvestment of fund distributions and may reflect the
reimbursement of the fund expenses as described in the prospectus. Had expenses
not been subsidized, returns would have been lower. Income may be subject to
state and local taxes. Some income may be subject to the Federal alternative
minimum tax. The Fund invests through a master portfolio (another fund with the
same objective).
CALL J.P. MORGAN FUNDS SERVICES AT (800) 521-5411 FOR A PROSPECTUS CONTAINING
MORE COMPLETE INFORMATION ABOUT THE FUND INCLUDING MANAGEMENT FEES AND OTHER
EXPENSES. PLEASE READ IT CAREFULLY BEFORE INVESTING.
9
<PAGE>
THE JPM PIERPONT NEW YORK TOTAL RETURN BOND FUND
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment in The New York Total Return Bond
Portfolio ("Portfolio"), at value $67,598,516
Deferred Organization Expenses 4,134
Receivable for Expense Reimbursements 1,411
Prepaid Trustees' Fees 63
Prepaid Expenses and Other Assets 411
-----------
Total Assets 67,604,535
-----------
LIABILITIES
Dividends Payable to Shareholders 65,780
Shareholder Servicing Fee Payable 10,842
Payable for Shares of Beneficial Interest
Redeemed 2,500
Administrative Services Fee Payable 1,644
Administration Fee Payable 321
Fund Services Fee Payable 40
Accrued Expenses 32,810
-----------
Total Liabilities 113,937
-----------
NET ASSETS
Applicable to 6,354,818 Shares of Beneficial
Interest Outstanding
(par value $0.001, unlimited shares authorized) $67,490,598
-----------
-----------
Net Asset Value, Offering and Redemption Price
Per Share $10.62
-----
-----
ANALYSIS OF NET ASSETS
Paid-in Capital $64,510,116
Undistributed Net Investment Income 21,047
Accumulated Net Realized Gain on Investment 226,011
Net Unrealized Appreciation of Investment 2,733,424
-----------
Net Assets $67,490,598
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
10
<PAGE>
THE JPM PIERPONT NEW YORK TOTAL RETURN BOND FUND
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME ALLOCATED FROM PORTFOLIO
Allocated Interest Income $1,578,907
Allocated Portfolio Expenses (124,262)
----------
Net Investment Income Allocated from
Portfolio 1,454,645
FUND EXPENSES
Shareholder Servicing Fee $ 61,487
Transfer Agent Fees 12,649
Administrative Services Fee 9,459
Printing Expenses 6,593
Professional Fees 4,738
Amortization of Organization Expenses 1,376
Fund Services Fee 1,065
Administration Fee 911
Trustees' Fees and Expenses 522
Miscellaneous 3,012
--------
Total Fund Expenses 101,812
Less: Reimbursement of Expenses (3,749)
--------
NET FUND EXPENSES 98,063
----------
NET INVESTMENT INCOME 1,356,582
NET REALIZED GAIN ON INVESTMENT ALLOCATED FROM
PORTFOLIO 226,011
NET CHANGE IN UNREALIZED APPRECIATION OF
INVESTMENT ALLOCATED FROM PORTFOLIO 1,690,137
----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $3,272,730
----------
----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
11
<PAGE>
THE JPM PIERPONT NEW YORK TOTAL RETURN BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE FISCAL
SEPTEMBER 30, 1997 YEAR ENDED
(UNAUDITED) MARCH 31, 1997
------------------ --------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 1,356,582 $ 2,460,444
Net Realized Gain on Investment Allocated from
Portfolio 226,011 45,929
Net Change in Unrealized Appreciation
(Depreciation) of Investment Allocated from
Portfolio 1,690,137 (177,841)
------------------ --------------
Net Increase in Net Assets Resulting from
Operations 3,272,730 2,328,532
------------------ --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (1,356,582) (2,460,444)
Net Realized Gain -- (140,067)
------------------ --------------
Total Distributions to Shareholders (1,356,582) (2,600,511)
------------------ --------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Proceeds from Shares of Beneficial Interest Sold 17,934,907 20,653,912
Reinvestment of Dividends and Distributions 994,820 1,809,010
Cost of Shares of Beneficial Interest Redeemed (9,553,197) (16,515,929)
------------------ --------------
Net Increase from Transactions in Shares of
Beneficial Interest 9,376,530 5,946,993
------------------ --------------
Total Increase in Net Assets 11,292,678 5,675,014
NET ASSETS
Beginning of Period 56,197,920 50,522,906
------------------ --------------
End of Period (including undistributed net
investment income of $21,047 for both reporting
periods) $ 67,490,598 $ 56,197,920
------------------ --------------
------------------ --------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
12
<PAGE>
THE JPM PIERPONT NEW YORK TOTAL RETURN BOND FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share outstanding throughout each period are as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE FOR THE FISCAL YEAR ENDED APRIL 11, 1994
SIX MONTHS ENDED MARCH 31, (COMMENCEMENT OF
SEPTEMBER 30, 1997 ------------------------- OPERATIONS) TO
(UNAUDITED) 1997 1996 MARCH 31, 1995
------------------ ----------- ----------- ----------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.28 $ 10.34 $ 10.11 $ 10.00
------------------ ----------- ----------- ----------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.23 0.46 0.46 0.40
Net Realized and Unrealized Gain (Loss) on
Investment 0.34 (0.03) 0.26 0.11
------------------ ----------- ----------- ----------------
Total from Investment Operations 0.57 0.43 0.72 0.51
------------------ ----------- ----------- ----------------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (0.23) (0.46) (0.46) (0.40)
Net Realized Gain -- (0.03) (0.03) --
------------------ ----------- ----------- ----------------
Total Distributions to Shareholders (0.23) (0.49) (0.49) (0.40)
------------------ ----------- ----------- ----------------
NET ASSET VALUE, END OF PERIOD $ 10.62 $ 10.28 $ 10.34 $ 10.11
------------------ ----------- ----------- ----------------
------------------ ----------- ----------- ----------------
Total Return 5.61%(a) 4.19% 7.16% 5.26%(a)
------------------ ----------- ----------- ----------------
------------------ ----------- ----------- ----------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (in thousands) $ 67,491 $ 56,198 $ $50,523 $ 38,137
Ratios to Average Net Assets
Expenses 0.72%(b) 0.75% 0.75% 0.75%(b)
Net Investment Income 4.41%(b) 4.44% 4.43% 4.31%(b)
Decrease Reflected in Expense Ratio due to
Expense Reimbursement 0.01%(b) 0.06% 0.04% 0.22%(b)
</TABLE>
- ------------------------
(a) Not annualized.
(b) Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
13
<PAGE>
THE JPM PIERPONT NEW YORK TOTAL RETURN BOND FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The JPM Pierpont New York Total Return Bond Fund (the "Fund") is a separate
series of The JPM Pierpont Funds, a Massachusetts business trust (the "Trust"),
which was organized on November 4, 1992. The Trust is registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company. The Fund commenced operations on April 11, 1994. Prior to October 10,
1996, the Trust's and the Fund's names were The Pierpont Funds and The Pierpont
New York Total Return Bond Fund, respectively.
The Fund invests all of its investable assets in The New York Total Return Bond
Portfolio (the "Portfolio"), a non-diversified open-end management investment
company having the same investment objective as the Fund. The value of such
investment included in the Statement of Assets and Liabilities reflects the
Fund's proportionate interest in the net assets of the Portfolio (40% at
September 30, 1997). The performance of the Fund is directly affected by the
performance of the Portfolio. The financial statements of the Portfolio,
including the Schedule of Investments, are included elsewhere in this report and
should be read in conjunction with the Fund's financial statements.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual amounts could differ from
those estimates. The following is a summary of the significant accounting
policies of the Fund:
a) Valuation of securities by the Portfolio is discussed in Note 1 of the
Portfolio's Notes to Financial Statements which are included elsewhere in
this report.
b) The Fund records its share of net investment income, realized and
unrealized gain and loss and adjusts its investment in the Portfolio each
day. All the net investment income and realized and unrealized gain and
loss of the Portfolio is allocated pro rata among the Fund and other
investors in the Portfolio at the time of such determination.
c) Substantially all the Fund's net investment income is declared as
dividends daily and paid monthly. Distributions to shareholders of net
realized capital gains, if any, are declared and paid annually.
d) The Fund incurred organization expenses in the amount of $13,301. Morgan
Guaranty Trust Company of New York ("Morgan") has agreed to reimburse the
Fund for these costs which are being deferred and will be amortized on a
straight-line basis over a period not to exceed five years beginning with
the commencement of operations of the Fund.
e) The Fund is treated as a separate entity for federal income tax purposes.
The Fund intends to comply with the provisions of the Internal Revenue
Code of 1986, as amended, applicable to regulated investment companies and
to distribute substantially all of its income, including net realized
capital gains, if any, within the prescribed time periods. Accordingly, no
provision for federal income or excise tax is necessary.
f) Expenses incurred by the Trust with respect to any two or more funds in
the Trust are allocated in proportion to the net assets of each fund in
the Trust, except where allocations of direct expenses to each fund can
otherwise be made fairly. Expenses directly attributable to a fund are
charged to that fund.
14
<PAGE>
THE JPM PIERPONT NEW YORK TOTAL RETURN BOND FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
2. TRANSACTIONS WITH AFFILIATES
a) The Trust, on behalf of the Fund, has retained Funds Distributor, Inc.
("FDI"), a registered broker-dealer, to serve as co-administrator and
distributor for the Fund. Under a Co-Administration Agreement between FDI
and the Trust on behalf of the Fund, FDI provides administrative services
necessary for the operations of the Fund, furnishes office space and
facilities required for conducting the business of the Fund and pays the
compensation of the Fund's officers affiliated with FDI. The Fund has
agreed to pay FDI fees equal to its allocable share of an annual
complex-wide charge of $425,000 plus FDI's out-of-pocket expenses. The
amount allocable to the Fund is based on the ratio of the Fund's net
assets to the aggregate net assets of the Trust and certain other
investment companies subject to similar agreements with FDI. For the six
months ended September 30, 1997, the fee for these services amounted to
$911.
b) The Trust, on behalf of the Fund, has an Administrative Services Agreement
(the "Services Agreement") with Morgan under which Morgan is responsible
for certain aspects of the administration and operation of the Fund. Under
the Services Agreement, the Fund has agreed to pay Morgan a fee equal to
its allocable share of an annual complex-wide charge. This charge is
calculated based on the aggregate average daily net assets of the
Portfolio and the other portfolios in which the Trust and The JPM
Institutional Funds invest (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 payable by
the Fund is determined by the proportionate share that its net assets bear
to the net assets of the Trust, the Master Portfolios, other investors in
the Master Portfolios for which Morgan provides similar services, and JPM
Series Trust. For the six months ended September 30, 1997, the fee for
these services amounted to $9,459.
Morgan has agreed to reimburse the Fund to the extent necessary to
maintain the total operating expenses of the Fund, including the expenses
allocated to the Fund from the Portfolio, at no more than 0.70% of the
average daily net assets of the Fund through July 31, 1998. For the six
months ended September 30, 1997, Morgan has agreed to reimburse the Fund
$3,749 for expenses under this agreement.
c) The Trust, on behalf of the Fund, has a Shareholder Servicing Agreement
with Morgan to provide account administration and personal account
maintenance services to Fund shareholders. The agreement provides for the
Fund to pay Morgan a fee for these services which is computed daily and
paid monthly at an annual rate of 0.20% of the average daily net assets of
the Fund. For the six months ended September 30, 1997, the fee for these
services amounted to $61,487.
Morgan, Charles Schwab & Co. ("Schwab") and the Trust are parties to
separate services and operating agreements (the "Schwab Agreements")
whereby Schwab makes fund shares available to customers of investment
advisors and other financial intermediaries who are Schwab's clients. The
Fund is not responsible for payments to Schwab under the Schwab
Agreements; however, in the event the Services Agreement with Schwab is
terminated for reasons other than a breach by Schwab and the relationship
between the Trust and Morgan is terminated, the Fund would be responsible
for the ongoing payments to Schwab with respect to pre-termination shares.
15
<PAGE>
THE JPM PIERPONT NEW YORK TOTAL RETURN BOND FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
d) The Trust, on behalf of the Fund, has a Fund Services Agreement with
Pierpont Group, Inc. ("Group") to assist the Trustees in exercising their
overall supervisory responsibilities for the Trust's affairs. The Trustees
of the Trust represent all the existing shareholders of Group. The Fund's
allocated portion of Group's costs in performing its services amounted to
$1,065 for the six months ended September 30, 1997.
e) An aggregate annual fee of $75,000 is paid to each Trustee for serving as
a Trustee of the Trust, The JPM Institutional Funds, the Master Portfolios
and JPM Series Trust. The Trustees' Fees and Expenses shown in the
financial statements represents the Fund's allocated portion of these
total fees and expenses. Prior to April 1, 1997, the aggregate annual
Trustee Fee was $65,000. The Trust's Chairman and Chief Executive Officer
also serves as Chairman of Group and receives compensation and employee
benefits from Group in his role as Group's Chairman. The allocated portion
of such compensation and benefits included in the Fund Services Fee shown
in the financial statements was $200.
3. TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest of one or more series.
Transactions in shares of beneficial interest of the Fund were as follows:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE FISCAL
SEPTEMBER 30, 1997 YEAR ENDED
(UNAUDITED) MARCH 31, 1997
------------------ --------------
<S> <C> <C>
Shares sold...................................... 1,709,629 1,992,628
Reinvestment of dividends and distributions...... 94,668 174,680
Shares redeemed.................................. (914,063) (1,590,722)
------------------ --------------
Net Increase..................................... 890,234 576,586
------------------ --------------
------------------ --------------
</TABLE>
4. CREDIT AGREEMENT
The Trust, on behalf of the Fund, together with other affiliated investment
companies (the "Funds"), entered into a revolving line of credit agreement (the
"Agreement") on May 28, 1997, with unaffiliated lenders. Additionally, since all
of the investable assets of the Fund are in the Portfolio, the Portfolio is
party to certain covenants of the Agreement. The maximum borrowing under the
commitment Agreement is $150,000,000. The Agreement expires on May 27, 1998,
however, the Fund as party to the Agreement will have the ability to extend the
Agreement and continue its participation therein for an additional 364 days. The
purpose of the Agreement is to provide another alternative for settling large
fund shareholder redemptions. Interest on any such borrowings outstanding will
approximate market rates. The Funds pay a commitment fee at an annual rate of
0.065% on the unused portion of the committed amount which is allocated to the
Funds in accordance with procedures established by their respective Trustees or
Directors. The Fund has not borrowed pursuant to the Agreement as of September
30, 1997.
16
<PAGE>
The New York Total Return Bond Portfolio
Semi-annual Report September 30, 1997
(unaudited)
(The following pages should be read in conjunction
with The JPM Pierpont New York Total Return Bond Fund
Semi-annual Financial Statements)
17
<PAGE>
THE NEW YORK TOTAL RETURN BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
SEPTEMBER 30, 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 (96.6%)
ALASKA (1.0%)
$ 2,000 North Slope Borough, Zero Coupon, (Capital
Appreciation, Series A), MBIA Insured.......... GO Aaa/AAA 06/30/01 0.000% $ 1,693,840
-------------
CALIFORNIA (0.6%)
1,000 Kaweah Delta Hospital District, Tulare County,
(Series F, due 06/01/14)....................... PP NR/NR 06/01/00(a) 5.250 1,000,330
-------------
GEORGIA (0.5%)
750 Georgia Municipal Electric Authority, (Refunding,
Series A)...................................... RB A/A 01/01/12 6.500 844,785
-------------
NEVADA (0.8%)
2,450 Clark County School District, Zero Coupon,
(Refunding, Series B), FGIC Insured............ GO Aaa/AAA 03/01/09 0.000 1,384,666
-------------
NEW YORK (88.8%)
2,250 Grand Central District Management Association
Inc., (Business Improvement District,
Prerefunded, due 01/01/22)..................... SO Aaa/AAA 01/01/02(a) 6.500 2,484,360
4,000 Metropolitan Transportation Authority, (Commuter
Facilities, Refunding, Series D), MBIA
Insured........................................ RB Aaa/AAA 07/01/06 6.000 4,405,480
5,500 Metropolitan Transportation Authority, (Dedicated
Tax Fund, Series A), MBIA Insured.............. RB Aaa/AAA 04/01/11 6.250 6,232,985
1,370 Metropolitan Transportation Authority, (Service
Contract, Commuter Facilities, Refunding,
Series N)...................................... RB Baa1/BBB+ 07/01/02 6.625 1,488,930
1,500 Metropolitan Transportation Authority, (Service
Contract, Commuter Facilities, Refunding,
Series O)...................................... RB Baa1/BBB+ 07/01/08 5.750 1,590,000
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
18
<PAGE>
THE NEW YORK TOTAL RETURN BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
SEPTEMBER 30, 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)
$ 1,500 Metropolitan Transportation Authority,
(Transportation Facilities, Refunding, Series
K), MBIA Insured............................... RB Aaa/AAA 07/01/07 6.300% $ 1,688,400
1,075 Monroe County, (Public Improvement, Partially
Prerefunded, Partially Escrowed to Maturity),
AMBAC Insured.................................. GO Aaa/AAA 06/01/08 5.875 1,182,801
55 Monroe County, (Public Improvement, Prerefunded,
Escrowed to Maturity), AMBAC Insured........... GO Aaa/AAA 06/01/08 5.875 60,759
1,500 Municipal Assistance Corp. for the City of New
York, (Refunding, Series J).................... RB Aa2/AA- 07/01/04 6.000 1,633,290
2,000 Municipal Assistance Corp. for the City of New
York, (Series 68).............................. RB Aa2/AA 07/01/99 7.000 2,101,460
1,460 New York City Industrial Development Agency,
(Civil Facilities Revenue, YMCA Greater New
York Project).................................. RB Baa3/NR 08/01/05 6.000 1,555,528
1,000 New York City Industrial Development Agency,
(Civil Facilities Revenue, YMCA Greater New
York Project).................................. RB Baa3/NR 08/01/06 6.000 1,066,960
1,750 New York City, (Refunding, Series A)............. GO Baa1/BBB+ 08/01/02 5.750 1,837,027
1,250 New York City, (Refunding, Series A)............. GO Baa1/BBB+ 08/01/04 7.000 1,410,100
1,715 New York City, (Refunding, Series A)............. GO Baa1/BBB+ 08/01/02 5.700 1,796,600
6,000 New York City, (Refunding, Series A, due
08/01/03)...................................... GO Baa1/BBB+ 08/01/02(a) 6.250 6,472,260
1,070 New York City, (Refunding, Series C)............. GO Baa1/BBB+ 02/01/04 6.000 1,140,556
1,500 New York City, (Refunding, Series H)............. GO Baa1/BBB+ 03/15/05 6.500 1,650,360
4,135 New York City, (Refunding, Series M)............. GO Baa1/BBB+ 06/01/99 6.000 4,258,223
3,125 New York City, (Refunding, Series M)............. GO Baa1/BBB+ 06/01/00 6.000 3,254,219
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
THE NEW YORK TOTAL RETURN BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
SEPTEMBER 30, 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)
$ 1,000 New York State Dormitory Authority, (City
University System, Series D)................... RB Baa1/BBB+ 07/01/03 8.750% $ 1,200,730
1,900 New York State Dormitory Authority, (Mental
Health Services Facilities Improvement,
Refunding, Series E), AMBAC Insured............ RB Aaa/AAA 08/15/04 6.000 2,064,464
5,650 New York State Dormitory Authority, (Mental
Health Services Facilities Improvements,
Refunding, Series B)........................... RB Baa1/A- 02/15/06 6.000 6,076,405
1,175 New York State Dormitory Authority, (Mental
Health Services Facilities Improvements, Series
B)............................................. RB Baa1/A- 02/15/09 6.500 1,326,411
1,750 New York State Dormitory Authority, (State
University Educational Facilities, Prerefunded,
Series B, due 05/15/15)........................ RB Aaa/BBB+ 05/15/00(a) 7.250 1,919,050
1,500 New York State Dormitory Authority, (State
University Educational Facilities, Refunding,
Series A)...................................... RB Baa1/BBB+ 05/15/04 6.500 1,648,500
1,500 New York State Dormitory Authority, (State
University Educational Facilities, Refunding,
Series A), AMBAC Insured....................... RB Aaa/AAA 05/15/07 5.500 1,605,150
3,000 New York State Dormitory Authority, (State
University Educational Facilities, Refunding,
Series A), FGIC Insured........................ RB Aaa/AAA 05/15/11 5.875 3,291,210
1,580 New York State Dormitory Authority, (State
University Educational Facilities, Refunding,
Series B), AMBAC Insured....................... RB Aaa/AAA 05/15/09 5.250 1,644,116
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE NEW YORK TOTAL RETURN BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
SEPTEMBER 30, 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)
$ 1,000 New York State Dormitory Authority, (State
University Educational Facilities, Series A)... RB Baa1/BBB+ 05/15/99 6.625% $ 1,040,200
1,210 New York State Dormitory Authority, (University
of Rochester, Series A)........................ RB A1/A+ 07/01/06 6.500 1,373,072
1,110 New York State Dormitory Authority, (Lease
Revenue, State University Dormitory Facilities,
Series A), AMBAC Insured....................... RB Aaa/AAA 07/01/11 6.000 1,228,681
5,000 New York State Environmental Facilities Corp.,
(PCR, Refunding)............................... RB Aa2/A- 06/15/11 5.750 5,363,300
5,000 New York State Environmental Facilities Corp.,
(Special Obligation, Prerefunded, due
04/01/22)...................................... RB Aaa/AAA 04/01/02(a) 7.375 5,721,400
1,000 New York State Housing Finance Agency, (Service
Contract Obligation, Prerefunded, Series A, due
09/15/20)...................................... RB Aaa/AAA 03/15/01(a) 7.800 1,132,400
1,250 New York State Local Government Assistance Corp.,
(Prerefunded, Series A, due 04/01/16).......... RB Aaa/AAA 04/01/01(a) 7.000 1,386,900
1,000 New York State Local Government Assistance Corp.,
(Prerefunded, Series A, due 04/01/21).......... RB Aaa/AAA 04/01/02(a) 7.125 1,134,130
2,000 New York State Local Government Assistance Corp.,
(Refunding, Series A), AMBAC Insured........... RB Aaa/AAA 04/01/06 6.000 2,191,540
3,350 New York State Local Government Assistance Corp.,
(Refunding, Series E).......................... RB A3/A+ 04/01/14 6.000 3,679,707
1,000 New York State Local Government Assistance Corp.,
(Series A)..................................... RB A3/A+ 04/01/00 6.200 1,047,530
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE NEW YORK TOTAL RETURN BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
SEPTEMBER 30, 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)
$ 1,000 New York State Local Government Assistance Corp.,
(Series C)..................................... RB A3/A+ 04/01/12 6.000% $ 1,095,770
1,500 New York State Medical Care Facilities Finance
Agency, (Mental Health Services, Refunding,
Series F)...................................... RB Baa1/A- 02/15/03 6.000 1,593,045
1,565 New York State Medical Care Facilities Finance
Agency,
(St. Lukes Hospital, Prerefunded, Series B, due
02/15/29), FHA Insured......................... RB Aaa/AAA 02/15/00(a) 7.450 1,713,065
2,000 New York State Power Authority, (Revenue &
General Purpose, Refunding, Series W).......... RB Aa2/AA- 01/01/03 6.625 2,209,460
2,195 New York State Power Authority, (Revenue &
General Purpose, Refunding, Series W).......... RB Aa2/AA- 01/01/08 6.500 2,505,658
2,000 New York State Thruway Authority, (Service
Contract, Local Highway & Bridge).............. RB Baa1/BBB 04/01/05 6.000 2,145,820
2,000 New York State Thruway Authority, (Service
Contract, Local Highway & Bridge, Refunding)... RB Baa1/BBB+ 04/01/04 5.500 2,084,200
2,470 New York State Urban Development Corp., (Center
for Industrial Innovation, Refunding).......... RB Baa1/BBB+ 01/01/06 6.250 2,695,635
1,155 New York State Urban Development Corp., (Center
for Industrial Innovation, Refunding).......... RB Baa1/BBB+ 01/01/07 6.250 1,265,279
3,000 New York State Urban Development Corp.,
(Correctional Capital Facilities, Prerefunded,
Series 2, due 01/01/21)........................ RB Aaa/BBB+ 01/01/01(a) 6.500 3,215,040
2,000 New York State Urban Development Corp.,
(Correctional Capital Facilities, Series 6).... RB Baa1/BBB+ 01/01/03 6.000 2,122,480
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE NEW YORK TOTAL RETURN BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
SEPTEMBER 30, 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)
$ 2,635 New York State Urban Development Corp.,
(Sub-Lien, Refunding).......................... RB A/A 01/01/06 6.000% $ 2,872,519
5,250 New York State, (Refunding, Series A)............ GO A2/A- 07/15/06 6.500 5,960,115
1,000 Orange County, (Refunding)....................... GO Aa2/NR 11/15/04 5.500 1,068,490
1,000 Orange County, (Refunding)....................... GO Aa2/NR 11/15/05 5.500 1,073,000
7,730 Port Authority of New York & New Jersey, (Special
Obligation, Series 6), MBIA Insured............ RB Aaa/AAA 12/01/11 6.250 8,693,545
1,030 Suffolk County Water Authority, Water Systems
Revenue, (Prerefunded, due 06/01/04), AMBAC
Insured........................................ RB Aaa/AAA 06/01/00(a) 6.600 1,113,986
1,000 Triborough Bridge & Tunnel Authority, (General
Purpose, Series A)............................. RB Aa/A+ 01/01/11 6.000 1,104,150
1,000 Triborough Bridge & Tunnel Authority, (General
Purpose, Series X)............................. RB Aa/A+ 01/01/12 6.625 1,167,490
1,500 Triborough Bridge & Tunnel Authority, (General
Purpose, Series Y)............................. RB Aa/A+ 01/01/07 5.900 1,639,575
3,000 Triborough Bridge & Tunnel Authority,
(Prerefunded, Series T, due 01/01/20).......... RB Aaa/A+ 01/01/01(a) 7.000 3,312,810
1,000 Trust for Cultural Resources of the City of New
York, (Series 1997, due 01/01/05).............. PP NR/NR 10/01/01(a) 5.250 1,011,960
2,000 United Nations Development Corp., (Senior Lien,
Series A, Prerefunded, due 07/01/26)........... RB A2/NR 07/01/03(a) 6.000 2,204,980
3,230 Yonkers, (Series C), AMBAC Insured............... GO Aaa/AAA 08/01/04 5.500 3,414,175
-------------
TOTAL NEW YORK............................... 150,667,441
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
23
<PAGE>
THE NEW YORK TOTAL RETURN BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
SEPTEMBER 30, 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 (3.2%)
$ 2,000 Puerto Rico Commonwealth, (Refunding)............ GO Baa1/A 07/01/99 5.500% $ 2,049,480
3,000 University of Puerto Rico, (Refunding, Series N),
MBIA Insured................................... RB Aaa/AAA 06/01/05 6.250 3,357,750
-------------
TOTAL PUERTO RICO............................ 5,407,230
-------------
TEXAS (0.1%)
120 Austin, Water Sewer & Electric Revenue, (Escrowed
to Maturity, Refunding)........................ RB A/NR 11/15/97 13.500 121,418
-------------
MISCELLANEOUS (1.6%)
2,100 Mashantucket Western Pequot Tribe, (Special
Revenue, Series A), 144A....................... RB Baa2/BBB- 09/01/01 6.250 2,230,620
500 Mashantucket Western Pequot Tribe, (Special
Revenue, Series A), 144A....................... RB Baa2/BBB- 09/01/02 6.250 535,930
-------------
TOTAL MISCELLANEOUS.......................... 2,766,550
-------------
TOTAL LONG TERM INVESTMENTS (COST $157,651,093)............................................... 163,886,260
-------------
SHORT-TERM INVESTMENTS (3.4%)
GEORGIA (0.6%)
1,000 Bartow County, Georgia Development Authority,
(PCR, Georgia Power Co.,
1st Series, due 06/01/23)...................... VRDN VMIG1/NR 10/01/97(a) 4.000 1,000,000
NEW YORK (2.5%)
700 New York City Municipal Water Finance Authority,
(Water and Sewer Systems Revenue, Series A, due
06/15/25), FGIC Insured........................ VRDN VMIGI/A-1+ 10/01/97(a) 4.100 700,000
900 New York City Municipal Water Finance Authority,
(Water and Sewer Systems Revenue, Series C, due
06/15/23), FGIC Insured........................ VRDN VMIGI/A-1+ 10/01/97(a) 3.850 900,000
100 New York City, (Series B, due 10/01/21), FGIC
Insured........................................ VRDN VMIGI/A-1+ 10/01/97(a) 4.100 100,000
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
24
<PAGE>
THE NEW YORK TOTAL RETURN BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
SEPTEMBER 30, 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 Energy Research and Development
Authority, (PCR, New York Electric and Gas,
Refunding, Series B, due 02/01/29), LOC Union
Bank of Switzerland............................ VRDN VMIGI/A-1+ 10/01/97(a) 3.900% $ 2,000,000
500 New York State Energy Research and Development
Authority, (PCR, New York Electric and Gas,
Refunding, Series D, due 10/01/29), LOC Union
Bank of Switzerland............................ VRDN VMIGI/A-1+ 10/01/97(a) 3.700 500,000
-------------
4,200,000
-------------
WASHINGTON (0.3%)
500 Washington State Health Care Facilities Authority
(VA Mason Medical Center, Refunding, Series B,
due 02/15/27).................................. VRDN VMIG1/A-1+ 10/01/97(a) 3.850 500,000
-------------
TOTAL SHORT-TERM INVESTMENTS (COST $5,700,000).................................................... 5,700,000
-------------
TOTAL INVESTMENTS (COST $163,351,093) (100.0%).................................................... 169,586,260
OTHER ASSETS IN EXCESS OF LIABILITIES (0.0%)...................................................... 45,631
-------------
NET ASSETS (100.0%)............................................................................... $ 169,631,891
-------------
-------------
</TABLE>
- ------------------------------
Note: Based on the cost of investments of $163,351,093 for federal income tax
purposes at September 30, 1997, the aggregate gross unrealized appreciation and
depreciation was $6,241,720 and $6,553, respectively, resulting in net
unrealized appreciation of investments of $6,235,167.
(a) The date listed under the heading maturity date represents an optional
tender date. The actual maturity date is indicated in the security description.
Definition of terms used:
AMBAC - Ambac Indemnity Corp., FHA - Federal Housing Authority, FGIC - Financial
Guaranty Insurance Company, GO - General Obligation, MBIA - Municipal Bond
Investors Assurance Corp., LOC - Letter of Credit, PCR - Pollution Control
Revenue, PP - Private Placement, RB - Revenue Bond, SO - Special Obligation,
VRDN - Variable Rate Demand Note.
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 coincides with the first call date of the first 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.
144A - Securities restricted for resale to Qualified Institutional Buyers.
The Accompanying Notes are an Integral Part of the Financial Statements.
25
<PAGE>
THE NEW YORK TOTAL RETURN BOND PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $163,351,093 ) $169,586,260
Cash 4,810
Receivable for Investments Sold 4,146,440
Interest Receivable 2,584,157
Deferred Organization Expenses 3,472
Prepaid Trustees' Fees 171
Prepaid Expenses and Other Assets 1,087
------------
Total Assets 176,326,397
------------
LIABILITIES
Payable for Investments Purchased 6,601,140
Advisory Fee Payable 41,576
Custody Fee Payable 12,432
Administrative Services Fee Payable 7,540
Administration Fee Payable 381
Fund Services Fee Payable 105
Accrued Expenses 31,332
------------
Total Liabilities 6,694,506
------------
NET ASSETS
Applicable to Investors' Beneficial Interests $169,631,891
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
26
<PAGE>
THE NEW YORK TOTAL RETURN BOND PORTFOLIO
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest Income $4,154,261
EXPENSES
Advisory Fee $243,251
Custodian Fees and Expenses 28,950
Administrative Services Fee 24,950
Professional Fees and Expenses 18,384
Fund Services Fee 2,822
Trustees' Fees and Expenses 1,552
Administration Fee 1,452
Amortization of Organization Expenses 1,155
Miscellaneous 4,428
--------
Total Expenses 326,944
----------
NET INVESTMENT INCOME 3,827,317
NET REALIZED GAIN ON INVESTMENTS 310,536
NET CHANGE IN UNREALIZED APPRECIATION OF
INVESTMENTS 4,736,566
----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $8,874,419
----------
----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
27
<PAGE>
THE NEW YORK TOTAL RETURN BOND PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE FISCAL
SEPTEMBER 30, 1997 YEAR ENDED
(UNAUDITED) MARCH 31, 1997
------------------ --------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 3,827,317 $ 6,033,800
Net Realized Gain (Loss) on Investments 310,536 (18,872)
Net Change in Unrealized Appreciation
(Depreciation) of Investments 4,736,566 (401,871)
------------------ --------------
Net Increase in Net Assets Resulting from
Operations 8,874,419 5,613,057
------------------ --------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 46,409,477 71,063,672
Withdrawals (33,574,989) (27,423,240)
------------------ --------------
Net Increase from Investors' Transactions 12,834,488 43,640,432
------------------ --------------
Total Increase in Net Assets 21,708,907 49,253,489
NET ASSETS
Beginning of Period 147,922,984 98,669,495
------------------ --------------
End of Period $ 169,631,891 $ 147,922,984
------------------ --------------
------------------ --------------
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FISCAL FOR THE PERIOD
FOR THE YEAR ENDED APRIL 11, 1994
SIX MONTHS ENDED MARCH 31, (COMMENCEMENT OF
SEPTEMBER 30, 1997 ------------------ OPERATIONS) TO
(UNAUDITED) 1997 1996 MARCH 31, 1995
------------------ ------ ------ ----------------
<S> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Expenses 0.40%(a) 0.43% 0.44% 0.48%(a)
Net Investment Income 4.72%(a) 4.75% 4.72% 4.59%(a)
Decrease Reflected in Expense Ratio due to
Expense Reimbursement -- -- -- 0.03%(a)
Portfolio Turnover 27% 35% 41% 63%
</TABLE>
- ------------------------
(a) Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
28
<PAGE>
THE NEW YORK TOTAL RETURN BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30,1997
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The New York Total Return Bond Portfolio (the "Portfolio") is registered under
the Investment Company Act of 1940, as amended, as a non-diversified, open-end
management investment company which was organized as a trust under the laws of
the State of New York on June 16, 1993. The Portfolio commenced operations on
April 11, 1994. The Portfolio's investment objective is to provide a high
after-tax total return for New York residents consistent with moderate risk of
capital. The Portfolio invests a significant amount of its assets in debt
obligations issued by political subdivisions and authorities in the State of New
York. The issuers' ability to meet their obligations may be affected by economic
and political developments within the State of New York. 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 more than 60 days, 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 closing bid price on such exchange or at the quoted bid price in
the OTC 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, indications as to value from dealers and
general market conditions. If such prices are not supplied by the Fund's
independent pricing service, such securities are priced in accordance with
procedures adopted by the Trustees. All portfolio securities with a
remaining maturity of 60 days or less 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 bonds, no readily available market quotations exist for most
municipal securities. The Portfolio values municipal securities on the
basis of prices from a pricing service which uses information with respect
to transactions in bonds, quotations from bond dealers, market
transactions in comparable securities and various relationships between
securities in determining values.
b) The Portfolio incurred organization expenses in the amount of $11,473.
Morgan Guaranty Trust Company of New York ("Morgan") has agreed to pay the
organization expenses of the Portfolio. The Portfolio has agreed to
reimburse Morgan for these costs which are being deferred and amortized on
a straight-line basis over a period not to exceed five years beginning
with the commencement of operations of the Portfolio.
c) 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.
29
<PAGE>
THE NEW YORK TOTAL RETURN BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
SEPTEMBER 30,1997
- --------------------------------------------------------------------------------
d) The Portfolio intends to be treated as a partnership for federal income
tax purposes. As such, each investor in the Portfolio will be taxed on its
share of the Portfolio's ordinary income and capital gains. It is intended
that the Portfolio's assets will be managed in such a way that an investor
in the Portfolio will be able to satisfy the requirements of Subchapter M
of the Internal Revenue Code. The cost of securities is substantially the
same for book and tax purposes.
2. TRANSACTIONS WITH AFFILIATES
a) The Portfolio has an Investment Advisory Agreement with 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 September 30, 1997, such fees amounted to $243,251.
b) The Portfolio has retained Funds Distributor, Inc. ("FDI"), a registered
broker-dealer, to serve as the co-administrator and exclusive placement
agent. Under a Co-Administration Agreement between FDI and the Portfolio,
FDI provides administrative services necessary for the operations of the
Portfolio, furnishes office space and facilities required for conducting
the business of the Portfolio and pays the compensation of the officers
affiliated with FDI. The Portfolio has agreed to pay FDI fees equal to its
allocable share of an annual complex-wide charge of $425,000 plus FDI's
out-of-pocket expenses. The amount allocable to the Portfolio is based on
the ratio of the Portfolio's net assets to the aggregate net assets of the
Portfolio and certain other investment companies subject to similar
agreements with FDI. For the six months ended September 30, 1997, the fee
for these services amounted to $1,452.
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 allocable share of an annual complex-wide charge. This charge
is calculated based on the aggregate average daily net assets of the
Portfolio and certain other portfolios for which Morgan acts as investment
advisor (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 payable by the Portfolio is
determined by the proportionate share that its net assets bear to the net
assets of the Master Portfolios, other investors in the Master Portfolios
for which Morgan provides similar services, and JPM Series Trust. For the
six months ended September 30, 1997, the fee for these services amounted
to $24,950.
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 $2,822 for the six months ended September 30, 1997.
e) An aggregate annual fee of $75,000 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 Trustees' Fees and Expenses
shown in the financial statements represents the Portfolio's allocated
portion of the total
30
<PAGE>
THE NEW YORK TOTAL RETURN BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
SEPTEMBER 30,1997
- --------------------------------------------------------------------------------
fees and expenses. Prior to April 1, 1997, the aggregate annual Trustee
Fee was $65,000. The Portfolio's Chairman and Chief Executive Officer also
serves as Chairman of Group and receives compensation and employee
benefits from Group in his role as Group's Chairman. The allocated portion
of such compensation and benefits included in the Fund Services Fee shown
in the financial statements was $600.
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the six months
ended September 30, 1997, were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
----------- -----------
<S> <C> <C>
Municipal Obligations............................ $53,258,216 $49,017,433
</TABLE>
4. CREDIT AGREEMENT
The Portfolio is party to a revolving line of credit agreement (the "Agreement")
as discussed more fully in Note 4 of the Fund's Notes to the Financial
Statements which are included elsewhere in this report.
31
<PAGE>
JPM PIERPONT PRIME MONEY MARKET FUND
JPM PIERPONT TAX EXEMPT MONEY MARKET FUND
JPM PIERPONT FEDERAL MONEY MARKET FUND
JPM PIERPONT SHORT TERM BOND FUND
JPM PIERPONT BOND FUND
JPM PIERPONT TAX EXEMPT BOND FUND
JPM PIERPONT NEW YORK TOTAL RETURN BOND FUND
JPM PIERPONT SHARES: CALIFORNIA BOND FUND
JPM PIERPONT EMERGING MARKETS DEBT FUND
JPM PIERPONT DIVERSIFIED FUND
JPM PIERPONT U.S. EQUITY FUND
JPM PIERPONT SHARES: TAX AWARE U.S. EQUITY FUND
JPM PIERPONT SHARES: TAX AWARE DISCIPLINED EQUITY FUND
JPM PIERPONT U.S. SMALL COMPANY FUND
JPM PIERPONT U.S. SMALL COMPANY OPPORTUNITIES FUND
JPM PIERPONT INTERNATIONAL EQUITY FUND
JPM PIERPONT INTERNATIONAL OPPORTUNITIES FUND
JPM PIERPONT EMERGING MARKETS EQUITY FUND
JPM PIERPONT EUROPEAN EQUITY FUND
JPM PIERPONT JAPAN EQUITY FUND
JPM PIERPONT ASIA GROWTH FUND
FOR MORE INFORMATION ON HOW THE JPM PIERPONT FAMILY OF FUNDS CAN HELP YOU PLAN
FOR YOUR FUTURE, CALL J.P. MORGAN FUNDS SERVICES AT (800) 521-5411.
The
JPM PIERPONT
NEW YORK
TOTAL RETURN
BOND FUND
SEMI-ANNUAL REPORT
SEPTEMBER 30, 1997
