<PAGE>
LETTER TO THE SHAREHOLDERS OF THE J.P. MORGAN NEW YORK TAX EXEMPT BOND FUND
November 2, 1998
Dear Shareholder:
The past six months have seen dramatic changes in the mutual fund marketplace.
While the U.S. equity markets hit record highs in July, economic crises in Asia,
Russia, and Latin America compounded to create a swift downturn in late August.
Virtually all of the developed markets, including the United States, felt the
impact. Investors seeking safe havens delved into money market and bond funds.
Foreign investors fled to Treasuries, which brought yields on Treasury bonds to
30-year lows. Municipal bonds also benefited, as U.S. taxpaying investors
regarded tax-exempt bond funds as a viable opportunity to reduce their risk
exposure from equity holdings but still retain the potential for attractive
returns.
We are pleased to report that the J.P. Morgan New York Tax Exempt Bond Fund,
formerly the J.P. Morgan New York Total Return Bond Fund, posted a healthy gain
of 4.27% for the six months ended September 30, 1998. The fund was in line with
the 4.26% return of its benchmark (the Lehman Brothers 1-16 year Municipal Bond
Index) for the period; it outperformed the 4.09% return of its competitors as
measured by the Lipper New York Intermediate Municipal Debt Funds Average. As of
September 30, 1998, the fund's 30-day SEC yield, at 3.82%, is equivalent to a
taxable yield of 6.32%, assuming a 39.6% tax rate.
The fund's net asset value, at $10.85 per share on September 30,1998, was up
from $10.62 per share on March 31, 1998. Distributions of approximately $0.22
per share were paid from ordinary income, substantially all of which were tax
exempt. The fund's net assets increased to $100.3 million from $85.2 million,
while the net assets of The New York Tax Exempt Bond Portfolio, in which the
fund invests, were $267.0 million.
The report that follows includes an interview with Elaine Young and Robert
Meiselas, both 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.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<S> <C> <C> <C>
LETTER TO THE SHAREHOLDERS . . . . . .1 GLOSSARY OF TERMS . . . . . . . . .7
FUND PERFORMANCE . . . . . . . . . . .3 FUND FACTS AND HIGHLIGHTS . . . . .8
PORTFOLIO MANAGER Q & A. . . . . . . .4 FINANCIAL STATEMENTS. . . . . . . 10
- --------------------------------------------------------------------------------
</TABLE>
1
<PAGE>
As chairman and president of Asset Management Services, we appreciate your
investment in the fund. 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
2
<PAGE>
FUND PERFORMANCE
EXAMINING PERFORMANCE
One way to look at performance is to review a fund's average annual total
return. This figure takes the fund's actual (or cumulative) return and shows
what would have happened if the fund had achieved that return by performing at a
constant rate each year. Average annual total returns represent the average
yearly change of a fund's value over various time periods, typically one, five,
or ten years (or since inception). Total returns for periods of less than one
year are not annualized and provide a picture of how a fund has performed over
the short term.
<TABLE>
<CAPTION>
PERFORMANCE TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS
--------------------- --------------------------------------
THREE SIX ONE THREE SINCE
AS OF SEPTEMBER 30, 1998 MONTHS MONTHS YEAR YEARS INCEPTION*
- ------------------------------------------------------------- --------------------------------------
<S> <C> <C> <C> <C> <C>
J.P. Morgan New York
Tax Exempt Bond Fund 2.91% 4.27% 7.13% 6.38% 6.62%
Lehman Brothers 1-16 year
Municipal Bond Index** 2.87% 4.26% 7.77% 7.34% 7.53%
Lipper New York Intermediate
Municipal Debt Funds Average 2.88% 4.09% 7.16% 6.10% 6.30%
</TABLE>
* 4/11/94 -- COMMENCEMENT OF OPERATIONS (AVERAGE ANNUAL TOTAL RETURNS
BASED ON MONTH END FOLLOWING INCEPTION; AVERAGE ANNUAL RETURN SINCE ACTUAL
INCEPTION IS 6.59%).
** PRIOR TO MAY 1, 1997 THE BENCHMARK WAS 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 NO 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. HAD EXPENSES
NOT BEEN SUBSIDIZED, RETURNS WOULD HAVE BEEN LOWER.
3
<PAGE>
PORTFOLIO MANAGER Q&A
This interview was conducted with Elaine Young and Robert Meiselas, both members
of the portfolio management team responsible for managing The New York Tax
Exempt Bond Portfolio in which the fund invests.
[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 and an M.B.A. in Finance.
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 C.P.A. 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. He is a graduate of St. John's
University and has completed graduate work at Long Island University
in the field of taxation.
This interview was conducted on October 15, 1998 and represents both Bob and
Elaine's views on that date.
HOW HAS THE NEW YORK TAX EXEMPT BOND PORTFOLIO PERFORMED IN THE LAST SIX MONTHS?
RM: Generally, all municipal bonds have done well during this period, for a few
reasons. First, global economic difficulties have stimulated greater investor
interest in bonds. Second, the stock market adjustment heightened demand for
municipals, as U.S. investors began to seek refuge in fixed-income investments.
Finally, supply of municipals in the summer months began to wane, which drove
prices up.
Our portfolio achieved solid performance for the six-month period. We attribute
this success to our ability to accurately project the heightened demand for
municipals and the likely movement of interest rates.
HOW HAS SECURITY SELECTION CONTRIBUTED TO PERFORMANCE?
EY: We've made an effort to invest in higher quality bonds. When evaluating risk
versus reward, it became apparent that currently there were no clear benefits of
assuming additional credit risk. We've also analyzed bond structures in order to
select the type of bonds that would most readily appreciate under our projected
economic scenario. We concluded that higher quality, non-callable bonds continue
to offer the best return
4
<PAGE>
without unnecessarily introducing volatility. Over the last few months, we've
also selectively introduced private placements into the allocation mix, which
should contribute to overall yield.
HOW HAS SUPPLY AFFECTED THE PORTFOLIO?
RM: In the spring months, there was ample supply; in fact, prices became
somewhat diluted. But supply began to wane in the summer months. Then, the
global financial market crises of the late summer heightened demand for
municipals, leaving a scarcity of supply. If the stock market continues to
perform poorly, demand for municipals is likely to remain strong.
YIELDS FOR 30-YEAR TREASURY BONDS HAVE BEEN REDUCED TO THEIR LOWEST RATES IN
DECADES. WHAT IMPLICATIONS DO HISTORICALLY LOW YIELDS HAVE FOR MUNICIPAL BONDS?
EY: Many of the flows into Treasuries were from foreign investors seeking a safe
haven from regional markets affected by crises in Asia, Russia, and Latin
America. For U.S. taxpayers, municipals offer a significant advantage because of
their tax-exempt status. We've seen very good flows into the portfolio in the
last six months. Low yields can stimulate increased supply because issuers may
find it attractive to refund existing debt, but we do not feel that this
potential incremental supply will overwhelm demand.
MANY ECONOMISTS, INCLUDING THOSE AT J.P. MORGAN, ARE CALLING FOR A RECESSION IN
1999. IF A RECESSION WERE TO OCCUR NEXT YEAR, HOW WOULD IT AFFECT MUNICIPAL BOND
FUNDS?
EY: It is difficult to forecast the impact of a recession on one segment of the
investment market because there are so many factors involved. However, we can
offer some observations. Unless the economic downturn is deep and sustained,
which we do not anticipate at this point, we think it is unlikely that the
credit standing of most states and municipalities would substantively weaken.
There may be pockets that are affected, but overall, the boom economy of the
last seven years has left many municipalities--including New York State and New
York City--with budget surpluses. Unlike the past, a large number of these state
and local governments have been able to set some money aside to provide a
cushion for future economic downturns. Separately, a pronounced economic
downturn could also threaten stock market prices which, at the same time, may
benefit municipal bonds.
WHAT ADVANTAGES DO MUNICIPAL BOND FUNDS HAVE VERSUS OTHER TYPES OF FUNDS --
MONEY MARKET, EQUITY -- RIGHT NOW?
RM: If circumstances allow, we believe that every investor should evaluate the
long-term prospects of their investments rather than the short-term results.
Among investment alternatives, we think that municipals should be a significant
part of a typical tax-aware portfolio. Under current economic and investment
conditions, the outlook for municipals is good, whereas other investment sectors
may be less attractive. As such, we think that this is a good time to invest in
municipals.
5
<PAGE>
HOW DO MUNICIPALS COMPARE TO OTHER FIXED INCOME INVESTMENTS?
EY: Municipals are more attractive than other fixed income investments right now
for a number of reasons. After considering federal, state and local individual
income taxes, municipals provide a substantially higher after-tax return than
most fixed income alternatives. At the same time, they offer lower volatility
and a lower incidence of credit risk.
Each investor must consider his or her individual federal and local income tax
rate and tax position. While the after-tax return advantage offered by
municipals is readily apparent for taxpayers in the highest income tax brackets,
it also makes sense for many New York taxpayers who pay a much lower combined
tax rate.
WHAT IS THE OUTLOOK FOR THE NEW YORK TAX EXEMPT BOND FUND?
RM: We're bullish on the outlook for the New York Tax Exempt Bond Fund and have
positioned the portfolio to take further advantage of economic conditions and
our view of the investment market. Moreover, we believe that demand for
municipals will remain very strong in the foreseeable future. In any case, our
portfolio should look very appealing to New York investors who are subject to
high income taxes. It offers high after-tax return at low risk when compared to
most alternatives.
6
<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 five-
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. Effectively, the interest received is the difference between face value
and the price paid for the security.
7
<PAGE>
FUND FACTS
INVESTMENT OBJECTIVE
J.P. Morgan New York Tax Exempt Bond Fund seeks to provide a high level of tax
exempt income 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 level of income which is free from federal, state, and New York
City personal income taxes.
- --------------------------------------------------------------------------------
COMMENCEMENT OF OPERATIONS
4/11/94
- --------------------------------------------------------------------------------
FUND NET ASSETS AS OF 9/30/98
$100,330,276
- --------------------------------------------------------------------------------
PORTFOLIO NET ASSETS AS OF 9/30/98
$267,015,462
- --------------------------------------------------------------------------------
DIVIDEND PAYABLE DATES
MONTHLY
- --------------------------------------------------------------------------------
CAPITAL GAIN PAYABLE DATES (IF APPLICABLE)
12/11/98
EXPENSE RATIO
The fund's current annualized 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, 1998
PORTFOLIO ALLOCATION
(PERCENTAGE OF TOTAL INVESTMENTS)
[CHART]
<TABLE>
<S> <C>
REVENUE BONDS 78.1%
GENERAL OBLIGATIONS 16.5%
PRIVATE PLACEMENTS 2.3%
SHORT-TERM & OTHER 3.1%
</TABLE>
30-DAY SEC YIELD
3.82%*
DURATION
5.72 years
<TABLE>
<S> <C>
QUALITY PROFILE
AAA-A 90.7%
Other 9.3%
</TABLE>
*YIELD IS NET OF FEES AND REFLECTS THE REIMBURSEMENT OF CERTAIN EXPENSES AS
DISCUSSED IN THE PROSPECTUS. HAD EXPENSES NOT BEEN SUBSIDIZED, THE 30-DAY SEC
YIELD WOULD HAVE BEEN 3.79%.
8
<PAGE>
DISTRIBUTED BY FUNDS DISTRIBUTOR, INC. EFFECTIVE OCTOBER 28, 1998, J.P. MORGAN
INVESTMENT MANAGEMENT INC., A WHOLLY OWNED SUBSIDIARY OF J.P. MORGAN & CO INC.,
WILL SERVE AS THE PORTFOLIO'S INVESTMENT ADVISOR. SHARES OF THE FUND ARE NOT
BANK DEPOSITS AND ARE NOT GUARANTEED BY ANY BANK, GOVERNMENT ENTITY, OR THE
FDIC. RETURN AND SHARE PRICE WILL FLUCTUATE AND REDEMPTION VALUE MAY BE MORE OR
LESS THAN ORIGINAL COST.
The fund invests through a master portfolio (another fund with the same
objective). Opinions expressed herein are based on current market conditions and
are subject to change without notice. Income may be subject to state and local
taxes. Some income may be subject to the Federal alternative minimum tax for
certain investors. Capital gains are not exempt from taxes.
CALL J.P. MORGAN FUNDS SERVICES AT (800) 521-5411 FOR A PROSPECTUS CONTAINING
MORE COMPLETE INFORMATION ABOUT THE FUND INCLUDING MANAGEMENT FEES AND OTHER
EXPENSES. PLEASE READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
9
<PAGE>
J.P. MORGAN NEW YORK TAX EXEMPT BOND FUND
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment in The New York Tax Exempt Bond
Portfolio ("Portfolio"), at value $ 99,691,585
Receivable for Expense Reimbursements 9,418
Deferred Organization Expenses 1,391
Prepaid Trustees' Fees 220
Receivable for Shares of Beneficial Interest Sold 776,605
Prepaid Expenses and Other Assets 7
------------
Total Assets 100,479,226
------------
LIABILITIES
Dividends Payable to Shareholders 78,706
Shareholder Servicing Fee Payable 19,633
Administrative Services Fee Payable 2,239
Administration Fee Payable 363
Fund Services Fee Payable 77
Accrued Expenses 47,932
------------
Total Liabilities 148,950
------------
NET ASSETS
Applicable to 9,245,758 Shares of Beneficial
Interest Outstanding
(par value $0.001, unlimited shares authorized) $100,330,276
------------
------------
Net Asset Value, Offering and Redemption Price
Per Share $10.85
-----
-----
ANALYSIS OF NET ASSETS
Paid-in Capital $ 95,369,123
Undistributed Net Investment Income 21,047
Accumulated Net Realized Gain on Investment 956,276
Net Unrealized Appreciation of Investment 3,983,830
------------
Net Assets $100,330,276
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
10
<PAGE>
J.P. MORGAN NEW YORK TAX EXEMPT BOND FUND
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME ALLOCATED FROM PORTFOLIO
Allocated Interest Income $2,182,876
Allocated Portfolio Expenses (175,665)
----------
Net Investment Income Allocated from
Portfolio 2,007,211
FUND EXPENSES
Shareholder Servicing Fee $ 98,827
Transfer Agent Fees 14,589
Administrative Services Fee 13,051
Registration Fees 11,880
Professional Fees 5,967
Amortization of Organization Expenses 1,375
Fund Services Fee 1,331
Administration Fee 940
Trustees' Fees and Expenses 631
Miscellaneous 10,069
--------
Total Fund Expenses 158,660
Less: Reimbursement of Expenses (15,692)
--------
NET FUND EXPENSES 142,968
----------
NET INVESTMENT INCOME 1,864,243
NET REALIZED GAIN ON INVESTMENT ALLOCATED FROM
PORTFOLIO 812,109
NET CHANGE IN UNREALIZED APPRECIATION OF
INVESTMENT ALLOCATED FROM PORTFOLIO 1,214,598
----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $3,890,950
----------
----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
11
<PAGE>
J.P. MORGAN NEW YORK TAX EXEMPT BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE FISCAL
SEPTEMBER 30, 1998 YEAR ENDED
(UNAUDITED) MARCH 31, 1998
------------------ --------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 1,864,243 $ 2,974,540
Net Realized Gain on Investment Allocated from
Portfolio 812,109 577,329
Net Change in Unrealized Appreciation of
Investment Allocated from Portfolio 1,214,598 1,725,945
------------------ --------------
Net Increase in Net Assets Resulting from
Operations 3,890,950 5,277,814
------------------ --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (1,864,243) (2,974,540)
Net Realized Gain -- (433,162)
------------------ --------------
Total Distributions to Shareholders (1,864,243) (3,407,702)
------------------ --------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Proceeds from Shares of Beneficial Interest Sold 21,108,022 40,909,669
Reinvestment of Dividends 1,415,851 2,580,218
Cost of Shares of Beneficial Interest Redeemed (9,380,988) (16,397,235)
------------------ --------------
Net Increase from Transactions in Shares of
Beneficial Interest 13,142,885 27,092,652
------------------ --------------
Total Increase in Net Assets 15,169,592 28,962,764
NET ASSETS
Beginning of Period 85,160,684 56,197,920
------------------ --------------
End of Period (including undistributed net
investment income of $21,047 and $21,047,
respectively) $ 100,330,276 $ 85,160,684
------------------ --------------
------------------ --------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
12
<PAGE>
J.P. MORGAN NEW YORK TAX EXEMPT 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, 1998 --------------------------- OPERATIONS) THROUGH
(UNAUDITED) 1998 1997 1996 MARCH 31, 1995
------------------ ------- ------- ------- -------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.62 $ 10.28 $ 10.34 $ 10.11 $ 10.00
------------------ ------- ------- ------- -------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.22 0.46 0.46 0.46 0.40
Net Realized and Unrealized Gain (Loss) on
Investment 0.23 0.40 (0.03) 0.26 0.11
------------------ ------- ------- ------- -------------------
Total from Investment Operations 0.45 0.86 0.43 0.72 0.51
------------------ ------- ------- ------- -------------------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (0.22) (0.46) (0.46) (0.46) (0.40)
Net Realized Gain -- (0.06) (0.03) (0.03) --
------------------ ------- ------- ------- -------------------
Total Distributions to Shareholders (0.22) (0.52) (0.49) (0.49) (0.40)
------------------ ------- ------- ------- -------------------
NET ASSET VALUE, END OF PERIOD $ 10.85 $ 10.62 $ 10.28 $ 10.34 $ 10.11
------------------ ------- ------- ------- -------------------
------------------ ------- ------- ------- -------------------
RATIOS AND SUPPLEMENTAL DATA
Total Return 4.27%(a) 8.49% 4.19% 7.16% 5.26%(a)
Net Assets, End of Period (in thousands) $ 100,330 $85,161 $56,198 $50,523 $ 38,137
Ratios to Average Net Assets
Expenses 0.70%(b) 0.71% 0.75% 0.75% 0.75%(b)
Net Investment Income 4.10%(b) 4.33% 4.44% 4.43% 4.31%(b)
Expenses without Reimbursement 0.73%(b) 0.77% 0.81% 0.79% 0.97%(b)
</TABLE>
- ------------------------
(a) Not annualized.
(b) Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
13
<PAGE>
J.P. MORGAN NEW YORK TAX EXEMPT BOND FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The J.P. Morgan New York Tax Exempt Bond Fund (the "fund") is a separate series
of the J.P. Morgan Funds, a Massachusetts business trust (the "trust") which was
organized on November 4, 1992. The trust is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The fund commenced operations on April 11, 1994. Prior to November 2, 1998, the
fund's name was J.P. Morgan New York Total Return Bond Fund.
The fund invests all of its investable assets in The New York Tax Exempt 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 (37% at
September 30, 1998). The performance of the fund is directly affected by the
performance of the portfolio. The financial statements of the portfolio,
including the Schedule of Investments, are included elsewhere in this report and
should be read in conjunction with the fund's financial statements.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual amounts could differ from
those estimates. The following is a summary of the significant accounting
policies of the fund:
a) Valuation of securities by the portfolio is discussed in Note 1a of the
portfolio's Notes to Financial Statements which are included elsewhere in
this report.
b) The fund records its share of net investment income, realized and
unrealized gain and loss and adjusts its investment in the portfolio each
day. All the net investment income and realized and unrealized gain and
loss of the portfolio is allocated pro rata among the fund and other
investors in the portfolio at the time of such determination.
c) Substantially all the fund's net investment income is declared as
dividends daily and paid monthly. Distributions to shareholders of net
realized capital gains, if any, are declared and paid annually.
d) The fund incurred organization expenses in the amount of $13,301, 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 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>
J.P. MORGAN NEW YORK TAX EXEMPT BOND FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
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 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, 1998, the fee for these services amounted to
$940.
b) The trust, on behalf of the fund, has an Administrative Services Agreement
(the "Services Agreement") with Morgan Guaranty Trust Company of New York
("Morgan") under which Morgan is responsible for certain aspects of the
administration and operation of the fund. Under the Services Agreement,
the fund has agreed to pay Morgan a fee equal to its allocable share of an
annual complex-wide charge. This charge is calculated based on the
aggregate average daily net assets of the portfolio and the other
portfolios in which the trust and the J.P. Morgan Institutional Funds
invest (the "master portfolios") and J.P. Morgan Series Trust in
accordance with the following annual schedule: 0.09% on the first $7
billion of their aggregate average daily net assets and 0.04% of their
aggregate average daily net assets in excess of $7 billion less the
complex-wide fees payable to FDI. The portion of this charge payable by
the fund is determined by the proportionate share that its net assets bear
to the net assets of the trust, the master portfolios, other investors in
the master portfolios for which Morgan provides similar services, and J.P.
Morgan Series Trust. For the six months ended September 30, 1998, the fee
for these services amounted to $13,051.
In addition, J.P. 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. For the six months
ended September 30, 1998, J.P. Morgan has agreed to reimburse the fund
$15,692 for expenses under this agreement. This reimbursement arrangement
can be changed or terminated at any time at the option of J.P. Morgan.
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. This rate was 0.20% of the average daily
net assets of the fund from April 1, 1998 through July 31, 1998. Effective
August 1, 1998 the rate was increased to 0.25%. For the six months ended
September 30, 1998, the fee for these services amounted to $98,827.
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
15
<PAGE>
J.P. MORGAN NEW YORK TAX EXEMPT BOND FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
Agreement with Schwab is terminated for reasons other than a breach by
Schwab and the relationship between the trust and Morgan is terminated,
the fund would be responsible for the ongoing payments to Schwab with
respect to pre-termination shares.
d) The trust, on behalf of the fund, has a Fund Services Agreement with
Pierpont Group, Inc. ("Group") to assist the trustees in exercising their
overall supervisory responsibilities for the trust's affairs. The trustees
of the trust represent all the existing shareholders of Group. The fund's
allocated portion of Group's costs in performing its services amounted to
$1,331 for the six months ended September 30, 1998.
e) An aggregate annual fee of $75,000 is paid to each trustee for serving as
a trustee of the trust, the J.P. Morgan Institutional Funds, the master
portfolios and J.P. Morgan Series Trust. The Trustees' Fees and Expenses
shown in the financial statements represent the fund's allocated portion
of these total fees and expenses. The trust's Chairman and Chief Executive
Officer also serves as Chairman of Group and receives compensation and
employee benefits from Group in his role as Group's Chairman. The
allocated portion of such compensation and benefits included in the Fund
Services Fee shown in the financial statements was $300.
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, 1998 YEAR ENDED
(UNAUDITED) MARCH 31, 1998
------------------ --------------
<S> <C> <C>
Shares of beneficial interest sold............... 1,979,793 3,864,109
Reinvestment of dividends........................ 132,677 243,534
Shares of beneficial interest redeemed........... (882,886) (1,556,053)
------------------ --------------
Net Increase..................................... 1,229,584 2,551,590
------------------ --------------
------------------ --------------
</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
Agreement was $100,000,000. The Agreement expired on May 27, 1998, however, the
fund as party to the Agreement has extended the Agreement and continues its
participation therein for an additional 364 days until May 26, 1999. The maximum
borrowing under the new Agreement is $150,000,000. The purpose of the Agreement
is to provide another alternative for settling large fund shareholder
redemptions. Interest on any such borrowings outstanding will approximate market
rates. The funds pay a commitment fee at an annual rate of 0.065% on the unused
portion of the committed amount which is allocable to the funds in accordance
with procedures established by their respective trustees or directors. There
were no outstanding borrowings to the Agreement at September 30, 1998.
16
<PAGE>
J.P. MORGAN NEW YORK TAX EXEMPT BOND FUND
SUPPLEMENTAL PROXY INFORMATION (UNAUDITED)
- --------------------------------------------------------------------------------
A Joint Special Meeting of Shareholders of the J.P. Morgan Family of Funds was
held on August 20, 1998. Each of the applicable funds voted in favor of adopting
the following proposals, therefore, the results are aggregated for the Trust
unless otherwise specified. The meeting was held for the following purposes:
<TABLE>
<S> <C>
1. To elect a slate of five Trustees to hold office for a term of unlimited
duration subject to the current retirement age of 70.
2a. To approve the amendment of the Fund's investment restriction relating to
diversification of assets.
2b. To approve the amendment of the Fund's investment restriction relating to
concentration of assets in a particular industry.
2c. To approve the amendment of the Fund's investment restriction relating to
the issuance of senior securities.
2d. To standardize the borrowing ability of the Fund to the extent permitted
by applicable law.
2e. To approve the amendment of the Fund's investment restriction relating to
underwriting.
2f. To approve the amendment of the Fund's investment restriction relating to
investment in real estate.
2g. To approve the amendment of the Fund's investment restriction relating to
commodities.
2h. To approve the amendment of the Fund's investment restriction relating to
lending.
2i. To approve the reclassification of the Fund's other fundamental
restrictions as nonfundamental.
3. To approve the reclassification of the Fund's investment objective from
fundamental to nonfundamental.
4. To approve a new investment advisory agreement of the Fund.
5. To amend the Declaration of Trust to provide dollar-based voting rights.
6. To ratify the selection of independent accountants,
PricewaterhouseCoopers LLP.
The results of the proxy solicitation on the above matters were as
follows:
</TABLE>
<TABLE>
<CAPTION>
DIRECTORS/MATTER VOTES FOR VOTES AGAINST ABSTENTIONS
- ------------------------------------------------------------------- ------------- ------------- -----------
<S> <C> <C> <C> <C>
1. Frederick S. Addy 2,692,335,831 18,884,648 --
William G. Burns 2,692,395,937 18,824,542 --
Arthur C. Eschenlauer 2,691,798,990 19,421,489 --
Matthew Healey 2,692,393,425 18,827,054 --
Michael P. Mallardi 2,692,488,290 18,732,189 --
2. Amending of Investment Restrictions:
a. Relating to diversification of assets 5,122,704 17,833 16,606
b. Relating to concentration of assets 5,116,956 23,581 16,606
c. Relating to issuance of senior securities 5,122,704 17,833 16,606
d. Relating to borrowing 5,122,704 17,833 16,606
e. Relating to underwriting 5,122,704 17,833 16,606
f. Relating to investment in real estate 5,122,704 17,833 16,606
g. Relating to commodities 5,122,704 17,833 16,606
h. Relating to lending 5,122,704 17,833 16,606
i. Reclassification of other restrictions as nonfundamental 5,066,604 73,933 16,606
3. Reclassification of investment objectives 5,047,710 92,827 16,606
4. Investment advisory agreement 5,118,145 9,457 32,364
5. Dollar-based voting rights 2,645,059,081 16,807,551 47,376,755
6. Independent accountants, PricewaterhouseCoopers LLP 2,682,031,391 4,303,418 24,885,671
</TABLE>
17
<PAGE>
The New York Tax Exempt Bond Portfolio
Semi-annual Report September 30, 1998
(The following pages should be read in conjunction
with J.P. Morgan New York Tax Exempt Bond Fund
Semi-annual Financial Statements)
18
<PAGE>
THE NEW YORK TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
<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 (96.9%)
CALIFORNIA (0.4%)
$ 1,000 Kaweah Delta Hospital District, Tulare
County, (Series F, due 06/01/14)...... PP NR/NR 06/01/00(a) 5.250% $ 1,022,010
-----------
CONNECTICUT (1.0%)
1,000 Mashantucket Western Pequot Tribe,
(Special Revenue, Prerefunded,
Escrowed to Maturity, Series A)
144A.................................. RB Aaa/AAA 09/01/01 6.250 1,065,340
250 Mashantucket Western Pequot Tribe,
(Special Revenue, Prerefunded,
Escrowed to Maturity, Series A)
144A.................................. RB Aaa/AAA 09/01/02 6.250 271,082
1,100 Mashantucket Western Pequot Tribe,
(Special Revenue, Series A) 144A...... RB Baa2/BBB- 09/01/01 6.250 1,165,659
250 Mashantucket Western Pequot Tribe,
(Special Revenue, Series A) 144A...... RB Baa2/BBB- 09/01/02 6.250 268,365
-----------
TOTAL CONNECTICUT................... 2,770,446
-----------
ILLINOIS (1.1%)
3,000 Illinois Development Finance Authority,
(IDR, Riverside Health & Fitness
Center Project, Series 1998-A, due
08/01/28)............................. PP NR/NR 08/01/01(a) 4.350 3,003,750
-----------
MICHIGAN (0.4%)
1,109 City of Detroit Public School, (Public
Power Revenue)........................ PP NR/NR 10/15/00 4.550 1,108,800
-----------
NEW YORK (94.0%)
4,000 Erie County Water Authority, (Water
Revenue, Refunding, Escrowed to
Maturity, Series A, due 12/01/04),
AMBAC Insured......................... RB Aaa/AAA 12/01/03(a) 5.000 4,182,240
3,100 Long Island Power Authority, (New York
Electric Systems, Refunding, Series
A), AMBAC Insured..................... RB Aaa/Baa1 12/01/09 5.500 3,451,943
4,950 Long Island Power Authority, (New York
Electric Systems, Refunding, Series
A), AMBAC insured..................... RB Aaa/Baa1 12/01/10 5.500 5,526,180
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
THE NEW YORK TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
<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)
$ 3,500 Long Island Power Authority, (New York
Electric Systems, Refunding, Series
A), AMBAC Insured..................... RB Aaa/Baa1 12/01/11 5.500% $ 3,914,050
4,000 Metropolitan Transportation Authority,
(Commuter Facilities, Refunding,
Series D), MBIA Insured............... RB Aaa/AAA 07/01/06 6.000 4,522,680
5,500 Metropolitan Transportation Authority,
(Dedicated Tax Fund, Series A), MBIA
Insured............................... RB Aaa/AAA 04/01/11 6.250 6,491,870
1,370 Metropolitan Transportation Authority,
(Service Contract, Commuter
Facilities, Refunding, Series N)...... RB Baa1/BBB+ 07/01/02 6.625 1,495,122
1,065 Monroe County, (Public Improvement,
Prerefunded, Escrowed to Maturity,
Series 1995), AMBAC Insured........... GO Aaa/AAA 06/01/08 5.875 1,214,419
65 Monroe County, (Public Improvement,
Unrefunded Balance, Series 1995),
AMBAC Insured......................... GO Aaa/AAA 06/01/08 5.875 74,119
4,000 Municipal Assistance Corp. for the City
of New York, (Refunding, Series E, due
07/01/07)............................. RB Aa2/AA 07/01/06(a) 5.500 4,414,520
2,150 Municipal Assistance Corp. for the City
of New York, (Refunding, Series G).... RB Aa2/AA 07/01/05 6.000 2,409,763
4,000 Municipal Assistance Corp. for the City
of New York, (Refunding, Series G).... RB Aa2/AA 07/01/07 6.000 4,573,480
1,500 Municipal Assistance Corp. for the City
of New York, (Refunding, Series J).... RB Aa2/AA 07/01/04 6.000 1,663,485
1,460 New York City Industrial Development
Agency, (Civil Facilities Revenue,
YMCA Greater New York Project)........ RB Baa3/NR 08/01/05 6.000 1,572,989
1,000 New York City Industrial Development
Agency, (IDR, Brooklyn Navy Yard,
Cogen Partners, Refunding, due
10/01/22)............................. RB Baa3/BBB- 10/01/21(a) 6.200 1,136,420
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE NEW YORK TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
<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)
$ 3,075 New York City Municipal Water Finance
Authority, (Water & Sewer Systems
Revenue, Series C), AMBAC Insured..... RB Aaa/AAA 06/15/21 6.200% $ 3,372,660
2,400 New York City Transitional Finance
Authority, (Series B)................. RB Aa3/AA 11/15/04 5.250 2,578,320
3,100 New York City Transitional Finance
Authority, (Series C)................. RB Aa3/AA 05/01/05 5.000 3,282,838
4,000 New York City Transitional Finance
Authority, (Series C)................. RB Aa3/AA 05/01/03 5.000 4,194,600
650 New York City, (Prerefunded, Escrowed to
Maturity, Series M)................... GO A3/A- 06/01/00 6.000 674,284
3,295 New York City, (Prerefunded, Series C,
SubSeries C-1)........................ GO Aaa/A- 08/01/18 7.000 3,715,673
670 New York City, (Prerefunded, Series D,
due 02/15/07)......................... GO A3/A- 02/15/05(a) 5.750 742,440
1,250 New York City, (Refunding, Series A).... GO A3/A- 08/01/04 7.000 1,433,012
1,500 New York City, (Refunding, Series A).... GO A3/A- 08/01/06 5.250 1,599,030
6,000 New York City, (Refunding, Series A, due
08/01/03)............................. GO A3/A- 08/01/02(a) 6.250 6,535,440
1,070 New York City, (Refunding, Series C).... GO A3/A- 02/01/04 6.000 1,166,514
1,000 New York City, (Refunding, Series G),
MBIA Insured.......................... GO Aaa/A3 02/01/09 6.750 1,197,470
1,500 New York City, (Refunding, Series H).... GO A3/A- 03/15/05 6.500 1,693,815
4,330 New York City, (Unrefunded Balance,
Series D, due 02/15/07)............... GO A3/A- 02/15/05(a) 5.750 4,708,572
2,280 New York State Dormitory Authority,
(Columbia University)................. RB Aaa/AAA 07/01/07 5.250 2,494,252
2,885 New York State Dormitory Authority, (FHA
Hospital & Nursing Home, Refunding,
Series A), AMBAC Insured.............. RB NR/AAA 08/15/08 5.000 3,054,061
2,000 New York State Dormitory Authority, (FHA
Hospital New York & Presbyterian,
Refunding), AMBAC Insured............. RB Aaa/AAA 02/01/04 5.000 2,102,200
2,500 New York State Dormitory Authority, (FHA
Hospital New York & Presbyterian,
Refunding, due 08/01/13), AMBAC
Insured............................... RB Aaa/AAA 02/01/08(a) 4.400 2,561,850
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE NEW YORK TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
<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)
$ 1,110 New York State Dormitory Authority,
(Lease Revenue, State University
Dormitory Facilities, Refunding,
Series A), AMBAC Insured.............. RB Aaa/AAA 07/01/11 6.000% $ 1,292,129
5,280 New York State Dormitory Authority,
(Long Island Jewish Medical Center,
Refunding), MBIA Insured.............. RB Aaa/AAA 07/01/05 5.000 5,582,280
2,000 New York State Dormitory Authority,
(Memorial Sloan Kettering Cancer,
Series C), MBIA Insured............... RB Aaa/AAA 07/01/19 5.750 2,273,660
5,650 New York State Dormitory Authority,
(Mental Health Services Facilities,
Refunding, Series B).................. RB A3/A- 02/15/06 6.000 6,273,308
2,000 New York State Dormitory Authority, (New
York University, Series A), MBIA
Insured............................... RB Aaa/AAA 07/01/06 5.000 2,129,360
2,510 New York State Dormitory Authority,
(North Shore University Hospital,
Refunding), MBIA Insured.............. RB Aaa/AAA 11/01/05 5.000 2,660,073
2,530 New York State Dormitory Authority,
(North Shore University Hospital,
Refunding), MBIA Insured.............. RB Aaa/AAA 11/01/10 5.500 2,810,349
2,000 New York State Dormitory Authority,
(Secondary Hospital, North General
Hospital, Refunding, Series G)........ RB Baa1/BBB+ 02/15/05 5.500 2,119,440
3,000 New York State Dormitory Authority,
(State University Educational
Facilities, Refunding)................ RB A3/A- 05/15/01 5.250 3,104,010
1,500 New York State Dormitory Authority,
(State University Educational
Facilities, Refunding, Series A)...... RB A3/A- 05/15/04 6.500 1,683,255
3,000 New York State Dormitory Authority,
(State University Educational
Facilities, Refunding, Series A), FGIC
Insured............................... RB Aaa/AAA 05/15/11 5.875 3,436,560
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE NEW YORK TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
<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 Dormitory Authority,
(University of Rochester, Refunding,
Series A), MBIA Insured............... RB Aaa/AAA 07/01/05 5.000% $ 2,120,560
1,210 New York State Dormitory Authority,
(University of Rochester, Series A)... RB A1/A+ 07/01/06 6.500 1,378,069
5,000 New York State Environmental Facilities
Corp., (PCR, State Water, Revolving
Fund, New York City Municipal Water,
Refunding)............................ RB Aa2/A+ 06/15/11 5.750 5,670,700
5,000 New York State Environmental Facilities
Corp., (Special Obligation, Riverbank
State Park, Prerefunded, due
04/01/22)............................. RB Aaa/AAA 04/01/02(a) 7.375 5,675,400
1,000 New York State Environmental Facilities
Corp., (State Clean Water & Drinking,
Revolving Funds, Second Resolution,
Series F)............................. RB Aa2/A+ 06/15/07 5.250 1,086,660
2,600 New York State Housing Finance Agency,
(Service Contract Obligation,
Refunding, Series C).................. RB Baa1/BBB+ 03/15/05 4.850 2,692,716
4,000 New York State Local Government
Assistance Corp., (Prerefunded, Series
C, due 04/01/10)...................... RB Aaa/A+ 04/01/01(a) 7.000 4,389,160
2,000 New York State Local Government
Assistance Corp., (Refunding, Series
A).................................... RB A3/A+ 04/01/06 6.000 2,243,140
2,525 New York State Local Government
Assistance Corp., (Refunding, Series
B), MBIA Insured...................... RB Aaa/AAA 04/01/04 5.250 2,692,660
3,350 New York State Local Government
Assistance Corp., (Refunding, Series
E).................................... RB A3/A+ 04/01/14 6.000 3,893,772
2,850 New York State Medical Care Facilities
Finance Agency, (Hospital & Nursing
Home Services, Series D, due
02/15/32)............................. RB Aa2/AA 02/15/03(a) 6.450 3,192,969
1,500 New York State Medical Care Facilities
Finance Agency, (Mental Health
Services, Refunding, Series F)........ RB A3/A- 02/15/03 6.000 1,620,750
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
23
<PAGE>
THE NEW YORK TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
<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)
$ 4,000 New York State Medical Care Facilities
Finance Agency, (Prerefunded, due
08/15/20)............................. RB Aaa/AAA 08/15/00(a) 7.875% $ 4,379,760
2,620 New York State Municipal Bond Bank
Agency, (Special Program, Refunding,
Series A), AMBAC Insured.............. RB Aaa/AAA 03/15/06 5.000 2,783,907
2,000 New York State Power Authority, (Revenue
& General Purpose, Refunding, Escrowed
to Maturity, Series W)................ RB Aaa/AAA 01/01/03 6.625 2,215,000
4,500 New York State Power Authority, (Revenue
& General Purpose, Refunding, Series
A).................................... RB Aa3/AA- 02/15/03 5.000 4,703,805
3,350 New York State Power Authority, (Revenue
& General Purpose, Refunding, Series
A).................................... RB Aa3/AA- 02/15/05 5.500 3,641,082
3,000 New York State Thruway Authority,
(Refunding, Series E)................. RB Aa3/AA- 01/01/07 5.500 3,293,790
2,000 New York State Thruway Authority,
(Service Contract, Local Highway &
Bridge)............................... RB Baa1/BBB+ 04/01/05 6.000 2,206,080
2,000 New York State Thruway Authority,
(Service Contract, Local Highway &
Bridge, Refunding).................... RB Baa1/BBB+ 04/01/04 5.500 2,137,920
9,935 New York State Thruway Authority,
(Service Contract, Local Highway &
Bridge, Series A-2), MBIA Insured..... RB Aaa/AAA 04/01/06 5.250 10,719,368
2,470 New York State Urban Development Corp.,
(Center for Industrial Innovation,
Refunding)............................ RB Baa1/BBB+ 01/01/06 6.250 2,776,700
2,000 New York State Urban Development Corp.,
(Correctional Capital Facilities,
Series 6)............................. RB Baa1/BBB+ 01/01/03 6.000 2,152,700
2,635 New York State Urban Development Corp.,
(Sub Lien, Corporate Purpose,
Refunding)............................ RB A2/A 01/01/06 6.000 2,933,625
5,250 New York State, (Refunding, Series A)... GO A2/A 07/15/06 6.500 6,101,498
3,100 New York State, (Refunding, Series B)... GO A2/A 08/15/05 6.250 3,514,842
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
24
<PAGE>
THE NEW YORK TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
<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)
$ 1,350 New York State, (Refunding, Series C)... GO A2/A 10/01/04 6.000% $ 1,498,419
2,415 New York State, (Refunding, Series F)... GO A2/A 09/15/03 5.000 2,540,339
1,000 Orange County, (Refunding).............. GO Aa2/NR 11/15/04 5.500 1,092,350
1,000 Orange County, (Refunding).............. GO Aa2/NR 11/15/05 5.500 1,100,500
7,730 Port Authority of New York & New Jersey,
(Special Project, JFK International
Air Terminal, Series 6), MBIA
Insured............................... RB Aaa/AAA 12/01/11 6.250 9,094,113
3,000 Triborough Bridge & Tunnel Authority,
(General Purpose, Refunding, Series
SR, due 01/01/07)..................... RB Aa3/A+ 01/01/99(a) 5.000 3,185,370
1,500 Triborough Bridge & Tunnel Authority,
(General Purpose, Refunding, Series
Y).................................... RB Aa3/A+ 01/01/07 5.900 1,686,300
3,960 Triborough Bridge & Tunnel Authority,
(Special Obligation, Refunding, Series
A), FGIC Insured...................... RB Aaa/AAA 01/01/07 5.500 4,353,624
1,000 Trust for Cultural Resources of the City
of New York, (Series 1997, due
04/01/05)............................. PP NR/NR 10/01/01(a) 5.250 1,030,450
4,000 United Nations Development Corp.,
(Senior Lien, Series A, Prerefunded,
due 07/01/26)......................... RB Aaa/NR 07/01/03(a) 6.000 4,445,000
3,230 Yonkers, (Series C), AMBAC Insured...... GO Aaa/AAA 08/01/04 5.500 3,490,887
-----------
TOTAL NEW YORK...................... 250,848,720
-----------
TOTAL LONG TERM INVESTMENTS (COST $248,739,622)................................ 258,753,726
-----------
SHORT-TERM INVESTMENTS (3.1%)
ARIZONA (0.4%)
1,200 Chandler Arizona Industrial Development
Authority, (Multifamily Housing,
Southpark Apartments Project,
Refunding, due 12/01/02), LOC Citibank
NA.................................... VRDN NR/A-1+ 10/01/98(b) 3.700 1,200,000
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
25
<PAGE>
THE NEW YORK TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
<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>
FLORIDA (0.1%)
$ 200 Dade County, Florida Industrial
Development Authority, (PCR, Florida
Power & Light Co. Project, Refunding,
due 04/01/20)......................... VRDN VMIG1/A-1+ 10/01/98(b) 4.200% $ 200,000
-----------
GEORGIA (0.7%)
1,400 Burke County Development Authority,
(PCR, Georgia Power Co., Vogtle
Project-4th Series, due 07/01/24)..... VRDN VMIG1/A-1 10/01/98(b) 4.150 1,400,000
300 Burke County Development Authority,
(PCR, Georgia Power Co., Vogtle
Project-4th Series, Refunding, due
09/01/25)............................. VRDN VMIG1/A+ 10/01/98(b) 4.200 300,000
200 Monroe County Development Authority,
(PCR, Georgia Power Co., Scherer
Project-2nd Series, Refunding, due
07/01/25)............................. VRDN VMIG1/A-1 10/01/98(b) 4.150 200,000
-----------
1,900,000
-----------
MICHIGAN (0.1%)
200 Midland County Economic Development
Corp., (Dow Chemical Co. Project,
Refunding, Series B, due 12/01/15).... VRDN P-1/A-1 10/01/98(b) 4.250 200,000
-----------
MISSOURI (0.3%)
700 Missouri Environmental Impact Authority
& Energy Resource Authority, (Bayer
Corp. Project, Refunding, due
03/01/09)............................. VRDN P-1/NR 10/01/98(b) 4.250 700,000
-----------
NEW YORK (1.3%)
700 New York City Municipal Water Finance
Authority, (Water and Sewer Systems
Revenue, Refunding, Series A, due
06/15/25), FGIC Insured............... VRDN VMIGI/A-1+ 10/01/98(b) 4.250 700,000
100 New York City, (Series B, due 10/01/21),
FGIC Insured.......................... VRDN VMIG1/A-1+ 10/01/98(b) 4.250 100,000
100 New York City, (Series B, due 10/01/22),
FGIC Insured.......................... VRDN VMIG1/A-1+ 10/01/98(b) 4.250 100,000
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
26
<PAGE>
THE NEW YORK TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
<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)
$ 200 New York City, (Sub-Series B-4, due
08/15/21), LOC Union Bank of
Switzerland........................... VRDN VMIG1/A-1+ 10/01/98(b) 4.250% $ 200,000
100 New York City, (Sub-Series B-4, due
08/15/22), LOC Union Bank of
Switzerland........................... VRDN VMIG1/A-1+ 10/01/98(b) 4.250 100,000
2,400 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+ 10/01/98(b) 4.100 2,400,000
-----------
3,600,000
-----------
WASHINGTON (0.2%)
400 Washington State Health Care Facilities
Authority, (VA Mason Medical Center,
Refunding, Series B, due 02/15/27).... VRDN VMIG1/A-1+ 10/01/98(b) 4.100 400,000
-----------
TOTAL SHORT-TERM INVESTMENTS (COST $8,200,000)..................................... 8,200,000
-----------
TOTAL INVESTMENTS (COST $256,939,622) (100.0%)..................................... 266,953,726
OTHER ASSETS IN EXCESS OF LIABILITIES (0.0%)....................................... 61,736
-----------
NET ASSETS (100.0%)................................................................ $267,015,462
-----------
-----------
</TABLE>
- ------------------------------
Note: Based on the cost of investments of $256,939,622 for federal income tax
purposes at September 30, 1998, the aggregate gross unrealized appreciation and
depreciation was $10,043,015 and $28,911, respectively, resulting in net
unrealized appreciation of investments of $10,014,104.
(a) The date listed under the heading maturity date represents an optional
tender date. The actual maturity date is indicated in the security description.
(b) Variable Rate Demand Notes 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.
Abbreviations used in Schedule of Investments are as follows:
AMBAC - Ambac Indemnity Corp., FGIC - Financial Guaranty Insurance Company, FHA
- -Federal Housing Authority, GO - General Obligation, IDR - Industrial
Development Revenue, LOC - Letter of Credit, MBIA - Municipal Bond Investors
Assurance Corp., NR - Not Rated, PCR - Pollution Control Revenue, PP - Private
Placement, RB - Revenue Bond, VRDN - Variable Rate Demand Note.
Escrowed to Maturity: Bonds for which cash and/or securities have been deposited
with a third party to cover payments of principal and interest at the maturity
which 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 canceled the old
issue.
144A: Securities restricted for resale to Qualified Institutional Buyers.
The Accompanying Notes are an Integral Part of the Financial Statements.
27
<PAGE>
THE NEW YORK TAX EXEMPT BOND PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $256,939,622 ) $266,953,726
Cash 73,015
Interest Receivable 3,729,006
Deferred Organization Expenses 1,169
Prepaid Trustees' Fees 551
Prepaid Expenses and Other Assets 20
------------
Total Assets 270,757,487
------------
LIABILITIES
Payable for Investments Purchased 3,653,947
Advisory Fee Payable 63,429
Administrative Services Fee Payable 9,366
Custody Fee Payable 2,475
Administration Fee Payable 677
Fund Services Fee Payable 211
Accrued Expenses 11,920
------------
Total Liabilities 3,742,025
------------
NET ASSETS
Applicable to Investors' Beneficial Interests $267,015,462
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
28
<PAGE>
THE NEW YORK TAX EXEMPT BOND PORTFOLIO
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest Income $ 5,606,070
EXPENSES
Advisory Fee $351,242
Custodian Fees and Expenses 33,692
Administrative Services Fee 33,560
Professional Fees and Expenses 20,459
Fund Services Fee 3,379
Administration Fee 1,519
Trustees' Fees and Expenses 1,427
Amortization of Organization Expense 1,154
Miscellaneous 4,870
--------
Total Expenses 451,302
-----------
NET INVESTMENT INCOME 5,154,768
NET REALIZED GAIN ON INVESTMENTS 1,919,979
NET CHANGE IN UNREALIZED APPRECIATION OF
INVESTMENTS 3,653,162
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $10,727,909
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
29
<PAGE>
THE NEW YORK TAX EXEMPT BOND PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE FISCAL
SEPTEMBER 30, 1998 YEAR ENDED
(UNAUDITED) MARCH 31, 1998
------------------ --------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 5,154,768 $ 7,914,129
Net Realized Gain on Investments 1,919,979 1,111,960
Net Change in Unrealized Appreciation of
Investments 3,653,162 4,862,341
------------------ --------------
Net Increase in Net Assets Resulting from
Operations 10,727,909 13,888,430
------------------ --------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 83,977,775 87,771,218
Withdrawals (24,701,632) (52,571,222)
------------------ --------------
Net Increase from Investors' Transactions 59,276,143 35,199,996
------------------ --------------
Total Increase in Net Assets 70,004,052 49,088,426
NET ASSETS
Beginning of Period 197,011,410 147,922,984
------------------ --------------
End of Period $ 267,015,462 $ 197,011,410
------------------ --------------
------------------ --------------
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FISCAL FOR THE PERIOD
FOR THE YEAR ENDED MARCH APRIL 11, 1994
SIX MONTHS ENDED 31, (COMMENCEMENT OF
SEPTEMBER 30, 1998 ------------------ OPERATIONS) THROUGH
(UNAUDITED) 1998 1997 1996 MARCH 31, 1995
------------------ ---- ---- ---- -------------------
<S> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Expenses 0.40%(a) 0.40% 0.43% 0.44% 0.48%(a)
Net Investment Income 4.40%(a) 4.62% 4.75% 4.72% 4.59%(a)
Expenses without Reimbursement -- -- -- -- 0.51%(a)
Portfolio Turnover 33%(b) 51% 35% 41% 63%(b)
</TABLE>
- ------------------------
(a) Annualized.
(b) Not Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
30
<PAGE>
THE NEW YORK TAX EXEMPT BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30,1998
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The New York Tax Exempt Bond Portfolio (the "portfolio") is registered under the
Investment Company Act of 1940, as amended, as a no-load, 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. Prior to November 2, 1998, the portfolio's name
was The New York Total Return Bond Portfolio. The portfolio's investment
objective is to provide high level of current income that is exempt from federal
income tax 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) The value of each security for which readily available market quotations
exist is based on a decision as to the broadest and most representative
market for such security. The value of such security will be based either
on the last sale price on a national securities exchange or, in the
absence of recorded sales, at the average of readily available closing bid
and asked prices on such exchanges. Unlisted securities are valued at the
average of the quoted bid and asked prices in the over-the-counter market.
Securities or other assets for which market quotations are not readily
available are valued at fair value in accordance with procedures
established by portfolio's trustees. Such procedures include the use of
independent pricing services, which use prices based upon yields or prices
of securities of comparable quality, coupon, maturity and type;
indications as to values from dealers; and general market conditions. All
short-term portfolio securities with a remaining maturity of less than 60
days are valued by the amortized cost method.
b) The portfolio incurred organization expenses in the amount of $11,473.
These costs were deferred and are being amortized on a straight-line basis
over a period not to exceed five years beginning with the commencement of
operations.
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.
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.
31
<PAGE>
THE NEW YORK TAX EXEMPT BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
SEPTEMBER 30,1998
- --------------------------------------------------------------------------------
2. TRANSACTIONS WITH AFFILIATES
a) Prior to October 28, 1998, the portfolio had an Investment Advisory
Agreement with Morgan Guaranty Trust Company of New York ("Morgan"). Under
the terms of the Agreement, the portfolio paid Morgan at an annual rate of
0.30% of the portfolio's average daily net assets. Effective October 28,
1998 the portfolio's Investment Advisor will be J.P. Morgan Investment
Management Inc. ("JPMIM"), an affiliate of Morgan and a wholly owned
subsidiary of J.P. Morgan & Co. Inc. ("J.P. Morgan"), and the terms of the
Agreement will remain the same. For the six months ended September 30,
1998, such fees amounted to $351,242.
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, 1998, the fee
for these services amounted to $1,519.
c) The portfolio has an Administrative Services Agreement (the "Services
Agreement") with Morgan under which Morgan is responsible for certain
aspects of the administration and operation of the portfolio. Under the
Services Agreement, the portfolio has agreed to pay Morgan a fee equal to
its allocable share of an annual complex-wide charge. This charge is
calculated based on the aggregate average daily net assets of the
portfolio and certain other portfolios for which JPMIM acts as investment
advisor (the "master portfolios") and J.P. Morgan Series Trust in
accordance with the following annual schedule: 0.09% on the first $7
billion of their aggregate average daily net assets and 0.04% of their
aggregate average daily net assets in excess of $7 billion less the
complex-wide fees payable to FDI. The portion of this charge payable by
the portfolio is determined by the proportionate share that its net assets
bear to the net assets of the master portfolios, other investors in the
master portfolios for which JPMIM provides similar services, and J.P.
Morgan Series Trust. For the six months ended September 30, 1998, the fee
for these services amounted to $33,560. In addition, J.P. Morgan has
agreed to reimburse the portfolio to the extent necessary to maintain the
total operating expenses of the portfolio at no more than 0.50% of the
average net assets of the portfolio. This reimbursement arrangement can be
changed or terminated at any time at the option of J.P. Morgan.
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 $3,379 for the six months ended September 30, 1998.
e) An aggregate annual fee of $75,000 is paid to each trustee for serving as
a trustee of the trust, the J.P. Morgan Funds, the J.P. Morgan
Institutional Funds, the master portfolios and J.P. Morgan Series
32
<PAGE>
THE NEW YORK TAX EXEMPT BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
SEPTEMBER 30,1998
- --------------------------------------------------------------------------------
Trust. The Trustees' Fees and Expenses shown in the financial statements
represents the portfolio's allocated portion of the total fees and
expenses. The portfolio's Chairman and Chief Executive Officer also serves
as Chairman of Group and receives compensation and employee benefits from
Group in his role as Group's Chairman. The allocated portion of such
compensation and benefits included in the Fund Services Fee shown in the
financial statements was $700.
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the six months
ended September 30, 1998 were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
- ------------ -----------
<S> <C>
$137,113,120 $75,571,990
</TABLE>
4. CREDIT AGREEMENT
The portfolio is party to a revolving line of credit agreement as discussed more
fully in Note 4 of the fund's Notes to the Financial Statements which are
included elsewhere in this report.
33
<PAGE>
J.P. MORGAN FUNDS
PRIME MONEY MARKET FUND
FEDERAL MONEY MARKET FUND
TAX EXEMPT MONEY MARKET FUND
SHORT TERM BOND FUND
BOND FUND
GLOBAL STRATEGIC INCOME FUND
EMERGING MARKETS DEBT FUND
TAX EXEMPT BOND FUND
NEW YORK TAX EXEMPT BOND FUND
CALIFORNIA BOND FUND: SELECT SHARES
DIVERSIFIED FUND
DISCIPLINED EQUITY FUND
U.S. EQUITY FUND
U.S. SMALL COMPANY FUND
U.S. SMALL COMPANY OPPORTUNITIES FUND
TAX AWARE U.S. EQUITY FUND: SELECT SHARES
INTERNATIONAL EQUITY FUND
EUROPEAN EQUITY FUND
INTERNATIONAL OPPORTUNITIES FUND
EMERGING MARKETS EQUITY FUND
GLOBAL 50 FUND: SELECT SHARES
FOR MORE INFORMATION ON THE J.P. MORGAN FUNDS CALL
J.P. MORGAN FUNDS SERVICES AT (800) 521-5411.
J.P. MORGAN
NEW YORK
TAX EXEMPT
BOND FUND
(formerly the J.P. Morgan New York Total
Return Bond Fund)
SEMI-ANNUAL REPORT
SEPTEMBER 30, 1998
rnybfr-989
