<PAGE>
LETTER TO THE SHAREHOLDERS OF THE J.P. MORGAN NEW YORK TOTAL RETURN BOND FUND
May 18, 1998
Dear Shareholder:
We are pleased to report that the J.P. Morgan New York Total Return Bond Fund
posted a healthy gain of 8.49% for the fiscal year ended March 31, 1998. While
the fund underperformed the 9.24% return of its benchmark for the period (the
Lehman Brothers 1-16 year Municipal Bond Index), it ranked in line with the
8.41% return of its competitors as measured by the Lipper New York Intermediate
Municipal Debt Funds Average. The fund's 30-day SEC yield, at 3.92%,
translates to an equivalent taxable yield of 6.49%, assuming a 39.6% tax rate.
The fund's net asset value, at $10.62 per share on March 31,1998, was up from
$10.28 per share on March 31, 1997. Distributions of approximately $0.46 per
share were paid from ordinary income substantially all of which were tax
exempt, and $0.06 from long-term capital gains. The fund's net assets increased
to $85.1 million from $56.2 million while the net assets of The New York Total
Return Bond Portfolio, in which the fund invests, were $197.0 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.
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
- --------------------------------------------------------------------------------
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
There are several ways to evaluate a mutual fund's historical performance
record. One approach is to take a look at the growth of a hypothetical
investment of $10,000. The chart at right shows that $10,000 invested on April
11, 1994* would have grown to $12,729 on March 31, 1998.
Another 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
you 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.
GROWTH OF $10,000 SINCE FUND INCEPTION*
APRIL 11, 1994* -- MARCH 31, 1998
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
J.P. MORGAN LEHMAN BROTHERS LIPPER NEW YORK
NEW YORK TOTAL RETURN NEW YORK 1-16 YEAR INTERMEDIATE MUNICIPAL
BOND FUND MUNICIPAL BOND INDEX DEBT FUNDS AVERAGE
--------------------- -------------------- ----------------------
<S> <C> <C> <C>
Inception 10,000 10,000 10,000
Sep-94 10,117 10,138 10,108
Mar-95 10,509 10,546 10,453
Sep-95 11,026 11,141 10,949
Mar-96 11,261 11,466 11,170
Sep-96 11,512 11,793 11,402
Mar-97 11,733 12,098 11,620
Sep-97 12,391 12,786 12,246
Mar-98 12,729 13,216 12,594
</TABLE>
PERFORMANCE
<TABLE>
<CAPTION>
TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS
----------------------- -----------------------------
THREE SIX ONE SINCE
AS OF MARCH 31, 1998 MONTHS MONTHS YEAR INCEPTION*
- ------------------------------------------------------------- -----------------------------
<S> <C> <C> <C> <C>
J.P. Morgan New York
Total Return Bond Fund 0.58% 2.73% 8.49% 6.35%
Lehman Brothers 1-16 year
Municipal Bond Index** 1.13% 3.36% 9.24% 7.37%
Lipper New York Intermediate
Municipal Debt Funds Average 0.78% 2.83% 8.41% 6.14%
</TABLE>
* 4/11/94 -- COMMENCEMENT OF OPERATIONS (AVERAGE ANNUAL TOTAL RETURNS BASED
ON MONTH END FOLLOWING INCEPTION; AVERAGE ANNUAL RETURN SINCE ACTUAL
INCEPTION IS 6.33%).
** 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 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.
2
<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
Total Return Bond Portfolio in which the fund invests.
ELAINE YOUNG, VICE PRESIDENT, is a portfolio manager with the U.S.
Fixed Income Group and responsible for managing municipal bonds. In
[PHOTO] 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 BS degree and an MBA. in
Finance. Elaine is also a Chartered Financial Analyst.
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
[PHOTO] joined J.P. Morgan's financial group in 1982, after having spent
ten 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.
This interview was conducted on April 2, 1998 and represents both Bob and
Elaine's views on that date.
LET'S START OFF BY GETTING A GENERAL BACKDROP. WHAT IMPORTANT EVENTS HAVE
OCCURRED IN THE TAX-EXEMPT BOND MARKET OVER THE PAST YEAR MONTHS?
EY: The continued economic difficulties in Asia have had a profound effect
on the municipal bond market. U.S. Treasury notes and bonds remain attractive
to foreign investors in the "flight to safety" from Asian markets. Municipals
have not enjoyed this demand and look cheap to many investors when compared
to the Treasury market. Consequently, yields offered by municipals, and the
lack of correlation with the Asian problems, have encouraged non-traditional
investors to become more active in the tax-exempt market. This source of
demand has helped the muni market absorb an increased level of supply at
aggressive prices. Unfortunately, prices that are offered in secondary
trading have been, at times, considerably weaker.
SUPPLY IS ALWAYS AN IMPORTANT ISSUE IN THE MUNICIPAL BOND MARKET. HAS THERE
BEEN AN AMPLE SUPPLY DURING THE PERIOD?
EY: Muni supply, particularly in New York, has been much higher than most
research analysts had projected, due to low interest rates. Municipal bond
prices have held up because the new investors I referred to earlier helped to
absorb the added supply.
3
<PAGE>
THAT'S A VERY DIFFERENT STORY FROM A COUPLE OF YEARS AGO WHEN GOVERNMENTS WERE
CUTTING BACK ON SPENDING, AND THERE WEREN'T MANY NEW ISSUES TO BE HAD, ISN'T IT?
RM: Yes. It's also a different economy. There was a balance-the-budget mindset
a couple of years ago. People didn't want to issue bonds because they thought
there was a direct cause and effect relationship between budget deficits and
financing projects that needed to get done. In my opinion, everyone's feeling a
little more comfortable about having more money to spend. Governments are
reporting balanced budgets and people are perhaps a little more liberal in
allowing bond deals to come along.
EY: State coffers are in better shape and voters have been more inclined to
approve new issues. There's also been some pent-up need. There was a lack of
infrastructure spending for a few years, and that has a way of catching up.
Even if governments have become somewhat more fiscally responsible, they still
have projects that need to get done.
THERE'S BEEN A LOT OF GOOD NEWS IN THE NEW YORK MUNICIPAL MARKET LATELY, ISN'T
THAT CORRECT?
RM: Yes that's true. Moody's upgraded New York State last year, and in January
they upgraded New York City. That's had a positive impact on market sentiment.
With an A rating, more investors are now able to buy New York City bonds. Many
investors are restricted from buying bonds rated below that level.
The big event, however, was the funding of the Long Island Power
Authority, the government entity created to buy out the Long Island Lighting
Company. It's was a multi-billion dollar deal. The threat of flooding the
market with supply had everyone worried for a while, and prices suffered.
Fortunately, it was a very successful underwriting. And now that it's past,
prices are firmer.
FOR THE PERIOD UNDER REVIEW, THE FUND OUTPERFORMED THE LIPPER NEW YORK
INTERMEDIATE MUNICIPAL DEBT FUNDS AVERAGE BUT UNDERPERFORMED ITS BENCHMARK, THE
LEHMAN BROTHERS 1-16 YEAR MUNICIPAL BOND INDEX. WHY?
RM: That can be difficult to pin down in a municipal fund. It's notable that
you can't buy the Lehman Muni Index. It's not like an equity index such as the
S&P 500 or even a taxable bond index like the Salomon Broad Investment Grade,
which can be replicated. Furthermore, it often has excess concentrations of a
single municipal credit, which is something we would try to avoid in the fund's
portfolio. The Lehman Muni Index is a guide to tell investors and tell us what
is the general direction of interest rates and the market, and it doesn't
always accurately track the New York market. We don't think it's an accurate
point of performance comparison.
I should also point out that we manage this fund with a high priority on
quality and consistency. The average credit quality of the portfolio is AA-,
which is very good for a New York portfolio. The portfolio is also structured
to have an intermediate duration, rather than a long one, to minimize
volatility. So while the fund has provided competitive returns, we try to
provide those returns with less risk.
4
<PAGE>
EY: As far as edging out the competition, I would largely attribute it to our
disciplined process. We try to buy bonds that are undervalued and sell the ones
that are overvalued based on our internal credit research. It also helps to
have a dedicated trading desk. Execution is extremely important in the
municipal market. Another plus has come from buying private placements, as they
provide additional yield without additional credit risk.
TELL US MORE ABOUT THE PRIVATE PLACEMENTS.
EY: Private placements are bonds that we purchase directly from issuers rather
than through the public bond market. Since it's cheaper for issuers to borrow
in the private placement market, we are able to obtain better yields for the
portfolio than public bonds. Morgan is able to use its credit expertise to
select private placements that it considers to be investment grade. In this
way, we believe that we are able to add better performance without taking on
additional credit risk.
WHAT IS YOUR OUTLOOK FOR THE COMING MONTHS? AND HOW ARE YOU POSITIONING THE
PORTFOLIO?
RM: Currently, the fund is neutral to its seven-year benchmark. Uncertainty
about events in Asia have buffered U.S. domestic concern about inflation. While
the successful completion of the Long Island Power Authority transaction has
reduced investor concern about over-supply, we will continue to carefully
monitor the new issue market in order to buy bonds as the best opportunities
arise.
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 five-year duration will experience an approximate 5% increase in price if
interest rates drop 100 basis points (1%) while a bond with a ten-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.
6
<PAGE>
FUND FACTS
INVESTMENT OBJECTIVE
J.P. Morgan 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
- -------------------------------------------------------------------------------
FUND NET ASSETS AS OF 3/31/98
$85,160,684
- -------------------------------------------------------------------------------
PORTFOLIO NET ASSETS AS OF 3/31/98
$197,011,410
- -------------------------------------------------------------------------------
DIVIDEND PAYABLE DATES
MONTHLY
- -------------------------------------------------------------------------------
CAPITAL GAIN PAYABLE DATES (IF APPLICABLE)
12/11/98
EXPENSE RATIO
The fund's current expense ratio of 0.70% (0.75% prior to July 14,1997) 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 MARCH 31, 1998
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PORTFOLIO ALLOCATION
(PERCENTAGE OF TOTAL INVESTMENTS)
<S> <C>
REVENUE BOND 78.6%
GENERAL OBLIGATION 16.1%
SHORT-TERM/OTHER 3.0%
SPECIAL OBLIGATIONS 1.3%
PRIVATE PLACEMENTS 1.0%
</TABLE>
30-DAY SEC YIELD
3.92%
DURATION
5.90 years
QUALITY PROFILE
AAA-A 70%
Other 30%
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 J.P. Morgan funds, a family of diversified mutual
funds.
PAAS is available to clients who invest a minimum of $500,000 in the J.P.
Morgan 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 J.P. Morgan funds
provide an excellent way to help you accumulate long-term wealth for
retirement.
KEOGH
Keoghs provide 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. J.P. Morgan 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 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.
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). References to specific securities are not intended to be and should
not be interpreted as recommendations to buy or sell such securities. 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.
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>
J.P. MORGAN NEW YORK TOTAL RETURN BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment in The New York Total Return Bond
Portfolio ("Portfolio"), at value $85,252,866
Receivable for Expense Reimbursements 29,457
Deferred Organization Expenses 2,766
Prepaid Trustees' Fees 271
Prepaid Expenses and Other Assets 212
-----------
Total Assets 85,285,572
-----------
LIABILITIES
Dividends Payable to Shareholders 69,694
Shareholder Servicing Fee Payable 14,288
Administrative Services Fee Payable 2,111
Payable for Shares of Beneficial Interest
Redeemed 1,500
Administration Fee Payable 275
Fund Services Fee Payable 111
Accrued Expenses 36,909
-----------
Total Liabilities 124,888
-----------
NET ASSETS
Applicable to 8,016,174 Shares of Beneficial
Interest Outstanding
(par value $0.001, unlimited shares authorized) $85,160,684
-----------
-----------
Net Asset Value, Offering and Redemption Price
Per Share $10.62
-----
-----
ANALYSIS OF NET ASSETS
Paid-in Capital $82,226,238
Undistributed Net Investment Income 21,047
Accumulated Net Realized Gain on Investment 144,167
Net Unrealized Appreciation of Investment 2,769,232
-----------
Net Assets $85,160,684
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
10
<PAGE>
J.P. MORGAN NEW YORK TOTAL RETURN BOND FUND
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED MARCH 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME ALLOCATED FROM PORTFOLIO
Allocated Interest Income $3,463,085
Allocated Portfolio Expenses (277,666)
----------
Net Investment Income Allocated from
Portfolio 3,185,419
FUND EXPENSES
Shareholder Servicing Fee $137,549
Transfer Agent Fees 25,670
Registration Fees 24,256
Administrative Services Fee 20,882
Printing Expenses 16,646
Professional Fees 12,539
Amortization of Organization Expenses 2,744
Fund Services Fee 2,291
Administration Fee 1,878
Trustees' Fees and Expenses 868
Miscellaneous 5,061
--------
Total Fund Expenses 250,384
Less: Reimbursement of Expenses (39,505)
--------
NET FUND EXPENSES 210,879
----------
NET INVESTMENT INCOME 2,974,540
NET REALIZED GAIN ON INVESTMENT ALLOCATED FROM
PORTFOLIO 577,329
NET CHANGE IN UNREALIZED APPRECIATION OF
INVESTMENT ALLOCATED FROM PORTFOLIO 1,725,945
----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $5,277,814
----------
----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
11
<PAGE>
J.P. MORGAN NEW YORK TOTAL RETURN BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FISCAL FOR THE FISCAL
YEAR ENDED YEAR ENDED
MARCH 31, 1998 MARCH 31, 1997
-------------- --------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 2,974,540 $ 2,460,444
Net Realized Gain on Investment Allocated from
Portfolio 577,329 45,929
Net Change in Unrealized Appreciation
(Depreciation) of Investment Allocated from
Portfolio 1,725,945 (177,841)
-------------- --------------
Net Increase in Net Assets Resulting from
Operations 5,277,814 2,328,532
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (2,974,540) (2,460,444)
Net Realized Gain (433,162) (140,067)
-------------- --------------
Total Distributions to Shareholders (3,407,702) (2,600,511)
-------------- --------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Proceeds from Shares of Beneficial Interest Sold 40,909,669 20,653,912
Reinvestment of Dividends and Distributions 2,580,218 1,809,010
Cost of Shares of Beneficial Interest Redeemed (16,397,235) (16,515,929)
-------------- --------------
Net Increase from Transactions in Shares of
Beneficial Interest 27,092,652 5,946,993
-------------- --------------
Total Increase in Net Assets 28,962,764 5,675,014
NET ASSETS
Beginning of Fiscal Year 56,197,920 50,522,906
-------------- --------------
End of Fiscal Year (including undistributed net
investment income of
$21,047 and $21,047, respectively) $ 85,160,684 $ 56,197,920
-------------- --------------
-------------- --------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
12
<PAGE>
J.P. MORGAN 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 FISCAL YEAR ENDED APRIL 11, 1994
MARCH 31, (COMMENCEMENT OF
--------------------------- OPERATIONS) TO
1998 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 0.46 0.46 0.46 0.40
Net Realized and Unrealized Gain (Loss) on
Investment 0.40 (0.03) 0.26 0.11
------- ------- ------- ----------------
Total from Investment Operations 0.86 0.43 0.72 0.51
------- ------- ------- ----------------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (0.46) (0.46) (0.46) (0.40)
Net Realized Gain (0.06) (0.03) (0.03) --
------- ------- ------- ----------------
Total Distributions to Shareholders (0.52) (0.49) (0.49) (0.40)
------- ------- ------- ----------------
NET ASSET VALUE, END OF PERIOD $ 10.62 $ 10.28 $ 10.34 $ 10.11
------- ------- ------- ----------------
------- ------- ------- ----------------
RATIOS AND SUPPLEMENTAL DATA
Total Return 8.49% 4.19% 7.16% 5.26%(a)
Net Assets, End of Period (in thousands) $85,161 $56,198 $50,523 $ 38,137
Ratios to Average Net Assets
Expenses 0.71% 0.75% 0.75% 0.75%(b)
Net Investment Income 4.33% 4.44% 4.43% 4.31%(b)
Decrease Reflected in Expense Ratio due to
Expense Reimbursement 0.06% 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>
J.P. MORGAN NEW YORK TOTAL RETURN BOND FUND
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The J.P. Morgan New York Total Return 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 January 1,
1998, the trust's and the fund's names were The JPM Pierpont Funds and The JPM
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 (43% at March
31, 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 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. 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 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 TOTAL RETURN BOND FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 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 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
fiscal year ended March 31, 1998, the fee for these services amounted
$1,878.
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 overseeing 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 (formerly The JPM Institutional Funds) invest (the "master
portfolios") and J.P. Morgan Series Trust (formerly 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 J.P.
Morgan Series Trust. For the fiscal year ended March 31, 1998, the fee for
these services amounted to $20,882.
In addition, 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% (0.75% prior to July 14, 1997) of the average daily net assets of
the fund through July 31, 1998. For the year fiscal ended March 31, 1998,
Morgan has agreed to reimburse the fund $39,505 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 fiscal year ended March 31, 1998, the fee for these
services amounted to $137,549.
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 TOTAL RETURN BOND FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 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
$2,291 for the fiscal year ended March 31, 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 $500.
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 FISCAL FOR THE FISCAL
YEAR ENDED YEAR ENDED
MARCH 31, 1998 MARCH 31, 1997
-------------- --------------
<S> <C> <C>
Shares of beneficial interest sold............... 3,864,109 1,992,628
Reinvestment of dividends and distributions...... 243,534 174,680
Shares of beneficial interest redeemed........... (1,556,053) (1,590,722)
-------------- --------------
Net Increase..................................... 2,551,590 576,586
-------------- --------------
-------------- --------------
</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 $100,000,000. Prior to January 26, 1998 the maximum
borrowing under the Agreement was $150,000,000. The Agreement expires on May 27,
1998, however, the fund and the unaffiliated lenders as party to the Agreement
will have the ability to extend the Agreement and continue their participation
therein for 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 allocable 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 March 31, 1998.
16
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of
J.P. Morgan New York Total Return Bond Fund
(Formerly The JPM Pierpont New York Total Return Bond Fund)
In our opinion, the accompanying statement of assets and liabilities and the
related statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
the J.P. Morgan New York Total Return Bond Fund (the "fund") at March 31, 1998,
the results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended and financial
highlights for each of the three years in the period then ended and for the
period April 11, 1994 (commencement of operations) to March 31, 1995, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the fund's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
New York, New York
May 19, 1998
17
<PAGE>
The New York Total Return Bond Portfolio
Annual Report March 31, 1998
(The following pages should be read in conjunction
with J.P. Morgan New York Total Return Bond Fund
Annual Financial Statements)
18
<PAGE>
THE NEW YORK TOTAL RETURN BOND PORTFOLIO
SCHEDULE OF INVESTMENTS
MARCH 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/
AMOUNT SECURITY S&P MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE (UNAUDITED) DATE RATE VALUE
- -------------- -------------------------------------------- -------- ------------ ----------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
LONG-TERM INVESTMENTS (97.6%)
CALIFORNIA (0.5%)
$ 1,000 Kaweah Delta Hospital District, Tulare
County, (Series F, due 06/01/14).......... PP NR/NR 06/01/00(a) 5.250% $ 1,000,000
------------
CONNECTICUT (1.4%)
1,000 Mashantucket Western Pequot Tribe, (Special
Revenue, Prerefunded, Series A) 144A...... RB Aaa/AAA 09/01/01 6.250 1,067,740
250 Mashantucket Western Pequot Tribe, (Special
Revenue, Prerefunded, Series A) 144A...... RB Aaa/AAA 09/01/02 6.250 270,952
1,100 Mashantucket Western Pequot Tribe, (Special
Revenue, Series A) 144A................... RB Baa2/BBB- 09/01/01 6.250 1,162,326
250 Mashantucket Western Pequot Tribe, (Special
Revenue, Series A) 144A................... RB Baa2/BBB- 09/01/02 6.250 267,207
------------
TOTAL CONNECTICUT....................... 2,768,225
------------
NEW YORK (94.0%)
4,000 Erie County Water Authority, (Water Revenue,
Refunding, Series A, due 12/01/04), AMBAC
Insured................................... RB Aaa/AAA 12/01/03(a) 5.000 4,157,800
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 2,470,027
4,000 Metropolitan Transportation Authority,
(Commuter Facilities, Refunding, Series
D), MBIA Insured.......................... RB Aaa/AAA 07/01/06 6.000 4,430,280
5,500 Metropolitan Transportation Authority,
(Dedicated Tax Fund, Series A), MBIA
Insured................................... RB Aaa/AAA 04/01/11 6.250 6,251,795
2,205 Metropolitan Transportation Authority,
(Excess Loss Funding, Special Obligation),
MBIA Insured.............................. RB Aaa/AAA 07/01/05 5.000 2,282,021
1,370 Metropolitan Transportation Authority,
(Service Contract, Commuter Facilities,
Refunding, Series N)(d)................... RB Baa1/BBB+ 07/01/02 6.625 1,487,217
1,500 Metropolitan Transportation Authority,
(Service Contract, Commuter Facilities,
Refunding, Series O)...................... RB Baa1/BBB+ 07/01/08 5.750 1,610,985
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
THE NEW YORK TOTAL RETURN BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MARCH 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/
AMOUNT SECURITY S&P MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE (UNAUDITED) DATE RATE VALUE
- -------------- -------------------------------------------- -------- ------------ ----------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
NEW YORK (CONTINUED)
$ 1,075 Monroe County, (Public Improvement,
Partially Prerefunded, Partially Escrowed
to Maturity), AMBAC Insured............... GO Aaa/AAA 06/01/08 5.875% $ 1,199,044
55 Monroe County, (Public Improvement,
Prerefunded, Escrowed to Maturity, Series
1995), AMBAC Insured...................... GO Aaa/AAA 06/01/08 5.875 61,346
1,500 Municipal Assistance Corp. for the City of
New York, (Refunding, Series J)........... RB Aa2/AA 07/01/04 6.000 1,640,655
2,150 Municipal Assistance Corp. for the City of
New York, (Series G)(d)................... RB Aa2/AA 07/01/05 6.000 2,362,743
1,460 New York City Industrial Development Agency,
(Civil Facilities Revenue, Refunding, YMCA
Greater New York Project)(d).............. RB Baa3/NR 08/01/05 6.000 1,570,872
1,000 New York City Industrial Development Agency,
(Civil Facilities Revenue, YMCA Greater
New York Project)......................... RB Baa3/NR 08/01/06 6.000 1,077,570
1,000 New York City Industrial Development Agency,
(IDR, Brooklyn Navy Yard, Cogen Partners,
due 10/01/22)............................. RB Baa3/BBB- 10/01/21(a) 6.200 1,102,370
2,000 New York City Municipal Water Finance
Authority, (Water & Sewer System Revenue,
Series D)(d).............................. RB A2/A- 06/15/07 5.000 2,073,540
3,000 New York City Transitional Finance
Authority, (Series A)..................... RB Aa3/AA 08/15/07 5.500 3,244,770
2,400 New York City Transitional Finance
Authority, (Series B)..................... RB Aa3/AA 11/15/04 5.250 2,532,624
1,750 New York City, (Refunding, Series A)........ GO A3/BBB+ 08/01/02 5.750 1,845,498
1,250 New York City, (Refunding, Series A)........ GO A3/BBB+ 08/01/04 7.000 1,417,275
1,715 New York City, (Refunding, Series A)........ GO A3/BBB+ 08/01/02 5.700 1,805,243
6,000 New York City, (Refunding, Series A, due
08/01/03)................................. GO A3/BBB+ 08/01/02(a) 6.250 6,494,700
1,070 New York City, (Refunding, Series C)........ GO A3/BBB+ 02/01/04 6.000 1,148,923
1,500 New York City, (Refunding, Series H)........ GO A3/BBB+ 03/15/05 6.500 1,664,085
3,125 New York City, (Refunding, Series M)........ GO A3/BBB+ 06/01/00 6.000 3,247,031
2,070 New York State Dormitory Authority, (City
University System, Series A).............. RB Baa1/BBB+ 07/01/00 5.000 2,106,743
1,000 New York State Dormitory Authority, (City
University System, Series D).............. RB Baa1/BBB+ 07/01/03 8.750 1,197,280
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE NEW YORK TOTAL RETURN BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MARCH 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/
AMOUNT SECURITY S&P MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE (UNAUDITED) DATE RATE VALUE
- -------------- -------------------------------------------- -------- ------------ ----------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
NEW YORK (CONTINUED)
$ 2,000 New York State Dormitory Authority,
(Hospital New York & Presbyterian), AMBAC
Insured................................... RB Aaa/AAA 02/01/04 5.000% $ 2,065,740
5,650 New York State Dormitory Authority, (Mental
Health Services Facilities Improvements,
Refunding, Series B)(d)................... RB A3/A- 02/15/06 6.000 6,117,029
1,175 New York State Dormitory Authority, (Mental
Health Services Facilities Improvements,
Series B)................................. RB A3/A- 02/15/09 6.500 1,333,566
1,440 New York State Dormitory Authority, (Mental
Health Services Facilities, Series C)..... RB A3/A- 08/15/07 5.375 1,509,955
2,000 New York State Dormitory Authority, (New
York University, Series A), MBIA
Insured................................... RB Aaa/AAA 07/01/06 5.000 2,065,600
2,500 New York State Dormitory Authority,
(Refunding, Hospital-New York &
Presbyterian, due 08/01/13), AMBAC
Insured................................... RB Aaa/AAA 02/01/08(a) 4.400 2,508,200
2,000 New York State Dormitory Authority,
(Secondary Hospital, North General
Hospital, Refunding, Series G)............ RB Baa1/BBB+ 02/15/05 5.500 2,091,540
2,000 New York State Dormitory Authority, (Sloan
Kettering Cancer, Series C), MBIA
Insured(c)................................ RB Aaa/AAA 07/01/19 5.750 2,175,700
3,000 New York State Dormitory Authority, (State
University Educational Facilities)........ RB A3/A- 05/15/01 5.250 3,099,810
1,750 New York State Dormitory Authority, (State
University Educational Facilities,
Prerefunded, Series B, due 05/15/15)...... RB Aaa/A- 05/15/00(a) 7.250 1,898,278
1,500 New York State Dormitory Authority, (State
University Educational Facilities,
Refunding, Series A)...................... RB A3/A- 05/15/04 6.500 1,669,605
1,500 New York State Dormitory Authority, (State
University Educational Facilities,
Refunding, Series A), AMBAC Insured....... RB Aaa/AAA 05/15/07 5.500 1,609,200
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE NEW YORK TOTAL RETURN BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MARCH 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/
AMOUNT SECURITY S&P MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE (UNAUDITED) DATE RATE VALUE
- -------------- -------------------------------------------- -------- ------------ ----------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
NEW YORK (CONTINUED)
$ 3,000 New York State Dormitory Authority, (State
University Educational Facilities,
Refunding, Series A), FGIC Insured(d)..... RB Aaa/AAA 05/15/11 5.875% $ 3,294,960
1,580 New York State Dormitory Authority, (State
University Educational Facilities,
Refunding, Series B), AMBAC Insured....... RB Aaa/AAA 05/15/09 5.250 1,660,912
1,210 New York State Dormitory Authority,
(University of Rochester, Series A)....... RB A1/A+ 07/01/06 6.500 1,369,224
2,000 New York State Dormitory Authority,
(University of Rochester, Series A), MBIA
Insured(c)................................ RB Aaa/AAA 07/01/05 5.000 2,068,600
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 1,233,332
5,000 New York State Environmental Facilities
Corp., (PCR, State Water, Revolving Fund,
New York City Municipal Water)............ RB Aa2/A+ 06/15/11 5.750 5,438,450
5,000 New York State Environmental Facilities
Corp., (Special Obligation, Prerefunded,
due 04/01/22)............................. RB Aaa/AAA 04/01/02(a) 7.375 5,672,800
2,000 New York State Government Assistance Corp.,
(Series B, due 04/01/20).................. RB Aaa/AAA 04/01/01(a) 7.500 2,225,200
2,600 New York State Housing Finance Agency,
(Service Contract Obligation, Refunding,
Series C)................................. RB Baa1/BBB+ 03/15/05 4.850 2,616,484
1,500 New York State Local Government Assistance
Corp., (Refunding, Series B), MBIA
Insured................................... RB Aaa/AAA 04/01/04 5.250 1,577,565
3,350 New York State Local Government Assistance
Corp., (Refunding, Series E).............. RB A3/A+ 04/01/14 6.000 3,707,747
1,000 New York State Local Government Assistance
Corp., (Series A)......................... RB A3/A+ 04/01/00 6.200 1,040,790
1,000 New York State Local Government Assistance
Corp., (Series C, due 04/01/12)........... RB A3/A+ 04/01/09(a) 6.000 1,108,140
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE NEW YORK TOTAL RETURN BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MARCH 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/
AMOUNT SECURITY S&P MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE (UNAUDITED) DATE RATE VALUE
- -------------- -------------------------------------------- -------- ------------ ----------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
NEW YORK (CONTINUED)
$ 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% $ 3,169,286
1,500 New York State Medical Care Facilities
Finance Agency, (Mental Health Services,
Refunding, Series F)...................... RB A3/A- 02/15/03 6.000 1,596,735
2,000 New York State Power Authority, (Revenue &
General Purpose, Escrowed to Maturity,
Series W)................................. RB Aa2/NR 01/01/03 6.625 2,201,980
2,195 New York State Power Authority, (Revenue &
General Purpose, Escrowed to Maturity,
Series W, due 01/01/08)................... RB Aa2/NR 01/01/06(a) 6.500 2,538,035
2,000 New York State Thruway Authority, (Service
Contract, Local Highway & Bridge) (d)..... RB Baa1/BBB+ 04/01/05 6.000 2,160,860
2,000 New York State Thruway Authority, (Service
Contract, Local Highway & Bridge,
Refunding)................................ RB Baa1/BBB+ 04/01/04 5.500 2,085,540
2,470 New York State Urban Development Corp.,
(Center for Industrial Innovation,
Refunding)................................ RB Baa1/BBB+ 01/01/06 6.250 2,711,146
1,155 New York State Urban Development Corp.,
(Center for Industrial Innovation,
Refunding)................................ RB Baa1/BBB+ 01/01/07 6.250 1,275,374
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 3,184,830
2,000 New York State Urban Development Corp.,
(Correctional Capital Facilities, Series
6)........................................ RB Baa1/BBB+ 01/01/03 6.000 2,127,720
2,635 New York State Urban Development Corp.,
(Sub-Lien, Refunding)..................... RB A2/A 01/01/06 6.000 2,887,538
5,250 New York State, (Refunding, Series A)....... GO A2/A 07/15/06 6.500 5,981,798
1,350 New York State, (Refunding, Series C)....... GO A2/A 10/01/04 6.000 1,477,143
1,000 Orange County, (Refunding).................. GO Aa2/NR 11/15/04 5.500 1,072,520
1,000 Orange County, (Refunding).................. GO Aa2/NR 11/15/05 5.500 1,076,610
7,730 Port Authority of New York & New Jersey,
(Special Obligation, Series 6), MBIA
Insured................................... RB Aaa/AAA 12/01/11 6.250 8,750,051
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
23
<PAGE>
THE NEW YORK TOTAL RETURN BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MARCH 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/
AMOUNT SECURITY S&P MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE (UNAUDITED) DATE RATE VALUE
- -------------- -------------------------------------------- -------- ------------ ----------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
NEW YORK (CONTINUED)
$ 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% $ 1,103,748
1,000 Triborough Bridge & Tunnel Authority,
(General Purpose, Series A)............... RB Aa3/A+ 01/01/11 6.000 1,120,200
3,000 Triborough Bridge & Tunnel Authority,
(General Purpose, Series SR, due
01/01/07)................................. RB Aa3/A+ 01/01/99(a) 5.000 3,121,110
1,000 Triborough Bridge & Tunnel Authority,
(General Purpose, Series X)............... RB Aa3/A+ 01/01/12 6.625 1,176,320
1,500 Triborough Bridge & Tunnel Authority,
(General Purpose, Series Y)............... RB Aa3/A+ 01/01/07 5.900 1,657,575
4,000 Triborough Bridge & Tunnel Authority,
(Prerefunded, Series T, due 01/01/20)..... RB Aaa/A+ 01/01/01(a) 7.000 4,369,400
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 1,022,020
2,000 United Nations Development Corp., (Senior
Lien, Series A, Prerefunded, due
07/01/26)................................. RB Aaa/NR 07/01/03(a) 6.000 2,199,880
3,230 Yonkers, (Series C), AMBAC Insured.......... GO Aaa/AAA 08/01/04 5.500 3,445,861
------------
TOTAL NEW YORK.......................... 185,154,144
------------
PUERTO RICO (1.7%)
3,000 University of Puerto Rico, (Refunding,
Series N), MBIA Insured................... RB Aaa/AAA 06/01/05 6.250 3,361,170
------------
TOTAL LONG TERM INVESTMENTS (COST $185,922,597)........................................ 192,283,539
------------
SHORT-TERM INVESTMENTS (3.0%)
CALIFORNIA (0.0%)
100 Los Angeles Regional Airports Improvement
Corp., (Los Angeles International Airport,
due 12/01/25), LOC Societe Generale....... VRDN NR/A-1+ 04/01/98(b) 3.750 100,000
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
24
<PAGE>
THE NEW YORK TOTAL RETURN BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MARCH 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/
AMOUNT SECURITY S&P MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE (UNAUDITED) DATE RATE VALUE
- -------------- -------------------------------------------- -------- ------------ ----------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
GEORGIA (0.6%)
$ 200 Appling County Development Authority, (PCR,
Georgia Power Co. Plant, Hatch Project,
due 09/01/29)............................. VRDN VMIG1/A-1 04/01/98(b) 3.800% $ 200,000
400 Burke County Development Authority, (PCR,
Georgia Power Co., Vogtle Project 1-st
Series, due 04/01/32)..................... VRDN VMIG1/A-1 04/01/98(b) 3.800 400,000
500 Burke County Development Authority, (PCR,
Georgia Power Co., Vogtle Project-4th
Series, due 09/01/25)..................... VRDN VMIG1/A+ 04/01/98(b) 3.800 500,000
100 Burke County Development Authority, (PCR,
Georgia Power Co., Vogtle Project-5th
Series, due 07/01/24)..................... VRDN VMIG1/A-1 04/01/98(b) 3.750 100,000
------------
1,200,000
------------
ILLINOIS (0.3%)
500 Illinois Development Finance Authority,
(Olin Corp. Project, Refunding, Series A,
due 06/01/04), LOC Wachovia Bank.......... VRDN NR/A-1+ 04/01/98(b) 3.850 500,000
------------
MASSACHUSETTS (0.0%)
100 Massachusetts State Industrial Finance
Agency, (PCR, Refunding, due 10/01/22).... VRDN VMIG1/A-1 04/01/98(b) 3.650 100,000
------------
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 04/01/98(b) 3.850 200,000
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
25
<PAGE>
THE NEW YORK TOTAL RETURN BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MARCH 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/
AMOUNT SECURITY S&P MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE (UNAUDITED) DATE RATE VALUE
- -------------- -------------------------------------------- -------- ------------ ----------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
NEW YORK (0.3%)
$ 200 New York City Municipal Water Finance
Authority, (Water and Sewer Systems
Revenue, Series C, due 06/15/23), FGIC
Insured................................... VRDN VMIG1/A-1+ 04/01/98(b) 3.850% $ 200,000
100 New York City, (Series B, due 10/01/21),
FGIC Insured.............................. VRDN VMIG1/A-1+ 04/01/98(b) 3.800 100,000
200 New York State Energy Research & Development
Authority, (PCR, New York State Electric &
Gas, Refunding, Series C, due 06/01/29)
LOC Morgan Guaranty Trust................. VRDN VMG1/A-1+ 04/01/98(b) 3.650 200,000
------------
500,000
------------
TENNESSEE (0.4%)
100 Bradley County Industrial Development Board,
(Olin Corp., Series C, due 11/01/17), LOC
Wachovia Bank............................. VRDN NR/A-1+ 04/01/98(b) 3.850 100,000
600 Tennessee State (Adjustable Bond,
Anticipation Notes, Series A, due
07/02/01)................................. VRDN VMIG1/A-1+ 04/01/98(b) 3.650 600,000
------------
700,000
------------
TEXAS (0.4%)
800 North Central Health Facilities Development
Corp., (Hospital Revenue, Presbyterian
Medical Center, Series D, due 12/01/15),
MBIA Insured.............................. VRDN VMIG1/A-1+ 04/01/98(b) 3.750 800,000
------------
WEST VIRGINIA (0.1%)
300 Marshall County, (Bayer Corp. Project,
Refunding, due 03/01/09).................. VRDN P-1/A-1+ 04/01/98(b) 3.850 300,000
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
26
<PAGE>
THE NEW YORK TOTAL RETURN BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MARCH 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/
AMOUNT SECURITY S&P MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE (UNAUDITED) DATE RATE VALUE
- -------------- -------------------------------------------- -------- ------------ ----------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
WYOMING (0.8%)
$ 200 Lincoln County, (PCR, Exxon Project, Series
B, due 11/01/14).......................... VRDN P-1/A-1+ 04/01/98(b) 3.850% $ 200,000
1,400 Platte County, (PCR, Tri-State G&T, Series
A, due 07/01/14), LOC Societe Generale.... VRDN P-1/NR 04/01/98(b) 4.000 1,400,000
------------
1,600,000
------------
TOTAL SHORT-TERM INVESTMENTS (COST $6,000,000)............................................. 6,000,000
------------
TOTAL INVESTMENTS (COST $191,922,597) (100.6%)............................................. 198,283,539
LIABILITIES IN EXCESS OF OTHER ASSETS (-0.6%).............................................. (1,272,129)
------------
NET ASSETS (100.0%)........................................................................ $197,011,410
------------
------------
</TABLE>
- ------------------------------
Note: Based on the cost of investments of $191,955,850 for federal income tax
purposes at March 31, 1998, the aggregate gross unrealized appreciation and
depreciation was $6,504,546 and $176,857 respectively, resulting in net
unrealized appreciation of investments of $6,327,689.
(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 Note tender dates and/or interest rates are reset at
specified intervals which coincide with their tender feature. The actual
maturity date is indicated in the security description.
(c) When-issued security.
(d) Segregated either partially or fully with the custodian for when-issued
securities.
Abbreviations used in the Schedule of Investments are as follows:
AMBAC - Ambac Indemnity Corp., FHA - Federal Housing Authority, FGIC - Financial
Guaranty Insurance Company, GO - General Obligation, IDR - Industrial
Development Revenue, 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 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 TOTAL RETURN BOND PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $191,922,597 ) $198,283,539
Cash 86,692
Interest Receivable 2,976,889
Deferred Organization Expenses 2,323
Prepaid Trustees' Fees 595
Prepaid Expenses and Other Assets 562
------------
Total Assets 201,350,600
------------
LIABILITIES
Payable for Investments Purchased 4,262,273
Advisory Fee Payable 49,802
Administrative Services Fee Payable 8,246
Custody Fee Payable 5,053
Administration Fee Payable 367
Fund Services Fee Payable 258
Accrued Expenses 13,191
------------
Total Liabilities 4,339,190
------------
NET ASSETS
Applicable to Investors' Beneficial Interests $197,011,410
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
28
<PAGE>
THE NEW YORK TOTAL RETURN BOND PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED MARCH 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest Income $ 8,603,253
EXPENSES
Advisory Fee $513,516
Custodian Fees and Expenses 57,278
Administrative Services Fee 52,013
Professional Fees and Expenses 43,922
Fund Services Fee 5,740
Administration Fee 2,869
Trustees' Fees and Expenses 2,516
Amortization of Organization Expenses 2,304
Miscellaneous 8,966
--------
Total Expenses 689,124
-----------
NET INVESTMENT INCOME 7,914,129
NET REALIZED GAIN ON INVESTMENTS 1,111,960
NET CHANGE IN UNREALIZED APPRECIATION OF
INVESTMENTS 4,862,341
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $13,888,430
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
29
<PAGE>
THE NEW YORK TOTAL RETURN BOND PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FISCAL FOR THE FISCAL
YEAR ENDED YEAR ENDED
MARCH 31, 1998 MARCH 31, 1997
-------------- --------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 7,914,129 $ 6,033,800
Net Realized Gain (Loss) on Investments 1,111,960 (18,872)
Net Change in Unrealized Appreciation
(Depreciation) of Investments 4,862,341 (401,871)
-------------- --------------
Net Increase in Net Assets Resulting from
Operations 13,888,430 5,613,057
-------------- --------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 87,771,218 71,063,672
Withdrawals (52,571,222) (27,423,240)
-------------- --------------
Net Increase from Investors' Transactions 35,199,996 43,640,432
-------------- --------------
Total Increase in Net Assets 49,088,426 49,253,489
NET ASSETS
Beginning of Fiscal Year 147,922,984 98,669,495
-------------- --------------
End of Fiscal Year $ 197,011,410 $ 147,922,984
-------------- --------------
-------------- --------------
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE FISCAL YEAR APRIL 11, 1994
ENDED MARCH 31, (COMMENCEMENT OF
--------------------- OPERATIONS) TO
1998 1997 1996 MARCH 31, 1995
----- ----- ----- ----------------
<S> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Expenses 0.40% 0.43% 0.44% 0.48%(a)
Net Investment Income 4.62% 4.75% 4.72% 4.59%(a)
Decrease Reflected in Expense Ratio due
to Expense Reimbursement -- -- -- 0.03%(a)
Portfolio Turnover 51% 35% 41% 63%
</TABLE>
- ------------------------
(a) Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
30
<PAGE>
THE NEW YORK TOTAL RETURN BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
MARCH 31,1998
- --------------------------------------------------------------------------------
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 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. The portfolio's investment objective is to provide
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 are valued by an outside independent pricing service
approved by the trustees. 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 readily
available closing bid price on such exchanges, or at the quoted bid price
in the over-the-counter market. 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. Securities or other assets
for which market quotations are not readily available are valued in
accordance with procedures established by the portfolio's trustees. Such
procedures include the use of comparable quality, coupon, maturity and
type, indications as to values from dealers, and general market
conditions. All 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 TOTAL RETURN BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31,1998
- --------------------------------------------------------------------------------
2. TRANSACTIONS WITH AFFILIATES
a) The portfolio has an Investment Advisory Agreement with Morgan Guaranty
Trust Company of New York ("Morgan"). Under the terms of the agreement,
the portfolio pays Morgan at an annual rate of 0.30% of the portfolio's
average daily net assets. For the fiscal year ended March 31, 1998, this
fee amounted to $513,516.
b) The portfolio has retained Funds Distributor, Inc. ("FDI"), a registered
broker-dealer, to serve as co-administrator and exclusive placement agent.
Under a Co-Administration Agreement 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 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 fiscal year ended March 31, 1998, the fee for
these services amounted to $2,869.
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 J.P. Morgan Series Trust (formerly
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 J.P. Morgan Series Trust. For the fiscal year ended March
31, 1998, the fee for these services amounted to $52,013.
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 $5,740 for the fiscal year ended March 31, 1998.
e) An aggregate annual fee of $75,000 is paid to each trustee for serving as
a trustee of J.P.Morgan Funds, J.P. Morgan Institutional Funds, the master
portfolios and J.P. Morgan Series Trust. The Trustees' Fees and Expenses
shown in the financial statements represents the portfolio's allocated
portion of the total fees and expenses. The portfolio's Chairman and Chief
Executive Officer also serves as Chairman of Group and receives
compensation and employee benefits from Group in his role as group's
Chairman. The allocated portion of such compensation and benefits included
in the Fund Services Fee shown in the financial statements was $1,200.
32
<PAGE>
THE NEW YORK TOTAL RETURN BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31,1998
- --------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the fiscal year
ended March 31, 1998, were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
------------ -----------
<S> <C> <C>
Municipal Obligations............................ $116,007,339 $83,855,522
</TABLE>
4. CREDIT AGREEMENT
The portfolio is party to a revolving line of credit agreement as discussed more
fully in Note 4 of the underlying investor fund's Notes to the Financial
Statements which are included elsewhere in this report.
33
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Investors of
The New York Total Return Bond Portfolio
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the supplementary data present fairly, in all material
respects, the financial position of The New York Total Return Bond Portfolio
(the "portfolio") at March 31, 1998, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and supplementary data for each of the three years in the
period then ended and for the period April 11, 1994 (commencement of operations)
to March 31, 1995 in conformity with generally accepted accounting principles.
These financial statements and supplementary data (hereafter referred to as
"financial statements") are the responsibility of the portfolio's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at March
31, 1998 by correspondence with the custodian and brokers and the application of
alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
New York, New York
May 19, 1998
34
<PAGE>
J.P. MORGAN FUNDS
FEDERAL MONEY MARKET FUND
PRIME MONEY MARKET FUND
TAX EXEMPT MONEY MARKET FUND
BOND FUND
CALIFORNIA BOND FUND: SELECT SHARES
EMERGING MARKETS DEBT FUND
GLOBAL STRATEGIC INCOME FUND
NEW YORK TOTAL RETURN BOND FUND
SHORT TERM BOND FUND
TAX EXEMPT BOND FUND
DIVERSIFIED FUND
DISCIPLINED EQUITY FUND
TAX AWARE U.S. EQUITY FUND: SELECT SHARES
U.S. EQUITY FUND
U.S. SMALL COMPANY FUND
U.S. SMALL COMPANY OPPORTUNITIES FUND
EMERGING MARKETS EQUITY FUND
EUROPEAN EQUITY FUND
INTERNATIONAL EQUITY FUND
INTERNATIONAL OPPORTUNITIES FUND
JAPAN EQUITY FUND
FOR MORE INFORMATION ON THE J.P. MORGAN FUNDS CALL
J.P. MORGAN FUNDS SERVICES AT (800) 521-5411.
J.P. MORGAN
NEW YORK
TOTAL RETURN
BOND FUND
ANNUAL REPORT
MARCH 31, 1998
