<PAGE>
LETTER TO THE SHAREHOLDERS OF THE J.P. MORGAN NEW YORK TAX EXEMPT BOND FUND
September 1, 1999
Dear Shareholder:
As interest rates rose, the J.P. Morgan New York Tax Exempt Bond Fund declined
1.41% over the four months ended July 31, 1999. The fund trailed its
competition, which fell 1.34% over the same period, as measured by the Lipper
New York Intermediate Municipal Debt Funds Average, and its benchmark, the
Lehman Brothers 1-16 year Municipal Bond Index, which also dropped, by 0.92%. Of
course, the index return is exclusive of fees and expenses. Higher interest
rates also mean that the fund's 30-day SEC yield has increased to 4.15% as of
July 31, which is a tax equivalent yield of 6.87% at a 39.6% federal income tax
rate.
The fund's net asset value as of July 31 was $10.35, down from $10.66 on March
31. Dividends of approximately $0.16 per share were paid over the four-month
period, of which approximately $0.13 was tax-exempt income, approximately $0.02
was a long-term capital gain, and approximately $0.01 was a short-term capital
gain.
The report that follows includes an interview with Robert Meiselas, who with
Benjamin S. Thompson, manages the fund. This interview is designed to reflect
what happened during the months past, as well as provide an outlook for the
future.
As chairman and president of Asset Management Services, we thank you for
investing with J.P. Morgan. Should you have any comments or questions, please
telephone 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>
<CAPTION>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<S> <C> <C> <C>
LETTER TO THE SHAREHOLDERS ... 1 GLOSSARY OF TERMS .......... 5
FUND PERFORMANCE ............. 2 FUND FACTS AND HIGHLIGHTS .. 6
PORTFOLIO MANAGER Q&A ........ 3 FINANCIAL STATEMENTS ....... 8
- --------------------------------------------------------------------------------
</TABLE>
1
<PAGE>
FUND PERFORMANCE
EXAMINING PERFORMANCE
There are several ways to evaluate a mutual fund's performance. One is to look
at the growth of a hypothetical investment. The chart at right shows that
$10,000 invested on April 11, 1994* would have grown to $13,226 on July 31,
1999.
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
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*
[GRAPH]
<TABLE>
<CAPTION>
PERFORMANCE TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS
------------------------ -------------------------------------
THREE FOUR SIX ONE THREE FIVE SINCE
AS OF JULY 31, 1999 MONTHS MONTHS MONTHS YEAR YEARS YEARS INCEPTION*
- ----------------------------------------------------------- -------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
J.P. Morgan New York
Tax Exempt Bond Fund -1.63% -1.41% -2.16% 2.48% 5.03% 5.36% 5.47%
Lehman Brothers 1-16 year
Municipal Bond Index** -1.20% -0.92% -1.31% 3.32% 5.84% 6.18% 6.25%
Lipper New York Intermediate
Municipal Debt Funds Average -1.59% -1.34% -2.02% 2.35% 5.00% 5.11% 5.23%
AS OF JUNE 30, 1999
- ----------------------------------------------------------- -------------------------------------
J.P. Morgan New York
Tax Exempt Bond Fund -1.83% -1.89% -1.26% 2.11% 5.31% 5.51% 5.47%
Lehman Brothers 1-16 year
Municipal Bond Index** -1.45% -1.41% -0.60% 3.04% 5.95% 6.37% 6.24%
Lipper New York Intermediate
Municipal Debt Funds Average -1.80% -1.90% -1.31% 2.03% 5.18% 5.28% 5.22%
</TABLE>
* THE FUND COMMENCED OPERATIONS ON APRIL 11, 1994, AND HAS PROVIDED A TOTAL
RETURN OF 5.46% FROM THAT DATE THROUGH JULY 31, 1999. FOR THE PURPOSE OF
COMPARISON, THE "SINCE INCEPTION" RETURNS IN THE TABLE ABOVE ARE CALCULATED
FROM APRIL 30, 1994, THE FIRST DATE WHEN DATA FOR THE FUND, ITS BENCHMARK,
AND ITS LIPPER CATEGORY AVERAGE WERE ALL AVAILABLE.
** 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.
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. LIPPER ANALYTICAL SERVICES,
INC. IS A LEADING RESOURCE FOR MUTUAL FUND DATA.
2
<PAGE>
PORTFOLIO MANAGER Q&A
Following is an interview with Robert Meiselas, who with Benjamin S. Thompson
manages the master portfolio in which the fund invests.
[PHOTO]
BENJAMIN S. THOMPSON, vice president, is senior fixed income portfolio manager
and head of J.P. Morgan's municipal bond strategies. His responsibilities
include coordination of strategy and research, portfolio structuring and trade
execution for U.S. tax-aware fixed income accounts. Prior to joining Morgan in
1999, Ben was a senior fixed income portfolio manager at Goldman Sachs Asset
Management. Earlier, he was in the Structured Finance Group of the Chase
Manhattan Bank. He holds a B.A. in Economics from Colorado College.
[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. Bob is a CPA and joined Morgan's financial group in 1982,
after having spent 10 years at Coopers & Lybrand. He 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. John's University
and has completed graduate work in taxation at Long Island University.
This interview was conducted on August 13, 1999, and represents the views of
both Bob and Ben on that date.
OVER THE LAST FEW MONTHS, THE NET ASSET VALUE OF THE FUND HAS DECLINED SLIGHTLY.
WHY?
RM: U.S. interest rates have risen significantly since the winter. High quality
municipal bond yields are roughly half of a percentage point higher than rates
prevailing a year ago. These rates had actually declined during the second half
of 1998, reaching the lowest levels in decades, before beginning to rise again
in February. Consequently, the recent NAV decline is entirely attributable to
the effect of rising interest rates on bond prices.
Interest rates in the U.S. have changed largely as a result of global economic
conditions. Last summer, foreign economies were generally weak while the U.S.
economy was very strong and the real rate of inflation at a historic low.
Foreign investors bought U.S. Treasuries, looking for safety, bringing long-term
interest rates to a historic low. Now, investor concern over foreign economies
has eased, reducing the demand to buy U.S. Treasury bonds. At the same time,
economists have become concerned that the rapid growth in the U.S. economy
cannot be sustained without re-introducing inflation. Federal Reserve Bank
officials are similarly concerned, and voted June 30 to raise interest rates by
a quarter of a percentage point. Many bond investors are now concerned that
interest rates may continue to rise and are investing their money cautiously.
3
<PAGE>
HOW HAS THE FUND RESPONDED TO THESE DRAMATICALLY CHANGING ECONOMIC CONDITIONS?
RM: We've taken several steps to minimize the impact of rising interest rates
upon the fund's net asset value. When we last wrote at the end of the winter, we
had already shifted from mildly bullish to neutral. We're now defensive. Last
winter, the fund was roughly a quarter of a year longer than its benchmark and
we were seeking higher yielding bonds in the marketplace. As the market began to
change, we gradually removed our long position, eventually settling duration at
about a half year SHORT of the benchmark. We correctly forecast that credit
spreads for lower investment grade bonds would widen and were glad that we
adopted a bias toward higher quality bonds early. Lastly, we carefully examined
the portfolio to identify bonds that could become discount bonds if interest
rates rose further. Discount bonds can rapidly lose value because a potential
buyer may be subject to income tax at ordinary rates when the bond accretes
toward par.
DO YOU EXPECT CONDITIONS TO IMPROVE ANY TIME SOON?
RM: As of early August, unfortunately, we suspect that market participants will
be concerned about rising interest rates in the immediate future. Foreign
economic growth has continued to improve and the U.S. dollar has begun to
weaken. As such, we foresee greater competition for global goods and services
than before. Also, Federal Reserve officials have said that some of the
conditions that allowed interest rates to drift lower, such as a strong dollar
and greater productivity, are no longer prevalent. If the Fed believes that the
U.S. economic growth rate is inflationary, it will continue to raise interest
rates. Until the Fed is satisfied that U.S. economic growth has slowed
sufficiently to make the risk of inflation less likely, the tax-exempt municipal
bond market will be uneasy about the prospect of rising interest rates.
SO IS THIS ANY TIME TO INVEST IN THE FUND?
RM: When people expect interest rates to rise significantly, they don't rush out
to buy bonds. But what are the alternatives? Rising interest rates typically do
not help many other types of investments, either - particularly stocks and real
estate. It is possible that municipals will lose less value than these other
investments. As of this writing, five year, high quality municipals have a yield
of roughly 4.4%. These provide investors paying the highest federal income tax
rates and 6-7% in state or local taxes with roughly an 8% yield on a
tax-adjusted basis. We believe this is attractive compared to many other
investment alternatives.
No investor can predict, with certainty, the direction, extent and timing of a
change in interest rates. Prudent investors make long term investment
allocations that they adjust when investment objectives change. We believe that
market conditions may warrant fine-tuning to take advantage of opportunities or
avoid temporal downturns. Some investors may invest in money market funds until
interest rates peak. But remaining uninvested is a large bet with an inherent
opportunity cost. This strategy bears an inherent opportunity cost if yield
foregone by investing in a money market fund rather than a tax exempt bond fund
exceeds the unrealized loss in NAV if rates don't go much higher. Moreover, the
investor will certainly give up this yield differential while the decline in NAV
may reverse if interest rates subsequently go back down. So selling to avoid a
temporal change in rates can create an opportunity cost and may also create
unfavorable tax consequences.
4
<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.
5
<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 7/31/99
$115,690,400
- --------------------------------------------
PORTFOLIO NET ASSETS AS OF 7/31/99
$276,998,018
- --------------------------------------------
DIVIDEND PAYABLE DATES
MONTHLY
- --------------------------------------------
CAPITAL GAIN PAYABLE DATE (IF APPLICABLE)
12/13/99
EXPENSE RATIO
The fund's annualized current 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 JULY 31, 1999
PORTFOLIO ALLOCATION
(PERCENTAGE OF TOTAL INVESTMENTS)
[PIE CHART]
REVENUE BONDS 75.5%
GENERAL OBLIGATIONS 14.6%
PRIVATE PLACEMENTS 7.5%
SHORT-TERM & OTHER 2.4%
30-DAY SEC YIELD
4.15%*
DURATION
4.87 YEARS
QUALITY PROFILE
AAA-A 85.1%
OTHER 14.9%
*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 LOWER.
6
<PAGE>
DISTRIBUTED BY FUNDS DISTRIBUTOR, INC. J.P. MORGAN INVESTMENT MANAGEMENT INC., A
WHOLLY OWNED SUBSIDIARY OF J.P. MORGAN & CO. INC., IS 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.
7
<PAGE>
J.P. MORGAN NEW YORK TAX EXEMPT BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment in The New York Tax Exempt Bond
Portfolio ("Portfolio"), at value $115,820,844
Receivable for Expense Reimbursements 14,135
Receivable for Shares of Beneficial Interest Sold 802
Prepaid Trustees' Fees 371
Prepaid Expenses and Other Assets 442
------------
Total Assets 115,836,594
------------
LIABILITIES
Distributions Payable to Shareholders 61,635
Shareholder Servicing Fee Payable 23,971
Payable for Shares of Beneficial Interest
Redeemed 8,000
Administrative Services Fee Payable 2,454
Administration Fee Payable 74
Fund Services Fee Payable 12
Accrued Expenses 50,048
------------
Total Liabilities 146,194
------------
NET ASSETS
Applicable to 11,175,063 Shares of Beneficial
Interest Outstanding
(par value $0.001, unlimited shares authorized) $115,690,400
------------
------------
Net Asset Value, Offering and Redemption Price
Per Share $10.35
-----
-----
ANALYSIS OF NET ASSETS
Paid-in Capital $116,033,819
Undistributed Net Investment Income 21,047
Accumulated Net Realized Loss on Investment (177,744)
Net Unrealized Depreciation of Investment (186,722)
------------
Net Assets $115,690,400
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
8
<PAGE>
J.P. MORGAN NEW YORK TAX EXEMPT BOND FUND
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FOUR
MONTHS ENDED FOR THE FISCAL
JULY 31, YEAR ENDED
1999 MARCH 31, 1999
------------ --------------
<S> <C> <C>
INVESTMENT INCOME ALLOCATED FROM PORTFOLIO
Allocated Interest Income $ 1,733,012 $ 4,721,235
Allocated Portfolio Expenses (154,792) (390,974)
------------ --------------
Net Investment Income Allocated from
Portfolio 1,578,220 4,330,261
------------ --------------
FUND EXPENSES
Shareholder Servicing Fee 95,896 238,894
Professional Fees 11,990 12,839
Administrative Services Fee 9,858 28,071
Transfer Agent Fees 9,653 24,182
Registration Fees 5,059 26,592
Fund Services Fee 870 2,559
Administration Fee 556 1,863
Trustees' Fees and Expenses 436 1,137
Amortization of Organization Expenses 23 2,742
Miscellaneous 8,832 22,762
------------ --------------
Total Fund Expenses 143,173 361,641
Less: Reimbursement of Expenses (29,456) (41,794)
------------ --------------
NET FUND EXPENSES 113,717 319,847
------------ --------------
NET INVESTMENT INCOME 1,464,503 4,010,414
NET REALIZED GAIN (LOSS) ON INVESTMENT ALLOCATED
FROM PORTFOLIO (170,050) 1,133,357
NET CHANGE IN UNREALIZED DEPRECIATION OF
INVESTMENT ALLOCATED FROM PORTFOLIO (2,846,951) (109,003)
------------ --------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $(1,552,498) $ 5,034,768
------------ --------------
------------ --------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
9
<PAGE>
J.P. MORGAN NEW YORK TAX EXEMPT BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FOUR
MONTHS ENDED FOR THE FISCAL FOR THE FISCAL
JULY 31, YEAR ENDED YEAR ENDED
1999 MARCH 31, 1999 MARCH 31, 1998
------------ -------------- --------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 1,464,503 $ 4,010,414 $ 2,974,540
Net Realized Gain (Loss) on Investment Allocated
from Portfolio (170,050) 1,133,357 577,329
Net Change in Unrealized Appreciation
(Depreciation) of Investment Allocated from
Portfolio (2,846,951) (109,003) 1,725,945
------------ -------------- --------------
Net Increase (Decrease) in Net Assets
Resulting from Operations (1,552,498) 5,034,768 5,277,814
------------ -------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (1,464,503) (4,010,414) (2,974,540)
Net Realized Gain (277,867) (1,007,351) (433,162)
------------ -------------- --------------
Total Distributions to Shareholders (1,742,370) (5,017,765) (3,407,702)
------------ -------------- --------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Proceeds from Shares of Beneficial Interest Sold 13,194,347 55,749,920 40,909,669
Reinvestment of Dividends and Distributions 1,435,861 3,927,401 2,580,218
Cost of Shares of Beneficial Interest Redeemed (14,796,491) (25,703,457) (16,397,235)
------------ -------------- --------------
Net Increase (Decrease) from Transactions in
Shares of Beneficial Interest (166,283) 33,973,864 27,092,652
------------ -------------- --------------
Total Increase (Decrease) in Net Assets (3,461,151) 33,990,867 28,962,764
NET ASSETS
Beginning of Period 119,151,551 85,160,684 56,197,920
------------ -------------- --------------
End of Period (including undistributed net
investment income of $21,047, $21,047 and
$21,047, respectively) $115,690,400 $ 119,151,551 $ 85,160,684
------------ -------------- --------------
------------ -------------- --------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
10
<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 FOUR APRIL 11, 1994
MONTHS ENDED FOR THE FISCAL YEAR ENDED MARCH 31, (COMMENCEMENT OF
JULY 31, -------------------------------------- OPERATIONS) THROUGH
1999 1999 1998 1997 1996 MARCH 31, 1995
------------ -------- ------- ------- ------- -------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.66 $ 10.62 $ 10.28 $ 10.34 $ 10.11 $ 10.00
------------ -------- ------- ------- ------- -------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.13 0.42 0.46 0.46 0.46 0.40
Net Realized and Unrealized Gain (Loss) on
Investment (0.28) 0.14 0.40 (0.03) 0.26 0.11
------------ -------- ------- ------- ------- -------------------
Total from Investment Operations (0.15) 0.56 0.86 0.43 0.72 0.51
------------ -------- ------- ------- ------- -------------------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (0.13) (0.42) (0.46) (0.46) (0.46) (0.40)
Net Realized Gain (0.03) (0.10) (0.06) (0.03) (0.03) --
------------ -------- ------- ------- ------- -------------------
Total Distributions to Shareholders (0.16) (0.52) (0.52) (0.49) (0.49) (0.40)
------------ -------- ------- ------- ------- -------------------
NET ASSET VALUE, END OF PERIOD $ 10.35 $ 10.66 $ 10.62 $ 10.28 $ 10.34 $ 10.11
------------ -------- ------- ------- ------- -------------------
------------ -------- ------- ------- ------- -------------------
RATIOS AND SUPPLEMENTAL DATA
Total Return (1.41)%(a) 5.39% 8.49% 4.19% 7.16% 5.26%(a)
Net Assets, End of Period (in thousands) $ 115,690 $119,152 $85,161 $56,198 $50,523 $ 38,137
Ratios to Average Net Assets
Net Expenses 0.70%(b) 0.70% 0.71% 0.75% 0.75% 0.75%(b)
Net Investment Income 3.82%(b) 3.95% 4.33% 4.44% 4.43% 4.31%(b)
Expenses without Reimbursement 0.78%(b) 0.74% 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.
11
<PAGE>
J.P. MORGAN NEW YORK TAX EXEMPT BOND FUND
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1999
- --------------------------------------------------------------------------------
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. At a meeting on November 12,
1998, the trustees elected to change the fund's fiscal year end from March 31 to
July 31.
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 (42% at July
31, 1999). 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) 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.
f) 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.
12
<PAGE>
J.P. MORGAN NEW YORK TAX EXEMPT BOND FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JULY 31, 1999
- --------------------------------------------------------------------------------
g) For federal income tax purposes, the fund incurred approximately $170,050
of realized capital losses in the period from November 1, 1998 to July 31,
1999. These losses were deferred for tax purposes until August 1, 1999.
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 four
months ended July 31, 1999 and for the fiscal year ended March 31, 1999,
the fees for these services amounted to $556 and $1,863, respectively.
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"), a wholly owned subsidiary of J.P. Morgan & Co. Incorporated
("J.P. 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 four months ended July 31, 1999 and for the
fiscal year ended March 31, 1999, the fees for these services amounted to
$9,858 and $28,071, respectively.
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. This reimbursement
arrangement can be changed or terminated at any time after November 28,
2000, at the option of J.P. Morgan. For the four months ended July 31,
1999 and for the fiscal year ended March 31, 1999, J.P. Morgan has agreed
to reimburse the fund $29,456 and $41,794, respectively, 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. This rate was 0.20% of the average daily
net assets of the fund from
13
<PAGE>
J.P. MORGAN NEW YORK TAX EXEMPT BOND FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JULY 31, 1999
- --------------------------------------------------------------------------------
April 1, 1998 through July 31, 1998. Effective August 1, 1998 the rate was
increased to 0.25%. For the four months ended July 31, 1999 and for the
fiscal year ended March 31, 1999, the fees for these services amounted to
$95,896 and $238,894, respectively.
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 Schwab 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
$870 and $2,559 for the four months ended July 31, 1999 and for the fiscal
year ended March 31, 1999, respectively.
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 $200 and $500 for the
four months ended July 31, 1999 and for the fiscal year ended March 31,
1999, respectively.
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 FOUR
MONTHS ENDED FOR THE FISCAL FOR THE FISCAL
JULY 31, YEAR ENDED YEAR ENDED
1999 MARCH 31, 1999 MARCH 31, 1998
------------ -------------- --------------
<S> <C> <C> <C>
Shares sold...................................... 1,260,215 5,203,659 3,864,109
Reinvestment of dividends and distributions...... 137,469 366,522 243,534
Shares redeemed.................................. (1,403,433) (2,405,543) (1,556,053)
------------ -------------- --------------
Net Increase (Decrease).......................... (5,749) 3,164,638 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 27, 1998, with unaffiliated lenders.
14
<PAGE>
J.P. MORGAN NEW YORK TAX EXEMPT BOND FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JULY 31, 1999
- --------------------------------------------------------------------------------
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
Agreement expired on May 26, 1999, however, the fund as party to the Agreement
has renewed the Agreement and will continue its participation therein for an
additional 364 days until May 23, 2000. The maximum borrowing under the
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 0.085% (0.065% prior to May 26, 1999) on the
unused portion of the committed amount. This is allocated to the funds in
accordance with procedures established by their respective trustees. There were
no outstanding borrowings pursuant to the Agreement at July 31, 1999.
15
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of
J.P. Morgan New York Tax Exempt 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
J.P. Morgan New York Tax Exempt Bond Fund (one of the series constituting part
of the J.P. Morgan Funds, hereafter referred to as the "fund") at July 31, 1999,
the results of its operations for the four months ended July 31, 1999 and for
the year ended March 31, 1999, and the changes in its net assets for the four
months ended July 31, 1999 and for the two years ended March 31, 1999 and
financial highlights for the four months ended July 31, 1999 and for the four
years ended March 31, 1999 and for the period April 11, 1994 (commencement of
operations) through 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.
PricewaterhouseCoopers LLP
New York, New York
September 15, 1999
16
<PAGE>
The New York Tax Exempt Bond Portfolio
Annual Report July 31, 1999
(The following pages should be read in conjunction
with J.P. Morgan New York Tax Exempt Bond Fund
Annual Financial Statements)
17
<PAGE>
THE NEW YORK TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS
JULY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/
PRINCIPAL SECURITY S&P
AMOUNT TYPE RATING MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION (UNAUDITED) (UNAUDITED) DATE RATE VALUE
- -------------- ---------------------------------------- ---------------- ---------- ------------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
LONG-TERM INVESTMENTS (95.2%)
CALIFORNIA (0.3%)
$ 812 Kaweah Delta Hospital District, Tulare
County, (Series F, due 06/01/14)...... PP NR/NR 06/01/00(a) 5.250% $ 821,728
------------
ILLINOIS (1.1%)
3,000 Illinois Development Finance
Authority............................. PP NR/NR 08/01/28 4.900 2,982,420
------------
MICHIGAN (1.5%)
3,444 City of Detroit Public School........... PP NR/NR 10/15/01 5.485 3,487,278
708 City of Detroit Public School, (Public
Power Revenue)........................ PP NR/NR 10/15/00 4.550 718,564
------------
TOTAL MICHIGAN...................... 4,205,842
------------
NEW YORK (91.5%)
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 4,109,520
2,195 Erie County, FGIC Insured............... GO Aaa/AAA 11/01/02 5.000 2,247,570
3,000 Long Island Power Authority, (Electric
Systems Revenue)...................... RB Baa1/A- 04/01/02 5.000 3,038,520
4,950 Long Island Power Authority, (Electric
Systems Revenue, Refunding, Series A),
AMBAC Insured......................... RB Aaa/AAA 12/01/10 5.500 5,142,456
3,500 Long Island Power Authority, (Electric
Systems Revenue, Refunding, Series A),
AMBAC Insured......................... RB Aaa/AAA 12/01/11 5.500 3,635,310
4,000 Metropolitan Transportation Authority,
(Commuter Facilities Revenue,
Refunding, Series D), MBIA Insured.... RB Aaa/AAA 07/01/06 6.000 4,315,640
5,500 Metropolitan Transportation Authority,
(Dedicated Tax Fund, Series A), MBIA
Insured............................... RB Aaa/AAA 04/01/11 6.250 6,063,805
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
18
<PAGE>
THE NEW YORK TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JULY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/
PRINCIPAL SECURITY S&P
AMOUNT TYPE RATING MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION (UNAUDITED) (UNAUDITED) DATE RATE VALUE
- -------------- ---------------------------------------- ---------------- ---------- ------------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
NEW YORK (CONTINUED)
$ 1,370 Metropolitan Transportation Authority,
(Service Contract, Commuter
Facilities, Refunding, Series N)...... RB Baa1/BBB+ 07/01/02 6.625% $ 1,451,912
1,065 Monroe County, (Public Improvement,
Prerefunded, Escrowed to Maturity,
Series 1995), AMBAC Insured........... GO Aaa/AAA 06/01/08 5.875 1,150,477
65 Monroe County, (Public Improvement,
Unrefunded Balance, Series 1995),
AMBAC Insured......................... GO Aaa/AAA 06/01/08 5.875 70,217
2,150 Municipal Assistance Corp. for the City
of New York, (Refunding, Series G).... RB Aa2/AA 07/01/05 6.000 2,315,206
1,500 Municipal Assistance Corp. for the City
of New York, (Refunding, Series J).... RB Aa2/AA 07/01/04 6.000 1,604,340
5,000 Municipal Assistance Corp. for the City
of New York, (Refunding, Series O).... RB Aa2/AA 07/01/05 5.000 5,127,200
1,460 New York City Industrial Development
Agency, (Civic Facilities Revenue,
YMCA Greater New York Project)........ RB Baa3/NR 08/01/05 6.000 1,547,425
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 1,057,180
5,000 New York City Transitional Finance
Authority, (Future Tax Secured,
Callable, Series A, due 11/15/12)..... RB Aa3/AA 05/15/09(a) 5.250 5,015,150
3,000 New York City Transitional Finance
Authority, (Future Tax Secured, Series
A).................................... RB Aa3/AA 08/15/07 5.500 3,140,880
2,600 New York City Transitional Finance
Authority, (Future Tax Secured, Series
A).................................... RB Aa3/AA 11/15/02 5.000 2,653,378
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
THE NEW YORK TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JULY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/
PRINCIPAL SECURITY S&P
AMOUNT TYPE RATING MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION (UNAUDITED) (UNAUDITED) DATE RATE VALUE
- -------------- ---------------------------------------- ---------------- ---------- ------------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
NEW YORK (CONTINUED)
$ 3,100 New York City Transitional Finance
Authority, (Future Tax Secured, Series
C).................................... RB Aa3/AA 05/01/05 5.000% $ 3,162,558
6,000 New York City, (Callable, Refunding,
Series A, due 08/01/03)............... GO A3/A- 08/01/02(a) 6.250 6,374,820
4,330 New York City, (Callable, Unrefunded
Balance, Series D, due 02/15/07)...... GO A3/A- 02/15/05(a) 5.750 4,542,646
670 New York City, (Prerefunded, Series D,
due 02/15/07)......................... GO A3/A- 02/15/05(a) 5.750 715,828
4,000 New York City, (Refunding, Series D).... GO A3/A- 11/01/09 6.500 4,457,360
1,000 New York City, (Refunding, Series G),
MBIA-IBC Insured...................... GO Aaa/AAA 02/01/09 6.750 1,132,950
7,992 New York Office of Temporary and
Disability Assistance, (General
Obligation)........................... PP NR/NR 03/31/05 4.480 8,019,898
2,280 New York State Dormitory Authority,
(Columbia University)................. RB Aaa/AAA 07/01/07 5.250 2,374,369
2,000 New York State Dormitory Authority,
(Cornell University, Callable,
Refunding, due 07/01/08).............. RB Aa2/AA 07/01/06(a) 5.300 2,079,500
2,885 New York State Dormitory Authority, (FHA
Hospital & Nursing Home, Refunding,
Series A), AMBAC Insured.............. RB NR/AAA 08/15/08 5.000 2,906,378
2,500 New York State Dormitory Authority, (FHA
Hospital New York & Presbyterian,
Callable, Refunding, due 08/01/13),
AMBAC/FHA Insured..................... RB Aaa/AAA 02/01/08(a) 4.400 2,405,700
2,000 New York State Dormitory Authority, (FHA
Hospital New York & Presbyterian,
Refunding), AMBAC Insured............. RB Aaa/AAA 02/01/04 5.000 2,039,380
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE NEW YORK TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JULY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/
PRINCIPAL SECURITY S&P
AMOUNT TYPE RATING MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION (UNAUDITED) (UNAUDITED) DATE RATE VALUE
- -------------- ---------------------------------------- ---------------- ---------- ------------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
NEW YORK (CONTINUED)
$ 2,000 New York State Dormitory Authority,
(Lease Revenue, Municipal Health
Facilities, Series 1), FSA Insured.... RB Aaa/AAA 01/15/07 5.000% $ 2,024,740
5,280 New York State Dormitory Authority,
(Long Island Jewish Medical Center,
Refunding), MBIA Insured.............. RB Aaa/AAA 07/01/05 5.000 5,386,814
2,000 New York State Dormitory Authority,
(Memorial Sloan Kettering Cancer
Center, Series C), MBIA Insured....... RB Aaa/AAA 07/01/19 5.750 2,089,640
5,650 New York State Dormitory Authority,
(Mental Health Services Facilities,
Refunding, Series B).................. RB A3/A- 02/15/06 6.000 6,045,217
2,000 New York State Dormitory Authority, (New
York University, Series A), MBIA
Insured............................... RB Aaa/AAA 07/01/06 5.000 2,040,740
2,000 New York State Dormitory Authority,
(North General Hospital, Refunding,
Series G)............................. RB Baa1/BBB+ 02/15/05 5.500 2,059,860
2,530 New York State Dormitory Authority,
(North Shore University Hospital,
Refunding), MBIA Insured.............. RB Aaa/AAA 11/01/10 5.500 2,627,784
3,000 New York State Dormitory Authority,
(State University Educational
Facilities, Refunding)................ RB A3/A- 05/15/01 5.250 3,051,750
1,500 New York State Dormitory Authority,
(State University Educational
Facilities, Refunding, Series A)...... RB A3/A- 05/15/04 6.500 1,625,745
3,000 New York State Dormitory Authority,
(State University Educational
Facilities, Refunding, Series A), FGIC
Insured............................... RB Aaa/AAA 05/15/11 5.875 3,210,990
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE NEW YORK TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JULY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/
PRINCIPAL SECURITY S&P
AMOUNT TYPE RATING MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION (UNAUDITED) (UNAUDITED) 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% $ 2,045,660
1,210 New York State Dormitory Authority,
(University of Rochester, Series A)... RB A1/A+ 07/01/06 6.500 1,340,910
4,000 New York State Environmental Facilities
Corp., (PCR, State Water, Revolving
Fund, Callable, Series A, due
06/15/01)............................. RB Aa1/AA 06/15/00(a) 7.300 4,185,920
5,000 New York State Environmental Facilities
Corp., (PCR, State Water, Revolving
Fund, New York City Municipal Water,
Refunding)............................ RB Aa1/AA- 06/15/11 5.750 5,284,600
2,000 New York State Environmental Facilities
Corp., (PCR, State Water, Revolving
Fund, Prerefunded, due 06/15/14)...... RB Aaa/AAA 06/15/01(a) 6.500 2,127,100
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 5,493,850
1,605 New York State Environmental Facilities
Corp., (State Clean Water & Drinking,
Revolving Funds, Second Resolution,
Series F)............................. RB Aa1/AA- 06/15/02 5.000 1,634,452
1,000 New York State Environmental Facilities
Corp., (State Clean Water & Drinking,
Revolving Funds, Second Resolution,
Series F)............................. RB Aa1/AA- 06/15/07 5.250 1,029,200
2,500 New York State Local Government
Assistance Corp., (Prerefunded, Series
A, due 04/01/11)...................... RB Aaa/A+ 04/01/01(a) 7.125 2,672,050
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE NEW YORK TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JULY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/
PRINCIPAL SECURITY S&P
AMOUNT TYPE RATING MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION (UNAUDITED) (UNAUDITED) DATE RATE VALUE
- -------------- ---------------------------------------- ---------------- ---------- ------------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
NEW YORK (CONTINUED)
$ 3,650 New York State Local Government
Assistance Corp., (Prerefunded, Series
A, due 04/01/19)...................... RB Aaa/A+ 04/01/02(a) 6.875% $ 3,965,031
2,525 New York State Local Government
Assistance Corp., (Refunding, Series
B), MBIA Insured...................... RB Aaa/AAA 04/01/04 5.250 2,614,435
3,350 New York State Local Government
Assistance Corp., (Refunding, Series
E).................................... RB A3/A+ 04/01/14 6.000 3,594,450
2,850 New York State Medical Care Facilities
Finance Agency, (Callable, Hospital &
Nursing Home Services, Series D, due
02/15/32)............................. RB Aa2/NR 02/15/03(a) 6.450 3,102,653
1,500 New York State Medical Care Facilities
Finance Agency, (Mental Health
Services, Refunding, Series F)........ RB A3/A- 02/15/03 6.000 1,574,670
2,620 New York State Municipal Bond Bank
Agency, (Special Program Revenue,
Refunding, Series A), AMBAC Insured... RB Aaa/AAA 03/15/06 5.000 2,671,273
2,000 New York State Power Authority, (Revenue
& General Purpose, Refunding, Escrowed
to Maturity, Series W)................ RB Aaa/AAA 01/01/03 6.625 2,149,140
4,500 New York State Power Authority, (Revenue
& General Purpose, Refunding, Series
A).................................... RB Aa3/AA- 02/15/03 5.000 4,585,860
3,350 New York State Power Authority, (Revenue
& General Purpose, Refunding, Series
A).................................... RB Aa3/AA- 02/15/05 5.500 3,498,171
3,050 New York State Thruway Authority,
(Highway & Bridge, Series B), AMBAC
Insured............................... RB Aaa/AAA 04/01/03 6.000 3,215,127
3,000 New York State Thruway Authority,
(Refunding, Series E)................. RB Aa3/AA- 01/01/07 5.500 3,142,890
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
23
<PAGE>
THE NEW YORK TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JULY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/
PRINCIPAL SECURITY S&P
AMOUNT TYPE RATING MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION (UNAUDITED) (UNAUDITED) DATE RATE VALUE
- -------------- ---------------------------------------- ---------------- ---------- ------------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
NEW YORK (CONTINUED)
$ 2,000 New York State Thruway Authority,
(Service Contract Revenue, Local
Highway & Bridge)..................... RB Baa1/BBB+ 04/01/05 6.000% $ 2,120,120
2,000 New York State Thruway Authority,
(Service Contract Revenue, Local
Highway & Bridge)..................... RB Baa1/BBB+ 04/01/04 5.500 2,067,840
2,470 New York State Urban Development Corp.,
(Center for Industrial Innovation,
Refunding)............................ RB Baa1/BBB+ 01/01/06 6.250 2,669,428
2,000 New York State Urban Development Corp.,
(Correctional Capital Facilities,
Series 6)............................. RB Baa1/BBB+ 01/01/03 6.000 2,094,360
3,500 New York State Urban Development Corp.,
(Correctional Facilities Service
Contract, Series B)................... RB Baa1/BBB+ 01/01/01 5.000 3,534,895
3,500 New York State Urban Development Corp.,
(Correctional Facilities Service
Contract, Series B), AMBAC Insured.... RB Aaa/AAA 01/01/09 5.250 3,584,280
2,500 New York State Urban Development Corp.,
(Prerefunded, due 04/01/11)........... RB Aaa/BBB+ 04/01/01(a) 7.500 2,686,925
2,635 New York State Urban Development Corp.,
(Subordinated Lien, Refunding)........ RB A2/A 01/01/06 6.000 2,816,235
5,250 New York State, (Refunding, Series A)... GO A2/A 07/15/06 6.500 5,830,703
3,100 New York State, (Refunding, Series B)... GO A2/A 08/15/05 6.250 3,379,806
1,350 New York State, (Refunding, Series C)... GO A2/A 10/01/04 6.000 1,446,930
2,415 New York State, (Refunding, Series F)... GO A2/A 09/15/03 5.000 2,474,989
1,395 Niagra Falls, (City School District,
High School Facility)................. RB Baa3/BBB- 06/15/06 5.625 1,434,311
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
24
<PAGE>
THE NEW YORK TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JULY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/
PRINCIPAL SECURITY S&P
AMOUNT TYPE RATING MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION (UNAUDITED) (UNAUDITED) DATE RATE VALUE
- -------------- ---------------------------------------- ---------------- ---------- ------------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
NEW YORK (CONTINUED)
$ 1,000 Orange County, (Refunding).............. GO Aa2/NR 11/15/04 5.500% $ 1,050,970
1,000 Orange County, (Refunding).............. GO Aa2/NR 11/15/05 5.500 1,053,980
7,730 Port Authority New York & New Jersey,
(Special Obligation Revenue, Special
Obligation), MBIA Insured............. RB Aaa/AAA 12/01/11 6.250 8,495,888
2,650 Suffolk County Water Authority,
(Waterworks Revenue, Refunding, Senior
Lien), MBIA Insured................... RB Aaa/AAA 06/01/07 5.100 2,710,023
1,500 Suffolk County Water Authority,
(Waterworks Revenue, Refunding, Senior
Lien), MBIA Insured................... RB Aaa/AAA 06/01/09 5.100 1,520,025
2,945 Triborough Bridge & Tunnel Authority,
(General Purpose, Refunding, Series
SR, due 01/01/07)..................... RB Aa3/A+ 01/01/00(a) 5.000 2,988,557
1,500 Triborough Bridge & Tunnel Authority,
(General Purpose, Refunding, Series
Y).................................... RB Aa3/A+ 01/01/07 5.900 1,605,690
3,960 Triborough Bridge & Tunnel Authority,
(Special Obligation, Refunding, Series
A), FGIC Insured...................... RB Aaa/AAA 01/01/07 5.500 4,143,546
2,000 Trust for Cultural Resources of the City
of New York, (Public Power Revenue,
Series 1999).......................... PP NR/NR 01/01/08 4.600 1,975,600
4,000 United Nations Development Corp.,
(Senior Lien, Prerefunded, Series A,
due 07/01/26)......................... RB Aaa/NR 07/01/03(a) 6.000 4,317,320
3,230 Yonkers, (Series C), AMBAC Insured...... GO Aaa/AAA 08/01/04 5.500 3,376,254
------------
TOTAL NEW YORK...................... 253,366,970
------------
PUERTO RICO (0.8%)
2,033 Commonwealth of Puerto Rico, (General
Obligation)........................... PP NR/NR 12/04/03 7.469 2,107,458
------------
TOTAL LONG-TERM INVESTMENTS (COST $264,087,421)............................................ 263,484,418
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
25
<PAGE>
THE NEW YORK TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JULY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/
PRINCIPAL SECURITY S&P
AMOUNT TYPE RATING MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION (UNAUDITED) (UNAUDITED) DATE RATE VALUE
- -------------- ---------------------------------------- ---------------- ---------- ------------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
SHORT-TERM INVESTMENTS (2.3%)
ALABAMA (0.0%)
$ 50 West Jefferson Industrial Development
Board, (PCR, Alabama Power Co.
Project, Refunding, due 06/01/28)..... VRDN VMIG1/A-1 08/02/99(a) 3.450% $ 50,000
------------
GEORGIA (0.3%)
300 Burke County Development Authority,
(PCR, Georgia Power Co., Vogtle
Project-1st Series, Callable, due
04/01/32)............................. VRDN VMIG1/A-1 08/02/99(a) 3.450 300,000
600 Monroe County Development Authority,
(PCR, Georgia Power Co., Scherer
Project-2nd Series, Refunding, due
07/01/25)............................. VRDN VMIG1/A-1 08/02/99(a) 3.450 600,000
------------
900,000
------------
LOUISIANA (0.1%)
300 East Baton Rouge Parish, (PCR, Exxon
Project, Refunding, due 11/01/19)..... VRDN P-1/A-1+ 08/02/99(a) 3.400 300,000
------------
MICHIGAN (0.3%)
950 Michigan State, (Strategic Fund Limited,
Reserve 1, due 09/01/30), LOC Barclays
Bank PLC.............................. VRDN P-1/A-1+ 08/02/99(a) 3.400 950,000
------------
NEW YORK (1.6%)
800 New York City Municipal Water Finance
Authority, (Water & Sewer Systems
Revenue, Callable, Refunding, Series
A, due 06/15/25), FGIC Insured........ VRDN VMIGI/A-1+ 08/02/99(a) 3.500 800,000
400 New York City Municipal Water Finance
Authority, (Water & Sewer Systems
Revenue, Callable, Series C, due
06/15/22), FGIC Insured............... VRDN VMIG1/A-1+ 08/02/99(a) 3.400 400,000
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
26
<PAGE>
THE NEW YORK TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JULY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/
PRINCIPAL SECURITY S&P
AMOUNT TYPE RATING MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION (UNAUDITED) (UNAUDITED) DATE RATE VALUE
- -------------- ---------------------------------------- ---------------- ---------- ------------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
NEW YORK (CONTINUED)
$ 3,200 New York City Municipal Water Finance
Authority, (Water and Sewer Systems
Revenue, Callable, Series C, due
06/15/23), FGIC Insured............... VRDN VMIG1/A-1+ 08/02/99(a) 3.400% $ 3,200,000
------------
4,400,000
------------
TOTAL SHORT-TERM INVESTMENTS (COST $6,600,000)............................................. 6,600,000
------------
TOTAL INVESTMENTS (COST $270,687,421) (97.5%).................................................. 270,084,418
OTHER ASSETS IN EXCESS OF LIABILITIES (2.5%)................................................... 6,913,600
------------
NET ASSETS (100.0%)............................................................................ $276,998,018
------------
------------
</TABLE>
- ------------------------------
Note: Based on the cost of investments of $270,706,542 for federal income tax
purposes at July 31, 1999, the aggregate gross unrealized appreciation and
depreciation was $2,612,375 and $3,234,499, respectively, resulting in net
unrealized depreciation of investments of $622,124.
(a) The date listed under the heading maturity date represents an optional
tender date or the next interest rate reset date. The final maturity date is
indicated in the security description.
AMBAC - Ambac Indemnity Corp.
FGIC - Financial Guaranty Insurance Company
FHA - Federal Housing Authority
FSA - Financial Securities Assurance
GO - General Obligation
IBC - IBC Financial Data, Inc.
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.
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
JULY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $270,687,421 ) $270,084,418
Cash 72,492
Interest Receivable 3,643,242
Receivable for Investments Sold 3,345,551
Prepaid Trustees' Fees 433
Prepaid Expenses and Other Assets 1,213
------------
Total Assets 277,147,349
------------
LIABILITIES
Advisory Fee Payable 69,727
Custody Fee Payable 14,279
Administrative Services Fee Payable 9,284
Administration Fee Payable 334
Fund Services Fee Payable 62
Accrued Expenses 55,645
------------
Total Liabilities 149,331
------------
NET ASSETS
Applicable to Investors' Beneficial Interests $276,998,018
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
28
<PAGE>
THE NEW YORK TAX EXEMPT BOND PORTFOLIO
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FOUR
MONTHS ENDED FOR THE FISCAL
JULY 31, YEAR ENDED
1999 MARCH 31, 1999
------------ --------------
<S> <C> <C>
INVESTMENT INCOME
Interest Income $ 4,479,189 $ 12,318,506
------------ --------------
EXPENSES
Advisory Fee 298,444 796,521
Professional Fees and Expenses 41,583 44,238
Custodian Fees and Expenses 26,097 85,723
Administrative Services Fee 25,575 73,366
Fund Services Fee 2,300 6,630
Trustees' Fees and Expenses 1,114 3,306
Administration Fee 880 3,052
Amortization of Organization Expenses 19 2,304
Miscellaneous 4,088 5,476
------------ --------------
Total Expenses 400,100 1,020,616
------------ --------------
NET INVESTMENT INCOME 4,079,089 11,297,890
NET REALIZED GAIN (LOSS) ON INVESTMENTS (774,564) 2,712,515
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) OF INVESTMENTS (7,106,907) 142,962
------------ --------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $(3,802,382) $ 14,153,367
------------ --------------
------------ --------------
</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 FOUR
MONTHS ENDED FOR THE FISCAL FOR THE FISCAL
JULY 31, YEAR ENDED YEAR ENDED
1999 MARCH 31, 1999 MARCH 31, 1998
------------ -------------- --------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 4,079,089 $ 11,297,890 $ 7,914,129
Net Realized Gain (Loss) on Investments (774,564) 2,712,515 1,111,960
Net Change in Unrealized Appreciation
(Depreciation) of Investments (7,106,907) 142,962 4,862,341
------------ -------------- --------------
Net Increase (Decrease) in Net Assets
Resulting from Operations (3,802,382) 14,153,367 13,888,430
------------ -------------- --------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 30,864,819 162,950,459 87,771,218
Withdrawals (70,994,351) (53,185,304) (52,571,222)
------------ -------------- --------------
Net Increase (Decrease) from Investors'
Transactions (40,129,532) 109,765,155 35,199,996
------------ -------------- --------------
Total Increase (Decrease) in Net Assets (43,931,914) 123,918,522 49,088,426
NET ASSETS
Beginning of Period 320,929,932 197,011,410 147,922,984
------------ -------------- --------------
End of Period $276,998,018 $ 320,929,932 $ 197,011,410
------------ -------------- --------------
------------ -------------- --------------
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE FOUR FOR THE FISCAL YEAR ENDED APRIL 11, 1994
MONTHS ENDED MARCH 31, (COMMENCEMENT OF
JULY 31, ------------------------- OPERATIONS) THROUGH
1999 1999 1998 1997 1996 MARCH 31, 1995
------------ ---- ---- ---- ---- -------------------
<S> <C> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Net Expenses 0.40%(a) 0.38% 0.40% 0.43% 0.44% 0.48%(a)
Net Investment Income 4.10%(a) 4.26% 4.62% 4.75% 4.72% 4.59%(a)
Expenses without Reimbursement 0.40%(a) 0.38% 0.40% 0.43% 0.44% 0.51%(a)
Portfolio Turnover 8%(b) 44% 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
JULY 31, 1999
- --------------------------------------------------------------------------------
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. The portfolio's investment objective is to provide
a high level of tax exempt income 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. At a meeting on November 12, 1998, the
trustees elected to change the portfolio's fiscal year end from March 31 to July
31.
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 portfolio values securities that are listed on an exchange using
prices supplied daily by an independent pricing service that are based on
the last traded price on a national securities exchange or, in the absence
of recorded trades, at the readily available mean of the bid and asked
prices on such exchange, if such exchange or market constitutes the
broadest and most representative market for the security. Independent
pricing service procedures may also include the use of prices based upon
yields or prices of securities of comparable quality, coupon, maturity and
type; indications as to values from dealers, operating data, and general
market conditions. Unlisted securities are valued at the average of the
quoted bid and asked prices in the over-the-counter market provided by a
principal market maker or dealer. If prices are not supplied by the
portfolio's independent pricing service or principal market maker or
dealer such securities are priced using fair values in accordance with
procedures adopted by the portfolio's trustees. All short-term securities
with a remaining maturity of 60 days or less are valued using 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.
31
<PAGE>
THE NEW YORK TAX EXEMPT BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JULY 31, 1999
- --------------------------------------------------------------------------------
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"), a
wholly owned subsidiary of J.P. Morgan & Co. Incorporated ("J.P. 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 is J.P. Morgan
Investment Management Inc. ("JPMIM"), an affiliate of Morgan and a wholly
owned subsidiary of J.P. Morgan, and the terms of the agreement remain the
same. For the four months ended July 31, 1999 and for the fiscal year
ended March 31, 1999, such fees amounted to $298,444 and $796,521,
respectively.
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 four months ended July 31, 1999 and for the
fiscal year ended March 31, 1999, the fees for these services amounted to
$880 and $3,052, respectively.
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 Morgan provides similar services, and J.P.
Morgan Series Trust. For the four months ended July 31, 1999 and for the
fiscal year ended March 31, 1999, the fees for these services amounted to
$25,575 and $73,366, respectively.
d) The portfolio has a Fund Services Agreement with Pierpont Group, Inc.
("Group") to assist the trustees in exercising their overall supervisory
responsibilities for the portfolio's affairs. The trustees of the
portfolio represent all the existing shareholders of Group. The
portfolio's allocated portion of Group's costs in performing its services
amounted to $2,300 and $6,630 for the four months ended July 31, 1999 and
for the fiscal year ended March 31, 1999, respectively.
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 (CONTINUED)
JULY 31, 1999
- --------------------------------------------------------------------------------
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 $400 and $1,400 for the four months ended July
31, 1999 and for the fiscal year ended March 31, 1999, respectively.
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) were as follows:
<TABLE>
<CAPTION>
FOR THE FOUR
MONTHS ENDED FOR THE FISCAL
JULY 31, YEAR ENDED
1999 MARCH 31, 1999
------------ --------------
<S> <C> <C>
Cost of Purchases................................ $ 21,698,896 $ 230,648,580
Proceeds from Sales.............................. $ 60,575,478 $ 113,320,935
</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>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Investors of
The New York Tax Exempt 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 Tax Exempt Bond Portfolio (the
"portfolio") at July 31, 1999, the results of its operations for the four months
ended July 31, 1999 and for the year ended March 31, 1999, and the changes in
its net assets for the four months ended July 31, 1999 and for the two years
ended March 31, 1999 and supplementary data for the four months ended July 31,
1999 and for the four years ended March 31, 1999 and for the period April 11,
1994 (commencement of operations) through 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 July 31, 1999 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
September 15, 1999
34
<PAGE>
J.P. MORGAN FUNDS
FEDERAL MONEY MARKET FUND
PRIME MONEY MARKET FUND
TAX EXEMPT MONEY MARKET FUND
TAX AWARE ENHANCED INCOME FUND: SELECT SHARES
SHORT TERM BOND FUND
BOND FUND
EMERGING MARKETS DEBT FUND
GLOBAL STRATEGIC INCOME FUND
TAX EXEMPT BOND FUND
CALIFORNIA BOND FUND: SELECT SHARES
NEW YORK 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
GLOBAL 50 FUND: SELECT SHARES
INTERNATIONAL EQUITY FUND
INTERNATIONAL OPPORTUNITIES FUND
FOR MORE INFORMATION ON THE J.P. MORGAN FUNDS
CALL J.P. MORGAN FUNDS SERVICES AT
(800) 521-5411.
IM0579-M
J.P. MORGAN
NEW YORK TAX EXEMPT BOND FUND
ANNUAL REPORT
JULY 31, 1999
