<PAGE>
LETTER TO THE SHAREHOLDERS OF THE J.P. MORGAN NEW YORK TAX EXEMPT BOND FUND
March 1, 2000
Dear Shareholder:
As interest rates rose, the J.P. Morgan New York Tax Exempt Bond Fund declined
0.33% over the six months ended January 31, 2000, although it did outperform its
competition, which fell 1.16% over the same period, as measured by the Lipper
New York Intermediate Municipal Debt Funds Average but underperformed its
benchmark, the Lehman Brothers 1-16 year Municipal Bond Index, which returned
- -0.17%. Higher interest rates also mean that the fund's 30-day SEC yield
increased to 4.60% as of January 31, which is a tax equivalent yield of 7.62% at
a 39.6% federal income tax rate.
The fund's net asset value as of January 31, 2000 was $10.11, down from $10.35
on July 31, 1999, after payment of dividends of approximately $0.21 per share
during the six-month period. During the period, the fund's net assets declined
from approximately $115.7 million to $114.0 million. In addition, the
portfolio's net assets declined from approximately $277.0 million to $260.4
million.
The report that follows includes an interview with Benjamin S. Thompson and
Robert Meiselas, who manage 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. Shappert
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
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
-------------------------------------------------------------------------------
1
<PAGE>
FUND PERFORMANCE
EXAMINING PERFORMANCE
One way to look at performance is to review a fund's average annual total
return. This figure takes the fund's actual (or cumulative) return and shows
what would have happened if the fund had achieved that return by performing at a
constant rate each year. Average annual total returns represent the average
yearly change of a fund's value over various time periods, typically one, five,
or ten years (or since inception). Total returns for periods of less than one
year are not annualized and provide a picture of how a fund has performed over
the short term.
<TABLE>
<CAPTION>
PERFORMANCE TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS
----------------------- ------------------------------------------------------------
THREE SIX ONE THREE FIVE SINCE
AS OF JANUARY 31, 2000 MONTHS MONTHS YEAR YEARS YEARS INCEPTION*
- ------------------------------------------------------------------ ------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
J.P. Morgan New York
Tax Exempt Bond Fund 0.05% -0.33% -2.48% 3.78% 5.26% 5.03%
Lehman Brothers 1-16 year
Municipal Bond Index** 0.29% -0.17% -1.48% 4.54% 6.33% 5.83%
Lipper New York Intermediate
Municipal Debt Funds Average 0.00% -1.16% -3.15% 3.52% 4.92% 4.53%
AS OF DECEMBER 31, 1999
- ------------------------------------------------------------------ ------------------------------------------------------------
J.P. Morgan New York
Tax Exempt Bond Fund -0.16% 0.43% -0.84% 3.93% 5.69% 5.06%
Lehman Brothers 1-16 year
Municipal Bond Index** -0.04% 0.54% -0.06% 4.72% 6.69% 5.95%
Lipper New York Intermediate
Municipal Debt Funds Average -0.43% -0.28% -1.59% 3.73% 5.36% 4.68%
</TABLE>
* THE FUND COMMENCED OPERATIONS ON APRIL 11, 1994, AND HAS PROVIDED A TOTAL
RETURN OF 4.91% FROM THAT DATE THROUGH JANUARY 31, 2000. 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
Benjamin S. Thompson and Robert Meiselas are both members of the portfolio
management team responsible for managing the master portfolio in which the fund
invests. They sat down on February 22, 2000 to discuss the fund's performance
over the six months ended January 31, 2000. Below are highlights of that
discussion, which represent the views of both Ben and Bob as of that date.
[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 spending 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 holds a B.S. in accounting from St. John's
University and a M.S. in taxation from Long Island University.
THE LAST SIX MONTHS HAVE BEEN DIFFICULT FOR BOND INVESTORS. WHAT HAPPENED?
Municipal bond yields rose dramatically along with interest rates in general in
the United States during the six months ended January 31. For example, 30-year
municipal yields (AAA general obligation debt) rose by 62 basis points during
the reporting period. Yields in the 10-year sector, where this fund is focused,
rose by a somewhat smaller margin, 48 basis points. So fortunately, the 10-year
sector was less volatile and outperformed longer-term holdings, although returns
were still negative.
DESPITE THIS TURBULENCE, THE FUND DID PERFORM BETTER THAN ITS PEERS. HOW DID YOU
DO IT?
J.P. Morgan Investment Management's overall defensive posture benefited
shareholders. We held the portfolio's duration shorter than that of most funds
within the Lipper Intermediate Municipal Debt peer group, and that helped
performance. Morgan's core fixed income strategy (primarily focusing on
investments in the short and intermediate parts of the yield curve) also
contributed to greater price insulation in a bearish environment.
3
<PAGE>
IN WHAT WAY?
Our conservative yield curve strategy focused primarily on short and
intermediate maturities (between 3 and 15 years as opposed to 20+ years). For
example, over the six months ended January 31, 5- and 10-year municipal
yields rose approximately 60 and 48 basis points, respectively, as compared
to 78 and 62 bps for 20- and 30-year maturities. Therefore, fund investors
clearly benefited from underexposure to the longer maturities where
significant price volatility and depreciation occurred.
DID COUPON STRATEGY HELP?
The fund's return was also enhanced by a conservative coupon strategy focusing
largely on higher coupon premium bonds rather than bonds priced at or near the
coupon or at a significant discount. These premium coupons insulated the fund's
price as interest rates rose rapidly.
ANYTHING ELSE?
Other factors that helped performance include opportunistic relative value
trading, credit-specific analysis and taking advantage of various state-specific
supply/demand imbalances.
WHAT ARE THE CURRENT CONDITIONS IN THE NEW YORK MUNICIPAL BOND MARKET? HOW DO
THEY DIFFER FROM THE NATIONAL MARKET?
The New York tax exempt market is quite similar to that of the national market
as a whole. In general, the New York market suffers from a significant supply
and demand imbalance. Essentially, the current supply of New York municipal debt
is inadequate to satisfy strong investor demand. As a result, quality spreads
generally are tighter than they have been when New York bonds have been more
readily available.
WHAT IS YOUR MARKET OUTLOOK?
After having been bearish for the past year or so, we are now beginning to adopt
a less negative outlook on interest rates. We also feel that the bond market
currently has priced in at least one more tightening by the Federal Reserve in
March and perhaps one more soon after that. In the municipal bond market, a
decrease in new issue supply could provide price stability and boost relative
asset class performance. At substantially higher rates we feel that many issuers
would be reluctant to take on additional debt and most potential refunding
candidates would be out-of-the-money. The dramatic treasury yield curve
inversion also should have a flattening "pull" on the municipal market over the
next several months. Credit quality spreads are relatively tight within the
investment grade sector but remain quite wide in higher-yielding sectors that
still carry a significant degree of event risk such as health care.
HOW IS THE FUND POSITIONED?
We intend to incorporate more of a barbell position on the yield curve to take
advantage of the flattening that we anticipate. We intend to upgrade credit
quality within the investment grade sector while continuing to perform rigorous
credit research on isolated situations in the more esoteric and seemingly better
yielding sectors such as health care and private placements.
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 1/31/00
$114,044,939
- --------------------------------------------------------------------------------
PORTFOLIO NET ASSETS AS OF 1/31/00
$260,357,516
- --------------------------------------------------------------------------------
DIVIDEND PAYABLE DATES
Monthly
- --------------------------------------------------------------------------------
CAPITAL GAIN PAYABLE DATE (IF APPLICABLE)
12/13/00
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 JANUARY 31, 2000
PORTFOLIO ALLOCATION
(PERCENTAGE OF TOTAL INVESTMENTS)
[CHART]
REVENUE BONDS 70.6%
PRIVATE PLACEMENTS 12.6%
GENERAL OBLIGATIONS 12.1%
SHORT-TERM & OTHER 4.7%
30-DAY SEC YIELD
4.60%*
DURATION
5.47 years
QUALITY PROFILE
AAA-A 78.8%
Other 21.2%
*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 (UNAUDITED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment in The New York Tax Exempt Bond
Portfolio ("Portfolio"), at value $112,325,554
Receivable for Shares of Beneficial Interest Sold 1,900,000
Receivable for Expense Reimbursements 2,408
Prepaid Trustees' Fees 327
Prepaid Expenses and Other Assets 420
------------
Total Assets 114,228,709
------------
LIABILITIES
Dividends Payable to Shareholders 76,528
Payable for Shares of Beneficial Interest
Redeemed 50,000
Shareholder Servicing Fee Payable 24,046
Administrative Services Fee Payable 2,377
Administration Fee Payable 113
Fund Services Fee Payable 39
Accrued Expenses 30,667
------------
Total Liabilities 183,770
------------
NET ASSETS
Applicable to 11,283,040 Shares of Beneficial
Interest Outstanding
(par value $0.001, unlimited shares authorized) $114,044,939
============
Net Asset Value, Offering and Redemption Price
Per Share $10.11
-----
-----
ANALYSIS OF NET ASSETS
Paid-in Capital $117,165,199
Undistributed Net Investment Income 21,047
Accumulated Net Realized Loss on Investment (1,631,408)
Net Unrealized Depreciation of Investment (1,509,899)
------------
Net Assets $114,044,939
============
</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 (UNAUDITED)
FOR THE SIX MONTHS ENDED JANUARY 31, 2000
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME ALLOCATED FROM PORTFOLIO
Allocated Interest Income $ 2,763,603
Allocated Portfolio Expenses (221,506)
-----------
Net Investment Income Allocated from
Portfolio 2,542,097
FUND EXPENSES
Shareholder Servicing Fee $146,562
Administrative Services Fee 14,730
Transfer Agent Fees 13,876
Professional Fees 6,182
Registration Fees 4,022
Fund Services Fee 989
Administration Fee 787
Trustees' Fees and Expenses 490
Miscellaneous 9,625
--------
Total Fund Expenses 197,263
Less: Reimbursement of Expenses (8,284)
--------
NET FUND EXPENSES 188,979
-----------
NET INVESTMENT INCOME 2,353,118
NET REALIZED LOSS ON INVESTMENT ALLOCATED FROM
PORTFOLIO (1,453,664)
NET CHANGE IN UNREALIZED DEPRECIATION OF
INVESTMENT ALLOCATED FROM PORTFOLIO (1,323,177)
-----------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS $ (423,723)
===========
</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 SIX
MONTHS ENDED FOR THE FOUR
JANUARY 31, 2000 MONTHS ENDED
(UNAUDITED) JULY 31, 1999
---------------- -------------
<S> <C> <C>
DECREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 2,353,118 $ 1,464,503
Net Realized Loss on Investment Allocated from
Portfolio (1,453,664) (170,050)
Net Change in Unrealized Depreciation of
Investment Allocated from Portfolio (1,323,177) (2,846,951)
--------------- ------------
Net Decrease in Net Assets Resulting from
Operations (423,723) (1,552,498)
--------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (2,353,118) (1,464,503)
Net Realized Gain -- (277,867)
--------------- ------------
Total Distributions to Shareholders (2,353,118) (1,742,370)
--------------- ------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Proceeds from Shares of Beneficial Interest Sold 18,069,710 13,194,347
Reinvestment of Dividends and Distributions 1,915,764 1,435,861
Cost of Shares of Beneficial Interest Redeemed (18,854,094) (14,796,491)
--------------- ------------
Net Increase (Decrease) from Transactions in
Shares of Beneficial Interest 1,131,380 (166,283)
--------------- ------------
Total Decrease in Net Assets (1,645,461) (3,461,151)
NET ASSETS
Beginning of Period 115,690,400 119,151,551
--------------- ------------
End of Period (including undistributed net
investment income of $21,047 and $21,047,
respectively) $ 114,044,939 $115,690,400
=============== ============
</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
SIX MONTHS ENDED FOR THE FOUR FOR THE FISCAL YEAR ENDED MARCH 31,
JANUARY 31, 200 MONTHS ENDED --------------------------------------
(UNAUDITED) JULY 31, 1999 1999 1998 1997 1996
---------------- ---------------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.35 $ 10.66 $ 10.62 $ 10.28 $ 10.34 $ 10.11
-------- -------- -------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.21 0.13 0.42 0.46 0.46 0.46
Net Realized and Unrealized Gain (Loss) on
Investments (0.24) (0.28) 0.14 0.40 (0.03) 0.26
-------- -------- -------- ------- ------- -------
Total from Investment Operations (0.03) (0.15) 0.56 0.86 0.43 0.72
-------- -------- -------- ------- ------- -------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (0.21) (0.13) (0.42) (0.46) (0.46) (0.46)
Net Realized Gain -- (0.03) (0.10) (0.06) (0.03) (0.03)
-------- -------- -------- ------- ------- -------
Total Distributions to Shareholders (0.21) (0.16) (0.52) (0.52) (0.49) (0.49)
-------- -------- -------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 10.11 $ 10.35 $ 10.66 $ 10.62 $ 10.28 $ 10.34
======== ======== ======== ======= ======= =======
RATIOS AND SUPPLEMENTAL DATA
Total Return (0.33)%(a) (1.41)%(a) 5.39% 8.49% 4.19% 7.16%
Net Assets, End of Period (in thousands) $114,045 $115,690 $119,152 $85,161 $56,198 $50,523
Ratios to Average Net Assets
Net Expenses 0.70%(b) 0.70%(b) 0.70% 0.71% 0.75% 0.75%
Net Investment Income 4.00%(b) 3.82%(b) 3.95% 4.33% 4.44% 4.43%
Expenses without Reimbursement 0.71%(b) 0.78%(b) 0.74% 0.77% 0.81% 0.79%
</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 (UNAUDITED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
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 (43% at January
31, 2000). 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) 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.
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.
12
<PAGE>
J.P. MORGAN NEW YORK TAX EXEMPT BOND FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
2. TRANSACTIONS WITH AFFILIATES
a) The trust, on behalf of the fund, has retained Funds Distributor, Inc.
("FDI"), a registered broker-dealer, to serve as co-administrator and
distributor for the fund. Under a Co-Administration Agreement between FDI
and the the trust on behalf of the fund, FDI provides administrative
services necessary for the operations of the fund, furnishes office space
and facilities required for conducting the business of the fund and pays
the compensation of the fund's officers affiliated with FDI. The fund has
agreed to pay FDI fees equal to its allocable share of an annual
complex-wide charge of $425,000 plus FDI's out-of-pocket expenses. The
amount allocable to the fund is based on the ratio of the fund's net
assets to the aggregate net assets of the trust and certain other
investment companies subject to similar agreements with FDI. For the six
months ended January 31, 2000, the fee for these services amounted to
$787.
b) The trust, on behalf of the fund, has an Administrative Services Agreement
(the "Services Agreement") with Morgan Guaranty Trust Company of New York
("Morgan"), under which Morgan is responsible for certain aspects of the
administration and operation of the fund. Under the Services Agreement,
the fund has agreed to pay Morgan a fee equal to its allocable share of an
annual complex-wide charge. This charge is calculated based on the
aggregate average daily net assets of the portfolio and the other
portfolios in which the trust and the J.P. Morgan Institutional Funds
invest (the "master portfolios") and J.P. Morgan Series Trust in
accordance with the following annual schedule: 0.09% on the first $7
billion of their aggregate average daily net assets and 0.04% of their
aggregate average daily net assets in excess of $7 billion less the
complex-wide fees payable to FDI. The portion of this charge payable by
the fund is determined by the proportionate share that its net assets bear
to the net assets of the trust, the master portfolios, other investors in
the master portfolios for which Morgan provides similar services, and J.P.
Morgan Series Trust. For the six months ended January 31, 2000, the fee
for these services amounted to $14,730.
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% 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 Morgan. For the six months ended January 31, 2000,
Morgan has agreed to reimburse the fund $8,284 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 0.25% of the average daily net assets of
the fund. For the six months ended January 31, 2000, the fee for these
services amounted to $146,562.
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
13
<PAGE>
J.P. MORGAN NEW YORK TAX EXEMPT BOND FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
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
$989 for the six months ended January 31, 2000.
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.
3. TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the trustees to issue an unlimited number of
full and fractional shares of beneficial interest of one or more series.
Transactions in shares of beneficial interest of the fund were as follows:
<TABLE>
<CAPTION>
FOR THE SIX FOR THE FOUR
MONTHS ENDED MONTHS ENDED
JANUARY 31, 2000 JULY 31, 1999
---------------- -------------
<S> <C> <C>
Shares sold...................................... 1,767,408 1,260,215
Reinvestment of dividends and distributions...... 187,341 137,469
Shares redeemed.................................. (1,846,772) (1,403,433)
--------------- -----------
Net Increase (Decrease).......................... 107,977 (5,749)
=============== ===========
</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. 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 to the
Agreement at January 31, 2000.
14
<PAGE>
The New York Tax Exempt Bond Portfolio
Semiannual Report January 31, 2000
(unaudited)
(The following pages should be read in conjunction
with J.P. Morgan New York Tax Exempt Bond Fund
Semiannual Financial Statements)
15
<PAGE>
THE NEW YORK TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/
AMOUNT SECURITY S&P MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE RATING DATE RATE VALUE
- -------------- ---------------------------------------- -------- --------- ----------- ----- ------------
<C> <S> <C> <C> <C> <C> <C>
LONG-TERM INVESTMENTS (97.1%)
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% $ 808,460
------------
ILLINOIS (1.1%)
3,000 Illinois Development Finance Authority.. PP NR/NR 08/01/28 4.900 2,954,430
------------
MICHIGAN (1.1%)
2,334 City of Detroit Public School........... PP NR/NR 10/15/01 5.485 2,345,631
365 City of Detroit Public School, (Public
Power Revenue)........................ PP NR/NR 10/15/00 4.550 368,713
------------
TOTAL MICHIGAN...................... 2,714,344
------------
NEW YORK (91.9%)
4,200 City University of New York, (John Jay
College, Refunding), MBIA Insured..... RB Aaa/AAA 08/15/05 5.750 4,330,956
4,000 Erie County Water Authority, (Water
Revenue, Refunding, Escrowed to
Maturity, Series A), AMBAC Insured.... RB Aaa/AAA 12/01/04 5.000 4,020,280
5,710 Long Island Power Authority, (Electric
Systems Revenue), FSA Insured......... RB Aaa/AAA 04/01/04 4.000 5,383,731
5,000 Long Island Power Authority, (Electric
Systems Revenue, Series A), AMBAC
Insured............................... RB Aaa/AAA 12/01/08 5.500 5,063,150
3,500 Long Island Power Authority, (New York
Electric Systems, Refunding, Series
A), AMBAC Insured..................... RB Aaa/AAA 12/01/11 5.500 3,492,335
4,000 Metropolitan Transportation Authority,
(Commuter Facilities, Refunding,
Series D), MBIA Insured............... RB Aaa/AAA 07/01/06 6.000 4,196,240
5,500 Metropolitan Transportation Authority,
(Dedicated Tax Fund, Series A), MBIA
Insured............................... RB Aaa/AAA 04/01/11 6.250 5,828,570
3,840 Metropolitan Transportation Authority,
(Service Contract, Transportation
Facilities, Series O), MBIA-IBC
Insured............................... RB Aaa/AAA 07/01/08 5.750 3,948,403
1,065 Monroe County, (Public Improvement,
Escrowed to Maturity, Series 1995),
AMBAC Insured......................... GO Aaa/AAA 06/01/08 5.875 1,113,000
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
16
<PAGE>
THE NEW YORK TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/
AMOUNT SECURITY S&P MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE RATING DATE RATE VALUE
- -------------- ---------------------------------------- -------- --------- ----------- ----- ------------
<C> <S> <C> <C> <C> <C> <C>
NEW YORK (CONTINUED)
$ 65 Monroe County, (Public Improvement,
Unrefunded Balance, Series 1995),
AMBAC Insured......................... GO Aaa/AAA 06/01/08 5.875% $ 67,930
5,000 Municipal Assistance Corp. for the City
of New York, (Series H)............... RB Aa2/AA 07/01/06 6.250 5,296,150
5,000 Municipal Assistance Corp. for the City
of New York (Series H)................ RB Aa2/AA 07/01/05 6.000 5,220,750
2,150 Municipal Assistance Corp. for the City
of New York, (Refunding, Series G).... RB Aa2/AA 07/01/05 6.000 2,244,922
1,460 New York City Industrial Development
Agency, (Civil Facilities Revenue,
YMCA Greater New York Project)........ RB Baa3/NR 08/01/05 6.000 1,473,330
1,000 New York City Industrial Development
Agency, (IDR, Brooklyn Navy Yard,
Cogen Partners, Refunding)............ RB Baa3/BBB- 10/01/22 6.200 929,790
5,000 New York City Municipal Water Finance
Authority, (Water & Sewer Systems
Revenue, Prerefunded, Series B due
06/15/20)............................. RB Aaa/AAA 06/15/06(a) 6.250 5,356,450
4,000 New York City Transitional Finance
Authority, (Future Tax Secured, Series
B).................................... RB Aa3/AA 11/15/14 6.125 4,118,320
4,500 New York City, (Health & Hospital Corp.
Revenue, Prerefunded, Series A, due
02/15/20)............................. RB Aaa/AAA 02/15/03(a) 6.300 4,766,265
695 New York City, (Prerefunded, Series D,
due 02/15/07)......................... GO A3/A- 02/15/05(a) 5.750 723,036
1,000 New York City, (Refunding, Series G),
MBIA-IBC Insured...................... GO Aaa/AAA 02/01/09 6.750 1,090,210
4,000 New York City, (Series I), MBIA
Insured............................... GO Aaa/AAA 04/15/07 6.250 4,229,440
4,305 New York City, (Unrefunded Balance,
Series D)............................. GO A3/A- 02/15/07 5.750 4,394,286
10,000 New York Convention Center Operating
Corp., (Yale Building Acquisition
Project).............................. PP NR/NR 12/01/04 6.500 9,885,200
7,033 New York Office of Temporary and
Disability Assistance................. PP NR/NR 07/01/04 5.210 7,038,512
6,059 New York Office of Temporary and
Disability Assistance, (General
Obligation)........................... PP NR/NR 03/31/05 4.480 6,050,483
4,375 New York State.......................... GO A2/A+ 03/01/07 6.000 4,545,494
4,485 New York State Dormitory Authority,
(City University, Prerefunded, due
07/01/19), MBIA Insured............... RB Aaa/AAA 07/01/04(a) 6.250 4,729,612
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
17
<PAGE>
THE NEW YORK TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/
AMOUNT SECURITY S&P MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE RATING DATE RATE VALUE
- -------------- ---------------------------------------- -------- --------- ----------- ----- ------------
<C> <S> <C> <C> <C> <C> <C>
NEW YORK (CONTINUED)
$ 2,280 New York State Dormitory Authority,
(Columbia University)................. RB Aaa/AAA 07/01/07 5.250% $ 2,304,943
3,745 New York State Dormitory Authority,
(Concord Nursing Home)................ RB A1/NR 07/01/16 6.250 3,732,454
2,000 New York State Dormitory Authority,
(Cornell University).................. RB Aa2/AA 07/01/08 5.300 2,014,960
2,500 New York State Dormitory Authority, (FHA
Hospital New York & Presbyterian,
Refunding), AMBAC-FHA Insured......... RB Aaa/AAA 08/01/13 4.400 2,462,000
280 New York State Dormitory Authority,
(Long Island Jewish Medical Center,
Refunding), MBIA Insured.............. RB Aaa/AAA 07/01/05 5.000 279,244
2,000 New York State Dormitory Authority,
(Memorial Sloan Kettering Cancer,
Series C), MBIA Insured............... RB Aaa/AAA 07/01/19 5.750 1,938,260
5,650 New York State Dormitory Authority,
(Mental Health Services Facilities,
Refunding, Series B).................. RB A3/A- 02/15/06 6.000 5,853,626
2,000 New York State Dormitory Authority, (New
York University, Series A), MBIA
Insured............................... RB Aaa/AAA 07/01/06 5.000 1,989,820
2,530 New York State Dormitory Authority,
(North Shore University Hospital,
Refunding), MBIA Insured.............. RB Aaa/AAA 11/01/10 5.500 2,540,879
3,450 New York State Dormitory Authority,
(Pratt Institute)..................... RB NR/AA 07/01/14 6.250 3,521,691
2,000 New York State Dormitory Authority,
(Secondary Hospital, North General
Hospital, Refunding, Series G)........ RB Baa1/BBB+ 02/15/05 5.500 1,985,320
1,500 New York State Dormitory Authority,
(State University Educational
Facilities, Refunding, Series A)...... RB A3/A- 05/15/04 6.500 1,579,635
3,000 New York State Dormitory Authority,
(State University Educational
Facilities, Refunding, Series A), FGIC
Insured............................... RB Aaa/AAA 05/15/11 5.875 3,102,360
1,210 New York State Dormitory Authority,
(University of Rochester, Series A)... RB A1/A+ 07/01/06 6.500 1,300,750
10,000 New York State Environmental Facilities
Corp., (PCR, State Water, Revolving
Fund, New York City Municipal
Water)................................ RB Aa1/AA- 06/15/10 5.750 10,261,800
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
18
<PAGE>
THE NEW YORK TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/
AMOUNT SECURITY S&P MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE RATING DATE RATE VALUE
- -------------- ---------------------------------------- -------- --------- ----------- ----- ------------
<C> <S> <C> <C> <C> <C> <C>
NEW YORK (CONTINUED)
$ 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% $ 5,098,000
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 1,002,930
8,350 New York State Local Government
Assistance Corp., (Refunding, Series
E).................................... RB A3/A+ 04/01/14 6.000 8,583,633
2,000 New York State Power Authority, (Revenue
& General Purpose, Refunding, Escrowed
to Maturity, Series W)................ RB Aaa/AAA 01/01/03 6.625 2,100,720
5,105 New York State Thruway Authority,
(Highway & Bridge, Series C), FGIC
Insured............................... RB Aaa/AAA 04/01/08 5.500 5,185,455
4,950 New York State Thruway Authority,
(Service Contract Revenue, Local
Highway & Bridge, Prerefunded, due
04/01/05)............................. RB Baa1/NR 04/01/15(a) 6.450 5,346,940
2,000 New York State Thruway Authority,
(Service Contract, Local Highway &
Bridge)............................... RB Baa1/BBB+ 04/01/05 6.000 2,069,860
2,000 New York State Thruway Authority,
(Service Contract, Local Highway &
Bridge, Refunding).................... RB Baa1/BBB+ 04/01/04 5.500 2,027,760
2,470 New York State Urban Development Corp.,
(Center for Industrial Innovation,
Refunding)............................ RB Baa1/BBB+ 01/01/06 6.250 2,585,794
2,000 New York State Urban Development Corp.,
(Correctional Capital Facilities,
Series 6)............................. RB Baa1/A- 01/01/03 6.000 2,052,360
2,635 New York State Urban Development Corp.,
(Sub Lien, Corporate Purpose,
Refunding)............................ RB A2/A 01/01/06 6.000 2,728,174
5,250 New York State, (Refunding,
Series A)............................. GO A2/A 07/15/06 6.500 5,610,255
1,350 New York State, (Refunding,
Series C)............................. GO A2/A 10/01/04 6.000 1,403,149
1,395 Niagra Falls, (City School District,
High School Facility)................. RB Baa3/BBB- 06/15/06 5.625 1,389,099
1,000 Orange County, (Refunding).............. GO Aa2/NR 11/15/04 5.500 1,024,840
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
THE NEW YORK TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/
AMOUNT SECURITY S&P MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE RATING DATE RATE VALUE
- -------------- ---------------------------------------- -------- --------- ----------- ----- ------------
<C> <S> <C> <C> <C> <C> <C>
NEW YORK (CONTINUED)
$ 7,730 Port Authority of New York & New Jersey,
(Special Project, JFK International
Air Terminal, Series 6), MBIA
Insured............................... RB Aaa/AAA 12/01/11 6.250% $ 8,232,682
4,365 Suffolk County, (Southwest Sewer
District, Refunding), MBIA Insured.... GO Aaa/AAA 02/01/08 6.000 4,576,833
3,690 Tobacco Settlement Asset Securitization
Corp., Inc., (Tobacco Flexible
Amortization Bonds, Series 1)......... RB Aa1/A+ 07/15/06 4.800 3,605,093
4,175 Tobacco Settlement Asset Securitization
Corp., Inc., (Tobacco Flexible
Amortization Bonds, Series 1)......... RB Aa1/A+ 07/15/07 4.875 4,073,130
2,690 Tobacco Settlement Asset Securitization
Corp., Inc., (Tobacco Flexible
Amortization Bonds, Series 1)......... RB Aa1/A+ 07/15/08 5.000 2,616,805
1,500 Triborough Bridge & Tunnel Authority,
(General Purpose, Refunding, Series
Y).................................... RB Aa3/A+ 01/01/07 5.900 1,553,955
2,580 Triborough Bridge & Tunnel Authority,
(General Purpose, Series B)........... RB Aa3/A+ 01/01/11 5.750 2,620,558
3,960 Triborough Bridge & Tunnel Authority,
(Special Obligation, Refunding, Series
A), FGIC Insured...................... RB Aaa/AAA 01/01/07 5.500 4,027,676
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 1,917,420
3,230 Yonkers, (Series C), AMBAC Insured...... GO Aaa/AAA 08/01/04 5.500 3,295,440
------------
TOTAL NEW YORK...................... 239,133,148
------------
NORTH CAROLINA (2.0%)
5,000 North Carolina Municipal Power Agency,
(Catawba Electric Revenue, Series B).. RB Baa1/BBB+ 01/01/08 6.375 5,107,000
------------
PUERTO RICO (0.7%)
1,838 Commonwealth of Puerto Rico, (General
Obligation)........................... PP NR/NR 12/04/03 7.469 1,914,929
------------
TOTAL LONG TERM INVESTMENTS (COST $256,361,496).............................. 252,632,311
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE NEW YORK TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/
S&P
SHARES SECURITY DESCRIPTION RATING RATE VALUE
- ------------- ---------------------------------------- --------- --------- ------------
<C> <S> <C> <C> <C>
SHORT-TERM INVESTMENTS (4.8%)
OTHER INVESTMENT COMPANIES (4.8%)
12,572,497 J.P. Morgan Institutional Tax Exempt
Money Market Fund
(cost $12,572,497).................... Aaa/AAA 3.200%(y) $ 12,572,497
------------
TOTAL INVESTMENTS (COST $268,933,993) (101.9%)................ 265,204,808
LIABILITIES IN EXCESS OF OTHER ASSETS (-1.9%)................. (4,847,292)
------------
NET ASSETS (100.0%)........................................... $260,357,516
============
</TABLE>
- ------------------------------
Note: Based on the cost of investments of $268,933,993 for federal income tax
purposes at January 31, 2000, the aggregate gross unrealized appreciation and
depreciation was $463,798 and $4,192,983, respectively, resulting in net
unrealized depreciation of investments of $3,729,185.
(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.
(y)Yield to Maturity.
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, MBIA - Municipal Bond Investors Assurance Corp., NR - Not Rated, PCR -
Pollution Control Revenue, PP - Private Placement, RB - Revenue Bond.
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.
21
<PAGE>
THE NEW YORK TAX EXEMPT BOND PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $268,933,993) $265,204,808
Interest Receivable 3,184,194
Prepaid Trustees' Fees 193
Prepaid Expenses and Other Assets 1,108
------------
Total Assets 268,390,303
------------
LIABILITIES
Payable for Investments Purchased 7,893,026
Advisory Fee Payable 66,766
Administrative Services Fee Payable 8,839
Administration Fee Payable 161
Fund Services Fee Payable 90
Accrued Expenses 63,905
------------
Total Liabilities 8,032,787
------------
NET ASSETS
Applicable to Investors' Beneficial Interests $260,357,516
============
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE NEW YORK TAX EXEMPT BOND PORTFOLIO
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JANUARY 31, 2000
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest Income $ 6,408,497
EXPENSES
Advisory Fee $407,169
Custodian Fees and Expenses 41,325
Administrative Services Fee 34,268
Fund Services Fee 2,303
Trustees' Fees and Expenses 1,286
Administration Fee 1,076
Miscellaneous 26,387
--------
Total Expenses 513,814
-----------
NET INVESTMENT INCOME 5,894,683
NET REALIZED LOSS ON INVESTMENTS (3,352,554)
NET CHANGE IN UNREALIZED DEPRECIATION OF
INVESTMENTS (3,126,182)
-----------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS $ (584,053)
===========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
23
<PAGE>
THE NEW YORK TAX EXEMPT BOND PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX FOR THE FOUR
MONTHS ENDED MONTHS ENDED
JANUARY 31, 2000 JULY 31, 1999
---------------- -------------
<S> <C> <C>
DECREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 5,894,683 $ 4,079,089
Net Realized Loss on Investments (3,352,554) (774,564)
Net Change in Unrealized Depreciation of
Investments (3,126,182) (7,106,907)
--------------- ------------
Net Decrease in Net Assets Resulting from
Operations (584,053) (3,802,382)
--------------- ------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 31,086,620 30,864,819
Withdrawals (47,143,069) (70,994,351)
--------------- ------------
Net Decrease from Investors' Transactions (16,056,449) (40,129,532)
--------------- ------------
Total Decrease in Net Assets (16,640,502) (43,931,914)
NET ASSETS
Beginning of Period 276,998,018 320,929,932
--------------- ------------
End of Period $ 260,357,516 $276,998,018
=============== ============
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FOR THE FOR THE FISCAL YEAR ENDED MARCH 31,
SIX MONTHS ENDED FOUR MONTHS ENDED ------------------------------------
JANUARY 31, 2000 JULY 31, 1999 1999 1998 1997 1996
---------------- ----------------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Net Expenses 0.38%(a) 0.40%(a) 0.38% 0.40% 0.43% 0.44%
Net Investment Income 4.31%(a) 4.10%(a) 4.26% 4.62% 4.75% 4.72%
Portfolio Turnover 53%(b) 8%(b) 44% 51% 35% 41%
</TABLE>
- ------------------------
(a) Annualized.
(b) Not Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
24
<PAGE>
THE NEW YORK TAX EXEMPT BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
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 value of each security for which readily available market quotations
exist is based on a decision as to the broadest and most representative
market for such security. The value of such security will be based either
on the last sale price on a national securities exchange or, in the
absence of recorded sales, at the average of readily available closing bid
and asked prices on such exchanges. Unlisted securities are valued at the
average of the quoted bid and asked prices in the over-the-counter market.
Securities or other assets for which market quotations are not readily
available are valued at fair value in accordance with procedures
established by portfolio's trustees. Such procedures include the use of
independent pricing services, which use prices based upon yields or prices
of securities of comparable quality, coupon, maturity and type;
indications as to values from dealers; and general market conditions. All
short-term portfolio securities with a remaining maturity of less than 60
days are valued by the amortized cost method.
b) Securities transactions are recorded on a trade date basis. Interest
income, which includes the amortization of premiums and discounts, if any,
is recorded on an accrual basis. For financial and tax reporting purposes,
realized gains and losses are determined on the basis of specific lot
identification.
c) The portfolio intends to be treated as a partnership for federal income
tax purposes. As such, each investor in the portfolio will be taxed on its
share of the portfolio's ordinary income and capital gains. It is intended
that the portfolio's assets will be managed in such a way that an investor
in the portfolio will be able to satisfy the requirements of Subchapter M
of the Internal Revenue Code. The cost of securities is substantially the
same for book and tax purposes.
2. TRANSACTIONS WITH AFFILIATES
a) The portfolio has an Investment Advisory Agreement with J.P. Morgan
Investment Management Inc. ("JPMIM"), an affiliate of Morgan Guaranty
Trust Company of New York ("Morgan") and wholly
25
<PAGE>
THE NEW YORK TAX EXEMPT BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
owned subsidiary of J.P. Morgan & Co. Incorporated ("J.P. Morgan"). Under
the terms of the agreement, the portfolio pays Morgan at an annual rate of
0.30% of the portfolio's average daily net assets. For the six months
ended January 31, 2000, such fees amounted to $409,086.
The portfolio may invest in one or more affiliated money market funds:
J.P. Morgan Institutional Prime Money Market Fund, J.P. Morgan
Institutional Tax Exempt Money Market Fund, J.P. Morgan Institutional
Federal Money Market Fund and J.P. Morgan Institutional Treasury Money
Market Fund. The Advisor has agreed to reimburse its advisory fee from the
portfolio in an amount to offset any doubling of investment advisory and
shareholder servicing fees. For the six months ended January 31, 2000,
J.P. Morgan has agreed to reimburse the portfolio $1,917 under this
agreement.
b) The portfolio has retained Funds Distributor, Inc. ("FDI"), a registered
broker-dealer, to serve as the co-administrator and exclusive placement
agent. Under a Co-Administration Agreement between FDI and the portfolio,
FDI provides administrative services necessary for the operations of the
portfolio, furnishes office space and facilities required for conducting
the business of the portfolio and pays the compensation of the officers
affiliated with FDI. The portfolio has agreed to pay FDI fees equal to its
allocable share of an annual complex-wide charge of $425,000 plus FDI's
out-of-pocket expenses. The amount allocable to the portfolio is based on
the ratio of the portfolio's net assets to the aggregate net assets of the
portfolio and certain other investment companies subject to similar
agreements with FDI. For the six months ended January 31, 2000, the fee
for these services amounted to $1,076.
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 six months ended January 31, 2000, the fee
for these services amounted to $34,268.
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 $2,303 for the six months ended January 31, 2000.
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 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
26
<PAGE>
THE NEW YORK TAX EXEMPT BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
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.
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the six months
ended January 31, 2000 were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
- --------- ------------
<S> <C>
$137,080,551 $140,535,501
</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.
27
<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.
IMSAR299
J.P. MORGAN NEW YORK TAX EXEMPT BOND FUND
SEMIANNUAL REPORT
JANUARY 31, 2000
