<PAGE>
THE NEW YORK TOTAL RETURN BOND PORTFOLIO
SCHEDULE OF INVESTMENTS
MARCH 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
PRINCIPAL TYPE OF MOODY'S/S&P MATURITY
AMOUNT SECURITY DESCRIPTION SECURITY (UNAUDITED) DATE RATE VALUE
- --------- ------------------------------------- ----------------- -------------- ----------- ------------- ----------
<C> <S> <C> <C> <C> <C> <C>
ALASKA (1.6%)
$2,000,000 North Slope Boro Alaska (Capital
Appreciation Series A, MBIA
Insured)........................... Insured Aaa/AAA 06/30/01 0.000 % $1,561,320
----------
CALIFORNIA (3.3%)
1,000,000 California State..................... General
Obligation A1/A 02/01/09 6.600 1,116,900
1,000,000 California State..................... General
Obligation A1/A 09/01/10 6.500 1,108,120
1,000,000 Kaweah Delta Hospital Tulare County
(Series F)......................... Private Placement NR/NR 06/01/97(A) 5.250 1,016,300
----------
TOTAL CALIFORNIA..................... 3,241,320
----------
DISTRICT OF COLUMBIA (0.1%)
100,000 District of Columbia (Refunding,
Series A, National Westminster
Insured)........................... Insured VMIG1/A-1+ 04/01/96(A) 3.850 (B) 100,000
----------
GEORGIA (6.0%)
200,000 Burke County Development Authority
(PCR Georgia Power Authority,
Vogtle Project).................... Revenue Bond VMIG1/A-1 04/01/96(A) 3.750 (B) 200,000
3,500,000 Georgia State (Series D)............. General
Obligation Aaa/AA+ 09/01/13 3.250 2,605,085
1,000,000 Gwinnett County Georgia School General
District (Refunding, Series B)..... Obligation Aa1/AA 02/01/07 6.400 1,110,660
750,000 Georgia Municipal Electric Authority
(First Crossover, Refunding,
General Resolution)................ Revenue Bond A/A 01/01/12(A) 6.500 804,465
1,000,000 Georgia Municipal Electric Authority
(Sixth Crossover, PJ-1-AMBAC
Insured)........................... Insured Aaa/AAA 01/01/08 7.000 1,152,910
----------
TOTAL GEORGIA........................ 5,873,120
----------
ILLINOIS (5.4%)
2,200,000 Chicago Illinois Motor Fuel Tax
(Refunding, AMBAC Insured)......... Insured Aaa/AAA 01/01/09 6.125 2,362,272
1,355,000 Chicago Illinois Metro Water
(Reclamation District Greater General
Chicago, Capital Improvement)...... Obligation Aa/AA 12/01/09 5.600 1,366,233
1,500,000 Illinois State Sales Tax Revenue
(Refunding, Series Q).............. Revenue Bond A1/AAA 06/15/12(A) 6.000 1,561,605
----------
TOTAL ILLINOIS....................... 5,290,110
----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
18
<PAGE>
THE NEW YORK TOTAL RETURN BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MARCH 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
PRINCIPAL TYPE OF MOODY'S/S&P MATURITY
AMOUNT SECURITY DESCRIPTION SECURITY (UNAUDITED) DATE RATE VALUE
- --------- ------------------------------------- ----------------- -------------- ----------- ------------- ----------
<C> <S> <C> <C> <C> <C> <C>
MASSACHUSETTS (1.2%)
$1,000,000 Massachusetts Bay Transportation
Authority (General Transportation
System, Refunding, Series A)....... Revenue Bond A1/A+ 03/01/08 7.000 % $1,149,730
----------
MICHIGAN (1.2%)
1,100,000 Detroit Michigan Sewage Disposal
(Refunding, Series B, MBIA
Insured)........................... Insured Aaa/AAA 07/01/07 6.250 1,197,372
----------
NEW JERSEY (2.2%)
2,000,000 New Jersey State Transportation
Traffic Authority (Refunding,
Series B, MBIA Insured)............ Insured Aaa/AAA 06/15/10 6.500 2,241,560
----------
NEW YORK (69.7%)
2,250,000 Grand Central District Management
Association Inc. (Business
Improvement District).............. Prerefunded Aaa/AAA 01/01/02(A) 6.500 2,498,468
555,000 Islip Public Improvement (NY Service
Contract Commuter Facilities,
Series O, MBIA Insured)............ Prerefunded Aaa/AAA 06/01/98(A) 7.300 602,158
1,500,000 Metropolitan Transportation Authority
(NY Service Contract Commuter
Facilities, Refunding, Series O)... Revenue Bond Baa1/BBB 07/01/08 5.750 1,505,085
1,370,000 Metropolitan Transportation Authority
(NY Service Contract Commuter
Facilities, Refunding, Series N)... Revenue Bond Baa1/BBB 07/01/02 6.625 1,479,038
1,500,000 Metropolitan Transportation Authority
(NY Transportation Facilities,
Refunding, Series K, MBIA
Insured)........................... Insured Aaa/AAA 07/01/07 6.300 1,652,565
55,000 Monroe County Public Improvement,
(Escrowed to Maturity, AMBAC
Insured)........................... Prerefunded NR/AAA 06/01/08 5.875 58,774
1,075,000 Monroe County Public Improvement
(AMBAC Insured).................... Insured Aaa/AAA 06/01/08 5.875 1,136,759
2,000,000 Municipal Assistance Corp. for New
York City (Refunding, Series D,
AMBAC Insured)..................... Insured Aaa/AAA 07/01/00 6.000 2,114,860
3,000,000 Municipal Assistance Corp. for New
York City (Refunding, Series 68)... Revenue Bond Aa/AA- 07/01/99 7.000 3,232,980
1,500,000 New York City (Refunding, Series H, General
Escrowed to Maturity).............. Obligation NRR/AAA 08/01/00 7.875 1,703,715
1,750,000 New York City (Refunding, Series General
A)................................. Obligation Baa1/BBB+ 08/01/02 5.750 1,778,612
1,250,000 New York City (Refunding, Series General
A)................................. Obligation Baa1/BBB+ 08/01/04 7.000 1,360,687
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
THE NEW YORK TOTAL RETURN BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MARCH 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
PRINCIPAL TYPE OF MOODY'S/S&P MATURITY
AMOUNT SECURITY DESCRIPTION SECURITY (UNAUDITED) DATE RATE VALUE
- --------- ------------------------------------- ----------------- -------------- ----------- ------------- ----------
<C> <S> <C> <C> <C> <C> <C>
$1,500,000 New York City (Refunding, Series General
H)................................. Obligation Baa1/BBB+ 03/15/05 6.500% $1,573,170
100,000 New York City (Series A, LOC-Sumitomo
Bank).............................. Insured VMIG1/A-1 04/01/96(A) 3.400(B) 100,000
300,000 New York City (Series B, LOC-UBS).... Insured VMIG1/A-1+ 04/01/96(A) 3.250(B) 300,000
1,475,000 New York City (Municipal Water
Finance Authority, Water & Sewer
System, Series A).................. Prerefunded NRR/AAA 06/15/99(A) 7.375 1,631,188
3,700,000 New York Dormitory Authority (City
University System, Series A)....... Prerefunded Aaa/NRR 07/01/00(A) 7.625 4,221,182
1,000,000 New York Dormitory Authority (City
University System, Refunding,
Series D).......................... Revenue Bond Baa1/BBB 07/01/03 8.750 1,196,650
1,000,000 New York Dormitory Authority (State
University Educational Facilities,
Series A).......................... Revenue Bond Baa1/BBB+ 05/15/99 6.625 1,056,510
1,750,000 New York Dormitory Authority (State
University Educational Facilities,
Refunding, Series B)............... Prerefunded Aaa/NRR 05/15/00(A) 7.250 1,966,212
1,500,000 New York Dormitory Authority
(University Educational Facilities,
Series A), AMBAC Insured........... Insured Aaa/AAA 05/15/07 5.500 1,543,950
1,210,000 New York Dormitory Authority
(University of Rochester, Series
A)................................. Revenue Bond A1/A+ 07/01/06 6.500 1,334,703
1,175,000 New York Dormitory Authority (Mental
Health Services Facilities)........ Revenue Bond Baa1/BBB+ 02/15/09 6.500 1,265,416
1,500,000 New York Dormitory Authority (State
University Educational Facilities,
Refunding, Series A)............... Revenue Bond Baa1/BBB+ 05/15/04 6.500 1,614,420
1,000,000 New York State Environmental
Facilities Corp. (PCR, State Water
Revolving Fund, Series E).......... Revenue Bond Aa/A 06/15/01 6.200 1,070,440
1,000,000 New York Housing Finance Agency
(Service Contract Obligation,
Series A).......................... Prerefunded Aaa/AAA 03/15/01(A) 7.800 1,161,280
1,250,000 New York State Local Government
Assistance Corp. (Series A)........ Prerefunded Aaa/AAA 04/01/01(A) 7.000 1,408,675
1,000,000 New York State Local Government
Assistance Corp. (Series A)........ Revenue Bond A/A 04/01/00 6.200 1,057,550
1,000,000 New York State Local Government
Assistance Corp. (Series A)........ Prerefunded Aaa/AAA 04/01/02(A) 7.125 1,146,290
1,000,000 New York Local Government Assistance
Corp. (Series C)................... Revenue Bond A/A 04/01/12(A) 6.000 1,035,480
1,565,000 New York Medical Care Facilities
Finance Agency (St. Lukes Hospital,
Series B, FHA Insured)............. Prerefunded Aaa/AAA 02/15/00(A) 7.450 1,760,390
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE NEW YORK TOTAL RETURN BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MARCH 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
PRINCIPAL TYPE OF MOODY'S/S&P MATURITY
AMOUNT SECURITY DESCRIPTION SECURITY (UNAUDITED) DATE RATE VALUE
- --------- ------------------------------------- ----------------- -------------- ----------- ------------- ----------
<C> <S> <C> <C> <C> <C> <C>
$1,500,000 New York Medical Care Facilities
Finance Agency (Mental Health
Services, Refunding, Series F)..... Revenue Bond Baa1/BBB+ 02/15/03 6.000% $1,551,030
1,000,000 New York Medical Care Facilities
Finance Agency (Mental Health
Services).......................... Prerefunded Aaa/AAA 02/15/99(A) 7.800 1,114,160
2,195,000 New York State Power Authority
(General Purpose, Refunding, Series
W)................................. Revenue Bond Aa/AA- 01/01/08 6.500 2,435,243
3,000,000 New York Thruway Authority (Highway &
Bridge, Series A, MBIA Insured).... Insured Aaa/AAA 04/01/04 6.250 3,271,740
500,000 New York State Urban Development
Corp. (Correctional Capital
Facilities, Series 1).............. Prerefunded Aaa/NR 01/01/00(A) 7.750 566,030
3,000,000 New York State Urban Development
Corp. (Correctional Capital
Facilities, Series 2).............. Prerefunded Aaa/NR 01/01/01(A) 6.500 3,254,040
2,470,000 New York State Urban Development
Corp. (Refunding, Project Center
for Individual Innovation)......... Revenue Bond Baa1/BBB 01/01/06 6.250 2,572,209
1,155,000 New York State Urban Development
Corp. (Refunding, Project Center
for Individual Innovation)......... Revenue Bond Baa1/BBB 01/01/07 6.250 1,196,973
1,030,000 Suffolk County Water Authority (AMBAC
Insured)........................... Prerefunded Aaa/AAA 06/01/00(A) 6.600 1,133,031
3,000,000 Triborough Bridge & Tunnel Authority
(Series T) (D)..................... Prerefunded Aaa/NRR 01/01/01(A) 7.000 3,366,150
1,000,000 Triborough Bridge & Tunnel Authority
(General Purpose, Refunding, Series
X)................................. Revenue Bond Aa/A+ 01/01/12(A) 6.625 1,112,940
1,500,000 Triborough Bridge & Tunnel Authority
(General Purpose, Refunding, Series
Y)................................. Revenue Bond Aa/A+ 01/01/07 5.900 1,589,340
----------
TOTAL NEW YORK....................... 68,730,093
----------
PUERTO RICO (7.4%)
1,750,000 Puerto Rico Commonwealth (Aqueduct &
Sewer Authority, MBIA Insured)..... Insured Aaa/AAA 07/01/07 6.000 1,875,703
1,000,000 Puerto Rico Commonwealth (Highway &
Transportation Authority, Series Y,
MBIA Insured)...................... Insured Aaa/AAA 07/01/06 6.250 1,096,940
1,000,000 Puerto Rico Commonwealth (Highway &
Transportation Authority, Series Y,
MBIA Insured)...................... Insured Aaa/AAA 07/01/07 6.250 1,095,040
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE NEW YORK TOTAL RETURN BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MARCH 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
PRINCIPAL TYPE OF MOODY'S/S&P MATURITY
AMOUNT SECURITY DESCRIPTION SECURITY (UNAUDITED) DATE RATE VALUE
- --------- ------------------------------------- ----------------- -------------- ----------- ------------- ----------
<C> <S> <C> <C> <C> <C> <C>
$3,000,000 University of Puerto Rico (University
Revenues, Refunding, Series N, MBIA
Insured)........................... Insured Aaa/AAA 06/01/05 6.250% $3,296,100
----------
TOTAL PUERTO RICO.................... 7,363,783
----------
TENNESSEE (0.2%)
200,000 Metropolitan Nashville Airport
Authority (American Airlines
Project, Series A)................. Revenue Bond NR/A-1+ 10/01/12(A) 3.800 (B) 200,000
----------
TEXAS (0.2%)
200,000 Austin, Water Sewer & Electric
(Refunding, Escrowed to
Maturity).......................... Revenue Bond A/A- 11/15/97 13.500 229,270
----------
UTAH (1.6%)
1,500,000 Intermountain Power Agency
(Refunding, Series C, MBIA Insured)
(C)................................ Insured Aaa/AAA 07/01/00 6.000 1,598,565
----------
TOTAL INVESTMENTS (100.1%)
(COST $96,875,770) 98,776,243
LIABILITIES IN EXCESS OF OTHER ASSETS
(-.1%) (106,748)
----------
NET ASSETS (100.0%) $98,669,495
----------
----------
<FN>
(A) The date shown represents a mandatory/optional put date or call date, or interest reset date.
(B) Variable rate demand note tender dates and/or interest rates are reset at specified intervals which coincide with
their tender feature. The rates shown are the current rates at March 31, 1996.
(C) Represents a when-issued security.
(D) $1,500,000 par segregated as collateral for when-issued security.
1. Based on the cost of investments of $96,875,770 for federal income tax purposes at March 31, 1996 the aggregate
gross unrealized appreciation and depreciation was $2,351,397 and $450,924 respectively, resulting in net
unrealized appreciation of investments of $1,900,473.
2. Abbreviations used in the schedule of investments are as follows: AMBAC -- American Municipal Bond Assurance Corp.
MBIA -- Municipal Bond Investors Assurance Corp., PCR -- Pollution Control Revenue, FHA -- Federal Housing
Authority, UBS -- Union Bank of Switzerland, NR -- Not Rated, NRR -- Not Rerated, LOC -- Letter of Credit.
3. Definition of terms used:
Crossover Refunded -- Bonds for which the issuer of the bond invests the proceeds from a subsequent bond issue in
cash and/ or securities which have been deposited with a third party to cover the payments of principal and
interest at the maturity of the bond.
Escrowed to Maturity -- Bonds for which cash and/or securities have been deposited with a third party to cover the
payments of principal and interest at the maturity of the bond.
Prerefunded -- Bonds for which the issuer of the bond invests the proceeds from a subsequent bond issuance in
treasury securities, whose maturity coincides with the first call date of the first bond.
Refunding -- Bonds for which the issuer has issued new bonds and canceled the old issue.
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE NEW YORK TOTAL RETURN BOND PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $96,875,770)
$98,776,243
Cash
32,277
Receivable for Investments Sold
2,213,150
Interest Receivable
1,480,350
Deferred Organization Expenses
6,932
Prepaid Expenses and Other Assets
1,108
-----------
Total Assets
102,510,060
-----------
LIABILITIES
Payable for Investments Purchased
3,773,409
Advisory Fee Payable
32,505
Fund Service Fee Payable
223
Administration Fee Payable
1,044
Administration Services Fee Payable
2,037
Accrued Expenses
31,347
-----------
Total Liabilities
3,840,565
-----------
NET ASSETS
Applicable to Investors' Beneficial Interests
$98,669,495
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
23
<PAGE>
THE NEW YORK TOTAL RETURN BOND PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED MARCH 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest Income $4,237,698
EXPENSES
Advisory Fee $246,966
Professional Fees and Expenses 45,526
Custodian Fees and Expenses 29,639
Printing Expense 12,034
Administration Fee 6,648
Administrative Services Fee 6,153
Fund Services Fee 5,530
Amortization of Organization Expenses 2,310
Trustee Fees and Expenses 1,647
Financial and Fund Accounting Services Fee 1,538
Registration Fees 611
Insurance Expense 535
Miscellaneous 1,002
-------
Total Expenses (360,139)
----------
NET INVESTMENT INCOME 3,877,559
NET REALIZED GAIN ON INVESTMENTS 547,038
NET CHANGE IN UNREALIZED APPRECIATION OF INVESTMENTS 916,458
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $5,341,055
----------
----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
24
<PAGE>
THE NEW YORK TOTAL RETURN BOND PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 11, 1994
(COMMENCEMENT
FOR THE OF
FISCAL YEAR OPERATIONS)
ENDED MARCH THROUGH
INCREASE IN NET ASSETS 31, 1996 MARCH 31, 1995
------------ ---------------
<S> <C> <C>
FROM OPERATIONS
Net Investment Income $3,877,559 $ 1,840,235
Net Realized Gain (Loss) on Investments 547,038 (125,677)
Net Change in Unrealized Appreciation of Investments 916,458 984,015
------------ ---------------
Net Increase in Net Assets Resulting from Operations 5,341,055 2,698,573
------------ ---------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 45,071,889 72,754,445
Withdrawals (10,574,756) (16,721,811)
------------ ---------------
Net Increase from Investors' Transactions 34,497,133 56,032,634
------------ ---------------
Total Increase in Net Assets 39,838,188 58,731,207
NET ASSETS
Beginning of Period 58,831,307 100,100
------------ ---------------
End of Period $98,669,495 $58,831,307
------------ ---------------
------------ ---------------
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 11, 1994
FOR THE FISCAL (COMMENCEMENT OF
YEAR ENDED MARCH OPERATIONS) THROUGH
31, 1996 MARCH 31, 1995
----------------- ---------------------
<S> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Expenses 0.44% 0.48%(a)
Net Investment Income 4.72% 4.59%(a)
Decrease Reflected in Expense Ratio due to Expense Reimbursement by Morgan -- 0.03%(a)
Portfolio Turnover 41% 63%
</TABLE>
- ------------------------
(a) Annualized
The Accompanying Notes are an Integral Part of the Financial Statements.
25
<PAGE>
THE NEW YORK TOTAL RETURN BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The New York Total Return Bond Portfolio (the "Portfolio") is registered under
the Investment Company Act of 1940, as amended, as a no-load, non-diversified,
open-end management investment company which was organized as a trust under the
laws of the State of New York. The Portfolio commenced operations on April 11,
1994. The Portfolio's investment objective is to provide a high after tax total
return for New York residents consistent with moderate risk of capital. The
Portfolio invests a significant amount of its assets in debt obligations issued
by political subdivisions and authorities in the State of New York. The issuers'
ability to meet their obligations may be affected by economic and political
developments within the State of New York. The Declaration of Trust permits the
Trustees to issue an unlimited number of beneficial interests in the Portfolio.
The preparation of financial statements prepared in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures. Actual amounts
could differ from those estimates. The following is a summary of the significant
accounting policies of the Portfolio:
a)Portfolio securities are valued by an outside independent pricing service
approved by the Trustees. The value of each security for which readily
available market quotations exist is based on a decision as to the
broadest and most representative market for such security. The value of
such security will be based either on the last sale price on a national
securities exchange, or, in the absence of recorded sales, at the readily
available closing bid price on such exchanges, or at the quoted bid price
in the over-the-counter market. Because of the large number of municipal
bond issues outstanding and the varying maturity dates, coupons and risk
factors applicable to each issuer's bonds, no readily available market
quotations exist for most municipal securities. Securities or other assets
for which market quotations are not readily available are valued in
accordance with procedures established by the Portfolio's Trustees. Such
procedures include the use of comparable quality, coupon, maturity and
type, indications as to values from dealers, and general market
conditions. All portfolio securities with a remaining maturity of less
than 60 days are valued by the amortized cost method.
b)The Portfolio incurred organization expenses in the amount of $11,473.
These costs were deferred and are being amortized by the Portfolio on a
straight-line basis over a five-year period from 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 subject to
taxation on its share of the Portfolio's ordinary income
26
<PAGE>
THE NEW YORK TOTAL RETURN BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1996
- --------------------------------------------------------------------------------
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.
2. TRANSACTIONS WITH AFFILIATES
a)The Portfolio has an investment advisory agreement with Morgan Guaranty
Trust Company of New York ("Morgan"). Under the terms of the investment
advisory agreement, the Portfolio pays Morgan a fee at an annual rate of
0.30% of the Portfolio's average daily net assets. For the fiscal year
ended March 31, 1996, this fee amounted to $246,966.
b)The Portfolio has retained Signature Broker-Dealer Services, Inc.
("Signature") to serve as administrator and exclusive placement agent.
Signature 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
Portfolio's officers affiliated with Signature. The agreement provided for
a fee to be paid to Signature at an annual rate determined by the
following schedule: 0.01% of the first $1 billion of the aggregate average
daily net assets of the Portfolio and the other portfolios subject to the
Administration Agreement, 0.008% of the next $2 billion of such net
assets, 0.006% of the next $2 billion of such net assets, and 0.004% of
such net assets in excess of $5 billion. The daily equivalent of the fee
rate is applied each day to the net assets of the Portfolio. For the
period April 1, 1995 through December 28, 1995, such fees amounted to
$3,420.
Effective December 29, 1995, the Administration Agreement was amended such
that the fee charged would be equal to the Portfolio's proportionate share
of a complex-wide fee based on the following annual schedule: 0.03% on the
first $7 billion of the aggregate average daily net assets of the
Portfolio and the other portfolios subject to this agreement (the "Master
Portfolios") and 0.01% on the aggregate average daily net assets of the
Master Portfolios in excess of $7 billion. The portion of this charge
payable by the portfolio is determined by the proportionate share its net
assets bear to the total net assets of The Pierpont Funds, The JPM
Institutional Funds, The JPM Advisor Funds and the Master Portfolios. For
the period December 29, 1995 through March 31, 1996, such fees amounted to
$3,228.
c)Until August 31, 1995, the Portfolio had a Financial and Fund Accounting
Services Agreement ("Services Agreement") with Morgan under which Morgan
would receive a fee, based on the percentage described below, for
overseeing certain aspects of the administration and operation of the
Portfolio and which was also designed to provide an expense limit for
certain expenses of the Portfolio. This fee was calculated exclusive of
the advisory fee, custody expenses, fund services fee, and amortization of
organization expenses at 0.10% of the Portfolio's average daily net assets
up to $200 million, 0.05% of the next $200 million of average daily net
assets, and 0.03% of average daily net assets thereafter. From April 1,
1995 through August 31, 1995, this fee amounted to $1,538. From September
1, 1995 until December 28, 1995, an interim agreement between the
Portfolio
27
<PAGE>
THE NEW YORK TOTAL RETURN BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1996
- --------------------------------------------------------------------------------
and Morgan, provided for the continuation of the oversight functions that
were outlined under the Services Agreement and that Morgan should bear all
of its expenses incurred in connection with these services.
Effective December 29, 1995, the Portfolio entered into an Administrative
Services Agreement (the "Agreement") with Morgan under which Morgan is
responsible for overseeing certain aspects of the administration and
operation of the Portfolio. Under the Agreement, the Portfolio has agreed
to pay Morgan a fee equal to its proportionate share of an annual
complex-wide charge. This charge is calculated daily based on the
aggregate net assets of the Master Portfolios in accordance with the
following annual schedule: 0.06% on the first $7 billion of the Master
Portfolios' aggregate average daily net assets and 0.03% of the aggregate
average daily net assets in excess of $7 billion. The portion of this
charge payable by the Portfolio is determined by the proportionate share
that the Portfolio's net assets bear to the net assets of the Master
Portfolios and other investors in the Master Portfolios for which Morgan
provides similar services. For the period December 29, 1995 through March
31, 1996, such fees amounted to $6,153.
d)The Portfolio has a Fund Services Agreement with Pierpont Group, Inc.
("Group") to assist the Trustees in exercising their overall supervisory
responsibilities for the Portfolio's affairs. The Trustees of the
Portfolio represent all the existing shareholders of Group. The
Portfolio's allocated portion of Group's costs in performing its services
amounted to $5,530 for the fiscal year ended March 31, 1996.
e)An aggregate annual fee of $65,000 is paid to each Trustee for serving as
a Trustee of The Pierpont Funds, The JPM Institutional Funds and the
Master Portfolios. The Trustees' Fees and Expenses shown in the financial
statements represent 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 received compensation and employee
benefits from Group in his role as Group's Chairman. The allocated portion
of such compensation and benefits included in the Fund Services Fee shown
in the financial statements was $700.
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the fiscal year
ended March 31, 1996, were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS FROM
PURCHASES SALES
------------- -------------
<S> <C> <C>
Municipal obligations........................................... $ 74,520,321 $ 33,013,356
</TABLE>
28
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Investors of
The New York Total Return Bond Portfolio
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the supplementary data present fairly, in all material
respects, the financial position of The New York Total Return Bond Portfolio
(the "Portfolio") at March 31, 1996, the results of its operations for the year
then ended, and the changes in its net assets and the supplementary data for the
year then ended 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 March 31, 1996 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
New York, New York
May 23, 1996
29
