<PAGE>
THE NEW YORK TOTAL RETURN BOND PORTFOLIO
SCHEDULE OF INVESTMENTS
MARCH 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S
AMOUNT SECURITY S&P MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE (UNAUDITED) DATE RATE VALUE
- -------------- ---------------------------------------- -------- ------------ ------------ ------- -------------
<C> <S> <C> <C> <C> <C> <C>
LONG-TERM INVESTMENTS (104.8%)
ALASKA (1.1%)
$ 2,000 North Slope Borough, Zero Coupon, GO Aaa/AAA 06/30/01 0.000% $ 1,628,080
(Capital Appreciation, Series A), MBIA
Insured...............................
-------------
ARIZONA (1.8%)
1,015 Tucson, Street & Highway User Revenue, RB Aaa/AAA 07/01/11 7.500 1,212,489
(Senior Lien, Series 1994-B), MBIA
Insured...............................
1,250 Tucson, Street & Highway User Revenue, RB Aaa/AAA 07/01/12 7.500 1,491,262
(Senior Lien, Series 1994-B), MBIA
Insured...............................
-------------
2,703,751
TOTAL ARIZONA.......................
-------------
CALIFORNIA (0.7%)
1,000 Kaweah Delta Hospital District, Tulare PP NR/NR 06/01/97(a) 5.250 1,002,920
County, (Series F, due 06/01/14)......
-------------
GEORGIA (0.5%)
750 Georgia Municipal Electric RB A/A 01/01/12 6.500 805,342
Authority,(Refunding, Series A).......
-------------
ILLINOIS (1.8%)
2,500 Illinois, Sales Tax Revenue, (Refunding, RB Aa3/AAA 06/15/12 6.000 2,616,900
Series Q).............................
-------------
MASSACHUSETTS (0.8%)
1,000 Massachusetts Bay Transportation RB A1/A+ 03/01/08 7.000 1,146,650
Authority, (General Transportation
System, Refunding, Series A)..........
-------------
NEVADA (0.9%)
2,450 Clark County School District, Zero GO Aaa/AAA 03/01/09 0.000 1,264,200
Coupon, (Refunding, Series B), FGIC
Insured...............................
-------------
</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, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S
AMOUNT SECURITY S&P MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE (UNAUDITED) DATE RATE VALUE
- -------------- ---------------------------------------- -------- ------------ ------------ ------- -------------
<C> <S> <C> <C> <C> <C> <C>
NEW JERSEY (1.4%)
$ 2,000 New Jersey Turnpike Authority, (Series RB Baa1/BBB+ 01/01/98 5.200% $ 2,018,160
A)....................................
-------------
NEW YORK (84.8%)
2,030 Albany County Airport Authority, Airport RB Aaa/AAA 12/15/07 5.500 2,044,514
Revenue, FSA Insured..................
2,250 Grand Central District Management SO Aaa/AAA 01/01/02(a) 6.500 2,452,477
Association Inc., (Business
Improvement District, Prerefunded, due
01/01/22).............................
555 Islip, (Prerefunded, due 06/01/01), MBIA GO Aaa/AAA 06/01/98(a) 7.300 586,840
Insured...............................
5,500 Metropolitan Transportation Authority, RB Aaa/AAA 04/01/11 6.250 5,915,855
(Dedicated Tax Fund, Series A), MBIA
Insured...............................
1,370 Metropolitan Transportation Authority, RB Baa1/BBB 07/01/02 6.625 1,454,995
(Service Contract, Commuter
Facilities, Refunding, Series N)......
1,500 Metropolitan Transportation Authority, RB Baa1/BBB 07/01/08 5.750 1,494,930
(Service Contract, Commuter
Facilities, Refunding, Series O)......
1,500 Metropolitan Transportation Authority, RB Aaa/AAA 07/01/07 6.300 1,621,005
(Transportation Facilities, Refunding,
Series K), MBIA Insured...............
1,075 Monroe County, (Public Improvement, GO Aaa/AAA 06/01/08 5.875 1,131,695
Partially Prerefunded, Partially
Escrowed to Maturity), AMBAC
Insured...............................
55 Monroe County, (Public Improvement, GO Aaa/AAA 06/01/08 5.875 58,230
Prerefunded, Escrowed to Maturity),
AMBAC Insured.........................
2,000 Municipal Assistance Corp. for the City RB Aa2/AA 07/01/99 7.000 2,107,860
of New York,
(Series 68)...........................
</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, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S
AMOUNT SECURITY S&P MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE (UNAUDITED) DATE RATE VALUE
- -------------- ---------------------------------------- -------- ------------ ------------ ------- -------------
<C> <S> <C> <C> <C> <C> <C>
NEW YORK (CONTINUED)
$ 2,000 Municipal Assistance Corp. for the City RB Aaa/AAA 07/01/00 6.000% $ 2,083,160
of New York,
(Series D), AMBAC Insured.............
1,460 New York City Industrial Development RB Baa3/NR 08/01/05 6.000 1,494,427
Agency, Civil Facilities Revenue,
(YMCA Greater New York Project).......
1,000 New York City Industrial Development RB Baa3/NR 08/01/06 6.000 1,019,220
Agency, Civil Facilities Revenue,
(YMCA Greater New York Project).......
1,475 New York City Municipal Water Finance RB NR/AAA 06/15/99(a) 7.375 1,589,799
Authority, (Water and Sewer Systems,
Prerefunded, Series A, due
06/15/09).............................
1,900 New York City, (Prerefunded, Series D, GO Aaa/BBB+ 02/01/02(a) 7.500 2,144,948
due 02/01/19).........................
1,500 New York City,(Refunding, Escrowed to GO Aaa/AAA 08/01/00 7.875 1,651,290
Maturity, Series H)...................
1,750 New York City, (Refunding, Series A).... GO Baa1/BBB+ 08/01/02 5.750 1,783,582
1,250 New York City, (Refunding, Series A).... GO Baa1/BBB+ 08/01/04 7.000 1,356,287
6,000 New York City, (Refunding, Series A, due GO Baa1/BBB+ 08/01/02(a) 6.250 6,247,140
08/01/03).............................
1,070 New York City, (Refunding, Series C).... GO Baa1/BBB+ 02/01/04 6.000 1,097,585
1,500 New York City, (Refunding, Series H).... GO Baa1/BBB+ 03/15/05 6.500 1,581,735
1,000 New York State Dormitory Authority, RB Baa1/BBB 07/01/03 8.750 1,175,460
(City University System, Series D)....
1,900 New York State Dormitory Authority, RB Aaa/AAA 08/15/04 6.000 2,007,445
(Mental Health Services Facilities
Improvement, Refunding, Series E),
AMBAC Insured.........................
5,650 New York State Dormitory Authority, RB Baa1/BBB+ 02/15/06 6.000 5,782,097
(Mental Health Services Facilities
Improvements, Refunding, Series B)....
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE NEW YORK TOTAL RETURN BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MARCH 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S
AMOUNT SECURITY S&P MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE (UNAUDITED) DATE RATE VALUE
- -------------- ---------------------------------------- -------- ------------ ------------ ------- -------------
<C> <S> <C> <C> <C> <C> <C>
NEW YORK (CONTINUED)
$ 1,175 New York State Dormitory Authority, RB Baa1/BBB+ 02/15/09 6.500% $ 1,258,343
(Mental Health Services Facilities
Improvements, Series B)...............
1,750 New York State Dormitory Authority, RB Aaa/BBB+ 05/15/00(a) 7.250 1,915,830
(State University Educational
Facilities, Prerefunded, Series B, due
05/15/15).............................
1,500 New York State Dormitory Authority, RB Baa1/BBB+ 05/15/04 6.500 1,591,830
(State University Educational
Facilities, Refunding, Series A)......
1,500 New York State Dormitory Authority, RB Aaa/AAA 05/15/07 5.500 1,546,890
(State University Educational
Facilities, Refunding, Series A),
AMBAC Insured.........................
3,000 New York State Dormitory Authority, RB Aaa/AAA 05/15/11 5.875 3,110,760
(State University Educational
Facilities, Refunding, Series A), FGIC
Insured...............................
1,000 New York State Dormitory Authority, RB Baa1/BBB+ 05/15/99 6.625 1,037,340
(State University Educational
Facilities, Series A).................
1,210 New York State Dormitory Authority, RB A1/A+ 07/01/06 6.500 1,321,441
(University of Rochester, Series A)...
1,110 New York State Dormitory Authority, RB Aaa/AAA 07/01/11 6.000 1,167,587
Lease Revenue, (State University
Dormitory Facilities, Series A), AMBAC
Insured...............................
1,000 New York State Housing Finance Agency, RB Aaa/AAA 03/15/01(a) 7.800 1,125,930
(Service Contract Obligation,
Prerefunded, Series A, due
09/15/20).............................
1,250 New York State Local Government RB Aaa/AAA 04/01/01(a) 7.000 1,377,863
Assistance Corp., (Prerefunded, Series
A, due 04/01/16)......................
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
23
<PAGE>
THE NEW YORK TOTAL RETURN BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MARCH 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S
AMOUNT SECURITY S&P MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE (UNAUDITED) DATE RATE VALUE
- -------------- ---------------------------------------- -------- ------------ ------------ ------- -------------
<C> <S> <C> <C> <C> <C> <C>
NEW YORK (CONTINUED)
$ 1,000 New York State Local Government RB Aaa/AAA 04/01/02(a) 7.125% $ 1,120,180
Assistance Corp., (Prerefunded, Series
A, due 04/01/21)......................
3,350 New York State Local Government RB A3/A 04/01/14 6.000 3,473,314
Assistance Corp., (Refunding, Series
E)....................................
1,000 New York State Local Government RB A3/A 04/01/00 6.200 1,041,800
Assistance Corp., (Series A)..........
1,000 New York State Local Government RB A3/A 04/01/12 6.000 1,044,370
Assistance Corp., (Series C)..........
1,500 New York State Medical Care Facilities RB Baa1/BBB+ 02/15/03 6.000 1,546,950
Finance Agency, (Mental Health
Services, Refunding, Series F)........
1,000 New York State Medical Care Facilities RB Aaa/AAA 02/15/99(a) 7.800 1,080,580
Finance Agency, (Prerefunded, due
02/15/19).............................
1,565 New York State Medical Care Facilities RB Aaa/AAA 02/15/00(a) 7.450 1,713,299
Finance Agency, (St. Lukes Hospital,
Prerefunded, Series B, due 02/15/29),
FHA Insured...........................
2,000 New York State Power Authority, (Revenue RB Aa/AA- 01/01/03 6.625 2,166,700
& General Purpose, Refunding, Series
W)....................................
2,195 New York State Power Authority, (Revenue RB Aa/AA- 01/01/08 6.500 2,412,305
& General Purpose, Refunding, Series
W)....................................
3,000 New York State Thruway Authority, RB Aaa/AAA 04/01/04 6.250 3,219,210
(Highway & Bridge, Series A), MBIA
Insured...............................
1,050 New York State Thruway Authority, RB Aaa/AAA 04/01/02 5.375 1,075,148
(Highway & Bridge, Series B), FGIC
Insured...............................
2,000 New York State Thruway Authority, RB Baa1/BBB 04/01/05 6.000 2,060,120
(Service Contract, Local Highway &
Bridge)...............................
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
24
<PAGE>
THE NEW YORK TOTAL RETURN BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MARCH 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S
AMOUNT SECURITY S&P MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE (UNAUDITED) DATE RATE VALUE
- -------------- ---------------------------------------- -------- ------------ ------------ ------- -------------
<C> <S> <C> <C> <C> <C> <C>
NEW YORK (CONTINUED)
$ 2,470 New York State Urban Development Corp., RB Baa1/BBB 01/01/06 6.250% $ 2,576,136
(Center for Industrial Innovation,
Refunding)............................
1,155 New York State Urban Development Corp., RB Baa1/BBB 01/01/07 6.250 1,201,893
(Center for Industrial Innovation,
Refunding)............................
500 New York State Urban Development Corp., RB Aaa/NR 01/01/00(a) 7.750 550,250
(Correctional Capital Facilities,
Prerefunded, Series 1, due
01/01/14).............................
3,000 New York State Urban Development Corp., RB Aaa/NR 01/01/01(a) 6.500 3,191,880
(Correctional Capital Facilities,
Prerefunded, Series 2, due
01/01/21).............................
1,000 New York State Urban Development Corp., RB Baa1/BBB 01/01/99 4.300 994,670
(Correctional Capital Facilities,
Series 7).............................
2,635 New York State Urban Development Corp., RB A/A 01/01/06 6.000 2,764,431
(Sub-Lien, Refunding).................
2,715 New York State Urban Development Corp., RB A/A 07/01/06 6.000 2,854,307
(Sub-Lien, Refunding).................
5,250 New York State, (Refunding, Series A)... GO A2/A- 07/15/06 6.500 5,731,058
3,500 New York State, (Refunding, Series C)... GO A2/A- 10/01/04 6.000 3,703,210
2,000 Port Authority of New York & New Jersey, RB Aaa/AAA 07/15/06 6.000 2,115,000
(Series 108), FGIC Insured............
1,030 Suffolk County Water Authority, Water RB Aaa/AAA 06/01/00(a) 6.600 1,109,588
Systems Revenue, (Prerefunded, due
06/01/04), AMBAC Insured..............
1,000 Triborough Bridge & Tunnel Authority, RB Aa/A+ 01/01/11 6.000 1,050,660
(General Purpose, Series A)...........
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
25
<PAGE>
THE NEW YORK TOTAL RETURN BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MARCH 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S
AMOUNT SECURITY S&P MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE (UNAUDITED) DATE RATE VALUE
- -------------- ---------------------------------------- -------- ------------ ------------ ------- -------------
<C> <S> <C> <C> <C> <C> <C>
NEW YORK (CONTINUED)
$ 1,000 Triborough Bridge & Tunnel Authority, RB Aa/A+ 01/01/12 6.625% $ 1,114,170
(General Purpose, Series X)...........
1,500 Triborough Bridge & Tunnel Authority, RB Aa/A+ 01/01/07 5.900 1,577,025
(General Purpose, Series Y)...........
3,000 Triborough Bridge & Tunnel Authority, RB Aaa/A+ 01/01/01(a) 7.000 3,292,440
(Prerefunded, Series T, due
01/01/20).............................
1,000 Trust for Cultural Resources of the City PP NR/NR 10/01/01(a) 5.250 995,020
of New York, (Series 1997, due
01/01/05).............................
3,230 Yonkers, (Series C), AMBAC Insured...... GO Aaa/AAA 08/01/04 5.500 3,317,921
-------------
125,430,025
TOTAL NEW YORK......................
-------------
PUERTO RICO (7.7%)
8,000 Puerto Rico Commonwealth, GO Baa1/A 07/01/99 5.500 8,144,800
(Refunding)*..........................
3,000 University of Puerto Rico, (Refunding, RB Aaa/AAA 06/01/05 6.250 3,254,940
Series N), MBIA Insured...............
-------------
11,399,740
TOTAL PUERTO RICO...................
-------------
TEXAS (0.1%)
200 Austin, Water, Sewer & Electric Revenue, RB A/NR 11/15/97 13.500 211,684
(Escrowed to Maturity, Refunding).....
-------------
VIRGINIA (1.4%)
2,000 Virginia State Public Building RB Aa/AA 08/01/03 5.100 2,019,240
Authority.............................
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
26
<PAGE>
THE NEW YORK TOTAL RETURN BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MARCH 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S
AMOUNT SECURITY S&P MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION TYPE (UNAUDITED) DATE RATE VALUE
- -------------- ---------------------------------------- -------- ------------ ------------ ------- -------------
<C> <S> <C> <C> <C> <C> <C>
MISCELLANEOUS (1.8%)
$ 2,100 Mashantucket Western Pequot Tribe, RB Baa/BBB 09/01/01 6.250% $ 2,183,391
Special Revenue,
(Series A), 144A......................
500 Mashantucket Western Pequot Tribe, RB Baa/BBB 09/01/02 6.250 520,890
Special Revenue,
(Series A), 144A......................
-------------
2,704,281
TOTAL MISCELLANEOUS.................
-------------
154,950,973
TOTAL INVESTMENTS (COST $153,452,372) (104.8%)............................................
(7,027,989)
LIABILITIES IN EXCESS OF OTHER ASSETS (-4.8%).............................................
-------------
$ 147,922,984
NET ASSETS (100.0%).......................................................................
-------------
-------------
</TABLE>
- ------------------------------
Note: Based on the cost of investments of $153,452,372 for federal income tax
purposes at March 31, 1997, the aggregate gross unrealized appreciation and
depreciation was $2,069,992 and $571,391, respectively, resulting in net
unrealized appreciation of investments of $1,498,601.
(a) The date listed under the heading maturity date represents an optional
tender date. The actual maturity date is indicated in the security description.
Defintion of terms used:
AMBAC - Ambac Indemnity Corp., FHA - Federal Housing Authority, FGIC - Financial
Guaranty Insurance Company, FSA - Financial Security Assurance, GO - General
Obligation, MBIA - Municipal Bond Investors Assurance Corp., PP - Private
Placement, RB - Revenue Bond, SO - Special Obligation.
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 cancelled the old
issue.
144A--Securities restricted for resale to Qualified Institutional Buyers.
* When-issued--A conditional transaction in a security authorized for issuance
but not yet actually issued.
The Accompanying Notes are an Integral Part of the Financial Statements.
27
<PAGE>
THE NEW YORK TOTAL RETURN BOND PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $153,452,372 ) $154,950,973
Interest Receivable 2,370,644
Deferred Organization Expenses 4,627
Prepaid Trustees' Fees 367
Prepaid Expenses and Other Assets 322
------------
Total Assets 157,326,933
------------
LIABILITIES
Payable for Investments Purchased 8,207,431
Payable to Custodian 1,113,872
Advisory Fee Payable 38,600
Custody Fee Payable 11,729
Administrative Services Fee Payable 7,361
Administration Fee Payable 374
Fund Services Fee Payable 360
Accrued Expenses 24,222
------------
Total Liabilities 9,403,949
------------
NET ASSETS
Applicable to Investors' Beneficial Interests $147,922,984
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
28
<PAGE>
THE NEW YORK TOTAL RETURN BOND PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED MARCH 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest Income $6,579,985
EXPENSES
Advisory Fee $380,380
Custodian Fees and Expenses 61,316
Professional Fees and Expenses 47,258
Administrative Services Fee 37,675
Administration Fee 6,531
Fund Services Fee 5,302
Amortization of Organization Expense 2,305
Trustees' Fees and Expenses 2,200
Miscellaneous 3,218
--------
Total Expenses 546,185
----------
NET INVESTMENT INCOME 6,033,800
NET REALIZED LOSS ON INVESTMENTS (18,872)
NET CHANGE IN UNREALIZED DEPRECIATION OF
INVESTMENTS (401,871)
----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $5,613,057
----------
----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
29
<PAGE>
THE NEW YORK TOTAL RETURN BOND PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FISCAL FOR THE FISCAL
YEAR ENDED YEAR ENDED
MARCH 31, 1997 MARCH 31, 1996
-------------- --------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 6,033,800 $ 3,877,559
Net Realized Gain (Loss) on Investments (18,872) 547,038
Net Change in Unrealized Appreciation
(Depreciation) of Investments (401,871) 916,458
-------------- --------------
Net Increase in Net Assets Resulting from
Operations 5,613,057 5,341,055
-------------- --------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 71,063,672 45,071,889
Withdrawals (27,423,240) (10,574,756)
-------------- --------------
Net Increase from Investors' Transactions 43,640,432 34,497,133
-------------- --------------
Total Increase in Net Assets 49,253,489 39,838,188
NET ASSETS
Beginning of Fiscal Year 98,669,495 58,831,307
-------------- --------------
End of Fiscal Year $ 147,922,984 $ 98,669,495
-------------- --------------
-------------- --------------
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE
FISCAL YEAR FOR THE PERIOD
ENDED MARCH APRIL 11, 1994
31, (COMMENCEMENT OF
------------ OPERATIONS) TO
1997 1996 MARCH 31, 1995
---- ----- ----------------
<S> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Expenses 0.43% 0.44% 0.48%(a)
Net Investment Income 4.75% 4.72% 4.59%(a)
Decrease Reflected in Expense Ratio due to
Expense Reimbursement -- -- 0.03%(a)
Portfolio Turnover 35% 41% 63%
</TABLE>
- ------------------------
(a) Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
30
<PAGE>
THE NEW YORK TOTAL RETURN BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
- --------------------------------------------------------------------------------
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 State residents consistent with moderate risk of capital.
The Portfolio invests a significant amount of its assets in debt obligations
issued by political subdivisions and authorities in the State of New York. The
issuers' ability to meet their obligations may be affected by economic and
political developments within the State of New York. The Declaration of Trust
permits the Trustees to issue an unlimited number of beneficial interests in the
Portfolio.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual amounts could differ from
those estimates. The following is a summary of the significant accounting
policies of the Portfolio:
a)Portfolio securities are valued by an outside independent pricing service
approved by the Trustees. The value of each security for which readily
available market quotations exist is based on a decision as to the
broadest and most representative market for such security. The value of
such security will be based either on the last sale price on a national
securities exchange, or, in the absence of recorded sales, at the readily
available closing bid price on such exchanges, or at the quoted bid price
in the over-the-counter market. Because of the large number of municipal
bond issues outstanding and the varying maturity dates, coupons and risk
factors applicable to each issuer's bonds, no readily available market
quotations exist for most municipal securities. Securities or other assets
for which market quotations are not readily available are valued in
accordance with procedures established by the Portfolio's Trustees. Such
procedures include the use of comparable quality, coupon, maturity and
type, indications as to values from dealers, and general market
conditions. All portfolio securities with a remaining maturity of less
than 60 days are valued by the amortized cost method.
b)The Portfolio incurred organization expenses in the amount of $11,473.
These costs were deferred and are being amortized on a straight-line basis
over a 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 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 TOTAL RETURN BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1997
- --------------------------------------------------------------------------------
2. TRANSACTIONS WITH AFFILIATES
a)The Portfolio has an Investment Advisory Agreement with Morgan Guaranty
Trust Company of New York ("Morgan"). Under the terms of the agreement,
the Portfolio pays Morgan a fee at an annual rate of 0.30% of the
Portfolio's average daily net assets. For the fiscal year ended March 31,
1997, such fees amounted to $380,380.
b)The Portfolio had retained Signature Broker-Dealer Services, Inc.
("Signature") to serve as administrator and exclusive placement agent.
Under an Administration Agreement, Signature provided administrative
services necessary for the operations of the Portfolio, furnished office
space and facilities required for conducting the business of the Portfolio
and paid the compensation of the Portfolio's officers affiliated with
Signature. The agreement provided for a fee to be paid to Signature equal
to the Portfolio's proportionate share of a complex-wide charge 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 (the "Master Portfolios") in which The JPM Pierpont Funds, The
JPM Institutional Funds or The JPM Advisor Funds invest and 0.01% on the
aggregate average daily net assets of the Master Portfolios in excess of
$7 billion. The portion of this charge paid by the Portfolio was
determined by the proportionate share its net assets bore to the total net
assets of The JPM Pierpont Funds, The JPM Institutional Funds, The JPM
Advisor Funds and the Master Portfolios. For the period from April 1, 1996
through July 31, 1996, such fees amounted to $4,617. The Administration
Agreement with Signature was terminated July 31, 1996.
Effective August 1, 1996, certain administrative functions formerly
provided by Signature are provided by Funds Distributor, Inc. ("FDI"), a
registered broker-dealer, and by Morgan. FDI also serves as the
Portfolio's exclusive placement agent. Under a Co-Administration Agreement
between FDI and the Portfolio, the Portfolio has agreed to pay FDI fees
equal to its allocable share of annual complex-wide charge of $425,000
plus FDI's out-of-pocket expenses. The amount allocable to the Portfolio
is based on the ratio of the Portfolio's net assets to the aggregate net
assets of The JPM Pierpont Funds, The JPM Institutional Funds, The JPM
Advisor Funds, the Master Portfolios, JPM SeriesTrust and JPM Series Trust
II. For the period from August 1, 1996 through March 31, 1997, the fee for
these services amounted to $1,914.
On November 15, 1996, The JPM Advisor Funds terminated operations and were
liquidated. Subsequent to that date, the net assets of The JPM Advisor
Funds were no longer included in the calculation of the allocation of
FDI's fees.
c)The Portfolio has an Administrative Services Agreement (the "Services
Agreement") with Morgan under which Morgan is responsible for overseeing
certain aspects of the administration and operation of the Portfolio.
Under the Services Agreement, the Portfolio has agreed to pay Morgan a fee
equal to its proportionate share of an annual complex-wide charge. Until
July 31, 1996, this charge was 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 Master Portfolios'
aggregate average daily net assets in excess of $7 billion. The portion of
this charge paid by the Portfolio was determined by the proportionate
share its net assets bore to the net
32
<PAGE>
THE NEW YORK TOTAL RETURN BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1997
- --------------------------------------------------------------------------------
assets of the Master Portfolios and investors in the Master Portfolios for
which Morgan provided similar services. For the period from April 1, 1996
through July 31, 1996, the fee for these services amounted to $8,835.
Effective August 1, 1996, the Services Agreement was amended such that the
annual complex-wide charge is calculated daily based on the aggregate net
assets of the Master Portfolios and JPM Series Trust in accordance with
the following annual schedule: 0.09% on the first $7 billion of their
aggregate average daily net assets and 0.04% of their aggregate average
daily net assets in excess of $7 billion, less the complex-wide fees
payable to FDI. The portion of this charge paid by the Portfolio is
determined by the proportionate share that its net assets bear to the net
assets of the Master Portfolios, investors in the Master Portfolios for
which Morgan provides similar services, and JPM Series Trust. For the
period from August 1, 1996 through March 31, 1997, the fee for these
services amounted to $28,840.
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 $5,302 for the fiscal year ended March 31, 1997.
e)An aggregate annual fee of $65,000 is paid to each Trustee for serving as
a Trustee of The JPM Pierpont Funds, The JPM Institutional Funds, the
Master Portfolios and JPM Series Trust. The Trustees' Fees and Expenses
shown in the financial statements represents the Portfolio's allocated
portion of the total fees and expenses. The Portfolio's Chairman and Chief
Executive Officer also serves as Chairman of Group and 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, 1997, were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
------------ -----------
<S> <C> <C>
Municipal Obligations............................ $ 99,205,542 $40,973,477
U.S. Government and Agency Obligations........... 2,376,172 2,452,734
------------ -----------
$101,581,714 $43,426,211
------------ -----------
------------ -----------
</TABLE>
33
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Investors of
The New York Total Return Bond Portfolio
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the supplementary data present fairly, in all material
respects, the financial position of The New York Total Return Bond Portfolio
(the "Portfolio") at March 31, 1997, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and supplementary data for each of the two years in the period
then ended and for the period April 11, 1994 (commencement of operations) to
March 31, 1995 in conformity with generally accepted accounting principles.
These financial statements and supplementary data (hereafter referred to as
"financial statements") are the responsibility of the Portfolio's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at March
31, 1997 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
PRICE WATERHOUSE LLP
New York, New York
May 14, 1997
34
