<PAGE>
THE NEW YORK TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS
JULY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/
PRINCIPAL SECURITY S&P
AMOUNT TYPE RATING MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION (UNAUDITED) (UNAUDITED) DATE RATE VALUE
-------------- ---------------------------------------- ----------- ----------------- ----------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
LONG-TERM INVESTMENTS (95.6%)
ARIZONA (2.0%)
$ 6,000 Arizona Healthcare Facilities Authority
(Catholic Healthcare Revenue,
Series A)............................. RB Baa1/BBB+ 07/01/09 6.125% $ 5,970,000
------------
ILLINOIS (1.0%)
3,000 Illinois Development Finance
Authority............................. PP NR/NR 08/01/28 4.350 2,979,600
------------
MASSACHUSETTS (1.7%)
5,000 Massachusetts, (Consolidation Loan,
Series B)............................. GO Aa2/AA- 06/01/13 5.750 5,210,700
------------
MICHIGAN (2.6%)
2,334 City of Detroit Public School........... PP NR/NR 10/15/01 5.485 2,340,636
365 City of Detroit Public School, (Public
Power Revenue)........................ PP NR/NR 10/15/00 6.360 366,147
5,000 Michigan State Hospital, (Finance
Authority Revenue, Ascension Health
Credit, Series B)..................... RB Aa2/AA 11/15/33 5.300 5,016,250
------------
TOTAL MICHIGAN...................... 7,723,033
------------
NEW YORK (85.9%)
6,895 Babylon Industrial Development Agency,
(Civic Facilities Revenue, Series A),
AMBAC Insured......................... RB Aaa/AAA 08/01/19 6.625 7,493,762
4,200 City University of New York, (John Jay
College, Refunding), MBIA-IBC
Insured............................... RB Aaa/AAA 08/15/05 5.750 4,403,742
5,710 Long Island Power Authority, (Electric
Systems Revenue), FSA Insured......... RB Aaa/AAA 04/01/04 4.000 5,524,025
4,000 Metropolitan Transporation Authority,
(Commuter Facilities Revenue,
Refunding, Series D), MBIA Insured.... RB Aaa/AAA 07/01/06 6.000 4,264,720
5,500 Metropolitan Transportation Authority,
(Dedicated Tax Fund, Series A), MBIA
Insured............................... RB Aaa/AAA 04/01/11 6.250 6,069,855
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE NEW YORK TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JULY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/
PRINCIPAL SECURITY S&P
AMOUNT TYPE RATING MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION (UNAUDITED) (UNAUDITED) DATE RATE VALUE
-------------- ---------------------------------------- ----------- ----------------- ----------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
NEW YORK (CONTINUED)
$ 1,065 Monroe County, (Public Improvement,
Escrowed to Maturity, Series 1995),
AMBAC Insured......................... GO Aaa/AAA 06/01/08 5.875% $ 1,145,365
65 Monroe County, (Public Improvement,
Unrefunded Balance, Series 1995),
AMBAC Insured......................... GO Aaa/AAA 06/01/08 5.875 69,905
5,000 Municipal Assistance Corp. for the City
of New York (Series H)................ RB Aa2/AA 07/01/05 6.000 5,293,600
2,150 Municipal Assistance Corp. for the City
of New York, (Refunding, Series G).... RB Aa2/AA 07/01/05 6.000 2,276,248
1,460 New York City Industrial Development
Agency, (Civil Facilities Revenue,
YMCA Greater New York Project)........ RB Baa3/NR 08/01/05 6.000 1,487,214
1,000 New York City Industrial Development
Agency, (IDR, Brooklyn Navy Yard,
Cogen Partners, Refunding)............ RB Baa3/BBB- 10/01/22 6.200 969,270
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 5,455,250
4,000 New York City Transitional Finance
Authority, (Future Tax Secured,
Series B)............................. RB Aa3/AA 11/15/14 6.125 4,277,480
695 New York City, (Prerefunded, Series D,
due 02/15/07)......................... GO A3/A- 02/15/05(a) 5.750 732,718
750 New York City, (Series G), AMBAC
Insured............................... GO Aaa/AAA 02/01/06 5.750 786,067
1,000 New York City, (Series G), MBIA-IBC
Insured............................... GO Aaa/AAA 02/01/09 6.750 1,123,080
4,000 New York City, (Series I), MBIA
Insured............................... GO Aaa/AAA 04/15/07 6.250 4,328,360
2,610 New York City, (Unrefunded Balance,
Series A)............................. GO A3/A- 08/01/00 6.000 2,610,000
4,305 New York City, (Unrefunded Balance,
Series D)............................. GO A3/A- 02/15/07 5.750 4,483,012
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE NEW YORK TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JULY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/
PRINCIPAL SECURITY S&P
AMOUNT TYPE RATING MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION (UNAUDITED) (UNAUDITED) DATE RATE VALUE
-------------- ---------------------------------------- ----------- ----------------- ----------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
NEW YORK (CONTINUED)
$10,000 New York Convention Center Operating
Corp., (Yale Building Acquisition
Project).............................. PP NR/NR 12/01/04 6.500% $ 10,147,700
6,330 New York Office of Temporary and
Disability Assistance................. PP NR/NR 07/01/04 5.210 6,330,700
4,083 New York Office of Temporary and
Disability Assistance, (General
Obligation)........................... PP NR/NR 03/31/05 4.480 4,079,658
4,375 New York State.......................... GO A2/A+ 03/01/07 6.000 4,670,094
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 4,761,724
2,280 New York State Dormitory Authority,
(Columbia University)................. RB Aaa/AAA 07/01/07 5.250 2,353,028
3,745 New York State Dormitory Authority,
(Concord Nursing Home)................ RB A1/NR 07/01/16 6.250 3,878,884
2,000 New York State Dormitory Authority,
(Cornell University, Refunding)....... RB Aa1/AA+ 07/01/08 5.300 2,066,580
5,650 New York State Dormitory Authority,
(Mental Health Services Facilities,
Refunding, Series B).................. RB A3/A 02/15/06 6.000 5,952,049
2,500 New York State Dormitory Authority, (New
York Presbyterian Hospital), AMBAC-FHA
Insured............................... RB Aaa/AAA 08/01/13 4.400 2,448,850
2,000 New York State Dormitory Authority, (New
York University, Series A), MBIA
Insured............................... RB Aaa/AAA 07/01/06 5.000 2,030,140
2,000 New York State Dormitory Authority,
(North General Hospital, Refunding,
Series G)............................. RB Baa1/A 02/15/05 5.500 2,039,140
2,530 New York State Dormitory Authority,
(North Shore University Hospital,
Refunding), MBIA Insured.............. RB Aaa/AAA 11/01/10 5.500 2,631,200
3,450 New York State Dormitory Authority,
(Pratt Institute)..................... RB NR/AA 07/01/14 6.250 3,684,910
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE NEW YORK TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JULY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/
PRINCIPAL SECURITY S&P
AMOUNT TYPE RATING MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION (UNAUDITED) (UNAUDITED) DATE RATE VALUE
-------------- ---------------------------------------- ----------- ----------------- ----------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
NEW YORK (CONTINUED)
$ 1,500 New York State Dormitory Authority,
(State University Educational
Facilities, Refunding, Series A)...... RB A3/A 05/15/04 6.500% $ 1,590,315
3,000 New York State Dormitory Authority,
(State University Educational
Facilities, Refunding, Series A), FGIC
Insured............................... RB Aaa/AAA 05/15/11 5.875 3,220,530
1,210 New York State Dormitory Authority,
(University of Rochester,
Series A)............................. RB A1/A+ 07/01/06 6.500 1,318,392
3,000 New York State Environmental Facilities
Corp., (PCR, State Water, Revolving
Fund, New York City Municipal
Water)................................ RB Aa1/AA+ 06/15/08 5.750 3,187,020
3,000 New York State Environmental Facilities
Corp., (PCR, State Water, Revolving
Fund, New York City Municipal
Water)................................ RB Aa1/AA+ 06/15/12 5.750 3,190,080
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 10,686,000
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 5,322,150
5,110 New York State Environmental Facilities
Corp., (State Clean Water and
Drinking, Revolving Funds,
Series B)............................. RB Aaa/AAA 07/15/14 5.700 5,279,908
5,500 New York State Environmental Facilities
Corp., (State Clean Water and
Drinking, Revolving Funds,
Series C)............................. RB Aa1/AA- 06/15/12 5.250 5,531,515
10,000 New York State Local Government
Assistance Corp., (Prerefunded,
Series C, due 04/01/18)............... RB Aaa/AA- 04/01/02(a) 6.250 10,483,500
8,350 New York State Local Government
Assistance Corp., (Refunding,
Series E)............................. RB A3/AA- 04/01/14 6.000 8,977,920
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
23
<PAGE>
THE NEW YORK TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JULY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/
PRINCIPAL SECURITY S&P
AMOUNT TYPE RATING MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION (UNAUDITED) (UNAUDITED) DATE RATE VALUE
-------------- ---------------------------------------- ----------- ----------------- ----------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
NEW YORK (CONTINUED)
$ 500 New York State Medical Care Facilities,
(Finance Agency Revenue, Prerefunded,
Series F, due 08/15/15), FHA
Insured............................... RB Aa2/AA 08/15/05(a) 6.200% $ 528,575
2,000 New York State Power Authority, (Revenue
& General Purpose, Escrowed to
Maturity, Series W)................... RB Aaa/AAA 01/01/03 6.625 2,097,380
6,000 New York State Power Authority, (Revenue
& General Purpose, Prerefunded,
Series AA, due 01/01/23).............. RB Aaa/AAA 01/01/02(a) 6.250 6,265,380
3,770 New York State Thruway Authority,
(Highway & Bridge, Series A), FSA
Insured............................... RB Aaa/AAA 04/01/14 6.000 4,019,197
500 New York State Thruway Authority,
(Highway & Bridge, Series B), MBIA
Insured............................... RB Aaa/AAA 04/01/05 6.000 527,760
5,105 New York State Thruway Authority,
(Highway & Bridge, Series C), FGIC
Insured............................... RB Aaa/AAA 04/01/08 5.500 5,321,758
2,000 New York State Thruway Authority,
(Service Contract Revenue, Local
Highway & Bridge)..................... RB Baa1/A 04/01/05 6.000 2,095,680
2,000 New York State Thruway Authority,
(Service Contract Revenue, Local
Highway & Bridge)..................... RB Baa1/A 04/01/04 5.500 2,049,720
4,950 New York State Thruway Authority,
(Service Contract Revenue, Local
Highway & Bridge, Prerefunded, due
04/01/15)............................. RB Baa1/NR 04/01/05(a) 6.450 5,407,776
2,470 New York State Urban Development Corp.,
(Center for Industrial Innovation,
Refunding)............................ RB Baa1/A 01/01/06 6.250 2,624,795
2,000 New York State Urban Development Corp.,
(Correctional Capital Facilities,
Series 6)............................. RB Baa1/A 01/01/03 6.000 2,056,680
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
24
<PAGE>
THE NEW YORK TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JULY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/
PRINCIPAL SECURITY S&P
AMOUNT TYPE RATING MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION (UNAUDITED) (UNAUDITED) DATE RATE VALUE
-------------- ---------------------------------------- ----------- ----------------- ----------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
NEW YORK (CONTINUED)
$ 2,000 New York State Urban Development Corp.,
(Senior Lien)......................... RB Aaa/AAA 07/01/09 5.750% $ 2,113,160
2,635 New York State Urban Development Corp.,
(Subordinated Lien, Refunding)........ RB A2/A 01/01/06 6.000 2,772,995
5,250 New York State, (Refunding,
Series A)............................. GO A2/A+ 07/15/06 6.500 5,725,965
1,350 New York State, (Refunding,
Series C)............................. GO A2/A+ 10/01/04 6.000 1,419,579
1,395 Niagra Falls, (City School District,
High School Facility)................. RB Baa2/BBB- 06/15/06 5.625 1,420,696
1,000 Orange County, (Refunding).............. GO Aa2/NR 11/15/04 5.500 1,035,270
3,600 Port Authority of New York and New
Jersey, (Delta Air Lines Inc. Project,
Series 1R)............................ RB Baa3/BBB- 06/01/08 6.950 3,759,552
4,365 Suffolk County, (Southwest Sewer
District, Refunding), MBIA Insured.... GO Aaa/AAA 02/01/08 6.000 4,688,839
3,690 Tobacco Settlement Asset Securitization
Corp. Inc., (Tobacco Flexible
Amortization Bonds, Series 1)......... RB Aa1/A+ 07/15/06 4.800 3,668,340
4,175 Tobacco Settlement Asset Securitization
Corp. Inc., (Tobacco Flexible
Amortization Bonds, Series 1)......... RB Aa1/A+ 07/15/07 4.875 4,166,024
2,690 Tobacco Settlement Asset Securitization
Corp. Inc., (Tobacco Flexible
Amortization Bonds, Series 1)......... RB Aa1/A+ 07/15/08 5.000 2,690,646
1,500 Triborough Bridge & Tunnel Authority,
(General Purpose, Refunding,
Series Y)............................. RB Aa3/A+ 01/01/07 5.900 1,594,140
3,960 Triborough Bridge & Tunnel Authority,
(Special Obligation, Refunding,
Series A), FGIC Insured............... RB Aaa/AAA 01/01/07 5.500 4,115,153
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
25
<PAGE>
THE NEW YORK TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JULY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/
PRINCIPAL SECURITY S&P
AMOUNT TYPE RATING MATURITY
(IN THOUSANDS) SECURITY DESCRIPTION (UNAUDITED) (UNAUDITED) DATE RATE VALUE
-------------- ---------------------------------------- ----------- ----------------- ----------- ------ ------------
<C> <S> <C> <C> <C> <C> <C>
NEW YORK (CONTINUED)
$ 2,000 Trust for Cultural Resources of the City
of New York, (Public Power Revenue,
Series 1999).......................... PP NR/NR 01/01/08 4.600% $ 1,962,740
3,230 Yonkers, (Series C), AMBAC Insured...... GO Aaa/AAA 08/01/04 5.500 3,325,479
------------
TOTAL NEW YORK...................... 256,108,939
------------
NORTH CAROLINA (1.8%)
5,000 North Carolina Municipal Power Agency,
(Catawba Electric Revenue,
Series B)............................. RB Baa1/BBB+ 01/01/08 6.375 5,244,400
------------
PUERTO RICO (0.6%)
1,637 Commonwealth of Puerto Rico, (General
Obligation)........................... PP NR/NR 12/04/03 7.469 1,709,799
------------
TOTAL LONG TERM INVESTMENTS (COST $281,811,119).......................................... 284,946,471
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
26
<PAGE>
THE NEW YORK TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JULY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY DESCRIPTION VALUE
------------- ---------------------------------------- ------------
<C> <S> <C>
SHORT-TERM INVESTMENTS (5.2%)
OTHER INVESTMENT COMPANIES (5.2%)
15,374,680 J.P. Morgan Institutional Tax Exempt
Money Market Fund*
(cost $15,374,680).................... $ 15,374,680
------------
TOTAL INVESTMENTS (COST $297,185,799)
(100.8%).............................. 300,321,151
LIABILITIES IN EXCESS OF OTHER ASSETS
(-0.8%)............................... (2,356,381)
------------
NET ASSETS (100.0%)..................... $297,964,770
============
</TABLE>
------------------------------
Note: Based on the cost of investments of $297,195,259 for federal income tax
purposes at July 31, 2000, the aggregate gross unrealized appreciation and
depreciation was $3,841,189 and $715,297, respectively, resulting in net
unrealized appreciation of investments of $3,125,892.
(a)The date listed under the heading maturity date represents an optional tender
date or the next interest rate reset date. The final maturity date is
indicated in the security description.
AMBAC - Ambac Indemnity Corp., FGIC - Financial Guaranty Insurance Company,
FHA - Federal Housing Authority, FSA - Financial Security 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.
*Money Market mutual fund registered under the Investment Act of 1940, as
amended and advised by J.P. Morgan Investment Management, Inc.
Escrowed to Maturity: Bonds for which cash and/or securities have been deposited
with a third party to cover payments of principal and interest at the maturity
which coincides with the first call date of the first bond.
The Accompanying Notes are an Integral Part of the Financial Statements.
27
<PAGE>
THE NEW YORK TAX EXEMPT BOND PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $297,185,799 ) $300,321,151
Interest Receivable 3,805,002
Prepaid Trustees' Fees 556
Prepaid Expenses and Other Assets 5,285
------------
Total Assets 304,131,994
------------
LIABILITIES
Payable to Custodian 15,114
Payable for Investments Purchased 6,002,667
Advisory Fee Payable 74,542
Administrative Services Fee Payable 6,016
Fund Services Fee Payable 254
Administration Fee Payable 127
Accrued Expenses 68,504
------------
Total Liabilities 6,167,224
------------
NET ASSETS
Applicable to Investors' Beneficial Interests $297,964,770
============
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
28
<PAGE>
THE NEW YORK TAX EXEMPT BOND PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED JULY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest Income $13,521,221
EXPENSES
Advisory Fee $809,418
Administrative Services Fee 68,240
Custodian Fees and Expenses 57,594
Professional Fees and Expenses 39,613
Fund Services Fee 4,457
Trustees' Fees and Expenses 2,921
Administration Fee 1,981
Miscellaneous 13,150
--------
Total Expenses 997,374
-----------
NET INVESTMENT INCOME 12,523,847
NET REALIZED LOSS ON INVESTMENTS (3,934,965)
NET CHANGE IN UNREALIZED APPRECIATION OF
INVESTMENTS 3,738,355
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $12,327,237
===========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
29
<PAGE>
THE NEW YORK TAX EXEMPT BOND PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FISCAL FOR THE FOUR FOR THE FISCAL
YEAR ENDED MONTHS ENDED YEAR ENDED
JULY 31, 2000 JULY 31, 1999 MARCH 31, 1999
-------------- ------------- --------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 12,523,847 $ 4,079,089 $ 11,297,890
Net Realized Loss on Investments (3,934,965) (774,564) 2,712,515
Net Change in Unrealized Appreciation
(Depreciation) of Investments 3,738,355 (7,106,907) 142,962
------------- ------------ -------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 12,327,237 (3,802,382) 14,153,367
------------- ------------ -------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 90,169,287 30,864,819 162,950,459
Withdrawals (81,529,772) (70,994,351) (53,185,304)
------------- ------------ -------------
Net Increase (Decrease) from Investors'
Transactions 8,639,515 (40,129,532) 109,765,155
------------- ------------ -------------
Total Increase (Decrease) in Net Assets 20,966,752 (43,931,914) 123,918,522
NET ASSETS
Beginning of Period 276,998,018 320,929,932 197,011,410
------------- ------------ -------------
End of Period $ 297,964,770 $276,998,018 $ 320,929,932
============= ============ =============
</TABLE>
--------------------------------------------------------------------------------
SUPPLEMENTARY DATA
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR
FOR THE FISCAL FOR THE FOUR ENDED MARCH 31,
YEAR ENDED MONTHS ENDED ----------------------
JULY 31, 2000 JULY 31, 1999 1999 1998 1997 1996
-------------- ------------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Net Expenses 0.36% 0.40%(a) 0.38% 0.40% 0.43% 0.44%
Net Investment Income 4.52% 4.10%(a) 4.26% 4.62% 4.75% 4.72%
Portfolio Turnover 86% 8%(b) 44% 51% 35% 41%
</TABLE>
------------------------
(a) Annualized.
(b) Not annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
30
<PAGE>
THE NEW YORK TAX EXEMPT BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
JULY 31, 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 accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts and disclosures. Actual amounts
could differ from those estimates. The following is a summary of the significant
accounting policies of the portfolio:
a) The portfolio values securities that are listed on an exchange using
prices supplied daily by an independent pricing service that are based on
the last traded price on a national securities exchange or in the absence
of recorded trades, at the readily available bid price on such exchange,
if such exchange or market constitutes the broadest and most
representative market for the security. Independent pricing service
procedures may also include the use of prices based on yields or prices of
securities of comparable quality, coupon, maturity and type, indications
as to values from dealers, operating data, and general market conditions.
Unlisted securities are valued at the quoted bid price in the over-the-
counter market provided by a principal market maker or dealer. If prices
are not supplied by the portfolio's independent pricing service or
principal market maker or dealer, such securities are priced using fair
values in accordance with procedures adopted by the portfolio's trustees.
All short-term portfolio securities with a remaining maturity of sixty
days or less are valued using 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.
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"), a wholly
31
<PAGE>
THE NEW YORK TAX EXEMPT BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JULY 31, 2000
--------------------------------------------------------------------------------
owned subsidiary of J.P. Morgan & Co. Incorporated ("J.P. Morgan"). Under
the terms of the agreement, the portfolio paid Morgan at an annual rate of
0.30% of the portfolio's average daily net assets. For the fiscal year
ended July 31, 2000, such fees amounted to $828,790.
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,
shareholder servicing, and administrative services fees. For the fiscal
year ended July 31, 2000, J.P. Morgan has agreed to reimburse the fund
$19,372 under this agreement. Interest income included in the Statement of
Operations for the year ended July 31, 2000 includes $253,500 of interest
income from investment in affiliated money market funds.
b) The trust on behalf of 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 fiscal year
ended July 31, 2000, the fee for these services amounted to $1,981.
c) The trust on behalf of 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 fiscal year ended July 31, 2000, the fee for
these services amounted to $68,240.
d) The trust on behalf of 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. For the fiscal year ended July 31, 2000, the portfolio's allocated
portion of Group's costs in performing its services amounted to $4,457.
32
<PAGE>
THE NEW YORK TAX EXEMPT BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JULY 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
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 $800.
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the fiscal year
ended July 31, 2000 were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
--------- ------------
<S> <C>
$252,339,102..... $229,215,772
</TABLE>
4. CREDIT AGREEMENT
The portfolio is party to a revolving line of credit agreement as discussed more
fully in Note 4 of the fund's Notes to the Financial Statements which are
included elsewhere in this report.
33
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Investors of
The New York Tax Exempt Bond Portfolio
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the supplementary data present fairly, in all material
respects, the financial position of The New York Tax Exempt Bond Portfolio (the
"portfolio") at July 31, 2000, the results of its operations for the year then
ended, and the changes in its net assets for the year then ended, for the four
months ended July 31, 1999 and for the year ended March 31, 1999 and the
supplementary data for the year then ended, for the four months ended July 31,
1999 and for the four years ended March 31, 1999, in conformity with accounting
principles generally accepted in the United States. 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 auditing standards
generally accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities at July 31,
2000 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
September 15, 2000
34
