(front cover)
J.P. Morgan Institutional
New York Tax Exempt Bond Fund
Semiannual Report
January 31, 2001
LETTER TO THE SHAREHOLDERS
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February 20, 2001
Dear Shareholder,
We are pleased to report to you that the J.P. Morgan Institutional New York
Tax Exempt Bond Fund outperformed its benchmark, the Lehman Brothers 1-16 year
Municipal Bond Index, for the six months ended January 31, 2001. The Fund
provided a total return of 6.02% for the semiannual period, while the index had
a total return of 5.77% for the same time period.
The Fund was also competitive with its peer group, as measured by the Lipper
New York Intermediate Municipal Debt Funds Average. For the six months ended
January 31, 2001, the Fund's peer group had a total return of 6.06%
The J.P. Morgan Institutional New York Tax Exempt Bond Fund's 30-day SEC
yield as of January 31, 2001 was 3.97%. This is equivalent to a taxable yield of
6.57% for an investor in the top federal income tax bracket of 39.6%.
The Fund's net asset value on January 31, 2001 was $10.78, an increase from
$10.40 at the start of the fiscal year. During the past six months, the Fund
distributed approximately $0.24 per share from ordinary income, all of which
was exempt from federal income tax.
On the following pages, portfolio manager Robert Meiselas discusses the
fixed income market in detail. Robert also explains the factors that influenced
Fund performance during the period, and provides insight in regard to
positioning the Portfolio for the coming months.
As chairman and president of Asset Management Services, we appreciate your
investment in the Fund. If you have any comments or questions, please contact
your Morgan representative, or call J.P. Morgan Funds Services at
(800) 766-7722.
Sincerely yours,
/signature/ /signature/
Ramon de Oliveira Keith M. Schappert
Chairman of Asset Management Services President of Asset Management Services
J.P. Morgan Chase & Co. J.P. Morgan Chase & Co.
TABLE OF CONTENTS
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Letter to the Shareholders 1
Fund Performance 2
Portfolio Manager Q&A 3
Fund Facts & Portfolio Highlights 5
Financial Statements 6
1
FUND PERFORMANCE
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EXAMINING PERFORMANCE
One way to look at performance is to review a fund's average annual total
return. This calculation takes the fund's actual return and shows what would
have happened if the fund had achieved that return by performing at a constant
rate each year. Average annual total returns represent the average yearly change
of a fund's value over various time periods, typically one, five, and ten years,
(or since inception). Total returns for periods of less than one year are not
annualized and provide a picture of how a fund has performed over the
short-term.
PERFORMANCE
TOTAL AVERAGE ANNUAL
RETURNS TOTAL RETURNS
--------------------- ---------------------------------
SIX ONE THREE FIVE SINCE
MONTHS YEAR YEARS YEARS INCEPTION*
AS OF JANUARY 31, 2001
J.P. Morgan Institutional New York Tax
Exempt Bond Fund 6.02% 10.95% 4.80% 5.15% 6.00%
Lehman Brothers 1-16 year Municipal
Bond Index** 5.77% 10.94% 5.21% 5.60% 6.42%
Lipper New York Intermediate
Municipal Debt Funds Average*** 6.06% 11.42% 4.54% 4.91% 5.50%
AS OF DECEMBER 31, 2000
J.P. Morgan Institutional New York Tax
Exempt Bond Fund 5.97% 9.26% 4.63% 5.15% 5.88%
Lehman Brothers 1-16 year Municipal
Bond Index** 5.57% 9.32% 5.10% 5.53% 6.30%
Lipper New York Intermediate
Municipal Debt Funds Average*** 6.05% 9.63% 4.42% 4.84% 5.39%
* The Fund commenced operations on April 11, 1994, and has provided an
average annual total return of 5.96% from that date through January 31, 2001.
For the purpose of comparison, the "since inception" returns in the table
above are calculated from April 30, 1994, the first date when data for the
Fund, its benchmark, and its Lipper category average were all available.
** Prior to May 1, 1997 the benchmark was the Lehman Brothers 1-15 year
Municipal Bond Index. Commencing May 1, 1997 the benchmark is the Lehman
Brothers 1-16 year Municipal Bond Index. Both are unmanaged indices that
measure municipal bond market performance. They do not include fees or
expenses and are not available for actual investment.
***Describes the average annual total return for all funds in the indicated
Lipper category, as defined by Lipper Inc., and does not take into account
applicable sales charges. Lipper Analytical Services, Inc. is a leading source
for mutual fund data.
Past performance is no guarantee of future results. Fund returns are net
of fees, assume the reinvestment of distributions, and reflect reimbursement
of certain fund and portfolio expenses as described in the prospectus. Had
expenses not been subsidized, returns would have been lower.
2
PORTFOLIO MANAGER Q&A
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Following is an interview with Robert Meiselas, who along with Benjamin S.
Thompson and Kingsley Wood Jr., manages the J.P. Morgan Institutional New York
Tax Exempt Bond Fund. This interview was conducted on February 16, 2001, and
reflects Robert's views on that date.
[photo of Robert Meiselas]
ROBERT MEISELAS, vice president, is a portfolio manager with the Tax Aware
Fixed Income Group responsible for managing municipal bonds, including tax
exempt private placements. Bob is a CPA and joined Morgan's financial group in
1982, after having spent 10 years at Coopers & Lybrand. He also spent five
years in J.P. Morgan's Private Banking Investment Management Group, and moved to
J.P. Morgan Investment Management in 1997. Bob is a graduate of St. John's
University and has completed graduate work in taxation at Long Island
University.
[photo of Benjamin S. Thompson]
BENJAMIN S. THOMPSON, vice president, is a senior fixed income portfolio
manager and head of J.P. Morgan's municipal bond strategies. His
responsibilities include coordination of strategy and research, portfolio
structuring, and trade execution for the Tax Aware Fixed Income Group. Prior to
joining Morgan in 1999, Ben was a senior fixed income portfolio manager at
Goldman Sachs Asset Management. Earlier, he was with the Structured Finance
Group of Chase Manhattan Bank. He holds a B.A. in Economics from Colorado
College.
[photo of Kingsley Wood, Jr.]
KINGSLEY (KIT) WOOD, JR., vice president, is a portfolio manager in the Tax
Aware Fixed Income Group. Prior to becoming a J.P. Morgan Investment
Management employee in 2000, he worked at Mercantile Bank & Trust (MSD&T Funds)
in Baltimore, MD as a portfolio manager where he managed all institutional
tax-exempt assets (mutual funds and separate accounts). Prior to that, he was a
sell-side institutional trader at ABN-AMRO Bank and Kemper Securities in
Chicago. Kit holds a B.A. from the University of Colorado, and has completed
graduate work towards an M.B.A. at the University of Maryland.
WHAT EVENTS IMPACTED THE FIXED INCOME MARKETS, GENERALLY, AND THE MUNICIPAL BOND
MARKET, SPECIFICALLY, OVER THE LAST SIX MONTHS?
The fixed income markets began the period on a volatile note after a period
of rising interest rates, and ended in a rally as interest rates declined. By
and large, the most significant factor was the Federal Reserve shifting its
interest rate stance from tightening to easing, and the subsequent recognition
by the bond market that U.S. economic growth slowed more than anticipated.
At the outset of this reporting period, there was some question as to
whether the Federal Reserve would continue to increase interest rates and
whether the previous rate increases were actually slowing the economy to the
much-discussed "soft landing" that everyone desired.
As we moved through autumn, investors became confident that the economy was,
indeed, slowing. Near year-end, however, it became evident the economy might be
slowing more than originally desired. In response, the Fed acted quickly and cut
interest rates by 50 basis points during the first week of January. The Fed then
followed with another 50 basis point cut on January 31, 2001, the last day of
this reporting period.
Bonds generally performed well in this environment. Prices in most fixed
income markets trended upward. In the end, performance was driven by whether you
were appropriately positioned as market expectations vacillated and whether you
were invested in the right bonds at the right time as the economic scenario
unfolded.
Another significant occurrence was the volatility experienced by the stock
market throughout the period. Stock market volatility led to increased retail
awareness of bonds, as investors sought safe havens for their equity-related
gains. This propelled the municipal bond market, in particular, as municipal
bonds pay attractive returns for investors attempting to lower their tax bill.
3
PORTFOLIO MANAGER Q&A
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(Continued)
HOW DID THESE THEMES PLAY OUT IN NEW YORK?
The supply of New York bonds has been much lower than in previous years, and
this lack of supply, along with consistent demand, drove prices upward. Also,
Standard & Poor's upgraded its rating for New York State general obligation
bonds from A to AA, which added to the appeal of New York munis.
WHY HAS SUPPLY BEEN A PROBLEM IN NEW YORK?
New York has traditionally been one of the most prolific issuers of debt in
the United States. Essentially, this debt was needed to finance the massive
infrastructure needs of a relatively large population. Also, a large portion of
the new debt was issued to retire older, more costly bond issues that were
already outstanding. Now, thanks to the creation of wealth from our strong
economy, tax revenues have increased markedly. Therefore, the need to borrow
money to finance projects is not the same as it used to be. In the past, for
example, the state might go to market for several billions of dollars at
different times during the year. Lately, however, we've seen only a fraction of
this activity. Aside from supply-related problems, we note that retail demand is
steadily increasing, which results in more pressure in a tight market that is
getting tighter.
HOW WAS THE FUND POSITIONED DURING THE LAST SIX MONTHS?
Although we forecasted an eventual decline in interest rates, we tempered
our bullish outlook to allow for market uncertainty. Throughout this period,
the Fund performed well during periods when interest rates declined and also
out-performed the competition when market uncertainty drove interest rates
upward. A key element of our strategy was a long duration position, amplified
through the addition of zero coupon and market discount bonds, which respond
best to a decline in rates. We continued to add higher-yielding private
placements to the portfolios and maintained a bias toward bonds of higher credit
quality due to the narrow credit spreads prevailing in the marketplace.
HAS YOUR POSITIONING PAID OFF THE WAY YOU EXPECTED?
Not always, but much of the time. While our bias toward higher quality bonds
did not add significantly to performance during the period, we believe it will
buffer the Fund when the bond market begins to weaken. We think that, as a
general rule, our positioning in the market has made us less susceptible to NAV
declines during a downturn. Because we are tax aware and don't take gains
purely to provide marginally higher returns, and because we are not structurally
as long as some other similar type funds, longer funds may have a higher return
every now and then.
HOW ARE YOU POSITIONING THE PORTFOLIO TO PROSPER IN THE MONTHS AHEAD?
After a good rally, we believe that the strong bull market for bonds may be
starting to wane. In our view, the Federal Reserve has signaled that it will
act vigorously to prevent the U.S. economy from sinking into recession.
Consequently, investors may not continue their aggressive buying of U.S.
government bonds as a safe haven investment. Due to current technical factors in
the municipal bond market, we don't believe that municipal bond prices will
significantly weaken. Nevertheless, in order to avoid taking undue risk, we have
repositioned the portfolio to de-emphasize holdings that could rapidly decline
in value should interest rates spike. In view of the tight spreads that
currently prevail in the market, we will continue to emphasize high-quality
securities.
4
FUND FACTS
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INVESTMENT OBJECTIVE
J.P. Morgan Institutional New York Tax Exempt Bond Fund seeks to provide a
high level of tax-exempt income for New York residents consistent with moderate
risk of capital. It is designed for investors subject to federal and New York
State income taxes who seek a high level of income which is free from federal,
state, and New York City personal income taxes.
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Inception Date: 4/11/1994
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Fund Net Assets as of 1/31/2001:
$196,077,880
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Portfolio Net Assets as of 1/31/2001:
$326,782,460
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Income Payable Dates
(if applicable): MONTHLY
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Capital Gain Payable Dates
(if applicable): 12/14/2001
EXPENSE RATIOS
The Fund's current annualized expense ratio of 0.50% covers shareholders'
expenses for custody, tax reporting, investment advisory, and shareholder
services, after reimbursement. The Fund is no-load and does not charge any
sales, redemption, or exchange fees. There are no additional charges for buying,
selling or safekeeping fund shares, or for wiring redemption proceeds from the
Fund.
PORTFOLIO HIGHLIGHTS
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ASSET ALLOCATION
All data as of January 31, 2001
[data from pie chart]
Revenue Bonds 54.9%
Insured 12.9%
General Obligations and House Authority 11.1%
Private Placement 7.8%
Prerefunded 7.5%
Short-Term Investments 4.9%
Tax Anticipation Notes 0.9%
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30-day SEC Yield: 3.97%
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Duration: 5.22 YEARS
DISTRIBUTED BY FUNDS DISTRIBUTOR, INC. J.P. MORGAN INVESTMENT MANAGEMENT INC.
SERVES AS INVESTMENT ADVISOR. SHARES OF THE FUND ARE NOT INSURED BY THE FDIC,
ARE NOT BANK DEPOSITS OR OTHER OBLIGATIONS OF THE FINANCIAL INSTITUTION AND ARE
NOT GUARANTEED BY THE FINANCIAL INSTITUTION. SHARES OF THE FUND ARE SUBJECT TO
INVESTMENT RISK, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL INVESTED. RETURN AND
SHARE PRICE WILL FLUCTUATE AND REDEMPTION VALUE MAY BE MORE OR LESS THAN
ORIGINAL COST.
References to specific securities and their issuers are for illustrative
purposes only and are not intended to be, and should not be interpreted as,
recommendations to purchase or sell securities. Opinions expressed herein and
other Fund data presented are based on current market conditions and are
subject to change without notice. The Fund invests through a master portfolio
(another Fund with the same objective).
CALL J.P. MORGAN FUNDS SERVICES AT (800) 766-7722 FOR A PROSPECTUS CONTAINING
MORE COMPLETE INFORMATION ABOUT THE FUND, INCLUDING MANAGEMENT FEES AND OTHER
EXPENSES. PLEASE READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
5
J.P. MORGAN INSTITUTIONAL NEW YORK TAX EXEMPT BOND FUND
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
- --------------------------------------------------------------------------------
JANUARY 31, 2001
ASSETS
Investment in The New York Tax Exempt Bond
Portfolio ("Portfolio"), at value $194,090,116
Receivable for Shares of Beneficial Interest Sold 2,515,000
Receivable for Expense Reimbursements 6,117
Prepaid Trustees' Fees and Expenses 163
Prepaid Expenses and Other Assets 276
---------------
TOTAL ASSETS 196,611,672
---------------
LIABILITIES
Dividends Payable to Shareholders 461,416
Shareholder Servicing Fee Payable 16,043
Administrative Services Fee Payable 3,789
Payable for Shares of Beneficial Interest Redeemed 969
Accrued Expenses and Other Liabilities 51,575
---------------
TOTAL LIABILITIES 533,792
---------------
NET ASSETS
Applicable to 18,194,425 Shares of Beneficial Interest Outstanding
(par value $0.001, unlimited shares authorized) $196,077,880
===============
Net Asset Value, Offering and Redemption Price Per Share $10.78
===============
ANALYSIS OF NET ASSETS
Paid-in Capital $191,003,690
Distributions in Excess of Net Investment Income (27,943)
Accumulated Net Realized Loss on Investment (872,812)
Net Unrealized Appreciation on Investment 5,974,945
---------------
NET ASSETS $196,077,880
===============
6 The Accompanying Notes are an Integral Part of the Financial Statements.
J.P. MORGAN INSTITUTIONAL NEW YORK TAX EXEMPT BOND FUND
STATEMENT OF OPERATIONS (UNAUDITED)
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FOR THE SIX MONTHS ENDED JANUARY 31, 2001
INVESTMENT INCOME
INCOME
Allocated Investment Income from Portfolio $4,600,445
Allocated Portfolio Expenses (332,650)
-----------
Investment Income 4,267,795
-----------
FUND EXPENSES
Shareholder Servicing Fee 92,194
Administrative Services Fee 21,965
Financial and Fund Accounting Services Fee 17,644
Registration Fees 10,184
Transfer Agent Fees 9,281
Professional Fees and Expenses 6,122
Printing Expenses 5,868
Fund Services Fee 1,236
Administration Fee 963
Trustees' Fees and Expenses 922
Miscellaneous Expenses 3,450
-----------
Total Fund Expenses 169,829
Less: Reimbursement of Expenses (37,919)
-----------
Net Fund Expenses 131,910
-----------
NET INVESTMENT INCOME 4,135,885
-----------
REALIZED AND UNREALIZED GAIN
NET REALIZED GAIN ON INVESTMENT ALLOCATED FROM PORTFOLIO 2,088,179
-----------
CHANGE IN NET UNREALIZED APPRECIATION ON
INVESTMENT ALLOCATED FROM PORTFOLIO 4,141,137
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $10,365,201
===========
The Accompanying Notes are an Integral Part of the Financial Statements. 7
J.P. MORGAN INSTITUTIONAL NEW YORK TAX EXEMPT BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
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FOR THE SIX MONTHS ENDED JANUARY 31, 2001 (UNAUDITED)
AND THE YEAR ENDED JULY 31, 2000
INCREASE IN NET ASSETS 2001 2000
FROM OPERATIONS
Net Investment Income $ 4,135,885 $ 6,941,803
Net Realized Gain (Loss) on Investment Allocated from Portfolio 2,088,179 (2,345,487)
Change in Net Unrealized Appreciation (Depreciation)
on Investment Allocated from Portfolio 4,141,137 2,250,089
----------------- -----------------
Net Increase in Net Assets Resulting from Operations 10,365,201 6,846,405
----------------- -----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (4,135,885) (6,941,803)
In Excess of Net Investment Income (13,490) (44,877)
----------------- -----------------
Total Distributions to Shareholders (4,149,375) (6,986,680)
----------------- -----------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Proceeds from Shares of Beneficial Interest Sold 58,953,176 44,578,604
Reinvestment of Distributions 1,195,878 1,485,907
Cost of Shares of Beneficial Interest Redeemed (43,601,677) (33,982,910)
----------------- -----------------
Net Increase from Transactions in Shares
of Beneficial Interest 16,547,377 12,081,601
----------------- -----------------
Total Increase in Net Assets 22,763,203 11,941,326
----------------- -----------------
NET ASSETS
Beginning of Period 173,314,677 161,373,351
----------------- -----------------
End of Period $196,077,880 $173,314,677
================= =================
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Shares of Beneficial Interest Sold 5,552,537 4,338,608
Shares of Beneficial Interest Reinvested 113,100 144,529
Shares of Beneficial Interest Redeemed (4,136,891) (3,305,213)
----------------- -----------------
Net Increase in Shares of Beneficial Interest 1,528,746 1,177,924
================= =================
8 The Accompanying Notes are an Integral Part of the Financial Statements.
J.P. MORGAN INSTITUTIONAL NEW YORK TAX EXEMPT BOND
FUND FINANCIAL HIGHLIGHTS
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SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT
EACH PERIOD IS AS FOLLOWS:
FOR THE SIX
MONTHS ENDED FOR THE FOR THE FOUR FOR THE YEARS ENDED MARCH 31
JANUARY 31, 2001 YEAR ENDED MONTHS ENDED -------------------------------------
(UNAUDITED) JULY 31, 2000 JULY 31, 1999 1999 1998 1997 1996
------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE,
BEGINNING OF PERIOD $10.40 $10.42 $10.72 $10.67 $10.31 $10.34 $10.11
------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.24 0.45 0.14 0.45 0.48 0.48 0.49
Net Realized and Unrealized Gain (Loss)
on Investment 0.38 (0.02) (0.28) 0.13 0.40 (0.02) 0.25
------------------------------------------------------------------------------------
Total From Investment Operations 0.62 0.43 (0.14) 0.58 0.88 0.46 0.74
------------------------------------------------------------------------------------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (0.24) (0.45) (0.14) (0.45) (0.48) (0.48) (0.49)
Net Realized Gain - - (0.02) (0.08) (0.04) (0.01) (0.02)
In Excess of Net Investment Income (0.00)(a) (0.00)(a) - - - - -
------------------------------------------------------------------------------------
Total Distributions to Shareholders (0.24) (0.45) (0.16) (0.53) (0.52) (0.49) (0.51)
------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE, END OF PERIOD $10.78 $10.40 $10.42 $10.72 $10.67 $10.31 $10.34
====================================================================================
RATIOS AND SUPPLEMENTAL DATA
Total Return 6.02%(b) 4.32% (1.25)%(b) 5.51% 8.64% 4.54% 7.40%
Net Assets, End of Period (in thousands) $196,078 $173,315 $161,373 $204,986 $111,418 $90,792 $47,926
Ratios to Average Net Assets
Net Expenses 0.50%(c) 0.50% 0.50%(c) 0.50% 0.50% 0.50% 0.50%
Net Investment Income 4.48%(c) 4.39% 4.01%(c) 4.15% 4.54% 4.70% 4.67%
Expenses without Reimbursement 0.54%(c) 0.56% 0.59%(c) 0.57% 0.59% 0.64% 0.67%
(a) Amount is less than $0.005.
(b) Not annualized
(c) Annualized
The Accompanying Notes are an Integral Part of the Financial Statements. 9
J.P. MORGAN INSTITUTIONAL NEW YORK TAX EXEMPT BOND FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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JANUARY 31, 2001
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1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION--The J.P. Morgan Institutional New York Tax Exempt Bond Fund
(the "Fund") is a separate series of the J.P. Morgan Institutional Funds, a
Massachusetts business Trust (the "Trust") which was organized on November 4,
1992. The Trust is registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company. The Fund commenced
operations on April 11, 1994. At a meeting on November 12, 1998, the Trustees
elected to change the Fund's fiscal year end from March 31 to July 31.
The Fund invests all of its investable assets in The New York Tax Exempt
Bond Portfolio (the "Portfolio"), a diversified open-end management investment
company having the same investment objective as the Fund. The value of such
investment included in the Statement of Assets and Liabilities reflects the
Fund's proportionate interest in the net assets of the Portfolio (approximately
59% at January 31, 2001). The performance of the Fund is directly affected by
the performance of the Portfolio. The financial statements of the Portfolio,
including the Schedule of Investments, are included elsewhere in this report and
should be read in conjunction with the Fund's financial statements.
The preparation of financial statements in accordance with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
and disclosures. Actual amounts could differ from those estimates. The following
is a summary of the significant accounting policies of the Fund:
SECURITY VALUATION--Valuation of securities by the Portfolio is discussed in
Note 1 of the Portfolio's Notes to Financial Statements that are included
elsewhere in this report.
INVESTMENT INCOME--The Fund earns income, net of expenses, daily on its
investment in the Portfolio. All net investment income, realized and unrealized
gains and losses of the Portfolio are allocated pro-rata among the Fund and
other investors in the Portfolio at the time of such determination.
EXPENSES--Expenses incurred by the Trust with respect to any two or more
Funds in the Trust are allocated in proportion to the net assets of each Fund
in the Trust, except where allocations of direct expenses to each Fund can
otherwise be made fairly.
INCOME TAX STATUS--It is the Fund's policy to distribute all net investment
income and net realized gains to shareholders and to otherwise qualify as a
regulated investment company under the provisions of the Internal Revenue Code.
Accordingly, no provision has been made for federal or state income taxes.
DISTRIBUTIONS TO SHAREHOLDERS--Distributions to a shareholder are recorded
on the ex-dividend date. Distributions from net investment income are declared
daily and paid monthly. Distributions from net realized gains, if any, are paid
annually.
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2. TRANSACTIONS WITH AFFILIATES
ADMINISTRATIVE SERVICES--The Trust has an Administrative Services Agreement
(the "Services Agreement") with Morgan Guaranty Trust Company of New York
("Morgan"), under which Morgan is responsible for certain aspects of the
administration and operation of the Fund. Under the Services Agreement, the
Trust 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 Trust and certain other registered investment companies
for which J.P. Morgan Investment Management, Inc. ("JPMIM") acts as investment
advisor 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 Funds Distributor, Inc. ("FDI"). The portion of this charge
payable by the Fund is determined by the proportionate share that its net assets
bear to the net assets of the Trust and certain other investment companies for
which Morgan provides similar services.
Morgan has agreed to reimburse the Fund to the extent the total operating
expenses of the Fund, including the expenses allocated to the Fund from the
Portfolio, exceed 0.50% of the Fund's average daily net assets. The
reimbursement agreement can be changed or terminated at any time after November
30, 2001, at the option of Morgan.
ADMINISTRATION--The Trust has retained FDI, a registered broker-dealer, to
serve as the co-administrator and distributor for the Fund. Under a
Co-Administration Agreement between FDI and the Trust, FDI provides
administrative services necessary for the operations of the Fund, furnishes
office space and facilities, required for conducting the business of the Fund
and pays the compensation of the Fund's officers affiliated with FDI.
10
J.P. MORGAN INSTITUTIONAL NEW YORK TAX EXEMPT BOND FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(Continued)
JANUARY 31, 2001
- --------------------------------------------------------------------------------
2. TRANSACTIONS WITH AFFILIATES (CONTINUED)
The Fund has agreed to pay FDI fees equal to its allocable share of an
annual complex-wide charge of $425,000 plus FDI's out-of-pocket expenses. The
portion of this charge payable by the Fund is determined by the proportionate
share that its net assets bear to the net assets of the Trust and certain other
investment companies for which FDI provides similar services.
SHAREHOLDER SERVICING--The Trust has a Shareholder Servicing Agreement with
Morgan under which Morgan provides account administration and personal account
maintenance service to Fund shareholders. The agreement provides for the Fund to
pay Morgan a fee for these services that is computed daily and paid monthly at
an annual rate of 0.10% of the average daily net assets of the Fund.
FUND SERVICES--The Trust has a Fund Services Agreement with Pierpont Group,
Inc. ("PGI") to assist the Trustees in exercising their overall supervisory
responsibilities for the Trust's affairs. The Trustees of the Trust represent
all the existing shareholders of PGI.
TRUSTEES--Each Trustee receives an aggregate annual fee of $75,000 for
serving on the boards of the Trust, the J.P. Morgan Funds, and other registered
investment companies in which they invest. The Trustees' Fees and Expenses shown
in the financial statements represent the Fund's allocated portion of the total
Trustees' Fees and Expenses. The Trust's Chairman and Chief Executive Officer
also serves as Chairman of PGI and receives compensation and employee benefits
from PGI. The allocated portion of such compensation and benefits included in
the Fund Services Fee shown on the Statement of Operations was $200.
- --------------------------------------------------------------------------------
3. BANK LOANS
The Fund may borrow money for temporary or emergency purposes, such as
funding shareholder redemptions. Effective May 23, 2000, the Fund, along with
certain other Funds managed by JPMIM, entered into a $150,000,000 bank line of
credit agreement with DeutscheBank. Borrowings under the agreement will bear
interest at approximate market rates. A commitment fee is charged at an annual
rate of 0.085% on the unused portion of the committed amount.
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4. CONCENTRATIONS OF RISK
From time to time, the Fund may have a concentration of several shareholders
holding a significant percentage of shares outstanding. Investment activities
of these shareholders could have a material impact on the Fund.
- --------------------------------------------------------------------------------
5. CORPORATE EVENT
The merger of J.P. Morgan & Co. Incorporated, the former parent company of
the Fund's Advisor, J.P. Morgan Investment Management, Inc. ("JPMIM"), with and
into The Chase Manhattan Corporation was consummated on December 31, 2000. J.P.
Morgan Chase & Co. will be the new parent company of JPMIM, which will continue
to serve as the Fund's Advisor.
11
THE NEW YORK TAX EXEMPT BOND PORTFOLIO
Semiannual Report January 31, 2001
(The following pages should be read in conjunction with J.P. Morgan
Institutional New York Tax Exempt Bond Fund Semiannual Financial Statements)
12
THE NEW YORK TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
JANUARY 31, 2001
PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------
MUNICIPALS - 95.1%
GENERAL OBLIGATIONS & HOUSE AUTHORITY - 11.1%
NEW YORK - 11.1%
$ 3,000,000 Babylon, (Waste Facilities), 9.00%,
8/1/11(FGIC) $ 4,148,790
7,000,000 New York, Series 1993 A-1, 5.75%, 8/1/14 7,250,880
4,375,000 New York, 6.00%, 3/1/07 4,841,944
5,250,000 New York, Series 1996 A, 6.50%,
7/15/06 5,912,550
6,455,000 New York, Series 1998 A, 5.00%, 8/1/05 6,742,118
4,325,000 New York, Series 1999 I, 4.00%, 4/15/02 4,351,902
3,230,000 Yonkers, Series 1996 C, 5.50%,
8/1/04(AMBAC) 3,408,910
--------------------------
36,657,094
--------------------------
INSURED - 12.9%
NEW YORK - 12.9%
6,895,000 Babylon Industrial Development Agency,
Series 2000 A, (Civic Facilities Rev.),
6.63%, 8/1/19(AMBAC) 7,832,375
4,200,000 City University of New York, (John Jay
College), 5.75%, 8/15/05(MBIA IBC) 4,537,890
5,500,000 Metropolitan Transportation Auth.,
Series 1996 A, 6.25%, 4/1/11(MBIA) 6,362,840
1,130,000 Monroe County, 5.88%, 6/1/08(AMBAC) 1,264,030
2,280,000 New York State Dormitory Auth. Rev.,
(Columbia University), 5.25%, 7/1/07 2,455,400
2,530,000 New York State Dormitory Auth. Rev., (North
Shore University Hospital), 5.50%,
11/1/10(MBIA) 2,761,950
2,100,000 New York State Medical Care Facilities
Finance Agency, Series 1994 A,
(N.Y. Hospital FHA Insured Mortgage),
6.80%, 8/15/24, Prerefunded at 102% of
Par(AMBAC) 2,376,885
5,000,000 New York, Series 1991 A, 3.00%,
8/15/02(MBIA IBC) 4,967,500
750,000 New York, Series 1996 G, 5.75%,
2/1/06(AMBAC) 812,475
4,000,000 New York, Series 1997 I, 6.25%,
4/15/07(MBIA) 4,491,200
4,365,000 Suffolk County, (Southwest Sewer District),
6.00%, 2/1/08(MBIA) 4,875,923
--------------------------
42,738,468
--------------------------
PREREFUNDED - 7.5%
NEW YORK - 7.5%
5,500,000 New York City Municipal Water Finance Auth.,
Series 1996 B, 6.25%, 6/15/20, Prerefunded
at 101% of Par 6,192,670
6,000,000 New York Power Auth. Rev., Series 1992 AA,
6.25%, 1/1/23, Prerefunded at 102% of Par 6,276,780
4,425,000 New York State Medical Care Facilities
Finance Agency, Series 1992 A, (Methodist
Nursing FHA), 6.70%, 8/15/23, Prerefunded
at 102% of Par 4,725,989
PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------
$ 485,000 New York State Medical Care Facilities
Finance Agency, Series 1995 F,
(FHA Insured Mortgage Project), 6.20%,
8/15/15, Prerefunded at 102% of Par $ 525,934
4,950,000 New York State Thruway Auth., (Local
Highway & Bridge), 6.45%, 4/1/15,
Prerefunded at 102% of Par 5,552,564
1,500,000 Triborough Bridge & Tunnel Auth. Rev.,
Series 1992 Y, 5.90%, 1/1/07(GO of Auth.) 1,650,795
--------------------------
24,924,732
--------------------------
PRIVATE PLACEMENT - 7.8%
ILLINOIS - 0.9%
3,000,000 Illinois Development Finance Auth. Rev.,
4.65%, 8/1/28 3,010,860
--------------------------
MICHIGAN - 0.4%
1,198,073 City of Detroit, 5.49%, 10/15/01 1,207,322
--------------------------
NEW JERSEY - 0.6%
2,000,000 Trust Cultural, 4.60%, 1/1/08 2,021,700
--------------------------
NEW YORK - 5.4%
10,000,000 New York Convention Center Operating Corp.
Certificates of Partnership, (Yale Building
Acquisition), 6.50%, 12/1/04 10,201,500
5,967,061 New York Office of Temporary & Disability
Assistance, 5.21%, 7/1/04 6,105,855
1,705,764 New York State Office, 4.48%, 3/31/05 1,707,931
--------------------------
18,015,286
--------------------------
PUERTO RICO - 0.5%
1,428,065 Puerto Rico Commonwealth, 7.47%, 12/4/03 1,508,180
--------------------------
25,763,348
--------------------------
REVENUE BONDS - 54.9%
ARIZONA - 1.8%
6,000,000 Arizona Health Facilities Auth. Rev.,
Series 1999 A, (Catholic Healthcare
West), 6.13%, 7/1/09 5,963,160
--------------------------
MICHIGAN - 1.5%
5,000,000 Michigan State Hospital Finance Auth. Rev.,
Series 1999 B, (Ascension Health Credit),
5.30%, 11/15/33 5,109,450
--------------------------
NEW YORK - 43.4%
2,000,000 Islip Community Development Agency,
(New York Institute of Technology), 7.50%,
3/1/26, Prerefunded at 102% of Par 2,361,260
10,000,000 Long Island Power Auth., 5.00%,
4/1/04(MBIA) 10,374,299
5,000,000 Municipal Assistance Corp. for the City of
New York, Series 1997 H, 6.00%, 7/1/05 5,442,250
3,000,000 Municipal Assistance Corp. for the City of
New York, Series 1999 L, 6.00%, 7/1/08 3,369,240
4,000,000 New York City Transitional Finance Auth.,
Series B, 6.13%, 11/15/14 4,474,160
The Accompanying Notes are an Integral Part of the Financial Statements. 13
THE NEW YORK TAX EXEMPT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(Continued)
JANUARY 31, 2001
PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------
$ 9,000,000 New York Local Government Assistance Corp.,
Series 1995 A, 5.90%, 4/1/11, Prerefunded
at 102% of Par $ 9,906,570
2,885,000 New York Mortgage Agency Rev.,
Series 2000-94, (Homeowner Mortgage),
5.35%, 4/1/23 2,945,498
2,000,000 New York Power Auth. Rev., Series 1990 W,
6.63%, 1/1/03 2,112,260
3,745,000 New York State Dormitory Auth. Rev.,
(Concord Nursing Home Inc.), 6.25%,
7/1/16(LOC: Fleet Bank N.A.) 3,993,294
3,450,000 New York State Dormitory Auth. Rev.,
(Pratt Institute), 6.25%, 7/1/14 3,847,233
2,055,000 New York State Dormitory Auth. Rev.,
(Manhattan College), 5.50%, 7/1/09(Asset
Guaranty GO of University) 2,193,363
1,770,000 New York State Dormitory Auth. Rev.,
(Manhattan College), 5.50%, 7/1/10(Asset
Guaranty GO of University) 1,885,439
5,000,000 New York State Dormitory Auth. Rev.,
Series 1993 A, (State University Educational
Facilities), 5.25%, 5/15/15(MBIA-IBC)
(Asset Guaranty GO of University) 5,320,000
1,210,000 New York State Dormitory Auth. Rev.,
Series 1994 A, (University of Rochester),
6.50%, 7/1/06(Asset Guaranty GO of
University) 1,360,427
8,360,000 New York State Dormitory Auth. Rev.,
Series 2001 A, (New York University),
5.75%, 7/1/13(AMBAC) 9,241,980
10,000,000 New York State Environmental Facilities Corp.,
(New York City Municipal Water), 5.75%,
6/15/10 11,159,999
5,000,000 New York State Environmental Facilities Corp.,
(New York City Municipal Water), 5.75%,
6/15/11 5,594,500
5,110,000 New York State Environmental Facilities Corp.,
(Pooled Loan Program), Series 2000 B,
5.70%, 7/15/14 5,565,403
2,635,000 New York State Urban Development Corp.,
6.00%, 1/1/06 2,870,358
3,600,000 Port Auth. of New York & New Jersey, 6.95%,
6/1/08 3,748,752
9,425,000 Port Auth. of New York & New Jersey,
120th Series, 5.75%, 10/15/07(MBIA) 10,332,345
8,000,000 Triborough Bridge & Tunnel Auth. Rev.,
Series 1992 Y, 5.50%, 1/1/17 8,589,120
7,500,000 Triborough Bridge & Tunnel Auth. Rev.,
Series 1998 A, 5.50%, 1/1/05(FGIC) 7,975,275
3,690,000 Tsasc Inc., Series 1999-1, 4.80%, 7/15/06 3,756,051
4,175,000 Tsasc Inc., Series 1999-1, 4.88%, 7/15/07 4,198,881
2,690,000 Tsasc Inc., Series 1999-1, 5.00%, 7/15/08 2,718,864
8,140,000 Westchester County Healthcare Corp. Rev.,
Series 2000 B, (County Guaranteed),
5.25%, 11/1/12 8,626,121
--------------------------
143,962,942
--------------------------
PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------
NORTH CAROLINA - 1.6%
$ 5,000,000 North Carolina Municipal Power Agency No. 1
Catawba Electric Rev., Series 1999 B,
6.38%, 1/1/08 $ 5,381,700
--------------------------
PENNSYLVANIA - 1.2%
4,000,000 Clinton County Industrial Development Auth.
Rev., Series 1992 A, (International Paper
Co.), 4.73%, 1/15/02(v) 4,000,000
--------------------------
TEXAS - 5.4%
5,000,000 Dallas-Fort Worth International Airport Facility
Improvement Corp. Rev., Series 2000 B,
(American Airlines), 6.05%, 5/1/29 5,118,200
5,000,000 Lubbock Health Facilities Development Corp.,
(St. Joseph Health Systems), 5.25%, 7/1/14 4,990,900
12,000,000 Texas Municipal Power Agency Rev.,
(Capital Appreciation), 4.62%, 9/1/10
(AMBAC)(y) 7,749,600
--------------------------
17,858,700
--------------------------
182,275,952
--------------------------
TAX ANTICIPATION NOTES - 0.9%
CALIFORNIA - 0.9%
3,000,000 Tustin Unified School District Rev.,
(Community Facilities 97-1), 6.10%, 9/1/02 3,038,760
--------------------------
TOTAL MUNICIPALS 315,398,354
--------------------------
(Cost $305,225,047)
SHORT-TERM INVESTMENTS - 4.9%
INVESTMENT COMPANIES - 4.9%
16,065,143 J.P. Morgan Institutional Tax Exempt Money
Market Fund* 16,065,143
--------------------------
(Cost $16,065,143)
TOTAL INVESTMENT SECURITIES - 100.0% $331,463,497
==========================
(Cost $321,290,190)
AMBAC - AMBAC Assurance Corporation
FGIC - Financial Guaranty Insurance Co.
FHA - Federal Housing Authority
GO - General Obligation
IBC - Insured Bond Certificate
LOC - Letter of Credit
MBIA - MBIA Insurance Corp.
(v) Rate shown reflects current rate on variable or floating rate instrument
or instrument with step coupon rate.
(y) Yield to maturity
* Affiliated money market mutual fund registered under the Investment Company
Act of 1940, as amended, and advised by J.P. Morgan Investment Management, Inc.
14 The Accompanying Notes are an Integral Part of the Financial Statements.
THE NEW YORK TAX EXEMPT BOND PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
- --------------------------------------------------------------------------------
JANUARY 31, 2001
ASSETS
Investments at Value (Cost $321,290,190) $331,463,497
Cash 473,790
Dividend and Interest Receivable 3,858,214
Prepaid Trustees' Fees and Expenses 467
Prepaid Expenses and Other Assets 447
-------------
TOTAL ASSETS 335,796,415
-------------
LIABILITIES
Payable for Investments Purchased 8,904,570
Advisory Fee Payable 80,383
Administrative Services Fee Payable 6,329
Accrued Expenses and Other Liabilities 22,673
-------------
TOTAL LIABILITIES 9,013,955
-------------
NET ASSETS
Applicable to Investors' Beneficial Interest $326,782,460
=============
The Accompanying Notes are an Integral Part of the Financial Statements. 15
THE NEW YORK TAX EXEMPT BOND PORTFOLIO
STATEMENT OF OPERATIONS (UNAUDITED)
- --------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED JANUARY 31, 2001
INVESTMENT INCOME
INCOME
Interest Income $ 7,669,422
Dividend Income from Affiliated Investment 12,346
------------
Investment Income 7,681,768
------------
EXPENSES
Advisory Fee 463,129
Administrative Services Fee 36,783
Custodian Fees and Expenses 24,440
Professional Fees and Expenses 21,458
Printing Expenses 4,691
Fund Services Fee 2,071
Trustees' Fees and Expenses 1,603
Administration Fee 903
Miscellaneous Expenses 400
------------
Total Expenses 555,478
------------
NET INVESTMENT INCOME 7,126,290
------------
REALIZED AND UNREALIZED GAIN
NET REALIZED GAIN ON INVESTMENT TRANSACTIONS 3,487,935
------------
CHANGE IN NET UNREALIZED APPRECIATION ON INVESTMENTS 7,037,956
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $17,652,181
============
16 The Accompanying Notes are an Integral Part of the Financial Statements.
THE NEW YORK TAX EXEMPT BOND PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED JANUARY 31, 2001 (UNAUDITED)
AND THE YEAR ENDED JULY 31, 2000
INCREASE IN NET ASSETS 2001 2000
FROM OPERATIONS
Net Investment Income $ 7,126,290 $ 12,523,847
Net Realized Gain (Loss) on Investment Transactions 3,487,935 (3,934,965)
Change in Net Unrealized Appreciation
(Depreciation) on Investments 7,037,956 3,738,355
--------------- -----------------
Net Increase in Net Assets Resulting from Operations 17,652,181 12,327,237
--------------- -----------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST
Contributions 85,909,669 90,169,287
Withdrawals (74,744,160) (81,529,772)
--------------- -----------------
Net Increase from Transactions in
Investors' Beneficial Interest 11,165,509 8,639,515
--------------- -----------------
Total Increase in Net Assets 28,817,690 20,966,752
--------------- -----------------
NET ASSETS
Beginning of Period 297,964,770 276,998,018
--------------- -----------------
End of Period $326,782,460 $297,964,770
=============== =================
SUPPLEMENTARY DATA
FOR THE SIX
MONTHS ENDED FOR THE FOR THE FOUR FOR THE YEARS ENDED MARCH 31
JANUARY 31, 2001 YEAR ENDED MONTHS ENDED -------------------------------------
(UNAUDITED) JULY 31, 2000 JULY 31, 1999 1999 1998 1997 1996
--------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
Net Expenses 0.36%(a) 0.36% 0.40%(a) 0.38% 0.40% 0.43% 0.44%
Net Investment Income 4.62%(a) 4.52% 4.10%(a) 4.26% 4.62% 4.75% 4.72%
Portfolio Turnover 52%(b) 86% 8%(b) 44% 51% 35% 41%
(a) Annualized
(b) Not annualized
The Accompanying Notes are an Integral Part of the Financial Statements. 17
THE NEW YORK TAX EXEMPT BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED
- --------------------------------------------------------------------------------
JANUARY 31, 2001
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION--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 of America 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:
SECURITY VALUATIONS--Fixed income securities, (other than convertible bonds),
with a maturity of 60 days or more held by Funds other than money market funds
will be valued each day based on readily available market quotations received
from independent or affiliated commercial pricing services. Such pricing
services will generally provide bidside quotations. Convertible bonds are
valued at the last sale price on the primary exchange on which the bond is
principally traded. When valuations are not readily available, securities are
valued at fair value as determined in accordance with procedures adopted by
the Trustees. All short-term securities with a remaining maturity of sixty days
or less are valued using the amortized cost method.
SECURITY TRANSACTIONS--Security transactions are accounted for as of the
trade date. Realized gains and losses are determined on the identified cost
basis, which is also used for federal income tax purposes.
INVESTMENT INCOME--Dividend income less foreign taxes withheld (if any) is
recorded as of the ex-dividend date or as of the time that the relevant
ex-dividend and amount becomes known. Interest income is recorded on the
accrual basis and includes accretion of discounts and amortization of premiums.
INCOME TAX STATUS--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
ADVISORY--The Portfolio has an Investment Advisory Agreement with J.P.
Morgan Investment Management, Inc. ("JPMIM"), an affiliate of Morgan Guaranty
Trust Company of New York ("Morgan") and a wholly owned subsidiary of J.P.
Morgan Chase & Co. Under the terms of the agreement, the Portfolio pays JPMIM
at an annual rate of 0.30% of the Portfolio's average daily net assets.
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
investment advisory, administrative fee and shareholder servicing fees related
to a Portfolio investment in an affiliated money market fund.
ADMINISTRATIVE SERVICES--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 registered investment companies for which JPMIM acts as
investment advisor 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
18
THE NEW YORK TAX EXEMPT BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED
- --------------------------------------------------------------------------------
(Continued)
JANUARY 31, 2001
- --------------------------------------------------------------------------------
2. TRANSACTIONS WITH AFFILIATES (CONTINUED)
net assets in excess of $7 billion less the complex-wide fees payable to
Funds Distributor, Inc. ("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 Trust and certain other investment companies for which
Morgan provides similar services.
ADMINISTRATION--The Portfolio has retained FDI, a registered broker-dealer,
to serve as the co-administrator and distributor for the Fund. 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 Portfolio's 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
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 Trust and
certain other investment companies for which FDI provides similar services.
FUND SERVICES--The Portfolio has a Fund Services Agreement with Pierpont
Group, Inc. ("PGI") 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 PGI.
TRUSTEES--Each Trustee receives an aggregate annual fee of $75,000 for
serving on the boards of the Trust, the J.P. Morgan Funds, the J.P. Morgan
Institutional Funds, and other registered investment companies in which they
invest. The Trustees' Fees and Expenses shown in the financial statements
represent the Fund's allocated portion of the total Trustees' Fees and
Expenses. The Trust's Chairman and Chief Executive Officer also serves as
Chairman of PGI and receives compensation and employee benefits from PGI. The
allocated portion of such compensation and benefits included in the Fund
Services Fee shown on the Statement of Operations was $400.
- --------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS
During the six months ended January 31, 2001, the Portfolio purchased
$176,847,148 of investment securities and sold $156,321,132 of investment
securities other than short-term investments.
- --------------------------------------------------------------------------------
4. CREDIT AGREEMENT
The Portfolio is party to a revolving line of credit agreement (the
"Agreement") as discussed more fully in Note 3 of the Fund's Notes to the
Financial Statements, which are included elsewhere in this report.
- --------------------------------------------------------------------------------
5. CONCENTRATIONS OF RISK
The ability of the issuers of debt, asset-backed and mortgage-backed
securities to meet their obligations may be affected by the economic and
political developments in a specific industry or region. The value of
asset-backed and mortgage-backed securities can be significantly affected by
changes in interest rates or rapid principal payments including prepayments.
- --------------------------------------------------------------------------------
6. CORPORATE EVENT
The merger of J.P. Morgan & Co. Incorporated, the former parent company of
the Portfolio's Advisor, J.P. Morgan Investment Management, Inc. ("JPMIM"),
with and into The Chase Manhattan Corporation was consummated on December 31,
2000. J.P. Morgan Chase & Co. will be the new parent company of JPMIM, which
will continue to serve as the Portfolio's Advisor.
19
NOTES
- --------------------------------------------------------------------------------
20
[back cover]
J.P. MORGAN INSTITUTIONAL FUNDS
Federal Money Market Fund
---------------------------------------------------------------------
Prime Money Market Fund
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Treasury Money Market Fund
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Tax Aware Enhanced Income Fund:
Institutional Shares
---------------------------------------------------------------------
Tax Exempt Money Market Fund
---------------------------------------------------------------------
Short Term Bond Fund
---------------------------------------------------------------------
Bond Fund
---------------------------------------------------------------------
Global Strategic Income Fund
---------------------------------------------------------------------
Tax Exempt Bond Fund
---------------------------------------------------------------------
California Bond Fund:
Institutional Shares
---------------------------------------------------------------------
New York Tax Exempt Bond Fund
---------------------------------------------------------------------
Diversified Fund
---------------------------------------------------------------------
Disciplined Equity Fund
---------------------------------------------------------------------
Large Cap Growth Fund:
Institutional Shares
---------------------------------------------------------------------
Market Neutral Fund:
Institutional Shares
---------------------------------------------------------------------
Tax Aware U.S. Equity Fund:
Institutional Shares
---------------------------------------------------------------------
Tax Aware Disciplined Equity Fund:
Institutional Shares
---------------------------------------------------------------------
U.S. Equity Fund
---------------------------------------------------------------------
U.S. Small Company Fund
---------------------------------------------------------------------
Emerging Markets Equity Fund
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European Equity Fund
---------------------------------------------------------------------
International Equity Fund
---------------------------------------------------------------------
International Opportunities Fund
---------------------------------------------------------------------
SmartIndex(tm) Fund:
Institutional Shares
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For more information on the J.P. Morgan
Institutional Funds, call J.P.
Morgan Funds Services at (800) 766-7722.
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Morgan Guaranty Trust Company MAILING
500 Stanton Christiana Road INFORMATION
Newark, Delaware 19713-2107
IN-SAN-24966 0102