<PAGE>
The Short Term Bond Portfolio
Semi-Annual Report April 30, 1995
(unaudited)
(The following pages should be read in conjunction
with The Pierpont Short Term Bond Fund
Semi-Annual Financial Statements)
14
<PAGE>
THE SHORT TERM BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
APRIL 30, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P VALUE
AMOUNT SECURITY DESCRIPTION RATING (NOTE 1A)
- - --------------- ------------------------------------------------------------ ----------- -----------
<C> <S> <C> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS
AND ASSET BACKED SECURITIES (13.3%)
FINANCE (13.3%)
$ 977,148 Equicon Home Equity Loan Trust, Series 1992-7, Remic:
Sequential Payer, Class A, 5.90% due 09/18/05............. Aaa/AAA $ 933,763
764,701 Fleetwood Credit Corp. Grantor Trust, Series 1994-A, Class
A, 4.70% due 07/15/09..................................... Aaa/AAA 720,014
1,293,136 Ford Credit Grantor Trust, Series 1994-B, Class A, 7.30% due
10/15/99.................................................. Aaa/AAA 1,300,378
878,073 Merrill Lynch Mortgage Investors, Inc., Series 1994-C1,
Class A, 8.72% due 11/25/20............................... Aaa/AAA 898,378
1,000,000 Premier Auto Trust, Series 1994-4, Class A3, 6.20% due
10/02/97.................................................. Aaa/AAA 989,400
1,500,000 Premier Auto Trust, Series 1994-3, Class A6, 6.85% due
03/02/99.................................................. Aaa/AAA 1,495,200
986,552 Residential Funding Mortgage Securities Inc., Series
1993-S49, Class A1, 6.00% due 12/25/08.................... Aaa/AAA 966,742
1,000,000 Queens Center Funding Corp., Class B, 144A,
8.37% due 01/01/04........................................ Baa1/BBB+ 1,000,000
-----------
TOTAL COLLATERALIZED OBLIGATIONS AND ASSET BACKED SECURITIES
(COST $8,371,738)......................................... 8,303,875
-----------
CORPORATE OBLIGATIONS (28.5%)
BANKING (8.8%)
1,000,000 Chase Manhattan Corp., 5.75% due 12/01/97................... Baa3/AAA- 1,001,180
1,000,000 First USA Bank Wilmington, Delaware, 4.97% due 11/30/95..... Baa3/AAA- 991,500
1,500,000 Norwest Corp., 7.75% due 12/31/96........................... Aa3/AA- 1,522,095
1,000,000 Regions Bank of Louisanna, 7.06% due 04/11/97............... NR/NR 1,002,240
1,000,000 Society National Bank Cleveland, 6.875% due 10/15/96........ Aa3/A 1,000,820
-----------
5,517,835
-----------
DEPARTMENT STORES (3.2%)
2,000,000 Sears, Roebuck & Co., 7.25% due 08/05/97.................... A2/BBB 2,010,340
-----------
COMMUNICATION (0.9%)
500,000 Bell Telephone of Canada, 13.375% due 10/15/10.............. A1/A+ 540,555
-----------
FINANCE (12.4%)
1,000,000 American General Finance, 7.25% due 03/01/98................ A1/A+ 1,002,740
1,500,000 Associates Corp., North America, 6.75% due 06/23/97......... Aa3/AA- 1,493,535
1,000,000 Chrysler Financial Corp., 5.17% due 09/20/96................ A3/BBB 974,670
1,000,000 Ford Motor Credit Corp., 8.95% due 06/12/96................. A2/A 1,023,890
500,000 Ford Motor Credit Corp., 6.125% due 12/11/95................ A1/A+ 499,555
2,250,000 General Motors Acceptance Corp., 7.875% due 11/05/96........ Baa1/BBB+ 2,279,070
515,000 General Motors Acceptance Corp., 5.625% due 02/01/99........ Baa1/BBB+ 483,899
-----------
7,757,359
-----------
UTILITIES -- ELECTRIC (1.7%)
1,000,000 Hydro Quebec, 9.75% due 09/29/98............................ Aa3/AA 1,068,140
-----------
</TABLE>
See Accompanying Notes.
15
<PAGE>
THE SHORT TERM BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P VALUE
AMOUNT SECURITY DESCRIPTION RATING (NOTE 1A)
- - --------------- ------------------------------------------------------------ ----------- -----------
<C> <S> <C> <C>
OIL AND GAS (1.5%)
$ 1,000,000 Occidental Petroleum Corp., 5.76% due 06/15/98.............. Baa3/BBB $ 955,040
-----------
TOTAL CORPORATE OBLIGATIONS (COST $17,867,298).............. 17,849,269
-----------
U.S. GOVERNMENT AGENCY OBLIGATIONS (28.5%)
Federal Home Loan Mortgage Corporation
1,134,753 8.00% due 01/01/99........................................ 1,155,394
804,415 9.00% due 05/01/97........................................ 820,978
634,178 Remic: SCH, LIQ, Series 1580, Class A, 6.50% due 09/15/98. 628,768
Federal National Mortgage Association
9,250,000 6.46% due 03/27/96........................................ 9,240,380
1,500,000 Remic: PAC-1(11), Series 1994-7, Class PB,
5.60% due 07/25/03...................................... 1,449,030
1,500,000 Remic: PAC-1(11), Series 1994-12, Class PC, 5.25% due
04/25/03................................................ 1,439,715
1,000,000 Remic: PAC-1(11), Series 1994-33, Class D,
5.50% due 04/25/05...................................... 945,640
249,995 Remic: PAC(11), Series G93-16, Class A, 5.00% due
06/25/04................................................ 248,718
U.S. Department Veteran Affairs (Vendee Mortgage Trust),
1,900,000 Remic: Sequential Payer, Series 1994-2, Class 3B, 6.50% due
02/15/06................................................ 1,854,229
-----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(COST $17,941,055)........................................ 17,782,852
-----------
U.S. TREASURY OBLIGATIONS (23.6%)
U.S. Treasury Notes
1,325,000 6.875% due 10/31/96....................................... 1,331,983
2,905,000 6.50% due 04/30/99........................................ 2,871,941
2,000,000 6.375% due 07/15/99....................................... 1,965,680
3,000,000 6.00% due 11/30/97........................................ 2,950,770
4,235,000 5.50% due 07/31/97........................................ 4,135,139
1,500,000 4.375% due 11/15/96....................................... 1,454,190
-----------
TOTAL U.S. TREASURY OBLIGATIONS (COST $14,648,911).......... 14,709,703
-----------
FOREIGN GOVERNMENT OBLIGATIONS (1.7%)
1,000,000 Republic of Italy, 9.375% due 04/03/97 (cost $1,036,727).... A1/NR 1,038,750
-----------
SHORT-TERM HOLDINGS (0.0%)
OTHER INVESTMENT COMPANIES (0.0%)
<CAPTION>
SHARES
- - ---------------
<C> <S> <C>
1,055 Seven Seas Money Market Fund (cost $1,055).................. 1,055
-----------
TOTAL INVESTMENTS (COST $59,866,784) (95.6%) 59,685,504
OTHER ASSETS IN EXCESS OF LIABILITIES (4.4%) 2,728,151
-----------
TOTAL NET ASSETS (100.0%) $62,413,655
-----------
-----------
</TABLE>
Note: Based on the cost of investments of $59,866,784 for federal income tax
purposes at April 30, 1995, the aggregate gross unrealized appreciation
and depreciation was $187,947 and $369,227, respectively, resulting in
net unrealized depreciation of $181,280.
See Accompanying Notes.
16
<PAGE>
THE SHORT TERM BOND PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
APRIL 30, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $59,866,784) (Note 1a) $ 59,685,504
Receivable for Investments Sold 5,001,870
Interest Receivable 792,850
Receivable for Expense Reimbursements (Note 2c) 30,723
Deferred Organization Expenses (Note 1e) 4,485
Prepaid Insurance 248
------------
Total Assets 65,515,680
------------
LIABILITIES
Payable for Securities Purchased 3,029,696
Custody Fee Payable 26,261
Advisory Fee Payable (Note 2a) 20,156
Fund Services Fee Payable (Note 2d) 613
Administration Fee Payable (Note 2b) 300
Accrued Expenses 24,999
------------
Total Liabilities 3,102,025
------------
NET ASSETS
Applicable to Investors' Beneficial Interests $ 62,413,655
------------
------------
</TABLE>
See Accompanying Notes.
17
<PAGE>
THE SHORT TERM BOND PORTFOLIO
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED APRIL 30, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME (NOTE 1C)
Interest Income $ 1,903,817
Dividend Income 60,424
-----------
Net Investment Income 1,964,241
EXPENSES
Advisory Fee (Note 2a) $ 73,593
Professional Fees 25,663
Custodian Fees and Expenses 20,606
Fund Services Fee (Note 2d) 3,054
Administration Fee (Note 2b) 1,859
Trustees' Fees and Expenses (Note 2e) 774
Amortization of Organization Expenses (Note 1e) 545
Miscellaneous 1,292
---------
Total Expenses 127,386
Less: Reimbursement of Expenses (Note 2c) (14,788)
---------
NET EXPENSES 112,598
-----------
NET INVESTMENT INCOME 1,851,643
NET REALIZED LOSS ON INVESTMENTS (including $39,746 net realized
losses from futures contracts) (168,619)
NET CHANGE IN UNREALIZED DEPRECIATION OF INVESTMENTS 714,858
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $2,397,882
-----------
-----------
</TABLE>
See Accompanying Notes.
18
<PAGE>
THE SHORT TERM BOND PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS FOR THE
ENDED FISCAL
APRIL 30, YEAR ENDED
1995 OCTOBER 31,
INCREASE (DECREASE) IN NET ASSETS (UNAUDITED) 1994
----------- -------------
<S> <C> <C>
FROM OPERATIONS:
Net Investment Income $1,851,643 $ 2,272,212
Net Realized Gain (Loss) on Investments (168,619) (1,015,882)
Net Change in Unrealized Depreciation of Investments 714,858 (804,516)
----------- -------------
Net Increase in Net Assets Resulting from Operations 2,397,882 451,814
----------- -------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 25,861,023 41,445,030
Withdrawals (19,169,064) (23,001,490)
----------- -------------
Net Increase from Investors' Transactions 6,691,959 18,443,540
----------- -------------
Total Increase in Net Assets 9,089,841 18,895,354
NET ASSETS
Beginning of Period 53,323,814 34,428,460
----------- -------------
End of Period $62,413,655 $53,323,814
----------- -------------
----------- -------------
</TABLE>
- - --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE FISCAL
APRIL 30, 1995 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1994
------------------ -------------------
<S> <C> <C>
Ratios to Average Net Assets:
Expenses 0.38%(a) 0.36%
Net Investment Income 6.29%(a) 5.01%
Decrease in Expense Ratio due to Expense Reimbursement by Morgan 0.05%(a) 0.05%
Portfolio Turnover 85% 230%
<FN>
- - ------------------------
(a) Annualized.
</TABLE>
See Accompanying Notes.
19
<PAGE>
THE SHORT TERM BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
APRIL 30, 1995
- - --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Short Term Bond Portfolio (the "Portfolio") is registered under the
Investment Company Act of 1940, as amended, as a no-load, 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 July 8, 1993. The
Declaration of Trust permits the Trustees to issue an unlimited number of
beneficial interests in the Portfolio.
The following is a summary of the significant accounting policies of the
Portfolio:
a)Portfolio securities with a maturity of 60 days or more, including
securities that are listed on an exchange or traded over the counter, are
valued using prices supplied daily by an independent pricing service or
services that (i) are based on the last sale price on a national
securities exchange, or in the absence of recorded sales, at the readily
available bid price on such exchange or at the quoted bid price in the
over-the-counter market, if such exchange or market constitutes the
broadest and most representative market for the security and (ii) in other
cases, take into account various factors affecting market value, including
yields and prices of comparable securities, indication as to value from
dealers and general market conditions. If such prices are not supplied by
the Portfolio's independent pricing services, such securities are priced
in accordance with procedures adopted by the Trustees. All portfolio
securities with a remaining maturity of less than 60 days are valued by
the amortized cost method.
b)Futures -- A futures contract is a transferable agreement between parties
to deliver or receive a financial instrument for a standardized amount
during a specific future month. Upon entering into such a contract the
Portfolio is required to pledge to the broker an amount of cash and/or
securities equal to the minimum "initial margin" requirements of the
exchange. Pursuant to the contract, the Portfolio agrees to receive from
or pay to the broker an amount of cash equal to the daily fluctuation in
value of the contract. Such receipts or payments are known as "variation
margin" and are recorded by the Portfolio as unrealized gains or losses.
When the contract is closed, the Portfolio records a realized gain or loss
equal to the difference between the value of the contract at the time it
was opened and the value at the time when it was closed. The use of
futures transactions involves the risk of imperfect correlation in
movements in the price of futures contracts, interest rates and the
underlying hedged assets, and the possible inability of counterparties to
meet the terms of their contracts. Treasury futures transactions during
the six months ended April 30, 1995 are summarized as follows:
<TABLE>
<CAPTION>
SALES OF FUTURES CONTRACTS
--------------------------------------
PRINCIPAL AMOUNT
NUMBER OF CONTRACTS OF CONTRACTS
------------------- ----------------
<S> <C> <C>
Contracts opened 145 $145,000,000
Contracts closed 145 145,000,000
--- -----------------
Open at end of period 0 $ 0
--- -----------------
--- -----------------
</TABLE>
20
<PAGE>
THE SHORT TERM BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- - --------------------------------------------------------------------------------
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. Dividend income is recorded on the
ex-dividend date. 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.
e)The Portfolio incurred organization expenses in the amount of $5,492.
These costs were deferred and are being amortized by the Portfolio on a
straight-line basis over a five-year period from the commencement of
operations.
2. TRANSACTIONS WITH AFFILIATES
a)The Portfolio has an investment advisory agreement with Morgan Guaranty
Trust Company of New York ("Morgan"). Under the terms of the investment
advisory agreement, the Portfolio pays Morgan at an annual rate of 0.25%
of the Portfolio's average daily net assets. For the six months ended
April 30, 1995, this fee amounted to $73,593.
b)The Portfolio retains Signature Broker-Dealer Services, Inc. ("Signature")
to serve as Administrator and exclusive placement agent. Signature
provides administrative services necessary for the operations of the
Portfolio, furnishes office space and facilities required for conducting
the business of the Portfolio and pays the compensation of the Portfolio's
officers affiliated with Signature. The agreement provides for a fee to be
paid to Signature at an annual rate determined by the following schedule:
0.01% of the first $1 billion of the aggregate average daily net assets of
the Portfolio and the other portfolios subject to the Administrative
Services Agreement, 0.008% of the next $2 billion of such net assets,
0.006% of the next $2 billion of such net assets, and 0.004% of such net
assets in excess of $5 billion. The daily equivalent of the fee rate is
applied to the daily net assets of the Portfolio. For the six months ended
April 30, 1995, Signature's fee for these services amounted to $1,859.
c)The Portfolio has a Financial and Fund Accounting Services Agreement
("Services Agreement") with Morgan under which Morgan receives a fee,
based on the percentages described below, for overseeing certain aspects
of the administration and operation of the Portfolio. The Services
Agreement is also designed to provide an expense limit for certain
expenses of the Portfolio. If total expenses of the Portfolio, excluding
the advisory fee, custody expenses, fund services fee, amortization of
organization expense, and brokerage costs, exceed the expense limit of
0.05% of the Portfolio's average daily net assets up to $200 million and
0.03% of average daily net assets thereafter, Morgan will reimburse the
Portfolio for the excess expense amount and receive no fee.
21
<PAGE>
THE SHORT TERM BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- - --------------------------------------------------------------------------------
Should such expenses be less than the expense limit, Morgan's fee would be
limited to the difference between such expenses and the fee calculated
under the Services Agreement. For the six months ended April 30, 1995,
Morgan has agreed to reimburse the portfolio $14,788.
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 $3,054 for the six months ended April 30, 1995.
e)An aggregate annual fee of $65,000 is paid to each Trustee for serving as
a Trustee of The Pierpont Funds, The JPM Institutional Funds and their
corresponding Portfolios. The Trustees' Fees and Expenses shown in the
financial statements represents the Portfolio's allocated portion of the
total fees and expenses. Prior to April 1, 1995, the aggregate annual
Trustee Fee was $55,000. The Trustee who serves as Chairman and Chief
Executive Officer of these Funds and Portfolios 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 show in the financial
statements was $400.
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the six months
ended April 30, 1995 were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
------------- -------------
<S> <C> <C>
U.S. Government and Agency Obligations $ 42,310,527 $ 44,493,353
Corporate and Collateralized Obligations 12,208,945 2,568,828
------------- -------------
$ 54,519,472 $ 47,062,181
------------- -------------
------------- -------------
</TABLE>
22
