THE SHORT TERM BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
APRIL 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT SECURITY DESCRIPTION RATING VALUE
- -------------- --------------------------------------------------------- ------------- ----------
<C> <S> <C> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS
AND ASSET BACKED SECURITIES (39.9%)
$ 388,529 Banc One Auto Grantor Trust, Series 1996-A, Class A,
Sequential Payer, Callable, 6.10% due 10/15/02.........
Aaa/AAA $ 388,529
757,319 CIT River Owners Trust, Series 1995-A, Class A,
Sequential Payer, Callable, 6.25% due 01/15/11.........
Aaa/AAA 753,003
326,155 Chase Manhattan Grantor Trust, Series 1996-A, Class A,
Pass Through, Callable, 5.20% due 02/15/02.............
Aaa/AAA 320,346
584,498 Equicon Home Equity Loan Trust, Series 1992-7, Remic:
Class A, Sequential Payer, Callable, 5.90% due
09/18/05...............................................
Aaa/AAA 572,767
611,247 Fleetwood Credit Corp. Grantor Trust, Series 1994-A,
Class A, Sequential Payer, Callable, 4.70% due
07/15/09...............................................
Aaa/AAA 586,156
1,400,000 Greentree Financial Corp., Series 1993-3, Class A3,
Sequential Payer, Callable, 5.20% due 10/15/18.........
Aa2/AA 1,380,931
718,307 Merrill Lynch Mortgage Investors, Inc., Remic: Series
1994-C1, Class A, Callable, 8.59% due 11/25/20.........
Aaa/AAA 729,306
597,272 Old Kent Auto Receivables Trust, Series 1995-A, Class A,
Sequential Payer, Callable, 6.20% due 08/15/01.........
Aaa/AAA 597,021
810,826 Prudential Home Mortgage Securities, Remic: Sequential
Payer, Series 1992-44, Class A1, Callable, 6.00% due
01/25/98...............................................
Aaa/AAA 795,955
----------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS AND ASSET
BACKED SECURITIES (COST $6,138,785).................... 6,124,014
----------
CORPORATE OBLIGATIONS (15.3%)
FINANCE (1.9%)
300,000 Cheung Kong Finance Cayman, 5.50% due 09/30/98...........
NR/NR 288,750
----------
OIL AND GAS (6.4%)
1,000,000 Occidental Petroleum Corp., 5.76% due 06/15/98...........
Baa3/BBB 982,990
----------
UTILITIES -- ELECTRIC (7.0%)
1,000,000 Hydro Quebec, 9.75% due 09/29/98.........................
Aa3/AA 1,068,125
----------
TOTAL CORPORATE OBLIGATIONS (COST $2,299,485)............ 2,339,865
----------
U.S. GOVERNMENT AGENCY OBLIGATIONS (29.2%)
518,761 Federal Home Loan Mortgage Corporation, 9.00% due
05/01/97............................................... 537,732
Federal National Mortgage Association
1,500,000 Remic: PAC-1(11), Series 1994-7, Class PB,
5.60% due 07/25/03..................................... 1,488,240
1,500,000 Remic: PAC-1(11), Series 1994-12, Class PC,
5.25% due 04/25/03..................................... 1,482,840
1,000,000 Remic: PAC-1(11), Series 1994-33, Class D,
5.50% due 04/25/05..................................... 976,540
----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(COST $4,489,982)...................................... 4,485,352
----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
17
<PAGE>
THE SHORT TERM BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY DESCRIPTION VALUE
- -------------- --------------------------------------------------------- ----------
U.S. TREASURY OBLIGATIONS (13.4%)
<C> <S> <C> <C>
U.S. Treasury Notes
$ 414,000 6.25% due 08/31/00....................................... $ 411,375
1,000,000 6.125% due 09/30/00...................................... 988,880
273,000 5.625% due 01/31/98...................................... 271,294
395,000 5.25% due 12/31/97....................................... 390,454
----------
TOTAL U.S.TREASURY OBLIGATIONS (COST $2,117,198)......... 2,062,003
----------
SHORT-TERM HOLDINGS (1.4%)
REPURCHASE AGREEMENT (1.4%)
211,000 Goldman Sachs Repurchase Agreement dated 04/30/96 due
05/01/96, at 5.33%, proceeds $211,031 (collateralized
by $146,000 U.S. Treasury Bond, 12.75% due 11/15/10,
valued at $215,425) (cost $211,000).................... 211,000
----------
OTHER MUTUAL FUNDS (0.0%)*
952 Seven Seas Money Market Fund (cost $952)................. 952
----------
TOTAL SHORT-TERM HOLDINGS (COST $211,952)................ 211,952
----------
TOTAL INVESTMENTS (COST $15,257,402) (99.2%) 15,223,186
OTHER ASSETS IN EXCESS OF LIABILITIES (0.8%) 124,062
----------
TOTAL NET ASSETS (100.0%) $15,347,248
----------
----------
</TABLE>
Note: Based on the cost of investments of $15,278,710 for federal income tax
purposes at April 30, 1996, the aggregate gross unrealized appreciation
and depreciation was $115,410 and $170,934, respectively, resulting in
net unrealized depreciation of $55,524.
* Less than 0.1%.
The Accompanying Notes are an Integral Part of the Financial Statements.
18
<PAGE>
THE SHORT TERM BOND PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
APRIL 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $15,257,402) $ 15,223,186
Interest Receivable 161,840
Deferred Organization Expenses 2,985
Receivable for Expense Reimbursements 1,802
Prepaid Expenses and Other Assets 153
------------
Total Assets 15,389,966
------------
LIABILITIES
Advisory Fee Payable 9,931
Custody Fee Payable 618
Administrative Services Fee Payable 324
Accrued Trustees' Fees Payable 175
Administration Fee Payable 175
Fund Services Fee Payable 59
Accrued Expenses 31,436
------------
Total Liabilities 42,718
------------
NET ASSETS
Applicable to Investors' Beneficial Interests $ 15,347,248
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
THE SHORT TERM BOND PORTFOLIO
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED APRIL 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
$ 630,162
Interest Income
EXPENSES
Advisory Fee $ 26,067
Professional Fees and Expenses 17,310
Custodian Fees and Expenses 11,946
Printing Expenses 4,040
Administrative Services Fee 1,527
Administration Fee 1,053
Amortization of Organization Expenses 680
Fund Services Fee 632
Trustees' Fees and Expenses 368
Miscellaneous 1,080
---------
Total Expenses 64,703
Less: Reimbursement of Expenses (17,783)
---------
(46,920)
NET EXPENSES
-----------
583,242
NET INVESTMENT INCOME
134,036
NET REALIZED GAIN ON INVESTMENTS (including $14,246 net realized
losses from futures contracts)
(214,869)
NET CHANGE IN UNREALIZED APPRECIATION OF INVESTMENTS
-----------
$ 502,409
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE SHORT TERM BOND PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
APRIL 30, FOR THE FISCAL
1996 YEAR ENDED
DECREASE IN NET ASSETS (UNAUDITED) OCTOBER 31, 1995
------------ ----------------
<S> <C> <C>
FROM OPERATIONS
Net Investment Income $ 583,242 $ 3,574,946
Net Realized Gain on Investments 134,036 407,824
Net Change in Unrealized Appreciation
of Investments (214,869 ) 1,076,791
------------ ----------------
Net Increase in Net Assets Resulting
from Operations 502,409 5,059,561
------------ ----------------
TRANSACTIONS IN INVESTORS' BENEFICIAL
INTERESTS
Contributions 9,063,425 32,690,159
Withdrawals (23,525,162 ) (61,766,958)
------------ ----------------
Net Decrease from Investors'
Transactions (14,461,737 ) (29,076,799)
------------ ----------------
Total Decrease in Net Assets (13,959,328 ) (24,017,238)
NET ASSETS
Beginning of Period 29,306,576 53,323,814
------------ ----------------
End of Period $15,347,248 $ 29,306,576
------------ ----------------
------------ ----------------
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE
PERIOD
JULY 8, 1993
(COMMENCEMENT
FOR THE SIX OF
MONTHS ENDED OPERATIONS)
APRIL 30, FOR THE FISCAL YEAR ENDED THROUGH
1996 ----------------------------------- OCTOBER 31,
(UNAUDITED) OCTOBER 31, 1995 OCTOBER 31, 1994 1993
------------ ---------------- ---------------- -------------
<S> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Expenses 0.45%(a) 0.42% 0.36% 0.37%(a)
Net Investment Income 5.60%(a) 6.11% 5.01% 3.99%(a)
Decrease in Expense Ratio due to
Expense Reimbursement 0.17%(a) 0.04% 0.05% 1.00%(a)
Portfolio Turnover 55% 177% 230% 116%
</TABLE>
- ------------------------
(a) Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE SHORT TERM BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
APRIL 30, 1996
- --------------------------------------------------------------------------------
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's investment objective is to provide a high
total return while attempting to limit the likelihood of negative quarterly
returns. 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 preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual amounts could differ from
those estimates. The following is a summary of the significant accounting
policies of the Portfolio:
a)Portfolio securities 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 an agreement to purchase/sell a specified
quantity of an underlying instrument at a specified future date. The price
at which the purchase and sale will take place is fixed when the Portfolio
enters in the contract. 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 Portfolio invests in
futures contracts solely for the purpose of hedging its existing portfolio
securities, or securities the Portfolio intends to purchase, against
fluctuations in value caused by changes in prevailing market interest
rates. The use of futures transactions involves the risk of imperfect
correlation in movements in the price of
22
<PAGE>
THE SHORT TERM BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1996
- --------------------------------------------------------------------------------
futures contracts, interest rates and the underlying hedged assets, and
the possible inability of counterparties to meet the terms of their
contracts. Futures transactions in U.S. Treasury securities during the six
months ended April 30, 1996 are summarized as follows:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
NUMBER OF CONTRACTS OF CONTRACTS
------------------- ----------------
<S> <C> <C>
Contracts opened 14 $ 1,914,828
Contracts closed (14) (1,914,828)
--
----------------
Open at end of period 0 $ 0
--
--
----------------
----------------
</TABLE>
c)Securities transactions are recorded on a trade date basis. Interest
income, which includes the amortization of premiums and discount, if any,
is recorded on an accrual basis. For financial and tax reporting purposes,
realized gains and losses are determined on the basis of specific lot
identification.
d)The Portfolio intends to be treated as a partnership for federal income
tax purposes. As such, each investor in the Portfolio will be taxable 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 $5,380.
These costs were deferred and are being amortized 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, 1996, such fees amounted to $26,067.
b)The Portfolio has retained Signature Broker-Dealer Services, Inc.
("Signature") to serve as administrator and exclusive placement agent.
Under its Administration Agreement with the Portfolio, Signature provides
administrative services necessary for the operations of the Portfolio,
furnishes office space and facilities required for conducting the business
of the Portfolio and pays the compensation of the Portfolio's officers
affiliated with Signature. The agreement provided for a fee to be paid to
Signature at an annual rate determined by the following schedule: 0.01% of
the first $1 billion of the aggregate average daily net assets of the
Portfolio and the other portfolios subject to the Administration
Agreement, 0.008% of the next $2 billion of such net assets, 0.006% of the
next $2 billion of such net assets, and 0.004% of such net assets in
excess of $5 billion. The daily equivalent of the fee rate was applied
each day to the net assets of the Portfolio. For the period November 1,
1995 through December 28, 1995, Signature's fee for these services
amounted to $252.
23
<PAGE>
THE SHORT TERM BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1996
- --------------------------------------------------------------------------------
Effective December 29, 1995, the Administration Agreement was amended such
that the fee charged would be equal to the Portfolio's proportionate share
of a complex-wide fee based on the following annual schedule: 0.03% on the
first $7 billion of the aggregate average daily net assets of the
Portfolio and the other portfolios subject to this agreement (the "Master
Portfolios") and 0.01% on the aggregate average daily net assets of the
Master Portfolios in excess of $7 billion. The portion of this charge
payable by the Portfolio is determined by the proportionate share of its
net assets bear to the total net assets of The Pierpont Funds, The JPM
Institutional Funds, The JPM Advisor Funds and the Master Portfolios. For
the period December 29, 1995 through April 30, 1996, such fees amounted to
$801.
c)Until August 31, 1995, the Portfolio had a Financial and Fund Accounting
Services Agreement ("Service Agreement") with Morgan under which Morgan
may receive a fee, based on the percentages described below, for
overseeing certain aspects of the administration and operation of the
Portfolio and was also designed to provide an expense limit for certain
expenses of the Portfolio. This fee was calculated exclusive of the
advisory fee, custody expenses, fund services fee, amortization of
organization expense, and brokerage costs at 0.05% of the Portfolio's
average daily net assets up to and including $200 million and 0.03% on any
excess over $200 million. From September 1, 1995 until December 28, 1995,
an interim agreement between the Portfolio and Morgan provided for the
continuation of the oversight functions that were outlined under the
Service Agreement and that Morgan should bear all of its expenses incurred
in connection with these services.
Effective December 29, 1995, the Portfolio entered into an Administrative
Services Agreement (the "Agreement") with Morgan under which Morgan is
responsible for overseeing certain aspects of the administration and
operation of the Portfolio. Under the Agreement, the Portfolio has agreed
to pay Morgan a fee equal to its proportionate share of an annual
complex-wide charge. This charge is calculated daily based on the
aggregate net assets of the Master Portfolios in accordance with the
following annual schedule: 0.06% on the first $7 billion of the Master
Portfolios' aggregate average daily net assets and 0.03% of the aggregate
average daily net assets in excess of $7 billion. The portion of this
charge payable by the Portfolio is determined by the proportionate share
that the Portfolio's net assets bear to the net asests of the Master
Portfolios and other investors in the Master Portfolios for which Morgan
provides similar services. For the period December 29, 1995 through April
30, 1996, the fee for these services amounted to $1,527.
In addition, Morgan has agreed to reimburse the Portfolio to the extent
necessary to maintain the total operating expenses of the Portfolio at no
more than 0.45% of the average daily net assets of the Portfolio through
February 28, 1997. For the six months ended April 30, 1996, Morgan has
agreed to reimburse the Portfolio $17,783 for expenses under this
agreement.
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 $632 for the six months ended April 30, 1996.
24
<PAGE>
THE SHORT TERM BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1996
- --------------------------------------------------------------------------------
e)An aggregate annual fee of $65,000 is paid to each Trustee for serving as
a Trustee of The Pierpont Funds, The JPM Institutional Funds and the
Master Portfolios. The Trustees' Fees and Expenses shown in the financial
statements represent the Portfolio's allocated portion of the total fees
and expenses. The Trustee who serves as Chairman and Chief Executive
Officer of the Portfolio 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 $100.
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the period were
as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
------------- -------------
<S> <C> <C>
U.S. Government and Agency Obligations $ 9,184,172 $ 15,069,368
Corporate and Collateralized Obligations 2,326,932 9,453,934
------------- -------------
$ 11,511,104 $ 24,523,302
------------- -------------
------------- -------------
</TABLE>
25
