<PAGE>
THE SHORT TERM BOND PORTFOLIO
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P
PRINCIPAL RATING
AMOUNT SECURITY DESCRIPTION (UNAUDITED) VALUE
- ---------- -------------------------------------------------- --------------- -----------
<C> <S> <C> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS AND ASSET BACKED SECURITIES (41.8%)
FINANCIAL SERVICES (41.8%)
$ 495,947 Aegis Auto Receivables Trust, Series 1996-3, Class
A, Sequential Payer, Callable, (144A) 8.80% due
03/20/02........................................ NR/NR $ 509,896
260,854 Chase Manhattan Grantor Trust, Series 1996-A,
Class A, Pass Through, Callable 5.20% due
02/15/02........................................ Aaa/AAA 259,387
625,862 CIT River Owners Trust,Series 1995-A, Class A,
Sequential Payer, Callable 6.25% due 01/15/11... Aaa/AAA 627,834
443,246 Equicon Home Equity Loan Trust, Series 1992-7,
Remic: Class A, Sequential Payer, Callable 5.90%
due 09/18/05.................................... Aaa/AAA 440,441
700,000 First Plus Home Loan Trust, Series 1996-3, Class
A2, Sequential Payer, Callable 6.85% due
06/20/07........................................ Aaa/AAA 705,359
534,020 Fleetwood Credit Corp. Grantor Trust, Series
1994-A, Class A, Sequential Payer, Callable
4.70% due 07/15/09.............................. Aaa/AAA 522,805
1,500,000 Green Tree Home Improvement Loan Trust, Series
1996-2, Class A2, Sequential Payer, Callable
6.80% due 09/15/27.............................. NR/AAA 1,518,516
493,103 Merrill Lynch Mortgage Investors, Inc., Remic
Series 1994-C1, Class A, Callable 8.61% due
11/25/20........................................ NR/AAA 497,110
478,131 Newcourt Receivables Asset Trust, Series 1996-1,
Class A, Sequential Payer, Callable 6.79% due
08/20/03........................................ NR/AAA 482,291
2,000,000 Premier Auto Trust, Series 1996-2, Class A3,
Sequential Payer, Callable, 6.35% due
01/06/00........................................ Aaa/AAA 2,016,800
727,404 Prudential Home Mortgage Securities, Remic:
Sequential Payer, Series 1992-44, Class A1,
Callable 6.00% due 01/25/98..................... Aaa/AAA 722,851
566,015 Summit Acceptance Auto Receivables, Series 1996-A,
Class A-1, (144A) 7.01% due 07/15/02............ Aaa/AAA 571,498
1,500,000 World Omni Automobile Lease Securitization Trust,
Series 1996-A, Class A1, Sequential Payer,
Callable 6.30% due 06/25/02..................... Aaa/AAA 1,502,460
500,000 World Omni Automobile Lease Securitization Trust,
Series 1996-B, Class A1 5.95% due 11/15/02...... Aaa/AAA 499,531
-----------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS AND
ASSET BACKED SECURITIES (COST
$10,819,469)................................ 10,876,779
-----------
CORPORATE OBLIGATIONS (12.9%)
ELECTRIC (4.1%)
1,000,000 Hydro Quebec 9.75% due 09/29/98................... NR/A+ 1,062,500
-----------
FINANCIAL SERVICES (1.1%)
300,000 Cheung Kong Finance Cayman 5.50% due 09/30/98..... NR/NR 293,437
-----------
OIL-SERVICES (3.8%)
1,000,000 Occidental Petroleum Corp. 5.76% due 06/15/98..... Baa3/BBB 993,120
-----------
TELEPHONE (3.9%)
1,000,000 Southwestern Bell Cap 7.30% due 07/15/99.......... A2/A+ 1,025,780
-----------
TOTAL CORPORATE OBLIGATIONS (COST
$3,310,280)................................. 3,374,837
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
THE SHORT TERM BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY DESCRIPTION VALUE
- ---------- -------------------------------------------------- -----------
<C> <S> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS (23.0%)
FEDERAL HOME LOAN MORTGAGE CORP.
$ 417,051 9.00% due 05/01/97................................ $ 423,169
1,500,000 REMIC: PAC-1(11), Series 1625, Class DA 5.50% due
07/15/04........................................ 1,483,935
-----------
1,907,104
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
1,500,000 REMIC: PAC-1(11), Series 1625, Class DA 5.60% due
07/25/03........................................ 1,494,495
1,000,000 REMIC: PAC-1(11), Series 1994-33, Class D 5.50%
due 04/25/05.................................... 986,310
-----------
2,480,805
-----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
1,500,000 GNMA TBA Nov 9.00%................................ 1,607,805
-----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (COST
$5,966,960).................................. 5,995,714
-----------
U.S. TREASURY OBLIGATIONS (15.0%)
U.S. TREASURY NOTES
3,880,000 United States Treasury Notes 6.00% due 08/15/99
(cost $3,854,313)............................... 3,889,428
-----------
SHORT-TERM INVESTMENTS (12.9%)
OTHER INVESTMENT COMPANIES (0.0%)*
626 Seven Seas Money Market Fund (cost $626).......... 626
-----------
REPURCHASE AGREEMENT (12.9%)
3,351,000 Goldman Sachs Repurchase Agreement, 5.54% dated
10/31/96 due 11/01/96, proceeds $3,351,516,
(collateralized by $2,474,000 U.S. Treasury
Bond, 11.625% due 11/15/04, valued at
$3,418,911) (cost $3,351,000)................... 3,351,000
-----------
TOTAL SHORT-TERM INVESTMENTS (COST
$3,351,626).................................. 3,351,626
-----------
TOTAL INVESTMENTS (COST $27,302,648) (105.6%)..... 27,488,384
LIABILITIES IN EXCESS OF OTHER ASSETS (-5.6%)..... (1,456,273)
-----------
NET ASSETS (100.0%)............................... $26,032,111
-----------
-----------
</TABLE>
- ------------------------------
Note: Based on the cost of investments of $27,302,648 for federal income tax
purposes at October 31, 1996, the aggregate gross unrealized appreciation and
depreciation was $236,697 and $50,961, respectively, resulting in net unrealized
appreciation of $185,736.
* Less than 0.1%.
TBA -- Security purchased on a forward commitment basis with an appropriate
principal amount and no definitive maturity date. The actual principal amount
and maturity date will be determined upon settlement date.
144A -- Securities restricted for resale to Qualified Institutional Buyers
REMIC -- Real estate mortgage investment conduit.
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE SHORT TERM BOND PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $27,302,648) $27,488,384
Interest Receivable 178,275
Receivable for Expense Reimbursement 15,700
Deferred Organization Expenses 2,300
Prepaid Expenses and Other Assets 22
-----------
Total Assets 27,684,681
-----------
LIABILITIES
Payable for Investments Purchased 1,601,250
Payable to Custodian 24,958
Advisory Fee Payable 5,693
Administrative Services Fee Payable 726
Custody Fee Payable 135
Administration Fee Payable 67
Fund Services Fee Payable 13
Accrued Trustees' Fees and Expenses 250
Accrued Expenses 19,478
-----------
Total Liabilities 1,652,570
-----------
NET ASSETS
Applicable to Investors' Beneficial Interests $26,032,111
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE SHORT TERM BOND PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest Income $1,212,907
EXPENSES
Advisory Fee $ 50,319
Professional Fees and Expenses 34,359
Custodian Fees and Expenses 25,934
Administrative Services Fee 4,344
Administration Fee 1,703
Printing Expenses 1,601
Amortization of Organization Expenses 1,365
Fund Services Fee 1,005
Registration Fees 610
Trustees' Fees and Expenses 602
Insurance Expense 508
Miscellaneous 250
--------
Total Expenses 122,600
Less: Reimbursement of Expenses (46,618)
--------
NET EXPENSES 75,982
----------
NET INVESTMENT INCOME 1,136,925
NET REALIZED GAIN ON INVESTMENTS
(including $25,919 net realized
loss from futures contracts) 146,407
NET CHANGE IN UNREALIZED APPRECIATION
OF INVESTMENTS 5,083
----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $1,288,415
----------
----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE SHORT TERM BOND PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FOR THE
FISCAL FISCAL
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1996 1995
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 1,136,925 $ 3,574,946
Net Realized Gain on Investments 146,407 407,824
Net Change in Unrealized Appreciation
of Investments 5,083 1,076,791
------------- -------------
Net Increase in Net Assets
Resulting from Operations 1,288,415 5,059,561
------------- -------------
TRANSACTIONS IN INVESTORS' BENEFICIAL
INTERESTS
Contributions 54,341,812 32,690,159
Withdrawals (58,904,692) (61,766,958)
------------- -------------
Net Decrease from Investors'
Transactions (4,562,880) (29,076,799)
------------- -------------
Total Decrease in Net Assets (3,274,465) (24,017,238)
NET ASSETS
Beginning of Fiscal Year 29,306,576 53,323,814
------------- -------------
End of Fiscal Year $ 26,032,111 $ 29,306,576
------------- -------------
------------- -------------
</TABLE>
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 8, 1993
(COMMENCEMENT
FOR THE FISCAL YEAR ENDED OCTOBER 31, OF
OPERATIONS) TO
------------------------------------- OCTOBER 31,
1996 1995 1994 1993
--------- --------- --------- --------------
<S> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Expenses 0.38% 0.42% 0.36% 0.37%(a)
Net Investment Income 5.65% 6.11% 5.01% 3.99%(a)
Decrease Reflected in Expense Ratio
due to Expense Reimbursement 0.23% 0.04% 0.05% 1.00%(a)
Portfolio Turnover 191% 177% 230% 116%
</TABLE>
- ------------------------
(a) Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
23
<PAGE>
THE SHORT TERM BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 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)The Portfolio values mortgage and asset-backed securities and other debt
securities with a maturity of 60 days or more, including securities that
are listed on an exchange or traded over the counter, 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. The
ability of issuers of mortgage and asset-backed securities, held by the
Portfolio, to meet their obligations may be affected by economic
developments in a specific industry or region. The value of mortgage and
asset-backed securities can be significantly affected by changes in
interest rates, rapid principal repayments including pre-payments.
The Portfolio's custodian or designated subcustodians, as the case may be,
under triparty repurchase agreements takes possession of the collateral
pledged for investments in repurchase agreements on behalf of the
Portfolio. It is the policy of the Portfolio to value the underlying
collateral daily on a mark-to-market basis to determine that the value,
including accrued interest, is at least equal to the repurchase price plus
accrued interest. In the event of default of the obligation to repurchase,
the Portfolio has the right to liquidate the collateral and apply the
proceeds in satisfaction of the obligation. Under certain circumstances,
in the event of default or bankruptcy by the other party to the agreement,
realization and/or retention of the collateral or proceeds may be subject
to legal proceedings.
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
24
<PAGE>
THE SHORT TERM BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1996
- --------------------------------------------------------------------------------
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 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 fiscal year ended October 31, 1996 are summarized as follows:
<TABLE>
<CAPTION>
PRINCIPAL
NUMBER OF AMOUNT
CONTRACTS OF CONTRACTS
--------- -------------
<S> <C> <C>
Contracts open at beginning of year.......... 10 $ 1,076,009
Contracts opened............................. 26 5,356,975
Contracts closed............................. (36) (6,432,984)
--------- -------------
Contracts open at end of year................ 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 fiscal year ended
October 31, 1996, such fees amounted to $50,319.
b)The Portfolio had retained Signature Broker-Dealer Services, Inc.
("Signature") to serve as Administrator and exclusive placement agent.
Under an Administration Agreement, Signature provided administrative
services necessary for the operations of the Portfolio, furnished office
space and facilities required for conducting the business of the Portfolio
and paid the compensation of the Portfolio's officers affiliated with
Signature. Until December 28, 1995, 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
25
<PAGE>
THE SHORT TERM BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1996
- --------------------------------------------------------------------------------
$1 billion of the aggregate average daily net assets of the Portfolio and
the other portfolios subject to the 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 from November 1, 1995 to December 28, 1995,
Signature's fee for these services amounted to $801.
Effective December 29, 1995, the Administration Agreement was amended such
that the fee charged was 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 (the "Master Portfolios") in which The
JPM Pierpont Funds, The JPM Institutional Funds or The JPM Advisor Funds
invest and 0.01% on the aggregate average daily net assets of the Master
Portfolios in excess of $7 billion. The portion of this charge paid by the
Portfolio was determined by the proportionate share its net assets bore to
the total net assets of The JPM Pierpont Funds, The JPM Institutional
Funds, The JPM Advisor Funds and the Master Portfolios. For the period
from December 29, 1995 through July 31, 1996, Signature's fee for these
services amounted to $746. The Administration Agreement with Signature was
terminated July 31, 1996.
Effective August 1, 1996, certain administrative functions formerly
provided by Signature are provided by Funds Distributor, Inc. ("FDI"), a
registered broker-dealer, and by Morgan. FDI also serves as the
Portfolio's exclusive placement agent. Under a Co-Administration Agreement
between FDI and the Portfolio, the Portfolio has agreed to pay FDI fees
equal to its allocable share of an annual complex-wide charge of $425,000
plus FDI's out-of-pocket expenses. The amount allocable to the Portfolio
is based on the ratio of the Portfolio's net assets to the aggregate net
assets of the The JPM Pierpont Funds, The JPM Institutional Funds, The JPM
Advisor Funds and the Master Portfolios. For the period from August 1,
1996 through October 31, 1996, the fee for these services amounted to
$156.
c)Until August 31, 1995, the Portfolio had a Financial and Fund Accounting
Services Agreement with Morgan which provided that Morgan would receive a
fee, based on the percentages described below, for overseeing certain
aspects of the administration and operation of the Portfolio and that 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, brokerage costs and amortization of
organization expenses at 0.05% of the Portfolio's average daily net assets
up to and including $200 million and 0.03% of average daily net assets 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
prior 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 "Services Agreement") with Morgan under which
Morgan was responsible for overseeing certain aspects of the
administration and operation of the Portfolio. Under the Services
Agreement, the Portfolio had agreed to pay Morgan a fee equal to its
proportionate share of an annual complex-wide charge. Until July 31, 1996,
this charge was calculated daily based on the aggregate net assets of the
Master Portfolios in accordance with the following annual schedule: 0.06%
on the first $7 billion of the Master Portfolios' aggregate average daily
net assets and 0.03% of the Master Portfolios' aggregate
26
<PAGE>
THE SHORT TERM BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1996
- --------------------------------------------------------------------------------
average daily net assets in excess of $7 billion. The portion of this
charge paid by the Portfolio was determined by the proportionate share
that the Portfolio's net assets bore to the net assets of the Master
Portfolios and investors in the Master Portfolios for which Morgan
provided similar services. For the period from December 29, 1995 through
July 31, 1996, Morgan's fee for these services amounted to $2,474.
Effective August 1, 1996, the Services Agreement was amended such that the
annual complex-wide charge is calculated daily based on the aggregate net
assets of the Master Portfolios in accordance with the following annual
schedule: 0.09% on the first $7 billion of the Master Portfolios'
aggregate average daily net assets and 0.04% of the Master Portfolio's
aggregate average daily net assets in excess of $7 billion less the
complex-wide fees payable to FDI. The allocation of the Portfolio's
portion of this charge is described above. For the period from August 1,
1996 through October 31, 1996, the fee for these services amounted to
$1,870.
In addition, prior to July 1, 1996, Morgan 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 Fund. Effective July 1, 1996 through at least February 28, 1997,
Morgan will reimburse the Portfolio to the extent necesssary to maintain
the Portfolio's total operating expenses at an annual rate of no more than
0.25% of the average daily net assets of the Fund. For the fiscal year
ended October 31, 1996, Morgan has agreed to reimburse the Portfolio
$46,618 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 $1,005 for the fiscal year ended October 31, 1996.
e)An aggregate annual fee of $65,000 is paid to each Trustee for serving as
a Trustee of The JPM Pierpont Funds, The JPM Institutional Funds 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 Portfolio's Chairman and Chief Executive Officer also
serves as Chairman of Group and received compensation and employee
benefits from Group in his role as Group's Chairman. The allocated portion
of such compensation and benefits included in the Fund Services Fee shown
in the financial statements was $130.
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....... $ 23,963,743 $ 26,603,778
Corporate and Collateralized Obligations..... 14,057,809 15,536,455
------------- -------------
Total........................................ $ 38,021,552 $ 42,140,233
------------- -------------
------------- -------------
</TABLE>
27
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Investors of
The Short Term Bond Portfolio
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the supplementary data present fairly, in all material
respects, the financial position of The Short Term Bond Portfolio (the
"Portfolio") at October 31, 1996, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended, and its supplementary data for each of the three years in the
period then ended and for the period July 8, 1993 (commencement of operations)
through October 31, 1993, in conformity with generally accepted accounting
principles. These financial statements and supplementary data (hereafter
referred to as "financial statements") are the responsibility of the Portfolio's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 1996 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
New York, New York
December 18, 1996
28
