<PAGE>
THE SHORT TERM BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
APRIL 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT{::} SECURITY DESCRIPTION RATING VALUE
- --------------------------- ------------------------------------------------- ------------ -------------
<C> <S> <C> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS AND ASSET BACKED SECURITIES (11.3%)
FINANCIAL SERVICES (11.3%)
$ 3,000,000 Advanta Mortgage Loan Trust, Sequential Payer,
Series 1997-4, Class A4, AS, Callable, 6.660%
due 03/25/22 (t)............................... Aaa/AAA $ 3,000,120
401,264 Bear Stearns Structured Securities, Inc., REMIC:
Sequential Payer, Series 1997-2, Class 1A1,
Callable, (144A), 7.000% due 08/25/36 (t)...... Aaa/NR 400,951
1,000,000 CIT RV Trust, Sequential Payer, Series 1997-A,
Class A5, Callable, 6.250% due 11/17/08........ Aaa/AAA 1,006,890
924,599 Commercial Mortgage Acceptance Corp., Sequential
Payer, Series 1997-ML1, Class A1, Partially
Callable, 6.500% due 11/15/04.................. Aaa/AAA 934,134
2,000,000 EQCC Home Equity Loan Trust, Sequential Payer,
Series 1998-1, Class A2F, AS, Callable, 6.136%
due 04/15/09................................... Aaa/AAA 2,003,740
1,489,826 Fleetwood Credit Corp. Grantor Trust, Sequential
Payer, Series 1997-B, Class A, Callable, 6.400%
due 05/15/13 (t)............................... Aaa/AAA 1,503,368
4,800,000 Green Tree Financial Corp., Sequential Payer,
Series 1996-7, Class A4, Callable, 6.800% due
10/15/27 (t)................................... Aaa/AAA 4,840,464
2,500,000 Green Tree Financial Corp., Sequential Payer,
Series 1998-2, Class A4, Callable, 6.080% due
07/01/09 (t)................................... Aaa/AAA 2,513,275
684,012 Green Tree Recreational, Equipment & Consumer
Trust, Sequential Payer, Series 1998-A, Class
A1C, Callable, 6.180% due 06/15/19 (t)......... NR/AAA 684,867
553,768 Green Tree Recreational, Equipment, & Consumer
Trust, Sequential Payer, Series1997-C, Class
A1, Callable, 6.490% due 02/15/18 (t).......... NR/AAA 552,838
915,046 Merrill Lynch Mortgage Investors, Inc.,
Sequential Payer, Series 1997-C2, Class A1,
Partially Callable, 6.460% due 12/10/29........ Aaa/AAA 926,627
1,575 Merrill Lynch Mortgage Investors, Inc., Series
1994-C1, Class A, Callable, CSTR, 8.700% due
11/25/20 (v)................................... NR/AAA 1,574
173,133 Merrill Lynch Mortgage Investors, Inc.,
Subordinated Bond, CSTR, Series 1995-C2, Class
E, Callable, 7.765% due 06/15/21 (v)........... Ba3/NR 161,365
865,906 Morgan Stanley Capital I, Sequential Payer, AFC,
Series 1998-HF1, Class A1, Partially Callable,
6.190% due 01/15/07............................ NR/AAA 871,588
1,000,000 Morgan Stanley Capital I, Sequential Payer,
Series 1997-ALIC, Class A1B, Callable, 6.440%
due 11/15/02................................... Aaa/NR 1,012,031
938,195 Mortgage Capital Funding, Inc., Sequential Payer,
Series 1998-MC1, Class A1, Partially Callable,
6.417% due 06/18/07 (t)........................ NR/AAA 945,231
62,650 Newcourt Receivables Asset Trust, Sequential
Payer, Series 1996-1, Class A, Callable, 6.790%
due 08/20/03................................... NR/AAA 63,146
134,927 Newcourt Receivables Asset Trust, Sequential
Payer, Series 1996-3, Class A, Callable, 6.240%
due 12/20/04................................... NR/AAA 136,219
5,000,000 Providian Home Equity Loan Trust, Series 1999-1,
Class A, Callable, 5.196% due 06/25/25 (v)..... Aaa/AAA 5,000,000
1,112,605 Residential Funding Mortgage Securities I, REMIC:
Sequential Payer, Series 1998-S7, Class A1,
Callable, 6.500% due 03/25/13.................. NR/AAA 1,110,513
1,500,000 Sears Credit Account Master Trust, Controlled
Amortization, Callable, Series 1996-1, Class A,
6.200% due 02/16/06............................ Aaa/AAA 1,513,125
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
16
<PAGE>
THE SHORT TERM BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT{::} SECURITY DESCRIPTION RATING VALUE
- --------------------------- ------------------------------------------------- ------------ -------------
<C> <S> <C> <C>
FINANCIAL SERVICES (CONTINUED)
$ 1,000,000 The Money Store Home Equity Trust, Series 1997-B,
Class A8, NAS, Callable, 6.900% due 07/15/38... Aaa/AAA $ 1,014,060
1,940,386 UCFC Home Equity Loan, Sequential Payer,
Series1997-A1, Class A3, AS, Callable, 6.975%
due 04/15/16................................... Aaa/AAA 1,963,458
-------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS AND
ASSET BACKED SECURITIES (COST
$32,247,802)............................... 32,159,584
-------------
CORPORATE OBLIGATIONS (24.0%)
APPARELS & TEXTILES (0.1%)
300,000 Fruit of the Loom, Inc., Refunding, 6.500% due
11/15/03....................................... Ba1/BB 274,680
-------------
BANKING (1.9%)
1,000,000 BankAmerica Corp., Refunding, 8.375% due
03/15/02....................................... Aa3/A 1,063,940
2,500,000 BankAmerica Corp., Series D, Callable 10/06/00,
MTN, 7.020% due 10/06/05 (t)................... Aa3/A 2,535,575
1,250,000 First Chicago NBD Corp., Refunding, 8.875% due
03/15/02....................................... A1/A 1,349,187
500,000 National Westminster Bank, Refunding, 9.375% due
11/15/03....................................... Aa3/AA- 565,480
-------------
5,514,182
-------------
BROADCASTING & PUBLISHING (0.2%)
500,000 Continental Cablevision, Inc., Callable 06/07/99,
Refunding, 11.000% due 06/01/07 (t)............ Ba2/BBB- 529,275
-------------
CHEMICALS (0.3%)
1,000,000 Cytec Industries, Inc., Callable, 6.500% due
03/15/03....................................... Baa2/BBB 974,550
-------------
ELECTRIC (0.5%)
1,000,000 Niagara Mohawk Power Corp., Series B, Callable,
7.000% due 10/01/00............................ Ba2/BB+ 1,008,980
500,000 Texas - New Mexico Power Co., Callable 09/15/00,
10.750% due 09/15/03........................... Baa3/BB+ 529,965
-------------
1,538,945
-------------
ENTERTAINMENT, LEISURE & MEDIA (0.6%)
1,500,000 News America Holdings, Inc., Refunding, 8.625%
due 02/01/03................................... Baa3/BBB- 1,619,115
-------------
</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, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT{::} SECURITY DESCRIPTION RATING VALUE
- --------------------------- ------------------------------------------------- ------------ -------------
<C> <S> <C> <C>
FINANCIAL SERVICES (15.9%)
$ 5,000,000 Associates Corp. N.A., 5.500% due 02/15/04 (t)... Aa3/AA- $ 4,878,200
610,000 Associates Corp. N.A., Putable, 5.960% due
05/15/37....................................... Aa3/AA- 613,636
4,000,000 AT&T Capital Corp., Series F, MTN, 7.500% due
11/15/00....................................... Baa3/BBB 4,095,960
5,000,000 AT&T Capital Corp., Series F, MTN, 6.450% due
06/14/00 (v)................................... Baa3/BBB 5,012,500
1,250,000 Banesto Delaware, Inc., Refunding, 8.250% due
07/28/02 (t)................................... A2/NR 1,319,738
1,500,000 Beneficial Corp., MTN, 8.200% due 03/15/02....... A2/A 1,587,045
1,000,000 Beneficial Corp., Series H, MTN, 6.710% due
12/15/03....................................... A2/A 1,020,730
1,500,000 Case Credit Corp., Series B, MTN, 6.240% due
11/06/00....................................... Baa1/A- 1,505,400
2,000,000 Caterpillar Financial Services Corp., Series F,
MTN, 5.600% due 06/05/03 (t)................... A2/A+ 1,973,500
2,500,000 Cendant Corp., Callable, 7.500% due 12/01/00
(t)............................................ Baa1/BBB 2,534,325
1,000,000 Chrysler Financial Co., LLC, Series Q, MTN,
6.610% due 06/16/00............................ A1/A+ 1,014,270
2,000,000 Enterprise Rent-a-Car USA Finance Co., (144A),
6.375% due 05/15/03 (t)........................ Baa2/BBB+ 1,969,440
5,000,000 Finova Capital Corp., Series D, MTN, 5.180% due
08/14/01 (v)(t)................................ Baa1/A- 4,988,100
5,000,000 Ford Motor Credit Co., MTN, 5.156% due 04/29/02
(v)(t)......................................... A1/A 5,009,050
500,000 GS Escrow Corp., Callable, 7.000% due 08/01/03... Ba1/BB+ 498,010
1,500,000 Heller Financial Inc., Series I, MTN, 5.480% due
02/05/01....................................... A3/A- 1,492,875
800,000 Homeside Lending, Inc., MTN, 6.875% due
06/30/02....................................... A1/A+ 821,848
1,500,000 Household Finance Corp., Series E, MTN, 5.300%
due 06/17/05 (v)............................... A2/A 1,490,445
3,500,000 Newcourt Credit Group Inc., 144A, 7.125% due
12/17/03 (t)................................... Baa3/BBB 3,627,050
-------------
45,452,122
-------------
FOREST PRODUCTS & PAPER (0.5%)
1,375,000 Georgia-Pacific Corp., 9.950% due 06/15/02....... Baa2/BBB- 1,516,694
-------------
GAS-PIPELINES (1.6%)
1,000,000 Enron Corp., Callable, 6.500% due 08/01/02....... Baa2/BBB+ 1,010,621
2,500,000 K N Energy, Inc., 6.450% due 11/30/01............ Baa2/BBB- 2,523,751
1,150,000 K N Energy, Inc., Callable, Putable, 6.300% due
03/01/01....................................... Baa2/BBB- 1,157,384
-------------
4,691,756
-------------
HEALTH & PERSONAL CARE (0.2%)
500,000 Playtex Family Products Corp., Callable,
06/07/99, Refundable, 9.000% due 12/15/03...... B2/B 512,500
-------------
METALS & MINING (0.4%)
1,150,000 Ryerson Tull, Inc., Callable, 8.500% due
07/15/01....................................... Baa3/BBB 1,184,500
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
18
<PAGE>
THE SHORT TERM BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT{::} SECURITY DESCRIPTION RATING VALUE
- --------------------------- ------------------------------------------------- ------------ -------------
<C> <S> <C> <C>
OIL-SERVICES (1.0%)
$ 500,000 Occidental Petroleum Corp., Callable, 6.750% due
11/15/02....................................... Baa3/BBB $ 501,595
1,500,000 Occidental Petroleum Corp., Series B, MTN,
Callable 9/15/99, 8.500% due 09/15/04.......... Baa3/BBB 1,518,135
753,473 Oil Purchase Co., Sinking Fund, (144A), 7.100%
due 10/31/02................................... Baa3/BBB 708,265
-------------
2,727,995
-------------
PACKAGING & CONTAINERS (0.4%)
500,000 Stone Container Corp., Callable, 12.750% due
04/01/02 (v)................................... B3/B- 502,500
500,000 Stone Container Corp., Refunding, Callable
06/07/99, 9.875% due 02/01/01.................. B2/B 508,125
-------------
1,010,625
-------------
WATER (0.4%)
1,000,000 U.S. Filter Corp., Callable, Putable, 6.375% due
05/15/01 (v)................................... Ba1/BBB+ 1,002,970
-------------
TOTAL CORPORATE OBLIGATIONS (COST
$68,752,558)............................... 68,549,909
-------------
FOREIGN CORPORATE OBLIGATIONS (3.7%)
AUSTRALIA (0.7%)
BANKING
2,000,000 Westpac Banking Ltd., Refunding, 9.125% due
08/15/01....................................... A1/A+ 2,123,040
-------------
CANADA (0.4%)
OIL PRODUCTION
1,000,000 Canadian Occidental Petroleum, Callable, 7.125%
due 02/04/04 (t)............................... Baa2/BBB 1,006,250
-------------
MEXICO (0.3%)
BANKING
1,000,000 Banco Nacional de Comercio Exterior SNC, Series
E, MTN, 8.000% due 04/14/00.................... Ba2/BB 1,002,500
-------------
NETHERLANDS (0.7%)
FINANCIAL SERVICES
2,000,000 ICI Investments BV, Series E, MTN, 6.750% due
08/07/02....................................... Baa1/A- 2,024,600
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
THE SHORT TERM BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT{::} SECURITY DESCRIPTION RATING VALUE
- --------------------------- ------------------------------------------------- ------------ -------------
<C> <S> <C> <C>
PANAMA (0.6%)
BANKING
$ 1,000,000 Banco Latinoamericano de Exportaciones, S.A.,
(144A), 6.550% due 04/15/03.................... Baa1/BBB $ 911,670
1,000,000 Banco Latinoamericano de Exportaciones, S.A.,
Series 107, (144A), 6.640% due 09/30/02........ Baa1/BBB 931,590
-------------
1,843,260
-------------
UNITED KINGDOM (0.5%)
BANKING
1,000,000 Barclays Bank PLC, 5.875% due 07/15/00........... A1/A 1,001,600
-------------
TELEPHONE
500,000 Cable & Wireless Communications, Inc., Callable,
6.375% due 03/06/03............................ Baa1/A- 501,075
-------------
1,502,675
-------------
VENEZUELA (0.5%)
FINANCIAL SERVICES
1,550,000 Corporacion Andina de Fomento, 7.375% due
07/21/00 (t)................................... A3/BBB+ 1,551,907
-------------
TOTAL FOREIGN CORPORATE OBLIGATIONS (COST
$11,218,156)............................... 11,054,232
-------------
FOREIGN GOVERNMENT OBLIGATIONS (9.2%)
CANADA (0.4%)
1,000,000 Province of Quebec, 7.500% due 07/15/02.......... A2/A+ 1,044,720
-------------
FRANCE (0.9%)
EUR 2,286,735 BTAN, Five-Year French Treasury Note, 4.750% due
03/12/02....................................... NR/NR 2,541,432
-------------
GERMANY (7.9%)
EUR 15,696,660 German Unity Fund, 8.000% due 01/21/02........... NR/NR 18,805,848
EUR 3,131,662 German Unity Fund, 8.500% due 02/20/01........... NR/NR 3,644,800
-------------
22,450,648
-------------
TOTAL FOREIGN GOVERNMENT OBLIGATIONS (COST
$28,336,593)............................... 26,036,800
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE SHORT TERM BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT{::} SECURITY DESCRIPTION VALUE
- --------------------------- ------------------------------------------------- -------------
<C> <S> <C> <C>
PRIVATE PLACEMENT (0.5%)
TELECOMMUNICATION SERVICES (0.5%)
$ 1,500,000 Charter Communication, due 03/18/08, 1.000% due
03/18/08 (cost $1,497,750)..................... $ 1,501,875
-------------
U.S. GOVERNMENT AGENCY OBLIGATIONS (44.3%)
FEDERAL HOME LOAN MORTGAGE CORP. (3.9%)
5,000,000 5.250% due 04/25/02.............................. 4,975,500
452,507 REMIC: Sequential Payer, Series 1980, Class VA,
Partially Callable, 7.000% due 08/15/02........ 459,294
2,914,281 REMIC: Sequential Payer, Series 2019, Class B,
Partially Callable, 6.500% due 07/15/16 (t).... 2,930,659
2,816,648 REMIC: Sequential Payer, Series 2061, Class VJ,
Partially Callable, 6.500% due 03/20/03 (t).... 2,821,915
-------------
11,187,368
-------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (18.3%)
2,857,970 6.500% due 08/01/28.............................. 2,877,568
70,091 8.500% due 08/01/05.............................. 72,746
982,930 IO, Series 292, Class 2, 7.500% due 11/01/27..... 211,023
982,930 PO, Series 292, Class 1, 7.081% due 11/01/27
(y)(t)......................................... 802,009
12,000,000 TBA, 6.000% due 03/01/29......................... 11,628,750
1,000,000 TBA, 6.500% due 02/01/14......................... 1,008,438
25,740,000 TBA, 6.500% due 03/01/29......................... 25,571,081
9,840,000 TBA, 7.000% due 03/01/29......................... 9,969,150
-------------
52,140,765
-------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (22.1%)
62,032,322 7.000% due 03/15/09.............................. 62,950,160
-------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(COST $126,855,716)......................... 126,278,293
-------------
U.S. TREASURY OBLIGATIONS (1.7%)
U.S. TREASURY NOTES (1.7%)
2,710,000 5.375% due 06/30/03.............................. 2,722,276
1,900,000 7.875% due 08/15/01.............................. 2,011,036
-------------
TOTAL U.S. TREASURY OBLIGATIONS (COST
$4,738,571)................................. 4,733,312
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE SHORT TERM BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P
SHARES SECURITY DESCRIPTION RATING VALUE
- --------------- ------------------------------------------------ --------------- -------------
<C> <S> <C> <C>
CONVERTIBLE PREFERRED STOCKS (0.3%)
FINANCIAL SERVICES (0.3%)
10,000 TCI Communications Financing II, Callable
05/31/01, 10.000%............................. A3/A $ 270,625
19,774 Equity Residential Properties Trust, Series A,
Callable 06/01/00, 9.375%..................... Baa1/BBB 506,709
-------------
TOTAL CONVERTIBLE PREFERRED STOCKS (COST
$787,415)................................. 777,334
-------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT{::}
- ---------------------------
<C> <S> <C>
SHORT-TERM INVESTMENTS (20.0%)
CERTIFICATES OF DEPOSIT -- FOREIGN (1.0%)
$ 3,000,000 Trident Capital Corp., 4.868% due 06/10/99 (y)
(cost $2,983,867).............................. 2,983,867
-------------
COMMERCIAL PAPER -- FOREIGN (1.7%)
5,000,000 Caisse D'Amortissement, 4.891% due 06/16/99 (y)
(cost $4,855,100).............................. 4,855,100
-------------
COMMERCIAL PAPER -- DOMESTIC (9.1%)
5,000,000 Asset Securitization Corp., 4.638% due 06/16/99
(y)............................................ 4,969,269
5,000,000 Morgan Stanley Dean Witter & Co., 4.656% due
05/18/99 (y)................................... 4,974,614
5,000,000 General Electric Capital Corp., 4.866% due
06/07/99 (y)................................... 4,975,333
6,000,000 MCI Worldcom, Inc. 4.937% due 05/18/99 (y)(t).... 5,985,607
5,000,000 Receivables Capital Corp., 4.496% due 05/17/99
(y)............................................ 4,989,289
-------------
TOTAL COMMERCIAL PAPER -- DOMESTIC (COST
$25,894,112)................................ 25,894,112
-------------
CORPORATE OBLIGATIONS
700,000 Fruit of the Loom, Inc., Refunding, 7.350% due
10/15/99 (y)................................... 701,554
2,500,000 RACERS, Series 1998-MM-8-4, (144A), 5.07% due
09/2/99 (v).................................... 2,498,750
-------------
TOTAL CORPORATE OBLIGATIONS (COST
$3,196,027)................................. 3,200,304
-------------
OTHER INVESTMENT COMPANIES (0.0%)
967 Seven Seas Money Market Fund (cost $967)......... 967
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE SHORT TERM BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT{::} SECURITY DESCRIPTION VALUE
- --------------------------- ------------------------------------------------- -------------
<C> <S> <C>
REPURCHASE AGREEMENT (7.1%)
$ 20,247,000 Goldman Sachs Repurchase Agreement, 4.89% dated
04/30/99 due 05/03/99, proceeds $20,255,251,
(collateralized by $13,287,000 U.S. Treasury
Bond, 13.875% due 5/15/11, valued at
$20,247,925) (cost $20,247,000)................ $ 20,247,000
-------------
TOTAL SHORT-TERM INVESTMENTS (COST
$57,177,073)................................... 57,181,350
-------------
TOTAL INVESTMENTS (COST $331,611,634) (115.0%)... 328,272,689
LIABILITIES IN EXCESS OF OTHER ASSETS (-15.0%)... (42,857,933)
-------------
NET ASSETS (100.0%).............................. $ 285,414,756
-------------
-------------
</TABLE>
- ------------------------------
Note: Based on the cost of investments of $331,611,689 for federal income tax
purposes at April 30, 1999, the aggregate gross unrealized appreciation and
depreciation was $351,641 and $3,690,641, respectively, resulting in net
unrealized depreciation of $3,339,000.
{::} Denominated in USD unless otherwise indicated.
(t) All or a portion of the security has been segregated as collateral for TBA
securities.
(v) Rate shown reflects current rate on variable or floating rate instrument or
instrument with step coupon rate.
(y) Yield to maturity.
Abbreviations used in the schedule of investments are as follows:
144A - Securities restricted for resale to Qualified Institutional Buyers.
AS - Accelerated Security
CSTR - Collateral Strip Rate
EUR - Euro
IO - Interest Only
MTN - Medium Term Note
NAS - Non-Accelerated Security
NR - Not Rated
PO - Principal Only
REMIC - Real Estate Mortgage Investment Conduit
TBA - Security purchased on a forward commitment basis with an approximate
principal amount and no definite maturity date. The actual principal amount and
maturity date will be determined upon settlement.
USD - United States Dollar
The Accompanying Notes are an Integral Part of the Financial Statements.
23
<PAGE>
THE SHORT TERM BOND PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
APRIL 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $331,611,634) $328,272,689
Receivable for Investments Sold 983,201
Unrealized Appreciation of Forward Foreign
Currency Contracts 1,977,694
Interest Receivable 2,517,851
Variation Margin Receivable 16,888
Receivable for Expense Reimbursement 12,519
Prepaid Trustees' Fees 1,342
Prepaid Expenses and Other Assets 780
------------
Total Assets 333,782,964
------------
LIABILITIES
Payable for Investments Purchased 48,276,219
Advisory Fee Payable 56,631
Administrative Services Fee Payable 5,835
Custody Fee Payable 250
Fund Services Fee Payable 107
Accrued Expenses 29,166
------------
Total Liabilities 48,368,208
------------
NET ASSETS
Applicable to Investors' Beneficial Interests $285,414,756
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
24
<PAGE>
THE SHORT TERM BOND PORTFOLIO
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED APRIL 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest Income $ 7,729,349
Dividend Income 35,673
-----------
Investment Income 7,765,022
EXPENSES
Advisory Fee $ 337,341
Custodian Fees and Expenses 52,216
Administrative Services Fee 35,753
Professional Fees and Expenses 18,348
Printing Expenses 4,201
Fund Services Fee 2,833
Administration Fee 1,839
Trustees' Fees and Expenses 572
Miscellaneous 407
-----------
Total Expenses 453,510
Less: Reimbursement of Expenses (93,634)
-----------
NET EXPENSES 359,876
-----------
NET INVESTMENT INCOME 7,405,146
NET REALIZED GAIN (LOSS) ON
Investment Transactions (927,815)
Futures Contracts 34,935
Foreign Currency Contracts and Transactions 1,815,123
-----------
Net Realized Gain 922,243
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) OF
Investments (4,689,711)
Futures Contracts (21,455)
Foreign Currency Contracts and Translations 1,331,125
-----------
Net Change in Unrealized Depreciation (3,380,041)
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $ 4,947,348
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
25
<PAGE>
THE SHORT TERM BOND PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
APRIL 30, FOR THE FISCAL
1999 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1998
------------- ----------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 7,405,146 $ 7,527,438
Net Realized Gain on Investments, Futures and
Foreign Currency Contracts and Transactions 922,243 1,079,966
Net Change in Unrealized Appreciation
(Depreciation) of Investments, Futures and
Foreign Currency Contracts and Translations (3,380,041) 1,956,909
------------- ----------------
Net Increase in Net Assets Resulting from
Operations 4,947,348 10,564,313
------------- ----------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 121,929,586 263,906,334
Withdrawals (105,945,157) (51,939,489)
------------- ----------------
Net Increase from Investors' Transactions 15,984,429 211,966,845
------------- ----------------
Total Increase in Net Assets 20,931,777 222,531,158
NET ASSETS
Beginning of Period 264,482,979 41,951,821
------------- ----------------
End of Period $ 285,414,756 $ 264,482,979
------------- ----------------
------------- ----------------
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FOR THE FISCAL YEAR ENDED
SIX MONTHS ENDED OCTOBER 31,
APRIL 30, 1999 --------------------------------
(UNAUDITED) 1998 1997 1996 1995 1994
---------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Net Expenses 0.27%(a) 0.25% 0.25% 0.38% 0.42% 0.36%
Net Investment Income 5.49%(a) 5.84% 6.17% 5.65% 6.11% 5.01%
Expenses without Reimbursement 0.34%(a) 0.38% 0.55% 0.61% 0.46% 0.41%
Portfolio Turnover 192%(b) 381% 219% 191% 177% 230%
</TABLE>
- ------------------------
(a) Annualized.
(b) Not Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
26
<PAGE>
THE SHORT TERM BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
APRIL 30, 1999
- --------------------------------------------------------------------------------
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, open-end management
investment company which was organized as a trust under the laws of the State of
New York on January 29, 1993. The portfolio commenced operations on July 8,
1993. The portfolio's investment objective is to provide a high total return,
consistent with low volatility of principal. The Declaration of Trust permits
the trustees to issue an unlimited number of beneficial interests in the
portfolio.
Investments in emerging and international markets may involve certain
considerations and risks not typically associated with investments in the United
States. Future economic and political developments in emerging market and
foreign countries could adversely affect the liquidity or value, or both, of
such securities in which the portfolio is invested. The ability of the issuers
of debt, asset-backed and mortgage securities held by the portfolio to meet
their obligations may be affected by economic and political developments in a
specific industry or region. The value of asset-backed and mortgage securities
can be significantly affected by changes in interest rates or rapid principal
repayments including pre-payments.
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 value of each security for which readily available market quotations
exist is based on a decision as to the broadest and most representative
market for each security. The value of such security will be based either
on the last sale price on a national securities exchange, or in the
absence of recorded sales, at the average of readily available closing bid
and asked prices on such exchanges. Securities listed on a foreign
exchange are valued at the last quoted sale price available before the
time when net assets are valued. Unlisted securities are valued at the
average of the quoted bid and asked prices in the over-the-counter market.
Securities or other assets for which market quotations are not readily
available are valued at fair value in accordance with procedures
established by the portfolio's trustees. Such procedures include the use
of independent pricing services, which use prices based upon yields or
prices of securities of comparable quality, coupon, maturity and type;
indications as to values from dealers; and general market conditions. All
short-term portfolio securities with a remaining maturity of less than 60
days are valued by the amortized cost method.
Trading in securities on most foreign exchanges and over-the-counter
markets is normally completed before the close of the domestic market and
may also take place on days on which the domestic market is closed. If
events materially affecting the value of foreign securities occur between
the time when the exchange on which they are traded closes and the time
when the portfolio's net assets are calculated, such securities will be
valued at fair value in accordance with procedures established by and
under the general supervision of the portfolio's trustees.
The portfolio's custodian or designated subcustodians, as the case may be
under tri-party 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
27
<PAGE>
THE SHORT TERM BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1999
- --------------------------------------------------------------------------------
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) The books and records of the portfolio are maintained in U.S. dollars. The
market value of investment securities, other assets and liabilities and
foreign currency contracts are translated at the prevailing exchange rates
at the end of the period. Purchases, sales, income and expenses are
translated at the exchange rates prevailing on the respective dates of
such transactions. Translation gains and losses resulting from changes in
exchange rates during the reporting period and gains and losses realized
upon settlement of foreign currency transactions are reported in the
Statement of Operations. Although the net assets of the portfolio are
presented at the exchange rates and market values prevailing at the end of
the period, the portfolio does not isolate the portion of the results of
operations arising as a result of changes in foreign exchange rates from
the fluctuations arising from changes in the market prices of securities
during the period.
c) Securities transactions are recorded on a trade date basis. Dividend
income is recorded on the ex-dividend date or as of the time that the
relevant ex-dividend date and amount becomes known. Interest income, which
includes the amortization of premiums and discounts, if any, is recorded
on an accrual basis. For financial and tax reporting purposes, realized
gains and losses are determined on the basis of specific lot
identification.
d) The portfolio may enter into forward and spot foreign currency contracts
to protect securities and related receivables and payables against
fluctuations in future foreign currency rates and to enhance returns. A
forward contract is an agreement to buy or sell currencies of different
countries on a specified future date at a specified rate. Risks associated
with such contracts include the movement in the value of the foreign
currency relative to the U.S. dollar and the ability of the counterparty
to perform.
The market value of the contract will fluctuate with changes in currency
exchange rates. Contracts are valued daily at the current foreign exchange
rates, and the change in the market value is recorded by the portfolio as
unrealized appreciation or depreciation of forward foreign currency
contract translations. At April 30, 1999, the portfolio had open forward
foreign currency contracts as follows:
<TABLE>
<CAPTION>
SETTLEMENT U.S. DOLLAR NET UNREALIZED
SALES CONTRACTS VALUE VALUE AT 4/30/99 APPRECIATION
- ------------------------------------------------- ----------- ---------------- --------------
<S> <C> <C> <C>
Euro 24,778,000.00 expiring 5/10/99.............. $28,208,514 $ 26,230,820 $ 1,977,694
</TABLE>
e) Futures -- A futures contract is an agreement to purchase/sell a specified
quantity of an underlying instrument at a specified future date or to
make/receive a cash payment based on the value of a securities index. The
price at which the purchase and sale will take place is fixed when the
portfolio enters into the contract. Upon entering into such a contract the
portfolio is required to pledge to the broker an amount of cash and/or
liquid 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 for the purpose of
hedging its existing portfolio securities, or securities the
28
<PAGE>
THE SHORT TERM BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1999
- --------------------------------------------------------------------------------
portfolio intends to purchase, against fluctuations in value caused by
changes in prevailing market interest rates or securities movements. 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. There were no open futures contracts at
April 30, 1999.
f) The portfolio may enter into commitments to buy and sell investments to
settle on future dates as part of its normal investment activities. These
commitments are reported at market value in the financial statements.
Credit risk exists on these commitments to the extent of any unrealized
gains on the underlying securities purchased and any unrealized losses on
the underlying securities sold. Market risk exists on these commitments to
the same extent as if the security were owned on a settled basis and gains
and losses are recorded and reported in the same manner. However, during
the commitment period, these investments earn no interest or dividends.
g) 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. The portfolio earns foreign income which may
be subject to foreign withholding taxes at various rates.
2. TRANSACTIONS WITH AFFILIATES
a) The portfolio's Investment Advisor is 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 & Co. Inc. ("J.P.
Morgan"). Under the terms of the agreement, the portfolio pays JPMIM at an
annual rate of 0.25% of the portfolio's average daily net assets. For the
six months ended April 30, 1999, such fees amounted to $337,341.
b) The portfolio, on behalf of the fund, has retained Funds Distributor, Inc.
("FDI"), a registered broker-dealer, to serve as the co-administrator and
exclusive placement agent. Under a Co-Administration Agreement between FDI
and the portfolio, FDI provides administrative services necessary for the
operations of the portfolio, furnishes office space and facilities
required for conducting the business of the portfolio and pays the
compensation of the 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 amount allocable to the portfolio is based on the ratio of the
portfolio's net assets to the aggregate net assets of the portfolio and
certain other investment companies subject to similar agreements with FDI.
For the six months ended April 30, 1999, the fee for theses services
amounted to $1,839.
c) The portfolio has an Administrative Services Agreement (the "Services
Agreement") with Morgan under which Morgan is responsible for certain
aspects of the administration and operation of the portfolio. Under the
Services Agreement, the portfolio has agreed to pay Morgan a fee equal to
its allocable share of an annual complex-wide charge. This charge is
calculated based on the aggregate average daily net assets of the
portfolio and certain other portfolios for which JPMIM acts as investment
advisor (the "master portfolios") and J.P. Morgan Series Trust in
accordance with the following annual schedule: 0.09% on the first $7
billion of their aggregate average daily net assets and 0.04% of their
29
<PAGE>
THE SHORT TERM BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1999
- --------------------------------------------------------------------------------
aggregate average daily net assets in excess of $7 billion less the
complex-wide fees payable to FDI. The portion of this charge payable by
the portfolio is determined by the proportionate share its net assets bear
to the net assets of the master portfolios, other investors in the master
portfolios for which Morgan provides similar services, and J.P. Morgan
Series Trust. For the six months ended April 30, 1999, the fee for these
services amounted to $35,753.
In addition, J.P. Morgan has agreed to reimburse the portfolio to the
extent necessary to maintain the total operating expenses of the portfolio
at no more than 0.30% of the average daily net assets of the portfolio.
Prior to March 1, 1999, the reimbursement agreement was 0.25%. This
reimbursement arrangement can be changed or terminated at any time at the
option of J.P. Morgan. For the six months ended April 30, 1999, J.P.
Morgan has agreed to reimburse the portfolio $93,634 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 $2,833 for the six months ended April 30, 1999.
e) An aggregate annual fee of $75,000 is paid to each trustee for serving as
a trustee of the J.P. Morgan Funds, the J.P. Morgan Institutional Funds,
the master portfolios and J.P. Morgan Series Trust. The Trustees' Fees and
Expenses shown in the financial statements represents the portfolio's
allocated portion of the total fees and expenses. The portfolio's Chairman
and Chief Executive Officer also serves as Chairman of Group and receives
compensation and employee benefits from Group in his role as Group's
Chairman. The allocated portion of such compensation and benefits included
in the Fund Services Fee shown in the financial statements was $600.
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the six months
ended April 30, 1999 were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
------------ ------------
<S> <C> <C>
U.S. Government and Agency Obligations........... $446,146,075 $333,251,314
Corporate, Collateralized Mortgage Obligations,
and Other Securities............................ 291,606,598 153,357,436
------------ ------------
$737,752,673 $486,608,750
------------ ------------
------------ ------------
</TABLE>
4. CREDIT AGREEMENT
The portfolio is party to a revolving line of credit agreement as discussed more
fully in Note 4 of the fund's Notes to the Financial Statements which are
included elsewhere in this report.
30
