<PAGE>
THE SHORT TERM BOND PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P
PRINCIPAL RATING
AMOUNT SECURITY DESCRIPTION (UNAUDITED) VALUE
--------------- ------------------------------------------------- ------------ -------------
<C> <S> <C> <C>
ASSET BACKED SECURITY (24.8%)
$ 10,646,500 Associates Corp. N.A, 6.475% due 03/15/28........ Aaa/AAA $ 10,543,367
4,000,000 Banc One Credit Card Master Trust, 6.150% due
07/15/02....................................... Aaa/AAA 3,998,720
12,000,000 CIT Group Inc., 7.375% due 03/15/03.............. A1/A+ 11,869,200
15,000,000 WFS Financial Owner Trust 2000-A A3, 7.220% due
09/20/04....................................... Aaa/AAA 14,936,715
3,000,000 Advanta Mortgage Loan Trust, Sequential Payer,
Series 1997-4, Class A4, 6.660% due 03/25/22... Aaa/AAA 2,965,782
2,500,000 Americredit Automobile Receivable Trust,
Sequential Payer, Series 1999-B, Class A4,
5.960% due 03/12/06............................ Aaa/AAA 2,411,720
4,350,000 AT&T Universal Card Master Trust, Series 1995-2,
Class A, 5.950% due 10/17/02................... Aaa/AAA 4,337,733
4,950,000 Carco Auto Loan Master Trust, Series 1999-4,
Class A, 6.430% due 11/15/04................... Aaa/AAA 4,852,351
10,000,000 Chase Credit Master Trust, Series 1997-2, Class
A, 6.300% due 04/15/03......................... Aaa/AAA 9,996,800
2,000,000 CIT RV Trust, Series 1999-A, Class CTFS, 7.210%
due 11/15/19................................... Baa3/BBB 1,893,126
1,125,000 Citibank Credit Master Trust I, Sub. Bond, PO,
Series 1997-6, Class A, 7.186% due 08/15/06.... Aaa/AAA 825,469
2,750,000 Comed Trans Funding Trust, Sequential Payer,
Series 1998-1, Class A5, 5.440% due 03/25/07... Aaa/AAA 2,545,898
12,000,000 DaimlerChrysler Auto Trust, Sequential Payer,
Series 2000-A, Class A2, 6.760% due 01/06/03... Aaa/AAA 11,970,000
500,000 EQCC Home Equity Loan Trust, NAS, Series 1997-3,
Class A8, 6.410% due 12/15/04.................. Aaa/AAA 484,610
8,500,000 First USA Credit Master Trust, Series 1999-4,
Class C , 6.930% due 01/19/05.................. NR/BBB 8,446,875
5,000,000 Ford Credit Auto Owner Trust, Series 1998-C,
Class D, 7.700% due 01/15/04................... NR/BB 4,879,690
4,900,000 Green Tree Financial Corp., Sequential Payer,
Series 1998-2, Class A4, 6.080% due 07/01/09... Aaa/AAA 4,873,932
349,126 Green Tree Rec Equipment & Cons Trust, Sequential
Payer, Series 1997-C, Class A1, 6.490% due
02/15/18....................................... NR/AAA 342,294
1,080,000 MBNA Master Credit Trust, Series 1995-F, Class A,
6.600% due 01/15/03............................ Aaa/AAA 1,080,670
2,751,578 Nationslink Funding Corp., Sequential Payer,
Series 1999-1, Class A1, 6.042% due
11/20/07 (s)................................... Aaa/AAA 2,600,241
3,250,000 Sears Credit Account Master Trust 1995-3A ,
7.000% due 10/15/04............................ Aaa/AAA 3,247,952
5,200,000 Sears Credit Account Master Trust, Series 1999-1,
Class A, 5.650% due 03/17/09................... Aaa/AAA 4,902,612
------------
TOTAL ASSET BACKED SECURITY (COST
$114,988,779).............................. 114,005,757
------------
COLLATERALIZED MORTGAGE OBLIGATIONS AND ASSET BACKED SECURITIES (2.0%)
FINANCIAL SERVICES (2.0%)
3,000,000 Comm, Series 2000-FL1A, Class H, (144A), 7.410%
due 03/16/03 (s)............................... Baa3/NR 2,924,763
2,500,000 Green Tree Financial Corp., Subordinated Bond,
Series 1999-2, Class B1, 8.410% due 12/01/30... NR/BBB+ 2,221,875
3,826,208 Providian Home Equity Loan Trust, Series 1999-1,
Class A, 6.435% due 06/25/25 (v)............... Aaa/AAA 3,824,984
------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS AND
ASSET BACKED SECURITIES (COST
$9,072,795)................................ 8,971,622
------------
</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, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P
PRINCIPAL RATING
AMOUNT SECURITY DESCRIPTION (UNAUDITED) VALUE
--------------- ------------------------------------------------- ------------ -------------
<C> <S> <C> <C>
CORPORATE OBLIGATIONS (29.3%)
AUTOMOTIVE (4.0%)
$ 15,000,000 DaimlerChrysler N.A. Holdings, 7.125% due
03/01/02 (s)................................... A1/A+ $ 14,916,150
1,000,000 General Motors Acceptance Corp., 6.750% due
02/07/02 (s)................................... A2/A 983,980
1,500,000 General Motors Acceptance Corp., 7.125% due
05/01/03 (s)................................... A2/A 1,477,110
1,000,000 General Motors Acceptance Corp., MTN, 5.800% due
02/23/01 (s)................................... A2/A 986,220
------------
18,363,460
BANKING (6.4%)
6,000,000 Bank of America Corp., 6.150% due 02/19/02
(s)(v)......................................... Aa1/AA- 5,997,360
9,000,000 BankBoston, MTN, 6.197% due 03/09/01 (s)(v)...... A2/A 9,008,460
6,000,000 FleetBoston Financial Group, MTN, 6.037% due
03/13/01 (s)................................... A2/A 5,993,604
1,250,000 Banesto Delaware, Inc., 8.250% due 07/28/02
(s)............................................ A2/NR 1,252,000
2,500,000 Bank One Corp., 6.875% due 08/01/06 (s).......... Aa3/A 2,381,775
1,000,000 BankAmerica Corp., 8.375% due 03/15/02 (s)....... Aa3/A 1,013,660
1,250,000 First Chicago NBD Corp., 8.875% due 03/15/02
(s)............................................ A1/A- 1,279,962
1,000,000 Mellon Funding Corp., 6.875% due 03/01/03 (s).... A3/A 979,540
500,000 National Westminster Bank, 9.375% due 11/15/03
(s)............................................ Aa3/A+ 525,645
1,000,000 Nationsbank Corp., Series E, MTN, 5.750% due
01/25/01 (s)................................... Aa2/A+ 990,570
------------
29,422,576
------------
CHEMICALS (0.3%)
1,500,000 Cytec Industries, Inc., MOPPRS, 6.846% due
05/11/05 (s)(v)................................ Baa2/BBB 1,370,985
------------
CONSUMER GOODS & SERVICES (0.8%)
3,000,000 Cendant Corp., 7.750% due 12/01/03............... Baa1/BBB 2,923,620
500,000 Playtex Family Products Corp., 9.000% due
12/15/03 (s)................................... B2/B 486,250
------------
3,409,870
------------
ELECTRIC (2.7%)
10,000,000 Georgia Power Co., 6.195% due 02/22/02 (s)(v).... A2/A 9,995,000
2,500,000 TXU Eastern Funding Co., 6.150% due 05/15/02
(s)............................................ Baa1/BBB+ 2,424,075
------------
12,419,075
------------
ENERGY (1.5%)
7,000,000 Constellation Energy, MTN, 6.740% due 04/04/03
(s)(v)......................................... A3/A- 6,990,690
------------
ENTERTAINMENT, LEISURE & MEDIA (0.3%)
1,500,000 News America Holdings, Inc., 8.625% due
02/01/03 (s)................................... Baa3/BBB- 1,517,355
------------
</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, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P
PRINCIPAL RATING
AMOUNT SECURITY DESCRIPTION (UNAUDITED) VALUE
--------------- ------------------------------------------------- ------------ -------------
<C> <S> <C> <C>
FINANCIAL SERVICES (7.2%)
$ 5,000,000 Associates Corp., 6.210% due 02/22/02............ Aa3/A+ $ 5,010,250
5,500,000 Nationsbank Corp., 6.581% due 07/16/01 (v)....... Aa2/A+ 5,527,115
5,000,000 Associates Corp. N.A., 5.500% due 02/15/04....... Aa3/A+ 4,628,000
1,500,000 Beneficial Corp., MTN, 8.200% due 03/15/02....... A2/A 1,520,100
1,000,000 Beneficial Corp., Series H, MTN, 6.710% due
12/15/03....................................... A2/A 972,360
2,000,000 Enterprise Rent-a-Car USA Finance Co., (144A),
6.375% due 05/15/03............................ Baa1/BBB 1,921,520
2,748,156 Green Tree Financial Corp., 1997-7 A, 6.270% due
07/15/29....................................... Aaa/AAA 2,743,841
800,000 Homeside Lending, Inc., MTN, 6.875% due
06/30/02....................................... A1/A+ 788,032
10,000,000 Triangle Funding LTD, Series 1997-2A, Class I
(144A), 6.421% due 10/15/03 (v)................ A1/AA 9,987,500
------------
33,098,718
------------
FOREST PRODUCTS & PAPER (0.3%)
1,375,000 Georgia-Pacific Corp., 9.950% due 06/15/02....... Baa2/BBB- 1,430,069
------------
GAS-PIPELINES (4.0%)
16,500,000 Enron Corp. (144A), 6.580% due 09/10/01 (v)...... Baa1/BBB+ 16,496,700
1,000,000 Enron Corp., 6.500% due 08/01/02................. Baa1/BBB+ 973,710
1,000,000 Williams Companies, Inc., 6.125% due 02/15/02.... Baa2/BBB- 973,150
------------
18,443,560
------------
METALS & MINING (0.3%)
1,150,000 Ryerson Tull, Inc., 8.500% due 07/15/01.......... Baa3/BBB 1,138,500
------------
OIL-SERVICES (0.4%)
1,000,000 Lasmo (USA), Inc., 7.500% due 06/30/06........... Baa2/BBB 947,890
500,000 Occidental Petroleum Corp., 6.750% due
11/15/02....................................... Baa3/BBB- 485,160
579,746 Oil Purchase Co., (144A), 7.100% due 04/30/02.... Ba2/BBB- 553,658
------------
1,986,708
------------
PACKAGING & CONTAINERS (0.1%)
500,000 Stone Container Corp., 12.250% due 04/01/02...... B3/B- 502,500
------------
RAILROADS (0.5%)
2,500,000 Norfolk Southern Corp., 6.875% due 05/01/01...... Baa1/BBB 2,475,525
------------
TELECOMMUNICATIONS (0.5%)
2,500,000 Sprint Capital Corp., 6.500% due 11/15/01........ Baa1/BBB+ 2,465,325
------------
TOTAL CORPORATE OBLIGATIONS (COST
$136,441,417).............................. 135,034,916
------------
</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, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P
PRINCIPAL RATING
AMOUNT SECURITY DESCRIPTION (UNAUDITED) VALUE
--------------- ------------------------------------------------- ------------ -------------
<C> <S> <C> <C>
FOREIGN CORPORATE OBLIGATIONS (0.5%)
AUSTRALIA (0.1%)
BANKING
$ 500,000 Westpac Banking Corp., 7.875% due
10/15/02 (s)................................... A1/A+ $ 502,205
------------
NETHERLANDS (0.4%)
FINANCIAL SERVICES
2,000,000 ICI Investments, 6.750% due 08/07/02 (s)......... Baa1/A- 1,957,100
------------
TOTAL FOREIGN CORPORATE OBLIGATIONS (COST
$2,521,995)................................ 2,459,305
------------
FOREIGN GOVERNMENT OBLIGATIONS (0.2%)
CANADA (0.2%)
1,000,000 Province of Quebec, 7.500% due 07/15/02 (cost
$1,037,985).................................... A2/A+ 1,000,700
------------
MORTGAGE BACKED SECURITY (18.7%)
COLLATERALIZED MORTGAGE OBLIGATIONS (5.7%)
12,000,000 Conseco Finance, Series 2000-B, Class AF2 ,
7.340% due 02/15/19............................ Aaa/AAA 11,910,000
9,655,000 The Money Store Home Equity Trust 96-C A6, 7.690%
due 05/15/24................................... Aaa/AAA 9,657,993
325,195 REMIC: Sequential Payer, Series 1980, Class VA,
7.000% due 08/15/02 (s)........................ 324,684
2,100,479 REMIC: Sequential Payer, Series 2019, Class B,
6.500% due 07/15/16 (s)........................ 2,063,048
2,160,329 REMIC: Sequential Payer, Series 2061, Class VJ,
6.500% due 03/20/03 (s)........................ 2,090,788
------------
26,046,513
------------
COMMERCIAL PROPERTIES (5.3%)
9,008,859 Morgan Stanley Capital Series 1998-XL1, Class A1,
6.220% due 06/03/30 (s)........................ NR/AAA 8,510,561
859,408 Commercial Mortgage Acceptance Corp., Sequential
Payer, Series 1997-ML1, Class A1, 6.500% due
11/15/04 (s)................................... Aaa/AAA 833,626
7,180,000 Credit Suisse First Boston Mortgage Securities
Corp. Series 1997-C1, Class A1B, 7.150% due
08/20/06 (s)................................... Aaa/AAA 7,045,375
6,462,014 Merrill Lynch Mortgage Investors, Inc.,
Sequential Payer, Series 1996-C2, Class A1,
6.690% due 11/21/28 (s)........................ NR/AAA 6,330,757
1,665,732 Morgan Stanley Capital I, Inc., Sequential Payer,
Series 1997-XL1, Class A1, 6.590% due
10/03/30 (s)................................... Aaa/AAA 1,620,706
------------
24,341,025
------------
MORTGAGE PASS-THROUGHS (7.7%)
18,540,000 TBA, May, 6.500% due 05/01/30.................... 17,300,230
3,335,000 TBA, May, 8.000% due 05/01/30.................... 3,329,797
168,955 FNMA, 6.500% due 05/01/28 (s).................... 158,010
107,620 FNMA, 6.500% due 07/01/28........................ 100,547
</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, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P
PRINCIPAL RATING
AMOUNT SECURITY DESCRIPTION (UNAUDITED) VALUE
--------------- ------------------------------------------------- ------------ -------------
<C> <S> <C> <C>
MORTGAGE PASS-THROUGHS (CONTINUED)
$ 778,465 FNMA, 6.500% due 08/01/28........................ $ 727,305
3,539 FNMA, 9.000% due 11/01/24 (s).................... 3,629
436,066 FNMA, 6.500% due 04/01/29........................ 407,408
420,808 FNMA, 6.500% due 04/01/29........................ 393,152
263,999 FNMA, 6.500% due 04/01/29........................ 246,649
176,363 FNMA, 7.500% due 06/01/12........................ 175,484
111,372 FNMA, 7.500% due 07/01/12........................ 110,817
1,495,047 FNMA, 6.500% due 11/20/04 (s).................... 1,460,466
9,715,811 GNMA , 6.500% due 12/15/28 (s)................... 9,106,241
239,696 GNMA, 6.500% due 01/01/29........................ 223,943
501,851 GNMA, 7.000% due 07/15/27 (s).................... 483,223
254,464 GNMA, 6.500% due 12/01/28........................ 237,741
18,649 GNMA, 7.000% due 03/15/09 (s).................... 18,349
231,610 GNMA, 7.000% due 03/15/09 (s).................... 227,886
293,411 GNMA, 7.000% due 07/15/09 (s).................... 288,693
347,060 GNMA, 7.000% due 11/15/23 (s).................... 335,478
------------
35,335,048
------------
TOTAL MORTGAGE BACKED SECURITY (COST
$86,883,409)............................... 85,722,586
------------
PRIVATE PLACEMENT (0.3%)
TELECOMMUNICATION SERVICES (0.3%)
1,500,000 Charter Communications, 8.010% due 03/18/08 (s)
(cost $1,497,750).............................. NR/NR 1,492,500
------------
U.S. GOVERNMENT AGENCY OBLIGATIONS (3.0%)
FEDERAL NATIONAL MORTGAGE ASSOCIATION (3.0%)
14,000,000 6.160% due 05/08/03 (s) (cost $13,537,882)....... 13,531,840
------------
U.S. TREASURY OBLIGATIONS (3.6%)
U.S. TREASURY NOTES (3.6%)
15,625,000 5.625% due 09/30/01 (s).......................... 15,400,312
1,000,000 6.250% due 02/28/02 (s).......................... 992,190
------------
TOTAL U.S. TREASURY OBLIGATIONS (COST
$16,550,472)............................... 16,392,502
------------
<CAPTION>
SHARES
---------------
<C> <S> <C> <C>
CONVERTIBLE PREFERRED STOCKS (0.1%)
FINANCE (0.1%)
19,774 Equity Residential Properties Trust, Series A,
9.375% (s) (cost $514,915)..................... Baa1/BBB 447,387
------------
PREFERRED STOCK (0.0%)
FINANCIAL SERVICES (0.0%)
10,000 TCI Communications Financing (cost $272,500)..... 257,500
------------
</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, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P
PRINCIPAL RATING
AMOUNT SECURITY DESCRIPTION (UNAUDITED) VALUE
--------------- ------------------------------------------------- ------------ -------------
<C> <S> <C> <C>
SHORT-TERM INVESTMENTS (20.5%)
COMMERCIAL PAPER-DOMESTIC (14.0%)
$ 12,000,000 AT&T Corp., 6.070% due 03/08/01 (v).............. $ 11,992,800
1,500,000 Case Credit Corp., Series B, MTN, 6.240% due
11/06/2000..................................... 1,494,525
5,000,000 CSX Corp., MTN, Series C, 6.430% due 06/15/00
(v)............................................ 5,001,395
6,000,000 Dominion Resources, 6.195% (y) due 01/26/2001
(s)............................................ 6,000,000
10,000,000 Dynergy, Inc., Discount Note, 6.237% (y) due
06/8/2000 (s).................................. 9,932,378
5,000,000 ERP Operating Ltd. Partnership, 6.86% due
08/21/03 (s)................................... 4,997,500
5,000,000 General Mills, 6.680% due 02/09/2001............. 4,984,750
5,000,000 Greyhound Financial Corp., 7.250% due
04/01/2001..................................... 4,982,250
1,150,000 K N Energy, Inc., 6.300% due 03/01/01 (s)........ 1,137,741
756,098 Niagara Mohawk Holdings, Inc., Series B, 7.00%
due 10/01/2000 (s)............................. 754,699
1,000,000 Security Pacific Corp., Series I, MTN, 6.00% due
05/01/2000 (s)................................. 999,996
12,000,000 Williams Holdings, 6.424% (y) due 06/16/2000
(s)............................................ 11,898,144
------------
64,176,178
------------
PRIVATE PLACEMENT (1.6%)
TELECOMMUNICATIONS (1.6%)
1,550,000 Corporacion Andina de Fomento, 7.375% due
07/21/2000..................................... 1,546,962
6,000,000 MCI Worldcom, Inc. (144A), 6.27% due
08/17/2000..................................... 6,001,140
------------
7,548,102
------------
SHORT-TERM INVESTMENTS (4.9%)
22,589,239 J.P. Morgan Institutional Prime Money Market
Fund (s)....................................... 22,589,239
------------
TOTAL SHORT-TERM INVESTMENTS (COST $94,396,568)................ 94,313,519
------------
TOTAL INVESTMENTS (COST $477,716,467) (103.1%)................. 473,630,134
OTHER LIABILITIES IN EXCESS OF ASSETS (-3.1%).................. (14,141,705)
------------
NET ASSETS (100.0%)............................................ $459,488,429
============
</TABLE>
------------------------------
Note: Based on the cost of the investments of $477,716,467 for federal income
tax purposes at April 30, 2000, the aggregate gross unrealized appreciation and
depreciation was $283,508 and $4,369,541, respectively, resulting in net
unrealized depreciation of $4,086,333.
(s) Security is fully or partially segregated with custodian as collateral for
future contracts or with broker as initial margin for futures contracts.
$168,722,538 of the market value has been segregated.
(v) Rate shown reflects current rate on variable or floating rate instrument or
investment with step coupon rate.
(y) Yield to maturity.
Abbreviations used in the schedule of investment are as follows:
144A - Securities restricted for resale to Qualified Institutional Buyers.
MTN - Medium Term Note.
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 will be determined upon settlement date.
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE SHORT TERM BOND PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $477,716,467) $473,630,134
Cash 1,512,325
Receivable for Investments Sold 6,512,357
Interest Receivable 3,804,460
Variation Margin Receivable 214,414
Prepaid Expenses and Other Assets 3,639
Prepaid Trustees 2,482
------------
Total Assets 485,679,811
------------
LIABILITIES
Payable for Investments Purchased 26,025,142
Advisory Fee Payable 93,294
Administrative Services Fee Payable 9,040
Administration Fee Payable 369
Fund Services Fee Payable 317
Accrued Expenses 63,220
------------
Total Liabilities 26,191,382
------------
NET ASSETS
Applicable to Investors' Beneficial Interests $459,488,429
============
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE SHORT TERM BOND PORTFOLIO
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividend Income $ 35,672
Interest Income 11,953,238
-----------
Investment Income 11,988,910
EXPENSES
Advisory Fee $ 424,330
Custodian Fees and Expenses 61,229
Administrative Services Fee 45,500
Professional Fees and Expenses 18,244
Fund Services Fee 3,174
Trustees' Fees and Expenses 2,024
Administration Fee 1,545
Miscellaneous Expense 43,439
----------
Total Expenses 599,485
Less: Reimbursement of Expenses (43,772)
----------
NET EXPENSES 555,713
-----------
NET INVESTMENT INCOME 11,433,197
NET REALIZED GAIN ON INVESTMENTS
Futures Contracts (553,031)
Investments (2,226,268)
Foreign Currency Transactions 255,841
----------
Net Realized Loss (2,523,458)
NET CHANGE IN UNREALIZED DEPRECIATION OF
INVESTMENTS
Futures Contracts 1,343,844
Investments (1,975,490)
Foreign Currency Contracts and Translations (255,841)
----------
Net Change in Unrealized Depreciation (887,487)
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $ 8,022,252
===========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
23
<PAGE>
THE SHORT TERM BOND PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE FISCAL
APRIL 30, 2000 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1999
-------------- ----------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 11,433,197 $ 17,750,854
Net Realized Loss on Investments (2,523,458) (3,791,010)
Net Change in Unrealized Depreciation of
Investments (887,487) (3,929,871)
------------ ---------------
Net Increase in Net Assets Resulting from
Operations 8,022,252 10,029,973
------------ ---------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 225,590,917 312,753,504
Withdrawals (167,946,475) (193,444,721)
------------ ---------------
Net Increase from Investors' Transactions 57,644,442 119,308,783
------------ ---------------
Total Increase in Net Assets 65,666,694 129,338,756
NET ASSETS
Beginning of Period 393,821,735 264,482,979
------------ ---------------
End of Period $459,488,429 $ 393,821,735
============ ===============
</TABLE>
--------------------------------------------------------------------------------
SUPPLEMENTARY DATA
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS ENDED FOR THE FISCAL YEAR ENDED OCTOBER 31,
APRIL 30, 2000 --------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
---------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Net Expenses 0.30% 0.29% 0.25% 0.25% 0.38% 0.42%
Net Investment Income 6.17% 5.49% 5.84% 6.17% 5.65% 6.11%
Expenses without Reimbursement 0.32% 0.34% 0.38% 0.55% 0.61% 0.46%
Portfolio Turnover 191% 398% 381% 219% 191% 177%
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
24
<PAGE>
THE SHORT TERM BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
APRIL 30, 2000
--------------------------------------------------------------------------------
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 portfolio values securities that are listed on an exchange using
prices supplied daily by an independent pricing service that are based on
the last traded price on a national securities exchange or in the absence
of recorded trades, at the readily available mean of the bid and asked
prices on such exchange, if such exchange or market constitutes the
broadest and most representative market for the security. Securities
listed on a foreign exchange are valued at the last traded price or, in
the absence of recorded trades, at the readily available mean of the bid
and asked prices on such exchange available before the time when net
assets are valued. Independent pricing service procedures may also include
the use of prices based on yields or prices of securities of comparable
quality, coupon, maturity and type, indications as to values from dealers,
operating data, and general market conditions. Unlisted securities are
valued at the average of the quoted bid and asked price in the
over-the-counter market provided by a principal market maker or dealer. If
prices are not supplied by the portfolio's independent pricing service or
principal market maker or dealer, such securities are priced using fair
values in accordance with procedures adopted by the portfolio's trustees.
All short-term securities with a remaining maturity of sixty days or less
are valued using 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
25
<PAGE>
THE SHORT TERM BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
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) 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, 2000, the portfolio had no open
forward foreign currency contracts.
e) 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
26
<PAGE>
THE SHORT TERM BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
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 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.
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 has an Investment Advisory Agreement with J.P. Morgan
Investment Management Inc. ("JPMIM"), a wholly owned subsidiary of J.P.
Morgan & Co. Incorporated ("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,
2000, such fees amounted to $463,095.
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 $ 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, 2000, the fee for these services
amounted to $1,545.
c) The portfolio has an Administrative Services Agreement (the "Services
Agreement") with Morgan Guaranty Trust Company of New York ("Morgan"), a
wholly owned subsidiary of J.P. 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
27
<PAGE>
THE SHORT TERM BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
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
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, 2000, the fee for these
services amounted to $45,500.
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.
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, 2000, J.P.
Morgan has agreed to reimburse the portfolio $43,772 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 $3,174 for the six months ended April 30, 2000.
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, 2000 were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
------------ ------------
<S> <C> <C>
U.S. Government and Agency Obligations........... $388,439,523 $341,815,222
Corporate and Collateralized Obligations......... 334,528,749 321,866,842
------------ ------------
$722,968,272 $663,682,064
============ ============
</TABLE>
28
<PAGE>
THE SHORT TERM BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
At April 30, 2000, the portfolio had open futures contracts as follows:
SUMMARY OF OPEN CONTRACTS AT APRIL 30, 2000
<TABLE>
<CAPTION>
NET UNREALIZED
APPRECIATION/ PRINCIPAL AMOUNT
CONTRACTS SHORT (DEPRECIATION) OF CONTRACTS
--------------- -------------- ----------------
<S> <C> <C> <C>
U.S. Two Year Treasury Note, expiring
June 2000....................................... 260 $ 124,851 $ 51,280,939
Euro Certificate of Deposit, expiring
June 2000....................................... 186 84,202 43,347,300
Euro Certificate of Deposit, expiring
September 2000.................................. 186 153,952 43,196,175
Euro Certificate of Deposit, expiring
December 2000................................... 186 173,777 43,105,500
Euro Certificate of Deposit, expiring
March 2001...................................... 186 176,202 43,089,225
Euro Certificate of Deposit, expiring
June 2001....................................... 186 163,027 43,065,975
Euro Certificate of Deposit, expiring
September 2001.................................. 186 149,077 43,063,650
Euro Certificate of Deposit, expiring
December 2001................................... 186 130,477 43,054,350
Euro Certificate of Deposit, expiring
March 2002...................................... 186 116,527 43,091,550
-------------- ------------- ---------------
Totals........................................... 1,748 $ 1,272,092 $ 396,294,664
============== ============= ===============
</TABLE>
4. CREDIT AGREEMENT
The portfolio is party to a revolving line of credit agreement (the "Agreement")
as discussed more fully in Note 4 of the fund's Notes to the Financial
Statements which are included elsewhere in this report.
29
