<PAGE>
LETTER TO THE SHAREHOLDERS OF THE J.P. MORGAN SHORT TERM BOND FUND
June 1, 2000
Dear Shareholder,
During the six months ended April 30, 2000, the J.P. Morgan Short Term Bond Fund
posted a 2.00% return, outperforming the 1.85% return of the Merrill Lynch 1-3
Year Treasury Index and the 1.29% return of the Lipper Short Intermediate
Investment Grade Debt Funds Average.
The fund's net asset value declined to $9.59 on April 30, 2000, from $9.68 on
October 31, 1999. The fund paid approximately $0.28 per share in dividends from
ordinary income during the reporting period. On April 30, 2000, the net assets
of the fund were approximately $38.1 million, while the assets of The Short Term
Bond Portfolio, in which the fund invests, amounted to approximately $459.5
million.
This report includes a discussion with Connie Plaehn, the portfolio manager
primarily responsible for The Short Term Bond Portfolio. In this interview,
Connie talks about the events of the previous six months that had the greatest
effect on the portfolio and discusses her investment strategy.
As chairman and president of Asset Management Services, we appreciate your
investment in the fund. If you have any comments or questions, please call your
Morgan representative or J.P. Morgan Funds Services at (800) 521-5411.
Sincerely yours,
/s/ Ramon de Oliveira /s/ Keith M. Schappert
Ramon de Oliveira Keith M. Schappert
Chairman of Asset Management Services President of Asset Management Services
J.P. Morgan & Co. Incorporated J.P. Morgan & Co. Incorporated
------------------------------------------------------------------------------
TABLE OF CONTENTS
LETTER TO THE SHAREHOLDERS........1 FUND FACTS AND HIGHLIGHTS.........6
FUND PERFORMANCE .................2 FINANCIAL STATEMENTS..............8
PORTFOLIO MANAGER Q&A.............3
------------------------------------------------------------------------------
1
<PAGE>
FUND PERFORMANCE
EXAMINING PERFORMANCE
One way to look at performance is to review a fund's average annual total
return. This figure takes the fund's actual (or cumulative) return and shows
what would have happened if the fund had achieved that return by performing at a
constant rate each year. Average annual total returns represent the average
yearly change of a fund's value over various time periods, typically one, five,
or ten years (or since inception). Total returns for periods of less than one
year are not annualized and provide a picture of how a fund has performed over
the short term.
<TABLE>
<CAPTION>
PERFORMANCE TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURN
------------------ ---------------------------------------
THREE SIX ONE THREE FIVE SINCE
AS OF APRIL 30, 2000 MONTHS MONTHS YEAR YEARS YEARS INCEPTION*
--------------------------------------------------------------------- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C>
J.P. Morgan Short Term Bond Fund 1.28% 2.00% 3.00% 5.21% 5.67% 5.01%
Merrill Lynch 1-3 Year Treasury Index** 1.55% 1.85% 3.67% 5.57% 5.94% 5.38%
Lipper Short Intermediate Investment Grade
Debt Funds Average*** 1.54% 1.29% 1.68% 4.79% 5.52% 4.78%
AS OF MARCH 31, 2000
--------------------------------------------------------------------- ---------------------------------------
J.P. Morgan Short Term Bond Fund 0.84% 1.84% 2.84% 5.32% 5.78% 5.00%
Merrill Lynch 1-3 Year Treasury Index** 1.25% 1.86% 3.73% 5.76% 6.07% 5.41%
Lipper Short Intermediate Investment Grade
Debt Funds Average*** 1.31% 1.64% 2.18% 5.18% 5.77% 4.85%
</TABLE>
*THE FUND COMMENCED OPERATIONS ON JULY 8, 1993, AND HAS PROVIDED A TOTAL RETURN
OF 4.96% FROM THAT DATE THROUGH APRIL 30, 2000. FOR THE PURPOSE OF COMPARISON,
THE "SINCE INCEPTION" RETURNS IN THE TABLE ABOVE ARE CALCULATED FROM JULY 31,
1993, THE FIRST DATE WHEN DATA FOR THE FUND, ITS BENCHMARK, AND ITS LIPPER
CATEGORY AVERAGE WERE ALL AVAILABLE.
**THE MERRILL LYNCH 1-3 YEAR TREASURY INDEX IS AN UNMANAGED INDEX WHICH MEASURES
SHORT-TERM MARKET PERFORMANCE. THE INDEX DOES NOT INCLUDE FEES OR EXPENSES AND
IS NOT AVAILABLE FOR ACTUAL INVESTMENT.
***DESCRIBES THE AVERAGE TOTAL RETURN FOR ALL FUNDS IN THE INDICATED LIPPER
CATEGORY, AS DEFINED BY LIPPER, INC., AND DOES NOT TAKE INTO ACCOUNT APPLICABLE
SALES CHARGES. LIPPER ANALYTICAL SERVICES, INC. IS A LEADING SOURCE FOR MUTUAL
FUND DATA.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. FUND RETURNS ARE NET OF
FEES, ASSUME THE REINVESTMENT OF DISTRIBUTIONS AND REFLECT REIMBURSEMENT OF
CERTAIN FUND AND PORTFOLIO EXPENSES AS DESCRIBED IN THE PROSPECTUS. HAD
EXPENSES NOT BEEN SUBSIDIZED, RETURNS WOULD HAVE BEEN LOWER.
2
<PAGE>
PORTFOLIO MANAGER Q&A
[PHOTO]
The following is an interview with CONNIE J. PLAEHN, managing director and
member of the portfolio management team for The Short Term Bond Portfolio, in
which the fund invests. Connie is a senior fixed income portfolio manager for
mutual funds, pension, and other institutional clients, and is responsible for
the Short/Intermediate/Tax Aware, Stable Value, and Long Duration Fixed Income
Strategies. Previously, Connie was a manager in Taxable Fixed Income for J.P.
Morgan Securities and, prior to that, managed J.P. Morgan Futures' London
operation. Connie holds a B.A. from Luther College and a Masters of Management
from Northwestern University, and is a C.P.A. This interview was conducted on
May 12, 2000, and reflects Connie's views on that date.
LET'S REVIEW THE PAST SIX MONTHS. IT'S BEEN AN INCREDIBLY TURBULENT PERIOD IN
FIXED INCOME MARKETS. WHAT CAUSED IT?
CJP: There were three main themes that dominated and destabilized fixed income
markets during this period. The first was interest rates. The Federal Reserve
Board has raised rates five times, in quarter point installments, since last
June. The common perception is that it will continue to raise rates, perhaps
substantially, by summer's end, in order to slow our economy and curb
inflationary growth.
The second central theme was the government's announcement that it would use
part of the budget surplus to retire much of its long-term debt, its first such
effort in 70 years. This promise has been held to fairly aggressively. And, in
fact, the Treasury recently affirmed its intention to retire $30 billion in debt
this year. It was also announced that fewer auctions would be held in the
future, thereby further reducing security supplies. This significant reduction
in supply, coupled with strong investor demand, led to a decline in long-term
yields, to the point where they are now less than short-term yields. In other
words, we are experiencing a classic inverted yield curve, one that has driven
many investors to chase Treasuries, or to sit out of the market altogether, at
the expense of spread products.
The final major theme, although there were several minor ones, was speculation
about whether the government would withdraw its support of the
quasi-governmental housing agencies. Public comments suggesting this might
happen caused gyrations in the credit markets. This said, we don't think a
withdrawal of support would be politically digestible, particularly during an
election year.
HOW DID THE FUND PERFORM WHILE ALL THIS WAS GOING ON?
CJP: The fund outperformed over the last six-month period, one in which the
yield on U.S. 2-year notes rose dramatically as credit spreads came under
pressure.
3
<PAGE>
HAS THE INVERSION OF THE YIELD CURVE HAD A MARKED IMPACT ON THE PORTFOLIO?
CJP: In a roundabout way it has in that the inversion of the yield curve has put
pressure on corporate spreads. As Treasury yields have declined, spreads on
corporates have widened. This widening, combined with dealer aversion to holding
inventories of most corporates and general turmoil in the equity markets, caused
corporates as a group to underperform quite a bit during this reporting period,
in the process dampening overall portfolio performance.
CORPORATE SPREADS ARE AT OR NEAR HISTORIC LEVELS RIGHT NOW. DO YOU EXPECT THEM
TO WIDEN EVEN FURTHER?
CJP: With current high demand for a dwindling supply of Treasuries, and growing
uncertainty caused by a rising interest rate environment, companies will likely
have to continue to pay dearly to interest investors in their paper. So, yes,
going forward, we feel spreads will widen further, at least into the near
future.
HOW ABOUT MORTGAGES?
CJP: That's another story. As noted, we had some significant,
Washington-inspired disruption in this sector over the past six months.
Basically, collateralized mortgage-backed securities were the star performers,
based on a lack of supply. Looking further out, if the Fed continues to raise
rates, those rates will be reflected in higher mortgage rates. This, combined
with large second-quarter paydowns by the Treasury, should keep
mortgage-Treasury spreads at historically wide levels. However, should the
housing market slow appreciably, the supply of mortgage product should diminish,
thereby making mortgage-related security spreads much more attractive than they
are at present.
WHAT ABOUT THE MUCH ANTICIPATED, EVEN DREADED, TURNING OF THE NEW YEAR? DID Y2K
END UP HAVING ANY EFFECT ON THE FIXED INCOME MARKETS?
CJP: No, not really. It turned out to be a non-event, largely because of the
extensive preparation for it that was undertaken by our government and the
financial services community.
WE'VE HEARD A LOT ABOUT THE FLIGHT TO QUALITY, WHEN NERVOUS INTERNATIONAL
INVESTORS SEEK TREASURIES AND OTHER DOMESTIC FIXED INCOME INVESTMENTS DURING
TIMES OF TROUBLE. GIVEN THE VOLATILITY HERE LATELY, HAVE YOU SEEN ANY OF THE
REVERSE: A FLIGHT FROM QUALITY?
CJP: No. International investors are big buyers of agency paper and so were
justifiably nervous when questions arose about government guarantees that back
these instruments. Extreme volatility in our equity markets didn't help matters.
But, despite market turbulence, they have not withdrawn their capital, which is
very good as it would aggravate an already problematical current account
deficit.
HOW DO YOU SEE FIXED INCOME MARKETS AND THE OVERALL ECONOMY MOVING OVER THE NEXT
3-6 MONTHS?
CJP: There's little doubt that the Fed will continue to raise rates until it
sees some sign that the economy is slowing. When that will be, and how high
rates will go in the meantime, is anyone's guess. For our part, we feel that
rates will increase by 75 basis points, to 6.75%, by the end of the summer,
thereby perpetuating the severe inversion in the yield curve that we've
experienced for some time now. The economy will continue
4
<PAGE>
along on a brisk pace, but we feel that there will be a sequential slowing of
growth as the year progresses. And, in fact, GDP growth slowed to 5.4% in the
first quarter, down significantly from 7.5% in the fourth quarter of last year.
We expect it will end the year at around 4.75% and slow further in 2001,
although this number could change at any time given the volatility we've been
experiencing lately.
Inflation will likely remain under control, but risks have risen. As measured by
the Employment Cost Index, companies saw their labor costs rise 1.4% during the
first quarter, the biggest jump in over 10 years. Elsewhere, the GDP price
deflator, which tends to track inflation, grew by 2.7% during the first quarter,
much higher than the 1.9% pace of the fourth quarter of 1999. So, we have some
inflationary pressures building that may encourage the Fed to take more severe
action than it has in the recent past.
GIVEN THE ABOVE, HOW ARE YOU POSITIONING THE FUND?
CJP: Over the next three months, we will maintain a short duration position
relative to the index in order to help maximize returns in this rising rate
environment. We also expect to maintain our current allocation to spread
sectors. I would note that we have been well positioned throughout the year,
just not as short as we should have been.
We try to maintain a broadly diversified portfolio in terms of sector
representation. Our aim is to keep conservative concentrations in respected
names. If you do that and stay your course, we believe you're going to add value
over the course of a market cycle, although there may be some painful moments,
such as we just experienced, between one end of the cycle and the other.
5
<PAGE>
FUND FACTS
INVESTMENT OBJECTIVE
J.P. Morgan Short Term Bond Fund seeks to
provide high total return, consistent with low volatility of principal. It is
designed for investors who do not require the stable net asset value typical of
a money market fund, but who seek less price fluctuation than is typical of a
longer term bond fund.
--------------------------------------------------------------------------
COMMENCEMENT OF OPERATIONS
7/8/93
--------------------------------------------------------------------------
FUND NET ASSETS AS OF 4/30/00
$38,165,485
--------------------------------------------------------------------------
PORTFOLIO NET ASSETS AS OF 4/30/00
$459,488,429
--------------------------------------------------------------------------
DIVIDEND PAYABLE DATES
MONTHLY
--------------------------------------------------------------------------
CAPITAL GAIN PAYABLE DATE (IF APPLICABLE)
12/13/00
EXPENSE RATIO
The fund's current annualized expense ratio of 0.60% covers shareholders'
expenses for custody, tax reporting, investment advisory, and shareholder
services, after reimbursement. The fund is no-load and does not charge any
sales, redemption, or exchange fees. There are no additional charges for buying,
selling, or safekeeping fund shares, or for wiring redemption proceeds from the
fund.
FUND HIGHLIGHTS
ALL DATA AS OF APRIL 30, 2000
PORTFOLIO ALLOCATION
(PERCENTAGE OF TOTAL INVESTMENTS)
[CHART]
CORPORATES 28.5%
ASSET-BACKED SECURITIES 24.1%
MORTGAGE-BACKED SECURITIES 20.0%
OTHER-COMMERCIAL PAPER (SHORT-TERM) 15.1%
MONEY MARKET FUNDS 4.8%
U.S. TREASURIES 3.5%
U.S. GOVERNMENT AGENCIES 2.9%
FOREIGN CORPORATES 0.5%
PRIVATE PLACEMENTS 0.3%
FOREIGN GOVERNMENT OBLIGATIONS 0.2%
PREFERRED STOCK 0.1%
30-DAY SEC YIELD
6.36%*
DURATION
0.49 years
<TABLE>
<CAPTION>
QUALITY BREAKDOWN
<S> <C>
AAA** 64.07%
AA 3.37%
A 19.54%
BBB 11.41%
Not rated 1.24%
Other 0.37%
</TABLE>
* YIELD REFLECTS THE REIMBURSEMENT OF EXPENSES AS DESCRIBED IN THE PROSPECTUS.
HAD EXPENSES NOT BEEN SUBSIDIZED, THE 30-DAY SEC YIELD WOULD HAVE BEEN LOWER.
YIELDS WILL FLUCTUATE.
** INCLUDES U.S. GOVERNMENT AGENCY, TREASURY OBLIGATIONS, REPURCHASE
AGREEMENTS, AND COMMERCIAL PAPER.
6
<PAGE>
DISTRIBUTED BY FUNDS DISTRIBUTOR, INC. J.P. MORGAN INVESTMENT MANAGEMENT
INC. SERVES AS AN INVESTMENT ADVISOR AND MAKES THE FUND AVAILABLE SOLELY IN ITS
CAPACITY AS SHAREHOLDER SERVICING AGENT. SHARES OF THE FUND ARE NOT BANK
DEPOSITS AND ARE NOT GUARANTEED BY ANY BANK, GOVERNMENT ENTITY, OR THE FDIC.
RETURN AND SHARE PRICE WILL FLUCTUATE AND REDEMPTION VALUE MAY BE MORE OR LESS
THAN ORIGINAL COST.
Past performance is no guarantee for future performance. Returns are net of
fees, assume the reinvestment of fund distributions and may reflect the
reimbursement of fund expenses as described in the prospectus. Had expenses not
been subsidized, returns would have been lower. The fund invests through a
master portfolio (another fund with the same objective).
The fund invests in foreign securities, non-investment grade bonds,
mortgage-backed securities, interest rate swaps, futures contracts, and other
derivatives that may make the fund more volatile.
CALL J.P. MORGAN FUNDS SERVICES AT (800) 521-5411 FOR A PROSPECTUS CONTAINING
MORE COMPLETE INFORMATION ABOUT THE FUND INCLUDING MANAGEMENT FEES AND OTHER
EXPENSES. PLEASE READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
7
<PAGE>
J.P. MORGAN SHORT TERM BOND FUND
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment in The Short Term Bond Portfolio
("Portfolio"), at value $38,370,487
Prepaid Trustees' Fees 133
Prepaid Expenses and Other Assets 14,031
-----------
Total Assets 38,384,651
-----------
LIABILITIES
Dividends Payable to Shareholders 174,692
Shareholder Servicing Fee Payable 7,943
Administrative Services Fee Payable 770
Administration Fee Payable 36
Fund Services Fee Payable 28
Accrued Expenses 35,697
-----------
Total Liabilities 219,166
-----------
NET ASSETS
Applicable to 3,981,168 Shares of Beneficial
Interest Outstanding
(par value $0.001, unlimited shares authorized) $38,165,485
===========
Net Asset Value, Offering and Redemption Price
Per Share $9.59
----
----
ANALYSIS OF NET ASSETS
Paid-in Capital $39,228,163
Accumulated Net Investment Income 144,732
Accumulated Net Realized Loss on Investment (923,611)
Net Unrealized Depreciation of Investment (283,799)
-----------
Net Assets $38,165,485
===========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
8
<PAGE>
J.P. MORGAN SHORT TERM BOND FUND
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME ALLOCATED FROM PORTFOLIO
Allocated Dividend Income $ 4,090
Allocated Interest Income 1,159,695
Allocated Portfolio Expenses (Net of
Reimbursement of $8,548) (50,336)
----------
Net Investment Income Allocated from
Portfolio 1,113,449
FUND EXPENSES
Shareholder Servicing Fee $45,055
Transfer Agent Fees 11,650
Registration Fees 7,689
Professional Fees 5,754
Printing Expenses 5,085
Administrative Services Fee 4,432
Trustees' Fees and Expenses 480
Fund Services Fee 306
Administration Fee 213
Miscellaneous 9,274
-------
Total Fund Expenses 89,938
Less: Reimbursement of Expenses (32,147)
-------
NET FUND EXPENSES 57,791
----------
NET INVESTMENT INCOME 1,055,658
NET REALIZED LOSS ON INVESTMENT ALLOCATED FROM
PORTFOLIO (228,258)
NET CHANGE IN UNREALIZED DEPRECIATION OF
INVESTMENT ALLOCATED FROM PORTFOLIO (91,574)
----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $ 735,826
==========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
9
<PAGE>
J.P. MORGAN SHORT TERM BOND FUND
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 (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 1,055,658 $ 1,883,753
Net Realized Loss on Investment Allocated from
Portfolio (228,258) (473,743)
Net Change in Unrealized Depreciation of
Investment Allocated from Portfolio (91,574) (443,936)
----------- ---------------
Net Increase in Net Assets Resulting from
Operations 735,826 966,074
----------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (1,056,996) (1,883,798)
Net Realized Gain -- (151,358)
----------- ---------------
Total Distributions to Shareholders (1,056,996) (2,035,156)
----------- ---------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Proceeds from Shares of Beneficial Interest Sold 21,732,646 25,459,633
Reinvestment of Dividends and Distributions 791,726 1,661,273
Cost of Shares of Beneficial Interest Redeemed (22,751,385) (18,322,547)
----------- ---------------
Net Increase (Decrease) from Transactions in
Shares of Beneficial Interest (227,013) 8,798,359
----------- ---------------
Total Increase (Decrease) in Net Assets (548,183) 7,729,277
NET ASSETS
Beginning of Period 38,713,668 30,984,391
----------- ---------------
End of Period (including undistributed net
investment income of $144,732 and $146,070,
respectively) $38,165,485 $ 38,713,668
=========== ===============
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
10
<PAGE>
J.P. MORGAN SHORT TERM BOND FUND
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
Selected data for a unit outstanding throughout each period are as follows:
<TABLE>
<CAPTION>
FOR THE FOR THE FISCAL YEAR ENDED OCTOBER 31,
SIX MONTHS ENDED ------------------------------------------
APRIL 30, 2000 1999 1998 1997 1996 1995
---------------- ------- ------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE PER UNIT, BEGINNING OF PERIOD $ 9.68 $ 9.98 $ 9.98 $ 9.86 $ 9.84 $ 9.60
--------------- ------- ------- ------- ------ -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.28 0.57 0.56 0.58 0.53 0.57
Net Realized and Unrealized Gain (Loss) on
Investments, Optres, (0.09) (0.31) 0.13 (0.01) 0.02 0.24
--------------- ------- ------- ------- ------ -------
Total from Investment Operations 0.19 0.26 0.29 0.57 0.55 0.81
--------------- ------- ------- ------- ------ -------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (0.28) (0.51) (0.56) (0.58) (0.53) (0.57)
Net Realized Gain -- (0.05) -- -- -- --
--------------- ------- ------- ------- ------ -------
Total distributions to Shareholders (0.28) (0.56) (0.29) (0.58) (0.53) (0.57)
--------------- ------- ------- ------- ------ -------
NET ASSET VALUE PER UNIT, END OF PERIOD $ 9.59 $ 9.68 $ 9.98 $ 9.85 $ 9.86 $ 9.84
=============== ======= ======= ======= ====== =======
RATIOS AND SUPPLEMENTAL DATA
Total Return 2.00% 2.70% 7.24% 5.98% 5.77% 8.70%
Net Assets, End of Period (in thousands) $ 38,165 $38,714 $30,984 $14,519 $8,207 $10,330
Expenses 0.60% 0.57% 0.50% 0.50% 0.62% 0.67%
Net Investment Income 5.89% 5.24% 5.66% 5.94% 5.42% 5.88%
Expenses without Reimbursement 0.83% 0.80% 0.98% 1.38% 1.61% 1.48%
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
11
<PAGE>
J.P. MORGAN SHORT TERM BOND FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
APRIL 30, 2000
--------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
J.P. Morgan Short Term Bond Fund (the "fund") is a separate series of J.P.
Morgan Funds, a Massachusetts business trust (the "trust"), which was organized
on November 4, 1992. The trust is registered under the Investment Company Act of
1940, as amended, as an open-end management investment company. The fund
commenced operations on July 8, 1993. The fund invests all of its investable
assets in The Short Term Bond Portfolio (the "portfolio"), a no-load
diversified, open-end management investment company having the same investment
objective as the fund. The value of such investment included in the Statement of
Assets and Liabilities reflects the fund's proportionate interest in the net
assets of the portfolio (8% at April 30, 2000). The performance of the fund is
directly affected by the performance of the portfolio. The financial statements
of the portfolio, including the Schedule of Investments, are included elsewhere
in this report and should be read in conjunction with the fund's financial
statements.
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 fund:
a) Valuation of securities by the portfolio is discussed in Note 1a of the
portfolio's Notes to Financial Statements which are included elsewhere in
this report.
b) The fund records its share of net investment income, realized and
unrealized gain and loss and adjusts its investment in the portfolio each
day. All the net investment income and realized and unrealized gain and
loss of the portfolio is allocated pro rata among the fund and other
investors in the portfolio at the time of such determination.
c) Substantially all the fund's net investment income is declared as
dividends daily and paid monthly. Distributions to shareholders of net
realized capital gain, if any, are declared and paid annually.
d) Expenses incurred by the trust with respect to any two or more funds in
the trust are allocated in proportion to the net assets of each fund in
the trust, except where allocations of direct expenses to each fund can
otherwise be made fairly. Expenses directly attributable to a fund are
charged to that fund.
e) The fund is treated as a separate entity for federal income tax purposes
and intends to comply with the provisions of the Internal Revenue Code of
1986, as amended, applicable to regulated investment companies and to
distribute substantially all of its income, including net realized capital
gains, if any, within the prescribed time periods. Accordingly, no
provision for federal income or excise tax is necessary.
f) For federal income tax purposes, the fund had a capital loss carryforward
at October 31, 1999 of $701,688, all of which expires in the year 2007. To
the extent that this capital loss is used to offset future capital gains,
it is probable that gains so offset will not be distributed to
shareholders.
12
<PAGE>
J.P. MORGAN SHORT TERM BOND FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
2. TRANSACTIONS WITH AFFILIATES
a) The trust, on behalf of the fund, has retained Funds Distributor, Inc.
("FDI"), a registered broker-dealer, to serve as the co-administrator and
distributor for the fund. Under a Co-Administration Agreement between FDI
and the trust on behalf of the fund, FDI provides administrative services
necessary for the operations of the fund, furnishes office space and
facilities required for conducting the business of the fund and pays the
compensation of the fund's officers affiliated with FDI. The fund 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 fund is based on the ratio of the fund's net
assets to the aggregate net assets of the trust 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 $213.
b) The trust, on behalf of the fund, 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 & Co. Incorporated
("J.P. Morgan") under which Morgan is responsible for certain aspects of
the administration and operation of the fund. Under the Services
Agreement, the fund 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 the other
portfolios in which the trust and the J.P. Morgan Institutional Funds
invest (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 fund is determined by the proportionate share that its net assets bear
to the net assets of the trust, 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 $4,432.
In addition, J.P. Morgan has agreed to reimburse the fund to the extent
necessary to maintain the total operating expenses of the fund, including
the expenses allocated to the fund from the portfolio, at no more than
0.60% of the average daily net assets of the fund through February 28,
2001. The reimbursement arrangement can be changed or terminated at any
time after February 28, 2001 at the option of J.P. Morgan. For the six
months ended April 30, 2000, J.P. Morgan has agreed to reimburse the fund
$32,147 for expenses under this agreement.
c) The trust, on behalf of the fund, has a Shareholder Servicing Agreement
with Morgan to provide account administration and personal account
maintenance services to fund shareholders. The agreement provides for the
fund to pay Morgan a fee for these services which is computed daily and
paid monthly at an annual rate of 0.25% of the average daily net assets of
the fund. For the six months ended April 30, 2000, the fee for these
services amounted to $45,055.
Morgan, Charles Schwab & Co. ("Schwab") and the trust are parties to
separate services and operating agreements (the "Schwab Agreements")
whereby Schwab makes fund shares available to customers of investment
advisors and other financial intermediaries who are Schwab's clients. The
fund is not
13
<PAGE>
J.P. MORGAN SHORT TERM BOND FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
responsible for payments to Schwab under the Schwab Agreements; however,
in the event the Services Agreement with Schwab is terminated for reasons
other than a breach by Schwab and the relationship between the trust and
Morgan is terminated, the fund would be responsible for the ongoing
payments to Schwab with respect to pre-termination shares.
d) The trust, on behalf of the fund, has a Fund Services Agreement with
Pierpont Group, Inc. ("Group") to assist the trustees in exercising their
overall supervisory responsibilities for the trust's affairs. The trustees
of the trust represent all the existing shareholders of Group. The fund's
allocated portion of Group's costs in performing its services amounted to
$306 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 trust, 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 fund's allocated portion
of the total fees and expenses. The trust'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 $100.
3. TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the trustees to issue an unlimited number of
full and fractional shares of beneficial interest of one or more series.
Transactions in shares of beneficial interest of the fund were as follows:
<TABLE>
<CAPTION>
FOR THE SIX FOR THE FISCAL
MONTHS ENDED YEAR ENDED
APRIL 30, 2000 OCTOBER 31, 1999
-------------- ----------------
<S> <C> <C>
Shares sold...................................... 2,256,838 2,597,503
Reinvestment of dividends and distributions...... 82,302 169,686
Shares redeemed.................................. (2,356,406) (1,874,614)
----------- ---------------
Net Increase (Decrease).......................... (17,266) 892,575
=========== ===============
</TABLE>
From time to time, the fund may have a concentration of several shareholders
holding a significant percentage of shares outstanding. Investment activities of
these shareholders could have a material impact on the fund and portfolio.
4. CREDIT AGREEMENT
The trust, on behalf of the fund, together with other affiliated investment
companies (the "funds"), entered into a revolving line of credit agreement (the
"Agreement") on May 26, 1999, with unaffiliated lenders. Additionally, since all
the investable assets of the fund are in the portfolio, the portfolio is party
to certain covenants of the Agreement. The maximum borrowing under the Agreement
was $100,000,000. The Agreement expired on May 23, 2000, however, the fund as
party to the Agreement has extended the Agreement and will continue its
participation therein for an additional year until May 23, 2001. The maximum
borrowing under the new Agreement is $150,000,000. The purpose of the Agreement
is to provide another alternative for settling large
14
<PAGE>
J.P. MORGAN SHORT TERM BOND FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 2000
--------------------------------------------------------------------------------
fund shareholder redemptions. Interest on any such borrowings outstanding will
approximate market rates. The funds pay a commitment fee at an annual rate of
0.085% on the unused portion of the committed amount which is allocated to the
funds in accordance with procedures established by their respective trustees or
directors. There were no outstanding borrowings to the Agreement as of
April 30, 2000.
15
<PAGE>
The Short Term Bond Portfolio
Semiannual Report April 30, 2000
(unaudited)
(The following pages should be read in conjunction
with J.P. Morgan Short Term Bond Fund
Semiannual Financial Statements)
16
<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.
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>
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.
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>
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.
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>
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.
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>
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 Ccmmunications Financing (cost $272,500)..... 257,500
------------
</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, 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.
22
<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.
23
<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.
24
<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.
25
<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
26
<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
27
<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
28
<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>
29
<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.
30
<PAGE>
J.P. MORGAN FUNDS
PRIME MONEY MARKET FUND
FEDERAL MONEY MARKET FUND
TAX EXEMPT MONEY MARKET FUND
TAX AWARE ENHANCED INCOME FUND: SELECT SHARES
SHORT TERM BOND FUND
BOND FUND
GLOBAL STRATEGIC INCOME FUND
EMERGING MARKETS DEBT FUND
TAX EXEMPT BOND FUND
NEW YORK TAX EXEMPT BOND FUND
CALIFORNIA BOND FUND: SELECT SHARES
DIVERSIFIED FUND
DISCIPLINED EQUITY FUND
U.S. EQUITY FUND
U.S. SMALL COMPANY FUND
U.S. SMALL COMPANY OPPORTUNITIES FUND
TAX AWARE U.S. EQUITY FUND: SELECT SHARES
INTERNATIONAL EQUITY FUND
EUROPEAN EQUITY FUND
INTERNATIONAL OPPORTUNITIES FUND
EMERGING MARKETS EQUITY FUND
GLOBAL 50 FUND: SELECT SHARES
FOR MORE INFORMATION ON THE J.P. MORGAN FUNDS, CALL J.P. MORGAN FUNDS SERVICES
AT (800) 521-5411.
IMSAR234
J.P. MORGAN SHORT TERM BOND FUND
SEMIANNUAL REPORT
APRIL 30, 2000
