<PAGE>
JPM INSTITUTIONAL MONEY MARKET FUND THE JPM INSTITUTIONAL
JPM INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND DIVERSIFIED FUND
JPM INSTITUTIONAL TREASURY MONEY MARKET FUND
JPM INSTITUTIONAL SHORT TERM BOND FUND
JPM INSTITUTIONAL BOND FUND
JPM INSTITUTIONAL TAX EXEMPT BOND FUND
JPM INSTITUTIONAL NEW YORK TOTAL RETURN BOND FUND
JPM INSTITUTIONAL DIVERSIFIED FUND
JPM INSTITUTIONAL SELECTED U.S. EQUITY FUND
JPM INSTITUTIONAL U.S. SMALL COMPANY FUND
JPM INSTITUTIONAL INTERNATIONAL EQUITY FUND
JPM INSTITUTIONAL EMERGING MARKETS EQUITY FUND
FOR MORE INFORMATION ON HOW THE JPM ANNUAL REPORT
INSTITUTIONAL FAMILY OF FUNDS CAN HELP YOU JUNE 30, 1994
PLAN FOR YOUR FUTURE, CALL J.P. MORGAN FUNDS
SERVICES AT (800) 766-7722.
<PAGE>
LETTER TO THE SHAREHOLDERS OF THE JPM INSTITUTIONAL DIVERSIFIED FUND
August 23, 1994
Dear Shareholder:
Shareholders of The JPM Institutional Diversified Fund (the "Fund") will
remember its first year of operation as a period characterized by profound
market uncertainty -- instigated primarily by inflation-fighting actions
undertaken by the Federal Reserve. The Fund met this challenge, however, and was
able to consistently outperform its Diversified Benchmark,* ending fiscal year
1994 with a return of -0.56% -- comfortably leading its benchmark by 73 basis
points. Although the Fund's inception was July 8, it had no public shareholders
until September 10, 1993; therefore, all returns are calculated as of September.
Given turbulent market conditions, the Fund's net asset value per share fell
from a high of $10.43 to $9.90 by fiscal year-end, after paying $0.045 per share
in dividends. The JPM Institutional Diversified Fund reached a capitalization of
$59 million by June 30, 1994, while the net assets of The Diversified Portfolio
(the "Portfolio"), in which the Fund invests, totalled $65 million as of June
30, 1994.
REVIEW SINCE INCEPTION
The Fund was launched during the heady days of a strengthening domestic economy
and near-4000 Dow. This prevailing mood of investment optimism changed, however,
during the first six calendar months of 1994. The Federal Reserve first publicly
debated, then decided to actually raise its Fed funds rate three times during
the period. These actions were generally regarded as pre-emptive strikes against
renewed inflation. Nevertheless, the hikes in the Fed funds rate caused
uncertainty to become pervasive among investors, which negatively affected both
domestic and international markets.
Despite this difficult environment, The JPM Institutional Diversified Fund
outpaced both the domestic stock and bond markets, as well as the average return
for similarly managed funds, as measured by the Lipper Balanced Fund Index
during the first half of 1994. Since we generally seek to purchase under-
valued securities, this downturn in markets during 1994's first half also
presented some attractive buying opportunities, which we are hopeful will prove
rewarding for our shareholders in the months to come.
There were two primary reasons for the Fund's favorable returns relative to its
Benchmark. First, the Portfolio's U.S. large stock holdings outpaced their S&P
500. Second, a modest overweighting in international equities also helped the
Portfolio to outperform its Benchmark.
As the fiscal year-end neared, extreme volatility took hold of virtually all
markets, especially the small-cap markets in which the Portfolio participates.
It was the relative underperformance of small-cap stocks, particularly those of
technology and health care companies, which deterred the Fund from recording
even better investment results. Overall, however, the Diversified Fund's
fundamental characteristics continued to be more attractive than those of the
market, as measured by the benchmarks used to compare fund performance. While no
one can predict future investment results, we
<TABLE>
<S> <C> <C> <C>
TABLE OF CONTENTS
Letter to the shareholders........... 1 Fund performance..................... 4
Fund facts and highlights............ 3 Financial statements................. 5
</TABLE>
1
<PAGE>
believe that the Fund's results since inception -- and especially those posted
during its last six-month period -- offer strong evidence that a balanced,
diversified investment approach can add value and reduce risk in a difficult
market environment.
THE INVESTMENT OUTLOOK
While rising interest rates have begun to have an impact on sectors of the U.S.
economy that are interest-rate sensitive, economic growth in the U.S. appears to
be continuing at above-average trends. The best evidence supporting this view is
the strength of second-quarter labor market indicators, which showed payroll
employment gains averaging well in excess of 200,000 per month, accompanied by a
further decline in the unemployment rate to 6%.
This above-trend growth is already resulting in higher inflation. For this
reason, and because the risks of delay exceed those of taking action, we expect
the Federal Reserve to initiate additional rounds of rate tightening during the
second half of 1994. We expect the Federal funds rate to be increased to over
5.0% - 5.5% by year-end. By way of contrast, this rate stood at 3% as recently
as January of this year, and at 4.25% by the end of 1994's second calendar
quarter. While our near-term forecast may appear somewhat cautious, keep in mind
that the Federal Reserve's ongoing vigilance in extending current low inflation
levels has proven to be one of the fundamental backbones for the superior
investment results of financial assets during the past decade.
As always, we welcome your comments or questions. Please call J.P. Morgan Funds
Services toll free at (800) 766-7722.
Sincerely yours,
Evelyn E. Guernsey
J.P. Morgan Fund Services
*COMPRISED OF THE S&P 500 (52%), THE RUSSELL 2000 (3%), THE SALOMON BROTHERS
BROAD INVESTMENT GRADE BOND (35%), AND THE MSCI EAFE (10%) INDICES.
MORGAN SERVES AS PORTFOLIO INVESTMENT ADVISOR AND MAKES THE JPM INSTITUTIONAL
DIVERSIFIED FUND (THE "FUND") AVAILABLE SOLELY IN ITS CAPACITY AS SHAREHOLDER
SERVICING AGENT FOR CUSTOMERS. THE FUND'S DISTRIBUTOR IS SIGNATURE BROKER-DEALER
SERVICES, INC. INVESTMENTS IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, MORGAN GUARANTY TRUST COMPANY OF NEW YORK OR ANY
OTHER BANK. SHARES OF THE FUND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND CAN
FLUCTUATE, SO AN INVESTOR'S SHARES WHEN REDEEMED MAY BE WORTH MORE OR LESS THAN
THEIR ORIGINAL COST.
The performance data quoted herein represent past performance. Please remember
that past performance is not a guarantee of future performance. Fund returns are
net of fees. All returns assume the reinvestment of Fund distributions and
reflect the reimbursement of certain Fund expenses as described in the
Prospectus. Had expenses not been subsidized, returns would have been lower. The
Fund invests all of its investable assets in The Diversified Portfolio (the
"Portfolio"), a separately registered investment company which is not available
to the public but only to other collective investment vehicles such as the Fund.
The Portfolio may invest in foreign securities which are subject to special
risks; prospective investors should refer to the Fund's Prospectus for a
discussion of these risks.
MORE COMPLETE INFORMATION ABOUT THE FUND, INCLUDING MANAGEMENT FEES AND OTHER
EXPENSES, IS PROVIDED IN THE PROSPECTUS, WHICH SHOULD BE READ CAREFULLY BEFORE
INVESTING. YOU MAY OBTAIN AN ADDITIONAL COPY OF THE PROSPECTUS BY CALLING (800)
766-7722.
2
<PAGE>
FUND FACTS
INVESTMENT OBJECTIVE
The JPM Institutional Diversified Fund seeks to provide a high total return from
a diversified portfolio of equity and fixed income securities. It is designed
for investors who wish to invest for long-term objectives such as retirement and
who seek over time to attain real appreciation in their investments, but with
somewhat less price fluctuation than a portfolio consisting solely of equity
securities.
- -------------------------------------------
INCEPTION
7/8/93
- -------------------------------------------
NET ASSETS AS OF 6/30/94 ($ MILLIONS)
59
- -------------------------------------------
EX-DIVIDEND DATES
8/29/94, 12/19/94
- -------------------------------------------
DIVIDEND PAYABLE DATES
8/30/94, 12/20/94
- -------------------------------------------
CAPITAL GAIN PAYABLE DATES (IF ANY)
8/30/94, 12/20/94
EXPENSE RATIO
The Fund's current annual expense ratio of 0.65% covers shareholders' expenses
for custody, tax reporting, investment advisory and shareholder services. 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 dividend or redemption proceeds from the Fund.
FUND HIGHLIGHTS
(ALL DATA AS OF JUNE 30, 1994)
Two pie charts: the first pie chart depicts normal allocation at June 30, 1994
by sector; the second pie chart depicts the allocation of the Fund's investment
securities held at June 30, 1994 by sector. Each pie is broken in pieces
representing sectors in the following percentages:
<TABLE>
<CAPTION>
SECTOR NORMAL ALLOCATION ALLOCATION AT 6/30/94
<S> <C> <C>
U.S. large cap equities 52.0% 48.0%
Fixed income 35.0% 38.1%
International Equities 10.0% 10.5%
U.S. small cap equities 3.0% 3.4%
</TABLE>
<TABLE>
<CAPTION>
LARGEST EQUITY HOLDINGS % OF PORTFOLIO
<S> <C>
- ------------------------------------------------
GENERAL ELECTRIC 1.7
EXXON 1.5
WAL-MART 1.3
AT&T 1.3
COCA-COLA 1.2
ROYAL DUTCH PETROLEUM 1.2
PHILIP MORRIS 1.1
MERCK 1.0
DUPONT 0.9
PROCTER & GAMBLE 0.9
</TABLE>
3
<PAGE>
FUND PERFORMANCE
EXAMINING PERFORMANCE
There are several ways to evaluate a mutual fund's performance. One approach is
to look at the growth of a hypothetical investment of $10,000. The chart at
right shows that $10,000 invested at The JPM Institutional Diversified Fund's
inception would have decreased to $9,944 by June 30, 1994.
Another way to look at performance is to review a fund's average annual total
returns; these figures represent the average yearly change of the Fund's value
over various time periods, typically 1, 5 or 10 years (or since inception). For
example, a hypothetical fund whose value increased by 4.0% in 1992 and 6.0% in
1993 had an average annual total return of 5.0% over the two-year period. Total
returns for periods of less than one year can also provide a picture of how a
fund has performed over the short term.
GROWTH OF $10,000 SINCE INCEPTION
SEPTEMBER 10, 1993 -- JUNE 30, 1994
- -------------------------------------------
Line graph with two axes: the X-axis represents time of operation; the Y-axis
represents dollar value. The graph plots four lines: the first line represents
the growth of a ten thousand dollar investment in the Fund from September 10,
1993 to June 30, 1994; the second line represents the growth of a ten thousand
dollar investment in a portfolio of securities reflecting the composition of
the Diversified Benchmark for the same time period; the third line represents
the growth of a ten thousand dollar investment in a portfolio of securities
reflecting the composition of the S&P 500 index for the same time period; the
fourth line represents the growth of a ten thousand dollar investment in a
portfolio of securities reflecting the composition of the Salomon Brothers Broad
Investment Grade Bond Index ("BIG") for the same time period. The graph points
are as follows:
<TABLE>
<CAPTION>
Year Fund Diversified S&P 500 BIG
<S> <C> <C> <C> <C>
Inception $ 10,000 $ 10,000 $ 10,000 $ 10,000
1 9,944 9,871 9,835 9,650
</TABLE>
<TABLE>
<CAPTION>
PERFORMANCE TOTAL RETURNS
---------------------------------------------------------
THREE YEAR ONE FIVE SINCE
AS OF JUNE 30, 1994 MONTHS TO DATE YEAR YEARS 9/10/93*
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
The JPM Institutional Diversified Fund 0.61% -1.79% N/A N/A -0.56%
Diversified Benchmark** 0.28% -2.41% N/A N/A -1.29%
S&P 500 0.42% -3.39% N/A N/A -1.65%
Salomon Brothers Broad Investment
Grade Bond Index ("BIG") -0.97% -3.75% N/A N/A -3.50%
<FN>
*ALTHOUGH THE FUND'S INCEPTION WAS JULY 8, IT HAD NO PUBLIC SHAREHOLDERS UNTIL
SEPTEMBER 10, 1993. AS A RESULT, ALL RETURNS ARE CALCULATED AS OF SEPTEMBER.
**THE DIVERSIFIED BENCHMARK IS COMPRISED OF THE S&P 500 (52%), THE RUSSELL 2000
(3%), THE SALOMON BROAD INVESTMENT GRADE BOND (35%) AND THE MSCI EAFE (10%)
INDICES.
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. ALL RETURNS ASSUME THE
REINVESTMENT OF DISTRIBUTIONS AND REFLECT REIMBURSEMENT OF CERTAIN FUND AND
PORTFOLIO EXPENSES AS DESCRIBED IN THE PROSPECTUS.
</TABLE>
4
<PAGE>
THE JPM INSTITUTIONAL DIVERSIFIED FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1994
- ------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investment in The Diversified Portfolio ("Portfolio"), at value $59,116,112
Receivable for Expense Reimbursements (Note 2b) 167,790
Receivable for Fund Shares Sold 17,248
Deferred Organization Expense (Note 1d) 38,666
Prepaid Expenses 131
----------
Total Assets 59,339,947
----------
LIABILITIES:
Payable for Fund Shares Redeemed 19,268
Shareholder Servicing Fee Payable (Note 2c) 15,506
Administration Fee Payable (Note 2a) 1,439
Fund Services Fee Payable (Note 2d) 498
Organization Expenses Payable 29,760
Accrued Expenses 51,245
----------
Total Liabilities 117,716
----------
NET ASSETS:
Applicable to 5,984,124 Shares of Beneficial Interest Outstanding $59,222,231
----------
----------
Net Asset Value, Offering and Redemption Price Per Share $9.90
----------
----------
ANALYSIS OF NET ASSETS:
Paid-in Capital $60,154,148
Undistributed Net Investment Income 765,989
Accumulated Net Realized Gain (Loss) on Investments and Foreign Currency
Transactions 355,600
Net Unrealized Depreciation of Investments and Foreign Currency
Translations (2,053,506)
----------
Net Assets $59,222,231
----------
----------
</TABLE>
See Accompanying Notes.
5
<PAGE>
THE JPM INSTITUTIONAL DIVERSIFIED FUND
STATEMENT OF OPERATIONS
FOR THE PERIOD JULY 8, 1993 (COMMENCEMENT OF OPERATIONS) TO JUNE 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME FROM PORTFOLIO (NOTE 1B):
Dividend Income (Net of Withholding Tax of $13,748) $ 540,972
Interest Income (Net of Withholding Tax of $342) 657,950
Allocated Portfolio Expenses (Net of Additional Fund
Reimbursement of $16,267) (Note 2b) (218,367)
----------
Allocated Net Investment Income from Portfolio 980,555
EXPENSES:
Shareholder Servicing Fee (Note 2c) $ 16,798
Administration Fee (Note 2a) 10,086
Fund Services Fee (Note 2d) 2,959
Trustees' Fees and Expenses (Note 2e) 917
Printing and Postage 40,501
Registration Fees 36,285
Transfer Agent Fee 17,249
Professional Fees 10,144
Amortization of Organization Expense (Note 1d) 9,429
Miscellaneous 1,655
---------
Total Expenses 146,023
Less: Reimbursement of Expenses (Note 2b) (146,023)
---------
NET EXPENSES 0
----------
NET INVESTMENT INCOME 980,555
NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY
TRANSACTIONS FROM PORTFOLIO 294,012
NET CHANGE IN UNREALIZED DEPRECIATION OF INVESTMENTS AND FOREIGN
CURRENCY TRANSLATIONS FROM PORTFOLIO (2,053,506)
----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (778,939)
----------
----------
</TABLE>
See Accompanying Notes.
6
<PAGE>
THE JPM INSTITUTIONAL DIVERSIFIED FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 8, 1993
(COMMENCEMENT OF
OPERATIONS) TO
JUNE 30, 1994
----------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net Investment Income $ 980,555
Net Realized Gain (Loss) on Investments and Foreign Currency
Transactions from Portfolio 294,012
Net Change in Unrealized Depreciation of Investments and Foreign
Currency Translations from Portfolio (2,053,506)
-----------------
Net Decrease in Net Assets Resulting from Operations (778,939)
---------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net Investment Income (194,728)
---------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST (NOTE 3):
Proceeds from Shares of Beneficial Interest Sold 70,255,554
Reinvestment of Dividends 194,277
Cost of Shares of Beneficial Interest Redeemed (10,353,933)
----------------
Net Increase from Transactions in Shares of Beneficial Interest 60,095,898
----------------
Total Increase in Net Assets 59,122,231
NET ASSETS:
Beginning of Period 100,000
----------------
End of Period (including undistributed net investment income of $765,989) $ 59,222,231
----------------
----------------
</TABLE>
See Accompanying Notes.
7
<PAGE>
THE JPM INSTITUTIONAL DIVERSIFIED FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share outstanding throughout the period are as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 8, 1993
(COMMENCEMENT OF
OPERATIONS) TO
JUNE 30, 1994
-----------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income 0.18
Net Realized and Unrealized Gain (Loss) on Investments and Foreign Currency (0.23)
------
Total from Investment Operations (0.05)
------
LESS DIVIDENDS TO SHAREHOLDERS FROM:
Net Investment Income (0.05)
------
NET ASSET VALUE, END OF PERIOD $ 9.90
------
------
Total Return (0.56)%(a)
RATIOS AND SUPPLEMENTAL DATA:
Net Assets at End of Period (in thousands) $59,222
Ratios to Average Net Assets (annualized):
Expenses* 0.65%
Net Investment Income* 2.92%
<FN>
* Reflects the Fund's proportionate share of the Portfolio's expenses and a
reimbursement of expenses by Morgan. If these agreements to reimburse the
Portfolio and the Fund for excess expenses had not been in place for the
period ended June 30, 1994, the annualized ratios of expenses and net
investment income to average net assets would have been 1.62% and 1.95%,
respectively.
(a) Not annualized.
</TABLE>
See Accompanying Notes.
8
<PAGE>
THE JPM INSTITUTIONAL DIVERSIFIED FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The JPM Institutional Diversified Fund (the "Fund") is a separate series of The
JPM Institutional 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 a diversified open-end management investment
company. The Fund commenced operations on July 8, 1993.
The Fund invests all of its investable assets in The Diversified Portfolio (the
"Portfolio"), a diversified open-end management investment company having the
same investment objective as the Fund. The value of such investment reflects the
Fund's proportionate beneficial interest in the net assets of the Portfolio
(90.8% at June 30, 1994). 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.
1. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of the significant accounting policies of the Fund:
a) Valuation of securities by the Portfolio is discussed in Note 1 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
and paid semi-annually. Distributions to shareholders of net realized
capital gain, if any, are declared and paid annually.
d) The Fund incurred organization expenses in the amount of $48,095. These
costs were deferred and are being amortized by the Fund on a straight-line
basis over a five-year period from the commencement of operations.
e) Each series of the Trust is treated as a separate entity for federal income
tax purposes. The Fund's policy is 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) 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.
9
<PAGE>
THE JPM INSTITUTIONAL DIVERSIFIED FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
g) The Fund has adopted Statement of Position 93-2 Determination, Disclosure,
and Financial Statement Presentation of Income, Capital Gain, and Return of
Capital Distributions by Investment Companies. Accordingly, permanent book
and tax basis differences relating to shareholder distributions are
reclassified to paid-in capital. As of June 30, 1994, the Fund reclassified
($61,588) from accumulated net realized gain (loss) on investments and
foreign currency transactions and $19,838 from undistributed net investment
income, to paid-in capital. Net investment income, net realized gains and
net assets were not affected by this change.
2. TRANSACTIONS WITH AFFILIATES:
a) The Trust retains Signature Broker-Dealer Services, Inc. ("Signature") to
serve as Administrator and Distributor. Signature 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 Signature.
Effective October 1, 1993, Signature receives a fee at an annual rate of
0.04% of the first $1 billion of the aggregate average daily net assets of
the Fund, the other funds in the Trust, The Pierpont Funds, and The JPM
Institutional Plus Funds (the "aggregate funds"), 0.032% of the next $2
billion of the aggregate funds' average daily net assets, 0.024% of the
next $2 billion of the aggregate funds' average daily net assets, and
0.016% of the aggregate funds' average daily net assets in excess of $5
billion. (Prior to October 1, 1993, the administration fee was at an annual
rate of 0.05% of the first $1 billion of the aggregate funds' average daily
net assets, 0.04% of the next $2 billion of the aggregate funds' average
daily net assets, 0.03% of the next $2 billion of the aggregate funds'
average daily net assets, and 0.02% of the aggregate funds' average daily
net assets in excess of $5 billion). For the period July 8, 1993 to June
30, 1994, the Funds' portion of Signature's fee for these services amounted
to $10,086.
b) The Trust, on behalf of the Fund, has a Financial and Fund Accounting
Services Agreement ("Services Agreement") with Morgan Guaranty Trust
Company of New York ("Morgan") under which Morgan receives a fee, based on
the percentage described below, for overseeing certain aspects of the
administration and operation of the Fund. The Services Agreement is also
designed to provide an expense cap for certain expenses of the Fund. If
total expenses of the Fund, excluding the shareholder servicing fee, the
Fund Services fee and amortization of organization expenses, exceed the
expense cap of 0.05% of the Fund's average daily net assets, Morgan will
reimburse the Fund for the excess expense amount and receive no fee. Should
such expenses be less than the expense cap, Morgan's fee would be limited
to the difference between such expenses and the fee calculated under the
Services Agreement. For the period July 8, 1993 to June 30, 1994, Morgan
agreed to reimburse the Fund $100,039 for excess expenses. In addition to
the expenses that Morgan assumes under the Services Agreement, 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 0.65% of the average daily net
assets of the Fund through June 30, 1994. For the period July 8, 1993 to
June 30, 1994, Morgan has agreed to reimburse the Fund $45,984 and an
additional $16,267 for excess expenses allocated from the Portfolio.
10
<PAGE>
THE JPM INSTITUTIONAL DIVERSIFIED FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
c) The Trust, on behalf of the Fund, has a Shareholder Servicing Agreement
with Morgan. The Agreement provides for the Fund to pay Morgan a fee for
these services which is computed daily and may be paid monthly at an annual
rate of 0.05% of the average daily net assets of the Fund. For the period
July 8, 1993 to June 30, 1994, the fee for these services amounted to
$16,798.
d) Effective January 15, 1994, 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 Chairman and sole shareholder of Group is also a
Trustee of the Trust. The Fund's allocated portion of Group's costs in
performing its services amounted to $2,959 for the period January 15, 1994
to June 30, 1994.
e) Each Trustee is paid a $55,000 annual fee for serving as a Trustee of the
aggregate funds and their corresponding Portfolios. The Trustee fee expense
shown in the financial statements represents the Fund's allocated portion
of the total fees and expenses.
3. SHARES OF BENEFICIAL INTEREST:
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (par value $0.001) of one or
more series. To date, the Trust has authorized shares of fourteen series, of
which the Fund's shares represent one series. Transactions in shares of
beneficial interest of the Fund were as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 8, 1993
(COMMENCEMENT OF
OPERATIONS) TO
JUNE 30, 1994
-----------------
<S> <C>
Shares Sold 6,989,005
Reinvestment of Dividends 19,216
Shares Redeemed (1,034,097)
-----------------
Net Increase 5,974,124
-----------------
-----------------
</TABLE>
11
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of
The JPM Institutional Diversified Fund
In our opinion, the accompanying statement of assets and liabilities and the
related statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
The JPM Institutional Diversified Fund (the "Fund") at June 30, 1994, and the
results of its operations, the changes in its net assets and the financial
highlights for the period July 8, 1993 (commencement of operations) through June
30, 1994, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
New York, New York
August 23, 1994
12
<PAGE>
THE DIVERSIFIED PORTFOLIO
ANNUAL REPORT JUNE 30, 1994
(THE FOLLOWING PAGES SHOULD BE READ IN CONJUNCTION
WITH THE JPM INSTITUTIONAL DIVERSIFIED FUND
ANNUAL FINANCIAL STATEMENTS)
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS
JUNE 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
--------- ----------
<S> <C> <C>
EQUITY SECURITIES (60.8%)
FOREIGN EQUITIES (9.4%)
AUSTRALIA (0.5%)
Amcor Ltd. (Packaging)..... 3,500 $ 23,086
Australia and NZ Bank Group
(Banking)................. 9,200 26,986
Broken Hill Proprietary Co.
Ltd. (Energy)............. 8,000 104,954
Coles Myer Ltd.
(Merchandising)........... 6,800 21,038
Goodman Fielder Wattie Ltd.
(Food & Household
Products)................. 42,000 39,227
National Australia Bank
Ltd. (Banking)............ 3,150 25,191
News Corporation Ltd.
(Publishing).............. 5,300 32,330
Southcorp Holdings Ltd.
(Food).................... 10,000 20,430
Western Mining Corp.
Holdings Ltd. (Metals &
Mining)................... 12,000 63,130
---------
356,372
---------
BELGIUM (0.1%)
General Banque (Banking)... 60 14,899
Groupe Bruxelles Lambert
NPV (Multi-Industry)...... 150 18,831
Solvay and Cie
(Chemicals)............... 45 19,520
Tractebel Investment
International
(Multi-Industry).......... 70 21,116
---------
74,366
---------
DENMARK (0.2%)
Danisco AS (Food &
Household Products)....... 200 29,575
Novo Nordisk AS, Series B
(Health & Personal
Care)..................... 300 30,957
TeleDanmark, Series B
(Utilities)............... 500 25,235
Unidanmark, Series A
(Banking)................. 1,500 54,247
---------
140,014
---------
FRANCE (1.3%)
Assurance Generale de
France (Insurance)........ 375 32,564
BSN SA (Food & Household
Products)................. 456 65,856
Canal Plus (Broadcasting &
Publishing)............... 210 31,681
Compagnie Financiere de Cic
Union Europ Certe de
Invest (Banking).......... 440 27,523
Compagnie Financiere de
Paribas Class A
(Banking)................. 525 33,342
Compagnie Financiere de St.
Gobain New Shares (Glass &
Packaging)................ 40 4,680
FRANCE (CONTINUED)
Compagnie Financiere de St.
Gobain (Glass &
Packaging)................ 450 $ 52,654
Compagnie Financiere de
Suez (Banking)............ 750 36,496
Eaux Cie Generale
(Utilities)............... 115 46,440
LVMH Moet Hennessy
(Beverages)............... 200 30,798
Legrand (Electrical &
Electronics).............. 45 34,150
LaGardere Groupe (Capital
Goods).................... 1,280 28,730
Peugeot SA (Automotive).... 415 58,942
Promodes (Merchandising)... 300 47,411
Rhone Poulenc SA, Class A
(Chemicals)............... 1,650 37,641
Schneider SA (Machinery &
Engineering).............. 675 43,663
Societe Generale
(Banking)................. 380 39,080
Societe Nationale Elf
Aquitaine (Energy)........ 1,460 101,962
Sommer-Allibert (Building
Materials)................ 90 30,880
Synthelabo (Health &
Personal Care)............ 990 35,207
---------
819,700
---------
GERMANY (0.2%)
Deutsche Bank AG
(Banking)................. 40 17,268
Hoechst AG (Chemicals)..... 80 16,360
Munchener Ruckversicherungs
AG (Insurance)............ 11 19,891
Veba AG (Utilities Electric
& Gas).................... 100 31,463
Volkswagen AG
(Automobiles)............. 60 17,817
---------
102,799
---------
HONG KONG (0.2%)
Cheung Kong Holdings Ltd.
(Real Estate)............. 12,000 52,397
Citic Pacific Ltd.
(Transportation).......... 11,000 29,743
HSBC Holdings Ltd. PLC
(Financial Services)...... 2,481 27,123
Hong Kong Electric Holdings
Ltd. (Utilities).......... 14,500 43,709
---------
152,972
---------
ITALY (0.3%)
Assicurazioni Generali
S.P.A. (Insurance)........ 2,000 51,410
Banco Ambrosiano Veneto
(Banking)................. 6,000 10,060
Fiat S.P.A.
(Automobiles)............. 16,000 39,911
Istituto Banco San Paolo di
Torino (Banking).......... 4,000 24,761
Italcementi S.P.A.
(Building Materials &
Components)............... 1,000 7,826
</TABLE>
See Accompanying Notes.
14
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
--------- ----------
<S> <C> <C>
ITALY (CONTINUED)
SIP Di Risp
(Telecommunications)...... 18,000 $ 37,541
---------
171,509
---------
JAPAN (4.8%)
Asics Corp. (Recreation,
Other Consumer Goods)..... 10,000 48,503
Chiyoda Fire & Marine
Insurance Co. Ltd.
(Insurance)............... 4,000 27,763
Chuo Trust & Banking Co.
(Banking)................. 5,000 81,177
Daiso Co. (Chemicals)...... 13,000 74,531
Dai-Ichi Pharmaceutical Co.
(Health & Personal
Care)..................... 7,000 103,704
Dai-Ichi Kangyo Bank
(Banking)................. 4,000 79,554
Daito Trust Construction
Co. Ltd. (Construction &
Housing).................. 2,000 47,692
Fuji Photo Film Co. Ltd.
(Photography)............. 4,000 89,295
Hitachi Ltd. (Electrical &
Electronics).............. 10,000 104,515
Hokkai Can Co. Ltd.
(Materials &
Commodities).............. 2,000 22,324
Hokkaido Electric Power Co.
Inc. (Electric & Gas
Utilities)................ 1,000 25,469
Hokkaido Takushoku Bank
(Banking)................. 15,000 70,776
Ishikawajima Harima
(Machinery)............... 8,000 38,803
Kirin Brewery Co. Ltd.
(Beverages & Tobacco)..... 5,000 59,361
Kitagawa Iron Works
(Steel)................... 20,000 113,242
Matsushita Electric
Industrial Co. Ltd.
(Consumer Electronics).... 4,000 73,465
Mitsubishi Electric Corp.
Ltd. (Electrical &
Electronics).............. 17,000 115,403
Mitsubishi Kasei Corp.
(Chemicals)............... 10,000 53,272
Mitsubishi Motors Corp.
(Automotive).............. 12,000 119,330
NKK Corp. (Steel).......... 40,000 107,560
Nagasakiya Co.
(Merchandising)........... 3,000 24,475
Nagoya, Bank of
(Banking)................. 5,000 42,466
Nichiei Co. (Building
Materials & Components)... 5,000 32,319
Nifco Inc. (Automotive).... 5,000 82,699
Niigata Chuo Bank
(Banking)................. 10,000 46,169
Nippon Credit Bank
(Banking)................. 3,000 194,521
Nippon Koshuha Steel Co.
(Steel)................... 15,000 60,883
Nomura Securities Co. Ltd.
(Financial Services)...... 3,000 72,451
Sacos Corp. (Leisure &
Tourism).................. 1,000 35,008
Sakura Bank Ltd.
(Banking)................. 7,000 99,442
San-In Godo Bank Ltd.
(Banking)................. 5,000 46,677
JAPAN (CONTINUED)
Shinmaywa Industries Ltd.
(Capital Goods)........... 5,000 $ 62,405
Snow Brand Milk Products
Co. Ltd. (Food & Household
Products)................. 10,000 78,133
Sumitomo Bank Ltd.
(Banking)................. 4,000 88,077
Sumitomo Realty &
Development Co. Ltd. (Real
Estate)................... 7,000 47,732
Sumitomo Trust & Banking
Ltd. (Banking)............ 10,000 104,515
Suzutan Co. (Retail)....... 2,000 24,150
Tohoku Electric Power Co.
Inc. (Utilities).......... 5,000 134,957
Tokai Bank Ltd.
(Banking)................. 10,000 132,927
Tokio Marine & Fire
Insurance Co. Ltd. (The)
(Insurance)............... 3,000 38,661
Tokyu Tourist Corp.
(Leisure & Tourism)....... 2,000 11,365
Toppan Printing Co. Ltd.
(Business & Public
Services)................. 4,000 60,883
Toyo Construction Co.
(Construction)............ 15,000 83,714
Toyo Ink Manufacturing Co.
(Chemicals)............... 6,000 42,618
---------
3,102,986
---------
MALAYSIA (0.2%)
Perusahaan Otomobile
Nasional (Automotive)..... 12,000 41,935
Public Bank Berhad
(Banking)................. 24,000 45,161
Tanjong Public Co. (Leisure
& Tourism)................ 7,000 30,376
Telekom Malaysia Berhad
(Utilities)............... 6,000 44,700
---------
162,172
---------
NEW ZEALAND (0.0%)
Independent Newspapers
(Broadcasting &
Publishing)............... 9,000 27,341
---------
SINGAPORE (0.3%)
NatSteel Ltd. (Metals -
Steel).................... 10,000 21,116
Sembawang Shipyard Corp.
(Machinery &
Engineering).............. 3,000 21,641
Singapore Airlines Ltd.
(Airline)................. 6,000 49,577
United Overseas Bank
(Banking)................. 6,000 48,003
United Overseas Land (Real
Estate)................... 22,000 31,740
---------
172,077
---------
SPAIN (0.2%)
Banco Bilbao Vizcaya
(Banking)................. 1,200 26,397
Endesa (Electric & Gas
Utilities)................ 600 27,130
</TABLE>
See Accompanying Notes.
15
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A))
--------- ----------
<S> <C> <C>
SPAIN (CONTINUED)
Fomento De Contrucciones Y
Contrat (Construction &
Housing).................. 200 $ 21,081
Iberdrola SA (Utilities)... 4,800 33,802
---------
108,410
---------
SWEDEN (0.1%)
Avesta Sheffield (Steel)... 5,000 33,970
Svenskt Stal, Series A
(Materials &
Commodities).............. 1,000 38,542
---------
72,512
---------
SWITZERLAND (0.1%)
Sandoz AG (Health)......... 45 23,437
Schweizerischer Bankverein
(Banking)................. 60 17,741
Zurich Versicherung
(Insurance)............... 20 19,737
---------
60,915
---------
UNITED KINGDOM (0.9%)
Allied Colloids Group
(Chemicals)............... 7,000 27,911
BAT Industries PLC
(Beverages & Tobacco)..... 3,500 21,679
British Gas Corp. PLC
(Utilities)............... 10,000 41,518
British Telecommunications
PLC
(Telecommunications)...... 6,600 37,558
British Tire & Rubber PLC
(Multi-Industry).......... 4,500 24,667
General Electric Co. PLC
(Electrical).............. 7,700 33,564
Glaxo Holdings PLC (Health
& Personal Care).......... 4,500 37,976
Grand Metropolitan PLC
(Beverages & Tobacco)..... 6,000 37,906
Guardian Royal Exchange PLC
(Insurance)............... 16,200 42,645
Hanson PLC
(Multi-Industry).......... 10,000 37,241
NFC PLC
(Transportation-Road &
Rail)..................... 7,500 22,298
National Westminster Bank
(Banking)................. 6,400 43,060
Redland (Building Materials
& Components)............. 2,500 19,007
Shell Transport & Trading
Co. (Energy Sources)...... 4,500 47,348
Tesco PLC
(Merchandising)........... 11,500 39,799
Thorn EMI PLC (Media &
Leisure).................. 2,900 45,108
Unilever (Food & Household
Products)................. 1,000 14,958
UNITED KINGDOM (CONTINUED)
Vickers PLC (Machinery &
Engineering).............. 10,000 $ 26,866
Yorkshire Water
(Utilities)............... 2,000 14,401
---------
615,510
---------
TOTAL FOREIGN EQUITIES (COST $5,831,694)......... 6,139,655
---------
UNITED STATES EQUITIES (51.0%)
BASIC INDUSTRIES (3.3%)
AGRICULTURE (0.0%)
Dekalb Genetics Corp. Class
B......................... 400 12,000
---------
CHEMICALS (1.8%)
Air Products & Chemicals,
Inc....................... 1,700 72,037
Albemarle Corp............. 1,100 18,012
Du Pont (E.I.) de Nemours &
Co., Inc.................. 10,200 595,425
Ethyl Corp................. 2,200 26,675
Georgia Gulf Corp. (a)..... 200 6,850
IMC Fertilizer Group,
Inc....................... 500 17,312
Mallinckrodt Group Inc..... 1,000 32,500
Monsanto Co................ 1,800 136,125
PPG Industries Inc......... 3,000 112,500
Praxair Inc................ 1,500 29,250
Rohm & Haas Co............. 800 49,800
Union Carbide Corp......... 2,800 74,900
---------
1,171,386
---------
METALS & MINING (0.8%)
Allegheny Ludlum Corp...... 1,800 33,300
Commercial Metals Co....... 2,000 51,500
Crown Cork & Seal Co., Inc.
(a)....................... 1,900 70,775
Inco Ltd................... 2,900 70,687
Maverick Tube Corp. (a).... 600 5,025
Oregon Steel Mills Inc..... 600 11,475
Pegasus Gold Inc........... 900 14,400
Phelps Dodge Corp.......... 1,800 102,600
Reynolds Metals Co......... 1,900 91,200
Rouge Steel Co. Class A.... 400 10,750
Steel Technologies Inc..... 2,400 39,600
Worthington Industries
Inc....................... 1,600 29,800
---------
531,112
---------
PAPER & FOREST PRODUCTS (0.7%)
Boise Cascade Corp......... 600 13,275
Bowater Inc................ 300 7,387
Champion International
Corp...................... 1,700 55,887
Federal Paper Board Co.,
Inc....................... 600 13,725
Georgia-Pacific Corp....... 1,700 101,787
International Paper Co..... 2,300 152,375
</TABLE>
See Accompanying Notes.
16
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
--------- ----------
<S> <C> <C>
PAPER & FOREST PRODUCTS (CONTINUED)
James River Corp. of
Virginia.................. 900 $ 15,300
Louisiana Pacific Corp..... 2,000 61,000
Mead Corp.................. 1,000 44,125
---------
464,861
---------
Total Basic Industries..... 2,179,359
---------
CONSUMER GOODS & SERVICES (13.3%)
AUTOMOTIVE & AUTOMOTIVE SUPPLIES (1.5%)
Arvin Industries Inc....... 200 4,800
Chrysler Corp.............. 1,600 75,400
Cooper Tire & Rubber Co.... 1,100 25,438
Eaton Corp................. 1,200 62,400
Excel Industries Inc....... 1,200 18,600
Ford Motor Co.............. 4,900 289,100
General Motors Corp........ 7,800 391,950
Intermet Corp.............. 4,100 31,775
Paccar Inc................. 700 32,200
Simpson Industries, Inc.... 1,600 29,200
---------
960,863
---------
BEVERAGES, FOOD, SOAP & TOBACCO (5.2%)
Brock Candy Co............. 300 2,437
Bush Boake Allen, Inc.
(a)....................... 800 14,000
CPC International Inc...... 2,300 110,975
Campbell Soup Co........... 3,600 123,750
Coca-Cola Co............... 19,800 804,375
Coca-Cola Enterprises
Inc....................... 800 13,600
General Mills, Inc......... 2,300 125,638
Gillette Co................ 3,200 208,400
Hershey Foods Corp......... 1,100 47,713
J & J Snack Foods Corp.
(a)....................... 300 3,844
Kellogg Co................. 3,400 184,875
PepsiCo Inc................ 12,200 373,625
Philip Morris Companies,
Inc....................... 13,400 690,100
Procter & Gamble Co........ 10,400 555,100
Quaker Oats Co............. 800 55,900
Ralston Purina Co.......... 1,500 51,937
---------
3,366,269
---------
ENTERTAINMENT, LEISURE & MEDIA (1.7%)
Boyd Gaming Corp. (a)...... 900 13,275
CAI Wireless System,
Inc....................... 100 1,012
CBS Inc.................... 400 124,400
Capital Cities/ABC, Inc.... 1,000 71,125
Carnival Cruise Lines, Inc.
Class A................... 1,300 57,525
Cinergi Pictures
Entertainment Inc. (a).... 500 4,563
Circus Circus Enterprises
Inc. (a).................. 1,400 30,100
Disney (Walt) Co........... 10,700 445,387
ENTERTAINMENT, LEISURE & MEDIA (CONTINUED)
Heritage Media Corp. Class
A (a)..................... 600 $ 10,650
Johnson Worldwide
Associates Inc. Class A
(a)....................... 600 15,075
Lottery Enterprises Inc.
(a)....................... 520 5,590
People's Choice TV Corp.
(a)....................... 400 8,700
PictureTel Corp. (a)....... 800 10,050
Synoptics Communications
Inc. (a).................. 1,500 20,344
Tele Communications Inc.
Class A (a)............... 8,300 170,150
Viacom Inc. Class B (a).... 3,900 123,337
---------
1,111,283
---------
HOME CONSTRUCTION (0.1%)
D.R. Horton, Inc. (a)...... 1,272 15,423
Owens-Corning Fiberglas
Corp...................... 1,800 56,025
---------
71,448
---------
MERCHANDISING (3.3%)
Arbor Drugs Inc............ 1,000 18,750
Braun's Fashions (a)....... 2,800 13,300
Catherines Stores Corp.
(a)....................... 1,200 10,650
Charming Shoppes, Inc...... 2,200 20,350
Dayton-Hudson Corp......... 1,100 89,100
Dillard Department Stores
Inc. Class A.............. 1,300 40,137
Family Dollar Stores,
Inc....................... 600 8,025
Fruit of the Loom Inc.,
Class A (a)............... 1,700 44,413
Hechinger Co. Class A...... 100 1,387
Home Depot, Inc............ 9,400 395,975
K-Swiss Inc................ 600 12,750
Lechters Inc. (a).......... 1,000 13,875
Limited (The), Inc......... 7,400 127,650
Melville Corp.............. 2,300 89,125
Musicland Stores Corp.
(a)....................... 100 1,600
Nine West Group, Inc.
(a)....................... 600 15,600
One Price Clothing Stores
(a)....................... 1,200 18,750
Penn Traffic Co. (a)....... 500 17,625
Price Costco, Inc. (a)..... 500 7,469
Rubbermaid Inc............. 4,400 115,500
Safety 1st Inc. (a)........ 300 6,600
TJX Companies, Inc......... 1,600 35,000
Toys "R" Us, Inc. (a)...... 6,200 203,050
Trans World Music Corp.
(a)....................... 2,100 23,100
Wal-Mart Stores, Inc....... 33,900 822,075
Woolworth Corp............. 1,700 26,988
---------
2,178,844
---------
PERSONAL CARE (0.1%)
Avon Products, Inc......... 1,100 64,763
---------
</TABLE>
See Accompanying Notes.
17
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
--------- ----------
<S> <C> <C>
PERSONAL SECURITY (0.0%)
Pinkerton's, Inc. (a)...... 1,300 $ 20,963
---------
PERSONAL SERVICES (0.1%)
Service Corp.
International............. 1,300 33,475
---------
PHOTOGRAPHIC EQUIPMENT (0.4%)
Eastman Kodak Co........... 5,400 259,875
---------
RESTAURANTS & HOTELS (0.9%)
Argosy Gaming Corp. (a).... 300 4,388
Brinker International, Inc.
(a)....................... 800 16,800
Cracker Barrel Old Country
Store, Inc................ 1,000 23,750
McDonald's Corp............ 14,400 415,800
Mirage Resorts, Inc. (a)... 1,400 26,250
O'Charleys Inc. (a)........ 200 3,650
Players International, Inc.
(a)....................... 800 11,900
Sbarro Inc................. 1,400 52,150
Taco Cabana, Inc. (a)...... 600 7,950
---------
562,638
---------
Total Consumer Goods &
Services.................. 8,630,421
---------
ENERGY (5.6%)
NATURAL GAS (0.3%)
Chesapeake Utilities
Corp...................... 200 2,800
El Paso Natural Gas Co..... 400 12,900
EnergyNorth Inc............ 200 3,725
Enron Corp................. 5,700 186,675
Providence Energy Corp..... 500 8,125
United Cities Gas Co....... 200 3,150
Valero Energy Corp......... 600 10,500
---------
227,875
---------
OIL-PRODUCTION (4.7%)
Atlantic Richfield Co...... 1,400 142,975
Baker Hughes Inc........... 1,700 34,850
Chevron Corp............... 6,600 276,375
Devon Energy Corp.......... 600 13,500
Exxon Corp................. 17,000 962,625
Mobil Corp................. 5,500 448,937
Occidental Petroleum
Corp...................... 3,400 64,175
Oryx Energy Co............. 1,100 16,500
Repsol S.A. (ADR).......... 870 24,904
Royal Dutch Petroleum Co.
(ADR)..................... 7,300 763,763
Sun Inc.................... 1,400 37,625
Tesoro Petroleum Corp.
(a)....................... 300 3,263
Texaco Inc................. 3,400 205,275
Union Texas Petroleum
Holdings Inc.............. 1,100 19,663
Vintage Petroleum, Inc..... 700 14,700
---------
3,029,130
---------
OIL-SERVICES (0.6%)
Baker Michael Corp. (a).... 1,700 $ 11,475
Dreco Energy Services Ltd.
Class A (a)............... 700 4,987
Global Marine Inc. (a)..... 2,500 11,563
Holly Corp................. 500 14,250
Noble Drilling Corp. (a)... 1,900 14,963
Noram Energy Corp.......... 1,500 9,000
Oceaneering International
Inc. (a).................. 1,300 18,200
Schlumberger Ltd........... 3,900 230,587
Smith International Inc.
(a)....................... 400 6,100
Sonat Offshore Drilling,
Inc....................... 900 27,675
Western Co. of North
America (a)............... 1,600 20,200
---------
369,000
---------
Total Energy............... 3,626,005
---------
FINANCE (6.5%)
BANKING (3.3%)
Ahmanson (H.F.) & Co....... 1,100 20,762
Amsouth Bancorporation..... 400 12,550
Bancorp South Inc.......... 200 6,500
Bank of Boston Corp........ 900 22,162
Bank of New York Co.,
Inc....................... 1,800 51,975
BankAmerica Corp........... 4,800 219,600
Bankers Trust New York
Corp...................... 1,000 66,625
Banknorth Group, Inc....... 300 6,337
Barnett Banks Inc.......... 1,300 56,875
Bay View Capital........... 1,000 25,125
CCB Financial Corp......... 200 7,925
Central Fidelity Banks,
Inc....................... 400 13,050
Charter One Financial,
Inc....................... 1,000 20,438
Chase Manhattan Corp....... 2,300 87,975
Chemical Banking Corp...... 3,400 130,900
Citicorp................... 5,100 203,362
Collective Bancorp Inc..... 100 2,187
Colonial Bancgroup, Inc.
Class A................... 600 13,275
Comerica, Inc.............. 1,300 36,725
Commerical Bank NY......... 200 1,850
Commercial Bankshares Inc.
(a)....................... 200 2,450
Community First Bankshares
Inc....................... 400 5,400
Continental Bank Corp...... 600 21,750
Corestates Financial
Corp...................... 1,700 43,775
Firstar Corp............... 600 21,225
First Chicago Corp......... 800 38,500
First Commerce Corp........ 500 14,187
First Commercial Corp...... 200 4,700
Firstfed Financial Corp.
(a)....................... 1,400 20,825
First National Bancorp.
GA........................ 300 6,113
First Tennessee National
Corp...................... 200 8,725
</TABLE>
See Accompanying Notes.
18
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
--------- ----------
<S> <C> <C>
BANKING (CONTINUED)
First UN Corp.............. 2,300 $ 106,088
First Virginia Banks,
Inc....................... 400 14,750
Fleet Financial Group
Inc....................... 2,300 86,825
GBC Bancorp................ 500 7,250
Golden West Financial
Corp...................... 800 30,900
Great Western Financial
Corp...................... 1,100 20,212
Greenfield Industries
Inc....................... 200 3,850
Hubco, Inc................. 300 6,075
Huntington Bancshares
Inc....................... 1,300 32,825
KeyCorp.................... 2,700 86,063
Mellon Bank Corp........... 800 45,000
Mercantile Bankcorp........ 200 7,025
Metropolitan Financial
Corp...................... 700 11,025
Mississippi Valley
Bankshares Inc............ 100 1,513
NBD Bancorp Inc............ 300 9,488
National Commerce
Bancorporation............ 600 13,200
NationsBank Corp........... 3,600 184,950
Northern Trust Corp........ 600 24,600
PNC Financial Corp......... 3,100 89,513
Republic New York Corp..... 600 27,675
Seacoast Banking Corp. of
Florida Class A........... 200 3,550
Shawmut National Corp...... 900 19,800
Silicon Valley Bancshares
(a)....................... 1,900 19,475
SouthTrust Corp............ 800 16,400
Southwest Bancorp, Inc.
Oklahoma.................. 100 1,287
Sterling Bancshares Inc.... 200 3,400
Sterling Financial Corp.
Wash (a).................. 200 2,750
Trustco BanCorp. of NY..... 600 13,650
U S Trust Corp............. 200 10,175
Victoria Bankshares,
Inc....................... 400 10,750
Washington Mutual Savings
Bank...................... 800 16,600
Westamerica
Bancorporation............ 700 21,175
Wilmington Trust Co........ 200 5,350
---------
2,147,037
---------
FINANCIAL SERVICES (1.4%)
American Express Co........ 5,400 139,050
American Residential
Holdings Corp............. 300 6,637
Bear Stearns Companies
Inc....................... 1,400 23,800
Beneficial Corp............ 700 25,550
Capstone Capital
Corporation Inc. (a)...... 300 5,400
Charles Schwab Corp........ 800 19,800
Cole Taylor Financial Group
Inc. (a).................. 300 4,050
Dean Witter, Discover &
Co........................ 2,000 75,000
Dreyfus Corp............... 600 29,100
Federal Home Loan Mortgage
Corp...................... 2,000 121,000
FINANCIAL SERVICES (CONTINUED)
Federal National Mortgage
Association............... 4,500 $ 375,750
Financial Federal Corp.
(a)....................... 500 7,562
Household International
Inc....................... 800 27,200
Lehman Brothers Holdings
Inc. (a).................. 1,100 16,638
Mills Corp................. 300 6,750
Paine Webber Group Inc..... 1,000 15,625
Payco American Corp. (a)... 1,600 14,600
SPS Transaction Services
Inc. (a).................. 200 11,175
Southwest Securities Group
Inc....................... 600 4,050
---------
928,737
---------
INSURANCE (1.6%)
AMBAC, Inc................. 500 19,625
AON Corp................... 1,200 40,650
Aetna Life & Casualty
Co........................ 1,500 83,812
Allstate Corp.............. 4,700 111,625
American General Corp...... 2,200 60,775
American International
Group, Inc................ 4,300 372,488
CMAC Investment Corp....... 300 7,575
Capital RE Corp............ 1,400 29,400
Commerce Bancorp Inc....... 605 11,722
Continental Corp........... 200 3,100
EquiCredit Corp. (a)....... 200 3,475
First Colony Corp.......... 700 15,050
Fremont General Corp....... 700 16,450
Hilb Rogal & Hamilton
Co........................ 800 9,800
MBIA, Inc.................. 400 22,950
MMI Cos. Inc............... 1,700 23,375
Progressive Corp........... 500 16,625
Providian Corp............. 1,400 42,350
St. Paul Companies, Inc.... 1,200 48,150
Torchmark Corp............. 800 31,200
Transamerica Corp.......... 700 36,488
UNUM Corp.................. 800 35,800
---------
1,042,485
---------
REAL ESTATE (0.2%)
Bay Apartment Communities
Inc....................... 200 4,100
Colonial Properties
Trust..................... 400 9,100
Developers Diversified
Realty Corp............... 200 6,200
Gables Residential Trust... 300 7,162
Healthcare Realty Trust.... 700 14,963
Liberty Property Trust
(a)....................... 200 4,000
MerryLand & Investment Co.
Inc....................... 300 6,075
ROC Communities, Inc....... 200 4,350
RFS Hotel Investors Inc.... 500 8,750
Southwestern Properties
Trust..................... 900 11,025
Summit Properties, Inc..... 100 2,000
</TABLE>
See Accompanying Notes.
19
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
--------- ----------
<S> <C> <C>
REAL ESTATE (CONTINUED)
Tucker Properties Corp..... 400 $ 6,400
Wellsford Residential
Property Trust............ 200 4,550
---------
88,675
---------
Total Finance.............. 4,206,934
---------
HEALTHCARE (4.1%)
BIOTECHNOLOGY (0.2%)
Affymax N.V. (a)........... 600 7,725
Athena Neurosciences,
Inc....................... 800 5,600
CellPro, Inc. (a).......... 1,300 25,350
Cephalon Inc. (a).......... 600 5,325
Chiron Corp. (a)........... 600 32,850
Genetic Therapy Inc. (a)... 300 3,000
Inhale Therapeutic Systems
(a)....................... 600 3,375
Northfield Laboratories
Inc. (a).................. 600 3,937
Oncor Inc. (a)............. 2,000 10,875
Perseptive Biosystems, Inc.
(a)....................... 900 14,287
Targeted Genetics Corp.
(a)....................... 600 3,525
Vertex Pharmaceuticals,
Inc. (a).................. 1,000 11,875
Vical Inc. (a)............. 500 4,500
---------
132,224
---------
HEALTH SERVICES (0.2%)
Abbey Healthcare Group Inc.
(a)....................... 2,400 36,000
Advocat Inc. (a)........... 1,100 9,350
Columbia Healthcare
Corp...................... 800 30,000
Health Risk Management Inc.
(a)....................... 2,000 12,500
Humana Inc. (a)............ 1,300 20,963
Isomedix Inc. (a).......... 200 3,375
Mariner Health Group, Inc.
(a)....................... 800 15,400
Protocol Systems Inc.
(a)....................... 200 1,225
Rotech Medical Corp. (a)... 300 5,587
---------
134,400
---------
HOSPITAL SUPPLIES (0.2%)
Fresnius USA Inc. (a)...... 400 2,500
I-Stat Corp. (a)........... 1,100 14,850
Medtronic Inc.............. 800 64,100
Puritan-Bennett Corp....... 1,000 19,875
Stryker Corp............... 400 10,650
Vital Signs, Inc. (a)...... 3,300 32,175
---------
144,150
---------
PHARMACEUTICALS (3.5%)
Abbott Laboratories........ 12,300 356,700
Alza Corp. (a)............. 1,400 32,900
American Home Products
Corp...................... 5,200 295,100
Amylin Pharmaceuticals,
Inc. (a).................. 1,100 6,531
Bausch & Lomb Inc.......... 900 33,300
PHARMACEUTICALS (CONTINUED)
Forest Laboratories, Inc.
(a)....................... 400 $ 17,400
Gensia Inc. (a)............ 100 938
Johnson & Johnson.......... 9,700 415,888
Merck & Co., Inc........... 21,400 636,650
Pfizer, Inc................ 5,300 334,563
Schering-Plough Corp....... 600 36,750
Warner-Lambert Co.......... 1,700 112,200
---------
2,278,920
---------
Total Healthcare........... 2,689,694
---------
INDUSTRIAL PRODUCTS & SERVICES (6.5%)
CAPITAL GOODS (0.1%)
Dover Corp................. 900 52,988
Gardner Denver Machinery
Inc....................... 800 7,200
Kaydon Corp................ 400 8,500
---------
68,688
---------
COMMERCIAL SERVICES (0.4%)
Advo Inc................... 1,200 18,300
Applied Power Inc. Class
A......................... 1,300 26,488
Banta Corp................. 100 3,212
Consolidated Graphics Inc.
(a)....................... 500 5,500
Donnelley (R R) & Sons
Co........................ 3,200 88,800
Emcon (a).................. 1,100 8,319
Emmis Broadcasting Corp.
(a)....................... 100 1,388
Granite Construction
Inc....................... 100 2,000
Matrix Service Co. (a)..... 700 3,675
National Service Industries
Inc....................... 1,600 41,600
Nu Kote Holding Inc. (a)... 200 3,400
Paging Network, Inc. (a)... 300 8,213
Paxar Corp. (a)............ 2,625 33,469
---------
244,364
---------
DIVERSIFIED MANUFACTURING (4.1%)
Allied-Signal, Inc......... 6,800 235,450
Apogee Enterprises, Inc.... 600 8,025
Brady (WH) Co. Class A..... 900 40,950
Coltec Industries, Inc..... 2,300 42,838
Cooper Industries Inc...... 1,700 61,200
General Dynamics Corp...... 1,600 65,400
General Electric Co........ 23,200 1,081,700
Goodyear Tire & Rubber
Co........................ 1,600 57,600
Guardsman Products, Inc.... 300 2,700
Johnson Controls Inc....... 800 38,700
Libbey Inc................. 700 12,950
Lockheed Corp.............. 1,600 104,600
Loral Corp................. 2,100 73,500
Martin Marietta Corp....... 2,100 92,663
Masco Corp................. 5,200 143,000
</TABLE>
See Accompanying Notes.
20
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
--------- ----------
<S> <C> <C>
DIVERSIFIED MANUFACTURING (CONTINUED)
Modine Manufacturing Co.... 100 $ 2,550
Ogden Corp................. 700 15,400
Pall Corp.................. 1,900 28,500
Panhandle Eastern Corp..... 1,300 25,675
Premier Industrial Corp.... 1,500 28,500
Sundstrand Corp............ 100 4,700
Tenneco Inc................ 5,900 273,613
Trinova Corp............... 400 13,850
Tyco International Ltd..... 800 36,600
Wheelabrator Technologies
Inc....................... 4,100 76,363
Whirlpool Corp............. 2,000 105,000
Worldtex Inc. (a).......... 500 2,500
---------
2,674,527
---------
ELECTRICAL EQUIPMENT (0.3%)
Avnet Inc.................. 500 15,750
Charter Power Systems
Inc....................... 600 7,275
Emerson Electric Corp...... 1,400 79,625
Encore Wire Corp. (a)...... 100 1,637
Grainger (W. W.) Inc....... 800 51,100
Hubbell Inc................ 200 11,100
Motorola Inc............... 100 4,450
---------
170,937
---------
MACHINERY (0.5%)
Black & Decker Corp........ 2,600 44,850
Caterpillar Inc............ 1,800 180,000
Deere & Co................. 1,500 101,438
General Signal Corp........ 900 29,700
---------
355,988
---------
METALS (0.4%)
Alcan Aluminum Ltd......... 5,400 122,850
Aluminum Co. of America.... 2,000 146,250
---------
269,100
---------
POLLUTION CONTROL (0.7%)
Browning-Ferris Industries,
Inc. (a).................. 4,000 121,500
Dames & Moore Inc.......... 800 11,700
Harding Associates, Inc.
(a)....................... 1,500 9,000
Measurex Corp.............. 1,600 28,400
Mid-American Waste Systems,
Inc....................... 2,200 12,375
TETRA Technologies Inc.
(a)....................... 1,100 9,350
WMX Technologies, Inc...... 10,600 280,900
---------
473,225
---------
Total Industrial Products &
Services............... 4,256,829
---------
TECHNOLOGY (4.0%)
AEROSPACE (0.1%)
Orbital Sciences Corp.
(a)....................... 800 $ 12,800
Rohr Industries Inc. (a)... 1,200 12,600
---------
25,400
---------
COMPUTER-PERIPHERAL SERVICES (1.1%)
Compaq Computer Corp.
(a)....................... 4,300 138,675
Dell Computer Corp. (a).... 600 15,825
Evans & Sutherland Computer
Corp...................... 300 4,125
Gateway 2000, Inc. (a)..... 700 7,831
International Business
Machines Corp............. 7,100 417,125
Komag Inc. (a)............. 100 1,838
Read-Rite Corp. (a)........ 2,900 37,519
Silicon Graphics Inc.
(a)....................... 2,600 57,525
Sun Microsystems Inc.
(a)....................... 2,500 51,250
---------
731,713
---------
COMPUTER-SOFTWARE (1.9%)
Adobe Systems Inc.......... 500 13,750
Aldus Corp. (a)............ 400 10,150
Alias Research Inc. (a).... 500 6,500
Autodesk, Inc.............. 300 14,812
Computer Software &
Development Inc........... 600 5,625
Davidson & Associates Inc.
(a)....................... 500 7,875
Electronic Arts, Inc.
(a)....................... 800 11,100
First Data Corp............ 2,100 86,887
Hewlett-Packard Co......... 5,100 384,412
Honeywell Inc.............. 2,400 74,400
InfoSoft International Inc.
(a)....................... 200 4,550
Intersolv Inc. (a)......... 900 9,337
Intuit, Inc. (a)........... 400 13,350
Landmark Graphics Corp.
(a)....................... 200 6,100
Learning Co., (The) (a).... 300 4,088
Microsoft Corp. (a)........ 6,600 340,312
NetManage Inc. (a)......... 600 8,325
Oracle Systems Corp. (a)... 3,600 134,775
Phoenix Technology Ltd
(a)....................... 2,200 9,900
Progress Software Corp.
(a)....................... 500 15,375
S3 Inc. (a)................ 1,600 13,900
Software Professionals Inc.
(a)....................... 300 975
Spectrum Holobyte Inc.
(a)....................... 100 775
Symantec Corp. (a)......... 1,200 12,750
Tripos Inc. (a)............ 100 575
Wavefront Technologies Inc.
(a)....................... 400 2,750
---------
1,193,348
---------
</TABLE>
See Accompanying Notes.
21
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
--------- ----------
<S> <C> <C>
ELECTRONICS (0.3%)
A M P Inc.................. 1,800 $ 124,650
Dynamics Corp. of
America................... 200 2,800
E-Systems, Inc............. 1,000 37,375
General Motors Corp. Class
E......................... 800 27,900
KEMET Corp................. 300 5,062
Qualcomm Inc. (a).......... 500 8,125
---------
205,912
---------
INFORMATION PROCESSING (0.2%)
NetFRAME Systems Inc.
(a)....................... 1,800 16,200
Network Computing Devices
Inc. (a).................. 1,000 3,812
Novell, Inc. (a)........... 7,600 126,825
---------
146,837
---------
SEMICONDUCTORS (0.2%)
Advanced Micro Devices,
Inc. (a).................. 2,100 52,500
Advanced Technology
Materials Inc. (a)........ 1,000 4,875
Asyst Technologies Inc.
(a)....................... 200 2,350
Brooktree Corp. (a)........ 2,000 14,500
Credence Systems Corp.
(a)....................... 2,000 32,000
Helix Technology Corp...... 300 7,500
Sierra Semiconductor Corp.
(a)....................... 900 7,481
Xilinx, Inc. (a)........... 600 20,550
---------
141,756
---------
TELECOMMUNICATIONS-EQUIPMENT (0.2%)
Cisco Systems, Inc. (a).... 4,400 102,300
Dialogic Corp. (a)......... 200 2,825
Telecom Corp, ADR.......... 11,600 31,301
---------
136,426
---------
Total Technology........... 2,581,392
---------
TRANSPORTATION (1.0%)
AIRLINES (0.2%)
AMR Corp. (a).............. 700 41,563
Delta Air Lines, Inc....... 400 18,100
Mesa Airlines Inc. (a)..... 1,700 17,000
Southwest Airlines Co...... 1,300 33,963
UAL Corp. (a).............. 400 50,500
---------
161,126
---------
RAILROADS (0.5%)
ABC Rail Products Corp.
(a)....................... 200 3,812
Burlington Northern Inc.... 1,100 58,712
CSX Corp................... 1,100 83,050
Consolidated Rail Corp..... 700 38,325
Union Pacific Corp......... 2,500 141,563
---------
325,462
---------
TRUCKING & FREIGHT CARRIERS (0.3%)
Harper Group, Inc.......... 600 $ 8,550
Interans Corp.............. 600 7,650
Interpool, Inc. (a)........ 600 6,900
Norfolk Southern Corp...... 1,700 107,100
Rollins Truck Leasing
Corp...................... 500 8,375
Ryder System, Inc.......... 1,100 27,638
Wabash National Corp....... 500 22,375
---------
188,588
---------
Total Transportation....... 675,176
---------
UTILITIES (6.7%)
ELECTRIC (1.4%)
Allegheny Power System,
Inc....................... 1,300 27,300
American Electric Power Co.
Inc....................... 2,100 59,325
Baltimore Gas & Electric
Co........................ 1,100 23,375
Bangor Hydro-Electric
Co........................ 500 6,625
Carolina Power & Light
Co........................ 200 4,625
Central & South West
Corp...................... 2,100 44,625
Central Hudson Gas &
Electric Corp............. 800 21,000
Cincinnati Gas & Electric
Co........................ 800 17,400
Detroit Edison Co.......... 1,300 32,175
Entergy Corp............... 2,600 64,350
FPL Group Inc.............. 2,100 62,728
Green Mountain Power
Corp...................... 400 9,850
Houston Industries Inc..... 1,400 45,675
Maine Public Service Co.... 100 2,588
Pacific Gas & Electric
Co........................ 4,800 114,000
Pinnacle West Capital
Corp...................... 800 13,100
Potamac Electric Power
Co........................ 1,200 22,950
Public Service Enterprise
Group, Inc................ 2,100 54,600
SCECorp.................... 4,300 55,363
Southern Co................ 7,300 136,875
Texas Utilities Co......... 2,300 72,163
Western Resources Inc...... 600 16,125
---------
906,817
---------
TELEPHONE (5.2%)
American Telephone &
Telegraph Co.............. 15,100 821,063
Ameritech Corp............. 5,500 210,375
Bell Atlantic Corp......... 4,600 257,600
BellSouth Corp............. 5,600 345,800
GTE Corp................... 10,600 333,900
ITT Corp................... 2,600 212,225
MCI Communications Corp.... 5,900 130,906
NYNEX Corp................. 4,600 174,225
Northern Telecom Ltd....... 4,300 118,787
Pacific Telesis Group...... 4,700 145,113
</TABLE>
See Accompanying Notes.
22
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
--------- ----------
<S> <C> <C>
TELEPHONE (CONTINUED)
Southwestern Bell Corp.......... 6,600 $ 287,100
Sprint Corp..................... 3,800 132,525
U S West, Inc................... 4,900 205,188
----------
3,374,807
----------
WATER (0.1%)
Aquarion Company................ 500 12,688
Connecticut Water Service
Inc............................ 400 9,300
E'town Corp..................... 300 7,950
Philadelphia Suburban Corp...... 300 5,325
Southern California Water Co.... 200 3,750
United Water Resources Inc...... 200 2,575
----------
41,588
----------
Total Utilities................. 4,323,212
----------
TOTAL UNITED STATES EQUITIES (COST $34,785,849).......
33,169,022
----------
TOTAL COMMON STOCKS (COST $40,617,543)................ 39,308,677
----------
PREFERRED STOCKS (0.3%)
JAPAN (0.2%)
Sakura Bank Ltd. (Banking)...... 6,000 124,201
----------
UNITED STATES (0.1%)
Chrysler Corp. $4.625
(Automotive)................... 700 92,543
----------
TOTAL PREFERRED STOCKS (COST $225,973)................ 216,744
----------
RIGHTS (0.0%)
FRANCE (0.0%)
Compagnie Financiere de Paribas,
expiring 05/09/96 (Banking).... 525 3,376
----------
ITALY (0.0%)
Pirelli S.P.A., expiring
07/08/94 (Industrial
Components).................... 6,000 30
----------
TOTAL RIGHTS (COST $4,366)............................ 3,406
----------
WARRANTS (0.1%)
JAPAN (0.1%) WARRANTS
---------
Casio Computer Co., Strike price
931 Yen, Expiring 3/4/97, 5 13,063
(Recreation)...................
Tobu Store Co. ADR, Strike price
721 Yen, Expiring 01/21/97, 15 26,250
(Retail).......................
Yodogawa Steel Works Ltd.,
Strike price 645 Yen, Expiring 10 17,000
12/10/97 (Steel)...............
----------
TOTAL WARRANTS (COST $55,562)......................... 56,313
----------
TOTAL EQUITY SECURITIES (COST $40,903,444)............
39,585,140
----------
PRINCIPAL VALUE
AMOUNT (NOTE 1A)
--------- ----------
FIXED INCOME SECURITIES (33.0%)
CONVERTIBLE BONDS (0.7%)
FRANCE (0.0%) (IN FRF)
---------
BSN SA 3.00% due 01/01/02 (Food 10,150 $ 1,765
& Household Products)..........
----------
JAPAN (0.7%) (IN YEN)
---------
Asahi Glass Co. 1.90% due
12/26/08 (Misc. Materials & 10,000,000 113,141
Commodities)...................
Matsushita Electric Industrial
Corp. 2.70% due 5/31/02 8,000,000 101,715
(Electric & Electronics).......
Mitsubishi Oil Corp. 1.00% due 5,000,000 61,897
3/31/03 (Energy Sources).......
Ricoh Co. 1.80% due 03/29/02
(Data Processing & 5,000,000 60,883
Reproduction)..................
Sagami Railway Co. 3.80% due 2,000,000 24,658
9/30/99 (Transportation).......
Yamato Transport 3.90% due 4,000,000 53,090
3/30/01 (Transportation).......
----------
415,384
----------
TOTAL CONVERTIBLE BONDS (COST $388,900)............... 417,149
----------
<CAPTION>
MOODY'S/ PRINCIPAL VALUE
S&P RATING AMOUNT (NOTE 1A)
----------- --------- ----------
<S> <C> <C> <C>
COLLATERALIZED OBLIGATIONS (6.3%)
UNITED STATES (6.3%)
FINANCE (6.3%) (IN USD)
---------
Cooperative Utility
Tr. Cajun Electric
Power Coop 9.520% due Aaa/AAA $1,860,000 2,111,119
03/15/19.............
Freehold Finance Inc-
Freehold Raceway Mall
Mtg. Pass-through
Class C 8.400% due Not Rated 500,000 477,250
03/20/02.............
GE Capital Mortgage
Services Inc. 6.500% Aaa/AAA 180,000 167,456
due 08/25/09.........
Prudential Home Mtg. Aaa/AAA 1,023,139 1,021,246
6.500% due 11/25/99..
Resolution Trust Corp.
Mtg. Pass-through
Series 1993 C1 4.288% Aaa/AAA 115,265 116,850
due 05/25/24.........
Resolution Trust Corp.
Mtg. Pass-through
Series 1993 C2 4.075% Aaa/AAA 200,414 201,666
due 03/25/25.........
----------
TOTAL COLLATERALIZED OBLIGATIONS (COST $4,238,003).......
4,095,587
----------
</TABLE>
See Accompanying Notes.
23
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/ PRINCIPAL VALUE
S&P RATING AMOUNT (NOTE 1A)
----------- --------- ----------
<S> <C> <C> <C>
CORPORATE OBLIGATIONS (12.2%)
UNITED STATES (12.2%)
ENERGY (1.0%)
OIL SERVICES (0.7%)
Atlantic Richfield Co.
9.000% due 04/01/21.. A2/A $ 160,000 $ 169,546
BP America Inc. 9.875%
due 03/15/04......... A1/AA- 250,000 285,048
----------
454,594
----------
OIL-PRODUCTION (0.3%)
Occidental Petroleum
Corp. 10.125% due
11/15/01............. Baa3/BBB 200,000 218,948
----------
Total Energy.......... 673,542
----------
FINANCE (6.0%)
BANKING (0.3%)
Ontario, Province of
Canada 7.375% due
01/01/03............. Aa3/AA- 200,000 193,164
----------
FINANCIAL SERVICES (5.7%)
Abbey National
Treasury Service
6.500% due 05/12/03.. Aa2/AA 250,000 228,285
Chemical Banking Corp.
10.125% due
11/01/00............. A3/A- 800,000 894,672
Chrysler Financial
Corp. 10.340% due
05/15/18............. A3/BBB+ 550,000 582,967
Ford Motor Credit Co.
8.250% due 05/15/96.. A2/A 500,000 513,790
Ford Motor Credit Co.
8.000% due 12/01/96.. A2/A 250,000 255,595
General Motors
Acceptance Corp.
8.000% due 10/01/96.. Baa1/BBB+ 500,000 508,480
General Motors
Acceptance Corp.
7.450% due 06/09/97.. Baa1/BBB+ 500,000 501,975
Nova Corp of Alberta
8.500% due 12/15/12.. A3/A 200,000 201,714
----------
3,687,478
----------
Total Finance......... 3,880,642
----------
INDUSTRIAL PRODUCTS & SERVICES (0.2%)
DIVERSIFIED MANUFACTURING (0.2%)
Boeing, Co. 7.250% due
06/15/25............. A1/AA $ 170,000 $ 149,284
----------
UTILITIES (5.0%)
ELECTRIC (5.0%)
Commonwealth Edison
Co. 7.000% due
02/15/97............. Baa3/BBB- 1,000,000 983,340
Cooperative Utility
Trust Big Rivers
Electric Co.
9.500% due 02/15/17.. Aaa/AAA 2,000,000 2,265,180
----------
Total Utilities....... 3,248,520
----------
TOTAL CORPORATE OBLIGATIONS (COST $8,223,462)............
7,951,988
----------
U.S. GOVERNMENT AGENCY OBLIGATIONS (3.1%)
Federal Home Loan Mortgage Corp.
Series 1580 6.500% due 09/15/98... 162,928 162,062
Federal National Mortgage
Association 6.500% due 04/01/08... 2,080,000 1,864,741
----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (COST
$2,093,045).............................................. 2,026,803
----------
U.S. GOVERNMENT TREASURY OBLIGATIONS (10.7%)
U. S. Treasury Notes 4.750% due
02/15/97.......................... 510,000 489,585
U. S. Treasury Notes 5.125% due
04/30/98.......................... 2,565,000 2,421,155
U. S. Treasury Notes 5.750% due
08/15/03.......................... 1,790,000 1,600,743
U. S. Treasury Bonds 11.250% due
02/15/15.......................... 1,475,000 2,006,797
U. S. Treasury Bonds 7.125% due
02/15/23.......................... 170,000 159,006
U. S. Treasury Zero Coupon Strip
0.000% due 02/15/97............... 160,000 135,706
U. S. Treasury Zero Coupon Strip
0.000% due 08/15/04............... 300,000 141,825
----------
TOTAL U.S. GOVERNMENT TREASURY
OBLIGATIONS (COST $7,431,029)............................ 6,954,817
----------
TOTAL FIXED INCOME SECURITIES (COST $22,374,439).........
21,446,344
----------
</TABLE>
See Accompanying Notes.
24
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
--------- ----------
<S> <C> <C>
SHORT-TERM INVESTMENTS (5.4%)
OTHER MUTUAL FUNDS
Seven Seas Money Market
Fund....................... 1,538,917 $1,538,917
U.S. GOVERNMENT TREASURY OBLIGATIONS
PRINCIPAL
AMOUNT
---------
U.S. Treasury Bills
3.420%-4.005% $2,002,000 2,000,714
due 07/07/94 to 07/21/94...
---------
TOTAL SHORT-TERM INVESTMENTS (COST $3,539,631)....
3,539,631
---------
TOTAL INVESTMENTS (99.2%) (COST $66,817,514)......
64,571,115
OTHER ASSETS NET OF LIABILITIES (0.8%)............ 517,021
---------
NET ASSETS (100.0%).................... $65,088,136
---------
---------
<FN>
(a) Non-income-producing securities
Note: Based on the cost of investments of $66,845,026 for Federal Income Tax
purposes at June 30, 1994, the aggregate gross unrealized appreciation and
depreciation was $1,233,060 and $3,506,971, respectively, resulting in net
unrealized depreciation of investments of $2,273,911.
(ADR) - Securities whose value is determined or significantly influenced by
trading on exchanges not located in the United States or Canada. ADR after
the name of a foreign holding stands for American Depository Receipt,
representing ownership of foreign securities on deposit with a domestic
custodian bank.
Currency Abbreviations:
FRF -- French Franc
USD -- United States Dollar
YEN -- Japanese Yen
</TABLE> See Accompanying Notes.
25
<PAGE>
THE DIVERSIFIED PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1994
- ------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments at Value (Cost $66,817,514) (Note 1a) $64,571,115
Cash 80,538
Foreign Currency at Value (Cost $159,436) 163,979
Dividends and Interest Receivable 494,064
Receivable for Expense Reimbursements (Note 2c) 173,987
Receivable for Investments Sold 64,357
Foreign Tax Reclaim Receivable 3,058
Deferred Organization Expense (Note 1d) 4,020
Other Assets 5,700
----------
Total Assets 65,560,818
----------
LIABILITIES:
Custodian Fees and Expenses Payable 168,361
Payable for Investments Purchased 106,366
Net Unrealized Depreciation on Forward Foreign Currency Contracts (Note 1c) 87,728
Advisory Fee Payable (Note 2a) 59,064
Fund Services Fee Payable (Note 2d) 777
Administration Fee Payable (Note 2b) 371
Organization Expense Payable 1,000
Accrued Expenses 49,015
----------
Total Liabilities 472,682
----------
NET ASSETS:
Applicable to Investors' Beneficial Interests $65,088,136
----------
----------
</TABLE>
See Accompanying Notes.
26
<PAGE>
THE DIVERSIFIED PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE PERIOD JULY 8, 1993 (COMMENCEMENT OF OPERATIONS) TO JUNE 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME (NOTE 1E):
Dividends (Net of Withholding Tax of $14,696) $ 576,241
Interest (Net of Withholding Tax of $366) 704,423
----------
Investment Income $1,280,664
EXPENSES:
Advisory Fee (Note 2a) 197,026
Custodian Fees and Expenses 168,361
Professional Fees 49,488
Fund Services Fee (Note 2d) 3,434
Administration Fee (Note 2b) 2,423
Trustees' Fees and Expenses (Note 2e) 788
Amortization of Organization Expense (Note 1d) 980
Miscellaneous 931
----------
Total Expenses 423,431
Less: Reimbursement of Expenses (Note 2c) (173,987)
----------
Net Expenses 249,444
----------
NET INVESTMENT INCOME 1,031,220
NET REALIZED GAIN (LOSS) ON:
Investment Transactions 394,063
Foreign Currency Transactions (22,211)
----------
Net Realized Gain 371,852
NET CHANGE IN UNREALIZED DEPRECIATION OF:
Investments (2,246,399)
Foreign Currency Translations (82,569)
----------
Net Change in Unrealized Depreciation (2,328,968)
----------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (925,896)
----------
----------
</TABLE>
See Accompanying Notes.
27
<PAGE>
THE DIVERSIFIED PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 8, 1993
(COMMENCEMENT OF
OPERATIONS) TO
JUNE 30, 1994
-----------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net Investment Income $ 1,031,220
Net Realized Gain on Investments and Foreign Currency Transactions 371,852
Net Change in Unrealized Depreciation of Investments and Foreign Currency
Translations (2,328,968)
-----------------
Net Decrease in Net Assets Resulting from Operations (925,896)
-----------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST:
Contributions 76,730,148
Withdrawals (10,816,216)
-----------------
Net Increase from Investors' Transactions 65,913,932
-----------------
Total Increase in Net Assets 64,988,036
NET ASSETS:
Beginning of Period 100,100
-----------------
End of Period $ 65,088,136
-----------------
-----------------
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 8, 1993
(COMMENCEMENT OF
OPERATIONS) TO
JUNE 30, 1994
-----------------
<S> <C>
RATIOS (ANNUALIZED):
Expenses to Average Net Assets 0.70%*
Net Investment Income to Average Net Assets 2.88 %*
Portfolio Turnover (a) 115 %
<FN>
* The Portfolio expenses reflect reimbursements by Morgan. If this agreement to
reimburse the Portfolio had not been in place for the period ended June 30,
1994, the annualized ratios of expenses and net investment income to average
net assets would have been 1.18% and 2.40%, respectively.
(a) Not annualized.
</TABLE>
See Accompanying Notes.
28
<PAGE>
THE DIVERSIFIED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The Diversified Portfolio (the "Portfolio") is registered under the Investment
Company Act of 1940, as amended, as a no-load, diversified, open-end management
investment company which was organized as a trust under the laws of the State of
New York on January 29, 1993. The Portfolio commenced operations on July 8,
1993. The Declaration of Trust permits the Trustees to issue an unlimited number
of beneficial interests in the Portfolio. The following is a summary of the
significant accounting policies of the Portfolio:
1. SIGNIFICANT ACCOUNTING POLICIES:
a)The value of each security for which readily available market quotations
exists is based on a decision as to the broadest and most representative
market for such security. The value of such security will be based either on
the last sale price on a national securities exchange, or, in the absence of
recorded sales, at the readily available closing bid price on such
exchanges, or at the quoted bid price in the over-the-counter market.
Securities listed on a foreign exchange are valued at the last quoted sale
price available before the time when net assets are valued. Unlisted
securities are valued at the average of the quoted bid and asked prices in
the over-the-counter market. Securities or other assets for which market
quotations are not readily available are valued at fair value in accordance
with procedures established by the Portfolio's Trustees. Such procedures
include the use of independent pricing services, which use prices based upon
yields or prices of securities of comparable quality, coupon, maturity and
type; indications as to values from dealers; and general market conditions.
All portfolio securities with a remaining maturity of less than 60 days are
valued at amortized cost.
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 asset value is 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.
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
forward contracts stated in foreign currencies are translated at the
prevailing exchange rates at the end of the period. Purchases, sales,
income and expenses are translated at the exchange rate prevailing on the
respective dates of such transactions. Gains and losses resulting from
changes in the exchange rate during the reporting period and gains and
losses realized upon settlement of foreign currency transactions are
reported in the Statement of Operations.
Since 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) The Portfolio may enter into forward foreign currency contracts to protect
securities and related receivables and payables against fluctuations in
future foreign currency rates. A forward contract is an agreement to buy or
sell currencies of different countries on a specified future date at a
specified rate.
29
<PAGE>
THE DIVERSIFIED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
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 based
on procedures established by and under the general supervision of the
Portfolio's Trustees and the change in the market value is recorded by the
Portfolio as unrealized appreciation or depreciation of forward foreign
currency contracts. At June 30, 1994, the Portfolio had open forward
foreign currency contracts as follows:
SUMMARY OF OPEN FORWARD FOREIGN CURRENCY CONTRACTS:
<TABLE>
<CAPTION>
U.S. DOLLAR NET UNREALIZED
SETTLEMENT VALUE AT APPRECIATION
DATE PROCEEDS 06/30/94 (DEPRECIATION)
---------- ------------ ------------ --------------
<S> <C> <C> <C> <C>
FOREIGN CURRENCY SALE CONTRACTS
French Franc 07/11/94 $ 195,863 $ 213,087 $ (17,224)
Japanese Yen 07/11/94 1,486,385 1,552,294 (65,909)
Danish Krona 07/11/94 59,620 64,303 (4,683)
<CAPTION>
COST
------------
<S> <C> <C> <C> <C>
FOREIGN CURRENCY BUY CONTRACTS
New Zealand Dollar 07/01/94 26,794 26,892 98
French Franc 07/01/94 3,690 3,680 (10)
--------------
Net Unrealized Depreciation on Open Forward Foreign Currency
Contracts $ (87,728)
--------------
--------------
</TABLE>
d) The Portfolio incurred organization expenses in the amount of $5,000. These
costs were deferred and are being amortized by the Portfolio on a
straight-line basis over a five-year period from the commencement of
operations.
e) Securities transactions are recorded on a trade date basis. Dividend income
is recorded on the ex-dividend date or at 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.
f) The Portfolio will be treated as a partnership for federal income tax
purposes. As such, each investor in the Portfolio will be subject to
taxation 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.
30
<PAGE>
THE DIVERSIFIED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
2. TRANSACTIONS WITH AFFILIATES:
a) The Portfolio has an investment advisory agreement with Morgan Guaranty
Trust Company of New York ("Morgan"). Under the terms of the investment
advisory agreement, the Portfolio pays Morgan at an annual rate of 0.55% of
the Portfolio's average daily net assets. For the period July 8, 1993 to
June 30, 1994, this fee amounted to $197,026.
b) The Portfolio has retained Signature Broker-Dealer Services, Inc.
("Signature") to serve as Administrator. Certain officers of Signature
serve as officers of the Portfolio. Under the Administration Agreement,
Signature provides management and administrative services necessary for the
operations of the Portfolio, furnishes office space and facilities required
for conducting the business of the Portfolio and pays the compensation of
the Portfolio's officers affiliated with Signature. Effective October 1,
1993, Signature receives a fee at an annual rate of 0.01% of the first $1
billion of aggregate average daily net assets of the Portfolio and the
other portfolios subject to the Administration Agreement (the "aggregate
portfolios"), 0.008% of the next $2 billion of the aggregate portfolios'
average daily net assets, 0.006% of the next $2 billion of the aggregate
portfolios' average daily net assets, and 0.004% of the aggregate
portfolios' average daily net assets in excess of $5 billion. Prior to
October 1, 1993, no administration fee was charged to the Portfolio. For
the period October 1, 1993 to June 30, 1994, the Portfolio's allocated
portion of Signature's fee for these services amounted to $2,423.
c) The Portfolio has a Financial and Fund Accounting Services Agreement
("Services Agreement") with Morgan under which Morgan receives a fee, based
on the percentages described below, for overseeing certain aspects of the
administration and operation of the Portfolio. The Services Agreement is
also designed to provide an expense cap for certain expenses of the
Portfolio. If total expenses of the Portfolio, excluding the advisory fee,
custody expenses, fund services fee, organization costs, and brokerage
costs, exceed the expense cap of 0.10% of the Portfolio's average daily net
assets up to $200 million, 0.05% of the next $200 million of average daily
net assets, and 0.03% of average daily net assets thereafter, Morgan will
reimburse the Portfolio for the excess expense amount and receive no fee.
Should such expenses be less than the expense cap, Morgan's fee would be
limited to the difference between such expenses and the fee calculated
under the Services Agreement. For the period July 8, 1993 to June 30, 1994,
Morgan agreed to reimburse the Portfolio $17,807 for excess expenses. In
addition to the expenses that Morgan assumes under the Services Agreement,
effective March 15, 1994, Morgan has voluntarily agreed to reimburse the
Portfolio to the extent necessary to maintain operating expenses of the
Portfolio at no more than 0.65% of the average daily net assets of the
Portfolio. For the period March 15, 1994 to June 30, 1994, Morgan agreed to
reimburse the Portfolio $156,180.
d) Effective January 15, 1994, the Portfolio entered into 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 Chairman and sole shareholder of Group is also a Trustee of
the Portfolio. The Portfolio's allocated portion of Group's costs in
performing its services amounted to $3,434 for the period January 15, 1994
to June 30, 1994.
31
<PAGE>
THE DIVERSIFIED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
e) Each Trustee is paid a $55,000 annual fee for serving as the Trustee of The
Pierpont Funds, The JPM Institutional Funds, The JPM Institutional Plus
Funds and their corresponding Portfolios, in the aggregate. The Trustee fee
expense shown in the financial statements represents the Portfolio's
allocated portion of the total fees.
3. INVESTMENT TRANSACTIONS:
Investment transactions (excluding short-term investments) for the period July
8, 1993 to June 30, 1994, were as follows:
<TABLE>
<CAPTION>
PROCEEDS FROM
COST OF PURCHASES SALES
- ------------------ ------------------
<S> <C>
$107,876,699 $44,926,734
</TABLE>
32
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of and Investors in
The Diversified Portfolio
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the supplementary data present fairly, in all material
respects, the financial position of The Diversified Portfolio (the "Portfolio")
at June 30, 1994, and the results of its operations, the changes in its net
assets and its supplementary data for the period July 8, 1993 (commencement of
operations) through June 30, 1994, in conformity with generally accepted
accounting principles. These financial statements and supplementary data
(hereafter referred to as "financial statements") are the responsibility of the
Portfolio's management; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit, which included
confirmation of securities at June 30, 1994 by correspondence with the custodian
and brokers, and the application of alternative auditing procedures where
confirmations from brokers were not received, provides a reasonable basis for
the opinion expressed above.
PRICE WATERHOUSE LLP
New York, New York
August 23, 1994
33
