<PAGE>
LETTER TO THE SHAREHOLDERS OF THE PIERPONT DIVERSIFIED FUND
August 15, 1995
Dear Shareholder:
We are pleased to report that The Pierpont Diversified Fund produced a
double-digit return for its fiscal year ended June 30, 1995 and solidly
outperformed its peer group average. For the year, the Fund returned 17.08%,
versus the Morningstar Balanced Fund Average of 15.57%. In addition, since its
inception*, the Fund had an average annual return of 9.25% compared with 6.44%
for the Morningstar Balanced Fund Average. We believe the Fund's relative
outperformance for the period can be attributed primarily to our security
selection decisions, which added value even in the uncertain interest rate
environment.
At its fiscal year end, the Fund's net asset value was $11.20 per share,
compared with $9.81 on June 30, 1994, after making distributions during the year
of $0.20 from ordinary income and $0.06 from short-term capital gains. In
addition, the Fund's net assets grew from $7.0 million to almost $22.4 million
at June 30, 1995. The net assets of The Diversified Portfolio, in which the Fund
invests, totaled approximately $187.1 million at June 30, 1995.
ECONOMIC ENVIRONMENT
Both stock and bond markets experienced dramatic swings during the period as
interest rates changed course. The Federal Reserve's monetary tightening in 1994
caused bond market returns to reach lows not seen in over 20 years. At the same
time, fears of inflation caused stock market volatility. In this environment,
investors favored large-capitalization stocks over small-capitalization issues,
believing larger companies would fare better as the economy slowed.
Early in 1995, however, market sentiment shifted as it became more probable that
the Federal Reserve had succeeded in engineering a "soft landing" for the
economy. In the first half of 1995, the S&P 500 reached record highs. Buying was
narrow however, as investors focused on technology stocks, which had experienced
strong growth, and on the largest multinational companies, which were expected
to benefit the most from low inflation and the weak dollar. Bonds and small-cap
stock prices also rose in the first half of 1995, but not to the same extent as
large-cap stocks.
* REFLECTS PERFORMANCE OF THE JPM INSTITUTIONAL DIVERSIFIED FUND FROM SEPTEMBER
10, 1993, THROUGH DECEMBER 15, 1993 (COMMENCEMENT OF OPERATIONS). ALL RETURNS
ARE CALCULATED FROM SEPTEMBER 30, 1993.
TABLE OF CONTENTS Fund performance. . . . . . . . 5
Letter to the shareholders. . 1 Special fund-based services6. . 6
Fund facts and highlights . . 4 Financial statements. . . . . . 8
1
<PAGE>
International stock returns proved disappointing for the Fund's fiscal year,
gaining only 1.65%, as measured by the Morgan Stanley Capital Europe, Australia,
and Far East (MSCI EAFE) Index. Attractive returns in many European and Asian
markets were mostly offset by negative returns in Japan. The Kobe earthquake,
along with continued economic weakness, caused the Japanese market to decline by
- -14.35% (in U.S. dollar terms) for the period.
PORTFOLIO REVIEW
The Portfolio's investment process looks at three sources to add value -- asset
allocation, stock selection, and bond selection.
ASSET ALLOCATION. Morgan's experienced investment professionals analyze the
relative attractiveness of equities compared with fixed income securities and
then allocate the Portfolio between these two major asset classes. We use our
own allocation model as a benchmark and slightly "overweight" or "underweight"
the Fund's asset classes relative to this benchmark based on our long-term
market analysis. The normal "benchmark" allocation model is 52.0% in large-cap
stocks, 35.0% in fixed income, 10.0% in international stocks, and 3.0% in
small-cap stocks.
As previously noted, bond prices fell in the second half of 1994. Bonds
therefore became more attractively valued relative to stocks, and we gradually
shifted assets from U.S. large-cap stocks into bonds. At the same time, the
Portfolio's overweighting in small-cap stocks was gradually reduced to a normal
position because they appeared overvalued. As the interest rate environment
appeared to stabilize in 1995, the Portfolio's allocations were brought closer
to their normal levels. The Portfolio's breakdown at the end of June was 33.1%
in fixed income, 50.6% in large-cap stocks, 2.8% in small-cap stocks, 9.1% in
international stocks, and 4.4% in cash or short-term investments.
STOCK SELECTION. In managing the Portfolio's equity holdings, we use fundamental
analysis, systematic stock valuation, and a disciplined decision making process
to select undervalued stocks with attractive long-term growth characteristics.
Adhering to this process, we seek to buy stocks that we believe are
"undervalued" relative to their future earnings and dividend-paying potential.
This approach is designed to add value under all market conditions.
For the year ended June 30, 1995, the Portfolio's large-cap stocks slightly
outperformed those in the S&P 500. For the same period, small-cap stock returns
were significantly higher that those in the Russell 2000. During the period, our
valuation measures indicated that Japanese stocks were attractively valued for
the long term. We therefore overweighted the Japanese portion of the Portfolio's
international equity exposure relative to the MSCI EAFE Index. However, as this
market declined, this position detracted from returns.
BOND SELECTION. The Portfolio's bond selection was slightly above the Salomon
Broad Investment Grade Index. In the rising interest rate environment of 1994,
the Portfolio had a duration that was slightly shorter than the Index. When it
became clearer there would be no further rate increases, the duration of the
Portfolio was
2
<PAGE>
lengthened slightly. In addition, as the market began to anticipate a cut in
interest rates -- which occurred in early July -- the duration of the bonds in
the Portfolio was extended to approximately 4.78 years versus 4.70 years for the
Index by the end of June.
Near the end of 1994, the Portfolio was modestly overweighted in corporates, and
we added slightly to its mortgage positions. We decreased our mortgage position
in early 1995, however, fearing that yields would rise and prepayment risk would
increase. Believing that yields on corporates would also increase, we focused on
corporates at the short end of the maturity spectrum. As yield spreads versus
Treasuries widened by the end of June, we began increasing Portfolio exposure to
corporates and mortgages, and by month-end had an overweighting in corporate
instruments.
INVESTMENT OUTLOOK
While on the surface U.S. equity markets appear to be getting expensive, falling
bond yields have actually made equities more attractive. Our diversified
approach to investing, which helps the Portfolio avoid relying on a few stocks
or sectors of the market for performance, should benefit from continued buying
in the equity markets. As investors conclude that the stocks they have focused
on so far this year have become too expensive, they should broaden their
purchases to those stocks that appear inexpensive relative to their price
appreciation potential.
In international equities, we continue to believe Japanese stocks are
attractively valued relative to those in Europe. In fact, the Japanese market
began to recover at the end of June, as Japanese investors were encouraged by
government actions to lower interest rates, stimulate the economy, and weaken
the yen. The Portfolio's international exposure remains slightly overweighted in
Japan relative to the MSCI EAFE Index.
At present, no compelling signals exist to overweight or underweight any
particular asset class. As a result, the Portfolio's allocations are currently
near their normal levels. We will continue to monitor various market indicators
to determine whether or not we will adjust this allocation going forward.
As always, we welcome your comments or questions. Please call J.P. Morgan Funds
Services toll free at (800) 521-5411.
Sincerely yours,
/s/ Evelyn E. Guernsey
Evelyn E. Guernsey
J.P. Morgan Funds Services
3
<PAGE>
Fund facts
INVESTMENT OBJECTIVE
The Pierpont 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.
- -------------------------------------------------------------------------------
NET ASSETS AS OF 6/30/95
$22,395,826
- -------------------------------------------------------------------------------
EX-DIVIDEND DATES
9/8/95, 12/22/95
- -------------------------------------------------------------------------------
DIVIDEND PAYABLE DATES (WEEK OF)
9/11/95, 12/26/95
- -------------------------------------------------------------------------------
CAPITAL GAIN PAYABLE DATES (WEEK OF, IF APPLICABLE)
9/11/95, 12/26/95
- -------------------------------------------------------------------------------
EXPENSE RATIO
The Fund's current annual expense ratio of 0.98% 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
Two pie charts: the first pie chart depicts normal allocation at June 30, 1995
by sector; the second pie chart depicts the allocation of the Fund's investment
securities held at June 30, 1995 by sector. Each pie is broken in pieces
representing sectors in the following percentages:
ALL DATA AS OF JUNE 30, 1995
BENCHMARK ALLOCATION
- U.S. LARGE-CAP EQUITIES 52.0%
[CHART]
FIXED INCOME 35.0%
- INTERNATIONAL EQUITIES 10.0%
- U.S. SMALL-CAP EQUITIES 3.0%
FUND ALLOCATION AT JUNE 30, 1995
- U.S. LARGE-CAP EQUITIES 50.6%
[CHART]
FIXED INCOME 33.1%
- INTERNATIONAL EQUITIES 9.1%
- U.S. SMALL-CAP EQUITIES 2.8%
- CASH 4.4%
LARGEST COMMON STOCK
HOLDINGS % OF PORTFOLIO
- --------------------------------------------------
GENERAL ELECTRIC 1.7
AT&T 1.4
PHILIP MORRIS 1.3
ROYAL DUTCH PETROLEUM 1.3
IBM 1.2
PROCTER & GAMBLE 1.1
MOBIL 0.9
PEPSICO 0.9
DISNEY 0.8
DUPONT 0.8
4
<PAGE>
Fund performance
EXAMINING PERFORMANCE
There are several ways to evaluate a mutual fund's historical performance
record. One approach is to look at the growth of a hypothetical investment of
$25,000 (minimum investment in the Fund). The chart at right shows that $25,000
invested at inception* would have increased to $29,185 by June 30, 1995.
Another 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 you
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 1, 5, or 10
years (or since inception). Total returns for periods of less than one year are
not annualized provide a picture of how a fund has performed over the short
term.
GROWTH OF $25,000 SINCE INCEPTION*
SEPTEMBER 10, 1993 - JUNE 30, 1995
Line graph with two axes: the X-axis represents years of operations; the
Y-axis represents dollar value. The graph plots four lines: the first line
represents the growth of a twenty five thousand dollar investment in the Fund
from September 10, 1993 (inception) to June 30, 1995; the second line
represents the growth of a twenty five thousand dollar investment in a
portfolio of securities reflecting the composition of the Morningstar
Balanced Funds Average ("Morningstar") for the same time period; the third
line represents the growth of a twenty five 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 twenty five
thousand dollar investment in a portfolio of securities reflecting the
composition of the Salomon Brothers Broad Investment Grade Bond Index
("BIG"). The graph points are as follows:
<TABLE>
<CAPTION>
Year Fund Morningstar S&P 500 Salomon BIG
- ---- ---- ----------- --------- ------------
<S> <C> <C> <C> <C>
9/10/93 $ 25,000 $ 25,000 $ 25,000 $ 25,000
6/30/94 24,928 24,163 24,713 24,070
6/30/95 29,185 27,885 31,155 27,090
</TABLE>
<TABLE>
<CAPTION>
PERFORMANCE TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS
---------------------------------------------
THREE SIX ONE THREE FIVE SINCE
AS OF JUNE 30, 1995 MONTHS MONTHS YEAR YEAR YEARS 9/10/93*
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
The Pierpont Diversified Fund 6.97% 14.05% 17.08% -- -- 9.25%
S&P 500 9.55% 20.21% 26.07% -- -- 13.40%
Salomon Brothers Broad Investment
Grade Bond Index 6.13% 11.51% 12.55% -- -- 4.69%
Morningstar Balanced Fund Average 7.17% 13.60% 15.57% -- -- 6.44%
<FN>
*REFLECTS PERFORMANCE OF THE JPM INSTITUTIONAL DIVERSIFIED FUND FROM SEPTEMBER
10, 1993, THROUGH DECEMBER 15, 1993 (COMMENCEMENT OF OPERATIONS). ALL RETURNS
ARE CALCULATED FROM SEPTEMBER 30, 1993.
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. FUND RETURNS ARE NET OF
FEES AND ASSUME THE REINVESTMENT OF DISTRIBUTIONS AND REFLECT REIMBURSEMENT OF
CERTAIN FUND AND PORTFOLIO EXPENSES AS DESCRIBED IN THE PROSPECTUS. MORNINGSTAR,
INC. IS A LEADING RESOURCE FOR MUTUAL FUND DATA. ALTHOUGH GATHERED FROM RELIABLE
SOURCES, DATA ACCURACY AND COMPLETENESS CANNOT BE GUARANTEED.
CONSISTENT WITH APPLICABLE REGULATORY GUIDANCE, PERFORMANCE FOR THE PERIOD PRIOR
TO THE PIERPONT DIVERSIFIED FUND'S COMMENCEMENT OF OPERATIONS REFLECTS THE
PERFORMANCE OF THE JPM INSTITUTIONAL DIVERSIFIED FUND, WHICH INVESTS ALL OF ITS
INVESTABLE ASSETS IN THE DIVERSIFIED PORTFOLIO AND HAS A SUBSTANTIALLY SIMILAR
INVESTMENT OBJECTIVE AND POLICIES AS THE PIERPONT DIVERSIFIED FUND. THE
PERFORMANCE FOR SUCH PERIOD REFLECTS THE DEDUCTION OF THE EXPENSES OF THE JPM
INSTITUTIONAL DIVERSIFIED FUND, WHICH WERE LOWER THAN THE EXPENSES OF THE
PIERPONT DIVERSIFIED FUND.
</TABLE>
5
<PAGE>
Special fund-based services
PIERPONT ASSET ALLOCATION SERVICE (PAAS)
For many investors, a diversified portfolio -- including short-term instruments,
bonds, and stocks -- can offer an excellent opportunity to achieve one's
investment objectives. PAAS provides investors with a comprehensive management
program for their portfolios. Through this service, investors can:
- - create and maintain an asset allocation that is specifically targeted at
meeting their most critical investment objectives;
- - make ongoing tactical adjustments in the actual asset mix of their
portfolios to capitalize on shifting market trends;
- - make investments through The Pierpont Funds, a family of diversified mutual
funds.
PAAS is available to clients who invest a minimum of $500,000 in The Pierpont
Funds.
IRA MANAGEMENT SERVICE
As one of the few remaining investments that can help your assets grow
tax-deferred until retirement, the IRA enables more of your dollars to work for
you longer. Morgan offers an IRA Rollover plan that helps you to build well-
balanced long-term investment portfolios, diversified across a wide array of
mutual funds. From money markets to emerging markets, The Pierpont Funds provide
an excellent way to help you accumulate long-term wealth for retirement. The IRA
Rollover plan is available to clients who invest at least $10,000 in any given
Pierpont Fund.
KEOGH
In early 1995, Morgan introduced a Keogh program for its clients. Keoghs provide
another excellent vehicle to help individuals who are self-employed or are
employees of unincorporated businesses to accumulate retirement savings. A Keogh
is a tax-deferred pension plan that can allow you to contribute the lesser of
$30,000 or 25% of your annual earned gross compensation. The Pierpont Funds can
help you build a comprehensive investment program designed to maximize the
retirement dollars in your Keogh account. The Keogh plan also requires a minimum
investment of $10,000 in any given Pierpont Fund.
6
<PAGE>
SIGNATURE BROKER-DEALER SERVICES, INC. IS THE DISTRIBUTOR OF THE PIERPONT
DIVERSIFIED FUND (THE "FUND").
MORGAN GUARANTY TRUST COMPANY OF NEW YORK ("MORGAN") SERVES AS PORTFOLIO
INVESTMENT ADVISOR AND MAKES THE FUND AVAILABLE SOLELY IN ITS CAPACITY AS
SHAREHOLDER SERVICING AGENT FOR CUSTOMERS. INVESTMENTS IN THE FUND ARE NOT
DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, MORGAN 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 and Portfolio 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
risk; 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)
521-5411.
7
<PAGE>
THE PIERPONT DIVERSIFIED FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment in The Diversified Portfolio ("Portfolio"), at value $ 22,407,100
Receivable for Shares of Beneficial Interest Sold 29,683
Deferred Organization Expenses 23,724
Prepaid Expenses 26
------------
Total Assets 22,460,533
------------
LIABILITIES
Shareholder Servicing Fee Payable 28,937
Administration Fee Payable 500
Fund Services Fee Payable 125
Accrued Expenses 35,145
------------
Total Liabilities 64,707
------------
NET ASSETS
Applicable to 2,000,000 Shares of Beneficial Interest Outstanding
(unlimited authorized shares, par value $0.001) $ 22,395,826
------------
------------
Net Asset Value, Offering and Redemption Price Per Share $11.20
------------
------------
ANALYSIS OF NET ASSETS
Paid-in Capital $ 20,232,093
Undistributed Net Investment Income 290,082
Accumulated Net Realized Gain on Investment, Foreign Currency
Transactions and Futures 430,631
Net Unrealized Appreciation of Investment, Foreign Currency
Translations and Futures 1,443,020
------------
Net Assets $ 22,395,826
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
8
<PAGE>
THE PIERPONT DIVERSIFIED FUND
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED JUNE 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME ALLOCATED FROM PORTFOLIO
Allocated Interest Income (Net of Foreign Withholding Tax of $73) $ 410,554
Allocated Dividend Income (Net of Foreign Withholding Tax of
$5,793) 227,888
Allocated Portfolio Expenses (Net of Reimbursement of $47,274) (95,219)
------------
Net Investment Income Allocated from Portfolio 543,223
FUND EXPENSES
Shareholder Servicing Fee $ 36,552
Printing 28,680
Transfer Agent Fees 22,300
Registration Fees 20,413
Professional Fees 10,816
Amortization of Organization Expense 7,216
Administration Fee 3,660
Fund Services Fee 1,437
Trustees' Fees and Expenses 181
Miscellaneous 2,008
---------
Total Fund Expenses 133,263
Less: Reimbursement of Expenses (85,177)
---------
NET FUND EXPENSES 48,086
------------
NET INVESTMENT INCOME 495,137
NET REALIZED GAIN ON INVESTMENT, FOREIGN CURRENCY TRANSACTIONS
AND FUTURES ALLOCATED FROM PORTFOLIO 397,319
NET CHANGE IN UNREALIZED DEPRECIATION OF INVESTMENT, FOREIGN
CURRENCY TRANSLATIONS AND FUTURES ALLOCATED FROM PORTFOLIO 1,718,483
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 2,610,939
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
9
<PAGE>
THE PIERPONT DIVERSIFIED FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE
PERIOD
DECEMBER 15,
1993
FOR THE (COMMENCEMENT
FISCAL OF
YEAR ENDED OPERATIONS)
JUNE 30, TO JUNE 30,
1995 1994
------------ ------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 495,137 $ 60,532
Net Realized Gain on Investment, Foreign Currency Transactions
and Futures Allocated from Portfolio 397,319 77,841
Net Change in Unrealized Depreciation of Investment, Foreign
Currency Translations and Futures Allocated from Portfolio 1,718,483 (275,463)
------------ ------------
Net Increase (Decrease) in Net Assets Resulting from Operations 2,610,939 (137,090)
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (223,701) (91)
Net Realized Gain on Investment, Foreign Currency Transactions
and Futures (43,693) --
------------ ------------
Total Distributions to Shareholders (267,394) (91)
------------ ------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST (NOTE 3)
Proceeds from Shares of Beneficial Interest Sold 16,869,445 7,514,475
Reinvestment of Dividends and Distributions 253,822 91
Cost of Shares of Beneficial Interest Redeemed (4,093,846) (354,625)
------------ ------------
Net Increase from Transactions in Shares of Beneficial Interest 13,029,421 7,159,941
------------ ------------
Total Increase in Net Assets 15,372,966 7,022,760
NET ASSETS
Beginning of Period 7,022,860 100
------------ ------------
End of Period (including undistributed net investment income of
$290,082 and $53,855, respectively) $22,395,826 $ 7,022,860
------------ ------------
------------ ------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
10
<PAGE>
THE PIERPONT DIVERSIFIED FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected Data for a share outstanding throughout each period are as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE DECEMBER 15, 1993
FISCAL YEAR (COMMENCEMENT OF
ENDED OPERATIONS) TO
JUNE 30, 1995 JUNE 30, 1994
------------- ------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.81 $10.00
------------- ------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.28 0.09
Net Realized and Unrealized Gain (Loss) on
Investments, Foreign Currency and Futures
Allocated from Portfolio 1.37 (0.27)
------------- ------------------
Total from Investment Operations 1.65 (0.18)
------------- ------------------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (0.20) (0.01)
Net Realized Gain on Investments, Foreign Currency
and Futures Allocated from Portfolio (0.06) --
------------- ------------------
Total Distributions to Shareholders (0.26) (0.01)
------------- ------------------
NET ASSET VALUE, END OF PERIOD $ 11.20 $ 9.81
------------- ------------------
------------- ------------------
Total Return 17.08% (1.82)%*
------------- ------------------
------------- ------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets at end of Period (in thousands) $22,396 $7,023
Ratios to Average Net Assets
Expenses 0.98% 0.98%(a)
Net Investment Income 3.39% 2.80%(a)
Decrease reflected in Expense Ratio due to
Expense Reimbursement 0.91% 1.52%(a)
<FN>
- ------------------------
* Not Annualized
(a) Annualized
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
11
<PAGE>
THE PIERPONT DIVERSIFIED FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Pierpont Diversified Fund (the "Fund") is a separate series of The Pierpont
Funds, a Massachusetts business trust (the "Trust"). The Trust is registered
under the Investment Company Act of 1940, as amended, as a diversified open-end
management investment company. The Fund commenced investment operations on
December 15, 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 objectives as the Fund. The value of such investment reflects
the Fund's proportionate interest in the net assets of the Portfolio (12% at
June 30, 1995). 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 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
realized net capital gains, if any, are declared and paid annually.
d)The Fund incurred organization expenses in the amount of $34,724. 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 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. As of June 30, 1995 the Fund incurred and elected to defer
post-October currency losses of approximately $33,000 until the next
taxable year. To the extent that this currency loss is used to offset
future income it is probable that the income so offset will not be
distributable to shareholders.
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.
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.
12
<PAGE>
THE PIERPONT DIVERSIFIED FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
Accordingly, permanent book and tax basis differences relating to
shareholder distributions are reclassified to paid-in capital. For the
fiscal year ended June 30, 1995, the Fund increased accumulated net
realized gain on investment, foreign currency transactions and futures by
$34,328, decreased undistributed net investment income by $35,209, and
increased paid-in capital by $881. The adjustments are primarily
attributable to foreign currency losses. 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. The
agreement provides for a fee to be paid to Signature at an annual rate
determined by the following schedule: 0.04% of the first $1 billion of the
aggregate average daily net assets of the Trust, as well as two other
affiliated fund families for which Signature acts as administrator, 0.032%
of the next $2 billion of such net assets, 0.024% of the next $2 billion
of such net assets, and 0.016% of such net assets in excess of $5 billion.
The daily equivalent of the fee rate is applied daily to the net assets of
the Fund. For the year ended June 30, 1995, Signature's fee for these
services amounted to $3,660.
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 percentages described below, for overseeing certain aspects of the
administration and operation of the Fund. The Services Agreement is also
designed to provide an expense limit 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 limit of 0.15% of the Fund's average daily net assets up to and
including $100 million and 0.13% of any excess over $100 million, Morgan
will reimburse the Fund for the excess expense amount and receive no fee.
Should such expenses be less than the expense limit, Morgan's fee would be
limited to the difference between such expenses and the fee calculated
under the Services Agreement. For the year ended June 30, 1995, Morgan has
agreed to reimburse the fund $66,127 for excess expenses. Effective
September 1, 1995, the Services Agreement will be terminated. The
oversight services that were provided under the Services Agreement will
continue to be provided by Morgan without any fee to the Fund until such
time as a new agreement is put into place. 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 0.98% of the average daily net assets of
the Fund through December 31, 1995. For the year ended June 30, 1995,
Morgan has agreed to reimburse the Fund $19,050 for expenses which
exceeded this limit.
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 0.25% of the average daily net assets of the Fund. For the
year ended June 30, 1995, the fee for these services amounted to $36,552.
13
<PAGE>
THE PIERPONT DIVERSIFIED FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
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. For the
fiscal year ended June 30, 1995, the Fund's allocated portion of Group's
costs in performing its services amounted to $1,437.
e)An aggregate annual fee of $65,000 is paid to each Trustee for serving as
a Trustee of the Pierpont Funds, The JPM Institutional Funds, their
corresponding Portfolios and The Series Portfolio. The Trustees' Fees and
Expenses shown in the financial statements represents the Fund's allocated
portion of the total fees and expenses. Prior to April 1, 1995, the
aggregate annual Trustee Fee was $55,000. The Trustee who serves as
Chairman and Chief Executive Officer of these Funds and Portfolios also
serves as Chairman of Group and received compensation and employee
benefits from Group in his role as Group's Chairman. The allocated portion
of such compensation and benefits included in the Fund Services Fee shown
in the financial statements was $200.
2. 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 PERIOD
DECEMBER 15, 1993
FOR THE FISCAL (COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO
JUNE 30, 1995 JUNE 30, 1994
-------------- ------------------
<S> <C> <C>
Shares sold 1,654,301 751,526
Reinvestment of dividends and distributions 25,646 9
Shares redeemed (395,709) (35,783)
-------------- -------
Net increase 1,284,238 715,752
-------------- -------
-------------- -------
</TABLE>
14
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of
The Pierpont 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 Pierpont Diversified Fund (one of the series constituting part of The
Pierpont Funds, hereafter referred to as the "Fund") at June 30, 1995, the
results of its operations for the year then ended, and the changes in its net
assets and the financial highlights for the year then ended and for the period
December 15, 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 audits. We
conducted our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
New York, New York
August 28, 1995
15
<PAGE>
The Diversified Portfolio
Annual Report June 30, 1995
(The following pages should be read in conjunction
with The Pierpont Diversified Fund
Annual Financial Statements)
16
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS
JUNE 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- -----------
<S> <C> <C>
EQUITIES (63.5%)
<CAPTION>
COMMON STOCKS (63.4%)
FOREIGN EQUITIES (9.2%)
AUSTRALIA (0.3%)
<S> <C> <C>
Broken Hill Proprietary Co. Ltd.
(Petroleum Services)........... 7,920 $ 97,493
CSR Ltd. (Conglomerates)........ 12,000 37,527
National Australia Bank Ltd.
(Banks)........................ 6,850 54,138
News Corporation Bank Ltd.
(Broadcasting)................. 13,700 76,533
Rothmans Holdings Ltd. (Food &
Beverages)..................... 7,200 24,819
Southcorp Holdings Ltd. (Food &
Beverages)..................... 28,500 56,919
TNT Ltd. (Trucking & Freight
Forwarding) (a)................ 17,000 22,353
Western Mining Corp. Holdings
Ltd. (Non-Ferrous Metals)...... 12,000 66,098
-----------
435,880
-----------
<CAPTION>
AUSTRIA (0.0%)*
<S> <C> <C>
Creditanstalt Bankverein
(Banks)........................ 200 11,786
Oester Elektrizita (Electric
Utilities)..................... 300 21,992
VA Technologie AG (Industrial
Machinery)..................... 200 25,031
-----------
58,809
-----------
<CAPTION>
BELGIUM (0.1%)
<S> <C> <C>
Arbed SA NPV (Steel) (a)........ 200 29,178
Banque Bruxelles Lambert NPV
(Banks)........................ 200 33,362
Generale De Banque SA (Banks)... 60 19,279
Groupe Bruxelles Lambert NPV
(Conglomerates)................ 350 47,924
Tractebel Capital NPV
(Conglomerates)................ 200 72,594
-----------
202,337
-----------
<CAPTION>
DENMARK (0.1%)
<S> <C> <C>
Carlsberg B (Food &
Beverages)..................... 200 9,333
Danisco AS (Food & Beverages)... 1,200 51,328
Den Danske Bank (Banks)......... 410 25,736
International Service System
(Conglomerates)................ 830 21,670
<CAPTION>
SHARES VALUE
---------- -----------
DENMARK (0.1%) (CONTINUED)
<S> <C> <C>
Novo Nordisk AS, Series B (Drugs
& Health Care)................. 240 $ 25,598
Sophus Berendsen, Class B
(Conglomerates)................ 455 42,884
Teledanmark AS (Telephone)...... 630 35,055
-----------
211,604
-----------
<CAPTION>
FRANCE (0.9%)
<S> <C> <C>
Air Liquide (Chemicals)......... 425 67,894
AXA (Insurance)................. 1,023 55,248
Bouygues (Homebuilders)......... 300 35,929
Carrefour Supermarkets (Retail
Trade)......................... 120 61,468
Christian Dior SA (Apparel &
Textiles)...................... 1,130 99,507
Compagnie Financiere de Cic
Union Europ Certe De Invest
(Banks)........................ 670 43,090
Compagnie Financiere de Paribas,
Class A (Banks)................ 995 59,807
Compagnie Financiere de St.
Gobain (Containers & Glass).... 501 60,517
Credit Local de France
(Banks)........................ 550 51,017
Eaux Cie Generale (Business
Services)...................... 780 86,822
Eridania Beghin - Say (Food &
Beverages)..................... 150 23,128
Groupe Danone (Food &
Beverages)..................... 435 73,168
Lafarge SA (Construction
Materials)..................... 450 34,989
LaGardere Groupe (Leisure &
Tourism)....................... 3,240 67,120
Lyonnaise des Eaux
(Conglomerates)................ 370 34,992
Peugeot SA (Automobiles)........ 415 57,571
Promodes (Retail Trade)......... 420 95,665
Rhone Poulenc SA, Class A
(Chemicals).................... 1,650 37,175
Roussel Uclaf (Drugs & Health
Care).......................... 220 34,329
SGS Thomson (Electronics) (a)... 1,200 48,235
Sanofi (Drugs & Health Care).... 900 49,811
Schneider SA (Industrial
Machinery)..................... 550 43,501
SEITA (Tobacco)................. 1,800 54,097
Societe Generale (Banks)........ 950 111,031
Societe Nationale Elf Aquitaine
(Gas Exploration).............. 874 64,587
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
17
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- -----------
FRANCE (0.9%) (CONTINUED)
<S> <C> <C>
Sommer-Allibert (Construction
Materials)..................... 90 $ 33,115
Synthelabo (Drugs & Health
Care).......................... 990 56,180
Thomson CSF (Aerospace)......... 1,200 26,888
Total B (Petroleum Services).... 2,290 137,834
Television Francaise
(Broadcasting)................. 230 22,638
Ugine SA (Iron & Steel)......... 500 35,145
-----------
1,762,498
-----------
<CAPTION>
GERMANY (0.4%)
<S> <C> <C>
Allianz AG Holdings
(Insurance).................... 20 35,693
Ava Allgemeine Handels Der Verbr
(Retail Grocery)............... 100 39,048
Bayer AG (Chemicals)............ 160 39,800
Bilfinger & Berger Bau AG
(Homebuilders)................. 80 36,937
Daimler-Benz AG (Automobiles)... 60 27,551
Deutsche Bank AG (Banks)........ 2,300 111,765
Deutsche Pfandbrief Und
Hypotheken Bank (Banks)........ 51 25,926
Deutsche Pfandbrief Und
Hypotheken Bank RFD
(Miscellaneous)................ 10 5,018
Hoechst AG (Chemicals).......... 130 28,089
Man AG (Industrial Machinery)... 190 48,980
Munchener Ruckversicherungs AG
(Insurance).................... 46 100,789
S.A.P. (Business Services)...... 50 66,346
Schering AG (Drugs & Health
Care).......................... 400 27,941
Siemens AG (Electrical
Equipment)..................... 115 57,088
SKW Trostberg (Miscellaneous)
(a)............................ 450 9,437
Thyssen AG (Steel) (a).......... 155 28,862
Veba AG (Electric Utilities).... 190 74,673
Volkswagen AG (Automobiles)..... 225 64,999
-----------
828,942
-----------
<CAPTION>
HONG KONG (0.3%)
<S> <C> <C>
Hong Kong Electric Holdings Ltd.
(Electric Utilities)........... 22,500 76,475
Hong Kong Telecom
(Telecommunications)........... 49,200 97,284
HSBC Holdings PLC (Banks)....... 7,200 92,352
Sun Hung Kai Properties Ltd.
(Real Estate).................. 23,000 170,171
Swire Pacific Ltd.
(Conglomerates)................ 10,000 76,249
<CAPTION>
SHARES VALUE
---------- -----------
HONG KONG (0.3%) (CONTINUED)
<S> <C> <C>
Television Broadcasts Ltd.
(Broadcasting)................. 19,000 $ 66,789
-----------
579,320
-----------
<CAPTION>
JAPAN (4.4%)
<S> <C> <C>
Achilles Corp. (Construction
Materials)..................... 10,000 36,694
Chugai Pharmaceutical Co. (Drugs
& Health Care)................. 12,000 121,480
Chuo Trust & Banking Co.
(Banks)........................ 5,000 56,634
Clarion Co. (Electronics) (a)... 5,000 19,173
Cosmo Oil Co. Ltd. (Mining, Oil
& Coal)........................ 20,000 113,032
Dai-Ichi Kangyo Bank (Banks).... 10,000 180,520
Daido Hoxan Corp. (Chemicals)... 10,000 62,179
Daiei Inc. (Retail Trade)....... 10,000 121,527
Daiichi Pharmaceutical Co.
(Drugs & Health Care).......... 15,000 219,456
Daikin Industries (Industrial
Machinery)..................... 10,000 80,467
Daishi Bank (Banks)............. 15,000 103,888
Daiso Co. (Chemicals)........... 13,000 52,611
Daito Trust Construction Co.
Ltd. (Construction & Mining
Equipment)..................... 9,000 84,951
Daiwa Bank (Banks).............. 20,000 180,520
Daiwa Securities Co. Ltd.
(Financial Services)........... 8,000 84,384
East Japan Railway Co.
(Railroads & Equipment)........ 30 153,973
Fuji Denki Reiki (Retail
Trade)......................... 2,000 21,733
Fuji Electric Co. Ltd.
(Electrical Equipment)......... 15,000 75,571
Fukui Bank (Banks).............. 15,000 80,526
Gakken Co. Ltd. (Broadcasting)
(a)............................ 10,000 61,471
Hitachi Ltd. (Electrical
Equipment)..................... 15,000 149,549
Hokkaido Can Co. Ltd. (Non-
Ferrous Metals)................ 6,000 47,219
Hokkaido Takushoku Bank
(Banks)........................ 28,000 76,644
Honda Motor Co. Ltd.
(Automobiles).................. 7,000 107,368
Industrial Bank Of Japan Ltd.
(Banks)........................ 5,000 130,376
Ishikawajima-Harima Heavy
Industries (Industrial
Machinery)..................... 40,000 157,158
Ishizuka Glass Co. Ltd.
(Glass)........................ 15,000 77,518
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
18
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- -----------
JAPAN (4.4%) (CONTINUED)
<S> <C> <C>
Itoki Crebio Corp.
(Miscellaneous)................ 4,000 $ 29,733
Japan Airport Terminals (Media &
Leisure)....................... 3,000 35,396
Japan Tobacco (Food &
Beverages)..................... 8 71,547
Kagawa Bank (Banks)............. 3,000 34,334
Kanematsu Corp.
(Conglomerates)................ 20,000 75,512
Kurabo Industries (Textiles).... 15,000 54,156
Kyushu Bank (Banks)............. 10,000 46,487
Matsushita Electrical Industrial
Co. Ltd. (Electronics)......... 15,000 233,614
Mitsubishi Chemical Corp.
(Chemicals).................... 20,000 85,659
Mitsubishi Electric Corp. Ltd.
(Electrical Equipment)......... 17,000 119,545
Mitsubishi Materials Corp. (Non-
Ferrous Metals)................ 20,000 89,670
Mitsubishi Motors Corp.
(Automobiles).................. 12,000 98,968
Mitsubishi Pencil Co. Ltd.
(Paper)........................ 5,000 41,414
Mitsui Toatsu Chemicals Inc.
(Chemicals).................... 20,000 73,624
Mitsui Trust & Banking Co. Ltd.
(Banks)........................ 15,000 138,045
Mitsukoshi Ltd. (Retail
Trade)......................... 30,000 214,501
Nagasakiya Co. (Retail) (a)..... 10,000 44,953
NEC Corp. (Electrical
Equipment)..................... 10,000 109,610
Nichias Corp. (Rubber, Cement &
Ceramics)...................... 15,000 66,014
Nichiei Co. (Construction
Materials)..................... 15,000 60,173
Nichii Co. (Retail Trade)....... 10,000 108,666
Nippon Credit Bank (Banks)...... 15,000 74,332
Nippon Koshuha Steel Co. (Iron &
Steel) (a)..................... 15,000 38,405
Nippon Paper Industries
(Paper)........................ 8,000 51,914
Nippon Road Co. (General
Construction).................. 10,000 99,109
Nippon Suisan Kaisha (Food &
Beverages) (a)................. 15,000 70,969
Nishi Nippon Railroad Co.
(Railroads & Equipment)........ 20,000 91,558
Nissin Electric Co. Ltd.
(Electrical Equipment)......... 16,000 105,717
Nomura Securities Co. Ltd.
(Investment Companies)......... 10,000 174,621
NSK Ltd (Industrial
Machinery)..................... 17,000 98,083
<CAPTION>
SHARES VALUE
---------- -----------
JAPAN (4.4%) (CONTINUED)
<S> <C> <C>
Osaka Gas Co. Ltd. (Gas &
Pipeline Utilities)............ 20,000 $ 73,860
Ricoh Corp. Ltd. (Computers &
Business Equipment)............ 7,000 60,126
Ryosan Co. Ltd. (Electrical
Equipment)..................... 2,000 47,195
Sagami Co. Ltd. (Retail
Trade)......................... 10,000 73,152
Sakura Bank Ltd. (Banks)........ 16,000 167,070
San-In Godo Bank (Banks)........ 8,000 77,494
Sanden Corp. (Electrical
Equipment)..................... 20,000 97,221
Sankyu Inc. (Trucking &
Warehousing)................... 15,000 56,103
Sanshin Electronics Co. Ltd.
(Electrical Equipment)......... 6,000 76,456
Shibusawa Warehouse Co.
(Miscellaneous)................ 10,000 53,684
Shikoku Chemical Corp.
(Chemicals).................... 12,000 57,483
Shin Nippon Air Technologies Co.
(Air Travel)................... 3,000 39,290
Shinmaywa Industries Ltd.
(Automobiles).................. 5,000 41,944
Shinobu Foods Products Co.
(Miscellaneous)................ 6,000 56,988
Snow Brand Milk Products Co.
Ltd. (Food & Beverages)........ 5,000 39,231
Sony Corp. (Electronics)........ 2,000 96,042
Sumitomo Bank Ltd. (Banks)...... 5,000 86,721
Sumitomo Forestry Co. (Home
Construction).................. 6,000 99,817
Sumitomo Metal Industries
(Steel) (a).................... 70,000 182,525
Tachi-S (Miscellaneous)......... 6,000 59,820
Takashimaya Co. Ltd. (Retail
Trade)......................... 6,000 80,703
Tobu Railway Co. Ltd. (Railroads
& Equipment)................... 10,000 62,415
Toenec Corp. (Electrical
Equipment)..................... 5,000 46,074
Toho Gas Co. Ltd. (Electric
Utilities)..................... 5,000 17,816
Tohoku Electric Power Co. Inc.
(Electric Utilities)........... 10,000 277,269
Tokio Marine & Fire Insurance
Co. Ltd. (Insurance)........... 15,000 172,024
Toshiba Corp. (Industrial
Machinery)..................... 8,000 50,687
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
19
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- -----------
JAPAN (4.4%) (CONTINUED)
<S> <C> <C>
Toshiba Engineering &
Construction Co. (Electrical
Equipment)..................... 10,000 $ 82,001
Toshiba Tungaloy Co. (Machinery)
(a)............................ 10,000 40,352
Toyo Construction Co.
(Construction Materials)....... 15,000 78,403
Toyota Motor Corp.
(Automobiles).................. 10,000 198,218
Uni-Charm Corp. (Household
Products)...................... 3,000 58,758
Yamaha Corp. (Toys, Amusements,
Sporting Goods)................ 5,000 54,569
Yasuda Trust & Banking Co. Ltd.
(Banks)........................ 25,000 163,707
Zexel Corp. (Railroads &
Equipment)..................... 15,000 101,233
-----------
8,319,402
-----------
<CAPTION>
MALAYSIA (0.1%)
<S> <C> <C>
Public Bank Berhad (Banks)...... 34,000 76,005
Sime Darby Berhad
(Conglomerates)................ 9,000 25,103
Tan Chong Motor Holdings Berhad
(Industrial Machinery)......... 36,000 41,050
Tanjong Public Co. (Leisure &
Tourism)....................... 17,000 58,572
-----------
200,730
-----------
<CAPTION>
NETHERLANDS (0.1%)
<S> <C> <C>
DSM NV (Chemicals).............. 250 21,539
Elsevier NV (Publishing)........ 3,200 37,793
Internationale Groep Nederlanden
(Insurance).................... 500 27,654
Philips Electronics (Household
Appliances Furnishings)........ 700 29,635
Royal Dutch Petroleum (Petroleum
Services)...................... 700 85,473
Unilever NV (Food).............. 300 39,032
-----------
241,126
-----------
<CAPTION>
NEW ZEALAND (0.1%)
<S> <C> <C>
Independent Newspapers
(Broadcasting)................. 12,000 37,305
Lion Nathan Ltd. (Food &
Beverages)..................... 20,000 39,577
-----------
76,882
-----------
<CAPTION>
SHARES VALUE
---------- -----------
NORWAY (0.2%)
<S> <C> <C>
Aker As, Series B
(Conglomerates)................ 2,500 $ 31,445
Hafslund Nycomed, Series B
(Drugs & Health Care).......... 2,500 57,819
Kvaerner AS, Series B (Capital
Goods)......................... 1,300 56,967
Norsk Hydro AS (Petroleum
Services)...................... 4,000 167,816
Orkla AS, A Free
(Conglomerates)................ 900 38,124
Orkla AS, B Free
(Conglomerates)................ 300 13,438
-----------
365,609
-----------
<CAPTION>
SINGAPORE (0.2%)
<S> <C> <C>
DBS Land Ltd. (Real Estate)..... 12,000 37,610
Development Bank of Singapore
(Banks)........................ 4,000 45,510
Sembawang Corporation Limited
(Industrial Machinery)......... 5,000 30,411
Sime Darby Berhad
(Conglomerates)................ 45,000 124,938
Singapore Airlines Ltd. (Air
Travel)........................ 3,000 27,693
Singapore Telecommunications
(Telephone).................... 22,000 43,606
Tanjong Public Ltd.
(Miscellaneous)................ 5,000 17,227
-----------
326,995
-----------
<CAPTION>
SPAIN (0.1%)
<S> <C> <C>
BCO Intercont Espa (Banks)...... 500 44,995
Fuerzas Electr De Cataluna SA
(Electric Utilities)........... 9,500 55,216
-----------
100,211
-----------
<CAPTION>
SWITZERLAND (0.4%)
<S> <C> <C>
Baer Holdings AG (Banks)........ 15 17,586
BBC AG Brown Boveri & Cei
(Electrical Equipment)......... 302 60,584
Ciba Geigy AG (Healthcare)...... 110 80,625
CS Holding (Banks).............. 600 54,972
Holderbank FN Glarus (Financial
Services)...................... 40 32,827
Nestle SA (Food & Beverages).... 90 93,713
Roche Holdings Genusschcine AG
(Drugs & Health Care).......... 16 103,099
Sandoz AG (Drugs & Health
Care).......................... 170 117,221
Schweizerische Bankgesellschaft
(Banks)........................ 40 41,442
Schweizerische Bankverein
(Banks)........................ 140 49,604
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
20
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- -----------
SWITZERLAND (0.4%) (CONTINUED)
<S> <C> <C>
Schweizerische
Ruchversicherungs-Gesell
(Insurance).................... 50 $ 38,515
Zurich Versicherungs
(Insurance).................... 40 50,265
-----------
740,453
-----------
<CAPTION>
UNITED KINGDOM (1.5%)
<S> <C> <C>
Abbey National PLC (Banks)...... 8,000 59,552
Allied Colloids Group PLC
(Chemicals).................... 15,500 30,448
Argos (Retail Trade)............ 7,000 48,099
Argyll Group PLC (Retail
Trade)......................... 9,000 48,028
BAT Industries PLC (Tobacco).... 8,000 61,333
BICC (Capital Goods)............ 4,000 18,896
BOC Group PLC (Chemicals)....... 2,100 26,822
British Gas PLC (Gas & Pipeline
Utilities)..................... 11,000 50,652
British Petroleum Co. Ltd.
(International Oil)............ 8,534 61,151
British Telecommunications PLC
(Telecommunications)........... 23,000 143,407
BTR (Conglomerates)............. 13,500 68,606
Cable & Wireless PLC
(Telecommunication Services)... 8,000 54,716
Dixon Group PLC (Retail
Trade)......................... 11,600 47,234
Forte PLC (Leisure Time)........ 12,000 43,423
General Electric Co. PLC
(Electrical Equipment)......... 7,000 34,182
Glaxo Holdings PLC (Drugs &
Health Care)................... 11,658 143,057
Glynwed International PLC
(Materials).................... 6,700 34,688
Granada Group PLC (Leisure
Time).......................... 5,500 53,364
Grand Metropolitan PLC (Food &
Beverages)..................... 10,000 61,317
Guardian Royal Exchange PLC
(Insurance).................... 20,200 66,348
Guinness PLC (Food &
Beverages)..................... 6,500 48,902
Hanson Trust PLC
(Conglomerates)................ 14,000 48,879
Hillsdown Holdings PLC (Food)... 16,000 46,063
HSBC Holdings (Banks)........... 5,150 66,474
Inchcape PLC (Transport &
Services)...................... 2,000 9,416
Kingfisher (Retail Trade)....... 6,000 40,512
Lloyds Bank PLC (Banks)......... 6,500 64,462
<CAPTION>
SHARES VALUE
---------- -----------
UNITED KINGDOM (1.5%) (CONTINUED)
<S> <C> <C>
Marks & Spencer PLC (Retail
Trade)......................... 2,500 $ 16,065
MEPC (Real Estate).............. 7,500 45,630
Pearson PLC (Media & Leisure)... 3,500 33,124
Peninsular & Oriental Steam
Navigation Co. (Trucking &
Freight Forwarding)............ 6,000 55,209
Racal Electronics PLC
(Electronics).................. 8,500 34,679
Reckitt & Colman PLC (Health &
Personal Care)................. 4,400 46,541
Redland PLC (Construction
Materials)..................... 5,500 35,998
Reuters Holdings PLC
(Publishing)................... 7,500 62,450
Rexam PLC (Paper)............... 3,300 25,326
Rolls-Royce PLC (Capital
Goods)......................... 15,000 41,634
Royal Bank of Scotland PLC
(Banks)........................ 9,000 61,198
RTZ Corp. PLC (Non-Ferrous
Metals)........................ 3,200 41,712
Scottish & Newcastle PLC (Food &
Beverages)..................... 6,000 52,775
Scottish Hydro Electric PLC
(Electric Utilities)........... 8,500 43,129
Sears Holdings (Retail Trade)... 30,000 47,479
Shell Transport & Trading Co.
(International Oil)............ 7,500 89,649
Smithkline Beecham (Drugs &
Health Care)................... 7,000 63,353
Standard Chartered Bank
(Banks)........................ 10,000 53,126
Tarmac PLC (Building)........... 24,000 42,946
Tesco PLC (Retail).............. 10,500 48,433
Thorn EMI PLC (Household
Appliances, Furnishings)....... 900 18,639
Tomkins (Conglomerates)......... 7,500 26,782
United Biscuits Holdings PLC
(Food & Beverages)............. 10,500 53,527
Vickers PLC (Industrial
Machinery)..................... 10,000 32,846
Willis Corroon Group PLC
(Insurance).................... 15,000 35,788
Yorkshire Electricity Group
(Utilities).................... 5,000 54,875
Yorkshire Water (Business, &
Public Services)............... 5,500 50,390
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
21
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- -----------
UNITED KINGDOM (1.5%) (CONTINUED)
<S> <C> <C>
Zeneca Group PLC (Drugs & Health
Care).......................... 2,300 $ 38,833
-----------
2,732,167
-----------
TOTAL FOREIGN COMMON STOCKS (COST
$17,376,389)............................... 17,182,965
-----------
<CAPTION>
UNITED STATES (54.2%)
BASIC INDUSTRIES (4.2%)
AGRICULTURE (0.0%)*
<S> <C> <C>
Dekalb Genetics Corp............ 1,600 70,200
-----------
<CAPTION>
CHEMICALS (1.9%)
<S> <C> <C>
Albemarle Corp.................. 2,700 42,188
Brady (WH) Co. Class A.......... 1,800 121,950
Dow Chemical Co................. 6,400 460,000
Du Pont (E.I.) de Nemours & Co.,
Inc............................ 23,400 1,608,750
Ethyl Corp...................... 2,200 23,375
Georgia Gulf Corp............... 700 22,838
Monsanto Co..................... 4,600 414,575
Morton International Inc........ 7,100 207,675
PPG Industries Inc.............. 4,400 189,200
Praxair Inc..................... 4,200 105,000
Rohm & Haas Co.................. 2,700 148,163
Union Carbide Corp.............. 5,900 196,913
Wellman Inc..................... 100 2,738
-----------
3,543,365
-----------
<CAPTION>
METALS & MINING (1.2%)
<S> <C> <C>
Allegheny Ludlum Corp........... 4,100 80,975
Aluminum Co. of America......... 9,900 496,238
Bethlehem Steel Corp. (a)....... 6,100 99,125
Commercial Metals Co............ 3,500 94,500
Crown Cork & Seal Co., Inc.
(a)............................ 4,700 235,588
Freeport Mcmoran Copper & Gold,
Inc., Class A.................. 2,200 45,375
Inco Ltd........................ 5,700 161,025
Intermet Corp................... 10,300 99,138
Kaiser Aluminum Corp. (a)....... 1,100 15,263
Maverick Tube Corp. (a)......... 1,900 14,250
Nucor Corp...................... 5,800 310,300
Oregon Steel Mills, Inc......... 1,800 30,825
Phelps Dodge Corp............... 4,500 265,500
Reynolds Metals Co.............. 4,500 232,875
<CAPTION>
SHARES VALUE
---------- -----------
METALS & MINING (1.2%) (CONTINUED)
<S> <C> <C>
Steel Technologies, Inc......... 6,800 $ 77,350
-----------
2,258,327
-----------
<CAPTION>
PAPERS & FOREST PRODUCTS (1.1%)
<S> <C> <C>
Boise Cascade Corp.............. 1,300 52,650
Champion International Corp..... 1,000 52,125
Georgia-Pacific Corp............ 2,300 199,525
International Paper Co.......... 4,500 385,875
James River Corp. of Virginia... 2,600 71,825
Kimberly Clark Corp............. 6,500 389,188
Louisiana Pacific Corp.......... 2,800 73,500
Mead Corp....................... 2,000 118,750
Scott Paper Co.................. 4,400 217,800
Union Camp Corp................. 2,000 115,750
Weyerhaeuser Co................. 6,200 292,175
-----------
1,969,163
-----------
Total Basic Industries........... 7,841,055
-----------
<CAPTION>
CONSUMER GOODS &
SERVICES (12.8%)
AUTOMOTIVE (1.5%)
<S> <C> <C>
Chrysler Corp................... 10,001 478,779
Cooper Tire & Rubber Co......... 4,000 97,500
Dana Corp....................... 4,200 120,225
Eaton Corp...................... 2,900 168,563
Echlin Inc...................... 2,800 97,300
Excel Industries, Inc........... 2,300 33,350
Ford Motor Co................... 24,700 734,825
General Motors Corp............. 16,800 787,500
Harley Davidson Inc............. 1,400 34,125
Modine Mfg. Co.................. 5,400 199,125
Paccar Inc...................... 700 32,725
Simpson Industries, Inc......... 8,000 89,000
-----------
2,873,017
-----------
<CAPTION>
BEVERAGES, FOOD, SOAP & TOBACCO (5.5%)
<S> <C> <C>
Anheuser Busch Companies Inc.... 11,400 648,375
Bush Boake Allen, Inc. (a)...... 1,200 36,450
Clorox Co....................... 2,200 143,550
Coca-Cola Co.................... 13,700 873,375
Coca-Cola Enterprises, Inc...... 5,500 120,313
CPC International, Inc.......... 6,000 370,500
Dreyer's Grand Ice Cream,
Inc............................ 500 18,313
Eskimo Pie Corp................. 700 11,375
General Mills Inc............... 6,500 333,938
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
22
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- -----------
BEVERAGES, FOOD, SOAP & TOBACCO (5.5%) (CONTINUED)
<S> <C> <C>
Gillette Co..................... 9,800 $ 437,325
John B. Sanfilippo & Son, Inc.
(a)............................ 500 5,063
Kellogg Co...................... 9,900 706,613
Nabisco Holdings Corp. Class
A.............................. 2,100 56,700
PepsiCo., Inc................... 36,300 1,656,188
Philip Morris Cos. Inc.......... 34,100 2,536,188
Procter & Gamble Co............. 30,100 2,163,438
Ralston Purina Co............... 4,100 209,100
Riviana Foods Inc............... 1,400 18,813
-----------
10,345,617
-----------
<CAPTION>
ENTERTAINMENT, LEISURE & MEDIA (2.0%)
<S> <C> <C>
Argosy Gaming Co. (a)........... 400 5,075
Boyd Gaming Corp. (a)........... 900 14,963
Carnival Corp................... 5,300 123,888
CBS Inc......................... 3,100 207,700
Cinergi Pictures Entertainment,
Inc. (a)....................... 2,400 16,350
Circus Circus Enterprises Inc.
(a)............................ 5,700 200,925
Comcast Corp.................... 10,600 196,763
Disney (Walt) Co................ 28,600 1,590,875
Doubletree Corp. (a)............ 500 10,875
Emmis Broadcasting Corp. (a).... 600 16,200
General Magic Inc. (a).......... 100 1,338
Heritage Media Corp. (a)........ 1,200 34,650
International Game Technology... 6,600 101,475
Johnson Worldwide Associates
Inc. Class A (a)............... 1,500 34,688
Knight Ridder Inc............... 1,300 73,938
People's Choice TV Corp. (a).... 700 17,850
Players International, Inc.
(a)............................ 1,100 22,138
Sports Club Company, Inc. (a)... 1,100 5,638
Time Warner Inc................. 20,400 838,950
Trans World Entertainment
Corp........................... 2,100 7,744
Tribune Co. New................. 2,100 128,888
-----------
3,650,911
-----------
<CAPTION>
HOME CONSTRUCTION (0.1%)
<S> <C> <C>
Armstrong World Industries
Inc............................ 600 30,075
Congoleum Corp. (a)............. 500 6,688
D.R. Horton, Inc................ 3,993 52,664
Fastenal Co..................... 1,200 32,925
Masco Corp...................... 5,700 153,900
Owens-Corning Fiberglas Corp.
(a)............................ 1,800 66,375
<CAPTION>
SHARES VALUE
---------- -----------
HOME CONSTRUCTION (0.1%) (CONTINUED)
<S> <C> <C>
South West Property Trust
Inc............................ 2,300 $ 26,450
-----------
369,077
-----------
<CAPTION>
MERCHANDISING (3.1%)
<S> <C> <C>
Bed Bath & Beyond Inc. (a)...... 1,900 46,194
Borders Group Inc. (a).......... 600 8,625
Braun's Fashions (a)............ 3,800 8,075
Catherines Stores Corp.......... 4,200 45,413
Charming Shoppes, Inc........... 4,700 24,969
Collins & Aikman Corp. (a)...... 2,500 22,500
Dayton-Hudson Corp.............. 2,400 172,200
Department 56, Inc. (a)......... 1,900 72,675
Dillard Department Stores Inc.
Class A........................ 4,300 126,313
Fruit Of The Loom Inc., Class A
(a)............................ 6,000 126,750
Gap Inc......................... 4,900 170,888
Garden Ridge Corp. (a).......... 300 7,350
Heartland Express Inc. (a)...... 700 18,200
Hechinger Co. Class A........... 1,300 9,263
Home Depot, Inc................. 12,100 491,563
K Mart Corp..................... 14,800 216,450
Leslie's Poolmart (a)........... 800 11,800
Limited Inc..................... 11,600 255,200
Liz Claiborne Inc............... 7,600 161,500
Lowe's Companies, Inc........... 2,600 77,675
May Department Stores Co........ 7,000 291,375
Maytag Corp..................... 1,700 27,200
Melville Corp................... 3,900 133,575
Nine West Group, Inc............ 1,400 51,100
Nordstrom Inc................... 3,100 128,069
One Price Clothing Stores, Inc.
(a)............................ 2,900 11,056
Penn Traffic Co. (a)............ 1,800 63,675
Penney J.C. Inc................. 6,600 316,800
Price Costco Inc. (a)........... 7,700 125,606
St. John Knits, Inc............. 300 13,463
TJX Companies, Inc.............. 5,400 71,550
Toys "R" Us, Inc. (a)........... 8,600 251,550
US Office Products Co. (a)...... 1,100 13,063
Urban Outfitters, Inc. (a)...... 700 15,400
V.F. Corp....................... 5,200 279,500
Viking Office Products, Inc.
(a)............................ 1,600 58,600
Wal-Mart Stores Inc............. 57,600 1,540,800
Walgreen Co..................... 3,400 170,425
Woolworth Corp.................. 6,300 95,288
-----------
5,731,698
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
23
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- -----------
PERSONAL CARE (0.1%)
<S> <C> <C>
Avon Products, Inc.............. 1,500 $ 100,500
-----------
<CAPTION>
RESTAURANTS & HOTELS (0.4%)
<S> <C> <C>
Boston Chicken, Inc. (a)........ 2,500 60,469
Brinker International, Inc.
(a)............................ 2,200 37,950
Cracker Barrel Old Country
Store, Inc..................... 3,300 68,269
Darden Restaurants Inc. (a)..... 6,500 70,688
Equity Inns Inc................. 1,400 15,138
Felcor Suite Hotels Inc......... 500 12,813
McDonald's Corp................. 5,900 230,838
Mirage Resorts, Inc............. 4,400 134,750
Sbarro, Inc..................... 1,300 30,225
Starbucks Corp. (a)............. 400 14,200
-----------
675,340
-----------
Total Consumer Goods &
Services....................... 23,928,323
-----------
<CAPTION>
ENERGY (5.4%)
NATURAL GAS (0.5%)
<S> <C> <C>
Chesapeake Utilities Corp....... 300 3,938
Devon Energy Corp............... 2,000 43,000
El Paso Natural Gas Co.......... 1,700 48,450
Enron Corp...................... 13,000 456,550
Panhandle Eastern Corp.......... 7,200 175,500
Providence Energy Corp.......... 1,800 27,450
Sonat Inc....................... 3,000 91,500
TransCanada Pipelines Ltd....... 800 10,700
United Cities Gas Co............ 1,600 24,400
Wicor, Inc...................... 100 2,813
-----------
884,301
-----------
<CAPTION>
OIL-PRODUCTION (4.4%)
<S> <C> <C>
Anadarko Petroleum Corp......... 2,800 120,750
Atlantic Richfield Co........... 2,800 307,300
Chevron Corp.................... 26,800 1,249,550
Exxon Corp...................... 14,300 1,009,938
Mobil Corp...................... 16,900 1,622,400
Occidental Petroleum Corp....... 15,000 343,125
Oryx Energy Co. (a)............. 4,800 66,000
Royal Dutch Petroleum Co.
(ADR).......................... 20,600 2,510,625
Tesoro Petroleum Corp. (a)...... 800 8,000
Texaco Inc...................... 12,500 820,313
Texas Meridian Resources
Corp........................... 1,000 10,750
Union Texas Petroleum Holdings,
Inc............................ 3,200 67,600
<CAPTION>
SHARES VALUE
---------- -----------
OIL-PRODUCTION (4.4%) (CONTINUED)
<S> <C> <C>
Vintage Petroleum, Inc.......... 4,100 $ 76,875
-----------
8,213,226
-----------
<CAPTION>
OIL-SERVICES (0.5%)
<S> <C> <C>
Ashland Oil Co.................. 2,100 73,763
Dreco Energy Services Ltd. Class
A (a).......................... 1,400 19,950
Dresser Industries Inc.......... 7,500 166,875
Holly Corp...................... 600 13,875
Noble Drilling Corp. (a)........ 9,200 66,700
Oceaneering International, Inc.
(a)............................ 4,200 37,275
Schlumberger Ltd................ 10,300 639,888
-----------
1,018,326
-----------
Total Energy..................... 10,115,853
-----------
<CAPTION>
FINANCE (6.5%)
BANKING (3.7%)
<S> <C> <C>
Ahmanson (H.F.) & Co............ 2,500 55,000
Banc One Corp................... 13,500 435,375
Bank Of Boston Corp............. 3,100 116,250
BankAmerica Corp................ 13,300 699,913
Bankers Trust New York Corp..... 2,800 173,600
Banknorth Group, Inc............ 1,000 26,625
Barnett Banks Inc............... 3,000 153,750
Bay View Capital Corp........... 1,000 26,875
Central Fidelity Banks, Inc..... 800 24,200
Chemical Banking Corp........... 7,200 340,200
Charter One Financial Inc....... 2,300 56,494
Citicorp........................ 14,100 816,038
Cole Taylor Financial Group,
Inc............................ 400 6,900
Colonial Bancgroup, Inc. Class
A.............................. 800 22,000
Comerica, Inc................... 3,700 118,863
Commerce Bancorp, Inc........... 2,100 40,556
Community First Bankshares,
Inc............................ 800 13,550
Corestates Financial Corp....... 4,100 142,988
Fifth Third Bancorp............. 1,700 96,050
First Chicago Corp.............. 1,600 95,800
First Commerce Corp............. 900 26,550
First Commercial Corp........... 200 5,900
First National Bancorp. GA...... 1,100 23,375
First Tennessee National
Corp........................... 800 37,050
First UN Corp................... 6,800 307,700
First Virginia Banks, Inc....... 700 26,250
Firstar Corp.................... 2,500 84,063
FirstFed Financial Corp. (a).... 1,400 20,475
Fleet Financial Group Inc....... 4,300 159,638
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
24
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- -----------
BANKING (3.7%) (CONTINUED)
<S> <C> <C>
GBC Bancorp..................... 1,200 $ 15,000
Great Western Financial Corp.... 5,100 105,188
HUBCO, Inc...................... 900 16,031
Huntington Bancshares Inc....... 3,800 79,325
Keycorp......................... 7,700 241,588
Marshall & Ilsley Corp.......... 3,100 70,331
Mellon Bank Corp................ 4,700 195,638
Mercantile Bancorp.............. 1,100 49,363
National Commerce
Bancorporation................. 1,700 43,563
NationsBank Corp................ 10,600 568,425
NBD Bancorp, Inc................ 5,200 166,400
Northern Trust Corp............. 1,000 40,000
Norwest Corp.................... 9,000 258,750
PNC Financial Corp.............. 6,900 181,988
Republic New York Corp.......... 800 44,800
Roosevelt Financial Group,
Inc............................ 2,400 39,900
Shawmut National Corp........... 3,700 117,938
Silicon Valley Bancshares (a)... 1,300 23,238
South Trust Corp................ 800 18,600
Southern National Corp.......... 3,600 86,400
Standard Federal
Bancorporation................. 200 6,725
State Street Boston Corp........ 2,200 81,125
Trustco Bank Corp. of New
York........................... 1,350 29,025
UJB Financial Corp.............. 1,000 30,375
Washington Fed Inc.............. 300 6,581
Washington Mutual Savings
Bank........................... 2,400 56,250
West One Bancorp................ 2,300 76,475
Westamerica Bancorporation...... 700 26,075
Wilmington Trust Corp........... 200 5,700
-----------
6,832,825
-----------
<CAPTION>
FINANCIAL SERVICES (1.1%)
<S> <C> <C>
A G Edwards Inc................. 1,500 33,750
Allstate Corp................... 4,700 139,238
Beneficial Corp................. 1,400 61,600
Capstone Capital Corporation
Inc............................ 1,600 28,600
Dean Witter Discover & Co....... 6,400 300,800
Federal Home Loan Mortgage
Corp........................... 5,400 371,250
Federal National Mortgage
Association.................... 10,500 990,938
First USA Inc................... 1,700 75,438
Mercury Financial Co............ 3,400 65,450
PaineWebber Group Inc........... 1,000 18,875
Southwest Securities Group
Inc............................ 1,500 12,938
Sterling Bancshares Inc......... 450 5,906
-----------
2,104,783
-----------
<CAPTION>
SHARES VALUE
---------- -----------
INSURANCE (1.5%)
<S> <C> <C>
Aetna Life & Casualty Co........ 3,000 $ 188,625
AMBAC Inc....................... 900 36,113
American General Corp........... 5,600 189,000
American International Group,
Inc............................ 10,200 1,162,800
AON Corp........................ 2,800 104,300
Capital Re Corp................. 5,000 130,000
Chubb Corp...................... 1,700 136,213
First Colony Corp............... 700 16,800
Fremont General Corp............ 1,200 28,950
Hilb, Rogal & Hamilton Co....... 600 7,500
Lincoln National Corp........... 2,300 100,625
MBIA, Inc....................... 1,300 86,450
MMI Companies, Inc.............. 4,800 94,200
Progressive Corp................ 1,300 49,888
Providian Corp.................. 2,100 76,125
Safeco Corp..................... 1,800 103,163
St. Paul Companies, Inc......... 2,100 103,425
Torchmark Corp.................. 1,600 60,400
Transamerica Corp............... 1,200 69,900
UNUM Corp....................... 1,400 65,625
USLIFE Corp..................... 500 20,125
-----------
2,830,227
-----------
<CAPTION>
REAL ESTATE (0.2%)
<S> <C> <C>
Amoy Properties Ltd. (a)........ 110,000 78,925
Cali Realty Corp................ 600 11,625
Chelsea GCA Realty, Inc......... 900 24,300
Colonial Properties Trust....... 700 16,100
Developers Diversified Realty
Corp........................... 1,000 28,750
Gables Residential Trust........ 600 12,300
Healthcare Realty Trust, Inc.... 2,800 56,700
Home Properties of New York,
Inc............................ 1,100 19,388
Liberty Property Trust.......... 300 5,888
MerryLand & Investment Company
Inc............................ 700 14,263
RFS Hotel Investments, Inc...... 1,300 19,663
ROC Communities, Inc............ 1,700 37,613
Starwood Lodging Trust (a)...... 600 14,100
Storage Trust Realty............ 900 18,225
Sun Communities Inc............. 500 12,500
Wellsford Residential Property
Trust.......................... 700 15,925
-----------
386,265
-----------
Total Finance.................... 12,154,100
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
25
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- -----------
HEALTHCARE (5.1%)
BIOTECHNOLOGY (0.1%)
<S> <C> <C>
Amylin Pharmaceuticals, Inc.
(a)............................ 700 $ 5,425
Athena Neurosciences, Inc.
(a)............................ 2,700 24,300
Human Genome Sciences, Inc.
(a)............................ 400 6,650
Inhale Therapeutic Systems
(a)............................ 1,200 9,375
Northfield Laboratories, Inc.
(a)............................ 1,200 17,700
Oncor, Inc. (a)................. 2,600 15,763
Targeted Genetics Corp. (a)..... 1,600 6,400
Univax Biologics, Inc. (a)...... 2,800 13,825
Vertex Pharmaceuticals, Inc..... 1,700 28,050
Vical, Inc. (a)................. 2,300 22,713
-----------
150,201
-----------
<CAPTION>
HEALTH SERVICES (1.3%)
<S> <C> <C>
Advocat, Inc. (a)............... 1,100 12,238
Columbia Healthcare Corp........ 33,700 1,457,525
Community Health System, Inc.
(a)............................ 600 20,325
Health Care & Retirement Corp.
(a)............................ 2,200 64,350
Health Management Associates,
Inc. Class A (a)............... 2,700 78,975
Humana Inc. (a)................. 11,100 195,638
Manor Care Inc.................. 3,700 107,763
Mariner Health Group, Inc.
(a)............................ 5,100 56,738
OccuSystems, Inc. (a)........... 200 3,363
Phycor, Inc. (a)................ 700 24,588
Summit Care Corp. (a)........... 2,000 36,750
U.S. Healthcare Inc............. 11,000 338,250
Vivra, Inc. (a)................. 1,500 40,688
-----------
2,437,191
-----------
<CAPTION>
HOSPITAL SUPPLIES (0.7%)
<S> <C> <C>
Bard (CR) Inc................... 3,200 96,000
Bausch & Lomb Inc............... 4,100 170,150
Baxter International Inc........ 21,100 767,513
Bioject Medical Technologies,
Inc............................ 600 863
Corvita Corp. (a)............... 1,300 6,500
Fresenius USA, Inc. (a)......... 5,700 74,813
Metra Biosystems Inc............ 900 9,000
Stryker Corp.................... 2,900 110,925
Sunrise Medical, Inc. (a)....... 600 18,675
Vital Signs, Inc................ 3,700 63,363
-----------
1,317,802
-----------
<CAPTION>
PHARMACEUTICALS (3.0%)
<S> <C> <C>
Abbott Laboratories............. 3,400 137,700
Alza Corp. Class A (a).......... 4,700 109,863
<CAPTION>
SHARES VALUE
---------- -----------
PHARMACEUTICALS (3.0%) (CONTINUED)
<S> <C> <C>
American Home Products Corp..... 17,600 $ 1,361,800
Chiron Corp. (a)................ 2,000 129,500
Eli Lilly & Co.................. 16,600 1,303,100
Forest Laboratories, Inc........ 2,600 115,375
Genetic Therapy Inc. (a)........ 500 7,313
ICU Medical Inc................. 300 4,219
Idexx Laboratories Inc.......... 2,200 57,613
Instent Inc..................... 100 1,450
Johnson & Johnson............... 400 27,050
Merck & Co., Inc................ 14,300 700,700
Pfizer, Inc..................... 9,000 831,375
SangStat Medical Corporation
(a)............................ 1,900 10,094
Schering Plough Corp............ 3,800 167,675
Warner Lambert Co............... 7,600 656,450
-----------
5,621,277
-----------
Total Healthcare................. 9,526,471
-----------
<CAPTION>
INDUSTRIAL PRODUCTS & SERVICES (6.1%)
CAPITAL GOODS (0.3%)
<S> <C> <C>
Charter Power Systems Inc....... 1,000 24,000
Dover Corp...................... 1,700 123,675
Gardner Denver Machinery, Inc.
(a)............................ 1,100 19,250
Ingersoll-Rand Co............... 3,000 114,750
Kaydon Corp..................... 2,300 68,425
Measurex Corp................... 100 3,038
Trinova Corp.................... 400 14,000
Tyco International Ltd.......... 3,800 205,200
Wheelabrator Technologies
Inc............................ 5,100 78,413
-----------
650,751
-----------
<CAPTION>
COMMERCIAL SERVICES (1.0%)
<S> <C> <C>
Advo, Inc....................... 1,300 24,538
Applied Power Inc. Class A...... 1,800 51,975
Banta Corp...................... 1,200 40,350
Boca Research Inc............... 300 8,119
Consolidated Graphics, Inc.
(a)............................ 2,000 28,375
Dames & Moore Inc............... 2,400 31,200
DeVRYInc. (a)................... 1,400 28,263
R.R. Donnelley & Sons Co........ 8,600 309,600
Equity Corporation International
(a)............................ 200 4,000
First Data Corp................. 4,200 238,875
General Motors Corp............. 17,400 756,900
Hooper Holmes, Inc.............. 1,300 10,969
Leasing Solutions, Inc. (a)..... 300 3,450
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
26
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- -----------
COMMERCIAL SERVICES (1.0%) (CONTINUED)
<S> <C> <C>
Payco American Corp. (a)........ 2,700 $ 21,938
Perseptive Biosystems Inc.
(a)............................ 5,600 60,550
Pinkerton's, Inc. (a)........... 2,600 47,450
Robert Half International, Inc.
(a)............................ 600 15,375
Safety 1st, Inc. (a)............ 1,100 21,863
Service Corp. International..... 4,500 142,313
SPS Transaction Services, Inc.
(a)............................ 400 13,850
Stewart Enterprises Inc......... 500 16,813
-----------
1,876,766
-----------
<CAPTION>
DIVERSIFIED MANUFACTURING (3.7%)
<S> <C> <C>
Allied Signal, Inc.............. 17,200 765,400
Apogee Enterprises, Inc......... 1,600 28,200
Coltec Industries Inc. (a)...... 3,800 65,550
Cooper Industries, Inc.......... 5,400 213,300
General Dynamics Corp........... 2,600 115,375
General Electric Co............. 57,800 3,258,475
Goodyear Tire & Rubber Co....... 2,700 111,375
Greenfield Industries, Inc...... 600 17,250
ITT Corp........................ 7,800 916,500
Johnson Controls Inc............ 2,300 129,950
Libbey, Inc..................... 2,100 43,575
Lockheed Corp................... 6,400 404,000
Loral Corp...................... 3,000 155,250
Premier Industrial Corp......... 1,500 35,438
Regal Beloit Corp............... 2,100 32,550
Sundstrand Corp................. 700 41,825
Tenneco Inc..................... 10,000 460,000
U.S. Industries, Inc. (a)....... 140 1,908
Whirlpool Corp.................. 2,000 110,000
Worldtex, Inc. (a).............. 1,400 8,225
-----------
6,914,146
-----------
<CAPTION>
ELECTRICAL EQUIPMENT (0.7%)
<S> <C> <C>
Avnet Inc....................... 500 24,188
Black & Decker Corp............. 5,900 182,163
Cellpro Inc. (a)................ 5,400 72,225
Emerson Electric Co............. 4,100 293,150
Encore Wire Corp. (a)........... 1,300 14,625
Exide Corp...................... 1,400 60,200
Grainger (W.W.) Inc............. 1,900 111,625
Helix Technology Corp........... 500 21,563
Hubbell Inc..................... 1,100 62,150
Imax Corp....................... 1,400 15,838
Kuhlman Corp.................... 500 5,625
Magnetek Inc. (a)............... 1,100 14,988
<CAPTION>
SHARES VALUE
---------- -----------
ELECTRICAL EQUIPMENT (0.7%) (CONTINUED)
<S> <C> <C>
National Service Industries
Inc............................ 2,700 $ 77,963
Nu Kote Holding Inc............. 500 15,750
Raytheon Co..................... 2,700 209,588
Thomas & Betts Corp............. 600 41,025
-----------
1,222,666
-----------
<CAPTION>
MACHINERY (0.5%)
<S> <C> <C>
Caterpillar Inc................. 8,300 533,275
Deere & Co...................... 3,400 291,125
General Signal Corp............. 1,900 75,525
-----------
899,925
-----------
<CAPTION>
POLLUTION CONTROL (0.0%)*
<S> <C> <C>
Harding Associates, Inc. (a).... 800 4,850
Mid-American Waste Systems,
Inc............................ 4,600 22,425
Sevenson Environmental Services,
Inc............................ 1,000 18,625
Tetra Technologies, Inc. (a).... 2,600 31,850
WMX Technologies, Inc........... 11,000 9,281
-----------
87,031
-----------
Total Industrial Products &
Services....................... 11,469,122
-----------
<CAPTION>
TECHNOLOGY (7.6%)
AEROSPACE (0.9%)
<S> <C> <C>
Boeing Co....................... 16,300 1,020,788
McDonnell Douglas Corp.......... 3,400 260,950
Northrop Grumman Corp........... 2,100 109,463
Orbital Sciences Corp. (a)...... 2,300 42,550
Rockwell International
Corporation.................... 200 9,150
Rohr Industries, Inc. (a)....... 3,900 56,063
Sun Microsystems, Inc. (a)...... 2,800 135,975
Watkins-Johnson Co.............. 300 13,350
-----------
1,648,289
-----------
<CAPTION>
COMPUTER-PERIPHERALS (0.0%)*
<S> <C> <C>
Plaintree Systems, Inc.......... 600 6,375
Planar Systems, Inc. (a)........ 600 13,350
-----------
19,725
-----------
<CAPTION>
COMPUTER-SOFTWARE (0.8%)
<S> <C> <C>
Autodesk, Inc................... 1,000 42,750
Avid Technology, Inc............ 700 26,163
Cheyenne Software, Inc. (a)..... 700 12,950
Davidson & Associates Inc.
(a)............................ 300 11,963
Dendrite International Inc...... 100 1,450
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
27
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- -----------
COMPUTER-SOFTWARE (0.8%) (CONTINUED)
<S> <C> <C>
Dialogic Corp................... 1,300 $ 23,238
Inso Corp....................... 400 23,675
Intersolv....................... 800 18,700
Intuit, Inc..................... 800 60,850
McAfee Associates, Inc. (a)..... 600 18,263
Mentor Graphics Corp. (a)....... 1,500 26,063
Microtec Research, Inc. (a)..... 2,400 18,900
Microchip Technology Inc........ 500 18,250
Microsoft Corp. (a)............. 3,200 289,400
Oracle Systems Corp. (a)........ 17,000 655,563
Phoenix Technology Ltd. (a)..... 1,900 20,425
Pinnacle Systems Inc. (a)....... 800 18,200
Project Software & Development,
Inc. (a)....................... 1,000 29,625
Quarterdeck Corp. (a)........... 1,900 22,325
Rational Software Corp.......... 1,100 14,988
Security Dynamics Technologies,
Inc. (a)....................... 600 26,775
Softkey International Inc....... 100 3,175
Sybase Inc. (a)................. 1,800 52,313
-----------
1,436,004
-----------
<CAPTION>
ELECTRONICS (0.2%)
<S> <C> <C>
AMP Inc......................... 7,000 295,750
Dynamics Corp. of America....... 200 4,575
-----------
300,325
-----------
<CAPTION>
INFORMATION PROCESSING (3.2%)
<S> <C> <C>
Apple Computer Corp............. 4,000 186,000
Bush Industries Inc............. 600 6,750
Compaq Computer Corp. (a)....... 9,500 431,063
Dell Computer Corp. (a)......... 1,600 96,300
Digital Equipment Corp. (a)..... 5,800 236,350
Gateway 2000, Inc. (a).......... 700 15,969
General Motors Corp. Class E.... 20,800 821,600
Hewlett-Packard Co.............. 20,200 1,504,900
International Business
Machines....................... 23,000 2,208,000
Maxis Inc....................... 600 15,900
Network Computing Devices, Inc.
(a)............................ 1,100 9,556
Network Express Inc............. 500 6,844
Network General Corp............ 1,500 40,969
Network Peripherals Inc......... 1,300 28,600
Nexgen Inc...................... 100 2,375
Novell, Inc. (a)................ 13,300 265,169
Oak Technology (a).............. 300 10,988
<CAPTION>
SHARES VALUE
---------- -----------
INFORMATION PROCESSING (3.2%) (CONTINUED)
<S> <C> <C>
Quantum Corp. (a)............... 600 $ 13,800
Silicon Graphics Inc. (a)....... 5,100 203,363
Spyglass Inc. (a)............... 100 2,875
Uunet Technologies Inc. (a)..... 100 2,750
Xcellenet Inc................... 1,300 29,738
-----------
6,139,859
-----------
<CAPTION>
SEMICONDUCTORS (1.2%)
<S> <C> <C>
Advanced Micro Devices, Inc.
(a)............................ 4,100 149,138
Advanced Technology Materials,
Inc............................ 2,500 25,781
Asyst Technologies, Inc......... 600 22,275
Brooktree Corp. (a)............. 2,100 35,963
Credence Systems Corp. (a)...... 1,050 31,500
Intel Corp...................... 3,000 189,938
Linear Technology Corp.......... 1,400 92,050
Micrel, Inc. (a)................ 2,000 45,250
Micrion Corp. (a)............... 1,000 13,250
Motorola Inc.................... 22,800 1,530,450
S3, Inc. (a).................... 400 14,375
SDL, Inc. (a)................... 900 26,775
Xilinx, Inc. (a)................ 600 56,325
-----------
2,233,070
-----------
<CAPTION>
TELECOMMUNICATIONS-EQUIPMENT (1.3%)
<S> <C> <C>
Applied Digital Access, Inc.
(a)............................ 3,000 38,250
Arch Communications Group (a)... 500 11,031
Bay Networks Inc. (a)........... 3,600 148,500
Comcast UK Cable Partners
Ltd............................ 600 9,750
Comdial Corp. (a)............... 2,800 11,638
Cox Communications, Inc. (a).... 2,900 56,188
Echostar Communications Corp.
(a)............................ 200 3,000
Harris Corp..................... 1,500 77,438
Heartland Wireless Communication
Inc............................ 300 7,050
Mobilemedia Corp. (a)........... 900 18,563
Northern Telecommunication
Ltd............................ 7,700 281,050
Paging Network Inc. (a)......... 2,600 88,400
SBC Communications, Inc......... 18,000 857,250
Tele-Communications, Inc. Class
A (a).......................... 34,600 810,938
Telewest Communications Plc
(a)............................ 900 23,288
Videotron Holdings Plc.......... 1,000 14,125
-----------
2,456,459
-----------
Total Technology............................. 14,233,731
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
28
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- -----------
TRANSPORTATION (0.9%)
AIRLINES (0.1%)
<S> <C> <C>
AMR Corp. (a)................... 2,000 $ 149,250
Mesa Airlines, Inc. (a)......... 7,400 67,988
Southwest Airlines Co........... 3,200 76,400
-----------
293,638
-----------
<CAPTION>
RAILROADS (0.7%)
<S> <C> <C>
Burlington Northern Inc......... 2,900 183,788
Conrail Inc..................... 2,100 116,813
CSX Corp........................ 3,700 277,963
Norfolk Southern Corp........... 3,700 249,288
Union Pacific Corp.............. 8,000 443,000
-----------
1,270,852
-----------
<CAPTION>
TRUCK & FREIGHT CARRIERS (0.1%)
<S> <C> <C>
American Freightways Corp....... 600 12,225
Federal Express Corp. (a)....... 1,300 78,975
USA Truck, Inc. (a)............. 400 5,950
Werner Enterprises, Inc......... 1,400 27,650
-----------
124,800
-----------
Total Transportation......................... 1,689,290
-----------
<CAPTION>
UTILITIES (5.6%)
ELECTRIC (1.5%)
<S> <C> <C>
Allegheny Power System Inc...... 3,000 70,500
Baltimore Gas & Electric Co..... 2,700 67,500
Central & South West Corp....... 5,400 141,750
Central Hudson Gas & Electric
Corp........................... 3,000 81,000
Central Louisiana Electric...... 1,000 23,500
Cinergy Corp.................... 3,800 99,750
CMS Energy Corp................. 1,300 32,013
Consolidated Edison Co.......... 2,300 67,850
Detroit Edison Co............... 3,600 106,200
Dominion Resources Inc.......... 4,300 156,950
Entergy Corp.................... 6,400 154,400
FPL Group Inc................... 5,500 212,438
General Public Utilities
Corp........................... 2,400 71,400
Houston Industries Inc.......... 3,300 139,013
Illinova Corp................... 900 22,838
Maine Public Service Co......... 100 2,113
New England Electric System..... 800 27,600
Niagara Mohawk Power Corp....... 1,900 28,025
Pacific Gas & Electric Co....... 10,800 313,200
<CAPTION>
SHARES VALUE
---------- -----------
ELECTRIC (1.5%) (CONTINUED)
<S> <C> <C>
Pinnacle West Capital Corp...... 1,800 $ 44,100
Potomac Electric Power Co....... 3,500 75,250
Scecorp......................... 11,200 191,800
Southern Co..................... 17,100 382,613
Texas Utilities Co.............. 5,600 192,500
Unicom Corp..................... 4,400 117,150
Western Resources Inc........... 600 18,525
-----------
2,839,978
-----------
<CAPTION>
TELEPHONE (4.1%)
<S> <C> <C>
Ameritech Corp.................. 16,300 717,200
AT&T............................ 49,900 2,650,938
Bell Atlantic Corp.............. 12,400 694,400
Bellsouth Corp.................. 14,700 933,450
GTE Corp........................ 28,700 979,388
MCI Communications Corp......... 18,200 399,263
Nynex Cablecomms Group Plc (a).. 1,000 20,313
Pacific Telesis Group........... 12,500 334,375
Sprint Corp..................... 9,300 312,713
U.S. West, Inc.................. 14,000 582,750
-----------
7,624,790
-----------
<CAPTION>
WATER (0.0%)*
<S> <C> <C>
Aquarion Co..................... 400 9,200
E'Town Corp..................... 700 18,988
SJW Corp........................ 100 3,588
Southern California Water Co.... 1,400 27,125
-----------
58,901
-----------
Total Utilities.............................. 10,523,669
-----------
TOTAL UNITED STATES COMMON STOCKS (COST
$91,380,206)............................... 101,481,614
-----------
TOTAL COMMON STOCKS (COST $108,756,595)......
118,664,579
-----------
<CAPTION>
PREFERRED STOCKS (0.1%)
FRANCE (0.0%)*
<S> <C> <C>
Legrand (Electrical
Equipment)..................... 450 44,524
-----------
<CAPTION>
GERMANY (0.0%)*
<S> <C> <C>
Rheinisch Westfalisches Elekt AG
(Electric Utilities)........... 150 41,261
-----------
TOTAL PREFERRED STOCKS (COST $70,001)........
85,785
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
29
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- -----------
RIGHTS (0.0%)*
GERMANY (0.0%)*
<S> <C> <C>
Allianz Holding
(Miscellaneous)................ 20 $ 1,490
-----------
TOTAL RIGHTS (COST $0)....................... 1,490
-----------
<CAPTION>
WARRANTS
----------
WARRANTS (0.0%)*
SWITZERLAND (0.0%)*
<S> <C> <C>
Holderbank Financiere Glaris
(Financial Services)........... 200 269
-----------
TOTAL WARRANTS (COST $0)..................... 269
-----------
TOTAL EQUITY SECURITIES (COST
$108,826,596).............................. 118,752,123
-----------
<CAPTION>
PRINCIPAL
AMOUNT (IN
USD)
----------
FIXED INCOME SECURITIES (33.6%)
CONVERTIBLE BONDS (0.4%)
<S> <C> <C>
Telekom Malaysia 4.000% due
10/03/04....................... 115,000 111,550
WMX Technologies Inc 2.000% due
01/24/05....................... 23,000 652,625
-----------
TOTAL CONVERTIBLE BONDS (COST $111,503)......
764,175
-----------
<CAPTION>
COLLATERALIZED OBLIGATIONS (2.1%)
FINANCE (2.1%)
<S> <C> <C>
General Electric Capital
Mortgages Services Inc. 6.500%
due 08/25/09................... 169,173 163,277
Green Tree Financial Corp.
7.200% due 04/15/19............ 3,000,000 3,061,650
Prudential Home Mortgage
Securities Co. 6.500% due
11/25/99....................... 365,384 363,557
Resolution Trust Corp. Mtg Pass
Thru 7.225% due 05/25/24....... 93,684 94,284
-----------
TOTAL COLLATERALIZED OBLIGATIONS (COST
$3,616,393)................................ 3,682,768
-----------
<CAPTION>
CORPORATE OBLIGATIONS (13.4%)
CONSUMER GOODS & SERVICES (0.0%)*
BEVERAGES, FOOD, SOAP & TOBACCO (0.0%)*
<S> <C> <C>
Boston Chicken Inc. 4.500%
debenture due 2/01/04.......... 16,000 14,660
-----------
Total Consumer Goods & Services.............. 14,660
-----------
<CAPTION>
PRINCIPAL
AMOUNT (IN
USD) VALUE
---------- -----------
ENERGY (0.3%)
OIL SERVICES (0.2%)
<S> <C> <C>
BP America Inc. 9.875% due
03/15/04....................... 250,000 $ 299,533
-----------
<CAPTION>
OIL-PRODUCTION (0.1%)
<S> <C> <C>
Du Pont (E.I.) de Nemours & Co.,
Inc. 8.650% due 12/01/97....... 25,000 26,290
Nova Gas Transmission Ltd.
8.500% due 12/15/12............ 200,000 218,972
-----------
245,262
-----------
Total Energy................................. 544,795
-----------
<CAPTION>
FINANCE (6.4%)
FINANCIAL SERVICES (6.4%)
<S> <C> <C>
Abbey National Treasury Service
6.500% due 05/12/03............ 300,000 293,988
Bank of America inc. 9.500% due
04/01/01....................... 1,025,000 $ 1,158,639
Chemical Banking Corp. 10.125%
due 11/01/00................... 800,000 920,128
Chrysler Financial Corp. 10.34%
due 05/15/08................... 550,000 568,287
Chrysler Financial Corp. 5.625%
due 01/15/99................... 500,000 484,420
Chrysler Financial Corp. 8.460%
due 01/19/00................... 1,000,000 1,065,330
Chrysler Financial Corp. 8.080%
due 01/31/99................... 500,000 512,840
Comeric Bank Detroit, Michigan
6.750% due 05/12/98............ 2,000,000 2,023,960
First Chicago Corp. 6.875% due
06/15/03....................... 50,000 49,736
Ford Motor Credit 7.500% due
11/19/99....................... 2,000,000 2,070,160
Ford Motor Credit 6.600% due
07/14/97....................... 500,000 504,160
General Motors Acceptance Corp.
7.450% due 06/09/97............ 500,000 510,840
General Motors Acceptance Corp.
6.700% due 04/21/97............ 500,000 504,340
General Motors Acceptance Corp.
6.250% due 01/06/00............ 1,500,000 1,470,960
-----------
Total Finance................................ 12,137,788
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
30
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN
USD) VALUE
---------- -----------
INDUSTRIAL PRODUCTS & SERVICES (1.2%)
DIVERSIFIED MANUFACTURING (1.2%)
<S> <C> <C>
Boeing Co. 7.250% due
06/15/25....................... 1,170,000 $ 1,151,514
Reed Publishing 9.000% due
07/10/96....................... 30,000 30,863
Texas Eastern Corp. 8.500% due
02/10/97....................... 1,000,000 1,024,100
-----------
Total Industrial Products & Services......... 2,206,477
-----------
<CAPTION>
UTILITIES (2.7%)
<S> <C> <C>
Cooperative Util Tr. Big Rivers
Electric Co. 9.500% due
02/15/17....................... 2,000,000 2,206,100
Cleveland Electric Illumination
Co. 7.375% due 06/03/01........ 2,000,000 1,860,640
Commonwealth Edison Co. 6.000%
due 03/15/98................... 1,090,000 1,077,661
-----------
Total Utilities.............................. 5,144,401
-----------
<CAPTION>
TELEPHONE (0.6%)
<S> <C> <C>
GTE Corp........................ 1,000,000 1,055,300
-----------
<CAPTION>
YANKEE BONDS (2.2%)
<S> <C> <C>
Hydro Quebec 8.050% due
07/07/24....................... 2,500,000 2,716,900
Ontario, Province of Canada
7.375% due 01/27/03............ 200,000 206,912
Quebec, Province of Canada
9.125% 03/01/00................ 1,000,000 1,098,770
-----------
Total Yankee Bonds........................... 4,022,582
-----------
TOTAL CORPORATE OBLIGATIONS (COST
$24,250,732)............................... 25,126,003
-----------
<CAPTION>
U.S. GOVERNMENT AGENCY OBLIGATIONS (5.7%)
<S> <C> <C>
Federal Home Loan 200052 8.500%
due 09/01/01................... 32,509 33,332
Federal Home Loan Mortgage Corp.
Gold 30yr 7.500% due
01/01/1999..................... 2,800,000 2,811,375
FNMA 30 Yr Pass Thru TBA 7.500%
due 01/01/99................... 3,725,000 3,740,133
GNMA 348471 7.000% due
05/15/23....................... 452,797 446,417
GNMA 353265 7.000% due
05/15/23....................... 105,498 104,001
GNMA 333096 7.000% due
06/15/23....................... 430,473 424,537
<CAPTION>
PRINCIPAL
AMOUNT (IN
USD) VALUE
---------- -----------
U.S. GOVERNMENT AGENCY OBLIGATIONS (5.7%) (CONTINUED)
<S> <C> <C>
GNMA 337448 7.000% due
06/15/23....................... 98,087 $ 96,670
GNMA 342722 7.000% due
06/15/23....................... 455,191 448,500
GNMA 354303 7.000% due
06/15/23....................... 449,667 443,201
GNMA 333864 7.000% due
07/15/23....................... 450,724 444,067
GNMA 344934 7.000% due
07/15/23....................... 109,134 107,598
GNMA 351588 7.000% due
07/15/23....................... 449,507 443,178
GNMA 353972 7.000% due
07/15/23....................... 429,342 423,301
GNMA 359017 7.000% due
07/15/23....................... 445,058 438,543
GNMA 364318 7.000% due
08/15/23....................... 137,322 135,338
GNMA 376371 7.000% due
01/15/24....................... 94,734 93,359
-----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(COST $10,385,531)......................... 10,633,550
-----------
<CAPTION>
U.S. GOVERNMENT TREASURY OBLIGATIONS (12.1%)
<S> <C> <C>
U.S. Treasury Bonds 10.375% due
11/15/12....................... 2,970,000 3,926,429
U.S. Treasury Bonds 8.125% due
08/15/19....................... 1,440,000 1,676,923
U.S. Treasury Notes 7.500% due
11/15/01....................... 8,330,000 8,940,589
U.S. Treasury Notes 5.500% due
07/31/97....................... 4,800,000 4,767,312
U.S. Treasury Notes 6.375% due
08/15/02....................... 600,000 607,254
U.S. Treasury Notes 7.750% due
11/30/99....................... 2,400,000 2,558,856
United States Tres Sc Strp Int
0.010% due 08/15/04............ 300,000 169,521
-----------
TOTAL U.S. GOVERNMENT TREASURY OBLIGATIONS
(COST $21,890,771)......................... 22,646,884
-----------
TOTAL FIXED INCOME SECURITIES (COST
$60,254,930)............................... 62,853,380
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
31
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN
USD) VALUE
---------- -----------
SHORT-TERM INVESTMENTS (4.4%)
REPURCHASE AGREEMENT (3.6%)
<S> <C> <C>
Goldman Sachs Repurchase
Agreement,
6.150% dated 06/30/95, due
07/03/95, proceeds $6,683,424.
(Collateralized by U.S.
Treasury Note, 4.250%, due
11/30/95, valued at
$6,814,301).................... 6,680,000 $ 6,680,000
-----------
<CAPTION>
OTHER MUTUAL FUNDS (0.6%)
<S> <C> <C>
Seven Seas Money Market Fund.... 1,168,218 1,168,218
-----------
</TABLE>
<TABLE>
<CAPTION>
LOCAL VALUE
CURRENCY (NOTE 1A)
------------- ------------
<S> <C> <C>
CURRENCY (0.2%)
Australian Dollar........... AUD 536 $ 381
Austrian Schilling.......... ATS 9,050 929
Belgian Franc............... BEF 354,294 12,455
Danish Krone................ DKK 83,078 15,383
Deutsche Mark............... DEM 23,227 16,796
French Franc................ FRF 34,908 7,196
Hong Kong Dollar............ HKD 114,898 14,849
Italian Lira................ ITL 458,595 280
Japanese Yen................ JPY 11,786,308 139,061
Malaysian Ringgit........... MYR 124,469 51,054
Netherlands Guilder......... NLG 8,163 5,268
New Zealand Dollar.......... NZD 577 386
Norwegian Krone............. NOK 41,192 6,686
Pound Sterling.............. GBP 85,736 136,371
Singapore Dollar............ SGD 13,401 9,590
Spanish Peseta.............. ESP 8,533,493 70,452
Swedish Krona............... SEK 10 1
Swiss Franc................. CHF 1,304 1,133
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL FOREIGN CURRENCY (COST $485,711)...... 488,271
------------
TOTAL SHORT-TERM INVESTMENTS (COST
$8,333,929)............................... 8,336,489
------------
TOTAL INVESTMENTS (101.5%) (COST
$177,415,455)............................. 189,941,992
OTHER LIABILITIES IN EXCESS OF ASSETS
(-1.5%)................................... (2,865,201)
------------
NET ASSETS (100.0%)......................... $187,076,791
------------
------------
<FN>
(a) Non-income producing securities.
(b) Floating Rate Note.
Note: Based on the cost of investments of $177,469,757 for Federal Income Tax
purposes at June 30, 1995, the aggregate gross unrealized appreciation was
$14,942,964, and the aggregate gross unrealized depreciation was
$2,470,729, resulting in net unrealized appreciation of investments of
$12,472,235.
* Less than 0.1%
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
32
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY DIVERSIFICATION
PERCENT OF
PORTFOLIO
------------
U.S. Government Treasury Obligations............................. 11.9 %
<S> <C>
Financial Services............................................... 9.7 %
Beverages, Food, Soap & Tobacco.................................. 6.0 %
U.S. Government Agency Obligations............................... 5.6 %
Drugs & Healthcare............................................... 5.6 %
Banking.......................................................... 5.1 %
Diversified Manufacturing........................................ 4.8 %
Electric Utilities............................................... 4.6 %
Telephone........................................................ 4.6 %
Oil-Production................................................... 4.5 %
Merchandising.................................................... 3.8 %
Information Processing........................................... 3.2 %
Entertainment, Leisure & Media................................... 2.3 %
Chemicals........................................................ 2.2 %
Yankee Bonds..................................................... 2.1 %
Automotive & Automotive Supplies................................. 1.8 %
Insurance........................................................ 1.8 %
Metals & Mining.................................................. 1.7 %
Telecommunications-Equipment..................................... 1.5 %
Semiconductors................................................... 1.2 %
Paper & Forest Products.......................................... 1.1 %
Electrical Equipment............................................. 1.1 %
Commercial Services.............................................. 1.0 %
Oil-Services..................................................... 1.0 %
Aerospace........................................................ 0.9 %
Railroads........................................................ 0.9 %
Machinery........................................................ 0.8 %
Computer Software................................................ 0.8 %
Natural Gas...................................................... 0.6 %
Conglomerates.................................................... 0.4 %
Home Construction................................................ 0.4 %
Capital Goods.................................................... 0.4 %
Electronics...................................................... 0.4 %
Restaurants & Hotels............................................. 0.3 %
Real Estate...................................................... 0.3 %
Construction Materials........................................... 0.3 %
Miscellaneous.................................................... 0.9 %
Short Term Investments........................................... 4.4 %
-----
100.0 %
-----
-----
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
33
<PAGE>
THE DIVERSIFIED PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $177,415,455) $189,941,992
Cash 3,885
Receivable for Investments Sold 5,890,209
Dividends and Interest Receivable 1,233,288
Receivable for Expense Reimbursements 249,406
Foreign Tax Reclaim Receivable 30,900
Deferred Organization Expenses 3,020
Other Assets 5,794
------------
Total Assets 197,358,494
------------
LIABILITIES
Payable for Investments Purchased 9,885,068
Custody Fee Payable 238,573
Advisory Fee Payable 113,247
Unrealized Depreciation on Open Forward Foreign Currency
Contracts 5,925
Fund Services Fee Payable 1,057
Administration Fee Payable 1,000
Accrued Expenses 36,833
------------
Total Liabilities 10,281,703
------------
NET ASSETS
Applicable to Investors' Beneficial Interests $187,076,791
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
34
<PAGE>
THE DIVERSIFIED PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED JUNE 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest (Net of Foreign Withholding Tax of $599) $ 3,373,957
Dividends (Net of Foreign Withholding Tax of $48,574) 1,881,773
-----------
Investment Income $ 5,255,730
EXPENSES
Advisory Fee 663,000
Custodian Fees and Expenses 373,252
Financial and Fund Accounting Services Fee 63,153
Professional Fees 41,675
Fund Services Fee 11,702
Administration Fee 7,770
Trustees' Fees and Expenses 3,631
Amortization of Organization Expense 1,000
Miscellaneous 4,419
-----------
Total Expenses 1,169,602
Less: Reimbursement of Expenses (385,400)
-----------
Net Expenses 784,202
-----------
NET INVESTMENT INCOME 4,471,528
NET REALIZED GAIN ON
Investment Transactions (including $72,190 net realized gains
from futures contracts) 3,568,797
Foreign Currency Transactions (358,335)
-----------
Net Realized Gain 3,210,462
NET CHANGE IN UNREALIZED APPRECIATION OF
Investments (including $3,884 net unrealized gains from
futures contracts) 14,774,260
Foreign Currency Contracts and Translations 82,764
-----------
Net Change in Unrealized Appreciation 14,857,024
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $22,539,014
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
35
<PAGE>
THE DIVERSIFIED PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE FISCAL JULY 8, 1993
YEAR (COMMENCEMENT OF
ENDED JUNE 30, OPERATIONS) TO
1995 JUNE 30, 1994
--------------- ------------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 4,471,528 $ 1,031,220
Net Realized Gain on Investments and Foreign Currency
Transactions 3,210,462 371,852
Net Change in Unrealized Appreciation of Investments and Foreign
Currency Translations 14,857,024 (2,328,968)
--------------- ------------------
Net Increase (Decrease) in Net Assets Resulting from Operations 22,539,014 (925,896)
--------------- ------------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST
Contributions 114,559,561 76,730,148
Withdrawals (15,109,920) (10,816,216)
--------------- ------------------
Net Increase from Investors' Transactions 99,449,641 65,913,932
--------------- ------------------
Total Increase in Net Assets 121,988,655 64,988,036
NET ASSETS
Beginning of Period 65,088,136 100,100
--------------- ------------------
End of Period $ 187,076,791 $ 65,088,136
--------------- ------------------
--------------- ------------------
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 8, 1993
(COMMENCEMENT
FOR THE FISCAL OF
YEAR ENDED OPERATIONS) TO
JUNE 30, 1995 JUNE 30, 1994
-------------- ---------------
<S> <C> <C>
Ratios to Average Net Assets
Expenses 0.65% 0.70%(a)
Net Investment Income 3.71% 2.88%(a)
Decrease reflected in Expense Ratio due to
Expense Reimbursement by Morgan 0.32% 0.48%(a)
Portfolio Turnover 136% 115%(b)
<FN>
- ------------------------
(a) Annualized
(b) Not Annualized
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
36
<PAGE>
THE DIVERSIFIED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Diversified Portfolio (the "Portfolio") is registered under the Investment
Company Act of 1940, as amended, (the "Act") as a no-load, diversified, open-end
management investment company which was organized as a trust under the laws of
the State of New York. The Portfolio 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:
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. 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. Portfolio securities with a remaining
maturity of less than 60 days are valued by the amortized cost method.
Trading in securities on most foreign exchanges and over-the-counter
markets is normally completed before the close of the domestic market and
may also take place on days on which the domestic market is closed. If
events materially affecting the value of foreign securities occur between
the time when the exchange on which they are traded closes and the time
when the Fund'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 expense are translated at the exchange rate prevailing on the
respective dates of such transactions. Translation 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.
37
<PAGE>
THE DIVERSIFIED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
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. Risks associated with such contracts include the movement
in the value of the foreign currency relative to the U.S. dollar (USD) 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
foreign currency translations. At June 30, 1995, the Portfolio had open
forward foreign currency contracts as follows:
SUMMARY OF OPEN CONTRACTS
<TABLE>
<CAPTION>
U.S.
DOLLAR NET
VALUE AT UNREALIZED
FOREIGN CURRENCY SALE CONTRACTS PROCEEDS 6/30/95 DEPRECIATION
- -------------------------------------------------- ---------- ---------- ------------
<S> <C> <C> <C>
Japanese Yen, settlement date, 7/11/95 $2,502,733 $2,508,658 $ 5,925
</TABLE>
d)Futures -- A futures contract is an agreement to purchase/sell a specified
quantity of an underlying instrument at a specified future date or to
make/receive a cash payment based on the value of a securities index. The
price at which the purchase and sale will take place is fixed when the
Portfolio enters in the contract. Upon entering into such a contract the
Portfolio is required to pledge to the broker an amount of cash and/or
securities equal to the minimum "initial margin" requirements of the
exchange. Pursuant to the contract, the Portfolio agrees to receive from
or pay to the broker an amount of cash equal to the daily fluctuation in
the value of the contract. Such receipts or payments are known as
"variation margin" and are recorded by the Portfolio as unrealized gains
or losses. When the contract is closed, the Portfolio records a realized
gain or loss equal to the difference between the value of the contract at
the time it was opened and the value at the time when it was closed. The
Portfolio invests in futures contracts solely for the purpose of hedging
its existing portfolio securities, or securities the Portfolio intends to
purchase, against fluctuations in value caused by changed in prevailing
market interest rates. The use of futures transactions involves the risk
of imperfect correlation in movements in the price of futures contracts,
interest rates and the underlying hedged assets, and the possible
inability of counterparties to meet the terms of their contracts. Futures
transactions in US Treasury securities during the fiscal year ended June
30, 1995 are summarized as follows:
<TABLE>
<CAPTION>
PRINCIPAL
NUMBER OF AMOUNT OF
CONTRACTS CONTRACTS
---------- ------------
<S> <C> <C>
Contracts opened 32 $ 3,691,098
Contracts closed (19) (2,175,094)
--
------------
Open at end of the fiscal year 13 $ 1,516,004
--
--
------------
------------
</TABLE>
38
<PAGE>
THE DIVERSIFIED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
SUMMARY OF OPEN CONTRACTS AT JUNE 30, 1995
<TABLE>
<CAPTION>
NET
CONTRACTS UNREALIZED
LONG APPRECIATION
-------- ------------
<S> <C> <C>
Two-Year US Treasury Notes, expiring September 1995 1 $ 103
Five-Year US Treasury Notes, expiring September 1995 5 1,681
Ten-Year US Treasury Notes, expiring September 1995 4 1,095
Thirty-Year US Treasury Bonds, expiring September 1995 3 1,005
--
------
Totals 13 $ 3,884
--
--
------
------
</TABLE>
e)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.
f)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 discount, if any, is recorded on
an accrual basis. For financial and tax reporting purposes, realized gains
and losses are determined on the basis of specific lot identification.
g)The Portfolio will be treated as a partnership for federal income tax
purposes. As such, each investor in the Portfolio will be taxable on its
share of the Portfolio's ordinary income and capital gains. It is intended
that the Portfolio's assets will be managed in such a way that an investor
in the Portfolio will be able to satisfy the requirements of Subchapter M
of the Internal Revenue Code. 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 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 fiscal year ended
June 30, 1995, such fees amounted to $663,000.
b)The Portfolio has retained Signature Broker-Dealer Services, Inc.
("Signature") to serve as Administrator and exclusive placement agent.
Signature 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 Signature. The agreement provides for
a fee to be paid to Signature at an annual rate determined by the
following schedule: 0.01% of the first $1 billion of the aggregate average
daily net assets of the Portfolio and the other portfolios subject to the
Administrative Services Agreement, 0.008% of
39
<PAGE>
THE DIVERSIFIED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1995
- --------------------------------------------------------------------------------
the next $2 billion of such net assets, 0.006% of the next $2 billion of
such net assets, and 0.004% of such net assets in excess of $5 billion.
The daily equivalent of the fee rate is applied to the daily net assets of
the Portfolio. For the fiscal year ended June 30, 1995, such expenses
amounted to $7,770.
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 limit 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 limit of 0.10% of the Portfolio's
average daily net assets up to $200 million, 0.05% on 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
limit, Morgan's fee would be limited to the difference between such
expenses and the fee calculated under the Services Agreement. For the
fiscal year ended June 30, 1995, Morgan's fee amounted to $63,153.
Effective September 1, 1995 the Services Agreement will be terminated. The
oversight services that were provided under the Services Agreement will
continue to be provided by Morgan without any fee to the Portfolio until
such time as a new agreement is put into place. In addition to the
expenses that Morgan assumes under the Service Agreement, 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 through December 31, 1995. For
the fiscal year ended June 30, 1995, Morgan agreed to reimburse the
Portfolio $385,400.
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 cost in performing its services
amounted to $11,702 for the fiscal year ended June 30, 1995.
e)An aggregate annual fee of $65,000 is paid to each Trustee for serving as
a Trustee of the Pierpont Funds, The JPM Institutional Funds, their
corresponding Portfolios, and The Series Portfolio. The Trustees' Fee and
Expenses shown in the financial statements represents the Portfolio's
allocated portion of the total fees and expenses. Prior to April 1, 1995,
the aggregate annual Trustee Fee was $55,000. The Trustee who serves as
Chairman and Chief Executive Officer of these Funds and Portfolios also
serves as Chairman of Group and received compensation and employee
benefits from Group in his role as Group's Chairman. The allocated portion
of such compensation and benefits included in the Fund Services Fee shown
in the financial statements was $1,400.
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the period were
as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
--------------- ------------
<S> <C>
$ 260,873,553 $158,656,909
</TABLE>
40
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Investors of
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, 1995, the results of its operations for the year then ended, and the
changes in its net assets and its supplementary data for the year then ended and
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 audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at June
30, 1995 by correspondence with the custodian and brokers and the application of
alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
New York, New York
August 28, 1995
41
<PAGE>
THE PIERPONT MONEY MARKET FUND
THE PIERPONT TAX EXEMPT MONEY MARKET FUND THE
THE PIERPONT TREASURY MONEY MARKET FUND PIERPONT
THE PIERPONT SHORT TERM BOND FUND DIVERSIFIED
THE PIERPONT BOND FUND FUND
THE PIERPONT TAX EXEMPT BOND FUND
THE PIERPONT NEW YORK TOTAL RETURN BOND FUND
THE PIERPONT DIVERSIFIED FUND ANNUAL REPORT
THE PIERPONT EQUITY FUND JUNE 30, 1995
THE PIERPONT CAPITAL APPRECIATION FUND
THE PIERPONT INTERNATIONAL EQUITY FUND
THE PIERPONT EMERGING MARKETS EQUITY FUND
FOR MORE INFORMATION ON HOW THE PIERPONT FAMILY OF FUNDS CAN HELP YOU PLAN FOR
YOUR FUTURE, CALL J.P. MORGAN FUNDS SERVICES AT (800) 521-5411.
