<PAGE>
THE PIERPONT MONEY MARKET FUND The
THE PIERPONT TAX EXEMPT MONEY MARKET FUND Pierpont
THE PIERPONT TREASURY MONEY MARKET FUND Diversified
THE PIERPONT SHORT TERM BOND FUND Fund
THE PIERPONT BOND FUND
THE PIERPONT TAX EXEMPT BOND FUND
THE PIERPONT NEW YORK TOTAL RETURN BOND FUND
THE PIERPONT DIVERSIFIED FUND
THE PIERPONT EQUITY FUND
THE PIERPONT CAPITAL APPRECIATION FUND
THE PIERPONT INTERNATIONAL EQUITY FUND
THE PIERPONT EMERGING MARKETS EQUITY FUND
FOR MORE INFORMATION ON HOW THE PIERPONT FAMILY SEMI-ANNUAL REPORT
OF FUNDS CAN HELP YOU PLAN FOR YOUR FUTURE, CALL DECEMBER 31, 1994
J.P. MORGAN FUNDS SERVICES AT (800) 521-5411.
<PAGE>
LETTER TO THE SHAREHOLDERS OF THE PIERPONT DIVERSIFIED FUND
February 10, 1995
Dear Shareholder:
We are pleased to report that The Pierpont Diversified Fund solidly outperformed
its competitive average for the second half of 1994 during difficult U.S. and
international stock and bond markets. For the six months ended December 31, 1994
the Fund returned 2.65%, significantly higher than the Morningstar Balanced Fund
Average return of 1.62%. Even as interest rates rose throughout the year, the
Fund had a positive return of 0.60% for 1994, while the Morningstar Balanced
Fund Average declined -2.81%.
We believe the Fund's performance for the period illustrates that a diversified
investment approach can add value and reduce risk in a difficult market. In
uncertain times such as these, it is tempting to react to short-term market
sentiment and change your investment strategy. Morgan, however, encourages you
to maintain a long-term view and "stay the course."
At year-end, the Fund's net asset value was $9.82 per share, compared with $9.81
on June 30, 1994, after paying dividends and distributions of $0.26 per share.
ECONOMIC ENVIRONMENT
During the second half of 1994, the Federal Reserve continued to raise
short-term interest rates. As a result, long-term interest rates also rose as
the 30-year bond returned 0.41%, and five-year notes returned 0.16% during the
period. Equities also reacted to continued inflationary concerns. While the S&P
500 Index was up 4.87% for the six-month period and 1.32% for the year, these
returns masked significant volatility in certain stocks, as companies reporting
less-than-expected earnings were punished by severe selling.
As the period drew to a close, the already difficult environment caused by
rising rates was compounded by several major news events. Orange County,
California announced a loss of over $1.7 billion in its investment fund,
resulting from an incorrect forecast on the direction of interest rates. Users
of Intel's new high-powered pentium chip discovered a flaw when calculating
complex mathematical formulas, causing technology stocks to fall as speculation
over slowed demand and product recalls drove prices down. Finally, Mexico
devalued the peso but failed to anticipate the extent of investor reaction,
causing international and U.S. stocks to suffer.
- -------------------------------------------------------------------------------
TABLE OF CONTENTS FUND PERFORMANCE...................5
LETTER TO THE SHAREHOLDERS....1 SPECIAL FUND-BASED SERVICES........6
FUND FACTS AND HIGHLIGHTS.....4 FINANCIAL STATEMENTS...............8
- -------------------------------------------------------------------------------
1
<PAGE>
PORTFOLIO REVIEW
The Fund's investment process looks at three potential sources of 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. Morgan's
allocation model is used as a benchmark, and the Portfolio's asset classes are
slightly "overweighted" or "underweighted" relative to this benchmark based on
our long-term market analysis. The normal allocation is 52% in U.S. large
company stocks, 10% in international equities, 3% in U.S. small-cap stocks, and
35% in fixed income.
The climb in rates had a particularly negative impact on bond prices during the
period. As bonds became more attractively valued relative to stocks, however, we
gradually shifted the Portfolio's allocation away from U.S. large-company stocks
into bonds. As small company stocks became more fully valued after several years
of outperformance, we gradually reduced our overweighting to a normal position.
After overweighting international equities in the beginning of the year, we
gradually reduced our allocation during the second half of 1994, as non-U.S.
market valuations became less compelling due to rising stock prices.
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 "underpriced" relative to their future earnings and
dividend-paying potential.
During the second half of 1994, the market's concern over long-term earnings
prospects took its toll on many of our holdings. This worsened during the fourth
quarter, as the sixth short-term rate increase of the year caused a flight to
more predictable investments. However, we continue to believe that the
Portfolio's undervalued issues should perform well over the long term.
BOND SELECTION. We actively manage the fixed income portion of the Portfolio
with respect to duration/maturity and integrate trading and research in making
sector allocation and bond selection decisions. During the period, we maintained
a slightly defensive position with respect to the Portfolio's average maturity,
focusing on securities with slightly shorter maturities than the Salomon
Brothers Broad Investment Grade Bond Index.
INVESTMENT OUTLOOK
We expect continued volatility in both the U.S. stock and bond markets in the
near term. Economic indicators late last year began showing the impact of
rising rates. However, we believe that last year's rate increases have had a
minimal effect on the growing economy and that further Federal Reserve
tightening is likely. In fact, on February 1, the Federal Reserve increased the
Fed Funds rate by 0.50% to 6.00% and the discount rate by 0.50% to 5.25%.
2
<PAGE>
Based on our analysis of the relative attractiveness of each market, the
Portfolio's allocation remains relatively unchanged since the end of 1994. We
plan to continue to overweight bonds, as they continue to look undervalued
relative to large-cap stocks. After a weak start in 1995, international equities
appeared to be somewhat more attractive. As a result, we modestly increased our
allocation. We are close to a neutral weighting in small-cap stocks, which
appear fairly valued.
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 12/31/94
$15,867,862
- -------------------------------------------------------------------------------
EX-DIVIDEND DATES
8/29/94, 12/19/94
- -------------------------------------------------------------------------------
DIVIDEND PAYABLE DATES
8/30/94, 12/20/94
- -------------------------------------------------------------------------------
CAPITAL GAIN PAYABLE DATES (IF APPLICABLE)
8/30/94, 12/20/94
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
ALL DATA AS OF DECEMBER 31, 1994
NORMAL ALLOCATION
[GRAPH]
U.S. LARGE-CAP EQUITIES 52%
FIXED INCOME 35%
INTERNATIONAL EQUITIES 10%
U.S SMALL-CAP EQUITIES 3%
ALLOCATION AT 12/31/94
[GRAPH]
U.S. LARGE-CAP EQUITIES 47.5%
FIXED INCOME 37.2%
INTERNATIONAL EQUITIES 9.9%
U.S. SMALL-CAP EQUITIES 3.0%
CASH 2.4%
LARGEST COMMON STOCK
HOLDINGS % OF PORTFOLIO
- --------------------------------------------------
GENERAL ELECTRIC 1.5
AT&T 1.2
COCA-COLA 1.2
ROYAL DUTCH PETROLEUM 1.1
MERCK 1.0
PHILIP MORRIS 0.9
WAL-MART 0.9
PROCTER & GAMBLE 0.8
EXXON 0.7
DUPONT 0.7
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
$10,000. The chart at right shows that $10,000 invested at the inception of the
Fund's predecessor fund would have increased to $10,128 by December 31, 1994.
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
provide a picture of how a fund has performed over the short term.
GROWTH OF $10,000 SINCE INCEPTION*
SEPTEMBER 10, 1993 - DECEMBER 31, 1994
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 ten thousand dollar investment in the Fund from September 10,
1993 (inception) to December 31, 1994; the second line represents the growth of
a ten thousand dollar investment in a portfolio of securities reflecting the
composition of the S&P 500 index for the same time period; the third line
represents the growth of a ten thousand dollar investment in a portfolio of
securities reflecting the composition of the Salomon Brothers Broad Investment
Grade Bond Index ("BIG") for the same time period; the fourth line represents
the growth of a ten thousand dollar investment in a portfolio of securities
reflecting the composition of the Morningstar Balanced Fund Average. The graph
points are as follows:
<TABLE>
<CAPTION>
Year Fund S&P 500 Salomon BIG Morningstar
<S> <C> <C> <C> <C>
0 $ 10,000 $ 10,000 $ 10,000 $ 10,000
1 9,818 9,835 9,650 9,694
2 10,128 10,314 9,740 9,848
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------
PERFORMANCE TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS
THREE YEAR ONE THREE FIVE SINCE
AS OF DECEMBER 31, 1994 MONTHS TO DATE YEAR YEARS YEARS 9/10/93*
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
The Pierpont Diversified Fund -0.29% 0.60% 0.60% - - 0.98%
S&P 500 -0.02% 1.32% 1.32% - - 2.39%
Salomon Brothers Broad Investment
Grade Bond Index 0.39% -2.85% -2.85% - - -1.98%
Morningstar Balanced Fund Average -1.10% -2.81% -2.81% - - -1.14%
<FN>
*REFLECTS PERFORMANCE OF THE JPM INSTITUTIONAL DIVERSIFIED FUND FROM SEPTEMBER
10, 1993, THROUGH DECEMBER 15, 1993 (COMMENCEMENT OF OPERATIONS).
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. 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. MORNINGSTAR, INC. IS A LEADING RESOURCE FOR MUTUAL FUND DATA. ALTHOUGH
GATHERED FROM RELIABLE SOURCES, DATA ACCURACY AND COMPLETENESS CANNOT BE
GUARANTEED.
</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>
MORGAN SERVES AS PORTFOLIO INVESTMENT ADVISOR AND MAKES THE PIERPONT DIVERSIFIED
FUND (THE "FUND") AVAILABLE SOLELY IN ITS CAPACITY AS SHAREHOLDER SERVICING
AGENT FOR CUSTOMERS. THE FUND'S DISTRIBUTOR IS SIGNATURE BROKER-DEALER SERVICES,
INC. INVESTMENTS IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, MORGAN GUARANTY TRUST COMPANY OF NEW YORK OR ANY OTHER BANK.
SHARES OF THE FUND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY. INVESTMENT RETURN
AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND CAN FLUCTUATE, SO AN INVESTOR'S
SHARES WHEN REDEEMED MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
The performance data quoted herein represent past performance. Please remember
that past performance is not a guarantee of future performance. Fund returns are
net of fees. All returns assume the reinvestment of Fund distributions and
reflect the reimbursement of certain Fund 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 (UNAUDITED)
DECEMBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment in The Diversified Portfolio ("Portfolio"), at value $15,838,012
Receivable for Fund Shares Sold 68,194
Receivable for Expense Reimbursement (Note 2b) 42,554
Deferred Organization Expense (Note 1d) 27,460
Prepaid Expenses 88
----------
Total Assets 15,976,308
----------
LIABILITIES
Organization Costs Payable 15,541
Shareholder Servicing Fee Payable (Note 2c) 5,630
Administration Fee Payable (Note 2a) 325
Fund Services Fee Payable (Note 2d) 103
Other Accrued Expenses 86,847
----------
Total Liabilities 108,446
----------
NET ASSETS
Applicable to 1,616,333 Shares of Beneficial Interest Outstanding $15,867,862
(unlimited shares authorized, par value $0.001)
----------
----------
Net Asset Value, Offering and Redemption Price Per Share $9.82
ANALYSIS OF NET ASSETS
Paid-in Capital $16,181,153
Undistributed Net Investment Income 4,258
Accumulated Net Realized Loss on Investments and Foreign Currency Transactions (88,213)
Net Unrealized Depreciation of Investments and Foreign Currency Translations (229,336)
----------
Net Assets $15,867,862
----------
----------
</TABLE>
See Accompanying Notes.
8
<PAGE>
THE PIERPONT DIVERSIFIED FUND
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED DECEMBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME ALLOCATED FROM PORTFOLIO (NOTE 1B)
Allocated Dividend Income (Net of Withholding Tax of $1,319) $ 80,656
Allocated Interest Income (Net of Withholding Tax of $40) 145,385
Allocated Portfolio Expenses (Net of Reimbursement of $13,198) (34,658)
---------
Net Investment Income Allocated from Portfolio 191,383
FUND EXPENSES
Registration Fees $ 15,044
Shareholder Servicing Fee (Note 2c) 13,245
Printing 10,357
Transfer Agent Fees 10,200
Professional Fees 4,517
Amortization of Organization Expense (Note 1d) 3,480
Administration Fee (Note 2a) 1,499
Fund Services Fee (Note 2d) 521
Trustees' Fees and Expenses (Note 2e) 108
Miscellaneous 861
---------
Total Fund Expenses 59,832
Less: Reimbursement of Expenses (Note 2b) (42,554)
---------
Net Fund Expenses 17,278
---------
NET INVESTMENT INCOME 174,105
NET REALIZED LOSS ON INVESTMENTS AND FOREIGN CURRENCY
TRANSACTIONS ALLOCATED FROM PORTFOLIO (87,197)
NET CHANGE IN UNREALIZED DEPRECIATION OF INVESTMENTS AND FOREIGN
CURRENCY TRANSLATIONS ALLOCATED FROM PORTFOLIO 46,127
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 133,035
---------
---------
</TABLE>
See Accompanying Notes.
9
<PAGE>
THE PIERPONT DIVERSIFIED FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
DECEMBER 15, 1993
FOR THE SIX MONTHS (COMMENCEMENT OF
ENDED DECEMBER 31, OPERATIONS) TO
1994 (UNAUDITED) JUNE 30, 1994
------------------ ------------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 174,105 $ 60,532
Net Realized Gain (Loss) on Investments and Foreign Currency
Transactions Allocated from Portfolio (87,197) 77,841
Net Change in Unrealized Appreciation (Depreciation) of Investments and
Foreign Currency Translations Allocated from Portfolio 46,127 (275,463)
------------------ ----------
Net Increase (Decrease) in Net Assets Resulting from Operations 133,035 (137,090)
------------------ ----------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (223,701) (91)
Net Realized Gain (43,693) -
------------------ ----------
Total Distributions to Shareholders (267,394) (91)
------------------ ----------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST (NOTE 3)
Proceeds from Shares of Beneficial Interest Sold 10,529,128 7,514,475
Reinvestment of Dividends and Distributions 253,822 91
Cost of Shares of Beneficial Interest Redeemed (1,803,589) (354,625)
------------------ ----------
Net Increase from Transactions in Shares of Beneficial Interest 8,979,361 7,159,941
------------------ ----------
Total Increase in Net Assets 8,845,002 7,022,760
NET ASSETS
Beginning of Period 7,022,860 100
------------------ ----------
End of Period (including undistributed net investment income of
$4,258 and $53,855, respectively) $ 15,867,862 $7,022,860
------------------ ----------
------------------ ----------
</TABLE>
See Accompanying Notes.
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
DECEMBER 15, 1993
FOR THE SIX MONTHS (COMMENCEMENT OF
ENDED DECEMBER 31, OPERATIONS) TO
1994 (UNAUDITED) JUNE 30, 1994
------------------ ------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.81 $ 10.00
------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.12 0.09
Net Realized and Unrealized Gain (Loss) on Investments and Foreign
Currency Allocated from Portfolio 0.15 (0.27)
------- -------
Total from Investment Operations 0.27 (0.18)
------- -------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (0.20) (0.01)
Net Realized Gain (0.06) 0.00
------- -------
Total Distributions to Shareholders (0.26) (0.01)
------- -------
NET ASSET VALUE, END OF PERIOD $ 9.82 $ 9.81
------- -------
------- -------
Total Return 2.65%* -1.82%*
RATIOS AND SUPPLEMENTAL DATA
Net Assets at end of Period (in thousands) $ 15,868 $ 7,023
Ratios to Average Net Assets
Expenses 0.98%(a) 0.98%(a)
Net Investment Income 3.29%(a) 2.80%(a)
Decrease reflected in above Expense Ratio due to Expense
Reimbursements 1.05%(a) 1.52%(a)
<FN>
- ------------------------
* Not Annualized
(a) Annualized
</TABLE>
See Accompanying Notes.
11
<PAGE>
THE PIERPONT DIVERSIFIED FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
DECEMBER 31, 1994
- --------------------------------------------------------------------------------
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 (14% at
December 31, 1994). The performance of the Fund is directly affected by the
performance of the Portfolio. The financial statements of the Portfolio,
including the schedule of investments, are included elsewhere in this report and
should be read in conjunction with the Fund's financial statements.
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.
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.
12
<PAGE>
THE PIERPONT DIVERSIFIED FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
DECEMBER 31, 1994
- --------------------------------------------------------------------------------
g)The Fund has adopted Statement of Position 93-2 Determination, Disclosure,
and Financial Statement Presentation of Income, Capital Gain, and Return
of Capital Distributions by Investment Companies. Accordingly, permanent
book and tax basis differences relating to shareholder distributions are
reclassified to paid-in capital.
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 the net assets
of The JPM Institutional Funds and The JPM Institutional Plus Fund, which
are 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 six months ended December 31,
1994, Signature's fee amounted to $1,499.
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 six months ended December 31, 1994,
Morgan has agreed to reimburse the fund $34,639 for excess expenses. In
addition to the expenses that Morgan assumes under the Services Agreement,
Morgan has agreed to reimburse the Fund to the extent necessary to
maintain the total operating expenses of the Fund, including the expenses
allocated to the Fund from the Portfolio, at no more than 0.98% of the
average daily net assets of the Fund through at least May 31, 1995. For
the six months ended December 31, 1994, Morgan has agreed to reimburse the
Fund $7,915 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
six months ended December 31, 1994, the fee for these services amounted to
$13,245.
13
<PAGE>
THE PIERPONT DIVERSIFIED FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
DECEMBER 31, 1994
- --------------------------------------------------------------------------------
d)The Trust, on behalf of the Fund, has a Fund Services Agreement with
Pierpont Group, Inc. ("Group") to assist the Trustees in exercising their
overall supervisory responsibilities for the Trust's affairs. The Trustees
of the Trust represent all the existing shareholders of Group. The Fund's
allocated portion of Group's costs in performing its services amounted to
$521 for the six months ended December 31, 1994.
e)An aggregate annual fee of $55,000 is paid to each Trustee for serving as
a Trustee of the Pierpont Funds, The JPM Institutional Funds, The JPM
Institutional Plus Fund and their corresponding Portfolios. The Trustees'
Fees and Expenses shown in the financial statements represents the Fund's
allocated portion of the total fees and expenses.
3. TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest of one or more series.
Transactions in shares of beneficial interest of the Fund were as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
DECEMBER 15, 1993
FOR THE SIX MONTHS (COMMENCEMENT OF
ENDED DECEMBER 31, OPERATIONS) TO
1994 (UNAUDITED) JUNE 30, 1994
------------------ ------------------
<S> <C> <C>
Shares sold 1,055,515 751,526
Reinvestment of dividends and distributions 25,646 9
Shares redeemed (180,590) (35,783)
-------- -------
Net increase 900,571 715,752
-------- -------
-------- -------
</TABLE>
14
<PAGE>
THE DIVERSIFIED PORTFOLIO
SEMI-ANNUAL REPORT DECEMBER 31, 1994
(UNAUDITED)
(The following pages should be read in conjunction
with The Pierpont Diversified Fund
Semi-Annual Financial Statements)
15
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
DECEMBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
---------- ------------
<S> <C> <C>
EQUITIES (58.6%)
COMMON STOCKS (58.3%)
FOREIGN EQUITIES (8.7%)
AUSTRALIA (0.4%)
Amcor Limited (Paper & Forest Products)..... 3,500 $ 25,295
Australia and NZ Bank Group (Banking)....... 10,600 34,933
Broken Hill Proprietary Co. Ltd. (Energy)... 6,700 101,726
CSR Ltd. (Building Materials)............... 8,000 27,605
National Australia Bank Ltd. (Banking)...... 4,150 33,275
News Corporation Bank Ltd. (Publishing)..... 6,300 24,670
Rothman's Holdings Ltd. (Tobacco)........... 4,000 14,888
SouthCorp Holdings Ltd. (Food).............. 19,000 42,726
TNT Ltd. (Transportation)................... 17,000 29,001
Western Mining Corp. (Metals & Mining)...... 9,900 57,422
------------
391,541
------------
AUSTRIA (0.0%)
Oester Elekrtizta (Utilities)............... 300 17,328
VA Technologie AG (Engineering &
Construction).............................. 200 20,133
------------
37,461
------------
BELGIUM (0.1%)
Arbed SA NPV (Iron & Steel)................. 200 30,053
General Banque (Banking).................... 60 15,278
Groupe Bruxelles Lambert NPV
(Multi-Industry)........................... 150 17,777
Solvay and Cie (Chemicals).................. 45 21,361
Tractebel Investment International
(Multi-Industry)........................... 70 21,147
------------
105,616
------------
DENMARK (0.2%)
Danisco (Food & Household Products)......... 1,200 42,604
Den Danske Bank (Banking)................... 1,100 60,026
International Service System (Commercial
Services).................................. 1,000 27,120
Novo Nordisk Series B (Health & Personal
Care)...................................... 300 28,501
<CAPTION>
VALUE
SHARES (NOTE 1A)
---------- ------------
<S> <C> <C>
DENMARK (CONTINUED)
TeleDanmark Series B (Utilities)............ 1,000 $ 50,789
------------
209,040
------------
FRANCE (1.0%)
Air Liquide (Chemicals)..................... 225 30,079
AXA (Insurance)............................. 500 23,160
Bouygues (Engineering & Construction)....... 300 28,702
Carrefour Supermarche (Retail - Grocery).... 70 28,991
Christian Dior SA (Food Processing)......... 395 30,914
Compagnie Financiere de Cic Union Europe
Certe de Invest
(Banking).................................. 440 28,586
Compagnie Financiere de St. Gobain (Glass &
Packaging)................................. 501 57,595
Compagnie Financiere de Suez (Banking)...... 750 34,404
Eaux Cie Generale (Utilities)............... 780 75,795
Eridania Beghin - Say (Agriculture)......... 150 19,715
Groupe Danone (Food Processing)............. 326 45,717
LVMH Moet Hennessy (Beverages).............. 220 34,724
Legrand (Electrical & Electronics).......... 45 37,114
LaGardere Groupe (Leisure & Tourism)........ 1,280 29,717
Peugeot SA (Automotive)..................... 415 56,877
Promodes (Merchandising).................... 300 55,832
Rhone Poulenc SA (Chemicals)................ 1,650 38,277
Roussel-Uclaf (Pharmaceutical).............. 220 26,321
Sanofi SA (Pharmaceutical).................. 400 18,446
Schneider SA (Machinery & Engineering)...... 550 36,454
Sgs Thomson(Electrical Equipment)........... 700 15,596
Societe Generale (Banking).................. 380 39,914
Societe Nationale Elf Aquitaine (Energy).... 1,514 106,555
Sommer Allibert (Appliances & Household).... 90 28,377
Synthelabo (Health & Personal Care)......... 990 40,037
Thomson CSF (Aerospace & Defense)........... 1,200 35,903
Total SA (Oil & Gas)..................... 800 46,463
TV Francaise (Health & Personal Care)....... 230 20,851
</TABLE>
See Accompanying Notes.
16
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
---------- ------------
FRANCE (CONTINUED)
<S> <C> <C>
Ugine SA (Iron & Steel)..................... 500 $ 35,106
------------
1,106,222
------------
GERMANY (0.6%)
Allianz AG Holdings (Insurance)............. 20 32,135
Ava Allg Handels V (Banking)................ 100 31,296
Bayer AG (Chemicals)........................ 170 39,821
Bilfinger & Berger Bau e Bank AG
(Engineering & Construction)............... 40 20,391
Daimler Benz (Automotive)................... 80 39,337
Deutsche Bank AG (Banking).................. 160 74,337
DT Pfand Hyp (Banking)...................... 31 15,083
Hoechst AG (Chemicals)...................... 130 28,270
Lufthansa (Transportation).................. 170 21,391
M.A.N. AG (Automotive)...................... 120 32,832
Munchener Ruckversicherungs AG
(Insurance)................................ 46 86,081
Schering AG (Pharmaceuticals)............... 40 26,250
Siemens AG (Manufacturing).................. 115 48,161
Thyssen AG (Iron & Steel)................... 155 29,556
Veba AG (Utilities)......................... 190 66,206
Volkswagen AG (Automotive).................. 125 34,361
------------
625,508
------------
HONG KONG (0.3%)
Citic Pacific Ltd (Transportation).......... 24,000 57,848
Dairy Farm Holdings (Transportation)........ 27,000 28,963
Hang Seng Bank (Financial Services)......... 5,400 38,733
Hong Kong Electric Holdings Ltd.
(Utilities)................................ 9,500 25,968
Hong Kong Telecom (Telecommunications)...... 34,800 66,339
New World Development (Real Estate)......... 7,000 18,682
Swire Pacific Ltd. (Transportation)......... 10,000 62,294
------------
298,827
------------
JAPAN (4.4%)
Achilles Corp. (Tire & Rubber).............. 10,000 43,173
Asahi Bank (Banking)........................ 9,000 104,819
Asics Corp. (Consumer Goods & Services)..... 10,000 39,157
Chiyoda Fire & Marine Insurance Co.
(Insurance)................................ 4,000 25,301
<CAPTION>
VALUE
SHARES (NOTE 1A)
---------- ------------
<S> <C> <C>
JAPAN (CONTINUED)
Chuo Trust & Banking Co.(Banking)........... 5,000 $ 72,791
Clarion Co. (Electrical Equipment).......... 10,000 50,201
Cosmo Oil Co. Ltd. (Oil & Gas).............. 10,000 74,900
Dai-Ichi Pharmaceutical Co. (Health &
Personal Care)............................. 10,000 157,631
Dai-Ichi Kangyo Bank (Banking).............. 4,000 75,502
Daiso Co. Ltd. (Chemicals).................. 13,000 63,956
Daito Trust Construction Co. Ltd.
(Construction)............................. 7,000 83,635
Daiwa Bank (Banking)........................ 10,000 101,406
Diamond Lease Company Ltd. (Financial
Services).................................. 3,000 47,590
Fujiya (Food Processing).................... 5,000 27,159
Gakken Co. (Publishing & Printing).......... 5,000 38,052
Hitachi (Electrical Equipment).............. 15,000 148,946
Hokkai Can Co. Ltd. (Materials &
Commodities)............................... 2,000 20,482
Hokkaido Electric Power Co.
Inc.(Utilities)............................ 1,000 22,892
Hokkaido Takushoku Bank (Banking)........... 28,000 118,916
Honda Motor Co. (Automotive)................ 8,000 142,169
Ishikawajima Harima (Machinery)............. 30,000 139,157
Ishizuka Glass Co. (Household Products)..... 15,000 109,940
Kagawa Bank (Banking)....................... 3,000 33,735
Kanematsu Corp. (Wholesale)................. 20,000 105,422
Kirin Brewery Co. (Beverages, Food, Soap &
Tobacco)................................... 5,000 55,723
Kitagawa Iron Works (Steel)................. 20,000 94,378
Kyushu Bank (Banking)....................... 10,000 49,197
Matsumura Gumi (Engineering &
Construction).............................. 8,000 44,578
Minolta Camera Corp. Ltd. (Electrical
Equipment)................................. 15,000 82,229
Mitsubishi Chemical Corp. Ltd.
(Chemicals)................................ 10,000 55,020
Mitsubishi Pencil Corp. Ltd.
(Manufacturing)............................ 5,000 51,205
Mitsubishi Electric Corp. Ltd. (Electrical
Equipment)................................. 17,000 120,673
Mitsubish Motors Corp. (Automotive)......... 12,000 117,711
Mitsukoshi Ltd. (Retail).................... 10,000 105,422
</TABLE>
See Accompanying Notes.
17
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
---------- ------------
JAPAN (CONTINUED)
<S> <C> <C>
Mutow (Wholesale)........................... 5,000 $ 44,177
NEC Corp. (Electrical Equipment)............ 4,000 45,783
NOF Corp. (Chemicals)....................... 12,000 77,108
Nabco :Ltd. (Automotive).................... 10,000 53,213
Nagasakiya Co. (Merchandising).............. 6,000 37,289
Nagoya, Bank of (Banking)................... 5,000 38,404
Nichias Corp. (Construction)................ 10,000 50,803
Nichiei Co. (Building Materials &
Components)................................ 15,000 77,259
Nichii Co. (Retail )........................ 8,000 103,614
Niigata Chuo Bank (Banking)................. 10,000 40,361
Nippon Credit Bank (Banking)................ 15,000 90,211
Nippon Koshuha Steel Co. (Steel)............ 15,000 55,723
Nippon Road Co. (Engineering &
Construction).............................. 10,000 97,289
Nippon Synthetic Chem (Chemicals)........... 7,000 41,396
Nissin Electric Co. (Electrical
Equipment)................................. 6,000 44,699
Nomura Securities Ltd. (Financial
Services).................................. 3,000 62,349
Pioneer Electronic Corp. (Electrical &
Equipment)................................. 4,000 96,386
Sacos Corp. (Leisure & Tourism)............. 1,000 26,004
Sakura Bank Ltd. (Banking).................. 7,000 94,177
San In Godo Bank (Banking).................. 5,000 45,181
Sankyu Inc. (Truck & Leasing)............... 15,000 70,633
Shikoku Electric Power (Utilities).......... 2,000 47,590
Shinmaywa Industries Ltd. (Industrial
Components)................................ 5,000 51,205
Snow Brand Milk (Food & Household
Products).................................. 10,000 76,004
Sumitomo Bank Ltd. (Financial Services)..... 10,000 190,763
Sumitomo Metal Industries Ltd. (Iron &
Steel)..................................... 23,000 74,588
Sumitomo Realty & Development Co. Ltd. (Real
Estate).................................... 7,000 41,466
Toho Gas Co. (Utilities).................... 12,000 49,639
Tohoku Electric Power Co. Inc.
(Utilities)................................ 5,000 127,008
Tokio Marine & Fire Insurance Ltd.
(Insurance)................................ 5,000 61,245
Toshiba Tongaloy Ltd. (Hand & Machine
Tools)..................................... 10,000 54,116
<CAPTION>
VALUE
SHARES (NOTE 1A)
---------- ------------
<S> <C> <C>
JAPAN (CONTINUED)
Toyo Construction Co. (Construction)........ 15,000 $ 70,482
Yamaha Corp. (Musical Instruments).......... 5,000 63,755
Yasuda Trust & Banking (Banking)............ 15,000 119,578
------------
4,942,566
------------
MALAYSIA (0.2%)
Perusahaan Otomobile Nasional
(Automotive)............................... 8,000 29,136
Public Bank Berhad (Banking)................ 24,000 47,934
Sime Darby Berhad (Multi-Industry).......... 13,200 30,241
Telecom Malaysia Berhad (Utilities)......... 7,000 47,425
Tanjong Public Co. (Leisure & Tourism)...... 5,000 14,882
------------
169,618
------------
NETHERLANDS (0.1%)
DSM NV (Chemicals).......................... 250 19,860
International Nederlanden (Financial
Services).................................. 700 33,066
Philips Electronics (Electrical
Equipment)................................. 700 20,727
Royal Dutch Petroleumn (Utilities).......... 350 38,107
Uniliver NV (Food Processing)............... 200 23,492
------------
135,252
------------
NEW ZEALAND (0.0%)
Independent Newspapers (Broadcasting &
Publishing)................................ 12,000 40,330
------------
NORWAY (0.2%)
Aker AS (Building Materials)................ 2,500 29,575
Hafslund Nycomed (Medical Supplies)......... 1,400 29,397
Kvaerner (Transportation)................... 600 27,150
Norsk Hydro AS (Chemicals).................. 2,200 86,536
Orkla "A"Free (Manufacturing)............... 300 10,957
Orkla class B (Manufacturing)............... 900 31,941
------------
215,556
------------
SINGAPORE (0.1%)
Singapore Airlines Ltd. (Aerospace)......... 4,000 36,775
</TABLE>
See Accompanying Notes.
18
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
---------- ------------
SINGAPORE (CONTINUED)
<S> <C> <C>
United Overseas Bank Ltd. (Banking)......... 3,000 $ 31,698
------------
68,473
------------
SWITZERLAND (0.2%)
BBC Brown Boveri (Electrical Equipment)..... 152 25,082
CS Holding (Banking)........................ 70 29,946
Ciba Geigy AG (Pharmeutical)................ 30 17,899
Nestle SA (Food Processing)................. 30 28,579
Roche Holding AG (Pharmaceutical)........... 8 38,717
Sandoz AG (Health & Personal Care).......... 45 23,445
Schweizerischer Bankverein (Banking)........ 60 16,593
Zurich Versicherun (Insurance).............. 20 19,022
------------
199,283
------------
UNITED KINGDOM (0.9%)
Abbey National PLC (Banking)................ 2,750 18,503
Allied Colloids Group (Chemicals)........... 12,500 25,035
BTR (Multi-Industry)........................ 9,000 41,402
BAT Industries PLC (Beverages & Tobacco).... 3,500 23,604
British Gas Corp. PLC (Utilities)........... 6,500 31,834
British Telecommunications PLC
(Telecommunications)....................... 8,750 51,684
British Steel PLC (Iron & Steel)............ 10,000 24,096
Cable & Wireless PLC (Telecommunications)... 3,000 17,697
Carlton Communications PLC
(Telecommunications)....................... 1,200 16,842
General Electric Co. PLC (Electrical
Equipment)................................. 3,700 15,979
Glaxo Holdings PLC (Health & Personal
Care)...................................... 4,000 41,558
Glynwed International PLC (Metal &
Hardware).................................. 3,700 19,394
Grand Metropolitan PLC (Beverages &
Tobacco)................................... 6,000 38,304
Guardian Royal Exchange (Insurance)......... 14,200 36,976
HSBC Holdings PLC (Banking)................. 2,650 29,295
Hanson PLC (Multi-Industry)................. 7,000 25,301
<CAPTION>
VALUE
SHARES (NOTE 1A)
---------- ------------
<S> <C> <C>
UNITED KINGDOM (CONTINUED)
Hillsdown Holdings (Food Processing)........ 6,000 $ 16,617
Lloyds Bank PLC (Banking)................... 5,000 43,225
NFC (Transportation)........................ 7,500 20,185
National Westminster Bank (Banking)......... 2,400 19,265
Pearson PLC (Publishing).................... 3,000 26,146
Racal Electronics PLC
(Telecommunications)....................... 3,000 10,374
Reckitt & Colman PLC (Health & Personal
Care)...................................... 2,900 26,681
Redland PLC (Building materials)............ 2,500 18,072
Sears PLC (Retail).......................... 17,000 29,180
Seeboard PLC ( Utilities)................... 3,000 22,719
Scottish Hydro Electric PLC (Utilities)..... 2,800 14,261
Shell Transport & Trading Co. (Utilities)... 5,500 59,983
Smith Industries PLC (Aerospace)............ 2,700 18,504
Tarmac PLC (Engineering & Construction)..... 11,000 20,568
Telewest Communications PLC
(Broadcasting)............................. 5,300 14,098
Tesco (Merchandising)....................... 10,500 40,909
Thorn EMI (Appliances & Household
Products).................................. 1,900 30,755
Unilever (Food & Household Products)........ 1,000 18,111
United Biscuits Holdings (Food
Processing)................................ 6,000 30,887
Vickers PLC (Machinery & Engineering)....... 9,000 24,644
Wellcome PLC (Pharmaceutical)............... 2,400 26,212
Kingfisher PLC (Retail)..................... 3,850 26,807
Yorkshire Water (Utilities)................. 3,000 24,644
------------
1,040,351
------------
TOTAL FOREIGN COMMON STOCKS (COST
$9,732,055).................................. 9,585,644
------------
UNITED STATES (49.6%)
BASIC INDUSTRIES (3.0%)
AGRICULTURE (0.0%)
Dekalb Genetics Corp........................ 600 15,825
</TABLE>
See Accompanying Notes.
19
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
---------- ------------
AGRICULTURE (CONTINUED)
<S> <C> <C>
Hubco, Inc.................................. 500 $ 11,125
------------
26,950
------------
CHEMICALS (1.0%)
Albemarle Corp.............................. 2,700 37,462
Brady (WH) Co. Class A...................... 1,600 76,400
Bush Boake Allen Inc........................ 700 18,900
Dow Chemical Co............................. 5,800 390,050
Ethyl Corp.................................. 2,200 21,175
Georgia Gulf Corp. (a)...................... 700 27,213
Monsanto Co................................. 2,100 148,050
PPG Industries Inc.......................... 4,400 163,350
Praxair Inc................................. 2,600 53,300
Union Carbide Corp.......................... 3,900 114,563
Wellman Inc................................. 100 2,825
------------
1,053,288
------------
METALS & MINING (1.1%)
Allegheny Ludlum Corp....................... 3,000 56,250
Bethleham Steel Corp........................ 3,000 54,000
Commercial Metals Co........................ 3,200 86,400
Crown Cork & Seal Co., Inc. (a)............. 4,700 177,425
Freeport McMoran Copper, Class A............ 1,600 34,000
Inco Ltd.................................... 3,200 91,600
Maverick Tube Corp. (a)..................... 1,900 17,575
Nucor Corp.................................. 2,400 133,200
Oregon Steel Mills Inc...................... 900 14,062
Pegasus Gold Inc............................ 800 9,100
Phelps Dodge Corp........................... 2,300 142,313
Reynolds Metals Co.......................... 1,900 93,100
Steel Technologies Inc...................... 4,000 51,000
Union Pacific Corp.......................... 4,800 219,000
Worthington Industries Inc.................. 2,900 57,638
------------
1,236,663
------------
PAPER & FOREST PRODUCTS (0.9%)
Bowater Inc................................. 700 18,637
Champion International Corp................. 2,300 83,950
Georgia-Pacific Corp........................ 2,100 150,150
International Paper Co...................... 2,700 203,512
Kimberly Clark Corp......................... 3,200 161,600
Louisiana Pacific Corp...................... 1,600 43,600
Mead Corp................................... 800 38,900
Paxar Corp. (a)............................. 5,556 55,560
Scott Paper Co.............................. 1,600 110,600
<CAPTION>
VALUE
SHARES (NOTE 1A)
---------- ------------
<S> <C> <C>
PAPER & FOREST PRODUCTS (CONTINUED)
Weyerhaeuser Co............................. 4,100 $ 153,750
------------
1,020,259
------------
Total Basic Industries................... 3,337,160
------------
CONSUMER GOODS & SERVICES (13.4%)
AUTOMOTIVE (1.4%)
Chrysler Corp............................... 3,600 176,400
Cooper Tire & Rubber Co..................... 2,000 47,250
Cummins Engine Inc.......................... 800 36,200
Eaton Corp.................................. 1,900 94,050
Excel Industries Inc........................ 2,300 31,913
Ford Motor Co............................... 14,500 406,000
General Motors Corp......................... 11,700 494,325
General Motors Corp. Class E................ 3,900 150,150
Intermet Corp............................... 7,100 49,700
Paccar Inc.................................. 700 30,800
Simpson Industries, Inc..................... 4,600 41,975
------------
1,558,763
------------
BEVERAGES, FOOD, SOAP & TOBACCO (5.0%)
Boston Chicken, Inc......................... 1,300 22,669
CPC International Inc....................... 3,200 170,400
Campbell Soup Co............................ 5,400 238,275
Clorox Co................................... 900 52,988
Coca-Cola Co................................ 27,800 1,431,700
Dreyer Grand Ice Cream Inc.................. 600 14,775
General Mills, Inc.......................... 3,700 210,900
Gillette Co................................. 4,800 358,800
J & J Snack Foods Corp. (a)................. 500 5,750
Kellogg Co.................................. 4,600 267,375
PepsiCo Inc................................. 17,700 641,625
Philip Morris Companies, Inc................ 19,200 1,104,000
Procter & Gamble Co......................... 15,300 948,600
Ralston Purina Co........................... 2,200 98,175
------------
5,566,032
------------
ENTERTAINMENT, LEISURE & MEDIA (1.6%)
Boyd Gaming Corp. (a)....................... 900 9,675
CBS Inc..................................... 2,700 149,513
Carnival Cruise Lines, Inc. Class A......... 5,300 112,625
Cinergi Pictures Entertainment Inc. (a)..... 700 4,550
Comcast UK Cable Partner.................... 300 4,781
Disney (Walt) Co............................ 18,500 853,313
</TABLE>
See Accompanying Notes.
20
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
---------- ------------
ENTERTAINMENT, LEISURE & MEDIA (CONTINUED)
<S> <C> <C>
Heritage Media Corp. Class A (a)............ 700 $ 18,813
International Game Technology............... 4,500 69,750
Johnson Worldwide Associates Inc. Class A
(a)........................................ 700 13,475
Knight Ridder Inc........................... 1,600 80,800
Lottery Enterprises Inc. (a)................ 1,620 6,683
People's Choice TV Corp. (a)................ 600 9,300
PictureTel Corp. (a)........................ 1,100 26,675
Tele Communications Inc. Class A (a)........ 13,600 296,650
Tribune Co. New............................. 2,100 114,975
------------
1,771,578
------------
HOME CONSTRUCTION (0.1%)
Armstrong World Industries Inc.............. 600 23,100
D.R. Horton, Inc. (a)....................... 2,472 22,402
Owens-Corning Fiberglas Corp................ 1,800 57,600
------------
103,102
------------
MERCHANDISING (3.0%)
Arbor Drugs Inc............................. 1,300 26,650
Braun's Fashions (a)........................ 3,800 12,825
Bush Industries Inc......................... 200 4,100
Catherines Stores Corp. (a)................. 2,800 23,450
Central Tractor & Farm County............... 100 1,475
Charming Shoppes, Inc....................... 4,700 30,843
Collins & Aikman Corp....................... 700 5,950
Dayton-Hudson Corp.......................... 1,100 77,825
Dillard Department Stores Inc. Class A...... 1,900 50,825
Fruit of the Loom Inc., Class A (a)......... 4,300 116,100
Gap Inc..................................... 3,200 97,600
Hechinger Co. Class A (a)................... 1,300 15,112
Home Depot, Inc............................. 9,300 427,800
K-Swiss Inc. (a)............................ 1,200 24,000
Lechters Inc. (a)........................... 300 5,081
Limited (The), Inc.......................... 11,600 210,250
Liz Claiborne Inc........................... 4,900 82,688
May Department Stores Co.................... 5,400 182,250
Melville Corp............................... 3,600 111,150
Meridian Sport Inc.......................... 400 3,700
Nine West Group, Inc. (a)................... 2,900 82,288
One Price Clothing Stores (a)............... 2,900 22,475
Penney J.C. Inc............................. 3,600 160,650
Penn Traffic Co. (a)........................ 800 30,400
<CAPTION>
VALUE
SHARES (NOTE 1A)
---------- ------------
<S> <C> <C>
MERCHANDISING (CONTINUED)
Safety 1st Inc. (a)......................... 400 $ 11,600
Sports Club Inc............................. 700 4,725
TJX Companies, Inc.......................... 3,300 51,563
Toys "R" Us, Inc. (a)....................... 6,200 189,100
Trans World Music Corp. (a)................. 2,100 17,063
V.F. Corp................................... 4,000 194,500
Wal-Mart Stores, Inc........................ 49,900 1,060,375
Woolworth Corp.............................. 1,900 28,500
------------
3,362,913
------------
PERSONAL CARE (0.3%)
Avon Products, Inc.......................... 1,500 89,625
Colgate Palmolive Co........................ 3,200 202,800
------------
292,425
------------
PERSONAL SECURITY (0.0%)
Pinkerton's, Inc. (a)....................... 2,100 40,425
Pittway Corp. Class A....................... 200 8,050
------------
48,475
------------
PERSONAL SERVICES (0.1%)
Equity Corp. International.................. 100 1,344
Robert Half International Inc............... 300 7,200
Service Corp. International................. 4,100 113,775
------------
122,319
------------
PHOTOGRAPHIC EQUIPMENT (1.0%)
Du Pont (E.I.) de Nemours & Co., Inc........ 15,400 866,250
Eastman Kodak Co............................ 5,300 253,075
------------
1,119,325
------------
RESTAURANTS & HOTELS (0.9%)
Argosy Gaming Corp. (a)..................... 600 6,975
Brinker International, Inc. (a)............. 2,200 39,875
Circus Circus Enterprises Inc.(a)........... 3,900 90,675
Cracker Barrel Old Country Store, Inc....... 1,200 22,050
McDonald's Corp............................. 23,300 681,525
Mirage Resorts, Inc. (a).................... 3,700 75,850
O'Charleys Inc. (a)......................... 300 3,413
Players International, Inc. (a)............. 1,100 24,750
Sbarro Inc.................................. 2,250 58,500
Starbucks Corp.............................. 300 8,194
</TABLE>
See Accompanying Notes.
21
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
---------- ------------
RESTAURANTS & HOTELS (CONTINUED)
<S> <C> <C>
Taco Cabana, Inc. (a)....................... 1,800 $ 16,200
------------
1,028,007
------------
Total Consumer Goods & Services.......... 14,972,939
------------
ENERGY (5.2%)
NATURAL GAS (0.2%)
Devon Energy Corp........................... 1,000 18,250
El Paso Natural Gas Co...................... 400 12,200
EnergyNorth Inc............................. 200 3,175
Enron Corp.................................. 5,700 173,850
General Public Utilities.................... 1,300 34,125
Oryx Energy Co.............................. 1,100 13,063
Providence Energy Corp...................... 900 14,288
TransCanada Pipelines Ltd................... 800 9,700
------------
278,651
------------
OIL-PRODUCTION (4.5%)
Atlantic Richfield Co....................... 3,100 315,425
Baker Hughes Inc............................ 2,900 52,925
Chevron Corp................................ 19,100 852,338
Exxon Corp.................................. 15,100 917,325
Mobil Corp.................................. 9,400 791,950
Occidental Petroleum Corp................... 8,800 169,400
Royal Dutch Petroleum Co. (ADR)............. 13,100 1,408,250
Tesoro Petroleum Corp. (a).................. 700 6,475
Texaco Inc.................................. 7,200 431,100
Vintage Petroleum, Inc...................... 2,200 37,125
------------
4,982,313
------------
OIL-SERVICES (0.5%)
Ashland Oil Co.............................. 600 20,700
Dreco Energy Services Ltd. Class A (a)...... 700 5,118
Global Marine Inc. (a)...................... 3,600 13,050
Holly Corp.................................. 700 18,288
Noble Drilling Corp. (a).................... 5,100 29,963
Noram Energy Corp........................... 1,500 8,063
Oceaneering International Inc. (a).......... 2,500 25,625
Schlumberger Ltd............................ 7,400 372,775
Sonat, Inc.................................. 1,800 50,400
United Cities Gas Co........................ 300 4,688
------------
548,670
------------
Total Energy............................. 5,809,634
------------
<CAPTION>
VALUE
SHARES (NOTE 1A)
---------- ------------
<S> <C> <C>
FINANCE (5.8%)
BANKING (3.0%)
Ahmanson (H. F.) & Co....................... 1,700 $ 27,412
Alabama National Bancorporation............. 200 1,775
Amsouth Bancorporation...................... 400 10,300
Banc One Corp............................... 8,800 223,300
BankAmerica Corp............................ 8,100 319,950
Bankers Trust New York Corp................. 2,100 116,288
Banknorth Group, Inc........................ 400 8,850
Barnett Banks Inc........................... 2,100 80,588
Bay View Capital Corp....................... 1,000 18,625
Central Fidelity Banks, Inc................. 600 14,700
Charter One Financial, Inc.................. 1,700 31,981
Chase Manhattan Corp........................ 3,400 116,875
Chemical Banking Corp....................... 4,700 168,613
Citicorp.................................... 8,600 355,825
Colonial Bancgroup, Inc. Class A............ 600 11,925
Comerica, Inc............................... 2,200 53,625
Community First Bankshares Inc.............. 500 6,813
Corestates Financial Corp................... 2,600 67,600
Crestar Financial Corp...................... 700 26,338
Firstar Corp................................ 1,100 29,563
First Commerce Corp......................... 1,100 24,338
First Commercial Corp....................... 105 2,402
Firstfed Financial Corp. (a)................ 1,400 17,675
First National Bancorp. GA.................. 800 15,100
First Tennessee National Corp............... 200 8,175
First UN Corp............................... 3,800 157,225
First Virginia Banks, Inc................... 400 12,800
Fleet Financial Group Inc................... 2,600 84,500
GBC Bancorp................................. 700 9,538
Golden West Financial Corp.................. 800 28,200
Great Western Financial Corp................ 3,400 54,400
Greenfield Industries Inc................... 200 4,750
Huntington Bancshares Inc................... 1,600 27,400
KeyCorp..................................... 4,500 112,500
Mellon Bank Corp............................ 2,700 82,688
Mercantile Bankcorp......................... 800 25,000
Meridian Bancorp Inc........................ 1,100 29,356
Mississippi Valley Bankshares Inc........... 100 1,738
National Commerce Bancorporation............ 800 18,400
Nations Bank Corp........................... 6,400 288,800
Northern Trust Corp......................... 600 21,150
Norwest Corp................................ 6,000 140,250
PNC Financial Corp.......................... 5,100 107,738
</TABLE>
See Accompanying Notes.
22
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
---------- ------------
BANKING (CONTINUED)
<S> <C> <C>
Republic New York Corp...................... 800 $ 36,200
Roosevelt Financial Group Inc............... 1,400 20,913
Seacoast Banking Corp. of Florida Class A... 200 3,400
Shawmut National Corp....................... 3,000 49,125
Silicon Valley Bancshares................... 2,900 38,788
SouthTrust Corp............................. 800 14,450
State Street Boston Corp.................... 1,600 45,700
Sterling Bancshares Inc..................... 300 5,250
Sterling Financial Corp. Wash............... 220 2,200
Synovus Financial Corp...................... 300 5,438
Trustco BanCorp. of NY...................... 550 11,275
UJB Financial Corp.......................... 1,000 24,125
Washington Mutual Savings Bank.............. 1,600 26,800
Westamerica Bancorporation.................. 700 20,650
Wilmington Trust Corp....................... 200 4,577
------------
3,273,960
------------
FINANCIAL SERVICES (1.1%)
Bear Stearns Companies Inc.................. 1,900 29,212
Capstone Capital Corporation Inc. (a)....... 800 12,600
Dean Witter, Discover & Co.................. 4,200 142,275
Eagle Financial Corp........................ 400 5,650
Equifax Inc................................. 2,400 63,300
Federal Home Loan Mortgage Corp............. 3,900 196,950
Federal National Mortgage Association....... 7,400 539,275
First Merchants Acceptance Corp............. 300 3,338
First USA Inc............................... 1,000 32,875
Leasing Solutions Inc....................... 200 1,400
Marshall & Ilsley Corp...................... 1,200 23,025
Mercury Financial Co........................ 1,900 24,700
Merrill Lynch & Co.......................... 500 17,875
Paine Webber Group Inc...................... 1,000 15,000
Quickturn Design System Inc................. 700 9,494
RFS Hotel Investors Inc..................... 1,000 14,625
ROC Communities, Inc........................ 1,100 23,100
SPS Transaction Services Inc. (a)........... 400 10,500
Schwab (Charles) Corp....................... 1,700 59,288
Southwest Securities Group Inc.............. 1,100 6,806
Waterhouse Investors Services Inc........... 200 2,450
------------
1,233,738
------------
<CAPTION>
VALUE
SHARES (NOTE 1A)
---------- ------------
<S> <C> <C>
INSURANCE (1.6%)
AMBAC, Inc.................................. 900 $ 33,525
AON Corp.................................... 1,200 38,400
Aetna Life & Casualty Co.................... 2,300 108,388
Allstate Corp............................... 4,700 111,038
American General Corp....................... 3,000 84,750
American International Group, Inc........... 6,300 617,400
CMAC Investment Corp........................ 500 14,438
Capital RE Corp............................. 3,100 84,863
Chubb Corp.................................. 1,500 116,063
Cinergy Corp................................ 2,500 58,438
Commerce Bancorp Inc........................ 635 11,990
EquiCredit Corp. (a)........................ 700 7,569
First Colony Corp........................... 700 15,663
Fremont General Corp........................ 1,200 28,050
Hilb Rogal & Hamilton Co.................... 600 7,275
MBIA, Inc................................... 600 33,675
MMI Cos. Inc................................ 3,400 53,975
Navigators Group Inc........................ 100 1,425
Progressive Corp............................ 1,300 45,500
Providian Corp.............................. 2,100 64,838
Safeco Corp................................. 900 46,913
St. Paul Companies, Inc..................... 1,200 53,700
Torchmark Corp.............................. 1,600 55,800
Transamerica Corp........................... 1,100 54,725
UNUM Corp................................... 1,400 52,850
USLIFE Corp................................. 500 17,438
------------
1,818,689
------------
REAL ESTATE (0.1%)
Carr Realty Corp............................ 200 3,600
Chelsea GCA Realty Inc...................... 600 16,350
Developers Diversified Realty Corp.......... 500 15,625
Gables Residential Trust.................... 500 10,750
Healthcare Realty Trust..................... 1,700 35,700
Home Properties of New York, Inc............ 600 11,775
Liberty Property Trust (a).................. 300 5,887
MerryLand & Investment Co. Inc.............. 600 13,125
Southwestern Properties Trust............... 1,300 15,925
Storage Trust Realty........................ 500 8,937
Tucker Properties Corp...................... 300 3,825
Wellsford Residential Property Trust........ 300 6,300
------------
147,799
------------
Total Finance............................ 6,474,186
------------
</TABLE>
See Accompanying Notes.
23
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
---------- ------------
HEALTHCARE (4.6%)
<S> <C> <C>
BIOTECHNOLOGY (0.1%)
Affymax N.V. (a)............................ 700 $ 12,338
Amylin Pharmaceuticals, Inc. (a)............ 1,400 8,050
Athena Neurosciences, Inc................... 1,100 6,325
Cephalon Inc. (a)........................... 400 3,250
Genetic Therapy Inc. (a).................... 200 1,350
Inhale Therapeutic Systems (a).............. 700 6,475
Northfield Laboratories Inc. (a)............ 900 9,113
Oncor Inc. (a).............................. 2,600 11,863
Perseptive Biosystems, Inc. (a)............. 4,000 20,750
Targeted Genetics Corp. (a)................. 800 4,250
Univax Biologics Inc........................ 1,600 7,000
Vertex Pharmaceuticals, Inc. (a)............ 1,400 20,825
Vical Inc. (a).............................. 600 4,800
------------
116,389
------------
HEALTH SERVICES (0.8%)
Abbey Healthcare Group Inc.(a).............. 2,100 48,431
Advocat Inc. (a)............................ 1,100 14,575
Columbia Healthcare Corp.................... 11,000 401,500
Community Health System Inc................. 300 8,175
Healthcare & Retirement Corp................ 1,000 30,125
Healthcare Compare Corp..................... 800 27,200
Health Risk Management Inc. (a)............. 1,200 30,000
Hooper Holmes Inc........................... 1,500 9,563
Humana Inc. (a)............................. 4,900 110,863
Manor Care Inc.............................. 1,400 38,325
Mariner Health Group, Inc. (a).............. 1,400 30,450
Oncormed Inc................................ 100 794
Protocol Systems Inc. (a)................... 200 1,800
U.S. Healthcare Inc......................... 3,400 139,825
------------
891,626
------------
HOSPITAL SUPPLIES (0.3%)
Bard C.R. Inc............................... 1,300 35,100
Baxter International Inc.................... 2,000 56,500
CellPro, Inc. (a)........................... 3,600 36,000
Corvita Corp. (a)........................... 500 2,344
Fresnius USA Inc. (a)....................... 4,300 36,013
Medtronic Inc............................... 3,200 178,000
Vital Signs, Inc. (a)....................... 3,100 34,100
------------
378,057
------------
PHARMACEUTICALS (3.4%)
Abbott Laboratories......................... 24,500 799,313
<CAPTION>
VALUE
SHARES (NOTE 1A)
---------- ------------
<S> <C> <C>
PHARMACEUTICALS (CONTINUED)
Alza Corp. (a).............................. 2,700 48,600
American Home Products Corp................. 7,800 $ 489,450
Bausch & Lomb Inc........................... 2,800 94,850
Chiron Corp. (a)............................ 800 64,050
Forest Laboratories, Inc. (a)............... 1,100 51,288
Gensia Inc. (a)............................. 500 2,109
Johnson & Johnson........................... 400 21,900
Lilly (Eli) & Co............................ 1,300 85,313
Merck & Co., Inc............................ 32,300 1,231,438
Pfizer, Inc................................. 7,900 610,275
Warner-Lambert Co........................... 2,200 169,400
------------
3,667,986
------------
Total Healthcare......................... 5,054,058
------------
INDUSTRIAL PRODUCTS & SERVICES (6.0%)
CAPITAL GOODS (0.2%)
Charter Power Systems Inc................... 800 14,600
Dover Corp.................................. 1,400 72,275
Gardner Denver Machinery Inc................ 800 7,950
Kaydon Corp................................. 1,400 33,600
Parker Hannifin Corp........................ 1,100 50,050
------------
178,475
------------
COMMERCIAL SERVICES (0.3%)
Advo Inc.................................... 1,300 22,425
Applied Power Inc. Class A.................. 1,500 38,063
Banta Corp.................................. 600 18,075
Consolidated Graphics Inc. (a).............. 600 6,900
Donnelley (R R) & Sons Co................... 5,400 159,300
Emcon (a)................................... 1,500 5,719
Emmis Broadcasting Corp. (a)................ 100 1,388
Matrix Service Co. (a)...................... 1,200 6,900
National Service Industries Inc............. 2,400 61,500
Paging Network, Inc. (a).................... 600 20,250
Payco American Corp. (a).................... 2,700 19,406
------------
359,926
------------
DIVERSIFIED MANUFACTURING (4.2%)
Alcan Aluminum Ltd.......................... 4,600 116,725
Allied-Signal, Inc.......................... 14,300 486,200
Aluminum Co. of America..................... 2,700 233,888
Apogee Enterprises, Inc..................... 1,500 25,688
Coltec Industries, Inc...................... 3,800 65,075
Cooper Industries Inc....................... 4,100 139,913
General Dynamics Corp....................... 1,600 69,600
</TABLE>
See Accompanying Notes.
24
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
---------- ------------
DIVERSIFIED MANUFACTURING (CONTINUED)
<S> <C> <C>
General Electric Co......................... 37,000 1,887,000
Goodyear Tire & Rubber Co................... 2,100 $ 70,613
Guardsman Products, Inc..................... 500 6,250
Johnson Controls Inc........................ 2,300 112,700
Libbey Inc.................................. 1,300 22,750
Lockheed Corp............................... 1,600 116,200
Loral Corp.................................. 2,100 79,538
Martin Marietta Corp........................ 2,400 106,500
Masco Corp.................................. 5,700 128,963
Modine Manufacturing Co..................... 4,700 133,950
Panhandle Eastern Corp...................... 2,300 45,425
Premier Industrial Corp..................... 1,500 35,438
Regal Beloit Corp........................... 200 2,725
Sundstrand Corp............................. 700 31,850
Tenneco Inc................................. 7,200 306,000
Trinova Corp................................ 400 11,750
TRW Inc..................................... 1,000 66,000
Tyco International Ltd...................... 3,800 180,500
United Technologies Corp.................... 1,400 88,025
Wheelabrator Technologies Inc............... 4,100 60,475
Whirlpool Corp.............................. 2,000 101,500
Worldtex Inc. (a)........................... 700 2,538
------------
4,733,779
------------
ELECTRICAL EQUIPMENT (0.2%)
Avnet Inc................................... 500 18,500
Emerson Electric Corp....................... 1,200 75,000
Encore Wire Corp. (a)....................... 100 1,719
General Signal Corp......................... 1,400 44,625
Grainger (W.W.) Inc......................... 1,200 69,300
Hubbell Inc................................. 200 10,650
Magnetek Inc................................ 1,150 15,525
------------
235,319
------------
MACHINERY (0.5%)
Black & Decker Corp......................... 5,200 123,500
Caterpillar Inc............................. 5,500 303,188
Deere & Co.................................. 2,100 139,125
------------
565,813
------------
POLLUTION CONTROL (0.6%)
Browning-Ferris Industries, Inc. (a)........ 6,100 173,087
Chemical Waste Management Inc............... 900 8,438
Dames & Moore Inc........................... 1,600 23,600
Harding Associates, Inc. (a)................ 2,400 13,500
<CAPTION>
VALUE
SHARES (NOTE 1A)
---------- ------------
<S> <C> <C>
POLLUTION CONTROL (CONTINUED)
Mid-American Waste Systems, Inc............. 4,100 28,188
TETRA Technologies Inc. (a)................. 2,300 $ 27,313
United Waste System Inc..................... 100 2,525
WMX Technologies, Inc....................... 13,200 346,500
------------
623,151
------------
Total Industrial Products & Services..... 6,696,463
------------
TECHNOLOGY (4.5%)
AEROSPACE (0.2%)
Northrop Grumman Corp....................... 800 33,600
McDonnell Douglas Corp...................... 600 85,200
Orbital Sciences Corp. (a).................. 900 17,100
Raytheon Co................................. 1,400 89,425
Rohr Industries Inc. (a).................... 2,700 28,013
------------
253,338
------------
COMPUTER-PERIPHERALS (0.1.%)
Quantum Corp................................ 600 9,038
Radius Inc.................................. 2,900 25,194
Read-Rite Corp. (a)......................... 2,200 40,700
------------
74,932
------------
COMPUTER-SOFTWARE (1.0%)
Adobe Systems Inc........................... 700 20,913
Alias Research Inc. (a)..................... 700 12,644
Autodesk, Inc............................... 1,000 39,625
Davidson & Associates Inc. (a).............. 200 6,450
Delrina Corp................................ 1,500 18,563
Electronic Arts, Inc. (a)................... 800 15,350
First Data Corp............................. 3,400 161,075
InfoSoft International Inc. (a)............. 300 10,500
Intersolv Inc. (a).......................... 800 14,450
Macromedia Inc.............................. 300 7,725
Microsoft Corp. (a)......................... 8,300 508,375
Microtec Research Inc....................... 500 4,375
Oracle Systems Corp. (a).................... 4,600 203,550
Phoenix Technology Ltd (a).................. 1,600 12,200
Pinnacle System Inc......................... 600 8,850
Progress Software Corp. (a)................. 600 22,725
Project Software & Development Inc.......... 1,100 16,088
Software Professionals Inc.................. 400 1,725
Sybase Inc.................................. 700 36,313
Symantec Corp. (a).......................... 1,500 26,344
</TABLE>
See Accompanying Notes.
25
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
---------- ------------
COMPUTER-SOFTWARE (CONTINUED)
<S> <C> <C>
Tripos Inc. (a)............................. 200 $ 912
------------
1,148,752
------------
ELECTRICAL EQUIPMENT (0.0%)
Dynamics Corp. of America................... 200 4,075
E-Systems, Inc.............................. 800 33,300
------------
37,375
------------
INFORMATION PROCESSING (1.8%)
Apple Computer Corp......................... 2,000 77,750
Compaq Computer Corp. (a)................... 5,100 201,450
Dell Computer Corp.(a)...................... 600 24,563
Gateway 2000, Inc. (a)...................... 700 15,181
Hewlett-Packard Co.......................... 5,400 539,325
HMG Worldwide Corp.......................... 500 1,625
International Business Machines Corp........ 11,000 808,500
NetFRAME Systems Inc. (a)................... 1,300 10,075
Network Computing Devices Inc. (a).......... 1,200 4,875
Novell, Inc. (a)............................ 8,900 151,856
Silicon Graphics Inc. (a)................... 2,600 80,275
Sun Microsystems Inc. (a)................... 2,800 99,225
Xcellenet Inc............................... 500 7,875
------------
2,022,575
------------
SEMICONDUCTORS (1.3%)
Advanced Micro Devices, Inc. (a)............ 1,500 37,312
Advanced Technology Materials Inc........... 1,300 7,556
Alliance Semiconductor Corp................. 300 9,412
Asyst Technologies Inc. (a)................. 200 4,775
Brooktree Corp. (a)......................... 2,900 24,106
Credence Systems Corp. (a).................. 1,600 36,600
Helix Technology Corp....................... 900 15,075
Intel Corp.................................. 7,100 452,625
Linear Technology Corp...................... 600 29,625
Micrel Inc.................................. 200 2,850
Micrion Corp................................ 1,000 11,625
Motorola Inc................................ 9,700 561,387
S3 Inc. (a)................................. 3,500 54,906
Texas Instruments Inc....................... 1,400 104,825
Xilinx, Inc. (a)............................ 600 35,475
------------
1,388,154
------------
<CAPTION>
VALUE
SHARES (NOTE 1A)
---------- ------------
<S> <C> <C>
TELECOMMUNICATIONS-EQUIPMENT (0.1%)
Alantec Corp................................ 400 $ 12,900
Bay Networks Inc. (a)....................... 2,400 70,500
Harris Corp................................. 600 25,500
Itron Inc................................... 400 8,000
Security Dynamics Technology Inc............ 100 1,856
------------
118,756
------------
Total Technology......................... 5,043,882
------------
TRANSPORTATION (0.7%)
AIRLINES (0.3%)
AMR Corp. (a)............................... 2,000 106,500
Delta Air Lines, Inc........................ 1,000 50,500
Mesa Airlines Inc. (a)...................... 4,500 41,063
Southwest Airlines Co....................... 3,200 53,600
UAL Corp. (a)............................... 200 17,475
------------
269,138
------------
RAILROADS (0.1%)
Burlington Northern Inc..................... 2,200 105,875
Illinois Central Corp....................... 1,100 33,825
------------
139,700
------------
TRUCKING & FREIGHT CARRIERS (0.3%)
CSX Corp.................................... 2,600 181,025
Consolidated Rail Corp...................... 1,700 85,850
Harper Group, Inc........................... 800 12,400
Interans Corp............................... 800 10,300
Interpool, Inc. (a)......................... 800 11,900
Rollins Truck Leasing Corp.................. 400 4,750
Werner Enterprises Inc...................... 500 11,813
------------
318,038
------------
Total Transportation..................... 726,876
------------
UTILITIES (6.4%)
ELECTRIC (1.5%)
Allegheny Power System, Inc................. 1,300 28,275
American Electric Power Co. Inc............. 2,100 69,038
Baltimore Gas & Electric Co................. 2,700 59,738
Bangor Hydro-Electric Co.................... 400 3,900
Central & South West Corp................... 3,200 72,400
</TABLE>
See Accompanying Notes.
26
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
---------- ------------
ELECTRIC (CONTINUED)
<S> <C> <C>
Central Hudson Gas & Electric Corp.......... 1,800 $ 47,700
Chesapeake Utilities Corp................... 200 2,550
CMS Energy Corp............................. 1,300..... 29,738
Consolidated Edison Co...................... 2,300 59,225
Detroit Edison Co........................... 2,300 60,088
Dominion Resources Inc...................... 3,200 114,400
Entergy Corp................................ 4,300 94,063
FPL Group Inc............................... 3,200 112,400
Green Mountain Power Corp................... 200 5,575
Illinova Corp............................... 900 19,575
Maine Public Service Co..................... 100 2,075
New England Electric System................. 800 25,700
Nipsco Industries Inc....................... 1,000 29,750
Niagara Mohawk Power Corp................... 1,900 27,075
Pacific Gas & Electric Co................... 7,200 175,500
Pinnacle West Capital Corp.................. 1,800 35,550
Potamac Electric Power Co................... 1,200 22,050
Public Service Enterprise Group, Inc........ 800 21,200
SCEcorp..................................... 8,200 119,925
Southern Co................................. 12,200 244,000
Texas Utilities Co.......................... 4,300 137,600
Western Resources Inc....................... 600 17,175
------------
1,636,265
------------
TELEPHONE (4.8%)
American Telephone & Telegraph Co........... 29,200 1,467,300
Ameritech Corp.............................. 10,100.... 407,787
Bell Atlantic Corp.......................... 8,000 398,000
BellSouth Corp.............................. 9,100 492,538
GTE Corp.................................... 17,400 528,525
ITT Corp.................................... 5,700 505,163
MCI Communications Corp..................... 14,400 265,500
Northern Telecom Ltd........................ 4,800 160,200
Pacific Telesis Group....................... 7,700 219,450
Southwestern Bell Corp...................... 11,000 444,125
Sprint Corp................................. 6,400 176,800
Telewest Communications..................... 500 13,281
<CAPTION>
VALUE
SHARES (NOTE 1A)
---------- ------------
<S> <C> <C>
TELEPHONE (CONTINUED)
U S West, Inc............................... 8,500 $ 302,813
------------
5,381,482
------------
WATER (0.1%)
Aquarion Company............................ 400 9,452
Connecticut Water Service Inc............... 300 6,975
E'town Corp................................. 500 13,188
SJW Corp.................................... 100 3,225
Southern California Water Co................ 600 10,500
United Water Resources Inc.................. 200 2,525
------------
45,865
------------
Total Utilities.......................... 7,063,612
------------
TOTAL UNITED STATES COMMON STOCKS (COST
$55,807,077)................................. 55,178,810
------------
TOTAL COMMON STOCKS (COST $65,539,132)....... 64,764,454
------------
PREFERRED STOCKS (0.2%)
AUSTRALIA (0.0%)
News Corporation Ltd. (Publishing).......... 3,150 10,870
------------
JAPAN (0.1%)
Sakura Bank Ltd. (Banking).................. 6,000 118,072
------------
UNITED STATES (0.1%)
Chrysler Corp. $4.625
(Automotive)................................ 700 96,163
------------
TOTAL PREFERRED STOCKS
(COST $238,985).............................. 225,105
------------
RIGHTS (0.1%)
FRANCE (0.1%)
Compagnie Financiere de Paribas (Banking)
(a)........................................ 995 66,135
------------
TOTAL RIGHTS (COST $71,403).................. 66,135
------------
</TABLE>
See Accompanying Notes.
27
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
WARRANTS (NOTE 1A)
---------- ------------
WARRANTS (0.0%)
<S> <C> <C>
JAPAN (0.0%)
Casio Computer Co., Expiring 3/4/97,
(Consumer Goods) (a)....................... 5 $ 10,500
Kuraray Co., Expiring 08/2/96, (Textiles)
(a)........................................ 10 15,500
Nippon Piston Ring Co. , Expiring 09/27/96,
(Auto-Parts) (a)........................... 40 9,626
Yodogawa Steel Works Ltd., Expiring 12/10/97
(Steel) (a)................................ 10 13,624
------------
TOTAL WARRANTS (COST $51,366)................ 49,250
------------
TOTAL EQUITY SECURITIES
(COST $65,900,886)........................... 65,104,944
------------
FIXED INCOME SECURITIES (36.4%)
CONVERTIBLE BONDS (0.3%)
<CAPTION>
PRINCIPAL
AMOUNT
----------
JAPAN (0.3%) (in yen)
----------
<S> <C> <C>
BOT Cayman Finance 4.250% due 03/31/03
(Financial Services)....................... 10,000,000 119,466
Matsushita Electric 1.400% due 03/31/04
(Electrical & Electronics)................. 7,000,000 71,124
Ricoh Co. 1.800% due 03/29/02 (Data
Processing & Reproduction)................. 5,000,000 58,233
Sagimi Railway Co. 3.800% due 9/30/99
(Trans. Road & Rail)....................... 2,000,000 21,486
Yamato Transport 3.900% due 3/30/01
(Transportation)........................... 4,000,000 47,390
------------
TOTAL CONVERTIBLE BONDS (COST $321,867)...... 317,699
------------
COLLATERALIZED OBLIGATIONS (1.5%)
<CAPTION>
FINANCE (1.5%) (in USD)
----------
<S> <C> <C>
Chase Mortgage Financial Corp. 7.000% due
4/25/25.................................... 500,000 440,703
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1A)
---------- ------------
<S> <C> <C>
FINANCE (CONTINUED)
Freemall Finance Inc. 8.400% due 03/20/02... $ 500,000 $ 466,641
General Electric Capital Mortgages Services
Inc. 6.500% due 08/25/09................... 174,685 157,762
Premier Auto Trust 6.200% due 10/02/97...... 50,000 48,750
Prudential Home Mortgage Services 6.500% due
11/25/99................................... 526,433 517,857
Resolution Trust Corp.93-c1 flat rate due
05/25/24................................... 101,097 101,539
------------
TOTAL COLLATERALIZED OBLIGATIONS
(COST $1,803,538)............................ 1,733,252
------------
CORPORATE OBLIGATIONS (7.1%)
CONSUMER GOODS & SERVICES (0.0%)
BEVERAGES, FOOD, SOAP & TOBACCO (0.0%)
Boston Chicken Inc. 4.500% debenture due
2/01/04.................................... 16,000 11,760
------------
Total Consumer Goods & Services.......... 11,760
------------
ENERGY (0.6%)
OIL SERVICES (0.3%)
BP America Inc. 9.875% due 03/15/04......... 250,000 275,442
------------
OIL-PRODUCTION (0.3%)
E. I. Dupont De Nemours 8.650% due
12/01/97................................... 25,000 25,436
Nova Gas Transmission Ltd. 8.500% due
12/15/12................................... 200,000 199,844
Occidental Petroleum Corp. 9.250% due
8/01/19.................................... 150,000 156,509
------------
381,789
------------
Total Energy............................. 657,231
------------
</TABLE>
See Accompanying Notes.
28
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1A)
---------- ------------
FINANCE (3.4%)
<S> <C> <C>
FINANCIAL SERVICES (3.4%)
Abbey National Treasury Service
6.500% due 05/12/03............
300,000 $ 265,352
Bank of America Inc. 9.500% due
04/01/01.......................
1,025,000 1,064,996
Chemical Banking Corp. 10.125%
due 11/01/20...................
800,000 858,416
Chrysler Financial Corp.
10.340%, 05/15/08..............
550,000 564,905
Chrysler Financial Corp. 5.625%,
01/15/99.......................
500,000 454,375
First Chicago Corp..............
50,000 44,769
General Motors Acceptance Corp.
7.450% due 06/09/97............
500,000 488,045
Reed Publishing Inc. 9.000% due
07/10/96.......................
30,000 30,419
-----------
3,771,277
-----------
REAL ESTATE (0.0%)
Amoy Properties Ltds. due
12/29/49.......................
30,000 20,625
-----------
Total Finance................
3,791,902
-----------
INDUSTRIAL PRODUCTS & SERVICES (1.0%)
DIVERSIFIED INDUSTRIAL (1.0%)
Boeing Co. 7.250% due
06/15/25.......................
170,000 144,418
GTE Corp. 8.850% due 03/01/98...
1,000,000 1,013,090
-----------
Total Industrial Products &
Services....................
1,157,508
-----------
UTILITIES (1.9%)
Cooperative Utility Tr. Big
Rivers Electric Co. 9.500% due
02/15/17.......................
2,000,000 2,126,020
-----------
YANKEE (0.2%)
Ontario, Province of Canada
7.375% due 01/01/03............
200,000 187,886
-----------
TOTAL CORPORATE OBLIGATIONS (COST
$8,448,881).................................
7,932,307
-----------
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1A)
--------- -----------
<S> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS (12.7%)
Federal Home Loan Mortgage Corp.
Series 1580 6.500% due
09/15/98.......................
139,134 $ 133,761
Federal Home Loan Mortgage Corp.
Group 20-0052 8.500% due
09/01/01.......................
35,761 35,623
Federal Home Loan Mortgage Corp.
Gold 30 yr TBA.................
3,000,000 2,955,930
Federal Home Loan Mortgage Corp.
Gold 30 yr TBA Jan.............
7,300,000 7,272,625
Government National Mortgage
Association
Gold 30 yr TBA Jan.............
3,850,000 3,674,363
-----------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS (COST $13,964,714)..............
14,072,302
-----------
U.S. GOVERNMENT TREASURY OBLIGATIONS (14.8%)
U. S. Treasury Notes 5.500% due
07/31/97.......................
8,720,000 8,251,300
U. S. Treasury Notes 6.375% due
08/15/02.......................
4,500,000 4,121,460
U. S. Treasury Notes 6.250% due
02/15/03.......................
4,135,000 3,740,314
U. S. Treasury SC Strip 0.010%
due 08/15/04...................
300,000 142,404
U. S. Treasury Bonds 8.125% due
08/15/19.......................
150,000 152,049
-----------
TOTAL U.S. GOVERNMENT TREASURY
OBLIGATIONS (COST $16,590,195)...
16,407,527
-----------
TOTAL FIXED INCOME SECURITIES
(COST $41,129,195)...............
40,463,087
-----------
</TABLE>
See Accompanying Notes.
29
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1A)
--------- -----------
SHORT-TERM INVESTMENTS (16.3%)
<S> <C> <C>
REPURCHASE AGREEMENT (9.0%)
Goldman Sachs Repurchase
Agreement, 5.75% dated
12/30/94, due 01/03/95,
proceeds $10,001,386 (
collateralized by U.S. Treasury
Strip, 0.00% due 05/15/05,
valued at $10,195,330).........
9,995,000 $ 9,995,000
OTHER MUTUAL FUNDS (0.2%)
Seven Seas Money Market Fund....
197,972 197,972
U.S. GOVERNMENT TREASURY OBLIGATIONS (7.1%)
<CAPTION>
PRINCIPAL
AMOUNT
---------
<S> <C> <C>
U.S. Treasury Bills 5.525% due
03/09/95 (cost $1,818,237).....
$1,833,014 1,818,237
U.S. Treasury Bills 5.415% due
03/23/95 (cost $4,939,081).....
5,000,000 4,939,081
U.S. Treasury Bills 5.470% due
03/30/95 (cost $1,169,155).....
1,185,000 1,169,155
-----------
TOTAL U.S. GOVERNMENT TREASURY
OBLIGATIONS......................
7,926,473
-----------
TOTAL SHORT-TERM INVESTMENTS
(COST $18,119,445)...............
18,119,445
-----------
TOTAL INVESTMENTS (111.3%)
(COST $125,149,528).........................
123,687,476
OTHER LIABILITIES IN EXCESS OF
ASSETS (-11.3%).................
(12,516,443)
-----------
NET ASSETS (100.0%)..............
$111,171,033
-----------
-----------
<FN>
(a) Non-income producing securities
Note: Based on the cost of investments of $125,163,223, for Federal Income Tax
purposes at December 31, 1994, the aggregate gross unrealized appreciation
was $2,966,100, and the aggregate gross unrealized depreciation was
$4,441,847, resulting in net unrealized depreciation of investments of
$1,475,747.
</TABLE>
See Accompanying Notes.
30
<PAGE>
THE DIVERSIFIED PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
DECEMBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $125,149,528) (Note 1a) $123,687,476
Cash 669,094
Foreign Currency, at Value (Cost $298,217) 300,139
Receivable for Expense Reimbursements (Note 2c) 106,764
Receivable for Investments Sold 500,791
Dividends and Interest Receivable (Note 1e) 802,550
Foreign Tax Reclaim Receivable 5,082
Prepaid Expenses 3,520
Other Assets 7,364
-----------
Total Assets 126,082,780
-----------
LIABILITIES
Payable for Investments Purchased 14,553,050
Financial and Fund Accounting Services Fee Payable (Note 2c) 14,801
Unrealized Depreciation on Open Forward Foreign Currency Contracts (Note 1c) 4,580
Advisory Fee Payable (Note 2a) 78,893
Fund Services Fee Payable (Note 2d) 1,021
Custody Fee Payable 94,687
Administration Fee Payable (Note 2b) 586
Accrued Expenses 162,584
Foreign Withholding Taxes Payable 1,545
-----------
Total Liabilities 14,911,747
-----------
NET ASSETS
Applicable to Investor's Beneficial Interests $111,171,033
-----------
-----------
</TABLE>
See Accompanying Notes.
31
<PAGE>
THE DIVERSIFIED PORTFOLIO
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED DECEMBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME (NOTE 1D)
Dividends (Net of Foreign Withholding Tax of $10,760) $ 652,856
Interest (Net of Foreign Withholding Tax of $325) 1,170,739
----------
Investment Income $1,823,595
EXPENSES
Advisory Fee (Note 2a) 237,228
Custodian Fees and Expenses 101,953
Financial and Fund Accounting Services Fee (Note 2c) 14,801
Amortization of Organization Expense 500
Professional Fees 22,500
Fund Services Fee (Note 2d) 4,312
Administration Fee (Note 2b) 2,868
Trustees' Fees and Expenses (Note 2e) 944
Miscellaneous 2,019
----------
Total Expenses 387,125
Less: Reimbursement of Expenses (Note 2c) (106,764)
----------
Net Expenses 280,361
----------
NET INVESTMENT INCOME 1,543,234
NET REALIZED GAIN (LOSS) ON:
Investment Transactions (808,810)
Foreign Currency Transactions 100,013
----------
Net Realized Loss (708,797)
NET CHANGE IN UNREALIZED APPRECIATION OF:
Investments 784,347
Foreign Currency Contracts and Translations 78,502
----------
Net Change in Unrealized Appreciation 862,849
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $1,697,286
----------
----------
</TABLE>
See Accompanying Notes.
32
<PAGE>
THE DIVERSIFIED PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX JULY 8, 1993
MONTHS ENDED (COMMENCEMENT OF
DECEMBER 31, 1994 OPERATIONS) TO
(UNAUDITED) JUNE 30, 1994
------------------ -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 1,543,234 $ 1,031,220
Net Realized Gain (Loss) (708,797) 371,852
Net Change in Unrealized Appreciation (Depreciation) 862,849 (2,328,968)
------------------ -------------------
Net Increase (Decrease) in Net Assets Resulting from Operations 1,697,286 (925,896)
------------------ -------------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST
Contributions 50,123,039 76,730,148
Withdrawals (5,737,428) (10,816,216)
------------------ -------------------
Net Increase from Investors' Transactions 44,385,611 65,913,932
------------------ -------------------
Total Increase in Net Assets 46,082,897 64,988,036
NET ASSETS
Beginning of Period 65,088,136 100,100
------------------ -------------------
End of Period $ 111,171,033 $ 65,088,136
------------------ -------------------
------------------ -------------------
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX JULY 8, 1993
MONTHS ENDED (COMMENCEMENT OF
DECEMBER 31, 1994 OPERATIONS) TO
(UNAUDITED) JUNE 30, 1994
--------------------- --------------------
<S> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Expenses 0.65%(a) 0.70%(a)
Net Investment Income 3.58(a) 2.88%(a)
Decrease Reflected in Expense Ratio due to Expense Reimbursement by
Morgan 0.25(a) 0.48%(a)
Portfolio Turnover 65(b) 115%(b)
<FN>
- ------------------------
(a) Annualized.
(b) Not annualized.
</TABLE>
See Accompanying Notes.
33
<PAGE>
THE DIVERSIFIED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
DECEMBER 31, 1994
- --------------------------------------------------------------------------------
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, or at the quoted bid price in the over-the-counter market.
Securities listed on a foreign exchange are valued at the last quoted sale
price available before the time when net assets are valued. Unlisted
securities are valued at the average of the quoted bid and asked prices in
the over-the-counter market. Securities or other assets for which market
quotations are not readily available are valued at fair value in
accordance with procedures established by the Portfolio's Trustees. Such
procedures include the use of independent pricing services, which use
prices based upon yields or prices of securities of comparable quality,
coupon, maturity and type; indications as to values from dealers; and
general market conditions. All portfolio securities with a remaining
maturity of less than 60 days are valued by the amortized cost method.
Trading in securities on most foreign exchanges and over-the-counter
markets is normally completed before the close of the domestic market and
may also take place on days on which the domestic market is closed. If
events materially affecting the value of foreign securities occur between
the time when the exchange on which they are traded closes and the time
when the Portfolio's net 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.
34
<PAGE>
THE DIVERSIFIED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
DECEMBER 31, 1994
- --------------------------------------------------------------------------------
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 December
31, 1994 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 10/31/94 DEPRECIATION
- --------------------------------------------------- ------------ ------------ -------------
<S> <C> <C> <C>
Japanese Yen, settlement date, 1/13/95............. $ 1,534,093 $ 1,538,673 $ (4,580)
-------------
-------------
</TABLE>
d)The Portfolio incurred organization expenses in the amount of $5,000.
These costs were deferred and are being amortized by the Portfolio on a
straight-line basis over a five-year period from the commencement of
operations.
e)Securities transactions are recorded on a trade date basis. Dividend
income is recorded on the ex-dividend date or at the time that the
relevant ex-dividend date and amount becomes known. Interest income, which
includes the amortization of premiums and 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.
f)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 six months ended
December 31, 1994 such fees amounted to $237,228.
b)The Portfolio retains 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
35
<PAGE>
THE DIVERSIFIED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
DECEMBER 31, 1994
- --------------------------------------------------------------------------------
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 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 six months ended
December 31, 1994 such expenses amounted to $2,868.
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 six
months ended December 31, 1994, Morgan's fee amounted to $14,801. In
addition to the expenses that Morgan assumes under Service Agreement,
effective March 15, 1994, Morgan has voluntarily agreed to reimburse the
Portfolio to the extent necessary to maintain operating expenses of the
Portfolio at no more than 0.65% of the average daily net assets of the
Portfolio. For the six months ended December 31, 1994, Morgan agreed to
reimburse the Portfolio $106,764.
d)The Portfolio has a Fund Services Agreement with Pierpont Group, Inc.
("Group") to assist the Trustees in exercising their overall supervisory
responsibilities for the Portfolio's affairs. The Trustees of the
Portfolio represent all the existing shareholders of Group. The
Portfolio's allocated portion of Group's costs in performing its services
amounted to $4,312 for the six months ended December 31, 1994.
e)An aggregate annual fee of $55,000 is paid to each Trustee for serving as
a Trustee of the Pierpont Funds, The JPM Institutional Funds, The JPM
Institutional Plus Fund and their corresponding Portfolios. The Trustees'
Fees and Expenses shown in the financial statements represents the
Portfolio's allocated portion of the total fees and expenses.
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>
$98,371,847 $ 53,910,088
</TABLE>
36
