<PAGE>
LETTER TO THE SHAREHOLDERS OF THE J.P. MORGAN DIVERSIFIED FUND
February 1, 2000
Dear Shareholder:
We are pleased to report that the J.P. Morgan Diversified Fund earned a solid
6.81% for the six months ended December 31, 1999. The fund outperformed its
peers, as measured by the Lipper Balanced Fund Average, which returned 3.00%,
as well as its benchmark*, which returned 6.73%.
The fund's net asset value per share increased from $16.36 on June 30, 1999
to $16.72 on December 31, 1999. The fund made distributions during the period
of approximately $0.18 per share from ordinary income, approximately $0.21
per share from short-term capital gains, and approximately $0.34 per share
from long-term capital gains. The fund's net assets stood at approximately
$338.6 million at the end of December, while the net assets of the master
portfolio, in which the fund invests, totaled approximately $1.0 billion.
The report that follows includes an interview with John M. Devlin, Jr., the
portfolio manager primarily responsible for the master portfolio. In this
interview, John discussed events in the financial markets, portfolio
performance, and what he sees on the horizon.
As chairman and president of Asset Management Services, we appreciate your
investment in the fund. If you have any comments or questions, please call
your Morgan representative or J.P. Morgan Funds Services at (800) 521-5411.
Sincerely yours,
/s/ Ramon de Oliveira /s/ Keith M. Schappert
Ramon de Oliveira Keith M. Schappert
Chairman of Asset Management Services President of Asset Management Services
J.P. Morgan & Co. Incorporated J.P. Morgan & Co. Incorporated
*COMPRISED OF 52% S&P 500 INDEX, 35% SALOMON BROTHERS BROAD INVESTMENT GRADE
BOND INDEX, 10% MSCI EAFE INDEX, AND 3% RUSSELL 2000 INDEX.
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
LETTER TO THE SHAREHOLDERS ....... 1 FUND FACTS AND HIGHLIGHTS.......... 5
FUND PERFORMANCE ................. 2 FINANCIAL STATEMENTS .............. 8
PORTFOLIO MANAGER Q&A ............ 3
- --------------------------------------------------------------------------------
1
<PAGE>
FUND PERFORMANCE
EXAMINING PERFORMANCE
One way to look at performance is to review a fund's average annual total
return. This figure takes the fund's actual (or cumulative) return and shows
what would have happened if the fund had achieved that return by performing
at a constant rate each year. Average annual total returns represent the
average yearly change of a fund's value over various time periods, typically
one, five, or ten years (or since inception). Total returns for periods of
less than one year are not annualized and provide a picture of how a fund has
performed over the short term.
<TABLE>
<CAPTION>
PERFORMANCE TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS
---------------- -------------------------------------
THREE SIX ONE THREE FIVE SINCE
AS OF DECEMBER 31, 1999 MONTHS MONTHS YEAR YEARS YEARS INCEPTION*
- --------------------------------------------------- -------------------------------------
<S> <C> <C> <C> <C> <C> <C>
J.P. Morgan Diversified Fund 9.55% 6.81% 13.87% 16.86% 18.01% 14.53%
Diversified Benchmark** 9.79% 6.73% 13.71% 18.34% 19.29% 15.50%
S&P500 Index 14.88% 7.70% 21.04% 27.56% 28.55% 22.96%
Salomon Brothers Broad
Investment Grade Bond Index -0.16% 0.56% -0.83% 5.73% 7.74% 5.66%
MSCI EAFE Index 16.99% 22.12% 26.96% 15.74% 12.83% 11.62%
Russell 2000 Index 18.44% 10.96% 21.26% 13.08% 16.69% 13.28%
Lipper Balanced Fund Average 7.59% 3.00% 8.73% 13.78% 16.24% 12.69%
</TABLE>
*PERFORMANCE FROM SEPTEMBER 10, 1993, THROUGH DECEMBER 15, 1993 (COMMENCEMENT
OF OPERATIONS) REFLECTS PERFORMANCE OF THE J.P. MORGAN INSTITUTIONAL
DIVERSIFIED FUND WHICH HAD A LOWER EXPENSE RATIO. THE FUND'S INCEPTION DATE
IS SEPTEMBER 10, 1993 AND HAS PROVIDED A TOTAL RETURN OF 14.23% THROUGH
DECEMBER 31, 1999. FOR PURPOSES OF COMPARISON, THE "SINCE INCEPTION" RETURNS
IN THE TABLE ABOVE ARE CALCULATED FROM SEPTEMBER 30, 1993, THE FIRST DATE
WHEN DATA FOR THE FUND, ITS BENCHMARK, AND LIPPER CATEGORY AVERAGE WERE ALL
AVAILABLE.
**COMPRISED OF 52% S&P 500 INDEX, 35% SALOMON BROTHERS BROAD INVESTMENT GRADE
BOND INDEX, 10% MSCI EAFE INDEX, AND 3% RUSSELL 2000 INDEX. THE INDICES ARE
UNMANAGED PORTFOLIOS THAT MEASURE MARKET PERFORMANCE. THEY DO NOT INCLUDE
FEES OR OPERATING EXPENSES, AND ARE NOT AVAILABLE FOR ACTUAL INVESTMENT.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. FUND RETURNS ARE NET OF
FEES, ASSUME THE REINVESTMENT OF FUND DISTRIBUTIONS, AND REFLECT REIMBURSEMENT
OF CERTAIN FUND AND PORTFOLIO EXPENSES AS DESCRIBED IN THE PROSPECTUS. HAD
EXPENSES NOT BEEN SUBSIDIZED, RETURNS WOULD HAVE BEEN LOWER. LIPPER ANALYTICAL
SERVICES, INC. IS A LEADING SOURCE FOR MUTUAL FUND DATA.
2
<PAGE>
PORTFOLIO MANAGER Q&A
[PHOTO]
The following is an interview with JOHN M. DEVLIN, JR., vice president and
member of the portfolio management team for the master portfolio. John joined
J.P. Morgan in 1986. At Morgan, he was on special assignment in the Frankfurt
office and, prior to that, spent six years on the fixed-income trading desk
as a mortgage and corporate specialist. Before joining Morgan, John was a
pension fund manager and Treasury manager during his 12 years with U.S.
Steel. He has his B.S. in Finance from Georgetown and his M.B.A. from Pace
University. He was an adjunct professor of Finance at Pace University for 10
years. This interview took place on January 25, 2000, and reflects John's
views on that date.
HOW DID THE MARKETS IN WHICH THE PORTFOLIO INVESTS PERFORM OVER THE SIX-MONTH
PERIOD ENDED DECEMBER 31, 1999?
JD: Large-cap U.S. stocks were extremely volatile during the second half of
1999, coming under heavy pressure in the third quarter, yet rebounding during
the last three months of the year. The S&P 500 was up 14.88% for the fourth
quarter, bringing the six-month return to 7.70%. Small-cap stocks, as
measured by the Russell 2000, followed a similar path, struggling during the
third quarter, but returning 18.44% in the fourth quarter, settling in at a
robust 10.96% for the six-month period. A rebound in global growth was
evident in foreign markets as well, with the MSCI EAFE returning 22.12% (in
U.S. dollar terms) for the second half of the year.
Fixed income markets continued to have a difficult time as the Federal
Reserve began raising short-term rates in June and corporate issuers flooded
the market, adding liquidity to their respective balance sheets well ahead of
Y2K. The bond market, as measured by the Salomon Brothers Broad Investment
Grade (BIG) Bond Index, returned only 0.56% for the six months, reflecting
the significant rise in interest rates across the yield curve.
IN LIGHT OF THE MARKET ENVIRONMENT, HOW DID THE FUND PERFORM?
JD: I am pleased to report that the fund continued to surpass its peer group
for the six-month period. The fund posted a net return of 6.81% for the
period versus the Lipper Balanced Fund Average's return of 3.00%. In
addition, the consistency of returns places the fund in the top 20% among its
223 peers for the past five years*. The fund also outperformed its benchmark
(comprised of 52% S&P 500, 35% Salomon BIG, 10% MSCI EAFE, and 3% Russell
2000), which posted a 6.73% return for the past six months.
Once again, this significant achievement is a direct result of bringing
together all of the excellent work we do at J.P. Morgan. The fund's
performance is driven by fundamental research of our worldwide network of
equity and fixed income analysts. Our portfolio construction methodology
(i.e., picking the right securities)
*THE FUND RANKED IN THE 20TH PERCENTILE OUT OF 448 FUNDS FOR THE ONE-YEAR
PERIOD ENDED 12/31/99.
3
<PAGE>
bolstered this performance. Add to this the fund's flexibility to diversify
into small caps, fixed income, and international equities, and the results
are an overall strategy that reduces risk - critically important in these
volatile times - and leads to consistently positive returns. As a matter of
fact, the annualized return for the fund for the five years ended December
31, 1999 was 18.01% compared to the 16.24% for the Lipper Balanced Fund
Average. We are very proud of our capabilities to produce this strong
performance for our clients.
WHICH SECURITY SELECTION AND ASSET ALLOCATION DECISIONS CONTRIBUTED THE MOST TO
THE PORTFOLIO'S PERFORMANCE FOR THE SIX MONTHS?
JD: Within the S&P 500, the technology sector returned over 42% for the
period, and has subsequently risen to comprise almost 30% of the market
capitalization of the index. Our portfolio construction discipline and
research has us owning Sun Microsystems and Cisco Systems, both of which were
up significantly over the six months and added to performance. Holdings in
Forest Labs, Citigroup, Procter & Gamble, Warner Lambert, and Microsoft all
contributed positively as well, and were some of our biggest holdings. An
overweight allocation to small caps and international equities also added
significantly to returns. Likewise, an underweight position in fixed income
coupled with shorter-than-the-index duration contributed positively to
returns.
WHICH HOLDINGS AND ALLOCATION DECISIONS DETRACTED FROM THE PORTFOLIO'S
PERFORMANCE?
JD: Not owning several very strong stocks - namely Qualcomm and Nortel
Networks - negatively impacted performance. In addition, large-cap stocks
continued to perform at record levels and we maintained a modest underweight
to this asset class. This underweight, however, was more than offset by the
performance of small caps and international equities during the period.
WHAT IS YOUR OUTLOOK FOR THE COMING MONTHS? HOW WILL YOU POSITION THE PORTFOLIO
AS A RESULT?
JD: Six months ago we discussed the possible disruptions to the market as
investors focused on Y2K-related problems. The equity markets successfully
weathered these concerns as global growth continued to push valuations
higher. Global economic growth is continuing to recover, providing a good
backdrop for stocks, translating into higher volume growth and better
earnings. Consumer confidence remains at historically high levels and should
continue to underpin growth. Inflation around the world has remained very
subdued in recent years due to excess capacity in Europe, Japan, and the
emerging markets. As growth progressively erodes this excess capacity,
inflation will pose an increased risk, especially in the United States. We
expect that central banks will correctly anticipate this and raise rates
accordingly, driving bond yields higher in the process. We expect stocks to
outperform bonds, although equity valuations remain high and will require
strong earnings to validate them.
4
<PAGE>
FUND FACTS
INVESTMENT OBJECTIVE
J.P. Morgan 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 of their
investments, but with somewhat less price fluctuation than a portfolio
consisting solely of equity securities.
- ------------------------------------------------------------------------------
COMMENCEMENT OF INVESTMENT OPERATIONS
12/15/93
- ------------------------------------------------------------------------------
FUND NET ASSETS AS OF 12/31/99
$338,576,197
- ------------------------------------------------------------------------------
PORTFOLIO NET ASSETS AS OF 12/31/99
$1,007,685,639
- ------------------------------------------------------------------------------
DIVIDEND PAYABLE DATES
QUARTERLY
- ------------------------------------------------------------------------------
CAPITAL GAIN PAYABLE DATE (IF APPLICABLE)
12/20/00
EXPENSE RATIO
The fund's current annualized expense ratio of 0.96% covers shareholders'
expenses for custody, tax reporting, investment advisory and shareholder
services, after reimbursement. The fund is no-load and does not charge any
sales, redemption, or exchange fees. There are no additional charges for
buying, selling, or safekeeping fund shares, or for wiring redemption
proceeds from the fund.
FUND HIGHLIGHTS
ALL DATA AS OF DECEMBER 31, 1999
DIVERSIFIED STRATEGY
[CHART]
U.S. LARGE-CAP EQUITIES 52.0%
FIXED INCOME 35.0%
INTERNATIONAL EQUITIES 10.0%
U.S.SMALL-CAP EQUITIES 3.0%
ASSET ALLOCATION AS OF 12/31/99*
(PERCENTAGE OF TOTAL INVESTMENTS)
U.S. LARGE-CAP EQUITIES 47.1%
FIXED INCOME 28.8%
INTERNATIONAL EQUITIES 14.1%
U.S.SMALL-CAP EQUITIES 5.5%
SHORT-TERM & OTHER INVESTMENTS 4.5%
TOP 10 HOLDINGS
(EXCLUDING SHORT-TERM INVESTMENTS) % OF TOTAL INVESTMENTS
- -----------------------------------------------------------
MICROSOFT CORP. 2.6%
FNMA TBA JANUARY, 7.5% DUE 1/1/30 2.1%
FNMA TBA JANUARY, 6.5% DUE 9/1/28 2.0%
FNMA TBA JANUARY, 6.0% DUE 9/1/28 1.9%
FNMA TBA JANUARY, 7.0% DUE 1/1/30 1.8%
GENERAL ELECTRIC CO. 1.8%
CISCO SYSTEMS, INC. 1.7%
INTEL CORP. 1.4%
EXXON MOBIL CORP. 1.3%
LUCENT TECHNOLOGIES, INC. 1.2%
*ASSET ALLOCATION IS BASED ON A PERCENTAGE OF TOTAL INVESTMENTS WHICH
EXCLUDES CASH COLLATERAL INVESTED IN SHORT-TERM SECURITIES USED FOR PURCHASES
MADE BUT NOT YET SETTLED.
5
<PAGE>
DISTRIBUTED BY FUNDS DISTRIBUTOR, INC. J.P. MORGAN INVESTMENT MANAGEMENT INC.
SERVES AS INVESTMENT ADVISOR. SHARES OF THE FUND ARE NOT BANK DEPOSITS AND
ARE NOT GUARANTEED BY ANY BANK, GOVERNMENT ENTITY, OR THE FDIC. RETURN AND
SHARE PRICE WILL FLUCTUATE AND REDEMPTION VALUE MAY BE MORE OR LESS THAN
ORIGINAL COST.
References to specific securities and their issuers are for illustrative
purposes only and are not intended to be, and should not be interpreted as,
recommendations to purchase or sell such securities. Opinions expressed
herein are based on current market conditions and are subject to change
without notice. The fund invests in a master portfolio (another fund with the
same objective). The portfolio invests in foreign securities, which are
subject to special risks. Prospective investors should refer to the
prospectus for a discussion of these risks.
CALL J.P. MORGAN FUNDS SERVICES AT (800) 521-5411 FOR A PROSPECTUS CONTAINING
MORE COMPLETE INFORMATION ABOUT THE FUND INCLUDING MANAGEMENT FEES AND OTHER
EXPENSES. PLEASE READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
6
<PAGE>
THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY
<PAGE>
J.P. MORGAN DIVERSIFIED FUND
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment in The Diversified Portfolio
("Portfolio"), at value $338,542,641
Receivable for Shares of Beneficial Interest Sold 304,786
Prepaid Trustees' Fees 839
Prepaid Expenses and Other Assets 1,172
------------
Total Assets 338,849,438
------------
LIABILITIES
Payable for Shares of Beneficial Interest
Redeemed 158,350
Shareholder Servicing Fee Payable 69,545
Dividends Payable to Shareholders 7,799
Administrative Services Fee Payable 7,020
Administration Fee Payable 343
Fund Services Fee Payable 299
Accrued Expenses 29,885
------------
Total Liabilities 273,241
------------
NET ASSETS
Applicable to 20,252,952 Shares of Beneficial
Interest Outstanding
(par value $0.001, unlimited shares authorized) $338,576,197
============
Net Asset Value, Offering and Redemption Price
Per Share $16.72
-----
-----
ANALYSIS OF NET ASSETS
Paid-in Capital $280,425,951
Distribution in Excess of Net Investment Income (217,030)
Accumulated Net Realized Gain on Investment 5,213,075
Net Unrealized Appreciation of Investment 53,154,201
------------
Net Assets $338,576,197
============
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
8
<PAGE>
J.P. MORGAN DIVERSIFIED FUND
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME ALLOCATED FROM PORTFOLIO
Allocated Interest Income $ 3,516,461
Allocated Dividend Income (Net of Foreign
Withholding Tax of $35,620) 1,271,040
Allocated Portfolio Expenses (Net of
Reimbursement of $14,808) (1,000,087)
-----------
Net Investment Income Allocated from
Portfolio 3,787,414
FUND EXPENSES
Shareholder Servicing Fee $387,534
Administrative Services Fee 39,166
Transfer Agent Fees 19,305
Registration Fees 12,190
Printing Expenses 7,373
Professional Fees 6,501
Fund Services Fee 2,555
Administration Fee 2,143
Trustees' Fees and Expenses 1,075
Miscellaneous 7,774
--------
Total Fund Expenses 485,616
Less: Reimbursement of Expenses (505)
--------
NET FUND EXPENSES 485,111
-----------
NET INVESTMENT INCOME 3,302,303
NET REALIZED GAIN ON INVESTMENT ALLOCATED FROM
PORTFOLIO 7,279,009
NET CHANGE IN UNREALIZED APPRECIATION OF
INVESTMENT ALLOCATED FROM PORTFOLIO 12,115,816
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $22,697,128
===========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
9
<PAGE>
J.P. MORGAN DIVERSIFIED FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE FISCAL
DECEMBER 31, 1999 YEAR ENDED
(UNAUDITED) JUNE 30, 1999
----------------- --------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 3,302,303 $ 5,365,639
Net Realized Gain on Investment Allocated from
Portfolio 7,279,009 9,650,906
Net Change in Unrealized Appreciation of
Investment Allocated from Portfolio 12,115,816 14,614,060
---------------- -------------
Net Increase in Net Assets Resulting from
Operations 22,697,128 29,630,605
---------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (3,551,752) (5,528,201)
Net Realized Gain (10,741,495) (4,482,373)
---------------- -------------
Total Distributions to Shareholders (14,293,247) (10,010,574)
---------------- -------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Proceeds from Shares of Beneficial Interest Sold 82,367,855 69,944,828
Reinvestment of Dividends and Distributions 14,141,810 9,806,241
Cost of Shares of Beneficial Interest Redeemed (32,663,365) (60,108,797)
---------------- -------------
Net Increase from Shareholder Transactions 63,846,300 19,642,272
---------------- -------------
Total Increase in Net Assets 72,250,181 39,262,303
NET ASSETS
Beginning of Period 266,326,016 227,063,713
---------------- -------------
End of Period (including undistributed net
investment income of $0 and $32,419,
respectively) $ 338,576,197 $ 266,326,016
================ =============
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
10
<PAGE>
J.P. MORGAN DIVERSIFIED FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share outstanding throughout each period are as follows:
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS ENDED FOR THE FISCAL YEAR ENDED JUNE 30,
DECEMBER 31, 1999 -------------------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
----------------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 16.36 $ 15.06 $ 13.89 $ 12.22 $ 11.20 $ 9.81
---------------- -------- -------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.17 0.34 0.33 0.37 0.30 0.28
Net Realized and Unrealized Gain on
Investment 0.92 1.61 2.03 2.02 1.48 1.37
---------------- -------- -------- ------- ------- -------
Total from Investment Operations 1.09 1.95 2.36 2.39 1.78 1.65
---------------- -------- -------- ------- ------- -------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (0.18) (0.35) (0.53) (0.32) (0.32) (0.20)
Net Realized Gain (0.55) (0.30) (0.66) (0.40) (0.44) (0.06)
---------------- -------- -------- ------- ------- -------
Total Distributions to Shareholders (0.73) (0.65) (1.19) (0.72) (0.76) (0.26)
---------------- -------- -------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 16.72 $ 16.36 $ 15.06 $ 13.89 $ 12.22 $ 11.20
================ ======== ======== ======= ======= =======
RATIOS AND SUPPLEMENTAL DATA
Total Return 6.81%(a) 13.35% 18.06% 20.52% 16.51% 17.08%
Net Assets, End of Period (in thousands) $ $338,576 $266,326 $227,064 $70,338 $53,198 $22,396
Net Expenses 0.96%(b) 0.98% 0.98% 0.98% 0.98% 0.98%
Net Investment Income 2.12%(b) 2.22% 2.81% 3.00% 3.04% 3.39%
Expenses Without Reimbursement 0.97%(b) 1.01% 1.07% 1.25% 1.36% 1.89%
</TABLE>
- ------------------------
(a) Not Annualized.
(b) Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
11
<PAGE>
J.P. MORGAN DIVERSIFIED FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
J.P. Morgan Diversified Fund (the "fund") is a separate series of J.P. Morgan
Funds, a Massachusetts business trust (the "trust"), which was organized on
November 4, 1992. The trust is registered under the Investment Company Act of
1940, as amended, as a diversified, open-end management investment company. The
fund commenced operations on December 15, 1993.
The fund invests all of its investable assets in The Diversified Portfolio (the
"portfolio"), a no-load diversified, open-end management investment company
having the same investment objective as the fund. The value of such investment
included in the Statement of Assets and Liabilities reflects the fund's
proportionate interest in the net assets of the portfolio (34% at December 31,
1999 ). The performance of the fund is directly affected by the performance of
the portfolio. The financial statements of the portfolio, including the Schedule
of Investments, are included elsewhere in this report and should be read in
conjunction with the fund's financial statements.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual amounts could differ from
those estimates. The following is a summary of the significant accounting
policies of the fund:
a) Valuation of securities by the portfolio is discussed in Note 1a of the
portfolio's Notes to Financial Statements which are included elsewhere in
this report.
b) The fund records its share of net investment income, realized and
unrealized gain and loss and adjusts its investment in the portfolio each
day. All the net investment income and realized and unrealized gain and
loss of the portfolio is allocated pro rata among the funds and other
investors in the portfolio at the time of such determination.
c) Substantially all the fund's net investment income is declared and paid as
dividends quarterly. Distributions to shareholders of net realized capital
gains, if any, are declared and paid annually.
d) The fund is treated as a separate entity for federal income tax purposes
and intends to comply with the provisions of the Internal Revenue Code of
1986, as amended, applicable to regulated investment companies and to
distribute substantially all of its income, including net realized capital
gains, if any, within the prescribed time periods. Accordingly, no
provision for federal income or excise tax is necessary.
e) 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.
TRANSACTIONS WITH AFFILIATES
a) The trust, on behalf of the fund, has retained Funds Distributor, Inc.
("FDI"), a registered broker-dealer, to serve as co-administrator and
distributor for the fund. Under a Co-Administration Agreement between FDI
and the trust on behalf of the fund, FDI provides administrative services
necessary for the operations of the fund, furnishes office space and
facilities required for conducting the business of the fund and pays the
compensation of the fund's officers affiliated with FDI. The fund has
12
<PAGE>
J.P. MORGAN DIVERSIFIED FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
agreed to pay FDI fees equal to its allocable share of an annual
complex-wide charge of $425,000 plus FDI's out-of-pocket expenses. The
amount allocable to the fund is based on the ratio of the fund's net
assets to the aggregate net assets of the trust and certain other
investment companies subject to similar agreements with FDI. For the six
months ended December 31, 1999, the fee for these services amounted to
$2,143.
b) The trust, on behalf of the fund, has an Administrative Services Agreement
(the "Services Agreement") with Morgan Guaranty Trust Company of New York
("Morgan"), a wholly owned subsidiary of J.P. Morgan & Co. Incorporated
("J.P. Morgan"), under which Morgan is responsible for certain aspects of
the administration and operation of the fund. Under the Services
Agreement, the fund has agreed to pay Morgan a fee equal to its allocable
share of an annual complex-wide charge. This charge is calculated based on
the aggregate average daily net assets of the portfolio and other
portfolios in which the trust and the J.P. Morgan Institutional Funds
invest (the "master portfolios") and J.P. Morgan Series Trust in
accordance with the following annual schedule: 0.09% on the first $7
billion of their aggregate average daily net assets and 0.04% of their
aggregate average daily net assets in excess of $7 billion less the
complex-wide fees payable to FDI. The portion of this charge payable by
the fund is determined by the proportionate share that its net assets bear
to the net assets of the trust, the master portfolios, other investors in
the master portfolios for which Morgan provides similar services, and J.P.
Morgan Series Trust. For the six months ended December 31, 1999, the fee
for these services amounted to $39,166.
In addition, J.P. Morgan has agreed to reimburse the fund to the extent
necessary to maintain the total operating expenses of the fund, including
the expenses allocated to the fund from the portfolio, at no more than
1.00% (prior to November 1, 1999, 0.98% was used) of the average daily net
assets of the fund through October 31, 2000. For the six months ended
December 31, 1999, J.P. Morgan has agreed to reimburse the fund $15,313
for expenses under this agreement.
c) The trust, on behalf of the fund, has a Shareholder Servicing Agreement
with Morgan to provide account administration and personal account
maintenance service to fund shareholders. The agreement provides for the
fund to pay Morgan a fee for these services which is computed daily and
paid monthly at an annual rate of 0.25% of the average daily net assets of
the fund. For the six months ended December 31, 1999, the fee for these
services amounted to $387,534.
Morgan, Charles Schwab & Co. ("Schwab") and the trust are parties to
separate services and operating agreements (the "Schwab Agreements")
whereby Schwab makes fund shares available to customers of investment
advisors and other financial intermediaries who are Schwab's clients. The
fund is not responsible for payments to Schwab under the Schwab
Agreements; however, in the event the services agreement with Schwab is
terminated for reasons other than a breach by Schwab and the relationship
between the trust and Morgan is terminated, the fund would be responsible
for the ongoing payments to Schwab with respect to pre-termination shares.
d) The trust, on behalf of the fund, has a Fund Services Agreement with
Pierpont Group, Inc. ("Group") to assist the trustees in exercising their
overall supervisory responsibilities for the trust's affairs. The trustees
of the trust represent all the existing shareholders of Group. The fund's
allocated portion of Group's costs in performing its services amounted to
$2,555 for the six months ended December 31, 1999.
13
<PAGE>
J.P. MORGAN DIVERSIFIED FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
e) An aggregate annual fee of $75,000 is paid to each trustee for serving as
a trustee of the trust, the J.P. Morgan Institutional Funds, the master
portfolios, and J.P. Morgan Series Trust. The Trustees' Fees and Expenses
shown in the financial statements represents the fund's allocated portion
of the total fees and expenses. The trust's Chairman and Chief Executive
Officer also serves as Chairman of Group and receives compensation and
employee benefits from Group in his role as Group's Chairman. The
allocated portion of such compensation and benefits included in the Fund
Services Fee shown in the financial statements was $500.
3. TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the trustees to issue an unlimited number of
full and fractional shares of beneficial interest of one or more series.
Transactions in shares of beneficial interest of the fund were as follows:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE FISCAL
DECEMBER 31, 1999 YEAR ENDED
(UNAUDITED) JUNE 30, 1999
----------------- --------------
<S> <C> <C>
Shares sold...................................... 5,105,904 4,535,106
Reinvestment of dividends and distributions...... 866,503 647,401
Shares redeemed.................................. (1,993,750) (3,984,763)
---------------- -------------
Net Increase..................................... 3,978,657 1,197,744
================ =============
</TABLE>
From time to time, the fund may have a concentration of several shareholders
holding a significant percentage of shares outstanding. Investment activities of
these shareholders could have a material impact on the fund and portfolio.
4. CREDIT AGREEMENT
The trust, on behalf of the fund, together with other affiliated investment
companies (the "funds"), entered into a revolving line of credit agreement (the
"Agreement") on May 27, 1998, with unaffiliated lenders. Additionally, since all
of the investable assets of the fund are in the portfolio, the portfolio is
party to certain covenants of the Agreement. The Agreement expired on May 26,
1999, however, the fund as party to the Agreement has renewed the Agreement and
will continue its participation therein for an additional 364 days until
May 23, 2000. The maximum borrowing under the new agreement is $150,000,000. The
purpose of the Agreement is to provide another alternative for settling large
fund shareholder redemptions. Interest on any such borrowings outstanding will
approximate market rates. The fund pays a commitment fee at an annual rate of
0.085% (0.065% prior to May 26, 1999) on the unused portion of the committed
amount. This is allocated to the funds in accordance with procedures established
by their respective trustees. There were no outstanding borrowings pursuant to
the Agreement at December 31, 1999.
14
<PAGE>
The Diversified Portfolio
Semi-annual Report December 31, 1999
(unaudited)
(The following pages should be read in conjunction
with J.P. Morgan Diversified Fund
Semi-annual Financial Statements)
15
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------------- ---------------
<S> <C> <C>
EQUITIES (65.9%)
COMMON STOCK (65.7%)
FOREIGN COMMON STOCK (16.1%)
AUSTRALIA (0.1%)
AMP Ltd. (Insurance)(s).......................... 8,900 $ 97,991
Broken Hill Proprietary Company Ltd. (Metals &
Mining)(s)..................................... 11,200 146,548
CSR Ltd. (Building Materials)(s)................. 25,300 61,240
Foster's Brewing Group Ltd. (Food, Beverages &
Tobacco)(s).................................... 15,400 44,026
Lend Lease Corp. Ltd. (Financial Services)(s).... 6,400 89,348
National Australia Bank Ltd. (Banking)(s)........ 14,500 221,021
Santos Ltd. (Oil-Production)(s).................. 21,800 59,185
Southcorp Ltd. (Food, Beverages & Tobacco)(s).... 23,100 81,152
Telstra Corp. Ltd. (Telecommunication
Services)(s)................................... 36,500 197,712
Telstra Corp. Ltd. (Telecommunication
Services)+(s).................................. 15,332 53,862
Westpac Banking Corp. Ltd. (Banking)(s).......... 15,700 107,917
WMC Ltd. (Metals & Mining)(s).................... 15,700 86,276
Woolworths Ltd. (Retail)(s)...................... 18,200 62,390
--------------
1,308,668
--------------
AUSTRIA (0.1%)
Bank Austria AG (Banking)(s)..................... 10,222 576,639
--------------
BELGIUM (0.0%)
Real Software (Computer Software)(s)............. 712 56,518
--------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------------- ---------------
<S> <C> <C>
BERMUDA (0.9%)
Annuity and Life Re, Ltd. (Insurance)............ 14,000 $ 364,875
Global Crossing Ltd. (Telephone)+................ 44,000 2,198,625
RenaissanceRe Holdings Ltd. (Insurance).......... 10,600 433,275
Tyco International Ltd. (Diversified
Manufacturing)................................. 149,000 5,792,375
--------------
8,789,150
--------------
CANADA (0.4%)
Cinar Corp., Class B (Entertainment, Leisure &
Media)+........................................ 14,200 353,225
Nortel Networks Corp. (Telecommunications-
Equipment)..................................... 4,700 474,700
Seagram Company Ltd. (Entertainment, Leisure &
Media)......................................... 80,100 3,599,494
--------------
4,427,419
--------------
DENMARK (0.0%)
Ratin A/S, B Shares (Holding Companies)(s)....... 1,256 141,184
--------------
FINLAND (0.4%)
Nokia OYJ (Telecommunications-Equipment)(s)...... 10,609 1,923,655
Sonera OYJ (Telecommunication Services)(s)....... 5,773 395,740
Stora Enso OYJ, R Shares (Forest Products &
Paper)(s)...................................... 55,713 956,953
Tietoenator OYJ (Computer Software)(s)........... 5,408 337,760
--------------
3,614,108
--------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
16
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------------- ---------------
<S> <C> <C>
FRANCE (1.3%)
Alstom SA (Railroads)(s)......................... 13,969 $ 416,315
Atos SA (Computer Systems)+(s)................... 1,231 146,231
Aventis SA (Pharmaceuticals)(s).................. 15,389 475,930
AXA (Insurance)(s)............................... 5,824 194,775
Banque Nationale de Paris (Financial
Services)(s)................................... 9,022 463,034
Business Objects SA - Spon. ADR (Computer
Software)+(s).................................. 1,100 204,112
Carrefour SA (Retail)(s)......................... 3,738 832,489
Castorama Dubois Investissement SA (Retail)(s)... 1,214 521,648
Christian Dior SA (Retail)(s).................... 1,253 298,795
CNP Assurances (Insurance)(s).................... 4,600 811,966
Coflexip SA (Oil-Services)(s).................... 1,348 169,412
Compagnie de Saint Gobain SA (Building
Materials)(s).................................. 2,462 323,081
Groupe Danone (Food, Beverages & Tobacco)(s)..... 2,213 353,525
Lagardere S.C.A. (Multi - Industry)(s)........... 6,499 97,973
Louis Vuitton Moet Hennessy (Food, Beverages &
Tobacco)(s).................................... 667 2,926,547
Pinault-Printemps-Redoute SA (Retail)(s)......... 2,007 894,457
Renault SA (Automotive)(s)....................... 4,040 465,772
Rhodia SA (Chemicals)(s)......................... 18,417 689,458
STMicroelectronics NV (Electronics)(s)........... 3,092 369,323
Suez Lyonnaise des Eaux (Utilities)(s)........... 1,230 310,503
Total Fina SA, B Shares (Oil-Services)(s)........ 21,926 529,699
Usinor SA (Metals & Mining)(s)................... 17,197 197,131
Vivendi (Utilities)(s)........................... 18,680 1,686,970
--------------
13,379,146
--------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------------- ---------------
<S> <C> <C>
GERMANY (1.2%)
BASF AG (Chemicals)(s)........................... 11,835 $ 306,999
Bayer AG (Chemicals)(s).......................... 6,402 370,443
Bilfinger & Berger Bau AG (Construction &
Housing)(s).................................... 6,400 12,253
Celanese AG (Chemicals)+(s)...................... 672 1,437,170
Consors Discount Broker AG (Financial
Services)+(s).................................. 2,286 888,337
DaimlerChrysler AG (Automotive)(s)............... 11,423 1,005,149
Deutsche Bank AG (Banking)(s).................... 11,900 84,214
Deutsche Telekom AG (Utilities)+(s).............. 23,216 608,021
Dresdener Bank AG (Banking)(s)................... 6,810 303,105
Entrium Direct Bankers AG (Banking)+(s).......... 5,500 584,709
Hochtief AG (Construction & Housing)(s).......... 4,800 139,256
Mannesmann AG (Diversified Manufacturing)(s)..... 11,057 178,905
Marschollek Lautenschlaeger und Partner AG
(Financial Services)(s)........................ 663 2,667,615
SAP AG (Computer Software)(s).................... 1,187 399,492
Schering AG (Pharmaceuticals)(s)................. 1,995 191,132
Siemens AG (Electrical Equipment)+(s)............ 11,296 200,362
Stinnes AG (Transport & Services)(s)............. 22,066 241,159
Thyssen Krupp AG (Diversified
Manufacturing)(s).............................. 13,110 466,792
VEBA AG (Utilities)(s)........................... 11,791 1,653,435
Volkswagen AG (Automotive)(s).................... 5,447 573,097
--------------
12,311,645
--------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
17
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------------- ---------------
<S> <C> <C>
HONG KONG (0.3%)
Cable and Wireless Ltd. (Telecommunication
Services)(s)................................... 91,600 $ 263,086
Cheung Kong Holdings Ltd. (Real Estate)(s)....... 37,000 130,031
Dao Heng Bank Group Ltd. (Banking)(s)............ 51,000 139,107
Hongkong Electric Holdings Ltd. (Electric)(s).... 44,500 770,438
Hutchison Whampoa Ltd. (Multi - Industry)(s)..... 53,000 468,836
SmarTone Telecommunications Holdings Ltd.
(Telecommunication Services)(s)................ 48,000 323,020
Sun Hung Kai Properties Ltd. (Real Estate)(s).... 31,000 264,542
Wharf Holdings Ltd. (Holding Companies)(s)....... 56,000 231,556
--------------
2,590,616
--------------
IRELAND (0.1%)
Bank of Ireland (Banking)(s)..................... 34,849 277,330
CRH PLC (Building Materials)(s).................. 12,893 278,094
Irish Life and Permanent PLC (Financial
Services)(s)................................... 16,258 153,948
Jefferson Smurfit Group PLC (Forest Products &
Paper)(s)...................................... 114,274 345,342
--------------
1,054,714
--------------
ITALY (0.5%)
Assicurazioni Generali SPA (Insurance)(s)........ 8,279 573,387
Banca Fideuram SPA (Financial Services)(s)....... 51,365 452,773
Banca Nazionale del Lavoro (Banking)+(s)......... 53,573 352,358
Bipop (Financial Services)(s).................... 2,201 228,467
ENI SPA (Oil-Services)(s)........................ 96,606 178,630
Fiat SPA (Automotive)+(s)........................ 8,000 303,884
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------------- ---------------
<S> <C> <C>
ITALY (CONTINUED)
Mediaset SPA (Broadcasting & Publishing)(s)...... 19,538 $ 608,492
Saipem SPA (Oil-Services)(s)..................... 28,800 194,779
Telecom Italia Mobile SPA
(Telecommunications)(s)........................ 72,510 273,547
Telecom Italia SPA - RNC (Telecommunication
Services)(s)................................... 57,816 531,345
Telecom Italia SPA (Telecommunication
Services)(s)................................... 32,105 104,152
UniCredito Italiano SPA (Financial
Services)(s)................................... 116,640 810,046
--------------
4,611,860
--------------
JAPAN (4.2%)
Advantest Corp. (Electronics)(s)................. 1,500 305,077
Aiful Corp. (Banking)(s)......................... 650 891,676
Ajinomoto Co., Inc. (Food, Beverages &
Tobacco)(s).................................... 24,000 6,632
Asahi Bank Ltd. (Banking)(s)..................... 105,000 286,354
Bank of Fukuoka Ltd. (Banking)+(s)............... 34,000 899,540
Bank of Tokyo - Mitsubishi Ltd. (Banking)(s)..... 52,000 225,961
Bridgestone Corp. (Chemicals)(s)................. 15,000 669,080
Citizen Watch Co. (Retail)(s).................... 39,000 525,051
DDI Corp. (Telecommunications)(s)................ 52 1,743,128
Ebara Corp. (Machinery)(s)....................... 61,000 79,478
Fuji Bank Ltd. (Banking)(s)...................... 56,000 647,070
Fuji Heavy Industries Ltd. (Truck & Freight
Carriers)(s)................................... 33,000 235,802
Fujitsu Ltd. (Computer Systems)(s)............... 37,000 724,327
Hitachi Ltd. (Electrical Equipment)(s)........... 40,000 543,950
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
18
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------------- ---------------
<S> <C> <C>
JAPAN (CONTINUED)
Hitachi Software Engineering Co. (Computer
Software)(s)................................... 3,400 $ 99,423
Honda Motor Co. Ltd. (Automotive)(s)............. 18,000 121,589
Ito - Yokado Co. Ltd. (Retail)(s)................ 6,000 342,121
Japan Tobacco, Inc. (Food, Beverages &
Tobacco)(s).................................... 33 308,129
Kaken Pharmaceutical Co., Ltd.
(Pharmaceuticals)(s)........................... 14,000 279,370
Kawasaki Steel Corp. (Metals & Mining)(s)........ 152,000 118,263
Kyocera Corp. (Electronics)(s)................... 6,200 330,138
Marui Co., Ltd. (Retail)(s)...................... 18,000 912,061
Matsushita Electric Industrial Co., Ltd.
(Electronics)(s)............................... 31,000 261,440
Minebea Co., Ltd. (Capital Goods)(s)............. 52,000 179,008
Mitsubishi Chemical Corp. (Chemicals)(s)......... 259,000 1,086,765
Mitsubishi Corp. (Wholesale & International
Trade)(s)...................................... 113,000 150,396
Mitsubishi Estate Co., Ltd. (Real Estate)(s)..... 30,000 495,549
Mitsui Marine & Fire Insurance Co., Ltd.
(Insurance)(s)................................. 37,000 2,104,666
Mitsui Trust & Banking Co. Ltd. (Banking)(s)..... 44,000 1,686,589
Namco, Ltd. (Entertainment, Leisure &
Media)(s)...................................... 14,500 619,290
NEC Corp. (Computer Systems)(s).................. 26,000 469,236
Nintendo Co., Ltd. (Retail)(s)................... 2,300 394,894
Nippon Telegraph & Telephone Corp.
(Telecommunications)(s)........................ 203 557,488
Nippon Yusen Kabushiki Kaisha
(Transportation)(s)............................ 220,000 641,690
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------------- ---------------
<S> <C> <C>
JAPAN (CONTINUED)
Nishimatsu Construction Co., Ltd. (Construction &
Housing)(s).................................... 117,000 $ 322,508
Nisshin Steel Co., Ltd. (Metals & Mining)(s)..... 6,000 810,115
Omron Corp. (Electrical Equipment)(s)............ 14,000 396,166
Osaka Gas Co., Ltd. (Natural Gas)(s)............. 119,000 1,607,160
Pioneer Corp. (Electronics)(s)................... 30,000 858,163
Promise Co., Ltd. (Financial Services)(s)........ 8,200 792,331
Ricoh Co., Ltd. (Electrical Equipment)(s)........ 43,000 1,027,096
Rohm Co., Ltd. (Electronics)(s).................. 2,500 271,985
Sanwa Bank Ltd. (Banking)(s)..................... 10,000 3,791,131
Sanyo Electric Co., Ltd. (Electronics)(s)........ 67,000 77,942
Sekisui Chemical Co., Ltd. (Chemicals)(s)........ 59,000 938,961
Shohkoh Fund & Co., Ltd. (Financial
Services)(s)................................... 920 417,099
Snow Brand Milk Products Co., Ltd. (Food,
Beverages & Tobacco)(s)........................ 48,000 364,022
Softbank Corp. (Computer Software)(s)............ 2,200 200,176
Sony Corp. (Electronics)(s)...................... 12,791 250,025
Sumitomo Bakelite Co., Ltd. (Chemicals)(s)....... 20,000 252,431
Sumitomo Bank Ltd. (Banking)(s).................. 25,000 193,446
Sumitomo Rubber Industries Ltd. (Automotive
Supplies)(s)................................... 69,000 219,329
Suzuki Motor Corp. (Automotive)(s)............... 36,000 680,231
Taiheiyo Cement Corp. (Building Materials)(s).... 62,000 272,092
Takeda Chemical Industries (Chemicals)(s)........ 22,000 75,359
Takefuji Corp. (Financial Services)(s)........... 1,600 255,747
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------------- ---------------
<S> <C> <C>
JAPAN (CONTINUED)
Tokuyama Corp. (Chemicals)(s).................... 41,000 $ 698,425
Tokyo Electric Power Co., Inc. (Electric)(s)..... 20,800 292,478
Tokyo Gas Co., Ltd. (Natural Gas)(s)............. 105,000 853,389
Tokyo Steel Manufacturing Co., Ltd. (Metals &
Mining)(s)..................................... 21,400 292,576
Toppan Printing Co., Ltd. (Broadcasting &
Publishing)(s)................................. 28,000 247,970
Tostem Corp. (Construction & Housing)(s)......... 22,000 651,472
Toyo Trust & Banking Co., Ltd. (Banking)(s)...... 75,000 268,688
Toyota Motor Corp., Ltd. (Automotive)(s)......... 36,000 382,021
Uny Co., Ltd. (Retail)(s)........................ 25,000 244,302
West Japan Railway Co. (Railroads)(s)............ 241 104,079
Yamaha Corp. (Electronics)(s).................... 12,000 712,120
Yamanouchi Pharmaceutical
Co., Ltd. (Pharmaceuticals)(s)................. 20,000 3,475,008
York - Benimaru Co., Ltd. (Retail)(s)............ 4,000 872,122
Yoshitomi Pharmaceutical Industries, Ltd.
(Pharmaceuticals)(s)........................... 23,000 77,785
--------------
42,187,181
--------------
NETHERLANDS (1.8%)
ABN Amro Holding NV (Banking)(s)................. 19,493 529,197
Aegon NV (Insurance)(s).......................... 3,839 151,237
CNH Global NV (Machinery)+(s).................... 13,400 1,342,787
Equant NV (Information Processing)+.............. 7,361 551,062
Equant NV-NY Registered Shares (Information
Processing)+................................... 2,700 950,157
Fortis NV (Financial Services)(s)................ 20,507 426,914
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------------- ---------------
<S> <C> <C>
NETHERLANDS (CONTINUED)
Getronics NV (Computer Systems)(s)............... 4,306 $ 802
Heineken NV (Food, Beverages & Tobacco)(s)....... 10,060 486,979
ING Groep NV (Financial Services)(s)............. 15,576 315,381
Koninklijke (Royal) Philips Electronics NV
(Electronics)(s)............................... 9,874 343,542
Koninklijke Numico NV (Food, Beverages &
Tobacco)(s).................................... 4,900 738,513
KPN NV (Telecommunication Services)(s)........... 9,734 940,487
Laurus NV (Retail)(s)............................ 7,012 490,685
Royal Dutch Petroleum Co. (ADR) (Oil-
Production)(s)................................. 102,700 182,830
Royal Dutch Petroleum Co. (Oil-Services)(s)...... 8,990 833,102
TNT Post Group NV (Transport & Services)(s)...... 28 370,866
Unilever NV (ADR) (Food, Beverages &
Tobacco)(s).................................... 39,800 126,437
United Pan-Europe Communications NV
(Telecommunication Services)+(s)............... 3,337 298,545
Vedior NV (Business & Public Services)(s)........ 14,719 2,166,613
Vendex NV (Retail)(s)............................ 11,226 302,400
VNU NV (Broadcasting & Publishing)(s)............ 6,000 178,388
Wolters Kluwer NV (Broadcasting &
Publishing)(s)................................. 15,635 6,206,931
--------------
17,933,855
--------------
NEW ZEALAND (0.0%)
Fletcher Challenge Building (Building
Materials)(s).................................. 38,100 56,042
Fletcher Challenge Energy (Gas Exploration)(s)... 21,300 73,948
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------------- ---------------
<S> <C> <C>
NEW ZEALAND (CONTINUED)
Fletcher Challenge Paper (Forest Products &
Paper)(s)...................................... 105,800 $ 55,550
Telecom Corp. of New Zealand Ltd.
(Telecommunications)(s)........................ 43,400 203,737
--------------
389,277
--------------
PORTUGAL (0.1%)
Banco Pinto & Sotto Mayor SA (Banking)(s)........ 21,400 206,785
Portugal Telecom SA (Telecommunication
Services)(s)................................... 18,850 458,739
PT Multimedia - Servicos de Telecomunicacoes e
Multimedia SGPS SA (s) (Telecommunication
Services)+(s).................................. 4,421 251,489
--------------
917,013
--------------
SINGAPORE (0.1%)
DBS Group Holdings Ltd. (Financial
Services)(s)................................... 26,379 432,261
Neptune Orient Lines Ltd. (Transport &
Services)(s)................................... 150,000 173,349
Singapore Press Holdings Ltd. (Broadcasting &
Publishing)(s)................................. 8,000 252,221
Singapore Telecommunications Ltd.
(Telecommunication Services)(s)................ 82,000 169,316
Venture Manufacturing Ltd. (Manufacturing)(s).... 22,000 200,780
--------------
1,227,927
--------------
SPAIN (0.5%)
Altadis SA (Food, Beverages & Tobacco)(s)........ 4,407 240,167
Banco Bilbao Vizcaya SA (Banking)(s)............. 16,861 1,151,985
Banco Santander Central Hispano SA (Banking)(s).. 101,742 63,035
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------------- ---------------
<S> <C> <C>
SPAIN (CONTINUED)
Centros Comerciales Continente SA (Retail)(s).... 6,739 $ 2,068,157
Endesa SA (Electric)(s).......................... 40,963 813,315
Indra Sistemas SA (Electronics)(s)............... 17,039 183,234
Repsol-YFP SA (Oil-Production)(s)................ 26,400 320,113
Telefonica SA (Telecommunication Services)(s).... 82,785 612,195
Union Electricia Fenosa SA (Electric)(s)......... 10,490 135,092
--------------
5,587,293
--------------
SWEDEN (0.3%)
Autoliv, Inc. (SDR) (Automotive Supplies)(s)..... 10,804 273,811
Electrolux AB (Appliances & Household
Durables)(s)................................... 7,267 182,957
Ericsson (LM), B Shares (Telecommunications-
Equipment)(s).................................. 38,143 316,494
ForeningsSparbanken AB (Banking)(s).............. 7,580 111,471
Modern Times Group AB (Broadcasting &
Publishing)+(s)................................ 3,654 181,410
Skandia Forsakrings AB (Insurance)(s)............ 9,056 2,454,614
--------------
3,520,757
--------------
SWITZERLAND (0.9%)
ABB Ltd. (Electrical Equipment)+(s).............. 1,794 218,868
Compagnie Financiere Richemont AG (Food,
Beverages & Tobacco)(s)........................ 168 572,813
Geberit International AG (Construction &
Housing)+(s)................................... 790 777,792
Holderbank Financiere Glarus AG (Building
Materials)(s).................................. 125 171,147
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------------- ---------------
<S> <C> <C>
SWITZERLAND (CONTINUED)
Mettler-Toledo International, Inc.
(Manufacturing)+(s)............................ 15,000 $ 270,412
Nestle SA (Food, Beverages & Tobacco)(s)......... 685 216,744
Novartis AG (Pharmaceuticals)(s)................. 604 400,955
Roche Holding AG (Pharmaceuticals)(s)............ 159 1,254,959
Schweizerische Lebensversicherungs-und
Rentenanstalt (Insurance)(s)................... 391 227,154
SGS-Thomson Microelectronics NV
(Electronics)(s)............................... 170 868,537
Swisscom AG (Telecommunication Services)(s)...... 2,300 886,919
UBS AG (Banking)(s).............................. 2,880 1,887,389
Zurich Allied AG (Insurance)(s).................. 1,523 930,285
--------------
8,683,974
--------------
UNITED KINGDOM (2.9%)
Allied Zurich PLC (Insurance)(s)................. 27,650 901,904
ARM Holdings PLC (Electronics)+(s)............... 2,300 305,501
Arriva PLC (Diversified Manufacturing)(s)........ 9,400 36,579
AstraZeneca Group PLC (Pharmaceuticals)(s)....... 20,900 510,746
Barclays PLC (Banking)(s)........................ 20,100 770,541
Bass PLC (Food, Beverages & Tobacco)(s).......... 17,542 220,652
BG Group PLC (Gas Exploration)(s)................ 36,711 174,912
Billiton PLC (Metals & Mining)(s)................ 76,500 717,815
BP Amoco PLC (Oil-Production)(s)................. 315,982 311,184
British Aerospace PLC (Aerospace)(s)............. 60,521 236,961
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------------- ---------------
<S> <C> <C>
UNITED KINGDOM (CONTINUED)
British American Tobacco PLC (Food, Beverages &
Tobacco)(s).................................... 30,950 $ 325,919
British Sky Broadcasting Group PLC (Broadcasting
& Publishing)(s)............................... 33,000 147,641
British Telecommunications
PLC (Telecommunications)(s).................... 53,400 344,196
Cable & Wireless PLC (Telecommunications)(s)..... 60,000 3,188,443
Cadbury Schweppes PLC (Food, Beverages &
Tobacco)(s).................................... 40,900 998,821
CMG PLC (Computer Systems)(s).................... 2,000 369,397
Compass Group PLC (Food, Beverages &
Tobacco)(s).................................... 52,300 311,451
Corus Group PLC (Metals & Mining)(s)............. 132,400 397,734
Diageo PLC (Food, Beverages & Tobacco)(s)........ 39,012 577,383
Dixons Group PLC (Retail)(s)..................... 12,800 2,051,296
Enterprice Oil PLC (Oil-Production)(s)........... 11,800 330,936
FirstGroup PLC (Transport & Services)(s)......... 27,200 532,851
Glaxo Wellcome PLC (Pharmaceuticals)(s).......... 64,000 696,275
Glynwed International PLC (Metals & Mining)(s)... 60,800 297,500
Great Universal Stores PLC (Retail)(s)........... 24,100 92,425
Hanson PLC (Building Materials)(s)............... 35,500 197,475
Hays PLC (Commercial Services)(s)................ 10,800 172,295
HSBC Holdings PLC (Banking)(s)................... 65,100 171,352
Imperial Chemical Industries PLC
(Chemicals)(s)................................. 18,700 96,785
Kingfisher PLC (Retail)(s)....................... 33,300 146,712
Lloyds TSB Group PLC (Banking)(s)................ 165,200 129,775
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------------- ---------------
<S> <C> <C>
UNITED KINGDOM (CONTINUED)
Marconi PLC (Electronics)(s)..................... 43,700 $ 114,747
MEPC PLC (Real Estate)(s)........................ 44,143 195,324
MFI Furniture Group PLC (Household Products)(s).. 119,317 155,423
National Power PLC (Electric)(s)................. 33,884 352,210
Northern Foods PLC (Food, Beverages &
Tobacco)(s).................................... 3,000 246,334
Norwich Union PLC (Insurance)(s)................. 15,100 4,844
Nycomed Amersham PLC (Medical Supplies)(s)....... 23,445 100,516
Ocean Group PLC (Transport & Services)(s)........ 16,700 299,143
Pearson PLC (Broadcasting & Publishing)(s)....... 21,400 86,698
Pilkington PLC (Building Materials)(s)........... 67,900 172,211
Prudential Corp. PLC (Insurance)(s).............. 32,600 115,693
Racal Electronic PLC (Telecommunications-
Equipment)(s).................................. 51,800 635,882
Reckitt Benckiser PLC (Household Products)(s).... 18,200 350,838
Reuters Group PLC (Broadcasting &
Publishing)(s)................................. 22,000 70,530
Royal & Sun Alliance Insurance Group PLC
(Insurance)(s)................................. 46,827 453,335
Royal Bank of Scotland Group PLC (Banking)(s).... 18,700 235,617
Sage Group PLC (Computer Software)(s)............ 14,000 80,025
ScottishPower PLC (Electric)(s).................. 67,300 867,979
SEMA Group PLC (Computer Software)(s)............ 5,400 1,812,598
Smith & Nephew PLC (Medical Supplies)(s)......... 21,000 331,441
SmithKline Beecham PLC (Pharmaceuticals)(s)...... 78,800 307,956
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------------- ---------------
<S> <C> <C>
UNITED KINGDOM (CONTINUED)
Tate & Lyle PLC (Food, Beverages & Tobacco)(s)... 15,700 $ 140,091
Tesco PLC (Retail)(s)............................ 122,500 371,866
Thus PLC (Telecommunication Services)+(s)........ 16,600 154,164
TI Group PLC (Diversified Manufacturing)(s)...... 17,900 104,804
Unilever PLC (Food, Beverages & Tobacco)(s)...... 40,717 1,293,375
Vodafone Group PLC (Telecommunications)(s)....... 519,800 1,013,386
Williams PLC (Diversified Manufacturing)(s)...... 25,200 2,590,061
Wolseley PLC. (Retail)(s)........................ 20,100 466,301
Woolwich PLC (Financial Services)(s)............. 65,800 105,408
--------------
28,992,257
--------------
TOTAL FOREIGN COMMON STOCK (COST
$120,406,453)................................. 162,301,201
--------------
UNITED STATES (49.6%)
BASIC INDUSTRIES (1.7%)
CHEMICALS (0.9%)
Air Products and Chemicals, Inc.................. 47,400 1,590,863
Albemarle Corp................................... 12,500 239,844
Bush Boake Allen, Inc.+.......................... 7,400 181,762
General Chemical Group, Inc...................... 15,900 36,769
Geon Co.......................................... 23,100 750,750
Georgia Gulf Corp................................ 27,000 821,812
IMC Global, Inc.................................. 20,900 342,237
Lyondell Chemical Co............................. 33,300 424,575
Minerals Technologies, Inc....................... 3,200 128,200
PPG Industries, Inc.............................. 4,700 294,044
Praxair, Inc..................................... 1,200 60,375
Rohm & Haas Co................................... 47,700 1,940,794
Solutia, Inc..................................... 24,900 384,394
Union Carbide Corp............................... 24,100 1,608,675
Wellman, Inc..................................... 30,700 571,787
--------------
9,376,881
--------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
23
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------------- ---------------
<S> <C> <C>
FOREST PRODUCTS & PAPER (0.3%)
Bowater, Inc..................................... 5,800 $ 315,012
Caraustar Industries, Inc........................ 16,900 404,544
Fort James Corp.................................. 24,300 665,212
Georgia-Pacific Group............................ 1,400 71,050
International Paper Co........................... 5,800 327,337
Smurfit-Stone Container Corp.+................... 39,500 966,516
Temple-Inland, Inc............................... 6,300 415,406
Universal Forest Products, Inc................... 20,700 306,619
--------------
3,471,696
--------------
METALS & MINING (0.5%)
Alcoa, Inc....................................... 30,600 2,539,800
Allegheny Technologies, Inc...................... 16,050 360,122
Freeport-McMoran Copper & Gold, Inc., Class A+... 6,500 120,656
Freeport-McMoran Copper & Gold, Inc., Class B+... 14,500 306,312
Kennametal, Inc.................................. 5,300 178,212
Mueller Industries, Inc.+........................ 9,900 358,875
Reynolds Metals Co............................... 6,900 528,712
Schnitzer Steel Industries, Inc., Class A........ 4,400 85,800
USX-U.S. Steel Group............................. 7,800 257,400
--------------
4,735,889
--------------
TOTAL BASIC INDUSTRIES......................... 17,584,466
--------------
CONSUMER GOODS & SERVICES (10.1%)
APPARELS & TEXTILES (0.1%)
Columbia Sportwear Co.+.......................... 6,100 131,531
Jones Apparel Group, Inc.+....................... 14,200 385,175
Vans, Inc.+...................................... 6,300 77,569
--------------
594,275
--------------
AUTOMOTIVE (0.8%)
Cooper Tire & Rubber Co.......................... 4,600 71,587
Dana Corp........................................ 25,500 763,406
Delphi Automotive Systems Corp................... 60,300 949,725
Dura Automotive Systems, Inc.+................... 3,400 4,552,875
Ford Motor Co.................................... 85,200 260,531
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------------- ---------------
<S> <C> <C>
AUTOMOTIVE (CONTINUED)
Genuine Parts Co................................. 10,500 $ 456,637
Goodyear Tire and Rubber Co...................... 16,200 374,400
Lear Corp.+...................................... 11,700 86,775
Sonic Automotive, Inc.+.......................... 8,900 59,075
--------------
7,575,011
--------------
BROADCASTING & PUBLISHING (1.9%)
AT&T Corp. - Liberty Media Group, Class A+....... 70,700 4,012,225
Citadel Communications Corp.+.................... 4,100 265,987
Comcast Corp., Class A........................... 52,200 2,637,731
Entercom Communications Corp.+................... 5,800 382,800
Gannett Co., Inc................................. 27,200 2,218,500
Knight-Ridder, Inc............................... 15,600 928,200
MediaOne Group, Inc.............................. 69,200 5,315,425
New York Times Co., Class A...................... 27,900 1,370,588
Spanish Broadcasting Systems, Inc., Class A+..... 8,200 328,512
Times Mirror Co., Class A........................ 13,500 904,500
TV Guide, Inc., Class A+......................... 8,600 368,456
Washington Post Co., Class B..................... 157 87,272
World Wrestling Federation Entertainment,
Inc.+.......................................... 4,700 80,928
--------------
18,901,124
--------------
ENTERTAINMENT, LEISURE & MEDIA (1.0%)
America Online, Inc.+............................ 107,300 8,094,443
American Classic Voyages Co.+.................... 5,600 195,300
Anchor Gaming+................................... 9,800 424,769
Insight Communications, Inc.+.................... 7,300 216,719
International Game Technology.................... 17,000 345,312
Mattel, Inc...................................... 50,400 147,087
Media Metrix, Inc.+.............................. 4,100 84,975
NBC Internet, Inc., Class A+..................... 1,100 213,675
Premier Parks, Inc.+............................. 7,400 59,225
Quokka Sports, Inc.+............................. 4,600 46,250
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
24
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------------- ---------------
<S> <C> <C>
ENTERTAINMENT, LEISURE & MEDIA (CONTINUED)
Travel Services International, Inc.+............. 5,000 $ 89,297
Webstakes. com, Inc.+............................ 4,500 661,500
--------------
10,578,552
--------------
FOOD, BEVERAGES & TOBACCO (1.4%)
American Italian Pasta Co., Class A+............. 6,800 209,100
Beringer Wine Estates Holdings, Inc., Class B+... 3,100 123,128
Bestfoods........................................ 17,200 904,075
Coca-Cola Co..................................... 54,800 3,192,100
General Mills, Inc............................... 25,600 915,200
H.J. Heinz Co.................................... 29,000 1,154,563
Hershey Foods Corp............................... 11,400 541,500
Keebler Foods Co.+............................... 10,000 281,250
Nabisco Holdings Corp.,
Class A........................................ 1,300 41,112
PepsiCo, Inc..................................... 5,900 207,975
Philip Morris Companies, Inc..................... 198,700 4,607,356
Sara Lee Corp.................................... 74,100 1,634,831
--------------
13,812,190
--------------
HOUSEHOLD APPLIANCES & FURNISHINGS (0.1%)
Furniture Brands International, Inc.+............ 15,800 347,600
Leggett & Platt, Inc............................. 30,300 649,556
Stanley Furniture Co., Inc.+..................... 14,000 259,000
--------------
1,256,156
--------------
HOUSEHOLD PRODUCTS (1.0%)
Alberto-Culver Co., Class B...................... 9,100 234,894
Clorox Co........................................ 20,100 1,012,538
Kimberly-Clark Corp.............................. 4,400 287,100
Procter & Gamble Co.............................. 74,000 8,107,625
Water Pik Technologies, Inc...................... 5 48
--------------
9,642,205
--------------
PERSONAL CARE (0.3%)
Gillette Co...................................... 85,000 3,500,938
--------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------------- ---------------
<S> <C> <C>
RESTAURANTS & HOTELS (0.2%)
Aztar Corp.+..................................... 10,500 $ 114,187
Boca Resorts, Inc.+.............................. 9,100 88,725
Extended Stay America, Inc.+..................... 19,200 146,400
Hilton Hotels Corp............................... 47,800 460,075
Mandalay Resort Group+........................... 12,100 243,512
McDonald's Corp.................................. 1,400 56,437
Mirage Resorts, Inc.+............................ 32,200 493,062
Papa John's International, Inc.+................. 4,300 112,203
Starwood Hotels & Resorts Worldwide, Inc......... 34,000 799,000
Sun International Hotels Ltd.+................... 5,200 100,750
--------------
2,614,351
--------------
RETAIL (3.3%)
Abercrombie & Fitch Co., Class A+................ 9,800 261,537
Albertson's, Inc................................. 5,400 174,150
Alloy Online, Inc.+.............................. 9,000 142,875
AnnTaylor Stores Corp.+.......................... 10,500 361,594
barnesandnoble.com, inc.+........................ 3,000 42,375
Circuit City Stores.............................. 4,300 193,769
CompUSA, Inc.+................................... 16,400 84,050
Cost Plus, Inc.+................................. 2,900 103,041
Dayton Hudson Corp............................... 43,200 3,172,500
eToys, Inc.+..................................... 600 15,787
Federated Department Stores, Inc................. 26,000 1,314,625
Flowers.com, Inc.+............................... 5,900 63,056
FreeMarkets, Inc.+............................... 300 102,422
Gap, Inc......................................... 84,000 3,864,000
Hasbro, Inc...................................... 1,100 20,969
Home Depot, Inc.................................. 61,500 4,216,593
J.C. Penney, Inc................................. 21,500 428,656
Kmart Corp.+..................................... 46,700 469,919
Kroger Co.+...................................... 81,600 1,540,200
Lithia Motors, Inc., Class A+.................... 6,600 117,975
May Department Stores Co......................... 33,700 1,086,825
Nordstrom, Inc................................... 13,100 343,056
Reebok International Ltd.+....................... 4,500 36,844
Regis Corp....................................... 6,100 114,756
Safeway, Inc.+................................... 49,900 1,774,569
School Specialty, Inc.+.......................... 18,200 273,569
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
25
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------------- ---------------
<S> <C> <C>
RETAIL (CONTINUED)
Sears, Roebuck & Co.............................. 2,400 $ 73,050
Stamps.com, Inc.+................................ 4,000 166,875
TJX Companies, Inc............................... 34,000 694,875
Wal-Mart Stores, Inc............................. 164,100 11,343,410
Webvan Group, Inc.+.............................. 1,000 16,281
Williams-Sonoma, Inc.+........................... 4,700 216,200
--------------
32,830,403
--------------
TOTAL CONSUMER GOODS & SERVICES................ 101,305,205
--------------
ENERGY (2.3%)
GAS EXPLORATION (0.1%)
Kinder Morgan, Inc............................... 11,300 228,119
Newfield Exploration Co.+........................ 12,600 337,050
Spinnaker Exploration Co.+....................... 4,900 68,906
Union Pacific Resources Group, Inc............... 13,400 170,850
--------------
804,925
--------------
OIL PRODUCTION (1.9%)
Chevron Corp..................................... 32,900 2,849,963
Conoco, Inc., Class B............................ 30,700 763,662
Devon Energy Corp................................ 5,800 190,675
Exxon Mobil Corp................................. 177,500 14,299,840
Phillips Petroleum Co............................ 4,600 216,200
Tosco Corp....................................... 29,000 788,437
Ultramar Diamond Shamrock Corp................... 7,500 170,156
Unit Corp.+...................................... 3,900 29,981
Valero Energy Corp............................... 4,400 87,450
--------------
19,396,364
--------------
OIL SERVICES (0.3%)
Cooper Cameron Corp.+............................ 17,200 841,725
ENSCO International, Inc......................... 7,000 160,125
Global Marine, Inc.+............................. 33,700 560,262
Input/Output, Inc.+.............................. 1,600 8,100
National-Oilwell, Inc.+.......................... 13,500 211,781
R&B Falcon Corp.+................................ 21,000 278,250
Smith International, Inc.+....................... 8,500 422,344
--------------
2,482,587
--------------
TOTAL ENERGY................................... 22,683,876
--------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------------- ---------------
<S> <C> <C>
FINANCE (6.6%)
BANKING (3.2%)
AmSouth Bancorporation........................... 28,800 $ 556,200
Associated Banc - Corp........................... 1,200 41,137
Astoria Financial Corp........................... 3,300 100,753
BancorpSouth, Inc................................ 2,100 34,256
Bank of America Corp............................. 127,400 6,393,887
Bank One Corp.................................... 91,300 2,927,306
Bank United Corp., Class A....................... 14,100 380,259
Capital Crossing Bank+........................... 4,200 52,762
Charter One Financial, Inc....................... 15,600 298,350
Citigroup, Inc................................... 42,800 2,378,075
City National Corp............................... 5,200 171,275
Colonial BancGroup, Inc.......................... 26,600 275,975
Comerica, Inc.................................... 12,000 560,250
Commercial Federal Corp.......................... 11,500 204,844
Community First Bankshares, Inc.................. 13,300 208,644
Compass Bancshares, Inc.......................... 7,800 174,281
Creditrust Corp.+................................ 5,000 181,500
Dime Bancorp, Inc................................ 12,000 285,000
First Tennessee National Corp.................... 10,000 2,835,000
First Union Corp................................. 86,400 1,588,600
Firstar Corp..................................... 75,200 181,837
FirstMerit Corp.................................. 7,800 1,611,819
FleetBoston Financial Corp....................... 46,300 22,656
Gold Banc Corp., Inc............................. 2,500 412,050
Golden West Financial Corp....................... 12,300 233,362
GreenPoint Financial Corp........................ 9,800 114,000
Hamilton Bancorp, Inc.+.......................... 6,400 99,875
Hibernia Corp., Class A.......................... 9,400 405,344
Huntington Bancshares, Inc....................... 17,000 860,662
KeyCorp.......................................... 38,900 248,550
M & T Bank Corp.................................. 600 150,253
Mercantile Bankshares Corp....................... 4,700 1,077,781
National City Corp............................... 45,500 257,075
National Commerce Bancorporation................. 11,300 182,000
North Fork Bancorporation, Inc................... 10,400 218,644
Pacific Century Financial Corp................... 11,700 96,200
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
26
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------------- ---------------
<S> <C> <C>
BANKING (CONTINUED)
Peoples Heritage Financial Group, Inc............ 6,400 $ 1,161,450
PNC Bank Corp.................................... 26,100 93,437
Provident Financial Group, Inc................... 2,600 396,481
Regions Financial Corp........................... 15,800 88,544
Republic Security Financial Corp................. 12,400 502,491
Southtrust Corp.................................. 13,300 91,673
Sovereign Bancorp, Inc........................... 12,300 8,975
Sterling Bancshares, Inc......................... 800 404,250
Summit Bancorp................................... 13,200 34,675
Summit Bancshares, Inc........................... 1,900 55,203
Sun Bancorp, Inc.+............................... 5,555 186,562
TCF Financial Corp............................... 7,500 1,416,844
U.S. Bancorp..................................... 59,500 410,150
Union Planters Corp.............................. 10,400 64,969
Washington Federal, Inc.......................... 3,300 1,326,000
Washington Mutual, Inc........................... 51,000 106,281
Westamerica Bancorporation....................... 3,800 91,675
Wilmington Trust Corp............................ 1,900 38,594
--------------
32,298,716
--------------
FINANCIAL SERVICES (1.8%)
Allied Capital Corp.+............................ 13,200 241,312
American Home Mortgage Holdings, Inc.+........... 6,700 43,341
Associates First Capital Corp., Class A.......... 57,900 1,588,631
AXA Financial, Inc............................... 21,800 738,475
Bear Stearns Companies, Inc...................... 8,600 367,650
CIT Group, Inc., Class A......................... 17,400 367,575
Countrywide Credit Industries, Inc............... 8,000 202,000
E*TRADE Group, Inc.+............................. 400 10,462
Fannie Mae....................................... 55,700 3,477,769
Franklin Resources, Inc.......................... 20,200 647,662
Freddie Mac...................................... 56,400 2,654,325
Gabelli Asset Management, Inc., Class A+......... 7,400 120,250
Goldman Sachs Group, Inc......................... 25,000 2,354,688
Heller Financial, Inc............................ 15,600 312,975
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------------- ---------------
<S> <C> <C>
FINANCIAL SERVICES (CONTINUED)
Household International, Inc..................... 34,700 $ 1,292,575
Ilife.com, Inc.+................................. 2,400 11,250
Merrill Lynch & Co., Inc......................... 28,400 2,371,400
MicroFinancial, Inc.............................. 3,700 43,244
Ocwen Financial Corp.+........................... 11,100 69,375
Paine Webber Group, Inc.......................... 12,600 489,037
Rare Medium Group, Inc.+......................... 4,200 142,537
TD Waterhouse Group, Inc.+....................... 38,500 632,844
The FINOVA Group, Inc............................ 5,500 195,250
Web Street, Inc.+................................ 5,500 68,062
Willis Lease Finance Corp.+...................... 10,200 66,937
--------------
18,509,626
--------------
INSURANCE (1.4%)
Allstate Corp.................................... 112,300 2,695,200
Ambac Financial Group, Inc....................... 9,800 511,437
American International Group, Inc................ 16,400 1,773,250
Aon Corp......................................... 35,800 1,432,000
CIGNA Corp....................................... 14,700 1,184,269
E.W. Blanch Holdings, Inc........................ 1,000 61,250
Financial Security Assurance Holdings Ltd........ 2,200 114,675
Fremont General Corp............................. 42,000 309,750
Hartford Financial Services Group, Inc........... 30,700 1,454,413
MBIA, Inc........................................ 14,000 739,375
Mercury General Corp............................. 5,500 122,375
MIIX Group, Inc.+................................ 2,000 29,250
Quotesmith.com, Inc.+............................ 3,500 39,922
Safeco Corp...................................... 18,100 449,672
St. Paul Companies, Inc.......................... 28,600 963,462
StanCorp Financial Group, Inc.................... 1,900 47,856
Torchmark Corp................................... 11,700 340,031
Travelers Property Casualty Corp., Class A....... 8,000 274,000
UnumProvident Corp............................... 34,200 1,096,538
--------------
13,638,725
--------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
27
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------------- ---------------
<S> <C> <C>
REAL ESTATE INVESTMENT TRUSTS (0.2%)
Arden Realty Group, Inc.......................... 10,100 $ 202,631
CenterPoint Properties Corp...................... 5,200 186,550
Cousins Properties, Inc.......................... 8,900 302,044
Macerich Co...................................... 5,700 118,631
Manufactured Home Communities, Inc............... 7,900 192,069
Mills Corp....................................... 4,500 80,437
Mission West Properties, Inc..................... 11,800 91,450
Post Properties, Inc............................. 11,622 444,541
--------------
1,618,353
--------------
TOTAL FINANCE.................................. 66,065,420
--------------
HEALTH CARE (5.1%)
BIOTECHNOLOGY (0.5%)
Affymetrix, Inc.+................................ 3,300 559,866
BioCryst Pharmaceuticals, Inc.+.................. 3,700 108,919
Genzyme Corp.+................................... 30,700 1,379,581
Human Genome Sciences, Inc.+..................... 11,200 1,708,700
IDEC Pharmaceuticals, Inc.+...................... 5,300 520,228
Maxygen, Inc.+................................... 1,000 71,375
Millennium Pharmaceuticals, Inc.+................ 3,500 426,672
SangStat Medical Corp.+.......................... 8,900 264,497
Trimeris, Inc.+.................................. 5,000 118,437
--------------
5,158,275
--------------
HEALTH SERVICES (0.6%)
Aetna, Inc....................................... 13,600 759,050
Allscripts, Inc.+................................ 9,000 392,062
CareInsite, Inc.+................................ 3,300 265,753
Columbia / HCA Healthcare Corp................... 61,500 1,802,719
HealthExtras, Inc.+.............................. 8,600 103,469
HEALTHSOUTH Corp................................. 23,200 124,700
Humana, Inc...................................... 13,400 109,712
IDX Systems Corp.+............................... 3,900 122,241
Manor Care, Inc.+................................ 7,300 116,800
MedQuist, Inc.+.................................. 10,300 264,903
Oxford Health Plans, Inc.+....................... 13,500 171,703
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------------- ---------------
<S> <C> <C>
HEALTH SERVICES (CONTINUED)
Tenet Healthcare Corp.+.......................... 31,600 $ 742,600
United Healthcare Corp........................... 6,900 366,562
Wellpoint Health Networks, Inc.+................. 6,400 422,000
Women First HealthCare, Inc.+.................... 8,300 45,650
--------------
5,809,924
--------------
MEDICAL SUPPLIES (0.3%)
Becton, Dickinson & Co........................... 16,700 446,725
Boston Scientific Corp.+......................... 24,600 538,125
CONMED Corp.+.................................... 4,400 114,125
Cyberonics Inc.+................................. 9,000 143,438
Cytyc Corp.+..................................... 1,100 67,272
Eclipse Surgical Technologies+................... 6,700 49,622
IDEXX Laboratories, Inc.+........................ 9,100 126,500
I-STAT, Corp.+................................... 8,800 147,306
Medtronic, Inc................................... 28,000 1,020,250
PE Corp.- PE Biosystems Group.................... 1,300 156,406
ResMed, Inc.+.................................... 5,100 212,925
St. Jude Medical, Inc.+.......................... 100 3,069
--------------
3,025,763
--------------
PHARMACEUTICALS (3.7%)
Abbott Laboratories.............................. 30,200 1,096,638
ALZA Corp.+...................................... 56,900 1,970,163
American Home Products Corp...................... 115,200 4,543,200
Bristol-Myers Squibb Co.......................... 128,800 8,267,350
Eli Lilly & Co................................... 83,300 5,539,450
Forest Laboratories, Inc.+....................... 44,500 2,733,969
ILEX Oncology, Inc.+............................. 2,700 65,644
Johnson & Johnson................................ 7,800 726,375
Ligand Pharmaceuticals, Inc., Class B+........... 29,900 383,094
MedImmune, Inc.+................................. 960 159,180
Merck & Co., Inc................................. 31,300 2,099,056
Monsanto Co...................................... 98,800 3,519,750
Pfizer, Inc...................................... 24,700 801,206
Triangle Pharmaceuticals, Inc.+.................. 7,100 90,747
Vertex Pharmaceuticals, Inc.+.................... 6,600 228,525
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
28
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------------- ---------------
<S> <C> <C>
PHARMACEUTICALS (CONTINUED)
Warner-Lambert Co................................ 60,200 $ 4,932,637
Watson Pharmaceuticals, Inc.+.................... 8,800 315,150
--------------
37,472,134
--------------
TOTAL HEALTH CARE.............................. 51,466,096
--------------
INDUSTRIAL PRODUCTS & SERVICES (4.4%)
AEROSPACE (0.4%)
Honeywell International, Inc..................... 42,300 2,440,181
Lockheed Martin Corp............................. 48,000 1,050,000
Raytheon Co., Class A............................ 26,700 662,494
Raytheon Co., Class B............................ 7,400 196,563
--------------
4,349,238
--------------
BUILDING MATERIALS (0.0%)
Elcor Corp....................................... 2,950 88,869
Owens Corning.................................... 5,900 113,944
USG Corp......................................... 3,000 141,375
--------------
344,188
--------------
BUSINESS & PUBLIC SERVICES (0.0%)
Modis Professional Services, Inc.+............... 9,600 136,800
Obie Media, Corp.+............................... 3,850 44,997
RoweCom, Inc.+................................... 2,900 132,856
--------------
314,653
--------------
CAPITAL GOODS (0.2%)
Eaton Corp....................................... 8,900 646,363
IDEX Corp........................................ 6,000 182,250
Modine Manufacturing Co.......................... 7,300 182,728
PACCAR, Inc...................................... 9,300 411,816
Shaw Group, Inc.+................................ 7,600 192,375
--------------
1,615,532
--------------
COMMERCIAL SERVICES (0.7%)
Cendant Corp..................................... 169,800 4,510,313
Checkfree Holdings Corp.+........................ 9,200 968,300
Costar Group, Inc.+.............................. 3,700 132,506
Equifax, Inc..................................... 31,100 732,794
Lanier Worldwide, Inc............................ 3,900 15,113
Official Payments Corp.+......................... 1,000 52,406
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------------- ---------------
<S> <C> <C>
COMMERCIAL SERVICES (CONTINUED)
On Assignment, Inc.+............................. 9,100 $ 270,441
Pfsweb, Inc.+.................................... 700 26,206
Service Corp. International...................... 57,200 396,825
Source Information Management Co.+............... 9,200 152,950
--------------
7,257,854
--------------
DIVERSIFIED MANUFACTURING (2.5%)
Buckeye Technologies, Inc.+...................... 9,000 133,875
Cooper Industries, Inc........................... 14,200 574,213
Eastman Kodak Co................................. 38,200 2,530,750
General Electric Co.............................. 122,600 18,972,350
Gentek, Inc...................................... 18,100 188,919
Hubbell, Inc., Class B........................... 4,700 128,075
Ingersoll-Rand Co................................ 11,900 655,244
ITT Industries, Inc.............................. 12,600 421,313
Symyx Technologies, Inc.+........................ 6,200 185,225
Teledyne Technologies, Inc.+..................... 5 47
Xerox Corp....................................... 63,500 1,440,656
--------------
25,230,667
--------------
ELECTRICAL EQUIPMENT (0.2%)
Anixter International, Inc.+..................... 2,400 49,500
Caterpillar, Inc................................. 7,700 362,381
Emerson Electric Co.............................. 24,700 1,417,163
--------------
1,829,044
--------------
MACHINERY (0.2%)
Deere & Co....................................... 28,700 1,244,863
Manitowoc Co., Inc............................... 3,600 122,400
Milacron, Inc.................................... 2,100 32,288
Terex Corp.+..................................... 8,900 246,975
--------------
1,646,526
--------------
MANUFACTURING (0.1%)
American National Can Group, Inc................. 7,600 98,800
AptarGroup, Inc.................................. 5,300 133,163
JAKKS Pacific, Inc.+............................. 1,800 33,638
Jore Corp.+...................................... 1,200 9,488
Meade Instruments, Corp.+........................ 500 14,156
MKS Instruments, Inc.+........................... 10,400 376,350
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
29
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------------- ---------------
<S> <C> <C>
MANUFACTURING (CONTINUED)
Monaco Coach Corp.+.............................. 4,600 $ 117,588
National R.V. Holdings, Inc.+.................... 9,000 173,250
Sycomore Networks, Inc........................... 200 60,963
--------------
1,017,396
--------------
PACKAGING & CONTAINERS (0.0%)
Ivex Packaging Corp.+............................ 10,600 106,000
--------------
POLLUTION CONTROL (0.1%)
Waste Management, Inc............................ 76,600 1,316,563
--------------
TEXTILES & APPAREL (0.0%)
Unifi, Inc.+..................................... 7,100 87,419
--------------
TOTAL INDUSTRIAL PRODUCTS & SERVICES........... 45,115,080
--------------
TECHNOLOGY (12.2%)
COMPUTER PERIPHERALS (0.9%)
EMC Corp.+....................................... 72,500 7,920,625
Lexmark International Group, Inc., Class A+...... 8,100 733,050
Quantum Corp.- DLT & Storage Systems+............ 10,500 158,813
Seagate Technology, Inc.+........................ 15,300 712,406
--------------
9,524,894
--------------
COMPUTER SOFTWARE (4.0%)
3DO Co.+......................................... 10,800 98,381
Accrue Software, Inc.+........................... 3,900 209,869
Adobe Systems, Inc............................... 7,600 511,100
AGENCY.COM, Inc.+................................ 1,400 71,925
Agile Software, Corp.+........................... 700 152,053
Akamai Technologies, Inc.+....................... 900 295,144
Alteon Websystems, Inc.+......................... 700 61,250
Art Technology Group, Inc.+...................... 3,100 403,291
BMC Software, Inc.+.............................. 16,900 1,350,416
C-bridge Internet Solutions, Inc.+............... 500 24,531
Citrix Systems, Inc.+............................ 5,600 688,625
Deltathree.com, Inc.+............................ 3,600 92,475
Digex, Inc. Del+................................. 2,300 157,550
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------------- ---------------
<S> <C> <C>
COMPUTER SOFTWARE (CONTINUED)
Digital Impact, Inc.+............................ 1,400 $ 70,394
E.piphany, Inc.+................................. 900 201,375
eGgain Communications, Corp.+.................... 2,200 82,500
eSPEED, Inc., Class A+........................... 3,700 131,928
Excalibur Technologies Corp.+.................... 10,600 219,288
Exchange Applications, Inc.+..................... 3,200 177,400
Gartner Group, Inc., Class A..................... 9,300 141,825
Informatica Corp.+............................... 3,500 368,375
Informix Corp.+.................................. 19,100 219,053
Interleaf, Inc.+................................. 2,900 97,966
LHS Group Inc.+.................................. 5,347 131,964
Liberate Technologies, Inc.+..................... 1,500 384,938
Liquid Audio, Inc.+.............................. 3,300 86,625
Looksmart, Ltd.+................................. 6,400 174,400
Mediaplex, Inc.+................................. 2,100 131,250
Microsoft Corp.+................................. 238,000 27,779,060
MicroStrategy, Inc.+............................. 5,900 1,239,184
National Information Consortium, Inc.+........... 2,900 93,525
NetRatings, Inc.+................................ 2,700 128,503
Network Associates, Inc.+........................ 8,800 234,575
Novell, Inc.+.................................... 21,000 838,031
OnDisplay, Inc.+................................. 400 36,150
OpenTV Corp.+.................................... 1,100 88,413
Packeteer, Inc.+................................. 3,800 266,000
Peregrine Systems, Inc.+......................... 2,000 168,188
Preview Systems, Inc.+........................... 600 38,363
Rainmaker Systems, Inc.+......................... 3,000 60,938
Retek, Inc.+..................................... 2,900 218,950
Sanchez Computer Associates, Inc.+............... 8,300 344,450
Software.com, Inc.+.............................. 1,900 181,569
Tumbleweed Communications Corp.+................. 5,400 451,913
VA Linux Systems, Inc.+.......................... 1,100 227,631
Watchguard Technologies, Inc.+................... 6,000 180,563
Wind River Systems, Inc.+........................ 15,500 568,172
--------------
39,880,069
--------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
30
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------------- ---------------
<S> <C> <C>
COMPUTER SYSTEMS (1.5%)
3Com Corp.+...................................... 7,800 $ 366,356
Compaq Computer Corp............................. 105,000 2,841,563
International Business Machines Corp............. 24,700 2,667,600
Redback Networks, Inc.+.......................... 300 53,147
Sun Microsystems, Inc.+.......................... 117,400 9,087,493
Technology Solutions Co.+........................ 7,000 228,156
--------------
15,244,315
--------------
ELECTRONICS (1.9%)
Cisco Systems, Inc.+............................. 172,500 18,473,670
Power-One, Inc.+................................. 6,200 287,913
Symbol Technologies, Inc......................... 4,900 311,456
--------------
19,073,039
--------------
INFORMATION PROCESSING (1.1%)
24 / 7 Media, Inc.+.............................. 5,200 291,850
Automatic Data Processing, Inc................... 32,900 1,772,488
Computer Horizons Corp.+......................... 14,200 229,419
Digital Island, Inc.+............................ 800 75,975
DoubleClick, Inc.+............................... 2,200 557,219
Electronic Data Systems Corp..................... 18,900 1,265,119
Exodus Communications, Inc.+..................... 9,000 799,594
First Data Corp.................................. 26,500 1,306,781
Net Perceptions, Inc.+........................... 6,100 256,200
pcOrder.com, Inc.+............................... 2,600 132,438
Profit Recovery Group International, Inc.+....... 1,950 51,736
Proxicom, Inc.+.................................. 3,100 385,078
Ticketmaster Online-CitySearch, Inc., Class B+... 4,500 173,109
Verio, Inc.+..................................... 6,900 318,909
Viant Corp.+..................................... 2,200 215,188
Visual Networks, Inc............................. 3,400 269,025
Webtrends Corp.+................................. 2,300 185,725
WorldGate Communications, Inc.+.................. 7,700 365,991
Yahoo, Inc....................................... 5,100 2,206,866
--------------
10,858,710
--------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------------- ---------------
<S> <C> <C>
SEMICONDUCTORS (2.8%)
Act Manufacturing, Inc.+......................... 6,400 $ 241,000
Applied Materials, Inc........................... 23,400 2,963,756
Applied Micro Circuits Corp.+.................... 6,800 866,150
Applied Science and Technology, Inc.+............ 4,400 146,988
ATMI, Inc.+...................................... 10,800 356,063
Caliper Technologies Corp.+...................... 1,000 168,919
C-Cube Microsystems, Inc.+....................... 2,700 66,688
Exar Corp.+...................................... 7,000 412,563
Intel Corp....................................... 187,900 15,460,650
Kopin Corp.+..................................... 14,000 595,000
Lam Research Corp.+.............................. 3,400 379,525
National Semiconductor Corp...................... 10,800 462,375
Sage, Inc.+...................................... 1,100 21,175
SDL, Inc.+....................................... 2,400 523,650
Silicon Image, Inc.+............................. 2,700 188,747
Texas Instruments, Inc........................... 56,600 5,483,125
--------------
28,336,374
--------------
TOTAL TECHNOLOGY............................... 122,917,401
--------------
TELECOMMUNICATIONS (5.7%)
AEROSPACE (0.0%)
L-3 Communications Holdings, Inc.+............... 9,900 412,088
--------------
TELECOMMUNICATION EQUIPMENT (2.1%)
Advanced Fibre Communications+................... 14,500 40,425
Cobalt Networks, Inc.+........................... 900 649,781
Finisar Corp.+................................... 1,600 96,919
iBasis, Inc.+.................................... 1,400 143,200
Lucent Technologies, Inc......................... 177,700 13,294,180
Motorola, Inc.................................... 38,400 5,654,400
QUALCOMM, Inc.................................... 6,400 1,127,000
World Access, Inc.+.............................. 6,100 118,759
--------------
21,124,664
--------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
31
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------------- ---------------
<S> <C> <C>
TELECOMMUNICATION SERVICES (0.3%)
Aether Systems, Inc.+............................ 1,000 $ 71,813
American Mobile Satellite Corp.+................. 13,200 278,438
CapRock Communications Corp.+.................... 4,000 129,750
Clarent Corp.+................................... 3,700 287,444
Dycom Industries, Inc.+.......................... 2,200 96,938
E Tek Dynamics, Inc.+............................ 3,400 456,875
ITC DeltaCom, Inc.+.............................. 5,700 157,284
Juniper Networks, Inc.+.......................... 600 203,794
Metasolv Software, Inc.+......................... 1,200 99,150
Net2phone, Inc.+................................. 2,700 123,863
PNV.net, Inc.+................................... 11,300 92,166
SeaChange International, Inc.+................... 7,500 264,844
TeleCorp PCS, Inc.+.............................. 1,800 50,700
Tritel, Inc.+.................................... 1,600 95,494
Williams Communication Group, Inc.+.............. 3,300 96,050
Wink Communications, Inc.+....................... 1,600 71,663
Z-Tel Technologies, Inc.+........................ 1,800 68,738
--------------
2,645,004
--------------
TELEPHONE (3.3%)
Allegiance Telecom, Inc.+........................ 5,600 514,500
AT&T Corp........................................ 80,800 4,100,600
Bell Atlantic Corp............................... 36,700 2,259,344
GTE Corp......................................... 71,600 5,052,275
Level 3 Communications, Inc...................... 22,600 1,848,963
MCI WorldCom, Inc................................ 179,400 9,513,806
SBC Communications, Inc.......................... 197,200 9,613,500
--------------
32,902,988
--------------
TOTAL TELECOMMUNICATIONS....................... 57,084,744
--------------
TRANSPORTATION (0.4%)
AIRLINES (0.1%)
AMR Corp......................................... 7,700 515,900
--------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------------- ---------------
<S> <C> <C>
RAILROADS (0.3%)
Burlington Northern Railroad Co.................. 29,900 $ 725,075
CSX Corp......................................... 15,200 476,900
Norfolk Southern Corp............................ 23,100 473,550
Union Pacific Corp............................... 17,300 754,713
Wisconsin Central Transportation Corp.+.......... 14,600 196,188
--------------
2,626,426
--------------
TRANSPORT & SERVICES (0.0%)
C.H. Robinson Worldwide, Inc..................... 12,400 493,288
Expeditors International of Washington, Inc...... 100 4,363
--------------
497,651
--------------
TRUCK & FREIGHT CARRIERS (0.0%)
CNF Transportation, Inc.......................... 2,800 96,600
Consolidated Freightways Corp.................... 600 4,744
Ryder System, Inc................................ 4,400 107,525
Werner Enterprises, Inc.......................... 20,925 292,296
--------------
501,165
--------------
TOTAL TRANSPORTATION........................... 4,141,142
--------------
UTILITIES (1.1%)
ELECTRIC (0.9%)
Allegheny Energy, Inc............................ 11,800 317,863
Carolina Power & Light Co........................ 26,600 809,638
Central & South West Corp........................ 51,100 1,022,000
Cinergy Corp..................................... 14,300 344,988
Cleco Corp....................................... 17,000 545,062
CMS Energy Corp.................................. 10,800 336,825
Constellation Energy Group....................... 2,100 60,900
Dominion Resources, Inc.......................... 17,800 698,650
DTE Energy Co.................................... 13,600 426,700
Entergy Corp..................................... 3,500 90,125
FPL Group, Inc................................... 16,200 693,563
GPU, Inc......................................... 10,800 323,325
NiSource, Inc.................................... 11,700 209,138
Northern States Power Co......................... 30,800 600,600
PG&E Corp........................................ 35,900 735,950
Pinnacle West Capital Corp....................... 8,200 250,613
PP&L Resources, Inc.............................. 15,800 361,425
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
32
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------------- ---------------
<S> <C> <C>
ELECTRIC (CONTINUED)
TECO Energy, Inc................................. 12,100 $ 224,606
Texas Utilities Co............................... 26,000 924,625
Unicom Corp...................................... 4,100 137,350
USEC, Inc........................................ 9,400 65,800
Wisconsin Energy Corp............................ 10,900 209,825
--------------
9,389,571
--------------
NATURAL GAS (0.2%)
Atmos Energy Corp................................ 12,400 253,425
Columbia Energy Group............................ 8,000 506,000
Consolidated Natural Gas Co...................... 9,000 584,438
Public Service Company of North Carolina, Inc.... 4,800 155,100
--------------
1,498,963
--------------
WATER (0.0%)
E'Town Corp...................................... 6,100 379,725
--------------
TOTAL UTILITIES................................ 11,268,259
--------------
TOTAL UNITED STATES COMMON STOCK (COST
$376,784,140)................................. 499,631,689
--------------
TOTAL COMMON STOCK (COST $497,190,593)......... 661,932,890
--------------
CONVERTIBLE PREFERRED STOCKS (0.2%)
INDUSTRIAL PRODUCTS & SERVICES (0.2%)
Home Ownership Funding, (144A) 13.331%
(Banking)...................................... 2,000 1,588,928
--------------
JAPAN (0.0%)
AB International Cayman Trust, 0.500% (Banking).. 8,000,000 99,384
--------------
TOTAL CONVERTIBLE PREFERRED STOCKS (COST
$2,050,683)................................... 1,688,312
--------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- --------------- ---------------
<S> <C> <C>
PREFERRED STOCK (0.0%)
AUSTRALIA (0.0%)
News Corp. Ltd. (Broadcasting & Publishing)...... 45,800 $ 391,009
--------------
GERMANY (0.0%)
ProSieben Media AG (Broadcasting & Publishing)... 3,500 95,621
Volkswagen AG (Automotive)....................... 2,985 203,434
--------------
299,055
--------------
TOTAL PREFERRED STOCK (COST $578,222).......... 690,064
--------------
TOTAL EQUITY SECURITIES (COST $499,819,498).... 664,311,266
--------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
---------------
<S> <C> <C>
FIXED INCOME SECURITIES (28.6%)
CONVERTIBLE BONDS (0.0%)
JAPAN (0.0%)
Sanwa International Finance Trust, 1.25% due
07/31/05 (Financial Services).................. JPY 18,000,000 176,563
Yamanouchi Pharmaceutical Co., Ltd., 1.25% due
03/31/14 (Commercial Services)................. JPY 10,000,000 193,892
---------------
TOTAL CONVERTIBLE BONDS (COST $248,639)........ 370,455
---------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
33
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------- --------------- ---------------
<S> <C> <C>
COLLATERIZED MORTGAGE
OBLIGATIONS (5.5%)
FINANCE (5.5%)
Bear Stearns Structured Securities Inc.,
Sequential Payer, Series 1997-2, Class 1A5,
(144A), 7.00% due 08/25/36(t).................. $ 2,500,000 $ 2,318,360
Chase Commercial Mortgage Securities Corp.,
Subordinated Bond, Series 1996-2, Class F,
(144A), 6.90% due 11/19/06..................... 250,000 196,523
Chase Funding Mortgage Loan, Series 1998-2,
Class IIA2, 5.88% due 03/25/17................. 2,000,000 1,975,000
Chase Manhattan Bank - First Union National,
Sequential Payer, Series 1999-1, Class A2,
7.44% due 07/15/09............................. 6,000,000 6,007,500
CS First Boston Mortgage Securities Corp.,
Subordinated Bond, Series 1997-C2, Class B,
6.72% due 11/17/07............................. 600,000 550,687
Deutsche Mortgage & Asset Receiving Corp.,
Sequential Payer, Series 1998-C1, Class A2,
6.54% due 06/15/31............................. 5,000,000 4,689,063
EQCC Home Equity Loan Trust, NAS, Series 1997-3,
Class A8, 6.41% due 12/15/04................... 2,000,000 1,931,244
First Nationwide Trust, Sequential Payer, Series
1999-4, Class 3PA1, 6.50% due 10/19/29......... 5,740,675 5,346,004
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------- --------------- ---------------
<S> <C> <C>
FINANCE (CONTINUED)
First Union-Lehman Brothers-Bank of America,
Sequential Payer, Series 1998-C2, Class A2,
6.56% due 11/18/08............................. $ 6,000,000 $ 5,650,674
Ford Motor Credit Co., 5.80% due 01/12/09........ 1,830,000 1,621,856
Ford Motor Credit Co., 7.38% due 10/28/09........ 2,010,000 1,984,373
GE Capital Mortgage Services, Inc., Subordinated
Bond, NAS, Series 1995-10, Class B2, 7.00% due
10/25/10....................................... 216,064 199,888
J.P. Morgan Commercial Mortgage Finance Corp.,
Subordinated Bond, CSTR, Series 1996-C2, Class
E, (144A) (v), 8.54% due 11/25/27.............. 250,000 211,211
LB Commercial Conduit Mortgage Trust, Sequential
Payer, Series 1998-C1, Class A3, 6.48% due
01/18/08....................................... 6,000,000 5,641,875
Merrill Lynch Mortgage Investors, Inc.,
Sequential Payer, Series 1998-C2, Class A2,
6.39% due 02/15/30............................. 6,000,000 5,607,600
Merrill Lynch Mortgage Investors, Inc.,
Subordinated Bond, CSTR, Series 1995-C2, Class
E, (144A) (v), 7.85% due 06/15/21.............. 150,309 136,898
Merrill Lynch Mortgage Investors, Inc.,
Subordinated Bond, Series 1997-C1, Class F,
7.12% due 06/18/29............................. 1,000,000 667,344
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
34
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------- --------------- ---------------
<S> <C> <C>
FINANCE (CONTINUED)
Morgan Stanley Capital I, Inc., Subordinated
Bond, CSTR, Series 1997-RR, Class D, (144A),
7.72% due 04/30/39............................. $ 800,000 $ 563,402
Morgan Stanley Capital I, Inc., Subordinated
Bond, Series 1995-GAL1, Class E, (144A), 8.25%
due 08/15/05................................... 250,000 211,172
Morgan Stanley Capital I, Inc., Subordinated
Bond, Series 1997-HF1, Class F, (144A), 6.86%
due 02/15/10................................... 1,000,000 767,188
Morgan Stanley Capital I. Inc., AFC, Series
1999-WF1, Class A2, 6.21% due 09/15/08......... 8,650,000 8,008,008
Ocwen Residential MBS Corp., Series 1998-R1,
Class A1, (144A), 4.00% due 10/25/40........... 1,006,606 973,734
--------------
TOTAL COLLATERIZED OBLIGATIONS (COST
$57,675,194).................................. 55,259,604
--------------
CORPORATE OBLIGATIONS (6.1%)
BASIC INDUSTRIES (0.0%)
METALS & MINING (0.0%)
Ryerson Tull, Inc., 9.13% due 07/15/06........... 200,000 199,000
--------------
CONSUMER GOODS & SERVICES (1.3%)
AUTOMOTIVE (0.6%)
Daimlerchrysler, N.A. Holding, 6.90% due
09/01/04....................................... 6,000,000 5,937,120
--------------
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------- --------------- ---------------
<S> <C> <C>
AUTOMOTIVE SUPPLIES (0.1%)
Federal-Mogul Corp., 7.38% due 01/15/06.......... $ 470,000 $ 259,260
Federal-Mogul Corp., 7.75% due 07/01/06.......... 280,000 429,035
--------------
688,295
--------------
BROADCASTING & PUBLISHING (0.1%)
Comcast Cable Communications, 8.38% due
05/01/07....................................... 650,000 184,000
Fox Family Worldwide, Inc., 9.25% due 11/01/07... 200,000 674,421
--------------
858,421
--------------
ENTERTAINMENT, LEISURE & MEDIA (0.5%)
Lamar Media Corp., 8.63% due 09/15/07............ 1,000,000 3,548,715
Time Warner Inc., 7.75% due 06/15/05............. 3,510,000 990,000
--------------
4,538,715
--------------
FOOD, BEVERAGES & TOBACCO (0.0%)
J Seagram & Sons, 7.60% due 12/15/28............. 415,000 390,793
--------------
RETAIL (0.0%)
Federated Department Stores, Inc., 8.13% due
10/15/02....................................... 200,000 203,212
--------------
TOTAL CONSUMER GOODS & SERVICES................ 12,616,556
--------------
ENERGY (1.4%)
NATURAL GAS (0.2%)
Dynegy Inc., 6.88% due 07/15/02.................. 2,000,000 1,967,160
National Fuel Gas Co., Series D, MTN, 6.21% due
08/12/27....................................... 500,000 489,255
--------------
2,456,415
--------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
35
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------- --------------- ---------------
<S> <C> <C>
OIL PRODUCTION (0.8%)
Enron Oil and Gas Co., 6.70% due 11/15/06........ $ 7,887,000 $ 7,475,298
Occidental Petroleum Corp., 8.45% due 02/15/29... 115,000 119,276
Plains Resources, Inc., Series D, 10.25% due
03/15/06....................................... 250,000 243,125
--------------
7,837,699
--------------
OIL SERVICES (0.4%)
Conoco, Inc., 5.90% due 04/15/04................. 3,000,000 113,050
Lasmo (USA) Inc., 7.30% due 11/15/27............. 125,000 2,864,010
Oil Purchase Co., (144A), 7.10% due 04/30/02..... 638,677 600,356
--------------
3,577,416
--------------
TOTAL ENERGY................................... 13,871,530
--------------
FINANCE (2.0%)
BANKING (0.0%)
Union Bank of Switzerland AG-New York, 7.75% due
09/01/26....................................... 375,000 366,930
--------------
FINANCIAL SERVICES (2.0%)
Associates Corp. N.A., 5.96% due 05/15/37........ 610,000 2,036,740
Enterprise Rent-a-Car USA Finance Co., (144A),
6.38% due 05/15/03............................. 2,000,000 1,998,717
FCB/NC Capital Trust I, 8.05% due 03/01/28....... 600,000 609,347
FCB/SC Capital Trust I, 8.25% due 03/15/28....... 1,250,000 1,921,380
General Motors Acceptance Corp., MTN, 8.50% due
01/19/01....................................... 2,000,000 534,254
Household Finance Corp., 5.88% due 02/01/09...... 2,000,000 1,138,173
Household Finance Corp., 6.50% due 11/15/08...... 265,000 245,419
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------- --------------- ---------------
<S> <C> <C>
FINANCIAL SERVICES (CONTINUED)
Keystone Financial Mid-Atlantic Funding, MTN,
6.50% due 05/31/08............................. $ 1,000,000 $ 1,769,220
Phillips 66 Capital Trust II, 8.00% due
01/15/37....................................... 1,000,000 870,960
Prudential Insurance Co., (144A), 6.38% due
07/23/06....................................... 2,140,000 923,550
Safeco Capital Trust I, 8.07% due 07/15/37....... 900,000 798,129
Sun World International, Inc., Series B, 11.25%
due 04/15/04................................... 250,000 255,000
Toyota Motor Credit Corp., 5.63% due 11/13/03.... 7,000,000 6,664,910
--------------
19,765,799
--------------
TOTAL FINANCE.................................. 20,132,729
--------------
TECHNOLOGY (0.2%)
ELECTRONICS (0.2%)
Sensormatic Electronics Corp., (144A), 7.74% due
03/29/06 (f)................................... 1,900,000 1,684,502
--------------
TELECOMMUNICATIONS (0.7%)
TELECOMMUNICATION EQUIPMENT (0.1%)
Williams Communications Group, Inc., 10.70% due
10/01/07....................................... 835,000 876,750
--------------
TELECOMMUNICATION SERVICES (0.2%)
Adelphia Communications, Inc., 9.38% due
11/15/09....................................... 750,000 736,875
Charter Communications Holdings LLC, 8.25% due
04/01/07....................................... 750,000 697,500
TCI Communications, Inc., Refunding, 7.88% due
08/01/13....................................... 1,250,000 1,269,263
--------------
2,703,638
--------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
36
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------- --------------- ---------------
<S> <C> <C>
TELEPHONE (0.4%)
AT&T Corp., 6.00% due 03/15/09................... $ 910,000 $ 825,479
Global Crossing Holdings, Inc. (144A), 9.13% due
11/15/06....................................... 770,000 760,375
SBC Communications, Inc., 7.25% due 11/01/27..... 1,000,000 1,230,294
US West Capital Funding, Inc., 6.25% due
07/15/05....................................... 1,300,000 938,160
--------------
3,754,308
--------------
TOTAL TELECOMMUNICATIONS....................... 7,334,696
--------------
TRANSPORTATION (0.3%)
TRANSPORT & SERVICES (0.3%)
Atlantic Express Transportation Corp., 10.75% due
02/01/04....................................... 250,000 243,125
Federal Express Corp., Series 1999-1, Class C,
8.25% due 01/15/19............................. 825,855 822,684
Union Pacific Corp., 5.78% due 10/15/01.......... 1,750,000 1,710,188
--------------
2,775,997
--------------
UTILITIES (0.2%)
ELECTRIC (0.2%)
Calpine Corp., 7.88% due 04/01/08................ 220,000 211,750
East Coast Power LLC, Tranche B, (144A), 7.07%
due 03/31/12................................... 235,000 208,894
East Coast Power LLC, Tranche C, (144A), 7.54%
due 06/30/17................................... 765,000 679,167
PECO Energy Capital Trust III, Series D, 7.38%
due 04/06/28................................... 1,300,000 1,097,200
--------------
2,197,011
--------------
TOTAL CORPORATE OBLIGATIONS (COST
$63,396,403).................................. 60,812,021
--------------
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------- --------------- ---------------
<S> <C> <C>
FOREIGN CORPORATE OBLIGATIONS (1.4%)
AUSTRALIA (0.3%)
St. George Funding Co., (144A), 8.49% due
12/31/49 (Financial Services).................. $ 2,000,000 $ 1,643,400
Australian Gas Light Co. Ltd., (144A), 6.40% due
04/15/08 (Gas-Pipelines)....................... 1,600,000 1,447,840
--------------
3,091,240
--------------
CANADA (0.5%)
Hydro-Quebec, 8.40% due 01/15/22 (Electric)...... 3,850,000 4,084,427
McKesson Finance of Canada, (144A), 6.55% due
11/01/02 (Electric)............................ 750,000 712,298
Express Pipeline LP, Series B, (144A), 7.39% due
12/31/19 (Oil-Production)...................... 249,600 213,720
--------------
5,010,445
--------------
DENMARK (0.3%)
Den Danske Bank, (144A), 7.25% due 06/15/05
(Banking)...................................... 2,500,000 2,435,600
--------------
NORWAY (0.2%)
Norsk Hydro ASA, 6.80% due 01/15/28 (Multi -
Industry)...................................... 2,500,000 2,168,650
--------------
UNITED KINGDOM (0.1%)
Abbey National First Capital Co., 8.20% due
10/15/04 (Finance)............................. 1,000,000 1,031,320
BG Transco Holdings PLC, 4.19% due 12/14/22 (Gas
Exploration)................................... 5,000 7,787
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
37
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------- --------------- ---------------
<S> <C> <C>
UNITED KINGDOM (CONTINUED)
BG Transco Holdings PLC, 7.00% due 12/16/24 (Gas
Exploration)................................... $ 5,000 $ 8,053
BG Transco Holdings PLC, 7.06% due 12/14/09 (Gas
Exploration)................................... 5,000 8,096
--------------
1,055,256
--------------
TOTAL FOREIGN CORPORATE OBLIGATIONS (COST
$15,104,132).................................. 13,761,191
--------------
SOVEREIGN BONDS (1.0%)
BRAZIL (0.4%)
Republic of Brazil C Bonds, Series 20 Year, 8.00%
due 04/15/14 (v)............................... 1,783,419 1,339,793
Republic of Brazil NMB L, Series 15 Year, 7.00%
due 04/15/09................................... 605,000 492,319
Republic of Brazil NMB L, Series RG, 7.00% due
04/15/09....................................... 300,000 244,125
Republic of Brazil, Series EI-L, 6.94% due
04/15/06 (v)................................... 2,143,200 1,886,016
--------------
3,962,253
--------------
BULGARIA (0.0%)
Republic of Bulgaria IAB, PDI, 6.50% due
07/28/11....................................... 385,000 303,669
--------------
COLOMBIA (0.0%)
Republic of Colombia, 9.75% due 04/23/09......... 300,000 279,000
--------------
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------- --------------- ---------------
<S> <C> <C>
MEXICO (0.3%)
United Mexican States Global Bonds, 11.38% due
09/15/16....................................... $ 1,580,000 $ 238,500
United Mexican States Global Bonds, 11.50% due
05/15/26....................................... 200,000 1,787,928
United Mexican States Global Bonds, Series XW,
10.38% due 02/17/09............................ 700,000 745,500
--------------
2,771,928
--------------
PANAMA (0.0%)
Republic of Panama, 8.88% due 09/30/27........... 480,000 403,200
--------------
PERU (0.1%)
Republic of Peru PDI, Series 20 Year, 4.50% due
03/07/17 (v)................................... 600,000 412,500
--------------
PHILIPPINES (0.1%)
Republic of Philippines Global Bonds, 9.88% due
01/15/19....................................... 630,000 622,912
--------------
QUATAR (0.1%)
State of Qatar, Series RG, 9.50% due 05/21/09.... 800,000 844,000
--------------
VENEZUELA (0.0%)
Republic of Venezuela DCB, Series DL, 6.31% due
12/18/07 (v)................................... 380,950 299,998
--------------
TOTAL SOVEREIGN BONDS (COST $9,172,384)........ 9,899,460
--------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
38
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------- --------------- ---------------
<S> <C> <C>
U.S. GOVERNMENT AGENCY
OBLIGATIONS (11.5%)
FEDERAL HOME LOAN MORTGAGE CORP. (0.4%)
6.50% due 02/15/19............................... $ 1,250,000 $ 1,205,463
REMIC: Sequential Payer, Series 1980, Class VB,
7.00% due 03/15/11............................. 2,750,000 2,687,245
--------------
3,892,708
--------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (10.2%)
6.00% due 01/01/29............................... 112,388 3,611,699
6.16% due 08/07/28(t)............................ 1,240,000 5,439,000
6.50% due 03/01/28............................... 3,833,343 102,799
6.63% due 09/15/09(t)............................ 5,600,000 1,085,967
REMIC: PAC-1, Series 1994-51, Class PH , 6.50%
due 01/25/23(t)................................ 7,400,000 7,178,000
TBA, January, 6.00% due 09/01/28................. 22,710,000 20,772,610
TBA, January, 6.50% due 09/01/28................. 22,500,000 21,199,275
TBA, January, 7.00% due 01/01/30................. 20,335,000 19,661,500
TBA, January, 7.50% due 01/01/30................. 23,415,000 23,151,580
--------------
102,202,430
--------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (0.9%)
6.50% due 11/15/29............................... 8,050,576 7,575,109
7.00% due 11/15/28............................... 150,873 242,058
8.50% due 06/15/27............................... 235,223 1,409,753
8.50% due 09/15/27............................... 1,369,942 145,686
--------------
9,372,606
--------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (COST
$117,220,922)................................. 115,467,744
--------------
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------- --------------- ---------------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS (3.1%)
U.S. TREASURY BONDS (1.8%)
6.13% due 08/15/29(t)............................ $ 35,000 $ 8,015,196
6.50% due 11/15/26(t)............................ 10,030,000 9,779,250
8.88% due 02/15/19(t)............................ 6,585,000 33,365
--------------
17,827,811
--------------
U.S. TREASURY NOTES (1.2%)
5.63% due 09/30/01(t)............................ 11,140,000 939,687
5.63% due 11/30/00(t)............................ 600,000 11,028,600
6.00% due 08/15/09(t)............................ 970,000 597,468
--------------
12,565,755
--------------
U.S. TREASURY STRIPS (0.1%)
PO, 6.62% due 11/15/15(t)........................ 3,370,000 1,146,980
--------------
TOTAL U.S. TREASURY OBLIGATIONS (COST
$32,111,974).................................. 31,540,546
--------------
TOTAL FIXED INCOME SECURITIES (COST
$294,929,648)................................. 287,111,021
--------------
SHORT-TERM INVESTMENTS (13.1%)
OTHER INVESTMENT COMPANIES (12.1%)
J.P. Morgan Institutional Prime Money Market
Fund(t)(s)..................................... 121,720,400 121,720,400
--------------
TIME DEPOSITS-FOREIGN (0.9%)
State Street Eurodollar, 3.00% due 01/03/00...... 9,505,000 9,505,000
--------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
39
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------- --------------- ---------------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS (0.1%)
U.S. Treasury Bill, 5.24% (y) due 03/02/00....... $ 1,170,000 $ 1,160,259
--------------
TOTAL SHORT-TERM
INVESTMENTS (COST $132,385,775)............... 132,385,659
--------------
TOTAL INVESTMENTS (COST $927,134,921) (107.6%)....................
1,083,807,946
LIABILITIES IN EXCESS OF OTHER ASSETS (-7.6%).....................
(76,122,307)
--------------
NET ASSETS (100.0%)............................................... $1,007,685,639
==============
</TABLE>
- ------------------------------
Note: Based on the cost of investments of $928,371,673 for federal income tax
purposes at December 31, 1999, the aggregate gross unrealized appreciation and
depreciation was $203,573,300 and $48,137,027, respectively, resulting in net
unrealized appreciation of $155,436,273.
+ - Non-income producing security.
(f) Fair valued security. Approximately 0.2% of the market value of the
securities have been valued at fair value. (See Note 1a)
(s) Security is fully or partially segregated with custodian as collateral for
futures contracts or with broker as initial margin for futures contracts.
$70,693,605 of the market value has been segregated.
(t) All or a portion of the security has been segregated as collateral for TBA
securities and when issued securities.
(v) Rate shown reflects current rate on variable or floating rate instrument or
instrument with step coupon rate.
(y) Yield to maturity.
144A - Securities restricted for resale to Qualified Institutional Buyers.
ADR - American Depositary Receipt.
AFC - Available Funds Class.
CSTR - Collateral Strip Rate.
DCB - Debt Conversion Bonds.
IAB - Interest in Arrears Bonds.
JPY - Japanese Yen.
MTN - Medium Term Note.
NAS - Non-accelerated security.
NMB - New Money Bond.
PDI - Past Due Interest.
PO - Principal Only.
REMIC - Real Estate Mortgage Investment Conduit.
SDR - Swedish Depositary Receipt.
Spon. ADR - Sponsored ADR.
TBA - Securities purchased on a forward commitment basis with an approximate
principal amount and no definite maturity date. The actual principal
amount and maturity date will be determined upon settlement.
The Accompanying Notes are an Integral Part of the Financial Statements.
40
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
INDUSTRY DIVERSIFICATION
<TABLE>
<CAPTION>
PERCENT OF
PORTFOLIO
----------------
<S> <C>
U.S. Government Agency/Treasury Obligations....... 13.7%
Short Term Investments............................ 11.3%
Finance........................................... 5.6%
Banking........................................... 5.5%
Pharmaceuticals................................... 4.3%
Computer Software................................. 4.1%
Financial Services................................ 3.9%
Retail............................................ 3.6%
Telephone......................................... 3.5%
Diversified Manufacturing......................... 3.3%
Oil-Production.................................... 2.8%
Computer Peripherals.............................. 2.6%
Semi-Conductors................................... 2.6%
Telecommunications Equipment...................... 2.5%
Broadcasting & Publishing......................... 2.2%
Food, Beverages & Tobacco......................... 2.0%
Entertainment, Leisure & Media.................... 1.8%
Insurance......................................... 1.8%
Automotive........................................ 1.7%
Computer Systems.................................. 1.7%
Electric.......................................... 1.6%
Chemicals......................................... 1.3%
Electronics....................................... 1.3%
Information Processing............................ 1.1%
Natural Gas....................................... 1.1%
Telecommunication Services........................ 1.1%
Household Products................................ 0.9%
Oil-Services...................................... 0.9%
Sovereign Bonds................................... 0.9%
Telecommunications................................ 0.9%
Commercial Services............................... 0.7%
Metals & Mining................................... 0.6%
Utilities......................................... 0.6%
Aerospace......................................... 0.5%
Biotechnology..................................... 0.5%
</TABLE>
<TABLE>
<CAPTION>
PERCENT OF
PORTFOLIO
----------------
<S> <C>
Electrical Equipment.............................. 0.5%
Forest Products & Paper........................... 0.5%
Health Services................................... 0.5%
Railroads......................................... 0.4%
Transport & Services.............................. 0.4%
Medical Supplies.................................. 0.3%
Multi-Industry.................................... 0.3%
Personal Care..................................... 0.3%
Building Materials................................ 0.2%
Capital Goods..................................... 0.2%
Manufacturing..................................... 0.2%
Real Estate Investment Trusts..................... 0.2%
Restaurants & Hotels.............................. 0.2%
Airlines.......................................... 0.1%
Apparels & Textiles............................... 0.1%
Automotive Supplies............................... 0.1%
Construction & Housing............................ 0.1%
Gas Exploration................................... 0.1%
Gas-Pipelines..................................... 0.1%
Household, Appliance & Furnishing................. 0.1%
Machinery......................................... 0.1%
Pollution Control................................. 0.1%
Real Estate....................................... 0.1%
Transportation.................................... 0.1%
Trucks & Freight Carriers......................... 0.1%
Wholesale & International Trade................... 0.1%
Appliances & Household Durables................... 0.0%*
Business & Public Services........................ 0.0%*
Holding Companies................................. 0.0%*
Packing & Container............................... 0.0%*
Textile........................................... 0.0%*
Water............................................. 0.0%*
-----
100.0%
=====
</TABLE>
- ------------------------------
* - Less than 0.1%.
The Accompanying Notes are an Integral Part of the Financial Statements.
41
<PAGE>
THE DIVERSIFIED PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $927,134,921) $1,083,807,946
Cash 601
Foreign Currency at Value (Cost $6,693,881) 6,669,250
Receivable for Investments Sold 20,511,667
Interest Receivable 3,281,219
Dividends Receivable 677,760
Variation Margin Receivable 496,544
Foreign Tax Reclaim Receivable 150,900
Unrealized Appreciation of Forward Foreign
Currency Contracts 50,733
Receivable for Expense Reimbursement 25,703
Prepaid Trustees' Fees 2,223
Prepaid Expenses and Other Assets 3,011
--------------
Total Assets 1,115,677,557
--------------
LIABILITIES
Payable for Investments Purchased 107,374,375
Advisory Fee Payable 457,241
Unrealized Depreciation of Forward Foreign
Currency Contracts 65,024
Administrative Services Fee Payable 20,775
Foreign Tax Withholding Payable 9,600
Fund Services Fee Payable 879
Administration Fee Payable 468
Accrued Expenses 63,556
--------------
Total Liabilities 107,991,918
--------------
NET ASSETS
Applicable to Investors' Beneficial Interests $1,007,685,639
==============
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
42
<PAGE>
THE DIVERSIFIED PORTFOLIO
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest Income $10,529,263
Dividend Income (Net of Foreign Withholding Tax
of $107,417) 3,802,069
-----------
Investment Income 14,331,332
EXPENSES
Advisory Fee $ 2,560,014
Custodian Fees and Expenses 319,737
Administrative Services Fee 117,640
Professional Fees and Expenses 25,363
Fund Services Fee 7,769
Administration Fee 5,326
Printing Expenses 4,357
Trustees' Fees and Expenses 3,652
Insurance Expense 959
-----------
Total Expenses 3,044,817
Less: Reimbursement of Expenses (44,357)
-----------
NET EXPENSES 3,000,460
-----------
NET INVESTMENT INCOME 11,330,872
NET REALIZED GAIN (LOSS) ON
Investment Transactions 20,918,895
Futures Contracts 1,725,168
Foreign Currency Contracts and Transactions (706,463)
-----------
Net Realized Gain 21,937,600
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) OF
Investment Transactions 31,255,969
Futures Contracts 2,305,301
Foreign Currency Contracts and Translations (395,280)
-----------
Net Change in Unrealized Appreciation 33,165,990
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $66,434,462
===========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
43
<PAGE>
THE DIVERSIFIED PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE FISCAL
DECEMBER 31, 1999 YEAR ENDED
(UNAUDITED) JUNE 30, 1999
----------------- --------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 11,330,872 $ 17,748,108
Net Realized Gain on Investments, Futures and
Foreign Currency Contracts and Transactions 21,937,600 34,831,065
Net Change in Unrealized Appreciation of
Investments, Futures and Foreign Currency
Contracts and Translations 33,165,990 37,910,587
---------------- -------------
Net Increase in Net Assets Resulting from
Operations 66,434,462 90,489,760
---------------- -------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 126,887,886 364,472,896
Withdrawals (59,517,736) (140,147,017)
---------------- -------------
Net Increase from Investors' Transactions 67,370,150 224,325,879
---------------- -------------
Total Increase in Net Assets 133,804,612 314,815,639
NET ASSETS
Beginning of Period 873,881,027 559,065,388
---------------- -------------
End of Period $ 1,007,685,639 $ 873,881,027
================ =============
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
Selected data for a share outstanding throughout each period are as follows:
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS ENDED FOR THE FISCAL YEAR ENDED JUNE 30,
DECEMBER 31, 1999 --------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
------------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Net Expenses 0.65%(a) 0.65% 0.65% 0.65% 0.65% 0.65%
Net Investment Income 2.43%(a) 2.55% 3.13% 3.33% 3.35% 3.71%
Expenses without Reimbursement 0.66%(a) 0.68% 0.71% 0.80% 0.82% 0.97%
Portfolio Turnover 101%(b) 144% 82% 100% 144% 136%
</TABLE>
- ------------------------
(a) Annualized.
(b) Not Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
44
<PAGE>
THE DIVERSIFIED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
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 on January 29, 1993. The portfolio commenced operations on
September 10, 1993. The portfolio's investment objective is to provide a high
total return from a diversified portfolio of equity and fixed income securities.
The portfolio may invest in international markets. The Declaration of Trust
permits the trustees to issue an unlimited number of beneficial interests in
the portfolio.
The portfolio may have elements of risk not typically associated with
investments in the United States due to concentrated investments in a limited
number of countries or regions which may vary throughout the year. Such
concentrations may subject the portfolio to additional risks resulting from
political or economic conditions in such countries or regions and the possible
imposition of adverse governmental laws or currency exchange restrictions
affecting such countries or regions which could cause the securities and their
markets to be less liquid and prices more volatile than those comparable to the
United States.
The ability of the issuers of debt, asset-backed, and mortgage securities held
by the portfolio to meet their obligations may be affected by the economic and
political developments in a specific industry or region. The value of
asset-backed and mortgage securities can be significantly affected by changes in
interest rates or rapid principal payments including prepayments.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual amounts could differ from
those estimates. The following is a summary of the significant accounting
policies of the portfolio:
a) The portfolio values securities that are listed on an exchange using
prices supplied daily by an independent pricing service that are based on
the last traded price on a national securities exchange or in the absence
of recorded trades, at the readily available mean of the bid and asked
prices on such exchange, if such exchange or market constitutes the
broadest and most representative market for the security. Securities
listed on a foreign exchange are valued at the last traded price or, in
the absence of recorded trades, at the readily available mean of the bid
and asked prices on such exchange available before the time when net
assets are valued. Independent pricing service procedures may also include
the use of prices based on yields or prices of securities of comparable
quality, coupon, maturity and type, indications as to values from dealers,
operating data, and general market conditions. Unlisted securities are
valued at the quoted bid and asked price, in the over-the-counter market
provided by a principal market maker or dealer. If prices are not supplied
by the portfolio's independent pricing service or principal market maker
or dealer, such securities are priced using fair values in accordance with
procedures adopted by the portfolio's trustees. All short-term securities
with a remaining maturity of sixty days or less are valued using the
amortized cost method.
Trading in securities on most foreign exchanges and over-the-counter
markets is normally completed before the close of the domestic market and
may also take place on days on which the domestic market is closed. If
events materially affecting the value of foreign securities occur between
the time when the
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THE DIVERSIFIED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
exchange on which they are traded closes and the time when the portfolio's
net assets are calculated, such securities will be valued at fair value in
accordance with procedures established by and under the general
supervision of the portfolio's trustees.
b) The portfolio's custodian or designated subcustodians, as the case may be
under tri-party repurchase agreements, takes possession of the collateral
pledged for investments in repurchase agreements on behalf of the
portfolio. It is the policy of the portfolio to value the underlying
collateral daily on a mark-to-market basis to determine that the value,
including accrued interest, is at least equal to the repurchase price plus
accrued interest. In the event of default of the obligation to repurchase,
the portfolio has the right to liquidate the collateral and apply the
proceeds in satisfaction of the obligation. Under certain circumstances,
in the event of default or bankruptcy by the other party to the agreement,
realization and/or retention of the collateral or proceeds may be subject
to legal proceedings.
c) The books and records of the portfolio are maintained in U.S. dollars. The
market value of investment securities, other assets and liabilities and
foreign currency contracts are translated at the prevailing exchange rates
at the end of the period. Purchases, sales, income and expense are
translated at the exchange rates prevailing on the respective dates of
such transactions. Translation gains and losses resulting from changes in
exchange rates during the reporting period and gains and losses realized
upon settlement of foreign currency transactions are reported in the
Statement of Operations. Although the net assets of the portfolio are
presented at the exchange rates and market values prevailing at the end of
the period, the portfolio does not isolate the portion of the results of
operations arising as a result of changes in foreign exchange rates from
the fluctuations arising from changes in the market prices of securities
during the period.
d) Securities transactions are recorded on a trade date basis. Dividend
income is recorded on the ex-dividend date or as of the time that the
relevant ex-dividend date and amount becomes known. Interest income, which
includes the amortization of premiums and discounts, if any, is recorded
on an accrual basis. For financial and tax reporting purposes, realized
gains and losses are determined on the basis of specific lot
identification.
e) The portfolio may enter into forward and spot foreign currency contracts
to protect securities and related receivables and payables against
fluctuations in future foreign currency rates and to enhance returns. A
forward foreign currency contract is an agreement to buy or sell
currencies of different countries on a specified future date at a
specified rate. Risks associated with such contracts include the movement
in the value of the foreign currency relative to the U.S. dollar and the
ability of the counterparty to perform.
The market value of the contract will fluctuate with changes in currency
exchange rates. Contracts are valued daily at the current foreign exchange
rates, and the change in the market value is recorded by the portfolio as
unrealized appreciation or depreciation of forward foreign currency
contract translations.
f) A futures contract is an agreement to purchase/sell a specified quantity
of an underlying instrument at a specified future date or to make/receive
a cash payment based on the value of a securities index. The price at
which the purchase and sale will take place is fixed when the portfolio
enters into the contract. Upon entering into such a contract, the
portfolio is required to pledge to the broker an amount of cash
46
<PAGE>
THE DIVERSIFIED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
and/or liquid securities equal to the minimum "initial margin"
requirements of the exchange. Pursuant to the contract, the portfolio
agrees to receive from, or pay to, the broker an amount of cash equal to
the daily fluctuation in the value of the contract. Such receipts or
payments are known as "variation margin" and are recorded by the portfolio
as unrealized gains or losses. When the contract is closed, the portfolio
records a realized gain or loss equal to the difference between the value
of the contract at the time it was opened and the value at the time when
it was closed. The portfolio invests in futures contracts for the purpose
of hedging its existing portfolio securities, or securities the portfolio
intends to purchase, against fluctuations in value caused by changes in
prevailing market interest rates or securities movements. The use of
futures transactions involves the risk of imperfect correlation in
movements in the price of futures contracts, interest rates and the
underlying hedged assets, and the possible inability of counterparties to
meet the terms of their contracts.
g) The portfolio intends to be treated as a partnership for federal income
tax purposes. As such, each investor in the portfolio will be taxed on its
share of the portfolio's ordinary income and capital gains. It is intended
that the portfolio's assets will be managed in such a way that an investor
in the portfolio will be able to satisfy the requirements of Subchapter M
of the Internal Revenue Code. The portfolio earns foreign income which may
be subject to foreign withholding taxes at various rates. The portfolio
may be subject to taxes imposed by countries in which it invests. Such
taxes are generally based on income and/or capital gains earned. Taxes are
accrued and applied to net investment income, net realized capital gains
and unrealized appreciation, as applicable, as to the income and/or
capital gains are earned.
2. TRANSACTIONS WITH AFFILIATES
a) The portfolio has Investment Advisory Agreement with J.P. Morgan
Investment Management Inc. ("JPMIM"), an affiliate of Morgan Guaranty
Trust Company of New York ("Morgan"),a wholly-owned subsidiary of
J.P. Morgan & Co. Incorporated ("J.P. Morgan"). Under the terms of the
agreement, the portfolio pays JPMIM at an annual rate of 0.55% of the
portfolio's average net assets. For the six months ended December 31,
1999, such fees amounted to $2,560,014.
The portfolio may invest in one or more affiliated money market funds:
J.P. Morgan Institutional Prime Money Market Fund, J.P. Morgan
Institutional Tax Exempt Money Market Fund, J.P. Morgan Institutional
Federal Money Market Fund and J.P. Morgan Institutional Treasury Money
Market Fund. The Advisor has agreed to reimburse its advisory fee from the
portfolio in an amount to offset any doubling of investment advisory and
shareholder servicing fees. For the six months ended December 31, 1999,
J.P. Morgan has agreed to reimburse the portfolio $24,409 under this
agreement.
b) The portfolio, has retained Funds Distributor, Inc. ("FDI"), a registered
broker-dealer, to serve as the co-administrator and exclusive placement
agent. Under a Co-Administration Agreement between FDI and the portfolio,
FDI provides administrative services necessary for the operations of the
portfolio, furnishes office space and facilities required for conducting
the business of the portfolio and pays the compensation of the portfolio's
officers affiliated with FDI. The portfolio has agreed to pay FDI fees
equal to its allocable share of an annual complex-wide charge of $425,000
plus FDI's out-of-pocket
47
<PAGE>
THE DIVERSIFIED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
expenses. The amount allocable to the portfolio is based on the ratio of
the portfolio's net assets to the aggregate net assets of the trust and
certain other investment companies subject to similar agreements with FDI.
For the six months ended December 31, 1999, the fee for these services
amounted to $5,326.
c) The portfolio has an Administrative Services Agreement (the "Services
Agreement") with Morgan under which Morgan is responsible for certain
aspects of the administration and operation of the portfolio. Under the
Services Agreement, the portfolio has agreed to pay Morgan a fee equal to
its allocable share of an annual complex-wide charge. This charge is
calculated based on the aggregate average daily net assets of the
portfolio and the other portfolios for which J.P. Morgan Funds and
J.P. Morgan Institutional Funds invest (the "master portfolios") and
J.P. Morgan Series Trust in accordance with the following annual schedule:
0.09% on the first $7 billion of their aggregate average daily net assets
and 0.04% of their aggregate average daily net assets in excess of
$7 billion less the complex-wide fees payable to FDI. The portion of this
charge payable by the portfolio is determined by the proportionate share
that its net assets bear to the net assets of the master portfolios, other
investors in the master portfolios for which Morgan provides similar
services, and J.P. Morgan Series Trust. For the six months ended
December 31, 1999, the fee for these services amounted to $117,640.
In addition, J.P. Morgan has agreed to reimburse the fund to the extent
necessary to maintain the total operating expenses of the portfolio, at no
more than 0.65% of the average daily net assets of the portfolio through
October 31, 2000. For the six months period ended December 31, 1999,
J.P. Morgan has agreed to reimburse the portfolio $44,357 for expenses
under this agreement.
d) The portfolio has a Fund Services Agreement with Pierpont Group, Inc.
("Group") to assist the trustees in exercising their overall supervisory
responsibilities for the trust's affairs. The trustees of the trust
represent all the existing shareholders of Group. The portfolio's
allocated portion of Group's costs in performing its services amounted to
$7,769 for the six months ended December 31, 1999.
e) An aggregate annual fee of $75,000 is paid to each trustee for serving as
a trustee of the trust, the J.P. Morgan Funds and J.P. Morgan
Institutional Funds, the master portfolios, and J.P. Morgan Series Trust.
The Trustees' Fees and Expenses shown in the financial statements
represents the portfolio's allocated portion of the total fees and
expenses. The trust's Chairman and Chief Executive Officer also serves as
Chairman of Group and receives compensation and employee benefits from
Group in his role as Group's Chairman. The allocated portion of such
compensation and benefits included in the Fund Services Fee shown in the
financial statements was $1,500.
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<PAGE>
THE DIVERSIFIED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the six months
period ended December 31, 1999 were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
------------ ------------
<S> <C> <C>
U.S. Government and Agency Obligations........... $730,534,049 $724,696,335
Corporate and Collateralized Obligations......... 216,415,326 142,008,863
------------ ------------
$946,949,375 $866,705,198
============ ============
</TABLE>
Open futures contracts at December 31, 1999 are as summarized as follows:
<TABLE>
<CAPTION>
NET UNREALIZED CURRENT
APPRECIATION/ MARKET VALUE
CONTRACTS LONG (DEPRECIATION) OF CONTRACTS
-------------- -------------- ------------
<S> <C> <C> <C>
Australian All Ordinary Index, expiring March
2000............................................ 39 $ 19,865 $ 2,001,557
CAC 40 Index, expiring January 2000.............. 79 382,215 4,770,858
DAX Index, expiring March 2000................... 34 701,607 5,989,697
IBEX Plus Index, expiring January 2000........... 32 84,091 3,784,411
U.S. Long Bond (CBT), expiring
March 2000...................................... 63 (177,659) 5,729,063
------------- ------------- -----------
Totals........................................... 247 $ 1,010,119 $22,275,586
============= ============= ===========
</TABLE>
<TABLE>
<CAPTION>
CONTRACTS SHORT
---------------
<S> <C> <C> <C>
FTSE 100 Index, expiring March 2000.............. 4 $(16,212) $ (450,631)
U.S. Five Year Note, expiring March 2000......... 1 1,275 (98,016)
U.S. Ten Year Note, expiring March 2000.......... 444 868,897 (42,561,565)
-------------- -------- ------------
Totals........................................... 449 $853,960 $(43,110,212)
============== ======== ============
</TABLE>
49
<PAGE>
THE DIVERSIFIED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
At December 31, 1999, the portfolio had open forward currency contracts as
follows:
<TABLE>
<CAPTION>
U.S. DOLLAR NET UNREALIZED
CONTRACTUAL VALUE AT APPRECIATION/
VALUE 12/31/99 (DEPRECIATION)
----------- ----------- --------------
<S> <C> <C> <C>
PURCHASE CONTRACTS
Australian Dollar 2,442,796,
expiring 03/17/2000............................. $1,551,395 $1,599,628 $ 48,233
British Pound 443,883, expiring 03/17/2000....... 720,720 716,766 (3,954)
Euro 5,496,442, expiring 03/17/2000.............. 5,614,780 5,568,786 (45,994)
Swiss Franc 1,451,549, expiring 03/17/2000....... 930,480 919,828 (10,652)
</TABLE>
<TABLE>
<CAPTION>
SETTLEMENT
VALUE
----------
<S> <C> <C> <C>
SALES CONTRACTS
Japanese Yen, 256,895,353,
expiring 03/17/2000............................. 2,542,387 2,544,311 (1,924)
--------
Net Unrealized Depreciation on Foreign Currency
Contracts....................................... $(14,291)
========
</TABLE>
4. CREDIT AGREEMENT
The portfolio is party to a revolving line of credit agreement (the "Agreement")
as discussed more fully in Note 4 of the fund's Notes to the Financial
Statements which are included elsewhere in this report.
50
<PAGE>
J.P. MORGAN FUNDS
PRIME MONEY MARKET FUND
FEDERAL MONEY MARKET FUND
TAX EXEMPT MONEY MARKET FUND
TAX AWARE ENHANCED INCOME FUND: SELECT SHARES
SHORT TERM BOND FUND
BOND FUND
GLOBAL STRATEGIC INCOME FUND
EMERGING MARKETS DEBT FUND
TAX EXEMPT BOND FUND
NEW YORK TAX EXEMPT BOND FUND
CALIFORNIA BOND FUND: SELECT SHARES
DIVERSIFIED FUND
DISCIPLINED EQUITY FUND
U.S. EQUITY FUND
U.S. SMALL COMPANY FUND
U.S. SMALL COMPANY OPPORTUNITIES FUND
TAX AWARE U.S. EQUITY FUND: SELECT SHARES
INTERNATIONAL EQUITY FUND
EUROPEAN EQUITY FUND
INTERNATIONAL OPPORTUNITIES FUND
EMERGING MARKETS EQUITY FUND
GLOBAL 50 FUND: SELECT SHARES
FOR MORE INFORMATION ON THE J.P. MORGAN FUNDS, CALL J.P. MORGAN FUNDS
SERVICES AT (800) 521-5411.
IMSAR285
J.P. MORGAN DIVERSIFIED FUND
SEMIANNUAL REPORT
DECEMBER 31, 1999
