<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
SHARES VALUE
----------- ------------
EQUITIES (58.2%)
COMMON STOCK (57.9%)
FOREIGN EQUITIES (11.9%)
AUSTRALIA (0.2%)
Broken Hill Proprietary
Company Ltd. (Metals &
Mining) ................... 5,400 $ 74,674
CSR Ltd. (Building
Materials) ................ 18,900 66,790
National Australia Bank Ltd.
(Banking) ................. 9,950 92,016
News Corporation Ltd.
(Broadcasting &
Publishing) ............... 10,500 59,584
Southcorp Holdings Ltd.
(Food, Beverages &
Tobacco) .................. 16,600 41,155
TNT Ltd. (Transportation) ... 31,000 34,890
WMC Ltd. (Metals &
Mining) ................... 9,500 68,041
------------
437,150
------------
BELGIUM (0.2%)
Arbed SA (Metals &
Mining)+ ................... 500 57,215
Banque Bruxelles Lambert SA
(Banking) ................. 200 37,282
Electrabel SA (Electric) .... 635 136,409
Fortis AG (Insurance) ....... 500 65,993
PetroFina SA
(Oil-Production) .......... 200 63,264
Solvay SA (Chemicals) ....... 70 43,291
------------
403,454
------------
CANADA (0.1%)
Inco Ltd. (Metals &
Mining) .................... 5,900 190,275
------------
FINLAND (0.1%)
Nokia AB (Telecommunications-
Equipment) ................ 1,700 62,571
Rautaruukki OY (Metals &
Mining) ................... 3,700 26,839
Sampo Insurance Company Ltd.
(Insurance) ............... 250 14,475
UPM-Kymmene Corporation
(Forest Products &
Paper)+ ................... 1,500 31,027
------------
134,912
------------
<CAPTION>
SHARES VALUE
----------- ------------
<S> <C> <C>
FRANCE (1.4%)
AXA - Non Negotiable
Certificates (Multi -
Industry)+ ................ 31 $ 1,696
Bouygues (Construction &
Housing) .................. 1,006 112,167
Carrefour Supermarche
(Retail) .................. 180 100,837
Castorama Dubois (Retail) ... 460 90,604
CEP Communications
(Broadcasting &
Publishing) ............... 900 76,048
Christian Dior SA
(Retail) .................. 820 106,719
Compagnie de Saint Gobain
(Building Materials) ...... 681 91,142
Compagnie Generale des Eaux
(Water) ................... 1,118 124,872
Credit Commercial de France
(Banking) ................. 1,200 55,617
Credit Local de France
(Financial Services) ...... 1,950 158,709
Elf Aquitaine SA
(Oil-Services) . 2,700 198,563
Essilor International (Health
Services) ................. 275 77,883
Groupe Danone (Food,
Beverages & Tobacco) ...... 1,335 202,010
Groupe Danone - Non
Negotiable Certificates
(Food, Beverages &
Tobacco)+ ................. 21 3,178
L'Air Liquide (Chemicals) ... 533 94,112
Lafarge SA (Building
Materials) . 309 18,697
Lagardere Groupe
(Entertainment, Leisure &
Media) .................... 3,240 83,516
Peugeot SA (Automotive) ..... 585 78,294
Pinault-Printemps-Redoute SA
(Retail) .................. 240 83,961
Promodes (Retail) ........... 420 121,070
Rexel SA (Electrical
Equipment) ................ 360 99,439
Rhone-Poulenc (Chemicals) ... 3,420 89,883
Roussel Uclaf
(Pharmaceuticals) ......... 220 52,777
Sanofi (Pharmaceuticals) .... 990 74,191
Schneider SA
(Electronics) ............. 2,375 124,561
SEITA (Food, Beverages &
Tobacco) .................. 2,600 119,190
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
----------- ------------
<S> <C> <C>
</TABLE>
FRANCE (CONTINUED)
<TABLE>
<S> <C> <C>
SGS - Thomson
Microelectronics NV
(Electronics)+ ............ 800 $ 28,127
Sidel, SA (Machinery) ....... 350 88,994
Societe Generale
(Banking) ................. 1,410 155,021
Societe Industrielle de
Transports Automobiles SA
(Sita) (Pollution
Control) .................. 370 91,348
Sommer Allibert (Diversified
Manufacturing) ............ 150 38,111
Synthelabo
(Pharmaceuticals) ......... 900 76,048
Television Francaise 1
(Broadcasting &
Publishing) ............... 660 75,383
Total SA (Oil-Services) ..... 2,290 169,834
Union des Assurances
Federales (Insurance) ..... 1,320 162,818
Usinor Sacilor (Metals &
Mining) ................... 2,600 37,499
Valeo SA (Automotive) ....... 1,300 69,569
------------
3,432,488
------------
GERMANY (1.1%)
Allgemeine
Handelsgesellschaft der
Verbraucher AG (Retail) ... 290 89,545
Allianz AG Holding
(Insurance) ............... 146 252,743
BASF AG (Chemicals) ......... 930 265,777
Bayer AG (Chemicals) ........ 3,800 134,186
Bilfinger & Berger Bau AG
(Construction &
Housing) .................. 180 75,919
Continental AG
(Automotive) .............. 4,770 77,404
Daimler-Benz AG
(Automotive) .............. 170 90,967
Deutsche Bank AG
(Banking) ................. 3,050 144,271
Deutsche Lufthansa AG
(Transportation) .......... 300 42,375
Deutsche Pfandbrief &
Hypothekenbank AG
(Banking) ................. 2,410 95,315
Dresdner Bank AG
(Banking) ................. 7,500 188,468
Fried, Krupp AG Hoesch Krupp
(Machinery) ............... 700 107,612
MAN AG (Automotive) ......... 420 104,521
Munchener Rueckversicherungs-
Gesellschaft
(Insurance) ............... 144 297,056
<CAPTION>
SHARES VALUE
----------- ------------
<S> <C> <C>
</TABLE>
GERMANY (CONTINUED)
<TABLE>
<S> <C> <C>
Siemens AG (Electrical
Equipment)+ ............... 4,940 $ 263,854
VEBA AG (Oil-Services) ...... 6,650 353,309
Volkswagen AG
(Automotive) .............. 555 206,192
------------
2,789,514
------------
HONG KONG (0.3%)
Cheung Kong Holdings Ltd.
(Real Estate) ............. 7,000 50,417
Henderson Land Development
Company Ltd. (Real
Estate) ................... 27,000 202,312
Hong Kong Electric Holdings
Ltd. (Electric) ........... 18,000 54,880
Hong Kong Telecommunications
Ltd.
(Telecommunications) ...... 43,600 78,295
HSBC Holdings PLC
(Banking) ................. 5,600 84,646
Hutchison Whampoa Ltd. (Multi
- Industry) ............... 11,000 69,207
Sing Tao Holdings
(Broadcasting &
Publishing) ............... 82,000 48,466
Sun Hung Kai Properties Ltd.
(Real Estate) ............. 9,000 90,982
Swire Pacific Ltd. (Multi -
Industry) ................. 12,000 102,706
Television Broadcast Ltd.
(Entertainment, Leisure &
Media) .................... 17,000 63,801
Tingyi (Cayman Islands)
Holding Co. (Food,
Beverages & Tobacco) ...... 38,000 10,432
------------
856,144
------------
IRELAND (0.1%)
Bank of Ireland PLC
(Banking) .................. 12,000 81,812
CRH PLC (Building
Materials) . 8,000 80,518
Jefferson Smurfit Group PLC
(Forest Products &
Paper) .................... 27,000 72,897
------------
235,227
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
----------- ------------
<S> <C> <C>
ITALY (0.2%)
Assicurazioni Generali
(Insurance) ............... 4,000 $ 92,240
ENI SPA (Oil-Services) ...... 13,000 64,832
Fiat SPA (Automotive) ....... 24,000 80,394
Instituto Mobiliare Italiano
SPA (Financial
Services) ................. 10,000 83,499
Telecom Italia SPA
(Telecommunications) ...... 51,000 109,622
------------
430,587
------------
JAPAN (3.9%)
Alps Electric Co. Ltd.
(Electrical Equipment) ..... 11,000 133,386
Asahi Bank Ltd. (Banking) ... 20,000 231,580
Asahi Glass Co. Ltd.
(Building Materials) ...... 7,000 83,606
Chugai Pharmaceutical Co.
Ltd. (Pharmaceuticals) .... 12,000 117,066
Dai-Ichi Kangyo Bank Ltd.
(Banking) ................. 7,000 130,195
Daido Steel Co. Ltd. (Metals
& Mining) ................. 12,000 59,299
Daiwa Bank Ltd. (Banking) ... 30,000 207,328
Daiwa Danchi Co. Ltd. (Real
Estate) ................... 6,000 38,511
East Japan Railway Co.
(Railroads) ............... 20 104,849
Ebara Corp. (Machinery) ..... 9,000 143,598
Familymart Co. (Retail) ..... 2,100 93,434
Fuji Denki Reiki (Multi -
Industry) ................. 100 1,276
Fuji Electric Co., Ltd.
(Electrical Equipment) .... 20,000 108,131
Fujitsu Ltd. (Computer
Systems) .................. 5,000 45,587
Fukui Bank (Banking) ........ 15,000 86,295
Gakken Co. Ltd. (Broadcasting
& Publishing)+ ............ 10,000 74,033
Gunze Ltd. (Textiles) ....... 15,000 93,954
Hitachi (Electrical
Equipment) ................ 25,000 232,491
Hokkaido Takushoku Bank
(Banking) ................. 28,000 84,754
Honda Motor Co.
(Automotive) .............. 2,000 51,786
<CAPTION>
SHARES VALUE
----------- ------------
<S> <C> <C>
</TABLE>
JAPAN (CONTINUED)
<TABLE>
<S> <C> <C>
Itoham Foods Inc. (Food,
Beverages & Tobacco) ...... 15,000 $ 114,194
Izumi Co. (Retail) .......... 4,000 79,868
Japan Airport Terminal
(Commercial Services) ..... 4,000 56,527
Japan Tobacco, Inc. (Food,
Beverages & Tobacco) ...... 5 38,293
Kagawa Bank (Banking) ....... 3,000 28,993
Kawasaki Kisen Kaisha Ltd.
(Transport & Services)+ ... 20,000 67,468
Kyocera Corp.
(Electronics) ............. 2,000 141,318
Kyowa Hakko Kogyo Co. Ltd.
(Chemicals) ............... 10,000 95,732
Marubeni Corp. (Transport &
Services) ................. 20,000 109,408
Matsushita Electric
Industries Co. Ltd.
(Electronics) ............. 15,000 278,990
Mitsubishi Chemical Corp.
(Chemicals) ............... 10,000 46,134
Mitsubishi Heavy Industries
Ltd. (Machinery) .......... 19,000 165,087
Mitsui Fudosan Co. Ltd. (Real
Estate) ................... 10,000 134,936
Mitsui Petrochemical
Industries (Chemicals) .... 10,000 80,232
Mitsui Toatsu Chemicals
(Chemicals) ............... 35,000 138,173
Mitsui Trust & Banking
(Banking) ................. 10,000 116,702
Mizuno Corp. (Retail) ....... 7,000 65,736
Nagoya Railroad Company Ltd.
(Railroads) ............... 11,000 56,062
Nippon Express Co. Ltd.
(Transport & Services) .... 11,000 107,311
Nippon Hodo Co. (Construction
& Housing) ................ 4,000 67,833
Nippon Road Co. (Construction
& Housing) ................ 8,000 68,854
Nippon Steel Corp. (Metals &
Mining) ................... 100,000 342,811
Nippon Telegraph & Telephone
Corp. (Telephone) ......... 6 44,420
Nishi-Nippon Railroad
(Railroads) ............... 20,000 82,967
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
----------- ------------
<S> <C> <C>
</TABLE>
JAPAN (CONTINUED)
<TABLE>
<S> <C> <C>
Nissan Diesel Motor Co.
(Automotive)+ ............. 10,000 $ 59,171
Nissan Motor Co. Ltd.
(Automotive) .............. 20,000 177,423
Nomura Securities Co. Ltd.
(Financial Services) ...... 16,000 312,177
NSK Corp. (Machinery) ....... 10,000 75,582
Okumura Corp. (Construction &
Housing) .................. 8,000 66,812
Ono Pharmaceutical
(Pharmaceuticals) ......... 3,000 103,117
Sakura Bank Ltd.
(Banking) ................. 40,000 444,925
San-In Godo Bank
(Banking) ................. 8,000 65,499
Sanden Corp. (Machinery) .... 15,000 114,605
Sankyo Aluminium Industries
Co. (Building
Materials) ................ 18,000 105,360
Sanwa Bank Ltd. (Banking) ... 15,000 277,622
Sekisui House Ltd.
(Construction &
Housing) .................. 5,000 56,983
Shikoku Electric Power Inc.
(Electric) ................ 4,500 99,698
Showa Shell Sekiyu K. K.
(Oil-Production) .......... 13,000 135,118
Sony Corp. (Electronics) .... 2,000 131,472
Sumitomo Bank Ltd.
(Banking) . 8,000 154,630
Sumitomo Forestry Co. (Forest
Products & Paper) ......... 7,000 104,028
Takashimaya Co. Ltd.
(Retail) .................. 6,000 92,997
TDK Corp. (Electronics) ..... 2,000 119,254
Toenec Corp. (Construction &
Housing) .................. 5,000 46,498
Toho Gas Co. (Natural
Gas) ...................... 30,000 100,108
Tohoku Electric Power Co.
Inc. (Electric) ........... 4,700 104,986
Tokio Marine & Fire Insurance
Co. Ltd. (Insurance) ...... 13,000 173,046
Tokyo Electric Power
(Electric) . 5,000 126,731
Tokyu Store Chain
(Retail) .................. 3,000 26,778
Tomen Corp. (Wholesale &
International Trade) ...... 40,000 153,535
Toppan Printing Co. Ltd.
(Broadcasting &
Publishing) ............... 10,000 145,877
Toyo Construction Co.
(Construction &
Housing) .................. 15,000 76,449
<CAPTION>
SHARES VALUE
----------- ------------
<S> <C> <C>
</TABLE>
JAPAN (CONTINUED)
<TABLE>
<S> <C> <C>
Toyo Trust & Banking Co. Ltd.
(Banking) ................. 27,000 $ 278,169
Toyota Motor Corp.
(Automotive) .............. 20,000 499,628
Ube Industries Ltd.
(Diversified
Manufacturing)+ ........... 29,000 110,256
Victor Company of Japan, Ltd.
(Electronics)+ ............ 4,000 57,257
Yamazaki Baking Co. Ltd.
(Food, Beverages &
Tobacco) .................. 6,000 111,049
Yokohama Rubber Company Ltd.
(Automotive) .............. 25,000 156,590
------------
9,512,638
------------
MALAYSIA (0.0%)*
Industrial Oxygen
Incorporated Berhad
(Agriculture) ............. 24,000 33,279
Sime Darby Berhad (Multi -
Industry) ................. 25,000 69,132
Telekom Malaysia Berhard
(Telecommunications) ...... 2,000 17,794
------------
120,205
------------
NETHERLANDS (1.8%)
ABN Amro Holdings NV
(Banking) ................. 1,980 106,251
Dutch State Mines NV
(Chemicals) ............... 1,100 109,228
ING Groep NV (Financial
Services)+ ................ 2,650 79,020
Koninklijke PTT Nederland NV
(Commercial Services) ..... 1,900 71,905
Philips Electronics NV
(Electronics) ............. 840 27,311
Royal Dutch Petroleum Co.
(Oil-Services) ............ 2,350 362,899
Royal Dutch Petroleum Co.
(ADR) (Oil-Services) ...... 17,200 2,644,500
Unilever NV (Food, Beverages
& Tobacco) ................ 800 115,760
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
23
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
----------- ------------
<S> <C> <C>
</TABLE>
NETHERLANDS (CONTINUED)
<TABLE>
<S> <C> <C>
Unilever NV (ADR) (Food,
Beverages & Tobacco) ...... 6,200 $ 899,775
Wolters Kluwer NV
(Broadcasting &
Publishing) ............... 500 56,796
------------
4,473,445
------------
NEW ZEALAND (0.0%)*
Fletcher Challenge Building
(Building Materials) ...... 4,500 8,786
Fletcher Challenge Energy
(Gas Exploration) ......... 4,500 9,927
Fletcher Challenge Paper
(Forest Products &
Paper) .................... 9,000 17,387
Lion Nathan Ltd. (Food,
Beverages & Tobacco) ...... 20,000 52,202
------------
88,302
------------
NORWAY (0.2%)
Aker AS, Series B
(Industrial) ............... 2,500 44,641
Hafslund AS, Series B
(Medical Supplies) ........ 1,700 10,729
Kvaerner AS, Series B
(Construction &
Housing) .................. 1,300 50,228
Norsk Hydro AS
(Oil-Services) . 4,000 195,803
Nycomed AS, Series B (Medical
Supplies) ................. 1,700 23,552
Orkla AS (Multi -
Industry) ................. 1,500 72,964
------------
397,917
------------
SINGAPORE (0.1%)
Hotel Properties Limited
(Restaurants & Hotels) .... 23,000 40,738
Sime Darby Berhad (Multi -
Industry) ................. 7,000 19,342
Singapore Airlines Ltd.
(Airlines) ................ 4,000 42,226
Singapore Telecommunications
Ltd.
(Telecommunications) ...... 18,000 47,951
United Overseas Bank Ltd.
(Banking) ................. 10,000 95,647
------------
245,904
------------
<CAPTION>
SHARES VALUE
----------- ------------
<S> <C> <C>
SPAIN (0.3%)
Banco Intercontinental
Espanol (Financial
Services) ................. 500 $ 55,884
Banco Pastor (Banking) ...... 700 43,678
Banco Popular Espanol SA
(Banking) ................. 620 110,449
Fuerzas Electric de Cataluna
SA (Electric) ............. 14,500 118,184
Hidroelectrica del Cantabrico
SA (Electric) ............. 1,600 55,658
Iberdrola SA (Electric) ..... 6,000 61,539
Repsol SA (Gas
Exploration) .............. 3,100 107,717
Telefonica de Espana
(Telecommunications) ...... 8,100 149,098
------------
702,207
------------
SWITZERLAND (0.3%)
Georg Fischer AG (Automotive
Supplies) ................. 50 57,724
Liechtenstein Global Trust AG
(Banking) ................. 70 34,115
Nestle SA (Food, Beverages &
Tobacco) .................. 145 165,547
Roche Holding AG
(Pharmaceuticals) ......... 15 114,390
Sandoz AG
(Pharmaceuticals) ......... 220 251,526
Schweizerische
Rueckversicherungs-
Gesellschaft
(Insurance) ............... 50 51,333
Schweizerischer Bankverein
(Banking) ................. 471 92,948
Societe Generale de
Surveillance Holding SA
(Commercial Services) ..... 160 70,308
------------
837,891
------------
UNITED KINGDOM (1.6%)
Abbey National PLC
(Banking) . 10,000 84,061
Allied Colloids Group PLC
(Chemicals) ............... 23,500 47,469
Allied Domecq PLC (Food,
Beverages & Tobacco) ...... 7,800 54,902
Amersham International PLC
(Biotechnology) ........... 1,600 26,104
Barclays PLC (Banking) ...... 7,000 84,022
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
24
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
----------- ------------
<S> <C> <C>
</TABLE>
UNITED KINGDOM (CONTINUED)
<TABLE>
<S> <C> <C>
BAT Industries PLC (Food,
Beverages & Tobacco) ...... 13,000 $ 101,199
BOC Group PLC (Chemicals) ... 4,500 64,572
Britannic Assurance PLC
(Insurance) ............... 5,500 61,445
British Aerospace PLC
(Aerospace) ............... 4,000 60,691
British Gas PLC (Natural
Gas) ...................... 15,500 43,110
British Petroleum Company PLC
(Oil-Services) ............ 16,120 141,517
British Telecommunications
PLC
(Telecommunications) ...... 18,100 97,308
BTR PLC (Multi -
Industry) ................. 18,800 73,905
Cable & Wireless PLC
(Telecommunications) ...... 6,000 39,669
Caradon PLC (Multi -
Industry) ................. 12,000 40,181
Dalgety PLC (Food, Beverages
& Tobacco) ................ 11,200 61,344
General Electric Company PLC
(Electrical Equipment) .... 15,000 80,759
Glaxo Wellcome PLC
(Pharmaceuticals) ......... 21,158 285,029
Glynwed International PLC
(Metals & Mining) ......... 8,300 40,753
Guardian Royal Exchange PLC
(Insurance) ............... 28,000 107,896
Guinness PLC (Food, Beverages
& Tobacco) ................ 11,700 85,080
Hanson PLC (Multi -
Industry) . 12,300 34,401
Hillsdown Holdings PLC (Food,
Beverages & Tobacco) ...... 23,700 63,868
HSBC Holdings PLC
(Banking) ................. 8,000 125,298
Inchcape PLC (Commercial
Services) ................. 8,500 38,697
Kingfisher PLC (Retail) ..... 7,800 78,354
Ladbroke Group PLC
(Entertainment, Leisure &
Media) .................... 20,000 55,471
Lloyds TSB Group PLC
(Banking) ................. 21,800 106,700
Lucas Industries PLC
(Automotive) .............. 13,000 45,752
<CAPTION>
SHARES VALUE
----------- ------------
<S> <C> <C>
</TABLE>
UNITED KINGDOM (CONTINUED)
<TABLE>
<S> <C> <C>
Marks & Spencer PLC
(Retail) .................. 12,000 $ 87,728
MEPC PLC (Real Estate) ...... 8,600 54,252
National Grid Group PLC
(Electric) ................ 9,500 25,168
National Power PLC
(Electric) ................ 10,500 84,838
National Westminster Bank PLC
(Banking) ................. 8,200 78,231
Pearson PLC (Broadcasting &
Publishing) ............... 7,000 72,221
Peninsular & Orient Steam
Navigation Co.
(Transportation) .......... 3,300 24,817
Racal Electronic PLC
(Telecommunications-
Equipment) ................ 9,500 45,021
Rank Organisation PLC
(Entertainment, Leisure &
Media) .................... 11,000 85,032
Reuters Holdings
(Broadcasting &
Publishing) ............... 9,000 108,937
Rolls-Royce PLC
(Aerospace) ............... 19,400 67,522
RTZ Corp. PLC (Metals &
Mining) ................... 6,000 88,846
Sainsbury (J.) PLC
(Retail) .................. 14,300 84,211
Sears PLC (Retail) .......... 48,400 74,452
Severn Trent (Water) ........ 3,000 25,358
Shell Transport & Trading Co.
(Oil-Services) ............ 8,400 123,210
SmithKline Beecham PLC
(Pharmaceuticals) ......... 7,625 81,572
South West Water PLC
(Water) ................... 5,500 55,890
Standard Chartered PLC
(Banking) ................. 4,700 46,811
Tarmac PLC (Construction &
Housing) .................. 32,000 54,694
Tesco PLC (Retail) .......... 15,000 68,523
THORN EMI PLC (Entertainment,
Leisure & Media) .......... 2,500 69,688
Tomkins PLC (Multi -
Industry) ................. 18,200 68,436
Unilever PLC (Food, Beverages
& Tobacco) ................ 5,000 99,443
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
25
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
----------- ------------
<S> <C> <C>
</TABLE>
UNITED KINGDOM (CONTINUED)
<TABLE>
<S> <C> <C>
Vodafone Group PLC
(Telecommunications) ...... 28,500 $ 106,059
Zeneca Group PLC
(Pharmaceuticals) ......... 2,600 57,528
------------
4,068,045
------------
TOTAL FOREIGN COMMON STOCK
(COST $26,958,890) ....... 29,356,305
------------
UNITED STATES (46.0%)
BASIC INDUSTRIES (2.9%)
AGRICULTURE (0.1%)
Dekalb Genetics Corp. ....... 6,600 169,950
------------
CHEMICALS (1.4%)
Air Products and Chemicals,
Inc. ...................... 4,100 236,775
Albemarle Corp. ............. 2,700 49,275
Crompton & Knowles Corp. .... 2,500 41,875
Cytec Industries, Inc.+ ..... 600 51,300
Dow Chemical Co. ............ 9,200 699,200
E.I. Du Pont De Nemours &
Co. ....................... 20,600 1,629,975
Ethyl Corp. ................. 4,300 41,387
General Chemical Group,
Inc.+ . 1,000 20,250
Georgia Gulf Corp. .......... 1,200 35,100
IMC Global, Inc. ............ 1,800 67,725
Landec Corp.+ ............... 200 4,075
Lyondell Petrochemical
Co. ....................... 2,700 65,137
Petrolite Corp. ............. 300 9,525
PPG Industries Inc. ......... 300 14,625
Rohm & Haas Co. ............. 2,400 150,600
Schulman (A), Inc. .......... 900 21,937
Synalloy Corp. .............. 300 4,800
Union Carbide Corp. ......... 5,300 210,675
Wellman, Inc. ............... 100 2,337
------------
3,356,573
------------
FOREST PRODUCTS & PAPER (0.5%)
Bowater Inc. ................ 2,700 101,587
Caraustar Industries,
Inc. ...................... 600 16,050
Champion International
Corp. ..................... 6,700 279,725
<CAPTION>
SHARES VALUE
----------- ------------
<S> <C> <C>
</TABLE>
FOREST PRODUCTS & PAPER (CONTINUED)
<TABLE>
<S> <C> <C>
International Paper Co. ..... 2,700 $ 99,562
James River Corp. of
Virginia .................. 5,900 155,612
Louisiana Pacific Corp. ..... 7,600 168,150
Mead Corp. .................. 3,700 191,937
Temple-Inland, Inc. ......... 3,900 182,325
Universal Forest Products,
Inc. ...................... 100 1,050
------------
1,195,998
------------
METALS & MINING (0.9%)
Alcan Aluminum Ltd. ......... 8,400 256,200
Allegheny Ludlum Corp. ...... 4,100 77,387
Aluminum Company of America
(ALCOA) ................... 8,800 504,900
Bethlehem Steel Corp.+ ...... 5,500 65,312
Commercial Metals Co. ....... 4,500 149,625
Crown Cork & Seal Company,
Inc. ...................... 8,300 373,500
Inland Steel Industries,
Inc. ...................... 2,400 47,100
Kennametal, Inc. ............ 1,400 47,600
Oregon Steel Mills, Inc. .... 2,100 28,875
Phelps Dodge Corp. .......... 3,600 224,550
Reynolds Metals Co. ......... 4,600 239,775
Schnitzer Steel Industries,
Inc. ...................... 600 15,825
Steel Technologies, Inc. .... 5,800 88,450
USX-U.S. Steel Group,
Inc. ...................... 4,200 119,175
------------
2,238,274
------------
TOTAL BASIC INDUSTRIES .... 6,960,795
------------
CONSUMER GOODS & SERVICES (11.6%)
AUTOMOTIVE (1.7%)
Amcast Industrial Corp. ..... 600 12,150
Cooper Tire & Rubber ........ 2,800 62,300
Dana Corp. .................. 2,100 65,100
Eaton Corp. ................. 4,100 240,362
Excel Industries, Inc. ...... 3,000 37,500
Exide Corp. ................. 1,400 33,950
Ford Motor Co. .............. 34,900 1,129,887
General Motors Corp. ........ 22,600 1,183,675
General Motors Corp., Class
H ......................... 18,200 1,094,275
Goodyear Tire and Rubber
Co. . 4,600 221,950
Simpson Industries, Inc. .... 5,200 47,775
------------
4,128,924
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
26
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
----------- ------------
<S> <C> <C>
BROADCASTING & PUBLISHING (0.7%)
Banta Corp. ................. 1,600 $ 40,500
Consolidated Graphics,
Inc.+ ..................... 2,600 57,200
Cox Communications, Inc. .... 1,800 38,925
Digital Generation Systems,
Inc.+ ..................... 300 2,887
Edmark Corp.+ ............... 500 10,062
Heartland Wireless
Communications, Inc.+ ..... 800 19,200
Heritage Media Corp.+ ....... 700 27,912
K-III Communications Corp.+ . 1,800 22,500
Norwood Promotional Products,
Inc.+ ..................... 700 15,487
People's Choice TV Corp.+ ... 1,900 34,200
R.R. Donnelley & Sons Co. ... 5,600 195,300
Tele-Communications TCI,
Series A+ ................. 30,300 547,294
Turner Broadcasting System,
Inc. ...................... 4,300 118,250
Viacom, Inc., Class B ....... 13,700 532,587
------------
1,662,304
------------
CONSTRUCTION & HOUSING (0.0%)*
D.R. Horton, Inc.+ .......... 5,976 62,748
------------
ENTERTAINMENT, LEISURE & MEDIA (1.4%)
Ascent Entertainment Group,
Inc.+ ..................... 1,900 47,500
Boyd Gaming Corp.+ .......... 900 13,500
Carnival Corp. .............. 4,400 127,050
Circus Circus Enterprises
Inc.+ ..................... 3,300 135,300
CKS Group, Inc.+ ............ 200 6,437
Comcast Corp. ............... 7,000 128,625
Disney (Walt) Co. ........... 24,500 1,540,437
Imax Corp.+ ................. 1,300 47,287
International Game
Technology ................ 6,600 111,375
Johnson Worldwide Associates,
Inc.+ ..................... 1,600 22,600
Mirage Resorts, Inc. ........ 3,300 178,200
SCP Pool Corp.+ ............. 700 12,425
Time Warner Inc. ............ 20,400 800,700
U.S. West, Inc. Media
Group ..................... 18,600 339,450
WMS Industries, Inc.+ ....... 1,900 46,787
------------
3,557,673
------------
<CAPTION>
SHARES VALUE
----------- ------------
<S> <C> <C>
FOOD, BEVERAGES & TOBACCO (3.5%)
Coca-Cola Co. ............... 29,700 $ 1,451,587
Coors (Adolph) Co. .......... 1,100 19,731
CPC International, Inc. ..... 5,700 410,400
Dreyer's Grand Ice Cream,
Inc. ...................... 600 19,125
Eskimo Pie Corp. ............ 1,100 19,250
Kellogg Co. ................. 6,300 461,475
Nabisco Holdings Corp., Class
A ......................... 1,900 67,212
PepsiCo., Inc. .............. 61,000 2,157,875
Philip Morris Companies,
Inc. ...................... 28,700 2,984,800
Ralston Purina Co. .......... 4,100 262,912
Riviana Foods, Inc. ......... 800 12,300
Sanderson Farms, Inc. ....... 500 6,437
Sara Lee Corp. .............. 17,300 560,087
Seagram Ltd. ................ 4,400 147,950
------------
8,581,141
------------
HOUSEHOLD APPLIANCES & FURNISHINGS (0.1%)
Aaron Rents, Inc. ........... 600 7,837
Bush Industries, Inc. ....... 800 27,200
Whirlpool Corp. ............. 4,400 218,350
------------
253,387
------------
HOUSEHOLD PRODUCTS (1.3%)
Bush Boake Allen, Inc.+ ..... 1,100 23,925
Colgate-Palmolive Co. ....... 5,700 483,075
Duracell International,
Inc. ...................... 4,600 198,375
Libbey, Inc. ................ 1,400 38,850
Procter & Gamble Co. ........ 26,700 2,419,687
------------
3,163,912
------------
PERSONAL CARE (0.2%)
Avon Products, Inc. ......... 5,200 234,650
French Fragrances, Inc. ..... 1,300 7,800
International Flavors &
Fragrances, Inc. .......... 4,300 204,787
------------
447,237
------------
RESTAURANTS & HOTELS (0.0%)*
Doubletree Corp.+ ........... 500 17,719
Extended Stay America,
Inc.+ ..................... 1,100 34,512
Landry's Seafood Restaurants,
Inc.+ ..................... 600 14,625
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
27
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
----------- ------------
<S> <C> <C>
</TABLE>
RESTAURANTS & HOTELS (CONTINUED)
<TABLE>
<S> <C> <C>
Papa Johns International
Inc.+ ..................... 400 $ 19,400
Planet Hollywood
International, Inc.+ ...... 200 5,387
Starbucks Corp.+ ............ 900 25,369
------------
117,012
------------
RETAIL (2.5%)
Books A Million, Inc.+ ...... 1,200 9,975
Catherines Stores Corp.+ .... 3,100 30,612
Charming Shoppes, Inc. ...... 4,700 32,900
Circuit City Stores, Inc. ... 3,900 140,887
Fastenal Co. ................ 1,600 69,800
Federated Department Stores,
Inc. ...................... 8,600 293,475
Garden Ridge Corp.+ ......... 900 45,506
Leslie's Poolmart+ .......... 1,000 17,500
Limited Inc. ................ 11,300 242,950
Lowe's Companies, Inc. ...... 6,700 242,037
Mattel, Inc. ................ 10,600 303,425
Melville Corp. .............. 4,400 178,200
Nine West Group, Inc. ....... 1,900 97,137
Nordstrom, Inc. ............. 1,400 62,125
One Price Clothing Stores,
Inc.+ ..................... 4,400 24,750
Penn Traffic Co.+ ........... 2,600 22,100
Penney (J.C.) Inc. .......... 11,500 603,750
Petco Animal Supplies,
Inc.+ ..................... 300 8,625
Price/Costco, Inc.+ ......... 8,100 174,150
Sears, Roebuck & Co. ........ 16,200 787,725
The Sports Authority,
Inc.+ ..................... 400 13,100
Toys 'R' Us, Inc.+ .......... 11,300 322,050
Trans World Entertainment
Corp.+ .................... 1,800 12,262
Urban Outfitters, Inc.+ ..... 2,000 50,000
Wal-Mart Stores, Inc. ....... 94,200 2,390,325
Wolverine World Wide,
Inc. ...................... 500 16,250
------------
6,191,616
------------
<CAPTION>
SHARES VALUE
----------- ------------
<S> <C> <C>
TEXTILES & APPAREL (0.2%)
Fruit of the Loom Inc.+ ..... 6,000 $ 153,000
Jones Apparel Group,
Inc.+ ..................... 1,300 63,862
V.F. Corp. .................. 2,900 172,912
Warnaco Group, Inc. ......... 2,400 61,800
------------
451,574
------------
TOTAL CONSUMER GOODS &
SERVICES ................. 28,617,528
------------
ENERGY (3.4%)
GAS EXPLORATION (0.4%)
Columbia Gas System, Inc. ... 2,400 125,100
Devon Energy Corp. .......... 1,700 41,650
El Paso Natural Gas Co. ..... 1,400 53,900
Enron Corp. ................. 13,500 551,812
K N Energy, Inc. ............ 900 30,150
Newfield Exploration Co.+ ... 500 19,437
PanEnergy Corp. ............. 6,600 216,975
Tesoro Petroleum Corp.+ ..... 1,400 10,150
Texas Meridian Resources
Corp.+ .................... 2,100 18,900
TransCanada Pipelines
Ltd. ...................... 800 11,800
------------
1,079,874
------------
OIL SERVICES (0.1%)
Camco International, Inc. ... 500 16,937
Dreco Energy Services
Ltd.+ ..................... 1,200 33,000
Landmark Graphics Corp.+ .... 1,500 29,156
Smith International,
Inc.+ ..................... 2,200 66,275
------------
145,368
------------
OIL PRODUCTION (2.9%)
Amoco Corp. ................. 9,700 702,037
Anadarko Petroleum Corp. .... 2,500 145,000
Ashland Oil Inc. ............ 2,200 87,175
Atlantic Richfield Co. ...... 2,200 260,700
Chevron Corp. ............... 28,000 1,652,000
Cooper Cameron Corp.+ ....... 1,390 60,812
Diamond Shamrock, Inc. ...... 900 25,987
Exxon Corp. ................. 28,900 2,510,687
Flores & Rucks, Inc.+ ....... 900 31,050
Phillips Petroleum Co. ...... 6,700 280,562
Pogo Producing Co. .......... 1,600 61,000
Sun Company, Inc. ........... 3,600 109,350
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
28
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
----------- ------------
<S> <C> <C>
</TABLE>
OIL PRODUCTION (CONTINUED)
<TABLE>
<S> <C> <C>
Texaco Inc. ................. 11,900 $ 998,112
Unocal Corp. ................ 5,600 189,000
Vastar Resources, Inc. ...... 800 29,900
Vintage Petroleum, Inc. ..... 200 5,100
------------
7,148,472
------------
TOTAL ENERGY .............. 8,373,714
------------
FINANCE (6.6%)
BANKING (3.6%)
AmSouth Bancorporation ...... 1,900 68,637
Banc One Corp. .............. 13,700 465,800
Bancorp Hawaii, Inc. ........ 1,300 46,800
Bank of Boston Corp. ........ 2,500 123,750
BankAmerica Corp. ........... 13,300 1,007,475
Banknorth Group, Inc. ....... 1,000 34,625
Barnett Banks, Inc. ......... 3,100 189,100
BayBank, Inc. ............... 1,200 129,750
Central Fidelity Banks,
Inc. ...................... 2,000 45,000
Charter One Financial,
Inc. ...................... 3,600 125,325
Citicorp .................... 16,100 1,330,262
Colonial BancGroup, Inc. .... 1,500 50,250
Commerce Bancorporation,
Inc. ...................... 700 16,537
Community First Bankshares,
Inc. ...................... 800 18,800
Corestates Financial
Corp. ..................... 7,400 284,900
Crestar Financial Corp. ..... 1,400 74,725
Dime Bancorp, Inc.+ ......... 2,900 37,700
First Chicago NBD Corp. ..... 10,500 410,812
First Colorado Bancorp,
Inc. ...................... 1,100 14,437
First Commerce Corp. ........ 200 7,100
First Hawaiian, Inc. ........ 500 14,312
First of America Bank
Corp. ..................... 2,100 93,975
First Tennessee National
Corp. ..................... 2,100 64,181
First Union Corp. ........... 9,500 578,312
First Virginia Banks Inc. ... 1,000 40,000
Firstar Corp. ............... 2,500 115,312
FirstFed Financial Corp.+ ... 600 10,425
Fleet Financial Group,
Inc. ...................... 8,800 382,800
GBC Bancorp ................. 1,400 32,025
Golden West Financial
Corp. ..................... 1,900 106,400
Great Western Financial
Corp. ..................... 5,100 121,762
GreenPoint Financial
Corp. ..................... 1,700 48,025
<CAPTION>
SHARES VALUE
----------- ------------
<S> <C> <C>
</TABLE>
BANKING (CONTINUED)
<TABLE>
<S> <C> <C>
H.F. Ahmanson and Co. ....... 3,800 $ 102,600
HUBCO, Inc. ................. 1,500 31,781
Irwin Financial Corp. ....... 200 7,925
KeyCorp ..................... 900 34,875
Mark Twain Bancshares,
Inc. ...................... 800 29,700
Mercantile Bancorporation
Inc. . 1,800 80,100
Mercantile Bankshares
Corp. ..................... 1,400 35,787
Mountain Parks Financial
Corp.+ .................... 500 13,625
National City Corp. ......... 7,300 256,412
National Commerce
Bancorporation ............ 1,800 56,700
NationsBank Corp. ........... 10,600 875,825
Pinnacle Financial Services,
Inc. ...................... 800 17,000
PNC Bank Corp. .............. 11,300 336,175
Regions Financial Corp. ..... 2,100 98,437
Republic New York Corp. ..... 1,800 112,050
Roosevelt Financial Group,
Inc. ...................... 3,600 69,525
Security First Network
Bank+ ..................... 100 3,337
Silicon Valley
Bancshares+ ............... 400 10,350
Southern National Corp. ..... 3,600 114,300
Southtrust Corp. ............ 3,000 84,750
Standard Federal
Bancorporation ............ 1,000 38,500
Sterling Bancshares, Inc. ... 675 9,450
Summit Bancorp .............. 3,100 108,887
TCF Financial Corp. ......... 1,200 39,900
Trustco Bank Corp. .......... 1,400 27,300
Union Planters Corp. ........ 1,500 45,562
Washington Federal, Inc. .... 1,300 26,812
Washington Mutual, Inc. ..... 2,400 72,000
Westamerica
Bancorporation ............ 1,000 50,625
Wilmington Trust Corp. ...... 1,200 39,000
------------
8,918,604
------------
FINANCIAL SERVICES (1.0%)
Advanta Corp. ............... 700 31,937
Amresco, Inc. ............... 1,100 18,906
Beneficial Corp. ............ 1,800 101,025
CCB Financial Corp. ......... 300 15,487
Dean Witter Discover &
Co. ....................... 6,400 366,400
Edwards (A.G.), Inc. ........ 2,000 54,250
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
29
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
----------- ------------
<S> <C> <C>
</TABLE>
FINANCIAL SERVICES (CONTINUED)
<TABLE>
<S> <C> <C>
Federal National Mortgage
Association ............... 36,400 $ 1,219,400
Finova Group, Inc. .......... 900 43,875
First USA, Inc. ............. 1,900 104,500
IMC Mortgage Co.+ ........... 800 18,200
Lehman Brothers Holdings,
Inc. ...................... 3,400 84,150
Litchfield Financial
Corp. ..................... 800 10,900
Mercury Finance Co. ......... 5,500 70,125
Paine Webber Group Inc. ..... 3,200 76,000
Salomon, Inc. ............... 3,500 154,000
Southwest Securities Group,
Inc. ...................... 1,800 20,925
WFS Financial, Inc.+ ........ 1,100 24,337
------------
2,414,417
------------
INSURANCE (1.8%)
Allstate Corp. .............. 14,900 679,812
AMBAC, Inc. ................. 900 46,912
American General Corp. ...... 8,200 298,275
American International Group,
Inc. ...................... 1,100 108,487
Capital Re Corp. ............ 5,700 209,475
Chartwell Re Corp. .......... 300 6,731
Chubb Corp. ................. 8,200 408,975
CIGNA Corp. ................. 3,000 353,625
First Colony Corp. .......... 2,000 62,000
ITT Hartford Group, Inc. .... 7,100 378,075
Lincoln National Corp. ...... 4,200 194,250
MBIA, Inc. .................. 1,700 132,387
MMI Companies, Inc. ......... 4,200 129,675
Ohio Casualty Corp. ......... 1,400 49,000
PMI Group, Inc. ............. 1,400 59,500
Providian Corp. ............. 3,700 158,637
RenaissanceRe Holdings,
Ltd. ...................... 1,300 40,137
Safeco Corp. ................ 5,000 177,187
St. Paul Companies, Inc. .... 3,300 176,550
Torchmark Corp. ............. 2,900 126,875
Travelers Group, Inc. ....... 15,200 693,500
USLIFE Corp. ................ 1,400 46,025
------------
4,536,090
------------
<CAPTION>
SHARES VALUE
----------- ------------
<S> <C> <C>
REAL ESTATE INVESTMENT TRUSTS (0.2%)
Associated Estates Realty
Corp. . 1,000 $ 21,000
Beacon Properties Corp. ..... 300 7,687
Capstone Capital Trust,
Inc. ...................... 1,900 38,950
CBL & Associate Properties,
Inc. ...................... 600 13,425
Chelsea GCA Realty, Inc. .... 900 28,575
Colonial Properties Trust ... 1,400 33,950
Columbus Realty Trust ....... 1,800 34,875
Developers Diversified Realty
Corp. ..................... 1,100 35,062
Gables Residential Trust .... 1,300 30,550
Healthcare Realty Trust,
Inc. ...................... 1,600 38,000
Highwoods Properties,
Inc. ...................... 500 13,813
Kimco Realty Corp. .......... 300 8,475
Liberty Property Trust ...... 1,800 35,775
Macerich Co. ................ 500 10,500
MerryLand & Investment
Company, Inc. ............. 1,100 23,100
Oasis Residential, Inc. ..... 1,300 28,438
Patriot American Hospitality,
Inc. ...................... 500 14,813
ROC Communities, Inc. ....... 300 7,163
Sovran Self Storage, Inc. ... 200 5,300
Starwood Lodging Trust ...... 500 18,188
Storage Trust Realty ........ 1,000 20,500
Wellsford Residential
Property Trust ............ 700 15,750
------------
483,889
------------
TOTAL FINANCE ............. 16,353,000
------------
HEALTH CARE (4.9%)
BIOTECHNOLOGY (0.1%)
Affymetrix Inc.+ ............ 300 4,519
Aksys Ltd.+ ................. 100 1,488
Biofield Corp.+ ............. 900 12,488
Houghten Pharmaceuticals,
Inc.+ ..................... 1,000 8,125
Human Genome Sciences,
Inc.+ ..................... 800 29,500
Incyte Pharmaceuticals,
Inc.+ ..................... 1,000 38,750
Microcide Pharmaceuticals,
Inc.+ ..................... 100 1,300
NABI, Inc.+ ................. 1,600 15,100
Neurocrine Bisciences,
Inc.+ ..................... 100 856
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
30
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
----------- ------------
<S> <C> <C>
</TABLE>
BIOTECHNOLOGY (CONTINUED)
<TABLE>
<S> <C> <C>
Neurogen Corp.+ ............. 600 $ 15,300
ONYX Pharmaceuticals,
Inc.+ ..................... 600 4,725
Sequana Therapeutics,
Inc.+ ..................... 1,100 16,913
Somatogen, Inc.+ ............ 1,400 19,863
Targeted Genetics Corp.+ .... 700 3,281
Vertex Pharmaceuticals,
Inc.+ ..................... 1,100 33,550
Virus Research Institute,
Inc. ...................... 800 7,350
------------
213,108
------------
HEALTH SERVICES (1.4%)
Advocat, Inc.+ .............. 900 8,550
Apria Healthcare Group,
Inc.+ ..................... 3,500 109,813
Columbia / HCA Healthcare
Corp. ..................... 29,400 1,569,225
Diagnostic Health Services,
Inc.+ ..................... 400 2,663
Health Care & Retirement
Corp.+ .................... 3,300 78,375
Health Management Associates,
Inc.+ ..................... 7,400 149,850
Humana, Inc.+ ............... 12,500 223,438
Manor Care, Inc. ............ 4,400 173,250
Mariner Health Group,
Inc.+ ..................... 2,100 38,850
Professional Sports Care
Management, Inc.+ ......... 300 2,269
Sierra Health Services,
Inc.+ ..................... 700 22,050
Sterling House Corp.+ ....... 800 15,200
Summit Care Corp.+ .......... 2,800 62,650
Sunrise Assisted Living,
Inc.+ ..................... 200 4,875
Tenet Healthcare Corp.+ ..... 15,000 320,625
United Healthcare Corp. ..... 12,500 631,250
Vivra, Inc.+ ................ 2,600 85,475
------------
3,498,408
------------
MEDICAL SUPPLIES (0.4%)
Bausch & Lomb, Inc. ......... 4,000 170,000
Biomet, Inc.+ ............... 7,700 109,725
Cellpro, Inc.+ .............. 1,600 28,200
Eclipse Surgical
Technologies+ ............. 300 4,125
Fresenius USA, Inc.+ ........ 2,400 51,600
Heartstream, Inc.+ .......... 800 11,200
Imagyn Medical, Inc.+ ....... 200 2,163
Kensey Nash Corp.+ .......... 1,300 17,225
<CAPTION>
SHARES VALUE
----------- ------------
<S> <C> <C>
</TABLE>
MEDICAL SUPPLIES (CONTINUED)
<TABLE>
<S> <C> <C>
KeraVision, Inc.+ ........... 1,900 $ 29,450
Medtronic, Inc. ............. 7,900 442,400
Perseptive Biosystems,
Inc.+ ..................... 2,900 26,825
Physio-Control International
Corp.+ .................... 700 12,294
Research Medical, Inc.+ ..... 2,000 44,125
Sola International, Inc.+ ... 500 14,375
------------
963,707
------------
PHARMACEUTICALS (3.0%)
Alza Corp.+ ................. 4,700 128,663
American Home Products
Corp. ..................... 32,700 1,966,088
Eli Lilly & Co. ............. 11,300 734,500
Forest Laboratories,
Inc.+ ..................... 2,600 100,425
Idec Pharmaceuticals
Corp.+ .................... 400 9,250
Johnson & Johnson ........... 5,200 257,400
Merck & Company, Inc. ....... 8,800 568,700
Pfizer, Inc. ................ 28,500 2,034,188
SangStat Medical Corp.+ ..... 1,600 27,100
Schering-Plough Corp. ....... 7,200 451,800
Vical, Inc.+ ................ 1,400 22,313
Warner-Lambert Co. .......... 17,000 935,000
Watson Pharmaceuticals,
Inc.+ ..................... 1,900 71,963
------------
7,307,390
------------
TOTAL HEALTH CARE ......... 11,982,613
------------
INDUSTRIAL PRODUCTS & SERVICES (4.5%)
BUILDING MATERIALS (0.2%)
BMC West Corp.+ ............. 400 6,725
Owens-Corning Fiberglass
Corp. ..................... 2,600 111,800
Sherwin-Williams Co. ........ 4,300 199,950
USG Corp.+ .................. 3,100 86,413
------------
404,888
------------
CAPITAL GOODS (0.3%)
ABC Rail Products Corp.+ .... 400 8,625
Applied Power, Inc. ......... 2,300 64,400
Cincinnati Milacron, Inc. ... 2,100 50,400
Collins & Aikman Corp.+ ..... 3,300 19,800
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
31
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
----------- ------------
<S> <C> <C>
</TABLE>
CAPITAL GOODS (CONTINUED)
<TABLE>
<S> <C> <C>
Cummins Engine Company,
Inc. ...................... 2,100 $ 84,788
Gardner Denver Machinery,
Inc.+ ..................... 1,800 47,475
IDEX Corp. .................. 100 3,800
Kaydon Corp. ................ 1,000 43,000
Modine Manufacturing Co. .... 5,800 152,975
PACCAR, Inc. ................ 2,000 97,750
Strategic Distribution,
Inc.+ ..................... 1,400 10,981
TRINOVA Corp. ............... 1,500 50,063
Wabash National Corp. ....... 600 10,650
Worldtex Inc.+ .............. 1,000 6,000
------------
650,707
------------
COMMERCIAL SERVICES (0.5%)
DeVry, Inc.+ ................ 1,900 85,500
Ecolab, Inc. ................ 2,100 69,300
Equity Corp.
International+ ............ 700 18,813
First Data Corp. ............ 8,100 644,963
Leasing Solutions, Inc.+ .... 1,000 15,500
May & Speh, Inc.+ ........... 1,400 21,700
Measurex Corp. .............. 900 26,325
Pinkertons, Inc.+ ........... 700 16,188
Robert Half International,
Inc.+ ..................... 1,400 39,025
Service Corp.
International ............. 4,200 241,500
Stewart Enterprises, Inc. ... 900 28,350
Whittman-Hart, Inc.+ ........ 100 3,650
------------
1,210,814
------------
DIVERSIFIED MANUFACTURING (2.1%)
AlliedSignal, Inc. .......... 23,600 1,348,150
Asyst Technologies, Inc.+ ... 500 8,938
Brady (W.H.) Co. ............ 2,100 47,513
Cooper Industries, Inc. ..... 5,700 236,550
Fisher Scientific
International, Inc. ....... 500 18,750
General Electric Co. ........ 22,900 1,980,850
Intermet Corp.+ ............. 6,900 96,169
ITT Industries Inc. ......... 9,800 246,225
Johnson Controls, Inc. ...... 3,400 236,300
Parker Hannifin Corp. ....... 1,900 80,513
Safety 1st Inc.+ ............ 3,800 31,113
<CAPTION>
SHARES VALUE
----------- ------------
<S> <C> <C>
</TABLE>
DIVERSIFIED MANUFACTURING (CONTINUED)
<TABLE>
<S> <C> <C>
Special Devices, Inc.+ ...... 300 $ 4,875
Tenneco, Inc. ............... 8,700 444,788
Tyco International Ltd.+ .... 11,300 460,475
------------
5,241,209
------------
ELECTRICAL EQUIPMENT (0.4%)
Anixter International,
Inc.+ ...................... 2,400 35,700
Black & Decker Corp. ........ 5,600 216,300
Bolder Technologies
Corp.+ .................... 700 8,750
Encore Wire Corp.+ .......... 1,700 18,063
General Instrument Corp.+ ... 5,600 161,700
Grainger (W.W.), Inc. ....... 2,700 209,250
Kuhlman Corp. ............... 400 6,950
MagneTek, Inc.+ ............. 1,100 10,588
Molex Inc. .................. 1,800 53,325
Raychem Corp. ............... 3,100 222,813
------------
943,439
------------
MACHINERY (0.4%)
Caterpillar, Inc. ........... 9,800 663,950
Ingersoll-Rand Co. .......... 4,700 205,625
------------
869,575
------------
POLLUTION CONTROL (0.6%)
Browning-Ferris Industries,
Inc. ...................... 14,900 432,100
Culligan Water Technologies,
Inc.+ ..................... 800 30,400
Dames & Moore, Inc. ......... 2,700 32,738
Sevenson Environmental
Services, Inc. ............ 1,200 21,000
Tetra Technologies, Inc.+ ... 3,300 57,750
WMX Technologies, Inc. ...... 29,000 949,750
------------
1,523,738
------------
TOTAL INDUSTRIAL PRODUCTS &
SERVICES ................. 10,844,370
------------
TECHNOLOGY (6.4%)
AEROSPACE (1.2%)
Boeing Co. .................. 20,400 1,777,350
Coltec Industries, Inc.+ .... 3,800 54,150
General Dynamics Corp. ...... 1,400 86,800
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
32
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
----------- ------------
<S> <C> <C>
</TABLE>
AEROSPACE (CONTINUED)
<TABLE>
<S> <C> <C>
Lockheed Martin Corp. ....... 4,400 $ 369,600
McDonnell Douglas Corp. ..... 5,900 286,150
Northrop Grumman Corp. ...... 1,200 81,750
Orbital Sciences Corp.+ ..... 2,400 39,300
Raytheon Co. ................ 3,700 191,013
Rohr Industries, Inc.+ ...... 2,500 52,188
------------
2,938,301
------------
COMPUTER SOFTWARE (1.2%)
Acxiom Corp.+ ............... 1,000 34,063
Adept Technology, Inc.+ ..... 2,400 31,800
Analogy, Inc.+ .............. 1,200 8,400
Aspen Technologies, Inc.+ ... 200 11,025
Autodesk, Inc. .............. 1,600 47,700
Avid Technology, Inc.+ ...... 600 11,063
Checkfree Corp.+ ............ 300 5,981
Cisco Systems, Inc.+ ........ 20,000 1,133,750
Davidson & Associates,
Inc.+ ..................... 1,200 36,300
DST Systems, Inc.+ .......... 800 25,600
Edify Corp.+ ................ 100 2,625
Inso Corp.+ ................. 500 25,813
ISOCOR+ ..................... 300 4,575
Mathsoft, Inc.+ ............. 2,200 12,650
Maxis, Inc.+ ................ 100 2,013
MetaTools, Inc.+ ............ 200 4,675
Metromail Corp.+ ............ 600 13,425
Microsoft Corp.+ ............ 3,500 420,219
Microware Systems Corp.+ .... 300 5,325
Network General Corp.+ ...... 2,900 61,988
Oak Technology, Inc.+ ....... 2,000 18,875
On Technology, Corp.+ ....... 2,200 22,688
Oracle Systems Corp.+ ....... 23,000 907,063
ParcPlace Digitalk, Inc.+ ... 2,200 19,800
Pinnacle Systems, Inc.+ ..... 1,200 25,200
PowerCerv Corp.+ ............ 900 11,363
Rational Software Corp.+ .... 800 43,150
Siebel Systems, Inc.+ ....... 100 1,700
SPS Transaction Services,
Inc.+ . 400 7,200
SS&C Technologies, Inc. ..... 100 1,525
Tripos, Inc. ................ 1,400 12,600
Vanstar Corp. ............... 800 13,400
Verity, Inc. ................ 200 5,675
------------
2,989,229
------------
<CAPTION>
SHARES VALUE
----------- ------------
<S> <C> <C>
COMPUTER PERIPHERALS (0.0%)*
In Focus Systems, Inc.+ ..... 100 $ 2,413
Mylex Corp. ................. 1,600 28,200
Planar Systems, Inc. ........ 3,200 45,400
Quantum Corp.+ .............. 600 8,700
Telxon Corp. ................ 300 3,581
------------
88,294
------------
COMPUTER SYSTEMS (1.9%)
Apple Computer, Inc. ........ 4,300 90,031
Compaq Computer Corp. ....... 9,400 462,950
Digital Equipment Corp. ..... 5,400 243,000
EMC Corp.+ .................. 9,900 184,388
Hewlett-Packard Co. ......... 17,900 1,783,288
International Business
Machines Corp. ............ 15,200 1,504,800
Silicon Graphics, Inc.+ ..... 1,200 28,800
Sun Microsystems, Inc.+ ..... 8,300 488,663
------------
4,785,920
------------
ELECTRONICS (0.5%)
Affinity Technology Group ... 200 1,663
Altera Corp. ................ 1,800 68,288
AMP, Inc. ................... 9,200 369,150
Bay Networks Inc. ........... 5,700 146,775
Brooktree Corp. ............. 2,500 26,094
FEI Co. ..................... 800 10,200
Gemstar International Group
Ltd. ...................... 100 2,963
Harris Corp. ................ 1,500 91,500
Input/Output, Inc.+ ......... 2,900 93,887
Itron, Inc.+ ................ 700 20,169
Mentor Graphics Corp.+ ...... 2,585 41,845
Micrel, Inc. ................ 2,600 43,225
Nimbus CD International,
Inc.+ ..................... 1,400 18,200
Perkin-Elmer Corp. .......... 3,100 149,575
Sensormatic Electronics
Corp. ..................... 2,700 44,213
Sunstrand Corp. ............. 3,100 113,538
Symbol Technologies,
Inc.+ ..................... 1,100 48,950
------------
1,290,235
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
33
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
----------- ------------
<S> <C> <C>
SEMICONDUCTORS (1.2%)
Actel Corp.+ ................ 2,400 $ 44,250
Advanced Technology
Materials, Inc.+ .......... 3,200 43,200
Applied Materials, Inc.+ .... 6,300 191,756
Credence Systems Corp.+ ..... 2,200 29,563
Intel Corp. ................. 28,900 2,122,344
National Semiconductor
Corp. ..................... 6,200 96,100
SDL, Inc.+ .................. 1,950 53,381
Sierra Semi Conductor
Corp.+ .................... 300 3,469
Texas Instruments, Inc. ..... 6,700 334,163
Xilinx, Inc. ................ 2,500 79,219
------------
2,997,445
------------
TELECOMMUNICATION SERVICES (0.3%)
360 Communications Co. ...... 3,800 91,200
Airtouch Communications,
Inc.+ ..................... 11,700 330,525
International CableTel,
Inc.+ ..................... 800 23,700
Metrocall, Inc.+ ............ 700 7,744
MobileMedia Corp.+ .......... 2,300 27,600
Omnipoint Corp.+ ............ 900 23,456
Paging Network, Inc.+ ....... 7,100 169,069
Premiere Technologies,
Inc.+ ..................... 300 9,338
------------
682,632
------------
TELECOMMUNICATION EQUIPMENT (0.1%)
Applied Digital Access,
Inc.+ ...................... 1,900 19,713
BroadBand Technologies,
Inc.+ . 1,200 38,850
Comdial Corp.+ .............. 3,400 29,750
Digital Microwave Corp.+ .... 2,000 33,125
P-COM, Inc.+ ................ 900 28,125
Scientific-Atlanta, Inc. .... 3,200 49,600
Wireless One, Inc.+ ......... 500 8,813
------------
207,976
------------
TOTAL TECHNOLOGY .......... 15,980,032
------------
TRANSPORTATION (0.8%)
AIRLINES (0.0%)*
Mesa Airlines, Inc.+ ........ 8,900 104,575
------------
<CAPTION>
SHARES VALUE
----------- ------------
<S> <C> <C>
RAILROADS (0.6%)
Burlington Northern Santa
Fe ......................... 4,900 $ 396,288
Conrail, Inc. ............... 2,700 179,213
CSX Corp. ................... 6,900 332,925
Genesee & Wyoming Inc. ...... 400 8,225
Illinois Central Corp. ...... 1,700 48,238
Union Pacific Corp. ......... 7,600 531,050
------------
1,495,939
------------
TRANSPORT & SERVICES (0.0%)*
Trico Marine Services,
Inc.+ ...................... 500 11,313
------------
TRUCK & FREIGHT CARRIERS (0.2%)
American Freightways
Corp.+ ..................... 2,000 22,125
Caliber System, Inc. ........ 1,300 44,200
Consolidated Freightways,
Inc. ...................... 1,300 27,463
Federal Express Corp. ....... 1,600 131,200
Fritz Companies, Inc. ....... 900 29,025
Rollins Truck Leasing
Corp. ..................... 2,700 28,013
Ryder System, Inc. .......... 2,600 73,125
USA Truck, Inc.+ ............ 500 5,438
Werner Enterprises, Inc. .... 1,300 33,638
------------
394,227
------------
TOTAL TRANSPORTATION ...... 2,006,054
------------
UTILITIES (4.9%)
ELECTRIC (1.3%)
Allegheny Power System,
Inc. ....................... 3,200 98,800
Baltimore Gas & Electric
Co. ....................... 4,300 122,013
Central Hudson Gas &
Electric .................. 2,800 87,500
Central Louisiana
Electric .................. 1,300 34,613
Consolidated Edison Co. of
New York, Inc. ............ 6,500 190,125
Dominion Resources, Inc. .... 5,900 236,000
DTE Energy Co. .............. 4,000 123,500
Edison International ........ 12,400 218,550
FPL Group, Inc. ............. 5,000 230,000
Houston Industries, Inc. .... 7,300 179,763
Illinova Corp. .............. 2,000 57,500
Kansas City Power & Light
Co. ....................... 1,700 46,750
Maine Public Service Co. .... 100 1,825
New England Electric
System .................... 1,700 61,838
Niagara Mohawk Power
Corp. ..................... 3,800 29,450
Northeast Utilities ......... 3,400 45,475
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
34
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
----------- ------------
<S> <C> <C>
</TABLE>
ELECTRIC (CONTINUED)
<TABLE>
<S> <C> <C>
Northern States Power Co.
Minnesota ................. 4,200 $ 207,375
P P & L Resources, Inc. ..... 5,400 127,575
Pacific Gas & Electric
Co. ....................... 13,500 313,875
Pinnacle West Capital
Corp. ..................... 2,800 85,050
Portland General Corp. ...... 1,300 40,138
Southern Co. ................ 18,700 460,488
Unicom Corp. ................ 6,000 167,250
Western Resources, Inc. ..... 1,700 50,788
------------
3,216,241
------------
NATURAL GAS (0.0%)*
New Jersey Resources
Corp. ...................... 200 5,750
Providence Energy Corp. ..... 2,000 34,500
United Cities Gas Co. ....... 2,200 33,688
Wicor, Inc. ................. 300 11,325
------------
85,263
------------
TELEPHONE (3.6%)
Ameritech Corp. ............. 15,600 926,250
AT & T Corp. ................ 47,700 2,957,400
Bell Atlantic Corp. ......... 12,200 777,750
GTE Corp. ................... 32,900 1,472,275
MCI Communications Corp. .... 23,000 587,938
<CAPTION>
SHARES VALUE
----------- ------------
<S> <C> <C>
</TABLE>
TELEPHONE (CONTINUED)
<TABLE>
<S> <C> <C>
NYNEX Corp. ................. 12,800 $ 608,000
Pacific Telesis Group ....... 11,900 401,625
SBC Communications, Inc. .... 800 39,400
Sprint Corp. ................ 12,100 508,200
US West Communications
Group ..................... 16,000 510,000
------------
8,788,838
------------
WATER (0.0%)*
Aquarion Co. ................ 500 12,375
E'Town Corp. ................ 700 19,425
SJW Corp. ................... 200 6,650
Southern California Water
Co. ....................... 1,600 35,200
------------
73,650
------------
TOTAL UTILITIES ........... 12,163,992
------------
TOTAL UNITED STATES COMMON
STOCKS (COST
$93,446,202) ............. 113,282,098
------------
TOTAL COMMON STOCKS (COST
$120,405,092) ............ 142,638,403
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
35
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
SECURITY DESCRIPTION SHARES VALUE
- ----------------------------- ----------- ------------
PREFERRED STOCK (0.3%)
FRANCE (0.0%)*
Legrand SA (Electrical
Equipment) ................ 560 $ 65,811
------------
GERMANY (0.3%)
Deutsche Lufthansa AG
(Airlines) ................ 200 28,184
Henkel KGAA (Chemicals) ..... 370 159,703
Jungheinrich AG
(Machinery) ............... 460 81,595
RWE AG (Oil-Services) ....... 4,650 142,970
SAP AG (Computer
Software) ................. 1,090 161,623
------------
574,075
------------
TOTAL PREFERRED STOCK (COST
$574,305) ................ 639,886
------------
RIGHTS (0.0%)*
FRANCE (0.0%)*
Carrefour Supermarkets
(Expires 5/2/98) (Retail)+
(cost $17,359) ............ 110 30,384
------------
WARRANTS (0.0%)*
SWITZERLAND (0.0%)*
Schweizerischer Bankverein
(Expires 6/30/00)
(Banking)+ ................ 55 180
------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ----------------------------- ----------- ------------
<S> <C> <C>
JAPAN (0.0%)*
Canon Sales Co. Inc. (Expires
11/11/97)
(Merchandising) ........... 130 $ 21,292
Dowa Mining Co., Ltd.
(Expires 12/9/97) (Metals &
Mining) ................... 20 23,250
Lion Corp. (Expires 06/18/99)
(Industrial) .............. 120 26,365
Maeda Corp. (Expires
02/05/97) (Construction &
Housing)+ ................. 10 15,125
New Oji Paper Co., Ltd.
(Expires 07/30/98) (Forest
Products & Paper) ......... 8 12,910
------------
98,942
------------
SINGAPORE (0.0%)*
United Overseas Land Ltd.
(Expires 06/09/97) (Real
Estate) ................... 20,760 15,297
------------
TOTAL WARRANTS (COST
$110,116) ................ 114,419
------------
TOTAL EQUITY SECURITIES
(COST $121,106,872) ...... 143,423,092
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
36
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- -------------------------- -------------- ------------
FIXED INCOME SECURITIES (38.7%)
CONVERTIBLE BONDS (0.4%)
ITALY (0.0%)* (IN ITL)
Istituto Nazionale delle
Assicurazioni, 6.50% due
06/28/01 (Insurance) ... 10,000,000 $ 6,629
------------
JAPAN (0.4%) (IN JPY)
BOT Cayman Finance Ltd.,
4.25% due 03/31/49
(Financial Services) ... 30,000,000 410,963
Daido Hoxan Inc., 1.60%
due 03/29/02
(Chemicals) ............ 5,000,000 51,148
Izumiya Co. Ltd., 0.80%
due 08/31/99
(Retail) ............... 15,000,000 210,610
NEC Corp., 1.90% due
03/30/01 (Computer
Systems) ............... 10,000,000 110,957
Ricoh Co. Ltd., 1.50% due
03/29/02 (Computer
Systems) ............... 6,000,000 65,371
SXL Corp., 2.70% due
03/29/02 (Construction &
Housing) ............... 5,000,000 52,880
------------
901,929
------------
UNITED KINGDOM (0.0%)* (IN GBP)
BPB Industries, 7.25% due
08/25/08
(Industrial) ........... 25,000 48,605
------------
(IN US
UNITED STATES (0.0%)* DOLLARS)
Boston Chicken Inc., 4.50%
due 02/01/04 (Food,
Beverages & Tobacco) ... 16,000 18,960
------------
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- -------------------------- -------------- ------------
<S> <C> <C>
MALAYSIA (0.0%)*
Commerce Asset Holding
Berhad, 1.75% due
09/26/04 (Banking) ..... $ 55,000 $ 65,725
Telekom Malaysia Berhad,
4.00% due 10/03/04
(Telecommunications) .... 25,000 26,344
------------
92,069
------------
TOTAL CONVERTIBLE BONDS
(COST $963,803) ....... 1,068,192
------------
COLLATERIZED OBLIGATIONS (5.5%)
FINANCE (5.5%)
Access Financial Corp.,
Series 1995-1, 6.38% due
05/15/21 ............... 3,000,000 2,894,280
Caterpillar Financial
Asset Trust, Series
1996-A, 6.30% due
05/25/02 ............... 500,000 498,203
Chrysler Financial Corp.,
8.46% due 01/19/00 ..... 1,000,000 1,051,130
Green Tree Financial
Corp., Series 1992-1,
6.70% due 10/15/17 ..... 1,000,000 989,844
Green Tree Financial
Corp., Series 1994-1,
7.20% due 04/15/19 ..... 3,000,000 2,989,890
Green Tree Financial
Corp., Series 1995-A,
7.25% due 07/15/05 ..... 1,575,857 1,571,425
Premier Auto Trust, Series
1993-6, 4.65% due
11/02/99 ............... 1,386,081 1,366,537
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
37
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- -------------------------- -------------- ------------
<S> <C> <C>
</TABLE>
FINANCE (CONTINUED)
<TABLE>
<S> <C> <C>
Resolution Trust Corp.
Mortgage Pass Thru,
Series 1993-C1, 4.29%
due
05/25/24 (a) ........... $ 61,748 $ 61,854
World Omni Automobile
Lease Securitization
Trust, Series 1996-A,
6.30% due 06/25/02 ..... 2,000,000 1,999,375
------------
13,422,538
------------
TOTAL COLLATERIZED
OBLIGATIONS (COST
$13,510,564) .......... 13,422,538
------------
CORPORATE OBLIGATIONS (9.2%)
CANADA (0.5%)
WATER (0.5%)
Hydro Quebec, 8.88% due
03/01/26 ............... 1,200,000 1,328,496
------------
BASIC INDUSTRIES (0.2%)
FOREST PRODUCTS & PAPER (0.1%)
Buckeye Cellulose Corp.,
9.25% due 09/15/08 ..... 200,000 200,000
------------
METALS & MINING (0.1%)
Ryerson Tull, Inc., 9.13%
due 07/15/06 ............ 200,000 200,500
------------
400,500
------------
CONSUMER GOODS & SERVICES (0.4%)
AUTOMOTIVE (0.1%)
Ford Motor Co., 9.95% due
02/15/32 ............... 300,000 376,470
------------
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- -------------------------- -------------- ------------
<S> <C> <C>
RETAIL (0.2%)
Federated Department
Stores Inc., 8.13% due
10/15/02 ............... $ 200,000 $ 197,102
Ferrellgas Partners LP
(144A), 9.38% due
06/15/06 ............... 200,000 193,000
------------
390,102
------------
TEXTILES & APPAREL (0.1%)
WestPoint Stevens, Inc.,
8.75% due 12/15/01 ..... 350,000 346,500
------------
1,113,072
------------
FINANCE (4.1%)
BANKING (2.5%)
Chase Manhattan Corp.,
10.13% due 11/01/00 .... 800,000 892,656
First Union Corp., 6.55%
due 10/15/35 ........... 2,800,000 2,680,020
Midland Bank PLC, 7.63%
due 06/15/06 ........... 560,000 565,757
NationsBank Corp., 6.50%
due 08/15/03 ........... 2,000,000 1,913,600
------------
6,052,033
------------
FINANCIAL SERVICES (1.0%)
Cheung Kong Finance, 5.50%
due 09/30/98 ........... 1,000,000 958,125
Ford Motor Credit, 8.63%
due 01/24/00 ........... 1,140,000 1,192,012
Sampoerna Intl. (144A),
8.38% due 06/15/06 ..... 200,000 202,920
------------
2,353,057
------------
INSURANCE (0.6%)
Metropolitan Life
Insurance Co. (144A),
7.00% due
11/01/05 ............... 1,500,000 1,449,270
------------
9,854,360
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
38
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- -------------------------- -------------- ------------
<S> <C> <C>
HEALTHCARE (0.2%)
HEALTH SERVICES (0.2%)
Tenet Healthcare Corp.,
10.13% due 03/01/05 .... $ 500,000 $ 527,500
------------
INDUSTRIAL PRODUCTS & SERVICES (0.4%)
ELECTRICAL EQUIPMENT (0.2%)
MARK IV Industries Inc.
(144A), 7.75% due
04/01/06 ............... 500,000 461,875
------------
PACKAGING & CONTAINERS (0.2%)
Owens-Illinois Inc.,
11.00% due 12/01/03 ..... 500,000 536,250
------------
998,125
------------
TECHNOLOGY (1.4%)
ELECTRONICS (1.2%)
Sensormatic Electronics
Corp., 7.74% due
03/29/06 ............... 3,000,000 2,947,500
------------
TELECOMMUNICATION EQUIPMENT (0.2%)
TCI Communications Inc.,
7.88% due 02/15/26 ..... 500,000 439,855
------------
3,387,355
------------
TRANSPORTATION (0.2%)
TRANSPORT & SERVICES (0.2%)
Teekay Shipping Corp.,
8.32% due 02/01/08 ..... 500,000 468,750
------------
UTILITIES (1.8%)
ELECTRIC (0.9%)
Cooperative Utilities
Trust Big Rivers Electric
Co., 9.50% due
02/15/17 ............... 2,000,000 2,158,280
------------
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- -------------------------- -------------- ------------
<S> <C> <C>
TELEPHONE (0.5%)
GTE Corp., 8.85% due
03/01/98 ............... $ 1,000,000 $ 1,037,240
Philippine Long Distance
Telephone, 10.63% due
02/06/04 ............... 150,000 163,950
------------
1,201,190
------------
WATER (0.4%)
Commonwealth Edison Co.,
6.00% due 03/15/98 ..... 1,090,000 1,080,027
------------
4,439,497
------------
TOTAL CORPORATE
OBLIGATIONS (COST
$23,037,271) .......... 22,517,655
------------
GOVERNMENT OBLIGATIONS (0.2%)
ARGENTINA (0.2%)
Republic of Argentina,
9.25% due 02/23/01 (cost
$465,926) .............. 500,000 476,875
------------
U.S. GOVERNMENT AGENCY OBLIGATIONS (11.7%)
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (4.7%)
GNMA Pool 180922, 7.50%
due 12/15/23 ........... 22,768 22,469
GNMA Pool 323388, 7.00%
due 04/15/24 ........... 494,945 476,350
GNMA Pool 333096, 7.00%
due 06/15/23 ........... 391,216 377,351
GNMA Pool 333864, 7.00%
due 07/15/23 ........... 419,511 403,377
GNMA Pool 337448, 7.00%
due 06/15/23 ........... 90,984 87,567
GNMA Pool 342722, 7.00%
due 06/15/23 ........... 420,586 404,557
GNMA Pool 344934, 7.00%
due 07/15/23 ........... 100,419 96,762
GNMA Pool 348471, 7.00%
due 05/15/23 ........... 424,853 409,172
GNMA Pool 351588, 7.00%
due 07/15/23 ........... 410,500 395,607
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
39
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- -------------------------- -------------- ------------
<S> <C> <C>
</TABLE>
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (CONTINUED)
<TABLE>
<S> <C> <C>
GNMA Pool 353265, 7.00%
due 05/15/23 ........... $ 97,621 $ 94,024
GNMA Pool 353295, 7.00%
due 02/15/24 ........... 423,712 407,475
GNMA Pool 353312, 7.00%
due 04/15/24 ........... 500,682 480,990
GNMA Pool 353972, 7.00%
due 07/15/23 ........... 369,748 356,822
GNMA Pool 354303, 7.00%
due 06/15/23 ........... 407,182 392,186
GNMA Pool 355842, 7.00%
due 01/15/24 ........... 71,459 68,872
GNMA Pool 359017, 7.00%
due 07/15/23 ........... 392,485 378,025
GNMA Pool 364318, 7.00%
due 08/15/23 ........... 129,405 124,496
GNMA Pool 371518, 7.00%
due 03/15/24 ........... 487,624 469,207
GNMA Pool 371587, 7.00%
due 01/15/24 ........... 73,535 70,796
GNMA Pool 373492, 7.50%
due 02/15/26 ........... 356,900 351,836
GNMA Pool 376371, 7.00%
due 01/15/24 ........... 87,113 83,847
GNMA Pool 383453, 7.00%
due 01/15/24 ........... 424,750 409,021
GNMA Pool 409758, 7.50%
due 07/15/25 ........... 288,369 284,341
GNMA Pool 410923, 7.50%
due 02/15/26 ........... 347,039 342,063
GNMA Pool 413149, 7.50%
due 10/15/25 ........... 302,298 298,069
GNMA Pool 420649, 7.50%
due 01/15/26 ........... 393,391 387,754
GNMA Pool 421005, 8.00%
due 06/15/31 ........... 2,142,100 2,147,455
GNMA TBA, 12.00% ......... 1,400,000 1,603,000
------------
11,423,491
------------
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- -------------------------- -------------- ------------
<S> <C> <C>
FEDERAL HOME LOAN MORTGAGE CORP. (3.2%)
Federal Home Loan PC
200052, 8.50% due
09/01/01 ............... $ 23,892 $ 24,380
Federal Home Loan PC
219744, 8.50% due
07/01/02 ............... 265,567 271,019
Federal Home Loan PC
219745, 8.50% due
07/01/02 ............... 656,138 669,622
FHLMC Gold TBA July,
7.50% .................. 2,500,000 2,467,187
FHLMC Gold TBA August,
8.00% .................. 4,380,000 4,416,956
------------
7,849,164
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (3.8%)
FNMA REMIC, 6.50% due
01/25/23 ............... 7,400,000 6,960,662
FNMA TBA, 7.50% due
01/01/00 ............... 2,510,000 2,474,703
------------
9,435,365
------------
TOTAL U.S. GOVERNMENT
AGENCY OBLIGATIONS
(COST $28,705,057) .... 28,708,020
------------
U.S. TREASURY OBLIGATIONS (11.7%)
U.S. TREASURY NOTES (4.7%)
United States Treasury
Notes, 7.75% due 11/30/99
(c) .................... 5,600,000 5,831,560
United States Treasury
Notes, 6.25% due
08/31/00 (c) ........... 1,850,000 1,836,643
United States Treasury
Notes, 6.38% due
03/31/01 (c) ........... 3,960,000 3,941,824
------------
11,610,027
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
40
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- -------------------------- -------------- ------------
<S> <C> <C>
U.S. TREASURY BONDS (7.0%)
United States Treasury
Bonds, 10.38% due
11/15/12 (c) ........... $ 1,600,000 $ 2,031,968
United States Treasury
Bonds, 11.13% due
08/15/03 ............... 1,085,000 1,359,570
United States Treasury
Bonds, 8.13% due
08/15/19 (b) ........... 2,585,000 2,900,990
United States Treasury
Bonds, 8.50% due
02/15/20 ............... 9,334,000 10,884,938
------------
17,177,466
------------
TOTAL U.S. TREASURY
OBLIGATIONS (COST
$28,640,072) .......... 28,787,493
------------
TOTAL FIXED INCOME
SECURITIES (COST
$95,322,693) .......... 94,980,773
------------
SHORT-TERM INVESTMENTS (5.0%)
U.S. TREASURY OBLIGATIONS (0.0%)*
United States Treasury
Bills, 5.03% due 10/10/96
(b) .................... 10,000 9,852
OTHER INVESTMENT COMPANIES (0.3%)
Seven Seas Money Market
Fund, 5.05% due
01/01/01 ............... 867,098 867,098
REPURCHASE AGREEMENT (4.7%)
Goldman Sachs Repurchase
Agreement 5.45% dated
06/28/96 due 07/01/96,
proceeds $11,485,214
(collateralized by
$11,722,000 U.S.
Treasury
Notes, 6.125% due
09/30/00,
valued at $11,710,338)
(cost $11,480,000) ..... 11,480,000 11,480,000
------------
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- -------------------------- -------------- ------------
<S> <C> <C>
TOTAL SHORT-TERM INVESTMENTS (COST
$12,356,953) ........................... $ 12,356,950
------------
TOTAL INVESTMENTS (COST $228,786,518)
(101.9%) ............................... 250,760,815
------------
LIABILITIES IN EXCESS OF OTHER ASSETS
(-1.9%) ................................ (4,779,263)
------------
NET ASSETS (100.0%) ...................... $245,981,552
------------
------------
</TABLE>
- ------------------------------
+ Non-income producing securities.
* Less than 0.01%.
(a) Floating Rate Note. Maturity date reflects the later of the
next interest rate change date or the next put date.
(b) $2,035,000 par segregated as collateral for initial margin
on futures contracts.
(c) $10,110,000 par segregated as collateral for TBA
securities.
144A -- Securities restricted for resale to Qualified Institutional
Buyers.
ADR -- Securities whose value is determined or significantly
influenced by trading on exchanges not located in the US or Canada. ADR after
the name of a foreign holding stands for American Depository Receipt,
representing ownership of foreign securities on deposit with a domestic
custodian bank.
TBA -- Securities purchased on a forward commitment basis
with an approximate principal amount and no definitive maturity date. The actual
principal amount and maturity date will be determined upon settlement date.
Note: Based on the cost of investments of $229,645,340 for Federal Income Tax
purposes at June 30, 1996, the aggregate gross unrealized appreciation was
$24,382,822, and the aggregate gross unrealized depreciation was $3,267,347,
resulting in net unrealized appreciation of investments of $21,115,475.
The Accompanying Notes are an Integral Part of the Financial Statements.
41
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
PERCENT OF
PORTFOLIO
----------
INDUSTRY DIVERSIFICATION
U.S. Government Agency/Treasury Obligations .......................................................... 23.1%
Banking .............................................................................................. 7.6%
Finance .............................................................................................. 5.4%
Food, Beverages & Tobacco ............................................................................ 4.4%
Telephone ............................................................................................ 4.0%
Pharmaceuticals ...................................................................................... 3.4%
Retail ............................................................................................... 3.3%
Oil-Production ....................................................................................... 2.9%
Insurance ............................................................................................ 2.9%
Automotive ........................................................................................... 2.5%
Electric ............................................................................................. 2.5%
Financial Services ................................................................................... 2.3%
Diversified Manufacturing ............................................................................ 2.2%
Electronics .......................................................................................... 2.1%
Computer Systems ..................................................................................... 2.0%
Chemicals ............................................................................................ 1.9%
Oil-Services ......................................................................................... 1.8%
Health Services ...................................................................................... 1.6%
Entertainment, Leisure & Media ....................................................................... 1.6%
Metals & Mining ...................................................................................... 1.4%
Computer Software .................................................................................... 1.3%
Household Products ................................................................................... 1.3%
Aerospace ............................................................................................ 1.2%
Semiconductors ....................................................................................... 1.2%
Water ................................................................................................ 1.1%
Electrical Equipment ................................................................................. 1.0%
Broadcasting & Publishing ............................................................................ 1.0%
Telecommunications ................................................................................... 0.8%
Railroads ............................................................................................ 0.7%
Machinery ............................................................................................ 0.7%
Forest Products & Paper .............................................................................. 0.7%
Pollution Control .................................................................................... 0.6%
Commercial Services .................................................................................. 0.6%
Gas Exploration ...................................................................................... 0.5%
Real Estate .......................................................................................... 0.4%
Medical Supplies ..................................................................................... 0.4%
Building Materials ................................................................................... 0.3%
Transportation & Trade Service ....................................................................... 0.3%
Home Construction .................................................................................... 0.3%
Textiles & Apparel ................................................................................... 0.4%
Miscellaneous ........................................................................................ 1.4%
Short Term Investments ............................................................................... 4.9%
----------
100.0%
----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
42
<PAGE>
THE DIVERSIFIED PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $228,786,518 ) $250,760,815
Cash 415,286
Foreign Currency at Value (Cost $1,107,306) 1,111,288
Receivable for Investments Sold 8,517,153
Dividends and Interest Receivable 1,639,916
Unrealized Appreciation of Forward Foreign Currency Contracts 63,541
Receivable for Expense Reimbursement 55,848
Foreign Tax Reclaim Receivable 47,288
Variation Margin Receivable 11,066
Deferred Organization Expenses 2,018
Prepaid Trustees' Fees 159
Prepaid Expenses and Other Assets 5,954
------------
Total Assets 262,630,332
------------
LIABILITIES
Payable for Investments Purchased 16,384,713
Advisory Fee Payable 109,107
Custody Fee Payable 88,698
Administrative Services Fee Payable 9,725
Administration Fee Payable 2,510
Fund Services Fee Payable 689
Accrued Expenses 53,338
------------
Total Liabilities 16,648,780
------------
NET ASSETS
Applicable to Investors' Beneficial Interests $245,981,552
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
43
<PAGE>
THE DIVERSIFIED PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest Income (Net of Foreign Withholding Tax of $595 ) $ 5,366,025
Dividend Income (Net of Foreign Withholding Tax of $94,780 ) 2,788,241
-----------
Investment Income 8,154,266
EXPENSES
Advisory Fee $ 1,122,941
Custodian Fees and Expenses 380,742
Professional Fees 69,222
Administrative Services Fee 26,848
Administration Fee 19,517
Financial and Fund Accounting Services Fee 18,839
Fund Services Fee 13,109
Trustees' Fees and Expenses 3,998
Amortization of Organization Expenses 1,002
Miscellaneous 18,666
-----------
Total Expenses 1,674,884
Less: Reimbursement of Expenses (347,771)
-----------
NET EXPENSES 1,327,113
-----------
NET INVESTMENT INCOME 6,827,153
NET REALIZED GAIN ON
Investment Transactions (including $43,761 net realized loss from
futures contracts) 14,368,196
Foreign Currency Transactions 624,771
-----------
Net Realized Gain 14,992,967
NET CHANGE IN UNREALIZED APPRECIATION OF
Investments (including $12,699 net unrealized appreciation from
futures contracts) 9,463,023
Foreign Currency Contracts and Translations 60,547
-----------
Net Change in Unrealized Appreciation 9,523,570
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $31,343,690
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
44
<PAGE>
THE DIVERSIFIED PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
FOR THE FOR THE
FISCAL FISCAL
YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30,
1996 1995
------------ ------------
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 6,827,153 $ 4,471,528
Net Realized Gain on Investments and Foreign Currency
Transactions 14,992,967 3,210,462
Net Change in Unrealized Appreciation of Investments and Foreign
Currency Translations 9,523,570 14,857,024
------------ ------------
Net Increase in Net Assets Resulting from Operations 31,343,690 22,539,014
------------ ------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 99,908,688 114,559,561
Withdrawals (72,347,617) (15,109,920)
------------ ------------
Net Increase from Investors' Transactions 27,561,071 99,449,641
------------ ------------
Total Increase in Net Assets 58,904,761 121,988,655
NET ASSETS
Beginning of Fiscal Year 187,076,791 65,088,136
------------ ------------
End of Fiscal Year $245,981,552 $187,076,791
------------ ------------
------------ ------------
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FOR THE PERIOD
FOR THE FISCAL YEAR JULY 8, 1993
(COMMENCEMENT
ENDED JUNE 30, OF OPERATIONS)
-------------------- THROUGH JUNE
1996 1995 30, 1994
--------- --------- ---------------
RATIOS TO AVERAGE NET ASSETS
Expenses 0.65% 0.65% 0.70%(a)
Net Investment Income 3.35% 3.71% 2.88%(a)
Decrease Reflected in Expense Ratio due to Expense
Reimbursements 0.17% 0.32% 0.48%(a)
Portfolio Turnover 144% 136% 115%(b)
</TABLE>
- ------------------------
(a)Annualized.
(b)Not Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
45
<PAGE>
THE DIVERSIFIED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Diversified Portfolio (the "Portfolio") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as a no-load, diversified, open-end
management investment company which was organized as a trust under the laws of
the State of New York. The Portfolio's investment objective is to provide a high
total return from a diversified portfolio of equity and fixed income securities.
The Portfolio commenced operations on July 8, 1993. The Declaration of Trust
permits the Trustees to issue an unlimited number of beneficial interests in the
Portfolio.
Investments in international markets may involve certain considerations and
risks not typically associated with investments in the United States. Future
economic and political developments in foreign countries could adversely affect
the liquidity or value, or both, of such securities in which the Portfolio is
invested. The ability of the issuers of the debt securities held by the
Portfolio to meet their obligations may be affected by economic and political
developments in a specific industry or region.
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 value of each security for which readily available market quotations
exists is based on a decision as to the broadest and most representative
market for such security. The value of such security will be based either
on the last sale price on a national securities exchange or, in the
absence of recorded sales, at the readily available closing bid price on
such exchange. Securities listed on a foreign exchange are valued at the
last quoted sale price available before the time when net assets are
valued. Unlisted securities are valued at the average of the quoted bid
and asked prices in the over-the-counter market. Securities or other
assets for which market quotations are not readily available are valued at
fair value in accordance with procedures established by the Portfolio's
Trustees. Such procedures include the use of independent pricing services,
which use prices based upon yields or prices of securities of comparable
quality, coupon, maturity and type; indications as to values from dealers;
and general market conditions. Portfolio securities with a remaining
maturity of less than 60 days are valued by the amortized cost method.
Trading in securities on most foreign exchanges and over-the-counter
markets is normally completed before the close of the domestic market and
may also take place on days on which the domestic market is closed. If
events materially affecting the value of foreign securities occur between
the time when the exchange on which they are traded closes and the time
when the Portfolio's net asset value is calculated, such securities will
be valued at fair value in accordance with procedures established by and
under the general supervision of the Portfolio's Trustees.
b)The books and records of the Portfolio are maintained in U.S. dollars. The
market value of investment securities, other assets and liabilities and
forward contracts stated in foreign currencies are translated at the
prevailing exchange rates at the end of the period. Purchases, sales,
income and expense are translated at the exchange rates prevailing on the
respective dates of such
46
<PAGE>
THE DIVERSIFIED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
transactions. Translation gains and losses resulting from changes in the
exchange rate during the reporting period and gains and losses realized
upon settlement of foreign currency transactions are reported in the
Statement of Operations.
Although the net assets of the Portfolio are presented at the exchange
rates and market values prevailing at the end of the period, the Portfolio
does not isolate the portion of the results of operations arising as a
result of changes in foreign exchange rates from the fluctuations arising
from changes in the market prices of securities during the period.
c)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. A forward contract is an
agreement to buy or sell currencies of different countries on a specified
future date at a specified rate. Risks associated with such contracts
include the movement in the value of the foreign currency relative to the
U.S. dollar and the ability of the counterparty to perform.
The market value of the contract will fluctuate with changes in currency
exchange rates. Contracts are valued daily based on procedures established
by and under the general supervision of the Portfolio's Trustees and the
change in the market value is recorded by the Portfolio as unrealized
appreciation or depreciation of forward and spot foreign currency contract
translations. At June 30, 1996, the Portfolio had open forward currency
contracts as follows:
SUMMARY OF OPEN FORWARD FOREIGN CURRENCY CONTRACTS
<TABLE>
<CAPTION>
U.S.
DOLLAR
VALUE AT NET
COST/ JUNE 30, UNREALIZED
SALE CONTRACTS PROCEEDS 1996 APPRECIATION
- -------------------------------------------------- ---------- ---------- ------------
<S> <C> <C> <C>
French Franc 2,793,522, expiring 07/23/96 $ 546,891 $ 543,355 $ 3,536
German Mark 1,892,684, expiring 07/23/96 1,251,099 1,246,108 4,991
Japanese Yen 310,741,165, expiring 07/23/96 2,901,411 2,846,397 55,014
------------
NET UNREALIZED APPRECIATION ON FORWARD FOREIGN
CURRENCY CONTRACTS $ 63,541
------------
------------
</TABLE>
d)Futures -- A futures contract is an agreement to purchase/sell a specified
quantity of an underlying instrument at a specified future date. The price
at which the purchase and sale will take place is fixed when the Portfolio
enters into the contract. Upon entering into such a contract the Portfolio
is required to pledge to the broker an amount of cash and/or securities
equal to the minimum "initial margin" requirements of the exchange.
Pursuant to the contract, the Portfolio agrees to receive from or pay to
the broker an amount of cash equal to the daily fluctuation in the value
of the contract. Such receipts or payments are known as "variation margin"
and are recorded by the Portfolio as unrealized gains or losses. When the
contract is closed, the Portfolio records a realized gain or loss equal to
the difference between the value of the contract at the time it was opened
and the value at the time when it was closed. The Portfolio invests in
futures contracts solely for the purpose of hedging its existing portfolio
securities, or securities the Portfolio intends to purchase, against
fluctuations in value caused by changes in prevailing market interest
rates or securities movements. The use of futures transactions involves
the risk of imperfect correlation in
47
<PAGE>
THE DIVERSIFIED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
movements in the price of futures contracts, interest rates and the
underlying hedged assets, and the possible inability of counterparties to
meet the terms of their contracts. Futures transactions during the fiscal
year ended June 30, 1996 are summarized as follows:
<TABLE>
<CAPTION>
PRINCIPAL
NUMBER OF AMOUNT OF
CONTRACTS CONTRACTS
---------- ------------
<S> <C> <C>
Contracts open at beginning of year 13 $ 1,516,004
Contracts opened 75 9,040,617
Contracts closed (68) (8,328,113)
--
------------
Contracts open at end of year 20 $ 2,228,508
--
--
------------
------------
</TABLE>
SUMMARY OF OPEN CONTRACTS AT JUNE 30, 1996
<TABLE>
<CAPTION>
NET
UNREALIZED
CONTRACTS APPRECIATION/
LONG (DEPRECIATION)
-------- ------------
<S> <C> <C>
Two-Year U.S. Treasury, expiring September 1996 2 $ (450 )
Five-Year U.S. Treasury, expiring September 1996 7 4,470
Ten-Year U.S. Treasury, expiring September 1996 5 4,061
Twenty-Year U.S. Treasury, expiring September 1996 4 6,099
Australian All Ord. Index, expiring September 1996 2 (1,481 )
-
------------
Totals 20 $ 12,699
-
-
------------
------------
</TABLE>
e)The Portfolio incurred organization expenses in the amount of $5,000.
These costs were deferred and are being amortized on a straight-line basis
over a five-year period from the commencement of operations.
f)Securities transactions are recorded on a trade date basis. Dividend
income is recorded on the ex-dividend date or at the time that the
relevant ex-dividend date and amount becomes known. Interest income, which
includes the amortization of premiums and discount, if any, is recorded on
an accrual basis. For financial and tax reporting purposes, realized gains
and losses are determined on the basis of specific lot identification.
g)The Portfolio intends to be treated as a partnership for federal income
tax purposes. As such, each investor in the Portfolio will be taxable on
its share of the Portfolio's ordinary income and capital gains. It is
intended that the Portfolio's assets will be managed in such a way that an
investor in the Portfolio will be able to satisfy the requirements of
Subchapter M of the Internal Revenue Code. The Portfolio earns foreign
income which may be subject to foreign withholding taxes at various rates.
2. TRANSACTIONS WITH AFFILIATES
a)The Portfolio has an Investment Advisory Agreement with Morgan Guaranty
Trust Company of New York ("Morgan"). Under the terms of the agreement,
the Portfolio pays Morgan at an annual rate of 0.55% of the Portfolio's
average daily net assets. For the fiscal year ended June 30, 1996, this
fee amounted to $1,122,941.
48
<PAGE>
THE DIVERSIFIED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
b)The Portfolio has retained Signature Broker-Dealer Services, Inc.
("Signature") to serve as administrator and exclusive placement agent.
Signature provides administrative services necessary for the operations of
the Portfolio, furnishes office space and facilities required for
conducting the business of the Portfolio and pays the compensation of the
Portfolio's officers affiliated with Signature. Until December 28, 1995,
the Administration Agreement provided for a fee to be paid to Signature at
an annual fee rate determined by the following schedule: 0.01% of the
first $1 billion of the aggregate average daily net assets of the
Portfolio and the other portfolios subject to the Administration
Agreement, 0.008% of the next $2 billion of such net assets, 0.006% of the
next $2 billion of such net assets and 0.004% of such net assets in excess
of $5 billion. The daily equivalent of the fee rate is applied each day to
the net assets of the Portfolio. For the period from July 1, 1995 through
December 28, 1995, Signature's fee for these services amounted to $5,430.
Effective December 29, 1995, the Administration Agreement was amended such
that the fee charged would be equal to the Portfolio's proportionate share
of a complex-wide fee based on the following annual schedule: 0.03% on the
first $7 billion of the aggregate average daily net assets of the
Portfolio and the other portfolios (the "Master Portfolios") in which The
Pierpont Funds, The JPM Institutional Funds and The JPM Advisor Funds
invest and 0.01% on the aggregate average daily net assets of the Master
Portfolios in excess of $7 billion. The portion of this charge payable by
the Portfolio is determined by the proportionate share its net assets bear
to the total net assets of The Pierpont Funds, The JPM Institutional
Funds, The JPM Advisor Funds and the Master Portfolios. For the period
from December 29, 1995 through June 30, 1996, Signature's fee for these
services amounted to $14,087.
Effective August 1, 1996, administrative functions provided by Signature
will be provided by Funds Distributor, Inc. ("FDI"), a registered
broker-dealer, and by Morgan. FDI will also become the Portfolio's
exclusive placement agent. Under a Co-Administration Agreement between FDI
and the Portfolio, FDI's fees are to be paid by the Portfolio (see Note
2c).
c)Until August 31, 1995, the Portfolio had a Financial and Fund Accounting
Services Agreement with Morgan under which Morgan received a fee, based on
the percentages described below, for overseeing certain aspects of the
administration and operation of the Portfolio and was also designed to
provide an expense limit for certain expenses of the Portfolio. This fee
was calculated exclusive of the advisory fee, custody expenses, fund
services fee, amortization of organization expense and brokerage costs at
0.10% of the Portfolio's average daily net assets up to and including $200
million, 0.05% on the next $200 million of average daily net assets, and
0.03% of average daily net assets thereafter. For the two-month period
ended August 31, 1995, the fee for these services amounted to $18,839.
From September 1, 1995 until December 28, 1995, an interim agreement
between the Portfolio and Morgan provided for the continuation of the
oversight functions that were outlined under the prior agreement and that
Morgan should bear all of its expenses incurred in connection with these
services.
Effective December 29, 1995, the Portfolio entered into an Administrative
Services Agreement (the "Services Agreement") with Morgan under which
Morgan is responsible for overseeing 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 proportionate share
of an annual complex-
49
<PAGE>
THE DIVERSIFIED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
wide charge. This charge is calculated daily based on the aggregate net
assets of the Master Portfolios in accordance with the following annual
schedule: 0.06% on the first $7 billion of the Master Portfolios'
aggregate average daily net assets and 0.03% of the aggregate average
daily net assets in excess of $7 billion. The portion of this charge
payable by the Portfolio is determined by the proportionate share that the
Portfolio's net assets bear to the net assets of the Master Portfolios and
investors in the Master Portfolios for which Morgan provides similar
services. For period from December 29, 1995 through June 30, 1996, the fee
for these services amounted to $26,848.
Effective August 1, 1996, the Services Agreement will be amended such that
the aggregate complex-wide fees to be paid by the Portfolio under both the
amended Services Agreement and the Co-Administration Agreement (see Note
2b) will be calculated daily based on the aggregate net assets of the
Master Portfolios in accordance with the following annual schedule: 0.09%
on the first $7 billion of the Master Portfolios' aggregate average daily
net assets and 0.04% of the Master Portfolios' aggregate average daily net
assets in excess of $7 billion.
In addition, Morgan has agreed to reimburse the Portfolio to the extent
necessary to maintain the total operating expenses of the Portfolio at no
more than 0.65% of the average daily net assets of the Portfolio through
October 31, 1996. For the fiscal year ended June 30, 1996, Morgan has
agreed to reimburse the Portfolio $347,771 for expenses under this
agreement.
d)The Portfolio has a Fund Services Agreement with Pierpont Group, Inc.
("Group") to assist the Trustees in exercising their overall supervisory
responsibilities for the Portfolio's affairs. The Trustees of the
Portfolio represent all the existing shareholders of Group. The
Portfolio's allocated portion of Group's costs in performing its services
amounted to $13,109 for the fiscal year ended June 30, 1996.
e)An aggregate annual fee of $65,000 is paid to each Trustee for serving as
a Trustee of The Pierpont Funds, The JPM Institutional Funds and the
Master Portfolios. The Trustees' Fee and Expenses shown in the financial
statements represents the Portfolio's allocated portion of the total fees
and expenses. The Portfolio's Chairman and Chief Executive Officer also
serves as Chairman of Group and received compensation and employee
benefits from Group in his role as Group's Chairman. The allocated portion
of such compensation and benefits included in the Fund Services Fee shown
in the financial statements was $1,700.
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the year were as
follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
--------------- ------------
<S> <C> <C>
U.S. Government and Agency Obligations $ 189,476,947 $173,380,030
Corporate and Collateralized Obligations 129,210,246 112,242,745
--------------- ------------
$ 318,687,193 $285,622,775
--------------- ------------
--------------- ------------
</TABLE>
50
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Investors of
The Diversified Portfolio
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the supplementary data present fairly, in all material
respects, the financial position of The Diversified Portfolio (the "Portfolio")
at June 30, 1996, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then ended and
the supplementary data for each of the two years in the period then ended and
for the period July 8, 1993 (commencement of operations) through June 30, 1994,
in conformity with generally accepted accounting principles. These financial
statements and supplementary data (hereafter referred to as "financial
statements") are the responsibility of the Portfolio's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe our audits, which included confirmation of securities at June 30,
1996 by correspondence with the custodian and brokers and the application of
alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
New York, New York
August 26, 1996
51
