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<PAGE> PAGE 3
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<PAGE> PAGE 4
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<PAGE> PAGE 5
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SIGNATURE RICHARD W. INGRAM
TITLE TREASURER
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial data extracted from the annual report
dated 06/30/97 for the Diversified Portfolio and is qualified in its entirety by
reference to such annual report.
</LEGEND>
<MULTIPLIER> 1000
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<PERIOD-END> JUN-30-1997
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</TABLE>
1177 Avenue of the Americas Telephone 212 596 7000
New York, NY 10036 Facsimile 212 596 8910
Price Waterhouse LLP [logo]
August 20, 1997
To the Investors and Trustees of
The Diversified Portfolio
In planning and performing our audit of the financial statements of The
Diversified Portfolio (the "Portfolio") for the year ended June 30, 1997, we
considered its internal control, including control activities for safeguarding
securities, in order to determine our auditing procedures for the purpose of
expressing our opinion on the financial statements and to comply with the
requirements of Form N-SAR, not to provide assurance on internal control.
The management of the Portfolio is responsible for establishing and maintaining
internal control. In fulfilling this responsibility, estimates and judgments by
management are required to assess the expected benefits and related costs of
control activities. Generally, control activities that are relevant to an audit
pertain to the entity's objective of preparing financial statements for external
purposes that are fairly presented in conformity with generally accepted
accounting principles. Those control activities include the safeguarding of
assets against unauthorized acquisition, use or disposition.
Because of inherent limitations in internal control, errors or irregularities
may occur and not be detected. Also, projection of any evaluation of internal
control to future periods is subject to the risk that it may become inadequate
because of changes in conditions or that the effectiveness of the design and
operation may deteriorate.
Our consideration of internal control would not necessarily disclose all matters
in internal control that might be material weaknesses under standards
established by the American Institute of Certified Public Accountants. A
material weakness is a condition in which the design or operation of any
specific internal control components does not reduce to a relatively low level
the risk that errors or irregularities in amounts that would be material in
relation to the financial statements being audited may occur and not be detected
within a timely period by employees in the normal course of performing their
assigned functions. However, we noted no matters involving internal control,
including control activities for safeguarding securities, that we consider to be
material weaknesses as defined above as of June 30, 1997.
This report is intended solely for the information and use of management and the
Trustees of the Portfolio and the Securities and Exchange Commission.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
MORGAN GUARANTY
TRANSACTIONS SUBJECT TO RULE 10f-3 PROCEDURES
Fund: Diversified Fund Security: Glenborough Realty Trust
Common Stock
Issuer: Glenborough Realty Trust
In Compliance
REQUIRED INFORMATION APPLICABLE RESTRICTION (Yes/No)
1. Offering Date 3/17/97 None N/A
2. Total Size of Offering 70,875,000 None N/A
3. Unit Price of Offering 20.25 None N/A
4. Underwriting Spread 1.12 determination
must be made _______
5. Years of Issuer's
Operations 19 Must be at
least three * _______
6. Underwriting Type firm Must be firm _______
7. Trade Date 3/17/97 No later than
1 day after #1 _______
8. Portfolio Assets on
Trade Date 280,581,559 None N/A
9. Price Paid per Unit 20.25 Must not exceed
#3 ($20.25) ______
10. Total Price Paid by
Portfolio 12,150 Must not exceed
#8 x 3% ($8,417,447) _______
11. Total Price Paid If less than $500,000,
by Portfolio plus must not exceed #2 x 10% _______
Total Price Paid (N/A), otherwise
for same securities must not exceed #2 x 4%
by associated Funds 1,781,659 ($2,835,000) _______
12. List of Underwriters Must not include Morgan
from whom Portfolio Guaranty or affiliates ** _______
purchased (attach a
list of ALL syndicate
members) Bear, Stearns
Security
Jeffries & Co.
The Adviser has determined that the underwriting commission, spread or profit is
reasonable and fair compared to underwritings of similar securities during a
comparable period of time. In determining which securities are comparable, the
Adviser has considered the factors set forth in the Fund's 10f-3 procedures.
John M. Devlin
Portfolio Manager
* Not applicable to munis. In the case of munis, (i) the issue must have
one investment grade rating or (ii) if the issuer or the revenue source
has been in operation for less than three years, the issue must have
one of the three highest ratings. Circle (i) or (ii), whichever is met.
** For munis purchased from syndicate manager, check box to confirm that
the purchase was not designated as a group sale. [ ]
MORGAN GUARANTY
TRANSACTIONS SUBJECT TO RULE 10f-3 PROCEDURES
Fund: Diversified Fund Security: Nationwide Financial Serv
Inc.
Issuer: Nationwide Financial Serv Inc. Common Stock Class A
In Compliance
REQUIRED INFORMATION APPLICABLE RESTRICTION (Yes/No)
1. Offering Date 3/5/97 None N/A
2. Total Size of Offering 482,690,000 None N/A
3. Unit Price of Offering 23.50 None N/A
4. Underwriting Spread 1.23 determination
must be made _______
5. Years of Issuer's
Operations 27 Must be at
least three * _______
6. Underwriting Type firm Must be firm _______
7. Trade Date 3/5/97 No later than
1 day after #1 _______
8. Portfolio Assets on
Trade Date 282,192,406 None N/A
9. Price Paid per Unit 23.50 Must not exceed
#3 ($23.50) ______
10. Total Price Paid by
Portfolio 16,450 Must not exceed
#8 x 3% ($8,465,772) _______
11. Total Price Paid If less than $500,000,
by Portfolio plus must not exceed #2 x 10% _______
Total Price Paid (N/A), otherwise
for same securities must not exceed #2 x 4%
by associated Funds 1,828,357 ($19,307,600) _______
12. List of Underwriters Must not include Morgan
from whom Portfolio Guaranty or affiliates ** _______
purchased (attach a
list of ALL syndicate
members) C S First Boston
The Adviser has determined that the underwriting commission, spread or profit is
reasonable and fair compared to underwritings of similar securities during a
comparable period of time. In determining which securities are comparable, the
Adviser has considered the factors set forth in the Fund's 10f-3 procedures.
John M. Devlin
Portfolio Manager
* Not applicable to munis. In the case of munis, (i) the issue must have
one investment grade rating or (ii) if the issuer or the revenue source
has been in operation for less than three years, the issue must have
one of the three highest ratings. Circle (i) or (ii), whichever is met.
** For munis purchased from syndicate manager, check box to confirm that
the purchase was not designated as a group sale. [ ]
