<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
EQUITIES (52.9%)
COMMON STOCK (52.5%)
FOREIGN COMMON STOCK (11.4%)
AUSTRALIA (0.1%)
Broken Hill Proprietary Company Ltd. (Metals &
Mining)........................................ 6,200 $ 88,245
CSR Ltd. (Building Materials).................... 9,800 34,248
National Australia Bank Ltd. (Banking)........... 9,550 112,260
Southcorp Holdings Ltd. (Food, Beverages &
Tobacco)....................................... 16,600 52,738
WMC Ltd. (Metals & Mining)....................... 8,900 56,056
-------------
343,547
-------------
BELGIUM (0.2%)
Arbed SA (Metals & Mining)....................... 500 54,306
Banque Bruxelles Lambert SA (Banking)............ 300 63,561
Electrabel SA (Utilities)........................ 660 156,042
Fortis AG (Insurance)............................ 800 128,193
PetroFina SA (Oil-Production).................... 200 63,593
Solvay SA (Chemicals)............................ 105 64,211
-------------
529,906
-------------
FINLAND (0.1%)
Kemira OY (ADR) (Chemicals)...................... 2,200 55,369
Metra OY (Industrial)............................ 100 5,598
Nokia AB (Telecommunications-Equipment).......... 3,100 179,448
Rautaruukki OY (Metals & Mining)................. 4,800 44,261
UPM-Kymmene Corporation (Forest Products &
Paper)+........................................ 3,100 64,905
-------------
349,581
-------------
FRANCE (1.2%)
AXA (Insurance).................................. 31 1,968
Carrefour Supermarche (Retail)................... 265 172,088
Castorama Dubois (Retail)........................ 696 119,554
CEP Communications (Broadcasting & Publishing)... 900 63,448
Christian Dior SA (Retail)....................... 1,090 175,491
Compagnie de Saint Gobain (Building Materials)... 690 97,420
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
FRANCE (CONTINUED)
Compagnie Generale des Eaux (Utilities).......... 1,583 $ 195,792
Credit Commercial de France (Banking)............ 1,950 90,022
Credit Local de France (Financial Services)...... 1,650 143,458
Elf Aquitaine SA (Oil-Services).................. 2,720 247,109
Erid Beghin Say (Insurance)...................... 600 96,370
Essilor International (Health Services).......... 425 128,757
Groupe Danone (Food, Beverages & Tobacco)........ 856 119,046
L'Air Liquide (Chemicals)........................ 839 130,722
Lafarge SA (Building Materials).................. 1,490 89,221
Lagardere Groupe (Entertainment, Leisure &
Media)......................................... 3,240 88,748
Pathe SA (Entertainment, Leisure & Media)+....... 270 64,920
Peugeot SA (Automotive).......................... 585 65,716
Promodes (Retail)................................ 420 118,356
Rexel SA (Electrical Equipment).................. 240 72,710
Rhone-Poulenc (Chemicals)........................ 3,511 119,470
Sanofi (Pharmaceuticals)......................... 1,077 106,897
Sidel SA (Machinery)............................. 1,400 96,139
Societe Generale (Banking)....................... 940 101,436
Synthelabo (Pharmaceuticals)..................... 1,450 156,471
Total SA (Oil-Services).......................... 2,160 175,335
Union des Assurances Federales (Insurance)....... 1,300 160,039
Usinor Sacilor (Metals & Mining)................. 2,600 37,759
Valeo SA (Automotive)............................ 1,980 121,876
-------------
3,356,338
-------------
GERMANY (1.0%)
Allgemeine Handelsgesellschaft der Verbraucher AG
(Retail)+...................................... 350 100,609
Allianz AG Holding (Insurance)................... 156 283,432
BASF AG (Chemicals).............................. 5,900 226,948
Bayer AG (Chemicals)............................. 4,830 196,822
Bayerische Hypotheken-und Wechsel Bank AG
(Banking)...................................... 6,400 193,315
Bilfinger & Berger Bau AG (Construction &
Housing)....................................... 1,800 65,991
Daimler Benz AG (Automotive)+.................... 1,680 115,553
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
17
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
GERMANY (CONTINUED)
Deutsche Pfandbrief & Hypothekenbank AG
(Banking)...................................... 2,010 $ 90,607
Deutsche Telekom AG (Telecommunication
Services)+..................................... 15,380 323,845
Douglas Holding AG (Retail)...................... 1,400 54,960
Dresdner Bank AG (Banking)....................... 5,200 155,550
Fried, Krupp AG Hoesch Krupp (Machinery)......... 1,250 201,965
Munchener Rueckversicherungs-Gesellschaft
(Insurance).................................... 97 242,011
Siemens AG (Electrical Equipment)................ 4,970 233,809
VEBA AG (Utilities).............................. 5,550 320,516
-------------
2,805,933
-------------
HONG KONG (0.4%)
Bank of East Asia Ltd. (Banking)................. 12,800 56,926
Cheung Kong Holdings Ltd. (Real Estate).......... 27,000 239,981
Henderson Land Development Company Ltd. (Real
Estate)........................................ 17,000 171,429
Hong Kong Electric Holdings Ltd. (Electric)...... 18,000 59,806
Hong Kong Telecommunications Ltd.
(Telecommunications)........................... 43,600 70,177
HSBC Holdings PLC (Banking)...................... 8,000 171,170
Hutchison Whampoa Ltd. (Multi-Industry).......... 16,000 125,663
Sing Tao Holdings (Broadcasting & Publishing).... 82,000 35,779
Sun Hung Kai Properties Ltd. (Real Estate)....... 9,000 110,246
Swire Pacific Ltd. (Multi-Industry).............. 12,000 114,415
Television Broadcast Ltd. (Entertainment, Leisure
& Media)....................................... 20,000 79,897
-------------
1,235,489
-------------
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
IRELAND (0.1%)
Bank of Ireland PLC (Banking).................... 12,000 $ 109,269
CRH PLC (Building Materials)..................... 4,800 49,719
Irish Life PLC (Insurance)....................... 9,000 41,661
Jefferson Smurfit Group PLC (Forest Products &
Paper)......................................... 30,500 92,661
-------------
293,310
-------------
ITALY (0.4%)
Arnoldo Mondadori Editore SPA (Entertainment,
Leisure & Media)............................... 9,000 73,101
Assicurazioni Generali SPA (Insurance)........... 9,000 170,174
ENI SPA (Oil-Services)........................... 37,000 189,441
Fiat SPA (Automotive)............................ 32,000 96,600
Instituto Mobiliare Italiano SPA (Financial
Services)...................................... 12,000 102,598
Montedison SPA (Chemicals)+...................... 105,000 71,404
Parmalat Finanziaria SPA (Food, Beverages &
Tobacco)....................................... 47,000 71,713
Stet Societa' Finanziaria Telefonica SPA
(Telecommunication Services)................... 26,000 87,636
Telecom Italia SPA (Telecommunications).......... 68,000 176,205
-------------
1,038,872
-------------
JAPAN (2.8%)
Asahi Bank Ltd. (Banking)........................ 20,000 177,479
Asahi Glass Co. Ltd. (Building Materials)........ 7,000 65,736
Cosmo Oil Co. Ltd. (Oil-Production).............. 21,000 100,775
Dai Ichi Pharmaceutical Co. Ltd.
(Pharmaceuticals).............................. 4,000 64,099
Daido Steel Co. Ltd. (Metals & Mining)........... 7,000 25,933
Daiwa Bank Ltd. (Banking)........................ 40,000 208,495
Daiwa Danchi Co. Ltd. (Real Estate)+............. 6,000 28,121
Daiwa Securities Co. Ltd. (Financial Services)... 8,000 70,992
East Japan Railway Co. (Railroads)............... 52 233,411
Ebara Corp. (Machinery).......................... 11,000 143,103
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
18
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
JAPAN (CONTINUED)
Familymart Co. Ltd. (Retail)..................... 2,400 $ 95,735
Fujitsu Ltd. (Computer Systems).................. 11,000 102,352
Gakken Co. Ltd. (Broadcasting & Publishing)...... 21,000 118,506
Gunze Ltd. (Textiles)............................ 14,000 72,491
Hitachi Ltd. (Electrical Equipment).............. 35,000 325,666
Hokkaido Takushoku Bank Ltd. (Banking)........... 28,000 54,278
Itoham Foods Inc. (Food, Beverages & Tobacco).... 12,000 74,231
Izumi Co. Ltd. (Retail).......................... 4,000 55,828
Izumiya Co. Ltd. (Retail)........................ 8,000 113,035
Japan Tobacco, Inc. (Food, Beverages &
Tobacco)....................................... 18 121,737
Kawasaki Kisen Kaisha Ltd. (Transport &
Services)+..................................... 20,000 45,490
Kyocera Corp. (Electronics)...................... 1,000 62,204
Matsushita Electric Industries Co. Ltd.
(Electronics).................................. 15,000 244,249
Mitsubishi Electric Corp. Ltd. (Electrical
Equipment)..................................... 24,000 142,672
Mitsubishi Heavy Industries Ltd. (Machinery)..... 26,000 206,082
Mitsui Petrochemical Industries Ltd.
(Chemicals).................................... 14,000 72,370
Mitsui Toatsu Chemicals Inc. (Chemicals)......... 40,000 121,651
Mitsui Trust & Banking Co. Ltd. (Banking)........ 10,000 77,970
Mizuno Corp. (Retail)............................ 11,000 83,208
New Oji Paper Co. Ltd. (Forest Products &
Paper)......................................... 11,333 71,570
Nippon Express Co. Ltd. (Transport & Services)... 13,000 88,929
Nippon Hodo Co. Ltd. (Construction & Housing).... 4,000 46,179
Nippon Road Co. Ltd. (Construction & Housing).... 4,000 21,711
Nippon Steel Corp. (Metals & Mining)............. 84,000 247,506
Nippon Telegraph & Telephone Corp.
(Telecommunications)........................... 12 90,773
Nishi-Nippon Railroad Co. (Railroads)............ 20,000 68,752
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
JAPAN (CONTINUED)
Nishimatsu Construction Co. Ltd. (Construction &
Housing)....................................... 12,000 $ 104,420
Nissan Diesel Motor Co. Ltd. (Automotive)........ 10,000 45,748
Nissan Motor Co. Ltd. (Automotive)............... 26,000 150,530
Nissei Sangyo Co. Ltd. (Electrical Equipment).... 11,000 128,888
Nomura Securities Co. Ltd. (Financial
Services)...................................... 16,000 239,855
NSK Ltd. (Machinery)............................. 16,000 96,769
Ono Pharmaceuticals Co. Ltd. (Pharmaceuticals)... 4,000 118,894
Ricoh Corp. Ltd. (Electrical Equipment).......... 13,000 148,962
Rohm Co. Ltd. (Semiconductors)................... 2,000 130,955
Sakura Bank Ltd. (Banking)....................... 40,000 285,345
San-In Godo Bank Ltd. (Banking).................. 8,000 58,585
Sanden Corp. (Machinery)......................... 12,000 95,942
Sankyo Aluminum Industries Co. Ltd. (Building
Materials)..................................... 23,000 90,359
Shikoku Electric Power Co. Inc. (Electric)....... 2,500 48,677
Sony Corp. (Electronics)......................... 2,000 130,783
Sumitomo Forestry Co. Ltd. (Forest Products &
Paper)......................................... 5,000 60,739
Sumitomo Realty & Development Co. Ltd. (Building
Materials)..................................... 15,000 94,340
Taisei Corp. (Construction & Housing)............ 20,000 103,386
Takashimaya Co. Ltd. (Retail).................... 6,000 71,853
The Kagawa Bank Ltd. (Banking)................... 3,000 23,908
Toda Construction Co. (Building Materials)....... 6,000 45,490
Toho Bank Ltd. (Banking)......................... 22,000 133,058
Toho Gas Co. Ltd. (Natural Gas).................. 22,000 57,810
Tokai Bank Ltd. (Banking)........................ 12,000 125,097
Tokio Marine & Fire Insurance Co. Ltd.
(Insurance).................................... 15,000 140,863
Tokyo Electric Power Co. Inc. (Electric)......... 6,500 142,242
Toppan Printing Co. Ltd. (Broadcasting &
Publishing).................................... 8,000 99,940
Tosoh Corp. (Chemicals)+......................... 25,000 85,509
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
JAPAN (CONTINUED)
Toyo Construction Co. (Construction & Housing)... 15,000 $ 45,748
Toyo Trust & Banking Co. Ltd. (Banking).......... 18,000 144,999
Toyota Motor Corp. (Automotive).................. 21,000 602,481
Ube Industries Ltd. (Chemicals).................. 25,000 70,647
Yamazaki Baking Co. Ltd. (Food, Beverages &
Tobacco)....................................... 4,000 63,755
Yokohama Rubber Company Ltd. (Automotive)........ 25,000 116,094
-------------
8,045,990
-------------
MALAYSIA (0.2%)
Commerce Asset-Holding Berhad (Banking).......... 10,328 77,700
IJM Corporation Berhad (Building Materials)...... 9,000 21,204
Industrial Oxygen Incorporated Berhad
(Agriculture).................................. 45,000 69,135
New Straits Times Press Berhad (Entertainment,
Leisure & Media)............................... 15,000 86,715
Sime Darby Berhad (Multi-Industry)............... 25,000 98,495
Tenaga Nasional Berhad (Telecommunications)...... 24,000 114,987
-------------
468,236
-------------
NETHERLANDS (1.9%)
Aegon NV (Insurance)............................. 1,740 110,753
Dutch State Mines NV (Chemicals)................. 950 93,586
ING Groep NV (Financial Services)................ 3,000 107,878
Koninklijke PTT Nederland NV
(Telecommunications)........................... 2,000 76,196
Philips Electronics NV (Electronics)............. 1,540 62,322
PolyGram NV (Entertainment, Leisure & Media)..... 600 30,525
Royal Dutch Petroleum Co. (Oil-Services)......... 2,200 385,249
Royal Dutch Petroleum Co. (ADR) (Oil-Services)... 17,500 2,988,125
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
NETHERLANDS (CONTINUED)
Unilever NV (Food, Beverages & Tobacco).......... 770 $ 136,039
Unilever NV (ADR) (Food, Beverages & Tobacco).... 7,400 1,296,850
Wolters Kluwer NV (Broadcasting & Publishing).... 930 123,391
-------------
5,410,914
-------------
NEW ZEALAND (0.1%)
Brierley Investments Ltd. (Financial Services)... 61,000 56,459
Fletcher Challenge Building (Building
Materials)..................................... 4,500 13,830
Fletcher Challenge Paper (Forest Products &
Paper)......................................... 56,100 115,343
Lion Nathan Ltd. (Food, Beverages & Tobacco)..... 38,500 92,213
Telecom Corporation of New Zealand
(Telecommunications)........................... 30,000 153,036
-------------
430,881
-------------
NORWAY (0.2%)
Kvaerner AS, Series B (Capital Goods)............ 2,800 121,465
Norsk Hydro AS (Oil-Services).................... 4,600 248,536
Nycomed ASA, Series B (Medical Supplies)+........ 3,000 46,043
Orkla ASA (Multi-Industry)....................... 1,300 82,454
Storebrand ASA (Insurance)+...................... 9,000 52,150
-------------
550,648
-------------
SINGAPORE (0.1%)
Development Bank Singapore (Banking)............. 8,000 108,091
Keppel Corporation Ltd. (Multi-Industry)......... 6,000 46,754
Singapore Airlines Ltd. (Airlines)............... 5,000 45,395
Singapore Land Ltd. (Real Estate)................ 7,000 38,783
Singapore Press Holdings (Entertainment, Leisure
& Media)....................................... 2,000 39,462
Singapore Telecommunications Ltd.
(Telecommunications)........................... 13,000 30,669
-------------
309,154
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
SPAIN (0.4%)
Autopistas Concesionaria Espanola SA
(Transportation)............................... 6,000 $ 82,568
Banco Bilbao Vizcaya SA (Banking)................ 300 16,168
Banco Intercontinental Espanol (Financial
Services)...................................... 900 139,281
Banco Pastor (Banking)........................... 1,100 70,359
Banco Popular Espanol SA (Banking)............... 700 137,228
Fuerzas Electric de Cataluna SA (Electric)....... 8,199 80,682
Hidroelectrica del Cantabrico SA (Electric)...... 2,000 76,187
Iberdrola SA (Electric).......................... 24,400 345,155
Repsol SA (Gas Exploration)...................... 4,400 168,457
-------------
1,116,085
-------------
SWITZERLAND (0.3%)
Georg Fischer AG (Automotive Supplies)........... 50 51,761
Liechtenstein Global Trust AG (Banking).......... 70 35,763
Nestle SA (Food, Beverages & Tobacco)............ 95 101,670
Novartis AG (Pharmaceuticals)+................... 230 262,593
Roche Holding AG (Pharmaceuticals)............... 11 85,323
Schweizerische Rueckversicherungs-Gesellschaft
(Insurance).................................... 60 63,855
Schweizerischer Bankverein (Banking)............. 511 96,855
Societe Generale de Surveillance Holding SA
(Commercial Services).......................... 160 70,067
-------------
767,887
-------------
UNITED KINGDOM (1.9%)
Abbey National PLC (Banking)..................... 14,400 188,270
Allied Colloids Group PLC (Chemicals)............ 34,000 70,112
Allied Domecq PLC (Food, Beverages & Tobacco).... 10,300 80,729
Amersham International PLC (Biotechnology)....... 3,100 61,008
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
UNITED KINGDOM (CONTINUED)
BAT Industries PLC (Food, Beverages & Tobacco)... 18,000 $ 149,088
Britannic Assurance PLC (Insurance).............. 9,200 113,357
British Aerospace PLC (Aerospace)................ 4,000 87,482
British Airways PLC (Airlines)................... 6,500 67,464
British Petroleum Company PLC (Oil-Services)..... 30,446 364,716
British Telecommunications PLC
(Telecommunications)........................... 14,400 97,339
BTR PLC (Multi-Industry)......................... 15,000 73,158
Cadbury Schweppes PLC (Food, Beverages &
Tobacco)....................................... 9,000 75,930
Dalgety PLC (Food, Beverages & Tobacco).......... 14,600 90,695
EMI Group PLC (Entertainment, Leisure & Media)... 4,000 94,447
General Electric Company PLC (Electrical
Equipment)..................................... 6,700 43,914
Glaxo Wellcome PLC (Pharmaceuticals)............. 18,000 292,632
Glynwed International PLC (Metals & Mining)...... 11,400 65,550
Guardian Royal Exchange PLC (Insurance).......... 25,000 119,149
Guinness PLC (Food, Beverages & Tobacco)......... 10,000 78,549
Hillsdown Holdings PLC (Food, Beverages &
Tobacco)....................................... 39,800 136,219
HSBC Holdings PLC (Banking)...................... 10,750 240,074
Hyder PLC (Water)................................ 8,100 103,407
Kingfisher PLC (Retail).......................... 12,900 139,077
Ladbroke Group PLC (Entertainment, Leisure &
Media)......................................... 24,000 95,285
Lloyds TSB Group PLC (Banking)................... 27,000 199,144
Lucas Varity PLC (Automotive Supplies)+.......... 22,000 83,956
MEPC PLC (Real Estate)........................... 11,600 86,154
National Grid Group PLC (Electric)............... 28,000 93,437
National Power PLC (Electric).................... 12,000 100,214
Pilkington PLC (Building Materials).............. 19,500 52,725
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
UNITED KINGDOM (CONTINUED)
Racal Electronic PLC (Telecommunications-
Equipment)..................................... 18,200 $ 79,733
Rank Group PLC (Entertainment, Leisure &
Media)......................................... 14,500 108,685
Reuters Holdings (Broadcasting & Publishing)..... 8,500 109,168
RMC Group PLC (Building Materials)............... 3,000 51,339
Rolls-Royce PLC (Aerospace)...................... 16,000 70,369
Royal Bank of Scotland Group (Banking)........... 13,600 130,798
RTZ Corp. PLC (Metals & Mining).................. 5,000 80,260
Sainsbury (J.) PLC (Retail)...................... 19,000 125,832
Scottish Power PLC (Electric).................... 19,000 114,127
Sears PLC (Retail)............................... 78,000 125,473
SmithKline Beecham PLC (Pharmaceuticals)......... 11,800 163,162
Standard Chartered PLC (Banking)................. 7,010 86,013
Tarmac PLC (Construction & Housing).............. 38,000 64,054
Tesco PLC (Retail)............................... 17,000 102,986
Tomkins PLC (Multi-Industry)..................... 22,000 101,651
Vodafone Group PLC (Telecommunications).......... 35,000 147,942
Zeneca Group PLC (Pharmaceuticals)............... 4,600 129,494
-------------
5,334,367
-------------
TOTAL FOREIGN COMMON STOCK (COST
$26,976,269).................................. 32,387,138
-------------
UNITED STATES (41.1%)
BASIC INDUSTRIES (2.4%)
AGRICULTURE (0.1%)
Dekalb Genetics Corp............................. 5,500 279,812
-------------
CHEMICALS (1.2%)
Air Products and Chemicals, Inc.................. 3,300 228,112
Albemarle Corp................................... 2,700 48,937
Crompton & Knowles Corp.......................... 3,500 67,375
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
CHEMICALS (CONTINUED)
Cytec Industries, Inc.+.......................... 1,400 $ 56,875
E.I. Du Pont De Nemours & Co..................... 19,100 1,802,562
General Chemical Group, Inc...................... 1,800 42,525
Georgia Gulf Corp................................ 1,500 40,312
Landec Corp.+.................................... 500 3,906
Lyondell Petrochemical Co........................ 2,400 52,800
OM Group, Inc.................................... 400 10,800
Rohm & Haas Co................................... 1,900 155,087
Synalloy Corp.................................... 800 12,900
The Dow Chemical Co.............................. 7,300 572,137
Union Carbide Corp............................... 6,200 253,425
Wellman, Inc..................................... 100 1,712
-------------
3,349,465
-------------
FOREST PRODUCTS & PAPER (0.4%)
American Pad & Paper Co.+........................ 3,000 67,875
Boise Cascade Corp............................... 2,200 69,850
Bowater Inc...................................... 2,600 97,825
Caraustar Industries, Inc........................ 1,200 39,750
Champion International Corp...................... 6,700 289,775
Mead Corp........................................ 3,600 209,250
Temple-Inland, Inc............................... 4,300 232,737
Universal Forest Products, Inc................... 1,500 19,687
Weyerhaeuser Co.................................. 4,800 227,400
-------------
1,254,149
-------------
METALS & MINING (0.7%)
Allegheny Teledyne, Inc.......................... 12,701 292,111
Aluminum Company of America (ALCOA).............. 10,100 643,875
Bethlehem Steel Corp.+........................... 7,100 63,900
Commercial Metals Co............................. 6,000 180,750
Inland Steel Industries, Inc..................... 2,400 48,000
Nucor Corp....................................... 4,400 224,400
Oregon Steel Mills, Inc.......................... 1,400 23,450
Phelps Dodge Corp................................ 2,700 182,250
Reynolds Metals Co............................... 3,400 191,675
Schnitzer Steel Industries, Inc.................. 2,700 68,850
Steel Technologies, Inc.......................... 8,400 112,350
Worthington Industries, Inc...................... 700 12,731
-------------
2,044,342
-------------
TOTAL BASIC INDUSTRIES......................... 6,927,768
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
CONSUMER GOODS & SERVICES (9.2%)
AUTOMOTIVE (0.9%)
Amcast Industrial Corp........................... 1,500 $ 37,125
Cooper Tire & Rubber............................. 3,400 67,150
Excel Industries, Inc............................ 5,000 83,125
Ford Motor Co.................................... 34,600 1,102,875
General Motors Corp.............................. 22,000 1,226,500
Lear Corp........................................ 2,200 75,075
Simpson Industries, Inc.......................... 9,100 100,100
-------------
2,691,950
-------------
BROADCASTING & PUBLISHING (0.6%)
Banta Corp....................................... 1,000 22,687
Comcast Corp..................................... 16,200 288,562
Consolidated Graphics, Inc.+..................... 1,300 73,125
Cox Communications, Inc.......................... 2,700 62,437
Digital Generation Systems, Inc.+................ 800 6,600
Heartland Wireless Communications, Inc.+......... 1,000 13,062
Heritage Media Corp.+............................ 1,900 21,375
K-III Communications Corp.+...................... 1,500 16,125
Norwood Promotional Products, Inc.+.............. 1,400 24,850
R.R. Donnelley & Sons Co......................... 6,800 213,350
Tele-Communications TCI, Series A+............... 31,000 404,937
U.S. West, Inc. Media Group...................... 27,200 503,200
-------------
1,650,310
-------------
CONSTRUCTION & HOUSING (0.0%)*
D.R. Horton, Inc................................. 10,376 112,839
-------------
ENTERTAINMENT, LEISURE & MEDIA (1.2%)
Ascent Entertainment Group, Inc.+................ 1,900 29,925
Boyd Gaming Corp.+............................... 900 7,425
Carnival Corp.................................... 10,300 339,900
Circus Circus Enterprises, Inc.+................. 5,200 178,750
Disney (Walt) Co................................. 4,000 278,500
Education Management Corp.+...................... 600 12,450
Grand Casinos, Inc.+............................. 1,900 25,650
Harrah's Entertainment, Inc...................... 5,200 103,350
Imax Corp.+...................................... 2,100 65,887
International Game Technology.................... 4,100 74,825
ITT Corp......................................... 5,800 251,575
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
ENTERTAINMENT, LEISURE & MEDIA (CONTINUED)
Johnson Worldwide Associates, Inc.+.............. 1,000 $ 13,000
MGM Grand, Inc................................... 2,900 101,137
Mirage Resorts, Inc.............................. 7,800 168,675
SCP Pool Corp.+.................................. 1,000 20,250
Steiner Leisure Ltd.............................. 1,000 19,875
Time Warner Inc.................................. 24,000 900,000
Viacom, Inc., Class B............................ 17,600 613,800
WMS Industries, Inc.+............................ 3,500 70,000
-------------
3,274,974
-------------
FOOD, BEVERAGES & TOBACCO (2.9%)
Coca-Cola Co..................................... 26,500 1,394,562
Consolidated Cigar Holdings Inc.+................ 400 9,900
Coors (Adolph) Co................................ 1,100 21,037
CPC International, Inc........................... 4,200 325,500
Dreyer's Grand Ice Cream, Inc.................... 800 23,700
Eskimo Pie Corp.................................. 800 8,750
Kellogg Co....................................... 10,000 656,250
Morningstar Group, Inc.+......................... 1,300 25,675
Nabisco Holdings Corp., Class A.................. 1,900 73,862
PepsiCo., Inc.................................... 69,900 2,044,575
Philip Morris Companies, Inc..................... 26,400 2,973,300
Ralston Purina Co................................ 5,300 388,887
Riviana Foods, Inc............................... 1,100 19,181
Sanderson Farms, Inc............................. 800 13,300
Sara Lee Corp.................................... 8,900 331,525
Savannah Foods & Industries, Inc................. 1,200 16,200
-------------
8,326,204
-------------
HOUSEHOLD APPLIANCES & FURNISHINGS (0.2%)
Aaron Rents, Inc................................. 1,400 16,450
Black & Decker Corp.............................. 6,000 180,750
Bush Industries, Inc............................. 2,300 44,275
Whirlpool Corp................................... 5,100 237,787
-------------
479,262
-------------
HOUSEHOLD PRODUCTS (1.2%)
Bush Boake Allen, Inc.+.......................... 1,200 31,950
Colgate-Palmolive Co............................. 4,400 405,900
Libbey, Inc...................................... 2,200 61,325
Procter & Gamble Co.............................. 24,600 2,644,500
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
23
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
HOUSEHOLD PRODUCTS (CONTINUED)
Rubbermaid, Inc.................................. 10,500 $ 238,875
Safety 1st, Inc.+................................ 4,400 46,750
-------------
3,429,300
-------------
PERSONAL CARE (0.0%)*
French Fragrances, Inc.+......................... 1,800 14,175
International Flavors & Fragrances, Inc.......... 2,300 103,500
-------------
117,675
-------------
RESTAURANTS & HOTELS (0.2%)
Candlewood Hotel Company, Inc.+.................. 2,000 19,250
Doubletree Corp.+................................ 700 31,325
Extended Stay America, Inc.+..................... 3,000 60,375
Hilton Hotels Corp............................... 9,100 237,737
Landry's Seafood Restaurants, Inc.+.............. 1,500 32,344
Papa John's International, Inc.+................. 900 30,544
Planet Hollywood International, Inc.+............ 200 3,950
-------------
415,525
-------------
RETAIL (1.9%)
Albertson's, Inc................................. 7,000 249,375
AutoZone, Inc.................................... 4,900 134,750
Books A Million, Inc.+........................... 2,300 15,812
Catherines Stores Corp.+......................... 3,600 19,350
Charming Shoppes, Inc............................ 4,200 21,131
Circuit City Stores, Inc......................... 3,200 96,400
Delia's Inc...................................... 100 1,969
Dominick's Supermarkets, Inc.+................... 700 15,225
Duckwall-Alco Stores, Inc.+...................... 500 7,062
Federated Department Stores, Inc.+............... 6,800 232,050
Garden Ridge Corp.+.............................. 6,000 52,125
General Nutrition Companies, Inc.+............... 4,300 73,100
Lazare Kaplan International, Inc.+............... 1,100 18,837
Linens 'N Things, Inc.+.......................... 1,400 27,475
Lithia Motors, Inc............................... 800 8,900
Loehmann's Holdings, Inc.+....................... 1,200 27,600
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
RETAIL (CONTINUED)
Mattel, Inc...................................... 7,600 $ 210,900
Nine West Group, Inc............................. 1,200 55,650
Nordstrom, Inc................................... 2,600 92,137
One Price Clothing Stores, Inc.+................. 3,300 9,075
Pacific Sunwear of California+................... 300 7,706
Party City Corp.+................................ 1,500 25,125
Penn Traffic Co.+................................ 3,200 11,600
Penney (J.C.) Inc................................ 7,500 365,625
Sears, Roebuck & Co.............................. 21,300 982,462
Stage Stores, Inc.+.............................. 1,000 18,000
The Limited, Inc................................. 8,800 161,700
Toys 'R' Us, Inc.+............................... 8,900 267,000
Trans World Entertainment Corp.+................. 1,300 9,344
Urban Outfitters, Inc.+.......................... 2,600 34,287
Wal-Mart Stores, Inc............................. 95,400 2,182,275
Wolverine World Wide, Inc........................ 1,000 29,000
-------------
5,463,047
-------------
TEXTILES & APPAREL (0.1%)
Ashworth, Inc.+.................................. 1,000 5,656
Fruit of the Loom Inc.+.......................... 6,000 227,250
Jones Apparel Group, Inc.+....................... 2,900 108,387
V.F. Corp........................................ 300 20,250
Worldtex, Inc.+.................................. 1,000 8,875
-------------
370,418
-------------
TOTAL CONSUMER GOODS & SERVICES................ 26,331,504
-------------
ENERGY (3.1%)
GAS EXPLORATION (0.4%)
Devon Energy Corp................................ 1,400 48,650
Enron Corp....................................... 12,600 543,375
K N Energy, Inc.................................. 1,100 43,175
Newfield Exploration Co.+........................ 2,000 52,000
Pogo Producing Co................................ 1,200 56,700
Texas Meridian Resources Corp.+.................. 1,200 20,550
Union Pacific Resources Group, Inc............... 9,001 263,268
-------------
1,027,718
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
24
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
NATURAL GAS (0.2%)
Columbia Gas System, Inc......................... 100 $ 6,362
PanEnergy Corp................................... 12,000 540,000
TransCanada Pipelines Ltd........................ 800 14,000
-------------
560,362
-------------
OIL PRODUCTION (2.3%)
Anadarko Petroleum Corp.......................... 2,500 161,875
Ashland Inc...................................... 2,200 96,525
Chevron Corp..................................... 700 45,500
Exxon Corp....................................... 36,500 3,577,000
Flores & Rucks, Inc.+............................ 1,200 63,900
Mobil Corp....................................... 13,300 1,625,925
Monterey Resources, Inc.+........................ 1,500 24,187
Texaco Inc....................................... 8,900 873,312
Tosco Corp....................................... 1,500 118,687
Ultramar Diamond Shamrock Corp................... 1,300 41,112
Vastar Resources, Inc............................ 1,200 45,600
-------------
6,673,623
-------------
OIL SERVICES (0.2%)
Camco International, Inc......................... 1,000 46,125
Cooper Cameron Corp.+............................ 1,390 106,335
Dreco Energy Services Ltd.+...................... 1,100 40,425
Global Marine, Inc............................... 5,800 119,625
Input/Output, Inc.+.............................. 3,200 59,200
National-Oilwell, Inc.+.......................... 1,600 49,200
Schlumberger Ltd................................. 100 9,987
Smith International, Inc.+....................... 2,200 98,725
Trico Marine Services, Inc.+..................... 700 33,775
-------------
563,397
-------------
TOTAL ENERGY................................... 8,825,100
-------------
FINANCE (6.7%)
BANKING (3.5%)
American Federal Bank, FSB....................... 400 7,600
Banc One Corp.................................... 13,600 584,800
Bancorp Hawaii, Inc.............................. 1,700 71,400
Bank United Corp................................. 800 21,450
Banknorth Group, Inc............................. 1,500 61,500
Barnett Banks, Inc............................... 2,200 90,475
Boatmen's Bancshares, Inc........................ 5,400 347,962
Central Fidelity Banks, Inc...................... 1,900 49,400
Charter One Financial, Inc....................... 2,600 109,525
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
BANKING (CONTINUED)
Citicorp......................................... 15,000 $ 1,545,000
Colonial BancGroup, Inc.......................... 2,900 116,000
Community First Bankshares, Inc.................. 383 10,614
CoreStates Financial Corp........................ 9,100 472,062
Crestar Financial Corp........................... 1,651 122,756
Dime Bancorp, Inc.+.............................. 4,600 67,850
First Alliance Corp.+............................ 400 11,950
First Chicago NBD Corp........................... 13,000 698,750
First Commerce Corp.............................. 1,600 62,000
First Hawaiian, Inc.............................. 1,000 35,250
First Republic Bancorp, Inc.+.................... 1,100 18,425
First Tennessee National Corp.................... 3,100 116,056
First Union Corp................................. 8,800 651,200
First Virginia Banks, Inc........................ 1,300 62,237
Firstar Corp..................................... 3,400 178,500
FirstFed Financial Corp.+........................ 1,400 30,800
Fleet Financial Group, Inc....................... 12,300 613,462
GBC Bancorp...................................... 2,400 67,500
Golden West Financial Corp....................... 2,300 145,187
Great Western Financial Corp..................... 5,600 162,400
H.F. Ahmanson and Co............................. 4,300 139,750
HUBCO, Inc....................................... 2,766 68,286
Irwin Financial Corp............................. 1,000 24,500
Mark Twain Bancshares, Inc....................... 1,800 87,750
National Commerce Bancorporation................. 1,400 53,200
NationsBank Corp................................. 13,900 1,358,725
North Fork Bancorporation, Inc................... 200 7,125
Old Kent Financial Corp.......................... 300 14,306
Pinnacle Financial Services, Inc................. 1,100 25,987
PNC Bank Corp.................................... 8,500 319,812
Regions Financial Corp........................... 2,500 129,219
Republic New York Corp........................... 2,600 212,225
Roosevelt Financial Group, Inc................... 6,900 144,037
Security First Network Bank+..................... 800 8,500
Signet Banking Corp.............................. 2,400 73,800
Southtrust Corp.................................. 3,800 132,525
Standard Federal Bancorporation.................. 1,000 56,875
Sterling Bancshares, Inc......................... 1,600 30,100
TCF Financial Corp............................... 1,400 60,900
Trans Financial, Inc............................. 700 16,275
Trustco Bank Corp................................ 1,425 30,370
Washington Federal, Inc.......................... 1,800 47,250
Washington Mutual, Inc........................... 2,900 125,606
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
25
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
BANKING (CONTINUED)
Westamerica Bancorporation....................... 1,200 $ 69,750
Wilmington Trust Corp............................ 1,100 43,725
-------------
9,812,709
-------------
FINANCIAL SERVICES (1.1%)
Advanta Corp..................................... 1,100 44,894
Amresco, Inc..................................... 800 21,300
Beneficial Corp.................................. 2,500 158,437
CCB Financial Corp............................... 300 20,475
Cole Taylor Financial Group, Inc................. 500 13,500
Contifinancial Corp.............................. 2,000 72,250
Dean Witter Discover & Co........................ 7,800 516,750
Edwards (A.G.), Inc.............................. 3,000 100,875
Emergent Group, Inc.+............................ 800 8,500
Federal National Mortgage Association............ 34,700 1,292,575
Finova Group, Inc................................ 900 57,825
First USA, Inc................................... 5,600 193,900
Hambrecht & Quist Group+......................... 600 12,975
Litchfield Financial Corp........................ 1,460 20,987
Mercury Finance Co............................... 8,100 99,225
Money Store, Inc................................. 1,800 49,950
Paine Webber Group Inc........................... 2,900 81,562
Salomon, Inc..................................... 4,300 202,637
Southwest Securities Group, Inc.................. 3,100 45,725
The Bear Stearns Companies, Inc.................. 5,300 147,737
WFS Financial, Inc.+............................. 1,400 27,300
Willis Lease Finance Corp.+...................... 1,000 12,687
Winthrop Resources Corp.......................... 500 14,562
-------------
3,216,628
-------------
INSURANCE (1.8%)
AMBAC, Inc....................................... 900 59,737
American General Corp............................ 10,600 433,275
Capital Re Corp.................................. 6,850 319,381
Chartwell Re Corp................................ 1,200 32,100
Chubb Corp....................................... 11,700 628,875
CIGNA Corp....................................... 5,100 696,787
ITT Hartford Group, Inc.......................... 7,200 486,000
Lincoln National Corp............................ 5,500 288,750
MBIA, Inc........................................ 2,300 232,875
MMI Companies, Inc............................... 4,800 154,800
Ohio Casualty Corp............................... 1,900 67,925
PMI Group, Inc................................... 1,900 105,212
Providian Corp................................... 7,800 400,725
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
INSURANCE (CONTINUED)
RenaissanceRe Holdings, Ltd...................... 2,600 $ 85,800
Safeco Corp...................................... 6,600 260,287
St. Paul Companies, Inc.......................... 4,300 252,087
Torchmark Corp................................... 3,700 186,850
Transamerica Corp................................ 5,600 442,400
USLIFE Corp...................................... 1,900 63,175
-------------
5,197,041
-------------
REAL ESTATE INVESTMENT TRUSTS (0.3%)
Arden Realty Group, Inc.+........................ 1,200 33,300
Bay Apartment Communities, Inc................... 1,400 50,400
Brandywine Realty Trust.......................... 500 9,750
Cali Realty Corporation.......................... 1,700 52,487
Capstone Capital Trust, Inc...................... 2,600 58,175
Chelsea GCA Realty, Inc.......................... 1,800 62,325
Colonial Properties Trust........................ 1,800 54,675
Columbus Realty Trust............................ 2,300 52,325
Developers Diversified Realty Corp............... 2,500 92,812
Gables Residential Trust......................... 2,300 66,700
Healthcare Realty Trust, Inc..................... 1,600 42,400
Highwoods Properties, Inc........................ 1,600 54,000
Liberty Property Trust........................... 1,400 36,050
Oasis Residential, Inc........................... 2,300 52,325
Patriot American Hospitality, Inc................ 600 25,875
Price REIT, Inc.................................. 700 26,950
Public Storage, Inc.............................. 1,400 43,400
Starwood Lodging Trust........................... 1,100 60,637
Weeks Corp....................................... 500 16,625
-------------
891,211
-------------
TOTAL FINANCE.................................. 19,117,589
-------------
HEALTH CARE (4.4%)
BIOTECHNOLOGY (0.1%)
Affymetrix, Inc.+................................ 500 10,125
Agouron Pharmaceuticals, Inc.+................... 400 27,050
ArQule, Inc.+.................................... 500 7,687
Calgene, Inc..................................... 1,400 7,087
Houghten Pharmaceuticals, Inc.+.................. 1,300 6,500
Human Genome Sciences, Inc.+..................... 1,800 73,125
IDEC Pharmaceuticals Corp.+...................... 700 16,581
Incyte Pharmaceuticals, Inc.+.................... 1,000 51,250
Mycogen Corp..................................... 300 6,375
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
26
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
BIOTECHNOLOGY (CONTINUED)
ONYX Pharmaceuticals, Inc.+...................... 1,000 $ 11,187
SangStat Medical Corp.+.......................... 1,900 50,112
Sequana Therapeutics, Inc.+...................... 1,900 31,112
Somatogen, Inc.+................................. 2,700 29,531
Transkaryotic Therapies, Inc.+................... 300 5,531
Vertex Pharmaceuticals, Inc.+.................... 800 32,100
Vical, Inc.+..................................... 1,200 19,725
-------------
385,078
-------------
HEALTH SERVICES (1.5%)
Applied Analytical Industries, Inc.+............. 500 9,625
Apria Healthcare Group, Inc.+.................... 6,600 123,750
Columbia / HCA Healthcare Corp................... 42,400 1,727,800
Diagnostic Health Services, Inc.+................ 1,400 11,112
Health Care & Retirement Corp.+.................. 3,300 94,463
Health Management Associates, Inc.+.............. 8,900 200,250
Humana, Inc.+.................................... 15,700 300,263
Kapson Senior Quarters Corp.+.................... 1,500 12,188
Lifeline Systems, Inc.+.......................... 700 12,206
Manor Care, Inc.................................. 5,500 148,500
Mariner Health Group, Inc.+...................... 6,100 50,706
Paracelsus Healthcare Corp.+..................... 1,500 5,438
Perkin-Elmer Corp................................ 3,600 211,950
Sierra Health Services, Inc.+.................... 2,400 59,100
Sterling House Corp.+............................ 1,500 13,125
Summit Care Corp.+............................... 2,100 33,731
Sunrise Assisted Living, Inc.+................... 400 11,150
Tenet Healthcare Corp.+.......................... 17,500 382,813
United Healthcare Corp........................... 14,500 652,500
Ventana Medical Systems, Inc.+................... 3,100 46,500
Vivra, Inc.+..................................... 3,500 96,688
-------------
4,203,858
-------------
MEDICAL SUPPLIES (0.2%)
Bausch & Lomb, Inc............................... 4,800 168,000
CellPro, Inc.+................................... 3,000 36,750
Eclipse Surgical Technologies+................... 1,000 9,000
Heartstream, Inc.+............................... 1,600 19,700
Kensey Nash Corp.+............................... 2,400 35,400
KeraVision, Inc.+................................ 3,600 48,600
Medi-Ject Corp.+................................. 2,700 9,788
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
MEDICAL SUPPLIES (CONTINUED)
Perseptive Biosystems, Inc.+..................... 1,200 $ 8,213
Physio-Control International Corp.+.............. 700 15,575
Research Medical, Inc.+.......................... 2,200 50,463
Sola International, Inc.+........................ 600 22,800
-------------
424,289
-------------
PHARMACEUTICALS (2.6%)
Alza Corp.+...................................... 6,300 163,013
American Home Products Corp...................... 15,800 926,275
Bristol-Myers Squibb Co.......................... 17,800 1,935,750
Forest Laboratories, Inc.+....................... 3,700 121,175
Johnson & Johnson................................ 4,000 199,000
Merck & Company, Inc............................. 9,700 768,725
Pfizer, Inc...................................... 21,800 1,806,675
Schering-Plough Corp............................. 4,200 271,950
Warner-Lambert Co................................ 16,400 1,230,000
-------------
7,422,563
-------------
TOTAL HEALTH CARE.............................. 12,435,788
-------------
INDUSTRIAL PRODUCTS & SERVICES (4.2%)
BUILDING MATERIALS (0.1%)
BMC West Corp.+.................................. 500 6,188
Owens Corning.................................... 4,000 170,500
Shaw Group, Inc.................................. 400 9,350
USG Corp.+....................................... 3,100 105,013
-------------
291,051
-------------
BUSINESS & PUBLIC SERVICES (0.0%)*
American Residential Services, Inc.+............. 400 10,850
-------------
CAPITAL GOODS (0.4%)
ABC Rail Products Corp.+......................... 800 15,850
Applied Power, Inc............................... 2,900 114,913
Cincinnati Milacron, Inc......................... 2,100 45,938
Collins & Aikman Corp.+.......................... 3,400 21,250
Cummins Engine Company, Inc...................... 2,600 119,600
Eaton Corp....................................... 2,800 195,300
Foster Wheeler Corp.............................. 2,100 77,963
IDEX Corp........................................ 1,100 43,863
Measurex Corp.................................... 2,000 48,000
Modine Manufacturing Co.......................... 6,200 163,525
Newport News Shipbuilding Inc.................... 1,700 25,500
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
27
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
CAPITAL GOODS (CONTINUED)
Strategic Distribution, Inc.+.................... 2,700 $ 21,600
TRINOVA Corp..................................... 1,500 54,563
Wabash National Corp............................. 2,700 49,613
-------------
997,478
-------------
COMMERCIAL SERVICES (0.2%)
DeVry, Inc.+..................................... 3,000 70,500
Ecolab, Inc...................................... 1,900 71,488
Equity Corp. International+...................... 1,050 20,606
May & Speh, Inc.+................................ 2,100 26,250
Pinkertons, Inc.+................................ 1,100 27,638
Robert Half International, Inc.+................. 1,200 41,250
Service Corp. International...................... 10,200 285,600
Whittman-Hart, Inc.+............................. 200 5,075
-------------
548,407
-------------
DIVERSIFIED MANUFACTURING (2.4%)
AlliedSignal, Inc................................ 22,500 1,507,500
Brady (W.H.) Co.................................. 1,700 41,331
Cooper Industries, Inc........................... 7,000 294,875
General Electric Co.............................. 21,500 2,125,813
General Motors Corp., Class H.................... 20,500 1,153,125
Greenfield Industries, Inc....................... 1,000 30,563
Hexcel Corp.+.................................... 800 13,000
Intermet Corp.................................... 12,500 199,219
ITT Industries, Inc.............................. 3,200 78,400
Johnson Controls, Inc............................ 1,400 116,025
Mueller Industries, Inc.+........................ 1,100 42,350
Nu-Kote Holding, Inc.+........................... 1,000 10,250
Parker Hannifin Corp............................. 2,400 93,000
Raychem Corp..................................... 1,600 128,200
Tenneco, Inc. - New Shares....................... 8,200 370,025
Tyco International Ltd........................... 7,700 407,138
Xerox Corp....................................... 2,900 152,613
-------------
6,763,427
-------------
ELECTRICAL EQUIPMENT (0.2%)
Anixter International, Inc.+..................... 2,400 38,700
Bolder Technologies Corp.+....................... 1,000 16,375
Encore Wire Corp.+............................... 3,000 51,563
Grainger (W.W.), Inc............................. 3,300 264,825
Kuhlman Corp..................................... 500 9,688
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
ELECTRICAL EQUIPMENT (CONTINUED)
MagneTek, Inc.+.................................. 1,100 $ 14,163
Molex Inc........................................ 2,300 81,794
-------------
477,108
-------------
MACHINERY (0.3%)
Caterpillar, Inc................................. 8,900 669,725
Ingersoll-Rand Co................................ 3,500 155,750
-------------
825,475
-------------
POLLUTION CONTROL (0.6%)
American Disposal Services, Inc.+................ 2,200 39,875
Browning-Ferris Industries, Inc.................. 9,100 238,875
Culligan Water Technologies, Inc.+............... 700 28,350
Dames & Moore, Inc............................... 4,800 70,200
Sevenson Environmental Services, Inc............. 1,200 20,400
Tetra Technologies, Inc.+........................ 1,800 45,788
WMX Technologies, Inc............................ 39,500 1,288,688
-------------
1,732,176
-------------
TOTAL INDUSTRIAL PRODUCTS & SERVICES........... 11,645,972
-------------
TECHNOLOGY (6.7%)
AEROSPACE (1.1%)
Boeing Co........................................ 17,300 1,840,288
Coltec Industries, Inc.+......................... 3,800 71,725
General Dynamics Corp............................ 1,200 84,600
Lockheed Martin Corp............................. 4,200 384,300
McDonnell Douglas Corp........................... 4,900 313,600
Northrop Grumman Corp............................ 1,100 91,025
Orbital Sciences Corp.+.......................... 4,900 83,913
Raytheon Co...................................... 4,500 216,563
Rohr Industries, Inc.+........................... 2,900 65,613
-------------
3,151,627
-------------
COMPUTER PERIPHERALS (0.1%)
EMC Corp.+....................................... 5,900 195,438
In Focus Systems, Inc.+.......................... 1,100 23,581
Pinnacle Systems, Inc.+.......................... 1,500 15,563
Quantum Corp.+................................... 600 17,100
Raster Graphics, Inc.+........................... 1,200 13,650
-------------
265,332
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
28
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
COMPUTER SOFTWARE (0.8%)
Acxiom Corp.+.................................... 600 $ 14,325
Analogy, Inc.+................................... 1,000 4,438
Aspen Technology, Inc.+.......................... 400 31,950
Avid Technology, Inc.+........................... 1,200 12,525
Clarify, Inc..................................... 100 4,769
Computer Associates International, Inc........... 6,500 323,375
Edify Corp.+..................................... 1,700 27,519
Forte Software, Inc.+............................ 400 13,075
Inso Corp.+...................................... 800 31,500
Legato Systems, Inc.............................. 100 3,244
MathSoft, Inc.+.................................. 2,000 7,438
Mentor Graphics Corp.+........................... 85 834
MetaTools, Inc.+................................. 500 5,844
Metromail Corp.+................................. 800 14,600
Microsoft Corp.+................................. 9,800 810,338
Microware Systems Corp.+......................... 700 9,625
Network General Corp.+........................... 3,300 99,619
Objective Systems Integrators, Inc.+............. 1,400 33,163
Oracle Corp.+.................................... 18,000 750,375
Red Brick Systems, Inc.+......................... 600 13,650
Simulation Sciences, Inc.+....................... 1,000 14,813
SPS Transaction Services, Inc.+.................. 400 6,100
Transaction Systems Architects, Inc.+............ 1,000 33,000
Tripos, Inc.+.................................... 2,200 26,263
Verity, Inc.+.................................... 200 3,050
VideoServer, Inc................................. 300 12,675
Visigenic Software, Inc.+........................ 1,600 23,900
-------------
2,332,007
-------------
COMPUTER SYSTEMS (1.6%)
BBN Corp.+....................................... 1,800 40,500
Compaq Computer Corp............................. 8,800 653,400
Hewlett-Packard Co............................... 28,500 1,432,125
International Business Machines Corp............. 14,600 2,204,600
Sapient Corp.+................................... 400 16,650
Sun Microsystems, Inc.+.......................... 12,400 318,525
Vanstar Corp.+................................... 700 17,150
-------------
4,682,950
-------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
ELECTRONICS (0.8%)
Adept Technology, Inc.+.......................... 3,200 $ 23,200
Bay Networks, Inc.+.............................. 3,600 75,150
Cisco Systems, Inc.+............................. 30,600 1,948,838
Flextronics International, Ltd................... 400 11,200
Gemstar International Group Ltd.................. 500 8,688
Harris Corp...................................... 1,900 130,388
Itron, Inc.+..................................... 2,200 38,500
Microchip Technology, Inc........................ 300 15,263
Nimbus CD International, Inc.+................... 2,700 23,288
Sensormatic Electronics Corp..................... 3,300 55,275
-------------
2,329,790
-------------
INFORMATION PROCESSING (0.2%)
BA Merchant Services, Inc........................ 700 12,513
Checkfree Corp.+................................. 1,500 25,594
DST Systems, Inc.+............................... 800 25,100
First Data Corp.................................. 14,600 532,900
National Processing, Inc.+....................... 400 6,400
-------------
602,507
-------------
SEMICONDUCTORS (1.4%)
Actel Corp.+..................................... 4,200 100,013
Advanced Technology Materials, Inc.+............. 4,600 79,925
Altera Corp...................................... 1,800 130,838
Applied Materials, Inc.+......................... 4,100 147,344
Credence Systems Corp.+.......................... 1,000 19,938
ESS Technology, Inc.+............................ 1,100 30,938
Intel Corp....................................... 23,300 3,050,844
Micrel, Inc...................................... 1,900 59,613
National Semiconductor Corp...................... 2,500 60,938
Oak Technology, Inc.+............................ 3,600 40,725
SDL, Inc.+....................................... 4,050 105,300
Silicon Valley Group, Inc........................ 300 6,019
-------------
3,832,435
-------------
TELECOMMUNICATION EQUIPMENT (0.4%)
Digital Microwave Corp.+......................... 2,700 75,094
General Instrument Corp.+........................ 5,600 121,100
Lucent Technologies, Inc......................... 17,500 809,375
P-COM, Inc.+..................................... 1,000 29,750
Proxim Inc.+..................................... 1,100 25,438
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
29
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
TELECOMMUNICATION EQUIPMENT (CONTINUED)
Scientific-Atlanta, Inc.......................... 3,200 $ 48,000
Wireless One, Inc.+.............................. 200 1,350
-------------
1,110,107
-------------
TELECOMMUNICATION SERVICES (0.3%)
Airtouch Communications, Inc.+................... 24,200 611,050
ICG Communications, Inc.+........................ 1,100 19,388
Omnipoint Corp.+................................. 1,200 23,025
Paging Network, Inc.+............................ 9,500 145,469
Premiere Technologies, Inc.+..................... 2,600 65,650
-------------
864,582
-------------
TELECOMMUNICATIONS (0.0%)*
DSP Communications, Inc.......................... 300 5,794
TCI Satellite Entertainment, Inc. -A+............ 3,100 30,806
-------------
36,600
-------------
TOTAL TECHNOLOGY............................... 19,207,937
-------------
TRANSPORTATION (0.6%)
AIRLINES (0.1%)
AMR Corp......................................... 2,900 255,563
Mesa Airlines, Inc.+............................. 4,000 27,500
Southwest Airlines Co............................ 4,200 92,925
-------------
375,988
-------------
RAILROADS (0.4%)
Burlington Northern Santa Fe..................... 3,700 319,588
CSX Corp......................................... 5,100 215,475
Genesee & Wyoming Inc.+.......................... 1,500 50,625
Union Pacific Corp............................... 10,600 637,325
-------------
1,223,013
-------------
TRUCK & FREIGHT CARRIERS (0.1%)
Allied Holdings, Inc.+........................... 800 6,200
American Freightways Corp.+...................... 3,100 34,100
Caliber System, Inc.............................. 2,100 40,425
Consolidated Freightways Corp.+.................. 1,000 9,000
Consolidated Freightways, Inc.................... 1,900 42,275
Rollins Truck Leasing Corp....................... 4,700 59,338
Ryder System, Inc................................ 2,000 56,250
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
TRUCK & FREIGHT CARRIERS (CONTINUED)
USA Truck, Inc.+................................. 1,000 $ 8,375
Werner Enterprises, Inc.......................... 2,400 43,650
-------------
299,613
-------------
TOTAL TRANSPORTATION........................... 1,898,614
-------------
UTILITIES (3.8%)
ELECTRIC (1.1%)
Allegheny Power System, Inc...................... 4,000 121,500
Baltimore Gas & Electric Co...................... 2,000 53,500
Black Hills Corp................................. 400 11,250
Calpine Corp.+................................... 1,000 20,000
Central Hudson Gas & Electric.................... 3,900 122,363
Central Louisiana Electric....................... 2,700 74,588
Cinergy Corp..................................... 5,200 173,550
Consolidated Edison Co. of New York, Inc......... 7,700 225,225
Dominion Resources, Inc.......................... 5,900 227,150
Edison International............................. 14,200 282,225
New England Electric System...................... 2,000 69,750
Northeast Utilities.............................. 3,700 49,025
Northern States Power Co......................... 4,300 197,263
Pacific Gas & Electric Co........................ 13,700 287,700
Pinnacle West Capital Corp....................... 2,600 82,550
Portland General Corp............................ 3,400 142,800
Potomac Electric Power Co........................ 3,200 82,400
Saint Joseph Light & Power Co.................... 800 12,300
Southern Co...................................... 22,100 500,013
Unicom Corp...................................... 6,500 176,313
Union Electric Co................................ 3,100 119,350
-------------
3,030,815
-------------
NATURAL GAS (0.1%)
Consolidated Natural Gas Company................. 2,400 132,600
New Jersey Resources Corp........................ 500 14,625
Providence Energy Corp........................... 1,600 28,000
United Cities Gas Co............................. 3,300 75,488
Wicor, Inc....................................... 800 28,700
-------------
279,413
-------------
TELEPHONE (2.5%)
Ameritech Corp................................... 13,200 800,250
AT & T Corp...................................... 39,000 1,696,500
Bell Atlantic Corp............................... 10,500 679,875
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
30
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
TELEPHONE (CONTINUED)
Frontier Corp.................................... 2,600 $ 58,825
GTE Corp......................................... 23,100 1,051,050
MCI Communications Corp.......................... 26,500 866,219
MFS Communications Company, Inc.+................ 12,500 679,688
NYNEX Corp....................................... 10,600 510,125
SBC Communications, Inc.......................... 1,000 51,750
Sprint Corp...................................... 10,500 418,688
US West Communications Group..................... 11,500 370,875
WorldCom, Inc.+.................................. 1,900 49,519
-------------
7,233,364
-------------
WATER (0.1%)
American Water Works, Inc........................ 2,100 43,313
E'Town Corp...................................... 1,400 44,275
SJW Corp......................................... 400 18,750
Southern California Water Co..................... 2,000 43,500
-------------
149,838
-------------
TOTAL UTILITIES................................ 10,693,430
-------------
TOTAL UNITED STATES COMMON STOCK (COST
$91,741,238).................................. 117,083,702
-------------
TOTAL COMMON STOCK (COST $118,717,507)......... 149,470,840
-------------
PREFERRED STOCK (0.3%)
AUSTRALIA (0.0%)*
News Corporation Ltd. (Broadcasting &
Publishing).................................... 2,200 9,785
-------------
GERMANY (0.3%)
Henkel KGAA (Chemicals).......................... 3,190 160,006
Jungheinrich AG (Machinery)...................... 760 85,809
MAN AG (Automotive).............................. 561 112,301
RWE AG (Utilities)............................... 5,490 185,243
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
GERMANY (CONTINUED)
SAP AG (Computer Software)....................... 680 $ 94,867
Volkswagen AG (Automotive)....................... 700 224,611
-------------
862,837
-------------
TOTAL PREFERRED STOCK (COST $809,195).......... 872,622
-------------
RIGHTS (0.0%)*
UNITED KINGDOM (0.0%)*
Allied Colloids Group PLC, Expiring 01/01/97
(Chemicals) (cost $0)+......................... 3,714 159
-------------
WARRANTS (0.1%)
GERMANY (0.1%)
Volkswagen AG, Expiring 10/27/98 (Automotive)+... 324 48,355
-------------
JAPAN (0.0%)*
Canon Sales Co. Inc., Expiring 11/11/97
(Merchandising)+............................... 130 12,489
Dowa Mining Co. Ltd., Expiring 12/09/97 (Metals &
Mining)+....................................... 20 7,250
Lion Corp., Expiring 06/18/99 (Industrial)+...... 120 12,422
Maeda Corp., Expiring 02/05/97 (Construction &
Housing)+...................................... 10 500
-------------
32,661
-------------
SINGAPORE (0.0%)*
United Overseas Land Ltd., Expiring 06/09/97
(Real Estate).................................. 776 355
-------------
SWITZERLAND (0.0%)*
Schweizerischer Bankverein, Expiring 6/30/00
(Banking)+..................................... 55 152
-------------
TOTAL WARRANTS (COST $122,459)................. 81,523
-------------
TOTAL EQUITY SECURITIES (COST $119,649,161).... 150,425,144
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
31
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
FIXED INCOME SECURITIES (34.2%)
CONVERTIBLE BONDS (0.2%)
(IN JPY)
------------
JAPAN (0.2%)
BOT Cayman Finance Ltd., 4.25% due 03/31/49
(Financial Services)........................... 30,000,000 $ 331,481
Daido Hoxan Inc., 1.60% due 03/29/02
(Chemicals).................................... 10,000,000 85,724
NEC Corp., 1.90% due 03/30/01 (Computer
Systems)....................................... 8,000,000 99,940
Yamanouchi Pharmaceutical Co. Ltd., 1.25% due
03/31/14 (Commercial Services)................. 10,000,000 102,955
-------------
TOTAL CONVERTIBLE BONDS (COST $655,085)........ 620,100
-------------
COLLATERIZED OBLIGATIONS (4.9%)
(IN USD)
------------
FINANCE (4.9%)
Access Financial Corp., Series 1995-1, 6.38% due
05/15/21....................................... $ 3,000,000 2,980,980
Aegis Auto Receivables Trust, Series 1996-3,
Class A, Sequential Payer, Callable, (144A),
8.80% due 03/20/02............................. 1,360,485 1,405,977
American Southwest Financial Corp., Series 60,
Class D, 8.90% due 03/01/18.................... 1,989,980 2,072,764
Caterpillar Financial Asset Trust, Series 1996-A,
6.30% due 05/25/02............................. 500,000 500,725
Green Tree Financial Corp., Series 1994-1, 7.20%
due 04/15/19................................... 3,000,000 3,074,730
Green Tree Financial Corp., Series 92-1, Class
A3, 6.70% due 10/15/17......................... 1,000,000 1,003,140
Premier Auto Trust, Series 1993-6, 4.65% due
11/02/99....................................... 967,195 958,625
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
FINANCE (CONTINUED)
Resolution Trust Corp. Mortgage Pass Thru, Series
1993-C1, 6.73% due 05/25/24.................... $ 24,059 $ 24,089
World Omni Automobile Lease Securitization Trust,
Series 1996-A, Class A1, Sequential Payer,
Callable, 6.30% due 06/25/02................... 2,000,000 2,006,020
-------------
TOTAL COLLATERIZED OBLIGATIONS (COST
$13,937,278).................................. 14,027,050
-------------
CORPORATE OBLIGATIONS (6.2%)
BASIC INDUSTRIES (0.2%)
FOREST PRODUCTS & PAPER (0.1%)
Buckeye Cellulose Corp., 8.50% due 12/15/05...... 200,000 200,000
-------------
METALS & MINING (0.1%)
Ryerson Tull, Inc., 9.13% due 07/15/06........... 200,000 209,500
-------------
409,500
-------------
CONSUMER GOODS & SERVICES (0.5%)
AUTOMOTIVE (0.1%)
Ford Motor Co., 9.95% due 02/15/32............... 300,000 387,495
-------------
BROADCASTING & PUBLISHING (0.2%)
Tele-Communications, Inc., 10.13% due 04/15/22... 430,000 468,033
-------------
RETAIL (0.1%)
Federated Department Stores, Inc., 8.13% due
10/15/02....................................... 200,000 205,518
-------------
TEXTILES & APPAREL (0.1%)
WestPoint Stevens, Inc., 8.75% due 12/15/01...... 350,000 359,625
-------------
1,420,671
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
32
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
FINANCE (3.4%)
BANKING (2.2%)
Chase Manhattan Corp. - New Shares, 10.13% due
11/01/00....................................... $ 800,000 $ 891,984
First Union Corp., 6.55% due 10/15/35............ 2,800,000 2,770,572
Midland Bank PLC, 7.63% due 06/15/06............. 560,000 578,150
NationsBank Corp., 6.50% due 08/15/03............ 2,000,000 1,970,600
-------------
6,211,306
-------------
FINANCIAL SERVICES (0.7%)
Ford Motor Credit, 8.63% due 01/24/00............ 1,140,000 1,209,112
Guangdong International Trust & Investment Corp.,
(144A), 8.75% due 10/24/16..................... 500,000 507,145
Sampoerna Intl. (144A), 8.38% due 06/15/06....... 200,000 202,800
-------------
1,919,057
-------------
INSURANCE (0.5%)
Metropolitan Life Insurance Co. (144A), 7.00% due
11/01/05....................................... 1,500,000 1,482,465
-------------
9,612,828
-------------
HEALTHCARE (0.2%)
HEALTH SERVICES (0.2%)
Tenet Healthcare Corp., 10.13% due 03/01/05...... 500,000 551,875
-------------
TECHNOLOGY (1.0%)
ELECTRONICS (1.0%)
Sensormatic Electronics Corp., 7.74% due
03/29/06....................................... 3,000,000 2,985,000
-------------
TRANSPORTATION (0.2%)
TRANSPORT & SERVICES (0.2%)
Teekay Shipping Corp., 8.32% due 02/01/08........ 500,000 500,000
-------------
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
UTILITIES (0.7%)
TELEPHONE (0.0%)*
Philippine Long Distance Telephone, 10.63% due
02/06/04....................................... $ 150,000 $ 170,063
-------------
WATER (0.7%)
Hydro Quebec, 8.88% due 03/01/26................. 1,800,000 2,072,286
-------------
2,242,349
-------------
TOTAL CORPORATE OBLIGATIONS (COST
$17,659,614).................................. 17,722,223
-------------
GOVERNMENT OBLIGATIONS (0.0%)*
ITALY (0.0%)*
Republic of Italy, 6.50% due 06/28/01 (cost
$6,498)........................................ 10,000,000 6,643
-------------
U.S. GOVERNMENT AGENCY
OBLIGATIONS (11.0%)
FEDERAL HOME LOAN MORTGAGE CORP. (2.2%)
Federal Home Loan PC 200052, 8.50% due
09/01/01....................................... 19,609 20,153
Federal Home Loan PC 219744, 8.50% due
07/01/02....................................... 231,236 237,688
Federal Home Loan PC 219745, 8.50% due
07/01/02....................................... 564,320 580,076
Federal Home Loan PC D76007, 8.00% due
11/01/26....................................... 2,326,037 2,371,092
Federal Home Loan PC E64204, 8.00% due
05/01/11....................................... 265,082 272,687
Federal Home Loan PC E64710, 8.00% due
06/01/11....................................... 536,897 552,306
Federal Home Loan PC E64838, 8.00% due
07/01/11....................................... 672,332 691,634
Federal Home Loan PC E64845, 8.00% due
07/01/11....................................... 608,474 625,943
Federal Home Loan PC E64901, 8.00% due
07/01/11....................................... 327,888 337,299
Federal Home Loan PC E64928, 8.00% due
08/01/11....................................... 508,012 522,556
-------------
6,211,434
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
33
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
FEDERAL NATIONAL MORTGAGE ASSOCIATION (4.1%)
FNMA Pool 365833, 8.00% due 12/01/26............. $ 4,289,451 $ 4,367,219
FNMA REMIC, 6.50% due 01/25/23................... 7,400,000 7,242,158
-------------
11,609,377
-------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION (4.7%)
GNMA Pool 180922, 7.50% due 12/15/23............. 22,629 22,636
GNMA Pool 323388, 7.00% due 04/15/24............. 476,527 467,053
GNMA Pool 333096, 7.00% due 06/15/23............. 387,616 380,213
GNMA Pool 333864, 7.00% due 07/15/23............. 416,662 408,016
GNMA Pool 337448, 7.00% due 06/15/23............. 88,289 86,526
GNMA Pool 342722, 7.00% due 06/15/23............. 405,759 397,567
GNMA Pool 344934, 7.00% due 07/15/23............. 93,707 91,935
GNMA Pool 348471, 7.00% due 05/15/23............. 363,520 356,907
GNMA Pool 351588, 7.00% due 07/15/23............. 396,867 389,227
GNMA Pool 353265, 7.00% due 05/15/23............. 91,590 89,832
GNMA Pool 353295, 7.00% due 02/15/24............. 401,087 393,045
GNMA Pool 353312, 7.00% due 04/15/24............. 490,135 479,832
GNMA Pool 353972, 7.00% due 07/15/23............. 360,807 354,070
GNMA Pool 354303, 7.00% due 06/15/23............. 374,047 366,963
GNMA Pool 354729, 7.50% due 01/15/24............. 357,315 357,426
GNMA Pool 355842, 7.00% due 01/15/24............. 69,200 67,870
GNMA Pool 359017, 7.00% due 07/15/23............. 380,280 372,834
GNMA Pool 364318, 7.00% due 08/15/23............. 123,995 121,514
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION (CONTINUED)
GNMA Pool 366787, 7.50% due 05/15/24............. $ 650,229 $ 650,430
GNMA Pool 371518, 7.00% due 03/15/24............. 479,677 469,958
GNMA Pool 371587, 7.00% due 01/15/24............. 68,778 67,446
GNMA Pool 372374, 8.00% due 09/15/26............. 428,386 437,087
GNMA Pool 376317, 7.50% due 01/15/24............. 93,258 93,287
GNMA Pool 376371, 7.00% due 01/15/24............. 83,534 81,880
GNMA Pool 376375, 7.50% due 01/15/24............. 217,246 217,313
GNMA Pool 383453, 7.00% due 01/15/24............. 400,311 392,569
GNMA Pool 388990, 7.50% due 07/15/22............. 203,561 203,624
GNMA Pool 400204, 7.50% due 05/15/24............. 56,873 56,891
GNMA Pool 421005, 8.00% due 06/15/31............. 2,136,902 2,169,618
GNMA Pool 423605, 8.00% due 08/15/26............. 678,031 691,801
GNMA Pool 430543, 8.00% due 06/15/26............. 1,337,554 1,364,706
GNMA Pool 780404, 12.00% due 07/15/26............ 1,286,058 1,469,900
-------------
13,569,976
-------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (COST
$31,005,361).................................. 31,390,787
-------------
U.S. TREASURY OBLIGATIONS (11.9%)
U.S. TREASURY BONDS (7.4%)
United States Treasury Bonds, 11.13% due
08/15/03....................................... 1,085,000 1,362,619
United States Treasury Bonds, 12.00% due
08/15/13....................................... 7,000,000 10,014,060
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
34
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
U.S. TREASURY BONDS (CONTINUED)
United States Treasury Bonds, 8.50% due
02/15/20....................................... $ 7,557,000 $ 9,078,148
United States Treasury Bonds, 6.00% due
02/15/26....................................... 500,000 455,065
-------------
20,909,892
-------------
U.S. TREASURY NOTES (4.5%)
United States Treasury Notes, 7.75% due
11/30/99....................................... 3,600,000 3,760,812
United States Treasury Notes, 6.38% due
03/31/01....................................... 2,960,000 2,980,158
United States Treasury Notes, 6.25% due
04/30/01....................................... 2,500,000 2,505,650
United States Treasury Notes, 6.63% due
06/30/01....................................... 3,615,000 3,672,189
-------------
12,918,809
-------------
TOTAL U.S. TREASURY OBLIGATIONS (COST
$32,943,258).................................. 33,828,701
-------------
TOTAL FIXED INCOME SECURITIES (COST
$96,207,094).................................. 97,595,504
-------------
SHORT-TERM INVESTMENTS (11.8%)
OTHER INVESTMENT COMPANIES (0.0%)*
Seven Seas Money Market Fund, 5.12%.............. 927 927
-------------
U.S. GOVERNMENT AGENCY OBLIGATIONS (11.8%)
Federal Home Loan Bank AGN Discount Note, 6.50%
due 01/02/97................................... 33,550,000 33,543,942
-------------
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------- ------------ -------------
U.S. TREASURY OBLIGATIONS (0.0%)*
United States Treasury Bills, due 06/19/97....... $ 100,000 $ 97,671
TOTAL SHORT-TERM INVESTMENTS (COST
$33,642,540).................................. 33,642,540
-------------
TOTAL INVESTMENTS (COST $249,498,795) (98.9%)..................
281,663,188
OTHER ASSETS IN EXCESS OF LIABILITIES (1.1%)...................
3,083,119
-------------
NET ASSETS (100.0%)............................................ $ 284,746,307
-------------
-------------
</TABLE>
- ------------------------------
+ Non-income producing securities.
* Less than 0.01%.
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.
Note: Based on the cost of investments of $250,582,310 for Federal Income Tax
purposes at December 31, 1996, the aggregate gross unrealized appreciation was
$34,839,003, and the aggregate gross unrealized depreciation was $3,758,125,
resulting in net unrealized appreciation of $31,080,878.
The Accompanying Notes are an Integral Part of the Financial Statements.
35
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
INDUSTRY DIVERSIFICATION
<CAPTION>
PERCENT OF
PORTFOLIO
------------
<S> <C>
U.S. Government Agency/Treasury Obligations......................................................... 23.2%
Financial Services.................................................................................. 7.2%
Banking............................................................................................. 7.1%
Food & Beverages.................................................................................... 3.9%
Pharmaceuticals..................................................................................... 3.2%
Insurance........................................................................................... 3.0%
Telephone........................................................................................... 2.6%
Retail.............................................................................................. 2.5%
Oil-Production...................................................................................... 2.4%
Diversified Manufacturing........................................................................... 2.4%
Electronics......................................................................................... 2.1%
Chemicals........................................................................................... 2.0%
Oil-Services........................................................................................ 1.8%
Computer Systems.................................................................................... 1.7%
Health Services..................................................................................... 1.7%
Automotive.......................................................................................... 1.7%
Electric............................................................................................ 1.5%
Entertainment....................................................................................... 1.4%
Semi-Conductors..................................................................................... 1.4%
Household Products.................................................................................. 1.2%
Metals & Mining..................................................................................... 1.2%
Aerospace........................................................................................... 1.2%
Telecommunications.................................................................................. 1.0%
Broadcasting & Publishing........................................................................... 1.0%
Computer Software................................................................................... 0.9%
Water............................................................................................... 0.8%
Forest Products & Paper............................................................................. 0.7%
Pollution Control................................................................................... 0.6%
Machinery........................................................................................... 0.6%
Electrical Equipment................................................................................ 0.6%
Railroads........................................................................................... 0.5%
Capital Goods....................................................................................... 0.5%
Gas Exploration..................................................................................... 0.4%
Building Materials.................................................................................. 0.4%
Natural Gas......................................................................................... 0.3%
Real Estate Investment Trusts....................................................................... 0.3%
Utilities........................................................................................... 0.3%
Textiles & Apparel.................................................................................. 0.3%
Miscellaneous....................................................................................... 2.5%
Short Term Investments.............................................................................. 11.9%
------------
100.0%
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
36
<PAGE>
THE DIVERSIFIED PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $249,498,795) $281,663,188
Cash 940,071
Foreign Currency at Value (Cost $661,717) 663,379
Dividends and Interest Receivable 1,826,009
Receivable for Investments Sold 636,783
Unrealized Appreciation of Forward Foreign
Currency Contracts 88,683
Foreign Tax Reclaim Receivable 56,241
Receivable for Expense Reimbursement 46,870
Prepaid Trustees' Fees 1,856
Deferred Organization Expenses 1,514
Prepaid Expenses and Other Assets 1,093
------------
Total Assets 285,925,687
------------
LIABILITIES
Payable for Investments Purchased 521,204
Variation Margin Payable 339,130
Advisory Fee Payable 133,238
Unrealized Depreciation of Forward Foreign
Currency Contracts 92,369
Custody Fee Payable 45,293
Administrative Services Fee Payable 7,683
Administration Fee Payable 794
Fund Services Fee Payable 394
Accrued Expenses 39,275
------------
Total Liabilities 1,179,380
------------
NET ASSETS
Applicable to Investors' Beneficial Interests $284,746,307
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
37
<PAGE>
THE DIVERSIFIED PORTFOLIO
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividend Income (Net of Foreign Withholding Tax
of $59,212 ) $ 1,755,422
Interest Income (Net of Foreign Withholding Tax
of $23 ) 4,160,562
-----------
Investment Income 5,915,984
EXPENSES
Advisory Fee $ 817,431
Custodian Fees and Expenses 203,994
Administrative Services Fee 45,683
Professional Fees and Expenses 25,669
Printing Expenses 7,404
Administration Fee 6,246
Fund Services Fee 5,240
Trustees' Fees and Expenses 2,015
Amortization of Organization Expense 504
Miscellaneous 2,005
-----------
Total Expenses 1,116,191
Less: Reimbursement of Expenses (138,079)
-----------
NET EXPENSES 978,112
-----------
NET INVESTMENT INCOME 4,937,872
NET REALIZED GAIN ON
Investment Transactions (including $20,660 net
realized loss from futures contracts) 9,551,457
Foreign Currency Transactions 207,829
-----------
Net Realized Gain 9,759,286
NET CHANGE IN UNREALIZED APPRECIATION OF
Investment (including $23,989 net unrealized
appreciation from futures contracts) 10,214,086
Foreign Currency Contracts and Translations (78,639)
-----------
Net Change in Unrealized Appreciation 10,135,447
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $24,832,605
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
38
<PAGE>
THE DIVERSIFIED PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE FISCAL
DECEMBER 31, 1996 YEAR ENDED
(UNAUDITED) JUNE 30, 1996
----------------- --------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 4,937,872 $ 6,827,153
Net Realized Gain on Investment and Foreign
Currency Transactions 9,759,286 14,992,967
Net Change in Unrealized Appreciation of
Investment and Foreign Currency Translations 10,135,447 9,523,570
----------------- --------------
Net Increase in Net Assets Resulting from
Operations 24,832,605 31,343,690
----------------- --------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 99,917,785 99,908,688
Withdrawals (85,985,635) (72,347,617)
----------------- --------------
Net Increase from Investors' Transactions 13,932,150 27,561,071
----------------- --------------
Total Increase in Net Assets 38,764,755 58,904,761
NET ASSETS
Beginning of Period 245,981,552 187,076,791
----------------- --------------
End of Period $ 284,746,307 $ 245,981,552
----------------- --------------
----------------- --------------
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE
FISCAL FOR THE PERIOD
FOR THE YEAR ENDED JULY 8, 1993
SIX MONTHS ENDED JUNE 30, (COMMENCEMENT OF
DECEMBER 31, 1996 ----------- OPERATIONS) TO
(UNAUDITED) 1996 1995 JUNE 30, 1994
----------------- ---- ---- ----------------
<S> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Expenses 0.65%(a) 0.65% 0.65% 0.70%(a)
Net Investment Income 3.30%(a) 3.35% 3.71% 2.88%(a)
Decrease Reflected in Expense Ratio due to
Expense Reimbursement 0.09%(a) 0.17% 0.32% 0.48%(a)
Portfolio Turnover 57%(b) 144% 136% 115%(b)
Average Broker Commissions $ 0.0089 -- -- --
</TABLE>
- ------------------------
(a) Annualized.
(b) Not Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
39
<PAGE>
THE DIVERSIFIED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
DECEMBER 31, 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 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 exchanges, or at the quoted bid price in the over-the-counter market.
Securities listed on a foreign exchange are valued at the last quoted sale
price available before the time when net assets are valued. Unlisted
securities are valued at the average of the quoted bid and asked prices in
the over-the-counter market. Securities or other assets for which market
quotations are not readily available are valued at fair value in
accordance with procedures established by the Portfolio's Trustees. Such
procedures include the use of independent pricing services, which use
prices based upon yields or prices of securities of comparable quality,
coupon, maturity and type; indications as to values from dealers;
operating data; 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
40
<PAGE>
THE DIVERSIFIED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
translated at the exchange rates prevailing on the respective dates of
such transactions. Translation gains and losses resulting from changes in
the exchange rate during the reporting period and gains and losses
realized upon settlement of foreign currency transactions are reported in
the Statement of Operations.
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 December 31, 1996, the Portfolio had open forward
currency contracts as follows:
<TABLE>
<CAPTION>
SUMMARY OF OPEN FORWARD FOREIGN CURRENCY
CONTRACTS
U.S. NET
DOLLAR UNREALIZED
VALUE AT APPRECIATION/
PURCHASE CONTRACTS COST/PROCEEDS 12/31/96 (DEPRECIATION)
- ----------------------------------------------- ----------- ---------- -----------
<S> <C> <C> <C>
French Franc 1,050,624, expiring 01/28/97...... $ 208,000 $ 202,951 $ (5,049)
German Mark 1,333,355, expiring 01/28/97....... 888,000 868,197 (19,803)
Japanese Yen 179,635,530, expiring 01/28/97.... 1,612,000 1,556,825 (55,175)
<CAPTION>
SALES CONTRACTS
- -----------------------------------------------
<S> <C> <C> <C>
French Franc 7,093,522, expiring 01/28/97...... $1,368,824 $1,370,271 $ (1,447)
German Mark 3,315,208, expiring 01/28/97....... 2,154,812 2,158,656 (3,844)
Japanese Yen 323,427,950, expiring 01/28/97.... 2,884,645 2,803,013 81,632
-----------
NET UNREALIZED DEPRECIATION ON FORWARD FOREIGN
CURRENCY CONTRACTS............................ $ (3,686)
-----------
-----------
</TABLE>
d)Futures -- A futures contract is an agreement to purchase/sell a specified
quantity of an underlying instrument at a specified future date or to
make/receive a cash payment based on the value of a securities index. The
price at which the purchase and sale will take place is fixed when the
Portfolio enters 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
41
<PAGE>
THE DIVERSIFIED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
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
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 six
months ended December 31, are summarized as follows:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
NUMBER OF CONTRACTS OF CONTRACTS
----------------------- ----------------
<S> <C> <C>
Contracts open at beginning of year.............................. 20 $ 2,228,508
Contracts opened................................................. 248 38,809,859
Contracts closed................................................. (251) (39,978,769)
----------------------- ----------------
Contracts open at end of year.................................... 17 $ 1,059,598
----------------------- ----------------
----------------------- ----------------
SUMMARY OF OPEN CONTRACTS AT DECEMBER 31, 1996
</TABLE>
<TABLE>
<CAPTION>
NET UNREALIZED
APPRECIATION/
CONTRACTS LONG (DEPRECIATION)
------------------------- ----------------
<S> <C> <C>
Australian All Ord. Index, expiring March 1997................... 15 $ 13,194
Financial Times-Stock Exchange 100-Share Index, expiring March
1997............................................................ 2 9,314
------------------------- ----------------
Totals........................................................... 17 $ 22,508
------------------------- ----------------
------------------------- ----------------
</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.
42
<PAGE>
THE DIVERSIFIED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
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 six months ended December 31, 1996, this
fee amounted to $817,431.
b)The Portfolio had retained Signature Broker-Dealer Services, Inc.
("Signature") to serve as administrator and exclusive placement agent.
Under an Administration Agreement, Signature provided administrative
services necessary for the operations of the Portfolio, furnished office
space and facilities required for conducting the business of the Portfolio
and paid the compensation of the Portfolio's officers affiliated with
Signature. The agreement provided for a fee to be paid to Signature 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 JPM Pierpont Funds, The JPM
Institutional Funds or 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 paid by the Portfolio was
determined by the proportionate share its net assets bore to the total net
assets of The JPM Pierpont Funds, The JPM Institutional Funds, The JPM
Advisor Funds and the Master Portfolios. For the period from July 1, 1996
through July 31, 1996, such fees amounted to $2,938. The Administration
Agreement with Signature was terminated July 31, 1996.
Effective August 1, 1996, certain administrative functions formerly
provided by Signature are provided by Funds Distributor, Inc. ("FDI"), a
registered broker-dealer, and by Morgan. FDI also serves as the
Portfolio's exclusive placement agent. Under a Co-Administration Agreement
between FDI and the Portfolio, the Portfolio has agreed to pay FDI fees
equal to its allocable share of an annual complex-wide charge of $425,000
plus FDI's out-of-pocket expenses. The amount allocable to the Portfolio
is based on the ratio of the Portfolio's net assets to the aggregate net
assets of the The JPM Pierpont Funds, The JPM Institutional Funds, The JPM
Advisor Funds, the Master Portfolios and JPM Series Trust. For the period
August 1, 1996 through December 31, 1996, the fee for those services
amounted to $3,308.
c)The Portfolio has 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-wide charge. Until
July 31, 1996, this charge was 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 Master Portfolios'
aggregate average daily net assets in excess of $7 billion. The portion of
this charge paid by the Portfolio was determined by the proportionate
share its net assets bore to the net assets of the Master Portfolios and
investors in the Master Portfolios for which Morgan provided similar
services. For the period from July 1, 1996 through July 31, 1996, the fee
for these services amounted to $5,686.
43
<PAGE>
THE DIVERSIFIED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
After July 31, 1996, the Services Agreement was amended such that the
aggregate complex-wide charge is calculated daily based on the aggregate
net assets of the Master Portfolios and JPM Series Trust in accordance
with the following annual schedule: 0.09% on the first $7 billion of their
aggregate average daily net assets and 0.04% of their aggregate average
daily net assets in excess of $7 billion less the complex-wide fees
payable to FDI. The portion of this charge paid by the Portfolio is
determined by the proportionate share that its net assets bear to the net
assets of the Master Portfolios, investors in the Master Portfolios, for
which Morgan provides similar services, and JPM Series Trust. For the
period from August 1, 1996 through December 31, 1996, the fee for these
services amounted to $39,997.
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, 1997. For the six months ended December 31, 1996, Morgan has
agreed to reimburse the Portfolio $138,079 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 $5,240 for the six months ended December 31, 1996.
e)An aggregate annual fee of $65,000 is paid to each Trustee for serving as
a Trustee of The JPM Pierpont Funds, The JPM Institutional Funds, the
Master Portfolios and JPM Series Trust. The Trustees' Fees and Expenses
shown in the financial statements represents the Portfolio's allocated
portion of the total fees and expenses. The 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 $700.
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the six months
ended December 31, 1996 were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS FROM
PURCHASES SALES
--------------- ---------------
<S> <C> <C>
U.S. Government and Agency Obligations.......................................... $ 114,015,635 $ 66,406,925
Equity, Corporate and Collateralized Obligations................................ 44,432,549 102,015,259
--------------- ---------------
$ 158,448,184 $ 168,422,184
--------------- ---------------
--------------- ---------------
</TABLE>
44
