<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS
JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
EQUITIES (58.3%)
COMMON STOCK (57.3%)
FOREIGN COMMON STOCK (11.3%)
AUSTRALIA (0.3%)
Broken Hill Proprietary Company Ltd. (Metals &
Mining)........................................ 14,700 $ 214,555
CSR Ltd. (Building Materials).................... 24,300 93,388
Mayne Nickless Ltd. (Commercial Services)........ 7,700 44,532
Southcorp Holdings Ltd. (Food, Beverages &
Tobacco)....................................... 16,600 61,682
Westpac Banking Corporation Ltd. (Banking)....... 36,000 214,945
WMC Ltd. (Metals & Mining)....................... 21,100 131,988
-------------
761,090
-------------
AUSTRIA (0.0%)*
Creditanstalt-Bankverein (Banking)............... 1,800 72,376
VA Technologie AG (Electrical Equipment)......... 400 73,216
-------------
145,592
-------------
BELGIUM (0.2%)
Arbed SA (Metals & Mining)....................... 700 80,807
Credit Communal Holding/ Dexia (Banking)......... 900 96,759
Electrabel SA (Utilities)........................ 860 184,439
Fortis AG (Insurance)............................ 800 165,341
Groupe Bruxelles Lambert SA (Multi - Industry)... 320 53,675
PetroFina SA (Oil-Production).................... 290 109,910
Solvay SA (Chemicals)............................ 85 50,125
-------------
741,056
-------------
FINLAND (0.0%)*
Outokumpu OY (Metals & Mining)................... 2,500 49,574
UPM-Kymmene Corp. (Forest Products & Paper)...... 3,100 71,618
-------------
121,192
-------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
FRANCE (0.8%)
Carrefour Supermarche SA (Retail)................ 135 $ 98,141
Christian Dior SA (Retail)....................... 340 56,175
Colas SA (Building Materials).................... 710 93,724
Compagnie Bancaire SA (Financial Services)....... 500 63,874
Compagnie de Saint Gobain SA (Building
Materials)..................................... 320 46,711
Compagnie Generale des Eaux (Utilities).......... 1,415 181,486
Credit Commercial de France SA (Banking)......... 1,350 57,257
Elf Aquitaine SA (Oil-Services).................. 1,710 184,662
Erid Beghin Say SA (Food, Beverages & Tobacco)... 434 65,053
Groupe Danone (Food, Beverages & Tobacco)........ 346 57,225
L'Air Liquide SA (Chemicals)..................... 449 71,354
Lagardere S.C.A. (Entertainment, Leisure &
Media)......................................... 2,430 70,653
Pathe SA (Entertainment, Leisure & Media)........ 350 69,512
Peugeot SA (Automotive).......................... 745 72,077
Promodes (Retail)................................ 480 187,146
Rhone-Poulenc - A Shares (Chemicals)............. 1,861 76,076
Sanofi SA (Pharmaceuticals)...................... 1,217 119,400
Schneider SA (Electronics)....................... 1,300 69,263
SEITA (Food, Beverages & Tobacco)................ 2,100 66,531
SGS Thomson Microelectronics NV (Electronics)+... 940 74,291
Societe Generale (Banking)....................... 780 87,155
Synthelabo (Pharmaceuticals)..................... 825 107,500
Thomson CSF (Electronics)........................ 2,100 54,155
Total SA - B Shares (Oil-Services)............... 1,390 140,635
Union des Assurances Federales (Insurance)....... 940 110,637
Usinor Sacilor (Metals & Mining)................. 4,100 74,026
-------------
2,354,719
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
GERMANY (1.0%)
Allianz AG (Insurance)........................... 840 $ 175,951
AVA Allgemeine Handelsgesellschaft der
Verbraucher AG (Retail)+....................... 290 82,546
BASF AG (Chemicals).............................. 2,080 76,932
Bayer AG (Chemicals)............................. 5,690 218,844
Bayerische Hypotheken-und Wechsel Bank AG
(Banking)...................................... 7,640 228,647
Bilfinger & Berger Bau AG (Construction &
Housing)....................................... 1,800 73,341
Continental AG (Automotive)...................... 8,310 206,494
Deutsche Bank AG (Banking)....................... 500 29,239
Deutsche Pfandbrief & Hypothekenbank AG
(Banking)...................................... 560 32,234
Deutsche Telekom AG (Utilities).................. 9,890 238,377
Douglas Holding AG (Retail)...................... 1,400 55,838
Dresdner Bank AG (Banking)....................... 4,810 166,449
Fried, Krupp AG Hoesch Krupp (Multi -
Industry)...................................... 1,250 244,615
Hannover Rueckversicherungs AG (Insurance)....... 900 62,495
Henkel KGaA (Chemicals).......................... 3,430 182,077
Lufthansa AG (Airlines).......................... 6,800 130,534
Muenchener Rueckversicherungs-Gesellschaft AG
(Insurance).................................... 97 272,207
SAP AG (Computer Software)....................... 230 46,197
Siemens AG (Electrical Equipment)................ 4,270 253,745
SKW Trostberg AG (Chemicals)..................... 2,200 74,363
VEBA AG (Utilities).............................. 5,530 311,007
-------------
3,162,132
-------------
HONG KONG (0.2%)
Bank of East Asia Ltd. (Banking)................. 160 667
Cheung Kong Holdings Ltd. (Real Estate).......... 18,000 177,740
Dickson Concepts International Ltd. (Wholesale &
International Trade)+.......................... 36,500 132,860
Henderson Land Development Company Ltd. (Real
Estate)........................................ 7,000 62,119
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
HONG KONG (CONTINUED)
Hong Kong Electric Holdings Ltd. (Electric)...... 18,000 $ 72,490
HSBC Holdings PLC (Banking)...................... 4,000 120,300
Hutchison Whampoa Ltd. (Multi - Industry)........ 8,000 69,186
New World Infrastructure Ltd. (Construction &
Housing)+...................................... 19,000 53,709
Swire Pacific Ltd. (Multi - Industry)............ 7,000 63,022
-------------
752,093
-------------
IRELAND (0.1%)
Allied Irish Banks PLC (Banking)................. 17,700 135,461
CRH PLC (Building Materials)..................... 4,800 50,110
Irish Life PLC (Insurance)....................... 9,000 46,164
Jefferson Smurfit Group PLC (Forest Products &
Paper)......................................... 30,500 88,344
-------------
320,079
-------------
ITALY (0.4%)
ENI SPA (Oil-Services)........................... 59,000 333,750
Fiat SPA (Automotive)............................ 28,000 100,711
Instituto Mobiliare Italiano SPA (Financial
Services)...................................... 14,000 125,889
Instituto Nazionale Delle Assicurazioni
(Insurance).................................... 87,000 132,430
Mediaset SPA (Broadcasting & Publishing)......... 14,000 59,365
Mediolanum SPA (Financial Services).............. 6,000 67,599
Montedison SPA (Multi - Industry)................ 120,000 79,130
Parmalat Finanziaria SPA (Food, Beverages &
Tobacco)....................................... 54,000 76,327
Stet Societa' Finanziaria Telefonica SPA
(Telecommunication Services)................... 26,000 90,156
Telecom Italia SPA (Telecommunications).......... 68,000 218,008
-------------
1,283,365
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
JAPAN (3.2%)
Aoyama Trading Co. Ltd. (Retail)................. 3,000 $ 96,478
Asahi Bank Ltd. (Banking)........................ 25,000 213,012
Central Glass Co. Ltd. (Diversified
Manufacturing)................................. 23,000 67,133
Cosmo Oil Co. Ltd. (Oil-Production).............. 11,000 52,678
Dai-Ichi Kangyo Bank Ltd. (Banking).............. 4,000 54,531
Dai-Ichi Pharmaceutical Co. Ltd.
(Pharmaceuticals).............................. 6,000 105,916
Daiwa Bank Ltd. (Banking)........................ 40,000 189,810
Daiwa Danchi Co. Ltd. (Real Estate)+............. 6,000 24,644
Daiwa Securities Co. Ltd. (Financial Services)... 12,000 94,800
DDI Corp. (Telecommunications)................... 28 207,009
East Japan Railway Co. (Railroads)............... 16 82,216
Ebara Corp. (Machinery).......................... 11,000 165,341
Fanuc Ltd. (Machinery)........................... 3,000 115,354
Fuji Photo Film Co. Ltd. (Electronics)........... 3,000 120,860
Fujitsu Ltd. (Computer Systems).................. 11,000 152,844
Hino Motors Ltd. (Automotive).................... 7,000 44,656
Hitachi Ltd. (Electrical Equipment)(a)........... 31,000 346,762
Ishihara Sangyo Kaisha (Chemicals)............... 19,000 56,288
Ito-Yokado Co. Ltd. (Retail)..................... 1,000 58,114
Itoham Foods, Inc. (Food, Beverages & Tobacco)... 12,000 66,276
Izumi Co. Ltd. (Retail).......................... 4,000 58,726
Izumiya Co. Ltd. (Retail)........................ 8,000 128,638
Japan Synthetic Rubber (Chemicals)............... 6,000 51,385
Japan Tobacco, Inc. (Food, Beverages &
Tobacco)....................................... 18 142,358
Kawasaki Kisen Kaisha Ltd. (Transport &
Services)+..................................... 20,000 40,374
Kissei Pharmaceutical Co. Ltd.
(Pharmaceuticals).............................. 6,000 132,133
Kyocera Corp. (Electronics)...................... 3,000 238,574
Marubeni Corp. (Multi - Industry)................ 17,000 77,252
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
JAPAN (CONTINUED)
Matsushita Electric Industries Co. Ltd.
(Electronics)(a)............................... 15,000 $ 302,805
Mitsubishi Electric Corp. Ltd. (Electrical
Equipment)..................................... 38,000 212,864
Mitsubishi Estate Co. Ltd. (Real Estate)......... 11,000 161,110
Mitsubishi Heavy Industries Ltd. (Machinery)..... 32,000 245,810
Mitsubishi Rayon Co. Ltd. (Textiles)............. 43,000 177,366
Mitsui Trust & Banking Co. Ltd. (Banking)........ 21,000 158,743
Mizuno Corp. (Retail)............................ 11,000 71,904
New Oji Paper Co. Ltd. (Forest Products &
Paper)......................................... 10,000 61,959
Nippon Express Co. Ltd. (Transport & Services)... 18,000 143,931
Nippon Oil Co. Ltd. (Oil-Production)............. 10,000 54,793
Nippon Road Co. Ltd. (Construction & Housing).... 4,000 15,101
Nippon Steel Corp. (Metals & Mining)............. 84,000 268,671
Nippon Telegraph & Telephone Corp.
(Telecommunications)........................... 23 221,096
Nishi-Nippon Railroad Co. (Railroads)............ 20,000 65,717
Nishimatsu Construction Co. Ltd. (Construction &
Housing)....................................... 16,000 111,859
Nissan Motor Co. Ltd. (Automotive)(a)............ 54,000 419,523
Nissei Sangyo Co. Ltd. (Electrical Equipment).... 11,000 134,580
Nomura Securities Co. Ltd. (Financial
Services)...................................... 16,000 220,921
NSK Ltd. (Machinery)............................. 16,000 103,050
Ricoh Corp. Ltd. (Electrical Equipment).......... 13,000 170,410
Rohm Co. Ltd. (Electrical Equipment)............. 1,000 103,120
Sakura Bank Ltd. (Banking)(a).................... 39,000 299,240
San-In Godo Bank Ltd. (Banking).................. 8,000 66,346
Sankyo Aluminum Industries Co. Ltd. (Building
Materials)..................................... 23,000 74,369
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
JAPAN (CONTINUED)
Secom Co. Ltd. (Electronics)..................... 2,000 $ 146,989
Sekisui Chemical Co. Ltd. (Chemicals)............ 9,000 91,235
Shikoku Electric Power Co., Inc. (Electric)...... 2,500 42,602
Shohkoh Fund & Co. Ltd. (Financial Services)..... 100 30,324
Sony Corp. (Electronics)......................... 2,000 174,605
Sumitomo Bakelite Co. Ltd. (Chemicals)........... 10,000 80,835
Sumitomo Forestry Co. Ltd. (Forest Products &
Paper)......................................... 13,000 143,144
Sumitomo Trust & Banking Co. Ltd. (Banking)...... 7,000 75,242
Taisei Corp. (Construction & Housing)............ 20,000 92,808
The Bank of Tokyo - Mitsubishi Ltd. (Banking).... 3,000 60,299
The Kagawa Bank Ltd. (Banking)................... 3,000 22,022
The Long-Term Credit Bank of Japan Ltd.
(Banking)...................................... 22,000 95,167
Toda Construction Co. (Building Materials)....... 6,000 42,052
Toho Bank Ltd. (Banking)......................... 22,000 135,541
Tokio Marine & Fire Insurance Co. Ltd.
(Insurance).................................... 13,000 170,410
Tokyo Electric Power Co., Inc. (Electric)........ 6,500 136,896
Tokyo Steel Manufacturing (Metals & Mining)...... 2,000 22,372
Toppan Printing Co. Ltd. (Broadcasting &
Publishing).................................... 10,000 157,301
Tostem Corp. (Construction & Housing)............ 4,000 110,810
Toyota Motor Corp. Ltd. (Automotive)............. 20,000 590,754
West Japan Railway Co. (Railroads)............... 49 192,266
Yamazaki Baking Co. Ltd. (Food, Beverages &
Tobacco)....................................... 4,000 70,611
York - Benimaru Co. Ltd. (Retail)................ 3,000 94,381
-------------
9,828,116
-------------
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
MALAYSIA (0.0%)*
Commerce Asset-Holding Berhad (Banking).......... 656 $ 1,728
Hong Leong Properties Berhad (Real Estate)....... 13,000 14,782
-------------
16,510
-------------
NETHERLANDS (1.7%)
Aegon NV (Insurance)............................. 880 61,531
Aegon NV (ARS) (Insurance)....................... 1 32
Dutch State Mines NV (Chemicals)................. 339 33,791
ING Groep NV (Financial Services)................ 2,798 129,238
Koninklijke PTT Nederland NV
(Telecommunications)........................... 841 33,051
Philips Electronics NV (Electronics)............. 1,621 116,322
Royal Dutch Petroleum Co. (Oil-Services)......... 5,960 310,575
Royal Dutch Petroleum Co. (ADR) (Oil-Services)... 50,100 2,724,187
Unilever NV (Food, Beverages & Tobacco).......... 690 145,514
Unilever NV (ADR) (Food, Beverages & Tobacco).... 7,400 1,613,200
Wolters Kluwer NV (Broadcasting & Publishing).... 468 57,087
-------------
5,224,528
-------------
NEW ZEALAND (0.2%)
Brierley Investments Ltd. (Financial Services)... 64,100 62,557
Carter Holt Harvey Ltd. (Forest Products &
Paper)......................................... 26,000 67,136
Fletcher Challenge Building Division Ltd.
(Building Materials)........................... 21,300 63,950
Fletcher Challenge Forests - New (Forest Products
& Paper)....................................... 1,920 2,733
Fletcher Challenge Paper Division Ltd. (Forest
Products & Paper).............................. 26,700 64,600
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
23
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
NEW ZEALAND (CONTINUED)
Lion Nathan Ltd. (Food, Beverages & Tobacco)..... 36,700 $ 92,775
Telecom Corporation of New Zealand
(Telecommunications)........................... 58,900 299,387
-------------
653,138
-------------
NORWAY (0.2%)
Kvaerner ASA - Series B (Capital Goods).......... 2,100 117,610
Norsk Hydro ASA (Oil-Services)................... 4,000 218,009
Nycomed ASA - Series B (Medical Supplies)........ 5,330 76,447
Orkla ASA (Multi - Industry)..................... 900 61,100
Storebrand ASA - A Shares (Insurance)+........... 13,000 77,601
-------------
550,767
-------------
SINGAPORE (0.2%)
City Developments Ltd. (Real Estate)............. 7,000 68,539
Hotel Properties Ltd. (Restaurants & Hotels)..... 24,000 40,787
Sembawang Maritime Ltd. (Transport & Services)... 11,000 34,465
Singapore Airlines Ltd. (Airlines)............... 15,000 134,280
Singapore Press Holdings Ltd. (Entertainment,
Leisure & Media)............................... 3,000 60,426
Singapore Telecommunications Ltd.
(Telecommunications)........................... 28,000 51,698
United Overseas Bank Ltd. (Banking).............. 17,000 174,774
-------------
564,969
-------------
SPAIN (0.2%)
Banco Bilbao Vizcaya SA (Banking)................ 1,520 123,712
Banco Popular Espanol SA (Banking)............... 300 73,638
Hidroelectrica del Cantabrico SA (Electric)...... 2,000 81,322
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
SPAIN (CONTINUED)
Iberdrola SA (Electric).......................... 11,400 $ 144,176
Repsol SA (Gas Exploration)...................... 1,700 72,013
-------------
494,861
-------------
SWEDEN (0.1%)
Avesta Sheffield AB (Metals & Mining)............ 9,416 108,987
Scania AB - B Shares (Automotive)................ 2,600 79,355
-------------
188,342
-------------
SWITZERLAND (0.4%)
Georg Fischer AG (Automotive Supplies)........... 50 69,623
Holderbank Financiere Glaris AG (Building
Materials)..................................... 82 77,565
Liechtenstein Global Trust AG (Banking).......... 80 49,113
Nestle SA (Food, Beverages & Tobacco)............ 85 112,296
Novartis AG (Pharmaceuticals).................... 252 403,449
Roche Holding AG (Pharmaceuticals)............... 14 126,810
Schweizerische Rueckversicherungs-Gesellschaft
(Insurance).................................... 82 116,151
Union Bank of Switzerland (Banking).............. 120 137,463
-------------
1,092,470
-------------
UNITED KINGDOM (2.1%)
Abbey National PLC (Banking)..................... 7,400 100,990
Allied Colloids Group PLC (Chemicals)............ 47,714 99,660
Allied Domecq PLC (Food, Beverages & Tobacco).... 10,300 74,055
Amersham International PLC (Biotechnology)....... 3,220 85,745
BAT Industries PLC (Food, Beverages & Tobacco)... 17,900 160,127
British Airways PLC (Airlines)................... 12,500 142,402
British Petroleum Co. PLC (Oil-Services)......... 27,151 337,550
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
24
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
UNITED KINGDOM (CONTINUED)
British Telecommunications PLC
(Telecommunications)........................... 33,400 $ 247,921
BTR PLC (Multi - Industry)....................... 17,200 58,826
Burmah Castrol PLC (Oil-Production).............. 1,900 32,128
Cadbury Schweppes PLC (Food, Beverages &
Tobacco)....................................... 15,500 138,270
Compass Group PLC (Food, Beverages & Tobacco).... 10,500 117,433
Dalgety PLC (Food, Beverages & Tobacco).......... 14,600 62,691
Flextech PLC (Broadcasting & Publishing)+........ 4,800 51,926
General Cable PLC (Broadcasting & Publishing)+... 19,100 51,815
General Electric Co. PLC (Electrical
Equipment)..................................... 6,700 40,031
Glaxo Wellcome PLC (Pharmaceuticals)............. 24,000 496,294
Glynwed International PLC (Metals & Mining)...... 18,600 71,936
Great Universal Stores PLC (Retail).............. 11,000 111,583
Guardian Royal Exchange PLC (Insurance).......... 51,300 231,803
Guinness PLC (Food, Beverages & Tobacco)......... 17,300 169,299
Hillsdown Holdings PLC (Food, Beverages &
Tobacco)....................................... 27,800 78,424
HSBC Holdings PLC (Banking)...................... 600 17,772
HSBC Holdings PLC (75p) (Banking)................ 14,500 446,086
Kingfisher PLC (Retail).......................... 8,700 98,750
Lloyds TSB Group PLC (Banking)................... 35,100 360,433
Lucas Varity PLC (Automotive Supplies)........... 31,100 107,660
MEPC PLC (Real Estate)........................... 15,600 127,673
National Westminster Bank PLC (Banking).......... 1,300 17,471
Norwich Union PLC (Insurance)+................... 5,101 26,997
Pilkington PLC (Building Materials).............. 32,500 74,644
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
UNITED KINGDOM (CONTINUED)
Racal Electronic PLC (Telecommunications-
Equipment)..................................... 18,200 $ 72,697
Rank Group PLC (Entertainment, Leisure &
Media)......................................... 19,500 123,487
Reed International PLC (Broadcasting &
Publishing).................................... 10,700 103,286
RMC Group PLC (Building Materials)............... 5,000 80,968
Rolls-Royce PLC (Aerospace)...................... 12,000 45,735
Royal Bank of Scotland Group PLC (Banking)....... 13,600 127,206
RTZ Corp. PLC (Metals & Mining).................. 3,500 60,959
Safeway PLC (Retail)............................. 8,500 49,159
Sainsbury (J.) PLC (Retail)...................... 19,000 115,103
Scottish Power PLC (Electric).................... 32,000 207,705
Sears PLC (Retail)............................... 78,000 88,275
Shell Transport & Trading Co. (Oil-Services)..... 9,600 65,507
SmithKline Beecham PLC (Pharmaceuticals)......... 5,100 93,834
Standard Chartered PLC (Banking)................. 3,124 47,625
Tomkins PLC (Multi - Industry)................... 22,500 97,362
Unilever PLC (Food, Beverages & Tobacco)......... 2,500 71,523
United News & Media PLC (Broadcasting &
Publishing).................................... 4,000 46,367
Vickers PLC (Capital Goods)...................... 20,700 70,280
Vodafone Group PLC (Telecommunications).......... 51,300 250,159
Wessex Water PLC (Water)......................... 20,300 137,506
Willis Corroon Group PLC (Insurance)............. 18,900 40,263
Zeneca Group PLC (Pharmaceuticals)............... 5,600 185,097
-------------
6,418,498
-------------
TOTAL FOREIGN COMMON STOCK (COST
$29,321,826).................................. 34,673,517
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
25
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
UNITED STATES (46.0%)
BASIC INDUSTRIES (2.8%)
AGRICULTURE (0.2%)
Dekalb Genetics Corp. - Class B.................. 5,100 $ 406,725
Pioneer Hi-Bred International, Inc............... 2,100 168,000
-------------
574,725
-------------
CHEMICALS (1.3%)
Albemarle Corp................................... 2,700 56,869
Crompton & Knowles Corp.......................... 3,500 77,875
Cytec Industries, Inc.+.......................... 1,400 52,325
Dow Chemical Co.................................. 7,600 662,150
E.I. Du Pont De Nemours & Co..................... 37,700 2,370,387
General Chemical Group, Inc...................... 1,000 26,750
Georgia Gulf Corp................................ 1,500 43,594
Landec Corp.+.................................... 600 3,600
Lyondell Petrochemical Co........................ 2,400 52,350
Minerals Technologies, Inc....................... 800 30,000
OM Group, Inc.................................... 500 16,562
PPG Industries Inc............................... 200 11,625
Rohm & Haas Co................................... 1,600 144,100
Union Carbide Corp............................... 6,200 291,787
Wellman, Inc..................................... 100 1,737
-------------
3,841,711
-------------
FOREST PRODUCTS & PAPER (0.5%)
American Pad & Paper Co.+........................ 6,000 101,250
Boise Cascade Corp............................... 2,200 77,687
Bowater Inc...................................... 1,900 87,875
Caraustar Industries, Inc........................ 3,100 107,337
Champion International Corp...................... 4,700 259,675
Mead Corp........................................ 3,600 224,100
Temple-Inland, Inc............................... 4,300 232,200
Universal Forest Products, Inc................... 2,400 34,950
Weyerhaeuser Co.................................. 6,800 353,600
-------------
1,478,674
-------------
METALS & MINING (0.8%)
Allegheny Teledyne, Inc.......................... 12,700 342,900
Aluminum Company of America...................... 10,100 761,287
Bethlehem Steel Corp.+........................... 7,100 74,106
Commercial Metals Co............................. 8,200 264,450
Fluor Corp....................................... 2,600 143,487
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
METALS & MINING (CONTINUED)
Freeport-McMoran Copper & Gold, Inc. - Class A... 8,900 $ 260,325
Inland Steel Industries, Inc..................... 2,000 52,250
Nucor Corp....................................... 4,400 248,600
Oregon Steel Mills, Inc.......................... 1,100 21,931
Schnitzer Steel Industries, Inc. - Class A....... 4,300 126,312
Steel Technologies, Inc.......................... 9,200 97,750
Worthington Industries, Inc...................... 4,100 75,209
-------------
2,468,607
-------------
TOTAL BASIC INDUSTRIES......................... 8,363,717
-------------
CONSUMER GOODS & SERVICES (10.4%)
AUTOMOTIVE (0.9%)
Amcast Industrial Corp........................... 2,400 60,000
Chrysler Corp.................................... 20,700 679,219
Cooper Tire & Rubber Co.......................... 3,400 74,800
Excel Industries, Inc............................ 1,900 37,050
Ford Motor Co.................................... 37,500 1,415,625
Goodyear Tire and Rubber Co...................... 5,400 341,887
Lear Corp.+...................................... 2,200 97,625
Simpson Industries, Inc.......................... 3,400 36,337
-------------
2,742,543
-------------
BROADCASTING & PUBLISHING (0.6%)
Banta Corp....................................... 1,600 43,600
Comcast Corp. - Class A.......................... 2,300 49,091
Cox Communications, Inc. - Class A+.............. 2,700 64,800
Digital Generation Systems, Inc.+................ 800 3,650
Heritage Media Corp. - Class A+.................. 1,600 30,200
K-III Communications Corp.+...................... 3,100 37,200
R.R. Donnelley & Sons Co......................... 8,100 296,662
TCI Satellite Entertainment, Inc. - Class A+..... 3,100 24,509
Tele-Communications TCI - Series A+.............. 34,200 507,656
U.S. West, Inc. Media Group+..................... 31,800 643,950
-------------
1,701,318
-------------
CONSTRUCTION & HOUSING (0.1%)
D.R. Horton, Inc................................. 17,276 179,238
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
26
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
ENTERTAINMENT, LEISURE & MEDIA (1.1%)
Boyd Gaming Corp.+............................... 900 $ 5,175
Circus Circus Enterprises, Inc.+................. 5,800 142,825
Education Management Corp.+...................... 800 20,600
Grand Casinos, Inc.+............................. 1,900 28,025
Harrah's Entertainment, Inc.+.................... 5,700 104,025
Imax Corp.+...................................... 6,600 162,937
International Game Technology.................... 7,000 124,250
ITT Corp.+....................................... 5,900 360,269
MGM Grand, Inc.+................................. 2,900 107,300
Mirage Resorts, Inc.+............................ 9,600 242,400
Steiner Leisure Ltd.+............................ 1,500 42,469
Time Warner, Inc................................. 30,000 1,447,500
Viacom, Inc. - Class B+.......................... 19,400 582,000
WMS Industries, Inc.+............................ 3,300 82,706
-------------
3,452,481
-------------
FOOD, BEVERAGES & TOBACCO (3.6%)
Anheuser Busch Companies, Inc.................... 19,000 796,812
Coca-Cola Co..................................... 29,800 2,011,500
CPC International, Inc........................... 4,600 424,637
General Mills, Inc............................... 5,600 364,700
Heinz (H.J.) Company............................. 10,800 498,150
Kellogg Co....................................... 10,000 856,250
Morningstar Group, Inc.+......................... 1,400 41,169
Nabisco Holdings Corp. - Class A................. 1,900 75,762
PepsiCo, Inc..................................... 67,000 2,516,687
Philip Morris Companies, Inc..................... 49,100 2,178,812
Ralston Purina Co................................ 5,300 435,594
Sara Lee Corp.................................... 600 24,975
Savannah Foods & Industries, Inc................. 2,100 36,881
Seagram Company Ltd.............................. 17,600 708,400
Twinlab Corp.+................................... 600 14,400
-------------
10,984,729
-------------
HOUSEHOLD APPLIANCES & FURNISHINGS (0.2%)
Aaron Rents, Inc. - Class B...................... 3,400 44,837
Black & Decker Corp.............................. 6,300 234,281
Bush Industries, Inc. - Class A.................. 4,000 95,000
LADD Furniture, Inc.+............................ 700 9,712
Leggett & Platt, Inc............................. 300 12,900
Royal Appliance Manufacturing Co.+............... 900 7,706
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
HOUSEHOLD APPLIANCES & FURNISHINGS (CONTINUED)
Stanley Furniture Co., Inc.+..................... 700 $ 16,187
Whirlpool Corp................................... 4,800 261,900
-------------
682,523
-------------
HOUSEHOLD PRODUCTS (1.1%)
Bush Boake Allen, Inc.+.......................... 2,200 68,475
Procter & Gamble Co.............................. 23,300 3,291,125
Rubbermaid, Inc.................................. 4,000 119,000
Safety 1st, Inc.+................................ 4,200 23,887
-------------
3,502,487
-------------
PERSONAL CARE (0.1%)
French Fragrances, Inc.+......................... 600 5,700
Gillette Co...................................... 2,200 208,450
-------------
214,150
-------------
RESTAURANTS & HOTELS (0.2%)
Candlewood Hotel Company, Inc.+.................. 3,800 30,875
Extended Stay America, Inc.+..................... 7,600 119,700
Hilton Hotels Corp............................... 12,500 332,031
McDonald's Corp.................................. 300 14,494
Papa John's International, Inc.+................. 2,400 88,650
-------------
585,750
-------------
RETAIL (2.4%)
Albertson's, Inc................................. 8,900 324,850
AutoZone, Inc.+.................................. 5,500 129,594
Best Buy Co., Inc.+.............................. 1,000 14,875
Catherines Stores Corp.+......................... 1,000 3,812
Charming Shoppes, Inc.+.......................... 5,600 29,312
Circuit City Stores, Inc......................... 3,700 131,581
Delia's, Inc.+................................... 600 11,100
Duckwall-Alto Stores, Inc.+...................... 1,600 20,400
Federated Department Stores, Inc.+............... 7,900 274,525
Gap, Inc......................................... 4,600 178,825
Garden Ridge Corp.+.............................. 10,400 130,650
General Nutrition Companies, Inc.+............... 2,800 78,225
Gymboree Corp.+.................................. 1,600 38,350
JLK Direct Distribution - Class A+............... 200 5,125
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
27
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
RETAIL (CONTINUED)
Lazare Kaplan International, Inc.+............... 1,300 $ 21,775
Linens 'N Things, Inc.+.......................... 800 23,700
Lithia Motors, Inc. - Class A+................... 1,600 18,000
Mattel, Inc...................................... 18,100 613,137
Nine West Group, Inc.+........................... 1,400 53,462
One Price Clothing Stores, Inc.+................. 6,500 24,375
Pacific Sunwear of California+................... 700 22,750
Party City Corp.+................................ 2,900 47,669
Penn Traffic Co.+................................ 3,800 29,925
Penney (J.C.) Inc................................ 9,000 469,687
Sears, Roebuck & Co.............................. 21,300 1,144,875
ShopKo Stores, Inc............................... 600 15,300
TJX Companies, Inc............................... 2,400 63,300
Toys 'R' Us, Inc.+............................... 10,700 374,500
Urban Outfitters, Inc.+.......................... 6,000 82,875
Wal-Mart Stores, Inc............................. 87,200 2,948,450
-------------
7,325,004
-------------
TEXTILES & APPAREL (0.1%)
Ashworth, Inc.+.................................. 3,300 33,516
Fruit of the Loom, Inc. - Class A+............... 6,000 186,000
Worldtex, Inc.+.................................. 1,000 8,000
-------------
227,516
-------------
TOTAL CONSUMER GOODS & SERVICES................ 31,597,739
-------------
ENERGY (3.4%)
GAS EXPLORATION (0.3%)
Devon Energy Corp................................ 900 33,075
Enron Corp....................................... 14,800 604,025
K N Energy, Inc.................................. 800 33,700
Newfield Exploration Co.+........................ 3,300 66,000
Ocean Energy, Inc.+.............................. 700 32,375
-------------
769,175
-------------
NATURAL GAS (0.0%)*
TransCanada Pipelines Ltd........................ 800 16,100
-------------
OIL PRODUCTION (3.0%)
Amoco Corp....................................... 400 34,775
Anadarko Petroleum Corp.......................... 3,500 210,000
Ashland, Inc..................................... 4,400 204,050
Atlantic Richfield Co............................ 8,800 620,400
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
OIL PRODUCTION (CONTINUED)
Chevron Corp..................................... 5,100 $ 377,081
Exxon Corp....................................... 71,800 4,415,700
Mobil Corp....................................... 35,600 2,487,550
Monterey Resources, Inc.......................... 2,400 35,700
Patterson Energy, Inc.+.......................... 600 27,150
Phillips Petroleum Co............................ 3,700 161,875
Plains Resources, Inc.+.......................... 3,300 48,675
Snyder Oil Corp.................................. 2,400 44,100
Tosco Corp....................................... 7,800 233,512
Ultramar Diamond Shamrock Corp................... 1,300 42,412
Unocal Corp...................................... 5,800 225,112
Valero Energy Corp............................... 2,800 101,500
-------------
9,269,592
-------------
OIL SERVICES (0.1%)
Cooper Cameron Corp.+............................ 1,000 46,750
Diamond Offshore Drilling Inc.+.................. 2,000 156,250
Dreco Energy Services Ltd. - Class A+............ 700 36,837
Hanover Compressor Co.+.......................... 500 9,750
Input/Output, Inc.+.............................. 4,100 74,312
Seacor Smit, Inc.+............................... 900 47,081
-------------
370,980
-------------
TOTAL ENERGY................................... 10,425,847
-------------
FINANCE (7.5%)
BANKING (3.4%)
Ahmanson, H F and Co............................. 4,300 184,900
Alex Brown, Inc.................................. 3,300 233,062
Banc One Corp.................................... 19,983 967,924
Bank United Corp. - Class A...................... 3,600 137,475
BankBoston Corp.................................. 2,700 194,569
Banknorth Group, Inc............................. 2,200 101,200
Charter One Financial, Inc....................... 1,800 97,087
Chase Manhattan Corp............................. 500 48,531
Colonial BancGroup, Inc.......................... 3,300 80,025
Commerce Bancshares, Inc......................... 1,000 45,312
Commercial Federal Corporation................... 1,100 40,837
Community First Bankshares, Inc.................. 1,200 45,900
CoreStates Financial Corp........................ 9,100 489,125
Crestar Financial Corp........................... 3,000 116,625
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
28
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
BANKING (CONTINUED)
Dime Bancorp, Inc................................ 4,600 $ 80,500
Eagle Bancshares, Inc............................ 400 7,025
First Alliance Corp.+............................ 600 17,175
First Chicago NBD Corp........................... 13,000 786,500
First Commerce Corp.............................. 1,100 48,331
First Hawaiian, Inc.............................. 2,000 68,125
First Republic Bancorp, Inc.+.................... 1,100 25,575
First Union Corp................................. 7,600 703,000
Firstar Corp..................................... 5,500 167,750
FirstFed Financial Corp.+........................ 2,300 71,444
Flagstar Bancorp, Inc.+.......................... 1,400 22,575
Fleet Financial Group, Inc....................... 6,400 404,800
GBC Bancorp...................................... 2,400 98,250
Golden West Financial Corp....................... 2,300 161,000
Great Western Financial Corp..................... 5,600 301,000
Hamilton Bancorp, Inc.+.......................... 500 13,312
Hibernia Corp. - Class A......................... 3,500 48,781
Household International, Inc..................... 2,900 340,569
HUBCO, Inc....................................... 4,366 125,795
InterWest Bancorp, Inc........................... 500 19,812
Irwin Financial Corp............................. 700 20,387
Mercantile Bancorporation, Inc................... 2,001 121,536
National Commerce Bancorporation................. 3,800 84,550
NationsBank Corp................................. 34,800 2,244,600
New Century Financial Corp.+..................... 500 7,187
North Fork Bancorporation, Inc................... 2,200 47,025
Old Kent Financial Corp.......................... 1,470 79,288
Pacific Century Financial Corp................... 1,700 78,625
Pinnacle Financial Services, Inc................. 2,200 63,525
Providian Financial Corp.+....................... 7,800 250,575
Republic New York Corp........................... 2,600 279,500
Security First Network Bank+..................... 900 6,131
Signet Banking Corp.............................. 2,400 86,400
Southtrust Corp.................................. 3,800 157,462
TCF Financial Corp............................... 1,400 69,125
Trustco Bank Corp................................ 2,900 61,806
Trustmark Corp................................... 300 8,512
Valley National Bancorp.......................... 300 8,137
Washington Federal, Inc.......................... 2,000 51,312
Washington Mutual, Inc........................... 4,200 251,081
Wells Fargo & Co................................. 700 188,650
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
BANKING (CONTINUED)
Westamerica Bancorporation....................... 600 $ 45,450
Wilmington Trust Corp............................ 100 4,581
-------------
10,509,336
-------------
FINANCIAL SERVICES (1.8%)
Advanta Corp. - Class B.......................... 1,200 42,675
Amresco, Inc.+................................... 3,000 64,687
Bear Stearns Companies, Inc...................... 5,600 191,450
Beneficial Corp.................................. 2,500 177,656
Citicorp......................................... 10,200 1,229,737
Contifinancial Corp.+............................ 2,000 73,000
Edwards (A.G.), Inc.............................. 3,000 128,250
Equifax, Inc..................................... 5,000 185,937
Federal Home Loan Mortgage Corporation........... 11,200 385,000
Federal National Mortgage Association............ 38,800 1,692,650
Finova Group, Inc................................ 1,000 76,500
Hambrecht & Quist Group, Inc.+................... 2,100 68,775
Litchfield Financial Corp........................ 2,360 39,382
Money Store, Inc................................. 1,600 45,750
Morgan Stanley, Dean Witter, Discover & Co....... 20,100 865,556
Ocwen Financial Corp.+........................... 800 25,850
Salomon, Inc..................................... 4,300 239,188
Southwest Securities Group, Inc.................. 2,300 44,419
WFS Financial, Inc.+............................. 2,300 37,663
Willis Lease Finance Corp.+...................... 2,200 27,363
-------------
5,641,488
-------------
INSURANCE (2.0%)
AMBAC, Inc....................................... 900 68,738
American General Corp............................ 11,500 549,125
American International Group, Inc................ 15,900 2,375,063
Capital Re Corp.................................. 7,750 414,625
Chartwell Re Corp................................ 2,100 63,000
Chubb Corp....................................... 2,000 133,750
General Re Corp.................................. 1,500 273,000
Hartford Financial Services Group, Inc........... 2,300 190,325
Hartford Life, Inc. - Class A+................... 300 11,250
Marsh & McLennan Companies, Inc.................. 6,400 456,800
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
29
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
INSURANCE (CONTINUED)
MBIA, Inc........................................ 2,300 $ 259,469
Mercury General Corp............................. 1,000 72,750
Ohio Casualty Corp............................... 1,100 48,263
PMI Group, Inc................................... 1,900 118,513
Progressive Corp................................. 2,100 182,700
RenaissanceRe Holdings, Ltd...................... 3,400 129,625
St. Paul Companies, Inc.......................... 2,800 213,500
Transamerica Corp................................ 5,600 523,950
Travelers Group, Inc............................. 1,300 81,981
Unum Corp........................................ 400 16,800
-------------
6,183,227
-------------
REAL ESTATE INVESTMENT TRUSTS (0.3%)
American General Hospitality Corp................ 2,200 54,450
Arden Realty Group, Inc.......................... 1,300 33,800
Boston Properties, Inc........................... 1,100 30,250
Brandywine Realty Trust.......................... 1,000 20,250
Burnham Pacific Properties, Inc.................. 2,300 31,625
Chelsea GCA Realty, Inc.......................... 500 19,000
Colonial Properties Trust........................ 800 23,500
Columbus Realty Trust............................ 3,100 70,525
Developers Diversified Realty Corp............... 2,600 104,000
Evans Withycombe Residential, Inc................ 800 16,600
Excel Realty Trust, Inc.......................... 1,000 26,375
Gables Residential Trust......................... 3,800 95,950
Healthcare Realty Trust, Inc..................... 2,000 55,750
Liberty Property Trust........................... 2,300 57,213
Oasis Residential, Inc........................... 4,100 96,350
Post Properties, Inc............................. 1,300 52,731
Price REIT, Inc.................................. 1,600 58,200
TriNet Corporate Realty Trust, Inc............... 900 29,756
Weeks Corp....................................... 700 21,875
Westfield America, Inc.+......................... 900 15,188
-------------
913,388
-------------
TOTAL FINANCE.................................. 23,247,439
-------------
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
HEALTH CARE (5.3%)
BIOTECHNOLOGY (0.1%)
ArQule, Inc.+.................................... 700 $ 12,075
Human Genome Sciences, Inc.+..................... 2,900 96,606
IDEC Pharmaceuticals Corp.+...................... 400 9,775
Incyte Pharmaceuticals, Inc.+.................... 800 52,700
Mycogen Corp.+................................... 600 11,700
SangStat Medical Corp.+.......................... 2,100 47,906
Sequana Therapeutics, Inc.+...................... 2,200 23,788
Transkaryotic Therapies, Inc.+................... 300 9,244
Vertex Pharmaceuticals, Inc.+.................... 300 11,438
Vical, Inc.+..................................... 900 11,588
-------------
286,820
-------------
HEALTH SERVICES (1.5%)
Apple Orthodontix, Inc. - Class A+............... 500 4,563
Applied Analytical Industries, Inc.+............. 2,300 46,863
Apria Healthcare Group, Inc.+.................... 6,600 117,150
Arbor Health Care Co.+........................... 600 18,900
Columbia/HCA Healthcare Corp..................... 49,900 1,961,694
Health Care & Retirement Corp.+.................. 3,900 130,163
Health Management Associates, Inc. - Class A+.... 5,000 142,500
Humana, Inc.+.................................... 15,700 363,063
Kapson Senior Quarters Corp.+.................... 2,900 33,169
Lifeline Systems, Inc.+.......................... 1,200 22,800
Mariner Health Group, Inc.+...................... 10,500 162,094
Paracelsus Healthcare Corp.+..................... 2,400 12,150
Sierra Health Services, Inc.+.................... 4,000 125,000
Sterling House Corp.+............................ 2,200 36,025
Summit Care Corp.+............................... 2,100 28,613
Tenet Healthcare Corp.+.......................... 18,300 540,994
United Healthcare Corp........................... 16,700 868,400
Ventana Medical Systems, Inc.+................... 5,800 72,500
Youth Services, Inc.+............................ 1,200 14,775
-------------
4,701,416
-------------
MEDICAL SUPPLIES (0.4%)
Arterial Vascular Energy, Inc.+.................. 800 25,725
Bausch & Lomb, Inc............................... 3,300 155,513
Biomet, Inc...................................... 6,700 124,997
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
30
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
MEDICAL SUPPLIES (CONTINUED)
Boston Scientific Corp.+......................... 11,600 $ 712,675
CellPro, Inc.+................................... 2,800 16,975
Closure Medical Corp.+........................... 900 17,100
CONMED Corp.+.................................... 1,200 20,550
Eclipse Surgical Technologies+................... 1,300 10,644
Heartstream, Inc.+............................... 3,000 25,875
IDEXX Laboratories, Inc.+........................ 3,100 38,459
Kensey Nash Corp.+............................... 5,200 57,850
KeraVision, Inc.+................................ 5,800 53,650
Medi-Ject Corp.+................................. 4,300 13,438
Physio-Control International Corp.+.............. 900 13,500
Sola International, Inc.+........................ 1,300 43,550
-------------
1,330,501
-------------
PHARMACEUTICALS (3.3%)
Alza Corp.+...................................... 6,300 182,700
American Home Products Corp...................... 29,300 2,241,450
Bristol-Myers Squibb Co.......................... 14,300 1,158,300
Forest Laboratories, Inc.+....................... 3,700 154,013
Johnson & Johnson................................ 5,200 334,750
Kos Pharmaceuticals, Inc.+....................... 600 16,275
Merck & Company, Inc............................. 10,000 1,035,000
Pfizer, Inc...................................... 9,000 1,075,500
Schering-Plough Corp............................. 36,000 1,723,500
Warner-Lambert Co................................ 16,600 2,062,550
Watson Pharmaceuticals, Inc.+.................... 2,100 88,594
-------------
10,072,632
-------------
TOTAL HEALTH CARE.............................. 16,391,369
-------------
INDUSTRIAL PRODUCTS & SERVICES (4.8%)
BUILDING MATERIALS (0.1%)
Owens Corning.................................... 4,000 172,500
USG Corp.+....................................... 3,000 109,500
-------------
282,000
-------------
BUSINESS & PUBLIC SERVICES (0.0%)*
American Residential Services, Inc.+............. 2,400 55,800
Comfort Systems USA, Inc.+....................... 400 6,250
Service Experts, Inc.+........................... 700 17,150
-------------
79,200
-------------
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
CAPITAL GOODS (0.5%)
ABC Rail Products Corp.+......................... 800 $ 13,850
Applied Power, Inc. - Class A.................... 2,400 123,900
Cincinnati Milacron, Inc......................... 2,100 54,469
Collins & Aikman Corp.+.......................... 4,700 47,000
Eastman Kodak Co................................. 4,700 360,725
Eaton Corp....................................... 2,500 218,281
Foster Wheeler Corp.............................. 2,100 85,050
Greenfield Industries, Inc....................... 2,400 65,400
IDEX Corp........................................ 3,000 99,000
MagneTek, Inc.+.................................. 7,200 119,700
Modine Manufacturing Co.......................... 6,600 197,175
Perceptron, Inc.+................................ 1,200 32,175
Shaw Group, Inc.+................................ 1,400 22,750
Wabash National Corp............................. 5,500 153,313
-------------
1,592,788
-------------
COMMERCIAL SERVICES (0.2%)
ADT Ltd.+........................................ 3,900 128,700
DeVry, Inc.+..................................... 3,300 89,100
Equity Corp. International+...................... 700 16,931
Pinkertons, Inc.+................................ 1,200 36,900
Robert Half International, Inc.+................. 1,000 47,063
Service Corp. International...................... 12,000 394,500
-------------
713,194
-------------
DIVERSIFIED MANUFACTURING (2.9%)
Aeroquip-Vickers Inc............................. 1,500 70,875
AlliedSignal, Inc................................ 22,200 1,864,800
Brady (W.H.) Co. - Class A....................... 1,600 46,350
Cooper Industries, Inc........................... 7,000 348,250
General Electric Co.............................. 43,800 2,863,425
General Motors Corp. - Class H................... 14,800 854,700
Harnischfeger Industries, Inc.................... 1,600 66,400
Hexcel Corp.+.................................... 1,000 17,250
Intermet Corp.................................... 11,200 180,250
ITT Industries, Inc.............................. 6,800 175,100
Johnson Controls, Inc............................ 4,800 197,100
Mueller Industries, Inc.+........................ 2,200 96,250
Raychem Corp..................................... 2,600 193,375
Tyco International Ltd........................... 9,100 633,019
Xerox Corp....................................... 18,100 1,427,638
-------------
9,034,782
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
31
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
ELECTRICAL EQUIPMENT (0.3%)
Anixter International, Inc.+..................... 2,400 $ 41,250
Bolder Technologies Corp.+....................... 1,200 16,500
Emerson Electric Co.............................. 9,700 534,106
Encore Wire Corp.+............................... 2,300 69,575
Grainger (W.W.), Inc............................. 3,300 258,019
-------------
919,450
-------------
MACHINERY (0.2%)
Caterpillar, Inc................................. 6,100 654,988
-------------
PACKAGING & CONTAINERS (0.1%)
Kimberly-Clark Corp.............................. 5,100 253,725
-------------
POLLUTION CONTROL (0.5%)
American Disposal Services, Inc.+................ 3,500 79,188
Dames & Moore, Inc............................... 2,400 29,700
Sevenson Environmental Services, Inc............. 1,400 29,225
Tetra Technologies, Inc.+........................ 2,400 56,850
Waste Management, Inc............................ 39,500 1,268,938
Wheelabrator Technologies, Inc................... 5,000 77,188
-------------
1,541,089
-------------
TOTAL INDUSTRIAL PRODUCTS & SERVICES........... 15,071,216
-------------
TECHNOLOGY (7.3%)
AEROSPACE (0.9%)
Boeing Co........................................ 32,900 1,745,756
Coltec Industries, Inc.+......................... 4,400 85,800
DeCrane Aircraft Holdings, Inc.+................. 900 13,275
McDonnell Douglas Corp........................... 9,600 657,600
Orbital Sciences Corp.+.......................... 5,200 82,875
Rohr Industries, Inc.+........................... 3,300 72,394
-------------
2,657,700
-------------
COMPUTER PERIPHERALS (0.1%)
Gateway 2000, Inc.+.............................. 5,600 181,650
In Focus Systems, Inc.+.......................... 1,600 41,300
Pinnacle Systems, Inc.+.......................... 2,100 35,831
Quantum Corp.+................................... 5,400 109,856
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
COMPUTER PERIPHERALS (CONTINUED)
Raster Graphics, Inc.+........................... 2,300 $ 16,388
Read-Rite Corp.+................................. 1,700 35,434
-------------
420,459
-------------
COMPUTER SOFTWARE (1.4%)
Aspen Technology, Inc.+.......................... 2,200 82,706
Autodesk, Inc.................................... 1,700 65,184
Avid Technology, Inc.+........................... 2,300 60,806
Ciber, Inc.+..................................... 100 3,419
Computer Associates International, Inc........... 12,800 712,800
Computer Horizons Corp.+......................... 250 8,547
Edify Corp.+..................................... 3,400 49,938
MathSoft, Inc.+.................................. 2,000 5,938
Metromail Corp.+................................. 1,300 32,175
Microsoft Corp.+................................. 13,000 1,644,094
Network General Corp.+........................... 2,300 34,141
Oracle Corp.+.................................... 26,400 1,329,075
Pure Atria Corp.+................................ 300 4,256
Red Brick Systems, Inc.+......................... 600 4,359
Transaction Systems Architects, Inc. - Class
A+............................................. 2,500 86,094
Tripos, Inc.+.................................... 1,800 27,563
Viasoft, Inc.+................................... 200 10,175
Visigenic Software, Inc.+........................ 3,700 32,375
-------------
4,193,645
-------------
COMPUTER SYSTEMS (1.7%)
Compaq Computer Corp.+........................... 9,100 903,175
EMC Corp./ Mass.+................................ 10,800 421,200
International Business Machines Corp............. 34,800 3,138,525
International Network Services+.................. 2,900 75,309
Quickturn Design System, Inc.+................... 2,300 27,169
Sapient Corp.+................................... 700 34,300
Silicon Graphics, Inc.+.......................... 6,400 96,000
Sun Microsystems, Inc.+.......................... 15,400 573,169
-------------
5,268,847
-------------
ELECTRONICS (1.0%)
Adept Technology, Inc.+.......................... 3,000 26,438
Bay Networks, Inc.+.............................. 7,200 191,250
Cabletron Systems, Inc.+......................... 6,900 195,356
Cisco Systems, Inc.+............................. 30,600 2,054,981
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
32
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
ELECTRONICS (CONTINUED)
Flextronics International, Ltd.+................. 500 $ 13,406
Harris Corp...................................... 1,500 126,000
Integrated Device Technology, Inc.+.............. 4,800 50,550
Itron, Inc.+..................................... 2,100 53,944
Nimbus CD International, Inc.+................... 2,800 30,800
Perkin-Elmer Corp................................ 3,900 310,294
Rambus, Inc.+.................................... 100 4,631
Sensormatic Electronics Corp..................... 3,300 42,488
Sipex Corp.+..................................... 200 7,125
Symbol Technologies, Inc......................... 1,700 57,163
Uniphase Corp.+.................................. 600 34,800
-------------
3,199,226
-------------
INFORMATION PROCESSING (0.4%)
Checkfree Corp.+................................. 3,200 56,300
Electronic Data System Corp...................... 9,200 377,200
First Data Corp.................................. 19,400 852,388
Remedy Corp.+.................................... 500 19,922
-------------
1,305,810
-------------
SEMICONDUCTORS (1.5%)
Actel Corp.+..................................... 3,100 52,700
Advanced Technology Materials, Inc.+............. 3,700 108,688
Credence Systems Corp.+.......................... 1,000 29,969
Intel Corp....................................... 25,600 3,624,800
Micrel, Inc.+.................................... 700 35,525
National Semiconductor Corp.+.................... 5,600 171,500
Oak Technology, Inc.+............................ 2,900 28,366
Ontrack Systems, Inc.+........................... 100 2,988
SDL, Inc.+....................................... 4,400 84,150
Silicon Valley Group, Inc.+...................... 700 18,419
Texas Instruments, Inc........................... 4,100 344,656
Vitesse Semiconductor Corp.+..................... 700 22,859
-------------
4,524,620
-------------
TELECOMMUNICATION EQUIPMENT (0.1%)
Digital Microwave Corp.+......................... 1,300 38,513
General Instrument Corp.+........................ 5,600 140,000
P-COM, Inc.+..................................... 1,800 59,175
Proxim Inc.+..................................... 1,600 38,700
-------------
276,388
-------------
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
TELECOMMUNICATION SERVICES (0.2%)
360 Communications Co.+.......................... 6,300 $ 107,888
Airtouch Communications, Inc.+................... 300 8,213
Aspect Telecommunications Corp.+................. 1,700 37,613
Glenayre Technologies, Inc.+..................... 2,800 45,938
ICG Communications, Inc.+........................ 2,200 42,213
Natural Microsystems Corp.+...................... 1,300 46,759
Omnipoint Corp.+................................. 3,400 56,419
Paging Network, Inc.+............................ 5,100 44,864
Premiere Technologies, Inc.+..................... 3,700 96,431
-------------
486,338
-------------
TELECOMMUNICATIONS (0.0%)*
Aware, Inc....................................... 400 5,875
Iridium World Communications Ltd.+............... 700 12,688
Qwest Communications International, Inc.+........ 500 13,594
-------------
32,157
-------------
TOTAL TECHNOLOGY............................... 22,365,190
-------------
TRANSPORTATION (0.7%)
AIRLINES (0.1%)
AMR Corp.+....................................... 2,200 203,500
ASA Holdings, Inc................................ 1,300 37,172
Southwest Airlines Co............................ 4,200 108,675
-------------
349,347
-------------
RAILROADS (0.5%)
Burlington Northern Santa Fe..................... 4,300 386,463
CSX Corp......................................... 6,100 338,550
Genesee & Wyoming Inc. - Class A+................ 2,400 64,800
Norfolk Southern Corp............................ 400 40,300
Union Pacific Corp............................... 8,600 606,300
-------------
1,436,413
-------------
TRUCK & FREIGHT CARRIERS (0.1%)
Allied Holdings, Inc.+........................... 800 8,750
American Freightways Corp.+...................... 2,400 37,650
CNF Transportation, Inc.......................... 900 29,025
Consolidated Freightways Corp.+.................. 1,000 16,406
Rollins Truck Leasing Corp....................... 5,600 83,300
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
33
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
TRUCK & FREIGHT CARRIERS (CONTINUED)
Ryder System, Inc................................ 1,700 $ 56,100
Werner Enterprises, Inc.......................... 3,800 74,100
-------------
305,331
-------------
TOTAL TRANSPORTATION........................... 2,091,091
-------------
UTILITIES (3.8%)
ELECTRIC (1.2%)
American Electric Power Co....................... 5,500 231,000
Baltimore Gas & Electric Co...................... 4,600 122,763
Calpine Corp.+................................... 1,600 30,400
Central & South West Corp........................ 4,300 91,375
Central Hudson Gas & Electric Corp............... 4,100 141,194
Central Louisiana Electric Co.................... 4,300 120,938
CMS Energy Corp.................................. 1,900 66,975
Consolidated Edison Co. of New York, Inc......... 7,700 226,669
Dominion Resources, Inc.......................... 5,900 216,088
DTE Energy Co.................................... 4,700 129,838
Duke Power Co.................................... 12,501 599,257
Entergy Corp..................................... 7,600 208,050
Houston Industries, Inc.......................... 900 19,294
Illinova Corp.................................... 2,200 48,400
Kansas City Power & Light Co..................... 1,200 34,275
New England Electric System...................... 2,000 74,000
Northeast Utilities.............................. 3,900 37,294
Northern States Power Co......................... 4,300 222,525
Otter Tail Power Company......................... 600 19,575
Pinnacle West Capital Corp....................... 2,900 87,181
Potomac Electric Power Co........................ 3,900 90,188
Saint Joseph Light & Power Co.................... 900 14,738
Southern Co...................................... 22,000 481,250
Texas Utilities Co............................... 100 3,444
Unicom Corp...................................... 7,000 155,750
Union Electric Co................................ 3,300 124,369
Wisconsin Energy Corp............................ 3,400 84,575
-------------
3,681,405
-------------
NATURAL GAS (0.0%)*
Energen Corporation.............................. 300 10,106
United Cities Gas Co............................. 1,200 28,500
Wicor, Inc....................................... 1,600 62,300
-------------
100,906
-------------
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
TELEPHONE (2.6%)
AT & T Corp...................................... 700 $ 24,544
Bell Atlantic Corp............................... 13,100 993,963
GTE Corp......................................... 30,800 1,351,350
MCI Communications Corp.......................... 26,500 1,014,453
NYNEX Corp....................................... 10,600 610,825
SBC Communications, Inc.......................... 30,700 1,899,563
Sprint Corp...................................... 17,200 905,150
WorldCom, Inc.+.................................. 35,400 1,131,694
-------------
7,931,542
-------------
WATER (0.0%)*
E'Town Corp...................................... 2,400 74,100
SJW Corp......................................... 300 15,750
Southern California Water Co..................... 1,800 44,100
-------------
133,950
-------------
TOTAL UTILITIES................................ 11,847,803
-------------
TOTAL UNITED STATES COMMON STOCK (COST
$98,982,878).................................. 141,401,411
-------------
TOTAL COMMON STOCK (COST $128,304,704)......... 176,074,928
-------------
CONVERTIBLE PREFERRED STOCKS (0.6%)
INDUSTRIAL PRODUCTS & SERVICES (0.6%)
Home Ownership Funding, (144A) (Industrial)...... 2,000 1,931,820
-------------
(COST $2,002,080)
PREFERRED STOCK (0.3%)
AUSTRALIA (0.0%)*
News Corporation Ltd. (Broadcasting &
Publishing).................................... 32,200 125,919
-------------
GERMANY (0.3%)
Jungheinrich AG (Machinery)...................... 760 125,174
MAN AG (Capital Goods)........................... 341 86,496
RWE AG (Utilities)............................... 7,570 263,696
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
34
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
GERMANY (CONTINUED)
SAP AG (Computer Software)....................... 600 $ 124,646
Volkswagen AG (Automotive)....................... 260 146,224
-------------
746,236
-------------
TOTAL PREFERRED STOCK (COST $716,906).......... 872,155
-------------
RIGHTS (0.0%)*
MALAYSIA (0.0%)*
Commerce Asset-Holding Berhad, Expiring 7/21/97
(Banking)...................................... 131 5
-------------
(COST $37)
WARRANTS (0.1%)
GERMANY (0.1%)
Muenchener Rueckversicherungs-Gesellschaft AG,
Expiring 03/13/98 (Insurance)+................. 40 14,117
Volkswagen AG, Expiring 10/27/98 (Automotive)+... 324 135,919
-------------
150,036
-------------
JAPAN (0.0%)*
Canon Sales Co. Inc., Expiring 11/11/97
(Merchandising)+............................... 130 16,319
Shin-Etsu Chemical Co. Ltd., Expiring 8/1/00
(Chemicals)+................................... 24 66,300
-------------
82,619
-------------
MALAYSIA (0.0%)*
Commerce Asset-Holding Berhad, Expiring 07/21/97
(Banking)...................................... 82 13
-------------
TOTAL WARRANTS (COST $112,986)................. 232,668
-------------
TOTAL EQUITY SECURITIES (COST $131,136,713).... 179,111,576
-------------
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------- ------------ -------------
FIXED INCOME SECURITIES (37.2%)
CONVERTIBLE BONDS (0.2%)
(IN JPY)
------------
JAPAN (0.2%)
BTM Cayman Finance Ltd., 4.25% due 03/31/49
(Financial Services)........................... $ 30,000,000 $ 352,617
NEC Corp., 1.90% due 03/30/01 (Computer
Systems)....................................... 8,000,000 117,522
STB Cayman Capital, 0.50% due 10/01/07 (Financial
Services)...................................... 15,000,000 147,798
Yamanouchi Pharmaceutical Co. Ltd., 1.25% due
03/31/14 (Commercial Services)................. 10,000,000 137,857
-------------
755,794
-------------
TOTAL CONVERTIBLE BONDS (COST $679,574)........ 755,794
-------------
COLLATERIZED OBLIGATIONS (4.0%)
(IN USD)
------------
FINANCE (4.0%)
Aegis Auto Receivables Trust, Series 1996-3,
Class A, Sequential Payer, Callable, (144A),
8.80% due 03/20/02............................. 1,134,525 1,137,006
American Southwest Financial Corp., Series 60,
Class D, 8.90% due 03/01/18.................... 1,984,134 2,053,717
Caterpillar Financial Asset Trust, Series 1996-A,
6.30% due 05/25/02............................. 500,000 501,960
Green Tree Financial Corp., Series 1992-1, Class
A3, 6.70% due 10/15/17......................... 1,000,000 1,002,760
Green Tree Financial Corp., Series 1994-1, 7.20%
due 04/15/19................................... 3,000,000 3,050,130
Merrill Lynch Mortgage Investors, Inc., Series
1995-C2, Class E, 7.98% due 06/15/21........... 296,793 293,640
Merrill Lynch Mortgage Investors, Inc., Series
1997-C1, Class F, 7.12% due 06/18/29........... 1,000,000 884,844
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
35
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
FINANCE (CONTINUED)
Morgan Stanley Capital, Series 1997-HF1, Class F,
6.86% due 07/15/29............................. $ 1,000,000 $ 895,800
Premier Auto Trust, Series 93-6, 4.65% due
11/02/99....................................... 625,775 622,220
Resolution Trust Corp. Mortgage Pass Thru, Series
1993-C1, 6.73% due 05/25/24.................... 5,719 5,717
World Omni Automobile Lease Securitization Trust,
Series 1996-A, Class A1, Sequential Payer,
Callable, 6.30% due 06/25/02................... 776,339 779,157
World Omni Automobile Lease Securitization Trust,
Series 1997-A, Class A2, Sequential Payer,
Callable, 6.75% due 06/25/03................... 1,200,000 1,208,625
-------------
12,435,576
-------------
TOTAL COLLATERIZED OBLIGATIONS (COST
$12,402,674).................................. 12,435,576
-------------
CORPORATE OBLIGATIONS (10.1%)
BASIC INDUSTRIES (0.2%)
FOREST PRODUCTS & PAPER (0.1%)
Buckeye Cellulose Corp., 8.50% due 12/15/05...... 200,000 202,250
-------------
METALS & MINING (0.1%)
Ryerson Tull, Inc., 9.13% due 07/15/06........... 200,000 211,000
-------------
413,250
-------------
CONSUMER GOODS & SERVICES (0.7%)
BROADCASTING & PUBLISHING (0.2%)
Capstar Radio Broadcasting, (144A), 9.25% due
07/01/07....................................... 250,000 243,750
Grupo Televisa SA, (144A), 11.38% due 05/15/03... 200,000 219,250
Jacor Communications Co., (144A), 8.75% due
06/15/07....................................... 300,000 296,250
-------------
759,250
-------------
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------- ------------ -------------
ENTERTAINMENT, LEISURE & MEDIA (0.2%)
News America Holdings, Inc., 7.75% due
12/01/45....................................... $ 400,000 $ 375,196
Outdoor Systems Inc., (144A), 8.88% due
06/15/07....................................... 300,000 291,750
-------------
666,946
-------------
FOOD, BEVERAGES & TOBACCO (0.1%)
Cott Corp., 8.50% due 05/01/07................... 250,000 249,375
-------------
RETAIL (0.1%)
Federated Department Stores, Inc., 8.13% due
10/15/02....................................... 200,000 209,172
Proffitt's Inc., (144A), 8.13% due 05/15/04...... 250,000 249,375
-------------
458,547
-------------
TEXTILES & APPAREL (0.1%)
WestPoint Stevens Inc., 8.75% due 12/15/01....... 350,000 362,687
-------------
2,496,805
-------------
FINANCE (5.3%)
BANKING (3.3%)
Abbey National First Capital, 8.20% due
10/15/04....................................... 1,000,000 1,064,830
Chase Manhattan Corp. - New Shares, 10.13% due
11/01/00....................................... 800,000 880,376
First Nationwide Holdings, Inc., 10.63% due
10/01/03....................................... 250,000 275,625
First Union Corp., 6.55% due 10/15/35............ 2,800,000 2,738,456
Midland Bank PLC, 7.63% due 06/15/06............. 560,000 575,148
NationsBank Corp., 6.50% due 08/15/03............ 2,000,000 1,953,480
St. George Bank Ltd., (144A), 7.15% due
06/18/07....................................... 2,250,000 2,222,212
Swiss Bank Corp. - New York, 7.75% due
09/01/26....................................... 375,000 382,297
-------------
10,092,424
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
36
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
FINANCIAL SERVICES (1.5%)
Associates Corp. North America, 5.96% due
05/15/37....................................... $ 610,000 $ 611,433
CANTV Finance Ltd., 9.25% due 02/01/04........... 210,000 213,413
Ford Motor Credit, 8.63% due 01/24/00............ 1,140,000 1,192,725
Guangdong International Trust & Investment Corp.,
(144A), 8.75% due 10/24/16..................... 500,000 523,975
Indah Kiat Finance Co. Mauritius, (144A), 10.00%
due 07/01/07................................... 500,000 498,125
Nationwide Financial Services, Inc., 8.00% due
03/01/27....................................... 1,000,000 1,025,610
Sampoerna Intl. (144A), 8.38% due 06/15/06....... 200,000 201,912
Sun World International, Inc., (144A), 11.25% due
04/15/04....................................... 100,000 104,250
Voto-Votorantim Overseas Trading, (144A), 8.50%
due 06/27/05................................... 250,000 248,750
-------------
4,620,193
-------------
INSURANCE (0.5%)
Metropolitan Life Insurance Co. (144A), 7.00% due
11/01/05....................................... 1,500,000 1,471,980
-------------
16,184,597
-------------
HEALTHCARE (0.2%)
HEALTH SERVICES (0.2%)
Tenet Healthcare Corp., 10.13% due 03/01/05...... 500,000 546,250
-------------
INDUSTRIAL PRODUCTS & SERVICES (0.3%)
BUILDING MATERIALS (0.2%)
Johns Manville International Group Inc., 10.88%
due 12/15/04................................... 250,000 278,125
USG Corp., Series B, 9.25% due 09/15/01.......... 250,000 263,125
-------------
541,250
-------------
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
DIVERSIFIED MANUFACTURING (0.1%)
Copamex Industrias SA, (144A), 11.38% due
04/30/04....................................... $ 120,000 $ 129,600
Polymer Group Inc., (144A), 9.00% due 07/01/07... 250,000 245,978
-------------
375,578
-------------
916,828
-------------
TECHNOLOGY (1.4%)
ELECTRONICS (1.0%)
Sensormatic Electronics Corp., 7.74% due
03/29/06....................................... 3,000,000 2,988,750
-------------
TELECOMMUNICATION SERVICES (0.1%)
Paging Network Inc., 10.00% due 10/15/08......... 200,000 192,500
-------------
TELECOMMUNICATIONS (0.3%)
Telecommunications, Inc., 8.25% due 01/15/03..... 1,050,000 1,074,843
-------------
4,256,093
-------------
TRANSPORTATION (0.5%)
RAILROADS (0.4%)
CSX Corp., 7.95% due 05/01/27.................... 1,100,000 1,125,102
-------------
TRANSPORT & SERVICES (0.1%)
Teekay Shipping Corp., 8.32% due 02/01/08........ 500,000 505,000
-------------
1,630,102
-------------
UTILITIES (1.5%)
ELECTRIC (0.6%)
Waterford 3 Funding, 8.09% due 01/02/17(b)....... 2,000,000 2,000,000
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
37
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
TELEPHONE (0.2%)
MFS Communications Company, Inc., 9.38% due
01/15/04....................................... $ 250,000 $ 231,563
Philippine Long Distance Telephone Company,
10.63% due 06/02/04............................ 150,000 170,250
Philippine Long Distance Telephone Company,
Series E, 7.85% due 03/06/07................... 120,000 115,595
-------------
517,408
-------------
WATER (0.7%)
Hydro Quebec, 8.88% due 03/01/26................. 1,800,000 2,036,034
-------------
4,553,442
-------------
TOTAL CORPORATE OBLIGATIONS (COST
$30,949,574).................................. 30,997,367
-------------
GOVERNMENT OBLIGATIONS (0.8%)
(IN USD)
------------
ARGENTINA (0.1%)
Republic of Argentina Bonos del Tesoro, Series
BT02, 8.75% due 05/09/02....................... 500,000 500,000
-------------
(IN CAD)
------------
CANADA (0.6%)
Government of Canada, Series A-76, 9.00% due
06/01/25....................................... 2,000,000 1,824,829
-------------
(IN ITL)
------------
ITALY (0.0%)*
Republic of Italy, 6.50% due 06/28/01............ 10,000,000 6,531
-------------
(IN USD)
------------
POLAND (0.1%)
Republic of Poland, 4.00% due 10/27/14........... 250,000 213,450
-------------
TOTAL GOVERNMENT OBLIGATIONS (COST
$2,506,180)................................... 2,544,810
-------------
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS
(10.5%)
FEDERAL HOME LOAN MORTGAGE CORP. (1.0%)
Federal Home Loan, 8.50% due 09/01/01-07/01/02... $ 687,508 $ 702,947
Federal Home Loan PC D76007, 8.00% due
11/01/26....................................... 2,247,748 2,300,255
-------------
3,003,202
-------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (3.7%)
FNMA, 8.00% due 12/01/26......................... 4,227,281 4,320,957
FNMA REMIC, 6.50% due 01/25/23................... 7,400,000 7,224,546
-------------
11,545,503
-------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (5.8%)
GNMA, 8.00% due 06/15/31......................... 2,131,483 2,169,423
GNMA, 9.00% due 05/15/16-01/15/17................ 2,971,670 3,127,709
GNMA, 7.00% due 05/15/23-04/15/24................ 5,687,382 5,599,974
GNMA, 7.50% due 07/15/22-06/15/27................ 5,491,289 5,508,326
GNMA, 12.00% due 05/15/16........................ 1,142,808 1,295,544
-------------
17,700,976
-------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (COST
$31,932,324).................................. 32,249,681
-------------
U.S. TREASURY OBLIGATIONS (11.6%)
U.S. TREASURY BONDS (5.8%)
United States Treasury Bonds, 11.13% due
08/15/03....................................... 405,000 499,138
United States Treasury Bonds, 12.00% due
08/15/13....................................... 1,730,000 2,432,553
United States Treasury Bonds, 8.50% due
02/15/20....................................... 11,787,000 13,952,390
United States Treasury Bonds, 6.50% due
11/15/26....................................... 1,099,000 1,052,479
-------------
17,936,560
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
38
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
U.S. TREASURY NOTES (5.8%)
United States Treasury Notes, 6.38% due
04/30/99....................................... $ 4,344,000 $ 4,365,329
United States Treasury Notes, 7.25% due
08/15/04(a).................................... 950,000 989,397
United States Treasury Notes, 7.75% due
11/30/99....................................... 3,600,000 3,722,724
United States Treasury Notes, 5.88% due
11/15/05....................................... 1,760,000 1,683,123
United States Treasury Notes, 6.38% due
03/31/01....................................... 470,000 470,480
United States Treasury Notes, 6.25% due
04/30/01....................................... 2,500,000 2,492,175
United States Treasury Notes, 6.63% due
06/30/01(a).................................... 3,615,000 3,648,258
United States Treasury Notes, 6.38% due
09/30/01....................................... 400,000 399,916
-------------
17,771,402
-------------
TOTAL U.S. TREASURY OBLIGATIONS (COST
$35,070,170).................................. 35,707,962
-------------
TOTAL FIXED INCOME SECURITIES (COST
$113,540,496)................................. 114,691,190
-------------
SHORT-TERM INVESTMENTS (3.3%)
OTHER INVESTMENT COMPANIES (0.0%)*
Seven Seas Money Market Fund, 5.12%.............. 3,280 3,280
-------------
REPURCHASE AGREEMENT (0.3%)
State Street Bank and Trust Company Repurchase
Agreement, 5.00%, dated 06/30/97 due 07/01/97,
proceeds $903,125 (collateralized by 660,000
U.S. Treasury Bond, 12.75% due 11/15/10, valued
at $928,022) (cost $903,000)(a)................ 903,000 903,000
-------------
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS (3.0%)
Federal Home Loan Bank Discount Note, 6.00% due
07/01/97....................................... $ 9,165,000 $ 9,165,000
-------------
U.S. TREASURY OBLIGATIONS (0.0%)*
United States Treasury Bills, 5.30% due
11/13/97(a).................................... 90,000 88,248
-------------
TOTAL SHORT-TERM INVESTMENTS (COST
$10,159,528).................................. 10,159,528
-------------
TOTAL INVESTMENTS (COST $254,836,737) (98.8%)..................
303,962,294
OTHER ASSETS IN EXCESS OF LIABILITIES (1.2%)...................
3,676,041
-------------
NET ASSETS (100.0%)............................................ $ 307,638,335
-------------
-------------
</TABLE>
- ------------------------------
+ Non-Income Producing Securities
* Less than 0.1%
(a) Security is fully or partially segregated as collateral for futures
contracts and/or delayed delivery securities. Total market value of collateral
is $6,577,163.
(b) Delayed delivery securities.
144A - Securities restricted for resale to Qualified Institutional Buyers.
ADR - Securities whose value is determined or significantly influenced by
trading on exchanges not located in the US or Canada. ADR after the name of a
foreign holding stands for American Depository Receipt, representing ownership
of foreign securities on deposit with a domestic custodian bank.
ARS - American Registered Share
Note: Based on the cost of investments of $255,498,300 for Federal Income Tax
purposes at June 30, 1997, the aggregate gross unrealized appreciation was
$51,391,940, and the aggregate gross unrealized depreciation was $2,927,946,
resulting in net unrealized appreciation of $48,463,994.
The Accompanying Notes are an Integral Part of the Financial Statements.
39
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY DIVERSIFICATION
PERCENT OF
PORTFOLIO
-----------
<S> <C>
U.S. Government Agency/Treasury Obligations..................................... 22.4%
Banking......................................................................... 8.20%
Financial Services.............................................................. 7.90%
Food & Beverages................................................................ 4.80%
Pharmaceuticals................................................................. 4.10%
Oil-Production.................................................................. 3.10%
Diversified Manufacturing....................................................... 3.10%
Insurance....................................................................... 3.10%
Retail.......................................................................... 3.00%
Telephone....................................................................... 2.80%
Electronics..................................................................... 2.50%
Electric........................................................................ 2.10%
Computer Systems................................................................ 1.80%
Health Services................................................................. 1.70%
Chemicals....................................................................... 1.70%
Oil-Services.................................................................... 1.60%
Automotive...................................................................... 1.50%
Semi-Conductors................................................................. 1.50%
Entertainment................................................................... 1.50%
Computer Software............................................................... 1.40%
Metals & Mining................................................................. 1.20%
Household Products.............................................................. 1.20%
Telecommunications.............................................................. 1.00%
Railroads....................................................................... 1.00%
Broadcasting & Publishing....................................................... 0.90%
Aerospace....................................................................... 0.90%
Foreign Government Obligations.................................................. 0.80%
Water........................................................................... 0.80%
Electrical Equipment............................................................ 0.80%
Forest Products & Paper......................................................... 0.70%
Industrial...................................................................... 0.60%
Capital Goods................................................................... 0.60%
Pollution Control............................................................... 0.50%
Building Materials.............................................................. 0.50%
Machinery....................................................................... 0.50%
Miscellaneous................................................................... 4.90%
Short Term Investments.......................................................... 3.30%
-----------
100.00%
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
40
<PAGE>
THE DIVERSIFIED PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $254,836,737 ) $303,962,294
Cash 452,799
Foreign Currency at Value (Cost $2,009,891 ) 1,998,611
Receivable for Investments Sold 5,555,893
Dividends and Interest Receivable 1,868,942
Unrealized Appreciation of Forward Foreign
Currency Contracts 223,721
Foreign Tax Reclaim Receivable 85,010
Receivable for Expense Reimbursement 56,059
Variation Margin Receivable 4,777
Deferred Organization Expenses 1,018
Prepaid Expenses and Other Assets 317
------------
Total Assets 314,209,441
------------
LIABILITIES
Payable for Investments Purchased 5,866,770
Unrealized Depreciation of Forward Foreign
Currency Contracts 321,240
Custody Fee Payable 216,961
Advisory Fee Payable 137,642
Administrative Services Fee Payable 7,770
Administration Fee Payable 759
Accrued Trustees' Fees and Expenses 646
Fund Services Fee Payable 262
Accrued Expenses 19,056
------------
Total Liabilities 6,571,106
------------
NET ASSETS
Applicable to Investors' Beneficial Interests $307,638,335
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
41
<PAGE>
THE DIVERSIFIED PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest Income (Net of Foreign Withholding Tax
of $49 ) $ 8,120,749
Dividend Income (Net of Foreign Withholding Tax
of $130,303 ) 3,418,859
-----------
Investment Income 11,539,608
EXPENSES
Advisory Fee $ 1,591,589
Custodian Fees and Expenses 569,049
Administrative Services Fee 89,749
Professional Fees 46,628
Fund Services Fee 9,911
Administration Fee 9,729
Trustees' Fees and Expenses 5,908
Amortization of Organization Expenses 1,000
Registration Fees 610
Miscellaneous 2,571
-----------
Total Expenses 2,326,744
Less: Reimbursement of Expenses (433,717)
-----------
NET EXPENSES 1,893,027
-----------
NET INVESTMENT INCOME 9,646,581
NET REALIZED GAIN ON
Investment Transactions (including $301,928 net
realized gain from futures contracts) 19,799,463
Foreign Currency Transactions 642,457
-----------
Net Realized Gain 20,441,920
NET CHANGE IN UNREALIZED
APPRECIATION(DEPRECIATION) OF
Investments (including $27,568 net unrealized
depreciation from futures contracts) 27,123,692
Foreign Currency Contracts and Translations (174,071)
-----------
Net Change in Unrealized Appreciation 26,949,621
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $57,038,122
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
42
<PAGE>
THE DIVERSIFIED PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FISCAL FOR THE FISCAL
YEAR ENDED YEAR ENDED
JUNE 30, 1997 JUNE 30, 1996
-------------- --------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 9,646,581 $ 6,827,153
Net Realized Gain on Investments and Foreign
Currency Transactions 20,441,920 14,992,967
Net Change in Unrealized Appreciation of
Investments and Foreign Currency Translations 26,949,621 9,523,570
-------------- --------------
Net Increase in Net Assets Resulting from
Operations 57,038,122 31,343,690
-------------- --------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 132,528,025 99,908,688
Withdrawals (127,909,364) (72,347,617)
-------------- --------------
Net Increase from Investors' Transactions 4,618,661 27,561,071
-------------- --------------
Total Increase in Net Assets 61,656,783 58,904,761
NET ASSETS
Beginning of Fiscal Year 245,981,552 187,076,791
-------------- --------------
End of Fiscal Year $ 307,638,335 $ 245,981,552
-------------- --------------
-------------- --------------
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE FISCAL YEAR JULY 8, 1993
ENDED JUNE 30, (COMMENCEMENT OF
--------------------- OPERATIONS) TO
1997 1996 1995 JUNE 30, 1994
------- ---- ---- ----------------
<S> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Expenses 0.65% 0.65% 0.65% 0.70%(a)
Net Investment Income 3.33% 3.35% 3.71% 2.88%(a)
Decrease Reflected in Expense Ratio due to
Expense Reimbursement 0.15% 0.17% 0.32% 0.48%(a)
Portfolio Turnover 100% 144% 136% 115%(b)
Average Broker Commission Rate per share $0.0060 -- -- --
</TABLE>
- ------------------------
(a) Annualized.
(b) Not Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
43
<PAGE>
THE DIVERSIFIED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
- --------------------------------------------------------------------------------
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 on January 29, 1993. The Portfolio's investment objective
is to provide a high total return from a diversified portfolio of equity and
fixed income securities. The Portfolio may invest in international markets. The
Portfolio commenced operations on July 8, 1993. The Portfolio's 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
exist 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 average of readily available closing bid
and asked prices on such exchange. Securities listed on a foreign exchange
are valued at the last quoted sale price available before the time when
net assets are valued. Unlisted securities are valued at the average of
the quoted bid and asked prices in the over-the-counter market. Securities
or other assets for which market quotations are not readily available are
valued at fair value in accordance with procedures established by the
Portfolio's Trustees. Such procedures include the use of independent
pricing services, which use prices based upon yields or prices of
securities of comparable quality, coupon, maturity and type; indications
as to values from dealers; and general market conditions. All Portfolio
securities with a remaining maturity of less than 60 days are valued by
the amortized cost method.
Trading in securities on most foreign exchanges and over-the-counter
markets is normally completed before the close of the domestic market and
may also take place on days on which the domestic market is closed. If
events materially affecting the value of foreign securities occur between
the time when the exchange on which they are traded closes and the time
when the Portfolio's net asset value is calculated, such securities will
be valued at fair value in accordance with procedures established by and
under the general supervision of the Portfolio's Trustees.
b)The Portfolio's custodian takes possession of the collateral pledged for
investments in repurchase agreements on behalf of the Portfolio. It is the
policy of the Portfolio to value the underlying collateral daily on a
mark-to-market basis to determine that the value, including accrued
interest, is at least equal to the repurchase price plus accrued interest.
In the event of default of the obligation to repurchase, the
44
<PAGE>
THE DIVERSIFIED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
Portfolio has the right to liquidate the collateral and apply the proceeds
in satisfaction of the obligation. Under certain circumstances, in the
event of default or bankruptcy by the other party to the agreement,
realization and/or retention of the collateral or proceeds may be subject
to legal proceedings.
c)The books and records of the Portfolio are maintained in U.S. dollars. The
market value of investment securities, other assets and liabilities and
foreign currency contracts are translated at the prevailing exchange rates
at the end of the period. Purchases, sales, income and expense are
translated at the exchange rates prevailing on the respective dates of
such transactions. Translation gains and losses resulting from changes in
the exchange rates during the reporting period and gains and losses
realized upon settlement of foreign currency transactions are reported in
the Statement of Operations.
Although the net assets of the Portfolio are presented at the exchange
rates and market values prevailing at the end of the period, the Portfolio
does not isolate the portion of the results of operations arising as a
result of changes in foreign exchange rates from the fluctuations arising
from changes in the market prices of securities during the period.
d)The Portfolio may enter into forward and spot foreign currency contracts
to protect securities and related receivables and payables against
fluctuations in future foreign currency rates. A forward contract is an
agreement to buy or sell currencies of different countries on a specified
future date at a specified rate. Risks associated with such contracts
include the movement in the value of the foreign currency relative to the
U.S. dollar and the ability of the counterparty to perform.
The market value of the contract will fluctuate with changes in currency
exchange rates. Contracts are valued daily based on procedures established
by and under the general supervision of the Portfolio's Trustees, and the
change in the market value is recorded by the Portfolio as unrealized
appreciation or depreciation of forward and spot foreign currency contract
translations. At June 30, 1997, the Portfolio had open forward foreign
currency contracts as follows:
SUMMARY OF OPEN FORWARD FOREIGN CURRENCY CONTRACTS
<TABLE>
<CAPTION>
U.S. DOLLAR NET UNREALIZED
COST/ VALUE AT APPRECIATION/
PURCHASE CONTRACTS PROCEEDS 6/30/97 (DEPRECIATION)
- ------------------------------------------------- ---------- ----------- --------------
<S> <C> <C> <C>
French Franc 3,694,804, expiring 07/24/97........ $ 646,000 $ 629,762 $ (16,238)
German Mark 1,696,568, expiring 07/24/97......... 981,500 974,512 (6,988)
Japanese Yen 564,984,358, expiring 07/24/97...... 4,785,200 4,947,257 162,057
<CAPTION>
SALES CONTRACTS
- -------------------------------------------------
<S> <C> <C> <C>
Canadian Dollar 2,500,000, expiring 09/09/97..... $1,828,521 $ 1,818,344 $ 10,177
French Franc 6,042,898, expiring 07/24/97........ 1,046,933 1,029,984 16,949
German Mark 1,700,991, expiring 07/24/97......... 990,096 977,053 13,043
Japanese Yen 586,797,062, expiring 07/24/97...... 4,861,740 5,138,259 (276,519)
--------------
NET UNREALIZED DEPRECIATION ON FORWARD FOREIGN
CURRENCY CONTRACTS.............................. $ (97,519)
--------------
--------------
</TABLE>
45
<PAGE>
THE DIVERSIFIED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
e)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
liquid securities equal to the minimum "initial margin" requirements of
the exchange. Pursuant to the contract, the Portfolio agrees to receive
from, or pay to, the broker an amount of cash equal to the daily
fluctuation in the value of the contract. Such receipts or payments are
known as "variation margin" and are recorded by the Portfolio as
unrealized gains or losses. When the contract is closed, the Portfolio
records a realized gain or loss equal to the difference between the value
of the contract at the time it was opened and the value at the time when
it was closed. The Portfolio invests in futures contracts for the purpose
of hedging its existing portfolio securities, or securities the Portfolio
intends to purchase, against fluctuations in value caused by changes in
prevailing market interest rates or securities movements. The use of
futures transactions involves the risk of imperfect correlation in
movements in the price of futures contracts, interest rates and the
underlying hedged assets, and the possible inability of counterparties to
meet the terms of their contracts. Futures transactions during the fiscal
year ended June 30, 1997 are summarized as follows:
<TABLE>
<CAPTION>
NUMBER OF PRINCIPAL AMOUNT
CONTRACTS OF CONTRACTS
--------- ----------------
<S> <C> <C>
Contracts open at beginning of the fiscal year... 20 $ 2,228,508
Contracts opened................................. 371 45,611,286
Contracts closed................................. (365) (45,918,310)
--------- ----------------
Contracts open at end of the fiscal year......... 26 $ 1,921,484
--------- ----------------
--------- ----------------
</TABLE>
Summary of Open Contracts at June 30, 1997
<TABLE>
<CAPTION>
NET UNREALIZED
APPRECIATION/
CONTRACTS LONG (DEPRECIATION)
-------------- --------------
<S> <C> <C>
Australian All Ordinary Index, expiring September
1997............................................ 22 $ 15,438
Financial Times-Stock Exchange 100-Share Index,
expiring September 1997......................... 4 (30,307)
-------------- --------------
Totals........................................... 26 $ (14,869)
-------------- --------------
-------------- --------------
</TABLE>
f)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.
g)Securities transactions are recorded on a trade date basis. Dividend
income is recorded on the ex-dividend date or as of the time that the
relevant ex-dividend date and amount become 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.
46
<PAGE>
THE DIVERSIFIED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
h)The Portfolio intends to be treated as a partnership for federal income
tax purposes. As such, each investor in the Portfolio will be subject to
tax on its share of the Portfolio's ordinary income and capital gains. It
is intended that the Portfolio's assets will be managed in such a way that
an investor in the Portfolio will be able to satisfy the requirements of
Subchapter M of the Internal Revenue Code. The Portfolio earns foreign
income which may be subject to foreign withholding taxes at various rates.
2. TRANSACTIONS WITH AFFILIATES
a)The Portfolio has an Investment Advisory Agreement with Morgan Guaranty
Trust Company of New York ("Morgan"). Under the terms of the agreement,
the Portfolio pays Morgan at an annual rate of 0.55% of the Portfolio's
average daily net assets. For the fiscal year ended June 30, 1997, this
fee amounted to $1,591,589.
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, JPM Series Trust, JPM Series Trust
II and certain other investment companies subject to similar agreements
with FDI. For the period August 1, 1996 through June 30, 1997, the fee for
these services amounted to $6,791.
On November 15, 1996, The JPM Advisor Funds terminated operations and were
liquidated. Subsequent to that date, the net assets of The JPM Advisor
Funds were no longer included in the calculation of the allocation of
FDI's fees.
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
47
<PAGE>
THE DIVERSIFIED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
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.
Effective August 1, 1996, the Services Agreement was amended such that the
annual complex-wide charge is calculated daily based on the aggregate
average daily 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 June 30, 1997, the fee
for these services amounted to $84,063.
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 fiscal year ended June 30, 1997, Morgan has
agreed to reimburse the Portfolio $433,717 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 $9,911 for the fiscal year ended June 30, 1997.
e)An aggregate annual fee of $75,000 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. Prior to April 1, 1997, the
aggregate annual Trustee Fee was $65,000. The Portfolio's Chairman and
Chief Executive Officer also serves as Chairman of Group and receives
compensation and employee benefits from Group in his role as Group's
Chairman. The allocated portion of such compensation and benefits included
in the Fund Services Fee shown in the financial statements was $2,000.
48
<PAGE>
THE DIVERSIFIED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1997
- --------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the fiscal year
ended June 30, 1997 were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
------------ ------------
<S> <C> <C>
U.S. Government and Agency Obligations........... $175,984,048 $ 99,223,481
Corporate, Collateralized Obligations and other
securities....................................... 109,344,601 176,593,018
------------ ------------
$285,328,649 $275,816,499
------------ ------------
------------ ------------
</TABLE>
49
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Investors of
The Diversified Portfolio
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the supplementary data present fairly, in all material
respects, the financial position of The Diversified Portfolio (the "Portfolio")
at June 30, 1997, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then ended,
and the supplementary data for each of the three years in the period then ended
and for the period July 8, 1993 (commencement of operations) through June 30,
1994, in conformity with generally accepted accounting principles. These
financial statements and supplementary data (hereafter referred to as "financial
statements") are the responsibility of the Portfolio's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at June
30, 1997 by correspondence with the custodians and brokers and the application
of alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
New York, New York
August 20, 1997
50
