<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS
JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
EQUITIES (65.3%)
COMMON STOCK (65.0%)
FOREIGN COMMON STOCK (14.2%)
AUSTRALIA (0.2%)
AMP Ltd. (Insurance)............................. 5,387 $ 58,892
Australia & New Zealand Banking Group Ltd.
(Banking)...................................... 14,800 108,829
Brambles Industries Ltd. (Commercial Services)... 2,596 68,390
Broken Hill Proprietary Company Ltd. (Metals &
Mining)........................................ 13,700 158,696
Colonial Ltd. (Financial Services)............... 17,300 61,264
CSR Ltd. (Building Materials).................... 25,600 73,203
Foster's Brewing Group Ltd. (Food, Beverages &
Tobacco)....................................... 21,800 61,442
Lend Lease Corp. Ltd. (Financial Services)....... 9,700 133,183
National Australia Bank Ltd. (Banking)........... 12,900 213,470
News Corp. Ltd. (Broadcasting & Publishing)...... 2,000 17,064
Pioneer International Ltd. (Building
Materials)..................................... 38,145 97,209
Southcorp Ltd. (Food, Beverages & Tobacco)....... 23,800 96,114
Telstra Corp. Ltd. (Telecommunication Services).. 34,500 197,694
Woolworths Ltd. (Retail)......................... 23,900 79,495
-------------
1,424,945
-------------
AUSTRIA (0.1%)
Bank Austria AG (Banking)........................ 13,520 711,083
-------------
BELGIUM (0.0%)
Delhaize-Le Lion SA (Retail)..................... 3,830 326,054
-------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
CANADA (0.5%)
Cinar Films, Inc., Class B (Entertainment,
Leisure & Media)............................... 18,300 $ 451,781
Seagram Company Ltd. (Entertainment, Leisure &
Media)......................................... 80,100 4,035,038
Alcan Aluminum Ltd. (Metals & Mining)............ 6,100 194,819
-------------
4,681,638
-------------
DENMARK (0.1%)
Danisco A/S (Food, Beverages & Tobacco).......... 7,251 327,676
Ratin A/S (Holding Companies).................... 1,104 129,715
GN Store Nord A/S (Telecommunications-
Equipment)..................................... 4,251 143,635
-------------
601,026
-------------
FINLAND (0.2%)
MeritaNordbanken OYJ (Banking)................... 30,500 173,310
Sampo Insurance Co. Ltd., A Shares (Insurance)... 4,700 136,200
Stora Enso OYJ, A Shares (Forest Products &
Paper)......................................... 29,673 317,610
Stora Enso OYJ, R Shares (Forest Products &
Paper)......................................... 58,240 630,233
Nokia OYJ (Telecommunications-Equipment)......... 8,495 744,656
-------------
2,002,009
-------------
FRANCE (1.3%)
Alcatel (Telecommunications-Equipment)........... 1,337 188,208
Alstom SA (Railroads)+........................... 9,774 307,429
AXA (Insurance).................................. 3,143 383,444
Canal Plus (Broadcasting & Publishing)........... 658 184,641
Carrefour SA (Retail)............................ 3,738 549,323
Castorama Dubois Investissement SA (Retail)...... 379,508
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
17
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
FRANCE (CONTINUED)
Compagnie de Saint Gobain SA (Building
Materials)..................................... 2,462 $ 392,274
Compagnie Financiere de Paribas (Financial
Services)...................................... 5,812 651,521
Compagnie Generale des Establishments Michelin-B
(Automotive Supplies).......................... 3,100 126,823
Elf Aquitaine SA (Oil-Services).................. 8,828 1,295,509
France Telecom SA (Telecommunication Services)... 2,453 185,301
Groupe Danone (Food, Beverages & Tobacco)........ 2,700 696,109
Imetal SA (Building Materials)................... 807 119,842
Lagardere S.C.A. (Multi-Industry)................ 6,499 241,951
Louis Vuitton Moet Hennessy (Food, Beverages &
Tobacco)....................................... 1,750 512,362
Renault SA (Automotive).......................... 3,627 157,846
Rhodia SA (Chemicals)............................ 11,330 214,991
Rhone-Poulenc SA (Chemicals)..................... 10,800 493,513
Sanofi-Synthelabo SA (Pharmaceuticals)+.......... 6,064 257,337
SEITA (Food, Beverages & Tobacco)................ 3,339 192,831
Societe Generale, Class A (Banking).............. 2,904 511,814
Total Fina SA, B Shares (Oil-Services)........... 12,166 1,569,562
Usinor SA (Metals & Mining)...................... 9,270 138,140
Vivendi (Utilities).............................. 16,051 1,300,234
-------------
11,050,513
-------------
GERMANY (1.3%)
BASF AG (Chemicals).............................. 13,609 601,382
Bilfinger & Berger Bau AG (Construction &
Housing)....................................... 7,700 190,182
Continental AG (Automotive)...................... 4,300 101,993
DaimlerChrysler AG (Automotive).................. 9,940 861,071
Deutsche Telekom AG (Telecommunication
Services)...................................... 13,190 553,621
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
GERMANY (CONTINUED)
Dresdner Bank AG (Banking)....................... 11,130 $ 435,018
Fresenius Medical Care AG (Medical Supplies)..... 1,931 115,301
Hochtief AG (Construction & Housing)............. 4,800 220,775
Hoechst AG (Holding Companies)................... 7,926 358,833
HypoVereinsbank (Banking)........................ 13,313 864,948
Karstadt AG (Retail)............................. 1,000 480,573
Mannesmann AG (Diversified Manufacturing)........ 10,191 1,520,753
Muenchener Rueckversicherungs-Gesellschaft AG
(Insurance).................................... 3,398 629,015
Munchener Rueckversicherungs-Gesellschaft AG -
New Shares (Insurance)+........................ 3,828 698,745
RWE AG (Utilities)............................... 9,913 458,911
SAP AG (Computer Software)....................... 1,178 398,467
Schering AG (Pharmaceuticals).................... 2,333 247,332
SGL Carbon AG (Chemicals)........................ 4,700 363,523
Siemens AG (Electrical Equipment)................ 11,296 871,364
SKW Trostberg AG (Chemicals)..................... 3,700 84,327
Stinnes AG (Transport & Services)+............... 12,055 187,723
VEBA AG (Utilities).............................. 18,291 1,075,191
Volkswagen AG (Automotive)....................... 2,647 169,519
-------------
11,488,567
-------------
HONG KONG (0.2%)
Cheung Kong Holdings Ltd. (Real Estate).......... 44,000 391,307
Hongkong Electric Holdings Ltd. (Electric)....... 71,500 230,389
Hutchison Whampoa Ltd. (Multi-Industry).......... 57,000 516,104
Sun Hung Kai Properties Ltd. (Real Estate)....... 66,000 601,847
-------------
1,739,647
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
18
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
IRELAND (0.1%)
CRH PLC (Building Materials)..................... 9,800 $ 173,831
Greencore Group PLC (Food, Beverages &
Tobacco)....................................... 28,100 86,936
Irish Life PLC (Financial Services).............. 8,944 94,543
Jefferson Smurfit Group PLC (Forest Products &
Paper)......................................... 74,072 173,784
-------------
529,094
-------------
ITALY (0.2%)
Assicurazioni Generali SPA (Insurance)........... 20,841 722,156
Banca Fideuram SPA (Financial Services).......... 51,365 299,288
ENI SPA (Oil-Services)........................... 53,306 318,294
Mediaset SPA (Broadcasting & Publishing)......... 27,852 247,592
Monte dei Paschi di Siena SPA (Banking)+......... 26,710 118,445
Telecom Italia SPA - RNC (Telecommunication
Services)...................................... 57,816 313,622
-------------
2,019,397
-------------
JAPAN (2.9%)
Alps Electric Co., Ltd. (Electronics)............ 2,000 46,845
Asahi Bank Ltd. (Banking)........................ 102,000 488,780
Bank of Tokyo - Mitsubishi Ltd. (Banking)........ 66,000 939,537
Bridgestone Corp. (Chemicals).................... 14,000 423,345
Citizen Watch Co. (Retail)....................... 34,000 294,953
Dai Nippon Printing Co., Ltd. (Business & Public
Services)...................................... 9,000 143,883
DDI Corp. (Telecommunications)................... 59 367,056
Denso Corp. (Automotive Supplies)................ 6,000 121,947
Ebara Corp. (Machinery).......................... 19,000 225,891
Fanuc Ltd. (Machinery)........................... 11,400 612,214
Fuji Heavy Industries, Ltd. (Truck & Freight
Carriers)...................................... 18,000 138,901
Fuji Photo Film (Electronics).................... 8,000 302,719
Fujitsu Ltd. (Computer Systems).................. 32,000 643,775
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
JAPAN (CONTINUED)
Hitachi Ltd. (Electrical Equipment).............. 30,000 $ 281,321
Hitachi Software Engineering Co. (Computer
Software)...................................... 3,000 148,716
Honda Motor Co. Ltd. (Automotive)................ 16,000 678,144
The Industrial Bank Japan, Ltd. (Banking)........ 17,000 134,836
Ito - Yokado Co. Ltd. (Retail)................... 13,000 869,988
Japan Tobacco, Inc. (Food, Beverages &
Tobacco)....................................... 46 509,269
Kawasaki Steel Corp. (Metals & Mining)........... 201,000 375,309
Kyocera Corp. (Electronics)...................... 5,800 340,229
Matsushita Electric Industrial Co. Ltd.
(Electronics).................................. 39,000 757,212
Minebea Co. Ltd. (Capital Goods)................. 42,000 468,455
Mitsubishi Chemical Corp. (Chemicals)............ 225,000 778,899
Mitsubishi Corp. (Wholesale & International
Trade)......................................... 55,000 372,616
Mitsubishi Estate Co. Ltd. (Real Estate)......... 26,000 253,693
Mitsui Mining & Smelting Co. Ltd. (Metals &
Mining)........................................ 6,000 30,982
Mitsui Trust & Banking Co. Ltd. (Banking)........ 88,000 140,322
NAMCO Ltd. (Entertainment, Leisure & Media)...... 12,600 338,329
Nichiei Co. Ltd. (Financial Services)............ 5,000 437,886
Nippon Telegraph & Telephone Corp.
(Telecommunications)........................... 149 1,735,762
Nippon Yusen Kabushiki Kaisha (Transport &
Services)...................................... 168,000 646,815
Nishimatsu Construction Co. Ltd. (Construction &
Housing)....................................... 100,000 573,382
Osaka Gas Co. Ltd. (Natural Gas)................. 103,000 349,755
Ricoh Co. Ltd. (Electrical Equipment)............ 56,000 770,811
Rohm Co. Ltd. (Electronics)...................... 5,000 782,824
Sanwa Bank Ltd. (Banking)........................ 14,000 137,760
Sekisui Chemical Co. Ltd. (Chemicals)............ 24,000 139,198
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
JAPAN (CONTINUED)
Shohkoh Fund & Co. Ltd. (Financial Services)..... 780 $ 559,370
Snow Brand Milk Products Co. Ltd. (Food,
Beverages & Tobacco)........................... 14,000 68,360
Softbank Corp. (Computer Software)............... 1,800 364,503
Sony Corp. (Electronics)......................... 600 64,691
Sony Music Entertainment, Inc. (Entertainment,
Leisure & Media)............................... 13,000 1,106,281
Sumitomo Bakelite Co., Ltd. (Chemicals).......... 18,000 138,603
Sumitomo Rubber Industries, Ltd. (Automotive
Supplies)...................................... 34,000 240,457
Suzuki Motor Corp. (Automotive).................. 19,000 302,182
Taiheiyo Cement Corp. (Building Materials)....... 62,000 177,749
Takashimaya Co. Ltd. (Retail).................... 7,000 66,914
Takeda Chemical Industries, Ltd. (Chemicals)..... 20,000 926,996
Takefuji Corp. (Financial Services)+............. 4,900 506,452
Tokai Bank Ltd. (Banking)........................ 27,000 153,921
Tokyo Electric Power Co., Inc. (Electric)........ 16,000 337,750
Tokyo Gas Co. (Natural Gas)...................... 90,000 221,587
Tokyo Steel Manufacturing Co. Ltd. (Metals &
Mining)........................................ 21,400 112,449
Tostem Corp. (Construction & Housing)............ 19,000 364,974
Toyota Motor Corp. Ltd. (Automotive)............. 35,000 1,107,520
Uny Co., Ltd. (Retail)........................... 7,000 105,258
West Japan Railway Co. (Railroads)............... 135 517,531
Yamanouchi Pharmaceutical Co. Ltd.
(Pharmaceuticals).............................. 19,000 726,808
York - Benimaru Co., Ltd. (Retail)............... 3,300 124,599
-------------
25,097,314
-------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
NETHERLANDS (2.2%)
ABN AMRO Holding NV (Banking).................... 39,178 $ 848,467
Aegon NV (Insurance)............................. 3,870 280,769
Akzo Nobel NV (Chemicals)........................ 5,800 244,040
Benckiser NV (Household Products)................ 3,116 166,296
Equant NV (Information Processing)+.............. 3,703 341,401
Getronics NV (Computer Systems).................. 6,713 258,225
Heineken NV (Food, Beverages & Tobacco).......... 10,060 515,099
ING Groep NV (Financial Services)................ 19,552 1,058,580
KPN NV (Telecommunication Services).............. 14,136 663,302
Laurus NV (Retail)............................... 11,169 259,161
Royal Dutch Petroleum Co. (Oil-Services)......... 10,990 643,753
Royal Dutch Petroleum Co. (ADR) (Oil-Services)... 132,600 7,989,150
TNT Post Group NV (Transport & Services)......... 5,380 128,442
United Pan-Europe Communications NV
(Telecommunication Services)+.................. 2,737 148,468
Vedior NV (Business & Public Services)........... 20,567 349,968
Vendex NV (Retail)............................... 22,482 600,493
Unilever NV (ADR) (Food, Beverages & Tobacco).... 35,800 2,497,050
New Holland NV (Machinery)....................... 8,900 152,413
Koninklijke (Royal) Philips Electronics NV
(Electronics).................................. 10,668 1,052,304
Koninklijke Ahold NV (Retail).................... 10,425 359,084
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
NETHERLANDS (CONTINUED)
STMicroelectronics NV (Semiconductors)........... 5,172 $ 344,560
Wolters Kluwer NV (Broadcasting & Publishing).... 8,220 327,214
-------------
19,228,239
-------------
NEW ZEALAND (0.0%)
Fletcher Challenge Building Division Ltd.
(Building Materials)........................... 24,700 35,995
Fletcher Challenge Energy (Gas Exploration)...... 16,600 45,039
Fletcher Challenge Paper Division Ltd. (Forest
Products & Paper).............................. 91,500 68,368
Telecom Corp. of New Zealand Ltd.
(Telecommunications)........................... 52,700 226,207
-------------
375,609
-------------
NORWAY (0.0%)
Nycomed Amersham PLC (Medical Supplies).......... 20,340 144,691
-------------
PORTUGAL (0.1%)
Banco Pinto & Sotto Mayor SA (Banking)........... 29,900 530,979
Portugal Telecom SA (Telecommunications)+........ 4,791 194,916
-------------
725,895
-------------
SINGAPORE (0.1%)
Development Bank of Singapore Ltd. (Banking)..... 32,000 390,962
Creative Technology Ltd. (Computer
Peripherals)................................... 15,000 195,598
Singapore Press Holdings Ltd. (Broadcasting &
Publishing).................................... 8,000 136,273
Venture Manufacturing Ltd. (Manufacturing)....... 25,000 192,368
-------------
915,201
-------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
SPAIN (0.4%)
Actividades de Construccion y Servicios SA
(Construction & Housing)....................... 8,001 $ 229,054
Endesa SA (Electric)............................. 34,366 732,914
Iberdrola SA (Electric).......................... 20,400 310,731
Indra Sistemas SA (Electronics).................. 8,153 87,863
Repsol SA (Oil-Production)....................... 13,900 283,827
Telefonica SA (Telecommunications)............... 22,998 1,107,830
Banco Santander Central Hispano SA (Banking)..... 83,514 869,869
-------------
3,622,088
-------------
SWEDEN (0.3%)
Autoliv, Inc. (SDR) (Automotive Supplies)........ 19,523 594,755
Electrolux AB, Series B (Appliances & Household
Durables)...................................... 7,267 152,148
Ericsson LM, B Shares (Telecommunications-
Equipment)..................................... 39,626 1,270,102
Skandia Forsakrings AB (Insurance)............... 21,890 409,388
-------------
2,426,393
-------------
SWITZERLAND (0.8%)
Compagnie Financiere Richemont AG (Food,
Beverages & Tobacco)........................... 108 207,720
Geberit International AG (Construction &
Housing)+...................................... 790 180,147
Holderbank Financiere Glarus AG (Building
Materials)..................................... 125 147,547
Nestle SA (Food, Beverages & Tobacco)............ 505 909,889
Novartis AG (Pharmaceuticals).................... 543 792,884
Roche Holding AG (Pharmaceuticals)............... 151 1,552,165
SGS-Thomson Microelectronics NV (Electronics)+... 170 176,059
Swisscom AG (Telecommunication Services)......... 2,300 865,502
UBS AG (Banking)................................. 3,280 978,985
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
SWITZERLAND (CONTINUED)
Zurich Allied AG (Insurance)..................... 1,254 $ 713,073
Mettler-Toledo International, Inc.
(Manufacturing)................................ 9,800 243,163
ABB Ltd. (Multi-Industry)+....................... 3,850 360,061
-------------
7,127,195
-------------
UNITED KINGDOM (2.3%)
Allied Zurich PLC (Insurance).................... 19,650 247,020
Arriva PLC (Diversified Manufacturing)........... 7,900 46,573
AstraZeneca Group PLC (Pharmaceuticals).......... 14,100 545,200
Barclays PLC (Banking)........................... 18,000 523,489
Bass PLC (Food, Beverages & Tobacco)............. 12,542 181,884
BG PLC (Gas Exploration)......................... 43,000 262,312
Billiton PLC (Metals & Mining)................... 102,100 357,287
British Aerospace PLC (Aerospace)................ 33,400 217,438
British American Tobacco PLC (Food, Beverages &
Tobacco)....................................... 27,750 261,798
BP Amoco PLC (Oil-Services)...................... 97,141 1,739,481
British Sky Broadcasting Group PLC (Broadcasting
& Publishing).................................. 21,000 194,807
British Telecommunications PLC
(Telecommunications)........................... 55,400 927,413
Cable & Wireless Communications PLC
(Telecommunications)........................... 67,500 860,778
Cadbury Schweppes PLC (Food, Beverages &
Tobacco)....................................... 34,000 216,998
Carlton Communications PLC (Entertainment,
Leisure & Media)............................... 17,500 145,098
Compass Group PLC (Food, Beverages & Tobacco).... 41,600 412,789
Diageo PLC (Food, Beverages & Tobacco)........... 27,812 292,194
Glaxo Wellcome PLC (Pharmaceuticals)............. 42,600 1,183,861
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
UNITED KINGDOM (CONTINUED)
Glynwed International PLC (Metals & Mining)...... 87,000 $ 284,562
Great Universal Stores PLC (Retail).............. 28,700 320,072
Hanson PLC (Building Materials).................. 16,000 143,759
Hays PLC (Commercial Services)................... 22,000 232,000
HSBC Holdings PLC (Banking)...................... 8,800 320,985
HSBC Holdings PLC (75p) (Banking)................ 15,500 549,246
Invensys PLC (Diversified Manufacturing)......... 17,500 82,756
Kingfisher PLC (Retail).......................... 29,900 348,918
Lloyds TSB Group PLC (Banking)................... 117,800 1,599,703
MEPC PLC (Real Estate)........................... 30,643 249,483
MFI Furniture Group PLC (Household Products)..... 130,117 82,554
National Power PLC (Electric).................... 70,584 512,916
Northern Foods PLC (Food, Beverages & Tobacco)... 45,700 94,008
Nycomed Amersham PLC (Medical Supplies).......... 15,045 105,237
Ocean Group PLC (Transport & Services)........... 11,900 196,021
Pearson PLC (Broadcasting & Publishing).......... 15,300 310,873
Pilkington PLC (Building Materials).............. 192,200 261,792
Prudential Corp. PLC (Insurance)................. 35,000 515,844
Racal Electronic PLC (Telecommunications-
Equipment)..................................... 47,000 286,343
Rentokil Initial PLC (Pollution Control)......... 14,000 54,288
Reuters Group PLC (Broadcasting & Publishing).... 14,000 184,159
RMC Group PLC (Building Materials)............... 13,000 209,017
Royal & Sun Alliance Insurance Group PLC
(Insurance).................................... 52,727 472,501
Royal Bank of Scotland Group PLC (Banking)....... 12,200 250,001
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
UNITED KINGDOM (CONTINUED)
Sainsbury (J.) PLC (Retail)...................... 40,200 $ 253,469
Shell Transport & Trading Co. (Oil-Services)..... 19,800 148,563
Smith & Nephew PLC (Medical Supplies)............ 5,000 15,132
SmithKline Beecham PLC (Pharmaceuticals)......... 52,300 680,134
Tate & Lyle PLC (Food, Beverages & Tobacco)...... 15,000 93,396
Tesco PLC (Retail)............................... 35,900 93,089
TI Group PLC (Diversified Manufacturing)......... 12,700 85,281
Tomkins PLC (Multi-Industry)..................... 75,500 327,279
Unilever PLC (Food, Beverages & Tobacco)......... 29,017 257,513
Vickers PLC (Capital Goods)...................... 50,066 128,638
Vodafone Group PLC (Telecommunications).......... 69,800 1,373,121
Williams PLC (Diversified Manufacturing)......... 18,000 118,885
Woolwich PLC (Financial Services)................ 47,000 274,859
-------------
20,132,817
-------------
BAHAMAS (0.0%)
Steiner Leisure Ltd. (Entertainment, Leisure &
Media)......................................... 7,475 225,652
-------------
BERMUDA (0.9%)
Tyco International Ltd. (Diversified
Manufacturing)................................. 78,800 7,466,300
RenaissanceRE Holdings Ltd. (Insurance).......... 7,000 259,000
-------------
7,725,300
-------------
TOTAL FOREIGN COMMON STOCK (COST
$103,841,658)................................. 124,320,367
-------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
UNITED STATES (50.8%)
BASIC INDUSTRIES (1.6%)
CHEMICALS (1.0%)
Albemarle Corp................................... 8,500 $ 196,562
Dow Chemical Co.................................. 27,600 3,501,750
General Chemical Group, Inc...................... 11,700 36,562
Geon Co.......................................... 12,100 390,225
Georgia Gulf Corp................................ 16,600 280,125
IMC Global, Inc.................................. 17,200 303,150
Lyondell Chemical Co............................. 14,700 303,187
Minerals Technologies, Inc....................... 2,300 128,369
PPG Industries, Inc.............................. 20,100 1,187,156
Rohm & Haas Co................................... 26,700 1,144,763
Solutia, Inc..................................... 12,500 266,406
Union Carbide Corp............................... 17,200 838,500
Wellman, Inc..................................... 24,200 385,687
-------------
8,962,442
-------------
FOREST PRODUCTS & PAPER (0.3%)
Bowater, Inc..................................... 4,900 231,525
Caraustar Industries, Inc........................ 11,200 275,800
Fort James Corp.................................. 20,200 765,075
International Paper Co........................... 19,400 979,700
Temple-Inland, Inc............................... 4,700 320,775
Universal Forest Products, Inc................... 16,500 353,719
-------------
2,926,594
-------------
METALS & MINING (0.3%)
Allegheny Teledyne, Inc.......................... 32,100 726,262
Commercial Metals Co............................. 5,900 168,150
Freeport - McMoRan Copper & Gold, Inc............ 33,900 608,081
Freeport - McMoRan Copper & Gold, Inc., Class
A.............................................. 6,500 108,875
Kennametal, Inc.................................. 3,400 105,400
Mueller Industries, Inc.+........................ 15,800 536,212
Reynolds Metals Co............................... 2,000 118,000
Schnitzer Steel Industries, Inc., Class A........ 4,000 89,750
-------------
2,460,730
-------------
TOTAL BASIC INDUSTRIES......................... 14,349,766
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
23
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
CONSUMER GOODS & SERVICES (9.5%)
APPARELS & TEXTILES (0.1%)
Columbia Sportwear Co.+.......................... 2,400 $ 36,675
Fruit of the Loom, Inc., Class A+................ 6,000 58,500
Jones Apparel Group, Inc.+....................... 14,201 487,272
Reebok International Ltd.+....................... 4,500 83,812
Unifi, Inc.+..................................... 7,100 150,875
-------------
817,134
-------------
AUTOMOTIVE (0.8%)
Amcast Industrial Corp........................... 3,200 52,200
Cooper Tire & Rubber Co.......................... 4,600 108,675
Dana Corp........................................ 25,500 1,174,606
Delphi Automotive Systems Corp................... 60,300 1,119,319
Dura Automotive Systems, Inc.+................... 3,100 103,462
Ford Motor Co.................................... 29,600 1,670,550
General Motors Corp.............................. 12,400 818,400
Genuine Parts Co................................. 10,800 378,000
Goodyear Tire and Rubber Co...................... 12,000 705,750
Lear Corp.+...................................... 11,700 582,075
Sonic Automotive, Inc.+.......................... 5,800 79,750
Tower Automotive, Inc.+.......................... 7,400 188,237
-------------
6,981,024
-------------
BROADCASTING & PUBLISHING (1.1%)
Citadel Communications Corp.+.................... 3,800 137,631
Comcast Corp., Class A........................... 50,800 1,952,625
Entercom Communications Corp..................... 5,400 230,850
HA-LO Industries, Inc.+.......................... 22,700 224,162
Knight Ridder, Inc............................... 15,600 857,025
MediaOne Group, Inc.+............................ 42,500 3,160,938
New York Times Co................................ 24,800 912,950
Radio One, Inc.+................................. 700 32,462
Times Mirror Co., New Shares..................... 15,800 936,150
TV Guide, Inc., Class A+......................... 1,400 51,144
Washington Post Co., Class B..................... 1,500 806,625
-------------
9,302,562
-------------
COMMERCIAL SERVICES (0.0%)
Nielsen Media Research, Inc...................... 4,300 125,775
-------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
ENTERTAINMENT, LEISURE & MEDIA (0.3%)
About. com, Inc.+................................ 500 $ 25,844
American Classic Voyages Co.+.................... 3,600 85,725
Anchor Gaming+................................... 4,900 235,659
Education Management Corp.+...................... 13,000 269,344
Florida Panthers Holdings, Inc.+................. 6,000 64,125
International Game Technology.................... 17,000 314,500
Mattel, Inc...................................... 50,400 1,332,450
Media Metrix, Inc.+.............................. 300 15,937
MGM Grand, Inc.+................................. 5,200 254,800
Sunterra Corp.+.................................. 3,300 45,994
Vistana, Inc.+................................... 2,700 42,019
-------------
2,686,397
-------------
FOOD, BEVERAGES & TOBACCO (2.3%)
American Italian Pasta Co., Class A+............. 5,200 157,950
Beringer Wine Estates Holdings, Inc., Class B+... 2,100 87,609
Bestfoods........................................ 15,600 772,200
Coca-Cola Co..................................... 86,300 5,393,750
Coors (Adolph) Co................................ 1,400 69,300
H.J. Heinz Co.................................... 22,700 1,137,838
Hershey Foods Corp............................... 8,000 475,000
Keebler Foods Co.+............................... 6,600 200,475
Pepsi Bottling Group, Inc........................ 9,800 226,012
PepsiCo, Inc..................................... 93,400 3,613,413
Philip Morris Companies, Inc..................... 155,500 6,249,156
Ralston-Ralston Purina Group..................... 15,500 471,781
Sara Lee Corp.................................... 46,100 1,045,894
-------------
19,900,378
-------------
HOUSEHOLD APPLIANCES & FURNISHINGS (0.2%)
Furniture Brands International, Inc.............. 12,400 345,650
Leggett & Platt, Inc............................. 30,300 842,719
Stanley Furniture Co., Inc.+..................... 9,800 219,275
-------------
1,407,644
-------------
HOUSEHOLD PRODUCTS (0.9%)
Blyth Industries, Inc.+.......................... 1,300 44,687
Bush Boake Allen, Inc.+.......................... 5,400 157,950
Clorox Co........................................ 3,100 331,119
Procter & Gamble Co.............................. 78,900 7,041,825
-------------
7,575,581
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
24
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
MISCELLANEOUS (0.0%)
Carriage Services, Inc., Class A+................ 1,600 $ 30,000
-------------
PERSONAL CARE (0.2%)
Gillette Co...................................... 37,600 1,541,600
-------------
REAL ESTATE (0.0%)
Realty Information Group, Inc.+.................. 3,100 133,881
-------------
RESTAURANTS & HOTELS (0.3%)
Extended Stay America, Inc.+..................... 12,800 153,600
Hilton Hotels Corp............................... 47,800 678,162
Mirage Resorts, Inc.+............................ 29,600 495,800
Starwood Hotels & Resorts Worldwide, Inc......... 34,000 1,039,125
Sun International Hotels Ltd.+................... 2,700 120,825
-------------
2,487,512
-------------
RETAIL (3.3%)
Abercrombie & Fitch Co., Class A+................ 7,600 364,800
Albertson's, Inc................................. 3,591 185,161
Alloy Online, Inc.+.............................. 2,300 26,378
Ames Department Stores, Inc.+.................... 5,300 241,481
AutoZone, Inc.+.................................. 18,900 569,362
barnesandnoble.com, inc.+........................ 2,300 41,328
CompUSA, Inc.+................................... 16,400 121,975
Corporate Express, Inc.+......................... 8,800 61,462
Dayton Hudson Corp............................... 34,200 2,223,000
Dillard's, Inc., Class A......................... 13,200 463,650
eToys, Inc.+..................................... 1,300 53,097
Federated Department Stores, Inc.+............... 26,000 1,376,375
Gap, Inc......................................... 12,750 642,281
General Nutrition Companies, Inc.+............... 13,400 311,969
Hannaford Brothers Co............................ 4,800 256,800
Home Depot, Inc.................................. 39,100 2,519,506
J.C. Penney, Inc................................. 21,500 1,044,094
Kmart Corp.+..................................... 60,300 991,181
Kroger Co.+...................................... 7,800 217,912
Lithia Motors, Inc., Class A+.................... 4,800 98,400
May Department Stores Co......................... 33,700 1,377,488
Nordstrom, Inc................................... 8,100 271,350
Pacific Sunwear of California, Inc.+............. 1,900 46,372
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
RETAIL (CONTINUED)
Regis Corp....................................... 6,050 $ 115,895
Safeway, Inc.+................................... 37,200 1,841,400
School Specialty, Inc.+.......................... 11,900 190,772
Sears, Roebuck & Co.............................. 48,100 2,143,456
Shoe Carnival, Inc.+............................. 2,700 45,984
ShopKo Stores, Inc.+............................. 8,800 319,000
Stamps.com, Inc.+................................ 2,600 45,662
The Finish Line, Inc., Class A+.................. 9,900 111,066
TJX Companies, Inc............................... 34,000 1,132,625
Toys 'R' Us, Inc.+............................... 34,000 703,375
Wal-Mart Stores, Inc............................. 173,700 8,381,020
Williams-Sonoma, Inc.+........................... 1,800 62,662
Zale Corp.+...................................... 3,500 140,000
-------------
28,738,339
-------------
TOTAL CONSUMER GOODS & SERVICES................ 81,727,827
-------------
ENERGY (2.4%)
GAS EXPLORATION (0.1%)
Barrett Resources Corp.+......................... 1,300 49,887
Devon Energy Corp................................ 6,300 225,225
Newfield Exploration Co.......................... 8,200 233,187
-------------
508,299
-------------
GAS - PIPELINES (0.1%)
Columbia Energy Group............................ 8,000 501,500
El Paso Energy Corp.............................. 11,300 397,619
K N Energy, Inc.................................. 5,500 73,562
-------------
972,681
-------------
OIL PRODUCTION (2.0%)
Exxon Corp....................................... 102,000 7,866,745
Mobil Corp....................................... 62,700 6,207,300
Phillips Petroleum Co............................ 13,300 669,156
Texaco, Inc...................................... 28,500 1,781,250
Tosco Corp....................................... 29,000 752,187
Ultramar Diamond Shamrock Corp................... 4,700 102,519
Valero Energy Corp............................... 4,400 94,325
-------------
17,473,482
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
25
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
OIL SERVICES (0.2%)
Cooper Cameron Corp.+............................ 12,300 $ 455,869
Diamond Offshore Drilling, Inc................... 5,700 161,737
ENSCO International, Inc......................... 15,300 305,044
Global Marine, Inc.+............................. 20,500 316,469
Input/Output, Inc.+.............................. 1,600 12,100
National-Oilwell, Inc.+.......................... 8,900 124,600
R&B Falcon Corp.+................................ 21,000 196,875
Smith International, Inc.+....................... 6,500 282,344
-------------
1,855,038
-------------
TOTAL ENERGY................................... 20,809,500
-------------
FINANCE (8.4%)
BANKING (4.0%)
Associated Banc-Corp............................. 3,800 157,700
BancorpSouth, Inc................................ 1,400 25,375
BancWest Corp.................................... 3,500 129,937
Bank of America Corp............................. 123,800 9,076,088
Bank of Commerce................................. 4,600 94,156
Bank One Corp.................................... 8,000 476,500
Bank United Corp., Class A....................... 10,200 409,594
BankBoston Corp.................................. 41,900 2,142,138
Banknorth Group, Inc............................. 5,000 164,219
Charter One Financial, Inc....................... 11,400 316,706
Colonial BancGroup, Inc.......................... 18,900 263,419
Commercial Federal Corp.......................... 8,900 206,369
Community First Bankshares, Inc.................. 8,800 209,550
Compass Bancshares, Inc.......................... 6,800 185,512
Dime Bancorp, Inc................................ 6,600 132,825
First American Corp.............................. 14,000 581,875
First Union Corp................................. 61,500 2,890,508
FirstFed Financial Corp.......................... 7,400 142,450
FirstMerit Corp.................................. 6,000 168,375
GBC Bancorp...................................... 7,800 159,169
Gold Banc Corp., Inc............................. 1,900 25,056
Golden West Financial Corp....................... 3,500 343,000
GreenPoint Financial Corp........................ 6,900 226,406
Hamilton Bancorp, Inc.+.......................... 6,100 146,019
Hibernia Corp., Class A.......................... 9,400 147,462
Hudson United Bancorp............................ 8,700 266,437
Huntington Bancshares, Inc....................... 7,400 259,000
KeyCorp.......................................... 35,600 1,143,650
M & T Bank Corp.................................. 500 275,000
Mercantile Bankshares Corp....................... 4,300 151,978
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
BANKING (CONTINUED)
National Commerce Bancorporation................. 18,900 $ 414,028
North Fork Bancorporation, Inc................... 8,700 185,419
Pacific Century Financial Corp................... 4,600 99,187
Peoples Heritage Financial Group, Inc............ 6,400 120,600
PNC Bank Corp.................................... 18,900 1,089,113
Prime Bancshares, Inc............................ 3,100 55,219
Provident Financial Group, Inc................... 2,600 112,206
Regions Financial Corp........................... 13,600 520,200
Republic Security Financial Corp................. 8,000 66,875
Southtrust Corp.................................. 10,300 394,941
Sovereign Bancorp, Inc........................... 10,200 123,994
Sterling Bancshares, Inc......................... 600 8,006
Summit Bancorp................................... 11,200 468,300
Summit Bancshares, Inc........................... 1,300 22,587
Sun Bancorp, Inc.+............................... 3,355 59,342
SunTrust Bank, Inc............................... 20,400 1,416,525
TCF Financial Corp............................... 7,500 209,062
Trustco Bank Corp................................ 1,714 46,010
U.S. Bancorp..................................... 48,400 1,645,600
Union Planters Corp.............................. 9,000 402,187
Washington Federal, Inc.......................... 3,300 73,941
Washington Mutual, Inc........................... 39,200 1,386,700
Wells Fargo Co................................... 111,500 4,766,625
Westamerica Bancorporation....................... 4,000 145,875
Wilmington Trust Corp............................ 1,900 109,012
-------------
34,858,027
-------------
FINANCIAL SERVICES (2.6%)
Allied Capital Corp.............................. 8,400 201,337
American Express Co.............................. 4,600 598,575
Associates First Capital Corp., Class A.......... 45,300 2,007,356
Astoria Financial Corp........................... 4,600 201,969
Bear Stearns Companies, Inc...................... 8,200 383,350
CIT Group, Inc., Class A......................... 5,300 153,037
Citigroup, Inc................................... 214,000 10,165,000
Creditrust Corp.+................................ 2,000 55,250
Donaldson, Lufkin & Jenrette, Inc-DLJdirect+..... 1,000 29,500
Equitable Companies, Inc......................... 9,400 629,800
Federal National Mortgage Association............ 35,400 2,420,475
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
26
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
FINANCIAL SERVICES (CONTINUED)
Franklin Resources, Inc.......................... 10,900 $ 442,812
Gabelli Asset Management, Inc., Class A+......... 5,700 90,131
Goldman Sachs Group, Inc.+....................... 27,300 1,972,425
Heller Financial, Inc............................ 3,900 108,469
Household International, Inc..................... 22,000 1,042,260
Intelligent Life Corp.+.......................... 2,000 13,062
Litchfield Financial Corp........................ 8,760 150,836
Merrill Lynch & Company, Inc..................... 13,600 1,087,150
MicroFinancial, Inc.............................. 2,500 35,781
Ocwen Financial Corp.+........................... 7,900 70,112
Paine Webber Group Inc........................... 9,000 420,750
TD Waterhouse Group, Inc.+....................... 2,400 60,150
The FINOVA Group, Inc............................ 3,900 205,237
Waddell & Reed Financial, Inc.................... 1,400 37,800
Waddell & Reed Financial, Inc., Class A.......... 300 8,231
Willis Lease Finance Corp.+...................... 8,900 145,459
Wit Capital Group, Inc.+......................... 2,500 84,922
-------------
22,821,236
-------------
INSURANCE (1.7%)
Allstate Corp.................................... 85,700 3,074,488
Ambac Financial Group, Inc....................... 7,500 428,437
American International Group, Inc................ 11,400 1,334,513
Annuity and Life Re (Holdings), Ltd.............. 9,300 208,959
Aon Corp......................................... 26,000 1,072,500
Chubb Corp....................................... 16,400 1,139,800
CIGNA Corp....................................... 15,300 1,361,700
E.W. Blanch Holdings, Inc........................ 2,900 197,744
Financial Security Assurance Holdings Ltd........ 2,200 114,400
Fremont General Corp............................. 13,700 258,587
Marsh & McLennan Companies, Inc.................. 26,700 2,015,850
MBIA, Inc........................................ 10,700 692,825
Mercury General Corp............................. 5,500 187,000
Ohio Casualty Corp............................... 1,800 64,913
Provident Companies, Inc......................... 4,300 172,000
St. Paul Companies, Inc.......................... 23,000 731,688
Torchmark Corp................................... 13,500 460,688
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
INSURANCE (CONTINUED)
Travelers Property Casualty Corp, Class A........ 6,400 $ 250,400
UNUM Corp.+...................................... 21,000 1,149,750
-------------
14,916,242
-------------
REAL ESTATE INVESTMENT TRUSTS (0.1%)
Arden Realty, Inc................................ 6,700 164,988
Burnham Pacific Properties, Inc.................. 7,000 86,188
CenterPoint Properties Corp...................... 1,300 47,613
Cousins Properties, Inc.......................... 5,800 196,113
Franchise Finance Corporation of America......... 3,300 72,600
Manufactured Home Communities, Inc............... 5,200 135,200
Mills Corp....................................... 3,100 67,231
Mission West Properties, Inc..................... 7,000 57,750
National Golf Properties, Inc.................... 3,900 94,819
Post Properties, Inc............................. 7,722 316,602
The Macerich Co.................................. 3,600 94,500
-------------
1,333,604
-------------
TOTAL FINANCE.................................. 73,929,109
-------------
HEALTHCARE (6.0%)
BIOTECHNOLOGY (0.8%)
Affymetrix, Inc.+................................ 4,400 216,425
Amgen, Inc.+..................................... 47,000 2,859,656
Applied Analytical Industries, Inc............... 5,900 66,559
Genzyme Corp.+................................... 30,700 1,487,991
Human Genome Sciences, Inc.+..................... 11,000 433,813
IDEC Pharmaceuticals Corp.+...................... 5,100 392,859
Incyte Pharmaceuticals, Inc.+.................... 1,400 36,969
Inhale Therapeutics Systems+..................... 1,600 38,250
Millennium Pharmaceuticals, Inc.+................ 4,500 161,859
MiniMed, Inc.+................................... 600 46,181
Novoste Corp.+................................... 1,600 33,550
Osteotech, Inc.+................................. 4,150 119,442
PE Corp.- PE Biosystems Group.................... 4,600 527,850
SangStat Medical Corp.+.......................... 8,900 151,578
Trimeris, Inc.+.................................. 1,400 20,344
-------------
6,593,326
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
27
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
HEALTH SERVICES (0.7%)
Aetna, Inc....................................... 13,600 $ 1,216,350
CareInsite, Inc.+................................ 1,100 52,181
Columbia / HCA Healthcare Corp................... 61,500 1,402,969
drkoop. com, Inc.+............................... 1,500 23,953
HCR Manor Care, Inc.+............................ 10,400 251,550
Health Management Associates, Inc., Class A+..... 24,400 274,500
HEALTHSOUTH Corp.+............................... 41,000 612,438
Humana, Inc.+.................................... 21,200 274,275
IDX Systems Corp.+............................... 2,800 63,088
LCA-Vision, Inc.+................................ 6,600 52,800
MedQuist, Inc.+.................................. 4,500 196,734
Pacificare Health Systems, Class B+.............. 1,200 86,363
Renal Care Group, Inc.+.......................... 3,900 100,791
Sunrise Assisted Living, Inc.+................... 9,000 313,313
Tenet Healthcare Corp.+.......................... 30,100 558,731
United Healthcare Corp........................... 4,300 269,288
Wellpoint Health Networks, Inc.+................. 6,100 517,738
Women First HealthCare, Inc.+.................... 5,700 76,238
-------------
6,343,300
-------------
MEDICAL SUPPLIES (0.2%)
Alterra Healthcare Corp.+........................ 19,870 273,213
CONMED Corp.+.................................... 7,100 217,216
Genzyme Surgical Products+....................... 5,496 24,215
IDEXX Laboratories, Inc.+........................ 6,700 155,566
Kensey Nash Corp.+............................... 9,000 72,563
Medtronic, Inc................................... 7,600 591,850
ResMed, Inc.+.................................... 3,400 112,731
Xomed Surgical Products, Inc.+................... 2,000 96,875
-------------
1,544,229
-------------
PHARMACEUTICALS (4.3%)
ALZA Corp.+...................................... 56,900 2,894,788
American Home Products Corp...................... 120,200 6,911,500
Bristol-Myers Squibb Co.......................... 142,500 10,037,344
Chiron Corp.+.................................... 16,700 346,003
Eli Lilly & Co................................... 14,300 1,024,238
Forest Laboratories, Inc.+....................... 44,500 2,058,125
Johnson & Johnson................................ 6,500 637,000
Ligand Pharmaceuticals, Inc., Class B+........... 19,800 218,419
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
PHARMACEUTICALS (CONTINUED)
MedImmune, Inc.+................................. 5,100 $ 346,322
Merck & Co., Inc................................. 31,200 2,308,800
Monsanto Co...................................... 98,800 3,896,425
Pfizer, Inc...................................... 7,800 856,050
U.S. Bioscience, Inc.+........................... 7,600 74,100
Warner-Lambert Co................................ 78,200 5,425,125
Watson Pharmaceuticals, Inc.+.................... 8,800 308,550
-------------
37,342,789
-------------
TOTAL HEALTHCARE............................... 51,823,644
-------------
INDUSTRIAL PRODUCTS & SERVICES (4.7%)
BUILDING MATERIALS (0.1%)
Elcor Corp....................................... 2,300 100,481
Owens Corning.................................... 5,900 202,813
Rock of Ages Corp.+.............................. 2,700 27,759
Sherwin-Williams Co.............................. 20,300 563,325
-------------
894,378
-------------
BUSINESS & PUBLIC SERVICES (0.0%)
Comfort Systems USA, Inc......................... 4,500 81,000
Kroll-O'Gara Co.+................................ 5,600 124,075
Metzler Group, Inc.+............................. 2,400 66,225
Service Experts, Inc.+........................... 3,900 85,556
-------------
356,856
-------------
CAPITAL GOODS (0.2%)
ABC Rail Products Corp.+......................... 3,100 63,259
Applied Power, Inc., Class A..................... 6,400 174,800
Eaton Corp....................................... 6,600 607,200
IDEX Corp........................................ 7,400 243,275
Modine Manufacturing Co.......................... 7,300 237,478
PACCAR, Inc...................................... 4,300 229,647
Shaw Group, Inc.+................................ 6,500 103,188
-------------
1,658,847
-------------
COMMERCIAL SERVICES (0.8%)
Cendant Corp.+................................... 169,800 3,480,900
Central Parking Corp............................. 4,900 167,825
Equifax, Inc..................................... 31,100 1,109,881
Newgen Results Corp.+............................ 600 7,219
On Assignment, Inc.+............................. 6,000 156,375
R.R. Donnelley & Sons Co......................... 26,600 985,863
Romac International, Inc.+....................... 5,700 50,409
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
28
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
COMMERCIAL SERVICES (CONTINUED)
Service Corp. International...................... 57,200 $ 1,101,100
Source Information Management Co.+............... 6,100 82,159
-------------
7,141,731
-------------
DIVERSIFIED MANUFACTURING (2.3%)
Alcoa, Inc....................................... 19,700 1,218,938
AlliedSignal, Inc................................ 43,000 2,709,000
AptarGroup, Inc.................................. 3,400 102,000
Coltec Industries, Inc........................... 15,400 333,988
Cooper Industries, Inc........................... 14,200 738,400
Eastman Kodak Co................................. 40,500 2,743,875
General Electric Co.............................. 87,500 9,887,500
Gentek, Inc...................................... 12,000 166,500
Harris Corp...................................... 12,900 505,519
Intermet Corp.................................... 6,500 97,906
ITT Industries, Inc.............................. 12,600 480,375
Sensormatic Electronics Corp.+................... 3,300 45,994
Tenneco, Inc..................................... 22,900 546,738
Xerox Corp....................................... 16,400 968,625
-------------
20,545,358
-------------
ELECTRICAL EQUIPMENT (0.3%)
Anixter International, Inc.+..................... 2,400 43,800
Emerson Electric Co.............................. 39,900 2,508,713
W.W. Grainger, Inc............................... 8,300 446,644
-------------
2,999,157
-------------
ELECTRONICS (0.0%)
Hubbell, Inc., Class B........................... 4,700 213,263
-------------
MACHINERY (0.2%)
Deere & Co....................................... 23,600 935,150
Manitowoc Co., Inc............................... 2,300 95,738
Milacron Inc..................................... 7,700 142,450
Terex Corp.+..................................... 7,700 234,369
-------------
1,407,707
-------------
MANUFACTURING (0.0%)
Herman Miller, Inc............................... 3,200 67,100
HON Industries, Inc.............................. 1,200 35,025
JAKKS Pacific, Inc.+............................. 2,100 62,409
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
MANUFACTURING (CONTINUED)
MKS Instruments, Inc.+........................... 8,100 $ 151,116
National R.V. Holdings, Inc.+.................... 3,800 92,150
-------------
407,800
-------------
PACKAGING & CONTAINERS (0.3%)
Gaylord Container Corp., Class A+................ 9,100 72,231
Ivex Packaging Corp.+............................ 7,500 165,000
Kimberly-Clark Corp.............................. 29,700 1,692,900
Smurfit-Stone Container Corp.+................... 39,500 810,984
-------------
2,741,115
-------------
POLLUTION CONTROL (0.5%)
Waste Management, Inc............................ 76,600 4,117,250
-------------
TOTAL INDUSTRIAL PRODUCTS & SERVICES........... 42,483,462
-------------
TECHNOLOGY (9.9%)
AEROSPACE (0.3%)
Armor Holdings, Inc.+............................ 5,300 55,319
L-3 Communications Holdings, Inc.+............... 6,700 323,694
Lockheed Martin Corp............................. 36,100 1,344,725
Raytheon Co., Class A............................ 11,500 792,063
-------------
2,515,801
-------------
AIRLINES (0.1%)
Boeing Co........................................ 27,600 1,219,575
-------------
COMPUTER PERIPHERALS (2.0%)
Cisco Systems, Inc.+............................. 201,000 12,945,656
EMC Corp./Mass+.................................. 65,600 3,608,000
Quantum Corp.+................................... 10,500 252,656
Seagate Technology, Inc.+........................ 15,300 392,063
-------------
17,198,375
-------------
COMPUTER SOFTWARE (1.9%)
Acxiom Corp.+.................................... 3,700 92,384
Allaire Corp.+................................... 1,200 81,788
Aspect Development, Inc.+........................ 6,700 123,741
Concord Communications, Inc.+.................... 6,500 290,063
Concur Technologies, Inc.+....................... 2,800 79,100
Electronic Arts Inc.+............................ 3,800 205,675
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
29
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
COMPUTER SOFTWARE (CONTINUED)
Excalibur Technologies Corp.+.................... 3,600 $ 51,413
i2 Technologies, Inc.+........................... 3,200 137,800
Legato Systems, Inc.+............................ 1,700 98,228
Macromedia, Inc.+................................ 1,200 42,638
Mentor Graphics Corp.+........................... 3,500 44,734
Microsoft Corp.+................................. 156,100 14,068,513
MicroStrategy, Inc.+............................. 7,000 265,344
New Era of Networks, Inc.+....................... 4,200 184,406
SalesLogix Corp.+................................ 3,300 49,294
Sanchez Computer Associates, Inc.+............... 5,000 172,813
Symantec Corp.+.................................. 3,500 89,359
Unify Corp.+..................................... 7,600 102,363
Wind River Systems, Inc.+........................ 11,300 181,153
-------------
16,360,809
-------------
COMPUTER SYSTEMS (2.3%)
3Com Corp.+...................................... 18,500 493,141
Brocade Communications Systems, Inc.+............ 200 19,369
Dell Computer Corp.+............................. 4,800 177,450
Equant NV-NY Registered Shares+.................. 3,100 291,788
Gateway, Inc.+................................... 9,700 572,300
International Business Machines Corp............. 109,300 14,127,025
Sun Microsystems, Inc.+.......................... 58,800 4,051,688
-------------
19,732,761
-------------
ELECTRONICS (0.0%)
Symbol Technologies, Inc......................... 10,500 387,188
-------------
INFORMATION PROCESSING (0.6%)
24 / 7 Media, Inc.+.............................. 3,300 127,256
Automatic Data Processing, Inc................... 26,300 1,157,200
CAIS Internet, Inc.+............................. 900 16,566
CCC Information Services Group, Inc.+............ 4,500 57,375
Computer Horizons Corp.+......................... 5,600 77,175
Covad Communications Group, Inc.+................ 1,850 98,570
Digital Island, Inc.+............................ 4,700 84,306
Electronic Data System Corp...................... 7,800 441,188
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
INFORMATION PROCESSING (CONTINUED)
First Data Corp.................................. 22,200 $ 1,086,413
Juniper Networks, Inc.+.......................... 1,000 149,156
Mpath Interactive, Inc.+......................... 4,000 88,250
Multex.com, Inc.+................................ 2,600 68,088
Net Perceptions, Inc.+........................... 4,000 87,500
NorthPoint Communications Group, Inc.+........... 1,100 40,081
Pegasus Systems, Inc.+........................... 1,400 52,631
Profit Recovery Group International, Inc.+....... 5,900 278,959
Proxicom, Inc.+.................................. 1,200 30,638
Rhythms NetConnections, Inc.+.................... 1,600 93,500
Safeguard Scientifics, Inc.+..................... 500 31,000
TheStreet.com, Inc.+............................. 900 32,372
TMP Worldwide, Inc.+............................. 1,900 121,006
USWeb Corp.+..................................... 7,100 157,753
Viant Corp.+..................................... 800 27,850
Visual Networks, Inc.+........................... 4,800 153,450
WorldGate Communications, Inc.+.................. 4,400 225,363
Xoom.com, Inc.+.................................. 1,600 83,650
-------------
4,867,296
-------------
SEMICONDUCTORS (2.7%)
Applied Materials, Inc.+......................... 23,400 1,727,944
Applied Micro Circuits Corp.+.................... 5,400 448,538
Applied Science and Technology, Inc.+............ 3,400 77,138
ATMI, Inc.+...................................... 12,100 358,463
Exar Corp.+...................................... 5,600 140,350
HI/FN, Inc.+..................................... 1,700 128,934
Intel Corp....................................... 206,400 12,274,350
Kopin Corp.+..................................... 1,000 23,906
Lam Research Corp.+.............................. 3,000 139,969
Maker Communications, Inc.+...................... 1,400 43,225
Motorola, Inc.................................... 37,700 3,572,075
National Semiconductor Corp.+.................... 7,500 189,844
PLX Technology, Inc.+............................ 500 23,703
SDL, Inc.+....................................... 5,600 286,125
Texas Instruments, Inc........................... 28,300 4,103,500
-------------
23,538,064
-------------
TOTAL TECHNOLOGY............................... 85,819,869
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
30
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
TELECOMMUNICATIONS (3.1%)
TELECOMMUNICATION EQUIPMENT (1.1%)
ANTEC Corp.+..................................... 4,000 $ 127,875
Lucent Technologies, Inc......................... 139,900 9,434,506
Network Plus Corp.+.............................. 1,100 17,600
-------------
9,579,981
-------------
TELECOMMUNICATION SERVICES (2.0%)
Allegiance Telecom, Inc.+........................ 5,400 296,831
America Online, Inc.+............................ 50,300 5,558,150
American Mobile Satellite Corp.+................. 7,300 119,766
CapRock Communications Corp.+.................... 4,600 186,156
Clarent Corp..................................... 2,400 36,000
Concentric Network Corp.+........................ 7,300 289,947
Exodus Communications, Inc.+..................... 1,800 215,944
MCI WorldCom, Inc.+.............................. 119,600 10,289,338
Rare Medium Group, Inc.+......................... 2,500 31,016
SeaChange International, Inc.+................... 1,800 33,131
Tetra Tech, Inc.+................................ 6,750 112,219
-------------
17,168,498
-------------
TOTAL TELECOMMUNICATIONS....................... 26,748,479
-------------
TRANSPORTATION (0.6%)
AIRLINES (0.1%)
Alaska Air Group, Inc.+.......................... 2,000 83,500
AMR Corp.+....................................... 10,400 709,800
-------------
793,300
-------------
RAILROADS (0.4%)
Burlington Northern Sante Fe Corp................ 29,900 926,900
CSX Corp......................................... 15,200 688,750
Norfolk Southern Corp............................ 20,700 623,588
Union Pacific Corp............................... 17,300 1,008,806
Wisconsin Central Transportation Corp.+.......... 1,700 31,769
-------------
3,279,813
-------------
TRANSPORT & SERVICES (0.0%)
C.H. Robinson Worldwide, Inc..................... 8,000 293,000
Forward Air Corp.+............................... 2,600 73,044
-------------
366,044
-------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
TRUCK & FREIGHT CARRIERS (0.1%)
American Freightways Corp.+...................... 2,900 $ 56,641
CNF Transportation, Inc.......................... 2,800 107,450
Consolidated Freightways Corp.+.................. 600 7,706
Ryder System, Inc................................ 4,400 114,400
Werner Enterprises, Inc.......................... 21,025 436,269
-------------
722,466
-------------
TOTAL TRANSPORTATION........................... 5,161,623
-------------
UTILITIES (4.6%)
ELECTRIC (1.2%)
Allegheny Energy, Inc............................ 11,800 378,338
Ameren Corp...................................... 12,900 495,038
Central & South West Corp........................ 51,100 1,194,463
Cinergy Corp..................................... 14,600 467,200
Cleco Corp....................................... 11,300 343,238
CMS Energy Corp.................................. 10,800 452,250
Constellation Energy Group....................... 14,000 414,750
Dominion Resources, Inc.......................... 17,800 770,963
Edison International............................. 10,700 286,225
Entergy Corp..................................... 23,800 743,750
FPL Group, Inc................................... 900 49,163
NiSource, Inc.+.................................. 9,500 245,219
Northeast Utilities+............................. 4,300 76,056
Northern States Power Co......................... 14,200 343,463
PG&E Corp........................................ 35,900 1,166,750
Pinnacle West Capital Corp....................... 8,200 330,050
PP&L Resources, Inc.............................. 15,800 485,850
Reliant Energy, Inc.............................. 7,400 204,425
Southern Co...................................... 2,000 53,000
TECO Energy, Inc................................. 12,100 275,275
Texas Utilities Co............................... 25,500 1,051,875
USEC, Inc........................................ 9,400 139,825
WESCO International, Inc.+....................... 3,900 79,950
Wisconsin Energy Corp............................ 10,900 273,181
-------------
10,320,297
-------------
NATURAL GAS (0.1%)
Atmos Energy Corp................................ 9,000 225,000
Consolidated Natural Gas Co...................... 9,000 546,750
Public Service Company of North Carolina, Inc.... 4,400 128,700
Wicor, Inc....................................... 5,400 150,863
-------------
1,051,313
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
31
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
TELEPHONE (3.3%)
Ameritech Corp................................... 51,200 $ 3,763,200
AT & T Corp...................................... 40,900 2,282,731
Bell Atlantic Corp............................... 103,800 6,785,925
Frontier Corp.................................... 3,000 177,000
GTE Corp......................................... 89,100 6,749,321
ITC DeltaCom, Inc.+.............................. 6,000 167,813
Level 3 Communications, Inc.+.................... 22,600 1,358,825
NEXTLINK Communications, Inc., Class A+.......... 3,200 237,900
SBC Communications, Inc.......................... 118,700 6,884,600
Sprint Corp...................................... 3,800 200,688
US WEST, Inc..................................... 11,300 663,875
-------------
29,271,878
-------------
WATER (0.0%)
E'Town Corp...................................... 4,000 183,000
-------------
TOTAL UTILITIES................................ 40,826,488
-------------
TOTAL UNITED STATES COMMON STOCK (COST
$332,099,422)................................. 443,679,767
-------------
TOTAL COMMON STOCK (COST $435,941,080)......... 568,000,134
-------------
CONVERTIBLE PREFERRED STOCKS (0.2%)
INDUSTRIAL PRODUCTS & SERVICES (0.2%)
Home Ownership Funding, (144A) 13.331%
(Banking)...................................... 2,000 1,703,398
-------------
JAPAN (0.0%)
AB International Cayman Trust, 0.500%
(Banking)...................................... 8,000,000 77,002
-------------
TOTAL CONVERTIBLE PREFERRED STOCKS (COST
$2,050,683)................................... 1,780,400
-------------
PREFERRED STOCK (0.1%)
AUSTRALIA (0.0%)
News Corp. Ltd. (Broadcasting & Publishing)...... 32,200 245,323
-------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
GERMANY (0.1%)
ProSieben Media AG (Broadcasting & Publishing)... 3,500 $ 158,816
Volkswagen AG (Automotive)....................... 4,808 177,757
-------------
336,573
-------------
TOTAL PREFERRED STOCK (COST $591,720).......... 581,896
-------------
RIGHTS (0.0%)
PORTUGAL (0.0%)
Portugal Telecom SA (Telecommunications)+........ 4,791 49
-------------
FRANCE (0.0%)
Louis Vuitton Moet Hennessey (Food, Beverages &
Tobacco)+...................................... 2,250 65,782
-------------
TOTAL RIGHTS (COST $50,744).................... 65,831
-------------
TOTAL EQUITY SECURITIES (COST $438,634,227).... 570,428,261
-------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT #
---------------
<S> <C> <C>
FIXED INCOME SECURITIES (28.5%)
CONVERTIBLE BONDS (0.0%)
JAPAN (0.0%)
Nichiei Construction Co. Ltd., (144A), 1.75% due
03/31/14 (Financial Services).................. JPY 8,000,000 84,603
Sanwa International Finance Trust, 1.25% due
07/31/05 (Financial Services).................. JPY 18,000,000 156,523
Yamanouchi Pharmaceutical Co. Ltd., 1.25% due
03/31/14 (Commercial Services)................. JPY 10,000,000 192,505
-------------
TOTAL CONVERTIBLE BONDS (COST $319,309)........ 433,631
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
32
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT # VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
COLLATERALIZED OBLIGATIONS (3.5%)
FINANCE (3.5%)
American Southwest Financial Corp., Support Bond,
Series 60, Class D, Callable, 8.90% due
03/01/18....................................... $ 1,326,952 $ 1,341,880
Bear Stearns Structured Securities Inc.,
Sequential Payer, Series 1997-2, Class 1A5,
Callable, (144A), 7.00% due 08/25/36........... 2,500,000 2,410,938
Chase Commercial Mortgage Securities Corp.,
Subordinated Bond, Series 1996-2, Class F,
Callable, (144A), 6.90% due 11/19/06........... 250,000 202,812
COMM, Sequential Payer, Series 1999-1, Class A2,
Partially Callable, 6.46% due 09/15/08......... 940,000 907,981
CS First Boston Mortgage Securities Corp.,
Sequential Payer, Series 1997-C2, Class A1,
Callable, 6.40% due 02/17/04................... 1,068,233 1,064,894
CS First Boston Mortgage Securities Corp.,
Subordinated Bond, Series 1997-C2, Class B,
Callable, 6.72% due 11/17/07................... 600,000 585,187
Ford Motor Credit Co., 5.80% due 01/12/09........ 780,000 712,842
GE Capital Mortgage Services, Inc., Subordinated
Bond, NAS, Series 1995-10, Class B2, Callable,
7.00% due 10/25/10............................. 232,859 220,599
J.P. Morgan Commercial Mortgage Finance Corp.,
Subordinated Bond, CSTR, Series 1996-C2, Class
E, Callable, (144A), 8.68% due 11/25/27........ 250,000 217,930
Merrill Lynch Mortgage Investors, Inc.,
Subordinated Bond, CSTR, Series 1995-C2, Class
E, 7.74% due 06/15/21.......................... 164,325 150,794
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT # VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
FINANCE (CONTINUED)
Merrill Lynch Mortgage Investors, Inc.,
Subordinated Bond, Series 1997-C1, Class F,
Partially Callable, 7.12% due 06/18/29......... $ 1,000,000 $ 728,750
Morgan Stanley Capital I, Inc. AFC, Series
1999-WF1 Class 2A Partially Callable, 6.21% due
09/15/08....................................... 8,650,000 8,225,610
Morgan Stanley Capital I, Inc., Sequential Payer,
Series 1998-XL2, Class A2, Partially Callable,
6.17% due 10/03/08............................. 940,000 884,188
Morgan Stanley Capital I, Inc., Subordinated
Bond, CSTR, Series 1997-RR, Class D, Callable,
(144A), 7.75% due 04/30/39..................... 800,000 601,750
Morgan Stanley Capital I, Inc., Subordinated
Bond, Series 1995-GAL1, Class E, Callable,
(144A), 8.25% due 08/15/05..................... 250,000 218,125
Morgan Stanley Capital I, Inc., Subordinated
Bond, Series 1997-HF1, Class F, Partially
Callable, (144A), 6.86% due 02/15/10........... 1,000,000 783,438
Mortgage Capital Funding, Inc., Sequential Payer,
Series 1997-MC2, Class A1, Partially Callable,
6.53% due 01/20/07............................. 450,471 446,142
Nomura Asset Securities Corp., Sequential Payer,
Series 1998-D6, Class A1B, Partially Callable,
6.59% due 03/17/28............................. 3,135,000 3,054,176
Ocwen Residential MBS Corp., Series 1998-R1,
Class A1, Callable, (144A), 4.00% due
10/25/40....................................... 1,096,986 1,082,588
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
33
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT # VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
FINANCE (CONTINUED)
Chase Funding Mortgage Loan, NAS, Series 1998-2,
Class IIA2, 5.88% due 03/25/17................. $ 2,000,000 $ 1,982,813
EQCC Home Equity Loan Trust, NAS, Series 1997-3,
Class A8, Callable, 6.41% due 12/15/04......... 2,000,000 1,972,520
Mortgage Capital Funding, Inc., Sequential Payer,
Series 1997-MC1, Class A3, Partially Callable,
7.29% due 03/20/07............................. 2,600,000 2,615,641
-------------
TOTAL COLLATERALIZED OBLIGATIONS (COST
$32,038,422).................................. 30,411,598
-------------
CORPORATE OBLIGATIONS (4.7%)
BASIC INDUSTRIES (0.0%)
CHEMICALS (0.0%)
Solutia, Inc., Callable, 6.72% due 10/15/37...... 350,000 342,447
-------------
METALS & MINING (0.0%)
Ryerson Tull, Inc., Callable, 9.13% due
07/15/06....................................... 200,000 212,500
-------------
554,947
-------------
CONSUMER GOODS & SERVICES (0.4%)
BROADCASTING & PUBLISHING (0.3%)
Comcast Cable Communication, Callable, 8.13% due
05/01/04....................................... 1,000,000 1,055,050
Fox Family Worldwide, Inc., Callable 11/01/02,
9.25% due 11/01/07............................. 200,000 184,000
TCI Communications, Inc., Refunding, 7.88% due
08/01/13....................................... 1,250,000 1,317,913
-------------
2,556,963
-------------
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT # VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
ENTERTAINMENT, LEISURE & MEDIA (0.0%)
Lamar Advertising Co., Callable 09/15/02, 8.63%
due 09/15/07................................... $ 300,000 $ 304,500
-------------
FOOD, BEVERAGES & TOBACCO (0.1%)
J Seagram & Sons, 7.60% due 12/15/28............. 415,000 399,545
-------------
RETAIL (0.0%)
Federated Department Stores, Inc., 8.13% due
10/15/02....................................... 200,000 209,192
-------------
3,470,200
-------------
ENERGY (0.2%)
NATURAL GAS (0.1%)
National Fuel Gas Co., Series D, MTN, Putable,
6.21% due 08/12/27............................. 500,000 495,580
-------------
OIL PRODUCTION (0.0%)
Occidental Petroleum Corp., Callable, 8.45% due
02/15/29....................................... 115,000 120,341
Plains Resources, Inc., Series D, Callable
03/15/01, 10.25% due 03/15/06.................. 250,000 254,375
-------------
374,716
-------------
OIL SERVICES (0.1%)
Lasmo (USA) Inc., Callable, 7.30% due 11/15/27... 125,000 116,091
Oil Purchase Co., Sinking Fund, (144A), 7.10% due
10/31/02....................................... 753,473 712,032
-------------
828,123
-------------
1,698,419
-------------
FINANCE (2.2%)
BANKING (0.0%)
Union Bank of Switzerland - New York, 7.75% due
09/01/26....................................... 375,000 384,521
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
34
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT # VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
FINANCIAL SERVICES (2.2%)
Associates Corp. N.A., Putable, 5.96% due
05/15/37....................................... $ 610,000 $ 610,262
FCB/NC Capital Trust I, Callable 03/01/08, 8.05%
due 03/01/28................................... 600,000 568,326
FCB/SC Capital Trust I, Callable 03/15/08, 8.25%
due 03/15/28................................... 1,250,000 1,210,625
General Motors Acceptance Corp., MTN, 8.50% due
01/19/01....................................... 2,000,000 2,069,340
Household Finance Corp., 6.50% due 11/15/08...... 265,000 252,680
Household Finance Corp., 5.88% due 02/01/09...... 2,000,000 1,817,080
Keystone Financial Mid Atlantic Funding, 6.50%
due 05/31/08................................... 1,000,000 943,120
Norwest Financial, Inc., 7.20% due 04/01/04...... 3,000,000 3,068,580
Phillips 66 Capital Trust II, Callable 01/15/07,
8.00% due 01/15/37............................. 1,000,000 984,880
Safeco Capital Trust 1, Callable 07/15/07, 8.07%
due 07/15/37................................... 900,000 853,749
Sun World International, Inc., Series B, Callable
04/15/01, 11.25% due 04/15/04.................. 250,000 262,813
Toyota Motor Credit Corp., 5.63% due 11/13/03.... 7,000,000 6,778,660
-------------
19,420,115
-------------
19,804,636
-------------
TECHNOLOGY (0.3%)
ELECTRONICS (0.3%)
Sensormatic Electronics Corp., Callable, (144A),
7.74% due 03/29/06(f).......................... 3,000,000 2,773,260
-------------
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT # VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
TRANSPORTATION (0.8%)
TRANSPORT & SERVICES (0.8%)
Atlantic Express Transportation Corp., Callable
02/01/01, 10.75% due 02/01/04.................. $ 250,000 $ 249,375
Enterprise Rent-a-Car USA Finance Co., (144A),
6.38% due 05/15/03............................. 2,000,000 1,947,720
Federal Express Corp., Series 1999-1, Class C,
Sinking Fund, 8.25% due 01/15/19............... 830,000 844,774
Union Pacific Corp., 5.78% due 10/15/01.......... 1,750,000 1,722,665
Williams Companies, Inc., 6.13% due 02/01/01..... 2,000,000 1,994,660
-------------
6,759,194
-------------
UTILITIES (0.8%)
ELECTRIC (0.3%)
East Coast Power LLC, Callable, Sinking Fund,
(144A), 7.07% due 03/31/12..................... 235,000 222,270
East Coast Power LLC, Callable, Sinking Fund,
(144A), 7.54% due 06/30/17..................... 765,000 716,216
PECO Energy Capital Trust III, Series D, 7.38%
due 04/06/28................................... 1,300,000 1,218,698
-------------
2,157,184
-------------
NATURAL GAS (0.1%)
Atmos Energy Corp., Callable, 6.75% due
07/15/28....................................... 1,200,000 1,067,736
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
35
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT # VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
TELEPHONE (0.4%)
AT&T Corp., Callable, 6.00% due 03/15/09......... $ 910,000 $ 855,209
SBC Communications, Inc., Callable 11/01/07,
7.25% due 11/01/27............................. 1,000,000 975,710
US West Capital Funding, Inc., Callable, 6.25%
due 07/15/05................................... 1,300,000 1,260,051
-------------
3,090,970
-------------
6,315,890
-------------
TOTAL CORPORATE OBLIGATIONS (COST
$42,875,378).................................. 41,376,546
-------------
FOREIGN CORPORATE OBLIGATIONS (1.7%)
AUSTRALIA (0.4%)
St. George Funding Co., Callable 06/30/07,
(144A), 8.49% due 12/31/49 (Financial
Services)...................................... 2,000,000 1,745,060
Australian Gas Light Co. Ltd., (144A), 6.40% due
04/15/08 (Gas-Pipelines)....................... 1,600,000 1,516,352
-------------
3,261,412
-------------
CANADA (0.6%)
McKesson Finance of Canada, (144A), 6.55% due
11/01/02 (Financial Services).................. 750,000 734,895
Express Pipeline LP, Series B, Callable, Sinking
Fund, (144A), 7.39% due 12/31/17
(Oil-Production)............................... 249,700 219,112
Rogers Cantel, Inc., Callable 10/01/02, 8.30% due
10/01/07 (Telecommunications).................. 250,000 250,000
Hydro-Quebec, 8.40% due 01/15/22 (Electric)...... 3,850,000 4,302,799
-------------
5,506,806
-------------
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT # VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
DENMARK (0.3%)
Den Danske Bank, (144A), 7.25% due 06/15/05
(Banking)...................................... $ 2,500,000 $ 2,501,850
-------------
HONG KONG (0.0%)
Bangkok Bank Public Co. Ltd., (144A), 9.03% due
03/15/29 (Banking)............................. 12,000 9,360
-------------
NORWAY (0.3%)
Norsk Hydro ASA, Callable, 6.80% due 01/15/28
(Multi-Industry)............................... 2,500,000 2,219,450
-------------
UNITED KINGDOM (0.1%)
Abbey National First Capital Co., 8.20% due
10/15/04 (Financial Services).................. 1,000,000 1,057,090
-------------
TOTAL FOREIGN CORPORATE OBLIGATIONS (COST
$15,354,046).................................. 14,555,968
-------------
SOVEREIGN BONDS (0.1%)
ARGENTINA (0.0%)
Republic of Argentina, Series FRB, Callable,
Sinking Fund, 5.94% due 03/31/05(v)............ 130,200 111,256
-------------
MEXICO (0.1%)
United Mexican States Global Bonds, 11.50% due
05/15/26....................................... 265,000 295,475
-------------
PERU (0.0%)
Republic of Peru PDI, Series 20 Year, Sinking
Fund, 4.50% due 03/07/17(v).................... 347,000 212,537
-------------
PHILLIPINES (0.0%)
Republic of Philippines Global Bonds, 9.88% due
01/15/19....................................... 237,000 233,753
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
36
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT # VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
PANAMA (0.0%)
Republic of Panama PDI, Series 20 Year, Sinking
Fund, 5.94% due 07/17/16(v).................... $ 208,514 $ 152,997
-------------
TOTAL SOVEREIGN BONDS (COST $1,022,413)........ 1,006,018
-------------
U.S. GOVERNMENT AGENCY OBLIGATIONS (13.3%)
FEDERAL HOME LOAN MORTGAGE CORP. (0.6%)
Sequential Payer, Series 2019, Class C, Partially
Callable, 6.50% due 02/15/19................... 1,250,000 1,229,288
8.50% due 09/01/01............................... 5,675 5,775
8.50% due 07/01/02............................... 282,926 287,877
Gold, 8.00% due 11/01/26......................... 1,125,641 1,156,596
Sequential Payer, Series 1980, Class VB, 7.00%
due 03/15/11................................... 2,750,000 2,742,245
-------------
5,421,781
-------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (10.0%)
6.16% due 08/07/28(s)............................ 1,240,000 1,159,784
8.00% due 12/01/26............................... 1,195,949 1,228,455
6.50% due 03/01/28............................... 3,860,337 3,723,990
6.00% due 01/01/29............................... 118,506 111,321
Remic PAC-1, Series 1994-51, Class PH, 6.50% due
01/25/23....................................... 7,400,000 7,365,294
TBA, July, 6.50% due 12/31/14.................... 10,020,000 9,844,650
TBA, July, 6.00% due 12/31/29.................... 8,535,000 8,017,609
TBA, July, 6.50% due 12/31/29.................... 47,840,000 46,150,770
TBA, July, 7.00% due 12/31/29.................... 10,105,000 9,988,186
-------------
87,590,059
-------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (2.7%)
8.50% due 06/15/27............................... 333,158 348,983
8.50% due 09/15/27............................... 1,532,492 1,605,286
7.00% due 12/15/28............................... 6,421,343 6,335,040
7.00% due 09/15/28............................... 3,520,312 3,472,999
7.00%(y) due 11/15/28............................ 10,439,578 10,299,270
7.00% due 06/15/28............................... 214,045 211,168
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT # VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (CONTINUED)
7.00% due 10/15/28............................... $ 382,489 $ 377,348
7.00% due 03/15/29............................... 27,811 27,437
7.00% due 04/15/29............................... 64,817 63,946
7.00% due 01/15/29............................... 271,840 268,186
-------------
23,009,663
-------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (COST
$116,881,238)................................. 116,021,503
-------------
U.S. TREASURY OBLIGATIONS (5.2%)
U.S. TREASURY STRIPS (0.1%)
PO, 6.42%(y) due 11/15/15........................ 3,370,000 1,201,405
-------------
U.S. TREASURY BONDS (2.5%)
5.50% due 08/15/28............................... 165,000 151,077
5.25% due 11/15/28............................... 1,705,000 1,511,329
5.25% due 02/15/29............................... 95,000 85,352
12.00% due 08/15/13.............................. 1,060,000 1,488,304
6.75% due 08/15/26............................... 16,186,000 17,329,055
6.50% due 11/15/26............................... 1,000,000 1,038,910
-------------
21,604,027
-------------
U.S. TREASURY NOTES (2.6%)
6.25% due 02/28/02(s)............................ 1,390,000 1,410,850
6.63% due 05/15/07............................... 660,000 687,331
5.50% due 05/15/09............................... 3,240,000 3,165,059
7.88% due 11/15/04(s)............................ 11,735,000 12,835,156
6.63% due 03/31/02(s)............................ 70,000 71,739
5.38% due 06/30/03(s)............................ 1,895,000 1,872,203
6.88% due 05/15/06(s)............................ 2,403,000 2,529,903
-------------
22,572,241
-------------
TOTAL U.S. TREASURY OBLIGATIONS (COST
$47,068,936).................................. 45,377,673
-------------
TOTAL FIXED INCOME SECURITIES (COST
$255,559,742)................................. 249,182,937
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
37
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
SHORT-TERM INVESTMENTS (13.0%)
OTHER INVESTMENT COMPANIES (0.0%)
SSGA Money Market Fund, 4.68% due 07/01/99....... $ 9,840 $ 9,840
-------------
REPURCHASE AGREEMENT (11.2%)
Goldman Sachs Repurchase Agreement, 4.85% dated
06/30/99, due 07/01/99, proceeds $97,647,153
(collateralized by $101,774,000 U.S. Treasury
Note, 5.63% due 05/15/08, valued at
$99,587,411)(s)(t)............................. 97,634,000 97,634,000
-------------
U.S. GOVERNMENT AGENCY OBLIGATIONS (1.7%)
Federal National Mortage Association Discount
Notes, 4.84% due 07/06/99(s)................... 15,000,000 14,989,920
-------------
TIME DEPOSITS (0.1%)
State Street Bank & Trust Co. London, 2.75% due
07/01/99....................................... 828,000 828,000
-------------
U.S. TREASURY OBLIGATIONS (0.0%)
U.S. Treasury Bill, 4.57%(y) due 02/03/00........ 640,000 619,443
-------------
TOTAL SHORT-TERM INVESTMENTS (COST
$114,081,376)................................. 114,081,203
-------------
TOTAL INVESTMENTS (COST $808,275,345) (106.8%).................
933,692,401
LIABILITIES IN EXCESS OF OTHER ASSETS (-6.8%)..................
(59,811,374)
-------------
NET ASSETS (100.0%)............................................ $ 873,881,027
-------------
-------------
</TABLE>
- ------------------------------
Note: Based on the cost of investments of $809,856,518 for federal income tax
purposes at June 30, 1999, the aggregate gross unrealized appreciation and
depreciation was $143,026,365 and $19,190,482, respectively, resulting in net
unrealized appreciation of $123,835,883.
+ Non-income producing security.
# Demoninated in USD unless otherwise noted.
(f) Fair valued security. Approximately 0.3% of the market value of the
securities have been valued at fair value. (See Note 1a)
(s) Security is fully or partially segregated with custodian as collateral for
futures contracts or with broker as initial margin for futures contracts.
$57,022,315 of the market value has been segregated.
(t) All or a portion of the security has been segregated as collateral for TBA
securities and when issued securities.
(v) Rate shown reflects current rate on variable or floating rate instrument or
instrument with step coupon rate.
(y) Yield to maturity.
144A - Securities restricted for resale to Qualified Institutional Buyers.
ADR - American Depositary Receipt.
AFC - Available Funds Class.
CSTR - Collateral Strip Rate.
JPY - Japanese Yen.
MTN - Medium Term Note.
NAS - Non-accelerated security.
PDI - Past Due Interest.
PO - Principal Only.
REMIC - Real Estate Mortgage Investment Conduit.
SDR - Swedish Depositary Receipt.
TBA - Securities purchased on a forward commitment basis with an approximate
principal amount and no definite maturity date. The actual principal
amount and maturity date will be determined upon settlement.
USD - United States Dollar.
The Accompanying Notes are an Integral Part of the Financial Statements.
38
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
INDUSTRY DIVERSIFICATION
<TABLE>
<CAPTION>
PERCENT OF
PORTFOLIO
-----------------
<S> <C>
U.S. Government Agency/Treasury Obligations....... 17.3%
Short Term Investments............................ 12.2%
Financial Services................................ 8.6%
Banking........................................... 5.5%
Pharmaceuticals................................... 4.6%
Retail............................................ 3.7%
Telephone......................................... 3.4%
Diversified Manufacturing......................... 3.2%
Food & Beverages.................................. 3.1%
Semi-Conductors................................... 2.6%
Insurance......................................... 2.2%
Computer Systems.................................. 2.2%
Electric.......................................... 2.0%
Oil - Production.................................. 2.0%
Computer Peripherals.............................. 1.9%
Computer Software................................. 1.8%
Oil - Services.................................... 1.8%
Entertainment..................................... 1.6%
Telecommunications Services....................... 1.5%
Broadcasting & Publishing......................... 1.5%
Chemicals......................................... 1.5%
Telecommunications Equipment...................... 1.3%
Automotive........................................ 1.1%
Household Products................................ 0.8%
Commercial Services............................... 0.8%
Electronics....................................... 0.8%
Transport & Services.............................. 0.8%
Telecommunications................................ 0.8%
Biotechnology..................................... 0.7%
Health Services................................... 0.7%
Information Processing............................ 0.6%
Electrical Equipment.............................. 0.5%
Forest Products & Paper........................... 0.5%
Metals & Mining................................... 0.5%
Pollution Control................................. 0.4%
Railroads......................................... 0.4%
Aerospace......................................... 0.4%
Multi-Industry.................................... 0.4%
Natural Gas....................................... 0.3%
Utilities......................................... 0.3%
Building Materials................................ 0.3%
Gas - Pipelines................................... 0.3%
Restaurants & Hotels.............................. 0.3%
Machinery......................................... 0.2%
Capital Goods..................................... 0.2%
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
39
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF
PORTFOLIO
-----------------
<S> <C>
Packaging & Containers............................ 0.2%
Construction & Housing............................ 0.2%
Medical Supplies.................................. 0.2%
Personal Care..................................... 0.2%
Real Estate....................................... 0.2%
Automotive Supplies............................... 0.2%
House Appliance & Furnishings..................... 0.2%
Real Estate Investment Trust...................... 0.1%
Transportation.................................... 0.1%
Foreign Government Obligation..................... 0.1%
Business & Public Services........................ 0.1%
Apparels & Textiles............................... 0.1%
Gas Exploration................................... 0.1%
Manufacturing..................................... 0.1%
Truck & Freight Carriers.......................... 0.1%
Airlines.......................................... 0.1%
Holdings Companies................................ 0.1%
Wholesale & International Trade................... 0.0%
Appliance & Household Durables.................... 0.0%
Water............................................. 0.0%
Miscellaneous..................................... 0.0%
-----------------
100.0%
-----------------
-----------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
40
<PAGE>
THE DIVERSIFIED PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $710,641,345) $836,058,401
Repurchase Agreement (Amortized Cost $97,634,000) 97,634,000
Cash 72,758
Foreign Currency at Value (Cost $3,315,173) 3,276,435
Receivable for Investments Sold 11,978,188
Interest Receivable 2,286,572
Unrealized Appreciation of Forward Foreign
Currency Contracts 697,355
Dividends Receivable 554,529
Foreign Tax Reclaim Receivable 180,337
Receivable for Expense Reimbursement 53,858
Prepaid Trustees' Fees 2,281
Prepaid Expenses and Other Assets 3,090
------------
Total Assets 952,797,804
------------
LIABILITIES
Payable for Investments Purchased 77,741,761
Advisory Fee Payable 382,469
Unrealized Depreciation of Forward Foreign
Currency Contracts 297,881
Variation Margin Payable 289,422
Custody Fee Payable 155,644
Administrative Services Fee Payable 17,822
Foreign Tax Withholding Payable 7,835
Fund Services Fee Payable 956
Administration Fee Payable 727
Accrued Expenses 22,260
------------
Total Liabilities 78,916,777
------------
NET ASSETS
Applicable to Investors' Beneficial Interests $873,881,027
------------
------------
</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, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividend Income (Net of Foreign Withholding Tax
of $264,073 ) $ 6,989,098
Interest Income 15,290,936
-----------
Investment Income 22,280,034
EXPENSES
Advisory Fee $ 3,834,721
Custodian Fees and Expenses 598,907
Administrative Services Fee 186,594
Professional Fees and Expenses 51,127
Fund Services Fee 16,444
Administration Fee 9,900
Printing Expenses 9,443
Trustees' Fees and Expenses 6,531
Insurance Expense 1,985
Amortization of Organization Expenses 18
-----------
Total Expenses 4,715,670
Less: Reimbursement of Expenses (183,744)
-----------
NET EXPENSES 4,531,926
-----------
NET INVESTMENT INCOME 17,748,108
NET REALIZED GAIN ON INVESTMENTS
Investment Transactions 33,138,394
Futures Contracts 1,453,146
Foreign Currency Contracts and Transactions 239,525
-----------
Net Realized Gain 34,831,065
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) OF
Investment Transactions 38,648,092
Futures Contracts (529,182)
Foreign Currency Contracts and Translations (208,323)
-----------
Net Change in Unrealized Appreciation 37,910,587
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $90,489,760
-----------
-----------
</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, 1999 JUNE 30, 1998
-------------- --------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 17,748,108 $ 13,414,451
Net Realized Gain on Investments, Futures and
Foreign Currency Contracts and Transactions 34,831,065 22,974,590
Net Change in Unrealized Appreciation of
Investments, Futures and Foreign Currency
Contracts and Translations 37,910,587 38,417,752
-------------- --------------
Net Increase in Net Assets Resulting from
Operations 90,489,760 74,806,793
-------------- --------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 364,472,896 230,295,407
Withdrawals (140,147,017) (53,675,147)
-------------- --------------
Net Increase from Investors' Transactions 224,325,879 176,620,260
-------------- --------------
Total Increase in Net Assets 314,815,639 251,427,053
NET ASSETS
Beginning of Fiscal Year 559,065,388 307,638,335
-------------- --------------
End of Fiscal Year $ 873,881,027 $ 559,065,388
-------------- --------------
-------------- --------------
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED JUNE
30,
--------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Net Expenses 0.65% 0.65% 0.65% 0.65% 0.65%
Net Investment Income 2.55% 3.13% 3.33% 3.35% 3.71%
Expenses without Reimbursement 0.68% 0.71% 0.80% 0.82% 0.97%
Portfolio Turnover 144% 82% 100% 144% 136%
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
43
<PAGE>
THE DIVERSIFIED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Diversified Portfolio (the "portfolio") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as a no-load, diversified, open-end
management investment company which was organized as a trust under the laws of
the State of New York on January 29, 1993. The portfolio commenced operations on
September 10, 1993. The portfolio's investment objective is to provide a high
total return from a diversified portfolio of equity and fixed income securities.
The portfolio may invest in international markets. The Declaration of Trust
permits the trustees to issue an unlimited number of beneficial interests in the
portfolio.
The portfolio may have elements of risk not typically associated with
investments in the United States due to concentrated investments in a limited
number of countries or regions which may vary throughout the year. Such
concentrations may subject the portfolio to additional risks resulting from
political or economic conditions in such countries or regions and the possible
imposition of adverse governmental laws or currency exchange restrictions
affecting such countries or regions which could cause the securities and their
markets to be less liquid and prices more volatile than those comparable to the
United States.
The ability of the issuers of debt, asset-backed, and mortgage securities held
by the portfolio to meet their obligations may be affected by the economic and
political developments in a specific industry or region. The value of asset-back
and mortgage securities can be significantly affected by changes in interest
rates or rapid principal payments including pre-payments.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual amounts could differ from
those estimates. The following is a summary of the significant accounting
policies of the portfolio:
a) The portfolio values securities that are listed on an exchange using
prices supplied daily by an independent pricing service that are based on
the last traded price on a national securities exchange or in the absence
of recorded trades, at the readily available mean of the bid and asked
prices on such exchange, if such exchange or market constitutes the
broadest and most representative market for the security. Securities
listed on a foreign exchange are valued at the last traded price or, in
the absence of recorded trades, at the readily available mean of the bid
and asked prices on such exchange available before the time when net
assets are valued. Independent pricing service procedures may also include
the use of prices based on yields or prices of securities of comparable
quality, coupon, maturity and type, indications as to values from dealers,
operating data, and general market conditions. Unlisted securities are
valued at the average of the quoted bid and asked price in the
over-the-counter market provided by a principal market maker or dealer. If
prices are not supplied by the portfolio's independent pricing service or
principal market maker or dealer, such securities are priced using fair
values in accordance with procedures adopted by the portfolio's trustees.
All short-term securities with a remaining maturity of sixty days or less
are valued using the amortized cost method.
Trading in securities on most foreign exchanges and over-the-counter
markets is normally completed before the close of the domestic market and
may also take place on days on which the domestic market is closed. If
events materially affecting the value of foreign securities occur between
the time when the
44
<PAGE>
THE DIVERSIFIED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
exchange on which they are traded closes and the time when the portfolio's
net assets are calculated, such securities will be valued at fair value in
accordance with procedures established by and under the general
supervision of the portfolio's trustees.
b) The portfolio's custodian or designated subcustodians, as the case may be
under tri-party repurchase agreements, takes possession of the collateral
pledged for investments in repurchase agreements on behalf of the
portfolio. It is the policy of the portfolio to value the underlying
collateral daily on a mark-to-market basis to determine that the value,
including accrued interest, is at least equal to the repurchase price plus
accrued interest. In the event of default of the obligation to repurchase,
the portfolio has the right to liquidate the collateral and apply the
proceeds in satisfaction of the obligation. Under certain circumstances,
in the event of default or bankruptcy by the other party to the agreement,
realization and/or retention of the collateral or proceeds may be subject
to legal proceedings.
c) The books and records of the portfolio are maintained in U.S. dollars. The
market value of investment securities, other assets and liabilities and
foreign currency contracts are translated at the prevailing exchange rates
at the end of the period. Purchases, sales, income and expenses are
translated at the exchange rates prevailing on the respective dates of
such transactions. Translation gains and losses resulting from changes in
exchange rates during the reporting period and gains and losses realized
upon settlement of foreign currency transactions are reported in the
Statement of Operations. Although the net assets of the portfolio are
presented at the exchange rates and market values prevailing at the end of
the period, the portfolio does not isolate the portion of the results of
operations arising as a result of changes in foreign exchange rates from
the fluctuations arising from changes in the market prices of securities
during the period.
d) Securities transactions are recorded on a trade date basis. Dividend
income is recorded on the ex-dividend date or as of the time that the
relevant ex-dividend date and amount becomes known. Interest income, which
includes the amortization of premiums and discounts, if any, is recorded
on an accrual basis. For financial and tax reporting purposes, realized
gains and losses are determined on the basis of specific lot
identification.
e) The portfolio incurred organization expenses in the amount of $5,000 which
were deferred and are being amortized on a straight-line basis over a
period not to exceed five years beginning with the commencement of
operations of the portfolio.
f ) The portfolio may enter into forward and spot foreign currency contracts
to protect securities and related receivables and payables against
fluctuations in future foreign currency rates and to enhance returns. A
forward foreign currency contract is an agreement to buy or sell
currencies of different countries on a specified future date at a
specified rate. Risks associated with such contracts include the movement
in the value of the foreign currency relative to the U.S. dollar and the
ability of the counterparty to perform.
The market value of the contract will fluctuate with changes in currency
exchange rates. Contracts are valued daily at the current foreign exchange
rates, and the change in the market value is recorded by the portfolio as
unrealized appreciation or depreciation of forward foreign currency
contract translations.
45
<PAGE>
THE DIVERSIFIED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
g) 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.
h) The portfolio intends to be treated as a partnership for federal income
tax purposes. As such, each investor in the portfolio will be taxed on its
share of the portfolio's ordinary income and capital gains. It is intended
that the portfolio's assets will be managed in such a way that an investor
in the portfolio will be able to satisfy the requirements of Subchapter M
of the Internal Revenue Code. The portfolio earns foreign income which may
be subject to foreign withholding taxes at various rates. The portfolio
may be subject to taxes imposed by countries in which it invests. Such
taxes are generally based on income and/or capital gains earned. Taxes are
accrued and applied to net investment income, net realized capital gains
and unrealized appreciation, as applicable, as to the income and/or
capital gains are earned.
2. TRANSACTIONS WITH AFFILIATES
a) The portfolio has Investment Advisory Agreement with J.P. Morgan
Investment Management Inc. ("JPMIM"), an affiliate of Morgan Guaranty
Trust Company of New York ("Morgan") and wholly-owned subsidiary of J.P.
Morgan & Co. Incorporated ("J.P. Morgan"). Under the terms of the
agreement, the portfolio pays JPMIM at an annual rate of 0.55% of the
portfolio's average net assets. For the fiscal year ended June 30, 1999,
such fees amounted to $3,834,721.
b) The portfolio has retained Funds Distributor, Inc. ("FDI"), a registered
broker-dealer, to serve as the co-administrator and exclusive placement
agent. Under a Co-Administration Agreement between FDI and the the
portfolio, FDI provides administrative services necessary for the
operations of the portfolio, furnishes office space and facilities
required for conducting the business of the portfolio and pays the
compensation of the fund's officers affiliated with FDI. The portfolio has
agreed to pay FDI fees equal to its allocable share of an annual
complex-wide charge of $425,000 plus FDI's out-of-pocket expenses. The
amount allocable to the portfolio is based on the ratio of the portfolio's
net assets to the aggregate net assets of the trust and certain other
investment companies subject to similar agreements with FDI. For the
fiscal year ended June 30, 1999, the fee for these services amounted to
$9,900.
46
<PAGE>
THE DIVERSIFIED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
c) The portfolio has an the Administrative Services Agreement (the "Services
Agreement") with Morgan under which Morgan is responsible for certain
aspects of the administration and operation of the portfolio. Under the
Services Agreement, the fund has agreed to pay Morgan a fee equal to its
allocable share of an annual complex-wide charge. This charge is
calculated based on the aggregate average daily net assets of the
portfolio and the other portfolios for which JPMIM acts as an investment
advisor ( the "master portfolio") and J.P. Morgan Series Trust in
accordance with the following annual schedule: 0.09% on the first $7
billion of their aggregate average daily net assets and 0.04% of their
aggregate average daily net assets in excess of $7 billion less the
complex-wide fees payable to FDI. The portion of this charge payable by
the portfolio is determined by the proportionate share that its net assets
bear to the net assets of the master portfolios, other investors in the
master portfolios for which Morgan provides similar services, and J.P.
Morgan Series Trust. For the fiscal year ended June 30, 1999, the fee for
these services amounted to $186,594.
In addition, J.P. 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 until further notification. For the fiscal year ended June 30,
1999, J.P. Morgan has agreed to reimburse the portfolio $183,744 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 trust
represent all the existing shareholders of Group. The portfolio's
allocated portion of Group's costs in performing its services amounted to
$16,444 for the fiscal year ended June 30, 1999.
e) An aggregate annual fee of $75,000 is paid to each trustee for serving as
a trustee of the J.P. Morgan Funds, J.P. Morgan Institutional Funds, the
master portfolios, and J.P. Morgan Series Trust. The Trustees' Fees and
Expenses shown in the financial statements represents the portfolio's
allocated portion of the total fees and expenses. The 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 $3,100.
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the fiscal year
ended June 30, 1999 were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
-------------- ------------
<S> <C> <C>
U.S. Government and Agency Obligations........... $ 628,567,316 $550,728,783
Corporate and Collateralized Obligations......... 547,044,621 419,832,454
-------------- ------------
$1,175,611,937 $970,561,237
-------------- ------------
-------------- ------------
</TABLE>
47
<PAGE>
THE DIVERSIFIED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
At June 30, 1999, the portfolio had open forward foreign currency contracts as
follows:
<TABLE>
<CAPTION>
U.S. DOLLAR NET UNREALIZED
CONTRACTUAL VALUE AT APPRECIATION/
VALUE 6/30/99 (DEPRECIATION)
----------- ----------- --------------
<S> <C> <C> <C>
PURCHASE CONTRACTS
Australian Dollar 1,303,797, expiring 07/23/99... $ 851,119 $ 863,215 $ 12,096
British Pound 1,933,348, expiring
07/23/99........................................ 3,124,209 3,047,969 (76,240)
Euro 6,106,000, expiring 07/23/99................ 6,454,949 6,307,499 (147,450)
Japanese Yen 518,725,720, expiring
07/23/99........................................ 4,320,000 4,299,757 (20,243)
Singapore Dollar, 1,300,000, expiring 07/23/99... 771,513 765,332 (6,181)
Swiss Franc 910,019 for GBP 376,352, expiring
07/23/99........................................ 605,669 599,235 (6,434)
Swiss Franc 234,191, expiring 07/23/99........... 157,281 151,036 (6,245)
</TABLE>
<TABLE>
<CAPTION>
SETTLEMENT
VALUE
-----------
<S> <C> <C> <C>
SALES CONTRACTS
Euro 11,321,223, expiring 07/23/99............... 12,081,938 11,694,826 387,112
Hong Kong Dollar 18,200,000, expiring 07/23/99... 2,348,296 2,344,547 3,749
Japanese Yen 1,352,739,694,
expiring 07/23/99............................... 11,453,543 11,212,962 240,581
New Zealand Dollar 568,620, expiring
07/23/99........................................ 313,480 301,452 12,028
Singapore Dollar 1,300,000 expiring 07/23/99..... 766,961 765,332 1,629
Swedish Krona 1,932,093, expiring 07/23/99....... 232,642 227,570 5,072
---------
NET UNREALIZED APPRECIATION ON FORWARD FOREIGN
CURRENCY CONTRACTS.............................. $ 399,474
---------
---------
</TABLE>
Open futures contracts at June 30, 1999 are summarized as follows:
<TABLE>
<CAPTION>
NET UNREALIZED
APPRECIATION/ CURRENT MARKET VALUE
CONTRACTS LONG (DEPRECIATION) OF CONTRACTS
--------------- -------------- --------------------
<S> <C> <C> <C>
Australian All Ordinary Index, expiring September
1999............................................ 28 $ (12,879) $ 1,379,486
FSTE 100 Index, expiring September 1999.......... 33 (74,380) 3,302,013
Topix Index, expiring September 1999............. 3 (2,142) 348,745
U.S. Long Bond (CBT), expiring September 1999.... 16 6,404 1,854,500
--------------- -------------- --------------------
Totals........................................... 80 $ (82,997) $ 6,884,744
--------------- -------------- --------------------
--------------- -------------- --------------------
</TABLE>
48
<PAGE>
THE DIVERSIFIED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NET UNREALIZED
APPRECIATION/ CURRENT MARKET VALUE
CONTRACTS SHORT (DEPRECIATION) OF CONTRACTS
--------------- -------------- --------------------
<S> <C> <C> <C>
CAC 40 Index, expiring July 1999................. 4 $ (1,762) $ (187,460)
DAX Index, expiring September 1999............... 2 (1,261) (277,858)
Hang Seng Index, expiring July 1999.............. 6 15,981 (523,490)
IBEX Plus Index, expiring July 1999.............. 1 (849) (105,067)
U.S. Five Year Note, expiring September 1999..... 6 (4,536) (654,000)
U.S. Ten Year Note, expiring September 1999...... 284 (365,798) (31,577,250)
--------------- -------------- --------------------
Totals........................................... 303 $ (358,225) $ (33,325,125)
--------------- -------------- --------------------
--------------- -------------- --------------------
</TABLE>
4. CREDIT AGREEMENT
The portfolio is party to a revolving line of credit agreement (the "Agreement")
as discussed more fully in Note 4 of the fund's Notes to the Financial
Statements which are included elsewhere in this report.
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, 1999, 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 five years in the period then ended, 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, 1999 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
August 18, 1999
50
