<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS
JUNE 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ----------------- ---------------------
<S> <C> <C>
EQUITIES (63.9%)
COMMON STOCK (63.7%)
FOREIGN COMMON STOCK (14.8%)
AUSTRALIA (0.3%)
AMP Ltd. (Insurance)(s).......................... 29,092 $ 296,928
Broken Hill Proprietary Company Ltd. (Metals &
Mining)(s)..................................... 27,026 320,463
CSR Ltd. (Building Materials)(s)................. 71,463 199,080
Lend Lease Corp. Ltd. (Financial Services)(s).... 20,103 257,177
Lion Nathan Ltd. (Food, Beverages &
Tobacco)(s).................................... 41,754 93,363
National Australia Bank Ltd. (Banking)(s)........ 26,200 438,837
Southcorp Holdings Ltd. (Food, Beverages &
Tobacco)(s).................................... 83,000 240,190
Telstra Corp. Ltd. (Telecommunication
Services)(s)................................... 90,800 369,611
Telstra Corp. Ltd.- Installment Receipt
(Telecommunication Services)(s)................ 15,332 34,979
Westpac Banking Corp. Ltd. (Banking)(s).......... 33,296 240,884
WMC Ltd. (Metals & Mining)(s).................... 24,836 111,431
--------------------
2,602,943
--------------------
BELGIUM (0.0%)
Agfa Gevaert NV (Industrial Products &
Services)(s)................................... 3,137 72,133
Real Software (Computer Software)(s)............. 1,205 77,384
Ubizen (Computer Software)+(s)................... 3,752 133,062
--------------------
282,579
--------------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ----------------- ---------------------
<S> <C> <C>
BERMUDA (0.8%)
Global Crossing Ltd. (Telecommunication
Services)+..................................... 63,600 $ 1,673,475
RenaissanceRe Holdings Ltd. (Insurance).......... 8,400 365,925
Tyco International Ltd. (Diversified
Manufacturing)................................. 116,500 5,519,187
--------------------
7,558,587
--------------------
CANADA (1.8%)
Certicom Corp. (Computer Software)+.............. 4,400 301,331
Exfo Electro-Optical Engineering, Inc.
(Telecommunications-Equipment)+................ 300 13,163
Genesis Microchip, Inc. (Semiconductors)+........ 2,400 42,900
Nortel Networks Corp. (Telecommunications-
Equipment)..................................... 179,100 12,223,575
Optimal Robotics Corp. (Computer Systems)+....... 7,100 272,462
Seagram Company Ltd. (Entertainment, Leisure &
Media)......................................... 80,100 4,645,800
--------------------
17,499,231
--------------------
DENMARK (0.0%)
Novo Nordisk A/S, B Shares
(Pharmaceuticals)(s)........................... 2,160 369,141
--------------------
FINLAND (0.4%)
Nokia OYJ (Telecommunications-Equipment)(s)...... 56,052 2,871,638
Sampo Insurance Co. Ltd., A Shares
(Insurance)(s)................................. 3,826 155,856
Stora Enso OYJ, R Shares (Forest Products &
Paper)(s)...................................... 30,560 280,479
Tietoenator OYJ (Computer Software)(s)........... 4,451 149,106
--------------------
3,457,079
--------------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
17
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ----------------- ---------------------
<S> <C> <C>
FRANCE (1.0%)
Alstom (Machinery)(s)............................ 12,369 $ 335,633
Aventis SA (Pharmaceuticals)(s).................. 3,107 227,672
Axa (Insurance)(s)............................... 3,785 598,605
BNP Paribas (Financial Services)(s).............. 7,622 736,411
Carrefour SA (Retail)(s)......................... 7,476 513,066
Christian Dior SA (Apparels & Textiles)(s)....... 1,727 393,140
CNP Assurances (Insurance)(s).................... 3,209 109,807
Coface (Financial Services)(s)................... 1,538 147,417
Coflexip SA (Oil-Services)(s).................... 2,054 250,032
Fimatex (Financial Services)+(s)................. 13,931 207,236
France Telecom SA (Telecommunication
Services)(s)................................... 2,890 405,536
Genset SA (Biotechnology)+(s).................... 3,081 221,485
Groupe Danone (Food, Beverages & Tobacco)(s)..... 6,910 920,627
Lafarge SA (Building Materials)(s)............... 6,603 515,177
Lagardere S.C.A. (Multi-Industry)(s)............. 3,918 300,431
Louis Vuitton Moet Hennessy (Food, Beverages &
Tobacco)(s).................................... 527 218,165
Renault SA (Automotive)(s)....................... 7,448 339,811
Rhodia SA (Chemicals)(s)......................... 10,882 183,574
Suez Lyonnaise des Eaux SA (Utilities)(s)........ 2,917 513,054
Total Fina Elf, B Shares (Oil-Services)+(s)...... 9,994 1,538,423
Usinor SA (Metals & Mining)(s)................... 9,569 117,216
Vivendi SA (Utilities)(s)........................ 16,388 1,452,191
--------------------
10,244,709
--------------------
GERMANY (0.8%)
Allianz AG (Insurance)(s)........................ 2,522 909,641
BASF AG (Chemicals)(s)........................... 14,795 597,019
Bayer AG (Chemicals)(s).......................... 15,493 607,068
Brokat Infosystems AG (Computer Software)+(s).... 1,881 148,742
Consors Discount Broker AG (Financial
Services)+(s).................................. 2,295 205,127
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ----------------- ---------------------
<S> <C> <C>
GERMANY (CONTINUED)
DaimlerChrysler AG (Automotive)(s)............... 5,555 $ 290,875
Deutsche Bank AG (Banking)(s).................... 8,961 740,380
Deutsche Lufthansa AG (Airlines)(s).............. 9,348 216,922
Deutsche Telekom AG (Telecommunication
Services)(s)................................... 22,658 1,298,714
E.On AG (Diversified Manufacturing)(s)........... 18,007 871,613
Intershop Communications AG (Computer
Software)+(s).................................. 484 221,240
Marschollek, Lautenschlaeger und Partner AG
(Financial Services)(s)........................ 100 42,174
PrimaCom AG (Broadcasting & Publishing)+(s)...... 3,782 170,377
Schering AG (Pharmaceuticals)(s)................. 7,881 433,595
Siemens AG (Diversified Manufacturing)(s)........ 6,617 1,002,095
--------------------
7,755,582
--------------------
HONG KONG (0.2%)
Bank of East Asia Ltd. (Banking)(s).............. 106,000 247,482
Cable and Wireless HKT Ltd. (Telecommunication
Services)(s)................................... 96,000 211,204
Cheung Kong Holdings Ltd. (Real Estate)(s)....... 21,000 232,352
Hong Kong Electric Holdings Ltd. (Electric)(s)... 96,500 310,719
Hutchison Whampoa Ltd. (Multi-Industry)(s)....... 66,600 837,274
SmarTone Telecommunications Holdings Ltd.
(Telecommunication Services)................... 64,500 142,730
Sunevision Holdings Ltd. (Computer
Systems)+(s)................................... 150,000 120,265
--------------------
2,102,026
--------------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
18
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ----------------- ---------------------
<S> <C> <C>
IRELAND (0.1%)
SmartForce Public Limited Co., Sponsored ADR
(Computer Software)+........................... 7,500 $ 360,000
Trintech Group PLC (Computer Software)+(s)....... 7,784 150,711
--------------------
510,711
--------------------
ISRAEL (0.0%)
ECtel Ltd. (Telecommunication Services)+......... 1,800 41,400
M-Systems Flash Disk Pioneers Ltd. (Computer
Peripherals)+.................................. 3,500 272,563
--------------------
313,963
--------------------
ITALY (0.5%)
Banca Fideuram SPA (Financial Services)(s)....... 25,733 389,707
Banca Popolare di Milano (Banking)(s)............ 39,444 285,443
Bipop-Carire SPA (Banking)(s).................... 22,010 173,835
Credito Emiliano SPA (Banking)(s)................ 70,246 201,318
ENI SPA (Oil-Services)(s)........................ 145,711 844,965
Fiat SPA (Automotive)(s)......................... 7,397 192,706
Mediolanum SPA (Insurance)(s).................... 15,200 248,258
Saipem SPA (Oil-Services)(s)..................... 43,462 258,281
San Paolo - IMI SPA (Banking)(s)................. 23,996 427,572
Telecom Italia Mobile SPA (Telecommunication
Services)(s)................................... 59,404 609,243
Telecom Italia SPA (Telecommunication
Services)(s)................................... 43,351 598,346
UniCredito Italiano SPA (Financial
Services)(s)................................... 70,406 338,095
--------------------
4,567,769
--------------------
JAPAN (3.1%)
Advantest Corp. (Electronics)(s)................. 1,100 245,877
Aiful Corp. (Financial Services)(s).............. 1,800 166,382
Ajinomoto Co., Inc. (Food, Beverages &
Tobacco)(s).................................... 35,000 449,884
Asahi Bank Ltd. (Banking)(s)..................... 33,000 139,105
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ----------------- ---------------------
<S> <C> <C>
JAPAN (CONTINUED)
Bank of Fukuoka Ltd. (Banking)(s)................ 36,000 $ 245,659
Bank of Tokyo - Mitsubishi Ltd. (Banking)(s)..... 45,000 544,823
Bridgestone Corp. (Automotive)(s)................ 18,000 381,929
Chuo Mitsui Trust and Banking Co. Ltd.
(Banking)(s)................................... 200 873
Daiwa Securities Group, Inc. (Financial
Services)(s)................................... 16,000 211,710
DDI Corp. (Telecommunication Services)(s)........ 14 134,965
Ebara Corp. (Machinery)(s)....................... 51,000 692,661
Fuji Bank Ltd. (Banking)(s)...................... 42,000 319,947
Fuji Heavy Industries, Ltd. (Automotive)(s)...... 38,000 276,546
Fujitsu Ltd. (Computer Systems)(s)............... 39,000 1,352,772
Hitachi Ltd. (Electrical Equipment) (s).......... 41,000 592,883
Hitachi Software Engineering Co. (Computer
Software)(s)................................... 1,000 108,691
Honda Motor Co. Ltd. (Automotive)(s)............. 11,000 375,313
Industrial Bank of Japan, Ltd. (Banking)(s)...... 30,000 227,967
Ito - Yokado Co. Ltd. (Retail)(s)................ 3,000 180,899
Kaken Pharmaceutical Co., Ltd.
(Pharmaceuticals)(s)........................... 8,000 62,076
Kawasaki Steel Corp. (Metals & Mining)(s)........ 113,000 162,336
Macnica, Inc. (Distributors)(s).................. 1,300 201,503
Marui Co. Ltd. (Retail)(s)....................... 14,000 268,607
Matsushita Electric Industrial Co., Ltd.
(Electronics)(s)............................... 26,000 675,771
Minebea Co. Ltd. (Electrical Equipment)(s)....... 51,000 641,085
Mitsubishi Chemical Corp. (Chemicals)............ 208,000 855,158
Mitsubishi Corp. (Wholesale & International
Trade)(s)...................................... 88,000 797,618
Mitsubishi Estate Co. Ltd. (Real Estate)(s)...... 28,000 330,268
Namco Ltd. (Entertainment, Leisure & Media)(s)... 6,000 216,625
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ----------------- ---------------------
<S> <C> <C>
JAPAN (CONTINUED)
NEC Corp. (Computer Systems)(s).................. 33,000 $ 1,038,609
Nintendo Co. Ltd. (Entertainment, Leisure &
Media)(s)...................................... 1,900 332,574
Nippon Meat Packers, Inc. (Food, Beverages &
Tobacco)(s).................................... 17,000 249,043
Nippon Telegraph & Telephone Corp.
(Telecommunication Services)(s)................ 136 1,812,391
Nippon Yusen Kabushiki Kaisha
(Transportation)(s)............................ 164,000 790,511
Nishimatsu Construction Co., Ltd.
(Construction & Housing)(s).................... 90,000 355,560
Nissan Motor Co. Ltd. (Automotive)(s)............ 114,000 673,409
Nisshin Steel Co. Ltd. (Metals & Mining)(s)...... 76,000 83,323
Nomura Securities Co Ltd (Finance)(s)............ 23,000 564,104
Omron Corp. (Electrical Equipment)(s)............ 5,000 136,099
Oriental Land Co. Ltd. (Restaurants &
Hotels)(s)..................................... 1,800 184,245
Orix Corp. (Financial Services)(s)............... 1,700 251,453
Osaka Gas Co. Ltd. (Natural Gas)(s).............. 89,000 256,557
Paris Miki, Inc. (Retail)(s)..................... 2,700 176,079
Pioneer Corp. (Electronics)(s)................... 13,000 507,443
Promise Co. Ltd (Financial Services)(s).......... 3,300 261,368
Ricoh Co. Ltd. (Electrical Equipment)(s)......... 17,000 360,711
Rohm Co. Ltd. (Electronics)(s)................... 1,900 556,684
Snow Brand Milk Products Co. Ltd. (Food,
Beverages & Tobacco)(s)........................ 36,000 193,942
Softbank Corp. (Information Processing)(s)....... 4,200 571,618
Sony Corp. (Electronics)(s)...................... 13,400 1,253,816
Sumitomo Bakelite Co. Ltd. (Chemicals)(s)........ 15,000 198,053
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ----------------- ---------------------
<S> <C> <C>
JAPAN (CONTINUED)
Sumitomo Bank Ltd. (Banking)(s).................. 23,000 $ 282,595
Sumitomo Rubber Industries Ltd.
(Automotive)(s)................................ 51,000 308,010
Sumitomo Trust and Banking Co. (Banking)(s)...... 40,000 285,431
Suzuki Motor Corp. (Automotive)(s)............... 14,000 181,012
Taiheiyo Cement Corp. (Building Materials)(s).... 45,000 94,419
Takeda Chemical Industries Ltd.
(Pharmaceuticals)(s)........................... 15,000 986,721
Takefuji Corp. (Financial Services)(s)........... 1,900 230,036
TDK Corp. (Electronics)(s)....................... 1,000 144,039
Tokio Marine & Fire Insurance Co. Ltd.
(Insurance)(s)................................. 19,000 219,801
Tokuyama Corp. (Chemicals)(s).................... 36,000 261,991
Tokyo Electric Power Co., Inc. (Electric)(s)..... 15,500 378,692
Tokyo Electron Ltd. (Electronics)(s)............. 3,000 411,701
Tokyo Gas Co. Ltd. (Natural Gas)(s).............. 78,000 219,687
Tokyo Steel Manufacturing Co. Ltd. (Metals &
Mining)(s)..................................... 21,400 70,184
Toppan Printing Co. Ltd. (Broadcasting &
Publishing)(s)................................. 42,000 445,385
Tostem Corp. (Construction & Housing)(s)......... 26,000 425,122
Toyo Trust & Banking Co. Ltd. (Banking)(s)....... 56,000 189,481
Toyota Motor Corp. Ltd. (Automotive)(s).......... 27,000 1,232,550
Uny Co. Ltd. (Retail)(s)......................... 29,000 401,541
Welfide Corp. (Pharmaceuticals)(s)............... 13,000 166,854
West Japan Railway Co. (Railroads)(s)............ 179 727,470
Yamanouchi Pharmaceutical Co. Ltd.
(Pharmaceuticals)(s)........................... 16,000 875,573
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ----------------- ---------------------
<S> <C> <C>
JAPAN (CONTINUED)
Yasuda Fire & Marine Insurance Co., Ltd.
(Insurance)(s)................................. 31,000 $ 163,782
York - Benimaru Co. Ltd. (Retail)(s)............. 3,400 96,404
--------------------
30,466,006
--------------------
LUXEMBOURG (0.0%)
Audiofina (Broadcasting & Publishing)(s)......... 1,951 252,454
--------------------
NETHERLANDS (1.6%)
ASM Lithography Holding NV (Electronics)+(s)..... 4,819 207,947
Core Laboratories NV (Oil-Services)+............. 4,400 127,600
Equant NV (Computer Systems)+(s)................. 3,703 151,059
Equant NV (Frankfurt line) (Computer
Systems)+(s)................................... 3,658 154,973
Getronics NV (Computer Systems)(s)............... 9,347 144,689
Heineken NV (Food, Beverages & Tobacco)(s)....... 8,886 542,972
ING Groep NV (Financial Services)(s)............. 13,320 903,916
Koninklijke Numico NV (Food, Beverages &
Tobacco)(s).................................... 6,569 312,929
KPN NV (Telecommunication Services)(s)........... 23,338 1,048,007
Lycos Europe NV (Computer Systems)+(s)........... 14,319 135,875
Royal Dutch Petroleum Co. - NY Shares
(Oil-Production)............................... 104,000 6,402,500
Royal Dutch Petroleum Co. (Oil-Production)(s).... 16,257 1,014,407
Royal Philips Electronics NV (Electronics)(s).... 34,643 1,640,338
TNT Post Group NV (Transport & Services)(s)...... 28 758
Unilever NV, NY Shares (Food, Beverages &
Tobacco)....................................... 39,500 1,698,500
United Pan-Europe Communications NV, A Shares
(Telecommunication Services)+(s)............... 14,412 378,362
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ----------------- ---------------------
<S> <C> <C>
NETHERLANDS (CONTINUED)
Versatel Telecom International NV
(Telecommunication Services)+(s)............... 7,175 $ 302,598
VNU NV (Broadcasting & Publishing)(s)............ 5,030 260,829
--------------------
15,428,259
--------------------
NEW ZEALAND (0.0%)
Fletcher Challenge Building (Building
Materials)(s).................................. 11,623 12,365
Fletcher Challenge Energy (Gas Exploration)(s)... 5,916 19,355
Telecom Corp. of New Zealand Ltd.
(Telecommunication Services)(s)................ 60,576 212,442
--------------------
244,162
--------------------
PORTUGAL (0.0%)
PT - Multimedia.com - Servicos de Acesso a
Internet (Computer Software)+(s)............... 4,421 34,027
PT Multimedia - Servicos de Telecomunicacoes
(Telecommunication Services)+(s)............... 4,421 220,351
Telecel-Communicacoes Pessoais SA
(Telecommunication Services)+(s)............... 12,799 195,058
--------------------
449,436
--------------------
SINGAPORE (0.1%)
Chartered Semiconductor Manufacturing Ltd.
(Semiconductors)+(s)........................... 9,000 78,600
DBS Group Holdings Ltd. (Financial
Services)(s)................................... 28,379 364,380
Singapore Press Holdings Ltd. (Broadcasting &
Publishing)(s)................................. 19,000 296,703
--------------------
739,683
--------------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ----------------- ---------------------
<S> <C> <C>
SPAIN (0.4%)
Amadeus Global Travel Distribution SA
(Transport & Services)(s)...................... 16,415 $ 188,018
Banco Bilbao Vizcaya Argentaria SA
(Banking)(s)................................... 31,909 478,650
Banco Santander Central Hispano SA
(Banking)(s)................................... 60,043 635,939
Endesa SA (Electric)(s).......................... 41,535 807,769
Indra Sistemas SA (Information Processing)(s).... 7,198 165,306
Repsol YPF SA (Oil-Production)(s)................ 22,840 456,450
Telefonica SA (Telecommunication Services)+(s)... 69,023 1,488,563
--------------------
4,220,695
--------------------
SWEDEN (0.5%)
Autoliv, Inc., SDR (Automotive)(s)............... 10,125 249,344
Hennes & Mauritz AB, B Shares (Retail)(s)........ 8,049 168,854
Investor AB, B Shares (Financial Services)(s).... 14,606 200,664
LM Ericsson, B Shares (Telecommunications-
Equipment)(s).................................. 119,936 2,386,140
Skandia Forsakrings AB (Insurance)(s)............ 46,597 1,237,841
Skandinaviska Ensklida Banken (Banking)(s)....... 37,538 447,238
--------------------
4,690,081
--------------------
SWITZERLAND (0.9%)
ABB Ltd. (Holding Companies)(s).................. 3,903 468,643
Carrier 1 International SA (Telecommunication
Services)+(s).................................. 2,088 118,079
Compagnie Financiere Richemont AG (Food,
Beverages & Tobacco)(s)........................ 220 594,613
Credit Suisse Group (Financial Services)(s)...... 3,838 765,901
Fantastic Corp (Computer Software)+(s)........... 5,256 52,394
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ----------------- ---------------------
<S> <C> <C>
SWITZERLAND (CONTINUED)
Givaudan (Personal Care)+(s)..................... 161 $ 49,158
Nestle SA (Food, Beverages & Tobacco)(s)......... 697 1,399,487
Novartis AG (Pharmaceuticals)(s)................. 886 1,407,923
Roche Holding AG (Pharmaceuticals)(s)............ 109 1,064,461
Schweizerische Lebensversicherungs-und
Rentenanstalt (Insurance)(s)................... 491 294,401
SGS Societe Generale de Surveillance Holding SA
(Commercial Services)(s)....................... 170 294,816
Swatch Group AG, B shares (Electronics)(s)....... 209 266,568
Swisscom AG (Telecommunication Services)(s)...... 1,651 573,652
UBS AG (Banking)(s).............................. 7,028 1,032,957
Zurich Allied AG (Insurance)(s).................. 1,763 873,856
--------------------
9,256,909
--------------------
UNITED KINGDOM (2.3%)
3i Group PLC (Financial Services)(s)............. 13,200 271,553
ARM Holdings PLC (Electronics)+(s)............... 27,600 295,804
AstraZeneca Group PLC (Pharmaceuticals)(s)....... 8,200 382,940
BAE Systems PLC (Aerospace)(s)................... 50,121 312,592
Bank of Scotland (Banking)(s).................... 28,522 271,361
BG Group PLC (Gas Exploration)(s)................ 50,211 324,555
Billiton PLC (Metals & Mining)(s)................ 63,300 257,761
Bookham Technology PLC (Electronics)+(s)......... 1,200 69,864
BP Amoco PLC (Oil-Production)(s)................. 273,082 2,620,860
British Airways PLC (Airlines)(s)................ 18,800 108,144
British American Tobacco PLC (Food, Beverages &
Tobacco)(s).................................... 25,415 169,664
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ----------------- ---------------------
<S> <C> <C>
UNITED KINGDOM (CONTINUED)
British Sky Broadcasting Group PLC
(Broadcasting & Publishing)+(s)................ 20,900 $ 408,762
British Telecommunications PLC
(Telecommunications)(s)........................ 50,400 651,553
Cable & Wireless PLC (Telecommunications)(s)..... 13,152 222,784
Cadbury Schweppes PLC (Food, Beverages &
Tobacco)(s).................................... 62,000 407,327
Carlton Communications PLC (Entertainment,
Leisure & Media)(s)............................ 12,241 157,506
Celltech Group PLC (Pharmaceuticals)+(s)......... 8,300 160,823
CMG PLC (Computer Systems)(s).................... 9,900 138,774
Compass Group PLC (Food, Beverages &
Tobacco)(s).................................... 17,600 231,922
Dixons Group PLC (Retail)(s)..................... 40,956 166,775
FirstGroup PLC (Transport & Services)(s)......... 22,500 80,381
Glaxo Wellcome PLC (Pharmaceuticals)(s).......... 49,200 1,435,186
Glynwed International PLC (Diversified
Manufacturing)(s).............................. 39,900 143,147
Granada Group PLC (Consumer Goods &
Services)(s)................................... 19,900 198,819
Great Universal Stores PLC (Retail)(s)........... 28,200 181,426
Hanson PLC (Building Materials)(s)............... 46,800 330,845
Hays PLC (Commercial Services)(s)................ 43,600 243,212
Hilton Group PLC (Restaurants & Hotels)(s)....... 41,400 145,395
HSBC Holdings PLC (Financial Services)(s)........ 77,000 880,616
Imperial Chemical Industries PLC
(Chemicals)(s)................................. 15,500 123,066
Johnson Matthey PLC (Chemicals)(s)............... 5,038 70,926
Kingfisher PLC (Retail)(s)....................... 21,800 198,497
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ----------------- ---------------------
<S> <C> <C>
UNITED KINGDOM (CONTINUED)
Lloyds TSB Group PLC (Banking)(s)................ 87,900 $ 830,300
Marconi PLC (Telecommunications-Equipment)(s).... 37,500 488,193
MFI Furniture Group PLC (Household
Products)(s)................................... 60,953 58,822
National Power PLC (Electric)(s)................. 28,084 178,979
Northern Foods PLC (Food, Beverages &
Tobacco)(s).................................... 46,300 83,404
Nycomed Amersham PLC (Medical Supplies)(s)....... 24,445 242,748
Ocean Group PLC (Transport & Services)(s)........ 9,700 160,051
Pearson PLC (Broadcasting & Publishing)(s)....... 9,900 314,714
Prudential PLC (Insurance)(s).................... 29,500 432,274
Reckitt Benckiser PLC (Household Products)(s).... 27,200 304,693
Reuters Group PLC (Broadcasting &
Publishing)(s)................................. 20,382 347,722
Royal & Sun Alliance Insurance Group PLC
(Insurance)(s)................................. 65,827 427,487
Royal Bank of Scotland Group PLC (Banking)(s).... 25,400 425,256
Sage Group PLC (Computer Software)(s)............ 24,100 195,179
Schroders PLC (Financial Services)(s)............ 6,000 107,902
Scottish Power PLC (Electric)(s)................. 36,900 312,807
Severn Trent PLC (Water)(s)...................... 14,468 157,799
Smith & Nephew PLC (Medical Supplies)(s)......... 39,800 147,006
SmithKline Beecham PLC (Pharmaceuticals)(s)...... 68,900 902,187
Standard Chartered PLC (Banking)(s).............. 19,500 242,938
Tesco PLC (Retail)(s)............................ 101,400 315,436
TI Group PLC (Diversified Manufacturing)(s)...... 24,100 131,335
Trinity Mirror PLC (Broadcasting &
Publishing)(s)................................. 9,900 88,869
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
23
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ----------------- ---------------------
<S> <C> <C>
UNITED KINGDOM (CONTINUED)
United News & Media PLC (Broadcasting &
Publishing)(s)................................. 8,400 $ 120,799
Vodafone AirTouch PLC (Telecommunications)(s).... 763,457 3,085,725
Williams PLC (Diversified Manufacturing)(s)...... 27,900 162,602
Woolwich PLC (Financial Services)(s)............. 32,100 135,937
WPP Group PLC (Business & Public Services)(s).... 17,300 252,717
--------------------
22,316,721
--------------------
TOTAL FOREIGN COMMON STOCK
(COST $114,439,077)........................... 145,328,726
--------------------
UNITED STATES (48.9%)
BASIC INDUSTRIES (1.4%)
CHEMICALS (0.8%)
Air Products and Chemicals, Inc.................. 47,400 1,460,512
Albemarle Corp................................... 9,900 195,525
Bush Boake Allen, Inc.+.......................... 2,400 105,000
Dow Chemical Co.................................. 38,600 1,165,237
Geon Co.......................................... 18,400 340,400
Georgia Gulf Corp................................ 14,600 303,862
Minerals Technologies, Inc....................... 7,300 335,800
PPG Industries, Inc.............................. 26,100 1,156,556
Praxair, Inc..................................... 18,400 688,850
Rohm & Haas Co................................... 47,700 1,645,650
Solutia, Inc..................................... 8,100 111,375
Symyx Technologies, Inc.+........................ 5,700 242,873
Wellman, Inc..................................... 24,400 394,975
--------------------
8,146,615
--------------------
FOREST PRODUCTS & PAPER (0.3%)
Bowater, Inc..................................... 3,600 158,850
Buckeye Technologies, Inc.+...................... 9,000 197,437
Caraustar Industries, Inc........................ 19,200 290,400
Fort James Corp.................................. 24,300 561,937
Georgia-Pacific Group............................ 5,300 139,125
International Paper Co........................... 12,600 375,637
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ----------------- ---------------------
<S> <C> <C>
FOREST PRODUCTS & PAPER (CONTINUED)
Smurfit-Stone Container Corp.+................... 39,500 $ 508,562
Temple-Inland, Inc............................... 6,300 264,600
--------------------
2,496,548
--------------------
METALS & MINING (0.3%)
Alcoa, Inc....................................... 80,100 2,322,900
Allegheny Technologies, Inc...................... 16,100 289,800
Mueller Industries, Inc.+........................ 7,900 221,200
Nucor Corp....................................... 7,200 238,950
--------------------
3,072,850
--------------------
TOTAL BASIC INDUSTRIES......................... 13,716,013
--------------------
CONSUMER GOODS & SERVICES (9.2%)
APPARELS & TEXTILES (0.1%)
Genesco, Inc.+................................... 4,100 65,856
Jones Apparel Group, Inc.+....................... 14,200 333,700
Vans, Inc.+...................................... 5,000 73,125
--------------------
472,681
--------------------
AUTOMOTIVE (0.9%)
BorgWarner, Inc.................................. 3,500 122,937
Dana Corp........................................ 25,500 540,281
Delphi Automotive Systems Corp................... 60,200 876,662
Ford Motor Co.................................... 101,300 4,355,900
General Motors Corp.............................. 44,400 2,577,975
Goodyear Tire and Rubber Co...................... 16,200 324,000
Visteon Corp.+................................... 11,430 138,589
--------------------
8,936,344
--------------------
BROADCASTING & PUBLISHING (1.2%)
AT&T Corp. - Liberty Media Group, Class A+....... 76,900 1,864,825
Comcast Corp., Special Class A+.................. 46,800 1,895,400
Entercom Communications Corp.+................... 4,600 224,250
Gannett Co., Inc................................. 25,700 1,537,181
Knight-Ridder, Inc............................... 5,500 292,531
MediaOne Group, Inc.+............................ 69,200 4,588,911
New York Times Co., Class A...................... 11,800 466,100
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
24
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ----------------- ---------------------
<S> <C> <C>
BROADCASTING & PUBLISHING (CONTINUED)
Spanish Broadcasting System, Inc., Class A+...... 14,500 $ 298,156
Valassis Communications, Inc.+................... 10,600 404,125
--------------------
11,571,479
--------------------
ENTERTAINMENT, LEISURE & MEDIA (1.3%)
America Online, Inc.+............................ 110,400 5,823,600
American Classic Voyages Co.+.................... 5,200 107,250
Anchor Gaming+................................... 7,800 373,912
Concord Camera Corp.+............................ 1,800 37,575
Fox Entertainment Group, Inc., Class A+.......... 14,500 440,437
Hasbro, Inc...................................... 13,500 203,344
iBEAM Broadcasting Corp.+........................ 10,800 194,400
International Game Technology+................... 14,000 371,000
JAKKS Pacific, Inc.+............................. 7,000 103,250
Time Warner, Inc................................. 73,100 5,555,600
--------------------
13,210,368
--------------------
FOOD, BEVERAGES & TOBACCO (1.3%)
Beringer Wine Estates Holdings, Inc.,
Class B+....................................... 2,500 88,281
Bestfoods........................................ 14,600 1,011,050
Coca-Cola Co..................................... 27,300 1,568,044
General Mills, Inc............................... 12,100 462,825
H.J. Heinz Co.................................... 31,300 1,369,375
Keebler Foods Co................................. 7,900 293,287
Kellogg Co....................................... 35,400 1,053,150
Nabisco Holdings Corp., Class A.................. 800 42,000
Philip Morris Companies, Inc..................... 232,200 6,167,812
Quaker Oats Co................................... 13,000 976,625
--------------------
13,032,449
--------------------
HOUSEHOLD APPLIANCES & FURNISHINGS (0.0%)
Stanley Furniture Co., Inc.+..................... 11,100 244,200
--------------------
HOUSEHOLD PRODUCTS (0.9%)
Alberto-Culver Co., Class B...................... 7,300 223,106
Clorox Co........................................ 23,200 1,039,650
Kimberly-Clark Corp.............................. 42,300 2,426,962
Procter & Gamble Co.............................. 89,900 5,146,775
--------------------
8,836,493
--------------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ----------------- ---------------------
<S> <C> <C>
PERSONAL CARE (0.4%)
Estee Lauder Companies, Inc., Class A............ 7,300 $ 360,894
Gillette Co...................................... 91,100 3,182,806
--------------------
3,543,700
--------------------
RESTAURANTS & HOTELS (0.3%)
Aztar Corp.+..................................... 7,000 108,500
Extended Stay America, Inc.+..................... 5,700 52,725
Marriott International, Inc., Class A............ 20,400 735,675
McDonald's Corp.................................. 18,200 599,462
Starwood Hotels & Resorts Worldwide, Inc......... 34,000 1,107,125
--------------------
2,603,487
--------------------
RETAIL (2.8%)
BJ's Wholesale Club, Inc.+....................... 1,300 42,900
Circuit City Stores-Circuit City Group........... 4,200 139,387
Cost Plus, Inc.+................................. 6,700 192,206
Federated Department Stores, Inc.+............... 26,000 877,500
Gap, Inc......................................... 84,000 2,625,000
Home Depot, Inc.................................. 64,200 3,205,987
J.C. Penney, Inc................................. 21,500 396,406
Kroger Co.+...................................... 63,700 1,405,381
Limited Inc...................................... 34,400 743,900
Lowe's Companies, Inc............................ 27,100 1,112,794
May Department Stores Co......................... 33,700 808,800
Nordstrom, Inc................................... 5,700 137,512
Pacific Sunwear of California, Inc.+............. 3,500 65,625
School Specialty, Inc.+.......................... 15,100 280,294
Sears, Roebuck & Co.............................. 25,000 815,625
Sonic Automotive, Inc.+.......................... 4,400 47,025
Target Corp...................................... 43,200 2,505,600
TJX Companies, Inc............................... 34,000 637,500
Wal-Mart Stores, Inc............................. 205,100 11,818,887
--------------------
27,858,329
--------------------
TOTAL CONSUMER GOODS & SERVICES................ 90,309,530
--------------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
25
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ----------------- ---------------------
<S> <C> <C>
ENERGY (2.6%)
GAS EXPLORATION (0.1%)
Kinder Morgan, Inc............................... 5,600 $ 193,550
Newfield Exploration Co.+........................ 10,000 391,250
Spinnaker Exploration Co.+....................... 3,900 99,937
Union Pacific Resources Group, Inc............... 26,000 572,000
--------------------
1,256,737
--------------------
GAS PIPELINES (0.2%)
Columbia Energy Group............................ 8,000 525,000
Dynegy, Inc., Class A............................ 7,300 498,681
Williams Companies, Inc.......................... 20,800 867,100
--------------------
1,890,781
--------------------
NATURAL GAS (0.1%)
El Paso Energy Corp.............................. 11,400 580,687
--------------------
OIL PRODUCTION (2.0%)
Apache Corp...................................... 5,500 323,469
Chevron Corp..................................... 32,900 2,790,331
Conoco, Inc., Class A............................ 16,000 352,000
Conoco, Inc., Class B............................ 14,800 363,525
Devon Energy Corp................................ 3,800 213,512
Exxon Mobil Corp................................. 168,800 13,250,800
Phillips Petroleum Co............................ 3,300 167,269
Texaco, Inc...................................... 26,800 1,427,100
Tosco Corp....................................... 6,100 172,706
Unit Corp.+...................................... 3,300 44,550
Valero Energy Corp............................... 4,000 127,000
--------------------
19,232,262
--------------------
OIL SERVICES (0.2%)
Baker Hughes, Inc................................ 16,300 521,600
Cooper Cameron Corp.+............................ 6,600 435,600
Global Industries, Ltd.+......................... 4,700 88,712
Global Marine, Inc.+............................. 16,200 456,637
Gulf Island Fabrication, Inc.+................... 2,300 39,100
National-Oilwell, Inc.+.......................... 13,200 433,950
Smith International, Inc.+....................... 2,600 189,312
Universal Compression Holdings, Inc.+............ 2,600 87,100
--------------------
2,252,011
--------------------
TOTAL ENERGY................................... 25,212,478
--------------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ----------------- ---------------------
<S> <C> <C>
FINANCE (6.9%)
BANKING (1.4%)
Bank of America Corp............................. 6,400 $ 275,200
Bank One Corp.................................... 57,100 1,516,719
Bank United Corp., Class A....................... 11,200 394,100
Banknorth Group, Inc............................. 10,300 157,719
Charter One Financial, Inc....................... 15,100 347,300
City National Corp............................... 4,200 145,950
Comerica, Inc.................................... 11,300 507,087
Compass Bancshares, Inc.......................... 4,500 76,781
Dime Bancorp, Inc................................ 12,000 189,000
First Tennessee National Corp.................... 9,400 155,687
First Union Corp................................. 86,100 2,136,356
Firstar Corp..................................... 37,100 781,419
FleetBoston Financial Corp....................... 19,200 652,800
Golden West Financial Corp....................... 8,200 334,662
GreenPoint Financial Corp........................ 8,000 150,000
Hibernia Corp., Class A.......................... 8,200 89,175
KeyCorp.......................................... 38,900 685,612
Marshall & Ilsley Corp........................... 8,700 361,050
Mercantile Bankshares Corp....................... 4,900 146,081
National Commerce Bancorporation................. 8,100 130,106
North Fork Bancorporation, Inc................... 12,500 189,062
Pacific Century Financial Corp................... 5,700 83,362
PNC Financial Services Group..................... 25,900 1,214,062
Regions Financial Corp........................... 10,300 204,712
SouthTrust Corp.................................. 12,100 273,762
Sterling Bancshares, Inc......................... 2,300 24,869
Summit Bancorp................................... 12,700 312,737
TCF Financial Corp............................... 4,200 107,887
U.S. Bancorp..................................... 54,100 1,041,425
Union Planters Corp.............................. 9,700 270,994
Washington Mutual, Inc........................... 39,400 1,137,675
--------------------
14,093,351
--------------------
FINANCIAL SERVICES (3.8%)
A.G. Edwards, Inc................................ 3,300 128,700
American Capital Strategies, Ltd................. 2,900 69,237
Ameritrade Holding Corp., Class A+............... 9,800 113,925
Associates First Capital Corp., Class A.......... 53,000 1,182,562
AXA Financial, Inc............................... 20,500 697,000
Bear Stearns Companies, Inc...................... 8,900 370,462
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
26
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ----------------- ---------------------
<S> <C> <C>
FINANCIAL SERVICES (CONTINUED)
Capital One Financial Corp....................... 8,400 $ 374,850
Charles Schwab Corp.............................. 112,921 3,796,969
CIT Group, Inc., Class A......................... 18,700 303,875
Citigroup, Inc................................... 174,100 10,489,525
Donaldson, Lufkin & Jenrette, Inc. - DLJ
Direct......................................... 2,000 84,875
Doral Financial Corp............................. 9,500 108,656
E*TRADE Group, Inc.+............................. 24,600 405,900
Fannie Mae....................................... 73,400 3,830,562
Franklin Resources, Inc.......................... 18,600 564,975
Freddie Mac...................................... 50,200 2,033,100
Gabelli Asset Management, Inc., Class A+......... 4,500 112,500
Goldman Sachs Group, Inc......................... 34,600 3,282,675
John Hancock Financial Services, Inc.+........... 44,900 1,063,569
Lehman Brothers Holdings, Inc.................... 9,800 926,712
Medallion Financial Corp......................... 3,300 50,944
Merrill Lynch & Co., Inc......................... 30,700 3,530,500
Morgan Stanley Dean Witter & Co.................. 26,100 2,172,825
PaineWebber Group, Inc........................... 8,100 368,550
Providian Financial Corp......................... 10,600 954,000
TD Waterhouse Group, Inc. +...................... 30,000 519,375
--------------------
37,536,823
--------------------
INSURANCE (1.5%)
Aetna, Inc....................................... 15,800 1,014,162
Allstate Corp.................................... 118,500 2,636,625
Ambac Financial Group, Inc....................... 10,300 564,569
American General Corp............................ 2,200 134,200
American International Group, Inc................ 16,400 1,927,000
Aon Corp......................................... 24,200 751,712
CIGNA Corp....................................... 15,700 1,467,950
E. W. Blanch Holdings, Inc....................... 4,100 83,281
Financial Security Assurance Holdings Ltd........ 2,200 166,925
Hartford Financial Services Group, Inc........... 25,600 1,432,000
Hooper Holmes, Inc............................... 17,000 136,000
Lincoln National Corp............................ 26,200 946,475
MBIA, Inc........................................ 14,500 698,719
MetLife, Inc.+................................... 83,500 1,758,719
MIIX Group, Inc.................................. 1,600 19,200
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ----------------- ---------------------
<S> <C> <C>
INSURANCE (CONTINUED)
Nationwide Financial Services, Inc., Class A..... 8,600 $ 282,725
Protective Life Corp............................. 5,400 143,775
StanCorp Financial Group, Inc.................... 3,500 112,437
Torchmark Corp................................... 19,100 471,531
--------------------
14,748,005
--------------------
REAL ESTATE INVESTMENT TRUSTS (0.2%)
Arden Realty, Inc................................ 8,000 188,000
CenterPoint Properties Corp...................... 4,200 171,150
Cousins Properties, Inc.......................... 7,100 273,350
General Growth Properties, Inc................... 6,000 190,500
Macerich Co...................................... 4,500 99,281
Manufactured Home Communities, Inc............... 6,300 150,806
Mills Corp....................................... 3,600 67,725
Mission West Properties, Inc..................... 9,900 103,950
Post Properties, Inc............................. 9,322 410,168
--------------------
1,654,930
--------------------
TOTAL FINANCE.................................. 68,033,109
--------------------
HEALTH CARE (6.0%)
BIOTECHNOLOGY (0.2%)
Aclara Biosciences, Inc.+........................ 900 45,844
Affymetrix, Inc.+................................ 1,900 313,737
Exelixis, Inc.+.................................. 3,200 106,800
Gene Logic, Inc.+................................ 1,500 53,531
Genzyme Corp.+................................... 3,900 231,806
Human Genome Sciences, Inc. +.................... 5,200 693,550
Incyte Genomics, Inc.+........................... 1,400 115,062
Maxygen, Inc.+................................... 1,400 79,472
Millennium Pharmaceuticals, Inc.+................ 400 44,750
Neurocrine Biosciences, Inc.+.................... 5,100 181,369
Nexell Therapeutics Inc.+........................ 26 387
Orchid Biosciences +............................. 6,800 258,187
--------------------
2,124,495
--------------------
HEALTH SERVICES (0.4%)
Accredo Health, Inc.+............................ 4,800 165,900
Allscripts, Inc.+................................ 4,100 94,300
Charles River Laboratories
International, Inc.+........................... 1,100 24,406
Community Health Care+........................... 2,200 35,612
HCA - The Healthcare Corp........................ 53,500 1,625,062
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
27
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ----------------- ---------------------
<S> <C> <C>
HEALTH SERVICES (CONTINUED)
Omnicare, Inc.................................... 3,900 $ 35,344
Tenet Healthcare Corp.+.......................... 36,600 988,200
Wellpoint Health Networks, Inc.+................. 7,300 528,794
--------------------
3,497,618
--------------------
MEDICAL SUPPLIES (0.4%)
Baxter International, Inc........................ 600 42,187
Becton, Dickinson and Co......................... 28,000 803,250
Boston Scientific Corp.+......................... 19,700 432,169
C. R. Bard, Inc.................................. 4,300 206,937
Cyberonics Inc................................... 2,600 31,200
Eclipse Surgical Technologies, Inc.+............. 1,600 7,000
Guidant Corp.+................................... 1,400 69,300
I-STAT Corp.+.................................... 8,700 151,706
Medtronic, Inc................................... 32,000 1,594,000
ORATEC Interventions, Inc.+...................... 3,300 110,137
PE Corp. - PE Biosystems Group................... 700 46,112
ResMed, Inc.+.................................... 4,100 109,675
St. Jude Medical, Inc.+.......................... 6,000 275,250
--------------------
3,878,923
--------------------
PHARMACEUTICALS (5.0%)
Abbott Laboratories.............................. 72,100 3,212,956
Abgenix, Inc.+................................... 2,400 287,663
Akorn, Inc.+..................................... 12,600 100,013
ALZA Corp.+...................................... 56,900 3,364,213
American Home Products Corp...................... 62,900 3,695,375
Bindley Western Industries, Inc.................. 7,300 192,994
Bristol-Myers Squibb Co.......................... 128,800 7,502,600
Eli Lilly and Co................................. 83,300 8,319,588
Enzon Inc.+...................................... 2,400 102,000
Forest Laboratories, Inc.+....................... 7,700 777,700
Gilead Sciences, Inc.+........................... 800 56,900
IDEC Pharmaceuticals Corp.+...................... 3,200 375,400
ILEX Oncology, Inc.+............................. 2,200 77,550
Johnson & Johnson................................ 2,100 213,938
Ligand Pharmaceuticals, Inc., Class B+........... 23,800 313,863
Merck & Co., Inc................................. 50,600 3,877,225
Pfizer, Inc...................................... 131,500 6,312,000
Pharmacia Corp................................... 128,200 6,626,338
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ----------------- ---------------------
<S> <C> <C>
PHARMACEUTICALS (CONTINUED)
Schering-Plough Corp............................. 68,900 $ 3,479,450
Trimeris, Inc.+.................................. 2,800 195,825
Vertex Pharmaceuticals, Inc.+.................... 3,600 379,350
--------------------
49,462,941
--------------------
TOTAL HEALTH CARE.............................. 58,963,977
--------------------
INDUSTRIAL PRODUCTS & SERVICES (4.0%)
BUILDING MATERIALS (0.0%)
Elcor Corp....................................... 8,450 194,350
--------------------
BUSINESS & PUBLIC SERVICES (0.1%)
FedEx Corp.+..................................... 11,600 440,800
Obie Media Corp.+................................ 4,250 34,000
Vicinity Corp.+.................................. 2,300 45,138
--------------------
519,938
--------------------
CAPITAL GOODS (0.1%)
PACCAR, Inc...................................... 9,300 369,094
Shaw Group, Inc.+................................ 6,000 282,750
--------------------
651,844
--------------------
COMMERCIAL SERVICES (0.4%)
Cendant Corp.+................................... 169,800 2,377,200
CheckFree Holdings Corp.+........................ 4,500 232,031
CoStar Group, Inc.+.............................. 2,900 72,681
On Assignment, Inc.+............................. 14,600 445,300
Source Information Management Co.+............... 6,800 103,700
--------------------
3,230,912
--------------------
CONSTRUCTION & HOUSING (0.0%)
Dycom Industries, Inc.+.......................... 2,600 119,600
--------------------
DIVERSIFIED MANUFACTURING (2.9%)
Agilent Technologies, Inc.+...................... 13,000 958,750
Cooper Industries, Inc........................... 15,000 488,438
Corning, Inc..................................... 4,900 1,322,388
Eastman Kodak Co................................. 28,600 1,701,700
Eaton Corp....................................... 10,600 710,200
General Electric Co.............................. 373,000 19,769,000
GenTek, Inc...................................... 17,320 193,768
Honeywell International, Inc..................... 71,300 2,401,919
ITT Industries, Inc.............................. 12,800 388,800
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
28
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ----------------- ---------------------
<S> <C> <C>
DIVERSIFIED MANUFACTURING (CONTINUED)
Johnson Controls, Inc............................ 7,300 $ 374,581
Parker Hannifin Corp............................. 8,700 297,975
--------------------
28,607,519
--------------------
ELECTRICAL EQUIPMENT (0.1%)
Emerson Electric Co.............................. 20,800 1,255,800
W.W. Grainger, Inc............................... 2,500 77,031
--------------------
1,332,831
--------------------
MACHINERY (0.3%)
Applied Science and Technology, Inc.+............ 5,300 137,138
Capstone Turbine Corp.+.......................... 700 31,544
Caterpillar, Inc................................. 32,500 1,100,938
Deere & Co....................................... 13,400 495,800
IDEX Corp........................................ 4,800 151,500
Ingersoll-Rand Co................................ 23,600 949,900
McDermott International, Inc..................... 26,800 236,175
--------------------
3,102,995
--------------------
MANUFACTURING (0.1%)
Meade Instruments Corp.+......................... 6,000 150,750
Mettler-Toledo International, Inc.+.............. 11,900 476,000
MKS Instruments, Inc.+........................... 4,600 179,975
Monaco Coach Corp.+.............................. 7,100 96,738
Rayovac Corp.+................................... 10,900 243,888
Snap-on, Inc..................................... 2,600 69,225
--------------------
1,216,576
--------------------
TOTAL INDUSTRIAL PRODUCTS & SERVICES........... 38,976,565
--------------------
TECHNOLOGY (13.6%)
AEROSPACE (0.1%)
B.F. Goodrich Co................................. 12,500 425,781
L-3 Communications Holdings, Inc.+............... 3,200 182,600
Titan Corp.+..................................... 2,900 129,775
--------------------
738,156
--------------------
COMPUTER PERIPHERALS (0.5%)
Cirrus Logic, Inc.+.............................. 5,200 83,200
EMC Corp.+....................................... 20,600 1,584,913
Integrated Circuit Systems, Inc.+................ 6,300 107,888
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ----------------- ---------------------
<S> <C> <C>
COMPUTER PERIPHERALS (CONTINUED)
JNI Corp.+....................................... 1,300 $ 41,113
Lexmark International Group, Inc., Class A+...... 7,800 524,550
Seagate Technology, Inc.+........................ 44,600 2,453,000
StorageNetworks, Inc.+........................... 700 63,175
--------------------
4,857,839
--------------------
COMPUTER SOFTWARE (3.6%)
Accrue Software, Inc.+........................... 4,100 145,550
Adobe Systems, Inc............................... 7,600 988,000
Art Technology Group, Inc.+...................... 3,600 363,375
Autodesk, Inc.................................... 3,900 135,281
BMC Software, Inc.+.............................. 14,700 536,320
Citrix Systems, Inc.+............................ 13,600 257,550
Clarent Corp.+................................... 5,400 386,100
click2learn.com, Inc.+........................... 9,400 165,675
Computer Associates International, Inc........... 38,900 1,991,194
Corillian Corp.+................................. 3,300 54,863
E.piphany, Inc.+................................. 1,100 117,906
eSPEED, Inc., Class A+........................... 7,500 325,781
Excalibur Technologies Corp.+.................... 3,400 135,788
FASTNET Corp.+................................... 4,900 18,375
Informatica Corp.+............................... 4,000 327,750
Mediaplex, Inc.+................................. 7,000 135,188
Metasolv Software, Inc.+......................... 1,600 70,400
Microsoft Corp.+................................. 261,300 20,904,000
Network Associates, Inc.+........................ 7,200 146,700
Nuance Communications, Inc.+..................... 600 49,988
Oracle Corp.+.................................... 47,200 3,967,750
Peregrine Systems, Inc.+......................... 7,800 270,563
Precise Software Solutions Ltd.+................. 1,200 28,800
Quest Software, Inc.+............................ 600 33,225
Sequoia Software Corp.+.......................... 3,600 58,950
Siebel Systems, Inc.+............................ 11,000 1,799,188
Software Technlogies Corp.+...................... 5,700 174,919
Sonic Foundry, Inc.+............................. 4,800 100,800
Symantec Corp.+.................................. 3,200 172,600
Tibco Software, Inc.+............................ 2,800 300,256
Tumbleweed Communications Corp.+................. 4,300 218,763
Ulticom, Inc.+................................... 1,100 26,417
Veritas Software Corp.+.......................... 5,500 621,586
Watchguard Technologies, Inc.+................... 4,800 263,700
Websense, Inc.+.................................. 2,100 52,763
WebTrends Corp.+................................. 4,500 174,094
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
29
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ----------------- ---------------------
<S> <C> <C>
COMPUTER SOFTWARE (CONTINUED)
Wind River Systems, Inc.+........................ 4,500 $ 170,438
Witness Systems, Inc.+........................... 6,200 151,125
--------------------
35,841,721
--------------------
COMPUTER SYSTEMS (2.7%)
Apple Computer, Inc.+............................ 14,800 775,150
Compaq Computer Corp............................. 86,400 2,208,600
Dell Computer Corp.+............................. 148,300 7,313,044
Hewlett-Packard Co............................... 27,700 3,459,038
Information Resource Engineering, Inc.+.......... 100 2,525
International Business Machines Corp............. 24,200 2,651,413
PRI Automation, Inc.+............................ 3,300 215,789
Redback Networks, Inc.+.......................... 300 53,400
Sun Microsystems, Inc.+.......................... 113,700 10,339,594
--------------------
27,018,553
--------------------
ELECTRONICS (2.4%)
August Technology Corp.+......................... 1,400 23,013
Cisco Systems, Inc.+............................. 340,300 21,630,319
DDi Corp.+....................................... 10,800 307,800
Manufacturers' Services Ltd.+.................... 1,900 39,069
Molecular Devices Corp.+......................... 600 41,513
Power-One, Inc.+................................. 3,500 398,781
Rockwell International Corp...................... 23,300 733,950
--------------------
23,174,445
--------------------
INFORMATION PROCESSING (0.2%)
Automatic Data Processing, Inc................... 13,000 696,313
Computer Horizons Corp.+......................... 10,200 137,063
Diamond Technology Partners, Inc.+............... 3,400 299,200
Digital Island, Inc.+............................ 2,900 141,013
DoubleClick, Inc.+............................... 8,300 316,438
eFunds Corp.+.................................... 6,225 72,366
Electronic Data Systems Corp..................... 13,200 544,500
Lifeminders, Inc.+............................... 2,300 67,994
Visual Networks, Inc.+........................... 7,700 219,450
--------------------
2,494,337
--------------------
SEMICONDUCTORS (4.1%)
ACT Manufacturing, Inc.+......................... 5,900 273,981
Advanced Micro Devices, Inc. +................... 8,800 679,800
Altera Corp.+.................................... 11,400 1,162,088
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ----------------- ---------------------
<S> <C> <C>
SEMICONDUCTORS (CONTINUED)
Applied Materials, Inc.+......................... 50,300 $ 4,558,438
ATMI, Inc.+...................................... 10,300 478,950
C-Cube Microsystems Inc.+........................ 9,500 186,438
Exar Corp.+...................................... 7,300 636,469
Intel Corp....................................... 163,800 21,898,013
Kopin Corp.+..................................... 6,900 477,825
Lam Research Corp.+.............................. 6,400 240,000
Lattice Semiconductor Corp.+..................... 8,200 566,825
MMC Networks, Inc.+.............................. 2,100 112,219
National Semiconductor Corp.+.................... 11,400 646,950
Silicon Image, Inc.+............................. 3,200 159,600
Silicon Laboratories, Inc.+...................... 1,400 74,375
Texas Instruments, Inc........................... 113,200 7,775,425
--------------------
39,927,396
--------------------
TOTAL TECHNOLOGY............................... 134,052,447
--------------------
TELECOMMUNICATIONS (4.0%)
TELECOMMUNICATION EQUIPMENT (1.1%)
Accelerated Networks, Inc.+...................... 500 21,094
Advanced Fibre Communications, Inc.+............. 14,300 647,969
JDS Uniphase Corp.+.............................. 500 59,938
Lucent Technologies, Inc......................... 47,000 2,784,750
Metawave Communications Corp.+................... 3,200 85,400
Motorola, Inc.................................... 124,500 3,618,281
New Focus, Inc.+................................. 1,700 139,613
ONI Systems Corp.+............................... 1,000 117,203
Plantronics, Inc.+............................... 700 80,850
Polycom, Inc.+................................... 4,000 376,375
Qualcomm, Inc.+.................................. 9,600 576,000
Stratos Lightwave, Inc.+......................... 925 25,784
Tellabs, Inc.+................................... 27,500 1,882,031
Turnstone Systems, Inc.+......................... 900 149,105
Virata Corp.+.................................... 3,200 190,800
Vyyo, Inc.+...................................... 3,000 81,000
Williams Communication Group, Inc.+.............. 2,600 86,288
--------------------
10,922,481
--------------------
TELECOMMUNICATION SERVICES (2.9%)
Aether Systems, Inc.+............................ 700 143,500
Allegiance Telecom, Inc.+........................ 5,300 339,200
ALLTEL Corp...................................... 7,900 489,306
AT&T Corp........................................ 81,600 2,580,600
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
30
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ----------------- ---------------------
<S> <C> <C>
TELECOMMUNICATION SERVICES (CONTINUED)
Bell Atlantic Corp............................... 36,700 $ 1,864,819
CapRock Communications Corp.+.................... 5,900 115,050
Choice One Communications, Inc.+................. 4,200 171,413
GTE Corp......................................... 71,600 4,457,100
iBasis, Inc.+.................................... 7,300 314,356
ITC DeltaCom, Inc.+.............................. 5,700 127,181
Net2Phone, Inc.+................................. 3,100 110,631
NTL, Inc.+(s).................................... 215 12,873
PNV.net, Inc.+................................... 4,000 5,500
SBC Communications, Inc.......................... 168,600 7,291,950
SeaChange International, Inc.+................... 5,900 170,363
Sprint Corp. (PCS Group)+........................ 11,100 660,450
TeleCorp PCS, Inc.+.............................. 1,400 56,438
U.S. Wireless Corp.+............................. 300 6,413
US West, Inc..................................... 13,500 1,157,625
WorldCom, Inc.+.................................. 179,400 8,229,975
--------------------
28,304,743
--------------------
TOTAL TELECOMMUNICATIONS....................... 39,227,224
--------------------
TRANSPORTATION (0.4%)
AIRLINES (0.1%)
AMR Corp.+....................................... 6,400 169,200
Delta Air Lines, Inc............................. 8,200 414,613
Southwest Airlines Co............................ 18,700 354,131
--------------------
937,944
--------------------
RAILROADS (0.2%)
Burlington Northern Santa Fe Corp................ 39,300 901,444
CSX Corp......................................... 11,700 247,894
Norfolk Southern Corp............................ 23,100 343,613
Union Pacific Corp............................... 19,700 732,594
Wisconsin Central Transportation Corp.+.......... 13,600 176,800
--------------------
2,402,345
--------------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ----------------- ---------------------
<S> <C> <C>
TRANSPORT & SERVICES (0.1%)
C.H. Robinson Worldwide, Inc..................... 10,200 $ 504,900
GATX Corp........................................ 2,900 98,600
--------------------
603,500
--------------------
TOTAL TRANSPORTATION........................... 3,943,789
--------------------
UTILITIES (0.8%)
ELECTRIC (0.8%)
Allegheny Energy, Inc............................ 9,300 254,588
Cinergy Corp..................................... 13,700 348,494
Cleco Corp....................................... 13,500 452,250
CMS Energy Corp.................................. 23,900 528,788
Consolidated Edison, Inc......................... 17,900 530,288
CP&L, Inc........................................ 25,500 814,406
DTE Energy Co.................................... 16,400 501,225
Edison International............................. 28,000 574,000
Entergy Corp..................................... 19,400 527,438
FPL Group, Inc................................... 14,800 732,600
GPU, Inc......................................... 12,800 346,400
NiSource, Inc.................................... 11,700 217,913
PG&E Corp........................................ 32,500 800,313
Pinnacle West Capital Corp....................... 8,200 277,775
PPL Corp......................................... 15,800 346,613
TXU Corp......................................... 26,000 767,000
Wisconsin Energy Corp............................ 12,300 243,694
--------------------
8,263,785
--------------------
WATER (0.0%)
E'Town Corp...................................... 4,800 318,900
--------------------
TOTAL UTILITIES................................ 8,582,685
--------------------
TOTAL UNITED STATES COMMON STOCK
(COST $375,468,019)........................... 481,017,817
--------------------
TOTAL COMMON STOCK (COST $489,907,096)......... 626,346,543
--------------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
31
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ----------------- ---------------------
<S> <C> <C>
CONVERTIBLE PREFERRED STOCKS (0.0%)
CONSUMER GOODS & SERVICES (0.0%)
ENTERTAINMENT, LEISURE & MEDIA (0.0%)
AMCV Capital Trust I, 7.00%...................... 2,100 $ 87,675
--------------------
TELECOMMUNICATIONS (0.0%)
TELECOMMUNICATION SERVICES (0.0%)
Verio, Inc., Series A, 6.75%..................... 1,900 112,337
--------------------
TOTAL CONVERTIBLE PREFERRED STOCK
(COST $208,718)............................... 200,012
--------------------
PREFERRED STOCK (0.2%)
AUSTRALIA (0.1%)
News Corp. Ltd. (Broadcasting &
Publishing)(s)................................. 66,000 799,045
--------------------
GERMANY (0.1%)
Marschollek, Lautenschlaeger und Partner AG - VO
(Financial Services)(s)........................ 827 410,686
ProSieben Media AG (Broadcasting &
Publishing)(s)................................. 1,465 182,897
Volkswagen AG (Automotive)(s).................... 8,285 196,464
--------------------
790,047
--------------------
TOTAL PREFERRED STOCK (COST $1,025,041)........ 1,589,092
--------------------
RIGHTS (0.0%)
TECHNOLOGY (0.0%)
COMPUTER SOFTWARE (0.0%)
Via Net.Works, Inc. (cost $362,817)+(s).......... 11,833 215,496
--------------------
TOTAL EQUITY SECURITIES (COST $491,503,672).... 628,351,143
--------------------
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
------------------------------------------------- ----------------- ---------------------
<S> <C> <C>
FIXED INCOME SECURITIES (32.0%)
COLLATERALIZED MORTGAGE OBLIGATIONS (7.6%)
FINANCE (7.6%)
Asset Securitization Corp., Sequential Payer,
Series 1997-D5, Class A1D, 6.85% due
02/14/41....................................... $ 5,300,000 $ 5,011,812
Bear Stearns Structured Securities Inc.,
Sequential Payer, Series 1997-2, Class 1A5,
(144A), 7.00% due 08/25/36..................... 2,500,000 2,266,407
Carco Auto Loan Master Trust, Series 1999-1,
Class A2, 5.78% due 03/15/04................... 5,000,000 4,896,850
Chase Funding Mortgage Loan, NAS, Series 1998-2,
Class IIA2, 5.88% due 03/25/17................. 1,602,535 1,586,510
CNH Equipment Trust, Sequential Payer,
Series 2000-A, Class A3, 7.14% due 08/15/04.... 5,050,000 5,061,060
Commercial Mortgage Acceptance Corp., Sequential
Payer, Series 1998-C2, Class A2, 6.03% due
03/15/08....................................... 5,600,000 5,148,500
CS First Boston Mortgage Securities Corp.,
Sequential Payer, Series 1999-C1, Class A2,
7.29% due 09/15/09............................. 600,000 597,938
Donaldson, Lufkin, Jenrette Commercial Mortgage
Corp., Sequential Payer, Series 2000-CF1
Class A1B, 7.62% due 05/10/10.................. 3,000,000 3,014,064
EQCC Home Equity Loan Trust, NAS, Series 1997-3,
Class A8, Callable,, 6.41% due 12/15/04........ 2,000,000 1,953,500
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
32
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
------------------------------------------------- ----------------- ---------------------
<S> <C> <C>
FINANCE (CONTINUED)
First Nationwide Trust, Sequential Payer,
Series 1999-4, Class 3PA1, 6.50% due
10/19/29....................................... $ 5,625,126 $ 5,261,236
First Union Commercial Mortgage Trust, Sequential
Payer, Series 1999-C1, Class A2, 6.07% due
10/15/08....................................... 3,740,000 3,413,921
Ford Credit Auto Owner Trust, Sequential Payer,
Series 2000-A, Class A3, 6.82% due 06/17/02.... 6,250,000 6,236,313
Ford Credit Auto Owner Trust, Sequential Payer,
Series 2000-A, Class A4, 7.09% due 11/17/03.... 5,000,000 5,010,940
GE Capital Mortgage Services, Inc., Subordinated
Bond, NAS, Series 1995-10, Class B2, Callable,
7.00% due 10/25/10............................. 209,627 194,802
JP Morgan Commercial Mortgage Finance Corp.,
Series 1999-C8, Class A1, 7.33% due
07/15/31....................................... 7,865,329 7,826,002
LB Commercial Conduit Mortgage Trust, Sequential
Payer, Series 1998-C1, Class A3, 6.48% due
01/18/08....................................... 6,700,000 6,392,222
Merrill Lynch Mortgage Investors, Inc.,
Sequential Payer, Series 1998-C2, Class A2,
6.39% due 02/15/30............................. 6,000,000 5,690,628
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
------------------------------------------------- ----------------- ---------------------
<S> <C> <C>
FINANCE (CONTINUED)
Morgan Stanley Capital I, Inc., Sequential
Payer, Series 1999-WF-1, Class A1, 5.91% due
04/15/08....................................... $ 4,767,621 $ 4,513,969
Ocwen Residential MBS Corp., Series 1998-R1,
Class A1, Callable, (144A), 4.00% due
10/25/40....................................... 935,244 899,734
--------------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(COST $75,173,444)............................ 74,976,408
--------------------
CORPORATE OBLIGATIONS (3.8%)
BASIC INDUSTRIES (0.3%)
CHEMICALS (0.3%)
Rohm & Haas Co., 7.85% due 07/15/29.............. 2,800,000 2,831,416
--------------------
METALS & MINING (0.0%)
Ryerson Tull, Inc., 9.13% due 07/15/06........... 200,000 187,000
--------------------
TOTAL BASIC INDUSTRIES......................... 3,018,416
--------------------
CONSUMER GOODS & SERVICES (0.9%)
AUTOMOTIVE (0.6%)
Daimlerchrysler, N.A. Holding, 6.90% due
09/01/04....................................... 6,000,000 5,860,680
Federal-Mogul Corp., 7.75% due 07/01/06.......... 70,000 47,600
--------------------
5,908,280
--------------------
BROADCASTING & PUBLISHING (0.0%)
Fox Family Worldwide, Inc., Callable 11/01/02,
9.25% due 11/01/07............................. 200,000 179,000
--------------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
33
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
------------------------------------------------- ----------------- ---------------------
<S> <C> <C>
ENTERTAINMENT, LEISURE & MEDIA (0.3%)
Adelphia Communications, Inc., 9.38% due
11/15/09....................................... $ 750,000 $ 695,625
Charter Communications Holdings LLC, 8.25% due
04/01/07....................................... 750,000 663,750
Lamar Media Corp., 8.63% due 09/15/07............ 1,000,000 960,000
--------------------
2,319,375
--------------------
MISCELLANEOUS CONSUMER GOODS (0.0%)
Sun World International, Inc., Series B,
Callable 04/15/01, 11.25% due 04/15/04......... 250,000 235,625
--------------------
RETAIL (0.0%)
Federated Department Stores, Inc., 8.13% due
10/15/02....................................... 200,000 202,004
--------------------
TOTAL CONSUMER GOODS & SERVICES................ 8,844,284
--------------------
ENERGY (0.9%)
NATURAL GAS (0.3%)
Dynegy Inc., 6.88% due 07/15/02.................. 2,000,000 1,967,320
National Fuel Gas Co., Series D, MTN, Putable,
6.21% due 08/12/27............................. 500,000 490,630
--------------------
2,457,950
--------------------
OIL-PRODUCTION (0.6%)
Amerada Hess Corp., 7.88% due 10/01/29........... 3,500,000 3,422,335
Conoco, Inc., 5.90% due 04/15/04................. 3,000,000 2,864,790
--------------------
6,287,125
--------------------
OIL-SERVICES (0.0%)
Oil Purchase Co., (144A), 7.10% due 04/30/02..... 519,769 488,583
--------------------
TOTAL ENERGY................................... 9,233,658
--------------------
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
------------------------------------------------- ----------------- ---------------------
<S> <C> <C>
FINANCE (1.0%)
BANKING (0.1%)
First Citizens Bancorp of South Carolina, Capital
Trust I, 8.25% due 03/15/28.................... $ 1,250,000 $ 1,018,750
--------------------
FINANCIAL SERVICES (0.9%)
Enterprise Rent-a-Car USA Finance Co., (144A),
6.38% due 05/15/03............................. 2,000,000 1,913,220
Provident Financing Trust I., 7.41% due
03/15/38....................................... 530,000 393,785
Toyota Motor Credit Corp., 5.63% due 11/13/03.... 7,000,000 6,665,820
--------------------
8,972,825
--------------------
INSURANCE (0.0%)
Safeco Capital Trust 1, Callable 07/15/07, 8.07%
due 07/15/37................................... 370,000 314,467
--------------------
TOTAL FINANCE.................................. 10,306,042
--------------------
TELECOMMUNICATIONS (0.3%)
TELECOMMUNICATIONS-EQUIPMENT (0.1%)
Williams Communication Group, Inc., 10.70% due
10/01/07....................................... 835,000 830,825
--------------------
TELECOMMUNICATION SERVICES (0.2%)
SBC Communications, Inc., Callable 11/01/07,
7.25% due 11/01/27............................. 1,000,000 908,400
US West Capital Funding, Inc., Callable, 6.25%
due 07/15/05................................... 1,300,000 1,217,905
--------------------
2,126,305
--------------------
TOTAL TELECOMMUNICATIONS....................... 2,957,130
--------------------
TRANSPORTATION (0.3%)
RAILROADS (0.2%)
Union Pacific Corp., 5.78% due 10/15/01.......... 1,750,000 1,709,488
--------------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
34
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
------------------------------------------------- ----------------- ---------------------
<S> <C> <C>
TRANSPORT & SERVICES (0.1%)
Atlantic Express Transportation Corp., 10.75% due
02/01/04....................................... $ 250,000 $ 221,250
Federal Express Corp., Series 1999-1, Class C,
8.25% due 01/15/19............................. 816,651 802,637
--------------------
1,023,887
--------------------
TOTAL TRANSPORTATION........................... 2,733,375
--------------------
UTILITIES (0.1%)
ELECTRIC (0.1%)
PECO Energy Capital Trust III, Series D, 7.38%
due 04/06/28................................... 1,300,000 1,122,758
--------------------
TOTAL CORPORATE OBLIGATIONS ( COST
$39,858,023).................................. 38,215,663
--------------------
FOREIGN CORPORATE OBLIGATIONS (0.9%)
AUSTRALIA (0.2%)
St. George Funding Co., Callable 06/30/07 (144A),
8.49% due 12/31/49 (Financial Services)(v)..... 2,000,000 1,722,340
--------------------
BERMUDA (0.1%)
Global Crossing Holdings Ltd., Inc. (144A), 9.13%
due 11/15/06 (Telecommunication Services)...... 770,000 741,125
--------------------
CANADA (0.1%)
Express Pipeline LP, Series B, (144A), 7.39% due
12/31/17 (Oil-Production)...................... 249,500 213,011
McKesson Finance of Canada, (144A), 6.55% due
11/01/02 (Financial Services).................. 750,000 706,732
--------------------
919,743
--------------------
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
------------------------------------------------- ----------------- ---------------------
<S> <C> <C>
CHINA (0.2%)
HSBC Capital Funding LP., (144A), 10.18% due
06/30/30 (Financial Services)(v)............... $ 1,445,000 $ 1,549,979
--------------------
DENMARK (0.2%)
Den Danske Bank, (144A), 7.25% due 06/15/05
(Banking)...................................... 2,500,000 2,462,475
--------------------
KOREA (0.0%)
Cho Hung Bank, (144A), 11.88% due 04/01/10
(Banking)(v)................................... 120,000 115,200
Hanvit Bank, (144A), 11.75% due 03/01/10
(Banking)(v)................................... 385,000 368,638
--------------------
483,838
--------------------
UNITED KINGDOM (0.1%)
Abbey National First Capital Co., 8.20% due
10/15/04 (Banking)............................. 1,000,000 1,024,390
--------------------
TOTAL FOREIGN CORPORATE OBLIGATIONS
(COST $9,057,955)............................. 8,903,890
--------------------
FOREIGN GOVERNMENT OBLIGATIONS (0.2%)
CANADA (0.2%)
Province of Quebec, 7.50% due 09/15/29
(cost $2,005,319).............................. 2,000,000 1,964,820
--------------------
SOVEREIGN BONDS (0.4%)
ARGENTINA (0.0%)
Republic of Argentina, 9.75% due 09/19/27........ 245,000 189,263
Republic of Argentina, 12.00% due 02/01/20....... 130,000 118,625
--------------------
307,888
--------------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
35
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
------------------------------------------------- ----------------- ---------------------
<S> <C> <C>
BRAZIL (0.1%)
Republic of Brazil, 12.75% due 01/15/20.......... $ 295,000 $ 280,250
Republic of Brazil Discount Bonds, Series 30 Year
ZL, 6.94% due 04/15/24(v)...................... 280,000 221,200
Republic of Brazil NMB L, Series RG, 7.44% due
04/15/09(v).................................... 305,000 256,581
--------------------
758,031
--------------------
COLOMBIA (0.1%)
Republic of Colombia, 9.75% due 04/23/09......... 595,000 464,100
Republic of Colombia, 11.75% due 02/25/20........ 245,000 202,738
--------------------
666,838
--------------------
MEXICO (0.1%)
United Mexican States, Series XW, 10.38% due
02/17/09....................................... 430,000 456,875
--------------------
PANAMA (0.0%)
Republic of Panama PDI, Series 20 Year, 7.06% due
07/17/16(v).................................... 205,337 168,376
--------------------
PERU (0.0%)
Republic of Peru PDI, Series 20 Year, 4.50% due
03/07/17(v).................................... 420,000 280,350
--------------------
PHILIPPINES (0.1%)
Republic of Philippines, Global Bonds, 9.88% due
01/15/19....................................... 810,000 660,150
Republic of Philippines, 10.63% due 03/16/25..... 110,000 94,050
--------------------
754,200
--------------------
TURKEY (0.0%)
Republic of Turkey, 11.88% due 01/15/30.......... 165,000 175,519
--------------------
TOTAL SOVEREIGN BONDS (COST $3,853,069)........ 3,568,077
--------------------
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
------------------------------------------------- ----------------- ---------------------
<S> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS (13.5%)
FEDERAL HOME LOAN MORTGAGE CORP. (0.1%)
6.50% due 02/15/19............................... $ 1,250,000 $ 1,203,900
--------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (11.2%)
6.00% due 01/01/29............................... 111,631 102,188
6.00% due 12/01/28............................... 2,236,405 2,047,228
6.50% due 03/01/28............................... 3,652,084 3,448,188
7.13% due 01/15/30............................... 1,085,000 1,092,964
7.25% due 01/15/10............................... 9,035,000 9,125,982
TBA, July, 6.00% due 07/01/30.................... 1,960,000 1,793,714
TBA, July, 7.00% due 07/01/30.................... 22,585,000 21,805,140
TBA, July, 7.50% due 07/01/15.................... 17,135,000 17,078,797
TBA, July, 7.50% due 07/01/30.................... 46,165,000 45,508,534
TBA, July, 8.00% due 07/01/30.................... 7,080,000 7,109,878
--------------------
109,112,613
--------------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (2.2%)
6.50% due 12/15/28............................... 7,775,895 7,383,601
8.50% due 06/15/27............................... 234,213 239,980
8.50% due 09/15/27............................... 668,002 684,448
8.50% due 09/15/27............................... 695,729 712,858
TBA, July, 8.00% due 07/01/30.................... 12,915,000 13,052,286
--------------------
22,073,173
--------------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(COST $132,454,151)........................... 132,389,686
--------------------
U.S. TREASURY OBLIGATIONS (5.6%)
U.S. TREASURY BONDS (4.6%)
5.25% due 02/15/29............................... 4,970,000 4,410,875
6.00% due 02/15/26............................... 5,650,000 5,532,593
6.13% due 08/15/29............................... 35,000 35,350
6.50% due 11/15/26............................... 12,360,000 12,910,391
6.75% due 08/15/26............................... 9,580,000 10,308,942
8.88% due 02/15/19............................... 9,375,000 12,065,906
--------------------
45,264,057
--------------------
U.S. TREASURY NOTES (0.5%)
4.75% due 11/15/08............................... 4,905,000 4,454,329
--------------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
36
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
------------------------------------------------- ----------------- ---------------------
<S> <C> <C>
U.S. TREASURY STRIPS (0.5%)
PO, 6.28% due 11/15/15(y)........................ $ 9,170,000 $ 3,553,650
PO, 6.28% due 05/15/18(y)........................ 4,200,000 1,397,424
--------------------
4,951,074
--------------------
TOTAL U.S. TREASURY OBLIGATIONS
(COST $52,498,397)............................ 54,669,460
--------------------
TOTAL FIXED INCOME SECURITIES
(COST $314,900,358)........................... 314,688,004
--------------------
SHORT-TERM INVESTMENTS (14.1%)
CORPORATE OBLIGATIONS (0.2%)
General Motors Acceptance Corp., MTN, 8.5% due
01/19/01....................................... 2,000,000 2,013,960
--------------------
OTHER INVESTMENT COMPANIES (13.7%)
Hamilton Money Fund.............................. 427,946 427,946
J.P. Morgan Institutional Prime Money Market
Fund*.......................................... 133,922,206 133,922,206
--------------------
134,350,152
--------------------
U.S. TREASURY OBLIGATIONS (0.2%)
U.S. Treasury Bill, 5.94% due 10/12/00(y)(s)..... 540,000 531,258
U.S. Treasury Note, 5.63% due 11/30/00(s)........ 600,000 598,404
U.S. Treasury Note, 5.63% due 02/28/01........... 800,000 796,000
--------------------
1,925,662
--------------------
TOTAL SHORT-TERM INVESTMENTS
(COST $138,303,714)........................... 138,289,774
--------------------
TOTAL INVESTMENTS (COST $944,707,744) (110.00%).....................
1,081,328,921
LIABILITIES IN EXCESS OF OTHER ASSETS (-10.00%).....................
(98,229,252)
--------------------
NET ASSETS (100.0%)................................................. $ 983,099,669
====================
</TABLE>
------------------------------
Note: Based on the cost of investments of $946,675,610 for federal income tax
purposes at June 30, 2000, the aggregate gross unrealized appreciation and
depreciation was $173,273,604 and $38,620,293, respectively, resulting in net
unrealized appreciation of $134,653,311.
(+) Non-income producing security.
(s) Security is fully or partially segregated with custodian as collateral for
TBA and when issued securities or futures contracts or with broker as
initial margin for futures contracts. $50,433,228 of the market value has
been segregated.
(v) Rate shown reflects current rate on variable or floating rate instrument or
instrument with step coupon rate.
(y) Yield to maturity.
*Money market mutual fund registered under the Investment Company Act of 1940,
as amended, and advised by J.P. Morgan Investment Management Inc.
144A - Securities restricted for resale to Qualified Institutional Buyers.
ADR - American Depository Receipt.
MTN - Medium Term Note.
NAS - Non-Accelerated Security.
NMB - New Money Bond.
PDI - Past Due Interest.
PO - Principal Only.
SDR - Swedish Depository 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.
The Accompanying Notes are an Integral Part of the Financial Statements.
37
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 2000
--------------------------------------------------------------------------------
INDUSTRY DIVERSIFICATION
<TABLE>
<CAPTION>
PERCENT OF
PORTFOLIO
----------------
<S> <C>
U.S. Government Agency/Treasury Obligations....... 17.3%
Short Term Investments............................ 12.8%
Finance........................................... 7.0%
Financial Services................................ 5.4%
Pharmaceuticals................................... 5.4%
Telecommunication Services........................ 4.0%
Semiconductors.................................... 3.7%
Computer Software................................. 3.5%
Diversified Manufacturing......................... 3.4%
Oil Production.................................... 3.4%
Computer Systems.................................. 2.8%
Retail............................................ 2.8%
Electronics....................................... 2.7%
Telecommunication Equipment....................... 2.7%
Banking........................................... 2.6%
Insurance......................................... 2.0%
Entertainment, Leisure & Media.................... 1.9%
Food, Beverages & Tobacco......................... 1.9%
Automotive........................................ 1.8%
Broadcasting & Publishing......................... 1.4%
Chemicals......................................... 1.3%
Electric.......................................... 1.1%
Household Products................................ 0.9%
Computer Peripherals.............................. 0.5%
Oil Services...................................... 0.5%
Machinery......................................... 0.4%
Medical Supplies.................................. 0.4%
Metals & Mining................................... 0.4%
Railroads......................................... 0.4%
Telecommunications................................ 0.4%
Commercial Services............................... 0.3%
Electrical Equipment.............................. 0.3%
Forest Products & Paper........................... 0.3%
Health Services................................... 0.3%
Information Processing............................ 0.3%
Natural Gas....................................... 0.3%
Personal Care..................................... 0.3%
Restaurants & Hotels.............................. 0.3%
Sovereign Bonds................................... 0.3%
Biotechnology..................................... 0.2%
Foreign Government Obligations.................... 0.2%
Gas Pipelines..................................... 0.2%
Real Estate Investment Trusts..................... 0.2%
Transport & Services.............................. 0.2%
Utilities......................................... 0.2%
Aerospace......................................... 0.1%
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
38
<PAGE>
THE DIVERSIFIED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 2000
--------------------------------------------------------------------------------
INDUSTRY DIVERSIFICATION (CONTINUED)
<TABLE>
<CAPTION>
PERCENT OF
PORTFOLIO
----------------
<S> <C>
Airlines.......................................... 0.1%
Apparels & Textiles............................... 0.1%
Building Materials................................ 0.1%
Business & Public Services........................ 0.1%
Capital Goods..................................... 0.1%
Construction & Housing............................ 0.1%
Gas Exploration................................... 0.1%
Manufacturing..................................... 0.1%
Multi-Industry.................................... 0.1%
Real Estate....................................... 0.1%
Transportation.................................... 0.1%
Wholesale & International Trade................... 0.1%
-----
100.0%
=====
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
39
<PAGE>
THE DIVERSIFIED PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $944,707,744) $1,081,328,921
Cash 4,411,006
Foreign Currency at Value (Cost $1,517,266) 1,518,023
Receivable for Investments Sold 5,170,026
Dividends and Interest Receivable 4,129,481
Foreign Tax Reclaim Receivable 193,034
Receivable for Expense Reimbursement 133,548
Unrealized Appreciation of Forward Foreign
Currency Contracts 102,790
Variation Margin Receivable 33,413
Prepaid Trustees' Fees 6
Prepaid Expenses and Other Assets 2,157
--------------
Total Assets 1,097,022,405
--------------
LIABILITIES
Payable for Investments Purchased 112,895,497
Advisory Fee Payable 443,486
Unrealized Depreciation of Forward Foreign
Currency Contracts 284,815
Administrative Services Fee Payable 19,527
Administration Fee Payable 919
Fund Services Fee Payable 880
Accrued Expenses 277,612
--------------
Total Liabilities 113,922,736
--------------
NET ASSETS
Applicable to Investors' Beneficial Interests $ 983,099,669
==============
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
40
<PAGE>
THE DIVERSIFIED PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED JUNE 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest Income $21,967,748
Dividend Income (Net of Foreign Withholding Tax
of $435,562) 8,121,417
-----------
Investment Income 30,089,165
EXPENSES
Advisory Fee $ 5,129,204
Custodian Fees and Expenses 858,220
Administrative Services Fee 238,077
Professional Fees and Expenses 48,624
Fund Services Fee 15,670
Printing Expenses 15,116
Trustees' Fees and Expenses 11,973
Administration Fee 8,873
Insurance Expense 1,813
-----------
Total Expenses 6,327,570
Less: Reimbursement of Expenses (238,773)
-----------
NET EXPENSES 6,088,797
-----------
NET INVESTMENT INCOME 24,000,368
NET REALIZED GAIN (LOSS) ON
Investments 29,545,974
Futures Contracts 3,433,534
Foreign Currency Contracts Transactions (1,139,812)
-----------
Net Realized Gain 31,839,696
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) OF
Investments 11,204,119
Futures Contracts 46,275
Foreign Currency Contracts and Translations (544,774)
-----------
Net Change in Unrealized Appreciation 10,705,620
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $66,545,684
===========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
41
<PAGE>
THE DIVERSIFIED PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FISCAL FOR THE FISCAL
YEAR ENDED YEAR ENDED
JUNE 30, 2000 JUNE 30, 1999
-------------- --------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 24,000,368 $ 17,748,108
Net Realized Gain on Investments, Futures and
Foreign Currency Contracts and Transactions 31,839,696 34,831,065
Net Change in Unrealized Appreciation of
Investments, Futures and Foreign Currency
Contracts and Translations 10,705,620 37,910,587
------------- -------------
Net Increase in Net Assets Resulting from
Operations 66,545,684 90,489,760
------------- -------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 239,595,249 364,472,896
Withdrawals (196,922,291) (140,147,017)
------------- -------------
Net Increase from Investors' Transactions 42,672,958 224,325,879
------------- -------------
Total Increase in Net Assets 109,218,642 314,815,639
NET ASSETS
Beginning of Fiscal Year 873,881,027 559,065,388
------------- -------------
End of Fiscal Year $ 983,099,669 $ 873,881,027
============= =============
</TABLE>
--------------------------------------------------------------------------------
SUPPLEMENTARY DATA
--------------------------------------------------------------------------------
Selected data for a share outstanding throughout each period are as follows:
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED JUNE 30,
--------------------------------------
2000 1999 1998 1997 1996
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Net Expenses 0.64% 0.65% 0.65% 0.65% 0.65%
Net Investment Income 2.50% 2.55% 3.13% 3.33% 3.35%
Expenses without Reimbursement 0.66% 0.68% 0.71% 0.80% 0.82%
Portfolio Turnover 217% 144% 82% 100% 144%
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
42
<PAGE>
THE DIVERSIFIED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
--------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Diversified Portfolio (the "portfolio") is registered under the Investment
Company Act of 1940, as amended, 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-backed 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 accounting principles
generally accepted in the United States 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 the values from
dealers, operating data, and general market conditions. Unlisted
securities are valued at the average of the quoted bid and asked prices 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
43
<PAGE>
THE DIVERSIFIED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2000
--------------------------------------------------------------------------------
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 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 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.
f) 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
44
<PAGE>
THE DIVERSIFIED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2000
--------------------------------------------------------------------------------
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.
g) 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. 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 the income and/or capital gains
are earned.
2. TRANSACTIONS WITH AFFILIATES
a) The portfolio has an Investment Advisory Agreement with J.P. Morgan
Investment Management Inc. ("JPMIM"), an affiliate of Morgan Guaranty
Trust Company of New York ("Morgan") and a 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 daily net assets. For the fiscal year ended June 30,
2000, such fees amounted to $5,277,759.
The portfolio may invest in one or more affiliated money market funds:
J.P. Morgan Institutional Prime Money Market Fund, J.P. Morgan
Institutional Tax Exempt Money Market Fund, J.P. Morgan Institutional
Federal Money Market Fund and J.P. Morgan Institutional Treasury Money
Market Fund. The Advisor has agreed to reimburse its advisory fee from the
portfolio in an amount to offset any doubling of investment advisory and
shareholder servicing fees. For the fiscal year ended June 30, 2000,
J.P. Morgan has agreed to reimburse the portfolio $148,555 under this
agreement. Interest income included in the Statement of Operations for the
year ended June 30, 2000 includes $2,081,250 of interest income from
investments in money market funds.
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 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 portfolio'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
45
<PAGE>
THE DIVERSIFIED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2000
--------------------------------------------------------------------------------
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, 2000, the fee for these services
amounted to $8,873.
c) The portfolio has an 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 portfolio 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 J.P. Morgan Funds and
J.P. Morgan Institutional Funds invest ( the "master portfolios") 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 JPMIM provides similar
services, and J.P. Morgan Series Trust. For the fiscal year ended
June 30, 2000, the fee for these services amounted to $238,077.
In addition, Morgan has agreed to reimburse the portfolio to the extent
necessary to maintain the total operating expenses of the portfolio, at no
more than 0.65% of the average daily net assets of the portfolio through
October 31, 2000. For the fiscal year ended June 30, 2000, Morgan has
agreed to reimburse the portfolio $238,773 for expenses under this
agreement.
d) The portfolio has a Fund Services Agreement with Pierpont Group, Inc.
("Group") to assist the trustees in exercising their overall supervisory
responsibilities for the portfolio's affairs. The trustees of the
portfolio represent all the existing shareholders of Group. The
portfolio's allocated portion of Group's costs in performing its services
amounted to $15,670 for the fiscal year ended June 30, 2000.
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 $3,000.
46
<PAGE>
THE DIVERSIFIED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2000
--------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the fiscal year
ended June 30, 2000 were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
-------------- --------------
<S> <C> <C>
U.S. Government and Agency Obligations........... $1,023,075,266 $1,051,388,474
Corporate and Collateralized Obligations......... 1,053,215,509 894,694,960
-------------- --------------
$2,076,290,775 $1,946,083,434
============== ==============
</TABLE>
Open futures contracts at June 30, 2000 are summarized as follows:
<TABLE>
<CAPTION>
NET UNREALIZED
APPRECIATION/ CURRENT MARKET VALUE
CONTRACTS LONG (DEPRECIATION) OF CONTRACTS
---------------- -------------- --------------------
<S> <C> <C> <C>
FTSE 100 Index, expiring September
2000................................... 10 $ (28,772) $ 962,307
Hang Seng Index, expiring July 2000..... 6 (1,220) 624,992
Topix Index, expiring September 2000.... 4 18,707 601,673
U.S. Five Year Note, expiring September
2000................................... 251 93,309 24,852,923
------- --------- ------------
Totals.................................. 271 $ 82,024 $ 27,041,895
======= ========= ============
</TABLE>
<TABLE>
<CAPTION>
CONTRACTS SHORT
---------------
<S> <C> <C> <C>
Dow Jones Euro Stoxx 50 (Price) Index,
expiring September 2000................ 3 $ 3,104 $ (149,439)
Share Price Index, expiring September
2000................................... 7 (12,427) (351,450)
U.S. Long Bond (CBT), expiring September
2000................................... 144 (207,808) (14,017,500)
U.S. Ten Year Note, expiring September
2000................................... 127 (259,840) (12,507,516)
------- --------- ------------
Totals.................................. 281 $(476,971) $(27,025,905)
======= ========= ============
</TABLE>
47
<PAGE>
THE DIVERSIFIED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2000
--------------------------------------------------------------------------------
At June 30, 2000, the portfolio had open forward currency contracts as follows:
<TABLE>
<CAPTION>
U.S. DOLLAR NET UNREALIZED
CONTRACTUAL VALUE AT APPRECIATION/
PURCHASE CONTRACTS VALUE 6/30/00 (DEPRECIATION)
------------------ ----------- ----------- --------------
<S> <C> <C> <C>
Australian Dollar 442,797, expiring 09/20/00..... $ 269,637 $ 266,237 $ (3,400)
British Pound 2,800,000, expiring 09/20/00....... 4,240,880 4,245,518 4,638
British Pound 3,390,000, expiring 09/20/00....... 5,135,503 5,140,109 4,606
Euro 790,000 for JPY 80,252,940, expiring
09/20/00........................................ 769,997 761,192 (8,805)
Euro 790,000 for JPY 79,976,914, expiring
09/20/00........................................ 767,348 761,192 (6,156)
Euro 15,830,460, expiring 09/20/00............... 15,202,590 15,253,184 50,594
Japanese Yen 428,490,000 for GBP 2,700,000,
expiring 09/20/00............................... 4,093,892 4,111,200 17,308
Japanese Yen 83,000,000, expiring 09/20/00....... 797,310 796,353 (957)
Japanese Yen 369,000,000, expiring 09/20/00...... 3,542,259 3,540,416 (1,843)
Swiss Franc 3,140,000, expiring 09/20/00......... 1,951,523 1,931,001 (20,522)
</TABLE>
<TABLE>
<CAPTION>
SETTLEMENT
SALES CONTRACTS VALUE
--------------- -----------
<S> <C> <C> <C>
British Pound 75,000, expiring 09/20/00.......... $ 112,973 $ 113,719 $ (746)
British Pound 3,344,000, expiring 09/20/00....... 5,006,904 5,070,361 (63,457)
Euro 1,477,000, expiring 09/20/00................ 1,400,610 1,423,140 (22,530)
Euro 10,309,000, expiring 09/20/00............... 9,805,405 9,933,070 (127,665)
Japanese Yen 951,078,391, expiring 09/20/00...... 9,135,692 9,125,239 10,453
Swiss Franc 7,142,073, expiring 09/20/00......... 4,403,728 4,426,451 (22,723)
Swedish Krona 1,700,000, expiring 09/20/00....... 194,731 195,027 (296)
Swedish Krona 5,183,000, expiring 09/20/00....... 604,079 594,603 9,476
---------
NET UNREALIZED DEPRECIATION ON FORWARD FOREIGN
CURRENCY CONTRACTS.............................. $(182,025)
=========
</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.
48
<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, 2000, 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 accounting principles generally accepted in the United States.
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 auditing standards generally accepted in the United States,
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, 2000 by correspondence with the custodian
and brokers, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
August 16, 2000
49
