INTERNATIONAL EQUITY PORTFOLIO
SEMI-ANNUAL REPORT
April 30, 1996
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
April 30, 1996
(unaudited)
(expressed in U.S. dollars)
Shares Value
- -------- ----------
COMMON STOCKS (98.3%)
AUSTRALIA (1.7%)
ENERGY
10,750 Broken Hill Proprietary Co., Ltd. .................. $ 165,430
20,000 Woodside Petroleum, Ltd. ........................... 115,632
-----------
281,062
-----------
GOLD MINES
24,000 RGC, Ltd. .......................................... 126,881
-----------
MATERIALS
6,450 CRA, Ltd. .......................................... 104,578
22,000 WMC, Ltd. .......................................... 160,377
-----------
264,955
-----------
TOTAL AUSTRALIA .................................... 672,898
-----------
FRANCE (6.3%)
CAPITAL EQUIPMENT
2,400 Alcatel Alsthom .................................... 225,718
-----------
CONSUMER DURABLES
1,480 Peugeot SA ......................................... 206,785
-----------
CONSUMER NON-DURABLES
430 Bongrain SA ........................................ 238,820
960 LVMH ............................................... 245,597
-----------
484,417
-----------
FINANCE
1,880 Societe Generale ................................... 218,287
-----------
MEDIA & ADVERTISING
1,050 Canal Plus ......................................... 257,242
2,840 Havas SA ........................................... 235,884
2,030 Television Francaise 1 ............................. 219,990
-----------
713,116
-----------
RETAIL
622 Comptoirs Modernes ................................. 240,735
-----------
SERVICES
1,580 Accor SA ........................................... 219,534
590 Sodexho SA ......................................... 233,945
-----------
453,479
-----------
TOTAL FRANCE ....................................... 2,542,537
-----------
GERMANY (1.5%)
BANKING
390 Commerzbank AG ..................................... 84,450
2,310 Depfa Bank AG ...................................... 78,765
-----------
163,215
-----------
CAPITAL EQUIPMENT
160 Siemens AG ......................................... 87,614
-----------
ENERGY
1,960 VEBA AG ............................................ 97,430
-----------
PHARMACEUTICALS
2,130 Merck KGaA* ........................................ 79,376
-----------
RETAIL
290 Kaufhof Holding AG ................................. 90,359
-----------
TRANSPORTATION
585 Lufthansa AG ....................................... 92,781
-----------
TOTAL GERMANY ...................................... 610,775
-----------
HONG KONG (2.9%)
BANKING
33,500 Dao Heng Bank Group, Ltd. .......................... 128,188
-----------
INSURANCE
145,000 National Mutual Asia, Ltd. ......................... 122,778
-----------
MULTI-INDUSTRY
21,000 Hutchison Whompoa, Ltd. ............................ 130,308
17,200 Jardine Matheson Hldgs., Ltd. ...................... 137,600
16,000 Swire Pacific, Ltd. ................................ 136,513
-----------
404,421
-----------
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
April 30, 1996 (continued)
(unaudited)
(expressed in U.S. dollars)
Shares Value
- -------- ----------
HONG KONG (continued)
REAL ESTATE
19,000 Cheung Kong Hldgs., Ltd. ........................... $ 135,706
29,000 New World Development Co., Ltd. .................... 130,089
14,000 Sun Hung Kai Properties, Ltd. ...................... 133,476
-----------
399,271
-----------
TELECOMMUNICATIONS
67,300 Hong Kong Telecommunications, Ltd. ................. 128,327
-----------
TOTAL HONG KONG .................................... 1,182,985
-----------
INDIA (2.8%)
CONSUMER DURABLES
17,500 Ashok Leyland, Ltd. ................................ 231,875
5,200 Bajaj Auto, Ltd. ................................... 185,900
-----------
417,775
-----------
MATERIALS
9,200 Grasim Industries, Ltd. ............................ 179,400
55,000 Indo Gulf Fertilisers and Chemicals Corp., Ltd. .... 99,000
16,500 Reliance Industries, Ltd. .......................... 272,333
-----------
550,733
-----------
PHARMACEUTICALS
5,800 Ranbaxy Laboratories, Ltd. ......................... 137,750
-----------
TOTAL INDIA ........................................ 1,106,258
-----------
INDONESIA (1.5%)
BANKING
54,000 Bank Bali .......................................... 138,847
116,250 Bank Dagang Nasional ............................... 115,827
-----------
254,674
-----------
MATERIALS
35,000 Semen Cibinong ..................................... 103,493
-----------
REAL ESTATE
43,500 Ciputra Development ................................ 96,004
172,000 Dharmala Intiland .................................. 134,519
-----------
230,523
-----------
TOTAL INDONESIA .................................... 588,690
-----------
IRELAND (2.4%)
BANKING
2,700 Allied Irish Banks, Plc ............................ 14,082
21,700 Irish Permanent, Plc ............................... 128,382
-----------
142,464
-----------
CONSUMER NON-DURABLES
40,600 Greencore Group, Plc ............................... 195,320
-----------
MATERIALS
52,000 Smurfit (Jefferson) Group, Plc ..................... 138,440
-----------
MEDIA & ADVERTISING
27,400 Independent Newspapers, Plc ........................ 228,227
-----------
PHARMACEUTICALS
3,620 Elan Corp., Plc., ADR* ............................. 239,373
-----------
TOTAL IRELAND ...................................... 943,824
-----------
ITALY (2.4%)
BANKING
11,900 Istituto Mobiliare Italiano SpA (IMI) .............. 94,469
-----------
CAPITAL EQUIPMENT
13,450 Sirti SpA .......................................... 85,333
-----------
CONSUMER DURABLES
18,100 Ente Nazionale Idrocarbun SpA (ENI)* ............... 78,217
30,100 Fiat SpA ........................................... 102,614
-----------
180,831
-----------
INSURANCE
3,460 Assicurazioni Generali SpA ......................... 86,278
15,000 Assicurazione Industriale SAI SpA .................. 64,917
62,600 Istituto Nazionale Delle Assicurazioni SpA ......... 96,184
-----------
247,379
-----------
RETAIL
16,000 Rinascente SpA ..................................... 110,730
-----------
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
April 30, 1996 (continued)
(unaudited)
(expressed in U.S. dollars)
Shares Value
- -------- ----------
ITALY (continued)
TELECOMMUNICATIONS
54,600 Telecom Italia Mobile SpA .......................... $ 120,595
62,700 Telecom Italia SpA ................................. 127,849
-----------
248,444
-----------
TOTAL ITALY ........................................ 967,186
-----------
JAPAN (40.1%)
BANKING
66,000 Asahi Bank, Ltd. ................................... 851,776
27,300 Bank of Tokyo-Mitsubishi Bank, Ltd. ................ 631,576
69,000 Mitsui Trust and Banking Co., Ltd. ................. 831,127
33,000 Sanwa Bank, Ltd. ................................... 668,802
44,000 Sumitomo Trust and Banking Co., Ltd. ............... 643,564
-----------
3,626,845
-----------
CAPITAL EQUIPMENT
2,000 Autobacs Seven Co., Ltd. ........................... 190,239
19,000 Bridgestone Corp. .................................. 352,373
6,000 Fanuc, Ltd. ........................................ 260,982
26,000 Hitachi, Ltd. ...................................... 280,866
54,000 Ishikawajima Harina Heavy Industries Co., Ltd. ..... 268,438
24,200 Kandenko ........................................... 330,825
45,000 Kubota, Ltd. ....................................... 313,608
13,200 Kurita Water Industries, Ltd. ...................... 331,877
5,000 Kyocera Corp. ...................................... 376,655
5,000 Mabuchi Motor Co., Ltd. ............................ 307,825
28,000 Matsushita Electric Industrial Co., Ltd. ........... 318,532
6,000 Murata Mfg. Co., Ltd. .............................. 232,876
22,000 NEC Corp. .......................................... 279,719
15,000 NipponDenso Co., Ltd. .............................. 326,944
17,000 Nippon Electric Glass, Ltd. ........................ 316,906
24,000 Sekisui House, Ltd. ................................ 298,265
-----------
4,786,930
-----------
CONSUMER DURABLES
17,000 Canon, Inc. ........................................ 338,034
6,000 TDK Corp. .......................................... 343,578
23,000 Toppan Printing .................................... 338,607
-----------
1,020,219
-----------
CONSUMER NON-DURABLES
8,000 Bandai Co., Ltd. ................................... 328,091
24,000 Kao Corp. .......................................... 321,208
3,000 Nintendo Co., Ltd. ................................. 229,435
9,000 Sony Corp. ......................................... 585,058
16,000 Yamazaki Baking, Ltd. .............................. 327,327
-----------
1,791,119
-----------
ENERGY
45,000 Cosmo Oil Co. ...................................... 294,680
-----------
FINANCE
3,000 Sanyo Shinpan Finance, Ltd. ........................ 209,359
40,000 Yamaichi Securities Co., Ltd. ...................... 316,237
-----------
525,596
-----------
MATERIALS
65,000 Dai Nippon Ink & Chemicals ......................... 353,568
87,000 Kawasaki Steel Corp. ............................... 318,541
23,000 Sumitomo Electric Industries, Ltd. ................. 329,812
15,000 Sumitomo Forestry Co., Ltd. ........................ 230,869
10,000 Tostem Corp. ....................................... 310,693
-----------
1,543,483
-----------
PHARMACEUTICALS
12,000 Sankyo Co. ......................................... 291,382
15,000 Taisho Pharmaceutical .............................. 328,378
13,000 Yamanouchi Pharmaceutical Co., Ltd. ................ 308,207
-----------
927,967
-----------
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
April 30, 1996 (continued)
(unaudited)
(expressed in U.S. dollars)
Shares Value
- -------- ----------
JAPAN (continued)
SERVICES
5,000 Ito-Yokado Co., Ltd. ............................... $ 294,919
5,000 Secom Co., Ltd. .................................... 353,712
-----------
648,631
-----------
TELECOMMUNICATIONS
60 DDI Corp. .......................................... 515,654
13,000 Matsushita Communications Industrial Co., Ltd. ..... 347,976
-----------
863,630
-----------
TOTAL JAPAN ........................................ 16,029,100
-----------
MALAYSIA (4.2%)
BANKING
57,000 Commerce Asset Hldgs., Bhd ......................... 388,642
-----------
FINANCE
180,000 Public Finance, Bhd ................................ 433,161
-----------
MATERIALS
203,000 Lion Land, Bhd ..................................... 257,282
-----------
REAL ESTATE
197,000 Bolton Properties, Bhd ............................. 339,751
76,000 IOI Properties, Bhd ................................ 251,474
-----------
591,225
-----------
TOTAL MALAYSIA ..................................... 1,670,310
-----------
NETHERLANDS (3.0%)
CONSUMER DURABLES
8,000 Polygram NV ........................................ 476,218
-----------
FINANCE
3,110 Fortis Amev NV ..................................... 222,156
-----------
MEDIA & ADVERTISING
32,860 Elsevier NV ........................................ 494,770
-----------
TOTAL NETHERLANDS .................................. 1,193,144
-----------
SINGAPORE (1.4%)
REAL ESTATE
55,000 DBS Land, Ltd. ..................................... 223,005
32,000 First Capital Corp., Ltd. .......................... 101,522
91,000 Wing Tai Hldgs., Ltd. .............................. 235,624
-----------
TOTAL SINGAPORE .................................... 560,151
-----------
SOUTH KOREA (1.0%)
MULTI-INDUSTRY
22,000 CITC Seoul Access Trust* ........................... 412,060
-----------
SPAIN (1.8%)
CONSUMER NON-DURABLES
3,000 Tabacalera SA ...................................... 136,792
3,900 Viscofan Envolturas SA ............................. 60,401
-----------
197,193
-----------
ENERGY
1,600 Repsol SA .......................................... 58,679
-----------
FINANCE
3,200 Argentaria SA ...................................... 129,560
-----------
MULTI-INDUSTRY
1,550 Corp Fin Alba ...................................... 122,343
-----------
SERVICES
9,890 Autopistas Cesa SA (Acesa) ......................... 103,410
-----------
UTILITIES
6,530 Telefonica de Espana ............................... 116,277
-----------
TOTAL SPAIN ........................................ 727,462
-----------
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
April 30, 1996 (continued)
(unaudited)
(expressed in U.S. dollars)
Shares Value
- -------- ----------
SWEDEN (2.1%)
CAPITAL EQUIPMENT
1,320 ASEA AB (B free) ................................... $ 133,915
6,490 Atlas Copco AB (A free) ............................ 122,018
6,200 Ericsson (LM)
Telephone Co., ADR ................................. 125,708
-----------
381,641
-----------
CONSUMER DURABLES
2,370 Electrolux AB (B free) ............................. 119,520
5,470 Volvo AB (B free) .................................. 125,425
-----------
244,945
-----------
MATERIALS
960 Mo och Domsjo AB (B free) .......................... 51,103
4,600 Munksjo AB ......................................... 36,289
-----------
87,392
-----------
MULTI-INDUSTRY
3,090 Investor AB (B free) ............................... 123,480
-----------
TOTAL SWEDEN ....................................... 837,458
-----------
SWITZERLAND (5.4%)
CONSUMER DURABLES
630 SMH AG (Bearer) .................................... 422,672
-----------
CONSUMER NON-DURABLES
420 Nestle AG (Registered)* ............................ 467,155
-----------
INSURANCE
570 Winterthur Insurance ............................... 357,627
-----------
MATERIALS
400 Ciba-Geigy AG ...................................... 461,662
-----------
PHARMACEUTICALS
420 Sandoz AG (Registered) ............................. 457,345
-----------
TOTAL SWITZERLAND .................................. 2,166,461
-----------
UNITED KINGDOM (17.8%)
BANKING
121,500 Bank of Scotland ................................... 456,334
-----------
CONSUMER DURABLES
20,500 THORN-EMI, Plc ..................................... 568,587
-----------
CONSUMER NON-DURABLES
40,000 Reckitt & Colman, Plc .............................. 438,958
-----------
MATERIALS
14,500 Redland, Plc ....................................... 93,203
81,100 Rentokil Group, Plc ................................ 467,579
33,500 RTZ Corp., Plc ..................................... 527,488
-----------
1,088,270
-----------
MULTI-INDUSTRY
88,700 BTR, Plc ........................................... 427,277
121,800 Inchcape, Plc ...................................... 535,385
-----------
962,662
-----------
PHARMACEUTICALS
38,400 Glaxo Wellcome, Plc ................................ 465,621
-----------
RETAIL
109,000 Argyll Group, Plc .................................. 544,754
22,600 Marks & Spencer, Plc ............................... 150,882
123,700 Tesco, Plc ......................................... 522,322
-----------
1,217,958
-----------
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
April 30, 1996 (continued)
(unaudited)
(expressed in U.S. dollars)
Shares Value
- -------- ----------
UNITED KINGDOM (continued)
SERVICES
59,200 Ladbroke Group, Plc ................................ $ 174,222
13,600 Orange, Plc.* ...................................... 57,375
226,994 Takare, Plc ........................................ 512,556
-----------
744,153
-----------
TELECOMMUNICATIONS
80,750 Carlton Communications, Plc ........................ 566,453
151,300 Vodafone Group, Plc ................................ 604,699
-----------
1,171,152
-----------
TOTAL UNITED KINGDOM ............................... 7,113,695
-----------
TOTAL INVESTMENTS (identified cost $35,702,179) (a) ... 98.3% $39,324,994
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ........ 1.7 672,464
-------- -----------
NET ASSETS ............................................ 100.0% $39,997,458
======== ===========
- ----------
* non-income producing security
(a) The aggregate cost for federal income tax purposes is $35,702,179, the
aggregate gross unrealized appreciation is $4,131,925 and the aggregate
gross unrealized depreciation is $509,110 resulting in net unrealized
appreciation of $3,622,815.
See Notes to Financial Statements.
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1996
(expressed in U.S. dollars)
(unaudited)
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value (identified cost $35,702,179) (Note 1) .. $39,324,994
Cash (including $1,003,808 in foreign currency) ............................. 1,228,949
Receivables for:
Forward foreign currency exchange contracts sold (Notes 1 and 4) ......... 14,642,022
Dividends ................................................................ 135,431
Investments sold ......................................................... 97,567
Foreign tax reclaim ...................................................... 8,564
Deferred organization expenses (Note 1) ..................................... 3,480
-----------
Total Assets ....................................................... 55,441,007
-----------
LIABILITIES:
Payables for:
Forward foreign currency exchange contracts sold, at value (Notes 1 and 4) 14,725,452
Investments purchased .................................................... 666,398
Foreign withholding taxes ................................................ 28,373
Investment advisory fee (Note 2) ......................................... 20,883
Expense reimbursement fee (Note 2) ....................................... 6,145
Administrative fee (Note 2) .............................................. 1,124
-----------
Total Liabilities .................................................. 15,448,375
-----------
NET ASSETS ...................................................................... $39,992,632
===========
Net Assets Consist of:
Paid-in capital ............................................................ 36,459,439
Net unrealized appreciation ................................................ 3,533,193
-----------
Net Assets ...................................................................... $39,992,632
===========
</TABLE>
See Notes to Financial Statements.
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF OPERATIONS
For the six months ended April 30, 1996
(expressed in U.S. dollars)
(unaudited)
INVESTMENT INCOME:
Income:
Dividends (net of foreign withholding tax of $46,322) ... $ 201,827
Interest ................................................ 29,809
----------
Total Income ........................................ 231,636
----------
Expenses:
Investment advisory fee (Note 2) ........................ 103,498
Expense reimbursement fee (Note 2) ...................... 33,790
Administrative fee (Note 2) ............................. 5,573
Amortization of organization expenses (Note 1) .......... 443
----------
Total Expenses ...................................... 143,304
----------
Net Investment Income ............................... 88,332
----------
NET REALIZED AND UNREALIZED GAIN (LOSS) (Notes 1 and 3)
Net realized gain (loss) on:
Investments ............................................. 1,137,556
Foreign exchange transactions ........................... (63,844
----------
1,073,712
----------
Net change in unrealized appreciation/depreciation on:
Investments ............................................. 3,217,486
Foreign currency translations ........................... 422,242
----------
3,639,728
----------
Net Realized and Unrealized Gain .................... 4,713,440
----------
Net Increase in Net Assets Resulting from Operations .... $4,801,772
==========
See Notes to Financial Statements.
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
For the period
For the six April 1, 1995
months ended (commencement of
April 30, 1996 operations) to
(unaudited) October 31, 1995
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income .................................... $ 88,332 $ 183,401
Net realized gain on investments and foreign exchange
transactions ....................................... 1,073,712 513,894
Net change in unrealized depreciation/appreciation on
investments and foreign currency translations ...... 3,639,728 (106,535)
------------ ------------
Net increase in net assets resulting from operations 4,801,772 590,760
------------ ------------
Capital transactions (Note 4):
Proceeds from contributions .............................. 7,000,000 27,500,000
------------ ------------
Total increase in net assets ....................... 11,801,772 28,090,760
NET ASSETS:
Beginning of period ............................................ 28,190,860 100,100
------------ ------------
End of period .................................................. $ 39,992,632 $ 28,190,860
============ ============
</TABLE>
See Notes to Financial Statements.
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
Selected per share data and ratios for a share outstanding throughout each
period (expressed in U.S. dollars)
<TABLE>
<CAPTION>
For the period
For the six April 1, 1995
months ended (commencement of
April 30, 1996 operations) to
(unaudited) October 31, 1995
------------ ------------
<S> <C> <C>
Ratios*/Supplemental Data:
Net assets, end of period (000's omitted) ........................ $ 39,993 $ 28,191
Ratio of expenses to average net assets .......................... 0.90% 0.90%
Ratio of net investment income to average net assets (Note 2)**... 0.55% 1.26%
Portfolio turnover rate .......................................... 36% 23%
Average commission rate paid per share *** ....................... $ 0.0178 $ 0.0152
</TABLE>
- ------------
* Annualized
** Had the expense reimbursement agreement not been in place, the ratio of
expenses to average net assets for the six months ended April 30, 1996
and for the period ended October 31, 1995 would have been 0.91% and
0.98%, respectively. Furthermore, the ratio of expenses reflects fees
reduced in connection with an expense offset arrangement with the
Portfolio's custodian. Had this arrangement not been in place, the ratio
would have been 1.37%.
*** Most foreign securities markets do not charge commissions based on a rate
per share but as a percentage of the principal value of the transaction.
As a result, the above rate is not indicative of the commission
arrangements currently in effect.
See Notes to Financial Statements.
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(expressed in U.S. dollars)
(unaudited)
1. Organization and Significant Accounting Policies. International Equity
Portfolio (the "Portfolio") is registered under the Investment Company Act of
1940, as amended, as a no-load, open-end management investment company which was
organized as a trust under the laws of the State of New York on August 15, 1994.
The Portfolio commenced operations on April 1, 1995. The Declaration of Trust
permits the Trustees to create an unlimited number of beneficial interests in
the Portfolio.
The financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America, and reflect the
following policies:
A. Valuation of Investments. (1) The value of investments listed on
either a domestic or foreign securities exchange is based on the last sale
price on that exchange prior to the time when assets are valued, or in the
absence of recorded sales, at the average of readily available closing bid
and asked prices on such exchange; (2) unlisted securities are valued at
the average of the quoted bid and asked prices in the over-the-counter
market; (3) securities or other assets for which market quotations are not
readily available are valued at fair value in accordance with procedures
established by and under the general supervision and responsibility of the
Portfolio's Trustees. Such procedures include the use of independent
pricing services, which use prices based upon yields or prices of
securities of comparable quality, coupon, maturity and type; indications as
to the value from dealers; and general market conditions; (4) all assets
and liabilities initially expressed in foreign currencies will be converted
into U.S. dollars at the prevailing rates of exchange available at the time
of valuation; and (5) trading in securities on most foreign exchanges and
over-the-counter markets is normally completed before the close of the New
York Stock Exchange and may also take place on days on which the New York
Stock Exchange is closed. If events materially affecting the value of
foreign securities occur between the time when the exchange on which they
are traded closes and the time when the Portfolio's net 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. Foreign Currency Translations. The accounting records of the
Portfolio are maintained in U.S. dollars. Foreign currency amounts are
translated into U.S. dollars at the current rate of exchange of such
currency against the U.S. dollar to determine the value of investments,
assets and liabilities. Purchases and sales of securities, and income and
expenses are translated at the prevailing rate of exchange on the
respective dates of such transactions. Upon the purchase or sale of a
security denominated in foreign currency, the Portfolio may enter into
forward foreign currency exchange contracts for the purchase or sale, for a
fixed amount of U.S. dollars of the amount of foreign currency involved in
the underlying security transaction. The Portfolio isolates that portion of
realized gain or loss on investments resulting from changes in foreign
exchange rates on investments from the fluctuations arising from changes in
market prices of such investments. Reported net realized and unrealized
gains and losses arise from the sales of portfolio securities, sales of
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the difference between the
amounts of dividends, interest and foreign withholding taxes recorded on
the Portfolio's books and the U.S. dollar equivalent of the amounts
actually received or paid. Net unrealized appreciation or depreciation on
foreign currency translations arise from changes in the value of the assets
and liabilities, excluding investments in securities, at fiscal year end,
arising from changes in the exchange rate.
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (continued)
(expressed in U.S. dollars)
(unaudited)
C. Forward Foreign Currency Exchange Contracts. The Portfolio may
enter into forward foreign currency exchange contracts ("contracts") in
connection with planned purchases or sales of securities, to hedge the U.S.
dollar value of portfolio securities denominated in a particular currency,
or to increase or shift its exposure to a currency other than U.S. dollars.
The Portfolio has no specific limitation on the percentage of assets which
may be committed to these types of contracts. The Portfolio could be
exposed to risks if the counterparties to the contracts are unable to meet
the terms of their contracts or if the value of the foreign currency
changes unfavorably. The U.S. dollar values of foreign currency underlying
all contractual commitments held by the Portfolio are determined using
forward currency exchange rates supplied by a quotation service.
D. Accounting for Investments. Security transactions are accounted for
on the trade date. Realized gains and losses on security transactions are
determined on the identified cost method. Dividend income and other
distributions from portfolio securities are recorded on the ex-dividend
date except that, if the ex-dividend date has passed, certain dividends
from foreign securities are recorded as soon as the Portfolio is informed
of the ex-dividend date. Dividend income is recorded net of foreign taxes
withheld where recovery of such taxes is not assured. Interest income is
accrued daily.
E. Federal Income Taxes. The Portfolio will be treated as a
partnership for federal income tax purposes. As such, each investor in the
Portfolio will be subject to taxation on its share of the Portfolio's
ordinary income and capital gains.
F. Deferred Organization Expenses. Expenses incurred by the Portfolio
in connection with its organization are being amortized on a straight-line
basis over a five-year period.
2. Transactions with Affiliates.
Investment Advisory Fee. The Portfolio has an investment advisory agreement
with Brown Brothers Harriman & Co. (the "Adviser") for which it pays the Adviser
a fee calculated daily and paid monthly at an annual rate equivalent to 0.65% of
the Portfolio's average daily net assets. For the six months ended April 30,
1996, the Portfolio incurred $103,498 for advisory services.
Administrative Fee. The Portfolio has an administrative agreement with
Brown Brothers Harriman Trust Company (Cayman) Limited (the "Administrator") for
which it pays the Administrator a fee calculated daily and paid monthly at an
annual rate equivalent to 0.035% of the Portfolio's average daily net assets.
The Administrator has a subadministration agreement with Signature Financial
Group (Cayman) Ltd. for which Signature Financial Group (Cayman) Ltd. receives
such compensation as is from time to time agreed upon. For the period six months
ended April 30, 1996, the Portfolio incurred $5,573 for administrative services.
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENT (continued)
(expressed in U.S. dollars)
Expense Payment Fee. Brown Brothers Harriman Trust Company (Cayman) Limited
pays certain expenses of the Portfolio and receives a fee from the Portfolio,
computed and paid monthly, such that after such fee the aggregate expenses will
not exceed 0.90% of the Portfolio's average daily net assets. For the period six
months ended April 30, 1996, Brown Brothers Harriman Trust Company (Cayman)
Limited incurred $36,400 in expenses on behalf of the Portfolio. The expense
reimbursement agreement will terminate when the aggregate amount of fees
received by Brown Brothers Harriman Trust Co. (Cayman) Limited thereunder equals
the aggregate amount of expenses paid by Brown Brother Harriman Trust Company
(Cayman) Limited thereunder.
3. Investment Transactions. For the six months ended April 30, 1996, the
cost of purchases and the proceeds of sales of investment securities other than
short-term investments were $19,101,393 and $11,016,443, respectively. There
were no purchases or sales of U.S. government obligations during the period.
Custody fees for the Portfolio paid pursuant to the expense reimbursement
agreement were reduced by approximately $73,000 as a result of an expense offset
arrangement with the Portfolio's custodian.
4. Financial Instruments with Off-Balance Sheet Risk. At April 30, 1996,
the Portfolio had outstanding forward foreign currency exchange contracts as a
hedge to protect against possible changes in foreign currency exchange rates
that would adversely affect a portfolio position or an anticipated portfolio
position. Forward contracts involve elements of market risk in excess of the
amount reflected in the Statement of Assets and Liabilities. The Portfolio bears
the risk of an unfavorable change in the foreign exchange rate underlying the
forward contracts.
Forward foreign currency exchange contracts open at April 30, 1996:
Contracts In Exchange Deliver Unrealized
to Deliver For Date Depreciation
JPY 1,536,000,000 $14,642,022 5/20/96 $ (83,451)
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