INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1995
(expressed in U.S. dollars)
Shares Value
- ------------ ------------
COMMON STOCKS (94.8%)
AUSTRALIA (3.6%)
BANKING
9,000 National Australia Bank, Ltd. .................. $ 77,057
------------
ENERGY
13,750 Broken Hill Proprietary Co., Ltd. .............. 186,224
20,000 Woodside Petroleum, Ltd. ....................... 95,826
------------
282,050
------------
GOLD MINES
9,000 Renison Goldfields Corp., Ltd. ................. 37,843
------------
INSURANCE
20,500 QBE Insurance Group ............................ 90,570
------------
MATERIALS
11,500 Amcor, Ltd. .................................... 86,197
6,000 CRA, Ltd. ...................................... 92,504
15,000 Western Mining Corp. Hldgs., Ltd. .............. 96,206
------------
274,907
------------
REAL ESTATE
6,500 Lend Lease Corp., Ltd. ......................... 90,410
------------
SERVICES
9,000 Brambles Industries, Ltd. ...................... 95,704
33,000 Burns Philp & Co., Ltd. ........................ 73,903
------------
169,607
------------
TOTAL AUSTRALIA ................................ 1,022,444
------------
FRANCE (5.4%)
CAPITAL EQUIPMENT
1,400 Alcatel Alsthom SA* ............................ 119,556
------------
CONSUMER DURABLES
940 Peugeot SA ..................................... 122,447
------------
CONSUMER NON-DURABLES
235 Bongrain SA .................................... 124,322
760 LVMH ........................................... 151,220
------------
275,542
------------
FINANCE
1,160 Societe Generale ............................... 132,603
------------
MEDIA & ADVERTISING
1,050 Canal + ........................................ 181,438
1,840 Havas .......................................... 127,556
1,350 Television Francaise 1 ......................... 139,414
------------
448,408
------------
RETAIL
450 Comptoirs Modernes ............................. 144,475
------------
SERVICES
1,050 Accor .......................................... 124,752
590 Sodexho ........................................ 152,866
------------
277,618
------------
TOTAL FRANCE ................................... 1,520,649
------------
GERMANY (5.1%)
BANKING
500 Commerzbank AG ................................. 115,729
2,300 Depfa Bank AG .................................. 89,869
------------
205,598
------------
CAPITAL EQUIPMENT
145 Rheinelektra AG ................................ 118,464
240 Siemens AG ..................................... 125,831
------------
244,295
------------
CONSUMER NON-DURABLES
210 Suedzucker AG .................................. 117,114
160 Wella AG ....................................... 87,639
------------
204,753
------------
ENERGY
3,000 VEBA AG ........................................ 123,167
------------
INSURANCE
160 Colonia Konzern AG ............................. 125,036
------------
MATERIALS
450 Bayer AG ....................................... 119,693
------------
MULTI-INDUSTRY
3,600 AGIV AG ........................................ 75,703
------------
PHARMACEUTICALS
2,300 Merck KGaA* .................................... 96,078
------------
RETAIL
335 Kaufhof Holding AG ............................. 114,713
------------
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1995 (continued)
(expressed in U.S. dollars)
Shares Value
- ------------ ------------
GERMANY (continued)
TRANSPORTATION
880 Lufthansa AG ................................... $ 122,410
------------
TOTAL GERMANY .................................. 1,431,446
------------
HONG KONG (10.4%)
BANKING
90,000 Dao Heng Bank Group, Ltd. ...................... 330,005
------------
CAPITAL EQUIPMENT
530,000 Truly International Hldgs ...................... 82,259
------------
FINANCE
120,000 Great Eagle Hldgs., Ltd. ....................... 329,035
------------
INSURANCE
333,000 National Mutual Asia, Ltd. ..................... 256,263
------------
MATERIALS
110,000 M.C. Packaging (Hong Kong) ..................... 46,950
------------
MULTI-INDUSTRY
50,000 Hutchison Whompoa .............................. 275,489
30,000 Jardine Matheson
Strategic Hldgs .............................. 183,000
46,000 Swire Pacific .................................. 345,073
------------
803,562
------------
REAL ESTATE
50,000 Cheung Kong Hldgs .............................. 281,956
89,000 New World Development Co. ...................... 346,483
30,000 Sun Hung Kai Properties ........................ 239,598
------------
868,037
------------
SERVICES
61,000 Wharf Hldgs .................................... 205,918
------------
TOTAL HONG KONG ................................ 2,922,029
------------
INDIA (3.2%)
CONSUMER DURABLES
12,000 Ashok Leyland, Ltd. ............................ 124,500
6,200 Bajaj Auto, Ltd. ............................... 167,400
------------
291,900
------------
MATERIALS
8,400 Grasim Industries .............................. 176,400
70,000 Indo Gulf Fertilisers and
Chemicals Corp. .............................. 103,250
10,500 Reliance Industries ............................ 166,688
------------
446,338
------------
PHARMACEUTICALS
7,000 Ranbaxy Laboratories, Ltd. ..................... 159,250
------------
TOTAL INDIA .................................... 897,488
------------
INDONESIA (2.3%)
BANKING
59,000 Bank Bali ...................................... 137,693
131,250 Bank Dagang Nasional Indonesia ................. 117,033
------------
254,726
------------
CONSUMER NON-DURABLES
80,000 Sinar Mas Agro Resources
& Technology ................................. 45,795
------------
MATERIALS
47,000 Semen Cibinong ................................. 123,139
------------
REAL ESTATE
58,000 Ciputra Development ............................ 130,251
192,000 Dharmala Intiland .............................. 107,794
------------
238,045
------------
TOTAL INDONESIA ................................ 661,705
------------
IRELAND (2.5%)
BANKING
21,000 Allied Irish Banks ............................. 106,241
21,700 Irish Permanent, PLC ........................... 114,349
------------
220,590
------------
CONSUMER NON-DURABLES
13,200 Greencore ...................................... 106,848
------------
MEDIA & ADVERTISING
22,200 Independent News ............................... 132,977
------------
PHARMACEUTICALS
5,970 Elan, PLC, ADR* ................................ 239,546
------------
TOTAL IRELAND .................................. 699,961
------------
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1995 (continued)
(expressed in U.S. dollars)
Shares Value
- ------------ ------------
ITALY (1.9%)
BANKING
11,650 Istituto Mobiliare Italiano (IMI) .............. $ 63,658
------------
CAPITAL EQUIPMENT
9,700 Sirti SpA ...................................... 59,089
------------
INSURANCE
2,900 Assicurazioni Generali SpA ..................... 67,588
18,320 Assicurazione Industriale
SAI SpA ...................................... 77,579
54,000 Istituto Nazionale
Delle Assicurazioni SpA ...................... 70,972
------------
216,139
------------
RETAIL
17,200 Rinascente ..................................... 101,970
------------
TELECOMMUNICATIONS
27,700 Telecom Italia Mobile SpA ...................... 46,485
27,700 Telecom Italia SpA ............................. 42,054
------------
88,539
------------
TOTAL ITALY .................................... 529,395
------------
JAPAN (24.0%)
CAPITAL EQUIPMENT
2,000 Autobacs Seven Co., Ltd. ....................... 188,670
15,000 Bridgestone Corp. .............................. 208,221
5,000 Fanuc, Ltd. .................................... 216,531
21,000 Hitachi, Ltd. .................................. 215,553
54,000 Ishikawajima Harina
Heavy Industries Co., Ltd. ................... 217,489
17,000 Kandenko ....................................... 209,394
3,000 Kyocera Corp. .................................. 245,760
22,000 Matsushita Electric
Industrial Co., Ltd. ......................... 217,215
6,000 Murata Mfg. Co., Ltd. .......................... 210,567
16,000 NEC Corp. ...................................... 211,154
12,000 NipponDenso Co., Ltd. .......................... 219,366
12,000 Nippon Electric Glass, Ltd. .................... 221,712
18,000 Sekisui House, Ltd. ............................ 207,635
------------
2,789,267
------------
CONSUMER DURABLES
13,000 Canon, Inc. .................................... 222,396
9,000 Fuji Photo Film Co., Ltd. ...................... 222,591
47,000 Isuzu Motors, Ltd.* ............................ 189,755
16,000 Sharp Corp. .................................... 222,103
4,000 TDK Corp. ...................................... 206,071
18,000 Toppan Printing ................................ 237,548
------------
1,300,464
------------
CONSUMER NON-DURABLES
19,000 Kao Corp. ...................................... 230,314
5,000 Sony Music Entertainment
(Japan), Inc. ................................ 214,087
13,000 Yamazaki Baking, Ltd. .......................... 230,021
------------
674,422
------------
ENERGY
45,000 Cosmo Oil Co. .................................. 219,952
------------
FINANCE
3,000 Sanyo Shinpan Finance, Ltd. .................... 214,087
------------
MATERIALS
49,000 Dai Nippon Ink & Chemicals ..................... 208,368
15,000 Sumitomo Forestry Co., Ltd. .................... 211,154
7,000 Tostem Corp. ................................... 214,869
------------
634,391
------------
PHARMACEUTICALS
10,000 Sankyo Co. ..................................... 219,952
12,000 Taisho Pharmaceutical .......................... 217,019
10,000 Yamanouchi Pharmaceutical Co., Ltd. ............ 222,885
------------
659,856
------------
SERVICES
4,000 Secom Co., Ltd. ................................ 260,423
------------
TOTAL JAPAN .................................... 6,752,862
------------
MALAYSIA (5.7%)
BANKING
76,000 Commerce Asset-Hldgs. Bhd ...................... 376,859
------------
FINANCE
213,000 Public Finance Bhd ............................. 400,685
------------
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1995 (continued)
(expressed in U.S. dollars)
Shares Value
- ------------ ------------
MALAYSIA (continued)
REAL ESTATE
220,000 Bolton Properties Bhd .......................... $ 285,714
85,000 IOI Properties Bhd ............................. 178,965
243,000 Lion Land ...................................... 262,987
27,000 Negara Properties (M) Bhd ...................... 107,320
------------
834,986
------------
TOTAL MALAYSIA ................................. 1,612,530
------------
NETHERLANDS (3.9%)
CONSUMER DURABLES
3,500 Polygram NV .................................... 218,501
------------
FINANCE
3,450 Fortis Amev NV ................................. 216,691
------------
FOOD & BEVERAGES
5,900 Ahold NV ....................................... 223,615
------------
MEDIA & ADVERTISING
16,950 Elsevier NV .................................... 219,153
2,440 Wolters Kluwer NV .............................. 222,071
------------
441,224
------------
TOTAL NETHERLANDS .............................. 1,100,031
------------
SINGAPORE (4.4%)
BANKING
35,000 Development Bank of Singapore .................. 401,274
18,000 Overseas Chinese Banking Corp. ................. 211,465
31,000 Overseas Union Bank ............................ 193,064
------------
805,803
------------
ENERGY
55,000 DBS Land ....................................... 162,704
------------
REAL ESTATE
85,000 Hotel Properties ............................... 128,733
91,000 Wing Tai Hldgs ................................. 157,785
------------
286,518
------------
TOTAL SINGAPORE ................................ 1,255,025
------------
SPAIN (1.1%)
CONSUMER NON-DURABLES
1,450 Tabacalera SA .................................. 48,707
3,900 Viscofan Envoltura ............................. 48,888
------------
97,595
------------
ENERGY
1,600 Repsol SA ...................................... 47,782
------------
MULTI-INDUSTRY
1,000 Corp Fin Alba .................................. 55,303
------------
SERVICES
5,680 Autopistas Cesa SA (Acesa) ..................... 53,051
------------
UTILITIES
4,100 Telefonica De Espana SA ........................ 51,731
------------
TOTAL SPAIN .................................... 305,462
------------
SWEDEN (1.3%)
CAPITAL EQUIPMENT
610 Asea AB (B free) ............................... 60,168
3,700 Atlas Copco AB (A free) ........................ 55,996
------------
116,164
------------
CONSUMER DURABLES
1,020 Electrolux AB (B free) ......................... 43,623
2,750 Volvo AB (B free) .............................. 61,911
------------
105,534
------------
MATERIALS
960 Mo och Domsjo AB (B free) ...................... 48,863
4,600 Munksjo AB ..................................... 33,250
------------
82,113
------------
MULTI-INDUSTRY
1,850 Investor AB (B free) ........................... 65,886
------------
TOTAL SWEDEN ................................... 369,697
------------
SWITZERLAND (5.0%)
CONSUMER DURABLES
430 SMH AG (Bearer) ................................ 268,158
------------
INSURANCE
400 Winterthur Insurance ........................... 268,123
------------
MATERIALS
350 Ciba-Geigy AG .................................. 302,123
------------
PHARMACEUTICALS
350 Sandoz AG (Registered) ......................... 291,333
------------
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1995 (continued)
(expressed in U.S. dollars)
Shares Value
- ------------ ------------
SWITZERLAND (continued)
SERVICES
150 SGS Surveillance Holdings ...................... $ 283,405
------------
TOTAL SWITZERLAND .............................. 1,413,142
------------
UNITED KINGDOM (15.0%)
BANKING
71,300 Bank of Scotland ............................... 284,073
------------
CONSUMER DURABLES
12,200 Thorn-EMI, Ltd. ................................ 284,120
------------
MATERIALS
28,800 Redland ........................................ 158,684
54,000 Rentokil Group ................................. 268,933
18,200 RTZ Corp., PLC ................................. 252,066
------------
679,683
------------
MEDIA & ADVERTISING
28,400 Reuters Holdings, PLC .......................... 264,019
------------
MULTI-INDUSTRY
41,700 BTR, PLC ....................................... 221,521
48,500 Inchcape, PLC .................................. 239,624
------------
461,145
------------
PHARMACEUTICALS
18,600 Glaxo Wellcome ................................. 250,843
25,900 SmithKline Beecham Group, Class A .............. 270,466
------------
521,309
------------
RETAIL
48,000 Argyll Group, PLC .............................. 243,984
37,300 Marks & Spencer ................................ 250,043
69,200 Tesco .......................................... 245,217
------------
739,244
------------
SERVICES
34,900 BAA ............................................ 271,475
80,800 Ladbroke Group, PLC ............................ 212,060
73,333 Takare, PLC .................................... 237,699
------------
721,234
------------
TELECOMMUNICATIONS
69,200 Vodafone Group ................................. 286,100
------------
TOTAL UNITED KINGDOM ........................... 4,240,927
------------
TOTAL COMMON STOCKS
(cost $26,292,736) ............................. $ 26,734,793
------------
Principal
Amount
- ------------
CONVERTIBLE BONDS (1.1%)
INDIA (1.1%)
FINANCE
$225,000 Industrial Credit & Investment Corp.
2.50%, 4/3/00 .................................. $ 171,563
------------
MATERIALS
140,000 Essar Gujurat, Ltd.
5.50%, 8/5/98 .................................. 138,950
------------
TOTAL CONVERTIBLE BONDS
(cost $347,241) ................................ $ 310,513
------------
TOTAL INVESTMENTS (identified cost $26,639,977)(a) .... 95.9% $27,045,306
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ........ 4.1 1,145,554
----- -----------
NET ASSETS ............................................ 100.0% $28,190,860
===== ===========
- ---------
* non-income producing security
(a) The aggregate cost for federal income tax purposes is $26,639,978, the
aggregate gross unrealized appreciation is $1,731,450 and the aggregate
gross unrealized depreciation is $1,326,076 resulting in net unrealized
appreciation of $405,329.
See Notes to Financial Statements.
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1995
(expressed in U.S. dollars)
ASSETS:
Investments in securities, at value (identified
cost $26,639,977) (Note 1) $ 27,045,306
Cash (including $83,328 in foreign currency) 1,685,933
Receivables for:
Forward foreign currency exchange contract
sold (Notes 1 and 4) 17,056,264
Investments sold 77,679
Dividends 58,976
Foreign tax reclaim 8,831
Interest 5,122
Deferred organization expenses (Note 1) 3,922
------------
Total Assets 45,942,033
------------
LIABILITIES:
Payables for:
Forward foreign currency exchange contract sold,
at value (Notes 1 and 4) 17,568,335
Investments purchased 127,873
Expense reimbursement fee (Note 2) 30,157
Investment advisory fee (Note 2) 15,791
Foreign withholding taxes 8,167
Administrative fee (Note 2) 850
------------
Total Liabilities 17,751,173
------------
NET ASSETS $ 28,190,860
============
Net Assets Consist of:
Paid-in capital 28,297,395
Net unrealized depreciation (106,535)
------------
Net Assets $ 28,190,860
============
See Notes to Financial Statements.
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF OPERATIONS
For the period April 1, 1995 (commencement of operations) to October 31, 1995
(expressed in U.S. dollars)
INVESTMENT INCOME
Income:
Dividends (net of foreign withholding tax of $55,648) $ 294,376
Interest 20,332
---------
Total Income 314,708
---------
Expenses:
Investment advisory fee (Note 2) 94,833
Expense reimbursement fee (Note 2) 30,847
Administrative fee (Note 2) 5,106
Amortization of organization expenses (Note 1) 521
---------
Total Expenses 131,307
---------
Net Investment Income 183,401
---------
NET REALIZED AND UNREALIZED GAIN (Notes 1 and 3)
Net realized gain on:
Investments 257,590
Foreign exchange transactions 256,304
---------
513,894
---------
Net change in unrealized appreciation on:
Investments 405,329
Foreign currency translations (511,864)
---------
(106,535)
---------
Net Realized and Unrealized Gain 407,359
---------
Net Increase in Net Assets Resulting from Operations $ 590,760
=========
See Notes to Financial Statements.
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
(expressed in U.S. dollars)
For the period
April 1, 1995
(commencement of
operations) to
October 31, 1995
----------------
INCREASE IN NET ASSETS:
Operations:
Net investment income $ 183,401
Net realized gain on investments and foreign exchange
transactions 513,894
Net depreciation on investments and foreign
currency translations (106,535)
------------
Net increase in net assets resulting from operations 590,760
------------
Capital Transactions:
Proceeds from contributions 27,500,000
Value of withdrawals --
------------
Net increase in net assets resulting from
capital transactions 27,500,000
------------
Total increase in net assets 28,090,760
NET ASSETS:
Beginning of period 100,100
------------
End of period $ 28,190,860
============
See Notes to Financial Statements.
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
(expressed in U.S. dollars)
For the period
April 1, 1995
(commencement of
operations) to
October 31, 1995
----------------
Ratios/Supplemental Data:
Net assets, end of period (000's omitted) $ 28,191
Ratio of expenses to average net assets (Note 2)** 0.90%*
Ratio of net investment income to average net assets 1.26%*
Portfolio turnover rate 23%
Average commission rate paid per share*** $ 0.0152
- ---------
* Annualized
** Had the expense reimbursement not been in place, the ratio of expenses to
average net assets for the period ended October 31, 1995 would have been
0.98%. 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 1.30%.
*** 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)
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 and received a contribution
of $5,000,000 on that date from the Brown Brothers Harriman & Co. Pension Plan
in exchange for a beneficial interest in the Portfolio. 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)
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 exdividend 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 straightline 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 dally and paid monthly at an annual rate equivalent
to 0.65% of the Portfolio's average dally net assets. For the period April 1,
1995 through October 31, 1995, the Portfolio incurred $94,833 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 dally 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 April 1,
1995 through October 31, 1995, the Portfolio incurred $5,106 for administrative
services.
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENT (continued)
(expressed in U.S. dollars)
EXPENSE REIMBURSEMENT 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 dally net assets. For
the period April 1, 1995 to October 31, 1995, Brown Brothers Harriman Trust
Company (Cayman) Limited incurred $41,900 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 period April 1, 1995 through
October 31, 1995, the cost of purchases and the proceeds of sales of investment
securities other than short-term investments were $30,809,859 and $4,402,124,
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 $48,000 as a result of an
expense offset arrangement with the Portfolio's custodian.
4. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK. At October 31,
1995, 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 October 31, 1995:
<TABLE>
<CAPTION>
Unrealized
Contracts In Exchange Deliver (Depreciation)/
TO DELIVER FOR DATE APPRECIATION
<S> <C> <C> <C> <C>
DM 17,700,000 $12,014,942 11/8/95 $ (564,756)
JPY 508,600,000 $ 5,041,322 11/8/95 $ 52,685
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
Trustees and Investors
International Equity Portfolio:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of International Equity Portfolio as of
October 31, 1995, and the related statement of operations, statement of changes
in net assets, and financial highlights for the period April 1, 1995
(commencement of operations) to October 31, 1995 (all expressed in U.S.
dollars). These financial statements and financial highlights are the
responsibility of the Portfolio's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned at October 31, 1995 by correspondence with the custodian and
brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
International Equity Portfolio at October 31, 1995, and the results of its
operations, the changes in its net assets, and its financial highlights for the
period April 1, 1995 (commencement of operations) to October 31, 1995 in
conformity with accounting principles generally accepted in the United States of
America.
Deloitte & Touche
Grand Cayman, Cayman Islands
December 12, 1995
<PAGE>
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
The following investment management strategies and techniques have
materially affected the Portfolio's performance for the fiscal year ended
October 31, 1995.
INTERNATIONAL EQUITY PORTFOLIO
In the months since the inception of the International Equity
Portfolio on April 1, 1995, international equity markets as measured by the
MSCI-EAFE Index have risen a dollar adjusted 2.1%. Declining interest rates in
the U.S., Germany and Japan over this period provided a boost to equity markets,
but the impact was dampened by the volatility of the U.S. dollar and its strong
recovery since early summer. The Portfolio achieved a return of 3.01% for its
investors over this period. The Portfolio's overweighted exposure to Hong Kong
and its gradual commitment to Japan contributed to the outperformance relative
to the benchmark.
Initially, the Portfolio's investment strategy concentrated on
Southeast Asian markets which offered above average growth potential at
depressed prices and on European markets where economies were at earlier stages
of recovery. The Portfolio began to invest in Japanese equities in late summer,
only after a stimulative fiscal policy; an aggressive monetary policy which
incorporated an historically low Official Discount Rate and non- sterilized
currency intervention; and a weaker Yen convinced us that we have seen the
market lows and that the long term bear market in Japan is over.
[The following table was represented by a chart in the printed matter]
INTERNATIONAL EQUITY PORTFOLIO
GROWTH OF $10,000
Line graph with two axes: the X-axis represents years of operations; the Y-axis
represents dollar value. The graph plots two lines: the first line represents
the growth of a ten thousand dollar investment in the Portfolio from April 1,
1995 to October 31, 1995; the second line represents the growth of a ten
thousand dollar investment in a portfolio of securities reflecting the
composition of the MSCI-EAFE Index for the same time period. The graph points
are as follows:
YEAR FUND** MSCI-EAFE
4/1/95* $10,000 $10,000
4/30/95 9,946 10,376
5/31/95 10,381 10,252
6/30/95 10,325 10,073
7/31/95 10,662 10,700
8/31/95 10,528 10,292
9/30/95 10,534 10,493
10/31/95 10,301 10,210
*inception
**net of fees and expenses
Past performance is not predictive of future performance.
