INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1997
(expressed in U.S. dollars)
Shares Value
------ -----
COMMON STOCKS & WARRANTS (96.40%)
AUSTRALIA (1.4%)
ENERGY
23,350 Woodside Petroleum, Ltd. .... $ 197,215
-----------
MATERIALS
7,935 Rio Tinto, Ltd............... 96,539
26,715 WMC, Ltd..................... 94,876
-----------
191,415
-----------
MULTI-INDUSTRY
73,000 Pacific Dunlop, Ltd. ........ 155,911
-----------
SERVICES
83,571 Pasminco, Ltd................ 106,572
-----------
TOTAL AUSTRALIA ............ 651,113
-----------
FINLAND (1.1%)
MULTI-INDUSTRY
6,000 Nokia AB .................... 524,235
-----------
TOTAL FINLAND ............... 524,235
-----------
FRANCE (6.7%)
BANKING
14,000 Banque National de Paris C.I.. 618,905
5,000 Societe Generale SA.......... 684,783
-----------
1,303,688
-----------
CAPITAL EQUIPMENT
4,150 Alcatel Alsthom SA .......... 500,741
-----------
CONSUMER NON-DURABLES
1,640 LVMH ........................ 278,629
-----------
MEDIA & ADVERTISING
2,190 Canal Plus .................. 380,803
-----------
SERVICES
3,395 Accor SA .................... 632,121
-----------
TOTAL FRANCE ................ 3,095,982
-----------
GERMANY (8.9%)
BANKING
22,550 Commerzbank AG............... 765,271
9,410 Depfa Bank AG................ 531,148
-----------
1,296,419
-----------
CAPITAL EQUIPMENT
850 Linde AG..................... 512,820
8,320 Siemens AG................... 512,097
-----------
1,024,917
-----------
ENERGY
8,330 VEBA AG ..................... 464,389
-----------
INSURANCE
3,200 Allianz AG................... 712,844
-----------
MULTI-INDUSTRY
20,000 Metallgesellshaft AG......... 397,958
-----------
RETAIL
4,224 Metro AG* ................... 185,740
-----------
TOTAL GERMANY ............... 4,082,267
-----------
HONG KONG (1.3%)
BANKING
17,000 Dao Heng Bank Group, Ltd. ... 39,139
-----------
CONSUMER GOODS
81,000 Dairy Farm Intl.............. 63,990
-----------
INSURANCE
73,000 National Mutual Asia, Ltd. .. 66,093
-----------
MATERIALS
174,000 C.P. Pokphand Co............. 41,635
-----------
MULTI-INDUSTRY
14,000 Guoco Group, Ltd............. 30,602
11,000 Hutchison Whampoa, Ltd....... 76,117
9,000 Jardine Matheson Holdings.... 57,600
8,000 Swire Pacific, Ltd........... 42,734
-----------
207,053
-----------
REAL ESTATE
10,000 Cheung Kong Hldgs., Ltd. .... 69,521
15,000 New World Development Co., Ltd. 52,771
-----------
122,292
-----------
TELECOMMUNICATIONS
23,800 Hong Kong
Telecommunications, Ltd. . 45,559
-----------
TOTAL HONG KONG ............. 585,761
-----------
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1997 (continued)
(expressed in U.S. dollars)
Shares Value
------ -----
INDIA (2.9%)
CONSUMER DURABLES
23,325 Ashok Leyland, Ltd. ......... $ 99,131
13,500 Bajaj Auto, Ltd. ............ 214,827
-----------
313,958
-----------
FINANCE
92,100 Industrial Credit & Investment
Corp. of India, Ltd....... 300,505
-----------
MATERIALS
9,815 Grasim Industries, Ltd....... 85,881
63,135 Indo Gulf Fertilisers and
Chemicals Corp., Ltd....... 58,400
84,600 Reliance Industries, Ltd..... 438,475
5,525 Southern Petrochemicals
Industries Corp., Ltd..... 16,022
-----------
598,778
-----------
PHARMACEUTICALS
5,500 Ranbaxy Laboratories, Ltd.... 107,068
-----------
TOTAL INDIA ............... 1,320,309
-----------
INDONESIA (0.1%)
PHARMACEUTICALS
90,000 Kalbe Farma.................. 54,924
-----------
TOTAL INDONESIA ............. 54,924
-----------
IRELAND (1.4%)
CONSUMER NON-DURABLES
240,000 Waterford Wedgewood, Plc. .. 277,921
-----------
PHARMACEUTICALS
7,678 Elan Corp., Plc., ADR* ...... 382,940
-----------
TOTAL IRELAND ............... 660,861
-----------
ITALY (3.7%)
BANKING
47,030 Istituto Mobiliare
Italiano SpA (IMI)......... 425,687
-----------
ENERGY
81,600 Ente Nazionale
Idrocarbun SpA (ENI)*...... 461,211
-----------
TELECOMMUNICATIONS
219,100 Telecom Italia Mobile SpA ... 808,845
-----------
TOTAL ITALY ................ 1,695,743
-----------
JAPAN (25.6%)
BANKING
53,000 Asahi Bank, Ltd.............. 274,798
84,000 Daiwa Bank, Ltd.............. 312,688
56,000 Mitsui Trust and
Banking Co., Ltd........... 194,499
55,000 Sakura Bank, Ltd............. 224,387
42,000 Sumitomo Trust and
Banking Co., Ltd. ......... 320,017
-----------
1,326,389
-----------
CONSUMER ELECTRONICS
15,000 Canon Inc. .................. 363,939
12,000 Canon Sales Co., Inc. ....... 218,363
300 Canon Sales Co., Inc.
(Warrants) ................ 19,282
4,300 Sony Corp. .................. 356,934
-----------
958,518
-----------
CONSUMER GOODS
46,000 Kirin Brewery Co. ........... 386,041
35,000 Suzuki Motor Corp. .......... 372,248
13,000 Toyota Motor Corp. .......... 361,861
-----------
1,120,150
-----------
CONSUMER NON-DURABLES
12,000 Fuji Photo Film Co. ......... 434,732
5,900 Nintendo Co., Ltd. .......... 509,846
-----------
944,578
-----------
ELECTRIC COMPONENTS
4,500 Kyocera Corp. ............... 257,624
9,000 Matsushita Communications
Industrial Co., Ltd. ...... 317,823
35,000 Minebea Co., Ltd. ........... 348,982
11,000 Murata Mfg. Co., Ltd. ....... 446,032
4,000 Rohm Company Ltd. ........... 382,219
5,000 TDK Corp. ................... 414,624
-----------
2,167,304
-----------
FINANCE
8,200 Acom Co., Ltd. .............. 449,688
7,500 Orix Corp. .................. 512,256
-----------
961,944
-----------
INDUSTRIAL ELECTRONICS
37,000 Hitachi, Ltd. ............... 284,379
-----------
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1997 (continued)
(expressed in U.S. dollars)
Shares Value
------ -----
JAPAN (continued)
MATERIALS
16,000 Bridgestone Corp. .......... $ 345,658
27,000 Sumitomo Electric
Industries, Ltd. .......... 356,710
20 Sumitomo Electric
Industries, Ltd. (Warrants) 30,744
-----------
733,112
-----------
MULTI-INDUSTRY
43,000 Sumitomo Corp. .............. 307,270
-----------
PHARMACEUTICALS
14,000 Taisho Pharmaceutical ....... 358,288
17,000 Yamanouchi Pharmaceutical
Co., Ltd. ................. 418,114
-----------
776,402
-----------
RETAIL
7,000 Ito-Yokado Co., Ltd. ........ 347,819
-----------
SERVICES
7,000 Benesse Corp. ............... 208,808
16,000 Credit Saison ............... 429,414
20 Credit Saison (Warrants) .... 47,500
120,000 Kawasaki Kisen Kaisha, Ltd. . 172,497
4,000 Nichiei Co. , Ltd. .......... 438,720
101,274 Prospect Japan Fund ......... 361,042
-----------
1,657,981
-----------
TELECOMMUNICATIONS
13 Japan Telecom Co., Ltd....... 181,471
-----------
TOTAL JAPAN ................ 11,767,317
-----------
MALAYSIA (1.1%)
FINANCE
181,000 Public Finance, Bhd. ........ 89,048
-----------
MULTI-INDUSTRY
158,000 Renong, Bhd. ................ 145,037
-----------
REAL ESTATE
238,000 Bolton Properties, Bhd. ..... 99,241
94,000 IOI Properties, Bhd. ........ 74,444
-----------
173,685
-----------
TELECOMMUNICATIONS
47,000 Telekom Malaysia ............ 121,959
-----------
TOTAL MALAYSIA ............. 529,729
-----------
NETHERLANDS (5.6%)
CONSUMER GOODS
4,600 Heineken NV ................. 748,226
-----------
FINANCE
10,500 Fortis Amev NV .............. 412,645
-----------
MATERIALS
4,995 Akzo Nobel NV ............... 880,139
-----------
TELECOMMUNICATIONS
14,300 Koninklijke PTT Nederland ... 546,515
-----------
TOTAL NETHERLANDS .......... 2,587,525
-----------
SPAIN (3.4%)
ENERGY
11,000 Repsol SA ................... 461,264
-----------
FINANCE
7,640 Argentaria SA................ 424,357
-----------
UTILITIES
24,430 Telefonica de Espana ........ 666,715
-----------
TOTAL SPAIN ................. 1,552,336
-----------
SWEDEN (3.0%)
CAPITAL EQUIPMENT
10,000 Ericsson (LM)
Telephone Co., Class `B' .. 440,593
-----------
CONSUMER DURABLES
5,070 Electrolux AB (B free) ...... 419,685
-----------
FINANCE
11,400 Skandia Forsakrings AB ...... 532,718
-----------
TOTAL SWEDEN ................ 1,392,996
-----------
SWITZERLAND (8.3%)
BANKING
4,234 Credit Suisse AG Registered.. 596,434
670 Union Bank of Switzerland
Bearer..................... 771,319
-----------
1,367,753
-----------
CONSUMER GOODS
85 Roche Holdings AG DRC ....... 746,956
-----------
CONSUMER NON-DURABLES
645 Nestle AG Registered ........ 908,827
-----------
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1997 (continued)
(expressed in U.S. dollars)
Shares Value
------ -----
SWITZERLAND (Continued)
PHARMACEUTICALS
502 Novartis AG Bearer .......... $ 791,584
-----------
TOTAL SWITZERLAND .......... 3,815,120
-----------
UNITED KINGDOM (21.9%)
BANKING
31,500 Barclays, Plc. .............. 789,038
42,000 Commercial Union, Plc. ...... 591,911
-----------
1,380,949
-----------
CONSUMER GOODS
57,000 Guiness, Plc. ............... 509,717
83,900 Safeway, Plc. ............... 546,513
57,000 Smithkline Beecham, Plc. .... 540,320
76,000 Unilever, Plc. .............. 566,140
-----------
2,162,690
-----------
ENERGY
48,000 British Petroleum Co., Plc. . 705,461
45,000 PowerGen, Plc. .............. 500,557
-----------
1,206,018
-----------
FINANCE
23,000 HSBC Holdings, Plc. ......... 540,236
32,000 Land Securities, Plc. ....... 536,880
63,500 LLoyds TSB Group, Plc. ...... 793,702
-----------
1,870,818
-----------
MULTI-INDUSTRY
115,000 Inchcape, Plc. .............. 418,683
-----------
PHARMACEUTICALS
36,000 Glaxo Wellcome, Plc. ........ 771,900
-----------
SERVICES
55,000 BAA, Plc. ................... 507,520
36,000 Granada Group, Plc. ......... 496,480
44,000 Railtrack Group, Plc. ....... 703,514
52,000 Reuters Holdings, Plc. ...... 564,462
-----------
2,271,976
-----------
TOTAL UNITED KINGDOM ........ 10,083,034
-----------
TOTAL INVESTMENTS (identified
cost $44,330,137) (a) .... 96.4% $44,399,252
CASH AND OTHER ASSETS IN
EXCESS OF LIABILITIES ...... 3.6 1,638,555
----- -----------
NET ASSETS .................... 100.0% $46,037,807
===== ===========
- ----------
* non-income producing security
(a) The aggregate cost for federal income tax purposes is $44,330,137, the
aggregate gross unrealized appreciation is $5,619,648, and the aggregate
gross unrealized depreciation is $5,550,533, resulting in net unrealized
appreciation of $69,115.
See Notes to Financial Statements.
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1997
(expressed in U.S. dollars)
ASSETS:
Investments in securities, at value (identified
cost $44,330,137) (Note 1) ............................. $44,399,252
Cash (including $14,578 in foreign currency) .............. 1,537,279
Receivables for:
Forward foreign exchange contracts sold ................ 335,621
Dividends .............................................. 78,280
Foreign tax reclaim .................................... 6,353
Deferred organizational expense ........................... 2,149
-----------
Total Assets ...................................... 46,358,934
-----------
LIABILITIES:
Payables for:
Investments purchased .................................. 256,376
Investment advisory fee (Note 2) ....................... 51,069
Foreign withholding taxes .............................. 10,415
Administrative fee (Note 2) ............................ 1,441
Expense reimbursement fee .............................. 1,826
-----------
Total Liabilities ................................. 321,127
-----------
NET ASSETS ................................................... $46,037,807
===========
Net Assets Consist of:
Paid-in capital ......................................... $45,629,380
Net unrealized appreciation ............................. 408,427
-----------
Net Assets ................................................... $46,037,807
===========
See Notes to Financial Statements.
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF OPERATIONS
For the year ended October 31, 1997
(expressed in U.S. dollars)
INVESTMENT INCOME:
Income:
Dividends (net of foreign withholding taxes of $166,607) $ 694,409
-----------
Expenses:
Investment advisory fee (Note 2) ....................... 293,880
Expense reimbursement fee (Note 2) ..................... 96,740
Administrative fee (Note 2) ............................ 15,824
Amortization of organization expenses (Note 1) ......... 887
-----------
Total Expenses ......................................... 407,331
-----------
Net Investment Income .............................. 287,078
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) (Notes 1 and 3):
Net realized gain (loss) on:
Investments ............................................ 2,973,296
Foreign exchange transactions ......................... (1,831,375)
-----------
1,141,921
-----------
Net change in unrealized depreciation on:
Investments ............................................ (615,011)
Foreign currency translations ......................... (4,588)
-----------
(619,599)
-----------
Net Realized and Unrealized Gain ..................... 522,322
-----------
Net Increase in Net Assets Resulting from Operations ...... $ 809,400
===========
See Notes to Financial Statements.
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
For the For the
year ended year ended
October 31, 1997 October 31, 1996
---------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income ................................ $ 287,078 $ 237,627
Net realized gain on investments and foreign
exchange transactions ............................. 1,141,921 1,907,166
Net change in unrealized appreciation (depreciation)
on investments and foreign currency translations .. (619,599) 1,134,561
------------ ------------
Net increase in net assets resulting from operations 809,400 3,279,354
------------ ------------
Capital transactions:
Proceeds from contributions .......................... 10,305,094 9,914,234
Value of withdrawals ................................. (4,561,135) (1,900,000)
------------ ------------
Net increase in net assets resulting from
capital transactions ............................ 5,743,959 8,014,234
------------ ------------
Total increase in net assets ..................... 6,553,359 11,293,588
NET ASSETS:
Beginning of period ...................................... 39,484,448 28,190,860
------------ ------------
End of period ............................................ $ 46,037,807 $ 39,484,448
============ ============
</TABLE>
See Notes to Financial Statements.
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
Selected ratios and supplemental data throughout each period
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
For the period
April 1, 1995
For the year ended October 31, (commencement of
------------------------------------ operations) to
1997 1996 October 31, 1995
-------------- -------------- --------------
<S> <C> <C> <C>
Ratios/Supplemental Data:
Net assets, end of period (000's omitted) .. $46,038 $39,484 $28,191
Expenses as a percentage of average
net assets .............................. 0.90% 0.90% 0.90%*
Ratio of net investment income to
average net assets ...................... 0.63% 0.68% 1.25%*
Portfolio turnover rate..................... 85% 56% 23%
Average commission rate paid per share...... $0.0223 $0.0191 $0.0200
</TABLE>
- ----------
* Annualized
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 an 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 Portfolio's financial statements are prepared in accordance with
accounting principles generally accepted in the United States of America, which
require management to make certain estimates and assumptions at the date of the
financial statements and are based, in part, on the following accounting
policies. Actual results could differ from those estimates.
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.
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
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (continued)
(expressed in U.S. dollars)
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. 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. 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 comply with the provisions of the Internal Revenue code
applicable to regulated investment companies. Accordingly, no provision
for federal income taxes in necessary.
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 year ended October
31, 1997, the Portfolio incurred $293,880 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 year ended
October 31, 1997, the Portfolio incurred $15,824 for administrative services.
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 daily net assets. For
the year ended October 31, 1997, Brown Brothers Harriman Trust Company (Cayman)
Limited incurred $159,939 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 year ended October 31, 1997, the cost
of purchases and the proceeds of sales of investment securities other than
short-term investments were $41,795,992 and $37,127,477, respectively. There
were no purchases or sales of U.S. government obligations during the period.
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (continued)
(expressed in U.S. dollars)
4. Financial Instruments with Off-Balance Sheet Risk. At October 31, 1997
the International Equity 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 Funds bear the risk of an unfavorable change in the foreign
exchange rate underlying the forward contracts.
Forward foreign currency exchange contracts open at October 31, 1997:
Contracts In Exchage Deliver Unrealized
to deliver For Date Appreciation
--------- ---------- ------- -------------
JPY 925,000,000 $7,983,774 11/18/97 $278,054
JPY 925,000,000 $7,778,862 12/02/97 57,567
--------
$335,621
========
<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, 1997, and the related statement of operations for the year then
ended, the statement of changes in net assets for the years ended October 31,
1997 and 1996 and the financial highlights for each of the years in the
three-year period ended October 13, 1997 (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 audits.
We conducted our audits 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, 1997 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 audits provide 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, 1997, the results of its operations, the changes in its
net assets, and its financial highlights for the respective stated periods in
conformity with accounting principles generally accepted in the United States of
America.
DELOITTE & TOUCHE
Grand Cayman, Cayman Islands
December 12, 1997
