<PAGE>
THE INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------- -------------
<S> <C> <C>
COMMON STOCK (90.2%)
AUSTRALIA (3.4%)
Broken Hill Proprietary Company Ltd. (Metals &
Mining)........................................ 535,805 $ 5,325,234
CSR Ltd. (Building Materials).................... 968,933 3,374,593
Fosters Brewing Group Ltd. (Food, Beverages &
Tobacco)....................................... 575,705 1,095,662
Mayne Nickless Ltd. (Commercial Services)........ 426,100 1,952,260
National Australia Bank Ltd. (Banking)........... 370,605 5,080,935
North Ltd. (Metals & Mining)..................... 211,500 555,775
Rio Tinto Ltd. (Metals & Mining)................. 69,700 849,947
Southcorp Holdings Ltd. (Food, Beverages &
Tobacco)....................................... 531,800 1,788,049
Westpac Banking Corporation Ltd. (Banking)....... 504,000 2,941,533
WMC Ltd. (Metals & Mining)....................... 856,000 3,047,039
-------------
26,011,027
-------------
AUSTRIA (0.8%)
Creditanstalt-Bankverein (Banking)............... 69,000 3,907,393
Voest-Alpine Technologie AG (Electrical
Equipment)..................................... 10,050 1,786,175
-------------
5,693,568
-------------
BELGIUM (1.1%)
Almanij NV (Financial Services).................. 58,300 2,586,000
Arbed SA (Metals & Mining)....................... 17,720 2,260,691
Groupe Bruxelles Lambert SA (Multi - Industry)... 8,000 1,239,173
PetroFina SA (Oil-Production).................... 5,600 2,062,097
-------------
8,147,961
-------------
FINLAND (0.7%)
Rautaruukki OYJ (K Shares) (Metals & Mining)..... 183,000 1,717,637
UPM-Kymmene Corp. (Forest Products & Paper)...... 155,000 3,452,595
-------------
5,170,232
-------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------- -------------
<S> <C> <C>
FRANCE (7.3%)
AXA-UAP (Insurance).............................. 22,592 $ 1,550,344
Carrefour Supermarche SA (Retail)................ 4,213 2,203,100
Christian Dior SA (Retail)....................... 11,365 1,263,647
Compagnie Bancaire SA (Financial Services)....... 16,610 2,135,392
Compagnie de Saint Gobain SA (Building
Materials)..................................... 16,334 2,349,629
Compagnie Generale des Eaux (Utilities).......... 42,473 4,965,973
Dexia France (Financial Services)................ 26,118 2,627,210
Elf Aquitaine SA (Oil-Services).................. 27,984 3,471,238
France Telecom SA (Telecommunication
Services)+..................................... 281,900 10,691,168
L'Air Liquide SA (Chemicals)..................... 12,626 1,963,203
Lagardere S.C.A. (Multi - Industry).............. 74,050 2,134,262
Peugeot SA (Automotive).......................... 19,655 2,229,783
Sanofi SA (Pharmaceuticals)...................... 22,868 2,177,134
SEITA (Food, Beverages & Tobacco)................ 74,600 2,384,696
SGS Thomson Microelectronics NV (Electronics)+... 30,000 2,139,493
Societe Generale (Banking)....................... 18,355 2,519,172
Synthelabo (Pharmaceuticals)..................... 22,365 2,638,244
Total SA (Oil-Services).......................... 21,973 2,443,125
Union des Assurances Federales (Insurance)....... 12,460 1,396,221
Usinor Sacilor SA (Metals & Mining).............. 155,719 2,583,577
-------------
55,866,611
-------------
GERMANY (9.2%)
AVA Allgemeine Handelsgesellschaft der
Verbraucher AG (Retail)+....................... 5,990 1,531,300
Bayer AG (Chemicals)(s).......................... 132,150 4,645,188
Bilfinger & Berger Bau AG (Construction &
Housing)....................................... 41,740 1,501,149
Continental AG (Automotive)(s)................... 232,940 5,562,457
Deutsche Bank AG (Banking)....................... 128,940 8,450,405
Douglas Holding AG (Retail)...................... 45,100 1,611,508
Dresdner Bank AG (Banking)....................... 73,270 3,001,208
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
THE INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------- -------------
<S> <C> <C>
GERMANY (CONTINUED)
Fried, Krupp AG Hoesch Krupp (Multi -
Industry)...................................... 8,160 $ 1,566,904
Hannover Rueckversicherungs AG (Insurance)....... 27,954 2,090,274
Henkel KGAA (Chemicals).......................... 30,315 1,479,509
Lufthansa AG (Airlines).......................... 250,800 4,386,062
Muenchener Rueckversicherungs-Gesellschaft AG
(Insurance)(s)................................. 27,820 8,114,124
SAP AG (Computer Software)....................... 27,450 7,886,593
Schering AG (Pharmaceuticals).................... 23,500 2,281,524
SGL Carbon AG (Chemicals)........................ 22,800 3,205,760
Siemens AG (Electrical Equipment)(s)............. 124,410 7,669,224
SKW Trostberg AG (Chemicals)..................... 31,000 1,066,263
VEBA AG (Utilities).............................. 74,800 4,176,435
-------------
70,225,887
-------------
HONG KONG (2.3%)
Bank of East Asia Ltd. (Banking)................. 120 269
Henderson Land Development Company Ltd. (Real
Estate)........................................ 196,000 1,085,296
Hong Kong & China Gas Co. Ltd. (Natural Gas)..... 1,420,000 2,682,191
Hong Kong Electric Holdings Ltd. (Electric)...... 703,500 2,384,591
HSBC Holdings PLC (Banking)...................... 149,600 3,387,023
Hutchison Whampoa Ltd. (Multi - Industry)........ 248,000 1,716,540
Sun Hung Kai Properties Ltd. (Real Estate)....... 681,000 5,021,928
Swire Pacific Ltd. (Multi - Industry)............ 201,000 1,073,976
-------------
17,351,814
-------------
IRELAND (1.1%)
Allied Irish Banks PLC (Banking)................. 336,000 2,855,858
CRH PLC (Building Materials)..................... 144,000 1,733,011
Irish Life PLC (Insurance)....................... 261,000 1,374,224
Jefferson Smurfit Group PLC (Forest Products &
Paper)......................................... 842,500 2,496,807
-------------
8,459,900
-------------
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------- -------------
ITALY (5.0%)
Assicurazioni Generali SPA (Insurance)........... 93,000 $ 2,082,685
Edison SPA (Utilities)........................... 399,000 2,089,252
ENI SPA (Oil-Services)........................... 1,556,000 8,764,381
Fiat SPA (Automotive)............................ 1,745,000 3,159,305
Instituto Mobiliare Italiano SPA (Financial
Services)...................................... 262,000 2,346,939
Instituto Nazionale Delle Assicurazioni
(Insurance).................................... 1,730,000 2,789,249
Istituto Bancario San Paolo di Torino SPA
(Banking)...................................... 278,000 2,112,777
Mediaset SPA (Broadcasting & Publishing)......... 462,000 2,099,316
Mediolanum SPA (Financial Services).............. 95,000 1,596,308
Parmalat Finanziaria SPA (Food, Beverages &
Tobacco)....................................... 1,308,000 1,818,655
Telecom Italia Mobile SPA (Telecommunication
Services)...................................... 1,274,000 2,615,614
Telecom Italia SPA (Telecommunication
Services)...................................... 725,000 4,551,223
Telecom Italia SPA - RNC (Telecommunication
Services)...................................... 561,000 2,270,354
-------------
38,296,058
-------------
JAPAN (21.4%)
Aichi Corp. (Machinery).......................... 90,000 366,675
Aoyama Trading Co. Ltd. (Retail)................. 38,000 1,020,537
Asahi Bank Ltd. (Banking)........................ 367,000 1,904,115
Asatsu, Inc. (Commercial Services)............... 38,000 789,889
Ashikaga Bank Ltd. (Banking)..................... 100,000 214,517
Bridgestone Corp. (Japan) (Chemicals)............ 119,000 2,572,545
Calsonic Corp. (Automotive Supplies)............. 104,000 567,257
Canon Sales Co., Inc. (Miscellaneous)............ 93,000 1,693,439
Central Glass Co. Ltd. (Diversified
Manufacturing)................................. 307,000 625,384
Dai-Ichi Kangyo Bank Ltd. (Banking).............. 100,000 848,092
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------- -------------
<S> <C> <C>
JAPAN (CONTINUED)
Daiichi Pharmaceutical Co. Ltd.
(Pharmaceuticals).............................. 136,000 $ 1,933,649
Daiwa Danchi Co. Ltd. (Real Estate)+............. 233,000 577,318
Daiwa Securities Co. Ltd. (Financial Services)... 35,000 211,857
DDI Corp. (Telecommunications)................... 665 2,222,748
Ebara Corp. (Machinery).......................... 180,000 2,170,117
Fanuc Ltd. (Machinery)........................... 30,000 1,212,272
Fuji Denki Reiki Co. Ltd. (Multi - Industry)..... 120,000 582,689
Fuji Photo Film Co. Ltd. (Electronics)........... 137,000 4,966,491
Fujitsu Ltd. (Computer Systems).................. 225,000 2,469,443
Fukuoka Chuo Bank Ltd. (Banking)................. 43,000 182,697
Furukawa Co. Ltd. (Machinery).................... 67,000 147,626
Gunze Ltd. (Apparels & Textiles)................. 22,000 64,937
Hiroshima Bank Ltd. (Banking).................... 100,000 300,989
Hitachi Ltd. (Electrical Equipment).............. 662,000 5,091,460
Hokkai Can Co. Ltd. (Packaging & Containers)..... 2,000 6,070
Hokuriku Bank Ltd. (Banking)..................... 100,000 276,877
Honda Motor Co. Ltd. (Automotive)................ 39,000 1,313,295
Ishihara Sangyo Kaisha Ltd. (Chemicals)+......... 321,000 659,242
Ito - Yokado Co. Ltd. (Retail)................... 63,000 3,132,451
Itoham Foods, Inc. (Food, Beverages & Tobacco)... 220,000 991,436
Izumi Co. Ltd. (Retail).......................... 103,000 828,145
Izumiya Co. Ltd. (Retail)........................ 85,000 699,676
Japan Synthetic Rubber Co. Ltd. (Chemicals)...... 100,000 676,810
Japan Tobacco, Inc. (Food, Beverages &
Tobacco)....................................... 299 2,453,754
Kirin Brewery Co. Ltd. (Food, Beverages &
Tobacco)....................................... 35,000 293,922
Kissei Pharmaceutical Co. Ltd.
(Pharmaceuticals).............................. 71,000 1,157,063
Kyocera Corp. (Electronics)...................... 65,900 3,775,263
Marubeni Corp. (Multi - Industry)................ 631,000 1,972,694
Maruha Corp. (Food, Beverages & Tobacco)......... 190,000 331,754
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------- -------------
JAPAN (CONTINUED)
Matsushita Electric Industries Co. Ltd.
(Electronics).................................. 347,000 $ 5,828,053
Mitsubishi Estate Co. Ltd. (Real Estate)......... 250,000 3,159,557
Mitsubishi Heavy Industries Ltd. (Machinery)..... 873,000 4,289,872
Mitsubishi Rayon Co. Ltd. (Textiles)............. 674,000 2,163,166
Mitsui Mining & Smelting Co. Ltd. (Metals &
Mining)........................................ 300,000 1,324,520
Mizuno Corp. (Retail)............................ 193,000 810,385
Nagase & Co. Ltd. (Wholesale & International
Trade)......................................... 127,000 644,134
Nanto Bank Ltd. (Banking)........................ 96,000 530,806
Nippon Express Co. Ltd. (Transport & Services)... 345,000 1,858,817
Nippon Road Co. Ltd. (Construction & Housing).... 100,000 214,517
Nippon Shinyaku Co. Ltd. (Pharmaceuticals)....... 38,000 254,344
Nippon Steel Corp. (Metals & Mining)............. 1,852,000 3,818,874
Nippon Telegraph & Telephone Corp.
(Telecommunications)........................... 922 7,819,405
Nishimatsu Construction Co. Ltd. (Construction &
Housing)....................................... 183,000 897,730
Nissan Diesel Motor Co. Ltd. (Automotive)........ 256,000 625,792
Nissan Fire & Marine Insurance Co. Ltd.
(Insurance).................................... 411,000 1,691,569
Nissan Motor Co. Ltd. (Automotive)............... 600,000 3,197,804
Nissei Sangyo Co. Ltd. (Electrical Equipment).... 82,000 852,249
Nomura Securities Co. Ltd. (Financial
Services)...................................... 185,000 2,153,488
North Pacific Bank Ltd. (Banking)................ 220,000 786,563
NSK Ltd. (Machinery)............................. 285,000 1,184,834
Okamura Corp. (Industrial)....................... 140,000 570,383
Omron Corp. (Electrical Equipment)............... 133,000 2,255,924
Pokka Corp. (Food, Beverages & Tobacco).......... 39,000 165,054
Ricoh Corp. Ltd. (Electrical Equipment).......... 306,000 3,943,626
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------- -------------
<S> <C> <C>
JAPAN (CONTINUED)
San-In Godo Bank Ltd. (Banking).................. 100,000 $ 730,855
Sankyo Aluminum Industries Co. Ltd. (Building
Materials)..................................... 75,000 130,955
Sansei Yusoki Co. Ltd. (Machinery)............... 79,000 325,143
Secom Co. Ltd. (Electronics)..................... 34,000 2,199,384
Sekisui Chemical Co. Ltd. (Chemicals)............ 182,000 1,433,059
Shikoku Electric Power Co., Inc. (Electric)...... 59,800 974,540
Shin-Etsu Chemical Co. Ltd. (Chemicals).......... 53,000 1,295,585
Shohkoh Fund & Co. Ltd. (Financial Services)..... 2,700 875,530
Snow Brand Milk Products Co. Ltd. (Food,
Beverages & Tobacco)........................... 227,000 868,213
Sony Corp. (Electronics)......................... 72,400 6,013,768
Sumitomo Forestry Co. Ltd. (Forest Products &
Paper)......................................... 291,000 2,105,013
Sumitomo Trust & Banking Co. Ltd. (Banking)...... 263,000 2,005,246
Tadano Ltd. (Machinery).......................... 186,000 811,923
Taisei Corp. (Construction & Housing)............ 227,000 796,491
Takeda Chemical Industries Ltd. (Chemicals)...... 111,000 3,027,188
TDK Corp. (Electronics).......................... 17,000 1,410,659
The Bank of Tokyo - Mitsubishi Ltd. (Banking).... 274,000 3,576,785
The Kagawa Bank Ltd. (Banking)................... 115,000 698,013
Toda Construction Co. (Building Materials)....... 128,000 646,013
Toho Bank Ltd. (Banking)......................... 140,000 825,310
Tokio Marine & Fire Insurance Co. Ltd.
(Insurance).................................... 144,000 1,436,767
Tokyo Electric Power Co., Inc. (Electric)........ 154,800 2,960,339
Tokyo Steel Manufacturing Co. Ltd. (Metals &
Mining)........................................ 61,000 431,113
Tomen Corp. (Wholesale & International Trade).... 310,000 520,662
Toppan Printing Co. Ltd. (Broadcasting &
Publishing).................................... 154,000 1,933,483
Tostem Corp. (Construction & Housing)............ 83,000 1,152,490
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------- -------------
JAPAN (CONTINUED)
Toyo Trust & Banking Co. Ltd. (Banking).......... 309,000 $ 2,309,728
Toyoda Gosei Co. Ltd. (Automotive)............... 139,000 785,898
Toyota Motor Corp. Ltd. (Automotive)............. 265,000 7,381,307
Tsubakimoto Chain Co. (Manufacturing)............ 200,000 889,665
West Japan Railway Co. (Railroads)............... 1,951 6,829,391
Xebio Co. Ltd. (Retail).......................... 54,000 871,040
Yamaha Motor Co. Ltd. (Automotive)............... 77,000 621,019
Yamazaki Baking Co. Ltd. (Food, Beverages &
Tobacco)....................................... 60,000 828,137
Yokohama Rubber Co. Ltd. (Automotive Supplies)... 188,000 547,102
York - Benimaru Co. Ltd. (Retail)................ 35,000 637,316
Yuasa Trading Co. Ltd. (Wholesale & International
Trade)......................................... 138,000 308,655
-------------
163,540,446
-------------
NETHERLANDS (2.0%)
Aegon NV (Insurance)............................. 17,420 1,373,333
ING Groep NV (Financial Services)................ 60,875 2,556,424
Moeara Enim Petroleum MIJ NV (New shares) (Oil-
Services)...................................... 160 3,561,557
Philips Electronics NV (Electronics)............. 33,082 2,591,025
Royal Dutch Petroleum Co. (Oil-Services)......... 32,370 1,712,968
Unilever NV (Food, Beverages & Tobacco).......... 71,380 3,795,705
-------------
15,591,012
-------------
NEW ZEALAND (1.7%)
Brierley Investments Ltd. (Financial Services)... 1,482,000 1,146,260
Carter Holt Harvey Ltd. (Forest Products &
Paper)......................................... 753,500 1,315,996
Fletcher Challenge Building Division Ltd.
(Building Materials)........................... 577,200 1,746,150
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------- -------------
<S> <C> <C>
NEW ZEALAND (CONTINUED)
Fletcher Challenge Paper Division Ltd. (Forest
Products & Paper).............................. 772,300 $ 1,271,755
Lion Nathan Ltd. (Food, Beverages & Tobacco)..... 931,600 2,254,626
Telecom Corporation of New Zealand
(Telecommunications)........................... 1,137,500 5,520,067
-------------
13,254,854
-------------
NORWAY (1.8%)
Kvaerner ASA (Series B) (Capital Goods).......... 64,820 3,124,984
Norsk Hydro ASA (Oil-Services)................... 118,900 6,547,435
Nycomed Amersham PLC (Biotechnology)+............ 111,789 4,024,061
-------------
13,696,480
-------------
SINGAPORE (2.1%)
City Developments Ltd. (Real Estate)............. 187,000 784,604
Hotel Properties Ltd. (Restaurants & Hotels)..... 1,193,000 902,511
Osprey Maritime Ltd. (Transport & Services)...... 1,016,000 955,918
Sembawang Marine & Logistics Ltd. (Transport &
Services)...................................... 563,000 1,445,956
Singapore Airlines Ltd. (Airlines)............... 598,600 4,490,389
Singapore Press Holdings Ltd. (Entertainment,
Leisure & Media)............................... 81,000 1,117,403
The Development Bank of Singapore Ltd.
(Banking)...................................... 173,125 1,617,865
United Overseas Bank Ltd. (Banking).............. 658,000 3,639,237
Wong's Circuits Holdings Ltd.
(Semiconductors)+.............................. 843,000 1,205,490
-------------
16,159,373
-------------
SPAIN (1.6%)
Banco Bilbao Vizcaya SA (Banking)................ 100,620 2,692,706
Banco Popular Espanol SA (Banking)............... 33,160 1,959,579
Hidroelectrica del Cantabrico SA (Electric)...... 53,000 2,267,886
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------- -------------
SPAIN (CONTINUED)
Iberdrola SA (Electric).......................... 270,200 $ 3,234,370
Repsol SA (Gas Exploration)...................... 53,000 2,224,133
-------------
12,378,674
-------------
SWEDEN (0.7%)
Autoliv, Inc. (SDR) (Automotive Supplies)........ 108,200 4,344,350
Avesta Sheffield AB (Metals & Mining)............ 121,928 912,314
Skandia Forsakrings AB (Insurance)............... 6,000 280,590
-------------
5,537,254
-------------
SWITZERLAND (4.7%)
ABB AG (Machinery)............................... 2,255 2,947,161
Holderbank Financiere Glarus AG (Building
Materials)..................................... 1,700 1,372,042
Liechtenstein Global Trust AG (Banking).......... 2,750 1,378,559
Nestle SA (Food, Beverages & Tobacco)............ 7,185 10,151,924
Novartis AG (Pharmaceuticals).................... 7,090 11,134,722
Roche Holding AG (Pharmaceuticals)............... 257 2,264,693
Schweizerische Rueckversicherungs-Gesellschaft
(Insurance).................................... 1,906 2,878,684
Union Bank of Switzerland Ltd. (Banking)......... 2,963 3,420,513
-------------
35,548,298
-------------
UNITED KINGDOM (23.3%)
Allied Colloids Group PLC (Chemicals)............ 1,441,100 2,489,080
Amersham International PLC (Biotechnology)....... 47,200 1,808,572
Bass PLC (Food, Beverages & Tobacco)............. 179,000 2,485,369
BAT Industries PLC (Food, Beverages & Tobacco)... 443,100 3,874,927
British Airways PLC (Airlines)................... 281,000 2,742,438
British Petroleum Co. PLC (Oil-Services)(s)...... 660,343 9,700,211
British Telecommunications PLC
(Telecommunications)........................... 968,700 7,358,597
BTR PLC (Multi - Industry)....................... 395,500 1,334,719
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
23
<PAGE>
THE INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------- -------------
<S> <C> <C>
UNITED KINGDOM (CONTINUED)
Burmah Castrol PLC (Oil-Production).............. 56,200 $ 965,979
Cadbury Schweppes PLC (Food, Beverages &
Tobacco)....................................... 395,300 3,977,275
Compass Group PLC (Food, Beverages & Tobacco).... 243,200 2,569,281
Flextech PLC (Broadcasting & Publishing)+........ 125,600 1,232,120
General Cable PLC (Broadcasting & Publishing)+... 498,500 1,019,841
General Electric Co. PLC (Electrical
Equipment)..................................... 46,000 293,701
Glaxo Wellcome PLC (Pharmaceuticals)(s).......... 587,800 12,597,024
Glynwed International PLC (Metals & Mining)...... 1,054,200 4,419,474
Great Universal Stores PLC (Retail).............. 269,000 3,186,926
Guardian Royal Exchange PLC (Insurance).......... 483,000 2,413,631
Guinness PLC (Food, Beverages & Tobacco)......... 406,400 3,632,356
HSBC Holdings PLC (Banking)...................... 48,600 1,140,964
HSBC Holdings PLC (75P) (Banking)(s)............. 353,000 8,790,401
Kingfisher PLC (Retail).......................... 258,200 3,714,934
Lloyds TSB Group PLC (Banking)(s)................ 882,950 11,030,619
Lucas Varity PLC (Automotive Supplies)........... 1,020,900 3,500,935
MEPC PLC (Real Estate)........................... 385,000 3,341,016
MFI Furniture Group PLC (Household Products)..... 777,334 1,551,180
Norwich Union PLC (Insurance)+................... 1,016,642 5,796,348
Pilkington PLC (Building Materials).............. 833,000 2,095,288
Prudential Corp. PLC (Insurance)................. 190,000 2,026,368
Racal Electronic PLC (Telecommunications-
Equipment)..................................... 774,600 2,883,620
Rank Group PLC (Entertainment, Leisure &
Media)......................................... 399,000 2,228,049
Reed International PLC (Broadcasting &
Publishing).................................... 315,000 3,113,880
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------- -------------
UNITED KINGDOM (CONTINUED)
RMC Group PLC (Building Materials)............... 177,000 $ 2,698,017
Rolls-Royce PLC (Aerospace)...................... 449,000 1,611,267
Royal Bank of Scotland Group PLC (Banking)....... 598,300 6,340,793
Sainsbury (J.) PLC (Retail)...................... 559,000 4,663,505
Scottish Power PLC (Electric).................... 838,000 6,267,385
Sears PLC (Retail)............................... 3,079,000 3,046,276
Shell Transport & Trading Co. PLC
(Oil-Services)................................. 337,200 2,390,445
SmithKline Beecham PLC (Pharmaceuticals)......... 196,132 1,858,251
Standard Chartered PLC (Banking)................. 238,800 2,590,873
Tomkins PLC (Multi - Industry)................... 495,000 2,540,002
Unilever PLC (Food, Beverages & Tobacco)......... 463,600 3,451,707
United News & Media PLC (Broadcasting &
Publishing).................................... 173,000 2,175,780
Vickers PLC (Capital Goods)...................... 328,300 1,257,954
Vodafone Group PLC (Telecommunications)(s)....... 1,142,900 6,228,724
Wessex Water PLC (Water)......................... 529,600 4,484,839
Zeneca Group PLC (Pharmaceuticals)(s)............ 212,000 6,687,013
-------------
177,607,954
-------------
TOTAL COMMON STOCK (COST $657,161,152)......... 688,537,403
-------------
PREFERRED STOCK (1.9%)
AUSTRALIA (0.6%)
News Corporation Ltd. (Broadcasting &
Publishing).................................... 1,072,863 4,771,846
-------------
GERMANY (1.3%)
AXA Colonia Konzern AG (Insurance)............... 20,200 1,795,658
Jungheinrich AG (Machinery)...................... 10,530 1,651,859
Prosieben Media AG (Broadcasting & Publishing)+.. 21,360 1,048,670
Prosieben Media Aktiengesell (ADR)(144A)
(Broadcasting & Publishing)+................... 6,764 166,056
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
24
<PAGE>
THE INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ------------- -------------
<S> <C> <C>
GERMANY (CONTINUED)
RWE AG (Utilities)............................... 121,020 $ 4,373,492
Volkswagen AG (Automotive)....................... 1,440 654,259
-------------
9,689,994
-------------
TOTAL PREFERRED STOCK (COST $14,072,144)....... 14,461,840
-------------
WARRANTS (1.1%)
GERMANY (0.7%)
Veba International Finance BV, Expiring 04/06/98
(Utilities)+................................... 8,870 2,989,045
Volkswagen AG, Expiring 10/27/98 (Automotive)+... 7,990 2,543,947
-------------
5,532,992
-------------
JAPAN (0.4%)
Fujitsu Ltd., Expiring 06/25/99 (Computer
Systems)+...................................... 87 158,418
Kyocera Corp., Expiring 1/23/98 (Electrical
Equipment)+.................................... 20 9,250
Rohm Co. Ltd., Expiring 11/20/97
(Semiconductors)+.............................. 800 1,382,139
Shin-Etsu Chemical Co. Ltd., Expiring 8/1/00
(Chemicals)+................................... 430 1,032,000
-------------
2,581,807
-------------
SINGAPORE (0.0%)*
United Overseas Land Ltd., Expiring 5/28/01
(Building Materials)+.......................... 900 195
-------------
TOTAL WARRANTS (COST $4,211,494)............... 8,114,994
-------------
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------- ------------- -------------
CONVERTIBLE BONDS (2.6%)
(IN FIM)
-------------
FINLAND (0.4%)
Metsa - Serla OYJ (144A), 4.38% due 10/15/02
(Forest Products & Paper)...................... 3,354,000 $ 3,274,342
-------------
(IN JPY)
-------------
JAPAN (2.2%)
BOT Cayman Finance Ltd., 4.25% due 03/31/49
(Financial Services)........................... 740,000,000 6,637,664
STB Cayman Capital, 0.50% due 10/01/07 (Financial
Services)...................................... 310,000,000 2,455,101
Toyota Motor Corp., 1.20% due 01/28/98
(Automotive)................................... 300,000,000 4,310,301
Yamanouchi Pharmaceutical Co. Ltd., 1.25% due
03/31/14 (Commercial Services)................. 280,000,000 3,480,502
-------------
16,883,568
-------------
TOTAL CONVERTIBLE BONDS (COST $21,226,184)..... 20,157,910
-------------
SHORT-TERM INVESTMENTS (2.3%)
EURO DOLLAR TIME DEPOSITS (2.0%)
(IN USD)
-------------
State Street Bank Euro Dollar, 5.25% due
11/03/97....................................... 15,538,000 15,538,000
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
25
<PAGE>
THE INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------- ------------- -------------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS (0.3%)
(IN USD)
-------------
United States Treasury Bills, 5.27% due 04/09/98
(s)............................................ 2,210,000 $ 2,160,201
-------------
TOTAL SHORT-TERM INVESTMENTS
(COST $17,698,279)............................ 17,698,201
-------------
TOTAL INVESTMENTS
(COST $714,369,253) (98.1%)...................................
748,970,348
OTHER ASSETS IN EXCESS OF LIABILITIES (1.9%)....................
14,637,978
-------------
NET ASSETS (100.0%).............................................
$ 763,608,326
-------------
-------------
</TABLE>
- ------------------------------
Note: The cost of securities for Federal Income Tax purposes at October 31,
1997, was $714,543,322, the aggregate gross unrealized appreciation and
depreciation was $114,285,539 and $79,858,513, respectively, resulting in net
unrealized appreciation of $34,427,026.
+ - Non-income producing security.
(s) - Security is fully or partially segregated as collateral for futures
contracts.
* - Less than 0.1%
144A - Securities restricted for resale to qualified institutional buyers.
ADR - Securities whose value is determined or significantly influenced by
trading on exchanges not located in the US or Canada. ADR after the name of a
foreign holding stands for American Depository Receipt, representing ownership
of foreign securities on deposit with a domestic custodian bank.
SDR - Swedish Depository Receipt
JPY - Japanese Yen
FIM - Finnish Markka
The Accompanying Notes are an Integral Part of the Financial Statements.
26
<PAGE>
THE INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
INDUSTRY DIVERSIFICATION
<TABLE>
<CAPTION>
PERCENT OF
TOTAL INVESTMENTS
-------------------
<S> <C>
Banking........................................................................................ 14.6%
Food, Beverage & Tobacco....................................................................... 6.6%
Pharmaceuticals................................................................................ 6.0%
Insurance...................................................................................... 5.2%
Oil - Services................................................................................. 5.2%
Automotive..................................................................................... 4.3%
Electronics.................................................................................... 3.9%
Retail......................................................................................... 3.9%
Telecommunications............................................................................. 3.9%
Financial Services............................................................................. 3.6%
Metals & Mining................................................................................ 3.6%
Chemicals...................................................................................... 3.4%
Electrical Equipment........................................................................... 2.9%
Telecommunication Services..................................................................... 2.7%
Utilities...................................................................................... 2.5%
Electric....................................................................................... 2.4%
Broadcasting & Publishing...................................................................... 2.3%
Building Materials............................................................................. 2.2%
Machinery...................................................................................... 2.0%
Forest Products & Paper........................................................................ 1.9%
Multi-Industry................................................................................. 1.9%
Real Estate.................................................................................... 1.9%
Airlines....................................................................................... 1.6%
Computer Systems............................................................................... 1.4%
Automotive Supplies............................................................................ 1.2%
Miscellaneous.................................................................................. 8.9%
-------------------
100.0%
-------------------
-------------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
27
<PAGE>
THE INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $714,369,253 ) $748,970,348
Cash 230
Foreign Currency at Value (Cost $1,575,130 ) 1,362,408
Receivable for Investments Sold 19,746,443
Dividends and Interest Receivable 1,479,712
Foreign Tax Reclaim Receivable 1,018,410
Unrealized Appreciation of Forward Foreign
Currency Contracts 876,428
Variation Margin Receivable 793,511
Prepaid Trustees' Fees 2,169
Prepaid Expenses 4,627
------------
Total Assets 774,254,286
------------
LIABILITIES
Payable for Investments Purchased 9,003,729
Unrealized Depreciation of Forward Foreign
Currency Contracts 836,236
Advisory Fee Payable 415,047
Custody Fee Payable 322,510
Administrative Services Fee Payable 11,468
Administration Fee Payable 11,251
Fund Services Fee Payable 1,157
Accrued Expenses 44,562
------------
Total Liabilities 10,645,960
------------
NET ASSETS
Applicable to Investors' Beneficial Interests $763,608,326
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
28
<PAGE>
THE INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividend Income (Net of Foreign Withholding Tax
of $2,524,216 ) $16,867,628
Interest Income (Net of Foreign Withholding Tax
of $5,661 ) 2,991,103
-----------
Investment Income 19,858,731
EXPENSES
Advisory Fee $ 5,305,885
Custodian Fees and Expenses 1,145,960
Administrative Services Fee 274,750
Professional Fees and Expenses 40,373
Fund Services Fee 32,439
Administration Fee 21,379
Trustees' Fees and Expenses 17,384
Printing Expenses 5,767
Insurance Expense 3,354
Registration Fees 485
-----------
Total Expenses 6,847,776
-----------
NET INVESTMENT INCOME 13,010,955
NET REALIZED GAIN ON
Investment Transactions (including $6,701,499
net realized gain from futures contracts) 21,032,403
Foreign Currency Transactions 8,956,247
-----------
Net Realized Gain 29,988,650
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) OF
Investments (including $2,204,018 net
unrealized depreciation from futures
contracts) (5,091,121)
Foreign Currency Contracts and Translations 724,316
-----------
Net Change in Unrealized Depreciation (4,366,805)
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $38,632,800
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
29
<PAGE>
THE INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FISCAL FOR THE FISCAL
YEAR ENDED YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
---------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 13,010,955 $ 11,608,802
Net Realized Gain on Investment and Foreign
Currency Transactions 29,988,650 34,313,067
Net Change in Unrealized Appreciation
(Depreciation) of Investments and Foreign
Currency Translations (4,366,805) 43,415,853
---------------- ----------------
Net Increase in Net Assets Resulting from
Operations 38,632,800 89,337,722
---------------- ----------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 151,295,413 369,388,677
Withdrawals (353,091,842) (185,257,400)
---------------- ----------------
Net Increase (Decrease) from Investors'
Transactions (201,796,429) 184,131,277
---------------- ----------------
Total Increase (Decrease) in Net Assets (163,163,629) 273,468,999
NET ASSETS
Beginning of Fiscal Year 926,771,955 653,302,956
---------------- ----------------
End of Fiscal Year $ 763,608,326 $ 926,771,955
---------------- ----------------
---------------- ----------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
30
<PAGE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE FISCAL YEAR ENDED OCTOBER OCTOBER 4, 1993
31, (COMMENCEMENT OF
--------------------------------- OPERATIONS) TO
1997 1996 1995 1994 OCTOBER 31, 1993
------ ------ ------ ------ ----------------
<S> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Expenses 0.77% 0.79% 0.82% 0.95% 0.99%(a)
Net Investment Income 1.47% 1.39% 1.31% 0.93% 0.43%(a)
Decrease Reflected in Expense Ratios due to
Expense Reimbursement -- -- -- -- 0.17%(a)
Portfolio Turnover 67% 57% 59% 56% 54%(b)
Average Broker Commissions 0.0018 0.0020 -- -- --
</TABLE>
- ------------------------
(a) Annualized.
(b) Portfolio turnover for the fiscal year ended October 31, 1993, included the
portfolio activity of The Pierpont International Equity Fund, Inc. for the
period November 1, 1992 through October 3, 1993, prior to conversion when The
Pierpont International Equity Fund, Inc. contributed all of its investable
assets to the Portfolio.
The Accompanying Notes are an Integral Part of the Financial Statements.
31
<PAGE>
THE INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The International Equity Portfolio (the "Portfolio") is registered under the
Investment Company Act of 1940, as amended, as a no-load, diversified, open-end
management investment company which was organized as a trust under the laws of
the State of New York. The Portfolio's investment objective is to provide a high
total return from a portfolio of equity securities of foreign companies. The
Portfolio commenced operations on October 4, 1993 and received a contribution of
certain assets and liabilities, including securities, with a value of
$160,213,973 on that date from The Pierpont International Equity Fund, Inc. in
exchange for a beneficial interest in the Portfolio. At that date, net
unrealized appreciation of $11,116,204 was included in the contributed
securities. Prior to May 12, 1997, the Portfolio's name was The Non-U.S. Equity
Portfolio. The Declaration of Trust permits the Trustees to issue an unlimited
number of beneficial interests in the Portfolio.
Investments in international markets may involve certain considerations and
risks not typically associated with investments in the United States. Future
economic and political developments in foreign countries could adversely affect
the liquidity or value, or both, of such securities in which the Portfolio is
invested. The ability of the issuers of the debt securities held by the
Portfolio to meet their obligations may be affected by economic and political
developments in a specific industry or region.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual amounts could differ from
those estimates. The following is a summary of the significant accounting
policies of the Portfolio:
a) The value of each security for which readily available market quotations
exist is based on a decision as to the broadest and most representative
market for such security. The value of such security will be based either
on the last sale price on a national securities exchange, or, in the
absence of recorded sales, at the average of the readily available closing
bid and ask price on such exchanges, or at the quoted bid price in the
over-the-counter market. Securities listed on a foreign exchange are
valued at the last quoted sale price available before the time when net
assets are valued. Unlisted securities are valued at the average of the
quoted bid and asked prices in the over-the-counter market. Securities or
other assets for which market quotations are not readily available are
valued at fair value in accordance with procedures established by 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 values from dealers; and general market conditions. All portfolio
securities with a remaining maturity of less than 60 days are valued by
the amortized cost method.
Trading in securities on most foreign exchanges and over-the-counter
markets is normally completed before the close of the domestic market and
may also take place on days on which the domestic market is closed. If
events materially affecting the value of foreign securities occur between
the time when the exchange on which they are traded closes and the time
when the Portfolio's net assets are calculated, such securities will be
valued at fair value in accordance with procedures established by and
under the general supervision of the Portfolio's Trustees.
b) The books and records of the Portfolio are maintained in U.S. dollars. The
market value of investment securities, other assets and liabilities and
forward contracts stated in foreign currencies are translated at
32
<PAGE>
THE INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
the prevailing exchange rates at the end of the period. Purchases, sales,
income and expenses are translated at the exchange rates prevailing on the
respective dates of such transactions. Translation gains and losses
resulting from changes in the exchange rates during the reporting period
and gains and losses realized upon settlement of foreign currency
transactions are reported in the Statement of Operations.
Although the net assets of the Portfolio are presented at the exchange
rates and market values prevailing at the end of the period, the Portfolio
does not isolate the portion of the results of operations arising as a
result of changes in foreign exchange rates from the fluctuations arising
from changes in the market prices of securities during the period.
c) Securities transactions are recorded on a trade-date basis. Dividend
income is recorded on the ex-dividend date or at the time that the
relevant ex-dividend date and amount become known. Interest income, which
includes the amortization of premiums and discounts, if any, is recorded
on an accrual basis. For financial and tax reporting purposes, realized
gains and losses are determined on the basis of specific lot
identification.
d) The Portfolio may enter into forward and spot foreign currency contracts
to protect securities and related receivables and payables against
fluctuations in future foreign currency rates. A forward contract is an
agreement to buy or sell currencies of different countries on a specified
future date at a specified rate. Risks associated with such contracts
include the movement in the value of the foreign currency relative to the
U.S. dollar and the ability of the counterparty to perform.
The market value of the contract will fluctuate with changes in currency
exchange rates. Contracts are valued daily based on procedures established
by and under the general supervision of the Portfolio's Trustees and the
change in the market value is recorded by the Portfolio as unrealized
appreciation or depreciation of foreign currency translations. At October
31, 1997, the Portfolio had open forward foreign currency contracts as
follows:
SUMMARY OF OPEN FORWARD FOREIGN CURRENCY CONTRACTS
<TABLE>
<CAPTION>
U.S. DOLLAR NET UNREALIZED
COST/ VALUE AT APPRECIATION/
PURCHASE CONTRACTS PROCEEDS 10/31/97 (DEPRECIATION)
- ------------------------------------------------- ----------- ----------- --------------
<S> <C> <C> <C>
Japanese Yen 1,063,371,995,
expiring 1/22/98................................ $ 9,085,000 $ 8,949,787 $ (135,213)
Japanese Yen 1,078,834,665,
expiring 1/22/98................................ 9,085,000 9,079,927 (5,073)
New Zealand Dollar 3,744,557,
expiring 1/22/98................................ 2,322,000 2,323,959 1,959
</TABLE>
33
<PAGE>
THE INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. DOLLAR NET UNREALIZED
COST/ VALUE AT APPRECIATION/
SALE CONTRACTS PROCEEDS 10/31/97 (DEPRECIATION)
- ------------------------------------------------- ----------- ----------- --------------
<S> <C> <C> <C>
Australian Dollar 19,344,596,
expiring 1/22/98................................ $14,134,709 $13,663,233 $ 471,476
Great British Pounds 9,648,962,
expiring 1/22/98................................ 15,729,352 16,124,333 (394,981)
Japanese Yen 6,388,207,631,
expiring 1/22/98................................ 53,682,417 53,765,847 (83,430)
New Zealand Dollar 24,384,000,
expiring 1/22/98................................ 15,536,266 15,133,273 402,993
Singapore Dollar 16,606,083,
expiring 1/22/98................................ 10,257,000 10,474,539 (217,539)
--------------
NET UNREALIZED APPRECIATION ON FORWARD FOREIGN
CURRENCY CONTRACTS.............................. $ 40,192
--------------
--------------
</TABLE>
e) Futures -- A futures contract is an agreement to purchase/sell a specified
quantity of an underlying instrument at a specified future date or to
make/receive a cash payment based on the value of a securities index. The
price at which the purchase and sale will take place is fixed when the
Portfolio enters into the contract. Upon entering into such a contract the
Portfolio is required to pledge to the broker an amount of cash and/or
securities equal to the minimum "initial margin" requirements of the
exchange. Pursuant to the contract, the Portfolio agrees to receive from
or pay to the broker an amount of cash equal to the daily fluctuation in
the value of the contract. Such receipts or payments are known as
"variation margin" and are recorded by the Portfolio as unrealized gains
or losses. When the contract is closed, the Portfolio records a realized
gain or loss equal to the difference between the value of the contract at
the time it was opened and the value at the time when it was closed. The
Portfolio invests in futures contracts solely for the purpose of hedging
its existing portfolio securities, or securities the Portfolio intends to
purchase, against fluctuations in value caused by changes in prevailing
market interest rates. The use of futures transactions involves the risk
of imperfect correlation in movements in the price of futures contracts,
interest rates and the underlying hedged assets and the possible inability
of counterparties to meet the terms of the contracts. Futures transactions
during the fiscal year ended October 31, 1997 are summarized as follows:
<TABLE>
<CAPTION>
NUMBER OF PRINCIPAL AMOUNT
CONTRACTS OF CONTRACTS
--------- ----------------
<S> <C> <C>
Contracts open at beginning of year.............. 239 $ 26,713,252
Contracts opened................................. 2,558 249,273,918
Contracts closed................................. (2,489) (256,854,979)
--------- ----------------
Contracts open at end of year.................... 308 $ 19,132,191
--------- ----------------
--------- ----------------
</TABLE>
34
<PAGE>
THE INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
SUMMARY OF OPEN CONTRACTS AT OCTOBER 31, 1997
<TABLE>
<CAPTION>
NET UNREALIZED
APPRECIATION/
CONTRACTS LONG (DEPRECIATION)
-------------- --------------
<S> <C> <C>
Australian All Ord. Index, expiring December
1997............................................ 245 $ (1,575,010)
Hang Seng Index, expiring November 1997.......... 10 96,251
Topix Index, expiring December 1997.............. 53 (748,512)
-------------- --------------
Totals........................................... 308 $ (2,227,271)
-------------- --------------
-------------- --------------
</TABLE>
f) The Portfolio intends to be treated as a partnership for federal income
tax purposes. As such, each investor in the Portfolio will be taxable on
its share of the Portfolio's ordinary income and capital gains. It is
intended that the Portfolio's assets will be managed in such a way that an
investor in the Portfolio will be able to satisfy the requirements of
Subchapter M of the Internal Revenue Code. The Portfolio earns foreign
income which may be subject to foreign withholding taxes at various rates.
2. TRANSACTIONS WITH AFFILIATES
a) The Portfolio has an Investment Advisory Agreement with Morgan Guaranty
Trust Company of New York ("Morgan"). Under the terms of the agreement,
the Portfolio pays Morgan at an annual rate of 0.60% of the Portfolio's
average daily net assets. For the fiscal year ended October 31, 1997, such
fees amounted to $5,305,885.
b) The Portfolio has retained Funds Distributor, Inc. ("FDI"), a registered
broker-dealer to serve as co-administrator and exclusive placement agent.
Under a Co-Administration Agreement between FDI and the Portfolio, FDI
provides administrative services necessary for the operation of the
Portfolio, furnishes office space and facilities required for conducting
the business of the Portfolio and pays the compensation of the officers
affiliated with FDI. The Portfolio has agreed to pay FDI fees equal to its
allocable share of annual complex-wide charge of $425,000 plus FDI's
out-of-pocket expenses. The amount allocable to the Portfolio is based on
the ratio of the Portfolio's net assets to the aggregate net assets of the
Portfolio and certain other investment companies subject to similiar
agreements with FDI. For the fiscal year ended October 31, 1997, the fee
for these services amounted to $21,379.
c) The Portfolio has an Administrative Services Agreement (the "Services
Agreement") with Morgan under which Morgan is responsible for overseeing
certain aspects of the administration and operation of the Portfolio.
Under the Services Agreement, the Portfolio has agreed to pay Morgan a fee
equal to its allocable share of an annual complex-wide charge. This charge
is calculated daily based on the aggregate average net assets of the
Portfolio and certain other portfolios for which Morgan acts as investment
advisor (the "Master Portfolios") and JPM Series Trust in accordance with
the following annual schedule: 0.09% on the first $7 billion of their
aggregate average daily net assets and 0.04% of their aggregate average
daily net assets in excess of $7 billion less the complex-wide fees
payable to FDI. The portion of this charge paid by the Portfolio is
determined by the proportionate share that its net assets
35
<PAGE>
THE INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
bear to the net assets of the Master Portfolios, other investors in the
Master Portfolios for which Morgan provides similar services, and JPM
Series Trust. For the fiscal year ended October 31, 1997, the fee for
these services amounted to $274,750.
d) The Portfolio has a Fund Services Agreement with Pierpont Group, Inc.
("Group") to assist the Trustees in exercising their overall supervisory
responsibilities for the Portfolio's affairs. The Trustees of the
Portfolio represent all the existing shareholders of Group. The
Portfolio's allocated portion of Group's costs in performing its services
amounted to $32,439 for the fiscal year ended October 31, 1997.
e) An aggregate annual fee of $75,000 is paid to each Trustee for serving as
a Trustee of The JPM Pierpont Funds, The JPM Institutional Funds, the
Master Portfolios and JPM Series Trust. The Trustees' Fees and Expenses
shown in the financial statements represent the Portfolio's allocated
portion of the total fees and expenses. Prior to April 1, 1997, the
aggregate annual Trustee Fee was $65,000. The Portfolio's Chairman and
Chief Executive Officer also serves as Chairman of Group and received
compensation and employee benefits from Group in his role as Group's
Chairman. The allocated portion of such compensation and benefits included
in the Fund Services Fee shown in the financial statements was $6,600.
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the fiscal year
ended October 31,1997 were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
--------------- ------------
<S> <C>
$554,372,538.... $708,319,449
</TABLE>
4. CREDIT AGREEMENT
The Portfolio is party to a revolving line of credit agreement (the "Agreement")
as discussed more fully in Note 4 of the Fund's Notes to the Financial
Statements which are included elsewhere in this report.
36
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Investors of
The International Equity Portfolio
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the supplementary data present fairly, in all material
respects, the financial position of The International Equity Portfolio (the
"Portfolio") at October 31, 1997, the results of its operations for the year
then ended, and the changes in its net assets for each of the two years in the
period then ended and the supplementary data for each of the four years in the
period then ended and for the period October 4, 1993 (commencement of
operations) to October 31, 1993, in conformity with generally accepted
accounting principles. These financial statements and supplementary data
(hereafter referred to as "financial statements") are the responsibility of the
Portfolio's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 1997 by correspondence with the
custodians and brokers and the application of alternative auditing procedures
where confirmations from brokers were not received, provide a reasonable basis
for the opinion expressed above.
PRICE WATERHOUSE LLP
New York, New York
December 19, 1997
37
