May 22, 1996
DEAR SHAREHOLDER:
The net asset value per share of your Fund as of April 30, 1996 was $10.77. This
represents a total return of 8.2% since the Fund's inception on August 3, 1995.
For the six months ended April 30, 1996, the Fund's total return was 12.6% and
the number of Fund shares outstanding rose by 67% to 2,923,779.
The EAFE index for international markets had a total return of 13.4% during the
same six-month period, performing in line with the U.S. stock market averages.
High returns were experienced in Continental Europe and the Far East. Local six
month returns, of approximately 20% in Japan, Spain, Italy, and the Netherlands,
were somewhat reduced by the strength of the dollar.
Market leadership alternated between economically sensitive and defensive
stocks, brought about by conflicting data about strength in many economies. We
increased the Fund's holdings in equities of companies domiciled in emerging
markets, which recovered during the period amid high volatility. These markets
now represent 8% of the Fund's net assets, with holdings in the Republic of
Korea, Taiwan, Thailand, the Philippines, Indonesia, Mexico, Brazil and Chile.
Rising liquidity and expectations that reform in the European corporate culture
will increase shareholder value boosted valuations there. We expanded our
holdings across Europe, particularly in Spain and Sweden, with an emphasis on
capital spending-related companies.
Currently, 35% of the Fund's net assets are invested in Japan, in line with the
size of the world's second largest economy. Evidence is growing that Japan is
emerging from a long recessionary period with the accompanying recovery of
corporate earnings.
Average worldwide economic growth in GNP in 1996 is expected to be roughly the
same as it was in 1995 in the OECD countries. In Europe, the focus is on
reducing budget deficits and national debt for countries that seek entry into
the European Monetary Union. Growth is picking up in Japan. In both areas,
monetary policy has been relaxed to stimulate the economic recovery. China
appears to have succeeded in reducing growth and inflation to sustainable
levels. The rest of the Far Eastern region continues to grow at a high pace. We
believe this macro-economic environment presents a number of attractive
investment opportunities for your Fund.
Sincerely,
[SIGNATURE]
Hans van den Berg
Vice President & Portfolio
Manager
- ----------------------------------
Shares of the 1838 International Equity Fund are distributed by Rodney Square
Distributors, Inc. 6/26/96
Past performance is not predictive of future results. Investment returns and
principal values will fluctuate, so that, when redeemed, shares may be
worth less than their original cost.
1
<PAGE>
SCHEDULE OF NET ASSETS (UNAUDITED) APRIL 30, 1996
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000'S)
OR NUMBER VALUE
SECTOR OF SHARES (NOTE 2)
------ --------- --------
COMMON STOCK (93.3%)
<S> <C> <C> <C>
AUSTRALIA (1.9%)
Broken Hill Propriety Co. Metals -- Diversified.......................... 20,116 $309,562
News Corp. Ltd. Publishing..................................... 50,000 293,009
------------
602,571
------------
BRAZIL (0.7%)
Telecomunicacoes Brasileiras Sponsor ADR Telecommunications............................. 4,400 238,150
------------
CHILE (0.6%)
Compania Telecomunicacion Chile ADR Telecommunications............................. 2,000 182,500
------------
FRANCE (5.8%)
Accor Lodging........................................ 2,300 320,119
Alcatel Alsthom Telecomm., Energy & Electricity................ 1,700 160,157
Axa Inc. Insurance...................................... 2,700 161,151
Carrefour Supermarche Retail -- Grocery.............................. 400 313,102
Cetelem Financial Services............................. 900 193,479
LVMH (Moet-Hennessy) Wines & Spirits................................ 1,350 345,959
Rhone Poulenc Chemicals...................................... 14,000 336,519
------------
1,830,486
------------
GERMANY (5.0%)
Allianz AG Holding Insurance...................................... 120 205,449
Bayer AG Chemicals...................................... 1,200 387,163
Deutsche Bank AG Banking........................................ 3,400 163,230
Mannesmann AG Machinery Manufacturer......................... 650 222,996
Siemens AG Electrical Equipment........................... 600 328,727
Veba AG Electric Utility............................... 5,300 262,605
------------
1,570,170
------------
HONG KONG (3.8%)
Cheung Kong Holdings, Ltd. Real Estate.................................... 38,000 271,478
HSBC Holdings Financial Services............................. 16,000 238,957
Hutchinson Whampoa Real Estate, Transportation & Telecomm......... 40,000 248,267
Sun Hung Kai Properties Real Estate.................................... 25,000 238,408
Swire Pacific, Ltd. (A Shares) General Trading & Air Transportation........... 25,000 213,355
------------
1,210,465
------------
INDONESIA (0.8%)
PT Bank Internasional Indonesia Banking........................................ 50,000 246,245
------------
ITALY (2.0%)
Assicurazioni Generali SPA Insurance...................................... 11,000 273,867
Telecom Italia Mobile SPA Telecommunications............................. 160,000 352,841
------------
626,708
------------
</TABLE>
See accompanying notes to financial statements.
2
<PAGE>
SCHEDULE OF NET ASSETS (UNAUDITED) -- continued APRIL 30, 1996
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000'S)
OR NUMBER VALUE
SECTOR OF SHARES (NOTE 2)
------ --------- --------
<S> <C> <C> <C>
JAPAN (36.3%)
All Nippon Airways Air Transportation............................. 32,000 $364,720
Asahi Bank, Ltd. Banking........................................ 25,000 323,248
Asahi Glass Co., Ltd. Glass Manufacturer............................. 26,000 316,257
Dai-Ichi Kangyo Bank Banking........................................ 19,000 387,611
Daiwa House Industries House Manufacturer............................. 12,000 191,938
Fuji Bank, Ltd. Banking........................................ 13,000 285,129
Hitachi, Ltd. Electronics.................................... 49,000 530,319
Hoya Corp. Glass Manufacturer............................. 12,000 425,251
Industrial Bank of Japan Banking........................................ 10,000 268,176
Japan Tobacco, Inc. Tobacco........................................ 23 213,239
Konica Corp. Photography Equipment.......................... 32,000 251,320
Kyocera Corp. Bioceramics Manufacturer....................... 5,000 377,362
Marubeni Corp. Miscellaneous Distributor...................... 71,000 426,372
Mitsubishi Estate Co. Ltd. Real Estate.................................... 20,000 281,585
Mitsubishi Materials Corp. Metals -- Diversified.......................... 49,000 295,664
Mitsubishi Oil Co. Oil Distributor................................ 37,000 333,822
Mitsubishi Trust & Banking Banking........................................ 19,000 329,378
Mitsui Toatsu Chemicals Chemicals...................................... 61,000 271,088
Nippon Steel Corp. Steel Manufacturer............................. 94,000 340,316
Nippon Television Network Broadcasting................................... 800 252,086
Nippondenso Co. Ltd. Electronics.................................... 15,000 327,558
Nitto Boeski Co. Textiles Manufacturer.......................... 84,000 303,307
Nomura Securities, Co., Ltd. Securities Dealer.............................. 16,000 349,395
Obayashi Corp. Construction................................... 36,000 335,489
Ricoh Company, Ltd. Office Equipment............................... 27,000 318,076
Seven-Eleven Retail -- Grocery.............................. 3,300 234,204
Sharp Corp. Electronics.................................... 29,000 505,512
Sumitomo Bank Banking........................................ 19,000 407,628
Sumitomo Trust & Banking Banking........................................ 27,000 395,656
Sumitomo Warehouse Storage/Warehousing............................ 54,000 399,794
Takeda Chemicals Industries Pharmaceuticals................................ 17,000 294,707
Tokio Marine & Fire Insurance...................................... 21,000 289,630
Tokyo Electric Power Electric Utility............................... 12,800 349,396
Toyota Motor Corp. Automobile Manufacturer........................ 11,000 251,798
Wacoal Corp. Textile Manufacturer........................... 15,000 204,006
------------
11,431,037
------------
MALAYSIA (1.3%)
Genting Berhad Resorts -- Plantation.......................... 11,000 98,809
Maylayan Banking Banking........................................ 23,000 224,125
United Engineers, Ltd. Engineering & Construction..................... 15,000 102,859
------------
425,793
------------
MEXICO (1.0%)
CIFRA SA ADR Retail......................................... 225,000 302,344
------------
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
SCHEDULE OF NET ASSETS (UNAUDITED) -- continued APRIL 30, 1996
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000'S)
OR NUMBER VALUE
SECTOR OF SHARES (NOTE 2)
------ --------- --------
<S> <C> <C> <C>
NETHERLANDS (4.5%)
Aegon N.V. Insurance...................................... 4,250 $203,045
Akzo N.V. Chemicals...................................... 1,250 145,638
Heineken N.V. Beverage Manufacturer.......................... 1,200 251,944
International Nederlanden Groep Financial Services............................. 2,961 229,356
Philips Electronics N.V. Electronics.................................... 6,000 212,529
Stork N.V. Miscellaneous Manufacturing.................... 7,600 214,473
Unilever N.V. Food, Detergents............................... 1,300 177,951
------------
1,434,936
------------
PHILIPPINES (0.8%)
Pilipino Telephone Corp. Telecommunications............................. 175,000 257,421
------------
REPUBLIC OF KOREA (0.9%)
Pohang Iron & Steel Company, Ltd. ADR Iron & Steel Manufacturer...................... 5,500 151,250
Samsung Electronics -- GDR* Electronics.................................... 3,352 142,461
------------
293,711
------------
SINGAPORE (1.9%)
DBS Land Real Estate.................................... 35,000 142,003
IPC Corp. Computer Manufacturer.......................... 160,000 81,429
Keppel Corp. Ltd. Shipbuilding, Real Estate...................... 12,000 108,477
Singapore Press Holdings Publishing..................................... 8,000 151,470
United O/S Bank Banking........................................ 11,000 107,268
------------
590,647
------------
SPAIN (2.4%)
Banco Santander SA Banking........................................ 3,750 174,639
Empresa Nacional DE Electricidad SA Utility........................................ 5,000 314,804
Repsol SA Oil & Gas Exploration.......................... 7,000 257,320
------------
746,763
------------
SWEDEN (3.8%)
Astra AB (A Shares) Pharmaceuticals................................ 6,800 302,519
Atlas Copco AB (A Shares) Machinery Manufacturer......................... 14,000 263,387
Svenska Handelsbanken (A Shares) Financial -- Banks............................. 17,000 348,674
Telefonaktiebolaget Lm Ericsson ADR Telecommunications............................. 13,500 275,062
------------
1,189,642
------------
SWITZERLAND (3.5%)
ABB AG Electrical Machinery........................... 240 290,156
Ciba-Geigy AG Pharmaceuticals................................ 200 231,615
Nestle SA Sponsor ADR Food Processing................................ 4,000 224,000
Roche Holding AG -- Genussshein Pharmaceuticals................................ 45 355,120
------------
1,100,891
------------
TAIWAN (0.6%)
China Steel Corp.* Steel Manufacturer............................. 8,000 180,000
------------
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
SCHEDULE OF NET ASSETS (UNAUDITED) -- continued APRIL 30, 1996
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000'S)
OR NUMBER VALUE
SECTOR OF SHARES (NOTE 2)
------ --------- --------
<S> <C> <C> <C>
THAILAND (1.2%)
Land & House Co. Ltd. Real Estate.................................... 6,000 $92,673
Telecomasia Corp.* Telephone Utility.............................. 30,000 78,415
Thai Farmers Bank Co. Banking........................................ 11,000 126,336
The Siam Cement Co., Ltd. Building Materials............................. 1,500 77,226
------------
374,650
------------
UNITED KINGDOM (14.5%)
British Petroleum Co. plc Oil & Gas Exploration and Distribution......... 42,217 381,475
BTR plc Miscellaneous Manufacturing.................... 70,000 338,965
Cable & Wireless plc Telecommunications............................. 169 1,331
Carlton Communications, plc Sponsor ADR Broadcasting................................... 10,000 353,750
Glaxo Holdings plc Pharmaceuticals................................ 21,000 255,174
Lloyds Tsb Group, plc Banking........................................ 60,796 292,103
Powergen plc Electric Utility............................... 20,244 170,405
Prudential Corp. plc Insurance...................................... 55,000 379,997
Reed International plc Publishing..................................... 23,000 395,188
Reuters Holdings plc Sponsor ADR Publishing..................................... 3,000 202,875
Shell Transport and Trading Co. plc Oil & Gas Exploration and Distribution......... 28,000 370,011
Siebe plc Machinery Manufacturer......................... 28,000 362,830
Smithkline Beecham plc Pharmaceuticals................................ 34,646 368,464
Tesco plc Retail -- Grocery.............................. 70,000 295,671
TI Group Miscellaneous Manufacturing.................... 49,000 402,850
------------
4,571,089
------------
TOTAL COMMON STOCK
(COST $27,170,625)........................................................... 29,406,219
------------
COMMERCIAL PAPER (5.5%)
Ford Motor Credit Corp., 5.29%, 05/01/96 Finance........................................ $1,724,029 $1,724,029
(COST $1,724,029) ------------
CORPORATE BONDS (0.4%)
United Micro Electron, Convertible, Electronics.................................... 100 125,500
1.25%, 06/08/04 (COST $150,000) ------------
TOTAL INVESTMENTS (COST $29,044,654)+ (99.2%).............................................. $31,255,748
OTHER ASSETS AND LIABILITIES, NET (0.8%)................................................... 240,108
------------
NET ASSETS (100.0%)........................................................................ $31,495,856
====== ============
</TABLE>
- ----------------------------------
* Non-income producing security.
+The cost for Federal income tax purposes was $29,045,141. The aggregate gross
unrealized appreciation in which there was an excess of market value over tax
cost was $2,786,618, and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value was
$576,011.
ADR -- American Depository Receipt
GDR -- Global Depository Receipt
See accompanying notes to financial statements.
5
<PAGE>
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
ASSETS:
<S> <C> <C>
Investments, at market (identified cost $29,044,654) (Note 2)................. $ 31,255,748
Foreign currency held at market (identified cost $5,071)...................... 5,006
Receivables:
Dividends and interest...................................................... 131,510
Foreign taxes recoverable................................................... 14,270
Forward foreign currency exchange contracts sold (Note 6)................... 5,142
Deferred organizational costs (Note 2)........................................ 110,004
Other assets.................................................................. 559
-------------
Total Assets............................................................. 31,522,239
LIABILITIES:
Payables:
Due to Advisor.............................................................. $8,365
Accrued expenses (Note 4)................................................... 12,865
Foreign currencies to deliver (Note 6)...................................... 5,153
--------------
Total Liabilities........................................................ 26,383
-------------
NET ASSETS.................................................................... $ 31,495,856
=============
NET ASSETS CONSIST OF:
Common stock.................................................................. $2,924
Additional capital paid in.................................................... 29,401,090
Undistributed net investment income........................................... 66,309
Accumulated net realized gain (loss) on:
Investments................................................................. (190,616)
Foreign currency transactions............................................... 5,379
Net unrealized appreciation (depreciation) on:
Investments................................................................. 2,211,094
Translation of assets and liabilities in foreign currencies................. (324)
-------------
NET ASSETS, for 2,923,779 shares outstanding.................................. $31,495,856
=============
NET ASSET VALUE offering price and redemption price per share ($31,495,856
divided by 2,923,779 outstanding shares of common stock, $0.001 par
value)...................................................................... $10.77
=============
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
STATEMENT OF OPERATIONS
FOR THE SIX-MONTH PERIOD ENDED APRIL 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C> <C>
Dividends................................................................. $237,705
Interest.................................................................. 35,963
------------
273,668
Less foreign taxes withheld............................................... (27,634)
------------
246,034
EXPENSES:
Investment advisory fee (Note 4).......................................... $84,783
Administration fee (Note 4)............................................... 24,863
Accounting fee (Note 4)................................................... 29,835
Custodian fees............................................................ 14,006
Amortization of organizational expenses (Note 2).......................... 12,891
Reports to shareholders................................................... 5,833
Legal..................................................................... 9,301
Audit..................................................................... 11,236
Registration fees......................................................... 8,318
Trustees' fees and expenses (Note 4)...................................... 12,308
Transfer agency fees...................................................... 6,562
Other..................................................................... 7,945
--------------
Total expenses before fee waivers....................................... 227,881
Advisory fee waived (Note 4)............................................ (63,415)
Administration fee waived (Note 4)...................................... (9,358)
Accounting fee waived (Note 4).......................................... (11,229)
Transfer agency fee waived (Note 4)..................................... (2,573)
--------------
Total Expenses, net................................................ 141,306
------------
Net Investment Income..................................................... 104,728
------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENTS AND FOREIGN CURRENCY:
Net realized from:
Investments............................................................... (167,077)
Foreign currency transactions............................................. (31,611)
Net unrealized appreciation (depreciation) during the period on:
Investments............................................................... 2,890,619
Translation of assets and liabilities in foreign currencies............... (280)
------------
Net realized and unrealized gain from investments and
foreign currency.......................................................... 2,691,651
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................... $ 2,796,379
============
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX-MONTH FOR THE PERIOD
PERIOD ENDED AUGUST 3, 1996+
APRIL 30, 1996 TO OCTOBER 31,
(UNAUDITED) 1995
----------------- ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income............................................ $104,728 $40,266
Net realized gain (loss) on:
Investments................................................... (167,077) (23,539)
Foreign currency transactions................................. (31,611) 36,990
Net unrealized appreciation (depreciation) during the period on:
Investments................................................... 2,890,619 (679,525)
Translation of assets and liabilities in foreign currencies... (280) (44)
----------------- ------------------
Net increase in net assets resulting from operations............. 2,796,379 (625,852)
----------------- ------------------
Distributions to shareholders from:
Net investment income ($0.043 and $0, respectively).............. (78,685) 0
----------------- ------------------
Increase in net assets from Fund share transactions (Note 5)....... 12,014,420 17,289,594
----------------- ------------------
Increase in net assets........................................... 14,732,114 16,663,742
NET ASSETS:
Beginning of period.............................................. 16,763,742 100,000
----------------- ------------------
End of period (including undistributed net investment income of
$66,309 and $40,266, respectively)............................ $ 31,495,856 $ 16,763,742
================ ================
</TABLE>
- ----------------------------------
+ Commencement of Operations.
See accompanying notes to financial statements.
8
<PAGE>
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements. It should be read in conjuction with the financial statements and
notes thereto.
<TABLE>
<CAPTION>
FOR THE SIX-MONTH FOR THE PERIOD
PERIOD ENDED AUGUST 3, 1995+
APRIL 30, 1996 TO OCTOBER 31,
(UNAUDITED) 1995
----------------- ------------------
<S> <C> <C>
NET ASSET VALUE -- BEGINNING OF PERIOD.................... $9.61 $10.00
----------------- ----------
INVESTMENT OPERATIONS:
Net investment income................................ 0.05 0.02
Net realized and unrealized gain (loss) on investment
and foreign currency transactions.................. 1.15 (0.41)
----------------- ----------
Total from investment operations................ 1.20 (0.39)
----------------- ----------
DISTRIBUTIONS:
From net investment income........................... (0.04) --
----------------- ----------
NET ASSET VALUE -- END OF PERIOD.......................... $10.77 $9.61
----------------- ----------
----------------- ----------
TOTAL RETURN(1)........................................... 12.56% (3.90)%
Ratios (to average net assets)/Supplemental Data:
Expenses(2).......................................... 1.25%* 1.25%*
Net investment income................................ 0.93%* 1.02%*
Portfolio turnover rate................................... 24.78%* 42.21%*
Average commission rate paid.............................. $0.0364 --
Net assets at end of period ($000's omitted).............. 31,496 16,764
</TABLE>
- ----------------------------------
+ Commencement of Operations.
(1) The total return for each period has not been annualized.
(2) Without fee waivers or expense reimbursements, the annualized ratio of
expenses to average daily net assets would have been 2.02% for the six-month
period ended April 30, 1996 and 2.60% for the period ended October 31, 1995.
* Annualized.
See accompanying notes to financial statements.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. DESCRIPTION OF THE FUND -- The 1838 Investment Advisors Funds (the
'Trust'), a diversified, open-end management investment company, was established
as a series Delaware business trust on December 9, 1994, and is registered under
the Investment Company Act of 1940, as amended (the '1940 Act'). The Trust's
Agreement and Declaration of Trust permits the Trustees to issue an unlimited
number of shares of beneficial interest. The Trust has established two series:
the 1838 International Equity Fund and the 1838 Small Cap Equity Fund. The 1838
International Equity Fund (the 'Fund'), the only series offered by the Trust as
of April 30, 1996, commenced operations on August 3, 1995. The Fund's investment
objective is capital appreciation, with a secondary objective of income. The
Fund seeks to achieve its objective by investing in a diversified portfolio of
equity securities of issuers located in countries other than the United States.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES.
SECURITY VALUATION -- The Fund's securities, except investments with remaining
maturities of 60 days or less, are valued at the last quoted sales price on the
security's principal exchange on that day. If there are no sales of the relevant
security on such day, the security will be valued at the mean between the
closing bid and asked price on that day, if any. Debt securities having a
maturity of 60 days or less are valued at amortized cost. Securities for which
market quotations are not readily available and all other assets will be valued
at their respective fair market value as determined in good faith by, or under
procedures established by, the Board of Trustees.
FEDERAL INCOME TAXES -- The Fund intends to qualify annually and elect to be
treated as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986 and to distribute all of its taxable income to its
shareholders. Therefore, no federal income or excise tax provision is required.
At October 31, 1995, the Fund had a net tax basis capital loss carryforward
available to offset future capital gains of approximately $24,000, which will
expire on October 31, 2003.
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS -- Distributions of net investment
income and net realized gains are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments for foreign currency
transactions. These distributions will be made annually in December. Additional
distributions may be made to the extent necessary to avoid the payment of a 4%
excise tax.
DEFERRED ORGANIZATIONAL COSTS -- Costs incurred by the Fund in connection with
the initial registration and public offering of shares have been deferred and
are being amortized on a straight-line basis over a five-year period beginning
on the date that the Fund commenced operations.
FOREIGN CURRENCY TRANSLATIONS -- The books and records of the Fund are
maintained in U.S. dollars. Foreign currency amounts are translated into U.S.
dollars on the following basis:
(i) market value of investment securities, assets and liabilities at the
daily rates of exchange, and
(ii) purchases and sales of investment securities, dividend and interest
income and certain expenses at the rates of exchange prevailing on the
respective dates of such transactions.
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- CONTINUED
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES -- continued
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, sales of foreign currencies, currency gains
or losses realized between the trade and settlement dates on securities
transactions, the difference between the amounts of dividends, interest, and
foreign withholding taxes recorded on the Fund's books, and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in the value of assets and
liabilities other than investments in securities at the end of the fiscal
period, resulting from changes in exchange rates.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS -- In connection with portfolio
purchases and sales of securities denominated in a foreign currency, the Fund
may enter into forward foreign currency exchange contracts. Additionally, the
Fund may enter into these contracts to hedge certain foreign currency assets.
Foreign currency exchange contracts are recorded at market value. Certain risks
may arise upon entering into these contracts from the potential inability of
counterparties to meet the terms of their contracts. Realized gains or losses
arising from such transactions are included in net realized gain (loss) from
foreign currency transactions.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS -- The preparation
of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that effect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenue and expenses during the reporting period. Actual results could differ
from those estimates.
OTHER -- Investment security transactions are accounted for on a trade date
basis. The Fund uses the specific identification method for determining realized
gain or loss on investments for both financial and federal income tax reporting
purposes. Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Interest income is recorded on an accrual basis.
NOTE 3. PURCHASES AND SALES OF INVESTMENT SECURITIES -- Purchases and sales of
investment securities (excluding short-term investments) for the six-month
period ended April 30, 1996 were $13,871,824 and $2,730,841, respectively.
NOTE 4. ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES -- The Trust, on
behalf of the Fund, employs 1838 Investment Advisors, L.P. (the 'Investment
Advisor'), a Delaware limited partnership and registered investment adviser, to
furnish investment advisory services to the Fund pursuant to an Investment
Advisory Agreement with the Trust. The Investment Advisor supervises the
investment of the assets of the Fund in accordance with its objective, policies
and restrictions. The Fund's assets are managed by MeesPierson 1838 Investment
Advisors (the 'Sub-Advisor') pursuant to a Sub-Investment Advisory Agreement
between the Investment Advisor and the Sub-Advisor. The Sub-Advisor is
compensated by the Investment Advisor for the services it provides.
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- CONTINUED
NOTE 4. ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES -- continued
The Fund pays the Investment Advisor a monthly fee at the annual rate of 0.75%
of the average daily net assets of the Fund. The Investment Advisor has
voluntarily agreed to waive its advisory fee or reimburse the Fund monthly to
the extent that the Fund's total operating expenses exceed 1.25% of the average
daily net assets of the Fund. This undertaking may be rescinded at any time in
the future. The advisory fee for the six-month period ended April 30, 1996
amounted to $84,783, of which $63,415 was waived.
Rodney Square Management Corporation ('RSMC'), a wholly-owned subsidiary of
Wilmington Trust Company ('WTC'), serves as Administrator to the Fund pursuant
to an Administration Agreement with the Trust. As Administrator, RSMC is
responsible for services such as financial reporting, compliance monitoring and
corporate management. For the services provided, RSMC receives a monthly
administration fee from the Trust at the annual rate of 0.15% of the average
daily net assets of the Trust on the first $50 million; 0.10% of such assets in
excess of $50 million to $100 million; 0.07% of such assets in excess of $100
million to $200 million; and 0.05% of such assets in excess of $200 million.
Each series pays its pro-rata portion based upon total Trust assets. Such fees
are subject to a minimum fee of $50,000 per year for one series and $15,000
minimum per year for each additional series. RSMC has agreed to waive a portion
of its fees. For the six-month period ended April 30, 1996, RSMC's
administration fees amounted to $24,863, of which $9,358 was waived. At April
30, 1996 Administration fees payable to RSMC amounted to $3,074.
Rodney Square Distributors, Inc. ('RSD'), a wholly-owned subsidiary of WTC, has
been engaged pursuant to a Distribution Agreement with the Trust to assist in
securing purchasers for shares of the Fund. RSD also directly, or through its
affiliates, provides investor support services. RSD receives no compensation for
distribution of shares of the Fund, except for reimbursement of out-of-pocket
expenses.
RSMC serves as Accounting Agent to the Fund. As Accounting Agent, RSMC
determines the Fund's net asset value per share and provides accounting services
to the Fund pursuant to an Accounting Services Agreement with the Trust. At
April 30, 1996, Accounting fees payable to RSMC amounted to $3,689.
RSMC also serves as the Fund's transfer agent pursuant to a Transfer Agency
Agreement with the Trust. For these services, RSMC receives a monthly fee
computed on the basis of the number of shareholder accounts that the Transfer
Agent maintains for the Fund during the month, and is reimbursed for
out-of-pocket expenses. At April 30, 1996, Transfer Agent fees payable to RSMC
amounted to $1,248.
The Trustees of the Trust who are 'interested persons' of the Trust, the
Investment Advisor or its affiliates and all personnel of the Trust or the
Investment Advisor performing services related to research, statistical and
investment activities are paid by the Investment Advisor or its affiliates. The
fees and expenses payable to the 'non-interested' Trustees amounted to $4,808 on
April 30, 1996.
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- CONTINUED
NOTE 5. FUND SHARE TRANSACTIONS -- At April 30, 1996, there were an unlimited
number of shares of beneficial interest with a $0.001 par value, authorized.
Transactions in shares of the Fund were as follows:
<TABLE>
<CAPTION>
FOR THE SIX-MONTH PERIOD FOR THE PERIOD
ENDED APRIL 30, 1996 AUGUST 3, 1995+
(UNAUDITED) TO OCTOBER 31, 1995
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Shares sold....................................... 1,172,520 $ 11,955,215 1,742,436 $ 17,357,801
Shares issued to shareholders in reinvestment of
distributions from net investment income and net
realized gains.................................. 7,882 78,427 0 0
Shares redeemed................................... (1,887) (19,222) (7,172) (68,207)
---------- ------------- ---------- -------------
Net increase...................................... 1,178,515 $ 12,014,420 1,735,264 $ 17,289,594
============= =============
Shares outstanding:
Beginning of period............................. 1,745,264 10,000
---------- ----------
End of period................................... 2,923,779 1,745,264
========== ==========
</TABLE>
NOTE 6. COMMITMENTS -- As of April 30, 1996, the Fund had entered into a forward
foreign currency exchange contract which contractually obligates the Fund to
deliver currencies at specified future dates. The open contract is as follows:
NET UNREALIZED
DEPRECIATION
CONTRACTS TO DELIVER IN EXCHANGE FOR SETTLEMENT DATE U.S. $
- ----------------------- --------------- --------------- -----------------
British Pound 3,416 U.S. $ 5,142 5/01/96 (11)
- ------------------
+Commencement of Operations.
13
[BACK COVER]
TRUSTEES
--------
W. THACHER BROWN
CHARLES D. DICKEY, JR.
FRANK B. FOSTER, III
GEORGE W. GEPHART, JR.
ROBERT P. HAUPTFUHRER
OFFICERS
--------
W. THACHER BROWN
President
GEORGE W. GEPHART, JR.
Vice President
JOHANNES B. van den BERG
Vice President
ANNA M. BENCROWSKY
Vice President, Treasurer
and Secretary
JOHN J. KELLEY
Assistant Treasurer
LAURIE V. BROOKS
Assistant Secretary
INVESTMENT ADVISOR 1838
------------------ INTERNATIONAL EQUITY FUND
-------------------------
1838 INVESTMENT ADVISORS, L.P.
FIVE RADNOR CORPORATE CENTER FIVE RADNOR CORPORATE CENTER
SUITE 320 SUITE 320
100 MATSONFORD ROAD 100 MATSONFORD ROAD
RADNOR, PA 19087 RADNOR, PA 19087
SUB-ADVISOR SEMI-ANNUAL REPORT
-----------
MEESPIERSON 1838 INVESTMENT ADVISORS APRIL 30, 1996
FIVE RADNOR CORPORATE CENTER
SUITE 320
100 MATSONFORD ROAD
RADNOR, PA 19087
CUSTODIAN
---------
BANKERS TRUST COMPANY
280 PARK AVENUE
NEW YORK, NY 10017
COUNSEL
-------
STRADLEY, RONON, STEVENS & YOUNG, LLP
2600 ONE COMMERCE SQUARE
PHILADELPHIA, PA 19103
AUDITORS
--------
COOPERS & LYBRAND, L.L.P.
2400 ELEVEN PENN CENTER
PHILADELPHIA, PA 19103
ET06
