<PAGE>
THE INTERNATIONAL OPPORTUNITIES PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
MAY 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
COMMON STOCK (85.3%)
ARGENTINA (1.5%)
Corcemar SA, Class B (Building Materials)(s)..... 318,060 $ 1,877,476
Telefonica de Argentina SA (Spon. ADR)
(Telecommunications)(s)........................ 56,200 1,830,012
YPF Sociedad Anonima (Spon. ADR) (Oil-
Production)(s)................................. 133,580 4,149,329
------------
7,856,817
------------
AUSTRALIA (2.4%)
Leighton Holdings Ltd. (Construction &
Housing)(s).................................... 254,000 859,100
Mayne Nickless Ltd. (Commercial Services)(s)..... 221,577 1,222,831
QBE Insurance Group Ltd. (Insurance)(s).......... 1,215,000 4,984,642
Telstra Corp. Ltd. (Installment Receipts)
(Telecommunication Services)(s)................ 201,800 475,254
WBK STRYPES Trust (Banking)(s)................... 16,300 536,881
Westpac Banking Corp. Ltd. (Banking)(s).......... 682,542 4,510,225
------------
12,588,933
------------
AUSTRIA (0.1%)
Bank Austria AG (Banking)+(s).................... 5,232 381,613
------------
BELGIUM (0.3%)
PetroFina SA (Oil-Production)(s)................. 4,300 1,767,066
------------
BRAZIL (0.8%)
Bompreco Supermercados do Norde SA (Spon. GDR)
(Food, Beverages & Tobacco)(s)................. 36,700 688,125
Companhia Paranaense de Energia - Copel
(Electric)(s).................................. 48,000,000 425,672
Light-Servicos de Eletricidade SA
(Electric)(s).................................. 6,700,000 2,359,194
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
BRAZIL (CONTINUED)
Makro Atacadista (GDR) (144A) (Retail)(s)........ 9,200 $ 85,586
Makro Atacadista SA (Spon. ADR) (Retail)(s)...... 41,600 386,996
------------
3,945,573
------------
CANADA (1.1%)
Alcan Aluminium Ltd. (Metals & Mining)(s)........ 39,900 1,140,816
Moore Corp. Ltd. (Business & Public
Services)(s)................................... 106,200 1,540,127
Petro - Canada (Oil-Production)(s)............... 45,600 778,827
Seagram Co. Ltd. (Food, Beverages &
Tobacco)(s).................................... 57,600 2,523,784
------------
5,983,554
------------
CHILE (0.7%)
Compania Cervecerias Unidas SA (Spon. ADR) (Food,
Beverages & Tobacco)(s)........................ 24,300 585,478
Compania de Telecomunicaciones de Chile SA (Spon.
ADR) (Telecommunication Services)(s)........... 71,900 1,595,281
Empresa Nacional de Electricidad SA (Spon. ADR)
(Utilities)(s)................................. 79,600 1,238,775
Sociedad Quimica y Minera de Chile SA (ADR)
(Chemicals)(s)................................. 11,900 409,806
------------
3,829,340
------------
CZECH REPUBLIC (0.4%)
Central European Media Enterprises Ltd., Class A
(Entertainment, Leisure & Media)+(s)........... 102,500 2,357,500
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
16
<PAGE>
THE INTERNATIONAL OPPORTUNITIES PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
MAY 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
DENMARK (0.9%)
Danisco A/S (Food, Beverages & Tobacco)(s)....... 15,500 $ 967,645
GN Store Nord A/S (Telecommunications-
Equipment)(s).................................. 60,600 1,604,372
Olicom A/S (Technology)+(s)...................... 75,625 2,206,925
------------
4,778,942
------------
FINLAND (1.3%)
Nokia OYJ, A Shares (Telecommunications-
Equipment)(s).................................. 43,800 2,886,057
UPM-Kymmene OYJ (Forest Products & Paper)(s)..... 136,700 3,966,283
------------
6,852,340
------------
FRANCE (11.6%)
Air Liquide SA (Chemicals)(s).................... 23,323 4,596,170
Carrefour SA (Retail)(s)......................... 7,450 4,552,608
Compagnie de Saint Gobain SA (Building
Materials)(s).................................. 10,195 2,010,792
Elf Aquitaine SA (Oil-Services)(s)............... 41,244 5,728,747
Lagardere S.C.A. (Multi-Industry)(s)............. 66,300 2,914,520
Paribas (Financial Services)(s).................. 53,840 5,489,499
PSA Peugeot Citroen (Automotive)(s).............. 14,544 2,841,818
Sanofi SA (Pharmaceuticals)(s)................... 25,068 2,937,214
SGS Thomson Microelectronics NV
(Electronics)+(s).............................. 39,100 3,151,387
Societe Generale (Banking)(s).................... 38,153 7,556,921
Suez Lyonnaise des Eaux (Utilities)(s)........... 12,100 2,064,947
Total SA, B Shares (Oil-Services)(s)............. 43,907 5,452,811
Vivendi (Utilities)(s)........................... 57,508 11,553,952
------------
60,851,386
------------
GERMANY (10.8%)
Bayer AG (Chemicals)(s).......................... 50,900 2,435,375
Deutsche Bank AG (Banking)(s).................... 83,700 7,211,336
Deutsche Lufthansa AG (Airlines)(s).............. 261,500 6,541,926
Dresdner Bank AG (Banking)(s).................... 143,630 8,080,629
Hannover Rueckversicherungs AG (Insurance)(s).... 18,940 2,140,692
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
GERMANY (CONTINUED)
Muenchener Rueckversicherungs-Gesellschaft AG
(Insurance)(s)................................. 18,970 $ 8,624,212
RWE AG (Utilities)(s)............................ 52,010 2,762,714
SAP AG (Computer Software)(s).................... 6,900 3,568,446
Schering AG (Pharmaceuticals)(s)................. 34,580 4,046,116
SGL Carbon AG (Chemicals)(s)..................... 29,700 3,531,762
SKW Trostberg AG (Chemicals)(s).................. 58,600 2,383,058
VEBA AG (Utilities)(s)........................... 65,475 4,304,297
Volkswagen AG (Automotive)(s).................... 1,700 1,379,801
------------
57,010,364
------------
HONG KONG (1.3%)
Dao Heng Bank Group Ltd. (Banking)(s)............ 2,084,000 4,464,368
Hutchison Whampoa Ltd. (Multi-Industry)(s)....... 236,000 1,233,449
Sun Hung Kai Properties Ltd. (Real Estate)(s).... 238,000 1,148,690
------------
6,846,507
------------
HUNGARY (0.2%)
Matav RT (Telecommunications)(s)................. 187,800 1,070,310
------------
INDIA (0.6%)
ITC Ltd. (GDR) (Food, Beverages & Tobacco)(s).... 96,300 1,743,030
Ranbaxy Laboratories Ltd. (GDR)
(Pharmaceuticals)(s)........................... 72,800 1,190,280
Reliance Industries Ltd. (GDR) (Chemicals)(s).... 36,600 279,075
Tata Engineering & Locomotive Co. Ltd. (Spon.
GDR) (Automotive)(s)........................... 3,000 16,125
------------
3,228,510
------------
IRELAND (0.5%)
CRH PLC (Building Materials)(s).................. 73,600 1,061,446
Greencore Group PLC (Food, Beverages &
Tobacco)(s).................................... 249,390 1,387,131
------------
2,448,577
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
17
<PAGE>
THE INTERNATIONAL OPPORTUNITIES PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
MAY 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
ISRAEL (0.2%)
Teva Pharmaceutical Industries Ltd. (ADR)
(Pharmaceuticals)(s)........................... 24,600 $ 1,007,062
------------
ITALY (0.8%)
Telecom Italia SPA - RNC (Telecommunication
Services)(s)................................... 769,359 4,151,595
------------
JAPAN (8.1%)
Bank of Fukuoka Ltd. (Banking)(s)................ 966,000 3,673,957
Fanuc Ltd. (Machinery)(s)........................ 108,000 3,975,029
Fuji Photo Film Co. Ltd. (Electronics)(s)........ 43,000 1,455,418
Fujitsu Ltd. (Computer Systems)(s)............... 388,000 4,452,205
Honda Motor Co. Ltd. (Automotive)(s)............. 118,000 4,019,484
Ito - Yokado Co. Ltd. (Retail)(s)................ 49,000 2,440,010
Mitsubishi Corp. (Wholesale & International
Trade)(s)...................................... 271,000 1,635,016
Mitsubishi Estate Co. Ltd. (Real Estate)(s)...... 237,000 2,081,542
Mitsui Trust & Banking Co. Ltd. (Banking)(s)..... 1,048,000 2,458,052
Nichiei Co. Ltd. (Building Materials)(s)......... 1,920 128,864
Nintendo Co. Ltd. (Retail)(s).................... 13,000 1,214,953
Sanwa Bank Ltd. (Banking)(s)..................... 4,000 35,045
Sekisui Chemical Co. Ltd. (Chemicals)(s)......... 555,000 2,787,716
Sony Corp. (Electronics)(s)...................... 38,900 3,284,595
Takeda Chemical Industries Ltd. (Chemicals)(s)... 101,000 2,609,461
Tokyo Steel Manufacturing Co. Ltd. (Metals &
Mining)(s)..................................... 107,000 491,120
Tostem Corp. (Construction & Housing)(s)......... 274,000 3,511,882
Yamanouchi Pharmaceutical Co. Ltd.
(Pharmaceuticals)(s)........................... 105,000 2,333,922
------------
42,588,271
------------
MALAYSIA (0.0%)
Tanjong PLC (Entertainment, Leisure &
Media)(s)...................................... 107,000 176,917
------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
MEXICO (1.9%)
Cemex SA de CV, B Shares (Building
Materials)(s).................................. 81,600 $ 400,779
Cemex SA de CV, B Shares (Spon. ADR) (Building
Materials)+(s)................................. 65,800 633,325
Empresas ICA Sociedad Controladora SA de CV
(Spon. ADR) (Construction & Housing)(s)........ 22,700 235,513
Grupo Financiero Banamex Accival SA de CV, Class
B (Banking)+(s)................................ 2,310,000 5,764,499
Panamerican Beverages Inc. (ADR) (Food, Beverages
& Tobacco)(s).................................. 21,000 710,063
Telefonos de Mexico SA de CV, Class L (Spon. ADR)
(Telecommunications)(s)........................ 42,246 2,004,045
------------
9,748,224
------------
NETHERLANDS (5.7%)
ASM Lithography Holding NV
(Semiconductors)+(s)........................... 107,600 4,413,093
De Boer Unigro NV (Retail)(s).................... 53,100 2,772,513
ING Groep NV (Financial Services)(s)............. 73,900 5,079,743
Philips Electronics NV (Electronics)(s).......... 68,250 6,491,828
Unilever NV (Food, Beverages & Tobacco)(s)....... 52,160 4,148,757
Vendex International NV (Retail)(s).............. 77,300 5,232,654
Wolters Kluwer NV (Broadcasting &
Publishing)(s)................................. 12,700 1,785,771
------------
29,924,359
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
18
<PAGE>
THE INTERNATIONAL OPPORTUNITIES PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
MAY 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
NEW ZEALAND (1.3%)
Fletcher Challenge Building Division Ltd.
(Building Materials)(s)........................ 306,600 $ 503,895
Fletcher Challenge Paper Division Ltd. (Forest
Products & Paper)(s)........................... 2,114,900 2,830,478
Telecom Corp. of New Zealand Ltd.
(Telecommunications)(s)........................ 741,200 3,412,430
------------
6,746,803
------------
NORWAY (1.1%)
Kvaerner PLC (Capital Goods)(s).................. 86,010 3,248,634
Kvaerner PLC, Series B (Capital Goods)(s)........ 38,500 1,318,712
Nycomed Amersham PLC, B Shares
(Biotechnology)(s)............................. 40,000 1,168,294
------------
5,735,640
------------
PAKISTAN (0.2%)
Fauji Fertilizer Co. Ltd. (Chemicals)+(s)........ 250,000 430,017
Hub Power Co. Ltd. (GDR) (Utilities)(s).......... 42,300 452,610
------------
882,627
------------
PERU (0.3%)
Cementos Lima, SA (Spon. ADR) (Building
Materials)(s).................................. 40,844 856,331
Telefonica del Peru SA, Class B
(Telecommunication Services)(s)................ 377,600 811,468
------------
1,667,799
------------
PHILIPPINES (0.7%)
First Philippine Holdings Corp., Class B
(Multi-Industry)(s)............................ 1,486,520 1,106,778
Philippine Long Distance Telephone Co. (ADR)
(Telecommunications)(s)........................ 99,698 2,529,837
------------
3,636,615
------------
POLAND (0.5%)
Elektrim Spolka Akcjna SA (Electrical
Equipment)(s).................................. 215,563 2,834,230
------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
PORTUGAL (0.7%)
Banco Totta & Acores SA (Registered B)
(Banking)(s)................................... 103,420 $ 3,831,839
------------
RUSSIA (0.4%)
Lukoil Holding (Spon. ADR) (Oil-Production)(s)... 53,200 2,314,200
------------
SINGAPORE (1.1%)
City Developments Ltd. (Real Estate)(s).......... 394,000 1,423,950
Fraser & Neave Ltd. (Food, Beverages &
Tobacco)(s).................................... 298,000 1,014,692
Singapore Airlines Ltd. (Airlines)(s)............ 396,000 2,199,993
Singapore Press Holdings Ltd. (Broadcasting &
Publishing)(s)................................. 168,432 1,378,442
------------
6,017,077
------------
SOUTH AFRICA (2.0%)
ABSA Group Ltd. (Banking)(s)..................... 257,000 2,018,713
Anglogold Ltd. (Metals & Mining)(s).............. 1,200 59,581
Billiton PLC (Metals & Mining)(s)................ 764,300 1,897,406
Elandsrand Gold Mining Co. Ltd. (Metals &
Mining)(s)..................................... 360,500 1,538,206
Free State Consolidated Gold Mines Ltd. (Metals &
Mining)(s)..................................... 204,200 1,128,722
South Africa Breweries Ltd. (Food, Beverages &
Tobacco)(s).................................... 132,900 3,747,796
------------
10,390,424
------------
SOUTH KOREA (0.4%)
Hyundai Motor Co. Ltd. (GDS) (Automotive)+(s).... 417,500 1,095,938
Pohang Iron & Steel Co. Ltd. (ADR) (Metals &
Mining)(s)..................................... 70,400 1,029,600
Samsung Electronics Co. Ltd. (GDR)(144A)
(Electronics)+(s).............................. 7,008 135,079
------------
2,260,617
------------
SPAIN (2.3%)
Acerinox SA (Metals & Mining)(s)................. 10,600 1,579,685
ACS, Actividades de Construccion y Servicios, SA
(Construction & Housing)+(s)................... 56,100 1,753,646
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
THE INTERNATIONAL OPPORTUNITIES PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
MAY 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
SPAIN (CONTINUED)
Iberdrola SA (Electric)(s)....................... 443,400 $ 7,325,776
Vallehermoso SA (Real Estate)(s)................. 39,462 1,517,819
------------
12,176,926
------------
SWEDEN (3.8%)
Astra AB, A Shares (Pharmaceuticals)(s).......... 77,200 1,552,689
Autoliv, Inc. (SDR) (Automotive Supplies)(s)..... 190,900 5,960,344
Incentive AB, B Shares (Pharmaceuticals)(s)...... 29,854 2,668,622
Skandia Forsakrings AB (Insurance)(s)............ 336,995 4,927,374
Stora Kopparbergs Bergslags Aktiebolag, A Shares
(Forest Products & Paper)(s)................... 307,300 4,983,711
------------
20,092,740
------------
SWITZERLAND (6.8%)
ABB AG (Machinery)(s)............................ 2,550 4,328,672
Nestle SA (Food, Beverages & Tobacco)(s)......... 4,170 8,948,431
Novartis AG (Pharmaceuticals)(s)................. 1,522 2,581,564
Roche Holding AG (Pharmaceuticals)(s)............ 744 7,665,777
Union Bank of Switzerland (Banking)(s)........... 6,035 10,162,894
Zurich Versicherungs - Gesellschaft
(Insurance)(s)................................. 3,600 2,252,086
------------
35,939,424
------------
TAIWAN (0.5%)
Evergreen Marine Corp. (Spon. GDR) (Transport &
Services)(s)................................... 269,100 2,509,358
------------
THAILAND (0.3%)
Banpu Public Co. Ltd. (Metals & Mining)(s)....... 241,300 1,015,622
Siam Cement Public Co. Ltd. (Building
Materials)+(s)................................. 42,100 385,665
------------
1,401,287
------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
TURKEY (0.4%)
Yapi ve Kredi Bankasi AS (Banking)(s)............ 54,605,000 $ 1,056,925
Yapi ve Kredi Bankasi AS (Non-tradable Receipts)
(Banking)(s)................................... 43,137,950 834,971
------------
1,891,896
------------
UNITED KINGDOM (11.3%)
Billiton PLC (Metals & Mining)(s)................ 1,316,400 3,305,844
British Airways PLC (Airlines)(s)................ 140,400 1,484,742
British Petroleum Co. PLC (Oil-Services)(s)...... 1,866 27,356
British Sky Broadcasting Group PLC (Broadcasting
& Publishing)(s)............................... 220,100 1,546,932
Cable & Wireless PLC (Telecommunications)(s)..... 165,000 1,865,968
Compass Group PLC (Food, Beverages &
Tobacco)(s).................................... 82,200 1,702,352
Glaxo Wellcome PLC (Pharmaceuticals)(s).......... 137,000 3,681,727
Lloyds TSB Group PLC (Banking)(s)................ 434,800 6,306,803
LucasVarity PLC (Automotive Supplies)(s)......... 970,800 4,274,323
Nycomed Amersham PLC (Biotechnology)(s).......... 28,000 847,898
PowerGen PLC (Electric)(s)....................... 123,000 1,552,458
Rank Group PLC (Entertainment, Leisure &
Media)(s)...................................... 231,300 1,346,535
Reed International PLC (Broadcasting &
Publishing)(s)................................. 117,900 1,091,072
RMC Group PLC (Building Materials)(s)............ 59,200 1,115,007
Royal & Sun Alliance Insurance Group PLC
(Insurance)(s)................................. 484,000 5,126,232
Shell Transport & Trading Co.
(Oil-Services)(s).............................. 906,100 6,686,033
Tate & Lyle PLC (Food, Beverages & Tobacco)(s)... 438,614 3,561,932
Unilever PLC (Food, Beverages & Tobacco)(s)...... 310,000 3,399,600
Vodafone Group PLC (Telecommunications)(s)....... 325,400 3,571,136
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE INTERNATIONAL OPPORTUNITIES PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
MAY 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
UNITED KINGDOM (CONTINUED)
Wessex Water PLC (Water)(s)...................... 313,400 $ 2,376,434
Zeneca Group PLC (Pharmaceuticals)(s)............ 109,100 4,428,161
------------
59,298,545
------------
TOTAL COMMON STOCK (COST $424,484,594)......... 449,021,807
------------
PREFERRED STOCK (4.5%)
ARGENTINA (0.3%)
Quilmes Industrial SA (Spon. ADR) (Food,
Beverages & Tobacco)(s)........................ 136,400 1,312,850
------------
AUSTRALIA (0.4%)
News Corp. Ltd. (Broadcasting & Publishing)(s)... 404,400 2,191,006
------------
AUSTRIA (0.5%)
Bank Austria AG (Banking)+(s).................... 30,932 2,759,131
------------
BRAZIL (2.4%)
Companhia Brasileira de Distribuicao Grupo Pao de
Acucar (Spon. ADR) (Food, Beverages &
Tobacco)(s).................................... 77,533 1,812,334
Petroleo Brasileiro SA (Oil-Production)(s)....... 11,700,000 2,258,253
Telecomunicacoes Brasileiras SA
(ADR)(Telecommunications)(s)................... 36,125 3,851,828
Uniao de Bancos Brasileiros SA (Spon. GDR)
(Banking)(s)................................... 155,300 4,862,831
------------
12,785,246
------------
GERMANY (0.9%)
ProSieben Media AG (Broadcasting &
Publishing)(s)................................. 23,495 1,172,910
RWE AG (Utilities)(s)............................ 71,010 2,867,815
Volkswagen AG (Automotive)(s).................... 1,200 722,238
------------
4,762,963
------------
TOTAL PREFERRED STOCK (COST $23,900,241)....... 23,811,196
------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
WARRANTS (0.2%)
GERMANY (0.2%)
RWE AG, Expiring 07/07/98 (Utilities)+(s)........ 71,010 $ 868,311
------------
JAPAN (0.0%)
Fujitsu Ltd., Expiring 06/25/99 (Computer
Systems)+(s)................................... 37 106,809
------------
TOTAL WARRANTS (COST $527,347)................. 975,120
------------
<CAPTION>
PRINCIPAL
AMOUNT
-----------
<S> <C> <C>
CONVERTIBLE BONDS (1.4%)
(IN HKD)
-----------
HONG KONG (0.6%)
Beijing Enterprises Holdings Ltd. (144A), 0.50%
due 03/31/03 (Food, Beverages & Tobacco)....... 3,829,000 3,321,657
------------
(IN JPY)
-----------
JAPAN (0.4%)
MTI Capital (Cayman) Ltd. (144A), 0.50% due
10/01/07 (Banking)............................. 155,000,000 836,160
Sanwa International Finance Trust, 1.25% due
07/31/05 (Financial Services)(s)............... 171,000,000 1,234,077
STB Cayman Capital (144A), 0.50% due 10/01/07
(Financial Services)........................... 30,000,000 195,937
------------
2,266,174
------------
(IN GBP)
-----------
UNITED KINGDOM (0.4%)
Compass Group PLC, 5.75% due 10/05/07 (Food,
Beverages & Tobacco)........................... 775,000 2,028,386
------------
TOTAL CONVERTIBLE BONDS (COST $8,172,897)...... 7,616,217
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE INTERNATIONAL OPPORTUNITIES PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
MAY 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
SHORT-TERM INVESTMENTS (2.4%)
REPURCHASE AGREEMENT (2.0%)
State Street Bank and Trust Repurchase Agreement,
5.00% due 06/01/98, dated 05/29/98, proceeds
$10,530,386 (collateralized by U.S. Treasury
Note, 6.625% due 07/31/01, valued at
$10,741,383) (Banking)......................... $10,526,000 $ 10,526,000
------------
U.S. TREASURY OBLIGATIONS (0.4%)
United States Treasury Bills, 5.01%* due 08/20/98
(Government Obligations)(s).................... 2,020,000 1,997,273
------------
TOTAL SHORT-TERM INVESTMENTS (COST
$12,523,366).................................. 12,523,273
------------
TOTAL INVESTMENTS (COST $469,608,445) (93.8%).................
493,947,613
------------
</TABLE>
<TABLE>
<CAPTION>
LOCAL
CURRENCY
--------------------
<S> <C> <C>
FOREIGN CURRENCY (7.5%)
Argentine Peso................................... ARS 21,217 21,227
Australian Dollar................................ AUD 564,258 353,422
Belgian Franc.................................... BEL 1,489,697 40,542
Brazilian Real................................... BRL 156,758 136,290
British Pound.................................... GBP 1,364,687 2,225,394
Canadian Dollar.................................. CAD 51,537 35,421
Czech Koruna..................................... CZK 391,500 11,875
Danish Krone..................................... DKK 27,301,336 4,019,782
Finnish Markka................................... FIM (486,972) (89,881)
French Franc..................................... FRF 20,365,832 3,404,082
German Mark...................................... DEM 6,846,478 3,840,310
Greek Drachma.................................... GRD 291,289,579 956,616
Hong Kong Dollar................................. HKD 6,005,042 774,944
Hungarian Forint................................. HUF 58,946,873 275,369
Irish Punt....................................... IEP 17,939 25,389
Italian Lira..................................... ITL 623,958 355
Japanese Yen..................................... JPY 304,862,298 2,200,139
Malaysian Ringgit................................ MYR 2,879,060 749,658
Netherlands Guilder.............................. NLG 11,842,532 5,894,517
New Zealand Dollar............................... NZD 531 284
<CAPTION>
LOCAL
SECURITY DESCRIPTION CURRENCY VALUE
----------------------- -------------------- ------------
<S> <C> <C>
FOREIGN CURRENCY (CONTINUED)
Norwegian Krone.................................. NOK 5,666,681 $ 752,313
Peruvian New Sol................................. PEN 43,692 15,267
Philippine Peso.................................. PHP 2,869 74
Singapore Dollar................................. SGD 14,957 8,935
South African Rand............................... ZAR 33,915,433 6,577,848
Spanish Peseta................................... ESP 152,523 1,008
Swiss Franc...................................... CHF 2,777,915 1,878,710
Thailand Baht.................................... THB 80,807,501 2,000,680
Turkish Lira..................................... TRL 786,171,086,052 3,043,399
------------
TOTAL FOREIGN CURRENCY
(COST $39,676,354).................................................. 39,153,969
------------
TOTAL INVESTMENTS AND FOREIGN CURRENCY (COST $509,284,799) (101.3%)....
533,101,582
LIABILITIES IN EXCESS OF OTHER ASSETS (-1.3%)..........................
(6,750,337)
------------
NET ASSETS (100.0%).................................................... $526,351,245
------------
------------
</TABLE>
- ------------------------------
Note: Based on the cost of investments of $470,254,155 for federal income tax
purposes at May 31, 1998, the aggregate gross unrealized appreciation and
depreciation was $50,357,296 and $26,663,838, respectively, resulting in net
unrealized appreciation of $23,693,458.
+ Non-income producing securities.
* Yield to Maturity.
(s)Security fully or partially segregated with custodian as collateral for
futures contracts or with broker as initial margin for futures contracts.
Total market value of securities segregated is $189,841,880.
ADR - American Depository Receipt
GDR - Global Depository Receipt
GDS - Global Depository Shares
SDR - Swedish Depository Receipt
Spon. ADR - Sponsored ADR
Spon. GDR - Sponsored GDR
144A - Securities restricted for resale to Qualified Institutional Buyers.
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE INTERNATIONAL OPPORTUNITIES PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
MAY 31, 1998
- --------------------------------------------------------------------------------
INDUSTRY DIVERSIFICATION
<TABLE>
<CAPTION>
PERCENT OF
TOTAL INVESTMENTS
-----------------
<S> <C>
Banking........................................... 17.8%
Food, Beverages & Tobacco......................... 8.8%
Pharmaceuticals................................... 6.9%
Insurance......................................... 5.7%
Utilities......................................... 5.3%
Telecommunications................................ 4.1%
Chemicals......................................... 3.9%
Oil - Services.................................... 3.6%
Retail............................................ 3.4%
Electronics....................................... 2.9%
Metals & Mining................................... 2.7%
Financial Services................................ 2.4%
Forest Products & Paper........................... 2.4%
Electric.......................................... 2.4%
Oil - Production.................................. 2.3%
Automotive Supplies............................... 2.1%
Airlines.......................................... 2.1%
Automotive........................................ 2.0%
Broadcasting & Publishing......................... 1.9%
Building Materials................................ 1.8%
Machinery......................................... 1.7%
Telecommunication Services........................ 1.4%
Construction & Housing............................ 1.3%
Real Estate....................................... 1.3%
Multi-Industry.................................... 1.1%
Capital Goods..................................... 0.9%
Computer Systems.................................. 0.9%
Telecommunications - Equipment.................... 0.9%
Semiconductors.................................... 0.9%
Entertainment, Leisure & Media.................... 0.8%
Computer Software................................. 0.7%
Electrical Equipment.............................. 0.6%
Transport & Services.............................. 0.5%
Water............................................. 0.5%
Technology........................................ 0.4%
Biotechnology..................................... 0.4%
Government Obligations............................ 0.4%
Wholesale & International Trade................... 0.3%
Business & Public Services........................ 0.3%
Commercial Services............................... 0.2%
-----------------
100.0%
-----------------
-----------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
23
<PAGE>
THE INTERNATIONAL OPPORTUNITIES PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
MAY 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $469,608,445 ) $493,947,613
Cash 531
Foreign Currency at Value (Cost $39,676,354 ) 39,153,969
Receivable for Investments Sold 23,666,291
Unrealized Appreciation of Forward Foreign
Currency Contracts 6,123,772
Dividends Receivable 706,377
Interest Receivable 23,704
Deferred Organization Expenses 10,481
Prepaid Expenses and Other Assets 493
------------
Total Assets 563,633,231
------------
LIABILITIES
Payable for Investments Purchased 30,700,524
Unrealized Depreciation of Forward Foreign
Currency Contracts 6,056,668
Advisory Fee Payable 272,342
Variation Margin Payable 183,176
Administrative Services Fee Payable 13,169
Organization Expenses Payable 12,000
Accrued Foreign Capital Gains Taxes 5,565
Custody Fee Payable 4,039
Administration Fee Payable 1,256
Fund Services Fee Payable 486
Accrued Trustees' Fees and Expenses 156
Accrued Expenses 32,605
------------
Total Liabilities 37,281,986
------------
NET ASSETS
Applicable to Investors' Beneficial Interests $526,351,245
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
24
<PAGE>
THE INTERNATIONAL OPPORTUNITIES PORTFOLIO
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED MAY 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividend Income (Net of Foreign Withholding Tax
of $904,873 ) $ 4,300,382
Interest Income (Net of Foreign Withholding Tax
of $362 ) 754,519
-----------
Investment Income 5,054,901
EXPENSES
Advisory Fee $ 1,364,664
Custodian Fees and Expenses 297,895
Administrative Services Fee 67,346
Professional Fees and Expenses 26,061
Fund Services Fee 7,081
Administration Fee 4,559
Printing Expenses 3,728
Trustees' Fees and Expenses 2,551
Amortization of Organization Expenses 1,395
Insurance Expense 1,360
Registration Fees 227
-----------
Total Expenses 1,776,867
-----------
NET INVESTMENT INCOME 3,278,034
NET REALIZED GAIN ON
Investment Transactions (including $4,649,606
net realized gain
from futures contracts) 10,511,902
Foreign Currency Contracts and Transactions 3,914,569
-----------
Net Realized Gain 14,426,471
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) OF
Investments (including $159,532 net unrealized
appreciation
from futures contracts) 34,906,112
Foreign Currency Contracts and Translations (1,318,928)
-----------
Net Change in Unrealized Appreciation 33,587,184
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $51,291,689
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
25
<PAGE>
THE INTERNATIONAL OPPORTUNITIES PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE
PERIOD
FEBRUARY 26,
1997
(COMMENCEMENT
OF
FOR THE SIX OPERATIONS)
MONTHS ENDED THROUGH
MAY 31, 1998 NOVEMBER 30,
(UNAUDITED) 1997
------------ ------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 3,278,034 $ 1,895,605
Net Realized Gain (Loss) on Investments and
Foreign Currency Contracts and Transactions 14,426,471 (4,271,164)
Net Change in Unrealized Appreciation
(Depreciation) of Investments and Foreign
Currency Contracts and Translations 33,587,184 (9,566,779)
------------ ------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 51,291,689 (11,942,338)
------------ ------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 267,891,471 311,281,790
Withdrawals (66,806,323) (25,365,044)
------------ ------------
Net Increase from Investors' Transactions 201,085,148 285,916,746
------------ ------------
Total Increase in Net Assets 252,376,837 273,974,408
NET ASSETS
Beginning of Period 273,974,408 --
------------ ------------
End of Period $526,351,245 $273,974,408
------------ ------------
------------ ------------
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
FEBRUARY 26,
1997
(COMMENCEMENT
OF
FOR THE SIX OPERATIONS)
MONTHS ENDED THROUGH
MAY 31, 1998 NOVEMBER 30,
(UNAUDITED) 1997
------------ ---------------
<S> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Expenses 0.78%(a) 0.89%(a)
Net Investment Income 1.44%(a) 1.26%(a)
Expenses without Reimbursement 0.78%(a) 0.92%(a)
Portfolio Turnover 68% 72%
</TABLE>
- ------------------------
(a) Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
26
<PAGE>
THE INTERNATIONAL OPPORTUNITIES PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
MAY 31, 1998
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The International Opportunities Portfolio (the "portfolio") is one of eight
subtrusts (portfolios) comprising The Series Portfolio (the "series portfolio").
The series portfolio is registered under the Investment Company Act of 1940, as
amended, as a no-load open-end management investment company which was organized
as a trust under the laws of the State of New York on June 24, 1994. The
portfolio's investment objective is to provide a high total return from a
portfolio of equity securities of foreign companies in developed and, to a
lesser extent, developing markets. The portfolio commenced operations on
February 26, 1997. 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 readily available closing bid
and asked prices on such exchanges. 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
short-term 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.
The portfolio's custodian takes possession of the collateral pledged for
investments in repurchase agreements on behalf of the portfolio. It is the
policy of the portfolio to value the underlying collateral daily on a
mark-to-market basis to determine that the value, including accrued
interest, is at least equal to the repurchase price plus accrued interest.
In the event of default of the obligation to repurchase, the portfolio has
the right to liquidate the collateral and apply the proceeds in
satisfaction of the obligation. Under certain circumstances, in the event
of default or bankruptcy by the other party to the agreement, realization
and/or retention of the collateral or proceeds may be subject to legal
proceedings.
27
<PAGE>
THE INTERNATIONAL OPPORTUNITIES PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
MAY 31, 1998
- --------------------------------------------------------------------------------
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
foreign currency contracts are translated at the prevailing exchange rates
at the end of the period. Purchases, sales, income and expense are
translated at the exchange rates prevailing on the respective dates of
such transactions. Translation gains and losses resulting from changes in
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 as of 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 at the current foreign exchange
rates, and the change in the market value is recorded by the portfolio as
unrealized appreciation or depreciation of forward foreign currency
contract translations. At May 31, 1998, the portfolio had open forward
foreign currency contracts as follows:
SUMMARY OF OPEN FORWARD FOREIGN CURRENCY CONTRACTS
<TABLE>
<CAPTION>
U.S. DOLLAR NET UNREALIZED
CONTRACTUAL VALUE AT APPRECIATION/
PURCHASE CONTRACTS VALUE 5/31/98 (DEPRECIATION)
- ------------------------------------------------- ----------- ----------- --------------
<S> <C> <C> <C>
Australian Dollar 15,941,423 for FRF 62,488,784,
expiring 7/17/98................................ $10,474,365 $ 9,994,171 $ (480,194)
Austrian Schilling 25,308,620, expiring 7/17/98.. 2,034,962 2,022,978 (11,984)
British Pound 13,587,631, expiring 7/17/98....... 22,539,552 22,104,564 (434,988)
British Pound 857,507 for NOK 10,500,000,
expiring 7/17/98................................ 1,396,019 1,395,005 (1,014)
Canadian Dollar 17,344,693, expiring 7/17/98..... 12,185,258 11,932,889 (252,369)
Canadian Dollar 2,477,275 for GBP 1,038,080,
expiring 7/17/98................................ 1,688,765 1,704,328 15,563
German Mark 98,006,944, expiring 7/17/98......... 54,894,242 55,129,613 235,371
German Mark 18,779,830 for SEK 80,522,885,
expiring 7/17/98................................ 10,298,438 10,563,790 265,352
</TABLE>
28
<PAGE>
THE INTERNATIONAL OPPORTUNITIES PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
MAY 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. DOLLAR NET UNREALIZED
CONTRACTUAL VALUE AT APPRECIATION/
PURCHASE CONTRACTS VALUE 5/31/98 (DEPRECIATION)
- ------------------------------------------------- ----------- ----------- --------------
<S> <C> <C> <C>
German Mark 9,387,271 for GBP 3,219,538, expiring
7/17/98......................................... $ 5,237,593 $ 5,280,408 $ 42,815
German Mark 7,162,159 for DKK 27,300,000,
expiring 7/17/98................................ 4,027,597 4,028,766 1,169
Irish Pound 3,570,758, expiring 7/17/98.......... 5,056,193 5,047,671 (8,522)
Italian Lira 10,602,000,000, expiring 7/17/98.... 6,037,507 6,037,293 (214)
Italian Lira 7,548,492,000 for ZAR 21,900,000,
expiring 7/17/98................................ 4,176,913 4,298,477 121,564
Japanese Yen 7,111,359,289, expiring 7/17/98..... 53,726,355 51,683,256 (2,043,099)
Netherlands Guilder 3,834,871, expiring
7/17/98......................................... 1,902,964 1,914,224 11,260
Norwegian Krone, 101,758,774, expiring 7/17/98... 13,549,770 13,529,255 (20,515)
Singapore Dollar 4,979,721, expiring 7/17/98..... 3,119,735 2,960,938 (158,797)
Spanish Peseta 658,963,509, expiring 7/17/98..... 4,341,227 4,362,364 21,137
Swedish Krona 63,370,335, expiring 7/17/98....... 8,128,049 8,104,720 (23,329)
Swiss Franc 7,970,850, expiring 7/17/98.......... 5,430,474 5,419,740 (10,734)
Swiss Franc 4,710,824 for NZD 6,024,071, expiring
7/17/98......................................... 3,214,022 3,203,101 (10,921)
</TABLE>
<TABLE>
<CAPTION>
SETTLEMENT
SALES CONTRACTS VALUE
- ------------------------------------------------- -----------
<S> <C> <C> <C>
Australian Dollar 18,375,153, expiring 7/17/98... 11,865,581 11,519,952 345,629
Australian Dollar 2,042,968 for GBP 794,929,
expiring 7/17/98................................ 1,293,203 1,280,800 12,403
Australian Dollar 3,569,824 for NZD 4,245,735,
expiring 7/17/98................................ 2,265,226 2,238,033 27,193
Austrian Schilling 26,300,000, expiring 7/17/98.. 2,066,310 2,102,221 (35,911)
Belgian Franc 60,300,000 for IEP 1,164,992,
expiring 7/17/98................................ 1,646,849 1,645,530 1,319
Belgian Franc 55,799,789, expiring 7/17/98....... 1,494,931 1,522,724 (27,793)
British Pound 5,619,760, expiring 7/17/98........ 9,246,418 9,142,311 104,107
Danish Krone 8,000,000, expiring 7/17/98......... 1,159,017 1,180,248 (21,231)
French Franc 89,307,445, expiring 7/17/98........ 14,732,340 14,969,707 (237,367)
German Mark 86,344,585, expiring 7/17/98......... 47,708,910 48,569,451 (860,541)
German Mark 10,485,161 for NLG 11,800,000,
expiring 7/17/98................................ 5,890,116 5,897,978 (7,862)
German Mark 1,861,231 for NOK 7,889,859, expiring
7/17/98......................................... 1,048,990 1,046,945 2,045
</TABLE>
29
<PAGE>
THE INTERNATIONAL OPPORTUNITIES PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
MAY 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. DOLLAR NET UNREALIZED
SETTLEMENT VALUE AT APPRECIATION/
SALES CONTRACTS VALUE 5/31/98 (DEPRECIATION)
- ----------------------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C>
German Mark 33,203,171 for GBP
11,036,905, expiring 7/17/98...... $ 17,955,005 $ 18,677,023 $ (722,018)
Irish Pound 411,158, expiring
7/17/98........................... 569,619 581,219 (11,600)
Italian Lira 2,652,523,692 expiring
7/17/98........................... 1,478,742 1,510,475 (31,733)
Japanese Yen 7,293,242,587,
expiring 7/17/98.................. 56,957,306 53,005,130 3,952,176
Netherlands Guilder 29,335,000,
expiring 7/17/98.................. 14,643,750 14,642,929 821
New Zealand Dollar 9,815,029,
expiring 7/17/98.................. 5,336,922 5,236,612 100,310
Norwegian Krone, 27,849,737,
expiring 7/17/98 ................. 3,689,000 3,702,739 (13,739)
Portuguese Escudo 680,000,000,
expiring 7/17/98.................. 3,742,432 3,733,286 9,146
Singapore Dollar 12,433,759,
expiring 7/17/98.................. 7,744,478 7,393,104 351,374
South African Rand 18,500,000,
expiring 7/17/98.................. 3,535,257 3,528,442 6,815
Spanish Peseta 93,638,840, expiring
7/17/98........................... 607,295 619,893 (12,598)
Swedish Krona 24,117,191, expiring
7/17/98........................... 3,087,989 3,084,457 3,532
Swiss Franc 17,831,846, expiring
7/17/98........................... 11,995,279 12,124,676 (129,397)
Swiss Franc 1,742,364 for ITL
2,088,310,372, expiring 7/17/98... 1,189,185 1,184,712 4,473
-------------------
Net Unrealized Appreciation on
Forward Foreign Currency
Contracts......................... $ 67,104
-------------------
-------------------
</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
liquid 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 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 or securities movements. The use of
futures transactions involves the risk of imperfect
30
<PAGE>
THE INTERNATIONAL OPPORTUNITIES PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
MAY 31, 1998
- --------------------------------------------------------------------------------
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 their contracts. At May 31, 1998, the
portfolio had open futures contracts as follows:
SUMMARY OF OPEN CONTRACTS AT MAY 31, 1998
<TABLE>
<CAPTION>
NET PRINCIPAL
UNREALIZED AMOUNT
APPRECIATION/ OF
CONTRACTS LONG (DEPRECIATION) CONTRACTS
-------------- ---------- -----------
<S> <C> <C> <C>
Australian All Ordinary Index, expiring June
1998............................................ 123 $(156,402) $5,228,352
DAX Index, expiring June 1998.................... 5 78,562 1,559,836
Hang Seng Index, expiring June 1998.............. 31 (68,349) 1,772,228
MATIF Index, expiring June 1998.................. 11 16,851 1,485,615
TOPIX Index, expiring June 1998.................. 118 153,120 10,436,234
-------------- ---------- -----------
Totals........................................... 288 $ 23,782 $20,482,265
-------------- ---------- -----------
-------------- ---------- -----------
</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 taxed 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 may be subject to taxes
imposed by countries in which it invests. Such taxes are generally based
on income and/or capital gains earned. Taxes are accrued and applied to
net investment income, net realized capital gains and unrealized
appreciation, as applicable, as the income and/or capital gains are
earned.
g) The portfolio incurred organization expenses in the amount of $14,000.
Morgan Guaranty Trust Company of New York ("Morgan") has paid the
organization expenses of the portfolio. The portfolio has agreed to
reimburse Morgan for these costs which are being deferred and amortized on
a straight-line basis over a period not to exceed five years beginning
with the commencement of operations of the portfolio.
h) Expenses incurred by the series portfolio with respect to any two or more
portfolios in the series portfolio are allocated in proportion to the net
assets of each portfolio in the series portfolio, except where allocations
of direct expenses to each portfolio can otherwise be made fairly.
Expenses directly attributable to a portfolio are charged to that
portfolio.
2. TRANSACTIONS WITH AFFILIATES
a) The portfolio has an Investment Advisory Agreement with 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 six months
ended May 31, 1998, such fees amounted to $1,364,664.
b) The portfolio has retained Funds Distributor, Inc. ("FDI"), a registered
broker-dealer, to serve as the co-administrator and exclusive placement
agent. Under a Co-Administration Agreement between FDI and the portfolio,
FDI provides administrative services necessary for the operations of the
portfolio, furnishes office space and facilities required for conducting
the business of the portfolio and pays the
31
<PAGE>
THE INTERNATIONAL OPPORTUNITIES PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
MAY 31, 1998
- --------------------------------------------------------------------------------
compensation of the portfolio's officers affiliated with FDI. The
portfolio has agreed to pay FDI fees equal to its allocable share of an
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 similar agreements with FDI.
For the six months ended May 31, 1998, the fee for these services amounted
to $4,559.
c) The portfolio has an Administrative Services Agreement (the "Services
Agreement") with Morgan under which Morgan is responsible for 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 based on the aggregate average daily net assets of the
portfolio and certain other portfolios for which Morgan acts as investment
advisor (the "master portfolios") and J.P. Morgan 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 payable by
the portfolio is determined by the proportionate share its net assets bear
to the net assets of the master portfolios, other investors in the master
portfolios for which Morgan provides similar services and J.P. Morgan
Series Trust. For the six months ended May 31, 1998, the fee for these
services amounted to $67,346.
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 $7,081 for the six months ended May 31, 1998.
e) An aggregate annual fee of $75,000 is paid to each trustee for serving as
a trustee of the J.P. Morgan Funds, the J.P. Morgan Institutional Funds,
the master portfolios and J.P. Morgan Series Trust. The Trustees' Fees and
Expenses shown in the financial statements represents the portfolio's
allocated portion of the total fees and expenses. The portfolio's Chairman
and Chief Executive also serves as Chairman of Group and receives
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 $1,500.
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the six months
ended May 31, 1998 were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
------------ ------------
<S> <C> <C>
$462,949,533 $279,061,739
</TABLE>
4. CREDIT AGREEMENT
The portfolio is party to a revolving line of credit agreement as discussed more
fully in Note 4 of the fund's Notes to the Financial Statements which are
included elsewhere in this report.
32