<PAGE>
- --------------------------------------------------------------------------------
Fellow Shareholders
- --------------------------------------------------------------------------------
International stock markets drifted over the three months ended October 31,
a dull performance exacerbated for U.S. investors by the strength of the U.S.
dollar. Japan was the strongest major market in local currency terms,
rebounding after weakness in the first half of the year. European and Southeast
Asian markets were mixed, with several reversing course after a strong rise in
the second quarter. Latin American stocks lurched downward, led by Mexico.
During the past 12 months, international returns sharply lagged the U.S.
market. The U.S. dollar was weak earlier in the year, but strengthened against
the yen in the final quarter. During the fund's fiscal year, the dollar rose
versus the yen but fell against the deutschemark.
Your fund was in negative territory in the last quarter but led the
benchmark shown below, aided by both country allocation and stock selection.
However, performance trailed the benchmark over the past 12 months, hindered by
generally weak returns for international small-cap stocks as well as by
disappointing stock holdings earlier in the year.
- --------------------------------------------------------------------------------
Performance Comparison
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Periods Ended 10/31/95
3 Months 12 Months
-------- ---------
<S> <C> <C>
International Discovery
Fund -3.74% -13.06%
FTA Euro-Pacific Small Cap
Index -6.45 -8.20
- --------------------------------------------------------------------------------
</TABLE>
Market Review
Japan
Japanese equities exploded in recent months after a dismal start to the
year. Unquestionably, the rebound was induced by the yen, which declined
against the dollar after rising too far earlier. However, the strong dollar
meant that gains turned into losses for U.S. investors.
The most important change in the quarter was in the attitude of government
authorities. Finally acknowledging the threat of deflation, the Bank of Japan
cut a key lending rate to 0.5%. It also intervened in the foreign exchange
market and injected liquidity into the system. These steps were necessary,
since the economic picture remains bleak. Industrial production suffered a
seventh consecutive monthly decline, housing starts fell 5% from a year ago,
and retail sales were weak. The only bright areas were capital expenditure and
monetary growth.
The danger posed by deflation cannot be overemphasized. While consumer
price inflation is flat, the wholesale price index is falling. This presents a
difficult problem for everyone, particularly companies with high fixed costs
that are reluctant to lay off employees for social reasons. The auto industry
is a case in point: major assemblers, forced to compete with an inflated yen in
foreign markets, have asked their suppliers for significant price cuts, which
erode profit margins.
Nonetheless, we are encouraged by measures to address these problems and
are content with the valuations of the fund's Japanese stock holdings. We have
concentrated on companies with strong balance sheets and promising long-range
strategies that exhibit signs of growth in their niche areas. Performance was
helped by Glory, a manufacturer of money handling machines; SMC, a producer of
pneumatic equipment; and Disco and Shinkawa, semiconductor stocks.
Southeast Asia
We increased our exposure to China, both directly and through companies in
Hong Kong with activities on the mainland. Our research reveals a successful
soft landing in progress for
<PAGE>
- --------------------------------------------------------------------------------
Market Performance: Small-Cap Indices
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
3 Months Ended 10/31/95
----------------------------------
Local Currency
Local vs. U.S. In U.S.
Currency Dollars Dollars
----------------------------------
<S> <C> <C> <C>
Australia -3.8% 2.9% -1.0%
France -4.0 -2.4 -6.3
Germany -3.1 -2.0 -5.0
Hong Kong 2.6 0.1 2.7
Italy -7.3 -0.5 -7.8
Japan 6.2 -13.9 -8.6
Mexico -2.6 -14.4 -16.2
Netherlands -0.7 -2.0 -2.7
Norway -5.4 -1.8 -7.0
Singapore -4.1 -1.5 -5.6
Sweden 0.1 6.1 6.2
Switzerland 9.7 0.9 10.6
United Kingdom 2.1 -1.4 0.7
- --------------------------------------------------------------------------------
</TABLE>
Source: NWSL Quantitative Products Group, utilizing MSCI indices
this formerly overheated economy. Credit is being eased, inflation is
falling, and foreign reserves are healthy. More important, possible successors
to Chairman Deng seem committed to a smooth takeover of Hong Kong on July 1,
1997. We bought Shanghai Friendship Company, which enjoys good management and a
dominant presence in the booming Shanghai retail market, and China Merchants
Shekou, a port with expanding capacity. In Hong Kong we added Aeon Credit
Service, a leading issuer of credit cards.
The economy of Singapore remains the envy of Asia, characterized by low
inflation, a large current account surplus, and gently easing interest rates.
With stock valuations at the low end of historical ranges, we view this market
favorably.
Malaysian stocks weakened in the quarter, but the economy seems to be on
steroids after having grown 8% or more annually for eight straight years.
However, the side effects of this growth are increasingly evident with
developing labor shortages, barely contained inflation, and a ballooning
current account deficit. Rising interest rates cut into earnings and attract
money away from stocks. We took profits in property stocks that had led the
market through late summer. We added two new stocks: Gemtech Resources, the
leading domestic manufacturer of disposable diapers, and Malaya Glass, which
supplies a Singapore soft drink conglomerate.
A similar picture of economic overheating is evident in Thailand,
Indonesia, and the Philippines, where widening current account deficits and
inflationary pressures weighed on their respective markets. However, our
confidence in the long-run potential of these countries remains unshaken for
two reasons. The first is renewed direct foreign investment in the region, a
trend we expect to continue. The second reason is strong export growth, despite
rising cost pressures and wage competition from China and other nations with
labor surpluses.
The Korean economy seemed to have turned the corner over the summer. The
trade picture improved with lower import growth, which allowed interest rates
to fall and bond prices to rise. Korea is an interest rate-driven market. With
foreign ownership limits rising to 15% from 12%, we added significantly to our
holdings here, primarily in small bank stocks.
Europe
Despite underperforming over the year, European smaller-company stocks
picked up in recent months, due mainly to a combination of lower interest
rates, modest growth, and low inflation. Weightings in the region did not
change significantly over the quarter. We are heavily invested in Norway and
Sweden and underweighted in France and Germany.
In Germany, the threat of economic overheating eased as the deutschemark
rose against the dollar, undermining the outlook for exporters. The pessimists
were in full voice at the end of the second quarter, but there was relief over
the past quarter when the mark weakened somewhat. Our exposure here is
primarily in companies benefiting from a recovery in the former East Germany.
In Switzerland, we took profits in Von Moos, the specialty steelmaker
threatened by
2
<PAGE>
a construction slowdown. We added a new position in an investment bank expected
to profit from falling rates and a recovery in emerging markets.
Italy and Spain have both reported improvement in inflation. Smaller
companies in Italy have produced excellent earnings, among them Fila, the
sportswear manufacturer; Safilo, an eyewear producer; Saes Getters, a
technology company; and Industrie Natuzzi, a pioneer in discounted leather
furniture. In Spain, we took profits in the chemicals company Aragonesas, whose
products are running into price resistance. We acquired the glass company
Cristaleria Espanola, whose prospects seem promising.
Scandinavia registered the best returns on the Continent. Norwegian smaller
companies are benefiting from a strong domestic economy, with auto and retail
sales growing and inflation subdued. Technology stocks Sysdeco Group and
Multisoft have performed well. Economic growth is up in Sweden, and
construction stocks BPA and Finnveden have done well there. We sold the cement
supplier Euroc and medical supply manufacturer Arjo. Small stock valuations are
attractive in this market and our enthusiasm for them remains
intact.
- --------------------------------------------------------------------------------
Geographic Diversification
- --------------------------------------------------------------------------------
[PIE CHART APPEARS HERE]
Europe 41%
Japan 15%
Far East 30%
Latin America 10%
All Other 4%
Based on net assets as of 10/31/95.
- --------------------------------------------------------------------------------
Smaller-company stocks in the U.K. enjoyed a good summer after many
sluggish months. However, returns varied from sector to sector. The biotech,
technology, and service areas had powerful runs, while construction and
retailing experienced difficulty. We sold the engineering stock Wellman at a
profit, and added to positions in Stoves, a stove manufacturer, and Precoat
International, a producer of prepainted rolled steel.
Latin America
Mexico's progress toward economic rehabilitation has been fitful. While a
trade surplus exists and inflation is falling, the currency recently staggered
to new lows. Interest rates spiked up, and investors feared that the recession,
which showed no signs of abating, might never end. The government introduced a
package enabling borrowers to reschedule credit card debt and bank overdrafts
at more favorable interest rates. We added to smaller-company stocks with good
earnings such as the food company Sigma Alimentos and juice manufacturer Jugos
de Valle, but remain underweighted here.
Argentina has become obsessed with the relationship between Finance
Minister Cavallo, the architect of the economic transformation, and the rest of
the political establishment. Despite President Menem's reassurances that
Cavallo's position is secure, a sharp drop in economic activity and high rates
of unemployment suggest the contrary. During the last quarter, we bought shares
of energy conglomerate Sociedad Comercial del Plata, whose growth prospects
appear strong even in a weak economy.
Swift moves by the government of Brazil earlier this year produced a down-
turn in the overheating economy. Retail sales plunged, automobile sales
evaporated, and unemployment rose sharply. By mid-July, the government relaxed
its restrictive policy with lower interest rates after several retailers filed
for bankruptcy. Although inflation is dropping, profit margins are still under
pressure. As the country moves through this painful adjustment period into an
era of sustainable growth
3
<PAGE>
and low inflation, well-managed smaller-company stocks should revive. We added
to our position in the stainless steel manufacturer Cia Acos Espec Itabira.
Investment Policy and Outlook
The economic cycle continues to turn upward throughout much of the world,
earnings growth is solid, strong bond markets are a plus, and stock valuations
range from neutral to favorable. Japan offers opportunities in selected
industries. Some growth companies throughout Europe offer good value, the
smaller Asian markets seem to have recovered from 18 months of uncertainty, and
the gloom should begin to recede in Latin America during the months ahead. All
in all, we believe that international markets overall should perform well in
1996.
Smaller-company stocks have endured considerable discomfort in recent
years. Nevertheless, we are hopeful that the more encouraging trend witnessed
in the established markets over the past quarter will broaden into other areas.
Respectfully submitted,
/s/ Martin G. Wade
Martin G. Wade
President
November 17, 1995
- --------------------------------------------------------------------------------
Portfolio Highlights
- --------------------------------------------------------------------------------
Periods Ended October 31, 1995
<TABLE>
<CAPTION>
Change in Price Per Share
- ---------------------------------
<S> <C>
3 Months (From $14.99 to $14.43) $ -0.56
12 Months (From $17.63 to $14.43) -3.20
- --------------------------------------------------------------------------------
Total Net Assets $325.4 Million
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
Industry Diversification
- --------------------------------------------------------------------------------
October 31, 1995
<TABLE>
<CAPTION>
Percent of
Net Assets
----------
<S> <C>
Capital Equipment 25.1%
Services 22.5
Consumer Goods 16.2
Finance 14.3
Materials 13.8
Energy 2.2
Multi-Industry 2.0
Miscellaneous 0.8
Reserves 3.1
- --------------------------------------------------------------------------------
Total Net Assets 100.0%
- --------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
- --------------------------------------------------------------------------------
Twenty-Five Largest Holdings
- --------------------------------------------------------------------------------
October 31, 1995
<TABLE>
<CAPTION>
Percent of
Net Assets
----------
<S> <C>
Samsung Engineering & Construction,
South Korea 0.8%
L.G. Information & Communications,
South Korea 0.7
MTD Capital, Malaysia 0.7
JBA Holdings, United Kingdom 0.6
Ashtead Group, United Kingdom 0.6
Matthew Clark, United Kingdom 0.5
Randstad Holdings, Netherlands 0.5
Hock Hua Bank, Malaysia 0.5
Britton Group, United Kingdom 0.5
Mayflower, United Kingdom 0.5
Pacific Basin Bulk Shipping (USD),
Hong Kong 0.5
Apollo Electronics, Japan 0.5
Phileo Allied, Malaysia 0.5
Southeast Asia Cement, Philippines 0.5
Barlow Limited, South Africa 0.5
Mulia Industrindo, Indonesia 0.5
Keyence, Japan 0.5
Amway Asia Pacific (USD), Hong Kong 0.5
Wing Hang Bank, Hong Kong 0.5
Sysdeco Group, Norway 0.4
Hagemeyer, Netherlands 0.4
Generale D'Affichage, Switzerland 0.4
Shah Alam Properties, Malaysia 0.4
Malaysian Assurance Alliance, Malaysia 0.4
China Hong Kong Photo Products,
Hong Kong 0.4
- --------------------------------------------------------------------------------
Total 12.8%
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
Security Classification
- --------------------------------------------------------------------------------
October 31, 1995
<TABLE>
<CAPTION>
Percent Market
of Net Cost Value
Assets (000) (000)
-------- ------ ------
<S> <C> <C> <C>
Common Stocks,
Rights, and
Warrants 88.2% $298,426 $287,089
Preferred Stocks
and Rights 7.4 26,386 23,971
Bonds 1.4 4,801 4,779
Short-Term
Investments 2.2 7,042 7,042
----- -------- --------
Total Investments 99.2 336,655 322,881
Other Assets Less
Liabilities .8 2,494 2,493
- --------------------------------------------------------------------------------
Total Net Assets 100.0% $339,149 $325,374
- --------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
- --------------------------------------------------------------------------------
Performance Comparison
- --------------------------------------------------------------------------------
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
INTERNATIONAL MSCI
DISCOVERY EAFE
FUND INDEX*
---- -----
<S> <C> <C>
1988** 10,000 10,000
1989 12,850 10,150
1990 13,462 8,849
1991 13,973 9,464
1992 12,672 8,213
1993 17,357 11,289
1994 19,036 12,429
1995 16,551 12,382
</TABLE>
* Net of withholding taxes. While not appropriate for this fund, the large
company EAFE index is used for this required comparison because the fund's
benchmark (FTA-Euro-Pacific Small Cap) lacks a seven-year history.
Note: The index return does not reflect expenses, which have been deducted from
the fund's return.
**Commencement of operations.
- --------------------------------------------------------------------------------
Average Annual Compound Total Return
- --------------------------------------------------------------------------------
Periods Ended October 31, 1995
<TABLE>
<CAPTION>
Since Inception
1 Year 5 Years 12/30/88
-------- --------- ---------------
<S> <C> <C>
-13.06% 4.22% 7.65%
</TABLE>
- --------------------------------------------------------------------------------
Note: For the above periods ended 9/30/95, the fund's returns were -10.31%,
6.83%, and 8.21%, respectively.
Investment return and principal value represent past performance and will
vary. Shares may be worth more or less at redemption than at original purchase.
- --------------------------------------------------------------------------------
6
<PAGE>
- --------------------------------------------------------------------------------
Statement of Net Assets
T. Rowe Price International Discovery Fund/October 31, 1995
- --------------------------------------------------------------------------------
(values in thousands)
<TABLE>
<CAPTION>
Value
-----------
<S> <C> <C>
ARGENTINA -- 0.9%
COMMON STOCKS
298,000 shs * Cadipsa 'B'............................. $ 196
9,100 Capex GDR (USD)......................... 116
23,500 Capex 'A' GDR (USD)..................... 300
31,000 Enron Global Power
& Pipeline (USD)...................... 732
90,000 * Fiplasto 'B'............................ 202
594,000 * Indupa.................................. 297
12,471 Juan Minetti............................ 30
35,000 Mirgor 'C' ADS (USD).................... 57
351,294 * Polledo 'B'............................. 190
25,000 Quilmes Industrial (USD)................ 440
137,200 Sociedad Comercial del Plata............ 277
Total Argentina 2,837
AUSTRALIA -- 2.3%
COMMON STOCKS AND RIGHTS
914,865 AAPC Limited............................ 530
285,000 * Acacia Resources........................ 467
108,000 Advance Bank of Australia............... 798
154,421 BRL Hardy............................... 193
200,000 Burswood Property Trust................. 258
358,714 * Crown Limited........................... 500
547,750 E.R.G. Limited.......................... 663
115,050 Elders Australia........................ 136
69,233 Eltin Limited........................... 159
77,000 Finemore Holdings....................... 117
275,800 Healthscope Limited..................... 189
266,028 Henry Walker Group...................... 340
283,000 JNA Telecommunications.................. 291
276,000 Just Jeans Holdings..................... 437
212,659 Leighton Holdings....................... 491
151,666 Mildara Blass Limited................... 757
242,730 * Stanilite Pacific....................... 277
96,746 rts * Stanilite Pacific....................... 52
483,005 shs Tyndall Australia....................... 526
449,000 Walker.................................. 157
7,338
PREFERRED STOCK
294,000 * Sydney Harbour Casino
Holdings.............................. 363
Total Australia 7,701
BELGIUM -- 0.1%
WARRANTS
25,000 wts * National Portefeuille,
6/15/99.............................. 71
BELIZE -- 0.1%
COMMON STOCK
20,750 shs BHI (USD).............................. 324
BRAZIL -- 4.5%
COMMON STOCK
65,000 Capco Automotive
Products (USD)....................... 496
PREFERRED STOCKS AND RIGHTS
30,100,000 * Arapua Import............................ 291
118,000,000 Artex.................................... 442
563,000 * Bahia Sul Celulose....................... 293
45,992,000 Banco Nacional........................... 909
3,076,000 Casa Anglo Bras.......................... 192
42,200,000 Ceval Alimentos.......................... 548
85,172,356 Cia Acos Espec Itabira................... 708
6,337,347 rts * Cia Acos Espec Itabira................... 0
279,000 shs Cia Siderurgiga Paulista
Cosipa 'B'............................. 418
3,505,758 Cia Tecidos Norte de Minas............... 1,093
1,145,965 Dixie Toga............................... 1,072
20,700,000 Duratex.................................. 1,012
10,888,000 * Eluma.................................... 396
1,044,000 Eucatex.................................. 148
750,000 Frigobras Cia Bras
de Frigorificos........................ 561
451,392,000 Industia e Comercio
Chapeco................................ 103
46,100,000 Ipiranga Petroleo........................ 527
4 Lojas Americanas......................... 0
28,746,000 Lojas Renner............................. 658
7,379,900 * Mesbla................................... 138
6,000,000 Metalurgica Schulz....................... 211
535,000 * Moinho Santista.......................... 356
582,354 rts * Moinho Santista.......................... 0
682,000 shs Multibras Eletrodomesticos............... 603
7,300,000 Pettenati sa Malhas
Confeccoes............................. 216
213,387,676 Refrigeracao Parana...................... 504
</TABLE>
7
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
----------
<S> <C> <C>
4,191,920 shs * Sifco................................... $ 196
2,443,000 Weg..................................... 1,219
875,000 * Wentex Textile.......................... 1,190
14,004
Total Brazil 14,500
CANADA -- 0.1%
COMMON STOCK
54,000 * Arakis Energy (USD)..................... 283
CHILE -- 0.4%
COMMON STOCKS
32,000 Chilquinta ADR (USD).................... 556
9,150 Genesis Chile Fund (USD)................ 354
10,550 Sociedad Quimica Minera
de Chile ADR (USD).................... 458
Total Chile 1,368
CHINA -- 0.9%
COMMON STOCKS
240,600 China Merchants Shekou
(HKD)................................. 100
288,000 * China North Industries
Investment (USD)...................... 262
1,011,500 Shanghai Diesel
Engine 'B' (USD)...................... 447
300,000 Shanghai Friendship
Company 'B' (USD)..................... 150
1,826,000 Shanghai Haixing
Shipping 'H' (HKD).................... 189
898,000 * Shanghai New Asia 'B' (USD)............. 431
355,000 Shanghai Shangling Electric
Appliance 'B' (USD)................... 312
291,800 Shenzhen Nanshan 'B' (HKD).............. 70
1,583,000 * Shenzhen North Jianshe
Motorcycle 'B' (HKD).................. 972
Total China 2,933
COLOMBIA -- 0.3%
COMMON STOCKS
20,000 Cementos Diamante 'B'
GDS (USD)............................. 350
20,000 Gran Cadena de Almacemes 'B'
ADS (USD)............................. 275
29,500 Maderas y Sinteticos Sociedad
Anoma ADR (USD)....................... 527
Total Colombia 1,152
CZECH REPUBLIC -- 0.2%
COMMON STOCK
6,297 IPS Praha............................... 522
DENMARK -- 0.3%
COMMON STOCK
7,353 * Silcon 'B'.............................. 269
CONVERTIBLE BOND
3,100,000 DKK Danske Traelastkompagni,
5.25%, 1/1/02......................... 599
Total Denmark 868
ECUADOR -- 0.1%
COMMON STOCK
1,705 shs La Cemento Nacional
GDS (USD)............................. 355
FINLAND -- 0.1%
COMMON STOCK
15,000 Huhtamaki Oy 'I'........................ 445
FRANCE -- 3.7%
COMMON STOCKS AND RIGHTS
3,682 But..................................... 937
6,400 Cardif.................................. 596
17,300 Cipe France............................. 1,015
6,100 * Club Mediterranee....................... 478
6,100 rts * Club Mediterranee....................... 6
2,240 shs * Concorde................................ 279
6,000 Dauphin................................. 209
15,000 De Dietrich & Cie....................... 760
9,896 Ecco Travail Temporaire................. 690
16,601 Groupe Zannier.......................... 213
8,586 Guilbert................................ 1,031
6,100 Manutan................................. 695
6,000 MGI Coutier............................. 356
23,000 * Moulinex................................ 458
3,100 Rexel................................... 501
19,037 Rochefortaise Communication............. 623
4,860 SITA.................................... 834
5,906 Societe Des Immeubles
de France............................. 268
9,940 Spir Communication...................... 844
14,500 * Vallourec............................... 569
3,312 Virbac.................................. 440
11,802
CONVERTIBLE BOND
410,760 FRF Virbac, 5.00%, 1/1/01................... 94
Total France 11,896
</TABLE>
8
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
-----------
<S> <C> <C>
GERMANY -- 4.3%
COMMON STOCKS AND WARRANTS
1,800 shs Altana.................................. $ 1,047
3,000 Balcke Durr............................. 737
1,250 Buderus................................. 536
37,500 * Dorries Scharmann....................... 213
1,000 Duerr Beteiligungs...................... 323
91 F.A. Gunther & Sohn..................... 7
9,142 Kampa Haus.............................. 361
1,000 Klein, Schanzlin & Becker............... 213
903 Nordstern Lebensmittel.................. 176
1,125 Pfleiderer Bau und
Verkehrssysteme....................... 377
9,300 * Pittler Maschinenfabrik................. 548
1,952 Plettac................................. 447
92 Sixt.................................... 26
125 wts * Sixt.................................... 97
2,250 shs Vereinigte Baubeschlag
Handel................................ 574
1,000 wts * Wella International Finance,
3/18/96............................... 65
5,747
PREFERRED STOCKS AND RIGHTS
21,000 shs Berentzen Gruppe........................ 589
1,600 Edding.................................. 515
1,600 Hach.................................... 823
2,400 Klein, Schanzlin & Becker............... 392
2,000 Leffers................................. 352
1,200 Marschollek Lautenschlaeger............. 806
11,900 Rhon Klinikum........................... 1,015
11,900 rts * Rhon Klinikum........................... 228
4,050 shs Signal Bau Huber........................ 429
268 Sixt.................................... 77
3,500 Spar Handells........................... 756
1,386 Sto..................................... 743
3,200 Villeroy & Boch......................... 605
4,424 Westag & Getalit........................ 990
8,320
Total Germany 14,067
GUATEMALA -- 0.3%
COMMON STOCK
38,000 * Basic Petroleum (USD)................... 1,045
HONG KONG -- 6.3%
COMMON STOCKS AND WARRANTS
2,477,000 * Aeon Credit Service..................... 471
46,000 Amway Asia Pacific (USD)................ 1,484
2,889,035 China Hong Kong
Photo Products........................ 1,326
904,000 Esprit Asia............................. 307
1,100,000 Fairyoung Holdings...................... 484
343,200 wts * Fairyoung Holdings, 6/30/96............. 13
2,181,000 shs Goldlion Holdings....................... 1,241
7,607,000 Harbour Ring International.............. 787
1,023,166 wts * Harbour Ring International,
7/17/97............................... 13
224,400 Hon Kwok Land Investment................ 68
762,000 Hong Kong Ferry......................... 788
4,214,000 Hualing Holdings........................ 654
1,139,000 IMC Holdings............................ 685
852,000 JCG Holdings............................ 623
881,000 Joyce Boutique.......................... 188
346,000 Kingboard Chemical...................... 106
1,603,000 National Mutual Asia.................... 1,234
152,000 * Ng Fung Hong............................ 68
1,248,000 Orient Overseas
International......................... 718
113,000 Pacific Basin Bulk
Shipping (USD)........................ 1,596
113,000 wts * Pacific Basin Bulk
Shipping, 9/30/99 (USD)............... 78
2,000,000 shs Pokphand................................ 802
1,786,000 QPL International....................... 1,224
3,133,540 Siu Fung Ceramics....................... 770
540,000 Swank International
Manufacturers......................... 64
664,000 Tian Teck Land.......................... 137
1,951,000 * Ultronics International................. 81
750,000 Wah Kwong Ship Holding.................. 1,052
3,200,000 Wai Kee Holdings........................ 393
452,000 Wing Hang Bank.......................... 1,456
2,390,000 Yeebo................................... 331
993,800 wts * Yeebo, 8/31/96.......................... 41
4,119,000 shs Yue Yuen Industrial..................... 1,079
Total Hong Kong 20,362
HUNGARY -- 0.2%
COMMON STOCKS
1,125 * Chinoin................................. 317
28,050 Richter Gedeon (USD)................... 428
Total Hungary 745
INDIA -- 1.5%
COMMON STOCKS
36,000 Ashok Leyland GDR (USD)................. 378
31,000 * Core Parenterals GDR (USD).............. 128
8,000 * East India Hotels GDR (USD)............. 145
</TABLE>
9
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
-----------
<S> <C> <C>
30,000 shs Grasim Industries GDS (USD)............. $ 622
25,800 Hindalco GDR (USD)...................... 823
42,000 * Indian Hotels GDS (USD)................. 772
10,000 Reliance Industries
GDS (USD)............................. 152
137,000 Videocon International
GDR (USD)............................. 343
3,363
CONVERTIBLE BONDS
760,000 USD Essar Gujarat, Cv.,
5.50%, 8/5/98......................... 755
565,000 Gujarat Ambuja Cements,
3.50%, 6/30/99........................ 788
1,543
Total India 4,906
INDONESIA -- 3.9%
COMMON STOCKS
279,250 shs Bank Dagang Nasional.................... 249
239,000 Bank International Indonesia............ 837
179,583 Duta Anggada Realty..................... 113
114,950 Enseval Putera Megatrading.............. 86
81,500 Hanjaya Mandala Sampoerna............... 754
198,656 Indah Kiat Paper & Pulp................. 195
210,350 Indofoods Sukses Makmur................. 972
207,600 Indorama Synthetic...................... 688
131,000 Indosat 'B'............................. 444
17,000 Indosat 'B' ADR (USD)................... 563
245,000 Inti Indorayon Utama.................... 302
161,500 Jakarta International Hotels
& Development......................... 222
234,500 Jaya Real Property...................... 669
714,000 Mayora Indah............................ 511
110,500 Modernland Realty....................... 156
507,800 Mulia Industrindo....................... 1,498
641,820 Pabrik Kertas Tjiwi Kimia............... 1,187
646,125 Panin Bank.............................. 711
265,200 Semen Cibinong.......................... 695
404,000 Semen Gresik............................ 1,049
169,000 United Tractors......................... 335
12,236
CORPORATE BOND
200,000 CHF Indorama Synthetic,
4.50%, 12/31/97....................... 224
CONVERTIBLE BOND
265,200,000 IDR Modernland Realty,
6.00%, 1/4/03......................... 110
Total Indonesia 12,570
IRELAND -- 0.5%
COMMON STOCKS AND WARRANTS
600,000 Barlo Group............................. 272
494,505 wts * Dragon Oil (GBP)........................ 4
700,000 shs * Kenmare Resources (GBP)................. 249
386,000 Kingspan Group.......................... 1,097
Total Ireland 1,622
ISRAEL -- 0.5%
COMMON STOCKS
314,000 Bank Hapoalim.......................... 499
90,000 * Blue Square............................ 588
18,000 Teva Pharmaceutical
ADR (USD)............................ 711
Total Israel 1,798
ITALY -- 2.5%
COMMON STOCKS AND WARRANTS
69,000 * Cementeria di Augusta................... 108
343,000 Danieli & Company,
savings shares........................ 947
55,500 wts * Danieli & Company, 11/30/99............. 29
635,000 shs * Editoriale la Republica................. 545
24,000 Fila Holdings ADR (USD)................. 1,020
117,000 * Industria Macchine
Automatiche........................... 816
16,300 Industrie Natuzzi
ADR (USD)............................. 624
634,081 Merloni Elettrodomestici,
savings shares........................ 716
67,700 Saes Getters............................ 1,291
46,000 Safilo.................................. 488
524,500 Tecnost................................. 1,086
90,000 Telecocavi, savings shares.............. 217
90,000 Vianini Lavori.......................... 151
15,000 Zucchi, savings shares.................. 35
8,073
CORPORATE BOND
333,000,000 ITL Danieli & Company,
6.34375%, 1/1/00...................... 166
Total Italy 8,239
JAPAN -- 14.7%
COMMON STOCKS AND WARRANTS
26,000 shs Amway Japan............................. 991
64,000 Apollo Electronics...................... 1,583
26,000 Asatsu.................................. 897
</TABLE>
10
<PAGE>
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- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
-----------
<S> <C> <C>
97,000 shs Avon Products........................... $ 403
20,000 Chofu Seisakusho........................ 469
112,000 Daibiru................................. 1,139
41,000 Daifuku................................. 489
14,000 Disco................................... 527
28,000 Eidensha................................ 326
1,450 wts * Eidensha, 2/14/96 (DEM)................. 23
26,000 shs Emoto Industry.......................... 348
29,000 Enix.................................... 1,049
8,000 Enplas.................................. 174
25,000 F.C.C. ................................. 770
6,000 Fanuc................................... 260
35,000 Glory................................... 1,228
73,000 * Hamada Printing Press................... 503
15,500 Higashi Nihon House..................... 208
9,500 Hirose Electric......................... 606
65,000 Hitachi Tool Engineering................ 355
49,000 Horiba.................................. 551
110,000 Idec Izumi.............................. 946
53,000 Ishiguro Homa........................... 948
67,000 Iwata Air Compressor
Manufacturing......................... 331
81,000 Japan Airport Terminal.................. 926
70,000 Japan Living Service.................... 443
35,000 Juel Verite Ohkubo...................... 241
100 wts * Juel Verite Ohkubo,
3/10/98 (CHF)......................... 8
71,000 shs Juntendo................................ 451
13,000 Kato Denki.............................. 341
700 wts * Kawasaki Electric,
12/20/96 (CHF)........................ 2
12,100 shs Keyence................................. 1,490
31,000 Kirin Beverage.......................... 470
37,000 KOA..................................... 600
46,200 KTK Telecommunications
Engineering........................... 465
26,100 Kyokuto Kaihatsu Kogyo.................. 574
21,000 Levi Strauss Japan
Kabushiki Kaisha...................... 310
47,000 Lintec.................................. 671
21,700 Mabuchi Motor........................... 1,313
7,000 * Maruwa Ceramic.......................... 527
23,000 Masaru.................................. 170
54,000 Meitec.................................. 882
89,000 Meitetsu Transport...................... 512
1,300 wts * Meitetsu Transport,
4/30/97 (CHF)......................... 55
34,000 shs Mori Seiki.............................. 671
27,000 Mos Food Services....................... 676
49,000 Namura Shipbuilding..................... 273
18,000 Natoco Paint............................ 264
38,000 New Japan Securities.................... 178
51,000 Nichicon................................ 688
16,000 Nichiei................................. 993
8,000 Nihon Dempa Kogyo....................... 205
56,000 * Nippon Columbia......................... 318
75,000 Nippon Denwa Shisetsu................... 621
39,000 Nippon Kagaku Yakin..................... 368
56,000 Nippon Konpo Unyu Soko.................. 454
55,000 Nippon Seiki............................ 608
80,000 Nippon Thompson......................... 653
83,000 Nippon Yusoki........................... 326
14,000 Nissha Printing......................... 171
56,000 Nitta................................... 925
47,000 Okasan Securities....................... 187
30,000 Osaka Organic Chemical.................. 267
39,000 Paltac.................................. 419
22,100 Promise................................. 871
23,400 Rinnai.................................. 517
41,000 Sanken Electric......................... 386
22,000 * Sankyo Engineering...................... 353
39,000 Sanoyas Hishino Meisho.................. 191
54,000 * Sanyo Securities........................ 165
16,000 Seiko................................... 311
31,800 Sekisui House........................... 367
24,000 Senshukai............................... 450
17,000 Shinkawa................................ 607
131,000 Sintokogio.............................. 973
9,600 SMC..................................... 675
104,000 * Sodick.................................. 986
92,000 Sogo Denki.............................. 409
28,000 Tamura.................................. 181
18,000 Techno Ryowa............................ 341
81,000 Toc..................................... 755
28,000 Tohoku Telecommunications............... 140
34,000 Tokai Rubber Industries................. 382
13,000 Tokyo Ohka Kogyo........................ 397
68,000 Topre................................... 485
56,000 * Toshiba Tungaloy........................ 348
23,000 Toyo Communication
Equipment............................. 427
71,000 Toyo Steel.............................. 226
14,400 Trusco Nakayama......................... 274
16,000 Uniden.................................. 258
69,000 Wako Securities......................... 459
17,000 Xebio................................... 632
68,000 * Yamatane Securities..................... 213
69,000 Yamato Kogyo............................ 546
Total Japan 48,165
</TABLE>
11
<PAGE>
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- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
-----------
<S> <C> <C>
MALAYSIA -- 5.1%
COMMON STOCKS AND WARRANTS
32,333 shs Arab Malaysian Finance.................. $ 113
249,000 Asas Dunia.............................. 784
235,000 Bandar Raya Developments................ 351
418,000 wts * Bandar Raya Developments,
9/1/97................................ 354
484,000 shs Chemical Company
of Malaysia........................... 971
445,000 * Gemtech Resources....................... 855
595,000 Hock Hua Bank........................... 1,756
250,000 LB Aluminum............................. 531
142,000 Lityan Holdings......................... 377
109,000 Malaya Glass............................ 365
329,000 Malaysian Assurance Alliance............ 1,334
402,666 MTD Capital............................. 2,250
748,750 Muda Holdings........................... 825
221,000 Peladang Kimia.......................... 626
522,000 Pelangi................................. 510
375,000 Phileo Allied........................... 1,579
43,000 Public Finance.......................... 81
545,000 Shah Alam Properties.................... 1,341
416,000 Sunway Building Technology.............. 1,113
170,000 Westmont................................ 589
16,705
PREFERRED STOCK
113,333 Arab Malaysian Finance,
Cv. Loan Stock,
7.50%, 11/20/99....................... 60
Total Malaysia 16,765
MEXICO -- 1.7%
COMMON STOCKS
46,000 * Altos Hornos Mexico..................... 245
109,740 Apasco.................................. 402
738,850 Embotelladores del
Valle Anahuac `B'..................... 672
255,000 * Empaques Ponderosa `B'.................. 537
90,000 Grupo Elektra........................... 354
73,000 Grupo Financiero Inbursa `B'............ 198
14,926 * Grupo Mexicano de Desarrollo
`B' ADS (USD)......................... 37
26,000 * Grupo Mexicano de Desarrollo
Units ADS (USD)....................... 78
39,000 Grupo Radio Centro
ADS (USD)............................. 278
106,200 * Grupo Sidek `B' ADR (USD)............... 199
2,640 * Grupo Sidek `L' ADR (USD)............... 7
24,936 * Grupo Simec `B' ADR (USD)............... 162
61,190 * Grupo Situr Convertible
ADR (USD)............................. 195
180,888 International de Ceramica............... 208
180,000 * Jugos de Valle `B'...................... 313
45,000 * Sears Roebuck de Mexico `B'
ADS (USD)............................. 242
56,000 * Sears Roebuck de Mexico `B'
GDS (USD)............................. 301
1,125,000 * Seguros Comercial
Americana `B'......................... 268
77,210 * Servicios Financieros
Quadram ADR (USD)..................... 396
29,200 Sigma Alimentos `B'..................... 205
92,000 Tolmex `B'.............................. 345
Total Mexico 5,642
NETHERLANDS -- 2.9%
COMMON STOCKS
8,750 Aalberts Industries..................... 513
28,925 Ahrend Groep............................ 1,023
7,500 Atag.................................... 499
22,500 Content Beheer.......................... 610
17,000 * Frans Maas Groep Koninklijke............ 543
28,000 Hagemeyer............................... 1,395
9,700 International - Muller.................. 695
15,000 Nedlloyd Groep.......................... 381
5,250 Otra.................................... 1,081
5,600 Polynorm................................ 590
39,000 Randstad Holdings....................... 1,760
13,200 Sphinx Gustavsberg...................... 366
Total Netherlands 9,456
NEW ZEALAND -- 1.0%
COMMON STOCKS
892,000 * CDL Hotels.............................. 377
116,000 Independent Newspapers.................. 354
41,000 PDL Holdings............................ 235
163,800 Ports of Auckland....................... 381
292,888 Skellerup Group......................... 396
76,000 Steel & Tube Holdings................... 361
158,000 The Helicopter Line..................... 459
184,857 Whitcoulls Group........................ 275
353,000 Wrightson............................... 284
Total New Zealand 3,122
NORWAY -- 3.0%
COMMON STOCKS
40,400 * Bona Ship Holdings...................... 415
9,680 Det Norske Luftfartselskap `B'.......... 448
</TABLE>
12
<PAGE>
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- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
-----------
<S> <C> <C>
9,500 shs Elkjop Norge............................ $ 244
30,670 Kverneland Gruppen...................... 532
76,400 Merkantildata........................... 675
72,762 * Moelven Industrier...................... 69
24,100 Multisoft............................... 580
17,000 Nera.................................... 609
19,900 Norske Skogsindustrier.................. 577
78,750 Schibsted............................... 873
52,000 * Sensonor................................ 442
37,000 * Smedvig................................. 642
64,000 * Sysdeco Group........................... 1,429
207,500 Tomra Systems........................... 1,309
59,436 Transocean.............................. 907
Total Norway 9,751
PERU -- 1.0%
COMMON STOCKS
218,278 Backus y Johnston
Cerveceria `T'........................ 391
20,070 Cementos Lima........................... 298
34,100 * Cementos Yura `C' (USD)................. 264
26,071 Compania de Seguard
la Fenix Peru......................... 294
280,000 * Compania Embotelladora
del Pacifico `B' (USD)................ 146
129,838 Enrique Ferreyros....................... 149
155,641 * Explosivos `C'.......................... 232
155,641 * Explosivos `T'.......................... 232
28,222 Minsur `T'.............................. 196
1,013,333 * Peru Real Estate `B'.................... 532
1 * Southern Peru Copper `T'................ 0
2,734
CORPORATE BOND
370,000 USD International Financial
Holdings,6.50%, 8/1/99................ 503
Total Peru 3,237
PHILIPPINES -- 2.4%
COMMON STOCKS
464,000 shs Ayala Land `B'.......................... 535
1,743,000 C & P Homes............................. 1,122
247,640 First Philippine Holdings `B'........... 524
95,000 Manila Electric......................... 709
107,000 Philippine Commerce
International Bank.................... 876
7,600 Philippine Long Distance
Telephone ADR (USD)................... 426
885,000 * Pilipino Telephone...................... 783
2,518,000 * SM Prime................................ 678
11,942,000 * Southeast Asia Cement................... 1,561
7,214
CONVERTIBLE BOND
253,300 USD Benpres Holdings,
4.20%, 11/26/49....................... 481
Total Philippines 7,695
POLAND -- 0.3%
COMMON STOCKS
1,329,372 shs * International UNP
Holdings (CAD)........................ 476
200,000 Mostostal Export........................ 469
Total Poland 945
PORTUGAL -- 0.4%
COMMON STOCKS
30,000 * Jornalgeste............................. 465
10,080 Salvador Caetano........................ 145
47,250 * Sempa................................... 454
1,064
PREFERRED STOCK
41,610 * Filmes Lusomundo........................ 393
Total Portugal 1,457
PUERTO RICO -- 0.1%
COMMON STOCK
40,000 * Pepsi Cola Puerto Rico
Bottling Company
`B' (USD)............................. 545
RUSSIA -- 0.4%
COMMON STOCKS
96,000 * Petersburg Long Distance
(USD)................................. 588
35,000 * Petersburg Long Distance
(CAD)................................. 209
2,750,000 * Star Mining (AUD)....................... 440
Total Russia 1,237
SINGAPORE -- 1.6%
COMMON STOCKS AND WARRANTS
538,000 * Acer Computer
International (USD)................... 969
289,000 CSA Holdings............................ 276
71,000 Far East Levingston
Shipbuilding.......................... 307
507,000 Hong Fok................................ 739
</TABLE>
13
<PAGE>
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- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
-----------
<S> <C> <C>
230,000 shs Hour Glass............................. $ 191
332,000 Hwa Tat Lee............................ 150
140,000 Intraco................................ 205
247,000 Malayan Credit......................... 453
292,000 Marco Polo Development................. 351
506,000 Pacific Carrier........................ 451
220,000 Republic Hotels & Resorts.............. 255
184,000 wts * Republic Hotels & Resorts,
7/12/00.............................. 76
206,000 shs Tiger Medicals......................... 315
266,000 Wing Tai Holdings...................... 461
Total Singapore 5,199
SOUTH AFRICA -- 1.3%
COMMON STOCKS
6,750 Anglo America Industrial............... 341
120,200 Barlow Limited......................... 1,549
519,200 Iscor.................................. 527
9,300 * Polifin................................ 20
140,000 Rembrandt Group........................ 1,276
62,000 Sasol.................................. 535
Total South Africa 4,248
SOUTH KOREA -- 2.1%
COMMON STOCKS AND RIGHTS
10,000 Coryo Securities....................... 182
19,170 HS Chemical............................ 584
22 Korea Growth Trust IDR
(USD)................................ 781
26,361 Kun Young Construction................. 413
6,141 rts * Kun Young Construction................. 0
20,000 shs * L.G. Information &
Communications....................... 1,576
10,000 * L.G. Information &
Communications, new.................. 788
57,753 * Samsung Engineering &
Construction......................... 1,917
21,681 * Samsung Engineering &
Construction, new.................... 697
1,321 * Samsung Electronic GDS
1/2 Voting Shares, new
(USD)................................ 23
Total South Korea 6,961
SPAIN -- 1.9%
COMMON STOCKS
53,000 * Algodonera de St. Antonia.............. 396
15,000 Azkoyen................................ 934
187,500 Corporacion Financiaera
Reunida.............................. 607
8,500 * Cristaleria Espanola................... 529
135,000 Filo................................... 608
23,821 Grupo Anaya............................ 565
139,000 * Grupo Duro Felguera.................... 547
65,670 Marco Iberica
Distribucion de Edic................. 683
27,000 Prosegur Compania
Securidad............................ 661
125,000 * Sotogrande............................. 247
5,777
CONVERTIBLE BOND
32,910,000 ESP Grupo Anaya, 7.00%,
3/18/98.............................. 271
Total Spain 6,048
SWEDEN -- 3.3%
COMMON STOCKS
51,170 shs Angpanne Foreningen `B'................ 863
411,000 * BPA `A'................................ 842
100,500 Catena `A'............................. 757
91,337 * Finnveden `B'.......................... 928
37,532 Gambro `B'............................. 656
22,100 Getinge Industrier `B'................. 942
43,950 Hoganas `B'............................ 1,185
95,150 ICB Shipping `B'....................... 788
42,000 Kalmar Industries...................... 683
29,770 Linjebuss `A'.......................... 269
18,000 Securitas `B'.......................... 697
140,000 Stena Line `B'......................... 712
58,000 TV 4 `A'............................... 1,266
10,588
CONVERTIBLE BOND
900,000 SEK Stena Line,
7.00%, 4/30/01....................... 122
Total Sweden 10,710
SWITZERLAND -- 2.6%
COMMON STOCKS
1,255 shs Bil GT Gruppe.......................... 774
460 Bossard Holdings....................... 820
2,050 Bucher Holding......................... 1,291
3,200 Generale D'Affichage................... 1,375
360 Gurit Heberlien........................ 755
1,200 Hilti.................................. 989
2,500 Lem Holding............................ 951
1,375 * Saurer................................. 497
340 Sig Schweiz............................ 737
2,000 * Von Moos............................... 194
Total Switzerland 8,383
</TABLE>
14
<PAGE>
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- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
-----------
<S> <C> <C>
TAIWAN -- 0.7%
COMMON STOCKS
60,304 shs * GVC Corporation
GDR (USD)............................. $ 543
12,428 * Tung Ho Steel Enterprise
GDR (USD)............................. 133
63,510 * Yageo GDR (USD)......................... 619
22,739 * Yageo GDR, new (USD).................... 222
1,517
CONVERTIBLE BONDS
150,000 USD Acer, 4.00%, 6/10/01.................... 461
150,000 United Micro Electronics,
1.25%, 6/8/04......................... 205
666
Total Taiwan 2,183
THAILAND -- 1.5%
COMMON STOCKS, RIGHTS AND WARRANTS
20,000 Bangkok Insurance Public................ 342
18,333 Bangkok Metropolitan Bank............... 18
41,900 Goodyear................................ 390
85,000 Hana Microelectronics................... 338
232,000 Industrial Finance of
Thailand.............................. 761
67,000 Precious Shipping....................... 402
67,000 rts * Precious Shipping....................... 375
59,000 shs Property Perfect........................ 469
20,444 wts * Property Perfect, 7/7/99................ 37
252,000 shs Robinson Deposit Store.................. 526
135,000 * Sahavirya Steel......................... 206
67,000 Sanyo Universal Electric................ 306
114,300 Swedish Motors.......................... 509
56,800 Unithai Line Public..................... 334
Total Thailand 5,013
UNITED KINGDOM -- 14.1%
COMMON STOCKS, RIGHTS AND WARRANTS
99,000 wts * Abtrust Lloyds Insurance................ 45
204,000 shs * Acorn Computer Group.................... 471
291,666 Ashtead Group........................... 1,951
110,000 Baggeridge Brick........................ 164
900,000 BCE Holdings............................ 345
250,000 Berisford International................. 585
78,664 * British Biotechnology................... 1,109
705,047 Britton Group........................... 1,750
750,000 Bruntcliffe Aggregates.................. 237
282,600 CALA.................................... 509
185,000 Carpetright............................. 1,018
1,280,585 Casket.................................. 162
223,000 Chamberlain Phipps...................... 296
577,500 Corporate Services Group................ 785
397,222 CRT Group............................... 754
265,000 Devro International..................... 1,018
13,846,152 * Dragon Oil.............................. 383
35,000 Druck Holdings.......................... 1,212
587,734 Enviromed............................... 167
100,952 Ferraris Group.......................... 88
105,000 FII Group............................... 739
95,000 First Technology........................ 701
247,200 Frost Group............................. 860
5,207,860 Graystone............................... 1,070
480,000 Halkin Holdings......................... 410
150,000 Helical Bar............................. 757
32,500 Henderson Administration
Group................................. 640
320,000 HTV Group............................... 1,305
178,000 Iceland Group........................... 467
300,000 Ingham.................................. 180
340,500 JBA Holdings............................ 2,078
120,000 * JKX Oil & Gas........................... 347
130,000 Kewill Systems.......................... 678
287,330 London & Overseas
Freighters............................ 382
93,000 Mackie International Group.............. 522
173,000 Matthew Clark........................... 1,762
1,115,000 Mayflower............................... 1,648
467,000 Mirror Group............................ 1,237
706,176 * Monument Oil & Gas...................... 656
450,000 NSM..................................... 626
300,000 Oliver Group............................ 173
733,333 * Pentos.................................. 0
141,000 Peter Black Holdings.................... 620
100,000 Pillar Property Investments............. 237
235,000 Pizza Express........................... 721
139,000 Powerscreen International............... 855
177,000 Precoat International................... 442
941,856 Princedale Group........................ 417
263,575 Prowting................................ 392
194,979 Quadramatic............................. 601
1,861,159 * Regal Hotel Group....................... 1,118
115,140 RJB Mining.............................. 900
2,000,000 * Roxspur................................. 206
1,126,525 * Roxspur, new............................ 116
50,000 Serco Group............................. 293
635,555 Spring Ram.............................. 271
418,750 Stakis.................................. 510
210,000 Sterling Publishing..................... 93
332,000 Stordata Solutions...................... 92
221,333 rts * Stordata Solutions...................... 19
</TABLE>
15
<PAGE>
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- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
-----------
<S> <C> <C>
94,000 shs * Stoves.................................. $ 312
618,530 Taylor Nelson........................... 425
165,000 TLG..................................... 447
655,000 Transtec................................ 888
63,500 Trifast................................. 355
475,000 Ugland International.................... 586
4,578,501 Verity Group............................ 905
265,000 Vibroplant.............................. 352
1,116,000 * Videologic Group........................ 582
323,888 Wickes.................................. 638
5,015,000 * Wiggins Group........................... 258
394,000 WPP Group............................... 959
44,897
PREFERRED STOCKS
550,000 Berisford International, 5.00%
Cv. Loan Stock, 2015.................. 583
120,000 Iceland Group, Cum. Cv.................. 248
831
Total United Kingdom 45,728
VENEZUELA -- 0.5%
COMMON STOCKS
15,000 Corimon ADR (USD)....................... 64
83,212 Mavesa ADR (USD)........................ 333
112,066 Mavesa ADS (USD)........................ 448
52,800 * Sudamtex de Venezuela `B'
ADR (USD)............................. 218
80,000 Venezolana de Prerreducidos
Caroni GDS (USD)...................... 432
Total Venezuela 1,495
VIETNAM -- 0.4%
COMMON STOCK
118,600 * Lazard Frier & Co.
Vietnam Fund (USD).................... 1,245
SHORT-TERM INVESTMENTS -- 2.2%
COMMERCIAL PAPER
$2,000,000 Delaware Funding,
5.70%, 11/3/95........................ 1,973
3,000,000 Preferred Receivables
Funding,
5.73%, 11/27/95....................... 2,978
2,091,603 Investments in Commercial
Paper through a
joint account,
5.87 - 5.88%, 11/1/95................. 2,091
Total Short-Term Investments 7,042
- ------------------------------------------------------------------------------
Total Investments in Securities -- 99.2% of
Net Assets (Cost $336,655) $322,881
- ------------------------------------------------------------------------------
Other Assets Less Liabilities..................................... $ 2,493
--------
<CAPTION>
Value
-----
<S> <C> <C>
Net Assets Consist of:
Accumulated net investment income -
net of distributions.................. $ 2,048
Accumulated net realized gain/loss -
net of distributions.................. (8,883)
Net unrealized gain (loss).............. (13,775)
Paid-in-capital applicable to
22,544,526 shares of $0.01 par
value capital stock outstanding;
2,000,000,000 shares of the
Corporation authorized................ 345,984
--------
NET ASSETS.............................. $325,374
========
NET ASSET VALUE PER SHARE............... $14.43
======
- ------------------------------------------------------------------------------
</TABLE>
* Non-income producing
AUD Australian dollar
CAD Canadian dollar
CHF Swiss franc
DEM German deutschemark
DKK Danish krone
ESP Spanish peseta
FRF French franc
GBP British sterling
HKD Hong Kong dollar
IDR Indonesian rupia
ITL Italian lira
SEK Swedish krona
USD U.S. dollar
The accompanying notes are an integral part of these financial statements.
16
<PAGE>
- -------------------------------------------------------------------------------
Statement of Operations
- -------------------------------------------------------------------------------
T. Rowe Price International Discovery Fund / Year Ended October 31, 1995
(in thousands)
<TABLE>
<S> <C>
INVESTMENT INCOME
Income
Dividend (net of foreign taxes of $944).......................... $ 6,839
Interest......................................................... 1,060
Other............................................................ 52
--------
Total income..................................................... 7,951
--------
Expenses
Investment management............................................ 4,381
Shareholder servicing............................................ 846
Custody and accounting........................................... 322
Prospectus and shareholder reports............................... 99
Registration..................................................... 61
Legal and audit.................................................. 52
Proxy and annual meeting......................................... 18
Directors........................................................ 14
Miscellaneous.................................................... 17
--------
Total expenses................................................... 5,810
Expenses paid indirectly......................................... (1)
--------
Net expenses..................................................... 5,809
--------
Net investment income.............................................. 2,142
--------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Securities....................................................... (7,141)
Foreign currency transactions.................................... (360)
--------
Net realized gain (loss)......................................... (7,501)
--------
Change in net unrealized gain or loss on:
Securities....................................................... (59,605)
Other assets and liabilities denominated in foreign currencies... (32)
--------
Change in net unrealized gain or loss............................ (59,637)
--------
Net realized and unrealized gain (loss)............................ (67,138)
--------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS.................. $(64,996)
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
- -------------------------------------------------------------------------------
Statement of Changes in Net Assets
- -------------------------------------------------------------------------------
T. Rowe Price International Discovery Fund
(in thousands)
<TABLE>
<CAPTION>
Year Ended October 31,
1995 1994
-------- --------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM
Operations
Net investment income................................................ $ 2,142 $ 1,710
Net realized gain (loss)............................................. (7,501) 33,944
Change in net unrealized gain or loss................................ (59,637) (3,800)
--------- ---------
Increase (decrease) in net assets from operations.................... (64,996) 31,854
--------- ---------
Distributions to shareholders
Net investment income................................................ (1,593) (1,527)
Net realized gain.................................................... (23,937) (437)
--------- ---------
Decrease in net assets from distributions............................ (25,530) (1,964)
--------- ---------
Capital share transactions*
Shares sold.......................................................... 55,318 283,987
Distributions reinvested............................................. 23,502 1,746
Shares redeemed...................................................... (166,714) (141,266)
Redemption fees received............................................. 352 84
--------- ---------
Increase (decrease) in net assets from capital share transactions.... (87,542) 144,551
--------- ---------
Increase (decrease) in net assets...................................... (178,068) 174,441
NET ASSETS
Beginning of period.................................................... 503,442 329,001
--------- ---------
End of period.......................................................... $ 325,374 $ 503,442
========= =========
- ---------------------------------------------------------------------------------------------------------
*Share information
Shares sold.......................................................... 3,750 16,233
Distributions reinvested............................................. 1,573 102
Shares redeemed...................................................... (11,326) (8,143)
--------- ---------
Increase (decrease) in shares outstanding............................ (6,003) 8,192
========= =========
- ---------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
- -------------------------------------------------------------------------------
Notes to Financial Statements
- -------------------------------------------------------------------------------
T. Rowe Price International Discovery Fund / October 31, 1995
Note 1 - Significant Accounting Policies
T. Rowe Price International Funds, Inc., (the Corporation) is registered
under the Investment Company Act of 1940. The International Discovery Fund
(the fund), a diversified, open-end management investment company, is one of
the portfolios established by the Corporation.
A) Valuation - Equity securities listed or regularly traded on a securities
exchange (including Nasdaq) are valued at the last quoted sales price at the
time the valuations are made. A security which is listed or traded on more
than one exchange is valued at the quotation on the exchange determined to be
the primary market for such security. Other equity securities and those listed
securities that are not traded on a particular day are valued at a price within
the limits of the latest bid and asked prices deemed by the Board of Directors,
or by persons delegated by the Board, best to reflect fair value.
Debt securities are generally traded in the over-the-counter market and are
valued at a price deemed best to reflect fair value as quoted by dealers who
make markets in these securities or by an independent pricing service.
Short-term debt securities are valued at their cost which, when combined with
accrued interest, approximates fair value.
For purposes of determining the fund's net asset value per share, the U.S.
dollar value of all assets and liabilities initially expressed in foreign
currencies is determined by using the mean of the bid and offer prices of such
currencies against U.S. dollars quoted by a major bank.
Assets and liabilities for which the above valuation procedures are
inappropriate or are deemed not to reflect fair value are stated at fair value
as determined in good faith by or under the supervision of the officers of the
fund, as authorized by the Board of Directors.
B) Currency Translation - Assets and liabilities are translated into U.S.
dollars at the prevailing exchange rate at the end of the reporting period.
Purchases and sales of securities and income and expenses are translated into
U.S. dollars at the prevailing exchange rate on the dates of such transactions.
The effect of changes in foreign exchange rates on realized and unrealized
security gains and losses is reflected as a component of such gains and losses.
C) Other - Income and expenses are recorded on the accrual basis. Expenses
paid indirectly are custody fees paid by float credits earned on daily residual
cash balances at the custodian. Investment transactions are accounted for on
the trade date. Realized gains and losses are reported on the identified cost
basis. Dividend income and distributions to shareholders are recorded by the
fund on the ex-dividend date. Income and capital gain distributions are
determined in accordance with federal income tax regulations and may differ
from those determined in accordance with generally accepted accounting
principles.
Note 2 - Investment Transactions
Consistent with its investment objective, the fund engages in the following
practices to manage exposure to certain risks or enhance performance. The
investment objective, policies, program, and risk factors of the fund are
described more fully in the fund's prospectus and Statement of Additional
Information.
A) Emerging Markets - At October 31, 1995, the fund held investments in
securities of companies located in emerging markets. Future economic or
political developments could adversely affect the liquidity or value, or both,
of such securities.
B) Commercial Paper Joint Account - The fund, and other affiliated funds,
may transfer uninvested cash into a commercial paper joint
19
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
account, the daily aggregate balance of which is invested in high-grade
commercial paper. All securities purchased by the joint account satisfy the
fund's criteria as to quality, yield, and liquidity.
C) Securities Lending - To earn additional income, the fund lends its
securities to approved brokers. At October 31, 1995, the market value of
securities on loan was $9,315,000, which was fully collateralized with cash.
Although the risk is mitigated by the collateral, the fund could experience a
delay in recovering its securities and a possible loss of income or value if
the borrower fails to return them.
D) Other - Purchases and sales of portfolio securities, other than
short-term securities, aggregated $162,814,000 and $267,093,000, respectively,
for the year ended October 31, 1995.
Note 3 - Federal Income Taxes
No provision for federal income taxes is required since the fund intends to
continue to qualify as a regulated investment company and distribute all of its
taxable income. The fund has unused realized capital loss carryforwards for
federal income tax purposes of $8,323,000 which expire in 2003. The fund
intends to retain gains realized in future periods that may be offset by
available capital loss carryforwards.
In order for the fund's capital accounts and distributions to shareholders
to reflect the tax character of certain transactions, $38,000 of undistributed
net investment income was reclassified as an increase to undistributed net
realized gains during the year ended October 31, 1995. The results of operations
and net assets were not affected by the reclassifications.
At October 31, 1995, the aggregate cost of investments for federal income
tax and financial reporting purposes was $336,655,000 and net unrealized loss
aggregated $13,774,000, of which $45,639,000 related to appreciated investments
and $59,413,000 to depreciated investments.
Note 4 - Related Party Transactions
The fund is managed by Rowe Price-Fleming International, Inc. (the Manager),
which is owned by T. Rowe Price Associates, Inc. (Price Associates), Robert
Fleming Holdings Limited, and Jardine Fleming Holdings Limited under a joint
venture agreement.
The investment management agreement between the fund and the Manager
provides for an annual investment management fee, of which $309,000 was payable
at October 31, 1995. The fee is computed daily and paid monthly, and consists
of an Individual Fund Fee equal to 0.75% of average daily net assets and a
Group Fee. The Group Fee is based on the combined assets of certain mutual
funds sponsored by the Manager or Price Associates (the Group). The Group Fee
rate ranges from 0.48% for the first $1 billion of assets to 0.31% for assets
in excess of $34 billion. At October 31, 1995, and for the year then ended,
the effective annual Group Fee rate was 0.34%. The fund pays a pro rata share
of the Group Fee based on the ratio of its net assets to those of the Group.
Under the terms of the investment management agreement, the Manager was
required to bear any expenses through December 31, 1993 which would have caused
the fund's ratio of expenses to average net assets to exceed 1.50%. Thereafter
through December 31, 1995, the fund is required to reimburse the Manager for
these expenses, provided that average net assets have grown or expenses have
declined sufficiently to allow reimbursement without causing the fund's ratio
of expenses to average net assets to exceed 1.50%. Pursuant to this and a
previous agreement, $146,000 of unaccrued fees were repaid during the year
ended
20
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
October 31, 1995. Pursuant to a previous agreement, $325,000 of
unaccrued fees from 1991-1992 were permanently waived at December 31, 1994.
In addition, the fund has entered into agreements with Price Associates and
two wholly owned subsidiaries of Price Associates, pursuant to which the fund
receives certain other services. Price Associates computes the daily share
price and maintains the financial records of the fund. T. Rowe Price Services,
Inc. (TRPS), is the fund's transfer and dividend disbursing agent and provides
shareholder and administrative services to the fund. T. Rowe Price Retirement
Plan Services, Inc., provides subaccounting and recordkeeping services for
certain retirement accounts invested in the fund. The fund incurred expenses
pursuant to these related party agreements totaling approximately $819,000 for
the year ended October 31, 1995, of which $103,000 was payable at period-end.
During the year ended October 31, 1995, the fund, in the ordinary course of
business, paid commissions of $417,000 to, and placed security purchase and
sale orders aggregating $80,769,000 with, certain affiliates of the Manager in
connection with the execution of various portfolio transactions.
21
<PAGE>
- -------------------------------------------------------------------------------
Financial Highlights
- -------------------------------------------------------------------------------
T. Rowe Price International Discovery Fund
<TABLE>
<CAPTION>
For a share outstanding throughout each period
---------------------------------------------------------------------
Ten Months
Year Ended Ended Year Ended
October 31, October 31, December 31,
---------------------- ---------------------------------
1995 1994 1993++ 1992 1991 1990
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD................................... $17.63 $16.16 $11.68 $12.99 $11.75 $13.94
------ ------ ------ ------ ------ ------
Investment Activities
Net investment income....................... 0.10 0.04 0.07* 0.13* 0.13* 0.14*
Net realized and unrealized
gain (loss)............................... (2.38) 1.52 4.41 (1.31) 1.24 (1.91)
------ ------ ------ ------ ------ ------
Total from investment activities............ (2.28) 1.56 4.48 (1.18) 1.37 (1.77)
------ ------ ------ ------ ------ ------
Distributions
Net investment income....................... (0.06) (0.07) -- (0.13) (0.13) (0.15)
Net realized gain........................... (0.87) (0.02) -- -- -- (0.27)
------ ------ ------ ------ ------ ------
Total distributions......................... (0.93) (0.09) -- (0.13) (0.13) (0.42)
------ ------ ------ ------ ------ ------
Redemption fees added
to paid-in-capital.......................... 0.01 -- -- -- -- --
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD................ $14.43 $17.63 $16.16 $11.68 $12.99 $11.75
====== ====== ====== ====== ====== ======
- ---------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Total return.................................. (13.1)% 9.7% 38.4%* (9.1)%* 11.7%* (12.8)%*
Ratio of expenses to average
net assets.................................. 1.50%** 1.50% 1.50%+* 1.50%* 1.50%* 1.50%*
Ratio of net investment income
to average net assets....................... 0.55% 0.38% 0.81%+* 1.07%* 1.03%* 1.10%*
Portfolio turnover rate....................... 43.5% 57.4% 71.8%+ 38.0% 56.3% 44.0%
Net assets, end of period
(in thousands).............................. $325,374 $503,442 $329,001 $166,362 $166,819 $136,660
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized
++ The fund's fiscal year-end was changed to October 31.
* Excludes expenses in excess of a 1.50% voluntary expense limitation in
effect through December 31, 1993.
** Beginning in fiscal 1995, includes expenses paid indirectly.
22
<PAGE>
- -------------------------------------------------------------------------------
Report of Independent Accountants
- -------------------------------------------------------------------------------
To the Board of Directors and Shareholders of
T. Rowe Price International Discovery Fund
In our opinion, the accompanying statement of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
T. Rowe Price International Discovery Fund (one of the portfolios constituting
T. Rowe Price International Funds, Inc.) at October 31, 1995, and the results
of its operations, the changes in its net assets and the financial highlights
for each of the fiscal periods presented, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 1995 by correspondence with
custodians and brokers and, where appropriate, the application of alternative
auditing procedures for unsettled security transactions, provide a reasonable
basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Baltimore, Maryland
November 17, 1995
23
<PAGE>
- --------------------------------------------------------------------------------
Annual Report
- --------------------------------------------------------------------------------
For yield, price, last transaction, and current balance, 24 hours,
7 days a week, call:
1-800-638-2587 toll free
625-7676 Baltimore area
For assistance with your existing fund account, call:
Shareholder Service Center
1-800-225-5132 toll free
625-6500 Baltimore area
T. Rowe Price
100 East Pratt Street
Baltimore, Maryland 21202
This report is authorized for distribution only to shareholders and to others
who have received a copy of the prospectus of the T. Rowe Price International
Discovery Fund.
[LOGO OF T. ROWE PRICE APPEARS HERE]
IDF
T. ROWE PRICE
- -------------
International Discovery
Fund
October 31, 1995
