<PAGE>
- ----------------------------------------------------------------
DIRECTORS OFFICERS
Barton M. Biggs James W. Grisham
CHAIRMAN OF THE BOARD VICE PRESIDENT
Chairman and Director, Michael F. Klein
Morgan Stanley Asset VICE PRESIDENT
Management Inc. and Harold J. Schaaff, Jr.
Morgan Stanley Asset VICE PRESIDENT
Management Limited; Joseph P. Stadler
Managing Director, VICE PRESIDENT
Morgan Stanley & Co. Valerie Y. Lewis
Incorporated; Director, SECRETARY
Morgan Stanley Group Karl O. Hartmann
Inc. ASSISTANT SECRETARY
Warren J. Olsen James R. Rooney
DIRECTOR AND PRESIDENT TREASURER
Principal, Morgan Joanna M. Haigney
Stanley Asset ASSISTANT TREASURER
Management Inc. and
Morgan Stanley & Co.
Incorporated
John D. Barrett II
Chairman and Director,
Barrett Associates, Inc.
Gerard E. Jones
Partner, Richards &
O'Neil LLP
Andrew McNally IV
Chairman and Chief
Executive Officer, Rand
McNally
Samuel T. Reeves
Chairman of the Board and
CEO, Pinacle L.L.C.
Fergus Reid
Chairman and Chief
Executive Officer,
LumeLite Corporation
Frederick O. Robertshaw
Of Counsel, Bryan, Cave
LLP
- ----------------------------------------------------------------
INVESTMENT ADVISER AND ADMINISTRATOR
Morgan Stanley Asset Management Inc.
1221 Avenue of the Americas
New York, New York 10020
- ----------------------------------------------------------------
DISTRIBUTOR
Morgan Stanley & Co. Incorporated
1251 Avenue of the Americas
New York, NY 10020
- --------------------------------------------------------
CUSTODIANS
The Chase Manhattan Bank
770 Broadway
New York, New York 10003
Morgan Stanley Trust Company
One Pierrepont Plaza
Brooklyn, New York 11210
- ----------------------------------------------------------------
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP
2000 One Logan Square
Philadelphia, Pennsylvania 19103
- ----------------------------------------------------------------
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
- ----------------------------------------------------------------
For current performance, current net asset value, or for assistance with your
account, please contact the Fund at (800) 548-7786. This report is authorized
for distribution only when preceded or accompanied by prospectuses of the Morgan
Stanley Institutional Fund, Inc.
[LOGO] MORGAN STANLEY
INSTITUTIONAL FUND, INC.
P.O. Box 2798
Boston, MA 02208-2798
[LOGO] MORGAN STANLEY
INSTITUTIONAL FUND, INC.
ACTIVE COUNTRY ALLOCATION PORTFOLIO
FIRST QUARTER REPORT
MARCH 31, 1997
<PAGE>
LETTER TO SHAREHOLDERS
- -------
The Active Country Allocation Portfolio invests in international equity markets,
with emphasis placed upon countries, rather than stock selection. This approach
reflects our belief that a diversified selection of securities representing
exposure to countries that we find attractive provides an effective way to
maximize the return and minimize the risk associated with global investing.
For the three months ended March 31, 1997, the Portfolio had a total return of
0.26% for the Class A shares and 0.18% for the Class B shares, as compared to a
total return of -1.57% for the Morgan Stanley Capital International (MSCI) EAFE
Index. The average annual total return for the one year and five-year periods
ended March 31, 1997 and for the period from inception on January 17, 1992
through March 31, 1997 was 5.12%, 9.86%, and 8.33%, respectively, for the Class
A shares as compared to 1.46%, 10.57% and 8.44%, respectively, for the Index.
PERFORMANCE COMPARED TO MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) EAFE
INDEX(1)
- ----------------------------------------------------
<TABLE>
<CAPTION>
TOTAL RETURNS(2)
----------------------------------------------------
AVERAGE
ANNUAL AVERAGE ANNUAL
YTD ONE YEAR FIVE YEARS SINCE INCEPTION
--------- --------- ----------- -----------------
<S> <C> <C> <C> <C>
PORTFOLIO--CLASS A........ 0.26% 5.12% 9.86% 8.33%
PORTFOLIO--CLASS B(3)..... 0.18 4.91 NA 1.74
INDEX..................... -1.57 1.46 10.57 8.44
</TABLE>
1. The MSCI EAFE Index is an unmanaged index of common stocks and includes
Europe, Australasia and the Far East (includes dividends net of withholding
taxes).
2. Total returns for the Portfolio reflect expenses waived and reimbursed, if
applicable, by the Adviser. Without such waiver and reimbursement, total
returns would be lower.
3. The Portfolio began offering Class B shares on January 2, 1996.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
- ------------------------------
THE COUNTRY SPECIFIC PERFORMANCE RESULTS PROVIDED ARE AS MEASURED BY THE MSCI
EAFE INDEX AND ARE FOR INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED
AS A GUARANTEE OF THE PORTFOLIO'S FUTURE PERFORMANCE. PAST PERFORMANCE SHOWN IS
NOT PREDICTIVE OF FUTURE PERFORMANCE. INVESTMENT RETURN AND PRINCIPAL VALUE WILL
FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS
THAN THEIR ORIGINAL COST. PLEASE SEE THE PROSPECTUS FOR A DESCRIPTION OF CERTAIN
RISK CONSIDERATIONS ASSOCIATED WITH INTERNATIONAL INVESTING.
Though we began the year with concerns that the European and Asian markets might
pullback with a U.S. sell off, the U.S. market powered to new highs in January
and European bourses followed. Not wanting to fight against a strongly trending
market, we increased our portfolio weighting in the U.K. and core Europe in
mid-January. This move added to portfolio returns as European equities generally
shrugged off the rise in global bond yields to end the quarter at new highs.
Asia, was not so fortunate, with Asia Ex-Japan losing 4.9% for the quarter and
Japan down -11.8%. Our 30% position in Japan, though neutral to the benchmark,
hurt absolute portfolio returns, although the sector tilt out of banks added
significant relative outperformance. (for the first quarter of 1997, our Japan
ex-banks portfolio outperformed the standard Japan basket by nearly 300 basis
points.) We moved to an underweight in Hong Kong in mid-February, but portfolio
positions in Hong Kong and Singapore detracted from quarterly returns. Hong Kong
sold off sharply in March on profit taking and on property and higher interest
rate fears; Singapore detracted from returns on slower than expected exports and
a 25 basis point rise in short term rates. For the quarter, the Emerging Markets
positions of Indonesia, Korea, and Thailand all detracted from returns.
Currently, the Portfolio has modest underweights in Europe and Asia (56% and 8%
respectively), a neutral position in Japan ex-banks (30%), 1% each in Indonesia,
Korea and Thailand, and 3% in cash. Currency hedges remain in place with 45%
hedges out of the deutsche mark bloc, 70% out of the Swiss franc and 45% out of
the Japanese yen. We believe the bull market in the dollar will continue, for
the sake of the Japanese economy, EMU and all those unemployed Europeans.
Japanese investment portfolio flows should also weaken the yen although, the
Japanese trade surplus will put a cap on dollar/yen strength.
JAPAN
The Japanese market proved a major disappointment for us in the quarter. In
February, we were encouraged by indications that real estate was bottoming and
by the government's efforts to speed up financial market reform despite
protestations from the Ministry of Finance. We were intrigued by rumors that
foreign
2
<PAGE>
financial institutions would be allowed to invest in Japanese banks, by
legislation to allow for the consolidation of holding company balance sheets,
and by the securitization of real estate. Instead, recent policy decisions (e.g.
Nippon Credit Bank) have been disappointingly backward-looking--partially
reinstating the bank "convoy" system and allowing banks to retire from
international operations (and hence BIS requirements) rather than face
dissolution. As long as the authorities fail to confront the problem head on, we
believe the "Japan premium" will exist, continuing to depress financial markets.
And unfortunately, time is running out. The rise in U.S. interest rates
strengthens the hand of those in the Bank of Japan who favor an interest rate
hike, and the weak yen is reviving trade tensions. On the positive side, after
seven years of recession in asset price-related sectors, we believe the economy
is growing faster than the consensus thinks, return on equity is improving and
corporate margins have come off depressed levels. The need to compete continues
to suppress costs, the market looks oversold and domestic buying appears to be
picking up. We continue to watch Japanese policy closely and remain negative on
the banks.
EUROPE
News on EMU was mixed during the quarter, as slow German growth and Finance
Minister Waigel's intransigence on the 3% deficit target raised fears about an
EMU delay. However, inflation news was better than expected in both Italy and
Spain, business surveys and hard data on German output came in above
expectations, and by early April the dollar had resumed its strengthening. We
believe that the original, limited EMU will begin on time, provided the core
European economies can generate sufficient growth in the interim. The European
cyclical growth case is strongly supported by extremely favorable monetary
conditions and weakening currencies. Currency devaluations will aid European
exports and in effect Europe will transfer some of its deflation and
unemployment to the dollar-bloc countries.
ASIA
Asia, with its now somewhat ill-fated peg to the U.S. dollar, is a recipient of
some of this European and Japanese deflation. Both the need to keep interest
rates high and the competitiveness of the yen are slowing exports and hurting
current account balances. We estimate that Asian growth will slow from the 8%
pace of 1990-1996 to 5-6%, but that the region's higher savings and investment
rates will inevitably pay off. Trade flows both within Asia and externally are
beginning to improve and foreign direct investment remains strong. Inflation
rates are generally falling as the economies cool off and interest rates should
ease once the fears of significantly higher U.S. rates subside. Singapore is
currently trading at undemanding valuations and exports are likely to recover in
the second half of 1997. At some point, we will look to increase our Hong Kong
allocation as it enters a new phase in the business cycle and comes out of its
earnings downturn. Demand in the local economy will be stimulated by easier
monetary and business conditions in China, and we suspect Hong Kong will become
a favored and more accessible destination for People's Republic of China-based
businesses in the year or two following the handover. This stimulus should
support many key sectors of the stock market, including banking and property.
Barton M. Biggs
PORTFOLIO MANAGER
Madhav Dhar
PORTFOLIO MANAGER
Francine J. Bovich
PORTFOLIO MANAGER
Ann D. Thivierge
PORTFOLIO MANAGER
April 1997
3
<PAGE>
INVESTMENTS (UNAUDITED)
- ----------
MARCH 31, 1997
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- --------------- ---------
<C> <S> <C>
COMMON STOCKS (97.8%)
AUSTRALIA (1.9%)
15,900 Amcor Ltd. $ 102
8,600 Australian Gas Light Co. Ltd. 49
23,400 Australian National Industries
Ltd. 26
29,813 Boral Ltd. 89
5,800 Brambles Industries Ltd. 95
45,523 Broken Hill Proprietary Co., Ltd. 607
13,597 Burns, Philip & Co., Ltd. 23
12,276 Coca Cola Amatil Ltd. 117
26,147 Coles Myer Ltd. 123
7,800 CRA Ltd. 115
13,700 Crown Ltd. 23
26,800 CSR Ltd. 103
45,600 Fosters Brewing Corp. 94
14,807 Gio Australia Holdings Ltd. 43
29,532 Goodman Fielder Ltd. 38
8,100 ICI Australia Ltd. 73
6,100 Leighton Holdings Ltd. 26
6,600 Lend Lease Corp., Ltd. 113
40,461 MIM Holdings Ltd. 54
33,040 National Australia Bank Ltd. 418
7,137 Newcrest Mining Ltd. 23
45,416 News Corp., Ltd. 212
40,791 Normandy Mining Ltd. 55
18,965 North Ltd. 62
21,700 Pacific Dunlop Ltd. 58
23,000 Pioneer International Ltd. 79
5,500 Plutonic Resources Ltd. 21
4,703 Renison Goldfields Consolidated
Ltd. 18
14,600 Santos Ltd. 58
5,000 Smith (Howard) Ltd. 41
3,000 Sons of Gwalia Ltd. 15
15,154 Southcorp Holdings Ltd. 51
7,900 TABCORP Holdings Ltd. 36
23,775 WMC Ltd. 150
1,067 Westfield Trust (New) 2
41,300 Westpac Banking Corp. 240
---------
3,452
---------
FRANCE (9.1%)
1,358 Accor S.A. 198
3,010 Air Liquide 477
5,739 Alcatel Alsthom 693
7,977 AXA S.A. 529
8,223 Banque Nationale de Paris 366
1,525 BIC Corp. 232
1,413 Bouygues 141
1,039 Canal Plus 205
1,575 Carrefour S.A. 979
3,650 Casino Guichard-Perrachon 172
<CAPTION>
VALUE
SHARES (000)
- --------------- ---------
<C> <S> <C>
1,036 Cie Bancaire S.A. $ 137
3,989 Cie de Saint Gobain 605
7,213 Cie de Suez, S.A. 374
4,311 Cie Financiere de Paribas S.A.,
Class A 301
4,333 Cie Generale des Eaux 590
12,000 Elf Aquitaine S.A. 1,233
1,525 Eridania Beghin-Say S.A. 240
475 Essilor International 139
3,333 Groupe Danone 530
2,721 Havas S.A. 203
1,430 L'air Liquide 226
2,835 L'OREAL 994
4,000 LVMH Moet Hennessy Louis Vuitton 973
4,692 Lafarge S.A. 326
1,305 Legrand 236
2,539 Lyonnaise des Eaux 260
6,964 Michelin Compagnie Generale des
Establissements, Class B 415
2,750 Pernod Ricard 155
2,550 Peugeot Citroen S.A. 291
905 Pinault-Printemps S.A. 390
820 Promodes 278
14,247 Rhone-Poulenc S.A., Class A 483
105 Sagem 59
435 Saint Louis 111
4,376 Sanofi S.A. 429
6,241 Schneider S.A. 358
58 Simco (New) 6
1,425 Simco S.A. (RFD) 140
175 Societe Eurafrance S.A. 83
3,424 Societe Generale 401
300 Sodexho S.A. 155
5,596 Thomson CSF 189
9,954 Total S.A., Class B 863
13,854 UAP (Compagnie) 366
11,900 Usinor Sacilor 195
---------
16,726
---------
GERMANY (10.2%)
1,900 Adidas AG 214
1,800 AGIV AG 33
900 Allianz AG 1,853
150 AMB Aachener & Muenchener
Beteiligungs AG 129
21,900 BASF AG 839
27,950 Bayer AG 1,176
9,400 Bayerische Hypotheken Bank AG 329
9,800 Bayerische Vereinsbank AG 404
3,250 Beiersdorf AG 170
1,900 Bilfinger & Berger Bau AG 75
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- --------------- ---------
<C> <S> <C>
GERMANY (CONTINUED)
300 Brau Und Brunnen AG $ 24
1,050 CKAG Colonia Konzern AG 99
3,700 Continential AG 83
19,000 Daimler-Benz AG 1,533
350 Degussa AG 149
18,900 Deutsche Bank AG 1,071
80,056 Deutsche Telekom AG 1,848
16,550 Dresdner Bank AG 589
1,800 Heidelberger Zement AG 159
3,450 Hochtief AG 145
350 Karstadt AG 121
2,400 Kloeckner-Humboldt-Deutz AG 22
350 Linde AG 246
14,350 Lufthansa AG 207
500 MAN AG 143
1,350 Mannesmann AG 516
6,000 Merck KGaA 246
3,815 Metro AG 392
309 Muenchener Rueck AG (Registered) 802
650 Preussag AG 176
12,550 RWE AG 561
2,250 SAP AG 383
2,700 Schering AG 273
21,250 Siemens AG 1,144
100 STRABAG AG 10
1,450 Thyssen AG 329
18,600 VEBA AG 1,068
1,050 Viag AG 498
256 Viag AG (RFD) 119
1,150 Volkswagen AG 634
---------
18,812
---------
HONG KONG (1.9%)
8,000 Applied International Holdings 1
18,382 Bank of East Asia Ltd. 62
57,000 Cathay Pacific Airways Ltd. 85
43,000 Cheung Kong Holdings Ltd. 379
36,000 China Light & Power Co., Ltd. 158
31,985 Chinese Estates Holdings 32
12,400 Giordano Holdings Ltd. 8
24,000 Hang Lung Development Co. 44
37,500 Hang Seng Bank Ltd. 387
3,600 Hong Kong Aircraft Engineering
Co., Ltd. 11
54,400 Hong Kong & China Gas Co., Ltd. 102
25,082 Hong Kong & Shanghai Hotels Ltd. 40
211,468 Hong Kong Telecommunications Ltd. 362
84,198 Hopewell Holdings Ltd. 45
66,000 Hutchison Whampoa Ltd. 496
21,000 Hysan Development Co., Ltd. 63
8,000 Johnson Electric Holdings Ltd. 20
11,000 Miramar Hotel & Investment Ltd. 20
30,263 New World Development Co., Ltd. 163
27,000 Oriental Press Group Ltd. 11
<CAPTION>
VALUE
SHARES (000)
- --------------- ---------
<C> <S> <C>
7,700 Peregrine Investment Holdings Ltd. $ 12
31,240 Shangri-La Asia Ltd. 36
32,000 Shun Tak Holdings Ltd. 21
36,000 South China Morning Post Holdings
Ltd. 31
20,300 Stelux Holdings International Ltd. 4
44,000 Sun Hung Kai Properties Ltd. 466
30,500 Swire Pacific Ltd., Class A 240
8,000 Television Broadcasts Ltd. 33
42,000 Wharf Holdings Ltd. 161
2,960 Wing Lung Bank Ltd. 20
7,000 Winsor Industrial Corp., Ltd. 2
---------
3,515
---------
INDONESIA (0.9%)
30,500 Astra International (Foreign) 99
7,000 Bank Bali (Foreign) 17
31,000 Bank Dagang Nasional (Foreign) 31
115,500 Bank International Indonesia
(Foreign) 88
53,000 Barito Pacific Timber (Foreign) 46
28,500 Ciputra Development (Foreign) 26
60,000 Gadjah Tunggal (Foreign) 27
68,000 Gudang Garam (Foreign) 297
94,500 Indah Kiat Pulp & Paper Corp.
(Foreign) 70
91,500 Indocement Tunggal Prakarsa
(Foreign) 130
23,500 Indorama Synthetics (Foreign) 19
36,500 Jakarta International Hotel &
Development (Foreign) 32
12,500 Kabel Indonesia (Foreign) 5
16,500 Kalbe Farma (Foreign) 19
31,500 Lippo Bank 31
17,500 Matahari Putra Prima (Foreign) 26
30,000 Mayora Indah 11
5,000 Modern Photo Film Co. (Foreign) 17
50,000 Mulia Industrindo (Foreign) 34
83,500 Polysindo Eka Perkasa (Foreign) 45
37,500 Putra Surya Perkasa (Foreign) 37
5,500 Semen Cibinong (Foreign) 17
350,500 Telekomunikasi Indonesia (Foreign) 536
2,500 Unilever Indonesia 50
---------
1,710
---------
ITALY (4.0%)
38,512 Assicurazioni Generali S.p.A 674
56,700 Banca Commerciale Italiana 114
22,300 Banco Ambrosiano Veneto S.p.A. 51
9,600 Benetton Group S.p.A. 119
6,500 Cartiere Burgo 34
111,000 Credito Italiano 158
30,000 Edison S.p.A. 160
350,000 ENI S.p.A. 1,779
4,800 Falck Acciaierie & Ferriere
Lombarde 23
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- --------------- ---------
<C> <S> <C>
ITALY (CONTINUED)
139,500 Fiat S.p.A. $ 443
34,800 Fiat S.p.A. Di Risp (NCS) 63
11,500 Impregilo S.p.A. 9
38,000 Istituto Bancario San Paolo 256
27,450 Istituto Mobiliare Italiano S.p.A. 239
171,900 Istituto Nazionale delle
Assicurazioni 231
6,300 Italcementi 16
11,850 Italcementi Di Risp 67
27,800 Italgas 93
18,900 Magneti Marelli S.p.A. 26
53,500 Mediaset S.p.A. 216
20,000 Mediobanca S.p.A. 126
185,574 Montedison S.p.A. 125
41,900 Montedison S.p.A. Di Risp (NCS) 27
153,250 Olivetti S.p.A. 55
61,920 Parmalat Finanziaria S.p.A. 86
78,000 Pirelli S.p.A. 170
14,265 R.A.S. S.p.A. 128
11,000 Rinascente 58
2,200 Saffa S.p.A. 5
5,900 SAI 48
5,900 Sasib S.p.A. 17
12,000 Sirti S.p.A. 74
28,000 Snia BPD S.p.A. 29
293,900 Telecom Italia Mobile S.p.A. 846
285,500 Telecom Italia S.p.A. 714
70,500 Telecom Italia S.p.A. Di Risp
(NCS) 150
---------
7,429
---------
JAPAN (30.1%)
4,290 Advantest Corp. 217
60,000 Ajinomoto Co. 479
30,000 Aoki Corp. 39
4,000 Aoyama Trading Co. 93
41,000 Asahi Bank Ltd. 258
30,000 Asahi Breweries Ltd. 296
91,000 Asahi Chemical Industry Co., Ltd. 474
86,000 Asahi Glass Co., Ltd. 772
30,000 Bridgestone Co. 563
37,000 Canon, Inc. 793
18,000 Casio Computer Co. 126
20,000 Chiba Bank 115
12,000 Chiyoda Corp. 40
30,000 Chugai Pharmaceuticals Co. 235
60,000 Dai Nippon Printing Co., Ltd. 1,005
41,000 Daiei, Inc. 226
30,000 Daikin Industries Ltd. 224
30,000 Daiwa House Industry 349
60,000 Daiwa Securities Co., Ltd. 433
37,000 Denso Corp. 727
178 East Japan Railway Co. 727
20,000 Ebara Corp. 241
12,900 Fanuc 396
48,000 Fuji Bank 555
<CAPTION>
VALUE
SHARES (000)
- --------------- ---------
<C> <S> <C>
23,000 Fuji Photo Film Ltd. $ 757
78,000 Fujitsu Ltd. 795
49,000 Furukawa Electric Co. 217
41,000 Hankyu Corp. 191
30,000 Hazama Corp. 52
150,000 Hitachi Ltd. 1,335
47,000 Honda Motor Co. 1,403
40,000 Industrial Bank of Japan 408
19,000 Ito-Yokado Co., Ltd. 845
121,000 Japan Airlines Co. 495
76,000 Japan Energy Corp. 183
14,000 Joyo Bank 72
24,000 Jusco Co., Ltd. 660
60,000 Kajima Corp. 280
40,200 Kansai Electric Power Co. 706
55,000 Kao Corp. 601
155,000 Kawasaki Steel Corp. 451
72,000 Kinki Nippon Railway 429
60,000 Kirin Brewery Co., Ltd. 495
60,000 Komatsu Ltd. 439
91,000 Kubota Corp. 379
60,000 Kumagai Gumi Co. 90
9,000 Kyocera Corp. 511
30,000 Kyowa Hakko Kogyo 180
91,000 Marubeni Corp. 353
19,000 Marui Co., Ltd. 275
91,000 Matsushita Electric Industries
Ltd. 1,421
91,000 Mitsubishi Chemical Corp. 276
84,000 Mitsubishi Corp. 747
106,000 Mitsubishi Electric Corp. 596
65,000 Mitsubishi Estate Co., Ltd. 694
165,000 Mitsubishi Heavy Industries Ltd. 1,074
61,000 Mitsubishi Materials Corp. 213
23,000 Mitsubishi Trust & Banking Co. 229
91,000 Mitsui & Co. 668
60,000 Mitsui Engineering & Shipbuilding 102
49,000 Mitsui Fudosan Co. 507
34,000 Mitsukoshi Ltd. 185
11,000 Murata Manufacturing Co., Ltd. 395
72,000 NEC Corp. 815
30,000 NGK Insulators 257
176,000 NKK Corp. 370
54,000 Nippon Express Co., Ltd. 360
30,000 Nippon Fire & Marine Insurance Co. 141
29,000 Nippon Light Metal Co. 90
30,000 Nippon Meat Packers, Inc. 311
91,000 Nippon Oil Co. 368
335,000 Nippon Steel Co. 921
91,000 Nippon Yusen Kabushiki Kaisha 322
115,000 Nissan Motor Co. 693
77,000 Nomura Securities Co., Ltd. 853
35,000 Odakyu Electric Railway Corp. 179
60,000 Oji Paper Co., Ltd. (New) 302
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- --------------- ---------
<C> <S> <C>
JAPAN (CONTINUED)
134,000 Osaka Gas Co. $ 324
30,000 Penta-Ocean Construction 97
10,000 Pioneer Electric Corp. 163
3,000 Rohm Co. 221
63,000 Sakura Bank 353
30,000 Sankyo Co., Ltd. 827
91,000 Sanyo Electric Co., Ltd. 344
7,000 Secom Co., Ltd. 393
5,900 Sega Enterprises 148
30,000 Sekisui House Ltd. 294
60,000 Sharp Corp. 713
9,000 Shimano, Inc. 146
43,000 Shimizu Corp. 238
13,000 Shin-Etsu Chemical Co. 247
13,000 Shiseido Co., Ltd. 168
17,000 Shizuoka Bank 149
60,000 Showa Denko 127
13,500 Sony Corp. 945
50,000 Sumitomo Bank 594
121,000 Sumitomo Chemical Co. 473
60,000 Sumitomo Corp. 427
40,000 Sumitomo Electric 544
12,000 Sumitomo Forestry Co., Ltd. 131
29,000 Sumitomo Metal & Mining Co. 175
211,000 Sumitomo Metal Industries 478
30,000 Sumitomo Osaka Cement Co., Ltd. 76
60,000 Taisei Corp., Ltd. 233
47,000 Takeda Chemical 985
60,000 Teijin Ltd. 230
76,000 The Bank of Tokyo-Mitsubushi 1,186
42,000 Tobu Railway Co. 186
21,600 Tohoku Electric Power 353
39,000 Tokai Bank 304
91,000 Tokio Marine & Fire Insurance Co. 927
14,000 Tokyo Dome Corp. 177
56,000 Tokyo Electric Power Co. 1,019
4,400 Tokyo Electron Ltd. 146
121,000 Tokyo Gas Co. 303
54,000 Tokyu Corp. 254
41,000 Toppan Printing Co., Ltd. 478
91,000 Toray Industries, Inc. 529
33,000 Toto Ltd. 294
60,000 Toyoba Co. 141
140,000 Toyota Motor Corp. 3,544
60,000 Ube Industries Ltd. 151
60,000 Yamaichi Securities Co. 187
25,000 Yasuda Trust & Banking Co. 70
---------
55,566
---------
KOREA (0.8%)
5,770 Cho Hung Bank Co., Ltd. (Foreign) 30
5,170 Commercial Bank of Korea 25
4,000 Daewoo Corp. 26
12,520 Daewoo Heavy Industries 63
<CAPTION>
VALUE
SHARES (000)
- --------------- ---------
<C> <S> <C>
1,730 Daewoo Securities Co. $ 17
1,270 Dong-Ah Construction Industrial
Co. 26
5,880 Hanil Bank 33
34 Hyundai Engineering & Construction
Co. RFD 1
1,740 Hyundai Engineering & Construction
Co. (Foreign) 36
1,420 Hyundai Motor Co., Ltd. 42
17,710 Korea Electric Power 514
5,310 Korea First Bank 22
3 Korea Mobile Telecommunications
Corp. RFD (Foreign) 3
130 Korea Mobile Telecommunications
Corp. 122
2,730 LG Chemical Ltd. 33
3,310 Pohang Iron & Steel Co., Ltd. 212
2,080 Samsung Corp. 23
870 Samsung Display Devices Co. 38
2,460 Samsung Electronics 194
340 Tong Yang Cement Co. 6
2,607 Yukong Ltd. 47
---------
1,513
---------
NETHERLANDS (3.7%)
7,774 ABN Amro Holdings N.V. 535
1,850 Akzo Nobel N.V. 266
15,600 Elsevier N.V. 254
950 Heineken N.V. 166
17,149 ING Groep N.V. 676
2,156 KLM Royal Dutch Airlines N.V. 64
3,166 Koninklijke Ahold N.V. 221
750 Koninklijke Hoogovens N.V. 37
2,500 Koninklijke KNP BT N.V. 53
22,101 Koninklijke PTT Nederland N.V. 819
550 Nedlloyd Groep N.V. 14
7,900 Philips Electronics N.V. 369
12,700 Royal Dutch Petroleum Co. 2,307
721 Stork N.V. 31
3,800 Unilever N.V. 742
1,668 Wolters Kluwer N.V. 201
---------
6,755
---------
SINGAPORE (2.4%)
24,000 Amcol Holdings Ltd. --
41,000 City Developments Ltd. 363
10,000 Cycle & Carriage Ltd. 101
49,000 DBS Land Ltd. 168
34,000 Development Bank of Singapore Ltd.
(Foreign) 395
12,000 First Capital Corp. Ltd. 33
15,800 Fraser & Neave Ltd. 129
20,000 Hai Sun Hup Group Ltd. 14
24,000 Hotel Properties Ltd. 41
10,000 Inchcape Bhd 35
7,000 Jurong Shipyard Ltd. 32
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- --------------- ---------
<C> <S> <C>
SINGAPORE (CONTINUED)
27,000 Keppel Corp., Ltd. $ 170
21,000 Natsteel Ltd. 51
42,000 Neptune Orient Lines Ltd.
(Foreign) 34
50,300 Oversea-Chinese Banking Corp.
(Foreign) 599
7,000 Overseas Union Enterprise Ltd. 33
16,000 Parkway Holdings Ltd. 61
5,000 Robinson & Co. Ltd. 20
8,600 Shangri-La Hotel Ltd. 26
65,000 Singapore Airlines Ltd. (Foreign) 522
17,800 Singapore Press Holdings (Foreign) 324
38,000 Singapore Technologies Industrial
Corp. 93
314,000 Singapore Telecommunications Ltd. 652
20,000 Straits Trading Co., Ltd. 45
75,000 United Industrial Corp., Ltd. 61
46,000 United Overseas Bank Ltd.
(Foreign) 471
---------
4,473
---------
SPAIN (3.4%)
335 Acerinox S.A. 47
59 Aguas de Barcelona 2
2,030 Aguas de Barcelona (New) 76
6,100 Argentaria S.A. 266
10,169 Autopistas Concesionaria Espanola
S.A. 117
10,400 Banco Bilbao Vizcaya S.A.
(Registered) 632
8,000 Banco Central Hispano Americano
S.A. 212
10,000 Banco Santander S.A. 690
500 Corporacion Financiera Alba 49
1,700 Corporacion Mapfre 88
145 Corporacion Mapfre (New) 8
1,800 Dragados y Construccion S.A. 29
1,550 Ebro Agricolas S.A. 29
650 ENCE S.A. 9
15,800 Endesa S.A. 1,021
5,400 Ercros S.A. 4
1,100 FASA Renault S.A. 20
450 Fomento Construction y Contractas
S.A. 39
1,750 Gas Natural SDG S.A. 383
45,900 Iberdrola S.A. 507
700 Metro Vacesa 25
200 Portland Valderrivas S.A. 13
15,100 Repsol S.A. 631
1,200 Tabacalera S.A., Class A 60
44,700 Telefonica de Espana S.A. 1,081
9,400 Union Electrica Fenosa S.A. 77
3,250 Uralita S.A. 26
1,767 Vallehermoso S.A. 41
750 Viscofan Envolturas Celulosicas
S.A. 13
<CAPTION>
VALUE
SHARES (000)
- --------------- ---------
<C> <S> <C>
484 Zardoya Otis S.A. $ 53
---------
6,248
---------
SWEDEN (3.8%)
3,950 ABB AB, Class A 447
2,300 AGA AB, Class A 35
6,500 AGA AB, Class B 98
27,800 Astra AB, Class A 1,346
9,150 Atlas Copco AB, Class A 231
2,600 Autoliv AB 112
2,600 Diligentia AB 30
3,600 Electrolux AB, Series B 229
45,400 Ericsson LM, Class B 1,604
1,800 Esselte AB, Class A 43
2,000 Hennes & Mauritz AB, Class B 268
400 Scancem AB, Class A 16
4,400 Securitas AB, Class B 126
5,600 Skandia Forsakrings AB 177
26,000 Skandinaviska Enskilda Banken,
Class A 288
6,100 Skanska AB, Class B 278
6,000 S.K.F. AB, Class B 158
15,050 Stora Kopparbergs Bergslags
Aktiebolag, Class A 214
9,200 Svenska Cellulosa AB, Class B 207
10,000 Svenska Handelsbanken, Class A 305
23,200 Swedish Match AB 83
6,600 Trelleborg AB, Class B 117
19,250 Volvo AB, Class B 516
---------
6,928
---------
SWITZERLAND (4.2%)
215 ABB AG 258
415 Adecco S.A. 135
135 Alusuisse-Lonza Holdings Ltd.
(Registered) 114
4,250 CS Holding AG (Registered) 510
15 Georg Fischer AG (Bearer) 18
160 Holderbank Financiere Glarus AG
(Bearer) 123
885 Nestle S.A. (Registered) 1,036
1,445 Novartis AG (Registered) 1,793
36 Roche Holding AG (Bearer) 443
156 Roche Holding AG (Registered) 1,349
40 SGS Surveillance 82
120 SMH AG (Bearer) 67
90 Sulzer AG (Registered) 59
1,710 Swiss Bank Corp. (Registered) 365
325 Swiss Reinsurance (Registered) 346
80 SwissAir (Registered) 71
470 Union Bank of Switzerland (Bearer) 423
550 Union Bank of Switzerland
(Registered) 99
145 Valora Holding 32
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- --------------- ---------
<C> <S> <C>
SWITZERLAND (CONTINUED)
1,060 Zuerich Versicherung (Registered) $ 334
---------
7,657
---------
THAILAND (2.2%)
21,500 Advanced Information Service PCL
(Foreign) 184
3,200 Ban Pu Coal Co. Ltd. (Foreign) 48
32,400 Bangchak Petroleum PCL (Foreign) 22
41,400 Bangkok Bank PCL (Foreign) 402
126,809 Bangkok Metropolitan Bank PCL
(Foreign) 39
42,275 Bank of Ayudhya PCL (Foreign) 106
11,800 CMIC Finance & Securities PCL
(Foreign) 7
3,600 CP Feedmill PCL (Foreign) 10
2,900 Castle Peak Holdings PCL 14
41,700 Dhana Siam Finance & Securities
PCL (Foreign) 59
27,400 General Finance & Securities PCL
(Foreign) 18
32,100 Industrial Finance Corp. of
Thailand (Foreign) 85
3,300 International Broadcasting Corp.
Ltd. 3
3,700 International Engineering Co.,
Ltd. 10
22,900 Italian Thai Development PCL
(Foreign) 84
20,700 Jasmine International PCL
(Foreign) 29
127,500 Krung Thai Bank PCL (Foreign) 177
10,000 Land & House Co., Ltd. (Foreign) 51
15,600 NTS Steel Groups PCL 3
34,851 National Finance & Securities PCL
(Foreign) 47
18,900 National Petrochemical PCL 19
19,200 National Petrochemical PCL
(Foreign) 20
19,800 One Holding PCL (Foreign) 2
12,700 Padaeng Industry PCL 5
36,700 Phatra Thanakit PCL (Foreign) 66
9,000 Phoenix Pulp & Paper PCL 12
44,600 PTT Exploration & Production PCL
(Foreign) 663
34,500 Quality House PCL (Foreign) 19
1,700 Saha-Union PCL 1
46,900 Sahaviriya Steel Industry PCL
(Foreign) 16
9,000 Shinawatra Computer Co. PCL 72
12,700 Shinawatra Computer Co. PCL
(Foreign) 107
21,700 Shinawatra Satellite PCL (Foreign) 26
10,400 Siam Cement PCL (Foreign) 271
37,300 Siam City Bank PCL (Foreign) 31
7,300 Siam City Cement PCL 43
3,500 Siam City Cement PCL (Foreign) 21
20,100 Siam Commercial Bank PCL (Foreign) 118
<CAPTION>
VALUE
SHARES (000)
- --------------- ---------
<C> <S> <C>
20,000 TPI Polene PCL $ 36
204,100 TelecomAsia Corp. PCL (Foreign) 348
41,600 Thai Airways International PCL
(Foreign) 71
33,100 Thai Farmers Bank PCL (Foreign) 216
26,500 Thai Military Bank PCL (Foreign) 44
4,600 Thai Plastic & Chemical PCL 16
58,800 Thai Telephone &
Telecommunications Co. (Foreign) 49
8,300 Tipco Asphalt PCL 35
14,800 United Communications Industry 96
21,500 United Communications Industry PCL
(Foreign) 139
15,900 Wattachak Co., Ltd. 7
---------
3,967
---------
UNITED KINGDOM (19.2%)
48,300 Abbey National plc 592
25,600 Arjo Wiggins Appleton plc 84
19,000 Associated British Foods plc 171
60,435 Barclays plc 1,015
40,200 Bass plc 539
111,935 BAT Industries plc 955
154,000 BG plc 412
25,554 BICC plc 113
47,110 Blue Circle Industries plc 322
23,170 BOC Group plc 364
38,100 Boots Co. plc 423
23,500 BPB Industries plc 129
18,175 British Aerospace plc 408
40,625 British Airways plc 438
199,505 British Petroleum Co. plc 2,319
57,900 British Sky Broadcasting plc 592
71,800 British Steel plc 192
206,200 British Telecommunications plc 1,511
148,005 BTR plc 649
10,726 Burmah Castrol plc 180
88,972 Cable & Wireless plc 722
39,980 Cadbury Schweppes plc 355
29,600 Caradon plc 122
154,000 Centrica plc 161
32,343 Coats Viyella plc 72
23,696 Commercial Union plc 262
17,200 Courtaulds plc 102
5,116 De La Rue Co. plc 46
17,794 EMI Group plc 326
18,272 Energy Group plc 153
20,215 GKN plc 333
101,600 General Electric plc 624
113,800 Glaxo Wellcome plc 2,090
25,812 Granada Group plc 390
75,472 Grand Metropolitan plc 610
42,500 Great Universal Stores plc 467
29,763 Guardian Royal Exchange plc 138
78,100 Guinness plc 661
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- --------------- ---------
<C> <S> <C>
UNITED KINGDOM (CONTINUED)
78,988 HSBC Holdings plc $ 1,867
22,840 Hanson plc 107
45,800 Harrisons & Crosfield plc 97
30,300 Imperial Chemical Industries plc 347
42,719 Ladbroke Group plc 158
28,300 Land Securities plc 360
29,100 Lasmo plc 114
44,000 Legal & General Group plc 282
193,000 Lloyds TSB Group plc 1,586
29,996 Lonrho plc 72
21,500 MEPC plc 169
122,200 Marks and Spencer plc 980
50,800 National Power plc 407
27,800 Peninsular & Oriental Steam
Navigation Co. plc 283
54,320 Pilkington plc 107
70,762 Prudential Corp. plc 660
12,100 RMC Group plc 194
41,999 RTZ Corp. plc 666
30,100 Rank Group plc 209
21,216 Redland plc 126
25,300 Reed International plc 466
60,200 Reuters Holdings plc 613
20,200 Rexam plc 116
49,928 Royal & Sun Alliance Insurance
Group plc 367
19,170 Royal Bank of Scotland Group plc 169
30,627 Safeway plc 180
55,423 Sainsbury (J) plc 309
7,600 Schroders plc 198
33,830 Scottish Power plc 197
70,000 Sears plc 84
20,000 Sedgwick Group plc 39
16,100 Slough Estates plc 72
87,598 Smithkline Beecham plc 1,301
18,738 Southern Electric plc 120
51,007 Tarmac plc 82
26,916 Taylor Woodrow plc 82
68,120 Tesco plc 392
25,852 Thames Water plc 282
18,450 Thorn plc 51
18,817 TI Group plc 172
24,000 Unilever plc 638
24,586 United Utilities plc 254
115,056 Vodafone Group plc 527
31,800 Zeneca Group plc 922
---------
35,466
---------
<CAPTION>
VALUE
SHARES (000)
- --------------- ---------
<C> <S> <C>
TOTAL COMMON STOCKS (Cost $178,251) $ 180,217
---------
PREFERRED STOCKS (0.4%)
AUSTRALIA (0.1%)
35,071 News Corp., Ltd. 137
---------
GERMANY (0.3%)
8,550 RWE AG 309
1,550 SAP AG 265
---------
574
---------
ITALY (0.0%)
44,000 Fiat S.p.A.. 74
---------
TOTAL PREFERRED STOCKS (Cost $740) 785
---------
<CAPTION>
NO. OF
RIGHTS
- ---------------
<C> <S> <C>
RIGHTS (0.0%)
AUSTRALIA (0.0%)
2,283 Crown Ltd., expiring 4/21/97 1
---------
TOTAL RIGHTS (Cost $0) 1
---------
<CAPTION>
NO. OF
WARRANTS
- ---------------
<C> <S> <C>
WARRANTS (0.0%)
FRANCE (0.0%)
620 Casino Guichard-Perrachon,
expiring 12/31/99 8
---------
HONG KONG (0.0%)
4,400 Applied International Holdings,
expiring 12/30/99 --
13,700 Hong Kong & China Gas Co., Ltd.,
expiring 9/30/97 6
8,582 Hong Kong & Shanghai Hotels,
expiring 10/12/98 2
2,300 Hysan Development Co., Ltd.,
expiring 4/30/98 1
11,500 Oriental Press Group Ltd.,
expiring 10/02/98 1
1,750 Peregrine Investment Holdings
Ltd., expiring 5/15/98 --
12,800 Stelux Holdings International
Ltd., expiring 2/28/98 1
---------
11
---------
ITALY (0.0%)
2,950 R.A.S. S.p.A, expiring 12/31/97 8
1,550 R.A.S. S.p.A. Saving Shares,
expiring 12/31/97 3
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
NO. OF VALUE
WARRANTS (000)
- --------------- ---------
<C> <S> <C>
ITALY (CONTINUED)
1,050 Rinascente S.p.A., expiring
12/31/99 $ --
---------
11
---------
SINGAPORE (0.0%)
11,750 Keppel Land Ltd., expiring
12/12/00 12
---------
SWITZERLAND (0.0%)
112 Roche Holding, expiring 5/05/98 7
---------
THAILAND (0.0%)
6,349 National Finance & Securities PCL,
expiring 11/15/99 3
1,980 One Holding PCL, expiring 10/14/01 --
---------
3
---------
TOTAL WARRANTS (Cost $10) 52
---------
<CAPTION>
NO. OF
UNITS
- ---------------
<C> <S> <C>
UNITS (0.1%)
AUSTRALIA (0.1%)
29,821 General Property Trust 56
29,948 Westfield Trust 56
---------
TOTAL UNITS (Cost $105) 112
---------
<CAPTION>
FACE
AMOUNT
- ---------------
<C> <S> <C>
CONVERTIBLE DEBENTURE (0.0%)
FRANCE (0.0%)
FRF 60 Sanofi 4.00%, 1/01/00 (Cost $38) 64
---------
TOTAL CONVERTIBLE DEBENTURE (Cost $38) 64
---------
FIXED INCOME SECURITY (0.0%)
FRANCE (0.0%)
62 Casino Guichard-Perrachon, Series
XW, 4.50%, 7/12/01 29
---------
TOTAL FIXED INCOME SECURITY (Cost $27) 29
---------
TOTAL FOREIGN SECURITIES (98.3%) (Cost $179,171) 181,260
---------
SHORT-TERM INVESTMENTS (0.8%)
REPURCHASE AGREEMENT (0.8%)
1,555 Chase Securities, Inc. 6.00%,
dated 3/31/97, due 4/01/97, to be
repurchased at $1,555
collateralized by U.S. Treasury
Bonds, 7.50%, due 11/15/16,
valued at $1,592 (Cost $1,555) 1,555
---------
<CAPTION>
AMOUNT VALUE
(000) (000)
- --------------- ---------
<C> <S> <C>
FOREIGN CURRENCY (0.3%)
AUD 1 Australian Dollar $ 1
ATS 23 Austrian Schilling 2
BEF 15 Belgian Franc --
BRL 17 Brazilian Real 16
GBP 43 British Pound 71
DEM 49 Deutsche Mark 29
FRF 97 French Franc 17
HKD 51 Hong Kong Dollar 7
ITL 7,252 Italian Lira 4
JPY 24 Japanese Yen --
MYR 22 Malaysian Ringgit 9
NLG 81 Netherlands Guilder 43
SGD 4 Singapore Dollar 3
KRW 4,740 South Korean Won 5
ESP 1,622 Spanish Peseta 12
SEK 1,178 Swedish Krona 156
CHF 150 Swiss Franc 104
THB 18 Thai Baht 1
---------
TOTAL FOREIGN CURRENCY (Cost $334) 480
---------
TOTAL INVESTMENTS (99.4%) (Cost $181,060) 183,295
---------
OTHER ASSETS AND LIABILITIES (0.6%)
Other Assets 116,299
Liabilities (115,248)
---------
1,051
---------
NET ASSETS (100%) $ 184,346
---------
---------
CLASS A:
NET ASSETS $184,320
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 16,064,759 outstanding $0.001 par
value shares (authorized 500,000,000 shares) $11.47
CLASS B:
NET ASSETS $26
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 2,243 outstanding $0.001 par value
shares (authorized 500,000,000 shares) $11.46
</TABLE>
- ----------------------------------
NCS -- Non Convertible Shares
PCL -- Public Company Limited
RFD -- Ranked for Dividend
11
