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Previous: MORGAN STANLEY INSTITUTIONAL FUND INC, N-30B-2, 1998-06-04 |
Next: MORGAN STANLEY INSTITUTIONAL FUND INC, N-30B-2, 1998-06-04 |
<PAGE>
- --------------------------------------------------------------------------------
DIRECTORS OFFICERS
Barton M. Biggs Stefanie V. Chang
CHAIRMAN OF THE BOARD VICE PRESIDENT
Chairman and Director, Morgan Stanley Harold J. Schaaff, Jr.
Asset Management Inc. and Morgan Stanley VICE PRESIDENT
Asset Management Limited; Managing Joseph P. Stadler
Director, Morgan Stanley & VICE PRESIDENT
Co. Incorporated Valerie Y. Lewis
Michael F. Klein SECRETARY
DIRECTOR AND PRESIDENT Karl O. Hartmann
Principal, Morgan Stanley Asset Management Inc. and ASSISTANT SECRETARY
Morgan Stanley & Co. Incorporated Joanna M. Haigney
John D. Barrett II TREASURER
Chairman and Director, Rene J. Feuerman
Barrett Associates, Inc. ASSISTANT TREASURER
Gerard E. Jones
Partner, Richards & O'Neil LLP
Andrew McNally IV
River Road Partners
Samuel T. Reeves
Chairman of the Board and Chief
Executive Officer,
Pinacle L.L.C.
Fergus Reid
Chairman and Chief Executive Officer, LumeLite
Plastics Corporation
Frederick O. Robertshaw
Of Counsel, Copple, Chamberlin &
Boehm, P.C.
- --------------------------------------------------------------------------------
INVESTMENT ADVISER AND ADMINISTRATOR
Morgan Stanley Asset Management Inc.
1221 Avenue of the Americas
New York, New York 10020
- --------------------------------------------------------------------------------
DISTRIBUTOR
Morgan Stanley & Co. Incorporated
1221 Avenue of the Americas
New York, New York 10020
- --------------------------------------------------------------------------------
CUSTODIANS
The Chase Manhattan Bank
3 Chase MetroTech Center
Brooklyn, New York 11245
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, 1998
<PAGE>
LETTER TO SHAREHOLDERS
- -------
The Active Country Allocation Portfolio invests in international equity markets,
with emphasis placed upon countries, rather that 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 potential and minimize the risk associated with global
investing.
For the three months ended March 31, 1998, the Portfolio had a total return of
15.69% for Class A shares and 15.65% for Class B shares compared to 14.71% for
the Morgan Stanley Capital International (MSCI) EAFE Index (the "Index"). For
the one year ended March 31, 1998,
PERFORMANCE COMPARED TO MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) EAFE
INDEX(1)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOTAL RETURNS(2)
----------------------------------------------
AVERAGE
AVERAGE ANNUAL
ONE ANNUAL SINCE
YTD YEAR FIVE YEARS INCEPTION
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
PORTFOLIO--CLASS A........... 15.69% 25.32% 12.69% 10.91%
PORTFOLIO--CLASS B........... 15.65 25.09 N/A 15.01
INDEX--CLASS A............... 14.71 18.61 11.93 10.04
INDEX--CLASS B............... 14.71 18.61 N/A 9.96
</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.
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.
the Portfolio had a total return of 25.32% for the Class A shares and 25.09% for
the Class B shares compared to 18.61% for the Index. For the five-year period
ended March 31, 1998, the average annual total return for Class A was 12.69%
compared to 11.93% for the Index. From inception on January 17, 1992 to March
31, 1998, the average annual total return for Class A was 10.91% compared to
10.04% for the Index. From inception on January 2, 1996 to March 31, 1998, the
average annual total return for Class B was 15.01% compared to 9.96% for the
Index.
First quarter 1998 performance returns for the regional indices are set forth
below:
<TABLE>
<CAPTION>
MSCI INDICES 1Q98 1Q98
- ------------------------------------- ----------- -----------
(USD) (LOCAL)
<S> <C> <C>
EUROPE............................... 20.3% 21.7%
JAPAN................................ 2.0 4.7
PACIFIC EX-JAPAN..................... 7.0 4.6
EMERGING MARKETS..................... 7.2 7.9
USA.................................. 13.9 --
</TABLE>
The first round effects of the Asian crisis, (i.e. plentiful liquidity and
falling long-term interest rates) continued to support developed financial
markets during the first quarter. Especially equities, but also bonds, powered
ahead in Europe and the U.S., while even Japan and Asia rallied briefly, but
sharply, in January (Japan +20%, Malaysia +50%). We were able to capture a
significant portion of the Asian rally by tactical moves into and out of Japan
and Malaysia during the quarter. Proceeds from the Asian sales were mostly
reinvested into Europe. Cash during the quarter ranged between 3% and 7%.
We remain overweight European equities, despite their strong recent performance
and high valuation levels. We believe they should go up faster as long as the
bubble lasts, and fall less when the correction, bear market or whatever finally
befalls us. We like Europe for three principal reasons.
2
<PAGE>
First, Europe is much earlier in both the business and investment cycle than the
U.S. Unlike the U.S., European economic growth (ex the U.K.) is on an upswing
(1998 GDP +3.0% vs. +2.0% in 1997) and double digit earnings expectations look
very reasonable. Corporate balance sheet restructuring, cost cutting, options
compensation packages, non-recurring chargeoffs, share buybacks, and other
creative accounting tactics all lie ahead for European management. U.S.
companies on the other hand, have already played their "Full Monty" as it were
and are facing earnings downgrades.
Secondly, Europe has further to go in what might be called "the equification
process." Equity ratios of institutional investors are still very low (in many
cases below 20%), and the public is just getting a whiff of the heady opium of
instant wealth creation a la mutual funds. European mutual fund investments
continue to set record levels (U.S. $29 billion in February versus the twelve
month average of U.S. $14 billion). Continued government privatization and
corporate IPOs add to market breadth, while greater accounting transparency and
pan European investing further reduce risk premiums.
Third, we believe the European Monetary Union ("EMU") should enhance Europe's
trend line growth rate by perhaps 0.5% of real GDP a year, or from 2% to 2.5%
per annum. There could even be a wave of euphoria as the great day approaches.
Will EMU work in the long run? God willing and if the creek don't rise because,
after all, a single currency is a logical next step for the European Union and
the rationalization of its economies. We think in the case of EMU, two plus two
really does make five. The issue, however, is how much of this has already been
discounted.
We are approximately 120% of the benchmark weight in Europe, with close to
double index weights in Spain, Italy, and Portugal (+38%, +36%, and +38%,
respectively). We also have two small sector tilts in Europe of about 2% each.
We are tilted towards energy stocks because, in an expensive world, they are
relatively cheap and we believe the price of oil has bottomed. We are tilted
toward banks because we expect the merger mania that is sweeping the world to
continue and accelerate in Europe.
In stark contrast, we are quite negative about Japan and the other Asian
markets. We made an extended trip to Tokyo, China, and Hong Kong just a few
weeks ago searching, to no avail, for reasons to be bullish.
Japan continues to wallow in inertia, stagnation, and deflation. While
admittedly massive, we don't believe the Y16.7 trillion stimulus package can
offset the galeforce winds of plummeting consumer and business confidence and
sharply lower profits. The most discouraging aspect of our visit was the
resistance to change we found at the Ministry of Finance, the Bank of Japan, and
in the political establishment. They still think the present crisis is just
another passing storm that, although dangerous, is not life-threatening to their
system. It seems as though only a more severe recession, a much weaker yen, and
new lows in the stock market will convince the mandarins to reform. We are half
the index weight in Japan and about 50% hedged back into the dollar.
The rest of Asia looks grim as well. Around the Pacific, the economies are not
in recessions, they are in depressions. Talk that the worst is over and that the
economies are bottoming is not borne out by the fundamental data. Imports are
dropping, exports are barely gaining, construction is collapsing, and the real
economies are declining at a frightening rate. The weakening yen and sharp fall
in the Japanese economy compound the problem. Not only are Japanese imports from
Asia falling precipitously, but Japan's net lending to Asia (FDI, equity
investments, and bank lending) is expected to halve this year.
Only China and Hong Kong seem somewhat resistant to the storm. Chinese
authorities show every indication of learning from the current Asian crisis.
They have announced a massive spending plan to stimulate domestic demand and a
three-year plan to reform the Chinese financial system, state-owned enterprises,
and government bureaucracy. Though we doubt they will accomplish their 8% 1998
GDP target and three-year reform timetable, their openness and incisiveness
stand in sharp contrast to Japan (and Malaysia.) The Hong Kong market, though
hurt by heavy exposure to services and an overbuilt property sector, is well
placed to benefit
3
<PAGE>
as it becomes more Chinese and as China converts to capitalism. We are slightly
overweight Hong Kong, as our sole Pacific holding outside of Japan.
We hold about three percent in cash at this writing. Although we like the
European markets, they aren't cheap. In fact, on strict historical valuation
ratios they are at all-time highs and are almost as extended as the U.S. Europe
has luxuriated in a massive interest rate driven bull market which in the last
39 months has seen stocks rise 120% as ten-year bond yields fell 325 basis
points. Relative to interest rate levels, the bourses are neutral to expensive
on such measures as forward yield gap and trend earnings.
In conclusion, we are fully invested but alert for any change in the euphoric
investment environment that continues to power this bubbly bull market.
Ann D. Thivierge
PORTFOLIO MANAGER
Barton M. Biggs
PORTFOLIO MANAGER
April 1998
4
<PAGE>
INVESTMENTS (UNAUDITED)
- ----------
MARCH 31, 1998
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- --------------- ---------
<C> <S> <C>
COMMON STOCKS (73.8%)
AUSTRALIA (1.0%)
8,200 Amcor Ltd. $ 35
3,900 Australian Gas Light Co., Ltd. 32
11,200 Australian National Industries
Ltd. 8
15,129 Boral Ltd. 38
2,800 Brambles Industries Ltd. 58
57,483 Broken Hill Proprietary Co., Ltd. 587
6,197 Burns, Philip & Co., Ltd. 1
9,914 Coca Cola Amatil Ltd. 78
13,541 Coles Myer Ltd. 68
11,783 Crown Ltd. 5
14,000 CSR Ltd. 49
23,700 Fosters Brewing Group Ltd. 51
11,981 Gio Australia Holdings Ltd. 36
15,410 Goodman Fielder Ltd. 24
3,600 ICI Australia Ltd. 25
3,100 Leighton Holdings Ltd. 12
3,118 Lend Lease Corp., Ltd. 73
17,823 MIM Holdings Ltd. 10
15,273 National Australia Bank Ltd. 217
3,237 Newcrest Mining Ltd. 5
22,727 News Corp., Ltd. 150
20,207 Normandy Mining Ltd. 22
8,628 North Ltd. 23
11,300 Pacific Dunlop Ltd. 22
11,500 Pioneer International Ltd. 33
2,800 Plutonic Resources Ltd. 10
2,402 Renison Goldfields Consolidated
Ltd. 3
4,100 Rio Tinto Ltd. 54
7,625 Santos Ltd. 29
2,600 Smith (Howard) Ltd. 20
1,500 Sons of Gwalia Ltd. 4
7,908 Southcorp Holdings Ltd. 31
4,100 TABCORP Holdings Ltd. 22
47,200 Telstra Corp., Ltd. (Installment
Receipts--Final Installment: AUD
1.35/shr due 11/17/98) 121
21,500 Westpac Banking Corp. 144
12,358 WMC Ltd. 42
---------
2,142
---------
AUSTRIA (0.4%)
100 Austria Mikro Systeme Int'l AG 6
400 Austian Airlines/Oesterreiche
Luftverkehrs AG 12
<CAPTION>
VALUE
SHARES (000)
- --------------- ---------
<C> <S> <C>
1,400 Bank Austria AG $ 95
1,200 Bank Austria AG (New) 80
200 Bau Holding AG 12
400 Boehler-Uddeholm AG 27
200 Brau Beteiligungs AG 12
100 BWT AG 20
200 EA-Generali AG 63
800 Flughafen Wein AG 36
100 Lenzing AG 6
400 Mayr-Melnhof Karton AG 28
1,000 Oest Elektrizatswirts AG, Class A 114
800 OMV AG 103
500 Radex-Heraklith Industriebet AG 21
300 Steyr-Daimler-Puch AG 8
400 VA Technologie AG 63
300 Wienerberger Baustoffindustrie AG 62
---------
768
---------
BELGIUM (0.1%)
400 Petrofina SA 144
---------
FRANCE (4.3%)
589 Accor 151
2,235 Alcatel Alsthom 420
4,727 AXA-UAP 487
3,064 Banque Nationale de Paris 238
786 BIC 60
402 Bouygues 70
499 Canal Plus 94
585 Carrefour 345
1,325 Casino Guichard-Perrachon 89
1,281 Cie de Saint Gobain 211
1,644 Cie Financiere de Paribas, Class A 166
1,845 Cie Generale des Eaux 300
8,127 Elf Aquitaine 1,065
453 Eridania Beghin-Say 91
167 Essilor International 56
9,745 France Telecom 514
1,164 Groupe Danone 281
1,095 Havas 91
242 Imetal 32
1,115 L'air Liquide 189
1,448 Lafarge 123
1,648 Lagardere S.C.A. 67
463 Legrand 125
906 L'OREAL 421
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- --------------- ---------
<C> <S> <C>
FRANCE (CONTINUED)
1,304 LVMH Moet Hennessy Louis Vuitton $ 277
1,847 Lyonnaise des Eaux 267
1,815 Michelin Compagnie Generale des
Establissements, Class B 108
127 Pathe 26
1,024 Pernod Ricard 70
318 Pinault-Printemps-Re doute 246
283 Promodes 136
777 PSA Peugeot Citroen 134
4,938 Rhone-Poulenc, Class A 251
74 Sagem 47
1,616 Sanofi 185
1,978 Schneider 152
368 Simco (RFD) 31
60 Societe Eurafrance 30
1,416 Societe Generale, Class A 283
98 Sodexho Alliance 68
19 Sodexho Alliance 13
1,818 Thomson CSF 73
7,576 Total, Class B 910
3,765 Usinor Sacilor 63
987 Valeo 87
---------
9,143
---------
GERMANY (8.1%)
1,300 Adidas AG 231
900 AGIV AG 19
5,950 Allianz AG 1,787
1,000 AMB AG 110
15,450 BASF AG 683
18,950 Bayer AG 862
6,150 Bayerische Hypotheken Bank AG 330
9,800 Bayerische Vereinsbank AG 700
1,950 Bilfinger & Berger Bau AG 63
200 Brau Und Brunnen AG 20
1,100 CKAG AG 134
2,100 Continential AG 54
13,950 Daimler-Benz AG 1,284
2,550 Degussa AG 145
15,400 Deutsche Bank AG 1,155
61,556 Deutsche Telekom AG 1,346
11,850 Dresdner Bank AG 541
1,435 Heidelberger Zement AG 112
2,700 Hochtief AG 110
250 Karstadt AG 97
1,350 Kloeckner-Humboldt-Deutz AG 12
300 Linde AG 216
9,450 Lufthansa AG 199
350 MAN AG 116
<CAPTION>
VALUE
SHARES (000)
- --------------- ---------
<C> <S> <C>
1,000 Mannesmann AG $ 724
4,850 Merck KGaA 205
5,976 Metro AG 264
2,090 Muechener Rueck AG (Registered) 902
500 Preussag AG 171
9,200 RWE AG 496
1,650 SAP AG 657
2,100 Schering AG 245
14,400 Siemens AG 960
100 STRABAG AG 8
900 Thyssen AG 195
13,500 VEBA AG 963
856 Viag AG 471
750 Volkswagen AG 587
---------
17,174
---------
HONG KONG (4.9%)
87,600 Bank of East Asia Ltd. 182
217,000 Cathay Pacific Airways Ltd. 212
147,000 Cheung Kong Holdings Ltd. 1,043
158,500 China Light & Power Co., Ltd. 798
103,000 Hang Lung Development Co. 150
122,400 Hang Seng Bank Ltd. 1,197
253,000 Hong Kong & China Gas Co., Ltd. 424
87,500 Hong Kong & Shanghai Hotel Ltd. 72
754,400 Hong Kong Telecommunications Ltd. 1,558
314,000 Hopewell Holdings Ltd. 70
247,000 Hutchison Whampoa Ltd. 1,737
69,000 Hysan Development Co., Ltd. 111
29,500 Johnson Electric Holdings Ltd. 126
124,000 New World Development Co., Ltd. 438
270,000 Regal Hotel International 42
146,000 Shangri-La Asia Ltd. 125
270,000 Sino Land Co. 139
112,000 South China Morning Post Holdings
Ltd. 75
156,000 Sun Hung Kai Properties Ltd. 1,062
100,000 Swire Pacific Ltd., Class A 529
27,000 Television Broadcasts Ltd. 71
19,100 Varitronix International Ltd. 38
152,000 Wharf Holdings Ltd. 298
---------
10,497
---------
ITALY (6.7%)
46,122 Assicurazioni Generali S.p.A. 1,422
62,700 Banca Commerciale Italiana 313
24,300 Banco Ambrosiano Veneto S.p.A. 152
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- --------------- ---------
<C> <S> <C>
ITALY (CONTINUED)
8,344 Benetton Group S.p.A. $ 175
7,500 Cartiere Burgo 67
108,500 Credito Italiano 536
29,000 Edison S.p.A. 244
481,000 ENI S.p.A. 3,277
4,800 Falck Acciaierie & Ferriere
Lombarde 39
158,950 Fiat S.p.A. 663
34,980 Fiat S.p.A. Di Risp (NCS) 92
11,500 Impregilo S.p.A. 14
38,000 Istituto Bancario San Paolo 533
27,450 Istituto Mobiliare Italiano S.p.A. 446
181,900 Istituto Nazionale delle
Assicurazioni 590
10,350 Italcementi S.p.A. 121
7,300 Italcementi S.p.A. (RNC) 45
28,800 Italgas 145
11,400 La Rinascente S.p.A. 122
21,400 Magneti Marelli S.p.A. 66
52,000 Mediaset S.p.A. 329
22,000 Mediobanca S.p.A. 321
125,574 Montedison S.p.A. 185
41,900 Montedison S.p.A. Di Risp (NCS) 43
99,680 Olivetti S.p.A. 142
66,920 Parmalat Finanziaria S.p.A. 144
73,000 Pirelli S.p.A. 280
16,260 R.A.S. S.p.A. 236
1,705 R.A.S. S.p.A (RNC) 19
5,900 SAI 82
13,500 Sirti S.p.A. 93
28,000 Snia BPD S.p.A. 47
154,444 Telecom Italia S.p.A. 1,217
39,534 Telecom Italia S.p.A. Di Risp
(NCS) 242
283,900 Telecom Italia Mobile S.p.A. 1,525
67,500 Telecom Italia Mobile S.p.A. (RNC) 261
---------
14,228
---------
JAPAN (13.6%)
110 Advantest Corp. 7
28,400 Ajinomoto Co. 247
29,600 Aoki Corp. 21
2,600 Aoyama Trading Co. 62
900 Asahi Bank Ltd. 4
18,000 Asahi Breweries Ltd. 238
56,000 Asahi Chemical Industry Co., Ltd. 209
52,800 Asahi Glass Co., Ltd. 292
<CAPTION>
VALUE
SHARES (000)
- --------------- ---------
<C> <S> <C>
89,000 Bank of Tokyo-Mitsubushi, Ltd. $ 1,081
800 Bank of Yokohama Ltd. 2
18,000 Bridgestone Co. 408
22,600 Canon, Inc. 510
12,800 Casio Computer Co. 110
400 Chiba Bank Ltd. 1
18,600 Chugai Pharmaceuticals Co. 121
22,600 Dai Nippon Printing Co., Ltd. 373
18,600 Daiei, Inc. 67
18,600 Daikin Industries Ltd. 86
18,600 Daiwa House Industry Co., Ltd. 136
20,600 Denso Corp. 386
109 East Japan Railway Co. 505
12,800 Ebara Corp. 133
8,000 Fanuc Ltd. 276
12,000 Fuji Photo Film Ltd. 446
43,200 Fujitsu Ltd. 450
12,800 Furukawa Electric Co. 50
22,000 Hankyu Corp. 100
16,000 Hazama Corp. 13
95,000 Hitachi Ltd. 691
22,000 Honda Motor Co. 792
12,000 Ito-Yokado Co., Ltd. 650
59,000 Japan Airlines Co. 186
43,000 Japan Energy Corp. 54
600 Joyo Bank 2
9,800 Jusco Co., Ltd. 176
35,400 Kajima Corp. 119
25,000 Kansai Electric Power Co. 420
23,000 Kao Corp. 302
29,400 Kawasaki Steel Corp. 43
40,200 Kinki Nippon Railway Co., Ltd. 219
36,400 Kirin Brewery Co., Ltd. 325
34,400 Komatsu Ltd. 164
50,000 Kubota Corp. 136
56,400 Kumagai Gumi Co. 48
5,400 Kyocera Corp. 284
16,600 Kyowa Hakko Kogyo Co., Ltd. 79
44,000 Long-Term Credit Bank of Japan
Ltd. 77
49,000 Marubeni Corp. 129
3,800 Marui Co., Ltd. 58
50,000 Matsushita Electric Industrial
Co., Ltd. 802
56,000 Mitsubishi Chemical Corp. 103
50,000 Mitsubishi Corp. 409
65,800 Mitsubishi Electric Corp. 173
102,000 Mitsubishi Heavy Industries Ltd. 388
34,400 Mitsubishi Materials Corp. 66
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- --------------- ---------
<C> <S> <C>
JAPAN (CONTINUED)
26,000 Mitsubishi Trust & Banking Co. $ 256
49,800 Mitsui & Co. 317
35,400 Mitsui Engineering & Shipbuilding
Co., Ltd. 28
400 Mitsui Fudosan Co., Ltd. 4
200 Mitsui Trust & Banking Co., Ltd. --
16,800 Mitsukoshi Ltd. 52
12,800 Mycal Corp. 86
33,400 NEC Corp. 336
18,600 NGK Insulators Ltd. 166
13,800 Nippon Express Co., Ltd. 88
15,600 Nippon Fire & Marine Insurance Co. 64
15,800 Nippon Light Metal Co. 22
16,600 Nippon Meat Packers, Inc. 224
53,800 Nippon Oil Co. 188
208,000 Nippon Steel Co. 334
281 Nippon Telegraph & Telephone Corp. 2,339
50,000 Nippon Yusen Kabushiki Kaisha 180
63,600 Nissan Motor Co. 243
106,800 NKK Corp. 96
20,600 Odakyu Electric Railway Corp. 83
36,400 Oji Paper Co., Ltd. (New) 176
78,600 Osaka Gas Co. 173
16,600 Penta-Ocean Construction Co., Ltd. 40
4,000 Pioneer Electric Corp. 65
1,000 Rohm Co. 91
65,000 Sakura Bank Ltd. 231
13,800 Sankyo Co., Ltd. 383
61,000 Sanwa Bank Ltd. 544
50,000 Sanyo Electric Co., Ltd. 132
3,800 Secom Co., Ltd. 232
3,600 Sega Enterprises Ltd. 66
18,600 Sekisui House Ltd. 152
34,200 Sharp Corp. 233
4,800 Shimano, Inc. 103
27,600 Shimizu Corp. 90
8,000 Shin-Etsu Chemical Co. 158
8,000 Shiseido Co., Ltd. 92
600 Shizuoka Bank Ltd. 7
34,400 Showa Denko 38
8,800 Sony Corp. 746
65,600 Sumitomo Chemical Co. 189
35,400 Sumitomo Corp. 230
23,400 Sumitomo Electric Industries 302
9,800 Sumitomo Forestry Co., Ltd. 60
16,800 Sumitomo Metal & Mining Co. 66
<CAPTION>
VALUE
SHARES (000)
- --------------- ---------
<C> <S> <C>
67,800 Sumitomo Metal Industries $ 112
16,600 Sumitomo Osaka Cement Co., Ltd. 25
36,400 Taisei Corp., Ltd. 100
11,800 Taisho Pharmaceutical Co. 264
21,000 Taiyo Yuden Co., Ltd. 239
22,600 Takeda Chemical Industries 575
36,400 Teijin Ltd. 108
22,400 Tobu Railway Co. 72
13,000 Tohoku Electric Power Co., Inc. 195
800 Tokai Bank Ltd. 5
56,000 Tokio Marine & Fire Insurance Co. 626
31,300 Tokyo Electric Power Co. 591
2,000 Tokyo Electron Ltd. 67
76,600 Tokyo Gas Co. 169
28,400 Tokyu Corp. 115
22,600 Toppan Printing Co., Ltd. 278
56,100 Toray Industries, Inc. 292
19,600 Toto Ltd. 143
36,400 Toyoba Co. 55
72,000 Toyota Motor Corp. 1,917
34,400 Ube Industries Ltd. 50
600 Yamaichi Securities Co. --
18,000 Yokogawa Electric Corp. 108
---------
29,040
---------
MALAYSIA (0.0%)
800 Amsteel Corp. Bhd --
500 Berjaya Land Bhd 1
800 Commerce Asset Holdings Bhd 1
300 Edaran Otomobil Nasional Bhd 1
500 Ekran Bhd --
700 Golden Hope Plantations Bhd 1
500 Hong Leong Industries Bhd 1
500 Hong Leong Properties Bhd --
500 Hume Industries (Malaysia) Bhd 1
500 IGB Corp. Bhd --
900 IOI Corp. Bhd 1
600 Jaya Tiasa Holdings Bhd 1
500 Kian Joo Can Factory Bhd 1
300 Kuala Lumpur Kepong Bhd 1
900 Malayan Cement Bhd 1
500 Malayan United Industries Bhd --
7,500 Malaysian Mosaics Bhd 3
600 Malaysian Pacific Industries Bhd 2
100 Malaysian Resources Corp. Bhd --
500 Metroplex Bhd --
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- --------------- ---------
<C> <S> <C>
MALAYSIA (CONTINUED)
500 Mulpha International Bhd $ --
600 Multi-Purpose Holdings Bhd --
700 Mycom Bhd --
300 Nestle Bhd 2
200 Perusahaan Otomobil Nasional Bhd --
100 Petaling Garden Bhd --
900 Public Bank Bhd (Foriegn) --
58,000 RHB Capital Bhd 51
500 R.J. Reynolds Bhd 1
15,000 Rashid Hussain Bhd 21
600 Resorts World Bhd 1
700 Rothmans of Pall Mall Bhd 6
100 Selangor Properties Bhd --
200 Shell Refining Co. (Malaysia) Bhd --
500 Sime Darby Bhd 1
500 TA Enterprise Bhd --
200 Tan Chong Motor Holdings Bhd --
500 Technology Resources Industries
Bhd 1
600 Telekom Malaysia Bhd 2
300 Tenaga Nasional Bhd 1
500 Time Engineering Bhd --
500 United Engineers Ltd. 1
500 YTL Corp., Bhd 1
---------
105
---------
NETHERLANDS (6.5%)
43,417 ABN Amro Holding N.V. 1,002
2,550 Akzo Nobel N.V. 518
18,500 Elsevier N.V. 304
2,700 Getronics N.V. 116
1,650 Heineken N.V. 375
30,513 ING Groep N.V. 1,732
2,470 KLM Royal Dutch Airlines N.V. 99
16,133 Koninklijke Ahold N.V. 521
3,400 Koninklijke KNP BT N.V. 89
14,848 Koninklijke PTT Nederland N.V. 769
750 Nedlloyd Groep N.V. 18
701 Oce N.V. 101
10,900 Philips Electronics N.V. 800
102,800 Royal Dutch Petroleum Co. 5,819
1,439 Stork N.V. 52
19,900 Unilever NV 1,342
2,185 Wolters Kluwer N.V. 312
---------
13,969
---------
<CAPTION>
VALUE
SHARES (000)
- --------------- ---------
<C> <S> <C>
NORWAY (0.1%)
3,700 Norsk Hydro ASA $ 183
---------
183
---------
PORTUGAL (1.4%)
10,500 Banco Commercial Portugues
(Registered) 339
6,300 Banco Espirito Santo (Registered) 291
5,500 Banco Portugues de Investimento
(New) 212
4,500 Banco Totta & Acores, Class B
(Registered) 167
1,200 Cia de Seguros Tranquilidade,
(Registered) 38
6,100 Cimpor SGPS 215
300 Cin-Corparacao Industial do Norte 25
1,200 Corticeira Amorim 18
25,600 EDP-Electricidade de Portugal 594
500 Engil-SGPS 6
700 INAPA-Investimentos Participacoes
e Gestao 9
5,950 Jeronimo Martins SGPS 245
6,400 Portucel Industrial Empressa
Produtora de Celulose 58
13,500 Portugal Telecom (Registered) 702
900 Sociedade de Construcoes Soares da
Costa 6
1,000 Somague-Sociedade Gestora de
Participacoes 12
3,000 Sonae Investmentos 141
1,300 UNICER-Uniao Cervejeira 28
---------
3,106
---------
SINGAPORE (0.0%)
32,000 Asia Food & Properties Ltd. 10
800 Fraser & Neave Ltd. 3
5,000 Inchcape Bhd 2
750 Keppel Corp., Ltd. 2
560 Oversea-Chinese Banking Corp.
(Foreign) 3
200 Robinson & Co., Ltd. 1
600 Shangri-La Hotel Ltd. 1
1,020 Singapore Press Holdings Ltd.
(Foreign) 12
---------
34
---------
SPAIN (3.5%)
435 Acerinox 71
18 Aguas de Barcelona (New) 1
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- --------------- ---------
<C> <S> <C>
SPAIN (CONTINUED)
1,489 Aguas de Barcelona $ 73
4,200 Argentaria 348
7,107 Autopistas Concesionaria Espanola 118
22,500 Banco Bilbao Vizcaya (Registered) 1,057
11,000 Banco Central Hispano Americano 353
16,000 Banco Santander 797
500 Corporacion Financiera Alba 68
1,890 Corporacion Mapfre 71
1,900 Dragados y Construccion 63
1,650 Ebro Agricolas 35
750 ENCE 14
34,400 Endesa 827
5,700 Ercros 8
2,200 Fomento Construction y Cantractas 116
5,000 Gas Natural SDG 312
31,200 Iberdrola 474
735 Inmobiliaria Metropolitana Vasco
Central 44
200 Portland Valderrivas 23
15,100 Repsol 771
1,200 Tabacalera, Class A 135
31,500 Telefonica de Espana 1,389
9,800 Union Electrica Fenosa 129
1,750 Uralita 24
1,467 Vallehermoso 57
750 Viscofan Envolturas Celulosicas 31
1,420 Zardoya Otis 51
---------
7,460
---------
SWEDEN (2.0%)
13,500 ABB AB, Class A 193
5,400 ABB AB, Class B 75
3,300 AGA AB, Class A 48
26,833 Astra AB, Class A 554
6,300 Astra AB, Class B 125
2,650 Atlas Copco AB, Class A 78
1,400 Atlas Copco AB, Class B 41
1,600 Electrolux AB, Series B 132
19,100 Ericsson LM, Class B 908
6,800 Forenings Sparbanken AB 224
4,200 Hennes & Mauritz AB, Class B 211
2,300 Netcom Systems AB Class B 67
3,900 Sandvik AB, Class A 111
1,600 Sandvik AB, Class B 46
1,800 Securitas AB, Class B 61
2,200 Skandia Forsakrings AB 143
<CAPTION>
VALUE
SHARES (000)
- --------------- ---------
<C> <S> <C>
12,200 Skandinaviska Enskilda Banken,
Class A $ 178
2,500 Skanska AB, Class B 113
1,900 S.K.F. AB, Class B 45
6,650 Stora Kopparbergs Bergslags AB,
Class A 102
5,100 Svenska Cellulosa AB, Class B 140
4,500 Svenska Handelsbanken, Class A 208
2,200 Svenskt Stal AB (SSAB) Series A 41
2,800 Trelleborg AB, Class B 41
400 Volvo AB, Class A 13
9,350 Volvo AB, Class B 298
1,600 WM-Data AB, Class B 42
---------
4,238
---------
SWITZERLAND (7.7%)
305 ABB AG 456
575 Adecco 203
185 Alusuisse-Lonza Holdings Ltd.
(Registered) 225
8,360 CS Holding AG (Registered) 1,673
30 Georg Fischer AG (Bearer) 57
220 Holderbank Financiere Glarus AG,
Class B (Bearer) 231
1,235 Nestle (Registered) 2,361
2,010 Novartis AG (Registered) 3,558
51 Roche Holding AG (Bearer) 872
217 Roche Holding AG (Registered) 2,350
55 SGS Surveillance 99
160 SMH AG (Bearer) 103
120 Sulzer AG (Registered) 94
2,380 Swiss Bank Corp. (Registered) 837
455 Swiss Reinsurance (Registered) 1,000
110 SwissAir (Registered) 154
610 Union Bank of Switzerland (Bearer) 997
720 Union Bank of Switzerland
(Registered) 235
205 Valora Holding AG 51
1,480 Zuerich Versicherungs (Registered) 859
---------
16,415
---------
THAILAND (0.0%)
8,000 CMIC Finance & Securities PCL
(Foreign) --
18,600 General Finance & Securities PCL
(Foreign) --
10,657 Land & House Co., Ltd. (Foreign) 5
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- --------------- ---------
<C> <S> <C>
THAILAND (CONTINUED)
34,700 Siam City Bank PCL (Foreign) $ --
14,600 TPI Polene PCL (Foreign) 3
---------
8
---------
UNITED KINGDOM (13.5%)
28,800 Abbey National plc 558
14,400 Arjo Wiggins Appleton plc 47
10,300 Associated British Foods plc 106
35,017 Barclays plc 1,051
20,267 Bass plc 389
63,835 B.A.T. Industries plc 652
79,941 BG plc 415
14,454 BICC plc 36
26,810 Blue Circle Industries plc 164
14,470 BOC Group plc 231
22,700 Boots Co. plc 364
14,400 BPB Industries plc 91
10,275 British Aerospace plc 339
24,725 British Airways plc 252
164,261 British Petroleum Co. plc 2,373
33,000 British Sky Broadcasting plc 248
41,200 British Steel plc 98
119,500 British Telecommunications plc 1,302
86,505 BTR plc 284
6,226 Burmah Castrol plc 127
51,472 Cable & Wireless plc 645
22,680 Cadbury Schweppes plc 315
16,540 Caradon plc 52
90,600 Centrica plc 171
18,543 Coats Viyella plc 30
14,396 Commercial Union plc 281
10,300 Courtaulds plc 62
2,116 De La Rue Co. plc 10
75,681 Diageo plc 892
11,912 Diageo plc, Class B 101
16,080 Elementis plc 37
10,289 EMI Group plc 86
1 Energy Group plc --
59,700 General Electric plc 473
12,415 GKN plc 336
65,900 Glaxo Wellcome plc 1,775
14,472 Granada Group plc 260
24,700 Great Universal Stores plc 307
16,463 Guardian Royal Exchange plc 118
12,340 Hanson plc 75
45,288 HSBC Holdings plc 1,387
18,600 Imperial Chemical Industries plc 332
24,719 Ladbroke Group plc 138
16,500 Land Securities plc 297
16,500 Lasmo plc 76
24,700 Legal & General Group plc 306
<CAPTION>
VALUE
SHARES (000)
- --------------- ---------
<C> <S> <C>
113,300 Lloyds TSB Group plc $ 1,764
16,496 Lonrho plc 30
72,100 Marks and Spencer plc 715
12,400 MEPC plc 124
28,800 National Power plc 296
16,870 Peninsular & Oriental Steam
Navigation Co. 253
30,920 Pilkington plc 63
41,162 Prudential Corp. plc 606
18,500 Rank Group plc 125
28,800 Reed International plc 293
30,333 Reuters Group plc 327
12,400 Rexam plc 58
24,748 Rio Tinto plc 333
6,200 RMC Group plc 101
28,828 Royal & Sun Alliance Insurance
Group plc 368
10,270 Royal Bank of Scotland Group plc 160
18,527 Safeway plc 115
32,923 Sainsbury (J) plc 283
4,100 Schroders plc 164
20,630 Scottish Power plc 194
41,200 Sears plc 39
12,346 Sedgwick Group plc 34
10,300 Slough Estates plc 71
102,996 Smithkline Beecham plc 1,303
10,338 Southern Electric plc 95
28,807 Tarmac plc 57
16,516 Taylor Woodrow plc 63
39,120 Tesco plc 393
14,452 Thames Water plc 229
10,328 Thorn plc 26
10,317 TI Group plc 91
57,600 Unilever plc 545
14,386 United Utilities plc 214
67,956 Vodafone Group plc 712
18,500 Zeneca Group plc 798
---------
28,731
---------
TOTAL COMMON STOCKS (Cost $130,210) 157,385
---------
PREFERRED STOCKS (0.6%)
AUSTRALIA (0.0%)
16,663 News Corp., Ltd. 94
---------
AUSTRIA (0.0%)
664 Bank Ausria AG 44
500 Bank Austria AG-Vorzug 34
100 Bau Holdings AG 5
---------
83
---------
GERMANY (0.5%)
6,150 RWE AG 278
1,150 SAP AG 491
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- --------------- ---------
<C> <S> <C>
GERMANY (CONTINUED)
300 Volkswagen AG $ 170
---------
939
---------
ITALY (0.1%)
53,900 Fiat S.p.A.. 143
---------
PORTUGAL
960 Jeronimo Martins SGPS 5
---------
TOTAL PREFERRED STOCKS (Cost $766) 1,264
---------
<CAPTION>
NO. OF
RIGHTS
- ---------------
<C> <S> <C>
RIGHTS (0.1%)
FRANCE (0.0%)
1,448 Lafarge Sa, expiring 4/8/98 2
---------
GERMANY (0.1%)
5,950 Allianz AG, expiring 4/1/98 32
1,050 Volkswagen AG, expiring 4/7/98 18
---------
50
---------
NORWAY (0.0%)
33 NCL Holdings ASA --
---------
PORTUGAL (0.0%)
10,500 Banco Commercial Portugues,
expiring 4/20/98 34
---------
SPAIN (0.0%)
11,000 Banco Central Hispanoamericano,
expiring 4/17/98 9
---------
TOTAL RIGHTS (Cost $0) 95
---------
<CAPTION>
NO. OF
WARRANTS
- ---------------
<C> <S> <C>
WARRANTS (0.0%)
FRANCE (0.0%)
4,333 Cie Generale des Eaux, expiring
5/02/01 5
---------
HONG KONG (0.0%)
845 Peregrine Investment Holdings
Ltd., expiring 5/15/98 --
---------
ITALY (0.0%)
1,400 La Rinascemmnte S.p.A., CW99,
expiring 12/31/99 2
<CAPTION>
NO. OF VALUE
WARRANTS (000)
- --------------- ---------
<C> <S> <C>
2,450 La Rinascente S.p.A., CW99,
expiring 12/31/99 $ 6
---------
8
---------
SINGAPORE (0.0%)
2,400 Asia Food & Properties Ltd.,
expiring 7/12/02 --
11,750 Straits Steamship, expiring
12/20/00 3
---------
3
---------
SWITZERLAND (0.0%)
112 Roche Holdings A.G., expiring
5/05/98 16
---------
THAILAND (0.0%)
6,349 National Finance & Securities PCL,
expiring 11/15/99 0
---------
TOTAL WARRANTS (Cost $10) 32
---------
<CAPTION>
NO. OF
UNITS
- ---------------
<C> <S> <C>
UNITS (0.0%)
AUSTRALIA (0.0%)
15,862 General Property Trust 30
16,986 Westfield Trust 36
---------
TOTAL UNITS (Cost $63) 66
---------
<CAPTION>
FACE
AMOUNT
(000)
- ---------------
<C> <S> <C>
CONVERTIBLE DEBENTURES (0.0%)
FRANCE (0.0%)
FRF 60 Sanofi 4.00%, 1/01/00 76
---------
TOTAL CONVERTIBLE DEBENTURES (Cost $38) 76
---------
FIXED INCOME SECURITIES (0.0%)
FRANCE (0.0%)
62 Casino Guichard-Perrachon, Series
XW, 4.50%, 7/12/01 42
18 Simco 3.25%, 1/01/06 17
---------
59
---------
ITALY (0.0%)
ITL 11,200 Mediobanca S.P.A., Series XW
4.50%, 1/01/00 6
---------
TOTAL FIXED INCOME SECURITIES (Cost $48) 65
---------
TOTAL FOREIGN SECURITIES (74.5%) (Cost $131,135) 158,983
---------
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
- --------------- ---------
<C> <S> <C>
SHORT-TERM INVESTMENT (24.1%)
REPURCHASE AGREEMENT (24.1%)
$ 51,294 Chase Securities, Inc. 5.60%,
dated 3/31/98, due 4/01/98, to be
repurchased at $51,302,
collateralized by U.S. Treasury
Notes, 5.50%, 3/31/03, valued at
$52,387 (Cost $51,294) $ 51,294
---------
FOREIGN CURRENCY (0.1%)
AUD 19 Australian Dollar 13
ATS 10 Austrian Schilling 1
BEF 15 Belgian Franc --
FRF 293 French Franc 47
DEM 34 German Mark 18
HKD 34 Hong Kong Dollar 4
IDR 4,010 Indonesian Rupiah --
ITL 30,819 Italian Lira 17
JPY 801 Japanese Yen 6
MA 7 Malaysian Ringgit 2
NLG 14 Netherlands Guilder 7
SGD 1 Singapore Dollar 1
ESP 5,388 Spanish Peseta 34
KRW 21,851 South Korean Won 16
SEK 51 Swedish Krona 6
---------
TOTAL FOREIGN CURRENCY (Cost $189) 172
---------
TOTAL INVESTMENTS (98.7%) (Cost $182,618) 210,449
---------
<CAPTION>
AMOUNT
(000)
---------
<C> <S> <C>
OTHER ASSETS AND LIABILITIES (1.3%)
Other Assets $ 223,667
Liabilities (220,821)
---------
2,846
---------
NET ASSETS (100%) $ 213,295
---------
---------
CLASS A:
NET ASSETS
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE $213,218
Applicable to 17,734,085 outstanding $.001 par
value shares (authorized 500,000,000 shares)
$12.02
---------
---------
CLASS B:
NET ASSETS
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE $77
Applicable to 6,319 outstanding $.001 par value
shares (authorized 500,000,000 shares)
$12.12
---------
---------
</TABLE>
- ------------------------------
NCS -- Non Convertible Shares
PCL -- Public Company Limited
RFD -- Ranked for Dividend
RNC -- Non Convertible Savings Shares
13
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