Annual Report
_____________________________________________________________________________
Foreign Equity Fund
October 31, 1994
_____________________________________________________________________________
Dear Shareholders
Although overseas stock markets grew more difficult during the final quarter,
the fiscal year ended October 31 was a good one for the Foreign Equity Fund.
During the last three months, your Fund's return of 3.4% was slightly better
than the unmanaged Morgan Stanley Capital International Europe, Australia and
Far East (MSCI EAFE) Index, and also better than the EAFE Index over the
12-month period. Results were well ahead of the U.S. stock market as
represented by the unmanaged Standard & Poor's 500 Stock Index for the fiscal
year.
Our weighting in Japan, which was generally strong until the last
quarter, made a modest contribution to the Fund's positive results relative to
the Index over its fiscal year. However, in the final quarter, a strong rally
in the markets of Latin America and Southeast Asia fueled most of the gain
against the Index. Superior results compared with the U.S. market were mostly
attributed to the strength of the Japanese and European currencies, in which
about three-quarters of the Fund's holdings is denominated. However, the
portfolio has significant positions in markets such as Malaysia, Singapore and
Mexico, which performed strongly without help from their local currencies.
Market Performance
3 Months Ended 10/31/94
_______________________________
Local Currency
Local vs. U.S. In U.S.
Currency Dollars Dollars
_______________________________
Australia 1.4% 0.4% 1.8%
France -7.7 5.1 -2.9
Germany -2.3 5.4 3.0
Hong Kong 2.0 0.0 1.9
Italy -9.9 3.0 -7.1
Japan -2.4 3.3 0.9
Netherlands 1.9 5.4 7.4
Norway -6.0 5.7 -0.7
Singapore 11.6 2.8 14.7
Spain -5.0 4.0 -1.2
Sweden 1.6 7.7 9.4
Switzerland -2.4 7.0 4.4
United Kingdom 0.6 6.1 6.7
The fiscal year was a turbulent one for world stock markets. The first
three months saw a final surge of the 1993 bull markets but, following the
U.S. Federal Reserve's move to increase interest rates in February, the middle
of 1994 was a much more difficult period. This tightening was quickly
translated to the smaller markets of Southeast Asia and Latin America where
the currencies bear a close relationship with the U.S. dollar, and these
markets corrected sharply. European markets held up better during this period.
The most important exception to a generally weak trend was Japan where the
market performed well and the strength of the yen was an added benefit to the
U.S. investor.
Turning to the world economy, there have been signs of recovery in both
Japan and Continental Europe, which are the last regions to emerge from the
world recession of the early '90s. In the Far East there is increasing
confidence that the runaway Chinese economy can be brought under control, but
the "tiger" economies of the region have continued to show strong growth with
little pressure on the inflation front.
The economy in Mexico has been sluggish. Although President-elect
Zedillo has outlined a conservative programme for his new administration,
there should be some acceleration in 1995. In Brazil the most important
development was the introduction of the real, a new currency linked to the
U.S. dollar, resulting in a dramatic drop in the country's inflation rate.
Fernando Henrique Cardoso, the architect of this latest plan to stabilise
Brazil's currency and inflation rate, was elected president, but it remains to
be seen whether Congress can introduce fiscal measures to underpin these
reforms.
Market Review
Far East
In Japan the economy is picking up, although the recovery is muted compared
with past cycles. Areas of strength include capital investment, with machine
tool orders now showing positive growth and private construction orders
clearly bottoming out. However, with half the economy accounted for by
consumer expenditure, it is likely to remain sluggish until consumers play
their part. Here the signs are discouraging; historically high unemployment
levels and slow income growth have affected sentiment and retail sales remain
dull. The construction sector is showing signs of life with orders picking up
after the vast overbuilding of the bubble period, although optimism has been
tempered by a recent fall in housing starts. The political scene seems to have
stabilised with the unlikely partnership of Japan's Liberal Democratic and
Socialist Parties lasting longer than many expected.
Having performed strongly for the first half of the calendar year, the
stock market is now becalmed with volume at very low levels. A sharp earnings
recovery is already priced into the market but, with the yen now at new highs
against the dollar, there is less confidence about the pace of the recovery in
corporate profits.
Elsewhere in the region, economic growth has remained strong, fueled by
the dynamics of increasing regional trade and the continuation of rapid growth
in China. If anything, the Chinese economy is probably too strong and the
authorities must be concerned with inflation levels running at over 20%.
Another worry is the continued trade deficit. This is due principally to high
levels of capital goods imports as overseas companies have developed their
manufacturing capacity in China's Special Economic Zones. However, recently
there have been signs that this capacity is now coming on stream, suggesting
that the trade account could soon move into surplus through lower imports and
rising exports.
With strong trading links to China, Hong Kong has also shown high rates
of growth. However, inflation has remained stubbornly high and interest rates
are bound to rise, bearing in mind that further tightening by the U.S. Federal
Reserve will immediately affect Hong Kong whose currency is pegged to the
dollar. Following its speculative binge at the end of 1993, the Hong Kong
stock market corrected sharply during the spring but recovered modestly during
the final quarter. It is unlikely to make further progress until the Federal
Reserve makes its move and the Chinese economy shows signs of a soft landing.
The best performing markets of the region were in Malaysia and
Singapore. The Malaysian economy has shown four consecutive years of 8% growth
fueled by manufacturing exports and infrastructure development. With domestic
consumption constrained, inflation has been surprisingly low, but it will be
difficult for the economy to sustain these growth rates without triggering
higher inflation. Singapore has shown equally high rates of growth and has
also kept inflation low. The current account surplus has benefited from strong
electronic exports, which in turn have contributed to high rates of growth.
Against the background of a strong economy and increased levels of equity
investment permitted in the state-sponsored saving scheme, the stock market
has performed well.
The Korean economy is well placed to benefit from accelerating world
growth given its strength in heavy industry and the prospect of improved
competitiveness with Japan as the yen strengthens. On a short-term basis, this
high growth will strain the current account and put upward pressure on
inflation. Longer term, the Japanese development path remains the model as
Korea tracks it almost perfectly with a 15-year lag.
In Australasia, both economies have shown above-trend rates of growth
with inflation sustained at remarkably low levels. In Australia, a severe
drought has affected agricultural production, but the economy is increasingly
integrated with fast-growing Southeast Asia and a pickup in the commodity
cycle also bodes well. New Zealand continues to be one of the world's most
remarkable turnaround situations with steady growth, inflation at less than
2%, and a strong current account surplus. As one of the few countries in the
region where interest rates can fall, the stock market has performed
particularly well over the last three months.
Europe
For most of the 12 months under review, the economies of Continental Europe
have been sluggish, but recently they exhibited distinct signs of life. In
Germany, the economy is entering a broad-based recovery led by exports and
capital investment. With the prospect of further tax surcharges to finance
reunification, consumer expenditure is likely to remain subdued. However,
longer term the whole economy is well placed to benefit from any economic
renaissance in the ex-communist states immediately to the east. The stock
market has made little progress over the year, although dollar returns in the
last quarter have been helped by deutschemark strength. With valuations
already looking stretched, the Fund's position in Germany is relatively small.
In the Netherlands, we find valuations more attractive, especially for a
number of large, international companies well positioned to benefit from a
recovery across Europe. Our largest holdings continue to be the two publishing
companies, Elsevier and Wolters Kluwer, which exhibit steady growth; the
former sees great potential from its recent purchase of the online data
businesses of Mead of the U.S.
In Switzerland, we can also find attractively valued multinationals in
areas of traditional Swiss strength such as pharmaceuticals and engineering.
This market has performed reasonably well although, in line with other
European markets, recent performance in dollars has been greatly assisted by
currency strength.
In France, the economic recovery is broadening and, with manageable
government finances and a presidential election looming in 1995, this recovery
is likely to be more sustainable than others in Europe. The stock market has
been one of the weaker performers as local insurance companies have sold
equities to cover bond losses. Our own selections have held up reasonably well
and we have been adding to our favourites on weakness.
The UK market leads the cycle in Europe and the economy has shown steady
if unspectacular growth for over two years. Although inflation remains at
remarkably low levels, the next move in UK interest rates is likely to be
upward, and we have reduced our UK holdings especially in the small-cap area
which has performed so well.
The Nordic markets are a bright spot in Europe, with Finland taking the
prize as the best performing market this year. This remarkable accomplishment
was led by mobile phone manufacturer Nokia, in which the Fund has a small
position. In Sweden, the move away from full employment will help
manufacturing competitiveness, and exports will continue to lead the recovery.
We have increased the portfolio's exposure to this market throughout the year,
focusing our attention on multinationals that will benefit from recovery in
overseas markets.
Latin America
Latin America provides its share of excitement with drama in both the stock
market and on the political scene. In Mexico, the assassination of a
presidential candidate at the beginning of the year and the uprising in the
southern state of Chiapas called into question the stability of Mexican
politics, but the PRI's victory in late summer was convincing enough. Partly
influenced by political developments, the stock market had its usual roller
coaster ride. The new government under Ernesto Zedillo will continue the
reforms which have been so successful, but in the latest accord with the
unions he has signaled a commitment to low inflation at the expense of growth.
In Brazil, investors have spent most of the year awaiting the
introduction of the real and the outcome of the presidential election. The
news has been encouraging on both fronts. Brazil's new currency was
successfully introduced in July and has more than held its ground against the
U.S. dollar. Mr. Cardoso's first-round win in the presidential election was
well received by the stock market, but tougher budgetary disciplines are
needed for the stabilisation to succeed.
Investment Policy & Outlook
In recent months, world stock markets have entered an uncertain period, with
attention focused on when the U.S. Federal Reserve will further tighten and to
what extent U.S. interest rates will rise. These developments will be a key
influence on overseas bond markets where historically high real yields compete
with equities for the investor's dollar. World markets are unlikely to make
much progress until this issue is resolved, but, outside the U.S., prospects
for corporate earnings growth remain attractive. In Japan and Europe, widening
evidence of economic recovery supports the outlook for better company profits,
and we see rapid growth in the dynamic economies of Southeast Asia. The heart
of our strategy is to invest in corporate earnings growth where we see it
attractively valued. We continue to find this in Europe, which accounts for
just under half the portfolio, and we also find it in the less developed
countries of Asia and Latin America.
Thus, we remain optimistic for the future, although investors may have
to be patient for a little longer before stock markets make a confident upward
move.
Respectfully submitted,
Martin G. Wade
President
November 18, 1994
Reviewing Your International Strategy
Not so very long ago, we probably would not have addressed this issue, because
relatively few U.S. investors had an international investing strategy to
review. In recent years, however, investor focus has broadened appreciably,
and now global investing seems finally to be catching up with "global
consuming."
The merits of placing a portion of your financial assets in overseas
investments have become widely recognized, as evidenced by the dramatic growth
of international mutual fund assets. Amid all the investment uncertainties
generated by rising interest rates this year - both in the U.S. and a number
of other countries - our international equity funds continued to expand
impressively.
The historic evidence is clear that a prudent equity diversification
strategy that includes foreign stocks can reduce the year-to-year volatility
of an equity portfolio and, over time, enhance overall returns. Volatility
may be reduced because foreign stocks often move in divergent directions from
the U.S. market. With over half of all stocks in the world originating and
trading outside the U.S. - many in countries growing faster than the U.S. - it
can be argued that the investor who restricts his or her portfolio entirely to
U.S. securities is less prudent than the one who diversifies more widely.
Since you are an international investor, we do not want to preach to the
converted. Rather, we want to suggest you take a minute to review your T.
Rowe Price international investments to ensure they are in line with your
financial strategy and your overall portfolio.
An International Allocation
Except in unusual circumstances, we believe a majority of an investor's
international equity exposure should be in a core fund that has a broadly
diversified portfolio of well-established companies around the world. Our
International Stock Fund is designed to be such a core holding. If you have a
particular interest in a certain region, you may want to put some assets in a
more specialized fund. The New Asia, Europe, Latin America, and Japan Funds
have narrow geographic focuses, while our International Discovery Fund
emphasizes rapidly growing smaller companies in all of those areas. Without
the conviction to stick through potentially tough periods, you should be
cautious about investing in regional funds, which may have greater price
volatility.
Don't base your allocation decisions solely on the past performance of
any stock market, and keep in mind the risks of foreign investing, including
the possibility of unfavorable currency exchange rates. You may want to
consider shifting a portion of your investment dollars into a particular
international asset over a period of time, instead of all at once. By focusing
on your particular financial objectives, the length of time in which you hope
to achieve them, and your willingness to accept risks represented by various
investments, you should be in a good position to structure your international
investment portfolio.
This report has been preceded or is accompanied by a prospectus.
_____________________________________________________________________________
TWENTY-FIVE LARGEST HOLDINGS
October 31, 1994
_____________________________________________________________________________
Percent of
Company Country Net Assets
_____________________________________________________________________________
Wolters Kluwer Netherlands 1.7%
_____________________________________________________________________________
Elsevier Netherlands 1.5
_____________________________________________________________________________
Royal Dutch Petroleum Netherlands 1.2
_____________________________________________________________________________
Swire Pacific 'A' Hong Kong 1.2
_____________________________________________________________________________
TMX ADS Mexico 1.1
_____________________________________________________________________________
Kyocera Japan 1.0
_____________________________________________________________________________
National Westminster Bank United Kingdom 1.0
_____________________________________________________________________________
Fletcher Challenge New Zealand 0.9
_____________________________________________________________________________
Technology Resources Industries Malaysia 0.9
_____________________________________________________________________________
Nippon Steel Japan 0.8
_____________________________________________________________________________
Wharf Holdings Hong Kong 0.8
_____________________________________________________________________________
Telebras Brazil 0.8
_____________________________________________________________________________
Eaux Cie Generale France 0.8
_____________________________________________________________________________
Cable & Wireless United Kingdom 0.8
_____________________________________________________________________________
BBC Brown Boveri United Kingdom 0.8
_____________________________________________________________________________
Mitsubishi Heavy Industries Japan 0.7
_____________________________________________________________________________
Nippon Denso Japan 0.7
_____________________________________________________________________________
Nestle Switzerland 0.7
_____________________________________________________________________________
Sharp Japan 0.7
_____________________________________________________________________________
Sumitomo Electric Japan 0.7
_____________________________________________________________________________
Cifra Mexico 0.7
_____________________________________________________________________________
Reed International United Kingdom 0.7
_____________________________________________________________________________
Telecom Italia Italy 0.7
_____________________________________________________________________________
United Engineers Malaysia 0.6
_____________________________________________________________________________
Valeo France 0.6
_____________________________________________________________________________
Total 22.1%
_____________________________________________________________________________
_____________________________________________________________________________
INDUSTRY
DIVERSIFICATION
October 31, 1994
_____________________________________________________________________________
Percent of
Net Assets
_____________________________________________________________________________
Consumer Goods 28.3%
_____________________________________________________________________________
Basic Industry 16.6
_____________________________________________________________________________
Financial/Insurance 16.3
_____________________________________________________________________________
Capital Goods 14.4
_____________________________________________________________________________
Utilities 8.1
_____________________________________________________________________________
Energy 4.2
_____________________________________________________________________________
Transport/Storage 2.9
_____________________________________________________________________________
Miscellaneous 0.2
_____________________________________________________________________________
Total Investments 91.0
_____________________________________________________________________________
Short-Term Investments 7.3
_____________________________________________________________________________
Other Assets Less Liabilities 1.7
_____________________________________________________________________________
Total Net Assets 100.0%
_____________________________________________________________________________
_____________________________________________________________________________
SECURITY
CLASSIFICATION
October 31, 1994
_____________________________________________________________________________
Percent Market
of Net Cost Value
Assets (000) (000)
_____________________________________________________________________________
Common
Stocks &
Warrants 89.6% $839,469 $949,438
_____________________________________________________________________________
Preferred
Stocks,
Rights &
Warrants 1.3 8,587 14,080
_____________________________________________________________________________
Bonds 0.1 218 215
_____________________________________________________________________________
Short-Term
Investments 7.3 76,964 76,964
_____________________________________________________________________________
Total
Investments 98.3 925,238 1,040,697
_____________________________________________________________________________
Other Assets
Less
Liabilities 1.7 18,379 17,781
_____________________________________________________________________________
Net Assets 100.0% $943,617 $1,058,478
_____________________________________________________________________________
_____________________________________________________________________________
GEOGRAPHIC
DIVERSIFICATION
October 31, 1994
_____________________________________________________________________________
Percent of
Net Assets
_____________________________________________________________________________
Japan 22%
_____________________________________________________________________________
United Kingdom 13
_____________________________________________________________________________
Netherlands 8
_____________________________________________________________________________
France 7
_____________________________________________________________________________
Mexico 4
_____________________________________________________________________________
Malaysia 4
_____________________________________________________________________________
All Others 42
_____________________________________________________________________________
_____________________________________________________________________________
TOTAL RETURN PERFORMANCE
Periods Ended October 31, 1994
_____________________________________________________________________________
Calendar
One Three Year- One Three Since
Month Months to-Date Year Years** 9/7/89**
_____________________________________________________________________________
Foreign Equity Fund* 1.81% 3.40% 5.42% 11.96% 13.32% 9.73%
_____________________________________________________________________________
TRP International
Stock Fund 1.90 3.55 5.59 12.03 13.31 9.98
_____________________________________________________________________________
S&P 500 Index 2.25 3.84 3.61 3.87 9.49 9.43
_____________________________________________________________________________
MSCI EAFE Index 3.35 2.51 12.76 10.38 9.85 4.39***
_____________________________________________________________________________
FT-A Euro
Pacific Index 3.40 2.40 14.17 10.83 9.28 4.18***
_____________________________________________________________________________
* An "institutional only" no-load mutual fund comparable to the T. Rowe
Price International Stock Fund. Total assets $1,058.5 million.
Inception 9/7/89.
** Average Annual Compound Total Return
*** From 8/31/89.
Income return and principal value represent past performance and will vary.
Shares may be worth more or less at redemption than at original purchase.
Chart 1 - FISCAL-YEAR PERFORMANCE COMPARISON
The accompanying notes are an integral part of these financial statements.
Statement of Net Assets (Value in thousands)
Foreign Equity Fund / October 31, 1994
Value
ARGENTINA - 0.8% (000)
_____________________________________________________________________________
Common Stocks
32,122 shs. Banco de Galicia Buenos Aires
ADR (USD). . . . . . . . . . . . . . . . $ 875
19,535 Banco Frances del Rio de la
Plata ADR (USD). . . . . . . . . . . . . 501
34,660 * Buenos Aires Embotelladora
ADR (USD). . . . . . . . . . . . . . . . 1,330
190,131 Naviera Perez. . . . . . . . . . . . . . . 1,042
145,160 Sociedad Comercial del Plata . . . . . . . 497
12,686 Sociedad Comercial del Plata
ADS (USD). . . . . . . . . . . . . . . . 422
26,330 Telefonica de Argentina ADR (USD). . . . . 1,632
10,600 Telefonica de Argentina ADS (USD). . . . . 665
26,395 Transportadora de Gas del Sur
ADS (USD). . . . . . . . . . . . . . . . 315
52,010 YPF Sociedad Anonima ADR (USD) . . . . . . 1,268
_________
Total Argentina . . . . . . . . . . . . . . . . . . . . 8,547
AUSTRALIA - 2.8%
_____________________________________________________________________________
Common Stocks
1,007,019 ANI. . . . . . . . . . . . . . . . . . . . 1,084
351,000 Australia & New Zealand Bank Group . . . . 1,017
239,000 Australia Gas & Light. . . . . . . . . . . 772
160,829 Broken Hill Property . . . . . . . . . . . 2,467
235,440 Email. . . . . . . . . . . . . . . . . . . 708
307,000 Howard Smith . . . . . . . . . . . . . . . 1,413
1,066,000 John Fairfax Holdings. . . . . . . . . . . 2,201
304,775 MIM. . . . . . . . . . . . . . . . . . . . 663
564,328 Mayne Nickless . . . . . . . . . . . . . . 2,980
436,988 News Corporation . . . . . . . . . . . . . 2,690
631,124 Nine Network . . . . . . . . . . . . . . . 1,903
279,788 Philip Burns . . . . . . . . . . . . . . . 715
1,685,657 * TNT. . . . . . . . . . . . . . . . . . . . 3,017
856,258 Western Mining . . . . . . . . . . . . . . 5,335
625,328 Woolworths . . . . . . . . . . . . . . . . 1,337
_________
28,302
Preferred Stock
556,000 TNT, Cum. Cv., 8.00% . . . . . . . . . . . 1,024
_________
Total Australia . . . . . . . . . . . . . . . . . . . . 29,326
AUSTRIA - 0.1%
_____________________________________________________________________________
Common Stock
11,110 Oesterreische Elektrik Wirtsch . . . . . . 696
Preferred Stock
6,841 Creditanstalt Bankverein . . . . . . . . . 408
_________
Total Austria . . . . . . . . . . . . . . . . . . . . 1,104
BELGIUM - 1.2%
_____________________________________________________________________________
Common Stocks
7,771 AG Finanz. . . . . . . . . . . . . . . . . 624
14,705 Delhaize Freres. . . . . . . . . . . . . . 590
8,250 Generale Banque. . . . . . . . . . . . . . 2,001
18,143 Kredietbank. . . . . . . . . . . . . . . . 3,586
120 Obourg Financiere. . . . . . . . . . . . . 106
6,790 UCB. . . . . . . . . . . . . . . . . . . . 5,241
_________
12,148
Value
BELGIUM - (Cont'd) (000)
_____________________________________________________________________________
Corporate Bond
5,445,000 BEL Kredietbank, 5.75%, 11/30/03 . . . . . . . $ 160
_________
Total Belgium . . . . . . . . . . . . . . . . . . . . 12,308
BRAZIL - 2.0%
_____________________________________________________________________________
Common Stocks
30 shs. Brazil Fund (USD). . . . . . . . . . . . . 1
20,600 * Cia Energetica de Sao Paulo
GDS (USD). . . . . . . . . . . . . . . . 340
45,140 * Companhia Energetica Minas
Gerais ADR (USD) . . . . . . . . . . . . 1,236
22,480,000 Companhia Siderurgica Nacional . . . . . . 1,025
3,601,928 Eletrobras . . . . . . . . . . . . . . . . 1,450
25,830,000 Telebras . . . . . . . . . . . . . . . . . 1,101
120,852 Telebras ADR (USD) . . . . . . . . . . . . 6,224
138,670 * Usiminas ADR (USD) . . . . . . . . . . . . 2,339
_________
13,716
Preferred Stocks, Rights & Warrants
1,150,333 Banco Bradesco . . . . . . . . . . . . . . 11
3,268,000 Brahma . . . . . . . . . . . . . . . . . . 1,141
267,777 wts. * Brahma, 9/30/96 . . . . . . . . . . . . . 24
2,686,000 shs. Cia Cimento Portland Itau. . . . . . . . . 1,200
15,281,000 Lojas Americanas . . . . . . . . . . . . . 476
25,135,975 Telebras . . . . . . . . . . . . . . . . . 1,280
2,421,227 Telesp . . . . . . . . . . . . . . . . . . 1,232
35,805 rts. * Telesp . . . . . . . . . . . . . . . . . . 1
1,273,000 shs. Usiminas . . . . . . . . . . . . . . . . . 2,156
_________
7,521
_________
Total Brazil . . . . . . . . . . . . . . . . . . . . 21,237
CANADA - 0.3%
_____________________________________________________________________________
Common Stocks
80,110 Alcan Aluminium. . . . . . . . . . . . . . 2,147
57,560 MacMillan Bloedel. . . . . . . . . . . . . 792
27,710 Royal Bank of Canada . . . . . . . . . . . 584
_________
Total Canada . . . . . . . . . . . . . . . . . . . . 3,523
CHILE - 0.8%
_____________________________________________________________________________
Common Stocks & Warrants
85,801 Chile Fund (USD) . . . . . . . . . . . . . 4,247
27,940 Chilectra ADR (USD). . . . . . . . . . . . 1,428
11,750 Compania de Telefonos de Chile
ADR (USD). . . . . . . . . . . . . . . . 1,096
101,230 Five Arrows Chile Fund (USD) . . . . . . . 280
20,246 wts. * Five Arrows Chile Fund,
5/31/99 (USD). . . . . . . . . . . . . . 14
43,910 shs. Genesis Chile Fund (USD) . . . . . . . . . 1,482
_________
Total Chile . . . . . . . . . . . . . . . . . . . . 8,547
DENMARK - 0.2%
_____________________________________________________________________________
Common Stocks
19,540 Den Danske Bank. . . . . . . . . . . . . . 1,050
8,200 Teledanmark. . . . . . . . . . . . . . . . 472
20,260 * Unidanmark . . . . . . . . . . . . . . . . 813
_________
Total Denmark . . . . . . . . . . . . . . . . . . . . 2,335
FINLAND - 0.3%
_____________________________________________________________________________
Preferred Stock
20,010 Nokia. . . . . . . . . . . . . . . . . . . 3,017
Value
FRANCE - 7.0% (000)
_____________________________________________________________________________
Common Stocks & Warrants
38,460 shs. Accor. . . . . . . . . . . . . . . . . . . $ 4,564
25,300 CMB Packaging. . . . . . . . . . . . . . . 903
10,870 Carrefour. . . . . . . . . . . . . . . . . 4,793
8,230 Chargeurs. . . . . . . . . . . . . . . . . 2,054
49,536 Cie de St. Gobain. . . . . . . . . . . . . 6,283
4,970 Clarins. . . . . . . . . . . . . . . . . . 480
91,832 Eaux Cie Generale. . . . . . . . . . . . . 8,410
14,717 Ecco . . . . . . . . . . . . . . . . . . . 1,901
540 Ecco Travail Temporaire. . . . . . . . . . 34
14,500 GTM Entrepose. . . . . . . . . . . . . . . 1,107
4,696 L'Oreal. . . . . . . . . . . . . . . . . . 1,020
19,816 LVMH . . . . . . . . . . . . . . . . . . . 3,195
36,666 Lafarge Coppee . . . . . . . . . . . . . . 2,908
35,370 Lapeyre. . . . . . . . . . . . . . . . . . 1,924
1,770 Legrand. . . . . . . . . . . . . . . . . . 2,372
32,990 * Peugeot. . . . . . . . . . . . . . . . . . 4,940
14,038 Pinault Printemps Redoute. . . . . . . . . 2,533
28,160 Poliet . . . . . . . . . . . . . . . . . . 2,160
3,302 Primagaz . . . . . . . . . . . . . . . . . 566
662 wts. * Primagaz, 6/30/95. . . . . . . . . . . . . 9
4,410 shs. Promodes . . . . . . . . . . . . . . . . . 859
7,350 Rexel. . . . . . . . . . . . . . . . . . . 1,019
7,950 Societe Generale de France . . . . . . . . 897
45,820 Societe Nationale Elf Aquitaine. . . . . . 3,386
59,256 Television Francaise . . . . . . . . . . . 6,146
39,050 Total. . . . . . . . . . . . . . . . . . . 2,533
126,390 Valeo. . . . . . . . . . . . . . . . . . . 6,861
_________
Total France . . . . . . . . . . . . . . . . . . . . 73,857
GERMANY - 3.8%
_____________________________________________________________________________
Common Stocks & Warrants
2,148 Allianz Holdings . . . . . . . . . . . . . 3,285
107 * Allianz Holdings, new. . . . . . . . . . . 164
400 wts. * Allianz Holdings, 3/29/96 . . . . . . . . 274
2,098 shs. Ava Allgemeine Handels -
Der Verbr. . . . . . . . . . . . . . . . 792
13,390 Bayer. . . . . . . . . . . . . . . . . . . 3,112
2,422 Bayerische Motoren Werke . . . . . . . . . 1,248
2,040 Bilfinger & Berger . . . . . . . . . . . . 1,152
7,172 Deutsche Bank. . . . . . . . . . . . . . . 3,489
14,713 Gehe . . . . . . . . . . . . . . . . . . . 5,028
8,960 Hoechst. . . . . . . . . . . . . . . . . . 1,945
1,923 Kaufhof Holdings . . . . . . . . . . . . . 651
20,112 Mannesmann . . . . . . . . . . . . . . . . 5,376
3,528 Rhon Klinikum. . . . . . . . . . . . . . . 3,143
4,049 Schering . . . . . . . . . . . . . . . . . 2,694
5,751 Veba . . . . . . . . . . . . . . . . . . . 1,927
6,800 wts. * Veba International
Finance, 4/6/98. . . . . . . . . . . . . 744
10,392 shs. Volkswagen . . . . . . . . . . . . . . . . 3,020
4,800 wts. * Volkswagen International
Finance, 10/27/98. . . . . . . . . . . . 479
_________
38,523
Preferred Stocks
15,464 shs. * Fielmann . . . . . . . . . . . . . . . . . 542
1,476 Krones Finance . . . . . . . . . . . . . . 1,350
_________
1,892
_________
Total Germany . . . . . . . . . . . . . . . . . . . . 40,415
Value
HONG KONG - 3.8% (000)
_____________________________________________________________________________
Common Stocks
489,000 shs. Citic Pacific. . . . . . . . . . . . . . . $ 1,471
6,986,000 Great Eagle Holdings . . . . . . . . . . . 3,978
1,735,208 Hong Kong Land Holdings. . . . . . . . . . 4,446
3,264,000 Hopewell Holdings. . . . . . . . . . . . . 3,358
1,214,000 Hutchison Whampoa. . . . . . . . . . . . . 5,609
1,602,000 Swire Pacific 'A'. . . . . . . . . . . . . 12,231
2,192,000 Wharf Holdings . . . . . . . . . . . . . . 8,652
_________
Total Hong Kong . . . . . . . . . . . . . . . . . . . . 39,745
ITALY - 2.3%
_____________________________________________________________________________
Common Stocks & Warrants
372 Alleanza Assicurazioni,
savings shares . . . . . . . . . . . . . 3
170,561 Assicurazioni Generali . . . . . . . . . . 4,257
1,053,880 Banca Fideuram . . . . . . . . . . . . . . 1,250
71,780 Danieli & Company, savings
shares . . . . . . . . . . . . . . . . . 233
17,945 wts. * Danieli & Company, 11/30/99. . . . . . . . 15
79,467 shs. Imi. . . . . . . . . . . . . . . . . . . . 521
368,000 Istituto Naz Delle
Assicurazioni. . . . . . . . . . . . . . 532
380,630 Italgas. . . . . . . . . . . . . . . . . . 1,162
2,745,812 * Montedison . . . . . . . . . . . . . . . . 2,258
24,510 RAS. . . . . . . . . . . . . . . . . . . . 304
112,500 Rinascente . . . . . . . . . . . . . . . . 603
386,000 SME Meridonale Di. . . . . . . . . . . . . 984
268,000 Sasib, savings shares. . . . . . . . . . . 854
896,680 Stet . . . . . . . . . . . . . . . . . . . 2,708
381,120 Stet, savings shares . . . . . . . . . . . 943
1,694,777 Telecom Italia . . . . . . . . . . . . . . 4,631
1,186,016 Telecom Italia, savings
shares . . . . . . . . . . . . . . . . . 2,633
_________
23,891
Corporate Bond
107,670,000 ITL Danieli & Company, 7.25%, 1/1/00 . . . . . 55
_________
Total Italy . . . . . . . . . . . . . . . . . . . . 23,946
JAPAN - 22.1%
Common Stocks
59,000 shs. Advantest. . . . . . . . . . . . . . . . . 2,071
213,000 * Alps Electric. . . . . . . . . . . . . . . 2,881
369,000 Amada. . . . . . . . . . . . . . . . . . . 4,877
97,000 Aoyama Trading . . . . . . . . . . . . . . 2,985
369,000 Canon. . . . . . . . . . . . . . . . . . . 6,858
220,000 Citizen Watch Company. . . . . . . . . . . 1,817
309,000 * Dai Nippon Screen Manufacturing. . . . . . 2,492
84,000 Daifuku. . . . . . . . . . . . . . . . . . 1,284
324,000 Daiichi Pharmaceutical . . . . . . . . . . 4,918
407,000 Daiwa House. . . . . . . . . . . . . . . . 5,631
702 East Japan Railway . . . . . . . . . . . . 3,501
80,000 Fanuc. . . . . . . . . . . . . . . . . . . 3,882
545,000 Hitachi. . . . . . . . . . . . . . . . . . 5,684
354,000 Hitachi Zosen. . . . . . . . . . . . . . . 2,072
126,000 Honda Motor Company. . . . . . . . . . . . 2,199
213,000 Inax . . . . . . . . . . . . . . . . . . . 2,265
209,000 * Ishihara Sangyo. . . . . . . . . . . . . . 934
103,000 Ito-Yokado . . . . . . . . . . . . . . . . 5,626
74,000 Kawada Industries. . . . . . . . . . . . . 818
175,000 Kokuyo . . . . . . . . . . . . . . . . . . 4,499
Value
JAPAN - (Cont'd) (000)
_____________________________________________________________________________
692,000 shs. Komatsu. . . . . . . . . . . . . . . . . . $ 6,573
145,000 Komori . . . . . . . . . . . . . . . . . . 3,878
408,000 Kumagai Gumi . . . . . . . . . . . . . . . 2,052
394,000 Kuraray. . . . . . . . . . . . . . . . . . 5,004
133,000 Kyocera. . . . . . . . . . . . . . . . . . 10,135
236,000 Makita Electric Works. . . . . . . . . . . 4,459
179,000 Marui. . . . . . . . . . . . . . . . . . . 3,271
369,000 Matsushita Electric Industries . . . . . . 6,134
195,000 Mitsubishi . . . . . . . . . . . . . . . . 2,658
970,000 Mitsubishi Heavy Industries. . . . . . . . 7,902
119,000 Mitsubishi Paper . . . . . . . . . . . . . 909
544,000 Mitsui Fudosan . . . . . . . . . . . . . . 6,122
177,000 Mitsui Petrochemical Industries. . . . . . 1,670
96,100 Murata Manufacturing . . . . . . . . . . . 3,929
252,000 NEC. . . . . . . . . . . . . . . . . . . . 3,226
126,000 National House . . . . . . . . . . . . . . 1,886
369,000 Nippon Denso . . . . . . . . . . . . . . . 7,887
117,000 Nippon Hodo. . . . . . . . . . . . . . . . 2,066
2,125,000 Nippon Steel . . . . . . . . . . . . . . . 8,776
192,000 Pioneer Electronic . . . . . . . . . . . . 5,016
50,000 Sangetsu . . . . . . . . . . . . . . . . . 1,487
147,000 Sankyo . . . . . . . . . . . . . . . . . . 3,825
39,700 Sega Enterprises . . . . . . . . . . . . . 2,062
471,000 Sekisui Chemical . . . . . . . . . . . . . 4,839
388,000 Sekisui House. . . . . . . . . . . . . . . 4,407
28,000 Seven-Eleven Japan . . . . . . . . . . . . 2,295
407,000 Sharp. . . . . . . . . . . . . . . . . . . 7,606
133,000 Shinetsu Chemical. . . . . . . . . . . . . 2,829
87,800 Sony . . . . . . . . . . . . . . . . . . . 5,358
631,000 Sumitomo . . . . . . . . . . . . . . . . . 6,515
501,000 Sumitomo Electric. . . . . . . . . . . . . 7,501
191,000 Sumitomo Forestry. . . . . . . . . . . . . 3,215
78,000 TDK. . . . . . . . . . . . . . . . . . . . 3,834
73,000 Taisho Pharmaceutical. . . . . . . . . . . 1,342
501,000 Teijin . . . . . . . . . . . . . . . . . . 2,969
280,000 Tokio Marine & Fire Insurance. . . . . . . 3,325
87,000 Tokyo Electronics. . . . . . . . . . . . . 2,910
87,000 Tokyo Steel Manufacturing. . . . . . . . . 2,183
99,000 Toppan Printing. . . . . . . . . . . . . . 1,462
122,850 Yurtec . . . . . . . . . . . . . . . . . . 2,664
_________
Total Japan . . . . . . . . . . . . . . . . . . . . 233,475
MALAYSIA - 4.1%
_____________________________________________________________________________
Common Stocks & Warrants
2,969,000 Affin Holdings . . . . . . . . . . . . . . 4,997
448,000 Aokam Perdana. . . . . . . . . . . . . . . 3,700
138,000 * Aokam Perdana 'A'. . . . . . . . . . . . . 1,080
2,066,000 Berjaya Sports Toto. . . . . . . . . . . . 3,218
398,333 wts. * Commerce Asset Holdings, 6/27/98 . . . . . 803
1,668,000 shs. MBF Capital. . . . . . . . . . . . . . . . 2,011
837,600 Malaysian Helicopter . . . . . . . . . . . 2,065
2,407,000 Renong . . . . . . . . . . . . . . . . . . 3,768
855,000 Resorts World. . . . . . . . . . . . . . . 5,421
2,338,000 * Technology Resources Industries. . . . . . 9,105
1,320,000 United Engineers . . . . . . . . . . . . . 7,130
_________
Total Malaysia . . . . . . . . . . . . . . . . . . . . 43,298
Value
MEXICO - 4.3% (000)
_____________________________________________________________________________
Common Stocks
248,469 shs. Cemex 'B'. . . . . . . . . . . . . . . . . $ 2,336
38,560 Cifra 'C'. . . . . . . . . . . . . . . . . 104
2,589,232 * Cifra ADR (USD). . . . . . . . . . . . . . 7,373
142,715 Desc 'B' . . . . . . . . . . . . . . . . . 1,080
392,712 Grupo Embotellador de Mexico . . . . . . . 5,047
140,889 Grupo Financiero Banamex 'C' . . . . . . . 968
763,929 Grupo Financiero Bancomer 'C'. . . . . . . 885
67,245 Grupo Financiero Bancomer
ADS (USD). . . . . . . . . . . . . . . . 1,563
11,160 Grupo Financiero Bancomer
GDS (USD). . . . . . . . . . . . . . . . . 258
611,771 Grupo Industrial Maseca. . . . . . . . . . 997
16,040 * Grupo Iusacell ADS (USD) . . . . . . . . . 485
51,683 * Grupo Mexicano de Desarrollo
(Series B) ADS (USD) . . . . . . . . . . 937
72,196 Grupo Televisa GDS (USD) . . . . . . . . . 3,213
51,419 Panamerican Beverages ADR (USD). . . . . . 1,774
209,798 TMX ADS (USD) . . . . . . . . . . . . . . 11,723
451,068 Tolmex 'B' . . . . . . . . . . . . . . . . 6,696
_________
Total Mexico . . . . . . . . . . . . . . . . . . . . 45,439
NETHERLANDS - 7.5%
_____________________________________________________________________________
Common Stocks
71,478 ABN Amro . . . . . . . . . . . . . . . . . 2,539
54,545 AMEV . . . . . . . . . . . . . . . . . . . 2,268
53,658 Ahold. . . . . . . . . . . . . . . . . . . 1,578
43,605 Akzo . . . . . . . . . . . . . . . . . . . 5,506
106,668 CSM. . . . . . . . . . . . . . . . . . . . 4,397
1,561,230 Elsevier . . . . . . . . . . . . . . . . . 15,928
101,260 International Nederlanden Groep. . . . . . 4,739
30,415 Koninklijke PTT Nederland. . . . . . . . . 969
17,094 Nutricia . . . . . . . . . . . . . . . . . 923
108,731 Polygram . . . . . . . . . . . . . . . . . 4,837
108,200 Royal Dutch Petroleum. . . . . . . . . . . 12,592
39,035 Unilever . . . . . . . . . . . . . . . . . 4,647
254,753 Wolters Kluwer . . . . . . . . . . . . . . 18,419
_________
79,342
Preferred Stock
10,797 International Nederlanden Groep. . . . . . 46
_________
Total Netherlands . . . . . . . . . . . . . . . . . . . . 79,388
NEW ZEALAND - 2.3%
_____________________________________________________________________________
Common Stocks
833,500 Air New Zealand 'B'. . . . . . . . . . . . 2,386
44,391 Brierley Investments . . . . . . . . . . . 33
1,994,497 Carter Holt Harvey . . . . . . . . . . . . 4,837
190,080 Fernz. . . . . . . . . . . . . . . . . . . 679
3,074,000 Fletcher Challenge . . . . . . . . . . . . 8,287
1,302,750 Fletcher Challenge,
Forests Division . . . . . . . . . . . . 1,724
133,125 Independent Newspapers . . . . . . . . . . 397
1,043,200 Telecom Corporation of
New Zealand. . . . . . . . . . . . . . . 3,634
291,000 * Trust Bank . . . . . . . . . . . . . . . . 278
426,125 Wilson & Horton. . . . . . . . . . . . . . 2,098
_________
Total New Zealand 24,353
NORWAY - 1.1%
_____________________________________________________________________________
Common Stocks
34,740 Bergesen 'A' . . . . . . . . . . . . . . . 754
Value
NORWAY - (Cont'd) (000)
_____________________________________________________________________________
39,870 shs. Kvaerner Industier 'A' . . . . . . . . . . $ 1,646
149,671 Norsk Hydro. . . . . . . . . . . . . . . . 6,032
105,456 Orkla 'A'. . . . . . . . . . . . . . . . . 3,097
35,100 Saga Petroleum 'B' . . . . . . . . . . . . 400
_________
Total Norway 11,929
PORTUGAL - 0.2%
_____________________________________________________________________________
Common Stocks
34,362 Jeronimo Martins . . . . . . . . . . . . . 1,541
22,812 * Jeronimo Martins, new. . . . . . . . . . . 1,023
_________
Total Portugal . . . . . . . . . . . . . . . . . . . . 2,564
SINGAPORE - 2.3%
_____________________________________________________________________________
Common Stocks & Warrants
690,000 DBS Land . . . . . . . . . . . . . . . . . 2,420
207,000 Far East Levingston
Shipbuilding . . . . . . . . . . . . . . 1,022
271,000 Jurong Shipyard. . . . . . . . . . . . . . 2,436
121,000 Keppel . . . . . . . . . . . . . . . . . . 1,112
595,000 Neptune Orient Lines . . . . . . . . . . . 887
379,000 Overseas Union Enterprises . . . . . . . . 2,426
320,000 Sembawang Shipyard . . . . . . . . . . . . 2,484
233,000 Singapore Airlines . . . . . . . . . . . . 2,237
445,000 Singapore Land . . . . . . . . . . . . . . 2,864
50,800 Singapore Press. . . . . . . . . . . . . . 931
1,052,000 United Industrial. . . . . . . . . . . . . 1,089
328,627 United Overseas Bank . . . . . . . . . . . 3,603
164,117 wts. * United Overseas Bank, 6/17/97. . . . . . . 972
_________
Total Singapore . . . . . . . . . . . . . . . . . . . . 24,483
SOUTH KOREA - 0.6%
_____________________________________________________________________________
Common Stocks
12,240 shs. Hanil Securities . . . . . . . . . . . . . 223
20,400 Korea Electric Power . . . . . . . . . . . 776
26,000 Pohang Iron & Steel. . . . . . . . . . . . 3,004
400 Samsung Electronic . . . . . . . . . . . . 68
1,847 * Samsung Electronics
GDR (USD). . . . . . . . . . . . . . . . 113
44,600 * Samsung Electronics
GDS (USD). . . . . . . . . . . . . . . . 2,698
_________
Total South Korea . . . . . . . . . . . . . . . . . . . . 6,882
SPAIN - 1.7%
_____________________________________________________________________________
Common Stocks
10,511 Banco Popular Espanol. . . . . . . . . . . 1,320
60,000 Banco Santander. . . . . . . . . . . . . . 2,441
104,330 Centros Commerciales Pryca . . . . . . . . 1,718
111,488 ENDESA . . . . . . . . . . . . . . . . . . 5,115
16,290 FOSCA. . . . . . . . . . . . . . . . . . . 1,640
17,098 Gas Natural. . . . . . . . . . . . . . . . 1,449
97,560 Repsol . . . . . . . . . . . . . . . . . . 3,123
121,603 Telefonica de Espana . . . . . . . . . . . 1,647
_________
Total Spain . . . . . . . . . . . . . . . . . . . . 18,453
SWEDEN - 1.7%
_____________________________________________________________________________
Common Stocks
24,130 Asea 'A' . . . . . . . . . . . . . . . . . 1,755
237,175 Astra 'B'. . . . . . . . . . . . . . . . . 6,331
131,600 Atlas Copco 'B'. . . . . . . . . . . . . . 1,793
Value
SWEDEN - (Cont'd) (000)
_____________________________________________________________________________
75,530 shs. Electrolux 'B' . . . . . . . . . . . . . . $ 3,922
34,270 Esselte 'B'. . . . . . . . . . . . . . . . 472
25,800 Hennes & Mauritz 'B' . . . . . . . . . . . 1,428
76,900 Sandvik 'B'. . . . . . . . . . . . . . . . 1,304
10,220 Scribona 'B' . . . . . . . . . . . . . . . 73
20,240 Stora Kopparberg 'B' . . . . . . . . . . . 1,261
_________
Total Sweden 18,339
SWITZERLAND - 3.2%
Common Stocks & Warrants
9,432 BBC Brown Boveri . . . . . . . . . . . . . 8,097
4,195 CS Holdings. . . . . . . . . . . . . . . . 1,834
2,585 wts. * CS Holdings, 12/16/94. . . . . . . . . . . 22
3,081 shs. Ciba Geigy . . . . . . . . . . . . . . . . 1,795
1,350 wts. * Landis & Gyr, 2/15/95. . . . . . . . . . . 1
8,336 shs. Nestle . . . . . . . . . . . . . . . . . . 7,794
1,033 Roche Holdings . . . . . . . . . . . . . . 4,594
8,047 Sandoz . . . . . . . . . . . . . . . . . . 4,012
9,130 Swiss Bank . . . . . . . . . . . . . . . . 2,632
3,120 Union Bank of Switzerland. . . . . . . . . 2,924
_________
Total Switzerland . . . . . . . . . . . . . . . . . . . . 33,705
THAILAND - 1.7%
_____________________________________________________________________________
Common Stocks
62,400 Advanced Information Service . . . . . . . 1,082
330,200 Bangkok Bank . . . . . . . . . . . . . . . 3,577
391,000 Bank of Ayudhya. . . . . . . . . . . . . . 1,530
39,000 Land & House . . . . . . . . . . . . . . . 801
29,000 Shinawatra Computer &
Communication. . . . . . . . . . . . . . 903
33,200 Siam Cement. . . . . . . . . . . . . . . . 1,916
198,800 Siam Commercial Bank . . . . . . . . . . . 2,058
334,800 Siam Pulp & Paper. . . . . . . . . . . . . 1,182
383,500 Thai Farmers Bank. . . . . . . . . . . . . 3,385
48,000 United Communications. . . . . . . . . . . 1,417
_________
Total Thailand . . . . . . . . . . . . . . . . . . . . 17,851
UNITED KINGDOM - 12.8%
_____________________________________________________________________________
Common Stocks
825,440 Abbey National . . . . . . . . . . . . . . 5,602
486,000 Argos. . . . . . . . . . . . . . . . . . . 2,567
727,200 Argyll Group . . . . . . . . . . . . . . . 3,121
2,044,530 Asda Group . . . . . . . . . . . . . . . . 2,006
214,000 BAA. . . . . . . . . . . . . . . . . . . . 1,799
522,200 British Gas. . . . . . . . . . . . . . . . 2,485
309,000 British Petroleum. . . . . . . . . . . . . 2,203
1,193,200 Cable & Wireless . . . . . . . . . . . . . 8,234
484,444 Cadbury Schweppes. . . . . . . . . . . . . 3,460
1,328,350 Caradon. . . . . . . . . . . . . . . . . . 5,800
389,000 Coats Viyella. . . . . . . . . . . . . . . 1,244
294,750 David S. Smith . . . . . . . . . . . . . . 2,470
431,840 East Midlands Electricity. . . . . . . . . 4,844
97,000 Eastern Electricity. . . . . . . . . . . . 1,259
221,000 First National Finance . . . . . . . . . . 242
470,650 Glaxo Holdings . . . . . . . . . . . . . . 4,595
840,000 Grand Metropolitan . . . . . . . . . . . . 5,728
738,000 Guinness . . . . . . . . . . . . . . . . . 5,624
Value
UNITED KINGDOM - (Cont'd) (000)
_____________________________________________________________________________
89,000 shs. Heath. . . . . . . . . . . . . . . . . . . $ 339
198,576 Heywood Williams Group . . . . . . . . . . 935
406,300 Hillsdown Holdings . . . . . . . . . . . . 1,113
450,300 John Laing . . . . . . . . . . . . . . . . 1,741
564,977 Kingfisher . . . . . . . . . . . . . . . . 4,351
624,000 Ladbroke Group . . . . . . . . . . . . . . 1,531
418,670 London Electricity . . . . . . . . . . . . 4,950
1,231,490 National Westminster Bank. . . . . . . . . 10,109
149,600 * Polly Peck International . . . . . . . . . 7
358,960 RTZ. . . . . . . . . . . . . . . . . . . . 5,025
655,000 Rank Organisation. . . . . . . . . . . . . 4,295
601,570 Reed International . . . . . . . . . . . . 7,368
242,000 Rolls Royce. . . . . . . . . . . . . . . . 689
331,000 Sears. . . . . . . . . . . . . . . . . . . 576
497,990 Shell Transport & Trading. . . . . . . . . 5,969
1,058,560 Smithkline Beecham, equity units . . . . . 6,457
104,000 South Western Electricity. . . . . . . . . 1,350
103,888 Spring Ram . . . . . . . . . . . . . . . . 76
863,000 T & N. . . . . . . . . . . . . . . . . . . 3,034
586,903 Tesco. . . . . . . . . . . . . . . . . . . 2,251
1,698,080 Tomkins. . . . . . . . . . . . . . . . . . 5,887
500,620 United Newspapers. . . . . . . . . . . . . 4,159
_________
135,495
Preferred Stock
84,000 First National Finance,
Cum. Cv., 7.00%. . . . . . . . . . . . . 172
_________
Total United Kingdom . . . . . . . . . . . . . . . . . . . . 135,667
SHORT-TERM INVESTMENTS - 7.3%
_____________________________________________________________________________
Commercial Paper
$10,000,000 American General Investment,
4.90%, 11/21/94. . . . . . . . . . . . . 9,955
5,000,000 Banque Nationale de Paris,
5.02%, 12/1/94 . . . . . . . . . . . . . 5,000
10,000,000 British Telecommunications,
5.00%, 11/29/94. . . . . . . . . . . . . 9,935
5,000,000 Caisse des Depots,
4.90%, 11/23/94. . . . . . . . . . . . . 4,976
5,000,000 Canadian Wheat Board,
4.83%, 11/15/94. . . . . . . . . . . . . 4,940
4,000,000 Ciesco L.P., 4.90%, 11/22/94 . . . . . . . 3,981
5,280,000 Delaware Funding Corporation,
4.85%, 11/18/94. . . . . . . . . . . . . 5,259
5,000,000 Hanson Finance, 4.90%, 12/1/94 . . . . . . 4,948
1,240,000 Harvard University,
4.75%, 11/1/94 . . . . . . . . . . . . . 1,240
5,000,000 New South Wales Treasury,
5.00%, 11/10/94. . . . . . . . . . . . . 4,975
5,000,000 Preferred Receivables Funding,
4.85%, 12/12/94. . . . . . . . . . . . . 4,937
3,000,000 Republic National Bank New York,
4.86%, 11/16/94. . . . . . . . . . . . . 2,964
12,000,000 Walt Disney Company,
5.40%, 1/10/95 . . . . . . . . . . . . . 11,854
_________
74,964
Other
2,000,000 Corporate Asset Funding, Floating
Rate Medium-Term Note,
4.98%, 12/12/94 . . . . . . . . . . . . 2,000
_________
Total Short-Term Investments . . . . . . . . . . . . . . . . . 76,964
Total Investments in Securities - 98.3%
(Cost - $925,238) . . . . . . . . . . . . . . . . . . . .$1,040,697
Other Assets Less Liabilities - 1.7% . . . . . . . . . . . . . 17,781
_________
Net Assets Consisting of:
Accumulated net investment income -
net of distributions . . . . . . . . . . . . . . $ 9,429
Accumulated realized gains/losses -
net of distributions . . . . . . . . . . . . . . 39,249
Net unrealized appreciation
of investments . . . . . . . . . . . . . . 114,861
Paid-in-capital applicable to 72,555,704
shares of $0.01 par value capital
stock outstanding; 1,000,000,000
shares authorized . . . . . . . . . . . . . . 894,939
_________
Net Assets - 100.0% . . . . . . . . . . . . . . $1,058,478
_________
_________
Net Asset Value Per Share. . . . . . . . . . . . . $14.59
______
______
* - Non-income producing
(BEL) - Belgian franc denominated
(DEM) - German deutschemark denominated
(FRF) - French franc denominated
(ITL) - Italian lira denominated
(JPY) - Japanese yen denominated
(NLG) - Dutch guilder denominated
(UK) - British pound denominated
(USD) - U.S. dollar denominated
The accompanying notes are an integral part of these financial statements.
_____________________________________________________________________________
STATEMENT OF OPERATIONS
Foreign Equity Fund / Year Ended October 31, 1994
_____________________________________________________________________________
Amounts in Thousands
______________________
Investment Income
Income
Dividends (net of foreign taxes of $1,856) . . . . $12,653
Interest . . . . . . . . . . . . . . . . . . . . . 2,620
_______
Total income . . . . . . . . . . . . . . . . . . . $15,273
Expenses
Investment management fees . . . . . . . . . . . . 5,137
Custodian and accounting fees
& expenses . . . . . . . . . . . . . . . . . . . 531
Shareholder servicing fees
& expenses . . . . . . . . . . . . . . . . . . . 182
Registration fees & expenses . . . . . . . . . . . 132
Legal & auditing fees. . . . . . . . . . . . . . . 35
Directors' fees & expenses . . . . . . . . . . . . 18
Prospectus & shareholder reports . . . . . . . . . 4
_______
Total expenses . . . . . . . . . . . . . . . . . . 6,039
_______
Net investment income. . . . . . . . . . . . . . . . 9,234
_______
Realized and Unrealized Gain (Loss)
on Investments
Net realized gain (loss)
Securities . . . . . . . . . . . . . . . . . . . . 41,026
Foreign currency transactions. . . . . . . . . . . (543)
_______
Net realized gain . . . . . . . . . . . . . . . . . 40,483
Change in net unrealized appreciation
or depreciation
Securities . . . . . . . . . . . . . . . . . . . . 29,416
Other assets and liabilities
denominated in foreign currencies . . . . . . . . (1,410)
_______
Change in net unrealized appreciation
or depreciation. . . . . . . . . . . . . . . . . . 28,006
_______
Net gain on investments. . . . . . . . . . . . . . . 68,489
_______
Increase in Net Assets
from Operations. . . . . . . . . . . . . . . . . . $77,723
_______
_______
The accompanying notes are an integral part of these financial statements.
_____________________________________________________________________________
STATEMENT OF CHANGES IN NET ASSETS
Foreign Equity Fund
_____________________________________________________________________________
Year Ten Months Year
Ended Ended Ended
October 31, October 31, December 31,
1994 1993* 1992
__________ __________ __________
Amounts in Thousands
____________________________________
Increase (Decrease) in Net Assets
Operations
Net investment income. . . . . . . . $ 9,234 $ 4,866 $ 2,813
Net realized gain
on investments. . . . . . . . . . . 40,483 7,964 2,203
Change in net unrealized
appreciation or depreciation
of investments. . . . . . . . . . . 28,006 92,464 (12,676)
_________ _________ _________
Increase (decrease) in
net assets from
operations. . . . . . . . . . . . . 77,723 105,294 (7,660)
_________ _________ _________
Distributions to shareholders
Net investment income. . . . . . . . (3,387) - (4,204)
Net realized gain on
investments . . . . . . . . . . . . (7,901) - (2,336)
_________ _________ _________
Decrease in net assets
from distributions to
shareholders . . . . . . . . . . . . (11,288) - (6,540)
_________ _________ _________
Capital share transactions
Sold 42,077, 18,423,
and 10,947 shares . . . . . . . . . 589,524 209,581 114,053
Distributions reinvested
of 532, 0, and 367 shares. . . . . 7,219 - 3,699
Redeemed 6,787, 5,474,
and 934 shares. . . . . . . . . . . (94,089) (64,465) (9,768)
_________ _________ _________
Increase in net assets from
capital share transactions. . . . . 502,654 145,116 107,984
_________ _________ _________
Net equalization . . . . . . . . . . . - - 1,373
_________ _________ _________
Total increase . . . . . . . . . . . . 569,089 250,410 95,157
Net Assets
Beginning of period. . . . . . . . . 489,389 238,979 143,822
_________ _________ _________
End of period. . . . . . . . . . . . $1,058,478 $ 489,389 $ 238,979
_________ _________ _________
_________ _________ _________
*The Fund's fiscal year-end was changed to October 31.
The accompanying notes are an integral part of these financial statements.
_____________________________________________________________________________
NOTES TO FINANCIAL STATEMENTS
Foreign Equity Fund / October 31, 1994
_____________________________________________________________________________
Note 1 - Significant Accounting Policies
_____________________________________________________________________________
Institutional International Funds, Inc. (the Corporation) is registered under
the Investment Company Act of 1940. The Foreign Equity Fund (the Fund), a
diversified, open-end management investment company, is the sole portfolio
currently 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 - Foreign currency amounts are translated into U.S.
dollars at prevailing exchange rates as follows: assets and liabilities at the
rate of exchange at the end of the respective period, purchases and sales of
securities and income and expenses at the rate of exchange prevailing on the
dates of such transactions. The effect of changes in foreign exchange rates on
realized and unrealized security gains or losses is reflected as a component
of such gains or losses.
C) Other - Income and expenses are recorded on the accrual basis. Investment
transactions are accounted for on the trade date. Realized gains and losses
are reported on an 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 which may differ from generally accepted accounting
principles. Effective January 1, 1993, the Fund discontinued its practice of
equalization. The results of operations and net assets were not affected by
this change.
Note 2 - Investment Transactions
_____________________________________________________________________________
As a part of its investment program, the Fund engages in the following
activities, the nature and risk of which are set forth more fully in the
Fund's Prospectus and Statement of Additional Information.
A) Emerging Markets - The Fund has 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) Forward Currency Exchange Contracts - At October 31, 1994, the Fund was a
party to various forward currency exchange contracts under which it is
obligated to exchange currencies at specified future dates. Risks arise from
the possible inability of counterparties to meet the terms of their contracts
and from movements in currency values. Outstanding contracts at October 31,
1994, are as follows:
Unrealized
Contract to Apprec.
Value ________________________________ (Deprec.)
Date Receive Deliver in USD Counterparty
_____ _______________ _______________ _______ ___________
Amounts in Thousands
_________________________________
11/94 NLG 14,101 JPY 816,556 (86) Chase Manhattan Bank
11/94 JPY 785,922 NLG 14,101 (231) Chase Manhattan Bank
11/94 FRF 43,068 JPY 813,432 (55) Chase Manhattan Bank
11/94 JPY 784,060 FRF 43,068 (249) Chase Manhattan Bank
11/94 JPY 785,500 DEM 12,568 (230) Chase Manhattan Bank
11/94 DEM 12,568 JPY 788,956 194 Chase Manhattan Bank
Net unrealized depreciation of $657,000 on these contracts at October 31,
1994, is included in the accompanying financial statements, of which $194,000
relates to appreciated contracts and $851,000 to depreciated contracts
C) Other - Purchases and sales of portfolio securities, other than short-term
and U.S. Government securities, aggregated $576,292,000 and $148,457,000,
respectively, for the year ended October 31, 1994.
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.
In order for the Fund's capital accounts and distributions to
shareholders to reflect the tax character of certain transactions, $2,141,000
of undistributed net investment income was reclassified as an increase to
undistributed net realized gains during the year ended October 31, 1994. The
results of operations and net assets were not affected by the
reclassifications.
At October 31, 1994, the aggregate cost of investments for federal
income tax and financial reporting purposes was $925,238,000 and net
unrealized appreciation aggregated $115,459,000, of which $132,073,000 related
to appreciated investments and $16,614,000 to depreciated investments.
Note 4 - Related Party Transactions
_____________________________________________________________________________
The Fund is managed by Rowe Price-Fleming International, Inc. (Price-Fleming)
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
Price-Fleming (the Manager) provides for an annual investment management fee,
computed daily and paid monthly, equal to 0.70% of average daily net assets.
During the year ended October 31, 1994, the Fund, in the ordinary course
of business, paid commissions of $289,000 to, and placed security purchase and
sale orders aggregating $71,164,000 with, certain affiliates of the Manager in
connection with the execution of various portfolio transactions at the
direction of Price-Fleming.
T. Rowe Price Services, Inc. (TRPS) and Retirement Plan Services, Inc.
(RPS) are wholly owned subsidiaries of Price Associates. TRPS provides
transfer and dividend disbursing agent functions and shareholder services for
all accounts. RPS provides subaccounting and recordkeeping services for
certain retirement accounts invested in the Fund. Price Associates, under a
separate agreement, calculates the daily share price and maintains the
financial records of the Fund. For the year ended October 31, 1994, the Fund
incurred fees totalling approximately $276,000 for these services provided by
related parties. At October 31, 1994, these investment management and service
fees payable were $618,000.
<TABLE>
____________________________________________________________________________________________________________
FINANCIAL HIGHLIGHTS
Foreign Equity Fund
____________________________________________________________________________________________________________
<CAPTION>
For a share outstanding throughout each period
_________________________________________________________________
Ten From
Year Months September 7, 1989
Ended Ended Year Ended December 31, (Commencement of
October 31, October 31, _______________________ Operations) to
1994 1993# 1992 1991 1990 December 31, 1989
_________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD . . . . . . . $13.32 $10.05 $10.73 $ 9.54 $10.62 $10.00
______ ______ ______ ______ ______ ______
Investment Activities
Net investment income . . . . . . 0.09 0.13 0.17 0.18+ 0.23*+ 0.05*
Net realized and unrealized
gain (loss). . . . . . . . . . 1.48 3.14 (0.57) 1.28 (1.10) 0.61
______ ______ ______ ______ ______ ______
Total from Investment
Activities. . . . . . . . . . . . 1.57 3.27 (0.40) 1.46 (0.87) 0.66
______ ______ ______ ______ ______ ______
Distributions
Net investment income . . . . . . (0.09) - (0.18) (0.18) (0.21) (0.04)
Net realized gain . . . . . . . . (0.21) - (0.10) (0.09) - -
______ ______ ______ ______ ______ ______
Total Distributions. . . . . . . . . (0.30) - (0.28) (0.27) (0.21) (0.04)
______ ______ ______ ______ ______ ______
NET ASSET VALUE,
END OF PERIOD . . . . . . . . . . $14.59 $13.32 $10.05 $10.73 $ 9.54 $10.62
______ ______ ______ ______ ______ ______
______ ______ ______ ______ ______ ______
____________________________________________________________________________________________________________
RATIOS/SUPPLEMENTAL DATA
Total Return . . . . . . . . . . . . 12.0% 32.5% (3.7)% 15.4% (8.2)% 6.6%
Ratio of Expenses to Average
Net Assets. . . . . . . . . . . . 0.82% 0.86%! 0.99% 1.00%+ 1.01%*+ 1.10%!*
Ratio of Net Investment Income to
Average Net Assets. . . . . . . . 1.26% 1.65%! 1.49% 1.64% 2.23% 1.43%!
Portfolio Turnover Rate. . . . . . . 22.0% 27.4%! 35.1% 46.7% 44.6% 13.80%!
Net Assets, End
of Period (in thousands). . . . .$1,058,478 $489,389 $238,979 $143,822 $83,645 $50,252
<FN>
# The Fund's fiscal year-end was changed to October 31.
+ Excludes expenses in excess of a 1.00% voluntary expense limitation in effect from March 1, 1990,
through December 31, 1991.
* Excludes expenses in excess of a 1.10% voluntary expense limitation in effect through February 28,
1990.
! Annualized.
</FN>
</TABLE>
_____________________________________________________________________________
REPORT OF INDEPENDENT ACCOUNTANTS
_____________________________________________________________________________
To the Board of Directors of Institutional International Funds, Inc. and
Shareholders of the Foreign Equity Fund
We have audited the accompanying statement of net assets of Foreign
Equity Fund, (the sole portfolio of Institutional International Funds, Inc.),
as of October 31, 1994, and the related statement of operations for the year
then ended, the statement of changes in net assets for the year ended October
31, 1994, the ten month period ended October 31, 1993 and the year ended
December 31, 1992, and the financial highlights for the year ended October 31,
1994, the ten month period ended October 31, 1993 and each of the three years
in the period ended December 31, 1992 and for the period September 7, 1989
(commencement of operations) to December 31, 1989. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of investments
owned as of October 31, 1994 by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Foreign Equity Fund as of October 31, 1994, the results of its
operations, the changes in its net assets and financial highlights for each of
the respective periods stated in the first paragraph in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Baltimore, Maryland
November 17, 1994
Chart 1 - FISCAL-YEAR PERFORMANCE COMPARISON
Shows growth of $10,000 investment in Foreign Equity Fund in September 1989 to
$16,135 on October 31, 1994, and growth of $10,000 investment in MSCIEAFE
Index in September 1989 to $12,289 on October 31, 1994.
