Annual Report
Foreign Equity Fund
October 31, 1995
Fellow Shareholders
The year ended October 31 was disappointing for foreign stocks, and the
Foreign Equity Fund's slight positive return fell well short of the torrid
pace of U.S. stocks. Over the final three months of the fiscal year, the
fund's -2.30% return was somewhat better than the -4.50% return of the Morgan
Stanley Capital International Europe, Australia and Far East (MSCI EAFE)
Index.
Over the 12-month period, the fund's performance against the index was
helped by an under-weighting in Japan, which fared poorly in U.S. dollars.
However, our small position in Mexico adversely affected results, largely due
to the peso collapse last winter. During the past three months, the picture
was somewhat similar, with low exposure to Japan helping relative returns. But
stock selection was a plus during a period when growth stocks performed better
than cyclicals in several markets. During both periods, the fund was
moderately overweighted in Europe, which provided the best dollar returns
outside the U.S.
Few overseas markets matched Wall Street. The exuberant U.S. stock
market was driven by generally strong corporate earnings and by a realization
that inflation was under control, thereby reducing fears of rising interest
rates.
Overseas the picture was not as rosy. Japan was mired in recession and,
although monetary policy has been extremely loose, corporate earnings have
been disappointing. The recovery in Europe was patchy, with the German
locomotive restrained by strength in the deutschemark, and consumer spending
inhibited by the cost of reunification. In France, the economy made little
progress under the strong franc policy. Among European economies, only the
U.K. maintained momentum.
By contrast, Southeast Asia barreled ahead under the influence of
China's economic renaissance and rising levels of intraregional trade and
investment. Disappointingly, this vibrant economic performance did not
translate into superior stock returns. In Latin America, Mexico steered its
economy through a difficult period following the peso crisis. The Brazilian
economy maintained its stride without the reappearance of trade and inflation
problems, which have troubled the country in the past.
Currency markets had another turbulent year. Early in 1995, the dollar
was weak against European currencies and fell to an all-time low versus the
yen. In recent months, these markets have been more settled and the dollar
appears to be at levels more acceptable to the U.S. and its major trading
partners.
Market Performance
3 Months Ended 10/31/95
_______________________________________
Local Currency
Local vs. U.S. In U.S.
Currency Dollars Dollars
______________________________________
Austria -9.6% -2.0% -11.4%
France -4.0 -2.4 -6.3
Germany -3.1 -2.0 -5.0
Hong Kong 2.6 0.1 2.7
Italy -7.3 -0.5 -7.8
Japan 6.2 -13.9 -8.6
Mexico -2.6 -14.4 -16.2
Netherlands -0.7 -2.0 -2.7
Norway -5.4 -1.8 -7.0
Singapore -4.1 -1.5 -5.6
Sweden 0.1 6.1 6.2
Switzerland 9.7 0.9 10.6
United Kingdom 2.1 -1.4 0.7
Source: NWSL Quantitative Products Group, using MSCI Indices
Investment Environment
Far East
A year ago, the economy in Japan showed tentative signs of recovery, but faded
in the spring when the yen hit new highs against the dollar and the full
extent of the banking crisis became apparent. With consumer spending still
slow, there was a serious possibility that the economy might enter a
deflationary cycle. Business was unwilling to invest and consumers were
reluctant to spend.
The wholesale price index showed a moderate annual decline, and the Bank
of Japan adopted a stimulative monetary policy. There are a number of reasons
to believe the economy has passed the worst point in this cycle. First, the
yen has weakened significantly from its spring highs versus the dollar, and
this should help the hard-pressed export sector. Second, the government
recently announced another supplementary budget with new expenditures of about
$80 billion, a strong fiscal stimulus at a time when monetary policy is
already supportive. Finally, the authorities appear to have grasped the need
to address the banking crisis and related problems of real estate loans.
Given the poor economic conditions, it is not surprising that the stock
market was dull over the year, although its volatility was moderated by
currency translation. The fund was underweighted here, largely because we
avoided the troubled financial sector, which forms a large part of the index.
Rather, our focus was on economically sensitive areas including technology
stocks, which performed well as the yen weakened.
Elsewhere in Asia, economic growth was surprisingly strong considering
that China's rapid growth moderated substantially and Japan provided little
stimulus. This growth was partly due to an increase in intraregional Asian
trade as prosperous countries in the area invested in the less developed
markets. If anything, it was the strength of the U.S. economy that drove
growth rates here, since it is the region's largest export market.
An important development in the region was growing optimism that China
will be able to achieve an economic "soft landing" with decelerating growth,
slowing inflation, and rising exports that should produce a trade account
surplus.
In Hong Kong, inflation and growth also slowed, but low interest rates
supported the stock market. In Singapore, stocks fell modestly in the quarter
and the market was lower than a year ago. This was surprising, since this
model economy has maintained high savings rates and high levels of corporate
investment with low inflation and a healthy current account surplus. Stock
valuations are at the low end of historical ranges, and we added modestly to
holdings here.
CHART 1: GEOGRAPHIC DIVERSIFICATION PIE CHART
The Malaysian economy also showed high growth rates. However, unlike in
Singapore, there were signs of overheating with labor shortages, rising
inflation, and pressure on the current account. The picture was similar in
Thailand, where accelerating capital imports produced a current account
deficit and inflation rose steadily all year. Not surprisingly, these two
markets were the weakest in the region.
Australia and New Zealand are much further along in their economic
cycles, which accounted for better stock performance. Problems continued in
Australia, with the current account deficit uncomfortably high as a percentage
of GDP. New Zealand's prospects appear brighter, since the economy enjoyed
both a fiscal and current account surplus.
Europe
In Europe, the broad picture is of slow economic recovery with inflation under
control, helped by currency strength versus the U.S. dollar. In Germany,
exports and capital investment remained strong, and higher than expected wage
settlements should help consumer spending recover from depressed levels. A
continuing recovery in the former East Germany should help underpin growth,
which we expect to be steady and prolonged rather than spectacular. With a
somewhat disappointing rate of economic growth, stocks performed poorly for
most of the year, although returns for U.S. investors were boosted by the
strong mark.
The situation was similar in the Netherlands, but the domestic economy
is of limited relevance to the Dutch stock market, which is dominated by a
small number of multinational companies. The fund's largest European positions
were in this market, where we found well-managed firms that maintained
earnings growth, despite the dull European economic environment.
The United Kingdom has by far the largest stock market in Europe, and it
was well represented in the fund. Our holdings featured well-managed
multinationals that are leaders in their fields. Examples include Glaxo and
SmithKline Beecham, both of which performed well as investor sentiment favored
the pharmaceutical sector. The overall economy demonstrated steady growth as
exports and capital spending led the way while consumer spending was subdued.
Recent signs suggest that the U.K. recovery is running out of steam, which
should give the government an opportunity to reduce interest rates.
When France elected Jacques Chirac as its president, the electorate
seemed to believe his claim that he could continue a strong franc policy while
reducing the stubbornly high level of unemployment. The financial markets were
less convinced that these policy aims were compatible, and the franc came
under pressure following the resignation of the finance minister. The latest
indications from this administration suggested that fiscal prudence will be
the cornerstone of its policy, but much rests on the hope that the German
locomotive will begin pulling Continental Europe toward higher growth.
Although the Nordic economies were troubled by stagnation and political
uncertainty, their stock markets were among the best in Europe. Leading the
way was Sweden, which was one of the few overseas markets to outperform the
U.S. Attention focused mostly on a couple of multinational companies that
dominate the index, but the fund's position in pharmaceutical manufacturer
Astra also did well. In Finland, for most of the year the market rise was led
by our key holding Nokia Oy 'A,' the mobile telephone manufacturer.
Latin America
The markets of Latin America experienced a roller coaster ride during the past
12 months. The fund's largest position was in Brazil, where the economy
progressed at a pace steady enough to forestall a resurgence of the inflation
and trade problems that besieged the country in the past. This gave President
Cardoso breathing room to introduce reforms in state spending, budget
priorities, and social security. With the real (local currency) holding up
well against the U.S. dollar, we are optimistic that Brazil is as close as
ever to realizing some of its great potential.
In Mexico, the economy suffered the inevitable traumas following the
heavy devaluation of the peso at the beginning of the year. The short-term
medicine of high real interest rates and savage cuts in public spending sent
the economy into a recession. Confidence is now returning, underpinned by
NAFTA and the reappearance of a small trade surplus.
Investment Policy and Outlook
Although fund performance was reasonable versus the benchmark, many
shareholders are no doubt disappointed that returns were well behind those of
U.S. stocks. Most of you realize that there will be periods when your fund
lags Wall Street. However, to those who remain concerned, I would like to
offer some comments.
First, a program of international diversification should be based only
on a long-term perspective. Inevitably there have been and will be periods
when the fund and international stocks in general get left behind. The past
fiscal year was one of those periods.
Regarding the fundamentals that drive stock markets, the two greatest
influences are the anticipated direction of interest rates and comparisons
between corporate earnings and investor expectations. Both of these factors
were positive in the U.S. this year. Low inflation generated optimism that
interest rates might fall further, while market observers were constantly
surprised by just how profitable and lean corporate America has become.
Finally, there was a renewed interest in technology, where many U.S. companies
lead the world.
Overseas it was much different. The economies of Japan and Europe were
well behind the U.S. Japan is suffering the longest recession in many years,
and the recovery in Europe was slower and more halting than expected. Adding
to these difficulties, several major central banks were slow to reverse a
tight monetary policy, resulting in interest rates that were too high for this
point in the cycle.
Looking to the future, we believe the factors that drive stock markets
will turn more positive overseas, while they may have already peaked in the
U.S. If inflation in Europe remains below expectations, as we believe it will,
interest rates should fall further. Consistent with this view, several central
banks are now able to loosen monetary policy to spur faltering economies. The
next phase should be stronger growth in corporate earnings. A weaker Japanese
yen combined with a strong fiscal stimulus should finally get this economy
moving again.
The smaller economies of Asia have performed well for a few years, but
their stock markets have suffered a long hangover following the rampant 1993
bull market in this region. Valuations here are now attractive by historical
standards, and we are comfortable being overweighted in this part of the
world. Latin American stocks gave investors an uncomfortable ride, but we see
no reason to abandon them. Over long periods, these markets have contributed
positively to your fund's returns, and we are confident they will again as
fundamentals in the region improve.
Patience has always been the hallmark of successful investment programs.
The case for international diversification remains intact, and we believe the
long-term investor will again reap the rewards of international investing that
they enjoyed in the past.
Respectfully submitted,
Martin G. Wade
President
November 17, 1995
INDUSTRY
DIVERSIFICATION
October 31, 1995
Percent of
Net Assets
______________
Services 22.6%
Finance 16.3
Capital Equipment 16.0
Consumer Goods 14.8
Energy 10.7
Materials 9.2
Multi-Industry 3.1
Reserves 7.3
_______
Net Assets 100.0%
SECURITY CLASSIFICATION
October 31, 1995
Percent of Cost Market Value
Net Assets (000) (000)
______________________________________________________________________
Common Stocks,
Rights, and Warrants 89.9% $ 1,305,740 $ 1,402,496
Preferred Stocks,
Rights, and Warrants 2.7 43,343 42,173
Bonds 0.1 547 574
Short-Term Investments 5.9 92,437 92,437
Total Investments 98.6 1,442,067 1,537,680
Other Assets
Less Liabilities 1.4 21,944 21,939
______ ___________ ___________
Net Assets 100.0% $ 1,464,011 $ 1,559,619
TWENTY-FIVE LARGEST HOLDINGS
October 31, 1995
Percent of
Company Country Net Assets
______________________________________________________________________
Wolters Kluwer Netherlands 2.3%
Elsevier Netherlands 1.8
Royal Dutch Petroleum Netherlands 1.3
National Westminster Bank United Kingdom 1.2
SmithKline Beecham United Kingdom 1.2
Reed International United Kingdom 1.1
BBC Brown Boveri & Cie Switzerland 1.0
Kyocera Japan 0.9
Eaux Cie Generale France 0.9
Roche Holdings Switzerland 0.9
Astra Sweden 0.8
United Engineers Malaysia 0.8
Hutchison Whampoa Hong Kong 0.8
Nestle Switzerland 0.8
Mitsubishi Heavy Industries Japan 0.8
Carrefour France 0.8
Polygram Netherlands 0.8
Nippon Denso Japan 0.7
Wharf Holdings Hong Kong 0.7
Shell Transport & Trading United Kingdom 0.7
Canon Japan 0.7
Gehe Germany 0.7
Norsk Hydro Norway 0.7
NEC Japan 0.7
Sumitomo Electric Japan 0.6
______
Total 23.7%
SUMMARY OF INVESTMENTS AND CASH
October 31, 1995
Percent of
Country Equities! Cash Total MSCI EAFE
_______ __________ _____ _____ ___________
Austria 0.1 - 0.1 0.3
Belgium 1.2 - 1.2 1.2
Denmark 0.3 - 0.3 0.8
Finland 0.2 - 0.2 0.7
France 7.4 - 7.4 6.5
Germany 4.4 - 4.4 6.9
Ireland - - - 0.3
Italy 1.8 - 1.8 2.3
Netherlands 9.1 - 9.1 4.0
Norway 1.5 - 1.5 0.5
Portugal 0.3 - 0.3 -
Spain 2.2 - 2.2 1.7
Sweden 2.2 - 2.2 2.1
Switzerland 4.2 - 4.2 6.1
United Kingdom 14.9 - 14.9 17.1
__________________________________________________________________
Total Europe 49.8% - 49.8% 50.6%
__________________________________________________________________
Australia 1.9 - 1.9 2.7
China 0.7 - 0.7 -
Hong Kong 3.5 - 3.5 3.2
Japan 21.8 - 21.8 39.6
Malaysia 3.0 - 3.0 2.2
New Zealand 0.9 - 0.9 0.4
Singapore 2.3 - 2.3 1.1
South Korea 1.6 - 1.6 -
Thailand 1.0 - 1.0 -
__________________________________________________________________
Total
Pacific Basin 36.7% - 36.7% 49.4%
__________________________________________________________________
Argentina 0.6 - 0.7 -
Brazil 2.6 - 2.6 -
Canada 0.4 - 0.4 -
Chile 0.9 - 0.9 -
Mexico 1.6 - 1.6 -
Peru 0.1 - 0.1 -
__________________________________________________________________
Total Americas 6.2% - 6.2% -
__________________________________________________________________
Short-Term Securities - 5.9 5.9 -
Other Assets
Less Liabilities - 1.4 1.4 -
__________________________________________________________________
Total 92.7% 7.3% 100.0% 100.0%*
__________________________________________________________________
! Includes bonds convertible into equities.
* Totals may not reflect the sum of individual weightings due to rounding.
EXCHANGE RATES TO U.S. DOLLARS
October 31, 1995
Country Exchange Rate
________________________________________________________________
Argentina 1.0001
Australia 1.3128
Austria 9.9015
Belgium 28.9400
Brazil 0.9618
Canada 1.3398
Denmark 5.4640
Finland 4.2476
France 4.8901
Germany 1.4076
Hong Kong 7.7317
Italy 1,594.0000
Japan 102.2950
Malaysia 2.5410
Mexico 7.1250
Netherlands 1.5778
New Zealand 1.5149
Norway 6.2270
Peru 2.2680
Portugal 148.3900
Singapore 1.4130
South Korea 765.1500
Spain 122.0550
Sweden 6.6406
Switzerland 1.1353
Thailand 25.1650
United Kingdom 0.6325
TOTAL RETURN PERFORMANCE
Periods Ended October 31, 1995
Calendar
One Three Year- One Three Since
Month Months to-Date Year Years** 9/7/89**
____________________________________________________________________________
Foreign Equity
Fund* -1.55% -2.30% 7.04% 0.64% 14.82% 8.20%
T. Rowe Price
International
Stock Fund -1.55 -2.34 6.80 0.38 14.63 8.36
S&P 500 Index -0.36 4.11 29.30 26.44 14.71 12.03
MSCI EAFE Index -2.66 -4.50 4.28 -0.07 15.00 3.66***
FT-A Euro
Pacific Index -2.61 -4.73 3.34 -1.08 14.66 3.31***
* An "institutional only" no-load mutual fund comparable to the T. Rowe
Price International Stock Fund. Total assets $1,559.6 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 2: PERFORMANCE COMPARISON LINE CHART
Note: The index return does not reflect expenses, which have been deducted
from the fund's return.
* Net of withholding taxes.
** Commencement of operations.
STATEMENT OF NET ASSETS
Foreign Equity Fund / October 31, 1995
Value
ARGENTINA - 0.6% (000)
COMMON STOCKS
55,230 shs Banco de Galicia
Buenos Aires 'B' ADR (USD) . . . . . . . $ 1,056
27,295 Banco Frances del
Rio de la Plata ADR (USD) . . . . . . . . 597
15,093 Buenos Aires
Embotelladora 'B' ADR (USD) . . . . . . . 345
13,780 Enron Global Power &
Pipeline (USD) . . . . . . . . . . . . . 326
308,144 Naviera Perez 'B' . . . . . . . . . . . . 1,359
218,900 *Sociedad Comercial del Plata . . . . . . 442
20,356 *Sociedad Comercial del Plata
ADR (USD) . . . . . . . . . . . . . . . . 412
20,487 Telecom Argentina ADS (USD) . . . . . . . 786
117,180 Telecom Argentina Stet 'B' . . . . . . . 451
97,904 Telefonica de Argentina 'B'
ADR (USD) . . . . . . . . . . . . . . . . 2,032
21,200 Telefonica de Argentina 'B'
ADS (USD) . . . . . . . . . . . . . . . . 440
33,618 Transportadora de Gas del Sur (USD) . . . 345
107,647 YPF Sociedad Anonima 'D'
ADR (USD) . . . . . . . . . . . . . . . . 1,843
______
Total Argentina . . . . . . . . . . . . . . . 10,434
AUSTRALIA - 1.9%
COMMON STOCKS
196,000 Amcor . . . . . . . . . . . . . . . 1,469
940,793 Australia Gas & Light . . . . . . . . . . 3,261
262,512 Broken Hill Proprietary . . . . . . . . . 3,555
627,537 Burns Philp & Company . . . . . . . . . . 1,405
205,789 Coca Cola Amatil . . . . . . . . . . . . 1,593
151,607 Lend Lease Corporation . . . . . . . . . 2,109
285,328 Mayne Nickless . . . . . . . . . . . . . 1,291
482,258 News Corporation . . . . . . . . . . . . 2,432
352,124 Publishing & Broadcasting . . . . . . . . 1,121
623,000 Tabcorp Holdings . . . . . . . . . . . . 1,732
265,258 Western Mining . . . . . . . . . . . . . 1,701
569,000 Westpac Banking . . . . . . . . . . . . . 2,336
548,000 Woodside Petroleum . . . . . . . . . . . 2,626
______
26,631
______
PREFERRED STOCKS
807,000 *Sydney Harbour Casino Holdings . . . . . 996
1,031,000 TNT, Cum. Cv., 8.00% . . . . . . . . . . 1,555
______
2,551
______
Total Australia . . . . . . . . . . . . . . . 29,182
AUSTRIA - 0.1%
COMMON STOCKS
9,862 Flughafen Wien . . . . . . . . . . . . . 634
16,710 Oesterreichische Elektrizitats . . . . . 1,021
______
1,655
______
PREFERRED STOCK
11,731 Creditanstalt - Bankverein . . . . . . . 585
______
Total Austria . . . . . . . . . . . . . . . 2,240
BELGIUM - 1.2%
COMMON STOCKS
7,011 Fortis . . . . . . . . . . . . . . . 752
10,699 Generale Banque . . . . . . . . . . . . . 3,486
28,831 Kredietbank . . . . . . . . . . . . . . . 7,263
5,587 UCB . . . . . . . . . . . . . . . 6,414
______
17,915
______
CONVERTIBLE BOND
15,157,500 BEL Kredietbank, 5.75%, 11/30/03 . . . . . . 520
______
Total Belgium . . . . . . . . . . . . . . . 18,435
BRAZIL - 2.6%
COMMON STOCKS
60,110 shs Brazil Fund (USD) . . . . . . . . . . . . 1,405
49,720,000 Companhia Siderurgica Nacional . . . . . 1,064
8,320,928 Eletrobras . . . . . . . . . . . . . . . 2,362
20,340 *Eletrobras ADR (USD) . . . . . . . . . . 290
37,430,000 Telecomunicacoes Brasilias . . . . . . . 1,243
______
6,364
______
PREFERRED STOCKS, RIGHTS AND WARRANTS
339,379,557 Banco Bradesco . . . . . . . . . . . . . 3,105
2,166,000 Banco Itau . . . . . . . . . . . . . . . 642
4,407,543 Brahma . . . . . . . . . . . . . . . 1,682
267,777 wts *Brahma, 9/30/96 . . . . . . . . . . . . 49
3,622,000 shs Brasmotor . . . . . . . . . . . . . . . . 847
3,725,000 Cia Cimento Portland Itau . . . . . . . . 983
20,600 Cia Energetica de Sao Paulo
ADS (USD) . . . . . . . . . . . . . . . . 211
46,508,300 Cia Energetica Minas Gerais . . . . . . . 996
2,220,757 rts *Cia Energetica Minas Gerais . . . . . . 0
23,857 shs Cia Energetica Minas Gerias
ADR (USD) . . . . . . . . . . . . . . . . 516
40,715 Cia Energetica Minas Gerais,
Non-Voting ADR (USD) . . . . . . . . . . 881
2,674,000 Cia Tecidos Norte de Minas . . . . . . . 834
37,644,000 Lojas Americanas . . . . . . . . . . . . 900
7,900,000 Petrol Brasileiros . . . . . . . . . . . 682
52,915,975 Telecomunicacoes Brasilias . . . . . . . 2,145
244,625 Telecomunicacoes Brasilias
ADR (USD) . . . . . . . . . . . . . . . . 9,938
22,573,681 Telecomunicacoes de Sao Paulo . . . . . . 3,239
23,399,000 Unibanco Uniao Banco . . . . . . . . . . 820
2,500,560,000 Usiminas . . . . . . . . . . . . . . . 2,340
12,540 Usiminas ADR (USD) . . . . . . . . . . . 116
303,510 Usiminas ADS (USD) . . . . . . . . . . . 2,808
______
33,734
______
Total Brazil . . . . . . . . . . . . . . . 40,098
CANADA - 0.4%
COMMON STOCKS
121,650 Alcan Aluminum . . . . . . . . . . . . . 3,870
78,510 MacMillan Bloedel . . . . . . . . . . . . 1,040
44,740 Royal Bank of Canada . . . . . . . . . . 1,006
______
Total Canada . . . . . . . . . . . . . . . 5,916
CHILE - 0.9%
COMMON STOCKS AND WARRANTS
10,996 AFP Providia ADR (USD) . . . . . . . . . 269
94,840 Chile Fund (USD) . . . . . . . . . . . . 2,158
25,379 Chilectra ADS (USD) . . . . . . . . . . . 1,066
41,091 Chilgener ADR (USD) . . . . . . . . . . . 986
26,794 Compania Cervecerias Unidas
ADS (USD) . . . . . . . . . . . . . . . . 620
17,588 Compania Telecomunicaciones
ADR (USD) . . . . . . . . . . . . . . . . 1,266
77,958 Empresa Nacional de Electric
ADS (USD) . . . . . . . . . . . . . . . . 1,676
45,760 Enersis ADS (USD) . . . . . . . . . . . . 1,150
678,430 Five Arrows Chile Fund (USD) . . . . . . 1,995
36,758 wts *Five Arrows Chile Fund,
5/31/99 (USD) . . . . . . . . . . . . . . 24
67,910 shs Genesis Chile Fund (USD) . . . . . . . . 2,631
______
Total Chile . . . . . . . . . . . . . . . 13,841
CHINA - 0.7%
COMMON STOCKS
314,700 shs *Huaneng Power International
'N' ADR (USD) . . . . . . . . . . . . . . 5,074
5,028,000 Maanshan Iron & Steel (HKD) . . . . . . . 917
9,198,000 Shanghai Petrochemical 'H' (HKD) . . . . 2,647
6,632,000 Yizheng Chemical Fibre 'H' (HKD) . . . . 1,930
______
Total China . . . . . . . . . . . . . . . 10,568
DENMARK - 0.3%
COMMON STOCKS
31,090 Den Danske Bank . . . . . . . . . . . . . 2,060
13,350 Tele Danmark 'B' . . . . . . . . . . . . 696
34,681 Unidanmark 'A' . . . . . . . . . . . . . 1,593
______
Total Denmark . . . . . . . . . . . . . . . 4,349
FINLAND - 0.2%
COMMON STOCK
59,940 *Nokia Oy 'A' . . . . . . . . . . . . . . 3,429
FRANCE - 7.4%
COMMON STOCKS AND WARRANTS
44,380 Accor . . . . . . . . . . . . . . . 5,273
53,312 Assurances Generales de France . . . . . 1,537
20,260 Carrefour . . . . . . . . . . . . . . . . 11,899
8,974 Castorama Dubois . . . . . . . . . . . . 1,455
21,063 Chargeurs . . . . . . . . . . . . . . . . 4,333
70,546 Cie de St. Gobain . . . . . . . . . . . . 8,411
16,696 Credit Local de France . . . . . . . . . 1,322
153,602 Eaux Cie Generale . . . . . . . . . . . . 14,276
33,442 Ecco . . . . . . . . . . . . . . . 5,184
648 Ecco Travail Temporaire . . . . . . . . . 45
66,020 Elf Aquitaine . . . . . . . . . . . . . . 4,496
25,650 GTM Entrepose . . . . . . . . . . . . . . 1,663
6,180 Guilbert . . . . . . . . . . . . . . . 742
1,339 Hermes International . . . . . . . . . . 236
6,702 L'Oreal . . . . . . . . . . . . . . . 1,638
56,858 Lafarge-Coppee . . . . . . . . . . . . . 3,768
44,820 Lapeyre . . . . . . . . . . . . . . . 2,251
23,440 Legrand . . . . . . . . . . . . . . . 3,921
37,836 LVMH . . . . . . . . . . . . . . . 7,528
9,690 Peugeot . . . . . . . . . . . . . . . 1,262
26,523 Pinault Printemps . . . . . . . . . . . . 5,749
42,610 Poliet . . . . . . . . . . . . . . . 3,346
22,136 Primagaz . . . . . . . . . . . . . . . 1,719
2,012 wts *Primagaz, 7/1/98 . . . . . . . . . . . . 16
11,550 shs Rexel . . . . . . . . . . . . . . . 1,866
23,854 Sanofi . . . . . . . . . . . . . . . 1,521
9,860 Societe Generale de France . . . . . . . 1,127
8,390 Sodexho . . . . . . . . . . . . . . . 2,174
87,426 Television Francaise . . . . . . . . . . 9,028
75,690 Total 'B' . . . . . . . . . . . . . . . . 4,678
59,984 Valeo . . . . . . . . . . . . . . . 2,710
______
Total France . . . . . . . . . . . . . . . 115,174
GERMANY - 4.4%
COMMON STOCKS, RIGHTS AND WARRANTS
4,510 Allianz Holdings . . . . . . . . . . . . 8,311
710 wts *Allianz Holdings, 3/29/96 . . . . . . . 694
3,085 shs Altana . . . . . . . . . . . . . . . 1,794
24,607 Bayer . . . . . . . . . . . . . . . 6,512
5,526 shs Bilfinger & Berger . . . . . . . . . . . 2,034
3,282 Buderus . . . . . . . . . . . . . . . 1,408
84,380 Deutsche Bank . . . . . . . . . . . . . . 3,822
17,684 Gehe . . . . . . . . . . . . . . . 8,681
3,503 *Gehe, new . . . . . . . . . . . . . . . 1,665
5,685 Hoechst . . . . . . . . . . . . . . . 1,486
15,100 Hornbach Baumarkt . . . . . . . . . . . . 762
20,347 Mannesmann . . . . . . . . . . . . . . . 6,697
21,115 *Praktiker . . . . . . . . . . . . . . . 668
42,820 Rhon Klinikum . . . . . . . . . . . . . . 4,107
42,820 rts *Rhon Klinikum . . . . . . . . . . . . . 912
74,410 shs Schering . . . . . . . . . . . . . . . 5,186
104,470 Veba . . . . . . . . . . . . . . . 4,289
13,836 wts *Veba, 4/6/98 . . . . . . . . . . . . . . 1,971
8,955 shs Volkswagen . . . . . . . . . . . . . . . 2,821
______
63,820
______
PREFERRED STOCKS
12,675 Fielmann . . . . . . . . . . . . . . . 698
2,844 Hornbach . . . . . . . . . . . . . . . 2,859
4,721 Krones . . . . . . . . . . . . . . . 1,690
______
5,247
______
Total Germany . . . . . . . . . . . . . . . 69,067
HONG KONG - 3.5%
COMMON STOCKS
4,412,000 First Pacific . . . . . . . . . . . . . . 5,079
5,384,000 Guangdong Investment . . . . . . . . . . 3,168
16,236,000 Guangzhou Investment . . . . . . . . . . 3,339
1,173,000 Guoco Group . . . . . . . . . . . . . . . 5,431
5,005,483 Hong Kong Land Holdings (USD) . . . . . . 9,010
2,218,000 Hutchison Whampoa . . . . . . . . . . . . 12,221
796,000 Swire Pacific 'A' . . . . . . . . . . . . 5,971
3,277,000 Wharf Holdings . . . . . . . . . . . . . 11,062
______
Total Hong Kong . . . . . . . . . . . . . . . 55,281
ITALY - 1.8%
COMMON STOCKS AND WARRANTS
602 Alleanza Assicurazioni . . . . . . . . . 4
116,664 Arnoldo Mondadori Editore . . . . . . . . 864
241,761 Assicurazioni Generali . . . . . . . . . 5,634
1,115,820 Banca Fideuram . . . . . . . . . . . . . 1,190
181,983 Danieli & Company, savings shares . . . . 502
17,945 wts *Danieli & Company, 11/30/99 . . . . . . 9
121,467 shs Imi . . . . . . . . . . . . . . . 664
567,000 Istituto Naz Della Assicurazioni . . . . 745
565,325 Italgas . . . . . . . . . . . . . . . 1,504
24,510 RAS . . . . . . . . . . . . . . . 246
207,500 Rinascente . . . . . . . . . . . . . . . 1,230
152,293 Sasib . . . . . . . . . . . . . . . 675
430,000 Sasib, savings shares . . . . . . . . . . 1,066
152,088 SME . . . . . . . . . . . . . . . 334
1,310,680 Stet . . . . . . . . . . . . . . . 3,712
676,120 Stet, savings shares . . . . . . . . . . 1,474
2,188,853 Telecom Italia . . . . . . . . . . . . . 3,323
832,254 Telecom Italia, savings shares . . . . . 982
1,795,399 *Telecom Italia Mobile . . . . . . . . . 3,013
86,206 Unicem . . . . . . . . . . . . . . . 541
______
27,712
______
CORPORATE BOND
107,670,000 ITL Danieli & Company, 7.25%, 1/1/00 . . . . 54
______
Total Italy . . . . . . . . . . . . . . . 27,766
JAPAN - 21.8%
COMMON STOCKS
28,000 shs Advantest . . . . . . . . . . . . . . . . 1,588
286,000 Alps Electric . . . . . . . . . . . . . . 2,936
559,000 Amada . . . . . . . . . . . . . . . 5,574
12,000 Aoyama Trading . . . . . . . . . . . . . 324
616,000 Canon . . . . . . . . . . . . . . . 10,538
294,000 Citizen Watch . . . . . . . . . . . . . . 2,015
487,000 *Dai Nippon Screen Manufacturing . . . . 4,351
103,000 Daifuku . . . . . . . . . . . . . . . 1,228
508,000 Daiichi Pharmaceutical . . . . . . . . . 7,101
587,000 Daiwa House . . . . . . . . . . . . . . . 8,780
389 DDI . . . . . . . . . . . . . . . 3,152
1,638 East Japan Railway . . . . . . . . . . . 7,734
137,000 Fanuc . . . . . . . . . . . . . . . 5,933
853,000 Hitachi . . . . . . . . . . . . . . . 8,756
803,000 Hitachi Zosen . . . . . . . . . . . . . . 3,948
198,000 Honda Motor . . . . . . . . . . . . . . . 3,445
294,000 Inax . . . . . . . . . . . . . . . 2,650
276,000 *Ishihara Sangyo Kaisha . . . . . . . . . 820
180,000 Ito-Yokado . . . . . . . . . . . . . . . 9,836
54,000 Kawada Industries . . . . . . . . . . . . 449
256,000 Kokuyo . . . . . . . . . . . . . . . 5,506
696,000 Komatsu . . . . . . . . . . . . . . . 5,443
199,000 Komori . . . . . . . . . . . . . . . 4,708
553,000 Kumagai Gumi . . . . . . . . . . . . . . 2,119
506,000 Kuraray . . . . . . . . . . . . . . . 4,996
177,000 Kyocera . . . . . . . . . . . . . . . 14,500
379,000 Makita . . . . . . . . . . . . . . . 5,891
417,000 Marui . . . . . . . . . . . . . . . 7,215
554,000 Matsushita Electric Industrial . . . . . 7,853
339,000 Mitsubishi . . . . . . . . . . . . . . . 3,745
1,566,000 Mitsubishi Heavy Industries . . . . . . . 12,079
401,000 Mitsubishi Paper Mills . . . . . . . . . 2,438
808,000 Mitsui Fudosan . . . . . . . . . . . . . 9,242
235,000 Mitsui Petrochemical Industries . . . . . 1,863
145,000 Murata Manufacturing . . . . . . . . . . 5,089
155,000 National House . . . . . . . . . . . . . 2,636
771,000 NEC . . . . . . . . . . . . . . . 10,175
606,000 Nippon Denso . . . . . . . . . . . . . . 11,078
151,000 Nippon Hodo . . . . . . . . . . . . . . . 2,347
2,992,000 Nippon Steel . . . . . . . . . . . . . . 9,915
511 Nippon Telephone & Telcom . . . . . . . . 4,191
488,000 Nomura Securities . . . . . . . . . . . . 8,921
313,000 Pioneer Electronic . . . . . . . . . . . 4,804
113,000 Sangetsu . . . . . . . . . . . . . . . 2,563
333,000 Sankyo . . . . . . . . . . . . . . . 7,324
58,150 Sega Enterprises . . . . . . . . . . . . 3,081
634,000 Sekisui Chemical . . . . . . . . . . . . 8,243
455,000 Sekisui House . . . . . . . . . . . . . . 5,249
57,000 Seven-Eleven Japan . . . . . . . . . . . 3,800
599,000 Sharp . . . . . . . . . . . . . . . 8,315
194,000 Shinetsu Chemical . . . . . . . . . . . . 3,964
160,900 Sony . . . . . . . . . . . . . . . 7,235
922,000 Sumitomo . . . . . . . . . . . . . . . 8,382
871,000 Sumitomo Electric . . . . . . . . . . . . 10,047
303,000 shs Sumitomo Forestry . . . . . . . . . . . . 4,265
151,000 TDK . . . . . . . . . . . . . . . 7,779
891,000 Teijin . . . . . . . . . . . . . . . 4,085
285,000 Tokio Marine & Fire Insurance . . . . . . 2,925
107,000 Tokyo Electronics . . . . . . . . . . . . 4,644
233,000 Tokyo Steel Manufacturing . . . . . . . . 4,328
196,000 Toppan Printing . . . . . . . . . . . . . 2,587
150,150 Yurtec . . . . . . . . . . . . . . . 2,730
______
Total Japan . . . . . . . . . . . . . . . 339,458
MALAYSIA - 3.0%
COMMON STOCKS AND WARRANTS
4,030,000 Affin Holdings . . . . . . . . . . . . . 7,613
618,000 wts *Affin Holdings, 11/15/99 . . . . . . . . 392
929,000 shs Aokam Perdana . . . . . . . . . . . . . . 1,557
1,260,000 Berjaya Sports Toto . . . . . . . . . . . 2,628
579,333 wts *Commerce Asset Holdings, 6/27/98 . . . . 1,573
2,155,000 shs MBF Capital . . . . . . . . . . . . . . . 2,035
3,438,000 Multi-Purpose Holding . . . . . . . . . . 4,600
2,964,000 Renong . . . . . . . . . . . . . . . 4,526
3,486,000 *Technology Resources Industries . . . . 8,849
1,976,000 United Engineers . . . . . . . . . . . . 12,287
______
Total Malaysia . . . . . . . . . . . . . . . 46,060
MEXICO - 1.6%
COMMON STOCKS
333,230 Cemex 'B' . . . . . . . . . . . . . . . . 1,029
3,698,583 Cifra 'B' ADR (USD) . . . . . . . . . . . 3,939
536,022 Fomentos Economico Mexicano 'B' . . . . . 1,110
211,640 *Gruma 'B' . . . . . . . . . . . . . . . 624
1,313,616 Grupo Embotellador de Mexico PC . . . . . 2,378
785,982 Grupo Financiero Banamex 'B' . . . . . . 1,346
8,491 Grupo Financiero Banamex 'L' . . . . . . 14
8,266 Grupo Financiero Bancomer 'L' . . . . . . 2
1,275,607 Grupo Industrial Maseca 'B' . . . . . . . 795
114,364 Grupo Modelo 'C' . . . . . . . . . . . . 435
370,244 *Grupo Sidek 'B' . . . . . . . . . . . . 176
113,983 Grupo Televisa GDR (USD) . . . . . . . . 1,952
106,697 Kimberly-Clark Mexico 'A' . . . . . . . . 1,393
66,034 Panamerican Beverages ADR (USD) . . . . . 1,808
234,846 Telefonos de Mexico 'L' ADS (USD) . . . . 6,458
617,783 Tolmex 'B' . . . . . . . . . . . . . . . 2,319
______
Total Mexico . . . . . . . . . . . . . . . 25,778
NETHERLANDS - 9.1%
COMMON STOCKS
101,967 ABN Amro Holdings . . . . . . . . . . . . 4,285
78,368 Ahold . . . . . . . . . . . . . . . 2,970
16,558 Akzo Nobel . . . . . . . . . . . . . . . 1,886
165,080 CSM . . . . . . . . . . . . . . . 6,884
2,154,715 Elsevier . . . . . . . . . . . . . . . 27,859
71,291 Fortis AMEV . . . . . . . . . . . . . . . 4,478
32,410 Hagemeyer . . . . . . . . . . . . . . . . 1,614
158,446 Internationale Nederlanden Groep . . . . 9,450
103,896 Koninklijke PTT Nederland . . . . . . . . 3,655
27,554 Nutricia . . . . . . . . . . . . . . . 2,139
189,349 Polygram . . . . . . . . . . . . . . . 11,821
169,347 Royal Dutch Petroleum . . . . . . . . . . 21,026
61,126 Unilever . . . . . . . . . . . . . . . 8,008
396,364 shs Wolters Kluwer . . . . . . . . . . . . . 36,074
______
. . . . . . . . . . . . . . . 142,149
PREFERRED STOCKS
10,797 Internationale Nederlanden Groep . . . . 56
______
Total Netherlands . . . . . . . . . . . . . . . 142,205
NEW ZEALAND - 0.9%
COMMON STOCKS
720,736 Air New Zealand 'B' . . . . . . . . . . . 2,484
678,115 Carter Holt Harvey . . . . . . . . . . . 1,621
399,080 Fernz . . . . . . . . . . . . . . . 1,180
646,179 Fletcher Challenge . . . . . . . . . . . 1,711
991,094 Fletcher Challenge, Forests
Division . . . . . . . . . . . . . . . 1,367
222,125 Independent Newspapers . . . . . . . . . 677
1,070,372 Telecom Corporation of New Zealand . . . 4,444
______
Total New Zealand . . . . . . . . . . . . . . . 13,484
NORWAY - 1.5%
COMMON STOCKS
47,470 Bergesen 'A' . . . . . . . . . . . . . . 983
54,569 Kvaerner 'A' . . . . . . . . . . . . . . 2,296
259,342 Norsk Hydro . . . . . . . . . . . . . . . 10,329
166,210 Orkla 'A' . . . . . . . . . . . . . . . . 8,595
59,230 Saga Petroleum 'B' . . . . . . . . . . . 713
______
Total Norway . . . . . . . . . . . . . . . 22,916
PERU - 0.1%
COMMON STOCK
234,550 Telefonica de Peru 'B' . . . . . . . . . 419
PORTUGAL - 0.3%
COMMON STOCK
88,854 Jeronimo Martins . . . . . . . . . . . . 4,730
SINGAPORE - 2.3%
COMMON STOCKS AND WARRANTS
995,000 DBS Land . . . . . . . . . . . . . . . 2,943
164,000 Development Bank of Singapore . . . . . . 1,880
302,000 Far East Levingston Shipbuilding . . . . 1,304
328,000 Jurong Shipyard . . . . . . . . . . . . . 2,182
181,000 Keppel . . . . . . . . . . . . . . . 1,486
847,000 Neptune Orient Lines . . . . . . . . . . 929
453,000 Overseas Union Bank . . . . . . . . . . . 2,821
384,000 Overseas Union Enterprises . . . . . . . 2,038
463,000 Sembawang . . . . . . . . . . . . . . . . 2,245
338,000 Singapore Airlines . . . . . . . . . . . 3,134
848,000 Singapore Land . . . . . . . . . . . . . 4,741
185,820 Singapore Press . . . . . . . . . . . . . 2,906
1,491,000 United Industrial . . . . . . . . . . . . 1,330
680,352 United Overseas Bank . . . . . . . . . . 5,970
196,940 wts *United Overseas Bank, 6/17/97 . . . . . 753
______
Total Singapore . . . . . . . . . . . . . . . 36,662
SOUTH KOREA - 1.6%
COMMON STOCKS
157,000 shs Cho Hung Bank . . . . . . . . . . . . . . 2,249
107,000 Hanil Bank . . . . . . . . . . . . . . . 1,383
98,987 Hanil Securities . . . . . . . . . . . . 1,514
70,100 *Kook Min Bank . . . . . . . . . . . . . 1,461
19,273 shs *Kook Min Bank, new . . . . . . . . . . . 370
111,200 Korea Electric Power . . . . . . . . . . 4,990
48,660 Pohang Iron & Steel . . . . . . . . . . . 4,871
1,331 Samsung Electronics . . . . . . . . . . . 303
263 *Samsung Electronics, new . . . . . . . . 58
19 *Samsung Electronics, new '3' . . . . . . 4
52,941 Samsung Electronics 1/2 Non-Voting
GDS (USD) . . . . . . . . . . . . . . . . 3,428
20,946 *Samsung Electronics 1/2 Non-Voting
GDS, new (USD) . . . . . . . . . . . . . 1,356
948 Samsung Electronics 1/2 Voting
GDR (USD) . . . . . . . . . . . . . . . . 104
187 *Samsung Electronics 1/2 Voting
GDR, new (USD) . . . . . . . . . . . . . 21
1,582 *Samsung Electronics 1/2 Common
GDS, new (USD) . . . . . . . . . . . . . 171
138,000 Seoul Bank . . . . . . . . . . . . . . . 1,327
43,156 Yukong . . . . . . . . . . . . . . . 1,624
2,966 Yukong, new . . . . . . . . . . . . . . . 108
______
Total South Korea . . . . . . . . . . . . . . . 25,342
SPAIN - 2.2%
COMMON STOCKS
14,881 Banco Popular Espanol . . . . . . . . . . 2,364
80,790 Banco Santander . . . . . . . . . . . . . 3,521
222,517 Centros Comerciales Pryca . . . . . . . . 4,740
159,388 Empresa Nacional de Electricidad . . . . 7,927
23,870 Fomento de Construcciones y Contra . . . 1,686
41,440 Gas Natural . . . . . . . . . . . . . . . 5,684
397,536 Iberdrola . . . . . . . . . . . . . . . . 2,997
145,338 Repsol . . . . . . . . . . . . . . . 4,340
210,384 Sevillana de Electricidad . . . . . . . . 1,389
______
Total Spain . . . . . . . . . . . . . . . 34,648
SWEDEN - 2.2%
COMMON STOCKS
34,250 Asea 'A' . . . . . . . . . . . . . . . 3,430
343,937 Astra 'B' . . . . . . . . . . . . . . . . 12,430
180,202 Atlas Copco 'B' . . . . . . . . . . . . . 2,727
117,527 Electrolux 'B' . . . . . . . . . . . . . 5,026
50,990 Esselte 'B' . . . . . . . . . . . . . . . 749
41,641 Hennes & Mauritz 'B' . . . . . . . . . . 2,721
40,960 Sandvik 'A' . . . . . . . . . . . . . . . 768
229,960 Sandvik 'B' . . . . . . . . . . . . . . . 4,329
50,180 Scribona 'B' . . . . . . . . . . . . . . 495
150,850 *Stora Kopparbergs 'B' . . . . . . . . . 1,829
______
Total Sweden . . . . . . . . . . . . . . . 34,504
SWITZERLAND - 4.2%
COMMON STOCKS
13,570 BBC Brown Boveri & Cie . . . . . . . . . 15,742
4,871 Ciba Geigy . . . . . . . . . . . . . . . 4,218
33,045 CS Holding . . . . . . . . . . . . . . . 3,376
11,643 Nestle . . . . . . . . . . . . . . . 12,204
1,845 Roche Holdings . . . . . . . . . . . . . 13,407
8,645 Sandoz . . . . . . . . . . . . . . . 7,135
4,213 Schweizerische Bankgesellschaft . . . . . 4,564
13,367 Schweizerischer Bankverein . . . . . . . 5,487
______
Total Switzerland . . . . . . . . . . . . . . . 66,133
THAILAND - 1.0%
COMMON STOCKS
152,124 Advanced Information
Service Public . . . . . . . . . . . . . 2,418
302,497 Bangkok Bank Public . . . . . . . . . . . 3,125
302,627 shs Bank of Ayudhya . . . . . . . . . . . . . 1,744
48,000 Land & House . . . . . . . . . . . . . . 775
29,115 Siam Cement . . . . . . . . . . . . . . . 1,587
204,777 Siam Commercial Bank . . . . . . . . . . 2,392
164,726 Thai Farmers Bank . . . . . . . . . . . . 1,362
108,000 *Total Access Communications (USD) . . . 653
82,004 United Communications . . . . . . . . . . 1,030
______
Total Thailand . . . . . . . . . . . . . . . 15,086
UNITED KINGDOM - 14.9%
COMMON STOCKS
1,179,440 Abbey National . . . . . . . . . . . . . 9,976
730,000 Argos . . . . . . . . . . . . . . . 5,886
1,090,200 Argyll Group . . . . . . . . . . . . . . 5,516
3,230,530 Asda Group . . . . . . . . . . . . . . . 5,235
199,000 BAA . . . . . . . . . . . . . . . 1,550
716,200 British Gas . . . . . . . . . . . . . . . 2,718
454,000 British Petroleum . . . . . . . . . . . . 3,345
1,183,200 Cable & Wireless . . . . . . . . . . . . 7,754
1,002,578 Cadbury Schweppes . . . . . . . . . . . . 8,274
1,666,350 Caradon . . . . . . . . . . . . . . . 5,243
584,000 Coats Viyella . . . . . . . . . . . . . . 1,717
500,000 Compass Group . . . . . . . . . . . . . . 3,407
437,750 David S. Smith . . . . . . . . . . . . . 4,000
465,619 East Midlands Electricity . . . . . . . . 6,368
112,000 GKN . . . . . . . . . . . . . . . 1,427
727,650 Glaxo . . . . . . . . . . . . . . . 9,807
1,326,000 Grand Metropolitan . . . . . . . . . . . 9,140
1,070,000 Guinness . . . . . . . . . . . . . . . 8,543
152,000 Heath . . . . . . . . . . . . . . . 384
255,576 Heywood Williams Group . . . . . . . . . 836
586,300 Hillsdown Holdings . . . . . . . . . . . 1,546
607,300 John Laing 'A' . . . . . . . . . . . . . 2,160
1,089,977 Kingfisher . . . . . . . . . . . . . . . 8,168
850,000 Ladbroke Group . . . . . . . . . . . . . 2,231
655,670 London Electricity . . . . . . . . . . . 9,382
1,953,490 National Westminster Bank . . . . . . . . 19,458
149,600 *Polly Peck International . . . . . . . . 0
964,000 Rank Organisation . . . . . . . . . . . . 6,401
1,171,570 Reed International . . . . . . . . . . . 17,782
555,851 Rolls Royce . . . . . . . . . . . . . . . 1,345
521,960 RTZ . . . . . . . . . . . . . . . 7,213
516,000 Sears . . . . . . . . . . . . . . . 826
943,000 Shell Transport & Trading . . . . . . . . 11,033
1,880,560 SmithKline Beecham, equity units . . . . 19,170
103,888 Spring Ram . . . . . . . . . . . . . . . 44
1,108,000 T & N . . . . . . . . . . . . . . . 2,505
869,903 Tesco . . . . . . . . . . . . . . . 4,140
2,417,080 Tomkins . . . . . . . . . . . . . . . 9,535
972,620 United Newspapers . . . . . . . . . . . . 7,973
______
Total United Kingdom . . . . . . . . . . . . . . . 232,038
SHORT-TERM INVESTMENTS - 5.9%
$ 4,000,000 BHF Finance (Delaware),
Commercial Paper, 5.74%, 11/6/95. . . . . 3,980
8,500,000 BMW U.S. Capital,
Commercial Paper, 5.74%, 11/27/95 . . . . 8,447
10.100.000 British Gas Capital,
Commerical Paper, 5.74%, 11/13/95 . . . . 10,048
15,000,000 Daimler-Benz North America,
Commercial Paper, 5.70%, 12/15/95 . . . . 14,867
10,000,000 Falcon Asset Securitization,
Commercial Paper, 5.73%, 11/16/95 . . . . 9,944
10,000,000 Federal National Mortgage Assn.,
Floating Rate Medium-Term Note,
5.813%, 9/27/96 . . . . . . . . . . . . . $10,000
15,000,000 Queensland Treasury,
Commercial Paper, 5.73%, 11/9/95. . . . . 14,919
10,000,000 Teco Finance,
Commercial Paper, 5.65%, 2/5/96 . . . . . 9,829
10,404,487 Investments in Commercial Paper through
a joint account, 5.87 - 5.88%,
11/1/95 . . . . . . . . . . . . . . . 10,403
______
Total Short-Term Investments . . . . . . . . . . . . . . . 92,437
Total Investments in Securities -
98.6% of Net Assets (Cost $1,442,067). . . . . . . . . . . . .$1,537,680
Other Assets Less Liabilities . . . . . . . . . . . . . . . 21,939
______
Net Assets Consist of: Value
________
Accumulated net investment income -
net of distributions . . . . . . . . . $ 20,836
Accumulated net realized gain/loss -
net of distributions . . . . . . . . . . 17,187
Net unrealized gain (loss) . . . . . . . . . . 95,608
Paid-in-capital applicable to
111,476,931 shares of $0.01 par value
capital stock outstanding;
1,000,000,000 shares authorized . . . . . . . . . .1,425,988
________
NET ASSETS . . . . . . . . . . $ 1,559,619
_________
_________
NET ASSET VALUE PER SHARE . . . . . . . . . . $13.99
______
______
* Non-income producing
BEL Belgian franc
HKD Hong Kong dollar
ITL Italian lira
USD U.S. dollar
The accompanying notes are an integral part of these financial statements.
STATEMENT OF OPERATIONS
Foreign Equity Fund / Year Ended October 31, 1995 (in thousands)
INVESTMENT INCOME
Income
Dividend (net of foreign taxes of $ 3,899) . . . . . $ 25,504
Interest . . . . . . . . . . . . . . . . . . . . . . . 5,345
_______
Total income . . . . . . . . . . . . . . . . . . . . . $ 30,849
_______
Expenses
Investment management . . . . . . . . . . . . . . . . 8,673
Custody and accounting . . . . . . . . . . . . . . . . 650
Registration . . . . . . . . . . . . . . . . . . . . . 311
Shareholder servicing . . . . . . . . . . . . . . . . 134
Legal and audit . . . . . . . . . . . . . . . . . . . 28
Directors . . . . . . . . . . . . . . . . . . . . . . 22
Prospectus and shareholder reports . . . . . . . . . . 12
Miscellaneous . . . . . . . . . . . . . . . . . . . . 41
_______
Total expenses . . . . . . . . . . . . . . . . . . . . 9,871
Expenses paid indirectly . . . . . . . . . . . . . . . (2)
_______
Net expenses . . . . . . . . . . . . . . . . . . . . . 9,869
_______
Net investment income . . . . . . . . . . . . . . . . . . . 20,980
_______
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Securities . . . . . . . . . . . . . . . . . . . . . . 21,147
Foreign currency transactions. . . . . . . . . . . . . (1,722)
_______
Net realized gain (loss) . . . . . . . . . . . . . . . 19,425
_______
Change in net unrealized gain or loss on:
Securities . . . . . . . . . . . . . . . . . . . . . . (19,846)
Other assets and liabilities
denominated in foreign currencies. . . . . . . . . . . 593
_______
Change in net unrealized gain or loss. . . . . . . . . (19,253)
_______
Net realized and unrealized gain (loss). . . . . . . . . . . 172
_______
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS. . . . . . $ 21,152
_______
_______
The accompanying notes are an integral part of these financial statements.
STATEMENT OF CHANGES IN NET ASSETS
Foreign Equity Fund (in thousands)
Years Ended October 31,
1995 1994
__________ __________
INCREASE (DECREASE) IN NET ASSETS FROM
Operations
Net investment income . . . . $ 20,980 $ 9,234
Net realized gain
(loss) . . . . . . . . . . . 19,425 40,483
Change in net unrealized
gain or loss . . . . . . . . (19,253) 28,006
__________ __________
Increase (decrease) in
net assets
from operations . . . . . . . 21,152 77,723
__________ __________
Distributions to shareholders
Net investment income . . . . (9,573) (3,387)
Net realized gain . . . . . . (41,487) (7,901)
__________ __________
Decrease in net assets
from distributions . . . . . (51,060) (11,288)
__________ __________
Capital share transactions*
Shares sold . . . . . . . . . 632,538 589,524
Distributions
reinvested . . . . . . . . . 35,819 7,219
Shares redeemed . . . . . . . (137,308) (94,089)
__________ __________
Increase (decrease) in
net assets from capital
share transactions . . . . . 531,049 502,654
__________ __________
Increase (decrease)
in net assets . . . . . . . . 501,141 569,089
NET ASSETS
Beginning of period . . . . . 1,058,478 489,389
__________ __________
End of period . . . . . . . .$ 1,559,619 $1,058,478
__________ __________
__________ __________
* Share information
Shares sold . . . . . . . . . 46,409 42,077
Distributions
reinvested . . . . . . . . . 2,775 532
Shares redeemed . . . . . . . (10,263) (6,787)
__________ __________
Increase (decrease) in
shares outstanding . . . . . 38,921 35,822
__________ __________
__________ __________
The accompanying notes are an integral part of these financial statements.
NOTES TO FINANCIAL STATEMENTS
Foreign Equity Fund / October 31, 1995
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 - Assets and liabilities are translated into U.S.
dollars at the prevailing exchange rate at the end of the reporting period.
Purchases and sales of securities and income and expenses are translated into
U.S. dollars at the prevailing exchange rate on the dates of such
transactions. The effect of changes in foreign exchange rates on realized and
unrealized security gains and losses is reflected as a component of such gains
and losses.
C) Other - Income and expenses are recorded on the accrual basis. Expenses
paid indirectly are custody fees paid by float credits earned on daily
residual cash balances at the custodian. Investment transactions are
accounted for on the trade date. Realized gains and losses are reported on
the identified cost basis. Dividend income and distributions to shareholders
are recorded by the fund on the ex-dividend date. Income and capital gain
distributions are determined in accordance with federal income tax regulations
and may differ from those determined in accordance with generally accepted
accounting principles.
Note 2 - Investment Transactions
Consistent with its investment objective, the fund engages in the following
practices to manage exposure to certain risks or enhance performance. The
investment objective, policies, program, and risk factors of the fund are
described more fully in the fund's prospectus and Statement of Additional
Information.
A) Emerging Markets - At October 31, 1995, the fund held investments in
securities of companies located in emerging markets. Future economic or
political developments could adversely affect the liquidity or value, or both,
of such securities.
B) Commercial Paper Joint Account - The fund, and other affiliated funds, may
transfer uninvested cash into a commercial paper joint account, the daily
aggregate balance of which is invested in high-grade commercial paper.
All securities purchased by the joint account satisfy the fund's criteria as
to quality, yield, and liquidity.
C) Other - Purchases and sales of portfolio securities, other than short-term
securities, aggregated $696,440,000 and $216,426,000, respectively, for the
year ended October 31, 1995.
Note 3 - Federal Income Taxes
No provision for federal income taxes is required since the fund intends to
continue to qualify as a regulated investment company and distribute all of
its taxable income.
At October 31, 1995, the aggregate cost of investments for federal
income tax and financial reporting purposes was $1,442,067,000 and net
unrealized gain aggregated $95,613,000, of which $182,239,000 related to
appreciated investments and $86,626,000 to depreciated investments.
Note 4 - Related Party Transactions
The fund is managed by Rowe Price-Fleming International, Inc. (the Manager),
which is owned by T. Rowe Price Associates, Inc. (Price Associates), Robert
Fleming Holdings Limited, and Jardine Fleming Holdings Limited under a joint
venture agreement. The investment management agreement between the fund and
the Manager provides for an annual investment management fee, of which
$913,000 was payable at October 31, 1995. The fee is computed daily and paid
monthly, and is equal to 0.70% of average daily net assets.
In addition, the fund has entered into agreements with Price Associates
and two wholly owned subsidiaries of Price Associates, pursuant to which the
fund receives certain other services. Price Associates computes the daily
share price and maintains the financial records of the fund. T. Rowe Price
Services, Inc., is the fund's transfer and dividend disbursing agent and
provides shareholder and administrative services to the fund. T. Rowe Price
Retirement Plan Services, Inc., provides subaccounting and recordkeeping
services for certain retirement accounts invested in the fund. The fund
incurred expenses pursuant to these related party agreements totaling
approximately $236,000 for the year ended October 31, 1995, of which $36,000
was payable at period-end.
During the year ended October 31, 1995, the fund, in the ordinary course
of business, paid commissions of $282,000 to, and placed security purchase and
sale orders aggregating $85,184,000 with, certain affiliates of the Manager in
connection with the execution of various portfolio transactions.
<TABLE>
FINANCIAL HIGHLIGHTS
Foreign Equity Fund
For a share outstanding throughout each period
____________________________________________________________
Ten Months
Year Ended Ended Year Ended
October 31, October 31, December 31,
___________________ __________ ___________________________
1995 1994 1993# 1992 1991 1990
________ ________ _______ _______ _______ _______
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD. . . . . . $14.59 $13.32 $10.05 $10.73 $9.54 $10.62
______ ______ ______ ______ ______ ______
Investment Activities
Net investment income . . . . 0.18 0.09 0.13 0.17 0.18o 0.23*o
Net realized and
unrealized gain (loss). . . . (0.14)*** 1.48 3.14 (0.57) 1.28 (1.10)
______ ______ ______ ______ ______ ______
Total from
investment activities . . . . 0.04 1.57 3.27 (0.40) 1.46 (0.87)
______ ______ ______ ______ ______ ______
Distributions
Net investment income . . . . (0.12) (0.09) - (0.18) (0.18) (0.21)
Net realized gain . . . . . . (0.52) (0.21) - (0.10) (0.09) -
______ ______ ______ ______ ______ ______
Total distributions . . . . . (0.64) (0.30) - (0.28) (0.27) (0.21)
______ ______ ______ ______ ______ ______
NET ASSET VALUE,
END OF PERIOD. . . . . . . . . $13.99 $14.59 $13.32 $10.05 $10.73 $9.54
______ ______ ______ ______ ______ ______
______ ______ ______ ______ ______ ______
RATIOS / SUPPLEMENTAL DATA
Total return . . . . . . . . . 0.6% 12.0% 32.5% (3.7)% 15.4%o (8.2)%*o
Ratio of expenses to
average net assets . . . . . . 0.80%** 0.82% 0.86%! 0.99% 1.00%o 1.01%*o
Ratio of net investment
income to average
net assets . . . . . . . . . . 1.69% 1.26% 1.65%! 1.49% 1.64%o 2.23%*o
Portfolio turnover rate. . . . 18.8% 22.0% 27.4%! 35.1% 46.7% 44.6%
Net assets, end of period
(in thousands) . . . . . . . .$1,559,619$1,058,478 $489,389 $238,979 $143,822 $83,645
! Annualized.
# The fund's fiscal year-end was changed to October 31.
* Excludes expenses in excess of a 1.10% voluntary expense limitation in effect through February 28,
1990.
o Excludes expenses in excess of a 1.00% voluntary expense limitation in effect from March 1, 1990
through December 31, 1991.
** Beginning in fiscal 1995, includes expenses paid indirectly.
*** The amount presented is calculated pursuant to a methodology prescribed by the Securities and
Exchange Commission for a share outstanding throughout the period. This amount is inconsistent with
the fund's aggregate gains and losses because of the timing of sales and redemptions of the fund's
shares in relation to fluctuating market values for the investment portfolio.
</TABLE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Foreign Equity Fund
In our opinion, the accompanying statement of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Foreign Equity Fund (the portfolio comprising Institutional International
Funds, Inc.) at October 31, 1995, and the results of its operations, the
changes in its net assets and the financial highlights for the year ended
October 31, 1995, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audit, which included confirmation of
securities at October 31, 1995 by correspondence with custodians and brokers
and, where appropriate, the application of alternative auditing procedures for
unsettled security transactions, provides a reasonable basis for the opinion
expressed above. The financial statements of the Fund for the fiscal periods
presented prior to the year ended October 31, 1995 were audited by other
independent accountants whose report dated November 17, 1994 expressed an
unqualified opinion on those statements.
PRICE WATERHOUSE LLP
Baltimore, Maryland
November 17, 1995
During fiscal 1995, Price Waterhouse LLP suceeded Coopers & Lybrand, L.L.P as
independent accountants for the Foreign Equity Fund, a decision that was
approved by the fund's Board of Directors. During the last two fiscal years,
the fund has received unqualified opinions and has had no disagreements with
Coopers & Lybrand, L.L.P. or reportable events that caused the change.
CHART 1: Geographic Diversification pie chart for the Foreign Equity Fund
annual report (October 31, 1995) showing percentages (based on net assets as
of 10/31/95) as follows: Europe -50%, Japan - 22%, Far East - 15%, Latin
America - 6%, and Other and Reserves - 7%.
CHART 2: Fiscal-Year Performance Comparison line graph for the Foreign Equity
Fund annual report (October 31, 1995). Shows $10,000 investments in the
Foreign Equity Fund and the MSCI EAFE (net of withholding taxes) from 9/89
(commencement of operations of the fund) to 10/95.
