Annual Report
October 31, 1996
Foreign Equity Fund
Fellow Shareholders
Few overseas markets were able to keep pace with an exuberant Wall Street
where stock prices benefited from a benign interest rate environment and
strong corporate earnings. Overseas the economic picture was more subdued.
Overall, foreign stock returns were lackluster for the past six months but
respectable for the year ended October 31.
PERFORMANCE REVIEW
The Foreign Equity Fund performed well against its benchmark index over the 12
months ended October 31. Its return of 14.48% over this period was
significantly ahead of the Morgan Stanley Capital International Europe,
Australia and Far East Index (MSCI EAFE). During the six months ended October
31, the fund's results were more moderate in absolute terms but were still
ahead of the index.
Performance Comparison
Periods Ended 10/31/96
__________________________
6 Months 12 Months
__________ __________
Foreign Equity Fund 1.03% 14.48%
MSCI EAFE Index -2.27 10.80
Over the 12-month period ended October 31, fund performance against the
index was helped significantly by an underweighting in Japan where the stock
market performed poorly in dollar terms. The fund continues to be overweighted
in the stock markets of Southeast Asia where markets such as Hong Kong
contributed well while small positions in markets such as Singapore, Thailand,
and Korea were disappointing. In Europe, the portfolio has a neutral weighting
against the index but our stock selection added value. An overweighting in the
Netherlands was particularly helpful. Latin America, which is not represented
in the index, performed well over the 12 months, with Brazil making a strong
contribution during the second half.
Although the fund has continued to perform well against its index and
peers, foreign stocks have failed to keep up with the U.S. market. In Europe,
the Continental economies have been weak, constrained by the tight fiscal
policies of those governments trying to meet the economic criteria required to
meet the start of Economic Monetary Union (EMU) in January 1999. Countering
this tight fiscal policy, most central banks kept the monetary reins
relatively loose, which in turn has helped a number of markets produce
double-digit returns.
Market Performance
6 Months Ended 10/31/96
_______________________________
Local Currency
Local vs. U.S. In U.S.
Currency Dollars Dollars
_______________________________
Australia 0.85% 0.87% 1.72%
France 2.15 1.35 3.53
Germany 6.65 1.35 8.09
Hong Kong 10.36 0.04 10.40
Italy -10.35 3.18 -7.50
Japan -8.74 -7.90 -15.95
Mexico 2.26 -6.96 -4.86
Netherlands 9.44 1.18 10.74
Norway 0.46 3.25 3.72
Singapore -16.26 -0.21 -16.44
Sweden 13.97 3.55 18.01
Switzerland 2.31 -1.11 1.17
United Kingdom 5.20 8.52 14.16
Source: FAME Information Services, Inc., using MSCI indices.
Japan continued its tentative recovery but the yen has remained weak
against a background of a declining current account surplus, low domestic
interest rates, and the government's determination to keep the corporate
sector competitive in world markets. Elsewhere in the Pacific, the picture was
mixed. The economies of Hong Kong and Malaysia remained buoyant, and each
stock market produced returns of over 20% during the 12 months under review.
Singapore and Korea were both hurt by a decline in exports of electronic
components to the U.S. and their stock markets were poor performers. The best
performance came from the stock markets of Latin America where overseas
investors have been encouraged by a mix of disciplined economic policies and
more stable currencies. Brazil and Argentina each achieved returns of more
than 30% in dollars and the Mexican market was not far behind.
Currency markets were much more subdued. The U.S. dollar improved
steadily against the yen for most of the year but rose only a modest amount
against leading European currencies such as the franc and deutschemark.
Perhaps surprisingly, the British pound and the Italian lira were the
strongest European currencies and each of them has even strengthened against
the dollar over the last 12 months. On balance, the overseas currency mix
hampered the fund.
INVESTMENT REVIEW
Far East
A year ago, the economy in Japan was in trouble as the combination of currency
strength and a banking crisis threatened to throw it into a deflationary
spiral. Helped by a stimulatory fiscal policy and a successful strategy of
currency depreciation, the economy pulled through this difficult period but
the recovery is patchy at best. Capital expenditure - traditionally the engine
of Japanese growth - picked up strongly and this in turn fed through to better
figures for production and shipments. Significantly, there is evidence that an
inventory overhang is now being worked off, which bodes well for the future.
Dimming this brighter picture is consumer expenditure - by far the largest
component of GDP - which remains very sluggish. Despite this mixed picture,
our assumption is that the economy will continue its steady recovery. Monetary
policy is supportive and the recent weakness of the yen will be a big help to
Japan's export industry.
The stock market also struggled to make progress. It still looks
expensive compared with other world markets but, against its own history,
looks to be better valued. Our strategy in the market avoids the financial
sector where bad loans continue to haunt the city banks and valuations remain
unacceptably high. We added to sectors such as retailing, pharmaceuticals, and
consumer nondurables where we can find growth at a reasonable valuation. Our
holdings also focused on a number of Japan's multinational corporations, many
of which are world leaders in their fields. These stocks performed well for us
recently and we have cut back in a number of them where prices moved ahead of
realistic expectations.
Elsewhere in the region, the economy of China is now an important
influence even though its stock market is very undeveloped. Three years ago
this economy was blazing along at an unsustainable pace, threatening an
inflationary blowout and a sharp reversal of the trade balance. However, the
current picture suggests that the authorities have achieved a soft landing.
GDP growth has moderated to a level of about 10%, inflation is back under
control, and the current account is now in modest surplus. The improved health
of the Chinese economy has provided support for Hong Kong where, over the last
six months, the stock market was one of the best in the region. With the U.S.
dollar pegged to the Hong Kong dollar, a more benign interest rate environment
in the U.S. quickly spilled over into Hong Kong, and the Bank of China reduced
its interest rates twice in the last few months. Improved business results
from the financial sector and a recovery in residential property prices all
helped this market, where we have a moderate overweighting.
In contrast, the Singapore market performed poorly over the last six
months as a weak trend in exports put a brake on the broad economy. The
government has announced measures to dampen speculation in the residential
property market and the recent trend in corporate earnings has been below
expectations. Singapore has one of the best managed economies in the world but
the stock market is unlikely to perform until the economy picks up again. In
contrast, the Malaysian market held up well during the summer months and
smaller companies continued to perform well. The worry here is that the
economy has been growing too fast, but recent statistics evidence a
deceleration, which will in turn moderate the high external deficit.
In Thailand, the stock market collapsed over the last six months.
Corporate profits came in below expectations, the quality of bank balance
sheets was called into question, and a downgrade in the rating of Thai
obligations was a blow to foreign confidence. Our portfolio had less than 1%
of assets in Thailand and the companies we have chosen should weather this
uncomfortable period for the economy. South Korea is another stock market that
performed poorly over the last six months. The main culprit here was a sharp
deterioration in the trade deficit with a loss of competitiveness against
Japanese companies and a very sharp fall in semiconductor prices. Again, our
position in this market is very small but, with a number of blue chips now
looking very cheap, it is probably time to add to our positions in Korea.
In Australia, the economy is slowing but not sliding into recession. The
new Liberal Coalition government was elected with a workable majority and its
objectives of labor reform and further integration with Southeast Asia bode
well for the future. The stock market itself has been unexciting but, helped
by a 7% appreciation of the currency against the U.S. dollar, returns for the
U.S. investor were quite reasonable. In New Zealand, the economy is in better
shape and the market has shown solid dollar returns helped by a strong
contribution from the New Zealand dollar.
Chart 1 - Geographic Diversification - pie chart showing: Europe 53%, Japan
21%, Far East 14%, Latin America 7%, Other and Reserves 5%.
Europe
In Europe, the economic picture is one of contrasts. On the Continent, the
German locomotive is showing a moderate recovery but there are few signs that
this has spread to its neighbors. On the other hand, the U.K. continued a
steady growth phase and smaller economies such as Norway and Ireland are
performing very strongly.
Germany remains at the forefront of the move to Economic Monetary Union
and, along with the other founder members, its government must soon meet the
Maastricht criteria for debt and budget deficits as a percentage of GDP. The
budget for the old West Germany is in surplus but there is a significant
deficit in the old East Germany and, therefore, overall fiscal policy remains
tight at this point in the cycle. Recognizing this dilemma, the Bundesbank
maintained a moderately loose monetary policy and the economy is unlikely to
slip into recession. The picture from now on should improve as unification tax
surcharges phase out and stimulate better consumer sentiment. Also the weaker
deutschemark will help with the export sector. We continued to underweight
this market but our bias toward growth companies in the chemical and drug
sectors enabled us to add value.
The situation in the Netherlands is similar but the domestic economy is
of limited relevance to the Dutch market, which is dominated by a small number
of multinational companies. A number of our favorite multinationals are among
our largest holdings, and oil major Royal Dutch Petroleum, together with media
and publishing stocks Wolters Kluwer and Elsevier, all performed very
strongly.
In the U.K., the economy is continuing a long period of steady growth
which has enabled corporate earnings to advance, but inflation and the current
account are well under control. It is unlikely that the U.K. will be a
founding member of EMU and, therefore, it is less constrained by the
Maastricht criteria. Also, with general elections that must be held no later
than May 1997, the ruling Conservative Party will be anxious for the "feel
good" factor to reappear. Despite all the temptations, the Chancellor has
behaved prudently by raising interest rates a notch and his forthcoming budget
will make few concessions on taxes. The stock market made good progress for
most of the year and was one of Europe's better performers. In recent weeks,
it retreated from an all-time high but, for the U.S. investor, this was more
than compensated for by sterling's sharp advance. Our bias toward growth
stocks in the service and pharmaceutical sector continued to be a successful
strategy in this market.
In France, the picture remained bleak with the economy hardly moving and
unemployment uncomfortably high. Already this has caused some social unrest
but the government is unable to offer fiscal stimulus given the deficit
targets required by EMU. At least the current account was in surplus and the
link between the french franc and deutschemark seemed to be holding steady.
Despite the poor economic background, we can find many investments that meet
our preference for growth at a reasonable price. These have tended to be in
the service sector where retailers such as Carrefour and Pinault Printemps
performed well.
The stock market in Switzerland is another where the multinationals tend
to dominate the scene. Surprisingly, the Swiss franc has been a weak currency
over the year but this has focused attention on the exporters where our
selections have been rewarding, even in U.S. dollars.
Turning to the smaller economies, the Nordic markets were strong, with
Sweden benefiting from a steady fall in interest rates as the government tried
to hold the strong kroner in line with other European currencies. Norway also
did well as the country's oil wealth provided healthy surpluses for both
public expenditure and external trade. Spain and Italy have indicated their
ambitions to be founding members of EMU but a cold look at the statistics
suggests they will be hard pressed to meet the required economic targets in
time. Nevertheless, the new Italian government under Mr. Prodi has shown
remarkable vigor in tackling deep-seated problems such as public sector wage
discipline and fiscal reform.
Latin America
The stock markets of Latin America made a strong contribution to the fund's
return over the last 12 months. Our largest position was in Brazil where the
economy regained momentum after a difficult 1995. Industrial production and
retail sales were both in positive territory but the government will respond
quickly to any signs of a resurgence of inflation or deterioration in the
trade position. Many analysts think the currency is overvalued although,
provided the government pursues the right policies, international confidence
can be maintained. The major stock market theme this year was the
privatization and restructuring of the telecommunications and electricity
sectors, and our holding in blue chip Telecomunicacoes Brasileiras
outperformed strongly.
Mexico has come a long way since the peso crisis of two years ago
although the banking system remains fragile despite a restructuring program.
After a savage recession, the economy is now growing again with the export
sector benefiting from the weak peso. Reserves are still uncomfortably low and
international confidence will depend on further improvement of the trade
position.
INVESTMENT POLICY AND OUTLOOK
Our strategy for the fund going forward is to maintain about half the
portfolio in the stock markets of Europe. Japan remains the largest individual
country position but is significantly underweighted versus the benchmark, and
we maintain important positions in the smaller markets of Southeast Asia and
Latin America. The portfolio remains well diversified in terms of its country
distribution and the number of stocks held. A common theme to our stock
selection is to find growth at a reasonable valuation, although we have been
comfortable holding more cyclical issues in markets such as Japan where we
think economic recovery will continue.
Stock markets tend to be driven by the direction of interest rate moves
and by the way corporate business results compare with expectations. For two
years now, these two forces have been simultaneously positive for the U.S.
market but have been less compelling overseas.
There are some signs that this may be about to change. Interest rates in
the U.S. are unlikely to fall much further and a long period of strong
corporate profit growth may be coming to an end. In contrast, interest rates
can fall further in a number of European markets and the economic recovery in
Europe and Japan may surprise on the upside. The smaller markets of Asia and
Latin America have great potential and have their part to play in a
diversified international portfolio.
The case for international diversification is as valid as ever, the fund
remains fully invested, and we are optimistic about its future.
Respectfully submitted,
Martin G. Wade
President
November 22, 1996
INDUSTRY DIVERSIFICATION
October 31, 1996
Percent of
Net Assets
____________
Services 26.6%
Finance 17.5
Consumer Goods 16.6
Capital Equipment 13.1
Energy 9.9
Materials 7.8
Multi-Industry 3.6
Miscellaneous 0.1
Reserves 4.8
Net Assets 100.0%
EXCHANGE RATES TO U.S. DOLLARS
October 31, 1996
Country Exchange Rate
_____________________________________________________________________________
Argentina 0.9999
Australia 1.2616
Austria 10.6545
Belgium 31.1900
Brazil 1.0274
Canada 1.3402
Czech Republic 26.9280
Denmark 5.8123
Finland 4.5350
France 5.1125
Germany 1.5144
Hong Kong 7.7322
Italy 1,517.0000
Japan 113.8550
Malaysia 2.5265
Mexico 8.0375
Netherlands 1.6967
New Zealand 1.4135
Norway 6.3808
Peru 2.5805
Philippines 26.2800
Portugal 153.0500
Singapore 1.4085
South Korea 826.2500
Spain 127.5950
Sweden 6.5757
Switzerland 1.2640
Thailand 25.4950
United Kingdom 0.6144
SECURITY CLASSIFICATION
October 31, 1996
Percent of Cost Market Value
Net Assets (000) (000)
___________________________________
Common Stocks, Rights,
and Warrants 92.0% $1,878,444 $2,135,928
Preferred Stocks 3.2 57,907 74,770
Bonds 0.0 525 677
Short-Term Investments 4.1 95,111 95,111
Total Investments 99.3 2,031,987 2,306,486
Other Assets Less Liabilities 0.7 15,967 15,983
Net Assets 100.0% $2,047,954 $2,322,469
TWENTY-FIVE LARGEST HOLDINGS
October 31, 1996
Percent of
Company Country Net Assets
__________________________________________________________________________
Wolters Kluwer Netherlands 2.2%
Royal Dutch Petroleum Netherlands 1.9
Elsevier Netherlands 1.8
National Westminster Bank United Kingdom 1.5
Smithkline Beecham United Kingdom 1.4
Telecomunicacoes Brasileiras Brazil 1.2
Reed International United Kingdom 1.2
Eaux Cie Generale France 1.2
Astra Sweden 1.0
Shell Transport & Trading United Kingdom 1.0
Roche Holdings Switzerland 0.9
ABB Sweden/Switzerland 0.9
ING Groep Netherlands 0.9
Gehe Germany 0.9
Mitsubishi Heavy Industries Japan 0.9
Kyocera Japan 0.8
Pinault Printemps France 0.8
Nestle Switzerland 0.8
Abbey National United Kingdom 0.8
NEC Japan 0.8
Carrefour France 0.8
Canon Japan 0.8
Kingfisher United Kingdom 0.7
Denso Japan 0.7
Bayer Germany 0.7
Total 26.6%
SUMMARY OF INVESTMENTS AND CASH
October 31, 1996
Percent of Net Assets
__________________________________________ Percent of
Country Equities! Cash Total MSCI EAFE
__________________________________________________________________________
Austria 0.1 - 0.1 0.4
Belgium 1.0 - 1.0 1.2
Czech Republic 0.0 - 0.0 -
Denmark 0.2 - 0.2 0.9
Finland 0.2 - 0.2 0.6
France 8.2 - 8.2 6.8
Germany 4.3 - 4.3 7.3
Ireland - - - 0.3
Italy 1.9 - 1.9 2.7
Netherlands 10.2 - 10.2 4.5
Norway 1.4 - 1.4 0.5
Portugal 0.5 - 0.5 -
Russia 0.0 - 0.0 -
Spain 2.3 - 2.3 2.0
Sweden 2.6 - 2.6 2.4
Switzerland 4.4 - 4.4 5.9
United Kingdom 15.7 - 15.7 18.2
Total Europe 53.0% - 53.0% 53.7%
Australia 1.7 - 1.7 3.0
China 0.4 - 0.4 -
Hong Kong 4.7 - 4.7 3.6
India 0.2 - 0.2 -
Japan 21.3 - 21.3 35.4
Malaysia 3.0 - 3.0 2.6
New Zealand 0.7 - 0.7 0.4
Philippines 0.1 - 0.1 -
Singapore 1.9 - 1.9 1.3
South Korea 1.0 - 1.0 -
Thailand 0.6 - 0.6 -
Total
Pacific Basin 35.6% - 35.6% 46.3%
Argentina 0.7 - 0.7 -
Brazil 3.3 - 3.3 -
Canada 0.3 - 0.3 -
Chile 0.7 - 0.7 -
Mexico 1.5 - 1.5 -
Peru 0.1 - 0.1 -
United States - 4.1 4.1 -
Total Americas 6.6% 4.1% 10.7% -
Other Assets
Less Liabilities - 0.7 0.7 -
Total 95.2% 4.8% 100.0% 100.0%
! Includes bonds convertible into equities.
TOTAL RETURN PERFORMANCE
Periods Ended October 31, 1996
Calendar
One Three Year- One Three Five Since
Month Months to-Date Year Years* Years* 9/7/89*
__________________________________________________________________________
Foreign
Equity Fund -0.51% 3.44% 9.92% 14.48% 8.86% 10.89% 9.06%
S&P 500 Index 2.76 10.83 16.63 24.10 17.68 15.55 13.65
MSCI EAFE
Index -1.00 1.91 3.57 10.80 6.92 7.98 4.63**
Lipper Inter-
national Funds
Average -0.71 2.54 6.61 10.73 7.05 9.36 7.63
FT-A Euro
Pacific
Index -1.18 1.78 3.41 10.72 6.68 7.41 4.31**
* 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.
PERFORMANCE COMPARISON
As of October 31, 1996
Chart 2 - Performance Comparison - SEC Graph: a line chart showing the
cumulative growth of $10,000 invested in the Foreign Equity Fund from
inception compared with $10,000 invested in a broad-based index and average
over the same period.
Note: The index return does not reflect expenses, which have been deducted
from the fund's return.
* MSCI EAFE Index from 8/31/89.
** Commencement of operations.
FINANCIAL HIGHLIGHTS
Foreign Equity Fund
For a share outstanding throughout each period
______________________________________________________________
Year Ten Months# Year
Ended Ended Ended
10/31/96 10/31/95 10/31/94 10/31/93 12/31/92 12/31/91
______________________________________________________
NET ASSET VALUE,
BEGINNING OF PERIOD $13.99 $14.59 $13.32 $10.05 $10.73 $9.54
______ ______ ______ ______ ______ ______
Investment activities
Net invest-
ment income 0.21 0.18 0.09 0.13 0.17 0.18*
Net realized and
unrealized
gain (loss) 1.78 (0.14)+ 1.48 3.14 (0.57) 1.28
______ ______ ______ ______ ______ ______
Total from invest-
ment activities 1.99 0.04 1.57 3.27 (0.40) 1.46
______ ______ ______ ______ ______ ______
Distributions
Net investment
income (0.18) (0.12) (0.09) - (0.18) (0.18)
Net realized gain (0.18) (0.52) (0.21) - (0.10) (0.09)
______ ______ ______ ______ ______ ______
Total distributions (0.36) (0.64) (0.30) - (0.28) (0.27)
______ ______ ______ ______ ______ ______
NET ASSET VALUE
END OF PERIOD $15.62 $13.99 $14.59 $13.32 $10.05 $10.73
______ ______ ______ ______ ______ ______
______ ______ ______ ______ ______ ______
RATIOS/SUPPLEMENTAL DATA
Total return 14.48% 0.64% 11.96% 32.54% (3.74)% 15.44%*
Ratio of expenses to
average net assets 0.76% 0.80% 0.82% 0.86%! 0.99% 1.00%*
Ratio of net investment
income to average
net assets 1.67% 1.69% 1.26% 1.65%! 1.49% 1.64%*
Portfolio turn-
over rate 13.8% 18.8% 22.0% 27.4%! 35.1% 46.7%
Average commission
rate paid $0.0017 - - - - -
Net assets,
end of period
(in thousands) $2,322,469 $1,559,619 $1,058,478 $489,389 $238,979 $143,822
* Excludes expenses in excess of a 1.00% voluntary expense limitation in
effect from 3/1/90 through 12/31/91.
! Annualized.
# The fund's fiscal year-end was changed to 10/31.
+ 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.
STATEMENT OF NET ASSETS
Foreign Equity Fund / October 31, 1996
Shares / Par Value
In thousands
ARGENTINA 0.7%
Common Stocks 0.7%
Banco de Galicia Buenos Aires
(Class B) ADR (USD) . . . . . . . . . . . 93,992 $ 1,704
Banco Frances del Rio ADR (USD). . . . . . 78,355 2,057
Enron Global Power & Pipeline (USD). . . . 13,780 388
Naviera Perez (Class B). . . . . . . . . . 618,461 3,928
Sociedad Comercial del Plata * . . . . . . 214,150 505
Sociedad Comercial del Plata
ADR (144a) (USD) *. . . . . . . . . . . . 19,896 471
Telecom Argentina Stet (Class B) . . . . . 114,560 432
Telecom Argentina Stet (Class B)
ADR (USD) . . . . . . . . . . . . . . . . 20,037 756
Telefonica de Argentina (Class B)
ADR (USD) . . . . . . . . . . . . . . . . 140,854 3,275
Telefonica de Argentina (Class B)
ADS (USD) . . . . . . . . . . . . . . . . 21,200 493
Transportadora de Gas del Sur
ADR (USD) . . . . . . . . . . . . . . . . 32,868 382
YPF Sociedad Anonima (Class D)
ADR (USD) . . . . . . . . . . . . . . . . 102,315 2,328
Total Argentina (Cost $16,411) 16,719
AUSTRALIA 1.7%
Common Stocks 1.6%
Amcor Limited. . . . . . . . . . . . . . . 133,000 827
Australia & New Zealand Bank Group . . . . 391,000 2,284
Australia Gas & Light. . . . . . . . . . . 828,181 4,543
Broken Hill Proprietary. . . . . . . . . . 354,338 4,705
Coca Cola Amatil . . . . . . . . . . . . . 55,289 760
Howard Smith . . . . . . . . . . . . . . . 201,089 1,578
Lend Lease . . . . . . . . . . . . . . . . 114,017 1,933
National Australia Bank. . . . . . . . . . 203,445 2,233
News Corporation . . . . . . . . . . . . . 488,331 2,779
Publishing and Broadcasting. . . . . . . . 441,124 1,986
Tabcorp Holdings . . . . . . . . . . . . . 844,000 3,981
TNT *. . . . . . . . . . . . . . . . . . . 576,000 1,109
Westpac Banking. . . . . . . . . . . . . . 522,000 2,979
WMC. . . . . . . . . . . . . . . . . . . . 324,258 2,038
Woodside Petroleum . . . . . . . . . . . . 513,000 3,619
37,354
Preferred Stocks 0.1%
Sydney Harbour Casino Holdings * . . . . . 1,309,000 1,868
1,868
Total Australia (Cost $30,382) . . . . . . 39,222
AUSTRIA 0.1%
Common Stocks 0.1%
EVN Energie Versargung Nieder. . . . . . . 6,230 845
Flughafen Wien . . . . . . . . . . . . . . 15,482 763
Total Austria (Cost $1,545) 1,608
BELGIUM 1.0%
Common Stocks 1.0%
Generale Banque. . . . . . . . . . . . . . 16,768 5,860
Generale Banque, VVPR Strip. . . . . . . . 1,524 1
Kredietbank. . . . . . . . . . . . . . . . 39,481 12,753
UCB. . . . . . . . . . . . . . . . . . . . 1,358 2,993
21,607
Convertible Bonds 0.0%
Kredietbank, 5.75%, 11/30/03 . . . . . . . BEL 14,782,500 $ 622
622
Total Belgium (Cost $16,346) 22,229
BRAZIL 3.3%
Common Stocks 0.5%
Brazil Fund (USD). . . . . . . . . . . . . 58,780 1,234
Companhia Siderurgica Nacional . . . . . . 49,720,000 1,234
Eletrobras . . . . . . . . . . . . . . . . 9,970,768 3,096
Eletrobras ADR (USD) * . . . . . . . . . . 20,340 318
Pao de Acucar GDR (USD). . . . . . . . . . 117,940 2,315
Telecomunicacoes Brasileiras . . . . . . . 44,988,700 2,741
Telecomunicacoes de Sao Paulo *. . . . . . 967,420 165
White Martins. . . . . . . . . . . . . . . 769,040,000 1,190
12,293
Preferred Stocks 2.8%
Banco Bradesco . . . . . . . . . . . . . . 638,961,239 5,448
Banco Itau . . . . . . . . . . . . . . . . 3,088,000 1,337
Brahma . . . . . . . . . . . . . . . . . . 6,133,250 3,791
Brasmotor. . . . . . . . . . . . . . . . . 5,547,410 1,884
Cia Cimento Portland Itau. . . . . . . . . 4,882,700 1,283
Cia Energetica de Sao Paulo ADS (USD) *. . 20,600 206
Cia Energetica Minas Gerais. . . . . . . . 66,062,577 2,103
Cia Energetica Minas Gerias
ADR (144a) (USD) *. . . . . . . . . . . . 16,530 523
Cia Energetica Minas Gerias
ADR, cv. (USD) *. . . . . . . . . . . . . 23,337 738
Cia Energetica Minas Gerais ADR, sponsored,
non voting (USD) *. . . . . . . . . . . . 79,555 2,516
Cia Tecidos Norte de Minas . . . . . . . . 3,724,770 1,251
Lojas Americanas . . . . . . . . . . . . . 37,644,000 592
Petrol Brasileiros . . . . . . . . . . . . 18,608,917 2,409
Telecomunicacoes Brasileiras . . . . . . . 64,795,902 4,812
Telecomunicacoes Brasileiras ADR (USD) . . 277,229 20,654
Telecomunicacoes Brasileiras
ADR (144a) (USD). . . . . . . . . . . . . 2,213 165
Telecomunicacoes de Minas Gerais . . . . . 10,703,000 1,195
Telecomunicacoes de Sao Paulo. . . . . . . 24,651,341 4,511
Telecomunicacoes de Rio de Janeiro . . . . 10,080,000 971
Unibanco . . . . . . . . . . . . . . . . . 103,658,000 2,875
Usiminas . . . . . . . . . . . . . . . . . 2,904,560,000 3,053
Usiminas ADR (144a) (USD). . . . . . . . . 12,540 130
Usiminas ADS (USD) . . . . . . . . . . . . 296,810 3,079
65,526
Total Brazil (Cost $60,615) 77,819
CANADA 0.3%
Common Stocks 0.3%
Alcan Aluminum . . . . . . . . . . . . . . 151,960 4,989
Royal Bank of Canada . . . . . . . . . . . 61,480 2,032
Total Canada (Cost $5,205) 7,021
CHILE 0.7%
Common Stocks and Warrants 0.7%
AFP Providia ADR (USD) . . . . . . . . . . 10,996 256
Chile Fund (USD) . . . . . . . . . . . . . 92,740 2,017
Chilectra ADR (144a) (USD) . . . . . . . . 33,009 $ 1,811
Chilgener ADS (USD). . . . . . . . . . . . 58,934 1,333
Compania Cervecerias Unidas ADS (USD). . . 43,830 888
Compania de Telecomunicaciones de Chile
ADR (USD) . . . . . . . . . . . . . . . . 17,198 1,696
Empresa Nacional de Electricidad
ADS (USD) . . . . . . . . . . . . . . . . 108,717 1,998
Enersis ADS (USD). . . . . . . . . . . . . 65,396 1,921
Five Arrows Chile Investment Trust
(USD) . . . . . . . . . . . . . . . . . . 663,410 1,957
Five Arrows Chile Investment Trust, warrants,
5/31/99 (USD) * . . . . . . . . . . . . . 36,758 19
Genesis Chile Fund (USD) . . . . . . . . . 66,410 2,823
Total Chile (Cost $15,759) 16,719
CHINA 0.4%
Common Stocks 0.4%
Huaneng Power International (Class N)
ADR (USD) * . . . . . . . . . . . . . . . 332,700 5,157
Shanghai Petrochemical (Class H) (HKD) . . 11,919,000 3,198
Yizheng Chemical Fibre (Class H) (HKD) . . 8,500,000 1,968
Total China (Cost $12,680) 10,323
CZECH REPUBLIC 0.0%
Common Stocks 0.0%
SPT Telecom. . . . . . . . . . . . . . . . 8,781 939
Total Czech Republic (Cost $834) 939
DENMARK 0.2%
Common Stocks 0.2%
Den Danske Bank. . . . . . . . . . . . . . 37,470 2,688
Tele Danmark (Class B) . . . . . . . . . . 13,050 658
Unidanmark (Class A) . . . . . . . . . . . 40,121 1,850
Total Denmark (Cost $4,504) 5,196
FINLAND 0.2%
Preferred Stocks 0.2%
Nokia (Class A). . . . . . . . . . . . . . 87,860 4,059
Total Finland (Cost $3,014) 4,059
FRANCE 8.2%
Common Stocks and Warrants 8.2%
Accor. . . . . . . . . . . . . . . . . . . 26,090 3,276
Alcatel Alsthom. . . . . . . . . . . . . . 50,920 4,343
Assurances Generales de France . . . . . . 65,582 1,934
AXA. . . . . . . . . . . . . . . . . . . . 13,600 849
Canal Plus . . . . . . . . . . . . . . . . 25,240 6,250
Carrefour. . . . . . . . . . . . . . . . . 32,397 17,978
Castorama Dubois . . . . . . . . . . . . . 11,668 1,997
Chargeurs International. . . . . . . . . . 15,368 667
Cie de St. Gobain. . . . . . . . . . . . . 69,756 9,415
Credit Local de France, bearer . . . . . . 20,520 1,765
Credit Local de France, registered . . . . 16,696 1,436
Eaux Cie Generale. . . . . . . . . . . . . 229,892 27,475
Ecco . . . . . . . . . . . . . . . . . . . 2,110 506
Elf Aquitaine. . . . . . . . . . . . . . . 85,880 6,867
GTM Entrepose. . . . . . . . . . . . . . . 25,080 $ 1,190
Guilbert . . . . . . . . . . . . . . . . . 28,341 4,507
Havas. . . . . . . . . . . . . . . . . . . 22,490 1,477
L'Oreal. . . . . . . . . . . . . . . . . . 8,615 2,917
Lapeyre. . . . . . . . . . . . . . . . . . 58,000 2,838
Legrand. . . . . . . . . . . . . . . . . . 20,839 3,616
LVMH . . . . . . . . . . . . . . . . . . . 63,936 14,644
Pathe. . . . . . . . . . . . . . . . . . . 16,728 4,512
Pinault Printemps. . . . . . . . . . . . . 49,853 18,800
Primagaz . . . . . . . . . . . . . . . . . 35,516 3,668
Primagaz, warrants, 6/30/98 *. . . . . . . 2,012 39
Rexel. . . . . . . . . . . . . . . . . . . 13,280 3,935
Sanofi . . . . . . . . . . . . . . . . . . 29,884 2,707
Schneider. . . . . . . . . . . . . . . . . 94,270 4,610
Societe Generale . . . . . . . . . . . . . 14,890 1,605
Sodexho. . . . . . . . . . . . . . . . . . 22,900 11,068
Television Francaise . . . . . . . . . . . 88,346 9,401
Total (Class B). . . . . . . . . . . . . . 177,361 13,873
Total France (Cost $157,759) 190,165
GERMANY 4.3%
Common Stocks and Warrants 4.0%
Allianz Holdings . . . . . . . . . . . . . 4,380 7,922
Allianz Holdings, warrants, 2/23/98 *. . . 13,000 687
Altana . . . . . . . . . . . . . . . . . . 1,686 1,347
Bayer. . . . . . . . . . . . . . . . . . . 451,659 17,059
Bilfinger and Berger . . . . . . . . . . . 63,560 2,573
Buderus. . . . . . . . . . . . . . . . . . 4,012 1,815
Deutsche Bank. . . . . . . . . . . . . . . 100,590 4,696
Gehe . . . . . . . . . . . . . . . . . . . 302,490 20,374
Hoechst. . . . . . . . . . . . . . . . . . 70,350 2,653
Hornbach Baumarkt. . . . . . . . . . . . . 14,770 478
Mannesmann . . . . . . . . . . . . . . . . 11,177 4,340
Praktiker. . . . . . . . . . . . . . . . . 32,915 674
Rhoen Klinikum . . . . . . . . . . . . . . 46,394 5,821
SAP. . . . . . . . . . . . . . . . . . . . 15,430 2,089
Schering . . . . . . . . . . . . . . . . . 24,562 1,977
Siemens. . . . . . . . . . . . . . . . . . 42,008 2,170
Siemens, warrants, 6/02/98 * . . . . . . . 12,000 1,014
Veba . . . . . . . . . . . . . . . . . . . 206,770 11,028
Veba, warrants, 4/06/98 *. . . . . . . . . 9,526 2,698
Volkswagen . . . . . . . . . . . . . . . . 4,834 1,936
93,351
Preferred Stocks 0.3%
Fielmann . . . . . . . . . . . . . . . . . 27,225 1,133
Hornbach . . . . . . . . . . . . . . . . . 32,830 2,059
Krones . . . . . . . . . . . . . . . . . . 4,621 1,632
SAP. . . . . . . . . . . . . . . . . . . . 16,644 2,240
7,064
Total Germany (Cost $83,607) 100,415
HONG KONG 4.7%
Common Stocks 4.7%
Cathay Pacific Airways . . . . . . . . . . 2,799,000 4,380
Dao Heng Bank Group. . . . . . . . . . . . 1,342,000 5,901
First Pacific. . . . . . . . . . . . . . . 5,584,931 $ 7,693
Guangdong Investment . . . . . . . . . . . 5,846,000 4,196
Guangzhou Investment . . . . . . . . . . . 14,320,000 4,630
Guoco Group. . . . . . . . . . . . . . . . 1,640,000 8,675
Hong Kong Land Holdings (USD). . . . . . . 7,603,719 16,956
Hopewell Holdings. . . . . . . . . . . . . 11,561,000 7,775
Hutchison Whampoa. . . . . . . . . . . . . 1,865,000 13,025
New World Development. . . . . . . . . . . 2,465,774 14,350
Swire Pacific (Class A). . . . . . . . . . 1,065,000 9,401
Wharf Holdings . . . . . . . . . . . . . . 2,939,000 12,125
Total Hong Kong (Cost $94,958) 109,107
INDIA 0.2%
Common Stocks 0.2%
State Bank of India GDR (USD). . . . . . . 322,700 4,840
Total India (Cost $4,566) 4,840
ITALY 1.9%
Common Stocks and Warrants 1.9%
Assicurazioni Generali . . . . . . . . . . 111,268 2,149
Banca Fideuram . . . . . . . . . . . . . . 2,087,300 4,424
Danieli & Company, savings shares. . . . . 113,820 362
ENI. . . . . . . . . . . . . . . . . . . . 1,187,107 5,685
Finanziaria Autogrill. . . . . . . . . . . 152,088 155
IMI. . . . . . . . . . . . . . . . . . . . 408,757 3,235
Industrie Natuzzi ADR (USD). . . . . . . . 37,490 1,696
Istituto Nazionale delle Assicurazioni . . 555,000 766
Italgas. . . . . . . . . . . . . . . . . . 552,325 2,039
Mediolanum . . . . . . . . . . . . . . . . 201,080 1,993
Rinascente . . . . . . . . . . . . . . . . 202,500 1,197
Rinascente, warrants, 11/30/99 * . . . . . 10,125 4
Sasib, savings shares. . . . . . . . . . . 124,282 215
Stet . . . . . . . . . . . . . . . . . . . 1,720,680 5,944
Stet, savings shares . . . . . . . . . . . 829,120 2,208
Telecom Italia . . . . . . . . . . . . . . 1,494,258 3,329
Telecom Italia Mobile. . . . . . . . . . . 3,339,866 6,902
Telecom Italia Mobile, savings shares. . . 872,266 995
Unicem * . . . . . . . . . . . . . . . . . 84,206 561
43,859
Corporate Bonds 0.0%
Danieli & Company, 7.25%, 1/01/00. . . . . ITL 89,730,000 55
55
Total Italy (Cost $37,538) 43,914
JAPAN 21.3%
Common Stocks 21.3%
Advantest. . . . . . . . . . . . . . . . . 39,700 1,499
Alps Electric. . . . . . . . . . . . . . . 318,000 3,938
Amada. . . . . . . . . . . . . . . . . . . 695,000 5,982
Canon. . . . . . . . . . . . . . . . . . . 928,000 17,769
Citizen Watch. . . . . . . . . . . . . . . 448,000 3,404
Daifuku. . . . . . . . . . . . . . . . . . 126,000 1,549
Daiichi Pharmaceutical . . . . . . . . . . 662,000 9,536
DaiNippon Screen Manufacturing . . . . . . 611,000 4,824
Daiwa House. . . . . . . . . . . . . . . . 855,000 $ 11,865
DDI. . . . . . . . . . . . . . . . . . . . 1,035 7,772
Denso. . . . . . . . . . . . . . . . . . . 831,000 17,225
East Japan Railway . . . . . . . . . . . . 2,129 9,780
Fanuc. . . . . . . . . . . . . . . . . . . 167,000 5,354
Hitachi. . . . . . . . . . . . . . . . . . 1,092,000 9,687
Hitachi Zosen. . . . . . . . . . . . . . . 1,097,000 5,357
Honda Motor. . . . . . . . . . . . . . . . 79,000 1,887
Inax . . . . . . . . . . . . . . . . . . . 331,000 2,814
Ishihara Sangyo Kaisha * . . . . . . . . . 368,000 1,102
Ito-Yokado . . . . . . . . . . . . . . . . 248,000 12,372
Kao. . . . . . . . . . . . . . . . . . . . 327,000 3,849
Kawada Industries. . . . . . . . . . . . . 107,000 771
Kokuyo . . . . . . . . . . . . . . . . . . 330,000 8,174
Komatsu. . . . . . . . . . . . . . . . . . 889,000 7,277
Komori . . . . . . . . . . . . . . . . . . 289,000 6,498
Kumagai Gumi . . . . . . . . . . . . . . . 633,000 2,001
Kuraray. . . . . . . . . . . . . . . . . . 747,000 7,217
Kyocera. . . . . . . . . . . . . . . . . . 292,000 19,261
Makita . . . . . . . . . . . . . . . . . . 462,000 6,330
Marui. . . . . . . . . . . . . . . . . . . 560,000 10,378
Matsushita Electric Industrial . . . . . . 876,000 14,003
Mitsubishi . . . . . . . . . . . . . . . . 452,000 5,042
Mitsubishi Heavy Industries. . . . . . . . 2,609,000 20,051
Mitsubishi Paper Mills . . . . . . . . . . 458,000 2,204
Mitsui Fudosan . . . . . . . . . . . . . . 1,329,000 16,459
Mitsui Petrochemical Industries. . . . . . 269,000 1,633
Murata Manufacturing . . . . . . . . . . . 310,000 9,965
National House Industrial. . . . . . . . . 170,000 2,449
NEC. . . . . . . . . . . . . . . . . . . . 1,652,000 17,992
Nippon Hodo. . . . . . . . . . . . . . . . 176,000 2,458
Nippon Steel . . . . . . . . . . . . . . . 3,998,000 11,658
Nippon Telephone & Telecom . . . . . . . . 904 6,312
Nomura Securities. . . . . . . . . . . . . 863,000 14,250
Pioneer Electronic . . . . . . . . . . . . 402,000 7,944
Sangetsu . . . . . . . . . . . . . . . . . 111,000 2,369
Sankyo . . . . . . . . . . . . . . . . . . 619,000 15,332
Sega Enterprises . . . . . . . . . . . . . 109,150 4,410
Sekisui Chemical . . . . . . . . . . . . . 939,000 10,474
Sekisui House. . . . . . . . . . . . . . . 635,000 6,693
Seven Eleven Japan . . . . . . . . . . . . 89,000 5,175
Sharp. . . . . . . . . . . . . . . . . . . 800,000 12,156
Shin-Etsu Chemical . . . . . . . . . . . . 525,000 8,992
Sony . . . . . . . . . . . . . . . . . . . 224,000 13,437
Sumitomo . . . . . . . . . . . . . . . . . 1,207,000 9,743
Sumitomo Electric. . . . . . . . . . . . . 1,280,000 16,864
Sumitomo Forestry. . . . . . . . . . . . . 394,000 5,571
TDK. . . . . . . . . . . . . . . . . . . . 221,000 12,966
Teijin . . . . . . . . . . . . . . . . . . 1,676,000 7,758
Tokio Marine & Fire Insurance. . . . . . . 341,000 3,744
Tokyo Electronics. . . . . . . . . . . . . 113,000 2,908
Tokyo Steel Manufacturing. . . . . . . . . 325,000 5,024
Toppan Printing. . . . . . . . . . . . . . 548,000 6,690
Uny. . . . . . . . . . . . . . . . . . . . 228,000 3,945
Yurtec . . . . . . . . . . . . . . . . . . 154,350 2,250
Total Japan (Cost $518,494) 494,393
MALAYSIA 3.0%
Common Stocks and Warrants 3.0%
Affin Holdings . . . . . . . . . . . . . . 4,615,000 $ 11,873
Affin Holdings, warrants, 11/15/99 * . . . 604,000 646
Berjaya Sports Toto. . . . . . . . . . . . 1,741,000 6,546
Commerce Asset Holdings. . . . . . . . . . 771,333 5,037
MBF Capital. . . . . . . . . . . . . . . . 2,983,000 4,109
Multi-Purpose Holdings . . . . . . . . . . 4,307,000 7,365
Renong . . . . . . . . . . . . . . . . . . 3,722,000 5,863
Renong, warrants, 11/21/00 * . . . . . . . 435,125 177
Resorts World. . . . . . . . . . . . . . . 599,000 3,438
Tanjong. . . . . . . . . . . . . . . . . . 1,731,000 6,714
Technology Resources Industries *. . . . . 2,257,000 5,405
United Engineers . . . . . . . . . . . . . 1,623,000 12,848
70,021
Preferred Stocks 0.0%
Renong, cv. loan stock, 4.00%, 5/21/01 . . 696,200 255
255
Total Malaysia (Cost $58,720) 70,276
MEXICO 1.5%
Common Stocks and Rights 1.5%
Cemex (Class B). . . . . . . . . . . . . . 325,840 1,171
Cemex ADS (USD). . . . . . . . . . . . . . 95,160 672
Cemex ADS (144a) (USD) . . . . . . . . . . 410,812 2,901
Cifra ADR (USD). . . . . . . . . . . . . . 3,139,213 3,893
Fomentos Economico Mexicano (Class B). . . 332,862 1,010
Gruma (Class B) *. . . . . . . . . . . . . 593,166 2,948
Gruma (Class B), rights *. . . . . . . . . 15,733 6
Grupo Financiero Banamex (Class B) . . . . 966,552 2,044
Grupo Financiero Banamex (Class L) . . . . 31,801 65
Grupo Financiero Bancomer (Class L) *. . . 8,266 3
Grupo Industrial Maseca (Class B). . . . . 1,664,467 2,025
Grupo Modelo (Class C) . . . . . . . . . . 347,864 1,803
Grupo Televisa GDR (USD) . . . . . . . . . 49,322 1,295
Kimberly-Clark Mexico (Class A). . . . . . 130,087 2,509
Panamerican Beverages (Class A)
ADR (USD) . . . . . . . . . . . . . . . . 100,714 4,394
Telefonos de Mexico (Class L)
ADS (USD) . . . . . . . . . . . . . . . . 251,614 7,674
Total Mexico (Cost $44,830) 34,413
NETHERLANDS 10.2%
Common Stocks 10.2%
ABN Amro Holdings. . . . . . . . . . . . . 187,860 10,618
Ahold. . . . . . . . . . . . . . . . . . . 163,050 9,514
Akzo Nobel . . . . . . . . . . . . . . . . 16,188 2,040
CSM. . . . . . . . . . . . . . . . . . . . 239,610 12,639
Elsevier . . . . . . . . . . . . . . . . . 2,565,208 42,635
Fortis Amev. . . . . . . . . . . . . . . . 222,877 6,660
Hagemeyer. . . . . . . . . . . . . . . . . 51,110 3,841
ING Groep. . . . . . . . . . . . . . . . . 657,575 20,502
Koninklijke PTT Nederland. . . . . . . . . 77,335 2,799
Nutricia . . . . . . . . . . . . . . . . . 36,084 5,062
Otra . . . . . . . . . . . . . . . . . . . 45,880 860
Polygram . . . . . . . . . . . . . . . . . 271,899 12,772
Royal Dutch Petroleum. . . . . . . . . . . 262,807 43,401
Unilever . . . . . . . . . . . . . . . . . 81,866 $ 12,448
Wolters Kluwer . . . . . . . . . . . . . . 399,141 51,307
237,098
Preferred Stocks 0.0%
ING Groep. . . . . . . . . . . . . . . . . 10,797 57
57
Total Netherlands (Cost $172,663) 237,155
NEW ZEALAND 0.7%
Common Stocks and Rights 0.7%
Air New Zealand (Class B). . . . . . . . . 511,736 1,249
Air New Zealand (Class B), rights *. . . . 139,564 145
Carter Holt Harvey . . . . . . . . . . . . 792,115 1,782
Fernz. . . . . . . . . . . . . . . . . . . 393,080 1,377
Fletcher Challenge Building. . . . . . . . 384,044 1,041
Fletcher Challenge Energy. . . . . . . . . 158,044 451
Fletcher Challenge Forests Division. . . . 1,558,094 2,601
Fletcher Challenge Paper . . . . . . . . . 284,089 514
Telecom Corporation of New Zealand . . . . 1,301,372 6,767
Total New Zealand (Cost $14,465) 15,927
NORWAY 1.4%
Common Stocks 1.4%
Bergesen (Class A) . . . . . . . . . . . . 46,430 1,015
Norsk Hydro. . . . . . . . . . . . . . . . 355,382 16,375
Orkla (Class A). . . . . . . . . . . . . . 222,310 14,215
Saga Petroleum (Class B) . . . . . . . . . 85,950 1,340
Total Norway (Cost $24,294) 32,945
PERU 0.1%
Common Stocks 0.1%
Telefonica del Peru (Class B). . . . . . . 316,910 671
Telefonica del Peru (Class B)
ADR (USD) . . . . . . . . . . . . . . . . 39,284 810
Total Peru (Cost $1,429) 1,481
PHILIPPINES 0.1%
Common Stocks 0.1%
Philippine National Bank . . . . . . . . . 197,100 2,269
Total Philippines (Cost $3,269) 2,269
PORTUGAL 0.5%
Common Stocks 0.5%
Jeronimo Martins . . . . . . . . . . . . . 117,664 10,709
Total Portugal (Cost $5,147) 10,709
RUSSIA 0.0%
Common Stocks 0.0%
Gazprom ADR (USD). . . . . . . . . . . . . 38,080 714
Total Russia (Cost $600) 714
SINGAPORE 1.9%
Common Stocks and Warrants 1.9%
DBS Land . . . . . . . . . . . . . . . . . 1,075,000 $ 3,389
Development Bank of Singapore. . . . . . . 290,000 3,479
Far East Levingston Shipbuilding . . . . . 367,000 1,759
Fraser & Neave . . . . . . . . . . . . . . 154,400 1,535
Jurong Shipyard. . . . . . . . . . . . . . 103,000 482
Keppel . . . . . . . . . . . . . . . . . . 237,000 1,767
Overseas Union Bank. . . . . . . . . . . . 1,221,000 8,322
Singapore Airlines . . . . . . . . . . . . 86,000 757
Singapore Land . . . . . . . . . . . . . . 1,104,000 6,114
Singapore Press. . . . . . . . . . . . . . 223,820 3,718
United Industrial. . . . . . . . . . . . . 1,853,000 1,539
United Overseas Bank . . . . . . . . . . . 976,352 9,497
United Overseas Bank, warrants,
6/17/97 * . . . . . . . . . . . . . . . . 192,940 685
Total Singapore (Cost $42,399) 43,043
SOUTH KOREA 1.0%
Common Stocks 1.0%
Cho Hung Bank. . . . . . . . . . . . . . . 243,230 2,527
Hanil Bank . . . . . . . . . . . . . . . . 166,500 1,528
Hanil Securities . . . . . . . . . . . . . 92,887 967
Kook Min Bank. . . . . . . . . . . . . . . 98,238 1,883
Korea Electric Power . . . . . . . . . . . 147,400 4,335
Pohang Iron & Steel. . . . . . . . . . . . 50,660 3,228
Samsung Electronic * . . . . . . . . . . . 42,487 3,107
Samsung Electronic GDR (USD) * . . . . . . 22,267 362
Samsung Electronic GDS (USD) * . . . . . . 1,464 50
Samsung Electronic GDS, 1/2 non voting
(USD) * . . . . . . . . . . . . . . . . . 69,887 1,524
Samsung Electronic, new *. . . . . . . . . 6,812 466
Samsung Fire & Marine Insurance. . . . . . 380 200
Seoul Bank . . . . . . . . . . . . . . . . 136,000 790
Shinhan Bank . . . . . . . . . . . . . . . 14,500 285
Yukong . . . . . . . . . . . . . . . . . . 70,278 1,636
Total South Korea (Cost $31,856) 22,888
SPAIN 2.3%
Common Stocks 2.3%
Aguas de Barcelona . . . . . . . . . . . . 29,857 1,221
Argentaria Banca de Espana . . . . . . . . 67,680 2,652
Banco Popular Espanol. . . . . . . . . . . 33,181 6,343
Banco Santander. . . . . . . . . . . . . . 120,703 6,196
Centros Comerciales Pryca. . . . . . . . . 91,773 2,107
Continente Central . . . . . . . . . . . . 45,860 931
Empresa Nacional de Electricidad . . . . . 180,145 11,027
Fomento de Construcciones y Contra . . . . 11,758 955
Gas Natural. . . . . . . . . . . . . . . . 34,818 6,091
Iberdrola. . . . . . . . . . . . . . . . . 531,026 5,639
Repsol . . . . . . . . . . . . . . . . . . 256,542 8,374
Repsol ADR (USD) . . . . . . . . . . . . . 10,390 340
Telefonica de Espana . . . . . . . . . . . 121,410 2,436
Total Spain (Cost $46,948) 54,312
SWEDEN 2.6%
Common Stocks 2.6%
ABB (Class A). . . . . . . . . . . . . . . 38,170 $ 4,324
Astra (Class B). . . . . . . . . . . . . . 523,057 23,863
Atlas Copco (Class B). . . . . . . . . . . 225,532 4,647
Electrolux (Class B) . . . . . . . . . . . 150,437 8,373
Esselte (Class B). . . . . . . . . . . . . 49,870 1,115
Hennes & Mauritz (Class B) . . . . . . . . 67,371 8,719
Nordbanken . . . . . . . . . . . . . . . . 13,300 350
Sandvik (Class A). . . . . . . . . . . . . 40,050 944
Sandvik (Class B). . . . . . . . . . . . . 247,110 5,825
Scribona (Class B) . . . . . . . . . . . . 49,060 541
Stora Kopparbergs (Class B). . . . . . . . 147,510 1,896
Total Sweden (Cost $41,181) 60,597
SWITZERLAND 4.4%
Common Stocks 4.4%
ABB. . . . . . . . . . . . . . . . . . . . 13,350 16,497
Adecco . . . . . . . . . . . . . . . . . . 32,713 9,188
Ciba-Geigy . . . . . . . . . . . . . . . . 8,150 10,039
CS Holding . . . . . . . . . . . . . . . . 40,405 4,036
Nestle . . . . . . . . . . . . . . . . . . 17,263 18,752
Roche Holdings . . . . . . . . . . . . . . 2,891 21,865
Sandoz . . . . . . . . . . . . . . . . . . 13,194 15,250
Schweizerischer Bankverein . . . . . . . . 34,384 6,624
Total Switzerland (Cost $77,360) 102,251
THAILAND 0.6%
Common Stocks and Warrants 0.6%
Advanced Information Service . . . . . . . 139,974 1,900
Bangkok Bank . . . . . . . . . . . . . . . 493,317 5,263
Bank of Ayudhya. . . . . . . . . . . . . . 355,246 1,017
Siam Cement. . . . . . . . . . . . . . . . 26,025 890
Siam Commercial Bank . . . . . . . . . . . 246,627 2,244
Thai Farmers Bank. . . . . . . . . . . . . 272,576 2,085
Thai Farmers Bank, warrants, 9/15/02 * . . 34,072 14
Total Access Communications (USD). . . . . 105,630 729
Total Thailand (Cost $16,161) 14,142
UNITED KINGDOM 15.7%
Common Stocks 15.7%
Abbey National . . . . . . . . . . . . . . 1,747,440 18,146
Argos. . . . . . . . . . . . . . . . . . . 939,200 11,771
Asda Group . . . . . . . . . . . . . . . . 4,059,530 7,797
British Gas. . . . . . . . . . . . . . . . 901,200 2,802
British Petroleum. . . . . . . . . . . . . 719,522 7,706
Cable & Wireless . . . . . . . . . . . . . 1,582,200 12,567
Cadbury Schweppes. . . . . . . . . . . . . 1,164,578 9,667
Caradon. . . . . . . . . . . . . . . . . . 2,090,350 8,233
Coats Viyella. . . . . . . . . . . . . . . 709,000 1,754
Compass Group. . . . . . . . . . . . . . . 611,000 6,076
David S. Smith . . . . . . . . . . . . . . 1,073,500 5,451
East Midlands Electricity. . . . . . . . . 434,619 3,809
Electrocomponents. . . . . . . . . . . . . 310,000 $ 2,079
GKN. . . . . . . . . . . . . . . . . . . . 138,000 2,599
Glaxo Wellcome . . . . . . . . . . . . . . 1,086,650 16,890
Grand Metropolitan . . . . . . . . . . . . 1,906,000 14,301
Guinness . . . . . . . . . . . . . . . . . 1,588,000 11,424
Heywood Williams Group . . . . . . . . . . 249,576 989
Hillsdown Holdings . . . . . . . . . . . . 675,300 1,934
John Laing (Class A) . . . . . . . . . . . 594,300 2,583
Kingfisher . . . . . . . . . . . . . . . . 1,621,977 17,265
Ladbroke Group . . . . . . . . . . . . . . 1,074,000 3,470
London Electricity . . . . . . . . . . . . 574,288 5,683
National Grid Group. . . . . . . . . . . . 510,800 1,496
National Westminster Bank. . . . . . . . . 2,974,619 34,036
Rank Group . . . . . . . . . . . . . . . . 1,233,000 8,148
Reed International . . . . . . . . . . . . 1,482,570 27,629
Rolls Royce. . . . . . . . . . . . . . . . 543,851 2,240
RTZ. . . . . . . . . . . . . . . . . . . . 756,960 12,074
Safeway. . . . . . . . . . . . . . . . . . 1,508,200 8,935
Sears. . . . . . . . . . . . . . . . . . . 504,000 710
Shell Transport & Trading. . . . . . . . . 1,366,000 22,411
Smithkline Beecham . . . . . . . . . . . . 2,582,015 31,771
Spring Ram . . . . . . . . . . . . . . . . 103,888 22
T & N. . . . . . . . . . . . . . . . . . . 1,399,000 2,892
Tesco. . . . . . . . . . . . . . . . . . . 1,353,903 7,294
Tomkins. . . . . . . . . . . . . . . . . . 3,312,080 13,854
United Newspapers. . . . . . . . . . . . . 1,374,620 15,057
Total United Kingdom (Cost $291,337) . . . 363,565
SHORT-TERM INVESTMENTS 4.1%
Commercial Paper 2.4%
Ciesco, 5.30%, 11/25/96. . . . . . . . . . $ 10,000,000 9,965
Indosuez North America, 5.38%, 12/18/96. . 10,000,000 9,930
Korea Development Bank, 5.27%, 11/12/96. . 10,000,000 9,984
Mobil Australia Finance, 4(2),
5.32%, 11/27/96 . . . . . . . . . . . . . 10,000,000 9,962
Oesterrichische Kontrollbank,
5.33%, 11/29/96 . . . . . . . . . . . . . 10,000,000 9,958
Investments in Commercial Paper through a
joint account 5.56 - 5.63%, 11/01/96. . . 5,312,558 5,312
55,111
Other 1.7%
Bank One Dayton, CD, 5.30%, 11/06/96 . . . 10,000,000 10,000
First Tennessee Bank N.A., CD,
5.32%, 11/04/96 . . . . . . . . . . . . . 10,000,000 10,000
SMM Trust, Floating Rate MTN,
5.706%, 3/26/97 . . . . . . . . . . . . . 10,000,000 10,000
Societe Generale, CD, 5.37%, 12/16/96. . . 10,000,000 10,000
40,000
Total Short-Term Investments
(Cost $95,111) . . . . . . . . . . . . . . 95,111
Total Investments in Securities
99.3% of Net Assets (Cost $2,031,987). . . $ 2,306,486
Other Assets Less Liabilities. . . . . . . 15,983
__________
NET ASSETS . . . . . . . . . . . . . . . . $ 2,322,469
__________
__________
Net Assets Consist of:
Accumulated net investment income -
net of distributions. . . . . . . . . . . $ 32,715
Accumulated net realized gain/loss -
net of distributions. . . . . . . . . . . 19,934
Net unrealized gain (loss) . . . . . . . . 274,515
Paid-in-capital applicable to 148,687,924 shares of
$0.01 par value capital stock outstanding;
1,000,000,000 shares authorized . . . . . 1,995,305
__________
NET ASSETS . . . . . . . . . . . . . . . . $ 2,322,469
__________
__________
NET ASSET VALUE PER SHARE. . . . . . . . . $ 15.62
__________
__________
* Non-income producing
4(2) Commercial paper sold within terms of a private placement memorandum,
exempt from registration under section 4.2 of the Securities Act of
1933, as amended, and may be sold only to dealers in that program or
other "accredited investors."
144a Security was purchased pursuant to Rule 144a under the Securities Act
of 1933 and may not be resold subject to that rule except to qualified
institutional buyers -total of such securities at year-end amounts to
0.25% of net assets.
BEL Belgian franc
CD Certificate of Deposit
HKD Hong Kong dollar
ITL Italian lira
MTN Medium-Term Note
USD U.S. dollar
The accompanying notes are an integral part of these financial statements.
STATEMENT OF OPERATIONS
Foreign Equity Fund
(in thousands)
Year
Ended
10/31/96
_________
INVESTMENT INCOME
Income
Dividend (net of foreign taxes of $ 6,145) . . . . . . $ 42,090
Interest . . . . . . . . . . . . . . . . . . . . . . . 6,070
________
Total income . . . . . . . . . . . . . . . . . . . . . . 48,160
________
Expenses
Investment management. . . . . . . . . . . . . . . . . 13,871
Custody and accounting . . . . . . . . . . . . . . . . 791
Registration . . . . . . . . . . . . . . . . . . . . . 313
Legal and audit. . . . . . . . . . . . . . . . . . . . 36
Directors. . . . . . . . . . . . . . . . . . . . . . . 12
Shareholder servicing. . . . . . . . . . . . . . . . . 9
Prospectus and shareholder reports . . . . . . . . . . 6
Miscellaneous. . . . . . . . . . . . . . . . . . . . . 15
________
Total expenses . . . . . . . . . . . . . . . . . . . . . 15,053
________
Net investment income. . . . . . . . . . . . . . . . . . 33,107
________
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss)
Securities . . . . . . . . . . . . . . . . . . . . . . 39,088
Foreign currency transactions. . . . . . . . . . . . . (1,281)
________
Net realized gain (loss) . . . . . . . . . . . . . . . 37,807
________
Change in net unrealized gain or loss
Securities . . . . . . . . . . . . . . . . . . . . . . 178,886
Other assets and liabilities denominated
in foreign currencies. . . . . . . . . . . . . . . . 21
________
Change in net unrealized gain or loss. . . . . . . . . 178,907
________
Net realized and unrealized gain (loss). . . . . . . . . 216,714
________
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS. . . . $ 249,821
________
________
The accompanying notes are an integral part of these financial statements.
STATEMENT OF CHANGES IN NET ASSETS
Foreign Equity Fund
(in thousands)
Year Year
Ended Ended
10/31/96 10/31/95
________ ________
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income . . . . . . . . . . . . $ 33,107 $ 20,980
Net realized gain (loss). . . . . . . . . . . 37,807 19,425
Change in net unrealized gain or loss . . . . 178,907 (19,253)
__________ __________
Increase (decrease) in net assets
from operations. . . . . . . . . . . . . . . 249,821 21,152
__________ __________
Distributions to shareholders
Net investment income . . . . . . . . . . . . (21,229) (9,573)
Net realized gain . . . . . . . . . . . . . . (21,229) (41,487)
__________ __________
Decrease in net assets from
distributions. . . . . . . . . . . . . . . . (42,458) (51,060)
__________ __________
Capital share transactions*
Shares sold . . . . . . . . . . . . . . . . . 772,534 632,538
Distributions reinvested. . . . . . . . . . . 30,404 35,819
Shares redeemed . . . . . . . . . . . . . . . (247,451) (137,308)
__________ __________
Increase (decrease) in net assets from
capital share transactions . . . . . . . . . 555,487 531,049
__________ __________
NET ASSETS
Increase (decrease) during period. . . . . . . 762,850 501,141
Beginning of period. . . . . . . . . . . . . . 1,559,619 1,058,478
__________ __________
End of period. . . . . . . . . . . . . . . . . $2,322,469 $1,559,619
__________ __________
__________ __________
*Share information
Shares sold . . . . . . . . . . . . . . . . . 51,462 46,409
Distributions reinvested. . . . . . . . . . . 2,138 2,775
Shares redeemed . . . . . . . . . . . . . . . (16,389) (10,263)
__________ __________
Increase (decrease) in
shares outstanding . . . . . . . . . . . . . 37,211 38,921
The accompanying notes are an integral part of these financial statements.
NOTES TO FINANCIAL STATEMENTS
Foreign Equity Fund / October 31, 1996
Note 1 - Significant Accounting Policies
T. Rowe Price 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 and commenced operations on
September 7, 1989.
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 amortized cost which 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.
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.
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 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.
Emerging Markets - At October 31, 1996, 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.
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.
Other - Purchases and sales of portfolio securities, other than short-term
securities, aggregated $798,278,000 and $257,049,000, respectively, for the
year ended October 31, 1996.
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, the
following reclassifications were made during the year ended October 31, 1996.
The results of operations and net assets were not affected by the
reclassifications.
Undistributed net investment income $ 1,000
Undistributed net realized gain (13,831,000)
Paid-in-capital 13,830,000
At October 31, 1996, the aggregate cost of investments for federal
income tax and financial reporting purposes was $2,031,987,000, and net
unrealized gain aggregated $274,499,000, of which $366,520,000 related to
appreciated investments and $92,021,000 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
$1,378,000 was payable at October 31, 1996. 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 $107,000 for the year ended October 31, 1996, of which $14,000
was payable at period-end.
During the year ended October 31, 1996, the fund, in the ordinary course
of business, paid commissions of $193,000 to, and placed security purchase and
sale orders aggregating $72,215,000 with, certain affiliates of the manager in
connection with the execution of various portfolio transactions.
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 constituting Institutional International
Funds, Inc., hereafter referred to as the "Fund") at October 31, 1996, the
results of its operations for the year then ended, and the changes in its net
assets and the financial highlights for each of the two years in the period
then ended, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 1996 by correspondence with
custodians and, where appropriate, the application of alternative auditing
procedures for unsettled security transactions, provide 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 19, 1996
During fiscal year 1995, Price Waterhouse LLP succeeded 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 two fiscal years
preceding the change, the fund received unqualified opinions and had no
disagreements with Coopers & Lybrand L.L.P. or reportable events that caused
the change.
APPENDIX
Chart 1 - Geographic Diversification - pie chart showing: Europe 53%, Japan
21%, Far East 14%, Latin America 7%, Other and Reserves 5%.
Chart 2 - Performance Comparison - SEC Graph: a line chart showing the
cumulative growth of $10,000 invested in the Foreign Equity Fund from
inception compared with $10,000 invested in a broad-based index and average
over the same period.
