Semiannual Report
April 30, 1997
Foreign Equity Fund
Fellow Shareholders
European and Latin American stock markets posted robust returns
in U.S. dollar terms during the past six months. However, a
strong dollar that appreciated against most foreign currencies
dampened returns for U.S. investors in many regions. Despite the
unfavorable currency translation, your fund registered
respectable returns during the half.
Performance Comparison
Periods Ended 4/30/97 6 Months 12 Months
_________________________________________________________
Foreign Equity Fund 6.14% 7.23%
MSCI EAFE Index 1.72% -0.60%
The Foreign Equity Fund maintained its steady progress during
the six months ended April 30, 1997. As can be seen from the
table, results for this period were well ahead of the unmanaged
Morgan Stanley Capital International Europe Australia and Far
East (EAFE) Index. The most important reasons for this
outperformance were the fund's underweighting in the
disappointing Japanese stock market and a significant position
in the exuberant markets of Latin America -- particularly Brazil
- -- which are not components of the EAFE index.
Over the 12-month period the fund's returns were well ahead of
the EAFE index. Again, the country weightings compared with that
of the index were beneficial -- particularly the underweighting
in Japan -- and stock selection in most markets was also
positive.
INVESTMENT REVIEW
Europe
The stock markets of Europe posted solid returns. Several got
off to a strong start this year, although returns to the U.S.
investor were moderated by the strength of the dollar. The core
Continental European economies are struggling at the moment, but
looser money and weakening currencies should help them recover.
In Germany a combination of low growth and high labor costs
boosted unemployment to record levels.
This in turn has raised questions as to whether the fiscal
deficit can meet the Maastricht criteria, but Germany seems as
committed as ever to European Monetary Union and a single
currency. Despite the dull economy, the stock market has been
strong, led by financials such as Deutsche Bank and
manufacturers such as Volkswagen; the latter has been helped by
a weaker deutschemark and the growing focus on shareholder
value.
Market Performance
Six Months Local Local Currency U.S.
Ended 4/30/97 Currency vs. U.S. Dollars Dollars
__________________________________________________________
Australia 6.94% -1.44% 5.40%
France 23.74 -12.48 8.30
Germany 28.30 -12.62 12.11
Hong Kong -0.04 -0.18 -0.22
Italy 25.88 -11.42 11.50
Japan -3.19 -10.38 -13.23
Mexico 16.85 0.25 17.13
Netherlands 31.15 -12.95 14.17
Norway 25.56 -10.47 12.42
Singapore -4.17 -2.58 -6.64
Sweden 26.05 -16.33 5.47
Switzerland 31.05 -14.57 11.95
United Kingdom 13.06 -0.36 12.66
Source: FAME Information Services, Inc., using MSCI indices.
In France the picture was similar, with the economy subdued,
unemployment remaining stubbornly high, and consumer sentiment
depressed. Despite these difficulties, the government also
remains committed to a single currency but it will prove
difficult to stimulate the economy without breaching the
Maastricht guidelines for economic convergence. Looking for a
firmer political base as the country approaches this important
transition, President Chirac recently called a general election.
At present it looks as though a right-of-center government will
be returned, but the majority may not be as high as Mr. Chirac's
original expectations. Given these uncertainties, the stock
market has been dull but core holdings such as the supermarket
chain Carrefour and conglomerate Eaux Cie Generale have been
able to make further progress.
The picture looks somewhat brighter in Italy. Improve-ment in
the debt position is vital for the future of this economy and
the outlook here is more encouraging following recent
legislation and public sector wage discipline. The lira has now
returned to the European exchange rate mechanism but it is still
an open question whether Italy will be in the first round of
countries to join the single currency.
In the U.K. the most important news was the General Election on
May 1 which brought the Labour Party under Mr. Blair to power
with a massive majority. Given the strength of the economy, it
was surprising to many observers that the electorate rejected
the Conservative Party so comprehensively. The explanation lies
in a deep desire for change after 17 years of Conservative rule,
a sense that Mr. Major's party was divided over Europe, and in
contrast to previous elections, a much more professional and
disciplined campaign by the Labour Party.
The new government will at least inherit an economy in good
shape with a strong currency, falling unemployment, and
inflation at low levels. The administration has already
surprised and pleased financial markets by giving more
independence to the Bank of England in setting monetary policy,
and its much more positive attitude toward Europe has been well
received on the Continent.
The stock market greeted the incoming government with enthusiasm
and pushed on to new highs. International growth stocks such as
SmithKline Beecham and Glaxo Wellcome have performed well, and
the conversion and public offerings of building societies
(mutually owned savings associations) stimulated interest in
financial stocks. The recently announced merger between the food
and drinks group Grand Metropolitan, which owns Burger King, and
the leading wines and spirits company Guinness was welcomed by
investors. Both stocks are in our portfolio and each moved
sharply ahead after the announcement.
Some of the best performance came from Europe's smaller bourses,
with Switzerland powering ahead as investors belatedly
appreciated that multinationals such as Novartis and Roche
Holdings -- both major pharmaceutical groups -- were well
positioned following an unprecedented period of Swiss franc
weakness. In Spain, where ambition to qualify for Monetary Union
is driving widespread reforms, the market also performed well.
The sharp rise in stock prices allowed us to take profits in
some of our positions, including oil company Repsol.
Chart 1 - Geographic Diversification pie chart
Far East
Stock market performance in the Pacific region was dragged down
by the continued poor performance of Japan. Perhaps
surprisingly, the economy in Japan is performing much better.
Fourth quarter GDP growth of 2.9% was one of the fastest among
the leading industrialized countries. Industrial production
continued strong into the first quarter of this year with
inventories declining and shipments improving significantly.
These broad statistics, however, mask a tale of two economies:
domestic consumption remains poor with the retail and service
sectors depressed, but exports are buoyant, aided by the recent
weakness of the yen. Indeed, the trade surplus has started to
expand again, which will be embarrassing for Tokyo, particularly
if the surplus with the U.S. expands too fast.
This contrast in the domestic economy was also reflected in the
stock market where the export and technology stocks have
performed well, but the financial sector, still struggling to
work out problem loans, has dragged the index down. The loan
problems facing Japanese banks have not been helped by several
real estate transactions in Tokyo at prices some 80% below the
peak of the bubble years. However, there are signs that
commercial property prices are stabilizing at this level, and
the stronger banks can survive provided that the valuation of
their loan collateral deteriorates no further.
Our strategy in the Tokyo market favored the export and
technology sectors with stocks such as NEC (communications and
computers), Kyocera (ceramic packaging), and Canon (cameras and
office equipment) among our largest positions. In contrast, your
portfolio had no exposure to the bank stocks -- the largest
sector in the index itself. This combination of positive stock
selection and underweighting in the market as a whole made a
major contribution to the fund's outperformance.
Elsewhere in the Pacific, stock market sentiment was adversely
affected by a small rise in U.S. interest rates; many countries
in the region link their monetary policies to those of the
Federal Reserve so that their currencies will shadow the U.S.
dollar. Export performance in the region was also disappointing
with countries such as Singapore and South Korea particularly
affected by the downturn in the electronic component cycle. The
worst performance came from Thailand where the stock market has
halved over the last 12 months. The problem here centered on a
significant oversupply of commercial property, and subsequent
price declines have led to the virtual bankruptcy of one of
Thailand's largest finance companies.
Turning from economics to politics, the major news was
unquestionably the death of China's paramount leader Deng
Xiaoping. Although he held no official posts at the time of his
death, his influence on Chinese history has been immense.
Inheriting a backward economy at the time of his succession from
Mao, Deng and his policy of rapid modernization turned the
economy into a super-power. In sharp contrast to previous
history, the transfer of power has gone smoothly with Jiang
Zemin, Deng's hand-picked successor, assuming control. Continued
political stability and an open door policy are essential for
confidence in Hong Kong, which reverts to Chinese sovereignty on
June 30. Although the Hong Kong stock market has been subdued
since the beginning of the year, we feel confident that this
transition will not affect Hong Kong's position as the dynamic
financial center of the region.
Latin America
As usual, Latin America provided much of the excitement in
recent months. Brazil led the way with an advance of over 30%
despite fears that a deteriorating trade deficit would put
downward pressure on the currency. The government should rise to
these challenges, and investors have been impressed by its
commitment to reform in areas such as privatization and the
deregulation of public sector tariffs. Our positions in the
Brazilian market are built around the telecommunications company
Telecomunicacoes Brasileiras, which has outperformed handsomely.
Although Brazil dominates our Latin American holdings, other
countries in the region have also moved along the path of reform
and their stock markets have made a useful contribution to fund
performance.
In Mexico the picture is rather more settled, although the
banking system remains fragile and consumer sentiment has been
hurt by lower real wages. Confidence is slowly returning and the
market performed much better, led by blue chips such as
telecommunications company Telefonos de Mexico and retailer
Cifra.
The stock markets of Argentina and Chile produced double-digit
returns this year. Both countries have shown a mix of strong
economic recovery, inflation under much better control, and a
commitment to economic reform that has attracted the
international investor.
INVESTMENT POLICY AND OUTLOOK
As usual, we have made no dramatic shifts in investment policy
but, led principally by our changing expectations for individual
companies, there have been some gradual changes in direction. We
have been modest net investors in Japan and our new investments
were in the domestic sector, which has been neglected recently
while the exporters and technology stocks enjoyed the spotlight.
Our underweighting in Japan is now at the lowest level of many
years, and there are signs that this market has passed its
worst. With the yen now stronger, stocks more related to the
domestic economy are likely to lead the way, hence our push into
this area. To complement this modest increase in Japan, we have
been shaving positions in the better-performing markets of
Southeast Asia such as Malaysia and Hong Kong. Our holdings in
Thailand and Korea are negligible but we are not yet convinced
that the problems in each country have been fully addressed.
More than half of the portfolio is in Europe where we can find
an attractive combination of economies that are beginning to
recover, a benign interest rate environment, and an increasing
focus on shareholder value. We have been reducing holdings in
the U.K. where the economic recovery is mature and the stock
market is beginning to look overextended. Valuations look more
reasonable in Continental Europe where the potential for company
earnings is greater.
Latin America will probably continue to provide the excitement
going forward, but it must be remembered that these are still
developing economies with volatile capital markets. There will
always be room for them in an international portfolio but
prudence will govern our exposure.
Pulling all this together, the fund's portfolio is well
diversified by country and individual stock exposure.
It gives the investor a reasonable balance between the
established economies overseas where we can find quality
companies at reasonable valuations and the less-developed
markets where there is perhaps more potential but at higher
risk. This broad strategy has served the fund well in the past
and should continue to do so in the future.
Respectfully submitted,
Martin G. Wade
President
May 22, 1997
Portfolio Highlights
Industry Diversification
Percent of
Net Assets
4/30/97
____________________________________________________
Services 26.9%
Finance 16.7
Consumer Goods 17.5
Capital Equipment 13.2
Energy 10.2
Materials 8.2
Multi-industry 3.8
Miscellaneous 0.2
Reserves 3.3
Net Assets 100.0%
____________________________________________________
Exchange Rates to U.S. Dollars
Country Exchange Rate
4/30/97
____________________________________________________
Argentina 0.9999
Australia 1.2823
Austria 12.1825
Belgium 35.7500
Brazil 1.0635
Canada 1.3970
Czech Republic 30.9430
Denmark 6.5907
Finland 5.2004
France 5.8365
Germany 1.7318
Hong Kong 7.7465
Italy 1,712.1750
Japan 126.9350
Malaysia 2.5108
Mexico 7.9465
Netherlands 1.9483
New Zealand 1.4425
Norway 7.1212
Peru 2.6650
Philippines 26.3700
Portugal 173.8500
Singapore 1.4475
South Korea 892.0000
Spain 146.2050
Sweden 7.8447
Switzerland 1.4741
Thailand 26.1225
United Kingdom 0.6170
____________________________________________________
Security Classification
Percent of Market
of Net Cost Value
4/30/97 Assets (000) (000)
_________________________________________________________
Common Stocks
and Warrants 92.6% $2,268,066 $2,599,554
Preferred Stocks 4.1 75,665 115,720
Bonds 0.0 466 754
Short-Term
Investments 4.6 127,653 127,653
Total Investments 101.3 2,471,850 2,843,681
Other Assets Less
Liabilities -1.3 -35,628 -35,964
_________________________________________________________
Net Assets 100.0% $2,436,222 $2,807,717
_________________________________________________________
Twenty-Five Largest Holdings
Percent of
Net Assets
Company Country 4/30/97
__________________________________________________________
Royal Dutch Petroleum Netherlands 2.1%
SmithKline Beecham United Kingdom 1.9
Telecomunicacoes Brasileiras Brazil 1.9
Wolters Kluwer Netherlands 1.7
Elsevier Netherlands 1.6
Novartis Switzerland 1.6
National Westminster Bank United Kingdom 1.5
Eaux Cie Generale France 1.3
Reed International United Kingdom 1.2
Roche Holdings Switzerland 1.1
ING Groep Netherlands 1.1
Shell Transport & Trading United Kingdom 1.1
Canon Japan 1.0
Glaxo Wellcome United Kingdom 1.0
Nestle Switzerland 0.9
ABB Sweden/Switzerland0.9
NEC Japan 0.9
Astra Sweden 0.9
Denso Japan 0.9
Carrefour France 0.9
Orkla Norway 0.9
Kingfisher United Kingdom 0.8
Kyocera Japan 0.8
Sumitomo Electric Industries Japan 0.8
Norsk Hydro Norway 0.8
__________________________________________________________
Total 29.6%
__________________________________________________________
Summary of Investments and Cash
April 30, 1997
Percent of
Equities Cash Total MSCI EAFE
___________________________________________________________
Europe
Austria 0.1% -- 0.1% 0.4%
Belgium 1.2 -- 1.2 1.3
Czech Republic -- -- -- --
Denmark 0.2 -- 0.2 0.9
Finland 0.2 -- 0.2 0.7
France 8.3 -- 8.3 7.2
Germany 4.5 -- 4.5 8.9
Ireland -- -- -- 0.3
Italy 2.2 -- 2.2 3.2
Netherlands 10.4 -- 10.4 5.0
Norway 1.8 -- 1.8 0.6
Portugal 0.5 -- 0.5 --
Russia -- -- -- --
Spain 2.3 -- 2.3 2.4
Sweden 2.4 -- 2.4 2.4
Switzerland 5.5 -- 5.5 6.4
United Kingdom 16.2 -- 16.2 19.7
___________________________________________________________
Total Europe 55.8% -- 55.8% 59.4%
___________________________________________________________
Pacific Basin
Australia 1.7% -- 1.7% 3.1%
China 0.5 -- 0.5 --
Hong Kong 3.8 -- 3.8 3.6
India 0.3 -- 0.3 --
Japan 20.7 -- 20.7 30.0
Malaysia 2.4 -- 2.4 2.4
New Zealand 0.5 -- 0.5 0.4
Philippines 0.3 -- 0.3 --
Singapore 2.0 -- 2.0 1.2
South Korea 0.5 -- 0.5 --
Thailand 0.2 -- 0.2 --
___________________________________________________________
Total Pacific Basin 32.9% -- 32.9% 40.6%
___________________________________________________________
Americas
Argentina 0.9% -- 0.9% --
Brazil 4.3 -- 4.3 --
Canada 0.3 -- 0.3 --
Chile 0.7 -- 0.7 --
Mexico 1.6 -- 1.6 --
Panama -- -- -- --
Peru 0.1 -- 0.1 --
United States -- 4.6% 4.6 --
Venezuela 0.1 -- 0.1 --
___________________________________________________________
Total Americas 8.0% 4.6% 12.6% --
___________________________________________________________
Other Assets Less
Liabilities -- -1.3 -1.3% --
___________________________________________________________
TOTAL 96.7% 3.3% 100.0% 100.0%*
___________________________________________________________
* Total may not add to 100.0% due to rounding.
Foreign Equity Fund
4/30/97
Performance Comparison
This chart shows the value of a hypothetical $10,000 investment in the fund
over the past 10 fiscal year periods or since inception (for funds lacking
10-year records). The result is compared with a broad-based average or index.
The index return does not reflect expenses, which have been deducted from the
fund's return.
Foreign Equity Fund
Chart 2 - SEC line graph
Total Return Performance
Periods Ended
4/30/97 Calen
dar
Year-
1 3 to- 1 3 5 Since
MonthMonths Date Year Years** Years** 9/7/89**
____________________________________________________________
Foreign
Equity
Fund* 0.81% 1.89% 0.75% 7.23% 8.73% 11.72% 9.30%
T. Rowe
Price
Inter-
national
Stock
Fund 0.65 1.76 0.65 7.11 8.79 11.67 9.46
S&P 500
Index 5.97 2.41 8.81 25.13 24.16 17.10 14.75
MSCI
EAFE
Index 0.55 2.62 -0.95 -0.60 5.56 10.92 4.55***
Lipper
Inter-
national
Funds
Average 0.20 1.81 1.46 5.43 6.42 10.58 8.07
FT-A
Euro
Pacific
Index 0.44 2.16 -1.81 -2.17 4.77 10.61 4.09***
* An "institutional only" no-load mutual fund comparable to the T.
Rowe Price International Stock Fund. Net assets $2,807.7 million.
Inception 9/7/89.
** Average annual compound total return. This table shows how the
fund would have performed each year if its actual (or cumulative)
returns for the periods shown had been earned at a constant rate.
*** From 8/31/89.
Investment return and principal value represent past performance and will
vary. Shares may be worth more or less at redemption than at original
purchase.
<TABLE>
<CAPTION>
______________________________________________________________________________________
Financial Highlights
Foreign Equity Fund
(Unaudited)
For a share outstanding throughout each period
Ten
6 Months Year Months# Year
Ended Ended Ended Ended
4/30/97 10/31/96 10/31/95 10/31/94 10/31/93 12/31/92 12/31/91
______________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C>
______________________________________________________________________________________
NET ASSET VALUE
Beginning
of
period $ 15.62 $ 13.99 $ 14.59 $ 13.32 $ 10.05 $ 10.73 $ 9.54
Invest-
ment
activi-
ties
Net
invest-
ment
income 0.09 0.21 0.18 0.09 0.13 0.17 .18*
Net
real-
ized and
unreal-
ized gain
(loss) 0.86 1.78 (0.14) 1.48 3.14 (0.57) 1.28
Total from
investment
activities 0.95 1.99 0.04 1.57 3.27 (0.40) 1.46
Distributions
Net invest-
ment
income (0.22) (0.18) (0.12) (0.09) -- (0.18) (0.18)
Net real-
ized gain (0.17) (0.18) (0.52) (0.21) -- (0.10) (0.09)
Total
distri-
butions (0.39) (0.36) (0.64) (0.30) -- (0.28) (0.27)
NET ASSET VALUE
End of
period $ 16.18 $ 15.62 $ 13.99 $ 14.59 $ 13.32 $ 10.05 $ 10.73
Ratios/Supplemental Data
Total
return 6.14% 14.48% 0.64% 11.96% 32.54% (3.74)% 15.44%*
Ratio of
expenses to
average net
assets 0.74%! 0.76% 0.80% 0.82% 0.86%! 0.99% 1.00%*
Ratio of
net invest-
ment income
to average
net assets 1.32%! 1.67% 1.69% 1.26% 1.65%! 1.49% 1.64%*
Portfolio
turnover
rate 12.8%! 13.8% 18.8% 22.0% 27.4%! 35.1% 46.7%
Average
commission
rate
paid $ 0.0008 $ 0.0017 -- -- -- -- --
Net assets,
end of
period (in
thou-
sands) $2,807,717 $2,322,469 $1,559,619 $1,058,478 $ 489,389 $ 238,979 $ 143,822
______________________________________________________________________________________
<FN>
* Excludes expenses in excess of a 1.00% voluntary expense limitation in effect from 3/1/90 through
12/31/90.
! Annualized.
# The fund's fiscal year-end was changed to 10/31.
______________________________________________________________________________________
</FN>
</TABLE>
The accompanying notes are an integral part of these financial statements.
Statement of Net Assets
Foreign Equity Fund
4/30/97 (Unaudited)
Shares/Par Value
In
thousands
___________________________________________________________
ARGENTINA 0.9%
Common Stocks 0.9%
Banco de Galicia Buenos Aires
(Class B) ADR (USD) 93,992 $ 2,287
Banco Frances del Rio
ADR (USD) 109,808 3,335
Enron Global Power &
Pipeline (USD) 13,780 407
Perez Companc (Class B) 692,301 5,615
Sociedad Comercial del Plata
ADR (144a) (USD) 19,896 604
Telecom Argentina Stet
(Class B) 114,560 567
Telecom Argentina Stet
(Class B) ADR (USD) 20,037 1,002
Telefonica de Argentina
(Class B) ADR (USD) 186,794 6,211
Transportadora de Gas del Sur
(Class B) ADS (USD) 32,868 411
YPF Sociedad Anonima (Class D)
ADR (USD) 203,225 5,614
Total Argentina (Cost $20,501) 26,053
AUSTRALIA 1.7%
Common Stocks 1.6%
Australia & New Zealand
Bank Group 332,000 2,120
Australian Gas Light
Company 828,181 4,747
Boral Limited 200,000 590
Broken Hill Proprietary 354,338 4,996
Coca Cola Amatil 66,411 759
Commonwealth Bank of Australia,
Installment Receipts, 11/14/97 386,300 2,892
Fosters Brewing Group 634,000 1,305
Lend Lease 114,017 2,182
National Australia Bank 203,445 2,784
National Mutual Holdings 844,000 1,250
News Corporation 864,931 3,986
Publishing & Broadcasting 627,124 3,311
St. George Bank 411,000 2,526
Tabcorp Holdings 626,000 3,093
Westpac Bank 421,000 2,269
WMC 499,258 2,959
Woodside Petroleum 513,000 4,081
45,850
Preferred Stocks 0.1%
News Corporation ADR (USD) 11,750 $ 178
Sydney Harbour Casino
Holdings * 1,309,000 2,205
2,383
Total Australia (Cost $39,149) 48,233
AUSTRIA 0.1%
Common Stocks 0.1%
EVN Energie Versorgung Nieder 6,230 770
Flughafen Wien 15,482 642
Total Austria (Cost $1,545) 1,412
BELGIUM 1.2%
Common Stocks 1.2%
CLF-Dexia * 13,199 1,310
Generale de Banque 19,238 7,978
Generale de Banque, VVPR Strip 1,524 1
Kredietbank 50,471 19,659
UCB 1,618 4,440
33,388
Convertible Bonds 0.0%
Kredietbank, 5.75%,
11/30/03 BEF 14,782,500 754
754
Total Belgium (Cost $23,132) 34,142
BRAZIL 4.3%
Common Stocks 0.6%
Brazil Fund (USD) 58,780 1,499
Companhia Siderurgica
Nacional 49,720,000 1,776
Eletrobras 11,582,768 5,238
Eletrobras ADR (USD) * 20,340 460
Telecomunicacoes Brasileiras 51,992,700 5,598
Telecomunicacoes
de Sao Paulo * 967,420 268
White Martins 400,674 1,364
16,203
Preferred Stocks 3.7%
Banco Bradesco 465,618,322 3,853
Banco Itau 3,088,000 1,670
Brahma 7,072,250 4,811
Brasmotor 5,547,410 1,330
Cia Cimento Portland Itau 4,882,700 $ 1,722
Cia Energetica de Sao Paulo
ADR (USD) * 20,600 327
Cia Energetica Minas Gerais 82,104,577 3,744
Cia Energetica Minas Gerais
ADR (144a) (USD) * 16,530 750
Cia Energetica Minas Gerais
ADR, Cv. (USD) 23,337 1,059
Cia Energetica Minas Gerais
ADR, Sponsored, Nonvoting
(USD) * 103,555 4,699
Cia Tecidos Norte de Minas 3,724,770 1,562
Lojas Americanas * 37,644,000 535
Pao de Acucar GDS (USD) 117,940 2,329
Petrol Brasileiros 21,518,917 4,532
Telecomunicacoes Brasileiras 71,618,902 8,215
Telecomunicacoes Brasileiras
ADR (USD) 330,229 37,894
Telecomunicacoes Brasileiras
ADR (144a) (USD) 2,213 254
Telecomunicacoes
de Minas Gerais 10,703,000 1,705
Telecomunicacoes
de Sao Paulo 27,902,341 7,923
Telecomunicacoes do Rio
de Janeiro 10,080,000 1,678
Unibanco 119,458,000 4,413
Usiminas 3,919,188,000 4,643
Usiminas ADR (USD) 361,810 4,251
Usiminas ADR (144a)
(USD) 12,540 147
104,046
Total Brazil (Cost $74,004) 120,249
CANADA 0.3%
Common Stocks 0.3%
Alcan Aluminium 169,810 5,762
Royal Bank of Canada 61,480 2,458
Total Canada (Cost $5,846) 8,220
CHILE 0.7%
Common Stocks and Warrants 0.7%
AFP Providia ADR (USD) 10,996 198
Chile Fund (USD) 56,889 1,380
Chilectra ADR (144a) (USD) 33,009 2,030
Chilgener ADS (USD) 58,934 $ 1,680
Compania Cervecerias Unidas
ADS (USD) 43,830 975
Compania de Telecomunicaciones
de Chile ADR (USD) 94,682 3,065
Empresa Nacional de
Electricidad ADS (USD) 140,341 2,702
Enersis ADS (USD) 65,396 2,060
Five Arrows Chile Investment
Trust (USD) 663,410 2,159
Five Arrows Chile Investment
Trust, Warrants, 5/31/99 (USD)* 36,758 13
Genesis Chile Fund (USD) 66,410 2,955
Santa Isabel ADR (USD) 50,195 1,224
Total Chile (Cost $17,604) 20,441
CHINA 0.5%
Common Stocks 0.5%
Huaneng Power International
(Class N) ADR (USD) * 332,700 8,068
Shanghai Petrochemical
(Class H) (HKD) 11,919,000 2,954
Yizheng Chemical Fibre
(Class H) (HKD) 8,500,000 1,668
Total China (Cost $12,680) 12,690
CZECH REPUBLIC 0.0%
Common Stocks 0.0%
SPT Telecom * 8,781 928
Total Czech Republic (Cost $834) 928
DENMARK 0.2%
Common Stocks 0.2%
Den Danske Bank 37,470 3,241
Tele Danmark (Class B) 13,050 628
Unidanmark (Class A) 40,121 1,984
Total Denmark (Cost $4,504) 5,853
FINLAND 0.2%
Common Stocks 0.2%
Nokia (Class A) 101,530 6,333
Total Finland (Cost $3,848) 6,333
FRANCE 8.3%
Common Stocks 8.3%
Accor 18,740 $ 2,687
Alcatel Alsthom 83,300 9,263
Assurances Generales de
France 65,582 2,134
AXA 42,973 2,644
Canal Plus 28,830 5,206
Carrefour 39,497 24,660
Chargeurs International * 15,368 908
Cie de St. Gobain 84,886 11,373
CLF-Dexia, Registered 1998 16,696 1,545
CLF-Dexia, Registered 1999 20,520 1,899
Eaux Cie Generale 268,242 37,365
Elf Aquitaine 103,010 9,990
GTM Entrepose 25,080 1,510
Guilbert 32,371 5,047
Havas 22,490 1,684
L'Oreal 10,335 3,667
Lapeyre 58,000 3,498
Legrand 20,839 3,517
LVMH 69,993 17,089
Pathe * 16,728 3,907
Pinault Printemps 41,643 17,516
Primagaz 35,516 3,481
Rexel 7,812 2,081
Sanofi 85,656 7,998
Schneider 171,250 9,653
Societe Generale 14,890 1,668
Sodexho 30,530 14,019
Television Francaise 88,346 8,522
Total (Class B) 231,621 19,208
Total France (Cost $195,373) 233,739
GERMANY 4.5%
Common Stocks and Warrants 4.2%
Allianz * 54,500 10,574
Allianz, Warrants, 2/23/98 * 13,000 1,012
Altana 1,686 1,305
Bayer * 419,013 16,269
Bayerische Hypotheken und
Wechsel Bank 205,208 6,399
Bilfinger & Berger * 74,460 2,769
Buderus 4,012 1,881
Commerzbank 102,930 2,761
Deutsche Bank 168,823 $ 8,899
Deutsche Telekom 134,688 2,923
Gehe 307,714 20,469
Hoechst 70,350 2,762
Hornbach Baumarkt 14,770 469
Mannesmann 12,767 5,021
Praktiker 32,915 528
Rhoen Klinikum 48,040 6,186
SAP 18,940 3,448
Schering 24,562 2,347
Veba 311,366 16,038
Veba, Warrants, 4/6/98 * 9,526 2,761
Volkswagen 5,994 3,794
118,615
Preferred Stocks 0.3%
Fielmann 27,225 701
Hornbach Holdings 32,830 2,104
Krones 4,621 1,788
SAP 16,644 3,065
7,658
Total Germany (Cost $109,277) 126,273
HONG KONG 3.8%
Common Stocks 3.8%
Cathay Pacific Airways 2,799,000 4,354
Dao Heng Bank Group 1,488,000 7,069
First Pacific 6,084,486 7,265
Guoco Group 1,774,000 8,427
Hong Kong Land Holdings
(USD) 7,004,719 14,570
Hopewell Holdings 10,541,000 5,477
HSBC Holdings 242 6
Hutchison Whampoa 2,251,000 16,709
New World Development 3,124,505 18,029
Swire Pacific (Class A) 1,530,000 11,801
Wharf Holdings 3,301,000 12,486
Total Hong Kong (Cost $101,237) 106,193
INDIA 0.3%
Common Stocks 0.3%
State Bank of India GDR
(USD) * 302,700 7,340
Total India (Cost $4,283) 7,340
ITALY 2.2%
Common Stocks 2.2%
Banca Fideuram 1,108,110 $ 2,783
Credito Italiano 1,873,281 2,626
Danieli & Company,
Savings Shares 36,820 133
ENI 1,322,107 6,730
Finanziaria Autogrill * 152,088 213
Gucci Group (USD) 36,839 2,556
IMI 472,757 4,018
Industrie Natuzzi
ADR (USD) 101,084 2,249
Istituto Nazionale
delle Assicurazioni 555,000 736
Italgas 730,325 2,509
Mediolanum 201,080 1,916
Rinascente 202,500 1,080
Seat * 1,895,680 580
Seat, Savings Shares * 829,120 164
Stet 2,061,680 9,785
Stet, Savings Shares 829,120 3,070
Telecom Italia 1,730,258 4,581
Telecom Italia Mobile 4,776,866 14,985
Telecom Italia Mobile,
Savings Shares 872,266 1,611
Total Italy (Cost $46,721) 62,325
JAPAN 20.7%
Common Stocks 20.7%
Advantest 43,670 2,425
Alps Electric 318,000 3,708
Amada 776,000 5,802
Canon 1,212,000 28,740
Citizen Watch 448,000 3,222
Daifuku 126,000 1,449
Daiichi Pharmaceutical 785,000 12,616
DaiNippon Screen
Manufacturing 682,000 5,427
Daiwa House 991,000 11,086
DDI 1,551 10,300
Denso 1,085,000 24,703
East Japan Railway 2,303 9,961
Fanuc 184,800 6,304
Hitachi 1,254,000 11,361
Hitachi Zosen 1,097,000 3,811
Honda Motor 79,000 $ 2,452
Inax 331,000 2,055
Ishihara Sangyo Kaisha * 368,000 925
Ito-Yokado 288,000 13,817
Kao 611,000 7,124
Kawada Industries 107,000 392
Kokuyo 357,000 7,762
Komatsu 889,000 6,499
Komori 289,000 6,170
Kumagai Gumi 633,000 848
Kuraray 807,000 7,120
Kyocera 381,000 22,812
Makita 504,000 6,909
Marui 772,000 12,711
Matsushita Electric Industrial 1,093,000 17,480
Mitsubishi 608,000 5,700
Mitsubishi Heavy Industries 3,408,000 22,499
Mitsubishi Paper Mills 458,000 1,458
Mitsui Fudosan 1,659,000 18,951
Mitsui Petrochemical
Industries 269,000 1,265
Murata Manufacturing 368,000 13,568
National House Industrial 170,000 2,009
NEC 2,157,000 26,339
Nippon Hodo 176,000 1,244
Nippon Steel 4,634,000 13,215
Nippon Telephone & Telecom 993 7,001
Nomura Securities 1,078,000 12,059
Pioneer Electronic 435,000 7,779
Sangetsu 111,000 1,880
Sankyo 782,000 20,946
Sega Enterprises 109,150 2,872
Sekisui Chemical 1,131,000 10,870
Sekisui House 685,000 6,098
Seven Eleven Japan 98,000 6,215
Sharp 1,110,000 14,429
Shin-Etsu Chemical 617,000 12,444
Shiseido 197,000 2,825
Sony 282,800 20,586
Sumitomo 1,431,000 9,628
Sumitomo Electric Industries 1,672,000 22,656
Sumitomo Forestry 435,000 4,421
TDK 279,000 20,111
Teijin 1,811,000 7,319
Tokio Marine & Fire Insurance 341,000 3,331
Tokyo Electronics 144,100 $ 5,563
Tokyo Steel Manufacturing 325,000 3,482
Toppan Printing 598,000 7,726
Uny 361,000 6,342
Yurtec 154,000 1,480
Total Japan (Cost $619,752) 580,302
MALAYSIA 2.4%
Common Stocks 2.3%
Affin Holdings 2,451,000 5,906
Berjaya Sports Toto 1,572,000 7,513
Commerce Asset Holdings 771,333 4,608
MBF Capital 2,545,000 3,771
Multi-Purpose Holdings 3,042,000 4,967
Renong 5,284,000 7,240
Resorts World 887,000 3,268
Tanjong 2,061,000 7,470
Technology Resources
Industries * 1,381,000 2,530
Time Engineering 1,215,000 2,226
United Engineers 2,299,000 16,298
65,797
Preferred Stocks 0.1%
Multi-Purpose Holdings, Cv.
Loan Stock, 3.00%, 1/13/02 3,574,000 1,331
Renong, Cv. Loan Stock,
4.00%, 5/21/01 696,200 247
1,578
Total Malaysia (Cost $65,378) 67,375
MEXICO 1.6%
Common Stocks 1.6%
Cemex (Class B) 478,840 1,760
Cemex ADS (USD) 505,972 3,352
Cifra (Class B) ADR (USD) 3,534,213 5,319
Fomentos Economico
Mexicano (Class B) 332,862 1,562
Gruma (Class B) * 608,899 2,873
Gruma (Class B) ADS (USD) * 147,828 2,799
Grupo Financiero Banamex
(Class B) * 966,552 2,068
Grupo Financiero Banamex
(Class L) * 31,801 64
Grupo Financiero Bancomer
(Class L) * 8,266 2
Grupo Industrial Maseca
(Class B) * 1,664,467 $ 1,625
Grupo Modelo (Class C) 347,864 2,110
Grupo Televisa GDR (USD) 49,322 1,141
Kimberly-Clark Mexico
(Class A) 1,001,310 3,642
Panamerican Beverages
(Class A) (USD) 201,428 5,841
Telefonos de Mexico
(Class L) ADR (USD) 285,614 11,782
Total Mexico (Cost $51,444) 45,940
NETHERLANDS 10.4%
Common Stocks and Warrants 10.4%
ABN Amro Holdings 245,640 16,882
Ahold 185,780 12,682
Akzo Nobel 21,098 2,718
Baan Company (USD) 58,260 3,131
CSM 241,579 13,875
Elsevier 2,731,665 43,745
Fortis Amev 264,177 9,966
Hagemeyer 58,930 5,127
ING Groep 716,275 28,125
ING Groep, Warrants, 3/15/01* 149,267 1,354
Koninklijke PTT Nederland 96,125 3,414
Nutricia 38,584 5,854
Otra 45,880 730
Polygram 359,639 17,628
Royal Dutch Petroleum 324,477 57,991
Unilever 104,666 20,355
Wolters Kluwer 394,741 46,782
290,359
Preferred Stocks 0.0%
ING Groep 10,797 55
55
Total Netherlands (Cost $215,239) 290,414
NEW ZEALAND 0.5%
Common Stocks 0.5%
Air New Zealand (Class B) 965,300 2,791
Carter Holt Harvey 499,115 1,107
Fernz 293,080 985
Fletcher Challenge Building 798,544 2,242
Fletcher Challenge Energy 158,044 459
Fletcher Challenge Forests
Division 1,720,589 2,374
Fletcher Challenge Paper 520,089 $ 1,154
Telecom Corporation of
New Zealand 698,372 3,132
Total New Zealand (Cost $14,319) 14,244
NORWAY 1.8%
Common Stocks 1.8%
Bergesen (Class A) 46,430 959
Norsk Hydro 464,112 22,615
Orkla (Class A) 287,210 24,078
Saga Petroleum (Class B) 85,950 1,382
Total Norway (Cost $34,865) 49,034
PANAMA 0.0%
Common Stocks 0.0%
Banco Latinoamericano de
Exportaciones (Class E) (USD) 25,252 1,158
Total Panama (Cost $1,243) 1,158
PERU 0.1%
Common Stocks 0.1%
Credicorp (USD) 54,960 1,154
Telefonica del Peru (Class B) 316,910 764
Telefonica del Peru (Class B)
ADS (USD) 83,788 2,011
Total Peru (Cost $3,495) 3,929
PHILIPPINES 0.3%
Common Stocks 0.3%
Philippine Long Distance
Telephone 65,100 3,715
Philippine National Bank * 583,137 3,826
Total Philippines (Cost $9,923) 7,541
PORTUGAL 0.5%
Common Stocks and Warrants 0.5%
Jeronimo Martins * 235,327 14,078
Jeronimo Martins, Warrants,
9/15/03 * 17,610 319
Total Portugal (Cost $5,749) 14,397
RUSSIA 0.0%
Common Stocks 0.0%
Rao Gazprom ADS (USD) * 38,080 594
Total Russia (Cost $600) 594
SINGAPORE 2.0%
Common Stocks and Warrants 2.0%
City Developments 405,000 $ 3,274
DBS Land 1,075,000 3,476
Development Bank of
Singapore 290,000 3,446
Fraser & Neave 415,400 3,013
Keppel 237,000 1,031
Keppel (Class A), New * 59,250 252
Overseas Chinese Bank 192,000 2,242
Overseas Union Bank 1,282,000 8,414
Singapore Land 1,218,000 5,680
Singapore Press 497,820 9,217
United Industrial 1,853,000 1,395
United Overseas Bank 1,261,352 11,851
United Overseas Bank,
Warrants, 6/17/97 * 72,940 251
Wing Tai Holdings 867,000 2,240
Total Singapore (Cost $60,124) 55,782
SOUTH KOREA 0.5%
Common Stocks 0.5%
Cho Hung Bank 275,000 1,501
Hanil Securities * 33,000 178
Kook Min Bank 106,430 2,038
Korea Electric Power 166,400 4,962
Pohang Iron & Steel 30,660 2,229
Samsung Electronic 49,299 4,053
Shinhan Bank 14,500 220
Total South Korea (Cost $21,481) 15,181
SPAIN 2.3%
Common Stocks 2.3%
Aguas de Barcelona 728 29
Argentaria Banca de Espana 82,960 3,700
Banco Bilbao Vizcaya 44,550 2,998
Banco Popular Espanol 33,391 7,080
Banco Santander 131,423 9,888
Centros Comerciales Pryca 91,773 1,594
Empresa Nacional
de Electricidad 120,872 8,449
Gas Natural 44,581 9,468
Iberdrola 587,376 6,629
Repsol 192,360 8,065
Telefonica de Espana 262,051 6,712
Total Spain (Cost $49,902) 64,612
SWEDEN 2.4%
Common Stocks 2.4%
ABB (Class A) 429,500 $ 5,229
Astra (Class B) 637,607 25,318
Atlas Copco (Class B) 259,812 6,442
Electrolux (Class B) 162,757 9,336
Esselte (Class B) 49,870 1,138
Hennes & Mauritz (Class B) 81,991 11,863
Nordbanken 13,300 408
Sandvik (Class A) 40,050 988
Sandvik (Class B) 272,400 6,702
Scribona (Class B) 49,060 610
Total Sweden (Cost $49,566) 68,034
SWITZERLAND 5.5%
Common Stocks and Warrants 5.5%
ABB 17,440 21,118
Adecco 43,363 14,473
Ciba Specialty Chemicals * 29,943 2,580
Credit Suisse Group 46,155 5,197
Nestle 21,793 26,463
Novartis 33,203 43,742
Roche Holdings 3,734 31,537
Roche Holdings, Warrants,
5/5/98 * 31 2
Schweizerischer Bankverein 41,064 8,970
Total Switzerland (Cost $112,747) 154,082
THAILAND 0.2%
Common Stocks 0.2%
Advanced Information Service 139,974 932
Bangkok Bank 252,317 2,338
Siam Cement 26,025 697
Thai Farmers Bank 272,576 1,649
Total Thailand (Cost $9,478) 5,616
UNITED KINGDOM 16.2%
Common Stocks 16.2%
Abbey National 1,200,440 16,635
Argos 1,161,200 12,120
Asda Group 4,778,530 8,906
BG * 901,200 2,629
British Petroleum 855,802 9,806
Cable & Wireless 2,068,200 $ 15,922
Cadbury Schweppes 1,417,578 11,786
Caradon 2,261,350 9,053
Centrica * 901,200 825
Coats Viyella 709,000 1,517
Compass Group 760,000 8,327
David S. Smith 1,183,500 4,297
Electrocomponents 746,000 4,788
GKN 138,000 2,126
Glaxo Wellcome 1,419,650 27,910
Grand Metropolitan 2,436,000 20,412
Guinness 2,078,000 17,109
Heywood Williams Group 249,576 993
Hillsdown Holdings 675,300 1,992
John Laing (Class A) 594,300 3,535
Kingfisher 2,116,977 22,920
Ladbroke Group 1,074,000 4,038
National Westminster Bank 3,625,619 42,838
Rank Group 1,334,000 9,189
Reed International 1,842,570 33,925
Rolls Royce 543,851 2,142
RTZ 977,960 15,502
Safeway 1,772,200 9,737
Sears 504,000 629
Shell Transport & Trading 1,665,000 29,495
SmithKline Beecham 3,416,015 54,700
T & N 1,399,000 3,038
Tesco 1,464,903 8,452
Tomkins 4,234,080 18,254
United News & Media 1,651,620 20,264
Total United Kingdom (Cost $357,160) 455,811
VENEZUELA 0.1%
Common Stocks 0.1%
Compania Anonima Nacional
Telefonos de Venezuela (Class D)
ADR (USD) * 51,920 1,558
Total Venezuela (Cost $1,194) 1,558
SHORT-TERM INVESTMENTS 4.6%
Commercial Paper 3.8%
Abbey National North America,
5.52%, 6/11/97 $ 1,000,000 $ 994
Becton Dickinson, 5.30%,
7/30/97 1,225,000 1,209
Bell Atlantic Financial Services,
5.53%, 5/1/97 10,000,000 10,000
Caisse des Depots et
Consignations, 4(2), 5.52%,
5/16/97 5,000,000 4,989
Corporate Asset Funding 4(2),
5.52%, 5/7/97 5,000,000 4,995
Delaware Funding, 4(2),
5.53-5.55%, 5/15-6/2/97 15,000,000 14,940
Du Pont (EI) de Nemours,
5.51%, 5/21/97 4,800,000 4,785
Finova Capital, 5.53%,
5/21/97 12,000,000 11,963
Great Lakes Chemical,
4(2), 5.56%, 5/27/97 4,500,000 4,482
Mobil Australia Finance,
4(2), 5.53%, 5/12/97 2,300,000 2,296
National Australia Funding,
5.51%, 5/21/97 10,000,000 9,969
Preferred Receivables
Funding, 5.52%, 5/22/97 10,000,000 9,968
RTZ America, 4(2),
5.53-5.58%, 5/1-6/17/97 9,500,000 9,467
Statoil (Den Norske Stats
Oljeselskap), 5.50%, 5/13/97 10,000,000 9,982
Investments in Commercial
Paper through a Joint Account,
5.60%, 5/1/97 5,616,191 5,616
105,655
Certificates of Deposit 0.8%
Banque National de Paris,
6.07%, 3/24/98 1,000,000 $ 999
Canadian Imperial Bank
Commerce,
5.53%, 5/23/97 10,000,000 10,000
Hessische Landesbank,
6.13%, 4/7/98 1,000,000 999
United States National
Bank Oregon,
5.53%, 5/19/97 10,000,000 10,000
21,998
Total Short-Term Investments
(Cost $127,653) 127,653
Total Investments in Securities
101.3% of Net Assets (Cost $2,471,850) $ 2,843,681
Other Assets Less Liabilities (35,964)
NET ASSETS $ 2,807,703
___________
Net Assets Consist of:
Accumulated net investment income -
net of distributions $ 15,703
Accumulated net realized gain/loss -
net of distributions 27,213
Net unrealized gain (loss) 371,495
Paid-in-capital applicable to 173,578,188
shares of $0.01 par value capital stock
outstanding; 1,000,000,000 shares authorized 2,393,306
NET ASSETS $ 2,807,717
___________
NET ASSET VALUE PER SHARE $ 16.18
___________
* Nonincome 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
period-end amounts to 0.13% of net assets.
BEF Belgian Franc
HKD Hong Kong dollar
USD U.S. dollar
Statement of Operations
Foreign Equity Fund
(Unaudited)
In thousands
6 Months
Ended
4/30/97
Investment Income
Income
Dividend (net of foreign
taxes of $ 3,133) $ 22,955
Interest 3,257
Total income 26,212
Expenses
Investment management 8,880
Custody and accounting 448
Registration 92
Shareholder servicing 14
Legal and audit 9
Directors 7
Prospectus and shareholder reports 1
Miscellaneous 6
Total expenses 9,457
Net investment income 16,755
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities 34,459
Foreign currency transactions (1,101)
Net realized gain (loss) 33,358
Change in net unrealized gain or loss
Securities 97,332
Other assets and liabilities
denominated in foreign currencies (352)
Change in net unrealized gain or loss 96,980
Net realized and unrealized gain (loss) 130,338
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $147,093
_________
The accompanying notes are an integral part of these financial statements.
Statement of Changes in Net Assets
Foreign Equity Fund
(Unaudited)
In thousands
6 Months Year
Ended Ended
4/30/97 10/31/96
Increase (Decrease) in Net Assets
Operations
Net investment income $ 16,755 $ 33,107
Net realized gain (loss) 33,358 37,807
Change in net unrealized
gain or loss 96,980 178,907
Increase (decrease) in net
assets from operations 147,093 249,821
Distributions to shareholders
Net investment income (33,767) (21,229)
Net realized gain (26,079) (21,229)
Decrease in net assets
from distributions (59,846) (42,458)
Capital share transactions*
Shares sold 507,211 772,534
Distributions reinvested 43,555 30,404
Shares redeemed (152,765) (247,451)
Increase (decrease) in
net assets from capital
share transactions 398,001 555,487
Net Assets
Increase (decrease) during
period 485,248 762,850
Beginning of period 2,322,469 1,559,619
End of period $ 2,807,717 $ 2,322,469
_________________________________________________________
*Share information
Shares sold 31,687 51,462
Distributions
reinvested 2,750 2,138
Shares redeemed (9,547) (16,389)
Increase (decrease) in
shares outstanding 24,890 37,211
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements
Foreign Equity Fund
4/30/97 (Unaudited)
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 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.
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 State-ment of Additional
Information.
Emerging Markets At April 30, 1997, 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 $529,518,000 and $157,194,000, respectively, for the
six months ended April 30, 1997.
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 April 30, 1997, the aggregate cost of investments for federal income tax
and financial reporting purposes was $2,471,850,000, and net unrealized gain
aggregated $371,831,000, of which $501,005,000 related to appreciated
investments and $129,174,000 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 Hold-ings 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 $1,575,000
was payable at April 30, 1997. 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 $64,000 for the six months ended April 30, 1997, of which
$11,000 was payable at period-end.
During the six months ended April 30, 1997, the fund, in the ordinary course
of business, placed security purchase and sale orders aggregating $27,427,000
with certain affiliates of the manager and paid commissions of $98,000
related thereto.
Chart 1 - Geographic Diversification - Geographic Diversification pie chart,
showing: Europe 56%, Japan 21%, Far East 12%, Latin America 8%, Other and
Reserves 3%.
Chart 2 - A line chart showing the cumulative growth of $10,000 invested in
the Foreign Equity Fund over the past 10 years (or from inception for funds
lacking 10-year histories) compared with $10,000 invested in a broad-based
index or average over the same period.
