Semiannual Report
April 30, 2000
Foreign Equity Fund
Dear Investor
International stock markets provided solid gains during the six months ended
April 30, 2000. Strength in various technology sectors drove telecommunications,
media, and technology stocks sharply higher prior to a dramatic reversal in
mid-March. While investors refocused their attention on value, cyclical, and
more defensive growth stocks late in the quarter, stocks connected to technology
and the so-called New Economy dominated the period.
Performance Comparison
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Periods Ended 4/30/00 6 Months 12 Months
---------------------------------------------------------------------------
Foreign Equity Fund 14.11% 21.11%
MSCI EAFE Index 6.84 14.17
Lipper International
Funds Average 14.17 24.75
Your fund provided robust returns for the 6- and 12-month periods shown in
the table. Performance was well ahead of the MSCI EAFE Index and in line
with the Lipper International Funds Average for the past six months, and a
bit behind Lipper for the past year. Our exposure to several buoyant
markets such as Brazil, Mexico, and Sweden, and underweighting of weaker
ones including the U.K., Japan, and Switzerland helped results relative to
the EAFE index. Substantial positions in the technology and media sectors
also lifted performance, as did successful stock selection in several
countries (Japan, Hong Kong, Italy) and sectors (telecom, banking). Your
fund's combination of more reasonably valued telecommunications, media, and
technology stocks and less dynamic steady-growth holdings in other sectors
helped performance when leadership changed in March.
The strength of New Economy stocks and sectors contrasted sharply with
those of other industries. Telecom and Internet-related companies and their
suppliers soared, while established enterprises such as food manufacturers
and utilities were left far behind. Performance was divided between big
winners and some significant losers. However, sector leadership changed as
an abundant supply of new issues reduced the value of Internet-related
investments and investors grew concerned about valuations. Pharmaceuticals,
consumer cyclicals, and financials started to recover. Performance in
technology-related sectors became increasingly selective and volatile with
investors growing concerned about stocks with great potential, perhaps, but
no signs of earnings.
Improving international economies provided a supportive backdrop for
stocks. Europe enjoyed stronger-than-expected growth, with further
consolidation in the telecom and banking sectors. The euro's 13% decline
against the dollar over the past six months had several causes: investments
flowing out of the euro zone as European companies acquired U.S. companies,
the persistent gap between exceptionally strong U.S. growth compared with
moderate growth in Europe, and higher interest rates in the U.S.
In Japan, while stronger capital expenditure and steadily improving
industrial production signaled a reviving economy, unemployment remained
high and the consumer sector weak. The economic recovery continued
throughout the rest of the Pacific. The possible entry of China into the
World Trade Organization encouraged investment there. In Latin America,
economies also improved. Mexico's debt rating was raised to investment
grade, further boosting regional prospects.
INVESTMENT REVIEW
At the end of April, Europe represented 59% of net assets, down from 64% in
October. Within the region, the U.K. remained the largest country exposure
at 17%. Japan was the largest country weighting overall at 20% of net
assets, off two percentage points from six months ago. In the Far East, our
exposure was stable at 8%. In Latin America, we split most of the portfolio
between Mexico and Brazil. Your fund was underweighted in Europe and Japan
relative to the EAFE index, but overweighted in the rest of Asia and Latin
America. These shifts were due to regional differences in performance and
to some holdings in Asia. Our purchases focused on selected New Economy
stocks with strong potential and on more traditional stocks, including
banks and pharmaceuticals, which appeared oversold based on their growth
prospects.
Geographic Diversification
---------------------------------------------------------------------------
Europe Japan Far East Latin America Other and Reserves
59 20 8 4 9
Based on net assets as of 4/30/00.
Europe
Country performance varied considerably, depending more on each country's
component of technology issues than on local factors. The Swedish and
Finnish markets were strongest, up 53% and 81% in U.S. dollar terms,
respectively, due mostly to the gains of technology leaders LM Ericsson and
Nokia.
Stocks in Germany rose 16% (more than 33% in local currency terms) as its
large technology and telecom stocks soared. The weak euro sharply reduced
returns for U.S. investors in the euro zone. In France, technology and
media accounted for much of the market's 15% rise in dollar terms and 32%
in local currency. The U.K. and Switzerland, with fewer technology and
telecom companies, were the weakest major markets, falling 3% and 8%,
respectively. Poorer performance from financial services companies and
pharmaceuticals held back their returns.
Market Performance
---------------------------------------------------------------------------
Six Months Local Local Currency U.S.
Ended 4/30/00 Currency vs. U.S. Dollars Dollars
---------------------------------------------------------------------------
Australia 0.79% -8.43% 1.44%
France 32.23 -13.30 14.64
Germany 33.25 -13.30 15.53
Hong Kong 12.27 - 0.25 11.99
Italy 26.37 -13.30 9.56
Japan 7.07 - 3.44 3.39
Mexico 18.45 2.19 21.04
Netherlands 17.19 -13.30 1.60
Singapore 2.22 - 2.56 - 0.40
Sweden 66.38 - 7.98 53.09
Switzerland 4.18 -11.44 - 7.73
United Kingdom 1.57 - 4.64 - 3.14
Source: RIMES Online, using MSCI indices.
Mobile telecom revenues are expected to rise in Europe as
Internet-compatible mobile telephones are introduced and customer usage
increases. The biggest news in the sector was U.K.-based mobile telecom
Vodafone Airtouch's acquisition of Germany's second largest telecom,
Mannesmann. The deal reinforced Vodafone's preeminence as the leading
global mobile business. The initial public offerings (IPOs) of Terra
Networks, controlled by Spanish telecom Telefonica, and T-Online,
controlled by Deutsche Telekom, were hugely oversubscribed and their prices
soared accordingly. U.K.-based Cable & Wireless, which carries about a
third of the world's Internet traffic, and United Pan-Europe Communications
of the Netherlands, with cable networks throughout Europe, both performed
strongly due to cable networks' potential for high-speed broadband
transmission.
Media companies surged because of their popular content, which can be
provided to Internet users. Another stimulus was the prospect for further
growth as Internet access via digital/interactive TV develops. Winners
included Italy's Telecom Italia and Television Francaise. Telecom Italia's
announcement that it would combine its dominant Internet subsidiary with
Seat, and acquire that company in the process, propelled Seat even higher,
while the continued ascent of Television Francaise reflected increasing
advertising demand, market leadership, and the potential for
Internet-related growth.
T. Rowe Price Becomes Sole Owner of International Investment Manager
---------------------------------------------------------------------------
As an international investor, you may be aware that the T. Rowe Price
international and global stock and bond funds have always been managed by
Rowe Price-Fleming International, Inc., a joint venture formed in 1979
between T. Rowe Price Associates and London-based Robert Fleming Holdings,
Limited.
On April 11, 2000, T. Rowe Price announced an agreement to purchase the 50%
of the joint venture owned by Flemings, thus becoming the sole owner of the
management company. In due course, the name of Rowe Price-Fleming
International will be changed to reflect its new status.
The change in ownership structure will not affect the investment approach
or operations of our international funds. We expect Rowe Price-Fleming's
leadership and professional staff to remain in place, together with the
substantial resources and expertise built up over the past 20 years.
Likewise, there will be no change in the offices in London, Hong Kong,
Tokyo, Singapore, Buenos Aires, Paris, and Baltimore.
Under the U.S. securities laws, the assignment of the funds' investment
management contract to a new entity is subject to shareholder approval.
Accordingly, after the purchase is concluded later this year, we will set a
date for a shareholder meeting and send you a proxy with voting
information.
The formation of Rowe Price-Fleming 20 years ago opened the way for T. Rowe
Price to expand the investment services offered to shareholders and
clients. As an integral part of T. Rowe Price, this very successful
international investment manager will provide significant opportunities to
enhance those services.
Technology stocks rocketed as markets for mobile telecom handsets, network
infrastructure, and other communications equipment mushroomed. Nokia and LM
Ericsson both benefited as demand for their telecom equipment and
infrastructure escalated, and we increased our holdings in LM Ericsson
during the past six months. STMicroelectronics in France, Germany's
Siemens, and Philips Electronics and ASM Lithography in the Netherlands all
performed strongly due to the demand for telecom, broadcasting, and
Internet products.
As sector leadership changed in March, neglected energy producers,
financials, basic materials, and pharmaceuticals rebounded, although they
still trailed far behind technology stocks. Energy producers Royal Dutch
Petroleum/Shell Transport & Trading (Netherlands/U.K.) and TotalFina
(France) made tangible progress with restructuring. The latter became more
optimistic about its prospects for cost reductions and various synergies as
the merger between the two previously independent companies progressed
further. After a dull period, the earnings outlook for pharmaceutical giant
Glaxo Wellcome improved and we added to the stock. The company's agreement
to merge with SmithKline Beecham enhanced its prospects for growth. The
banking sector consolidated as Royal Bank of Scotland Group won a battle
against Bank of Scotland to acquire National Westminster Bank.
Finnish/Swedish Nordic Baltic Holding acquired its Danish neighbor
Unidanmark, and U.K.-based HSBC acquired French/Belgian bank CCF.
Unfortunately, the fund had its share of losers as well. We were
disappointed by investors' failure to reward companies with histories of
solid, long-term earnings growth while favoring many New Economy stocks
with little or no earnings. Food and beverage and some financial stocks
were particularly hard hit. Among them were Unilever of the U.K. and
Belgian/Netherlands insurer Fortis.
Far East and Other
In Japan, performance peaked early in 1999 and lagged during the past six
months. However, the sedate 3% rise in dollar terms masked volatile swings
and a wide disparity among sector performances. Our holdings in
established, fundamentally sound technology and consumer electronics
companies performed well in an environment of surging demand for their
products. Sony rose sharply following an announcement of its intention to
provide Internet banking, launch an Internet-compatible product, and split
its shares. Restructuring, robust demand, and plans for Internet alliances
and services drove the shares of NEC and Toshiba higher. Canon's successful
range of digital products and its strengthening position in the
semiconductor production equipment market accounted for its buoyancy.
Murata Manufacturing, best known for leadership in mobile handset
components, and Kyocera for handset production, also rose.
Telecom and media were other leading sectors. The agreement among DDI, IDO,
and KDD to merge marked the first step in the consolidation of telecom
companies, and Kyocera's sharp gain partly reflected its status as the
largest shareholder in the proposed new entity. The strong performance of
Japan's dominant mobile telecom, NTT DoCoMo, reflected the success of its
Internet- compatible services. We added to this position during the period.
Media company Fuji Television Network climbed due to its popular programs,
advertising growth, and potential to provide viewers with Internet access.
Outside technology, your fund's low exposure to declining banking stocks
helped performance. Brokerage firms, in contrast, registered strong gains
due to record launches of stock funds. Nomura Securities, which surged in
this environment, expects to benefit as savings accounts containing over $1
trillion mature during the next two years. A significant percentage of this
money is likely to be invested into equity funds. Perceiving that bank
stocks had been oversold during the period, we added to Sumitomo Bank and
established a new position in Fuji Bank.
Despite the high-flying technology sectors, Japan's economy remained
lackluster. Fourth-quarter GDP was off 1.4% from the third quarter, and
unemployment rose to a postwar high of 4.9%. While industrial production
strengthened, worries about future job losses depressed consumer spending
and retail sales as company restructuring and bankruptcies increased.
Underfunding of corporate pensions and planned cuts to national pension
benefits also hurt consumption.
Industry Diversification
---------------------------------------------------------------------------
Percent of
Net Assets
4/30/00
---------------------------------------------------------------------------
Services 38.9%
Capital Equipment 17.5
Finance 15.9
Consumer Goods 14.1
Energy 5.8
Multi-industry 1.5
Materials 1.4
Reserves 4.9
Total 100.0%
Technology-related stocks also led markets in Asia outside of Japan.
Singapore and South Korea were weaker since lagging financial, natural
resources, and industrial companies dominate those markets. In contrast,
Hong Kong, Taiwan, and India registered double-digit gains because of their
exposure to technology-related issues.
Hong Kong's leading performers were Internet company Pacific Century
CyberWorks, China Telecom (Hong Kong), and diversified Internet portal
holding company Hutchison Whampoa. Rapidly growing demand, impressive
results, and the possible admission of China to the World Trade
Organization stimulated China Telecom, one of the world's largest cellular
phone operators, which provides mobile telecom services in China.
Hutchison's announcements of several Internet-related deals drove its
performance. Among our laggards in this region, Henderson Land Development
fell in price as property values failed to recover as expected.
In the region's emerging markets, South Korean technology giant Samsung
Electronics, with significant market positions in semiconductors, flat
panel screens, and mobile handsets, rose rapidly through the quarter and we
added to this position. In Taiwan, two of the world's leading electronic
component producers, Taiwan Semiconductor Manufacturing and Hon Hai
Precision Industry, performed extremely well. Indian finance company ICICI
was one of the region's best performers, helped by the company's focus on
returns, beneficial government reforms, and the potential for increased
market share versus the state-owned banks.
Despite overall weakness in the Australian market, our media holdings there
were winners. Both News Corporation and Publishing & Broadcasting have
valuable content and Internet businesses. NewsCorp's interests extend
globally and range from film to digital television and program content
production, and we added to these holdings. On the losing side of the
ledger, telecom Telstra suffered from a rapid decline in its core business
and the slow pace of the company's Internet development.
Latin America
Further economic advances in Brazil and Mexico, coupled with the buoyancy
ofregional technology stocks, pushed Brazil up 38% and Mexico 21% in dollar
terms. Brazilian investors contributed to gains there as they switched from
bonds to stocks when interest rates fell from over 30% early in 1999 to
around 19%. However, Brazil's need to fund its fiscal deficit and Mexico's
close trade links with the U.S. make their markets sensitive to changes in
U.S. interest rates, economic growth, and stock performance.
Your portfolio's largest positions in the region, Telebras in Brazil and
Telmex in Mexico, performed well. Both have significant growth prospects
because market penetration is low and improving economic conditions
encourage consumer spending. They also carry more attractive valuations
than their peers in developed markets. In this market, we added to media
company Grupo Televisa. Brazil's major energy stock, Petrobras, was another
market leader as the company's restructuring raised returns and earnings.
Its growth potential and the possibility of further deregulation also
encouraged investors.
INVESTMENT POLICY AND OUTLOOK
Accelerating deregulation, restructuring, and consolidation in Europe are
key catalysts for earnings growth. The convergence of information and
communication technologies and their application to traditional businesses
are additional stimuli for further market gains. If Japan's growth
potential is to be fully realized, it will need to complement its leading
position in New Economy technology with a willingness to alter traditional
ways of doing business. In the rest of Asia, the slow but steady pace of
reform, coupled with economic recovery, could fuel growth of traditional
and Internet-related sectors. The region's enthusiastic embracing of the
New Economy should also stimulate markets.
Around the world, the extent to which companies can increase shareholder
value by integrating new technologies and the Internet with traditional
businesses, or by providing networks and software, will benefit their
earnings outlooks. Competition drives prices down, bringing rewards to
consumers and to the shareholders of companies that compete best.
Following a year of speculation in Internet and technology stocks, we
welcome a return to selectivity and a focus on financial fundamentals.
After this period of volatility and consolidation among technology
companies is over, the firms that can compete and flourish in this changing
environment will emerge as winners over time. With this transition taking
place and interest rates rising, we expect the stock market volatility to
continue during the next few months. Your fund contains the stocks of
diverse companies with solid fundamentals and leading market positions
across a wide range of industries and international markets. We believe
this approach will continue to serve our shareholders well over the long
term.
Respectfully submitted,
Martin G. Wade
Chairman
John R. Ford
President
May 19, 2000
New President of T. Rowe Price
International Funds
After more than 20 years as president of T. Rowe Price International Funds,
Inc., Martin G. Wade has passed the baton to his colleague, John R. Ford.
John Ford has been associated with T. Rowe Price's international investment
management arm since 1984. He currently serves on the Investment Advisory
Committees of all the T. Rowe Price international equity funds.
Mr. Wade was instrumental in the launching of T. Rowe Price's first foreign
stock offering, the International Stock Fund, in 1980, and played a key
role thereafter in the company's increasing presence as an international
asset manager. He remains associated with the International Funds as
chairman and is also a member of the Board of Directors of T. Rowe Price
Associates.
Portfolio Highlights
Twenty-Five Largest Holdings
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Percent of
Net Assets
Company Country 4/30/00
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Vodafone Airtouch United Kingdom 3.1%
Nokia Finland 3.0
Glaxo Wellcome United Kingdom 1.8
Sony Japan 1.7
Television Francaise France 1.6
Murata Manufacturing Japan 1.5
News Corporation Australia 1.5
Vivendi France 1.5
TotalFina France 1.4
NTT DoCoMo Japan 1.4
Shell Transport & Trading United Kingdom 1.3
Cable & Wireless Hong Kong/
United Kingdom 1.3
Kyocera Japan 1.3
Nippon Telegraph &
Telephone Japan 1.3
Philips Electronics Netherlands 1.3
Telecom Italia Mobile Italy 1.3
NEC Japan 1.2
Canon Japan 1.2
Adecco Switzerland 1.2
LM Ericsson Sweden 1.2
Royal Bank of Scotland
Group United Kingdom 1.1
Telebras Brazil 1.1
ING Groep Netherlands 1.1
Samsung Electronics South Korea 1.0
VNU Netherlands 1.0
Total 36.4%
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Note: Table excludes reserves
Security Classification
--------------------------------------------------------------------------------
Percent Market
of Net Cost Value
4/30/00 Assets (000) (000)
--------------------------------------------------------------------------------
Common Stocks 93.5% $2,335,943 $3,406,050
Preferred Stocks 1.6 51,283 59,989
Short-Term Investments 4.5 162,168 162,168
Total Investments 99.6 2,549,394 3,628,207
Other Assets Less
Liabilities 0.4 15,495 15,495
Net Assets 100.0% $2,564,889 $3,643,702
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Summary of Investments and Cash
--------------------------------------------------------------------------------
April 30, 2000
Percent of
Equities Cash Total MSCI EAFE
Europe
Austria -- -- -- 0.2%
Belgium 0.6% -- 0.6% 0.7
Denmark 0.2 -- 0.2 0.7
Finland 3.0 -- 3.0 3.6
France 10.5 -- 10.5 10.8
Germany 4.3 -- 4.3 9.1
Ireland 0.3 -- 0.3 0.4
Italy 4.9 -- 4.9 4.1
Netherlands 7.1 -- 7.1 5.1
Norway 0.2 -- 0.2 0.3
Portugal 0.1 -- 0.1 0.4
Spain 2.8 -- 2.8 2.7
Sweden 3.5 -- 3.5 3.5
Switzerland 3.6 -- 3.6 5.4
United Kingdom 17.3 -- 17.3 20.3
Total Europe 58.4% -- 58.4% 67.3%
--------------------------------------------------------------------------------
Pacific Basin
Australia 3.1% -- 3.1% 2.3%
Hong Kong 3.0 -- 3.0 2.2
India 1.2 -- 1.2 --
Japan 20.3 -- 20.3 27.2
New Zealand 0.2 -- 0.2 0.1
Singapore 0.5 -- 0.5 0.9
South Korea 1.5 -- 1.5 --
Taiwan 1.5 -- 1.5 --
Total Pacific Basin 31.3% -- 31.3% 32.7%
--------------------------------------------------------------------------------
Americas
Argentina 0.1% -- 0.1% --
Brazil 2.1 -- 2.1 --
Canada 1.1 -- 1.1 --
Chile -- -- -- --
Mexico 2.1 -- 2.1 --
Panama -- -- -- --
Peru -- -- -- --
United States -- 4.5% 4.5 --
Venezuela -- -- -- --
Total Americas 5.4% 4.5% 9.9% --
--------------------------------------------------------------------------------
Other Assets Less Liabilities -- 0.4 0.4 --
TOTAL 95.1% 4.9% 100.0% 100.0%*
--------------------------------------------------------------------------------
* Total may not add to 100.0% due to rounding.
Foreign Equity Fund
4/30/00
Performance Comparison
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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 benchmarks, which may include a
broad-based market index and a peer group average or index. Market indexes do
not include expenses, which are deducted from fund returns as well as mutual
fund averages and indexes.
Foreign Equity Fund
--------------------------------------------------------------------------------
Lipper
Foreign MSCI International
Equity EAFE Funds
Fund Index Average
4/30/90 10.000 10.000 10.000
4/91 10.615 10.471 10.308
4/92 11.261 9.6150 10.778
4/93 12.250 11.735 11.737
4/94 15.245 13.724 14.469
4/95 15.517 14.531 14.563
4/96 18.273 16.238 16.977
4/97 19.595 16.141 18.320
4/98 22.966 19.245 22.329
4/99 24.497 21.132 22.748
4/00 29.668 24.128 26.974
<TABLE>
<CAPTION>
Total Return Performance
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Calendar
Periods Ended 4/30/00 1 Month 3 Months Year-to-Date 1 Year 3 Years* 5 Years* 10 Years*
--------------------------------------------------------------------------------
Foreign Equity Fund -5.91% 0.57% -5.41% 21.11% 14.83% 13.84% 11.49%
S&P 500 Index -3.01 4.46 -0.78 10.13 23.69 25.26 18.78
MSCI EAFE Index -5.24 1.12 -5.29 14.17 14.34 10.67 9.21
Lipper International
Funds Average -6.31 -0.02 -5.66 24.75 15.37 13.15 10.15
FT-A Euro Pacific Index -4.95 0.24 -6.45 14.33 13.95 10.03 8.75
* 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.
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>
Financial Highlights
Foreign Equity Fund
(Unaudited)
For a share outstanding throughout each period
-----------------------------------------------------------
6 Months Year
Ended Ended
4/30/00 10/31/99 10/31/98 10/31/97 10/31/96 10/31/95
NET ASSET VALUE
Beginning of period $ 20.08 $ 17.03 $ 16.51 $ 15.62 $ 13.99 $ 14.59
Investment activities
Net investment
income (loss) 0.03 0.21 0.28 0.21 0.21 0.18
Net realized and
unrealized gain (loss) 2.74 3.26 0.93 1.07 1.78 (0.14)
Total from
investment activities 2.77 3.47 1.21 1.28 1.99 0.04
Distributions
Net investment
income (0.17) (0.29) (0.21) (0.22) (0.18) (0.12)
Net realized gain (1.34) (0.13) (0.48) (0.17) (0.18) (0.52)
Total distributions (1.51) (0.42) (0.69) (0.39) (0.36) (0.64)
NET ASSET VALUE
End of period $ 21.34 $ 20.08 $ 17.03 $ 16.51 $ 15.62 $ 13.99
----------------------------------------------------------
Ratios/Supplemental Data
Total return (diamond) 14.11% 20.79% 7.65% 8.30% 14.48% 0.64%
Ratio of total expenses
to average net assets 0.74%! 0.74% 0.74% 0.75% 0.76% 0.80%
Ratio of net investment
income (loss) to average
net assets 0.31%! 1.08% 1.58% 1.40% 1.67% 1.69%
Portfolio
turnover rate 52.7%! 18.2% 18.6% 15.9% 13.8% 18.8%
Net assets, end of period
(in millions) $ 3,644 $ 3,361 $ 3,204 $ 3,160 $ 2,322 $ 1,560
(diamond) Total return reflects the rate that an investor would have earned on
an investment in the fund during each period, assuming reinvestment
of all distributions.
! Annualized
The accompanying notes are an integral part of these financial statements.
Portfolio of Investments
Foreign Equity Fund
April 30, 2000 (Unaudited)
Shares Value
--------------------------------------------------------------------------------
In thousands
ARGENTINA 0.1%
Common Stocks 0.1%
Telefonica de Argentina
(Class B) ADR (USD) 139,084 $ 4,885
Total Argentina (Cost $3,653) 4,885
AUSTRALIA 3.1%
Common Stocks 2.3%
Brambles Industries 314,500 8,853
Broken Hill Proprietary 384,362 4,139
Commonwealth Bank
of Australia 556,691 8,479
Lend Lease 396,494 4,297
News Corporation 2,003,055 25,438
Publishing & Broadcasting 1,108,904 8,613
TABCORP Holdings 703,130 3,764
Telstra 2,201,098 9,435
Telstra, Installment receipts 511,000 1,307
Westpac Banking 1,269,411 8,103
82,428
Preferred Stocks 0.8%
News Corporation 2,738,362 29,457
29,457
Total Australia (Cost $90,152) 111,885
BELGIUM 0.6%
Common Stocks 0.6%
Dexia (EUR) 59,701 7,739
Fortis B (EUR) 359,338 9,072
Societe Europeenne des Satellites
(Class A) (EUR) 16,676 2,534
UCB (EUR) 40,015 1,346
Total Belgium (Cost $13,911) 20,691
BRAZIL 2.1%
Common Stocks 1.4%
Embratel Participacoes
ADR (USD) 151,000 3,397
Pao de Acucar GDR (USD) 113,848 3,245
Telebras ADR (USD) 346,052 40,899
Unibanco GDR (USD) 114,158 2,847
50,388
Preferred Stocks 0.7%
Banco Itau 46,901,000 3,507
Petrol Brasileiros 77,206,021 $ 18,392
Telesp-Telecomunicacoes
de Sao Paulo 137,633,024 3,430
Telesp Celular 145,075,041 2,603
27,932
Total Brazil (Cost $68,172) 78,320
CANADA 1.1%
Common Stocks 1.1%
Alcan Aluminum 125,100 4,072
Celestica (USD) * 377,051 20,573
Nortel Networks 107,110 12,107
Royal Bank of Canada 54,210 2,559
Total Canada (Cost $26,111) 39,311
DENMARK 0.2%
Common Stocks 0.2%
Tele Danmark A/S 80,150 5,869
Total Denmark (Cost $3,834) 5,869
FINLAND 3.0%
Common Stocks 3.0%
Nokia (EUR) 1,888,480 108,331
Total Finland (Cost $17,091) 108,331
FRANCE 11.2%
Common Stocks 11.2%
Alcatel Alsthom (EUR) 118,041 27,364
Altran Technologies (EUR) 28,150 5,753
Aventis (EUR) 416,946 22,932
Aventis (DAX Exchange) (EUR) 64,389 3,477
AXA (EUR) 157,401 23,396
Banque National de Paris (EUR) 297,970 24,082
Canal Plus (EUR) 70,150 13,520
Cap Gemini (EUR) 66,040 12,962
Carrefour (EUR) 50,324 3,262
Cie de St. Gobain (EUR) 67,666 9,233
Danone (EUR) 18,620 4,071
Hermes (EUR) 44,320 6,326
L'Oreal (EUR) 5,162 3,566
Lafarge (EUR) 19,550 1,660
Legrand (EUR) 63,029 11,758
LVMH (EUR) 33,779 14,175
Sanofi Synthelabo (EUR) 469,320 $ 17,514
Schneider Electric (EUR) 59,878 3,919
Societe Generale (EUR) 25,181 5,215
Sodexho Alliance (EUR) 26,110 3,912
STMicroelectronics (EUR) 145,483 27,669
Television Francaise (EUR) 85,616 58,609
TotalFina (Class B) (EUR) 344,574 52,282
Vivendi (EUR) 540,854 53,496
Total France (Cost $255,764) 410,153
GERMANY 4.3%
Common Stocks 4.2%
Allianz (EUR) 49,730 19,137
Bayer (EUR) 104,824 4,367
Bayerische Vereinsbank (EUR) 321,244 19,888
Deutsche Bank (EUR) 285,797 19,201
Deutsche Telekom (EUR) 286,270 18,579
Gehe (EUR) 162,214 5,044
Infineon Technologies (EUR) * 272,843 18,789
Rhoen Klinikum (EUR) 138,312 5,099
SAP (EUR) 64,500 30,198
Siemens (EUR) 38,751 5,742
Veba (EUR) 143,236 7,188
153,232
Preferred Stocks 0.1%
SAP (EUR) 4,410 2,600
2,600
Total Germany (Cost $124,383) 155,832
HONG KONG 3.0%
Common Stocks 3.0%
Cable & Wireless
Hong Kong Telecom 2,994,550 7,074
Cheung Kong Holdings 1,630,670 19,470
China Telecom (Hong Kong) 4,046,130 28,959
Dao Heng Bank Group 1,675,500 7,744
Henderson Land Development 1,432,050 6,269
Hutchison Whampoa 1,759,660 25,528
Pacific Century CyberWorks 6,286,000 11,702
Sun Hung Kai Properties 479,400 3,754
Total Hong Kong (Cost $65,245) 110,500
INDIA 1.2%
Common Stocks 1.2%
Global Tele-Systems 240,000 $ 6,570
Hindustan Lever 252,000 13,826
ICICI Limited 858,000 2,648
ICICI Limited ADR (USD) 439,970 11,164
Mahanagar Telephone 1,614,000 8,322
Total India (Cost $40,107) 42,530
IRELAND 0.3%
Common Stocks 0.3%
SmartForce ADR (USD) * 212,538 10,228
Total Ireland (Cost $5,377) 10,228
ITALY 4.9%
Common Stocks 4.9%
Alleanza Assicurazioni (EUR) 1,017,000 10,521
Banca Intesa (EUR) 1,715,579 6,316
Banca Popolare di Brescia (EUR) 202,530 18,412
ENI (EUR) 2,609,532 12,977
Gucci Group (USD) 26,431 2,316
Mediaset (EUR) 752,000 12,203
Mediolanum (EUR) 864,845 14,349
San Paolo IMI (EUR) 513,006 7,182
Tecnost (EUR) 1,608,000 5,643
Telecom Italia (EUR) 2,049,950 28,662
Telecom Italia Mobile (EUR) 4,829,256 46,098
Unicredito (EUR) 3,511,719 14,239
Total Italy (Cost $111,205) 178,918
JAPAN 20.3%
Common Stocks 20.3%
Bridgestone 208,000 4,516
Canon 960,000 43,905
DDI 588 6,750
East Japan Railway 708 4,195
Fanuc 129,900 13,614
Fuji Bank 2,783,000 23,189
Fuji Television Network 1,501 25,013
Fujitsu 803,000 22,749
Hitachi 449,000 5,362
Ito-Yokado 109,000 7,962
Kao 203,000 6,183
Kokuyo 315,000 $ 4,477
Komori 134,000 1,837
Kyocera 278,000 46,507
Makita 404,000 3,508
Marui 629,000 11,821
Matsushita Electric
Industrial 1,353,000 35,825
Mitsui Fudosan 1,072,000 10,897
Murata Manufacturing 285,000 55,409
NEC 1,667,000 45,373
Nippon Telegraph
& Telephone 3,731 46,286
Nomura Securities 1,157,000 29,135
NTT DoCoMo 1,478 49,397
Sankyo 401,000 8,836
Seven-Eleven Japan 209,000 25,734
Shin-Etsu Chemical 242,000 12,793
Shiseido 370,000 4,679
Softbank (New shares) * 40,200 9,937
Softbank 18,400 4,531
Sony (New shares) * 263,400 30,482
Sony 263,400 30,262
Sumitomo 922,000 10,328
Sumitomo Bank 1,455,000 18,198
Sumitomo Electric
Industries 597,000 7,953
TDK 119,000 15,942
Toshiba 3,632,000 35,239
Yamanouchi Pharmaceutical 435,000 22,995
Total Japan (Cost $463,173) 741,819
MEXICO 2.1%
Common Stocks 2.1%
Femsa UBD
(Represents 1 Class B
and 4 Series D shares) 2,073,690 8,209
Grupo Iusacell ADR (USD) * 229,700 3,661
Grupo Televisa GDR (USD) * 470,362 29,839
Telefonos de Mexico (Class L)
ADR (USD) 620,268 36,479
Total Mexico (Cost $56,264) 78,188
NETHERLANDS 6.4%
Common Stocks 6.4%
ABN Amro (EUR) 160,699 3,309
Akzo Nobel (EUR) 29,831 1,221
ASM Lithography (EUR) 767,520 30,003
CSM (EUR) 371,218 $ 6,378
Equant (EUR) * 112,742 8,727
Fortis NI (EUR) 510,744 12,843
ING Groep (EUR) 726,135 39,621
KPN (EUR) 68,835 6,937
Philips Electronics (EUR) 1,033,990 46,126
Royal Dutch Petroleum (EUR) 334,878 19,301
TNT Post Groep (EUR) 36,667 800
United Pan-Europe
Communications (EUR) * 266,111 9,684
VNU (EUR) 707,650 37,860
Wolters Kluwer (EUR) 429,090 10,127
Total Netherlands (Cost $164,247) 232,937
NEW ZEALAND 0.2%
Common Stocks 0.2%
Telecom Corporation
of New Zealand 1,656,592 6,999
Total New Zealand (Cost $7,358) 6,999
NORWAY 0.2%
Common Stocks 0.2%
Orkla (Class A) 418,395 6,469
Total Norway (Cost $4,737) 6,469
PORTUGAL 0.1%
Common Stocks 0.1%
Jeronimo Martins (EUR) 250,281 4,464
Total Portugal (Cost $2,051) 4,464
SINGAPORE 0.5%
Common Stocks 0.5%
United Overseas Bank 2,569,560 17,918
Total Singapore (Cost $17,035) 17,918
SOUTH KOREA 1.5%
Common Stocks 1.5%
Korea Telecom ADR (USD) 278,000 9,591
Pohang Iron & Steel
ADR (USD) 98,572 2,070
Samsung Electronics 141,223 38,177
South Korea Telecom 16,000 4,253
Total South Korea (Cost $38,763) 54,091
SPAIN 2.8%
Common Stocks 2.8%
Banco Bilbao Vizcaya (EUR) 765,492 $ 10,438
Banco Santander Central
Hispano (EUR) 2,414,860 25,181
Empresa Nacional
de Electricidad (EUR) 882,458 19,141
Gas Natural (EUR) 103,274 1,726
Repsol (EUR) 417,801 8,546
Telefonica (EUR) 1,700,173 37,837
Total Spain (Cost $66,468) 102,869
SWEDEN 3.5%
Common Stocks 3.5%
ABB 69,090 7,706
Atlas Copco (Class B) 88,352 2,020
Electrolux (Class B) 376,305 6,358
Hennes & Mauritz (Class B) 566,320 15,033
LM Ericsson 483,940 43,018
Nordic Baltic Holding 2,183,068 13,757
Nordic Baltic Holding (DKK) * 352,617 2,195
Sandvik (Class B) 118,330 2,824
Securitas (Class B) 1,309,295 33,879
Total Sweden (Cost $75,812) 126,790
SWITZERLAND 3.6%
Common Stocks 3.6%
ABB 121,077 13,585
Adecco 52,903 43,407
Credit Suisse Group 65,105 11,760
Nestle 17,123 30,184
Roche Holdings 1,034 10,798
Swisscom 11,909 4,199
UBS 73,937 18,114
Total Switzerland (Cost $81,480) 132,047
TAIWAN 1.5%
Common Stocks 1.5%
Hon Hai Precision Industry 1,853,000 17,867
Taiwan Semiconductor
Manufacturing 4,872,960 31,377
United Microelectronics 1,176,000 3,978
Total Taiwan (Cost $40,508) 53,222
UNITED KINGDOM 17.3%
Common Stocks 17.3%
Abbey National 424,100 $ 4,840
AstraZeneca Group 542,307 22,704
Baltimore Technologies 71,400 7,192
BG Group 409,600 2,463
BP Amoco 1,433,304 12,374
Cable & Wireless 2,488,500 41,263
Cadbury Schweppes 1,618,378 11,087
Celltech Group 466,000 7,691
Centrica 869,710 3,101
Compass Group 2,411,050 34,235
David S. Smith 532,185 1,127
Diageo 1,702,924 13,774
Electrocomponents 674,640 6,775
GKN 117,700 1,631
Glaxo Wellcome 2,148,700 65,637
Hays 279,000 1,929
Hilton Group 646,940 2,709
HSBC Holdings (HKD) 471,600 5,283
John Laing (Class A) 218,410 738
Kingfisher 1,370,977 11,222
Marconi 1,010,000 12,580
Reed International 4,448,691 30,879
Rio Tinto 862,060 13,355
Royal Bank of Scotland Group 2,690,599 41,724
Safeway 878,470 2,961
Shell Transport & Trading 6,012,400 48,677
SmithKline Beecham 2,730,880 37,269
Standard Chartered 898,000 12,122
Tesco 1,949,004 6,623
Tomkins 2,849,256 8,750
Unilever 1,416,946 8,494
United News & Media 536,510 6,975
Vodafone Airtouch 24,406,087 111,907
WPP Group 1,904,000 30,682
Total United Kingdom (Cost $544,325) 630,773
SHORT-TERM INVESTMENTS 4.5%
Money Market Funds 4.5%
Reserve Investment Fund,
6.18% #! 162,167,725 162,168
Total Short-Term Investments
(Cost $162,168) 162,168
Total Investments in Securities
99.6% of Net Assets (Cost $2,549,394) $3,628,207
Other Assets Less Liabilities 15,495
NET ASSETS $3,643,702
----------
* Non-income producing
# Seven-day yield
! Affiliated company
ADR American depository receipt
DKK Danish krone
EUR Euro
GDR Global depository receipt
HKD Hong Kong dollar
USD U.S. dollar
The accompanying notes are an integral part of these financial statements.
Statement of Assets and Liabilities
Foreign Equity Fund
April 30, 2000 (Unaudited)
In thousands
Assets
Investments in securities, at value
Affiliated companies (cost $162,168) $ 162,168
Other companies (cost $2,387,226) 3,466,039
Total investments in securities 3,628,207
Other assets 28,086
Total assets 3,656,293
Liabilities
Total liabilities 12,591
NET ASSETS $3,643,702
----------
Net Assets Consist of:
Accumulated net investment income -
net of distributions $ 4,569
Accumulated net realized gain/loss -
net of distributions 207,922
Net unrealized gain (loss) 1,078,258
Paid-in-capital applicable to 170,734,550
shares of $0.01 par value capital stock
outstanding; 1,000,000,000 shares authorized 2,352,953
NET ASSETS $3,643,702
----------
NET ASSET VALUE PER SHARE $ 21.34
----------
Statement of Operations
Foreign Equity Fund
(Unaudited)
In thousands
6 Months
Ended
4/30/00
Investment Income (Loss)
Income
Dividend (net of foreign taxes of $2,305) $ 16,538
Interest (including $2,854 from affiliated companies) 2,902
Total income 19,440
Expenses
Investment management 13,041
Custody and accounting 593
Registration 29
Shareholder servicing 17
Legal and audit 14
Directors 5
Prospectus and shareholder reports 1
Miscellaneous 18
Total expenses 13,718
Net investment income (loss) 5,722
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities 221,700
Foreign currency transactions (4,030)
Net realized gain (loss) 217,670
Change in net unrealized gain or loss
Securities 251,986
Other assets and liabilities
denominated in foreign currencies (114)
Change in net unrealized gain or loss 251,872
Net realized and unrealized gain (loss) 469,542
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 475,264
----------
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
4/30/00 10/31/99
Increase (Decrease) in Net Assets
Operations
Net investment income (loss) $ 5,722 $ 35,439
Net realized gain (loss) 217,670 254,287
Change in net unrealized
gain or loss 251,872 328,965
Increase (decrease) in net
assets from operations 475,264 618,691
Distributions to shareholders
Net investment income (28,399) (53,955)
Net realized gain (223,838) (24,187)
Decrease in net assets
from distributions (252,237) (78,142)
Capital share transactions*
Shares sold 363,717 534,332
Distributions reinvested 198,989 58,440
Shares redeemed (502,851) (976,185)
Increase (decrease) in net
assets from capital
share transactions 59,855 (383,413)
Net Assets
Increase (decrease) during period 282,882 157,136
Beginning of period 3,360,820 3,203,684
End of period $ 3,643,702 $ 3,360,820
---------------------------------
*Share information
Shares sold 16,516 28,737
Distributions reinvested 9,716 3,394
Shares redeemed (22,893) (52,874)
Increase (decrease) in
shares outstanding 3,339 (20,743)
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements
Foreign Equity Fund
April 30, 2000 (Unaudited)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Institutional International Funds, Inc. (the corporation) is registered
under the Investment Company Act of 1940. The Foreign Equity Fund (the
fund), a diversified, open-end management investment company, is the sole
portfolio established by the corporation and commenced operations on
September 7, 1989. The fund seeks long-term growth of capital through
investments primarily in the common stocks of established non-U.S.
companies.
The accompanying financial statements are prepared in accordance with
generally accepted accounting principles for the investment company
industry; these principles may require the use of estimates by fund
management.
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.
Investments in mutual funds are valued at the closing net asset value per
share of the mutual fund on the day of valuation.
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.
Affiliated Companies As defined by the Investment Company Act of 1940, an
affiliated company is one in which the fund owns at least 5% of the
outstanding voting securities.
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. Credits earned on
daily uninvested cash balances at the custodian are used to reduce the
fund's custody charges.
NOTE 2 - INVESTMENT TRANSACTIONS
Purchases and sales of portfolio securities, other than short-term
securities, aggregated $942,066,000 and $1,182,862,000, respectively, for
the six months ended April 30, 2000.
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, 2000, the cost of investments for federal income tax purposes
was substantially the same as for financial reporting and totaled
$2,549,394,000. Net unrealized gain aggregated $1,078,813,000 at
period-end, of which $1,188,466,000 related to appreciated investments and
$109,653,000 to depreciated investments.
NOTE 4 - FOREIGN TAXES
The fund is subject to foreign income taxes imposed by certain countries in
which it invests. Foreign income taxes are accrued by the fund and withheld
from dividend and interest income.
NOTE 5 - RELATED PARTY TRANSACTIONS
The fund is managed by Rowe Price-Fleming International, Inc. (the
manager), which is owned by subsidiaries of T. Rowe Price Associates, Inc.
(Price Associates) and Robert Fleming Holdings Limited (Fleming). Price
Associates has entered into an agreement with Fleming to purchase Fleming's
interest in the manager. The investment management agreement between the
fund and the manager provides for an annual investment management fee, of
which $2,123,000 was payable at April 30, 2000. The fee is computed daily
and paid monthly, and is equal to 0.70% of average daily net assets.
Foreign Equity Fund
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 $68,000 for the six months ended April 30, 2000, of which
$13,000 was payable at period-end.
The fund may invest in the Reserve Investment Fund and Government Reserve
Investment Fund (collectively, the Reserve Funds), open-end management
investment companies managed by T. Rowe Price Associates, Inc. The Reserve
Funds are offered as cash management options only to mutual funds and other
accounts managed by T. Rowe Price and its affiliates and are not available
to the public. The Reserve Funds pay no investment management fees.
Distributions from the Reserve Funds to the fund for the six months ended
April 30, 2000, totaled $2,854,000 and are reflected as interest income in
the accompanying Statement of Operations.
During the six months ended April 30, 2000, the fund, in the ordinary
course of business, placed security purchase and sale orders aggregating
$64,043,000 with certain affiliates of the manager and paid commissions of
$77,000 related thereto.
